EUROTEX INDUSTRIES & EXPORTS LTD, MUMBAI V. ADDL CITY RG 3(1), MUMBAI

ITA 6124/MUM/2010

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 55755 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 2 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-11-2011
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: E
• Next Hearing Date: 02-11-2011
• Assessment Year: 2006-2007
• Appeal Filed On: 09-08-2010
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Keywords: Depreciation
• Section: 2

Judgement Text

1 ENROTEX INDUSTRIES & EXPORTS LTD IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI E BENCH MUMBAI BENCHES, MUMBAI BEFORE SHRI B RAMAKOTAIAH, AM & SHRI VIJAY PAL RAO, JM ITA NO. 6124/MUM/2010 (ASST YEAR 2006-07) ENROTEX INDUSTRIES & EXPORTS LTD C/O SHANKARLAL JAIN & ASSOCIATES 12 ENGINEER BUILDING, 262 PRINCES ST MUMBAI 2 VS THE ADDL COMMR OF INCOME TAX RANGE 3(1), MUMBAI (APPELLANT) (RESPONDENT) PAN NO. AAACE1569M ASSESSEE BY NONE REVENUE BY SH G P TRIVEDI DT.OF HEARING 2 ND NOV 2011 DT OF PRONOUNCEMENT 4 TH , NOV 2011 PER VIJAY PAL RAO, JM THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER DATED 1.4.2010 OF THE CIT(A) FOR THE AY 2006-07. 2 THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS IN THIS APPEAL: 1. THE LD. CIT(A) ERRED IN CONFIRMING DISALLOWANCE OUT OF INTEREST, APPLYING THE PROVISIONS OF SECTION 14A, WITHOUT APPRECIATING THE FACT THAT ALL THE INVESTMENTS WERE MADE PRIOR TO A.Y. 1998-99 AND AS PER FACTS FOUND B Y HONBLE ITAT IN EARLIER YEAR, NO BORROWED FUNDS ARE BEING USED FOR MAKING THE SAID I NVESTMENT. THE LD. CIT(A) FAILED TO APPRECIATE THAT NO DISALLOWANCE IS CALLED FOR. 2. LD. CIT(A) ERRED IN CONFIRMING DISALLOWANCE OUT OF THE ADMINISTRATIVE EXPENSES UNDER THE PROVISIONS OF SECTION 14A, WITHOUT APPREC IATING THE FACT THAT NO EXPENSE IS BEING INCURRED BY THE APPELLANT FOR EARNING OF THE DIVIDEND. 3. LD. CIT(A) ERRED IN CONFIRMING DISALLOWANCE OF R S.50,680/- OUT OF DEPRECIATION ON CERTAIN PLANT AND MACHINERY, STATING THAT HONBLE I TAT HAS CONFIRMED THE DISALLOWANCE: ON THE CONTRARY, HONBLE ITAT HAS DEL ETED THE DISALLOWANCE IN EARLIER 7 YEARS. 3 THE ASSESSEE FILED A LETTER DATED 29.10.2011 FOR SEEKING ADJOURNMENT. SINCE THE ISSUES ARE COVERED; THEREFORE, WE DECLINE THE A DJOURNMENT AND PROPOSED TO HEAR AND DISPOSE OFF THE APPEAL EX-PARTE. 2 ENROTEX INDUSTRIES & EXPORTS LTD 4 GROUND NOS 1 & 2 REGARDING DISALLOWANCE U/S 14A. 4.1 WE HAVE HEARD THE LD DR AND CAREFULLY PERUSED THE RELEVANT MATERIAL ON RECORD. THE CIT(A) HAS DIRECTED THE AO TO MAKE THE PROPORTIONAL ALLOCATION UNDER RULE 8D IN PARA 8 OF THE IMPUGNED ORDER AS UNDER: 8. IT IS HOWEVER PERTINENT TO NOTE THAT THE TOTAL INTEREST PAID BY THE APPELLANT COMPANY INCLUDES FINANCE CHARGES, BANK CHARGES, PROCE SSING CHARGES, BROKERAGE ETC., AMOUNTING TO RS. 98,39,003/- OUT OF TOTAL INTEREST AND FINANCE CHARGES AMOUNTING TO RS. 7,58,45,925/-. IN ADDITION , THE AMOUNT OF RS. 75,84,287/- AND RS. 5,42,354/- HAS BEEN PAID ON FOREIGN CURRENCY LOAN TAKEN FOR THE EXPORT BUSINESS. THESE TWO ITEMS SHOULD BE EXCLUDED AND SHOULD BE DEDUCTED FROM THE TOTAL AMOUNT OF INTEREST AMOUNT ING TO RS. 7,58,45,925/- BEFORE MAKING PROPORTIONAL ALLOCATION UNDER RULE 8D. 4.2 RULE 8D IS NOT APPLICABLE FOR THE AY UNDER CONS IDERATION AS HELD BY THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF GO DREJ AND BOYCE MFG. CO. LTD. V. DEPUTY COMMISSIONER OF INCOME-TAX REPORTED IN 328 ITR 81. THEREFORE, WITHOUT DISTURBING THE FINDINGS GIVEN BY THE CIT(A) SO FAR AS DECIDED IN FAVOUR OF THE ASSESSEE, WE REMIT THE ISSUE ONLY WITH REGARD TO T HE DISALLOWANCE CONFIRMED BY THE CIT(A) AND DIRECTION ISSUED FOR APPLYING RULE 8D, TO THE RECORD OF THE ASSESSING OFFICER FOR DECIDING THE SAME IN LIGHT OF THE DECI SION OF THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF GODREJ (SUPRA). 5 THE THIRD GROUND IS REGARDING DISALLOWANCE OF DEP RECIATION OF RS. 50,680/. 5.1 WE HAVE HEARD THE LD DR AND PERUSED THE RELEVAN T MATERIAL ON RECORD. THE ASSESSING OFFICER DISALLOWED THE DEPRECIATION ON TH E GROUND THAT THE ASSESSEE DOES NOT OWN THE ASSETS IN QUESTION. THE CIT(A), THOUGH IN PARA 15 OF HIS ORDER HAS OBSERVED THAT THE CLAIM HAS BEEN ADMITTED BY THE TR IBUNAL IN THE EARLIER YEAR; HOWEVER, WHILE CONCLUDING THE FINDINGS IN PARA 17, THE CIT(A) HAS DISALLOWED THE CLAIM OF DEPRECATION. THE OBSERVATION AND THE FIND INGS GIVEN BY THE LD CIT(A) IN PARAS 15 & 17 ARE AS UNDER: 3 ENROTEX INDUSTRIES & EXPORTS LTD 15. AS REGARDS THE DISALLOWANCE OF RS. 50,680/-, I T WAS STATED THAT THE ASSETS WERE SUPPLY LINES WHICH WERE SET UP BY THE APPELLANT BUT WERE NOT OWNED BY THEN, THE ITAT HAD ADMITTED THE APPELLANTS CLAIM I N THIS REGARD. 16 17 AS REGARDS THE DISALLOWANCE OF RS. 50,680/- THIS IS DISALLOWED FOLLOWING THE DECISION OF ITAT IN EARLIER YEARS IN THE CASE OF THE APPELLANT. 6 WE FURTHER NOTE THAT FOR THE AY 2005-06, THIS TRI BUNAL IN ASSESSEES OWN CASE IN ITA NO.2676/MUM/2008 VIDE ORDER DATED 5.4.2009 HAS DECIDED THE ISSUE IN PARA 4 AS UNDER; 4. THE LEARNED AR. FOR THE ASSESSEE POINTED OUT THA T SIMILAR ISSUE HAS BEEN DECIDED BY THE TRIBUNAL IN THE ASSESSEES OWN CASE R ELATING TO THE ASSESSMENT YEAR 2000-0 1 IN ITA NO.1954/MUM/2007. WE FIND THAT SIMILAR ISSUE AROSE BEFORE THE TRIBUNAL IN THE ASSESSMENT YEAR 2000-01 AND VIDE ORDER DATED 19TH FEBRUARY, 2009, IT HAS BEEN HELD THAT DEPRECIATION IS TO BE ALLOWED ON THE CONTRIBUTIONS MADE TO STATE ELECTRICITY BOARD FOR PRO VIDING ELECTRICITY LINES IN THE PRE-OPERATIVE PERIOD. THE SAID ASSETS WERE SHOWN IN THE BLOCK OF ASSETS AND THE TRIBUNAL HELD THAT DENIAL OF DEPRECIATION WA S NOT JUSTIFIED. IN LINE WITH THE RATIO LAID DOWN BY THE CO-ORDINATE BENCH OF THE TRIBUNAL RELATING TO ASSESSMENT YEAR 2000-01, WE DIRECT THE ASSESSING OFF ICER TO ALLOW THE CLAIM OF THE ASSESSEE IN RESPECT OF DEPRECIATION OF RS. 43,770 /- CLAIMED ON THE CONTRIBUTIONS MADE TO STATE ELECTRICITY BOARD FOR PRO VIDING ELECTRICITY LINES IN THE PRE-OPERATIVE PERIOD. THE FIRST GROUND OF APPEAL IS THUS ALLOWED. 7 IN VIEW OF THE ORDER OF THE TRIBUNAL IN ASSESSEE S OWN CASE AS WELL AS A APPARENT CONTRADICTIONS IN THE IMPUGNED ORDER OF TH E CIT(A), QUA THIS ISSUE, WE ALLOW THE CLAIM OF THE ASSESSEE. 8 IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PART LY ALLOWED FOR STATISTICAL PURPOSE. ORDER PRONOUNCED ON THE 4 TH , DAY OF NOV 2011. SD/ SD/- ( B RAMAKOTAIAH ) ACCOUNTANT MEMBER ( VIJAY PAL RAO ) JUDICIAL MEMBER PLACE: MUMBAI : DATED: 4 TH ,NOV 2011 4 ENROTEX INDUSTRIES & EXPORTS LTD RAJ* COPY FORWARDED TO: 1 APPELLANT 2 RESPONDENT 3 CIT 4 CIT(A) 5 DR /TRUE COPY/ BY ORDER DY /AR, ITAT, MUMBAI