Income Tax Appellate Tribunal - Ahmedabad
Acit,Central Circle-2(3),, Ahmedabad vs Ratnamani Metals & Tubes Ltd.,, ... on 23 December, 2016
आयकर अपील य अ धकरण, अहमदाबाद यायपीठ 'ए' अहमदाबाद।
IN THE INCOME TAX APPELLATE TRIBUNAL
"A" BENCH, AHMEDABAD
BEFORE SHRI S.S. GODARA, JUDICIAL MEMBER AND
SHRI PRADIP KUMAR KEDIA, ACCOUNTANT MEMBER
आयकर अपील सं./ ITA No. 2704/Ahd/2013
नधारण वष/A.Y. 2010-11
ACIT, Vs M/s. Ratnamani Metals &
Central Circle-2(3), Tubes Ltd,
Ahmedabad 17, Rajmugat Society,
Narangpura Char Rasta,
Naranpura, Ahmedabad
PAN : AABCR 1742 E
अपीलाथ!/ (Appellant) "#यथ!/ (Respondent)
By Revenue : Shri K. Madhusudan, Sr DR
By Assessee : Shri P.D. Shah, AR
सुनवाई क तार ख/Date of Hearing : 25/11/2016
घोषणा क तार ख /Date of Pronouncement: 23/12/2016
आदे श/O R D E R
PER S.S. GODARA, JUDICIAL MEMBER
This revenue's appeal for assessment year 2010-11, arises against CIT(A)-III, Ahmedabad's order dated 30.09.2013 passed in case No.CIT(A)-III/14/DCIT/CC-2(3)/13-14, in proceedings u/s 143(3) of the Income-tax Act, 1961 (in short the "Act").
2. The Revenue's first substantive ground seeks to revive section 36(1)(iii) disallowance/addition of interest amount of Rs.60,983/- as made by the Assessing Officer and deleted in lower appellate proceedings.
3. The assessee-company manufactures steel tubes and pipes. It also generates wind-mill power. The Assessing Officer noticed the ITA No.2704/Ahd/2013 ACIT vs. M/s. Ratnamani Metals & Tubes Ltd A.Y. 2010-11 -2- assessee to have created capital work in progress of Rs.2,97,12,276/-. The Assessee pleaded to have created the same from internally generated interest free funds. The Assessing Officer quoted its failure in not producing cash flow statement to disallow the impugned section 36(1)(iii) proportionate interest amount out of total interest expenditure of Rs.1,74,98,421/-; coming to Rs.60,983/- thereby making the addition in question.
4. The CIT(A) reverses Assessing Officer's findings as follows:-
"7. From the perusal of records it is found that the same issue was considered in the case of appellant by my predecessor for A.Y. 2009-10. Vide order dated 28/11/2011 in Appeal No.CIT(A)-XI/413/Addl.CIT R- 5/10-11 my predecessor allowed claim of appellant with the following observation:
"3. I have carefully considered rival submissions. I have also gone through the assessment order and submissions of the Id. AR. As per the unambiguous previsions of proviso to section 36(1)(iii), for making disallowance of interest following conditions are required to be satisfied.
(i) Capital is borrowed for acquiring capital asset,
(ii) Interest is paid in respect of capita/borrowed.
(iii) The acquisition of assets should be for the purpose of expansion of an existing business or profession,
(iv) Interest liability may or may not be capitalized.
Disallowance as per the provisions of proviso to section 36(1)(iii) has to fulfill the above said conditions for sustainable disallowance. It is seen that A.O. has not brought any material on record to indicate that capital was borrowed for investment in capital work in progress. This way, the first enabling condition as mentioned above is not fulfilled, Accordingly, the disallowance made by the A.O, is untenable, The A.O, has made proportionate disallowance of interest, In my considered view, this disallowance is not mandated by provisions of proviso to section 36(1)(iii). In ITA No.2704/Ahd/2013 ACIT vs. M/s. Ratnamani Metals & Tubes Ltd A.Y. 2010-11 -3- view of the above, disallowance of Rs.46,73,553/-is deleted, This ground of appeal is allowed."
Since facts of the case are identical for this year, I do not see any reason to come to a different conclusion. I therefore, hold that disallowance of Rs.60,983/- is not justified and the same is directed to be deleted. Ground No.2 of the appeal is thus allowed."
5. We have heard rival submissions. Case file perused. Learned Authorized Representative points out at the outset that a co-ordinate bench in assessee's case for preceding assessment year ITA No.274/Ahd/2012 decided on 11.12.2015 has already adjudicated the very issue against the Revenue. Learned Departmental Representative fails to rebut this factual and legal position. We thus find no reason to interfere in the above extracted lower appellate findings deleting the impugned interest disallowance. This first substantive ground fails.
6. The Revenue's next substantive ground seeks to revive disallowance of Section 80IA(4)(iv) deduction of Rs.1,62,48,244/- as made by the Assessing Officer. We find that the CIT(A) discusses Assessing Officer's findings along with relevant backdrop of facts as under:-
"10. Appellant in its written submissions argued that "Ground No.3- Disallowance of claim of deduction u/s 80IA(4)(iv)
1) That the learned AO has erred in law and facts by making disallowances of claim of deduction u/s 80IA(4)(iv) Rs.1,62,48,244/- and therefore the learned AO be directed to allow the deduction, while computing the total income.ITA No.2704/Ahd/2013
ACIT vs. M/s. Ratnamani Metals & Tubes Ltd A.Y. 2010-11 -4-
2) In regard to our claim we would like to submit that under similar facts and circumstances your honor has allowed our claim u/s 80IA(4)(iv) in A.Y. 2009-10 and hence we request your honor that as there is no change in the facts and circumstances compared to A.Y. 2009-10 to allow our claim for A. Y. 2010-11 also. Copy of CIT(A) order for A. Y. 2009-10 is submitted herewith as Annexure 1. (Refer Para No 4.3 of the said order)"
11. This issue has been also considered by my predecessor in the case of appellant for A.Y. 2009-10. Deduction u/s. 80IA(4)(iv) was allowed in the earlier year by my predecessor with the following observation:
"4.2 I have carefully considered rival submissions, I have also gone through the assessment order and the submissions made by the ld. A.R. I have also perused the case laws relied upon by the ld. A.R. It is seen that in the case of deduction u/s. 801A, provisions of section 80IA(5) which starts with non obstinate clause that profits purpose of section 80IA is to be worked out as if eligible industrial previous year, The express provisions of the Act makes it very dear that eligible profits for deduction u/s. 801A is to be computed for the eligible industrial undertaking individually. It simply means that if such industrial undertaking had suffered tosses in the earlier years, these losses has to be set off against income of the current year. After this set off, if there are some profits, the same is eligible for deduction u/s. 80IA(iv), in this regard, it will be-pertinent to quote the concluding para in the case of AGIT v/s. Goldmine shares and Finance Pvt Ltd, (2008) 113 ITD 209 (Ahd) or 302 ITR 208 (Ahd.) "to conclude we answer the question referred in the affirmative, in the favour of the revenue and against the assessee, in the terms that in view of the specific provisions of section 80IA(S) of the income-tax Act, 1961 the profit from the eligible business for the purpose of determination of the quantum of deduction u/s.801A of the Act has to be computed after deduction of notional brought forward losses and depreciation of eligible business even though they have been allowed set off against other income in earlier years."ITA No.2704/Ahd/2013
ACIT vs. M/s. Ratnamani Metals & Tubes Ltd A.Y. 2010-11 -5- 4.3 The above facts makes it very clear that notional brought forward loss, depreciation, of the earlier years, if any, pertaining to the eligible business needs to be set off against profits of current year, to reach to correct figure of eligible profits for deduction u/s.80IA(iv). In this case A.O. had annexed details of profit and loss account since AY. 2004-05 alongwith assessment order, Perusal of these details reveals that, the appellant has suffered loss of. Rs.3,58,17,980/- (2,13,15,198 + 1,43,02,784) for the A.Yrs. 2004-05 & 2005-08. Perusal of this chart further reveals that for A.Ys.2008-07,2007-08 & 2008-09, the appellant had earned a profit of Rs.3,09,96,800/-(68,90,448 + 1,21,53,374 + 1,19,52,978). This way, at the end of A.Y. 2008-09, the appellant was having of brought forward business loss of eligible unit at Rs.46,21,180/- (3,58,17,980 - 3,09,98,800., During the year under consideration, appellant has declared profit from wind mills at Rs.1,30,26,967/-. As per the above discussions, eligible profits for deduction u/s.80IA(iv) can be computed after set off of not forward loss of Rs.46,21,180/- against this profit. This way eligible profit u/s.80IA(iv) is worked out at Rs.84,05,787/-. (1,30,26,967- 46,21,180). Appellant has claimed deduction u/s.80IA(iv) on a profit of Rs.84,05,787/- only and in my considered view, appellant's computation for eligible profits for the purpose of deduction u/s.801A(iv) is strict as per provisions of I.T. Act. In view of this, deduction u/s 80IA(iv) of Rs.84,05,787/- is ordered to be allowed. This ground of appeal is allowed. "
12. From the perusal of records it is found that the appellant has claimed deduction u/s. 80IA after considering the notional brought forward losses and depreciation even though the same have been set off against income of other units in the earlier years. For Shikharpur Unit the profit during the year is Rs. 50,84,176/-. Appellant has claimed deduction to the extent of Rs. 33,60,127/- only. This amount has been arrived at after set off of brought forward losses and deprecation. I therefore, hold that appellant is eligible for deduction of Rs.1,62,48,244/- u/s.80IA(4)(iv). This view derives support form decision of Hon'ble ITAT, Spl. Bench, Ahmedabad in the case of Goldmine Shares and Finance Pvt. Ltd. and the decision of Hon'ble Madras High Court in the case of Velayudhaswamy Spinning Mills (P) Ltd [38 DTR 57]. The disallowance of Rs.1,62,48,244/- made by AO is therefore, directed to be deleted."ITA No.2704/Ahd/2013
ACIT vs. M/s. Ratnamani Metals & Tubes Ltd A.Y. 2010-11 -6-
7. We have heard both the parties. Case file perused. We notice herein as well that this tribunal has already upheld CIT(A) identical findings deleting the very disallowance in preceding assessment year. Learned Departmental Representative does not indicate any distinction on facts involved in the impugned assessment year. We thus draw support from the above co-ordinate bench's order upholding similar findings to decide the very issue against the Revenue. Its latter substantive ground also fails.
8. This Revenue's appeal is dismissed.
Order pronounced in the Court on 23rd December, 2016 at Ahmedabad Sd/- Sd/-
(PRADIP KUMAR KEDIA) (S.S. GODARA) ACCOUNTANT MEMBER JUDICIAL MEMBER Ahmedabad, Dated 23/12/2016 *Bt
आदे श क& " त(ल)प अ*े)षत/Copy of the Order forwarded to :
1. अपीलाथ / The Appellant
2. यथ / The Respondent.
3. संब"ं धत आयकर आय$ ु त / Concerned CIT
4. आयकर आय$ ु त(अपील) / The CIT(A)
5. 'वभागीय *त*न"ध, आयकर अपील य अ"धकरण, अहमदाबाद / DR, ITAT, Ahmedabad
6. गाड/ फाईल / Guard file.
TRUE COPY आदे शानस
ु ार/ BY ORDER,
TRUE COPY
उप/सहायक पंजीकार (Dy./Asstt.Registrar)
आयकर अपील य अ धकरण, अहमदाबाद / ITAT, Ahmedabad