ASST CIT 8(1)(1), MUMBAI vs. R.R. KABEL LTD, MUMBAI

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ITA 7205/MUM/2014Status: DisposedITAT Mumbai04 July 2016AY 2011-123 pages

In favour of the assessee: the Revenue's appeal was dismissed. From the AI summary of this appeal.

AI SummaryDismissed

What did the Tribunal hold?

The Tribunal upheld the CIT(A)'s decision to delete the disallowance of interest under Section 14A, noting that the assessee had sufficient own funds and loans were secured for specific purposes. The Tribunal also upheld the deletion of addition under Section 145A, agreeing that the assessee's method of accounting for excise duty had a nil net effect.

What were the facts?

The Revenue appealed against the CIT(A)'s order concerning disallowance under Section 14A and deletion of addition under Section 145A. The CIT(A) had deleted the disallowance of interest under Section 14A by following a coordinate bench decision and deleted the addition under Section 145A by following a similar precedent.

What were the issues?

Whether interest disallowance under Section 14A was justified and whether addition for excise duty under Section 145A was correctly made.

Which sections of the Income-tax Act were involved?

Section 14A,Section 145A

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, “D” Bench, Mumbai

For Appellant: Dr. K. Shivaram
Hearing: 4.7.2016Pronounced: 4.7.2016

The appeal filed by the Revenue is directed against the order dated 19.9.2014 passed by learned CIT(A)-13, Mumbai and it relates to A.Y. 2011-12.

2.

The Revenue is contesting the decision rendered by learned CIT(A) on following issues :

(a) Disallowance made u/s. 14A of the Act.

(b) Deletion of the addition made u/s. 145 of the Act.

3.

We have heard the parties and perused the record. First issue relates to the deletion of the disallowance of interest made u/s. 14A of the Act. We noticed that learned CIT(A) has passed the order by following the decision rendered by the Coordinate Bench in the assessee’s own case in relating to A.Y. 2009-10. We noticed that the Tribunal has 2 R.R. Kabel Ltd.

taken note of the fact that all the loans were secured loans and they have been used for specific purposes. Further, perusal of the balance-sheet of the assessee also shows that the own funds available with the assessee is in far excess of the investment made. Hence we are of the view that the interest disallowance made by the Assessing Officer under Rule 8D(2)(ii) has been rightly deleted by learned CIT(A) and accordingly we uphold his order on this issue.

4.

Next issue relates to the addition made u/s. 145A of the Act. The Assessing Officer took the view that the assessee has not included excise duty in the valuation of the closing stock and accordingly worked out the excise duty component on the opening and closing stock of the assessee. The said working called for an addition of ` 92,97,132/- and accordingly added the same to the total income of the assessee. In the appellate proceedings, the assessee furnished a chart showing that it was following exclusive method of accounting and net effect under exclusive method or inclusive method was nil. Learned CIT(A) noticed that an identical issue was examined by the Coordinate Bench of the Tribunal in assessee’s own case in relating to A.Y. 2005-06. Accordingly, by following the said decision learned CIT(A) deleted the disallowance.

5.

Before us also, learned AR invited our attention to the workings given by the assessee in the tax audit report as well as before the tax authorities. Perusal of the same shows that the assessee has worked out the impact of the excise duty on opening stock, closing stock, purchases and sales and has shown that the effect will be nil under both exclusive and inclusive methods. From the assessment order, we noticed that the Assessing Officer has worked out the impact only on opening stock and closing stock and failed to apply the provisions of section 145A of the Act on purchases and sales. As per the provisions of section 145A of the Act, adjustments of the duties and taxes have to be made on valuing purchases, sales and inventories. Workings given by the assessee shows that the assessee has worked out the impact of duty on 3 R.R. Kabel Ltd.

purchases, sales and inventories and in our view the same is in accordance with the provisions of section 145A of the Act. Accordingly in our view, decision rendered by learned CIT(A) on this issue does not call for any interference.

6.

In the result, appeal filed by the Revenue is dismissed.

Order has been pronounced in the Court on 4.7.2016

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