DCIT, New Delhi v. M/s Continental Engines Ltd.,, New Delhi

ITA 4207/DEL/2013 | 2008-2009
Pronouncement Date: 20-11-2014 | Result: Dismissed

Appeal Details

RSA Number 420720114 RSA 2013
Assessee PAN AABCC9896N
Bench Delhi
Appeal Number ITA 4207/DEL/2013
Duration Of Justice 1 year(s) 4 month(s) 10 day(s)
Appellant DCIT, New Delhi
Respondent M/s Continental Engines Ltd.,, New Delhi
Appeal Type Income Tax Appeal
Pronouncement Date 20-11-2014
Appeal Filed By Department
Order Result Dismissed
Bench Allotted B
Tribunal Order Date 20-11-2014
Date Of Final Hearing 30-10-2014
Next Hearing Date 30-10-2014
Assessment Year 2008-2009
Appeal Filed On 10-07-2013
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCHES : B NEW DELHI AND SHRI J.SUDHAKAR REDDY AM AND SHRI C.M. GARG JM ITA NOS: 4207 4208/DEL/2013 AYS : - 2008-09 2006-07 DCIT VS. M/S. CONTINENTAL ENGINES LIMITED CENTRAL CIRCLE-2 22 COMMERCIAL COMP LEX NEW DELHI. MALCHA MARG NEW DELHI. (PAN AABCC9896N) (APPELLANT) (RESPOND ENT) APPELLANT BY :S HRI K.V.S.R. KRISHNA CA RESPONDENT :SM T PARMINDER KAUR SR. DR O R D E R PER J.SUDHAKAR REDDY ACCOUNTANT MEMBER BOTH THESE APPEALS ARE FILED BY THE REVENU E AND ARE DIRECTED AGAINST SEPARATE ORDERS OF THE COMMISSIONER OF INCOME TAX (A) V NEW DELHI DATED 6.3.2013 FOR THE YEAR 2006-07 AND DATED 8.3.2013 FOR THE ASSTT. YEAR 2008-09. BOTH THESE APPEALS ARE HEARD TOGETHER AND ARE BEING DISPOSED OFF BY WA Y OF THIS COMMON ORDER. 2. THE ASSESSEE IS COMPANY AND IS ENGAGED IN THE B USINESS OF MANUFACTURING OF AUTO COMPONENTS. 3. WE HAVE HEARD SMT. PARWINDER KAUR LD. SR. DR O N BEHALF OF THE REVENUE AND SHRI K.V.S.R. KRISHNA THE LD. COUNSEL ON BEHALF OF THE ASSESSEE. ITA NOS. 4207 4208/DEL/2013 AYS 2008-09 2006-07 DCIT VS. CONTINENTAL ENGINES LTD. 2 4. ON A CAREFUL CONSIDERATION OF RIVAL CONTENTIO NS AND THE FACTS AND CIRCUMSTANCES OF THE CASE AND ON A PERUSAL OF THE PAPERS ON RECOR D AND THE ORDERS OF THE AUTHORITIES BELOW WE HOLD AS FOLLOWS :- WE TAKE UP THE REVENUE APPEAL IN ITA NO. 4207/ D/13 ON THE FOLLOWING GROUNDS :- 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE THE CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS. 2 21 770/- MADE BY THE AO ON ACCOUNT OF DISALLOWANCE OF DEDUCTION U/S 10B OF THE INCOME TAX ACT 1961 ON MISCELLANEOUS INCOME EARNED BY THE ASSESSEE FROM SA LE OF SCRAP. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE THE CIT(A) HAS ERRED IN HOLDING THE MISCELLANEOUS INCOME EARNED FROM SAL E OF SCRAP AS MAIN BUSINESS ACTIVITY. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE THE CIT(A) HAS ERRED IN DIRECTING THE AO TO ALLOW THE REVISED CLAIM OF D EDUCTION UNDER SECTION 10B OF THE INCOME TAX ACT 1961 AT RS. 52 46 09 215 /- FROM RS. 50 25 60 163/- AS CLAIMED BY THE ASSESSEE OTHER THA N FILING REVISED RETURN OF INCOME. 4. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE THE CIT(A) HAS ERRED IN IGNORING THE DECISION OF HONBLE APEX COURT IN T HE CASE OF GOETZE (INDIA) LTD. VS. CIT 284 ITR 323 (SC) (2006) WHICH IS SQUARELY APPLICABLE IN THE INSTANT CASE. 5. THE FIRST GROUND IS AGAINST THE ORDER OF THE L D. CIT(A) ALLOWING THE CLAIM OF THE ASSESSEE TO INCLUDE MISCELLANEOUS INCOME IN PROFIT S OF BUSINESS FOR THE PURPOSE OF COMPUTING DEDUCTION U/S 10B. THE FIRST APPELLATE AU THORITY DEALT WITH THIS ISSUE IN PARA 5 AT PAGE 2 OF HIS ORDER. HE FOLLOWED HIS OWN DECISION TAKEN IN THE YEAR 2006- 07 AND DIRECTED THE AO TO GRANT RELIEF. IN THE ASST T. YEAR 2006-07 WE FIND THAT THE MISCELLANEOUS INCOME IN QUESTION PERTAINS TO SALE O F SCRAP AND WRITE OFF OF CERTAIN CREDIT BALANCES. BOTH THESE ITEMS OF INCOME HAVE BE EN ASSESSED UNDER THE HEAD INCOME FROM BUSINESS OF PROFESSION BY THE AO. IT I S NOT THE CASE OF AO THAT THESE ITA NOS. 4207 4208/DEL/2013 AYS 2008-09 2006-07 DCIT VS. CONTINENTAL ENGINES LTD. 3 INCOMES ARE ASSESSABLE UNDER SOME OTHER HEAD OF INC OME AND NOT AS INCOME FROM BUSINESS. UNDER THESE CIRCUMSTANCES WE ARE OF THE CONSIDERED OPINION THAT THE ORDER OF THE FIRST APPELLATE AUTHORITY HAS TO BE UP HELD BY APPLYING THE DECISION OF THE SPECIAL BENCH OF THE TRIBUNAL IN THE CASE OF MARAL OVERSEAS LD. VS. ACIT ITA NOS. 777 & 999 (IND) OF 2004 & 295 & 356 (IND) OF 2006 D ATED 28.3.2012 WHERE IT IS HELD THAT IN THE CASE OF LIBERTY INDIA THE HONBLE SUPREME COURT HAS DEALT WITH THE PROVISIONS OF SECTION 80IA/80IB OF THE ACT AND NOT SECTION 10B WHERE A FORMULA HAS BEEN PRESCRIBED U/S 10B(4) THE APPLICATION OF WHIC H WOULD RESULT IN ARRIVING AT THE FIGURE OF PROFITS AND GAINS THAT ARE TO BE CONSIDER ED AS DERIVED BY THE 100% EOU FOR THE PURPOSE OF COMPUTING EXEMPTION U/S 10B (1) THUS A DISALLOWANCE ON THE GROUND THAT A PARTICULAR INCOME IS NOT DERIVED FROM THE BUSINESS IS BAD IN LAW AS THE SAME DOES NOT CONFIRM TO THE FORMULA PRESCRIBED UND ER THE ACT. GROUND NO. 2 IS SAME AS GROUND NO. 1. HENCE BOTH GROUND NO. 1 & 2 A RE DISMISSED. 6. GROUND NO. 3 & 4 ARE AGAINST THE ACTION OF THE LD. CIT(A) ADMITTING AN ADDITIONAL CLAIM OF THE ASSESSEE. WE FIND THAT THE ASSESEE HAS MADE A CLAIM U/S 10B IN THE RETURN OF INCOME. IT IS ONLY A CASE WHERE TH E CLAIM U/S 10B WAS SOUGHT TO BE RECOMPUTED. IT IS NOT A FRESH CLAIM AND HENCE IN OU R VIEW THE JUDGMENT OF THE HONBLE SUPREME COURT IN THE CASE OF GOETZE (INDIA) LTD. DOES NOT APPLY. 7. BE IT AS IT MAY THIS IS A LEGAL GROUND AND ALL THE FACTS RELATABLE TO THIS GROUND ARE ON RECORD. THUS IN VIEW OF THE DECISION OF HON BLE SUPREME COURT IN THE CASE OF NTPC LTD. 229 ITR 383 (SC) WE DO NOT FIND ANY INFI RMITY IN THE ACTION OF THE FIRST APPELLATE AUTHORITY. AS FAR AS COMPUTATION OF RELIE F U/S 10B IS CONCERNED THE LD. DR ITA NOS. 4207 4208/DEL/2013 AYS 2008-09 2006-07 DCIT VS. CONTINENTAL ENGINES LTD. 4 COULD NOT CONTROVERT THE FACTUAL FINDING OF THE LD. CIT(A) AND HENCE THE SAME IS UPHELD. HENCE THESE TWO GROUND NOS. 3 & 4 ARE DIS MISSED. 8. IN THE RESULT APPEAL OF THE REVENUE IS DISMISSED. ITA NO. 4208/DEL/13 IS THE REVENUE APPEAL FOR THE A SSTT. YEAR 2006-07. THE GROUNDS ARE AS UNDER :- 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE THE CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS. 15 94 813/- MADE BY TH E ASSESSING OFFICER ON ACCOUNT OF DISALLOWANCE OF INTEREST ON ACCOUNT OF I NTEREST FREE LOAN OF RS. 2.64 CRORE ADVANCED TO ITS SUBSIDIARY COMPANY. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE THE CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS. 20 37 678/- MADE BY TH E AO ON ACCOUNT OF DISALLOWANCE OF DEDUCTION U/S 10B OF THE INCOME TAX ACT 1961 ON MISCELLANEOUS INCOME EARNED BY THE ASSESSEE FROM SA LE OF SCRAP 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE THE CIT(A) HAS ERRED IN HOLDING THE MISCELLANEOUS INCOME EARNED FROM SALE O F SCRAP AS MAIN BUSINESS ACTIVITY. 9. THE FIRST ISSUE IS REGARDING THE DELETIO N OF ADDITION OF RS. 15 94 813/- BY THE LD. CIT(A) ON ACCOUNT OF DISALLOWANCE OF INTEREST ON INTEREST FREE LOAN OF RS. 2.64 CRORES ADVANCED TO A SUBSIDIARY COMPANY. THE FIRST APPELLATE AUTHORITY HAS GIVEN A FINDING THAT THE AO WAS FACTUALLY WRONG IN HOLDING THAT THE ASSESSEE HAD GIVEN INTEREST FREE ADVANCE TO ITS SUBSIDIARY M/S. INTER MOTOR B V HOLLAND EUROPE. 10. THE FACTUAL POSITION IS THAT THE ASSESSEE HA D PURCHASED SHARES OF A SUBSIDIARY COMPANY FOR THE PURPOSE OF HAVING CONTROL OVER IT. THE AMOUNT IN QUESTION IS INVESTMENT MADE AND NOT A LOAN ADVANCED. AS THERE I S NO INTEREST FREE LOAN GIVEN WE UPHOLD THE FINDINGS IN PARA 5.2 OF THE CIT(A) ORDER AND DISMISS GROUND NO. 1 OF THE REVENUE. ITA NOS. 4207 4208/DEL/2013 AYS 2008-09 2006-07 DCIT VS. CONTINENTAL ENGINES LTD. 5 11. GROUND NO. 2 IS ON THE DISALLOWANCE OF DEDUC TION U/S 10B OF MISCELLANEOUS INCOME. THE MISCELLANEOUS INCOME IN QUESTION IS EAR NED FROM SALE OF SCRAP. THE INCOME FROM THESE ITEMS HAS BEEN ASSESSED UNDER THE HEAD INCOME FROM BUSINESS PROFESSION. UNDER THESE CIRCUMSTANCES THERE CAN B E NO DISALLOWANCE BY APPLYING THE PROPOSITION LAID DOWN BY THE SPECIAL BENCH OF T HE TRIBUNAL IN THE CASE OF MARAL OVERSEAS LTD. VS. ACIT ITA NOS. 777 & 999 (IND) OF 2004 & 295 & 356 (IND) OF 2006 DATED 28.3.2012 (SB). FOR THE REASONS GIVEN WH ILE DISMISSING REVENUES APPEAL GROUND NO. 3 & 4 FOR THE ASSTT. YEAR 2008-09 GROUN D OF THE REVENUE IS DISMISSED. 12. GROUND NO. 3 IS AN EXTENSION OF GROUND NO. 2 AND REQUIRES NO ADJUDICATION. GROUND NO. 4 & 5 ARE GENERAL IN NATURE. 13. IN THE RESULT BOTH THE APPEALS OF THE REV ENUE ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 20 TH NOVEMBER 2014. SD/- SD/- (C.M.GARG) (J.SUDHAKAR REDDY) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: THE 20 TH NOVEMBER 2014 *VEENA COPY OF THE ORDER FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR 6. GUARD FILE BY ORDER DEPUTY REGISTRAR