M/s Pb State Forest Development Corpn. Ltd., Chandigarh V. ACIT, Chandigarh

CO 12/CHANDI/2012

• Counselvise Citation: [2012] 122 COUNSELVISE.COM (IT) 6847 (ITAT-CHANDIGARH)
• Appeal Type: Cross Objection
• Pronouncement Date: 30-01-2012
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 27-12-2012
• Assessment Year: 2008-2009
• Appeal Filed On: 01-03-2012
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: JYOTI KUMARI
• Section: 43B

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL CHANDIGARH BENCH A, CHANDIGARH BEFORE SHRI T.R. SOOD, A.M AND MS. SUSHMA CHOWLA, J M ITA NO. 75/CHD/2012 ASSESSMENT YEAR : 2008-09 A.C.I.T. CIRCLE 4(1) V M/S PUNJAB STATE FOREST CHANDIGARH DEVELOPMENT CORPORATION LTD. SCO 112-113 SECTOR 34-A, CHANDIGARH AABCP 2806 R CROSS-OBJECTIONS NO. 12/CHD/2012 ARISING OUT OF ITA NO. 75/CHD/2012 ASSESSMENT YEAR : 2008-09 M/S PUNJAB STATE FOREST V A.C.I.T. CIRCLE 4(1) DEVELOPMENT CORPORATION CHANDIGARH LTD. SCO 112-113 SECTOR 34-A, CHANDIGARH AABCP 2806 R (APPELLANT) (RESPONDENT DEPARTMENT BY SMT. JYOTI KUMARI ASSESSEE BY: SHRI ASHWANI KUMAR DATE OF HEARING 23.1.2013 DATE OF PRONOUNCEMENT 30.1.2013 O R D E R PER T.R.SOOD, A.M THIS APPEAL IS DIRECTED AGAINST THE ORDER PASSED BY THE LD. CIT(A), CHANDIGARH DATED 17.11.2011 AND THE ASS ESSEE HAS FILED AN CROSS-OBJECTIONS. ITA NO. 75/CHD/2012 REVENUES APPEAL 2. IN THIS APPEAL THE REVENUE HAS RAISED THE FOLLOW ING GROUNDS: 1 ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND I N LAW, THE LD. CIT(A) HAS ERRED IN ALLOWING APPEAL OF THE ASSESSEE WITHOUT APPRECIATING THE FACTS OF THE CASE . 2 ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THE LD. CIT(A) HAS ERRED IN DELETING THE ADDITI ON ON ACCOUNT OF UNPAID ROYALTY MADE BY THE ASSESSING OF FICER 2 BY INVOKING PROVISIONS OF SECTION 43B(A) OF INCOME- TAX ACT. 3. AFTER CONSIDERING THE RIVAL SUBMISSIONS WE FIND THAT DURING THE ASSESSMENT PROCEEDINGS THE ASSESSING OFFICER N OTICED THAT THE ASSESSEE HAS DEBITED AN AMOUNT OF RS. 8,44,02,8 28/- ON ACCOUNT OF ROYALTY TO THE FOREST DEPARTMENT, PUNJA B. PART OF THE ROYALTY WAS PAID IN ASSESSMENT YEAR 2007-08 AND PART OF IT WAS PAID BEFORE THE DUE DATE OF FILING OF RETURN. HOWEVER, ROYALTY PAYABLE ON 31.3.2007 WHICH HAS NOT BEEN PAI D TILL DUE DATE OF FILING OF RETURN, HAD NOT BEEN ADDED BACK T O THE COMPUTATION OF INCOME THOUGH THE ASSESSEE WAS REQUI RED TO DO THE SAME U/S 43B. THEREFORE, A SHOW CAUSE NOTICE WAS ISSUED AND A DETAILED REPLY DATED 2.12.2008 WAS FILED. IT WAS MAINLY SUBMITTED THAT THE ASSESSEE WAS A CORPORATION SET U P BY THE PUNJAB GOVERNMENT IN 1983 WITH THE MAIN OBJECT TO O BTAIN STANDING TREES FROM THE STATE FOREST DEPARTMENT ON PAYMENT OF THEIR PRICE, HARVEST THEM WITH MORE EFFICIENT TOOLS AND MAKE TIMBER WOOD AVAILABLE TO RIGHT CONSUMERS. THE CORP ORATION WAS MAINLY SET UP TO ELIMINATE UNSCRUPULOUS MIDDLE MEN. THUS THE ASSESSEE WAS MAINLY PURCHASING TREES FROM PUNJA B STATE FOREST DEPARTMENT AND ROYALTY WAS IN FACT COST OF T HE STANDING TREES AND WOULD NOT BE COVERED BY THE DEFINITION OF ROYALTY. THE ASSESSING OFFICER DID NOT ACCEPT THE CONTENTION S AND OBSERVED THAT IN CASE OF STAR PAPER MILLS LTD. V CI T, 252 ITR 337 (CAL) IT WAS CLEARLY HELD THAT ROYALTY PAYABLE FOR OBTAINING EUCALYPTUS WAS STATUTORY LIABILITY AND NOT A CONTRA CTUAL LIABILITY. HE ALSO PLACED RELIANCE ON VARIOUS CASE LAWS WHERE IT WAS HELD THAT ROYALTY WAS A STATUTORY DEMAND, THEREFORE, PRO VISIONS OF SECTION 43B WOULD BE ATTRACTED. HE ALSO REFERRED T O DECISION OF CHANDIGARH BENCH OF THE TRIBUNAL BUT DID NOT ACCEPT THE SAME AND THE RELATING DISCUSSION REGARDING THIS AT PAGE 7 IS AS UNDER: 3 THE ISSUE OF ROYALTY IS TAX OR NOT ALSO CAME BEFOR E HON'BLE ITAT, CHANDIGARH BENCH IN THE CASE OF ACIT, SHIMLA V M/S H.P.STATE FOREST CORP LTD (ITA NO. 149 TO 153/CHD/2005) DECIDED ON 14.6.2006. THE RELEVANT PORTION OF THE SAID ORDER IS ATTACHED AS ANNEXURE-A TO THIS ORDER. HOWEVER, HERE AGAIN THE HON'BLE ITAT DISCUS SED THE CASE OF GORELAL DUBEY V CIT, 248 ITR 3 (S.C), I NDIA CEMENT LTD V. STATE OF TAMIL NADU, 188 ITR 690 (S.C ) AND STATE OF WEST BENGAL & ANOTHER V KESO RAM INDUSTRIES LTD. & OTHERS, 266 ITR 721 (S.C) ONLY. THE ISSUE BEFORE THEM WAS THUS LIMITED TO THE ISSUE AS TO WHETHER ROYALTY IS TAX OR NOT AND AFTER CONSIDERI NG ABOVE SAID JUDGMENTS THIS WAS HELD THAT ROYALTY IS NOT TAX. HOWEVER, THE ISSUE WHETHER ROYALTY IS COVERE D BY TERMS TAX, DUTY, CESS OR FEE, BY WHATEVER NAME CAL LED OR NOT WAS NEVER DISCUSSED OR DECIDED. SO THE SAID JUDGMENT OR HON'BLE ITAT IS NOT RELEVANT IN THE PRE SENT CASE IN VIEW OF THE PROVISIONS OF SECTION 43B(A). IN THIS BACKGROUND HE ADDED ROYALTY PAYABLE FOR EAR LIER YEARS VIDE PARA 5.5 WHICH IS AS UNDER: CONSIDERING THE ABOVE ASPECTS, ROYALTY PAID BY THE ASSESSEE IS CONSIDERED TO BE COVERED BY PROVISIONS OF SECTION 43B(A) OF INCOME-TAX ACT AND THE AMOUNT REMAINING UNPAID IS DISALLOWED. THE SAME IS WORKED OUT AS FOLLOWS: ROYALTY RELATING TO EARLIER YEARS PAYABLE AS ON 1.4.2007 RS. 9,58,00,976.32 ROYALTY FOR FINANCIAL YEAR 2007-08 RS. 8,44,02,828.26 RS. 18,02,03,804.58 LESS: AMOUNT OF ROYALTY PAID UPTO 31.3.2008 RS. 9,58,49,015.50 THE DATE OF FILING OF RETURN NIL RS. 9,58,49,015.50 ROYALTY WHICH REMAINED UNPAID RS. 8,43,54,789.08 4 ON APPEAL, THE LD. CIT(A) CONFIRMED THE ADDITION. 5 BEFORE US, THE LD. COUNSEL OF THE ASSESSEE SUBMIT TED THAT THE ISSUE IS COVERED BY ASSESSEES OWN CASE OF ASSE SSMENT YEAR 2005-06 BY THE ORDER OF THE TRIBUNAL. 6 ON THE OTHER HAND, THE LD. DR FOR THE REVENUE STR ONGLY SUPPORTED THE ORDER OF THE LD. CIT(A). 4 7 WE HAVE HEARD THE RIVAL SUBMISSIONS CAREFULLY AND FIND THAT THE TRIBUNAL IN ASSESSEES OWN CASE FOR ASSESS MENT YEAR 2005-06 IN ITA NO. 693/CHD/2008 DISCUSSED THE ISSUE IN DETAIL AND IT WAS MAINLY OBSERVED THAT THE ASSESSEE HAS PA ID ONLY COST OF THE TREES TO THE FOREST DEPARTMENT AND THER EFORE, SAME CAN NOT BE CONSTRUED AS ROYALTY OR TAX. THE TRIBUN AL HAD MAINLY RELIED ON THE DECISION OF HON'BLE RAJASTHAN HIGH COURT IN CASE OF CIT V. UDAIPUR DISTILLERY CO. LTD. WHICH HAS BEEN NOW CONFIRMED BY THE HON'BLE SUPREME COURT AND REPO RTED AS CIT V. UDAIPUR DISTILLERY CO. LTD., 314 ITR 188 (S. C). NO PURPOSE WOULD BE SERVED TO EXTRACT ALL THE PARAS OF EARLIER TRIBUNAL ORDER AND THEREFORE, FOR THE SAKE OF BREVI TY, WE ARE REPRODUCING PARA 38 AS UNDER: 38 - IN THE LIGHT OF THE ABOVE DISCUSSION, AN IRRESISTIBLE CONCLUSION IS THAT THE ROYALTY PAYABLE BY THE APPELLANT CORPORATION TO THE GOVERNMENT OF PUNJAB I S NOT A STATUTORY IMPOST. HENCE, IT IS CONCLUDED THAT TH E AMOUNT SO PAID BY THE APPELLANT IS NOT HIT BY THE PROVISIONS CONTAINED IN SECTION 43B OF THE ACT AS I T IS NEITHER TAX OR DUTY OR CESS OR FEE SO AS TO CONSTIT UTE A STATUTORY IMPOST LIABLE TO FALL WITHIN THE SCOPE OF THE PROVISIONS CONTAINED IN SECTION 43B OF THE ACT. IN VIEW OF THE ABOVE, IT IS HELD THAT THE DEDUCTION SO CLAIMED OF RS. 3,33,22,619/- IS ALLOWABLE IN ACCORDANCE WITH LAW. 8 FOLLOWING THE ABOVE ORDER, WE DECIDE THE ISSUE AG AINST THE REVENUE AND THE APPEAL OF THE REVENUE IS DISMIS SED. CROSS-OBJECTIONS NO. 12/CHD/2012 9 IN THIS CROSS-OBJECTIONS THE ASSESSEE HAS RAISED THE FOLLOWING GROUND: THAT ORDER PASSED U/S 250(6) BY THE LD. CIT(A), CHANDIGARH IS AGAINST LAW AND FACTS ON THE FILE IN AS MUCH AS HE WAS NOT JUSTIFIED TO ARBITRARILY UPHOLD ADDIT ION OF RS. 1,11,759/- ON ACCOUNT OF INTEREST FROM BANKS. 10 AFTER CONSIDERING THE RIVAL SUBMISSIONS WE FIND THAT DURING THE ASSESSMENT PROCEEDINGS THE ASSESSING OFF ICER 5 NOTICED THAT THE ASSESSEE HAS SHOWN INTEREST INCOME ON FIXED DEPOSITS AMOUNTING TO RS. 2,26,57,362/- IN THE PROF IT AND LOSS ACCOUNT. THE DETAILS SUBMITTED DEPICTED ACTUAL INT EREST OF RS. 2,27,69,121/-. THE DIFFERENCE OF RS. 1,11,759/- WA S NOT SHOWN BY THE ASSESSEE AND ACCORDINGLY THE SAME WAS ADDED TO THE INCOME OF THE ASSESSEE. 11 BEFORE THE LD. CIT(A) IT WAS MAINLY SUBMITTED TH AT WHATEVER INTEREST APPEARED IN THE BOOKS OF ACCOUNT, WAS SHOWN AS INTEREST INCOME. IT WAS FURTHER SUBMITTED THAT SYSTEM OF ACCOUNTING WITH RESPECT TO INTEREST ON FDRS CONTINU ES TO BE THE SAME AS WAS IN THE PAST YEARS. IT IS THUS PRAYED T HAT INTEREST ADDED TO RS. 1,11,759/- BE KINDLY DELETED. THE DIF FERENCE BETWEEN THE INTEREST DECLARED BY THE APPELLANT AND THE INTEREST CREDITED BY THE BANK AS PER THE TDS CERTIFICATES IS ONLY BECAUSE OF THE FACT THAT THE APPELLANT IS ACCOUNTIN G FOR THE INTEREST ON THE BASIS OF THE NUMBER OF DAYS INVOLVE D IN THE FINANCIAL YEAR FOR WHICH THE FDR WAS WITH THE BANK, WHEREAS THE BANK IS CREDITING INTEREST ON THE BASIS OF THE CLOSING DATES AS PER THEIR RECORD. THE PERUSAL OF THE CHART WILL REVEAL THAT THE APPELLANT HAS DULY ACCOUNTED FOR THE TOTAL AMOU NT OF INTEREST WHICH WAS DUE ON THE FDR DURING THE YEAR E NDING 31.3.2008. 12 THE LD. CIT(A) OBSERVED THAT THE ASSESSEE SHOULD HAVE DECLARED THE INTEREST AS CREDITED BY THE BANK AND T HEREFORE, CONFIRMED THE ADDITION. 13 BEFORE US, THE LD. COUNSEL OF THE ASSESSEE SUBMI TTED THAT THE ASSESSEE WAS ACCOUNTING FOR INTEREST ON THE BAS IS OF NUMBER OF WORKING DAYS INVOLVED IN THE FINANCIAL YE AR FOR WHICH FDR WAS WITH THE BANK WHEREAS INTEREST WAS CR EDITED BY 6 THE BANK ON THE BASIS OF CLOSING DATES AS PER THEI R RECORD. HE FURTHER SUBMITTED THAT EXCESS INTEREST, IF ANY, HAS ALREADY BEEN INCLUDED IN THE INCOME OF NEXT YEAR AND THEREFORE, SAME CANNOT BE TAXED TWICE AND THUS THE ADDITION SHOULD BE DELE TED. 14 ON THE OTHER HAND, THE LD. DR FOR THE REVENUE SU PPORTED THE ORDER OF THE ASSESSING OFFICER. 15 AFTER CONSIDERING THE RIVAL SUBMISSIONS WE FIND THAT ONCE THE INTEREST SHOWN IN THE TDS CERTIFICATE SAME FIGU RE HAS TO BE TAKEN AS INCOME OF THE ASSESSEE. IF THERE WAS ANY DIFFERENCE, THE ASSESSEE SHOULD HAVE FILED ITS OWN WORKING. HOW EVER, NO SUCH WORKING HAS BEEN FILED BEFORE THE ASSESSING OF FICER, CIT(A) OR EVEN BEFORE US. THEREFORE, IN THE ABSENC E OF ANY JUSTIFICATION WE CONFIRM THE ADDITION ON ACCOUNT OF INTEREST AMOUNTING TO RS. 1,11,759/-. AS FAR AS ALTERNATIVE SUBMISSIONS THAT THIS AMOUNT HAS BEEN OFFERED IN THE NEXT YEAR, THE ASSESSEE IS AT LIBERTY TO APPROACH THE DEPARTMENT F OR NECESSARY RECTIFICATION AND OR OTHER ACTION AS PER THE LAW. 16. IN THE RESULT, APPEAL OF THE REVENUE AND THE CR OSS- OBJECTIONS OF THE ASSESSEE ARE DISMISSED. ORDER PRONOUNCED ON 30.01.2013 SD/- SD/- (SUSHMA CHOWLA) (T.R. SOOD) JUDICIAL MEMBER ACCOUNTANT MEM BER DATED : 30.01.2013 SURESH COPY TO: THE APPELLANT/THE RESPONDENT/THE CIT/THE C IT(A)/THE DR