THE DCIT RG 9(1), MUMBAI v. M/S. BAHUBALI ELECTRONICS P. LTD, MUMBAI

1 ITA NO.5120/MUM/2008 ASSESSMENT YEAR : 2005-06. IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH B MUMBAI BEFORE SHRI N.V. VASUDEVAL JUDICIAL MEMBER AND SHRI J. SUDHAKAR REDDY ACCOUNTANT MEMBER I.T.A. NO. 5120/MUM/2008. ASSESSMENT YEAR : 2005-06. DY. COMMISSIONER OF INCOME-TAX M/ S BAHUBALI ELECTRONICS P. LTD. RANGE-9(1) MUMBAI. VS. 745/2 KRISHNA KUTIR SOCIETY KHAR PALI ROAD BEHIND RTO OFF ICE KHAR (WEST) MUMBAI 400 052. PAN :AAACB 4399J. APPELLANT. RESPONDENT. APPELLANT BY : SHRI HARI GOVIND SINGH. RESPONDENT BY : NONE. O R D E R PER J. SUDHAKAR REDDY A.M. : THIS IS AN APPEAL FILED BY THE REVENUE DIRECTED AG AINST THE ORDER OF THE CIT(APPEALS)-IX MUMBAI DATED 05-05-2008 ON THE FOL LOWING GROUNDS:. 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW THE LEARNED CIT(A) ERRED IN DELETING ADDITION OF RS.13 85 463/- MADE BY THE ASSESSING OFFICER ON ACCOUNT OF ADJUSTMENT IN THE V ALUE OF CLOSING STOCK U/S 145A OF THE I.T. ACT BY ERRONEOUSLY RELYING ON THE HONBLE SUPREME COURT DECISION IN THE CASE OF CIT VS. INDONIPPON CH EMICAL CO. (261 ITR 275) WHICH RELATES TO THE PERIOD PRIOR TO INTRODUCT ION OF SECTION 145A OF THE I.T. ACT AND IS THEREFORE NOT APPLICABLE TO T HE ASSESSEES CASE. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW THE LD. CIT(A) ERRED IN HOLDING THAT THERE WOULD BE NO EFFE CT ON PROFITABILITY OF THE ASSESSEE CONSIDERING THE IMPACT OF MODVAT AS P ER THE PROVISIONS OF SECTION 145A OF THE IT ACT IGNORING THE FACT TH AT THE VALUATION OF RAW 2 ITA NO.5120/MUM/2008 ASSESSMENT YEAR : 2005-06. MATERIAL / GOODS IN PROCESS WAS MADE WITHOUT INCLUD ING THE EXCISE DUTY COMPONENT IN VIOLATION OF PROVISIONS OF SECTION 145 A OF THE I.T. ACT. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW THE LD. CIT(A) ERRED IN REDUCING THE DISALLOWANCE OF RS.8 8 0 470/- MADE BY THE ASSESSING OFFICER U/S 14A OF THE I.T. ACT (BEING 0% OF THE DIVIDEND INCOME OF RS.88 04 700/-) TO RS.4 67 936/-. 2. NONE APPEARED ON BEHALF OF THE ASSESSEE. THERE I S NEITHER ANY APPLICATION FOR ADJOURNMENT. UNDER THESE CIRCUMSTANCES WE DISPOSE OF THE CASE EXPARTE ON MERITS QUA THE ASSESSEE AFTER HEARING THE LEARNED DR. 3. HEARD MR. HARI GOVIND SINGH THE LEARNED DR. THE ASSESSEE IS A PRIVATE LIMITED COMPANY ENGAGED IN THE BUSINESS OF MANUFACT URING OF AUDIO MAGNETIC TAPES. THE ADDITIONS WERE MADE U/S 145A AND U/S 14A OF THE I.T. ACT. THE FIRST APPELLATE AUTHORITY DELETED THESE ADDITIONS. 4. ON A PERUSAL OF THE ORDER OF THE FIRST APPELLATE AUTHORITY ON THE ISSUE OF ADDITION U/S 145A AT PARA 2.3 PAGE HE HELD AS FOL LOWS : 2.3 I HAVE CAREFULLY CONSIDERED THE APPELLANTS SU BMISSION AS WELL AS THE AOS CONTENTION. THE HONBLE SUPREME COURT IN THEIR DECISION IN THE CASE OF CIT VS. INDONIPPON CHEMICAL CO. (261 ITR 275 SC) HA VE HELD THAT NO ADDITION ON ACCOUNT OF UTILIZED MODVAT CREDIT CAN B E MADE. THE AUDITED STATEMENT SUBMITTED BY THE APPELLANT SHOWS THAT THE RE WOULD BE NO EFFECT ON PROFITABILITY OF THE COMPANY CONSIDERING THE IMPACT OF MODVAT AS PER THE PROVISIONS OF SECTION 45A. HOWEVER THE AO HAS IGNO RED THE FACT THAT THE APPELLANT IS FOLLOWING CONSISTENTLY SAME METHOD FOR VALUING OPENING AND CLOSING STOCK. KEEPING IN VIEW THE APPELLANTS SUB MISSION AND THE AUDITED STATEMENT I DIRECT THE AO TO DELETE THE ADDITION. THIS GROUND OF APPEAL IS ALLOWED. WE FIND NO INFIRMITY IN THESE FINDINGS OF THE CIT(A PPEALS). 5. COMING TO THE DISALLOWANCE U/S 14A THE CIT(APPE ALS) AT PARA 3.2 HELD AS FOLLOWS : 3 ITA NO.5120/MUM/2008 ASSESSMENT YEAR : 2005-06. 3.2 I HAVE CONSIDERED THE APPELLANTS SUBMISSIONS AS WELL AS THE AOS CONTENTION. IT CAN BE SEEN THAT THE APPELLANT HAS E ARNED TAX FREE INCOME OF RS.88 04 706/- AGAINST WHICH IT HAS CLAIMED THAT NO EXPENDITURE HAS BEEN INCURRED TO EARN SUCH EXEMPT INCOME. HOWEVER AS PE R RULE 8D DISALLOWANCE HAS BEEN WORKED OUT AT RS.4 67 936/- A S AGAINST THE DISALLOWANCE OF RS.8 80 470/- MADE BY THE AO U/S. 1 4A OF THE I.T. ACT. THE AO IS THEREFORE DIRECTED TO RESTRICT THE DISALLOWAN CE AS PER THE WORKING UNDER RULE 8D OF THE I.T. AT TO RS.4 67 936/-. THIS GROUND OF APPEAL IS PARTLY ALLOWED. THE ASSESSEE HAS NOT COME IN APPEAL. 6. THOUGH RULE 8D CANNOT BE APPLIED FOR THE ASSESSM ENT YEAR 2005-06 IN VIEW OF THE JUDGMENT OF THE JURISDICTIONAL HIGH COURT IN THE CASE OF GODREJ BOYCE MANUFACTURING CO. LTD. (2010) 234 CTR (BOM) 1. AS T HE ASSESSEE HAS NOT DISPUTED THIS DISALLOWANCE WE FIND NO INFIRMITY IN THE ORDE R OF THE CIT(APPEALS). ACCORDINGLY WE DISMISS THIS GROUND OF THE REVENUE 7. IN THE RESULT THE APPEAL OF THE REVENUE IS DISM ISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 25 TH FEBRUARY 2011. SD/- SD/- (N.V. VASUDEVAN) (J. SUDH AKAR REDDY) JUDICIAL MEMBER. ACCOUNTANT MEMBER MUMBAI DATED: 25 TH FEBRUARY 2011. WAKODE 4 ITA NO.5120/MUM/2008 ASSESSMENT YEAR : 2005-06. COPY TO : 1. APPELLANT 2. RESPONDENT 3. C.I.T. 4. CIT(A) 5. DR B-BENCH (TRUE COPY) BY ORDER ASSTT. REGIS TRAR ITAT MUMBA I.