ACIT, Corporate Circle 3(1), Chennai V. Taqa Neyveli Power Company Power P Ltd, Chennai

ITA 150/CHNY/2018

• Counselvise Citation: [2018] 121 COUNSELVISE.COM (IT) 5129 (ITAT-CHENNAI)
• Duration Of Justice: 5 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-06-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Assessment Year: 2013-2014
• Appeal Filed On: 11-01-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MRS VIJAYA PRABHA
• Keywords: Business expenditure
• Section: 37

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, CHENNAI , , $ BEFORE SHRI GEORGE MATHAN, JUDICIAL MEMBER AND SHRI S. JAYARAMAN, ACCOUNTANT MEMBER / I .T.A. NO: 150/CHNY/2018 / ASSESSMENT YEAR : 2013-14 THE ASSISTANT COMMISSIONER OF INCOME TAX, CORPORATE CIRCLE 3(1), NEW BLOCK, 4 TH FLOOR, 121, MAHATMA GANDHI ROAD, NUNGAMBAKKAM, CHENNAI 600 034. VS. M/S. TAQA NEYVELI POWER COMPANY PVT. LTD., NO 79, KASTHURI AVENUE, MRC NAGAR, R A PURAM, RAJA ANNAMALAIPURAM, CHENNAI 600 028. [PAN: AACCS 2753B] ( / APPELLANT) ( / RESPONDENT ) REVENUE BY : MRS. VIJAYA PRABHA, JCIT ASSESSEE BY : SHRI. SANDEEP BAGMAR, ADVOCATE & /DATE OF HEARING : 26.06.2018 & /DATE OF PRONOUNCEMENT : 26.06.2018 / O R D E R PER S. JAYARAMAN, ACCOUNTANT MEMBER: THE REVENUE FILED THIS APPEAL AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS)-11, CHENNAI IN ITA NO. 99/CIT( A)-11/2016-17 DATED 25.10.2017 FOR ASSESSMENT YEAR 2013-14. :-2-: ITA NO. 150/CHNY/2018 2. M/S. TAQA NEYVELI POWER COMPANY PVT LTD., THE AS SESSEE IS A 250 MW LIGNITE BASED POWER GENERATING COMPANY AT NEYVELI. WHILE MAKING THE ASSESSMENT FOR ASSESSMENT YEAR 2013-14, THE ASSESSI NG OFFICER NOTICED THAT THE ASSESSEE HAS INCURRED AN INTEREST EXPENDITURE O F RS. 3316,375/- TOWARDS DELAYED PAYMENT OF EXCISE DUTY. HE DISALLOWED IT H OLDING THAT IT IS NOT AN ALLOWABLE EXPENDITURE. AGGRIEVED, THE ASSESSEE FIL ED AN APPEAL BEFORE THE CIT(A). THE CIT(A) ALLOWED THE APPEAL ON THIS ISSU E. 3. AGGRIEVED, THE REVENUE FILED THIS APPEAL WITH TH E FOLLOWING GROUNDS: 1. THE ORDER OF THE LEARNED CIT(A) IS CONTRARY TO L AW AND FACTS AND CIRCUMSTANCES OF THE CASE. 2.1 THE LD. CIT(A) ERRED IN DELETING THE DISALLOWAN CE OF INTEREST ON DELAYED PAYMENT OF EXCISE DUTY EVEN THOUGH THE SAME IS PENAL IN NATURE AND HENCE NOT ALLOWABLE EXPENDITURE U/S 37(1). 2.2 THE LD. CIT(A) OUGHT TO HAVE SEEN THAT THE RELI ED DECISION OF THE HONBLE APEX COURT IN THE CASE OF LACHMANDAS MATHURDAS REPORTED IN 254 ITR 799 IS RELATING TO THE INTEREST ON DELAYED PAYMENT OF SALE TAX AND HENC E NO APPLICABLE TO THE FACTS OF THE CASE IN HAND. 2.3 THE LEARNED CIT(A) OUGHT TO HAVE FOLLOWED THE D ECISION OF THE APEX COURT IN THE CASE OF HONBLE SUPREME COURT IN THE CASE OF M/S. BHARAT COMMERCE INDUSTRIES LIMITED (153 ITR 275) WHEREIN THE APEX COURT HELD T HAT ANY INTEREST PAYABLE FOR DEFAULT COMMITTED BY THE ASSESSEE IN DISCHARGING HIS STATUTORY LIABILITY IS NOT ALLOWABLE EXPENDITURE. 3. FOR THESE AND OTHER GROUNDS THAT MAY BE ADDUCED AT THE TIME OF HEARING, IT IS PRAYED THAT THE ORDER OF THE LEARNED CIT (A) MAY BE SET ASIDE AND THAT OF THE ASSESSING OFFICER BE RESTORED. 4. THE LD. DR PRESENTED THE CASE ON THE LINES OF TH E GROUNDS OF APPEAL, SUPRA. PER CONTRA, THE LD. AR INVITING OUR ATTENTI ON TO THE ORDER OF THE LD. :-3-: ITA NO. 150/CHNY/2018 CIT(A) SUBMITTED THAT THE LD. CIT(A) AFTER PERUSING THE CENTRAL EXCISE TAX ACT, 1994, HE HAS NOTICED THAT THERE ARE TWO SECTIO NS VIS., SECTION 11AA WHICH CHARGES INTEREST ON DELAYED PAYMENT OF DUTY AND SEC TION 11AC WHICH CHARGES PENALTY FOR SHORT LEVY OR NON-LEVY OF DUTY. AS PER THESE PROVISIONS, IT IS CLEAR THAT THE DELAYED PAYMENT OF EXCISE DUTY ATTRACTS IN TEREST WHEREAS THE FAILURE TO PAY EXCISE DUTY ATTRACTS PENALTY. THEREFORE, THE LD. CIT(A) HELD THAT LEVY OF PENALTY WOULD FALL UNDER EXPLANATION TO SECTION 37 OF THE ACT BUT NOT INTEREST. INTEREST ON THE DELAYED PAYMENT OF EXCISE DUTY IS C OMPENSATORY IN NATURE AND WOULD NOT FALL UNDER EXPLANATION TO SECTION 37 OF T HE ACT. THE SUPREME COURT IN THE CASE OF LACHMANDAS MATHURADAS HELD THAT INTE REST ON ARREARS OF TAX IS COMPENSATORY IN NATURE AND NOT PENAL. IN VIEW OF TH E ABOVE, INTEREST ON DELAYED PAYMENT OF EXCISE DUTY IS HELD TO BE COMPEN SATORY IN NATURE AND THEREFORE AN ALLOWABLE EXPENDITURE. 4.1 FURTHER, THE LD. AR SUBMITTED THAT THE DECISION RELIED ON BY THE REVENUE VIZ., 153 ITR 275 IS NOT RENDERED BY THE AP EX COURT AS IS PLEADED BY THE REVENUE, BUT IT WAS RENDERED BY THE DELHI HIGH COURT AND IT IS IN CONNECTION WITH THE ISSUE OF INTEREST LEVIED FOR FA ILURE TO PAY ADVANCE TAX UNDER THE INCOME TAX ACT. THE ISSUE, IN THE ASSESS EES CASE IS IN CONNECTION WITH INDIRECT TAX. THE LD. AR FURTHER SUBMITTED TH AT THE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS INDIA PISTONS LTD., 250 ITR 279 (MAD) HELD THAT THE INTEREST PAID FOR DELAYED PAYMENTS OF CUSTOM DU TY IS ALLOWABLE AND HENCE PLEADED THAT THE ORDER PASSED BY THE LD. CIT(A) MAY BE UPHELD. :-4-: ITA NO. 150/CHNY/2018 5. WE CONSIDERED THE RIVAL SUBMISSIONS AND FIND MER IT IN THE SUBMISSIONS OF THE LD. AR. IT IS CLEAR FROM THE ORDERS OF THE LOWER AUTHORITIES THAT THE IMPUGNED INTEREST WAS NOT IN CONNECTION WITH INFRAC TION OF LAW, IF ANY. THE RATIO RELIED ON BY THE REVENUE IS NOT APPLICABLE TO THE FACTS OF THIS CASE. THE EXCISE DUTY IS AN INDIRECT TAX, PAYABLE BY THE ASSE SSEE IN THE COURSE OF ITS BUSINESS AND IS ADMISSIBLE AS BUSINESS EXPENDITURE. THE INTEREST ON THE LATE PAYMENT OF EXCISE DUTY, INCURRED BY THE ASSESSEE HA S TO BE REGARDED AS COMPENSATORY IN NATURE AND HENCE, ALLOWABLE AS BUSI NESS EXPENDITURE. FOLLOWING, THE RATIO OF THE JURISDICTIONAL HIGH COU RT, THE REVENUES APPEAL IS DISMISSED. 6. IN THE RESULT, THE REVENUES APPEAL IS DISMISSE D. ORDER PRONOUNCED IN THE OPEN COURT ON 26 TH JUNE, 2018 AT CHENNAI. SD/- ( ) (GEORGE MATHAN) ! ' /JUDICIAL MEMBER SD/- ( ) (S. JAYARAMAN) ' /ACCOUNTANT MEMBER /CHENNAI, + /DATED: 26 TH JUNE, 2018 JPV &./010 /COPY TO: 1. 2 / APPELLANT 2. .42 /RESPONDENT 3. 5 ) ( /CIT(A) 4. 5 /CIT 5. 0. /DR 6. /GF