Income Tax Appellate Tribunal - Mumbai
Jayabharat Textile & Real Estate P.Ltd, ... vs Department Of Income Tax on 20 May, 2015
आयकर अपील य अ धकरण, मुंबई यायपीठ , मुंबई ।
IN THE INCOME TAX APPELLATE TRIBUNAL "J" BENCH, MUMBAI
सव ी डी. म मोहन, उपा य एवं नरे कुमार ब लै या, लेखा सद य के सम
BEFORE SHRI D. MANMOHAN, VICE PRESIDENT AND
SHRI N.K. BILLAIYA, ACCOUNTANT MEMBER
आयकर अपील सं/ I.T.A. No.4671/Mum/2012
( नधारण वष / Assessment Year : 2009-10
The DCIT, Cir.6(1), बनाम/ M/s. Jaybharat Textile &
Aayakar Bhavan, Real Estate Pvt. Ltd.,
Vs.
Mumbbai-400 020 11/12, Raghuvanshi Mill
Compound,
Senapati Bapat Marg,
Lower Parel,
Mumbai-400 013
थायी ले खा सं . /जीआइआर सं . /PAN/GIR No. : AAACJ 5959L
(अपीलाथ /Appellant) .. ( यथ / Respondent)
अपीलाथ ओर से/ Appellant by: Shri S.D. Srivastava
यथ क ओर से/Respondent by: Shri Salil Kapoor
सन
ु वाई क तार ख / Date of Hearing :07.05.2015
घोषणा क तार ख /Date of Pronouncement :20.05.2015
आदे श / O R D E R
PER N.K. BILLAIYA, AM:
This is an appeal by the Revenue preferred against the order of the Ld. CIT(A)-14, Mumbai dt. 20.4.2012 pertaining to assessment year 2009-10.
2. The Revenue has raised as many as 7 grounds of appeal. However, the Ld. Departmental Representative Shri S.D. Srivastava, at the very 2 ITA. No. 4671/M/12 outset, stated that he will put forth his argument only in respect of ground No. 7 which relates to the deletion of the addition of Rs. 54.97 lakhs made u/s. 14A of the Act. In respect of other 6 grounds of appeal, the Ld. DR stated that the Revenue has no case, neither on facts nor on the point of law.
3. With this factual background, we take each ground of appeal one by one . Ground No. 1,2 & 3 relate to the allocation of expenses like interest, depreciation and finance charges between 80IB and non 80IB units.
3.1. The Ld. CIT(A) has considered these issues vide ground No. 2 of his order wherein the Ld. CIT(A) observed that the assessee has claimed deduction u/s. 80IB of the Act in respect of its Silvassa unit. The deduction was claimed at Rs. 6,60,95,278/-. The AO examined the allocation of expenses on different units as the assessee was having taxable profits in other units engaged in trading and manufacturing activities. The AO was of the firm belief that the expenses like selling and administration, interest and depreciation are required to be allocated among different units in the ratio of their turnover. The assessee strongly objected to this and stated that interest payment has been made on term loans and depreciation and interest have been allocated by the assessee in the ratio of fixed assets as these items of expenditures are directly linked with the fixed assets of respective units and have no relation to the turnover.
3.2. After considering the facts and the submissions and the allocation chart, the Ld. CIT(A) was convinced that interest and finance charges incurred on term loans are taken for a particular unit therefore cannot be reallocated to other units for the purpose of computation of deduction 3 ITA. No. 4671/M/12 u/s. 80IB of the Act. Similarly, there cannot be any question of reallocation of depreciation of a particular unit to other units. In respect of selling and administrative expenses, the Ld. CIT(A) dismissed assessee's similar contention and agreed with the AO that selling and administrative expenses have to be allocated in the proportion of sales turnover. Except for the allocation of selling and administrative expenses on the basis of turnover, the Ld. CIT(A) deleted the entire reallocation of expenses made by the AO in respect of interest, finance charges and depreciation.
4. Aggrieved by this, the Revenue is before us. As mentioned elsewhere, the Ld. DR has fairly conceded that the Revenue has no case, we therefore decline to interfere with the findings of the Ld. CIT(A). Ground No. 1,2 & 3 are accordingly dismissed.
5. Ground No. 4.1 relates to the denial of opportunity to the AO before admitting new facts as per Rule 46A.
6. The Ld. DR failed to bring any new facts considered by the Ld. CIT(A) which deprived the AO from making his comment. We, therefore, do not find any reason to entertain this ground. Ground No. 4.1 is accordingly dismissed.
7. Ground No. 4.2 relates to the deletion of the disallowance of Rs. 42,61,285/- on account of short credit of interest subsidy.
8. The Ld. CIT(A) has considered this issue vide ground No. 3 of the appeal before him and at para 5.4 the Ld. CIT(A) has observed that he has looked into the ledger account maintained by the assessee for the subsidy receivable on the basis of which the subsidy is being disclosed. At para-
4 ITA. No. 4671/M/125.6 the Ld. CIT(A) observed that the AO has not been able to understand the accounts of the assessee. The Ld. CIT(A) further commented that the AO has not bothered to ascertain as to whether these amounts of subsidy have already been taxed in earlier years or not. The Ld. CIT(A) further observed that the AO has considered the subsidy computed by her is in respect of 5 banks whereas the assessee has actually received subsidy from two banks i.e. Indian Overseas Bank and UCO Bank. It appears that the AO has collected information from all the banks without examining from which bank the assessee has already accounted for the subsidy in earlier years. The Ld. CIT(A) finally deleted the disallowance made by the AO holding that once the subsidy has been taxed in accrual basis, the same cannot be taxed on receipt.
8.1. As mentioned elsewhere, the DR could not bring anything in support of the assessment order. We, therefore do not find any reason to interfere with the findings of the Ld. CIT(A). Ground No. 4.2 is accordingly dismissed.
9. Ground No. 5 relates to the deletion of the addition of interest payment of Rs. 1,92,703/- made u/s. 43B of the Act.
9.1. This issue has been discussed by the Ld. CIT(A) at para-6 of his order where he has considered ground No. 4 of the appeal before him and at para 6.3, the Ld. CIT(A) observed that there is no such disallowance mentioned by the tax auditors at clause 21 of the Tax Audit report therefore, it is not known why the AO has disallowed the amount of Rs. 1,92,703/-. On finding no reason for the disallowance, the Ld. CIT(A) deleted the addition.
5 ITA. No. 4671/M/129.2. As the Ld. CIT(A) has deleted the addition by categorically stating that the AO has not given any reason for the disallowance we decline to interfere. Ground No. 5 is accordingly dismissed.
10. Ground No. 6 relates to the deletion of the addition of Rs. 15 crores made u/s. 68 of the Act.
11. While scrutinizing the return of income, the AO noticed that the assessee had taken an unsecured loan of Rs. 15 crores from Hikal Pro Estate Pvt. Ltd. The assessee was asked to explain the credits in the light of the provisions of Sec. 68 of the Act. The assessee furnished confirmation from the said creditor. Continuing her investigation, the AO issued notice u/s. 133(6) of the Act. The notice was returned unserved. When this was brought to the notice of the assessee, the assessee furnished new address of the loan creditor which happened to be the address of the assessee itself. In support, the assessee also furnished the return of income as well as the balance sheet of the said loan creditor for the assessment year 2009-10. The AO was of the firm belief that the loan creditor have no capacity to advance a sum of Rs. 15 crores and made the addition u/s. 68 of the Act.
12. Before the Ld. CIT(A), it was explained that in this line of trade, it is not uncommon for conversion of a trade debt into a loan. It was explained that the assessee had purchased material from various suppliers who in turn had bought the same material from M/s. Hikal Pro Estate Pvt. Ltd. On the request of these trade creditors, the assessee agreed to pay the outstanding amounts to M/s. Hikal Pro Estate Pvt. Ltd. which transaction has been confirmed by the trade creditors as well as the loan creditors.
6 ITA. No. 4671/M/1212.1. After considering the facts and the submissions and strongly drawing support from the decision of the Hon'ble Supreme Court in the case of CIT Vs Lovely Exportds (P) Ltd 216 CTR 195, the Ld. CIT(A) deleted the addition.
13. Before us, the Ld. DR could not bring anything in support of the assessment order.
14. We have given a thoughtful consideration to the findings of the Ld. CIT(A) in the light of the decision of the Hon'ble Supreme Court in the case of Lovely Exports (supra). We do not find any reason to interfere with the findings of the Ld. CIT(A). Ground No. 6 is accordingly dismissed.
15. Ground No. 7 relates to the deletion of the addition of Rs. 54.97 lakhs made u/s. 14A of the Act.
16. This issue has been considered by the Ld. CIT(A) at para-10 of his order qua ground No. 8 of assessee's appeal before him. While scrutinizing the balance sheet of the assessee, during the course of the scrutiny assessment proceedings, the AO noticed that the assessee company is having investment in shares. However, the AO noticed that the assessee has not disallowed any expenditure against the said investment income. The AO went on to compute the disallowance in the light of the provisions of Sec. 14A r.w. Rule 8D and computed the disallowance at Rs. 59,17,265/-.
16.1. It was explained to the Ld. CIT(A) that all the investments are old investment which have been funded through own reserves and capital. It was further stated that no notional interest can be assumed to have been 7 ITA. No. 4671/M/12 incurred for disallowance when the investments were made from out of own capital.
17. After considering the facts and the submissions, the Ld. CIT(A) observed that the AO has restricted herself to the general discussion without considering the facts which come out from the accounts of the assessee. At para-10.7 of his order, the Ld. CIT(A) observed that there is no expenditure which can be said to be directly relating to income which does not form part of total income. There is also no interest expenditure which can be said to be proportionately incurred for earning the dividend income. The Ld. CIT(A) further observed that the interest expenditure incurred by the assessee is directly attributable to the fixed assets for which the term loan has been taken. After making these observations, the Ld. CIT(A) stated that certain expenditures have to be allocated in the light of the decision of the Hon'ble Bombay High Court in the case of Godrej & Boyce Manufacturing Co. Ltd. 238 ITR 81Vs DCIT and restricted the disallowance at Rs.4,20,265/- and directed to delete the amount of Rs. 54.97 lakhs.
18. Aggrieved by this, the Revenue is before us.
19. The Ld. DR could not controvert the finding of the fact by the Ld. CIT(A) that the interest has been paid on term loan taken for the purchase of the fixed assets and therefore there cannot be any disallowance of interest as the Ld. CIT(A) has categorically stated that no direct expenditure has been incurred. We, therefore, decline to interfere with the addition sustained by the Ld. CIT(A) and simultaneously we also decline to interfere with the deletion of the addition made by the Ld. CIT(A). Ground No. 7 is accordingly dismissed.
8 ITA. No. 4671/M/1220. In the result, the appeal filed by the Revenue is dismissed Order pronounced in the open court on 20th May, 2015 Sd/- Sd/-
(D.MANMOHAN ) (N.K. BILLAIYA)
उपा य /VICE PRESIDENT लेखा सद य / ACCOUNTANT MEMBER
मंब
ु ई Mumbai; दनांक Dated :20 May , 2015
th
व. न.स./ RJ , Sr. PS
आदे श क त ल प अ े षत/Copy of the Order forwarded to :
1. अपीलाथ / The Appellant
2. यथ / The Respondent.
3. आयकर आयु त(अपील) / The CIT(A)-
4. आयकर आयु त / CIT
5. वभागीय त न ध, आयकर अपील य अ धकरण, मंब ु ई / DR, ITAT, Mumbai
6. गाड फाईल / Guard file.
आदे शानस ु ार/ BY ORDER, स या पत त //True Copy// उप/सहायक पंजीकार (Dy./Asstt. Registrar) आयकर अपील य अ धकरण, मंब ु ई / ITAT, Mumbai