The DCIT, Circle-1(1)(2), Ahmedabad V. Ahmedabad Steel Craft Ltd., Ahmedabad

ITA 854/AHD/2015

• Counselvise Citation: [2018] 126 COUNSELVISE.COM (IT) 6090 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 10 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-02-2018
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: C
• Assessment Year: 2008-2009
• Appeal Filed On: 10-04-2015
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: DHIREN SHAH WITH KARAN SHAH
• Assessee Lawyers: MEENAKSHI DOHRI
• Keywords: Recovery proceedings; Depreciation; Business expenditure; Earning of tax free income; Proportionate interest
• Section: 14A; 115JB; 194C

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD C BENCH (BEFORE SHRI RAJPAL YADAV, JUDICIAL MEMBER & SHRI N.K. BILLAIYA, ACCOUNTANT MEMBER) ITA. NOS: 854 TO 856/AHD/2015 & C.O. NOS. 72 TO 74/AHD/2015 (ASSESSMENT YEARS: 2008-09 TO 2010-11) THE DCIT, CIRCLE-1(1)(2), AHMEDABAD M/S. AHMEDABAD STEEL CRAFT LTD. 401, 4 TH FLOOR, 637 COMPLEX, PANCHWATI 2 ND LANE, GULBAI TEKRA, AHMEDABAD-380015 V/S V/S` M/S. AHMEDABAD STEEL CRAFT LTD. 401, 4 TH FLOOR, 637 COMPLEX, PANCHWATI 2 ND LANE, GULBAI TEKRA, AHMEDABAD-380015 THE DCIT, CIRCLE-1(1)(2), AHMEDABAD (APPELLANT) (RESPONDENT) ITA. NOS: 738 , 739 & 1768/AHD/2015 (ASSESSMENT YEARS: 2009-10 TO 2011-12) M/S. AHMEDABAD STEEL CRAFT LTD. 401, 4 TH FLOOR, 637 COMPLEX, PANCHWATI 2 ND LANE, GULBAI TEKRA, AHMEDABAD-380015 V/S THE ACIT, (OSD) RANGE-1, AHMEDABAD (APPELLANT) (RESPONDENT) PAN: AACCA3036B APPELLANT BY : SHRI DHIREN SHAH WITH KARAN SHAH, AR RESPONDENT BY : SMT. MEENAKSHI DOHRI, SR. D. R. ITA NOS. 854 TO 856/AHD/2015 AND OTHERS . A.YS. 2008 -09 TO 2011-12 2 ( )/ ORDER DATE OF HEARING : 13 -02-201 8 DATE OF PRONOUNCEMENT : 20 -02-2018 PER N.K. BILLAIYA, ACCOUNTANT MEMBER: 1. THE CAPTIONED APPEALS WERE HEARD TOGETHER AND ARE D ISPOSED OF BY THIS COMMON ORDER FOR THE SAKE OF CONVENIENCE AND BREVIT Y. ITA NO. 854/AHD-2015 & C.O. NO. 72/AHD/2015 PERTAIN ING TO A.Y. 2008-09. 2. THE FIRST GRIEVANCE OF THE REVENUE RELATES TO THE D ELETION OF THE DISALLOWANCE OF INTEREST OF RS. 3,71,399/-. 3. AT THE VERY OUTSET, IT WAS POINTED OUT THAT AN IDEN TICAL ISSUE WAS CONSIDERED AND DECIDED BY THE TRIBUNAL IN ASSESSEES OWN CASE IN A .Y. 2005-06 IN FAVOUR OF THE ASSESSEE AND AGAINST THE REVENUE. WE FIND FORCE IN THIS CONTENTION AS THE TRIBUNAL IN ITA NO. 3563/AHD/2007 HAD CONSIDERED AN IDENTICAL ISSUE AS UNDER:- 5. GROUND NO. 1 IS AS UNDER: 1. THE LD. CIT(A) ERRED IN LAW AND ON FACTS IN DELETIN G DISALLOWANCE OF RS. 5,15,689/- MADE ON ACCOUNT OF INTEREST EXPENSES. 5.1 AS PER ASSESSING OFFICER, THE ASSESSEE HAS BORR OWED FUNDS AN ADVANCE ON A LOWER RATE OF INTEREST. AFTER DISCUSSING THE DETAIL S OF ADVANCE TO CERTAIN PARTIES A PROPORTIONATE INTEREST EXPENSE DISALLOWANCE OF RS.5 ,15,689/- WAS MADE. WHEN ITA NOS. 854 TO 856/AHD/2015 AND OTHERS . A.YS. 2008 -09 TO 2011-12 3 THE MATTER WAS CARRIED BEFORE THE FIRST APPELLAT E AUTHORITY, WE HAVE OBSERVED THAT THE LEARNED CIT (APPEALS) HAS G IVEN A FINDING THAT AS PER .THE BALANCE-SHEET, THE SHARE CAPITAL WAS TO THE TUNE OF RS.4,09,20,000/- AND SURPLUS RESERVES WAS RS. 7,91,97,138/-. AS PER ASSESSEE, TH E TOTAL INTEREST-FREE FUNDS AVAILABLE WERE RS. 12,01,17,138/-. AS AGAINST THAT, ADVANCES ALLEGED TO BE INTEREST- FREE WERE TO THE TUNE OF RS.45,05,003/-. IN THE LIGHT OF THIS BACKGROUND, NOW BEFORE US A DECISION OF RELIANCE UTILITIES & PO WER LTD. PLACED ON RECORD, REPORTED AS 313 ITR 340 ( BOM.) . ONCE THE HON'BLE COURT HAS TAKEN A VIEW THAT THE ASSESSEE POSSESSED SUFFICIENT INTEREST-FREE FUN DS OF ITS OWN, THEN THE PRESUMPTION STANDS ESTABLISHED THAT THE INVESTMENT TOWARDS ALLEGED INTEREST- FREE FUNDS WERE OUT OF THE AVAILABLE INTEREST-FREE RESERVES. IT WAS HELD THAT NO PART OF INTEREST ON BORROWINGS SHOULD BE DISALLOWED ON THE BASIS THAT THE INVESTMENTS WERE MADE OUT OF INTEREST-BEARING FUNDS . FOLLOWING THIS PRECEDENT WE HEREBY AFFIRM THE FINDINGS OF LD. CIT(A) .THIS G ROUND OF THE REVENUE IS, THEREFORE, DISMISSED. 4. AS NO DISTINGUISHING FACT HAS BEEN BROUGHT BEFORE U S, RESPECTFULLY FOLLOWING THE DECISION OF THE CO-ORDINATE BENCH (SUPRA), THIS GRO UND IS DISMISSED. 5. GROUND NO. 2 RELATES TO THE DELETION OF THE DISALLO WANCE OF RS. 4,52,915/- U/S. 14A OF THE ACT. 6. THE A.O. FOUND THAT THE ASSESSEE HAS EARNED DIVIDEN D INCOME TO THE TUNE OF RS. 3,69,482/- AND LTCG OF RS. 2,54,346/- WHICH ARE CLAIMED AS EXEMPT FROM TAX. THE A.O. NOTICED THAT THE ASSESSEE HAS PAID IN TEREST OF RS. 64,23,562/-. THE A.O. WAS OF THE OPINION THAT CERTAIN EXPENSES N EED TO BE DISALLOWED FOR EARNING THE EXEMPT INCOME AS PER THE PROVISIONS OF SECTION 14A READ WITH RULE 8D. THE A.O. COMPUTED SUCH DISALLOWANCE AT RS. 4,84 ,261/-. ITA NOS. 854 TO 856/AHD/2015 AND OTHERS . A.YS. 2008 -09 TO 2011-12 4 7. BEFORE THE LD. CIT(A), THE ASSESSEE STRONGLY CONTEN DED THAT NO NEW INVESTMENTS WERE MADE DURING THE YEAR AND IN FACT T HE INVESTMENTS OF EARLIER YEARS WERE SOLD DURING THE YEAR AND THERE IS A REDU CTION IN THE INVESTMENT. THEREFORE, NO DISALLOWANCE NEEDS TO BE MADE U/S. 14 A OF THE ACT. THE LD. CIT(A) PARTLY CONVINCED WITH THE CONTENTION OF THE ASSESSEE AND RESTRICTED THE DISALLOWANCE TO RS. 31,346/- AND DELETED RS. 4,52,9 15/-. 8. BEFORE US, THE LD. D.R. STRONGLY SUPPORTED THE FIND INGS OF THE A.O. AND LD. COUNSEL REITERATED WHAT HAS BEEN STATED BEFORE THE LOWER AUTHORITIES. 9. WE HAVE CAREFULLY CONSIDERED THE ORDERS OF THE AUTH ORITIES BELOW. THE UNDISPUTED FACT IS THAT THE ASSESSEE WAS HAVING INT EREST FREE FUNDS AMOUNTING TO RS. 7.17 CRORES. IT IS ALSO TRUE THAT DURING THE YE AR THE INVESTMENT OF RS. 1.15 CRORES WAS REDUCED TO RS. 10 LACS. CONSIDERING THE INTEREST FREE FUNDS AVAILABLE WITH THE ASSESSEE ADDED WITH INTERNAL ACCRUALS ON A CCOUNT OF LIQUIDATION OF INVESTMENT, WE DO NOT FIND THIS TO BE A FIT CASE FO R ANY DISALLOWANCE U/S. 14A OF THE ACT READ WITH RULE 8D. THE LD. CIT(A) HAS RESTR ICTED THE DISALLOWANCE TO RS. 31,346/- AND THAT SHOULD MEET THE ENDS OF JUSTI CE. NO INTERFERENCE IS CALLED FOR. GROUND NO. 2 IS DISMISSED. 10. GROUND NO. 3 RELATES TO THE DELETION OF THE ADDITIO N OF RS. 54,42,812/- MADE U/S. 40(A)(IA) OF THE ACT. 11. ON PERUSAL OF THE DETAILS FURNISHED BY THE ASSESSEE , THE A.O. FOUND THAT THE ASSESSEE HAS DEBITED SHIPPING FREIGHT, MISC. SHIPPI NG AND SHIPPING AGENCY CHARGES OF RS. 1,07,69,170/-. THE A.O. FOUND THAT O UT OF THIS, THE ASSESSEE HAS PAID RS. 56,18,612/- TO C & F AGENT. THE A.O. NOTIC ED THAT THE ASSESSEE HAS ITA NOS. 854 TO 856/AHD/2015 AND OTHERS . A.YS. 2008 -09 TO 2011-12 5 DEDUCTED TAX ONLY ON 1,75,800/-. NO TAX WAS DEDUCTE D ON PAYMENT OF RS.54,42,812/-. THE ASSESSEE WAS ASKED TO EXPLAIN W HY THESE EXPENSES SHOULD NOT BE DISALLOWED U/S. 40(A)(IA) OF THE ACT. 12. THE ASSESSEE REPLIED THAT THE EXPENSES ARE REIMBURS EMENT OF RAILWAY FREIGHT, OCEAN FREIGHT, LOADING & UNLOADING AT PORT, DOCUMEN TATION CHARGES AND HENCE NO TAX WAS DEDUCTED AT SOURCE. AS REGARDS, SHIPPING FREIGHT IS CONCERNED, IT WAS CONTENDED THAT SUCH SHIPPING AGENTS ARE NORMALLY NO N-RESIDENT SHIPPING COMPANY WHO ARE GOVERNED BY THE PROVISION OF SECTIO N 172 OF THE ACT. THEREFORE, THERE IS NO LIABILITY TO DEDUCT TAX AT S OURCE. STRONG RELIANCE WAS PLACED ON THE CBDT CIRCULAR NO. 723 DATED 19.09.199 5. REPLY OF THE ASSESSEE DID NOT FIND ANY FAVOUR WITH THE A.O. WHO CONCLUDED BY DISALLOWING RS. 54,42,812/- U/S. 40(A)(IA) OF THE ACT. 13. ASSESSEE STRONGLY AGITATED BEFORE THE LD. CIT(A) AN D REITERATED ITS CLAIM THAT THERE WAS NO LIABILITY TO DEDUCT TAX AT SOURCE ON T HE IMPUGNED PAYMENTS. 14. AFTER CONSIDERING THE FACTS AND THE SUBMISSIONS AND DRAWING SUPPORT FROM THE CBDT CIRCULAR NO. 723 DATED 19.09.1995, THE LD. CIT (A) DIRECTED TO DELETE THE DISALLOWANCE OF RS. 54,42,812/-. BEFORE US, THE LD . D.R. STRONGLY SUPPORTED THE FINDINGS OF THE A.O. PER CONTRA, THE LD. COUNSEL FO R THE ASSESSEE REITERATED WHAT HAS BEEN STATED BEFORE THE LOWER AUTHORITIES. 15. WE HAVE GIVEN A THOUGHTFUL CONSIDERATION TO THE ORD ERS OF THE AUTHORITIES BELOW QUA THE ISSUE. THE CIRCULAR NO. 723 DATED 10.09.199 5 READS AS UNDER:- 913. TAX DEDUCTION AT SOURCE FROM PAYMENT MADE TO FOREIGN SHIPPING COMPANIES ITA NOS. 854 TO 856/AHD/2015 AND OTHERS . A.YS. 2008 -09 TO 2011-12 6 1. REPRESENTATIONS HAVE BEEN RECEIVED REGARDING THE SC OPE OF SECTIONS 172, 194C AND 195 OF THE INCOME-TAX ACT, 1961, IN CONNECTION WITH TAX DEDUCTION AT SOURCE FROM PAYMENTS MADE TO THE FOREIGN SHIPPING COMPANIE S OR THEIR AGENTS. 2. SECTION 172 DEALS WITH SHIPPING BUSINESS OF NON-RES IDENTS. SECTION 172(1) PROVIDES THE MODE OF THE LEVY AND RECOVERY OF TAX I N THE CASE OF ANY SHIP, BELONGING TO OR CHARTERED BY A NONRESIDENT, WHICH C ARRIES PASSENGERS, LIVESTOCK, MAIL OR GOODS SHIPPED AT A PORT IN INDIA. AN ANALYS IS OF THE PROVISIONS OF SECTION 172 WOULD SHOW THAT THESE PROVISIONS HAVE TO BE APP LIED TO EVERY JOURNEY A SHIP, BELONGING TO OR CHARTERED BY A NON-RESIDENT, UNDERT AKES FROM ANY PORT IN INDIA. SECTION 172 IS A SELF-CONTAINED CODE FOR THE LEVY A ND RECOVERY OF THE TAX, SHIP- WISE, AND JOURNEY WISE, AND REQUIRES THE FILING OF THE RETURN WITHIN A MAXIMUM TIME OF THIRTY DAYS FROM THE DATE OF DEPARTURE OF T HE SHIP. 3. THE PROVISIONS OF SECTION 172 ARE TO APPLY, NOTWITH STANDING ANYTHING CONTAINED IN OTHER PROVISIONS OF THE ACT. THEREFORE, IN SUCH CAS ES, THE PROVISIONS OF SECTIONS 194C AND 195 RELATING TO TAX DEDUCTION AT SOURCE AR E NOT APPLICABLE. THE RECOVERY OF TAX IS TO BE REGULATED, FOR A VOYAGE UN DERTAKEN FROM ANY PORT IN INDIA BY A SHIP UNDER THE PROVISIONS OF SECTION 172. 4. SECTION 194C DEALS WITH WORK CONTRACTS INCLUDING CA RRIAGE OF GOODS AND PASSENGERS BY ANY MODE OF TRANSPORT OTHER THAN RAIL WAYS. THIS SECTION APPLIED TO PAYMENTS MADE BY A PERSON REFERRED TO IN CLAUSES (A ) TO (J) OF SUB-SECTION (1) TO ANY RESIDENT (TERMED AS CONTRACTOR). IT IS CLEAR FR OM THE SECTION THAT THE AREA OF OPERATION OF TDS IS CONFINED TO PAYMENTS MADE TO AN Y RESIDENT. ON THE OTHER HAND, SECTION 172 OPERATES IN THE AREA OF COMPUTATI ON OF PROFITS FROM SHIPPING BUSINESS OF NON-RESIDENTS. THUS, THERE IS NO OVERLA PPING IN THE AREAS OF OPERATION OF THESE SECTIONS. 5. THERE WOULD, HOWEVER, BE CASES WHERE PAYMENTS ARE M ADE TO SHIPPING AGENTS OF NON-RESIDENT SHIPOWNERS OR CHARTERERS FOR CARRIAGE OF PASSENGERS ETC., SHIPPED AT A PORT IN INDIA. SINCE, THE AGENT ACTS ON BEHALF OF THE NON-RESIDENT SHIP-OWNER OR ITA NOS. 854 TO 856/AHD/2015 AND OTHERS . A.YS. 2008 -09 TO 2011-12 7 CHARTERER, HE STEPS INTO THE SHOES OF THE PRINCIPAL . ACCORDINGLY, PROVISIONS / OF SECTION 172 SHALL APPLY AND THOSE OF SECTIONS 194C AND 195 WILL NOT APPLY. 16. AN IDENTICAL ISSUE WAS CONSIDERED BY THE CO-ORDINAT E BENCH IN THE CASE OF HASMUKH J. PATEL IN ITA NO. 2081/AHD/2009 WITH C.O. NO. 174/AHD/2009 AND HELD AS UNDER:- 9. THE AO INVOKED THE PROVISIONS OF SECTION 40(A) (IA) OF THE IT ACT FOR NON- DEDUCTION OF TDS AS REQUIRED U/S 194C OF THE IT ACT . HOWEVER, THE ABOVE PROVISION IS APPLICATION FOR THE AMOUNTS PAYABLE TO THE RESIDENTS OR THE AMOUNTS PAYABLE TO CONTRACTORS OR SUB-CONTRACTORS BEING RES IDENT. SIMILARLY, THE PROVISIONS OF SECTION 194C OF THE IT ACT APPLY TO THE AREA OF OPERATION OF TDS WHICH IS CONFINED TO PAYMENTS MADE TO ANY RESIDENTS. THE ASS ESSEE IN HIS REPLY SPECIFICALLY PLEADED THAT THE AMOUNT IN QUESTION IS NOTHING BUT REIMBURSEMENT OF FREIGHT CHARGES WHICH WAS PAID TO THE SHIPPING AGENTS FOR C ARRYING MATERIALS FOR SALE. THUS, THE ASSESSEE MADE THE PAYMENT TO THE SHIPPING BUSINESS OF NON-RESIDENTS THROUGH SHIPPING AGENT. A SPECIAL PROCEDURE IS PROV IDED U/S 172 OF THE IT ACT FOR PAYMENT OF TAXES IN CASE OF ANY SHIP BELONGING TO O R CHARTERED BY A NON-RESIDENT WHICH CARRIES PASSENGER, LIVESTOCK, MATERIAL OR GOO DS SHIPPED AT A PORT IN INDIA. IT HAS NOTHING TO DO WITH THE ACTIVITY CARRIED OUT BY THE ASSESSEE. THE BOARD CIRCULAR NO.723 (SUPRA} CLARIFIES BOTH THE PROVISIONS OF SEC TION 172 OF THE IT ACT AND SECTION 194C OF THE IT ACT AND IT IS PROVIDED THAT IN SUCH CASE THE PROVISIONS OF SECTION 172 OF THE IT ACT WOULD APPLY AND NO DEDUCT ION OF TAX IS REQUIRED AS PER SECTION 194C OF THE IT ACT. IT IS ALSO CLARIFIED TH AT THAT SINCE THE AGENT ACTS ON BEHALF OF THE NON-RESIDENT SHIP OWNERS OR CHARTERER , HE STEPS INTO THE SHOES OF THE PRINCIPAL AND ACCORDINGLY, PROVISIONS OF SECTION 19 4C OF THE IT ACT WOULD NOT APPLY IN THE CASE OF THE ASSESSEE. THE AO HAS ALSO NOT MA DE OUT ANY CASE THAT THE ASSESSEE HAS PAID ANY AMOUNT TO THE RESIDENTS. THER EFORE, PROVISIONS OF SECTION 194C OF THE IT ACT HAVE BEEN WRONGLY APPLIED IN THE CASE OF THE ASSESSEE. THE LEARNED CIT(A) WAS, THEREFORE, NOT JUSTIFIED IN REM ANDING THE MATTER TO THE FILE OF ITA NOS. 854 TO 856/AHD/2015 AND OTHERS . A.YS. 2008 -09 TO 2011-12 8 THE AO FOR VERIFICATION OF THE DETAILS OF EXPENSES AND DEPOSIT OF THE/FAX. THE DIRECTION GIVEN BY THE LEARNED CIT(A) IS CONTRARY T O THE ABOVE PROVISIONS OF LAW. IN VIEW OF THE ABOVE DISCUSSIONS, WE DO NOT APPROVE TH E FINDINGS OF THE AUTHORITIES BELOW. THE ORDERS OF THE AUTHORITIES BELOW ARE ACCO RDINGLY SET ASIDE AND QUASHED. RESULTANTLY, THE ADDITION IS DELETED. 17. ON FINDING PARITY IN THE FACTS, WE FOLLOW THE FINDI NG OF THE CO-ORDINATE BENCH AND DECLINE TO INTERFERE WITH THE FINDINGS OF THE L D. CIT(A). 18. THE SECOND LIMB IS THE REIMBURSEMENT OF EXPENSES. W E FIND THAT IN ADDITION TO THE AGENCY COMMISSION, THE ASSESSEE HAS ALSO REIMBU RSED EXPENDITURES WHICH WERE INCURRED BY THE AGENT ON BEHALF OF THE ASSESSE E. ON SUCH REIMBURSEMENT OF EXPENSES, WE FIND THAT THERE IS NO ELEMENT OF PR OFIT. ON THE GIVEN FACTS, THERE WAS NO LIABILITY ON THE ASSESSEE TO DEDUCT TA X AT SOURCE AND THEREFORE NO INTERFERENCE IS CALLED FOR IN THE FINDINGS OF THE L D. CIT(A). GROUND NO. 3 IS DISMISSED. 19. GROUND NO. 4 RELATES TO THE DELETION OF THE ADDITIO N ON ACCOUNT OF DISALLOWANCE OF DEPRECIATION OF RS. 30,600/- ON MOTOR CAR REGIST ERED IN THE NAME OF FOREMAN. 20. WE FIND THAT AN IDENTICAL ISSUE WAS CONSIDERED BY T HE TRIBUNAL IN ASSESSEES OWN CASE IN ITA NO. 489 & 399/AHD/2011 VIDE ORDER DASTE D 17.07.2015 AND HAS DECIDED THIS ISSUE AGAINST THE ASSESSEE. THE RELEVA NT FINDINGS READ AS UNDER:- 9. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUS ED THE MATERIAL ON RECORD. THE ISSUE IN THE PRESENT CASE IS WITH RESPECT TO CLAIM OF DEPRECIATION OF VEHICLE WHICH IN THE NAME OF AN EMPLOYEE AND NOT IN THE NAME OF A SSESSEE. WE FIND THAT LD. CIT(A) WHILE UPHOLDING THE DISALLOWANCE HAS NOTED T HAT ASSESSEE HAS FAILED TO ITA NOS. 854 TO 856/AHD/2015 AND OTHERS . A.YS. 2008 -09 TO 2011-12 9 PROVE THE BUSINESS USE OF VEHICLE FOR THE PURPOSE O F BUSINESS AND THE DOMINION AND CONTROL OF THE ASSESSEE ON THE VEHICLE ALSO REM AINED UNPROVED. BEFORE US, LD. A.R. HAS NOT PLACED ANY MATERIAL ON RECORD TO DEMON STRATE AS TO WHAT WAS THE UNDERSTANDING BETWEEN THE EMPLOYEE AND THE ASSESSEE AND WHETHER THE CONCERNED EMPLOYEE IN WHOSE NAME THE VEHICLE WAS PU RCHASED WAS STILL IN THE EMPLOYMENT OF ASSESSEE. LD. A.R. HAS ALSO NOT PLACE D ANY MATERIAL ON RECORD TO CONTROVERT THE FINDINGS OF LD. CIT(A). IN VIEW OF THE AFORESAID FACTS, WE FIND NO REASON TO INTERFERE WITH THE ORDER OF LD. CIT(A) AN D THUS THE GROUND OF ASSESSEE IS DISMISSED. 21. RESPECTFULLY FOLLOWING THE FINDINGS OF THE CO-ORDIN ATE BENCH, GROUND NO. 4 IS ALLOWED. 22. IN THE RESULT, THE APPEAL OF THE REVENUE IS PARTLY ALLOWED. 23. THE CROSS OBJECTION IS IN SUPPORT OF THE ORDER OF T HE LD. CIT(A), HENCE CALLS FOR NO SEPARATE ADJUDICATION. ITA NO. 855/AHD/2015 WITH C.O. NO. 73/AHD/2015 FOR A.Y. 2009-10. 24. FIRST GROUND RELATES TO THE DISALLOWANCE OF INTERES T OF RS. 3,71,399/-. 25. AN IDENTICAL ISSUE HAS BEEN CONSIDERED BY US IN ITA NO. 854/AHD/2015 (SUPRA) VIDE GROUND NO. 1 OF THAT APPEAL. FOR OUR D ETAILED DISCUSSION THEREIN, GROUND NO. 1 IS DISMISSED. 26. GROUND NO. 2 RELATES TO THE DELETION OF THE ADDITIO N OF RS. 87,43,255/- MADE U/S. 40(A)(IA) OF THE ACT. ITA NOS. 854 TO 856/AHD/2015 AND OTHERS . A.YS. 2008 -09 TO 2011-12 10 27. AN IDENTICAL ISSUE HAS BEEN CONSIDERED BY US IN ITA NO. 854/AHD/2015 (SUPRA) VIDE GROUND NO. 3 OF THAT APPEAL. FOR OUR D ETAILED DISCUSSION THEREIN, GROUND NO. 2 IS DISMISSED. 28. GROUND NO. 3 RELATES TO THE DELETION OF THE DISALLO WANCE OF DEPRECIATION OF RS. 7,59,375/- ON VEHICLE PURCHASED IN THE NAME OF DIRE CTOR. 29. DURING THE COURSE OF THE SCRUTINY ASSESSMENT, THE A .O. NOTICED THAT THE ASSESSEE HAS PURCHASED MOTOR CARS IN THE NAME OF DI RECTORS AND HAS CLAIMED DEPRECIATION ON THE SAME. THE ASSESSEE WAS ASKED TO EXPLAIN WHY DEPRECIATION SHOULD NOT BE DISALLOWED WHEN THE VEHICLES ARE NOT IN THE NAME OF THE ASSESSEE. THE ASSESSEE CLAIMED THAT THOUGH THE VEHICLES ARE I N THE NAME OF THE DIRECTORS BUT THE PURCHASE CONSIDERATION OF THE CARS HAS BEEN MADE BY THE ASSESSEE AND DEBITED IN THE BOOKS OF ACCOUNTS OF THE ASSESSEE AN D THE SAID CARS ARE USED FOR THE PURPOSE OF THE BUSINESS OF THE ASSESSEE AND HEN CE DEPRECIATION SHOULD BE ALLOWED. 30. THIS CONTENTION OF THE ASSESSEE WAS DISMISSED BY TH E A.O. WHO WAS OF THE FIRM BELIEF THAT TO CLAIM DEPRECIATION, THE ASSESSEE MUS T BE OWNER OF THE VEHICLE. THE DEPRECIATION WAS ACCORDINGLY DISMISSED. 31. BEFORE THE LD. CIT(A), THE ASSESSEE REITERATED WHAT HAS BEEN STATED BEFORE THE A.O. AFTER CONSIDERING THE FACTS AND THE SUBMISSIO NS AND DRAWING SUPPORT FROM THE SOME JUDICIAL DECISIONS DISCUSSED IN THE B ODY OF THE ORDER OF THE LD. CIT(A). THE LD. CIT(A) ALLOWED THE DEPRECIATION TO THE EXTENT OF 75% AND RESTRICTED THE DISALLOWANCE TO RS. 2,53,125/-. BEFO RE US, THE LD. D.R. SUPPORTED THE FINDINGS OF THE A.O. LD. COUNSEL FOR THE ASSESS EE REITERATED WHAT HAS BEEN ITA NOS. 854 TO 856/AHD/2015 AND OTHERS . A.YS. 2008 -09 TO 2011-12 11 STATED BEFORE THE LOWER AUTHORITIES. THE LD. COUNSE L FURTHER CONTENDED THAT IN THE CASE OF A COMPANY, THERE CANNOT BE ANY ELEMENT OF PERSONAL USAGES OF THE VEHICLES AND THEREFORE THE LD. CIT(A) HAS ERRED IN RESTRICTING THE DISALLOWANCE TO RS. 2,53,125/-. 32. WE HAVE GIVEN A THOUGHTFUL CONSIDERATION TO THE OR DERS OF THE AUTHORITIES BELOW. IT IS TRUE THAT THE VEHICLES HAVE BEEN PURCH ASED IN THE NAMES OF THE DIRECTORS OF THE ASSESSEE COMPANY. IT IS EQUALLY TR UE THE CONSIDERATION HAS BEEN PAID BY THE ASSESSEE COMPANY AND DEBITED IN ITS BOO KS OF ACCOUNT. AN IDENTICAL ISSUE WAS CONSIDERED BY THE HONBLE JURISDICTIONAL HIGH COURT OF GUJARAT IN THE CASE OF ARAVALI FINLEASE LTD.341 ITR 282 AND THE H ONBLE COURT HELD THAT WHERE THE VEHICLE ARE REGISTERED IN THE NAME OF DIR ECTOR AND USED BY THE ASSESSEE COMPANY FOR THE PURPOSE OF BUSINESS OF COM PANY, THE ASSESSEE WAS ENTITLED TO DEPRECIATION ON SAID VEHICLES. RESPECTF ULLY FOLLOWING THE FINDINGS OF THE HONBLE HIGH COURT (SUPRA), DEPRECIATION ON VEH ICLE IS ALLOWED. 33. INSOFAR AS RESTRICTING THE DISALLOWANCE TO 25% HOLD ING THAT PERSONAL USAGES OF VEHICLE CANNOT BE DENIED, IN OUR CONSIDERED OPINION , THERE CANNOT BE ANY ELEMENT OF PERSONAL USAGES BY A LOCAL PERSON (ASSES SEE COMPANY) AND THEREFORE NO DISALLOWANCE CAN BE MADE ON THE ALLEGATION THAT THERE WAS PERSONAL ELEMENT. WE ACCORDINGLY DIRECT THE A.O. TO DELETE THE DEPREC IATION OF RS. 2,53,125/- ALSO WHICH WAS CONFIRMED BY THE LD. CIT(A). THE ASSESSEE IS ENTITLED FOR THE FULL DEPRECIATION AS CLAIMED BY IT. GROUND NO. 3 IS DIS MISSED. 34. GROUND NO. 4 RELATES TO THE DELETION OF THE DISALLO WANCE OF DEPRECIATION ON MOTOR CAR REGISTERED IN THE NAME OF THE FOREMAN. ITA NOS. 854 TO 856/AHD/2015 AND OTHERS . A.YS. 2008 -09 TO 2011-12 12 35. AN IDENTICAL ISSUE HAS BEEN CONSIDERED BY US IN ITA NO. 854/AHD/2015 (SUPRA) VIDE GROUND NO. 4 OF THAT APPEAL. FOR OUR D ETAILED DISCUSSION THEREIN, GROUND NO. 4 IS ALLOWED. 36. GROUND NO. 5 RELATES TO THE DELETION OF THE ADDITIO N OF RS. 1,69,034/- TO THE BOOK PROFIT U/S. 115JB IN RESPECT OF DISALLOWANCE M ADE U/S. 14A OF THE ACT. 37. THIS ISSUE IS NOW WELL SETTLED BY THE SPECIAL BENCH OF ITAT DELHI IN THE CASE OF VIREET INVESTMENTS PVT. LTD. IN ITA NO. 502/DELH I/ 2012 WHEREIN THE SPECIAL BENCH HAS HELD THAT DISALLOWANCE MADE U/S. 14A CANNOT BE CONSIDERED FOR COMPUTING BOOK PROFIT U/S. 115JB OF THE ACT. 38. RESPECTFULLY FOLLOWING THE FINDINGS OF THE SPECIAL BENCH, GROUND NO. 5 IS DISMISSED. 39. IN THE RESULT, THE APPEAL FILED BY THE REVENUE IS P ARTLY ALLOWED. 40. CROSS OBJECTION OF THE ASSESSEE IS IN SUPPORT OF TH E ORDER OF THE LD. CIT(A), HENCE NO SEPARATE ADJUDICATION. ITA NO. 738/AHD/2015 IS CROSS APPEAL BY THE ASSESSE E FOR A.Y. 2009-10. 41. FIRST GROUND RELATES TO THE RESTRICTION OF THE DISA LLOWANCE ON ACCOUNT OF DEPRECIATION TO RS. 2,53,125/-. ITA NOS. 854 TO 856/AHD/2015 AND OTHERS . A.YS. 2008 -09 TO 2011-12 13 42. THIS ISSUE HAS BEEN CONSIDERED AND DECIDED IN FAVOU R OF THE ASSESSEE BY US IN ITA NO. 855/AHD/2015 VIDE GROUND NO. 3 OF THAT APPE AL. FOR OUR DETAILED DISCUSSION THEREIN, GROUND NO. 1 IS ALLOWED. 43. GROUND NO. 2 RELATES TO THE DISALLOWANCE ON ACCOUNT OF LOANS AND ADVANCES WRITTEN OFF RS. 6,18,333/-. 44. THE A.O. NOTICED THAT THE ASSESSEE HAS CLAIMED THE EXPENSES REGARDING ADVANCE TO SUNDRY CREDITOR, DEPOSIT AND ADVANCE TO STAFF AS WRITE OFF IN THE PROFIT AND LOSS ACCOUNT. THE ASSESSEE WAS ASKED TO JUSTIFY ITS CLAIM OF WRITE OFF. THE ASSESSEE FILED REPLY AS UNDER:- IN RESPONSE, THE ASSESSEE VIDE LETTER DATED 18/10/2 010 SUBMITTED AS UNDER: I) ADVANCE TO SUNDRY CREDITORS : THE ASSESSEE COMPANY HAS WRITTEN OFF THE ADVANCES G IVEN TO DIFFERENT SUPPLIERS AS PER DETAILS GIVEN IN OUR EARLIER REPLY DATED 7/1 0/2011 AT SR. NO. 3 AS PER EXHIBIT-11, WHICH ARE OUTSTANDING SINCE LONG. THE S AME IS REQUIRED TO BE A/LOWED AS TRADING JOSS BECAUSE THE ADVANCE TO SUPPLIERS IS A REGULAR BUSINESS TRANSACTION NORMALLY CARRIED OUT BY ANY BUSINESSMAN. II) DEPOSITS: IN THE EARLIER YEARS, THE ASSESSEE COMPANY HAS GIVE N DEPOSIT OF ? 2,38,471.58 TO THE AHMEDABAD ELECTRICITY CO. LTD. WHICH INCLUDES C ABLE EXPENSES FOR TAKING HP. SINCE THE FACTORY HAS BEEN SOLD OUT BY THE ASSESSEE COMPANY, THE AEC HAS REFUNDED THE DEPOSIT OF T 1,28,7487- ONLY AND REMAI NING AMOUNT NOT REFUNDED TO THE ASSESSEE COMPANY AS THE SAME HAS BEEN TREATED A S CABLE COST SINCE THE SAID CABLES CANNOT BE TAKEN BACK AND REUSE. ACCORDINGLY, THE SAID AMOUNT OF RS. 1,09,724/- IS WRITTEN OFF AS NO LONGER RECEIVABLE. HENCE, THE SAME IS REQUIRED TO BE ALLOWED AS TRADING LOSS. III) FURTHER, AN AMOUNT OF RS.1,86,482A HAS BEEN WR ITTEN OFF IN RESPECT OF EXCISE DUTY. SINCE, THE MANUFACTURING ACTIVITY OF THE ASSE SSEE COMPANY HAS BEEN ITA NOS. 854 TO 856/AHD/2015 AND OTHERS . A.YS. 2008 -09 TO 2011-12 14 STOPPED, THE EXCISE DEPARTMENT HAS NOT REFUNDED THE SAID AMOUNT OF RS.1,86,482/-. THE ASSESSEE COMPANY HAS FILED AN AP PEAL BEFORE THE APPELLATE TRIBUNAL IN THE MATTER, HOWEVER, THE SAID APPEAL HA S BEEN DISMISSED BY THE APPELLATE TRIBUNAL. SINCE THE SAID AMOUNT OFRS.1,86 ,482/- IS NOT REFUNDABLE, THE SAME IS ALLOWED AS TRADING LOSS. IV) IN EVERY MANUFACTURING INDUSTRY, LOANS/ADVANCES TO KARGAR (EMPLOYEES), IS A REGULAR FEATURE. THE ASSESSEE COMPANY HAS ALSO GIVE N THE LOANS/ADVANCES TO DIFFERENT KARIGARS (EMPLOYEES) WHO WERE WORKING IN THE FACTORY. HOWEVER, WHEN THE FACTORY WAS CLOSED DOWN OR SOLD, AT THE TIME OF FULL AND FINAL SETTLEMENT WITH THESE KARIGAR (EMPLOYEES), THE LOANS/ADVANCES GIVEN TO THEM WAS REMAINED TO BE ADJUSTED FROM SOME OF THE KARIGARS(EMPLOYEES). BU T, IN SOME OTHER KARIGARS(EMPLOYEES) IT WAS NOT POSSIBLE TO RECOVER THE SAID LOANS/ADVANCES TOTALING TO RS.3,38,712/-. UNDER -- THE CIRCUMSTANC ES, THE ASSESSEE COMPANY HAS WRITTEN OFF THE SAID AMOUNT. THE SAID AMOUNT IS REQ UIRED TO BE ALLOWED AS BUSINESS EXPENDITURE. IN THIS REGARD, RELIANCE IS P LACED ON THE DECISION OF HON'BLE DELHI HIGH COURT IN THE CASE OF CIT VS. TRIVENI ENG INEERING & INDS. LTD. (ITA NO. 59 OF 2009) DATED 14-9-2010.' 45. THE CLAIM OF THE ASSESSEE DID NOT FIND ANY FAVOUR W ITH THE A.O. WHO MADE THE ADDITION OF RS. 6,18,333/-. 46. ASSESSEE CARRIED THE MATTER BEFORE THE LD. CIT(A) B UT WITHOUT ANY SUCCESS. 47. BEFORE US, THE LD. COUNSEL FOR THE ASSESSEE REITERA TED WHAT HAS BEEN STATED BEFORE THE LOWER AUTHORITIES. 48. WE HAVE GIVEN A THOUGHTFUL CONSIDERATION TO THE ORD ERS OF THE AUTHORITIES BELOW. WE FIND THAT THE ASSESSEE HAS GIVEN ADVANCES TO ITS SUPPLIERS SUCH ITA NOS. 854 TO 856/AHD/2015 AND OTHERS . A.YS. 2008 -09 TO 2011-12 15 ADVANCES WERE OUTSTANDING SINCE PAST MANY YEARS DUE TO SOME DISPUTE WITH THE PARTIES ON NON-SUPPLY OF THE GOODS. IN OUR CONSIDER ED OPINION, WRITE OFF OF TRADE ADVANCES IS A REGULAR BUSINESS TRANSACTION DO NE IN THE NORMAL COURSE OF BUSINESS, HENCE ALLOWABLE. 49. THE ASSESSEE HAD DEPOSITS WITH AHMEDABAD ELECTRICIT Y COMPANY TOTALING TO RS. 2,38,47/-. SINCE THE FACTORY WAS SOLD THE ELECTRICI TY COMPANY REFUNDED THE DEPOSIT OF RS. 1,28,748/-, THE ASSESSEE WROTE OF TH E BALANCE AMOUNT NOT RECEIVED FROM THE ELECTRICITY COMPANY. IN OUR CONSI DERED OPINION, THE DEPOSIT WAS GIVEN IN THE NORMAL COURSE OF BUSINESS AND HENC E ELIGIBLE FOR WRITE OF AS A BUSINESS LOSS. 50. THE DEPOSIT OF RS. 1,86,482/- WAS GIVEN TO THE EXCI SE DEPARTMENT BUT SINCE THE MANUFACTURING ACTIVITY OF THE ASSESSEE COMPANY HAS BEEN STOPPED. THE EXCISE DEPARTMENT DECLINED TO REFUND THE DEPOSIT. THE ASSESSEE PREFERRED AN APPEAL BEFORE THE APPELLATE TRIBUNAL WHICH WAS DISM ISSED. HENCE, THERE WAS A WRITE OFF OF THE SAID DEPOSIT. IN OUR CONSIDERED OP INION, WHEN A GOVERNMENT DEPARTMENT REFUSED TO REFUND THE DEPOSIT, THE WRITE OF THE SAME IS ELIGIBLE FOR DEDUCTION FROM THE BUSINESS PROFIT OF THE ASSESSEE. 51. THE ADVANCES WRITTEN OFF WERE THE LOANS AND ADVANCE S GIVEN TO THE EMPLOYEES OF THE COMPANY. SINCE THE KARIGARS LEFT THE JOB ON THE CLOSURE OF THE FACTORY, THE LOANS AND ADVANCES BECAME IRRECOVERABLE. HENCE, WRITTEN OFF. IN OUR CONSIDERED OPINION, SINCE THE LOANS /ADVANCES WERE GIVEN TO THE EMPLOYEES OF THE COMPANY IN THE ORDINARY COURSE OF BUSINESS, NON -RECOVERY OF THE SAME HAS TO BE ALLOWED AS A BUSINESS LOSS. ITA NOS. 854 TO 856/AHD/2015 AND OTHERS . A.YS. 2008 -09 TO 2011-12 16 52. CONSIDERING THE FACTS OF THE IMPUGNED WRITE OFF IN TOTALITY, WE SET ASIDE THE FINDINGS OF THE LD. CIT(A) AND DIRECT THE A.O. TO D ELETE THE ADDITION OF RS. 6,18,333/-. GROUND NO. 2 IS ALLOWED. 53. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED. ITA NO. 856/AHD/2015 WITH C.O. NO.74/AHD/2015 PERTA INING TO A.Y. 2010-11. 54. GROUND NO. 1 RELATES TO THE DELETION OF THE ADDITIO N MADE U/S. 40(A)(IA) OF THE ACT. 55. AN IDENTICAL ISSUE HAS BEEN CONSIDERED BY US IN ITA NO. 854/AHD/2015 (SUPRA) VIDE GROUND NO. 3 OF THAT APPEAL. FOR OUR D ETAILED DISCUSSION THEREIN, GROUND NO. 1 IS DISMISSED. 56. GROUND NO. 2 RELATES TO THE DELETION OF THE ADDITIO N ON DISALLOWANCE OF DEPRECIATION ON VEHICLES PURCHASED IN THE NAME OF D IRECTOR. 57. AN IDENTICAL ISSUE HAS BEEN CONSIDERED BY US IN ITA NO. 855/AHD/2015 (SUPRA) VIDE GROUND NO. 3 OF THAT APPEAL. FOR OUR D ETAILED DISCUSSION THEREIN, GROUND NO. 2 IS DISMISSED. 58. GROUND NO. 3 RELATES TO THE DELETION OF THE ADDITIO N ON DISALLOWANCE OF DEPRECIATION ON MOTOR CAR REGISTERED IN THE NAME OF THE FOREMAN. ITA NOS. 854 TO 856/AHD/2015 AND OTHERS . A.YS. 2008 -09 TO 2011-12 17 59. AN IDENTICAL ISSUE HAS BEEN CONSIDERED BY US IN ITA NO. 854/AHD/2015 (SUPRA) VIDE GROUND NO. 4 OF THAT APPEAL. FOR OUR D ETAILED DISCUSSION THEREIN, GROUND NO. 1 IS ALLOWED. 60. IN THE RESULT, THE APPEAL FILED BY THE REVENUE IS P ARTLY ALLOWED. 61. CROSS OBJECTION OF THE ASSESSEE IS IN SUPPORT OF TH E ORDER OF THE LD. CIT(A), THEREFORE, NEEDS NO SEPARATE ADJUDICATION. ITA NO. 739/AHD/2015 ASSESSEES APPEAL FOR A.Y. 201 0-11 62. FIRST GROUND RELATES TO THE DISALLOWANCE MADE U/S. 14A OF THE ACT AMOUNTING TO RS. 1,59,832/-. 63. THE A.O. NOTICED THAT THE ASSESSEE HAS EARNED DIVID END INCOME TO THE TUNE OF RS. 1,66,233/-. INVOKING THE PROVISIONS OF SECTION 14A READ WITH RULE 8D, THE A.O. COMPUTED THE DISALLOWANCE AT RS. 1,59,832/-. 64. ASSESSEE CARRIED THE MATTER BEFORE THE LD. CIT(A) B UT WITHOUT ANY SUCCESS. 65. WE FIND THAT THE ASSESSEE IS HAVING SUFFICIENT INTE REST FREE FUNDS FOR MAKING THE INVESTMENTS. THEREFORE, THERE IS NO QUESTION OF DIS ALLOWANCE ON ACCOUNT OF INTEREST PAYMENT. THEREFORE, DISALLOWANCE OF RS. 11 ,356/- IS DIRECTED TO BE DELETED. DISALLOWANCE ON ACCOUNT OF ADMINISTRATIVE EXPENSES AMOUNTING TO RS. 1,48,476/- IS CONFIRMED. GROUND NO. 1 IS PARTLY ALL OWED. ITA NOS. 854 TO 856/AHD/2015 AND OTHERS . A.YS. 2008 -09 TO 2011-12 18 66. GROUND NO. 2 RELATES TO THE RESTRICTION OF THE DISA LLOWANCE OF DEPRECIATION @ 25%. 67. AN IDENTICAL ISSUE HAS BEEN CONSIDERED BY US IN IT A NO. 855/AHD/2015 (SUPRA) VIDE GROUND NO. 4 OF THAT APPEAL. FOR OUR D ETAILED DISCUSSION THEREIN, THIS GROUND IS ALLOWED. 68. GROUND NO. 3 RELATES TO THE DISALLOWANCE OF WRITE O FF OF RS. 12,453/-. 69. AN IDENTICAL ISSUE HAS BEEN CONSIDERED BY US IN ITA NO. 738/AHD/2015 (SUPRA) VIDE GROUND NO. 2 OF THAT APPEAL. FOR OUR D ETAILED DISCUSSION THEREIN, THIS GROUND IS ALLOWED. 70. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED. ITA NO. 1768/AHD/2015 ASSESSEES APPEAL FOR A.Y. 20 11-12. 71. FIRST GROUND RELATES TO THE DISALLOWANCE MADE U/S. 14A READ WITH RULE 8D OF THE ACT. 72. WE HAVE HELD THAT DISALLOWANCE ON ACCOUNT OF ADMINI STRATIVE EXPENSES HAS TO BE MADE U/S. 14A READ WITH RULE 8D OF THE ACT. THER EFORE, WE DO NOT FIND ANY ERROR OR INFIRMITY IN THE DISALLOWANCE MADE BY THE A.O. GROUND NO. 1 IS DISMISSED. 73. GROUND NO. 2 RELATES TO THE RESTRICTION OF THE DISA LLOWANCE OF DEPRECIATION @ 25% ON MOTOR CAR. ITA NOS. 854 TO 856/AHD/2015 AND OTHERS . A.YS. 2008 -09 TO 2011-12 19 74. AN IDENTICAL ISSUE HAS BEEN CONSIDERED BY US IN ITA NO. 855/AHD/2015 (SUPRA) VIDE GROUND NO. 3 OF THAT APPEAL. FOR OUR D ETAILED DISCUSSION THEREIN, THIS GROUND IS ALLOWED. 75. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED IN OPEN COURT ON 20- 02- 20 18 SD/- SD/- (RAJPAL YADAV) (N. K. BILLAIYA) JUDICIAL MEMBER TRUE COPY ACCOUNTANT MEMBER AHMEDABAD: DATED 20 /02/2018 RAJESH COPY OF THE ORDER FORWARDED TO: - 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE CIT (APPEALS) 4. THE CIT CONCERNED. 5. THE DR., ITAT, AHMEDABAD. 6. GUARD FILE. BY ORDER DEPUTY/ASSTT.REGISTRAR ITAT,AHME DABAD