JCIT(OSD), Circle -4, Kolkata, Kolkata V. M/s Jay Shree Tea & Industries, Kolkata

ITA 590/KOL/2012

• Counselvise Citation: [2013] 140 COUNSELVISE.COM (IT) 70441 (ITAT-KOLKATA)
• Duration Of Justice: 1 year(s) 7 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-11-2013
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2007-2008
• Appeal Filed On: 13-04-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RAJENDRA PRASAD
• Assessee Lawyers: B K CHATURVEDI
• Keywords: Depreciation; Earning of tax free income; Notional interest
• Section: 14A; 115JB

Judgement Text

I.T.A. NO.: 5 90/KOL./2012 & C.O. NO. 49-KOL-2012(IN ITA NO.590-KOL-2012) ASSESSMENT YE AR : 2007-08 PAGE 1 TO 6 1 IN THE INCOME TAX APPELLATE TRIBUNAL, KOLKATA A BENCH, KOLKATA CORAM : SHRI MAHAVIR SINGH (JUDICIAL MEMBER) AND SHRI ABRAHAM P. GEORGE (ACCOUNTANT MEMBER) I.T.A. NO.: 590/KOL./ 2012 ASSESSMENT YEAR : 2007-2008 JOINT COMMISSIONER OF INCOME TAX (OSD)........ .APPELLANT CIRCLE-4, KOLKATA, P-7, CHOWRINGHEE SQUARE, 8 TH FLOOR, KOLKATA-700 069 -VS.- M/S. JAY SHREE TEA & INDUSTRIES LTD.,.............. .............RESPONDENT INDUSTRY HOUSE, 15 TH FLOOR, 10, CAMAC STREET, KOLKATA-700 017 PAN : AAACJ 7788 D] & C.O. NO. 49/KOL./2012 (ARISING OUT OF I.T.A. NO.: 590/KOL./ 2012) ASSESSMENT YEAR : 2007-2008 M/S. JAY SHREE TEA & INDUSTRIES LTD.,.............. .............CROSS OBJECTOR INDUSTRY HOUSE, 15 TH FLOOR, 10, CAMAC STREET, KOLKATA-700 017 PAN : AAACJ 7788 D] -VS.- JOINT COMMISSIONER OF INCOME TAX (OSD)........ .RESPONDENT CIRCLE-4, KOLKATA, P-7, CHOWRINGHEE SQUARE, 8 TH FLOOR, KOLKATA-700 069 APPEARANCES BY: SHRI RAJENDRA PRASAD, SR. D.R., FOR THE DEPARTMENT SHRI B.K. CHATURVEDI, A.R., FOR THE ASSESSEE DATE OF CONCLUDING THE HEARING : NOVEMBER 27, 2013 DATE OF PRONOUNCING THE ORDER : NOVEMBER 29, 2013 O R D E R PER SHRI ABRAHAM P. GEORGE : 1. THESE ARE APPEAL AND CROSS OBJECTION FILED BY TH E REVENUE AND ASSESSEE RESPECTIVELY DIRECTED AGAINST AN ORDER DAT ED 23 RD DECEMBER, I.T.A. NO.: 5 90/KOL./2012 & C.O. NO. 49-KOL-2012(IN ITA NO.590-KOL-2012) ASSESSMENT YE AR : 2007-08 PAGE 1 TO 6 2 2011 OF COMMISSIONER OF INCOME TAX (APPEALS)-IV, KO LKATA FOR ASSESSMENT YEAR 2007-08. 2. REVENUE IN ITS GROUND NO.1 IS AGGRIEVED THAT LD . CIT(APPEALS) HAD RESTRICTED A DISALLOWANCE OF RS.2,20,15,787/- MADE BY THE ASSESSING OFFICER UNDER SECTION 14A OF THE INCOME TAX ACT, 19 61 (IN SHORT THE ACT) TO RS.5,47,433/-. AS AGAINST, THIS ASSESSEE IN ITS CROSS OBJECTION AGGRIEVED ON THE SCALED DOWN DISALLOWANCE MADE UNDER SECTION 14A OF THE ACT. 3. LD. COUNSEL FOR THE REVENUE SUBMITTED THAT ASSES SING OFFICER HAD ASSIDUOUSLY APPLIED SECTION 14A ALONGWITH RULE 8D O F THE INCOME TAX RULES, 1962 FOR MAKING THE DISALLOWANCE. PER CONTRA , LD. A.R. SUBMITTED THAT SECTION 14A COULD NOT HAVE BEEN APPLIED AT ALL IN VIEW OF THE DECISION OF HONBLE MUMBAI HIGH COURT IN THE CASE OF GODREJ & BOYCE MANUFACTURING CO. LTD. VS.- DCIT [328 ITR 81]. 4. WE HAVE HEARD THE RIVAL SUBMISSIONS AND SEEN THE IMPUGNED ORDER. IN THE CASE OF GODREJ & BOYCE MFG. CO. LTD., HONBL E MUMBAI HIGH COURT HAD HELD THAT RULE 8D COULD BE APPLIED FOR MAKING DISALLOWANCE UNDER SECTION 14A OF THE ACT ONLY FROM ASSESSMENT YEAR 20 08-09. THEREFORE, FOR THE IMPUGNED ASSESSMENT YEAR 2007-08, THE SAID RULE HAD NO APPLICABILITY. HOWEVER, THEIR LORDSHIPS ALSO OBSERV ED THAT EVEN PRIOR TO ASSESSMENT YEAR 2008-09, A DISALLOWANCE UNDER SECTI ON 14A COULD BE MADE CONSIDERING THE FACTS AND CIRCUMSTANCES OF EAC H CASE. ASSESSING OFFICER, THEREFORE, WAS NOT JUSTIFIED IN RELYING ON RULE 8D FOR MAKING THE DISALLOWANCE. LD. CIT(APPEALS) HAD RESTRICTED THE D ISALLOWANCE TO THE EXTENT OF 1% OF THE EXEMPT INCOME, WHICH IS A REASO NABLE ESTIMATE GENERALLY FOLLOWED BY THIS TRIBUNAL, WHILE CONSIDER ING DISALLOWANCES UNDER SECTION 14A OF THE ACT, FOR YEARS PRIOR TO AS SESSMENT YEAR 2008-09. WE CANNOT APPRECIATE THE ARGUMENT OF THE ASSESSEE T HAT NO DISALLOWANCE AT ALL WAS CALLED FOR UNDER SECTION 14A OF THE ACT. WE, THEREFORE, DISMISS I.T.A. NO.: 5 90/KOL./2012 & C.O. NO. 49-KOL-2012(IN ITA NO.590-KOL-2012) ASSESSMENT YE AR : 2007-08 PAGE 1 TO 6 3 THE GROUND NO. 1 OF THE REVENUE AS WELL AS CROSS OB JECTION FILED BY THE ASSESSEE. 5. VIDE ITS GROUND NO. 2, REVENUE IS AGGRIEVED THAT LD. CIT(APPEALS) DELETED AN ADDITION OF RS.2,20,15,787/- MADE TO THE BOOK PROFIT, WHILE COMPUTING TAX UNDER SECTION 115JB OF THE ACT. 6. LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ISSUE STOOD COVERED BY THE ORDER OF THIS TRIBUNAL IN ASSESSEES OWN CAS E FOR ASSESSMENT YEAR 2006-07 AS WELL AS 2008-09. 7. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE ORDER RELIED ON BY THE LD. COUNSEL FOR THE ASSESSEE. THIS TRIBUN AL IN REVENUES APPEAL FOR ASSESSMENT YEAR 2008-09 IN ITA NO.684/KOL/2012, FOLLOWING ITS OWN ORDER FOR ASSESSMENT YEAR 2006-07 IN ITA NO. 2248/K OL/2010 HAD HELD THAT WHILE COMPUTING BOOK PROFIT UNDER CHAPTER XIV- B OF THE ACT, SECTION 14A HAD NO APPLICATION WHATSOEVER. RESPECTFULLY FOL LOWING THIS DECISION, WE DISMISS GROUND NO.2 RAISED BY THE REVENUE. 8. VIDE ITS GROUND NO. 3, REVENUE IS AGGRIEVED THA T NOTIONAL INTEREST OF RS.12,87,900/-ON STICKY LOANS ADDED BY THE ASSES SING OFFICER WAS DELETED BY THE LD. CIT(APPEALS). 9. LD. COUNSELS FOR THE ASSESSEE AS WELL AS THE REV ENUE POINTED OUT THAT THE ISSUE WAS COVERED BY THE DECISION OF THIS TRIBUNAL IN ASSESSEES OWN CASE FOR ASSESSMENT YEARS 2003-04, 2006-07 AS W ELL AS 2008-09. 10. WE HAVE HEARD THE RIVAL SUBMISSIONS AND ALSO SE EN THE ORDERS RELIED ON BY THE ASSESSEE. PARA 5 OF THE ORDER DATED 20.04 .2007 OF THIS TRIBUNAL IN ITA NO. 1773/KOL/2006 FOR ASSESSMENT YEAR 2003-0 4 IS REPRODUCED HEREUNDER:- I.T.A. NO.: 5 90/KOL./2012 & C.O. NO. 49-KOL-2012(IN ITA NO.590-KOL-2012) ASSESSMENT YE AR : 2007-08 PAGE 1 TO 6 4 5. ON CAREFUL CONSIDERATION OF THE UNDISPUTED FACT S AND AFTER ANALYZING THE SAME IN THE LIGHT OF THE RIVAL SUBMISSIONS MADE BY BOTH THE SIDES, IT IS FOUND THA T UNDISPUTEDLY THE ASSESSEE HAS NOT ACCOUNT FOR INTER EST ON DEPOSIT OF RS.3,99,40,000/- AS THE ASSESSEE HAS INI TIATED LEGAL PROCEEDINGS FOR RECOVERY OF THE SAID AMOUNT A ND THE PROCEEDINGS ARE STILL PENDING BEFORE THE APPROPRIAT E AUTHORITIES. THEREFORE, THE ASSESSEE HAS NOT GOT TH E INTEREST THEREBY BUT THE AO WORKED OUT THE NOTIONAL INTEREST @15% OF THE SAID LOAN ON THE GROUND THAT THE ASSESSEE IS FOLLOWING THE MERCANTILE SYSTEM AND HE HAS TO ACCOU NT FOR THE ACCRUED INTEREST ON THE ADVANCE MADE BY THE ASS ESSEE. THE ASSESESE HAS INITIATED LEGAL PROCEEDINGS AGAINS T THE BORROWER FOR THE RECOVERY OF THE AMOUNT BEFORE THE APPROPRIATE AUTHORITIES WHICH IS PENDING FOR ADJUDI CATION. THEREFORE, THE ACTION OF THE DEPARTMENT CHARGING NO TIONAL INTEREST IN THE HANDS OF THE ASSESSEE ON THE AMOUNT OF RS.3,99,40,000/- IS NOT PERMISSIBLE UNDER THE LAW, MORE SO, IN THE LIGHT OF THE UNDISPUTED FACT OF THE LEGAL PR OCEEDINGS FOR THE RECOVERY OF THE SAID AMOUNT. HENCE, THE ADD ITION IS NOT SUSTAINABLE FOR LEGAL SCRUTINY AND ACCORDINGLY DELETED. FOR THE IMPUGNED ASSESSMENT YEAR ALSO REVENUE HAS N O CASE THAT ASSESSEE HAD ACCOUNTED AS INCOME ANY INTEREST ON STICKY LOAN S. ASSESESE HAVING NOT ACCOUNTED FOR ANY INTEREST ON STICKY LOANS, WE ARE OF THE VIEW THAT LD. CIT(APPEALS) WAS JUSTIFIED IN RELYING ON THE EARLIE R ORDERS OF THIS TRIBUNAL, AND DELETING THE ADDITION MADE. GROUND NO . 3 OF REVENUES APPEAL STANDS DISMISSED. 11. VIDE ITS GROUND NO. 4, REVENUE IS AGGRIEVED TH AT LD. CIT(APPEALS) DELETED AN ADDITION OF RS.1,46,80,553/- BEING INTER EST INCOME ON INVESTMENT MADE OUT OF THE FOREIGN BUYERS FUNDS LY ING TO THE CREDIT OF THE ASSESSEE. 12. LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ISSUE WAS NOT REGARDING INTEREST ON INVESTMENT BUT DISALLOWANCE W AS ON ACCOUNT OF CESS ON GREEN LEAF. AS AGAINST THIS LD. D.R. SUBMITTED T HAT THE DISALLOWANCE WAS RIGHTLY DONE BY THE ASSESSING OFFICER. I.T.A. NO.: 5 90/KOL./2012 & C.O. NO. 49-KOL-2012(IN ITA NO.590-KOL-2012) ASSESSMENT YE AR : 2007-08 PAGE 1 TO 6 5 13. IN REPLY LD. A.R. SUBMITTED THAT LD. CIT(APPEAL S) WAS WELL SUPPORTED BY THE DECISION OF HONBLE JURISDICTIONAL HIGH COUR T IN THE CASE OF CIT VS.- AFT INDUSTRIES LTD. [270 ITR 167]. 14. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE ORDERS OF AUTHORITIES BELOW. THE GROUND ITSELF IS MISCONCEIVE D SINCE THERE WAS NO ADDITION OF THE LIKE AMOUNT FOR ANY INTEREST INCOME ON FOREIGN FUNDS, MADE BY THE ASSESSING OFFICER IN THE ASSESSMENT ORD ER. IF WE CONSIDER IT AS A DISALLOWANCE FOR CESS ON GREEN LEAVES, IN VIEW OF THE DECISION OF THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF AF T INDUSTRIES LTD. (SUPRA), THE OUTGO COULD ONLY BE CONSIDERED AS AGRI CULTURAL EXPENDITURE. THEREFORE, THE ADDITION WAS RIGHTLY DELETED BY THE LD. CIT(APPEALS). NO INTERFERENCE IS REQUIRED. GROUND NO. 4 OF REVENUES APPEAL IS DISMISSED. 15. VIDE ITS GROUND NO. 5, GRIEVANCE OF THE REVENUE IS THAT A DISALLOWANCE OF RS.32,07,083/- ON ACCOUNT OF DEPREC IATION CLAIMED ON PLANT & MACHINERY PURCHASED OUT OF AMOUNTS RECEIVED FROM NABARD WAS DELETED BY THE LD. CIT(APPEALS). 16. LD. COUNSEL FOR THE ASSESSEE POINTED OUT THAT S IMILAR ISSUE HAD COME UP BEFORE THE TRIBUNAL IN ASSESSEES OWN CASE FOR A SSESSMENT YEAR 2003- 04 IN ITA NO. 1572/KOL/2008. 17. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE ORDERS OF AUTHORITIES BELOW. THE ISSUE REGARDING DISALLOWANCE ON ACCOUNT OF DEPRECIATION ON PLANT AND MACHINERY PURCHASED OUT O F AMOUNTS WITHDRAWN FROM NABARD HAD COME UP BEFORE THIS TRIBU NAL IN REVENUES APPEAL FOR ASSESSMENT YEAR 2003-04. IT WAS HELD AS UNDER BY THIS TRIBUNAL AT PARAS 2-3 OF ITS ORDER :- 2. THE REVENUE HAS TAKEN FOLLOWING EFFECTIVE GROUN D OF APPEAL:- THAT THE LD. CIT(A) HAS ERRED IN DELETING THE DISALLOWANCE ON ACCOUNT OF DEPRECIATION ON I.T.A. NO.: 5 90/KOL./2012 & C.O. NO. 49-KOL-2012(IN ITA NO.590-KOL-2012) ASSESSMENT YE AR : 2007-08 PAGE 1 TO 6 6 PLANT AND MACHINERY PURCHASED OUT OF WITHDRAWAL FROM NABARD. 3. AT THE TIME OF HEARING BEFORE US, THE LD. AR OF THE ASSESSEE HAS SUBMITTED THAT THE ISSUE IS SQUARELY C OVERED IN FVOUR OF THE ASSESSEE BY THE ITAT KOLKATA BENCHS O RDER IN THE CASE OF ACIT VS.- M/S. GOODRICKE GROUP LTD. IN ITA NO. 2557/KOL/2004 DATED 10 TH JUNE, 2005. THE LD. D.R. HAS NOT DISPUTED THE ABOVE SUBMISSION OF THE LD. AR OF THE ASSESSEE. IN VIEW OF THE ABOVE, GROUND NO. 1 TAKEN BY THE REV ENUE IS REJECTED. RESPECTFULLY FOLLOWING THE DECISION, WE DISMISS GRO UND NO. 5 OF THE REVENUE. 18. GROUND NO. 6 IS GENERAL IN NATURE AND NEED FOR ADJUDICATION. 19. IN THE RESULT, THE APPEAL FILED BY THE REVENUE AS WELL AS CROSS OBJECTION BY THE ASSESSEE ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 29 TH DAY OF NOVEMBER, 2013. SD/- SD/- MAHAVIR SINGH ABRAHAM P. GEORGE (JUDICIAL MEMBER) (ACC OUNTANT MEMBER) KOLKATA, THE 29 TH DAY OF NOVEMBER, 2013 COPIES TO : (1) THE APPELLANT (2) THE RESPONDENT (3) CIT (4) CIT(A) (5) THE DEPARTMENTAL REPRESENTATIVE (6) GUARD FILE BY ORDER ETC ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL KOLKATA BENCHES, KOLKATA LAHA/SR. P.S.