ECO RECYLING LTD, MUMBAI V. DCIT 9(1)(1), MUMBAI

ITA 688/MUM/2017

• Counselvise Citation: [2018] 119 COUNSELVISE.COM (IT) 2215 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 9 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-11-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: Not Allotted
• Assessment Year: 2012-2013
• Appeal Filed On: 31-01-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: D G PANSARILD
• Assessee Lawyers: M SUBRAMANIYAMLD
• Keywords: Depreciation; Earning of tax free income
• Section: 14A; 2

Judgement Text

ITA.NO.688/MUM/2017 ECO RECYCLING LIMITED ASSESSMENT YEAR-2012-13 1 IN THE INCOME TAX APPELLATE TRIBUNAL E BENCH, MUMBAI , , BEFORE HONBLE SHRI JOGINDER SINGH, VP AND HONBLE SHRI MANOJ KUMAR AGGARWAL, AM ./I.T.A. NO.688/MUM/2017 ( / ASSESSMENT YEAR: 2012-13) ECO RECYCLING LIMITED UNIT-422, THE SUMMIT BUSINESS BAY NR. WESTERN EXPRESS HIGHWAY METRO STATION ANDHERI (E), MUMBAI-400 093. / VS. D Y. C OMMISSIONER OF INCOME TAX-9(1)(1) MUMBAI. ./ ./PAN/GIR NO. AAACS 6183 R ( /APPELLANT ) : ( / RESPONDENT ) ASSESSEE BY : SHRI M. SUBRAMANIYAM-LD. AR REVENUE BY : SHRI D.G. PANSARI- LD. DR / DATE OF HEARING : 25/10/2018 / DATE OF PRONOUNCEMENT : 16/11/2018 / O R D E R PER MANOJ KUMAR AGGARWAL (ACCOUNTANT MEMBER) 1. AFORESAID APPEAL BY ASSESSEE FOR ASSESSMENT YEAR [AY] 2012-13 CONTEST THE ORDER OF LD. COMMISSIONER OF INCOME TAX (APPEALS)-16, MUMBAI, [CIT(A)], APPEAL NO.CIT(A)-16/IT-70/DCIT.9(1)(1) /2015-16 DATED 07/11/2016 BY RAISING THE FOLLOWING GROUNDS O F APPEAL:- 1. THE LEARNED CIT (A) HAS ERRED IN CONFIRMING DIS ALLOWANCE OF RS.2,11,559/- U/S. 14 R.W.R 8D(2)(III) DISREGARDING THE FACT THAT THE APPELLANT CASE IS COVERED ITA.NO.688/MUM/2017 ECO RECYCLING LIMITED ASSESSMENT YEAR-2012-13 2 U/S.8D(1)(B). FURTHER THE LEARNED CIT(A) ERRED IN N OT RESTRICTING THE DISALLOWANCE U/S. 14 READ WITH RULE 8D TO THE EXTEN T OF EXEMPT INCOME WHICH IN APPELLANT CASE WAS RS. 1,67,022/-. 2. THE LEARNED CIT(A) HAS ERRED IN CONFIRMING DISA LLOWANCE OF PRELIMINARY EXPENSES OF RS. 24,72,194/- ON GROUND THAT THE APPE LLANT DID NOT PROVIDE COMPLETE BIFURCATION OF EXPENSES WITH DOCUMENTARY E VIDENCE. IN FACT THE STATEMENT OF FACTS MENTIONED HEAD-WISE EXPENSES AND DOCUMENTARY EVIDENCE WAS NOT CALLED FOR DURING THE HEARING. 3. THE LEARNED ASSESSING OFFICER AND CIT(A) ERRED IN NOT CONSIDERING THE ALTERNATE PLEA OF THE APPELLANT TO THE DISALLOWANCE OF RS. 2472194/- MENTIONED IN 2 ABOVE I.E., TO ALLOW DEPRECIATION U/ S 32(1)(B) EXPLANATION 3 SINCE THE SAID EXPENDITURE HAS CREATED INTANGIBLE A SSETS WHICH HAS BUSINESS AND COMMERCIAL RIGHTS BEING PROCESS KNOW HOW AND TR ADE MARK. THE EXPENSES BEING R&D COST UNDER THE DSIR APPROVAL CLE ARLY MENTIONS THE CREATION OF SUCH INTANGIBLE ASSET. 4. THE LEARNED ASSESSING OFFICER AND CIT(A) ERRED IN NOT ALLOWING 1/5TH OF CONSULTANCY FEES OF RS. 4,23,584 (1/5TH OF RS. 21,1 7,920 I.E. THE CONSULTANCY FEES). THE SAID EXPENSES WERE ALLOWED IN A.Y. 2011- 12 (PARA 7.2.3 OF A.Y. 2011-12 ORDER) 5. THE LEARNED ASSESSING OFFICER AND CIT(A) ERRED IN NOT GRANTING MAT CREDIT OF RS. 11,00,927 OUT OF THE MAT CREDIT AVAILABLE OF RS .11,86,160. THE ASSESSMENT FOR IMPUGNED AY WAS FRAMED BY LD. DEPUTY COMMISSIONER OF INCOME TAX-9(1), MUMBAI [AO] U/S. 1 43(3) VIDE ORDER DATED 09/03/2015 WHEREIN THE INCOME OF THE ASSESSEE WAS ASSESSED AT RS.71.44 LACS UNDER NORMAL PROVISIONS AFTER CERTAIN ADDITIONS / DISALLOWANCES AS AGAINST RETURNED INCOME OF RS.38.9 6 LACS E-FILED BY THE ASSESSEE ON 27/09/2012. THE ASSESSEE BEING R ESIDENT CORPORATE ENTITY WAS ENGAGED IN THE BUSINESS OF RECYCLING OF E-WASTE. AS EVIDENT FROM GROUNDS OF APPEAL, THE FOLLOWING QUANTUM ADDIT IONS / ADJUSTMENTS ARE THE SUBJECT MATTER OF PRESENT APPEAL BEFORE US: - NO. NATURE OF ADDITION / ADJUSTMENT AMOUNT (RS.) 1. DISALLOWANCE U/S. 14A 6,81,278/- 2. PRELIMINARY EXPENSES WRITTEN-OFF 24,72,194/- 3. 1/5 TH ALLOWANCE OF CONSULTANCY FEES 4. NON GRANT OF MAT CREDIT ITA.NO.688/MUM/2017 ECO RECYCLING LIMITED ASSESSMENT YEAR-2012-13 3 2. DURING ASSESSMENT PROCEEDINGS, IT WAS NOTED THAT THE ASSESSEE EARNED EXEMPT DIVIDEND INCOME OF RS.1,67,022/- WHIC H CALLED FOR DISALLOWANCE U/S.14A READ WITH RULE 8D. THE LD. AO, APPLYING RULE 8D, COMPUTED THE SAME AS RS.6,81,278/-. THE FIRST APPEL LATE AUTHORITY DELETED INTEREST DISALLOWANCE MADE U/R 8D(2)(II) BU T CONFIRMED THE EXPENSE DISALLOWANCE U/R 8D(2)(III), AGAINST WHICH THE ASSESSEE IS UNDER APPEAL BEFORE US. THE LD. AUHTORIZED REPRESENTATIVE FOR ASSESSEE [AR], SHRI M. SUBRAMANIAM FAIRLY SUBMITTED THAT THE AMOUNT OF DISALLOWANCE COULD NOT EXCEED THE EXEMPT INCOME EARNED BY THE AS SESSEE DURING THE IMPUGNED AY AS HELD BY TRIBUNAL IN ASSESSEES OWN C ASE FOR AY 2011- 12 AND THEREFORE, THE DISALLOWANCE MAY BE RESTRICTE D TO THE EXTENT OF EXEMPT INCOME EARNED BY THE ASSESSEE. CONCURRING WI TH THE SAME, WE RESTRICT THE IMPUGNED DISALLOWANCE TO RS.1,67,022/- . THIS GROUND STANDS PARTLY ALLOWED. 3. GROUND NUMBERS 2, 3 & 4 ARE RELATED WITH ASSESSE ES CLAIM ON ACCOUNT OF PRELIMINARY EXPENSES WRITTEN-OFF DURING IMPUGNED AY. THE ASSESSEE CLAIMED AN EXPENDITURE OF RS.26.89 LACS TO WARDS THE SAME. THE LD. AO, FOLLOWING THE STAND IN AY 2011-12, DISA LLOWED THE SAME TO THE EXTENT OF RS.24.72 LACS. IN THE ABSENCE OF NECE SSARY DOCUMENTARY EVIDENCES, LD. CIT(A) CONFIRMED THE SAME. BOTH THE REPRESENTATIVE CONVERGED ON THE POINT THAT THIS ISSUE MAY BE RESTO RED BACK FOR RE- ADJUDICATION IN LINE WITH THE DECISION OF THIS TRIB UNAL FOR AY 2011-12. IN VIEW OF THE SAID SUBMISSIONS, THE ISSUE STANDS REST ORED BACK TO THE FILE OF LD. AO TO RE-ADJUDICATE THE SAME ON SIMILAR LINES A S DONE IN AY 2011-12. THE ASSESSEE IS DIRECTED TO SUBSTANTIATE THE SAME. THESE GROUNDS STANDS ALLOWED FOR STATISTICAL PURPOSES. ITA.NO.688/MUM/2017 ECO RECYCLING LIMITED ASSESSMENT YEAR-2012-13 4 4. IN THE LAST GROUND, THE ASSESSEE IS AGGRIEVED BY SHORT CREDIT OF MAT CREDIT OF AY 2011-12. THE LD. AR SUBMITTED THAT THE ASSESS EE HAS BEEN GRANTED SHORT MAT CREDIT, THE RECTIFICATION OF WHICH HAS ALREADY BEEN SOUGHT BY THE ASSESSEE U/S 154. THE SAME IS MERELY CONSEQUENTIAL IN NATURE. THE LD. AO IS DIRECTED TO RE-WORK THE CORRE CT MAT CREDIT AS AVAILABLE TO THE ASSESSEE FOR EARLIER YEARS AND GRA NT THE CREDIT OF THE SAME AS PER LAW. THIS GROUND STANDS ALLOWED FOR STA TISTICAL PURPOSES. 5. FINALLY, THE APPEAL STANDS PARTLY ALLOWED FOR ST ATISTICAL PURPOSES IN TERMS OF OUR ABOVE ORDER. ORDER PRONOUNCED IN THE OPEN COURT ON 16 TH NOVEMBER, 2018. SD/- SD/- (JOGINDER SINGH) (MAN OJ KUMAR AGGARWAL) / VICE PRESIDENT / ACCOUNTANT MEMBER MUMBAI; DATED :16.11.2018 SR.PS:-THIRUMALESH/JAISY VARGHESE / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT 3. $ ( ) / THE CIT(A) 4. $ / CIT CONCERNED 5. #% &###' , #' , / DR, ITAT, MUMBAI 6. & ()* / GUARD FILE / BY ORDER, / (DY./ASSTT.REGISTRAR) , / ITAT, MUMBAI.