DCIT, CHENNAI V. S.L.Lumax Ltd., Sriperambudur

ITA 1578/CHNY/2016

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 8176 (ITAT-CHENNAI)
• Duration Of Justice: 4 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-10-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 05-10-2016
• Assessment Year: 2010-2011
• Appeal Filed On: 30-05-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: A V SREEKANTH IRS
• Assessee Lawyers: R VIJAYARAGHAVAN
• Keywords: Competent authority

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH : CHENNAI . . . , ! . '#'$ , % !& ' [BEFORE SHRI N.R.S. GANESAN, JUDICIAL MEMBER AND SHRI ABRAHAM P. GEORGE, ACCOUNTANT MEMBER ] ./ I.T.A. NO. 1578/MDS/2016 / ASSESSMENT YEAR : 2010-2011 DEPUTY COMMISSIONER OF INCOME TAX, CORPORATE CIRCLE 6(2) CHENNAI 600 034 VS. M/S. S L LUMAX LTD, G-15, SIPCOT INDUSTRIAL PARK, IRRUNGATTUKKOTAI, SRIPERAMBADUR 602 105. [PAN AAACL 1857B] ( () / APPELLANT) ( *+() /RESPONDENT) / APPELLANT BY : SHRI. A.V. SREEKANTH, IRS, JCIT /RESPONDENT BY : SHRI. R. VIJAYARAGHAVAN, ADVOCATE / DATE OF HEARING : 05-10-2016 ! / DATE OF PRONOUNCEMENT : 21-10-2016 / O R D E R PER ABRAHAM P. GEORGE, ACCOUNTANT MEMBER THIS APPEAL OF THE REVENUE IS DIRECTED AGAINST AN ORDER DATED 25.02.2016 OF THE COMMISSIONER OF INCOME-TAX (APPEALS)-15, CHENNAI. ITS GRIEVANCE IS THAT LD. COMMISSIONER OF INCOME TAX (APPEALS) DELETED AN ADDITION OF ?2,20,63,819/- MAD E BY THE LD. ASSESSING OFFICER U/S.41(1) R.W.S 28(IV) OF THE AC T. ITA NO.1578/MDS/2016 :- 2 -: 2. REVENUE HAS FILED THIS APPEAL WITH A DELAY OF TEN D AYS. CONDONATION PETITION HAS BEEN FILED. REASONS SHOWN FOR THE DELAY ARE JUSTIFIED. DELAY IS CONDONED. APPEAL IS ADMITTED. 3. FACTS OF THE CASE ARE THAT ASSESSEE HAD AVAILED DEF ERRED SCHEME FOR SALES TAX LIABILITY CALLED INTEREST FREE SALES TAX DEFERRAL SCHEME INTRODUCED BY TAMIL NADU GOVERNMENT IN MAY, 1990. AS PER THIS SCHEME, ELIGIBLE UNITS WERE ALLOWED TO COLLECT SALES TAX AND RETAIN IT FOR A PRESCRIBED PERIOD. ASSESSEE HAD OPTED FOR THIS SCHEME FOR A NINE YEAR PERIOD. IN OTHER WORDS, AS PER THIS SCHE ME ASSESSEE WAS TO REMIT THE SALES TAX COLLECTED BY IT DURING THE PERI OD OF NINE YEARS, AFTER SUCH PERIOD EITHER IN LUMPSUM OR IN INSTALLMENTS. H OWEVER, GOVERNMENT THROUGH A G.O.NO.48 HAD ALLOWED AN OPTI ON TO PERSONS TAKING THE BENEFIT OF DEFERRAL SCHEME, TO PAY THE D EFERRED TAX IN ONE LUMPSUM AT THE DISCOUNTED RATE OF 8%. IN OTHER WOR DS IT ALLOWED PREMATURE PAYMENTS OF THE DUE AMOUNTS AT A SUM DIS COUNTED AT THE RATE OF 8%. ASSESSEE AVAILED THIS SCHEME AND AGAIN ST THE DEFERRED TAX OF ?5,79,43,346/- FOR THE PERIOD 1.4.2006 TO 31.08. 2007, IT MADE ACTUAL PAYMENT OF ?3,58,79,527/-, TAKING ADVANTAGE OF THE 8% DISCOUNTING. IN OTHER WORDS, ASSESSEE RECEIVED A RE BATE OF ?2,20,63,819/-. LD. ASSESSING OFFICER WAS OF THE OP INION THAT ASSESSEE ITA NO.1578/MDS/2016 :- 3 -: THE BENEFIT RECEIVED BY ASSESSEE FELL WITHIN SEC. 41(1) READ ALONGWITH SECTION 28(IV) OF THE ACT. HE MADE AN ADDITION OF ?2,20,63,819/-. 4. ASSESSEES APPEAL BEFORE LD. COMMISSIONER OF INCOM E TAX (APPEALS) WAS SUCCESSFUL. THE LD. COMMISSIONER OF INCOME TAX (APPEALS) FOLLOWING THE JUDGMENTS OF HONBLE KARNA TAKA HIGH COURT IN THE CASE OF CIT VS. M/S. MCDOWELL & CO LTD 369 ITR 684 AND THAT OF HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. SULZAR INDIA LTD 369 ITR 717 HELD THAT SEC. 41(1) OF THE ACT WAS NOT ATTRACTED TO SUCH BENEFIT ON ACCOUNT OF PREPAYMENT AT DISCOUNTED RAT E. 5. NOW BEFORE US, THE LD. DEPARTMENTAL REPRESENTATIVE STRONGLY ASSAILING THE ORDER OF THE LD. COMMISSIONE R OF INCOME TAX (APPEALS) SUBMITTED THAT SIMILAR ISSUE WAS DECIDED IN FAVOUR OF THE REVENUE BY THE APEX COURT IN THE CASE OF CIT VS. THIRUMALAISWAMY NAIDU & SONS 230 ITR 534 AND POLYFLEX (INDIA) PVT. LTD VS. CIT 257 ITR 343 . 6. PER CONTRA, THE LD. AUTHORISED REPRESENTATIVE STRO NGLY SUPPORTED THE ORDERS OF THE AUTHORITIES BELOW. 7. WE HAVE CONSIDERED THE RIVAL CONTENTIONS AND PERUSE D THE ORDERS OF THE AUTHORITIES BELOW. THE REVENUE IS REL YING ON TWO CASES ITA NO.1578/MDS/2016 :- 4 -: DECIDED BY THE APEX COURT VIZ THIRUMALAISWAMY NAIDU & SONS(SUPRA) AND POLYFLEX (INDIA) PVT. LTD (SUPRA). IN THE CASE OF THIRUMALAISWAMY NAIDU & SONS(SUPRA) THE QUESTION WAS WHETHER SALES TAX REFUND COULD BE CONSIDERED AS TRADING RECEIPTS WHEN ENTIRE AMOU NT OF SALES TURNOVER INCLUDING AMOUNT OF TAX COLLECTED WAS INC LUDED IN ASSESSEES INCOME . AS FOR THE CASE OF POLYFLEX (INDIA) PVT. LTD (SUPRA ) THE QUESTION WAS WHETHER REFUND OF EXCISE DUTY COULD BE CONSIDERED AS PROFIT CHARGEABLE U/SEC. 41(1) OF THE ACT. BOTH TH E SAID CASES HAD NOTHING TO DO WITH PREMATURE PAYMENT EFFECTED AT DI SCOUNTED UNDER A SALES TAX DEFERRAL SCHEME. AS AGAINST THIS, THE OB SERVATION OF KARNATAKA HIGH COURT IN THE CASE OF M/S. MCDOWELL & CO LTD (SUPRA) RELIED ON BY THE LD. COMMISSIONER OF INCOME TAX (AP PEALS) FOR GIVING RELIEF TO THE ASSESSEE READ AS UNDER:- 12. IN THE INSTANT CASE, AS PER THE SCHEME HE WAS ALLOWED TO RETAIN THE SALES TAX AS DETERMINED BY TH E COMPETENT AUTHORITY AND PAY THE SAME 15 YEARS THEREAFTER. THE TAX COLLECTED WAS DEEMED TO HAVE BEEN PAID AND, THEREFORE, THE TAX SO COLLECTED CANN OT BE CONSTRUED AS INCOME IN THE HANDS OF THE ASSESSEE . THE TAX SO RETAINED BY THE ASSESSEE IS IN THE NATUR E OF A LOAN GIVEN BY THE GOVERNMENT AS AN INCENTIVE FOR SETTING UP THE INDUSTRIAL UNIT IN A RURAL AREA. THE SAID LOAN HAD TO BE REPAID AFTER 15 YEARS. AGAIN, IT IS AN INCENTIVE. HOWEVER, BY A SUBSEQUENT SCHEME, A PROVISION WAS MADE FOR PREMATURE PAYMENT. WHEN THE ASSESSEE HAD THE BENEFIT OF MAKING THE PAYMENT AFTE R 15 YEARS, IF HE IS MAKING A PREMATURE PAYMENT, THE SAID AMOUNT EQUAL TO THE NET PRESENT VALUE OF THE DEFERRED TAX WAS DETERMINED AT RS. 4,25,79,684 AND ON SUCH PAYMENT THE ENTIRE LIABILITY TO PAY TAX/LOA N ITA NO.1578/MDS/2016 :- 5 -: STOOD DISCHARGED. AGAIN, IT IS NOT A BENEFIT CONFER RED ON AN ASSESSEE. THEREFORE, SECTION 41(1) OF THE ACT IS NOT ATTRACTED TO THE FACTS OF THIS CASE. HENCE, THE TRIBUNAL WAS JUSTIFIED IN HOLDING THAT THERE IS NO LIABILITY TO PAY TAX. UNDER THESE CIRCUMSTANCES, WE DO NOT SEE ANY ERROR COMMITTED BY THE TRIBUNAL IN PASSING THE IMPUGNED ORDER. THE SUBSTANTIAL QUESTIO N OF LAW IS ANSWERED IN FAVOUR OF THE ASSESSEE AND AGAINST THE REVENUE. IN VIEW OF THE ABOVE, WE ARE OF THE OPINION THAT LD . COMMISSIONER OF INCOME TAX (APPEALS) WAS JUSTIFIED IN GIVING RELIEF SOUGHT BY THE ASSESSEE. WE DO NOT FIND ANY REASON TO INTERFERE. 8. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISMISS ED. ORDER PRONOUNCED ON FRIDAY, THE 21ST DAY OF OCTOBE R, 2016, AT CHENNAI. SD/- SD/- ( . . . ' ) (N.R.S. GANESAN) / JUDICIAL MEMBER ( ! . '#'$ ) (ABRAHAM P. GEORGE) % / ACCOUNTANT MEMBER #$ / CHENNAI %& / DATED: 21 ST OCTOBER, 2016 KV &' ()*) / COPY TO: 1 . / APPELLANT 3. +,' / CIT(A) 5. )-. / / DR 2. / RESPONDENT 4. + / CIT 6. .01 / GF