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Income Tax Appellate Tribunal, “H” Bench, Mumbai
Before: Shri B.R. Baskaran (AM) & Shri Amit Shukla (JM)
These cross appeals are directed against the order dated 28.3.2014 passed by the learned CIT(A)-14, Mumbai and they relate to A.Y. 2010-11.
The assessee is a manufacturer of televisions, air conditioners, washing machines and certain other FMCG products. The only issue contested by the assessee relates to the disallowance made by the Assessing Officer u/s. 14A of the Act. During the year under consideration the assessee received dividend
2 M/s. Mirc Electronics Ltd. income of ` 25,32,356/- and claimed the same as exempt u/s. 10(34) of the Act. The assessee disallowed a sum of ` 21,978 u/s. 14A of the Act. However, the Assessing Officer took the view that the disallowance is required to be made as per Rule 8D of the I.T. Rules and accordingly computed the disallowance u/r. 8D(2)(iii) of the I.T. Rules. At ` 16,73,028/-. The same was confirmed by the learned CIT(A) and hence the assessee has filed this appeal before us.
We have heard the parties on this issue and perused the record. Learned counsel appearing for the assessee submitted that identical issue was considered by the Coordinate Bench of the Tribunal in assessee’s own case related to AY 2008-09 (in and the Tribunal, vide its order dated 29.5.2015, has deleted the identical disallowance made by the Assessing Officer. Learned AR further invited our attention to the Schedule of investments placed at page No. 26 of the paper book. A perusal of the same would show that the assessee has invested major amount in its subsidiary company name M/s. Akasaka Electronic Limited. Learned AR submitted that the above said company is also engaged in the business of manufacturing of electronic items and hence there is business expediency in making investment in that company. He further submitted that the assessee has made investment in three more companies, namely M/s. Kongarar Textiles Limited, M/s. Menon Pistons Limited and M/s. Onida Finance Limited. He submitted that M/s. Onida Finance Ltd. is also a subsidiary company of the assessee. He submitted the investments in the above said companies (including subsidiaries) have been made in the earlier years and they have been brought forward during the year under consideration. Learned AR further submitted that, during the year under consideration, the assessee had made investment in the mutual funds to the tune of ` 13 crores. Besides the above, the assessee also purchased and sold unit of certain mutual funds. Learned AR submitted that the investments in mutual funds do not require much analysis and further, all these activities have been carried out by a staff. Hence the assessee has disallowed a portion of his salary u/s. 14A of the Act. Learned AR further submitted that the 3 M/s. Mirc Electronics Ltd.
Assessing Officer did not record his dissatisfaction over working given by the assessee by making due reference to the books of accounts and he has mechanically applied provisions of section 14A of the Act. He submitted that the addition made by the AO is liable to be dismissed on this ground also.
On the contrary, learned Departmental Representative submitted that the Assessing Officer was required to apply provisions of Rule 8D for computing disallowance u/s. 14A of the Act.
Having heard the rival submissions, we find merit in the contentions of the assessee. From the Schedule of investments given at page No. 26 of the paper book, we noticed that entire amount of investments made in equity shares (subsidiary companies and other companies) have been brought forward from earlier year, meaning thereby, no movement in these investment found was during the year under consideration. Other investments made by the assessee consisted of investments made in various schemes of different mutual funds only. According to Ld A.R, one of the staffs was assigned for this job and hence a portion of his salary has been considered for making disallowance u/s 14A of the Act. However, we notice that the assessee has not made disallowance out of other administrative expenses, even though there was fresh investments in Mutual funds and further there has been activities of purchase and sale of mutual fund units. Considering the activity involved in the investment portfolio of the assessee, we are of the view that a portion of other administrative expenses should also be allocated towards the investment activities. Accordingly we are of the view that the disallowance u/s 14A may be reasonably estimated at Rs.50,000/- and the same would take care of other administrative expenses and would meet the requirements of sec. 14A of the Act. Accordingly, we set aside the order passed by the learned CIT(A) on this issue and direct the Assessing Officer to restrict the addition to Rs.50,000/- (including the amount disallowed by the assessee). We order accordingly.
4 M/s. Mirc Electronics Ltd.
We shall now take up the appeal filed by the Revenue. The only issue urged in this appeal is whether the learned CIT(A) was justified in holding that the assessee is entitled to higher rate of depreciation at 30% on moulds held by the assessee, as against 15% allowed by the Assessing Officer.
We heard the parties on this issue and perused the record. We noticed that the learned CIT(A) has allowed claim of the assessee by following decision rendered by the Coordinate Bench in assessee’s own case relating to A.Y. 2006-07 (ITA No. 849/Mum/2010 dated 13.3.2013). For the sake of convenience, we extract below the observations made by the learned CIT(A) on this issue :
I have considered the Submissions of the appellant and perused the materials available on record. It is found that the issue under appeal stands covered in favour of the appellant by the aforesaid orders of Hon'ble ITAT Mumbai bench in its own case. The relevant extract of the order of Honh1e Tribunal dated 13.03.2013 is reproduced below:
"We have care folly considered the rival submissions in the light of the material placed before us. It is a question of allowance of depreciation @ 30% vis.ã-vis 25%. The contention of the assessee that in the past such depreciation has been granted @30%. Learned CJT(:t had invoked section 263 and order of learned CIT(A) was quashed by the Tribunal. Therefore, in view of the consistency we are of the opinion that the claim of the assessee should have been accepted by the Assessing as no view facts have been brought on record to justify for different stand taken during the year under consideration and such view is supported by Hon'ble Supreme Court in the case of Radhasoami Satsang v. CIT (193 ITR 321). Accordingly, this ground of the appellant is allowed.” It is also observed that vide its order dated 18.03.2013, the Hon'ble Tribunal directed the AO to allow depreciation on moulds at 30% as claimed b it. Since there is no change in the facts of the case on this issue, it is held that the appellant is entitled to claim depreciation on moulds @30% respectfully following the aforesaid orders of Hon'ble ITAT. The Assessing Officer is, therefore, directed to allow depreciation on moulds @30% as claimed by the appellant. Ground No2 of the present appeal is accordingly allowed.
5 M/s. Mirc Electronics Ltd.
Since the learned CIT(A) has followed the decision rendered by the Coordinate Bench in assessee’s own case, we do not find any reasons to interfere with the order passed by the learned CIT(A) on this issue.
In the result, appeal filed by the assessee is partly allowed and the appeal filed the Revenue is dismissed.
Order has been pronounced in the Court on 5.12.2016