PES Engineers Private Limited, Hyderabad V. DCIT, Circle-16(3), Hyderabad

ITA 176/HYD/2014

• Counselvise Citation: 17622514 RSA 2014
• Duration Of Justice: 1 year(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-02-2015
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 18-02-2015
• Assessment Year: 2006-2007
• Appeal Filed On: 04-02-2014
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: RAJAT MITRA
• Assessee Lawyers: V RAGHAVENDRA RAO
• Section: 143(3); 80IB; 154

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH B, HYDERABAD BEFORE SHRI P.M. JAGTAP, ACCOUNTANT MEMBER AND SHRI SAKTIJIT DEY, JUDICIAL MEMBER ITA NO. 176/HYD/2014 ASSESSMENT YEAR: 2006-07 PES ENGINEERS PVT. LTD., HYDERABAD PAN AABCP4220B VS. DY. COMMISSIONER OF INCOME- TAX, CIRCLE 16(3), HYDERABAD. (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI V. RAGHAVENDRA RAO REVENUE BY : SHRI RAJAT MITRA DATE OF HEARING 18-02-2015 DATE OF PRONOUNCEMENT 20-02-2015 O R D E R PER SAKTIJIT DEY, J.M.: THIS APPEAL OF THE ASSESSEE IS DIRECTED AGAINST OR DER DATED 29/11/2013 PASSED BY LD. CIT(A)-V, HYDERABAD FOR A. Y. 2006-07. 2. THE ISSUE RAISED IN THE PRESENT APPEAL IS CONFIN ED TO ALLEGED ADDITION OF INTEREST INCOME OF RS. 43,83,543. 3. BRIEFLY THE FACTS ARE, ASSESSEE A COMPANY IS ENG AGED IN THE BUSINESS OF FABRICATION AND ERECTION. FOR THE AY UN DER CONSIDERATION, ASSESSEE FILED ITS RETURN OF INCOME ON 18/11/06 DECLARING TOTAL INCOME OF RS. 2,69,30,723 AFTER CLA IMING DEDUCTION OF RS. 4,83,76,860 U/S 80IB OF THE ACT. ASSESSMENT IN CASE OF ASSESSEE WAS COMPLETED U/S 143(3) OF THE ACT FOR TH E IMPUGNED AY VIDE ORDER DATED 04/11/08. WHILE COMPLETING ASSESSM ENT, AO DISALLOWED THE DEDUCTION CLAIMED U/S 80IB. FURTHER, AO ALSO 2 ITA NO. 176/HYD/2014 PES ENGINEERS PVT. LTD. OBSERVED THAT INTEREST INCOME RECEIVED BY ASSESSEE HAS TO BE EXCLUDED FOR THE PURPOSE OF DEDUCTION U/S 80IB. ASS ESSEE CHALLENGED THE DISALLOWANCE OF DEDUCTION U/S 80IB I N AN APPEAL PREFERRED BEFORE LD. CIT(A). LD. CIT(A) WHILE CONSI DERING ASSESSEES CLAIM, THOUGH, HELD THAT ASSESSEE IS EL IGIBLE TO CLAIM DEDUCTION U/S 80IB, BUT, AS FAR AS INTEREST INCOME IS CONCERNED, LD. CIT(A) HELD THAT INTEREST INCOME ALONG WITH EXPENDI TURE HAS TO BE APPORTIONED AMONGST VARIOUS UNITS AS PER THE DECISI ON OF HIS PREDECESSOR IN AY 2005-06. THE FINDING OF THE LD. C IT(A) IN ORDER DATED 11/11/2009 IS EXTRACTED HEREIN FOR READY REFE RENCE: 6.1 IN THE GROUND OF APPEAL NO. 4(A), IT HAS BEEN S TATED THAT THE EXPENDITURE WITH RESPECT TO HEAD OFFICE EXPENSE S IS NOT APPORTIONABLE AMONGST VARIOUS UNITS. THE APPELLANT HAS FURTHER STATED THAT HE WAS NOT GIVEN ANY OPPORTUNIT Y ON THIS ISSUE. HOWEVER, I FIND THAT THE ISSUE HAS BEEN DECI DED BY MY PREDECESSOR VIDE PARA 6 OF IN ITA NO. 0153/DC-16(3) /CIT(A)- V/2007-08 DATED 29.10.2008 FOR AY 2005-06 IN THE CA SE OF THE APPELLANT. SIMILARLY WITH REGARD TO GROUND NO. 4(B), THE ISSUE OF APPORTIONMENT OF INTEREST INCOME AND EXPEN DITURE AMONGST VARIOUS UNITS HAS BEEN DECIDED BY PREDECESS OR AS PER PARA 7 OF HIS ORDER REFERRED TO ABOVE. IN THE C URRENT YEAR ALSO, THE FACTS ARE IDENTICAL AND THE APPELLANT HAS NOT GIVEN ANY DETAILS REGARDING ITS CLAIM. AS PER PARA 6 OF I TS WRITTEN SUBMISSIONS THE APPELLANT HAS STATED AS BELOW: 6. IN REGARD TO THE GROUNDS AT 4(1) & 4(B) WHICH REGARDING THE INTEREST RECEIPTS ADMITTED AT THE HEA D OFFICE AND EXPENDITURE INCURRED AT THE HEAD OFFICE, THE ISSUE IS COVERED BY THE ORDER OF THE CIT(A)-V, HYDERABAD FOR THE ASSESSMENT YEAR 2005-06 (SUPRA) WHICH HAS BECOME FINAL AS THERE IS NO APPEAL TO THE TRIBUNAL ON THE POINT. THEREFORE THE GROUNDS 4(A) & 4(B) MAY BE DISPOSED OFF ACCORDINGLY. 6.2 IN VIEW OF THE ABOVE, I DO NOT FIND ANY MERIT I N THE ABOVE GROUNDS OF THE APPELLANT. ACCORDINGLY, THE GR OUND NOS. 4(A) & 4(B) ARE DECIDED IN FAVOUR OF THE REVENUE AN D AGAINST THE APPELLANT. 4. AGAINST THE AFORESAID ORDER OF LD. CIT(A), NEITH ER ASSESSEE NOR DEPARTMENT PREFERRED ANY APPEAL BEFORE THE TRIB UNAL. THUS, THE 3 ITA NO. 176/HYD/2014 PES ENGINEERS PVT. LTD. ORDER OF LD. CIT(A() BECAME FINAL. IN PURSUANCE TO THE ORDER OF LD. CIT(A), AO PASSED A CONSEQUENTIAL ORDER ON 02/12/09 DETERMINING TOTAL INCOME AT RS. 3,20,00,341 AFTER ALLOWING DEDU CTION U/S 80IB. AGAINST THE AFORESAID CONSEQUENTIAL ORDER PASSED BY AO, ASSESSEE MOVED AN APPLICATION U/S 154 OF THE ACT CLAIMING TH AT DEDUCTION U/S 80IB WAS ALLOWED AT RS. 4,33,07,242 AS AGAINST RS. 4,76,90,785 CLAIMED BY ASSESSEE BY REDUCING INTEREST INCOME OF RS. 43,83,543, WHICH IS ALREADY INCLUDED IN THE TOTAL INCOME. THER EFORE, AS ASSESSEE HAS NOT INCLUDED INTEREST INCOME WHILE CON SIDERING THE PROFIT FOR COMPUTATION OF DEDUCTION U/S 80IB, REDUC TION OF INTEREST INCOME FROM PROFIT OF 80IB WOULD AMOUNT TO TAXATION OF THE SAME INCOME TWICE. AO, HOWEVER, REJECTED ASSESSEES CLAI M BY OBSERVING THAT AS LD. CIT(A) HAS ALREADY DECIDED THE ISSUE AN D THE CONSEQUENTIAL ORDER IS ONLY IMPLEMENTING THE SAID D IRECTION OF LD. CIT(A), ASSESSEES CLAIM CANNOT BE ACCEPTED. AGAINS T THE ORDER PASSED U/S 154, ASSESSEE PREFERRED APPEAL BEFORE LD . CIT(A). LD. CIT(A), HOWEVER, DID NOT FIND MERIT IN ASSESSEES C LAIM FOR THE REASON THAT IN THE CONSEQUENTIAL ORDER, AO HAS MERE LY IMPLEMENTED THE DIRECTION OF LD. CIT(A). 5. THE LD. AR SUBMITTED BEFORE US THAT INTEREST INC OME FORMS PART OF P&L ACCOUNT AND HAS BEEN CONSIDERED WHILE C OMPUTING GROSS TOTAL INCOME. HE SUBMITTED THAT WHILE COMPUT ING DEDUCTION U/S 80IB ASSESSEE HAS NOT INCLUDED INTEREST INCOME, WHICH WAS CREDITED UNDER THE HEAD OFFICE ACCOUNT AND TEHRI SI TE ACCOUNT. HOWEVER, AO WHILE APPORTIONING INTEREST INCOME AMON GST 80IB UNITS AND NON 80IB UNITS SHOULD HAVE REDUCED IT WHI LE COMPUTING DEDUCTION U/S 80IB BECAUSE INTEREST INCOME OFFERED IN HEAD OFFICE ACCOUNT IS SHIFTED TO THE UNITS BY WAY OF APPORTION MENT AND INCLUDED IN THE INCOMES OF THE UNIT. IT WAS SUBMITT ED, AS INTEREST INCOME IS NOT DERIVED FROM BUSINESS OF INDUSTRIAL U NDERTAKING, THE SAME DOES NOT QUALIFY FOR EXEMPTION U/S 80IB, THERE FORE, ASSESSEE 4 ITA NO. 176/HYD/2014 PES ENGINEERS PVT. LTD. HAS OFFERED INTEREST INCOME IN HEAD OFFICE ACCOUNT AND IN TEHRI SITE OFFICE. LD. AR SUBMITTED, WHEN INTEREST INCOM E IS APPORTIONED AMONGST 80IB AND NON 80IB UNITS, THE SAME SHOULD AL SO BE REDUCED FROM HO INCOME SHOWN BY ASSESSEE, OTHERWISE IT WILL AMOUNT TO TAXING THE SAME INCOME TWICE. 6. THE LD. DR, ON THE OTHER HAND SUBMITTED BEFORE U S THAT ASSESSEE HAVING NOT CHALLENGED THE ORDER OF LD. CIT (A) AND THE CONSEQUENTIAL ORDER HAVING BEEN PASSED IN TERMS WIT H THE DIRECTION OF LD. CIT(A) IN SO FAR AS APPORTIONMENT OF INTERES T IS CONCERNED, AT THIS STAGE ASSESSEE CANNOT CHALLENGE THE CONSEQUENT IAL ORDER PASSED BY AO. 7. WE HAVE CONSIDERED THE SUBMISSIONS OF THE PARTIE S AND PERUSED THE ORDERS OF THE REVENUE AUTHORITIES AS WE LL AS OTHER MATERIALS ON RECORD. UNDISPUTEDLY, WHILE COMPLETING ASSESSMENT AO HAS REJECTED ASSESSEES CLAIM OF DEDUCTION U/S 8 0IB IN TOTO. WHILE DOING SO, HE HAS ALSO COMMENTED THAT AS PER T HE DECISION OF THE HONBLE SUPREME COURT IN CASE OF PANDIYAN CHEMI CALS LTD., ASSESSEE CANNOT CLAIM DEDUCTION U/S 80IB ON THE INT EREST INCOME AS IT IS NOT A PROFIT DERIVED FROM ELIGIBLE BUSINES S. LD. CIT(A), THOUGH, ACCEPTED ASSESSEES CLAIM OF ALLOWABILITY U /S 80IB, HOWEVER, HE DIRECTED AO TO APPORTION INTEREST INCOM E AMONGST VARIOUS UNITS BY FOLLOWING THE ORDER PASSED BY HIS PREDECESSOR FOR AY 2005-06, WHICH HAS ALSO BEEN ACCEPTED BY ASSESSE E. ADMITTEDLY, THE ORDER PASSED BY LD. CIT(A) DIRECTIN G APPORTIONMENT OF INTEREST INCOME HAS NOT BEEN CHALLENGED BY ASSES SEE BEFORE HIGHER APPELLATE AUTHORITY. THUS, IN A SENSE, LD. CIT(A)S ORDER BECAME FINAL. AS CAN BE SEEN, AO WHILE COMPUTING DE DUCTION U/S 80IB AS PER THE DIRECTION OF LD. CIT(A) APPORTIONED INTEREST INCOME AMONGST UNITS AND THEREAFTER COMPUTED DEDUCTION U/S 80IB. IN THE AFORESAID FACTS AND CIRCUMSTANCES, AO HAVING PASSED 5 ITA NO. 176/HYD/2014 PES ENGINEERS PVT. LTD. CONSEQUENTIAL ORDER STRICTLY IN COMPLIANCE TO THE D IRECTIONS OF LD. CIT(A) AND THE ORDER OF LD. CIT(A) HAVING NOT BEEN CHALLENGED BY ASSESSEE BEFORE HIGHER APPELLATE AUTHORITY, NO FAUL T CAN BE FOUND WITH THE CONSEQUENTIAL ORDER PASSED BY AO. EVEN ACC EPTING THE FACT THAT GIVING EFFECT TO THE DIRECTIONS OF LD. CI T(A) MIGHT HAVE RESULTED IN AN ERRONEOUS COMPUTATION OF DEDUCTION U /S 80IB, BUT, NOTHING CAN BE DONE AT THIS STAGE AS ASSESSEE HAS N OT CHALLENGED THE DIRECTIONS OF LD. CIT(A) TO APPORTION THE INTE REST INCOME AMONGST DIFFERENT UNITS. IN THE AFORESAID VIEW OF THE MATTER, WE DO NOT FIND ANY INFIRMITY IN THE IMPUGNED ORDER OF LD. CIT(A), WHICH IS ACCORDINGLY UPHELD. 8. IN THE RESULT, APPEAL OF THE ASSESSEE IS DISMISS ED. PRONOUNCED IN THE OPEN COURT ON 20/02/2015. SD/- SD/- (P.M. JAGTAP) (SAKTIJIT DEY) ACCOUNTANT MEMBER JUDICIAL MEMBER HYDERABAD, DATED: 20 TH FEBRUARY, 2015 KV COPY TO:- 1) PES ENGINEERS PVT. LTD., 1 ST FLOOR, PANCOM CHAMBERS, 6-3-1090/1A, RAJ BHAVAN ROAD, SOMAJIGUDA, HYD-8 2. 2) DCIT, CIRCLE 16(3), AAYAKAR BHAVAN, BASHEERBAG , HYDERABAD 3) CIT(A)-V, HYDERABAD 4) CIT-IV, HYDERABAD 5) THE DEPARTMENTAL REPRESENTATIVE, I.T.A.T., HYDE RABAD. 6 ITA NO. 176/HYD/2014 PES ENGINEERS PVT. LTD.