ITO, New Delhi V. M/s. Metalsrussia (India) (P) Ltd., New Delhi

ITA 1222/DEL/2012

• Counselvise Citation: 122220114 RSA 2012
• Duration Of Justice: 6 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-09-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: E
• Next Hearing Date: 24-09-2012
• Assessment Year: 2008-2009
• Appeal Filed On: 12-03-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: AROOP KUMAR SINGH
• Assessee Lawyers: ARUP MITRA
• Section: 115JB

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI E BENC H BEFORE SHRI I.C. SUDHIR , JM & SHRI A.N. PAHUJA, AM ITA NO.1222/DEL/2012 ASSESSMENT YEAR: 2008-09 INCOME-TAX OFFICER, WARD 6(4), ROOM NO.418 C.R. BUILDING, I.P. ESTATE NEW DELHI V/S . M/S METALSRUSSIA (INDIA) LTD., D-1, 1209, POCKET-1, VASANT KUNJ, NEW DELHI [PAN : AAECM 2423 Q] (APPELLANT) (RESPONDENT) ASSESSEE BY SHRI ARUP MITRA, AR REVENUE BY SHRI AROOP KUMAR SINGH, DR DATE OF HEARING 24-09-2012 DATE OF PRONOUNCEMENT 24-09-2012 O R D E R A.N.PAHUJA:- THIS APPEAL FILED ON 12.03.2012 BY THE REVENUE AGA INST AN ORDER DATED 12.12.2011 OF THE LD. CIT(A)-IX, NEW DELHI, R AISES THE FOLLOWING GROUNDS:- 1 THE ORDER OF THE LD. CIT(A) IS ERRONEOUS AND CONT RARY TO FACTS AND LAW. 2 ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) HAS ERRED IN DELETING THE ADDIT ION OF ` `99,28,100/- MADE BY THE ASSESSING OFFICER BY RECOGNIZING THE REVENUE IN RESPECT OF PAYMENT RECEIVED FROM SAIL AGAINST THE INVOICES RAISED BY T HE ASSESSEE COMPANY. 2.1 THE LEARNED CIT(A) ERRED IN APPRECIATING THE FA CTS THAT THE ASSESSEE WAS FOLLOWING MERCANTILE SYSTEM O F ACCOUNTING. ITA NO.1222/DEL./2012 2 3 THE APPELLANT CRAVES LEAVE, TO ADD, ALTER, OR AME ND ANY GROUND OF APPEAL RAISED ABOVE AT THE TIME OF HEARING. 2. FACTS, IN BRIEF, AS PER RELEVANT ORDERS ARE THA T E-RETURN DECLARING LOSS OF ` ` 4,547/- AND BOOK PROFITS OF ` `31,580/- U/S 115JB OF INCOME-TAX ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT) FILED ON 28.09.2008 BY THE ASSESSEE, PROVIDING CONSULTANCY BUSINESS AUXILIARY SERVICES I NCLUDING MARKETING, SUPPORT AND REPRESENTATION OF INTERNATIONAL STEEL & TUBE IN DUSTRIES LTD. & ITS ASSOCIATE COMPANIES PRODUCT AND SERVICES IN INDIA, AFTER BEIN G PROCESSED U/S 143(1) OF THE ACT, WAS TAKEN UP FOR SCRUTINY WITH THE SERVICE OF A NOTICE U/S 143(2) OF THE ACT. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE AS SESSING OFFICER (A.O. IN SHORT), NOTICED THAT THE ASSESSEE COMPANY WAS APPOI NTED SUB CONTRACTOR BY MONT BLANC TRADING LTD. IN A CONTRACT DATED 25.5.2007 EN TERED WITH STEEL AUTHORITY OF INDIA LTD., BOKARO STEEL PLANT. THE ASSESSEE RAISE D TWO INVOICES NO.MRI/BSL/01 AND MRI/BSL/02 FOR ` ` 49,64,050/- EACH, BEING 5% OF THE TOTAL CONTRACT PR ICE AGAINST SUBMISSION AND APPROVAL OF GENERAL LAYOUT/G ENERAL ARRANGEMENT DRAWING SPECIFIED IN APPENDIX-3, CLAUSE 2.1(A) OF THE CONTR ACT NO.TC/M/AGT/943 DATED 25.5.2007 AND CLAUSE 2.1(B) OF THE SAME CONTRACT I N PURSUANCE OF THESE INVOICES, THE ASSESSEE RECEIVED PAYMENT FROM SAIL A FTER DEDUCTION OF TAX AT SOURCE BUT THE SAME WAS REFLECTED AS ADVANCE IN THE BALANCE SHEET. TO A QUERY BY THE AO AS TO WHY THE AMOUNT BE NOT TREATED AS IN COME SINCE THE ASSESSEE WAS FOLLOWING PROJECT COMPLETION METHOD AS THE METH OD OF ACCOUNTING, THE ASSESSEE REPLIED AS UNDER:- 1. THE ASSESSEE COMPANY HAS NOT DONE ANY ACTIVITY I N ACCORDANCE WITH THE AGREEMENT DATED 25.5.2007. 2. AMOUNT WAS RECEIVED FROM M/S STEEL AUTHORITY OF INDIA LTD., BOKARO BECAUSE THE ASSESSEE COMPANY WAS ELIGIBLE FO R RECEIVING THE SAME AS PER THE AGREEMENT EVEN THOUGH IT HAS NOT RENDERED ANY SERVICES. 3. NIL SERVICES TAX RETURN WAS SUBMITTED FOR FINANC IAL YEAR 2007-08. ITA NO.1222/DEL./2012 3 4. M/S MONT BLANC TRADING LTD. HAS ISSUED A CERTIFI CATE THAT THE ASSESSEE COMPANY HAS NOT CARRIED OUT ANY ACTIVITY A ND AMOUNT RECEIVED WAS MERELY AN ADVANCE. 5. TAX DEDUCTED BY M/S STEEL AUTHORITY OF INDIA LTD ., BOKARO WAS NOT CLAIMED BY THE ASSESSEE COMPANY. 6. AMOUNT RECEIVED WAS CORRECTLY SHOWN AS AN ADVANC E IN ACCORDANCE WITH ACCOUNTING STANDARD-7 ISSUED BY THE INSTITUTE OF CHARTERED ACCOUNTANTS OF INDIA. 2.1 HOWEVER, THE AO DID NOT ACCEPT THE SUBMISSION S ON THE GROUND THAT THE ASSESSEE DID NOT EXPLAIN THE REASONS FOR RAISING TH E INVOICES AFTER GETTING THE DRAWINGS WHICH WAS ONE OF THE CONDITIONS FOR RELEAS E OF PAYMENT. ACCORDINGLY, THE AO BROUGHT TO TAX THE ENTIRE AMOUNT OF ` ` 99,28,100/- AS INCOME OF THE YEAR UNDER CONSIDERATION. 3. ON APPEAL, AFTER HAVING A REMAND REPORT FROM TH E AO AND COMMENTS OF THE ASSESSEE THEREON, THE LD. CIT(A) D ELETED THE ADDITION, HOLDING AS UNDER:- 7. I HAVE CONSIDERED THE FINDINGS RECORDED BY THE LD. AO AS PER THE ASSESSMENT ORDER, THE SUBMISSIONS MADE B Y THE LD. AR AND THE FACTS OF THE CASE ON RECORD. IT IS UNDISPU TED THAT SUBMISSION AND APPROVAL OF GENERAL LAYOUT/GENERAL A RRANGEMENT DRAWINGS WAS NOT IN THE SCOPE OF THE APPELLANT COMP ANY AND SIMILARLY, THE SUBMISSIONS OF THESE DRAWINGS WAS NO T IN THE SCOPE OF MONT BLANC TRADING LTD. HOWEVER, DESPITE OBSERVIN G SO AS PER THE ASSESSMENT ORDER, THE LD. AO TREATED THE AMOUNT REC EIVED AS INCOME OF THE APPELLANT CITING THE REASON THAT IT H AD RAISED INVOICES FOR THE SAME. IT WAS SUBMITTED BY THE APPELLANT TH AT IT HAD NOT DONE ANY ACTIVITY OR RENDERED ANY SERVICE IN ACCORDANCE WITH THE AGREEMENT DATED 25.05.2007 AND THE AMOUNTS WERE ADV ANCE PAYMENTS RECEIVED IN ACCORDANCE WITH THE SAID AGREE MENT BETWEEN SAIL, BOKARO STEEL PLANT AND MZTM, UKRAINE AND MONT BLANC TRADING LTD. 7.1 IN ORDER TO VERIFY THE CONTENTION OF THE APPEL LANT, THE MATTER WAS REMANDED TO THE LD. AO FOR NECESSARY VER IFICATION WITH SAIL. AS PER THE REMAND REPORT, THE LD. AO HAS STA TED THAT THE APPELLANT HAD RECOGNIZED REVENUE OUT OF THE MONIES RECEIVED IN SUBSEQUENT ASSESSMENT YEARS I.E. IN THE ASSESSMENT YEAR 2009-10 AN INCOME TO THE TUNE OF ` ` 52,10,362 WAS SHOWN AND THE BALANCE AMOUNT OF ` ` 47,17,738/- WAS SHOWN IN THE ASSESSMENT YEAR 2010- 11. THE LD. AOR HAS FURTHER STATED THAT A HOLISTIC VIEW OF THE WORK ITA NO.1222/DEL./2012 4 EXECUTED AND INCOME RECOGNIZED WOULD SHOW THAT THER E WAS NO DEFERMENT OF TAX PAYABLE EITHER BECAUSE THE TDS WAS ALREADY MADE AND DEPOSITED BY SAIL. THUS, THE TAX DEDUCTED AT SOURCE WAS ALREADY IN THE COFFERS OF THE GOVERNMENT. 7.2 FROM THE ABOVE, IT IS CLEAR THAT THE APPELLANT HAD RIGHTLY SHOWN THE AMOUNT RECEIVED FROM SAIL AS ADVA NCE RECEIVED IN THE BALANCE SHEET. SINCE, NO WORK WAS EXECUTED BY THE APPELLANT DURING THE YEAR, THE MONEY RECEIVED CANNO T BE TREATED AS THE INCOME FOR THE YEAR UNDER CONSIDERATION. FURTH ER MORE, AS RIGHTLY ADMITTED BY THE LD. AO, THERE WAS NO REVENU E LOSS SINCE THE AMOUNT RECEIVED HAS BEEN ACCOUNTED FOR BY THE APPEL LANT AS INCOME IN THE SUCCEEDING TWO YEARS. MOREOVER, IN T HE YEAR OF PAYMENT, SAIL HAD ALREADY DEDUCTED TAX AT SOURCE AN D DEPOSITED THE SAME IN THE GOVERNMENT ACCOUNT, HENCE, THERE WA S NO QUESTION OF EVEN DEFERMENT OF TAX PAYMENT. UNDER T HESE CIRCUMSTANCES, I HOLD THAT THE ADDITION WAS WRONGLY MADE BY THE LD. AO AND THE SAME IS ACCORDINGLY DIRECTED TO BE DELET ED. 4. THE REVENUE IS NOW IN APPEAL BEFORE US AGAINST THE AFORESAID FINDINGS OF THE LD. CIT(A).THE LD. DR SUPPORTED THE ORDER OF THE AO WHILE THE LD. AR ON BEHALF OF THE ASSESSEE RELIED UPON THE FINDIN GS OF THE LD. CIT(A). 5. WE HAVE HEARD BOTH THE PARTIES AND GONE THROUG H THE FACTS OF THE CASE. INDISPUTABLY AND AS POINTED OUT BY THE LD. C IT(A) SUBMISSION AND APPROVAL OF GENERAL LAYOUT/GENERAL ARRANGEMENT DRAWINGS WAS NOT WITHIN THE SCOPE OF THE SUB-CONTRACT ALLOTTED TO THAT COMPANY WHILE THE SUB MISSIONS OF THESE DRAWINGS WAS NOT WITHIN THE SCOPE OF WORK OF MONT BLANC TRAD ING LTD. SINCE THE AFORESAID AMOUNT WAS RECEIVED BY THE ASSESSEE FROM STEEL AUT HORITY OF INDIA BY WAY OF ADVANCE AND INDISPUTABLY, NO WORK WAS EXECUTED BY T HE ASSESSEE DURING THE YEAR, APPARENTLY, THE AMOUNT COULD NOT BE TAXED AS INCOME OF THE YEAR UNDER CONSIDERATION, IN ACCORDANCE WITH AS-7 ISSUED BY IC AI. THE REVENUE HAVE NOT PLACED BEFORE US EVEN AN IOTA OF EVIDENCE THAT THE ASSESSEE UNDERTOOK ANY ACTIVITY IN TERMS OF THE AFORESAID AGREEMENT DATED 25.5.2007 ,RESULTING IN ACCRUAL OF INCOME. THE LD. CIT(A),INTER ALIA, POINTED OUT THAT THERE WAS NO REVENUE LOSS, THE AMOUNT HAVING BEEN REFLECTED AS INCOME IN THE S UBSEQUENT TWO YEARS WHILE ITA NO.1222/DEL./2012 5 TAX WAS DEDUCTED AT SOURCE IN THE YEAR UNDER CONSID ERATION. IN VIEW OF THE AFORESAID UNDISPUTED FINDINGS OF THE LD. CIT(A),ESP ECIALLY WHEN THE LD. DR HAS NOT PLACED BEFORE US ANY MATERIAL CONTROVERTING THE AF ORESAID FINDINGS OF THE LD. CIT(A) SO AS TO ENABLE US TO TAKE A DIFFERENT VIEW IN THE MATTER, WE ARE NOT INCLINED TO INTERFERE. THEREFORE, GROUND NO.2 IN TH E APPEAL IS DISMISSED.. 6.. GROUND NO.1 IN THE APPEAL BEING GENERAL IN NAT URE, DOES NOT REQUIRE ANY SEPARATE ADJUDICATION WHILE NO ADDITIONAL GROUN D HAVING BEEN RAISED BEFORE US IN TERMS OF RESIDUARY GROUND NO. 3 IN THE APPEAL , ACCORDINGLY, THESE GROUNDS ARE DISMISSED. 7. .NO OTHER PLEA OR ARGUMENT WAS MADE BEFORE US. 8. IN THE RESULT, APPEAL IS DISMISSED. SD/- SD/- (I.C. SUDHIR) (A.N. PAHUJA) (JUDICIAL MEMBER) (ACCOUNTANT MEMBER) NS COPY OF THE ORDER FORWARDED TO :- 1. ASSESSEE 2. INCOME-TAX OFFICER, WARD 6(4), ROOM NO.418,C.R. BUILDING, I.P. ESTATE,NEW DELHI 3. CIT CONCERNED. 4. CIT(A)-IX, NEW DELHI. 5. DR, ITAT, E BENCH, NEW DELHI 6. GUARD FILE. BY ORDER, DEPUTY / ASSTT.REGISTRAR ITAT, DELHI ORDER PRONOUNCED IN OPEN COURT