2019 (5) TMI 540 - AT - Income Tax

ITAT upholds CIT(A)'s decisions for A.Y. 2011-12 & 2012-13, dismissing revenue's appeals. (A)

DCIT, Circle – 1 (1) (1), Ahmedabad. Versus M/s. Amol Dicalite Ltd.

DCIT, Circle – 1 (1) (1), Ahmedabad. Versus M/s. Amol Dicalite Ltd. - TMI Issues Involved:1. Deletion of disallowance under Section 40(a)(i) for consultancy and supervision charges.2. Deletion of disallowance of additional depreciation.3. Deletion of addition on account of unutilized CENVAT credit.4. Deletion of disallowance under Section 14A read with Rule 8D.Issue-Wise Detailed Analysis:Ground No.1: Deletion of Disallowance under Section 40(a)(i) for Consultancy and Supervision ChargesThe assessee filed its return of income declaring a total income of Rs. 2,35,39,500/-. During scrutiny, it was found that the assessee had made payments to non-residents amounting to Rs. 71,43,952/- for consultancy and supervision charges without deducting TDS as required under Section 195 of the Act. The Assessing Officer (AO) disallowed this amount under Section 40(a)(i). However, the Commissioner of Income Tax (Appeals) [CIT(A)] deleted the disallowance, following the decision in the assessee's own case for A.Y. 2010-11. The ITAT upheld the CIT(A)'s order, relying on the coordinate bench's decision in similar cases, and dismissed the revenue's appeal.Ground No.2: Deletion of Disallowance of Additional DepreciationThe assessee claimed additional depreciation of Rs. 1,53,74,316/- on plant and machinery purchased and leased out. The AO disallowed this, restricting depreciation to 15%, arguing that the machinery was used for leasing, not manufacturing. The CIT(A) deleted the disallowance, following the order in the assessee's case for A.Y. 2010-11. The ITAT upheld the CIT(A)'s decision, citing the Gujarat High Court's judgment in Diamines & Chemicals Ltd., which stated that additional depreciation is allowable even if the machinery is used for leasing, provided the assessee is engaged in manufacturing. The revenue's appeal was dismissed.Ground No.3: Deletion of Addition on Account of Unutilized CENVAT CreditThe AO added Rs. 23,64,484/- to the assessee's income for unutilized CENVAT credit, arguing that the assessee followed an exclusive method of accounting, which was against Section 145A. The CIT(A) deleted the addition, stating that the unutilized CENVAT credit was shown as loans and advances and not claimed as an expense in the Profit & Loss account. The ITAT upheld the CIT(A)'s decision, referencing the Gujarat High Court's judgment in Narmada Chematur Petrochemicals Ltd., which held that unutilized CENVAT credit cannot be treated as income. The revenue's appeal was dismissed.Ground No.4: Deletion of Disallowance under Section 14A read with Rule 8DFor A.Y. 2012-13, the AO disallowed Rs. 1,38,489/- under Section 14A read with Rule 8D, arguing that the assessee must have incurred administrative expenses related to investments. The CIT(A) deleted the disallowance, stating that no exempt income was earned, and hence, no expenditure was incurred. The ITAT upheld the CIT(A)'s decision, relying on the Gujarat High Court's judgment in Corrtech Energy Pvt. Ltd., which held that no disallowance under Section 14A is warranted if no exempt income is earned. The revenue's appeal was dismissed.Conclusion:In conclusion, the ITAT dismissed both the revenue's appeals for A.Y. 2011-12 and A.Y. 2012-13, upholding the CIT(A)'s decisions on all grounds. The judgments relied on established legal precedents, including decisions by the Gujarat High Court and coordinate benches of the ITAT. The appeals were found to be devoid of merit, and the orders of the CIT(A) were confirmed.