Smt. Sangeeta Sayal, New Delhi V. DCIT, New Delhi

ITA 736/DEL/2013

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 4826 (ITAT-DELHI)
• Duration Of Justice: 4 year(s) 6 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-08-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: G
• Next Hearing Date: 15-06-2017
• Assessment Year: 2009-2010
• Appeal Filed On: 06-02-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S S RAMA
• Keywords: Depreciation; Rule of consistency; Tax effect
• Section: 234B; 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH: G NEW DELHI BEFORE SHRI G.D. AGRAWAL, HONBLE PRESIDEN T & SHRI K.N. CHARRY, JUDICIAL MEMBER ITA NO. 736/DEL/2013 ( ASSESSMENT YEAR: -2009-10) SANGEETA SAYAL C/O M/S RRA TAXINDIA, D-28, SOUTH EXTENSION, PART-1, NEW DELHI. AAUPS2763G VS DCIT CIRCLE 15(1) NEW DELHI. ASSESSEE BY SH. ASHWANI TANEJA, ADV. SH. SHANTANU JAIN, ADV. REVENUE BY SH. S.S. RAMA, CIT DR ORDER PER SHRI K.N. CHARY, J.M. THIS IS AN APPEAL BY THE ASSESSEE CHALLENGING THE ORDER DATED 06.12.2012 IN APPEAL NO. 269/2011-12 PASSED BY THE LD. COMMISSIONER OF INCOME TAX (APPEALS)-XVIII, NEW DEL HI (FOR SHORT HEREINAFTER CALLED AS THE LD. CIT (A)). 2. ASSESSEE IS AN INDIVIDUAL AND DERIVING INCOME FR OM THE EXPORT OF GARMENT & FABRIC. FOR THE AY 2009-10 SHE HAS FI LED THE RETURN DATE OF HEARING 23.08.2017 DATE OF PRONOUNCEMENT 29.08.2017 2 ITA NO. 736/DEL/2013 OF INCOME ON 28.09.2009 DECLARING THE TOTAL INCOME OF RS. 56,24,160/- AND DURING THE YEAR THE ASSESSING OFFIC ER FOUND THAT THE ASSESSEE HAD SHOWN SALES AT RS. 2,19,75,231/- A ND THE NET PROFIT AT RS. 70,35,026/-. HOWEVER, AFTER THE ASSE SSEE BEING HEARD THE ASSESSMENT WAS COMPLETED AT THE TOTAL INCOME OF THE ASSESSEE AT RS. 95,07,170/- BY MAKING THREE ADDITIONS. THE FIRST ADDITION IS RS. 16,32,361/- BY INVOKING THE PROVISIONS U/S 14A OF THE INCOME TAX ACT (HEREINAFTER FOR SHORT REFERRED TO AS THE ACT) AND RULE 8D OF THE INCOME TAX RULES, 1961 (HEREINAFTER FOR SHOR T REFERRED TO AS THE RULES), SECOND ADDITION IS RS. 13,27,279/- BY DISALLOWING THE INTEREST PAID BY THE ASSESSEE ON THE LOANS OBTAINED BY THEM TO THE EXTENT THE ASSESSEE HAD ADVANCED INTEREST FREE LOAN S TO RELATED PARTIES, AND THE THIRD ADDITION IS RS. 9,23,367/- T OWARDS DISALLOWANCE OF 2/3 RD OF THE VEHICLE RUNNING AND MAINTENANCE, AND DEPRECIATION ON VEHICLES. IN APPEAL LD. CIT (A) PA RTLY ALLOWED THE RELIEF TO THE ASSESSEE. IN RESPECT OF THE ADDITION U/S 14A OF THE ACT, LD. CIT (A) DIRECTED THE ASSESSING OFFICER TO RE-COMPUTE THE DISALLOWANCE ON THAT SCORE AFTER REDUCING THE INVES TMENTS GENERATING TAXABLE INCOME. IN RESPECT OF THE INTER EST EXPENDITURE OF RS. 13,27,279/- LD. CIT (A) CONFIRMED THE SAME. IN RESPECT OF 3 ITA NO. 736/DEL/2013 THE DISALLOWANCE OF TWO THOUGHTS OF INTEREST ON CAR LOAN, VEHICLE RUNNING AND MAINTENANCE AND DEPRECIATION ON VEHICLE S, LD.CIT (A) LIMITED THE DISALLOWACE TO 50%. 3. AGGRIEVED BY THE IMPUGNED ORDER, THE ASSESSEE IS IN APPEAL BEFORE US CHALLENGING THESE THREE ADDITIONS AND ALS O CHARGING OF INTEREST U/S 234B AND 234D OF THE ACT. 4. IT IS THE ARGUMENT OF THE LD. AR ON THE ADDITION BASED ON SECTION 14A OF THE ACT READ WITH RULE 8D OF THE RUL ES, THAT THE AO ERRED IN FACTORING IN THE TOTAL INVESTMENT INSTEAD OF ADOPTING THE AVERAGE VALUE OF INVESTMENT RETURNS OF WHICH IS NOT PART OF TOTAL INCOME THAT IS THE VALUE OF TAX EXEMPT INVESTMENT. LD. AR PLACED RELIANCE ON THE DECISION OF THE HONBLE JURISDICTIO NAL HIGH COURT IN ACB INDIA LIMITED (FORMERLY M/S ARYAN COAL BENEFICA TIONS P. LTD.) VS. ASSISTANT COMMISSIONER OF INCOME TAX (ITA NO. 6 15/2014), WHEREIN VIDE PARAGRAPH NOS. 4 & 5 THE HONBLE HIGH COURT HELD AS FOLLOWS: 4. THE AO, INSTEAD OF ADOPTING THE AVERAGE VALUE OF INVESTMENT OF WHICH INCOME IS NOT PART OF THE TOTAL INCOME I.E. THE VALUE OF TAX EXEMPT INVESTMENT, CHOSE TO FACTOR IN THE TOTAL INVESTMENT ITSELF. EVEN THOUGH THE CIT (APPEALS) N OTICED THE EXACT VALUE OF THE INVESTMENT WHICH YIELDED TAXABLE INCOME, HE DID NOT CORRECT THE ERROR BUT CHOSE TO APPLY HIS OW N EQUITY. 4 ITA NO. 736/DEL/2013 GIVEN THE RECORD THAT HAD TO BE DONE SO TO SUBSTITU TE THE FIGURE OF RS. 38,61,09,287/- WITH THE FIGURE OF RS. 3,53,2 6,800/- AND THEREAFTER ARRIVE AT THE EXACT DISALLOWANCE OF 0.5% . 5. IN VIEW OF THE ABOVE REASONING, THE FINDINGS OF THE ITAT AND THE LOWER AUTHORITIES ARE HEREBY SET ASIDE. THE AP PEAL IS ALLOWED AND THE MATTER IS REMITTED TO WORK OUT THE TAX EFFECT TO THE AO WHO SHALL DO SO AFTER GIVING DUE NOTICE TO T HE PARTY. 5. ON A PERUSAL OF RECORD, WE FIND THAT BEFORE THE LD. CIT (A) ALSO THE SAID POINT WAS ARGUED AND VIDE PARAGRAPH N OS. 4.5 THE LD. CIT (A) DIRECTED THE ASSESSING OFFICER TO RECOMPUTE D THE DISALLOWANCE UNDER SECTION 14A AFTER REDUCING THE I NVESTMENTS GENERATING TAXABLE RENTAL INCOME WHICH HAS BEEN REF LECTED BY THE ASSESSEE IN HER COMPUTATION OF INCOME. WE, THEREFO RE, WHILE RESPECTFULLY FOLLOWING THE DECISIONS OF THE HONBLE JURISDICTIONAL HIGH COURT SET ASIDE THIS GROUND TO THE FILE OF THE AO TO WORK OUT THE TAX EFFECT, KEEPING IN VIEW THE ABOVE DECISION OF HONBLE JURISDICTIONAL HIGH COURT IN ACB INDIA LIMITED CASE (SUPRA). 6. NOW TURNING TO THE ADDITION IN RESPECT OF THE IN TEREST AMOUNT PAID BY THE ASSESSEE TO A TUNE OF RS. 13,27,279/-, IT IS THE SUBMISSION OF THE LD. AR THAT THE AO HAS DISALLOWED INTEREST AT 12% ON INTEREST FREE LOANS GIVEN TO SISTER CONCERNS /RELATIVES. ON THIS ASPECT, WE FIND FROM THE RECORD THAT THE AO DI D NOT ACCEPT THE CONTENTIONS OF THE ASSESSEE THAT ENOUGH INTEREST FR EE FUNDS WERE 5 ITA NO. 736/DEL/2013 AVAILABLE WITH THE ASSESSEE WHICH WERE USED TO MAKE INTEREST FREE ADVANCES TO SUCH SISTER CONCERNS. LD. AR BROUGHT T O OUR NOTICE VIDE PAGE NOS. 190 & 15 OF THE PAPER BOOK, WHICH IS THE COPY OF THE BALANCE SHEET TO DEMONSTRATE THAT IN RESPECT OF THE ASSESSMENT YEARS 2008-09 AND 2009-10 THE INTEREST FREE LOANS A DVANCE TO THE SISTER CONCERNS WERE ACCEPTED VIDE ASSESSMENT ORDER S TO BE FOUND AT PAGE NO. 168 & 194. IN RESPECT OF THE AY 2010-1 1 AO MADE A SPECIFIC QUERY AND WAS REPLIED BY THE ASSESSEE VIDE PAGE NOS. 208 TO 214 OF THE PAPER BOOK. 7. ON A CAREFUL CONSIDERATION OF THE RECORD, WE FOU ND THAT IN RESPECT OF THE AY 2010-11 THE AO MADE A SPECIFIC QU ERY ON THE ASPECT OF THE INTEREST FREE LOANS ADVANCE TO THE VE RY SAME SISTER CONCERNS AND THERE WAS NO ADDITION ON THIS ASPECT. EVEN IN RESPECT OF AY 2007-08 THERE WAS NO ADDITION ON THIS GROUND. IN THE CIRCUMSTANCES, WE ARE SATISFIED THAT BY FOLLOWI NG THE RULE OF CONSISTENCY THE ADDITION ON THIS GROUND CANNOT BE S USTAINED. HENCE, THIS GROUND IS ALLOWED AND THE ADDITION MADE TO A TUNE OF RS. 13,27,279/- IS DELETED. 6 ITA NO. 736/DEL/2013 8. NOW COMING TO THE VEHICLE RUNNING, MAINTENANCE A ND DEPRECIATION THEREON IS CONCERNED AO DISALLOWED 2/3 RD OF THE EXPENDITURE, WHEREAS THE LD. CIT (A) LIMITED IT TO 50%. LD. DR SUBMITS THAT ALL THESE CARS ARE LUXURY CARS AND THE CONTENTION OF THE ASSESSEE IS THAT THESE CARS WERE HANDLED SOLELY FOR THE PURPOSE OF BUSINESS CANNOT BE ACCEPTED. HAVING REGARD TO T HE FACTS AND CIRCUMSTANCES OF THE CASE AND HAVING REGARD TO THE EXPENDITURE INVOLVED ON THIS COUNT, WE ARE OF THE CONSIDERED OP INION THAT THE ENDS OF THE JUSTICE WOULD BE MET, IF THE DISALLOWAN CE IS LIMITED TO 25% OF THE EXPENDITURE. WE, THEREFORE, DIRECT THE AO TO LIMIT THE DISALLOWANCE TO THE EXTENT OF 25% ONLY. HENCE, THI S GROUND IS PARTLY ALLOWED. 9. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALL OWED IN PART FOR STATISTICAL PURPOSE. ORDER PRONOUNCED IN THE OPEN COURT ON 29.08.2017 SD/- SD/- (G.D. AGRAWAL) (K.N. CHARY) PRESIDENT JUDICIAL ME MBER DATED: 29.08.2017 *KAVITA ARORA 7 ITA NO. 736/DEL/2013 COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(APPEALS) 5. DR: ITAT TRUE COPY ASSISTANT REGISTRAR ITAT NEW DELHI DRAFT DICTATED ON 24.08.2017 DRAFT PLACED BEFORE AUTHOR 25.08.2017 DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER DRAFT DISCUSSED/APPROVED BY SECOND MEMBER. 29.8.17 APPROVED DRAFT COMES TO THE SR.PS/PS 29.8.17 KEPT FOR PRONOUNCEMENT ON 29.8.17 FILE SENT TO THE BENCH CLERK 30.8.17 DATE ON WHICH FILE GOES TO THE AR DATE ON WHICH FILE GOES TO THE HEAD CLERK. DATE OF DISPATCH OF ORDER. 8 ITA NO. 736/DEL/2013