M/s C.R.G. Industries, Baddi V. DCIT, Circle, Parwanoo

ITA 51/CHANDI/2018

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 7522 (ITAT-CHANDIGARH)
• Duration Of Justice: 5 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-07-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2014-2015
• Appeal Filed On: 16-01-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MANJIT SINGH
• Keywords: Business income; Depreciation; Additional depreciation
• Section: 40A(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DIVISION BENCH A, CHANDIGARH BEFORE SHRI SANJAY GARG, JUDICIAL MEMBER AND MS.ANNAPURNA GUPTA, ACCOUNTANT MEMBER ITA NO.51/CHD/2018 (ASSESSMENT YEAR : 2014-15) M/S CRG INDUSTRIES, VS. THE D.C.I.T., 75, HPSIDC INDL. AREA, CIRCLE PARWANOO. BADDI, DISTT. SOLAN (H.P.) PAN: AAEFC7147E (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI AJAY JAIN, CA RESPONDENT BY : SHRI MANJIT SINGH, SR.DR DATE OF HEARING : 20.06.2018 DATE OF PRONOUNCEMENT : 03.07.2018 ORDER PER SANJAY GARG, JUDICIAL MEMBER : THE PRESENT APPEAL HAS BEEN PREFERRED BY THE ASSESS EE AGAINST THE ORDER OF LD. COMMISSIONER OF INCOME TAX (APPEALS), SHIMLA (HEREINAFTER REFERRED TO AS LD.C IT (APPEALS)] DATED 19.12.2017, PASSED U/S 250(6 OF T HE INCOME TAX ACT, 1961 (IN SHORT THE ACT) IN APPEAL NO.IT/119/16-17/SML RELATING TO ASSESSMENT YEAR 201 4-15. 2. THE ASSESSEE HAS RAISED FOLLOWING GROUNDS OF APP EAL: 1. THAT THE ID COMMISSIONER OF INCOME TAX (APPEAL) HAS WRONGLY UPHELD THE ADDITION OF RS.241200/- UNDER SE CTION 36(L)(III) OF INCOME TAX AND ALSO ERRED BY NOT ALLO WING 100 % DEDUCTION UNDER SECTION 80IC OF INCOME TAX ON DISALLOWANCE SUSTAINED UNDER SECTION 36(L)(III) OF I.T . ACT. 2. THAT THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) HAS WRONGLY UPHELD THE ADDITION OF RS.199 064/- ON ACCOUNT OF ADDITIONAL DEPRECIATION ON PLANT & MAC HINERY WITHOUT APPRECIATING THE FACT THAT THE RESULTANT BU SINESS INCOME SHALL BE REDUCED BY ADDITIONAL DEPREC IATION & DEDUCTION UNDER SECTION 80IC IS ALLOWED ON NET RESU LTANT INCOME AFTER DEPRECIATION. ITA NO.51/CHD/2018 AY: 2014-15 2 3. THAT THE ID COMMISSIONER OF INCOME TAX (APPEAL) HAS WRONGLY UPHELD THE ADDITION OF RS.429322/- - UNDER SECTION 40A(3)) OF INCOME TAX AND ALSO ERRED BY NOT ALLOWING 100 % DEDUCTION UNDER SECTION 80IC OF INCOME TAX ON DISALLOWANCE SUSTAINED UNDER SECTION 40A(3) OF I.T. A CT. 4. THAT THE ID CIT(A) HAS ERRED BY NOT ALLOWING DEDUCTION U/S ON THE RESULTANT BUSINESS INCOME AFTE R DISALLOWANCES MADE BY ASSESSING OFFICER & CONFIRMED BY CIT(A) . 5. THAT THE ID COMMISSIONER OF INCOME TAX (APPEAL) HAS WRONGLY UPHELD THE DISALLOWANCE OF DEDUCTION UNDER SECTION 80IC ON INTEREST RECEIVED AMOUNTING TO RS.1029291/- & ALSO ERRED BY NOT ALLOWING THE DEDUCT ION OF INTEREST PAID BY THE APPELLANT. 3. SO FAR GROUND NOS.1 TO 4 ARE CONCERNED, THE COMM ON CONTENTION OF THE ASSESSEE IN RESPECT OF EACH OF TH E DISALLOWANCES MADE BY THE ASSESSING OFFICER IS THAT EVEN THOUGH THE ASSESSING OFFICER HAD MADE THE IMPUGNED DISALLOWANCES U/S 36(1)(III) OF THE ACT AND FURTHER ADDITION ON ACCOUNT OF LESS CLAIM OF ADDITIONAL DEPRECIATION AND THEREBY REDUCING THE ELIGIBLE INCOME OF THE ASSESSE E U/S 80IC OF THE ACT AND FURTHER ADDITION U/S 4A(3) OF T HE ACT FOR MAKING PAYMENTS IN CASH OF MORE THAN RS.20,000/- YE T, THE ABOVE DISALLOWANCES WILL GO TO ADD/REDUCE THE BUSIN ESS INCOME OF THE ASSESSEE, WHICH OTHERWISE, IS ELIGIBL E FOR DEDUCTION U/S 80IC OF THE ACT. THE LD. COUNSEL FOR ASSESSEE HAS FURTHER STATED IT WILL NOT HAVE ANY EFFECT ON T HE TAX LIABILITY OF THE ASSESSEE. 4. WE HAVE CONSIDERED THE ABOVE SUBMISSIONS OF THE LD. COUNSEL FOR ASSESSEE. SO FAR AS THE ADDITION MADE B Y THE ASSESSING OFFICER IN RESPECT OF INTEREST EXPENDITUR E U/S 36(1)(III) OF THE ACT AND ADDITION MADE ON ACCOUNT OF CLAIM OF LESS DEPRECIATION ON PLANT & MACHINERY IS CONCER NED, WE ITA NO.51/CHD/2018 AY: 2014-15 3 FIND FORCE IN THE CONTENTION OF THE LD. COUNSEL FOR ASSESSEE THAT THE DISALLOWANCE U/S 36(1)(III) OF THE ACT WOU LD ADD TO THE BUSINESS INCOME OF THE ASSESSEE, WHEREAS THE AD DITION MADE ON ACCOUNT OF CLAIM OF LESS DEPRECIATION WILL GO ON REDUCING THE BUSINESS INCOME OF THE ASSESSEE, WHICH OTHERWISE, ADMITTEDLY, IS ELIGIBLE FOR DEDUCTION U /S 80IC OF THE ACT. IN VIEW OF THE ABOVE, THE ABOVE STATED DI SALLOWANCE CANNOT BE EXIGIBLE TO TAXATION SEPARATELY. 5. SO FAR AS THE DISALLOWANCE U/S 40A(3) OF THE ACT IS CONCERNED, THOUGH ON THE FACE OF IT, IT IS A SORT O F PENAL PROVISION FOR WHICH THE ASSESSEES EXPENDITURE IS D ISALLOWED FOR MAKING PAYMENT OF MORE THAN THE PRESCRIBED LIMI T OTHER THAN THE BANKING CHANNEL, HOWEVER, THE LD. COUNSEL FOR ASSESSEE HAS DRAWN OUR ATTENTION TO CIRCULAR NO.37/ 2016 DATED 2.11.2016 OF THE CBDT, WHEREIN THE CBDT HAS DIRECTED ITS OFFICERS THAT THE DISALLOWANCE INTER-A LIA MADE U/S 40A(3) OF THE ACT, RESULTING INTO ENHANCEMENT O F THE BUSINESS INCOME OF THE ASSESSEE WILL BE ELIGIBLE FO R DEDUCTION UNDER CHAPTER VI-A, WHICH INCLUDES THE PROVISIONS OF SECTION 80IC OF THE ACT. THE RELEVANT PART OF THE CIRCULAR OF THE CBDT REPRODUCED AS UNDER: (II) IF DEDUCTION UNDER SECTION 40A(3) OF THE ACT IS NOT ALLOWED, THE SAME WOULD HAVE TO BE ADDED TO THE PRO FITS OF THE UNDERTAKING ON WHICH THE ASSESSEE WOULD BE ENTI TLED FOR DEDUCTION UNDER SECTION 80-IB OF THE ACT. THIS VIEW WAS TAKEN BY THE COURT IN THE FOLLOWING CASE: * PRINCIPAL CIT, KANPUR VS, SURYA MERCHANTS LTD., I.T. APP EAL NO. 248 OF 2015, MAY 03, 2016, ALLAHABAD HIGH COURT. THE ABOVE VIEWS HAVE ATTAINED FINALITY AS THESE JUDGM ENTS OF THE HIGH COURTS OF BOMBAY, GUJARAT AND ALLAHABAD HAVE BEEN ACCEPTED BY THE DEPARTMENT. ITA NO.51/CHD/2018 AY: 2014-15 4 3. IN VIEW OF THE ABOVE, THE BOARD HAS ACCEPTED, TH E SETTLED POSITION THAT THE /DISALLOWANCES MADE UNDER SECTIONS 32, 40{A)(IA), 40*3), 43B, ETC. OF THE ACT AND/OTHER SPECIFIC DISALLOWANCES, RELATED TO THE BUSINESS ACTIVITY AGAINST WHICH THE CHAPTER VI-A DEDUCTION HAS BEEN CLAIMED, RESULT IN ENHANCEMENT O F THE PROFITS OF THE ELIGIBLE BUSINESS, AND THAT DEDUCTIO N UNDER CHAPTER VI-A IS ADMISSIBLE ON THE PROFITS SO ENHANCE D BY THE DISALLOWANCE. 6. IN VIEW OF THE ABOVE DISCUSSION, GROUND NOS.1 TO 4 OF THE APPEAL OF THE ASSESSEE ARE DECIDED WITH THE OBS ERVATION THAT ENHANCEMENT/ADDITION INTO THE INCOME OF THE AS SESSEE ON ACCOUNT OF THE AFORESAID DISALLOWANCES WILL NOT MAKE THE ASSESSEE LIABLE TO PAY THE ADDITIONAL TAX, RATHER I T WILL INCREASE/DECREASE OF THE BUSINESS INCOME OF THE ASS ESSEE, WHICH OTHERWISE, IS ELIGIBLE FOR DEDUCTION U/S 80IC OF THE ACT. THE ASSESSING OFFICER IS DIRECTED TO FOLLOW TH E ABOVE DIRECTIONS. GROUND NOS.1 TO 4 RAISED BY THE ASSESSE E ARE ACCORDINGLY, ALLOWED IN ABOVE TERMS. 7. SO FAR AS GROUND NO.5 IS CONCERNED, THE LD. COUN SEL FOR ASSESSEE FAIRLY ADMITTED THAT THE ASSESSEE IS NOT E LIGIBLE FOR DEDUCTION U/S 80IC OF THE ACT IN RESPECT OF INTERES T INCOME, HOWEVER, HE HAS PLEADED THAT THE ASSESSEE MAY BE AL LOWED THE SET OFF OF THE INTEREST EXPENDITURE INCURRED FO R EARNING OF INTEREST INCOME. 8. HOWEVER, THE LEARNED REPRESENTATIVES OF BOTH THE PARTIES HAVE SUBMITTED THAT THIS ISSUE HAS NOT BEEN ADJUDICATED UPON EITHER BY THE ASSESSING OFFICER OR BY THE LD.CIT(APPEALS). WE, THEREFORE, RESTORE THE ISSUE R ELATING GROUND NO.5 TO THE LIMITED EXTENT THAT IF THE INTER EST EXPENDITURE INCURRED BY THE ASSESSEE HAS NEXUS WITH THE ITA NO.51/CHD/2018 AY: 2014-15 5 INTEREST INCOME EARNED BY THE ASSESSEE, THE ASSESSE E WILL BE ELIGIBLE FOR NETTING OFF/SETTING OFF OF THE SAME AG AINST THE INTEREST INCOME. THE MATTER IS, THEREFORE, RESTORED TO THE FILE OF THE ASSESSING OFFICER TO DECIDE THIS ISSUE AFRESH ON THIS LIMITED POINT. 9. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS TRE ATED AS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 3/7/2018. (ANNAPURNA GUPTA) (SANJAY GARG) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 3 RD JULY, 2018 *RATI* COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) 4. THE CIT 5. THE DR ASSISTANT REGISTRAR, ITAT, CHANDIGARH