Income Tax Appellate Tribunal - Pune
Deputy Commissioner Of Income-Tax,, vs Tapi Prestressed Products Ltd.,, ... on 30 November, 2018
आयकर अपील
य अ धकरण "ए" यायपीठ पण
ु े म ।
IN THE INCOME TAX APPELLATE TRIBUNAL "A" BENCH, PUNE
ी डी. क णाकरा राव,लेखा सद य, एवं ी वकास अव थी, या"यक सद य के सम#
BEFORE SHRI D. KARUNAKARA RAO, AM AND SHRI VIKAS AWASTHY, JM
आयकर अपील सं. / ITA Nos. 830 & 1195/PUN/2015
"नधा&रण वष& / Assessment Years : 2010-11 & 2011-12
The Deputy Commissioner of Income Tax,
Circle-2, Jalgaon.
.......अपीलाथ / Appellant
बनाम / V/s.
M/s. Tapi Prestressed Products Ltd.
Anjale Shivar, Tal : Yawal,
Dist. : Jalgaon.
PAN : AAACT6669D
......
यथ / Respondent
Assessee by : Shri Nikhil Pathak
Revenue by : Shri Rajeev Kumar
सन
ु वाई क तार ख / Date of Hearing : 11.09.2018
घोषणा क तार ख / Date of Pronouncement : 30.11.2018
आदे श / ORDER
PER VIKAS AWASTHY, JM
These two appeals have been filed by the Revenue. In ITA No.830/PUN/2015, the Revenue has assailed the order of Commissioner of Income Tax (Appeal)-2, Nashik dated 17.03.2015 for the assessment year 2010-11. ITA No.1195/PUN/2015, by the Revenue is against the order of Commissioner of Income Tax (Appeal)-2, Nashik dated 10.06.2015 for the assessment year 2011-12.
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ITA Nos.830 & 1195/PUN/2015 A.Ys.2010-11 & 2011-12 ITA No.830/PUN/2015 A.Y. 2010-11
2. In assessment year 2010-11, the Revenue has raised following grounds of appeal:
"1. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in deleting the addition of Rs.47,86,412/- made u/s.40(a)(ia) of the Income Tax Act, 1961 without appreciating the fact that assessee had not deducted tax at source on the payments made to subcontractors but paid TDS from its own pocket, the genuineness of such expenses are questionable.
2. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in deleting the disallowance of interest of Rs.1,67,88,000/- made on interest free advances given to its subsidiary company, JNP Road Infrastructure Projects (P) Ltd.
3. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in deleting the disallowance of interest of Rs.84,00,000/- made on the interest free advances given to parties.
4. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in deleting the disallowance of deduction u/s.80-IA(4) of Rs.6,92,63,702/- without appreciating the fact that the assessee is mere contractor and not a developer.
5. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in restricting the addition of Rs.14,02,681/- to Rs.1,40,268/- made on account of closing stock without appreciating the fact the assessee did not disclose the actual closing stock in its books of account.
6. On the facts and in the circumstances of the case and in law, the order of the Ld. CIT(A)-II,, Nashik be cancelled on the above issues and that of the AO be restored.
7. The appellant craves leave to add, alter, modify, delete amend any of the grounds with prior permission of the Hon'ble CIT, as per the circumstances of the case.
8. The appellant prays to file any of the additional evidence appropriate to the grounds taken in appeal."
3. Shri Rajeev Kumar representing the Department submitted that the assessee has made payments to subcontractors without deducting tax at source under the provisions of section 194C of the Income Tax Act, 1961 (hereinafter referred to as 'the Act'). Hence, the Assessing Officer made disallowance of such payments u/s.40(a)(ia) of the Act. The Commissioner of 3 ITA Nos.830 & 1195/PUN/2015 A.Ys.2010-11 & 2011-12 Income Tax (Appeal) deleted the disallowance on the ground that the assessee has deposited TDS amount before the due date of filing return. The said amount has been deposited by assessee from its own account. The requirement of law is that the amount should have been debited from payments made to subcontractors.
3.1 In respect of ground No.2 of the appeal, the ld. DR submitted that the Assessing Officer had made addition of Rs.1,67,88,000/- u/s.36(1)(iii) of the Act in respect of irrecoverable debit balance of subsidiary company. The assessee has given interest free advances to its subsidiary, M/s.JNP Road Infrastructure Projects (P) Ltd. on one hand and on the other, had taken loan to the tune of Rs.21.82 Crores during the period 01.04.2009 to 31.03.2010. The assessee has diverted borrowed interest bearing funds for non business purposes to its subsidiaries, therefore, the Assessing Officer had rightly made disallowance of interest. The ld. DR vehemently defended the order of Assessing Officer and prayed for reversing the findings of Commissioner of Income Tax (Appeal) in respect of above addition.
3.2 In respect of ground No. 3 of the appeal, the ld. DR submitted that disallowance of Rs.84,00,000/- was made by the Assessing Officer u/s.36(1)(iii) of the Act in respect of interest free funds advanced to various parties without charging interest. However, the Commissioner of Income Tax (Appeal) deleted the same by following the decision of Hon'ble Jurisdictional High Court in the case of CIT Vs. Reliance Utilities and Power Ltd. reported as 313 ITR 340.
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ITA Nos.830 & 1195/PUN/2015 A.Ys.2010-11 & 2011-12 3.3 In respect of ground No. 4 of the appeal, the ld. DR submitted that the Assessing Officer disallowed deduction of Rs.6,92,63,702/- u/s.80-IA(4) of the Act as the assessee is a job contractor and not an infrastructure developer. The Assessing Officer in the order has categorically observed that the assessee has not utilized its own funds into the project and the actual ownership is with the Government organizations. The Assessing Officer has further noted that the assessee has raised R.A Bills to the Govt. Department from time to time against which the payments were received. Thus, the assessee is not an infrastructure developer but only a contractor. The ld. DR prayed for upholding the order of Assessing Officer and reversing the findings of Commissioner of Income Tax (Appeal) on this issue.
4. On the other hand, Shri Nikhil Pathak appearing on behalf of the assessee vehemently defended the order of Commissioner of Income Tax (Appeal) and prayed for dismissing the appeal of the Revenue. The ld. AR submitted that the assessee has duly complied with the provisions of section 194C of the Act and has deducted TDS in respect of the payment made to the subcontractors. However, the assessee initially deposited TDS from his account and thereafter debited the amount to subcontractors account. Thus, there is due compliance to the provisions of section 194C of the Act. 4.1 In respect of disallowance of interest, ld. AR submitted that the assessee is having own interest free funds much more than the advances made to the subsidiary and other parties. Therefore, no disallowance u/s.36(1)(iii) of the Act is called for. To support his submissions, ld. AR placed reliance on the decision of Hon'ble Bombay High Court in the case of CIT Vs. Reliance Utilities and Power Ltd. (supra.).
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ITA Nos.830 & 1195/PUN/2015 A.Ys.2010-11 & 2011-12 4.2 In respect of disallowance of deduction u/s.80-IA (4) of the Act, ld. AR submitted that this issue has been dealt by the Tribunal in assessee's case for assessment year 2007-08. Now, the order of Tribunal has been upheld by the Hon'ble Bombay High Court. The ld. AR pointed that the Tribunal in Department's appeal in ITA No.1109/PN/2012 for the assessment year 2007- 08 decided on 30.10.2013 had decided the issue in favour of the assessee. The Department carried the matter in appeal before the Hon'ble Bombay High Court in Income Tax Appeal No.106 of 2014. The Hon'ble Bombay High Court vide order dated 2nd July, 2015 confirmed the order of Tribunal and dismissed the appeal of the Revenue.
5. We have heard the submissions made by representatives of rival sides and have perused the orders of Authorities below. We have also considered the decisions on which the ld. AR has placed reliance. The first ground of appeal is with respect to deleting of addition Rs.47,86,412/- u/s.40(a)(ia) of the Act. The contention of the ld. DR is that the assessee has made payments to the subcontractors in violation to the provisions of section 194C of the Act. A perusal of the impugned order shows that the Commissioner of Income Tax (Appeal) has given finding of fact that though the assessee did not deduct TDS at the time of making payments, however, the assessee has deposited TDS amount to the Government exchequer before due date of filing return of income and the said TDS amount has been debited to the payees account. Thus, the provisions of section 194C of the Act have been duly complied with. The purpose of deducting tax at source is to ensure earlier recovery of tax on the income received by the payees and also that the amount has been debited and paid before the due date of filing return. Both these conditions have been 6 ITA Nos.830 & 1195/PUN/2015 A.Ys.2010-11 & 2011-12 satisfied in the present case. We do not find any infirmity in the order of Commissioner of Income Tax (Appeal) in deleting the disallowance u/s.40(a)(ia) of the Act. Accordingly, ground No.1 raised in appeal by the Department is dismissed being devoid of any merit.
6. Ground Nos. 2 and 3 of the appeal is with respect to disallowance of interest. The contention of the ld. DR is that the assessee has diverted borrowed funds to its subsidiary for non business purpose. The Commissioner of Income Tax (Appeal) deleted the disallowance made u/s.36(1)(iii) of the Act by following the decision of Hon'ble Jurisdictional High Court in the case of CIT Vs. Reliance Utilities and Power Ltd. (supra.) The First Appellate Authority has observed that own funds of the assessee are much more than the advances made to subsidiaries/ other parties. The factual finding of fact has not been controverted by the Department. We find that the issue raised by Revenue in ground Nos. 2 and 3 is squarely covered by the decision of Hon'ble Jurisdictional High Court in the case of CIT Vs. Reliance Utilities and Power Ltd. (supra.). The ground No. 2 and 3 sans merit and accordingly, the same are dismissed.
7. In ground No.4 of the appeal, the Revenue has assailed deleting of the disallowance of deduction u/s.80-IA(4) of the Act. The ld. AR has pointed that this issue has already been considered by the Tribunal in appeal by the Department in ITA No.1109/PN/2012 (supra.) and again in ITA No.2139/PN/2013 for the assessment year 2009-10 decided on 31.07.2015. The Tribunal has held that the assessee is eligible for claiming deduction u/s.80-IA(4) of the Act. The decision of the Tribunal in ITA No. 1109/PN/2012 (supra.) has been upheld by the Hon'ble Bombay High Court In Income Tax 7 ITA Nos.830 & 1195/PUN/2015 A.Ys.2010-11 & 2011-12 Appeal No. 106 of 2014 decided on 2nd July, 2015. Thus, the issue of assessee's eligibility to claim deduction u/s.80IB(4) has been laid to rest by the Hon'ble Bombay High Court in favour of the assessee. The ground No.4 of the appeal by Revenue is dismissed.
8. In ground No.5 of the appeal, the Revenue has assailed restricting of addition of Rs.14,02,681/- to Rs.1,40,268/- on account of closing stock. We find that the ground No. 5 is consequential to ground No. 4. Since we have dismissed ground No. 4 of the appeal, the ground No. 5 is also liable to be dismissed. We hold and direct accordingly. Hence, ground No. 5 raised in appeal by Revenue is dismissed.
9. Ground Nos. 6 to 8 are general in nature and hence, requires no adjudication. Accordingly, the same are dismissed.
10. In the result, appeal of the Department for assessment year 2010-11 is dismissed being devoid of any merit.
ITA No.1195/PUN/2015
A.Y.2011-12
11. In assessment year 2011-12, the Revenue has assailed the order of Commissioner of Income Tax (Appeal) by raising following grounds:
"1. On the facts and in the circumstances of the case and in law, the Ld.CIT(A) erred in deleting the disallowance of interest of Rs.35,09,090/- made on the interest free advances given to parties and thereby failed to appreciate the fact that the advances have not been utilized for the purpose of business and therefore, the addition made by the Assessing Officer is justified.
2. On the facts and in the circumstances of the case and in law, the Ld .CIT(A) erred in deleting the disallowance of interest of Rs.1,54,76,151/- made on the interest free advances given to its subsidiary company, JNP Road Infrastructure Projects (P) Ltd and thereby failed to appreciate the 8 ITA Nos.830 & 1195/PUN/2015 A.Ys.2010-11 & 2011-12 fact that the advances have not been utilized for the purpose of business and therefore, the addition Assessing Officer is justified.
3. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in deleting the addition of Rs.44,96,377/- made on account of disallowance u/s.14A of the Income Tax Act, 1961 r.w.Rle 8D of the Income Tax Rules, 1962.
4. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in deleting addition of Rs.6,92,73,438/- made on account of disallowance of deduction u/s.80IA (4) of the Income Tax Act, 1961.
5. The order of the Ld. CIT(A)-II, Nashik be cancelled on the above issues and that of the AO be restored.
6. The appellant craves leave to add, alter, modify, delete, amend any of the grounds of appeal.
7. The appellant prays to file any of the additional evidence appropriate to the grounds taken in appeal."
12. The ld. DR for the Revenue submitted that ground No. 1 raised in appeal is identical to ground No. 3 raised in assessment year 2010-11 and ground No.2 of the instant appeal is identical to ground No. 2 raised in assessment year 2010-11. The ld. DR further submitted that the ground No. 3 is fresh ground relating to disallowance made u/s.14A r.w. Rule 8D. The ld. DR further contended that the assessee has made investment to the tune of Rs.10.88 Crores in the subsidiary. Apart from subsidiary, investments have also been made in other companies. The total investment portfolio of the assessee is to the tune of Rs.11.01 Crores. No suo-motu disallowance was made by assessee in respect of investment made. Hence, the Assessing Officer made disallowance of Rs.44,96,377/- invoking the provisions of Rule 8D. The Commissioner of Income Tax(Appeal) deleted the above said disallowance. The ld. DR prayed for reversing the findings of Commissioner of Income Tax (Appeal).
13. On the other hand, ld. AR of the assessee submitted that during the period relevant to assessment year under appeal, the assessee has earned 9 ITA Nos.830 & 1195/PUN/2015 A.Ys.2010-11 & 2011-12 exempt income only to the tune of Rs.6,600/-. The Commissioner of Income Tax (Appeal) following various decisions of the Hon'ble High Courts and Tribunal held that where no exempt income is earned, no disallowance u/s.14A of the Act is to be made.
14. Both sides heard. Orders of the Authorities below perused. The ground Nos. 1 and 2 raised in the present appeal is with respect to disallowance of interest u/s.36(1)(iii) of the Act. The Commissioner of Income Tax (Appeal) while granting relief to the assessee has observed that own funds of the assessee are much more than the advances made by assessee to various parties including its subsidiaries. This fact has not been disputed by the Revenue. The Commissioner of Income Tax (Appeal) has granted relief to the assessee by following the decision of Hon'ble Bombay High court in the case of CIT Vs. Reliance Utilities and Power Ltd. (supra.). We do not find any error in the findings of the Commissioner of Income Tax (Appeal) in deleting the disallowance made u/s.36(1)(iii) of the Act. Accordingly, ground Nos. 1 and 2 raised in appeal by Revenue is dismissed.
15. In ground No. 3 of the appeal, Revenue has assailed deleting of the disallowance u/s.14A r.w.Rule 8D. Undisputedly, the assessee has made investment of more than Rs.11 Crores. The assessee has earned meager exempt income of Rs.6600/-. The assessee has not made any suo-motu disallowance in respect of investments made. The Tribunal has been consistently taken a view that disallowance u/s.14A r.w.Rule 8D is to be restricted to the extent of exempt income earned and where no exempt income has been earned by assessee, no disallowance u/s.14A r.w. Rule 8D is to be made The aforesaid propositions are supported by the decision of Hon'ble 10 ITA Nos.830 & 1195/PUN/2015 A.Ys.2010-11 & 2011-12 Punjab & Haryana High Court in the case of Pr. CIT Vs. State Bank of Patiala reported as 393 ITR 476 and the decision of Hon'ble Delhi High Court in the case of Cheminvest Ltd reported as 378 ITR 33, respectively. Since the assessee in present case has earned exempt income of Rs.6,600/-, we restrict the disallowance to the extent of exempt income earned. The ground No. 3 raised in appeal is partly allowed, accordingly.
16. In ground No. 4 of the appeal, Revenue has assailed deleting of disallowance of deduction u/s. 80IA(4) of the Act. While deciding the appeal in ITA No.830/PUN/2015 for the assessment year 2010-11, this issue has been dealt in detailed and for the reasons given in assessment year 2010-11, the ground No. 4 raised in present appeal is dismissed.
17. Ground Nos. 5 to 7 are general in nature and hence, requires no adjudication. Accordingly, the same are dismissed.
18. In the result, appeal of the Revenue for assessment year 2010-11 is dismissed and appeal of the Revenue for assessment year 2011-12 is partly allowed.
Order pronounced on Friday, the 30th day of November, 2018.
Sd/- Sd/-
(डी. क णाकरा राव/D. KARUNAKARA RAO) ( वकास अव थी /VIKAS AWASTHY)
लेखा सद य/ACCOUNTANT MEMBER या यक सद य/JUDICIAL MEMBER
पण
ु े / Pune; !दनांक / Dated : 30th November, 2018.
SB
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ITA Nos.830 & 1195/PUN/2015
A.Ys.2010-11 & 2011-12
आदे श क* +"त-ल प अ.े षत / Copy of the Order forwarded to :
1. अपीलाथ / The Appellant.
2. यथ / The Respondent.
3. The CIT (Appeal)-2, Nashik.
4. The Pr. CIT-2, Nashik.
5. %वभागीय त न(ध, आयकर अपील य अ(धकरण, "ए" ब,च, पण ु े / DR, ITAT, "A" Bench, Pune.
6. गाड/ फ़ाइल / Guard File.
// True Copy // आदे शानुसार / BY ORDER, नजी स(चव / Private Secretary आयकर अपील य अ(धकरण, पण ु े / ITAT, Pune.