DCIT (OSD) CIR 3(1), MUMBAI v. HIKAL LTD, MUMBAI

ITA 45/MUM/2011 | 2001-2002
Pronouncement Date: 19-07-2013 | Result: Partly Allowed

Appeal Details

RSA Number 4519914 RSA 2011
Assessee PAN AAACH0383A
Bench Mumbai
Appeal Number ITA 45/MUM/2011
Duration Of Justice 2 year(s) 6 month(s) 15 day(s)
Appellant DCIT (OSD) CIR 3(1), MUMBAI
Respondent HIKAL LTD, MUMBAI
Appeal Type Income Tax Appeal
Pronouncement Date 19-07-2013
Appeal Filed By Department
Order Result Partly Allowed
Bench Allotted H
Tribunal Order Date 19-07-2013
Date Of Final Hearing 03-07-2013
Next Hearing Date 03-07-2013
Assessment Year 2001-2002
Appeal Filed On 04-01-2011
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH H MUMBAI BEFORE SHRI P.M. JAGTAP ACCOUNTANT MEMBER AND DR. S.T.M. PAVALAN JUDICIAL MEMBER ITA NO. 45/MUM/2011 ASSESSMENT YEAR: 2001-02 DCIT (OSD) CIR 3(1) R. NO. 609 AAYAKAR BHAVAN MUMBAI-400 020 VS. M/S. HIKAL LTD. 6 NAWAB BUILDING 327 D.N. ROAD FORT MUMBAI- 400 001 PAN: AAACH 0383 A (APPELLANT) (RESPONDENT) REVENUE BY : SHRI AJAI ASSESSEE BY : SHRI SANJAY PARIKH DATE OF HEARING : 03.07.2013 DATE OF PRONOUNCEMENT : 19.07.2013 O R D E R PER DR. S.T.M. PAVALAN JM: THIS APPEAL FILED BY THE REVENUE IS DIRECTED AGAIN ST THE ORDER OF THE LD.CIT(A) -7 MUMBAI DATED 18.10.2010 FOR THE ASSES SMENT YEAR 2001-02. 2. APROPOS GROUND NO 1 REGARDING THE DISALLOWANCE O F RS.3 01 000/- MADE BY THE AO AND THE SAME DELETED BY THE LD.CIT(A) THE R ELEVANT FACTS ARE THAT DURING THE YEAR UNDER CONSIDERATION THE ASSESSEE COMPANY HAD PAID RS.3 01 000/- TO HIRE MATH DESIGN AND VARLUL FOR DEVELOPING LOGO OF THE C OMPANY AND CLAIMED THE SAME AS REVENUE EXPENDITURE. HOWEVER IN THE ASSESSMENT FRA MED U/S 143(3) THE AO DISALLOWED THE EXPENDITURE AND ADDED THE SAME TO TH E TOTAL INCOME OF THE ASSESSEE TREATING THE SAME AS CAPITAL IN NATURE AS THE LOGO DEVELOPED FOR THE COMPANY GIVES BENEFIT OF AN ENDURING NATURE. ON APPEAL THE LD.CI T(A) DELETED THE IMPUGNED ADDITION AND ALLOWED THE CLAIM OF THE ASSESSEE TREA TING THE SAID AMOUNT AS REVENUE EXPENDITURE. AGGRIEVED BY THE IMPUGNED DECISION TH E REVENUE HAS RAISED THIS GROUND IN THE APPEAL BEFORE US. ITA NO. 45/MUM/2011 M/S. HIKAL LTD. ASSESSMENT YEAR: 2001-02 2 2.1 HAVING HEARD BOTH THE SIDES AND PERUSED THE MAT ERIAL ON RECORD IT IS OBSERVED THAT THE ASSESSEE COMPANY IS IN EXISTENCE SINCE 1991 AND HAS ALREADY LOGO IN PLACE. THE ASSESSEE HAS PAID THE CHARGES TO THE CONSULTANTS ONLY FOR MODIFICATION OF THE EXISTING LOGO WHICH IN OUR VIEW HAS NOT RE SULTED IN THE CREATION OF ANY NEW CAPITAL ASSET. IN VIEW OF THAT MATTER WE DO NOT FI ND ANY INFIRMITY IN THE DECISION OF THE LD.CIT(A) TREATING THE SAID EXPENDITURE AS REVE NUE IN NATURE AND THUS THE SAME IS UPHELD. GROUND NO. 1 IS DISMISSED. 3. GROUND NO.2 PERTAINS TO THE DISALLOWANCE OF RS.1 5 75 790/- MADE BY THE AO AS AGAINST THE DEDUCTION CLAIMED BY THE ASSESSEE U /S 10B AND THE SAME ALLOWED BY THE LD.CIT(A). 3.1 THE RELEVANT FACTS ARE THAT THE ASSESSEES COMP ANY TALOJA UNIT IS 100% EXPORT ORIENTED UNIT ELIGIBLE TO REBATES AND SET-OF F FROM THE STATE GOVERNMENT OUT OF PURCHASE TAX PAID ON PURCHASE FOR THE PURPOSE OF MA NUFACTURING IN THE EXPORT ORIENTED UNIT. WHILE CLAIMING THE DEDUCTION OF SALE TAX PAID ON RAW MATERIAL U/S 10B THE ASSESSEE INCLUDED A SUM OF RS.15 75 790/- WHICH IT RECEIVED AS INTEREST ON DELAYED REFUND FROM THE STATE GOVERNMENT. ACCORDING TO THE ASSESSEE THE INTEREST EARNED ON DELAYED STATE GOVERNMENT DUES AS INTEREST IS AN INCOME DERIVED FROM THE INDUSTRIAL UNDERTAKING ELIGIBLE FOR DEDUCT ION U/S 10B OF THE I.T. ACT. HOWEVER IN THE ASSESSMENT FRAMED U/S 143(3) THE A O HAD DISALLOWED THE CLAIM OF THE ASSESSEE AS THE INCOME ON ACCOUNT OF INTEREST W AS NOT DERIVED FROM EXPORT OF ARTICLE OR THING OR COMPUTER SOFTWARE AS ENVISAGED U/S 10B AND THEREBY REDUCED THE SAME FROM THE PROFIT OF THE UNIT FOR THE PURPOSE OF CALCULATING THE DEDUCTION U/S 10B. 3.2 ON APPEAL THE LD.CIT(A) ALLOWED THE CLAIM OF T HE ASSESSEE ON THE REASON THAT INTEREST ON SALES TAX REFUND WAS A PART OF INC OME DERIVED FROM EXPORT ORIENTED UNDERTAKING WHICH WAS EARNED IN THE NORMAL COURSE OF BUSINESS AND THE SAME ELIGIBLE FOR CALCULATING DEDUCTION U/S 10B OF THE A CT. AGGRIEVED BY THE IMPUGNED DECISION THE REVENUE HAS RAISED THIS GROUND IN THE APPEAL BEFORE US. 3.3 HAVING HEARD BOTH THE SIDES AND PERUSED THE MAT ERIAL ON RECORD IT IS NOTED THAT A SIMILAR ISSUE HAS EARLIER BEEN DECIDED BY TH E ITAT IN THE ASSESSEES OWN CASE ITA NO. 45/MUM/2011 M/S. HIKAL LTD. ASSESSMENT YEAR: 2001-02 3 FOR THE AYS 2003-04 AND 2004-05 IN ITA NOS 1039 & 1 040/MUM/2007. THE ITAT IN THE SAID DECISIONS WHILE RELYING ON THE JUDGMENT O F THE HONBLE SUPREME COURT IN THE CASE OF LIBERTY INDIA VS. CIT [317 ITR 218 (SC) ] HAS HELD THAT SALES TAX REFUND IS DIFFERENT FROM INTEREST ON SALES TAX REFUND AND THEREBY DISALLOWED THE CLAIM OF THE ASSESSEE. CONSIDERING THE SAID DECISION OF THE ITAT WE ARE OF THE VIEW THAT THE LD.CIT(A) IS NOT JUSTIFIED IN HOLDING THE IMPUGNED RECEIPT OF INTEREST ON DELAYED REFUND IS ELIGIBLE TO BE INCLUDED IN THE PROFIT FOR THE PURPOSE OF CALCULATING THE DEDUCTION U/S 10B OF THE ACT. ACCORDINGLY WE SET A SIDE THE DECISION OF THE LD.CIT(A) ON THIS COUNT AND THE ORDER OF THE AO IS RESTORED. GROUND NO. 2 IS ALLOWED. 4. GROUND NO.3 RELATES TO DISALLOWANCE OF DEDUCTION MADE BY THE AO AS REGARDS THE RECEIPT OF INSURANCE CLAIM OF RS.23 67 044/- AN D THE SAME ALLOWED BY THE LD.CIT(A). 4.1 THE RELEVANT FACTS ARE THAT THE ASSESSEE COMPAN Y HAD RECEIVED CLAIM FROM THE INSURANCE COMPANY TOWARDS THE POLICY TAKEN ON ITS B USINESS ASSETS. THE ASSESSEE HAD CLAIMED THE INSURANCE RECEIPT OF RS.23 67 044/- AS DEDUCTION EXEMPT U/S 10B OF THE INCOME TAX ACT. ACCORDING TO THE ASSESSEE THE SAID RECEIPT WAS DIRECTLY INCIDENTAL TO CARRYING ON BUSINESS OF MANUFACTURING OF GOODS AND ELIGIBLE FOR EXEMPTION U/S 10B OF THE ACT. HOWEVER IN THE ASSES SMENT FRAMED U/S 143(3) THE AO DISALLOWED THE SAID CLAIM OF THE ASSESSEE AS THE IMPUGNED RECEIPT WAS NOT RECEIVED FROM THE EXPORT OF ARTICLE OR THING OR COM PUTER SOFTWARE AS ENVISAGED U/S 10B AND THEREBY REDUCED THE SAME FROM THE TOTAL INC OME FOR THE PURPOSE OF CALCULATING THE DEDUCTION U/S 10B OF THE ACT. 4.2 ON APPEAL THE LD.CIT(A) BY FOLLOWING HIS EARL IER ORDER FOR THE ASSESSMENT YEAR 2003-04 ALLOWED THE CLAIM OF THE ASSESSEE AS THE AMOUNT RECEIVED ON ACCOUNT OF MACHINERY BREAK DOWN TOWARDS INSURANCE CLAIM WER E SORT OF REIMBURSEMENT EXPENSES INCURRED BY THE ASSESSEE AND GOES TO REDUC E THE COST OF PRODUCTION WHICH OTHERWISE WOULD HAVE BEEN DEBITED TO P & L ACCOUNT RESULTING IN REDUCTION OF INCOME. AGGRIEVED BY THE IMPUGNED DECISION THE REV ENUE HAS RAISED THIS GROUND IN THE APPEAL BEFORE US. ITA NO. 45/MUM/2011 M/S. HIKAL LTD. ASSESSMENT YEAR: 2001-02 4 4.3 HAVING HEARD BOTH THE SIDES AND PERUSED THE MAT ERIAL ON RECORD IT IS NOTED THAT THE REVENUE HAS NOT PREFERRED ANY APPEAL AGAIN ST THE ORDER OF THE LD.CIT(A) ON THE ISSUE OF ALLOWABILITY OF THE DEDUCTION IN RESPE CT OF A SIMILAR INSURANCE CLAIM FOR THE ASSESSMENT YEAR 2003-04. THE DECISION OF THE L D.CIT(A) GIVING RELIEF TO THE ASSESSEE ON A SIMILAR ISSUE IN THE AY 2003-04 THUS HAS BEEN ACCEPTED BY THE DEPARTMENT AND THIS BEING SO WE FIND NO JUSTIFIABL E REASON TO INTERFERE WITH THE IMPUGNED ORDER OF THE LD.CIT(A) DECIDING A SIMILAR ISSUE IN FAVOUR OF THE ASSESSEE FOLLOWING HIS DECISION RENDERED IN AY 2003-04 WHICH HAS BEEN ACCEPTED BY THE DEPARTMENT. THUS GROUND NO. 3 IS DISMISSED. 5. GROUND NO. 4 RELATES TO THE DISALLOWANCE OF DEDU CTION MADE BY THE AO AS REGARDS THE INTEREST RECEIVED ON DEPOSIT FOR L/C & BANK GUARANTEE AND THE SAME ALLOWED BY THE LD.CIT(A). 5.1 THE RELEVANT FACTS ARE THAT DURING THE YEAR UND ER CONSIDERATION THE ASSESSEE COMPANY HAD RECEIVED RS.44 13 717/- AS INTEREST ON DEPOSIT FOR L/C AND BANK GUARANTEE. THE ASSESSEE HAD CLAIMED THE SAID INTERE ST AS DEDUCTION EXEMPT U/S 10B. HOWEVER IN THE ASSESSMENT FRAMED U/S 143(3) THE A O DISALLOWED THE CLAIM OF THE ASSESSEE AS THE SAID INCOME WAS NOT DERIVED FROM EX PORT OF ARTICLE OR THINGS OR COMPUTER SOFTWARE AS ENVISAGED U/S 10B AND THEREBY REDUCED THE SAME FROM THE TOTAL INCOME FOR THE PURPOSE OF CALCULATING DEDUCTI ON U/S 10B. 5.2 ON APPEAL THE LD.CIT(A) ALLOWED THE CLAIM OF T HE ASSESSEE BY FOLLOWING HIS EARLIER ORDERS IN THE ASSESSEES OWN CASE FOR THE A YS 1999-2000 2003-04 AND 2004- 05 AS INTEREST DERIVED FROM DEPOSITS GIVEN ON MARGI N MONEY FOR OBTAINING BANK GUARANTEE CONSTITUTE BUSINESS INCOME OF THE ASSESSE ES EXPORT UNDERTAKING ELIGIBLE FOR EXEMPTION U/S 10B. AGGRIEVED BY THE IMPUGNED DE CISION THE REVENUE HAS RAISED THIS GROUND IN THE APPEAL BEFORE US. 5.3 AT THE OUTSET IT HAS BEEN POINTED OUT THAT THE ITAT IN THE ASSESSEES OWN CASE IN ITA NOS.1039 & 1040/MUM/2007 FOR THE AYS 20 03-04 & 2004-05 HAS HELD THAT INTEREST RECEIVED ON MARGIN MONEY KEPT IN THE BANK FOR THE PURPOSE OF MAINTAINING BANK GUARANTEE ARE ELIGIBLE FOR DEDUCTI ON BECAUSE SUCH INTEREST HAS TO BE TREATED AS INCOME EARNED FROM BUSINESS AND THERE BY ALLOWED THE CLAIM OF THE ITA NO. 45/MUM/2011 M/S. HIKAL LTD. ASSESSMENT YEAR: 2001-02 5 ASSESSEE WHILE DISMISSING THE APPEAL OF THE REVENUE . IN THE ABSENCE OF ANY DIFFERENTIATING FACTS BROUGHT BY THE REVENUE AS REG ARDS THE FACTS FOR THE YEAR UNDER CONSIDERATION WE FOLLOWING THE SAID ORDER OF THE ITAT DECIDE THIS GROUND IN FAVOUR OF THE ASSESSEE BY UPHOLDING THE ORDER OF THE LD.CI T(A) ON THIS COUNT. GROUND NO. 4 IS DISMISSED. 6. IN THE RESULT THE APPEAL FILED BY THE REVENUE I S PARTLY ALLOWED . ORDER PRONOUNCED IN THE OPEN COURT ON THIS 19 TH DAY OF JULY 2013. SD/- SD/- (P.M. JAGTAP) (DR. S.T.M. PAVALAN) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI DATED: 19.07.2013. *SRIVASTAVA COPY TO: THE APPELLANT THE RESPONDENT THE CIT CONCERNED MUMBAI THE CIT (A) CONCERNED MUMBAI THE DR H BENCH //TRUE COPY// [ BY ORDER DY/ASSTT. REGISTRAR ITAT MUMBAI.