DCIT, Corporate Citcle -3(2), CHENNAI V. VSL India Pvt.Ltd., CHENNAI

ITA 138/CHNY/2018

• Counselvise Citation: [2019] 116 COUNSELVISE.COM (IT) 4762 (ITAT-CHENNAI)
• Duration Of Justice: 1 year(s) 6 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-08-2019
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Assessment Year: 2012-2013
• Appeal Filed On: 10-01-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: R CLEMENT RAMESH KUMAR
• Assessee Lawyers: T VASUDEVAN
• Keywords: Tax effect; Set aside
• Section: 139

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL, C BENCH : CHENNAI , . , [BEFORE SHRI INTURI RAMA RAO, ACCOUNTANT MEMBER AND SHRI DUVVURU RL REDDY , JUDICIAL MEMBER ] ./I.T.A. NO.138/CHNY/2018. $ $ / ASSESSMENT YEAR :2012-13 DEPUTY COMMISSIONER OF INCOME TAX, CORPORATE CIRCLE-3(2), CHENNAI 600 034. VS. M/S.VSL INDIA PVT LTD ., 2 ND FLOOR,WEST WING, NO.21,NORTH PHASE,INDUSTRIAL ESTATE, EKKADUTHANGAL, CHENNAI 600 032. [PAN AAACV 9694 E] ( / APPELLANT) ( /RESPONDENT) ( ) / APPELLANT BY : MR.R.CLEMENT RAMESH KUMAR, ADDL. C.I.T D.R +,( ) /RESPONDENT BY : MR.T.VASUDEVAN,ADVOCATE ) /DATE OF HEARING : 18-07-2019 ) /DATE OF PRONOUNCEMENT : 08-08-2019 / O R D E R PER INTURI RAMA RAO, ACCOUNTANT MEMBER THIS APPEAL OF THE REVENUE IS DIRECTED AGAINS T THE ORDER OF THE COMMISSIONER OF INCOME-TAX (APPEALS)-11, CH ENNAI DATED 20.10.2017 FOR ASSESSMENT YEAR 2012-13. ITA NO. 138/CHNY/2018 :- 2 -: 2. THE REVENUE RAISED FOLLOWING GROUNDS FOR OUR AD JUDICATION. 1. THE ORDER OF THE LD. CIT(A) IS CONTRARY TO LAW A ND FACTS AND CIRCUMSTANCES OF THE CASE. 2.1 THE LD.CIT(A) ERRED IN DELETING THE DISALLOWANC E OF EXPENDITURE ON INTEREST ON DELAYED PAYMENT OF SERVI CE TAX OF RS.69.20.234/- EVEN THOUGH THE SAME IS PENAL IN NAT URE. 2.2. THE LD.CIT(A) OUGHT TO HAVE SEEN THAT HE RELI ED DECISION OF THE HONBLE DELHI TRIBUNAL IN THE CASE OF M/S.MESSE E DUSSELDORF INDIA PVT LTD., WAS NOT ACCEPTED BY THE DEPARTMENT AND FURTHER APPEAL IS NOT SUGGESTED ONLY ON ACCOUNT OF LOW TAX EFFECT. 2.3 THE LD.CIT(A) OUGHT TO HAVE FOLLOWED THE DECIS ION OF THE APEX COURT IN THE CASE OF M/S.BHARAT COMMRCE INDUST RIES LTD.,(153 ITR 275) WHEREIN THE APEX COURT HELD THAT ANY INTEREST PAYABLE FOR DEFAULT COMMITTED BY THE ASSES SEE IN DISCHARGING HIS STATUTORY LIABILITY IS NOT ALLOWABL E EXPENDITURE. 3. FOR THESE AND OTHER GROUNDS THAT MAY BE ADDUCED AT THE TIME OF HEARING, IT IS PRAYED THAT THE ORDER OF THE LD. CIT(A) MAY BE SET ASIDE AND THAT OF THE ASSESSING OFFICER BE RESTORED. 3. THE BRIEF FACTS OF THE CASE ARE THAT: THE ASSESSEE NAMELY M/S.VSL INDIA PVT LTD., IS A CO MPANY INCORPORATED UNDER THE PROVISIONS OF THE COMPANY AC T, 1956. IT IS ENGAGED IN THE BUSINESS OF CIVIL WORK CONTRACTS. ITA NO. 138/CHNY/2018 :- 3 -: THE RETURN OF INCOME FOR THE ASSESSMENT YEAR 2012-1 3 WAS FILED ON 29.11.2012 DECLARING A LOSS OF RS.4,27,83,179/-. AG AINST THE SAID RETURN OF INCOME, ASSESSMENT WAS COMPLETED BY THE DEPUTY COMMISSIONER OF INCOME TAX, CORPORATE CIRCLE 3(2),C HENNAI (HEREINAFTER REFERRED AS AO') VIDE ORDER DATED 0 4.02.2015 PASSED U/S.143(3) OF THE INCOME TAX ACT, 1961 (IN SHORT THE ACT) AT LOSS OF RS.2,69,64,291/- AFTER MAKING CERTAIN DISALLOWANCES /ADDITIONS INCLUDING THE INTEREST PAID ON DELAYED PAYMENT OF SERVICE TAX OF RS.69,20,334/- ON THE GROUND THAT INTEREST IS PENAL IN NATURE. B EING AGGRIEVED, THE ASSESSEE PREFERRED AN APPEAL BEFORE THE LD.CIT(A), WHO CONSIDERING THE PROVISIONS OF SECTION 75 IN THE SERVICE TAX ACT , CHAPTER-IV OF THE FINANCE ACT,1994, HELD THAT INTEREST ON DELAYED PAY MENT OF SERVICE TAX IS ONLY COMPENSATORY IN NATURE PLACING RELIANCE IN THE FOLLOWING DECISIONS, I) MAHALAKSHMI SUGAR MILLS CO. VS.C.I.T IN (1980) 123 ITR 429 (SC) II) LACHMANDA MATHURADAS IN 254 ITR 799 (SC) III) SWADESHI COTTON MILLS LTD., VS. 233 ITR 199 (SC), ITA NO. 138/CHNY/2018 :- 4 -: DIRECTED THE ASSESSING OFFICER TO DELETE THE ADDITI ON OF INTEREST ON DELAYED PAYMENT OF SERVICE TAX. BEING AGGRIEVED WIT H THE ORDER OF THE LD.CIT(A), THE REVENUE IS BEFORE US IN THE PRESENT APPEAL. 4. BEFORE US, LD. SENIOR D.R PLACED RELIANCE ON TH E ORDERS OF THE LOWER AUTHORITIES AND ALSO ON THE DECISION OF DELHI HIGH COURT IN THE CASE OF M/S.BHARAT COMMERCE INDUSTRIES LTD.,(153 IT R 275). 5. ON THE OTHER HAND, IT IS SUBMITTED BY LD.AR THA T INTEREST PARTAKES THE CHARACTER OF PRINCIPAL TAX, AND THEREF ORE, INTEREST ON SERVICE TAX IS ALLOWABLE. HENCE, IT IS PRAYED THAT INTEREST MAY BE ALLOWED AS DEDUCTION. IN THIS CONNECTION, HE RELIED ON THE DECISIONS OF HONBLE SUPREME COURT IN THE CASE OF MAHALAKSHMI SU GAR MILLS CO. VS.C.I.T IN (1980) 123 ITR 429 (SC) AND OF HONBLE GUJARAT HIGH COURT IN THE CASE OF C.I.T-III VS. KAYPEE MECHANICAL INDI A PVT LTD., IN 2014(4) TMI 829(GUJARAT) AND OF JAIPUR TRIBUNAL IN THE CASE OF M/S.ORIENTAL EARTHMOVERS PVT LTD., IN 2019(4) TMI 1 580(I.T.A.T, JAIPUR) AND OF KOLKATA TRIBUNAL IN THE CASE OF M/S. SAI FOOD PRODUCTS PVT LTD. VS. DCIT KOLKATA IN 2018(4) TMI 565 I.T. A.T, KOLKATA. 6. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. THE ONLY ISSUE INVOLV ED IN THE PRESENT ITA NO. 138/CHNY/2018 :- 5 -: APPEAL RELATED TO ALLOWABILITY OF INTEREST PAID FOR BELATED PAYMENT OF SERVICE TAX. ADMITTEDLY, THE INTEREST IS PAID FOR BELATED PAYMENT OF SERVICE TAX, WHICH IS A COMPENSATORY NATURE. IT IS SETTLED POSITION OF LAW THAT INTEREST ON DELAY IN PAYMENT OF TAX IS ALS O PART AND PARCEL OF TAX AND IT IS EQUALLY SETTLED POSITION OF LAW THAT SERVICE TAX PAID IS ALSO A PERMISSIBLE DEDUCTION. THE HONBLE SUPREME C OURT IN THE CASE OF MAHALAKSHMI SUGAR MILLS CO. VS.C.I.T IN (1980) 1 23 ITR 429 (SC) AND C.I.T VS. LUXMI DEVI SUGAR MILLS P. LTD., REPOR TED IN [1991] 188 ITR 41 HELD THAT INTEREST IS ONLY OF COMPENSATORY N ATURE AND DOES NOT TAKE A COLOUR OF PENALTY AND THEREFORE, ALLOWABLE D EDUCTION. THEREFORE, WE ARE OF CONSIDERED OPINION THAT INTEREST PAID ON ACCOUNT OF BELATED PAYMENT OF SERVICE TAX IS ALLOWABLE DEDUCTION. REL IANCE IN THE JUDGMENT OF DELHI HIGH COURT IN THE CASE OF M/S.BHA RAT COMMERCE INDUSTRIES LTD., (153 ITR 275)(DELHI) BY THE SENIOR D.R, CANNOT COME TO RESCUE OF THE REVENUE FOR THE REASON THAT IT IS A DECISION, WHICH RELATES TO ALLOWABILITY OF INTEREST PAID UNDER THE PROVISIONS OF SECTIONS 139 & 215 OF THE INCOME TAX ACT. THE HONBLE DELH I HIGH COURT TOOK A VIEW THAT SINCE LIABILITY TO INCOME TAX IS NOT A PERMISSIBLE DEDUCTION, THE INTEREST CANNOT ALSO BE ALLOWED. THE VIEW OF T HE HONBLE DELHI HIGH COURT IS IN CONSONANCE WITH THE RATIO LAID DOW N BY THE HONBLE SUPREME COURT IN THE CASE OF C.I.T VS. LUXMI DEVI S UGAR MILLS P. LTD., ITA NO. 138/CHNY/2018 :- 6 -: CITED SUPRA. THUS, WE DO NOT FIND ANY MERIT IN THE APPEAL FILED BY THE REVENUE. ACCORDINGLY, THE APPEAL OF REVENUE IS DISM ISSED. 7. IN THE RESULT, THE APPEAL OF REVENUE IS DISMISS ED. ORDER PRONOUNCED ON 8 TH AUGUST, 2019, AT CHENNAI. SD/- SD/- ( . ) (DUVVURU RL REDDY) ' # /JUDICIAL MEMBER ( ) (INTURI RAMA RAO) /ACCOUNTANT MEMBER / CHENNAI 2 / DATED: 08 TH AUGUST, 2019. K S SUNDARAM ) +45 65 / COPY TO: 1 . ( / APPELLANT 3. 7 () / CIT(A) 5. 5 +< / DR 2. +,( / RESPONDENT 4. 7 / CIT 6. $ / GF