ACIT CIR 1, THANE V. LANXESS INDIA P.LTD, THANE

ITA 4267/MUM/2014

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 8621 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 7 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-02-2017
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: A
• Assessment Year: 2007-2008
• Appeal Filed On: 16-06-2014
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: DR KAILASH P GAIKWAD

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, MUM BAI , , BEFORE S/SHRI RAJENDRA, A.M. AND SANJAY GARG,J.M. ./ITA NO.4267/MUM/2014, / ASSESSMENT YEAR: 2007-08 ACIT CIRCLE-1 ASHAR I.T.PARK, 6 TH FLOOR, BWING, ROOM NO.22 ROAD NO.16Z, WAGLE INDL. ESTATE THANE (W)-400 604. VS. LANXESS INDIA PVT. LTD. LANXESS HOUSE, PLOT NO.A-162, 163, 164 ROAD NO.27, MIDC OPP. ITI COLLEGE, WAGLE ESTATE, THANE (W)-400 604. PAN: AACCB 3880 A ( /APPELLANT ) ( / RESPONDENT ) REVENUE BY: DR. KAILASH P. GAIKWAD ASSESSEE BY: SHRI RAVI SAWANA / DATE OF HEARING: 30.01.2017 / DATE OF PRONOUNCEMENT: 10.02.2017 ,1961 254(1) ORDER U/S.254(1)OF THE INCOME-TAX ACT,1961(ACT) , ,, , -PER RAJENDRA,AM: CHALLENGING THE ORDER,DATED 20/03/2014,OF THE CIT ( A)-II,THANE THE ASSESSING OFFICER(AO)HAS FILED THE PRESENT APPEAL. ASSESSEE-COMPANY,ENGAGED IN THE BUSINESS OF MANUFACTURING AND TRADING OF CHEMICALS AND CHEMICAL INTERMEDIATES,FILED ITS RETURN OF INCOME ON 30/10/ 2007, DECLARING TOTAL INCOME AT RS. 9.48 CRORES.THE AO COMPLETED THE ASSESSMENT U/S.143 (3) OF THE ACT,ON 21/12/2010, DETERMINING ITS INCOME AT RS. 10.71 CRORES. 2. FIRST EFFECTIVE GROUND OF APPEAL IS ABOUT DELETING THE ADDITION OF RS.71.96 LAKHS UNDER SECTION 14 A R.W.R 8D OF THE INCOME TAX RULES, 1962 (RULES). 3. IT WAS BROUGHT TO OUR NOTICE THAT IDENTICAL ISSUE F OR THE EARLIER YEAR WAS DECIDED BY THE TRIBUNAL,IN ITS ORDER DATED 29/08/2013 (ITA/1406/MU MBAI/2012 AND 1780/MUMBAI/2012.). IN ITS ORDER, THE TRIBUNAL HAS HELD THAT THE PROVISION S OF RULE 8D OF THE RULES WERE NOT APPLICABLE TO THAT YEAR,THAT DISALLOWANCE AT THE RA TE OF 0.5% OF THE AVERAGE INVESTMENT SHOULD BE WORKED OUT AFTER EXCLUDING THE STRATEGIC INVESTM ENT.AS THE FACTS FOR THE YEAR UNDER APPEAL ARE IDENTICAL TO THE FACTS OF EARLIER YEAR,SO,WE HO LD THAT NO PART OF INTEREST EXPENDITURE SHOULD BE DISALLOWED UNDER SECTION 14 A OF THE ACT.WE FURT HER DIRECT THE AO THAT DISALLOWANCE SHOULD BE RESTRICTED TO 0.5% OF THE AVERAGE INVESTM ENT AFTER EXCLUDING THE STRATEGIC INVESTMENT. FIRST GROUND IS ALLOWED IN FAVOUR OF TH E AO, IN PART. 4. SECOND GROUND OF APPEAL IS ABOUT DELETING THE ADDIT ION ON ACCOUNT OF CARBON CREDIT (CC),AMOUNTING TO RS. 52.76 LAKHS. DURING THE ASSES SMENT PROCEEDINGS, THE AO OBSERVED THAT THE DEPARTMENT WAS IN POSSESSION OF INFORMATION THA T THE ASSESSEE HAD RECEIVED 7252 CERTIFIED 4267/M/14-(07-08) LANXESS INDIAPVT.LTD. 2 EMISSIONS REDUCTION (CER.S) DURING THE YEAR. HE DIR ECTED THE ASSESSEE TO CLARIFY AS TO WHY THE SAME WAS NOT APPEARING IN THE RETURN OF INCOME. AFTER CONSIDERING THE SUBMISSION OF THE ASSESSEE THE AO HELD THAT IT WAS NOT VERY FEASIBLE AS TO WHETHER THE CC SOLD IN SUBSEQUENT YEAR INCLUDED THE CC RECEIVED DURING THE YEAR I.E. 7252 CER.S. FINALLY, HE ASSESSED THE VALUE OF CC AT RS. 52, 76, 400/-AND MADE AN ADDITION OF T HE SAID AMOUNT TO THE TOTAL INCOME OF THE ASSESSEE. 5. AGGRIEVED BY THE ORDER OF THE AO, THE ASSESSEE PREF ERRED AN APPEAL BEFORE THE FIRST APPELLATE AUTHORITY (FAA).BEFORE HIM IT MADE ELABOR ATE SUBMISSIONS. THE FAA CALLED FOR A REMAND REPORT FROM THE AO. IN HIS REPORT DATED 14/0 2/2014, THE AO STATED THAT INFORMATION WAS AVAILABLE WITH THE DEPARTMENT ABOUT THE CC,THAT RECORDS ON WHICH THE THEN AO HAD RELIED UPON WERE NOT TRACEABLE. AFTER CONSIDERING THE AVAILABLE MATERIAL,THE FAA HE LD THAT NO INFORMATION WAS AVAILABLE ON RECORD TO SHOW THAT THE ASSESSEE HAD RECEIVED CC OF 7252 CER.S DURING THE YEAR UNDER APPEAL, THAT IT HAD SHOWN THE PROFIT ON SALE OF 11, 593 CER.S IN THE SUCCEEDING ASSESSMENT YEAR, THAT IN ABSENCE OF ANY MATERIAL AVAILABLE ON RECORD NO ADDITION WAS CALLED FOR. 6. DURING THE COURSE OF HEARING BEFORE US, THE DEPARTM ENTAL REPRESENTATIVE (DR) STATED THAT MATTER COULD BE DECIDED ON MERITS.THE AUTHORISED RE PRESENTATIVE (AR) RELIED UPON THE ORDER OF THE FAA AND STATED THAT DEPARTMENT HAD NO EVIDEN CE ABOUT THE CREDIT OF CC FOR THE YEAR UNDER APPEAL. WE FIND THAT IN THE REMAND REPORT THE AO HIMSELF AS STATED THAT NO DOCUMENTARY EVIDENCE WAS AVAILABLE ABOUT RECEIPT OF CER.S DURING THE YEAR UN DER CONSIDERATION.CLEARLY THE THEN AO HAD MADE THE ADDITION WITHOUT ANY BASIS.THEREFORE, IN O UR OPINION, THE ORDER OF THE FAA DOES NOT NEED ANY INTERFERENCE FROM OUR SIDE.CONFIRMING THE SAME, IS DECIDED AGAINST THE AO. AS A RESULT, APPEAL FILED BY THE AO STANDS PARTLY A LLOWED. . ORDER PRONOUNCED IN THE OPEN COURT ON 10 TH FEBRUARY, 2017. 10 2017 SD/- SD/- ( /SANJAY GARG) ( ! / RAJENDRA) ' / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI; # DATED : 10 .02.2017 . JV.SR.PS. / COPY OF THE ORDER FORWARDED TO : 1. APPELLANT / 2. RESPONDENT / 3. THE CONCERNED CIT(A)/ , 4. THE CONCERNED CIT / 4267/M/14-(07-08) LANXESS INDIAPVT.LTD. 3 5. DR E BENCH, ITAT, MUMBAI / , , . . . 6. GUARD FILE/ //TRUE COPY// / BY ORDER, / DY./ASST. REGISTRAR , /ITAT, MUMBAI.