DCIT, Circle, Panckula v. M/s Haryana Agro Industries Corporation Ltd., Panchkula

ITA 772/CHANDI/2019 | 2013-2014
Pronouncement Date: 21-11-2019 | Result: Dismissed

Appeal Details

RSA Number 77221514 RSA 2019
Assessee PAN AAACH4686C
Bench Chandigarh
Appeal Number ITA 772/CHANDI/2019
Duration Of Justice 6 month(s) 4 day(s)
Appellant DCIT, Circle, Panckula
Respondent M/s Haryana Agro Industries Corporation Ltd., Panchkula
Appeal Type Income Tax Appeal
Pronouncement Date 21-11-2019
Appeal Filed By Department
Order Result Dismissed
Bench Allotted A
Tribunal Order Date 21-11-2019
Last Hearing Date 21-11-2019
First Hearing Date 21-11-2019
Assessment Year 2013-2014
Appeal Filed On 17-05-2019
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL CHANDIGARH BE NCH A CHANDIGARH .. !' '# $ % &' BEFORE: SHRI. N.K.SAINI VP & SHRI SANJAY GARG J M ITA NOS. 772 & 773/CHD/2019 ASSESSMENT YEARS : 2013-14 & 2014-2015 THE DCIT CIRCLE PANCHKULA HARYANA M/S HARYANA AGRO INDUSTRIES CORPORATION LTD. BAY NO. 15-20 SECTOR-2 PANCHKULA HARYANA PAN NO: AAACH4686C APPELLANT RESPONDENT !' ASSESSEE BY : SHRI ATUL GOYAL CA #!' REVENUE BY : SHRI CHANDRAJIT SINGH CIT(DR) $ %! & DATE OF HEARING : 21/11/2019 '()*! & DATE OF PRONOUNCEMENT : 21/11/2019 &(/ ORDER PER N.K. SAINI VICE PRESIDENT THESE TWO APPEALS BY THE DEPARTMENT ARE DIRECTED AG AINST THE COMMON ORDER DT. 31/03/2019 OF LD. CIT(A) PANCHKULA. 2. SINCE THE ISSUES INVOLVED ARE COMMON AND THE APP EALS WERE HEARD TOGETHER SO THESE ARE BEING DISPOSED OFF BY THIS CO MMON ORDER FOR THE SAKE OF CONVENIENCE AND BREVITY. 3. AT THE FIRST INSTANCE WE WILL DEAL WITH THE APPE AL IN ITA NO. 772/CHD/2019 FOR THE ASSESSMENT YEAR 2013-14 WHEREIN THE FOLLOWI NG GROUNDS HAVE BEEN RAISED: 1. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF TH E CASE THE LD. CIT(A) IS RIGHT IN LAW IN HOLDING THAT THE WOODEN CRATES AND POLY COVERS ARE PERISHABLE THINGS HAVING SHORT LIFE AND DOES NOT GIVE ENDURING BENEFIT TO THE ASSESSEE IGNORING THE ASPECT THAT THE ASSESSEE HIMSELF CLAIM ED 25% OF THE EXPENDITURE INCURRED ON WOODEN CRATES AND POLY COVERS DURING TH E YEAR AND SPREAD OVER THE 2 REMAINING OF 75% INTO FOUR YEARS CLAIMING 25% DURIN G EACH OF THE YEAR WHICH ESTABLISHES THE NATURE OF EXPENDITURE AS CAPITAL? 2. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF TH E CASE THE LD. CIT(A) IS RIGHT IN LAW IN ALLOWING THE APPEAL OF THE ASSESSEE ON THE ISSUE OF EXPENDITURE INCURRED ON WOODEN CRATES AND POLY COVERS IGNORING THE ASPECT THAT THE PARTICULAR ACCOUNTING POLICY FOLLOWED BY THE ASSESS EE WOULD NOT OVERRIDE THE PROVISIONS OF THE INCOME TAX ACT 1961 AS THE TAXAB ILITY OF INCOME IS TO BE DECIDED AS PER THE PROVISIONS OF THE STATUE AS HELD BY THE HON'BLE APEX COURT IN THE CASE OF TUTICORIN ALKALI CHEMICAL & FERTILIZERS LTD. V/S COMMISSIONER OF INCOME TAX REPORTED AS [1997] 227 ITR 172 (SC)? 3. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE LD. CIT(A) HAS ERRED TO ALLOW THE APPEAL OF THE ASSESSEE AND DELETE THE ADDITION OF RS. 7113804/- MADE- ON ACCOUNT OF SERVICE CHARGE ON GUNNY BAGS BY HOLDING THAT THE SAID CHARGES IS ALLOWABLE UNDER SECTION 37(1) OF THE ACT WHICH IS NOT CORRECT BECAUSE THE SAME TANTAMOUNT TO ALLOWING DOUBLE DEDUCTION TO THE ASSESSEE AS THE ASSESSEE HAS ON HAND CLAIMED EXPENDITURE ON ACCOUNT OF SERVICE CHARGES PAYABLE @ 1% ON PROCUREMENT OF GUNNY BAGS BY DEBITING THE PURCHA SES OF STOCK IN TRADE ACCOUNT(WHEAT) TO WHICH IT PERTAINS AND ON THE OTHER HAND ASSESSEE HAS ALSO CREATED A PROVISION FOR SERVICE C HARGES @ 1% ON PROCUREMENT OF GUNNY BAGS AS PAYABLE. 4. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF TH E CASE THE LD. CIT(A) HAS ERRED TO ALLOW THE APPEAL OF THE ASSESSEE AND DELET ING THE DISALLOWANCE OF RS.28 69 270/-U/S 14A BECAUSE ON THE ONE HAND THE A SSESSEE COMPANY HAS MADE INVESTMENTS AMOUNTING TO RS. 207 74 000/- ON T HE OTHER HAND ASSESSEE HAS SHOWN OUTSTANDING SECURED LOAN FROM BANKS FOR WHICH ASSESSEE IS PAYING HUGE INTEREST AMOUNT. 5. IT IS PRAYED THAT THE ORDER OF THE LD. CIT(A) BE SE T-ASIDE AND THAT OF THE A.O. BE RESTORED. 6. THE APPELLANT CRAVES LEAVE TO ADD OR AMEND THE GROU NDS OF APPEAL BEFORE THE APPEAL IS HEARD AND DISPOSED OFF. 4. AS REGARDS TO THE ISSUE RELATING TO EXPENDITURE ON WOODEN CRATES AND POLY COVERS RAISED VIDE GROUND NOS. 1 AND 2 THE LD. COUN SEL FOR THE ASSESSEE AT THE VERY OUTSET STATED THAT THIS ISSUE IS COVERED IN FA VOUR OF THE ASSESSEE VIDE ORDER DT. 16/11/2018 IN ITA NO. 216/CHD/2016 FOR THE ASSE SSMENT YEAR 2012-13 IN ASSESSEES OWN CASE WHEREIN VIDE ORDER DT. 16/11/20 18 THE RELEVANT FINDINGS HAS BEEN GIVEN IN PARA 8&9. 5. IN HIS RIVAL SUBMISSIONS THE LD. DR SUPPORTED TH E ORDER OF THE A.O. 3 6. AFTER CONSIDERING THE SUBMISSIONS OF BOTH THE PA RTIES AND PERUSING THE MATERIAL AVAILABLE ON RECORD IT IS NOTICED THAT AN IDENTICAL ISSUE HAVING SIMILAR FACTS HAS ALREADY BEEN ADJUDICATED BY THIS BENCH OF ITAT IN ASSESSEES OWN CASE VIDE AFORESAID REFERRED TO ORDER DT. 16/11/2018 AND THE RELEVANT FINDINGS HAVE BEEN GIVEN IN PARA 8 & 9 OF THE SAID ORDER WHICH RE AD AS UNDER: 8. GROUND NO. 4: VIDE GROUND NO. 4 THE ASSESSEE HAS AGITATED THE TREATMENT OF EXPENDITURE INCURRED ON WOODEN CRATES AND POLY-C OVERS AS CAPITAL EXPENDITURE AS AGAINST THE CLAIM OF THE ASSESSEE AS REVENUE EXPENDITURE. 9. WE FIND FORCE IN THE CONTENTION OF THE LD. COUNS EL FOR THE ASSESSEE THAT THE WOODEN CRATES AND POLY-COVERS ARE PERISHABLE THINGS WHICH HAVE SHORT LIFE AND ARE NOT OF ENDURING BENEFIT TO THE ASSESSEE. EVEN T HE ASSESSEE HAS CLAIMED ONLY 25% OF THE SAID EXPENDITURE DURING THE YEAR AND HAS BEEN SPREAD OVER THE REMAINING OF 75% INTO FOUR YEARS CLAIMING 25% DURIN G EACH OF THE YEAR. CONSIDERING THE ABOVE FACTS WE DONT FIND ANY JUST IFICATION ON THE PART OF THE LOWER AUTHORITIES TO TREAT IT AS A LONG TERM CAPITA L EXPENDITURE OF ENDURING BENEFIT. THIS GROUND OF THE APPEAL OF THE ASSESSEE IS HEREBY ALLOWED . SINCE THE FACTS FOR THE YEAR UNDER CONSIDERATION AR E IDENTICAL TO THE FACTS INVOLVED IN THE PRECEDING ASSESSMENT YEAR 2012-13 S O RESPECTFULLY FOLLOWING THE AFORESAID REFERRED TO ORDER DT. 16/11/2018 IN ITA N O. 216/CHD/2016 WE DO NOT SEE ANY MERIT IN THE APPEAL OF THE DEPARTMENT ON TH IS ISSUE. 7. AS REGARDS TO THE ISSUE INVOLVED IN GROUND NO. 3 RELATING TO SERVICE CHARGES PAYABLE @ 1%ON PROCUREMENT OF GUNNY BAGS. 8. THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THIS ISSUE WAS ALSO INVOLVED IN THE PRECEDING A.Y. 2012-13 WHEREIN IT HAS BEEN R ESTORED TO THE FILE OF THE A.O. FOR VERIFICATION AND SINCE THE FACTS ARE SIMILAR FO R THIS YEAR ALSO THE SAME ACTION IS TO BE TAKEN. 9. THE LD. DR ALSO AGREED TO THE SAID PROPOSITION. 10. AFTER CONSIDERING THE SUBMISSIONS OF BOTH THE P ARTIES IT IS NOTICED THAT AN IDENTICAL ISSUE WAS INVOLVED IN THE PRECEDING A.Y. 2012-13 WHEREIN THE RELEVANT FINDINGS HAVE BEEN GIVEN VIDE PARA 7 OF THE AFORESA ID REFERRED TO ORDER DT. 16/11/2018 WHICH READ AS UNDER: 4 7. GROUND NO.3: VIDE THIS GROUND THE ASSESSEE HAS AGITATED THE ADDITION OF RS. 72 03 620/- ON ACCOUNT OF DISALLOWANCE OF EXPEN DITURE @ 1 % DEPARTMENTAL CHARGES ON PURCHASE OF GUNNY BAGS. THE LD. COUNSEL FOR THE ASSESSEE HAS SUBMITTED THAT THE AFORESAID EXPENDITURE HAS BEEN DISALLOWED BY THE LOWER AUTHORITIES CONSIDERIN G THE SAME AS A PROVISION WHEREAS THE ASSESSEE HAD ACTUALLY INCURRED THE AFO RESAID EXPENDITURE DURING THE YEAR. HE IN THIS RESPECT HAS MOVED AN APPLICATION FOR ADMISSION OF ADDITIONAL EVIDENCE TO PROVE THE ABOVE FACT OF INCURRING OF EX PENDITURE DURING THE YEAR. IN VIEW OF THE ABOVE SUBMISSION OF THE LD. COUNSEL OF THE ASSESSEE THE ISSUE IS RESTORED TO THE FILE OF THE ASSESSING OFFICER TO VE RIFY IF THE AFORESAID EXPENDITURE HAD ACTUALLY BEEN INCURRED DURING THE YEAR AND IF FOUND SO THEN TO ALLOW THE CLAIM OF THE SAME TO THE ASSESSEE. SO RESPECTFULLY FOLLOWING THE AFORESAID REFERRED TO ORDER DT. 16/11/2018 IN ITA NO. 216/CHD/2016 FOR THE ASSESSMENT YEAR 2012-1 3 THIS ISSUE IS RESTORED TO THE FILE OF THE A.O. FOR FRESH ADJUDICATION. 11. THE NEXT ISSUE VIDE GROUND NO. 4 RELATES TO THE DELETION OF DISALLOWANCE AMOUNTING TO RS. 28 69 270/- MADE BY THE A.O. UNDER SECTION 14A OF THE ACT. 12. THE FACTS RELATING TO THIS ISSUE IN BRIEF ARE T HAT THE A.O. MADE THE IMPUGNED DISALLOWANCE BY INVOKING THE PROVISIONS OF SECTION 14A OF THE ACT. HE ALSO OBSERVED THAT THE PROVISIONS OF SECTION 14A WE RE APPLICABLE EVEN IN THOSE CASES WHERE INCOME DID NOT ARISE. 13. BEING AGGRIEVED THE ASSESSEE CARRIED THE MATTER TO THE LD. CIT(A) WHO INCORPORATED THE SUBMISSION OF THE ASSESSEE IN PARA 7.1 OF THE IMPUGNED ORDER WHICH READ AS UNDER: 7.1 DURING THE APPELLATE PROCEEDINGS THE COUNSEL FOR T HE APPELLANT STATED THAT DURING THE COURSE OF THE ASSESSMENT PROCEEDING S IT WAS EXPLAINED TO THE AO THAT THE INVESTMENTS ARE MADE IN THE YEARS 1994-199 6 OUT OF ITS CAPITAL AND THERE IS NO INCOME FROM THESE INVESTMENTS. IT WAS SUBMITT ED THAT THE ASSESSEE HAS NOT RECEIVED ANY EXEMPT INCOME AND IT HAS NOT CLAIMED A NY EXEMPTION UNDER SECTION 10(33) OF THE ACT. IT WAS SUBMITTED THAT AL L THE INVESTMENTS HAD BEEN MADE IN EARLIER YEARS AND NO FRESH INVESTMENT HAD B EEN MADE BY THE ASSESSEE. FURTHER IT WAS SUBMITTED THAT DIFFERENT COURTS HAV E ALREADY HELD THAT NO DISALLOWANCE UNDER THE PROVISIONS OF SECTION 14A OF THE ACT R.W. RULE 8D(2) SHALL BE MADE IN CASE THERE IS NO EXEMPT INCOME HAS BEEN EARNED BY THE ASSESSEE AND SINCE THE ASSESSEE HAS NOT EARNED ANY EXEMPT IN COME DURING THE YEAR UNDER CONSIDERATION NO DISALLOWANCE U/S 14A WAS WAR RANTED. THE COUNSEL FOR THE APPELLANT RELIED ON THE DECISION OF HON'BLE DELHI H IGH COURT IN THE CASE OF CHEMINVEST LTD. VS. CIT [2015] 378 ITR 33 (DEL) AND JOINT INVESTMENTS (P) LTD. VS. CIT [2015] 372 ITR 694 (DEL). 5 13.1 LD. CIT(A) DELETED THE DISALLOWANCE MADE BY TH E A.O. BY OBSERVING IN PARA 7.2 OF THE IMPUGNED ORDER AS UNDER: 7.2 I HAVE GONE THROUGH THE FACTS OF THE CASE AND WRITT EN SUBMISSION FILED BY THE APPELLANT. IT IS OBSERVED THAT THE ENTIRE INVESTMENTS HAD BEEN MADE DURING THE FINANCIAL YEARS 1993-94 1994-95 AND 1995-96. I T IS FURTHER NOTED THAT THE APPELLANT HAS CLAIMED THAT IT HAS NOT EARNED ANY EX EMPT DIVIDEND INCOME IN THE PREVIOUS YEAR AND AS SUCH SECTION 14A IS NOT ATTRAC TED IN THE CASE OF THE ASSESSEE WHICH IS A CONDITION PRECEDENT TO INVOKE THE SAID P ROVISIONS. THIS FACT HAS NOT BEEN DISPUTED BY THE AO. THE AO HAS RELIED ON THE CBD TS CIRCULAR NO.5/2014 DATED 11.02.2014 WHICH SAID THAT 'RULE 8D READ WITH SECTION 14A OF THE ACT PROVIDES FOR DISALLOWANCE OF THE EXPENDITURE EVEN W HERE TAXPAYER IN A PARTICULAR YEAR HAS NOT EARNED ANY EXEMPT INCOME'. THIS CIRCUL AR HAS BEEN DULY CONSIDERED BY THE HON'BLE CHANDIGARH BENCH OF THE ITAT IN THE CASE OF M/S VARDHMAN CHEMTECH PRIVATE LIMITED ITA 488/CHD/2015 WHEREIN I T WAS HELD THAT HIGH COURT/SUPREME COURT DECISIONS WOULD OVERRULE CIRCUL ARS ISSUED BY THE CBDT. FURTHER CHENNAI BENCH OF ITAT IN ITA NO.L717/MDS/2 013 AFTER CONSIDERING THE CIRCULAR HAS DISMISSED THE APPEAL OF THE REVENUE. T HE DECISION IN CIT VS. LAKHANI MARKETING 272 CTR 265 (P&H) WAS PRONOUNCED AFTER TH E SAID CIRCULAR AND HENCE OVERRULES THE CIRCULAR. UNDER THESE CIRCUMSTANCES T HE DECISION OF JURISDICTIONAL HON'BLE P&H HIGH COURT IN THE CASE OF C I T V S M/S LAKHANI MARKETING WILL BE APPLICABLE TO THE FACTS OF THE APPELLANT'S CASE WHE REIN IT HAS BEEN HELD THAT IN CASE THERE IS NO EXEMPT INCOME ARISING DURING THE Y EAR NO DISALLOWANCE U/S 14A SHOULD BE MADE. THEREFORE THE DISALLOWANCE OF U/S 14A SHOULD BE MADE. THEREFORE THE DISALLOWANCE OF RS. 28 69 270/- MADE BY THE A.O. ON THIS ACCOUNT IS ORDERED TO BE DELETED. THIS GROUND OF APPEAL IS ALL OWED. 14. NOW THE DEPARTMENT IS IN APPEAL. 15. THE LD. CIT DR ALTHOUGH SUPPORTED THE ORDER OF THE A.O. BUT COULD NOT REBUT THE FINDINGS GIVEN BY THE LD. CIT(A) VIDE PAR A 7.2 OF THE IMPUGNED ORDER. 16. IN HIS RIVAL SUBMISSIONS THE LD. COUNSEL FOR TH E ASSESSEE REITERATED THE SUBMISSIONS MADE BEFORE THE LD. CIT(A) AND STRONGLY SUPPORTED THE IMPUGNED ORDER. 17. AFTER CONSIDERING THE SUBMISSIONS OF BOTH THE P ARTIES AND THE MATERIAL AVAILABLE ON THE RECORD IT IS NOTICED THAT THE ASS ESSEE DID NOT EARN ANY EXEMPT DIVIDEND INCOME FOR THE YEAR UNDER CONSIDERATION AN D THE LD. CIT(A) DELETED THE DISALLOWANCE BY FOLLOWING THE JUDGMENT OF THE H ON'BLE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS. LAKHANI MARKETING REPO RTED AT 272 CTR 265 (P&H) WHEREIN IT HAS BEEN HELD THAT IN CASE WHERE THERE I S NO EXEMPT INCOME ARISING 6 DURING THE YEAR NO DISALLOWANCE UNDER SECTION 14A OF THE ACT SHOULD BE MADE. WE THEREFORE DO NOT SEE ANY MERIT IN THIS GROUND OF THE DEPARTMENTAL APPEAL. 18. IN ITA NO. 773/CHD/2019 FOR THE A.Y. 2014-15 S IMILAR ISSUES ARE INVOLVED AS WERE INVOLVED FOR THE ASSESSMENT YEAR 2013-14 IN IT A NO. 772/CHD/2019 THEREFORE OUR FINDINGS GIVEN IN THE FORMER PART OF THIS ORDER SHALL APPLY MUTATIS MUTANDIS FOR BOTH THE ASSESSMENT YEARS UNDER CONSID ERATION. 19. IN THE RESULT DEPARTMENTAL APPEALS ARE DISMISS ED. (ORDER PRONOUNCED IN THE OPEN COURT ON 21/11/2019 ) SD/- SD/- '# $ .. (SANJAY GARG ) ( N.K. SAI NI) % &'/ JUDICIAL MEMBER / VICE PRESIDENT AG DATE: 21/11/2019 (+! -.- COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT 3. $ / CIT 4. $ / 01 THE CIT(A) 5. -2 45&456789 DR ITAT CHANDIGARH 6. 8:% GUARD FILE (+ $ BY ORDER ; # ASSISTANT REGISTRAR