ABC BEARING LTD, MUMBAI V. DCIT 6(1), MUMBAI

ITA 4285/MUM/2016

• Counselvise Citation: [2018] 126 COUNSELVISE.COM (IT) 0501 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 7 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-01-2018
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: Not Allotted
• Assessment Year: 2011-2012
• Appeal Filed On: 21-06-2016
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: RAJAT MITTAL LD
• Assessee Lawyers: JINITA BHIMANI LD
• Keywords: Depreciation; Opportunity of being heard; Earning of tax free income
• Section: 143(3); 14A

Judgement Text

ITA.NO.4285/MUM/2016 ABC BEARINGS LIMITED ASSESSMENT YEAR 2011-12 IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH, MUMBAI , , BEFORE SHRI MAHAVIR SINGH, JM AND SHRI MANOJ KUMAR AGGARWAL, AM ./I.T.A. NO. 4285/MUM/2016 ( / ASSESSMENT YEAR: 2011-12) ABC BEARING S LIMITED 402-B, POONAM CHAMBERS DR.ANNIE BESANT ROAD WORLI,MUMBAI 400 018 / VS. DEPUTY COMMISSIONER OF INCOME TAX-6(1) AAYKAR BHAVAN,M.K.ROAD MUMBAI-400 020 ./ ./PAN/GIR NO. AAACT-5018-Q ( /APPELLANT ) : ( !' / RESPONDENT ) ASSESSEE BY : JINITA BHIMANI, LD. AR REVENUE BY : RAJAT MITTAL, LD. DR / DATE OF HEARING : 25/01/2018 / DATE OF PRONOUNCEMENT : 31/01 /2018 / O R D E R PER MANOJ KUMAR AGGARWAL (ACCOUNTANT MEMBER) 1. THE CAPTIONED APPEAL BY ASSESSEE FOR ASSESSMENT YEAR [AY] 2011-12 CONTEST THE ORDER OF LD. COMMISSIONER OF IN COME-TAX (APPEALS)-12 [CIT(A)], MUMBAI, APPEAL NO.CIT(A)-12/DCIT- 6(1)(1)/21/14-15 DATED 29/04/2016. THE ASSESSMENT FOR IMPUGNED AY WAS FRAMED BY LD. DEPUTY COMMISSIONER OF INCOME TAX 6(1), MUMBAI [AO] U/S 143(3) OF THE INCOME TAX ACT, 1961 ON 18/03/2014. THE ASSESSEE HAS RAISED THE FOLLOWING EFFECTIVE GROUNDS OF APPEAL:- ITA.NO.4285/MUM/2016 ABC BEARINGS LIMITED ASSESSMENT YEAR 2011-12 2 1. THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) ERRED IN CONFIRMING DISALLOWANCE OF RS.7,60,254/- U/S. 14A OF THE INCOM E-TAX ACT 1961 CONSISTING OF DISALLOWANCE OUT OF INTEREST OF RS.1,35,254/- AN D DISALLOWANCE OUT OF EXPENSES OF RS.6,25,000/-. YOUR APPELLANTS SUBMIT T HAT THE SAID DISALLOWANCE OF RS.7,60,254/- U/S.14A IS NOT AT ALL WARRANTED AN D THE SAME OUGHT TO BE DELETED. WITHOUT PREJUDICE TO THE ABOVE, YOUR APPELLANTS SUB MIT THAT THE DISALLOWANCE U/S.14A MADE BY THE LEARNED ASSESSING OFFICER IS EX CESSIVE AND OUGHT TO BE REDUCED SUBSTANTIALLY. 2. THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS ) ERRED IN CONFIRMING THE ALLOWANCE, OF DEPRECIATION OF ELECTRICAL INSTALLATI ON AT RS.21,61,264/-, BEING 10% OF RS.2,16,12,646/- ON ELECTRICAL INSTALLATIONS BY CONSIDERING THE SAME AS FURNITURE & FITTINGS AND NOT ALLOWING THE APPELL ANTS CLAIM OF DEPRECIATION OF RS.32,41,897/-, BEING 15% OF RS.2,16,12,640/- BY CO NSIDERING THE ELECTRICAL INSTALLATIONS AS PLANT & MACHINERY. YOUR APPELLANTS SUBMIT THAT THEY HAVE RIGHTLY CLAIMED THE DEPRECIATION ON ELECTRICAL INST ALLATION AT 15% BEING THE RATE APPLICABLE TO PLANT & MACHINERY AND SUBMIT THAT THE DEPRECIATION AS CLAIMED BY THEM OUGHT TO HAVE BEEN ALLOWED. 3. THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS ) ERRED IN CONFIRMING THE ADDITION OF SUM OF RS.7,60,254/- BEING AMOUNT DISAL LOWED U/S.14A WHILE COMPUTING THE BOOK PROFIT U/S.115JB. YOUR APPELLANT S SUBMIT THAT THIS ADDITION OF RS.7,60,254/- IS NOT WARRANTED AND THE LEARNED A SSESSING OFFICE BE DIRECTED TO DELETE THE SAME WHILE COMPUTING THE BOO K PROFIT U/S.115JB. WITHOUT PREJUDICE TO THE ABOVE, YOUR APPELLANTS SUB MIT THAT THE DISALLOWANCE IS EXCESSIVE AND OUGHT TO BE REDUCED SUBSTANTIALLY. 2.1 FACTS, IN BRIEF, ARE THAT THE ASSESSEE BEING RESIDENT CORPORATE ASSESSEE ENGAGED IN THE BUSINESS OF MANUFACTURING OF BEARINGS WAS ASSESSED AT RS.35.37 CRORES AFTER CERTAIN ADJUSTMEN TS / DISALLOWANCES AS AGAINST RETURNED INCOME O RS.35.19 CRORES E-FILED BY THE ASSESSEE ON 31/08/2011. THE ISSUE UNDER DISPUTE IS DISALLOWA NCE U/S 14A AND RATE OF DEPRECIATION ON CERTAIN ELECTRICAL INSTALLATIONS. 2.2 IT WAS NOTED THAT THE ASSESSEE REFLECTED EXEMPT DIVIDEND INCOME OF RS. 4.64 LACS AND DURING ASSESSMENT PROCEEDINGS, FU RNISHED WORKING OF DISALLOWANCE U/S 14A READ WITH RULE 8D FOR RS.7.60 LACS WHICH COMPRISED OF INTEREST DISALLOWANCE OF RS.1.35 LACS U/R 8D(2)(II) AND EXPENSE DISALLOWANCE OF RS.6.25 LACS U/R 8D(2)(III) . THE SAME WAS ACCEPTED BY LD. AO AND ACCORDINGLY ADDED TO THE INC OME OF THE ASSESSEE UNDER NORMAL PROVISIONS AS WELL AS WHILE C OMPUTING BOOK PROFIT FOR THE PURPOSE OF MINIMUM ALTERNATIVE TAX [MAT] U/S 115JB. ITA.NO.4285/MUM/2016 ABC BEARINGS LIMITED ASSESSMENT YEAR 2011-12 3 2.3 THE SECOND ISSUE PERTAINS TO RATE OF DEPRECIATI ON ON CERTAIN ELECTRICAL INSTALLATIONS. THE ASSESSEE, TREATING TH EM AS PLANT & MACHINERY, CLAIMED DEPRECIATION @15% WHICH WAS RESTRICTED TO 1 0% BY LD. AO, TREATING THEM AS PART OF FURNITURE AND FIXTURE. THE DIFFERENTIAL ADDITION CAME TO RS10.80 LACS. 3. AGGRIEVED, THE ASSESSEE CONTESTED THE SAME WITHOUT ANY SUCCESS BEFORE LD. CIT(A) VIDE IMPUGNED ORDER DATED 29/04/2 016 WHERE LD. CIT(A) CONFIRMED THE STAND OF LD. AO. AGGRIEVED, TH E ASSESSEE IS IN FURTHER APPEAL BEFORE US. 4. THE LD. AUTHORISED REPRESENTATIVE FOR ASSESSEE [ AR], WHILE DRAWING OUR ATTENTION TO THE DOCUMENTS PLACED IN TH E PAPER- BOOK, CONTESTED THE ADDITIONS WHERE LD. DEPARTMENTAL REPR ESENTATIVE [DR] PLACED RELIANCE ON THE STAND OF LOWER AUTHORITIES. 5. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED RELEVANT MATERIAL ON RECORD. IT EMANATES FROM THE RECORD THAT MAJOR I NVESTMENTS MADE BY THE ASSESSEE FOR RS.12.50 CRORES IS IN THE SHAPE OF EQUITY CAPITAL OF NSK-ABC BEARINGS LTD. AND THE ASSESSEE HAS CONTENDED THAT THESE INVESTMENTS ARE IN JOINT VENTURES AS BUSINESS INVES TMENT AND OLD INVESTMENTS MADE IN AY 2008-09. FURTHER, THE ASSESS EE HAS NOT EARNED ANY EXEMPT INCOME FROM THE SAID INVESTMENT DURING T HE YEAR. THESE FACTORS ARE NOT CONTROVERTED BY THE REVENUE. FURTHE R, A PERUSAL OF THE FINANCIAL STATEMENTS PLACED ON RECORD REVEALS THAT THE INTEREST FREE FUNDS IN THE SHAPE OF SHARE CAPITAL AND RESERVES FAR EXCEEDS THE INVESTMENTS MADE BY THE ASSESSEE AND THEREFORE, IN THE ABSENCE OF NEXUS BETWEEN INTEREST BEARING LOANS VIS--VIS INVESTMENTS MADE B Y THE ASSESSEE, THE PRESUMPTION HAS TO BE DRAWN IN ASSESSEES FAVOR THA T THE INVESTMENTS ITA.NO.4285/MUM/2016 ABC BEARINGS LIMITED ASSESSMENT YEAR 2011-12 4 WERE MADE OUT OF INTEREST FREE OWNED FUNDS. UPON SI MILAR FACTS, WE FIND THAT THE TRIBUNAL IN ASSESSEES OWN CASE FOR AY 200 8-09 ITA NO. 1303/M/2012 DATED 06/01/2016 DELETED DISALLOWANCE U /S 14A BY FINDING THAT OWN FUNDS FAR EXCEEDED THE INVESTMENTS MADE BY THE ASSESSEE. THEREFORE, AFTER CONSIDERING THE FACTUAL MATRIX, WE FIND THAT IMPUGNED ADDITION WAS NOT JUSTIFIED AND THEREFORE, BY DELETI NG THE SAME, WE ALLOW THIS GROUND OF ASSESSEES APPEAL WHICH MAKES GROUND NO. 3 INFRUCTUOUS. RESULTANTLY, GROUND NO.1 STANDS ALLOWED WHEREAS GR OUND NO. 3 STANDS DISMISSED. 6. SO FAR AS RATE OF DEPRECIATION ON ELECTRICAL INSTALLATION IS CONCERNED, WE NOTE THAT LD. CIT(A), AT PARA-5 HAS DISMISSED ASSESSEES APPEAL SINCE THE FACTS ON RECORD COULD NOT SPELL OUT THE F UNCTIONS OF SUCH ELECTRICAL FITTINGS . WE ALSO FIND THAT THE ASSESSEE, BEFORE LD. CIT(A) , HAD RAISED A PLEA THAT NO OPPORTUNITY OF BEING HEARD WA S GRANTED BY LD. AO TO THE ASSESSEE TO EXPLAIN THE NATURE OF THESE ELEC TRICAL FITTINGS. HENCE, WITHOUT DELVING MUCH DEEPER INTO THE ISSUE, THE MAT TER IS REMITTED BACK TO THE FILE OF LD. AO TO RE-APPRECIATE THE FACTUAL MATRIX WITH A DIRECTION TO THE ASSESSEE TO SUBSTANTIATE HIS CLAIM IN THIS REGA RD. RESULTANTLY, THIS GROUND STANDS ALLOWED FOR STATISTICAL PURPOSES. 7. RESULTANTLY, THE ASSESSEES APPEAL STANDS PARTLY ALLOWED IN TERMS OF OUR ABOVE ORDER. ITA.NO.4285/MUM/2016 ABC BEARINGS LIMITED ASSESSMENT YEAR 2011-12 5 ORDER PRONOUNCED IN THE OPEN COURT ON 31 ST JANUARY,2018 SD/- SD/- (MAHAVIR SINGH) ( MANOJ KUMAR AGGARWAL) / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI; DATED : 31.01.2018 SR.PS:- THIRUMALESH ! / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. !' / THE RESPONDENT 3. * ( ) / THE CIT(A) 4. * / CIT CONCERNED 5. !$- , - , / DR, ITAT, MUMBAI 6. ./ / GUARD FILE / BY ORDER, / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI