The Asstt. Commissioner of Income Tax, Range - 1, Jalandhar V. M/s Kapsons Industries Ltd., Jalandhar

ITA 511/ASR/2017

• Counselvise Citation: [2018] 126 COUNSELVISE.COM (IT) 5736 (ITAT-AMRITSAR)
• Duration Of Justice: 6 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-02-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2014-2015
• Appeal Filed On: 03-08-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RAJEEV GUBGOTRA LD
• Assessee Lawyers: S K VATTA LD
• Keywords: Depreciation; Proportionate interest
• Section: 143(3); 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AMRITSAR BENCH, AMRITSAR BEFORE SH. SANJAY ARORA, ACCOUNTANT MEMBER AND SH. N.K.CHOUDHRY, JUDICIAL MEMBER ITA NO.511(ASR)/2017 ASSESSMENT YEAR:2014- 15 ASST. CIT RANGE-1, JALANDHAR VS. M/S KAPSONS INDUSTRIES LTD., JALANDHAR PAN:AAACK9887G (APPELLANT) (RESPONDENT) APPELLANT BY: SH. RAJEEV GUBGOTRA (LD. DR) RESPONDENT BY: SH. S.K. VATTA (LD.CA) DATE OF HEARING: 20.12.2017 DATE OF PRONOUNCEMENT: 26.02.2018 ORDER PER N.K.CHOUDHRY, JM: THE INSTANT APPEAL HAS BEEN PREFERRED BY THE REVENUE DEPARTMENT, ON FEELING AGGRIEVED AGAINST THE ORDER DATED 09.06.2017 PASSED BY THE LD. CIT(A)-1, JALANDHAR, IN APPEAL NO.1/10164/16-17/CIT(A)/JALANDHAR, BY RAISING THE FO LLOWING GROUNDS OF APPEAL. 1. THAT ON THE FACTS IN THE CIRCUMSTANCES OF THE C ASE THE LD. CIT(A) HAS ERRED IN LAW IN DELETING THE ADDITIO N OF RS.62,28,830/- MADE BY THE A.O. UNDER SECTION 14A O F THE INCOME TAX ACT,1961. 2. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF TH E CASE, THE LD. CIT(A) HAS ERRED IN LAW IN DELETING THE ADD ITION OF RS.4,23,955/- WHICH WAS MADE BY THE A.O. BY DISALLO WING ITA NO.511/ASR/2017 (A.Y.2014-15) ACIT VS. M/S KAPSONS INDU STRIES LTD., JALANDHAR 2 PROPORTIONATE INTEREST FREE ADVANCES U/S 36(1)(III) OF THE INCOME TAX ACT, 1961. 2. THE LD. DR SPECIFICALLY RELIED UPON THE ORDER PASSED BY THE ASSESSING OFFICER AND SUBMITTED THAT THE ORDER UNDER CHALLENGE PASSED BY THE LD. CIT(A) SUFFERS FROM ILLEGALI TY, IMPROPRIETY AND INFIRMITY. 3. ON THE OTHER HAND, THE LD. AR SUBMITTED THAT THE ORDER IMPUGNED HEREIN IS BASED UPON THE ORDERS PASSED BY THE CO- ORDINATION BENCH AT ITAT, AMRITSAR ITSELF FOR ASST. YEAR :2011-12, 2012-13 & 2013-14 IN THE CASE OF ASSESSEES ITSELF, THEREFO RE, IT DOES NOT REQUIRE ANY INFERENCE BY THIS COURT. 4. WE HAVE GONE THROUGH WITH THE FACTS AND CIRCUMSTANCES OF THE CASE, WE FEEL IT APPROPRIATE TO REPRODUCE THE CONCLU DING PART OF THE IMPUGNED ORDER. 05. I HAVE CAREFULLY CONSIDERED THE ASSESSMENT ORD ER U/S 143(3) OF THE INCOME ACT AND WRITTEN SUBMISSIONS OF THE ASSES SEE ON RECORDS. HAVING CONSIDERED SAME, I HOLD AS UNDER:- 06. SINCE THE ISSUES INVOLVED ARE IDENTICAL IS IN A.Y. 2012-13 & 2013-14, AFTER CAREFULLY CONSIDERING THE SAME, I FI ND MYSELF IN AGREEMENT. RESPECTFULLY FOLLOWING ORDER OF MY PREDE CESSOR FOR A.Y. 2012-13 IN APPEAL NO. 32/L4-15/CIT(A)/JAL., DATED 25.05.2015 AND IN A.Y. 2013-14 IN APPEAL NO. 119/15 -16/CIT(A)- 1/JAL, DATED 31.05.2016 IN CASE OF ASSESSEE ITSELF, I DELETE THE ADDITION OF RS.62,28,830/- UNDER SECTION 14A OF INC OME TAX ACT AS CHALLENGED VIDE GROUND NOS. 1, 2 AND 3. 07. IN THE RESULT, APPEAL IS ALLOWED. WE HAVE ALSO GONE THROUGH WITH THE ORDER PASSED BY THE CO-ORDINATION BENCH RELEVANT TO ASST. YEARS:2011-12, 20 12-13 ITA NO.511/ASR/2017 (A.Y.2014-15) ACIT VS. M/S KAPSONS INDU STRIES LTD., JALANDHAR 3 AND 2013-14, IN WHICH THE SAME AND IDENTICAL GROUNDS/I SSUES HAVE BEEN CONSIDERED BY THE BENCH AND DECIDED ACCORDINGLY . FOR THE SAKE OF CONVENIENCE AND CLARITY, WE FEEL IT APPROP RIATE TO REPRODUCE THE CRUX PART OF THE JUDGMENT DATED 28.10.2 016 PASSED IN ITA NO.410(ASR)/2016 FOR ASST. YEAR 2013-14. 6. WE HAVE HEARD THE RIVAL PARTIES AND HAVE GONE T HROUGH THE MATERIAL ON RECORD. WE FIND THAT THE ASSESSEE V IDE ITS SUBMISSIONS MADE BEFORE THE LD. CIT(A) HAD EXPLAINE D THAT THE INVESTMENT IN THE SISTER COMPANIES WAS OUT OF INTER NAL ACCRUAL GENERATION TO THE TUNE OF RS.9.89 CRORES. IT WAS S UBMITTED THAT THE ASSESSEE HAD SHARE CAPITAL AND FREE RESERVES TO THE TUNE OF RS.131.27 CRORES. IT WAS ALSO SUBMITTED BEFORE THE ID. CIT(A) THAT DISALLOWANCES MADE UNDER SECTION 14A WERE AGAI NST THE RULES OF CONSISTENCY AND AT NO STAGE, THE ADDITIONS IN THE PREVIOUS ASSESSMENT YEARS WERE MADE EXCEPT ASSESSME NT YEARS 2010-11 TO 2013- 14 AND FOR THESE YEARS ALSO, THE M ATTER WAS DECIDED IN FAVOUR OF THE ASSESSEE. THE ID. CIT(A) A FTER GOING THROUGH THESE SUBMISSIONS AND AFTER RELYING UPON NU MBER OF CASE LAWS DELETED THE ADDITIONS. WE FIND THAT THE I NVESTMENTS ARE CONTINUING FROM EARLIER YEARS IN WHICH THE ISSU E HAS ALREADY BEEN DECIDED IN FAVOUR OF THE ASSESSEE BY THE ORDER OF THE TRIBUNAL DATED 12.08.2016. FOR THE SAKE OF CONVENIE NCE, THE FINDINGS OF THE TRIBUNAL, AS CONTAINED IN PARA 6 AR E REPRODUCED BELOW: '6. WE HAVE HEARD THE RIVAL PARTIES AND HAVE GONE THROUGH THE MATERIAL PLACED ON RECORD. WE FIND THAT THE LEARNED CIT(A) HAS DELETED THE ADDITION MADE BY ASSESSING OFFICER U/S 14A BY HOLDING THAT ASSESSEE HAD SUFFICIENT FINDS OF ITS OWN AND LEARNED CIT(A) HAS ALSO FOLLOWED THE ORDERS IN THE CASE OF ASSESSEE ITSELF FOR ASST. YEAR 2010-11& 2011-12, WHEREIN UNDER SIMILAR FACTS AND CIRCUMSTANCES THE ADDITION U/S 14A WAS DELETED. THE LEARNED C1T(A) HAS RELIED UPON A NUMBER OF JUDGMENTS FOR MAKING THE DELETIONS. WE FIND THAT ASSESSEE COMPANY HAD SUBSTANTIAL OWN CAPITAL BASE B Y WAY OF SHARE CAPITAL AND BY WAY OF FREE RESERVES IN THE ASST. YEARS: 2011- 12 & 2012-13 OF RS.77.20 CORES A ND 117.39 CORES ON WHICH NO INTEREST WAS BEING PAID BY THE ASSESSEE COMPANY. THE LEARNED CIT(A) HAS MADE A ITA NO.511/ASR/2017 (A.Y.2014-15) ACIT VS. M/S KAPSONS INDU STRIES LTD., JALANDHAR 4 CATEGORICAL FINDING IN THIS RESPECT. THE LEARNED CT T(A) HAS ALSO MADE A FINDING OF FACT THAT ASSESSEE COMPANY H AD EARNED NET PROFIT BEFORE DEPRECIATION TO THE EXTENT OF RS. 17.73 CORES AND RS.14.32 CRORES IN ASST. YEARS: 201 1-12 & 2012-13 RESPECTIVELY. WE ARE IN AGREEMENT WITH TH E FINDINGS OF LEARNED CIT(A) AND LEARNED DR WAS NOT A BLE TO CONTROVERT- ANY OF THE FINDINGS, THEREFORE, WE DO N OT FIND ANY INFIRMITY IN THE ORDER OF LEARNED CIT(A) AS REG ARDS GROUND NO.L AND THEREFORE, THE SAME IS DISMISSED 7. FINDING THE ISSUE OF DISALLOWANCE U/S 14A PAR I-MATERIA TO THE FACTS AND CIRCUMSTANCES OF THE PRESENT CASE, WE HOLD THAT THE LD. CIT(A) HAS RIGHTLY DELETED THE ADDITION U/S 14A AND THERE IS NO INFIRMITY IN THE ORDER OF THE ID. CIT(A) AND THEREFORE, GROUND NO.L OF THE APPEAL IS DISMISSED. 8. NOW COMING TO GROUND NO. 2, WE FIND THAT IN THIS YEAR, THE AO HAD MADE DISALLOWANCE OF RS.4,20,000/- AS INTERE ST ON INTEREST FREE ADVANCES OF RS.35,00,000/- TO M/S. OR IEL VENTURES. WE FIND THAT THE SIMILAR DISALLOWANCE WAS DELETED B Y THE ID. CIT(A) IN EARLIER YEAR AND THE TRIBUNAL HAD ALSO DI SMISSED THE APPEAL OF THE REVENUE. THE RELEVANT FINDINGS OF THE TRIBUNAL, AS CONTAINED IN PARA-7 OF ITS ORDER ARE REPRODUCED BEL OW. 7. NOW COMING TO GROUND NO.2, WE FIND THAT LEARNED CIT(A) HAS MADE A FINDING OF FACT THAT ALL INTEREST FREE ADVANCE MADE BY COMPANY WERE CLEARLY FOR BUSINESS PURPOSES AND FOR THE REQUIREMENTS TO CARRY ON BUSINESS FOR ASSESSEE COMPANY AND WERE RELATABLE TO ITS BUSINESS TRANSACTIONS IN THE COURSE OF NORMAL BUSINESS ACTIVITIES. THE LEARNED CIT(A) HAD ALSO MA DE A FINDING OF FACT THAT ASSESSEE WAS HAVING HUGE CAS H ACCRUALS. THE LEARNED CIT(A) HAS PASSED AN EXHAUSTIVE AND SPEAKING ORDER AND WE ARE IN CONTROVERT ANY OF THE FINDINGS AND THEREFORE, WE DO NOT FIND ANY INFIRMITY IN THE ORDER THE SAME. IN VIEW O F THE ABOVE, THE GROUND NO.2 OF APPEAL IS ALSO DISMISSED. THEREFORE, RESPECTFULLY FOLLOWING THE ORDER OF THE TRIBUNAL DATED 12.08.2016 IN ASSESSEE S OWN CASE FOR THE ASSESSME NT YEAR 2012-13, WE HOLD THAT THE DISALLOWANCE OF RS.4,20,0 00/- WAS NOT WARRANTED. ACCORDINGLY, GROUND NO.2 IS ALSO DIS MISSED. ITA NO.511/ASR/2017 (A.Y.2014-15) ACIT VS. M/S KAPSONS INDU STRIES LTD., JALANDHAR 5 9. GROUND NOS. 3 & 4 ARE GENERAL IN NATURE, HENCE, DO NOT REQUIRE ANY ADJUDICATION. 10. IN VIEW OF THE ABOVE, THE APPEAL OF THE REVENU E IS DISMISSED. WE RESPECTFULLY FOLLOWING THE JUDGMENT PASSED BY THE CO - ORDINATION BENCH, AS THE ISSUES AND ADJUDICATION THEREOF SHALL ALSO MUTATIS MUTANDIS APPLY TO THE INSTANT CASE AS WELL, THEREFORE, WE DO NOT FIND ANY CONTRARY MATERIAL OR SU BSTANCE IN THE APPEAL OF THE REVENUE DEPARTMENT. 5. IN THE RESULT, THE APPEAL FILED BY THE REVENUE DEPA RTMENT STANDS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 26.02.2018. SD/- SD/- (SANJAY ARORA) (N.K.CHOUDHRY) ACCOUNTANT MEMBER J UDICIAL MEMBER DATED:26.02.2018 /PK/ PS. COPY OF THE ORDER FORWARDED TO: (1) M/S KAPSONS INDUSTRIES LTD., JALANDHAR (2) THE ASST. CIT, RANGE-1, JALANDHAR (3) THE CIT(A)-1, JALANDHAR (4) THE CIT CONCERNED. (5) THE SR DR, I.T.A.T., AMRITSAR TRUE COPY BY ORDER