DCIT, CIRCLE- 27(1), NEW DELHI V. USHA INTERNATIONAL LTD., NEW DELHI

ITA 7184/DEL/2018

• Counselvise Citation: [2021] 107 COUNSELVISE.COM (IT) 2819 (ITAT-DELHI)
• Duration Of Justice: 2 year(s) 11 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-10-2021
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: G
• Assessment Year: 2015-2016
• Appeal Filed On: 12-11-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Capital asset; Depreciation; Earning of tax free income; Rule 8D
• Section: 14A; 73; 13; 20

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH G, NEW DELHI BEFORE SH. N. K. BILLAIYA, ACCOUNTANT MEMBER AND SH. K. N. CHARY, JUDICIAL MEMBER (THROUGH VIDEO CONFERENCING) ITA NO.7184/DEL/2018 ASSESSMENT YEAR: 2015-16 DCIT CIRCLE 27 (1) NEW DELHI VS USHA INTERNATIONAL LTD. FLAT NO.1005, SURYA KIRAN BUILDING, 19-K. G. MARG, NEW DELHI-110001 PAN NO.AAACT0066A (APPELLANT) (RESPONDENT) APPELLANT BY SH. N. K. BANSAL, SR. DR. RESPONDENT BY SH. V. P. GUPTA, ADVOCATE SH. ANUNAV KUMAR, ADVOCATE DATE OF HEARING: 25/10/2021 DATE OF PRONOUNCEMENT: 25/10/2021 ORDER PER N. K. BILLAIYA, AM: THIS APPEAL FILED BY THE REVENUE IS PREFERRED AGAI NST THE ORDER OF THE CIT(A)-9, NEW DELHI DATED 24.08.2018 F OR A.Y. 2015-16. 2. THE GRIEVANCE OF THE REVENUE READ AS UNDER :- 2 3. AT THE VERY OUTSET THE COUNSEL FOR THE ASSESSEE DREW OUR ATTENTION TO THE DECISION OF THIS TRIBUNAL IN ASSES SEES OWN CASE IN A.Y.2014-15 AND POINTED OUT THAT ALL THE GROUNDS OF THE PRESENT APPEAL HAVE BEEN DECIDED BY THIS TRIBUNAL IN EARLIE R ASSESSMENT YEAR IN FAVOUR OF THE ASSESSEE AND AGAINST THE REVE NUE. THE COUNSEL SUPPLIED THE COPY OF THE DECISION OF THIS T RIBUNAL. 4. PER CONTRA THE DR STRONGLY SUPPORTED THE FINDING S OF THE AO BUT COULD NOT BRING ANY DISTINGUISH DECISION IN FAV OUR OF THE REVENUE. 5. WE HAVE GIVEN A THOUGHTFUL CONSIDERATION TO THE SUBMISSIONS MADE BY THE COUNSEL. WE FIND FORCE IN THE CONTENTION OF THE COUNSEL. ALL THE GROUNDS IN THE PRESENT APPEAL HAS BEEN CONSIDERED AND DECIDED BY THIS TRIBUNAL IN ITA NO.3318/DEL/2018 ORDER DATED 22.09.2021. 3 6. GROUND NO.1 RELATES TO THE DELETION OF THE DISAL LOWANCE MADE U/S. 14 A R.W.R 8D OF THE ACT. 7. THIS ISSUE WAS CONSIDERED BY THE TRIBUNAL (SUPRA ). THE RELEVANT FINDINGS READ AS UNDER :- 8. SO FAR AS DISALLOWANCE OF 14A OF RS.55,53,844/- , WE FIND THAT THE AO HAS MADE DISALLOWANCE OF RS.62,65,891/- MADE BY THE AO WITHOUT RECORDING ANY SATISFACTION AS TO WHA T WAS THE EXEMPT INCOME AND THE COMPUTATION OF DISALLOWANCE M ADE BY THE ASSESSEE AT RS. 3,44,109/- IS NOT CORRECT. LD. CIT( A) HAD RESTRICTED THE DISALLOWANCE TO THE AMOUNT OF EXEMPT INCOME FOL LOWING THE DECISION OF EARLIER YEARS AND THE JUDGMENT OF HONB LE DELHI HIGH COURT. THE RELEVANT OBSERVATION AND THE FINDING OF THE LD. CIT(A) IN THIS REGARD READS AS UNDER :- 5.2 DURING THE COURSE OF ASSESSMENT PROCEEDINGS TH E APPELLANT COMPANY VIDE ITS LETTER DATED 22.11.2016, A COPY OF WHICH HAS BEEN GIVEN IN THE PAPER BOOK HAD SUBMITTED BEFORE T HE ASSESSING OFFICER THAT NO DISALLOWANCE IN THE FACTS AND CIRCU MSTANCES OF THE CASE OF THE APPELLANT COMPANY IS CALLED FOR ON ACCO UNT OF INTEREST AS WELL AS ON ACCOUNT OF ADMINISTRATIVE EXPENSES. T HE COMPANY, HOWEVER, HAS MADE ADDITION OF RS.3,44,109/- WITH A VIEW TO AVOID ANY CONTROVERSY IN THIS REGARD AND THE AMOUNT OF DISALLOWANCE AS THE AMOUNT OF DISALLOWANCE IS REPRE SENTING SALARY OF ONE EXECUTIVE WHO IS ATTENDING THE ACTIVI TIES IN RELATION TO INVESTMENTS APART FROM OTHER OFFICE ACTIVITIES. THE COMPANY HAD ALSO SUBMITTED THAT DURING THE YEAR DIVIDEND INCOME WAS ONLY OF RS.7,12,047/-, WHICH WAS CLAIMED AS EXEMPT IN COMPU TATION OF TAXABLE INCOME. THE ASSESSING OFFICER HAD NOT ACCEP TED THE CONTENTION OF THE APPELLANT COMPANY AND VIDE THE OR DER OF ASSESSMENT HAS MADE FURTHER DISALLOWANCE OF 4 RS.62,65,891/-, WHICH HAS BEEN CALCULATED AS PER RU LE 8D OF INCOME TAX RULES WITHOUT MUCH DISCUSSION IN THE ORD ER. DURING THE COURSE OF HEARING OF APPEAL THE REPRESENTATIVE OF THE APPELLANT COMPANY HAS RELIED UPON THE CONTENTIONS RAISED BEFO RE THE ASSESSING OFFICER. HE HAS, HOWEVER, VIDE THE CHART SUBMITTED, HAS POINTED OUT THAT IN EARLIER YEARS CIT(A) IN APP EALS OF THE COMPANY FOR A.YRS. 2011-12 AND 2012-13 HAD RESTRICT ED THE DISALLOWANCE TO THE EXTENT OF DIVIDEND INCOME. 5.3 IN VIEW OF DECISION OF MY PREDECESSORS IN THE C ASE OF THE APPELLANT COMPANY IN APPEALS FOR AYS 2011-12 AND 20 12-13 AND FOLLOWING THE JUDGMENTS OF HONBLE DELHI HIGH COURT IN THE CASES OF JOINT INVESTMENT PVT. LTD. V. CIT (2015) 372 ITR 694 (DEL), CIT V. HOLCIM INDIA P. LTD., (2014) 272 CTR (DEL.) 282 AND CHEMINVEST LTD. V. CIT (2015) 378 ITR 33 (DEL.) THE DISALLOWAN CE UNDER SECTION 14A READ WITH RULE 8D OF INCOME TAX RULES IS RESTRI CTED TO RS. 7,12,047/- I.E. THE AMOUNT OF DIVIDEND INCOME. SINC E THE ASSESSEE COMPANY HAS ALREADY MADE DISALLOWANCE OF RS. 3,44,1 09/-. FURTHER DISALLOWANCE ON THIS BASIS IS TO BE MADE OF RS. 3,67,938/- AS AGAINST DISALLOWANCE OF RS, 62,65,891 /- MADE BY THE ASSESSING OFFICER. HENCE THE ASSESSEE GETS RELI EF OF RS. 58,97,953/- (RS. 62,65,891-RS. 3,44,109/-). THUS. T HIS GROUND OF APPEAL IS PARTLY ALLOWED. 9. SINCE THE AFORESAID DECISION IS BASED ON THE PRI NCIPLE LAID DOWN BY THE HONBLE JURISDICTIONAL HIGH COURT, THER EFORE, WE DO NOT FIND INFIRMITY IN THE FINDING OF THE LD.CIT(A) AND THE SAME IS CONFIRMED. 5 8. RESPECTFULLY FOLLOWING THE AFOREMENTIONED FINDIN GS GROUND NO.1 IS DISMISSED. 9. GROUND NO.2 RELATES TO THE DELETION OF THE DISAL LOWANCE U/S.36 (1) (VA). THIS ISSUE WAS CONSIDERED BY THE TRIBUNAL (SUPRA) AT PARA-11 OF THIS ORDER THE RELEVANT FINDI NGS READ AS UNDER :- 11. LASTLY, ON ACCOUNT OF DISALLOWANCE OF RS. 16,71 7/- ON ACCOUNT OF LATE PAYMENT OF ESI AND PF, WE FIND THAT THIS IS SUE IS ALSO COVERED IN FAVOUR OF THE ASSESSEE COMPANY BY THE OR DER OF THE TRIBUNAL IN THE APPEAL FOR THE ASSESSMENT YEAR 2011 -12 VIDE PARA 13 EMPLOYEES CONTRIBUTION TOWARDS PROVIDENT FUND HA S BEEN PAID BY THE COMPANY DURING THE YEAR AND LD. CIT(A) HAS G IVEN FOLLOWING FINDINGS IN THIS REGARD :- '5.5. THE APPELLANT SUBMITS THAT THE AFORESAID AMOU NT REPRESENTS EMPLOYEES CONTRIBUTION TO PROVIDENT FUND. SAME HAS BEEN PAID BY THE COMPANY DURING THE YEAR. HE HAS ALSO POINTED OU T THAT ASSESSING OFFICER WHILE GIVING DETAILS OF AMOUNT IN THE ASSESSMENT ORDER HAS WRONGLY MENTIONED YEAR 2016 AG AINST 2 ITEMS INSTEAD OF THE YEAR 2013. IN THIS CONNECTION, HE HAS REFERRED TO DETAILS GIVEN IN TAX AUDIT REPORT ON PAGE 73 OF THE PAPER BOOK. 5.6 I HAVE PERUSED THE TAX AUDIT REPORT FOR THE AY 2014-15 AND FIND THAT THE PAYMENTS HAVE BEEN MADE ON OR BEFORE THE DUE DATE OF FILING OF RETURN APPLICABLE IN THE CASE OF THE A PPELLANT. THEREFORE, THE IMPUGNED ADDITION MADE IN THE GROUND OF APPEAL (RS. 16717/-) DESERVES TO BE DELETED IN VIEW OF VAR IOUS DECISIONS OF THE DELHI HIGH COURT INCLUDING THE DECISION IN T HE CASE OF CIT V. AIMIL LTD. (2010) 311 ITR 508 (DEL). ACCORDINGLY, D ISALLOWANCE 6 MADE BY THE ASSESSING OFFICER OF RS.16,717/- IS DIR ECTED TO BE DELETED. 12. ONCE THE PAYMENTS HAVE BEEN MADE ON OR DUE DATE OF RETURN OF INCOME THEN WE DO NOT FIND ANY INFIRMITY IN THE AFORESAID FINDING OF/THE LD.CIT(A). ACCORDINGLY THIS GROUND O F THE REVENUE IS DISMISSED. 10. RESPECTFULLY FOLLOWING THE AFOREMENTIONED FINDI NGS, THE FINDINGS OF THE CIT(A) ARE UPHELD. 11. GROUND NO.3 RELATES TO THE DELETION OF THE DISA LLOWANCE MADE ON ACCOUNT OF CLUB SERVICES AND FACILITIES. T HIS ISSUE WAS CONSIDERED BY THE TRIBUNAL (SUPRA) AT PARA-10 OF IT S ORDER. THE RELEVANT FINDING READ AS UNDER :- 10. AS REGARDS DISALLOWANCE OF RS. 6,94,236/- ON ACCOUNT OF CLUB EXPENDITURE, WE FIND THAT AO HAS DISALLOWED THE CLUB SERVICES AND THESE EXPENSES HOL DING THAT IT IS NOT RELATED TO THE BUSINESS ACTIVITIES O F THE ASSESSEE. LD. CIT (A) RELIED UPON THE JUDGMENT OF HONBLE SUPREME COURT IN THE CASE OF CIT VS. UNITED GLASS MFG. CO. LTD. AND THE EARLIER YEAR LD. CIT(A) ORDER HAS DELETED THE SAID DISALLOWANCE. WE FIND THAT THI S ISSUE IS DECIDED IN FAVOUR OF THE ASSESSEE COMPANY BY THE ORDER OF THE TRIBUNAL IN THE APPEAL FOR THE 7 ASSESSMENT YEAR 2011- 12. ACCORDINGLY THIS GROUND RAISED BY THE REVENUE IS DISMISSED. 12. RESPECTFULLY FOLLOWING THE FINDINGS OF THE TRIB UNAL GROUND NO.3 IS DISMISSED. 13. GROUND NO.4 RELATES TO THE DELETION OF DISALLOW ANCE OF DEPRECIATION CLAIMED @ 25% ON OPENING WDV OF INTELL ECTUAL PROPERTY RIGHTS. 14. THIS ISSUE WAS CONSIDERED BY THE TRIBUNAL (SUPR A) AT PARA-4 OF ITS ORDER. THE RELEVANT FINDINGS READ AS UNDER :- 4. AFTER CONSIDERING THE AFORESAID SUBMISSIONS AND ON PERUSAL OF THE FINDINGS OF THE IMPUGNED ORDER AS WEL L AS TRIBUNALS ORDERS FOR THE EARLIER YEARS WE FIND THAT IN SO FAR AS GROUND NO. 1 IS CONCERNED, I.E., DISALLOWANCE OF DEPRECIATION, WE FIND THAT AO HAS NOTED THAT ASSESSEE IN AY 2012-13 HAD CAPITALISED AN AMOUNT OF RS.103,63,25,665 /- TOWARDS ACQUISITION OF THE INTELLECTUAL PROPERTY AS SET AND CLAIMED DEPRECIATION @ 25% TREATING IT AS INTANGIBLE CAPITAL ASSET. AO HAD OBSERVED THAT DURING THE ASSESSMENT FOR AY 2012-13, IT WAS FOUND THAT THE ASSESSEE HAS MADE PAYMENTS TO THE TRUSTS MF IS MORE THAN 42% OF WHAT WAS PAID TO CT, IT WAS DETERMINED THAT THE PAYMENT OF RS.30,87,17,650/- MADE BY THE ASSESSEE TO THE MANSA ROVER TRUSB(MT)CANNOT BE TERMED AS WHOLLY AND EXCLUSIVELY 8 INCURRED FOR BUSINESS PURPOSES. THE DEPRECIATION CLA IMED BY THE ASSESSEE @ 25% ON THE TOTAL AMOUNT SPENT ON THE MT (I.E 7,71,79,413/-) WAS DISALLOWED AND ADDED TO THE RETURNE D INCOME OF THE ASSESSEE. 5. ASSESSING OFFICER NOTED THAT DURING THE ASSESSMEN T PROCEEDINGS FOR AY 2013-14 ALSO, THE ASSESSEE HAS C LAIMED DEPRECIATION ON THE INTELLECTUAL PROPERTY ASSET AND ACCORDINGLY DISALLOWANCE OF RS.5,78,84,559/- WAS MA DE. CONSIDERING THE FACTS AND CIRCUMSTANCES AND FOLLOWING THE ASSESSMENT ORDER FOR AY 2013-14, A 25% DEPRECIATION O N RS. 17,36,35,678/- (I.E DIFFERENCE OF RS.23,15,38,237/- (-) RS.5,78,84,559/-) IS DISALLOWED. HENCE, THE DISALLO WANCE OF RS.4,34,13,420/- HAS BEEN MADE AND RETURNED INCOME OF THE ASSESSEE. 6. IN THE FIRST APPEAL, LD. CIT(A) HAD FOLLOWED THE ORDER FOR ASSESSMENT YEAR 2012-13, WHEREIN THIS ISSUE WAS EXA MINED IN DETAIL WHICH IS AS UNDER :- 'AFTER CAREFULLY CONSIDERING ALL THE ABOVE FACTS AND CIRCUMSTANCES, IT IS HELD THAT THE DISALLOWANCE OF DEPRECIATION ON ACQUIRING PROPRIETARY COMMERCIAL INF ORMATION FROM MT, WHILE ALLOWING THE CLAIM OF DEPRECIATION ON ACCRUING THE TRADE MARKS IN QUESTION FROM CIT, IS WITHOUT LO GIC. THE SAID INTANGIBLE ASSETS WERE ACQUIRED BY THE APPELLANT FROM MT UNDER A TRIPARTITE COMPRISE AGREEMENT. THE CONSID ERATION OF RS. 17.32 CRORES WAS PAID TO MT AS PART OF THE O VERALL SETTLEMENT CONSIDERATION OF RS. 103.63 CRORES. THERE IS NO BASIS FOR HOLDING THAT THE PAYMENT WAS NOT INCURRED WHOLLY 9 AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS OF THE APPELLANT, AS IT ACQUIRED THE RIGHTS WHICH ENABLED IT TO EFFECTI VELY CARRY ON ITS BUSINESS, AND IN FACT WITHOUT THIS PAYMENT, THE APPELLANT WOULD NOT HAVE BEEN ABLE TO CARRY ON THE B USINESS OF MANUFACTURE AND SALE OF HOME APPLIANCES UNDER THE USHA BRAND NAME. ACCORDINGLY THE AO IS DIRECTED TO DELETE THE DISALLOWANCE OF DEPRECIATION OF RS.7,71,79,413/-. 7. IT HAS BEEN INFORMED THAT THE REVENUE DID NOT FILE ANY APPEAL AGAINST THE ORDER OF LD. CIT (A) IN THE FIRST YEAR I.E., IN AY 2012-13. HOWEVER, LOOKING TO THE FACT THAT SINCE IN THIS YEAR THE ASSESSEE IS ALLOWED FOR DEPRECIATION ON WDV BROUGHT OVER, THEN AN EARLIER POSITION HAS BEEN ACC EPTED AND ATTAINED FINALITY, THEN DEPRECIATION CANNOT BE DISAL LOWED IN THE SUBSEQUENT YEAR. ONCE THE DEPRECIATION HAS BEEN ALLOWED IN THE FIRST YEAR OF CAPITALISATION OF EXPE NDITURE, THEREAFTER THERE IS NO BASIS FOR DISALLOWING THE CON SEQUENTIAL BENEFIT ON/WDV. ACCORDINGLY, THIS GROUND RAISED BY TH E REVENUE IS DISMISSED. 15. RESPECTFULLY FOLLOWING THE DECISION OF THIS TRI BUNAL IN A.Y.2014-15 (SUPRA) GROUND NO. 4 IS DISMISSED. 16. IN THE RESULT, THE APPEAL FILED BY THE REVENUE IS DISMISSED. 10 17. DECISION ANNOUNCED IN THE OPEN COURT IN THE PRE SENCE OF BOTH REPRESENTATIVES ON 25.10.2021. SD/- SD/- (K. NARSIMHA CHARY) (N. K. BILLAIYA) JUDICIAL MEMBER ACCOUNTANT MEM BER *NEHA* DATE:-25.10.2021 COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(APPEALS) 5. DR: ITAT ASSISTANT REGI STRAR ITAT NEW DELHI DATE OF DICTATION 25.10.2021 DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER 25.10.2021 DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE OTHER MEMBER 25.10.2021 DATE ON WH ICH THE APPROVED DRAFT COMES TO THE SR.PS/PS 25.10.2021 DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE DICTATING MEMBER FOR PRONOUNCEMENT 25.10.2021 DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR. PS/ PS 25.10.2021 DATE ON WHICH THE FINAL ORDER IS UPLOADED ON THE WEBSITE OF ITAT 25.10.2021 DATE ON WHICH THE FILE GOES TO THE BENCH CLERK 25.10.2021 DATE ON WHICH FILE GOES TO THE HEAD CLERK. THE DATE ON WHICH FILE GOES TO THE ASSISTANT REGISTRAR FOR SIGNATURE ON THE ORDER DATE OF DISPATCH OF THE ORDER