Sindhusagar Costructions, v. I.T.O. Ward 2(2) Kudal,

ITA 1244/PUN/2008 | 2002-2003
Pronouncement Date: 23-09-2010 | Result: Allowed

Appeal Details

RSA Number 124424514 RSA 2008
Assessee PAN AAYFS1491D
Bench Pune
Appeal Number ITA 1244/PUN/2008
Duration Of Justice 1 year(s) 9 month(s) 22 day(s)
Appellant Sindhusagar Costructions,
Respondent I.T.O. Ward 2(2) Kudal,
Appeal Type Income Tax Appeal
Pronouncement Date 23-09-2010
Appeal Filed By Assessee
Order Result Allowed
Bench Allotted Not Allotted
Tribunal Order Date 23-09-2010
Assessment Year 2002-2003
Appeal Filed On 01-12-2008
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH A PUNE BEFORE SHRI SHAILENDRA KUMAR YADAV JM AND SHRI D. KARUNAKARA RAO AM I.T.A. NO. 1244 TO 1246/PN/2008 A.Y. 2002-03 TO 2004-05 SINDHUSAGAR CONSTRUCTION MASHID GALLI SOMWAR PETH MALVAN DIST. SINDHUSAGAR PAN AAYFS 1491 D APPELLANT VS. THE I.T.O. WARD 2(2) KUDAL RESPONDENT I.T.A. NO. 1546 TO 1548/PN/2008 A.Y. 2002-03 TO 2004-05 I.T.O. WARD 2(4) KUDAL APPELLANT VS. SINDHUSAGAR CONSTRUCTION MASHID GALLI SOMWAR PETH MALVAN DIST. SINDHUSAGAR PAN AAYFS 1491 D RESPONDENT ASSESSEE BY : SHRI M.K. KULKARNI DEPARTMENT BY: SHRI ABHAY DAMLE ORDER PER BENCH ALL THESE APPEALS PERTAIN TO SAME ASSESSEE. SO THE Y ARE BEING DISPOSED OFF BY THIS CONSOLIDATED ORDER FOR T HE SAKE OF CONVENIENCE. I.T.A. NO. 1536 TO 1548/PN/2008 (DEPARTMENTS APPEA LS) 2. THE ISSUE IN REVENUES APPEAL IS WITH REGARDS TO DELETION OF ADDITION ON ACCOUNT OF DISALLOWANCE OF DEDUCTION U/S ITA NO. 1244 TO 1246 AND 1546 TO 1548/PN/2008 SINDHUSAGAR CONSTRUCTION A.Y. 2002-03 TO 2004-05 2 80IB(10). THE CLAIM WAS NOT ALLOWED PRIMARILY ON T HE GROUND THAT THE RETURN FILED BY THE ASSESSEE WAS NOT ACCOM PANIED BY AUDIT REPORT IN FORM NO. 10CCB. ACCORDING TO A.O THE RETURNS WERE NOT ACCOMPANIED BY THE PROFIT AND LOSS ACCOUNT BALANCE SHEET COMMENCEMENT CERTIFICATES AND OTHER DOCUMENTS RELATING TO THE CLAIM U/S 80-IB(10). THE REVISED RETURN FOR A.Y. 2004-05 WAS HOWEVER ACCOMPANIED BY AUDIT REPORT IN FORM NO. 10CCB. IN THE ORDER FOR A.Y. 2 005-06 IT IS MENTIONED THAT THE RETURN OF INCOME WAS ACCOMPANIED BY THE AUDIT REPORT IN FORM NO. 10CCB FOR A.Y. 2004-05. TH E REASON FOR DISALLOWANCE HAS BEEN MENTIONED AS THE AUDIT RE PORT NOT BEEN FILED BEFORE THE SPECIFIED DATE. IN THE ORDER FOR A.Y. 2005- 06 IT IS MENTIONED THAT THE CLAIM WAS BEING DISALL OWED FOR THE REASONS GIVEN IN A.Y. 2003-04. IN A.Y. 2003-04 TH E REASON FOR DISALLOWING THE CLAIM FOR DEDUCTION IS THAT THE AUD IT REPORT IN FORM NO. 10CCB WAS NOT FILED BEFORE THE SPECIFIED D ATE. VARIOUS CONTENTIONS WERE RAISED ON BEHALF OF THE AS SESSEE IN THIS REGARD AND THE CONTROVERSY BEFORE US IS WITH R EGARDS TO ALLOWABILITY OF DEDUCTION U/S 80-IB(10). SUB-RULE 1 AND 2 OF RULE 18BBB READS AS UNDER: 1) THE REPORT OF THE AUDIT OF THE ACCOUNTS OF AN ASSESSEE WHICH IS REQUIRED TO BE FURNISHED UNDER S UB- SECTION (7) OF SECTION 80IA OR SUB-SECTION (7) OF S ECTION 80-L EXCEPT IN THE CASES OF MULTIPLEX THEATRES AS D EFINED IN SUB-SECTION (7A) OF SECTION 80-IB OR CONVENTION CENTERS AS DEFINED IN SUB-SECTION (7B) OF SECTION 80-IB OR HOSPITAL IN RURAL AREAS AS DEFINED IN SUB-SECTION (11B) OF S ECTION 80-IB SHALL BE IN FORM NO. 10CCB. ITA NO. 1244 TO 1246 AND 1546 TO 1548/PN/2008 SINDHUSAGAR CONSTRUCTION A.Y. 2002-03 TO 2004-05 3 2) A SEPARATE REPORT IS TO BE FURNISHED BY EACH UNDERTAKING OR ENTERPRISE OF THE ASSESSEE CLAIMING DEDUCTION UNDER SECTION 80-I OR SECTION 80-IA OR SE C. 80- IC AND SHALL BE ACCOMPANIED BY THE PROFIT AND LOSS ACCOUNT AND BALANCE SHEET OF THE UNDERTAKING OR ENTERPRISE AS IF THE UNDERTAKING OR THE ENTERPRISE WERE A DISTINCT ENTITY. 3) IN THE CASE OF AN ENTERPRISE CARRYING ON THE BUSINESS OF DEVELOPING OR OPERATING AND MAINTAINING OR INFRASTRUCTURE FACILITY THE FORM SHALL BE ACCOMPAN IED BY A COPY OF THE AGREEMENT OF THE ENTERPRISE WITH THE CENTRAL GOVERNMENT OR THE STATE GOVERNMENT OR THE LOCAL AUTHORITY FOR CARRYING ON THE BUSINESS OF DEVELOPIN G OR OPERATING AND MAINTAINING OR DEVELOPING OPERATING AND MAINTAINING THE INFRASTRUCTURE FACILITY. 3. CIT(A) OBSERVED THAT SUB-RULE 1 TALKS ABOUT AUDI T REPORT ONLY AS REQUIRED UNDER SUB-SECTION 7 OF SEC. 80-IA SUB-SECTION 7 OF SECTION 80-I 7A OF 80-IB 7B OF SECTION 80-IB AND 11B OF SEC. 80IB. ALL THESE SUB-SECTIONS 7 OF SEC. 80IA 7A 7B 11B OF 80-IB CONTAIN A SPECIFIC CONDITION THAT THE ASSE SSEE SHALL FURNISH ALONG WITH THE RETURN OF INCOME REPORT OF A N AUDIT IN SUCH FORM AND CONTAINING SUCH PARTICULARS AS MAY BE PRESCRIBED. SECTION 7 OF SECTION 80-IA IS A GENERAL SECTION THAT THE DEDUCTION UNDER SUB SECTION 1 OF SEC. 80-IA FRO M PROFITS DERIVES FROM THE UNDERTAKING SHALL NOT BE ADMISSIBL E UNLESS ACCOUNTS OF THE UNDERTAKING HAVE BEEN AUDITED AND T HE REPORT OF SUCH AUDIT IN THE PRESCRIBED FORM IS SUBMITTED A LONG WITH THE RETURN. SIMILARLY SUB-SECTION 7 OF SEC. 80-O P RESCRIBED AN AUDIT REPORT TO BE SUBMITTED ALONG WITH THE REPORT WHERE THE ASSESSEE IS A PERSON OTHER THAN COMPANY OR CO-OPERA TIVE ITA NO. 1244 TO 1246 AND 1546 TO 1548/PN/2008 SINDHUSAGAR CONSTRUCTION A.Y. 2002-03 TO 2004-05 4 SOCIETY. THE PRESCRIBED FORM FOR AUDIT IS MENTIONED IN SEC. 18BBB. 3.1 SUB-RULE 2 OF RULE 18BBB SIMPLY STATES THAT THE SEPARATE REPORT IS TO BE FURNISHED BY EACH UNDERTAKING OR EN TERPRISE CLAIMING DEDUCTION AND SHALL BE ACCOMPANIED PROFIT AND LOSS ACCOUNT AND BALANCE SHEET OF THE UNDERTAKING AS IF THE UNDERTAKING WAS A DISTINCT ENTITY. SUB-RULE 3 OF R ULE 18BBB PRESCRIBES THAT IN CASE OF INFRASTRUCTURE FACILITY COPY OF THE AGREEMENT OF THE ENTERPRISE WITH THE CENTRAL GOVERN MENT OR STATE GOVERNMENT ETC. SHOULD ALSO BE SUBSTITUTED. S UB-RULE 4 OF RULE 18BBB STATES THAT IN ANY OTHER CASE I.E. OT HER THAN INFRASTRUCTURE FACILITY THE FORM SHALL BE ACCOMPANI ED BY A COPY OF THE APPROVAL OR PERMISSION TO CARRY OUT THE ACTI VITY BY THE CENTRAL GOVERNMENT OR STATE GOVERNMENT ETC. IN THI S BACKGROUND IT WAS OBSERVED BY THE CIT(A) THAT IN C ASE OF ENTERPRISE COVERED U/S 80-I AND 80-IA A SEPARATE A UDIT REPORT FOR THE ENTERPRISE OR UNDERTAKING IS NECESSARY. UN DER THE PROVISIONS OF SEC. 80-IB DEDUCTION IS ALLOWED TO AN ELIGIBLE BUSINESS WHICH INCLUDES AN INDUSTRIAL UNDERTAKING 8 0B(2) BUSINESS OF SHOP 80-IB(6) HOTEL 80IB(7) MULTIPLEX 80-IB(7)(A) CONVENTION CENTERS 80-IB(7)(B) ETC. OUT OF VARIOUS ELIGIBLE BUSINESSES ONLY IN CASE OF MULTIPLEX THEATRES 7(A) CONVENTION CENTER 7(B) AND HOSPITAL 11(B) THERE IS A SPECIFIC DIRECTION IN ITA NO. 1244 TO 1246 AND 1546 TO 1548/PN/2008 SINDHUSAGAR CONSTRUCTION A.Y. 2002-03 TO 2004-05 5 THE SUB-SECTION THAT SEPARATE AUDIT REPORT SHOULD B E FURNISHED. IN CASE OF BUSINESS MENTIONED IN SUB-SE CTION 7(A) THE AUDIT REPORT SHOULD BE IN FORM 10CCBA IN CASE O F BUSINESS MENTIONED IN SUB-SECTION 7(B) IT SHOULD BE IN FORM NO. 10CCB AND IN CASE OF 11(B) IT IS 10CCBC. THERE IS NO GE NERAL CLAUSE OR SUB-SECTION IN SEC. 80-IB DIRECTING THAT AUDIT S HOULD BE CARRIED OUT AND REPORT SUBMITTED ALONG WITH THE RET URN OF INCOME AS IN THE CASE OF SECTION 80-IA WHERE SUB-SE CTION APPLIES TO ALL ELIGIBLE UNDERTAKING OR BUSINESS. T HE PROVISIONS OF A RULE CAN ONLY BE READ WITH REFERENCE TO A SPEC IFIC PROVISION IN THE ACT. IN THE ABSENCE OF ANY SPECIFIC PROVISI ON IN SECTION 80-IB THERE CANNOT BE A STATUTORY DUTY CAST ON THE ASSESSEE. 4. WITHOUT PREJUDICE TO THE ABOVE FINDINGS OF THE C IT(A) WE OBSERVED THAT THIS ISSUE IS COVERED IN FAVOUR OF TH E ASSESSEE BY THE DECISION OF PUNE BENCH OF I.T.A.T. IN THE CASE OF M/S. G.B. RUBBER PRODUCTS IN ITA NO. 649/PN/2008 FOR A.Y. 200 3-04 DATED 26 TH JULY 2010 WHEREIN FOLLOWING THE MADRAS HIGH COURT JUDGMENT IN THE CASE OF CIT VS. VALLI COTTON TRADER S (P) LTD. (2007) 288 ITR 400 (MAD) IT WAS HELD THAT THE CIT(A ) WAS NOT JUSTIFIED IN CONFIRMING THE DISALLOWANCE OF THE CLA IM OF DEDUCTION U/S 80-IA ON ACCOUNT OF NON-FILING OF THE AUDIT REPORT ALONG WITH THE RETURN WHICH WAS SUBSEQUENTL Y FILED. WE ARE AWARE OF THE FACT THAT HONBLE HIGH COURT OF RAJASTHAN ITA NO. 1244 TO 1246 AND 1546 TO 1548/PN/2008 SINDHUSAGAR CONSTRUCTION A.Y. 2002-03 TO 2004-05 6 IN THE CASE OF CIT VS. JYOTI JAIN (2009) 17 DTR (R AJ) 286 WHEREIN FOLLOWING THE RATIO OF SAME HIGH COURT IN T HE CASE OF CIT VS. KOTHARI IMPEX (2008) 3 DTR 295 HAS TAKEN A VIEW THAT THE REQUIREMENT OF FURNISHING AUDIT REPORT ALONG WI TH RETURN FOR CLAIMING DEDUCTION UNDER SEC. 80-IA IS MANDATOR Y AND NOT DIRECTORY. IF THERE ARE TWO POSSIBLE VIEWS AVAILAB LE WITH THE ASSESSEE IN TERMS OF HIGH COURT DECISIONS AND THAT TOO IN ABSENCE OF JURISDICTIONAL HIGH COURT THE VIEW IN F AVOUR OF THE ASSESSEE SHOULD BE FOLLOWED. SO IN VIEW OF THE ABO VE DISCUSSIONS WE ARE NOT INCLINED TO INTERFERE WITH THE FINDING OF THE CIT(A). IN VIEW OF THE ABOVE WE HOLD THAT FO LLOWING THE RATIO OF HONBLE MADRAS HIGH COURT IN THE CASE OF V ALLI COTTON TRADERS (P) LTD. (SUPRA) WHEREIN IT HAS BEEN HELD T HAT NON- FURNISHING OF AUDIT REPORT CLAIM OF THE ASSESSEE FO R DEDUCTION U/S 80-IB SHOULD NOT BE REJECTED. SIMILAR ISSUE HAS ARISEN FOR A.Y. 2004-05 AND 2005-06. SO FOLLOWING THE DECISIO N GIVEN FOR A.Y. 2003-04 THE ISSUE RAISED BY THE REVENUE FOR A .Y. 2004-05 AND 2005-06 IS DECIDED IN FAVOUR OF THE ASSESSEE AN D AGAINST THE REVENUE. I.T.A. NO. 1244 TO 1246/PN/2008 (ASSESSEES APPEALS ) 5. THE GROUNDS RAISED BY THE ASSESSEE FOR A.Y. 2002 -03 READ AS UNDER: 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW THE LD. CIT(A) KOLHAPUR WAS NOT JUSTIFIE D IN ITA NO. 1244 TO 1246 AND 1546 TO 1548/PN/2008 SINDHUSAGAR CONSTRUCTION A.Y. 2002-03 TO 2004-05 7 SUSTAINING THE ADDITION OF RS. 1 36 861/- MADE BY T HE A.O INVOKING SECTION 40A(3) OF THE ACT INASMUCH AS SUCH PAYMENT WAS NOT HIT BY THAT SECTION AND MORE SO EVE N AFTER ADDITION ON ACCOUNT OF DISALLOWANCE ENTIRE IN COME WAS EXEMPT AS THE ONLY SOURCE OF INCOME WAS THE INC OME U/S 80-IB(10) OF THE ACT AND IT BE HELD ACCORDINGLY . 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW THE LD. CIT(A) WAS NOT JUSTIFIED IN SUST AINING THE ADDITION OF RS. 28 255/- MADE BY THE A.O ON ACC OUNT OF REVISED REVENUE AND MORE SO THE ENTIRE INCOME EV EN AFTER ADDITION WAS EXEMPT AS THE ONLY SOURCE OF INC OME WAS THE INCOME U/S 80-IB OF THE ACT AND IT BE HELD ACCORDINGLY. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW THE A.O IS NOT JUSTIFIED IN DISALLOWING THE CLAIM OF THE ASSESSEE MADE FOR COMPENSATION PAID OF RS. 80 000/-. THE PAYMENT WAS ESSENTIAL DURING THE COUR SE OF THE BUSINESS CARRIED ON BY THE ASSESSEE AND IT B EING NOT OF CAPITAL NATURE WAS ALLOWABLE IN FULL. IT BE ALLOWED ACCORDINGLY. EVEN ASSUMING CAPITAL OR REVENUE EXPENDITURE THE ADDITION WOULD BE TO BUSINESS INCOM E AND ULTIMATELY EXEMPT U/S 80-IB(10) OF THE ACT. 6 THE STAND OF THE ASSESSEE IS THAT THE ISSUE IN PR INCIPLE IS COVERED IN FAVOUR OF THE ASSESSEE BY VARIOUS DECISI ONS. IT WAS POINTED OUT THAT THE ITAT PUNE BENCH IN THE CASE OF SHRI MAHAVIR NAGARI SAHAKARI PAT SANSTHA LTD. VS. DY. CI T (2002) 74 TTJ (PUNE) 793 HAS HELD THAT SECTION 68 DOES NO T MAKE ANY DISTINCTION BETWEEN A BANKING CONCERN AND NON-B ANKING CONCERN. WHERE THE ACCOUNTS ARE MAINTAINED BY THE ASSESSEE AND CASH CREDITS APPEAR IN SUCH BOOKS OF ACCOUNT T HEN PROVISIONS OF SEC. 68 WOULD BECOME APPLICABLE AND T HE INITIAL BURDEN TO PROVE THE GENUINENESS OF THE CASH CREDITS WOULD BE ON THE ASSESSEE THOUGH THE NATURE OF ONUS MAY VARY FROM THE ITA NO. 1244 TO 1246 AND 1546 TO 1548/PN/2008 SINDHUSAGAR CONSTRUCTION A.Y. 2002-03 TO 2004-05 8 CASE TO CASE. IT WAS FOUND THAT THERE IS NO FORCE IN THE CONTENTION OF THE ASSESSEE THAT PROVISIONS OF SEC. 68 CANNOT BE APPLIED TO BLOCK ASSESSMENT. SINCE THERE IS NO EXC LUSION OF SEC. 68 PROVISIONS OF SEC. 68 WOULD BE APPLICABLE T O BLOCK ASSESSMENT. FURTHER IN THIS BACKGROUND WITH REGARD S TO DEDUCTION U/S 80-IB AND 80-IA IT WAS HELD THAT CASH CREDITS EVEN IF TAXED WOULD BE CONSIDERED AS INCOME FROM TH E SAME BUSINESS I.E. PROVIDING CREDIT FACILITIES TO THE ME MBERS AND ACCORDINGLY IT WOULD ALSO BE ENTITLED TO DEDUCTION U/S 80P. WE ALSO FIND THAT HON'BLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. GEM PLUS JEWELLERUY INDIA LTD. (2010) 233 C TR (BOM) 248 ON THE POINT OF EXEMPTION U/S 10A OBSERVED THAT WITH REGARDS TO TOTAL TURNOVER IN RESPECT OF FREIGHT AND INSURANCE IT WAS OBSERVED THAT FREIGHT AND INSURANCE DOES NOT HA VE AN ELEMENT OF TURNOVER AND HAVE TO BE EXCLUDED FROM TH E TOTAL TURNOVER. EXPORT TURNOVER IN THE NUMERATOR MUST H AVE THE SAME MEANING AS THE EXPORT TURNOVER WHICH IS A CONS TITUENT ELEMENT OF THE TOTAL TURNOVER IN THE DENOMINATOR. D EFINITION OF EXPORT TURNOVER EXCLUDES FREIGHT AND INSURANCE. SINCE EXPORT TURNOVER HAS BEEN DEFINED BY PARLIAMENT AND THERE I S A SPECIFIC EXCLUSION OF FREIGHT AND INSURANCE THE EX PRESSION EXPORT AND TURNOVER CANNOT HAVE A DIFFERENT MEANI NG WHEN IT FORMS A CONSTITUENT PART OF THE TOTAL TURNOVER FOR THE PURPOSES OF APPLICATION OF THE FORMULA. MOREOVER A RECEIPT SUCH AS ITA NO. 1244 TO 1246 AND 1546 TO 1548/PN/2008 SINDHUSAGAR CONSTRUCTION A.Y. 2002-03 TO 2004-05 9 FREIGHT AND INSURANCE WHICH DOES NOT HAVE AN ELEMEN T OF PROFIT CANNOT BE INCLUDED IN THE TOTAL TURNOVER. THUS IT WAS HELD THAT THE FREIGHT AND INSURANCE CHARGES DOES SOT HAV E AN ELEMENT AND ARE TO BE EXCLUDED FROM THE TOTAL TURNO VER FOR HE PURPOSE OF COMPUTING EXEMPTION U/S 10A. WITH REFER ENCE TO ADDITION OF DISALLOWANCE OF PF/ESIC PAYMENTS AS THE PLAIN CONSEQUENCE OF THE DISALLOWANCE AND ADD BACK MADE B Y THE A.O IS AN INCREASE IN THE BUSINESS PROFITS OF THE A SSESSEE. WE ALSO FIND THAT HONBLE HIMACHAL PRADESH HIGH COURT IN THE CASE OF CIT VS. ALLIED INDUSTRIES IN ITA NO. 32 OF 2006 HELD THAT WHERE AMOUNT SURRENDERED BY THE ASSESSEE WAS A SSESSED AS BUSINESS INCOME DEDUCTION U/S 80-IB WAS ALLOWA BLE IN RESPECT OF AMOUNT SO SURRENDERED. SO VARIOUS COMPO NENTS OR DISALLOWANCES NEED TO BE APPRECIATED IN THE LIGHT O F ABOVE DISCUSSION AND FOR SAME PURPOSES THE MATER IS REST ORED TO THE FILE OF THE A.O WHO WILL DECIDE THE SAME AS PER FAC T AND LAW IN THE LIGHT OF ABOVE LEGAL POSITION AFTER PROVIDING D UE OPPORTUNITY OF HEARING. AS A RESULT ALL THE ISSUES IN ASSESSEE S APPEAL ARE RESTORED TO THE FILE OF THE A.O. FOR THE REASONS IN DICATED ABOVE. 7. IN THE RESULT DEPARTMENTAL APPEALS ARE DISMISSE D WHEREAS ASSESSEES APPEALS ARE ALLOWED FOR STATISTI CAL PURPOSES. ITA NO. 1244 TO 1246 AND 1546 TO 1548/PN/2008 SINDHUSAGAR CONSTRUCTION A.Y. 2002-03 TO 2004-05 10 PRONOUNCED IN THE OPEN COURT ON 23 RD SEPTEMBER 2010. SD/- SD/- (D. KARUNAKARA RAO) (SHAILENDRAKUMAR YADAV) ACCOUNTANT MEMBER JUDICIAL MEMBER PUNE DATED THE 23 RD SEPTEMBER 2010 ANKAM COPY FORWARDED TO: (1) ASSESSEE (2) DEPARTMENT (3) CIT- KOLHAPUR (4) CIT(A) KOLHAPUR (5) THE D.R. A' BENCH PUNE TRUE COPY BY ORDER ASSISTANT REGISTRAR INCOME-TAX APPELLATE TRIBUNAL PUNE BENCHES PUNE