Century Enka Limited, Kolkata V. DCIT, C ircle- 1, Kolkata, Kolkata

ITA 1822/KOL/2010

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 5151 (ITAT-KOLKATA)
• Duration Of Justice: 5 year(s) 3 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-01-2016
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 28-07-2014
• Assessment Year: 1997-1998
• Appeal Filed On: 24-09-2010
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: ANJAN PRASAD RAY
• Assessee Lawyers: AKASH MANSINKA; VIVEK RUIA ACA
• Keywords: Business income; Opportunity of being heard
• Section: 143(3); 263

Judgement Text

I.T.A. NO. 1822/KOL./2010 ASSESSMENT YEAR: 1997-1998 PAGE 1 OF 5 IN THE INCOME TAX APPELLATE TRIBUNAL, KOLKATA A BENCH, KOLKATA BEFORE SHRI P.M. JAGTAP, ACCOUNTANT MEMBER AND SHRI S.S. VISWANETHRA RAVI, JUDICIAL MEMBER I.T.A. NO. 1822/KOL/ 2010 ASSESSMENT YEAR : 1997-1998 CENTURY ENKA LIMITED,.............................. .............................APPELLANT BIRLA BUILDING, 7 TH FLOOR, 9/1, R.N. MUKHERJEE ROAD, KOLKATA-700 001 [PAN : AABCC 2491 D] -VS.- DEPUTY COMMISSIONER OF INCOME TAX,................. ...............RESPONDENT CIRCLE-1, KOLKATA, AAYAKAR BHAWAN, P-7, CHOWRINGHEE SQUARE, KOLKATA-700 069 APPEARANCES BY: SHRI AKASH MANSINKA, FCA & SHRI VIVEK RUIA, ACA, FOR THE ASSESSEE SHRI ANJAN PRASAD RAY, JCIT, FOR THE DEPARTMENT DATE OF CONCLUDING THE HEARING : JANUARY 08, 2016 DATE OF PRONOUNCING THE ORDER : JANUARY 13, 2016 O R D E R PER SHRI P.M. JAGTAP :- THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAIN ST THE ORDER OF LD. COMMISSIONER OF INCOME TAX (APPEALS)-VI, KOLKATA DA TED 07.07.2010 FOR THE ASSESSMENT YEAR 1997-98 2. THE ASSESSEE IN THE PRESENT CASE IS A COMPANY, W HICH IS ENGAGED IN THE BUSINESS OF MANUFACTURE AND SALE OF POLYESTER A ND NYLON FILAMENTS YARNS, ENGINEERING PLASTIC, NYLON INDUSTRIAL YARN, TYRE CORD FABRICS, ETC. THE RETURN OF INCOME FOR THE YEAR UNDER CONSIDERATI ON WAS FILED BY IT ON 21.11.1997 SHOWING TOTAL INCOME OF RS.32,66,13,040/ -. IN THE ASSESSMENT COMPLETED UNDER SECTION 143(3) VIDE AN ORDER DATED 09.03.2000, THE TOTAL INCOME OF THE ASSESSEE WAS DETERMINED BY THE ASSESS ING OFFICER AT RS.33,74,95,090/-. THE RECORDS OF THE SAID ASSESSME NT CAME TO BE I.T.A. NO. 1822/KOL./2010 ASSESSMENT YEAR: 1997-1998 PAGE 2 OF 5 EXAMINED BY THE LD. CIT AND ON SUCH EXAMINATION, HE FOUND THAT THE ORDER PASSED BY THE ASSESSING OFFICER UNDER SECTION 143(3 ) HAD SUFFERED, INTER ALIA, FROM THE FOLLOWING ERROR:- THE ASSESSEE CLAIMED DEDUCTION U/S. 80I/ 80IA AMOU NTING TO RS.7,46,64,648/- AND FOR RS.3,98,76,252/- FOR IT S UNIT NO. 16 & 17 RESPECTIVELY. IT WAS NOTICED FROM THE RECOR DS THAT THE SAID DEDUCTION ACTUALLY RELATED TO UNITS NO. 17 AND 20 RESPECTIVELY. IT WAS FURTHER NOTICED THAT WHILE COM PUTING THE INCOME PERTAINING TO THSE UNITS EXPENDITURES ON ACCOUNT OF COMMISSION PAID FOR SALES AND TRANSPORT HANDLING AND OCTROI DUTY WERE NOT TAKEN INTO ACCOUNT ALTHOUGH AN AMOUNT OF RS.2,76,87,520/- AND RS.3,28,18,000/- WERE SHOWN RESPECTIVELY UNDER THESE HEADS IN THE PROFIT & LOSS ACCOUNT. THUS THE INCOME FROM THE UNITS NO. 17 AND 20 WERE COMPUTED AT A HIGHER FIGURE AND NATURALLY THE DEDUC TION U/S 80I / 80IA WERE ALLOWED AT A HIGHER AMOUNT, REDUCIN G THE INCOME. THUS, ON THIS POINT ALSO, THE ASSESSMENT WA S ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENU E. NOTICE UNDER SECTION 263, THEREFORE, WAS ISSUED BY THE LD. CIT(APPEALS) CALLING FOR THE EXPLANATION OF THE ASSESSEE. IN REP LY, IT WAS EXPLAINED BY THE ASSESSEE THAT THE SALE OF TEXTILE YARNS WAS PRE DOMINANTLY EFFECTED THROUGH DEALERS/AGENTS AND, THEREFORE, COMMISSION W AS PAYABLE ONLY IN RESPECT OF SUCH SALES. IT WAS SUBMITTED THAT THE SA LE OF TYRE YARN, ON THE OTHER HAND, WAS PREDOMINANTLY EFFECTED DIRECTLY AND NO COMMISSION WAS PAYABLE FOR THE SALE. IT WAS ALSO SUBMITTED THAT IN CASE OF TYRE-CORD FABRICS, THE TYRE MANUFACTURERS THEMSELVES USED TO ARRANGE TO LIFT THE MATERIALS THROUGH THEIR AUTHORIZED TRANSPORTERS AND SINCE THE FREIGHT COST WAS BORNE BY THEM, HARDLY ANY FREIGHT EXPENDITURE W AS INCURRED BY THE ASSESSEE. THIS EXPLANATION OF THE ASSESSEE WAS NOT FOUND ACCEPTABLE BY THE LD. CIT IN THE ABSENCE OF ANY EVIDENCE TO SUPPO RT AND SUBSTANTIATE THE SAME AND ACCORDINGLY REVISING THE ORDER PASSED BY T HE ASSESSING OFFICER UNDER SECTION 143(3), HE DIRECTED THE ASSESSING OFF ICER TO RE-COMPUTE THE DEDUCTION ALLOWABLE TO THE ASSESSEE UNDER SECTION 8 0I/ 80IA AFTER ALLOWING OPPORTUNITY OF BEING HEARD TO THE ASSESSEE . AS PER THE DIRECTION GIVEN BY THE LD. CIT VIDE ORDER UNDER SECTION 263, A FRESH ORDER WAS PASSED BY THE ASSESSING OFFICER ON 18.09.2002, WHER EIN HE REDUCED THE CLAIM OF THE ASSESSEE FOR DEDUCTION UNDER SECTION 8 0I AND 80IA BY I.T.A. NO. 1822/KOL./2010 ASSESSMENT YEAR: 1997-1998 PAGE 3 OF 5 RS.48,07,135/- AFTER APPORTIONING THE COMMISSION AN D TRANSPORTATION EXPENSES ON THE BASIS OF SALES AMONG ALL THE UNITS OF THE ASSESSEE INCLUDING UNITS NO. 17 & 20, WHICH ARE ENTITLED FOR DEDUCTION UNDER SECTION 80I AND 80IA. 3. AGAINST THE ORDER PASSED BY THE ASSESSING OFFICE R UNDER SECTION 143(3) READ WITH SECTION 263, AN APPEAL WAS PREFERR ED BY THE ASSESSEE BEFORE THE LD. CIT(APPEALS) AND AFTER HAVING FAILED TO SUCCEED THEREIN, THE ASSESSEE HAS PREFERRED THIS APPEAL BEFORE THE TRIBU NAL ON THE FOLLOWING GROUNDS:- (1) BASED ON THE FACTS AND THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A)-VI, KOLKATA ERRED IN NOT UPHOLDING THE APPELLANTS CLAIM FOR DEDUCTION OF SP ECIFIC EXPENDITURE WHICH HAS BEEN ACCRUED BY THE APPELLANT ON ACTUAL BASIS WHILE DETERMINING AMOUNT OF DEDUCTION UNDER SECTION 80I AND 80IA, IN RESPECT OF ELIGIBLE UNITS. (2) WITHOUT PREJUDICE TO THE ABOVE, THE LD. CIT(A) ERRED IN DISREGARDING THE APPELLANTS SUBMISSION THAT EVEN I F THE SPECIFIC EXPENDITURE NEEDS TO BE ALLOCATED TO THE E LIGIBLE UNITS, THEN SUCH ALLOCATION SHOULD BE UNDERTAKEN IN THE RATIO OF EXTERNAL SALES OF THE ELIGIBLE UNIT (I.E. AGGREGATE SALES LESS INTER-UNIT TRANSFER) INSTEAD OF AGGREGAT E SALES, SINCE THE EXPENDITURE (I.E. TRANSPORTATION, HANDLIN G & OCTROI AND COMMISSION ON SALES) HAS NOT BEEN INCURR ED IN RELATION TO INTER-UNIT TRANSFERS. 4. WE HAVE HEARD THE ARGUMENTS OF BOTH THE SIDES AN D ALSO PERUSED THE RELEVANT MATERIAL AVAILABLE ON RECORD. AS REGARDS T HE ISSUE RAISED BY THE ASSESSEE IN GROUND NO. 1, IT IS OBSERVED THAT THE S AME WAS CONSIDERED AND DECIDED BY THE LD. CIT IN THE ORDER PASSED UNDER SE CTION 263 VIDE PARAGRAPH NO. 5, WHICH READS AS UNDER:- 5. IN REGARD TO THE PAYMENT OF COMMISSION PAID FOR SALES AND TRANSPORT HANDLING AND OCTROI DUTY IT IS SEEN THAT THE ASSESSEE HAD NOT COME OUT WITH THE FULL FA CTS. THE ASSESSEE HAS NOT FURNISHED ANY EVIDENCE IN SUPPORT OF ITS CONTENTION THAT IN THE CASE OF TEXTILE YARNS AND TY RE CORD FABRICS NO COMMISSION WAS PAYABLE BY THE AGENTS RAT HER THE PURCHASERS LIFT THE GOODS FROM THE PREMISES OF THE ASSESSEE. A BUSINESS HOUSE MAINTAINS SOME RULES, REGULATIONS AND SYSTEMS WHICH ARE UNIFORM IN ALL TH E I.T.A. NO. 1822/KOL./2010 ASSESSMENT YEAR: 1997-1998 PAGE 4 OF 5 UNITS. IT MAY NOT BE SUCH THAT ONE UNIT REVERSES TH E PROCEDURES FOLLOWED BY OTHER UNITS, BOTH BELONGING TO THE SAME MANAGEMENT. THE CORRECT PROCEDURE WOULD HAVE BEEN THAT TOTAL COMMISSION ON SALES SHOULD BE DIVID ED BY THE TOTAL SALES AND MULTIPLIED BY THE SALES MADE IN THAT UNIT. THE SAME PROCEDURE IS TO BE APPLIED IN CASE O F FREIGHT, OCTROI AND TRANSPORT CHARGES. IT WILL BE F OUND THAT A LESSER AMOUNT OF PROFIT WILL ARISE IN UNIT NO. 17 AND 20. IT IS MANIFEST FROM THE RELEVANT PORTION OF THE LD. CITS ORDER PASSED UNDER SECTION 263 AS REPRODUCED ABOVE THAT THE ISSU E WAS DECIDED BY THE LD. CIT ON MERIT HOLDING THAT THE COMMISSION ON SAL ES AND TRANSPORTATION CHARGES ARE REQUIRED TO BE APPORTIONED ON THE BASIS OF SALES OF ALL THE UNITS OF THE ASSESSEE INCLUDING UNITS NO. 17 & 20, WHICH ARE ELIGIBLE FOR DEDUCTION UNDER SECTION 80I AND 80IA. SINCE NO APPE AL HAS BEEN FILED BY THE ASSESSEE AGAINST THE ORDER PASSED BY THE LD. CI T UNDER SECTION 263, AS ADMITTED BY THE LD. COUNSEL FOR THE ASSESSEE AT THE TIME OF HEARING BEFORE US, THIS ISSUE, IN PRINCIPLE, HAS BECOME FINAL ON M ERIT AND THE ASSESSEE, IN OUR OPINION, IS NOT ENTITLED TO RAISE THE SAME IN T HE PRESENT APPEAL, WHICH IS ARISING FROM THE ORDER OF THE ASSESSING OFFICER PASSED UNDER SECTION 143(3) READ WITH SECTION 263 GIVING EFFECT TO THE O RDER OF THE LD. CIT PASSED UNDER SECTION 263. WE, THEREFORE, FIND NO ME RIT IN GROUND NO. 1 RAISED BY THE ASSESSEE AND DISMISS THE SAME. 5. AS REGARDS GROUND NO. 2, WE, HOWEVER, FIND MERIT IN THE ISSUE RAISED THEREIN RELATING TO THE ASSESSEES ALTERNATIVE CLAI M THAT WHILE APPORTIONING THE SALES COMMISSION AND TRANSPORTATIO N EXPENSES AS PER THE DIRECTION GIVEN BY THE LD. CIT IN HIS ORDER UND ER SECTION 263, THE ASSESSING OFFICER OUGHT TO HAVE TAKEN ONLY THE SALE S MADE TO THE THIRD PARTIES AND NOT TO THE GOODS TRANSFERRED FROM ONE U NIT OF THE ASSESSEE TO OTHER UNITS, AS THERE IS NO QUESTION OF PAYMENT OF ANY COMMISSION ON SUCH INTER-UNIT SALES AND THERE IS HARDLY ANY QUESTION O F TRANSPORTATION INVOLVED IN SUCH INTER-UNIT SALES, WHICH ARE LOCATE D AT ONE PLACE. WE, ACCORDINGLY, DIRECT THE ASSESSING OFFICER TO RE-COM PUTE THE DEDUCTION ALLOWABLE TO THE ASSESSEE UNDER SECTION 80I AND 80I A IN RESPECT OF UNITS I.T.A. NO. 1822/KOL./2010 ASSESSMENT YEAR: 1997-1998 PAGE 5 OF 5 NO. 17 & 20 BY APPORTIONING THE SALES COMMISSION AN D TRANSPORTATION EXPENSES IN THE RATIO OF SALES MADE TO THIRD PARTIE S ONLY. GROUND NO. 2 OF THE ASSESSEES APPEAL IS ACCORDINGLY ALLOWED. 6. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PAR TLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON JANUARY 13, 2016. SD/- SD/- (S.S. VISWANETHRA RAVI) (P.M. JAGTAP) JUDICIAL MEMBER ACCOUNTANT MEMBER KOLKATA, THE 13 TH DAY OF JANUARY, 2016 COPIES TO : (1) CENTURY ENKA LIMITED, BIRLA BUILDING, 7 TH FLOOR, 9/1, R.N. MUKHERJEE ROAD, KOLKATA-700 001 (2) DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE-1, KOLKATA, AAYAKAR BHAWAN, P-7, CHOWRINGHEE SQUARE, KOLKATA-700 069 (3) COMMISSIONER OF INCOME TAX (APPEALS)-VI, KOLKATA (4) COMMISSIONER OF INCOME TAX- , KOLKATA (5) THE DEPARTMENTAL REPRESENTATIVE (6) GUARD FILE BY ORDER ASSISTANT REGISTRAR, INCOME TAX APPELLATE TRIBUNAL, KOLKATA BENCHES, KOLKATA LAHA/SR. P.S.