Income Tax Appellate Tribunal - Chennai
Parry Agro Industries Limited, Chennai vs Dcit Corporate Circle 5(1), Chennai on 21 March, 2018
आयकर अपील य अ धकरण ,' बी ' यायपीठ,चे नई
IN THE INCOME TAX APPELLATE TRIBUNAL
"B" BENCH, CHENNAI
ी जॉजमाथन, या यक सद यएवं ी एस जयरामन, लेखा सद य केसम%
BEFORE SHRI GEORGE MATHAN, JUDICIAL MEMBER AND
SHRI S. JAYARAMAN, ACCOUNTANT MEMBER
आयकर अपील सं/.I.T.A. Nos. 2372 & 2373/Chny/2017
नधारण वष/Assessment Years : 2013-14 & 2014-15
M/s. Parry Agro Industries Limited, The Deputy Commissioner of
Parry House, 5th Floor, Vs. Income Tax,
43, Moore Street, Corporate Circle -5(1),
Chennai - 600 001. Nungambakkam,
Chennai.
[PAN: AAFCP 9414M]
(अपीलाथ /Appellant) ( यथ /Respondent)
Assessee by : Shri S.P. Chidambaram, Advocate
Revenue by : Shri N. Madhavan, Addl. CIT
सुनवाईक.तार ख/Date of Hearing : 21.03.2018
घोषणाक.तार ख/Date of Pronouncement : 21.03.2018
आदे श/ O R D E R
PER S. JAYARAMAN, ACCOUNTANT MEMBER:
The assessee filed these appeals against the orders of the Commissioner of Income Tax (Appeals)-3, Chennai in ITA Nos. 7 & 182/2016- 17 dated 30.06.2017 for assessment years 2013-14 & 2014-15.
:-2-: ITA Nos.2372 & 2373/Chny/2017
2. M/s. Parry Agro Industries Limited, the assessee, is engaged in the business of cultivation and manufacturer of tea. In the assessments made for assessment years 2013-14 & 2014-15, the Assessing Officer disallowed additional depreciation of 10% claimed u/s. 32(1)(iia) on the opening balance of the additions made to plant and machinery that was put to use for less than 180 days in assessment years 2012-13 & 2013-14, respectively. Further, the AO made disallowance u/s. 14A r.w.r. 8D in assessment years 2013-14 & 2014-15 respectively, in spite of the assessee made an estimated disallowance attributable for earning dividend income. Aggrieved, the assessee filed appeals before the CIT(A). The CIT(A) confirmed the disallowance made towards additional depreciation for both the ays. In respect of disallowances made u/s. 14A r.w.r 8D, the CIT(A) relying on the jurisdictional High Court decision in the case of Royola Corporation Pvt. Ltd., in ITA No. 908/2015 restricted the disallowances u/s. 14A r.w.r. 8D to the extent of dividend income earned. Aggrieved against these orders, the assessee filed these appeals.
3. In respect of the additional depreciation, the AR submitted that in its case, this tribunal in ITA No. 1114/Mds/2017 for assessment year 2012-13 dated 21.09.2017 allowed the appeal by applying the ratio of the jurisdictional High Court in the case of CIT vs T.P. Texitles Pvt. Ltd., [2017] 79 Taxmann.com 411. Further, it is submitted that the Assessing Officer has no :-3-: ITA Nos.2372 & 2373/Chny/2017 considered the fact that the assessee is a manufacturer of tea and only 40% of the income computed as per Rule 8 of the Income Tax Rules is liable for tax and therefore, the disallowances made are to be restricted to 40%.
4. We heard the rival contentions. Following this tribunal order, supra, we hold that the assessee was eligible for claiming the balance 10% depreciation in the impugned assessment orders. The AO is directed to allow such claim. The assessee's plea that such disallowances are to be restricted to 40% in accordance with Rule 8 of the Income Tax Rules is also in accordance with provisions and accordingly, the AO is directed to restrict the disallowances to 40%. The assessee's appeal for these two years stands allowed.
5. In respect of the disallowance made u/s. 14A r.w.r. 8D(2), the AR submitted that the assessee already disallowed Rs. 43,464/- and Rs. 3,76,777/-, respectively, as expenditure incurred for earning dividend income in assessment years 2013-14 & 2014-15 respectively. The assessee makes investment in mutual funds out of surplus available from time to tie and had not incurred any expense other than the expenditure already disallowed. The AO/CIT(A) erred in including the non-current investment in partnership firm of Rs. 960.85 lakhs. While, considering the average value of investments in the formula under Rule 8D(iii), without considering the fact that no exempt income was earned by the assessee from such investments. Further, the AR :-4-: ITA Nos.2372 & 2373/Chny/2017 submitted that this tribunal in the case of M/s. Computer Age Management Services (P) Ltd., for assessment years 2006-07 to 2010-11 in ITA Nos. 1236 & 1240/Mds/2014 & 1259 to 1261/Mds/2014. Following the Kolkatta Bench tribunal decision in the case of REI Agro Limited vs DCIT [144 ITD 141] directed the AO to re-compute the disallowance under Rule 8D(2)(iii) by taking the amount equal to half percent of the average value of investment which is given rise to the income which does not form part of total income. Per contra, the DR relied on the orders of the CIT(A).
6. We heard the rival contentions. Since the CIT(A) applied the decision of this tribunal, supra, and restricted the disallowances u/s. 14A r.w.r 8D to the extent of exempt income, we do not find any reason to interfere with his orders. However, the assessee questions the computation made under Rule 8D(2)(iii) relying on the Kolkatta Bench decision, supra The relevant portion of the order relied on by the AR is extracted as under:
"11. The Kolkata Bench of this Tribunal in REI Agro Ltd. Vs. DCIT (supra) held that disallowance under section 14A read with Rule 80 can be made only by taking into consideration the investments which has given rise to such income which does not form part of the total income. While holding so, the Tribunal observed as under:-
"8. In respect of provisions of Rule 8D(2)(iii) which is the subject matter of the assessee's appeal in the assessee's hand, a perusal of the said provision shows that what is disallowable under Rule BD(2){iii) is the amount equal to ½ percentage of the average value of the investment the income from which does not or shall not form part of the total income. Thus, under sub-clause (iii) what is disallowed is ½ percentage of the numerator 8 in Rule 8D(2)(ii). Again this is to be :-5-: ITA Nos.2372 & 2373/Chny/2017 calculated in the same line as mentioned earlier in respect of Numerator B in Rule 8D(2)(ii) of the Act.
8.1. Thus, not all investments become the subject matter of consideration when computing disallowance under section 14A read with rule 8D. The disallowance under section 14A read with rule 8D is to be in relation to the income which does not form part of the total income and this can be done only by taking into consideration the investment which has given rise to this income which does not form part of the total income. Under the circumstances, the computation of the disallowance under section 14A read with rule 8D(2)(iii) which is issue in the assessee's appeal is restored to the file of the Assessing Officer for re-computation in line with the direction given above. No disallowance under section 14A read with rule 80(2)(ii) and (ii) can be made in this case. "
12. Following the said decision, we direct the Assessing Officer to recompute the disallowance under Rule 8D(2)(iii) by taking the amount equal to ½ percentage of the average value of the investment which has given rise to the income which does not form part of total income."
Accordingly, we direct the Assessing Officer to re-compute the disallowances under Rule 8D(2)(iii) by taking the amount equal to ½ percentage of the average value of the investments which have given rise to the income which does not form part of total income. Thus, the corresponding grounds are partly allowed for statistical purposes.
7. In the result, the assessee's above appeals are partly allowed for statistical purposes.
:-6-: ITA Nos.2372 & 2373/Chny/2017 Order pronounced in the Open Court on 21st March, 2018 at Chennai.
Sd/- Sd/-
(जॉजमाथन) (एसजयरामन)
(GEORGE MATHAN) (S. JAYARAMAN)
"या यकसद#य/Judicial Member लेखासद#य/Accountant Member
चे नई/Chennai,
st
3दनांक/Dated: 21 March, 2018
JPV
आदे शक.5 त6ल7पअ8े7षत/Copy to:
1. अपीलाथ9/Appellant 2. 5;यथ9/Respondent 3. आयकरआयु<त) अपील(/CIT(A)
4. आयकरआयु<त/CIT 5. 7वभागीय5 त न ध/DR 6. गाडफाईल/GF