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Income Tax Appellate Tribunal, “C” BENCH: KOLKATA
Before: Shri A. T. Varkey, JM & Dr. A. L. Saini, AM]
ORDER
Per Shri A.T.Varkey, JM
This is an appeal filed by the assessee against the order of Ld. CIT(A)-XII, Kolkata dated 21.03.2014 for AY 2010-11.
At the outset itself, the Ld. AR stated that the assessee does not intend to press ground nos. 1 and 2 which read as under: “1. That in the facts and circumstances of the case, the Ld. AO erred in disallowing the assessee’s claim of write off sundry balances amounting to Rs.1,40,33,201/- and the Ld. CIT(A) erred in confirming the action of the Ld. AO. 2. That in the facts and circumstances of the case, the Ld. AO erred in disallowing the assessee’s claim of write off of advances amounting to Rs.1,96,27,737/- and the Ld. CIT(A) erred in confirming the action of the Ld. AO.” 3. In the light of the aforesaid submission of the assessee’s AR, we dismiss these grounds of appeal
of the assessee.
4. Ground no. 4 is against the order of the Ld. CIT(A) in not allowing depreciation at 80% on electric genset. At the outset itself, the Ld. Counsel for the assessee contended that this issue is no longer res integra since in assessee’s own case for AY 2009-10. The Tribunal has given relief to the assessee by observing as under:
2 V2 Retail Ltd., AY, 2010-11 “3.4. We have heard rival submissions and perused the material available on record. We find that the issue in dispute is squarely covered by the decision of the Hon’ble Rajasthan High court in the case of Agarwal Transformers Pvt. Ltd., supra wherein it was held as under: “…..In order to appreciate the controversy involved, it will be convenient to extract the relevant entry at clause (xiii) of item 10A of Appendix I appended to Income-tax Rules, which reads as follows: "Any special devices including electric generators and pumps running on wind energy." 3, According to the rules of construction, where two or more words which are susceptible of analogous meaning are coupled together noscitur a sociis, they are understood to be used in their cognate sense. They take, as it were, their colour from each other, the meaning of the more general being restricted to a sense analogous to that of the less general. Thus. in our view the word 'electric generator' must be construed as ejusdem generis. The electric generator by itself generate electricity and, therefore, do not fall within the renewable energy devices. It is different from pumps run on wind energy, which falls within the renewable energy devices. Thus, it is erroneous to say that the condition 'run on wind energy' is also attached to electric generators. Even grammatically neither, nor the word 'both' is used after the word 'pumps' in the relevant entry and this also clarifies that the condition 'running on' wind 'energy' is only attached to the word 'pumps' and not to the electric generators. A further reading of the entry shows that it is inclusive, it refers to two different items namely, electric generators and secondly the pumps running on wind energy. Thus, in our view the electric generator clearly fails under the renewable energy devices and the Tribunal has rightly allowed the depreciation at the rate of 30 per cent on the basis of item 10A, clause (xiii), of Appendix 1.
The reference is accordingly answered in favour of the assessee and against the revenue.” Respectfully following the ratios laid down in the aforesaid decision, we allow the ground no. 3 of assessee’s appeal.” So respectfully, following the Coordinate Bench decision, we are inclined to give relief to the assessee. Therefore, this ground of appeal of assessee is allowed.
5. Ground no. 5 is in respect of denial of additional depreciation on new plant and machinery. At the outset itself, the Ld. Counsel for the assessee drew our attention to the fact that the very same issue has been decided in assessee’s own case for the year 2009-10 wherein the Coordinate Bench of this Tribunal held in para 2.5 as under:
“2.5. We have heard rival submissions and perused the material available on record. For the sake of convenience the provisions of section 32(1)(iia) of the Act are reproduced hereunder: “32(1) In respect of depreciation of …… (iia) In the case of any new machinery or plant (other than ships and aircraft), which has been acquired and installed after the 31st day of March, 2005, by an assessee engaged in the business of manufacture or production of any article or thing (or in the business of generation or generation and distribution of power), a further sum equal to twenty per cent of the actual cost of such machinery or plant shall be allowed as deduction under clause (ii).
3 V2 Retail Ltd., AY, 2010-11 Provided that no deduction shall be allowed in respect of – (A) Any machinery or plant which, before its installation by the assessee, was used either within or outside India by any other person; or (B) Any machinery or plant installed in any office premises or any residential accommodation , including accommodation in the nature of a guest –house; or (C) Any office appliances or road transport vehicles; or (D) Any machinery or plant, the whole of the actual cost of which is allowed as a deduction (whether by way of depreciation or otherwise) in computing the income chargeable under the head “Profits and gains of business or profession”of any one previous year”. 2.6. We find that installation of new plant and machinery in sales outlet/retail office would fall under clause (B) of proviso to section 32(1)(iia) of the Act. We are in complete agreement with the arguments advanced by the Ld. DR. Needless to mention that the assessee is entitled for the benefit of having its written down value increased due to additional depreciation getting disallowed. The Ld. AO is directed to rework the written down value accordingly and give benefit of increased depreciation in the subsequent years as a consequential impact. Accordingly, ground nos. 1 and 2 raised by the assessee are partly allowed for statistical purposes.” Respectfully following the same, we also direct the same relief which has been partly allowed for statistical purposes.
Coming to the other issue i.e. ground no.3 in respect to the Ld. CIT(A)’s confirming the action of the AO in treating the loan given by Unicorn Marketing Private Limited to the assessee company to the tune of Rs.2,74,82,063/- as deemed dividend. At the outset itself it was brought to our knowledge that the lender company from whom it is alleged that loan has been taken by the assessee i.e. M/s. Unicorn Marketing Pvt. Ltd. is taken as true then also the deemed dividend u/s. 2(22)(e) of the Income-tax Act, 1961 (hereinafter referred to as the “Act”) is not attracted. The Ld. AR contended that the assessee company does not have shareholding in M/s. Unicorn Marketing Private Limited, the lender company. Though the assessee disputes as to whether loan has been taken by the assessee, however, according to assessee, the amount in question cannot be brought to tax under the deemed dividend u/s. 2(22)(e) of the Act for the simple reason that the assessee company is not a substantial shareholder having more than 10% shareholding in the lender company i.e.in M/s. Unicorn Marketing Pvt. Ltd. For this proposition, the assessee relied on the order of the Hon’ble Delhi High Court in CIT Vs. Bikaner Cuisine (P) Ltd. Vs. CIT (2014) 45 taxmann.com 253 (Del.) in which the Hon’ble High Court has held as under (head-note): “Section 2(22) of the Income-tax Act, 1961 – Deemed dividend (Loans or advances)-Assessee- company received certain amount as unsecured loan by BIPS-Assessing Officer invoked 4 V2 Retail Ltd., AY, 2010-11 provision of section 2(22)(e) and thereby made addition on ground that assessee-company and BIPS had common shareholder – Whether since assessee-company itself was not a shareholder in payer company BIPS, amount of loan could not be treated as deemed dividend under section 2(22) in hands of assessee-company-Held, yes (Paras 2 & 3) (In favour of assessee).”
Assessee has also relied on the order of Hon’ble Delhi High Court in CIT Vs. MCC Marketing (P) Ltd. (2011 16 taxmann.com 411 (Del) wherein the Hon’ble High Court has held as under (head-note): “Section 2(22) of the Income-tax Act, 1961 - Deemed dividend - Assessment year 2006-07 - Assessee, a private limited company, received a certain amount as unsecured loan from its sister concern by name MIPL - Assessing Officer having noticed that one A was holding more than 20 per cent shares in both MIPL and assessee-company invoked provisions of section 2(22)(e) and made addition of aforesaid amount to income of assessee - Whether in view of judgment of Delhi High Court rendered in case of CIT v. Ankitech (P.) Ltd. [2011] 199 Taxman 341 /11 taxmann.com 100, provisions of section 2(22)(e) were not attracted in instant case - Held, yes - Whether, therefore, impugned addition made by Assessing Officer under section 2(22)(e) was not justified - Held, yes [In favour of assessee]”
We note that the AO has made the addition on the basis that the assessee company has secured unsecured loan from M/s. Unicorn Marketing Pvt. Ltd. in which the substantial shareholder M/s. Ricon Commodities Pvt. Ltd. (having shareholding 22.05%) of assessee company; and M/s. Ricon Commodities Pvt. Ltd. has shareholding of 44.16% i.e. more than 10% of shareholding in lender company M/s. Unicorn Marketing Pvt. Ltd. so, the AO has made the has made the addition u/s. 2(22)(e) of the Act. So, it is the case of the AO that since M/s. Ricon Commodities Pvt. Ltd. has substantial shareholding in both assessee company and the lender company M/s. Unicorn Marketing Pvt. Ltd., so the loan taken by assessee company should be treated as deemed dividend. We note that it is no where the case of the AO that the assessee company is a substantial shareholder of M/s. Unicorn Marketing Pvt. Ltd. and according to the submission of the Ld. AR, the assessee company does not have the shareholding of M/s. Unicorn Marketing Pvt. Ltd. which is supposed to have given loan to assessee company which fact itself has been disputed. However, according to assessee company, even if for argument sake it is taken as loan given by M/s. Unicorn Marketing Pvt. Ltd. to assessee company, still sec. 2(22)(e) of the Act is not attracted because the assessee company is not a substantial shareholder of M/s. Unicorn Marketing Pvt. Ltd. the deemed dividend u/s. 2(22)(e) of the Act is not at all attracted. In such a scenario, we are unable to accept the AO’s addition of Rs.2,74,82,063/- u/s. 2(22)(e)
5 V2 Retail Ltd., AY, 2010-11 of the Act which has been restricted by the Ld. CIT(A) to Rs.44,83,088/- which is to the extent of accumulated profit of M/s. Unicorn Marketing Pvt. Ltd. as on 01.04.2009. We find that the AO as well as the Ld. CIT(A) erred in making the addition applying sec. 2(22)(e) of the Act which cannot be invoked to tax the amount in question. Therefore, this ground of appeal of assessee is allowed.