SIEMENS LTD, MUMBAI v. ADDL.C.I.T. SP. RG.30, MUMBAI

ITA 6757/MUM/2011 | 1998-1999
Pronouncement Date: 30-04-2015

Appeal Details

RSA Number 675719914 RSA 2011
Assessee PAN AAACS0764L
Bench Mumbai
Appeal Number ITA 6757/MUM/2011
Duration Of Justice 3 year(s) 6 month(s) 23 day(s)
Appellant SIEMENS LTD, MUMBAI
Respondent ADDL.C.I.T. SP. RG.30, MUMBAI
Appeal Type Income Tax Appeal
Pronouncement Date 30-04-2015
Appeal Filed By Assessee
Bench Allotted E
Tribunal Order Date 30-04-2015
Date Of Final Hearing 27-03-2015
Next Hearing Date 27-03-2015
Assessment Year 1998-1999
Appeal Filed On 07-10-2011
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL E BENCH MUMBAI . . BEFORE SHRI JOGINDER SINGH JM & SHRI R.C.SHARMA AM ./ ITA NO. 6757 / MUM /20 1 1 ( / ASSESSMENT YEAR : 1998 - 99 ) SIEMENS LTD. 130 PANDURANG MARG WORLI MUMBAI - 400 016 VS. ADCIT SPL.RANGE - 30 MUMBAI - 400 038 ./ ./ PAN/GIR NO. : A A AC S 0764 L ( / APPELLANT ) .. ( / RESPONDENT ) AND ./ ITA NO.6424/MUM/2011 ( / ASSESSMENT YEAR :1998 - 99) ADCIT SPL.RANGE - 30 MUMBAI - 400 038 VS. SIEMENS LTD. 130 PANDURANG MARG WORLI MUMBAI - 400 016 ./ ./ PAN/GIR NO. : AAACS 0764 L ( / APPELLANT ) .. ( / RESPONDENT ) /ASSESSEE BY : SHRI NITESH JOSHI /REVENUE BY : MRS. MANJUNATHA SWAMY / DATE OF HEARING : 17 TH APRIL 201 5 / DATE OF PRONOUNCEME NT 30/04/2015 / O R D E R PER R.C.SHARMA (A.M) : TH ESE ARE THE APPEALS FILED BY ASSESSEE AND REVENUE AGAINST THE ORDER OF CIT(A) FOR THE ASSESSMENT YEAR 1998 - 99 IN THE MATTER OF ORDER PASSED UNDER SECTION 143(3) OF THE I.T. ACT. 2 . THE ASSESSEE I N ITS APPEAL HAS TAKEN THE FOLLOWING GROUNDS : - GROUND NO.1 - OTHER INCOME COMPRISING OF INTEREST/MANAGEMENT FEES/MISCELLANEOUS INCOME AGGREGATING TO RS. 10 92 79 182/ - TREATED AS INCOME FROM OTHER SOURCES INSTEAD OF BUSINESS INCOME. GROUND NO.2 - ADDIT IONS ON ACCOUNT OF UNUTILIZED MODVAT CREDIT TO CLOSING STOCK OF RS. 3 74 63 308/ - . GROUND NO.3 - DISALLOWANCE OF NET INVENTORY WRITTEN OFF RS. 8 13 07 484/ - . ITA NO S . 675 7& 6424 /1 1 2 GROUND NO.4 - DISALLOWANCE OF BAD DEBTS WRITTEN OFF RS. 2 05 22 730/ - . GROUND NO.5 - NON - ALLOWABILITY OF 1/10 TH REGISTRATION FEES OF RS. 1 25 000 PAID FOR INCREASING THE AUTHORISED CAPITAL UNDER SECTION 35D OF THE ACT. THE REVENUE IN ITS APPEAL HAS TAKEN THE FOLLOWING GROUNDS : - 1. 'ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE LD. CIT (A) ERRED IN TREATING THE INCENTIVE OF RS.30 LAKHS AS CAPITAL RECEIPTS RELYING UPON THE DECISION OF SPECIAL BENCH OF THE TRIBUNAL IN THE CASE OF DCIT VS RELIANCE INDUSTRIES LTD 88 ITD 273 ( MUM.) (SB) AS AGAINST THE REVENUE RECEIPT IGNORING THE DECISION OF THE HON'BLE SUPREME COURT IN THE CASE OF SAHNEY STEEL PRESS WORKS LTD VS CIT( 1997) 228 ITR 253 / 94 TAXMAN 368?' 2. 'ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE LD. CIT(A) ERRED IN TREATING THE INCENTIVE OF RS.30 LAKHS AS CAPITAL RECEIPTS RELYING UPON THE DECISION OF SPECIAL BENCH OF THE TRIBUNAL IN THE CASE OF DCIT VS RELIANCE INDUSTRIES LTD 88 ITD 273 ( MUM.) (SB) AS AGAINST THE REVENUE RECEIPT IGNORING THE FACT THAT THE DEPARTMENT HAS NOT ACCEPTED THE DECISION OF THE SPECIAL BEN CH ( SUPRA) AND FURTHER APPEAL WAS FILED BEFORE THE HON'BLE BOMBAY HIGH COURT WHICH IS STILL PENDING FOR DISPOSAL ON MERITS.?' 3. THE LD. CIT(A)'S ORDER IS PERVERSE IN LAW AND ON FACTS AND DESERVES TO BE SET ASIDE. THE APPELLANT PRAYS THAT THE ORDER OF C IT (A) ON THE GROUNDS BE SET ASIDE AND THAT OF THE AO RESTORED. THE APPELLANT CRAVES LEAVE TO AMEND OR ALTER ANY GROUND OR ADD A NEW GROUND THAT MAY BE NECESSARY. 3 . WE HAVE CONSIDERED RIVAL CONTENTIONS AND PERUSED THE RECORD. DURING THE COURSE OF SCRUT INY FOLLOWING INCOME WAS ASSESSED BY THE AO AS INCOME FROM OTHER SOURCES IN PLACE OF ASSESSEES CONTENTION REGARDING INCOME FROM BUSINESS : - THE AO ERRED IN HOLDING THAT INTEREST/INCOME AS UNDER ASSESSABLE UNDER THE HEAD INCOME FROM OTHER SOURCES RS. B ) INTEREST ON HDFC BONDS 469 887 C) INTEREST ON STAFF LOANS INTEREST ON OVERDUE 6 633 947 D) OUTSTANDINGS 57 271 999 E) INTEREST ON I.T.REFUND 3 245 346 F) MANAGEMENT FEES 16 400 000 G) MISCELLANEOUS 24 563 111 ITA NO S . 675 7& 6424 /1 1 3 4. LEARNED AR DREW OUR ATTENTION TO THE ORDER OF THE TRIBUNAL FOR THE A.YS.1993 - 94 TO 1996 - 97 DATED 31 - 1 - 2007 IN ASSESSEES OWN CASE WHEREIN INTEREST INCOME WAS TREATED AS INCOME FROM BUSINESS. 5 . ON THE OTHER HAND LEARNED DR RELIED ON THE FINDINGS RECORDED BY THE LOWER AUTHORITIES FOR TREATMENT OF VARIOUS INCOMES OFFERED BY THE ASSESSEE. 6 . WE HAVE CONSIDERED RIVAL CONTENTIONS AND ALSO DELIBERATED ON THE JUDICIAL PRONOUNCEMENTS REFERRED BY THE CIT(A) FOR HOLDING VARIOUS INCOME AS INCOME FROM OTHER SOURCES. WE HAD ALSO DELIBERATED ON THE JUDICIAL PRONOUNCEMENTS CITED AT BAR AND H O LD THAT INTEREST OF HDFC BANK RS. 4 69 887/ - THE INTEREST OF IT REFUND AMOUNTING TO RS. 32 45 346/ - IS ASSESSABLE AS INCOME FROM OTHER SOURCES. THE INTEREST ON LOANS GIVEN TO STAFF IN THE COURSE OF ITS BUSINESS I NSOFAR AS SUCH ADVANCES WAS TO BE GIVEN AS A PART OF BUSINESS NECESSITY IS ASSESSABLE AS BUSINESS INCOME . THE MANAGEMENT FESS HAS BEEN EARNED BY THE ASSESSEE IN THE COURSE OF CARRYING ON ITS BUSINESS THEREFORE THE SAME IS ASSESSABLE AS BUSINESS INCOME IN VIEW OF THE DECISION OF THE HONBLE BOMBAY HIGH COURT IN THE CASE OF GILBERT & BARKER MANUFACTURING CO. USA 111 ITR 529 (BOM) . THUS T HE INCOME RECEIVED BY THE ASSESSEE IN THE FORM O N INTEREST OF STAFF LOAN INTEREST ON OVERDUE OUTSTANDING AND MANAGEMENT FEES ARE IN THE NATURE OF BUSINESS INCOME. ACCORDINGLY WE DIRECT THE AO TO TREAT ALL THESE THREE INCOME AS INCOME FROM BUSINESS. IN RESPECT OF THE MISCELLANEOUS INCOME OF RS. 2 45 63 111/ - SINCE NO DETAIL WAS FILED BEFORE THE LOWER AUTHORITIES WE RESTOR E THE MATTER BACK TO THE FILE OF THE AO FOR DECIDING ITA NO S . 675 7& 6424 /1 1 4 AFRESH SO AS TO SUBSTANTIATE THE NATURE OF INCOME RECEIVED BY THE ASSESSEE WITH RESPECT TO NATURE OF ASSESSEES BUSINESS. WE ACCORDINGLY CONFIRM THE ACTION OF LOWER AUTHORITIES FOR TREATING THE SAME AS I NCOME FROM OTHER SOURCES . 7 . IN GROUND NO.2 ASSESSEE IS AGGRIEVED FOR ADDITION ON ACCOUNT OF UNUTILIZED MODVAT CREDIT TO CLOSING STOCK. 7. 1 WE HAVE CONSIDERED RIVAL CONTENTIONS AND FOUND THAT ASSESSEE WAS FOLLOWING EXCLUSIVE METHOD OF ACCOUNTING WHEREBY D U TY ELEMENT IN PURCHASES AND SALES IS TAKEN TO THE BALANCE SHEET AND NOT TO THE PROFIT AND LOSS ACCOUNT. THUS THE OPENING STOCK AND CLOSING STOCK BOTH ARE VALUED NET OF SUCH DUTIES. IT IS ACCEPTED POSITION PRIOR TO INSERTION OF SECTION 145A BY THE FINANCE (NO.2) ACT 1998 WITH EFFECT FROM 01.04.1999 THAT IT WAS OPEN TO THE ASSESSEE TO FOLLOW THE METHOD OF ACCOUNTING. WE FOUND THAT IN ASSESSEES OWN CASE FOR THE ASSESSMENT YEAR 1993 - 94 TO 1996 - 97 THE TRIBUNAL HAS DECIDED THIS ISSUE IN FAVOUR OF THE ASSESSEE . RESPECTFULLY FOLLOWING THE ORDER OF THE TRIBUNAL IN ASSESSEES OWN CASE WE DIRECT THE AO TO DELETE THE ADDITION MADE ON ACCOUNTS OF UNUTILIZED MODVAT CREDIT. 8. THE NEXT GRIEVANCE OF THE ASSESSEE RELATES TO ALLOWANCE OF NET INVENTORY WRITE OFF. WE HAVE CONSIDERED RIVAL CONTENTIONS AND FOUND THAT ASSESSEE CHARGES COST OF ACTUAL CONSUMPTION OF RAW MATERIALS AND BROUGHT OUT OF COMPONENTS TO MATERIAL CONSUMPTION ACCOUNT. THE COST OF DIFFERENCE IN THE RAW MATERIALS AND BROUGHT OUT COMPONENTS DUE TO EXCESSES AND SHORTAGES ON PHYSICAL VERIFICATION AND PART AND FULL WRITE OFF ITA NO S . 675 7& 6424 /1 1 5 DUE TO OBSOLESCENCE IS SEPARATELY SHOWN UNDER THE HEAD INVENTORY WRITE OFF. WE FOUND THAT ASSESSEE HAS ALSO ACCOUNTED FOR AS INCOME IN RESPECT OF SALE OF SCRAP IN THE SUBSEQUENT YEAR. SINC E THIS METHOD OF ACCOUNTING HAS BEEN CONSISTENTLY FOLLOWED BY THE ASSESSEE IN EARLIER YEAR AS WELL AS IN SUBSEQUENT YEAR THERE IS NO JUSTIFICATION FOR DISALLOWING SCRAP INVENTORY WRITTEN OFF IN THE BOOKS OF ACCOUNTS. SINCE T HE ASSESSEE HAS ACCOUNTED FOR I NCOME EARNED IN RESPECT OF OBSOLETE STOCK OF THE SUBSEQUENT YEAR AND THE SAME HAVE ALREADY BEEN OFFERED FOR TAX AND ACCEPTED BY THE DEPARTMENT NOT ALLOWING SUCH INVENTORY WRITTEN OFF AMOUNTS TO DOUBLE TAXATION OF THE SAME INCOME. ACCORDINGLY WE DIRECT T HE AO TO DELETE THE DISALLOWANCE . 9. THE NEXT GRIEVANCE RELATES TO THE ALLOWANCE OF BAD DEBTS WRITTEN OFF. FROM THE RECORD WE FOUND THAT ASSESSEE HAS WRITTEN OFF DEBTS WHICH ARE NOT RECOVERABLE. ALL THESE BAD DEBTS WERE RELATING TO THE OLD INVOICES INCOME OF WHICH HAS ALREADY BEEN ACCOUNTED FOR IN EARLIER YEARS THEREFORE THERE IS NO REASON TO DECLINE THE CLAIM OF BAD DEBTS U/S.36(1)(VII) . THE ISSUE OF ALLOWING OF CLAIM OF BAD DEBTS IS COVERED BY THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF TR F LTD. 323 ITR 397 (SC). HOWEVER IN RESPECT OF PAYMENT ON WHICH TDS CERTIFICATE HAS NOT ISSUED BY THE DEDUCTORS IS TO BE CONSIDERED FOR DEDUCTION AS BUSINESS LOSS. TO THIS EXTENT WE RESTORE THE MATTER BACK TO THE FILE OF THE AO FOR DECIDING ALTERNATIVE CLAIM OF BUSINESS LOSS. 10. THE NEXT GRIEVANCE RELATES TO ALLOWANCE OF DEDUCTION UNDER SECTION 35D OF THE ACT. SINCE NO DETAIL WAS FURNISHED BEFORE THE LOWER AUTHORITIES ITA NO S . 675 7& 6424 /1 1 6 WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE LOWER AUTHORITIES FOR DECLIN ING CL AIM OF DEDUCTION U/S.35D. 11. IN THE APPEAL FILED BY THE REVENUE (I.E. ITA NO. 6424/MUM/2011) THE REVENUE IS BASICALLY AGGRIEVED FOR TREATMENT OF INCENTIVE AS CAPITAL RECEIPT. FROM THE RECORD WE FOUND THAT ASSESSEE WAS IN RECEIPT OF INCENTIVE AS PER SCHEME ENUNCIATED IN RESOLUTION DTD.30 - 9 - 1998 BY THE INDUSTRIES ENERGY AND LABOUR DEPARTMENT GOVERNMENT OF MAHARASHTRA. THE OBJECT OF THE SCHEME WAS TO ACHIEVE DISPERSAL OF INDUSTRIES OUTSIDE THE BOMBAY - THANE - PUNE BELT AND TO ATTRACT THEM TO THE UNDERDEVELOPED AND DEVELOPING AREAS OF THE STATE. THE CIT(A) HAS TREATED SUCH RECEIPT AS CAPITAL IN NATURE BY FOLLOWING THE DECISION OF THE ITAT SPECIAL BENCH IN THE CASE OF RELIANCE INDUSTRIES LTD. 88 ITD 273. WE FOUND THAT EXACTLY SIMILAR ISSUE HAS BEEN DECIDED BY THE HONBLE BOMBAY HIGH COURT IN THE CASE OF KIRLOSKA R OIL ENGINES LTD. 364 ITR 88 (BOM) . WHILE DEALING WITH THE SAME SCHEME THE HONBLE HIGH COURT HELD THAT THE INCENTIVE RECEIVED WOULD BE A CAPITAL RECEIPT NOT CHARGEABLE TO TAX UNDER THE ACT. RESPECTFUL LY FOLLOWING THE DECISION OF THE HONBLE JURISDICTIONAL HIGH COURT WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE CIT(A) FOR TREATING THE INCENTIVE AS CAPITAL IN NATURE. 12 . IN THE RESULT APPEAL OF THE REVENUE IS DISMISSED WHEREAS THE APPEAL OF THE A SSESSEE IS ALLOWED IN PART . ORDER PRONOUNCED IN THE OPEN COURT ON THIS 30/04 / 201 5 . ITA NO S . 675 7& 6424 /1 1 7 30/04 / 201 5 SD/ - SD/ - ( ) ( JOGINDER SINGH ) ( . . ) ( R.C.SHARMA ) / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI ; DATED 30/04 /201 5 . . /PKM . / PS / COPY OF THE ORDER FORWARDED TO : / BY ORDER / ( ASSTT. REGISTRAR) / ITAT MUMBAI 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ( ) / THE CIT(A) MUMBAI. 4. / CIT 5. / DR ITAT MUMBAI 6. / GUARD FILE. //TRUE COPY//