Packaging India Pvt. Ltd., Pondicherry V. JCIT, Pondicherry

ITA 186/CHNY/2017

• Counselvise Citation: [2019] 117 COUNSELVISE.COM (IT) 0152 (ITAT-CHENNAI)
• Duration Of Justice: 2 year(s) 5 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-06-2019
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: D
• Next Hearing Date: 04-09-2017
• Assessment Year: 2012-2013
• Appeal Filed On: 20-01-2017
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: MRS R ANITA
• Section: 143(3); 37(1)

Judgement Text

, , IN THE INCOME-TAX APPELLATE TRIBUNAL D BENCH, CHENNAI , . , BEFORE SHRI INTURI RAMA RAO, ACCOUNTANT MEMBER & SHRI DUVVURU RL REDDY, JUDICIAL MEMBER ./ I.T.A. NO. 186/CHNY/2017 / ASSESSMENT YEAR: 2012-13 M/S. PACKAGING INDIA PVT. LTD., #151/4 & 151/5, KANDANPET VILLAGE, PILLAIYARKUPPAM POST, BAHOUR COMMUNE, PONDICHERRY 607 402. [PAN:AAACP3492J] VS. THE JOINT COMMISSIONER OF INCOME TAX, PONDICHERRY RANGE, PONDICHERRY. ( /APPELLANT) ( /RESPONDENT) / APPELLANT BY : SHRI PHILIP GEORGE, ADVOCATE / RESPONDENT BY : MRS. R. ANITA, JCIT / DATE OF HEARING : 17.06.2019 /DATE OF PRONOUNCEMENT : 26.06.2019 / O R D E R PER DUVVURU RL REDDY, JUDICIAL MEMBER: THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF THE LD. COMMISSIONER OF INCOME TAX (APPEALS), PUDUCHERRY, DATED 07.11.2016 RELEVANT TO THE ASSESSMENT YEAR 2012-13. IN ITS APPEAL, THE ASSESSEE HAS RAISED THREE GROUNDS VIZ., (I) CONFIRMATION OF DISALLOWANCE OF PAYMENT MADE TO UTTARANCHAL POWER CORPORATION, (II) CONFIRMATION OF DISALLOWANCE OF PAYMENT MADE TO SALES TAX DEPARTMENT (III) REJECTION OF ALTERNATIVE PLEA OF PROPORTIONATE DEDUCTION UNDER SECTION 80IC OF THE INCOME TAX ACT, 1961 [ACT IN SHORT] IN THE EVENT OF CONFIRMATION OF DISALLOWANCES. I.T.A. NO. 186/CHNY/17 2 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE FILED ITS RETURN OF INCOME FOR THE ASSESSMENT YEAR 2012-13 ADMITTING INCOME AT .4,45,54,222/- AFTER CLAIMING DEDUCTION OF .5,23,49,681/- UNDER CHAPTER VIA AND PAID TAX ON MAT PROVISIONS. THE CASE OF THE ASSESSEE WAS SELECTED FOR SCRUTINY. AGAINST STATUTORY NOTICES, THE ASSESSEE FILED RELEVANT DETAILS. ON VERIFICATION OF THE DETAILS FILED BY THE ASSESSEE, THE ASSESSMENT UNDER SECTION 143(3) OF THE ACT WAS COMPLETED BY MAKING VARIOUS DISALLOWANCES. 2.1 AGAINST THE DISALLOWANCE OF PAYMENT MADE TO UTTARANCHAL POWER CORPORATION OF .11,04,495/-, ON VERIFICATION OF THE BOOKS OF ACCOUNT OF UTTARAKHAND UNIT, THE ASSESSING OFFICER NOTICED THAT THE ASSESSEE HAS MADE TWO PAYMENTS OF .11,51,782/- AND .16,335/- AS ELECTRICITY CHARGES, OUT OF THESE PAYMENTS PAID OF .10,92,420/- AND .12,075/- TO UTTARANCHAL POWER CORPORATION WERE DEBITED UNDER THIS HEAD. WHEN THE ASSESSEE WAS ASKED TO SUBMIT THE EXPLANATION AND DETAILS AND WHY THE PENALTY OF .11,04,495/- PAID TO UTTARANCHAL POWER CORPORATION SHOULD NOT BE DISALLOWED, THE ASSESSEE HAS SUBMITTED THAT BOTH THE PAYMENTS ARE AMOUNTS CHARGED BY UTTARANCHAL POWER CORPORATION AT ENHANCED TARIFF RATE FOR HAVING CONSUMED MORE ENERGY DURING RESTRICTED HOURS OF SUPPLY. ON VERIFICATION OF THE COPIES OF BILLS & LETTERS OF UTTARANCHAL POWER CORPORATION, THE ASSESSING OFFICER NOTICED THAT THERE WAS CLEAR CUT VIOLATION OF ORDER ISSUED BY UERC, WHICH HAS CLEARLY STATED THAT ANY VIOLATION DETECTED SHALL ATTRACT A PENALTY, BY VIOLATION OF I.T.A. NO. 186/CHNY/17 3 NORMS LAID DOWN BY UERC, THE ASSESSEE PAID PENALTY. SINCE THE CLAIM OF PENALTY IS NOT ALLOWABLE UNDER SECTION 37(1) OF THE ACT, THE PENALTY PAID BY THE ASSESSEE OF .11,04,495/- [.10,92,420 + 12,075] WAS BROUGHT TO TAX. ON APPEAL, AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE, THE LD. CIT(A) CONFIRMED THE DISALLOWANCE. 4. ON BEING AGGRIEVED, THE ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL. BY REITERATING THE SUBMISSIONS AS MADE BEFORE THE AUTHORITIES BELOW, THE LD. COUNSEL FOR THE ASSESSEE PRAYED FOR DELETING THE ADDITION. ON THE OTHER HAND, THE LD. DR STRONGLY SUPPORTED THE ORDERS OF AUTHORITIES BELOW. 5. WE HAVE HEARD BOTH THE SIDES, PERUSED THE MATERIALS AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF AUTHORITIES BELOW. WE HAVE ALSO PERUSED THE LETTER ISSUED BY THE UTTARANCHAL POWER CORPORATION LTD. IN 2009, FILED BY THE ASSESSEE, WHEREIN, IT HAS BEEN CATEGORICALLY STATED THAT AS PER TARIFF ORDER ISSUED BY UERC ANY VIOLATION DETECTED SHALL ATTRACT PENALTY OF .50 PER KVA/KW PER DAY OF THE CONTRACTED DEMAND FOR THE NUMBER OF DAYS OF SUCH VIOLATION. THE SAID ORDER FURTHER STATED THAT DURING THE RESTRICTED HOURS, THE INDUSTRIAL CONSUMERS ARE ALLOWED TO USE 15% OF THE CONTRACTED DEMAND ONLY AND ANY VIOLATION SHALL ATTRACT PENALTY AS SPECIFIED ABOVE. IN THE LETTER DATED 09/1/2012, THE EXECUTIVE ENGINEER OF UTTARANCHAL POWER CORPORATION LTD. HAS SPECIFICALLY MENTIONED THAT THE SUM OF .10,92,420/- I.T.A. NO. 186/CHNY/17 4 REPRESENTS PENALTY ONLY FOR VIOLATION OF TARIFF FOR 25 DAYS IN MARCH, 2010. FROM THE ABOVE LETTER, IT IS CLEAR THAT THE AMOUNT COLLECTED REPRESENTED ONLY PENALTY FOR VIOLATION OF THE LAW AND IT IS NOT NORMAL ELECTRICITY CHARGES AS CLAIMED BY THE ASSESSEE. 5.1 AS PER UERC NORMS, THERE ARE TWO DIFFERENT TYPES OF POWER SUPPLY I.E., CONTINUOUS SUPPLY AND NON-CONTINUOUS SUPPLY. THE CONSUMERS WHO HAVE OPTED FOR CONTINUOUS SUPPLY SHALL BE EXEMPTED FROM LOAD SHEDDING DURING SCHEDULED/UNSCHEDULED POWER CUTS AND DURING RESTRICTED HOURS OF THE PERIOD OF RESTRICTION IN USAGE APPROVED BY THE COMMISSION FROM TIME TO TIME, EXCEPT LOAD SHEDDING REQUIRED DUE TO EMERGENCY BREAKDOWN/SHUTDOWN. FOR SUCH CONSUMERS 10% INCREASE IN THE ENERGY CHARGE AS GIVEN IN RATE OF CHARGE SHALL BE APPLICABLE FOR THE REMAINING PART OF THE YEAR. DEMAND CHARGE AND OTHER CHARGES REMAIN SAME AS PER RATE OF CHARGE PRESCRIBED BY THE UERC. SIMILARLY, THE CONSUMERS NOT OPTING FOR CONTINUOUS SUPPLY (NON-CONTINUOUS SUPPLY), AS IN THE PRESENT CASE OF THE ASSESSEE, SHALL NOT BE ALLOWED TO USE POWER IN EXCESS OF 15% OF THEIR CONTRACTED DEMAND DURING RESTRICTED HOURS OF THE PERIOD OF RESTRICTION IN USAGE APPROVED BY THE COMMISSION FROM TIME TO TIME. FOR SUCH CONSUMERS ENERGY CHARGE, DEMAND CHARGE AND OTHER CHARGES AS PER RATE OF CHARGE GIVEN ABOVE SHALL BE APPLICABLE. HOWEVER, ANY VIOLATION DETECTED IN USAGE OF POWER DURING RESTRICTED HOURS (ABOVE 15% OF I.T.A. NO. 186/CHNY/17 5 CONTRACTED LOAD) SHALL ATTRACT A PENALTY, CONTINUOUS SUPPLY SURCHARGE AND OTHER TERMS AS SPECIFIED BY THE UERC. 5.2 THUS, WITHOUT OPTING FOR CONTINUOUS POWER SUPPLY, THE ASSESSEE WAS FOUND IN USAGE OF ENERGY DURING RESTRICTED HOURS (ABOVE 15% OF CONTRACTED LOAD), PROHIBITED BY LAW, THEREBY, IT WAS LEVIED TO PAY PENALTY, WHICH CANNOT BE TREATED AS JUST LIKE PAYMENT OF ELECTRICITY CHARGES, BUT, IT IS AN OFFENCE COMMITTED BY THE ASSESSEE AGAINST WHICH, THE ASSESSEE WAS PENALIZED. AS PER EXPLANATION TO SECTION 37(1) OF THE ACT, ANY EXPENDITURE INCURRED BY AN ASSESSEE FOR ANY PURPOSE WHICH IS AN OFFENCE OR WHICH IS PROHIBITED BY LAW SHALL NOT BE DEEMED TO HAVE BEEN INCURRED FOR THE PURPOSE OF BUSINESS OR PROFESSION AND NO DEDUCTION OR ALLOWANCE SHALL BE MADE IN RESPECT OF SUCH EXPENDITURE. THIS EXPLANATION WOULD SQUARELY APPLY TO THE FACTS OF THE ASSESSEE'S CASE AND THE AMOUNT PAID BEING PENALTY, THE ASSESSING OFFICER WAS JUSTIFIED IN DISALLOWING THE SAME AND RIGHTLY CONFIRMED BY THE LD. CIT(A). THUS, THE GROUND RAISED BY THE ASSESSEE STANDS DISMISSED. 6. THE NEXT GROUND RAISED IN THE APPEAL OF THE ASSESSEE RELATES TO DISALLOWANCE OF PENALTY PAYMENT MADE TO SALES TAX DEPARTMENT OF .9,89,171/-. THE ASSESSING OFFICER DISALLOWED THE PENALTY PAYMENT MADE TO THE SALES TAX DEPARTMENT, SINCE IN VIEW OF THE EXPLANATION TO SECTION 37(1) I.T.A. NO. 186/CHNY/17 6 OF THE ACT, THE ASSESSEE IS NOT ENTITLED TO CLAIM DEDUCTION OF THE SAID AMOUNT. ON APPEAL, THE LD. CIT(A) CONFIRMED THE DISALLOWANCE. 6.1 WE HAVE HEARD BOTH THE CONTENTIONS. WE HAVE CONSIDERED THE SUBMISSIONS OF THE LD. COUNSEL THAT THE PAYMENT MADE TO SALES TAX DEPARTMENT BY WAY OF INTEREST WHICH IS COMPENSATORY IN NATURE FOR BELATED FILING OF RETURN AND PAYMENT OF TAXES THEREON. WE HAVE ALSO GONE THROUGH THE ORDER OF THE JOINT COMMISSIONER (APPEALS) FIRST, COMMERCIAL TAX, UTTARAKHAND, IN ASSESSEES OWN CASE, WHEREIN, IT WAS AMPLY CLEAR AND ELABORATELY DISCUSSED THE CIRCUMSTANCES UNDER WHICH PENALTY WAS LEVIED, MORE PARTICULARLY, AGAINST LEVY OF PENALTY BY THE ASSESSING OFFICER [COMMERCIAL TAX], THE ASSESSEE PREFERRED FURTHER APPEAL. THEREFORE, THE PENALTY PAYMENT MADE BY THE ASSESSEE AND DISALLOWED BY THE ASSESSING OFFICER WAS RIGHTLY CONFIRMED BY THE LD. CIT(A). THUS, THE GROUND RAISED BY THE ASSESSEE STANDS DISMISSED. 7. THE NEXT GROUND RAISED IN THE APPEAL OF THE ASSESSEE RELATES TO DEDUCTION UNDER SECTION 80IC OF THE ACT ON THE GROUND THAT CONFIRMATION OF DISALLOWANCES WILL INCREASE THE INCOME OF THE ASSESSEE AND THEREBY THE ASSESSEE IS ELIGIBLE TO CLAIM DEDUCTION UNDER SECTION 80IC OF THE ACT. BY REFERRING TO CBDT CIRCULAR NO. 37/2016 DATED 02.11.2016, IT WAS THE SUBMISSION OF THE ASSESSEE THAT THE DISALLOWANCES MADE UNDER SECTIONS 32, I.T.A. NO. 186/CHNY/17 7 40(A)(I), 40A(3), 43B, ETC. OF THE ACT AND OTHER SPECIFIC DISALLOWANCES, RELATED TO THE BUSINESS ACTIVITY AGAINST WHICH THE CHAPTER VIA DEDUCTION HAS BEEN CLAIMED WOULD RESULT IN ENHANCEMENT OF THE PROFITS OF THE ELIGIBLE BUSINESS AND THAT DEDUCTION UNDER CHAPTER VIA IS ADMISSIBLE ON THE PROFITS SO ENHANCED BY THE DISALLOWANCE. 8. WE HAVE CONSIDERED THE SUBMISSIONS OF THE ASSESSEE AS WELL AS REVENUE. SIMILAR PLEA WAS RAISED BY THE ASSESSEE BEFORE THE LD. CIT(A). AGAINST THE SUBMISSIONS OF THE ASSESSEE, THE LD. CIT(A) HAS OBSERVED THAT AS PER EXPLANATION TO SECTION 37(1) OF THE ACT ITSELF, IT IS GIVEN THAT SUCH EXPENDITURE WHICH IS AN OFFENCE OR PROHIBITED BY LAW SHALL NOT BE DEEMED TO HAVE BEEN INCURRED FOR THE PURPOSE OF BUSINESS OR PROFESSION AND NO DEDUCTION OR ALLOWANCE SHALL BE MADE IN RESPECT OF SUCH EXPENDITURE AND MADE IT CLEAR THAT ONLY THAT EXPENDITURE WHICH IS RELATED TO BUSINESS ACTIVITY WOULD COME UNDER THE PURVIEW OF THE AFORESAID CIRCULAR OF THE CBDT. THE LD. CIT(A) FURTHER HELD THAT THE EXPENDITURE HAD ALREADY BEEN INCURRED AND THEREFORE, BUT FOR THE DISALLOWANCE UNDER THE INCOME TAX ACT, WOULD NOT INCREASE THE PROFIT IN THE HANDS OF THE ASSESSEE. THUS, THE LD. CIT(A) HAS HELD THAT AS THE DISALLOWANCE UNDER EXPLANATION TO SECTION 37(1) OF THE ACT IS DEEMED TO HAVE NOT BEEN INCURRED FOR THE PURPOSE OF BUSINESS, THEY CANNOT BE CONSIDERED FOR THE PURPOSE OF COMPUTING PROFITS OF THE BUSINESS OF THE ASSESSEE, THEREBY, THE QUESTION OF CLAIMING ANY DEDUCTION UNDER SECTION I.T.A. NO. 186/CHNY/17 8 80IC OF THE ACT DOES NOT ARISE. IN THE APPELLATE ORDER, THE LD. CIT(A) HAS NARRATED CORRECT POSITION OF LAW AND PENALTY PAYMENT MADE BY THE ASSESSEE, CANNOT BE CLAIMED AS AN ALLOWABLE EXPENDITURE. IN VIEW OF THE ABOVE FACTS, THE ALTERNATIVE PLEA RAISED BY THE ASSESSEE STANDS DISMISSED. 9. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS DISMISSED. ORDER PRONOUNCED ON THE 26 TH JUNE, 2019 IN CHENNAI. SD/ - SD/ - (INTURI RAMA RAO) ACCOUNTANT MEMBER (DUVVURU RL REDDY) JUDICIAL MEMBER CHENNAI, DATED, 26.06.2019 VM/- /COPY TO: 1. / APPELLANT, 2. / RESPONDENT, 3. ( ) /CIT(A), 4. /CIT, 5. /DR & 6. /GF.