BBEL-MIPL Joint Venture., Hyderabad V. Dy. Commissioner of Income Tax, Circle-14(1), Hyderabad

ITA 1259/Hyd/2017

• Counselvise Citation: [2021] 108 COUNSELVISE.COM (IT) 5764 (ITAT-HYDERABAD)
• Duration Of Justice: 3 year(s) 9 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-04-2021
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB-A
• Next Hearing Date: 25-03-2021
• Assessment Year: 2010-2011
• Appeal Filed On: 20-07-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: S RAMA RAO
• Keywords: CHAPTER IV
• Section: 143(3); 40(a)(ia); 201; 44BB; 22; 28; 2; 11

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD A BENCH, HYDERABAD. BEFORE SHRI S.S. GODARA, JUDICIAL MEMBER AND SHRI LAXMI PRASAD SAHU, ACCOUNTANT MEMBER (THROUGH VIRTUAL HEARING) ITA NO S . 1259 /HYD/201 7 & 1337/HYD/2015 (ASSESSMENT YEAR S : 201 0 - 11 & 2011 - 12 ) M/S. BBE L - MIPL JOINT VENTURES, PLOT NO.119, MEENAKSHIS HOUSE, ROAD NO.10, BANJARA HILLS, HYDERABAD - 500 033 PAN AAAAB 7423P VS. DY. COMMISSIONER OF INCOME TAX, CIRCLE 14(1), HYDERABAD. APPELLANT RESPONDENT APPELLANT BY : SHRI S. RAMA RAO. RESPONDENT BY : SHRI SUNIL KUMAR PANDEY (D.R) DATE OF HEARING : 25.03. 2021. DATE OF PRONOUNCEMENT : 22 .04. 2021. O R D E R PER SHRI S.S. GODARA, J.M. : TH E S E ASSESSEES APPEAL S FOR THE ASST. YEAR S 201 0 - 11 & 2011 - 12 ARISE FROM THE COMMISSIONER OF INCOME TAX (APPEALS) - 6 , HYDERABAD S SEPARATE ORDER S DT. 12.04.2017 & 17.09.2015 PASSED IN CASE NO S . 0225/2015 - 16/CIT(A) - 6/17 - 18 & 1378/2014 - 15/CIT(A) - 6/15 - 16 , IN PROCEEDINGS UNDER SECTION 143(3) OF INCOME TAX ACT, 1961 (THE A CT) ; RESPECTIVELY. 2 ITA NO S . 1259/HYD/2017 & 1337/HYD/2015 HEARD BOTH THE PARTIES . C ASE FILE S PERUSED. 3. THE ASSESSEE'S SOLE IDENTICAL SUBSTANTIVE GROUNDS PRESSED IN THE INSTANT APPEAL READ AS FOLLOWS : L EARNED COUNSEL INVITED OUR ATTENTION THE CIT(A) IDENTICAL DETAILED DISCUSSION UPHOLDING THE ASSESSING OFFICERS ACTION INVOKING SECTION 40 (A)(IA) DISALLOWANCE IN ASSESSMENT YEAR 2010 - 11 WITH FURTHER DIRECTIONS TO THE ASSESSING OFFICER THAT THE SAID EXPEN SES OUGHT TO BE ALLOWED ONLY TO THE EXTENT IT REDUCES ASSESSEE'S NET PROFITS TO ZERO ONLY AS FOLLOWS : 3 ITA NO S . 1259/HYD/2017 & 1337/HYD/2015 06.5 IDEALLY, THE ASSESSEE SHOULD HAVE EARNED SOME PROFIT IN ITS BUSINESS BUT IF IT SUB - CONTRACTED ITS WORK TO ITS MEMBERS ON THE SO CALLED ' BACK TO BACK' BASIS, THE MAXIMUM CONSIDERATION THAT IT COULD APPROPRIATELY PAY TO ITS MEMBERS WAS WHAT IT RECEIVED FROM ITS PRINCIPAL, NET OF THE EXPENDITURE IT HAD TO INCUR IN ITS ACCOUNTS. IN OTHER WORDS, ONLY SO MUCH OF EXPENDITURE CAN BE OPTIMALLY ALLO WED AS THAT REDUCES ITS NET PROFIT TO ZERO. IN OTHER WORDS, THE DISALLOWANCE OF RS.63,08,598/ - U/S. 40A(2) OF THE IT ACT MEETS THE ENDS OF JUSTICE. AS THE SAME WAS REDUCED BY THE ASSESSING OFFICER TO RS.8,79,522/ - VIDE HIS ORDER U/S 143(3), THE DISALLOWANC E WILL BE LIMITED TO RS.( - ) 8,79,522/ - ONLY. BUT, AS IT IS NOT ASCERTAINED WHETHER THE ASSESSEE HAS GONE IN APPEAL AGAINST THE ADDITION MADE U/S 40(A)(IA) OF RS.54.29 LAKHS IN THE ORDER PASSED U/S. 143(3), THE ASSESSING OFFICER WHILE GIVING EFFECT TO THIS ORDER IS ACCORDINGLY DIRECTED TO COMPUTE THE INCOME AT ZERO ONLY. 4. WE HAVE GIVEN OUR THOUGHTFUL CONSIDERATION TO RIVAL PLEADINGS AGAINST AND IN SUPPORT OF THE CIT(A)S AFORESAID DIRECTIONS RESTRICTING THE IMPUGNED DISALLOWANCE(S) ONLY TO THE E XTENT THEY REDUCE TO ASSESSEE'S NET PROFIT TO ZERO ONLY . WE FIND NO REASON TO SUSTAIN THE SAME. WE MAKE IT CLEAR THAT THERE IS NO PROVISION IN THE ACT AND MORE PARTICULARLY IN CHAPTER IV - D FROM SECTI O N 2 8 TO 44BB DEALING WITH PROFIT AND GAINS OF A BU SINESS OR A PROFESSION WHICH CAN SUGGEST THAT AN EXPENDITURE CLAIM S DISALLOWANCE COULD BE RESTRICTED TO ZERO INCOME THEREIN 4 ITA NO S . 1259/HYD/2017 & 1337/HYD/2015 RESULTING IN LOSS FIGURES AS WELL. WHILE HOLDING SO, IT WOULD NOT BE OUT OF CONTEXT ALTOGETHER IF WE REFER TO HONBLE APEX CO URT S LARGER BENCH DECISION IN CIT VS. MANMOHAN DAS (19 6 6) 59 ITR 699 (SC) THAT AN ASSESSING OFFICER ARRIVING AT LOSS FIGURE CANNOT RESTRICT THE SAME FROM BEING CARRIED FORWARD IN EARLIER YEAR SINCE IT IS FOR THE ASSESSING AUTHORITY OF THE SUBSEQUENT YEAR TO DEAL WITH SUCH AN ISSUE AND IF AT ALL THE FORMER OF THEM DECIDES THE SAME IN SUCH A MANNER, IT IS NOT B INDING ON THE ASSESSEE IN THE SAID SUBSEQUENT YEAR. WE ADOPT THE VERY REASON ING HEREIN AS WELL MINDFUL OF THE FACT THAT IF THE IMPUGNED EXPENDITURE CLAIMED RESULTS THE ASSESSEE'S INCOME COMPUTED IN LOSS , IT S EXPENDITURE CLAIM WHICH IS OTHERWISE ALLOWABLE OUGHT NOT TO BE ACCEPTED AS NOT WITHIN THE FOUR CORNERS OF THE FISCAL STATU TE . THE RE IS ALSO NO SUCH RESTRICTIONS CLAUSE IN CHAPTE R VI OF THE ACT TO THIS EFFECT AS WELL. CASE LAW C OMMISSIONER OF CUSTOMS VS. DILIP KUMAR & CO. & OTHERS (2018) 9 SCC 1(SC) HAS SETTLED THE LAW THAT A FISCAL STATUTE HAS TO BE STRICTLY INTERPRETED WHETHER DEALING WITH TAXING OR EXEMPTION PROVISIONS. L EARNED DEPARTMENT REPRESENTATIVE FAILS TO REBUT THE FACT THAT THE CIT(A) IMPUGNED DIRECTIONS HAVE NOT QUOTED ANY STATUTORY PROVISION AT ALL THAT SUCH A DISALLOWANCE SUBSISTS TILL IT REACHES NIL INCOME ONLY. WE THUS REVERSE THE CIT(A) FINDINGS UNDER 5 ITA NO S . 1259/HYD/2017 & 1337/HYD/2015 CHALLENGE FOR THIS PRE CISE REASON ALONE. THE ASSESSEES SOLE SUBSTANTIVE GROUND IN A.Y. 2010 - 11 INVOLVING IN ITA NO.1259/HYD/2017 SUCCEEDS. 5. S AME ORDER TO FOLLOW IN ASSESSEE'S LAT T ER APPEAL IN ITA NO.1337/HYD/2015 FOR A.Y. 2011 - 12 ASWELL SINCE RAISING THE VERY ISSUE QU A SEC. 40A(2) DISALLOWANCE AS PER THE CIT(A) DIRECTION S IN PARA 7.6 PAGE 6 THEREOF UNDER CHALLENGE . 5. THESE TWO ASSESSEE'S APPEALS ARE ALLOWED IN ABOVE TERMS. A COPY OF THIS ORDER IS PLACED IN THE RESPECTIVE FILES. ORDER PRONOUNCED IN THE OPEN COURT ON 22ND APRIL , 2021. SD/ - SD/ - (LAXMI PRASAD SAHU) (S.S. GODARA) ACCOUNTANT MEMBER JUDICIAL MEMBER HYDERABAD, DT. 22 .0 4 .2021. * REDDY GP COPY TO : 1. M/S. BBE L - MIPL JOINT VENTURES,PLOT NO.119, MEENAKSHIS HOUSE, ROAD NO.10, BANJARA HILLS, HYDERABAD - 500 033 2. DY. COMMISSIONER OF INCOME TAX, CIRCLE 14(1), HYDERABAD. 3. PR. C I T - 6 , HYDERABAD. 4. CIT(APPEALS) - 6, HYDERABAD. 5. DR, ITAT, HYDERABAD. 6. GUARD FILE. BY ORDER SR. PVT. SECRETARY, ITAT, HYDERABAD.