Plastiblends India Ltd, Mumbai vs Assessee

आयकर अपीलीय अिधकरण, अिधकरण मुंबई IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES 'C' MUMBAI सव ौी आय.पी. बंसल, याियक सदःय एवं ौी चं पुजारी, लेखा सदःय के सम । BEFORE SHRI I.P. BANSAL, JUDICIAL MEMBER AND SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER

ITA NO.6008/Mum/13 (A.Y.2010-11)

Plastiblends India Limited The DCIT Kolsite House, 31, Shah Indl. Estate Range - 8(2), Off Veera Desai Road, Andheri (W) Vs. Mumbai. Mumbai-400 053. (Respondent) GIR No./PAN : AAACP 6287 B (Appellant )

Appellant by : Shri Nitesh Joshi Respondent by : Shri Neil Philip - DR

Date of hearing : 25 /02/2015 Date of pronouncement : 04/03/2015

ORDER

PER CHANDRA POOJARI, A.M:

This appeal by the assessee is directed against the order dated 31/7/2013 passed by the ld. CIT(A) for the assessment year 2010-11. The first ground raised by the assessee in this appeal is as follows :-

"1. The CIT(A) ought to have held that the Appellant had disclaimed deduction by way of depreciation under section 32(1) of the Act in the earlier years and, therefore, the written down value on which depreciation was to be allowed for the year under consideration should have been higher to that extent."

2. The brief facts of the issue are that, with regard to the claim of depreciation for the three divisions of Daman Unit, the AO noted that the opening WDV of the assets of this division was incorrect, in as much as, 2 ITA No.6008/Mum/13

the assessee had not reduced the depreciation allowed by the AO for the earlier years prior to assessment year 2002-03. But for that year, the assessee had not claimed depreciation on the said assets of three divisions of the Daman Unit, which had been thrust upon the assessee by the AO during the course of finalizing the assessments for those years. However, in the assessment order the AO has recomputed the WDV by taking into consideration the depreciation already allowed for those years. Thus there was difference in the depreciation claimed and allowed.

3. On appeal, CIT(A) rejected the claim of the assessee by observing that the issue was decided against the assessee by the Jurisdictional High Court in the assessee's own case for the assessment year 1997-98 reported in 318 ITR 352 (Plastiblends India Ltd. vs. CIT)(Bom.).

4. Before us, the ld. AR relied on the order of the Tribunal for the assessment year 2008-09 and 2009-10 in ITA No.4080 & 4081/Mum/2012 dated 12/9/2014, wherein it was held as follows:-

"5. We have carefully perused the order of the Tribunal in ITA 2757/M106. The Tribunal at para-2 of its order has held as under:

"During the course of hearing the learned counsel for the assessee pointed out that in the year in question the assessee has clai med dep re ci a ti on an d there is n o qu esti on o f th rus t of any depreciation but its grievance is that the final orders o f t h e e a r l i e r y e a r s w h i c h h a v e n o t b e e n p r o p e r l y i mplemented. The assessee desires there should be a specific direction to the Assessing Officer on this behalf so as not to disturb the finality of the orders of the orders of the earlier years. The learned Departmental Representative on the other hand, has no objection if a specific direction is given to the Assessing Officer. We, therefore, direct the Assessing Officer that the written down value as at the beginning of the year shall be computed only on the basis of the orders 3 ITA No.6008/Mum/13

which have already reached the finality. In other words, the depreciation actually claimed or directed to be allowed only shall be taken into consideration before arriving the written down value of the assets in question.

Respectfully following the above findings of the Tribunal (supra), we hold accordingly. Ground No.1 is treated as allowed for statistical purposes."

5. We have heard both the parties on this issue and considered the material available on record. The Tribunal in assessee's own case for the assessment year 2008-09 and 2009-10 observed that depreciation actually claimed are directed to be allowed only shall be taken into consideration before arriving at the written down value of the assets in question. However, while deciding this issue in assessment year 2008-09 and 2009- 10 the Tribunal has not considered the judgment of assessee's own case for the assessment year 1997-98 reported in ITR 318 ITR 352. In view of this we are inclined to hold that for the purpose of deduction under Chapter-VIA, the gross total income has to be computed interalia by deducting deductions allowable under section 30 to Section 43D,including depreciation allowable under section 32 of the Income tax Act eventhough the assessee has computed the total income under Chapter IV by its claiming the current depreciation. With these observations we disposed the ground taken by the assessee .

6. Ground No.2 and 3 which came up for our consideration are as follows :-

"2. The CIT(A) ought to have held that the Appellant had already disallowed Rs.15,095/- as being allocable under section 14A and no further expenditure by way of administrative cost had been incurred in relation to earning of exempt income and, hence, no such additional expenditure could not be the subject matter of disallowance under section 14A of the Act.

4 ITA No.6008/Mum/13 "3. The CIT(A) ought to have held that the disallowance, if any, under section 14A of the Act could not exceed the amount of Rs.15,095/-. The CIT(A) erred in upholding an adhoc disallowance under section 14a @ 0.5% of average value of investments on the first day and last day of previous year."

6.1 Facts of the issue are this ground relates to disallowance of Rs.2,83,314/- as expenditure disallowable under section 14A in relation to the exempt income and treating the same as not allowable expenditure under section 14A in computation of the total income by applying provisions of Rule 8D. During the assessment proceedings the assessee had shown dividend income of Rs.14,02,902/- which has been claimed as exempt under section 10(34). The AO held that it was not possible for the assessee to have earned the tax free income which involved complex investment decisions without incurring management and administrative expenses, especially as such decisions were taken by the Board of Directors. The AO therefore, held that it was valid to disallow proportionate management expenses, and relied on the following judicial decisions:-

a) Cheminvest Ltd. (317 ITR 86(AT) and

b) Godrej & Boyce Mfg. Co.Ltd. 234 CTR 1

6.2 The CIT(A) followed the earlier order of the CIT(A) in assessee's own case for the assessment years 2008-09 and 2009-10 and deducted claim of the assessee. Against this the assessee is in appeal before us.

6.3 We have heard both the parties and perused the material available on record. Admittedly, for this case the above issue was decided by the order of this Tribunal in the assessment years 2008-09 and 2009-10 in ITA 5 ITA No.6008/Mum/13

nos.4080 & 4081/Mum/2012 dated 12/9/2014 wherein it was held as follows:-

"12. We have carefully perused the orders of the authorities below. A perusal of the schedule of investments at page-21 of the Annual Report for the year shows that the investments as on 3 1.3.2007 were at Rs. 15.74 crores, the same has come down to Rs. 7.41 crores on 31.3.2008. A perusal of the cash flow statement at page-30 of the Annual report shows that the assessee had sufficient cash accruals from its own funds therefore we agree with the contention of the Ld. Counsel that no part of interest can be disallowed nor this issue is before us. However, coming to the disallowance of other direct or indirect expenditure, the assessee has computed the disallowance at Rs. 24,304/- by allocating the salary paid to junior accountant. We do not agree with this computation of disallowance by the assessee. It is an undisputed fact that investment is a policy decision taken by the Board of Directors at the highest level which requires lot of consultancy from various experts. Therefore, the disallowance u/s. 14A r.w. Rule 8D(2)(iii) becomes imperative, as the disallowance have been computed by the AO as per the applicable provisions of law. We do not find any reason to interfere with the disallowance. Ground No. 2 & 3 are accordingly dismissed."

6.4 The facts of the present case is similar to the one considered by the Tribunal for the assessment years 2008-09 and 2009-10 cited supra. In view of this, we are inclined to decide the issue in favor of the assessee on similar lines.

7. In the result appeal of the assessee in ITA No.6008/Mum/13 is partly allowed.

Order pronounced in the open court on 04/03/2015. आदे श क घोषणा खुले यायालय म# $दनांकः 04/03/2015 को क गई ।

Sd/- Sd/- (आय.पी. बंसल / I.P. BANSAL) (चं पुजारी /CHANDRA POOJARI ) याियक सदःय / JUDICIAL MEMBER लेखा सदःय / ACCOUNTANT MEMBER मुंबई Mumbai; $दनांक Dated : 04/03/2015 व.िन.स./Jv, Sr. PS 6 ITA No.6008/Mum/13

आदे श क ूितिल*प अमे*षत/Copy षत of the Order forwarded to : 1. अपीलाथ- / The Appellant 2. ू.यथ- / The Respondent. 3. आयकर आयु/(अपील) / The CIT(A)- 4. आयकर आयु/ / CIT

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

6. गाड फाईल / Guard file.

आदे शानुसार/ ार BY ORDER, स.या*पत ूित //True Copy//

उप/सहायक उप सहायक पंजीकार (Dy./Asstt. Registrar) आयकर अपीलीय अिधकरण, अिधकरण मुंबई / ITAT, Mumbai