M/s. Innovative Steals Pvt. Ltd., New Delhi V. ITO, New Delhi

ITA 1391/DEL/2010

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 3856 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 2 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-05-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: I
• Assessment Year: 2006-2007
• Appeal Filed On: 31-03-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MONA MOHANTY

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH E, NEW DELHI BEFORE SHRI I.P. BANSAL, JUDICIAL MEMBER & SHRI SHAMIM YAHYA, ACCOUNTANT MEMBER ITA NO. 1391/DEL/2010 ASSESSMENT YEAR: 2006-07 INNOVATIVE STEALS PVT. LTD., VS. INCOME TAX OFFIC ER, N-127, GREATER KAILASH, WARD 11(4), NEW DELHI. NEW DELHI. AAAC19255J (APPELLANT) (RESPONDENT) APPELLANT BY : NONE RESPONDENT BY : SMT. MONA MOHANTY, SR. DR ORDER PER I.P. BANSAL, J.M. THIS IS AN APPEAL FILED BY THE ASSESSEE. IT IS DI RECTED AGAINST THE ORDER PASSED BY LD. CIT(A) DATED 25.02.2010 FOR A.Y . 2006-07. GROUNDS OF APPEAL READ AS UNDER: - 1. THAT THE LD. CIT(A) HAS ERRED BOTH ON FACTS AND IN LAW UPHOLDING THE ACTION OF THE AO IN CHARGING VALUE OF FRINGE BE NEFIT ON TOUR AND TRAVEL EXPENSES OF RS. 7,12,100/- @ 20% INSTEAD OF 5% CLAIMED BY THE ASSESSEE COMPANY. THE FINDING THAT THE ASSESSEE COMPANY WAS NOT ENGAGED IN THE BUSINESS OF CONSTRUCTION AS ENVISAGED IN CLAUSE (B) OF SEC. 115 WC OF THE ACT, IS WHOLLY MISCONCEIVED AND IS IN DISREGARD OF THE S UBMISSION MADE AND EVIDENCE PRODUCED BY THE ASSESSEE. 2. THAT THE FURTHER FINDING THAT THE DRAWINGS AND DESI GNS FILED ONLY SUGGEST THAT THE MAIN ACTIVITIES OF THE APPELLANT C OMPANY WAS MANUFACTURING OF SPECIALIZED EQUIPMENTS. THE LD. C IT(A) HAS ITA NO. 1391/D/2010 2 FAILED TO APPRECIATE THAT THE MANUFACTURING OF SPEC IALIZED EQUIPMENT AND INSTALLATION THEREOF REQUIRE LOT OF C ONSTRUCTION SO AS TO ENABLE THE ASSESSEE TO WORK OUT THE VALUE OF FBT @ 5%. IT IS, THEREFORE, PRAYED THAT THE VALUE OF FBT ON T OUR AND TRAVEL EXPENSES BE DIRECTED TO BE WORKED OUT @ 5%. 2. IMPUGNED ASSESSMENT IS AN ORDER PASSED U/S115WE( 3) OF INCOME TAX ACT, 1961(ACT). WHILE CALCULATING FRING E BENEFIT, IT IS THE CASE OF THE ASSESSEE THAT IT IS ENGAGED IN THE BUSI NESS OF CONSTRUCTION HENCE, FRINGE BENEFIT SHOULD BE CALCULATED @ 5% INS TEAD OF GENERAL RATE OF 20%. THE AO DID NOT ACCEPT SUCH CLAIM OF THE AS SESSEE AND HAS CALCULATED THE FRINGE BENEFIT ON THE TOURS AND TRAV EL EXPENSES OF RS. 7,12,100/- @ 20% INSTEAD OF 5% AND IT IS IN THIS MA NNER, THE VALUE OF FRINGE BENEFITS HAVE BEEN ASSESSED BY THE AO AT RS. 1,52,522/- IN PLACE OF SUCH VALUE CALCULATED BY THE ASSESSEE AT RS. 45, 707/-. THUS, ADDITION OF RS. 1,06,815/- IS MADE BY THE AO TO THE FRINGE B ENEFIT AND ACCORDINGLY A DEMAND OF RS. 47,622/- ON ACCOUNT OF TAX HAS BEEN RAISED. THE AO REJECTED THE CONTENTION OF THE ASSESSEE THAT ITS AC TIVITY INVOLVES A LOT OF CIVIL CONSTRUCTION WORK. THE ASSESSEE IS ENGAGED I N THE BUSINESS OF MANUFACTURING OF SPECIALIZED EQUIPMENT OF SOLID AND WASTE AND A LIQUID WASTE TREATMENT FOR INDUSTRIES AND COMMUNITIES AND THESE EQUIPMENTS ARE KNOWN AS (I) TWIN WIRE BELT FILTER PRESS FOR SLUDGE MANAGEME NT (II) UPWARD FLOW ANAEROBIC SLUDGE BED REACTORS (UAS B) FOR BIOGAS GENERATION FROM WASTE WATER AND OTHER STRONG WASTES . (III) SOLD STATE FERMENTATION REACTORS FOR TREATMEN T OF DIFFICULT WASTES AND GARBAGE. ITA NO. 1391/D/2010 3 OTHER THAN THESE CONVENTIONAL EQUIPMENT FOR POLLUTI ON CONTROL AND ENVIRONMENT ARE ALSO MADE. THE AO IS OF THE OPINIO N THAT THE ACTIVITIES CARRIED ON BY THE ASSESSEE DOES NOT INCLUDE CONSTRU CTION AS CLAIMED BY THE ASSESSEE, HENCE, THE BENEFIT OF 5% VALUE OF FRI NGE BENEFIT CANNOT BE GIVEN TO THE ASSESSEE. 3. BEFORE CIT(A), IT HAS BEEN THE CASE OF THE ASSES SEE THAT AO DID NOT APPRECIATE THE FACTUAL ASPECT OF THE ASSESSEES CASE. THE ACTIVITIES OF THE ASSESSEE OF INSTALLATION OF TWIN WIRE BELT FILTER PRESS AND UPWARD FLOW ANAEROBIC SLUDGE BED REACTORS (USAB), REQUIRED LOT OF CIVIL CONSTRUCTION, WITHOUT WHICH INSTALLATION OF T REATMENT PLANT COULD NOT HAVE BEEN POSSIBLE. THE ASSESSEE ALSO SUBMITTED TH E DRAWINGS TO SUBSTANTIATE ITS ARGUMENT THAT PROCESS OF INSTALLAT ION INCLUDES LOT OF CONSTRUCTION. REFERENCE WAS ALSO MADE TO THE DEFIN ITIONS OF WORD CONSTRUCTION AND CONSTRUCT FROM NEW WEBSTERS D ICTIONARY OF ENGLISH LANGUAGE (DELUXE ENCYCLOPEDIC EDITION) AND DEFINITI ON READ AS BELOW: - CONSTRUCTION : - THE ACT OR ART OF CONSTRUCTING; THE WAY IN WHICH A THING IS CONSTRUCTED; A BUILDING; THE AC T OR MANNER OF CONSTRUCTING THE ARRANGEMENT AND CONNECTION OF W ORDS IN A SENTENCE ACCORDING TO ESTABLISH USAGES; SYNTACTIC AL CONNECTION, EXPLANATION OR INTERPRETATION, AS OF A LAW OR A TEXT, OR OF CONDUCT. CONSTRUCT : - PILE OR PUT TOGETHER, BUILD, MAKE, TO FORM BY PUTTING TOGETHER PARTS; BUILD; FRAME; DEVISE; TO DR AW, AS A FIGURE, SO AS TO FULFILL GIVEN CONDITIONS, THE RESU LT OF INTELLECTUAL PERCEPTION AND CONSIDERATION OF THING S AND IDEAS RECEIVE THROUGH THE SENSES. ITA NO. 1391/D/2010 4 4. THE DEFINITION FROM CONCISE OXFORD THESAURUS THE SE WORDS ARE DEFINED AS FOLLOW: - CONSTRUCTION : - A BRIDGE UNDER CONSTRUCTION BUILDING, ERECTION, ELEVATION, ESTABLISHMENT, ASSEMBLY, MANUF ACTURE, FABRICATION. AN IMPRESSIVE CONSTRUCTION STRUCTURE, BUILDING, EDIFICE, ASSEMBLY, FRAMEWORK. THE CONSTRUCTION OF A SENTENCE COMPOSITION, FORMATION, STRUCTURE. PUT A DIFFERENT CONSTRUCTION ON HER WORDS INTERPRETATION, READING, MEANING, EXPLANATION, INFERENCE, EXPLICATION. CONSTRUCT : - CONSTRUCT A HOUSING ESTATE/CONSTRUCT A BRIDGE BUILD, ERECT, PUT UP, SET UP, RAISE, ELEVATE , ESTABLISH, ASSEMBLE, MANUFACTURE, FABRICATE, MAKE. CONSTRUCT A PLAN/THEORY FORM, FORMULATE, PUT TOGETHER, CREATE, DEVISE, DESIGN, INVENT, COMPOSE, FASHION, MOULD, MODEL, SHA PE, FRAME, FORGE, ENGINEER, FABRICATE, MANUFACTURE. 5. REFERRING TO THESE DEFINITIONS IT WAS CONTENDED THAT ASSESSEE SHOULD BE INTERPRETED TO BE CARRYING ON BUSINESS OF CONSTRUCTION HENCE, FRINGE BENEFIT SHOULD BE VALUED @ 5% AND NOT AT 20% AS ASSESSED BY THE AO. LD. CIT(A) HAS REJECTED SUCH CONTENTION OF THE ASSESSEE. HE OBSERVED THAT THE ACTIVITY STATED BY THE ASSESSEE T O BE INVOLVING CIVIL CONSTRUCTION ACTIVITIES ARE ANCILLARY AN INCIDENTAL IN NATURE TOWARDS PERFORMING THE MAIN AND ONLY ACTIVITY OF MANUFACTUR ING ALL WASTE TREATMENT EQUIPMENT TO BE SUPPLIED TO THE INDUSTRIE S AND COMMUNITIES. THEREFORE, ASSESSEE CANNOT BE SAID TO BE ENGAGED IN THE BUSINESS OF CONSTRUCTION BEING AN EMPLOYER AS ENVISAGED U/S 115 WC(2)(B) AND IN THIS MANNER LD. CIT(A) HAS UPHELD THE ACTION OF AO. THE ASSESSEE IS AGGRIEVED, HENCE HAS RAISED AFOREMENTIONED GROUNDS OF APPEAL. ITA NO. 1391/D/2010 5 6. NOTICE OF HEARING WAS SENT TO ASSESSEE. HOWEVER , NONE WAS PRESENT ON BEHALF OF ASSESSEE ON THE FIXED DATE OF HEARING. THOUGH THE DATE OF HEARING WAS DULY NOTED BY THE LD. COUNSEL O F THE ASSESSEE, THEREFORE, WE PROCEED TO DECIDE THE PRESENT APPEAL EX-PARTE QUA THE ASSESSEE, AFTER HEARING LD. DR. 7. REFERRING TO THE ASSESSMENT ORDER AND THE ORDER OF CIT(A), IT WAS SUBMITTED BY LD. DR THAT ASSESSEE CANNOT BE SAID TO BE ENGAGED IN THE ACTIVITY OF THE CONSTRUCTION, THEREFORE, ASSESSEE C ANNOT CLAIM THE BENEFIT OF LOWER RATE OF FRINGE BENEFIT. THEREFORE, SHE PL EADED THAT LD. CIT(A) HAS RIGHTLY REJECTED THE CLAIM OF THE ASSESSEE AND HIS ORDER SHOULD BE UPHELD. 8. WE HAVE CAREFULLY CONSIDERED THE SUBMISSION OF L D. DR. WE HAVE ALSO GONE THROUGH THE ORDER OF AO, THE ORDER OF CIT (A) AND THE COPIES OF SUBMISSIONS MADE BY THE ASSESSEE BEFORE AO AS WELL AS BEFORE CIT(A) WHICH ARE ENCLOSED IN THE PAPER BOOK FILED BY THE L D. COUNSEL OF THE ASSESSEE. THE WORD CONSTRUCTION HAS NOT BEEN DEF INED IN THE INCOME TAX ACT. PROVISIONS OF SEC. 115WC(2)(B) READ AS UN DER: - 115WC(2)(B) IN THE CASE OF AN EMPLOYER ENGAGED I N THE BUSINESS OF CONSTRUCTION, THE VALUE OF FRINGE BENEF ITS FOR THE PURPOSES REFERRED TO IN CLAUSE (F) OF SUB-SECTION ( 2) OF SECTION 115WB SHALL BE FIVE PER CENT INSTEAD OF TWENTY PER CENT REFERRED TO IN CLAUSE (C) OF SUB-SECTION (1), 9. AS PER PROVISIONS OF SEC. 115WC(2)(B) IN THE CAS E OF AN EMPLOYER WHO IS ENGAGED IN THE BUSINESS OF CONSTRUCTION, THE VALUE OF FRINGE ITA NO. 1391/D/2010 6 BENEFIT SHALL BE TAKEN @ 5%. THE QUESTION BEFORE U S IS THAT WHETHER OR NOT ASSESSEE ENGAGED IN THE BUSINESS OF CONSTRUCTIO N. THE WORD CONSTRUCTION HAS NOT BEEN DEFINED IN THE ACT. TH EREFORE, ITS ORDINARY MEANING IN COMMON PARLANCE HAS TO BE TAKEN. THE D EFINITIONS AS GIVEN IN AFOREMENTIONED TWO DICTIONARIES HAVE ALREADY BEE N REPRODUCED. IF THOSE DEFINITIONS ARE KEPT IN MIND, THE WORD CONST RUCT CANNOT BE RESTRICTED ONLY TO CIVIL CONSTRUCTION. IT INCLUDE IN ITS AMBIT PILE OR PUT TOGETHER, BUILD, MAKE, TO FORM BY PUTTING TOGETHER PARTS; FRAME; DEVISE; TO DRAW, AS A FIGURE, SO AS TO FULFILL GIVEN CONDITION S, THE RESULT OF INTELLECTUAL PERCEPTION AND CONSIDERATION OF THINGS AND IDEAS RE CEIVE THROUGH THE SENSES. IT ALSO INCLUDE CONSTRUCT A HOUSING ESTATE /CONSTRUCT A BRIDGE BUILD, ERECT, PUT UP, SET UP, RAISE, ELEVATE, ESTAB LISH, ASSEMBLE, MANUFACTURE, FABRICATE, MAKE, CONSTRUCT A PLAN/THEO RY FORM, FORMULATE, PUT TOGETHER, CREATE, DEVISE, DESIGN, INVENT, COMPO SE ETC. ETC. 10. THE WORD CONSTRUCTION THOUGH MAINLY CONNECTED TO THE BUILDING BUT IT INCLUDES WITHIN ITS AMBIT A BRIDGE UNDER CON STRUCTION BUILDING, ERECTION, ELEVATION, ESTABLISHMENT, ASSEMBLY, MANUF ACTURE, FABRICATION. IT ALSO INCLUDES AN IMPRESSIVE CONSTRUCTION STRUCTU RE, BUILDING, EDIFICE, ASSEMBLY, FRAMEWORK. THEREFORE, ITS AMBIT HAS NOT BEEN RESTRICTED TO ONLY TO CONSTRUCTION OF BUILDING. IT INCLUDES IMPR ESSIVE CONSTRUCTION STRUCTURE, BUILDING, EDIFICE, ASSEMBLY, FRAMEWORK E TC. THE NATURE OF PLANTS MADE BY THE ASSESSEE INCLUDED FIXATION OF CE RTAIN EQUIPMENTS ON LAND FOR MANAGING WASTE AND IT INCLUDE ALSO CERTAIN DEGREE OF CIVIL CONSTRUCTION. A STRUCTURE IS CREATED THROUGH WHICH THE WASTE IS MANAGED ITA NO. 1391/D/2010 7 BY THOSE EQUIPMENTS. IT ALSO REQUIRES LAND TO ESTA BLISH SUCH ERECTIONS AND TO PUT PLANT THEREON. THEREFORE, IT CANNOT BE SAID THAT ASSESSEES ACTIVITY DOES NOT INVOLVE BUSINESS OF CONSTRUCTION. EVEN AT THE COST OF REPETITION, IT MAY BE MENTIONED HERE THAT THE WORD UTILIZED IN THE PROVISION IS ONLY CONSTRUCTION AND NOT CIVIL CONS TRUCTION. THEREFORE, THE APPLICATION OF SEC. 115WC(2)(B) CANNOT BE RESTRICTE D ONLY TO THE BUSINESS RELATING TO CIVIL CONSTRUCTION AND IT WILL COVER THE BUSINESS ACTIVITY OF THE ASSESSEE CARRIED ON IN THE PRESENT CASE. WE, THEREFORE, DO NOT FIND ANY SUBSTANCE IN THE ADDITION WHICH HAS BEEN UPHELD BY CIT(A) THE SAME IS DELETED. 11. IN THE RESULT, THE APPEAL IS FILED BY THE ASSES SEE IS ALLOWED IN THE MANNER AFORESAID. ORDER WAS PRONOUNCED IN THE OPEN COURT ON 31.5.2011 SD/- SD/- (SHAMIM YAHYA) (I.P. BANSAL) ACCOUNTANT MEMBER JUDI CIAL MEMBER DATED: 31.5.11 *KAVITA COPY FORWARDED TO: - 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT TRUE COPY BY ORDER, DEPUTY REGISTRAR