M/s Maini Precision Products P. Ltd., Bangalore V. ACIT, Bangalore

ITA 1686/BANG/2012

• Counselvise Citation: [2013] 140 COUNSELVISE.COM (IT) 68327 (ITAT-BANGALORE)
• Duration Of Justice: 8 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-09-2013
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 12-09-2013
• Assessment Year: 2004-2005
• Appeal Filed On: 31-12-2012
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: BIJOY KUMAR PANDA
• Section: 43B; 143(3); 80HHC

Judgement Text

ITA NO.1686 OF 2012 AND CO NO.73 OF 2013 MANI PRECI SION PRODUCTS P LTD BANGALORE PAGE 1 OF 8 IN THE INCOME TAX APPELLATE TRIBUNAL BANGALORE ABENCH, BANGALORE BEFORE SHRI N. BARTHVAJASANKAR, VICE PRESIDENT AND SHRI GEORGE GEORGE K. JUDICIAL MEMBER ITA NO.1686/BANG/2012 (ASSESSMENT YEAR: 2004-05) M/S MANI PRECISION PRODUCTS P LTD, PEENYA, B-165 3 RD CROSS PEENYA INDUSTRIAL ESTATE, BANGALORE 560058 PAN: AABCM 8269 R VS. ASST. COMMISSIONER OF INCOME TAX, CIRCLE 12(1) BANGALORE (APPELLANT) (RESPONDENT) C.O. NO.73/BANG/2013 (ARISING OUT OF ITA NO.1686/BANG/2012) (ASSESSMENT YEAR 2004-05) ASST. COMMISSIONER OF INCOME TAX, CIRCLE 12(1) BANGALORE VS. M/S MANI PRECISION PRODUCTS P LTD, PEENYA, B-165 3 RD CROSS PEENYA INDUSTRIAL ESTATE, BANGALORE 560058 PAN: AABCM 8269 R (CROSS OBJECTOR) (RESPONDENT) DEPARTMENT BY: SHRI BIJOY KUMAR PANDA, DR ASSESSEE BY: SMT. PRATHIBHA R, ADV. DATE OF HEARING: 12/09/2013 DATE OF PRONOUNCEMENT: 30/09/2013 O R D E R PER GEORGE GEORGE K. J.M. THESE APPEALS AT THE INSTANCE OF THE ASSESSEE AND T HE CROSS OBJECTION PREFERRED BY THE DEPARTMENT, ARE DI RECTED AGAINST THE CIT (A)S ORDER DATED 31.10.2012. SINCE THE ISSUES RAISED IN THE APPEAL AND THE CROSS OBJECTION PERTAI NS TO THE ITA NO.1686 OF 2012 AND CO NO.73 OF 2013 MANI PRECI SION PRODUCTS P LTD BANGALORE PAGE 2 OF 8 SAME ASSESSEE, THEY WERE HEARD TOGETHER AND DISPOSE D OF BY THIS CONSOLIDATED ORDER. 2. WE SHALL FIRST TAKE UP THE ASSESSEES APPEAL FOR ADJUDICATION: ITA NO.1686/BANG/2012 (ASSESSEE APPEAL) 3. THE ASSESSEES GROUND NO.3 IS NOT MAINTAINABLE A S THE CHARGING OF INTEREST U/S 234B, 234C AND 234D OF THE ACT IS MANDATORY AND CONSEQUENTIAL IN NATURE. 3.1 THE SOLITARY ISSUE THAT RAISES FOR OUR CONSIDER ATION IS: WHETHER THE CIT (A) IS JUSTIFIED IN RESTRICTING THE CLAIM OF DEDUCTION U/S 80HHC OF THE ACT. 3.1.1 BRIEFLY STATED THE FACTS OF THE CASE ARE AS FOLLOWS: 3.1.2 THE ASSESSEE IS A COMPANY ENGAGED IN THE MANUFACTURING PRECISION COMPONENTS. A RETURN OF INC OME WAS FILED FOR THE CONCERNED ASSESSMENT YEAR, DECLARING A TOTAL INCOME OF RS.6,46,44,220. THE ASSESSMENT U/S 143(3) WAS COMPELTED BY ORDER DATED 28.12.2006, DETERMINING TH E TOTAL INCOME OF RS.7,43,14,310. THE ASSESSEE BEING AGGRIE VED BY THE DENIAL OF DEDUCTION U/S 80HHC OF THE ACT ON PROFITS OF SALE OF DEPB LICENSE, PREFERRED AN APPEAL BEFORE THE CIT (A ). THE CIT(A) RESTORED THIS ISSUE TO THE ASSESSING OFFICER FOR COMPUTATION VIDE PARA 8.2 OF HIS ORDER. 3.2 HOWEVER, IN THE COURSE OF THE APPELLATE PROCEED INGS, THE CIT (A) ISSUED AN ENHANCEMENT NOTICE ON 8.3.2010 WI TH REGARD ITA NO.1686 OF 2012 AND CO NO.73 OF 2013 MANI PRECI SION PRODUCTS P LTD BANGALORE PAGE 3 OF 8 TO NETTING OF MACHINING CHARGES. IT WAS BROUGHT TO THE NOTICE OF THE ASSESSEE THAT IN VIEW OF THE HON'BLE KARNATAKA HIGH COURTS JUDGMENT IN THE ASSESSEES OWN CASE, 90% OF THE MACHINING CHARGES HAS TO BE REDUCED FROM THE EXPORT TURNOVER WHILE COMPUTING THE DEDUCTION U/S 80HHC. THE ASSESS EE SUBMITTED THAT WHILE CALCULATING THE DEDUCTION U/S 80HHC BY APPLYING EXPLANATION (BAA), THE ASSESSING OFFICER I S NOT REQUIRED TO EXCLUDE 90% OF THE MACHINING CHARGES TO THE TUNE OF RS.1,26,000. IT WAS FURTHER SUBMITTED THAT IF 90 % IS REQUIRED TO BE EXCLUDED, THEN EXCLUSION SHOULD BE L IMITED TO NET OF MACHINING CHARGES BEING GROSS RECEIPTS LESS RELATED EXPENSES CHARGED OF IN THE P&L A/C. THE CIT (A) HAD , HOWEVER, DISMISSED THE PLEA OF THE ASSESSE. THE REASONING OF THE CIT (A) READ AS FOLLOWS: 7.3 I HAVE CONSIDERED THE ISSUE CAREFULLY. THE KARNATAKA HIGH COURT ORDER DOES NOT SPECIFICALLY MENTION THE COMPUTATION OF THE DEDUCTION AFTER NETTING OFF OF THE MACHINING CHARGES. RATHER, IT ON LY FINDS THAT MACHINING CHARGES ARE TO BE REDUCED FROM THE EXPORT TURNOVER. THE HIGH COURT ORDER ALSO MAKE S IT CLEAR THAT THE COMPUTATION IS TO BE DONE AS PER THE PRINCIPLES LAID DOWN IN THE CASE OF CIT VS. K. RAVINDRANATHAN NAIR (2007) REPORTED IN 295 ITR 228 (SC). 7.4 ON A PERUSAL OF THE ISSUE, I FIND THAT TEHMATTE R IS SWUARELY COVERED BY THE CASE OF ACG ASSOCIATED CAPSULES P LTD VS. CIT (CENTRAL)-IV MUMBAI (2012) 343 ITR 89 (SC) WHERE THE LEARNED SUPREME COURT HAS HELD THAT ONLY THE NET AMOUNT OF THE TOTAL INCO ME RECKONED FOR THE PURPOSE OF PROFITS OF THE BUSINESS OF THE ASSESSEE IS TO BE REDUCED UNDER EXPLANATION (BAA) OF CLAUSE(I) OF SECTION 80HHC. I MAY ALSO MENTION THAT FOLLOWING THIS ORDER OF THE APEX COURT , THE ITAT BANGALORE, IN THE APPELLANTS OWN CASE IN A COMMON ORDER FOR ITA NOS. 454-457 AND 438/BANG/2010 PRONOUNCED ON 13-04-2012 HAS ACCEPTED THAT ONLY THE NET MACHING CHARGES ARE TO B E ITA NO.1686 OF 2012 AND CO NO.73 OF 2013 MANI PRECI SION PRODUCTS P LTD BANGALORE PAGE 4 OF 8 EXCLUDED AND DIRECTED THE AO TO COMPUTE THE DEDUCTION ACCORDINGLY. AS SUCH I AM OF THE VIEW THA T THE NET AMOUNT OF MACHINING CHARGES ONLY IS TO BE REDUCED IN THIS CASE AND THE AO IS DIRECTED TO COMPUTE THE DEDUCTION ACCORDINGLY AFTER ASCERTAININ G THAT THE OUTFLOWS CLAIMED ARISE DIRECTLY ON ACCOUNT OF THE INCOMES FROM MACHINING CHARGES ONLY. THIS GROUND OF APPEAL IS ALLOWED WITH THE DIRECTION ABOVE. 4. THE ASSESSEE, BEING AGGRIEVED, IS IN APPEAL BEFO RE US. 5. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL ON RECORD. IT IS FAIRLY ADMITTED BY THE LE ARNED COUNSEL FOR THE ASSESSEE THAT THE ISSUE, IN QUESTION, IS SQ UARELY COVERED BY THE JUDGMENT OF THE HON'BLE JURISDICTIONAL HIGH COURT IN THE ASSESSEES OWN CASE IN ITA NO.52 OF 2009 AND 182 TO 185 OF 2009 (JUDGMENT DATED 18.08.2009). HOWEVER, IT WAS S UBMITTED BY THE LEARNED AR THAT AN SLP HAS BEEN PREFERRED AG AINST THE JUDGMENT OF THE HON'BLE JURISDICTIONAL HIGH COURT A ND THE SAME IS PENDING FOR ADJUDICATION, AND THEREFORE, RE QUESTED THE BENCH TO RESTORE THE MATTER TO THE ASSESSING OFFICE R FOR A FINAL DECISION IN THE CASE AFTER THE HON'BLE SUPREME COUR T TAKES A VIEW ON THE ISSUE. 5.1. WE ARE, HOWEVER, OF THE VIEW THAT THE PLEA OF THE ASSESSEE IS TO BE REJECTED FOR THE REASON THAT IN ASSESSEES OWN CASE THE HON'BLE JURISDICTIONAL HIGH COURT HAS DECIDED THE I SSUE IN FAVOUR OF REVENUE AND THE ASSESSEE HAS FILED AN SLP BEFORE THE HON'BLE SUPREME COURT. SINCE THE ASSESSEE IS ALREAD Y BEFORE THE HON'BLE SUPREME COURT, THIS CASE CAN ALSO BE TA KEN BEFORE THE APPELLATE FORUM FOR REDRESSAL. IT IS ORDERED AC CORDINGLY. ITA NO.1686 OF 2012 AND CO NO.73 OF 2013 MANI PRECI SION PRODUCTS P LTD BANGALORE PAGE 5 OF 8 6. WE SHALL NOW PROCEED TO ADJUDICATE THE CROSS OBJ ECTION OF THE REVENUE AS UNDER: C.O. NO.73/BANG/2013 CROSS OBJECTION OF THE REVEN UE 6.1 A SOLITARY ISSUE RAISED BY THE REVENUE FOR ADJU DICATION IS: WHETHER THE CIT (A) WAS JUSTIFIED IN DELETING THE A DDITION MADE ON EMPLOYEES CONTRIBUTIONS TO PF & ESI AMOUNTING T O RS.2,76,840 AND RS.12,823 RESPECTIVELY AS PER THE P ROVISIONS OF S.2(24)(X) R.W.S. 36(1)(VA) OF THE ACT?. 6.2 BRIEFLY STATED, DURING THE COURSE OF THE ASSESS MENT PROCEEDINGS, THE ASSESSING OFFICER HAD OBSERVED THA T THERE WAS A DELAY IN RESPECT OF REMITTING THE EMPLOYEES SHAR ES OF PF & ESI AMOUNTING TO RS.2.76 LAKHS AND RS.12,823 RESPEC TIVELY TO THE RESPECTIVE AUTHORITIES. ACCORDINGLY, THE SAME W ERE DISALLOWED BY APPLYING THE PROVISIONS OF S. 36(1)(V A) R.W.S. 2(24)(X) OF THE ACT. HOWEVER, ON AN APPEAL, THE CIT (A) HAD DELETED THE ADDITION BY FOLLOWING THE JUDGMENT OF T HE HON'BLE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT V. SAB ARI ENTERPRISES REPORTED IN (2008) 298 ITR 141 (KAR.). 6.3 AGGRIEVED, THE REVENUE HAS COME UP BEFORE US WI TH ITS PRESENT CROSS OBJECTION. IT WAS THE CASE OF THE REV ENUE THAT THE CIT (A) ERRED IN DELETING THE ADDITION ON EMPLOYEES CONTRIBUTION TO PF AND ESI AS PER THE PROVISIONS OF S.2(24)(X) R.W.S. 36(1)(VA) OF THE ACT AND THAT DEDUCTION IS A LLOWABLE ONLY WHERE THE PAYMENT TO PF & ESI HAS BEEN MADE WITHIN THE DUE DATE UNDER THE RELEVANT ACT. OUR ATTENTION WAS ALSO DRAWN BY THE REVENUE TO THE EFFECT THAT THE EARLIER BENCH OF THIS ITA NO.1686 OF 2012 AND CO NO.73 OF 2013 MANI PRECI SION PRODUCTS P LTD BANGALORE PAGE 6 OF 8 TRIBUNAL HAD VIDE ITS ORDER DATED 31.05.2013 IN THE CASE OF DCIT V. ESSAE TERAKA PVT. LTD, FOLLOWING THE DECISI ONS OF THE ITAT, KOLKATA IN THE CASE OF (I) BENGAL CHEMICAL & PHARMACEUTICALS LIMITED AND OF THE SPECIAL BENCH OF KOLKATA TRIBUNAL IN (II) JCIT V. ITC LTD ON THE ISSUE OF EM PLOYEES CONTRIBUTION TO PF AND ESI, REVERSED THE ORDER OF T HE CIT (A) ON A SIMILAR ISSUE. IT WAS, THEREFORE, PLEADED THAT TH E CLAIM OF THE ASSESSEE FOR DEDUCTION OF EMPLOYEES CONTRIBUTIONS OF PF & ESI CANNOT BE ALLOWED SINCE THE SAME WERE NOT PAID BY T HE ASSESSEE IN ACCORDANCE WITH THE RELEVANT PROVISIONS OF THE ACT. 6.4 ON THE OTHER HAND, THE LEARNED AR HAD SUPPORTED THE FINDINGS OF THE CIT (A). IT WAS PLEADED THAT THERE WAS NO INFIRMITY IN THE FINDING OF THE CIT (A) WARRANTING THE INTERVENTION OF THIS BENCH. 6.5 WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSI ONS, PERUSED THE RELEVANT MATERIALS ON RECORD AND ALSO T HE CASE LAWS ON WHICH EITHER OF THE PARTY HAVE PLACED THEIR RELIANCE. IT WAS THE SUBMISSION OF THE LEARNED AR THAT THE EMPLO YEES CONTRIBUTIONS TOWARDS ESI & PF WERE DULY PAID TO TH E RESPECTIVE AUTHORITIES BEFORE THE DUE DATE FOR FILI NG THE RETURN OF THE RELEVANT ASSESSMENT YEAR AND THAT ON ACCOUNT OF PROVISO TO S. 43B AS AMENDED BY THE FINANCE ACT, 2003 W.E.F . 1.4.2004, THE ASSESSEE IS ENTITLED TO RELIEF. MOREO VER, THE ASSESSMENT ORDER IS CONSPICUOUSLY SILENT AS TO WHET HER THE PAYMENT TO PF & ESI, THOUGH BELATED, WAS IT PAID BE FORE THE DUE DATE FOR FILING OF THE RETURN OF INCOME OR OTHE RWISE?. ITA NO.1686 OF 2012 AND CO NO.73 OF 2013 MANI PRECI SION PRODUCTS P LTD BANGALORE PAGE 7 OF 8 6.5.1 IN THIS CONTEXT, WE REFER TO THE JUDGMENT O F THE HON'BLE JURISDICTIONAL HIGH COURT IN THE CASE OF M/S. SPECT RUM CONSULTANTS INDIA PRIVATE LIMITED V. CIT (WRIT PETI TION NO.8834 OF 2011 (T-IT) DATED 17.4.2013) ON IDENTICAL FACTS. AFTER ANALYZING THE ISSUE IN DEPTH AND ALSO REFERRING TO THE JUDGMENTS OF THE (I) HON'BLE DIVISION BENCH IN THE CASE OF SABARI ENTERPRISES (SUPRA) AND (II) THE HON'BLE SUP REME COURT IN THE CASE OF CIT V. ALOM EXTRUSIONS LIMITED, THE HON'BLE COURT HAD RULED THAT- 8. REGARD BEING HAD TO THE WORDS DUE DATE AS INTERPRETED IN SABARI ENTERPRISES CASE, AND AFFIRME D BY THE APEX COURT IN ALOM EXTRUSIONS LTD., THERE CAN BE NO MORE DOUBT THAT THE ASSESSING OFFICER AS WELL AS THE REVISION AUTHORITY FELL IN EFFORT IN DISALLOWING THE DEDUCTION OF RS.22,91,791/- BEING THE EMPLOYEES CONTRIBUTION REMITTED BY THE PETITIONER-EMPLOYER-ASSESSEE BOTH UNDER THE ESI AND EPF ACT, PARTLY BEFORE 31/3/2006 IN THE FINANCIAL YEAR CONCERNED AND THE BALANCE BEFORE THE FILING OF THE RETURNS U/S 139(1) OF THE ACT AS EXTENDED UNTO 30/11/2006. 6.5.2 THE REVENUE HAS NEITHER DISPUTED THE CLAIM O F THE ASSESSEE THAT THE PAYMENTS WERE MADE BEFORE THE DUE DATE FOR FILING THE RETURN NOR BROUGHT ANY DOCUMENTARY EVIDE NCE TO REBUT THE ASSESSEES CLAIM ON THE ISSUE. 6.5.3 IN CONFORMITY WITH THE RULINGS OF THE HON'BL E JURISDICTIONAL HIGH COURT IN THE CASES OF (I) SABAR I ENTERPRISES AND (II) M/S. SPECTRUM CONSULTANTS INDIA PRIVATE LI MITED (SUPRA), WE ARE OF THE CONSIDERED VIEW THAT THE CIT (A) WAS JUSTIFIED IN DELETING THE ADDITION MADE ON THE PREM ISE THAT THE CLAIM OF THE ASSESSEE WAS FOUND TO BE ADMISSIBLE. ITA NO.1686 OF 2012 AND CO NO.73 OF 2013 MANI PRECI SION PRODUCTS P LTD BANGALORE PAGE 8 OF 8 7. IN THE RESULT, THE ASSESSEES APPEAL IS DISMISSE D AND THE REVENUES CROSS OBJECTION IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 30 TH SEPTEMBER, 2013. SD/- SD/- (N. BARTHVAJASANKAR) (GEORGE GEORGE K) VICE PRESIDENT JUDICIAL MEMBER BANGALORE DATED 30 TH SEPTEMBER, 2013. VNODAN/SPS COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CONCERNED CIT(A) 4. THE CONCERNED CIT 5. THE DR, ITAT, BANGALORE BY ORDER ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL, BANGALORE BENCHES, BANGALORE