FIRST FLIGHT COURIERS LTD, MUMBAI V. DCIT 12(2)(1), MUMBAI

ITA 1324/MUM/2018

• Counselvise Citation: [2019] 117 COUNSELVISE.COM (IT) 2356 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 3 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-06-2019
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: F
• Assessment Year: 2013-2014
• Appeal Filed On: 06-03-2018
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: CHAUDHARY ARUN KUMAR SINGH LD
• Assessee Lawyers: RAJESH AGARWALLD
• Keywords: Business income; Set aside
• Section: 143(3); 115JB

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL F BENCH, MUMBAI BEFORE SHRI SAKTIJIT DEY, JM AND SHRI MANOJ KUMAR AGGARWAL, AM ./ I.T.A. NO.1324/MUM/2018 ( / ASSESSMENT YEAR: 2013-14) M/S. FIRST FLIGHT COURIERS LTD. G-1001/02, LOTUS CORPORATE PARK GRAHAM FIRTH STEEL COMPOUND GOREGAON (EAST), MUMBAI-400 063. / VS. D CIT - 12(2)(1) ROOM NO.223, 2 ND FLOOR AAYKAR BHAVAN, M.K. ROAD MUMBAI-400 020. ! ./ ./PAN/GIR NO. AAACF-0841-R ( /APPELLANT ) : ( / RESPONDENT ) & ./ I.T.A. NO.2439/MUM/2018 ( / ASSESSMENT YEAR: 2013-14) D CIT - 12(2)(1) ROOM NO.223, 2 ND FLOOR AAYKAR BHAVAN, M.K. ROAD MUMBAI-400 020. / VS. M/S. FIRST FLIGHT COURIERS LTD. G-1001/02, LOTUS CORPORATE PARK GRAHAM FIRTH STEEL COMPOUND GOREGAON (EAST), MUMBAI-400 063. ! ./ ./PAN/GIR NO. AAACF-0841-R ( /APPELLANT ) : ( / RESPONDENT ) ASSESSEE BY : SHRI RAJESH AGARWAL-LD.AR REVENUE BY : CHAUDHARY ARUN KUMAR SINGH-LD.DR / DATE OF HEARING : 07/05/2019 / DATE OF PRONOUNCEMENT : 25/06/2019 / O R D E R MANOJ KUMAR AGGARWAL (ACCOUNTANT MEMBER): - 1. AFORESAID CROSS APPEALS FOR ASSESSMENT YEAR [AY] 2013-14 CONTEST THE ORDER OF LD. COMMISSIONER OF INCOME-TAX (APPEAL S)-20, MUMBAI 2 CIT(A)], APPEAL NO. CIT(A)-20/DCIT-12(2)(1)/IT-10270/16-17 DATED 29/11/2017. 2.1 THE GROUNDS RAISED BY THE ASSESSEE READ AS UNDE R: - 1. ON THE FACTS AND CIRCUMSTANCES ON LAW, THE LEARNED ASSESSING OFFICER HAS ERRED AND CIT(A)-20 FURTHER ERRED, IN NOT ADMITTING OUR CLAIM AND NOT ALLOWING THE DEDUCTION FOR EMPLOYEE CONTRIBUTION TO PF OF RS. 24,02,980/- AND ESIC OF RS. 13,01,980/- WHICH WERE DELAYED BUT PAID BEFORE DUE DATE OF FILLING OF INCO ME TAX RETURN, WHICH WAS DISALLOWED BY THE APPELLANT ITSELF IN ITS COMPUTATION/ ORIGINAL R ETURN OF INCOME AND CLAIMED DURING ASSESSMENT PROCEEDINGS. 2. ON THE FACTS AND CIRCUMSTANCES ON LAW, THE LEARNED ASSESSING OFFICER HAS ERRED AND CIT(A)-20 FURTHER ERRED, IN CONSIDERING THE INTERES T INCOME OF RS. 3,73,78,956/- AS INCOME FROM OTHER SOURCES AS AGAINST THE INCOME FROM BUSIN ESS AS CLAIMED BY THE APPELLANT. THE GROUNDS RAISED BY THE REVENUE READ AS UNDER: - 1. WHETHER ON THE FACTS AND IN CIRCUMSTANCES OF TH E CASE AND IN LAW, THE LD.CIT(A) ERRED IN DELETING THE ADDITION OF RS.1,35,00,000/-ON ACCOUNT OF FOREIGN EXCHANGE FLUCTUATION LOSS WITHOUT APPRECIATING THE FACT THAT THE NATURE OF LOSS IS IN NATURE OF CONTINGENT AND SUCH LOSS IS NOT ALLOWABLE AS PER STATUTE OF THE AC T? 2. WHETHER ON THE FACTS AND IN CIRCUMSTANCES OF TH E CASE AND IN LAW, THE LD.CLT(A) ERRED IN DELETING THE ADDITION OF RS.1,46,303/-ON ACCOUNT OF FOREIGN EXCHANGE FLUCTUATION LOSS RELATED TO AMOUNT PAYABLE TO CREDITORS IN FOREIGN E XCHANGE WITHOUT APPRECIATING THE FACT THAT SUCH PROVISION IS NOT ALLOWABLE AS PER STATUTE OF THE ACT? 3. WHETHER ON THE FACTS AND IN CIRCUMSTANCES OF TH E CASE AND IN LAW, THE LD.CIT(A) ERRED IN DELETING THE ADDITION MADE TO BOOK PROFIT OF RS.1,3 6,48,178/-WITHOUT APPRECIATING THE FACT THAT SUCH PROVISIONS IS TO BE INCREASED AS PER EXPL ANATION 1 OF SUB-SECTION(2) OF SECTION 115JB OF THE ACT? 4. THE APPELLANT PRAYS THAT THE ORDER OF THE CIT ( A) ON THE GROUNDS BE SET ASIDE AND THAT OF THE ASSESSING OFFICER BE RESTORED. 2.2 THE LD. AUTHORIZED REPRESENTATIVE FOR ASSESSEE [AR], AT THE OUTSET, SUBMITTED THAT MOST OF THE ISSUES IN CROSS-APPEALS ARE COVERED BY THE EARLIER ORDERS OF THIS TRIBUNAL IN ASSESSEES OWN C ASE FOR OTHER AYS, THE COPIES OF WHICH HAS BEEN PLACED ON RECORD. THE LD. DR PLACED RELIANCE ON THE STAND OF LD. AO. IN THE BACKGROUND, WE PROCEED TO DISPOSE-OFF THE ISSUES RAISED IN THE CROSS-APPEALS. 2.3 BRIEFLY STATED THE ASSESSEE BEING RESIDENT CORPORATE ASSESSEE WAS ASSESSED FOR IMPUGNED AY U/S 143(3) ON 31/03/2016 W HEREIN THE INCOME OF 3 THE ASSESSEE, UNDER NORMAL PROVISIONS, WAS DETERMIN ED AT RS.254.70 LACS AFTER CERTAIN ADDITIONS / DISALLOWANCES AS AGAINST NIL RETURN FILED BY THE ASSESSEE ON 29/11/2013. THE BOOK PROFITS U/S 115JB WERE DETERMINED AT RS.2218.88 LACS AS AGAINST RS.2082.39 LACS OFFERED BY THE ASSESSEE. ITA 1324/MUM/2018 : ASSESSEES APPEAL 3.1 DURING ASSESSMENT PROCEEDINGS, THE ASSESSEE MAD E A NEW CLAIM TOWARDS DELAYED PAYMENT OF PROVIDENT FUND [PF] & EM PLOYEES STATE INSURANCE [ESI] CONTRIBUTION FOR RS.24.02 LACS & RS .13.01 LACS RESPECTIVELY. THE SAID EXPENDITURE WAS SUO-MOTO DISALLOWED BY THE ASSESSEE WHILE FILING THE RETURN OF INCOME AND DURI NG ASSESSMENT PROCEEDINGS, THE ASSESSEE PLEADED FOR THE ALLOWANCE OF THE SAME. BOTH THE LOWER AUTHORITIES REJECTED THE SAME RELYING UPON TH E DECISION OF HONBLE SUPREME COURT RENDERED IN GOETZ INDIA LTD. VS. CIT 284 ITR 323. AGGRIEVED, THE ASSESSEE IS IN APPEAL BEFORE US BY W AY OF GROUND NO.1. 3.2 KEEPING IN VIEW THE FACT THAT ASSESSEES CORREC T INCOME WAS TO BE COMPUTED AND KEEPING IN VIEW THE DECISION OF HONBLE SUPREME COURT RENDERED IN JUTE CORPORATION OF INDIA LTD. V/S CIT [187 ITR 688 ], WE ADMIT THE ASSESSEES CLAIM AND RESTORE THE ISSUE BA CK TO THE FILE OF LD. AO TO EXAMINE THE SAME. THE LD. AO IS DIRECTED TO ALLO W THE SAME AFTER VERIFYING THAT THE AFORESAID CONTRIBUTIONS / PAYMEN TS WERE DEPOSITED BEFORE DUE DATE OF FILING OF RETURN OF INCOME AND SECONDLY , THE DEDUCTION OF THE SAME WAS NOT CLAIMED BY THE ASSESSEE IN ANY OTHER A SSESSMENT YEAR. THE ASSESSEE IS DIRECTED TO SUBSTANTIATE THE SAME. THIS GROUND STANDS ALLOWED FOR STATISTICAL PURPOSES. 4 4.1 IN GROUND NO. 2, THE ASSESSEE IS AGGRIEVED BY THE FACT THAT INTEREST INCOME OF RS.373.78 LACS AS OFFERED BY THE ASSESSEE UNDER THE HEAD BUSINESS INCOME WAS ASSESSED AS INCOME FROM OTHER SOURCES. THE SAID INTEREST COMPRISED-OFF OF INTEREST ON BANK DEPOSITS FOR RS.218.01 LACS AND INTEREST ON INCOME TAX REFUND FOR RS.155.77 LACS. B EFORE LD. AO, THE ASSESSEE SUBMITTED THAT THE ASSESSEE WAS REQUIRED T O PROVIDE BANK GUARANTEES AGAINST BUSINESS OBLIGATIONS AND THE FIX ED DEPOSITS WERE MADE AS A SECURITY FOR ISSUE OF SUCH BANK GUARANTEES. TH EREFORE, THE SAID DEPOSITS WERE KEPT FOR THE PURPOSES OF ASSESSEES B USINESS AND ACCORDINGLY, THE INTEREST EARNED THEREUPON WAS TO B E ASSESSED AS BUSINESS INCOME. HOWEVER, THE SAME COULD NOT CONVINCE LD. AO, WHO TR EATED THE SAME AS INCOME FROM OTHER SOURCES. THE LD. FIRST APPELLATE AUTHORITY CONFIRMED THE STAND OF LD.AO BY OBSERVING THAT INTE REST INCOME WAS NOT INEXTRICABLY LINKED TO ASSESSEES BUSINESS AND INTE REST INCOME HAD NO NEXUS WITH ASSESSEES BUSINESS. AGGRIEVED, THE ASSE SSEE IS IN FURTHER APPEAL BEFORE US. 4.2 BEFORE US, LD. AR HAS PLACED RELIANCE ON THE FO LLOWING JUDICIAL PRONOUNCEMENTS: - I) CIT V/S INDO SWISS JEWELS LTD. [HONBLE BOMBAY H IGH COURT 284 ITR 389] II) CIT V/S GREEN INFRA LTD. [HONBLE BOMBAY HIGH COURT ITA NO. 1162 OF 2014] III) POWAI LABS TECH. P. LTD. V/S ITO [MUMBAI TRIB UNAL ITA NO.3352/MUM/2011] IV) GLOBAL INF. SERVICES LTD. V/S DCIT [MUMBAI TRI BUNAL ITA NO.3290/MUM/2010] V) SUJAY TRADING P. LTD. V/S JCIT [MUMBAI TRIBUNAL 111 ITD 249] 4.3 WE HAVE CAREFULLY CONSIDERED THE SAME. AT THE O UTSET, IT IS OBSERVED THAT INTEREST COMPONENT INCLUDE INTEREST ON INCOME TAX REFUND FOR RS.155.77 5 LACS, WHICH IS, UNDOUBTEDLY, ASSESSABLE AS INCOME FROM OTHER SOURCES. THEREFORE, THE DECISION OF LOWER AUTHORITY, TO THAT EXTENT, STAND CONFIRMED. 4.4 THE BALANCE INTEREST COMPONENT OF RS.281.01 LAC S IS STATED TO BE EARNED BY THE ASSESSEE FROM BANK DEPOSITS. WE HAVE CAREFULLY PERUSED THE AFORESAID DECISIONS. WE FIND THAT THE ABOVE DECISIO NS HAVE BEEN RENDERED ON PECULIAR FACTS OF EACH CASE WHEREIN THE ASSESSEE WAS ABLE TO DEMONSTRATE THAT THE SURPLUS FUNDS KEPT AS DEPOSITS HAD SOME BUSINESS NEXUS WITH THOSE DEPOSITS AND THE DOMINANT OBJECTIV E WAS TO ACHIEVE SOME BUSINESS PURPOSES. HOWEVER, IN THE PRESENT CASE, WE FIND THAT, EXCEPT FOR ASSESSEES SUBMISSIONS, THE AFORESAID FACTS ARE NOT FORTHCOMING. THE LD. AR HAS SUBMITTED THAT THE FIXED DEPOSITS WERE KEPT TO FACILITATE ISSUANCE OF BANK GUARANTEES AND TO MEET CERTAIN BUSINESS OBLIGA TIONS. THESE FACTS REQUIRE EXAMINATION & VERIFICATION BY LD. AO. THERE FORE, WE DEEM IT FIT TO RESTORE THE MATTER BACK TO THE FILE OF LD.AO FOR RE -ADJUDICATION IN THE LIGHT OF THESE SUBMISSIONS. THE ASSESSEE IS DIRECTED TO SUBS TANTIATE THE SAME AND DEMONSTRATE THE BUSINESS NEXUS OF THESE DEPOSITS AN D JUSTIFY ASSESSABILITY OF THE SAME AS BUSINESS INCOME . THE GROUND STANDS PARTLY ALLOWED FOR STATISTICAL PURPOSES. 5. RESULTANTLY, THE ASSESSEES APPEAL STANDS PARTLY ALLOWED FOR STATISTICAL PURPOSES. ITA 2439/MUM/2018: REVENUES APPEAL 6.1 THE FIRST GROUND OF REVENUES APPEAL IS QUA DELETION OF DISALLOWANCE OF RS.135 LACS ON ACCOUNT OF FOREIGN EXCHANGE FLUCTUAT ION LOSS. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, IT WAS SUBMITTED BY THE ASSESSEE THAT THE LOSS WAS CRYSTALLIZED LIABILITIES DUE AND PAYAB LE IN RESPECT OF TERMINATION 6 OF LEASES OF EARLIER YEARS. THE TOTAL OUTSTANDING A S ON 01/04/2012 WAS RS.22 CRORES WHICH INCREASED TO RS.23.35 CRORES AS ON 31/03/2013 WHICH NECESSITATE THE PROVISIONS OF THE DIFFERENTIAL AMOU NT IN THE BOOKS OF ACCOUNTS. SINCE THERE WAS ASCERTAINED LIABILITY IN FOREIGN EXCHANGE AS AT THE BALANCE SHEET DATE, IT WAS NECESSARY TO ACCOUNT FOR SUCH LIABILITY AT THE PREVAILING RATE OF FOREIGN EXCHANGE AT THE CLOSE OF THE FINANCIAL YEAR. ACCORDINGLY, LOSS OF RS.135 LACS WAS DEBITED TO PRO FIT & LOSS ACCOUNT AND CLAIMED AS EXPENDITURE. THE ENTIRE CLAIM WAS STATED TO BE FULLY PAID IN AY 2015-16. HOWEVER, NOT CONVINCED, LD. AO TREATING TH E SAME AS CONTINGENT LIABILITY, DISALLOWED THE SAME. 6.2 THE SECOND GROUND IS SIMILAR TO GROUND NO.1. IT WAS NOTED THAT THE ASSESSEE DEBITED AN AMOUNT OF RS.1.46 LACS IN THE P ROFIT & LOSS ACCOUNT TOWARDS PROVISION FOR FOREIGN EXCHANGE FLUCTUATION ON ACCOUNT OF CLOSING CREDITORS AT YEAR END. HOWEVER, THE SAME WAS DISALL OWED BY LD. AO, ON SIMILAR REASONING. 6.3 UPON FURTHER APPEAL, THE LD. FIRST APPELLATE AU THORITY, RELYING UPON THE DECISION OF HONBLE APEX COURT RENDERED IN WOODWORD GOVERNOR [312 ITR 254] ALLOWED THE SAME. AGGRIEVED, THE REVENUE IS IN APPE AL BEFORE US. 6.4 THE LD. AR HAS SUBMITTED THAT THE ISSUE STOOD C OVERED BY THE ORDER OF THIS TRIBUNAL IN ASSESSEES OWN CASE FOR AY 2010-11 WHICH HAS BEEN FOLLOWED IN AYS 2011-12 & 2012-13 ALSO. UPON PERUSA L OF ORDER FOR AY 2010-11, ITA NO. 3436/MUM/2014 DATED 10/08/2016, WE FIND THAT GROUND NO.1 STOOD COVERED IN ASSESSEES FAVOR VIDE PARA-9 WHEREIN THE TRIBUNAL, AFTER CONSIDERING THE FACTUAL MATRIX, HAS ALLOWED T HE ASSESSEES CLAIM TREATING THE EXPENDITURE AS CRYSTALLIZED LIABILITY. THIS DECISION HAS 7 SUBSEQUENTLY BEEN FOLLOWED IN AYS 2011-12 & 2012-13 VIDE ITA NOS.5398- 99/MUM/2016 DATED 26/04/2018. 6.5 IN THE AFORESAID CIRCUMSTANCES, WE DIRECT LD. A O TO ASCERTAIN THAT THE FACTS IN THIS AY ARE PARI-MATERIA THE SAME AS IN EARLIER YEARS. THE LD. AO IS DIRECTED TO EXAMINE THE FACT THAT THE AFORESAID LIA BILITIES HAVE CRYSTALIZED DURING IMPUGNED AY AS PER THE TERMS OF THE SETTLEME NT AND THESE LIABILITIES HAS FULLY BEEN DISCHARGED BY THE ASSESSEE BY MAKING ACTUAL PAYMENT. FURTHER, SIMILAR TREATMENT HAS BEEN GIVEN BY THE AS SESSEE TO RESULTANT GAIN, IF ANY, ARISING OUT OF THESE TRANSACTIONS IN SUBSEQ UENT YEARS. BOTH THESE GROUNDS STAND ALLOWED FOR STATISTICAL PURPOSES. 6.6 GROUND NO. 3 IS CONSEQUENTIAL GROUND AND CONTES T DELETION OF ADJUSTMENT OF FOREIGN EXCHANGE LOSSES FROM BOOK PRO FITS U/S 115JB. THE SAID MATTER ALSO STANDS RESTORED BACK TO THE FILE O F LD. AO. THE SAME MAY BE RE-ADJUDICATED IN TERMS OF THE STAND TAKEN AGAIN ST GROUND NOS. 1 & 2. NEEDLESS TO ADD THAT IF THE LIABILITIES ARE FOUND T O BE ALLOWABLE, NO ADJUSTMENT THEREOF WOULD BE WARRANTED U/S 115JB. TH IS GROUND STAND ALLOWED FOR STATISTICAL PURPOSES. GROUND NO. 4 IS G ENERAL IN NATURE. 7. THE REVENUES APPEAL STANDS ALLOWED FOR STATISTI CAL PURPOSES. CONCLUSION 8. THE REVENUES APPEAL ITA NO.2439/MUM/2018 STANDS ALLOWED FOR STATISTICAL PURPOSES WHEREAS THE ASSESSEES APPEAL ITA NO.1324/MUM/2018 STANDS PARTLY ALLOWED FOR STATISTI CAL PURPOSES. 8 ORDER PRONOUNCED IN THE OPEN COURT ON 25 TH JUNE, 2019. SD/- SD/- (SAKTIJIT DEY) (MANOJ KUMAR AGGARWAL) / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI; DATED : 25/06/2019 SR.PS:-JAISY VARGHESE ! '! / COPY OF THE ORDER FORWARDED TO : 1. !% / THE APPELLANT 2. &'!% / THE RESPONDENT 3. ( ) / THE CIT(A) 4. / CIT CONCERNED 5. ( )& * , * , / DR, ITAT, MUMBAI 6. ) ,-. / GUARD FILE / BY ORDER, / (DY./ASSTT.REGISTRAR) , / ITAT, MUMBAI.