SEC Industries Pvt.Ltd., Hyd, Hyderabad v. DCIT, Circle-3(1), Hyderabad, Hyderabad

ITA 337/HYD/2016 | 2011-2012
Pronouncement Date: 28-09-2016 | Result: Dismissed

Appeal Details

RSA Number 33722514 RSA 2016
Assessee PAN AADCS4199N
Bench Hyderabad
Appeal Number ITA 337/HYD/2016
Duration Of Justice 6 month(s) 7 day(s)
Appellant SEC Industries Pvt.Ltd., Hyd, Hyderabad
Respondent DCIT, Circle-3(1), Hyderabad, Hyderabad
Appeal Type Income Tax Appeal
Pronouncement Date 28-09-2016
Appeal Filed By Assessee
Order Result Dismissed
Bench Allotted B
Tribunal Order Date 28-09-2016
Date Of Final Hearing 21-09-2016
Next Hearing Date 21-09-2016
Assessment Year 2011-2012
Appeal Filed On 21-03-2016
Judgment Text
ITA NO 337 OF 2015 SEC INDUSTRIES P LTD HYDERABAD PAGE 1 OF 6 IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD B BENCH HYDERABAD BEFORE SMT. P. MADHAVI DEVI JUDICIAL MEMBER AND SHRI B. RAMAKOTAIAH ACCOUNTANT MEMBER ITA NO.337/HYD/2016 (ASSESSMENT YEAR: 2011-12) M/S. SEC INDUSTRIES PRIVATE LIMITED HYDERABAD PAN: AADCS 4199 N VS DY. COMMISSIONER OF INCOME TAX CIRCLE 3 (1) HYDERABAD FOR ASSESSEE: SHRI A.V.RAGHURAM FOR REVENUE: SMT. S. NARASAMMA CIT-DR O R D E R PER SMT. P. MADHAVI DEVI J.M. THIS IS ASSESSEES APPEAL FOR THE A.Y 2011-12. IN T HIS APPEAL THE ASSESSEE HAS CHALLENGED THE ORDER OF TH E CIT U/S 263 OF THE I.T. ACT. THE ASSESSEE HAS RAISED THE GROUN DS OF APPEAL BOTH AGAINST THE CIT ASSUMING JURISDICTION U/S 263 OF THE ACT AND ALSO AGAINST THE DIRECTION OF THE CIT TO MAKE THE D ISALLOWANCE U/S 40(A)(IA) AND ALSO THE ASSESSEES CLAIM U/S 35(AB) OF THE ACT. THE ASSESSEE HAS ALSO FILED ADDITIONAL GROUNDS OF APPEA L WHICH ARE AS UNDER: I. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE THE ID. PRO C.I. T. ERRED IN DIRECTING THE ASSESSING OFFICER TO DISALLOW THE INTEREST DATE OF HEARING : 21.09.2016 DATE OF PRONOUNCEMENT : 28.09.2016 ITA NO 337 OF 2015 SEC INDUSTRIES P LTD HYDERABAD PAGE 2 OF 6 EXPENDITURE BY INVOKING PROVISIONS OF SECTION 40A(IA) OF THE ACT FAILING TO APPRECIATE THAT THE ENTIRE INTEREST EXPENDITURE WAS ALREADY PAID AND NOTHING REMAINED PAYABLE. II. WITHOUT PREJUDICE TO ABOVE GROUND ON THE FACTS AND IN THE CIRCUMSTANCES THE PRO C.I. T. ERRED IN NOT CONSIDERING 2ND PROVISO TO SECTION 40A(IA) OF THE ACT AND IN DIRECTING THE ASSESSING OFFICER TO DISALLOW THE INTEREST EXPENDITURE OF RS.14 66 389 UNDER THE PROVISIONS OF SECTION 40A(IA) OF THE ACT. III. WITHOUT PREJUDICE TO ABOVE GROUNDS THE ID. PR.C.I. T. FAILED TO APPRECIATE THAT THE ~ PROVISO TO SECTION 40A(IA) OF THE ACT BEING CLARIFICATORY IN NATURE OPERATE RETROSPECTIVELY AND ACCORDINGLY THE ID. PR.C.I. T. OUGHT NOT TO HAVE DIRECTED THE ASSESSING OFFICER TO DISALLOW THE INTEREST EXPENDITURE. 3. IT IS SUBMITTED THAT THE FACTS RELATING TO THE ABOVE LEGAL GROUNDS ARE ALREADY ON RECORD BEFORE THE ID. PR.C.I.T. WHEREIN THE APPELLANT TOOK A STAND THAT IT HAD PAID THE INTEREST TO INDIA BULLS (NBFC) WITHOUT DEDUCTING TAXES. THEREFORE THERE IS NO NECESSITY OF INVESTIGATING INTO FACTS FOR ADJUDICATING THE ADDITIONAL GROUNDS. IT IS SUBMITTED THAT THE ABOVE ADDITIONAL GROUNDS DESERVE TO BE ADMITTED AND ADJUDICATED UPON HAVING REGARD TO THE PRINCIPLES LAID OUT IN THE JUDGMENT OF HON'BLE SUPREME COURT IN THE CASE OF CIT VS. N.T.P.C. (229 ITR 383- SC). IT IS SUBMITTED THAT THOUGH THE APPELLANT CONTESTED THE DISALLOWANCE OF INTEREST EXPENDITURE THE ABOVE GROUNDS COULD NOT BE TAKEN IN THE PROCEEDINGS BEFORE THE ID. PRO C.I.T. BY IGNORANCE OF LAW ON PART OF THE ASSESSEE. IN THE AFORESAID CIRCUMSTANCES IT IS PRAYED THAT THE HON'BLE TRIBUNAL MAY BE PLEASED TO ADMIT THE ITA NO 337 OF 2015 SEC INDUSTRIES P LTD HYDERABAD PAGE 3 OF 6 ADDITIONAL GROUNDS RAISED ABOVE AND ADJUDICATE THE SAME ON MERITS. 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE A COMPANY ENGAGED IN THE BUSINESS OF ENGINEERING FAB RICATION & COMPONENTS MANUFACTURING FILED ITS RETURN OF INCOM E FOR THE RELEVANT A.Y 2011-12 ON 23.09.2011 DECLARING TOTAL I NCOME OF RS.3 97 62 930 UNDER THE NORMAL PROVISIONS OF BOOK PROFIT AND AT RS.5 70 80 156 U/S 115JB OF THE ACT. DURING THE COU RSE OF ASSESSMENT PROCEEDINGS U/S 143(3) OF THE ACT THE A O CALLED FOR THE DETAILS AND ALSO VERIFIED THE BOOKS OF ACCOUNT OF THE ASSESSEE. DURING THE ASSESSMENT PROCEEDINGS THE AO MADE ADDI TION OF A SUM OF RS.1 32 353 ONLY ON ACCOUNT OF DISALLOWANCE OF CLIENT RELATIONSHIP EXPENDITURE OF RS.1 06 00 AND MISCELLA NEOUS EXPENDITURE OF RS.26 353 AND CONCLUDED THE ASSESSME NT ACCORDINGLY. THEREAFTER THE CIT CALLED FOR THE ASS ESSMENT RECORDS OF THE ASSESSEE U/S 263 OF THE I.T. ACT AND ON VERI FICATION OF THE SAME HE NOTICED THAT THE ASSESSEE COMPANY CLAIMED WEIGHTED DEDUCTION @ 200% U/S 35(2AB) ON SCIENTIFIC R&D CAPIT AL & REVENUE EXPENDITURE AMOUNTING TO RS.2 06 06 384. TH EREFORE HE CAME TO THE CONCLUSION THAT THE DEPRECIATION COULD NOT BE ALLOWED ON ASSETS WHERE DEDUCTION FOR EXPENDITURE ON SCIENT IFIC RESEARCH WAS ALLOWED. HE OBSERVED THAT THE ASSESSEE HAD CLAI MED DEPRECIATION OF RS.9 47 528 ON R&D ASSETS AND THE S AME WAS NOT ADDED BACK WHILE COMPUTING THE TOTAL INCOME. FURTHER HE ALSO NOTICED FROM THE TDS RECONCILIATION THAT FOR THE FI NANCIAL YEAR 2010-11 THE ASSESSEE COMPANY FAILED TO DEDUCT TDS ON THE ITA NO 337 OF 2015 SEC INDUSTRIES P LTD HYDERABAD PAGE 4 OF 6 INTEREST PAYMENT OF RS.14 66 389 TO M/S INDIA BULLS . HE THEREFORE OBSERVED THAT THIS INTEREST NEEDS TO BE DISALLOWED U/S 40(A)(IA) AND ADDED TO THE TOTAL INCOME. HE OBSERVE D THAT THE AO HAS NOT VERIFIED THESE TWO ISSUES AND THEREFORE HE CAME TO THE CONCLUSION THAT THE ASSESSMENT ORDER IS ERRONEOUS A S THE PROVISIONS OF INCOME TAX ACT ARE NOT PROPERLY APPLI ED AND IS PREJUDICIAL TO THE INTEREST OF REVENUE AS THE INCOM E WAS LEADING TO LOSS OF REVENUE. ACCORDINGLY A SHOW CAUSE NOTICE W AS TO THE ASSESSEE ON 10.12.2015 U/S 263 OF THE ACT WAS ISSUE D PROPOSING TO REVISE THE ASSESSMENT ORDER DATED 17.12.2013 ON THIS GROUND. 3. THE ASSESSEE REPLIED VIDE LETTER DATED 4.11.201 5 STATING THAT THE ASSESSEE HAD ERRONEOUSLY HAD NOT A DDED BACK THE AMOUNT OF RS.9 47 258 TOWARDS DEPRECIATION OF R&D A SSETS AND THERE WAS NO INTENTION OF THE ASSESSEE TO CONCEAL OR SHOW INACCURATE PARTICULARS OF INCOME. THUS THE ASSESSE E CONCEDED TO THE DISALLOWANCE OF RS.9 47 528. AS REGARDS THE INT EREST OF RS.14 66 389 PAID TO M/S. INDIA BULLS WITHOUT MAKIN G ANY TDS THE ASSESSEE SUBMITTED THAT DURING THE FINANCIAL YE AR 2010-11 THE ASSESSEE HAS MADE PAYMENT TO M/S. INDIA BULLS WHICH IS NON-BANKING FINANCIAL CORPORATION TOWARDS INTEREST AND PRINCIPAL PAYMENT FOR THE LOAN TAKEN AND THAT THE A MOUNTS ARE PAID THROUGH EMI AND THE AMOUNT OF EMI WAS PAID BY WAY OF ECS AND THE AMOUNT IS AUTOMATICALLY DEBITED AND THEREFO RE MAKING OF TDS BEFORE PAYMENT IS NOT POSSIBLE. IT WAS FURTHER SUBMITTED THAT THIS AMOUNT IS ALSO NOT REQUIRED TO BE DISALLOWED U /S 40(A)(IA) OF THE ACT AS M/S. INDIA BULLS CREDITED THE INTENT TO ITS P&L A/C AND ITA NO 337 OF 2015 SEC INDUSTRIES P LTD HYDERABAD PAGE 5 OF 6 HAS ALSO PAID THE TAX THEREON EITHER IN THE FORM OF ADVANCE TAX OR AS SELF ASSESSMENT TAX. THE CIT HOWEVER WAS NOT CO NVINCED WITH THE ASSESSEES CONTENTIONS AND DIRECTED THE AO TO B RING TO TAX THE SUM OF RS.9 47 528 AND TO REVISE THE INCOME ACCORDI NGLY. AS REGARDS THE DISALLOWANCE U/S 40(A)(IA) AND THE ASSE SSEES CONTENTION THEREON THE CIT OBSERVED THAT THE DETAI LS OF THE PAYMENT OF TAX BY M/S INDIA BULLS IS NOT AVAILABLE ON RECORD NOR WAS IT EXAMINED BY THE AO WHILE PASSING THE ASSESSM ENT ORDER. HE THEREFORE SET ASIDE THE ASSESSMENT ORDER AND D IRECTED THE AO TO REVISE THE INCOME OF THE ASSESSEE AFTER ALLOWING AN OPPORTUNITY OF BEING HEARD TO THE ASSESSEE COMPANY. AGAINST THI S ORDER OF THE CIT (A) THE ASSESSEE IS IN APPEAL BEFORE US. 4. AT THE TIME OF HEARING THE LEARNED COUNSEL DID NOT SERIOUSLY ARGUE ON THE CORRECTNESS OF THE ASSUMPTIO N OF JURISDICTION U/S 263 OF THE ACT. HOWEVER HE ONLY P LEADED FOR MODIFICATION OF THE DIRECTION OF THE CIT TO THE AO AS REGARDS THE DISALLOWANCE U/S 40(A)(IA) IS CONCERNED. 5. HAVING REGARD TO THE RIVAL CONTENTIONS AND THE M ATERIAL ON RECORD WE FIND THAT THE ASSESSEES CONTENTION A BOUT THE APPLICABILITY OF 2 ND PROVISO TO SECTION 40(A)(IA) TO THE CASE OF THE ASSESSEE NEEDS VERIFICATION BY THE AO AND THE CIT ( A) HAS DIRECTED THE AO TO VERIFY THE SAME. THEREFORE THE ADDITIONA L GROUNDS RAISED BY THE ASSESSEE ARE NOT ADMITTED. AS REGARDS GROUNDS NO. 4 & 5 WITH REGARD TO DISALLOWANCE OF WEIGHTED DEDUC TION U/S 35(2AB) TO THE EXTENT OF RS.9 47 528 IS CONCERNED WE FIND THAT ITA NO 337 OF 2015 SEC INDUSTRIES P LTD HYDERABAD PAGE 6 OF 6 THE ASSESSEE HAS NO OBJECTION TO THE SAME. IN VIEW OF THE SAME WE DO NOT SEE ANY REASON TO INTERFERE WITH THE DIRECTI ON OF THE CIT TO THE AO TO VERIFY THE CLAIM OF THE ASSESSEE THAT M/S . INDIA BULLS HAS THE CREDITED THE INTEREST AMOUNT TO ITS P&L A/C AND HAS PAID THE TAX THEREON. IN VIEW OF THE SAME THE ASSESSEE S APPEAL IS DISMISSED. 6. IN THE RESULT ASSESSEES APPEAL IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 28 TH SEPTEMBER 2016. SD/- SD/- (B. RAMAKOTAIAH) ACCOUNTANT MEMBER (P. MADHAVI DEVI) JUDICIAL MEMBER HYDERABAD DATED 28 TH SEPTEMBER 2016. VINODAN/SPS COPY TO: 1 RAJU & PRASAD CAS 401 DIAMOND HOUSE ADJ. AMRUT HA HILLS PUNJAGUTTA HYDERABAD 500082 2 DY. COMMISSIONER OF INCOME TAX CIRCLE 3(1) HYDER ABAD 3 PR.CIT -3 HYDERABAD 4 THE DR ITAT HYDERABAD 5 GUARD FILE BY ORDER