DCIT, New Delhi v. M/s. Minda Wirelinks Pvt. Ltd., New Delhi

ITA 2187/DEL/2010 | 2003-2004
Pronouncement Date: 21-01-2011 | Result: Dismissed

Appeal Details

RSA Number 218720114 RSA 2010
Assessee PAN AAACM5506E
Bench Delhi
Appeal Number ITA 2187/DEL/2010
Duration Of Justice 8 month(s) 14 day(s)
Appellant DCIT, New Delhi
Respondent M/s. Minda Wirelinks Pvt. Ltd., New Delhi
Appeal Type Income Tax Appeal
Pronouncement Date 21-01-2011
Appeal Filed By Department
Order Result Dismissed
Bench Allotted E
Tribunal Order Date 21-01-2011
Date Of Final Hearing 20-01-2011
Next Hearing Date 20-01-2011
Assessment Year 2003-2004
Appeal Filed On 07-05-2010
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCHES D: NEW DELHI BEFORE SHRI I.P. BANSAL JUDICIAL MEMBER AND SHRI A.K. GARODIA ACCOUNTANT MEMBER ITA NO. 2187/DEL/2010 ASSESSMENT YEAR: 2003-04 DCIT VS. MINDA WIRELINKS PVT. LTD. CIRCLE 6(1) 2659/2 GURUDWARA ROAD C.R. BLDG. KAROL BAGH NEW DELHI. NEW DELHI. AAACM5506E (APPELLANT) (RESPONDENT) & CROSS OBJECTION NO. 390/DEL/2010 ASSESSMENT YEAR: 2003-04 MINDA WIRELINKS PVT. LTD. VS. DCIT 2659/2 GURUDWARA ROAD CIRCLE 6(1) KAROL BAGH NEW DELHI. C.R. BLDG. NEW DELHI. (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI PEEYUSH SONKAR SR. DR RESPONDENT BY : SHRI AS HWANI TANEJA CA ORDER PER I.P. BANSAL J.M. THE APPEAL IS FILED BY THE REVENUE AND CROSS OBJEC TION BY THE ASSESSEE. BOTH OF THEM ARE DIRECTED AGAINST ORDER PASSED BY CIT(A) DATED 16.2.10 FOR A.Y. 2003-04. ITA NO. 2187/D/10 & CO NO. 390/DEL/10 2 2. GROUNDS OF APPEAL BY REVENUE ARE AS UNDER: - 1. THE ORDER OF THE LD. CIT(A) IS ERRONEOUS AND C ONTRARY TO FACTS AND LAW. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW THE LD. CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS. 1 24 39 024/- MADE BY THE AO ON ACCOUNT OF SALES TAX LIABILITY CONVERTED INT O LOAN. 2.1THE LD. CIT(A) HAS IGNORED THAT THE GOVT. ORDER IN QUESTION IS NOT APPLICABLE FOR THE YEAR UNDER CONSIDERATION. 3. THE APPELLANT CRAVES LEAVE TO ADD TO ALTER OR AMEND ANY GROUNDS OF THE APPEAL RAISED ABOVE AT THE TIME OF THE HEARING. GROUNDS OF CROSS OBJECTION BY ASSESSEE ARE AS UNDER : - 1. THAT HAVING REGARD TO THE FACTS AND CIRCUMSTANC ES OF THE CASE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN CONFIRMING THE ACTION OF LD. AO IN MAKING DISALLOWANCE OF RENT PAID TO SH. A.K. MINDA OF RS. 1 39 500/- AND SH. S.L. MINDA OF RS. 21 000/-. 2. THAT HAVING REGARD TO THE FACTS AND CIRCUMSTANCE S OF THE CASE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN CONFIRMING THE ACTION OF LD. AO IN MAKING DISALLOWANCE OF ACCRUED INTEREST OF RS . 72 000/- ON AMOUNT OF RS. 12 00 000/- DUE FROM SMT. SATYAWATI A GGARWAL. 3. THAT THE APPELLANT CRAVES LEAVE TO ADD MODIFY AMEND OR DELETE ANY OF THE GROUNDS OF APPEAL AT THE TIME OF HEARING AND ALL THE ABOVE GROUNDS ARE WITHOUT PREJUDICE TO EACH OTHER. 3. THE ASSESSEE IS ENGAGED IN THE BUSINESS OF MANUF ACTURING OF WIRING HARNESS AND ITS COMPONENTS. IT FILED RETURN AT A L OSS OF RS. 2 10 38 972/- ON 7.11.03. DURING THE COURSE OF ASSESSMENT PROCEEDIN G THE AO NOTICED THAT A SALES TAX LIABILITY OF RS. 1.24 CRORE WAS CONVERT ED INTO SALES TAX DEFERMENT LOAN FROM PICUP. THE AO ISSUED SHOW CAUSE NOTICE T O THE ASSESSEE TO ITA NO. 2187/D/10 & CO NO. 390/DEL/10 3 SHOW WHY THE SAID AMOUNT SHOULD NOT BE ADDED BACK T O THE INCOME OF THE ASSESSEE UNDER THE PROVISIONS OF SEC. 43B OF THE AC T AS THE SAME WAS NOT ACTUALLY PAID AND THE LIABILITY WAS EXISTED. IN RE SPONSE IT WAS SUBMITTED THAT SALES TAX COLLECTED HAS BEEN CONVERTED TO INTEREST FREE LOAN ON 24.3.03. FOLLOWING TABLE WAS DESCRIBED TO SPECIFY THE DETAIL : - PERIOD OF SALES TAX COLLECTION CONVERTED TO LOAN AMOUNT DATE OF REPAYMENT LOAN 11.3.99 TO 31.3.99 171749 31.5.04 1.4.99 TO 31.3.2000 4333336 31.5.05 1.4.2000 TO 31.3.01 3699854 31.5.06 1.4.01 TO 31.3.02 4234085 31.5.07 1.4.02 TO 31.12.02 3376564 31.5.08 1.1.03 TO 28.2.03 697609 31.5.08 16513197 4. IT WAS SUBMITTED THAT AMOUNT OF SALES TAX SO COL LECTED BEFORE 31.3.02 AMOUNTING TO RS. 1 24 39 024/- (1 65 13 197/- - 33 76 564/- - 6 97 609/-) HAS BEEN ADDED TO THE INCOME IN RESPECTIVE ASSESSME NT YEARS U/S 43B OF THE ACT. THE SAME IS CLAIMED IN COMPUTING INCOME F ROM BUSINESS OR PROFESSION FOR A.Y. 03-04. REFERENCE WAS MADE TO C IRCULAR NO. 674 DATED 29.12.1993 WHERE BOARD HAS DECIDED THAT THE AMOUNT OF SALES TAX LIABILITY CONVERTED INTO LOAN MAY BE ALLOWED AS DEDUCTION IN THE ASSESSMENT FOR THE PREVIOUS YEAR IN WHICH SUCH CONVERSION HAS BEEN PER MITTED BY OR UNDER THE GOVERNMENT ORDER. COPY OF CIRCULAR WAS ALSO FURNIS HED. AS CIRCULAR MENTIONED ABOUT THE AMENDMENT IN THE STATE ACT THE AO REQUIRED THE ASSESSEE TO FURNISH THE SAID AMENDMENT. IN ABSENCE OF FURNISHING SUCH ITA NO. 2187/D/10 & CO NO. 390/DEL/10 4 GOVERNMENT ORDER THE AMOUNT OF RS. 1 24 39 024/- W AS DISALLOWED U/S 43B OF THE ACT AND ADDED BACK TO THE INCOME OF THE ASSE SSEE. 5. BEFORE CIT(A) A COPY OF CIRCULAR DATED 8 TH OCTOBER 1995 ISSUED U/S 4A OF U.P. SALES TAX ACT WAS SUBMITTED AS PER THE S AID CIRCULAR THE AMOUNT OF SALES TAX PAYABLE BY AN ASSESSEE SHOULD BE CONVE RTED TO INTEREST FREE LOAN FROM PICUP BY WAY OF BOOK TRANSFER. IT WAS AL SO SPECIFIED THAT SUCH SUM WILL BE ASSUMED TO BE PAID U/S 43B OF INCOME TA X ACT. A COPY OF LETTER FROM PICUP IN SUPPORT OF CONVERSION OF SALES TAX DE FERMENT LOAN WAS ALSO FILED ON THE BASIS OF WHICH IT WAS CLAIMED THAT TH E CONVERTED AMOUNT DISALLOWED IN PRECEDING PREVIOUS YEARS SHOULD BE AL LOWED AS DEDUCTION IN THE YEAR UNDER CONSIDERATION. THEREFORE KEEPING I N VIEW CIRCULAR NO. 496 AND 674 ISSUED BY CBDT AND CIRCULAR DATED 8 TH OCTOBER 1995 U/S 4A OF U.P. SALES TAX ACT IT WAS OBSERVED BY CIT(A) THAT THE ADDITION WAS UNWARRANTED AND HE HAS DELETED THIS ADDITION. TO B ETTER UNDERSTAND THE RELEVANT PORTION OF CIT(A) DEALING WITH THIS ISSUE IS REPRODUCED BELOW: - 3.0 GROUND NO.1 RELATES TO SALES TAX LIABILITY OF RS. 1.24 CRORES CLAIMED TO HAVE BEEN CONVERTED INTO SALES TA X DEFERMENT LOAN FROM PICUP. DURING THE ASSESSMENT PROCEEDINGS THE APPELLANT COULD NOT FILE A COPY OF THE GOVERNMENT ORDER BY WHICH THE DEFERMENT OF SALES TA X LIABILITY IS TO BE ALLOWED U/S 43B ON ACCOUNT OF CO NVERSION TO LOAN. IN THE ABSENCE OF GOVERNMENT ORDER REGARDING DEFERRED SALES TAX LIABILITY THE AO HAS DISALLOWED THE SAME. 3.1 IN THE APPELLATE PROCEEDINGS THE LD. AR HAS SU BMITTED THAT IN THE PRECEDING FINANCIAL YEARS THE UNPAID LI ABILITY OF ITA NO. 2187/D/10 & CO NO. 390/DEL/10 5 SALES TAX ON ACCOUNT OF DEFERMENT ADDED TO INCOME U /S 43B OF THE ACT WAS AS DETAILED BELOW: FINANCIAL YEAR ASSESSMENT YEAR AMOUNT(RS.) 1998-99 1999-2000 1 72 576 1999-2000 2000-01 43 30 620 2000-01 2001-02 37 35 388 2001-02 2002-03 42 34 194 1 24 72 778 OUT OF ABOVE AMOUNT OF SALES TAX DEFERMENT THE FOL LOWING AMOUNT HAS BEEN CONVERTED INTO SALES TAX DEFERMENT LOAN FROM PICUP DURING THE PREVIOUS YEAR RELEVANT TO ASS ESSMENT YEAR 2003-04: FINANCIAL YEAR AMOUNT(RS.) 1998-99 1 71 749 1999-2000 43 33 336 2000-01 36 99 854 2001-02 42 34 085 1 24 39 024 THE LD. AR SUBMITTED A COPY OF CIRCULAR DATED 8.10. 1995 U/S4S OF THE U.P. SALES TAX ACT. AS PER THE CIRCUL AR THE AMOUNT OF SALES TAX PAYABLE BY AN ASSESSEE SHOULD B E CONVERTED TO INTEREST FREE LOAN FROM PICUP BY WAY O F BOOK TRANSFER. IT IS FURTHER SPECIFIED THAT SUCH SUM WI LL BE ASSUMED TO BE PAID U/S 43B OF THE INCOME TAX ACT. A COPY OF THE LETTER FROM PICUP IN SUPPORT OF CONVERSION O F SALES TAX DEFERMENT LOAN HAS ALSO BEEN FILED. ON THE BASIS OF THE CIRCULAR OF UP GOVERNMENT AND THE SPECIFIC CONVERS ION OF DEFERRED SALES TAX TO LOAN BY PICUP IN THE CASE OF THE APPELLANT THE TOTAL AMOUNT SO CONVERTED INTO LOAN OUT OF AMOUNT DISALLOWED IN PRECEDING PREVIOUS YEAR HAS BE EN CLAIMED AS A DEDUCTION IN COMPUTING INCOME FROM BUS INESS ITA NO. 2187/D/10 & CO NO. 390/DEL/10 6 OR PROFESSION FOR AY 03-04. KEEPING IN VIEW CIRCUL AR NO. 496 & 674 ISSUED BY CBDT AND ALSO CIRCULAR DATED 8.10.9 5 U/S 4A OF U.P. SALES TAX ACT IT HAS BEEN STATED THAT T HE AMOUNT OF DEFERRED PAYMENT LIABILITY OF SALES TAX SO CONVE RTED INTO SALES TAX DEFERMENT LOAN FROM PICUP IS ALLOWABLE U/ S 43B OF THE I.T. ACT. 3.2 I HAVE CONSIDERED THE SUBMISSIONS OF THE LD. A R AND PERUSED THE DOCUMENTS FILED BY HIM. PARA 2 AND 3 O F CIRCULAR NO. 674 DATED 29.12.1993 READ AS BELOW: 2) IT HAS BEEN BROUGHT TO THE NOTICE OF THE BOARD THAT SOME STATE GOVERNMENTS INSTEAD OF AMENDING THE SALES TA X ACT HAVE ISSUED GOVERNMENT ORDERS NOTIFYING SCHEMES UND ER WHICH SALES TAX IS DEEMED TO HAVE BEEN ACTUALLY COL LECTED AND DISBURSED AS LOANS. SUCH GOVERNMENT ORDERS ALS O PROVIDE THAT ENTRIES SHALL BE MADE IN THE GOVERNMEN T ACCOUNTS GIVING EFFECT TO DEEMED COLLECTIONS BY CRE DITING THE APPROPRIATE RECEIPT-HEADS RELATING TO DISBURSAL OF LOANS. IT HAS THEREFORE BEEN REPRESENTED THAT AS SUCH CONV ERSION OF THE SALES TAX LIABILITY INTO LOANS HAVE SIMILAR STA TUTORY EFFECT AS CAN BE ACHIEVED THROUGH AMENDMENTS OF THE SALES TAX ACT THE AMOUNTS COVERED UNDER THE SCHEME SHOULD BE ALLOWED AS DEDUCTION FOR THE PREVIOUS YEAR IN WHICH THE CONVERSION HAS BEEN PERMITTED BY THE STATE GOVERNME NTS. 3) THE BOARD HAVE CONSIDERED THE MATTER AND ARE OF THE OPINION THAT SUCH DEFERRAL SCHEMES NOTIFIED BY THE STATE GOVERNMENTS THROUGH THE GOVERNMENT ORDERS MEET THE REQUIREMENTS OF THE BOARDS CIRCULAR NO. 496 DATED 25.9.1987 IN EFFECT THOUGH IN A DIFFERENT FORM. AC CORDINGLY THE BOARD HAVE DECIDED THAT THE AMOUNT OF SALES TAX LIABILITY CONVERTED INTO LOANS MAY BE ALLOWED AS DEDUCTION IN THE ITA NO. 2187/D/10 & CO NO. 390/DEL/10 7 ASSESSMENT FOR THE PREVIOUS YEAR IN WHICH SUCH CONV ERSION HAS BEEN PERMITTED BY OR UNDER THE GOVERNMENT ORDER S. AS PER ABOVE REFERRED CIRCULARS SALES TAX LIABILIT Y CONVERTED INTO LOAN MAY BE ALLOWED AS DEDUCTION IN THE ASSESS MENT FOR THE PREVIOUS YEAR IN WHICH SUCH CONVERSION HAS BEEN PERMITTED BY OR UNDER THE GOVERNMENT ORDERS. PERUSAL OF THE ORDER OF U.P. GOVERNMENTS ORDER OF 8.10.1995 SHOWS THAT THE SALES TAX LIABILITY CONVER TED TO LOAN IS ELIGIBLE TO BE CLAIMED AS EXPENSE U/S 43B. IT I S EVIDENT FROM LETTER FROM PICUP (LETTER NO. INS.9/TTD-123/20 02- 2003/30 DATED 7.4.2003) TO THE APPELLANT COMPANY TH AT IN THE APPELLANTS CASE AN AMOUNT OF RS. 1 24 39 024/- BEING SALES TAX LIABILITY HAS BEEN CONVERTED INTO LOAN AN D AS SUCH AMOUNT SO CONVERTED SHOULD BE ALLOWED AS DEDUCTION/ S 43B OF THE ACT. IN VIEW OF THE DOCUMENTARY EVIDENCE AT TACHED REGARDING THE CONVERSION OF SALES TAX LIABILITY TO LOAN APPEAL ON THIS GROUND IS ALLOWED. 6. DEPARTMENT IS AGGRIEVED WITH SUCH FINDING RECORD ED BY LD. CIT(A). RELYING UPON ASSESSMENT ORDER IT WAS PLEADED BY LD . DR THAT ADDITION WAS RIGHTLY MADE BY THE AO. HE ALSO SUBMITTED THAT LET TER ISSUED BY PICUP AS MENTIONED IN THE ORDER OF CIT(A) IS ALSO DATED 7.4. 03 WHICH DATE FALLS BEYOND THE RELEVANT ACCOUNTING YEAR. THEREFORE HE PLEADED THAT ORDER OF CIT(A) SHOULD BE SET ASIDE AND THAT OF AO BE RESTOR ED. 7. ON THE OTHER HAND IT WAS SUBMITTED BY LD. AR TH AT LD. CIT(A) HAS RIGHTLY DELETED THE ADDITION. ITA NO. 2187/D/10 & CO NO. 390/DEL/10 8 8. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSIO NS IN THE LIGHT OF MATERIAL PLACED BEFORE US. CIRCULAR NOS. 496 & 674 ISSUED BY CBDT READ WITH CIRCULAR DATED 8 TH OCTOBER 1995 ISSUED U/S 4A OF U.P. SALES TAX ACT MAKES IT CLEAR THAT SALES TAX LIABILITY CONVERTED T O LOAN ARE ELIGIBLE TO BE CLAIMED AS EXPENSE U/S 43B OF THE ACT. PICUP HAS I SSUED LETTER TO THE ASSESSEE WHICH IS DATED 7.4.03. THE ONLY OBJECTION OF LD. DR WAS THAT THE SAID DATE FALL IN SUBSEQUENT FINANCIAL YEAR HENCE CLAIM COULD NOT BE ALLOWED IN THE PRESENT YEAR. HERE IT CAN BE MENTIONED THA T IT WAS CLEARLY MENTIONED BY THE ASSESSEE BEFORE AO AND IT IS RECORDED IN THE ASSESSMENT ORDER ALSO THAT THE SALES TAX COLLECTED WAS CONVERTED INTO INT EREST FREE LOAN ON 24.3.03. NO MATERIAL HAS BEEN BROUGHT ON RECORD TO SUGGEST T HAT SALES TAX COLLECTED WAS NOT CONVERTED INTO INTEREST FREE LOAN ON 24.3.0 3 WHICH DATE FALLS WITHIN THE RELEVANT FINANCIAL YEAR. MOREOVER UNDER PROVI SO TO SEC. 43B SALES TAX ETC. EVEN IF PAID AFTER RELEVANT FINANCIAL YEAR BU T BEFORE DUE DATE OF FILING THE RETURN THEN ALSO IT HAS TO BE ALLOWED IN THE RELEV ANT FINANCIAL YEAR. EVEN IF THE CONTENTION OF LD. DR IS ACCEPTED THAT THE DATE OF PAYMENT SHOULD BE CONSIDERED TO BE 7.4.03 EVEN THEN THAT IS THE DATE BEFORE DUE DATE OF FILING THE RETURN HENCE ALSO CIT(A) WAS RIGHT IN DELETING THE DISALLOWANCE. THEREFORE WE FIND NO FORCE IN THE CONTENTION RAISE D BY THE LD. DR. LD. CIT(A) HAS RIGHTLY GRANTED THE RELIEF TO THE ASSESS EE. WE DECLINE TO INTERFERE. THE DEPARTMENTAL APPEAL IS DISMISSED. ITA NO. 2187/D/10 & CO NO. 390/DEL/10 9 9. THE CROSS OBJECTION FILED BY THE ASSESSEE WAS NO T PRESSED BY THE LD. AR HENCE DISMISSED. 10. IN THE RESULT APPEAL AS WELL AS CROSS OBJECTIO N BOTH ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 21.1.2011 (A.K. GARODIA) (I.P. BANSAL) ACCOUNTANT MEMBER JUDICIAL MEMBER * KAVITA DATED: COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR TRUE COPY BY ORDER DEPUTY REGISTRAR ITAT