DCIT, New Delhi v. M/s. National Textile Corporation Ltd., New Delhi

ITA 2211/DEL/2013 | 2009-2010
Pronouncement Date: 19-11-2014 | Result: Dismissed

Appeal Details

RSA Number 221120114 RSA 2013
Assessee PAN AAACN2847D
Bench Delhi
Appeal Number ITA 2211/DEL/2013
Duration Of Justice 1 year(s) 7 month(s) 3 day(s)
Appellant DCIT, New Delhi
Respondent M/s. National Textile Corporation Ltd., New Delhi
Appeal Type Income Tax Appeal
Pronouncement Date 19-11-2014
Appeal Filed By Department
Order Result Dismissed
Bench Allotted E
Tribunal Order Date 19-11-2014
Date Of Final Hearing 25-08-2014
Next Hearing Date 25-08-2014
Assessment Year 2009-2010
Appeal Filed On 15-04-2013
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCHES : E NEW DELHI BEFORE S MT. DIVA SINGH J.M. AND SHRI J.SUDHAKAR REDDY A.M. ITA NO. 2 211 /DEL/201 3 ASSESSMENT YEAR : 200 9 - 10 DCIT CIRCLE 13(1) VS. NATIONAL TEXTILE CORPORATION LTD. ROOM NO.406 C.R.BLDG. CORE 4 SCOPE COMPLEX 7 C.R.BLDG. IP ESTATE LODHI ROAD NEW DELHI NEW DELHI PAN: AAAC N 2847 D (A PPELLANT) (RESPONDENT) ASSESSEE BY: - NONE . DEPARTMENT BY: - S HRI GUNJAN PRASAD CIT D.R. O R D E R PER J.SUDHAKAR REDDY ACCOUNTANT MEMBER THIS IS AN APPEAL FILED BY THE REVENUE AND IS DIRECTED AGAINST THE ORDER OF THE LD.CIT(APPEALS) - XVI NEW DELHI DT. 30.01.2013 PERTAINING TO THE AY 200 9 - 10. 2. FACTS IN BRIEF: - THE ASSESSEE IS A PUBLIC LIMITED COMPANY AND IS ENGAGED IN THE BUSINESS OF MANUFACTURING OF TEXTILES. IT FILED ITS RETURN OF INCOME ELECTRONICALLY (E - RETURN ) ON 28.7.2009 DECLARING INCOME OF RS.1 16 540/ - . THEREAFTER A REVISED RETURN OF INCOME WAS FILED ON 31.3.2010 DECLARING NIL INCOME. THE AO PASSED AN ORDER U/S 143(3) ON 23.12.2011 DETERMINING THE TOTAL INCOME AT RS.32 04 18 100/ - INTER ALIA MAKING D ISALLOWANCE OF EXPENSES U/S 14A DISALLOWANCE OF PRIOR PERIOD EXPENSES AND DISALLOWANCE ON ACCOUNT OF FOREIGN EXCHANGE VARIATIONS CLAIMED AS REVENUE EXPENSES. ITA 2211/DEL/2013 AY: 2009 - 10 NATIONAL TEXTILE CORPN. LTD. NEW DELHI 2 3. AGGRIEVED THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE FIRST APPELLATE AUTHORITY WHI CH GRANTED PART RELIEF. AGGRIEVED THE REVENUE HAS COME UP IN APPEAL BEFORE US ON THE FOLLOWING GROUNDS. 1. THE LD.CIT(A) HAS ERRED IN LAW AND ON FACTS IN IGNORING THE FACT THAT THOUGH THE INVESTMENTS WERE MADE THROUGH BORROWED MONEY IN ITS SUBSIDIARY COMPANIES BUT THE INVESTMENTS HAS RESULTED INTO INCOME WHICH HAS BEEN CLAIMED AS EXEMPT. 2. THE LD.CIT(A) HAS ERRED IN LAW AND ON FACTS IN IGNORING THE FACT THATS.14A OF THE ACT IS INVOKED WHERE THE INVESTMENTS ARE MADE AND THOSE EARNINGS/RETURNS ON THESE INVESTMENTS ARE NOT INCLUDED IN THE TAXABLE INCOME AND THE SAME SITUATION IS IN THE CASE OF THE ASSESSEE. 3. THE LD.CIT(A) HAS ERRED IN LAW AND ON FACTS IN IGNORING THE FACT THAT THE PROVISIONS OF THE INCOME TAX ACT DO NOT ALLOW PRIOR PERIOD EXPENSES TO BE ADJUSTED. 4. THE LD.CIT(A) HAS ERRED IN LAW AND ON FACTS IN IGNORING THE FACT THAT S.145 OF THE ACT PERMITS USE OF ONE TYPE OF ACCOUNTING SYSTEM IN A PARTICULAR YEAR AND MIXED ACCOUNTING SYSTEM IS NOT AT ALL ALLOWED. 5. THE LD.CIT(A) HAS ERRED IN LAW AN D ON FACTS IN IGNORING THE FACT THAT THE ASSESSEE NOT INCLUDED THE SAID PLANT AND MACHINERY IN THE BLOCK OF FIXED ASSETS. 6. THE LD.CIT(A) HAS ERRED IN LAW AND ON FACTS IN IGNORING THE FACT THAT FOR CLAIMING THE DEPRECIATION AND ADDITIONAL DEPRECIATION THE ASSESSEE SHOULD HAVE CLAIMED THE SAME IN ITS RETURN OF INCOME FOR THE PARTICULAR YEAR. 7. THE LD.CIT(A) HAS ERRED IN LAW AND ON FACTS BY NOT CONSIDERING THE PROVISION OF THE ACT WHEREIN IT IS PROVIDED THAT THE ASSESSEE HAS TO ESTABLISH THE USAGE OF THAT PLANT AND MACHINERY IN THAT PARTICULAR YEAR ONLY THEN THE ASSESSEE CAN CLAIM DEPRECIATION AND ADDITIONAL DEPRECIATION ON THE SAME. 8. THE APPELLANT CRAVES TO BE ALLOWED TO ADD ANY FRESH GROUNDS OF APPEAL AND/OR DELETE OR AMEND ANY OF THE GROUNDS OF APPEA L. 4. NONE APPEARED ON BEHALF OF THE ASSESSEE DESPITE ISSUAL OF NOTICE. THERE IS NO PETITION FOR ADJOURNMENT EITHER . UNDER THE CIRCUMSTANCES WE ITA 2211/DEL/2013 AY: 2009 - 10 NATIONAL TEXTILE CORPN. LTD. NEW DELHI 3 DISPOSE OF THE CASE EX PARTE ON MERITS QUA THE ASSESSEE AFTER HEARING THE LD.D.R. 5. HEARD MR.GUNJAN PRASAD THE LD.D.R. ON BEHALF OF THE REVENUE. 6. ON A CAREFUL CONSIDERATION OF THE FACTS AND CIRCUMSTANCES OF THE CASE ON PERUSAL OF ORDERS OF LOWER AUTHORITIES MATERIAL ON RECORD AND CASE LAWS CITED WE HOLD AS FOLLOWS. 7. GROUND NOS. 1 AND 2 ARE ON THE ISSU E OF DISALLOWANCE U/S 14A. 7.1 . THE FIRST APPELLATE AUTHORITY HAS NOTED THAT THE AO HAS DETERMINED DIRECT EXPENDITURE UNDER CLAUSE (I) OF SUB - RULE (2) OF RULE 8D AT NIL INCOME. AS REGARDS INDIRECT INTEREST EXPENDITURE UNDER CLAUSE (II) OF SUB RULE (2) HE FOLLOWED THE DECISION OF HIS PREDECESSOR IN APPEAL NO.127/2010 - 11 IN THE CASE OF THE APPELLANT FOR THE AY 2008 - 09 VIDE ORDER DT. 8.8.2011. IN THIS DECISION THE LD.CIT(APPEALS) HAS GIVEN A FACTUAL FINDING THAT NO INTEREST EXPENDITURE WAS INCURRED FOR EARNING TAXABLE INCOME . THE LOAN WAS FROM THE GOVERNMENT AND IT WAS FOR WORKING CAPITAL ASSISTANCE. INTEREST WAS PAID ON DELAYED PAYMENT OF ELECTRICITY BILLS PF AND ESI DUES AND INTEREST TO SELLING AGENTS ON THE S ECURITY DEPOSITS INTEREST TO EMPLOYEES ON THE SECURITY DEPOSITS ETC. THIS FACTUAL FINDING COULD NOT BE CONTROVERTED BY THE LD.CIT D.R. THUS THE DELETION OF THE DISALLOWANCE OF RS.1 07 82 277/ - BY THE FIRST APPELLATE AUTHORITY IS UPHELD. THE THIRD ELEM ENT IS DISALLOWANCE OF O THER INDIRECT EXPENSES UNDER RULE 8D(2)(III). THE AO S FINDING HAS BEEN UPHELD BY THE LD.CIT(A) AND HENCE THERE IS NO GRIEVANCE TO THE REVENUE. IN THE RESULT THIS GROUND OF THE REVENUE IS DISMISSED. 7.2. GROUND NOS. 3 AND 4 ARE ON THE ISSUE OF DISALLOWANCE OF PRIOR PERIOD EXPENSES. THE ASSESSEE HAS INCURRED PRIOR PERIOD EXPENSES OF RS.16 61 43 508/ - . IT HAD PRIOR PERIOD INCOME OF RS.10 22 60 782/ - . THE NET PRIOR PERIOD AMOUNT OF RS.63 88 272/ - WAS ALREADY ADDED BY THE ASSESS EE IN THE COMPUTATION OF INCOME. THUS THE FINDING OF THE FIRST ITA 2211/DEL/2013 AY: 2009 - 10 NATIONAL TEXTILE CORPN. LTD. NEW DELHI 4 APPELLATE AUTHORITY THAT THERE IS A DOUBLE ADDITION OF RS.63 88 272/ - IS FACTUALLY CORRECT. 7.3. AS FAR AS THE BALANCE AMOUNT IS CONCERNED THE ASSESSEE S CONTENTION IS THAT THE AMOUNT HAS CR YSTALLISED DURING THE YEAR AS THE ASSESSEE CAME TO KNOW ABOUT THESE EXPENSES ONLY IN THE F.Y. 2008 - 09. 7.4. THE SECOND LIMB OF THE ARGUMENT OF THE ASSESSEE IS THAT WHICH HAS BEEN CONSISTENTLY FOLLOWING THE POLICY OF NETTING OUT PRIOR PERIOD INCOME WITH PRIOR PERIOD EXPENSES AND THE NET EFFECT WAS DISCLOSED IN THE COMPUTATION OF INCOME. IT WAS ALSO SUBMITTED THAT SUCH A TREATMENT WAS ACCEPTED BY THE REVENUE FOR THE AY 2007 - 08 AND 2008 - 09. THE FIRST APPELLATE AUTHORITY HAS ON THE PRINCIPLE OF CONSISTENC Y ACCEPTED THE CONTENTIONS OF THE ASSESSEE. WE FIND NO INFIRMITY IN THE SAME. THUS GROUND NO.3 AND 4 ARE DISMISSED. 7.5. GROUND NO.5 6 AND 7 IS RELATED TO DISALLOWANCE OF FOREIGN EXCHANGE FLUCTUATION LOSS. THE ASSESSEE CLAIMED FOREIGN EXCHANGE FLUCTUA TION LOSS UNDER THE HEAD FINANCIAL CHARGES IN THE PROFIT AND LOSS A/C. ADMITTEDLY THE FOREIGN EXCHANGE FLUCTUATION LOSS PERTAINS TO THE RATE DIFFERENCE ARISING ON ACCOUNT OF PURCHASE OF PLANT AND MACHINERY. THE DISALLOWANCE WAS UPHELD BY THE FIRST APPE LLATE AUTHORITY. THE ALTERNATIVE CONTENTION OF THE ASSESSEE WAS THAT THE FOREIGN EXCHANGE RATE DIFFERENCE GOES TO INCREASE THE COST OF PLANT AND MACHINERY AS PER PROVISIONS OF S.43A READ WITH S.32(1)(II) AND (II A) OF THE ACT. THE LD.CIT(A) DIRECTED GRA NT OF DEPRECIATION @ 15% AND AN ADDITIONAL DEPRECIATION @ 20%. THIS FINDING COULD NOT BE CONTROVERTED BY THE LD.CIT DR. THUS THE SAME IS UPHELD. ITA 2211/DEL/2013 AY: 2009 - 10 NATIONAL TEXTILE CORPN. LTD. NEW DELHI 5 7.6. IN THE RESULT GROUND NOS. 5 6 AND 7 ARE DISMISSED. 7.7. GROUND NO.8 IS GENERAL IN NATURE. 8 . IN THE RESULT REVENUE S APPEAL STANDS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 19 TH NOVEMBER 2014. SD/ - SD/ - ( DIVA SINGH ) ( J. SUDHAKAR REDDY) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: THE 19 TH NOVEMBER 2014 *MANGA COPY OF THE ORDER FORWARDED TO: 1.APPELLANT; 2.RESPONDENT; 3.CIT; 4.CIT(A); 5.DR; 6.GUARD FILE BY ORDER ASST. REGISTRAR