M/s. Technicast Engineers Ltd., New Delhi v. DCIT, New Delhi

ITA 3761/DEL/2010 | 2007-2008
Pronouncement Date: 28-01-2011 | Result: Allowed

Appeal Details

RSA Number 376120114 RSA 2010
Bench Delhi
Appeal Number ITA 3761/DEL/2010
Duration Of Justice 5 month(s) 23 day(s)
Appellant M/s. Technicast Engineers Ltd., New Delhi
Respondent DCIT, New Delhi
Appeal Type Income Tax Appeal
Pronouncement Date 28-01-2011
Appeal Filed By Assessee
Order Result Allowed
Bench Allotted H
Tribunal Order Date 28-01-2011
Date Of Final Hearing 18-01-2011
Next Hearing Date 18-01-2011
Assessment Year 2007-2008
Appeal Filed On 05-08-2010
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH: H NEW DELHI BEFORE SHRI RAJPAL YADAV JUDICIAL MEMBER AND SHRI K.G. BANSAL ACCOUNTANT MEMBER I.T.A NO. 3761/DEL/10 ASSTT. YEAR 2007-08 M/S. TECHNICAST ENGINEERS LTD. 1400 MODI TOWER 98 NEHRU PLACE NEW DELHI. VS. DCIT CIRCLE 16 (1) NEW DELHI. (APPELLANT) (RESPONDENT) APPELLANT BY: SHRI P.S. KASHYAP CA RESPONDENT BY: SHRI AMRENDRA KUMAR SR. DR ORDER PER RAJPAL YADAV JM: THE ASSESSEE IS IN APPEAL BEFORE US AGAINST THE OR DER OF LD. CIT(A) DATED 24 TH MAY 2010 PASSED FOR ASSTT. YEAR 2007-08. IN THE F IRST GROUND OF APPEAL ASSESSEE HAS PLEADED THAT LD. REV ENUE AUTHORITIES HAVE ERRED IN NOT ALLOWING THE DEDUCTION OF ` 1 49 989/-. ITA NO. 3761/DEL/10 ASSTT. YEAR 2007-08 2 2. THE BRIEF FACTS OF THE CASE ARE THAT ASSESSEE CO MPANY HAS FILED ITS RETURN OF INCOME ON 26.10.2007 DECLARING A LOSS OF ` 63 15 341/-. THE ASSESSEE COMPANY AT THE RELEVANT TIME WAS ENGAGED I N THE BUSINESS OF MANUFACTURING CAST GRAY IRON BARS LABOUR JOB WORK AND MINING ACTIVITIES. ON SCRUTINY OF THE PROFIT AND LOSS ACCOUNT IT REVEA LED TO THE AO THAT ASSESSEE HAS CLAIMED A SUM OF ` 1 49 989/- WHICH IS DEBITED UNDER THE HEAD PRIOR PERIOD EXPENSES. ACCORDING TO THE ASSESS EE IT HAS PURCHASED VEHICLE ON HIRE PURCHASE BASIS. THE ASSES SEE INSTEAD OF DEBITING THE INTEREST EXPENSES ON SUCH LOAN HAS DE BITED THE PRINCIPAL AMOUNT I.E HIRE PURCHASE ACCOUNT. THE ASSESSEE OUGH T TO HAVE DEBITED THE INTEREST EXPENSE ACCOUNT IN THE EARLIER YEAR. W HEN THIS MISTAKE CAME TO ITS NOTICE IT HAS RECTIFIED THE MISTAKE AND CLAIMED THE INTEREST EXPENSES. THE AO REJECTED THE CLAIM OF ASSESSEE ON THE GROUND THAT IT DOES NOT RELATE TO THE ACCOUNTING YEAR RELEVANT TO THIS ASSTT. YEAR. 3. APPEAL TO THE LD. CIT(A) DID NOT BRING ANY RELIE F TO THE ASSESSEE. 4. BEFORE US LD. COUNSEL FOR THE ASSESSEE HAS REITE RATED ITS SUBMISSION AS WERE MADE BEFORE THE AO. ON THE OTHER HAND LD. DR RELIED UPON THE ORDERS OF REVENUE AUTHORITIES BELO W. 5. WE HAVE DULY CONSIDERED THE RIVAL CONTENTION AND GONE THROUGH THE RECORD CAREFULLY. THE ASSESSEE MIGHT BE RIGHT I N ITS CONTENTION THAT ITA NO. 3761/DEL/10 ASSTT. YEAR 2007-08 3 THIS AMOUNT REPRESENT THE INTEREST EXPENSE ON THE A UTO LOAN. THE EXPENSE IS RELATABLE TO A.Y. 2006-07. IT COULD HAVE BEEN CLAIMED IN THAT ASSTT. YEAR BECAUSE ASSESSEE IS FOLLOWING MERCANTIL E SYSTEM OF ACCOUNTANCY. LD. COUNSEL FOR THE ASSESSEE AT THE TI ME OF HEARING SUBMITTED THAT ALLOWABILITY OF THE EXPENSE IS NOT I N DOUBT THE DISPUTE RELATES TO THE YEAR OF ALLOWABILITY. ACCORDING TO H IM IF IT IS NOT ALLOWABLE IN ASSTT. YEAR 2007-08 THEN THE DIRECTION BE ISSUED TO THE AO FOR GRANTING THE DEDUCTION IN ASSTT. YEAR 2006-07. IT IS DIFFICU LT FOR US TO CONCUR WITH THE SUBMISSION OF LD. COUNSEL BECAUSE THE DISPUTE P ERTAINS BEFORE US IS ONLY IN RESPECT OF ASSTT. YEAR 2007-08. THE STATUS OF ASSTT. YEAR 2006-07 IS NOT BEFORE US. THE APPEAL IS RELATABLE TO ASSTT. YEAR 2007-08. WE ARE SUPPOSED TO EXAMINE THE ISSUE WHETHER THIS AMOUNT C AN BE ALLOWED IN THIS YEAR OR NOT. THE EXPENSE DOES NOT RELATE TO TH IS YEAR. THEREFORE IT CANNOT BE GRANTED AS A DEDUCTION. HOWEVER THE ASSE SSEE WILL BE AT LIBERTY TO APPROACH THE AO FOR REDRESSAL OF ITS GRI EVANCE IN THE CONCERNED ASSTT. YEAR AND THE AO MAY CONSIDER THE CLAIM OF AS SESSEE SYMPATHETICALLY SUBJECT TO THE CONDITION THAT THE P ROCEDURE IN LAW PROVIDE HIM THE JURISDICTION TO CONSIDER SUCH CLAIM. THIS G ROUND OF APPEAL IS THUS REJECTED. ITA NO. 3761/DEL/10 ASSTT. YEAR 2007-08 4 6. IN THE NEXT GROUND OF APPEAL GRIEVANCE OF ASSESS EE IS THAT LD. AO HAS ERRED IN DISALLOWING SUM OF ` 2 72 000/- WITH THE AID OF SECTION 14A OF THE INCOME TAX ACT. THE BRIEF FACTS OF THE CASE ARE THAT AO FOUND INVESTMENT OF ` 5 42 26 639/-. HE DISALLOWED THE EXPENSES U/S 14A WITH THE HELP OF RULE 8D. BEFORE LD. CIT(A) IT WAS CONTE NDED BY THE ASSESSEE THAT ASSESSEE HAS RECEIVED A DIVIDEND OF ` 146/- ONLY. THE EXPENSES DISALLOWED BY THE ASSESSEE ARE NOT IN CONS ONANCE WITH THE DIVIDEND INCOME. LD. CIT(A) DID NOT FIND FORCE IN T HE CONTENTION OF ASSESSEE ON THE GROUND THAT DISALLOWANCE HAS BEEN M ADE WITH THE HELP OF RULE 8D. ACCORDING TO HIM AO HAS CONSIDERED THE TOTAL INVESTMENT MADE BY THE ASSESSEE WHICH MAY HAVE NOT YIELDED ANY DIVIDEND IN THIS YEAR. 7. LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT HON BLE BOMBAY HIGH COURT IN THE CASE OF GODREJ BOYCE MFG. CO. LTD. VS. DCIT REPORTED IN 328 ITR 81 HAS HELD THAT RULE 8 D IS NOT APPLICABLE PRIOR TO ASSTT. YEAR 2008-09 BECAUSE RULE 8D HAS BEEN INTRODUCED IN MARC H 2008. ACCORDING TO THE DECISION OF HONBLE BOMBAY HIGH CO URT RULE 8D IS PROSPECTIVE IN NATURE. HE POINTED OUT THAT LD. AO I S NOT JUSTIFIED IN MAKING THE DISALLOWANCE ON THE STRENGTH OF RULE 8 D. HE ALSO MADE A REFERENCE TO THE ORDER OF TRIBUNAL PASSED IN ITA NO . 4063/D/06 IN THE ITA NO. 3761/DEL/10 ASSTT. YEAR 2007-08 5 CASE OF DCIT VS. M/S. MAHARASHTRA SEAMLESS LTD. ON THE OTHER HAND LD. DR SUBMITTED THAT IF RULE 8D IS NOT APPLICABLE IN THE PRESENT ASSTT. YEAR THEN MATTER BE REMITTED TO THE AO FOR READJUDI CATION. HE WILL WORK OUT THE REASONABLE EXPENSES FOR MAKING SUCH DISALLO WANCE AS PER THE DECISION OF HONBLE BOMBAY HIGH COURT. 8. WE HAVE DULY CONSIDERED THE RIVAL CONTENTION AND GONE THROUGH THE RECORD CAREFULLY. THE HONBLE BOMBAY HIGH COURT HAS HELD THAT RULE 8D IS NOT APPLICABLE PRIOR TO ASSTT. YEAR 2008-09. THUS THE DISALLOWANCE FOR THE PURPOSE OF SECTION 14A CANNOT BE WORKED OUT IN THE PRESENT ASSTT. YEAR WITH THE HELP OF RULE 8D. IN THE ABSENCE OF RU LE 8D LD. AO HAS TO CONSIDER THE SURROUNDING CIRCUMSTANCE AND THEN WORK OUT REASONABLE EXPENSES IF ANY RELATABLE TO EARNING TAX FREE INCO ME. AS FAR AS THE ORDER OF THE TRIBUNAL RELIED UPON THE ASSESSEE IS CONCERN ED WE FIND THAT FACTS ARE DIFFERENT. IN THAT CASE ASSESSEE HAS PLEADED TH AT IT WAS MAINTAINING THE SEPARATE ACCOUNTS FOR INTEREST EXPENDITURE IN R ESPECT OF CASH CREDIT LIMITS AND BORROWED FUNDS UTILIZED FOR MAKING INVES TMENT. ACCORDING TO ASSESSEE IN THAT CASE BORROWED FUNDS WERE NOT UTILI ZED IN TAX FREE BONDS. IN THE CASE IN HAND AO HAS NOT EXAMINED ANY SUCH ASPECTS. HE SIMPLY WORKED OUT THE DISALLOWANCE ON THE BASIS OF RULE 8D. THEREFORE TAKING INTO CONSIDERATION THE DECISION OF HONBLE B OMBAY HIGH COURT WE ITA NO. 3761/DEL/10 ASSTT. YEAR 2007-08 6 ALLOW THIS GROUND OF APPEAL FOR STATISTICAL PURPOSE S AND SET ASIDE THIS ISSUE TO THE FILE OF AO FOR READJUDICATION. 9. IN THE RESULT APPEAL OF THE ASSESSEE IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 28 TH JANUARY 2011. SD/- [K.G. BANSAL] [RAJPAL YADAV] ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 28 TH JANUARY 2011 VEENA COPY FORWARDED TO: - 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT (A) 5. DR ITAT TRUE COPY BY ORDER DEPUTY REGISTRAR ITAT