ITO 1(1)(4), MUMBAI v. GODAVARI CORPORATION LTD, MUMBAI

ITA 5290/MUM/2010 | 2006-2007
Pronouncement Date: 23-11-2011 | Result: Dismissed

Appeal Details

RSA Number 529019914 RSA 2010
Assessee PAN AAACG1850D
Bench Mumbai
Appeal Number ITA 5290/MUM/2010
Duration Of Justice 1 year(s) 4 month(s) 25 day(s)
Appellant ITO 1(1)(4), MUMBAI
Respondent GODAVARI CORPORATION LTD, MUMBAI
Appeal Type Income Tax Appeal
Pronouncement Date 23-11-2011
Appeal Filed By Department
Order Result Dismissed
Bench Allotted G
Tribunal Order Date 23-11-2011
Date Of Final Hearing 02-11-2011
Next Hearing Date 02-11-2011
Assessment Year 2006-2007
Appeal Filed On 28-06-2010
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL G BENCH MUMBAI BEFORE SHRI J. SUDHAKAR REDDY ACCOUNTANT MEMBER A ND SHRI V. DURGA RAO JUDICIAL MEMBER ITA NO. 5289 AND 5290/MUM./2010 (A.YS : 2003-04 AND 2006-07 ) INCOME TAX OFFICER-1(1)(4) ROOM NO.579 AAYAKAR BHAVAN 101 M.K. ROAD MUMBAI 400 020 .. APPELLANT V/S M/S. GODVARI CORPORATION LTD. INDUSTRY HOUSE 159 CHURCHGATE MUMBAI 400 020 PAN AAACG1850D .... RESPONDENT REVENUE BY : MR. A.K. NAYAK ASSESSEE BY : MR. VIJAY KOTHARI DATE OF HEARING 02.11.2011 DATE OF ORDER 23.11.2011 O R D E R PER J. SUDHAKAR REDDY A.M. THESE APPEALS FILED BY THE REVENUE ARE DIRECTED A GAINST THE IMPUGNED SEPARATE ORDERS DATED 26 TH FEBRUARY 2010 PASSED BY THE COMMISSIONER (APPEALS)-I MUMBAI FOR ASSESSMENT YEARS 2003-04 A ND 2006-07. 2. THE ASSESSEE IS A COMPANY AND IS ENGAGED IN THE BUS INESS OF POWER GENERATION AS WELL AS TRADING IN SHARES. THE ADDITI ON IN DISPUTE FOR ASSESSMENT YEAR 2003-04 IS DELETION OF ADDITION BY THE COMMISSIONER M/S. GODVARI CORPORATION LTD. ITA NO. 5289/MUM./2010 ITA NO. 5290/MUM./2010 2 (APPEALS) BEING SALES TAX LIABILITY. THE COMMON GRO UND FOR BOTH THE ASSESSMENT YEARS IN APPEAL IS THE EXPENDITURE ON AL IBAUGH PROPERTY. 3. WE FIRST TAKE UP GROUND NO.1 FOR ASSESSMENT YEAR 2 003-04 WHICH IS AGAINST THE DIRECTION OF THE COMMISSIONER (APPEALS) TO THE ASSESSING OFFICER TO EXCLUDE AN AMOUNT OF ` 38 97 994 FROM THE INCOME OF THE ASSESSEE AS IT IS SALES TAX DEFERMENT BENEFIT WHICH IS AVAILED BY M/S. DAGGER FOREST TOOLS LTD. THE FACTS AS BROUGHT OUT BY THE COMMISSIONER (APPEALS) IN HIS IMPUGNED ORDER VIDE PARAS-4.3 TO 4.7 ARE REPRODUCE D BELOW FOR READY REFERENCE:- 4.3 THE BRIEF FACTS RELATING TO THIS GROUND ARE TH AT THE APPELLANT HAD SETUP AND COMMISSIONED WIND MILL IN A.Y.2002-03. TH E SAID WIND MILL WAS ERECTED AT VAREKARWADI DISIRICT SATARA. AS PER THE POLICY OF GOVERNMENT OF MAHARASHTRA THE POWER GENERATED BY T HE WIND MILL WAS EITHER - (A) TO BE SOLD TO M.S.E.B AT THE RATE PRESCRIBED IN THE AGREEMENT; OR (B) PERMITT D TO BE USED FOR CAPTIVE USE; OR (C) SOLD TO A THIRD PARTY THE APPELLANT UNDER AN AGREEMENT WITH MSEB AND DAG GER FORST TOOLS LTD. EXERCISED THE OPTION OF SELLING THE POWER TO M /S. DAGGER FORST TOOLS LTD. 4.4 AS PER THE POLICY OF THE GOVERNMENT OF MAHARASH TRA CERTAIN ADDITIONAL BENEFITS WERE AVAILED TO THE APPELLANT C OMPANY FOR SETTING UP AND COMMISSIONING OF WIND MILL. ONE OF THE BENEF ITS CONFERRED WAS SALES TAX DEFERMENT BENEFIT WHERE UNDER THE WIND MILL/OR ITS NOMINEE BECAME ENTITLED TO SALES TAX DEFERMENT OF RS.50 LAC S PER ANNUM FOR SIX YEARS. UNDER THIS SCHEME THE APPELLANT COMPANY PER MITTED M/S. DAGGER FORST TOOLS LTD. TO AVAIL OF THE SALES TAX D EFERMENT BENEFITS. UNDER THE SALES TAX DEFERRAL SCHEME THE ELIGIBLE U NITS ARE PERMITTED TO COLLECT SALES TAX AND RETAIN SUCH TAX FOR A PRESCRI BED PERIOD. AFTER THE PRESCRIBED PERIOD IS OVER THE SALES TAX IS TO BE PA ID TO GOVERNMENT EITHER IN LUMP SUM OR IN INSTALMENTS. 4.5 DURING THE PREVIOUS YEAR RELATING TO A.Y. 2003- 04 M/S. DAGGER FORST TOOLS LTD. AVAILED SALES TAX DEFERMENT BENEFI TS TO THE EXTENT OF RS.38 97 994/-. AS PER THE SALES TAX DEFERRAL SCHEM E. DAGGER FORST TOOLS LTD. BECAME ENTITLED TO COLLECT SALES TAX AND RETAIN SUCH LAX FOR A PRESCRIBED PERIOD. AFTER THE PERIOD GOT OVER DAGGE R FORST TOOLS LTD WAS REQUIRED TO PAY THE SALES TAX TO THE GOVERNMENT . M/S. GODVARI CORPORATION LTD. ITA NO. 5289/MUM./2010 ITA NO. 5290/MUM./2010 3 4.6 AS STATED EARLIER THE APPELLANT HAS CREDITED R S.82 19 426/- AS INCOME FROM WIND MILL IN ITS PROFIT & LOSS ACCOUNT THIS AMOUNT WAS COMPRISED OF RS.43 21 432/- BEING THE AMOUNT OF ELE CTRICITY GENERATION CHARGES PAID BY M.S.E.B AND RS.38 97 994 /- BEING THE AMOUNT OF SALES TAX INCENTIVES AVAILED BY DAGGER FO RST TOOLS LTD. 4.7 THE APPELLANT DURING THE COURSE OF ASSESSMENT P ROCEEDING VIDE LETTER DATED 11.3.2005 CLAIMED THAT THE AMOUNT OF R S.38 97 994/- WAS WRONGLY CREDITED TO INCOME FROM WIND MILL AND ACCOR DINGLY REQUESTED THAT THE SAID AMOUNT MIGHT NOT BE INCLUDED WHILE CO MPUTING THE TOTAL INCOME OF THE APPELLANT. THE A.O REJECTED THE REQUE ST OF THE APPELLANT TO REVERSE THE ENTRY OF SALES TAX LIABILITY OF RS.3 8 97 994/- BY OBSERVING AS UNDER: THE CONTENTIONS O/THE ASSESSEE ARE CONSIDERED IN T HE LINE OF ABOVE CITED LETTERS. IN THE LETTER DATED 17.3.20 05 THE ASSESSEE HAS ADMITTED THAT UNDER THE SALES TAX BENE FITS FOR THE POWER GENERATION BUSINESS FROM THE WIND MIL L THE ASSESSEE IS ENTITLED TO RS.50.00 LACS PER ANNUM FOR A PERIOD OF 6 YEARS I.E. 3 CRORES MAXIMUM. THE SAME BENEFIT HAS ALREADY BEEN TRANSFERRED TO M/S. DAGGER FORST TOOLS LID. THEREFORE THE REQUEST OF/HE ASSESSEE TO REVERSE THE ENTRY OF THE SALES TAX LIABILITY OF RR.38 97 99 4/- IS REJECTED. 4. THE COMMISSIONER (APPEALS) HELD THAT THERE IS NO IN COME ARISING TO THE ASSESSEE ON ACCOUNT OF SALES TAX DEFERMENT BENEFIT AVAILED BY M/S. DAGGER FORST TOOLS LTD. AGGRIEVED THE REVENUE IS IN APPEAL BEFORE THE TRIBUNAL. 5. AFTER HEARING RIVAL CONTENTIONS WE ARE UNABLE TO A PPRECIATE THE CLAIM MADE BY THE ASSESSEE. IN THE PROFIT & LOSS ACCOUNT THE ASSESSEE HAS SHOWN CERTAIN FIGURES AS INCOME FROM WINDMILL. IT IS NOT CLEAR AS TO WHAT ARE THE COMPONENTS OF THIS FIGURE OF INCOME. THE ASSESSEE I S NOT ABLE TO DEMONSTRATE THAT THE SALES TAX COLLECTED BY IT FORM ED A PART OF TOTAL FIGURE DISCLOSED AS INCOME. SALES TAX DEFERMENT BENEFIT A S WE UNDERSTAND IS GRANTING OF TIME IN PAYMENT OF SALES TAX. IT IS AVA ILABLE ONLY IF SALES TAX IS COLLECTED AND PAYMENT IS DUE TO THE GOVERNMENT. IN THE PRESENT CASE THE FIGURE IN THE PROFIT & LOSS ACCOUNT UNDER THE HEAD INCOME SUGGESTS THAT SALES TAX HAS BEEN INCLUDED. UNDER THOSE CIRCUMSTAN CES WE DO NOT UNDERSTAND AS TO HOW THE ASSESSEE CLAIMS REDUCTION IN THE AMOUNT OF INCOME ITSELF. ONCE THE AMOUNT IS CREDITED AS INCOME SUFF ICIENT MATERIAL HAS TO BE M/S. GODVARI CORPORATION LTD. ITA NO. 5289/MUM./2010 ITA NO. 5290/MUM./2010 4 PRODUCED TO SUPPORT THE CLAIM THAT THIS WAS THE WRO NG ENTRY OR THAT IN FACT NOT AN INCOME AT ALL. AS THE REQUIRED MATERIAL FOR ADJUDICATION IS NOT ON RECORD WE ARE OF THE CONSIDERED OPINION THAT THE I SSUE NEEDS TO BE RESTORED BACK TO THE FILE OF ASSESSING OFFICER FOR DENOVO AD JUDICATION FOR CONSIDERING THE CLAIM THE ORDERS PASSED BY THE GOVERNMENT OF M AHARASHTRA ENABLING TRANSFER OF BENEFITS TO M/S. DAGGER FORST TOOLS LTD . THE BREAK-UP OF AMOUNT SHOWN UNDER THE HEAD INCOME FROM WINDMILL ETC. IN VIEW OF THE ABOVE WE SET ASIDE THE IMPUGNED ORDER PASSED BY THE COMMISSI ONER (APPEALS) AND RESTORE THE ISSUE BACK TO THE FILE OF ASSESSING OFF ICER FOR DENOVO ADJUDICATION. THIS GROUND IS THUS ALLOWED FOR STATISTICAL PURPO SES. 6. GROUND NO.2 FOR ASSESSMENT YEAR 2003-04 AND GROUN D NO.1 FOR ASSESSMENT YEAR 2006-07 ARE COMMON EXCEPT VARIATI ON IN FIGURES IS ON THE ISSUE OF DISALLOWANCE ON ACCOUNT OF EXPENDITURE INC URRED ON ALIBAUG PROPERTY. 7. THE FACTS AS BROUGHT OUT IN THE IMPUGNED ORDER PAS SED BY THE COMMISSIONER (APPEALS) VIDE PARA-5.3 IS REPRODUCED BELOW FOR READY REFERENCE:- 5.3 SCIMITAR INVESTMENT & TRADING CO. PVT. LTD. UN DER AN AGREEMENT DATED 30.3.2001 WITH SHRI YASHOVARDHAN BIRLA HAD TA KEN A FARM HOUSE ALONGWITH THE LAND ADJACENT THERETO ON AN ANNUAL R ENT OF RS. 3 00 000/-. UNDER THE AGREEMENT SCIMITAR INVESTMENT & TRADING CO. PVT. LTD. WAS THE CARETAKER OF THE PREMISES. SCIMIT AR INVESTMENT & TRADING CO. PVT. LTD. WAS SUBSEQUENTLY AMALGAMATED WITH THE APPELLANT COMPANY. ACCORDINGLY ALL THE ASSETS LIAB ILITIES ETC. OF SCIMITAR INVESTMENT & TRADING CO. PVT. LTD. GOT MER GED WITH THE APPELLANT COMPANY. 8. THE ASSESSING OFFICER DISALLOWED THE EXPENDITURE IN CURRED BY THE ASSESSEE ON ALIBAUGH PROPERTY ON THE FOLLOWING GROU NDS:- 5.4 DURING THE COURSE OF ASSESSMENT PROCEEDINGS TH E A.O. VIDE LETTER DATED 2.1 .2006 CALLED UPON THE APPELLANT TO EXPLAIN AS TO HOW THE EXPENSES WERE WHOLLY AND EXCLUSIVELY INCURRED F OR THE PURPOSES OF APPELLANTS BUSINESS. THE APPELLANT VIDE ITS LETTER DATED 12.1.2006 FURNISHED ITS EXPLANATION. THE EXPLANATION FILED BY THE APPELLANT WAS NOT ACCEPTED BY THE A.O. FOR THE FOLLOWING REASONS: - M/S. GODVARI CORPORATION LTD. ITA NO. 5289/MUM./2010 ITA NO. 5290/MUM./2010 5 A) THE APPELLANT HAS NOT SUBSTANTIATED AS TO HOW POSSE SSION OF FARM HOUSE BENEFITED THE BUSINESS OF THE APPELLANT COMPANY. B) THE AGREEMENT WITH SHRI YASHOVARDHAN BIRLA WAS MERE LY A TAX PLANNING DEVICE. C) THE APPELLANT HAD FAILED TO EXPLAIN IN WHAT CONNECT ION WITH THE BUSINESS OF THE APPELLANT COMPANY THE FARM HOUSE AC COMMODA- TION WAS REQUIRED. THE APPELLANT ALSO DID NOT FURNI SH THE NAMES OF THE GUESTS AND HOW THEY WERE RELATED TO THE DEVE LOPMENT AND PROMOTION OF BUSINESS OF THE COMPANY. D) HAVING REGARD TO THE NATURE OF BUSINESS ACTIVITIES CARRIED ON BY THE APPELLANT (TRADING IN SHARES FINANCE (NBFC) P OWER GENERATION) IT COULD NOT BE SAID THAT THE ARRANGEME NT WAS WHOLLY AND EXCLUSIVELY FOR THE PURPOSES OF APPELLAN TS BUSINESS. 9. THE COMMISSIONER (APPEALS) ACCEPTED THE CONTENTIONS OF THE ASSESSEE THAT THE PREMISES WERE USED FOR THE PURPOSE OF HOLD ING DISCUSSIONS/MEETINGS FOR THE PURPOSE OF BUSINESS. AS THE ASSESSEE HAD EA RNED CERTAIN INCOME FROM SALE OF COCONUT FROM THE TREES IN THE COMPOUND OF A LIBAUGH PROPERTY HE HELD THAT THE ASSESSEE EARNED INCOME AND THUS THE EXPE NDITURE WAS ALLOWABLE. AGGRIEVED THE REVENUE IS IN APPEAL BEFORE THE TRIB UNAL. 10. RIVAL CONTENTIONS HEARD. ON A CAREFUL CONSIDERATION OF THE FACTS AND CIRCUMSTANCES OF THE CASE AND ON PERUSAL OF THE PAP ERS ON RECORD WE FIND THAT THE SCIMITAR INVESTMENT & TRADING CO. PVT. LTD . HAD TAKEN THE PROPERTY IN QUESTION ON RENT FROM SHRI YASHOVARDHAN BIRLA. L ATER THIS COMPANY AMALGAMATED WITH THE ASSESSEE COMPANY. IT IS ALSO N OT IN DISPUTE THAT THE RENT AND OTHER EXPENDITURE INCURRED ON ALIBAUG PROP ERTY HAS BEEN ALLOWED AS BUSINESS DEDUCTION IN THE ASSESSMENT ORDER PASSED I N CASE OF SCIMITAR INVESTMENT & TRADING CO. PVT. LTD. THE COMMISSIONER (APPEALS) HAS GIVEN A FINDING OF FACT THAT IT IS EVIDENT THAT VARIOUS EXP ENDITURES HAVE BEEN INCURRED ON THE SAID PREMISES. HE FURTHER HELD THAT THE ASSE SSEE HAS FILED EVIDENCE TO SHOW THAT IT HAD PAID SUBSTANTIAL AMOUNT FOR THE PU RCHASE OF PROPERTY IN ALIBAUG AND THAT THE SAME WAS NOT REGISTERED IN ASS ESSEES NAME AND THE ASSESSEE WAS REQUIRED TO VISIT ALIBAUG FOR THE PURP OSE OF REGISTRATION ETC. OF THE PROPERTY PURCHASED. AGAINST THESE FINDINGS THE LEARNED DEPARTMENTAL M/S. GODVARI CORPORATION LTD. ITA NO. 5289/MUM./2010 ITA NO. 5290/MUM./2010 6 REPRESENTATIVE COULD NOT ADDUCE ANY EVIDENCE TO SHO W THAT THIS PROPERTY WAS USED FOR NON-BUSINESS PURPOSE. AS THE ASSESSEE IS A COMPANY THE QUESTION OF EXPENDITURE BEING INCURRED FOR PERSONAL PURPOSE DOES NOT ARISE. PROVISIONS OF SECTION 37(3) PROVIDING DISALLOWANCE OF EXPENDITURE INCURRED BY THE ASSESSEE ON THE MAINTENANCE OF ACCOMMODATION IN THE NATURE OF GUEST HOUSE WAS OMITTED BY THE FINANCE ACT 1997. HENCE IN THE SUBSEQUENT YEARS THE EXPENDITURE INCURRED BY THE ASSESSEE ON THE MAINTENANCE OF GUEST HOUSE IS ALLOWABLE DEDUCTION UNDER SECTION 37(1) OF THE ACT. CONSEQUENTLY WE UPHOLD THE FINDINGS OF THE COMMISSIONER (APPEALS ) AND DISMISS GROUND NO.2 FOR ASSESSMENT YEAR 2003-04 AND GROUND NO.1 FO R ASSESSMENT YEAR 2006-07. 11. GROUND NO.3 FOR ASSESSMENT YEAR 2003-04 IS ON THE ISSUE OF DELETION OF DISALLOWANCE OF ` 1 57 960 ON ACCOUNT OF EXPENDITURE INCURRED ON ALI BAUGH PROPERTY. 12. AFTER HEARING BOTH THE PARTIES WE FIND THAT THE AS SESSEE OWNED A SPEED BOAT IN THE NAME AND STYLE OF PRINCES SHLOKA WHICH IS USED FOR TRANSPORTING PERSONS TO THE ALIBAUG PROPERTY. THE A SSESSEE ALSO EARNED INCOME BY HIRING PRINCES SHLOKA TO THE TUNE OF ` 26 000 FOR ASSESSMENT YEAR 2003-04. THE ASSESSING OFFICER ALLOWED DEPRECI ATION ON THE SPEED BOAT BUT RESTRICTED THE CLAIM OF THE ASSESSEE ON EXPENDI TURE INCURRED ON SALARY AND LABOUR CHARGES TO THE TUNE OF ` 26 000 I.E. THE INCOME EARNED BY THE ASSESSEE AS AGAINST THE CLAIM OF ` 2 01 960 RESULTING IN DISALLOWANCE OF SALARY AND LABOUR CHARGES OF ` 1 57 960. THE COMMISSIONER (APPEALS) ALLOWED THE CLAIM MADE BY THE ASSESSEE. CONSISTENT WITH THE VIEW TAKEN BY US VIDE PARA-10 ABOVE THAT THE EXPENDITURE INCURRED ON THE MAINTENANCE OF GUEST HOUSE IS TO BE ALLOWED WE UPHOLD THE FINDING S OF THE COMMISSIONER (APPEALS) THAT THE EXPENDITURE INCURRED TOWARDS PAY MENTS SALARY AND LABOUR CHARGES FOR THE SPEED BOAT HAVE TO BE ALLOWED. THE CLAIM OF EXPENDITURE CANNOT BE RESTRICTED TO THE INCOME EARNED. THIS GRO UND IS THUS DISMISSED. M/S. GODVARI CORPORATION LTD. ITA NO. 5289/MUM./2010 ITA NO. 5290/MUM./2010 7 13. GROUND NO.2 FOR ASSESSMENT YEAR 2006-07 IS ON THE ISSUE OF DELETION OF DISALLOWANCE OF ` 3 00 000 ON ACCOUNT OF EXPENDITURE INCURRED ON ALIBAUGH PROPERTY. 14. AFTER HEARING BOTH THE PARTIES AND IN VIEW OF OUR F INDINGS IN GROUND NO.2 FOR ASSESSMENT YEAR 2003-04 VIDE PARA-10 ABO VE THAT THE EXPENDITURE INCURRED ON GUEST HOUSE IS TO BE ALLOWED WE HOLD T HAT THE REPAIRS AND MAINTENANCE EXPENDITURE INCURRED ON LEASED PREMISES I.E. ALIBAUGH PROPERTY IS TO BE ALLOWED. WE ORDER ACCORDINGLY. 15. IN THE RESULT APPEAL FOR ASSESSMENT YEAR 2003-04 I S PARTLY ALLOWED AND APPEAL FOR ASSESSMENT YEAR 2006-07 IS DISMISSED . ORDER PRONOUNCED IN THE OPEN COURT ON 23 RD NOVEMBER 2011 SD/- V. DURGA RAO JUDICIAL MEMBER SD/- J. SUDHAKAR REDDY ACCOUNTANT MEMBER MUMBAI DATED: 23 RD NOVEMBER 2011 COPY TO : (1) THE ASSESSEE; (2) THE RESPONDENT; (3) THE CIT(A) MUMBAI CONCERNED; (4) THE CIT MUMBAI CITY CONCERNED; (5) THE DR G BENCH ITAT MUMBAI. TRUE COPY BY ORDER PRADEEP J. CHOWDHURY ASSISTANT REGISTRAR SR. PRIVATE SECRETARY ITAT MUMBAI BENCHES MUMBAI