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Income Tax Appellate Tribunal, “D” BENCH, AHMEDABAD
Before: SHRI WASEEM AHMED&
PER Ms. MADHUMITA ROY - JM: Both the appeals filed by the revenue are against the separate order dated 15.02.2016 & 16.02.2016 passed by the Commissioner of Income Tax (Appeals)-Gandhinagar, Ahmedabad under section 143(3) of the Income Tax Act, 1961 (in short ‘the Act’) arising out of the orders dated 24.01.2014 & 23.02.2015 passed by the DCIT, Circle -1, Ahmedabad & DCIT, Circle – 1(1)(1), Ahmedabad for the Assessment Years 2011-12 & 2012-13 respectively.
ITA No.1247/Ahd/2016 for A.Y. 2011-12: 2. The instant appeal filed by the revenue with the following grounds: “1. The CIT(A) has erred in law and in facts in deleting the disallowance made u/s 40(a)(i) in respect of consultancy and supervision charges of Rs.71,43,952/-.
ITA Nos.1247 & 1248/Ahd/2016 DCIT vs. Amol Dicalite Ltd. Asst.Years 2011-12 & 2012-13 - 2 - 2. The CIT(A) has erred in law and in facts in deleting the disallowance made on additional depreciation of Rs.1,53,74,316/-. 3. The CIT(A) has erred in law and in facts in deleting the addition made on account of unutilized CENVAT Credit of Rs.23,64,484/-. On the fact and in the circumstances of the case and in law, the CIT(A) ought to have upheld the order of the Assessing Officer to the extent' mentioned above since the assessee has failed to disclose his true income/book profit. The appellant prays that the order of CIT(A) on the above grounds be set aside and that of the Assessing Officer be restored to the above extent. The appellant craves, to leave, to amend or alter any ground or add a new ground which may be necessary.”
Ground No.1 3. This ground relates to the order passed by the Learned CIT(A) in deleting the disallowance made u/s 40(a)(i) in respect of consultancy and supervision charges of Rs.71,43,952/-
The assessee filed its return of income on 26.09.2011 declaring total income of Rs.2,35,39,500/- which was processed u/s 143(1) of the Act. Under scrutiny, notice dated 18.09.2012 u/s 143(2) was served upon the assessee on 22.09.2012 by the RPAD along with a questionnaire dated 28.11.2012 followed by a further notice u/s 143(2) r.w.s. 129 and 142(1) of the Act dated 02.05.2013 due to change of incumbent.
Upon verification of the details during the course of assessment proceeding, it was found that the assessee company had made payment to non- residents amounting to Rs.71,43,952/- (Rs.63,76,114/- + Rs.1,36,260/- for consulting charges and Rs.6,31,578/- for supervision charges). The assessee was required to deduct TDS on the said charges paid to the non-residents as per provision of Section 195 of the Act as with the prima facie view of the Learned AO, letter dated 26.12.2013 was issued to the assessee to explain as to
ITA Nos.1247 & 1248/Ahd/2016 DCIT vs. Amol Dicalite Ltd. Asst.Years 2011-12 & 2012-13 - 3 - why the same should not be disallowed as per the provision of section 40(a)(i) of the Act. Explanation referred by the assessee was not found acceptable by the Learned AO and he, thus, disallowed an amount of Rs.71,43,952/- as per provision of section 40(a)(i) of the Act holding that the payment made to the non-residents are in the nature of “fees for technical services” and thus tax was required to be deducted at source as per provisions of section 195 of the Act, which the assessee failed to do. In appeal, the same was deleted by the Learned CIT(A) following the decision passed by his predecessor in assessee’s own appeal for A.Y. 2010-11. Hence, the instant appeal.
At the time of hearing of the instant appeal, the Learned Senior Counsel appearing for the assessee submitted before us that the issue is covered by the judgment and order passed by the co-ordinate bench in ITA No.539/Ahd/2018 for A.Y. 2008-09 & ITA No.1246/Ahd/2016 for A.Y. 2010-11; copies whereof have also been submitted before us. The Learned representative of the department, however, could not controvert the submission made by the Learned AR.
Heard the rival contentions made by the respective parties, perused the relevant material available on record including the order passed by the Co- ordinate Bench as relied upon by the Learned Senior Counsel appearing for the assessee. The relevant portion thereof is as follows: “17. The 1st issue raised by the Revenue is that learned CIT (A) erred in deleting the addition made by the AO for rupees 87,57,593.00 on account of non-deduction of TDS under section 195 read with section 40(a)(i) of the Act. 18. At the outset, we note that the issue raised is identical to the issue raised by the Revenue in ITA 539/Ahd/2018 which we have decided against the Revenue and in favor of the assessee vide Paragraph No. 14 of this order. Therefore respectfully following the same we do not find any reason to disturb
ITA Nos.1247 & 1248/Ahd/2016 DCIT vs. Amol Dicalite Ltd. Asst.Years 2011-12 & 2012-13 - 4 - the finding of the learned CIT-A. Hence the ground of Revenue’s appeal is dismissed.”
We find no reason to deviate from decision taken by the Co-ordinate Bench as narrated above and respectfully relying upon the same we confirm the order passed by the authorities below. The revenue’s appeal is found to be devoid of any merit and thus dismissed.
Ground No.2 7. The second ground relates to deletion of disallowance of additional depreciation of Rs.1,53,74,316/-.
The assessee-company had purchased plant and machinery of Rs.153,743,158/- on which additional depreciation of Rs.1,53,74,316/- (less than 180 days) has been claimed. The entire plant and machinery was on lease and accordingly rental income of Rs.5,77,44,000/- was shown by the assessee. By and under a letter dated 26.12.2013, the assessee was directed to explain as to why said additional depreciation should not be disallowed. The issue was finalized by the Learned AO ultimately by disallowing the additional depreciation and the depreciation has been restricted only 15% i.e. Rs.1,53,74,316/- added to the total income of the assessee, which in turn was deleted by the Learned CIT(A) following his predecessor’s order in assessee’s own case for A.Y. 2010-11. Hence, the instant appeal before us.
At the very outset of the hearing of the matter, the Learned Sr. Counsel appearing for the assessee submitted before us that the issue is also covered by the order passed by the Co-ordinate Bench in ITA No.1246/Ahd/2016 for A.Y.
ITA Nos.1247 & 1248/Ahd/2016 DCIT vs. Amol Dicalite Ltd. Asst.Years 2011-12 & 2012-13 - 5 - 2010-11; copy whereof has been submitted before us. However, The Learned DR has not able to controvert the argument advanced by the Learned AR.
Heard the rival contentions made by the respective parties, perused the relevant material available on record including the order passed by the Co- ordinate Bench as relied upon by the Learned Senior Counsel appearing for the assessee. The relevant portion thereof is as follows: “19. The 2nd issue raised by the revenue is that learners CIT (A) erred in deleting the addition made by the AO for 85,75,341.00 on account of additional depreciation under section 32(iia) of the Act. 20. AO during the assessment proceedings noted that assessee had purchased plant & machinery of Rs. 8,57,53,410/- on which additional depreciation of Rs. 85,75,341/- (less than 180 days) has been claimed. The AO also noted that assessee during the year has leased the plant & machinery and declared rental income of Rs. 3,91,68,000/-. Thus AO was of the view that since assessee is engaged in the business of leasing; therefore, additional depreciation is not available to the assessee. Accordingly, the AO issued show cause notice to the assessee. 21. In response to the notice, the assessee submitted that it has rightly claimed additional depreciation at the rate of 10% since it was used for less than 180 days. As per the provision of section 32(iia) of Act assessee is required to be engaged in the business of manufacture or production of any article or thing and it is not necessary whether new machinery is used for the business of manufacture or production. 22. Further, it is also important to note that assessee is engaged in manufacture or production and on this account also assessee is eligible for the additional depreciation. 23. The assets have been used in the business of leasing the assets of the assessee. Accordingly, the assessee is eligible for additional depreciation. 24. However, AO disregarded the contention of the assessee by holding that the assets were used in the business of leasing and not in the business of manufacture. Thus the assessee is not entitled to the additional depreciation.
ITA Nos.1247 & 1248/Ahd/2016 DCIT vs. Amol Dicalite Ltd. Asst.Years 2011-12 & 2012-13 - 6 - 24.1 Thus the AO after having a reliance on the judgment of Hon’ble Gujrat high court in case of Bhagwati Appliances vs. ITO (337 ITR 286) added Rs. 85,75,341/- to the total income of the assessee. 25. Aggrieved assessee preferred an appeal to ld. CIT-A, who deleted the addition made by the AO following the co-ordinate bench order in the case of Heavy Metal and tubes Ltd in ITA no. 1951/A/2011. The ld. CIT-A also relied on the judgment of Hon’ble Gujarat High court in the case of Diamines & Chemicals Ltd reported 42 Taxman.com 193 where depreciation was allowed by holding that there is no requirement of correlation between the assets acquired and manufacturing activity. 26. The learned DR before us vehemently supported the order of the AO whereas the learned AR before us reiterated the submissions as made before the learned CIT-A. The learned AR vehemently supported the order of learned CIT-A. 27. We have heard the rival contentions and perused the materials available on record. The issue in the instant case relates to the fact whether the assessee is eligible for additional depreciation on the machinery which have been given on lease. The AO was of the view that the assessee has not used the machineries in connection with the manufacturing activity. Therefore the AO disallowed the additional depreciation claimed by the assessee. 27.1 However, the learned CIT (A) subsequently reversed the order of the AO by observing that it is not the precondition for claiming the additional depreciation that the assessee should be engaged in the business of manufacturing activity. 27.2 It is an undisputed fact that the assessee is engaged in the manufacturing business as well as in the business of leasing. Therefore the condition imposed under section 32(iia) of the Act gets fulfilled for claiming the additional depreciation. Regarding this we find support and guidance from the judgment of Hon’ble Gujarat High Court in the case of Diamines & Chemicals Ltd (supra) wherein it was held as under: “At the outset, it is required to be noted that the assessee claimed the deduction under Section 32(1)(iia) of the Income-tax Act with respect to the cost incurred by it for installation of the Wind Electric Generator. The Assessing Officer disallowed the same and made the addition of Rs.1,17,98,030/- by observing that as the assessee is not in the business of generation and distribution of power, the assessee shall not be entitled to deduction under Section 32(1)(iia) of the Income-tax Act of Rs.1,17,98,030/-. The said addition has been deleted by the CIT(A) relying upon the decisions of the Madras High Court in
ITA Nos.1247 & 1248/Ahd/2016 DCIT vs. Amol Dicalite Ltd. Asst.Years 2011-12 & 2012-13 - 7 - the case of VTM Ltd (Supra) and in the case of Hi Tech Arai Ltd. (Supra). In both the aforesaid decisions, the Madras High Court had an occasion to consider the similar issue and it is held that while claiming the deduction under Section 32(1)(iia) of the Income-tax Act setting up wind-mill has nothing to do with the power industry and what is required to be satisfied in order to claim additional depreciation is that the setting up of new machinery or plant should have been acquired and installed by an assessee, who was already engaged in the business of manufacture or production of any article or thing. Considering the aforesaid facts and circumstances and considering the relevant provisions of Section 32(1)(iia) of the Incometax Act, which was prevailing at the relevant time, i.e. during the year under consideration, it cannot be said that the ITAT by applying the ratio of decision of the Madras High Court in the case of VTM Ltd. (Supra) and in the case of Hi Tech Arai Ltd. (Supra) has committed any error in deleting the addition of Rs.1,17,98,030/- on account of disallowance of additional depreciation of Wind Electric Generator. 3. We see no reason to interfere with the impugned judgment and order passed by the ITAT. No question of law, much less substantial question of law arises in the present Tax Appeal. Hence, the present Tax Appeal deserves to be dismissed and is accordingly dismissed.” 27.3 We also find support and guidance from the order of this tribunal in the case of Heavy Metal and tubes Ltd (supra) wherein it was held as under: “7. We have heard the rival submissions and perused the material on record. It is an undisputed fact that Assessee has installed a Windmill during the year under review. We further find that CIT(A) while deciding the issue has given a finding that the Assessee is already engaged in the business of manufacturing of production of Pipes and Tubes and has also fulfilled all the conditions laid down for claim of additional depreciation. We further find that the Hon'ble Gujarat High Court in the case of CIT vs. Diamines and Chemicals Ltd. (supra) has concluded that while claiming the deduction u/s. 32(1)(iia) setting up Windmill has nothing to do with the power industry and what is required to be satisfied in order to claim additional depreciation is that setting up of new machinery or plant should have been acquired and installed by an Assessee who was already engaged in the business of manufacture or production of any article or thing. Further before us Revenue has not brought 4 ITA No 1951/A/2011 & CO No. 232/A/2011 . A.Y. 2008-09 any binding contrary decision in its support. Considering the fact that Assessee is already engaged in the business of manufacturing and the Assessee has installed a windmill during the year and seen in the light of the
ITA Nos.1247 & 1248/Ahd/2016 DCIT vs. Amol Dicalite Ltd. Asst.Years 2011-12 & 2012-13 - 8 - decision of Hon'ble Gujarat High Court we find no reason to interfere with the order of CIT(A). In view of the aforesaid facts, this ground of Revenue is dismissed.” In view of the above, we are of the considered opinion that the assessee is eligible for the additional depreciation under section 32(iia) of the Act. Accordingly, we hold that there is no infirmity in the order of learned CIT-A and accordingly no interference is required. Thus the AO is directed to delete the addition made by him. Hence the ground of appeal of the revenue is dismissed.” We find no reason to depart from the established course by the decision taken by the Co-ordinate Bench as mentioned above and respectfully relying on the same we confirm the order passed by the authorities below. The revenue’s appeal is found to be devoid of any merit and thus dismissed.
Ground No.3 11. This ground relates to the deletion of addition towards disallowance of Rs.23,64,484/- on account of unutilized CENVAT credit.
During the course of assessment proceeding on explanation of column No. 22(a) of 3CD Report, it revealed that the appellant shown unutilized CENVAT credit at the end of the year totaling to Rs.23,64,484/-. If further revealed that the appellant has been following exclusive method for accounting CENVAT as against inclusive method mandated under section 145A of the Act, the specific quarry, therefore, was raised by the Learned AO. However, the explanation rendered by the assessee was not found suitable and Learned AO made addition of the said amount being utilized CENVAT to the total income of the assessee. During the appellate proceeding, the appellant submitted as follows before the first appellant authority: “6.2 Appellant during the course of appellate proceedings, contended as under: 3] The ld.AO was completely in error on facts and in law in making an impugned addition for the alleged unutilized Cenvat
ITA Nos.1247 & 1248/Ahd/2016 DCIT vs. Amol Dicalite Ltd. Asst.Years 2011-12 & 2012-13 - 9 - Credits of Rs.23,64,484/- by not appreciating the submission made by the Appellant in reply dt.06.01.14 vide para-1 in right perspective which was although reproduced in the assessment order but however, the ld. AO completely failed to controvert / counter the said submission with justifiable reason in support for such impugned addition made. Instead, the ld. AO went on to discuss theoretically and academically to thrust the point to justify the addition which is completely irrelevant. In view of the submission made under para-1 of reply dt.06.01.14, the ld. AO ought to have accepted the same as correct and valid and thus, ought to have refrained from making such addition which has resulted in double addition. It is further submitted that Unutilized Cenvat Credit of Rs. 23,64,484/- cannot be treated as income, for which, an attention to be drawn to the Accounting Standard provisions on valuation of Inventories. The said AS - 2 "Valuation of Inventories" mandates that the cost of inventories should comprise all costs of purchase, costs of conversion and other costs incurred in bringing the inventories to their present location and condition. Further, the cost of purchase consists of the purchase price including duties and taxes (other than those subsequently recoverable by the enterprise from the taxing authorities), freight inwards and other expenditure directly attributable to the acquisition. Trade discounts, rebates, duty drawbacks and other similar items are deducted in determining the costs of purchase. Hence, valuing the stocks as per the AS -2 as prescribed by ICAI itself does not include the refundable taxes (i.e., the Excise, Service Tax and VAT) while valuation of inventories. The Appellant has followed the exclusive method of accounting which is the correct accounting treatment when the assessee adopts to take the Cenvat credit against output tax liability. The same analogy has been adopted by the Appellant. The Appellant reproduces hereunder the accounting entries for your perusal which entails and meant that the accounting done by the Appellant is in consonance with the prevailing accounting practices. At the time of booking of purchases / expenses: Purchases/ Expenses Account (Cenvat credit portion) Dr. -47,26,205 To Suppliers Account 47,26,205 Accumulation of Cenvat receivable balance and to record the Cenvat on inward: Cenvat receivable Account Dr. - 47,26,205
ITA Nos.1247 & 1248/Ahd/2016 DCIT vs. Amol Dicalite Ltd. Asst.Years 2011-12 & 2012-13 - 10 - Purchases / Expenses Account (Cenvat credit portion) - 47,26,205 Accounting at the time of removal of goods: Party Account (Excise / service tax liability portion) Dr. - 23,61,721 To Sales Account 23,61,721 Booking of Output tax liability to respective payable account: Sales Account Dr.(Excise / service tax liability portion) - 23,61,721 To Cenvat payable Account - 23,61,721 Utilization of Cenvat receivable amount against output tax liability: Cenvat payable Account Dr. - 23,61,721 To Cenvat receivable Account - 23,61,721 Now, the accounting as drawn and explained above means that only the Cenvat credit (totaling to Rs. 47,26,205/-) which has actually been utilized to the extent for output tax liability (arising out of Sales to the tune of Rs.23,61,721/-) and the remainder of Cenvat which has been actually availed but not utilized were shown as carried forward balance of Loans and Advances in the Balance Sheet as on 31/03/2011. Further, the Appellant would like to reiterate the fact that the provisions of Section 145A of the Income Tax Act, 1961 cannot be linked with the accounting precedence. Since, the Appellant has to draw your kind attention to the fact that the statement No. 12 stating particulars in Form 3CD for clause 22(a) gives the reconciliation effect on profitability by following inclusive method and giving the effect of Cenvat taxes by following the said principles, which cannot be coincided with the accounting methodology for refundable taxes. Considering the above logical reasoning along with the accounting made by the Appellant as per the prevailing practices laid down as per law, the Appellant would like to once again invite your kind attention to the fact that Cenvat receivable amount on purchase and expenses have been utilized so far as the output tax liability related to the year was concerned and the balance portion as the same pertains to Cenvat credit was taken as receivable balance and rightly shown under the head Loans and Advances. Hence, taking the view contrary to this and taxing the said unutilized credit amount of receivable balance of Rs. 23,64,484/- as income would result in to cascading effect of taxation. In view of such facts, the said amount cannot be taxed once again and hence, the addition made on this account is requested to be deleted.”
ITA Nos.1247 & 1248/Ahd/2016 DCIT vs. Amol Dicalite Ltd. Asst.Years 2011-12 & 2012-13 - 11 -
Ultimately, the Learned CIT(A) deleted such addition with the following observation: “6.3 I have considered the facts of the case, assessment order and submission made by the appellant. AO in his order has held that as per the provisions of section 145A of the IT Act, the stock is required to be valued in accordance with the method of accounting regularly employed and further adjusted to include the amount of any tax/duty actually paid or incurred to bring the goods to the place of its location and condition as on the date of valuation. The AO has therefore held that the value of excise duty pertaining to the finished goods is required to be added to the total income and accordingly, an amount of Rs.23,61,721/- is added to the value of closing stock. On the other hand, appellant has argued that it is liable to pay excise duty on the goods sold under the MODVAT/CENVAT scheme and gets credit for the excise duty paid for materials purchased by it and utilized in the manufacture of excisable goods. The credits so received are utilized for payment of excise duty liability of production and sale of goods. It has also stated that it is consistently following system of accounting adopted and accounting for the input credits - excise duty/service tax under "exclusive method"/"net method". It is stated that the accounting policy adopted by the appellant is in line with the mandatory accounting standards prescribed under the Companies Act, 1956 and is being consistently followed from year to year. The credit so available is accounted for in the books which is debited when credit is available/availed of and credited when excise duty liability is paid off utilizing the balance available in this regard. On examination of profit and loss account it is found that the appellant has not claimed this expenditure in Profit and Loss account and therefore appellant has opted for exclusive method so to say purchase and sale are debited/credited without the amount of VAT. The result of which either debit or credit is considered as a balance sheet item. This method is consistently followed by the appellant this is admitted position of fact that the amount of VAT paid by appellant is not included in cost of purchase and the same was not debited in P & L account. Further u/s 145A in determining the profit the cost of inventory should comprise all cost of purchase, cost of conversion, and other cost incurred in bringing inventories to their present location and condition. The section further provide that the cost of purchase consist of purchase price including duties and taxes(other than those subsequently recoverable from the taxing authorities) even in such case duties and taxes can only be included when it is not recoverable. The AO has also mentioned in his order that the appellant is maintaining exclusive method of accounting. Therefore, if the addition is confirmed on the analogy of the AO, it may lead
ITA Nos.1247 & 1248/Ahd/2016 DCIT vs. Amol Dicalite Ltd. Asst.Years 2011-12 & 2012-13 - 12 - to double taxable. Therefore, the addition made of Rs.23,64,484/- is not justified and is directed to be deleted. This ground is allowed in favour of the appellant.”
At the time of hearing of the instant appeal the Learned Sr. Counsel appearing for the assessee submitted before us that the identical issue has already been decided in the identical facts and circumstances of the case in the matter of CIT-vs-Bell Granito Ceramica Ltd. reported in Tax Appeal No.436 of 2011 with 437 of 2011 by the Hon’ble Jurisdictional High Court in favour of the assessee. The Learned DR, however, could not controvert the contention made by the Learned AR.
Heard the rival contentions made by the respective parties, perused the relevant material available on record including the order passed by the Co- ordinate Bench in the matter of Bell Granito Ceramica Ltd (supra) as relied upon by the Learned Senior Counsel appearing for the assessee. The relevant portion thereof is as follows: “5. We find that Hon'ble Jurisdictional High Court in the case of Narmada Chematur Petrochemicals Limited (Supra) has held that, if the duty of Central Excise is not due and payable, it cannot be termed to be a cost in relation to the raw materials then such duty also cannot be termed to be a cost qua the finished goods appearing in the closing stock because admittedly, on the said day (presumption being that such goods are excisable goods) no excise duty is due and payable at the said stage and for the purposes of Excise Act, they levy is not complete unless and until Section 3 and 4 of the Excise Act operate together. According to Hon'ble High Court for the purpose of the said statute, which is the only statute under which duty of central excise can be levied and collected, the charge is not fastened in law and it cannot be stated that for the purpose of computing chargeable income such a charge gets fastened qua the finished goods appearing as part of closing stock. Further Hon'ble High Court elaborating that it would result into an anomalous situation under the two statutes, the Excise Act and the IT Act leading to contrary positions under both the statutes and in the facts of the present case, even on application of the general principles, the addition sought to be made by Revenue cannot be sustained. Further, it is held that making of an entry or absence of an entry cannot determine rights and
ITA Nos.1247 & 1248/Ahd/2016 DCIT vs. Amol Dicalite Ltd. Asst.Years 2011-12 & 2012-13 - 13 - liabilities of parties. In other words, Hon'ble High Court held that if the law does not lead to incurring of a liability, or does not lead to a corresponding right to insist for discharging such a liability any accounting practice (even if suggested by the ICAI) cannot lay down anything to the contrary. Hon'ble High Court has discussed the provisions of Section 145A which has been inserted by Finance (No.2) Act, 1998 w.e.f. 1 st April, 1999. Hon'ble High Court considered that though the Bill proposed retrospective insertion ultimately the section has come on the statute book only from 1st April, 1999 but what is more material is that the same relates to inclusion in the value of inventory the amount of any tax, duty etc. paid or liability incurred for the same under any law in force. Meaning thereby such tax, duty, etc. should have been actually paid or should be actually due and payable under the law applicable to such tax, duty, etc. in force. Otherwise even Section 145A will also not carry case of Revenue any further. CIT v. English Electric Co. of India Ltd. (2000) 243 ITR 512 (Mad) and CIT v. Dyanavision Limited (2004) 267 ITR 600 (Mad) was also considered. And finally concluded that under the scheme of the excise duty, the assessee incurs liability to pay excise duty only upon both the events taking place, namely manufacture of excisable goods and removal of excisable goods; excise duty is not therefore includible in the valuation of closing stock. We find that the issue is squarely covered in favour of the assessee and against the Revenue by the decision of Hon'ble jurisdictional High Court in Narmada Chematur Petrochemicals Ltd. (supra). Accordingly, this common issue in the appeals of the Revenue is dismissed.” Since the controversy is covered by the judgment of this Court in ACIT v. Narmada Chematur Petrochemicals Limited (2010) 233 CTR 265 (Guj.), therefore, in our opinion, no question of law, much less, any substantial question of law arises in these two tax appeals for the consideration of this Court. Both the Tax Appeals are accordingly dismissed.”
Since, we find that the issue is squarely covered by the judgment passed by the Jurisdictional High Court as mentioned above, we find no reason to deviate from the same and respectfully relying on it we confirm the order passed by the authorities below. The revenue’s appeal is found to be devoid of any merit and thus dismissed.
ITA No.1248/Ahd/2016 for A.Y. 2012-13:
The instant appeal filed by the revenue with the following grounds:
ITA Nos.1247 & 1248/Ahd/2016 DCIT vs. Amol Dicalite Ltd. Asst.Years 2011-12 & 2012-13 - 14 - “1. The CIT(A) has erred in law and in facts in deleting the disallowance made u/s 40(a)(i) in respect of consultancy and supervision charges of Rs.81,55,045/-. 2. The CIT(A) has erred in law and in facts in deleting the addition made on account of unutilized CENVAT credit of Rs.7,18,178/-. 3. The CIT(A) has erred in law and in facts in deleting the disallowance of Rs.1,38,489/- made u/s 14A r.w.r 8D of the Act. On the fact and in the circumstances of the case and in law, the CIT(A) ought to have upheld the order of the Assessing Officer to the extent' mentioned above since the assessee has failed to disclose his true income/book profit. The appellant prays that the order of CIT(A) on the above grounds be set aside and that of the Assessing Officer be restored to the above extent. The appellant craves, to leave, to amend or alter any ground or add a new ground which may be necessary.”
Ground No.1 16. This ground of appeal relates to the order passed by the Learned CIT(A) in deleting the disallowance u/s 40(a)(ia) in respect of consultancy and supervision charges of Rs.81,55,045/-.
The issue involved in this ground of appeal is identical to that of the issue already been dealt with by us in ITA No.1247/Ahd/2016 for A.Y. 2011- 12 and in the absence of any changed circumstances the same shall apply mutatis mutandis. Hence, this ground of appeal preferred by the revenue is also dismissed.
Ground No.2 18. In this ground of appeal revenue has challenged the order passed by the Learned CIT(A) in deleting the addition made on account of unutilized CENVAT credit of Rs.7,18,178/-.
ITA Nos.1247 & 1248/Ahd/2016 DCIT vs. Amol Dicalite Ltd. Asst.Years 2011-12 & 2012-13 - 15 - 19. The issue involved in this ground of appeal is identical to that of the issue already been dealt with by us in ITA No.1247/Ahd/2016 for A.Y. 2011- 12 and in the absence of any changed circumstances the same shall apply mutatis mutandis. Hence, this ground of appeal preferred by the revenue is also dismissed.
Ground No.3 20. This ground relates to deleting disallowance of Rs.1,38,489/- made u/s 14A r.w.r. 8D of the Income Tax Rule, 1962.
During the course of assessment proceeding, it was found that the appellant has invested to the tune of Rs.25,01,917/- as on 31.03.2011 and 31.02.2011. However, appellant-company has not disallowed any expenditure in terms of interest cost, administrative cost or any other expenses with regard to making and managing such investment. By and under an order sheet entry dated 05.01.2015, the assessee was asked as to why the disallowance should not be made in terms of provisions of section 14A of the Act in the manner as prescribed under Rule 8D of the Income Tax Rules, 1962. The assessee’s case was this that the assessee has not earned any exempted income in the nature of dividend from shares / mutual funds neither claimed and therefore the question of disallowance u/s 14A does not arise. However, The Learned AO was of the opinion that the assessee must have incurred administrative expenses such as documentation, salaries of employees, handling the investment port folio, administrative overheads like stationary, telephone, computer, office equipments, vehicles etc. every year a part of which could be attributable to the investment port folio. Ultimately, an amount of Rs.1,38,489/- was disallowed under section 14A r.w.r. 8D by the Learned AO which was in turn deleted by the Learned CIT(A).
ITA Nos.1247 & 1248/Ahd/2016 DCIT vs. Amol Dicalite Ltd. Asst.Years 2011-12 & 2012-13 - 16 - 22. At the time of hearing of the instant appeal, the Learned Sr. Counsel appearing for the assessee submitted that the Learned AO failed to understand that when there is no expenditure claimed from any taxable source of income, there can be no question of disallowance of any expenditure. The disallowance therefore, has to be made for any expenditure which is claimed from taxable income but bears proximity with the investment etc., which would lead to the non-taxable income. Further that, the AO has been failed to consider that in terms of section 14A(2) condition precedent for him to determine amount of expenditure incurred in relation to exempt income is that he must record his dissatisfaction with correctness of claim of expenditure made by assessee or with correctness of claim made by assessee that no expenditure has been incurred. When no expense has been proved to be incurred, the disallowance as made by the Learned AO is uncalled for. He also relied upon the judgment passed by the Jurisdictional High Court on this issue in the matter of CIT-vs- Corrtech Energy Pvt. Ltd. reported in 372 ITR 92 (Guj) in support of his argument. On the contrary the Learned DR relied upon the order passed by the Learned AO.
We have heard the rival contentions made by the respective parties, perused the relevant materials available on record and also the judgment passed by the Jurisdictional High Court in the matter of Corrtech Energy Pvt. Ltd. (supra). It is settled principle of law that when there is no claim for expenditure addition of notional disallowance expenditure is all the more illogical and unsustainable in the eye of law, particularly when the AO has not been able to prove that any expense has been made to earn the income nor has disproved the claim of the appellant in this regard.
ITA Nos.1247 & 1248/Ahd/2016 DCIT vs. Amol Dicalite Ltd. Asst.Years 2011-12 & 2012-13 - 17 -
Respectfully, relying upon the ratio laid down by the Hon’ble Jurisdictional High Court in the matter of Corrtech Energy Pvt. Ltd., we find no infirmity in the order passed by the Learned CIT(A) so far as to warrant interference. The question is accordingly answered in the affirmative, i.e. in favour of the assessee and against the revenue. Consequently, the appeal fails and is accordingly dismissed.
In the combined result, both the revenue’s appeals are dismissed. This Order pronounced in Open Court on 03/05/2019
Sd/- Sd/- ( WASEEM AHMED ) ( Ms. MADHUMITA ROY ) ACCOUNTANT MEMBER JUDICIAL MEMBER Ahmedabad; Dated 03/05/2019 Priti Yadav, Sr.PS
आदेश क� ��त�ल�प अ�े�षत/Copy of the Order forwarded to : 1. अपीलाथ� / The Appellant 2. ��यथ� / The Respondent. 3. संबं�धत आयकर आयु�त / Concerned CIT 4. आयकर आयु�त(अपील) / The CIT(A)-Gandhinagar, Ahmedabad. 5. �वभागीय ��त�न�ध, आयकर अपील�य अ�धकरण, अहमदाबाद / DR, ITAT, Ahmedabad 6. गाड� फाईल / Guard file. आदेशानुसार/ BY ORDER, स�या�पत ��त //True Copy// उप/सहायक पंजीकार (Dy./Asstt.Registrar) आयकर अपील�य अ�धकरण, अहमदाबाद / ITAT, Ahmedabad 1. Date of dictation 01.05.2019 (dictation pages 11) 2. Date on which the typed draft is placed before the Dictating Member 02.05.2019 3. Other Member………………… 4. Date on which the approved draft comes to the Sr.P.S./P.S …03/05/2019 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……. 7. Date on which the file goes to the Bench Clerk………………… 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……………………………………