DCIT 14(2)(2), MUMBAI V. P Z CUSSONS INDIA P. LTD, MUMBAI

ITA 1430/MUM/2016

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 9702 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 4 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-07-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: Not Allotted
• Assessment Year: 2011-2012
• Appeal Filed On: 15-03-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: V JUSTIN
• Assessee Lawyers: V J GINDE
• Keywords: Depreciation; Unabsorbed depreciation
• Section: 143(3); 194C

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH A, MUMBAI BEFORE SHRI G.S.PANNU, ACCOUNTANT MEMBER AND SHRI RAVISH SOOD, JUDICIAL MEMBER ITA NO.1428/MUM/2016(A. Y 2006-07) ITA NO.1429/MUM/2016(A. Y 2007-08) ITA NO.1430/MUM/2016(A. Y 2011-12) THE DCIT-14 (2)(2), ROOM NO.404,4 TH FLOOR, AAYKAR BHAVAN,M.K.ROAD, MUMBAI 400 020 ...... APPEL LANT VS. P.Z.CUSSONS INDIA PVT. LTD., 321, SAI COMMERCIAL BUILDING, BKS DEVSHI MARG, GOVANDI, MUMBAI 400088 PAN: AAACC4461A . .... RESPONDENT APPELLANT BY : SHRI V.JUSTIN RESPONDENT BY : SHRI V.J.GINDE DATE OF HEARING : 04/07/2017 DATE OF PRONOUNCEMENT : 31/07/2017 ORDER PER G.S.PANNU,A.M: THE CAPTIONED THREE APPEALS RELATE TO THE SAME ASS ESSEE AND INVOLVE CERTAIN COMMON ISSUES, THEREFORE, THEY HAVE BEEN CL UBBED, HEARD TOGETHER AND A CONSOLIDATED ORDER IS BEING PASSED FOR THE SA KE OF CONVENIENCE AND BREVITY. 2. FIRST, WE MAY TAKE UP THE APPEALS IN ITA NOS.142 8 & 1429/MUM/2016, PERTAINING TO THE ASSESSMENT YEARS 2006-07 AND 200 7-08, WHICH ARE 2 ITA NO.1428/MUM/2016(A. Y 2006-07) ITA NO.1429/MUM/2016(A. Y 2007-08) ITA NO.1430/MUM/2016(A. Y 2011-12) DIRECTED AGAINST A COMMON ORDER DATED 07/12/2015 PASSED BY THE CIT(A) - 22, MUMBAI, WHICH IN TURN AROSE FROM TWO SEPARATE ORDERS DATED 28/03/2012 PASSED BY THE ASSESSING OFFICER UNDER SECTION 271(1)(C) OF THE ACT FOR ASSESSMENT YEAR 2006-07 AND 2007-08 RESPEC TIVELY. 3. IN THESE APPEALS, THE ISSUE RELATES TO THE PENAL TY IMPOSED BY THE ASSESSING OFFICER UNDER SECTION 271(1)(C) OF THE AC T AMOUNTING TO RS.68,69,241/- AND RS.1,02,28,240/- FOR ASSESSMENT YEARS 2006-07 AND 2007- 08 RESPECTIVELY. NOTABLY, IN THE ASSESSMENTS FIN ALIZED UNDER SECTION 143(3) OF THE ACT THE ASSESSING OFFICER MADE DISALLOWANCES BY INVOKING SECTION 40(A)(IA) OF THE ACT IN RESPECT OF PURCHASE OF GOOD S OF RS.2,04,07,729/- AND RS.3,03,86,928/- FOR ASSESSMENT YEARS 2006-07 AND 2 007-08 RESPECTIVELY BY HOLDING THAT AGREEMENTS FOR PURCHASES WERE IN THE NATURE OF WORK CONTRACTS, WHICH WAS LIABLE FOR DEDUCTION OF TAX AT SOURCE UNDER SECTION 194C OF THE ACT. THE CLAIM OF THE ASSESSEE WAS THAT SUC H AGREEMENTS WERE PURCHASE AND SALE CONTRACTS SIMPLICITER, WHICH DID NOT REQUIRE ANY DEDUCTION OF TAX AT SOURCE UNDER SECTION 194C OF THE ACT. THE ASSESSING OFFICER DISAGREED WITH THE ASSESSEE AND IN THE ABSENCE OF T HE REQUISITE DEDUCTION OF TAX AT SOURCE UNDER SECTION 194C OF THE ACT, THE AM OUNTS WERE DISALLOWED IN TERMS OF SECTION 40(A)(IA) OF THE ACT. SUBSEQUENTL Y, VIDE ORDERS DATED 28/03/2012, THE ASSESSING OFFICER LEVIED PENALTY U NDER SECTION 271(1)(C) OF THE ACT FOR THE ASSESSMENT YEARS OF 2006-07 AND 2 007-08 OF RS.68,69,241/- AND RS.2,02,28,240/- RESPECTIVELY. THE CIT(A) HAS DELETED THE LEVY OF PENALTY IN BOTH THE YEARS BY NOTICING THAT THE TRIBUNAL VID E ITS ORDER IN ITA NOS. 8267/MUM/2010 & 8265/MUM/2010 DATED 30/09/2015 UPHE LD ASSESSEES CONTENTION THAT THE AGREEMENT FOR PURCHASES WERE NO T WORK CONTRACTS SO AS TO BE LIABLE FOR DEDUCTION OF TAX UNDER SECTION 194 C OF THE ACT, AND THE 3 ITA NO.1428/MUM/2016(A. Y 2006-07) ITA NO.1429/MUM/2016(A. Y 2007-08) ITA NO.1430/MUM/2016(A. Y 2011-12) ADDITIONS MADE BY THE ASSESSING OFFICER BY INVOKING SECTION 40(A)(IA) OF THE ACT WERE DELETED. IN VIEW OF THE AFORESAID DECISIO N OF THE TRIBUNAL, THE CIT(A) NOTED THAT THE VERY FOUNDATION FOR LEVY OF P ENALTY DOES NOT REMAIN AND, THEREFORE, THE PENALTIES LEVIED UNDER SECTION 271(1)(C) OF THE ACT WERE CANCELLED. AGAINST SUCH A DECISION OF THE CIT(A), REVENUE IS IN APPEAL BEFORE US. 4. AT THE TIME OF HEARING, IT WAS A COMMON POINT BE TWEEN THE PARTIES THAT THE ORDER OF THE TRIBUNAL DATED 30/09/2015 (SU PRA) CONTINUES TO HOLD THE FIELD AS IT HAS NOT BEEN ALTERED BY ANY HIGHER AUTHORITY, THEREFORE, IN OUR CONSIDERED OPINION, THE CIT(A) MADE NO MISTAKE IN D ELETING THE PENALTY MADE BY THE ASSESSING OFFICER UNDER SECTION 271(1)( C) OF THE ACT FOR THE ASSESSMENT YEARS 2006-07 AND 2007-08 RESPECTIVELY. RESULTANTLY, THE APPEALS OF THE REVENUE FOR ASSESSMENT YEARS 2006-07 AND 2007-08 ARE DISMISSED. 5. NOW, WE MAY TAKE UP THE APPEAL OF THE REVENUE IN ITA NO.1430/MUM/2016, WHICH IS DIRECTED AGAINST THE OR DER PASSED BY THE CIT(A)-22, MUMBAI DATED 07/12/2015, WHICH IN TURN A ROSE FROM AN ORDER PASSED BY THE ASSESSING OFFICER UNDER SECTION 143(3 ) OF THE ACT FOR ASSESSMENT YEAR 2011-12. 6. IN THIS APPEAL, THE REVENUE HAS RAISED THE FOLLO WING GROUNDS OF APPEAL: 1. WHETHER ON THE FACTS AND THE CIRCUMSTANCES OF T HE CASE AND IN LAW , THE LD.CIT(A) ERRED IN DELETING THE DISALLOWANCE U/S.4 0(A)(IA) OF THE I.T.ACT,1961 MADE ON ACCOUNT ON NON-DEDUCTION OF TDS ON A WORKS CONTRACT. 2. 'WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE CIT(A)ERRED IN DELETING THE DISALLOWANCE OF UNABSOR BED DEPRECIATION PERTAINING TO 4 ITA NO.1428/MUM/2016(A. Y 2006-07) ITA NO.1429/MUM/2016(A. Y 2007-08) ITA NO.1430/MUM/2016(A. Y 2011-12) IF A.Y.1996-97 TO 2001-02 DISALLOWED IN VIEW OF PRO VISION OF SECTION 32(2) OF THE I.T.ACT, 1961. ' 3. THE APPELLANT CRAVES LEAVE TO ADD, AMEND, VAR Y, OMIT OR SUBSTITUTE ANY OF THE AFORESAID GROUNDS OF APPEAL AT ANY TIME BEFORE OR A T THE TIME OF HEARING OF APPEAL. 7. IN SO FAR AS THE FIRST GROUND IS CONCERNED, THE RELEVANT FACTS ARE THAT ASSESSEE IS ENGAGED IN THE BUSINESS OF PROVIDING T RADING IN SOAPS, TALCUM POWDER, BABY PRODUCTS AND PROVIDING SERVICES TO OTH ER GROUP COMPANIES OF PZ CUSSONS GROUP. THE ASSESSEE COMPANY PURCHASES T HESE PRODUCTS FROM VARIOUS MANUFACTURERS WHO IN TURN MANUFACTURE THE S AME AS PER THE SPECIFICATIONS PROVIDED BY THE ASSESSEE AND SUC H PRODUCTS ARE SOLD BY THE ASSESSEE UNDER ITS OWN BRAND NAME. IN THIS CONTE XT, THE ASSESSING OFFICER NOTED THAT ASSESSEE HAD ENTERED INTO AGREEMENTS WIT H THREE SUCH MANUFACTURERS NAMELY, VVF LTD., SUHAN COSMOTECH (IN DIA) AND JEWEL PHARMA. FROM THE SAID PARTIES ASSESSEE HAD PURCHAS ED GOODS WORTH RS.97,21,778/-, DETAILED AS UNDER:- (1) VVF LTD. RS. 80,45,660/- (2) SUHAN COSMOTECH (INDIA) RS. 6,39,028/ - (3) JEWEL PHARMA RS. 10,37,090/ - TOTAL : RS.97,2 1,718/- 8. THE RELEVANT DISCUSSION IN THE ASSESSMENT ORDER REVEALS THAT FOLLOWING HIS EARLIER STAND, THE ASSESSING OFFICER CONCLUDED THAT THE AGREEMENTS OF PURCHASE WITH THE AFORESAID THREE PARTIES WERE IN T HE NATURE OF WORKS CONTRACT AND NOT AGREEMENTS FOR PURCHASE OF GOODS SIMPLICITER. THEREFORE, HE PROCEEDED TO HOLD THAT IN THE ABSENCE OF ANY DED UCTION OF TAX AT SOURCE, UNDER SECTION 194C OF THE ACT IN THE CONTEXT OF WOR KS CONTRACT, THE EXPENDITURE OF PURCHASES OF RS.97,21,778/- WAS LIAB LE TO BE DISALLOWED IN TERMS OF SECTION 40(A)(IA) OF THE ACT. THIS DISALL OWANCE HAS SINCE BEEN 5 ITA NO.1428/MUM/2016(A. Y 2006-07) ITA NO.1429/MUM/2016(A. Y 2007-08) ITA NO.1430/MUM/2016(A. Y 2011-12) DELETED BY THE CIT(A) BY RELYING ON THE DECISION OF THE TRIBUNAL IN ASSESSEES OWN CASE FOR ASSESSMENT YEARS 2006-07 AND 2007-08 D ATED 30/09/2015 (SUPRA). THE CIT(A) NOTED THAT THE FACTS AND CIRCU MSTANCES IN THIS YEAR WERE SIMILAR TO THOSE CONSIDERED BY THE TRIBUNAL IN ASSE SSMENT YEARS 2006-07 AND 2007-08 AND, THEREFORE, FOLLOWING THE DECISION OF T HE TRIBUNAL DATED 30/09/2015 (SUPRA), HE HAS DELETED THE ADDITION. 9. BEFORE US, THE LD. DEPARTMENTAL REPRESENTATIVE Q UITE FAIRLY DID NOT CONTEST THAT THE ISSUE IS COVERED BY THE DECISION O F THE TRIBUNAL DATED 30/9/2015 (SUPRA), SO HOWEVER, HE PLACED RELIANCE O N THE ORDER OF THE ASSESSING OFFICER. 10. AFTER CONSIDERING THE ARGUMENTS OF THE LD. DEPA RTMENTAL REPRESENTATIVE, WE FIND NO REASONS TO INTERFERE WIT H THE CONCLUSION DRAWN BY THE CIT(A) AS IT IS BASED ON A SUBSISTING PRECED ENT IN THE ASSESSEES OWN CASE VIDE ORDER OF THE TRIBUNAL DATED 30/09/2015(SU PRA). IN FACT, APART FROM THE PRECEDENT IN THE ASSESSEES OWN CASE, WE HAVE A LSO PERUSED THE SEMINAL FEATURES OF THE CONTRACT ENTERED INTO BY THE ASSESS EE WITH THE THREE CONCERNS FOR PURCHASE OF GOODS. SUCH FEATURES HAS BEEN ELUCIDATED IN THE STATEMENT OF FACTS FILED BEFORE THE CIT(A), AND WHI CH CLEARLY BRING OUT THAT THE CONTRACT FOR SUPPLY OF GOODS IS ON PRINCIPAL-TO -PRINCIPAL BASIS AND IS A CONTRACT FOR PURCHASE OF GOODS BY THE ASSESSEE AND SALE OF GOODS BY THE RESPECTIVE MANUFACTURERS. NO DOUBT, THE MANUFACTUR ERS ARE OBLIGED TO MANUFACTURE PRODUCTS AS PER THE SPECIFICATIONS AND STANDARDS PROVIDED BY THE ASSESSEE BUT IT IS A CASE WHERE THE CONTRACTUAL OBLIGATIONS ARE ENTERED INTO ON A PRINCIPAL-TO-PRINCIPAL BASIS. THE MANUF ACTURERS BUY RAW MATERIAL AND PACKING MATERIAL AT THEIR OWN COST AND AS PER T HEIR REQUIREMENTS AND IT 6 ITA NO.1428/MUM/2016(A. Y 2006-07) ITA NO.1429/MUM/2016(A. Y 2007-08) ITA NO.1430/MUM/2016(A. Y 2011-12) IS THE OBLIGATION OF THE MANUFACTURERS TO DELIVER T HE PRODUCTS AS PER SPECIFICATIONS PROVIDED BY THE ASSESSEE. CONSIDERI NG THE FACTUAL MATRIX, WE FIND NO REASON TO DEPART FROM THE EARLIER FINDING OF THE TRIBUNAL WITH REGARD TO SIMILAR CONTRACTS WHICH HAVE BEEN HELD NOT TO BE IN THE NATURE OF WORK CONTRACTS. THEREFORE, IN THIS VIEW OF THE MATTER, WE HEREBY AFFIRM THE FINDINGS OF THE CIT(A) ON THIS ISSUE AND ACCORDING LY, REVENUE FAILS ON THIS ASPECT. 11. IN SO FAR AS GROUNDS OF APPEAL NO.2 IS CONCERNE D, THE RELEVANT FACTS CAN BE UNDERSTOOD AS FOLLOWS. IN THE RETURN OF INC OME, ASSESSEE COMPANY CLAIMED SET-OFF OF THE UNABSORBED DEPRECIATION PERT AINING TO ASSESSMENT YEARS 1996-97 TO 1999-2000 OF RS.51,57,371/-. THE ASSESSING OFFICER DISALLOWED THE CLAIM BECAUSE, ACCORDING TO HIM, S ECTION 32(2) OF THE ACT SO PREVALENT DURING THE ASSESSMENT YEARS 1997-98 TO 20 01-02, PRESCRIBED THAT UNABSORBED DEPRECIATION COULD BE CARRIED FORWARD ON LY UPTO EIGHT YEARS AND, THEREFORE, THE UNABSORBED DEPRECIATION PERTAINING T O ASSESSMENT YEARS 1996-97 TO 1999-2000 WAS NOT AVAILABLE FOR SET OFF IN THE IN THE INSTANT ASSESSMENT YEAR, WHICH WAS BEYOND A PERIOD OF EIGHT YEARS. THE CIT(A) HAS SINCE DISAGREED WITH THE ASSESSING OFFICER. THE CI T(A) NOTED THE PLEA OF THE ASSESSEE THAT SECTION 32(2) OF THE ACT REFERRED BY THE ASSESSING OFFICER WAS SUBSTITUTED BY FINANCE ACT, 2001 EFFECTIVE FROM ASS ESSMENT YEAR 2002-03. IN TERMS OF SUCH AMENDMENT, THE RESTRICTION ON CARRY F ORWARD OF UNABSORBED DEPRECIATION FOR 8 YEARS WAS DONE AWAY WITH AND THE NEW SECTION 32(2) OF THE ACT ONLY PRESCRIBED THAT DEPRECIATION REMAINING UNABSORBED IN AN ASSESSMENT YEAR SHALL BE CARRIED FORWARD TO THE NEX T ASSESSMENT YEAR AND SHALL FORM PART OF THE CURRENT DEPRECIATION. ON TH E STRENGTH OF THIS AMENDMENT, ASSESSEE CANVASSED THAT UNABSORBED DEPR ECIATION REMAINING 7 ITA NO.1428/MUM/2016(A. Y 2006-07) ITA NO.1429/MUM/2016(A. Y 2007-08) ITA NO.1430/MUM/2016(A. Y 2011-12) AT THE END OF ASSESSMENT YEAR 2001-02 WOULD FORM PA RT OF THE DEPRECIATION FOR ASSESSMENT YEAR 2002-03 AND, THEREFORE, IT COUL D BE CARRIED FORWARD AND SET-OFF WITHOUT ANY TIME LIMIT AS PER THE AMENDED P ROVISIONS OF SECTION 32(2) OF THE ACT. BEFORE THE CIT(A), ASSESSEE ALSO POINT ED OUT THAT THE DECISION OF THE SPECIAL BENCH OF THE TRIBUNAL IN THE CASE OF DC IT VS. TIMES GUARANTY LTD.(2010) 40 SOT 14 WAS NO LONGER A GOOD LAW, INA SMUCH AS, THE SAME WAS CONTRARY TO THE JUDGMENT OF THE GUJARAT HIGH COURT IN THE CASE OF GENERAL MOTORS INDIA PVT. LTD. VS. DCIT, 354 ITR 244(GUJ). THE CIT(A) NOTICED THAT THE JUDGMENT OF THE HONBLE GUJARAT HIGH COURT IN THE C ASE OF GENERAL MOTORS INDIA PVT. LTD. (SUPRA) WAS CLEARLY SUPPORTING THE STAND OF THE ASSESSEE AND, THEREFORE, HE ALLOWED THE CLAIM OF THE ASSESSEE FOR SET-OFF OF THE BROUGHT FORWARD UNABSORBED DEPRECIATION PERTAINING TO ASSES SMENT YEARS 1996-97 TO 1999-2000 TO THE EXTENT OF THE INCOME AVAILABLE IN THE INSTANT ASSESSMENT YEAR. AGAINST SUCH A DECISION OF THE CIT(A) REVENU E IS IN APPEAL BEFORE US. 12. APART FROM REITERATING THE GROUND OF APPEAL RAI SED, THE LD. DEPARTMENTAL REPRESENTATIVE HAS NOT POINTED OUT ANY DECISION CONTRARY TO THAT OF HONBLE GUJARAT HIGH COURT IN THE CASE OF GENERAL MOTORS INDIA PVT. LTD. (SUPRA), WHICH HAS BEEN FOLLOWED BY THE CIT(A) . 13. ON THE CONTRARY, THE LD. REPRESENTATIVE FOR THE ASSESSEE POINTED OUT THAT SUBSEQUENT TO THE ORDER OF THE CIT(A) THE HON BLE RAJASTHAN HIGH COURT IN THE CASE OF PCIT VS. M/S. AUTOLITE (INDIA) LTD. IN ITA NO.206/2016 DATED 08/11/2016 HAS ALSO FOLLOWED THE DECISION OF THE HO NBLE GUJARAT HIGH COURT GENERAL MOTORS INDIA PVT. LTD. (SUPRA) AND DECIDED THE ISSUE IN FAVOUR OF THE 8 ITA NO.1428/MUM/2016(A. Y 2006-07) ITA NO.1429/MUM/2016(A. Y 2007-08) ITA NO.1430/MUM/2016(A. Y 2011-12) ASSESSEES STAND; IN THIS CONTEXT, HE HAS FURNISHED A COPY OF THE ORDER OF THE HONBLE RAJASTHAN HIGH COURT DATED 8/11/2016 (SUPR A). 14. IN VIEW OF THE AFORESAID, WE FIND NO REASONS TO INTERFERE WITH THE DECISION OF THE CIT(A), WHICH IS IN CONFORMITY WITH THE JUDGMENTS OF HONBLE GUARAT HIGH COURT IN THE CASE OF GENERAL MOTORS IND IA PVT. LTD. (SUPRA) & HONBLE RAJASTHAN HIGH COURT IN THE CASE OF M/S. AU TOLITE (INDIA) LTD. (SUPRA). IN THE RESULT, REVENUE FAILS IN THIS APPEAL ALSO. 15. RESULTANTLY, CAPTIONED APPEALS OF THE REVENUE A RE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 31/07/2017 SD/- SD/- (RAVISH SOOD) (G.S. PANNU) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI, DATED 31/07/2017 VM , SR. PS COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT , 2. THE RESPONDENT. 3. THE CIT(A)- 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE. BY ORDER, //TRUE COPY// (DY./ASSTT. REGISTRAR) ITAT, MUMBAI