BHARAT BIJLEE LTD, MUMBAI V. ADDL CIT 6(1), MUMBAI

ITA 4053/MUM/2012

• Counselvise Citation: [2015] 120 COUNSELVISE.COM (IT) 9093 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 7 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-01-2015
• Appeal Filed By: Assessee
• Bench Allotted: B
• Next Hearing Date: 08-01-2015
• Assessment Year: 2008-2009
• Appeal Filed On: 08-06-2012
• Court: TRIBUNAL
• Department Lawyers: VIVEK BATRA SR
• Assessee Lawyers: RONAK G DOSHI
• Keywords: Depreciation; Additional depreciation; Earning of tax free income; Question of law
• Section: 43B; 234B; 14A

Judgement Text

IN THE INCO ME TAX APPELLATE TRIBUNAL B BENCH, MUMBAI BEFORE SHRI I.P. BANSAL, JUDICIAL MEMBER AND SHRI B.R. BASKARAN , ACCOUNTANT MEMBER ./I.T.A. NO. 4053/M/2012 ( / ASST. YEAR : 2008 - 2009 ) BHARAT BIJLEE LTD., 6 TH FLOOR, ELECTRIC MANSION, APPASHAEB, MARATHE MARG, PRABHADEVI, MUMBAI 400 025. / VS. ADDL CIT 6(1), MUMBAI. ./ PAN : AAACB2900K ( / APPELLANT) .. ( / RESPONDENT ) ./I.T.A. NO. 4160/M/2012 ( / ASST. YEAR : 2008 - 2009 ) ADDL CIT 6(1), MUMBAI. / VS. BHARAT BIJLEE LTD., 6 TH FLOOR, ELECTRIC MANSION, APPASHAEB, MARATHE MARG, PRABHADEVI, MUMBAI 400025. ./ PAN : AAACB2900K ( / APPELLANT) .. ( / RESPONDENT ) / A SSESSEE BY : SHRI RONAK G DOSHI / REVENUE BY : SHRI VIVEK BATRA, SR. AR / DATE OF HEARING : 08.01.2015 / DATE OF PRONOUNCEMENT : 08 .01.2015 / O R D E R PER I.P. BANSAL, JM : THESE ARE THE CROSS APPEALS DIRECTED AGAINST THE ORDER PASSED BY THE CIT (A) - 14, MUMBAI DATED 30.03.2012 FOR THE ASSESSMENT YEAR 2008 - 2009. FIRSTLY, WE SHALL TAKE UP THE ASSESSEES APPEAL AND THE GROUNDS RAISED BY THE ASSESSEE IN ITS APPEAL READ AS UNDER: GROUND N O.I: DISALLO WANCE OF PROVISION FOR LEAVE EN CASHMENT OF RS,. 43,97,522/ - 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE HONBLE CIT (A) ERRED IN CONFIRMING THE ACTION OF THE ASSESSING OFFICER OF DISALLOWING A SUM OF RS. 43,97,522/ - AS PROVISION FOR LEAVE ENCASHMENT ON THE ALLEGED GROUND THAT THE PROVISIONS OF SECTION 43B(F) OF THE ACT ARE DIRECTLY APPLICABLE. 2 2. THE APPELLANT PRAYS THAT THE DISALLOWANCE OF AFORESAID PROVISION FOR LEAVE ENCASHMENT BE DELETED. GROUND NO.II: DISALLOWANCE U/S 14A R.W.R. 8D OF 4,70,104/ - 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE CIT (A) ERRED IN UPHOLDING THE ACTION OF THE ASSESSING OFFICER OF DISALLOWING A SUM OF RS. 4,70, 104/ - ALLEGEDLY AS EXPENSES (INCLUDING INTEREST) INCURRED TOWARDS EARNING EXEMPT INCOME U/S 14A OF THE ACT R.W.R 8D OF THE INCOME TAX RULES, 1962. 2. HE FAILED TO APPRECIATE AND OUGHT TO HAVE HELD THAT NO INTEREST EXPENSE WAS ACTUALLY INCU8RRED BY THE APPELLANT FO R THE PURPOSE OF EARNING EXEMPT INCOME. IN ANY CASE, THE EXPENSES ATTRIBUTED BY THE ASSESSING OFFICER WITHOUT HAVING ANY REGARD TO THE ACCOUNTS ARE UNREASONABLE AN EXCESSIVE. 3. THE APPELLANT PRAYS THAT THE DISALLOWANCE OF RS. 4,70,104/ - SHOULD BE DELETED OR SUBSTANTIALLY REDUCED. GROUND NO.III: LEVY OF INTEREST. 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE ASSESSING OFFICER ERRED IN LEVY OF INTEREST U/S 234B AND 234C OF THE ACT. 2. ISSUE RAISED BY THE ASSESSEE IN GROUND NO.1 WAS STATED TO BE COVERED BY THE ORDER OF THE TRIBUNAL IN THE CASE OF ASSESSEE ITSELF VIDE ORDER DATED 24.6.2013 IN ITA NO.7531/M/2010. COPY OF THE SAID ORDER OF THE TRIBUNAL IS PLACED AT PAGES 38 TO 41 OF THE PAPER BOOK PERTAINING TO CASE LAWS. THE ISSUE HAS BEEN DEALT WITH BY THE TRIBUNAL AS FOLLOWS: 2. A SUM OF RS . 21,35,352/ - WAS ADDED BY THE A . O UNDER THE PROVISIONS OF SECTION 43B OF THE INCOME TAX ACT, 1961 (THE ACT) ON ACCOUNT OF PROVISION FOR LEAVE ENCASHMENT , OUT OF WHICH A SUM OF RS. 1,26,897/ - WAS ALLOW ED ON ACCOUNT OF PAYMENT TILL 30/10/2007 AND IN THIS MANNER A NET ADDITION OF RS . 20,08,455/ - WAS MADE . THE ADDITION WAS AGITATED IN AN APPEAL FILED BEFORE LD . CIT(A) , WHO HAS ALLOWED THE RELIEF TO THE ASSESSEE ON THE BASIS OF DECISION OF ITAT IN THE CASE OF UNIVERSAL MEDICARE PVT . LTD ., VS. ACIT IN ITA NO . 6191/MUM/2008 . THE DEPARTMENT IS AGGRIEVED , HENCE, HAS FILED THE AFOREMENTIONED APPEAL . 3. AT THE OUTSET LD. AR OF THE ASSESSEE HAS PRODUCED BEFORE US A COPY OF ORDER OF THE TRIBUNAL DATED 8/8/2012 IN I TA NO . 6189/MUM/2011 IN THE CASE OF ESSAR EXPLORATION & PRODUCT I ON INDIA LTD . VS . ACIT , ORDER DATED 8/8/2012, IN WHICH SIMILAR ISSUE CAME UP FOR CONSIDERATION OF ITAT. BEFORE ITA REFERENCE WAS MADE TO THE AFOREMENTIONED DECISION IN THE CASE OF M/S. UNIVERSA L MEDICARE PVT. LTD. VS. ACIT(SUPRA) , AND AFTER HEARING BOTH THE PARTIES AND CONSIDERING THE ISSUE THAT IN ANOTHER MATTER IN THE CASE OF EXID E INDUSTRIES LTD. VS . UNION OF INDIA , 292 ITR 470 (CAL) , WHERE PROVISIONS OF SECTION 43B(F) WERE HELD TO BE ARBITRARY AND IN SPECIAL LEAVE PETITION BEFORE HON'BLE APEX COURT VIDE ORDER DATED 8/9/2008 THE JUDGMENT OF HONBLE CULCUTTA HIGH COURT HAS BEEN STAYED AND ALSO THE FACT THAT HON'BLE BOMBAY HIG H COURT HAS ADMITTED THE ISSUE IN CONSIDERATION IN THE APPEAL F ILED BY TH E DEPARTMENT IN THE CASE OF M/S. UNIVERSAL MEDICARE PVT. LTD.(SUPRA) , THE MATTER WAS RESTORED BACK TO THE FILE OF AO WITH THE FOLLOWING OBSERVATIONS: ' 7 . WE OBSERVE THAT MUMBAI TRIBUNAL BY ITS ORDER DATED 30.3 . 2009 IN THE CASE UNIVERSAL MEDICARE PVT LTD. (SUPRA) ALLOWED THE CLAIM OF PROVISION FOR LEAVE ENCASHMENT ON THE BASIS OF DECISION OF HON'BLE APEX COURT IN THE CASE OF BHARAT EARTH MOVERS (SUPRA) AS THE HONBLE CALCUTTA HIGH COURT IN THE CASE OF EXIDE INDUSTRIES (SUPRA) STRUCK: DOWN T HE PROVISION OF SECTION 43B(F) BEING ARBITRARY, UNCONSCIONABLE. FURTHER , THE DEPARTMENT FILED SLP BEFORE HON ' BLE APEX COURT AGAINST THE DECISION OF HON ' BLE 3 CALCUTTA HIGH COURT IN THE CASE OF EXIDE INDUSTRIES LTD (SUPRA) BY ITS ORDER DATED 8 . 9.2008 IN SLP N O . 12060 / 2008 HAS STAYED THE OPERATION OF JUDGMENT OF HON ' BLE CALCUTTA HIGH COURT. FURTHER, IT IS ALSO A FACT THAT HON'BLE BOMBAY HIGH COURT HAS ADMITTED THE ISSUE UNDER CONSIDERATION IN THE APPEAL FILED BY DEPARTMENT IN THE CASE OF UNIVERSAL MEDICARE PVT LTD (SUPRA) . AT THE TIME OF HEARING , ID A . R. SUBMITTED THAT THE SAID APPEAL IS YET TO BE DISPOSED OF WE ALSO OBSERVE THAT ITAT KOLKATA BENCH BY ITS ORDER DATE D 30 . 1 . 2012 CONSIDERED THE SAID ISSU E AND BY FOLLOWING EARLIER DECISION ON IDENTICAL ISSUE IN THE CASE ERNST & YOUNG PVT LTD . (SUPRA) HAS RESTORED THE MATTER TO THE FILE OF AC WITH A DIRECTION TO ADJUDICATE THE SAME AS PER DECISION OF HON ' BLE APEX COURT IN THE CASE OF EXIDE INDUSTRIES LTD (SUP RA) , IN VIEW OF ABOVE AND RESPECTFULLY FOLLOWING THE EARLIER DECISIONS (SUPRA) , WE SET ASIDE THE ORDERS OF AUTHORITIES BELOW AND RESTORE THE MATTER BACK TO THE FILE OF AO FOR ADJUD I CAT I ON AFRESH AS PER THE DECISION OF HON ' BLE APEX COURT IN THE CASE OF EXIDE INDUSTRIES LTD (SUPRA). 3 . 1 REFERRING TO THE ABOVE OBSERVATION IT WAS PLEADED BY LD. A.R THAT THE MATTER MAY BE RESTORED BACK TO THE FILE OF AO WITH SIMILAR DIRECTIONS . 4. LD. D.R DID NOT HAVE ANY OBJECTION TO SUCH REQUEST OF LD . A . R . 5 . IN THIS VIEW OF THE SITUATION, AFTER HEARING BOTH THE PARTIES , RESPECTFULLY FOLLOWING SUBSEQUENT DECISION OF THE TRIBUNAL ON THIS ISSUE IN THE CASE OF ESSAR EXPLORATION & PRODUCTION INDIA LTD (SUPRA), WE RESTORE THE ISSUE TO THE FILE OF ASSESSING OFFICER WITH SIMILAR DIRECTIONS . THE RELEVANT OBSERVATIONS HAVE ALREADY BEEN REPRODUCED. WE DIRECT ACCORDINGLY. 6. IN THE RESULT, APPEAL FILED BY THE REVENUE IS ALLOWED FOR STATISTICAL PURPOSES IN THE MANNER AFORESAID. 3. IN THIS VIEW OF THE SITUATION, AFTER HEARING BOTH THE PARTIES, WE PASS THE SAME ORDER FOR PRESENT AY AND THE GROUND NO.1 IS TREATED TO BE ALLOWED FOR STATISTICAL PURPOSES. 4. APROPOS GROUND NO.2, AN AMOUNT OF RS. 4,70,104/ - CALCULATED TO BE DISALLOWED U/S 14A WHICH COMPRISES OF THE TWO COMPONENTS RS. 2, 69,620/ - BEING ON ACCOUNT OF INTEREST AND RS. 2,00,484/ - ON ACCOUNT OF EXPENSES. THE GRIEVANCE OF THE ASSESSEE IS LIMITED ONLY TO THE EXTENT OF DISALLOWANCE ON ACCOUNT OF INTEREST I.E., A SUM OF RS. 2,69,620 / - . IT IS THE CASE OF THE ASSESSEE THAT ITS OWN FUNDS ARE MORE THAN THE INVESTMENT MADE IN THE SHARES AND SECURITIES FROM WHICH TAX FREE INCOME HAS BEEN EARNED. REFERENCE IN THIS REGARD HAS BEEN MADE TO THE PAGE 3 OF THE PAPER BOOK ON WHICH BALANCE SHEET IS SUBMITTED. THE SHARE CAPITAL AND RESERVE AND SURPLUS OF THE ASSESSEE AS ON 1.4.2007 IS A SUM OF RS. 11,584.24 LAKHS AS AGAINST THE INVESTMENT IN SHARES AND SECURITIES OF A SUM OF RS. 1,872.97 LAKHS. AS ON 4 31.3.2008, SHARE CAPITAL AND RESERVE AND SURP LUS ARE RS. 16,849.81 LAKHS AND INVESTMENT OF RS. 2,028.97 LAKHS. IT WAS SUBMITTED THAT IN ACCORDANCE WITH THE DECISION OF THE HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. HDFC BANK (366 ITR 505) NO DISALLOWANCE ON ACCOUNT OF INTEREST WAS CALLED FOR. 5. ON THIS ISSUE, WE HAVE HEARD BOTH THE PARTIES. LD DR RELIED ON THE ORDERS PASSED BY THE ASSESSING OFFICER AND THE CIT (A). IT HAS BEEN OBSERVED THAT ASSESSEES INVESTMENT IN SHARES AND SECURITIES FROM WHICH ASSESSEE HAS EARNED TAX FREE INCOME IS MUC H LESS THAN THE SHARE CAPITAL AND RESERVE AND SURPLUS. THEREFORE, THE CONTENTION OF THE ASSESSEE IS REQUIRED TO BE ACCEPTED AND IT IS HELD THAT NO DISALLOWANCE ON ACCOUNT OF INTEREST WAS CALLED FOR. ACCORDINGLY, ADDITION OF RS. 2,69,620/ - IS DELETED AND DISALLOWANCE IS SUSTAINED ONLY FOR A SUM OF RS. 2,00,484/ - . THIS GROUND IS PARTLY ALLOWED. 6. APROPOS GROUND NO.3, IT WAS SUBMITTED THAT THE SAME IS CONSEQUENTIAL. WE DIRECT THE ASSESSING OFFICER TO RECALCULATE THE INTEREST AS PER THE PROVISIONS OF LAW A FTER GIVIN G EFFECT TO THIS ORDER . ITA NO.4160/M/2012 (AY 2008 - 2009) (BY REVENUE) 7. THIS APPEAL FILED BY THE REVENUE ON 13.6.2012. IN THIS APPEAL REVENUE RAISED THE FOLLOWING GROUNDS WHICH READ AS UNDER: 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD CIT (A) ERRED IN ALLOWING DEDUCTION CLAIMED BY THE ASSESSEE ON ACCOUNT OF PROVISIONS OF WARRANTY OF RS. 46,77,000/ - WITHOUT APPRECIATING THE FACTS THAT PROVISIONS OF WARRANTY IS A CONTING ENT LIABILITY, WHICH MAY ARISE IN A FUTURE DATE. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD CIT (A) ERRED IN DELETING THE DISALLOWANCE OF ADDITIONAL DEPRECIATION OF RS. 48,666/ - WITHOUT APPRECIATING THE FACTS THAT THESE ASSET S ARE NOT CONNECTED WITH THE MANUFACTURING ACTIVITY. 8. APROPOS GROUND NO.1, A T THE OUTSET IT WAS POINTED OUT BY THE LD AR THIS ISSUE IS COVERED BY THE EARLIER ORDERS OF THE TRIBUNAL WHICH HAS BEEN APPROVED BY THE 5 HONBLE HIGH COURT AND REFERENCE IN THIS REGARD WAS MADE TO THE DECISION OF THE HONBLE BOMBAY HIGH COURT IN THE CASE OF ASSESSEE ITSELF FOR THE AY 2005 - 2006 [2014] 365 ITR 258 (BOMBAY). COPY OF THE SAID JUDGMENT OF THE HONBLE HIGH COURT IS PLACED AT PAGES 132 - 138 OF THE PAPER BOOK WHERE THEIR LORDSHIPS HAVE DISMISSED THIS GROUND OF APPEAL WITH THE FOLLOWING OBSERVATION. 10. AT THE OUTSET, THE COUNSEL AGREED THAT THE QUESTION POSED AT PARAGRAPH 4(I), NAMELY, THE DEDUCTION CLAIMED BY THE ASSESSEE ON ACCOUNT OF THE PROVISIONS FOR WARRANTY IS CONCERNED, THAT IS FULLY COVERED IN FAVOUR OF THE ASSESSEE AND AGAINST THE REVENUE BY TH E JUDGMENT OF THE HONBLE SUPREME COURT IN THE CASE OF ROTORK CONTROLS (P) LTD (SUPRA). THE APPEAL, THEREFORE, DOES NOT RAISE ANY SUBSTANTIAL QUESTION OF LAW IN RELATION TO THIS DEDUCTION. 9. LATER ON THE AFOREMENTIONED DECISION WAS FOLLOWED BY THE HO NBLE HIGH COURT IN RESPECT OF THE AY 2006 - 2007 VIDE ORDER DATED 25.7.2014 IN INCOME TAX APPEAL NO.535 OF 2012. COPY OF THIS ORDER IS PLACED AT PAGE 139 AND 140 OF THE PAPER BOOK. 10. IN THIS VIEW OF THE SITUATION AS THE ISSUE IS COVERED IN FAVOUR OF THE A SSESSEE BY THE AFOREMENTIONED ORDER S OF THE HONBLE BOMBAY HIGH COURT, WE DISMISSED GROUND NO.1 OF THE REVENUES APPEAL. 11. APROPOS GROUND NO.2, ASSESSING OFFICER HAS DISCUSSED THIS ISSUE IN PARA 9 OF THE ASSESSMENT ORDER. ADDITIONAL DEPRECIATION @ 20% H AS BEEN DISALLOWED ON CERTAIN ITEMS AND DISALLOWANCE IS A SUM OF RS. 48,666/ - . LD CIT (A) HAS DISCUSSED THIS ISSUE AT PARA 8 OF HIS ORDER. HE OBSERVED THAT THESE ASSETS ARE IN THE SHAPE OF FAN & AIR CONDITIONERS AND THE ADDITIONAL DEPRECIATION HAS BEEN D ISALLOWED BY THE ASSESSING OFFICER FOR THE REASON THAT THEY ARE NOT RELATED TO MANUFACTURING ACTIVITIES. HE OBSERVED THAT THESE FANS & AIR CONDITIONERS ARE INSTALLED IN THE FACTORY PREMISES I.E., SHOP FLOOR AND DESIGN DEPARTMENT THEREFORE, THESE ASSETS AR E BEING USED IN MANUFACTURING PLANT OF THE ASSESSEE. IN THIS MANNER LD CIT (A) HAS DELETED THE 6 DISALLOWANCE. AGGRIEVED WITH THE DECISION OF THE LD CIT (A), REVENUE HAS RAISED THE GROUND NO.2 BEFORE THE TRIBUNAL. 12. WE HAVE HEARD BOTH THE PARTIES AND THE IR CONTENTIONS HAVE CAREFULLY BEEN CONSIDERED. THE FINDING OF THE FACT BY THE CIT (A) IS THAT THE FANS AND AIR CONDITIONERS ON WHICH DISALLOWANCE HAS BEEN MADE ARE INSTALLED IN THE FACTORY PREMISES AND THESE FINDINGS ARE NOT DISLODGED BY THE REVENUE. IN THIS VIEW OF THE SITUTATION , WE SEE NO INFIRMITY IN THE DELETION OF DISALLOWANCE AND WE DECLINE TO INTERFERE. THIS GROUND RAISED BY THE REVENUE IS ALSO DISMISSED.] 13. IN THE RESULT, APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED AND THE APPEAL OF THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 8 TH JANUARY, 2015. SD/ - SD/ - (B.R. BASKARAN) (I.P. BANSAL) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI ; 8 .1.2015 . . ./ OKK , SR. PS / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ( ) / THE CIT(A) - 4. / CIT 5. , , / DR, ITAT, MUMBAI 6. / GUARD FILE . //TRUE COPY// / BY ORDER, / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI