National Textile Corporation Ltd., New Delhi V. DCIT, Circle-13(1), New Delhi

ITA 4787/DEL/2017

• Counselvise Citation: [2022] 104 COUNSELVISE.COM (IT) 9665 (ITAT-DELHI)
• Duration Of Justice: 5 year(s) 2 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-09-2022
• Appeal Filed By: Assessee
• Order Result: PartlyAllowed
• Bench Allotted: E
• Assessment Year: 2011-2012
• Appeal Filed On: 26-07-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Depreciation; Earning of tax free income; Cost of acquisition; Valuation report; Unabsorbed depreciation; TDS; Rule 8D
• Section: 143(3); 142(1); 14A; 13

Judgement Text

Page | 1 INCOME TAX APPELLATE TRIBUNAL DELHI BENCH “E”: NEW DELHI BEFORE SHRI N. K. BILLAIYA, ACCOUNTANT MEMBER AND SHRI ANUBHAV SHARMA, JUDICIAL MEMBER ITA No. 4787/Del/2017 (Assessment Year: 2011-12) National Textile Corporation Ltd, Scope Complex, Core-IV, 7, Institutional Area, Lodhi Road, New Delhi Vs. DCIT, Circle-13(1), New Delhi (Appellant) (Respondent) PAN: AAACN2847D ITA No. 4667/Del/2017 (Assessment Year: 2011-12) Addl. CIT, Special Range-6, New Delhi Vs. National Textile Corporation Ltd, Scope Complex, Core-IV, 7,, Institutional Area, Lodhi Road, New Delhi (Appellant) (Respondent) PAN:AAACN2847D Assessee by : Shri Ved Jain, Adv Ms. Supriya Mehta, CA Revenue by: Ms. Rinku Singh, CIT DR Shri Jeetender Chand, Sr. DR Date of Hearing 21/09/2022 Date of pronouncement /09/2022 O R D E R PER ANUBHAV SHARMA, J. M.: 1. These are the appeals preferred by the Assessee and the revenue against the order dated 03.04.2017 of Ld. Commissioner of Page | 2 Income Tax (Appeals)-38, New Delhi (hereinafter referred as First Appellate Authority in short Ld. „FAA‟) in appeal No. 05/201617 before it against the order dated 31.03.2014 passed u/s 143(3) of the Income Tax Act, 1961 (hereinafter referred as „the Act‟) by the ld. AO, DCIT, Circ-13(1), New Delhi (hereinafter referred as the Ld. AO). 2. The brief facts of the case as can be picked form record are that assessee is a Public Sector Undertaking formed with the sole object of reviving sick textile mills mainly to safeguard the interest of labourers employed by these Mills and having b/d unabsorbed losses of Rs 8,416.91 Crores during the current A.Y. 2011-12. Further assessee is also not liable to pay taxes as per BIFR mandate. Assessee filed its original E- Return as on 30th Sept 2011 which was later on revised as on 18th August 2012 declaring an income of Rs 860.28 Crores as per MAT u/s 115 JB and determined tax liability of Rs. 257.05 Crores. The case was selected for scrutiny & notice u/s 143(2) was served on assessee with in statutory time & statutory notice u/s 142(1) along with detailed questioner was also issued to assessee. Assessee replied to all the asked questions in questioner from time to time. The Ld. A.O. made following disallowances:- a. Disallowance of Rs 1,47,38,443/- u/s 14A read with Rule 8D(ii). b. Disallowance of Rs 11 ,13,426/- on account of difference in cost of acquisition of property as per valuation report. c. Disallowance of transfer expenses of Rs 77,59,383/- against sale of properties based on not providing details for it and TDS reconciliation of expenses. d. Disallowance of prior period expenses of Rs 3,93,07,000/- on the allegation that no evidences of crystallization of these expenses in the current year was given Page | 3 & similar disallowance was made in the Assessment in the A.Y. 2008-10. Assessee claims that it made detailed submissions for disallowance u/s 14A read with Rule 8D according to which no disallowance vide clause (2) sub clause (ii) is applicable on the assessee. Further Ld. A.O. also made excessive disallowance by Rs 1,63,183/- based on wrong figures of investments. Assessee submits that in the preceding A.Y. 2008-09 & 2009-10, CIT(A) has absolutely accepted the working of assessee & deleted additions based on the similar working of Ld. A.O. Assessee claims it was never provided any opportunity or confronted with the difference in valuation of property of Rs 11,13,426/- wrt to valuation report. It is alleged that the Ld. A.O. made additions against fair play without recourse to natural justice solely with the thirst of revenue. Assessee made detailed submissions regarding the nature of transfer expenses of Rs 77,59,383/- being spent on E-action, which were ignored by A.O. It is alleged that he further tried to substantiate his disallowance by referring to TDS provisions in general. Assessee also made detailed submissions pertaining to non disallowance of prior period expenses Rs. 3,93,07,000/- as per facts of the case, assessee claims that same were simply ignored. Even acceptance by department for earlier years in scrutiny/ appeal orders was also ignored. Assessee alleges that the Ld.A.O. also wrongly calculated Total taxable income of Rs 826,63,87,002/- including book profit of Rs 1,291,17,54,852/- by making wrong adjustments therein alongwith not allowing the b/d losses including unabsorbed. It is claimed that the A.O. shouldn‟t have made additions u/s 14A read with rule 8D, Prior Period expenses especially when it has been vehemently struck down by the CIT (A) in earlier years. He should have also not proceeded with additions based on wrong facts on account of Cost of acquisition of property and transfer expenses and calculated total income including Page | 4 book profit after allowing losses including unabsorbed depreciation. The Ld. CIT (A) allowed the appeal partly and so both revenue and assessee have both come in appeal. 3. The Assessee has raised the following grounds of appeal:- “1. On the facts and circumstances of the case, the order passed by the learned CIT (A) is bad both in the eye of law and on facts. 2. (i) On the facts and circumstances of the case, the learned CIT(A) has erred, both on facts and in law,in confirming the disallowance of an amount of Rs.1.47.38.443/- made by AO invoking the provision of Section 14A read with Rule 8D. (ii) That the disallowance has been confirmed despite the assessee suo motto making disallowance of an amount of Rs.9,06,897/-, also computed under Rule 8D. 3. (i) On the facts and circumstances of the case, the learned CIT(A) has erred, both on facts and in law, in rejecting the contention of the assessee that the interest expenditure having direct nexus with the taxable income, no disallowance under Rule 8D(ii) can be made. (ii) Without prejudice to the above and in the alternative the computation under Rule 8D made by AO is wrong. 4. (i) On the facts and circumstances of the case, the learned CIT(A) has erred, both on facts and in law, in confirming the addition of Rs.11,13,426/- made by AO on account of difference in cost of property sold. (ii) That the addition has been confirmed rejecting the explanation and evidence furnished by the assessee in regard to the same. (iii) That the addition has been confirmed misunderstanding the facts of the case. 5. On the facts and circumstances of the case, the learned CIT (A) has erred, both on facts and in law, in confirming the disallowance to the extent of Rs.5,269/- made by AO an account of transfer expenses.” 4. The revenue has raised the following grounds of appeal:- “1. Whether on facts and in circumstances of the case, the Ld. CIT(A) is legally justified in deleting the disallowance of „prior period expenditure‟ of Rs. 3,93,07,000/- following its order in assessee‟s own case for earlier years and without recording material evidence to reach a conclusion that liability to incur the expenditure was actually crystallized during the Page | 5 year under consideration and by ignoring a fact that the assessee had not proved that liability to incur expenditure of Rs. 3,93,07,000/- was actually crystallized during the year under consideration? 2. Whether on facts and in circumstances of the case, the Ld. CIT(A) is legally justified in allowing relief to the assessee on issue of prior period expense on the basis of its order in the case of the assessee for the earlier assessment year without appreciating that the issue involving factual verification cannot be decided on the basis of its decision for earlier assessment year based on peculiar facts of that year? 3. Whether on facts and in circumstances of the case, the Ld. CIT(A) is legally justified in allowing relief to the assessee on the basis of its earlier order in the assessee‟s own case despite the fact the principle of res-judicata is not applicable to Income Tax Proceedings as each assessment year is a separate year.” 5. Heard and perused the record. Ground-wise determination of the issues in respective appeals is as below. 6. Ground Nos. 2 and 3 in Assessee’s appeal in ITA No. 4787/Del/2019. It was submitted on behalf of the Assessee that in spite of Assessee making a suo moto disallowances of Rs. 9,05,897/- without recording any satisfaction for the reasons for disallowance of this amount the Ld. AO enhanced the same. Reliance was placed on the judgment of the Hon‟ble Supreme Court of India in case of Maxopp Investment Ltd. Vs. CIT, 2018 (3) TMI 805- wherein, the apex court has held that before applying the theory of apportionment, the AO needs to record satisfaction that having regard to the kind of the Assessee, suo moto disallowance u/s 14A was not correct. Reliance in this regard was also placed on judgment of Hon'ble Supreme Court in case of Godrej & Boyce Manufacturing Company Ltd Vs. DCIT (2017) 394 ITR 449. It was further submitted that the Assessee‟s own funds are more than the value of investments and referring to page No. 13 of the paper book, where copy of balance sheet is available. It was submitted that the share capital and reserve and surplus of the Page | 6 Assessee total upto Rs. 668771.58 lacs and details of investment available at page No. 13 to 21 were referred to submit that the investment are merely of Rs. 1811 lacs. Reliance was also placed on the judgment of the Hon'ble Supreme Court in CIT Vs. Reliance Industries ltd, Civil appeal No. 10/2019 dated 02.01.2019 and South Indian Bank Ltd Vs CIT (2021) 9 TMI 566, to submit that if own sources funds exceeds investments then disallowance u/s 14A is not warranted. Lastly, the ld counsel submitted that the Assessee had made suo moto disallowance of Rs. 9,05,897/- a per the provisions of Rule 8D. It was submitted that the Ld. AO has fallen an error adding provision of investment of Rs. 326.36 lacks made by the Assessee and calculated the average investment and if this amount is reduced from the calculation by the AO there is no difference in the suo moto disallowance and the disallowances arrived by the ld AO. 7. The ld DR further supported the findings of Ld. Tax Authorities below. 8. Giving thoughtful consideration to the matter on record it can be observed that the at page No. 83 to 91, the Assessee‟s reply dated 18.03.2014 submitted before the Ld. AO is available where in details of calculation of suo moto disallowance is shown. There is force in the contention of the ld counsel that only those investment are required to be considered for the purpose of the calculation under Rule 8D, which had yielded the exempt income. In the present case the dividend income is received in investment in subsidiary companies only as is evident from page No. 176 of the paper book. The provision for investments is certainly not considerable for computing average value of investment which yielded the exempt income during the year. 9. Apart from this there is also substance in the contention of the ld counsel for the Assessee that the AO had failed to record Page | 7 satisfaction before making any disallowance beyond the suo moto disallowance. At the same time the Assessee‟s own funds are established to be more than the value of investments yielding exempt income. However, the ld CIT(A) has failed to appreciate the aforesaid contention. Accordingly, ground is sustained in favour of the Assessee. 10. Ground No. 4 arising out of Assessee’s appeal No. 4787/Del/2017. It was submitted on behalf of the Assessee that during the year under consideration it has sold property in Aurangabad measuring 18943 sq.mts for Rs. 10,11,00,000/- and another property admeasuring 313 sq mt for Rs. 15,66,252/-. The copies of sale deeds of these two properties is available at page No. 92 to 137 and 138-163 of the paper book. It was submitted that the Assessee however showed it has sold property after claiming index cost of acquisition and valuation reports claimed the capital loss of Rs. 61,94,958/-. It was submitted that inadvertently only valuation report of property admeasuring of 18943 sq mt was submitted, however, the valuation report of 313 sq. mts was not provided to Ld. AO. It was submitted that the ld CIT(A) was provided the valuation report of the land 313 measuring sq mt. and remand report was called from the Assessee but inspite of admitting it in evidence the ld CIT(A) ignored the same. 11. The ld DR further defended the findings of the tax authorities below. 12. In regard to this ground the bench is of considered opinion that at para 5.2 the ld CIT(A) mentioned the fact of admission of the additional evidence of the Assessee u/s 250(4) of the Act and thereafter remand report from the AO was called. Once the ld CIT(A) has admitted the valuation report in regard 313 sq mts. of land, then it was not justified to uphold addition in regard 313 sq mts of land on basis that Assessee had failed to furnish the same before the ld AO. Page | 8 Thus, it is fit case to transmit back the issue to the ld CIT(A) to take into consideration the valuation report in respect of 313 sq mts of land and determine the issue again. The ground is decided in favour of the Assessee for statistical purposes. 13. Ground No. 5 arising out of Assessee’s appeal No. 4787/Del/2017. In regard to this ground it can be observed that the admitted fact is that the ld CIT(A) has deleted the addition to the extent of Rs. 77,54,114/- out of Rs. 7759383/- made by the AO. The remaining amount of Rs. 5269/- was not corroborated by any documentary evidence, when examined by the Ld. Tax Authorities below. No interference is called for in the appeal. The ground is decided against the Assessee. 14. In regard to ground Nos. 1 to 3 out of appeal of the revenue in ITA No. 4667/Del/2017 of the revenue it can be observed that the Ld. AO had made the addition on the basis of following the Assessment Year 2009-10 in Assessee‟s own case and ld CIT(A) had deleted the addition by relying on the decision in favour of the Assessee from this tribunal. Nothing is brought on record to establish that there is distinction of fact. The tribunal recognized netting off of the expenditure and there is no reasons to differentiate. The ground raised are determined against the revenue. 15. In the result the appeal of the Assessee is partly allowed and the appeal filed by the revenue is dismissed. Order pronounced in the open court on 29/09/2022. -Sd/- -Sd/- (N. K. BILLAIYA) (ANUBHAV SHARMA) ACCOUNTANT MEMBER JUDICIAL MEMBER Dated: 29/09/2022 A K Keot Copy forwarded to Page | 9 1. Applicant 2. Respondent 3. CIT 4. CIT (A) 5. DR:ITAT ASSISTANT REGISTRAR ITAT, New Delhi