GLOBAL CALCIUM PRIVATE LIMITED,HOSUR vs. ACIT COMPANY CIRCLE II(2), CHENNAI

आदेश/ O R D E R

PER S. JAYARAMAN, ACCOUNTANT MEMBER:

The assessee filed this appeal against the order of the Commissioner

of Income Tax (Appeals)-13, Chennai in ITA No. 80/CIT(A)-13/AY 2005-06

dated 01.12.2017 for assessment year 2005-06.

:- 2 -: ITA No.1229/Chny/2018 2. M/s. Global Calcium Pvt. Ltd., the assessee, is a manufacturer of

bulk drugs and chemicals for food and pharmaceutical application. While

making the assessment for assessment year 2005-06, the AO, inter alia,

disallowed additional depreciation claimed on the cost of windmill, made

disallowance u/s. 14A, disallowed 10% financial charges on the grounds

that non-interest bearing loans were advanced to companies wherein the

directors of the assessee company are interested, assessed the rent

received from staff quarters (non-factory building) and admitted under the

head “business” as an income from “house property” and consequently

disallowed the depreciation claimed by the assessee. Aggrieved, the

assessee filed an appeal before the Ld. CIT(A) . The Ld. CIT(A) dismissed

the appeal. Against the order of the Ld. CIT(A), the assessee filed this

appeal.

depreciation on the windmill for the reason that the assessee has not

produced any article or thing using the windmill but for power. Though

the jurisdictional High Court decision in the case of CIT vs M/s. Hitech Arai

Ltd (TC(A) No. 670 & 671 of 2009), wherein it was held that the new

machinery or plant need not have any operational connectivity to the

article or thing that was being manufactured by the tax payer and

jurisdictional High Court Madurai decision in VTM Ltd vs CIT, Madurai etc

were relied before the Ld. CIT(A), he dismissed the appeal. The AR

:- 3 -: ITA No.1229/Chny/2018 further submitted in the assessee’s case the CIT invoked the jurisdiction

u/s. 263 on this aspect vide his proceedings in C.No 218(90)/CIT-263-09-

10 dated 26.02.2010, however, dropped the proceedings by his letter

dated 19.03.2010. In view of the above facts & circumstances, the AR

pleaded that the disallowance made by the AO & confirmed by the Ld.

CIT(A) be deleted. Per contra, the Ld. DR supported the orders of the

lower authorities.

assessee’s favour, supra. Following the jurisdictional High Court decisions

in the cases of CIT vs M/s. Hi Tech Arai Ltd., & VTM Ltd vs CIT, Madurai,

supra, the assessee’s grounds of appeal are allowed on this issue.

assessee received dividend of Rs. 5,46,641/- and claimed it as an exempt

income, towards which it has not shown any expenditure. The AO

determined u/s. 14A r.w.r. 8D Rs. 1,56,453/- an expenditure relatable to

the exempt income. Aggrieved, the assessee filed an appeal. The Ld.

CIT(A) after considering the decisions in the cases of Chem Invest vs CIT,

378 ITR 33 (Del), this tribunal decision in the case of ACIT vs M. Bhaskara,

152 ITD 844, held that disallowances could be restricted to the extent of

exempt income and in this case, the disallowance made by the AO being at

Rs 1,58,453/-, which is less than the exempt income earned by the

:- 4 -: ITA No.1229/Chny/2018 assessee, confirmed the disallowance made by the AO. In this regard, the

AR submitted that the impugned dividend was earned on the old

investments made in the earlier years and there are no expenses incurred

to earn it. Hence, he pleaded to delete the addition. Per contra, the Ld.

DR supported the orders of the lower authorities.

applicable for this assessment year i.e., for assessment year 2005-06, this

tribunal consistently held that disallowance of reasonable sum is warranted

and 2% of the exempt income could be a reasonable sum which could be

disallowed. Accordingly, we direct the AO to restrict the disallowance

accordingly. The corresponding appeal grounds are allowed partly.

grounds that non-interest bearing loans were advanced to companies

wherein the directors of the assessee company are interested. In this

regard, the AO found that the assessee has advanced non-interest bearing

fund at Rs. 43,45,000/-, in total, to two companies viz., Bebloc India

Private Ltd & Global Suppliers Pvt. Ltd., wherein the directors of the

assessee company are interested. Since, the assessee has incurred

financial charges of Rs. 29,71,724/-, the AO disallowed 10% of such

charges on the total loans. Aggrieved, the assessee filed an appeal before

the Ld. CIT(A). The AR submitted before the Ld. CIT(A) that the assessee

:- 5 -: ITA No.1229/Chny/2018 company is a profit making company, it has accumulated cash surplus out

of its business income that were subjected to tax. Such internal accruals

have been used for temporary short lending to group companies. The

assessee does not use any own funds or working capital funds for this

purpose. Unless such finding is made, the disallowance should not be

made. However, the Ld. CIT(A) upheld the disallowance. In the facts and

circumstances, the AR pleaded for deletion of such disallowance. The Ld.

DR relied on orders of the lower authorities.

before the lower authorities that the company is a profit making company,

it has accumulated cash surplus out of its business income that were

subjected to tax, such internal accruals have been used for temporary

short lending to group companies, the assessee does not use any own

funds or working capital funds for this purpose, unless such finding is

made, the disallowance should not be made etc, we find that the lower

authorities have not recorded any finding on the assessee’s plea. In the

facts and circumstances, we deem it fit to remit this issue back to the AO

for a fresh examination in accordance with law. The assessee shall place

relevant materials before the AO in support of its contention and the AO

after giving adequate opportunity to the assessee decide this issue in

accordance with law. Hence, the corresponding grounds are treated as

allowed for statistical purposes.

:- 6 -: ITA No.1229/Chny/2018

quarters under the head house property. In this regard, the AR did not

press the grounds of appeal and hence, the corresponding grounds are

treated as dismissed. Since, this ground is dismissed, consequentially the

issue on the depreciation claim on such properties are also treated as

dismissed.

Order pronounced on Wednesday, the 31st day of October, 2018 at Chennai.

Sd/- Sd/- (एन.आर.एस .गणेशन) (एसजयरामन) (N.R.S. GANESAN) (S. JAYARAMAN) �या�यकसद�य/Judicial Member लेखासद�य/Accountant Member

चे�नई/Chennai, )दनांक/Dated: 31st October , 2018 JPV आदेशक$*�त+ल,पअ-े,षत/Copy to: 1. अपीलाथ//Appellant 2. *0यथ//Respondent 3. आयकरआयु1त ) अपील(/CIT(A) 5. ,वभागीय*�त�न�ध/DR 6. गाड4फाईल/GF 4. आयकरआयु1त/CIT