Income Tax Appellate Tribunal - Delhi
Amway India Enterprises Pvt. Ltd., New ... vs Assessee
IN THE INCOME TAX APPELLATE TRIBUNAL
DELHI BENCH : A : NEW DELHI
BEFORE SHRI I.P. BANSAL, JUDICIAL MEMBER
AND
SHRI A.N. PAHUJA, ACCOUNTANT MEMBER
ITA No.3843/Del/2011
Assessment Year : 2006-07
DCIT, Vs. M/s Amway India Enterprises Pvt.
Circle 1 (1), Ltd.,
New Delhi. 1st Floor, Plot No.8,
Elegance Tower,
Non Hierarchical Commercial
Centre, Jasola,
New Delhi - 110 025.
PAN : AAACA5603Q
CO No.330/Del/2011
(ITA No.3843/Del/2011)
Assessment Year : 2006-07
M/s Amway India Enterprises Vs. DCIT,
Pvt. Ltd., Circle 1 (1),
1st Floor, Plot No.8, New Delhi.
Elegance Tower,
Non Hierarchical Commercial
Centre, Jasola,
New Delhi - 110 025.
PAN : AAACA5603Q
(Appellant) (Respondent)
Assessee by : Shri Tarandeep Singh &
Manish Upneja, CA's
Revenue by : Smt. Srujani Mohanty, Sr. DR
ORDER
PER I.P. BANSAL, JUDICIAL MEMBER
The appeal is filed by the revenue and CO by the assessee. They are directed against the order passed by the CIT (A) dated 1st June, 2 ITA No.3843/Del/2011 C.O. No.330/Del/2011 2011 for Assessment Year 2006-07. The grounds of appeal read as under:-
"1. The learned CIT (A) has erred on facts and in law in treating the expenses of Rs.77,21,466/- on leasehold improvement as revenue in nature disregarding the fact that new assets were purchased and installed for the renovation/improvement of leasehold premises.
2. The learned CIT (A) has erred on fats and in law in restricting the disallowance u/s 14A read with Rule 8D to Rs.15,57,441.75 as against disallowance of Rs.38,26,774/-. Learned CIT (A) has failed to take cognizance of sub-section (3) of section 14A which specifies that even if the assessee makes a claim that no expenditure has been incurred in earning the exempted income, sub-section (2) of Section 14A shall apply, meaning thereby, disallowance u/s 14A(1) is called for.
3. The appellant raves leave for reserving the right to amend, modify, alter, add or forego any ground(s) of appeal at any time before or during the hearing of this appeal."
1.1 The grounds of Cross Objections read as under:-
"1. That on facts and in law the Commissioner of Income-tax (Appeals) erred in upholding a disallowance of Rs.15,57,441.75 (i.e., 0.5% of dividend income of Rs.3,11,48,835/-) under section 14A of the Income Tax Act, 1961.
That the respondent prays for leave to add, alter or amend any grounds of the cross objections raised above, at or before the time of hearing."
2. Apropos to Ground No.1 filed by the revenue, the facts are that the assessee has incurred a total expenditure of ` 77,21,486 towards the improvements in its offices located at Kolkota, Chennai and at its head office. The assessee was required to submit as to why such expenditure should not be disallowed following the same line in earlier years. In response, it was submitted that this issue has been decided by ITAT in favour of the assessee. Considering the submission of the assessee, the AO observed that since the matter is being litigated at the level of High Court, the contention of the assessee is not acceptable and for the reason of disallowance being made in earlier year i.e. assessment year 2005-06, these expenditures have been 3 ITA No.3843/Del/2011 C.O. No.330/Del/2011 disallowed in its entirety. The details of these expenditures are not given in the assessment order, however, in para 6 of the order of CIT (A), such details have been given which are as under:-
Particulars Amount (Rs.)
Plumbing, sanitary, tiling 264,410
False ceiling, wooden partitions, storage
cabinets, doors 2,197,120
Furniture 697,027
Electrical i.e., tube light, halogen fittings, sockets, et. 751,840 Other Misc. repair work 290,787 LAN cabling 813,519 Temporary wooden partitions for division of cabins, fixed wooden cupboards, wooden worktops 10,70,201 Barricade pole 58,500 Ducting 410,240 Day to day repair/renovation at Chennai office 114,233 Renovation of Data Centre 283,770 Cable, Racks Mounting work at head office 352,920 Cabins at head office 16,900 Total 77,21,466
3. Ld. CIT (A) observed that ITAT in assessee's own case which is reported at 27 SOT 304 has decided this issue according to which such disallowance was to be deleted. After reproducing the order of the Tribunal in assessee's own case, ld. CIT (A) has deleted the addition. The department is aggrieved, hence, in appeal.
4. After narrating the facts, relying upon the assessment order, ld. DR submitted that the disallowance was rightly made by the AO and it has wrongly been deleted by the CIT (A).
5. On the other hand, it was submitted by ld. AR that the disallowance has rightly been deleted by Ld. CIT (A) following the order of the Tribunal in assessee's own case. However, ld. AR fairly conceded that according to the aforementioned decision of the Tribunal, furniture cannot be considered to be an allowable 4 ITA No.3843/Del/2011 C.O. No.330/Del/2011 expenditure and he, in this regard, referred to the observations of the Tribunal in para 7, the relevant portion whereof read as under:-
"After going through the nature of expenditure so incurred, we found that by incurring these expenditure except expenditure Air conditioning duct and furniture, no new asset has come into existence and the expenditure so incurred was on account of commercial expediency and for the commercial use of the lease hold premises and to give proper outlook to the office and to create international standard of good working environment on multinational work culture."
6. He, therefore, submitted that furniture amounting to ` 6,97,027/- should be excluded and, therefore, if the Tribunal decision is followed, the disallowance has to be restricted only to the extent of ` 6,97,027/-.
7. After hearing both the parties, we restrict the disallowance to a sum of ` 6,97,027/- following the aforementioned decision of the Tribunal which is reported as 27 SOT 344 in respect of assessment years 2001-02 and 2002-03. Ground No.1 of the revenue is partly allowed.
8. Ground No.2 of the departmental appeal and ground of Cross Objections raised by the assessee are common. The facts relating to this ground is that the Assessing Officer found that the assessee had claimed exempted income in the shape of dividend of a sum of ` 3,11,48,835/-. Referring to the provisions of Section 14A read with Rule 8D, the Assessing Officer has computed the disallowance by referring to Rule 8D(2)(iii) at a sum of ` 38,26,774/-. Learned CIT (A) has concluded this issue in para 12-18 of the impugned order. He has arrived at a conclusion that it will be reasonable to add 5% of the total exempted income and he, in this manner, has restricted the disallowance to ` 15,57,441.75. The revenue is aggrieved by the part deletion of disallowance of the addition and the assessee in its cross objections has agitated the sustained addition.
5 ITA No.3843/Del/2011 C.O. No.330/Del/20119. Relying upon the assessment order, it was pleaded by the learned DR that the Assessing Officer was right in making the disallowance and it has wrongly been partly deleted by the learned CIT (A).
10. On the other hand, the learned AR of the assessee submitted written synopsis in which it has been mentioned that for making disallowance u/s 14A the onus is on the revenue and reference in this regard is made to the following decisions:-
i) CIT vs. Hero Cycles 323 ITR 518 (P&H);
ii) ACIT vs. Eicher Ltd. 101 TTJ (Del) 369; and
iii) Maruti Udyog vs. DCIT 92 ITD 119 (Del)
11. It was further submitted that in assessee's case the disallowance is made by the Assessing Officer under Rule 8D (2)(iii) which is only as regards administrative expenses and he referred to the decision of Kerala High Court in the case of Catholic Bank and Others reported in 237 CTR (Ker) 164 in which it has been held that prior to insertion of Rule 8D, no disallowance on account of direct expenses was called for.
12. Further, it was submitted by him that no direct precedent of jurisdictional High Court is available, therefore, the view expressed by Punjab & Haryana High Court and Kerala High court should be followed. It was further submitted that in the instant case since the necessary facts are available on record, the issue should be decided on merits and it should not be remitted back to the Assessing Officer and if the matter is remanded back, it will only facilitate the Assessing Officer to fill the loopholes in his order and, thus, it has been pleaded by the learned AR that the issue should be decided at the level of the Tribunal.
6 ITA No.3843/Del/2011 C.O. No.330/Del/201113. We have carefully considered the rival submissions in the light of the material placed before us. It may be seen that for immediate preceding assessment year 2005-06, this issue was restored back to the file of Assessing Officer by the Delhi ITAT only on the ground that the disallowance was made by the Assessing Officer under Rule 8D and it was sustained by learned CIT (A) under Rule 8D. Though it has been the contention of the learned AR that necessary facts are available on record, but, it has not been shown that how the necessary facts are available on record. In this case the Assessing Officer has made disallowance with reference to Rule 8D only and has not discussed this issue in detail. If it is held that Rule 8D is not applicable, then, the Assessing Officer has to be provided with opportunity to consider the case afresh in the light of the observations of Hon'ble Bombay High court in the case of Godrej & Boyce Mfg. Co. Ltd. vs. DCIT (2010) 328 ITR 81 (Bom). Here, it will be relevant to reproduce the observations fo the Tribunal on this issue in assessee's own case for Assessment Year 2005-06:-
"6. We have carefully considered the rival submissions in the light of the material placed before us. The disallowance has been computed by the Assessing Officer under Rule 8D of Income-tax Rules, 1962. The learned CIT (A) has also upheld the disallowance on the ground that the aforementioned Special Bench decision of the Tribunal has held that Rule 8D has retrospective operation. The aforementioned decision of the Special Bench has been over-ruled by the Hon'ble Bombay High Court in the case of Godrej & Boyce Mfg. Pvt. Ltd. (supra). Therefore, the very basis on which the disallowance has been made does not exist. However, it is seen that though Rule 8D is not applicable, but the Assessing Officer is duty bound to make the disallowance under Section 14A after considering all the facts and circumstances of the case as observed by Hon'ble Bombay High Court in the aforementioned case of Godrej & Boyce Mfg. Pvt. Ltd. (supra). Therefore, keeping in view the facts and circumstances of the case, we consider it just and proper to restore this issue to the file of Assessing Officer to consider this issue raised in the present appeal denovo as per the provisions of law after giving the assessee a reasonable opportunity of hearing. Therefore, we restore this issue to the file of Assessing Officer to reconsider and re-adjudicate the same after giving the assessee a reasonable opportunity of 7 ITA No.3843/Del/2011 C.O. No.330/Del/2011 hearing. We direct accordingly. In the result, the ground No.2 raised by the assessee is allowed for statistical purposes in the manner aforesaid."
14. Therefore, in our humble opinion, it will be most appropriate if the matter is restored back to the file of Assessing Officer. By restoring the matter back to the file of Assessing Officer, no prejudice will be caused to the assessee as what is directed by the Tribunal is just to re-adjudicate the issue denovo after giving the assessee a reasonable opportunity of hearing. The assessee will get opportunity of hearing before the Assessing Officer particularly in view that substantial addition has been upheld by the learned CIT (A) on this issue and the CIT (A) has also not given the reasons for making disallowance only to the extent of 5%of the total exempted income. In view of the above discussion, we are of the opinion that the matter should be restored back to the file of Assessing Officer with the similar directions as have been given for Assessment Year 2005-06 and the relevant observations of the Tribunal for that year have already been reproduced. With similar directions, we restore this issue to the file of Assessing Officer.
15. For statistical purposes the ground No.2 of the revenue and the Cross Objections raised by the assessee both are allowed.
16. In the result, the appeal filed by the revenue is partly allowed in the manner aforesaid and the Cross Objection filed by the assessee is allowed for statistical purposes in the manner aforesaid.
The order pronounced in the open court on 21.10.2011.
Sd/- Sd/-
[A.N. PAHUJA] [I.P. BANSAL]
ACCOUNTANT MEMBER JUDICIAL MEMBER
Dated, 21.10.2011.
8 ITA No.3843/Del/2011
C.O. No.330/Del/2011
dk
Copy forwarded to: -
1. Appellant
2. Respondent
3. CIT
4. CIT(A)
5. DR, ITAT
By Order,
Deputy Registrar,
ITAT, Delhi Benches