IN THE INCOME TAX APPELLATE TRIBUNAL
DELHI BENCH `D', NEW DELHI
Before Sh. R. S. Syal, AM And Smt. Diva Singh, JM
ITA No. 3066/Del/2013 : Asstt. Year : 2009-10
Lloyd Insulations (India) Vs Addl. Commissioner of Income
Ltd., Tax, Range-4,
M-13, Punjhouse Premises, New Delhi
Connaught Place,
New Delhi
(APPELLANT) (RESPONDENT)
ITA No. 3641/Del/2013 : Asstt. Year : 2009-10
DCIT, Circle-4(1), Vs Lloyd Insulations (India)
New Delhi Ltd.,
M-13, Punjhouse Premises,
Connaught Place,
New Delhi
(APPELLANT) (RESPONDENT)
PAN No. AAACL0486E
Assessee by : S/Shri K. V. S. R Krishna
Revenue by : Ms Sulekha Verma
Date of Hearing : 25.3.2014 Date of Pronouncement : 26.3.2014
ORDER
Per R. S. Syal , AM:
These two cross appeals one by the assessee and other by the
Revenue - arise out of the order passed by the CIT(A) on 22.3.2013 in
relation to the assessment year 2009-10.
2 ITA No. 3066/Del/2013 & 3641/Del/2013
Lloyd Insulation (India) Ltd.
2. Revised grounds filed by the Revenue have been taken on record.
3. First ground taken by the Revenue is against the deletion of
addition of Rs. 10,75,37,079/- made by the Assessing Officer on account
of difference between the income appearing in the TDS certificates and
income offered for taxation. Briefly stated the facts of this ground as
recorded in para 3 of the assessment order are that the assessee earned
income from contract sales and the product sales. In respect of contract
sales, the assessee claimed that there was advance receipt of Rs. 10.75
crore, which was considered as liability in its balance sheet. On being
called upon to reconcile the claim as per TDS certificates with the
related income in the Profit and loss account, the assessee stated that the
contract sales shown in the P & L account were more than the amount
credited as per TDS certificates. As regards the advance of Rs. 10.75
crore reflected as liability in the balance sheet, the assessee stated that it
would be adjusted upon the completion of jobs in the subsequent year.
The A.O noted that the assessee had submitted detail of large number of
TDS certificates but there was no reconciliation. He opined that there
was possibility of certain income not being considered by the assessee
while computing the income. Following the view taken by him for the
assessment year 2008-09, the Assessing Officer made addition of Rs.
10.75 crores. The ld. CIT(A) deleted this addition.
3 ITA No. 3066/Del/2013 & 3641/Del/2013
Lloyd Insulation (India) Ltd.
4. After considering the rival submissions and perusing the relevant
material on record, it is observed that the Assessing Officer based this
addition on the similar view taken by him for the immediately preceding
year 2008-09. The cross appeals for the assessment year 2008-09 came
up for consideration before the Tribunal in ITA No. 2400/Del/2011 etc.
A copy of the tribunal order dated 9.8.2012 has been placed on record.
Relevant discussion on similar issue is contained on page 2 para 4 of
such order. It can be seen that the observations of the A.O for making
addition of Rs. 29.08 crore as reproduced by the Tribunal in its order
are mutatis mutandis similar to those for the current year. The Tribunal,
after considering the arguments at length, ordered for the deletion of the
addition. The Revenue challenged the said Tribunal order before the
Hon'ble Delhi High Court. Vide judgment dated 12.9.2013, the Hon'ble
Delhi High Court dismissed the Revenue's appeal by holding that no
substantial question of law arises for consideration from the order of the
Tribunal on this issue. A copy of the judgment is available on page 110
of the paper book. It can be seen from the record that the amount of
Rs.29.08 crore which was shown as liability as at the end of the
preceding year has been accounted for as income for the current year.
Similar position was stated before the authorities below qua the current
addition of Rs.10.75 crore. Such contention has not been refuted by the
AO. It, therefore, becomes patent that the addition made for the instant
4 ITA No. 3066/Del/2013 & 3641/Del/2013
Lloyd Insulation (India) Ltd.
year, similar to the one made for the preceding year which came to be
finally deleted by the Hon'ble High Court, cannot survive.
5. The ld. Departmental Representative contended that the assessee
failed to furnish reconciliation between the income offered and credit for
TDS certificates obtained and hence the matter should be restored to the
file of Assessing Officer. We are not convinced with this submission for
the obvious reason that if a particular amount as per TDS certificate has
been availed against which no corresponding income is shown, then the
course open to the Revenue is to deny the benefit of such TDS credit to
the assessee and not to make addition for any income. As no specific
instance has been pointed out by the A.O that a particular TDS credit
was claimed by the assessee against which no corresponding income
was shown, we cannot accept the general submission made on behalf of
the Revenue. Apart from that, the ground raised before us is against the
deletion of addition and not for denying the benefit of any TDS
certificate. This ground is therefore, not allowed.
6. Second ground of the Departmental appeal is against the deletion
of addition of Rs. 92,37,687/- made by the AO on account of non-
inclusion of Excise Duty in the closing stock of raw material in
contravention to the provisions of sec. 145A. Filtering out unnecessary
details, it is observed that similar disallowance was made by the
Assessing Officer u/s 145A on account of non-inclusion of Excise Duty
5 ITA No. 3066/Del/2013 & 3641/Del/2013
Lloyd Insulation (India) Ltd.
pertaining to the closing stock of raw material for the immediately
preceding year. When the matter finally came up before the Tribunal, the
issue was restored for a fresh decision in the light of the judgment of the
Hon'ble Delhi High Court in the case of CIT Vs Mahavir Aluminum Ltd.
(2008) 297 ITR 77 (Delhi). A copy of such order passed by the Tribunal
is available in the paper book. No distinguishing features for the current
year have been pointed out by the ld. DR. Respectfully following the
precedent, we set aside the impugned order on this score and remit the
matter to the file of A.O for deciding this issue afresh in accordance with
the afore noted judgment of the Hon'ble Delhi High Court in Mahavir
Aluminum Ltd. (supra).
7. The last effective ground in the Revenue's appeal is against the
deletion of disallowance of Rs. 1,57,152/- made on account of excess
claim of depreciation on scanners and CD-writers @ 60% as computer
peripherals. The assessee claimed depreciation @ 60% on scanners and
CD-writers etc. by considering them as part of computers. The
Assessing Officer restricted the entitlement to 15% on such items by
excluding them from the ambit of `Computers'. This led to the
disallowance of Rs. 1,57,152/-. The ld. CIT(A) deleted such addition.
8. After considering the rival submissions and perusing the relevant
material on record, we find that this issue stands decided in favour of the
assessee by the Special Bench order of the Tribunal in DCIT Vs
6 ITA No. 3066/Del/2013 & 3641/Del/2013
Lloyd Insulation (India) Ltd.
Datacraft India Ltd. (2010) 133 TTJ (Mum) (SB) 377. No contrary the
precedent has been brought to our notice by the ld. DR. We, therefore,
uphold the impugned order on this issue.
9. The only issue raised by the assessee through various grounds is
against the confirmation of disallowance of Rs. 19,40,796/- made by the
Assessing Officer u/s 14A r.w Rule 8D. Briefly stated the facts of
the case are that the assessee made investment of Rs. 14.61 crore in
securities fetching income not chargeable to tax. The assessee earned
dividend income of Rs. 4,444/- during the year, which was claimed as
exempt. In view of the fact that the assessee did not offer any
disallowance u/s 14A, the Assessing Officer, after giving due notice to
the assessee and recording proper reasons, made disallowance at Rs.
19,40,796/- as per Rule 8D. No relief was allowed in the first appeal.
The assessee is aggrieved against the sustenance of such disallowance.
10. Having heard the rival submissions and perused the relevant
material on record, we observe that the assessment year under
consideration is 2009-10. As per the judgment of the Hon'ble
jurisdictional High Court in Maxopp Investment Ltd. Vs CIT (2012) 347
ITR 272 (Delhi), the disallowance u/s 14A is required to be made as per
Rule 8D from assessment year 2009-10. As such, the contention urged
on behalf of the assessee that the disallowance be made on some
reasonable basis and not as per rule 8D is devoid of merits. The further
7 ITA No. 3066/Del/2013 & 3641/Del/2013
Lloyd Insulation (India) Ltd.
contention of the ld. AR that the exempt income was a meager sum and
hence such a substantial disallowance u/s 14A was not called for, also
does not stand in the light of the Special Bench order in Cheminvest Ltd.
Vs Income-tax Officer (2009) 121 ITD 318(Delhi) (SB). In this order, the
Special Bench has held that disallowance of expenses u/s 14A is
warranted even if the exempt income is nil. This contention is also
repelled.
11. Now we come to the computation of disallowance made by the
A.O as per Rule 8D, which is in two components. The first component
of such disallowance is interest expenditure amounting to Rs.
13,10,295/-. The ld. AR submitted that interest free funds with the
assessee far exceeded the amount of investment in the securities fetching
exempt income. It is axiomatic that disallowance u/s 14A is called for
only in respect of the expenses which are claimed as deduction. If there
is no deduction of expenditure relatable to the exempt income, there can
be no question of computing disallowance u/s 14A in a mechanical
manner. It is trite that if an assessee has interest free funds as well as
interest bearing funds at its disposal then the presumption would be that
the investment were made from interest free funds. The Hon'ble
Bombay High Court in CIT Vs Reliance Realities and Power Ltd. (2009)
313 ITR 340 (Bom) has held to this extent. Similar view has been taken
by Third Member of the Tribunal in Visen Industries Ltd. Vs Additional
8 ITA No. 3066/Del/2013 & 3641/Del/2013
Lloyd Insulation (India) Ltd.
CIT (2012) 136 ITD 309 (Bom) (TM). The natural corollary which,
therefore, follows is that if the interest free funds available at the
assessee's disposal are more than the investments made which give
exempt income then the presumption would be that such investments
were financed out of the interest free funds available at the assessee's
disposal. Once this is the case, there can be no question of attributing
interest claimed in the profit and loss account to such investments. If
there is no interest attributable to the investments bearing exempt
income, there can be no question of any disallowance of interest u/s
14A. The Hon'ble Gujarat High Court in CIT Vs Suzlon Energy Ltd.
(2013) 354 ITR 630 (Guj.) has held to this extent by laying down that
no disallowance of interest u/s 14A can be made if own capital is more
than the investment fetching exempt income. Since, necessary details in
this regard are not properly forthcoming, we deem it appropriate to set
aside the impugned order on this issue and remit this matter to the file of
A.O for computing disallowance of interest, if any, as per Rule 8D in
the light of the above discussion.
12. The second segment of disallowance amounting to Rs. 6,30,501/-
at ½ % of average investment, being in conformity with Rule 8D
applicable for the current year, is upheld.
13. In the result, the appeal of the assessee is partly allowed and that of
the Revenue is partly allowed for statistical purposes.
9 ITA No. 3066/Del/2013 & 3641/Del/2013
Lloyd Insulation (India) Ltd.
Order pronounced in the open Court on 26/03/2014.
Sd/- Sd/-
(Diva Singh) (R. S. Syal)
JUDICIAL MEMBER ACCOUNTANT MEMBER
Dated: 26/03/2014
*Subodh*
Copy forwarded to:
1.Appellant
2.Respondent
3.CIT
4.CIT(Appeals)
5.DR: ITAT
ASSISTANT REGISTRAR
Date Initial
1. Draft dictated on 25.03.2014 PS
2. Draft placed before author 25.03.2014 PS
3. Draft proposed & placed before the 25.3.2014 JM/AM
second member
4. Draft discussed/approved by Second JM/AM
Member.
5. Approved Draft comes to the Sr.PS/PS PS/PS
6. Kept for pronouncement on PS
7. File sent to the Bench Clerk PS
8. Date on which file goes to the AR
9. Date on which file goes to the Head Clerk.
10. Date of dispatch of Order.
*
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