DCIT, New Delhi v. M/s. KRIBHCO, New Delhi

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH I : NEW DELHI BEFORE SHRI RAJPAL YADAV JM AND SHRI SHAMIM YAHYA AM ITA NO.1697/DEL/2009 ASSESSMENT YEAR : 2005-06 M/S KRISHAK BHARATI COOPERATIVE LIMITED RED ROSE HOUSE 49-50 NEHRU PLACE NEW DELHI. PAN NO.AAAAK0203G. VS. ADDL.COMMISSIONER OF INCOME TAX RANGE-24 NEW DELHI. (APPELLANT) (RESPONDENT) ITA NO.1768/DEL/2009 ASSESSMENT YEAR : 2005-06 DY.COMMISSIONER OF INCOME TAX CIRCLE-24(1) NEW DELHI. VS. M/S KRISHAK BHARATI COOPERATIVE LIMITED RED ROSE HOUSE 49-50 NEHRU PLACE NEW DELHI. PAN NO.AAAAK0203G. (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI K.S.V.S.MANIAN AND SHRI K.V.S.R.KRISHNA CAS. REVENUE BY : SHRI MOHANISH VERMA CIT-DR. ITA-1697 & 1768/DEL/2009 2 ORDER PER SHAMIM YAHYA AM : THESE CROSS-APPEALS BY THE REVENUE AND ASSESSEE EMANATE OUT OF THE ORDER OF LEARNED CIT(A) DATED 26.2.20909 AND PERTAIN TO AY 2005 -06. REVENUES APPEAL :- 2. THE FIRST ISSUE RAISED IS THAT LEARNED CIT(A) ERRED IN HOLDI NG THAT THE DISALLOWANCE U/S 14A IS NOT APPLICABLE IN THE CASE OF DEDUCTION CLAIME D U/S 80P(2)(D) OF THE IT ACT. 3. AT THE OUTSET LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT THIS ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF THIS TRIBUNAL I N ASSESSEES OWN CASE REPORTED IN [2010] 6 ITR (TRIB) 686 (DELHI) VIDE ORDER DATED 8.4.2010 WHEREIN IT HAS BEEN HELD THAT THE INCOME D ERIVED BY THE ASSESSEE FROM COOPERATIVE BANKS AND INTEREST ON DEPOSITS WITH COOPERATIVE BANKS WERE NOT EXEMPT U/S 10 AND WERE INCLUDIBLE IN ITS INCOME. DEDUCTION IF ANY WAS GIVEN BY THE STATUTE U/S 80P WHICH PERTAINED TO DE DUCTION OF INCOME. HENCE IT WAS HELD THAT SINCE BOTH THE RECEIPTS OF THE A SSESSEE WERE NOT EXEMPT AND INCLUDIBLE IN INCOME MERELY BECAUSE DEDUCTION U/S 8 0P WAS PROVIDED THE ASSESSEES CASE COULD NOT BE ASSUMED TO BE HIT BY SECTION 14 A. THE ORDER OF THE CIT(A) WAS TO BE UPHELD. ITA-1697 & 1768/DEL/2009 3 4. RESPECTFULLY FOLLOWING THE AFORESAID PRECEDENT WE UPHOLD THE O RDER OF LEARNED CIT(A) AND DECIDE THE ISSUE IN FAVOUR OF THE ASSESSEE. 5. NEXT ISSUE RAISED IS THAT CIT(A) ERRED IN DELETING THE DISA LLOWANCE OF `14 59 16 969/- TO M/S GAIL WITHOUT DEDUCTING TAX AT SOURCE A S PER THE PROVISIONS OF THE INCOME-TAX ACT. UPON ENQUIRY ASSESSEE SUBMITTED THA T THE GAS WAS DELIVERED AND SOLD BY GAIL AT HAZIRA AND THE POINT OF SALE WAS LOCATED AT PREMISES AT HAZIRA. THE TRANSPORTATION CHARGES ARE PART OF VARIOUS ELEMENTS IN THE PURCHASE OF GAS. IT WAS CLAIMED THAT IT WAS N OT A CONTRACT FOR CARRYING OUT ANY WORK BUT FOR SUPPLY OF GAS. THE TRANSPORTATION CHARGE S WERE SAID TO BE CONSIDERED BY GAIL AS PART OF THEIR GROSS TOTAL INCOME AND TH ERE WAS NO LOSS OF REVENUE TO THE GOVERNMENT. THE ASSESSEE HAS FURTHE R SUBMITTED THAT CASE WAS PENDING BEFORE THE ITAT AHMEDABAD IN THIS REGARD. HOWEVER THE AO WAS NOT SATISFIED AND HE MADE THE IMPUGNED ADDITI ON THAT PROVISO TO SECTION 40(A)(IA) ARE ATTRACTED. 6. UPON ASSESSEES APPEAL LEARNED CIT(A) CONSIDERED THE ISSUE AND REFERRED TO THE DECISION OF THE AHMEDABAD ITAT DECISION IN ITA NOS.17 02 1703 2473 2474 4573 AND 4574/AHD/2007. THE TRIBUNA L HAS HELD AS UNDER:- ITA-1697 & 1768/DEL/2009 4 THIS BEING THE FACTUAL POSITION THE PAYMENT FOR THE PURCHASE OF NATURAL GAS AND AS PER THE CONTRACT OF THE ASSESSEE IT IS ONLY ASKING FOR SUPPLY OF NATURAL GAS FROM THE PRODUCERS FOR THE PURPOSE OF USE OF THIS GAS FOR BURNING IN ASSESSEES FACTORY FOR MANUFACTURING OF UREA. CLEARLY THIS IS A CONTRACT FOR SALE OF GOODS AND NOT A WORKS CONTRACT AS HELD BY THE LOWER AUTHORITIES. IN VIEW OF THE ABOVE WE QUASH THE ORDERS OF THE LOWER AUTHORITIES AND ALLOW THE APPEALS OF THE ASSESSEE. 7. FOLLOWING THE ABOVE ORDER OF THE AHMEDABAD BENCH DATED 5.9.20 08 LEARNED CIT(A) HELD THAT THE TRANSACTION WAS NOT CONTRACT FOR TRANSPORTATION OF GAS BY GAIL BUT IT WAS A COMPOSITE AGREEMENT FOR SALE OF GOODS. AGAINST THIS ORDER THE REVENUE IS IN APPEAL BEFORE US. 8. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RECORDS. WE FIND THAT IT IS UNDISPUTED THAT A COORDINATE BENCH AT AHMEDABAD HAD FOU ND THE SAID CONTRACT TO BE A CONTRACT FOR SALE OF GOODS AND NOT A WORKS CONTRACT. UNDER THE CIRCUMSTANCES RESPECTFULLY FOLLOWING THE SAID DECISION W E UPHOLD THE ORDER OF LEARNED CIT(A) AND DECIDE THE ISSUE IN FAVOUR OF THE ASSE SSEE. 9. NEXT ISSUE RAISED IS THAT CIT(A) HAS ERRED IN DIRECTING THE AO TO TREAT THE PAYMENT OF `2 56 48 187/- TOWARDS INSURANCE PREMIUM PAID U NDER SANKAT HARAN BIMA YOJANA AS DEDUCTIBLE BUSINESS INCOME. ITA-1697 & 1768/DEL/2009 5 10. IN THIS REGARD AT THE OUTSET IT WAS SUBMITTED THAT TH E SAME ISSUE HAS BEEN DECIDED BY THIS TRIBUNAL IN ASSESSEES OWN CASE IN ITA NO.1767/D EL/2009 FOR AY 2004-05 VIDE ORDER DATED 24.7.2009. THE AMOUNT OF INSU RANCE PREMIUM PAID IN THIS REGARD WAS HELD TO BE PAID FOR THE PURPOSE OF BUSINESS AND IT WAS HELD THAT AO WAS NOT JUSTIFIED IN HOLDING THAT THE PAYMENT WAS AN UNWARRANTED EXPENDITURE. RESPECTFULLY FOLLOWING THE AFORESAID PR ECEDENT WE UPHOLD THE ORDER OF LEARNED CIT(A) AND DECIDE THE ISSUE IN FAVOUR OF THE ASSESSEE. 11. NEXT ISSUE RAISED IS THAT CIT(A) HAS ERRED IN DIRECTING THE AO TO ALLOW DEDUCTION OF `16 26 460/- ON ACCOUNT OF R&D EXPENSES EVEN THOUGH A SSESSEE HAS NOT MADE ANY VALID CLAIM IN THE RETURN OF INCOME. 12. IN THIS REGARD THE IMPUGNED CLAIM OF THE ASSESSEE WAS NOT ENT ERTAINED BY THE AO ON THE GROUND THAT THE SAME WAS NOT CLAIMED IN THE R ETURN OF INCOME BUT WAS CLAIMED ONLY DURING THE COURSE OF ASSESSMENT. IN TH IS REGARD RELIANCE WAS PLACED ON APEX COURT DECISION IN THE CASE OF GOETZE INDI A LTD. 284 ITR 323. LEARNED CIT(A) UPON CAREFUL CONSIDERATION OF VARIO US CASE LAWS PROCEEDED TO HOLD THAT ASSESSEE CAN RAISE THE ISSUE AND HE WENT ON T O ADJUDICATE THE ISSUE AND DECIDE THE SAME IN FAVOUR OF THE ASSESSEE. A GAINST THIS ORDER THE REVENUE IS IN APPEAL BEFORE US. ITA-1697 & 1768/DEL/2009 6 13. WE HAVE HEARD BOTH THE COUNSELS AND HAVE PERUSED THE RECORDS. WE FIND THAT IT IS SETTLED LAW THAT A VALID CLAIM OF THE ASSESSEE CA N BE MADE DURING THE COURSE OF ASSESSMENT PROCEEDINGS. IN THIS REGARD WE NOTE THAT ARTICLE 265 OF THE CONSTITUTION OF INDIA MANDATES THAT NO TAX CA N BE COLLECTED EXCEPT BY AUTHORITY OF LAW. CBDT CIRCULAR DATED 11.4.1955 NO.14(XL-35) STATES THAT OFFICERS OF THE DEPARTMENT MUST NOT TAKE ADVANTAGE OF IGNORANCE OF THE ASSESSEE AS TO HIS RIGHTS. IN THE CASE OF CIT VS. V.M.R.P. FIRM 56 ITR 57 HONBLE APEX COURT HAS HELD THAT IF A PARTICULAR INCOME IS NOT T AXABLE UNDER THE INCOME-TAX ACT IT CANNOT BE TAXED ON THE BASIS OF ESTOPPEL OR AN Y OTHER EQUITABLE DOCTRINE. IN THE BACKGROUND OF AFORESAID DISCUSSION WE DO NOT FIND ANY INFIRMITY IN THE PROPOSITION THAT ASSESSEES ISSUE REQUIRED A DJUDICATION. HOWEVER WE NOTE THAT LEARNED CIT(A) HAS PROCEEDED TO ADJUDICATE THIS ISSUE AT HIS LEVEL WITHOUT GIVING THE AO ANY OPPORTUNITY IN THIS R EGARD OR CALLING FOR A REMAND REPORT IN THIS REGARD. IN OUR CONSIDERED OPINION INTERE ST OF JUSTICE WILL BE SERVED IF THIS ISSUE IS REMITTED TO THE FILE OF THE AO TO CONSIDER THE SAME AFRESH AND DECIDE AS PER FACTS AVAILABLE. NEEDLESS TO ADD ASSES SEE SHOULD BE GRANTED ADEQUATE OPPORTUNITY OF BEING HEARD. 14. IN THE RESULT THIS APPEAL FILED BY THE REVENUE STANDS PA RTLY ALLOWED FOR STATISTICAL PURPOSES. ITA-1697 & 1768/DEL/2009 7 ASSESSEES APPEAL :- 15. THE FIRST ISSUE RAISED IS THAT CIT(A) ERRED IN LAW IN INV OKING PROVISIONS OF SECTION 14A IN RESPECT OF DIVIDEND INCOME RECEIVED FROM IFFCO-TOKYO GENERAL INSURANCE CO.LTD. ASSESSEE HAS NOT INCURRED ANY EXPENDI TURE AND HENCE SECTION 14A IS NOT AT ALL ATTRACTED. 16. IN THIS REGARD AO NOTED THAT ASSESSEE HAS RECEIVED VARIOUS I TEMS LIKE DIVIDEND AND INTEREST. IN AOS OPINION DEDUCTION U/S 80P(2)(D) WAS NOT ALLOWABLE. UPON ASSESSEES APPEAL LEARNED CIT(A) NOTED WITH REGAR D TO DIVIDEND INCOME EARNED FROM IFFCO-TOKYO GENERAL INSURANCE CO.LTD. THAT SECTION 14A WAS ATTRACTED. HE DIRECTED THE AO TO FOLLOW RULE 8 D AND COMPUTE THE DISALLOWANCE IN ACCORDANCE WITH SPECIAL BENCH DECISION OF TH E MUMBAI TRIBUNAL IN ITO VS. DAGA CAPITAL MANAGEMENT 26 SOT 603. 17. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RECORDS. WE FIND THAT HONBLE BOMBAY HIGH COURT IN THE CASE OF GODREJ BOYCE MFG.CO. 328 ITR 81 HAS HELD THAT THE AO COULD ADOPT A REASONABLE BASIS TO IDENTI FY THE EXPENSES IN RELATION TO THE EARNING OF EXEMPT INCOME AND OVERR ULED THE DECISION OF THE SPECIAL BENCH. RESPECTFULLY FOLLOWING THE AFORESAID DECI SION ITA-1697 & 1768/DEL/2009 8 WE REMIT THIS ISSUE TO THE FILE OF THE AO TO EXAMINE THE SAME AFRESH AND COMPUTE REASONABLE DISALLOWANCE ACCORDINGLY. 18. NEXT ISSUE RAISED IS THAT CIT(A) ERRED IN CONFIRMING THE DISAL LOWANCE OF `6 17 364/- BEING AMOUNT WRITTEN OFF IN THE PREVIOUS YEAR RE LEVANT TO THIS ASSESSMENT YEAR TOWARDS AMORTIZATION OF LEASE AMOUNT PAID TOWARDS LAN D OBTAINED FROM NOIDA AUTHORITIES. 19. AT THE OUTSET IN THIS REGARD WE NOTE THAT TRIBUNAL IN ASSESSEES OWN CASE FOR AY 2004-05 IN ITA NO.1696/DEL/2009 VIDE ORDER DATED 1 1.9.2009 HAS HELD THAT THE SAID EXPENDITURE WAS CAPITAL IN NATURE AND NOT DEDUCTIBLE IN COMPUTING THE INCOME. LEARNED COUNSEL FOR THE ASSESSEE TRIED TO DI STINGUISH THE ISSUE BY REFERRING TO THE DECISION OF HONBLE GUJARAT HIGH C OURT IN THE CASE OF DCIT VS. SUN PHARMACEUTICALS WHEREIN ON ANALOGICAL ISSUE THIS DECISION HAS BEEN RENDERED IN FAVOUR OF THE ASSESSEE. HOWEVER SINCE THIS TRIBUNAL IN ASSESSEES OWN CASE HAS TAKEN A VIEW ADHERING TO THE DOCTRINE OF PRECEDENCE WE RELYING UPON THE DECISION OF COORDINATE BENCH OF THE TRIBUNAL IN ASSESSEES OWN CASE DECIDED THE ISSUE AGAINST THE ASSESSEE. 20. IN THE RESULT THIS APPEAL BY THE ASSESSEE STANDS PARTLY AL LOWED FOR STATISTICAL PURPOSES. ITA-1697 & 1768/DEL/2009 9 DECISION PRONOUNCED IN THE OPEN COURT ON 25 FEBRUARY 2011. SD/- SD/- (RAJPAL YADAV) (SHAMIM YAHYA) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 25.02.2011. VK. COPY FORWARDED TO: - 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR ITAT ASSISTANT REGISTRAR ITA-1697 & 1768/DEL/2009 10