DCIT, CIRCLE- 27(1), NEW DELHI vs. USHA INTERNATIONAL LTD., NEW DELHI

This appeal filed by the revenue is preferred against the order of the CIT(A)-9, New Delhi dated 24.08.2018 for A.Y. 2015-16. 2. The grievance of the revenue read as under :-

6. Ground No.1 relates to the deletion of the disallowance made u/s. 14 A r.w.r 8D of the Act.

7. This issue was considered by the Tribunal (supra). The relevant findings read as under :- “8. So far as disallowance of 14A of Rs.55,53,844/-, we find that the AO has made disallowance of Rs.62,65,891/- made by the AO without recording any satisfaction as to what was the exempt income and the computation of disallowance made by the assessee at Rs. 3,44,109/- is not correct. Ld. CIT(A) had restricted the disallowance to the amount of exempt income following the decision of earlier years and the judgment of Hon’ble Delhi High Court. The relevant observation and the finding of the Ld. CIT(A) in this regard reads as under :- “5.2 During the course of assessment proceedings the appellant company vide its letter dated 22.11.2016, a copy of which has been given in the Paper Book had submitted before the Assessing Officer that no disallowance in the facts and circumstances of the case of the appellant company is called for on account of interest as well as on account of administrative expenses. The company, however, has made addition of Rs.3,44,109/- with a view to avoid any controversy in this regard and the amount of disallowance as the amount of disallowance is representing salary of one executive who is attending the activities in relation to investments apart from other office activities. The company had also submitted that during the year dividend income was only of Rs.7,12,047/-, which was claimed as exempt in computation of taxable income. The Assessing Officer had not accepted the contention of the appellant company and vide the order of assessment has made further disallowance of Rs.62,65,891/-, which has been calculated as per Rule 8D of Income Tax Rules without much discussion in the order. During the course of hearing of appeal the representative of the appellant company has relied upon the contentions raised before the Assessing Officer. He has, however, vide the Chart submitted, has pointed out that in earlier years CIT(A) in appeals of the company for A.Yrs. 2011-12 and 2012-13 had restricted the disallowance to the extent of dividend income. 5.3 In view of decision of my predecessors in the case of the appellant company in appeals for AYs 2011-12 and 2012-13 and following the judgments of Hon’ble Delhi High Court in the cases of Joint Investment Pvt. Ltd. v. CIT (2015) 372 ITR 694 (Del), CIT v. Holcim India P. Ltd., (2014) 272 CTR (Del.) 282 and Cheminvest Ltd. v. CIT (2015) 378 ITR 33 (Del.) the disallowance under section 14A read with Rule 8D of Income Tax Rules is restricted to Rs. 7,12,047/- i.e. the amount of dividend income. Since the assessee company has already made disallowance of Rs. 3,44,109/-. Further disallowance on this basis is to be made of Rs. 3,67,938/- as against disallowance of Rs, 62,65,891/- made by the Assessing Officer. Hence the assessee gets relief of Rs. 58,97,953/- (Rs. 62,65,891-Rs. 3,44,109/-). Thus. This ground of appeal

is partly allowed. ”

9. Since the aforesaid decision is based on the principle laid down by the Hon’ble Jurisdictional High Court, therefore, we do not find infirmity in the finding of the Ld.CIT(A) and the same is confirmed.”

8. Respectfully following the aforementioned findings ground No.1 is dismissed.

made by the Assessing Officer of Rs.16,717/- is directed to be deleted. ” 12. Once the payments have been made on or due date of return of income then we do not find any infirmity in the aforesaid finding of/the Ld.CIT(A). Accordingly this ground of the revenue is dismissed.

“10. As regards disallowance of Rs. 6,94,236/- on account of club expenditure, we find that AO has disallowed the club services and these expenses holding that it is not related to the business activities of the assessee. Ld. CIT (A) relied upon the judgment of Hon’ble Supreme Court in the case of CIT vs. United Glass Mfg. Co. Ltd. and the earlier year Ld. CIT(A) order has deleted the said disallowance. We find that this issue is decided in favour of the assessee company by the order of the Tribunal in the appeal for the assessment year 2011- 12. Accordingly this ground raised by the revenue is dismissed.”

“4. After considering the aforesaid submissions and on perusal of the findings of the impugned order as well as Tribunal’s orders for the earlier years we find that in so far as ground No. 1 is concerned, i.e., disallowance of depreciation, we find that AO has noted that assessee in AY 2012-13 had capitalised an amount of Rs.103,63,25,665/- towards acquisition of the intellectual property asset and claimed depreciation @ 25% treating it as intangible capital asset. AO had observed that during the assessment for AY 2012-13, it was found that the assessee has made payments to the trusts MF is more than 42% of what was paid to CT, it was determined that the payment of Rs.30,87,17,650/- made by the assessee to the Mansarover Trusb(MT)cannot be termed as wholly and exclusively incurred for business purposes. The depreciation claimed by the assessee @ 25% on the total amount spent on the MT (i.e 7,71,79,413/-) was disallowed and added to the returned income of the assessee.

5. Assessing Officer noted that during the assessment proceedings for AY 2013-14 also, the assessee has claimed depreciation on the intellectual property asset and accordingly disallowance of Rs.5,78,84,559/- was made. Considering the facts and circumstances and following the assessment order for AY 2013-14, a 25% depreciation on Rs. 17,36,35,678/- (i.e difference of Rs.23,15,38,237/- (-) Rs.5,78,84,559/-) is disallowed. Hence, the disallowance of Rs.4,34,13,420/- has been made and returned income of the assessee.

and exclusively for the purpose of business of the appellant, as it acquired the rights which enabled it to effectively carry on its business, and in fact without this payment, the appellant would not have been able to carry on the business of manufacture and sale of home appliances under the Usha brand name. Accordingly the AO is directed to delete the disallowance of depreciation of Rs.7,71,79,413/-.