M/s. Wheels India Limited, CHENNAI v. Addl.CIT, CHENNAI

IN THE INCOME TAX APPELLATE TRIBUNAL CHENNAI BENCH D BEFORE SHRI B. RAMAKOTAIAH ACCOUNTANT MEMBER AND SHRI GEORGE MATHAN JUDICIAL MEMBER I.T.A. NO. 653 & 536/MDS/2005 [ASSESSMENT YEAR 2001-02 & 2000-01] WHEELS INDIA LTD PADI CHENNAI 600 050. VS. THE A.C.I.T COMPANY RANGE III CHENNAI PAN: AAACW 0315 K (APPELLANT) (RESPONDENT) I.T.A. NO. 725/MDS/2005 [ASSESSMENT YEAR 2000-01] THE A.C.I.T COMPANY RANGE III CHENNAI VS. WHEELS INDIA LTD PADI CHENNAI 600 050. PAN: AAACW 0315 K (APPELLANT) (RESPONDENT) DEPARTMENT BY : SHRI TAP AS KUMAR DUTTA ASSESSEE BY : SHRI R. VIJAYARAGHAVAN ITA NOS.536 725 & 653/MDS/2005 :- 2 -: O R D E R PER B. RAMAKOTAIAH A.M.:- THESE ARE APPEALS FILED BY THE ASSESSEE FOR ASSESSM ENT YEARS 2000-01 AND 2001-02 AND CROSS APPEAL BY THE R EVENUE FOR ASSESSMENT YEAR 2000-01 WHEREIN COMMON ISSUES ARE I NVOLVED. HENCE THESE ARE BEING DISPOSED OF BY A COMMON ORDER FOR THE SAKE OF CONVENIENCE AND BREVITY. ITA NOS. 536/MDS/2005 & 725/MDS/2005 2. THESE ARE CROSS APPEALS IN WHICH THE ASSESSING O FFICER WHILE ASSESSING THE COMPANY DECLARED INCOME OF RS. 3 42 74 470/- U/S 115JA OF THE INCOME-TAX ACT 1961 [THE ACT FOR SHORT] DISALLOWED CERTAIN AMOUNTS AND ADDED TO THE INCOME ADMITTED UNDER THE PROVISIONS OF THE ACT. THE AMOU NTS DISALLOWED BY THE ASSESSING OFFICER ARE VRS PAYMENTS AS PER P ARA 4 OF THE ASSESSING OFFICERS ORDER OF RS. 42 75 524/- AND SA LES TAX PENALTY OF RS. 3 19 165/-. IN ADDITION THE ASSESS ING OFFICER ALSO RESTRICTED THE DEDUCTION U/S 80HHC OF THE ACT TO AN AMOUNT OF RS. 1548817/- WHICH WAS ALSO NOT ALLOWED UNDER NORMAL P ROVISIONS AND ALSO MADE DISALLOWANCE UNDER SECTION 43B OF RS. 33 31 865/- . THE LD. CIT(A) ALSO CANCELLED THE ABOVE AMOUNTS AND ALLOWED THE AMOUNT PAID TOWARDS VRS PENALTY AND SALES TAX WHEREAS HE REJECTED THE CONTENTIONS FOR ADDITION MADE U/S ITA NOS.536 725 & 653/MDS/2005 :- 3 -: 80HHC OF THE ACT AND HAS NOT ADJUDICATED THE ISSUE U/S 43B OF THE ACT. THE ASSESSEE ALSO CONTESTED THE ISSUE OF REOPENING BEFORE THE LD. CIT(A) WHO ALSO DISMISSED THE GROUN D. ACCORDINGLY THE REVENUE AND THE ASSESSEE ARE AGGRI EVED AND IN APPEAL. 3. IN ASSESSEES APPEAL THE FIRST GROUND IS WITH R EFERENCE TO REOPENING OF ASSESSMENT U/S 147 OF THE ACT. THE LD . CIT(A) REJECTED THE ISSUE STATING THAT THE ASSESSING OFFIC ER WAS JUSTIFIED IN REOPENING THE ASSESSMENT IN VIEW OF THE PROVISIO NS CONTAINED IN EXPLANATION 2(B) TO SECTION 147 WHILE APPLYING T O THE FACTS OF THE CASE. 4. AFTER CONSIDERING THE ARGUMENTS OF THE LD. COUNS EL FOR THE ASSESSEE AND THE LD. D.R. WE DO NOT FIND ANY REASO N TO INTERFERE WITH THE FINDING OF THE LD. CIT(A) AS THERE WAS NO ASSESSMENT U/S 143(3) EARLIER AND THE ASSESSING OFFICER REOPENED A FTER RECORDING REASONS. THEREFORE GROUND NO. 1 IS REJECTED. 5. GROUND NO. 2 PERTAINS TO THE ISSUE OF RESTRICTIO N OF ELIGIBLE DEDUCTION U/S 80HHC OF THE ACT IN RESPECT OF EXPORT INCENTIVES UNDER THE PROVISIONS OF SECTION 115JA OF THE ACT. THE ASSESSING OFFICER DID NOT DISCUSS ELABORATELY ON THE ISSUE WH ILE CONSIDERING THE SAME FOR PROVISIONS OF SECTION 115JA OF THE ACT . THE ENTIRE DISCUSSION IS FOCUSED ON ALLOWING DEDUCTION UNDER R EGULAR DEDUCTION. THE LD. CIT(A) ALSO REJECTED THE ASSESS EES CONTENTION. ITA NOS.536 725 & 653/MDS/2005 :- 4 -: 6. THE ASSESSEE ALSO RAISED ADDITIONAL GROUND ON TH E ISSUE OF COMPUTATION OF BOOK PROFIT FOR RELIEF U/S 80HHC STA TING THAT THE BASIS FOR COMPUTATION SHOULD BE BOOK PROFIT AND THA T SHOULD BE COMPUTED IN ACCORDANCE WITH THE MANNER LAID DOWN U/ S 80HHC OF THE ACT. 7. THIS ISSUE NOW STANDS SETTLED BY THE DECISION OF THE HON'BLE SUPREME COURT IN THE CASE OF AJANTA PHARMA LIMITED VS. CIT REPORTED IN 327 ITR 305. ACCORDINGLY THE ASSESSIN G OFFICER IS DIRECTED TO REOPEN THE DEDUCTION U/S 80HHC OF THE A CT AFTER AFFORDING REASONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. THIS GROUND IS ALLOWED FOR STATISTICAL PURPOSES. 8. GROUND NO. 3 PERTAINS TO THE ISSUE OF DISALLOWAN CE IN RESPECT OF PAYMENTS U/S 43B OF THE ACT AMOUNTING TO RS.33 31 865/- WHICH WAS NOT ADJUDICATED BY THE LD. CIT(A) EVEN THOUGH SPECIFIC GROUND WAS RAISED. 9. ON EXAMINING THE FACTS WE FIND THAT THE ASSESSI NG OFFICER DISALLOWS THE PAYMENTS MADE U/S 43B OF THE ACT BY W AY OF PROVIDENT FUND ESI GRATUITY AMOUNTING RS. 33 31 8 65 IN COMPUTING THE BOOK PROFITS U/S 115JA OF THE ACT. THE SAME AMOUNTS WERE ALLOWED IN COMPUTING THE PROFITS UNDER NORMAL METHOD OF COMPUTATION OF INCOME-TAX AND HENCE THE S AME CANNOT BE DISALLOWED IN COMPUTING THE BOOK PROFITS. IN VI EW OF THE DECISION OF THE HON'BLE SUPREME COURT REPORTED IN [2 009] 319 ITR 306 IN THE CASE OF CIT VS. ALOM EXTRUSIONS LTD. T HE ASSESSEE IS ITA NOS.536 725 & 653/MDS/2005 :- 5 -: ELIGIBLE FOR DEDUCTION OF THE AMOUNT PAID BEFORE TH E DUE DATE FOR FILING RETURN OF INCOME. NOT ONLY THAT THERE IS N O PROVISION OF DISALLOWED AMOUNT WHILE COMPUTING THE AMOUNT U/S 11 5JA OF THE ACT. AS SEEN FROM THE ORDERS OF THE ASSESSING OFFI CER ENTIRE FOCUS OF THE ASSESSING OFFICER WAS TO MADE CERTAIN DISALLOWANCES WHILE COMPUTING NORMAL INCOME WHEREAS IN PARA 8 OF THE ORDER HE STARTED COMPUTATION WITH THE BOOK PROFIT U/S 115 JA OF THE ACT FOR WHICH SEPARATE PROVISIONS ARE APPLICABLE. IN V IEW OF THIS AND FACTS AVAILABLE ON RECORD AND ALSO THAT LAW PERMITS PAYMENTS BEFORE FILING RETURN OF INCOME THIS GROUND IS ALLO WED. THE ASSESSING OFFICER IS DIRECTED TO DELETE THE ADDITIO N. 10. ACCORDINGLY THE ASSESSEES GROUNDS ARE ALLOWED FOR STATISTICAL PURPOSES. ITA NO. 725/MDS/2005 11. THE FIRST ISSUE RAISED IN THIS APPEAL IS WITH R EGARD TO THE LD. CIT(A) ALLOWING THE VRS PAYMENT TO EMPLOYEES CLAIME D BY THE ASSESSEE IN FULL AS REVENUE EXPENDITURE. 12. IT WAS SUBMITTED BY THE LD. A.R. THAT THESE PAY MENTS CANNOT BE DISALLOWED UNDER THE PROVISIONS OF SECTION 115JA OF THE ACT AND ACCORDINGLY THE LD. CIT(A) WAS CORRECT IN ALLO WING THE CLAIM WHEREAS THE LD. D.R. VEHEMENTLY ARGUED THAT THE AMO UNT CANNOT BE DELETED. 13. AFTER HEARING THE RIVAL SUBMISSIONS WE AGREE W ITH THE FINDING OF THE LD. CIT(A) THAT THE PAYMENTS TO EMPL OYEES ON VRS ITA NOS.536 725 & 653/MDS/2005 :- 6 -: SHOULD HAVE BEEN ALLOWED AS REVENUE EXPENDITURE AND THAT THE PAYMENTS OF SALES TAX PENALTY IS NOT IN VIOLATION O F ANY PROVISIONS OF THE SALES TAX ACT DOES NOT CONSTITUTE OFFENCE. ACCORDINGLY THEY ARE ALLOWED AS BUSINESS EXPENDITURE. 14. MOREOVER SUCH DISALLOWANCES ARE NOT PERMITTED WHILE COMPUTING INCOME U/S 115JA OF THE ACT WHICH MAY BE APPLICABLE FOR REGULAR COMPUTATION OF INCOME. IN VIE4W OF THI S THERE IS NO MERIT IN THE REVENUES APPEAL. ACCORDINGLY THE SA ME STAND DISMISSED. 15. ITA NO. 653/MDS/2005 PERTAINS TO ASSESSMENT YEA R 2001- 02 IN WHICH THE ASSESSEE IS AGGRIEVED ON THE COMPUT ATION OF INCOME UNDER NORMAL PROVISIONS OF THE ACT AND ALSO FILED ADDITIONAL GROUND WITH REFERENCE TO COMPUTATION U/S 80HHC OF THE ACT. IT WAS ADMITTED THAT THE ASSESSMENT WAS COMPL ETED INVOKING PROVISIONS OF SECTION 115JA OF THE ACT WHICH WAS HI GHER THAN THE NORMAL PROVISIONS. ACCORDINGLY THE GROUNDS RAISED WITH REFERENCE TO THE COMPUTATION U/S 80HHC BECOME ACADEMIC IN NAT URE. THE LD COUNSEL ALSO DID NOT PRESS OTHER GROUNDS. 16. ADDITIONAL GROUND RAISED IN THIS APPEAL IS AS U NDER: WHILE COMPUTING BOOK PROFIT U/S 115JA OF THE ACT THE RELIEF IN RESPECT OF EXPORT SHOULD BE COMPUTED ON THE BASI S OF BOOK PROFIT IN ACCORDANCE WITH THE MANNER LAID DOWN U/S 80HHC OF THE WORK. 17. SINCE ADDITIONAL GROUND IS ALLOWED AND THE ASSE SSING OFFICER IS DIRECTED TO COMPUTE DEDUCTION U/S 80HHC OF THE ACT ITA NOS.536 725 & 653/MDS/2005 :- 7 -: ACCORDING TO PROVISIONS DISCUSSED ON THE REGULAR CO MPUTATION IS ACADEMIC IN NATURE. ACCORDINGLY GROUNDS ARE TREATE D AS NOT PRESSED. THE ASSESSING OFFICER IS DIRECTED TO COMP UTE DEDUCTION U/S 80HHC OF THE ACT AS PER THE PROVISIONS OF LAW A FTER GIVING THE ASSESSEE DUE OPPORTUNITY OF BEING HEARD. THE ASSES SEES APPEAL IS ALLOWED FOR STATISTICAL PURPOSES. 18. IN THE RESULT THE APPEALS OF THE ASSESSEE ARE ALLOWED WHEREAS THE APPEAL OF THE REVENUE STANDS DISMISSED. ORDER PRONOUNCED IN THE COURT ON 10 TH FEBRUARY 2011 AT CHENNAI. SD/- SD/- (GEORGE MATHAN) JUDICIAL MEMBER (B. RAMAKOTAIAH) ACCOUNTANT MEMBER CHENNAI : 10 TH FEBRUARY 2011 VL/- COPY TO: 1. APPELLANT 2. RESPONDENT 3. CIT(A) 4. CIT 5 DR