Income Tax Appellate Tribunal - Ahmedabad
Gmm Pfaulder Ltd.,, Ahmedabad vs Assessee on 17 April, 2015
आयकर अपील य अ धकरण, अहमदाबाद यायपीठ 'ए', अहमदाबाद ।
IN THE INCOME TAX APPELLATE TRIBUNAL " A " BENCH, AHMEDABAD सम ी जी.डी.अ वाल, उपा य एवं ी कुल भारत, या यक सद य । BEFORE SHRI BEFORE SHRI G.D. AGARWAL,VICE PRESIDENT (AZ) And SHRI KUL BHARAT, JUDICIAL MEMBER Sl. ITA No(s) Nos. Assessment Appeal(s) by No(s) Year(s) Appellant vs. Respondent Appellant Respondent
1. 318/Ahd/2011 2006-07 GMM The Asst.CIT Pfaudler Ltd. Circle-4 3rd Floor, Ahmedabad B-Jadav Chambers Ashram Road Ahmedabad PAN:AABC G0563A
2. 613/Ahd/2011 2006-07 Revenue Assessee
3. 319/Ahd/2011 2007-08 Assessee Revenue
4. 614/Ahd/2011 2007-08 Revenue Assessee
5. 2279/Ahd/2011 2008-09 Assessee Revenue
6. 2296/Ahd/2011 2008-09 Revenue Assessee Assessee by : Shri Shri S.N.Soparkar, A.R. Revenue by : Shri Dinesh Singh, Sr.DR ु वाई क तार!ख / सन Date of Hearing 25/03/2015 घोषणा क तार!ख /Date of Pronounce ment 17/04/2015 आदे श / O R D E R PER BENCH :
These cross-appeals by the Assessee and the Revenue are directed against the separate orders of the ld.Commissioner of Income Tax(Appeals)-VIII, Ahmedabad ('CIT(A)' in short) pertaining to ITA Nos.318,613, 319,614, 2279 & 2296 /Ahd/2011 GMM Pfaudler Ltd. vs. Dy.CIT(cross-appeals) Asst.Years -2006-07,2007-08 & 2008-09 -2- Assessment Years (AYs) 2006-07, 2007-08 & 2008-09 dated 06/12/2010, 06/12/2010, & 07/07/2010 respectively. Since common issues and facts are involved in these appeals, these appeals were heard together and are being disposed of by way of this consolidated order for the sake of convenience.
2. First, we take up the cross-appeals of Assessee and Revenue, i.e. ITA No.318/Ahd/2011 & ITA No.613/Ahd/2011 respectively for AY 2006-07. The following grounds of appeal have been raised by the respective parties:-
(a) Assessee's appeal in ITA No.318/Ahd/2011- for AY 2006-07.
1. The Learned Commissioner (Appeal) failed to understand the facts and circumstances of the case.
2. The Learned Commissioner (Appeal) erred in confirming the disallowance of Rs.2,69,966/- being administrative expenses u/s.14A of the Act, considering them incurred in relation to exempted dividend income.
3. The appellant prays for appropriate relief on the above grounds of appeals.
4. The appellant craves leave to add, alter, amend, substitute, or withdraw any of the above grounds of appeal as circumstances may justify.
(b) Revenue's appeal in ITA No.613/Ahd/2011- for AY 2006-07.
1. The ld.CIT(A) has erred in law and on facts in deleting the disallowance of Rs.4,09,899/- being liquidated damages made by the ITA Nos.318,613, 319,614, 2279 & 2296 /Ahd/2011 GMM Pfaudler Ltd. vs. Dy.CIT(cross-appeals) Asst.Years -2006-07,2007-08 & 2008-09 -3- A.O., without appreciating the facts and materials brought on record by the Assessing Officer.
2. The ld.CIT(A) has erred in law and on facts in deleting the disallowance of Rs.34,39,000/- being bad debts, made by the A.O., without appreciating the facts and materials brought on record by the Assessing Officer.
3. The ld.CIT(A) has erred in law and on facts in deleting the disallowance of Rs.1,12,14,000/- being provision for warranty expenses, made by the A.O., without appreciating the facts and materials brought on record by the Assessing Officer.
4. The ld.CIT(A) has erred in law and on facts in deleting the disallowance of Rs.23,43,716/- being interest expenses, made by the A.O. U/s.14A of the Act, without appreciating the facts and materials brought on record by the Assessing Officer.
5. The ld.CIT(A) has erred in law and on facts in deleting the disallowance of Rs.1,86,650/- being proportionate interest expenses made by the A.O. u/s.36(i)(iii) of the Act, without appreciating the facts and materials brought on record by the Assessing Officer.
6. The ld.CIT(A) has erred in law and on facts in deleting the disallowance of Rs.49,60,500/- being Royalty expenses made by the A.O., without apspreciating the facts and materials brought on record by the Assessing Officer.
7. On the facts and in the circumstances of the case, the ld.CIT(A) ought to have upheld the decision of the Assessing Officer.
8. It is, therefore, prayed that the order of the learned CIT(A) may be set aside and that of the Assessing Officer may be restored to the above extent.
2. Briefly stated facts are that the case of the assessee was picked up for scrutiny assessment and the assessment u/s.143(3) of the Income Tax Act,1961 (hereinafter referred to as "the Act") was framed vide order dated 30/12/2008. The AO while framing the assessment, made various disallowances/additions on account of accrued interest to APSEB of ITA Nos.318,613, 319,614, 2279 & 2296 /Ahd/2011 GMM Pfaudler Ltd. vs. Dy.CIT(cross-appeals) Asst.Years -2006-07,2007-08 & 2008-09 -4- Rs.8,33,185/-, provisions for liquidated damages of Rs.4,09,899/-, Bad debts written off of Rs.34,39,000/- provisions for warranty expenses of Rs.1,12,14,000/-, disallowance u/s.14A of the Act of Rs.26,13,682/-, disallowance of proportionate interest u/s.36(1)(iii) of Rs.1,86,650/-, claim of Royalty of Rs.49,60,500/- and Arms length Price of Rs.2,28,082/-. Against this, the assessee preferred an appeal before the ld.CIT(A) in respect of disallowance of provisions for liquidated damages amounting to Rs.4,09,899/-, disallowance of bad-debts amounting to Rs.34,39,000/-, disallowance of provisions for warranty expenses amounting to Rs.1,12,14,000/-, disallowance made by invoking the provisions of section 14A of the Act amounting to Rs.26,13,682/-, disallowance of proportionate interest u/s.36(1)(iii) amounting to Rs.1,86,650/-, disallowance of claim of royalty amounting to Rs.49,60,500/- and addition of Arms Length Price in respect of sale material to associated-concern amounting to Rs.2,28,082/-. The ld.CIT(A) deleted the disallowance of Rs.4,09,899/- made on account of liquidated damages. The ld.CIT(A) also deleted the addition made on account of bad-debts written off of Rs.34,49,000/- by following the order of his predecessor in AY 2005-06. In respect of disallowance of provisions for warranty expenses of Rs.1,12,14,000/-, the ld.CIT(A) deleted the same by following his predecessor's order passed in AY 2005-06. However, in respect of disallowance of Rs.26,13,682/- made u/s.14A of the Act, the ld.CIT(A) partly allowed the appeal, whereby the ITA Nos.318,613, 319,614, 2279 & 2296 /Ahd/2011 GMM Pfaudler Ltd. vs. Dy.CIT(cross-appeals) Asst.Years -2006-07,2007-08 & 2008-09 -5- ld.CIT(A) deleted the addition made on account of the interest expenses and sustained the addition made on account of administrative expenses of Rs.2,69,966/-. In respect of disallowance made u/s.36(1)(iii) of Rs.1,86,650/-, the ld.CIT(A) following his predecessor's order passed in AY 2005-06 deleted the addition. In respect of the addition made on account of royalty of Rs.49,60,500/-, the ld.CIT(A) following his predecessor's order passed in AY 2005-06, deleted the addition. The ground raised in respect of disallowance made on account of ALP was withdrawn before the ld.CIT(A) and, therefore, this addition was confirmed by the ld.CIT(A). Both the Assessee and Revenue have preferred appeals against the order of ld.CIT(A).
3. First, we take up the Assessee's appeal in AY 2006-07. The only effective ground in assessee's appeal, i.e. in ITA No.318/Ahd/2011 for AY 2006-07, is against the confirmation of addition of Rs.2,69,966/- being administrative expenses u/s.14A of the Act. The ld.Sr.counsel for the assessee Shri S.N.Soparkar submitted that the identical issue was before the ITAT for AY 2005-06. He submitted that the ld.CIT(A) has followed the decision of his predecessor passed in AY 2005-06. He submitted that the issue travelled upto the Tribunal (ITAT 'A' Bench) by way of ITA No.2627/Ahd/2008-Assessee's cross-appeal and ITA No.2923/Ahd/2008-Revenue's appeal and the Hon'ble Tribunal vide order dated 28/01/2014 was pleased to decide this issue in favour of ITA Nos.318,613, 319,614, 2279 & 2296 /Ahd/2011 GMM Pfaudler Ltd. vs. Dy.CIT(cross-appeals) Asst.Years -2006-07,2007-08 & 2008-09 -6- assessee. He drew our attention towards paras-6 & 7 in ITA No.2627/Ahd/2008(supra), wherein the Coordinate Bench had deleted the addition made on administrative expenses following the decision of Hon'ble Kerala High Court rendered in the case of CIT vs. Catholic Syrian Bank Ltd. reported at (2012) 207 Taxman 2. The relevant paras-6 and 7 of the Tribunal's order dated 28/01/2014 are reproduced hereunder:-
"6. Ground No.3 is against the confirmation of disallowance of Rs.3,62,160/- being administrative expenses u/s.14A of the Act.
6.1. The ld.counsel for the assessee submitted that this issue is decided in favour of assessee by the Hon'ble Coordinate Bench in ITA No.1476/Ahd/2006 pertaining to AY 2002-03.
6.2. On the contrary, ld.Sr.DR supported the order of the ld.CIT(A). The ld.Sr.DR has relied on the decision of Hon'ble Calcutta High Court in the case of Dhanuka & Sons vs. CIT reported at (2011) 12 taxmann.com 227 (Cal.).
7. We have heard the rival submissions, perused the material available on record and gone through the orders of the authorities below. We find that the Hon'ble Coordinate Bench in ITA No.1476/Ahd/2006(supra) vide para-16, it has been held that since the assessee had sufficient profits generated this year and it had mixed funds and no nexus is established by the AO as to whether investment was made out of interest bearing funds, disallowance of interest cannot be made. Similarly no disallowance out of administrative expenditure can be made as there is no direct nexus. As a result, this grounds is allowed. In this year also, the AO has not established the nexus. Moreover, the ld.counsel for the assessee has relied on the decision of the Hon'ble Kerala High Court in the case of CIT vs. Catholic Syrian ITA Nos.318,613, 319,614, 2279 & 2296 /Ahd/2011 GMM Pfaudler Ltd. vs. Dy.CIT(cross-appeals) Asst.Years -2006-07,2007-08 & 2008-09 -7- Bank Ltd. reported at (2012) 207 Taxman 2 :: (2011) 9 taxmann.com 148 (Ker.)(Mag), wherein the Hon'ble High Court has held that so far as disallowance of administrative expense is concerned, there is no precious formula or proportionate disallowance, hence no disallowance can be called for under the identical facts. On the other hand, the ld.DR has relied on the decision of Hon'ble Calcutta High Court in the case of Dhanuka & Sons(supra). Since different views have been expressed by the Hon'ble Calcutta High Court and Hon'ble Kerala High Court, view which is in favour of assessee is to be Adopted as held by the Hon'ble Supreme Court in the case of CIT vs. Vegetable Products Ltd. reported at 88 ITR 192 (SC). Therefore, respectfully following the decision of Hon'ble Kerala High Court in the case of Catholic Syrian Bank Ltd.(supra), this ground of assessee's appeal is allowed."
3.1. The ld.Sr.DR Shri Dinesh Singh supported the orders of the authorities below. He submitted that some amount of the administrative expenses can be attributed to the earning of the exempt income.
4. We have heard the rival submissions, perused the material available on record and gone through the orders of the authorities below. We find that the Coordinate Bench in ITA No.1476/Ahd/2006 pertaining to AY 2002-03 had decided the similar issue in favour of the assessee. We also find that the facts are identical to the facts as were raised in AY 2005-06, therefore following the earlier order of this Coordinate Bench passed in ITA No.2627/Ahd/2008(assessee's own case), dated 28/01/2014, we direct the AO to delete the addition for this year as well. Thus, this ground of assessee's appeal is allowed.
ITA Nos.318,613, 319,614, 2279 & 2296 /Ahd/2011 GMM Pfaudler Ltd. vs. Dy.CIT(cross-appeals) Asst.Years -2006-07,2007-08 & 2008-09 -8- 4.1. The other grounds raised in this appeal are general in nature need no separate adjudication.
5. In the result, the appeal of the Assessee for AY 2006-07 is allowed.
6. Now, we take up the Revenue's appeal (ITA No.613/Ahd/2011 - for AY 2006-07).
6.1. First ground of Revenue's appeal is against deletion of disallowance of Rs.4,09,899/- in respect of liquidated damages made by the AO.
6.2. At the outset, ld.Sr.DR submitted that the identical issue was raised in ITA No.2923/Ahd/2008 for AY 2005-06(supra) by the Revenue. The Tribunal vide its order dated 28/01/2014 was pleased to restore this issue to the AO for decision afresh.
6.3. On the contrary, ld.Sr.counsel for the assessee Shri S.N.Soparkar supported the order of the ld.CIT(A).
7. We have heard the rival submissions, perused the material available on record and gone through the orders of the authorities below. We find that the Coordinate Bench of this Tribunal in ITA Noi.2923/Ahd/2008-Revenue's appeal, the issue had restored to the file ITA Nos.318,613, 319,614, 2279 & 2296 /Ahd/2011 GMM Pfaudler Ltd. vs. Dy.CIT(cross-appeals) Asst.Years -2006-07,2007-08 & 2008-09 -9- of AO for decision afresh. The relevant findings of the Tribunal are reproduced hereunder:-
"11.1. The first ground is against deletion of disallowance of provision for liquidated damages of Rs.8,67,740/-. The ld.Sr.DR submitted that the ld.CIT(A) was not justified in deleting the disallowance of provision for liquidated damages. On the contrary, ld.counsel for the assessee fairly submitted that under the identical facts, the Hon'ble Coordinate Bench in ITA No.2002/Ahd/2007 for AY 2003-04 (assessee's cross- appeal), dated 11/02/2011, the issue ahs been restored back to the file of AO.
12. We have heard the rival submissions, perused the material available on record and gone through the orders of the authorities below. We find that the Hon'ble Coordinate Bench in ITA No.2002/Ahd/2007 for AY 2003-04 vide para-56 has restored this issued back to the file of AO. The Hon'ble Tribunal in para-56 has given the following direction:-
"56. We have heard the parties and carefully perused the material on record. In our considered view the issue regarding liquidated damages requires a fresh look by the AO. He would allow the claim on actual basis. Wherever the other party has claimed liquidated damages against the assessee in the current year Asst.Year it should be allowed. The assessee would submit individual account and the AO will examine such accounts and take a decision as per law. This ground is allowed but for statistical purposes."
12.1. After considering the totality of the facts, we feel that a similar direction may also be issued in this case as well. Accordingly, the AO is directed to decide this issue afresh in the light of the direction issued in ITA No.2002/Ahd/2007 (supra). Thus, this ground of the Revenue is allowed but for statistical purposes."
ITA Nos.318,613, 319,614, 2279 & 2296 /Ahd/2011 GMM Pfaudler Ltd. vs. Dy.CIT(cross-appeals) Asst.Years -2006-07,2007-08 & 2008-09
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7.1. Therefore, in this year also, this ground of Revenue's appeal is restored back to the file AO for decision afresh. The AO is hereby directed to decide this issue in the light of the direction given by the Tribunal in ITA No.2923/Ahd/2008(supra). Thus, this ground of Revenue's appeal is allowed for statistical purposes.
8. Ground No.2 is against the deletion of disallowance of Rs.34,39,000/- being bad-debts made by the AO.
8.1. The ld.Sr.DR supported the order of the AO. On the contrary, ld.Sr.counsel for the assessee Shri S.N.Soparkar submitted that in AY 2005-06, the Tribunal in ITA No.2923/Ahd/2008/Ahd/2008 had decided the issue in favour of assessee. He drew our attention towards paras-13 and 14 of the Tribunal's order dated 28/01/2014 passed in ITA No.2923/Ahd/2008.
9. After hearing the rival submissions, we find that the identical issue was before this Tribunal in ITA No.2923/Ahd/2008, wherein the Tribunal in paras-13 to 14.1 has decided the issue in favour of the assessee by observing as under:-
"13. Ground No.2 is against the deletion of the disallowance of Rs.26,08,000/-, being bad debts written off. The ld.Sr.DR supported the order of the AO, whereas ld.counsel for the assessee supported the order of the ld.CIT(A) and submitted that an identical issue has been ITA Nos.318,613, 319,614, 2279 & 2296 /Ahd/2011 GMM Pfaudler Ltd. vs. Dy.CIT(cross-appeals) Asst.Years -2006-07,2007-08 & 2008-09
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decided by the Tribunal in ITA No.1241/Ahd/06 for AY 2002-03 (Revenue's cross-appeal), order dated 11/02/2011.
14. We have heard the rival submissions, perused the material available on record and gone through the orders of the authorities below. We find that the Hon'ble Coordinate Bench vide para-43 of its order has decided this issue in favour of assessee by observing as under:-
"43. We have heard the parties and carefully perused the material on record. In our considered view there is no case for interference in the order of ld.CIT(A). It is admitted position that assessee has actually written off the amounts. Once it is so then matter is squarely covered by the decision of Hon.Supreme Court in the case of TRF Ltd. vs. CIT (2010) 323 ITR 397 (SC() wherein it is held that w.e.f. 1.4.1989 in order to obtain a deduction in relation to bad debts it is not necessary for the assessee to establish that the debt in fact has become irrecoverable. It is enough if the bad debt is written off and the bad debt is irrecoverable in the account of assessee. Following the above decision of Hon.Supreme Court, we confirm the order of ld.CIT(A) and dismiss this ground of Revenue."
14.1. Since the facts are identical in this case also and the Revenue has not pointed out any change in the facts and circumstances of the case, therefore we uphold the order of the ld.CIT(A) and dismiss this ground of the Revenue's appeal."
9.1. Since the facts are identical to the facts as were raised in ITA No.2923/Ahd/2008 for AY 2005-06 and the Revenue has not pointed out any change into the facts and circumstances of the case, therefore following the decision of Coordinate Bench passed in ITA No.2923/Ahd/2008, the issue is decided in favour of assessee in this year as well. Hence, the finding of the ld.CIT(A) is sustained and this ground of Revenue's appeal is rejected.
ITA Nos.318,613, 319,614, 2279 & 2296 /Ahd/2011 GMM Pfaudler Ltd. vs. Dy.CIT(cross-appeals) Asst.Years -2006-07,2007-08 & 2008-09
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10. Ground No.3 is against the deletion of disallowance of Rs.1,12,14,000/- being provision for warranty expenses made by the AO.
10.1. The ld.Sr.DR submitted that the Tribunal in earlier assessment year, i.e. AY 2005-06 was pleased to restore this issue to the file of AO. He drew our attention towards para-15 of the Tribunal's order passed in ITA Noa.2923/Ahd/2008(supra).
10.2. The ld.Sr.counsel for the assessee fairly conceded the fact that this issue has been restored to the file of the AO.
11. After hearing both the parties, we find that the Coordinate Bench of this Tribunal had restored this issue while passing the order in ITA No.2923/Ahd/2008(supra) and the relevant findings contained in para-15 are reproduced hereunder:-
"15. Ground No.3 is against the deletion of disallowance of Rs.68,61,000/- in respect of provision for warranty expenses. The Sr.DR supported the order of the AO, whereas the ld.counsel for the assessee supported the order of the ld.CIT(A). Ld.counsel for the assessee pointed out that this issue has been set aside to the file of AO by the Hon'ble Coordinate Bench in ITA No.12/Ahd/2008 for AY 2004-
05. 15.1. We have heard the rival submissions, perused the material available on record and gone through the orders of the authorities ITA Nos.318,613, 319,614, 2279 & 2296 /Ahd/2011 GMM Pfaudler Ltd. vs. Dy.CIT(cross-appeals) Asst.Years -2006-07,2007-08 & 2008-09
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below. We find that the Hon'ble Tribunal in ITA No.12/Ahd/2008 for AY 2004-05 (Revenue's appeal in assessee's own case) vide order dated 11/12/2011 has restored the matter back to the file of AO by observing as under:-
"76. Ground No.2 relates to deletion of a sum of Rs.6,43,000/- is provisions for warranty expenses. The assessee debited a sum of Rs.25,70,000/- in the P&L a/c. The AO disallowed warranty expenses for three months on proportionate basis as pertaining to the subsequent year. The ld.CIT(A) allowed the entire claim following the decision of ITAT, Bangalore in the case of Wipro Ge Medical System Ltd. vs. DCIT 81 TTJ 455.
...
79. We have heard the parties. The assessee has to submit present value of warranty expenses. It has to be properly ascertained and discounted on accrual basis. A proper calculation on this issue will be submitted to the AO who will examine the same and allow the claim as per decision of Hon.Supreme Court in Rotork Controls India (P) ltd. (supra) as above. This ground of Revenue is allowed but for statistical purposes."
15.2. Since the facts are identical in this case also and the Revenue has not pointed out any change in the facts and circumstances of the case, therefore taking a consistent view, we accordingly set aside the order of the ld.CIT(A) and restore this issue back to the file AO for fresh adjudication. Thus, this ground of Revenue's appeal is allowed but for statistical purposes."
11.1. Since there is no change into the facts and circumstances of the case and following the decision of the Coordinate Bench passed in ITA No.2923/Ahd/2008, in this year also, this issue is restored back to the file of AO for decision afresh. Thus, this ground of Revenue's appeal is allowed for statistical purposes.
ITA Nos.318,613, 319,614, 2279 & 2296 /Ahd/2011 GMM Pfaudler Ltd. vs. Dy.CIT(cross-appeals) Asst.Years -2006-07,2007-08 & 2008-09
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12. Ground No.4 is against the deletion of disallowance of interest expenses of Rs.23,43,716/- being interest expenses made by the AO u/s.14A of the Act.
12.1. At the outset, ld.Sr.counsel for the assessee pointed out that the identical issue came before the Hon'ble Tribunal by way of ITA No.2923/Ahd/2008-Revenue's appeal, wherein the Hon'ble Tribunal has decided the issue in favour of assessee.
12.2. The ld.Sr.DR has fairly conceded the fact that the Tribunal has decided this issue in favour of assessee for AY 2005-06. However, he supported the order of the AO.
13. We have heard the parties. We find that the ld.CIT(A), while deciding the issue, has followed his predecessor's order passed in AY 2005-06 and the issue travelled upto the stage of Tribunal by way of ITA No.2923/Ahd/2008 and the Tribunal has decided the issue in favour of assessee by holding as under:-
"16. Ground No.4 is against the deletion of disallowance of interest expenses of Rs.13,44,876/- u/s.14A of the Act. The ld.Sr.DR supported the order of the AO and placed reliance on the decision of Hon'ble Calcutta High Court rendered in the case of Dhanuka & Sons vs. CIT (supra) and decision of ITAT Mumbai Bench rendered in the case of Kalpataru Construction Overseas (P.) Ltd. vs. DCIT reported at (2007) 13 SOT 194 (Mum.). On the contrary, ld.counsel for the assessee supported the order of the ld.CIT(A) and submitted that the issue has ITA Nos.318,613, 319,614, 2279 & 2296 /Ahd/2011 GMM Pfaudler Ltd. vs. Dy.CIT(cross-appeals) Asst.Years -2006-07,2007-08 & 2008-09
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been decided by the Hon'ble Coordinate Bench in ITA No.1476/Ahd/2006 for AY 2002-03.
17. We have heard the rival submissions, perused the material available on record and gone through the orders of the authorities below. We find that the Hon'ble ITAT in ITA No.1476/Ahd/2006(supra) vide para Nos.14 to 16 has held as under:-
"14. We have considered the rival submissions and perused the material on record. In our considered view, the matter would go to the file of AO as per the decision of Hon.Bombay High Court in the case of Godrej Boyce Mfg. Co.Ltd. (supra) only when it is held that some amount is required to disallowed as there is a nexus between the exempted income and investment, i.e. if Revenue is able to show that interest bearing capital has been invested in shares but where no such nexus is established the question of determining any disallowance does not arise and, therefore, matter need not be sent to the file of AO as no determination of any disallowance would be necessary. In the present case we notice that loan funds have decreased this year as compared to earlier years. Even though investments have increased from Rs.940.32 lacs to Rs.1008.51 lacs but such increase in investment cannot be linked to any borrowed funds this year as assessee has in fact not borrowed any additional fund this year. Prior to the decision of Hon.Supreme Court in the case of Hon'ble Supreme Court in S.A.Builders vs. CIT 288 ITR 1 (SC) onus was considered on the assessee to show the nexus between the interest free funds and investment on which no income is earned. After S.A.Builders case (supra) onus is considered shifted to the Revenue and AO has to show that interest bearing capital alone were invested in investment on which no income was earned. Hon.Supreme Court in the case of Munjal Sales Corporation vs. CIT (2008) 298 ITR 298 (SC) held where assessee had sufficient profits in the current year then interest free advances can be considered to be flowing from such profits.
Hon'ble Bombay High Court in CIT vs. Reliance Utilities & Power Ltd. (2009) 313 ITR 340 (Bom) held that if there are fund available both interest free and interest bearing, then a presumption arise that investment were out of interest free funds generated or available with the assessee. If the interest free funds were sufficient to meet the investment no disallowance of interest paid on borrowed funds would ITA Nos.318,613, 319,614, 2279 & 2296 /Ahd/2011 GMM Pfaudler Ltd. vs. Dy.CIT(cross-appeals) Asst.Years -2006-07,2007-08 & 2008-09
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be necessary. Once such presumption is established claim of interest was allowable.
15. There is another aspect of the matter. If the assessee has made investment in subsidiaries out of mixed funds and for commercial expediency then no interest out of payment made on borrowed funds can be disallowed as held in S.A.Builders Ltd. vs. CIT (2007) 288 ITR 1 (SC). Hon'ble Punjab & Haryana High Court in CIT vs. Hero Cycles Ltd. (2010) 323 ITR 518 (P& H) held that no disallowance out of interest payment is permissible if AO does not establish nexus between the expenditure incurred and income generated.
16. Since assessee had sufficient profits generated this year and it had mixed funds and no nexus is established by the AO as to whether investment was made out of interest bearing funds, disallowance of interest cannot be made. Similarly no disallowance out of administrative expenditure can be made as there is no direct nexus. As a result, this ground is allowed."
17.1. The Hon'ble Coordinate Bench has examined the various case laws and came to the conclusion that the assessee had sufficient profits generated this year and it had mixed funds and no nexus is established by the AO as to whether investment was made out of interest-bearing funds, disallowance of interest cannot be made. In the present case also, the facts are identical, therefore we do not find any reason to take a contrary view than taken by the Hon'ble Coordinate Bench. Thus, this ground of the Revenue's appeal is rejected."
13.1. Since the facts are identical to the facts as were raised in ITA No.2923/Ahd/2008 for AY 2005-06 and the Revenue has not pointed out any change into the facts and circumstances of the case, therefore following the decision of Coordinate Bench passed in ITA No.2923/Ahd/2008, the issue is decided in favour of assessee in this year ITA Nos.318,613, 319,614, 2279 & 2296 /Ahd/2011 GMM Pfaudler Ltd. vs. Dy.CIT(cross-appeals) Asst.Years -2006-07,2007-08 & 2008-09
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as well. Hence, the finding of the ld.CIT(A) is sustained and this ground of Revenue's appeal is rejected.
14. Ground No.5 is against the deletion of disallowance of Rs.1,86,650/- being proportionate interest expenses made by the AO u/s.36(1)(iii) of the Act.
14.1. At the outset, the ld.Sr.counsel for the assessee pointed out that the identical issue came before the Hon'ble Tribunal by way of ITA No.2923/Ahd/2008-Revenue's appeal, wherein the Hon'ble Tribunal has decided the issue in favour of assessee.
14.2. The ld.Sr.DR has fairly conceded the fact that the Tribunal has decided this issue in favour of assessee for AY 2005-06. However, he supported the order of the AO.
15. We have heard the parties. We find that the issue travelled upto the stage of Tribunal by way of ITA No.2923/Ahd/2008 and the Tribunal has decided the issue in favour of assessee by holding as under:-
"18. Ground No.5 is against the deletion of disallowance of Rs.1,29,034/- u/s.36(1)(iii) of the Act. The ld.Sr.DR has supported the order of the AO, whereas ld.counsel for the assessee supported the order of the ld.CIT(A) and submitted that under the identical facts, the Hon'ble Tribunal in ITA No.1476/Ahd/2006(supra) the issue has been ITA Nos.318,613, 319,614, 2279 & 2296 /Ahd/2011 GMM Pfaudler Ltd. vs. Dy.CIT(cross-appeals) Asst.Years -2006-07,2007-08 & 2008-09
- 18 -
decided in favour of assessee vide para Nos.9 & 16 by observing as under:-
"9. Ground No.4(a) relates to disallowance of proportionate interest of Rs.10,70,7000/-. The AO disallowed proportionate interest out of interest paid on borrowed funds on the assumption that borrowed money has been used for acquisition of investment as on balance sheet date. As per AO the Company had made total investment to the extent of Rs.1008.51 lacs in the equity shares and Mutual funds. During the year the investment in shares and Mutual funds were increased from 940.32 lacs to Rs.1008.51 lacs. Out of this investment, to the tune of Rs.61 lacs, is made in subsidiary Companies namely Karamsad Investment Ltd. & Karamsad Holding Ltd. Since the assessee had purchased shares in those companies being sister concerns, the nature of investment is the same as in shares and Mutual Fund of other companies. The assessee company had earned dividend income of Rs.94.47 lacs during the year and has claimed as exempt under section 10(33). Invoking section 14A AO held that expenditure for earning exempted income cannot be allowed as deduction. Similarly, the AO identified that administrative expenditure which could have been incurred for handling the investment in shares and Mutual Fund. A part of such expenditure was considered attributable to investment made in sister concerns, the income therefrom was exempt under section 10(33). The assessee submitted that it has enough working capital and it has not increased its borrowings this year. Therefore, it cannot be said that investment in subsidiary was done during this year out of any borrowed capital made this year. Regarding administrative expenditure sought to be disallowed assessee submitted before the AO that there is no relationship of such expenditure with the investment activities. No specific staff has been appointed for this purpose. The AO, however, did not agree and disallowed proportionate interest by holding that assessee did not produce any evidence to show that interest free funds were alone used for making such investment in sister concerns. The assessee has not maintained separate account for making investment are out of mixed funds. There is no nexus between the investment and interest free funds. Onus is on the assessee during the year and also in earlier years that investment for earning capital gains and dividend are made out of interest free capital. After long and detailed discussion the AO disallowed pro-rata interest worked ITA Nos.318,613, 319,614, 2279 & 2296 /Ahd/2011 GMM Pfaudler Ltd. vs. Dy.CIT(cross-appeals) Asst.Years -2006-07,2007-08 & 2008-09
- 19 -
out at Rs.10.70 lacs. In addition, he also disallowed, by estimate administrative, expenditure of Rs.1,20,000/-. ...
16. Since assessee had sufficient profits generated this year and it had mixed funds and no nexus is established by the AO as to whether investment was made out of interest bearing funds, disallowance of interest cannot be made. Similarly no disallowance out of administrative expenditure can be made as there is no direct nexus. As a result, this ground is allowed."
18.1. In the present case also, the facts are identical as the ld.CIT(A) had given a finding on fact that there assessee had sufficient interest free fund and it had not diverted the interest bearing fund same remained unrebutted. Therefore, we do not find any reason to take a contrary view than taken by the Hon'ble Coordinate Bench. Thus, this ground of the Revenue's appeal is rejected.
15.1. Since the facts are identical to the facts as were raised in ITA No.2923/Ahd/2008 for AY 2005-06 and the Revenue has not pointed out any change into the facts and circumstances of the case, therefore following the decision of Coordinate Bench passed in ITA No.2923/Ahd/2008, the issue is decided in favour of assessee in this year as well. Hence, the finding of the ld.CIT(A) is sustained and this ground of Revenue's appeal is rejected.
16. Ground No.6 of Revenue's appeal is against the deletion of disallowance of Rs.49,60,500/- being royalty expenses made by the AO.
16.1. At the outset, ld.Sr.counsel for the assessee pointed out that the identical issue came before the Hon'ble Tribunal by way of ITA ITA Nos.318,613, 319,614, 2279 & 2296 /Ahd/2011 GMM Pfaudler Ltd. vs. Dy.CIT(cross-appeals) Asst.Years -2006-07,2007-08 & 2008-09
- 20 -
No.2923/Ahd/2008-Revenue's appeal, wherein the Hon'ble Tribunal has decided the issue in favour of assessee.
16.2. The ld.Sr.DR has fairly conceded the fact that the Tribunal has decided this issue in favour of assessee for AY 2005-06. However, he supported the order of the AO.
17. We have heard the parties. We find that the issue travelled upto the stage of Tribunal by way of ITA No.2923/Ahd/2008 and the Tribunal has decided the issue in favour of assessee by holding as under:-
"20. Ground No.7 is against the deletion of disallowance of royalty of Rs.41,06,250/-. The ld.Sr.DR supported the order of the AO, whereas ld.counsel for the assessee supported the order of the ld.CIT(A) and submitted that the assessee-company is paying royalty to Pfaudler Inc, USA for the usage of trademarks. It is submitted that as per user Agreement the assessee-company has got the right of user only and not of ownership. The payment of Royalty is related to sales made by user of technology supplied by them. If the assessee does not use the technology then no royalty payment is required. User of the trademark did not create any asset or conferred any permanent right in favour of the assessee. The Agreement is only for 11 years and terminable by short notice. Royalty is paid in course of profit earning process.
20.1. We have heard the rival submissions, perused the material available on record and gone through the orders of the authorities below. We find that on the basis of the submissions of the assessee, ld.CIT(A) has given a finding on fact that the assessee has not acquired any ownership rights. It has got the right of user only. Since, AY 1989- 90, the user charges claimed as royalty have been allowed in the ITA Nos.318,613, 319,614, 2279 & 2296 /Ahd/2011 GMM Pfaudler Ltd. vs. Dy.CIT(cross-appeals) Asst.Years -2006-07,2007-08 & 2008-09
- 21 -
assessments, the rate of user charges is 1% of the sales during the year under consideration. TDS has been made in respect of royalty payments. As it is a recurring expenditure payable on the basis of sales and the appellant has not acquired any capital asset or permanent right, the payment of royalty is allowable as business expenditure. The Revenue has not controverted this fact by placing any material on record, therefore, we do not find any infirmity in the order of the ld.CIT(A), the same is hereby upheld. Thus, this ground of Revenue's appeal is rejected."
17.1. Since there is no change into the facts and circumstances of the case, therefore taking a consistent view, the issue is decided in favour of assessee. Thus, this ground of Revenue's appeal is rejected.
18. Ground Nos.7 & 8 are general in nature require no independent adjudication.
19. In the combined result, Assessee's appeal in ITA No.318/Ahd/11 for AY 2006-07 is allowed and Revenue's appeal in ITA No.613/Ahd/2011 for AY 2006-07 is partly allowed for statistical purposes.
20. Now, we take up the cross-appeals of Assessee and Revenue for AYs 2007-08 & 2008-09, wherein following grounds have been raised by the respective parties:-
(c) Assessee's appeal for AY 2007-08 (ITA No.319/Ahd/2011) ITA Nos.318,613, 319,614, 2279 & 2296 /Ahd/2011 GMM Pfaudler Ltd. vs. Dy.CIT(cross-appeals) Asst.Years -2006-07,2007-08 & 2008-09
- 22 -
1. The Learned Commissioner (Appeal) failed to understand the facts and circumstances of the case.
2. The Learned Commissioner (Appeal) erred in confirming the disallowance of Rs.9,14,475/- being administrative expenses u/s.14A of the Act, considering them incurred in relation to exempted dividend income.
3. The appellant prays for appropriate relief on the above grounds of appeals.
4. The appellant craves leave to add, alter, amend, substitute, or withdraw any of the above grounds of appeal as circumstances may justify.
(d) Revenue's appeal for AY 2007-08 (ITA No.614/Ahd/2011)
1. The ld.CIT(A) has erred in law and on facts in deleting the disallowance of Rs.33,909,742/- being bad debts, made by the A.O., without appreciating the facts and materials brought on record by the Assessing Officer.
2. The ld.CIT(A) has erred in law and on facts in deleting the disallowance of Rs.1,53,55,536/- being provision for warranty expenses, made by the A.O., without appreciating the facts and materials brought on record by the Assessing Officer.
3. The ld.CIT(A) has erred in law and on facts in deleting the disallowance of interest expenses Rs.25,28,987/- and Admn.Exoebses of Rs.9,14,475/- made by the AO U/s.14A of the Act, without appreciating the facts and materials brought on record by the Assessing Officer.
4. The ld.CIT(A) has erred in law and on facts in deleting the disallowance of Rs.1,98,428/- being proportionate interest expenses made by the A.O. u/s.36(i)(iii) of the Act, without appreciating the facts and materials brought on record by the Assessing Officer.
5. The ld.CIT(A) has erred in law and on facts in deleting the disallowance of Rs.56,09,987/- being Royalty expenses made by the A.O., without appreciating the facts and materials brought on record by the Assessing Officer.
ITA Nos.318,613, 319,614, 2279 & 2296 /Ahd/2011 GMM Pfaudler Ltd. vs. Dy.CIT(cross-appeals) Asst.Years -2006-07,2007-08 & 2008-09
- 23 -
6. The ld.CIT(A) has erred in law and on facts in deleting the disallowance of Rs.17,21,313/- being provision for bad advances written off, made by the A.O., without appreciating the facts and materials brought on record by the Assessing Officer.
7. On the facts and in the circumstances of the case, the ld.CIT(A) ought to have upheld the decision of the Assessing Officer.
8. It is, therefore, prayed that the order of the learned CIT(A) may be set aside and that of the Assessing Officer may be restored to the above extent.
(e) Assessee's appeal for AY 2008-09 (ITA No.2279/Ahd/2011)
1. The Learned Commissioner (Appeal) failed to understand the facts and circumstances of the case.
2. The Learned Commissioner (Appeal) erred in confirming the disallowance of Rs.14,25,893/- beinginterest expense u/s.14A of the Act r.w.r 8D, on invalid ground that interest expenses are incurred for making investment in shares and mutual funds though the Assessee has sufficient interest free funds available for making investments.
3. Alternatively, without prejudice to above ground of appeal, the Commissioner (Appeal) erred in including Rs.5,22,75,000/- being investment in foreign subsidiary from which income not forming part of total income is earned, in the average value of investment for working out interest disallowable u/s.14A of the Act r.w.r.8D.
4. The Learned Commissioner(Appeal) erred in confirming the addition of Rs.1,82,085/- on account of provision for advances with direction not to tax in assessment year 2011-12 being the year of recovery.
5. The appellant prays for appropriate relief on the above grounds of appeals.
6. The appellant craves leave to add, alter, amend, substitute, or withdraw any of the above grounds of appeal as circumstances may justify.
ITA Nos.318,613, 319,614, 2279 & 2296 /Ahd/2011 GMM Pfaudler Ltd. vs. Dy.CIT(cross-appeals) Asst.Years -2006-07,2007-08 & 2008-09
- 24 -
(f) Revenue's appeal for AY 2008-09 (ITA No.2296/Ahd/2011)
1. The Ld.CIT(A) has erred in law and on facts in deleting the disallowance of Rs.1,47,77,100/- made on account of provision for warranty expenses without appreciating facts that provision for warranty was in the nature of contingent, unascertained and non-crystallized liability.
2. The Ld.CIT(A) has erred in law and on facts in deleting the disallowance of Rs.27,96,724/- made on account of interest expenses u/s.36(1)(iii) without appreciating the fact that once the funds are put into the business, they lose identity.
3. The Ld.CIT(A) has erred in law and on facts in deleting the disallowance of Rs.62,84,947/- made on account of royalty payment without appreciating the fact that the said payment was made for the use of trade mark.
4. On the facts and in the circumstances of the case, the Ld.CIT(A) ought to have upheld the order of the Assessing Officer.
5. It is, therefore, prayed that the order of the Ld.CIT(A) may be set aside and that of the Assessing Officer may be restored to the above extent.
21. Now, we take up the Assessee's appeal, ITA No.319/Ahd/2011 for AY 2007-08. The only effective ground is against confirming disallowance of Rs.9,14,475/-. The facts are identical as were in the year 2006-07. In this year also, the AO and the ld.CIT(A) followed their order passed in AY 2005-06. The matter travelled upto the stage of the Tribunal and the Tribunal was pleased to decide this issue in favour of assessee in ITA No.2627/Ahd/2008 for AY 2005-06. There is no ITA Nos.318,613, 319,614, 2279 & 2296 /Ahd/2011 GMM Pfaudler Ltd. vs. Dy.CIT(cross-appeals) Asst.Years -2006-07,2007-08 & 2008-09
- 25 -
change into the facts and circumstances in the present year. The Revenue has not pointed out any change into the facts and circumstances, therefore taking a consistent view. This ground of assessee's appeal is allowed.
21.1. Ground Nos.1, 3 & 4 are general in nature need no separate adjudication. As a result, Assessee's appeal in ITA No.319/Ahd/2011 for AY 2007-08 is allowed.
22. Revenue's appeal, ITA No.614/Ahd/2011 for AY 2007-08. The representatives of both the parties have adopted their arguments as were made in the AY 2006-07. The facts and circumstances are identical as were in the AY 2006-07.
22.1. Ground No.1 is in this appeal is against the deletion of addition of bad debts by the ld.CIT(A). It is contended by the ld.Sr.counsel for the assessee that the ld.CIT(A) followed its order passed in the AY 2005-06 and the issue travelled upto the stage of Tribunal in ITA No.2923/Ahd/2008 and the Tribunal has decided the issue in favour of assessee. The ld.Sr.DR has fairly conceded the facts. Therefore, taking a consistent view, this ground of Revenue's appeal is rejected.
23. Ground No.2 is against the deletion of disallowance of expenses made for the provision for warranty amounting to Rs.1,53,55,536/-. The ITA Nos.318,613, 319,614, 2279 & 2296 /Ahd/2011 GMM Pfaudler Ltd. vs. Dy.CIT(cross-appeals) Asst.Years -2006-07,2007-08 & 2008-09
- 26 -
ld.Sr.counsel for the assessee submitted that the ld.CIT(A) followed its order passed in AY 2005-06. The issue travelled upto the stage of the Tribunal and the Tribunal was pleased to decide this issue in favour of assessee in ITA No.2627/Ahd/2008 for AY 2005-06. The ld.Sr.DR has not controverted the submissions made by the ld.Sr.counsel for the assessee.
23.1. We have heard both the sides, perused the material available on record and gone through the orders of the authorities below. We find that this Tribunal in ITA No.2923/Ahd/2008 in paras-15, 15.1 & 15.2(reproduced at para-11 of this order) has restored this issue by following the order of the Coordinate Bench passed in ITA No.12/Ahd/2008 for AY 2004-05. Since there is no change into the facts and circumstances of the case, therefore taking a consistent view, the issue is restored to the file of AO for decision afresh in the light of the direction given by the Tribunal in ITA No.12/Ahd/2008 for AY 2004-05. Thus, this ground of Revenue's appeal is allowed for statistical purposes.
24. Ground No.3 is against the deletion of disallowance of interest expenses of Rs.25,28,987/- and Administrative expenses of Rs.9,14,475/-. The disallowances were made by invoking the provisions of section 14A of the Act. The ld.Sr.counsel for the assessee has pointed ITA Nos.318,613, 319,614, 2279 & 2296 /Ahd/2011 GMM Pfaudler Ltd. vs. Dy.CIT(cross-appeals) Asst.Years -2006-07,2007-08 & 2008-09
- 27 -
out that the ld.CIT(A) has followed the order passed in AY 2005-06 and the issue travelled upto the stage of the Tribunal and the Tribunal in ITA No.2923/Ahd/2008 has decided the issue in favour of assessee, in paras- 16 & 17 of its order. The ld.Sr.DR has fairly conceded the fact that the ld.CIT(A) has followed the order passed in AY 2005-06.
25. We have heard the rival submissions, perused the material available on record and gone through the orders of the authorities below. The facts are identical as were in the AY 2005-06. This Tribunal in ITA No.2923/Ahd/2008 for AY 2005-06, order dated 28/01/014, has decided the issue in favour of assessee in paras-16 & 17 (reproduced in paras-13 & 13.1 of this order). Since there is no change into the facts and circumstances of the case, therefore taking a consistent view, the issue is decided in favour of assessee. Thus, this ground of Revenue's appeal is rejected.
26. Ground No.4 is against the deletion of disallowance of Rs.1,98,428/- being proportionate interest expenses made by the AO u/s.36(1)(iii) of the Act. The ld.Sr.counsel for the assessee has pointed out that the ld.CIT(A) has followed the order passed in AY 2005-06 and the issue travelled upto the stage of the Tribunal and the Tribunal in ITA No.2923/Ahd/2008 has decided the issue in favour of assessee, in para-
ITA Nos.318,613, 319,614, 2279 & 2296 /Ahd/2011 GMM Pfaudler Ltd. vs. Dy.CIT(cross-appeals) Asst.Years -2006-07,2007-08 & 2008-09
- 28 -
18 of its order. The ld.Sr.DR has fairly conceded the fact that the ld.CIT(A) has followed the order passed in AY 2005-06.
27. We have heard the rival submissions, perused the material available on record and gone through the orders of the authorities below. The facts are identical as were in the AY 2005-06. This Tribunal in ITA No.2923/Ahd/2008 for AY 2005-06, order dated 28/01/014, has decided the issue in favour of assessee in para-18 (reproduced in paras-15 & 15.1 of this order). Since there is no change into the facts and circumstances of the case, therefore taking a consistent view, the issue is decided in favour of assessee. Thus, this ground of Revenue's appeal is rejected.
28. Ground No.5 is against the deleting of disallowance of Rs.56,09,987/- being royalty expense. The ld.Sr.counsel for the assessee has pointed out that the ld.CIT(A) has followed the order passed in AY 2005-06 and the issue travelled upto the stage of the Tribunal and the Tribunal in ITA No.2923/Ahd/2008 has decided the issue in favour of assessee, in para-20 of its order. The ld.Sr.DR has supported the order of the AO and fairly conceded the fact that the ld.CIT(A) has followed the order passed in AY 2005-06.
29. We have heard the rival submissions, perused the material available on record and gone through the orders of the authorities below. The facts ITA Nos.318,613, 319,614, 2279 & 2296 /Ahd/2011 GMM Pfaudler Ltd. vs. Dy.CIT(cross-appeals) Asst.Years -2006-07,2007-08 & 2008-09
- 29 -
are identical as were in the AY 2005-06. This Tribunal in ITA No.2923/Ahd/2008 for AY 2005-06, order dated 28/01/014, has decided the issue in favour of assessee in para-20 (reproduced in paras-17 & 17.1 of this order). Since there is no change into the facts and circumstances of the case, therefore taking a consistent view, the issue is decided in favour of assessee. Thus, this ground of Revenue's appeal is rejected.
30. Ground No.6 is against the deletion of disallowance of Rs.17,21,313/- in respect of provision for bad advances written off. The ld.Sr.counsel for the assessee has pointed out that the ld.CIT(A) has followed the order passed in AY 2005-06 and the issue under appeal travelled upto the stage of the Tribunal and the Tribunal in ITA No.2923/Ahd/2008 was pleased to set aside the issue to the file of AO in para-11.1 & 12.1 of its order. The ld.Sr.DR supported the order of the AO and fairly conceded that the issue has been set aside to the file of AO.
31. We have heard the rival submissions, perused the material available on record and gone through the orders of the authorities below. We find that the ld.CIT(A) has followed the order passed in AY 2005-06. The facts are identical as were in the AY 2005-06. This Tribunal in ITA No.2923/Ahd/2008 for AY 2005-06, order dated 28/01/014, has set aside the issue to the file of AO in paras-11.1 to 12.1 (reproduced in ITA Nos.318,613, 319,614, 2279 & 2296 /Ahd/2011 GMM Pfaudler Ltd. vs. Dy.CIT(cross-appeals) Asst.Years -2006-07,2007-08 & 2008-09
- 30 -
paras-7 & 7.1 of this order). Since there is no change into the facts and circumstances of the case, therefore taking a consistent view, the issue is restored to the file of AO to decide the same afresh in the light of the direction given in ITA No.2002/Ahd/2007 for AY 2003-04, dated 11/02/2011. Thus, this ground of Revenue's appeal is allowed for statistical purposes.
32. Ground Nos.7 & 8 are general in nature need no independent adjudication.
33. In the result, the appeal of the Revenue for AY 2007-08 is partly allowed for statistical purposes.
34. Now, we take up the cross-appeals of the Assessee and Revenue for AY 22008-09.
34.1. Assessee's appeal (ITA No.2279/Ahd/2011):- Ground No.4 of assessee's appeal has not been pressed by the ld.counsel for the assessee and, therefore, the same is dismissed as such.
34.2. Ground Nos.1, 5 & 6 are general in nature require no independent adjudication.
ITA Nos.318,613, 319,614, 2279 & 2296 /Ahd/2011 GMM Pfaudler Ltd. vs. Dy.CIT(cross-appeals) Asst.Years -2006-07,2007-08 & 2008-09
- 31 -
34.3. Ground Nos.2 & 3 are inter-connected and the same are against confirming the disallowance of Rs.14,25,893/- out of interest expenses u/s.14A r.w.Rule 8D of the Act and alternatively, erred in including Rs.5,22,75,000/- being investment in foreign subsidiary which calculating average value of investment for working out interest disallowable.
34.4. The ld.Sr.counsel for the assessee has pointed out that the ld.CIT(A) has followed the order passed in AY 2005-06 and the issue travelled upto the stage of the Tribunal and the Tribunal in ITA No.2923/Ahd/2008 has decided the issue in favour of assessee, in paras- 16 & 17 of its order. The ld.Sr.DR has supported the order of the AO and fairly conceded the fact that the ld.CIT(A) has followed the order passed in AY 2005-06.
34.5. We have heard the rival submissions, perused the material available on record and gone through the orders of the authorities below. The facts are identical as were in the AY 2005-06. This Tribunal in ITA No.2923/Ahd/2008 for AY 2005-06, order dated 28/01/014, has decided the issue in favour of assessee in paras-16 & 17 (reproduced in paras-13 & 13.1 of this order). Since there is no change into the facts and circumstances of the case, therefore taking a consistent view, the ITA Nos.318,613, 319,614, 2279 & 2296 /Ahd/2011 GMM Pfaudler Ltd. vs. Dy.CIT(cross-appeals) Asst.Years -2006-07,2007-08 & 2008-09
- 32 -
issue is decided in favour of assessee. Thus, these grounds of Assessee's appeal are allowed.
35. In the result, Assessee's appeal for AY 2008-09 is partly allowed.
36. Revenue's appeal (ITA No.2296/Ahd/2011):- Ground No.1 is against deletion of disallowance of Rs.1,47,77,100/- made on account of provision for warranty expenses. The ld.Sr.counsel for the assessee has pointed out that the ld.CIT(A) has followed the order passed in AY 2005- 06 and the issue under appeal travelled upto the stage of the Tribunal and the Tribunal in ITA No.2923/Ahd/2008 was pleased to set aside the issue to the file of AO in para-15 of its order. The ld.Sr.DR supported the order of the AO and fairly conceded that the issue has been set aside to the file of AO.
36.1. We have heard the rival submissions, perused the material available on record and gone through the orders of the authorities below. We find that the ld.CIT(A) has followed the order passed in AY 2005-06. The facts are identical as were in the AY 2005-06. This Tribunal in ITA No.2923/Ahd/2008 for AY 2005-06, order dated 28/01/014, has set aside the issue to the file of AO in para-15 (reproduced in paras-11 & 11.1 of this order). Since there is no change into the facts and circumstances of the case, therefore taking a consistent view, the issue is ITA Nos.318,613, 319,614, 2279 & 2296 /Ahd/2011 GMM Pfaudler Ltd. vs. Dy.CIT(cross-appeals) Asst.Years -2006-07,2007-08 & 2008-09
- 33 -
restored to the file of AO to decide the same afresh in the light of the direction given in ITA No.2002/Ahd/2007 for AY 2003-04, dated 11/02/2011. Thus, this ground of Revenue's appeal is allowed for statistical purposes.
37. Ground No.2 of Revenue's appeal is against the deletion of disallowance of Rs.27,96,724/- out of interest expenses u/s.36(1)(iii) of the Act. The ld.Sr.counsel for the assessee has pointed out that the ld.CIT(A) has followed the order passed in AY 2005-06 and the issue travelled upto the stage of the Tribunal and the Tribunal in ITA No.2923/Ahd/2008 has decided the issue in favour of assessee, in para- 18 of its order. The ld.Sr.DR has fairly conceded the fact that the ld.CIT(A) has followed the order passed in AY 2005-06.
37.1. We have heard the rival submissions, perused the material available on record and gone through the orders of the authorities below. The facts are identical as were in the AY 2005-06. This Tribunal in ITA No.2923/Ahd/2008 for AY 2005-06, order dated 28/01/014, has decided the issue in favour of assessee in para-18 (reproduced in paras-15 & 15.1 of this order). Since there is no change into the facts and circumstances of the case, therefore taking a consistent view, the issue is decided in favour of assessee. Thus, this ground of Revenue's appeal is rejected.
ITA Nos.318,613, 319,614, 2279 & 2296 /Ahd/2011 GMM Pfaudler Ltd. vs. Dy.CIT(cross-appeals) Asst.Years -2006-07,2007-08 & 2008-09
- 34 -
38. Ground No.3 is against the deletion of disallowance of royalty payment of Rs.62,84,947/-. The ld.Sr.counsel for the assessee has pointed out that the ld.CIT(A) has followed the order passed in AY 2005- 06 and the issue travelled upto the stage of the Tribunal and the Tribunal in ITA No.2923/Ahd/2008 has decided the issue in favour of assessee, in para-20 of its order. The ld.Sr.DR has fairly conceded the fact that the ld.CIT(A) has followed the order passed in AY 2005-06.
39. We have heard the rival submissions, perused the material available on record and gone through the orders of the authorities below. The facts are identical as were in the AY 2005-06. This Tribunal in ITA No.2923/Ahd/2008 for AY 2005-06, order dated 28/01/014, has decided the issue in favour of assessee in para-20 (reproduced in paras-17 & 17.1 of this order). Since there is no change into the facts and circumstances of the case, therefore taking a consistent view, the issue is decided in favour of assessee. Thus, this ground of Revenue's appeal is rejected.
40. Ground No.4 & 5 are general in nature require no independent adjudication. In the result, Revenue's appeal for AY 2008-09 is partly allowed for statistical purposes.
ITA Nos.318,613, 319,614, 2279 & 2296 /Ahd/2011 GMM Pfaudler Ltd. vs. Dy.CIT(cross-appeals) Asst.Years -2006-07,2007-08 & 2008-09
- 35 -
41. In the combined result, the Assessee's cross-appeals in A.Ys. 2006-07, 2007-08 both are allowed and Assessee's appeal in AY 2008- 09 is partly allowed. The Revenue's cross-appeals for all the three years are partly allowed for statistical purposes.
Order pronounced in the Court on Friday, the 17th day of April, 2015 at Ahmedabad.
Sd/- Sd/-
(जी.डी.अ वाल) (कुल भारत)
उपा य या यक सद य
( G.D. AGARWAL ) ( KUL BHARAT )
VICE PRESIDENT (AZ) JUDICIAL MEMBER
Ahmedabad; Dated 17/ 04 /2015
ट!.सी.नायर, व. न.स./T.C. NAIR, Sr. PS
आदे श क त!ल"प अ#े"षत/Copy of the Order forwarded to :
1. अपीलाथ/ / The Appellant
2. 01यथ/ / The Respondent.
3. संब4ं धत आयकर आय6
ु त / Concerned CIT
4. आयकर आय6
ु त(अपील) / The CIT(A)-VIII, Ahmedabad
5. 7वभागीय 0 त न4ध, आयकर अपील!य अ4धकरण, अहमदाबाद / DR, ITAT, Ahmedabad
6. गाड: फाईल / Guard file.
आदे शानुसार/ BY ORDER, स1या7पत 0 त //True Copy// उप/सहायक पंजीकार (Dy./Asstt.Registrar) आयकर अपील य अ धकरण, अहमदाबाद / ITAT, Ahmedabad
1. Date of dictation .. 30.3.15/8.4.15 (dictation-pad 18+15 pages attached at the end of this File)
2. Date on which the typed draft is placed before the Dictating Member ..01.4.2015/9.4.15
3. Other Member...
4. Date on which the approved draft comes to the Sr.P.S./P.S.................
5. Date on which the fair order is placed before the Dictating Member for pronouncement......
6. Date on which the fair order comes back to the Sr.P.S./P.S.......17.4.15
7. Date on which the file goes to the Bench Clerk.....................17.4.15
8. Date on which the file goes to the Head Clerk..........................................
9. The date on which the file goes to the Assistant Registrar for signature on the order..........................
10. Date of Despatch of the Order..................