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Income Tax Appellate Tribunal, “G” BENCH, MUMBAI
Before: SHRI C.N. PRASAD, JM & SHRI RAJESH KUMAR, AM
आयकर अपीऱीय अधिकरण, म ुंबई न्यायपीठ “जी” म ुंबई IN THE INCOME TAX APPELLATE TRIBUNAL “G” BENCH, MUMBAI श्री सी. एन.प्रसाद, न्याययक सदस्य एवं श्री राजेश कुमार, ऱेखा सदस्य के समक्ष BEFORE SHRI C.N. PRASAD, JM AND SHRI RAJESH KUMAR, AM Godrej Industries Ltd., The Dy. Commissioner of Kalyaniwlla and Mistry, Income-tax-10(2), फनधभ/ Room No.475, 4th floor, Army and Navi Building, 148, Mahatma Gandhi road, Aayakar Bhavan, Vs. Fort, M K Marg, Mumbai-400001 Mumbai-400020 Asst. Commissioner of Income- Godrej Industries Ltd., tax-14(1)(2), Pirojsha Nagar, Eastern फनधभ/ Room No.460, 4th floor, Express Highway, Aayakar Bhavan, Vikhroli, Vs. M K Marg, Mumbai-400079 Mumbai-400020 स्थधमी रेखध सं./ PAN : AAACG2953R (अऩीरधथी /Appellant) (प्रत्मथी / Respondent) :
अऩीरधथी की ओय से / Assessee by : Shri F V Irani प्रत्मथी की ओय से/Respondent by : Ms.Vidisha Kalra
सुनवधई की तधयीख /Date of Hearing : 29.12.2016 घोषणध की तधयीख /Date of Pronouncement : 10.1.2017
2 and 164/Mum/2015 आदेश / O R D E R PER RAJESH KUMAR, A. M: These cross appeals are directed against the order dated 14.10.2014 passed by the ld. CIT(A)-21, Mumbai. These appeals, for the sake of convenience, are clubbed together, heard together and are being disposed of in this consolidated order. 2. The issue raised in the first ground is against the confirmation of action of the AO by the ld.CIT(A) by holding that the expenses on brand building claimed by the assessee was of capital in nature and accordingly not allowable as revenue expenditure. 3. At the outset, the ld.AR submitted before us that the issue taken by the assessee in the first ground is covered by the decision of the Co-ordinate Bench of the Tribunal in assessee’s own case in ITA No.3428/Mum/2013 (AY-2009-10) and ITA No.3737/Mum/2013(AY-2009-10) dated 1.6.2016 and therefore, the ground taken by the assessee should be allowed. 4. The ld. DR appeared fairly agreed to the submissions of the ld.AR. 5. We have carefully considered the rival submissions and perused the material available on record including the orders of authorities below and order of coordinate bench relied upon by the assessee. We find from the order of co-ordinate Bench in the case of assessee (supra) the issue raised by 3 and 164/Mum/2015 the assessee stands covered vide para 8 of the order, wherein it has been held as under : “8. We have considered the submissions of the assessee in detail and gone through the judgments relied upon by it. We have also gone through the orders of the lowers authorities and submissions of the ld. DR. W have read the agreement entered into between the Godrej group and Interbrand, UK for improvements in the Godrej brand. It is a matter of public knowledge that brand "Godrej" has been existing for last many years. The terms of the agreement itself suggest that desired improvements were required to be made in the Godrej brand which already existed. It was further submitted by the assessee before the lower authorities that there was no change in Godrej logo, the logo, the sign age, the size of the brand name as all of these remained to be the same as they were before. The only change was change in the colour and colour combination which was brought in line with the likes of the youth. In any case, we have conspicuously noted that the name of the brand "Godrej” remained as it is , i.e. Godrej. Under these circumstances, one cannot contend at all that there was any type of acquisition of new intangible asset. The Godrej brand was with this group and remained as it is._ There was no change in the ownership of the brand. In the given facts, at the best, it could be argued that there was some improvements in the looks and appearance of the brand. Under these circumstances, it cannot be contend that there was creation of a 'new capital asset. It was settled way back by Hon'ble Supreme Court in the case of Empire Jute Co Ltd vs CIT 124 ITR 1 that for the purpose of treating an expenditure as capital expenditure, twin conditions are must, viz. (i) there should be benefit of enduring nature; (ii) the expenditure must give rise to creation of new capital asset. The observations of Hon’ble Supreme Court were reiterated in subsequent judgment in the case of Alembic Chemical Works ltd vs CIT 177 ITR 377 (SC) and thereafter many judgements came from various courts from all over the country wherein similar views were taken. In the facts of the case before us, admittedly, there is no creation of new assets. Thus, the impugned expenditure cannot be held to be a capital expenditure. Similar view has been taken by Hon'ble Mumbai Bench of ITAT in the case of Fine Jewellery {India} Ltd vs ACIT (supra) as has been relied upon by the Id.counsel wherein it has been held that expenditure incurred by the assessee on creation of brand was allowable as revenue expenditure u/s 37(1) of the Income-tax Act. The Id.counsel also relied upon other judgments from 4 and 164/Mum/2015 Mumbai Bench in the case of Brightest Circle Jwellery Pvt Ltd (ITA No.4511/Mum/2011 dated 11th May, 2012) which has been authored by one of us, i.e. Hon'ble JM, wherein identical issue was involved and after discussing the entire law on this issue it was held by the co- ordinate bench that expenditure incurred on brand building was revenue in nature. Thus, under these facts and circumstances of this case and in view of the clear position of law as discussed above, we hold these expenses are revenue expenses and direct the Assessing Officer to treat the same as such and allow the same and, therefore, we delete the disallowance made by the Assessing Officer.
Grounds 2 to 6: in these grounds, the assessee has challenged the disallowance made by the Assessing Officer u/s 14A on account of interest. During the course of hearing it was submitted by the Id.counsel that investment in tax free securities was for strategic reasons and that own funds of the assessee were in excess of investment in the tax free securities. It was further submitted that the Hon’ble Tribunal in assessee’s own case for AYs 2006-07 and 2007-08 vide order dated 5.9.2014 decided identical issue in favour of the assessee. In assessment year 2008-09, the Tribunal in assessee’s own case vide order dated 7.10.2015 I ITA No.ITA No.424/Mum/2012 also decided the issue in favour of the assessee in principle but sent it back to the file of the AO for the limited purpose of verification of facts.”
Accordingly, respectfully following the decision of the co-ordinate bench of the Tribunal, we set aside the order of the ld.CIT(A) and direct the AO to delete the disallowance made on account of brand building expenditure. 7. The issue raised in the grounds no.2 to 8 is common and is against the upholding the disallowance by the ld.CIT(A) as made by the AO under section 14A read rule 8D of the Income Tax Rules, 1962. 5 and 164/Mum/2015 8. The brief facts of the case are that the AO during the course of assessment proceedings, AO noted that the assessee has earned exempt income of Rs.4280.11 lacs and also made suo motto disallowance under section 14A of expenses attributable to earning of the exempt income to the extent of Rs.36,98,000/-. The AO also observed that no disallowance has been made by the assessee on account of interest expenses and therefore the provisions of Rule 8D(2)(ii) of the Rules were attracted. Accordingly the AO after giving the show cause notice to the assessee and considering the contentions raised that no expenses were incurred directly for earning of the exempt income/dividend in defense by holding that no separate records have been maintained for the investments in shares and securities yielding exempt income and other business transactions. Therefore, the AO came to the conclusion that the assessee failed to prove direct nexus of investments in shares out of own surplus funds and re-worked the disallowance by taking interest expenditure u/s 14A r.w.rule 8D(2)(ii) of the Rules at Rs.2823.31 lakhs and Rs.523.16 lakhs under rule 8D (2)(iii) of the Rules and after allowing the deduction suo mottu disallowance of Rs.36.98 lakhs made the net disallowance of Rs.3310.48 lakhs. 9. During the appellate proceeding before the FAA, the addition made by the AO was partly sustained by observing and holding as under:
6 and 164/Mum/2015 “6.3 I have considered the facts and circumstances of the case. This issue had come into consideration of CIT(A) in A.Y.2009-10 wherein in para 6.2 it is held as under: "6.2 I have considered the facts of the case. This issue has come into consideration in IIT(A) order of A. Y.2007-08 wherein para 3.1 it is held as under: “3.1 I have carefully considered the facts of the case. In my considered view, any interest and administrative expenses as held to be relatable to earning of exempt income for computing the income under the normal provisions of the Act, is required to be added in the book profit as per provisions of sec. 115JB of the Act. While adjudicating ground No.1 to 7 above, the undersigned has held that expenditure of Rs.3,91,46,500/ - was pertaining to earning of exempt income and therefore, was disallowable as per provisions of sec. 14A(l) of the Act. In the facts and circumstances, the AO is directed to reduce the book profit by the amount of exempted gross dividend income. The AO is also directed to increase book profit to the extent of expenditure held to be relatable to earning of exempt dividend income. These grounds of appeal are therefore, partly allowed” Following the above order, A.O. is directed to restrict the disallowance to Rs.6.44 crores as disallowance of expenditure u./s.14A of the IT Act instead of Rs.27,92,00,000/-. Disallowance u/s.14A in earlier grounds of appeal is only Rs.6.44 crores, hence, A.O. is directed to restrict the disallowance to Rs. 6.44 crores. Relief granted to the appellant is Rs.21,18,OO,OOO/-. This ground of appeal is partly allowed." Following the above decision, A.Os addition is confirmed for sec.115JB. However, addition of sec.115JB is restricted to disallowance confirmed in the previous ground of appeal for the disallowance u/s 14A i.e.Rs.8,26,99,OOO/- instead of Rs.33,1O,48,OOO/- added by the A.O. The disallowance is restricted to Rs.8,26,99,OOO/-. The appellant had already disallowed Rs.36,98,OOO/-, hence, net amount allowable for disallowance is Rs.7,90,01,000/- rest of the amount is deleted i.e.Rs.25,20,47,000. Relief granted to the appellant is Rs.25,20,47,000/-
7 and 164/Mum/2015
The ld.CIT(A) sustained the disallowance to the extent of Rs.826.99 lacs by allowing the relief to the assessee to the extent of Rs.2520.47 lacs.
As regard the disallowance under rule 8D(2)(ii), the ld. AR submitted that the investments made by the assessee in the subsidiary companies were for strategic purposes and therefore the provisions of section 14A read with rule 8D(2)(ii) were not applicable. In defense of his arguments, the ld. AR drew our attention to the decision of co-ordinate bench of the Tribunal in assessee’s own case in ITA No.424/M/2012 (AY-2008-09) dated 7.10.2015, ITA NO.1900/Mum/2011(AY-2006-07) and others, dated 28.8.2014 and ITA Nos.3428/Mum/2013 and 3737/Mum/2013) (AY-2009-10), wherein the ld. counsel pointed out that the identical issue has been decided in favour of the assessee under identical facts and circumstances and therefore the disallowance as sustained by the ld.CIT(A) under rule 8D(2) should be deleted. 12. As regards the disallowance made under rule 8D(2)(iii), the ld. AR submitted that the AO has not recorded any satisfaction before invoking the provisions of rule 8D and therefore disallowance was bad in law. In the alternatively, the ld.AR submitted before us that if at all the provisions of rule 8D(2)(iii) was to be invoked then these investments of strategic nature
8 and 164/Mum/2015 made in the sister concerns required to be excluded while working out the disallowance. 13. On the other hand, the ld. DR strongly relied upon the orders of authorities below by submitting that the Rule 8D(2) is clearly applicable to the year under consideration. The reliance placed by the ld.AR on the decision of the co-ordinate bench of the Tribunal was also not correct as decisions pertained to the assessment years prior to AY 2008-09. The ld. DR submitted before us that the AO has duly recorded the satisfaction in the assessment order and there was no merit in the arguments advanced by the ld AR and therefore the disallowance as sustained by the CIT(A) should be upheld. 14. We have heard both the parties on the issue and perused material placed before us including the impugned orders of the authorities below and the case law relied upon by the assessee. We find from the records before us that the assessee has made strategic investments in the sister concerns which is undisputed which in our opinion should not be considered for the purpose of disallowance of interest under rule 8D(2)(ii)& (iii) as the motive behind the said investments are not for earning dividend income but made from strategic perspectives. The case of the assessee stands covered in favour of the assessee by the decision of the co-ordinate bench of the Tribunal in ITA No.424/M/2012(supra), wherein the Tribunal has decided
9 and 164/Mum/2015 the issue u/r 80D(2)(ii) and (iii) in favour of the assessee vide para 11 and 12 of the order which read as under : “11. Having said all that in the light of the decision of the Tribunal given in earlier assessment years and the relevant portion as exhibited hereinabove, the assessee raised a new plea during this year and claimed that the investments made in the companies are strategic investments which have been made for business purposes and therefore should not be considered when computing the average value of investments for the purpose of Rule 8D(2)(ii) and 8D(2)(iii) of the Act. In support, the Ld. Counsel relied upon various decisions of the Tribunal and the Hon’ble High Courts. 12. After giving a thoughtful consideration to the facts of the case in the light of the decision of the Tribunal, the claim of strategic investments made by the assessee need verification. We, therefore, restore the entire issue to the file of the AO. The AO is directed to verify the claim of the assessee that the investments are made for strategic purposes and decide this issue afresh in the light of the findings given by the Tribunal in assessee’s own case in earlier assessment years and also keeping in mind that if investments are found to be of strategic in nature then to decide the issue as per the decision of the Tribunal given in the case of J.M. Financial Ltd. in ITA No. 4521/M/2010 read with M/s. Garware Wall Ropes Ltd. in ITA No. 5408/M/2012. The assessee may furnish any other related decision in support of its claim. With the above directions, ground No. 1 to 5 are treated as allowed for statistical purpose.”
In view of the above, we direct the AO to delete the disallowance on account of interest under rule 8D(2)(ii) in toto and so far as the disallowance under rule 8D(2)(iii) is concerned, the investments made in the sister concerns are of strategic nature are also required to be excluded while calculating the disallowance under rule 8D(2)(iii) of the Rules. We, therefore, direct the AO to rework the disallowance under rule 8D(2)(iii)
10 and 164/Mum/2015 after excluding strategic investments and accordingly the ground raised by the assessee is allowed.
The issue raised in Ground No.9 and 10 is common and is against the decision of ld. CIT(A) that while computing the book profit under section 115JB, the disallowance worked out under section 14A read with rule 8D is required to be added to the book profits.
The ld.AR very fairly admitted that the issue raised in these grounds stands covered in favour of the revenue and against the assessee by the decision of the Co-ordinate Bench of the Tribunal in assessee’s own case in ITA No.1900/Mum/2011 (AY:2006-2007) order dated 5.9.2014 and vide para 20 of the above order, the tribunal decided the issue against the assessee, in vide para 30 and in ITA No.3428/Mum/2013 and 3737/Mum/2013, para 11,12 and 13. In view of the fair admission of the ld.AR, we do not want to interfere in the decision of Tribunal and accordingly dismiss these grounds.
Ground no.10 taken by the assessee pertains to confirmation of disallowance by the ld.CIT(A) in respect of amortization premium paid for leasehold land as made by the AO.
11 and 164/Mum/2015 19. At the time of hearing, the ld.AR admitted before the Tribunal that an identical issue had come up before this Tribunal in number of appeals filed by the assessee in ITA No.1900/Mumn/2011, 1614/Mum/2011 (AY-2006-07) order dated 5.9.2014 (para15), and 3136/Mum/2011 (AY-2007-08), order dated 5.9.2014 (para 33), ITA No.424/Mum/2012 (AY-2008-09) order dated 7.10.2015 (para 13 and 14) and also in ITA No.3428/Mum/2013 and 3737/Mum/2013 (Y 2009-10) which decided the issue against the assessee and in view of the said decisions the ground raised should be dismissed .
In view of the above admission of the ld. AR, we confirm the decision of the ld. CIT(A) and dismiss the ground taken by the assessee.
The issue raised in ground no.11 by the assessee pertains to confirmation of disallowance concerning unutilized Cenvat Credit of Rs.2,74,95,395/-.
At outset the ld.AR submitted before us that the issue raised by the assessee in this ground stands covered by the decisions of the Co-ordinate Bench of the Tribunal vide ITA No.4621/Mum/2011 and 3136/Mum/2011 (AY-2007-08), order dated 5.9.2014 (para 26 and 27), ITA No.424/Mum/2012 (AY-2008-09) order dated 7.10.2015 (para 15) and also 12 and 164/Mum/2015 in ITA No.3428/Mum/2013 and 3737/Mum/2013 (AY 2009-10) (para 15) in favour of the assessee. 23. On perusal of the above Tribunal orders, we find that the issue of cenvat credit is allowed in favour of the assessee. Accordingly, respectfully following the decision of the Tribunal in assessee’s own case we allow the ground taken by the assessee.
Ground No.12 taken by the assessee is against upholding the order of AO on the issue of opening written down value and not allowing depreciation by CIT(A) on the basis of ITAT order.
The ld. AR fairly agreed before us that the issue raised by the assessee in this appeal stands covered against the assessee by the decision of Co-ordinate Bench of the Tribunal in ITA No.3428/Mum/2013 and 3737/Mum/2013 (AY 2009-10). Therefore, the ld.AR prayed that the ground raised by the assessee be allowed.
We, on perusal of the decision relied upon by the assessee in its own case in ITA No.3428/Mum/2013 and 3737/Mum/2013 (AY 2009-10). (supra), the Tribunal vide para 16 of the order has been decided the issue agains the assessee . Therefore, respectfully following the decision of the Tribunal in assessee’s own case, we dismiss this ground. The relevant para is reproduced below:
13 and 164/Mum/2015 “16. Ground no.10: In this ground, the assessee has challenged the action of the lower authorities with regard to adoption of value of opening WDV of block of assets. It has been requested by the assessee that AO should be directed to accept the WDV of block of assets and allow depreciation as claimed by the assessee as per its return of income. It was clearly submitted that this issue has been decided against the assessee by h e Tribunal in AYs 2007-08 and 2008-09”
Ground No.13 pertains to not adjudicating the additional ground raised by the assessee before the ld.CIT(A) that AO erred in treating the vehicle lease entered into by the assessee as a finance lease and thereby treating the lease rental paid during the year on the lease of cars aggregating to Rs.88,52,212/- as a capital expenditure and disallowing the same and granting depreciation thereon. We find that the issue raised by the assessee in this ground is identical to one decided by the coordinate bench in its own case in ITA No ITA No.3428/Mum/2013 and 3737/Mum/2013 (AY 2009-10) vide para 21 which is extracted below: “21. It is brought to our notice that the expenditure on lease rental is incurred as common expenditure for the whole group. Same fleet of cars is shared between group companies. Lease agreement is same. Other facts are also identical. The lower authorities have also relied upon the order of Godrej Consumer Product Ltd for making disallowance which was subsequently reversed by the ITAT. Thus, in the given facts, order of the ITAT has to be applied in the case of assessee company’s facts also. Thus, respectfully following the order of the co-ordinate bench, we decide this issue in favour of the assessee and hold that the rent of lease rental has to be allowed as revenue expenditure. Consequently, the disallowance made by the AO is directed to be deleted”.
14 and 164/Mum/2015
Respectfully following the decision of the coordinate bench we are inclined to allow the ground raised by the assessee by setting aside the order of CIT(A) on this issue. 28. Ground no 14 is without prejudice ground and as we have alredy allowed the main issue raised in ground no 13 in favour of the assessee , therefore this without prejudice ground becomes infructuous and dismissed accordingly. 29. Ground no.1 and 2 taken by the revenue read as under : 1. "On the facts and in the circumstances of the case, the Ld. CIT(A) erred in restricting the disallowance to Rs. 8,26,99,000/ - as against disallowance of Rs.33,10,48,000/- made by the Assessing Officer." 1.1. "On the facts and in. the circumstances of the case, the Ld. CIT(A) erred in not appreciating that the expenses on each investments are not separately identifiable and hence could not be directly attributed to the exempt income. 2. "On the facts and in the circumstances of the case, the Ld. CJT(A) erred in holding that only Rs. 8,26,99,000/- being disallowance u/s. 14A, be added to the book profit and not the entire disallowance of Rs. 33,10,48,000/-
Ground No.1 and 2 taken by the revenue is in respect of restricting the disallowance to Rs.8,26,00,000/- by CIT(A) as against disallowance of Rs.33,10,48,000/- made by the AO under rule 8D(2) of the Rules.
15 and 164/Mum/2015 31. We have already decided the issue in favour of the assessee vide para 11 to 15 hereinabove and therefore these grounds raised by the revenue become infructuous and accordingly, dismissed as infructuous. 32. Ground No.3 taken by the revenue reads as under :
"On the facts and in the circumstances of the case, the Ld. CIT(A) erred in not appreciating the fact that the adjustment u/ s. 145A was made after recasting the Opening Stock as directed by the CIT(A) in earlier years.
The issue raised in the grounds no.3 raised by the revenue is that the ld.CIT(A) has not appreciated that the adjustment under section 145A was made after recasting the opening stock as detected by the ld.CIT(A) in the earlier years. The ld. AR submitted before us that the first appellate authority while disposing of the issue raised by the assessee before it has observed that the matter was to be sent back to the AO to re-consider and recast the account of the assessee on opening stock, purchases and sales and inventory. However, in the last line at page 19 of the order, the ld.CIT(A) has allowed ground of the assessee’s appeal instead of sending back the issue to the file of the AO. The ld. AR argued before us that the issue can only be decided with a direction to the AO according to the decision of co-ordinate bench of the Tribunal in assessee’s own be directed to be followed by the AO.
16 and 164/Mum/2015 34. We have heard the rival contentions and perused the material placed before us. We find that the ld.CIT(A) after giving detailed observations and finding in para 8.3 wrongly stated the ground of appeal to be allowed. For the sake of convenience the para 8.3 is reproduced below : “8.3 I have considered the facts and circumstances of the case. This issue had come into consideration of CIT(A) in A.Y.2008-09 wherein in para 9.3 it is held as under: "9.3 I have considered the facts of the case. This issue has come into consideration of CIT(A) in A Y.2008-09 wherein para 5.3 it was held as under: (5.3 I have considered the facts of the case. The facts of the issue under consideration are identical to that of A Y.2007-08. In appeal order did. 03.02.2011, the undersiqned decided this issue as under: "5.1 I have considered the facts of the case. This issue was also there in appellant's own, case for A. Y. 2006-07, wherein the identical facts were involved. In appeal order elated 20.12.2010, for AY 2006-07, the undersigned decided the issue as under: "5.3 I have carefully considered the facts of the case. As per provisions of section 145A, the valuation of purchases and sales of goods and inventory for the purpose of determining the income chargeable under the head "profits and gains of business or profession" shall be: .... (b) .. further adjusted to include the amount of any tax, duty, cess or fee (by whatever name called) paid or incurred by the assessee to bring the goods to the place of its location and conditions as on the date of valuation: The provisions of section 145A are mandatory and supersedes the accounting standards. In the case under consideration, the AO considered the element of excise duty and other taxes while valuing the inventory only whereas element of such duty. or taxes were also required to be considered for valuing the purchases, sales and inventory. Various courts
17 and 164/Mum/2015 have also held that when such adjustment is required to be made, such adjustment will also have to be made in the opening stock. In the facts and circumstances, the AO is directed to recast the accounts of the appellant by considering the element of excise duty and other taxes in the opening stock, purchases, sales and inventory. The increase, if any, on account of these adjustments, should be added in the income of the 'appellant. The appellant is directed to provide all the information to the AO. Subject to such exercise by the AO, these grounds of appeal are therefore, adjudicated accordingly." Following the appeal order of A Y. 2006-07, the AO is directed to recast the accounts of the appellant by considering the element of exciseduty and other taxes in opening 'stock, purchases, sales and inventory. The resultant increase, if any, on account of these adjustments should be added in the income of appellant. Subject to such exercise by the AO, these grounds of appeal are adjudicated accordingly. " Following the above decision, the A 0. is directed to carry the similar. exercise If there is no impact on the profits of the company by following either of the method, the addition made by A 0. Should be treated as deleted. Subject to such exercise by the AO., these grounds of appeal are adjudicated accordingly Following the above decision, this around of appeal is allowed.” 35. We find that the issue has been dealt with by us in ground no.11 of ITA No.151/Mum/2015 (supra). In view of the above, decision, we sent back this issue back to the file of the AO for verification of the facts and then decide the issue in accordance with law after providing necessary opportunity of the hearing to the assessee. This ground is allowed for statistical purposes.
18 and 164/Mum/2015 36. Grounds of appeal No.4 taken by the revenue reads as under :
"On the facts and in the circumstances of the case, the Ld. CIT(A) erred in-not appreciating the fact that the additional depreciation u/s 32(ii)(a) is only applicable in the first year of installation of Plant & Machinery and not subsequent years, even though when the asset is utilized for a period of less than 180 days. " 37. At the outset, the ld.AR submitted that the issue raised in this ground stands covered by the decision of the co-ordinate Bench of the Tribunal in assessee’s own case in ITA NO.6438/Mum/2013(AY-2007-08) order dated 1.6.2015 and in ITA No.3428/Mum/2013 and 3737/Mum/2013 (AY 2009- 10), dated 1.6.2016 and therefore prayed that the issue be decided in favour of the assessee. 38. On perusal of the above said orders we find that the issue raised by the assessee stands covered in favour of the assessee vide para 2 to 4 of the order passed in ITA No.6438/Mum/2013 which is reproduced below: “2. During the hearing of this appeal, Shri Ajit Kumar Srivastava, learned CIT-DR, advanced his arguments which are identical to the ground raised by submitting that the learned Commissioner of Income T ax (Appeals) while granting direction to the Assessing Officer ignored the provisions of the Act. The addition so made by the Assessing Officer was defended. On the other hand, Ms. Sonalee Godbole, learned Counsel for the assessee defended the conclusion arrived at in the impugned order by submitting that the case is covered in favour of the assessee by the decision of the learned Commissioner of Income Tax (Appeals) itself for the assessment year 2009-10, which has been reproduced at Page-2 onwards of the impugned order. 3. We have considered the rival submissions and perused the material available on record. If the observation made in the assessment order, leading to addition made to the total income, conclusion drawn in the impugned
19 and 164/Mum/2015 order, material available on record, assertions made by the ld. respective counsels, if kept in juxtaposition and analyzed, we note that the assessee declared total income as “nil” as per the normal provisions of the Act and total income at Rs.21,86,10,388, u/s 115JB of the Act. The assessee company was assessed on 21st December 2009, u/s 143(3) of the Act, computing the total loss of Rs.29,83,16,673, as per the normal provision and total income of Rs.26,34,32,387, u/s 115JB of the Act. The assessee claimed additional depreciation u/s 32(1)(iia) of the Act. The learned Commissioner invoking revisional jurisdiction u/s 263 of the Act, directed the Assessing Officer not to allow carry forward of unclaimed depreciation pursuant to the direction disallowed the additional depreciation and restricted to 10% on the ground that the plant and machinery was put to use after 30th September 2006. Thus, the period is less than 180 days. Therefore, only restricted rate shall be applicable. On appeal, before the learned Commissioner of Income Tax (Appeals), by following the decision for the assessment year 2009-10, the issue was decided in favour of the assessee. The Revenue is aggrieved and is in appeal before this Tribunal. We find that the provisions of section 32(1)(iia) of the Act, was introduced vide Finance Act, 2002 (effective from the assessment year 2003-04) with a view to give boost to the manufacturing sector, therefore, it was proposed to allow additional depreciation of a sum equal to 15% (over and above normal depreciation) of the actual cost of such plant and machinery acquired and installed after 31st March 2002. This was sort of incentive to the assessee to invest and acquire plant and machinery to expand the manufacturing capacity. The Finance Act, 2005, further amended section 32, to increase the rate of additional depreciation to 20% on new plant and machinery and dispensed with the condition of additional depreciation which to be allowed only to a new industrial undertaking. The provision was explained by CBDT, Circular no.8 of 2002. The Delhi Bench of the Tribunal in DCIT v/s Cosmo Films Ltd. (ITA no.2831/Del./2007), held that in section 32(1)(iia) of the Act, the expression used is “shall be allowed”. Thus, the assessee company earned the benefit as soon as it has purchased new plant and machinery in full but restricted 50% in that particular year on account of period of usages. Such restrictions cannot divert the statutory right of the assessee. Identical ratio was laid down in ACIT v/s SIL Investment Ltd., 54 SOT (Del.) 54, which was duly followed by the Mumbai Bench of the Tribunal in MITC Rolling Mills Pvt. Ltd. v/s ACIT, (ITA no.2789/Mum./2013), order dated 13th May 2013. Thus, the assessee is entitled to depreciation in the subsequent year, if the entire depreciation is not allowed in the first
20 and 164/Mum/2015 year of installation. The ratio laid down in ITO v/s M/s. Aswani Industries (ITA no.140/Ahd./2013) order dated 31st May 2013, further supports the claim of the assessee. The ratio laid down in Apollo Tyres Ltd. v/s ACIT, (2014) 45 taxman.com 337 (Cochin)(Trib.) further supports the case of the assessee. If the ratio laid down in the aforesaid cases is kept juxtaposition with the facts before us, we are of the view that the assessee is entitled for 50% of the additional depreciation and there is no restriction to claim the additional depreciation, if otherwise available, to the assessee. We find no infirmity in the conclusion drawn by the learned Commissioner of Income Tax (Appeals). It is affirmed.” In ITA No.3428/Mum/2013, the issue has been decided vide para 26 which is reproduced below: “26. Ground No.2: This ground is with regard to allowing additional depreciation in the first year of installation of plant and machinery. It was fairly stated that this ground has been decided by the Tribunal in assessee’s own case in AY 2007-08 wherein identical facts were involved. It is noted by us that additional depreciation has been allowed to the assessee. We direct the AO to allow depreciation in accordance with the order of the Tribunal for AY 2007-08. This ground may be treated as allowed accordingly”. Respectfully following the decisions of the coordinate benches, this ground is allowed. 39. Ground no.5 taken by the revenue reads as under:
"On the facts and in the circumstances of the case, the Ld. CIT(A) erred in directing the Assessing Officer to examine the charging of interest u/ s 234B, without appreciating the fact that the retrospective amendment in the Act, for deriving the Book Profit was meant for section 80HHC only & not section 234B, and hence the interest under section 234B was rightly charged by the AO”
21 and 164/Mum/2015 40. Facts of the case are that the claim under section 80HHC was withdrawn by the assessee on account of retrospective amendment in section 115JB of Act for calculation of book profits.AO charged interest under section 234B by ignoring the facts of the advance tax was duly deposited by the assessee as per the provisions of the Act prevalent on the statute book during the financial year. The ld. DR submitted before us that in view of the retrospective amendment the AO has rightly charged on withdrawal of section 80HHC and order of the AO be upheld and that of ld.CIT(A) be set aside. 41. The ld.AR while referring to the provisions of section 234B submitted that the amendment in subsequent year cannot be taken course of by the AO to calculate the interest under section 234B of the Act and accordingly prayed to uphold the order of FAA. The ld. AR admitted that the advance tax was paid on the basis of provisions of law prevalent during the financial year and the return of income was filed accordingly. The ld. AR further submitted that the amendment to section 115JB which is retrospective in nature was made by Finance Act, 2011 much after the due date for payment of advances and due date for filing of return of income by the assessee and therefore the assessee could not have visualized future changes in law and therefore could not be penalized for the fault not attributable to assessee. The ld. AR vehemently relied on the following decisions:
22 and 164/Mum/2015 A) Prime Securities V/s ACIT reported in 333 ITR 464 (Bom) (HC); B) Emami Ltd V/s CIT reported in 337 ITR 470 (Cal) (HC); C) Grindwell Norton V/s ACIT ITA No.9178/Mum/2004 (Mum-Trib); D) Priyanka Overseas Ltd V/s DCIT reported in 79 ITD 353 (Del-Trib); E) Haryana Warehousing Corporation V/s DCIT reported in 75 ITD 155 (Del-Trib).
The ld.AR pointed out that the similar issue has been decided by the first appellate authority for the assessment year 2008-09 which was not appealed before the Higher Forum by the revenue. In view of this the ld.AR prayed that the decision of the ld.CIT(A) be affirmed on this issue by dismissing the ground raised by the revenue.
We have carefully considered the rival submissions and perused the material placed before us in respect of the issue in hand. We find that the assessee has deposited the advance tax in four installments as per columns before the due date as per the provision of the Act. It is also clear from the fact before us that during the year the assessee paid taxes as per the law prevailing provisions in the Act in the relevant year and filed return of income accordingly. We find that the Financial Act 2001 brought out retrospective change to the provision of section 115JB w.e.f. 1.4.2005 and the assessee could not have foreseen the effect of this amendment while estimating and filing the return of income. On 14.10.2010. The case of the assessee finds
23 and 164/Mum/2015 support the decision of Jurisdictional High Court in the Prime Securities V/s ACIT reported in 333 ITR 464 (Bom) (HC), wherein it has been held : “Held that a perusal of the provisions of sections 208 and 209 shows that for the purpose of payment of advance tax the assessee has to estimate his current income and then he has to calculate income-tax on that income at the rate in force in the financial year. Thus, the amount of advance tax is to be decided by the assessee after estimating his current income and then applying law in force for deciding the amount of tax. It was an admitted position in the instant case that the date on which the assessee paid the advance tax it had estimated its income and liability for payment of advance tax in accordance with law that was in force. Therefore, it was obvious that there was no failure on the part of the assessee to pay advance tax in accordance with the provisions of sections 208 and 209. As in the instant case it was nobody's case that the assessee had committed a default in payment of advance tax when it actually paid it, the assessee could not be held liable to pay interest under section 234B. Insofar as the observations in the order of the Tribunal, that the assessee should have anticipated the events that took place in March, 1992, were concerned, they had no substance. It was rightly submitted that it was not possible for the assessee to anticipate the events that were to take place in the next financial year and pay advance tax on the basis of those anticipated events. It was to be held that in the facts and circumstances of the case the Tribunal was not justified in law in holding that the interest was payable under section 234B”
Moreover, in the case of the assessee the first appellate authority has already adjudicated the issue in favour of the assessee which was not challenged by the revenue. We, therefore, respectfully following the ratio laid down by the Hon’ble Jurisdictional High Court incline to uphold the order passed by the ld.CIT(A) on this issue by dismissing the appeal of the revenue.
24 and 164/Mum/2015
In the results, the appeal of the assessee is partly allowed and that of revenue stands dismissed. Order pronounced in the open court on 19th Jan, 2017. sd (C.N. Prasad) (Rajesh Kumar) न्याययक सदस्य / Judicial Member ऱेखा सदस्य / Accountant Member भुंफई Mumbai; ददनधंक Dated : 1.2017 SRL,Sr.PS आदेश की प्रनतलरपऩ अग्रेपषत/Copy of the Order forwarded to : अऩीरधथी / The Appellant 1. 2. प्रत्मथी / The Respondent आमकय आमुक्त(अऩीर) / The CIT(A) 3. आमकय आमुक्त / CIT – concerned 4. 5. पवबधगीम प्रनतननधध, आमकय अऩीरीम अधधकयण, भुंफई / DR, ITAT, Mumbai गधर्ा पधईर / Guard File 6. आदेशधनुसधय/ BY ORDER,उऩ/सहधमक ऩंजीकधय (Dy./Asstt.