ACIT CEN CIR 34, MUMBAI V. H & R JOHNSON (INDIA ) LTD, MUMBAI

ITA 4878/MUM/2009

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 48733 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 8 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-05-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: H
• Next Hearing Date: 10-05-2011
• Assessment Year: 2006-2007
• Appeal Filed On: 24-08-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SAMPAT KUMAR
• Assessee Lawyers: CHETAN KARIA
• Keywords: Depreciation

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL H BENCH: MUMBAI BEFORE SHRI R.S. PADVEKAR, JUDICIAL MEMBER AND SHRI B. RAMAKOTAIAH, ACCOUNTANT MEMBER ITA NO.4621/MUM/2009 (ASSESSMENT YEAR: 2006-07) M/S. H. & R. JOHNSON INDIA LTD., WINDSOR, 7 TH FLOOR,, C.S.T. ROAD, KALINA, SANTACRUZ (WEST), MUMBAI -400 098 ....... APPELLANT VS ACIT, CC -34, R. NO.104, FIRST FLOOR, AAYAKAR BHAVAN, MUMBAI -400 020 ..... RESPONDENT ITA NO.4878/MUM/2009 (ASSESSMENT YEAR: 2006-07) ACIT, CC -34, R. NO.104, FIRST FLOOR, AAYAKAR BHAVAN, MUMBAI -400 020 ....... APPELLANT VS M/S. H. & R. JOHNSON (INDIA) LTD., WINDSOR, 7 TH FLOOR,, C.S.T. ROAD, KALINA, SANTACRUZ (WEST), MUMBAI -400 098 ..... RESPONDENT PAN: AAACH 3506 P REVENUE BY: SHRI SAMPAT KUMAR ASSESSEE BY: SHRI CHETAN KARIA O R D E R PER R.S. PADVEKAR, JM THESE TWO APPEALS ONE BY THE REVENUE AND OTHER BY T HE ASSESSEE ARE FILED CHALLENGING THE IMPUGNED ORDERS OF THE LD . CIT (A) -VI ITA NO.4621/MUM/2009 ITA NO.4878/MUM/2009 M/S. H. & R. JOHNSON (INDIA) LTD. 2 MUMBAI DATED 30.06.2009 FOR THE A.Y. 2006-07. FIRS T, WE TAKE THE ASSESSEES APPEAL BEING ITA NO.4621 OF 2009. 2. THE FIRST GROUND IS IN RESPECT OF DISALLOWANCE M ADE U/S.14A BY APPLYING RULE 8D. 3. IT WAS NOTICED BY THE A.O. THAT THE ASSESSEE HAS RECEIVED THE DIVIDEND OF RS 39.35 LAKHS FROM ITS INVESTMENTS. T HE A.O. WAS OF THE OPINION THAT THE ASSESSEE SHOULD HAVE MADE APPORTIO NMENT OF SOME EXPENDITURE CLAIMED IN P & L A/C AND DISALLOWED EXP ENDITURE AS RELATABLE FOR MAKING THE INVESTMENT. AFTER CONSIDE RING THE AVERAGE INVESTMENT VALUE AND ADOPTING 1 PER CENT OF THE SAM E. THE A.O. WORKED OUT DISALLOWANCE AT RS 19,30,000/- AND MADE ADDITION TO THE TOTAL INCOME OF THE ASSESSEE. THE LD. CIT (A) DELE TED THE SAID ADDITION. NOW, THE REVENUE IS IN APPEAL BEFORE US. 4. WE HAVE HEARD THE PARTIES AND PERUSED THE RECORD S. THE LD. D.R. SUBMITS THAT IN VIEW OF THE DECISION OF THE HO NBLE HIGH COURT OF BOMBAY IN THE CASE OF DCIT VS. GODREJ AND BOYCEE MF G. CO. LTD. 328 ITR 81 (BOM), THIS ISSUE HAS GO BACK TO THE FILE O F THE A.O. PER CONTRA THE LD. COUNSEL SUBMITS THAT IN THE CASE OF GODREJ & BOYCEE MFG. CO. LTD. (SUPRA), THE HONBLE HIGH COURT OF BOMBAY HAS HELD THAT RULE 8D HAS NO APPLICATION PRIOR TO THE A.Y. 2008-09. AS R IGHTLY ARGUED BY THE LD. COUNSEL, RULE 8D CANNOT BE APPLIED TO THE ASSES SMENT YEARS PRIOR TO THE A.Y. 2008-09. BUT, AT THE SAME TIME, THE A. O. CAN MAKE SOME REASONABLE ESTIMATION AS PER THE GUIDELINES GIVEN B Y THE HONBLE HIGH COURT OF BOMBAY IN THE CASE OF GODREJ & BOYCEE MFG. CO. LTD. (SUPRA). ADMITTEDLY, THE DECISION IN THE CASE IN THE GODREJ & BOYCEE MFG. CO. LTD. (SUPRA) WAS NOT AVAILABLE WHEN THIS ISSUE WAS DECIDED BY BOTH THE AUTHORITIES BELOW. WE, ACCORDINGLY, RESTORE THE ISS UE TO THE FILE OF THE A.O. FOR FRESH ADJUDICATION WITH THE DIRECTION THAT AS PER THE GUIDELINES GIVEN AND PRINCIPLES LAID DOWN IN THE CA SE OF GODREJ & ITA NO.4621/MUM/2009 ITA NO.4878/MUM/2009 M/S. H. & R. JOHNSON (INDIA) LTD. 3 BOYCEE MFG. CO. LTD. (SUPRA) THE A.O. SHOULD DECIDE THIS ISSUE AFRESH. ACCORDINGLY, GROUND NO.1 IS ALLOWED FOR THE STATIST ICAL PURPOSES. 5. THE NEXT ISSUE IS IN RESPECT OF RATE OF DEPRECIA TION FOR UPS, BATTERIES, LCD PROJECTOR, STABILIZER AND SCANNER, W HICH ACCORDING TO THE ASSESSEE THE RATE OF DEPRECIATION APPLICABLE TO THE COMPUTER AT 60%. THE ARGUMENT OF THE LD. COUNSEL IS THAT THE L D. CIT (A) HAS RIGHTLY DECIDED THAT UPS, BATTERIES, LCD PROJECTOR, STABILIZER AND SCANNER ETC ARE THE INTEGRAL PART OF THE COMPUTER A ND DEPRECIATION IS TO BE ALLOWED AT THE SAME RATE I.E. 60%. PER CONTR A, THE LD. D.R. SUBMITS THAT THE HONBLE SPECIAL BENCH OF THE TRIBU NAL IN THE CASE OF DY. CIT VS. DATA CRAFT INDIA LTD. 133 TTJ (BOM) (SB ) 377 HAS LAID DOWN GUIDELINES FOR ALLOWING THE DEPRECIATION ON TH E PERIPHERALS AND OTHER ACCESSORIES. BOTH THE PARTIES AGREED THAT TH E ISSUE CAN BE RESTORED TO THE FILE OF THE A.O. FOR FRESH ADJUDICA TION IN THE LIGHT OF GUIDELINES GIVEN AND PRINCIPLES LAID DOWN BY THE HO NBLE SPECIAL BENCH IN THE CASE OF DATA CRAFT INDIA LTD. (SUPRA). WE, ACCORDINGLY, RESTORE THE ISSUE TO THE FILE OF THE A.O. WITH THE DIRECTION THAT HE SHOULD DECIDE THE SAME AFRESH IN THE LIGHT OF THE G UIDELINES AND PRINCIPLES GIVEN IN DATA CRAFT INDIA LTD. (SUPRA). ACCORDINGLY, GROUND NO.2 IS SET ASIDE. 6. NOW, WE DECIDE REVENUES APPEAL BEING ITA NO.487 8 OF 2009. 7. THE REVENUE HAS TAKEN THE FOLLOWING EFFECTIVE GR OUNDS:- 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LD. CIT (A) WAS NOT CORRECT IN DELETING TH E ADDITION MADE U/S.41(1) OF RS 50,83,725/-. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LD. CIT (A) WAS NOT CORRECT IN NOT APPRECI ATING THE ASSESSING OFFICERS ACTION (THAT THE LIABILITIES WE RE NOT IN ITA NO.4621/MUM/2009 ITA NO.4878/MUM/2009 M/S. H. & R. JOHNSON (INDIA) LTD. 4 EXISTENCE IN A.Y. 2006-07) WHICH IS PROVED BY THE CIRCUMSTANCES, I.E. ASSESSEE FAILED TO PRODUCE CONF IRMATION FOR THE A.Y. 2006-07 AND SUBSEQUENTLY THE SAME HAS BEEN WRITTEN OFF IN A.Y. 2009-10 BY THE ASSESSEE HIMSELF . 8. BRIEFLY STATED THE FACTS ARE AS UNDER. THE ASSE SSEE IS ENGAGED IN THE MANUFACTURING AND SALE OF CERAMIC TILES AND ACC ESSORIES. RETURN FILED BY THE ASSESSEE FOR THE A.Y. 2006-07 WAS SELE CTED FOR SCRUTINY. IT WAS NOTICED BY THE A.O. THAT AMOUNT OF RS 50,83,725 /- WAS SHOWN AS OUTSTANDING SINCE 1.4.2002. THE A.O. ASKED THE ASS ESSEE TO FILE THE CONFIRMATION FROM THE PARTIES TO PROVE THAT THE ACT UALLY THE AMOUNTS WERE OUTSTANDING. IT APPEARS THAT THE ASSESSEE ONL Y FILED THE LETTERS ONLY STATING THAT THOSE AMOUNTS ARE STILL OUTSTANDI NG AND ARE NOT RETURNED BACK AND HENCE NO ADDITION CAN BE MADE U/S .41(1) OF THE ACT. THE ASSESSEE CHALLENGED THE SAID ADDITION BEF ORE THE LD. CIT (A). THE LD. CIT (A) DELETED THE ADDITION BY GIVING FOLL OWING REASONS:- 6.4 I HAVE CONSIDERED THE FACTS OF THE ISSUE AND T HE WRITTEN SUBMISSIONS MADE BY THE AR AND FIND MERIT IN THEM. IT IS AN ADMITTED FACT THAT THE IMPUGNED CREDIT BALANCES HAV E BEEN WRITTEN OFF IN THE BOOKS OF THE APPELLANT DURING TH E PREVIOUS YEAR RELEVANT TO THE ASSESSMENT YEAR UNDER CONSIDERATION NOR HAVE THESE CREDITORS COMMUNICATED TO THE APPELLANT THEIR INTENTION OF WAIVING OFF THEIR RECEIVABLES. NOR HAS THE A.O. BE EN ABLE TO PROVE OR BRING ON RECORD ANY MATERIAL TO CORROBORATE THAT THE APPELLANT HAS OBTAINED EITHER IN CASH OR IN ANY OTHER MANNER ANY AMOUNT OR BENEFIT IN RESPECT OF THE SAID LIABILITIES. THU S, ONE OF THE PRIMARY CONDITIONS TO INVITE THE APPLICABILITY OF T HE PROVISIONS OF SECTION 41(1) IS NOT SATISFIED. HENCE, IN VIEW OF T HE FACTS AND LEGAL POSITIONS BROUGHT OUT BY THE AR, THE ADDITION MADE BY THE A.O. IS DELETED AND THIS GROUND OF APPEAL IS ALLOWED. AGGRIEVE, THE REVENUE IS IN APPEAL BEFORE US. ITA NO.4621/MUM/2009 ITA NO.4878/MUM/2009 M/S. H. & R. JOHNSON (INDIA) LTD. 5 9. WE HAVE HEARD THE PARTIES AND PERUSED THE RECORD S. THE LD. D.R. VEHEMENTLY ARGUED THAT NO PRUDENT BUSINESSMAN WOULD KEEP THE AMOUNT OUTSTANDING FOR YEARS TOGETHER. HE, FURTHER ARGUES THAT THE ADDITION MADE BY THE A.O. IS SUPPORTED BY THE DECIS ION OF THE HONBLE SUPREME COURT IN THE CASE OF CIT VS. T.V. SUNDARAM IYANGAR & SONS LTD. AND 222 ITR 344 (SC) AS WELL AS SOLID CONTAINE R LTD. VS. DCIT 308 ITR 417 (BOM). PER CONTRA, THE LD. COUNSEL SUB MITS THAT BOTH THE DECISIONS ARE NOT APPLICABLE TO THE ASSESSEES CASE IN THE CASE OF T.V. SUNDARAM IYANGAR & SONS LTD. (SUPRA) AS WELL AS SOL ID CONTAINER LTD. (SUPRA) FACTS ARE DISTINGUISHABLE. IN OUR OPINION, BOTH THE DECISIONS ARE DISTINGUISHABLE ON FACTS AS RIGHTLY ARGUED BY T HE LD. COUNSEL. THE A.O. HAS MADE THE ADDITION MERELY ON THE PRESUMPTIO N AND IT IS WELL SETTLED PRINCIPLE THAT PRESUMPTION CANNOT BE THE BA SE FOR MAKING THE ADDITION U/S.41(1). WE FIND NO REASON TO INTERFERE WITH THE ORDER OF THE LD. CIT (A) ON THIS ISSUE. ACCORDINGLY, GROUND S TAKEN BY THE ASSESSEE ARE DISMISSED. 10. IN THE RESULT, ASSESSEES APPEAL IS ALLOWED FOR THE STATISTICAL PURPOSES AND REVENUES APPEAL IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS DAY OF 1 2 TH MAY 2011. SD/- SD/- ( B. RAMAKOTAIAH ) ACCOUNTANT MEMBER ( R.S. PADVEKAR ) JUDICIAL MEMBER MUMBAI, DATE: 16 TH MAY 2011 COPY TO:- 1) THE APPLICANT. 2) THE RESPONDENT. 3) THE CIT (A)CENTRALVI, MUMBAI. 4) THE CIT CENTRAL -III, MUMBAI. 5) THE D.R. H BENCH, MUMBAI. BY ORDER / / TRUE COPY / / ASSTT. REGISTRAR I.T.A.T., MUMBAI *CHAVAN ITA NO.4621/MUM/2009 ITA NO.4878/MUM/2009 M/S. H. & R. JOHNSON (INDIA) LTD. 6 SR.N. EPISODE OF AN ORDER DATE INITIALS CONCERNED 1 DRAFT DICTATED ON 12.05.2011 SR.PS 2 DRAFT PLACED BEFORE AUTHOR 13.05.2011 SR.PS 3 DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER JM/AM 4 DRAFT DISCUSSED/APPROVED BY SECOND MEMBER JM/AM 5 APPROVED DRAFT COMES TO THE SR.PS/PS SR.PS/PS 6 KEPT FOR PRONOUNCEMENT ON SR.PS/PS 7 FILE SENT TO THE BENCH CLERK SR.PS/PS 8 DATE ON WHICH FILE GOES TO THE HEAD CLERK 9 DATE OF DISPATCH OF ORDER