Asstt.CIT Cir. 1(1),, Pune v. Akzo Noble Chemicals India Ltd., Pune

ITA 69/PUN/2009 | 2004-2005
Pronouncement Date: 28-02-2011 | Result: Dismissed

Appeal Details

RSA Number 6924514 RSA 2009
Bench Pune
Appeal Number ITA 69/PUN/2009
Duration Of Justice 2 year(s) 1 month(s) 12 day(s)
Appellant Asstt.CIT Cir. 1(1),, Pune
Respondent Akzo Noble Chemicals India Ltd., Pune
Appeal Type Income Tax Appeal
Pronouncement Date 28-02-2011
Appeal Filed By Department
Order Result Dismissed
Bench Allotted B
Tribunal Order Date 28-02-2011
Assessment Year 2004-2005
Appeal Filed On 15-01-2009
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH B PUNE BEFORE SHRI I.C. SUDHIR (JM) AND SHRI G.S. PANNU (AM) ITA NO. 1317 /PN/200 7 ( ASSTT. YEAR : 200 4 - 05 ) AKZO NOBEL CHEMICALS (INDIA) LIMITED 501 502 5 TH FLOOR SAN MAHU COMPLEX 5 BUND GARDEN R OAD OPPOSITE POONA CLUB PUNE 411 001 PAN : NOT AVAILABLE .. APPELLANT V. THE DEPUTY COMMISSIONER OF INCOME TAX CIRCLE 1(1) PUNE . RESPONDENT ITA NO. 69 /PN/200 9 (ASSTT. YEAR : 200 4 - 05 ) THE DEPUTY COMMISSIONER OF INCOME TAX CIRCLE 1(1) PUNE . APPELLANT V. AKZO NOBEL CHEMICALS (INDIA) LIMITED . RESPONDENT 501 502 5 TH FLOOR SAN MAHU COMPLEX 5 BUND GARDEN ROAD OPPOSITE POONA CLUB PUNE 411 001 PAN : NOT AVAILABLE A SSESSEE BY : SH RI ANUJ DESHMUKH DEPARTMENT BY : SHRI A .S. SINGH ORDER PER I.C. SUDHIR J M THE ASSESSEE HAS QUESTIONED FIRST APPELLATE ORDER ON SEVERAL GROUNDS . T HE LD CIT(A) HAS UPHELD THE ACTION OF THE A.O CONSIDERING THE SURPLUS OF RS. 2 32 59 000/ - ARISING OU T OF PRE - PAYMENT OF THE DEFERRED SALES TAX LIABILITY UNDER THE SALES TAX DEFER R ED LOAN SCHEME OF GOVERNMENT OF THE MAHARASHTRA AS REVENUE/TRADING RECEIPTS CHARGEABLE TO TAX U/S. 41(1) OF THE ACT. ITA NO 1317 /PN/200 7 &69/PN/2009 AKZO NOBEL CHEMICALS (INDIA) LTD. A.Y.2004 - 05 PAGE OF 5 2 2. SINCE THE ISSUE RAISED IN THE GROUNDS IS NOW FULLY COV ERED BY THE DECISION OF SPECIAL BENCH OF THE TRIBUNAL IN THE CASE OF SULZER INDIA LTD. V/S. JCIT AND OTHERS ITA NO. 2944/MUM/2007 ( A.Y. 2003 - 04) AND OTHERS ORDER DT. 10 TH NOVEMBER 2010 WE REJECTED THE REQUEST OF ASSESSEE FOR ADJOURNMENT. THE HEARING W AS ACCORDINGLY PROCEEDED. 3. WE FIND THAT THE SPECIAL BENCH OF THE TRIBUNAL IN THE CASE OF SULZER INDIA LTD. V/S. JCIT(SUPRA) UNDER ALMOST SIMILAR CIRCUMSTANCES ON AN IDENTICAL ISSUE HAS COME TO THE CONCLUSION THAT THE DEFERRED SALES - TAX L IABILITY BE ING DIFFERENCE BETWEEN THE PAYMENT OF NET PRESENT VALUE AGAINST THE FUTURE LIABILITY CREATED BY THE ASSESSEE UNDER THE CAPITAL RESERVE ACCOUNT IN ITS BOOKS OF ACCOUNT IS A CAPITAL RECEIPT AND CANNOT BE TERMED AS PERMISSION/CESSATION OF LIABILITY AND CONSEQ UENTLY NO BENEFIT HAS ARISEN TO THE ASSESSEE IN TERMS OF SECTION 41(1)(A ) OF THE INCOME TAX ACT 1961. THE RELEVANT EXTRACT OF FACTS IN THE SAID CASE OF SULZER INDIA LTD. V/S. JCIT IS BEING REPRODUCED HEREIN - BELOW FOR A READY REFERENCE : NOW COMING BA CK TO THE CASE BEFORE US THE ASSESSEE WAS LIABLE TO PAY SALES TAX AMOUNTS COLLECTED FROM 1.11.1989 TO 31.10.1996 PAYMENTS OF WHICH WERE DEFERRED UNDER THE SCHEME AND THE AMOUNTS WERE PAYABLE AFTER TWELVE YEARS IN SIX EQUAL ANNUAL INSTALMENTS COMMENCING FROM 1.05.2003 WHICH MEANS THAT THE LIABILITY WAS PAYABLE IN FUTURE. LATER ON THE STATE GOVERNMENT CAME WITH A SCHEME BY WHICH IT WAS PROVIDED THAT IF SOME DEALER OPTS THEN THEY COULD PAY THE FUTURE LIABILITY AT A DISCOUNTED VALUE OR WHAT WE MAY CALL N ET PRESENT VALUE IMMEDIATELY. THUS IN THIS SITUATION IT CANNOT BE CONSTRUED AS REMISSION OF LIABILITY; BECAUSE THE STATE GOVERNMENT HAS NOT WAIVED ANY OF THE LIABILITY AS GIVEN IN THE ILLUSTRATIONS. HAD THE STATE GOVERNMENT ACCEPTED LESSER AMOUNT AFTER TWELVE YEARS OF REDUCED SUCH INSTALMENTS THEN IT COULD HAVE BEEN A CASE OF REMISSION OR CESSATION. HOWEVER IN THE CASE BEFORE US THE STATE GOVERNMENT HAS CHOSEN TO RECEIVE THE MONEY IMMEDIATELY WHICH WAS RECEIVABLE FROM 1.05.2003 TO 1.05.2008. THE AMOUNT OF RS.3 37 13 393/ - WAS ACTUALLY PAID TO SICOM ON 30.12.2002. THUS THE AMOUNT WHICH WAS ITA NO 1317 /PN/200 7 &69/PN/2009 AKZO NOBEL CHEMICALS (INDIA) LTD. A.Y.2004 - 05 PAGE OF 5 3 PAYABLE FROM 1.05.2003 TO 1.05.2008 HAS BEEN PAID ON 30.12.2002. THUS IT DOES NOT SATISFY THE CONDITION OF ACTUAL REMISSION IN PRAESENTI AS OPINED BY THE LEA RNED AUTHORS IN THE ABOVE COMMENTARY. IT IS A SIMPLE CASE OF COLLECTING THE AMOUNT AT NET PRESENT VALUE WHICH IS DUE LATER ON AND EVEN THE FORMULA FOR COLLECTING THE NET PRESENT VALUE WAS ALSO GIVEN BY THE SICOM AND THE AMOUNTS HAVE BEEN PAID AS PER T HAT FORMULA. THEREFORE SUCH PAYMENT OF NET PRESENT VALUE OF THE FUTURE LIABILITY CANNOT BE IN OUR OPINION CLASSIFY AS REMISSION OR CESSATION OF THE LIABILITY SO AS TO ATTRACT THE PROVISIONS OF SECTION 41(1)(A) OF THE INCOME TAX ACT 1961. WE ARE FULL Y CONSCIOUS THAT ISSUE BEFORE US IS REGARDING STATUTORY LIABILITY AND THE ABOVE DISCUSSION AND THE PROVISIONS OF THE INDIAN CONTRACT ACT REFERRED TO BY US IN THE ABOVE PARA RELATE TO CONTRACTUAL LIABILITY. HOWEVER WE HAVE REFERRED TO THESE PROVISIONS JUST TO UNDERSTAND THE MEANING OF THE EXPRESSION REMISSION FOR THE PURPOSE OF DECIDING THE CASE BEFORE US UNDER THE INCOME TAX ACT AND OUR DECISION IS BASED ON THE PROVISIONS OF THE INCOME TAX ACT 1961. 4 . THE FINDING OF SPECIAL BENCH GIVEN IN PARA NO. 109 IS RE PRODUCED HERE - UNDER: 109. FOR THE REASONS AS STATED ABOVE WE HOLD THAT THE DEFERRED SALES TAX LIABILITY RS.4 14 87 984/ - BEING THE DIFFERENCE BETWEEN THE PAYMENT OF NET PRESENT VALUE RS.3 37 13 393/ - AGAINST THE FUTURE LIABILITY OF RS.7 52 01 3 78/ - CREDITED BY THE ASSESSEE UNDER THE CAPITAL RESERVE ACCOUNT IN ITS BOOKS OF ACCOUNT IS A CAPITAL RECEIPT AND CANNOT BE TERMED AS REMISSION/CESSATION OF LIABILITY AND CONSEQUENTLY NO BENEFIT HAS ARISEN TO THE ASSESSEE IN TERMS OF SEC. 41(1)(A) OF THE IN COME TAX ACT 1961. ACCORDINGLY THE MODIFIED QUESTION AS FRAMED IN PARA - 5 OF THIS ORDER IS ANSWERED IN FAVOUR OF THE ASSESSEE AND AGAINST THE REVENUE. 5 . WE THUS SET ASIDE THE MATTER TO THE FILE OF THE LD CIT(A) TO DECIDE THE ISSUE RAISED IN THE GROUN D IN THE PRESENT APPEAL AFRESH FOLLOWING THE DECISION OF SPECIAL BENCH IN THIS REGARD IN THE CASE OF SULZER INDIA LIMITED V/S. JCIT AFTER AFFORDING OPPORTUNITY OF BEING ITA NO 1317 /PN/200 7 &69/PN/2009 AKZO NOBEL CHEMICALS (INDIA) LTD. A.Y.2004 - 05 PAGE OF 5 4 HEARD TO THE PARTIES. THE APPEAL IS ACCORDINGLY ALLOWED FOR STATISTICAL PURPOSES. IT A NO.69/PN/2009 6. THE REVENUE HAS QUESTIONED FIRST APPELLATE ORDER WHEREBY THE LD CIT(A) HAS CANCELLED THE PENALTY OF RS.84 00 000/ - LEVIED U/S. 271(1)(C ) OF THE ACT. 7. HAVING GONE THROUGH THE ORDERS OF THE LOWER AUTHORITIES WE FIND THAT THE A.O HA D LEVIED PENALTY IN QUESTION ON THE BASIS THAT REMISSION OF SALES - TAX LIABILITY ALLOWED AS DEDUCTION U/S. 43B CONSTITUTED THE INCOME OF THE ASSESSEE AND A WRONG CLAIM OF DEDUCTION OF THE REMITTED LIABILITY TANTAMOUNTS TO FURNISHING INACCURATE PARTICULARS OF INCOME WARRANTING LEVY OF PENALTY. THE LD CIT(A) HAS DELETED THE PENALTY MAINLY ON THE BASIS THAT IN THE PRESENT CASE THE QUANTUM AMOUNT WHICH HAS BEEN TAKEN TO BE ON ACCOUNT OF REVENUE RECEIPT AS AGAINST CAPITAL RECEIPT CLAIMED BY THE APPELLANT CANNO T BE TREATED FURNISHING OF INACCURATE PARTICULARS OF INCOME ON THE PART OF THE ASSESSEE. THE EXPLANATION OF THE ASSESSEE FOR NOT SHOWING THE QUANTUM AMOUNT ON WHICH PENALTY HAS BEEN IMPOSED AS INCOME HAS BEEN ACCEPTED TO BE BONAFIDE. THE LD CIT(A) HAS FO LLOWED SEVERAL DECISIONS OF HONBLE SUPREME COURT IN THIS REGARD. WE FULLY CONCUR WITH THE FINDING OF THE LD CIT (A) AS IN THE PRESENT CASE THE ASSESSEE HAD FURNISHED ALL THE NECESSARY INFORMATION ABOUT THE QUANTUM AMOUNT CLAIMING THE SAME AS CAPITAL REC EIPT. MERELY BECAUSE THE A.O DID NOT AGREE WITH THE SAME AND TREATED THIS AMOUNT AS REVENUE RECEIPT DOES NOT LEAD TO A CONCLUSION BEYOND DOUBT THAT IN RELATION TO THAT AMOUNT THERE WAS CONCEALMENT OF PARTICULARS OF INCOME OR FURNISHING INACCURATE PARTIC ULARS THEREOF ON THE PART OF THE ASSESSEE TO ATTRACT THE PENAL PROVISION U/S. 271(1)(C ) OF THE ACT. WE THUS ITA NO 1317 /PN/200 7 &69/PN/2009 AKZO NOBEL CHEMICALS (INDIA) LTD. A.Y.2004 - 05 PAGE OF 5 5 DO NOT FIND REASON TO INTERFERE WITH THE FIRST APPELLATE ORDER WHICH IS COMPREHENSIVE AND REASONED ONE. SAME IS UPHELD. THE GROUNDS ARE ACCORDING LY REJECTED. 8. CONSEQUENTLY APPEAL IS DISMISSED. 9. IN THE RESULT ITA NO. 1317/PN/2007 IS ALLOWED FOR STATISTICAL PURPOSES AND ITA NO. 69/PN/2009 IS DISMISSED. THE ORDER IS PRONOUNCED IN THE OPEN COURT ON 28 TH FEBRUARY 201 1 . SD/ - SD/ - ( G.S. PANNU ) ACCOUNTANT MEMBER ( I.C. SUDHIR ) JUDICIAL MEMBER PUNE DATED THE 28 TH FEBRUARY 20 1 1 US COPY OF THE ORDER IS FORWARDED TO : 1. THE A PPELLANT 2. THE RESPONDENT 3. THE CIT I PUNE 4. THE CIT(A) - I PUNE 5. THE D. R. B BENCH PUNE 6. GUARD FILE BY ORDER ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL PUNE