Jct Electronics Limited, Mohali vs Assessee

JCT Electronics Limited, Vs. The D.C.I.T., A-32, Industrial Area, Phase VII, Circle 6(I), Mohali. Mohali PAN: AAACJ4084A (Appellant) (Respondent)

Appellant by : Shri S.K.Sood Respondent by : Shri Manjit Singh, DR

Date of hearing : 24.03.2015 Date of Pronouncement : 26.03.2015

PER BHAVNESH SAINI, J.M. :

This appeal filed by the assessee is directed

against the order of learned Commissioner of Income

Tax(Appeals),Chandigarh dated 23.8.2013, for assessment

year 2006-07.

2. We have heard the learned representatives of both

the parties and perused the material available on record.

3. On ground No.1, the assessee challenged the order

of the learned CIT (Appeals) in disallowing depreciation 2

amounting to Rs.69,79,162/- on the ground that Mohali unit

was not operational during the year.

4. The learned representative for the assessee stated

that this issue has been decided against the assessee by

I.T.A.T., Chandigarh Bench in the case of the assessee in ITA

No.550/Chd/2011 for assessment year 2007-08 vide order

dated 31.10.2014, in which it was held as under :

"3. On Ground No.1, the assessee challenged the order of learned C IT (Appeals) in d i s a l l o wi n g depreciation amounting to Rs.56,51,251/- on the assets held by the assessee co mp any at Moh ali. T h e l e a r n e d C IT ( A p p e a l s ) f o u n d t h a t t h e a s s e s s e e c o m p a n y h a d t wo m a n u f a c t u r i n g units, one at Mohali, Punjab and other at Vadodara, Gujrat. T h e o p e r a t i o n o f M o h a l i u n i t wa s s u s p e n d e d i n May, 2001 on account of losses and f inancial constraints, ultimately leading to lock out on 13.3.2002. The matter was ultimately ref erred to BIFR. The learned C IT (Appeals) dismissed this ground of appeal of the assessee b y f o l l o wi n g h i s a p p e l l a t e o r d e r f o r p r e c e d i n g a s s e s s me n t year 2006-07.

3. The learned counsel f or the assessee submitted that i n t h e c a s e o f s a m e a s s e s s e e f o r a s s e s s me n t y e a r 2 0 0 4 - 05, the Hon'ble Punjab & Haryana High Court in ITA No.161 of 2010 dated 31.1.2011 dismissed similar ground of appeal of the assessee. The issue is covered against the assessee. The copy of the order is placed on record. Considering the above and submissions of the learned counsel for the assessee, it is clear that the Hon'ble Punjab & Haryana High Court has already dismissed the appeal of the assessee on identical issue in the preceding a s s e s s me n t y e a r 2 0 0 4 - 0 5 . T h e r e f o r e , t h e r e i s n o me r i t i n this ground of appeal of the assessee. T h e s a me is accordingly dismissed."

3 5. It was further submitted that the assessee has

preferred appeal in the Hon'ble Supreme Court.

6. Considering the above submissions in the light of

the earlier order of the Tribunal, we dismiss this ground of

appeal being covered against the assessee by the order of the

Tribunal dated 31.10.2014. This ground of appeal of the

assessee is, therefore, dismissed.

7. On ground No.2, the assessee challenged the

disallowance of club membership fees of Rs.2,73,866/- paid

for the senior employees of the company. The learned

representative for the assessee submitted that this issue is

decided in favour of the assessee by I.T.A.T., Chandigarh

Bench in the case of the same assessee by same order dated

31.10.2014 (supra), in which in para 4 it was held as under :

"4. On Ground No.2, the assessee challenged the order of t h e l e a r n e d C IT ( A p p e a l s ) i n d i s a l l o wi n g me mb e r s h i p f e e paid to the club in Delhi and only of a minor amount to club in Chandigarh a mo u n t i n g to Rs.1,99,381/-. The assessee contended bef ore the CIT (Appeals) that despite Mohali unit wa s c l o s e d , the assessee made eff orts to revive it and in this connection, executives of the assessee c o m p a n y i n C h a n d i g a r h u t i l i z e d t h e me mb e r s h i p o f t h e Chandigarh club for f urthering the business of the assessee co mp any. T h e l e a r n e d C IT ( A p p e a l s ) , h o we v e r , f o l l o wi n g his order for a s s e s s me n t year 2006-07 dismissed this ground of appeal of the assessee. The learned counsel for the assessee submitted that no w the issue is covered by the judgment of Full Bench of the 4

H o n ' b l e P u n j a b & H a r y a n a H i g h C o u r t i n t h e c a s e o f C IT Vs. Groz Beckert Asia Ltd., 31 Tax man.com 155 (P & H) in wh i c h it wa s held that corporate membership had adv an tage to the assessee f or limited period f or running of business and benef it of assessee and, theref ore, expenditure cannot be treated as capital asset. The learned D.R. for the Revenue did not dispute this proposition. F o l l o wi n g t h e j u d g m e n t o f t h e H o n ' b l e P u n j a b & H a r y a n a H i g h C o u r t a b o v e , we s e t a s i d e t h e o r d e r s o f the authorities belo w and delete the addition."

8. The learned D.R for the Revenue, however,

submitted that the unit of the assessee was closed.

Therefore, deduction should not be allowed.

9. This issue is considered in detail alongwith closure

of the unit and similar addition has been deleted in

assessment year 2007-08 (supra). Following the order of the

Tribunal for assessment year 2007-08 dated 31.10.2014

(supra), we delete this addition.

10. In the result, ground No.2 of the appeal of the assessee

is allowed.

11. On ground No.3, the assessee challenged the

disallowance of Rs.41,33,836/- under section 36(1)(va) of the

Act. The learned CIT (Appeals) noted that in the original

assessment order this issue has been adjudicated and his

predecessor also dismissed the appeal. Therefore, the

addition was confirmed. The learned representative for the

assessee submitted that the original assessment order was

passed on 19.12.2008 under section 143(3) of the Act in which 5

similar addition was made and the assessee moved an

application under section 154 of the Act before the Assessing

Officer which was decided vide order dated 22.3.2010 and it

was contended that the assessee has already added back the

amount resulting in double addition and the Assessing Officer

has deleted the addition. In view of the order of the Assessing

Officer under section 154 of the Act dated 22.3.2010, the

addition is liable to be deleted because the learned CIT

(Appeals) confirmed the addition by following the original

assessment order. Since in the original assessment order

rectification order is made by the Assessing Officer deleting

the same addition, therefore, there is no justification to

sustain the addition in the present proceedings. The addition

is deleted. The ground No.3 of the appeal of the assessee is

allowed.

12. On ground No.4, the assessee challenged the

addition of Rs.48,43,298/- in respect of liability due to M/s

Micro Precision Industries.

13. The learned CIT (Appeals) noted that M/s Micro

Precision Industries had written off outstanding debt of

Rs.48,43,298/- in the name of the assessee during the year

under consideration. When the Assessing Officer questioned

about the taxability of this amount under section 41(1) of the

Act, the assessee had submitted that M/s Micro Precision

Industries had never informed the assessee officially that they

had given up the claim. The Assessing Officer was not

satisfied with the explanation of the assessee and added the 6

amount. The explanation of the assessee before the learned

CIT (Appeals) was that the write off does not mean that the

contractual liability has ceased to exist but it was not

accepted by the learned CIT (Appeals) because the amount was

written off by the concerned party and this ground was

dismissed.

14. We have considered the rival submissions. The

learned representative for the assessee submitted that the

concerned party never informed the assessee about written off

the amount in question in the year under consideration.

Therefore, no addition could be made under section 41(1) of

the Act and relied upon the following decisions :

i) CIT Vs. Smt.Sita Devi Juneja (2010) 187 Taxman 96 (Punj & Har)

ii) CIT Vs. Puridevi Mahendrakumar Chaudhary (2014) 41 Taxman.com 329 (Gujarat)

iii) CIT-IV Vs. G.K. Patel & Co.

(2013) 29 Taxmann.com 248(Gujarat)

iv) CIT, Delhi-II Vs. Jain Exports (P) Ltd.

(2013) 35 Taxmann.com 540(Delhi)

v) CIT-III, Vs. Shri Vardhman Overseas Ltd.

(2011) 16 Taxmann.com 350(Delhi)

vi) ITO Vs. Bhavnesh Prints (P) Ltd.

(2011) 12 Taxmann.com 46(Ahd)

vii) DCIT, Vs. GCG Technology Housing Projects (P) Ltd.

(2011) 12 Taxmann.com 244(Delhi)

15. On the other hand,, the learned D.R for the Revenue

relied upon the orders of the authorities below and referred to

para 11 of the assessment order and stated that when the

concerned party has written off the debt in question, it

becomes the income of the assessee.

7

16. We have considered the rival submissions. In the

light of the decision relied upon by the assessee in the case of

Smt.Sita Devi Juneja (supra), the issue of bilateral act of the

assessee and creditors on record was not considered in the

present case. Nothing has been brought on record whether

there was any bilateral act of the assessee and creditors on

record for cessation of liability. The assessee has been

claiming since the beginning that the concerned party has not

informed about the giving up of the claim in question so as to

make the amount in question as income of the assessee. No

factual foundation for making addition against the assessee

has been brought on record by the Assessing Officer.

Therefore, the matter requires reconsideration at the level of

the Assessing Officer in the light of the decisions cited by the

learned representative for the assessee. We accordingly set

aside the orders of the authorities below and restore this

issue to the file of the Assessing Officer with direction to

redecide this issue strictly in accordance with section 41(1) of

the Act and in the light of the decisions cited by the learned

representative for the assessee before us. The Assessing

Officer shall give reasonable sufficient opportunities of being

heard to the assessee.

17. In the result, this ground of appeal raised by the

assessee is allowed for statistical purposes. 8

18. On ground No.5, the assessee challenged the

disallowance of Rs.21,59,067/- under section 14A of the Act.

The Assessing Officer on perusal of the balance sheet noted

that the assessee invested a sum of Rs.1.57 crores in shares

and has earned dividend income of Rs.28,000/-. As the

dividend income is exempt from tax, the expenses incurred to

earn exempt income including interest expenses on investment

in shares are not allowable under section 14A of the Act. The

assessee has also not apportioned/reduced such expenses in

relation to investment made to earn exempt income from the

total interest expenses incurred. The Assessing Officer,

therefore, made disallowance under section 14A of the Act.

19. The learned CIT (Appeals) noted that Rule 8D has

been incorporated w.e.f. 24.3.2008 and so as not applicable to

the year in question but some method of computation has to

be applied to determine the expenditure relating to the exempt

income and accordingly following the decision of the Punjab &

Haryana High Court in the case of CIT Vs. Abhishek

Industries, 286 ITR 1(P&H) dismissed this ground of appeal of

the assessee.

20. On consideration of the findings of fact recorded by

the Assessing Officer and in the absence of material on

record, we do not find any justification to interfere with the

orders of the authorities below. This ground of appeal of the

assessee is accordingly dismissed.

9

21. On ground No.6, the assessee challenged the

addition of Rs.7,40,000/-. The brief facts are that the

assessee claimed expenditure amounting to Rs.18,50,000/-

under the head "software and computerization expenses". The

assessee had claimed that the expenditure was incurred on

computer stationery, consumables and maintenance of

hardware, etc. but no evidence was produced to support the

claim. The claim of the assessee was not accepted. The

Assessing Officer treated the amount as capital expenses and

allowed depreciation @ 60% resulting into addition of

Rs.7,40,000/-.

22. The learned CIT (Appeals) on the same reasoning

also confirmed the addition and dismissed this ground of

appeal of the assessee.

23. On consideration of the rival submissions, we do not

find any merit in this ground of appeal of the assessee. The

learned representative for the assessee filed list of

expenditure on this issue to claim that the same were revenue

expenditure. However, it is a fact that no evidence was

produced either before the Assessing Officer or before the

learned CIT (Appeals) to support the claim that the

expenditure was revenue in nature. The learned CIT (Appeals)

also noted that the finding of fact recorded by the Assessing

Officer has not been controverted by the assessee before him.

The list of expenditure filed before us for the first time would

not reveal anything and as such, could not be taken into

consideration particularly when no proper petition is filed for 10

admission of the additional evidence. In the absence of any

material on record, we do not find any justification to

interfere with the order of the learned CIT (Appeals). This

ground of appeal of the assessee is accordingly dismissed.

24. No other point is argued or pressed.

25. In the result, the appeal of the assessee is partly

allowed.

Order pronounced in the open court on this 26th day of

March, 2015.

Sd/- Sd/- (T.R.SOOD) (BHAVNESH SAINI) ACCOUNTANT MEMBER JUDICIAL MEMBER

Dated : 26 t h March, 2015

*Rati*

Copy to: The Appellant/The Respondent/The CIT(A)/The CIT/The DR.

Assistant Registrar, ITAT, Chandigarh