Joint Commissioner of Income Tax (LTU) , Bangalore V. M/s Teaxas Instruments (India) Pvt Ltd , Bangalore

ITA 1958/BANG/2018

• Counselvise Citation: [2020] 110 COUNSELVISE.COM (IT) 1189 (ITAT-BANGALORE)
• Duration Of Justice: 2 year(s) 6 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-12-2020
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 15-12-2020
• Assessment Year: 2007-2008
• Appeal Filed On: 06-06-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: R PREMI D R SHRI SHARATH RAO
• Keywords: Revision of order; Non-deduction of tax; Set aside
• Section: 143(3); 144C; 263

Judgement Text

ITA NO.1958/BANG/2018 M/S. TEXAS INSTRUMENTS (INDIA) PVT. LTD., BANGALORE IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH: BANGALORE BEFORE SHRI GEORGE GEORGE K., JUDICIAL MEMBER AND SHRI B.R. BASKARAN, ACCOUNTANT MEMBER ITA NO.1958/BANG/2018 ASSESSMENT YEAR: 2007-08 JCIT(LTU) BANGALORE VS. M/S. TEXAS INSTRUMENTS (INDIA) PVT. LTD. BGMANE TECH PARK NO.66/3, ADJACENT TO LRDE C.V RAMAN NAGAR POST BYRASANDRA BANGALORE-560 093 PAN NO : AAACT5445M APPELLANT RESPONDENT APPELLANT BY : SMT. R. PREMI, D.R. RESPONDENT BY : SHRI SHARATH RAO, A.R. DATE OF HEARING : 15.12.2020 DATE OF PRONOUNCEMENT : 16.12.2020 O R D E R PER B.R. BASKARAN, ACCOUNTANT MEMBER: THE REVENUE HAS FILED THIS APPEAL CHALLENGING THE O RDER DATED 30-03-2018 PASSED BY LD CIT(A)-2, BENGALURU AND IT RELATES TO THE ASSESSMENT YEAR 2007-08. THE ONLY ISSUE URGED BY T HE REVENUE IS WHETHER THE LD CIT(A) WAS JUSTIFIED IN DELETING THE ADDITION OF RS.5,53,30,473/- MADE BY THE AO U/S 40(A)(I) OF THE INCOME-TAX ACT,1961 ['THE ACT' FOR SHORT]. 2. THE FACTS RELATING TO THE ISSUE ARE DISCUSS ED IN BRIEF. THE ORIGINAL ASSESSMENT FOR THE YEAR UNDER CONSIDERATIO N WAS COMPLETED ITA NO.1958/BANG/2018 M/S. TEXAS INSTRUMENTS (INDIA) PVT. LTD., BANGALORE PAGE 2 OF 6 BY THE AO ON 26-08-2011 U/S 143(3) R.W.S. 144C OF T HE ACT. THE ABOVE SAID ASSESSMENT ORDER WAS REVISED BY LD CIT ( LTU) U/S 263 OF THE ACT AND HENCE THE AO PASSED RE-ASSESSMENT ORDER U/S 143(3) R.W.S 263 OF THE ACT. THE ISSUE UNDER DISPUTE RELA TES TO THE ADDITION OF RS.5,53,30,473/- MADE BY THE AO. 3. THE LD CIT (LTU) NOTICED THAT THE ASSESSEE H AD DISALLOWED A SUM OF RS.24,77,29,455/- IN THE EARLIER YEAR U/S 40 (A)(I)/(IA) OF THE ACT, BUT CLAIMED THE ABOVE SAID AMOUNT FULLY AS DED UCTION DURING THE YEAR UNDER CONSIDERATION. THE LD CIT TOOK THE VIEW THAT THE ASSESSEE IS REQUIRED TO SUBSTANTIATE THE SAID CLAIM WITH EVI DENCES. HE NOTICED THAT THE AO HAS NOT PROPERLY EXAMINED THE ABOVE SAI D CLAIM MADE BY THE ASSESSEE IN THE ORIGINAL ASSESSMENT PROCEEDINGS . ACCORDINGLY, THE LD CIT (LTU) REVISED THE ASSESSMENT ORDER AND RESTO RED THE MATTER TO THE FILE OF AO FOR EXAMINING IT AFRESH. IN THE SET ASIDE PROCEEDINGS, THE AO OBSERVED THAT THE ASSESSEE HAS FURNISHED EVI DENCES TO THE TUNE OF RS.19,23,98,982/- ONLY. ACCORDINGLY, HE DI SALLOWED THE BALANCE AMOUNT OF RS.5,53,30,473/- AND ADDED THE SA ME TO THE TOTAL INCOME OF THE ASSESSEE. 4. IN THE APPELLATE PROCEEDINGS, THE ASSESSEE SUBMITTED BEFORE THE LD CIT(A) THAT IT HAD DISALLOWED A SUM OF RS.24,77, 29,455/- U/S 40(A)(I)/(IA) OF THE ACT, WHILE COMPUTING THE TOTAL INCOME FOR ASSESSMENT YEAR 2006-07. IN THE SUCCEEDING YEAR, I .E., DURING THE YEAR UNDER CONSIDERATION, THE YEAREND PROVISIONS WE RE REVERSED AND CREDITED TO THE EXPENDITURE ACCOUNT. SINCE THE ASS ESSEE HAD DISALLOWED THE PROVISION FOR EXPENSES IN AY 2006-07 , THE REVERSAL OF THE SAME IS NOT TAXABLE DURING AY 2007-08. ACCORDI NGLY, IT WAS SUBMITTED THAT THE ASSESSEE HAS CLAIMED THE AMOUNT OF PROVISION FOR EXPENSES SO REVERSED AS DEDUCTION. THE LD CIT(A) C ALLED FOR A REMAND REPORT FROM THE AO ON THE EXPLANATIONS SO OFFERED B Y THE ASSESSEE. ITA NO.1958/BANG/2018 M/S. TEXAS INSTRUMENTS (INDIA) PVT. LTD., BANGALORE PAGE 3 OF 6 IN THE REMAND REPORT, THE ASSESSING OFFICER SUBMITT ED THAT THE LEDGER ACCOUNT OF SOFTWARE DEVELOPMENT EXPENSES CONTAIN REVERSAL ENTRIES. HOWEVER, THE AO SUBMITTED THAT THE INDIVIDUAL LEDGE R COPIES OF VENDORS WERE NOT PRODUCED BEFORE HIM. THE ASSESSEE , THEREAFTER, GAVE A DETAILED REPLY TO LD CIT(A) EXPLAINING THE M ODALITIES OF PASSING ACCOUNTING ENTRIES. IT WAS SUBMITTED THAT THE REVE RSAL OF PROVISION FOR EXPENSES RESULTS IN REDUCTION IN THE AMOUNT OF CONCERNED EXPENDITURE. IT WAS ALSO SUBMITTED THAT THE AMOUNT SO REVERSED IS NOT TAXABLE, SINCE IT REPRESENTS THE AMOUNT DISALLO WED IN THE EARLIER YEAR. THE LD CIT(A) WAS CONVINCED WITH THE EXPLANA TIONS GIVEN BY THE ASSESSEE. ACCORDINGLY, HE DELETED THE IMPUGNED DISALLOWANCE. AGGRIEVED, THE REVENUE HAS FILED THIS APPEAL. 5. THE LD D.R SUPPORTED THE ORDER PASSED BY THE AO BY SUBMITTING THAT THE ASSESSEE HAS FAILED TO SHOW EVIDENCES FOR THE AMOUNT OF RS.5,53,30,473/- DISALLOWED BY THE AO. 6. THE LD A.R SUBMITTED THAT THE ASSESSEE HAD V OLUNTARILY DISALLOWED A SUM OF RS.24.77 CRORES IN AY 2006-07 U /S 40(A)(I)/(IA) OF THE ACT FOR NON-DEDUCTION OF TAX AT SOURCE. THE ABOVE SAID AMOUNT CONSISTED OF FOLLOWING TWO ITEMS:- INVOICES RECEIVED AND ACCOUNTED IN AY 2006-07 - 15.06 CRORES YEAR END PROVISIONS MADE IN AY 2006-07 - 9.71 CRORES -------- 24.77 CRORES ======== THE LD A.R SUBMITTED THAT THE ASSESSEE HAD NOT DEDU CTED TAX AT SOURCE FROM THE ABOVE SAID PAYMENTS DURING THE YEAR ENDING 31.3.2006 (AY 2006-07) AND HENCE DISALLOWED THE SAM E U/S 40(A)(I)/(IA) OF THE ACT. DURING THE FINANCIAL YEA R 2006-07 RELEVANT TO AY 2007-08, THE ASSESSEE DEDUCTED TAX AT SOURCE FRO M THE AMOUNT OF RS.15.06 CRORES AND HENCE IT WAS CLAIMED AS DEDUCTI ON AS PER THE ITA NO.1958/BANG/2018 M/S. TEXAS INSTRUMENTS (INDIA) PVT. LTD., BANGALORE PAGE 4 OF 6 PROVISIONS OF SEC.40(A)(I)/(IA) OF THE ACT. THE AO HAS ALSO ALLOWED THE SAME. 7. THE LD A.R SUBMITTED THAT THE DISPUTE RELATE S TO THE PROVISION FOR EXPENSES OF RS.9.71 CRORES ACCOUNTED FOR IN AY 2006-07. HE SUBMITTED THAT THE ASSESSEE IS FOLLOWING MERCANTILE SYSTEM OF ACCOUNTING AND HENCE IT IS REQUIRED TO PROVIDE FOR ALL KNOWN EXPENSES. IT IS ALSO FOLLOWING THE POLICY OF REVER SING THE YEAREND PROVISIONS ON THE FIRST DAY OF NEXT YEAR. ACCORDIN GLY, THE ASSESSEE REVERSED THE AMOUNT OF RS.9.71 CRORES AS ON 1.4.200 6 AND CREDITED THE SAME TO THE EXPENSES ACCOUNT, WHICH RESULTED IN OFFERING THE SAME AS INCOME. HOWEVER, SINCE THE ASSESSEE HAS NO T CLAIMED THE ABOVE SAID AMOUNT OF RS.9.71 CRORES AS DEDUCTION IN THE IMMEDIATELY PRECEDING YEAR, THE SAME IS NOT TAXABLE AS INCOME, WHEN IT IS CREDITED TO THE EXPENDITURE/PROFIT & LOSS ACCOUNT. ACCORDIN GLY, THE ASSESSEE CLAIMED THE AMOUNT OF RS.9.71 CRORES AS DEDUCTION. OUT OF THE ABOVE SAID PROVISION AMOUNT, THE ASSESSEE COULD RELATE TH E EXPENDITURE ACCOUNTED FOR IN AY 2007-08 TO THE EXTENT OF RS.4.1 7 CRORES. HENCE THE AO HAS ASSESSED THE SAME AS INCOME FOR WANT OF EVIDENCES. THE LD A.R SUBMITTED THAT THE YEAREND PROVISIONS ARE MA DE ON ESTIMATED BASIS AND HENCE THERE BOUND TO BE DIFFERENCE BETWEE N THE AMOUNT SO PROVIDED FOR AND THE BILL AMOUNT. HENCE IT IS DIFF ICULT TO MAKE ONE TO ONE LINKING OF EXACT AMOUNTS. IN ANY CASE, REMAINI NG AMOUNT OF RS.5.54 CRORES REPRESENTS MERE REVERSAL OF PROVISIO N CREATED EARLIER AND ALSO NOT CLAIMED AS DEDUCTION IN THE EARLIER YE AR. HENCE THE AMOUNT OF RS.5.54 CRORES HAS SUFFERED TAX IN AY 200 6-07. HENCE TAXING THE SAME AMOUNT AGAIN IN THE CURRENT YEAR WO ULD RESULT IN DOUBLE TAXATION OF SAME INCOME. THE LD A.R SUBMITT ED THAT THE LD CIT(A) HAS APPRECIATED THESE SUBMISSIONS AND ACCORD INGLY DELETED THIS ADDITION. ACCORDINGLY, THE LD A.R CONTENDED T HAT THE ORDER PASSED BY LD CIT(A) DOES NOT CALL FOR ANY INTERFERE NCE. ITA NO.1958/BANG/2018 M/S. TEXAS INSTRUMENTS (INDIA) PVT. LTD., BANGALORE PAGE 5 OF 6 8. WE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RECORD. AS PER THE SUBMISSIONS MADE BY LD A.R, WE NOTICE THAT THE DISALLOWANCE OF RS.5.54 CRORES MADE BY THE AO FORMS PART OF PROVISI ON FOR EXPENSES AMOUNT OF RS.9.71 CRORES CREATED ON 31.3.2006 RELEV ANT TO AY 2006- 07. IT WAS SUBMITTED THAT THE ABOVE SAID AMOUNT OF RS.9.71 CRORES REPRESENTED YEAREND PROVISION FOR EXPENSES CREATED AS PER ACCOUNTING PRINCIPLES. THERE IS NO DISPUTE WITH RE GARD TO THE FACT THAT THE ABOVE SAID AMOUNT OF RS.9.71 CRORES (INCLU DED IN THE AMOUNT OF RS.24.77 CRORES) WAS DISALLOWED BY THE ASSESSEE VOLUNTARILY IN AY 2006-07, MEANING THEREBY, THE ASSESSEE DID NOT CLAI M RS.9.71 CRORES AS DEDUCTION AT ALL IN AY 2006-07. 9. AS PER THE PROVISIONS OF THE ACT, IF THE AS SESSEE HAS GOT ANY BENEFIT FROM AN AMOUNT, WHICH WAS CLAIMED AS DEDUCT ION IN AN EARLIER YEAR, THEN SUCH BENEFIT IS TAXABLE. HOWEVE R, WHEN THE ASSESSEE HAS NOT CLAIMED THE AMOUNT AS DEDUCTION AT ALL IN AN EARLIER YEAR, ANY BENEFIT OBTAINED FROM IT CANNOT BE SUBJEC TED TO TAX UNDER THE ACT. IN THE INSTANT CASE, THE ASSESSEE HAS DIS ALLOWED THE PROVISION AMOUNT OF RS.9.71 CRORES WHILE COMPUTING TOTAL INCOME FOR AY 2006-07, MEANING THEREBY, THE ASSESSEE HAS NOT C LAIMED THE AMOUNT OF RS.9.71 CRORES AS DEDUCTION IN AY 2006-07 . THE ASSESSEE HAS REVERSED THE ENTIRE AMOUNT OF RS.9.71 CRORES IN THE YEAR RELEVANT TO AY 2007-08 BY CREDITING THE SAME TO EXPENDITURE ACCOUNT/P & L A/C. OUT OF THE AMOUNT SO REVERSED, THE ASSESSEE H AS INCURRED EXPENSES TO THE TUNE OF RS.4.17 CRORES. THE ASSES SEE HAS NOT INCURRED EXPENSES FOR THE BALANCE AMOUNT OF RS.5.54 CRORES AND HENCE IT HAS INCREASED THE PROFIT/TOTAL INCOME OF T HE ASSESSEE. SINCE IT WAS NOT CLAIMED AS DEDUCTION IN AY 2006-07, THE SAME CANNOT BE SUBJECTED TO TAX DURING THE YEAR UNDER CONSIDERATIO N. ACCORDINGLY, WE ARE OF THE VIEW THAT THE LD CIT(A) WAS JUSTIFIED IN DELETING THE ITA NO.1958/BANG/2018 M/S. TEXAS INSTRUMENTS (INDIA) PVT. LTD., BANGALORE PAGE 6 OF 6 DISALLOWANCE OF RS.5.54 CRORES. ACCORDINGLY, WE UP HOLD HIS ORDER PASSED ON THIS ISSUE. 10. IN THE RESULT, THE APPEAL FILED BY THE REV ENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 16 TH DEC, 2020 SD/- (GEORGE GEORGE K. ) JUDICIAL MEMBER SD/- (B.R. BASKARAN) ACCOUNTANT MEMBER BANGALORE, DATED 16 TH DEC, 2020. VG/SPS COPY TO: 1. THE APPLICANT 2. THE RESPONDENT 3. THE CIT 4. THE CIT(A) 5. THE DR, ITAT, BANGALORE. 6. GUARD FILE BY ORDER ASST. REGISTRAR, ITAT, BANGALORE.