CLOGH PROJECTS INTERNATIONAL PTY LTD, MUMBAI v. DDIT (IT) RG 1(2), MUMBAI

ITA 670/MUM/2010 | 2006-2007
Pronouncement Date: 19-01-2011 | Result: Partly Allowed

Appeal Details

RSA Number 67019914 RSA 2010
Bench Mumbai
Appeal Number ITA 670/MUM/2010
Duration Of Justice 11 month(s) 23 day(s)
Appellant CLOGH PROJECTS INTERNATIONAL PTY LTD, MUMBAI
Respondent DDIT (IT) RG 1(2), MUMBAI
Appeal Type Income Tax Appeal
Pronouncement Date 19-01-2011
Appeal Filed By Assessee
Order Result Partly Allowed
Bench Allotted C
Tribunal Order Date 19-01-2011
Date Of Final Hearing 04-01-2011
Next Hearing Date 04-01-2011
Assessment Year 2006-2007
Appeal Filed On 27-01-2010
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL 'C' BENCH MUMBAI BEFORE SHRI D.K. AGARWAL JUDICIAL MEMBER AND SHRI B. RAMAKOTAIAH ACCOUNTANT MEMBER ITA NO. 670/MUM/2010 (ASSESSMENT YEAR: 2006-07) M/S. CLOUGH PROJECTS INTERNATIONAL DDIT (IT) 1(2) PTE LTD. LEVEL -2 22 MOUNT ST. PERTH MUMBAI WEST AUSTRALIA AUSTRALIA VS. PAN - ACCC 6057 C APPELLANT RESPONDENT ITA NO. 1133/MUM/2010 (ASSESSMENT YEAR: 2006-07) DDIT (IT) 1(2) M/S. CLOUGH PROJECTS INTERNATIONAL MUMBAI PTE LTD. LEVEL -2 22 MOUNT ST. PERTH VS. WEST AUSTRALIA AUSTRALIA PAN - ACCC 6057 C APPELLANT RESPONDENT APPELLANT BY: SHRI MURLIDHAR & SHRI DEVESH K. SHAH RESPONDENT BY: SHRI SANJIV DUTT O R D E R PER B. RAMAKOTAIAH A.M. THESE ARE CROSS APPEALS BY THE ASSESSEE AND THE REV ENUE AGAINST THE ORDER OF THE CIT(A) X MUMBAI DATED 30.11.2009 PASS ED AGAINST THE ORDER UNDER SECTION 154 BY THE A.O. DATED 27.04.2009. 2. ASSESSEE HAS RAISED THE FOLLOWING GROUNDS: - 1) THAT N THE FACTS AND IN THE CIRCUMSTANCES OF TH E CASE AND IN LAW THE COMMISSIONER OF INCOME TAX (APPEAL) HAS ERRED I N CONFIRMING THE DISALLOWANCE UNDER SECTION 43B TO THE INCOME DE TERMINED UNDER SECTION 44BB OF THE IT ACT. 2) THAT N THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW CIT(A) HAS ERRED IN CONFIRMING THE LEVY OF INTEREST UNDER SECTION 220(2). 3) CIT(A) HAS NOT ADJUDICATED ON THE FOLLOWING GROU NDS THE AO HAS ERRED IN NOT CONSIDERING OUR SUBMISSION TO EXCL UDE AN ITA NO. 670/MUM/2010 M/S. CLOUGH PROJECTS INTERNATIONAL PTY LTD. 2 AMOUNT OF RS.154 264 243/- WHICH WAS WRONGLY CONSID ERED AS PART OF THE GROSS RECEIPT IGNORING THE ACCOUNTING S TANDARD 7 ISSUED BY THE ICAI. 3. BRIEFLY STATED THE ASSESSEE DECLARED A LOSS OF ` 16 19 54 399/- WHEREAS IN THE ORDER UNDER SECTION 143(3) DATED 29.12.2008 PROVISIONS OF SECTION 44BB WERE INVOKED AND PROFIT AT 10% OF THE AGGREGAT E AMOUNT RECEIVED FROM THE CONTRACT WORK WERE ASSESSED AND THE TOTAL INCOM E WAS DETERMINED AT ` 30 86 12 920/-. SUBSEQUENTLY THE A.O. NOTICED THAT DISALLOWANCE UNDER SECTION 40(A) AND 43B WERE NOT MADE AND ISSUED NOTI CE UNDER SECTION 154 AND PASSED ORDER DISALLOWING THE AMOUNT UNDER SECTI ON 43B. HE ALSO LEVIED INTEREST UNDER SECTION 234B 234C AND 234D. THE CIT (A) VIDE HIS ORDER CONSIDERED ASSESSEES SUBMISSIONS ADDITION CONFIRME D THE DISALLOWANCE UNDER SECTION 43B WHILE DELETING THE INTEREST LEVIE D. ASSESSEE IS AGGRIEVED ON THE ADDITION SO MADE UNDER SECTION 43B AND THE REVE NUE IS AGGRIEVED ON THE INTEREST DISALLOWED. 4. WE HAVE HEARD THE LEARNED COUNSEL AND THE LEARNED D .R. 5. GROUND NO. 1 IN ASSESSEES APPEAL IS WITH REFERENCE TO THE DISALLOWANCE UNDER SECTION 43B. THE LEARNED COUNSEL SUBMITTED THAT THE INCOMES ARE DETERMINED UNDER THE PROVISIONS OF SECT ION 44BB AND ACCORDINGLY THERE IS NO NEED FOR DISALLOWING ANY AM OUNT UNDER SECTION 43B. IT WAS HIS CONTENTION THAT UNDER THE PROVISION OF S ECTION 44BB WHAT IS ASSESSED IS DEEMED PROFIT AND SINCE THE PROFITS ARE ASSESSED AT 10% OF THE GROSS RECEIPTS PROVISIONS OF SECTION 43B ARE NOT A PPLICABLE. WHETHER A DISALLOWANCE UNDER SECTION 43B CAN STILL BE MADE WH EN PROVISIONS OF SECTION 44BB WERE INVOKED IS A DEBATABLE ISSUE AND NOT A MI STAKE APPARENT FROM RECORD. FURTHER ARGUING THE LEARNED COUNSEL SUBMITT ED THAT ON MERITS THE ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE BY THE D ECISION OF THE HON'BLE CALCUTTA HIGH COURT IN THE CASE OF CIT VS. SCHLUMBE RGER SEA CO. INC. (2002) 124 TAXMAN 358(CAL) WHEREIN IT WAS HELD THAT IF 90% OF THE RECEIPTS AND GAINS MENTIONED AND 10% OF THOSE NOT MENTIONED ARE NECESSARILY EXCLUDED BY SECTION 44BB THOSE CANNOT BE INCLUDED BY AN IND IRECT MANNER OR BY APPLICATION OF RESIDUARY ARTICLES OR PROVISIONS. RE LYING OF THE PRINCIPLES LAID DOWN BY THE ABOVE SAID JUDGMENT IT IS HIS ARGUMENT THAT ONCE THE PROVISIONS ITA NO. 670/MUM/2010 M/S. CLOUGH PROJECTS INTERNATIONAL PTY LTD. 3 OF SECTION 44BB ARE INVOKED AND GROSS RECEIPTS ARE TAXED THERE IS NO NEED FOR INVOKING THE PROVISIONS OF SECTION 43B. HE ALSO REL IED ON THE JUDGMENT OF THE HON'BLE MADRAS HIGH COURT IN THE CASE OF S. MOHAMMA D DHURABUDEEN 4 DTR (MADRAS) 218 WHEREIN ON DISALLOWANCE OF 40A(3) THE HON'BLE HIGH COURT HELD THAT THE DISALLOWANCE IS NOT WARRANTED. THE LE ARNED COUNSEL ALSO SUBMITTED THAT THE QUESTION OF DISALLOWANCE UNDER S ECTION 43B ARISES ONLY IF THERE IS A CLAIM FOR DEDUCTION AND AS ASSESSEE IS N OT ENTITLED FOR ANY DEDUCTION UNDER SECTION 43BB THE QUESTION OF DISALL OWANCE DOES NOT ARISE. IT WAS HIS SUBMISSION THAT THE A.O. WAS WRONG IN INVOK ING THE PROVISIONS OF SECTION 44BB ON THE ISSUE WHICH IS NOT A MISTAKE AP PARENT FROM RECORD. 6. THE LEARNED D.R. SUBMITTED THAT PROVISIONS OF SECTI ON 44BB EXCLUDE APPLICATION OF PROVISIONS FROM SECTIONS 28 TO 43A A ND ACCORDINGLY PROVISIONS OF SECTION 43B ARE NOT EXCLUDED. CONSEQUENTLY THE A .O. WAS CORRECT IN DISALLOWING THE AMOUNT UNDER SECTION 43B. HE DISTIN GUISHED THE JUDGEMENT OF THE HON'BLE MADRAS HIGH COURT WHEREIN THE PROVIS IONS OF SECTION 40A(3) ARE MADE APPLICABLE WHICH IN FACT ARE WITHIN THE E XCLUDED PROVISIONS AND THEREFORE THE A.O. ALSO EXCLUDED THE AMOUNTS CONSID ERED FOR DISALLOWANCE U/S 40A(3) (PARA 1 OF THE ORDER). IT WAS HIS SUBMIS SION THAT SINCE THE PROVISIONS OF SECTION 43B ARE WITH NON-OBSTANTE CLA USE THEY ARE TO BE MADE APPLICABLE EVEN IF INCOME ARE ASSESSED UNDER SECTIO N 44BB. HE REFERRED TO THE ORDER OF THE CIT(A) IN PARA 3.3 TO SUPPORT HIS CONTENTION. 7. WE HAVE CONSIDERED THE ISSUE. THE PROVISIONS OF SEC TION 44BB ARE AS UNDER: - 44BB. (1) NOTWITHSTANDING ANYTHING TO THE CONTRARY CONTA INED IN SECTIONS 28 TO 41 AND SECTIONS 43 AND 43A IN THE C ASE OF AN ASSESSEE [ BEING A NON-RESIDENT ] ENGAGED IN THE BUSINESS O F PROVIDING SERVICES OR FACILITIES IN CONNECTION WITH OR SUPPLYING PLAN T AND MACHINERY ON HIRE USED OR TO BE USED IN THE PROSPECTING FOR O R EXTRACTION OR PRODUCTION OF MINERAL OILS A SUM EQUAL TO TEN PER CENT OF THE AGGREGATE OF THE AMOUNTS SPECIFIED IN SUB-SECTION (2) SHALL B E DEEMED TO BE THE PROFITS AND GAINS OF SUCH BUSINESS CHARGEABLE TO TA X UNDER THE HEAD PROFITS AND GAINS OF BUSINESS OR PROFESSION : PROVIDED THAT THIS SUB-SECTION SHALL NOT APPLY IN A CASE WH ERE THE PROVISIONS OF SECTION 42 OR SECTION 44D OR SECTION 115A OR SECTION 293A APPLY FOR THE PURPOSES OF COMPUTING PROFITS OR GAIN S OR ANY OTHER INCOME REFERRED TO IN THOSE SECTIONS. ITA NO. 670/MUM/2010 M/S. CLOUGH PROJECTS INTERNATIONAL PTY LTD. 4 (2) THE AMOUNTS REFERRED TO IN SUB-SECTION (1) SHAL L BE THE FOLLOWING NAMELY : (A) THE AMOUNT PAID OR PAYABLE (WHETHER IN OR OUT O F INDIA) TO THE ASSESSEE OR TO ANY PERSON ON HIS BEHALF ON ACCOUNT OF THE PROVISION OF SERVICES AND FACILITIES IN CONNECTION WITH OR SUPPLY OF PLANT AND MACHINERY ON HIRE USED OR TO BE USED IN THE PROSPECTING FOR OR EXTRACTION OR PRODUCTION OF MI NERAL OILS IN INDIA; AND (B) THE AMOUNT RECEIVED OR DEEMED TO BE RECEIVED IN INDIA BY OR ON BEHALF OF THE ASSESSEE ON ACCOUNT OF THE PROVISION OF SERVICES AND FACILITIES IN CONNECTION WITH OR SUPPLY OF PLANT A ND MACHINERY ON HIRE USED OR TO BE USED IN THE PROSPECTING FOR O R EXTRACTION OR PRODUCTION OF MINERAL OILS OUTSIDE INDIA. [(3) NOTWITHSTANDING ANYTHING CONTAINED IN SUB-SEC TION (1) AN ASSESSEE MAY CLAIM LOWER PROFITS AND GAINS THAN THE PROFITS AND GAINS SPECIFIED IN THAT SUB-SECTION IF HE KEEPS AND MAIN TAINS SUCH BOOKS OF ACCOUNT AND OTHER DOCUMENTS AS REQUIRED UNDER SUB-S ECTION (2) OF SECTION 44AA AND GETS HIS ACCOUNTS AUDITED AND FURN ISHES A REPORT OF SUCH AUDIT AS REQUIRED UNDER SECTION 44AB AND THER EUPON THE ASSESSING OFFICER SHALL PROCEED TO MAKE AN ASSESSME NT OF THE TOTAL INCOME OR LOSS OF THE ASSESSEE UNDER SUB-SECTION (3 ) OF SECTION 143 AND DETERMINE THE SUM PAYABLE BY OR REFUNDABLE TO THE ASSESSEE.] EXPLANATION.FOR THE PURPOSES OF THIS SECTION (I) PLANT INCLUDES SHIPS AIRCRAFT VEHICLES DRI LLING UNITS SCIENTIFIC APPARATUS AND EQUIPMENT USED FOR THE PU RPOSES OF THE SAID BUSINESS; (II) MINERAL OIL INCLUDES PETROLEUM AND NATURAL G AS.] 8. INVOKING THE ABOVE PROVISIONS THE A.O. VIDE HIS AS SESSMENT ORDER DATED 29.12.2008 DETERMINED THE INCOME AT ` 30 86 12 920/- AS AGAINST THE LOSS CLAIMED AT ` 16 19 54 339/-. DURING THE ASSESSMENT PROCEEDINGS T HE ASSESSEE MOVED AN APPLICATION UNDER SECTION 144A TO THE ADDITIONAL DIRECTOR OF INCOME TAX (INTERNATIONAL TAXATION) RANGE I MU MBAI AND HIS DIRECTIONS WERE RECEIVED VIDE LETTERS DATED 19.12.2008 AND 26 12 2008. THEREAFTER THE A.O. CONCLUDED THE ASSESSMENT VIDE ORDER DATED 29.1 2.2008 AFTER ELABORATELY DISCUSSING WHY THE PROVISIONS OF SECTIO N 44BB ARE APPLICABLE AND THE GROSS RECEIPTS ARE TO BE ASCERTAINED AND AC CORDINGLY COMPUTED THE INCOME REJECTING ASSESSEES BOOK RESULTS. SINCE THE A.O. INVOKED PROVISIONS OF SECTION 44BB THAT TOO ON THE DIRECTIONS FROM TH E ADDITIONAL DIRECTOR (INTERNATIONAL TAXATION) WE ARE OF THE VIEW THAT P ROVISIONS OF SECTION 43B CANNOT BE INVOKED ONCE THE PROVISIONS OF SECTION 44 BB WERE INVOKED. THE ITA NO. 670/MUM/2010 M/S. CLOUGH PROJECTS INTERNATIONAL PTY LTD. 5 ARGUMENT THAT PROVISIONS OF SECTION 43B ARE NOT APP LICABLE AS THE ASSESSEE HAS NOT CLAIMED ANY DEDUCTION HAS TO BE CONSIDERED FAVOURABLY. PROVISIONS OF SECTION 43B ARE AS UNDER: - 43B. NOTWITHSTANDING ANYTHING CONTAINED IN ANY OTHER PRO VISION OF THIS ACT A DEDUCTION OTHERWISE ALLOWABLE UNDER THI S ACT IN RESPECT OF (A) ANY SUM PAYABLE BY THE ASSESSEE BY WAY OF TAX DUTY CESS OR FEE BY WHATEVER NAME CALLED UNDER ANY LAW FOR THE TIME BEING IN FORCE OR (B) ANY SUM PAYABLE BY THE ASSESSEE AS AN EMPLOYER BY WAY OF CONTRIBUTION TO ANY PROVIDENT FUND OR SUPERANNUATIO N FUND OR GRATUITY FUND OR ANY OTHER FUND FOR THE WELFARE OF EMPLOYEES OR (C) ANY SUM REFERRED TO IN CLAUSE (II) OF SUB-SECTI ON (1) OF SECTION 36 OR (D) ANY SUM PAYABLE BY THE ASSESSEE AS INTEREST ON ANY LOAN OR BORROWING FROM ANY PUBLIC FINANCIAL INSTITUTION [OR A STATE FINANCIAL CORPORATION OR A STATE INDUSTRIAL INVESTM ENT CORPORATION] IN ACCORDANCE WITH THE TERMS AND COND ITIONS OF THE AGREEMENT GOVERNING SUCH LOAN OR BORROWING [ O R] (E) ANY SUM PAYABLE BY THE ASSESSEE AS INTEREST ON ANY [LOAN OR ADVANCES FROM A SCHEDULED BANK IN ACCORDANCE WITH T HE TERMS AND CONDITIONS OF THE AGREEMENT GOVERNING SUC H LOAN [OR ADVANCES] OR (F) ANY SUM PAYABLE BY THE ASSESSEE AS AN EMPLOYER IN LIEU OF ANY LEAVE AT THE CREDIT OF HIS EMPLOYEE SHALL BE ALLOWED (IRRESPECTIVE OF THE PREVIOUS YEAR IN WHICH THE LIABILITY TO PAY SUCH SUM WAS INCURRED BY THE ASSESSEE ACCORD ING TO THE METHOD OF ACCOUNTING REGULARLY EMPLOYED BY HIM) ONLY IN CO MPUTING THE INCOME REFERRED TO IN SECTION 28 OF THAT PREVIOUS YEAR IN WHICH SUCH SUM IS ACTUALLY PAID BY HIM : PROVIDED THAT NOTHING CONTAINED IN THIS SECTION SHALL APPLY IN RELATION TO ANY SUM WHICH IS ACTUALLY PAID BY THE ASSESSEE O N OR BEFORE THE DUE DATE APPLICABLE IN HIS CASE FOR FURNISHING THE RETU RN OF INCOME UNDER SUB-SECTION (1) OF SECTION 139 IN RESPECT OF THE PR EVIOUS YEAR IN WHICH THE LIABILITY TO PAY SUCH SUM WAS INCURRED AS AFORE SAID AND THE EVIDENCE OF SUCH PAYMENT IS FURNISHED BY THE ASSESS EE ALONG WITH SUCH RETURN. EXPLANATION 1FOR THE REMOVAL OF DOUBTS IT IS HERE BY DECLARED THAT WHERE A DEDUCTION IN RESPECT OF ANY SUM REFERRED TO IN CLAUSE (A) OR CLAUSE (B) OF THIS SECTION IS ALLOWED IN COMPUTING THE INCOME REFERRED TO IN SECTION 28 OF THE PREVIOUS YEAR (BEING A PREVIOU S YEAR RELEVANT TO THE ASSESSMENT YEAR COMMENCING ON THE 1ST DAY OF APRIL 1983 OR ANY EARLIER ASSESSMENT YEAR) IN WHICH THE LIABILITY TO PAY SUCH SUM WAS ITA NO. 670/MUM/2010 M/S. CLOUGH PROJECTS INTERNATIONAL PTY LTD. 6 INCURRED BY THE ASSESSEE THE ASSESSEE SHALL NOT BE ENTITLED TO ANY DEDUCTION UNDER THIS SECTION IN RESPECT OF SUCH SUM IN COMPUTING THE INCOME OF THE PREVIOUS YEAR IN WHICH THE SUM IS ACT UALLY PAID BY HIM.] EXPLANATION 2FOR THE PURPOSES OF CLAUSE (A) AS IN FORCE AT ALL MATERIAL TIMES ANY SUM PAYABLE MEANS A SUM FOR W HICH THE ASSESSEE INCURRED LIABILITY IN THE PREVIOUS YEAR EV EN THOUGH SUCH SUM MIGHT NOT HAVE BEEN PAYABLE WITHIN THAT YEAR UNDER THE RELEVANT LAW.] EXPLANATION 3 FOR THE REMOVAL OF DOUBTS IT IS HERE BY DECLARED THAT WHERE A DEDUCTION IN RESPECT OF ANY SUM REFERRED TO IN CLAUSE (C) [OR CLAUSE (D)] OF THIS SECTION IS ALLOWED IN COMPUTING THE INCOME REFERRED TO IN SECTION 28 OF THE PREVIOUS YEAR (BEING A PREVIOU S YEAR RELEVANT TO THE ASSESSMENT YEAR COMMENCING ON THE 1ST DAY OF APRIL 1988 OR ANY EARLIER ASSESSMENT YEAR) IN WHICH THE LIABILITY TO PAY SUCH SUM WAS INCURRED BY THE ASSESSEE THE ASSESSEE SHALL NOT BE ENTITLED TO ANY DEDUCTION UNDER THIS SECTION IN RESPECT OF SUCH SUM IN COMPUTING THE INCOME OF THE PREVIOUS YEAR IN WHICH THE SUM IS ACT UALLY PAID BY HIM. EXPLANATION 3A FOR THE REMOVAL OF DOUBTS IT IS HE REBY DECLARED THAT WHERE A DEDUCTION IN RESPECT OF ANY SUM REFERRED TO IN CLAUSE (E) OF THIS SECTION IS ALLOWED IN COMPUTING THE INCOME REFERRED TO IN SECTION 28 OF THE PREVIOUS YEAR (BEING A PREVIOUS YEAR RELEVANT T O THE ASSESSMENT YEAR COMMENCING ON THE 1ST DAY OF APRIL 1996 OR A NY EARLIER ASSESSMENT YEAR) IN WHICH THE LIABILITY TO PAY SUCH SUM WAS INCURRED BY THE ASSESSEE THE ASSESSEE SHALL NOT BE ENTITLED TO ANY DEDUCTION UNDER THIS SECTION IN RESPECT OF SUCH SUM IN COMPUT ING THE INCOME OF THE PREVIOUS YEAR IN WHICH THE SUM IS ACTUALLY PAID BY HIM. EXPLANATION 3B FOR THE REMOVAL OF DOUBTS IT IS HE REBY DECLARED THAT WHERE A DEDUCTION IN RESPECT OF ANY SUM REFERRED TO IN CLAUSE (F) OF THIS SECTION IS ALLOWED IN COMPUTING THE INCOME REFERR ED TO IN SECTION 28 OF THE PREVIOUS YEAR (BEING A PREVIOUS YEAR RELEVANT T O THE ASSESSMENT YEAR COMMENCING ON THE 1ST DAY OF APRIL 2001 OR A NY EARLIER ASSESSMENT YEAR) IN WHICH THE LIABILITY TO PAY SUCH SUM WAS INCURRED BY THE ASSESSEE THE ASSESSEE SHALL NOT BE ENTITLED TO ANY DEDUCTION UNDER THIS SECTION IN RESPECT OF SUCH SUM IN COMPUT ING THE INCOME OF THE PREVIOUS YEAR IN WHICH THE SUM IS ACTUALLY PAID BY HIM. EXPLANATION 3C FOR THE REMOVAL OF DOUBTS IT IS HE REBY DECLARED THAT A DEDUCTION OF ANY SUM BEING INTEREST PAYABLE UNDE R CLAUSE (D) OF THIS SECTION SHALL BE ALLOWED IF SUCH INTEREST HAS BEEN ACTUALLY PAID AND ANY INTEREST REFERRED TO IN THAT CLAUSE WHICH HAS B EEN CONVERTED INTO A LOAN OR BORROWING SHALL NOT BE DEEMED TO HAVE BEEN ACTUALLY PAID. EXPLANATION 3D FOR THE REMOVAL OF DOUBTS IT IS HE REBY DECLARED THAT A DEDUCTION OF ANY SUM BEING INTEREST PAYABLE UNDE R CLAUSE (E) OF THIS SECTION SHALL BE ALLOWED IF SUCH INTEREST HAS BEEN ACTUALLY PAID AND ANY INTEREST REFERRED TO IN THAT CLAUSE WHICH HAS B EEN CONVERTED INTO A LOAN OR ADVANCE SHALL NOT BE DEEMED TO HAVE BEEN AC TUALLY PAID. EXPLANATION 4 FOR THE PURPOSES OF THIS SECTION ITA NO. 670/MUM/2010 M/S. CLOUGH PROJECTS INTERNATIONAL PTY LTD. 7 (A) PUBLIC FINANCIAL INSTITUTIONS SHALL HAVE THE MEANING ASSIGNED TO IT IN SECTION 4A OF THE COMPANIES ACT 1956 (1 O F 1956); (AA) SCHEDULED BANK SHALL HAVE THE MEANING ASSIG NED TO IT IN THE EXPLANATION TO CLAUSE (III) OF SUB-SECTION (5) OF SECTION 11;] (B) STATE FINANCIAL CORPORATION MEANS A FINANCIAL CORPORATION ESTABLISHED UNDER SECTION 3 OR SECTION 3A OR AN INS TITUTION NOTIFIED UNDER SECTION 46 OF THE STATE FINANCIAL CO RPORATIONS ACT 1951 (63 OF 1951); (C) STATE INDUSTRIAL INVESTMENT CORPORATION MEANS A GOVERNMENT COMPANY WITHIN THE MEANING OF SECTION 617 OF THE CO MPANIES ACT 1956 (1 OF 1956) ENGAGED IN THE BUSINESS OF P ROVIDING LONG-TERM FINANCE FOR INDUSTRIAL PROJECTS AND [ELIG IBLE FOR DEDUCTION UNDER CLAUSE (VIII) OF SUB-SECTION (1) OF SECTION 36].] 9. BEFORE INVOKING THE PROVISIONS A DEDUCTION OTHERWI SE ALLOWABLE UNDER THIS ACT IS NECESSARY FOR CONSIDERING THE DISALLOWA NCE UNDER SECTION 43B. AS RIGHTLY SUBMITTED BY THE LEARNED COUNSEL SINCE ASS ESSEES CLAIMS ARE NOT CONSIDERED EITHER UNDER SECTION 37(1) OR UNDER SECT ION 28 OR ANY OF THE PROVISIONS IN DETERMINING THE PROFITS FROM THE HEAD BUSINESS OR PROFESSION NO AMOUNT WHICH IS NOT ALLOWED WHILE COMPUTING THE INCOME CAN BE CONSIDERED FOR DEDUCTION UNDER SECTION 43B. SINCE T HE ASSESSEES CLAIM OF EXPENDITURE MADE IN THE BOOKS ARE NOT AT ALL CONSID ERED AND EVENTHOUGH THE ASSESSEE HAS RETURNED THE LOSS TO A LARGE EXTENT T HE ASSESSMENT PROCEEDINGS INVOKING PROVISIONS OF SECTION 44BB HAS DETERMINED THE PROFIT OR GAINS OF SUCH BUSINESS CHARGEABLE TO TAX UNDER THE HEAD PRO FITS AND GAINS OF BUSINESS OR PROFESSION. SINCE THE AMOUNT DEEMED TO BE PROFIT AND GAINS OF SUCH BUSINESS CHARGEABLE TO TAX INCLUDE THE DEEMED ALLOWANCES/ DISALLOWANCES. THE PROVISIONS OF SEC 44BB ESTIMATE THE INCOME AT 10% IF GROSS RECEIPTS AND NO SEPARATE CLAIM FOR EXPENDITUR E IS ALLOWABLE. IN VIEW OF THIS WE ARE OF THE OPINION THAT THE DISALLOWANCE UN DER SECTION 43B OF ` 5 86 624/- IS NOT WARRANTED. THE CIT(A) ANALYSED TH E PROVISIONS OF SECTION 44BB AND DISTINGUISHED THE JUDGEMENT OF HON'BLE MAD RAS HIGH COURT STATING THAT THE EXCLUSION OF THE PROVISIONS ARE AP PLICABLE UPTO SECTION 43A AND NOT TO 43B. HOWEVER APPLICATION OF SECTION 43B CAN ONLY ARISE ONLY WHEN THERE IS AN AMOUNT CLAIMED AS DEDUCTION OTHERW ISE ALLOWABLE UNDER THE ACT. SINCE ASSESSEES BOOKS OF ACCOUNTS ARE REJ ECTED THE CLAIM OF DEDUCTION WAS MADE IN THE P & L ACCOUNT ARE DEEMED TO HAVE BEEN REJECTED ITA NO. 670/MUM/2010 M/S. CLOUGH PROJECTS INTERNATIONAL PTY LTD. 8 AND AS A RESULT INCOMES ARE DETERMINED ON PRESUMPT ION BASIS UNDER SECTION 43BB. THAT MAY BE THE REASON WHY THE DISALL OWANCE UNDER SECTION 40A (WHICH THE A.O. HAS ACCEPTED IN THE ORDER UNDER SECTION 154) AND UNDER SECTION 43B ARE NOT CONSIDERED BY THE ADDITIONAL CI T IN THE DIRECTIONS UNDER SECTION 144A. IN VIEW OF THIS WE ARE OF THE OPINIO N THAT THE A.O. ERRED IN INVOKING PROVISIONS OF SECTION 43B. 10. THE PRINCIPLES ESTABLISHED BY THE HON'BLE CALCUTTA HIGH COURT EVENTHOUGH DIRECTLY NOT APPLICABLE ARE STILL VALID AND IN VIEW OF THE SAME WE ARE OF THE OPINION THAT DISALLOWANCE UNDER SECTION 43B ARE NOT WARRANTED AND THAT TOO UNDER SECTION 154 WHICH IS APPLICABLE ONLY FOR RECTIFYING THE MISTAKE APPARENT FROM RECORD. THIS ISSUE IS A DEBAT ABLE ONE AND THERE ARE CONFLICTING JUDICIAL PRONOUNCEMENTS FOR DISALLOWANC E UNDER VARIOUS PROVISIONS OF THE ACT. THE HON'BLE MADRAS HIGH COUR T HELD THAT ARTIFICIAL DISALLOWANCE UNDER SECTION 40A(3) DOES NOT ARISE. T HE HON'BLE AP HIGH COURT HOWEVER UPHELD THE ORDERS OF DISALLOWANCE W HILE ESTIMATING NET PROFIT BY REJECTING THE BOOKS OF ACCOUNT. SO THIS I SSUE IS A DEBATABLE ONE WHETHER PROVISIONS OF SECTION 43B ARE APPLICABLE OR NOT. WE ARE OF THE OPINION THAT THIS IS A DEBATABLE ISSUE WHICH COULD NOT BE UNDERTAKEN IN THE PROCEEDINGS UNDER SECTION 154. ACCORDINGLY GROUND N O. 1 OF THE ASSESSEE IS ALLOWED. A.O. IS DIRECTED TO DELETE THE DISALLOWANC E SO MADE. 11. GROUND NO. 2 IS CONSEQUENTIAL IN NATURE ON LEVY OF INTEREST UNDER SECTION 220(2) AND GROUND NO. 3 BECOMES ACADEMIC IN NATURE AS IT IS ABOUT MERITS OF ADDITIONS SO MADE UNDER SECTION 143(3) WH ICH DOES NOT ARISE OUT OF THE ORDER UNDER SECTION 154. ACCORDINGLY GROUND NO. 1 IS CONSIDERED ALLOWED AND GROUND NOS. 2 & 3 ARE CONSIDERED INFRUCTUOUS. A PPEAL IS PARTLY ALLOWED. 12. THE ISSUE IN REVENUES APPEAL IS WITH REFERENCE TO THE DELETION OF LEVY OF INTEREST UNDER SECTION 234B 234C & 234D. THE A. O. WHILE PASSING THE ORDER UNDER SECTION 154 LEVIED INTEREST UNDER SECT ION 234B 234C & 234D ON THE DISALLOWANCE MADE AND CHARGED AN AMOUNT OF ` 3 31 82 773/- AND ` 43 12 099/- UNDER SECTION 234B AND 220(2) RESPECTIV ELY. THE CIT(A) DELETED THE ADDITION STATING AS UNDER: - ITA NO. 670/MUM/2010 M/S. CLOUGH PROJECTS INTERNATIONAL PTY LTD. 9 6.2 I HAVE CONSIDERED SUBMISSIONS. INTEREST U/S 23 4B IS CHARGEABLE PROVIDED THE ASSESSEE WHO IS LIABLE TO PAY ADVANCE D TAX U/S 208 HAS FAILED TO PAY SUCH TAX. THE APPELLANT IS A NON-RESI DENT HENCE ITS INCOME WAS SUBJECTED TO TDS THEREFORE THE APPELLANT WAS NO T LIABLE TO PAY ADVANCE TAX. THE HON'BLE BOMBAY HIGH COURT IN DIT ( IT) MUMBAI VS. M/S. NGC NETWORK ASIA LLC (222 CTR (BOM) 86): 2009 -TIOL-43-HC- MUM-IT) (DTD. 14 TH JAN 2009) HELD THAT WHEN A DUTY IS CAST ON THE PAYER TO PAY THE TAX AT SOURCE ON FAILURE NO INTE REST CAN BE IMPOSED ON THE PAYEE-ASSESSEE. SIMILAR VIEW ALSO EXPRESSED IN THE CASE OF DDIT (IT) VS. THORESEN CHARTERING SINGAPORE (PTE) LTD. ( 2008) (15 DTR (MUMBAI) (TRIB) 395) (DATED 26 TH JUNE 2008) AND IN MOTOROLA INC. V DCIT (95 ITD 269) (DEL) (SB). RESPECTFULLY FOLLOWING THE AFORESAID DECISION OF THE JURISDICTIONAL HIGH COURT THIS GROUND OF APPEA L IS ALLOWED. 13. THE LEARNED D.R. REFERRING TO PARA 13 OF THE ASSE SSMENT ORDER SUBMITTED THAT ASSESSEES INCOME WAS SUBJECTED TO 0 .84% AND 4.6% BY WAY OF TDS WHERE THE ASSESSEE WAS SUBJECTED TO TAX AT M UCH HIGHER RATE AND THEREFORE THE ASSESSEE SHOULD HAVE PAID ADVANCE TAX AND ACCORDINGLY THE LEVY OF INTEREST LEVY OF INTEREST UNDER SECTION 234 C IS WARRANTED. 14. THE LEARNED COUNSEL SUBMITTED THAT THIS ISSUE IS CO VERED BY THE JUDGEMENT OF THE HON'BLE BOMBAY HIGH COURT RELIED U PON BY THE CIT(A) AND AS THE ENTIRE INCOME WAS SUBJECTED TO TDS ASSESSEE WAS NOT ELIGIBLE TO PAY ADVANCE TAX. 15. WE HAVE CONSIDERED THE ISSUE. ON MERITS THE ISSUE I S IN FAVOUR OF THE ASSESSEE BY THE JUDGEMENT OF THE HON'BLE BOMBAY HIG H COURT IN THE CASE OF M/S. NGC NETWORK ASIA LLC 222 CTR (BOM) 86 WHICH T HE LEARNED CIT(A) FOLLOWED AND ALSO SIMILAR VIEWS EXPRESSED BY THE IT AT IN THE CASE OF MOTOROLA INC. VS. DCIT 95 ITD 269 (DEL)(SB). RESPECTFULLY FO LLOWING THE AFORESAID DECISIONS THE ORDER OF THE CIT(A) IS TO BE CONFIRME D. APPEAL IS DISMISSED. 16. IN THE RESULT ASSESSEES APPEAL IN ITA NO. 670/MUM /2010 IS PARTLY ALLOWED AND REVENUES APPEAL IN ITA NO. 1133/MUM/20 10 IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 19 TH JANUARY 2011. SD/- SD/- (D.K. AGARWAL) (B. RAMAKOTAIAH) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI DATED: 19 TH JANUARY 2011 ITA NO. 670/MUM/2010 M/S. CLOUGH PROJECTS INTERNATIONAL PTY LTD. 10 COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) X MUMBAI 4. THE CIT DIT (INTERNATIONAL TAXATION) MUMBAI MUMB AI CITY 5. THE DR C BENCH ITAT MUMBAI BY ORDER //TRUE COPY// ASSISTANT REGISTRAR ITAT MUMBAI BENCHES MUMBAI N.P.