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11-01-2019, Welspun India, Section 14A, 5A, 3, 43(1), Tribunal Mumbai

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1 day 23 hours ago #8365 by amit
Section - 14A, 5A, 3, 43(1), 153A
Order Date - 11-01-2019
Favouring - Partly
Court - Tribunal Mumbai
Appellant - Welspun India Ltd.
Respondent - DCIT
Justice - JOGINDER SINGH VP & RAMIT KOCHAR AM
Citation - 119Taxpundit161
Appeal No. - I.T.A. No.5376, 5375,5374
Asstt. Year - 2008-09,2009-10, 2010-11 and 2011-12

Order

PER : JOGINDER SINGH

These eight appeals are cross appeals filed by the Assessee and the Revenue for assessment year’s(AY’s) 2008-09 to 2011-12. Since common issues are involved in all these appeals for AY 2008-09 to 2011-12 , they were heard together and disposed of by this common order for the sake of convenience. First, we shall take up cross appeals for AY 2008-09 , the assessee’s appeal being ITA no. 5376/Mum/2015 and the Revenues appeal being 5725/Mum/2015 respectively, have arisen from the appellate order dated 10.09.2015 passed by Ld. Commissioner of Income-tax(Appeals)-51,Mumbai and the appeal before Ld. CIT(A) had arisen from the assessment order dated 26.03.2013 passed by the learned Assessing Officer u/s. 143(3) r.w.s. 153A r.w.s. 144C(1) of the Income-tax Act,1961 (hereinafter called “ the Act”).

2. The grounds of appeal raised by the Revenue in the memo of appeal filed with the Income-Tax Appellate Tribunal, Mumbai (hereinafter called “the tribunal”) in ITA no. 5725/Mum/2015 for AY 2008-09, read as under:-

1) "On the facts and in the circumstances of the case and in l w, the Ld.CIT(A) erred in holding that backward area incentive consisting of Sales Tax Incentive and excise duty benefits as Capital Receipt."

2) "Alternatively and without prejudice, the CIT(A) should have applied Explanation 10 to Sec.43(1) and should have directed that the backward area incentive should have been reduced from the actual cost."

3) "On the facts and in the circumstances of the case and in law, the Ld.CIT(A) erred in deleting the disallowance of Rs.3,59,88,823/- made u/s.14A read with Rule 8D without appreciating that Rule 8D is squarely applicable.‖

4) ― On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in deleting the addition made on account of premature redemption without appreciating that the transaction is in the nature of sale, exchange or relinquishment of assets as was held by the Supreme Court in Anarkali Sarabhai vs. CIT (224 ITR 422).‖

4) "On the facts and in the circumstances of the case and in law, the Ld.CIT(A) erred in deleting the addition made on account of book profit without appreciating that there is no brought forward book loss available to the assessee."

5) ―On the facts and in the circumstances of the case and in law, the Ld.CIT(A) erred in deleting the addition made to book profit on account of disallowance u/s.14A of the IT Act."

6) The appellant craves leave to amend or alter any ground or add a new ground which may be necessary.‖

3. The grounds of appeal raised by the assessee in the memo of appeal filed with the Income-Tax Appellate Tribunal, Mumbai (hereinafter called “the tribunal”) in ITA no 5376/Mum/2015 for AY 2008-09, read as under:-

“The ground or grounds of appeal are without prejudice to one another.

1 .a) On the facts and in the circumstances of the case and in law, the ld. CIT(A) erred in confirming the addition to the extent of Rs 32,94,347/- made by the AO to the income of the Appellant, by way of disallowing certain expenditure claimed to have been incurred relating to exempt income invoking the provisions of section 14A.

b) The ld. CIT(A) failed to appreciate that:-

(i) having regard to the accounts there is no reason and basis in reaching to dis-satisfaction with the correctness of the claim of the Appellant that no expenditure was incurred in relation to dividend income which does not form part of the total income; and

(ii) The investment in shares was made out of business strategy and there was no major change in such investment.

c} In reaching to the conclusion and confirming such addition the ld. C1T(A) omitted to consider relevant factors, considerations, principles and evidences while
he was overwhelmed, influenced and prejudiced by irrelevant considerations and factors.

2. On the facts and in the circumstances of the case and in law, the ld. CIT(A) erred in confirming the addition to the extent of Rs. 1,14,25,322/- (i.e. Rs 81,30,975/- + Rs. 32,94,347/-) made by the AO to the book profit of the Appellant by way of adding back disallowance made u/s. 14A by the Appellant and further disallowance made by the AO and thereby erred in enhancing the book profit artificially.

3. The ld. CIT(A) erred in holding that levy of interest u/s. 234D of the Income Tax Act, 1961 is consequential. The Appellant denies its liability for such interest.

4 . The ld. CIT(A) erred in holding that ground raised disputing initiation of the penalty proceedings u/s.271(1)(c) of the Income Tax Act, 1961 is premature. The Appellant denies its liability for such penalty. The Appellant craves leave to add, alter, amend or delete any or all of the above grounds of appeal.‖

4. The brief facts of the case are that the assessee is engaged in the manufacturing of terry towels . The search operations were carried out by Revenue in the case of Welspun group of entities u/s. 132 of the 1961 Act on 13 h October, 2010 . The assessee was also covered by Revenue in the aforesaid searches conducted by Revenue u/s 132 of the 1961 Act.

5. The first issue which arose before us comprises of chargeability to income-tax of incentives by way of refund of Excise Duty of Rs. 3,65,47,921/- and Exemption of Sales Tax to the tune of Rs. 5,75,56,878/- as revenue receipt or the same are capital receipts not exigible to income-tax. It so happened that Kutch District in Gujarat was hit by devastating earthquake on 26th January, 2001 and in order to redevelop and rehabilitate Kutch District of Gujarat , the Central and State Government formulated policy/schemes to encourage setting up of new industry in said Kutch District wherein certain incentives by way of refund of excise duty as well Sales Tax incentives

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