Joy Partnership, Kolkata V. DDIT(IT)-1(1), Kolkata, Kolkata

CO 89/KOL/2009

• Counselvise Citation: [2017] 123 COUNSELVISE.COM (IT) 2972 (ITAT-KOLKATA)
• Duration Of Justice: 7 year(s) 4 month(s) 17 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 28-04-2017
• Appeal Filed By: Assessee
• Bench Allotted: C
• Next Hearing Date: 06-04-2017
• Assessment Year: 2006-2007
• Appeal Filed On: 11-12-2009
• Court: TRIBUNAL
• Department Lawyers: RAJAT K KUREEL
• Assessee Lawyers: SUSHONITA BASU
• Keywords: Depreciation; Permanent establishment; Wholly owned subsidiary; Revised return; Unabsorbed depreciation
• Section: 143(3); 234B; 6

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL C, BENC H KOLKATA BEFORE SHRI N.V.VASUDEVAN, JM & DR. A.L.SAINI, AM ./ ITA NO.1866/KOL/2009 ( / ASSESSMENT YEAR : 2006-2007) ASSTT. DIT, INTERNATIONAL TAXATION-1 (1) KOLKATA, AAYAKAR BHAWAN, 4 TH FLOOR, P-7, CHOWRINGHEE SQUARE, ROOM NO. 4/5 KOL-700069 VS. M/S. JOY PARTNERSHIP 85/1, MINING CENTRE, TOPSIA ROAD (SOUTH) KOLKATA-700046 ./ ./PAN/GIR NO.: AADFJ6427H ( /APPELLANT ) .. ( / RESPONDENT ) AND CO NO.89/KOL/2009 ( / ASSESSMENT YEAR : 2006-2007) M/S. JOY PARTNERSHIP 85/1, MINING CENTRE, TOPSIA ROAD (SOUTH) KOLKATA-700046 VS. ASSTT. DIT, INTERNATIONAL TAXATION-1 (1) KOLKATA, AAYAKAR BHAWAN, 4 TH FLOOR, P-7, CHOWRINGHEE SQUARE, ROOM NO. 4/5 KOL-700069 ./ ./PAN/GIR NO. : AADFJ6427H ( /APPELLANT ) .. ( / RESPONDENT ) /REVENUE BY : SHRI RAJAT K KUREEL JCIT DR /ASSESSEE BY : SHRI SUSHONITA BASU, AR / DATE OF HEARING : 06/04/2017 /DATE OF PRONOUNCEMENT / /2017 / O R D E R PER DR. ARJUN LAL SAINI, AM: THE CAPTIONED APPEAL FILED BY THE REVENUE, AND CRO SS OBJECTIONS FILED BY THE ASSESSEE, PERTAINING TO ASSESSMENT YEA R 2006-07, ARE DIRECTED AGAINST THE ORDER PASSED BY THE LD. COMMIS SIONER OF INCOME TAX (APPEALS)-VI KOLKATA, IN APPEAL NO.9/CIT(A)-VI/2008 -09/DDIT(II)-1/KOL, DATED 11.08.2009, WHICH IN TURN ARISES OUT OF AN OR DER PASSED BY THE ITA NO.1866/K/2009 & CO NO.89/K/2009 M/S JOY PARTNERSHIP 2 ASSESSING OFFICER (AO) UNDER SECTION 143(3) OF THE INCOME TAX ACT, 1961 (IN SHORT THE ACT), DATED 31/12/2008. 2. THE APPEAL FILED BY THE REVENUE AND THE CROSS OB JECTIONS FILED BY THE ASSESSEE RELATE TO THE SAME ASSESSEE, SAME ASSE SSMENT YEAR, COMMON ISSUES INVOLVED, THEREFORE, THESE HAVE BEEN CLUBBED AND HEARD TOGETHER AND A CONSOLIDATED ORDER IS BEING PASSED F OR THE SAKE OF CONVENIENCE. 3. BRIEF FACTS OF THE CASE QUA THE ASSESSEE ARE THA T THE ASSESSEE IS A NON RESIDENT PARTNERSHIP FIRM. THE PARTNERSHIP WAS FORMED BY A DEED OF AGREEMENT DATED DECEMBER 23, 1998 IN THE U.K. BETWE EN JOY MINING MACHINERY LTD. (JMML) HAVING REGISTERED OFFICE AT BROMYARD ROAD, WORCESTOR, UK AND JOY MANUFACTURING COMPANY (U.K) L TD. HAVING REGISTERED OFFICE AT 1, BLYTHESWOOD SQUARE GLASGOW U.K. THE ABOVE TWO PARTNERS IN THE PARTNERSHIP UNDER THE NAME JOY PART NERSHIP AND KIER INTERNATIONAL MINING PARTNERSHIP ( ANOTHER PARTNER SHIP BODY IN THE U.K.) HAD FORMED A JOINT VENTURE IN THE U.K. NAMELY JOY K IER JOINT VENTURE AND ENTERED INTO A CONTRACT DATED 06.04.1999 WITH SOUTH EASTERN COALFIELDS LTD. ( S.E.C.L), BILASPUR, M.P., A GOVT. OF INDIA U NDERTAKING AND A WHOLLY OWNED SUBSIDIARY OF COAL INDIA LTD. FOR PROVIDING S ERVICES AT THE CHIRIMIRI COLLIERY ZERO SEAM UNDERGROUND MINES IN THE CHIRIMI RI AREA OF THE SAID COMPANY. SUBSEQUENTLY, KIER INTERNATIONAL PARTNERSH IP WITHDREW FROM THE JOINT VENTURE AND JOY PARTNERSHIP BECAME THE SOLE E XECUTOR OF THE CONTRACT. THE SCOPE OF SERVICES INCLUDE SUPERVISION AND ASSISTANCE IN ITA NO.1866/K/2009 & CO NO.89/K/2009 M/S JOY PARTNERSHIP 3 ERECTION AND COMMISSIONING OF SECL`S EQUIPMENT ETC. THE CONTRACT BECAME OPERATIONAL FROM 01.11.2001. LATER, THE ASSE SSEE ENTERED IN TO OTHER CONTRACTS WITH WESTERN COALFIELDS LTD AND SIN GARENI COLLIERIES COMPANY LTD, ALSO SUBSIDIARIES OF COAL INDIA LTD, F OR PROVIDING SERVICES AT THEIR COLLIERIES. WORK UNDER THESE CONTRACTS CONTIN UED DURING THE PREVIOUS YEAR. THE PROJECT OFFICE OF THE ASSESSEE IS PRESENT LY SITUATED AT MINING CENTRE, 85/2, TOPSIA ROAD (SOUTH) ROAD, KOLKATA-700 046, WHICH IS ALSO THE PERMANENT ESTABLISHMENT OF THE ASSESSE IN INDIA THROUGH WHICH THE BUSINESS IS CONDUCTED. THE ASSESSEE FILED THE ORIGI NAL RETURN OF INCOME ON 31.10.2006 DECLARING TOTAL INCOME AT RS. 19,77,410/ -. LATER ON, THE ASSESSEE FILED THE REVISED RETURN ON DATED 19.04.20 07. THE ASSESSEE`S CASE WAS SELECTED FOR SCRUTINY U/S 143(2) OF THE AC T AND THE ASSESSING OFFICER COMPLETED THE ASSESSMENT BY MAKING THE DISA LLOWANCE U/S 40(A) (IA) OF THE INCOME TAX ACT AT RS.30,16,461/-. THE A SSESSING OFFICER OBSERVED THAT TAX ON TAX PERQUISITE BEING NON-M ONETARY IN NATURE AND PAID BY THE ASSESSEE ON BEHALF OF ITS EMPLOYEES, IS NOT TO BE ADDED AGAIN FOR THE PURPOSE OF COMPUTATION OF TAXABLE INCOME OF THE EMPLOYEE AND CONSEQUENTLY, IT IS NOT AN ADMISSIBLE EXPENSES IN T HE HANDS OF THE EMPLOYER U/S 40(A) (V) OF THE ACT AND THIS WAY THE ASSESSING OFFICER DISALLOWED RS.30,16,461/-. 4.DISATISFIED WITH THE ORDER OF ASSESSING OFFICER, THE ASSESSEE FILED AN APPEAL BEFORE THE COMMISSIONER OF INCOME TAX (APPEA LS), WHO HAS DELETED THE ADDITION MADE BY THE AO. THE LD CIT (A) OBSERVED THAT THE ITA NO.1866/K/2009 & CO NO.89/K/2009 M/S JOY PARTNERSHIP 4 STATEMENT FURNISHED BY THE ASSESSEE DURING THE COUR SE OF ASSESSMENT PROCEEDINGS WHICH SHOWS RECONCILIATION BETWEEN THE AMOUNT DEBITED UNDER THE HEAD PAYROLL COST NOT SHOWN IN GROSS SA LARY IN FORM NO.16 ISSUED TO THE EMPLOYEE READ WITH FORM NO.24. IN THE SAID RECONCILIATION STATEMENT THE LD CIT(A) OBSERVED THAT THIS STATEMEN T INCLUDED AN AMOUNT OF RS.30,16,461/- WHICH STOOD DEBITED TO THE PROFIT AND LOSS ACCOUNT OF THE APPELLANT DUE TO GROSSING UP BUT WAS NOT INCLUDED I N THE GROSS SALARY OF THE EXPATRIATE EMPLOYEES REFLECTED IN THE FORM NO. 16 ISSUED TO EMPLOYEES READ WITH FORM NO.24. THE ASSESSEE EXPLAI NED THAT THE SAID AMOUNT REPRESENTS A PART OF THE TAX BORNE BY THE AS SESSEE ON SALARY OF ITS EXPATRIATE EMPLOYEES, WHICH WAS COMPUTED IN ACC ORDANCE WITH THE METHOD STATED IN THE DECISION RENDERED BY THE SPECI AL BENCH OF THE HON`BLE ITAT, DELHI IN RBF RIG CORPORATION VS. ACIT . IT IS ALSO TRUE THAT REGARDING THE APPLICABILITY OF THE PROVISIONS OF SE CTION 40(A) (V) OF THE ACT, THE SECTION 10(10CC) OF THE ACT APPLIES IN CASE OF NON-MONETARY PERQUISITE WHERE NO GROSSING UP HAS BEEN DONE WHILE COMPUTING THE TAXABLE INCOME OF THE EXPATRIATE EMPLOYEES. THE GRO SSING UP HAS BEEN DONE WHILE COMPUTING THE TAXABLE OF THE EXPATRIATE EMPLOYEES THERE CAN NOT BE ANY QUESTION OF APPLICATION OF SECTION 10(10 CC) AND ACCORDINGLY NO DISALLOWANCE CAN BE INFLICTED U/S 40(A) (V) OF T HE ACT AND ACCORDINGLY THE LD CIT(A) DELETED THE ADDITION. ITA NO.1866/K/2009 & CO NO.89/K/2009 M/S JOY PARTNERSHIP 5 5. NOT BEING SATISFIED WITH THE ORDER OF THE LD CIT (A), THE REVENUE IS IN APPEAL BEFORE US AND HAS TAKEN THE FOLLOWING GROUND S OF APPEAL. 1) THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE LD CIT(A) ERRED IN ALLOWING A RELIEF OF RS. 30,16,461/- TO THE ASSESSE E BY DELETING THE DISALLOWANCE MADE BY THE ASSESSING OFFICER U/S 40(A )(V) OF THE I.T. ACT1961. 2) THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE LD CIT(A) ERRED IN NOT ACCEPTING THE FACT THAT TAX ON TAX PERQUISIT E BEING NON-MONETARY IN NATURE AND PAID BY THE ASSESSEE ON BEHALF OF ITS EM PLOYEES, IS NOT TO BE ADDED AGAIN FOR THE PURPOSE OF COMPUTATION OF TAXA BLE INCOME OF THE EMPLOYEE AND CONSEQUENTLY, IT IS NOT AN ADMISSIBLE EXPENSE IN THE HANDS OF THE EMPLOYERS U/S 40(A) (V) OF THE ACT. 3) THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE LD CIT(A) ERRED IN ALLOWING THE SET OFF OF CARRY FORWARD OF UNABSORBE D DEPRECIATION OF A.Y.2005-06 OF RS.36,353/- TO THE ASSESSEE IN THE A .Y. 2006-07 AS THE DEPARTMENT HAS PREFERRED AN APPEAL AGAINST THE ORDE R OF THE LD CIT(A) FOR THE A.Y.2005-06 BEFORE THE HON`BLE ITAT. THE ASSESSEE FILED THE FOLLOWING CROSS OBJECTIONS(C O-89/09): 1. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE LD CIT(A) ERRED IN UPHOLDING THE ACTION OF THE ASSESSING OFFICER ON ACCOUNT OF ADDITION OF RS.4,08,031/- BEING INTEREST ON FIXED D EPOSIT. 2. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE LD CIT(A) ERRED IN UPHOLDING THE LEVY OF INTEREST UNDER SECTION 234 B OF THE ACT. 6. THE GROUND NO.1 AND 2 RAISED BY THE REVENUE RELA TE TO RELIEF PROVIDED BY THE LD CIT(A) OF RS. 30,16,461/- TO THE ASSESSEE BY DELETING THE DISALLOWANCE MADE BY THE ASSESSING OFF ICER U/S 40(A)(V) OF THE I.T. ACT1961 6.1 LD COUNSEL FOR THE ASSESSEE HAS SUBMITTED BEFOR E US THAT IN ORDER TO UNDERSTAND THE ISSUE PROPERLY IT IS NECESSARY TO GO THROUGH THE RELEVANT PROVISIONS OF SECTION 40(A) (V) AND SECTION 10(10CC ) OF THE ACT. THE RELEVANT PART OF THESE SECTIONS ARE REPRODUCED BELO W: ITA NO.1866/K/2009 & CO NO.89/K/2009 M/S JOY PARTNERSHIP 6 SECTION 40(A)(V) OF THE INCOME TAC ACT, 1961 READS AS FOLLOWS: ..AMOUNTS NOT DEDUCTIBLE. 40. NOTWITHSTANDING ANYTHING TO THE CONTRARY IN SEC TIONS 30 TO 38, THE FOLLOWING AMOUNTS SHALL NOT BE DEDUCTED IN COMPUTIN G THE INCOME CHARGEABLE UNDER THE HEAD PROFITS AND GAINS OF BUS INESS OR PROFESSION- (A) IN THE CASE OF AN ASSESSEE- [(V) ANY TAX ACTUALLY PAID BY AN EMPLOYER REFERRED TO IN CLAUSE (10CC) OF SECTION 10] FURTHER, SECTION 10(10CC) OF THE ACT READS AS FOLLO WS- INCOMES NOT INCLUDED IN TOTAL INCOME. 10.IN COMPUTING THE TOTAL INCOME OF A PREVIOUS YEAR OF ANY PERSON ANY INCOME FALLING WITHIN ANY OF THE FOLLOWING CLAUSES SHALL NOT BE INCLUDED- [(10CC) IN THE CASE OF AN EMPLOYEE, BEING AN INDIVI DUAL DRIVING INCOME IN THE NATURE OF A PERQUISITE, NOT PROVIDED FOR BY WAY OF MONETARY PAYMENT, WITHIN THE MEANING OF CLAUSE (2) OF SECTION 17, THE TAX ON SUCH INCOME ACTUALLY PAID BY HIS EMPLOYER, AT THE OPTION OF THE EMPLOYER, ON BEHALF OF SUCH EMPLOYEE, NOTWITHSTANDING ANYTHING CONTAINED I N SECTION 200 OF THE COMPANIES ACT, 1956 THE LD COUNSEL SUBMITTED THAT IN THE PRESENT CASE, THE EXEMPTION UNDER SECTION 10(10CC) OF THE ACT IS NOT APPLICABLE AS TH E TAX BORNE BY EMPLOYER HAS ALREADY BEEN GROSSED UP. MOREOVER, EXE MPTION UNDER ITA NO.1866/K/2009 & CO NO.89/K/2009 M/S JOY PARTNERSHIP 7 SECTION 10(10CC) OF THE ACT HAS ALSO NOT BEEN CLAIM ED. ON PERUSING THE SAME, IT WOULD BE CLEAR THAT THE ASSESSEE HAS PAID TAX ON TAX AND NOT CLAIMED EXEMPTION UNDER SECTION 10(10CC) OF THE ACT . 6.2 ON THE OTHER HAND, LD DR FOR THE REVENUE HAS P RIMARILY REITERATED THE STAND TAKEN BY THE ASSESSING OFFICER WHICH WE HAVE ALREADY NOTED IN OUR EARLIER PARA AND IS NOT BEING REPEATED FOR THE SAKE OF BREVITY. 6.3 HAVING HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD, WE NOTICED THAT THE EXEMPTION UNDER SECT ION 10(10CC) OF THE ACT IS NOT APPLICABLE AS THE TAX BORNE BY EMPLOYER HAS ALREADY BEEN GROSSED UP. MOREOVER, EXEMPTION UNDER SECTION 10(10 CC) OF THE ACT HAS ALSO NOT BEEN CLAIMED BY THE ASSESSEE. THE ASSESSEE HAS PAID TAX ON TAX AND NOT CLAIMED EXEMPTION UNDER SECTION 10(10CC) OF THE ACT. THEREFORE, IN OUR VIEW, THERE CAN NOT BE ANY DISALLOWANCE UNDE R SECTION 40(A) (V) OF THE ACT, AND HENCE WE CONFIRM THE ORDER OF LD CIT(A ). 6.4 IN THE RESULT, THE APPEAL FILED BY THE REVENUE ON GROUND NO.1 AND 2, IS DISMISSED. 8.GROUND NO. 3 RAISED BY THE REVENUE IS CONSEQUENCE IN NATURE. AS THE DEPARTMENT HAS PREFERRED AN APPEAL AGAINST THE ORDE R OF THE LD CIT(A) FOR THE A.Y. 2005-06 BEFORE THE HON,BLE ITAT AND THE IS SUE OF SET OFF OF CARRY FORWARD OF UNABSORBED DEPRECIATION FOR A.Y. 2005-06 OF RS.36,353/-, WOULD BE DECIDED AS PER THE ORDER OF HON`BLE ITAT. THEREFORE, THIS GROUND RAISED BY THE REVENUE IS PRE-MATURE AND CONS EQUENTIAL IN NATURE AND DOES NOT REQUIRE ADJUDICATION. ITA NO.1866/K/2009 & CO NO.89/K/2009 M/S JOY PARTNERSHIP 8 9. CROSS OBJECTION NO.1 RAISED BY THE ASSESSEE RELA TES TO ADDITION OF RS.4,08,031/- ON ACCOUNT OF INTEREST ON FIXED DEPOS IT. A LIMITED REQUEST OF LD.COUNSEL OF ASSESSEE BEFORE US, IS FOR A DIRECTIO N TO DIRECT THE AO THAT IF THE SAME INCOME IS TAXED IN THE SUCCEEDING YEAR ON RECEIPT BASIS THEN THE SAME SHOULD BE DELETED IN PREVIOUS YEAR, IN WHICH I T HAD BEEN TAXED BASED ON ACCRUAL, TO AVOID DOUBLE TAXATION. WE AGRE E WITH THE SUBMISSION OF LD AR AND WE DIRECT THE ASSESSING OFFICER TO DEL ETE THE INTEREST INCOME IF THE SAME INCOME IS OFFERED TO TAX BY THE ASSESSE E IN THE SUCCEEDING ASSESSMENT YEAR. THEREFORE, WE ALLOW CO.NO.1 FOR ST ATISTICAL PURPOSES. 9.1 IN THE RESULT, THE CROSS OBJECTION NO.1 RAISED BY THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. 10. CROSS OBJECTION NO. 2 RAISED BY THE ASSESSEE RE LATES TO LEVY OF INTEREST UNDER SECTION 234B OF THE ACT, WHICH IS PR E-MATURE AND CONSEQUENTIAL IN NATURE. ASSESSING OFFICER IS DIREC TED TO GIVE CONSEQUENTIAL RELIEF. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 28/04/ 2017. SD/ - (N.V.VASUDEVAN) SD/ - (DR. A.L.SAINI) / JUDICIAL MEMBER / ACCOUNTANT MEMBER /KOLKATA ; $% DATED 28/04/2017 & ()* /PRAKASH MISHRA ,SR.PS. / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT-ASST.DIT(IT)-1, KOLKATA 2. / THE RESPONDENT.-M/S JOY PARTNERSHIP 3. 4 ( ) / THE CIT(A), KOLKATA. 4. 4 / CIT 5. 56 7 8 , 8 , / DR, ITAT, KOLKATA 6. 7 9 / GUARD FILE. ITA NO.1866/K/2009 & CO NO.89/K/2009 M/S JOY PARTNERSHIP 9 / BY ORDER, ( ASSTT. REGISTRAR) % & , / ITAT, KOLKATA 5 //TRUE COPY//