DCIT, CHENNAI vs. M/S. FARIDA CLASSIC SHOES PVT. LTD., CHENNAI

The first issue arises for consideration in both the appeals is disallowance made by the Assessing Officer under Section 14A of the Income-tax Act, 1961 (in short 'the Act') read with Rule 8D of Income-tax Rules, 1962.

Shri B. Sahadevan, the Ld. Departmental Representative, submitted that on identical situation, this Tribunal for the assessment years 2011-12 and 2012-13 in & 2103/Mds/2015 allowed an identical claim of the assessee by placing its reliance on the earlier order of this Tribunal in ACIT v. M/s Best & Crompton Engineering Ltd. in I.T.A. No.1603/Mds/2012 dated 16.07.2013. The Ld. D.R. further submitted that the Revenue has already filed an appeal before the High Court against the order of this Tribunal.

We have heard Ms. S. Vidya, the Ld. representative of the assessee also. Admittedly, the issue of disallowance under Section 14A of the Act, on identical circumstances, was considered by the Tribunal in the assessee's own case for assessment years 2011-12 and 2012.13. An identical disallowance was deleted by this Tribunal by confirming the order of the CIT(Appeals). It is not in dispute that the facts are identical to that of assessment years 2011-12 and 2012-13. Therefore, this Tribunal do not find any reason to take a different view. By following the order of this Tribunal for assessment years 2011-12 and 2012-13 in the assessee's own case for the reasons stated therein, the order of the CIT(Appeals) is confirmed.

The next issue arises for consideration is with regard to disallowance of expenditure on impairment of molds.

Shri B. Sahadevan, the Ld. Departmental Representative, submitted that the Assessing Officer found that the assessee has debited an amount of `42,89,391/- on account of impairment of molds. According to the Ld. D.R., molds are used for manufacture of shoes, therefore, it has to be considered as plant and machinery. Any write off or loss on sale of moulds is on capital account, therefore, it cannot be allowed as revenue expenditure. The assessee brought to the notice of the Assessing Officer the order of this Tribunal in M/s Farida Leatherware Pvt. Ltd. in I.T.A. No.2304/Mds/2013. However, the Assessing Officer found that an appeal has already been filed before the High Court and the same is pending.

On the contrary, Ms. S. Vidya, the Ld. representative for the assessee, submitted that on identical set of facts, this Tribunal in M/s Farida Leatherware Pvt. Ltd. (supra) found that the expenditure incurred on the impairment of molds has to be allowed as revenue expenditure. The CIT(Appeals), in fact, placed his reliance on the order of this Tribunal. The Ld. representative further submitted that mere pendancy of appeal before the High Court cannot be a reason to take a different view.

We have considered the rival submissions on either side and perused the relevant material available on record. Admittedly, the expenditure on impairment of molds was considered by this Tribunal in M/s Farida Leatherware Pvt. Ltd. (supra). This Tribunal found that it has to be allowed as revenue expenditure. Since facts are identical, this Tribunal is of the considered opinion that the CIT(Appeals) has rightly placed his reliance on the order of this Tribunal in M/s Farida Leatherware Pvt. Ltd. (supra) and allowed the claim of the assessee. Therefore, this Tribunal do not find any reason to interfere with the order of the lower authority and accordingly the same is confirmed.