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आदेश/Order
Per Sanjay Garg, Judicial Member:
The present appeal has been preferred by the Revenue against the order dated 8.5.2018 of the Commissioner of Income Tax (Appeals)-1, Chandigarh [hereinafter referred to as CIT(A)].
The Revenue has taken following grounds of appeal:-
On the facts and in the circumstances of the case, the Ld. CIT(A) has erred in allowing appeal of the assessee without appreciating the facts of the case.
On the facts and circumstances of the case, the Ld. CIT(A) has erred in deleting the addition of Rs. 21,50,686/- made u/s 36(l)(iii) of the I.T. Act, 1961, ignoring that the assessee has not maintained
ITA No. 1051/Chd/2018- M/s A.B. Sugars Ltd., Chandigarh 2
any separate account for interest bearing / interest free and hence the amount advanced to sister concern cannot be said to be made form interest free funds only.
On the facts and circumstances of the case, the Ld. CIT(A) has erred in deleting the addition of Rs. 21,50,686/- made u/s 36(l)(iii) of the I.T.Act, 1961, ignoring that the assessee has failed to establish any business expediency for advancing such a huge sum to its concern.
On the facts and circumstances of the case, the Ld. CIT(A) has erred in deleting the addition of Rs. 21,50,686/- made u/s 36(l)(iii) of the I.T. Act, 1961, based on the submission of the assessee ignoring that neither the assessed has brought this fact into the notice of AO during the assessment proceedings nor this fact is apparent from the records, therefore the submission of the assessee is nothing but an after-thought only.
On the facts and circumstances of the case, the Ld. CIT(A) has erred in restricting the addition of Rs. 11,08,624/- made u/s 14A of the I.T. Act, 1961, to Rs. 1.19 Lacs without taking cognizance of circular No. 5 of 2014 of CBDT on this issue, wherein it has been clarified that the provision of section 14A are applicable even when no exempt income has been earned.
On the facts and in circumstances of the case and in law the ITAT has erred in deleting the addition made on account of capitalization of interest related to CWIP as there was a huge addition of fixed assets and interest was required to be capitalized on account of CWIP.
On the facts and in circumstances of the case and in law the Ld. CIT{A) has erred in deleting the disallowance of additional depreciation as the Assessing officer had made a combined disallowance on account of excess depreciation & additional depreciation amounting to Rs. 5,56,98,007/- and the asseessee has failed to prove how excess rates of depreciation were allowable on the items and the
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assessee also failed to prove that those items were being used in its business.
It is prayed that the order of the Ld. CIT(A) be cancelled and that of the assessing officer may be restored.
The appellant craves leave to add or amend any grounds of appeal before the appeal is heard or is disposed off.
Ground Nos. 1 to 4 : Vide ground Nos, 1 to 4, the Revenue has
agitated the action of the CIT(A) in deleting the addition of Rs.
21,50,686/- which was made by the Assessing officer u/s 36(1) (iii) of the
Income-tax Act, 1961 (in short 'the Act').
The Assessing officer had made the impugned additions on account
of notional disallowance of interest expenditure in respect of the interest
free advances given by the assessee to its sister concern. The assessee
took the plea before the Ld. CIT(A) that, firstly, the advances were made
out of business expediency and secondly, that assessee had its own /
interest free sufficient funds to meet the investment.
The Ld. CIT(A) deleted the addition made by the Assessing officer
while relying upon the decision of the Hon'ble Jurisdictional High Court
in Bright Enterprises (ITA No. 224 of 2013) and judgement of Hon'ble
Supreme Court in the case of M/s Hero Cycles (63 Taxman 308), wherein,
it has been held that if assessee had funds / interest free funds available
with it to make investment, the presumption will be that investment made
by the assessee is out of own funds.
Now the issue is also squarely covered by the decision of the
ITA No. 1051/Chd/2018- M/s A.B. Sugars Ltd., Chandigarh 4
Hon'ble Supreme Court in in ‘CIT Vs. Reliance Industries Ltd’ [2019] 102
taxmann.com 52 (SC) / 410 ITR 466 (SC). We, therefore, do not find any
infirmity in the order of the Ld. CIT(A) on this issue.
Ground No.5 : Vide this ground, the Revenue has agitated the
disallowance made by the Assessing officer of Rs. 11,08,624/- u/s 14A of
the Act at Rs. 1.19 lacs. The Ld. CIT(A) while relying upon the decision
of the Hon'ble Delhi High Court in the case of ‘Joint Investment Pvt Ltd.
(ITA No. 117/2015) and in the case of M/s Expire Packaging Pvt Ltd. in
ITA No. 415 of 2015 (P&H) has restricted the disallowance u/s 14A of the
Act to the extent of tax exempt income earned by the assessee. The issue
is squarely covered by the various decisions of the Hon'ble High Courts
including that of the Jurisdictional High Court of Punjab and Haryana in
the case of ‘CIT Vs. Winsome Textiles’ (2009) 319 ITR 204 (P&H) and
Hon'ble Delhi High Court in the case of ‘Cheminvest Ltd Vs. ITO’ (2015)
378 ITR 33 (Delhi) and of the Hon'ble Gujarat High Court in the case of
‘Corrtech Energy P. Ltd. (2014) 45 Taxman.com 116’ and further of the
Hon'ble Allahabad High Court in the case of ‘CIT Vs. M/s Shivam Motors
(P) Ltd’ (2014) 272 CTR (All) 277 and various other case laws. In all the
above referred to case laws, the Hon'ble High Courts have been unanimous
to hold that disallowance u/s 14A cannot exceed the tax exempt income
earned by the assessee.
We do not find any infirmity in the order of the CIT(A) on this issue.
Ground No.6: 8. Vide ground No.6, the Revenue has agitated the
action of the CIT(A) in deleting the addition made on account of
capitalization of interest relating to capital work in progress. The Ld.
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CIT(A) has dealt with this issue in para 8 of the impugned order, wherein,
he while relying upon the decision of the Tribunal in the own case of the
assessee for assessment year 2010-11 held that the funds invested in the
assets were only a small percentage of total fixed assets and could not be
termed as ‘substantial expansion’ and, therefore, the addition could not be
made under the proviso to section 36(1)(iii) of the Act. No distinguishing
fact or contrary decision has been cited by the Ld. DR on this issue.
In view of this, we do not find any infirmity in the order of the
CIT(A) on this issue also.
Ground No.7: Vide this ground, the Revenue has agitated the
action of the CIT(A) in deleting the disallowance of additional
depreciation made by the Assessing officer. A perusal of the impugned
order of the CIT(A) on this issue reveals that the assessee had claimed
depreciation in respect of various items. However, the CIT(A) has directed
the Assessing officer to examine the additional depreciation claimed in
respect of each of the items and allow depreciation and additional
depreciation as per schedule by applying different rate of depreciation
applicable as per rules.
We find that the Ld. CIT(A) has not deleted the addition on this
issue, rather, he has directed the Assessing officer to examine each item
and allow the depreciation and additional depreciation in accordance with
law and as per rules.
We do not find any infirmity in the order of the CIT(A) on this issue
also.
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Ground Nos. 8 & 9 are general and do not require any specific adjudication.
In the result, there is no merit in the appeal of the Revenue and the same is accordingly dismissed. Order dictated and pronounced in the Open Court on 21.02.2019.
Sd/- Sd/- (अ�नपूणा� गु�ता / ANNAPURNA GUPTA) (संजय गग� / SANJAY GARG) लेखा सद�य/ Accountant Member �या�यक सद�य/ Judicial Member
Dated : 21.02.2019 “आर.के.” आदेश क� ��त�ल�प अ�े�षत/ Copy of the order forwarded to : 1. अपीलाथ�/ The Appellant 2. ��यथ�/ The Respondent 3. आयकर आयु�त/ CIT 4. आयकर आयु�त (अपील)/ The CIT(A) 5. �वभागीय ��त�न�ध, आयकर अपील�य आ�धकरण, च�डीगढ़/ DR, ITAT, CHANDIGARH 6. गाड� फाईल/ Guard File
आदेशानुसार/ By order, सहायक पंजीकार/ Assistant Registrar