DCIT 9(1), MUMBAI v. BHOR INDUSTRIES LTD, MUMBAI

ITA 6255/MUM/2009 | 2003-2004
Pronouncement Date: 08-07-2011 | Result: Dismissed

Appeal Details

RSA Number 625519914 RSA 2009
Assessee PAN AAACB3535C
Bench Mumbai
Appeal Number ITA 6255/MUM/2009
Duration Of Justice 1 year(s) 7 month(s) 5 day(s)
Appellant DCIT 9(1), MUMBAI
Respondent BHOR INDUSTRIES LTD, MUMBAI
Appeal Type Income Tax Appeal
Pronouncement Date 08-07-2011
Appeal Filed By Department
Order Result Dismissed
Bench Allotted B
Tribunal Order Date 08-07-2011
Date Of Final Hearing 04-07-2011
Next Hearing Date 04-07-2011
Assessment Year 2003-2004
Appeal Filed On 03-12-2009
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES B MUMBAI BEFORE SHRI R.S.SYAL AM AND SHRI V.DURGA RAO JM ITA NO.6255/MUM/2009 : ASST.YEAR 2003-2004 THE DY.COMMISSIONER OF INCOME-TAX CIRCLE 1(1) MUMBAI. VS. M/S.BHOR INDUSTRIES LIMITED TANNA HOUSE ANNEXE 11/A NATHALAL PAREKH MARG COLABA MUMBAI 400 039. PAN :AAACB3535C. (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI P.C.MAURYA RESPONDENT BY : SHRI S.C.TIWARI O R D E R PER R.S.SYAL AM : THIS APPEAL BY THE REVENUE IS DIRECT ED AGAINST THE ORDER PASSED BY THE COMMISSIONER OF INCOME-TAX (APPEALS) ON 27.08.2009 IN RELATI ON TO THE ASSESSMENT YEAR 2003-2004. 2. GROUND NO.1 IS AGAINST THE DELETION OF ADDITION OF RS.36 490 MADE BY THE ASSESSING OFFICER TOWARDS BE LATED PAYMENT OF EMPLOYE ES CONTRIBUTION. BRIEFLY STATED THE FACTS OF THIS GROUND ARE THAT TH E ASSESSEE DEPOSITED THE SAID SUM BEYOND THE DUE DATE BUT WITHIN THE GRACE PERI OD WHICH WAS DISALLOWED BY THE A.O. THE LEARNED CIT(A) DELETED THE SAID ADDITION. 3. AFTER CONSIDERING THE RIVAL SUBMISSIONS AND PERUSING THE RELE VANT MATERIAL ON RECORD WE FIND THAT THE SAID CONTRIBUTIO N HAS BEEN ADMITTEDLY PAID WITHIN THE GRACE PERIOD. THE HONBLE MADRAS HIGH COURT IN CIT VS. SHRI GANAPATHY MILLS COMPANY LIMITED [(2000) 243 ITR 879 (MAD.)] HAS HELD THAT NO DISALLOWANCE CAN BE MADE WHERE THE CONTRIBUTI ON IS DEPOSITED LATE BUT W ITHIN THE GRACE PERIOD. BE THAT AS IT MAY THE H ONBLE SUPREM E COURT IN CIT VS. ALOM EXTRUSIONS LIMITED [(2009) 319 ITR 306 (SC)] HAS BEEN HELD THAT THE AM ENDMENT TO SECOND PROVISO TO SECTION 43B BY THE FINANCE ACT 2003 IS RETROSPECTIVE. SINCE THE AMOUNT IN ITA NO.6255/MUM/2009 M/S.BHOR INDUSTRIES LIMITED. 2 QUESTION WAS ADMITTEDLY PAID BEFORE THE DUE DATE OF FILING THE RETURN U/S.139(1) IN OUR CONSIDERED OPINION THE L EARNED CIT(A) WAS JUSTIFIED IN DELETING THIS ADDITION. THIS GROUND IS NOT ALLOWED. 4. GROUND NO.2 IS AGAINST THE DELETION OF ADDITION OF RS.61 LAKHS. BRIEFLY STATED THE FACTS OF THIS GROUND ARE THAT TH E ASSESSEE INCLUDED RS .61 LAKHS IN THE COMPUTATION OF INCOME AS LO NG TERM CAPITAL GAIN. ON BEING CALLED UPON TO EXPLAIN AS TO WHY THIS RECEIPT BE NOT CONSIDERED AS BUSINESS INCOME THE ASSESSEE CONTENDED THAT IT ENTERED INTO SUPPLY AGREEMENT DATED 21 ST MARCH 2002 WITH M/S.PIDILITE INDUSTRIES LIMITED (PIL) FO R SUPPLY OF FINISHED PROD UCTS MANUFACTURED BY THE ASSESSEE-COMPANY AS PER THE SPECIFICATIONS A ND STANDARDS STIPULATED BY THE PIL. AS PER THE TERMS OF AGREEMENT CL AUSE 17.4 EITHER PARTY WAS EL IGIBLE TO TERMINATE SUPPLY AGREEMENT AT ANY TIME GIVING A NOTICE OF 7 DAYS TO THE OTHER PARTY WHICH NOTICE WAS REQUIRED TO BE ISSU ED ON OR BEFORE 15 TH OF APRIL 2002 WITHOUT ASSIGNING ANY REASONS FOR SUCH TERMINATION. IT WAS CONTENDED TH AT THE SAID PAYMENT OF RS.61 LAKHS WAS RECEIVED BY THE ASSESSEE AS PER CLAUSE 17.4 OF THE AGRE EMENT FROM THE PIL AND AS SUCH IT WAS A CAPITAL RECEIPT. THE ASSES SING OFFICER INVOKED THE PROVISIONS OF SECTION 28(IV) AND HELD THAT SUCH AMOUNT WAS TO BE CONSIDERED AS BUSINESS INCOME. THE LEARNED CIT(A) OVERTURNED THE ASSESSM ENT ORDER ON THIS POINT AND ORDERED FOR THE DELETION OF ADDITION. 5. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE RE LEVANT MATERIAL ON RECORD. THE ASSESSEE ENTERED INTO SUPPLY AGREEMENT DATED 21. 03.2002 WITH PIL WHO HAD ALREADY ACQUIRED VARIOUS ASSET S RELATING TO THE ASSESSEES BUSINESS INTER ALIA INCLUDING TRADEMARK AND TECHNICAL KNOW- HOW ETC. AS PER THIS AGREEMENT THE ASSESSEE THROUGH ITS SUBSIDIARY AGREED TO MANUFACTURE PRODUCTS ON BEHALF OF PIL. CLAUSE 17 DEALS WITH THE TERMINATION OF THE AGREEMENT. IT PROVIDES THAT PIL SHALL BE ENTITLED TO TERMINATE THE AGREEMENT BY GIVING A NOTICE OF NOT LESS THAN 7 DAYS. IT IS FURTHER PROVIDED IN CLAUSES 17.4 AND 17.5 TH AT IN CASE THE AGREEMENT IS TERMINATED PIL SHALL PAY A SUM OF RS.61 LAKHS TO THE ASSESSEE. IT IS THIS SUM OF RS.61 LAKHS ITA NO.6255/MUM/2009 M/S.BHOR INDUSTRIES LIMITED. 3 WHICH HAS RECEIVED BY THE ASSESSEE ON TERMIN ATION OF AGREEMENT BY PIL THAT HAS BEEN SUBJECTED TO TAX BY THE ASSESSING OF FICER AS `BUSINESS INCOME AS AGAINST `CAPITAL GAIN OFFERED BY THE ASSESSEE. IT IS SETTLED POSITION IN LAW THAT ANY COMPENSATION FOR LOSS OF INCOME IS A REVE NUE RECEIPT WHEREAS THE COMPENSATION FOR LOSS OF SOURCE OF INCOME IS A CAPITAL RECEIP T. THIS PROPOSITION HAS BEEN LAID DOWN BY THE HONBLE SUPREME COURT IN SEVERAL JUDGMENTS INCLUDING KETTLEWELL BULLEN AND CO. LTD. VS. CIT [(1964) 53 ITR 261 (SC)] TO THE EFFECT THAT COMPENSATION RECEIVED FOR THE TERMINATION OF AGENCY IS A CAPITAL RECEIPT AND NOT A TRADING RECEIPT ASSESSABLE AS INCOME. ADVERTIN G TO THE FACTS OF THE INSTANT CASE IT IS NOTED THAT THE SAID SUM OF RS.61 LAKHS WAS RECEIVED BY THE ASSESSEE FOR THE TERMINATION OF THE AGREEMENT WHICH IF CONTINUED WOULD HAVE RESULTED INTO THE PROFITS ON REGULAR BASIS. SINCE THE VERY SOURCE OF INCOME HAS BEEN ABANDONED BY THE PAYMENT OF RS.61 LAKHS IN OUR CONSIDERED OPINION THE SAME CANNOT BE CHARGED TO TAX AS `BUSINESS INCOME. WE ARE NOT INTE RFERING WITH THE IMPUGNED ORDE R TO THE EFFECT OF THE INCLUSION OF THIS AMOUNT IN THE COMPUT ATION OF INCOME UNDER THE HEAD `CAPITAL GAIN AS THE SAID SUM WAS VOLUNTARILY OFFERED BY THE ASSESSEE ACCORDINGLY AND NO CONTENTION HAS BEEN RAISED E ITHER AT THE ASSESSMENT OR THE A PPELLATE STAGE THAT IT IS A CAPITAL RECEIPT NOT WARRANTING EVEN THE INCL USION IN THE COMPUTA TION OF CAPITAL GAIN. AS SUCH WE HOLD THAT THE LE ARNED CIT(A) WAS RIGHT IN OVERTURNING THE ASSESSMENT ORDER ON THIS POINT. THIS GROUND IS NOT ALLOWED. 6. IN THE RESULT THE APPEAL IS DISMISSED. ORDER PRONOUNCED ON THIS 8 TH DAY OF JULY 2011. SD/- SD/- ( V.DURGA RAO ) ( R.S.SYAL ) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI : 8 TH JULY 2011. DEVDAS*` ITA NO.6255/MUM/2009 M/S.BHOR INDUSTRIES LIMITED. 4 COPY TO : 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE CIT CONCERNED 4. THE CIT(A) - IX MUMBAI. 5. THE DR/ITAT MUMBAI. 6. GUARD FILE. TRUE COPY. BY ORDER ASSISTANT REGISTRAR ITAT MUMBAI.