DCIT, Circle - 2, Kolkata, Kolkata V. M/s. LMJ Logistics Ltd., Kolkata

ITA 1800/KOL/2010

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 1643 (ITAT-KOLKATA)
• Duration Of Justice: 6 year(s) 8 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 02-06-2017
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: C
• Next Hearing Date: 01-11-2016
• Assessment Year: 2007-2008
• Appeal Filed On: 20-09-2010
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: MD GHAYAS UDDIN JCITSRDR
• Assessee Lawyers: ARTI DEBNATH
• Keywords: Business income; Depreciation
• Section: 143(3); 115JB; 80IB

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL KOLKATA BENCH C KOLKATA BEFORE SHRI N.V.VASUDEVAN, JUDICIAL MEMBER AND SHRI WASEEM AHMED, ACCOUNTANT MEMBER ITA NO. 1800 / KOL / 2010 ASSESSMENT YEAR :2007-08 DCIT, CIRCLE-2, P-7, CHOWRINGHEE SQUARE, KOLKATA-69 V/S . M/S LMJ LOGISTICS LTD. 30, J.L. NEHRU ROAD, KOLKATA-16 [ PAN NO.AABCP 8494 K ] /APPELLANT .. / RESPONDENT /BY APPELLANT MD. GHAYAS UDDIN, JCIT-SR-DR /BY RESPONDENT SMT. ARTI DEBNATH, FCA /DATE OF HEARING 20-04-2017 /DATE OF PRONOUNCEMENT 02-06-2017 / O R D E R PER WASEEM AHMED, ACCOUNTANT MEMBER:- THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST THE ORDER OF COMMISSIONER OF INCOME TAX (APPEALS)-I, KOLKATA DAT ED 09.07.2010. ASSESSMENT WAS FRAMED BY DCIT, CIRCLE-2, KOLKATA U/ S 143(3) OF THE INCOME TAX ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT ) VIDE HER ORDER DATED 31.12.2009 FOR ASSESSMENT YEAR 2007-08. MD. GHAYAS UDDIN, LD. DEPARTMENTAL REPRESENTATIVE R EPRESENTED ON BEHALF OF REVENUE AND SMT. ARTI DEBNATH, LD. AUTHORIZED REPRE SENTATIVE APPEARED ON BEHALF OF ASSESSEE. ITA NO.1800/KOL/2010 A.Y. 2007-08 DCIT CIR-2, KOL. VS. M/S LMJ LOGISTICS LTD. PAGE 2 2. AT THE OUTSET WE FIND THAT THE ISSUES RAISED BY THE REVENUE IN GROUND NO. 1 TO 3 ARE INTER-CONNECTED, THEREFORE WE DECIDE D TO ADJUDICATE THE SAME TOGETHER FOR THE SAKE OF CONVENIENCE. 2.1 THE ISSUES RAISED BY REVENUE IN ITS GROUNDS NO. 1 TO 3 OF APPEAL ARE THAT LD. CIT(A) ERRED IN DIRECTING THE ASSESSING OF FICER FOR RE-VERIFICATION OF ADDITION OF 1,09,11,962/- ON ACCOUNT OF RENT RECEIPTS SHOWN AS BUSINESS INCOME AS WELL DENYING THE BENEFIT U/S 80-IB(11A) OF THE ACT FOR RS. 1,25,22,588/- ONLY. 3. FACTS IN BRIEF ARE THAT ASSESSEE IS A LIMITED CO MPANY AND ENGAGED IN BUSINESS OF CLEARING AND FORWARDING AGENTS. THE ASS ESSEE IS ALSO ENGAGED IN THE BUSINESS OF INTEGRATED ACTIVITY OF HANDLING, ST ORAGE AND TRANSPORTATION OF FOOD-GRAINS AT GANDHIDHAM, GUJARAT. THE ASSESSEE IS RUNNING A WAREHOUSE IN GANDHIDHAM PROVIDING INTEGRATED FACILITIES FOR THE FOOD-GRAINS. THE ASSESSEE FROM ITS UNIT AT GANDHIDHAM HAS SHOWN GROSS RECEIPT OF 1,98,69,397.97 ON ACCOUNT OF HANDLING CHARGES, TRANSPORTATION AND STO RAGE CHARGES. THE ASSESSEE IN RESPECT OF ITS UNIT AT GANDHIDHAM HAS C LAIMED DEDUCTION U/S. 80IB(11A) OF THE ACT. THE AO, DURING THE COURSE OF ASSESSMENT PROCEEDINGS, ISSUED A LETTER TO THE DIRECTORATE OF INCOME-TAX (I NVESTIGATION) UNIT AT GANDHIDHAM TO VERIFY THE VERACITY OF ITS INCOME FRO M THE UNIT OF GANDHIDHAM. THE INSPECTOR OF DIRECTORATE OF INCOME-TAX (INVESTI GATION) GANDHIDHAM IN TURN SUBMITTED ITS REPORT WHICH READS AS UNDER:- I) ASSESSEE IS HAVING TWO WAREHOUSES WHICH ARE NU MBERED AS 8 & 13 AT GANDHIDHAM, II) THESE WAREHOUSES WERE REGISTERED IN THE NAME OF ASSESSEE ON 28.07.2005; III) THE COMPLETION CERTIFICATE IN RESPECT OF WAREH OUSE NO. 8 WAS ISSUED ON 07.04.2007 AND IN RESPECT OF WARE HOUSE NO. 13 W AS ISSUED ON 12.03.2007. IV) THE PART OF WAREHOUSE WAS GIVEN ON RENT SINCE L ONG TIME TO M/S RISHI SHIPPING LTD. WHICH WAS FILLED WITH THE DAP (FERTIL IZER) ITA NO.1800/KOL/2010 A.Y. 2007-08 DCIT CIR-2, KOL. VS. M/S LMJ LOGISTICS LTD. PAGE 3 IN VIEW OF THE ABOVE, THE AO SOUGHT CLARIFICATION B Y ISSUING A NOTICE FOR THE DEDUCTION CLAIMED BY THE ASSESSEE U/S. 80B(11A) OF THE ACT. THE AO WAS OF THE VIEW THAT WAREHOUSES IN QUESTION WERE COMPLETED AT THE FAG-END OF THE RELEVANT FINANCIAL YEAR. THEREFORE THE ASSESSEE CAN NOT BE ENTITLED FOR DEDUCTION U/S. 80IB(11A) OF THE ACT. IN COMPLIANCE THERETO THE ASSESSEE SUBMITTED THAT THE CONSTRUCTION ACTIVITY OF WAREHOU SE AND LOGISTIC INFRASTRUCTURE WAS COMPLETED SOMETIME IN THE MONTH OF APRIL, 2006 AND AFTER THE COMPLETION OF THE CONSTRUCTION OF WAREHOUSE, TH E WAREHOUSE SPACE WERE RENTED OUT TO M/S RISHI SHIPPING LTD. IN THE MONTH OF MAY, 2006. THE ASSESSEE ALSO SUBMITTED THAT THE REPORT OF THE INSP ECTOR WAS FURNISHED VIDE DATED 23.12.2009 WHEREAS THE IMPUGNED CASE RELATES TO THE PREVIOUS YEAR 2006-07. AT THAT RELEVANT TIME, THERE WAS A STOCK O F FOOD-GRAINS OF M/S RISHI SHIPPING LTD. IN THE WAREHOUSE OF THE ASSESSEE. THU S, THE REPORT OF INSPECTOR ALLEGING THAT THE WAREHOUSE WAS FILLED FOR STORAGE OF DAP (FERTILIZER) CANNOT BE ACCEPTED. HOWEVER, THE AO DISREGARDED THAT THE CONT ENTION OF THE ASSESSEE BY OBSERVING AS UNDER:- A) THE COMPLETION CERTIFICATE IN RESPECT OF WAREHOU SE NO. 13 AND 8 BY THE DEPUTY SECRETARY (P) KANDLA PORT TRUST WERE GIV EN AT THE FAG- END OF THE RELEVANT PREVIOUS YEAR I.E. 12.3.2007 AN D IN THE BEGINNING OF NEXT FINANCIAL YEAR I.E. 7.4.2007. THE YEAR OF D ISPUTE IS FINANCIAL YEAR 2006-07. THEREFORE THERE IS NO QUESTION OF UTI LIZATION OF THE WAREHOUSE FOR THE PURPOSE OF THE FOOD-GRAINS. THUS THE ASSESSEE IS NOT ENTITLED FOR DEDUCTION U/S. 80IB(11A) OF THE AC T. B) THE DEDUCTION U/S 80IB(11A) IS AVAILABLE WHERE T HE ASSESSEE IS ENGAGED IN THE BUSINESS OF PROVIDING INTEGRATED FAC ILITIES FOR HANDLING, TRANSPORTATION AND STORAGE OF FOOD-GRAINS . NO COPY OF AGREEMENT WITH M/S RISHI SHIPPING LTD. WAS PROVIDED BEFORE HAVING THE REPORT OF THE INSPECTOR. THEREFORE, IT IS TRANS PIRED THAT THE ASSESSEE WAS NOT ENGAGED IN THE INTEGRATED FACILITI ES AS ENVISAGED. THUS, THE AO WORKED OUT THE INCOME FROM THE UNIT LO CATED AT GANDHIDHAM AS DETAILED UNDER:- ITA NO.1800/KOL/2010 A.Y. 2007-08 DCIT CIR-2, KOL. VS. M/S LMJ LOGISTICS LTD. PAGE 4 1) GROSS RECEIVED FROM GANDHIDHAM OF 198,09,398/- LESS : RELEVANT EXPENSE IN RESPECT OF GANDHIDHAM UN IT 1. ELECTRICITY CHARGES RS. 23,879.00 2. GENERATOR CHARGES RS. 20,528.00 3. INSURANCE CHARGES RS. 78,568.00 4. PRINTING & STATIONERY RS. 10,865.00 5. REPAIRS & MAINTENANCE RS. 7,800.00 6. TRAVELLING CHARGES RS. 5,194.00 7. FINANCIAL CHARGES RS.24,50,230.00 (THE ABOVE EXPENSES ARE ALLOWED AS CLAIMED BY THE A SSESSEE, BROKERAGE & COMMISSION, CARTAGE EXPENSES, TRANSPORTATION CHARGE S ARE DISALLOWED AS THEY CANNOT RELATE TO BE CLAIMED TO AN UNIT OF HIRE , AMOUNT ON RATES & TAXES ARE DISALLOWED AS THEY CANNOT BE SEGREGATED FROM PE NALTY & FINES, WHICH ARE NOT ALLOWABLE) 9. DEPRECIATION RS.11,81,721.00 RS.37,78,784.00 NET PROFIT RS.1,60,30,614 (A) THEREFORE, AO WORKED OUT NET PROFIT OF 160,30,614/- AS DISCUSSED ABOVE. THE AO FURTHER OBSERVED THAT THE ASSESSEE IN RESPECT OF ITS UNIT AT GANDHIDHAM HAS ALREADY DECLARED PROFIT FOR A SUM OF 51,18,652/- AND ACCORDINGLY OPINED THAT SUM OF 109,11,962/- (160306134 -5118652) HAS TO BE ADDED T O THE TOTAL INCOME OF ASSESSEE. ACCORDINGLY, THE AO ADDED THE S UM OF 109,11,962/- TO THE TOTAL INCOME OF ASSESSEE. 3.1 BESIDES THE ABOVE, THE ASSESSEE IN ITS ORIGINAL RETURN OF INCOME CLAIMED A DEDUCTION OF 125,22,588/- U/S. 80IB(11A) OF THE ACT IN RESPECT O F ITS GANDHIDHAM UNIT WHICH WAS DENIED BY THE AO IN HIS A SSESSMENT ORDER FOR THE REASONS AS DISCUSSED AFORESAID. THUS, THE AO CONCLU DED THE ISSUE OF GANDHIDHAM UNIT BY ADDING A SUM OF 109,1,962/- TO THE TOTAL INCOME OF ASSESSEE AND BY DISALLOWING THE CLAIM OF ASSESSEE F OR 125,22,588/- U/S 80IB(11A) OF THE ACT. 4. AGGRIEVED, ASSESSEE PREFERRED AN APPEAL BEFORE L D. CIT(A). ITA NO.1800/KOL/2010 A.Y. 2007-08 DCIT CIR-2, KOL. VS. M/S LMJ LOGISTICS LTD. PAGE 5 SUBMISSION IN RESPECT OF ADDITION FOR 10,911,962/- . THE ASSESSEE BEFORE LD. CIT(A) SUBMITTED THAT THE I NCOME IN RESPECT OF GANDHIDHAM UNIT HAS ALREADY BEEN INCLUDED IN ITS FI NANCIAL STATEMENT AND HAS BEEN DULY OFFERED TO TAX IN ITS INCOME TAX RETURN. THEREFORE, FURTHER ADDITION OF 109,11,962/- WILL LEAD TO DOUBLE TAXATION. SUBMISSION IN RESPECT OF DISALLOWANCE OF DEDUCTION FOR 125,22,588/- U/S. 80IB(11A) OF THE ACT . IN THIS REGARD, THE SUBMISSION OF ASSESSEE CAN BE S UMMARIZED AS UNDER:- (I) THERE IS NO REQUIREMENT U/S. 80IB(11A) OF THE A CT THAT FOR CLAIMING THE DEDUCTION A COMPLETION CERTIFICATE HAS TO BE OB TAINED FROM THE CONCERNED AUTHORITY. IN FACT MAJOR CONSTRUCTION WAS COMPLETED IN THE BEGINNING OF FINANCIAL YEAR AND ACCORDINGLY IT WAS LET OUT TO M/S RISHI SHIPPING LTD. IN THE MONTH OF MAY, 2006. (II) THE OBSERVATION OF THE AO THAT THE AGREEMENT W ITH M/S RISHI SHIPPING LTD., WAS NOT REVEALED PRIOR TO THE INQUIR Y CONDUCTED BY THE INSPECTOR AT GANDHIDHAM IS NOT TRUE. IT IS BECAUSE IN THE COURSE OF ASSESSMENT VARIOUS DETAILS/ STATEMENTS WERE SUBMITT ED BEFORE THE AO WHEREIN THE NAME OF M/S RISHI SHIPPING LTD WAS VERY MUCH MENTIONED. THEREFORE, THE ALLEGATION OF THE AO IS BASED ON ITS OWN SURMISE AND CONJECTURE. (III) IT WAS A CLEARLY MENTIONED IN THE REPORT OF I NSPECTOR THAT THE WAREHOUSE WAS LET OUT TO M/S RISHI SHIPPING LTD. SI NCE LONG. THEREFORE THE CONTENTION OF THE AO THAT COMPLETION CERTIFICAT E WAS OBTAINED BY THE ASSESSEE SUBSEQUENTLY PROVES TO BE WRONG. THE INVES TIGATION REPORT SHOWS THAT THE COMMERCIAL ACTIVITY WAS STARTED BEFO RE OBTAINING THE COMPLETION CERTIFICATE FROM THE APPROPRIATE AUTHORI TY. AS PER THE INVESTIGATION REPORT, WHICH WAS CONDUCTED IN THE MO NTH OF DECEMBER, 2009 REVEALED THAT THERE WAS STORAGE OF DAP (FERTIL IZER) AND NOT OF THE FOOD GRAINS. HERE IT IS PERTINENT TO NOTE THAT THE ISSUE BEFORE THE AO PERTAINS TO THE FINANCIAL YEAR 2006-07 AND THE REPO RT OF THE INSPECTOR ITA NO.1800/KOL/2010 A.Y. 2007-08 DCIT CIR-2, KOL. VS. M/S LMJ LOGISTICS LTD. PAGE 6 WAS OBTAINED IN THE MONTH OF DECEMBER 2009 AND THUS THE REPORT OF INSPECTOR IS SILENT ABOUT THE ITEMS STORED IN THE F INANCIAL YEAR 2006-07. THE REPORT OF THE INSPECTOR CONTAINS ITEMS STORED I N THE PERIOD OF DECEMBER 2009 WHICH IS IRRELEVANT TO THE YEAR UNDER CONSIDERATION. THUS, THE ALLEGATION OF THE AO THAT THERE WAS STORA GE OF DAP (FERTILIZER) IS BASED ON ITS OWN SURMISE AND CONJECTURE. LD. CIT(A) AFTER CONSIDERING THE SUBMISSIONS OF ASSESSEE HAS DELETED THE ADDITION MA DE BY THE AO AS WELL AS GRANTED RELIEF U/S. 80IB(11A) OF THE ACT BY OBSERVI NG AS UNDER:- 1. IN THIS GROUND THE APPELLANT HAS OBJECTED TO TH E ACTION OF THE ASSESSING OFFICER IN MAKING AN ADDITION OF RS.1,09,11,9620/- AS INCOME FROM ITS GANDHIDHAM UNIT, THOUGH THE SAME APPEARS AS A PART OF NET PROFIT AS PER THE PROFIT AND LOSS ACCOUNT. 2. THE APPELLANT HAD SUBMITTED DURING THE APPELLATE PROCEEDINGS THAT THE AMOUNT WAS ALREADY A PART OF INCOME AS PER THE AUDI TED PROFIT AND LOSS ACCOUNT. THE DCIT HAS MISTAKENLY ADDED THE SAME AGA IN TO THE TOTAL INCOME. 3. IN VIEW OF THE SUBMISSIONS MADE BY THE APPELLANT AND LOOKING INTO THE FACTS AND ASSESSMENT ORDER OF THE CASE IT APPEARS THAT TH E ADDITION MADE BY THE AO IN TAXING THE SAME INCOME TWICE WHILE COMPUTING THE TOTAL INCOME OF THE APPELLANT IS INCORRECT. HENCE, A DIRECTION IS BEING ISSUED TO THE AO TO VERIFY THE FACT AN ACCORDINGLY IF THE APPELLANTS CONTENTI ON IS CORRECT, AS APPARENTLY IT IS DELETED THE ADDITION. DEDUCTION U/S. 80IB(11A) OF THE ACT FOR 1,25,22,588/- 1. IN THIS GROUND THE APPELLANT HAS OBJECTED TO TH E ACTION OF THE ASSESSING OFFICER IN DISALLOWING THE CLAIM OF THE APPELLANT A ND ADDING RS.1,25,22,588/- U/S 80IB(11A) OF THE ACT. 2. THE ASSESSING OFFICER BASED ON THE REPORT OF INS PECTOR, HA STATED THAT THE COMPLETION CERTIFICATE FOR THE WAREHOUSES AT KANDLA PORT TRUST AREA WE OBTAINED BY THE ASSESSEE ON 12.03.2007 & 07.04.2007 . FURTHER, THE AO CONTENDED THAT THE ASSESSEE HAD NEVER CAME UP WITH THE INFORMATION ON ITS ENGAGEMENT WITH M/S RISHI SHIPPING CO. PRIOR TO THE REVEALING OF THE RESULTS OF THE ENQUIRY BY THE INSPECTOR AT GANDHIDHAM. HENCE, THERE WAS NO OCCUPATION, THUS NO HANDLING, TRANSPORTATION AND STORAGE OPERAT ION IN FY 2006-07. HENCE, THE TOTAL CLAIM OF DEDUCTION U/S. 80IB(11A) AMOUNTI NG TO RS.1,25,22,588/- WAS DISALLOWED. 3. THE APPELLANT ON THE CONTRARY HAS CHALLENGED THI S HYPOTHESIS OF THE AO THAT COMPLETION CERTIFICATE IS NOT THE DETERMINING FACTO R FOR CLAIMING DEDUCTION U/S 80IB(11A) OF THE ACT. IN OTHER WORDS, IT IS NOT A P RE-REQUISITE FOR CLAIMING A DEDUCTION U/S. 80IB. TE APPELLANT SUBMITTED THAT TH EY HAD SUBMITTED A LIST OF STORAGE, HANDLING & TRANSPORTATION CHARGES FOR THE FY 2006-07 ON 03.12.2009, WHICH CONTAINS THE NAME OF M/S RISHI SH IPPING ON VARIOUS DATES. FURTHER, A PER THE INVESTIGATION REPORT ONLY, THE P LOT AT KANDLA PORT WAS GIVEN TO RISHI SHIPPING LIMITED SINCE LONG. ITA NO.1800/KOL/2010 A.Y. 2007-08 DCIT CIR-2, KOL. VS. M/S LMJ LOGISTICS LTD. PAGE 7 AS FAR AS THE FACTS RELATING TO THE STORAGE OF DAP (FERTILIZER) IS CONCERNED AND AS PER THE INVESTIGATION REPORT FROM THE INSPECTOR, GANDHIDHAM, IT APPARENTLY RELATES TO THE CURRENT YEAR ONLY AND NOT FOR THE AS SESSMENT YEAR IN QUESTION. THERE IS NOTHING ON RECORDS TO PROVE THAT THE WAREH OUSE AT PLOT NO 13 AT KANDLA PORT TRUST WAS USED FOR PURPOSES OTHER THAN THE STORAGE OF FOODGRAINS. 4. CONSIDERING THE SUBMISSIONS MADE BY THE APPELLAN T AND THE ASSESSMENT ORDER, IT APPEARS THAT THE AO WAS NOT JUSTIFIED IN DISALLOWING THE CLAIM. THE SUBMISSIONS MADE SHOW THAT THE APPELLANT WAS CARRYI NG ON THE INTEGRATED OPERATION OF HANDLING, TRANSPORTATION AND STORAGE S INCE SOME TIME AND NOTHING SPEEDIER WAS PLACED ON THE RECORDS BY THE A O TO PROVE THAT THE CONTENTION OF THE APPELLANT WAS WRONG. FURTHER, NOT HING ON THE RECORD HAS BEEN PLACED BY THE AO THAT THE ASSESSEE WAS NOT CAR RYING ON THE INTEGRATED ACTIVIT9Y OF HANDLING, TRANSPORTATION AND STORAGE O F FOOD GRAINS FOR THE ASSESSMENT YEAR UNDER APPEAL. HENCE, IN VIEW OF THE ABOVE SUBMISSIONS & RELYING O N THE DECISION OF THE SUPREME COURT IN THE CASE OF DHAKESHWARI COTTON MILLS 26 ITR 775 (SC), WHICH STATES THE GUIDELINE THAT THE ASSESSING OFFIC ER WHILE MAKING AN ASSESSMENT SECTION 143(3), IS NOT ENTITLED TO GUESS AND MAKE AN ASSESSMENT WITHOUT REFERENCE TO ANY EVIDENCE OR ANY MATERIAL A T ALL WHICH COULD WELL APPLY TO THE CASE OF THE APPELLANT. THE DISALLOWANCE IS T HEREFORE REMAINS UNSUBSTANTIATED AND CANNOT BE SUSTAINED. THE REVENUE, BEING AGGRIEVED, IS IN APPEAL BEFORE U S ON THE FOLLOWING GROUNDS:- 1.THAT ON FACTS AND CIRCUMSTANCES OF THE CASE THE L D. CIT(A) ERRED IN PASSING AN ORDER BASED EXCLUSIVELY ON THE SUBMISSIO N OF THE ASSESSEE AND COMPLETELY IGNORING THE DISCUSSIONS IN THE ASSESSME NT ORDER ON EACH OF THE DECIDED ISSUES. 2. THAT ON FACTS AND CIRCUMSTANCES OF THE CASE THE LD. CIT(A) ERRED IN DIRECTING THE AO FOR RE-VERIFICATION OF THE ADDITIO N OF RS.1,09,11,962/- DISREGARDING THE FACT THAT THIS ADDITION WAS ON ACC OUNT OF DETERMINATION OF RENT [ AS BUSINESS INCOME ] BASED ON RECEIPTS DISCLOSED BY THE ASSESSEE FROM THE UNIT AND SUBSEQUENT REJECTION OF CLAIM U/S. 80I B(11A). 3. THAT ON THE FACTS 4. THAT ON THE FACTS 5. LD. DR BEFORE US SUBMITTED THAT ASSESSEE IS ENTI TLED FOR DEDUCTION U/S. 80IB(11A) OF THE ACT WHEN HE IS ENGAGED IN THE INTE GRATED BUSINESS OF HANDLING, TRANSPORTATION AND STORAGE OTHERWISE THE DEDUCTION U/S. 80IB(11A) OF THE ACT IS NOT AVAILABLE. HE FURTHER SUBMITTED THAT THERE IS NO IOTA OF EVIDENCE SUGGESTING THAT ASSESSEE IS ENGAGED IN THE INTEGRAT ED FACILITIES. THE ASSESSEE IN THE INSTANT CASE HAS LET OUT THE PROPERTY TO M/S RISHI SHIPPING LTD. ON RENTAL BASIS AND IT NEVER PROVIDED ANY SERVICE AS ENVISAGE D UNDER THE PROVISION OF ITA NO.1800/KOL/2010 A.Y. 2007-08 DCIT CIR-2, KOL. VS. M/S LMJ LOGISTICS LTD. PAGE 8 SEC. 80IB(11A) OF THE ACT. LD. DR ALSO SUBMITTED TH AT IT IS NOWHERE CLEAR FROM THE AGREEMENT BETWEEN THE ASSESSEE AND M/S RISHI SH IPPING LTD. SUGGESTING THAT THE INTEGRATED SERVICES WERE PROVIDED BY THE A SSESSEE. LD. DR ALSO SUBMITTED THAT THERE IS NO EVIDENCE PROVIDED BY THE ASSESSEE AT THE TIME OF ASSESSMENT PROCEEDINGS SUGGESTING THAT HE IS PROVID ING INTEGRATED SERVICES AS ENVISAGED U/S. 80IB(11A) OF THE ACT AS WELL AS T HERE IS NO EVIDENCE THAT FOOD-GRAINS WAS STORED BY THE ASSESSEE IN ITS WAREH OUSE. LD. DR VEHEMENTLY RELIED ON THE ORDER OF AO. ON THE OTHER HAND, LD. AR FOR THE ASSESSEE FILED TW O SETS OF PAPER BOOK WHICH IS RUNNING PAGES FROM 1 TO 41 AND 1 TO 89 RESPECTIV ELY. HE SUBMITTED THAT THE CONSTRUCTION ACTIVITY OF THE WAREHOUSE WAS DULY COM PLETED IN THE YEAR UNDER CONSIDERATION AS EVIDENT FROM THE SCHEDULE-4 OF THE DEPRECIATION CHART WHICH IS PLACED ON PAGE 11 OF THE PAPER BOOK. THE ASSESSE E IN SUPPORT OF ITS WAREHOUSE AT GANDHIDHAM HAS CLAIMED DEPRECIATION IN THE BOOKS OF ACCOUNT. THEREFORE, THE ALLEGATION OF THE AO THAT IT WAS COM PLETED AT THE FAG-END OF THE FINANCIAL YEAR IS NOT JUSTIFIABLE AND HE REITERATED THE ARGUMENTS THAT WERE MADE BEFORE THE LD. CIT(A). 6. WE HAVE HEARD THE RIVAL CONTENTIONS OF BOTH THE PARTIES AND PERUSED AND CAREFULLY CONSIDERED THE MATERIAL ON RECORD; IN CLUDING THE JUDICIAL PRONOUNCEMENTS CITED AND PLACED RELIANCE UPON. AT T HE OUTSET, WE FIND THAT THE INCOME IN RESPECT OF GADHIDHAM UNIT WAS ALREADY OFFERED TO TAX AS EVIDENT FROM THE FINANCIAL STATEMENT OF THE ASSESSEE WHICH ARE PLACED ON PAGES 1 TO 21 OF THE PAPER BOOK, MORE PARTICULARLY FROM THE PR OFIT AND LOSS ACCOUNT WHICH IS PLACED ON PAGE 9 OF THE PAPER BOOK. MOREOVER, WE FIND THAT LD. CIT(A) HAS MERELY DIRECTED THE AO TO VERIFY THE SAME WHETHER T HE INCOME IN RESPECT OF GANDHIDHAM UNIT HAS BEEN INCLUDED IN ITS BOOKS OF A CCOUNT, AS SUCH, WE FIND NO INFIRMITY IN THE ORDER OF LD. CIT(A). THUS THE A O HAS ALL THE RIGHT AS PROVIDED UNDER THE STATUTE TO ENSURE WHETHER INCOME HAS BEEN INCLUDED IN THE INCOME OF THE ASSESSEE AND THEREFORE WE FIND NO INF IRMITY IN THE ORDER OF LD. CIT(A). HENCE, THIS GROUND OF REVENUES APPEAL IS D ISMISSED. ITA NO.1800/KOL/2010 A.Y. 2007-08 DCIT CIR-2, KOL. VS. M/S LMJ LOGISTICS LTD. PAGE 9 7. NEXT ISSUE IN THE INSTANT CASE RELATES THE DEDUC TION CLAIM BY ASSESSEE U/S 80IB(11A) OF THE ACT. THE DEDUCTION WAS DENIED BY AO ON THE GROUND THAT THE WAREHOUSES IN RESPECT OF WHICH THE DEDUCTION WA S CLAIMED WERE NOT READY FOR COMMERCIAL ACTIVITIES IN THE YEAR UNDER CONSIDE RATION. THE OBSERVATION OF THE AO WAS BASED ON THE COMPLETION CERTIFICATES WHI CH WERE ISSUED BY THE APPROPRIATE AUTHORITY AT THE FAG-END OF THE RELEVAN T FINANCIAL YEAR AND IN THE BEGINNING OF THE NEXT FINANCIAL YEAR. HOWEVER, ON P ERUSAL OF SECTION U/S 80IB OF THE ACT WE FIND THERE IS NO PRE-CONDITION FOR CL AIMING THE DEDUCTION THAT THERE HAS TO BE ANY COMPLETION CERTIFICATE. ADMITTE DLY, THE INCOME OF ASSESSEE HAS SHOWN THE UNIT LOCATED AT GANDHIDHAM IN ITS PRO FIT AND LOSS ACCOUNT. THUS, IN OUR CONSIDERED VIEW, THE DEDUCTION U/S. 80IB(11A ) OF THE ACT CANNOT BE DENIED MERELY ON THE GROUND THAT COMPLETION CERTIFI CATE WAS FURNISHED AT THE FAG-END OF FINANCIAL YEAR. IT IS ALSO PERTINENT TO NOTE THAT THE INSPECTOR HAS GIVEN THE REPORT BY STATING THAT THE WAREHOUSE WAS RENTED OUT TO M/S RISHI SHIPPING LIMITED SINCE LONG WHICH PROVES THAT THE C OMMERCIAL ACTIVITY STARTED BEFORE THE COMPLETION CERTIFICATED OBTAINED BY THE ASSESSEE. 7.1 NOW COMING TO THE OTHER REASON THAT THE REQUIRE MENT OF PROVISION OF SEC. 80IB(11A) OF THE ACT THAT THE ASSESSEE MUST BE ENGAGED IN THE INTEGRATED FACILITIES PROVIDING FOR HANDLING, TRANS PORTATION AND STORAGE CHARGES. IN THIS REGARD, WE FIND THAT THE ASSESSEE HAS NOT P RODUCED ANY SUPPORTING DOCUMENTS OTHER THAN LIST OF CLIENTS WHICH ARE PLAC ED IN THE RECORD. ON PERUSAL OF THAT LIST, WE FIND THAT IT IS INTERNAL LIST MAIN TAINED BY ASSESSEE WHICH WAS DULY FURNISHED BEFORE AUTHORITIES BELOW. HOWEVER, I N OUR CONSIDERED VIEW, THE LIST CANNOT BE A CONCLUSIVE EVIDENCE THAT THE ASSES SEE IS ENGAGED IN PROVIDING INTEGRATED SERVICE. HOWEVER, WE DISAGREE WITH THE CONTENTION OF LD. DR THAT THERE WAS A STORAGE OF DAP (FERTILIZER) IN THE WAREHOUSE MAINTAINED BY ASSESSEE. IT IS BECAUSE, THE AO OBSERVED THAT THERE WAS A STORAGE OF DAP (FERTIL IZER) ON THE BASIS OF REPORT SUBMITTED BY INSPECTOR WHICH WAS FURNISHED IN THE Y EAR 2009-10 AND THERE IS NO INFORMATION AVAILABLE WITH THE REVENUE WHAT WAS STORED IN THE YEAR UNDER CONSIDERATION IN THE WAREHOUSE OF THE ASSESSEE. THE REFORE, WE ARE OF THE VIEW ITA NO.1800/KOL/2010 A.Y. 2007-08 DCIT CIR-2, KOL. VS. M/S LMJ LOGISTICS LTD. PAGE 10 THAT THE REVENUE HAS FAILED TO PRODUCE NECESSARY EV IDENCE SUGGESTING THAT THERE WAS STORAGE OF DAP (FERTILIZER) AND NOT FOOD- GRAINS IN THE YEAR UNDER CONSIDERATION. NOW, THE ISSUE REMAINS TO BE ADJUDIC ATED WHETHER THE ASSESSEE IS ENGAGED IN THE INTEGRATED SERVICE AS EN VISAGED UNDER THE PROVISION OF SECTION 80IB(11A) OF THE ACT. IN THIS REGARD, LD. AR HAS FURNISHED A LIST OF 17 PAGES WHEREIN THE INCOME OF STORAGE, T RANSPORTATION, AND HANDLING CHARGES WAS SHOWN. HOWEVER, IN OUR CONSIDERED VIEW, THAT THE LIST CANNOT BE TREATED AS CONCLUSIVE EVIDENCE TO HOLD THAT THE ASS ESSEE IS ENGAGED IN THE INTEGRATED SERVICES. BESIDES THE ABOVE, WE ALSO FIN D THAT THE AO HAS NOT EXERCISED HIS POWER U/S. 143(3) OF THE ACT TO ASCER TAIN FROM THE PARTIES WHERE THEY AVAILED INTEGRATED SERVICES FROM THE ASSESSEE. WITH THIS VIEW OF THE MATTER, WE ARE INCLINED TO GIVE ONE MORE OPPORTUNIT Y TO ASSESSEE TO JUSTIFY ITS CLAIM FOR DEDUCTION U/S. 80IB(1A) OF THE ACT. IN TH E LIGHT OF ABOVE STATED DISCUSSION, THUS, WE RESTORE THIS ISSUE TO THE FILE OF AO TO ADJUDICATE THE ISSUE AFRESH IN ACCORDANCE WITH LAW AND AFTER GIVING OPPO RTUNITY OF BEING HEARD TO ASSESSEE. HENCE, THIS GROUND OF REVENUES APPEAL IS ALLOWED FOR STATISTICAL PURPOSE. 8. LAST ISSUE RAISED BY REVENUE IS THAT LD. CIT(A) ERRED IN DELETING THE DISALLOWANCE MADE BY AO FOR DEBT REDEMPTION RESERVE IN CALCULATING BOOK PROFIT U/S. 115JB OF THE ACT. 10. THE AO WHILE CALCULATING THE BOOK PROFIT HAS TR EATED THE DEBT REDEMPTION RESERVE AS UNASCERTAINED LIABILITY AND A CCORDINGLY DISALLOWED THE SAME. 11. AGGRIEVED, ASSESSEE PREFERRED AN APPEAL BEFORE LD.CIT(A). THE ASSESSEE BEFORE LD.CIT(A) SUBMITTED THAT THE AMOUNT OF DEBT REDEMPTION RESERVE REPRESENTS THE ASCERTAINED LIABILITY AND TH EREFORE LIABLE TO BE DEDUCTED WHILE WORKING OUT THE BOOK PROFIT U/S.115JB OF THE ACT. THE LD.CIT(A) AFTER CONSIDERING THE SUBMISSION OF ASSESSEE HAS DELETED THE ADDITION MADE BY THE AO BY OBSERVING AS UNDER:- 1. IN THIS GROUND THE APPELLANT HAS OBJECTED TO THE ACTION OF THE ASSESSING OFFICER IN DISALLOWING THE DEDUCTION OF RS.91,30,52 4/- MADE FROM BOOK PROFIT ON ITA NO.1800/KOL/2010 A.Y. 2007-08 DCIT CIR-2, KOL. VS. M/S LMJ LOGISTICS LTD. PAGE 11 ACCOUNT OF PROFIT TRANSFERRED TO DEBT REDEMPTION FUND FOR THE PURPOSES OF CALCULATION OF BOOK PROFIT U/S. 115JB OF THE INCOME TAX ACT, 1961. THE AO SUBMITTED THAT IN CALCULATION OF MAT U/S. 11 5JB DEFERRED TAX AND PROFIT TRANSFERRED TO DEBT REDEMPTION RESERVE IS N OT ALLOWANCE AS PER THE ACT. THE APPELLANT DURING THE APPELLATE PROCEEDING SUBMI TTED THAT TRANSFER TO DEBT REDEMPTION RESERVE ACCOUNT IS MEANT TO MEET FUTURE LIABILITY ARISING OUT OF THE REDEMPTION OF DEBTS. THIS DEBT REDEMPTION RESERVE I S CALLED RESERVE ONLY NAMESAKE. IT IS IN FACT, A PROVISION TO MEET A FUTU RE LIABILITY. THE APPELLANT ALSO PLACED RELIANCE ON THE DECISION OF THE HON. CALCUTT A TRIBUNAL IN THE CASE OF IOL LTD. 81 TTJ 525 (CAL)WHICH HOLD THAT DEBENTURE REDEMPTION RESERVE IS NEITHER A RESERVE NOR AMOUNT SET ASIDE TO MEET UNAS CERTAINED LIABILITIES. BASED ON THE SUBMISSION MADE AND FOLLOWING THE ABOV E DECISION, THE DISALLOWANCE OF DEBT REDEMPTION RESERVES WHILE CALC ULATING THE PROFIT U/S.115JB IS DELETED. THE REVENUE, BEING AGGRIEVED, IS IN APPEAL BEFORE U S ON THE FOLLOWING GROUND:- 4. THAT ON FACTS AND CIRCUMSTANCES OF THE CASE THE LD. CIT(A) ERRED IN DELETING THE DISALLOWANCE OF DEBT REDEMPTION RESERV E IN CALCULATING THE PROFIT U/S 115JB. 12. BEFORE US BOTH THE PARTIES RELIED ON THE ORDER OF AUTHORITIES BELOW AS FAVOURABLE TO THEM. 13. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. AT THE OUTSET, WE FIND THAT THE JUDGMENT OF HON'BLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. RAYMOND LTD. (2012) 209 TAXMAN 65 (BOM) HAS HELD THAT THE DEBENTURE REDEMPTION RESERVE IS A ASC ERTAINED LIABILITY AND THEREFORE ALLOWABLE DEDUCTION U/S. 115JB OF THE ACT . THE RELEVANT EXTRACT OF HEAD-NOTE IS REPRODUCED BELOW:- COMPANY-DEBENTURE REDEMPTION RESERVE-WHETHER A RESE RVE-WHETHER ITAT WAS RIGHT IN DELETING THE ADJUSTMENT MADE BY THE AO RELATING TO REDEMPTION OF DEBENTURES RESERVE AMOUNTING TO RS.18.80 CRORES- HELD, NATURE OF A DEBENTURE REDEMPTION RESERVE (DDR) HAS BEEN CONSIDE RED BY THE JUDGMENT OF THE SUPREME COURT IN NATIONAL RAYON CORPORATION LTD. VS. COMMISSIONER OF INCOME TAX [(1997) 227 ITR 764], WHEREIN IT WAS HELD THAT THE BASIC PRINCIPLE IS THAT AN AMOUNT SET APART TO MEET A KNO WN LIABILITY CANNOT BE REGARDED AS RESERVE - WHERE A COMPANY ISSUES DEBENTURES, THE LIABILITY TO REPAY ARISES THE MOMENT THE MONEY IS BORROWED-BY IS SUING DEBENTURES A COMPANY TAKES A LOAN AGAINST THE SECURITY OF ITS AS SETS-THOUGH THE LOAN MAY NOT BE REPAYABLE IN THE YEAR OF ACCOUNT, THE OBLIGA TION TO REPAY IS A PRESENT OBLIGATION. HENCE ANY MONEY SET APART IN THE ACCOUN TS OF THE COMPANY TO ITA NO.1800/KOL/2010 A.Y. 2007-08 DCIT CIR-2, KOL. VS. M/S LMJ LOGISTICS LTD. PAGE 12 REDEEM THE DEBENTURE HAS TO BE TREATED AS MONIES SE T APART TO MEET A KNOWN LIABILITY-CONSEQUENTLY, DEBENTURES HAVE TO BE SHOWN IN THE BALANCE SHEET OF A COMPANY AS A LIABILITY-BEING MONIES SET APART TO ME ET A KNOWN LIABILITY, A DEBENTURE REDEMPTION RESERVE CANNOT BE REGARDED AS A RESERVE FOR THE PURPOSE OF SCHEDULE VI TO THE COMPANIES ACT, 1956-M ERE FACT THAT A DEBENTURE REDEMPTION RESERVE IS LABELED AS A RESERV E WILL NOT RENDER IT AS A RESERVE IN THE TRUE SENSE OR MEANING OF THAT CONCEP T-AN AMOUNT WHICH IS RETAINED BY WAY OF PROVIDING FOR A KNOWN LIABILITY IS NOT A RESERVE-THEREFORE, TRIBUNAL WAS CORRECT IN HOLDING THAT THE AMOUNT WHI CH WAS SET APART AS A DEBENTURE REDEMPTION RESERVE IS NOT A RESERVE WITHI N THE MEANING OF EXPLANATION (B) TO SECTION 115JA OF THE INCOME TAX ACT, 1961. RESPECTFULLY FOLLOWING THE SAME WE DO NOT FIND ANY REASON TO INTERFERE IN THE ORDER OF LD. CIT(A). HENCE, THIS GROUND OF REVENUE IS DISMISSED. 14. IN THE RESULT, REVENUES APPEAL STANDS PARTLY ALLOW ED FOR STATISTICAL PURPOSE. ORDER PRONOUNCED IN THE OPEN COURT 02/ 06/2017 SD/- SD/- ( !') ( !') (N.V.VASUDEVAN) (WASEEM AHMED) (JUDICIAL MEMBER) (ACCOUNTANT MEMBER) KOLKATA, *DKP, SR.P.S $!% &- 02 / 06 /201 7 / COPY OF ORDER FORWARDED TO:- 1. /APPELLANT-DCIT, CIRCLE-2, P-7, CHOWRINGHEE SQUARE, KOLKATA-69 2. /RESPONDENT-M/S LMJ LOGISTICS LTD., 30, J.L. NEHRU ROAD, KOLKATA-16 3. %.%/0 1 1 2 / CONCERNED CIT KOLKATA 4. 1 1 2- / CIT (A) KOLKATA 5. 567 /0, 1 /0 , / DR, ITAT, KOLKATA 6. 7:; <= / GUARD FILE. BY ORDER/ 1! , /TRUE COPY/ SR. PRIVATE SECRETARY, HEAD OF OFFICE/DDO 1 /0 , ITA NO.1800/KOL/2010 A.Y. 2007-08 DCIT CIR-2, KOL. VS. M/S LMJ LOGISTICS LTD. PAGE 13