The Statesman Ltd., Kolkata V. DCIT, C ircle- 7, Kolkata, Kolkata

CO 40/KOL/2010

• Counselvise Citation: [2012] 122 COUNSELVISE.COM (IT) 8013 (ITAT-KOLKATA)
• Duration Of Justice: 2 year(s) 6 month(s) 10 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 23-10-2012
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2005-2006
• Appeal Filed On: 13-04-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: A K MAHAPATRA
• Keywords: Business income; Proportionate interest; Bad and doubtful debts
• Section: 12; 11; 15

Judgement Text

CO NO 39 AND 40/KOL/ 2010 AND I.T.A. NO.: 483, 484/KOL/ 2010 ASSESSMENT YEAR: 2004 - 05 AND 2005 - 06 PAGE 1 OF 7 IN THE INCOME TAX APPELLA TE TRIBUNAL, KOLKATA B BENCH, KOLKATA [CORAM : PRAMOD KUMAR AM AND MAHAVIR SINGH JM] I.T.A. NO. : 483, 484/KOL/ 2010 ASSESSMENT YEAR : 2004 - 05 AND 2005 - 06 DEPUTY COMMISSIONER OF INCOME TAX CIRCLE 7, KOLKATA .APPELLANT VS. THE STATESMAN LIMITED . RESPONDENT STATESMAN HOUSE 4, CHOWRINGHEE SQUARE, KOLKATA 700 001 PAN : AABCT3842R CO NO 39 AND 40/KOL/ 2010 ARISING OUT OF I.T.A. NO. : 483, 484/KOL/ 2010 ASSESSMENT YEAR : 2004 - 05 AND 2005 - 06 THE STATESMAN LIMITED .CROSS OBJECTOR STATESMAN HOUSE 4, CHOWRINGHEE SQUARE, KOLKATA 700 001 PAN : AABCT3842R VS DEPUTY COMMISSIONER OF INCOME TAX CIRCLE 7, KOLKATA RESPONDENT APPEARANCES BY: N K PODDAR SENIOR ADVOCATE, ALONG WITH A K TIBREWAL AND AMIT AGARWAL FOR THE ASSESSEE A K MAHAPATRA FOR THE REVENUE DATE OF CONCLUDING THE HEARING : SEPTEMBER 19 , 2012 DATE OF PRONOUNCING THE ORDER : OCTOBER 23 , 2012 O R D E R PER PRAMOD KUMAR: 1. THESE APPEALS FILED BY THE ASSESSING OFFICER, AS ALSO CROSS OBJECTIONS FILED BY THE ASSESSEE, PERTAIN TO THE SAME ASSESSEE, INVOLVE INTERCONNECTED ISSUES AND WERE HEARD TOGETHER. AS A MATTER OF CO NO 39 AND 40/KOL/ 2010 AND I.T.A. NO.: 483, 484/KOL/ 2010 ASSESSMENT YEAR: 2004 - 05 AND 2005 - 06 PAGE 2 OF 7 CONVENIENCE, THEREFORE, ALL THE APPEALS AND THE CROSS OBJECTIONS ARE BEING DISPOSED OF BY WAY OF THIS CONSOLIDATED ORDER. 2. IN BOTH THE APPEALS FILED BY THE ASSESSING OFFICER, COMMON GRIEVANCE IS AS FOLLOWS: THAT THE LEARNED CIT(A) HAS ERRED IN ACCEPTING THE ASSESSEES BIFURCATION OF THE COM POSITE SALE PROCEEDS TOWARDS SALE OF LAND AND SALE OF BUILDING WITHOUT CONSIDERING THAT THE LAND WAS NOT SEPARATELY AVAILABLE FOR SALE AND WAS SOLD ONLY AS AN UNDIVIDED SHARE OF LAND AND THUS THE BIFURCATION OF COMPOSITE SALE PROCEEDS WAS FICTITIOUS. 3. AS LEARNED REPRESENTATIVES FAIRLY AGREE, IN THE IMPUGNED ORDER, LEARNED CIT(A) HAS MERELY FOLLOWED THE ORDER DATED 31 ST JANUARY 2007 PASSED BY A COORDINATE BENCH OF THIS TRIBUNAL, IN ASSESSEES OWN CASE FOR THE ASSESSMENT YEAR 2003 - 04, AND HAS DIRECTED THE ASSESSING OFFICER TO RECOMPUTE THE CAPITAL GAINS, BOTH LONG TERM AND SHORT TERM ARISING TO THE..ASSESSEE COMPANY IN THE PREVIOUS YEAR RELEVANT TO THE ASSESSMENT YEAR.STRICTLY IN ACCORDANCE WITH THE PRINCIPLES LAID DOWN BY THE LEARNED TRIBUNAL IN THE ASSESSMENT YEAR 2003 - 04 VIDE ITS ORDER DATED 31 ST JANUARY 2007. THESE DIRECTIONS ARE CONTAINED IN PARAGRAPH 43 OF THE APPELLATE ORDER FOR THE ASSESSMENT YEAR 2004 - 05 AND PARAGRAPH 44 OF THE APPELLATE ORDER FOR THE ASSESSMENT YEAR 2005 - 06. 4. WHEN THE CI T(A) HAS MERELY FOLLOWED THE ORDER OF THIS TRIBUNAL FOR AN EARLIER ASSESSMENT YEAR, WHICH HAS NOT BEEN REVERSED OR OTHERWISE TINKERED WITH BY THE HIGHER JUDICIAL FORUMS, WE CANNOT SEE ANY INFIRMITY IN SUCH AN ACTION OF THE LEARNED CIT(A). AS A LOWER TIER IN THE JUDICIAL HIERARCHY, THIS IS PRECISELY WHAT THE CIT(A) OUGHT TO HAVE DONE LOYALLY FOLLOW THE ORDERS OF THE HIGHER TIERS OF THE JUDICIAL HIERARCHY. THE ISSUE IN APPEAL IS THUS CLEARLY AND SQUARELY COVERED BY THE ORDER OF THE COORDINATE BENCH. LEARN ED REPRESENTATIVES ALSO FAIRLY AGREE ON THIS BASIC PROPOSITION. IN THIS VIEW OF THE MATTER, AND RESPECTFULLY FOLLOWING THE CO NO 39 AND 40/KOL/ 2010 AND I.T.A. NO.: 483, 484/KOL/ 2010 ASSESSMENT YEAR: 2004 - 05 AND 2005 - 06 PAGE 3 OF 7 ESTEEMED VIEWS OF THE COORDINATE BENCH, WE APPROVE THE CONCLUSIONS ARRIVED AT BY THE LEARNED CIT(A) AND DECLINE TO INTERFERE IN THE M ATTER. 5. THE APPEALS FILED BY THE ASSESSING OFFICER ARE THUS DISMISSED. 6. WE NOW TAKE UP THE CROSS OBJECTIONS FILED BY THE ASSESSEE. 7. IN THE CROSS OBJECTIONS FILED BY THE ASSESSEE FOR THE ASSESSMENT YEAR 2004 - 05, (I.E. ITA NO. 39/KOL/2010), THE ASS ESSEE HAS RAISED THREE CROSS OBJECTIONS. IN THE FIRST GROUND OF CROSS OBJECTION, THE GRIEVANCE RAISED IS AS FOLLOWS: THAT THE LEARNED CIT(A) ERRED IN ARBITRARILY CONFIRMING THE DISALLOWANCE OF RS 5,33,544 BEING THE AMOUNT OF INTEREST PAID TO THE PROVIDEN T FUND AUTHORITIES BY WAY OF INTEREST LEVIED UNDER SECTION 7Q OF THE EMPLOYEES PROVIDENT FUND AND MISCELLANEOUS PROVISIONS ACT, 1952. 8 . THE SHORT REASON FOR WHICH THE IMPUGNED DISALLOWANCE HAS BEEN MADE IS THAT WHILE AS PER THE ORDERS PASSED BY THE PROVI DENT FUND AUTHORITIES, THE AGGREGATE INTEREST FIGURE IS RS 4,69,997, AND CERTIFIED DEMAND NOTICES ISSUED BY THE RECOVERY AUTHORITIES IS RS 6,64,826, THE ACTUAL PAYMENT MADE IS RS 5,33,544. THE CIT(A) HAS ALSO OBSERVED THAT NEITHER OF THESE FIGURES (I.E. F IGURE IN THE ORDER AND THE DEMAND NOTICE) MATCH WITH THE FIGURE DISALLOWED BY THE AO AND UNDER THE CIRCUMSTANCES, I AM OF THE OPINION THAT THE APPELLANT HAS NOT BEEN ABLE TO EXPLAIN THE FIGURE CLAIMED BY IT AS INTEREST AND, ACCORDINGLY, I CONFIRM THE DIS ALLOWANCE. AGGRIEVED, THE ASSESSEE IS NOW BEFORE US. 9 . HAVING HEARD THE RIVAL CONTENTIONS AND HAVING PERUSED THE MATERIAL ON RECORD, WE ARE INCLINE TO UPHOLD THE CONTENTION OF THE ASSESSEE THAT SINCE THE ASSESSEE HAS ONLY PAID RS 5,33,544 AS AGAINST A DEMAND NOTICE OF RS 6,64,826 AND SINCE THE CLAIM IS ADMISSIBLE ONLY ON PAYMENT BASIS UNDER SECTION 43B, THE ASSESSEE IS ELIGIBLE FOR DEDUCTION OF RS 5,33,544. AS REGARDS THE DISCREPANCY BETWEEN THE ORDER AND DEMAND NOTICE FIGURE, CO NO 39 AND 40/KOL/ 2010 AND I.T.A. NO.: 483, 484/KOL/ 2010 ASSESSMENT YEAR: 2004 - 05 AND 2005 - 06 PAGE 4 OF 7 IT IS ONLY ELEMENTARY THAT DEMAND NOTICE FIGURE BEING HIGHER CAN BE EXPLAINED BY THE INTEREST BEING UPDATED TILL THE DATE ON WHICH THE DEMAND IS RAISED; NOTHING, THEREFORE, TURNS ON IT. IN VIEW OF THESE DISCUSSIONS, AS ALSO BEARING IN MIND ENTIRETY OF THE CASE, WE UPHOLD THE GRIEVA NCE OF THE ASSESSEE. THE ASSESSING OFFICER IS, ACCORDINGLY, DIRECTED TO DELETE THE IMPUGNED DISALLOWANCE OF RS 5,33,544. 10 . GROUND NO. 1 OF THE CROSS OBJECTION IS THUS ALLOWED. 11 . IN THE SECOND GROUND OF CROSS OBJECTION, THE ASSESSEE HAS RAISED THE FOLLOWING GRIEVANCE: THAT THE LEARNED CIT(A) ERRED IN ARBITRARILY CONFIRMING THE INCLUSION OF TOTAL INCOME OF THE ASSESSEE COMPANY HEREIN OF A SUM OF RS 1,00,05,9122 REPRESENTING THE PROVISION FOR DOUBTFUL DEBTS NO LONGER REQUIRED - WRITTEN BACK AS FORMI NG PART OF OTHER INCOME AGGREGATING TO RS 22,80,20,531 CREDITED TO AUDITED PROFIT AND LOSS ACCOUNT FOR THE FINANCIAL YEAR ENDING 31 ST MARCH 2004 CORRESPONDING TO THE ASSESSMENT YEAR 2004 - 05. 12 . SO FAR AS THIS GRIEVANCE OF THE ASSESSEE IS CONCERNED, IT IS A PURELY FACTUAL MATTER INASMUCH AS THE CONTENTION OF THE ASSESSEE IS THAT THIS WRITE BACK DOES NOT RELATE TO ANY DEDUCTION FOR BAD DEBTS AND IS IN RESPECT OF THE PROVISIONS MADE, BUT ADDED BACK TO THE INCOME BY ASSESSEE ITSELF, AND THEREFORE, THE WRITE BACK OF PROVISION CAN ALSO NOT BE ADDED TO THE INCOME. LEARNED REPRESENTATIVES FAIRLY AGREE THAT THE MATTER CAN BE RESTORED TO THE FILE OF THE ASSESSING OFFICER FOR VERIFICATION OF FACTUAL ELEMENTS ( I.E. ADDING BACK THE PROVISIONS TO THE PROFIT IN THE RETURNED INCOME) EMBEDDED IN THE CONTENTIONS OF THE ASSESSEE AND IN CASE THE SAME IS FOUND TO BE CORRECT, THE IMPUGNED ADDITION IS TO BE DELETED. WE ORDER ACCORDINGLY. 13 . GROUND NO. 2 IS THUS ALLOWE D FOR STATISTICAL PURPOSES IN THE TERMS INDICATED ABOVE. CO NO 39 AND 40/KOL/ 2010 AND I.T.A. NO.: 483, 484/KOL/ 2010 ASSESSMENT YEAR: 2004 - 05 AND 2005 - 06 PAGE 5 OF 7 14 . IN THIRD GROUND OF CROSS OBJECTION, THE ASSESSEE HAS RAISED THE FOLLOWING GRIEVANCE: THAT THE LEARNED CIT(A) ERRED IN ARBITRARILY CONFIRMING THE INCLUSION IN THE TOTAL INCOME OF THE ASSESSEE COMPANY HEREIN A SUM OF RS 2,85,72,309 REPRESENTING AMOUNT TRANSFERRED BY IT FROM ITS CAPITAL RESERVE ACCOUNT TO THE PROFIT AND LOSS ACCOUNT, AND WHICH AMOUNT FORMED PART OF RS 78,89,878 BEING THE PROFIT BEFORE TAXATION APPEARING AT PAGE 19 OF THE PRINTED AUDITED ACCOUNTS FOR THE YEAR UNDER APPEAL, THE SUM WITH REFERENCE TO WHICH THE BUSINESS INCOME WAS INADVERTENTLY COMPUTED AND RETURNED BY THE ASSESSEE COMPANY FOR THE YEAR UNDER APPEAL. 15 . SO FAR AS THIS ISSUE IS CONCERNED, THE MATERIAL FACTS ARE LIKE T HIS. THERE IS NO DISPUTE THAT THE AMOUNT OF RS 2,85,72,309 WAS TRANSFERRED BY THE ASSESSEE FROM CAPITAL RESERVE TO THE PROFIT AND LOSS ACCOUNT. THIS CAPITAL RESERVE WAS CREATED BY THE ASSESSEE ON REVALUATION OF ITS LAND AND BUILDING IN THE FINANCIAL YEAR ENDING 31 ST MARCH 2002, BUT TO THE EXTENT THE RELATED ASSET HAS BEEN SOLD IN THE CURRENT YEAR, THE CORRESPONDING AMOUNT CREDITED TO THE PROFIT AND LOSS ACCOUNT HAS BEEN TRANSFERRED TO THE PROFIT AND LOSS ACCOUNT . ON THESE FACTS, THE AO HAS BROUGHT THE AMO UNT OF TRANSFER TO TAX, AND THE CIT(A) HAS CONFIRMED THE SAME BY OBSERVING THAT DURING THE YEAR UNDER CONSIDERATION, THE PORTION OF BUILDING, ALONGWITH PROPORTIONATE INTEREST OF THE LAND, HAS BEEN SOLD AND THEREFORE PORTION OF CAPITAL RESERVE RELATING TO THE PORTION OF BUILDING SOLD HAS BEEN REALIZED AND TRANSFERRED TO THE PROFIT AND LOSS ACCOUNT AND THAT CONSIDERING THE ABOVE FACTS, I AM OF THE OPINION THAT THIS AMOUNT IS NOT A MERE TRANSFER, AS CLAIMED BY THE APPELLANT, AND SHOULD SUFFER TAXATION. TH E ASSESSEE IS AGGRIEVED AND IS BEFORE US IN THIS CROSS OBJECTION. 16 . HAVING HEARD THE RIVAL SUBMISSIONS AND HAVING PERUSED THE MATERIAL ON RECORD, WE ARE INCLINED TO UPHOLD THE STAND OF THE ASSESSEE. THE TRANSFER ENTRY FROM THE CAPITAL RESERVE TO THE PRO FIT AND LOSS ACCOUNT IS ON ACCOUNT OF THE FACT THAT THE CORRESPONDING PORTION OF ASSET CEASES TO EXIST FROM THE ASSET SIDE OF THE BALANCE SHEET, AND, THEREFORE, THIS ACCOUNTING ADJUSTMENT IS WARRANTED. HOWEVER, AS FAR AS PROFIT ON SALE OF ASSET, I.E. CO NO 39 AND 40/KOL/ 2010 AND I.T.A. NO.: 483, 484/KOL/ 2010 ASSESSMENT YEAR: 2004 - 05 AND 2005 - 06 PAGE 6 OF 7 CAPI TAL GAINS, IS CONCERNED, IT HAS NOTHING TO DO WITH THE REVALUATION OF THE ASSET AND IS COMPUTED ON THE BASIS OF ACTUAL, I.E. HISTORICAL, COST. THEREFORE, ADJUSTMENT ON ACCOUNT OF REVALUATION CANNOT SEPARATELY BE BROUGHT TO TAX, AND THAT TOO AS A REVENUE IT EM. ANY PROFIT ON REVALUATION OF ASSET CANNOT, IN ANY CASE, GIVE RISE TO A TAXABLE INCOME. THE PRESENT ENTRY IS IN RESPECT OF THE COMPONENT OF PROFIT ON REVALUATION TRANSFERRED FROM CAPITAL RESERVE, AS CORRESPONDING ASSET CEASES TO BE HELD BY THE ASSET, TO THE PROFIT AND LOSS ACCOUNT. IT DOES NOT, THEREFORE, GIVE RISE TO AN INCOME WHICH CAN BE BROUGHT TO TAX. LEARNED DEPARTMENTAL REPRESENTATIVE ALSO COULD NOT INVITE OUR ATTENTION TO ANY SPECIFIC PROVISIONS UNDER WHICH SUCH A CREDIT COULD BE BROUGHT TO TAX. THE STAND OF THE AUTHORITIES BELOW IS THUS CLEARLY IN ERROR IN PRINCIPLE. HOWEVER, AS LEARNED DR CONTENDS FOR VERIFICATION OF RELEVANT FACTS, WE SEE NO HARM IN REMITTING THE MATTER TO THE FILE OF THE ASSESSING OFFICER FOR VERIFYING THE FACTUAL ELEMENTS EM BEDDED IN ASSESSEES CONTENTIONS, AND THE GIVING RELIEF IN ACCORDANCE WITH THE LAW. IN VIEW OF THESE DISCUSSIONS, AS ALSO BEARING IN MIND ENTIRETY OF THE CASE, WE UPHOLD THE GRIEVANCE OF THE ASSESSEE IN PRINCIPLE BUT REMIT THE MATTER TO THE FILE OF ASSESSI NG OFFICER FOR ADJUDICATION DE NOVO AS ABOVE. 17. GROUND NO. 3 IS THUS ALLOWED FOR STATISTICAL PURPOSES IN THE TERMS INDICATED ABOVE. 18. IN CO NO. 40/KOL/2000, I.E. ASSESSEES CROSS OBJECTION FOR THE ASSESSMENT YEAR 2005 - 06, THE ONLY GRIEVANCE RAISED BY THE ASSESSEE IS AS FOLLOWS: THAT THE LEARNED CIT(A) ERRED IN ARBITRARILY CONFIRMING THE INCLUSION IN THE TOTAL INCOME OF THE ASSESSEE COMPANY HEREIN A SUM OF RS 1,75,29,038 REPRESENTING AMOUNT TRANSFERRED BY IT FROM ITS CAPITAL RESERVE ACCOUNT TO THE P ROFIT AND LOSS ACCOUNT, AND WHICH AMOUNT FORMED PART OF RS 97,07,834 BEING THE PROFIT BEFORE TAXATION APPEARING AT PAGE 19 OF THE PRINTED AUDITED ACCOUNTS FOR THE YEAR UNDER APPEAL, THE SUM WITH REFERENCE TO WHICH THE BUSINESS INCOME WAS INADVERTENTLY COMP UTED AND RETURNED BY THE ASSESSEE COMPANY FOR THE YEAR UNDER APPEAL. CO NO 39 AND 40/KOL/ 2010 AND I.T.A. NO.: 483, 484/KOL/ 2010 ASSESSMENT YEAR: 2004 - 05 AND 2005 - 06 PAGE 7 OF 7 19. LEARNED REPRESENTATIVES FAIRLY AGREE THAT WHATEVER IS DECIDED FOR THE ASSESSMENT YEAR 2004 - 05, IT WILL FOLLOW MUTATIS MUTANDIS FOR THIS ASSESSMENT YEAR AS WELL. AS WE HAVE REMITTED T HE SAID MATTER TO THE FILE OF THE ASSESSING OFFICER WITH CERTAIN DIRECTIONS, AS IN PARAGRAPH 16 ABOVE, WE DO THE SAME FOR THIS ASSESSMENT YEAR AS WELL. THE DIRECTIONS FOR THE ASSESSMENT YEAR 2005 - 06 WILL APPLY IN THIS ASSESSMENT YEAR AS WELL. 20. IN THE R ESULT, THE CROSS OBJECTION FOR THE ASSESSMENT YEAR 2005 - 06 IS ALLOWED FOR THE STATISTICAL PURPOSES IN THE TERMS INDICATED ABOVE. 21. TO SUM UP, WHILE APPEALS OF THE ASSESSING OFFICER ARE DISMISSED, THE CROSS OBJECTIONS OF THE ASSESSE ARE ALLOWED IN THE LI MITED TERMS INDICATED ABOVE. PRONOUNCED IN THE OPEN COURT TODAY ON 23 RD DAY OF OCTOBER, 2012 SD/XX SD/XX MAHAVIR SINGH PRAMOD KUMAR (JUDICIAL MEMBER) (ACCOUNTANT MEMBER) KOLKATA, THE 23 RD OCTOBER , 2012 COPIES TO : (1) THE APPELLANT (2) THE RESPONDENT (3) CIT (4) CIT(A) (5) THE DEPARTMENTAL REPRESENTATIVE (6) GUARD FILE BY ORDER ETC ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL KOLKATA BENCHES, KOLKATA