Dy.CIT, Circle-16(2), Hyderabad V. M/s Maruthi Tubes Private Limited, Secunderabad

ITA 1044/HYD/2013

• Counselvise Citation: 104422514 RSA 2013
• Duration Of Justice: 1 year(s) 3 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-10-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2006-2007
• Appeal Filed On: 01-07-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: B RAMA KRISHNA
• Assessee Lawyers: S RAMA RAO

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH A', HYDERABAD BEFORE SHRI P.M.JAGTAP, ACCOUNTANT MEMBER AND SHRI SAKTIJIT DEY, JUDICIAL MEMBER ITA NO.1044/HYD/13 : ASSESSMENT YEAR 2006 - 07 DY. COMMISSIONER OF INCOME - TAX CIRCLE 16(2), HYDERABAD V/S. M/S. MARUTHI TUBES PRIVATE LIMITED, HYDERABAD (PAN AABCM 5529 J) (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI B.RAMAKRISHNA RESPONDENT BY : SHRI S.RAMA RAO DATE OF HEARING 27 . 1 0.2014 DATE OF PRONOUNCEMENT 29.10.2014 O R D E R PER P.M.JAGTAP, ACCOUNTANT MEMBER : THIS APPEAL IS PREFERRED BY THE REVENUE AGAINST THE O R DER OF THE LEARNED COMMISSIONER OF INCOME - TAX(APPEALS) V, HYDERABAD DATED 13.3.2013. 2. GROUND NO.1 RAISED BY THE R EVENUE IN THI S APPEAL I S GENERAL SEEKING NO SPECIFIC ADJU D I C ATION. 3. IN GROUNDS NO.2 AND 3, THE R E VENU E HAS CHALLENGED THE ACTION OF TH E LEARNED CIT(A) IN ALLO W IN G THE CLAIM O F TH E ASSESSEE FOR DEDUC T ION UNDER S.80IB. 4. THE ASSESSEE IN THE PRESENT CA S E IS A COMPANY WHICH IS ENGAGED IN THE BU S IN E SS OF MANUFACTURE OF HDPE PIPES AND EXECUTION OF WORKS CONTRACT . THE RETURN OF INCOME FOR THE YEAR UNDER CONSIDERATION WAS FILED BY IT ON 30.11.2006. IN THE SAID R E TURN, A COMBINED PROFIT OF R S .90,75,670 WAS CLAIMED BY THE ASSESSEE F R OM THE BU S IN E SS OF MANU F ACTURE OF HDPE PIPES AS WELL I TA NO. 1044/H YD/20 13 M/S. MARUTHI TUBES PRIVATE LIMITED, HYDERABAD 2 AS EXECUTION OF WORKS CONTR A CT AND DEDUCTION TH E REON AT THE RATE OF 30%, AMOUNTING TO R S .27,22,701 W AS CLAIMED UNDER S.80IB OF THE ACT. DU RIN G THE COU R SE OF ASSESSMENT PROCEEDINGS, T H E CLA IM O F TH E ASSESSEE FOR DEDUCTION UNDER S.80IB WAS EXAMINED BY THE ASSESSING OFFICER AND ON SUCH EXAMINATION, H E FOUND THAT PROFIT SHOWN BY THE ASSESSEE WAS IN C LU S IVE OF INTEREST ON BANK DEPO S I T S AMOUNTING T O RS.10,76,660, WHICH WAS NOT ELIGIBLE FOR DEDUCTION UNDER S.80IB. HE ALSO HELD T H A T THE ASSESSEE WAS FURTHER NOT ENTITLED TO DEDUCTION UNDER S.80IB ON THE P R OFITS F R OM THE BU S IN E SS OF EXECUTION OF WORKS CONTRACT. SIN C E NO SEPARATE BOOKS O F AC C OUNT WERE MAIN T AIN E D BY THE ASSESSEE IN R E SPECT OF THE SAID ACTIVITY, HE ESTIMATED THE P R O F I T FROM THE SAID ACTIVITY AT RS.71,93,893 BY APPLYING A NET PROFIT RATE OF 5% AND HELD THAT THE ASSESSEE WAS ENTITLED FOR DEDUCTION UNDER S.80IB IN RESPECT OF PROFIT ONLY TO THE EXTENT OF R S .8,05,970 (RS.90,75,670 - RS.10,76,660 - RS.71,93,893), PROVIDED THE CON D IT I ON S FOR CLAIMING THE SAID DEDUCTION WERE SATISFIED BY TH E ASSESSEE . IN THI S REGARD, HE HELD THAT ONE SUCH CON DI TION THAT THE VALUE O F PLANT AND MA CH INERY SHOULD B E BELOW RS.1 CRORE WAS NO T SATISFIED IN THE CA S E OF THE ASSESSEE AND THER E FORE, THE ASSESSEE WAS NO T ENTITLED TO CLAIM ANY DEDUCTION UN D ER S.80IB. ACCOR D INGLY, THE CLAIM OF TH E ASSESSEE FOR DEDUC T I O N UN D ER S.80IB WAS ENTIRELY DISALLOWED BY THE ASSESSING O FFICER I N THE ASSESSMENT COMPLETED UNDER S.143(3) VIDE ORDER DATED 31.12.2008. 5. AGAINST THE ORDER PASSED BY THE ASSESSING OFFICER UN D ER S.143(3), AN APPE A L WAS PREFERRED BY THE ASSESSEE BEFORE THE LEARNED CIT(A) CHALLENGING INTER AL I A THE DISALLOWA NCE MADE BY THE ASSESSING OFFICER ON ACCOUN T OF DEDUCTION CLAIMED UNDER S.80IB . A FTER CON S IDERIN G THE SUBMI S SION S MADE BY THE ASSESSEE AS WELL AS THE MATERIAL AVAILABLE ON RECORD, THE LEARNED CIT(A) UPHELD THE DECISION OF THE ASSESSING OFFICER THAT THE ASSESSEE WAS NO T I TA NO. 1044/H YD/20 13 M/S. MARUTHI TUBES PRIVATE LIMITED, HYDERABAD 3 ENTITLED FOR DEDUCTION UNDER S.80IB IN RESPECT OF PROFITS FR O M TH E ACTIVITY OF EXECUTION OF WORKS C ON T R A CT AND IN T EREST INCOM E RECEIVED ON BANK DEPO S ITS. 6. AS REGARDS THE ESTIMATION OF THE PROFIT OF THE ASSESSEE FORM THE ACTIVITY OF WORKS CON T R A CT, THE LEARNED CIT(A) ALLOWED PART RELIEF TO THE ASSESSEE BY REDUCIN G THE ESTIMATE OF R S .71,93,893 MAD E BY THE ASSESSING OFFICER TO R S .60,80,729. ACCOR D INGLY, THE PROFIT FROM THE ACTIVITY OF MANUFACTURE OF HDPE PIPES WAS WORKED OUT BY THE LEARNED CIT(A) AT RS.19,18,281 (R S .9 0 ,75,670 - RS. 60,80,729 - RS. 10,76,660), AND THE ASSESSING OFFICER WAS DIR E CTED BY HIM TO ALLO W THE CLAIM O F THE ASSESSEE FOR DEDUCTION UNDER S.80IB IN RESPECT OF THE SAID PROFIT. STILL AGGRI E VED BY THE ORDER OF THE LEARNED CIT(A), ASSESSEE PREFERRED AN APPEAL BEFORE THE TRIBUNAL. 7 . DURIN G THE COU R SE OF APPELLATE PROCEE D IN G S BEFORE TH E T RIBUNAL, THE ASSESSEE DID NO T P R ESS THE ISSUE RELATING TO I T S CLAIM FOR DEDUCTION UNDER S.80IB I N RESPECT OF PROFIT FROM THE ACTIVITY OF EXE C U T ION OF WORKS CONTRACT . THE T RIBUNAL ACCO RD INGLY DISMISSED T HE RELEVANT GROUN D RAISED BY THE ASSESSEE ON THIS I S SUE , AS NO T P R ESSED. AS REGARDS THE ISSUE RELATING TO ESTIM A TION OF SUCH PROFIT, THE T R IBUNAL RESTORED THE SAME TO THE FI L E O F THE LEARNED CIT(A) FOR DECI D ING THE SAME AFRESH AFTER GIVING THE ASSESSEE REA S ON A BLE OPPORTUNITY OF BEIN G HEARD. 8 . AS PER THE DI R E C TIONS O F THE T RIBUNAL, THE LEARNED CIT(A) ESTIM A TED THE P R O F I T OF THE ASSESSEE F R OM NON - MANUFACTURING DIVISION, WHICH IS NO T ELIGIBLE FOR DEDUCTION UNDER S.80IB AT RS.38,2 4 ,73 3 AND ACCORDINGLY, DETERMINED THE P R O F IT OF TH E ASSESSEE F R OM MANUFACTUR ING D I VISION AT R S .46,34,110. THE ASSESSING OFFICER ACCORDINGLY WAS DIRECTED BY HIM TO ALLOW I TA NO. 1044/H YD/20 13 M/S. MARUTHI TUBES PRIVATE LIMITED, HYDERABAD 4 DED U C T ION TO THE ASSESSEE UNDER S.80IB (10) ON THE SAID PROFIT DERIVED FORM MANU FA CTURING DIVISION. AGGRIEVED BY THE O R DER OF THE LEARNED CIT(A), RE VENUE HAS RAISED THIS ISSUE IN THE PRESENT APPEAL FIL E D BEFORE THE TRIBUNAL. 9 . WE HAVE HEARD THE ARGUMENTS OF BOTH THE SIDES AND ALSO PERUSED THE RELEVANT MATERIAL ON RECORD. THE MAIN CONTENTION RAISED BY THE LEARNED DEPARTMENTAL REPRESENTATIVE ON THIS I S SU E I S TH A T ONLY TH E MATTER RELATING TO THE ESTIMATION OF THE P R OFIT OF THE ASSESSEE F R OM THE ACTIVITY OF EXECUTION OF WORKS CONTRACT WAS RESTORED BY THE TRIBUNAL TO THE F ILE OF THE LEARNED CIT(A), AND SIN C E THE ISSUE REL A TI O N TO THE CLAIM FOR DEDUC T I O N UNDER S .80IB WAS NO T PRESSED BY THE ASSESSEE BEFORE THE TRIBUNAL, THE LEARNED CIT(A) IS NOT JUSTIFIED IN DIRECTING THE ASSESSING OFFICER TO ALLOW THE CLAIM O F THE ASSESSEE FOR DEDUCTION UNDER S.80IB. ACCORDING TO HIM, THIS DIRECTION GIVEN BY THE LEARNED CIT(A) I N THE SET ASIDE PROCEEDINGS IS BEYOND THE SCOPE OF THE SAID PROCEEDINGS, WHICH IS CONFINED BY THE DIRECTION OF THE TRIBUNAL, AND THE LEARNED CIT(A) HAS THUS TRANSGRESSED HIS LIMIT, WHILE DI R ECTING THE ASSESSING OFFICER TO ALLOW PART OF THE CLAIM O F TH E A SSESSEE FOR DEDUCTION UN D ER S.80IB. W E ARE UNABLE TO ACCEPT THIS CONTENTION OF TH E LEARNED DEPARTMENTAL REPRESENTATIVE. IT IS OB SE RVED TH AT THE ASSESSEE IS ENGAGED IN THE BU S IN E SS OF MANUFACTURE OF HDPE PIPES AS WELL AS EXECUTION OF WORKS CON T RACT. I N TH E R ETURN OF INCOME FILED BY IT, DEDUCTION UN D ER S.80IB WAS CLAIMED BY THE ASSESSEE IN RESP E CT OF PROFIT ON TH E SE TWO BUSINESS ACTIVITIES TAKEN TOGETHER AS WELL AS ON IN T ER E ST INCOME RECEIVED ON BANK DEPOSITS. THE ASSESSING OFFICER, HOWEVER, DISALLOWED THE CLAIM O F THE ASSESSEE FOR DEDUCTION UNDER S.80IB IN ITS ENTIRE T Y. IN THE APPELLATE ORDER PASSED IN THE FIRST ROUND, TH E LEARNED CIT(A) UPHELD THE DECISION OF THE ASSESSING OFFICER THAT THE INTEREST INCOME RECEIVED ON BANK DEPO S I T S WAS NO T ELIGIBLE FOR DE DUC T ION UNDER S.80IB, AND THIS APPARENTLY WAS ACCEPTED BY THE I TA NO. 1044/H YD/20 13 M/S. MARUTHI TUBES PRIVATE LIMITED, HYDERABAD 5 ASSESSEE, AND THEREFORE, THE DECISION OF THE CIT(A) ON THAT ASPECT BECAME FINAL. AS REGARDS THE P R O F I T DERIVED F R OM THE ACTIVITY OF MANUFACTURING HDPE PIPES, THE LEARNED CIT(A) HELD THAT THE S AME WAS ELIGIBLE FOR DEDUC T ION UNDER S.80IB AND SINCE NO APPE A L WAS FILED BY THE DEPARTMENT , CHALLENGING THI S DECISION OF TH E LEARNED CIT(A) BEFORE THE T RIBUN A L, THE SAME ALSO BECAME FINAL. 10. TH E REM A INING ISSUES THAT SURVIVED FOR CON S ID E RATION OF THE TRIBUNAL , AS RAISED BY THE ASSESSEE IN ITS APPEAL , THUS WERE RELATING TO THE QUANTIF I CATION OF ITS PROFIT FROM THE ACTIVITY OF EXECUTION OF WORKS CONTRACT AND ELIGIBILITY O F T H E SAME FOR DEDUC T ION UNDER S.80IB. AS REGARDS THE CLAIM OF THE ASSESSEE FOR DEDUCTION UNDER S.80IB IN RESPECT OF PROFIT FROM THE AC T IVITY OF WORKS CONTRACT, A SIMILAR ISSUE WAS ALREADY DECIDED BY TH E TRIBUNAL AGAINST THE ASSESSEE IN ASSESSMENT YEAR 2005 - 06 AND ACCORDINGLY, THE SAME WAS NO T PRESSED BY TH E ASSESSEE DURING TH E CO U R SE OF APPELLATE PROCEEDINGS FOR THE YEAR UNDER CONSIDERATION BEFORE THE TRIBUNAL. THE ISSUE THAT SURVIVED FOR THE CONSIDERATION OF THE T RIBUNAL IN THI S CONTE X T WAS THUS ONLY IN RELATION TO THE QUANTI F ICATION OF THE PROFIT OF THE ASSESSEE F R OM THE ACTIV ITY OF EXECUTION OF WORKS CONTRACT AND THE SAME WAS RESTORED BY THE TRIBUNAL TO THE FILE OF THE CIT(A) VIDE ITS ORDER DATED 19.7.2012 , PASSED IN ITA NO.1650/HYD/2010 FOR DECIDING THE SAME AFRESH. IT I S HOWEVER, PERTINENT TO NOTE HERE THAT THE ISSUE R E L A TIN G TO THE DETERMINATION OF THE PROFIT F R OM THE MANU FA CTURING D I VISION ELIGIBLE FOR DEDUCTION UNDER S.80IB W A S DEPENDENT ON AND CONSEQUENTIAL TO THE ESTIMATION OF PROFIT OF THE ASSESSEE F R OM THE ACTIVITY OF WO R KS CONTRA C T IN AS MUCH AS THE BALANCING FIG URE, AFTER ESTIMATING THE P R O F IT OF THE ASSESSEE F R OM THE ACTIVITY OF EXECUTION OF WORKS CONTRACT, WAS GOING TO BE THE PROFIT OF THE MANU FA CTURING D IVISION WHICH IS ELIGIBLE FOR DEDUCTION UNDER S.80IB. ACCOR D INGLY, THE LEARNED CIT(A), AFTER ESTIMATING THE P R O F IT OF THE ASSESSEE F R OM THE ACTIVITY OF EXECU T ION OF WORKS I TA NO. 1044/H YD/20 13 M/S. MARUTHI TUBES PRIVATE LIMITED, HYDERABAD 6 CONTRACT AS P E R THE DIR E C T IONS OF THE TRIBUNAL, PROCEEDED TO DIR E CT THE ASSESSING OFFICER TO ALLOW DEDUCTION TO THE ASSESSEE UNDER S.80IB IN RESPECT OF THE BALANCING FIGURE, WHICH REPR E SENT ED THE P R O F I T O F THE MANU FA CTURING DIVI S ION OF TH E ASSESSEE. I N OU R OPINION, TH E LEARNED CIT(A) THUS HAS NO T GONE BEYOND THE SCOPE OF THE SET ASIDE PROCEEDINGS, AS ALLEGED BY THE LEARNED DEPARTMENTAL REPRESENTATIVE, WHILE DIRECTING THE ASSESSING OFFICER T O ALLOW T HE CLAIM O F T H E ASSESSEE FOR DEDUCTION UNDER S.80IB IN RESPECT OF THE PROFIT OF THE MANUFACTURING DIVISION, WHICH IS DETERMINED IN CONS E QUENCE TO THE ESTIMATION OF THE PROFIT OF THE ASSESSEE F R OM THE ACTIVITY OF EXE C UT I ON OF WORKS CONTRACT. IN THAT VIEW OF THE MATT E R, WE FIND NO MERIT IN GROUNDS NO.2 AND 3 OF THE REVENUES APPEAL, AND DISMISS THE SAME ACCORDINGLY. 11. IN G R OUND NO.4, THE REVENUE HAS CHALLENGED THE ACTION OF THE LEARNED CIT(A) IN DELETING THE ADDITION OF RS.2,71,90,481 MADE BY THE ASSESSING OFFICER BY INVOKING THE P R OVISION S OF S.40(A)(IA) OF THE ACT. 12. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, IT WAS NOTICED BY THE ASSESSING OFFICER THAT THE TAX DEDUCTED AT SOURCE BY THE ASSESSEE FROM THE PAYMENTS MADE TO THE CONTRACTORS AMOUNTING TO RS.2,71,90,481 WAS BELATEDLY PAID BY THE ASSESSEE IN THE MONTH OF OCTOBER, 2005. HE THEREFORE, INVOKED THE PROVISIONS OF S.40(A)(IA) AND MADE A DISALLOWANCE OF RS.2,71,90,481. ON APPEAL, THE LEARNED CIT(A) CONFIRMED THE SAID DISALLOWANCE MADE BY THE ASSESSING OFFICER. ON FURTHER APPEAL, THE TRIBUNAL RESTORED THIS ISSUE TO THE FILE OF THE LEARNED CIT(A) WITH A DIRECTION TO EXAMINE THE SAME IN THE LIGHT O F TH E DECISION OF THE SP E CIAL B ENCH (VISAKHAPATNAM) O F THE TRIBUNAL IN THE CA S E OF MERYLIN SHIPPING AND TR ANSPO R TS V/S. ACIT (2012)(20 TAXMANN.COM.244) ACCORDIN G LY, THE ISSUE WAS EX A MINED BY THE LEARNED CIT(A), AND H E I TA NO. 1044/H YD/20 13 M/S. MARUTHI TUBES PRIVATE LIMITED, HYDERABAD 7 FOUND THAT OUT OF THE TOTAL AMOUNT O F R S .2,71,90,481, A SUM OF R S .40,96,319 WAS PAYABLE AT THE END O F THE RELE V A NT PREVIOUS YEAR. HE FURTHER FOUN D TH A T THE ENTIRE AMOUNT O F TAX DEDUCTED AT SOU R CE WAS PAID BY TH E ASSESSEE BEFORE THE DUE DATE OF FILIN G OF TH E RETURN OF INCOME FOR THE YEAR UNDER CONSIDERATION AND THE R EFO R E, NO DISALLOWANCE UNDER S.40(A)(IA) WAS CALLED FOR , A S PER THE DECISION O F THE HON'BLE KOLKATA HIGH COU R T IN TH E CASE OF CIT V/ S. VIRGIN CREATIONS (ITA NO. 302 OF 2011 DATED 23 - 11 - 2011). HE TH E R E FORE, DELETED THE ENTIRE DISALLOWANCE MADE BY THE ASSESSING OFFICER BY INVOKING THE P R O V ISION S OF S.40( A)(IA). 1 3 . WE HAVE HEARD THE ARGUMENTS OF BOTH THE SIDES AND ALSO PERUSED THE RELEVANT MATERIAL ON RECORD. ALTHOUGH TH E LEARNED DEPARTMENTAL REPRESENTATIVE HAS CONTENDED THAT THE OP ER ATION O F THE DECISION OF THE SP E CIAL BENCH OF TH E TRIBU N AL IN THE CA S E OF M ERYLIN SHIPPIN G AND TR A N S PO R TS (SUPRA) WAS STAYED BY THE HON'BLE A. P . HIGH COU R T WHEN TH E IMPU G N E D ORDER CAME TO BE PASSED BY THE LEARNED CIT(A), IT IS OBSERVED THAT THE LEARNED CIT(A) HAS ACTUALLY D ELETED THE ENTIRE DISALLOWANCE MADE BY THE ASSESSIN G OFFICER UN D ER S.40(A)(IA) BY FOLLOWING THE DECISION OF THE HON'BLE KOLKA TA HIGH COU R T IN THE C A SE OF VIRGIN CREATIONS (SUPRA) AND THE HON'BLE ANDHRA P RADESH HIGH COU R T IN TH E CASE OF CIT V/S. PEC ELECTRICALS PVT. LTD. ( ITTA NO.263 OF 2013) VIDE ORDER DA TED 12.7.2013, HAS CONCURRED WITH THE VIEW O F THE HON'BLE KOLKATA HIGH COURT IN THE CASE OF VIRGIN CR E ATIONS (SUPRA) . THUS, THE I S SUE INVOLVED IN G R OUN D NO.4 OF THE REVENUES APPEAL IS SQU A RELY COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF TH E HON'BLE ANDHRA PRADESH HIGH COURT IN TH E CA S E OF PEC ELECTRIC A LS (SUPRA) AND RESPECTFULLY FOLLOWING THE SAID DECISION OF THE JURISDI C T I ONAL HIGH COU R T, WE UPHOLD THE IMPU G N E D ORDER OF TH E LEARNED CIT(A), DELETING THE DISALLOWANCE MADE BY THE ASSESSING OFFI CER UNDER S.40(A)(IA). GROUND NO.4 OF THE REVENUES APPEAL IS ACCORDINGLY DISMISSED. I TA NO. 1044/H YD/20 13 M/S. MARUTHI TUBES PRIVATE LIMITED, HYDERABAD 8 1 4 . IN THE RESULT, APPEAL OF THE REVENUE IS DISMISSED. \ ORDER PRONOUNCED IN THE COURT ON 29 TH OCTOBER, 2014 SD/ - SD/ - ( SAKTIJIT DEY ) ( P.M.JAGTAP ) JUDICIAL MEMBER ACCOUNTANT MEMBER DT/ - 29 TH OCTOBER, 2014 COPY FORWARDED TO: 1. M/S. MARUTHI TUBES PRIVATE LIMITED, 5 - 4 - 86 - 92 133/A ALKARIM TRADE CENTRE, RANIGUNJ, SECUNDERABAD 500 003 . 2 . DY. COMMISSIONER OF INCOME - TAX CIRCLE 1 6 ( 2 ), HYDERABAD 3. 4. COMMISSIONER OF INCOME - TAX(APPEALS) V , HYDERABAD COMMISSIONER OF INCOME - TAX I V , HYDERABAD 5. DEPARTMENTAL REPRESENTATIVE, ITAT, HYDERABAD. B.V.S