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Income Tax Appellate Tribunal, KOLKATA BENCH “D” KOLKATA
Before: Shri P.M.Jagtap & Shri S.S.Viswanethra Ravi
O R D E R
PER S.S.Viswanethra Ravi, Judicial Member:
- This appeal by the Revenue is against the order dated 07.09.2016 passed by Commissioner of Income Tax (Appeals)-4, Kolkata for assessment year 2013-14 passed by dated 12.08.2013.
Ground No. 1 is relating to deletion of addition made u/s. 2(22)(e) of the income Tax Act, 1961 (hereinafter referred to as ‘the Act’).
During the assessment proceedings Assessing Officer found that assessee received ₹1,75,70,220/- towards loan from Cobol Management (P) Ltd. Further the AO was of the opinion that Shri Atul Dua and Smt. Poonam Dua are the common shareholders in the capacity of shareholders having substantial interest with more than 20% holding in the assessee-company and as well as in the said Cobol Management DCIT Cir-10(1) Kol. Vs. M/s Multitech Auto Pvt.Ltd. Page 2 (P) Ltd. The AO was of the opinion that any transactions in the form of loan or advanced is covered by the definition u/s 2(22)(e) of the Act and added an amount of ₹37,32,369/- total income of assessee.
Ld. CIT(A) on examination of material evidence on record and by placing reliance on the decision of Hon'ble Special Bench of the ITAT in the case of Bhowmick Colour Pvt. Ltd of Mumbai Tribunal deleted the said addition made by the AO. The relevant portion of order of CIT(A) is reproduced herein below:-
4.2 I have considered the submission of the AR of the appellant as well as the assessment order on the issue. I have also considered the various judicial decisions on the matter as submitted in the foregoing. I have also gone through the materials on record in this regard. On a careful consideration of the matter, I find force in the argument advanced by the AR of the appellant. In a nutshell, section 2(22)(e) of the Act is attracted in a case where there is an advance of loan to the shareholder of the company giving the loan in which the recipient of the loan happens to hold more than 10% of the shares in the lending company. I find that loan was given by one company (Cobol Management(P) Ltd.) to another company (M/s Multitech Auto (P) Ltd.) and that the latter was not a shareholder in the former. Only the common shareholders as mentioned supra had more than 10% stakes in both the companies. The status of company being a separate entity, there is no basis for treating the company’s loan to be that of the shareholder’s which would warrant the attraction of the provision of section 2(22)(e) of the Act. the matter is well settled, inter alia, in the case decided by the Special Bench, ITAT, Mumbai in the case of ACIT, Circle-33, Mumbai vs. Bhaumik Colour (P) Ltd. in of 2004 for AY 1997-98 dated 19.11.2008. In view of this, I do not find the action of the AO to be endorsable at the appellate stage for which it is now directed that addition of ₹37,32,369/- made in this regard be deleted. The AO is directed accordingly.
Ld. DR relied on the order of AO. None appeared on behalf of assessee.
Heard the ld. DR and perused the material available on record. We find that AO on an impression that the two shareholders i.e. Atul Dua and Smst. Poonam Dua are common shareholders having 20% holding in assessee-company and M/s Cobol Management (P) Ltd. treated the amount as deemed dividend. CIT(A) placing reliance in the case of Special Bench Mumbai Bhowmick Colour Pvt. Ltd. deleted the said addition made by Assessing Officer. It is noticed that assessee is not the shareholders in M/s Cobol Management (P) Ltd. The CIT(A) found satisfied on examination of record available before him that the assessee and M/s Cobol DCIT Cir-10(1) Kol. Vs. M/s Multitech Auto Pvt.Ltd. Page 3 Management (P) Ltd. are separate entities and found no basis for treating the loan given by the M/s Cobol Management (P) Ltd. to assessee to be that of shareholders i.e. Atul Dua and Poonam Dua. Therefore, we find no infirmity in the order of CIT(A). Accordingly, ground No.1 raised by Revenue is dismissed.
Ground No.2 is relating to deletion of addition made on account of claim of additional depreciation.
The AO disallowed the claim of additional depreciation on the expenditure incurred towards correction, commissioning and installation of machinery. According to CIT(A) the actual cost of machineries and plant includes the cost of erection, commission and installation charges and allowed additional depreciation.
Ld. DR relied on the order of AO.
Heard the Ld. DR and perused material available on record. The assessee incurred an amount of ₹19,50,90,000/- towards expenditure incurred on erection, commissioning and installation charges and interest on the machineries and claimed depreciation on machinery. The Assessing Officer was of the opinion this amounts incurred as above were not actually part of the cost of said plant and machinery and did not consider the said amount in the claim of additional depreciation. We find that CIT(A) rightly held the actual cost includes the amount incurred toward erection commission and installation plant and machineries thereby CIT(A) rightly deleted the addition, and the relevant portion in para 6.2 which is reproduced as under:-
“6.2 I have considered the submission of the AR of the appellant as well as the assessment order. Impugned order find that the AO has not considered the sum of ₹19,50,909/- which was incurred by the appellant towards erection, commissioning, installation, interest on the machineries. According to the AO these amounts will not form a part of machineries and therefore the AO did not allow additional depreciation on these amounts. I agree with the contention of the AR that the actual cost of machineries and plant should necessary include erection, commissioning and installation charges. In my considered opinion, of the machineries are not erected or installed the machine cannot be put to use. Therefore, the actual cost of plant or DCIT Cir-10(1) Kol. Vs. M/s Multitech Auto Pvt.Ltd. Page 4 machinery eligible for depreciation should necessary include the cost of erection and installation. In view of the foregoing, I direct the AO to allow additional depreciation of ₹2,06,771/- a claimed by the appellant. This ground is allowed.” 11. We find no infirmity in the order of CIT(A). We uphold the same. Ground No.2 is dismissed.