The ACIT, Central Circle, Vijayawada V. M/s KCP Ltd, Chennai., Chennai

ITA 191/VIZ/2005

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 7059 (ITAT-VISAKHAPATNAM)
• Duration Of Justice: 4 year(s) 11 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-03-2010
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: DB
• Assessment Year: 1996-1997
• Appeal Filed On: 05-04-2005
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: G S S GOPINATH
• Keywords: Rectification of order
• Section: 244A; 80HHC; 154

Judgement Text

PAGE 1 OF 6 IN THE INCOME TAX APPELLATE TRIBUNAL VISAKHAPATNAM BENCH, VISAKHAPATNAM BEFORE: SHRI SUNIL KUMAR YADAV, JUDICIAL MEMBER AND SHRI BR BASKARAN, ACCOUNTANT MEMBER ITA NO.102/VIZAG/20003 & ITA NO.191/VIZAG/2005 ASSESSMENT YEARS: 1995-96 & 1996-97 RESPECTIVELY ACIT, CENTRAL CIRCLE, VIJAYAWADA VS. THE KCP LTD., CHENNAI (APPELLANT) (RESPONDENT) APPELLANT BY: SHRI G.S.S. GOPINATH, DR RESPONDENT BY: SHRI C. SUBRAHMANYAM, CA ORDER PER BENCH: BOTH THE APPEALS FILED AT THE INSTANCE OF THE REVE NUE ARE DIRECTED AGAINST THE ORDER OF THE LD CIT (A) AND THEY RELATE TO THE ASSESSMENT YEAR 1995-96 & 1996-97. SINCE BOTH THE APPEALS WERE HEA RD TOGETHER WE FIND IT CONVENIENT TO DISPOSE THEM OFF BY THIS COMMON ORDER . 2. FIRST WE TAKE UP THE APPEAL RELATING TO THE ASS ESSMENT YEAR 1996- 97 (ITA NO.191/VIZAG/2005). THE ONLY ISSUE URGED IN THIS APPEAL IS WHETHER THE LD CIT (A) IS JUSTIFIED IN DIRECTING TH E ASSESSING OFFICER TO GIVE INTEREST AS PER THE CALCULATIONS MADE BY THE ASSESS EE. THE FACTS RELATING TO THE ISSUE ARE THAT THE AO ISSUED A NOTICE U/S 154 O N 16/6/2003 IN ORDER TO RECTIFY THE EXCESS INTEREST ALLOWED IN THE EARLIER ORDER DATED 21.5.2002 PASSED U/S 154 OF THE ACT. THE AO ALSO ENCLOSED A WORKING SHEET OF THE PROPOSED TAX WORKING, ACCORDING TO WHICH A TAX DEMA ND OF RS.2,30,521/- PAGE 2 OF 6 WAS PROPOSED TO BE RAISED. THE ASSESSEE OBJECTED TO THE PROPOSED WORKINGS MADE BY THE AO AND INSTEAD ENCLOSED A WORK ING SHEET INDICATING THEREIN THE TAX DEMAND, REFUND DUE AND INTEREST PAY ABLE TO THE ASSESSEE. ACCORDING TO THE CALCULATION MADE BY THE ASSESSEE, IT HAS TO GET A FURTHER REFUND OF RS.17,19,330/- TOWARDS THE TAX AND A SUM OF RS.2,08,103/- TOWARDS THE INTEREST UP TO 25-10-2002. ACCORDING T O THE ASSESSEE THE CALCULATION WITH REGARD TO THE TAX PORTION AND INTE REST PORTION SHOULD HAVE BEEN MADE SEPARATELY. HOWEVER, THE ASSESSING OFFIC ER, WITHOUT CONSIDERING THE OBJECTIONS OF THE ASSESSEE, PASSED THE ORDER U/S 154 ON 18-02-2004 DETERMINING THE TAX PAYABLE BY THE ASSES SEE AT RS.3,30,521/-. AGGRIEVED THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE LD CIT (A) WHO DIRECTED THE AO TO MODIFY THE ORDER IN ACCORDAN CE WITH THE CALCULATIONS MADE BY THE ASSESSEE. AGGRIEVED THE RE VENUE IS IN APPEAL BEFORE US. 3. WE HAVE HEARD THE PARTIES AND CAREFULLY PERUSED THE RECORD. FROM THE ORDER DATED 18-2-2004 PASSED U/S 154 OF THE ACT , WE NOTICE THAT THE REFUND WAS GRANTED TO THE ASSESSEE INITIALLY ON 31- 3-1998. THEREAFTER REFUNDS WERE GIVEN IN INSTALLMENTS ON 30-8-2001, 24 -7-2002, 6-9-2002 AND 15-2-2003. IN BETWEEN THERE WAS A TAX DEMAND AND T HE AO HAD CHARGED INTEREST U/S 220(2) OF THE ACT FOR THE PERIOD FROM 1.5.99 TO 27.3.2009. 3.1 THE CONTENTION OF THE ASSESSEE IS THAT WHEN EVER THE TAX ALREADY PAID BY THE ASSESSEE BECOMES REFUNDABLE, THE CALCUL ATION SHOULD BE SEPARATELY MADE FOR TAX PORTION AND INTEREST PORTIO N. ACCORDINGLY, THE ASSESSEE CLAIMS THAT A SUM OF RS.17,03,110/- IS REF UNDABLE TO THE ASSESSEE TOWARDS THE TAX PORTION AND A SUM OF RS.2,08,103/- IS REFUNDABLE TOWARDS THE INTEREST PORTION. PAGE 3 OF 6 3.2 SECTION 244A OF THE ACT PROVIDES FOR PAYMEN T OF INTEREST ON THE AMOUNT THAT HAS BECOME PAYABLE TO THE ASSESSEE. ACC ORDING TO THE SUB SECTION (3) OF THAT SECTION, WHERE AS A RESULT OF A N ORDER PASSED UNDER ANY OF THE SECTIONS SPECIFIED THEREIN, THE AMOUNT ON WH ICH INTEREST WAS PAYABLE UNDER SUB SECTION (1) HAS BEEN INCREASED OR REDUCED AS THE CASE MAY BE, INTEREST SHALL BE INCREASED OR REDUCED ACCORDINGLY AND IN A CASE WHERE THE INTEREST IS REDUCED THE AO SHALL SERVE ON THE ASSES SEE A NOTICE OF DEMAND IN THE PRESCRIBED FORM SPECIFYING THE AMOUNT OF EXC ESS INTEREST PAID AND REQUIRING HIM TO PAY SUCH AMOUNT AND SUCH NOTICE OF DEMAND SHALL BE DEEMED TO BE A NOTICE U/S 156 AND THE PROVISIONS OF THE ACT SHALL APPLY ACCORDINGLY. 3.3 SEC.220(2) OF THE ACT PROVIDES THAT IF THE AMOUNT SPECIFIED IN THE NOTICE OF PAYMENT U/S 156 IS NOT PAID WITHIN THE SP ECIFIED PERIOD, THE ASSESSEE SHALL BE LIABLE TO PAY INTEREST AT THE RAT E AND IN THE MANNER SPECIFIED IN THAT SECTION. 3.4 ON A PLAIN READING OF BOTH THE SECTION, IT IS SEEN THAT THE DEPARTMENT HAS TO PAY INTEREST WHENEVER REFUND BECO MES DUE TO THE ASSESSEE. SIMILARLY, THE DEPARTMENT SHOULD COLLECT INTEREST WHENEVER THERE IS DEFAULT IN PAYMENT OF TAX SPECIFIED IN THE NOTIC E OF DEMAND. 4. IN THE CASE BEFORE US, THE REFUND WAS ORIGINALLY GRANTED ON 31-3- 1998. THE SAID ORDER IS NOT AVAILABLE ON RECORD AND HENCE IT IS NOT KNOWN WHETHER ANY INTEREST WAS GIVEN U/S 244A OF THE ACT, THOUGH THE ASSESSEE CLAIMS IN HIS WORKING SHEET THAT A SUM OF RS.96,39, 696/- WAS GIVEN U/S 244A OF THE ACT. IN THE ORDER DATED 18-2-2004, THE AO HAS SPECIFIED A LUMP SUM AMOUNT OF RS.2,01,15,005/- AS INTEREST U/S 244A OF THE ACT. THOUGH THE REFUND WAS GIVEN IN 5 INSTALLMENTS, THE AO HAS SPECIFIED A PAGE 4 OF 6 SINGLE FIGURE OF INTEREST PAYABLE TO THE ASSESSEE U /S 244A OF THE ACT, THAT TOO AT THE END OF THE WORKINGS. HOWEVER, AS STATED EARLIER, THE AO SHOULD HAVE MADE 5 SEPARATE CALCULATIONS OF INTEREST PAYAB LE U/S 244A OF THE ACT I.E. INTEREST SHOULD HAVE BEEN CALCULATED AS AND WH EN THE REFUND WAS GRANTED TO THE ASSESSEE. IF THE INTEREST HAD BEEN S O CALCULATED, THERE WOULD BE VARIATION IN THE TAX DEMAND IMPOSED ON THE ASSESSEE IN BETWEEN. HENCE THE TAX WORKINGS AND INTEREST WORKINGS GIVEN IN THE ORDER DATED 18- 2-2004 DOES NOT APPEAR TO BE IN ACCORDANCE WITH THE LAW. IN BETWEEN, THE TAX DEMAND HAS ARISEN, WITHOUT TAKING INTO ACCOUNT THE INTEREST PAYABLE TO THE ASSESSEE ON REFUND. THUS TO SOME EXTENT THERE A PPEARS TO BE SOME JUSTIFICATION IN THE CLAIM OF THE ASSESSEE THAT THE CALCULATIONS WITH REGARD TO THE TAX PORTION AND INTEREST PORTION SHOULD BE MADE SEPARATELY. HOWEVER, AS PER THE PROVISIONS OF SECTION 244A, THE INTEREST IS TO BE GRANTED U/S 244A, WHENEVER THERE ARISES REFUND AND INTEREST SHO ULD BE CHARGED U/S 220(2), WHENEVER THERE IS DEFAULT IN PAYMENT TAX DU E BY THE ASSESSEE. THE PROVISO TO SECTION 220(2) AND SECTION 244A(3) P ROVIDE FOR THE MANNER OF ADJUSTMENT OF INTEREST IN CONSEQUENCE OF SUBSEQU ENT ORDERS. THUS, IN OUR OPINION, THE CALCULATION OF INTEREST PAYABLE/CH ARGEABLE SHOULD BE MADE IN ACCORDANCE WITH THE MANDATE OF THE SECTION. THOU GH THE LD CIT (A) HAS ACCEPTED THE CALCULATIONS MADE BY THE ASSESSEE, IN OUR OPINION, THE LD CIT (A) HAS NOT ANALYSED THE ISSUE IN ACCORDANCE WITH T HE PROVISIONS OF THE ACT. IN VIEW OF THE ABOVE, WE REVERSE THE ORDER OF THE LD CIT (A) AND RESTORE THE ISSUE BACK TO THE FILE OF THE AO WITH A DIRECTI ON TO MAKE THE CALCULATIONS OF INTEREST IN ACCORDANCE WITH THE LAW IN THE LIGHT OF THE PRINCIPLES STATED ABOVE. 5. NOW LET US TAKE UP THE APPEAL RELATING TO THE ASSESSMENT YEAR 1995- 96. THE ONLY ISSUE URGED IN THIS APPEAL IS WHETHER THE LD CIT(A) IS JUSTIFIED IN ACCEPTING THE CLAIM OF THE ASSESSEE TH AT THE BROUGHT FORWARD PAGE 5 OF 6 INVESTMENT ALLOWANCE IS NOT DEDUCTIBLE FOR THE PURP OSE OF CALCULATION OF DEDUCTION U/S 80HHC OF THE ACT. 5.1 THE ASSESSING OFFICER, IN THE RECTIFICATION ORDER PASSED U/S 154 OF THE ACT, DEDUCTED THE BROUGHT FORWARD INVESTMENT ALLOWA NCE FROM THE BUSINESS PROFITS AND ALLOWED THE DEDUCTION U/S 80HHC OF THE ACT ON THE BUSINESS PROFITS SO ARRIVED AT. THOUGH BOTH THE COUNSEL ARG UED ON THE MERITS, THE LEGAL ISSUE THAT EMERGES IS THAT WHETHER THE INSTAN T ISSUE, BEING DEBATABLE IN NATURE, CAN BE RECTIFIED IN A RECTIFICATION PROC EEDING CARRIED U/S 154 OF THE ACT. THE LD AR PLACED RELIANCE ON THE FOLLOWI NG DECISION TO DRIVE THE POINT THAT THE BROUGHT FORWARD INVESTMENT ALLOWANCE IS TO BE SET OFF ONLY AGAINST THE TOTAL INCOME OF THE ASSESSEE AND NOT AGAINST BUSINESS PROFITS AS ASSUMED BY THE AO. A) ZF STEERING GEAR (INDIA) LTD. V DCIT (2001) (77 ITD 279)(PUNE) B) ALLANA FROZEN FOODS (P) LTD. V DCIT (2001) (78 ITD 223 )(MUM) THE VERY FACT THAT SIMILAR ISSUE HAS TRAVELED UP TO THE TRIBUNAL SHOWS THE VERY DEBATABLE NATURE OF THE ISSUE. IT IS NOW WELL SETTLED PROPOSITION THAT THE ISSUES WHICH ARE DEBATABLE IN NATURE CANNOT BE RECTIFIED IN THE RECTIFICATION PROCEEDINGS CARRIED U/S 154 OF THE AC T. IN VIEW OF THE ABOVE SAID LEGAL POSITION, THE AO IS NOT ENTITLED TO CARR Y OUT THE IMPUGNED ADJUSTMENT IN THE RECTIFICATION PROCEEDING CARRIED OUT U/S 154 OF THE ACT. SINCE WE HAVE DECIDED THE LEGAL ISSUE IN FAVOUR OF THE ASSESSEE, WE ARE NOT GOING INTO THE MERITS OF THE ISSUE. ACCORDINGLY, W E UPHOLD THE FINAL DECISION OF THE LD CIT(A), THOUGH THE DECISION HAS BEEN ARRIVED BY HIM ON MERITS OF THE CASE. PAGE 6 OF 6 5. IN THE RESULT THE APPEAL FILED BY THE REVENUE FOR ASSESSMENT YEAR 1996-97 IS TREATED AS ALLOWED FOR STATISTICAL PURPO SES AND THE APPEAL RELATING TO THE ASSESSMENT YEAR 1995-96 IS DISMISSE D. PRONOUNCED IN THE OPEN COURT ON 09-03-2010. SD/- SD/- (SUNIL KUMAR YADAV) (B R BASKARAN) JUDICIAL MEMBER ACCOUNTANT MEMBER PVV/SPS VISAKHAPATNAM, DATE:9 TH MARCH, 2010. COPY TO 1 THE ACIT, CENTRAL CIRCLE, VIJAYAWADA 2 M/S THE KCP LIMITED, RAMA KRISHNA BUILDINGS, NO.2 DR. P.V. CHERIAN CRESCENT, CHENNAI 3 THE CIT, VIJAYAWADA 4 THE CIT(A), VIJAYAWADA 5 THE DR, ITAT, VISAKHAPATNAM. 6 GUARD FILE. BY ORDER SENIOR PRIVATE SECRETARY INCOME TAX APPELLATE TRIBUNAL VISAKHAPATNAM