WESTRN REFRIGERATION P. LTD, MUMBAI v. DCIT 7(3), MUMBAI

ITA 6167/MUM/2009 | 2005-2006
Pronouncement Date: 27-08-2010 | Result: Partly Allowed

Appeal Details

RSA Number 616719914 RSA 2009
Assessee PAN AAACW0012H
Bench Mumbai
Appeal Number ITA 6167/MUM/2009
Duration Of Justice 9 month(s) 1 day(s)
Appellant WESTRN REFRIGERATION P. LTD, MUMBAI
Respondent DCIT 7(3), MUMBAI
Appeal Type Income Tax Appeal
Pronouncement Date 27-08-2010
Appeal Filed By Assessee
Order Result Partly Allowed
Bench Allotted G
Tribunal Order Date 27-08-2010
Date Of Final Hearing 12-08-2010
Next Hearing Date 12-08-2010
Assessment Year 2005-2006
Appeal Filed On 26-11-2009
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH G : MUMBAI BEFORE SHRI D.K. AGARWAL (JM) AND SHRI A.L. GEHL OT (AM) ITA NO.6167/MUM/2009 ASSESSMENT YEAR : 2005-2006 WESTERN REFRIGERATION PVT. LTD. 7-B PANNALAL SILK MILLS COMPOUND 78 LBS MARG BHANDUP (W) MUMBAI 400 078. ..( APPELLANT ) P.A. NO. (AAACW 0012 H) VS. DY. COMMISSIONER OF INCOME TAX- 7(3) AAYAKAR BHAVAN M.K. ROAD MUMBAI400 020. ..( RESPONDENT ) APPELLANT BY : SHRI V IJAY MEHTA. RESPONDENT BY : SHRI A. K. NAYAK. O R D E R PER D.K. AGARWAL (JM). THIS APPEAL PREFERRED BY THE ASSESSEE IS DIRECTED AGAINST T HE ORDER DATED 26.8.2009 PASSED BY THE LD. CIT(A) FOR TH E ASSESSMENT YEAR 2005-2006. 2. BRIEFLY STATED FACTS OF THE CASE ARE THAT THE ASSESSEE COM PANY IS ENGAGED IN THE BUSINESS OF MANUFACTURE OF REFRIGERATED DISPLAY CABINETS DISPENSORS REFRIGERATION PARTS COFFEE MACHIN ES AND PARTS THEREOF PROVIDING MANAGEMENT SERVICES AND MANUFACTU RE OF COOLERS ITA NO.6167/M/09 AY : 05-06 2 DISPENSORS STABILIZERS SHEET METAL PARTS COFFEE MACHIN ES OVENS AND PARTS THEREOF. IT FILED RETURN DECLARING TOTAL INCOME AT ` 52 61 955/-. HOWEVER THE ASSESSMENT WAS COMPLETED AT AN INCOME OF ` 61 38 970/- VIDE ORDER DATED 12.12.2007 PASSED U/S.143(3) OF THE I NCOME TAX ACT 1961 (THE ACT). ON APPEAL THE LD. CIT(A) WHILE DEL ETING THE DISALLOWANCE OF INTEREST ON LOAN TO RELATIVE OF DIRECTO RS ` 2 61 000/- UPHELD THE OTHER ADDITION/ DISALLOWANCES MADE BY THE A SSESSING OFFICER. 3. BEING AGGRIEVED BY THE ORDER OF THE LD. CIT(A) T HE ASSESSEE IS IN APPEAL BEFORE US. 4. GROUND NO.1 IS AGAINST THE TREATING OF THE INTEREST RECEIVED ON FDR OF ` 5 42 476/- AS INCOME FROM OTHER SOURCES NOT ELIGIBLE FO R DEDUCTION U/S.80IB. 5. AT THE TIME OF HEARING THE LD. COUNSEL FOR THE A SSESSEE FAIRLY SUBMITS THAT THIS ISSUE NOW STANDS COVERED AGAINST THE ASSESSEE AND IN FAVOUR OF THE REVENUE IN LIBERTY INDIA VS. CIT ( 2009) 317 ITR 218(SC) THEREFORE THE ISSUE MAYBE DECIDED ACCORDINGLY W HICH WAS NOT OBJECTED TO BY THE LD. DR. 6. AFTER HEARING THE RIVAL PARTIES AND PERUSING THE M ATERIAL AVAILABLE ON RECORD WE FIND THE FACTS ARE NOT IN DISPUT E INASMUCH AS THE ASSESSING OFFICER HAS TREATED THE INTEREST INCOME TO TH E EXTENT OF ` 5 42 476/- AS INCOME FROM OTHER SOURCES NOT ELIGIBLE FO R DEDUCTION U/S.80 IB(4) OF THE ACT AND THE LD. CIT(A) UPHELD THE VIEW OF THE ASSESSING OFFICER . ITA NO.6167/M/09 AY : 05-06 3 7. IN LIBERTY INDIA SUPRA IT HAS BEEN HELD AND OBSERV ED BY THEIR LORDSHIPS AS UNDER(PLACITUM 15 AT PAGE 233): CONTINUING OUR ANALYSIS OF SECTION 80-IA/80-IB IT MAY BE MENTIONED THAT SUB-SECTION (13) OF SECTION 80-IB PR OVIDES FOR APPLICABILITY OF THE PROVISIONS OF SUB-SECTION (5) AND SUB-SECTIONS (7) TO (12) OF SECTION 80-IA SO FAR A S MAY BE APPLICABLE TO THE ELIGIBLE BUSINESS UNDER SECTI ON 80- IB. THEREFORE AT THE OUTSET WE STATED THAT ONE NE EDS TO READ SECTIONS 80-I 80-IA AND 80-IB AS HAVING A COM MON SCHEME. ON A PERUSAL OF SUB-SECTION (5) OF SECTION 80-IA IT IS NOTICED THAT IT PROVIDES FOR THE MANNER OF COMPUTATION OF PROFITS OF AN ELIGIBLE BUSINESS. ACC ORDINGLY SUCH PROFITS ARE TO BE COMPUTED AS IF SUCH ELIGIBLE BUSINESS IS THE ONLY SOURCE OF INCOME OF THE ASSESS EE. THEREFORE THE DEVICES ADOPTED TO REDUCE OR INFLATE THE PROFITS OF ELIGIBLE BUSINESS HAVE GOT TO BE REJECT ED IN VIEW OF THE OVERRIDING PROVISIONS OF SUB- SECTION (5) OF SECTION 80-IA WHICH ARE ALSO REQUIR ED TO BE READ INTO SECTION 80-IB. (SEE SECTION 80-IB(13)). WE MAY REITERATE THAT SECTIONS 80-I 80-IA AND 80-IB HAVE A COMMON SCHEME AND IF SO READ IT IS CLEAR THAT THE S AID SECTIONS PROVIDE FOR INCENTIVES IN THE FORM OF DEDU CTION(S) WHICH ARE LINKED TO PROFITS AND NOT TO INVESTMENT. ON AN ANALYSIS OF SECTIONS 80-IA AND 80-IB IT BECOMES CLE AR THAT ANY INDUSTRIAL UNDERTAKING WHICH BECOMES ELIGIBLE ON SATISFYING SUB-SECTION (2) WOULD BE ENTITLED TO DE DUCTION UNDER SUB-SECTION (1) ONLY TO THE EXTENT OF PROFITS DERIVED FROM SUCH INDUSTRIAL UNDERTAKING AFTER SPECIFIED DA TE(S). HENCE APART FROM ELIGIBILITY SUB-SECTION(1) PURPOR TS TO RESTRICT THE QUANTUM OF DEDUCTION TO A SPECIFIED PERCENTAGE OF PROFITS. THIS IS THE IMPORTANCE OF T HE WORDS DERIVED FROM INDUSTRIAL UNDERTAKING AS AGAINST P ROFITS ATTRIBUTABLE TO INDUSTRIAL UNDERTAKING. IT HAS BEEN FURTHER HELD (PLACITUM 22 & 24 AT PAGE 235): ITA NO.6167/M/09 AY : 05-06 4 THEREFORE WE ARE OF THE VIEW THAT THE DUTY DRAW BACK DEPB BENEFITS REBATES ETC. CANNOT BE CREDITED AG AINST THE COST OF MANUFACTURE OF GOODS DEBITED IN THE PRO FIT AND LOSS ACCOUNT FOR PURPOSES OF SECTION 80-IA/80-IB AS SUCH REMISSIONS (CREDITS) WOULD CONSTITUTE INDEPENDENT S OURCE OF INCOME BEYOND THE FIRST DEGREE NEXUS BETWEEN PRO FITS AND THE INDUSTRIAL UNDERTAKING. . . . . IN THE CIRCUMSTANCES WE HOLD THAT DUTY DRAWBACK RECEIPT/DEPB BENEFITS DO NOT FORM PART OF THE NET P ROFITS OF ELIGIBLE INDUSTRIAL UNDERTAKING FOR THE PURPOSES OF SECTION 80-I/80-IA/80-IB OF THE 1961 ACT. RESPECTFULLY FOLLOWING THE AUTHORITATIVE PRONOUNCEMENT OF HONBLE APEX COURT WE DECLINE TO INTERFERE WITH ORDER PASSED B Y THE LD. CIT(A) ON THIS ACCOUNT AND ACCORDINGLY THE GROUND TAKEN BY THE ASSESSEE IS REJECTED. 8. GROUND NO.2 IS AGAINST THE SUSTENANCE OF DISALLOWANCE O F ` 73 536/- U/S.43B ON ACCOUNT OF DELAY IN DEPOSIT OF EMP LOYEES PROVIDENT FUND. 9. THE BRIEF FACTS OF THE ABOVE ISSUE ARE THAT IT WAS INTERALIA OBSERVED BY THE ASSESSING OFFICER THAT A PERUSAL OF THE SUB MISSION MADE BY THE ASSESSEE SHOWS THAT THE EMPLOYEES CONTRIBUTIO NS TOWARDS PROVIDENT FUND AMOUNTING TO ` 73 536/- WAS MADE BEYOND THE DUE DATE. THE ASSESSING OFFICER WAS OF THE VIEW THAT TH E SAME IS NOT ALLOWABLE IN TERMS OF SECOND PROVISO TO SECTION 43B READ WITH EXPLANATION BELOW CLAUSE (VA) OF SUB SECTION (1) OF SECTI ON 36 AND SUB CLAUSE (X) OF SECTION 2(24) OF THE I.T. ACT 1961 AND ACC ORDINGLY HE DISALLOWED THE SAME. BEFORE THE LD. CIT(A) IT WAS CONT ENDED THAT THE ITA NO.6167/M/09 AY : 05-06 5 EMPLOYEES CONTRIBUTION TO PROVIDENT FUND HAS BEEN PAI D THOUGH BEYOND DUE DATE BUT BEFORE GRACE PERIOD. HOWEVER TH E LD. CIT(A) FOLLOWING THE DECISION IN CIT VS. SOUTH INDIA CORPORAT ION 242 ITR 114 (KER.) AND HITECH (INDIA) PVT. LTD. VS. UNION OF IND IA ORS. 227 ITR 446 (AP) UPHELD THE DISALLOWANCE MADE BY THE ASSESSING OFFICE R . 10. AT THE TIME OF HEARING THE LD. COUNSEL FOR THE A SSESSEE SUBMITS THAT THERE IS NO DISPUTE THAT THE PAYMENT HAS BEEN M ADE WITHIN GRACE PERIOD THEREFORE THE SAME IS ALLOWABLE IN VIEW OF T HE DECISION IN THE CASE OF CIT VS. ALOM EXTRUSIONS LTD. (2009) 319 ITR 306 (SC). 11. ON THE OTHER HAND THE LD. DR SUPPORTS THE ORDER O F THE ASSESSING OFFICER AND THE LD. CIT(A). 12. HAVING CAREFULLY HEARD THE SUBMISSIONS OF THE RIVAL PARTIES AND PERUSING THE MATERIAL AVAILABLE ON RECORD WE ARE OF T HE OPINION THAT THE ISSUE INVOLVED IN THE PRESENT CASE IS NO MORE RES INT EGRA AND IS COVERED BY THE DECISION OF THE HONBLE SUPREME COURT IN CIT VS. ALOM EXTRUSIONS LTD. (2009) 319 ITR 306 (SC) WHEREIN THE IR LORDSHIPS HAVE CONSIDERED THE APPLICABILITY OF SECTION 36(1)(VA) READ WITH SECTION 2(24)(X) AS WELL AS 43B OF THE ACT AND IT HAS BEEN HEL D THAT THE AMENDMENT WAS CURATIVE IN NATURE AND APPLICABLE RETRO SPECTIVELY WITH EFFECT FROM APRIL 1 1988. IN VIEW OF THE ABOVE LEGA L POSITION AND IN THE ABSENCE OF ANY CONTRARY MATERIAL PLACED ON RECORD BY THE REVENUE TO SHOW THAT THE PAYMENT HAS NOT BEEN MADE WITHIN THE GR ACE PERIOD THE DISALLOWANCE OF ` 73 536/- MADE BY THE ASSESSING OFFICER AND SUSTAINED BY THE LD. CIT(A) IS THEREFORE DELETED. TH E GROUND TAKEN BY THE ASSESSEE IS THEREFORE ALLOWED. ITA NO.6167/M/09 AY : 05-06 6 13. ADDITIONAL GROUND TAKEN BY THE ASSESSEE READS AS UNDE R :- THE LD. CIT(A) HAS ERRED IN NOT HOLDING THAT THE INTEREST EXPENDITURE RELATABLE TO LC FIXED DEPOSIT IS TO BE REDUCED FROM THE EXPENDITURE PERTAINING TO ELIGIBLE UNDERTA KING. THE LD. CIT(A) OUGHT TO HAVE DIRECTED TO LD. ASSES SING OFFICER TO INCREASE THE PROFIT OF THE ELIGIBLE UNDE RTAKING U/S. 80IB OF THE INCOME TAX ACT BY SUCH AMOUNT. 14. AT THE TIME OF HEARING THE LD. COUNSEL FOR THE A SSESSEE SUBMITS THAT DENIAL OF DEDUCTION U/S. 80 IB OF THE ACT IS WIT H REGARD TO ` 5 42 476/- REPRESENTING INTEREST RECEIVED FROM BANK ON THE FIXED DEPOSITS KEPT BY THE ASSESSEE AS MARGIN MONEY FOR OPENING LETTERS OF CREDITS IN VIEW OF ITS ASSESSMENT UNDER THE HEAD INCOME F ROM OTHER SOURCES. IN THIS CONNECTION IT IS SUBMITTED THAT FOR MAKING THE FIXED DEPOSITS WHICH WERE ESSENTIAL FOR THE PURPOSES OF THE BUSI NESS OF THE ASSESSEE THE BORROWED FUNDS WERE UTILIZED ON WHICH INTER EST EXPENDITURE WAS ALSO INCURRED AS IS EVIDENT FROM THE R ECORD. AND IN SUPPORT HE PLACED ON RECORD THE DETAILS THEREOF. HE FUR THER SUBMITS THAT THE RECEIPT OF INTEREST IS UNDOUBTEDLY LINKED WIT H THE INTEREST EXPENDITURE INCURRED BY THE ASSESSEE ON THE BORROWED FUN DS. THE NEXUS BETWEEN THE INTEREST EXPENDITURE AND THE INTERE ST RECEIPTS HAS HOWEVER NOT BEEN SCRUTINIZED BY THE ASSESSING OFFICER AS T HE AMOUNT OF ` 5 42 476/- WAS CONSIDERED AS INCOME FROM OTHER SOURCES W HILE WORKING OUT DEDUCTION U/S.80-IB OF THE ACT WHICH IS CON TRARY TO THE JUDGEMENT OF THE HONBLE SUPREME COURT IN THE CASE OF KESHAVJI RAVJI & CO. VS. CIT (183 ITR 1) THE ORDERS OF THE CO-ORDINA TE BENCHES OF THE HONBLE TRIBUNAL IN THE CASE OF M/S. MAHENDRA BROTHERS V S. JCIT IN ITA NO.1653/M/2002 DATED 08.10.2004 ETC ALL OF WHICH HAV E BEEN FOLLOWED IN ITO VS. VARUN CONTINENTAL LTD. (ITA NO. 3427/MUM/2002 DATED 26.08.2005) A COPY OF WHICH HE ALSO PLACED ON RE CORD. HE ITA NO.6167/M/09 AY : 05-06 7 FURTHER SUBMITS THAT THE ADDITIONAL GROUND OF APPEAL IS PURELY ON QUESTION OF LAW AND NO NEW FACTS ARE REQUIRED TO BE BR OUGHT ON RECORD. HE THEREFORE SUBMITS THAT THE ADDITIONAL GROUND OF APP EAL BE ADMITTED AND ADJUDICATED IN VIEW OF THE RATIO OF THE FOLLOWIN G DECISIONS : I) NATIONAL THERMAL POWER CORPORATION VS. CIT (229 ITR )383 (SC) II) JUTE CORPORATION OF INDIA LTD. VS. CIT (187 ITR 688 (SC); AND III) AHMEDABAD ELECTRICITY CO. LTD. VS. CIT (199 ITR 351 (BOM)(FB). 15. ON THE OTHER HAND THE LD. DR STRONGLY OBJECTS TO T HE ADMISSION OF THE ADDITIONAL GROUND OF APPEAL. 16. WE HAVE CAREFULLY CONSIDERED THE SUBMISSIONS OF THE R IVAL PARTIES AND PERUSED THE MATERIAL AVAILABLE ON RECORD. WE FIN D THAT THERE IS NO DISPUTE THAT THE ASSESSING OFFICER WHILE CONSIDERING THE ISSU E OF INTEREST INCOME OF ` 5 42 476/- RECEIVED FROM BANK ON THE FDRS KEPT BY THE ASSESSEE AS MARGIN MONEY TREATED THE INCOME FROM B ANK INTEREST ON SUCH FDRS AS INCOME FROM OTHER SOURCES NOT ELIGI BLE FOR DEDUCTION U/S.80-IB OF THE ACT. THE CLAIM OF THE ASSESSEE IS THAT THE ASSESSING OFFICER WHILE TREATING THE INTEREST INCOME AS INCO ME FROM OTHER SOURCES HAS NOT CONSIDERED THE INTEREST EXPENDITURE INCURRED BY THE ASSESSEE ON BORROWED FUNDS WHICH IS ALSO ON THE RECORD O F THE ASSESSING OFFICER. HOWEVER THE NEXUS BETWEEN THE INTEREST EXPENDITURE AND INTEREST RECEIPTS HAS NOT BEEN SCRUTINI SED BY THE ASSESSING OFFICER. ACCORDING TO THE ASSESSEE THE COMPLETE DET AILS ARE ON RECORD AND THE CLAIM IS LEGAL CLAIM THEREFORE THE ADDITIONAL GROUND TAKEN BY THE ASSESSEE BE ADMITTED. IN THE ABSENCE OF ANY CONTRARY MATERIAL PLACED ON RECORD BY THE REVENUE AND KEEPING IN VIEW THE RATIO OF DECISION ON HON'BLE SUPREME COURT IN NATIONAL THERM AL POWER ITA NO.6167/M/09 AY : 05-06 8 CORPORATION SUPRA AND ALSO KEEPING IN VIEW THAT THE RELEVANT MATERIAL IS AVAILABLE ON RECORD AND THE CLAIM MADE BY THE ASSESSEE IS A LEGAL CLAIM WHICH GOES TO THE ROOT OF THE MATTER WE ADMIT T HE ADDITIONAL GROUND TAKEN BY THE ASSESSEE. HOWEVER THE NEXUS BETWEEN THE INTEREST EXPENDITURE AND INTEREST RECEIPT HAS NOT BEEN SCRUTINISED BY THE ASSESSING OFFICER THEREFORE IN THE INTEREST OF JUST ICE THE ISSUE IS RESTORED BACK TO THE FILE OF THE ASSESSING OFFICER WHO SHAL L DECIDE THE SAME AFRESH IN THE LIGHT OF OUR OBSERVATIONS HEREINABOV E AND ACCORDING TO LAW AFTER PROVIDING REASONABLE OPPORTUNITY OF BEI NG HEARD TO THE ASSESSEE. THE ADDITIONAL GROUND TAKEN BY THE ASSESSEE IS T HEREFORE PARTLY ALLOWED FOR STATISTICAL PURPOSES. 17. IN THE RESULT ASSESSEE'S APPEAL STANDS PARTLY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 27.8.2010. SD/- SD/- (A.L. GEHLOT) ( D.K. AGARWAL ) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI DATED: 27.8.2010. JV. COPY TO: THE APPELLANT THE RESPONDENT THE CIT CONCERNED MUMBAI THE CIT(A) CONCERNED MUMBAI THE DR BENCH TRUE COPY BY ORDER DY/ASSTT. REGISTRAR ITAT MUMBAI.