DCIT, New Delhi V. M/s ICRA Ltd., New Delhi

ITA 4932/DEL/2010

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 4225 (ITAT-DELHI)
• Duration Of Justice: 5 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-04-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 18-04-2011
• Assessment Year: 2005-2006
• Appeal Filed On: 11-11-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: K RAVI RAM CHANDRAN
• Assessee Lawyers: VIPIN AGGARWAL
• Keywords: Depreciation; Earning of tax free income
• Section: 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, IN THE INCOME TAX APPELLATE TRIBUNAL, IN THE INCOME TAX APPELLATE TRIBUNAL, IN THE INCOME TAX APPELLATE TRIBUNAL, DELHI DELHI DELHI DELHI, BENCH , BENCH , BENCH , BENCH C C C C, , , , NEW DELHI NEW DELHI NEW DELHI NEW DELHI BEFORE SHRI C. L. SETHI JUDICIAL MEMBER AND SHRI K. D. RANJAN, ACCOUNTANT MEMBER ITA NO. 4932 /DEL/2010 (ASSESSMENT YEAR 2005-06) DCIT, CIRCLE 11(1), VS. M/S. ICRA LTD., NEW DELHI 1105, KAILASH BUILDING 11 TH FLOOR, KASTURBA GANDHI MARG, NEW DELHI. (APPELLANT) (RESPONDENT) PAN AAACI0218B APPELLANT BY: SHRI K RAVI RAMCHANDRAN, SR. DR RESPONDENT BY: SHRI VIPIN AGGARWAL, CA ORDER ORDER ORDER ORDER PER K. D. RANJAN, AM: PER K. D. RANJAN, AM: PER K. D. RANJAN, AM: PER K. D. RANJAN, AM: 1. THIS APPEAL BY THE REVENUE FOR THE ASSESSMENT YE AR 2005-06 ARISES OUT OF THE ORDER OF LD. CIT(A) XIII, NEW DEL HI. THE GROUNDS OF APPEAL RAISED BY THE REVENUE ARE REPRODUCED AS UNDE R: 1) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LD. CIT(A) ERRED IN ALLOWING THE EXPENSES AMOUNTING TO ` 22.65 LACS PROPORTIONATELY OUT OF ADMINISTRATI VE EXPENSES OF ` 22.33 CRORES TREATING TO BE EXPENSES INCURRED FOR EARNING EXEMPTED U/S 14A OF THE INCOME TAX ACT. THE ACTION OF THE LD. ASSESSING OFFICER IS ARBITRARY UNJUSTIFIED AND AGAI NST THE PROVISIONS OF LAW. 2) THE LD. CIT(A) ERRED IN LAW OF ALLOWING THE DEPR ECIATION OF ` 2,63,886/-. 2. THE 1 ST ISSUE FOR CONSIDERATION RELATES TO DISALLOWANCE OF ` 22.65 LACS PROPORTIONATELY OUT OF ADMINISTRATIVE EX PENSES OF ` 22.33 CRORES U/S 14A OF THE ACT. THE FACTS OF THE CASE S TATED IN BRIEF ARE THAT THE ASSESSEE HAD EARNED DIVIDEND AND INTEREST INCOME OF ` 42,01,154/- WHICH IS EXEMPT FROM TAX. THE ASSESSEE HAD INCURRED THE ADMINISTRATIVE AND PERSONNEL EXPENSES OF ` 22.3 3 CRORES. THE ASSESSING OFFICER DISALLOWED THE ADMINISTRATIVE AND PERSONNEL EXPENSES IN THE RATIO OF THE TURNOVER. I.T.A.NO. 4932/DEL/2010 2 3. ON APPEAL BEFORE LD. CIT(A) IT WAS SUBMITTED BY THE ASSESSEE THAT ASSESSEE HAD NOT INCURRED ANY EXPENDITURE FOR EARNING THE TAX FREE INCOME. THE TAX FREE INTEREST OF ` 42,01,154/ - WAS EARNED ON ` 7.18 CRORES WORTH OF REC AND UTI BONDS WHICH HAD BE EN PURCHASED IN THE PREVIOUS YEAR. DURING THE YEAR, NO FINANCIA L EXPENSES WERE MADE. NO PERSON WAS DEPUTED SPECIFICALLY FOR EARNIN G THE TAX FREE INCOME AND INTEREST/DIVIDEND WAS RECEIVED AUTOMATIC ALLY ON DUE DATE. THE CFO OF THE ASSESSEE COMPANY USED TO TAKE THE DECISION REGARDING THE INVESTMENT IN AND REDEMPTION OF MUTUA L FUNDS. IT WAS ALSO SUBMITTED THAT THE COMPANY HAD SUO MOTO DISALL OWED ` 1 LACS IN THE INCOME TAX RETURN ON ACCOUNT OF EXPENDITURE INCURRED FOR EARNING THE TAX FREE INCOME. IT WAS ALSO SUBMITTED THAT ITAT IN ASSESSMENT YEAR 2004-05 HAS HELD THAT UNLESS THERE WAS ANY MATERIAL WITH THE ASSESSING OFFICER TO SHOW THAT AN Y EXPENDITURE WAS INCURRED IN EARNING THE EXEMPT INCOME NOTHING C OULD BE DISALLOWED U/S 14A OF THE ACT ON ESTIMATION BASIS. THE ASSESSEE ALSO PLACED RELIANCE ON THE DECISION OF HON'BLE BOM BAY HIGH COURT IN THE CASE OF GODREJ & BOYCE MANUFACTURING CO. PVT . LTD. VS DCIT 43 DTR 177 WHEREIN IT HAS BEEN HELD THAT PROVISIONS OF SECTION 14A WERE NOT RETROSPECTIVE IN NATURE. LD. CIT(A) IN VI EW OF THE DECISION OF HON'BLE BOMBAY HIGH COURT AND THE DECISION OF IT AT IN ASSESSEES OWN CASE FOR ASSESSMENT YEAR 2004-05 HELD THAT DISA LLOWANCE U/S 14A SHOULD BE ESTIMATED AT ` 1 LACS WHICH HAD BEEN ALREADY SUO MOTO DISALLOWED BY THE ASSESSEE IN ITS RETURN OF IN COME. THEREFORE, NO FURTHER DISALLOWANCE WAS WARRANTED. 4. WE HAVE HEARD BOTH THE PARTIES AND GONE THROUGH THE MATERIAL AVAILABLE ON RECORD. HON'BLE BOMBAY HIGH COURT IN THE CASE OF GODREJ & BOYCE CO. MANUFACTURING CO. PVT. L TD. (SUPRA) HAS HELD THAT PROVISIONS OF RULE 8D ARE NOT RETROSPECTI VE IN NATURE. THEY ARE APPLICABLE FOR THE ASSESSMENT YEAR 2008-09. IT AT IN ASSESSEES OWN CASE HAS ALSO HELD THAT IN THE ABSENCE OF SPECI FIC EXPENDITURE INDICATED BY THE ASSESSING OFFICER RELATING TO EARN ING THE EXEMPT INCOME PROPORTIONATE DISALLOWANCE WAS NOT JUSTIFIED . IN VIEW OF I.T.A.NO. 4932/DEL/2010 3 THESE FACTS AND POSITION OF LAW, WE DO NOT FIND ANY INFIRMITY IN THE ORDER PASSED BY CIT(A) DELETING THE ADDITION. 5. THE NEXT ISSUE FOR CONSIDERATION RELATES TO ALLO WANCE OF DEPRECIATION OF ` 2,63,886/- ON COMPUTER. THE ASSE SSING OFFICER DISALLOWED THE CLAIM OF THE ASSESSEE FOR DEPRECIATI ON ON COMPUTER @ 60%. HE TREATED THE COMPUTERS AND PERIPHERALS A S PLANT & MACHINERY AND ALLOWED DEPRECIATION @ 25%. ON APPEA L, LD. CIT(A) RELYING ON THE DECISION OF ITAT IN THE CASE OF ITO VS SIMRAN MAJUMDAR 101 TTJ 501 AND IN THE CASE OF EXPEDATORS INTERNATIONAL (P) LTD., VS ADDL. CIT 118 TTJ 2008 (DEL.) HELD THA T OUTPUT DEVICES SUCH AS PRINTER, SCANNER, SERVER AND PORT SWITCHES WERE COMPUTER PERIPHERALS AND FORM PART OF THE P.C. THESE OUTPU T DEVICES COULD NOT WORK IN ISOLATION AND ALSO WORKING ON COMPUTER SYSTEM WITHOUT OUTPUT DEVICES SUCH AS PRINTER WOULD BE FUTILE. HE , THEREFORE, ALLOWED DEPRECIATION @ 60% AS AGAINST 25% ALLOWED B Y THE ASSESSING OFFICER. 4. WE HAVE HARD BOTH THE PARTIES AND GONE THROUGH T HE MATERIAL AVAILABLE ON RECORD. WE FIND THAT THIS ISSUE IS SQ UARELY COVERED BY THE DECISION OF ITAT CALCUTTA BENCH IN THE CASE OF ITO VS SIMRAN MAJUMDAR (SUPRA) AND ITAT DELHI BENCH IN THE CASE O F CONTAINER CORPORATION OF INDIA 30 SOT VS 285 DELHI. SINCE TH E ISSUE IS SQUARELY COVERED BY THE DECISION OF ITAT IN THE CAS ES REFERRED TO ABOVE, THE COMPUTER AND ITS PERIPHERALS ARE ELIGIBL E FOR DEPRECIATION @ 60%. ACCORDINGLY, WE DO NOT FIND ANY INFIRMITY I N THE ORDER PASSED BY CIT(A) DELETING THE ADDITION. 5. IN THE RESULT, APPEAL FILED BY THE REVENUE IS DI SMISSED. 6. ORDER PRONOUNCED IN THE OPEN COURT ON 21 ST APR., 2011. SD./- SD./- (C. L. SETHI) (K. D. RANJAN) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 21 ST APR., 2011 SP. I.T.A.NO. 4932/DEL/2010 4 COPY FORWARDED TO 1. APPELLANT 2. RESPONDENT 3. CIT TRUE COPY: BY ORDER 4. CIT(A) 5. DR DY. REGISTRAR, ITAT, NEW DELHI