ACIT, Pune V. Spicer India Pvt Ltd, Pune

ITA 1279/PUN/2012

• Counselvise Citation: [2013] 140 COUNSELVISE.COM (IT) 72086 (ITAT-PUNE)
• Duration Of Justice: 1 year(s) 2 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-08-2013
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: B
• Assessment Year: 2004-2005
• Appeal Filed On: 11-06-2012
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: ADARSH KUMAR MODI
• Assessee Lawyers: R D ONKAR
• Keywords: Business income; Capital receipt
• Section: 143(3); 115JB

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH B , PUNE BEFORE: SHRI G. S. PANNU, ACCOUNTANT MEMBER AND SHRI R.S. PADVEKAR, JUDICIAL MEMBER ITA NO. 1279 / P N/ 20 12 ASSESSMENT YEAR : 2004 - 05 ASST. COMMISSIONER OF INCOME TAX, CI RCLE - 10, PUNE VS. SPICER INDIA LTD., 29, MILESTONE PUNE NASHIK ROAD, VILLAGE KURULI, TAL. KHED, DIST. PUNE (APPELLANT) (RESPONDENT) PAN NO. AAECS1869C APPELLANT BY: SHRI ADARSH KUMAR MODI RESPONDENT BY: SHRI R.D. ONKAR DATE OF HEARING : 01 - 08 - 2013 DATE OF PRONOUNCEMENT : 26 - 08 - 2013 ORDER P ER R.S. PADVEKAR , JM : - THIS APPEAL HAS BEEN FILED BY THE REVENUE CHALLENGING THE IMPUGNED ORDER OF THE LD. CIT(A) - V, PUNE 30 - 03 - 2012 FOR THE A.Y. 2004 - 05. THE REVENUE HAS TAKEN THE FOLLOWING GROUND S IN THE APPEAL: 1. THE LEARNED CIT(A) ERRED IN LAW AND FACTS IN ALLOWING FROM THE TOTAL INCOME THE AMOUNT OF SURPLUS OF RS.36,57,30,272/ - THAT HAS ARISEN DUE TO PREMATURE PAYMENT OF DEFERRED SALES TAX LOAN AT NET PRESENT VALUE (NPV) FOR THE YEAR UNDER CONSI DERATION. 2. THE LEARNED CIT(A) ERRED IN ALLOWING THE ASSESSEE THE AMOUNT OF SURPLUS OF RS.36,57,30,272/ - THAT HAS ARISEN DUE TO PREMATURE PAYMENT OF DEFERRED SALES TAX LOAN AT NET PRESENT VALUE (NPV) TO EXCLUDE FROM THE BOOK PROFITS WHILE WORKING OUT INCOME UNDER SECTION 115JB OF THE INCOME TAX ACT, 1961. 2. THE FACTS WHICH ARE REVEALED FROM THE RECORD AS UNDER. THE ASSESSEE IS ENGAGED IN THE MANUFACTURE AND SALE OF DRIVE TRAIN COMPONENTS NAMELY PROPELLER SHAFTS, UNIVERSAL JOINTS, AXLES AND TRANSFER 2 ITA NO. 1279/PN/2012, SPICER INDIA LTD., PUNE CAS ES AND COMPONENT THEREOF WHICH IS CONCERNED WITH THE TRANSMISSION SYSTEM. THE ASSESSEE FILED THE RETURN OF INCOME FOR THE A.Y. 2004 - 05 DECLARING THE TAXABLE INCOME AT RS. NIL. THE RETURN FILED BY THE ASSESSEE WAS SELECTED FOR SCRUTINY AND ASSESSMENT HAS BEEN COMPLETED U/S. 143(3) OF THE INCOME - TAX ACT. THE ASSESSEE HAS SET UP MANUFACTURING UNITS AT CHAKAN, NEAR PUNE, SATARA IN MAHARASHTRA, JODALLI IN KARNATAKA AND HUSUR IN TAMIL NADU. 3. SO FAR AS THE ISSUE OF TREATMENT OF SETTLEMENT OF THE SALES TAX DEFERRED LIABILITY OF THE ASSESSEE TO THE EXTENT OF RS.36,57,30,272/ - , T HE ASSESSING OFFICER HAS OBSERVED THAT THE ASSESSEE HAS AVAILED THE BENEFIT OF SALES TAX SCHEME OF THE SICOM LTD. AND PREPAID A PART OF THE SAID LIABILITY AT IT S NET PRESENT VALUE (NP V) , CONSEQUENT TO WHICH GAIN OF RS.36,57,30,272/ - HAS ACCRUED TO THE ASSESSEE COMPANY WHICH HAS BEEN CREDITED TO THE PROFIT AND LOSS ACCOUNT AND THE ASSESSEE HAS NOT INCLUDED SAID AMOUNT IN THE COMPUTATION OF TOTAL INCOME . A S THE PROVISIONS OF SEC. 115JB OF THE INCOME - TAX ACT ARE APPLICABLE , T HE ASSESSING OFFICER WORKED OUT THE BOOK PROFIT WHICH WORKING IS GIVEN IN ANNEXURE - B TO THE ASSESSMENT ORDER. THE ASSESSING OFFICER DID NOT EXCLUDE THE AMOUNT OF RS.36,57,30,272/ - WHICH HAS BEEN CREDITED TO THE PROFI T AND LOSS ACCOUNT AND ALSO IS A PART OF REJECTING THE CLAIM OF THE ASSESSEE THAT THE SAID AMOUNT IS TO BE EXCLUDED W HILE COMPUTING THE INCOME UNDER THE NORMAL PROVISIONS OF THE ACT AS WELL AS THE SAME AMOUNT IS TO BE EXCLUDED WHILE COMPUTING THE BOOK PROF IT U/S. 115JB OF THE ACT ALSO. 4. THE LD. CIT(A) ACCEPTED THE PLEA OF THE ASSESSEE. SO FAR AS THE COMPUTATION UNDER THE NORMAL PROVISIONS OF THE ACT IS CONCERNED, FOLLOWING THE DECISIONS OF THE HON'BLE SPECIAL BENCH OF THE ITAT IN THE CASE OF THE SULZE R INDIA LTD. VS. JCIT 1 3 4 TTJ (MUMBAI) (SB) 385 / 47 3 ITA NO. 1279/PN/2012, SPICER INDIA LTD., PUNE DTR 329 . THE CIT(A) ALSO ACCEPTED THE PLEA OF THE ASSESSEE THAT THE SAID AMOUNT IS TO BE EXCLUDED WHILE COMPUTING THE B OOK P ROFIT IN VIEW OF THE AMENDMENT TO SEC.115JB OF THE ACT MORE PARTICULARLY INSERTI ON OF CLAUSE - ( VIII ) BELOW EXPLANATION - 1 W.E.F. 01 - 04 - 2001 BY THE FINANCE ACT, 2001. NOW THE REVENUE IS IN APPEAL BEFORE US. 5. WE HAVE HEARD THE RIVAL SUBMISSIONS OF THE PARTIES AND PERUSED THE RECORD. IN THIS CASE, IT IS NOT DISPUTED THAT THE PROVISIO NS OF SEC. 115JB ARE APPLICABLE TO THE ASSESSEE. T HE BASIC FACT S PERTAINING TO THE ISSUE BEFORE US ARE REQUIRED TO BE MENTIONED HERE. THE ASSESSEE BECOME ELIGIBLE TO SALES TAX DEFERRAL BENEFIT UNDER THE P ACKAGE S CHEME OF INCENTIVE S 1988 IN RESPECT OF CHAK AN UNIT AND UNDER PACKAGE S CHEME OF INCENTIVE S 1993 IN RESPECT OF UNIT AT SATARA WHICH WAS IMPLEMENTED BY THE SICOM LTD. WHICH IS ACTED AS NODAL AGENC Y OF THE GOVT. OF MAHARASHTRA . U NDER THE DEFERRAL SCHEME , T HE SALES TAX COLLECTED FROM THE CUSTOMERS WAS ALLOWED TO BE ACCUMULATED AND THE LIABILITY TO REPA Y T HE AMOUNT REMAINED IN THE HA NDS OF THE ASSESSEE OVER THE PERIOD OF DEFERRAL I.E. FOR 10 YEARS REPAYABLE THEREAFTER OVER FURTHER PERIOD OF 5 Y EARS IN 5 EQUAL INSTALLMENTS. THE GOVT. OF MAHARASHTRA AMEND ED SEC. 38 OF BOMBAY SALES TAX ACT AND IT WAS PROVIDED THAT THE PREPAYMENT OF THE DEFE RRED SALES TAX LIABILITY WAS ALLOWABLE AT NET PRESENT VALUE (NPV). THE ELIGIBLE UNITS UNDER THE SCHEME AVAILING THE DEFERRAL SALES TAX LIABILITY IS THE SAME CAN BE DONE ON PAYMENT OF PRESCRIBED NPV OF THE LIABILITY EVEN BEFORE THE COMMENCEMENT OF SCHEDULED PERIOD OF REPAYMENT. THE ASSESSEE , THEREFORE, OPTED FOR REPAYMENT OF THE SALES TAX LIABILITY BEFORE THE COMMENCEMENT OF THE SCHEDULED REPAYMENT PERIOD ON THE NPV . T HE TOTAL SALES TAX COLLECTED BY THE ASSESSEE FOR THE CHAKAN AND SATARA UNDERTAKING WAS TO THE EXTENT OF RS. 57,20, 88,130/ - AND THE ASSESSEE PAID 20,63,57,858/ - AGAINST THE SAID DEFERRED SALES TAX LIABILITY 4 ITA NO. 1279/PN/2012, SPICER INDIA LTD., PUNE AND COULD GET THE BENEFIT TO THE EXTENT OF RS.36,57,3 0,272/ - AND THIS AMOUNT IS IN PRECISE ISSUE IN DISPUTE. SO FAR AS THE TREATMENT OF THE SAID AMOUNT WHILE COMPUTING THE INCOME UNDER THE NORMAL PROVISIONS OF THE INCOME - TAX ACT IS CONCERNED, THE REVENUE HAS TO FAIL AS IT IS SQUARELY COVERED IN FAVOUR OF TH E ASSESSEE BY THE DECISION OF THE HON'BLE SPECIAL BENCH OF THE ITAT, MUMBAI IN THE CASE OF SULZER INDIA LTD. (SUPRA). 6. NOW THE NEXT QUESTION IS WHETHER THE BENEFIT AVAILED BY THE ASSESSEE TO THE EXTENT OF RS.36,57,30,272/ - AND WHICH IS ADMITTEDLY CREDIT ED TO THE PROFIT AND LOSS ACCOUNT AND PART OF THE PROFITS PREPARED AS PER THE BOOKS OF ACCOUNT OF THE ASSESSEE COMPANY CAN BE EXCLUDED APPLYING CLAUSE - ( VIII ) IN PART - II BELOW EXPLANATION - 1 TO SEC. 115JB OF THE ACT. IN RESPECT OF THE TREATMENT OF THE DEFER RED SALES TAX , TWO CLAUSES ARE INSERTED IN EXPLANATION - 1 , MORE PARTICULARLY IN FI R ST PART CLAUSE - (H) AND IN THE SECOND PART CLAUSE - ( VIII ) BUT IN OUR OPINION , THE SAID AMENDMENT HAS NO BEARING ON THE PRESENT ASSESSEES CASE . SO FAR AS THE BENEFIT AVAILED B Y THE ASSESSEE ON PREPAYMENT OF THE DEFERRED SALES TAX LIABILITY IS CONCERNED, IN THE CASE OF SULZER INDIA LTD. (SUPRA) THE HON'BLE SPECIAL BENCH HAS HELD THAT AMOUNT PAID BY THE ELIGIBLE UNIT AS PER THE FORMULA ON THE NPV MADE BY SICOM LTD. AND IF THE ASS ESSEE GET THE BENEFIT , T HE SAID BENEFIT IS IN THE NATURE OF THE CAPITAL RECEIPT. IN OUR OPINION THIS ISSUE IN RESPECT OF THE COMPUTATION OF THE BOOK PROFIT U/S. 115JB OF THE ACT HAS TO BE DECIDED AGAINST THE ASSESSEE , BY FOLLOWING DECISION OF THE SPECIAL BENCH OF THE TRIBUNAL IN THE CASE OF RAIN COMMODITIES LTD. VS. DCIT 131 TTJ (HYD) (SB) 514. WE , ACCORDINGLY , ANSWER THE GROUND NO. 1 AGAINST THE REVENUE AND GROUND NO. 2 IN FAVOUR OF THE REVENUE. WE, THEREFORE, REVERSE THE ORDER OF THE CIT(A) BY HOLDING THAT WHILE COMPUTING THE BOOK PROFIT U/S. 115JB THE AMOUNT TO THE EXTENT OF THE 5 ITA NO. 1279/PN/2012, SPICER INDIA LTD., PUNE RS.36,57,30,272/ - CANNOT BE EXCLUDED BY APPLYING CLAUSE - (VIII) IN II PART TO EXPLANATION - 1 BELOW SEC. 115JB (2). 7. IN THE RESULT, THE REVENUES APPEAL IS PARTLY ALLOWED. PRO NOUNCED IN THE OPEN COURT ON 26 - 08 - 20 1 3 SD/ - SD/ - ( G.S. PANNU ) ( R.S. PADVEKAR ) ACCOUNTANT MEMBER JUDICIAL MEMBER RK /PS PUNE , DATED : 26 TH AUGUST, 20 1 3 COPY TO 1 DEPARTMENT 2 ASSESSEE 3 THE CIT(A) - V , PUNE 4 THE CIT - V, PUNE , 5 THE DR, ITAT, B BENCH, PUNE . 6 GUARD FILE. //TRUE COPY// BY ORDER PRIVATE SECRETARY INCOME TAX APPELLATE TRIBUNAL PUNE