Nahar Industrial Enterprises Ltd., Ludhiana V. DCIT, Ludhiana

ITA 897/CHANDI/2012

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 80868 (ITAT-CHANDIGARH)
• Duration Of Justice: 2 year(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-09-2014
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 23-04-2014
• Assessment Year: 2008-2009
• Appeal Filed On: 31-08-2012
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: MANJIT SINGH
• Keywords: Business expenditure
• Section: 143(3); 14A; 115JB

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL CHANDIGARH BENCH B, CHANDIGARH BEFORE SHRI T.R.SOOD, ACCOUNTANT MEMBER AND MS. SUSHMA CHOWLA, JUDICIAL MEMBER ITA NO. 897/CHD/2012 ASSESSMENT YEAR : 2008-09 NAHAR INDUSTRIAL ENTERPRISES LTD., VS. THE D.C .I.T., FOCAL POINT, CIRCLE VII, LUDHIANA. LUDHIANA. PAN: AACCN3563A (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI NAVDEEP SHARMA RESPONDENT BY : SHRI MANJIT SINGH, DR DATE OF HEARING : 19.08.2014 DATE OF PRONOUNCEMENT : 10.09.2014 O R D E R PER SUSHMA CHOWLA, J.M. : THE APPEAL FILED BY THE ASSESSEE IS AGAINST THE OR DER OF THE COMMISSIONER OF INCOME TAX(APPEALS)-II, LUDHIANA DA TED 01.06.2012 RELATING TO ASSESSMENT YEAR 2008-09 AGAINST THE ORD ER PASSED UNDER SECTION 143(3) OF INCOME TAX ACT, 1961 (IN SHORT T HE ACT). 2. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL: 1. THAT THE LD. CIT (A) -II ERRED IN LAW AND FACT S IN NOT DELETING THE ADDITION OF RS 6206581/- MADE BY THE ASSESSING OFFICER U/S 14A BY APPLYING RULE 8D OF THE INCOME TAX RULES ON ACCOUNT OF EXPENSES DEEMED TO H AVE BEEN INCURRED TO EARN DIVIDEND INCOME AND LONG TERM CAPITAL GAIN. DIRECTIONS BE GIVEN TO DELETE THE ADDITION OF RS 6 206581/- SUSTAINED BY CIT(A) ON SURMISES AND CONJECTURES AND WITHOUT ANY NEXUS OF EXPENDITURE HAVING BEING INCURRED TO EARN DIVIDEND INCOME AND L ONG TERM CAPITAL GAIN. THE LOWER AUTHORITIES ERRED IS LOW AND FACTS IN AP PLYING RULE 8D READ WITH SECTION 14 A OF THE ACT FOR COMPUTING DISALLOWANCE FOR THE PURPOSE OF COMPUTING BOOK PROFITS U/S 115 JB OF THE ACT . DIRE CTIONS BE GIVEN NOT TO APPLY RULE 8D FOR THE PURPOSE OF COMPUTING BOOK PRO FITS U/S 115 JB OF THE ACT. 2 2. THAT THE LD.CIT(A)-II ERRED IN LAW AND ON FACTS IN NOT DELETING THE, ADDITION OF RS 17842/- MADE BY THE ASSESSING OFFICE R BY CAPITALIZING SAID EXPENDITURE INCURRED ON INSTALLATION OF HAND PUMPS INSTALLED FOR THE BENEFIT OF THE LABOUR WORKING IN THE UNIT TO PROVIDE DRINKI NG WATER. DIRECTIONS BE GIVEN TO ALLOW THE AMOUNT OF RS 17842 /- WHICH IS A NECESSARY BUSINESS EXPENDITURE INCURRED FOR LABOUR WELFARE. 3. THAT THE APPELLANT CRAVES, LEAVE TO ADD, AMEND, ALTER, MODIFY OR SUBSTITUTE ALL OR ANY OF THE ABOVE MENTIONED GROUND OF APPEAL BEFORE THE APPEAL IS FINALLY HEARD AND DISPOSED OFF. 3. THE ISSUE IN GROUND NO.1 RAISED BY THE ASSESSEE IS TWO FOLD I.E. FIRST DISALLOWANCE MADE UNDER SECTION 14A OF THE AC T BY APPLYING RULE 8D OF INCOME TAX RULES. THE SECOND PART OF THE GRO UND IS AGAINST THE COMPUTATION OF BOOK PROFITS UNDER SECTION 14A OF TH E ACT IN VIEW OF THE DISALLOWANCE MADE UNDER SECTION 115JB OF THE ACT. T HE GROUND NO. 2 RAISED BY ASSESSEE IS AGAINST CAPITALIZING OF EXPEN DITURE. 4. THE LEARNED A.R. FOR THE ASSESSEE FAIRLY ADMITTE D THAT FIRST PART OF GROUND NO.1 IS NOT PRESSED AND SIMILARLY EVEN GROUN D NO.2 IS NOT PRESSED. CONSEQUENTLY, THE ONLY ISSUE ARISING BEF ORE US IS IN RELATION TO COMPUTATION OF BOOK PROFITS UNDER SECTION 115JB OF THE ACT. THE LEARNED A.R. FOR THE ASSESSEE FURTHER POINTED OUT T HAT THE ISSUE IS SQUARELY COVERED BY THE ORDER OF THE TRIBUNAL IN IT A NO.870/CHD/2013 IN THE CASE OF SISTER CONCERN OF THE ASSESSEE. 5. THE LEARNED D.R. FOR THE REVENUE PLACED RELIANCE ON THE ORDERS OF THE AUTHORITIES BELOW. 6. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RECORD. WE FIND THAT RECOMPUTATION OF BOOK PROFITS UNDER SECTI ON 115JB OF THE ACT AROSE BEFORE THE TRIBUNAL IN ACIT VS. M/S NAHAR CAP ITAL & FINANCIAL SERVICES LTD. AND THE TRIBUNAL IN ITA NO.870/CHD/20 13 RELATING TO ASSESSMENT YEAR 2010-11 VIDE ORDER DATED 6.6.2014 H ELD AS UNDER: 3 5. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RECORD. THE ISSUE ARISING IN THE PRESENT APPEAL IS IN RELAT ION TO COMPUTATION OF BOOK PROFITS UNDER SECTION 115JB. THE ASSESSING OFFICER WHILE COMPUTING THE BOOK PROFITS HAD ADDED BACK DISALLOWANCE WORKED OUT UNDER SECTION 14A OF THE AC T TO THE NET PROFITS OF THE BUSINESS. THE PLEA OF THE ASSESSEE IN THIS REGARD WAS THAT THE ASSESSEE ITSELF HAD DISALLOWED SUM OF RS.4 2,37,722/- ON ACCOUNT OF DISALLOWANCE UNDER SECTION 14A OF THE AC T UNDER REGULAR PROVISIONS AND RS.32,86,397/- UNDER SECTION 115JB PROVISION IN ITS RETURN OF INCOME ON PROPORTIONATE BASIS. THE ASSESSING OFFICER RECOMPUTED THE BOOK PROFITS UNDER SECTION 115JB OF THE ACT AND THE CIT (APPEALS) DELETED THE SAME A GAINST WHICH THE REVENUE IS IN APPEAL. 6. WE FIND THAT SIMILAR ISSUE OF COMPUTATION OF BOO K PROFITS UNDER SECTION 115JB OF THE ACT IN VIEW OF READJUSTM ENT ON ACCOUNT OF DISALLOWANCE UNDER SECTION 14A OF THE ACT AROSE BEFORE THE TRIBUNAL IN ASSESSEES OWN CASE RELATING TO ASSESSM ENT YEAR 2008- 09. THE TRIBUNAL IN ITA NO.1120/CHD/2011 VIDE ORDE R DATED 27.7.2012 IN TURN RELYING ON AN EARLIER DECISION OF THE CHANDIGARH BENCH OF THE TRIBUNAL IN DCIT VS. IND SWIFT LTD. IN ITA NO.729/CHD/2009 RELATING TO ASSESSMENT YEAR 2006-07 DATE OF ORDER 30.11.2009 HELD AS UNDER: 5. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RECORD. THE ONLY ISSUE ARISING IN THE PRESENT APP EAL IS IN RESPECT OF COMPUTATION OF BOOK PROFITS UNDER SECTION 115JB OF THE ACT. THE ASSESSING OFFICER WHILE COMPUTING THE SAID BOOK PROFITS HAD ADDED BACK THE DISALLOWANCE WORKED OUT UNDER SECTIO N 14A OF THE ACT OF THE NET PROFITS OF THE BUSINESS AND COMPUTED THE TAX LIABILITY OF THE ASSESSEE COMPANY THEREAFTER. WE F IND THAT THE ISSUE IN THE PRESENT CASE IS COVERED BY THE ORDER O F THE CHANDIGARH BENCH OF THE TRIBUNAL IN DCIT VS. IND-SW IFT LTD. (SUPRA) WHERE VIDE ORDER DATED 30.11.2009 VIDE PARA 8 IT WAS HELD AS UNDER: 8. THE GROUND 1(IV) RAISED BY THE REVENUE IS AGAIN ST THE COMPUTATION OF BOOK PROFITS U/S 115 JB OF THE A CT. THE ASSESSING OFFICER WHILE COMPUTING THE BOOK PROFIT U /S 115 4 JB OF THE ACT HAD ADDED BACK THE DISALLOWANCE WORKE D U/S 14A OF THE I.T. ACT TO THE NET PROFIT SHOWN IN THE PROFIT AND LOSS ACCOUNT AND COMPUTED THE PROFITS FOR THE YEAR. THE CIT (A) REWORKED THE BOOK PROFITS BY EXCLUDING THE SAID NOTIONAL DISALLOWANCE U/S 115 JB OF THE ACT, IN TUR N FOLLOWING THE RATIO LAID DOWN BY THE APEX COURT IN APOLLO TYRES LTD. 255 ITR 273 (SC). WE ARE IN CONFORMITY WITH THE ORDER OF CIT(A). THE ADJUSTMENTS, IF ANY, TO B E MADE TO THE PROFIT SHOWN IN THE PROFIT AND LOSS ACCOUNT, ARE PROVIDED IN THE SECTION 115 JB OF THE ACT ITSELF. THERE IS NO PROVISION IN THE ACT TO MAKE ADJUSTMENT ON ACCOU NT OF NOTIONAL DISALLOWANCE WORKED OUT UNDER SECTION 14A OF THE ACT. THE HON'BLE SUPREME COURT IN APOLLO TYRES LTD. (SUPRA) HELD THAT THE PROFITS OF THE BUSINESS ARE N OT TO BE DISTURBED FOR COMPUTING THE BOOK PROFITS EXCEPT IN THE CIRCUMSTANCES PROVIDED UNDER THE SAID ACT. WE CONF IRM THE ORDER OF CIT IN THIS REGARD AND DISMISS THE GRO UND NO.1(IV) RAISED BY THE REVENUE. 6. THE ISSUE ARISING IN THE PRESENT APPEAL IS IDENT ICAL TO THE ISSUE BEFORE THE CHANDIGARH BENCH OF THE TRIBUNAL I N DCIT VS. IND-SWIFT LTD. (SUPRA) AND FOLLOWING THE SAME WE DI RECT THE ASSESSING OFFICER TO ADOPT THE BOOK PROFITS AS PER THE PROFIT & LOSS ACCOUNT AND DO NOT MAKE ADDITION ON ACCOUNT OF DISALLOWANCE WORKED OUT UNDER SECTION 14A OF THE AC T, AS SUCH DISALLOWANCE IS COMPUTED UNDER THE NORMAL PROVISION OF THE ACT, WHICH ARE NOT APPLICABLE FOR DETERMINING BOOK PROFI TS UNDER SECTION 115JB OF THE ACT. 7. SIMILAR ISSUE WAS AROSE IN ASSESSMENT YEAR 2009- 10 IN ASSESSEES OWN CASE IN ITA NO.1353/CHD/2012 ORDER DATED 16.4.2013. FOLLOWING THE PARITY OF REASONING AND ISSUE BEING IDENTICAL WE FIND NO MERIT IN THE AFORESAID ADDITIO N MADE BY THE ASSESSING OFFICER AND UPHOLDING THE ORDER OF THE CI T (APPEALS) WE DISMISS THE GROUNDS OF APPEAL RAISED BY THE REVENUE . 7. THE ISSUE BEFORE US IS IDENTICAL TO THE ISSUE BE FORE THE TRIBUNAL IN THE CASE OF SISTER CONCERN AND FOLLOWING THE SAME P ARITY OF REASONING WE 5 DIRECT THE ASSESSING OFFICER TO EXCLUDE THE DISALLO WANCE MADE UNDER SECTION 14A OF THE ACT, WHILE COMPUTING THE BOOK PR OFITS U/S 115JB OF THE ACT. WE DIRECT THE ASSESSING OFFICER TO RECO MPUTE THE BOOK PROFITS UNDER SECTION 115JB OF THE ACT. THE GROUND OF APP EAL RAISED BY THE ASSESSEE IS ALLOWED. 8. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 10 TH DAY OF SEPTEMBER, 2014. SD/- SD/- (T.R.SOOD) (SUSHMA CHOWLA) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 10 TH SEPTEMBER, 2014 *RATI* COPY TO: THE APPELLANT/THE RESPONDENT/THE CIT(A)/TH E CIT/THE DR. ASSISTANT REGISTRAR, ITAT, CHANDIGARH