M/s R.M.Chemicals Pvt. Ltd., Bhopal V. The ACIT 3(1), Bhopal

CO 99/IND/2012

• Counselvise Citation: [2013] 122 COUNSELVISE.COM (IT) 8230 (ITAT-INDORE)
• Duration Of Justice: 3 month(s) 10 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 14-01-2013
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: DB
• Assessment Year: 2006-2007
• Appeal Filed On: 04-10-2012
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: R A VERMA
• Assessee Lawyers: S S DESH
• Keywords: Reopening of assessment; Retrospective amendment; Assessment record; Revenue expenditure; Reassessment proceedings; Capital expenditure
• Section: 147; 37

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL , INDORE BENCH, INDORE BEFORE SHRI JOGINDER SINGH, J.M. AND SHRI R.C.SHARM A, A.M. PAN NO. : AACR7154D I.T.A.NO. 461 /IND/201 2 . A.Y. : 2006 - 07 ACIT, 3(1), M/S. R.M. CHEMICALS PVT.LTD., BHOPA L VS 74, JUMERATI, BHOPAL APPELLANT RESPONDENT C.O.NO.99/IND/2012 (ARISING OUT OF I.T.A.NO. 461/IND/2012.) A.Y. : 2006 - 07 M/S. R.M. CHEMICALS PVT.LTD., ACIT, 3(1), 74, JUMERATI, BHOPAL VS BHOPAL CROSS OBJECTOR RESPONDENT DEPARTMENT BY : SHR I R. A. VERMA, SR. DR ASSESSEE BY : SHRI S. S. DESHPANDE, CA DATE OF HEARING : 03.01 .201 3 DATE OF PRONOUNCEMENT : 14 . 01 .201 3 -: 2: - 2 O R D E R PER R. C. SHARMA, A.M. THIS IS AN APPEAL FILED BY THE REVENUE AND CROSS OBJECTION FILED BY THE ASSESSEE AGAINST THE ORDER O F CIT(A) DATED 23.5.2012, FOR THE ASSESSMENT YEAR 2006-07. 2. THE REVENUE HAS TAKEN FOLLOWING GROUNDS :- ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE CIT(A) HAS ERRED IN :- 1. DELETING ADDITION OF RS. 11,53,378/- BY HOLDING THAT THE PAYMENT OF RS. 11,53,378/- MADE BY THE ASSESSI NG OFFICER U/S 40A(IA). 2. DELETING THE ADDITION OF RS. 10,94,314/- MADE BY ASSESSING OFFICER BY DISALLOWING THE INTEREST CHAR GED. 3. RIVAL CONTENTIONS HAVE BEEN HEARD AND RECORDS PERUSED. THE FACTS OF THE CASE IN BRIEF ARE THAT TH E ASSESSEE COMPANY IS MANUFACTURING SYNTHETIC DETERGENT ON JOB WORK BASIS FOR HINDUSTAN UNILEVER LIMITED. THE ASSESSING OFFICER FOUND THAT THE TDS DEDUCTED ON PAYMENTS OF RS. 14,2 0,678/- WAS DEPOSITED AFTER THE DUE DATE FOR DEPOSITING TDS IN GOVT. ACCOUNT. THE ASSESSEE SUBMITTED BEFORE THE ASSESSIN G OFFICER -: 3: - 3 THAT OUT OF THE TOTAL PAYMENT OF RS. 14,20,678/- TH E PAYMENT AMOUNTING TO RS. 11,53,378/- WAS MADE FOR CAPITAL EXPENDITURE HENCE THE SAME WAS NOT COVERED UNDER SE CTION 40A(IA). THE ASSESSING OFFICER HELD THAT ALL EXPEND ITURE ON WHICH TDS DEDUCTED WAS NOT DEPOSITED IN GOVERNMENT ACCOUNT WITHIN DUE DATE WAS NOT ALLOWABLE U/S 40A( IA). AFTER GIVING THIS FINDING HE MADE ADDITION OF RS. 14,20,6 789/-. 4. BY THE IMPUGNED ORDER, THE LD. CIT(A) DELETED THE ADDITION AFTER RECORDING FOLLOWING FINDINGS :- 2.3 I HAVE EXAMINED THE FACTS OF THE MATTER. DURING THE APPELLATE PROCEEDINGS THE ASSESSMENT RECORDS WERE ALSO EXAMINED. IT IS FOUND THAT OUT OF THE TOTAL AM OUNT OF PAYMENT OF RS. 14,20,678/- IN RESPECT OF WHICH TDS DEDUCTED HAVE NOT BEEN DEPOSITED WITHIN DUE DATE PAYMENT OF RS. 11,53,3787/- IS DONE FOR PURCHASE OF CAPITAL GOODS. THIS PAYMENT IS NOT COVERED BY SECTI ON 40A(IA) HENCE ADDITION OF RS. 11,53,378/- IS DELETE D. 5. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND HAVE GONE THROUGH THE DOCUMENTS PLACED ON RECORD AND FOU ND THAT -: 4: - 4 THE ASSESSEE HAS DEPOSITED ENTIRE TDS BEFORE THE LA ST DUE DATE FILING RETURN, WHICH IS AS UNDER :- DUE DATE OF TDS DEPOSIT DATE OF DEPOSIT AMOUNT OF DEPOSIT RATE ON WHICH TDS DEDUCTED 07.08.2005 07.07.2006 91,260 2.244 07.10.2005 31.07.2006 29,500 2.244 07.10.2005 31.07.2006 7,84,742 2.244 07.10.2005 07.04.2006 73,130 2.244 07.10.2005 07.04.2006 6,440 2.244 07.10.2005 07.04.2006 35,840 2.244 07. 11.2005 07.04.2006 27,580 2.244 07.1.2006 07.04.2006 33,902 2.244 07.02.2006 07.04.2006 43,090 2.244 07.02.2006 07.04.2006 5,278 2.244 07.02.2006 07.04.2006 2,500 2.244 07.02.2006 07.04.2006 2,500 2.244 07.02.2006 07.04.2006 1,88,068 2.244 07.02.200 6 07.04.2006 43,409 2.244 07.02.2006 07.04.2006 18703 2.244 07.02.2006 07.04.2006 34734 2.244 1420648 2.244 6. THE ASSESSING OFFICER HAS ALSO TABULATED THE ABOVE DETAILS IN ITS ORDER IN PARA 2. 7. THE LD. SENIOR DR DID NOT DISPUTE TO THE FACTUAL POSITION WITH REGARD TO THE ACTUAL PAYMENT OF TDS. ONCE THE TDS HAS BEEN FOUND TO BE PAID BEFORE THE LAST DATE OF FILING RETURN, NO DISALLOWANCE IS WARRANTED U/S 40A(IA). D URING THE -: 5: - 5 COURSE OF HEARING, THE LD. AUTHORIZED REPRESENTATIV E ALSO DRAWN OUR ATTENTION TO THE SUBMISSION FILED BEFORE THE ASSESSING OFFICER WHICH INDICATE THAT OUT OF TOTAL PAYMENT OF RS. 14,20,676/-, A SUM OF RS. 11,53,378/- WAS PAID FOR CAPITAL GOODS AND FOR WHICH NO EXPENDITURE WAS CLAIMED IN T HE PROFIT AND LOSS ACCOUNT. UNDER THE PROVISIONS OF SECTION 4 0(A)(IA) DISALLOWANCE IS WARRANTED IF THE ASSESSEE HAS CLAIM ED EXPENDITURE IN THE PROFIT AND LOSS ACCOUNT AND ONCE IT IS FOUND THAT THE ASSESSEE HAS NOT CLAIMED ANY EXPENDITURE I N RESPECT OF SUCH PAYMENT, NO DISALLOWANCE IS WARRANTED U/S 4 0A(IA) OF INCOME-TAX ACT, 1961. HOWEVER, IN THE INSTANT CASE BEFORE US, ENTIRE TDS HAS BEEN PAID BEFORE THE LAST DATE OF FI LING RETURN AS PER OUR CONSIDERED VIEW, NO DISALLOWANCE IS WARRANT ED U/S 40(A)(IA). OUR VIEW IS SUPPORTED BY THE DECISION OF COORDINATE BENCH IN THE CASE OF SHRI JAWAHAR LAL, I.T.A.NO. 20 4 & 205/IND/2011, ORDER DATED 31 ST AUGUST, 2012, WHEREIN IT WAS HELD THAT AMENDMENT BROUGHT IN SECTION 40A(IA) BY F INANCE ACT, 2010, WAS RETROSPECTIVE FROM 1.4.2005. PRECISE OBSERVATION WAS AS UNDER :- -: 6: - 6 16. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND H AVE GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW AN D ALSO DELIBERATED ON THE DECISIONS RELIED ON BY THE CIT D R IN THE CASE OF BHARTI SHIPYARD, AS WELL AS THE DECISION OF HON'BLE KOLKATA HIGH COURT IN THE CASE OF VIRGIN CREATIONS. WE FOUND THAT VARIOUS BENCHES OF THE TRIBUNAL HAVE DEA LT WITH THE ISSUE OF ALLOWABILITY OF CLAIM OF DEDUCTION U/S 40A(IA) DURING THE ASSESSMENT YEAR 2005-06 AND SUBSEQUENTLY , WHEREIN IT WAS HELD THAT IN VIEW OF THE DECISION OF HON'BLE KOLKATA HIGH COURT IN THE CASE OF VIRGIN CREATIONS AMENDMENT BROUGHT IN BY THE FINANCE ACT, 2010, WERE RETROSPECTIVE FROM 1.4.2005. IN THE CASE OF PIYUSH C.MEHTA, I.T.A.T., MUMBAI BENCH IN I.T.A.NO. 1231/MUM/2009 V IDE ORDER DATED 11 TH APRIL, 2012, HELD AS UNDER :- 17. IT CAN BE SEEN FROM THE ABOVE DECISION OF THE HON'BLE CALCUTTA HIGH COURT THAT AMENDMENT TO THE PROVISIONS OF SEC.40A(IA) OF THE ACT, BY THE FINANCE ACT, 2010 AS AFORESAID WAS HELD TO BE RETROSPECTIVE FROM -: 7: - 7 1.4.2005. IF THE AMENDMENT IS CONSIDERED AS RETROSPECTIVE FROM 1.4.2005, THE EFFECT WILL BE THAT PAYMENTS OF TDS TO THE CREDIT OF THE GOVERNMENT ON OR BEFORE THE LAST DATE FOR FILING RETURN OF INCOME U/S. 139(1) OF THE ACT FOR THE RELEVANT AY HAVE TO BE ALLOWED & DEDUCTION. ADMITTEDLY, IN THE CASE OF THE ASSESSEE PAYMENTS WERE SO MADE BEFORE THE SAID DUE DATE AND IN TERMS OF THE DECISION OF THE HON'BLE CALCUTTA HIGH COURT NO DISALLOWANCE COULD BE MADE BY THE AO U/S. 40(A)(IA) OF THE ACT. 18. THE QUESTION NOW IS AS TO WHETHER TO FOLLOW THE DECISION OF THE HON'BLE SPECIAL BENCH WHICH HAS TAKEN THE VIEW THAT AMENDMENT BY THE FINANCE ACT, 2010 TO THE PROVISIONS OF SEC.40(A)(IA) OF THE ACT IS PROSPECTIVE AND NOT RETROSPECTIVE FROM 1.4.2005 OR THE DECISION OF THE HON'BLE CALCUTTA HIGH COURT TAKING A CONTRARY VIEW. ON THE ABOVE QUESTION, THE LEARNED COUNSEL FOR THE ASSESSEE BROUGHT TO OUR NOTICE THE DECISION OF THE ITAT DELHI IN THE CASE OF TEJ INTERNATIONAL (P) LTD. V. DY. CIT (2000) 69 TTJ (DEL) 650, WHEREIN IT WAS HELD THAT IN THE HIERARCHICAL JUDICIAL SYSTEM THAT WE HAVE IN -: 8: - 8 INDIA, THE WISDOM OF THE COURT BELOW HAS TO YIELD TO THE HIGHER WISDOM OF THE COURT ABOVE, AND THEREFORE, ONCE AN AUTHORITY HIGHER THAN THIS TRIBUNAL HAS EXPRESSED ITS ESTEEMED VIEWS ON AN ISSUE, NORMALLY, THE DECISION OF THE HIGHER JUDICIAL AUTHORITY IS TO BE FOLLOWED. THE BENCH HAS FURTHER HELD THAT THE FACT THAT THE JUDGMENT OF THE HIGHER JUDICIAL FORUM IS FROM A NON-JURISDICTIONAL HIGH COURT DOES NOT REALLY ALTER THIS POSITION, AS LAID DOWN BY THE HON'BLE BOMBAY HIGH COURT IN THE CASE OF CIT V. GODAVARIDEVI SARAF, 113 ITR 589(BOM). 19. IN VIEW OF THE ABOVE, WE HOLD FOLLOWING THE DECISION OF THE HON'BLE CALCUTTA HIGH COURT THAT AMENDMENT TO THE PROVISIONS OF SECTION 40(A)(IA) OF THE ACT, BY THE FINANCE ACT, 2010 IS RETROSPECTIVE FROM 1.4.2005. CONSEQUENTLY, ANY PAYMENT OF TAX DEDUCTED AT SOURCE DURING PREVIOUS YEARS RELEVANT TO AND FROM AY 05-06 CAN BE MADE TO THE GOVERNMENT ON OR BEFORE THE DUE DATE FOR FILING RETURN OF INCOME U/S.139(1) OF THE ACT. IF PAYMENTS ARE MADE AS AFORESAID, THEN NO DISALLOWANCE U/S 40(A)(IA) OF THE ACT CAN BE MADE. ADMITTEDLY IN THE PRESENT CASE THE ASSESSEE HAD DEPOSITED THE TAX -: 9: - 9 DEDUCTED AT SOURCE BEFORE THE DUE DATE FOR FILING RETURN OF INCOME U/S. 139(1) OF THE ACT AND THEREFORE THE IMPUGNED DISALLOWANCE DESERVES TO BE DELETED. WE ORDER ACCORDINGLY AND ALLOW THE APPEAL BY THE ASSESSEE. 17. IN VIEW OF THE ABOVE DISCUSSION AND APPLYING THE PROPOSITION OF LAW LAID DOWN IN THE ABOVE DECIS ION OF CALCUTTA HIGH COURT, WHERE PAYMENT TO THE GOVERNMEN T TREASURY WAS ADMITTEDLY MADE BEFORE LAST DATE OF FI LING RETURN, THE SAME CANNOT BE DISALLOWED U/S 40A(IA). ACCORDINGLY,, ACTION OF THE CIT(A) IS UPHELD. 8. THE ASSESSING OFFICER HAS ALSO DISALLOWED BANK CHARGES AND FINANCE CHARGES ON THE PLEA THAT THE SA ME WERE CAPITAL IN NATURE BY THE IMPUGNED ORDER, THE LD. CI T(A) DELETED THE DISALLOWANCE BY OBSERVING AS UNDER :- 3.1 THE FACTS OF THE MATTER IN BRIEF ARE THAT THE APPELLANT HAD OBTAINED TERM LOAN FROM BANK FOR ESTABLISHING AN INDUSTRIAL UNIT AT BADDI DISTRICT, SOLAN WHICH COMMENCE PRODUCTION ON 16.07.2005. THE APPELL ANT -: 10: - 10 PAID BANK CHARGES, TRUSTEESHIP FEE, DD COMMISSION A ND INTEREST ON THESE TERM LOAN. THE BANK CHARGES AND I NTEREST UP TO THE DATE OF COMMENCEMENT OF PRODUCTION WERE CAPITALIZED AND BANK INTEREST AND CHARGES AFTER THE DATE OF PRODUCTION WERE CLAIMED AS REVENUE EXPENDITURE. THE ASSESSING OFFICER HELD THAT THE APPELLANT HAS CHANG ED ACCOUNTING POLICY WHICH IS NOT ALLOWABLE AND DISALL OWED THE INTEREST AND BANK CHARGES TOTALING TO RS. 10943 14/- AS CAPITAL EXPENDITURE. I HAVE EXAMINED THE ISSUE. IT IS FOUND THAT THE APPELLANT HAS RIGHTLY CAPITALIZED THE BANK CHARGES ETC. UP TO THE DATE OF COMMENCEMENT OF PRODUCTION. THE INTEREST AND BANK CHARGES AFTER THE DATE OF COMMENC EMENT OF PRODUCTION ARE RIGHTLY CLAIMED AS REVENUE EXPEND ITURE AND ARE ALLOWABLE U/S 36(I)(III). IN VIEW OF THE AB OVE THE DISALLOWANCE OF RS. 1094314/- IS DELETED. 9. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND FOUND FROM RECORD THAT ASSESSEE HAD CLAIMED BANK CHARGES AND FINANCE CHARGES INCURRED AFTER COMMENCEMENT OF PROD UCTION, AS REVENUE EXPENSES. THESE EXPENSES ARE ESSENTIALLY INCURRED REVENUE IN NATURE. ACCORDINGLY, THERE IS NO REASON TO DISALLOW THE SAME IN TERMS OF PROVISIONS OF SECTION 37. EVEN THOUGH THE LD. CIT(A) HAS ALLOWED THE SAME U/S 36(I)(III), AS PER OUR -: 11: - 11 CONSIDERED VIEW, SUCH REVENUE EXPENDITURE ARE ALLOW ABLE U/S 37 OF THE INCOME-TAX ACT, 1961. FURTHERMORE, A CLEA R FINDING HAS BEEN RECORDED BY CIT(A) THAT SUCH EXPENDITURE W AS CLAIMED ONLY AFTER COMMENCEMENT OF PRODUCTION. THUS , THERE IS NO INFIRMITY IN THE ORDER OF CIT(A) FOR ALLOWING SUCH CLAIM. 10. IN THE CROSS OBJECTION, THE ASSESSEE HAS CHALLENGED REOPENING OF ASSESSMENT U/S 147 AND ALSO CIT(A)S A CTION FOR MAINTAINING ADDITION OF RS. 2,67,300/-. IN THIS REG ARD, WE FOUND THAT THE CIT(A) HAS UPHELD THE ADDITION OF RS . 2,67,300/- IN RESPECT OF PAYMENT MADE ON WHICH TDS HAS NOT BEEN DEDUCTED AND WHICH PERTAINS TO REVENUE NATURE. THE PRECISE FINDING OF CIT(A) WAS AS UNDER :- 2.3 I HAVE EXAMINED THE FACTS OF THE MANNER. DURI NG THE APPELLATE PROCEEDINGS THE ASSESSMENT RECORDS WE RE ALSO EXAMINED. IT IS FOUND THAT OUT OF THE TOTAL AM OUNT OF PAYMENT OF RS. 14,20,678/- IN RESPECT OF WHICH TDS DEDUCTED HAVE NOT BEEN DEPOSITED WITHIN DUE DATE PAYMENT OF RS. 11,53,378/- IS DONE FOR PURCHASE OF CAPITAL GOODS. THIS PAYMENT IS NOT COVERED BY SECTI ON 40(A)(IA) HENCE ADDITION OF RS. 11,53,378/- IS DELE TED. -: 12: - 12 2.4. THE BALANCE AMOUNT OF RS. 2,67,300/- ARE PAYME NT FOR REVENUE EXPENDITURE THEY ARE COVERED BY SECTION 40(A)(IA) SINCE THE APPELLANT HAS NOT DEPOSITED TDS DEDUCTED ON THIS PAYMENT WITHIN DUE DATE THIS AMOUN T OF EXPENDITURE IS NOT ALLOWABLE U/S 40(A)(IA). THE APP ELLANT PLEA THAT THE AMENDMENT TO SECTION 40(A)(IA) MADE B Y FINANCE ACT, 2010, SHOULD BE GIVEN EFFECT FROM 01.0 4.2005 IS NOT IN ACCORDANCE WITH LAW. THE ACT HAS CLEARLY PROVIDED THAT THE AMENDMENT SHOULD BE APPLICABLE W.E.F. 1.4. 2010 HENCE IT CANNOT BE APPLY WITH RETROSPECTIVE EFFECT. IN VIEW OF THE ABOVE DISALLOWANCE OF RS. 2,67,300/- IS CONF IRMED. IN RESULT THE DISALLOWANCE U/S 40(A)(IA) IS REDUCED FROM RS. 14,20,678/- TO RS. 2,67,300/-. 11. THE ISSUE HAS ALREADY BEEN DISCUSSED BY US WHILE DEALING WITH REVENUES GROUNDS FOR DELETION OF DISA LLOWANCE U/S 40(A)(IA), SINCE ENTIRE AMOUNT OF TDS WAS DEPOS ITED BY THE ASSESSEE BEFORE THE LAST DATE OF FILING RETURN, NO DISALLOWANCE WAS WARRANTED. ACCORDINGLY, THE CIT(A) WAS NOT JUS TIFIED IN SUSTAINING ADDITION OF RS. 2,67,300/-. -: 13: - 13 12. IN SO FAR AS REOPENING IS CONCERNED, WE FOUND THAT THE DETAILED REASONS HAVE BEEN RECORDED BY THE ASSESSIN G OFFICER FOR REOPENING THE ASSESSMENT. ACCORDINGLY, WE DO N OT FIND ANY INFIRMITY IN THE ORDER OF CIT(A) FOR UPHOLDING THE REASSESSMENT PROCEEDINGS. 13. IN THE RESULT, THE APPEAL FILED BY THE REVENUE IS DISMISSED, WHEREAS CROSS OBJECTION IS ALLOWED IN PA RT. THIS ORDER HAS BEEN PRONOUNCED IN THE OPEN COURT ON 14 TH JANUARY, 2013. SD/ - SD/ - (JOGINDER SINGH) (R. C. SHARMA) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 14 TH JANUARY, 2013. CPU* 3.3.1