Sreelakshmi Cashew Company, Kollam V. DCIT, Kollam

ITA 157/COCH/2013

• Counselvise Citation: [2013] 140 COUNSELVISE.COM (IT) 69037 (ITAT-COCHIN)
• Duration Of Justice: 7 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-11-2013
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: DB
• Next Hearing Date: 27-08-2013
• Assessment Year: 2008-2009
• Appeal Filed On: 22-03-2013
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: S VIJAYAPRABHA
• Assessee Lawyers: T V HARIHARAN
• Keywords: Opportunity of being heard
• Section: 43B; 80IB

Judgement Text

ITA NO. 157/ COCH/ 2013 1 IN THE INCOME TAX APELALTER TIBUNAL COCHIN BENCH , COCHIN BEFORE S/SH RI N.R.S. GANESAN, JM & B. R. BASKARAN, AM ITA NO. 157/ COCH/ 2013 (ASST YEAR 2008 - 09 ) SREELAKSHMI CASH EW COMPANY KADAPPAKKADA KOLLAY 691 008 VS THE DY COMMR OF INCOME TAX CIRCLE I, KOLLA M 691 001 ( APPELLANT) (RESPONDENT) PAN NO. AAZFS1211Q ASSESSEE BY SHRI T V HARIHARAN REVENUE BY SMT S VIJAYAPRABHA, JR DR DATE OF HEARING 27 TH AUG 2013 DATE OF PRONOUNCEMENT 6 TH NOV 2013 OR D ER PER B.R. BASKARAN, AM: THE APPEAL FILED B Y THE ASSESSEE IS DIRECTED AGAINST THE ORDER DATED 0 1. 0 2.2013 PASSED BY THE LD CIT(A), TRIVANDRUM AND IT RELATES TO THE ASST YEAR 2008 - 09. AT THE TIME OF HEARING, THE ASSES SEE DID NOT PRESS THE GROUND NUMBERED AS 4(B) AND ACCORDINGLY, THE SAID GROUND IS D ISMISSED AS WITHDRAWN. THE REMAINING GROUNDS GIVE RISE TO THE FOLLOWING ISSUES: A) DISALLOWANCE OF DEDUCTION CLAIMED U/S 80IB OF THE ACT; B) ASSESSMENT OF SALES PROCEEDS OF DEPB BENEFIT; AND C) DISALLOWANCE OF CLAIM OF SALES TAX AMOUNT U/S 43B OF THE ACT. 2 THE F ACTS RELATING TO THE CASE ARE STATED IN BRIEF: THE ASSESSEE IS A PARTNERSHIP FIRM ENGAGED IN THE MANUFACTURE AND EXPORT OF CASHEW KERNELS. IT FILED THE RETURN OF INCOME FOR THE YEAR UNDER CONSIDERATION DECLARING THE INCOME OF RS. 1.04 CRORE. HOWEVER, TH E AO COMPLETED THE ASSESSMENT DETERMINING THE INCOME AT RS. 2.28 CRORES BY MAKING VARIOUS ADDITIONS. IN THE APPEAL FILED BY THE ASSESSEE, THE LD CIT(A) CONFIRMED THE ASSESSMENT ORDER. H ENCE, THIS APPEAL CAME TO BE FILED BY THE ASSESSEE BEFORE US. ITA NO. 157/ COCH/ 2013 2 3 WE HAVE HEARD THE RIVAL CONTENTIONS AND CAREFULLY PERUSED THE RECORD. THE FIRST ISSUE RELATES TO THE DISALLOWANCE OF CLAIM OF DEDUCTION CLAIMED BY THE ASSESSEE U/S 80IB OF THE ACT. WE NOTICE THAT THE AO DISALLOWED THE SAID CLAIM ON THE REASON ING THAT THE AS SESSEE DID NOT MAINTAIN SEPARATE BOOKS OF ACCOUNT IN RESPECT OF UNITS ELIGIBLE FOR DEDUCTION U/S 80IB AND FURTHER, THE ASSESSEE HAS COMPUTED THE PROFIT ELIGIBLE FOR THE SAID DEDUCTION ON ESTIMATE D BASIS. THE LD CIT(A) ALSO CONFIRMED THE SAID VIEW TAKEN BY THE AO. HOWEVER BEFORE US , THE LD COUNSEL CONTENDED THAT THE ASSESSEE HAS COMPUTED THE PROFITS FOR THE UNITS ELIGIBLE FOR DEDUCTION U/S 80IB ON THE BASIS OF CONSOLIDATED BOOKS OF ACCOUNT MAINTAINED BY IT. WE NOTICE THAT AN IDENTICAL ISSUE CAME TO BE C ONSIDERED BY THE HONBLE SUPREME COURT IN THE CASE OF CIT VS . BONGAIGAON REFINERY AND PETROCHEMICAL LTD IN CIVIL APPEAL NO. 1679 OF 2004 AND THE HONBLE SUPREME COURT VIDE ITS ORDER DATED 5 TH SEPT 2012 HAS HELD AS UNDER: AT THE OUTSET, IT MAY BE STATED THAT THE IMPUGNED ORDER OF THE HIGH COURT IS CRYPTIC. ORDINARILY, WE WOULD HAVE REMITTED THE CASE TO THE HIGH COURT FOR DE NOVO CONSIDERATION. THE HIGH COURT HAS RELIED UPON ITS EARLIER JUDGMENT, WHICH, IN OUR VIEW, IS NOT APPLICABLE ON ALL FOURS TO THE FA CTS OF THE PRESENT CASE. HOWEVER, TO PUT AN END TO THE LITIGATION, WE ARE OF THE VIEW, THAT THOUGH NEITHER SECTION 80HH NOR SECTION 80I (AS IT THEN STOOD) STATUTORILY OBLIGED BRPL TO MAINTAIN ITS ACCOUNTS UNIT - WISE AND THAT IT WAS OPEN TO BRPL TO MAINTAIN ITS ACCOUNTS IN A CONSOLIDATED FORM IN ORDER TO PUT AN END TO THE LITIGATION BETWEEN THE TAX DEPARTMENT AND THE PSU WE REMIT THE CASE TO THE CASE TO THE AO TO ASCERTAIN WHETHER THE ASSESSEE HAD CORRECTLY CALCULATED ITS NET PROFITS FOR ASSESSMENT YEAR 1992 - 93 IN RESPECT OF ITS PETROCHEMICAL UNIT FOR THE PURPOSES OF CLAIMING DEDUCTION UNDER SECTIONS 80HH AND 80I OF THE I.T. ACT, 1961. IN THE PRESENT CASE, BRPL HAS PREPARED ITS FINANCIAL STATEMENTS ON CONSOLIDATED BASIS FROM WHICH IT HAS WORKED OUT UNIT - WISE N ET PROFITS. IF NOT DONE, IT COULD BE DONE BY THE AUDITORS EVEN TODAY FROM THE CONSOLIDATED BOOKS OF ACCOUNTS. ONCE SUCH WORKING IS CERTIFIED BY THE AUDITORS THE NET PROFIT COMPUTATION (UNIT - WISE) COULD BE PLACED BEFORE THE AO WHO CAN FIND OUT WHETHER SUCH PROFIT(S) IS PROPERLY WORKED OUT AND ON THAT BASIS COMPUTE DEDUCTION UNDER SECTION 80HH/80I. 3.1 THE DECISION RENDERED BY THE HONBLE APEX COURT IN THE ABOVE CITED CASE CLEARLY BRING OUT THE POSITION THAT IT IS NOT NECESSARY TO MAINTAIN SEPARATE BOOKS O F ACCOUNT IN RESPECT OF UNITS ELIGIBLE FOR DEDUCTION U/S 80IB OF THE ACT IN ORDER TO CLAIM DEDUCTION UNDER THAT SECTION. ITA NO. 157/ COCH/ 2013 3 HENCE, THE VIEW TAKEN BY THE TAX AUTHORITIES IS LIABLE TO BE SET ASIDE. AS OBSERVED BY THE HONBLE SUPREME COURT, THE PROFIT RELATABL E TO THE ELIGIBLE UNIT CAN BE COMPUTED FROM THE CONSOLIDATED BOOKS MAINTAINED BY THE ASSESSEE. BEFORE US, T HE LD AR SUBMITTED THAT THE ASSESSEE HAS COMPUTED THE PROFITS ON THE BASIS OF THE BOOKS OF ACCOUNT MAINTAINED BY IT ONLY AND NOT ON ESTIMATED BASIS AS ASSUMED BY THE TAX AUTHORITIES . AS PER THE OBSERVATIONS MADE BY THE HONBLE SUPREME COURT, THE AO CAN EXAMINE THE WORKINGS FURNISHED BY THE ASSESSEE AND FIND OUT WHETHER SUCH PROFIT IS PROPERLY WORKED OUT AND ON THAT BASIS COMPUTE DEDUCTION U/S 80IB OF THE ACT. HOWEVER, IT IS NOT CLEAR AS TO WHETHER THE AO DID EXAMINE THE WORKINGS FURNISHED BY THE ASSESSEE OR NOT. HENCE , IN OUR VIEW, THIS ISSUE REQUIRES FRESH EXAMINATION AT THE END OF THE AO. ACCORDINGLY, WE SET ASIDE THE ORDER OF THE LD CIT(A) ON T HIS ISSUE AND RESTORE THE SAME TO THE FILE OF THE AO WITH THE DIRECTION TO EXAMINE THE ISSUE AFRESH IN THE LIGHT OF THE DECISION OF THE HONBLE SUPREME COURT IN THE ABOVE SAID CASE AND TAKE APPROPRIATE DECISION IN ACCORDANCE WITH LAW. 4 NEXT ISSUE RELAT ES TO THE ASSESSMENT OF AMOUNT RECEIVED UNDER DEPB SCHEME. THIS ISSUE HAS BEEN SETTLED BY THE HONBLE SUPREME COURT IN THE CASE OF TOPMAN EXPORTS V. COMMISSIONER OF INCOME - TAX IN 342 ITR 49. ACCORDINGLY, THIS ISSUE ALSO REQUIRES TO BE EXAMINED AT THE END OF THE AO. ACCORDINGLY, WE SET ASIDE THIS ISSUE AND RESTORE THE SAME TO THE FILE OF THE AO WITH A DIRECTION TO EXAMINE THIS ISSUE AFRESH IN THE LIGHT OF THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF TOPMAN EXPORTS, (REFERRED SUPRA ) AND TAKE A PPROPRIATE DECIS ION IN ACCORDANCE WITH LAW. 5 LAST ISSUE RELATES TO THE ISSUE OF DISALLOWANCE OF OUTSTANDING S ALES TAX AMOUNT U / S 43B OF THE ACT. THE FACTS RELATING TO THE SAME ARE DISCUSSED IN BRIEF. THE ASSESSEE CLAIMED AN ITA NO. 157/ COCH/ 2013 4 AMOUNT OF RS. 41,45,602/ - A S SALES TAX EXPENDITURE IN THE P&L ACCOUNT. THE AUDITORS HAD REPORTED THAT THE ABOVE SAID AMOUNT INCLUDES A SUM OF RS. 34,49,399/ - RELATING TO PRIOR YEAR S . THOUGH THE SAID AMOUNT WAS SHOWN AS OUTSTANDING AS AT THE YEAR END, YET T HE ASSESSEE PAID THE SAME BEFORE THE DUE DATE F OR FILING OF RETURN . A CCORDINGLY THE ASSESSEE DID NOT DISALLOW THE SAME U/S 43B OF THE ACT , WHILE COMPUTING THE INCOME . 5.1 THE AO , HOWEVER, TOOK THE VIEW THAT THE BENEFIT OF CLAIMING O F DEDUCTION OF OUTSTANDING TAX AMOUNT AS PER THE PROVISO TO SEC. 43B OF THE ACT WOULD APPL Y TO ONLY THE TAX AMOUNT OF THE CURRENT YEAR AND IT WOULD NOT APPL Y TO THE OUTSTANDING SALES TAX AMOUNT RELATING TO THE EARLIER YEARS . A CCORDINGLY, HE DISALLOWED THE CLAIM OF RS. 34.49 LACS MADE BY THE ASSE SSEE AND THE SAME WAS ALSO CONFIRMED BY THE LD CIT(A). 5.2 THE LD AR SUBMITTED THAT THE SALE TAX AMOUNT OF RS. 34.49 LACS , THOUGH RELATED TO EARLIER PERIODS, YET IT WAS ACCOUNTED DURING THE YEAR UNDER CONSIDERATION ONLY FOR THE REASON THAT IT GOT CRYSTAL LIZED DURING THE INSTANT YEAR . ACCORDINGLY , THE SAME WAS SHOWN PAYABLE AS AT THE END OF THE YEAR UNDER CONSIDERATION. SINCE IT WAS SHOWN AS OUTSTANDING, THE SAME IS LIABLE TO BE DISALLOWED U/S 43B OF THE ACT. HOWEVER, SINCE THE ASSESSEE HAS PAID THE SAI D AMOUNT BEFORE THE DUE DATE OF FILING OF THE RETURN , THE LD A.R SUBMITTED THAT SUCH A DISALLOWANCE IS NOT REQUIRED TO BE MADE AS PER THE PROVISO TO SEC. 43B OF THE ACT. 5.3 HOWEVER, THE LD DR SUBMITTED THAT THE IMPUGNED AMOUNT OF RS. 34.49 LACS DO ES NOT PERTAIN TO THE YEAR UNDER CONSIDERATION AND THE AUDITORS OF THE ASSESSEE HAVE CLASSIFIED THE SAME AS A PRIOR PERIOD EXPENDITURE . ACCORDINGLY, THE LD D.R SUBMITTED THAT THE ASSESSEE COULD ITA NO. 157/ COCH/ 2013 5 NOT CLAIM THE SAME AS DEDUCTION DURING THE YEAR UNDER CONSIDE RATION, EVEN IF IT WAS PAID BEFORE THE DUE DATE OF FILING OF RETURN OF INCOME. 6 WE HAVE HEARD THE RIVAL CONTENTION AND CAREFULLY PERUSED THE RECORD. WE HAVE ALSO CAREFULLY CONSIDERED THE PROVISIONS OF SECTION 43B OF THE ACT. THE SAID SECTION STARTS WITH A NON - OBSTENTE CLAUSE, WHICH IS EXTRACTED BELOW: N OTWITHSTANDING ANYTHING CONTAINED IN ANY OTHER PROVISIONS OF THIS ACT, A DE DU CTION OTHERWISE ALLOWABLE UNDER THIS ACT A PLAIN READING OF THE ABOVE PROVISIONS WOULD SHOW THAT THE IMPUGNED DEDUCTION SHOUL D OTHERWISE BE ALLOWABLE AS A DEDUCTION UNDER THIS ACT, IF THE PROVISIONS OF SEC. 43B ARE NOT AVAILABLE IN THE STATUTE BOOK . HENCE, IN OUR VIEW, W HAT IS REQUIRED TO BE REQUIRED TO BE SEEN IS WHETHER THE CLAIM OF THE ASSESSEE FOR DEDUCTION OF IMPUGNED SALE S TAX AMOUNT IS OTHERWISE ALLOWABLE UNDER THIS ACT. ACCORDINGLY, WE ARE UNABLE TO AGREE WITH THE VIEW OF TAX AUTHORITIES THAT THE BENEFIT GIVEN UNDER PROVISO TO SEC. 43B WOULD APPLY ONLY TO THE TAX RELATING TO THE INSTANT YEAR. 6.1 ACCORDING TO THE ASSESSEE, THE AMOUNT OF RS. 34.49 LACS GOT CRYSTALLIZED DURING THE YEAR UNDER CONSIDERATION AND ACCORDINGLY IT WAS ACCOUNTED FOR AS AN EXPENDITURE ITEM IN THE INSTANT YEAR . HOWEVER, WE NOTICE THAT THE SAID SUBMISSIONS MADE BY THE ASSESSEE HA VE NOT BEEN EX AMINED BY THE AO. IT IS SETTLED PROPOSITION THAT THE LIABILITY TOWARDS ANY EXPENDITURE CAN BE ACCOUNTED FOR AS EXPENDITURE IN THE YEAR IN WHICH IT GOT CRYSTALLIZED. I F IT IS SO ACCOUNTED, THEN IT WOULD BE TAKE N AS THE EXPENDITURE OF THAT YEAR ONLY. I F THE SAID EXPENDITURE IS AN ITEM LISTED OUT IN SEC. 43B OF THE AC AND IF IT IS PAID BEFORE THE DUE DATE OF FILING OF THE RETURN, IN OUR VIEW, THE SAME NEED NOT BE DISALLOWED U/S 43B OF THE ACT. HOWEVER, AS STATED EARLIER, THE AO DID NOT EXAMINE WHETHER T HE AMOUNT OF RS.34.49 LACS ACTUALLY GOT CRYSTALLIZED DURING THE YEAR ITA NO. 157/ COCH/ 2013 6 UNDER CONSIDERATION AND ACCORDINGLY, WHETHER IT TAKES THE CHARACTER OF EXPENDITURE OF THE YEAR UNDER CONSIDERATION OR NOT . ONLY IF A DECISION IS TAKEN ON THIS QUESTION, IN OUR VIEW, THE QUESTION OF APPLICABILITY OF THE PROVISION OF SEC. 43B C OULD BE EXAMINED. IN VIEW OF THE FOREGOING DISCUSSIONS , IN OUR VIEW, THIS ISSUE ALSO REQUIRES EXAMINATION AT THE END OF THE AO. ACCORDINGLY, WE SET ASIDE THE ORDER OF LD CIT(A) ON THIS ISSUE AND R ESTORE THE SAME TO THE FILE OF THE AO WITH A DIRECTION TO EXAMINE THE ISSUE AFRESH IN THE LIGHT OF THE D ISCUSSIONS MADE ABOVE AND ALSO BY DULY CONSIDERING THE INFORMATION AND EXPLANATION THAT MAY BE GIVEN BY THE ASSESSEE AND TAKE APPROPRIATE DECIS ION IN AC CORDANCE WITH LAW. NEEDLESS TO MENTION, THE ASSESSEE SHOULD BE GIVEN NECESSARY OPPORTUNITY OF BEING HEARD. 7 IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS TREATED AS ALLOWED FOR STATISTICAL PURPOSE. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 6 TH DAY OF NOV 2013. SD/ - S D/ - (N.R.S. GANESAN) ( B.R. BASKARAN ) JUDICIAL MEMBER ACCOUNTANT MEMBER COCHIN: DATED 6 TH NOV. 2013 RAJ* ITA NO. 157/ COCH/ 2013 7 COPY TO: 1. APPELLANT SREELAKSHMI CASHEW CO. KADAPPAKKADA, KOLLAM 691 008 2. RESPONDENT THE DY COMMR OF INCOME TA, CIRCLE I KOLLAM 3. CIT(A) 4. CIT , KOLLAM 5. DR 6. GUARD FILE BY ORDER ASSISTANT REGISTRAR ITAT, COCHIN