Smt. Renu Somani, Uttar Dinajpur V. CIT, Jalpaiguri, Jalpaiguri

ITA 1096/KOL/2010

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 54481 (ITAT-KOLKATA)
• Duration Of Justice: 1 year(s) 2 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-08-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Assessment Year: 2006-2007
• Appeal Filed On: 31-05-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: D R SINDHAL
• Assessee Lawyers: J M THARD
• Section: 143(3); 80IB

Judgement Text

, , , , , , ,, , IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH : KOLKATA [ . . . . . .. . , , ! ! ! ! , ] [BEFORE HONBLE SHRI S.V. MEHROTRA, AM & HONBLE SHRI MAHAVIR SINGH, JM !' !' !' !' / I.T.A NO. 1096/KOL/2010 #$ %& #$ %& #$ %& #$ %&/ // / ASSESSMENT YEAR : 2006-07 RENU SOMANI - VS.- COMMISSIONER OF INCOME TAX RAIGANJ. [PAN : AOQPS 6732 K] JALPAIGURI. [ () () () () /APPELLANT ] ]] ] [ +,() +,() +,() +,()/ // / RESPONDENT ] ]] ] () () () () / FOR THE APPELLANT : SHRI J. M. THARD +,() +,() +,() +,() / FOR THE RESPONDENT : SHRI D. R. SINDHAL, C IT - /ORDER . . . . . .. . , PER S. V. MEHROTRA, A. M. THE ASSESSEE HAS PREFERRED THIS APPEAL FOR ASSESSM ENT YEAR 2006-07 AGAINST THE ORDER OF LD. CIT, JALPAIGURI DATED 04.05.2010 U/S. 263 OF TH E INCOME TAX ACT. 2. FROM THE EXAMINATION OF RECORDS, LD. CIT NOTICED THAT ASSESSMENT WAS COMPLETED U/S. 143(3) ON 27.11.2008 BY ALLOWING THE CLAIM FOR DEDU CTION U/S. 80IB OF THE ACT. LD. CIT CONCLUDED THAT THERE WAS AN ERROR IN ALLOWING THE CLAIM FOR D EDUCTION U/S. 80IB RESULTING IN REVENUE LOSS, SINCE THE DECISION COMPLETELY IGNORED THE INTERPRET ATION OF THE RELEVANT PROVISIONS OF SECTION 80-IB FINALLY SETTLED BY SEVERAL HONBLE SUPREME COURT JU DGMENTS. HE, THEREFORE, INITIATED PROCEEDINGS U/S. 263 OF THE ACT FOR REVISION OF THE ASSESSMENT ORDER. THE ASSESSEE SUBMITTED THAT IT HAD RECEIVED CERTAIN ASSISTANCE IN THE FORM OF INTEREST SUBSIDY UNDER ARTICLE 9 OF WEST BENGAL INCENTIVE SCHEME, 2000, AS THE ASSESSEES PROJECT W AS AN APPROVED PROJECT FOR THE PURPOSE OR GETTING SUCH LOAN. IT WAS SUBMITTED THAT THE LOAN W AS TAKEN FOR THE PURPOSE OF INDUSTRIAL UNDERTAKING. THE PAYMENT OF INTEREST ON SUCH LOAN A ND CONSEQUENTLY, INTEREST SUBSIDY ASSISTANCE RECEIVED BY THE ASSESSEE WAS INDIVISIBLE PARTS OF T HE BUSINESS ACTIVITY ENTITLING THE ASSESSEE TO CLAIM DEDUCTION U/S. 80IB. IT WAS POINTED OUT THAT SINCE SUCH ASSISTANCE WAS PART OF THE PROFIT OF THE INDUSTRIAL UNDERTAKING THE SAME QUALIFIED FOR D EDUCTION U/S. 80IB. THE ASSESSEE ALSO RELIED ON ITA NO. 1096/KOL/2010 2 THE DECISION OF HONBLE MADRAS HIGH COURT IN THE CA SE OF CIT VS. MADRAS MOTORS LTD. [2002] 257 ITR 60 (MAD.). LD. CIT AGAIN ISSUED A DETAILED LETT ER REFERRING TO VARIOUS CASE LAWS AND EMPHASIZED THAT THE PHRASE DERIVED FROM HAS BEEN USED U/S. 80IB AS AGAINST ATTRIBUTABLE TO. THE ASSESSEE POINTED OUT THAT THERE IS DIFFERENCE BETWE EN THE LANGUAGES USED IN SECTIONS 80HH & 80IB AND POINTED OUT THAT IN SECTION 80HH THE PHRASE USE D IS DERIVED FROM INDUSTRIAL UNDERTAKING WHEREAS IN SECTION 80IB PHRASE USED IS DERIVED FRO M ANY BUSINESS. THE ASSESSEE FURTHER POINTED OUT THAT, IN ANY VIEW OF THE MATTER, IT IS A DEBATA BLE ISSUE AND, THEREFORE, NOT AMENABLE TO REVISIONARY JURISDICTION U/S. 263. 3. LD. COUNSEL APPEARING ON BEHALF OF THE ASSESSEE SUBMITTED THAT INTEREST SUBSIDY WAS IN THE FORM OF REIMBURSEMENT OF EXPENDITURE AND, THEREFORE , IT WAS DERIVED FROM BUSINESS ACTIVITY AND ELIGIBLE FOR DEDUCTION U/S. 80IB OF THE ACT. LD. CO UNSEL FURTHER SUBMITTED THAT ASSESSING OFFICER HAD ISSUED NOTICE U/S.154 FOR WITHDRAWING DEDUCTION U/S 80IB IN RESPECT OF INTEREST SUBSIDY OF RS.5,28,701/-. HE REFERRED TO THE REPLY FILED BY TH E ASSESSEE AND POINTED OUT THAT AFTER CONSIDERING THE SAID REPLY, ASSESSING OFFICER DID NOT PASS ANY ORDER U/S. 154 OF THE ACT. LD. COUNSEL FURTHER REFERRED TO ORDER U/S. 263 OF THE ACT AND POINTED O UT THAT ALL THE CASES REFERRED TO THEREIN WERE ELABORATELY DISCUSSED IN THE REPLY FILED BY THE ASS ESSEE. HE SUBMITTED THAT THE FOLLOWING DECISIONS ARE IN FAVOUR OF THE ASSESSEE :- I) CIT -VS- ELTEK SGS P. LTD - 300-ITR-6 (DELHI) : - IN THIS CASE THE HONBLE COURT EXPLAINED THAT THERE NEED NOT NECESSARILY BE A DIRECT NEXUS BETWEEN THE ACTIVITY OF AN INDUSTRIAL UNDERTA KING AND THE PROFITS AND GAINS. THE ENTITLEMENT OF THE DUTY DRAW-BACK AROSE FROM SE C.75(L) OF THE CUSTOMS ACT, 1962, READ WITH RELEVANT NOTIFICATION ISSUED BY THE CENTRAL GOVERNMENT IN THAT REGARD. AN ASSESSEE WOULD BE ENTITLED TO DEDUCTION U/S.80-JB IN RESPECT OF THE DUTY DRAW-BACK. II) CIT-VS- DHARAM PAL PREM CHAND LTD - 317-ITR-353 (DELHI)/221- CTR-133 IN THIS CASE THE HONBLE COURT HELD THAT THERE WAS NO REASON TO EXCLUDE THE AMOUNT OF REFUND OF EXCISE DUTY IN ARRIVING AT THE PROFIT DERIVED FOR THE PURPOSE OF ALLOWING DEDUCTION U/S. 80-LB. III) B. DESRAJ VS- CIT -301 ITR 439 (SC) THIS WAS A CASE RELATING TO THE DEDUCTION ALLOWABLE U/S.8OHHC. THE HONBLE COURT HELD THAT THE CASH COMPENSATORY ALLOWANCE AND DUTY DRAW-BACK HAVE TO BE INCLUDED IN THE PROFITS OF THE BUSINESS FOR COMPUTI NG THE DEDUCTION ALLOWABLE ITA NO. 1096/KOL/2010 3 ULS.8OHHC. WITH REFERENCE TO THESE DECISIONS, LD. COUNSEL SUBM ITTED THAT, IN ANY VIEW OF THE MATTER, IT IS A HIGHLY DEBATABLE ISSUE AND, THEREFORE, NOT AMENABLE TO JURISDICTION U/S. 263 OF THE ACT. LD. CIT, HOWEVER, DID NOT ACCEPT THE ASSESSEES CONTENTION A ND DIRECTED THE ASSESSING OFFICER TO REVISE THE ASSESSMENT ORDER WITHOUT GRANTING THE CLAIM FOR DED UCTION U/S. 80IB IN RESPECT OF INTEREST SUBSIDY OF RS.5,28,701/- 4. LD. DEPARTMENTAL REPRESENTATIVE REFERRED TO ASSE SSMENT ORDER AND POINTED OUT THAT NO ENQUIRY HAS BEEN MADE BY THE ASSESSING OFFICER IN T HIS REGARD. LD. DEPARTMENTAL REPRESENTATIVE SUBMITTED THAT THERE IS NO NEXUS OF INTEREST SUBSID Y WITH INDUSTRY. IN REGARD TO THE RELIANCE PLACED ON THE DECISIONS OF HONBLE DELHI HIGH COURT IN THE CASE OF DHARAM PAL PREM CHAND LIMITED (SUPRA), LD. DEPARTMENTAL REPRESENTATIVE SUBMITTED THAT THE SAID DECISION IS NOT APPLICABLE BECAUSE EXCISE DUTY HAD DIRECT NEXUS WITH THE MANUF ACTURING ACTIVITY. LD. DEPARTMENTAL REPRESENTATIVE FURTHER REFERRED TO FOLLOWING TWO DE CISIONS OF I.T.A.T., INDORE BENCH TO SUBMIT THAT EVEN IN THE CASE OF DEBATABLE ISSUES, THE JURISDICT ION U/S. 263 OF THE ACT CAN BE ASSUMED :- (I) D & H SECHERON ELECTRODES LTD. VS. DCIT [1999] 70 ITD 214 (IND.) (II) JEHAN NUMA PALACE HOTEL (P) LTD. VS. CIT [199 9] 70 ITD 552 (IND.) 5. WE HAVE CONSIDERED THE SUBMISSIONS OF BOTH THE P ARTIES AND HAVE PERUSED THE RECORDS OF THE CASE. ADMITTEDLY, ASSESSING OFFICER HAD ISSUED NOTICE U/S. 154 ON 21.01.2010 AND, THEREFORE, HAD AN OCCASION TO EXAMINE THE ISSUE WITH REFERENCE TO ASSESSEES CLAIM FOR DEDUCTION U/S. 80IB IN REGARD TO INTEREST SUBSIDY. THE ASSESSEE HAD FILED DETAILED REPLY TO THE NOTICE U/S. 154. THE ASSESSING OFFICER DID NOT PASS ANY ORDER THEREAFTER . RECTIFICATION PROCEEDINGS ARE PART AND PARCEL OF ASSESSMENT PROCEEDINGS. THEREFORE, AFTER CONSIDE RATION OF ISSUE IN 154 PROCEEDINGS, IT CAN NOT BE SAID THAT ASSESSING OFFICER DID NOT APPLY HIS MI ND WHILE PASSING THE ASSESSMENT ORDER. 6. NOW, NEXT ISSUE FOR OUR CONSIDERATION IS WHETHER IT WAS A DEBATABLE ISSUE OR NOT. ADMITTEDLY, THERE IS NO DIRECT DECISION ON THIS ISS UE. LD. CIT HAD TRIED TO DRAW ANALOGY BY REFERRING TO VARIOUS DECISIONS WITH REFERENCE TO SE CTION 80HH. ONLY ONE DECISION REFERRED BY HIM IS U/S. 80IB, IN THE CASE OF CIT VS. KHEMKA CONTAIN ER (P) LTD. [2005] 275 ITR 559 (P&H) WHICH WAS IN CONNECTION WITH TRANSPORT SUBSIDY. THE CORE OF DISPUTE IS WHETHER THE INTEREST SUBSIDY WAS DERIVED FROM BUSINESS ACTIVITY OR ONLY ATTRIBUTABLE TO BUSINESS ACTIVITY. ADMITTEDLY, IT WAS IN THE ITA NO. 1096/KOL/2010 4 FORM OF REIMBURSEMENT OF EXPENDITURE AND, THEREFORE , THE ARGUMENT THAT IT WAS DERIVED FROM BUSINESS ACTIVITY CAN NOT BE BRUSHED ASIDE WITHOUT DETAILED DELIBERATIONS. THEREFORE, THIS ISSUE IS HIGHLY DEBATABLE AND, THEREFORE, JURISDICTION U/S. 263 COULD NOT BE INVOKED, IN VIEW OF SETTLED POSITION OF LAW, LD. DEPARTMENTAL REPRESENTATIVE HA S RELIED ON THE DECISION IN THE CASE OF D & H SECHERON ELECTRODES LTD. (SUPRA). IN THIS CASE, TRI BUNALS OBSERVATIONS WERE AS UNDER :- REGARDING DEDUCTION U/S. 32AB ON THE PROFIT ON SAL E OF FIXED ASSETS. IT WAS NOT IN DISPUTE THAT AMENDMENT HAD BEEN BROUG HT BY THE TAXATION LAWS (AMENDMENT & MISCELLANEOUS PROVISIONS), 1986 W ITH EFFECT FROM 1-4-1988 IN SECTION 43(6)(C) AND SECTION 50(1) DEFI NING THE WRITTEN DOWN VALUE IN THE CONTEXT OF THE BLOCK SYSTEM AND B RINGING TO TAX SHORT-TERM CAPITAL GAINS ON TRANSFER OF DEPRECIABLE ASSETS. THE ASSESSMENT ORDER WOULD GO TO REVEAL THAT THE ENTIRE FOCUS OF THE ASSESSING OFFICER WAS CONCENTRATED UPON THE ASSESSE ES CLAIM OF DEDUCTION UNDER SECTION 32AB ON THE BASIS OF INCOME BEFORE ADJUSTMENT OF LOSSES ARISING OUT OF JOINT VENTURES. AFTER DETAILED DISCUSSION, HE REACHED THE CONCLUSION THAT LOSSES F ROM JOINT VENTURES HAD TO BE REDUCED FROM THE PROFIT OF THE ASSESSEE C OMPANY FOR THE PURPOSE OF ALLOWING DEDUCTION UNDER SECTION 32AB. T HERE WAS NOT EVEN ONE WORD IN THE ORDER ABOUT THE ELIGIBILITY OF PROFIT ON SALE OF FIXED ASSETS FOR DEDUCTION UNDER SECTION 32AB. WHET HER PROFIT ON SALE OF FIXED ASSETS CONSTITUTED ELIGIBLE PROFIT OR NOT IN THE CONTEXT OF THE AMENDED PROVISIONS STATED ABOVE WAS A MATTER OF DEB ATE. LOOKED AT FROM THIS PERSPECTIVE ALSO THE COMMISSIONER COULD E XERCISE HIS POWERS UNDER SECTION 263 OF THE ACT. 6.1 FROM THE ABOVE OBSERVATIONS, IT IS EVIDENT THAT SINCE ASSESSING OFFICER HAD NOT CONSIDERED THE AMENDMENT AT ALL AND, THEREFORE, TRIBUNAL HAD C ONFIRMED THE FINDINGS OF THE LD. CIT U/S. 263 OF THE ACT. THE FACTS IN THE PRESENT CASE ARE ENTIR ELY DISTINGUISHABLE. SIMILARLY, IN THE CASE OF JEHA N NUMA PALACE HOTEL (P) LTD., ASSESSING OFFICER ACCEP TED THE ASSESSEES COMPUTATION WITHOUT EXAMINING THE SECTION 115J. IT WAS HELD AS UNDER :- THE ASSESSMENT ORDER WAS TOTALLY SILENT ON INCOME UNDER SECTION 115J. IT WAS OBLIGATORY ON THE PART OF THE ASSESSING OFFICER TO HAVE EXAMINED THE APPLICABILITY OF THE PROVISIONS OF SECTION 115J IN THE LIGHT OF T HE CLAM MADE BY THE ASSESSEE BUT THIS HAD NOT BEEN DONE. THOROUGH PERUSAL OF THE ASS ESSMENT ORDER LEFT THE IMPRESSION THAT THE APPLICABILITY OF THE PROVISIONS OF SECTION 115J TO THE CASE OF THE ASSESSEE ESCAPED THE ATTENTION OF THE ASSESSING OFFICER ALTOGETHER, OTHERWISE HAD HE EXAMINED THE APPLICABILITY OF THE SAID PROVI SION, THERE SHOULD HAVE BEEN SOME WHISPER AT LEAST IN THE ASSESSMENT ORDER WHICH , OF COURSE, WAS NOT. THERE WAS NO MENTION AT ALL OF SECTION 1151 IS THE ENTIRE ASSESSMENT ORDER WHAT TO SAY OF ANY ENQUIRY OR APPLICATION OF MIND ON THE WORKIN G OF BOOK PROFIT SUBMITTED BY THE ASSESSEE. ARBITRARY EXERCISE OF QUASI-JUDICIAL POWER BY THE A SSESSING OFFICER WOULD ITA NO. 1096/KOL/2010 5 CERTAINLY INVITE INVOCATION OF SECTION 263 BY THE C OMMISSIONER. TWO CONDITIONS MUST EXIST TO ENABLE THE COMMISSIONER TO EXERCISE H IS REVISIONARY POWER UNDER SECTION 263: (1) THAT THE ORDER OF THE ASSESSING OF FICER MUST BE FOUND TO BE ERRONEOUS AND THAT (2) BY VIRTUE OF THE ORDER BEING ERRONEOUS PREJUDICE HAS BEEN CAUSED TO THE INTEREST OF THE REVENUE. FROM THE ABOVE, IT IS EVIDENT THAT THE FACTS WERE E NTIRELY DIFFERENT IN THE SAID CASE. ASSESSING OFFICER HAD NOT APPLIED HIS MIND TO THE PROVISIONS OF SECTION 115J. HOWEVER, IN THE PRESENT CASE, ASSESSING OFFICER HAD APPLIED HIS MIND TO THE PROVI SIONS OF SECTION 80IB IN THE PROCEEDINGS U/S. 154 WHICH IS PART AND PARCEL OF ASSESSMENT PROCEEDI NGS.. IN VIEW OF ABOVE DISCUSSION, FOLLOWING THE DECISION OF HONBLE SUPREME COURT IN THE CASE O F MALABAR INDUSTRIAL CO. LTD. VS. CIT [2000] 243 ITR 83 (SC), WE QUASH THE PROCEEDING INITIATED U/S. 263 OF THE ACT AS THE ISSUE INVOLVED WAS HIGHLY DEBATABLE AND AMENABLE TO TWO OPINIONS. WHIL E PARTING, WE MAY CLARIFY THAT WE HAVE NOT EXPRESSED ANY OPINION ON MERITS OF THE ISSUE RAISED BY LD. CIT. 7. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED. - - - - . . . . / .# 0 1 / .# 0 1 / .# 0 1 / .# 0 1 2 2 2 2 ORDER PRONOUNCED IN THE COURT ON 05. 08. 2011. SD/- SD/- [ ! , ] [ .. , ] [ MAHAVIR SINGH ] [ S.V. MEHROTRA ] JUDICIAL MEMBER ACCOUNTANT MEMBER ( (( (2 2 2 2) )) ) DATED : 5TH AUGUST, 2011. - 5 + 6 76%/ COPY OF THE ORDER FORWARDED TO: 1. () /APPELLANT : RENU SOMANI, PROP. SOMANI FOOD PRODUC TS, TULSIPARA, RAIGANJ, DIST. U TTAR DINAJPUR. 2 +,() / RESPONDENT : COMMISSIONER OF INCOME TAX, REVENUE BUILDING, JALPAIGURI. 3. -# / CIT, 4. -# ()/ CIT(A), KOLKATA. 5. 0 + #/ DR, KOLKATA BENCHES, KOLKATA [,6 + / TRUE COPY] -#./ BY ORDER, !> /ASSTT REGISTRAR [KKC ?@ #A> B /SR.PS]