UNITOP CHEMICALS P. LTD, MUMBAI v. DCIT 8(3), MUMBAI

ITA 2142/MUM/2010 | 2006-2007
Pronouncement Date: 31-12-2010 | Result: Partly Allowed

Appeal Details

RSA Number 214219914 RSA 2010
Assessee PAN AAACU1406F
Bench Mumbai
Appeal Number ITA 2142/MUM/2010
Duration Of Justice 9 month(s) 13 day(s)
Appellant UNITOP CHEMICALS P. LTD, MUMBAI
Respondent DCIT 8(3), MUMBAI
Appeal Type Income Tax Appeal
Pronouncement Date 31-12-2010
Appeal Filed By Assessee
Order Result Partly Allowed
Bench Allotted F
Tribunal Order Date 31-12-2010
Assessment Year 2006-2007
Appeal Filed On 18-03-2010
Judgment Text
1 ITA 2142/MUM/10 M/S UNITOP CHEMICALS P. LTD. IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES F BEFORE SHRI R.V. EASWAR PRESIDENT AND SHRI P.M. JA GTAP A.M. ITA NO. 2142/MUM/2010 ASSESSMENT YEAR 2006-07 UNITOP CHEMICALS PVT. LTD. C-WING EAST WEST INDL. CENTRE ANDHERI KURLA ROAD SAFED POOL MUMBAI 400 072. PAN AAACU1406F VS. DCIT RANGE 8(3) MUMBAI . 52 APPELLANT RESPONDENT APPELLANT BY SHRI PARAS SAVLA RESPONDENT BY SHRI SUMEET KUMAR ORDER PER P.M. JAGTAP A.M. THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF LD. CIT(A)-18 MUMBAI DATED 19.01.2010 AND IN THE SOLITARY GROUND RAISED THEREIN THE ASSESSEE HAS CHALLENGED THE ADDITIONS OF ` 7 35 145/- AND ` 18 228/- MADE BY THE A.O. AND CONFIRMED BY THE LD. CIT(A) ON ACCOUNT OF DISALLOWANCE OF EXP ENSES U/S 14-A AND DEPRECIATION ON UPS AND SCANNER RESPECTIVELY. 2. THE ASSESSEE IN THE PRESENT CASE IS A COMPANY WH ICH IS ENGAGED IN THE BUSINESS OF MANUFACTURING OF SPECIALITY CHEMICALS. THE RETURN O F INCOME FOR THE YEAR UNDER CONSIDERATION WAS FILED BY IT ON 29.11.2006 DECLARI NG TOTAL INCOME OF ` 4 56 30 440/-. IN THE SAID RETURN DIVIDEND INCOME OF ` 99 94675/- RECEIVED BY THE ASSESSEE WAS CLAIMED TO BE EXEMPT U/S 10(33). ACCORDING TO THE A.O. THE E XPENSES INCURRED BY THE ASSESSEE WERE PARTLY ATTRIBUTABLE TO EARNING OF THE SAID EXEMPT I NCOME AND ACCORDINGLY THE QUANTUM OF SUCH EXPENSES ATTRIBUTABLE TO DIVIDEND INCOME WAS W ORKED OUT BY HIM AT ` 7 35 145/- BY 2 ITA 2142/MUM/10 M/S UNITOP CHEMICALS P. LTD. APPLYING RULE 8-D OF THE INCOME TAX RULES 1962. F OR THIS PURPOSE HE RELIED ON THE DECISION OF SPECIAL BENCH OF ITAT MUMBAI IN THE CA SE OF DAGA CAPITAL MANAGEMENT PVT. LTD. 117 ITD 169 (SB) WHEREIN IT WAS HELD THAT THE SAID RULE 8-D IS APPLICABLE RETROSPECTIVELY. THE EXPENSES ATTRIBUTABLE TO EARNI NG OF EXEMPT DIVIDEND INCOME THUS WAS WORKED OUT BY THE A.O. AT ` 7 35 145/- BY APPLYING RULE 8-D AND THE SAID AMOUN T WAS DISALLOWED BY HIM BY INVOKING THE PROVISIONS OF SEC TION 14-A. ON APPEAL THE LD. CIT(A) CONFIRMED THE SAID DISALLOWANCE MADE BY THE A.O. 3. WE HAVE HEARD THE ARGUMENTS OF BOTH THE SIDES AN D ALSO PERUSED THE RELEVANT MATERIAL ON RECORD. IN ITS RECENT JUDGMENT DELIVER ED IN THE CASE OF GODREJ BOYCE MFG. CO. LTD. (ITA NO. 626 OF 2010 DTD. 12.08.2010) TH E HONBLE BOMBAY HIGH COURT HAS HELD THAT RULE 8D OF THE INCOME TAX RULES 1962 IS A PPLICABLE ONLY PROSPECTIVELY I.E. FROM A.Y. 2008-09. THE SAID RULE THUS IS NOT APPLIC ABLE IN THE PRESENT CASE INVOLVED IN A.Y. 2006-07. AS FURTHER HELD BY THE HONBLE BOMBAY HIGH COURT IN THE CASE OF GODREJ BOYCE MFG. CO. LTD. (SUPRA) THE QUANTUM OF DISALLOW ANCE U/S 14A FOR THE YEARS EARLIER TO A.Y. 2008-09 HAS TO BE WORKED OUT BY ADOPTING SOME REASONABLE METHOD. KEEPING IN VIEW THIS DECISION OF THE HONBLE BOMBAY HIGH COURT WE SET ASIDE THE ORDERS OF AUTHORITIES BELOW ON THIS ISSUE AND RESTORE THE MAT TER TO THE FILE OF THE A.O. WITH A DIRECTION TO DECIDE THE SAME AFRESH IN THE LIGHT OF THE DECISION OF HONBLE BOMBAY HIGH COURT IN THE CASE OF GODREJ BOYCE MFG. CO. LTD. (SU PRA). AS FURTHER SUBMITTED BY THE LEARNED COUNSEL FOR THE ASSESSEE IN THIS CONTEXT I NVESTMENT IN THE SHARES WHICH FETCHED THE DIVIDEND INCOME HAVING BEEN MADE BY THE ASSESSE E OUT OF ITS OWN FUNDS AND NOT FROM THE BORROWED FUNDS THERE WAS NO INTEREST EXPENDITU RE INCURRED BY THE ASSESSEE IN RELATION TO EARNING OF DIVIDEND INCOME AND THUS THERE WAS NO QUESTION OF MAKING ANY DISALLOWANCE OUT OF INTEREST EXPENDITURE U/S 14-A. IN OUR OPINION THIS FACTUAL ASPECT REQUIRES VERIFICATION AND SINCE NEITHER THE A.O. NO R THE CIT(A) HAS DONE THE SAME DESPITE SPECIFIC SUBMISSIONS MADE ON BEHALF OF THE ASSESSEE TO THIS EFFECT WE DIRECT THE A.O. TO VERIFY THIS STAND OF THE ASSESSEE ALSO AND ALLOW AP PROPRIATE RELIEF. 3 ITA 2142/MUM/10 M/S UNITOP CHEMICALS P. LTD. 4. AS REGARDS THE ISSUE RELATING TO THE ASSESSEES CLAIM FOR HIGHER DEPRECIATION @ 60% ON SCANNER IT IS OBSERVED THAT THE SAME IS SQU ARELY COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF SPECIAL BENCH OF ITAT AT MUMBAI IN THE CASE OF DCIT VS. DATACRAFT INDIA LTD. 133TTJ 377 WHEREIN IT WAS HELD THAT A CO MPUTER IN COMMON SENSE AND AS POPULARLY UNDERSTOOD REFERS TO ANY ELECTRONIC OR O THER HIGH SPEED DATA PROCESSING DEVICE AND INCLUDES ALL INPUT AND OUTPUT DEVICES WHICH ARE CONNECTED TO OR RELATED TO IT. RESPECTFULLY FOLLOWING THE SAID DECISION OF THE SPE CIAL BENCH WE HOLD THAT THE ASSESSEE IS ENTITLED TO CLAIM HIGHER DEPRECIATION OF 60% ON SCANNER BEING AN INPUT DEVICE WHICH IS CONNECTED TO THE COMPUTER. AS REGARDS THE UPS WE ARE OF THE VIEW THAT THE ASSESSEE IS NOT ENTITLED FOR HIGHER DEPRECIATION OF 60% THEREON AS THE UPS IN OUR OPINION IS NEITHER AN INPUT NOR AN OUTPUT DEVICE WHICH IS CONNECTED TO OR RELATED TO THE COMPUTER. THE UPS IS AN ELECTRICAL EQUIPMENT WHICH PERFORMS THE FUNCT ION OF SUPPLYING POWER TO THE COMPUTER WITHOUT INTERRUPTION IN CASE THERE IS A FA ILURE OF MAIN ELECTRICAL SUPPLY. WE THEREFORE MODIFY THE IMPUGNED ORDER OF THE LD. CIT (A) ON THIS ISSUE AND DIRECT THE A.O. TO RECOMPUTE THE DEPRECIATION ALLOWABLE TO THE ASSE SSEE. 5. IN THE RESULT APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED ON 31 ST DECEMBER 2010. SD/- SD/- (R.V. EASWAR) (P.M. JAGTAP) PRESIDENT A CCOUNTANT MEMBER MUMBAI DATED 31 ST DECEMBER 2010. RK 4 ITA 2142/MUM/10 M/S UNITOP CHEMICALS P. LTD. COPY TO 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) 18 - MUMBAI 4. THE CIT- 8 MUMBAI 5. THE DR BENCH F 6. MASTER FILE // TUE COPY// BY ORDER DY/ASSTT. REGISTRAR ITAT MUMBAI 5 ITA 2142/MUM/10 M/S UNITOP CHEMICALS P. LTD. ` DATE INITIALS 1. DRAFT DICTATED 29.12.10 SR.P.S./P.S. 2. DRAFT PLACED BEFORE AUTHOR 29.12.10 SR.P.S./P.S. 3. DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER. - J.M./A.M. 4.DRAFT DISCUSSED/ APPROVED BY SECOND MEMBER. J.M./A.M. 5. APPROVED DRAFT COMES TO THE SR.P.S./P.S. SR.P.S./P.S. 6. KEPT FOR PRONOUNCEMENT ON SR.P.S./P.S. 7. FILE SENT TO THE BENCH CLERK SR.P.S./P.S. 8. DATE OF WHICH FILE GOES TO THE HEAD CLERK. 9. DATE OF DISPATCH OF ORDER.