M/s. Munjal Auto Industries Ltd., Baroda V. The Addl.CIT.,Rnge-4, Baroda

ITA 475/AHD/2012

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 1678 (ITAT-AHMEDABAD)
• Duration Of Justice: 4 year(s) 2 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-05-2016
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: D
• Next Hearing Date: 11-05-2016
• Assessment Year: 2008-2009
• Appeal Filed On: 22-02-2012
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: SONIA KUMAR
• Assessee Lawyers: SURENDRA MODIANIAR
• Keywords: Earning of tax free income; Capital expenditure
• Section: 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD D BENCH (BEFORE SHRI RAJPAL YADAV, JUDICIAL MEMBER & SHRI N.K. BILLAIYA, ACCOUNTANT MEMBER) ITA. NO: 475/AHD/2012 (ASSESSMENT YEAR: 2008-09) MUNJAL AUTO INDUSTRIES LTD. 187 G.I.D.C., ESTATE, WAGHODIA, DISTRICT BARODA-391760 V/S THE ADDITIONAL CIT, RANGE-4, BARODA (APPELLANT) (RESPONDENT) PAN: AAACG8588L APPELLANT BY : SHRI SURENDRA MODIANI,AR RESPONDENT BY : SMT. SONIA KUMAR, SR. D.R. ( )/ ORDER DATE OF HEARING : 11 -05-201 6 DATE OF PRONOUNCEMENT : 12 -05-2016 PER N.K. BILLAIYA, ACCOUNTANT MEMBER: 1. THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAIN ST THE ORDER OF LD. CIT(A)-III, BARODA DATED 19.12.2011 PERTAINING TO A .Y. 2008-09. ITA NO 475/A HD/2016 . A.Y. 2008- 09 2 2. THE GRIEVANCE OF THE ASSESSEE IS TWOFOLD. THE FIRST GRIEVANCE RELATES TO THE DISALLOWANCE MADE U/S. 14A OF THE ACT. 3. THE ASSESSEE IS ENGAGED IN MANUFACTURING OF AUTO CO MPONENTS FOR TWO WHEELERS. WHILE SCRUTINIZING THE RETURN OF INCOME, THE A.O FOUND THAT THE ASSESSEE HAS CLAIMED DIVIDEND ON MUTUAL FUND AM OUNTING TO RS. 1,15,00,983/- AS EXEMPT. THE A.O OBSERVED THAT THE ASSESSEE HAS SUO MOTU DISALLOWED RS. 50,000/- U/S. 14A OF THE ACT. T HE ASSESSEE WAS ASKED TO SHOW CAUSE WHY THE DISALLOWANCE SHOULD NOT BE MADE AS PER THE PROVISIONS OF SECTION 14A READ WITH RULE 8D. AS SESSEE FILED A DETAILED REPLY STATING THAT THE INVESTMENTS HAVE BE EN MADE FROM OWN FUNDS AND NO BORROWED FUNDS HAVE BEEN UTILIZED FOR THE PURPOSES OF MAKING INVESTMENT. THIS CLAIM OF THE ASSESSEE WAS F OUND ACCEPTED BY THE A.O BUT IN SO FAR AS THE ALLOCATION OF ADMINIST RATIVE EXPENSES ARE CONCERNED, THE A.O COMPUTED THE DISALLOWANCE AS PER THE FORMULA GIVEN IN RULE 8D AND COMPUTED THE DISALLOWANCE AT R S. 7,94,592/- AND SINCE THE ASSESSEE HAS SUO MOTU DISALLOWED RS. 50,0 00/-. THE A.O MADE AN ADDITION OF RS. 7,44,592/-. 4. ASSESSEE CARRIED THE MATTER BEFORE THE LD. CIT(A) B UT WITHOUT ANY SUCCESS. 5. THE RELEVANT FINDINGS OF THE LD. CIT(A) READS AS UN DER:- 5.3.1 SO FAR AS DISALLOWANCE OUT OF OTHER EXPENSES ARE CONCERNED, THE APPELLANT HAS NOT MAINTAINED ANY SEPARATE BOOKS OF ACCOUNTS FOR THE EXPENSES RELATED TO EARNING OF EXEMPT INCOME. IN SU CH A CASE, A PART OF ADMINISTRATIVE EXPENSES RELATED TO SUCH INCOME HAS TO BE DISALLOWED U/S 14A. FROM THE RECORDS, IT IS SEEN THAT THE AVERAGE INVES TMENT IN MUTUAL FUNDS AMOUNTED TO RS. 1,04,42,84,052/-. INVESTMENT OF SUC H HUGE FUNDS REQUIRES DECISION ON PART OF BOARD OF DIRECTORS AND OTHER SE NIOR EXECUTIVE OF THE ITA NO 475/A HD/2016 . A.Y. 2008- 09 3 COMPANY AND CANNOT BE LEFT TO ONE FINANCE EXECUTIVE . IT ALSO REQUIRES INVOLVEMENT OF CLERICAL AND SUPERVISORY STAFF. HENC E, THE APPELLANTS CLAIM THAT ONLY RS. 50,000/- SHOULD BE DISALLOWED ON THIS ACCOUNT IS NOT CORRECT. ONCE THE APPELLANTS METHOD OF WORKING OF DISALLOWA NCE U/S. 14A IS REJECTED, THE DISALLOWANCE IS REQUIRED TO BE MADE AS PER RULE 8D W.E.F. 2008-09. HENCE, IT IS HELD THAT A.O HAS RIGHTLY INVOKED RULE 8D AND MADE DISALLOWANCE. ACCORDINGLY, APPELLANTS APPEAL ON TH IS GROUND IS DISMISSED. 6. AGGRIEVED BY THIS, THE ASSESSEE IS BEFORE US. THE L D. COUNSEL FOR THE ASSESSEE SIMPLY REITERATED WHAT HAS BEEN STATED BEF ORE THE LOWER AUTHORITIES. THE LD. D.R. STRONGLY RELIED UPON THE FINDINGS OF THE REVENUE AUTHORITIES. 7. WE HAVE CAREFULLY CONSIDERED THE ORDERS OF THE AUTH ORITIES BELOW. EVEN, BEFORE US THE LD. COUNSEL COULD NOT EXPLAIN T HE EXPENDITURE INCURRED ON EARNING EXEMPT INCOME. AS NO SEPARATE B OOKS OF ACCOUNTS HAVE BEEN MAINTAINED BY THE ASSESSEE, WE DO NOT FIN D ANY ERROR OR INFIRMITY IN THE FINDINGS OF THE LD. CIT(A) (SUPRA) . WE ACCORDINGLY DISMISS THIS GRIEVANCE OF THE ASSESSEE. 8. THE SECOND GRIEVANCE RELATES TO THE DISALLOWANCE OF RS. 2,56,600/- OUT OF EXPENDITURE DEBITED TO REPAIRS AND MAINTENANCE. 9. WHILE SCRUTINIZING THE ACCOUNTS OF THE ASSESSEE, TH E A.O FOUND THAT THE ASSESSEE HAS DEBITED THE FOLLOWING EXPENDITURE UNDE R THE HEAD REPAIRS:- (A) REPAIRING WORK ON ROAD NO. 2 RS. 1,51,775/- (B) REPAIRING OF PLASTER AND FENCING RS. 1,25, 959/- WORK IN PARKING AREA ITA NO 475/A HD/2016 . A.Y. 2008- 09 4 (C) REPAIRING WORK ON ROAD NO. 1 RS. 1,35,000/ - (D) FENDING ON ROAD NO. 1 NEAR SCRAP YARD RS. 1, 38,600/- (E) GALI, WALL & OTHER MISC. EXPS. RS. 1,18,000 /- TOTAL RS. 6,69,334/ - 10. THE ASSESSEE WAS ASKED TO JUSTIFY THE CLAIM OF EXPE NDITURE BEING OF REVENUE IN NATURE. ASSESSEE FILED A DETAILED REP LY WHICH DID NOT FIND ANY FAVOUR WITH THE A.O WHO WAS OF THE FIRM BELIEF THAT THE EXPENDITURE CANNOT BE TERMED AS CURRENT REPAIRS AND , THEREFORE, TREATED THE EXPENDITURE AS CAPITAL EXPENDITURE AND ADDED BACK RS. 6,69,334/- TO THE TOTAL INCOME OF THE ASSESSEE. 11. ASSESSEE STRONGLY AGITATED THE MATTER BEFORE THE LD . CIT(A). AFTER CONSIDERING THE FACTS AND THE SUBMISSIONS, TH E LD. CIT(A) WAS CONVINCED THAT THE EXPENDITURE INCURRED ON REPAIRIN G OF ROADS, REPAIRING OF PLASTER AND FENCING IN PARKING AREA AR E IN THE NATURE OF CURRENT REPAIRS AND ACCORDINGLY DELETED THE EXPENDI TURE UNDER THESE HEADS. HOWEVER, IN SO FAR AS EXPENDITURE ON FENCIN G ON ROAD NO. 1 NEAR SCRAP YARD AND CONSTRUCTION OF GALI/WALL IS CO NCERNED, THE LD. CIT(A) WAS OF THE OPINION THAT THEY HAVE BEEN LAID OUT TO ACQUIRE NEW ASSET AND HENCE, ARE TO BE TREATED AS CAPITAL EXPEN DITURE AND CONFIRMED THE ADDITION TO THIS EXTENT AND ALSO DIRE CTED THE A.O TO CONSIDER THE CLAIM OF DEPRECATION ON SUCH TREATMENT OF CAPITAL EXPENDITURE. 12. AGGRIEVED BY THIS, THE ASSESSEE IS BEFORE US. THE L D. COUNSEL FOR THE ASSESSEE REITERATED WHAT HAS BEEN STATED BEFORE THE LOWER AUTHORITIES. THE LD. D.R. STRONGLY RELIED UPON THE FINDINGS OF THE LD. CIT(A). ITA NO 475/A HD/2016 . A.Y. 2008- 09 5 13. WE HAVE GIVEN A THOUGHTFUL CONSIDERATION TO THE ORD ERS OF THE AUTHORITIES BELOW. WE FIND THAT THE ASSESSEE COULD NOT BRING ANY EVIDENCE ON RECORD BY WHICH WE CAN FIND OUT ANY ERR OR OR INFIRMITY IN THE FINDINGS OF THE LD. CIT(A). IN OUR CONSIDERED OPINION, THE FINDINGS OF THE LD.CIT(A) ARE BASED ON FACTS WHICH COULD NOT BE REBUTTED BY THE ASSESSEE NEITHER BEFORE THE LOWER AUTHORITIES NOR B EFORE US. WE, THEREFORE, DECLINE TO INTERFERE; THE SECOND GRIEVAN CE OF THE ASSESSEE IS ALSO DISMISSED. 14. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS DISMISSED. ORDER PRONOUNCED IN OPEN COURT ON 12 - 05 - 2016. SD/- SD/- (RAJPAL YADAV) (N. K. BILLAIYA) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD: TRUE COPY RAJESH COPY OF THE ORDER FORWARDED TO: - 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE CIT (APPEALS) 4. THE CIT CONCERNED. 5. THE DR., ITAT, AHMEDABAD. 6. GUARD FILE. BY ORDER DEPUTY/ASSTT.REGISTRAR ITAT,AHME DABAD