ITO, Ward - 1(2), Kolkata, Kolkata V. M/s. Binayak Hi-Tech Engineering Ltd., Howrah

ITA 111/KOL/2011

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 54709 (ITAT-KOLKATA)
• Duration Of Justice: 10 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-11-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2007-2008
• Appeal Filed On: 14-01-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S K ROY
• Assessee Lawyers: D S DAMLE; MIRAJ D. SHAH

Judgement Text

, , , , , IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH : KOLKATA [ . . . . , ,, , . . ! !! ! . , ] [BEFORE SHRI N. VIJAYA KUMARAN, J. M. & SHRI C. D. RAO, A.M.] $ $ $ $ / I.T.A NO.111/KOL/2011 / // / ASSESSMENT YEAR : 2007-08 INCOME TAX OFFICER/WARD-1(2) -VS.- M/S. BINAYAK HI-TECH ENGINEERING LIMITED KOLKATA. HOWRAH [PAN : AABCB 2869 G]. [ + + + + /APPELLANT ] ]] ] [ -.+ -.+ -.+ -.+/ // / RESPONDENT ] ]] ] + + + + / FOR THE APPELLANT : SHRI S. K. ROY -.+ -.+ -.+ -.+ / FOR THE RESPONDENT : S/SHRI D.S. DAMLE & S HRI MIRAJ D. SHAH 0 ! 0 ! 0 ! 0 ! /DATE OF HEARING : 14.11.2011 0 ! 0 ! 0 ! 0 ! /DATE OF PRONOUNCEMENT : 25.11.2011 /ORDER . . . . , PER N. VIJAYA KUMARAN, J. M. THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST ORD ER OF LD. CIT(A)-I, KOLKATA DATED 27.09.2010 FOR ASSESSMENT YEAR 2007-08 ON THE FOLLO WING GROUNDS :- (1) THE LD. CIT(A)-I ERRED IN LAW AS WEL L AS IN FACTS IN DELETING THE ADDITION OF RS.36,49,187/- MADE U/S. 41(1) OF THE I.T. ACT, 1961 ON ACCOUNTS OF VAT REFUND RECEIVABLE. (3) THE LD. CIT(A)-I ERRED IN LAW AS WELL AS IN FACTS IN DIRECTING THE AO TO REDUCE A SUM OF RS.17,14,590/- FROM THE TOTAL INCOM E OF THE ASSESSEE WHICH THE ASSESSING OFFICER DID NOT ALLOW AS DEDUCT ION (DEPB CREDITS) IN COMPUTING THE TOTAL INCOME OF THE ASSESSEE. 2. THE FIRST GROUND AGAINST THE DELETION OF ADDITIO N MADE UNDER SECTION 41(1) OF THE INCOME TAX ACT. [ ITA NO.111/KOL/2011] 2 3. THE FACTS RELEVANT ARE THAT THE ASSESSEE-COMPANY FILED RETURN OF INCOME ON 28.10.2007. EARLIER, THE RETURN WAS PROCESSED UNDER SECTION 143 (1) OF THE ACT AND BY WAY OF SCRUTINY ASSESSMENT UNDER SECTION 143(3), ASSESSMENT WAS COM PLETED. ASSESSING OFFICER ON VERIFICATION OF NOTES ON ACCOUNTS FOUND THAT TAXES INCLUDING EXCISE VAT ETC. WERE NOT INCLUDED IN THE VALUATION STOCK. FURTHER, ASSESSEE HAS SHOWN RS.63,79,274/- A S VALUE ADDED TAX RECEIVABLE. SAME WAY, THE VALUE ADDED TAX RECEIVABLE AS ON 31.03.2006 WAS RS. 27,30,087/-. THEREFORE, THE ASSESSEE HAD TREATED THE BALANCE SUM OF RS.36,49,187/- AS VALUE ADDED TAX RECEIVABLE RELATABLE TO THE FINANCIAL YEAR 2006-07 RELEVANT TO THE ASSESSMENT YEAR UNDER APPEAL BEFORE US. ASSESSING OFFICER AFTER CALLED FOR THE EXPLANATION FOUND THAT THIS WAS ASSE SSABLE UNDER SECTION 41(1) OF THE ACT AS INCOME OF THE ASSESSEE AND THERE IS NO LIABILITY FOR PAYME NT OF VAT. HE, THEREFORE, TREATED IT AS INCOME OF THE ASSESSEE FOR THE ASSESSMENT YEAR UNDER APPEAL U NDER SECTION 41(1) OF THE INCOME TAX ACT. ON APPEAL TO THE LD. CIT(A), LD. CIT(A) FOUND THAT REC EIVABLE VAT AND IT IS AMPLY PROVED THAT ASSESSEE DID NOT RECEIVE THE VAT REFUND AS IT IS DI SPUTED SUM SUBJECT TO THE DECISION OF THE WEST BENGAL VALUE ADDED TAX RULES, 2005 AND AS PER SUB-R ULE (1) OF RULE 76, THE EXPORT OF SHORT REFUND OF TAX AND CONDITIONS LAID DOWN IN SUB-RULE (2), WHEREBY EXPORTERS HAD MADE AN APPLICATION FOR SUCH REFUND IN PROPER FORM AND THE APPROPRIATE AUTHORITY HAS TO PASS ORDER OF REFUND. 4. THIS CONTENTION OF THE ASSESSEE IS FORTIFIED BY THE RELIANCE OF THE ASSESSEES PROFIT AND LOSS ACCOUNT FOR THE RELEVANT PREVIOUS YEAR ENDED WITH 3 1.03.2007 I.E. RELEVANT FOR THE ASSESSMENT YEAR UNDER APPEAL BEFORE US. IN THAT PROFIT AND LOSS ACC OUNT THE VALUE ADDED TAX RECEIVABLE IS SHOWN AS ON 31.03.2007. IN THE COMPUTATION OF INCOME SHEET A NNEXED THERETO ASSESSEE HAS SHOWN VAT RECEIVED FOR THE ASSESSMENT YEARS 2006-07, 2009-10 & 2010-11; AND THEY WERE RIGHTLY OFFERED TO TAX UNDER SECTION 41(1). AS PER THE DETAILS FILED I T MADE CLEAR THAT THE ASSESSEE IS OFFERING THE VAT RECEIVED IN THE RELEVANT ASSESSMENT YEARS WHENEVER IT WAS RECEIVED. THE CONSISTENCY OF ACCOUNTING SHOULD NOT BE DISTURBED UNLESS IT IS SHOWN THAT THE ASSESSEE DELIBERATELY SUPPRESSED THE INCOME. 5. THAT BEING THE LIABILITY ATTACHED AND THE DECISI ON OF HONBLE SUPREME COURT IN THE CASE OF POLYFLEX (INDIA) (P) LTD. VS. CIT [2002] 257 IT 343 (SC), LD. CIT(A) FOUND THAT SECTION 41(1) IS NOT ATTRACTED IN RESPECT OF THIS KIND OF RECEIVABLE VAT AS EXPLAINED BY THE ASSESSEE. THEREFORE, HE PLEASED TO DELETE THE ADDITION. [ ITA NO.111/KOL/2011] 3 6. AGAINST WHICH DEPARTMENT URGED THIS GROUND AS GR OUND NO.1 BEFORE US. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL AVAILABL E ON RECORD INCLUDING THE PRECEDENTS. AS PER SECTION 41(1) WHERE AN ALLOWANCE TO GRANT AN ASSESS EE IN ANY YEAR IN RESPECT OF ANY LOSS, EXPENDITURE OR TRADING LIABILITY AND SUBSEQUENTLY D URING ANY PREVIOUS YEAR, THE ASSESSEE RECEIVES WHETHER IN CASH OR ANY OTHER MANNER WHATSOEVER ANY AMOUNT IN RESPECT OF SUCH LOSS OR EXPENDITURE OR THE ASSESSEE IS BENEFITED BY THE REMISSION OR CE SSATION OF THE TRADING LIABILITY, THE AMOUNT RECEIVED OR THE AMOUNT OF THE LIABILITY WHICH IS EX TINGUISHED, IS CHARGEABLE AS BUSINESS PROFIT OF THE PREVIOUS YEAR. ASSESSING OFFICER WAS OF THE VIEW TH AT IT IS THE BENEFIT ACCRUED TO THE ASSESSEE, THEREFORE, IT IS CHARGEABLE UNDER SECTION 41(1) OF THE ACT. ASSESSING OFFICER, THEREFORE, RELIED ON THE ASSESSMENT. 7. ON THE OTHER HAND, LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ASSESSEE IS IN EXPORT OF ENGINEERING GOODS. VAT REFUND HAS TO BE CLAIMED IN APPROPRIATE FORM AS PER SUB-RULE (3) OF RULE 76 OF WEST BENGAL VAT ACT. IT SHOULD BE ADJUDICATED BY THE COMMERCIAL TAX OFFICER AFTER THE ASSESSEE HAS MADE THE CLAIM. THE LD. COMMERCIAL TAX OFFICER CAN PASS AN ORDER ACCEPTING OR REJECTING THE CLAIM. IN THIS CASE, IT IS AMPLY MADE CLEAR THAT THE ORDER HAS NOT BEEN PASSED FOR THE ALLEGED BENEFIT HAS TO BE CHARGED UNDER SECTION 41( 1). LD. COUNSEL FOR THE ASSESSEE, THEREFORE, SUBMITTED THAT ASSESSEE IS FOLLOWING MERCANTILE SYS TEM OF ACCOUNTING. THE RIGHT TO REFUND IS NOT ACCRUED TO THE ASSESSEE DURING THE RELEVANT PREVIOU S YEAR. THEREFORE, LD. COUNSEL BY RELYING THE LD. CIT(A)S ORDER PRAYED FOR REJECTION OF THE GROU ND OF THE REVENUE. THIS PRAYER OF THE ASSESSEE IS JUSTIFIED AS THE ASSESSING OFFICER HIMSELF HAS ACCE PTED THE FACT THAT THE VAT WAS RECEIVABLE AND NOT ACTUALLY RECEIVED. ASSESSING OFFICER WAS OF THE OPINION THAT VAT RECEIVABLE BY THE ASSESSEE SHOULD HAVE BEEN CREDITED AS INCOME WITHOUT WAITING FOR THE REFUND ORDER BY THE VAT AUTHORITY. WE ARE OF THE VIEW THAT IT IS NOT AN AUTOMATIC REFU ND AND IT IS REFUNDING ON THE DECISION OF COMMERCIAL AUTHORITY WHO HAS TO ADJUDICATE THE CLAI M. AFTER CLAIM OF REFUND HAS BEEN CLAIMED BY THE ASSESSEE THROUGH PRESCRIBED FORM, THE COMMERCIA L TAX DEPARTMENT HAS TO ACCEPT OR REJECT THE CLAIM AND THAT BEING THE FACTUAL POSITION. IT IS NO T THE BENEFIT ACCRUED TO THE ASSESSEE DURING THE YEAR AS THE CLAIM WAS NOT ADJUDICATED BY THE COMMER CIAL TAX AUTHORITY. HENCE, WE AGREE WITH THE FINDINGS OF THE LD. CIT(A). THEREFORE, THE GROUND N O.1 OF THE DEPARTMENT IS DISMISSED 8. THE SECOND ISSUE IS THAT REDUCTION FROM THE TOTA L INCOME WITH REGARD TO DEPB CREDIT [ ITA NO.111/KOL/2011] 4 DEDUCTION MADE BY THE LD. CIT(A). WE HAVE HEARD THE RIVAL SUBMISSIONS ON THIS ISSUE. THE DECISION OF HONBLE BOMBAY HIGH COURT IN THE CASE O F KALPATARU COLOURS AND CHEMICALS NO.2887 OF 2009 DATED 29.06.2010 WHEREIN HONBLE BOMBAY HIG H COURT HELD THAT DEPB CREDIT IS LIABLE TO BE TAXED IN THE YEAR OF ISSUE OF CREDIT OR IN THE Y EAR OF SALE OF CREDIT. FOR THIS PREVIOUS YEAR RELEV ANT FOR THE ASSESSMENT YEAR UNDER APPEAL AS ON 31.03.20 07, THE PROFIT AND LOSS ACCOUNT SHOWS THE EXPORT BENEFIT RECEIVABLE (DEPB) TO THE TUNE OF RS. 17,14.590.35. THE SCHEDULE 9 TO THE BALANCE SHEET ENDED WITH 31.03.2007 EXPORT BENEFIT (DEPB) R EALIZATION IS SHOWN AS RS.27,83,209.74 UNDER THE HEAD OTHER INCOME. IT IS AMPLY CLEAR TH AT ASSESSEE HAS NOT SOLD DEPB CREDITS DURING THE RELEVANT YEAR. THEREFORE, ASSESSEE IS JUSTIFIED IN EXCLUDING THE SAME I.E. SUM OF RS.17,14,590/- AS TO THE EXTENT IT WAS NOT SOLD DURING THE ASSESSMENT YEAR UNDER APPEAL I.E. 2007-08. IT IS FURTHER EXPLAINED THAT THE OTHE R YEAR DEPB CREDITS FOR FINANCIAL YEAR 2007-08 I.E. SUBSEQUENT YEARS AND 2008-09 WAS OFFERED TO TAX RES PECTIVELY. THIS WILL STRENGTHEN THE CASE. RESPECTFULLY, FOLLOWING THE DECISION OF HONBLE BOM BAY HIGH COURT IN THE CASE OF KALPATARU COLOURS AND CHEMICALS (SUPRA) AND IT IS CLEARLY EST ABLISHED ON FACTS THAT TO THE EXTENT OF RS.17,14,590/- THE DEPB CREDITS WAS NOT SOLD IN THE YEAR I.E. ASSESSMENT YEAR 2007-08. HENCE, WE ARE OF THE VIEW THAT IT IS NOT THE YEAR IN WHICH TH IS AMOUNT IS TO BE TAKEN AS INCOME. THEREFORE, WE ARE OF THE VIEW THAT THE ORDER OF LD. CIT(A) IS QUI TE JUSTIFIED WHICH REQUIRES NO INTERFERENCE. THIS GROUND OF THE DEPARTMENT IS ALSO DECIDED AGAINST TH E DEPARTMENT AND IN FAVOUR OF THE ASSESSEE. 9. IN THE RESULT, DEPARTMENTAL APPEAL IS DISMISSED. 3 3 3 3 ! ! ! ! ORDER PRONOUNCED IN THE COURT ON 25.11.2011. SD/- SD/- [ . . . . . .. .8 8 8 8 , ] [ . . . . , ,, , ] [ C. D. RAO ] [ N. VIJAYAK UMARAN ] ACCOUNTANT MEMBER JUDICIAL MEMBER D ATED : 25TH NOVEMBER, 2011. [ ITA NO.111/KOL/2011] 5 0 - 9/ COPY OF THE ORDER FORWARDED TO: 1. + /APPELLANT : INCOME TAX OFFICER, WARD-1(2), AAYAKA R BHAWAN, P-7, CHOWRINGHEE SQUARE, KOLKATA-700 069. 2 . -.+ / RESPONDENT : M/S. BINAYAK HI-TECH ENGINEERING LT D., 117/2, MIR PARA ROAD, BHATTANAG AR, LILUAH, HOWRAH-711 203. 3. - / CIT, 4. ()/ CIT(A), KOLKATA. 5. -/ DR, KOLKATA BENCHES, KOLKATA [. -/ TRUE COPY] / BY ORDER, /ASSTT. REGISTRAR [KKC BC D /SR.PS]