Deputy Commissioner of Income TAx Circle-4(1)(2), Bangalore V. M/s Mann And Hummel Filter Pvt Ltd , Bangalore

ITA 1598/BANG/2017

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 7248 (ITAT-BANGALORE)
• Duration Of Justice: 3 month(s) 30 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-11-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2012-2013
• Appeal Filed On: 24-07-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: VIKAS SURYAWANSHI
• Assessee Lawyers: T SURYANARAYANA
• Keywords: Opportunity of being heard
• Section: 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL SMC-A BENCH : BANGALORE BEFORE SHRI SUNIL KUMAR YADAV, JUDICIAL MEMBER ITA NO.1598/BANG/2017 ASSESSMENT YEAR : 2012-13 DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE-4(1)(2), ROOM NO.230, 2 ND FLOOR, BMTC BUILDING, 80 FEET ROAD, 6 TH BLOCK, KORAMANGALA, BENGALURU-560095. VS. M/S. MANN AND HUMMEL FILTER PVT. LTD., NO.231/1, 11 TH MAIN, PEENYA INDUSTRIAL AREA, 1 ST STAGE, 3 RD PHASE, BENGALURU-560058. PAN : AAECM4056D APPELLANT RESPONDENT REVENUE BY : SHRI. VIKAS SURYAWANSHI, ADDL. CIT ASSESSEE BY : SHRI. T. SURYANARAYANA, ADVOCATE DATE OF HEARING : 16.11.2017 DATE OF PRONOUNCEMENT : 23.11.2017 O R D E R PER SUNIL KUMAR YADAV, JUDICIAL MEMBER THIS APPEAL IS PREFERRED BY THE REVENUE AGAINST TH E ORDER OF CIT(A), INTERALIA , ON THE FOLLOWING GROUNDS: 1. THE ORDER OF THE LD. CIT (A), IN SO FAR AS IT I S PREJUDICIAL TO THE INTEREST OF THE REVENUE, IS OPPOSED TO LAW AND THE FACT AND CIRCUMSTANCES OF THE CASE. 2. ON FACTS OF THE CASE, WHETHER THE DECISION OF TH E LD CIT (A) IS RIGHT IN ALLOWING THE APPEAL OF ASSESSEE AS THE SAME CONTRAV ENES THE PROVISIONS OF SECTION 14A AND ALSO THE LD CIT (A) HAS NOT FOLLOWE D THE INSTRUCTIONS LAID DOWN IN THE BOARD'S CIRCULAR NO 5/2014 DATED 11.02.2014 & 1 4 OF 2001. 3. ON FACTS OF THE CASE, WHETHER THE LD CIT (A) IS RIGHT IN ALLOWING THE APPEAL ON THE ISSUE OF PROVISION OF INVENTORY DESPITE THE FACT THAT NO CONTINGENT PROVISION IS ALLOWABLE AS PER THE I T ACT, 1961. 4. ON FACTS OF THE CASE, WHETHER THE LD CIT (A) IS RIGHT IN ALLOWING THE APPEAL ON THE ISSUE OF SERVICE TAX RECEIVABLE DESPITE THE FACT THAT NO PROVISION IS ITA NO. 1598/BANG/2017 PAGE 2 OF 4 ALLOWABLE AS PER THE I T ACT, 1961. FURTHER, THE AS SESSEE HAS NOT SATISFIED THE CONDITIONS AS ENUMERATED IN THE HON'BLE APEX COURT DECISION IN THE CASE OF M/S ROTORK INDIA PVT. LTD., WHICH CASE WAS RELIED ON BY THE ASSESSEE ITSELF. 5. FOR THESE AND OTHER GROUNDS THAT MAY BE URGED AT THE TIME OF HEARING, IT IS PRAYED THAT THE ORDER OF THE CIT (A) IN SO FAR AS I T RELATES TO THE ABOVE GROUNDS MAY BE REVERSED AND THAT OF THE ASSESSING OFFICER M AY BE RESTORED. 6. THE APPELLANT CRAVES LEAVE TO ADD, ALTER, AMEND AND / OR DELETE ANY OF THE GROUNDS THAT MAY BE URGED. 2. APROPOS GROUND NO.1 IS GENERAL IN NATURE AND NEE DS NO INDEPENDENT ADJUDICATION. 3. APROPOS GROUND NO.2 RELATE TO THE DISALLOWANCE U NDER SECTION 14A OF THE ACT DESPITE THE FACT THAT ASSESSEE HAS NOT EARNED ANY EXEMPTED INCOME. THIS ISSUE HAS ALREADY BEEN EXAMINED BY THE TRIBUNAL IN THE CASE OF M/S. TANGLIN RETAIL REALITY DEVELOPMENTS PRIVATE LIMITED VS. DCIT IN ITA NO.265/BANG/2016 . THE RELEVANT PORTION OF THE ORDER OF THE TRIBUNAL IS EXTRACTED HEREUNDER FOR THE SAKE OF REF ERENCE: 4. HAVING CAREFULLY EXAMINED THE ORDER OF THE LOWE R AUTHORITIES IN THE LIGHT OF THE RIVAL SUBMISSIONS, WE FIND THAT TH E ASSESSEE HAS NOT RECEIVED ANY EXEMPTED INCOME, THEREFORE NO DISALLOWANCE UNDE R SECTION 14A IS TO BE MADE. WE HAVE ALSO CAREFULLY EXAMINED THE COMPUTAT ION OF INCOME AND THE BALANCE SHEETS AND FIND THAT THE ASSESSEE HAS NOT E ARNED ANY EXEMPTED INCOME. WE HAVE ALSO EXAMINED THE JUDGMENTS REFERR ED TO BY THE ASSESSEE IN WHICH A SIMILAR PROPOSITION HAS BEEN LAID DOWN. TH EREFORE, WE ARE OF THE VIEW THAT WHEN THE ASSESSEE HAS NOT RECEIVED ANY EXEMPTE D INCOME, NO DISALLOWANCE UNDER SECTION 14A CAN BE MADE. WE ACC ORDINGLY SET ASIDE THE ORDER OF THE CIT(A) AND DELETE THE ADDITIONS MADE A FTER MAKING DISALLOWANCE UNDER SECTION 14A OF THE ACT. FOLLOWING THE ABOVE ORDER, WE DELETE THE DISALLOWA NCE AS THERE WAS NO EXEMPTED INCOME. 4. APROPOS GROUND NO. 3 RELATE TO THE PROVISIONS OF INVENTORIES. IN THIS REGARD IT WAS CONTENDED THAT THIS ISSUE IS COVERED BY THE JUDGMEN T OF THE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS. IBM INDIA LTD. [2015] 55 TAXMANN.COM 515 (K AR. HC). COPY OF THE ORDER OF THE HONBLE HIGH COURT IS PLACED ON RECORD. IT WAS ALSO CONTENDED THAT WHILE ADJUDICATING THE ISSUE, THE CIT(A) HAS FOLLOWED THE JUDGMENT OF JURISDICTIONAL HIGH COURT AND ALLOWED THE CLAIM OF THE ASSESSEES. THE LEARNED DR DID NOT DISPUTE THESE FACTS. ITA NO. 1598/BANG/2017 PAGE 3 OF 4 5. HAVING CAREFULLY EXAMINED THE ORDER OF THE LOWER AUTHORITIES IN THE LIGHT O FRIVAL SUBMISSIONS, I FIND THAT IMPUGNED ISSUE IS SQUARELY COVERED BY THE JUDGMENT OF THE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS. IBM INDIA LTD., (SUPRA) AND CIT(A) DECIDED THE ISSUE FOLLOWING THE JUDGMENT OF THE JURISDICTIO NAL HIGH COURT. FOR THE SAKE OF REFERENCE, I EXTRACT THE RELEVANT PORTION OF THE ORDER OF THE CIT(A) AS UNDER: 6.2 ASSESSEES SUBMISSIONS: THE ASSESSEE HAS FILED HIS WRITTEN SUBMISSION DATED 07.04.2017, THE RELEVANT PORTION OF THE WRITTEN SUBMISSION IS REPRODUCED AS UNDER: THE COMPANY HAD CREATED THE PROVISION FOR OBSOLETE INVENTORY BASED ON THE PAST EXPERIENCE AND BY APPLYING A SPECIFIC P ERCENTAGE ON THE VALUE OF NON-MOVING INVENTORY (I.E., INVENTORY WHIC H HAS NOT MOVED FOR MORE THAN ONE YEAR) IN ACCORDANCE WITH INDIAN GAAP AND ACCOUNTING STANDARDS NOTIFIED UNDER THE COMPANIES ACT, 1956. THE COMPANY PLACES RELIANCE ON THE FOLLOWING DECISI ONS, WHEREIN IT HAS BEEN HELD THAT CLAIMS FOR PROVISIONS FOR OBSOLE TE INVENTORY CREATED BASED ON THE METHOD OF ACCOUNTING FOLLOWED CONSISTE NTLY IS ALLOWABLE UNDER THE INCOME TAX LAW ON ACCRUAL BASIS: A) IBM INDIA LTD. [2015] 55 TAXMANN.COM 515 (KAR. HC) B) HOTLINE TELETUBE AND COMPONENTS LTD [2008] 175 T AXMAN 286 (DEL HC); AND C) TUPPERWARE INDIA PVT. LTD. (ITA NO. 5823/DEL/201 0, ORDER DATED 1 OCTOBER 2010) (DELHI ITAT). 6.3 THE ASSESSEE CONTENDS THAT, THE PROVISION MADE AGAINST OBSOLETE INVENTORY, IS A CONSISTENT PRACTICE BASED ON THE PR ESCRIBED METHOD OF ACCOUNTING FOLLOWED BY THE APPELLANT. THE AO HAS NOT REFUTED THIS CLAIM OF THE ASSESSEE. IT IS NOT THE AOS CASE THAT, SIMILAR PROVISIONS WERE NOT MADE IN THE PAST AND THAT THE SAME WERE DISALLOWED BY THE DEPARTMENT. ON THE OTH ER HAND THERE IS NO SPECIFIC FINDING OF FACT TO DISPUTE THE ASSESSEES COMPUTATI ON OR THE AUDITED ACCOUNTS. THE AMOUNT IN QUESTION BEING NOMINAL AND GIVEN THE ASSE SSEES NATURE OF BUSINESS, THERE APPEARS TO BE NO TANGIBLE EVIDENCE TO NEGATE THE ASSESSEES CLAIM, ESPECIALLY IN LIGHT OF THE JUDICIAL POSITION HIGHLIGHTED BY TH E APPELLANT. IN THESE FACTS & CIRCUMSTANCES, THE DISALLOWANCE OF RS.1,43,335/- IS DIRECTED TO BE DELETED. 6. SINCE THE CIT(A) HAS DECIDED THE ISSUE FOLLOWING THE JUDGMENT OF THE JURISDICTIONAL HIGH COURT, I FIND NO INFIRMITY THEREIN. ACCORDING LY, I CONFIRM HIS ORDER. 7. APROPOS GROUND NO. 4, THE LEARNED COUNSEL FOR TH E ASSESSEE HAS INVITED OUR ATTENTION THAT ON THIS ISSUE THE CIT(A) HAS RESTORE D THE MATTER TO THE FILE OF THE AO WITH DIRECTION TO READJUDICATE THE ISSUE AFRESH AFTER AF FORDING OPPORTUNITY OF BEING HEARD TO THE ITA NO. 1598/BANG/2017 PAGE 4 OF 4 ASSESSEE. SINCE THE ISSUE HAS NOT BEEN DECIDED AGA INST THE REVENUE, NO APPEAL OF THE REVENUE IS SUSTAINABLE. 8. I HAVE CAREFULLY EXAMINED THE ORDER OF THE CIT(A ) AND I FIND THAT CIT(A) HAS SIMPLY RESTORED THE MATTER TO THE FILE OF THE AO WITH CERT AIN DIRECTIONS TO BE EXECUTED AFTER AFFORDING OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. SINCE I DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE CIT(A), I CONFIRM THE SAME. I, HOWEVER, FOR TH E SAKE OF REFERENCE, EXTRACT THE ORDER OF THE CIT(A) AS UNDER: IN BACKGROUND OF THE ABOVE DISCUSSION AND FACTS & CIRCUMSTANCES OF THE CASE, IT IS HELD THAT, THE ASSESSEES CONTENTION IS PRIMA-FACIE ALLOWABLE IN ABSENCE OF SPECIFIC EVIDENCIARY JUSTIFICATION IN THE AOS ORDE R AND IN VIEW OF THE JUDICIAL POSITION VIZ-A-VIZ THE FACTS SUBMITTED BY THE APPELLANT. HO WEVER IN HOLDING SO, THE AO IS ALSO DIRECTED TO VERIFY, IF AND WHEN THIS PROVISION WAS REVERSED/ADJUSTED BY THE APPELLANT IN THE SUBSEQUENT ASSESSMENT PERIODS, IN RESPECT OF THE IMPUGNED SERVICE TAX AMOUNTS SHOWN AS RECEIVABLE. THE AO IS DIRECTED TO TAKE APPROPRIATE RECTIFICATORY ACTION AFTER GIVING DUE OPPORTUNITY TO THE APPELLAN T, WHO IS SIMULTANEOUSLY DIRECTED TO PRODUCE THE RELEVANT EVIDENCIARY DOCUMENTS IN THIS REGARD. THIS GROUNDS OF APPEAL IS THEREFORE ALLOWED SUBJECT TO THE ABOVE DIRECTION . 9. ACCORDINGLY, THIS APPEAL OF THE REVENUE STAND DI SMISSED. 10. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISS ED. PRONOUNCED IN THE OPEN COURT ON 23 RD NOVEMBER, 2017. SD/- (SUNIL KUMAR YADAV) JUDICIAL MEMBER PLACE : BANGALORE DATED :23/11/2017 /NS/* COPY TO : 1 APPELLANT 2 RESPONDENT 3 CIT(A)-II BANGALORE 4 CIT 5 DR, ITAT, BANGALORE. 6 GUARD FILE BY ORDER SR. PRIVATE SECRETARY, ITAT, BANGALORE.