DCIT, Ludhiana V. M/s Malwa Industries Ltd., Ludhiana

ITA 429/CHANDI/2017

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 6511 (ITAT-CHANDIGARH)
• Duration Of Justice: 9 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-12-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: Not Allotted
• Assessment Year: 2011-2012
• Appeal Filed On: 07-03-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: DR GULSHAN RAJ
• Keywords: Capital expenditure
• Section: 14A; 37(1)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DIVISION BENCH B, CHANDIGARH BEFORE SHRI SANJAY GARG, JUDICIAL MEMBER AND MS.ANNAPURNA GUPTA, ACCOUNTANT MEMBER ITA NO.429/CHD/2017 (ASSESSMENT YEAR : 2011-12) AND ITA NO.430/CHD/2017 (ASSESSMENT YEAR : 2012-13) THE D.C.I.T., VS. M/S MALWA INDUSTRIES LTD., CIRCLE-6, INDUSTRIAL ARE-A, LUDHIANA. LUDHIANA. PAN: AABCM1287D (APPELLANT) (RESPONDENT) APPELLANT BY : DR.GULSHAN RAJ, CIT, DR RESPONDENT BY : SHRI SUDHIR SEHGAL DATE OF HEARING : 06.12.2017 DATE OF PRONOUNCEMENT : 21.12.2017 ORDER PER ANNAPURNA GUPTA, A.M.: BOTH THE ABOVE APPEALS HAVE BEEN FILED BY THE REVEN UE AGAINST SEPARATE ORDERS PASSED BY THE LD. COMMISSIO NER OF INCOME TAX(APPEALS)-4, LUDHIANA [HEREINAFTER REFERR ED TO AS CIT(APPEALS)] DATED 30.12.2016 RELATING TO ASSESS MENT YEARS 2011-12 AND 2012-13. 2. IT WAS COMMON GROUND BETWEEN BOTH THE PARTIES TH AT THE ISSUES INVOLVED IN BOTH APPEALS WERE IDENTICAL. THEREFORE, BOTH THE APPEALS WERE HEARD TOGETHER AND ARE BEING DISPOSED OFF BY WAY OF A COMMON ORDER. FOR THE SAKE OF CONVENIENCE WE SHALL BE DEALING WIT H FACTS IN THE CASE OF I.T.A NO.429/CHD/17 RELATING T O ASSESSMENT YEAR 2011-12. 2 I.T.A. NO 429/CHD/2017 (A.Y 2011-12): 3. GROUND NO. 1 RAISED BY THE REVENUE READS AS UNDE R: I) 'WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LEARNED CIT(A) HAS ERRED IN LAW IN DELETING THE ADDITION OF RS. 25,24,786/- MADE ON ACCOUNT OF DISALLOWANCE OF BANK CHARGES. 4. THE REVENUE IN THE ABOVE GROUND HAS CHALLENGED T HE DELETION OF DISALLOWANCE OF BANK CHARGES OF RS.25,2 40,786/- THE MAIN REASON FOR MAKING THE IMPUGNED DISALLOWANC E BY THE A.O. WAS THAT THE ASSESSEE COMPANY HAD PAID THE BANK CHARGES FOR PROCESSING OF WORKING CAPITAL LOAN WHIC H IN HIS OPINION WAS A CAPITAL EXPENDITURE AND HENCE NOT ALL OWABLE UNDER SECTION 37(1) OF THE ACT. 5. THE LD. CIT(APPEALS) DELETED THE DISALLOWANCE SO MADE ON FINDING THAT IDENTICAL ISSUE HAD BEEN DECIDED IN FAVOR OF THE ASSESSEE COMPANY IN ASSESSMENT YEAR 2005-06 TO 2008- 09 BY THE LD. CIT(APPEALS)WHOSE ORDER, IN TURN, HAD BEEN UPHELD BY THE I.T.A.T. ALSO. 6. BEFORE US LD. DR RELIED UPON THE ORDER OF THE A.O.,THOUGH FAIRLY CONCEDED THAT THE ISSUE HAD BEEN DECIDED BY THE ITAT IN FAVOUR OF THE ASSESSEE IN PRECEDING YEARS. THE LD. COUNSEL FOR THE ASSESSEE ,ON THE OTHER HAND RELIED ON THE ORDER OF CIT(APPEALS). 7. HAVING HEARD BOTH THE PARTIES WE FIND NO INFIRMI TY IN THE ORDER OF THE LD. CIT(APPEALS). LD. DR HAD NOT B ROUGHT TO OUR NOTICE ANY DISTINGUISHING FACTS IN THE PRESENT CASE AS COMPARED TO THE FACTS IN THE PRECEDING YEARS WHERE IN IDENTICAL EXPENDITURE HAD BEEN HELD TO BE REVENUE I N NATURE 3 AND ALLOWED IN APPEAL BOTH BY THE CIT(APPEALS) AND THE I.T.A.T. FOR THE AFORESAID REASON, SINCE THE ISSUE STANDS DECIDED IN FAVOR OF THE ASSESSEE IN PRECEDING YEARS AND IN THE ABSENCE OF ANY DISTINGUISHING FACTS HAVING BEEN BROUGHT TO OUR NOTICE, WE UPHOLD THE ORDER THE OF THE LD. CIT(APPEALS) DELETING THE DISALLOWANCE OF BANK CHAR GES AMOUNTING TO RS.25,240,786/-. GROUND OF APPEAL NO. 1 RAISED BY THE REVENUE, THEREFORE, STAND DISMISSED. 8. GROUND OF APPEAL NO. 2 RAISED BY THE REVENUE REA DS AS UNDER: II) 'WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN SAW. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) WAS JUSTIFIED IN RESTRICTING THE ADDITION OF RS.2,86.58,780/- TO RS.1.67,075/-MADE BY THE ASSESSING OFFICER UNDER SECTION 14A OF THE INCOME TAX ACT, 19 61 READ WITH RULE 8D OF THE INCOME TAX RULES, 1962 AND THER EBY ALLOWING RELIEF OF RS. 2, 84,91, 705/- TO THE ASSE SSEE'. 9. THE AFORESAID GROUND RELATES TO THE ISSUE OF DISALLOWANCE OF EXPENSES MADE AS PER THE PROVISIONS OF SECTION 14A OF THE ACT. BRIEFLY STATED THE A.O. MAD E THE IMPUGNED DISALLOWANCE ON ACCOUNT OF THE FACT THAT T HE ASSESSEE COMPANY HAD MADE INVESTMENTS IN SHARES/MUT UAL FUNDS, THE INCOME FROM WHICH WAS EXEMPT FROM TAX. THEREFORE INVOKING THE PROVISION OF SECTION 14A REA D WITH RULE 8D OF THE INCOME TAX RULE 1961,THE A.O. MADE DISALLOWANCE OF EXPENSES AMOUNTING TO RS.2,86,58,78 0/- 10. THE LD. CIT(APPEALS), HOWEVER, DELETED THE DISALLOWANCE MADE ON ACCOUNT OF INTEREST AS PER RUL E 4 8D(2(II) OF THE INCOME TAX RULES,1962, FOR THE REAS ON THAT THE ASSESSEE HAD SUFFICIENT INTEREST FREE FUNDS OF ITS OWN FOR MAKING THE INVESTMENTS. THE DISALLOWANCE ON ACCOUNT OF ADMINISTRATIVE EXPENSES AS PER RULE 8D(2)(III) WAS HOWEVER UPHELD. THUS, IN EFFECT OUT OF THE TOTAL DISALLOWAN CE MADE BY THE A.O. OF RS.2,86,58,780/-, DISALLOWANCE OF RS.2,84,91,705/- WAS DIRECTED TO BE DELETED AND THE BALANCE AMOUNTING TO RS.1,67,075/- WAS UPHELD. AGGRIEVED BY THE SAME THE REVENUE HAS RAISED THE PRESENT GROUND BEFO RE US. 11. BEFORE US LD.DR RELIED ON THE ORDER OF THE A.O. WHILE THE LD. COUNSEL FOR THE ASSESSEE RELIED ON THE ORDE R OF CIT(APPEALS). 12. HAVING HEARD BOTH THE PARTIES AND HAVING GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW, WE FIN D NO INFIRMITY IN THE ORDER OF THE LD. CIT(APPEALS) DELE TING THE DISALLOWANCE. WE FIND THAT THE ASSESSEE HAD REPEATE DLY CONTENTED BOTH BEFORE THE A.O. AND THE CIT(APPEALS) , THAT IT HAD UTILIZED ITS OWN INTEREST FREE FUNDS FOR THE PU RPOSE OF MAKING THE IMPUGNED INVESTMENTS WHICH WERE MADE IN EARLIER YEARS. IT WAS SUBMITTED BY THE ASSESSEE THA T THE SAID INVESTMENTS WERE MADE IN FINANCIAL YEARS 2005-06 & 2006- 07 WHEN THE CASH ACCRUALS FROM THE BUSINESS OF THE COMPANY WERE TO THE TUNE OF RS.37.08 CRORES AND RS. 51.71 CRORES WHICH WERE SUFFICIENT FOR MAKING THE IMPUGNE D INVESTMENTS OF RS.34.65 CRORES. COPIES OF FINANCIAL STATEMENTS OF THE SAID YEARS WERE ALSO FILED. BASED ON THE ABOVE FACTS THE LD. CIT(APPEALS), WE FIND, DELETED THE 5 DISALLOWANCE MADE FOLLOWING THE DECISION OF THE JURISDICTIONAL HIGH COURT IN THE CASE OF HERO CYCLE S LTD. THE SAID PROPOSITION HAS BEEN REITERATED BY THE HON ,BLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF CIT VS. MAX INDIA LTD. IN ITA NO.186 OF 2013 (O&M) VIDE ORDER D T.06-09- 16. THE LD. DR HAS NOT CONTROVERTED THE AFORESTATE D FACTS BEFORE US NOR HAS ANY CONTRARY DECISION OF THE JURI SDICTIONAL HIGH COURT BEEN BROUGHT TO OUR NOTICE. WE THEREFORE SEE NO REASON TO DISTURB THE ORDER OF THE LD. CIT(APPEALS) . 13. IN VIEW OF THE ABOVE, WE UPHOLD THE ORDER THE L D. CIT(APPEALS) IN DELETING THE DISALLOWANCE MADE UNDE R SECTION 14A AMOUNTING TO RS.2,84,91,705/- GROUND APPEAL NO. 2 RAISED BY THE REVENUE, THEREFOR E, STANDS DISMISSED. 14. THE APPEAL OF THE REVENUE IS DISMISSED. I.T.A. NO 430/CHD/2017 (A.Y 2012-13): 15. GROUND NO.1 RAISED BY THE REVENUE READS AS UNDE R: I) 'WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LEARNED CIT(A) HAS ERRED IN LAW IN DELETING THE ADDITION OF RS.22,21,132/- MADE ON ACCOUNT OF DISALLOWANCE OF BANK CHARGES. 16. IT WAS COMMON GROUND BETWEEN THE PARTIES THAT T HE ISSUE IN THIS GROUND IS SIMILAR TO THE ISSUE IN GRO UND NO.1 RAISED BY THE REVENUE IN ITS APPEAL IN ITA NO. 429/CHD/2017 DEALT WITH BY US ABOVE. THE FINDINGS G IVEN THEREIN AT PARA 7 OF OUR ORDER ABOVE SHALL APPLY TO THIS 6 GROUND ALSO MUTATIS MUTANDIS. GROUND NO.1 RAISED BY THE REVENUE, THEREFORE, STANDS DISMISSED. 17. GROUND NO.2 RAISED BY THE REVENUE READS AS UNDE R: II) 'WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) WAS JUSTIFIED IN RESTRICTING THE ADDITION OF RS.5,2 8,78,161/- TO RS.17,32,500/- MADE BY THE ASSESSING OFFICER UNDER SECTION 14A OF THE INCOME TAX ACT, 1961 READ WITH RULE 8D OF THE IN COME TAX RULES, 1962 AND THEREBY ALLOWING RELIEF OF RS. 5,11,45,661/- TO THE ASSESSEE'. 18. IT WAS COMMON GROUND BETWEEN THE PARTIES THAT T HE ISSUE IN THIS GROUND IS SIMILAR TO THE ISSUE IN GRO UND NO.4 RAISED BY THE REVENUE IN ITS APPEAL IN ITA NO. 429/CHD/2017 DEALT WITH BY US ABOVE. THE FINDINGS G IVEN THEREIN AT PARA 12 OF OUR ORDER ABOVE SHALL APPLY T O THIS GROUND ALSO MUTATIS MUTANDIS. GROUND NO.2 RAISED BY THE REVENUE, THEREFORE, STANDS DISMISSED. 19. THE APPEAL OF THE REVENUE IS DISMISSED. 20. IN THE RESULT, THE BOTH THE APPEALS OF THE REVE NUE ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT. ( SANJAY GARG) (ANNAPURNA GUPTA) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED 21 ST DECEMBER, 2017 *RATI* COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT 4. THE CIT(A) 5. THE DR ASSISTANT REGISTRAR, ITAT, CHANDIGARH 7