DCIT, CHENNAI v. Abi Showtech India Ltd., CHENNAI

ITA 1162/CHNY/2016 | 2010-2011
Pronouncement Date: 28-10-2016

Appeal Details

RSA Number 116221714 RSA 2016
Assessee PAN AABCA8160B
Bench Chennai
Appeal Number ITA 1162/CHNY/2016
Duration Of Justice 6 month(s)
Appellant DCIT, CHENNAI
Respondent Abi Showtech India Ltd., CHENNAI
Appeal Type Income Tax Appeal
Pronouncement Date 28-10-2016
Appeal Filed By Department
Bench Allotted C
Date Of Final Hearing 18-10-2016
Next Hearing Date 18-10-2016
Assessment Year 2010-2011
Appeal Filed On 28-04-2016
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH : CHENNAI . . . . . ' # $ % &' ( [ BEFORE SHRI N.R.S. GANESAN JUDICIAL MEMBER AND SHRI D. S. SUNDER SINGH ACCOUNTANT MEMBER ] ./ I.T.A.NO. 1162/MDS/2016 / ASSESSMENT YEAR : 2010-11 THE DY. COMMISSIONER OF INCOME-TAX CIRCLE 1(1) CHENNAI VS. M/S ABI SHOWATECH INDIA LTD 67 STONE ACRE CHAMIERS ROAD R.A PURAM CHENNAI 600 028 [PAN AABCA 8160 B ] ( )* / APPELLANT) ( + )* /RESPONDENT) / APPELLANT BY : DR. MILIND MADHUKAR BHUSARI CIT /RESPONDENT BY : NONE / DATE OF HEARING : 18 - 10 - 2016 ! / DATE OF PRONOUNCEMENT : 28 - 10 - 2016 / O R D E R PER D.S. SUNDER SINGH ACCOUNTANT MEMBER THIS APPEAL OF THE REVENUE IS DIRECTED AGAINST THE ORDER OF THE COMMISSIONER OF INCOME-TAX (APPEALS)-I CHENNA I DATED 1.2.2016 FOR ASSESSMENT YEAR 2010-11. 2. GROUND NO.1 AND 6 ARE GENERAL IN NATURE REQUIRING N O SPECIFIC ADJUDICATION. ITA NO. 1162/16 :- 2 -: 3. GROUND NO.2 IS RELATED TO THE DISALLOWANCE MADE U/ S 14A OF THE INCOME-TAX ACT 1961(IN SHORT THE ACT). 4. THE ASSESSING OFFICER DISALLOWED A SUM OF ` 4 38 303/- U/S 14A OF THE ACT R.W. RULE 8D OF THE INCOME TAX RULES . DURING THE ASSESSMENT PROCEEDINGS THE ASSESSEE REPLIED THAT THE QUANTUM OF DISALLOWANCE SHOULD BE ` 3 52 028/- AFTER EXCLUSION OF STRATEGIC INVESTMENTS MADE IN SUBSIDIARY COMPANIES AND SPECIF IC BORROWING OF PURCHASE OF FIXED ASSETS. THE ASSESSING OFFICER N OT SATISFIED WITH THE EXPLANATION INVOKED THE PROVISIONS OF RULE 8D AND COMPUTED THE DISALLOWANCE AT ` 4 38 303/-. BEFORE THE CIT(A) THE ASSESSEE REITERATED THE ARGUMENTS MADE BEFORE THE ASSESSING OFFICER. THE CIT(A) IN PARA 7 OF HIS ORDER DIRECTED THE ASSESSIN G OFFICER TO EXCLUDE THE SPECIFIC BORROWINGS ON FIXED ASSETS THE INVEST MENTS MADE FOR STRATEGICAL PURPOSES IN WHOLLY OWNED SUBSIDIARY COM PANIES OF THE ASSESSEE AND INVESTMENTS MADE IN WHOLLY OWNED SUBS IDIARY ABI SHOWATECH OMAN LLC FZC AND TO RECOMPUTE THE DISALLO WANCE U/S 14A. OF THE ACT. FOR READY REFERENCE WE REPRODUCE PARA 7 OF THE CIT(A) ORDER AS UNDER: 7. I HAVE CAREFULLY CONSIDERED THE FACTS ORDER OF THE AO SUBMISSIONS MADE BY THE APPELLANT AND MATERIAL ON R ECORD. I HAVE ALSO PERUSED THE ORDER IN APPELLANT'S OWN CASE FOR THE IMMEDIATELY PRECEDING ASSESSMENT YEAR 2009-10 IN ITA NO.597/201 1-12/A-1 DATED 30.10.2013. THE FIRST PLEA ADVANCED BY THE AP PELLANT IS DIRECTED TOWARDS EXCLUSION OF SPECIFIC BORROWINGS OF A SUM O F RS.26.27 LAKHS ITA NO. 1162/16 :- 3 -: FOR PURCHASE OF FIXED ASSETS. THE SECOND PLEA IS WI TH REGARD TO EXCLUSION OF INVESTMENTS MADE FOR STRATEGIC PURPOSE S AND IN WHOLLY OWNED SUBSIDIARIES FOR COMPUTING THE DISALLOWANCE U /S 14A R.W. RULE 8D IN TERMS OF THE RATIO OF THE JURISDICTIONAL ITAT IN EIH ASSOCIATED HOTELS LTD V. OCIT IN ITA NO.1503/MDS/2012 DATED 17 .7.2013 AND DCIT V. AMALGAMATIONS LTD 43 ITR (TRIB) 540 CHENNAI . THE THIRD PLEA IS WITH REGARD TO EXCLUDE FROM THE INVESTMENTS A SU M OF RS.20.48 LAKHS WHICH REPRESENT INVESTMENT MADE BY THE APPELL ANT IN WHOLLY OWNED SUBSIDIARY ABI SHOWATECH OMAN LLC FZC THE IN COME FROM WHICH IS TAXABLE AND HENCE CANNOT BE INCLUDED WHILE COMPUTING 14A DISALLOWANCE. THE PLEA OF THE APPELLANT IS UPHELD A ND THE AO IS DIRECTED TO RECOMPUTE THE DISALLOWANCE U/S 14A R.W. RULE 8D AFTER EXCLUDING THE ABOVE THREE TYPES OF INVESTMENTS. THI S GROUND OF APPEAL IS PARTLY ALLOWED. 5. WHILE RESTRICTING THE ADDITION THE CIT(A) FOLLOWED THE ORDER OF THIS TRIBUNAL IN EIH ASSOCIATED HOTELS LTD IN I. T.A.NO. 1503/MDS/2012 DATED 17.7.2013 AND DCIT V. AMALGAMATIONS LTD 43 ITR (TRIB) 540 CHENNAI. 6. AGGRIEVED BY THE ORDER OF THE CIT(A) THE DEPARTMEN T IS IN APPEAL BEFORE US. THE LD. DR SUBMITTED THAT THE DEP ARTMENT HAS FILED APPEAL BEFORE THE HON'BLE MADRAS HIGH COURT AGAINST THE ORDER OF THE TRIBUNAL IN THE CASE OF EIH ASSOCIATED HOTELS LTD (SUPRA) . THEREFORE HE ARGUED THAT THE DISALLOWANCE MADE BY THE ASSESSI NG OFFICER MAY BE CONFIRMED. 7. NONE APPEARED ON BEHALF OF THE ASSESSEE. THEREFOR E WE PROCEED TO DECIDE THE APPEAL AFTER HEARING THE LD. DR AND THE MATERIAL AVAILABLE ON RECORD. ITA NO. 1162/16 :- 4 -: 8. WE HEARD THE LD. DR AND CONSIDERED THE MATERIAL AVA ILABLE ON RECORD. THE CIT(A) WHILE DIRECTING THE ASSESSI NG OFFICER TO RESTRICT THE DISALLOWANCE U/S 14A FOLLOWED THE DECISION OF THIS TRIBUNAL IN THE CASE OF EIH ASSOCIATED HOTELS LTD (SUPRA) AND AMAL GAMATIONS LTD.(SUPRA) OF THIS TRIBUNAL. THEREFORE WE DO N OT FIND ANY INFIRMITY IN THE ORDER OF THE CIT(A) AND THE SAME IS UPHELD. 9. GROUND NO.3 IS RELATED TO THE DISALLOWANCE OF ` 29 39 33 353/- U/S 10B OF THE ACT. THE ASSESSING OFFICER DISALLOWED THE EXEMPTION CLAIMED BY THE ASSESSEE U/S 10B FOR WANT OF RATIFICATION OF BOARD OF APPROVAL. 10. AGGRIEVED BY THE ORDER OF THE ASSESSING OFFICER TH E ASSESSEE WENT ON APPEAL BEFORE THE CIT(A). BEFORE THE CIT(A) THE ASSESSEE FILED THE CERTIFICATION OF LOP BY THE BOAR D OF APPROVAL NEW DELHI DATED 18.9.2013 REFERS TO REFERENCE DATED 27 .2.2001. FOR READY REFERENCE WE REPRODUCE HEREUNDER PARA 11 OF THE CI T(A)S ORDER: 11. I HAVE CAREFULLY CONSIDERED THE FACTS ORDER O F THE AO SUBMISSIONS MADE BY THE APPELLANT AND MATERIAL ON R ECORD. THE AO DISALLOWED THE CLAIM MADE U/S 10B SPECIFICALLY O N THE GROUND THAT THE COMMUNICATION FROM THE DEVELOPMENT COMMISS IONER MEPZ REGARDING RATIFICATION BY THE BOARD WAS WITHOU T THE DATE OF RATIFICATION AND THE FILE NO. DURING THE APPELLATE PROCEEDINGS THE APPELLANT HAS PRODUCED THE COMMUNICATION FROM ASST.DEVELOPMENT COMMISSIONER MEPZ-SEZ WHICH STATE S THAT RATIFICATION WAS MADE BY THE BOARD OF APPROVAL IN I TS 4TH MEETING (2013 SERIES) HELD ON 30.8.2.013 A COPY OF WHICH W AS ALSO MARKED TO THE DCIT COMPANY CIRC\E-1 (1). IT MAY AL SO BE ADDED THAT THE APPELLANT IS IN RECEIPT OF CERTIFICATION F OR 100% EXPORT ORIENTED UNIT APPROVED UNDER THE SPECIAL SCHEME OF GOVERNMENT ITA NO. 1162/16 :- 5 -: OF INDIA BY THE DEVELOPMENT COMISSIONER MEPZ SPEC IAL ECONOMIC ZONE MINISTRY OF COMMERCE NEW DELHI WITH REGARD TO ITS FACTORY IN PULIVALLAM VILLAGE WHERE IT IS SITUA TED. THE CERTIFICATION OF LOP BY THE BOARD OF APPROVAL NEW DELHI DATED 18.9.2013 REFERS TO REFERENCE DATED 27.2.2001 ALSO. THEREFORE THE AO IS DIRECTED TO ALLOW THE CLAIM MA DE BY THE APPELLANT U/S 10B IN ACCORDANCE WITH THE RATIFICATI ON GIVEN BY THE BOARD OF APPROVALS. THIS GROUND OF APPEAL IS ALLOWE D. 11. DURING APPEAL THE LD. DR ARGUED THAT SINCE THE APP ROVAL FROM THE BOARD WAS NOT PLACED BEFORE THE ASSESSING OFFICER THIS MATTER MAY BE SENT BACK TO THE ASSESSING OFFICER. 12. WE HAVE CONSIDERED THE SUBMISSIONS OF THE LD. DR AN D PERUSED THE MATERIAL PLACED BEFORE US. THE ASSESSE E-COMPANY IS ENGAGED IN EXPORT OF MOTOR PARTS FOR WHICH IT WAS R EGISTERED WITH MEPZ AND CLAIMED THE DEDUCTION U/S 10B OF THE ACT. FOR THE PURPOSE OF CLAIMING DEDUCTION U/S 10B OF THE ACT AS PER I NSTRUCTION NO.2 OF 2009 DATED 9.3.2004 APPROVAL GRANTED BY THE DEVELO PMENT COMMISSIONER IN THE CASE OF 100% EOU WILL BE CONSID ERED VALID ONCE SUCH APPROVAL IS RATIFIED BY THE BOARD OF APPROVAL FOR EOU SCHEME. SINCE THE RATIFICATION FROM THE BOARD OF APPROVAL W AS NOT PLACED BEFORE THE ASSESSING OFFICER THE ASSESSING OFFICER DISALL OWED THE DEDUCTION CLAIMED BY THE ASSESSEE. DURING APPEAL PROCEEDING S THE ASSESSEE OBTAINED THE RATIFICATION FROM THE BOARD OF APPROVA L AND PLACED BEFORE THE CIT(A). HOWEVER THE CIT(A) HAS NOT GIVEN OPP ORTUNITY TO THE ASSESSING OFFICER TO VERIFY THE CORRECTNESS AND GEN UINENESS OF THE ITA NO. 1162/16 :- 6 -: RATIFICATION OF THE BOARD OF APPROVAL. THEREFORE WE ARE OF THE CONSIDERED OPINION THAT THE EVIDENCE PLACED BY THE ASSESSEE DURING THE PENDENCY OF APPEAL PROCEEDINGS SHOULD BE EXAMI NED BY THE ASSESSING OFFICER ALSO. THEREFORE WE REMIT THE MA TTER BACK TO THE ASSESSING OFFICER TO VERIFY THE RATIFICATION OF THE BOARD OF APPROVAL AND ALLOW THE DEDUCTION ON MERITS. FOR STATISTICAL PUR POSES THIS GROUND IS ALLOWED. 13. GROUND NO.4 IS RELATED TO THE DEDUCTION U/S 40(A)( I) OF THE ACT. 14. DURING ASSESSMENT PROCEEDINGS THE ASSESSING OFFICE R FOUND THAT THE ASSESSEE MADE THE PAYMENT OF ` 2 00 20 345/- IN RESPECT OF COMMISSION PAID TO NON-RESIDENTS AND THE ASSESSEE HAS NOT DEDUCTED THE TDS AS PER SEC. 195 OF THE ACT. THE ASSESSEE SUBMITTED BEFORE THE ASSESSING OFFICER THAT THE PAYMENTS ARE NOT SUB JECTED TO TDS FOR THE REASON THAT THE RECIPIENTS HAVE NO BUSINESS CON NECTION OR PERMANENT ESTABLISHMENT IN INDIA. HOWEVER THE ASS ESSING OFFICER PLACING RELIANCE ON THE AMENDMENT TO SEC. 9 VIDE FI NANCE ACT 2010 AND INSERTION OF EXPLANATION 2 TO SUB-SECTION(1) OF SEC. 195 VIDE FINANCE ACT 2012 HELD THAT THE EXPENDITURE INCURR ED ON ACCOUNT OF SALES COMMISSION OUTSIDE INDIA TO THE EXTENT OF ` 2 00 20 345/- ITA NO. 1162/16 :- 7 -: ATTRACTS PROVISIONS OF SEC. 195 AND ACCORDINGLY MAD E THE DISALLOWANCE U/S 40(A)(I) OF THE ACT. 15. THE CIT(A) DELETED THE ADDITION AS PER PARA 16 OF H IS ORDER AS UNDER: 16. I HAVE CAREFULLY CONSIDERED THE FACTS ORDER OF THE A.O SUBMISSIONS MADE BY THE APPELLANT AND MATERIAL ON R ECORD. THE ISSUE RELATING TO PAYMENT OF COMMISSION TO NON-RESI DENT AGENT M/S BIGGLESWADE LTD. HONGKONG WAS ALSO CONSIDERED BY CIT(A) VIDE ADJUDICATING ON THE ISSUES FOR THE A.Y 2009-10 IN I.T.A.NO.597/2011-12/A.I WHEREIN FOR ELABORATE REAS ONS DISCUSSED THEREIN THE COMMISSION PAID TO THE NON-RESIDENT HAS BEEN HELD NOT ATTRACTING WITHHOLDING TAX AND THEREFORE NOT W ITHIN THE PURVIEW OF S.40(A)(I). WITH MATERIAL FACTS REMAINI NG SAME I DO NOT FIND ANY REASON TO TAKE A DIFFERENT VIEW IN THE MATTER. THE A.O IS DIRECTED TO DELETE THE DISALLOWANCE MADE U/ S 40(A)(I) OF ` .2 00 20 345. THIS GROUND OF APPEAL IS ALLOWED. 16. THE LD. DR SUPPORTED THE ORDER OF THE ASSESSING OFF ICER. 17. WE FIND THAT SIMILAR ISSUE HAS COME UP BEFORE THIS TRIBUNAL IN THE ASSESSEES OWN CASE FOR ASSESSMENT YEAR 2009- 10 IN I.T.A.NO.2316/MDS/2013 AND VIDE ORDER DATED 4.3.201 6 THIS TRIBUNAL HAS CONSIDERED THIS ISSUE AND REMITTED THE MATTER B ACK TO THE FILE OF THE ASSESSING OFFICER AS PER THE FOLLOWING DISCUSSI ON: 20. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS ON EI THER SIDE AND ALSO PERUSED THE MATERIAL AVAILABLE ON REC ORD. EVEN THOUGH THE CIT(A) REFERRED TO THE DECISION OF THE AAR IN SPAHI PROJECTS PVT. LTD.(SUPRA) AFTER EXTRAC TING THE CBDT CIRCULAR NO.786 DATED 2.7.2000 HE FOUND THAT THE COMMISSION PAID BY THE ASSESSEE TO THE FOREIGN AGE NT HAS TO BE ALLOWED AS EXPENDITURE. THE WITHDRAWAL OF TH E CIRCULARS BY THE CBDT IN CIRCULAR NO.7 OF 2009 DATE D ITA NO. 1162/16 :- 8 -: 22.10.2009 WAS NOT CONSIDERED BY ANY OF THE LOWER AUTHORITIES. THIS TRIBUNAL IS OF THE CONSIDERED O PINION THAT THE EFFECT OF THE CIRCULARS ISSUED EARLIER HAS TO BE CONSIDERED IN THE LIGHT OF THE LATEST CIRCULAR ISSU ED I.E CIRCULAR NO.7 OF 2009. SINCE THE LOWER AUTHORITIES HAVE NO OCCASION TO CONSIDER CIRCULAR NO.7 OF 2009 THIS T RIBUNAL IS OF THE CONSIDERED OPINION THAT THE MATTER NEEDS TO BE RECONSIDERED BY THE ASSESSING OFFICER. ACCORDINGLY THE ORDERS OF THE LOWER AUTHORITIES ARE SET ASIDE AND T HE ENTIRE ISSUE OF PAYMENT OF COMMISSION IS REMITTED BACK TO THE FILE OF THE ASSESSING OFFICER. THE ASSESSING OFFIC ER SHALL RECONSIDER THE ISSUE AFRESH IN THE LIGHT OF THE MAT ERIAL AVAILABLE ON RECORD AND THE CIRCULAR NO.7 OF 2009 I SSUED BY THE CBDT AND THEREAFTER DECIDE THE SAME IN ACCORDANCE WITH LAW AFTER GIVING A REASONABLE OPPOR TUNITY TO THE ASSESSEE. 18. SINCE THE FACTS ARE IDENTICAL WE REMIT THE MATTER BACK TO THE FILE OF THE ASSESSING OFFICER WITH DIRECTION TO REC ONSIDER THE ISSUE AFRESH IN THE LIGHT OF THE MATERIAL AVAILABLE ON RE CORD AND CBDT CIRCULAR NO.7 OF 2009 AND THEREAFTER DECIDE ON MERI TS AND IN ACCORDANCE WITH LAW AFTER GIVING AN OPPORTUNITY TO THE ASSESSEE. 19. GROUND NO.5 IS RELATED TO THE DISALLOWANCE OF ADDIT IONAL DEPRECIATION OF ` 39 68 160/- U/S 32(1)(IIA) OF THE ACT. 20. DURING ASSESSMENT PROCEEDINGS THE ASSESSEE CLAIME D ADDITIONAL DEPRECIATION U/S 32(1)(IIA) OF THE ACT IN RESPECT OF ASSETS ACQUIRED IN THE SECOND HALF OF FINANCIAL YEAR 2008- 09 FOR WHICH ADDITIONAL DEPRECIATION OF 50% WAS ALLOWED IN ASSE SSMENT YEAR 2009- 10. THE ADDITIONAL DEPRECIATION IS ALLOWABLE TO AN INDUSTRIAL ITA NO. 1162/16 :- 9 -: UNDERTAKING IN THE YEAR IN WHICH THE ASSETS ARE ACQ UIRED AND INSTALLED. WHEREAS AS PER THE PROVISIONS OF SEC. 32(1)(IIA) T HE ADDITIONAL DEPRECIATION CLAIMED BY THE ASSESSEE WAS DISALLOWE D BY THE ASSESSING OFFICER. IN NUTSHELL THE ASSESSEE IS ENTITLED FOR ADDITIONAL DEPRECIATION @ 20% ON THE ASSETS ACQUIRED AND INSTALLED. SINCE THE ASSESSEE HAS USED THE ASSETS FOR LESS THAN 180 DAYS THE ASSESSI NG OFFICER ALLOWED DEPRECIATION @ 10% IN ASSESSMENT YEAR 2009-10 AND R EMAINING 10% WAS CLAIMED BY THE ASSESSEE IN THE YEAR UNDER CONS IDERATION AND THE SAME WAS DISALLOWED BY THE ASSESSING OFFICER IN ASS ESSMENT YEAR 2010-11. 21. AGGRIEVED BY THE ORDER OF THE ASSESSING OFFICER TH E ASSESSEE WENT ON APPEAL BEFORE THE CIT(A) AND THE C IT(A) HAS ALLOWED THE ADDITIONAL DEPRECIATION RELYING ON THE DECISION OF THIS TRIBUNAL IN THE CASE OF DEVI POLYMERS P LTD VS ACIT IN I.T.A.NO.165/MDS/2014 DATED 9.4.2014 AND IN ASSESS EES OWN CASE FOR ASSESSMENT YEAR 2008-09 AND 2009-10 THIS TRIBUNAL H AS ALLOWED ADDITIONAL DEPRECIATION RELYING ON THE DECISION OF COCHIN BENCH OF THE TRIBUNAL IN THE CASE OF APOLLO TYRES LTD VS ACIT [ 2014] 64 SOT 203 AND ALSO CAREFULLY GOING THROUGH THE SECOND PROVISO TO SEC. 32(1) OF THE ACT. SINCE THE ISSUE AND THE FACTS ARE IDENTI CAL IN ASSESSEES OWN CASE FOR ASSESSMENT YEAR 2008-09 AND 2009-10 WE DO NOT FIND ANY ITA NO. 1162/16 :- 10 -: REASON TO INTERFERE WITH THE ORDER OF THE CIT(A) AN D THE SAME IS UPHELD. 22. IN THE RESULT THE APPEAL OF THE ASSESSEE IS PART LY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 28 TH OCTOBER 2016 AT CHENNAI. SD/- SD/- ( . . . ' ) (N.R.S. GANESAN) / JUDICIAL MEMBER ( . . ' # $ ) (D.S. SUNDER SINGH) % / ACCOUNTANT MEMBER #$ / CHENNAI %& / DATED: 28 TH OCTOBER 2016 RD &' ()*) / COPY TO: 1 . / APPELLANT 4. + / CIT 2. / RESPONDENT 5. ) - . / DR 3. +/' / CIT(A) 6. -01 / GF