Gujarat High Court
Pr. Commissioner Of ... vs Gujarat Gas Company Ltd. & ... on 7 February, 2017
Author: M.R. Shah
Bench: M.R. Shah, B.N. Karia
O/TAXAP/90/2017 ORDER
IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
TAX APPEAL NO. 90 of 2017
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PR. COMMISSIONER OF INCOME-TAX-GANDHINAGAR....Appellant(s)
Versus
GUJARAT GAS COMPANY LTD. & 1....Opponent(s)
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Appearance:
MR SUDHIR M MEHTA, ADVOCATE for the Appellant(s) No. 1
MR BS SOPARKAR, CAVEATOR for the Opponent(s) No. 1
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CORAM:HONOURABLE MR.JUSTICE M.R. SHAH
and
HONOURABLE MR.JUSTICE B.N. KARIA
Date : 07/02/2017
ORAL ORDER
(PER : HONOURABLE MR.JUSTICE M.R. SHAH) 1.00. Feeling aggrieved and dissatisfied with the impugned order passed by the learned Income Tax Appellate Tribunal (hereinafter referred to as "the learned tribunal" for short) in ITA No.1950/AHD/2011, by which the learned tribunal has dismissed the said appeal preferred by the revenue, revenue has preferred the present appeal with the following proposed questions of law :-
"[A] Whether the ITAT has erred in fact and in law in deleting the disallowance made by the AO on account of proportionate interest and administrative expenses of Rs.25,41,310/-?
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[B] Whether ITAT has erred in fact and in law in
deleting the addition made by the AO on account of
unutilized modvat/cenvat credit of Rs.56,08,089/-? [C] Whether the ITAT has erred in fact and in law in deleting the addition made by the AO on account of project loss of Rs.7,49,000/- in relation to amount receivable from Mahanagar Gas Ltd.?"
2.00. That the assessee filed its return of income for the A.Y. 2005-06 declaring total income of Rs.108,15,96,445/-. While processing the assessment under section 143(3) of the Income Tax Act, 1961 (hereinafter referred to as "the Act"), the A.O. disallowed Rs.8,84,372/- on account of proportionate interest and Rs.16,54,333/- towards administrative expenses, under section 14A of the Act. The A.O. also made addition of Rs.15,68,089/- on account of unutilized modvat/cenvat credit. The A.O. also made addition of Rs.7,49,000/- on account of project loss in relation to amount receivable from Mahanagar Gas Ltd.
2.01. Feeling aggrieved and dissatisfied with the assessment order passed by the A.O. making disallowance on account of proportionate interest and administrative expenses of Rs.25,41,310/- (in all) and making addition of Rs.56,08,089/- on account of unutilized modvat/cenvat credit and addition made by the A.O. on account of project loss of Rs.7,49,000/- in relation to amount receivable from Mahanagar Gas Ltd., the assessee preferred appeal before the learned CIT(A).
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2.02. At this stage it is required to be noted that before the learned A.O. the assessee itself voluntarily offered Rs.6 Lacs towards administrative expenses.
2.04. The learned CIT(A) allowed the appeal preferred by the assessee partly. The learned CIT(A) set aside the disallowance of Rs.8,84,372/- made by the A.O. on account of proportionate interest. The learned CIT(A) estimated the administrative expenses at 2% of exempt dividend income as expenditure incurred for earning exempt income and restricted the disallowance at Rs.10,54,333/-. However, as the assessee had already suo-motu made disallowance at Rs.6 Lacs, the learned CIT(A) held that the balance amount of Rs.4,54,333/- be disallowed under section 14A of the Act. The learned CIT(A) also directed to delete addition of Rs.56,08,089/-made by the A.O. on account of unutilized modvat/cenvat credit. The learned CIT(A) also directed to delete addition made by the A.O. on account of project loss of Rs.7,49,000/- in relation to amount receivable from Mahanagar Gas Ltd.
2.05. Feeling aggrieved and dissatisfied with the order passed by the learned CIT(A), revenue preferred appeal before the learned tribunal and the learned tribunal considering its earlier decision in the case of very assessee for the A.Y. 2004- 05, confirmed the order passed by the learned CIT(A) with respect to disallowance towards administrative expenses and consequently, the learned tribunal dismissed the said appeal preferred by the revenue confirming the order passed by the learned CIT(A) deleting addition made by the A.O. on account of unutilized modvat/cenvat credit of Rs.56,08,089/-. The learned tribunal also deleted the addition made by the A.O. on Page 3 of 7 HC-NIC Page 3 of 7 Created On Sun Aug 13 10:34:42 IST 2017 O/TAXAP/90/2017 ORDER account of project loss of Rs.7,49,000/- in relation to amount receivable from Mahanagar Gas Ltd.
2.06. Feeling aggrieved and dissatisfied with the impugned order passed by the learned tribunal, the revenue preferred the present appeal with the following proposed questions of law :-
"[A] Whether the ITAT has erred in fact and in law in deleting the disallowance made by the AO on account of proportionate interest and administrative expenses of Rs.25,41,310/-?
[B] Whether ITAT has erred in fact and in law in deleting the addition made by the AO on account of unutilized modvat/cenvat credit of Rs.56,08,089/-? [C] Whether the ITAT has erred in fact and in law in deleting the addition made by the AO on account of project loss of Rs.7,49,000/- in relation to amount receivable from Mahanagar Gas Ltd.?"
3.00. We have heard Mr. Sudhir Mehta, learned counsel appearing on behalf of the revenue and Ms.B.S. Soparkar, learned advocate appearing on behalf of the assessee.
3.01. Now, so far as the proposed question [A] is concerned, it is required to be noted that the learned A.O. disallowed the proportionate interest at Rs.8,84,372/-.
However, it is required to be noted that the assessee was
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already having enough fund for investment in tax free security and therefore, the learned CIT(A) directed to delete disallowance at Rs.8,84,372/- made on account of proportionate interest. The same has been confirmed by the learned tribunal. It is required to be noted that similar disallowance in the case of the very assessee for the A.Y. 2004-05 and the same has attained finality. The aforesaid has also been considered by the learned tribunal while passing the impugned judgement and order.
3.02. Now, so far as the disallowance of administrative expenses is concerned, the learned CIT(A) has made reasonable estimation at 2% of the exempt dividend income as expenditure incurred for earning exempt income. Accordingly, against disallowance made by the A.O. of Rs.16,54,333/-, the learned CIT(A), the learned CIT(A) restricted disallowance to Rs.10,54,333/-. The assessee itself voluntarily offered Rs.6 Lacs towards administrative expenses before the A.O. The learned CIT(A) has restricted administrative expenses with respect to the balance of Rs.4,54,333/-. The aforesaid has been confirmed by the learned tribunal. The relevant discussion has been made by the learned tribunal in para 21 to 27. We are in complete agreement with the reasons and the view taken by the learned tribunal. Under the circumstances, we see no reason to interfere with the impugned judgement and order passed by the learned tribunal so far as question No. [A] is concerned.
3.03. Now, so far as question No.[B] i.e. with respect to addition made by the A.O. on account of unutilized modvat/cenvat credit of Rs.56,08,089/- is concerned, it is Page 5 of 7 HC-NIC Page 5 of 7 Created On Sun Aug 13 10:34:42 IST 2017 O/TAXAP/90/2017 ORDER required to be noted that the learned tribunal has taken note that with respect to modvat receivable account, there is corresponding less debit to the purchase account and hence to that extent there is already income offered for tax. If that be so, there was no question of further adding modvat/cenvat credit to the income of the assessee for the year under consideration. Under the circumstances, we see no reason to interfere with the impugned judgement and order passed by the learned tribunal so far as confirming the order passed by the learned CIT(A) deleting the addition made by the A.O. on account of unutilised modvat/cenvat credit of Rs.56,08,089/-. We are in complete agreement with the view taken by the learned tribunal.
3.04. Now, so far as question No.[C] i.e. with respect to the addition made by the A.O. on account of project loss of Rs.7,49,000/- in relation to amount receivable from Mahanagar Gas Ltd. is concerned, the said issue is squarely covered against the revenue in view of the decision of the Hon'ble Supreme Court in the case of T.R.F. Ltd. Versus Commissioner of Income Tax, reported in (2010) 323 ITR 397 (SC). In the aforesaid decision, the Hon'ble Supreme Court has observed that with respect to bad debt claim, the assessee is required to establish only that the debt was written off and it is not necessary for the assessee to establish that the debt, in fact, had become non-recoverable. Under the circumstances, even the present appeal qua question No.[C] also deserves to be dismissed.
4.00. In view of the above and for the reasons stated above, present appeal fails and the same deserves to be Page 6 of 7 HC-NIC Page 6 of 7 Created On Sun Aug 13 10:34:42 IST 2017 O/TAXAP/90/2017 ORDER dismissed. No substantial question of law arise in the present appeal. Hence, present appeal is dismissed. In the facts and circumstances of the case, there shall be no order as to costs.
Sd/-
(M.R. SHAH, J.) Sd/-
(B.N. KARIA, J.) Rafik..
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