The ACIT, Circle,, Gandhidham-Kutch v. Ratan Wood Pvt. Ltd.,, Gandhidham-Kutch

ITA 1501/RJT/2005 | 2001-2002
Pronouncement Date: 25-03-2011 | Result: Partly Allowed

Appeal Details

RSA Number 150124914 RSA 2005
Assessee PAN AABCR0074M
Bench Rajkot
Appeal Number ITA 1501/RJT/2005
Duration Of Justice 5 year(s) 7 month(s) 14 day(s)
Appellant The ACIT, Circle,, Gandhidham-Kutch
Respondent Ratan Wood Pvt. Ltd.,, Gandhidham-Kutch
Appeal Type Income Tax Appeal
Pronouncement Date 25-03-2011
Appeal Filed By Department
Order Result Partly Allowed
Bench Allotted DB
Tribunal Order Date 25-03-2011
Date Of Final Hearing 18-03-2011
Next Hearing Date 18-03-2011
Assessment Year 2001-2002
Appeal Filed On 11-08-2005
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL RAJKOT BENCH RAJKOT BEFORE SHRI A.L. GEHLOT (AM) AND SHRI N.R.S. GANESA N (JM) I.T.A. NO.1501/RJT/2005 (ASSESSMENT YEAR 2001-02) THE ACIT(CIRCLE) VS RATAN WOOD PVT LTD GANDHIDHAM PLOT NO.46 SECTOR NO.8 GIDC GANDHIDHAM-KUTCH PAN : AABCR0074M (APPELLANT) (RESPONDENT) I.T.A. NO.1502/RJT/2005 (ASSESSMENT YEAR 2001-02) THE ITO WD.1 VS M/S MIECO BOARDS GANDHIDHAM PLOT NO.46 SECTOR 8 GIDC GANDHIDHAM-KUTCH PAN : AADFM2157P (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI JAI RAJ KUMAR RESPONDENT BY : SHRI KALPESH DOSHI O R D E R PER AL GEHLOT AM THESE TWO APPEALS ARE FILED BY TWO DIFFERENT ASSES SEES. THEY RELATE TO ASSESSMENT YEAR 2001-02 AND ARISE OUT OF THE ORDER SEPARATE BUT IDENTICAL ORDERS BOTH DATED 06-05-2005 PASSED BY THE CIT(A)-II RAJK OT. SINCE COMMON GROUNDS BASED ON IDENTICAL SET OF FACTS ARE RAISED FOR THE SAKE OF CONVENIENCE THESE APPEALS ARE DISPOSED OF BY WAY OF THIS COMMON ORDER . ON PERUSAL OF ORDER SHEET OF THE APPEALS WE NOTICE THAT BOTH APPEALS HAVE NOT BEEN FIXED FOR THE PERIOD 29- 05-2007 TO 21-10-2010. APPEALS WERE FIXED FOR CLAR IFICATION FROM REGISTRY AND LEARNED REPRESENTATIVES OF PARTIES THAT IS THERE AN Y SPECIFIC REASONS FOR NOT FIXING THE CASES DURING THAT PERIOD. THEY SAID THAT THERE IS NO SPECIFIC REASONS FOR NOT FIXING THE CASE ONLY IT WAS DUE TO OVERSIGHT BY TH E REGISTRY. ITA NO.1501/RJT/2005 ITA NO.1502/RJT/2005 2 2. THE EFFECTIVE GROUNDS IN ITA NO.1501/RJT/2005 AR E AS FOLLOWS: 1. THAT THE LD.CIT(A) HAS ERRED IN LAW AND ON FACT S OF THE CASE IN HOLDING THE LOSS ARISE ON DESTROY OF DEPRECIABLE ASSETS IN EARTHQUAKE AS REVENUE LOSS AND THEREBY IN DELETING THE DISALLOWANCE OF RS. 11 16 720 MADE BY THE AO TREATI NG THE LOSS AS CAPITAL LOSS. 2. THAT THE LD.CIT(A) HAS ERRED IN LAW AND ON FACTS OF THE CASE IN DELETING THE DISALLWOANCE MADE BY THE AO U/S 40 (A)(I) OF THE I.T. ACT 1961 OF USANCE INTEREST OF RS.13 82 5 06/-. 3. THE EFFECTIVE GROUNDS IN ITA NO.1502/RJT/2005 AR E AS FOLLOWS: 1. THAT THE LD.CIT(A) HAS ERRED IN LAW AND ON FACT S OF THE CASE IN HOLDING THE LOSS ARISE ON DESTROY OF DEPRECIABLE ASSETS IN EARTHQUAKE AS REVENUE LOSS AND THEREBY IN DELETING THE DISALLOWANCE OF RS.10 96 110 MADE BY THE AO TREATIN G THE LOSS AS CAPITAL LOSS. 2. THAT THE LD.CIT(A) HAS ERRED IN LAW AND ON FACTS OF THE CASE IN DELETING THE DISALLOWANCE MADE BY THE AO U/S 40 (A)(I) OF THE I.T. ACT 1961 OF USANCE INTEREST OF RS.5 06 69 3/-. 4. THE BRIEF FACTS NOTED FROM RATAN WOOD PVT LTD A RE THAT THE ASSESSEE CLAIMED EARTHQUAKE LOSS IN PROFIT & LOSS ACCOUNT. THE ASSESSING OFFICER WAS OF THE VIEW THAT IT IS A CAPITAL LOSS. THE CIT(A) FOL LOWED THE JUDGMENT OF THE APEX COURT IN CASE OF VANIA SILK MILLS PVT LTD VS CIT (1 91 ITR 647 AND HELD THAT THERE IS NO TRANSFER OF CAPITAL ASSET THEREFORE THERE C ANNOT BE ANY CAPITAL GAIN OR LOSS. PROVISIONS OF SECTION 45(1A) ARE ALSO NOT APPLICABL E IN THE PRESENT CASE AS NO AMOUNT WAS RECEIVED FROM THE INSURER. 5. AT THE OUTSET THE LD.AR POINTED OUT THAT THE AS SESSING OFFICER AND THE CIT(A) BOTH HAVE NOT BEEN PROPERLY APPRECIATED THE FACTS OF THE CASE. HE SUBMITTED THAT FIXED ASSETS WERE DAMAGED DUE TO THE EARTHQUAKE. A SCHEME WAS UNDERTAKEN BY THE GOVERNMENT OF GUJARAT IN WHIC H THE LOSS DUE TO EARTHQUAKE WAS PARTLY REIMBURSED BY THE GUJARAT GOV ERNMENT. HE SUBMITTED THAT ITA NO.1501/RJT/2005 ITA NO.1502/RJT/2005 3 THE SUBSIDY RECEIVED WAS DULY ACCOUNTED FOR IN THE BOOKS OF ACCOUNT OF THE ASSESSEE. HE FURTHER SUBMITTED THAT IN FACT SO-CAL LED LOSS CLAIMED IN THE PROFIT & LOSS ACCOUNT IS IN FACT REPAIR EXPENSES INCURRED ON ACCOUNT DAMAGES IN FIXED ASSETS SINCE THESE ARE THE CURRENT REPAIRS. THEREF ORE THE SAME ARE ALLOWABLE AS REVENUE EXPENDITURE. THE LD.AR DREW OUR ATTENTION ON THE DETAILS OF EXPENSES WHICH HAS BEEN FILED IN THE PAPER BOOK. THE LD.DR ON THE OTHER HAND SUBMITTED THAT THE ASSESSEE HAS POINTED OUT THIS FOR THE FIRS T TIME BEFORE THE ITAT AND THE ASSESSING OFFICER AND CIT(A) BOTH DID NOT GET THE O PPORTUNITY TO CONSIDER THOSE FACTS. HE ACCORDINGLY REQUESTED THAT THE MATTER MA Y BE SENT BACK TO THE FILE OF THE ASSESSING OFFICER FOR WHICH THE LD.AR HAS NO OB JECTION. WE ACCORDINGLY WEND BACK THIS GROUND OF BOTH THE APPEALS TO THE FILE OF THE ASSESSING OFFICER WITH THE DIRECTION TO DECIDE THE ISSUE AFRESH IN ACCORDANCE WITH LAW AFTER PUTTING ON RECORD THE COMPLETE AND CORRECT FACTS OF THE CASE AND AFTE R PROVIDING REASONABLE OPPORTUNITY OF HEARD TO THE ASSESSEE. 6. THE BRIEF FACTS OF SECOND GROUND ARE THAT THE AS SESSEE COMPANY IS ENGAGED IN IMPORTING DIFFERENT SHAPE AND SIZE OF TI MBER LOGS FROM ABROAD. THE ASSESSEE OPENED A LETTER OF CREDIT WITH HIS BANKER FOR IMPORTING GOODS FROM ABROAD. THE ASSESSEE HAS REMITTED USANCE INTEREST. THE ASSESSING OFFICER NOTICED THAT THE ASSESSEE DID NOT DEDUCT TAX AT SOU RCE FROM THE INTEREST PAID TO BANK ON L.C. ACCOUNT. THE ASSESSING OFFICER HELD T HAT SINCE THE ASSESSEE DID NOT DEDUCT TAX AT SOURCE FROM THE PAYMENT MADE TO THE N ON-RESIDENT TOWARDS USANCE INTEREST THE INTEREST EXPENSES WAS NOT ALLOWABLE I N VIEW OF THE PROVISIONS OF SECTION 40(A)(I) OF THE ACT. ACCORDINGLY HE DISALL OWED AMOUNT FO RS.13 82 506 IN THE CASE OF RATAN WOOD PVT LTD AND RS.5 03 693 IN T HE CASE OF MIECO BOARDS. THE CIT(A) ALLOWED THE ASSESSEES CLAIM ACCEPTING A SSESSEES CONTENTION AS UNDER: 11. I HAVE CAREFULLY CONSIDERED THE SUBMISSION OF THE APPELLANT AND HAVE CONSIDERED THE MATERIAL ON THE RECORD. THE RE IS NO DOUBT THAT THE EVIDENCE IN THE FORM OF APPROVAL BY THE GO VERNMENT OF INDIA GOES TO THE ROOT OF THE MATTER AND THE APPROV AL HAD BEEN ITA NO.1501/RJT/2005 ITA NO.1502/RJT/2005 4 GRANTED BY THE GOVERNMENT OF INDIA REFERRING TO THE PAST TRANSACTIONS UNDER THE SPECIFIC LETTERS OF CREDIT THE ADDITIONAL EVIDENCE IS THUS REQUIRED TO BE ADMITTED AND I DO S O. WHILE DOING SO I TAKE NOTE OF THE AMENDMENT MADE BY AN ORDINAN CE DATED 8 TH SEPTEMBER 2002 IN SECTION 10(15(IV) WITH RETROSPE CTIVE EFFECT FROM 1 ST APRIL 1962 ENTITLING THE SHIP BREAKING INDUSTRY TO AVAIL OF THE BENEFIT OF EXEMPTION UNDER THAT SECTION. IN THE PR ESENT CASE THOUGH THIS AMENDMENT IS NOT APPLICABLE BUT THE FAC TS STANDS THAT THE GOVERNMENT OF INDIA HAS ACCORDED DE FACTO APPRO VAL IN RESPECT OF THE SPECIFIC PAST TRANSACTIONS. THIS REFLECTS T HE INTENTION OF THE LEGISLATURE AND THEREFORE THE ADDITIONAL EVIDENCE NOW PRODUCED IS REQUIRED TO BE ADMITTED. NOT ADMITTING THIS EVIDEN CE WOULD HAVE DEPRIVED THE APPELLANT FROM THE BENEFIT GRANTED WIT H RETROSPECTIVE EFFECT BY THE GOVERNMENT OF INDIA. 7. THE LD.DR RELIED UPON THE ORDER OF THE ASSESSING OFFICER ON THE OTHER HAND THE LD.AR RELIED UPON THE ORDER OF THE CIT(A) . 8. WE HAVE HEARD THE RELEARNED REPRESENTATIVES OF T HE PARTIES RECORD PERUSED. THE ADMITTED FACTS OF THE CASE ARE THAT T HE ASSESSEE PAID USUANCE INTEREST ON THE LC ACCOUNT OPENED BY THE ASSESSEE F OR THE PURPOSE OF IMPORTING THE GOODS. SECTION 10(15)(IV) PROVIDES EXEMPTION T O INTEREST PAYABLE TO SOME PRESCRIBED GOVERNMENT OR LOCAL AUTHORITIES AND INDU STRIAL UNDERTAKING AS STATED IN CLAUSES (A) AND (B). CLAUSE (C) OF SECTION 10(15)( IV) READS AS BELOW: (C) BY AN INDUSTRIAL UNDERTAKING IN INDIA ON ANY M ONEYS BORROWED OR DEBT INCURRED BY IT BEFORE THE 1 ST DAY OF JUNE 2001 IN A FOREIGN COUNTRY IN RESPECT OF THE PURCHASE OUTSIDE INDIA OF RAW MATERIALS OR COMPONENTS OR CAPITAL PLANT AND MACHIN ERY TO THE EXTENT TO WHICH SUCH INTEREST DOES NOT EXCEED THE A MOUNT OF INTEREST CALCULATED AT THE RATE APPROVED BY THE CEN TRAL GOVERNMENT IN THIS BEHALF HAVING REGARD TO THE TERMS OF THE L OAN OR DEBT AND ITS REPAYMENT. EXPLANATION 1. FOR THE PURPOSES OF THIS ITEM PURC HASE OF CAPITAL PLANT AND MACHINERY INCLUDES THE PURCHASE OF SUCH CAPITAL PLANT AND MACHINERY UNDER A HIRE-PURCHASE AGREEMENT OR A LEASE AGREEMENT WITH AN OPTION TO PURCHASE SUCH PLANT AND MACHINERY. ITA NO.1501/RJT/2005 ITA NO.1502/RJT/2005 5 EXPLANATION 2. FOR THE REMOVAL OF DOUBTS IT IS HER EBY DECLARED THAT THE USANCE INTEREST PAYABLE OUTSIDE INDIAN BY AN UNDERTAKING ENGAGED IN THE BUSINESS OF SHIP-BREAKING I N RESPEC T OF PURCHASE OF A SHIP FROM OUTSIDE INDIA SHALL BE DEEMED TO BE THE INTEREST PAYABLE ON A DEBT INCURRED IN A FOREIGN COUNTRY IN RESPECT OF THE PURCHASE OUTSIDE INDIA. AS PER THE ABOVE PROVISIONS OF SECTION 10(15)(IV)(C ) AND UNDER THE FACTS OF THE CASE UNDER CONSIDERATION THE USANCE INTEREST IS EXE MPT IN THE HANDS OF THE RECIPIENT. THEREFORE DEDUCTION OF TAX AT SOURCE U /S 195 DOES NOT ARISE. SINCE THE ASSESSEE IS NOT LIABLE TO DEDUCT TAX AT SOURCE PROVISIONS OF SECTION 40((A)(I) CANNOT BE APPLIED IN THE CASE OF THE ASSESSEE. THE PERSON MAKING PAYMENT TO THE NON-RESIDENT WOULD BE LIABLE TO DEDUCT TAX IF T HE PAYMENT SO MADE IS CHARGEABLE TO TAX UNDER THE ACT. IMPLIED IF THE P AYMENT IS NOT CHARGEABLE TO TAX UNDER THE ACT THE PAYER WOULD NOT BE LIABLE TO DED UCT TAX AT SOURCE. UNDER THE CIRCUMSTANCES WE DO NOT FIND THE ANY INFIRMITY IN THE ORDER OF CIT(A). HIS ORDER ON THIS ISSUE IS UPHELD. GROUND 2 IN BOTH THE APPE ALS FAILS. 9. IN THE RESULT BOTH THE APPEALS ARE TREATED AS P ARTLY ALLOWED FOR STATISTICAL PURPOSE. 10. IN THE RESULT THE APPEAL FILED BY THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON -02-2011. (N.R.S. GANESAN) (A.L. GEHLOT) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI DT : FEBRUARY 2011 PK/- ITA NO.1501/RJT/2005 ITA NO.1502/RJT/2005 6 COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A)-II RAJKOT 4. THE CIT-I RAJKOT 5. THE DR (TRUE COPY) BY ORDER ASSTT.REGISTRAR ITAT RAJKOT