Income Tax Appellate Tribunal - Ahmedabad
Sayaji Industries Ltd.,, Ahmedabad vs Acit., (Osd)Circle-8,, Ahmedabad on 11 November, 2016
IN THE INCOME TAX APPELLATE TRIBUNAL
AHMEDABAD '' A " BENCH - AHMEDABAD
Before Shri R.P. Tolani, JM, & Shri Manish Borad, AM.
ITA Nos. 581 & 1752/Ahd/2012
Asst. Year: 2008-09 & 2009-10
Sayaji Industries Ltd., Vs. ACIT (OSD), Circle-8,
P.O. Kathwada, Ahmedabad. Ahmedabad.
Appellant Respondent
PAN AADCS0861R
ITA No. 2247/Ahd/2012
Asst. Year: 2009-10
DCIT, Circle-8, Vs. Sayaji Industries Ltd.,
Ahmedabad. P.O. Kathwada, Ahmedabad.
Appellant Respondent
Appellant by Shri Sanjay R. Sjhah, AR
Respondent by Shri K. Madhusudan, Sr. DR
Date of hearing: 7/11/2016
Date of pronouncement: 11/11/2016
ORDER
PER Manish Borad, Accountant Member.
These three appeals, one by assessee for Asst. Year 2008-09 and cross appeals by assessee and Revenue for Asst. Year 2009-10 are directed against the orders of ld. CIT(A) XIV, Ahmedabad dated 10.01.2012 and 6/7/2012 arising out of orders u/s 143(3) of the IT Act, 1961 (in short the Act) framed on 10/12/2010 and 4/11/2011 by ACIT(OSD) Circle-8, Ahmedabad for Asst. Year 2008-09 & 2009-10 ITA No. 581, 1752 & 2247/Ahd/2012 2 Asst. Year 2008-09 & 2009-10 respectively. As the issues raised in these appeals are common and the assessee is the same, these were heard together and are being disposed of by this common order for the sake of convenience.
2. First we will take assessee's appeals for Asst. Year 2008-09 & 2009-10 vide ITA No. ITA Nos. 581 & 1752/Ahd/2012 raising common grounds challenging the orders of ld. CIT(A) wherein sustaining disallowance u/s 14A of the Act and also confirming the disallowance u/s 14A of the Act to be considered while computing book profit u/s 115JB of the Act have been challenged.
3. For the purpose of adjudicating we take the facts for Asst. Year 2008-09 brief facts are that assessee is a limited company engaged in the business of manufacturing and selling of starch and its derivations. Return of income was filed on 27.09.2008 declaring total loss of Rs.8478701/- and declaring total income u/s 115JB of the Act at Rs.13948978/-. The case was selected for scrutiny assessment. Notice u/s 143(2) following by notice u/s 142(1) of the Act were duly issued and served. Necessary details were called for and supplied by the assessee. Assessed loss stood at Rs.2732096/- and profits for the purpose of MAT was assessed at Rs.15864575/-.
4. Appeal before first appellate authority brought part relief to the assessee.
5. Aggrieved, assessee is now in appeal before the Tribunal.
ITA No. 581, 1752 & 2247/Ahd/2012 3Asst. Year 2008-09 & 2009-10
6. Ground no.1 is general in nature, which needs no adjudication.
7. Ground no.2 reads as under :-
2. The learned CIT(A) erred in confirming the disallowance u/s 14A read with Rule 8D to the extent of Rs. 6,97,078 out of the disallowance of Rs.
19,46,597/- made by the AO. It be so held now.
2.1 The learned CIT(A) failed to appreciate that disallowing u/s. 14A, the AO ought to have satisfied that expenditure disallowed by the appellant hi return of income is not correct. It be so held now.
2.2. The learned CIT(A) erred in not appreciating the fact that there was no fresh investment during the year and hi the immediately preceding year, it has been accepted that no expenditure for interest has been incurred for earning dividend income, it is submitted in the facts of the case that the learned C1T(A) ought to have deleted the disallowance made.
8. Ld. AR submitted that total exempt dividend is Rs.18,02,832/-; out of which dividend from Sayaji Sethness Ltd. is Rs.18.00,000/-. Investment in Sayaji Sethness Ltd. amounting to Rs.120 Lacs was made in A.Y 1995-96 and 1996-97 out of its own funds i.e., in both the years interest free funds were more than the investments made. No disallowance was made u/s. 36( 1 )(iii) in those years. Reliance is placed on :-
- CIT Vs. UTI Bank Ltd. 32 taxmann.com 370 (Guj.)
- CIT Vs. Gujarat Narmada Valley Fertilizers Co. Ltd.
42 taxmann.com 270 (Guj.}
- CIT v. Reliance Utilities & Power Ltd. 313 ITR 340 (Bom.)
- CIT v. Hero Cycles Ltd. 323 ITR 518 (Punj & Har)
a) Ld. AR further submitted that Hon'ble Tribunal in Appellant's
own case for AY 2007-08 has held that it is undisputed fact that the ITA No. 581, 1752 & 2247/Ahd/2012 4 Asst. Year 2008-09 & 2009-10 investments in Sayaji Sethness Ltd. which forms a substantial chunk of investments were made in AY 1995-96 & 1996-97 out of Appellant's own funds in form of capital and reserves and profits from operations and deleted disallowance towards proportionate interest u/s 14A; though they upheld the disallowance of Rs. 25,000/- towards other expenses.
b) Further in support of his contention submitted that if no nexus is proved by AO to establish that borrowed funds are used for tax free investment no disallowance can be sustained u/s 14A of the Act as held in -
- CIT v. Reliance Utilities and Power Ltd 313 ITR 340 (Bom.) CIT v. Suzlon Energy Ltd 33 taxmann.com 151 (Guj.)
- CIT vs Gujarat Narmada Valley Fertilizers Co Ltd.
42 taxmann.com 270 (Guj.)
c) No further investment had been made during the year under consideration. Disallowance cannot be made if no disallowance was made in earlier years and no fresh investment has been made during the year. (Relied on CIT v. Sridev Enterprises 192 ITR 165(Kar.) There is no requirement to allocate Rs.25,000 as administrative expense to exempt income as there are no activity incurring any expense except receipt of yearly dividend which happens once in year. Reliance is placed on Godrej & Boyce vs. DCIT 328 ITR 81 (Bom.) Without prejudice to the above, in case the AO's order is upheld then Interest expense not attributable to exempt income should not be considered for rule 8D(ii) purposes as borrowed ITA No. 581, 1752 & 2247/Ahd/2012 5 Asst. Year 2008-09 & 2009-10 funds were used for specific purposes i.e for purchase of fixed assets and to meet working capital requirements. Reliance is placed on following decisions:
- ITO v. Narain Prasad Dalmia 52 Taxmann.com 83 (Kol. IT AT) ACIT Vs. Champion Commercial Company Ltd. 26 taxmann.com 342 (Kol. ITAT) ACIT vs Best & Crompton Engineering Limited 36 taxmann.com 555 (Chennai 1TAT)
d) Even in A.Y. 2003-04, the appellant's claim for deduction u/s 80M was allowed in the regular assessment by the department and no adjustment was carried out regarding interest or other expenses due to the fact that there was no expenditure incurred for earning exempt income. Investment in subsidiary companies is strategic investment for the purpose of acquiring controlling interest. Reliance is placed on -
Garware Wall Ropes Ltd. V CTT 46 taxmann.com 18 (Mum ITAT)
- E1H Associates Hotels Ltd. V DCIT in ITA No. 1503/Mds/2012
- JM Finance Ltd. V ACIT in ITA No. 4521/Mum/2012
- Interglobe Enterprises Ltd. V DCIT ITA No. 1362 & 1032/Del/2013
e) Only investments which have earned exempt dividend income should be considered for computation of disallowance u/s 14A r.w.r 8D. Reliance is placed on -
- Corrtech Energy Pvt Ltd 45 taxmann.com 116 (Guj.)
- CIT Vs. ACB India Ltd in ITA 615 of 2014 [TS-176-HC-2015] (Del.) ITA No. 581, 1752 & 2247/Ahd/2012 6 Asst. Year 2008-09 & 2009-10
f) Ld. AR further in support of his arguments submitted that assessee has sufficient interest free funds for making investments in shares and mutual funds and post amendment in Rule 8D of the IT Rules, 1962 r.w.s. 14A of the Act for Asst. Year 2008-09 also Hon. Jurisdictional High Court in the case of Principal CIT vs. India Gelatine and Chemicals Ltd. (2016) 66 taxmann.com 356 (Gujarat) has upheld the Tribunal's decision deleting the entire disallowance for Asst. Year 2009-10 made by Assessing Officer on the ground that assessee has sufficient interest free funds.
9. On the other hand, ld. DR supported the orders of lower authorities. He could not controvert the submissions of ld. AR and counter judgment.
10. We have heard the rival contentions and perused the material on record. Through this ground assessee has challenged the action of ld. CIT(A) sustaining the disallowance u/s 14A of the Act. We observe that during the course of assessment proceedings it was observed by Assessing Officer that assessee earned dividend income of Rs.1802832/-. There stood investments of Rs.12925000/- in quoted and unquoted shares and government securities. Assessee paid interest of Rs.54,44,2000/- against loan of Rs.35.27 crores. Based upon these facts and figures ld. Assessing Officer applied Rule 8D of the IT Rules 1962 r.w.s.14A of the Act and calculated disallowance at Rs.1946597/- (Rs.20,000/- admitted by assessee + interest disallowance of Rs.1798062/- + 0.5% of average investment at Rs.128535/-). Further when the matter cam up before first ITA No. 581, 1752 & 2247/Ahd/2012 7 Asst. Year 2008-09 & 2009-10 appellate authority, disallowance admitted by assessee at Rs.20,000/- was deleted and for the remaining disallowance method followed by Assessing Officer was sustained but the matter was restored to the Assessing Officer for re-calculation as some figures were wrongly inserted in the method provided under rule 8D. Accordingly, ld. Assessing Officer recomputed the disallowance at Rs.697078/- u/s 14A of the Act for which assessee is now in appeal before the Tribunal.
11. From going through the submissions of ld. AR we find that the impugned investments as on 31.3.2008 at Rs.129.25 lacs mainly includes investment of Rs.120.00 lacs invested in equity shares of Sayaji Sethness Ltd. brought forward from 1996-97. If this investment of Rs.120 lacs brought forward from Asst. Year 1996-97 is kept apart the remaining investment left at Rs.9.25 lacs only. Further on going through the audited balance sheet at page 50 of the Paper Book, we find that assessee possessed share capital and reserve and surplus i.e. interest free funds at Rs.2029.00 lacs and investment against interest free funds was only Rs.129.25 lacs which in percentage term is approximately 6%. Further in order to verify such major investment of Rs.120.00 lacs investment in shares of Sayaji Sethness Ltd. being brought forward from 1996-97, we find that at page 70-123 of paper book assessee has filed copy of annual report for Asst. Years 1994- 95 and 1995-96, (more specifically at page 111) that investment of Rs.120.00 lacs stood invested and as on 31.3.1996 also assessee was having interest free funds in the form of share capital reserve and surplus at Rs.1730.53 lacs. Further the fact that investment in ITA No. 581, 1752 & 2247/Ahd/2012 8 Asst. Year 2008-09 & 2009-10 Sayaji Sethness Ltd. which formed substantial chunk of investment made in Asst. Years 1995-96 & 1996-97 has been decided by the Co- ordinate Bench in assessee's own case in ITA No.376/Ahd/2012 for Asst. Year 2007-08 by observing as under :-
"5.5. We have heard the rival submissions and perused the material available on record. It is an undisputed fact that the investments in Sayaji Sethness Ltd. which forms a substantial chunk of investments were made in AY 1995-96 and 1996-97. From the copy of cash flow statements of those years it is seen that in those years, assessee was having substantial interest free funds in the form of capital and reserves and profits from operations. In the case of CIT vs. Reliance Utilities and Power Ltd. (supra) the Hon. High Court has held that if there are interest free funds available to an assessee sufficient to meet its investments and at the same time the assessee has raised a loan, it can be presumed that the investments were from interest free funds available. It is also a fact that Hon. Bombay High Court in the case of Godrej & Boyce Ltd., has held that provisions of rule 8D are applicable from AY 2008-09 and in earlier years though provisions of rule 8D are not applicable but reasonable disallowance u/s 14A be made by the AO. Considering the aforesaid facts we find no fault in the order of CIT (A) with respect to the deleting the disallowance on account of interest while computing the disallowance u/s 14A is concerned. As far as disallowance on account of administrative expenses is concerned, we find that CIT(A) after noting that the provisions of rule 8D are not applicable to the year under consideration, but after considering the facts, had restricted the disallowance to Rs.25,000/- as against Rs.64,000/- made by the AO which in our view, in the present facts and circumstances seems to be reasonable. In view of the aforesaid facts we find no reason to interfere with the order of ld. CIT(A). Thus the ground of revenue and the ground raised by assessee CO are dismissed."
12. From the above discussion we come to the finding that assessee on one hand is having sufficient interest free funds to meet the investments and secondly the major portion of exempt income at ITA No. 581, 1752 & 2247/Ahd/2012 9 Asst. Year 2008-09 & 2009-10 Rs.18 lacs out of total exempt income at Rs.1820.83 lacs is only out of dividend of Sayaji Sethness Ltd. and these investments were made way back in 1995-96 and 1996-97. In these facts we find that the judgment of Hon. Jurisdictional High Court in the case of Principal CIT vs. India Gelatine and Chemicals Ltd. (supra) is squarely applicable to the assessee's case wherein Hon. Jurisdictional High Court has upheld the order of the Tribunal deleting the entire disallowance made by Assessing Officer on the ground that assessee had sufficient interest free funds out of which investment was made. The relevant portion of the judgment of Hon. Jurisdictional High Court is reproduced below :-
5.1 Now, so far as the deletion of disallowance of interest expenses under Section 14A of the Act by the learned Tribunal CIT(A) is concerned, it is required to be noted that the AO made the disallowance under Section 14A of the Act on the ground that the assessee was not able to justify that the investments made in the shares and mutual funds amounting to Rs.
21,14,07,850/- was made out of the interest-free funds. However, it is required to be noted that both, the learned CIT(A) as well as the learned Tribunal have categorically found on the basis of the material on record that as such the assessee was having interest-free funds out of which the investment was made. Therefore, by observing in paras 6 to 9 extracted hereinbelow, the learned Tribunal has deleted the entire disallowance of Rs. 12,06,934/- made by the AO under section 14A of the Act "6. We have heard the rival submissions and perused the orders of bwer authorities and material available on record. The undisputed facts of the case are that the Assessing Officer observed that the assessee has made investment of Rs. 21,14,07,850/- and the assessee has paid interest on borrowed funds of Rs. 40,10,8617-. He also observed that the assessee has not made disallowance of interest expenditure according to section 14A read with Rule 8D of the Act He therefore computed the proportionate disallowance of interest expenditure at Rs. 5,84,706/- and disallowed the same. Before the Commissioner of Income Tax (Appeals), the assessee submitted that the assessee had , borrowed funds ITA No. 581, 1752 & 2247/Ahd/2012 10 Asst. Year 2008-09 & 2009-10 for the purposes of vehicle and old loan of Rs. 2005/- for Captive Power Plant, and therefore no borrowed funds were used for non-business purposes. Further, the assessee relied upon the decision of the Horible Supreme Court in the case of S A Builders (supra) and Munjal Sales Corporation (supra) and the decision of Hon'ble Mumbai High Court in the case of Reliance Utility &, Power Ltd. (supra) where it was held that if the interest free funds of the assessee were sufficient for making investments, no disallowance of interest expenditure was called for. The Commissioner of Income Tax (Appeals) held that the finding of the Assessing Officer was not correct that the assessee has not charged any interest free loan to associate concerns. He held that the assessee in fact earned interest income at the rate varying from 9% to 12.5% from the associated concerns depending upon the availability of surplus funds and thereby earned interest income of approximately Rs. 50.74 lakhs during the year. He, therefore, held that disallowance made by the Assessing Officer u/s. 36(i)(iii) was of Rs. 40,10,861/- was not justified.
7. The Departmental Representative has merely relied upon the order of the Assessing Officer. He has not pointed out any specific error in the order of the Commissioner of Income Tax (Appeals). He could not bring any material on record to show that the assessee could not have advanced interest free loans or loans at lower rate of interest to the sister concerns out of its interest free funds available with it. Therefore, we find no infirmity in the order of the Commissioner of Income Tax Appeals) which is confirmed and the ground no. 1 of appeal of the Revenue is dismissed.
8. Further, the Assessing Officer also made disallowance of Rs. 8,22,228/- out of administrative expenses, but had restricted the disallowance made to Rs. 6,22,228/- as the assessee himself had ' made disallowance of Rs. 2,00,000/- as expenses incurred for earning tax free divided income. The Commissioner of Income Tax (Appeals) observed that the said expenses must have been incurred by the assessee in making the investments and therefore confirmed the disallowance of Rs. 6,22,228/-made by the Assessing Officer. The Authorized Representative of the assessee submitted that the assessee has earned divided income of Rs. 12,200/- as will be evidenced from the statement of accounts of the assessee at page 26 of the paper book for which disallowance of Rs. 6,22,228/-cannot be made.
ITA No. 581, 1752 & 2247/Ahd/2012 11Asst. Year 2008-09 & 2009-10
9. We find that the Assessing Officer as well as the Commissioner of Income Tax (Appeals) could not pinpoint any error in the computation of disallowance made by the assessee of Rs. 2,00,000/- in earning tax free divided income. In the circumstances, in our considered opinion, disallowance of Rs. 6,22,228/- could not have been made by the Assessing Officer and confirmed by the Commissioner of Income Tax (Appeals). Our above view finds support from the decision of the Hon'ble Delhi High Court in the case of CIT v. Consolidated Photo & Finvest Ltd. (2012) 211 Taxman 184 (Del) Therefore, we set aside the orders of lower authorities and delete the disallowance of Rs. 6,22,228/-. Thus, ground no. 1 of appeal of the assessee is allowed."
We are in complete agreement with the view taken by the learned Tribunal and the reasons given by the learned Tribunal while deleting the disallowance of interest expenses under Section 14A of the Act.
13. Respectfully following the judgment of Hon. Jurisdictional High Court, we are of the view that no disallowance out of the interest expenditure is to be made in the case of assessee u/s 14A of the Act. However, suo motu disallowance made by assessee at Rs.20,000/- and 0.5% of average investment as recalculated at Rs.64215/- by Assessing Officer Rs.64215/- is sustained as disallowance u/s 14A of the IT Act. Accordingly this ground of assessee is partly allowed.
14. Ground no.3 is - the learned CIT(A) erred in confirming the disallowance u/s. 14A made by the AO while, computing book profit u/s. 115JB of the Act.
15. At the outset ld. AR submitted that the issue has been held against assessee by the Tribunal in assessee's own case for Asst. Year 2007-08 and, therefore, disallowance, if any, to be sustained after adjudication of ground no.2 may also be added to the book profit for the purpose of calculating MAT.
ITA No. 581, 1752 & 2247/Ahd/2012 12Asst. Year 2008-09 & 2009-10
16. Ld. DR supported the orders of lower authorities.
17. We have heard the rival contentions and perused the record. The issue raised in this ground is with respect to addition of disallowance made u/s 14A of the Act to the book profit for computation of book profit u/s 115JB of the Act. We find that the Co- ordinate Bench in ITA No.376/Ahd/2012 in assessee's own case for Asst. Year 2007-08 has adjudicated this issue and decided in favour of Revenue by observing as below :-
6.3 We have heard rival submissions and perused the material on record. The issue in the present case is with respect to the addition of disallowance made u/s. 14A to the book profits for computation of book profit u/s. 115JB of the Act. We find that the co-ordinate benches of the Tribunal while deciding the issue in favour of assessee in the case of M/s.
Essar Teleholdings Ltd., (supra) and Quippo Telecom Infrastructure Ltd.,(supra) had placed reliance on the decision of Delhi Bench in the case of Goetze (Idia) Ltd. v/s. CIT [2009] 32 SOT 101 (Del.)- We find that the aforesaid decision of Delhi Tribunal was challenged by the Revenue .and the matter was carried before the Hon'ble Delhi High Court. Delhi High Court while deciding the issue in the case of CIT v/s. Goetze lRdia'Ltdr^:(sup:ra),decfdM-'the issue in favour of Revenue. The relevant portion of the order reads as under;-
"35. By order dated 16th May, 2012, the following substantial questions of law were framed in the present appeals:-
"(i) Whether the Income Tax Appellate Tribunal was right in holding that while computing book profit under section 115JB of the Income Tax Act 1961 no disallowance under Section 14A was required to be made?
(ii) Whether the Income-Tax Appellate Tribunal was right in deleting interest u/s 234D of the Income Tax Act, 1961? "ITA No. 581, 1752 & 2247/Ahd/2012 13
Asst. Year 2008-09 & 2009-10
37. Ld. counsel for the respondents-assessee, during the course of hearing, has fairly conceded, that the first question has to be answered' in favour of the Revenue and against the assessee in view of the provisions In the Explanation 1 below Sec. 115JB(2) and clause (f), The Assessing Officer it is stated had made an addition of Rs.88,292/-to the book profits towards expenditure incurred having nexus with dividend income, which were exempt under section 10(33). Recording the said statement, the first question is answered in favour of the appellant -Revenue and against the respondent- assessee."
6.4 We thus find that Hon. Delhi High Court in the case of Goetze India (supra) has decided the issue in favour of the Revenue. Before us ld. AR has not brought any contrary binding decision in its support. In view of the aforesaid facts we find no reason to interfere with the order of CIT(A) whereby he has directed the AO to consider the figure of disallowance of Rs.25,000/- for calculating the book profit u/s 115JB of the Act. Thus, this ground of the Revenue and of assessee are dismissed.
18. Respectfully following the decision of Co-ordinate Bench, we are of the view that disallowance u/s 14A of the Act has to be considered for calculating book profit u/s 115JB of the Act. Therefore, disallowance sustained by us in ground no.2 above at Rs.84215/- is to be added to arrive at the book profit u/s 115 JB of the Act.
19. Ground no.4 reads as under :-
4. The Learned CIT(A) erred in not deleting interest charged u/s 234C. It is submitted that interest u/s 234C cannot be levied when assessment was made u/s 115JB.
4.1. Without prejudice to above, interest u/s 234C ought to b<= charged on returned income and not on assessed income. It be so held now.
20. Ld. AR submitted that assessee has calculated interest u/s 234C on the returned income whereas ld. Assessing Officer has computed on the assessed income. Ld. AR further submitted that ITA No. 581, 1752 & 2247/Ahd/2012 14 Asst. Year 2008-09 & 2009-10 when interest is computed u/s 115JB of the Act provisions of section 234C are not applicable. In any case, the interest would be computed on the returned income and not on the assessed income.
21. Ld. DR supported the orders of lower authorities.
22. We have heard the rival contentions and perused the record. Through this ground assessee has challenged the order of ld. CIT(A) for not deleting the interest charged u/s 234C of the Act when assessment was made u/s 115JB of the Act and also not directing the Assessing Officer to charge interest u/s 234C of the Act on the returned income rather than assessed income. We are of the view that in the given facts and circumstances assessee is liable to pay interest u/s 234C only on the returned income where income is assessed as book profit u/s 115JB of the Act as the normal income is loss then not on the assessed income.
23. Other grounds of general nature, which need no adjudication.
24. Now we take up assessee's appeal in ITA No. ITA No. 1752/Ahd/2012 for Asst. Year 2009-10 on following grounds are -
1. The order passed by the Learned CIT(A) is erroneous and contrary to the provisions of law & facts of the case and therefore needs to be suitably modified. It is submitted that it be so held now.
2. The learned CIT(A) erred in confirming the disallowance made by AO u/s 14A read with Rule 8D of Rs.661353/- net of disallowance made by appellant of Rs.20000/-. It be so held now.
ITA No. 581, 1752 & 2247/Ahd/2012 15Asst. Year 2008-09 & 2009-10 2.1 The learned CIT(A) failed to appreciate that while making disallowance u/s.
14A read with Rule 8D, the AO ought to have satisfied himself that expenditure disallowed by the appellant in return of income was not correct. It be so held now.
2.2 The learned CIT(A) erred in not appreciating the fact that there was no fresh investment during the year and in A.Y. 2007-08, it had been accepted by him that no expenditure for interest has been incurred for earning dividend income, it is submitted in the facts of the case that the learned CIT(A) ought to have deleted the disallowance made.
3. The learned CIT(A) erred in confirming the disallowance u/s. 14A made by the AO while computing book profit u/s. 115JB of the Act. It be so held now.
Your appellant prays for leave to add, alter and/or amend all or any of the grounds before the final hearing of appeal.
25. In this appeal mainly two grounds are effective. Firstly disallowance sustained u/s 14A of the Act and secondly considering disallowance u/s 14A of the Act for the purpose of sec.115JB of the Act. We find that these two grounds are similar to those adjudicated by us for Asst. Year 2008-09 in ITA No.581/Ahd/2012 wherein we have held that no disallowance is called for out of the interest expenditure u/s 14A of the Act as the assessee possesses sufficient interest free funds to cover the investments made, by respectfully following the judgment of Hon. Jurisdictional High Court in the case of Principal CIT vs. India Gelatine & Chemicals (supra). However, following out decision for Asst. year 2008-09 we sustain disallowance of Rs.20,000/- being suo motu made made by assessee and disallowance being 0.5% at Rs.64215/-, in total disallowance u/s 14A of the Act is at Rs.84,625/-.
ITA No. 581, 1752 & 2247/Ahd/2012 16Asst. Year 2008-09 & 2009-10
26. Similarly as regards the second ground we have followed the decision of the Co-ordinate Bench in assessee's own case for Asst. year 2007-08 wherein it was held that disallowance u/s 14A of the Act is to be considered after considering book profit u/s 115JB of the Act. Relying on the same decision for Asst. year 2009-10, we sustain the disallowance and direct the Assessing Officer to add disallowance of Rs.84,625/- as held above in ground no.1 for Asst. year 2009-10 and add the same to the net profit of the assessee for the purpose of calculation of book profit u/s 115JB of the Act. Accordingly ground no.2 is partly allowed and ground no.3 is dismissed.
27. Other grounds are of general nature, which need no adjudication.
28. Now we take up Revenue's appeal in ITA No. 2247/Ahd/2012 for Asst. Year 2009-10.
30. Ground no.1 reads as under :-
1) The Ld. Commissioner of Income-Tax (Appeals)-XIV, Ahmedabad has erred in law and on facts in deleting the disallowance of Rs.51,45,493/-
made by the Assessing Officer u/s..2(24)(x) r.w.s. 36(1)(va) of the Act.
31. Ld. DR supported the order of Assessing Officer.
32. On the other hand, ld. Ar submitted that during the year under consideration assessee has claimed deduction for employees contribution to PF paid within the due date after taking into consideration of grace period given under the respective Act. However, ld. Assessing Officer has disallowed Rs.51,45,493/-
ITA No. 581, 1752 & 2247/Ahd/2012 17Asst. Year 2008-09 & 2009-10 towards employees contribution to PF as according to him the same was not paid within the due date. Ld. AR further submitted that there are two dates for depositing PF contribution as the first 15 due date and the other is grace period. Due date is 15 of the month and grace period is of 5 days as given by the Department itself. During Asst. Year 2009-10 all the payments have been made before the expiry of grace period and at few instance falls after the date but finally paid before the end of the grace period. Further under Asst. Year 2004-05 the Tribunal has allowed the claim of assessee and even in the matter when the matter travelled to the Hon. Jurisdictional High Court the issue has been decided in favour of assessee and against the Revenue.
33. We have heard the rival contentions and perused the record. Through this ground Revenue is aggrieved with the order of ld. CIT(A) deleting the disallowance of Rs.51,45,493/- disallowed by the Assessing Officer u/s 2(24)(x) r.w.s. 36(1)(va) of the Act. We observe from the facts placed before us that for Asst. Year 2009-10 assessee has deposited the PF contribution before the lapse of grace period i.e. 20th of the next month. Grace period is the time for 5 days which is given by PF Department to the employer for making the payment after the completion of due date of 15th. This fact is duly supported by annexure 5 to Tax Audit Report placed at page 25 of the Paper Book. Further we observe that Co-ordinate Bench has adjudicated similar issue for Asst. Year 2007-08 in ITA No.376/Ahd/2010 by observing as follows :-
ITA No. 581, 1752 & 2247/Ahd/2012 18Asst. Year 2008-09 & 2009-10 "8.5 We have heard the rival submissions and perused the material on record. On perusing the annexure of Tax Audit Report which is placed on page 7 of the paper book it is seen that the employees contribution to PF have been paid within the due dates after taking into consideration the grace period allowed under the PF Act. We further find that CIT(A) while deleting the addition has notied, that in earlier years on identical facts the addition made by the A.O. were deleted. Before us Revenue has not placed any material on record to controvert the findings of CIT(A) nor could demonstrate that the payments have not been made by the assessee within the due dates including the grace period prescribed by the PF Act. In view of the aforesaid facts we find no reason to interfere with the order of the CIT(A). Thus this ground is dismissed."
34. We further observe that Hon. Jurisdictional High Court in assessee's own case for Asst. Year 2005-06 & 2006-07 has held in favour of assessee by upholding the order of the Tribunal by observing that Tribunal was justified in deleting the disallowance made under the provisions of sec.36(1)(x) of the Act with regard to delayed employer's contribution to P.F. Respectfully following the judgment of Hon. Jurisdictional High Court and the decision of the Tribunal and in the given facts and circumstances for the year under appeal we find no reason to interfere with the order of CIT(A). We uphold the same. Accordingly, this ground of Revenue is dismissed.
35. Ground no.2 reads as under :-
ITA No. 581, 1752 & 2247/Ahd/2012 19Asst. Year 2008-09 & 2009-10
2) The Ld. Commissioner of Income-Tax (Appeals)-XIV, Ahmedabad has erred in law and on facts in deleting the disallowance amounting to Rs.
13,29,334/- made by the Assessing Officer on account of depreciation on flat.
36. Brief facts are that while framing the assessment order Assessing Officer observed that assessed income by allowing depreciation on residual building @ 5% as against 10% claimed by assessee as the assessee failed to furnish any evidence that the building was exclusively used for the purpose of business and no other activities. However, in appeal before the first appellate authority, assessee succeeded as assessee deleted the disallowance.
37. Now the Revenue is in appeal before the Tribunal.
38. Ld. DR duly supported the order of Assessing Officer and also appraised that the issue raised in this ground has been decided by the Co-ordinate Bench in Asst. Year 2007-08 against the assessee. Ld. AR could not controvert the submissions made by ld. DR and duly accepted that the issue has been decided against the assessee.
39. We have heard the rival contentions and perused the record. Revenue has challenged the order of CIT(A) for deleting the disallowance of depreciation by allowing depreciation @ 10% as against 5% made by the Assessing Officer. We observe that this issue of charging depreciation on the flat came up before the Co- ordinate Bench Ahmedabad for Asst. Year 2007-08 in ITA ITA No. 581, 1752 & 2247/Ahd/2012 20 Asst. Year 2008-09 & 2009-10 No.376/Ahd/2010 wherein the Bench has held in favour of Revenue by observing as below :-
"9.5 We have heard the rival submissions and perused the material on record. The issue in the present case is with respect to the allowing the depreciation @ 5% or 10% pm the flat. Before us apart from reiterating the submissions made before Assessing Officer and ld. CIT(A), the ld. AR has not placed any material on record to support its contention that assessee is eligible for higher depreciation. The ld. AR has also not placed any material on record to demonstrate that the municipal taxes for the aforesaid flat which is being paid by the assessee has been paid for commercial use and not for residential use. We further find that the copy of correspondence placed at page 103 & 104 of the paper book and which has been relied upon by ld. AR is addressed to "Maize Products" and not to assessee. No material has been placed on record to show that the reference to "Maize Products" is to the assessee or some other party. In view of the aforesaid fats we are of the view that Assessing Officer was fully justified in allowing depreciation @ 5%. We thus set aside the order of the ld. CIT(A) on this ground and uphold the order of Assessing Officer. Thus this ground of Revenue is allowed."
40. We find that the issue is squarely decided against the assessee for Asst. Year 2007-08 and even for the year under appeal assessee has been unable to place any record to demonstrate that the flat has been used for commercial purposes and not for residential use and also failed to provide any evidence that the building was exclusively ITA No. 581, 1752 & 2247/Ahd/2012 21 Asst. Year 2008-09 & 2009-10 used for business and not for the use of stay of directors and other employees. In the facts and circumstances of the case, we are of the view that assessee should be allowed depreciation @ 5% as against 10% claimed in the return of income. Accordingly, this ground of Revenue is allowed.
41. Other grounds are of general nature, which need no adjudication.
42. In the result, assessee's appeals are partly allowed for statistical purposes and the appeal of Revenue is partly allowed.
Order pronounced in the open Court on 11th November, 2016 Sd/- sd/-
(R.P. Tolani) (Manish Borad)
Judicial Member Accountant Member
Dated 11/11/2016
Mahata/-
Copy of the order forwarded to:
1. The Appellant
2. The Respondent
3. The CIT concerned
4. The CIT(A) concerned
5. The DR, ITAT, Ahmedabad
6. Guard File
BY ORDER
Asst. Registrar, ITAT, Ahmedabad
ITA No. 581, 1752 & 2247/Ahd/2012 22
Asst. Year 2008-09 & 2009-10
1. Date of dictation: 7/11/2016
2. Date on which the typed draft is placed before the Dictating Member: 10/11/2016 other Member:
3. Date on which approved draft comes to the Sr. P. S./P.S.:
4. Date on which the fair order is placed before the Dictating Member for pronouncement: __________
5. Date on which the fair order comes back to the Sr. P.S./P.S.:
6. Date on which the file goes to the Bench Clerk: 11/11/2016
7. Date on which the file goes to the Head Clerk:
8. The date on which the file goes to the Assistant Registrar for signature on the order:
9. Date of Despatch of the Order: