ACIT, Range-8, Pune V. Anusaya Auto Press Parts Pvt. Ltd., Pune

ITA 1600/PUN/2013

• Counselvise Citation: [2014] 120 COUNSELVISE.COM (IT) 8547 (ITAT-PUNE)
• Duration Of Justice: 1 year(s) 4 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-12-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 09-12-2014
• Assessment Year: 2009-2010
• Appeal Filed On: 23-08-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Capital receipt
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH A, PUNE BEFORE SHRI G.S. PANNU, ACCOUNTANT MEMBER AND SHRI R.S. PADVEKAR, JUDICIAL MEMBER ITA NO.1536/PN/2013 (ASSESSMENT YEAR : 2009-10) ANUSUYA AUTO PRESS PARTS PVT. LTD., GAT NO.388, VILLAGE MAHAKUNGE, TALEGAON CHAKAN ROAD, PUNE 410 501. PAN : AACCA3246K . APPELLANT VS. ADDL. COMMISSIONER OF INCOME TAX, RANGE 8, PUNE. . RESPONDENT ITA NO.1600/PN/2013 (ASSESSMENT YEAR : 2009-10) DY. COMMISSIONER OF INCOME TAX, CIRCLE- 8, PUNE. . APPELLANT VS. ANUSUYA AUTO PRESS PARTS PVT. LTD., GAT NO.388, VILL. MAHALUNGE, TALEGAON, CHAKAN ROAD, TAL. KHED, PUNE 410 501. PAN : AACCA3246K . RESPONDENT ASSESSEE BY : MR. KISHOR PHADKE DEPARTMENT BY : MR. RAJESH DAMOR DATE OF HEARING : 09-12-2014 DATE OF PRONOUNCEMENT : 29-12-2014 ORDER PER G. S. PANNU, AM THE CAPTIONED CROSS-APPEALS, EACH BY THE ASSESSEE A ND THE REVENUE, PERTAINING TO THE ASSESSMENT YEAR 2009-10, WERE HEA RD TOGETHER AND ARE BEING DISPOSED-OFF BY WAY OF A CONSOLIDATED ORDER F OR THE SAKE OF CONVENIENCE AND BREVITY. THE CAPTIONED CROSS-APPEALS ARE DIREC TED AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS)-V, PUNE DATED 31.05.2013 WHICH, IN TURN, HAS ARISEN FROM AN ORDER DATED 29.12.2011 PAS SED BY THE ASSESSING OFFICER U/S 143(3) OF THE INCOME TAX ACT, 1961 (IN SHORT THE ACT). ITA NO.1536/PN/2013 ITA NO.1600/PN/2013 2. IN THE APPEAL OF THE ASSESSEE, THE FOLLOWING GRO UNDS OF APPEAL HAVE BEEN RAISED :- 1. THE LD. CIT(A)-V ERRED IN LAW AND FACTS IN CONF IRMING THE REALLOCATION OF PUNE UNIT EXPENSES AMOUNTING TO RS. 1,30,81,261/- TO THE RUDRAPUR UNIT (A UNIT ELIGIBLE FOR DEDUCTION OF 80- IC OF THE I.T. ACT, 1961) ON THE BASIS OF SALES, AND THEREBY, REDUCING DEDUCTION OF RUDRAPUR INDUSTRIAL UNDERTAKING BY EQUIVALENT AMOUNT. 2. IN PARTICULAR THE LD. CIT(A)-V ERRED IN LAW AND FACTS IN CONFIRMING REALLOCATION OF THE FOLLOWING EXPENSES T O RUDRAPUR UNIT THOUGH, IN FACT, MAJORITY OF ALL THESE EXPENSES WERE INCURRED BY THE APPELLANT FOR ITS PUNE UNIT :- - BANK CHARGES - RS.16,15,164 - INTEREST ON WORKING CAPITAL & TERM LOAN - RS.9 2,76,128 - FOREIGN TRAVEL OF DIRECTORS - RS. 6,91,721 - DIRECTORS REMUNERATION - RS.14,33,960 - CONSULTANCY FEES PAID - RS. 64,288 ---------------------- TOTAL RS.1,30,81,261 ============ 3. ALTHOUGH, THE ASSESSEE COMPANY HAS RAISED TWO GR OUNDS OF APPEAL BUT THE SOLITARY DISPUTE RELATES TO THE MANNER OF COMPU TING ELIGIBLE PROFITS AND GAINS OF BUSINESS WITH RESPECT TO THE RUDRAPUR UNIT , WHICH IS ENTITLED FOR DEDUCTION U/S 80-IC OF THE ACT. THE LIMITED DIFFER ENCE BETWEEN THE ASSESSEE AND THE REVENUE BEFORE US RELATES TO THE ALLOCATION OF THE FOLLOWING EXPENSES - BANK CHARGES; INTEREST ON WORKING CAPITAL & TERM LO AN; FOREIGN TRAVEL OF DIRECTORS; DIRECTORS REMUNERATION; AND, CONSULTANC Y FEES IN ORDER TO COMPUTE THE PROFITS OF RUDRAPUR UNIT. AS PER THE REVENUE, THE AFORESAID EXPENSES AMOUNTING TO RS.1,30,81,288/- WERE REQUIRED TO BE A LLOCATED TO RUDRAPUR UNIT WHILE CALCULATING THE PROFITS OF THE RUDRAPUR UNIT ELIGIBLE FOR DEDUCTION U/S 80- IC OF THE ACT. 4. BEFORE US, THE LD. REPRESENTATIVE FOR THE ASSESS EE HAS NOT PRESSED THE DISPUTE PERTAINING TO ALLOCATION OF EXPENSES ON ACC OUNT OF FOREIGN TRAVEL OF DIRECTORS, DIRECTORS REMUNERATION AND CONSULTANCY FEES PAID, AS DONE BY THE LOWER AUTHORITIES. THE LD. REPRESENTATIVE FOR THE ASSESSEE HAS ONLY CHALLENGED THE ACTION OF THE LOWER AUTHORITIES IN A LLOCATING BANK CHARGES ITA NO.1536/PN/2013 ITA NO.1600/PN/2013 RS.16,15,164/- AND INTEREST ON WORKING CAPITAL & TE RM LOAN RS.92,76,128/- TOWARDS THE RUDRAPUR UNIT. 5. THE AFORESAID EXPENSES HAVE BEEN ALLOCATED TO TH E RUDRAPUR UNIT ON THE BASIS OF THE RESPECTIVE SALES OF THE TWO UNITS I.E. ONE AT PUNE AND OTHER AT RUDRAPUR. THE GRIEVANCE OF THE ASSESSEE IS THAT AL LOCATION OF SUCH EXPENSES ON THE BASIS OF SALE TURNOVER OF THE RESPECTIVE UNI TS IS NOT PROPER AND THAT THE SAME CAN BE ALLOCATED ON THE BASIS OF ACTUAL INCURR ENCE OF EXPENDITURE. IN THIS CONTEXT, THE LD. REPRESENTATIVE DREW OUR ATTENTION TO THE WRITTEN SUBMISSIONS MADE TO THE CIT(A), WHICH HAVE BEEN REPRODUCED IN P ARA 12 OF THE IMPUGNED ORDER. IN TERMS OF THE SAID SUBMISSIONS, ASSESSEE ANALYZED THE EXPENSES INCURRED BY WAY OF BANK CHARGES AND INTEREST ON WOR KING CAPITAL & TERMS LOAN AND THE SAID ANALYSIS SHOWED THAT ONLY BANK CHARGES TO THE EXTENT OF RS.1,63,953/- AND INTEREST ON WORKING CAPITAL & TER MS LOAN TO THE EXTENT OF RS.4,38,039/- WERE ELIGIBLE FOR ALLOCATION TO THE R UDRAPUR UNIT. THE SAID POSITION WAS NOT ACCEPTED BY THE CIT(A) PRIMARILY O N THE GROUND THAT IN THE RETURN OF INCOME NO EXPENSES ON ACCOUNT OF THE AFOR ESAID HEADS OF EXPENDITURE, WERE ALLOCATED IN THE SEGMENTAL PROFIT & LOSS ACCOUNT PREPARED BY THE ASSESSEE IN RESPECT OF PUNE AND RUDRAPUR UNI TS. 6. IN OUR VIEW, THE AFORESAID GROUND TAKEN BY THE C IT(A) TO REJECT THE CLAIM OF THE ASSESSEE IS UNJUST. NO DOUBT, IN THE SEGMEN TAL PROFIT & LOSS ACCOUNT PREPARED FOR THE PUNE AND RUDRAPUR UNITS AT THE TIM E OF FILING OF THE RETURN, ASSESSEE HAS NOT ALLOCATED ANY OF THE AFORESAID EXP ENDITURE TOWARDS RUDRAPUR UNIT. SO HOWEVER, ONCE IN THE ASSESSMENT PROCEEDINGS, THE INFIRMITY HAD COME TO BE NOTED BY THE INCOME-TAX AUTHORITIES THEN IT IS IMPERATIVE THAT THE AMOUNT OF EXPENDITURE ALLOCABLE TOWARDS RUDRAPU R UNIT, WHICH WAS EARLIER LEFT OUT, BE DETERMINED ON A RATIONALE AND REASONAB LE BASIS. THE BASIS OF ALLOCATION CANVASSED BY THE ASSESSEE, NAMELY, ON AC TUALS IS QUITE SOUND AND IN ANY CASE IS PREFERABLE TO THE BASIS SOUGHT TO BE ADOPTED BY THE INCOME-TAX ITA NO.1536/PN/2013 ITA NO.1600/PN/2013 AUTHORITIES I.E. ON THE BASIS OF SALES. NOTABLY, I N SO FAR AS THE ANALYSIS OF THE ASSESSEE WHICH HAVE BEEN REPRODUCED BY THE CIT(A) I N THE IMPUGNED ORDER IS CONCERNED, THE SAME IS NOT DISPUTED BY THE REVENUE. THEREFORE, IN OUR VIEW, IT WOULD MEET THE ENDS OF JUSTICE IF THE EXPENSES O N ACCOUNT OF BANK CHARGES TO THE EXTENT OF RS.1,63,953/- AND INTEREST ON WORK ING CAPITAL & TERMS LOAN TO THE EXTENT OF RS.4,38,039/- ARE ALLOCATED TOWARDS R UDRAPUR UNIT IN ORDER TO COMPUTE THE ELIGIBLE PROFITS FOR THE PURPOSES OF SE CTION 80-IC OF THE ACT. THUS, ASSESSEE PARTLY SUCCEEDS. 7. IN THE RESULT, APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. 8. NOW, WE TAKE-UP THE CROSS-APPEAL OF THE REVENUE WHEREIN THE SOLITARY GROUND OF APPEAL READS AS UNDER :- 1. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES O F THE CASE, THE LD. CIT(A) WAS JUSTIFIED IN HOLDING THAT DISCOUNT O F RS.1,09,65,630/- RECEIVED ON PRE-PAYMENT OF LIABILITY UNDER THE SALES TAX DE FERRAL SCHEME AS NOT A REMISSION OR CESSATION OF LIABILITY U/S 41(1)? 9. THE ISSUE IN THE REVENUES APPEAL RELATES TO THE TREATMENT OF DISCOUNT OF RS.1,09,65,630/- ON PRE-PAYMENT OF DEFERRAL SAL ES TAX LIABILITY AT ITS UNDER PRESENT VALUE. THE ASSESSING OFFICER TREATED SUCH AMOUNT AS REMISSION OR CESSATION OF LIABILITY AND HELD IT TAXABLE U/S 41(1 ) OF THE ACT. NOTABLY, ASSESSEE TREATED SUCH AN AMOUNT ACCRUING ON ACCOUNT OF PRE-P AYMENT OF DEFERRAL SALES TAX LIABILITY ON PRESENT VALUE BASIS TO BE A CAPI TAL RECEIPT NOT CHARGEABLE TO TAX. IN BRIEF, IT MAY BE NOTED THAT UNDER THE SAL ES TAX DEFERRAL SCHEME OF THE STATE GOVERNMENT, ASSESSEE WAS ALLOWED TO RETAIN TH E SALES TAX COLLECTED AND THE SAME WAS TREATED AS LOAN FROM THE STATE GOVERNM ENT. SUBSEQUENTLY, IN TERMS OF A SCHEME FORMULATED BY THE STATE GOVERNMEN T, ASSESSEE WAS ALLOWED TO MAKE PRE-MATURE RE-PAYMENT OF LOAN AND T HUS AFTER DISCOUNTING THE OUTSTANDING DUES AT ITS NET PRESENT VALUE, IT RESUL TED IN A DISCOUNT OF RS.1,09,65,630/- IN THE HANDS OF THE ASSESSEE. THE ASSESSING OFFICER TREATED THE SAID SUM AS A TAXABLE RECEIPT. ITA NO.1536/PN/2013 ITA NO.1600/PN/2013 10. THE CIT(A) DIFFERED WITH THE ASSESSING OFFICER AND FOLLOWING THE DECISION OF THE SPECIAL BENCH OF THE TRIBUNAL IN TH E CASE OF SULZAR INDIA LTD. VS. JT.CIT, (2010) 134 TTJ 385 (MUM)(SB) HELD THAT SUCH AN AMOUNT WAS A CAPITAL RECEIPT NOT CHARGEABLE TO TAX. AGAINST SUC H A DECISION OF THE CIT(A), REVENUE IS IN APPEAL BEFORE US. 11. BEFORE US, IT WAS A COMMON POINT BETWEEN THE PA RTIES THAT SIMILAR ISSUE IN THE ASSESSEES OWN CASE FOR ASSESSMENT YEAR 2008 -09 VIDE ITA NO.539/PN/2012 DATED 25.04.2013 AND FOR ASSESSMENT YEAR 2007-08 VIDE ITA NO.2249/PN/2012 DATED 23.06.2014 HAS BEEN HELD IN F AVOUR OF THE ASSESSEE. NOTABLY, IT WAS ALSO A COMMON POINT BETWEEN THE PAR TIES THAT THE DECISION OF THE SPECIAL BENCH OF THE TRIBUNAL IN THE CASE OF SU LZAR INDIA LTD. (SUPRA), WHICH HAVE BEEN RELIED UPON BY THE CIT(A), CONTINUE S TO HOLD THE FIELD AS IT HAS NOT BEEN ALTERED BY ANY HIGHER AUTHORITY. THER EFORE, IN THIS BACKGROUND, THE ORDER OF THE CIT(A) IS HEREBY AFFIRMED AND REVE NUE FAILS IN ITS APPEAL. 12. RESULTANTLY, WHEREAS THE APPEAL OF THE ASSESSEE IS PARTLY ALLOWED, THE CROSS-APPEAL OF THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 29 TH DECEMBER, 2014. SD/- SD/- (R.S. PADVEKAR) (G.S. PANNU) JUDICIAL MEMBER ACCOUNTANT MEMBER PUNE, DATED: 29 TH DECEMBER, 2014. SUJEET COPY OF THE ORDER IS FORWARDED TO : - 1) THE ASSESSEE; 2) THE DEPARTMENT; 3) THE CIT(A)-V, PUNE; 4) THE CIT-V, PUNE; 5) THE DR A BENCH, I.T.A.T., PUNE; 6) GUARD FILE. BY ORDER //TRUE COPY// ASSISTANT REGISTRAR I.T.A.T., PUNE