DCIT 14(2)(1), MUMBAI V. POSITIVE PACKAGING INDUSTRIES LTD, MUMBAI

ITA 6360/MUM/2017

• Counselvise Citation: [2019] 112 COUNSELVISE.COM (IT) 6368 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 3 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-01-2019
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Assessment Year: 2012-2013
• Appeal Filed On: 27-10-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: BHARTI SINGH
• Keywords: Depreciation; Additional depreciation; Earning of tax free income; Revised return; Rule 8D; Set aside
• Section: 14A; 32(1)(iia); 201; 144C

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES C , MUMBAI BEFORE S HRI RAJESH KUMAR ( AM ) AND SHRI RAM LAL NEGI (JM) ITA NO. 6360 /MUM/2017 ASSESSMENT Y EAR: 2012 - 13 THE D.C.I.T - 14(2)(1), 432, AAYAKAR BHAVAN, 4 TH FLOOR, M.K. MARG, MUMBAI - 400020 VS. M/S POSITIVE PACKAGING INDUSTRIES LTD., 98, JOLLY MAKER CHAMBER 2, 225, NARIMAN POINT, MUMBAI - 400021 PAN: AAACP2836Q (APPELLANT) (RESPONDENT) REVENUE BY : MS. BHARTI SINGH (D R) ASSESSEE BY : SHRI BHAUMIK GODA (A R) DATE OF HEARING: 10 /01 /201 9 DATE OF PRONOUNCEMENT: 31 / 01 /201 9 O R D E R PER RAM LAL NEGI, JM THIS APPEAL HAS BEEN FILED BY THE REVENUE AGAINST THE ORDER DATED 17.07.2017 PASSED BY THE COMMISSIONER OF INCOME TAX ( APPEALS) - 8 (FOR SHORT THE CIT (A) ) , MUMBAI, FOR THE ASSESSMENT YEAR 2012 - 13 , WHEREBY THE LD. CIT (A) HAS ALLOWED T HE APPEAL FILED BY THE ASSESSEE AGAINST THE ASSESSMENT ORDER PASSED U/S 143 (3) R.W.S 144C ( 3) OF THE INCOME TAX ACT, 1961 (FOR SHORT THE A CT). 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE COMPANY ENGAGED IN THE BUSINESS OF MANUFACTURING PACKAGING MATERIAL, PRINTING CYLINDERS AND METALIZED FILM, FILED ITS RETURNS OF INCOME FOR THE ASSESSMENT YEAR UNDER CONSIDERATION DECLARING TOTAL INC OME OF RS. 53,22,77,335/ - . THE ASSESSEE ALSO FILED REVISED RETURN DECLARING THE TOTAL INCOME OF RS. 53,17,08,404/ - . SINCE, THE 2 ITA NO. 63 60 /MUM/2017 ASSESSMENT YEAR: 2012 - 13 CASE WAS SELECTED FOR SCRUTINY, THE AO ISSUED NOTICE U/S 143 (2) AND 142 (1) OF THE ACT. IN RESPONSE TO THE SAID NOTICES, THE AUT HORIZED REPRESENTATIVE OF THE ASSESSEE (AR) APPEARED BEFORE THE AO AND SUBMITTED THE DETAILS CALLED FOR. IT WAS NOTICED THAT THE ASSESSEE COMPANY HAD MADE INVESTMENT OF RS. 5,51,40,000/ - AS NON - CURRENT INVESTMENT. SINCE, THE ASSESSEE HAD NOT MADE SUO MOTO DISALLOWANCE U/S 14A READ WITH RULE 8D OF THE ACT, THE AO ISSUED SHOW CAUSE NOTICE TO THE ASSESSEE TO EXPLAIN AS TO WHY THE DISALLOWANCE U/S 14A READ WITH RULE 8D SHOULD NOT BE MADE. THE ASSESSEE SUBMITTED THAT SINCE IT HAS NOT RECEIVED ANY DIVIDEND INCOM E AND NOT CLAIMED ANY EXPENDITURE U/S 10 , NO DISALLOWANCE WAS REQUIRED TO BE MADE U/S 14A READ WITH RULE 8D OF THE ACT. HOWEVER, THE AO REJECTING THE CONTENTION OF THE ASSESSEE MADE DISALLOWANCE OF RS. 8,39,099/ - UNDER RULE 8D (2)(II) & (III). 3. IT WAS FURTHER NOTICED THAT THE ASSESSEE HAD CLAIMED ADDITIONAL DEPRECIATION U/S 32(1)(IIA) AMOUNTING TO RS. 4,85,99,280/ - PERTAINING TO PLANTS AND MACHINERY AMOUNTING TO RS. 48,59,92,801/ - , ACQUIRED AND INSTALLED IMMEDIATE PRECEDING YEAR AND PUT TO USE FOR LESS THAN 180 DAYS IN THAT YEAR. THE ASSESSEE WAS ACCORDINGLY ASKED TO EXPLAIN AS TO WHY THE ADDITIONAL DEPRECIATION SHOULD NOT BE DISALLOWED. THE ASSESSEE CONTENDED THAT IT IS ENTITLED FOR DEPRECIATION EQUAL TO 20% OF THE ACTUAL COST OF NEW PLANT AND MACHINER Y ACQUIRED DURING THE YEAR INSTALLED. HOWEVER, THE AO REJECTIN G THE CONTENTION OF THE ASSESSE ADDED BACK THE AMOUNT CLAIMED BY THE ASSESSEE TO THE INCOME OF THE ASSESSEE AND DETERMINED THE TOTAL INCOME AT RS. 58,17,15,710/ - . THE ASSESSEE CHALLENGED THE ASS ESSMENT ORDER BEFORE THE LD. CIT (A). THE LD. CIT (A) AFTER HEARING THE ASSESSEE DELETED THE TOTAL ADDITIONS MADE BY THE AO. THE REVENUE IS IN APPEAL AGAINST THE SAID FINDINGS OF THE LD. CIT (A). 4. THE REVENUE HAS PREFERRED THE PRESENT APPEAL BY RAISING THE FOLLOWING EFFECTIVE GROUNDS OF APPEAL : 1. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT (A) HAS ERRED IN DELETING THE DISALLOWANCE OF AN 3 ITA NO. 63 60 /MUM/2017 ASSESSMENT YEAR: 2012 - 13 AMOUNT OF RS. 8,39,099/ - U/S 14A R.W.R. 8D WITH REGARD TO THE INVESTMENT MADE BY THE ASS ESSEE IN THE EQUITY SHARES OF ICM PACKAGING PVT. LTD. 2. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT (A) HAS ERRED IN DELETING THE ADDITIONAL DEPRECIATION OF RS. 4,85,99,280/ - U/S 32(1)(IIA) OF THE I.T. ACT, PERTAINING TO PLANT S & MACHINERIES ACQUIRED AND INSTALLED IN THE IMMEDIATELY PRECEDING YEAR BUT WERE PUT TO USE FOR LESS THAN 180 DAYS IN THAT YEAR. 5. AS REGARDS, THE GROUND NO. 1 OF THE APPEAL, THE LD. DEPARTMENTAL REPRESENTATIVE (DR) SUBMITTED THAT SINCE THE AO HAS DETE RMINED THE AMOUNT OF DISALLOWANCE U/S 14A READ WITH RULE 8D AND IN ACCORDANCE WITH THE CBDT CIRCULAR NO. 5/2014 DATED 11.02.2014 AND FOLLOWING THE LAW LAID DOWN BY THE HONBLE BOMBAY HIGH COURT IN THE CASE OF GODREJ BO YCE MANUFACTURING LTD., THE LD. CIT (A ) OUGHT TO HAVE CONFIRMED THE ADDITION. 6. ON THE OTHER HAND, THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT SINCE THE LD. CIT (A) HAS DELETED THE ADDITION IN QUESTION BY FOLLOWING THE DECISIONS OF THE TRIBUNAL AND THE JUDGMENTS OF THE VARIOUS HIGH COURT S. THERE IS NO INFIRMITY IN THE FINDINGS OF THE LD. CIT (A) TO INTERFERE WITH. 7 . WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. WE NOTICE THAT THE LD. CIT (A) DECIDED THIS ISSUE IN FAVOUR OF THE ASSESSEE ON THE BASIS OF THE LAW L AID DOWN OF THE VARIOUS HIGH COURTS AND DECISIONS OF THE VARIOUS BENCHES OF THE ITAT. THE LD. CIT (A) HAS HELD THAT THE APPELLANT HAD SUFFICIENT OWN FUNDS AS WELL AS INTEREST FREE FUNDS AVAILABLE WHICH WAS MORE THAN THE AMOUNT OF INVESTMENT MADE BY THE ASS ESSEE. SINCE, THE ASSESSEE HAD SUFFICIENT INTEREST FREE FUNDS, THE LD.CIT (A) HAS RIGHTLY DELETED THE ADDITION MADE U/S 14A READ WITH RULE 8D (2)(II) OF THE RULES IN THE LIGHT OF THE JUDGMENT OF THE HONBEL BOMBAY HIGH COURT IN THE CASE OF CIT VS. HDFC BAN K 366 ITR 505 (BOM). MOREOVER, THE ASSESSEE HAS NOT EARNED ANY EXEMPT INCOME, NO QUESTION OF DISALLOWANCE DOES ARISE . T HE HONBLE DELHI HIGH 4 ITA NO. 63 60 /MUM/2017 ASSESSMENT YEAR: 2012 - 13 COURT , IN THE CASE OF CH EMINVEST LTD. VS. CIT 378 ITR 33 (DELHI HAS HELD THAT IN ORDER TO APPLY THE PROVISIONS OF S ECTION 14A READ WITH RULE 8D, THERE SHOULD BE AN ACTUAL RECEIPT OF INCOME WHICH IS NOT INCLUDIBLE IN THE TOTAL INCOME DURING THE RELEVANT PREVIOUS YEAR OR IN OTHER WORDS SECTION 14A WILL NOT APPLY IF NO EXEMPT INCOME IS RECEIVED OR RECEIVABLE DURING THE YE AR RELEVANT TO THE ASSESSMENT YEAR UNDER CONSIDERATION. SINCE, THE FINDINGS OF THE LD. CIT (A) ARE BASED ON THE LAW LAID DOWN BY THE HONBLE DELHI HIGH COURT DISCUSSED ABOVE, THERE IS NO INFIRMITY IN THE ORDER OF THE LD. CIT (A). HENCE, WE UPHOLD THE FIND INGS OF THE LD. CIT (A) AND DISMISSED THIS GROUND OF APPEAL OF THE REVENUE. 8 . SO FAR AS GROUND NO. 2 IS CONCERNED, THE LD. DR SUBMITTED THAT THE LD. CIT (A) ERRED IN DELETING THE ADDITIONAL DEPRECIATION OF RS. 4,85,99,280/ - U/S 32 (1)(IIA) OF THE ACT PER TAINING TO THE PLANTS AND MACHINERY ACQUIRED AND INSTALLED IN THE PRECEDING YEAR IGNORING THE FACT THAT THESE WERE PUT TO USE FOR LESS THAN 180 DAYS IN THE PREVIOUS YEAR. THEREFORE, THE ORDER OF THE LD.CIT (A) IS LIABLE TO BE SET ASIDE. 9 . ON THE OTHER HA ND, THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE LD. CIT (A) HAS RIGHTLY DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE. THE LD. COUN SEL FURTHER CONTENDED THAT THE ASSESSEE IS ENTITLED FOR DEDUCTION OF A FURTHER SOME EQUAL TO 20% OF THE ACTUAL COST OF SUCH MACHINERY OR PLANT UNDER SECTION 32(1)(IIA) OF THE ACT. THE LD. COUNSEL RELIED ON THE VARIOUS DECISIONS OF THE TRIBUNAL AND THE HIGH COURTS. 10 . WE HAVE GONE THROUGH THE RELEVANT MATERIAL IN THE LIGHT OF THE RIVAL SUBMISSIONS OF THE PARTIES. WE NOTICE THAT THIS GROUND OF THE APPEAL IS COVERED IN FAVOUR OF THE ASSESSEE BY THE VARIOUS DECISIONS OF THE ITAT AND THE JUDGMENT OF THE HONBLE HIGH COURT OF KARNATAKA. T HE LD. CIT (A) HAS DECIDED THE ISSUE IN QUESTION BY TAKING INTO CONSIDERATION THE SAID DECIS IONS . THE RELEVANT PARA OF THE ORDER PASSED BY THE LD. CIT(A) READS AS UNDER: - 5.3.2 I FIND THAT THIS ISSUE STANDS FULLY COVERED IN FAVOUR OF THE APPELLANT BY THE RATIO OF DECISIONS IN THE FOLLOWING CASES: 5 ITA NO. 63 60 /MUM/2017 ASSESSMENT YEAR: 2012 - 13 1. HONBLE ITAT MUMBAI IN CASE OF M/S MITC ROLL ING MILLS P. LTD., VS. ACIT 10(2). 2. DCIT VS. COSMO FILMS LTD. 139 ITD 628 (DEL). 3. ACIT VS. SIL INVESTMENT LTD. 54 SOT 54 (DEL). 4. INDIAN WRITING INSTRUMENTS PVT. LTD. VS. DCIT 3(2), MUMBAI ITAT MUMBAI BENCH I MUMBAI. 5. CIT VS. M/S RITTAL INDIA PVT. LTD. DATED 04.01.2016 (HIGH COURT OF KARNATAKA AT BENGALURU, ITA NO. 590 OF 2015 (380 ITR 423) 6. CIT VS. M/S RITTAL INDIA PVT. LTD. DATED 24.11.2015 (HIGH COURT OF KARNATAKA AT BENGALURU, ITA NO. 268/2014. IN VIEW OF THE ABOVE, THIS GROUND OF APPEAL IS ALLOWED. 1 1 . AS POINTED OUT BY THE LD. COUNSEL, I N THE CASE OF CIT VS. RITTAL INDIA PVT. LTD. (SUPRA) , THE HONBLE KARNATAK HIGH COURT HAS DECIDED THE IDENTICAL ISSUE IN FAVOUR OF THE ASSESSEE. IN THE SAID CASE THE ASSESSEE HAD ACQUIRED AND INSTALLED NEW PLANT AND MACH INERY IN THE ASSESSMENT YEAR 2007 - 08 AND WAS PUT TO USE FOR A PERIOD OF LESS THAN 180 DAYS. THE ASSESSEE CLAIMED 10% ADDITIONAL DEPRECIATION U/S 32(1)(IIA) IN THE ASSESSMENT YEAR 2007 - 08, WHICH WAS ALLOWED BY AO. HO WEVER, BALANCE 10% WAS REJECTED IN THE AS SESSMENT YEAR 2008 - 09. IN THE FIRST APPEAL THE CIT(A) AFFIRMED THE ACTION OF THE AO. BUT IN THE SECOND APPEAL THE TRIBUNAL ALLOWED THE ASSESSEES CLAIM. IN THE FURTHER APPEAL THE HONBLE HIGH COURT AFFIRMED THE DECISION OF THE TRIBUNAL AND HELD THAT THE AS SESSEE IS ENTITLED FOR 50% DEPRECIATION IN THE SUBSEQUENT YEAR. THE OBSERVATIONS OF THE HONBLE COURT ARE AS UNDER: - THE LANGUAGE USED IN CLAUSE (IIA) OF THE SAID SECTION CLEARLY PROVIDES THAT A FURTHER SUM EQUAL TO 20% OF THE ACTUAL COST OF SUCH MACHIN ERY OR PLANT SHALL BE ALLOWED AS DEDUCTION UNDER CLAUSE (II). THE WORD SHALL USED IN THE SAID CLAUSE IS VERY SIGNIFICANT. THE BENEFIT WHICH IS TO BE GRANTED IS 20% ADDITIONAL DEPRECIATION. BY VIRTUE OF THE PROVISO REFERRED TO ABOVE, ONLY 10% CAN BE CLAIM ED IN ONE YEAR, IF PLANT AND MACHINERY IS PUT TO USE FOR LESS THAN 180 DAYS IN THE SAID FINANCIAL YEAR. THIS WOULD NECESSARILY MEAN THAT THE BALANCE 10% ADDITIONAL DEDUCTION CAN BE AVAILED IN THE SUBSEQUENT ASSESSMENT YEAR, OTHERWISE THE VERY PURPOSE OF IN SERTION OF CLAUSE (IIA) WOULD BE 6 ITA NO. 63 60 /MUM/2017 ASSESSMENT YEAR: 2012 - 13 DEFEATED BECAUSE IT PROVIDES FOR 20% DEDUCTION WHICH SHALL BE ALLOWED. 1 2 . SINCE, THE CASE IS COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION S OF THE COORDINATE BENCH , AND OTHER BENCHES OF THE TRIBUNAL AND THE JUDGMENT O F THE HONBLE HIGH COURT OF KARNATAKA , DISCUSSED ABOVE, W E DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE LD. CIT (A). WE THEREFORE , UPHOLD THE FINDINGS OF THE LD. CIT (A) AND DISMISSED THIS GROUND OF APPEAL OF THE REVENUE. IN THE RESULT, APPEAL FILED B Y THE REVENUE FOR ASSESSMENT YEAR 2012 - 13 IS DISMISSED . ORDER PRONOUNCED IN THE OPEN COURT ON 31 ST JANUARY , 2019 . SD/ - SD/ - ( RAJESH KUMAR ) ( RAM LAL NEGI ) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI ; DATED: 31 / 01 / 201 9 ALINDRA, PS / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ( ) / THE CIT(A) - 4. / CIT 5. , , / DR, ITAT, MUMBAI 6. / GUARD FILE . / BY ORDER, //TRUE COPY// / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI