Income Tax Appellate Tribunal - Mumbai
Bhilad Textile Industries P. Ltd , ... vs Assessee on 9 April, 2013
धकरण, मंुबई यायपीठ 'ई', मंुबई ।
आयकर अपील य अ धकरण, IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES "E", MUMBAI सव ी आर.एस. याल, लेखा सद य एवं संजय गग, या यक सद य, के सम ।
Before Shri R.S.Syal, AM and Shri Sanjay Garg, JM ITA No.3233/Mum/2010 : Asst.Year 2004-2005 ITA No.325/Mum/2009 : Asst.Year 2005-2006 ITA No.3234/Mum/2010 : Asst.Year 2006-2007 M/s.Bhilad Textile Industries Pvt.Ltd. The Dy.Commissioner of Income-tax Centre Point, 7th Floor, 18th Road बनाम/ Circle 10(2) Chembur, Mumbai - 400 071. Mumbai.
PAN : AAACB1673P. Vs.
(अपीलाथ /Appellant) ( यथ /Respondent)
ITA No.5915/Mum/2009 : Asst.Year 2006-2007
ITA No.2342/Mum/2011 : Asst.Year 2007-2008
ITA No.3543/Mum/2011 : Asst.Year 2008-2009
M/s.Supreme Nonwovens Pvt. Ltd. The Dy.Commissioner of Income-tax
Centre Point, 7th Floor, 18th Road बनाम/
Circle 10(2)
Chembur, Mumbai - 400 071. Mumbai.
PAN : AAACS5921R. Vs.
(अपीलाथ /Appellant) ( यथ /Respondent)
ITA No.3574/Mum/2011 : Asst.Year 2007-2008
The Dy.Commissioner of Income-tax M/s.Supreme Nonwovens Pvt. Ltd.
Circle 10(2) बनाम/
Centre Point, 7th Floor, 18th Road
Mumbai. Chembur, Mumbai - 400 071.
(अपीलाथ /Appellant) Vs. ( यथ /Respondent)
राज व क ओर से /Revenue by : Shri Dipak Kumar Sinha
नधा रती क ओर से /Assessee by : Shri K. Gopal and Sh. Jitendra Singh
सनवाई
ु क तार ख / घोषणा क तार ख /
Date of Hearing : 08.04.2013 Date of Pronouncement : 09.04.2013
आदे श / O R D E R
Per Bench :
These seven appeals by two different but connected assessee, some of which are cross appeals, relate to assessment years 2004- 2 ITA No.3233/Mum/2010 & Ors. M/s.Bhilad Textile Industries Pvt.Ltd.
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2005, 2005-2006, 2006-2007, 2007-2008 and 2008-2009. Since some common issues are involved in these appeals, we are, therefore, proceeding to dispose them off by this consolidated order for the sake of convenience.
ITA No.3233/Mum/2010 : M/s.Bhilad Textile Industries Pvt.Ltd.Assessment Year 2004-2005
2. This appeal by the assessee arises out of the order passed by the Commissioner of Income-tax (Appeals) on 29.03.2010 in relation to the assessment year 2004-2005.
3. Additional ground challenging the initiation of reassessment was not pressed by the learned AR. The same is, therefore, dismissed.
4. The first ground is against the confirmation of disallowance of `23,91,696 being depreciation on goodwill. Briefly stated the facts of this ground are that the assessee acquired the business of M/s.Dhariwal Nonwovens for a lumpsum consideration of `250 lakh with effect from 01.04.2003. The net asset of M/s.Dhariwal Nonwovens on the date of transfer were to the tune of `1,30,41,518. The difference between the sale consideration and net asset amounting to `1,19,58,402 was paid towards goodwill which was capitalized in the books of account on which depreciation was claimed at `29,89,620. The Assessing Officer disallowed the claim of depreciation on goodwill. The learned CIT(A) upheld the assessment order on this point.
3 ITA No.3233/Mum/2010 & Ors.M/s.Bhilad Textile Industries Pvt.Ltd.
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5. After considering the rival submissions and perusing the relevant material on record, we find that this issue is no more res integra in view of the judgment of the Hon'ble Supreme Court in the case of CIT v. Smifs Securities Ltd. [(2012) 348 ITR 302 (SC)]. In that case also excess consideration paid by that assessee over the value of net asset acquired by YSN Shares and Securities Private Limited was considered as goodwill on which depreciation was claimed. Such claim was not accepted by the revenue authorities. The second question before the Hon'ble Supreme Court in that case was : "Whether goodwill is an asset within the meaning of section 32 of the Income-tax Act, 1961, and whether depreciation on `goodwill' is allowable under the said section?" The said question has been answered in favour of the assessee. As the facts and circumstances of the instant case are mutatis mutandis similar to those considered and decided by the Hon'ble Supreme Court in the case of Smifs Securities Ltd. (supra), in our considered opinion, the assessee's claim to depreciation cannot be denied. We, therefore, hold that the goodwill is an asset within the meaning of section 32 of the Act and accordingly is eligible for depreciation.
6. Second ground of the appeal is against the confirmation of disallowance of `6,49,159 made u/s 14A of the Act. Briefly stated the facts of this ground are that the assessee earned exempt dividend income of `83,81,265 on investment of `1.42 crore. No expenditure was disallowed by the assessee voluntarily u/s 14A of the Act. The 4 ITA No.3233/Mum/2010 & Ors. M/s.Bhilad Textile Industries Pvt.Ltd.
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Assessing Officer computed the disallowance u/s 14A as per Rule 8D amounting to `6,49,159. The learned CIT(A) upheld the assessment order.
7. We have heard the rival submissions and perused the relevant material on record. We find that the assessment year involved before us is 2004-2005. The Hon'ble jurisdictional High Court in the case of Godrej & Boyce Ltd. Mfg. Co. v. DCIT [(2010) 328 ITR 81 (Bom)] has held that the provisions of Rule 8D cannot be applied to any assessment year prior to 2008-2009. Since the assessment year under consideration is prior to assessment year 2008-2009, as such Rule 8D cannot be invoked for the purposes of computing disallowance u/s 14A. We, therefore, vacate the finding given by the learned CIT(A) in this regard. The matter is accordingly sent back to the AO for working out the disallowance under this provision on some `reasonable basis' as has been held by the Hon'ble High Court in Godrej & Boyce Ltd. Mfg. Co. (supra).
8. Last ground of this appeal is against the confirmation of disallowance of `1,80,137 u/s 145A being difference between the Cenvat addition to opening and closing stock of raw material and packing material. The facts apropos this ground are that during the course of assessment proceedings the Assessing Officer observed that the assessee was following `Exclusive method' of accounting for valuing the inventory. Considering these facts, the Assessing Officer made addition of `1,80,137, which came to be upheld in first appeal.
5 ITA No.3233/Mum/2010 & Ors.M/s.Bhilad Textile Industries Pvt.Ltd.
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9. We have heard the rival submissions and perused the relevant material on record. Section 145A was inserted by the Finance (No.2) Act, 1998 with effect from 1.4.1999. It provides that the valuation of purchase and sale of goods and inventory for the purposes of determining the income chargeable under the head "Profits and gains of business or profession" shall be in accordance with the method of accounting regularly employed by the assessee and further adjusted to include the amount of any tax, duty, cess etc. paid or incurred by the assessee to bring the goods to the place of its location as on the date of valuation. According to the prescription of this section, which is applicable to the year under consideration, the amount of tax, duty, cess etc. is liable to be included in the value of purchases, sales, opening and closing stock. It is not appropriate to include the closing CENVAT in the figure of closing stock without modifying the figures of purchases, sales and opening stock. The Hon'ble jurisdictional High Court in CIT Vs. Mahalaxmi Glass Works Pvt. Ltd. [(2009) 318 ITR 116 (Bom.)] and the Hon'ble Delhi High Court in CIT Vs. Mahavir Alluminium [(2008) 297 ITR 77 (Del.)] have held to this extent. As the authorities below have not properly adjusted other figures with the amount of tax, duty, cess etc., we set aside the impugned order and restore the matter to the file of A.O. for deciding it afresh in accordance with the afore-noted judgements and the provisions of section 145A.
10. In the result, the appeal is partly allowed.
6 ITA No.3233/Mum/2010 & Ors.M/s.Bhilad Textile Industries Pvt.Ltd.
Supreme Nonwovens Pvt.Ltd.
ITA No.325/Mum/2009 : M/s.Bhilad Textile Industries Pvt.Ltd.Assessment Year 2005-2006
11. First ground of this appeal is against the confirmation of disallowance of `23,91,696 being depreciation on goodwill.
12. Both the sides are in agreement that the facts and circumstances of the instant ground are mutatis mutandis similar to those of the similar issue considered and decided by us above for the assessment year 2004-2005. Following the view taken hereinabove, we direct that the goodwill be considered as eligible for depreciation. This ground is allowed.
13. Two additional grounds involving single issue of disallowance u/s 14A have been raised in this appeal. Since these grounds are legal in nature and no fresh facts are required to be examined, we admit the same. In fact, no serious objection was taken by the ld. DR to the admission of such grounds.
14. By way of these additional grounds, the assessee has assailed the sustenance of disallowance u/s 14A amounting to `4,95,000. Similar issue has been considered and decided by us above. Both the sides are in agreement that the facts and circumstances of the instant grounds are mutatis mutandis similar to those of assessment year 2004-2005. Following the view taken hereinabove, we remit the mater to the file of the AO for working out the disallowance under 7 ITA No.3233/Mum/2010 & Ors. M/s.Bhilad Textile Industries Pvt.Ltd.
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this provision on some `reasonable basis' as has been held by the Hon'ble High Court in Godrej & Boyce Ltd. Mfg. Co. (supra).
15. In the result, the appeal is partly allowed.
ITA No.3234/Mum/2010 : M/s.Bhilad Textile Industries Pvt.Ltd.Assessment Year 2006-2007
16. First ground of this appeal is against the confirmation of disallowance of `16,81,661 being depreciation on goodwill. As the facts and circumstances of this ground are admittedly similar to the similar ground disposed of by us for the A.Y. 2004-05, following the view taken hereinabove, we allow this ground of appeal.
17. Second ground of the assessee's appeal is against the confirmation of disallowance u/s 14A amounting to `11,69,778. Similar issue has been considered and decided by us above in the appeal for the assessment year 2004-2005. Following the same, we remit the mater to the file of the AO for working out the disallowance under this provision on some `reasonable basis' as has been held by the Hon'ble High Court in Godrej & Boyce Ltd. Mfg. Co. (supra).
18. Third ground raised by the assessee is against the confirmation of disallowance of `1,36,215 u/s 145A. Here again, both the sides are in agreement that the facts and circumstances of the instant ground are mutatis mutandis similar to those of assessment year 2004-2005. Following the view taken hereinabove, we set aside the impugned 8 ITA No.3233/Mum/2010 & Ors. M/s.Bhilad Textile Industries Pvt.Ltd.
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order and restore the matter to the file of A.O. for deciding it afresh in accordance with the judgements in the case of Mahalaxmi Glass Works Pvt. Ltd. (Bom.) and Mahavir Alluminium (Del.) and the provisions of section 145A.
19. In the result, the appeal is partly allowed.
ITA No.5915/Mum/2009 : M/s.Supreme Nonwovens Pvt.Ltd.Assessment Year 2006-2007
20. First ground of this appeal is against the confirmation of disallowance of `9,70,917 being depreciation on goodwill.
21. Both the sides agree that the facts and circumstances of the ground are mutatis mutandis similar to those of the similar issue considered and decided by us for the assessment year 2004-2005 in the case of M/s.Bhilad Textile Industries Pvt.Ltd. Following the view taken hereinabove, we direct to consider the amount of Goodwill as an asset eligible for depreciation.
22. The second ground of the assessee's appeal is against the confirmation of disallowance u/s 14A amounting to `87,86,671. This issue has been considered and decided by us above in the case of M/s.Bhilad Textile Industries Pvt.Ltd. As the facts and circumstances of the this ground are similar to those of assessment year 2004-2005 in the case of M/s.Bhilad Textile Industries Pvt.Ltd., following the view taken hereinabove, we remit the mater to the file of the AO for working out the disallowance under this provision on some 9 ITA No.3233/Mum/2010 & Ors. M/s.Bhilad Textile Industries Pvt.Ltd.
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`reasonable basis' as has been held by the Hon'ble High Court in Godrej & Boyce Ltd. Mfg. Co. (supra).
23. Third ground raised by the assessee is against the confirmation of disallowance of `9,28,576 u/s 145A. Here again, both the sides are in agreement that the facts and circumstances of the ground are similar to those of assessment year 2004-2005 in the case of M/s.Bhilad Textile Industries Pvt.Ltd. Following the view taken hereinabove, we set aside the impugned order and restore the matter to the file of A.O. for deciding it afresh in accordance with the judgements in the case of Mahalaxmi Glass Works Pvt. Ltd. (Bom.) and Mahavir Alluminium (Del.) and the provisions of section 145A.
24. In the result, the appeal is partly allowed.
M/s.Supreme Nonwoven Industries Pvt.Ltd. Asst.Year 2007-2008 ITA No.2342/Mum/2011 & ITA No.3574/Mum/2011
25. These two cross appeals - one by the assessee and the other by the Revenue - arise out of the order passed by the Commissioner of Income-tax (Appeals) on 28.02.2011 in relation to assessment year 2007-2008.
26. First ground raised in assessee's appeal is against the confirmation of disallowance of `19,89,434 being depreciation on goodwill.
10 ITA No.3233/Mum/2010 & Ors.M/s.Bhilad Textile Industries Pvt.Ltd.
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27. Both the sides are unanimous that the facts and circumstances of the ground case are mutatis mutandis similar to those of similar issue considered and decided by us for the assessment year 2004- 2005 in the case of M/s.Bhilad Textile Industries Pvt.Ltd. Respectfully following the view taken hereinabove, we direct to consider the amount of goodwill as an item of asset eligible for depreciation. This ground is allowed.
28. Second ground of the assessee's appeal and first ground of the Revenue's appeal are in respect of section 14A. This issue has been considered and decided by us above in the case of M/s.Bhilad Textile Industries Pvt.Ltd. Both the sides are in agreement that the facts and circumstances of the instant year are mutatis mutandis similar to those of assessment year 2004-2005 in the case of M/s.Bhilad Textile Industries Pvt.Ltd. Following the view taken hereinabove, we remit the mater to the file of the AO for working out the disallowance under this provision on some `reasonable basis' as has been held by the Hon'ble High Court in Godrej & Boyce Ltd. Mfg. Co. (supra).
29. Second ground raised by the Revenue is against the deletion of addition of `1,71,71,385 u/s 145A. Here again, both the sides are in agreement that the facts and circumstances of the ground for this year are mutatis mutandis similar to those of assessment year 2004-2005 in the case of M/s.Bhilad Textile Industries Pvt.Ltd. Following the view taken hereinabove, we set aside the impugned order and restore the matter to the file of A.O. for deciding it afresh in accordance with 11 ITA No.3233/Mum/2010 & Ors. M/s.Bhilad Textile Industries Pvt.Ltd.
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the judgements in the case of Mahalaxmi Glass Works Pvt. Ltd. (Bom.) and Mahavir Alluminium (Del.) and the provisions of section 145A.
30. In the result, both the appeals are partly allowed.
M/s.Supreme Nonwoven Industries Pvt.Ltd. Asst.Year 2008-2009 ITA No.3543/Mum/2011
31. First issue raised through first three grounds is against the confirmation of disallowance of `14,92,075 being depreciation on goodwill.
32. As it is a recurring issue, which has been considered and decided by us for the assessment year 2004-2005 above in the case of M/s.Bhilad Textile Industries Pvt.Ltd., we direct to consider the amount of goodwill as an asset eligible for depreciation.
33. Second issue raised by the assessee is against the confirmation of disallowance of `44,27,615 u/s 145A. Both the sides are in agreement that the facts and circumstances of these grounds are mutatis mutandis similar to those of assessment year 2004-2005 in the case of M/s.Bhilad Textile Industries Pvt.Ltd. Following the view taken hereinabove, we set aside the impugned order and restore the matter to the file of A.O. for deciding it afresh in accordance with the judgements in the case of Mahalaxmi Glass Works Pvt. Ltd. (Bom.) and Mahavir Alluminium (Del.) and the provisions of section 145A.
12 ITA No.3233/Mum/2010 & Ors.M/s.Bhilad Textile Industries Pvt.Ltd.
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34. In the result, the appeal is partly allowed.
Order pronounced on this 09th day of April, 2013.
आदे श क घोषणा दनांकः को क गई ।
Sd/- Sd/-
(Sanjay Garg) (R.S.Syal)
या यक सद य / JUDICIAL MEMBER लेखा सद य / ACCOUNTANT MEMBER
मंुबई Mumbai; दनांक Dated : 09th April, 2013.
Devdas*
आदे श क त ल प अ े षत/Copy
षत of the Order forwarded to :
1. अपीलाथ / The Appellant
2. यथ / The Respondent.
3. आयकर आयु (अपील) / The CIT, Mumbai.
4. आयकर आयु / CIT(A)-21, Mumbai
5. वभागीय त न ध, आयकर अपील य अ धकरण, मंुबई / DR, ITAT, Mumbai
6. गाड फाईल / Guard file.
ु / BY ORDER,
आदे शानसार
स या पत त //True Copy//
उप/सहायक पंजीकार (Dy./Asstt.
उप/ Registrar)
आयकर अपील य अ धकरण,
धकरण, मंुबई / ITAT, Mumbai