ACIT CORPORATE CIRCLE 1 (1), CHENNAI V. M/S ABI SHOWATECH INDIA LTD, CHENNAI

ITA 481/CHNY/2018

• Counselvise Citation: [2018] 112 COUNSELVISE.COM (IT) 5222 (ITAT-CHENNAI)
• Duration Of Justice: 7 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-10-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2014-2015
• Appeal Filed On: 12-02-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: D ROHINI
• Assessee Lawyers: S JAGANATHAN
• Keywords: Depreciation; Additional depreciation; Earning of tax free income; Rule 8D; Set aside
• Section: 14A; 201

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, CHENNAI . . . , , ' BEFORE SHRI N.R.S. GANESAN, JUDICIAL MEMBER AND SHRI S. JAYARAMAN, ACCOUNTANT MEMBER / .I.T.A. NOS. 480 & 481/CHNY/2018 /ASSESSMENT YEARS : 2013-14 & 2014-15 ASSISTANT COMMISSIONER OF INCOME TAX, CORPORATE CIRCLE -1(1), CHENNAI 600 034. VS. M/S. ABI SHOWATECH INDIA LTD., 67, STONE ACRE, CHAMIERS ROAD, R A PURAM, CHENNAI 600 028. [PAN: AABCA 8160B] ( /APPELLANT) ( /RESPONDENT) REVENUE BY : SHRI. D. ROHINI, JCIT ASSESSEE BY : SHRI S. JAGANATHAN, FCA $ /DATE OF HEARING : 05.10.2018 $ /DATE OF PRONOUNCEMENT : 09.10.2018 / O R D E R PER S. JAYARAMAN, ACCOUNTANT MEMBER: THE REVENUE FILED THESE APPEALS AGAINST THE ORDERS OF THE COMMISSIONER OF INCOME TAX (APPEALS)-1, CHENNAI IN ITA NOS. 59 & 281/CIT(A)-1/2016-17 DATED 30.11.2017 FOR ASSESSMENT YEARS 2013-14 & 201 4-15, RESPECTIVELY. :- 2 -: ITA NOS. 480 & 481/CHNY/2018 2. M/S. ABI SHOWATECH INDIA LTD., THE ASSESSEE, IS ENGAGED IN THE BUSINESS OF MANUFACTURE OF PARTS AND ACCESSORIES OF MOTOR VE HICLES AND PARTS OF TURBO CHARGER. WHILE MAKING THE ASSESSMENTS FOR ASSESSME NT YEARS 2013-14 & 2014-15, THE ASSESSING OFFICER NOTICED, INTER ALIA, THAT THE ASSESSEE ADMITTED DIVIDEND INCOME FROM SHARES AND MUTUAL FUNDS AND CL AIMED THEM AS AN EXEMPT INCOME U/S. 10, TOWARDS WHICH IT DISALLOWED RS. 6,04,162/- AND RS. 7,97,474/-, RESPECTIVELY, AS AN EXPENDITURE IN RELA TION TO SUCH INCOME. WHILE ARRIVING THE SAME, THE ASSESSEE HAS NOT CONSIDERED THE INVESTMENTS SHOWN UNDER THE HEAD TRADE INVESTMENTS WHICH IS ALSO A SOURCE OF DIVIDEND INCOME. IN VIEW OF THAT THE ASSESSING OFFICER INVOKED THE P ROVISIONS OF SECTION 14A R.W.R. 8D, RE-WORKED THE DISALLOWANCES FROM WHICH H E REDUCED THE AMOUNT ALREADY DISALLOWED BY THE ASSESSEE AND ADDED THE BA LANCE IN THE RESPECTIVE ASSESSMENTS. FURTHER, THE AO NOTICED THAT THE ASSE SSEE HAS CLAIMED ADDITIONAL DEPRECIATION @ 10% (50% OF 20%), IN RESP ECT OF ADDITIONS MADE TO PLANT AND MACHINERY ACQUIRED IN THE SECOND HALF OF THE PRECEDING ASSESSMENT YEARS I.E., IN ASSESSMENT YEARS 2012-13 & 2013-14, RESPECTIVELY. SINCE, THE ADDITIONS TO FIXED ASSETS MADE IN SECOND HALF OF TH OSE ASSESSMENT YEARS, FOR THE BALANCE 50% OF THE ADDITIONS MADE TO THE PLANT AND MACHINERY, THE ASSESSEE CLAIMED THE ADDITIONAL DEPRECIATION IN THE SUBSEQUENT ASSESSMENT YEARS VIZ., ASSESSMENT YEARS 2013-14 & 2014-15, RES PECTIVELY. THE AO DID NOT ACCEPT SUCH CLAIM AND MADE DISALLOWANCES. AGGRIEVE D, THE ASSESSEE FILED APPEALS AGAINST THOSE ORDERS BEFORE THE LD. CIT(A). :- 3 -: ITA NOS. 480 & 481/CHNY/2018 3. THE LD. CIT(A) FOLLOWING THE SPECIAL BENCH DELHI TRIBUNAL DECISION IN THE CASE OF ACIT VS VIREET INVESTMENTS P LTD 165 ITD 27 DELHI TRIBUNAL, 82 TAXMANN.COM 415 (DELHI TRIB) (SB), DIRECTED THE AO TO COMPUTE THE DISALLOWANCE U/S. 14A BY CONSIDERING ONLY THOSE INV ESTMENTS THAT HAVE YIELDED EXEMPT INCOME DURING THE YEAR. ON THE ISSUE OF ADD ITIONAL DEPRECIATION CLAIM, RELYING ON THE JURISDICTIONAL HIGH COURT DECISIONS IN THE CASES OF BRAKES INDIA LTD VS DCIT IN TCA NO.551 OF 2013, ASSESSEES OWN C ASE IN TCA NOS. 699 TO 702 OF 2013 DATED 14.03.2017 AND CIT VS T.P. TEXTIL ES (P) LTD. (2017) 79 TAXMAN.COM 411 (MAD)/ 394 ITR 483 ETC, ALLOWED THE APPEALS. 4. AGGRIEVED, THE REVENUE FILED THESE APPEALS WITH THE FOLLOWING COMMON GROUNDS: 1. THE ORDER OF THE LEARNED CIT(A) IS CONTRARY TO LAW, FACTS AND CIRCUMSTANCES OF THE CASE. 2.1 THE LEARNED CIT(A) ERRED IN RESTRICTING THE DIS ALLOWANCE MADE OF RS.13.09 LAKHS U/S.14A R.W.RULE 8D BY DIRECTING THE AO TO EX CLUDE THE INVESTMENT WHICH DO NOT YIELD INCOME WHILE COMPUTING THE DISALLOWANC E 2.2 THE LEARNED CIT(A) ERRED IN HOLDING THAT THE IN VESTMENTS WHICH DO NOT YIELD EXEMPT INCOME HAVE TO BE REDUCED WHILE COMPUTING TH E DISALLOWANCE UNDER LIMB (III) OF THE RULE 8D, WITHOUT APPRECIATING THE FACT THAT THE ENTIRE INVESTMENTS ARE CAPABLE OF EARNING EXEMPT INCOME, A ND FURTHER RULE SD DOES NOT PROVIDE FOR SUCH EXCLUSION 3.1 THE LEARNED CIT(A) ERRED IN DELETING THE DISALL OWANCE OF RS.2.37 CRORES CLAIMED TOWARDS ADDITIONAL DEPRECIATION U/S.32(1)(I IA) OF THE ACT 3.2 THE LEARNED CIT(A) ERRED IN DELETING THE DISALL OWANCE OF BALANCE OF ADDITIONAL DEPRECIATION CLAIMED U/S.32(1)(IIA) WHIC H WAS NOT UTILIZED IN THE EARLIER YEAR AS NO SUCH PROVISIONS EXIST IN THE SAI D SECTION FOR CARRYING FORWARD THE UNUTILIZED PORTION OF THE ADDITIONAL DEPRECIATI ON OF THE EARLIER YEAR. :- 4 -: ITA NOS. 480 & 481/CHNY/2018 3.3 THE LEARNED CIT(A) FAILED TO APPRECIATE THAT TH E BENEFIT OF SUCH CARRY FORWARD OF UNUTILIZED ADDITIONAL DEPRECIATION IS AV AILABLE TO THE ASSESSEE ONLY W.E.F. 1.4.2016 AND NOT FOR THE IMPUGNED AY 2013-14 4.1 FOR THESE AND OTHER GROUNDS THAT MAY BE ADDUCED AT THE TIME OF HEARING, IT IS PRAYED THAT THE ORDER OF THE LEARNED CIT(A) MAY BE SET ASIDE AND THAT OF THE ASSESSING OFFICER RESTORED. 5. THE LD. DR RE-EMPHASISED THE REVENUES ARGUMENTS PLACED BEFORE THE SPECIAL BENCH IN RESPECT OF ISSUE U/S. 14A AND PRES ENTED THE CASES ON THE LINES OF GROUNDS OF APPEAL. THE LD AR RELIED ON THE DECI SIONS OF THE LD. CIT(A). 6. WE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE R ELEVANT MATERIAL. THE SPECIAL BENCH OF THE DELHI TRIBUNAL IN THE CASE OF ACIT VS VIREET INVESTMENTS (P) LTD., SUPRA, AFTER CONSIDERING DUE SUBMISSIONS OF THE REVENUE AND VARIOUS JUDGEMENTS HAS HELD THAT ONLY THOSE INVESTMENTS WHI CH YIELDED EXEMPT INCOME DURING THE YEAR ALONE SHOULD BE CONSIDERED F OR COMPUTING THE AVERAGE VALUE OF INVESTMENTS IN PARA 11.16 OF THE ORDER, SU PRA. SINCE, THE IMPUGNED ASSESSMENT ORDERS DO NOT REVEAL AS TO WHETHER SUCH INVESTMENTS WERE CONSIDERED OR NOT, THE LD. CIT(A), FOLLOWING THE S PECIAL BENCH DECISION HAS DIRECTED THE AO TO COMPUTE THE DISALLOWANCE U/S. 14 A IN ACCORDANCE WITH THAT DECISION, OF WHICH WE DO NOT FIND ANY REASON TO INT ERFERE AND HENCE THE REVENUES APPEALS ON THIS ISSUE ARE DISMISSED FOR A SSESSMENT YEARS 2013-14 & 2014-15, RESPECTIVELY. :- 5 -: ITA NOS. 480 & 481/CHNY/2018 6.1 WITH REGARD TO THE ADDITIONAL DEPRECIATION CLAI M, SINCE THE LD. CIT(A) APPLIED THE RATIO OF THE JURISDICTIONAL HIGH COURT DECISIONS VIZ., JURISDICTIONAL BRAKES INDIA LTD VS DCIT IN TCA NO.551 OF 2013, ASS ESSEES OWN CASE IN TCA NOS. 699 TO 702 OF 2013 DATED 14.03.2017 AND CIT VS T.P. TEXTILES (P) LTD. (2017) 79 TAXMAN.COM 411 (MAD)/ 394 ITR 483, SUPRA, WE DO NOT FIND ANY REASON TO INTERFERE WITH THE ORDERS OF THE LD. CIT( A). THUS, ALL THE GROUNDS OF THE REVENUES APPEALS FOR ASSESSMENT YEARS 2013-14 & 2014-15 ARE DISMISSED. 7. IN THE RESULT, THE REVENUES APPEALS IN ITA NOS. 480 & 481/CHNY/2018 ARE DISMISSED. ORDER PRONOUNCED ON TUESDAY, THE 09 TH DAY OF OCTOBER, 2018 AT CHENNAI. SD/- ( . . . ) (N.R.S. GANESAN) /JUDICIAL MEMBER SD/- ( ) (S. JAYARAMAN) /ACCOUNTANT MEMBER /CHENNAI, ) /DATED: 09 TH OCTOBER , 2018 JPV $*+,-, /COPY TO: 1. / /APPELLANT 2. *0/ /RESPONDENT 3. 1 ) ( /CIT(A) 4. 1 /CIT 5. ,* /DR 6. 4 /GF