Asst. CIT, Circle-1, Aurangabad V. M/s. Sanjeev Precision Components Pvt. Ltd., Aurangabad

ITA 1227/PUN/2013

• Counselvise Citation: 122724514 RSA 2013
• Duration Of Justice: 11 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-05-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2008-2009
• Appeal Filed On: 31-05-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S P WALIMBE
• Keywords: Business income; Capital receipt
• Section: 2

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH B , PUNE BEFORE: SHRI R.S. PADVEKAR, JUDICIAL MEMBER AND SHRI R.K. PANDA, ACCOUNTANT MEMBER ITA NO. 1226 / P N/ 20 1 3 ASSESSMENT YEAR : 200 8 - 09 THE ASSTT. COMMISSIONER OF INCOME TAX, CIRCLE 1, AURANGABAD VS. M/S. SANJEEV AUTO PARTS MANUFACTURERS PVT. LTD., K - 96, MIDC WALUJ, AURANGABAD (APPELLANT) (RESPONDENT) PAN NO. AAECS0129H ITA NO. 1227 /PN/20 13 ASSESSMENT YEAR : 2008 - 09 THE ASSTT. COMMISSIONER OF INCOME TAX, CI RCLE 1, AURANGABAD VS. M/S. SANJEEV PRECISION COMPONENTS PVT. LTD., C - 238, MIDC WALUJ, AURANGABAD (APPELLANT) (RESPONDENT) PAN NO. AAECS6185P APPELLANT BY: SHRI S.P. WALIMBE RESPONDENT BY: SHRI NIKHIL PATHAK DATE OF HEARING : 21 - 05 - 2014 D ATE OF PRONOUNCEMENT : 27 - 05 - 2014 ORDER PER R.S . PADVEKAR , JM : - BOTH THESE APPEALS ARE FILED BY THE REVENUE FOR THE A.Y. 2008 - 09 IN RESPECT OF TWO DIFFERENT ASSESSEES CHALLENGING THE IMPUGNED ORDERS OF THE LD. CIT(A), AURANGABAD. AS THE ISSUES AND FACTS ARE IDENTICAL HENCE, BOTH THE APPEALS ARE DISPOSED OF F BY THIS CONSOLIDATED ORDER. THE GROUNDS TAKEN BY THE REVENUE WHICH ARE VERBATIM IN BOTH APPEAL S ARE AS UNDER: 1. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, DIFFERENCE BETWEEN TH E PAYMENT OF NET PRESENT VALUE AGAINST 2 ITA NO S. 1 226 & 1227/PN/2013, M/S. SANJEEV AUTO PARTS MANUFACTURES PVT. LTD. & ORS., AURANGABAD THE FUTURE LIABILITY OF CREDITED BY THE ASSESSEE UNDER THE CAPITAL RESERVE ACCOUNT IN ITS BOOKS OF ACCOUNT IS A CAPITAL RECEIPT OR REVENUE RECEIPT ? 2. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, SUCH P AYMENT OF NET PRESENT VALUE OF THE FUTURE LIABILITY CAN BE CLASSIFY AS REMISSION OR CESSATION OF THE LIABILITY SO AS TO ATTRACT THE PROVISIONS OF SECTION 41 (1) (A) OF THE INCOME TAX ACT, 1961 OR NOT? 3. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE, DIFFERENCE IN PAYMENT OF NET PRESENT VALUE OF THE FUTURE LIABILITY CAN BE TERMED AS GAIN/BENEFIT AND ACCORDINGLY BUSINESS INCOME OR NOT ? 4. THE ORDER OF THE AO BE RESTORED AND THAT OF THE CIT(A) BE VACATED. 2. THE FACTS WHICH ARE REVEALED FROM THE R ECORD AS UNDER. IN THE CASE OF THE ASSESSEE M/S. SANJEEV AUTO PARTS MANUFACTURERS PVT. LTD. ( BEING ITA NO. 1226/PN/2013 ), AS OBSERVED BY THE ASSESSING OFFICER THE ASSESSEE I S IN THE BUSINESS OF MANUFACTURING COMPONENTS REQUIRED FOR AUTO INDUSTRY HAVING UN ITS LOCATED AT D - 33, MIDC, WALUJ, AURANGABAD. THE ASSESSEE IS COVERED UNDER THE PACKAGE SCHEME OF INCENTIVES, 1993 (IN SHORT PACKAGE SCHEME, 1993). THE ASSESSEE HAS COLLECTED SALES TAX UNDER THE SAID SCHEME UNDER DEFERRAL OPTION. THE ASSESSEE HAS MADE THE PREPAYMENT OF DEFERRED SALES TAX LIABILITY AND THE ASSESSEE COULD GET THE BENEFIT TO THE EXTENT OF RS.30,27,797/ - . THE ASSESSEE CLAIMED THAT THE SAID AMOUNT IS CAPITAL IN NATURE AND IS NOT TAXABLE AS A REVENUE RECEIPT. THE ASSESSING OFFICER INVOKI NG THE PROVISIONS OF SEC.41(1) AND BROUGHT TO TAX ENTIRE AMOUNT OF RS.30,27,797/ - IN THE HANDS OF THE ASSESSEE AS THE REVENUE RECEIPT. IN THE ASSESSMENT PROCEEDINGS THE ASSESSEE RELIED ON THE DECISION OF THE ITAT, SPECIAL BENCH, MUMBAI IN THE CASE OF SULZ ER INDIA LTD. VS. JCIT, 138 ITD 137 (MUM((SB) . 3 ITA NO S. 1 226 & 1227/PN/2013, M/S. SANJEEV AUTO PARTS MANUFACTURES PVT. LTD. & ORS., AURANGABAD 3. IN THE CASE OF ANOTHER ASSESSEE M/S. SANJEEV PRECISION COMPONENTS PVT. LTD. ( BEING ITA NO. 1227/PN/2013 ), THE ASSESSEE IS HAVING THE IDENTICAL BUSINESS I.E. MANUFACTURING COMPONENTS OF AUTO INDUSTRY HAVING UNITS LOCATED AT D - 33, MIDC, WALUJ, AURANGABAD. THE SAID ASSESSEE IS ALSO COVERED AND ELIGIBLE UNDER THE PACKAGE SCHEME OF INCENTIVES, 1993. THE ASSESSEE HAS OPTED FOR THE DEFERRAL SALES TAX SCHEME IN WHICH THE ASSESSEE HAS COLLECTED THE SALES TAX WHICH WAS TO BE REPAID AFTER CERTAIN PERIOD IN EQUAL INSTALLMENTS. THE ASSESSEE MADE THE PREPAYMENT OF THE SALES TAX LIABILITY AND DUE TO THE PREPAYMENT T HE ASSESSEE GOT THE BENEFIT TO THE EXTENT OF RS.46,56,608/ - WHICH WAS CLAIMED AS A CAPITAL RECEIPT. THE A SSESSING OFFICER REJECTED THE CLAIM OF THE ASSESSEE AND BY INVOKING THE PROVISIONS OF SEC. 41(1) AND BROUGHT TO TAX THE ENTIRE AMOUNT AS A REVENUE RECEIPT. IN BOTH THE CASES THE ISSUE WAS CARRIED BEFORE THE LD. CIT(A). THE LD. CIT(A) ALLOWED THE CLAIM OF THE ASSESSEE F OLLOWING THE DECISION OF THE ITAT, PUNE IN THE CASE OF ACIT, CIRCLE - 1, AURANGABAD VS. YESHSHREE PRESS COMPS PVT. LTD., AURANGABAD, ITA NOS. 1353 & 1354/PN/2011 DATED 24 - 01 - 2013. IN THE CASE OF YESHSHREE PRESS COMPS PVT. LTD. (SUPRA) THE TRI BUNAL HAS FOLLOWED THE DECISION OF THE HON'BLE SPECIAL BENCH, ITAT, MUMBAI IN THE CASE OF SULZER INDIA LTD. (SUPRA) AND HELD THAT THE GAIN ON ACCOUNT OF LIABILITY TO PAY THE SALES TAX LOAN IN FUTURE AND ACTUALLY PRE PAYMENT MADE IN RESPECT OF THE OUTSTANDIN G SALES TAX LIABILITY IS A CAPITAL RECEIPT. 4. WE HAVE HEARD THE PARTIES. THE LD. COUNSEL SUBMITS THAT THE ISSUE STANDS SQUARELY COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF THE HON'BLE SPECIAL BENCH, ITAT, MUMBAI IN THE CASE OF SULZER INDIA LTD. (SUPRA) . T HE IDENTICAL ISSUE HAS COME FOR THE CONSIDERATION BEFORE THE HON'BLE SPECIAL BENCH AND IT WAS HELD THAT THE DIFFERENCE BETWEEN THE NPV AGAINST THE FUTURE LIABILITY CREDITED BY THE ASSESSEE IN HIS BOOKS OF ACCOUNT IS A CAPITAL RECEIPT AND CANNOT BE REMISSION/CESSATION OF LIABILITY AND CONSEQUENTLY NO BENEFIT HAS ARISEN TO THE ASSESSEE IN TERMS 4 ITA NO S. 1 226 & 1227/PN/2013, M/S. SANJEEV AUTO PARTS MANUFACTURES PVT. LTD. & ORS., AURANGABAD OF SEC. 41(1) OF THE INCOME - TAX ACT. WE, THEREFORE, FIND NO REASON TO INTERFERE WITH THE ORDER OF THE LD. CIT(A) . ACCORDINGLY, SAME ARE CONFIRMED. 5. IN THE RESULT, BOTH THE APPEALS OF THE REVENUE ARE DISMISSED. PRONOUNCED IN THE OPEN COURT ON 27 - 05 - 201 4 SD/ - SD/ - ( R.K. PANDA ) ( R.S. PADVEKAR ) ACCOUNTANT MEMBER JUDICIAL MEMBER RK /PS PUNE , DATE D : 27 TH MAY, 20 1 4 COPY TO 1 ASSESSEE 2 DEPARTMENT 3 THE CIT(A) , AURANGABAD 4 THE CIT, AURANGABAD 5 THE DR, ITAT, B BENCH, PUNE . 6 GUARD FILE. //TRUE COPY// BY ORDER PRIVATE SECRETARY INCOME TAX APPELLATE TRIBUNAL PUNE