Income Tax Appellate Tribunal - Delhi
Addl. Cit, New Delhi vs M/S. National Textile Corporation ... on 7 February, 2023
THE INCOME TAX APPELLATE TRIBUNAL
DELHI BENCH 'E', NEW DELHI
Before Dr. B. R. R. Kumar, Accountant Member
Sh. Yogesh Kumar US, Judicial Member
ITA No. 2043/Del/2017 : Asstt. Year : 2012-13
National Textile Corporation Ltd., Vs Addl. CIT,
Core-4, Scope Complex-7, Lodhi Special Range-6,
Road, New Delhi New Delhi
(APPELLANT) (RESPONDENT)
PAN No. AAACN2847D
ITA No. 1969/Del/2017 : Asstt. Year : 2012-13
Addl. CIT, Vs National Textile Corporation Ltd.,
Special Range-6, Core-4, Scope Complex-7, Lodhi
New Delhi Road, New Delhi
(APPELLANT) (RESPONDENT)
PAN No. AAACN2847D
Assessee by : Sh. Manoj Kumar Anand, CA
Revenue by : Sh. Ajay Kumar Arora, Sr. DR
Date of Hearing: 06.12.2022 Date of Pronouncement: 07.02.2023
ORDER
Per Dr. B. R. R. Kumar, Accountant Member:
The present appeals have been filed by the assessee and the Revenue ag ainst the orders of ld. CIT(A)-33, New Delhi dated 27.01.2017.
2. The assessee has raised the following ground s of appeal:
"1 . That t he disallowanc e of Rs 30,84,050/- u/s 14A read with rul e 8D of t he I-T Act 1961 is incorrec t in law a nd on the facts of the cas e & prayed f or del eti on.
2. That ass essee be allowed Rs 19,08,26,076 as additional depreciation u/s 32(1) (iia) of precedi ng year (F.Y. 10-11) which was claimed 'A onl y & as sess ee is eligibl e t o claim the 2 ITA Nos. 1969 & 2043/Del./2017 National Textile Corporation Ltd.
balanc e A i n c urrent fina ncial y ear (F.Y. 11-12 ) & prayed f or it allowanc e in t he c urrent fi nancial year.
3. That raising of demand of Rs 36,41,59,287/- a gains t the assess ee i gnori ng BIFR order is b ad in law and on the facts of the case & need to be deleted.
4. That assessee's income is to be reduced by Rs 2,24,00,00,000 being earned against sale of FSI, which isn't taxable income & prayed for its red uction."
3. The revenue has raised the following grounds of appeal:
"1 . Whether i n fac ts and on circ umst ances of the case, the Ld. C IT(A) is legally justified i n deleti ng the disallowanc e of prior period expenditure of Rs. 2,85,98,000/- followi ng its order i n c ase of assess ee for earlier ass essment year and without recording material evidence to reach a conclusion t hat liability to inc ur t he expenditure was act ually c rystallized duri ng the year under c onsiderati on and by i gnori ng a fac t that t he ass essee had not proved t hat liability t o i nc ur expenditure of R s. 2,85,98,000/- was act ually crys tallized duri ng the year under considerati on?
2. Whether in facts and on circumstances of the case, the Ld. CIT(A) is legally justified in allowing relief to the assessee on issue of prior period expense on the basis of its ord er in the case of the assessee for the earlier assessment year without realizing that the issue involving factual verification cannot be decided on the basis of its decision for earlier assessment year based on peculiar facts of that year?
3. Whether in facts' and on circumstances of the case, the Ld. CIT(A) is legally justified in allowing relief to the assessee on the basis of its earlier order in the assessee's own case despite the fact that principle of res- judicata is not applicable to Income Tax proceedings as each assessment year is a separate year?"
Disallowance u/s 14A:
4. The AO made disallowance of Rs. 30,84,050/- u/s 14A read with Rule 8D. The Assessee has received dividend income of Rs. 7,02,91,580/- which was claimed as exempt u/s 10(34) of the Act. The assessee has disallowed an amount of Rs. 905915/-. A suo moto u/s 14A. The total investment made by 3 ITA Nos. 1969 & 2043/Del./2017 National Textile Corporation Ltd.
the assessee was Rs. 21.38 crores. The AO disallowed interest expenditure of Rs. 29,20,847/- attributable to income which does not form p art of the total income. Before the ld. CIT(A), the assessee submitted the details of interest of Rs. 48,67,65,130/- as under:
Det a ils of I nt e rest Pa rt ic ula rs A m ou nt R e ma rk s Int er es t on L oa n f rom GO1 43 ,3 4 ,31 ,71 4 W ork ing c a p ita l a ss is t a nc e f ro m G ov t . t o r un Sic k M ills Int er es t on Ba nk L oa ns f or 29 ,2 6 ,57 3 F or w ork in g c ap it a l W o rk ing Ca p it a l req u ire m e nt s o f N T C Int er es t on t ra d e c red it s 15 ,1 3 ,29 9 In t e res t p a id to Se llin g A g ent s a ga ins t t he ir Sec urit y D ep os it Int er es t on c ot t o n d u es 2,5 7 ,1 3 ,091 In t e res t pa id a ga ins t pu rc ha s e of c ot t o n Int er es t o n ot he r l oa n a nd 9,9 0 ,8 28 In t e res t pa id t o Em p loy e es dep os i ts a ga i ns t t hei r Sec u rit y D ep os it Int er es t o n P rov id ent F u nd & 7,3 5 0 In t e res t pa id f o r p ro v id ent ESI D ues f und & E SI d ues Surc ha r ge on 7,9 4 ,4 70 Ma inly f o r d ela y e d pa y m ent Wa t e r/E lec t ric it y et c . of Elec t r ic ity b ills . In t er e s t on Oth er s 40 , 1 9, 10 3 Us u al Bu s i n ess Ex p en s e s Ba n k Ch a rg e s 89 , 8 4, 76 1 Ch a rg e s P a id t o B an k C ash Di s c ou n t al l o w ed ' 83 , 5 6, 20 9 Di s c ou n t g i ven on Ca sh P a y m en t Fo re ign E xc ha ng e R a t e 27 ,7 32 Ex p e ns e due to R at e Di ff erenc e D if fere nc e T OT A L 48 ,6 7 ,65 ,13 0
5. Provisions of Rule 8D are as under:
"Method f or determini ng amount of expendit ure in relation to inc ome not i ncludible in total i ncome.
8D. (1 ) Where the Ass essing Of ficer, ha vi ng regard to the accounts of the assess ee of a pr evious y ear, is not satisfi ed with--
(a) the corr ect ness of t he claim of expenditure made by the assess ee; or
(b) the claim made by the assessee t hat no expenditure has been i ncur red, i n relation to i nc ome whic h does not f orm part of t he total inc ome und er the Act f or s uc h previ ous year, he s hall det ermi ne the amount of expendit ure in 4 ITA Nos. 1969 & 2043/Del./2017 National Textile Corporation Ltd.
relation t o s uc h inc ome in accorda nce with the provisions of sub-r ul e (2 ).
[(2 ) T he expenditur e in relation t o inc ome which does not f orm part of the t otal incom e shall be the aggregate of f ollowi ng amounts , namely:--
(i) the a mount of expendit ure direc tly relati ng to i nc ome whic h does not f orm part of t otal i ncome; and
(ii) an amount equal to one per c ent of the annual average of t he m onthl y average of the openi ng and closi ng balances of t he val ue of i nves tment, i nc ome from whic h does not or shall not f orm part of total i nc ome :
Provided that t he amount referred to i n clause (i) and clause
(ii) s hall not exceed the total expenditure claimed by the assess ee.] (3 ) [***]"
(ii) In a case where the assessee has incurred expenditure by way of interest during the previous year which is not directly attributable to any particular income or receipt an amount computed in accordance with the following formula, namely:
AXB C Where A=amount of expenditure by way of interest other than the amount of interest included in clause (i) incurred during the previous year;
B=the average of value of investment, income from which does not or shall not form part of the total income, as appearing in the balance sheet of the assessee, on the first day and the last day of the previous year;
C=the average of total assets as appearing in the balance sheet of the assessee, on first day and the last day of the previous year;
6. In the instant case A=amount of expenditure by way of interest other than the amount of interest included in clause (i) incurred during the previous year was Rs. 40,19,403/- as can be deciphered from the table. With regard to B&C of the Formula the AO is directed 5 ITA Nos. 1969 & 2043/Del./2017 National Textile Corporation Ltd.
to take into consideration the "dividend y ielding investments"
while computing the disallowance. The appeal of the assessee on this ground is allowed for statistical purposes.
Additio nal Depreciation:
7. The company claimed additional depreciation on new plant and machinery installed during the year from the details furnished, the AO found that the assessee claimed depreciation @20% on thoug h the machinery was put to use for less than 180 days and hence, depreciation as well as additional depreciation was allowed @ 50% of the allowable amount in accordance with section 32(1)(iia). A concurrent reading of provisions of section 32(1) and 32(1)(iia) of the Act we hold that the assessee is eligib le for 50% of depreciation allowance and additional depreciation on the plant and machinery procured.
Sale of FSI:
8. Assessee for the first time has taken up the issue of capital gains arising out of sale of FSI before the ld CIT(A). The same is as under:-
"Reduction in income by Rs 2,24,00,00,000 against sale of FSI: - The brief facts of the case are that assessee Computed Capital Gain considering it as Sales Price. In this regard it is respectfully submitted in the very case of CIT Vs. Sambhaji Nagar coop Hsg Society Ltd, ITA No. 1356 of 2012, Date of Order: 11.12.2014, by Hon'ble Bombay High Court held that sale of FSI isn't taxable. Please note that this order is after the date of filling of return as on 29.09.2012 & this fact was duly submitted to Ld. AO as per paper book page No. 133 vide point no 4 (Not repeated here again for the 6 ITA Nos. 1969 & 2043/Del./2017 National Textile Corporation Ltd.
sake of brevity), which was ignored by him. Now it is prayed to direct the AO for reduction of income including profit u/s 115 JB by Rs 224.00 Crores.
This has reference to discussions held as on 17th Jan 2017, it is respectfully submitted that assessee has not paid any amount against acquiring of FSI of Rs. 2,24,00,00,000/- as sold during the year. This FSI was given by MHADA (Maharashtra Housing and Development Authority) & MCGM (Municipal Corporation Of Greater Mumbai) as per their policy against surrender of land acquired at nil cost. Please note that the land was transferred to NTC as per Nationalization Act 1974,1986 & 1995 as passed by Parliament of India to safeguard the interest of workers employed therein.
Note on FSI sale in Mumbai of Rs. 224,00,00,000 The following 3 agreement to Sale are submitted:
28,00,00,000.00 Page no 90-125
1,40,00,00,000.00 Page no 126-155
56,00,00,000.00 Page no 156-185
2,24,80,00,000.00
In this regard it is respectfully submitted in the very recent case of CIT Vs. Sambhaji Nagar Coop. Hsg. Society Ltd., I.T.A. No. 1356 of 2012, Date of Order 11.12.2014, by honourable Bombay High Court held that sale of FSI isn't taxable. Please note that this order is after the date of filling of return as on 29.09.2012.
In our case Rs. 186,85,46,000 has been shown as long Term Capital Gain.
Your Goodself are requested to reduce the taxable income (MAT tax effect also) by Rs. 186,85,46,000 and oblige.7 ITA Nos. 1969 & 2043/Del./2017
National Textile Corporation Ltd.
It is further submitted that as held in the following cases, if any expenses (or Excessive Income) isn't claimed (or reduced) in the ROI, it can be allowed (or reduced) by A. O. during assessment proceedings:-
Jute Corporation Of India Ltd. vs CIT (1991 (187) ITR 688 (SC)) National Thermal Power Co. Ltd. vs CIT (1998 (229) ITR 383 (SC) CIT vs Pruthvi Brokers & Shareholder (P) Ltd. (ITA NO 3908 of 2010)"
9. The ld. CIT(A) held that the above referred order Hon'ble Mumbai High Court dismissed Revenue's appeal b y hold ing that the appeal does not raise any substantial question of law. No principle are laid down in the said order of Hon'ble Mumbai High Court. The same does not help the case of the assessee.
10. The ld CIT(A) held that d uring the appellant proceedings after discussion the counsel for the appellant submitted that ground no 9 is not pressed. Before us, it was argued that the matter indeed has been argued before the ld. C IT(A), however it was found to be omitted and hence another opportunity be given in the interest of justice. The ld. DR argued that having not pressed the issue before the ld. CIT(A) further recourse cannot be sought from the Tribunal. Having considered the entire factum and the issue involved, we hereby hold that no prejudice would be caused to the Revenue if the matter is remanded back to the file of the ld. CIT(A) for adjudication afresh who shall take a decision in accordance with the Income Tax Act after given an opportunity of being heard to the assessee.
8 ITA Nos. 1969 & 2043/Del./2017National Textile Corporation Ltd.
ITA No. 1969/Del/2017 : Asstt. Year : 2012-13 (Revenue Appeal)11. The solitary issue involved in the appeal of the revenue pertains to d isallowances of "Prior period expenses".
12. We find that this is a covered issue & relief has been granted earlier also on the same ITAT & CIT(A) for the A.Y. 2008-09, 2009-10.
13. In the current year there is a prior period income of Rs. 285.98 Lakhs which is ad justed against prior period expenses of Rs. 531.57 Lak hs. This practice has been consistently followed by assessee since inception & duly accepted by the department also in all its earlier orders for A.Y. 2007-08 & 2008-09 & 2010-11. The details of Net Prior Period Expenses as has been added back in the COI are as follows:
A.Y. 2007-08 2008-09 2009-10
Amount 4,22,94,313.00 2,28,94,60,659.00 6,38,82,722.00
A.Y. 2010-11 2011-12 2012-13
Amount 5,20,36,911.00 Income(Net) 2,45,59,430.00
A.Y. 2013-14 2014-15 2015-16
Amount Income(Net) 1,57,47,097.00 49,31,02,928.00
14. The coord inate bench of Tribunal while deciding the issue for A.Y.2009-10 held as under:
".........The assessee has incurred prior period expenses of Rs. 16,61,43,5087 It had prior period income of Rs. 10,22,60,782/-. The net prior amount of Rs. 63,88,272/-, was already added by the assessee in the computation of income. Thus the finding of the first Appellate Authority that there is a double addition of Rs.63,88,272/- is factually correct. As far as the balance amount is concerned the assessee's contention is that the amount has crystallized during the year, as the assessee came to know about these expenses only in the P. Y. 2008-09.
The second limb of the argument of the assessee is that, which has been consistently following the policy of netting out prior period income with prior period expenses and the net effect was disclosed in the computation of income. It was also submitted that such a treatment was accepted by the Revenue for the AY 2007-08 and 2008-09. The First Appellate 9 ITA Nos. 1969 & 2043/Del./2017 National Textile Corporation Ltd.
Authority has, on the principle of consistency, accepted the contentions of the assessee. We find no infirmity in the same. Thus ground no.3 and 4 are dismissed.''
15. Having perused the issue, in the absence of any change in the factual content and the legal proposition we decline to interfere with the order of the ld CIT(A) which was rightly based on the earlier order of the Tribunal.
16. In the result, the appeal of the assessee is partly allowed and the appeal of the Revenue is dismissed .
Order Pronounced in the Open Court on 07/02/2023.
Sd/- Sd/-
(Yogesh Kumar US) (Dr. B. R. R. Kumar)
Judicial Member Accountant Member
Dated: 03/07/2023
*Subodh Kumar/AK, Sr. PS*
Copy forwarded to:
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2. Respondent
3. CIT
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