SUPREME NONWOVEN INDUSTRIES PVT. LTD., MUMBAI v. A.C.I.T. RG.10(2), MUMBAI

ITA 2605/MUM/2012 | 2009-2010
Pronouncement Date: 09-10-2013 | Result: Partly Allowed

Appeal Details

RSA Number 260519914 RSA 2012
Assessee PAN AAACB1673P
Bench Mumbai
Appeal Number ITA 2605/MUM/2012
Duration Of Justice 1 year(s) 5 month(s) 22 day(s)
Appellant SUPREME NONWOVEN INDUSTRIES PVT. LTD., MUMBAI
Respondent A.C.I.T. RG.10(2), MUMBAI
Appeal Type Income Tax Appeal
Pronouncement Date 09-10-2013
Appeal Filed By Assessee
Order Result Partly Allowed
Bench Allotted E
Tribunal Order Date 09-10-2013
Date Of Final Hearing 07-10-2013
Next Hearing Date 07-10-2013
Assessment Year 2009-2010
Appeal Filed On 17-04-2012
Judgment Text
E IN THE INCOME TAX APPELLATE TRIBUNAL E BENCH MUMBAI .. !'# $ $ $ $ %$$ $&; ( !'# !) BEFORE SHRI P.M. JAGTAP AM AND SHRI VIVEK VARMA J M !./ I.T.A. NO.2605 /MUM/2012 ( (+ & $ & (+ & $ & (+ & $ & (+ & $ & / / / / ASSESSMENT YEAR : 2009-10 M/S SUPREME NONWOVEN INDUSTRIES PVT. LTD. C/O KALYANIWALLA & MISTRY ARMY & NAVY BUILDING 148 MAHATMA GANDHI ROAD MUMBAI 400 001. + + + + / VS. ASSTT. C.I.T. RG. 10(2) MUMBAI. #- !./ PAN : AAACB1673P ( -. / // / APPELLANT ) .. ( /0-. / RESPONDENT ) ASSESSEE BY SHRI K. GOPAL ASSESSEE BY : SHRI ABANIKANT NAYAK !+$ 1 / // / DATE OF HEARING : 07-10-2013 23 1 / DATE OF PRONOUNCEMENT : 09-10-2013 [ '4 / O R D E R PER P.M. JAGTAP A.M . : .. !'# THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAIN ST THE ORDER OF THE LD. CIT(A) 22 MUMBAI DATED 09-032012. 2. THE ISSUE RAISED IN GROUND NO. 1 TO 4 RELATES TO THE DISALLOWANCE OF RS. 11 19 057/- MADE BY THE A.O. AND CONFIRMED BY THE L D. CIT(A) ON ACCOUNT OF DEPRECIATION ON GOODWILL. 3. THE ASSESSEE IN THE PRESENT CASE IS A COMPANY WH ICH IS ENGAGED IN THE BUSINESS OF MANUFACTURING OF AUTOMOBILE PARTS AND N ON-WOVEN FABRICS. THE ITA 2605/M/12 2 RETURN OF INCOME FOR THE YEAR UNDER CONSIDERATION W AS FILED BY IT ON 25-09-2009 DECLARING TOTAL INCOME OF RS. 1 59 600/- UNDER THE NORMAL PROVISIONS OF THE ACT AND INCOME U/S 115JB OF THE I NCOME TAX ACT 1961 OF RS. 41 47 960/-. ON 1-4-2003 THE ASSESSEE HAD `ACQ UIRED THE BUSINESS OF M/S DHARIWAL NONWOVENS FOR A TOTAL CONSIDERATION OF RS. 250 LACS. THE NET ASSET OF THE SAID FIRM ON THE DATE OF TRANSFER WERE TO THE TUNE OF RS. 1 30 41 518/-. THE DIFFERENCE BETWEEN THE SALE CON SIDERATION AND THE VALUE OF NET ASSET AMOUNTING TO RS. 1 19 58 482/- WAS PAID B Y THE ASSESSEE TOWARDS GOODWILL AND AFTER CAPITALIZING THE SAID AMOUNT IN THE BOOKS OF ACCOUNT DEPRECIATION WAS CLAIMED BY THE ASSESSEE IN THE YEA R UNDER CONSIDERATION AS WAS CLAIMED IN THE EARLIER YEARS. RELYING ON THE ST AND TAKEN IN THE EARLIER YEARS DISALLOWING THE CLAIM OF THE ASSESSEE FOR THE SAID DEPRECIATION A SIMILAR DISALLOWANCE WAS MADE BY THE A.O. IN THE YEAR UNDER CONSIDERATION. ON APPEAL THE LD. CIT(A) CONFIRMED THE SAID DISALLOWA NCE FOLLOWING HIS ORDER RENDERED IN ASSESSEES OWN CASE IN THE EARLIER YEAR S ON THE SIMILAR ISSUE. 3. WE HAVE HEARD THE ARGUMENTS OF BOTH THE SIDES AN D ALSO PERUSED THE RELEVANT MATERIAL AVAILABLE ON RECORD. IT IS OBSERV ED THAT A SIMILAR ISSUE INVOLVED IN ASSESSEES OWN CASE FOR THE EARLIER YEA RS I.E. ASSESSMENT YEARS 2004-05 TO 2008-09 HAS BEEN DECIDED BY THE TRIBUNAL VIDE ITS COMMON ORDER DATED 9-04-2013 PASSED IN ITA NO. 3233/MUM/10 AND O THERS FOR THE FOLLOWING REASONS GIVEN IN PARA NO. 5:- 5. AFTER CONSIDERING THE RIVAL SUBMISSIONS AND PER USING THE RELEVANT MATERIAL ON RECORD WE FIND THAT THIS ISSUE IS NO M ORE RES INTEGRA IN VIEW OF THE JUDGMENT OF THE HONBLE SUPREME COURT IN THE CASE OF CIT V. SMIFS SECURITIES LTD. [(2012) 348 ITR 302 (SC)]. IN THAT CASE ALSO EXCESS CONSIDERATION PAID BY THAT ASSESSEE OVER THE VALUE OF NET ASSET ACQUIRED BY YSN SHARES AND SECURITIES PRIVATE LIMITED WAS CO NSIDERED AS GOODWILL ON WHICH DEPRECIATION WAS CLAIMED. SUCH CL AIM WAS NOT ACCEPTED BY THE REVENUE AUTHORITIES. THE SECOND QUE STION BEFORE THE HONBLE SUPREME COURT IN THAT CASE WAS : WHETHER G OODWILL IS AN ASSET WITHIN THE MEANING OF SECTION 32 OF THE INCOME-TAX ACT 1961 AND WHETHER DEPRECIATION ON `GOODWILL IS ALLOWABLE UND ER THE SAID SECTION? THE SAID QUESTION HAS BEEN ANSWERED IN FAVOUR OF TH E ASSESSEE. AS THE ITA 2605/M/12 3 FACTS AND CIRCUMSTANCES OF THE INSTANT CASE ARE MUT ATIS MUTANDIS SIMILAR TO THOSE CONSIDERED AND DECIDED BY THE HON BLE SUPREME COURT IN THE CASE OF SMIFS SECURITIES LTD. (SUPRA) IN OU R CONSIDERED OPINION THE ASSESSEES CLAIM TO DEPRECIATION CANNOT BE DENI ED. WE THEREFORE HOLD THAT THE GOODWILL IS AN ASSET WITHIN THE MEANI NG OF SECTION 32 OF THE ACT AND ACCORDINGLY IS ELIGIBLE FOR DEPRECIATIO N. 4. AS THE ISSUE INVOLVED IN THE YEAR UNDER CONSIDER ATION AS WELL AS ALL THE MATERIAL FACTS RELEVANT THERETO ARE SIMILAR WE RES PECTFULLY FOLLOW THE DECISION OF THE CO-ORDINATE BENCH OF THIS TRIBUNAL RENDERED IN ASSESSEES OWN CASE FOR THE EARLIER YEARS AND DIRECT THE A.O. TO ALLOW THE CLAIM OF THE ASSESSEE FOR DEPRECIATION ON GOODWILL. GROUND NO. 1 TO 4 OF THE ASSESSEES APPEAL ARE ACCORDINGLY ALLOWED. 5. THE ISSUE RAISED IN GROUND NO. 5 RELATES TO THE DISALLOWANCE OF RS. 2 04 056/- MADE BY THE A.O. U/S 40(A)(IA) OF THE AC T AND CONFIRMED BY THE LD. CIT(A). 6. DURING THE YEAR UNDER CONSIDERATION PAYMENT OF RS. 2 04 056/- WAS MADE BY THE ASSESSEE TO M/S VAPI WASTE AND EFFLUENT MANAGEMENT CO. LTD. (VWEMCL). ACCORDING TO THE A.O. THE ASSESSEE WAS REQUIRED TO DEDUCT TAX AT SOURCE FROM THE SAID PAYMENT MADE ON ACCOUNT OF FEE FOR TECHNICAL SERVICES AND SINCE NO SUCH TAX WAS DEDUCTED BY THE ASSESSEE HE DISALLOWED THE AMOUNT OF RS. 2 04 056/- PAID BY THE ASSESSEE TO M/ S VWEMCL BY INVOKING THE PROVISIONS OF SECTION 40(A)(IA) OF THE ACT. ON APPEAL THE LD. CIT(A) CONFIRMED THE DISALLOWANCE MADE BY THE A.O. ON THIS ISSUE FOR THE FOLLOWING REASONS GIVEN IN PARA 3.3 OF HIS IMPUGNED ORDER:- 3.3. 1 HAVE GONE THROUGH THE ASSESSMENT ORDER PER USED THE SUBMISSIONS MADE BY THE APPELLANT AND ALSO DISCUSSE D THE CASE WITH THE A.R. OF THE APPELLANT. BEFORE ME THE APPELLANT REITERATED THE SUBMISSIONS AS MADE BEFORE A.O. AND IT WAS FURTHER SUBMITTED THAT IN THE ASSESSMENT ORDER OF VWEMCL THE INCOME HAS BEEN TREATED AS EXEMPT. HOWEVER ON PERUSAL OF THE COPY OF ASSESSME NT ORDER DATED 31.12.2007 IT IS NOTED THAT THE INTEREST INCOME RE CEIVED FROM THE BANK ON FIXED DEPOSITS HAVE BEER TREATED AS TAXABLE AND HENCE THE INCOME HAS NOT BEEN TREATED AS TOTALLY EXEMPT BY THE A.O. OF VWEMCL. THE ITA 2605/M/12 4 APPELLANT IS REGULARLY PAYING SERVICE CHARGES TO VWEMCL AND HENCE THE APPELLANT WAS REQUIRED TO MAKE TDS ON THIS PAYM ENT. THE APPELLANTS ATTENTION WAS ALSO INVITED TO PROVISION S OF SECTION 1 95J UNDER WHICH THIS PAYMENT WAS TO BE TREATED AS FEES FOR TECHNICAL CHARGES SINCE VWEMCL IS A COMPANY WHICH IS PROVIDIN G TECHNICAL SERVICES OF TREATING THE EFFLUENT OF THE COMPANY F OR WHICH IT IS BEING PAID REGULARLY. THE APPELLANT STATED THAT THE PAYME NT MADE BY IT IS FOR STANDARD FACILITY AVAILABLE TO ALL. IN VIEW OF THES E FACTS I AM OF THE CONSIDERED OPINION THAT THE A.O. HAS RIGHTLY DISALL OWED THE SUM OF RS.2 04 056/- ULS.40(A)(IA) WHICH IS UPHELD. 7. WE HAVE HEARD THE ARGUMENTS OF BOTH THE SIDES AN D ALSO PERUSED THE RELEVANT MATERIAL AVAILABLE ON RECORD. THE LD. D.R. HAS STRONGLY RELIED ON THE REASONS GIVEN BY THE LD. CIT(A) IN PARA 3.3 OF HIS IMPUGNED ORDER IN SUPPORT OF THE REVENUES CASE ON THIS ISSUE WHILE THE LD. COUN SEL FOR THE ASSESSEE HAS SUBMITTED THAT A SIMILAR ISSUE INVOLVED IN THE CASE OF M/S RUBY MACONS LTD. VS. DCIT FOR ASSESSMENT YEAR 2005-06 HAS BEEN DECID ED BY THE TRIBUNAL IN FAVOUR OF THE ASSESSEE VIDE ITS ORDER DATED 11 TH JUNE 2010 PASSED IN ITA NO. 4056/MUM/2008. HE HAS ALSO PLACED ON RECORD A COPY OF THE SAID ORDER AND A PERUSAL OF THE SAME SHOWS THAT A SIMILAR DISALLOW ANCE MADE BY THE A.O. U/S 40(A)(IA) OF THE ACT AND CONFIRMED BY THE LD. CIT(A ) ON ACCOUNT OF PAYMENT MADE TO M/S VWEMCL WAS DELETED BY THE TRIBUNAL FOR THE FOLLOWING REASONS GIVEN IN PARA 14 & 15 OF ITS ORDER:- 14. WE MAY TURN TO THE FACTS OF THE CASE ON HAND S O AS TO APPRECIATE AS TO WHETHER THE SERVICES RENDERED BY VWEMCL INVOLVES HUMAN INTERFACE OR WAS IT MERELY A STANDARD FACILITY PROVIDED TO AL L THE MEMBERS WHO WERE JOINTLY INVOLVED IN SETTING UP AFFLUENT TREATM ENT PLANT. IT IS NOT IN DISPUTE THAT THE RATE IS FIXED DEPENDING ON THE ACT UAL WATER CONSUMED BY MEMBER UNIT AND ALSO BASED ON DISCHARGE QUALITY NORMS. IT IS ALSO NOT IN DISPUTE THAT AMOUNT COLLECTED IS ON NO PROFI T NO LOSS BASIS AND IF ANY EXCESS AMOUNT IS COLLECTED IT IS PASSED ON TO M EMBERS BY WAY OF DISCOUNT. THIS WAS ACCEPTED BY THE ASSESSING OFFICE R WHILE MAKING AN ASSESSMENT UNDER SECTION 143 (3) OF THE ACT IN THE CASE OF VWEMCL. SUCH BEING THE CASE IT HAS TO BE CONSIDERED AS A ST ANDARD FACILITY AVAILABLE TO EACH MEMBER/INDUSTRIAL UNDERTAKING ; V WEMCL IS RUNNING A TREATMENT PLANT PROVIDING A STANDARD FACILITY AND IF ANY WORK FORCE IS INVOLVED IN MAINTAINING THE STANDARD FACILITY IT CA NNOT BE SAID THAT A SPECIAL SKILL/KNOWLEDGE WAS PASSED ON BY INDIVIDUAL S TO THE ASSESSEE IN LIEU OF A SPECIFIC FEE COLLECTED. SUCH BEING THE CA SE WE ARE OF THE ITA 2605/M/12 5 CONSIDERED OPINION THAT IT CANNOT BE CONSIDERED AS A PAYMENT IN THE FORM OF FEE FOR TECHNICAL SERVICES. IN THE CASE O F RECIPIENT COMPANY THE ASSESSING OFFICER ACCEPTED THAT CHARGES WERE RECOVE RED FROM THE MEMBER UNITS BY ADOPTING MUTUALITY CONCEPT. 15. IN FACT IN THE SUBSEQUENT YEARS ASSESSING OFF ICER HAS NOT INVOKED THE PROVISIONS OF SECTION 194J OF THE ACT IN ASSESS EES OWN CASE. IT APPEARS THAT THE ASSESSEE AGREED TO DEDUCT 2% TAX U NDER SECTION 194C OF THE ACT BASED UPON AN UNDERSTANDING REACHED BY A LL THE INDUSTRIAL UNDERTAKINGS IN THAT LOCALITY AND SUCH UNDERSTANDIN G WAS ACCEPTED BY THE REVENUE. IT MAY BE POINTED OUT THAT IN THE SUBS EQUENT YEARS THE ASSESSING OFFICER ADMITTED THAT PROVISIONS OF SECTI ON 194J OF THE ACT ARE NOT APPLICABLE IN RESPECT OF PAYMENTS MADE BY MEMB ER INDUSTRIAL UNDERTAKINGS TO VWEMCL IN THE FORM OF AFFLUENT TRE ATMENT CHARGES. ON A CONSCPECTUS OF THE MATTER WE ARE OF THE VIEW THAT THE IMPUGNED PAYMENTS ARE NOT HIT BY THE PROVISIONS OF SECTION 1 94J OF THE ACT AND CONSEQUENTLY DISALLOWANCE MADE BY THE ASSESSING OFF ICER UNDER SECTION 40(A)(I) OF THE ACT IS NOT IN ACCORDANCE WITH LAW. 8. AS THE ISSUE INVOLVED IN THE YEAR UNDER CONSIDER ATION AS WELL AS ALL THE MATERIAL FACTS RELEVANT THERETO ARE SIMILAR TO THAT OF A.Y. 2005-06 WE RESPECTFULLY FOLLOW THE ORDER OF THE CO-ORDINATE BE NCH OF THIS TRIBUNAL DATED 11 TH JUNE 2010 FOR A.Y. 2005-06 AND DELETE THE DISALLO WANCE MADE BY THE A.O. U/S 40(A)(IA) OF THE ACT AND CONFIRMED BY THE LD. CIT(A) ON ACCOUNT OF PAYMENT MADE BY THE ASSESSEE TO M/S VWEMCL. GROUND NO. 5 OF ASSESSEES APPEAL IS ACCORDINGLY ALLOWED. 9. IN GROUND NO. 6 THE ASSESSEE IS SEEKING DIRECTI ON TO THE A.O. TO ALLOW THE CREDIT FOR ADVANCE TAX OF RS. 10 LACS PAID ON 1 3 TH JUNE 2008. 10. WE HAVE HEARD THE ARGUMENTS OF BOTH THE SIDES A ND ALSO PERUSED THE RELEVANT MATERIAL AVAILABLE ON RECORD. THE LD. COUN SEL FOR THE ASSESSEE HAS SUBMITTED THAT A SUM OF RS. 10 LACS WAS PAID BY THE ASSESSEE AS ADVANCE TAX ON 13 TH JUNE 2008 IN STATE BANK OF INDIA CHEMBUR BRANCH BUT THE CREDIT FOR THE SAME COULD NOT BE AVAILED BY THE ASSESSEE AS TH ERE WAS A MISTAKE IN MENTIONING THE CORRECT PERMANENT ACCOUNT NUMBER BY THE BANK. HE HAS INVITED OUR ATTENTION TO THE LETTER DATED 31-12-201 1 ISSUED BY THE STATE BANK ITA 2605/M/12 6 OF INDIA PLACED AT PAGE 81 OF HIS PAPER BOOK ADMITT ING THIS MISTAKE AND URGED THAT THE A.O. MAY BE DIRECTED TO ALLOW THE CREDIT F OR THE ADVANCE TAX OF RS. 10 LACS PAID BY THE ASSESSEE AFTER NECESSARY VERIFICAT ION. THE LD. D.R. ON THE OTHER HAND HAS INVITED OUR ATTENTION TO PARA 4.1 O F THE IMPUGNED ORDER OF THE LD. CIT(A) TO POINT OUT THAT THE RECTIFICATION APPL ICATION U/S 154 OF THE ACT HAS BEEN FILED BY THE ASSESSEE BEFORE THE A.O. ON 23-01 -2012 CLAIMING THE CREDIT FOR THE ADVANCE TAX AND THE LD. CIT(A) HAS ALREADY DIRECTED THE A.O. TO DISPOSE OF THE SAID APPLICATION AFTER VERIFYING THE CLAIM O F THE ASSESSEE. AS SUBMITTED BY THE LD. COUNSEL FOR THE ASSESSEE THE A.O. HOWE VER HAS NOT DISPOSED OF THE APPLICATION FILED BY THE ASSESSEE U/S 154 OF THE AC T INSPITE OF THE DIRECTION GIVEN BY THE LD. CIT(A). WE THEREFORE DIRECT THE A.O. TO DISPOSE OF THE MISC. APPLICATION FILED BY THE ASSESSEE CLAIMING THE CRED IT FOR ADVANCE TAX OF RS. 10 LACS EXPEDITIOUSLY AFTER NECESSARY VERIFICATION. GR OUND NO. 6 OF THE ASSESSEES APPEAL IS ACCORDINGLY TREATED AS ALLOWED. 11. GROUND NO. 7 RAISED BY THE ASSESSEE CLAIMING RE LIEF BY WAY OF INCREASING THE VALUE OF OPENING STOCK OF THE YEAR UNDER CONSID ERATION AS A RESULT OF THE ADDITION MADE TO THE VALUE OF CLOSING STOCK IN THE IMMEDIATELY PRECEDING YEAR U/S 145 OF THE ACT IS NOT PRESSED BY THE LD. COUNSE L FOR THE ASSESSEE. THE SAME IS ACCORDINGLY DISMISSED AS NOT PRESSED. 12. IN THE RESULT APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 9 TH OCTOBER 2013. . '4 1 23 5'+6 09-10-2013 3 1 SD/- SD/- (VIVEK VARMA) (P.M. JAGTAP ) ( !'# JUDICIAL MEMBER !'# / ACCOUNTANT MEMBER MUMBAI ; 5'+ DATED 09-10-2013 ITA 2605/M/12 7 $.(+.!./ RK SR. PS '4 1 /(7% 8% '4 1 /(7% 8% '4 1 /(7% 8% '4 1 /(7% 8% / COPY OF THE ORDER FORWARDED TO : 1. -. / THE APPELLANT 2. /0-. / THE RESPONDENT. 3. 9 () / THE CIT(A)22 MUMBAI. 4. 9 / CIT 10 MUMBAI 5. %$< /((+ / DR ITAT MUMBAI E BENCH 6. =& > / GUARD FILE. '4+! '4+! '4+! '4+! / BY ORDER !0% /( //TRUE COPY// ? ? ? ?/ // /!@ !@ !@ !@ ( DY./ASSTT. REGISTRAR) / ITAT MUMBAI