Dollex Industries Ltd, Mumbai vs Assessee

1 ITA No.6857/M/12 Dollex Indus. Ltd. आयकर अपीलीय अिधकरण, अिधकरण, मुब ं ई ᭠यायपीठ 'डी ' मुंबई । IN THE INCOME TAX APPELLATE TRIBUNAL " D " BENCH, MUMBAI

᮰ी िवजय पाल राव, ᭠याियक सद᭭य, एवं ᮰ी एन. के . िबलै᭦या, लेखा सद᭭य. के समᭃ ।

BEFORE SHRI VIJAY PAL RAO , JM AND SHRI N.K. BILLAIYA, AM

आयकर अपील सं./I.T.A. No. 6857/Mum/2012 ( िनधाᭅरण वषᭅ / Assessment Year : 2009-10 )

M/s. Dollex बनाम/ बनाम Income Tax Officer Industries Ltd. Vs. Ward-9(1)(3) 201, "A" Wing, Mumbai. Khernagar Sarvodaya CHS Building No.11, Khernagar, Bandra (E) MUMBAI-400 051. ᭭थायी ले खा सं . /जीआइआर सं . /PAN/GIR No. : AAACD 1534 D (अपीलाथᱮ /Appellant) .. (ᮧ᭜यथᱮ / Respondent)

अपीलाथᱮ ओर से / Appellant by : Shri Rakesh Joshi (AR)

ᮧ᭜यथᱮ कᳱ ओर से/Respondent by : Shri Jeetendra Kumar (DR)

सुनवाई कᳱ तारीख / Date of 26/11/2014 Hearing : घोषणा कᳱ तारीख /Date of 14/01/2015 Pronouncement :

आदेश / O R D E R

PER VIJAY PAL RAO, JM:

This appeal by the assessee is directed against the order dated 31/08/2012 of CIT(A) for the assessment year 2009-10. The assessee has raised the following grounds :-

Being aggrieved by the order of the CIT (A) 19, Mumbai, hereafter referred to as the CIT(A),your appellant submits the following grounds of appeal for your sympathetic consideration:

2 ITA No.6857/M/12 Dollex Indus. Ltd.

1) The learned CIT (A) erred in disallowing crushing charges Rs 37,20,317/-

and rent Rs 1,00,00,000/- respectively u/s 40(a)(ia) of the I.T.Act 1961

In this respect she ought to have appreciated that the arrangement between your appellant and Nanded Dist co-op bank ltd. was never in the nature of landlord and tenant and hence no TDS was deductible from the same .She ought to have appreciated that entire payment towards the above mentioned charges was wholly and exclusively for the business purposes of your appellant and hence be allowed as business expense of your appellant in computing business income of the year AY 2009-10.

It is humbly prayed that the said disallowance u/s 40(a)(ia) of the I.T.Act 1961 be deleted.

2) The learned CIT (A) erred in treating the fixed assets purchased at cost of Rs. 4,59,294/- during the year as unexplained expenditure within the meaning of sec 69 C of the I.T.Act 1961 and thereby making the addition of the said amount to the income of your appellant.

In this respect she ought to have appreciated that the expenditure is fully accounted for in the books of accounts and the source of the payments made for the said purchases is also explained as recorded in the books of accounts

On these facts and under the circumstances the provisions of sec 69C of the I.T.Act 1961 are not applicable to such expenditure.

Your appellant humbly prays that the said addition of Rs. 4,59,294/- under sec 69C of the I.T.Act 1961 be deleted.

3) The learned AO erred in reworking the depreciation and in restricting the same to Rs 27,83,299/- instead of Rs. 31,53,796/- as claimed by your appellant.

She ought to have appreciated that your appellant was entitled to and had correctly worked out the claim of depreciation and hence the entire depreciation claimed by your appellant be allowed in computing business income of the year AY 2009-10.

4) Your appellant craves for leave to add, amend, alter, 3 ITA No.6857/M/12 Dollex Indus. Ltd.

modify and/or delete all or any one or more of the above said grounds of appeal if necessary.

2. Ground No.1 is regarding disallowance u/s. 40(a)(ia). We have heard the ld. AR as well as ld. DR and considered the relevant material on record. At the outset it was submitted that an identical issue has been considered by this Tribunal for the assessment year 2007-08 while deciding MA No.93/Mum/2004 vide order dated 10/10/2014 in para 10 and 11 as under :-

"10. Out of the total disallowance of Rs. 2,39,42,030, the crushing charges of Rs.88,97,590/- and factory lease rent disallowed to the extent of Rs. 1,30,83,090/- are the payments made to the Government as pointed out by the assessee in the miscellaneous applications. There is no dispute that the assessee has taken over the sugar plant in question on lease for a period of six years f rom the Government of Maharashtra. Therefore, there is no reason to disbelieve the fact pointed out by the assessee in the Miscellaneous Applications that these items of expenditure are the payments to the Government of Maharashtra. If this fact is found to be correct then the provisions of TDS are not applicable on such payments in view of section 196 of the Income Tax Act as under:-

196. 2 Interest or dividend or other sums payable to Government, Reserve or certain corporations Notwithstanding anything contained in the foregoing provisions of this Chapter, no deduction of tax shall be made by any person from any sums payable to-

(i) the Government, or

(ii) the Reserve Bank of India, or

(iii) a corporation established by or under a Central Act which is, under any law for the time being in force, exempt from income- tax on its income, or

(iv) a Mutual Fund specified under clause (23D) of section 10, where such sum is payable to it by way of interest or dividend in respect of any securities or shares owned by it or in which it has full beneficial interest, or any other income accruing or arising to it.]"

11. Since, it is a crucial relevant fact which goes to the root of the issue so far as these two expenditures are concerned, therefore, the non consideration of this fact tantamount a mistake crept in the impugned order. This fact was also no t taken into account by the authorities belo w while decid ing the issue. Theref ore, in the f acts and circums tances of the case and in the interes t of justice, 4 ITA No.6857/M/12 Dollex Indus. Ltd.

the ground No.4 and 5 of the assessee's appeal are set as ide to the record of CIT(A) f or consideration and examination of this f act and then decide the issue of disallo wance u/s. 40(a)(ia). If the f acts pointed out in the Miscellaneous Applications of the assessee are f ound to be correct then in vie w of the provis ions of section 196 of the Inco me Tax Act, no dis allo wance can be made u/s. 40(a)(ia) in respect of such expenditur e to be paid to the Government."

2.1 An identical issue was set aside to the record of AO for the year 2007- 08 for examination of the facts brought to the notice of the Tribunal by the assessee regarding payment in question to the Government. The assessee has filed additional evidence in support of the claim that the payment in question is in pursuant to the manufacturing agreement between assessee and Maharashtra Government. Accordingly this issue is set aside to the record of CIT(A) for verification of the fact and applicability of sec 196 of the Income tax Act on such payment.

3. Ground No.2 is regarding addition u/s. 69C. We have heard the ld. AR as well as ld. DR and considered the relevant material on record. At the outset it was submitted that an identical issue has been considered by this Tribunal for the assessment year 2007-08 while deciding MA No.93/Mum/2004 vide order dated 10/10/2014 in para 7 as under :-

"7. Since the fact of expenditure duly recorded in the Books of Accounts is a crucial and relevant fact for deciding the issue of addition u/s. 69C. It is pertinent to mention that if an expenditure is duly recorded in the Books of Accounts then the same does not fall under the expression of unexplained expenditure in terms of section 69C of the Income Tax Act. Therefore, we are of the view that there is a mistake apparent on record so far as the finding of Tribunal in sustaining the disallowance of Rs, 5,86,292 is concerned, in para 6 to 9 of the impugned order. Accordingly, we modify the impugned order and set aside the issue of addition u/s 69C to the extent of Rs. 5,86,292/- to the record of CIT(A) for considering the fact that the expenditure is duly recorded in the Books of 5 ITA No.6857/M/12 Dollex Indus. Ltd.

Accounts and the source of the payment as explained and recorded in the Books of Accounts and then decide the issue as per law. It is clarified that if the expenditure is found to be duly recorded in the Books of Accounts then it does not fall under the purview of section 69C. Needless to say, the assessee be given an opportunity of hearing before deciding the issue afresh."

3.1 Accordingly this issue is set aside to the record of CIT(A) for considering the fact that the expenditure is duly recorded in the books of account and sources of payment explained and recorded in the books of account and thus decided the issue as per law.

4. Ground No.3 is regarding restricting the claim of depreciation. At the time of hearing the ld. AR of the assessee stated that the assessee does not want to press ground No.3 and same may be dismissed as not pressed. The ld. DR has no objection if Ground No.3 is dismissed as not pressed. Accordingly Ground No.3 is dismissed being not pressed.

5. Appeal of the assessee is partly allowed for statistical purposes.

Order pronounced in the open court on 14/01/2015. . आदेश कᳱ घोषणा खुले ᭠यायालय मᱶ ᳰदनांकः 14/01/2015 को कᳱ गई ।

Sd/- Sd/- (N.K. Billaiya) (Vijay Pal Rao )

लेखा सद᭭य / ACCOUNTANT MEMBER ᭠याियक सद᭭य / JUDICIAL MEMBER

मुंबई Mumbai; ᳰदनांक Dated 14/01/2015.

व.िन.स./ Jv, Sr. PS 6 ITA No.6857/M/12 Dollex Indus. Ltd.

आदेश कᳱ ᮧितिलिप अᮕेिषत/Copy षत of the Order forwarded to :

1. अपीलाथᱮ / The Appellant

2. ᮧ᭜यथᱮ / The Respondent.

3. आयकर आयुᲦ(अपील) / The CIT(A)-

4. आयकर आयुᲦ / CIT

5. िवभागीय ᮧितिनिध, आयकर अपीलीय अिधकरण, मुंबई / DR, ITAT, Mumbai

6. गाडᭅ फाईल / Guard file.

आदेशानुसार/ ार BY ORDER, स᭜यािपत ᮧित //True Copy// उप/ उप/सहायक पंजीकार ीकार (Dy./Asstt.

Registrar) आयकर अपीलीय अिधकरण, अिधकरण, मुंबई / ITAT, Mumbai