ACIT, CHATRAPATTI vs. M/S. BEACH MINERALS CO. PVT. LTD., CHENNAI

आदेश / O R D E R

Per A. Mohan Alankamony, AM:-

(ii) The Ld.CIT(A) has erred by holding that disallowance U/s.14A cannot be made while arriving at the book profit for the purpose of computing MAT U/s. 115JB of the Act.

(iii) The Ld.CIT(A) has erred in deleting the addition of Rs.4,68,31,841/- made towards disallowance of repair and maintenance charges.

4.1 On appeal the Ld.CIT(A) decided the issue in favour of the assessee by following the order of the Chennai Bench of the Tribunal in the assessee’s own case for the assessment year 2010-11 in vide order dated 06.08.2015. The relevant portion of the order is reproduced herein below for reference:-

“12. The appellant assailed the disallowance made and submitted that the issue was decided in favour of the company by the Hon'ble ITAT, Chennai vide its order in dated 6.8.2015 for the prior AY. 2010-11.

"6.1 .... " .. At the outset, we find that there is no merit for the Revenue to make addition of Rs.3,11,34,630/- invoking the provisions of section 14A of the Act because the investment mad of Rs.71,55,33,570/-, bears no cost in the form of interest or whatsoever, since the funds by which the investment is made is assessee's own funds. Further, these investments are made only with sister companies of the assessee and no cost can be attributed for the management of such funds. Therefore, we hereby delete the addition of Rs.3, 11,34,630/- made by the Ld.Assessing Officer invoking the provisions of section 14A of the Act. This ground raised by the assessee is allowed in its favour. "

“.... From the above it is apparent that the aforesaid provision of the Act does not refer to any disallowance made u/s 14A of the Act while arriving at the Book Profit for the purpose of Section 115J8(2) of the Act. Further Section 14A of the Act is a provision with fiction disallowing the deemed expenditure attributable to exempt income viz., dividend income u/s 10 of the Act and Section 115JB of the Act is also a provision with fiction for payment of tax in respect of deemed income. Therefore while computing the profit for the purpose of Section 115JB of the Act another provision with fiction cannot be superimposed. Hence the question of increasing the 'Book Profit' due to the disallowance u/s 14A of the Act will not arise. However, in the instant ase of the assessee, since we have already deleted the addition made u/s 14A, increasing the book profit will not arise .....

.. . From the above decision it is clear that while computing the "Book Profit" of the company under the provisions of section 115JB of the Act; any disallowance made under the normal provisions of the Act also cannot be given effect to for arriving at the "Book Profit" for the purpose of Section 115JB of the Act. Accordingly, this ground raised by the assessee is allowed in its favour. "

4.2 Since the Ld.CIT(A) has only followed the decision of the Tribunal on the identical issues in the assessee’s own case for the earlier assessment year, we do not find it necessary to interfere with his order. Accordingly we hereby uphold the order of the Ld.CIT(A) with respect to Ground No.(i) & (ii) raised by the Revenue.

During the course of scrutiny assessment proceedings, it was observed by the Ld.AO that the assessee had debited the amount of Rs.4,68,31,841/- under the head ‘repairs & maintenance’. On verifying the bills, it was observed that it pertained to the financial year 2009-10 relevant to assessment year 2010-11. On query it was explained by the Ld.AR that the payment were made during the relevant assessment year and the books of accounts were maintained in accordance with the method regularly followed by the company year after year. The Ld.AO rejected the submission of the assessee since the expenditure did not relate to the assessment year 2011-12 and accordingly disallowed the expense. When the matter cropped up before the Ld.CIT(A), the Ld.CIT(A) after examining the issue arrived at the conclusion that the assessee had booked the expenditure at the time of consumption of spare parts which was in accordance with the method of accounting followed consistently by the assessee. We do not find any infirmity in the order of the Ld.CIT(A) on this issue. From the order of the Ld.CIT(A), it is evident that the assessee had not treated the purchase of spares as expenditure in the year in which the spares were acquired but treated it as expenditure in the year in which the spares were consumed and the payment was made. The payment for the spares was also made in the year in which it was consumed. Though there is lapse on the part of the assessee to record the accounting entries at the time of happening of events, there is nothing wrong in the method of booking expenditure at the time of consuming the spares as per the accepted principles of accounting which is consistently followed by the assessee year after year as the expenditure has only crystalized when the spares were consumed during the relevant assessment year. The Ld.CIT(A) has also observed in his order that the company has maintained proper records to show full particulars including quantity details, etc., of its assets and inventory. He has also observed that there is no discrepancy in the inventories recorded in the book and physical inventory. It was also clarified that the charge to revenue was only made on crystallization of the liability. It was also observed by the Ld.CIT(A) that compared to the repairs & maintenance expenditure incurred by the assessee during the four preceding assessment years the expenditure incurred by the assessee in the relevant assessment year is much lower. Therefore we do not find it necessary to interfere with the order of the Ld.CIT(A) on this issue. Hence this ground raised by the Revenue is devoid of merits. Accordingly we uphold the order of the Ld.CIT(A).