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Income Tax Appellate Tribunal, “E” BENCH, MUMBAI
PER MAHAVIR SINGH, JM:
Out of these three appeals, one by the assessee and two by the Revenue are arising out of the order of Commissioner of Income Tax (Appeals)-3, Mumbai [in short CIT(A)], in appeal No. CIT(A)-3/IT- 16&107/ACIT-2(1)(1)/16-17, order of even date 15.11.2016. The Assessments were framed by the Asst. Commissioner of Income Tax, Circle-2(1)(2), Mumbai (in short ‘ACIT/ AO’) for the A.Ys. 2011-12 & 2012- 13 vide order dated 10-03-2014, 31.03.2015 under section 143(3) of the Income Tax Act, 1961 (hereinafter ‘the Act’).
In ITA No. 1036/Mum/2017
The only issue in this appeal of assessee is against the order of CIT(A) in holding that the levy of interest under section 234C of the Act is mandatory. For this assessee has raised following two grounds: -
“1. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in holding
ITA Nos. 1036, 1137& 1160/Mum/2017
the levy of interest under sectino234C as mandatory without appreciating the facts of the case.
On the facts and in the circumstances of the case and in law, the ld CIT ought to have appreciated that there was no shortfall on payment of advance tax due on returned income in any of the installments for advance tax and hence, interest levied under section 234C of the Act amounting to Rs. 2,07,304/- ought to be deleted. "
At the outset, it is noticed that the CIT(A) has directed vide Para 10 as under: -
“10. Ground No.4 related to levy of interest under section 234C. As charging of interest under section 234C of the IT Act, 1961 is mandatory as held by the Hon’ble Supreme Court in the case of Anjum H. Ghaswala, 252 ITR 1 (SC), Ground No. 3 is dismissed. "
When this was confronted to the learned Counsel for the assessee he only stated that the charging of interest under section 234C of the Act is consequential but it should be calculated correctly and on the returned income i.e. short fall on payment of advance tax due on returned income in any of the installments for the advance tax. When pointed out what is the mistake in calculation, he only requested that the AO can be directed to compute the charging of interest under section 234C of the Act as per law. On this, the learned Sr. DR has not objected. In term of the above, we direct the AO to compute the correct charge of interest under section 234C of the Act as per law. Accordingly, this issue is restored back to the file of the AO.
ITA Nos. 1036, 1137& 1160/Mum/2017
In ITA Nos. 1160 & 1137/Mum/2017
The first issue relating to these appeals in ITA No. 1160 & 1137/Mum/2017 for AYs 2011-12 and 2012-13 respectively, is exactly identical, hence, we will take up the issue and facts from ITA No. 1137/Mum/2017 for AY 2012-13 and decide the issue. The first issue in these appeals of Revenue is against the order of CIT(A) directing the AO to allow depreciation on revalued cost of the machinery and not on the WDV. For this Revenue has raised following ground: -
“Ground in ITA No. 1160/Mum/2017 for AY 2011-12
On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in allowing depreciation at revalued cost of the machinery and not at WDV.
Ground in ITA No. 1137/Mum/2017 for AY 2012-13
On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in allowing depreciation at revalued cost of the machinery and not at WDV."
At the outset, the learned Counsel for the assessee stated that this issue has been considered by the Tribunal in earlier years and on that very basis, the CIT(A) has allowed the claim of the assessee vide Para 6 to 6.2 as under: -
“6. Ground No. 1 relates to disallowance of depreciation u/s 32 of the IT Act on WDV of the fixed assets as per the return of income filed by the appellant. During the course of assessment
ITA Nos. 1036, 1137& 1160/Mum/2017
proceedings, the AO has not allowed depreciation u/s 32 of the IT Act on WDV as per the return of income filed by the appellant. On the other hand, the appellant has submitted that this issue has come before the Hon'ble ITAT, Mumbai in the appellant's own case in ITA No. 6020/Mum/2011 for the AY 200708, which has been followed by the AO in the AY 2010-11. It was further submitted that the AU ought to have given effect to ITAT's order for AY 2007-08 and should have allowed depreciation on WDV as per the return of income filed.
6.1 I have carefully considered the rival submissions and the facts of the case. The issue of allowability of depreciation on the cost of acquisition of assets acquired from TML is decided in favour of the appellant in its own case and also in case of its group concern for earlier years i.e. AY 2007-08 and 2008-09 by the decision of the Hon’ble ITAT, Mumbai wherein the Hon'ble ITAT has accepted the contention of the appellant. The Hon’ble ITAT has decided this issue in the appellant's own case for the AY 2008-09, in para 3, 4 and 5. The operative para is as follows -
The decision in the case of Essar Oil Ltd. as above squarely covered the case of the assessee. Therefore, the AO is directed to take the cost of acquisition of such assets as have been acquired by it from MIs Tata Motors Ltd. at the cost at which they have been acquired means the actual
ITA Nos. 1036, 1137& 1160/Mum/2017
consideration paid by the assessee company and accordingly allow the depreciation claimed by the assessee. fit the ground of appeal is allowed."
6.2 In view of the above facts and circumstances of the case and respectfully following the directions of the Hon'ble ITAT Bench, Mumbai, the AO is directed to allow the depreciation as directed above, hence Ground No. 1 is allowed."
We find that this issue is squarely covered in assessee’s own case from AY 2007-08 to 2009-10 in ITA Nos. 1304,6020,8324/Mum/2011 & 3363/Mum/2013. We find that the Tribunal vide order dated 29.07.2016 has considered this issue vide Para 11.3 to 13 as under: -
“11.3 In view of the above provisions, the assessee had filed revised return of income for AY 2007-08, revising the tax depreciation claim by considering the actual purchase consideration paid for purchase of assets. TML had also revised the return of income for AY 2007-08 and reduced the actual sale consideration revised from its block of assets. Thus both the assessee and TML had treated this transaction on a consistent basis in the revised return of income also. However, in case of assessee for AY 2007-8, the assessing officer had taken a different view applying the provisions of explanation 6 to section 43(1) read with explanation 2 to section 43(6) and allowed the depreciation to the assessee on the WDV of the assets in the hand of TML instead of the actual cost of the assets to the
ITA Nos. 1036, 1137& 1160/Mum/2017
Appellant. He further submits that during the year i.e. AY 2008-09, the Assessing Officer has allowed depreciation on WDV as computed as per the order under section 143(3) for AY 2007-08 instead of on the WDV as per the return of income filed by the assessee. Therefore, he pleaded to allow depreciation as claimed by the assessee and allow this ground of appeal.
The ld. CIT(A) held as under:
“I have considered the facts of the case and submissions of the assessee. In case assessee is allowed depreciation on higher value i.e. the actual cost of the assets purchases by it from the holding company then naturally the consequential effect in the year under consideration will be given to the assessee by allowing depreciation on the revised written down value, accordingly, the ground is treated as allowed.
We do not find any infirmity in the order of the Ld. CIT(A) hence, this ground raised by the revenue is dismissed."
As the issue is squarely covered in favour of assessee, respectfully following consistent view of earlier years, we dismiss this issue of Revenue’s appeals.
The next common issue relating to these appeals in ITA No. 1160 & 1137/Mum/2017 for AYs 2011-12 and 2012-13 respectively, is exactly identical, hence, we will take up the issue from ITA No. 1137/Mum/2017
ITA Nos. 1036, 1137& 1160/Mum/2017
for AY 2012-13 and decide the issue. The next issue in these appeals of Revenue is against the order of CIT(A) deleting the disallowance of expenses relatable to exempt income as the assessee has no exempt income received during the year. For this Revenue has raised the following ground Nos. 2 and 3: -
“Ground in ITA No. 1160/Mum/2017 for AY 2011-12
On the facts and in the circumstances of the case and in law, the ld. CIT(A) erred in holding that section 14A would not apply if no exempt income has been received during the year despite there being no such precondition for invoking section 14A.
On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in sustaining the disallowance under section 14A while computing book profit under section 115JB of the I.T. Act, 1961
Grounds in ITA No. 1137/Mum/2017 for AY 2012-13
On the facts and in the circumstances of the case and in law, the ld. CIT(A) erred in holding that section 14A would not apply if no exempt income has been received during the year despite there being no such precondition for invoking section 14A.
On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in sustaining the disallowance under section 14A while computing book profit under section 115JB of the I.T. Act, 1961."
ITA Nos. 1036, 1137& 1160/Mum/2017
At the outset, it is noticed from the order of CIT(A) and that of the AO that there is no exempt income earned or claimed by assessee in the computation of income. This fact is narrated by CIT(A) in Para 7.1 and 8 as under: -
“7.1 On the other hand, the appellant submitted that it has not earned any income which is exempt from tax. Accordingly, the question of making any disallowance under section 14A of the IT Act does not arise. The appellant has further relied upon the Hon'ble ITAT decision in the case of Tata Industries Ltd. vs ITO (47 CCH 498) (group concern of the appellant), in which the Hon'ble ITAT has held that the disallowance u/s 14A of the IT Act would not apply if no exempt income has been received or receivable in the relevant previous year. Respectfully following the decision of the ITAT, Mumbai in the case of one of the group concern namely Tata Industries Ltd., the AO is directed to follow the decision of the Hon'ble ITAT, hence Ground No. 2.1 is allowed.
Ground No. 2.2 relates to disallowance of expenses u/s 14A of the IT Act, 1961 read with Rule 8D of the I T Rules, 1962 added in the income of the appellant while computing the income under the provisions of Section 115JB of the IT Act, 1961. Since Ground Number 2.1 has been allowed, no addition is required to he made in computing the income under the provisions of Section 115JB of the IT Act, 1961. Ground No. 2.2 is allowed. Therefore,
ITA Nos. 1036, 1137& 1160/Mum/2017
Ground No. 2 (which include Grounds No. 2.1 and 2.2) is allowed."
We find that this issue is squarely covered by the decision of Hon’ble Bombay High Court, Nagpur Bench, in the case of Pr. CIT vs. Ballarpur Industries Limited in Income Tax Appeal No. 51 of 2016, wherein this issue has been considered and finally following the judgment of Hon’ble Delhi High Court in the case of Cheminvest Limited vs. CIT (2015) 378 ITR 33 (Delhi) held as under: -
“On hearing the learned Counsel for the Department and on a perusal of the impugned orders, it appears that both the Authorities have recorded a clear finding of fact that there was no exempt income earned by the assessee. While holding so, the Authorities relied on the judgment of the Delhi High Court in Income Tax Appeal No. 749/2014, which holds that the expression “does not form part of the total income” in Section 14A of the Income Tax Act, 1961 envisages that there should be an actual receipt of the income, which is not includible in the total income, during the relevant previous year for the purpose of disallowing any expenditure incurred in relation to the said income. The Income Tax Appellate Tribunal held that the provisions of Section 14A of the Income Tax Act, 1961 would not apply to the facts of this case as no exempt income was received or receivable during the relevant previous year. It is not the case of the Assessing Officer that any actual income was received by the assessee and the same was includible in the total income. In the facts of the case, the Authorities held
11 ITA Nos. 1036, 1137& 1160/Mum/2017
that since the investments made by the assessee in the sister concerns were not the actual income received by the assessee, they could not have been included in the total income.” 12. After hearing rival contentions and going through the facts and circumstances of the case, admitted position on facts is that there is no exempt income claimed by assessee. Once there is no exempt income, the issue is squarely covered by the decision of Hon’ble Bombay High Court in the case of Ballarpur Industries Limited (supra). Respectfully following the Hon’ble Jurisdictional High Court, we confirm the order of CIT(A) deleting the disallowance. 13. In the result, the appeal of assessee in ITA No. 1036/Mum/2017 is allowed for statistical purposes and the appeals of Revenue in ITA Nos. 1137 & 1160/Mum/2017 are dismissed.
Order pronounced in the open court on 28-09-2018.
Sd/- Sd/- (राजेश कुमार / RAJESH KUMAR) (महावीर स िंह /MAHAVIR SINGH) (लेखा दस्य / ACCOUNTANT MEMBER) (न्याययक दस्य/ JUDICIAL MEMBER) मुिंबई, ददनािंक/ Mumbai, Dated: 28-09-2018 स दीप सरकार, व.निजी सधिव / Sudip Sarkar, Sr.PS
12 ITA Nos. 1036, 1137& 1160/Mum/2017 आदेश की प्रनिललपप अग्रेपिि/Copy of the Order forwarded to : अपीलाथी / The Appellant 1. प्रत्यथी / The Respondent. 2. आयकर आयुक्त(अपील) / The CIT(A) 3. आयकर आयुक्त / CIT 4. 5. ववभागीय प्रयतयनधि, आयकर अपीलीय अधिकरण, मुिंबई / DR, ITAT, Mumbai गार्ड फाईल / Guard file. 6.
आदेशाि सार/ BY ORDER, त्यावपत प्रयत //True Copy// उप/सहायक पुंजीकार (Asstt. Registrar) आयकर अपीलीय अधिकरण, मुिंबई / ITAT, Mumbai