M/s. Rittal India Pvt Ltd, Doddaballapur V. Deputy Commissioner of Income Tax, LTU, Circle 1, Bangalore

ITA 1961/BANG/2017

• Counselvise Citation: [2019] 116 COUNSELVISE.COM (IT) 7892 (ITAT-BANGALORE)
• Duration Of Justice: 1 year(s) 9 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-07-2019
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Assessment Year: 2010-2011
• Appeal Filed On: 05-10-2017
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: VIKAS SURYAVAMSHI B ENGALURU
• Assessee Lawyers: S RAMASUBRAMANIAN
• Keywords: Reassessment proceedings; TDS; Set aside

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH : BANGALORE BEFORE SHRI N.V. VASUDEVAN, VICE PRESIDENT AND SHRI JASON P. BOAZ , ACCOUNTANT MEMBER I TA NO. 1961/ BANG / 2017 ASSESSMENT YEAR : 2010 - 11 M/S. RITTAL INDIA PVT. LTD., NO.23 & 24, KIADB INDUSTRIAL AREA, VEERAPURA, DODDABALLAPUR 561 203. PAN: AAACR 7927A VS. THE DEPUTY COMMISSIONER OF INCOME TAX, LTU, CIRCLE 1, BANGALORE. APP EL L ANT RESPONDENT APP ELL ANT BY : SHRI S. RAMASUBRAMANIAN, CA R E SPONDENT BY : SHRI VIKAS SURYAVAMSHI, ADDL.CIT(DR)(ITAT), BENGALURU. DATE OF HEARING : 16. 0 7 . 201 9 DATE OF PRONOUNCEMENT : 19 . 0 7 . 201 9 O R D E R PER N V VASUDEVAN, VICE PRESIDENT THIS IS AN APPEAL BY THE ASSESSEE AGAINST THE ORD ER DT.30.8.2017 OF CIT(APPEALS), LARGE TAX PAYER UNIT, BANGALORE, RELA TING TO ASSESSMENT YEAR 2010-11. 2. THOUGH ARGUMENTS WERE ADVANCED ON THE VALIDITY O F THE PROCEEDINGS INITIATED U/S.147 OF THE INCOME TAX ACT, 1961 (THE ACT), OUT OF WHICH ORDER OF ASSESSMENT AND ORDER OF CIT(A) THAT IS IMPUGNED IN THIS APPEAL ARISES, WE ARE OF THE VIEW THAT A DECISION ON THE MERITS OF THE APPEAL WOULD BE SUFFICIENT IN THE FACTS AND CIRCUMSTANCES OF THE PR ESENT CASE. ITA NO. 1961/BANG/2017 PAGE 2 OF 7 3. THE ASSESSEE IS A COMPANY ENGAGED IN THE BUSINES S OF MANUFACTURE AND SALE OF ENCLOSURES, HEAT EXCHANGERS , INDUSTRIAL COOLING EQUIPMENTS, POWER DISTRIBUTION AND MOD CENTRES. TH E ASSESSEE CLAIMED DEDUCTION U/S.80JJAA OF THE ACT IN A SUM OF RS.15,3 5,357/- AND THE SAME WAS ALLOWED IN ASSESSMENT COMPLETED U/S.143(3) OF T HE ACT BY ORDER DATED 28.11.2014. SUBSEQUENTLY, THE AO INITIATED REASSES SMENT PROCEEDINGS ON THE GROUND THAT TO CLAIM DEDUCTION U/S.80JJAA OF TH E ACT, THE ASSESSEE OUGHT TO HAVE EMPLOYED ATLEAST 100 NEW WORKMEN DURI NG THE RELEVANT PREVIOUS YEAR AND SINCE THE ASSESSEE EMPLOYED ONLY 42 NEW WORKMEN, THE DEDUCTION U/S.80JJAA OF THE ACT WAS WRONGLY ALLOWED , WHICH HAS RESULTED IN ESCAPEMENT OF INCOME CHARGEABLE TO TAX. THE PRO VISIONS OF SEC.80JJA OF THE ACT, READS THUS: DEDUCTION IN RESPECT OF EMPLOYMENT OF NEW WORKMEN. 80JJAA. (1) WHERE THE GROSS TOTAL INCOME OF AN ASSE SSEE, BEING AN INDIAN COMPANY, INCLUDES ANY PROFITS AND GAINS D ERIVED FROM ANY INDUSTRIAL UNDERTAKING ENGAGED IN THE MANUFACTU RE OR PRODUCTION OF ARTICLE OR THING, THERE SHALL, SUBJEC T TO THE CONDITIONS SPECIFIED IN SUB-SECTION (2), BE ALLOWED A DEDUCTION OF AN AMOUNT EQUAL TO THIRTY PER CENT OF ADDITIONAL WA GES PAID TO THE NEW REGULAR WORKMEN EMPLOYED BY THE ASSESSEE IN THE PREVIOUS YEAR FOR THREE ASSESSMENT YEARS INCLUDING THE ASSES SMENT YEAR RELEVANT TO THE PREVIOUS YEAR IN WHICH SUCH EMPLOYM ENT IS PROVIDED. (2) NO DEDUCTION UNDER SUB-SECTION (1) SHALL BE ALL OWED ( A ) IF THE INDUSTRIAL UNDERTAKING IS FORMED BY SPLIT TING UP OR RECONSTRUCTION OF AN EXISTING UNDERTAKING OR AMALGA MATION WITH ANOTHER INDUSTRIAL UNDERTAKING; ( B ) UNLESS THE ASSESSEE FURNISHES ALONG WITH THE RET URN OF INCOME THE REPORT OF THE ACCOUNTANT, AS DEFINED IN THE EXPLANATION BELOW SUB-SECTION (2) OF SECTION 288 GIVING SUCH PARTICUL ARS IN THE REPORT AS MAY BE PRESCRIBED. ITA NO. 1961/BANG/2017 PAGE 3 OF 7 EXPLANATION. FOR THE PURPOSES OF THIS SECTION, THE EXPRESSIONS, ( I ) 'ADDITIONAL WAGES' MEANS THE WAGES PAID TO THE N EW REGULAR WORKMEN IN EXCESS OF ONE HUNDRED WORKMEN EMPLOYED DURING THE PREVIOUS YEAR : PROVIDED THAT IN THE CASE OF AN EXISTING UNDERTAKIN G, THE ADDITIONAL WAGES SHALL BE NIL IF THE INCREASE IN THE NUMBER OF REGULAR WORKMEN EMPLOYED DURING THE YEAR IS LESS TH AN TEN PER CENT OF EXISTING NUMBER OF WORKMEN EMPLOYED IN SUCH UNDERTAKING AS ON THE LAST DAY OF THE PRECEDING YEA R; ( II ) 'REGULAR WORKMAN', DOES NOT INCLUDE ( A ) A CASUAL WORKMAN; OR ( B ) A WORKMAN EMPLOYED THROUGH CONTRACT LABOUR; OR ( C ) ANY OTHER WORKMAN EMPLOYED FOR A PERIOD OF LESS THAN THREE HUNDRED DAYS DURING THE PREVIOUS YEAR; ( III ) 'WORKMAN' SHALL HAVE THE MEANING ASSIGNED TO IT IN CLAUSE ( S ) OF SECTION 2 OF THE INDUSTRIAL DISPUTES ACT, 1947 (14 OF 1947). 4. IN THE REASSESSMENT PROCEEDINGS, THE AO HELD THA T SINCE THE ASSESSEE FAILED TO SHOW THAT IT SATISFIED THE COND ITIONS LAID DOWN IN SEC.80JJAA OF THE ACT, IT WAS NOT ENTITLED TO THE S AID DEDUCTION AND ACCORDINGLY ADDED A SUM OFRS.15,35,357/- THAT WAS A LLOWED AS DEDUCTION U/S.80JJAA OF THE ACT IN THE ASSESSMENT U/S.143(3) OF THE ACT. THE FOLLOWING WERE THE RELEVANT OBSERVATIONS OF THE AO IN THIS REGARD:- 5. AS PER THE PROVISIONS OF EXPLANATION-I TO SECTI ON 80JJAA ADDITIONAL WAGES MEANS WAGES PAID TO NEW REGULAR WO RKMEN IN EXCESS OF 100 WORKMEN. THE PROVISO ALSO LAYS DOWN T HAT IN THE CASE OF AN EXISTING FACTORY THE ADDITIONAL WAGES SH ALL BE NIL IF THE INCREASE IN THE NUMBER OF REGULAR WORKMEN IS LESS T HAN 10% OF THE EXISTING NUMBER AS ON THE LAST DAY OF THE PRECE DING YEAR. 6. THE ASSESSEE HAS NOT ADDUCED ANY REASON AS TO WH Y THE DEDUCTION U/ S 80JJAA SHOULD NOT BE DISALLOWED. IN VIEW OF THE FACTS BROUGHT OUT ABOVE IT IS CLEAR THAT THE ASSESS EE IS NOT ELIGIBLE FOR DEDUCTION U/S 80JJAA FOR THIS ASSESSMENT YEAR A S THE ITA NO. 1961/BANG/2017 PAGE 4 OF 7 CONDITIONS STIPULATED IN THE SAID SECTION HAVE NOT BEEN FULFILLED. THE ASSESSMENT IS COMPLETED ACCORDINGLY DISALLOWING THE DEDUCTION U/S 80JJAA. PARTICULARS AMOUNT IN RS. AMOUNT IN RS. TOTAL INCOME AS PER ORDER DATED 28/ 11/ 4,26,76,850 ADD: DISALLOWANCE U/S 80JJAA 15,35,357 ASSESSED INCOME 4,42,12,207 TAX THEREON @ 30% 1,32,63,662 SURCHARGE @ 10% 13,26,366 EDUCATION CESS @ 3% 4,37,701 TOTAL TAXABLE -- (A) 1,50,27,729 BOOK PROFIT 9,76,27,521 TAX THERE ON- (B) @ 15% 1,46,44,128 SURCHARGE @ 10% 14,64,413 EDUCATION CESS @ 3% 4,83,256 PAYABLE 1,65,91,797 LESS: TDS 22,70,362 ADVANCE TAX 1,39,35,000 1,62,05,362 PAYABLE 3,86,435 ADD: INT U S 234C 50,055 PAYABLE 436490 LESS: SELF ASSESSMENT TAX PAID ON 28/9/2010 1,71,409 BALANCE PAYABLE 265080 LESS: REGULAR TAX PAID ON 3/2/2015 265080 BALANCE PAYABLE NIL ITA NO. 1961/BANG/2017 PAGE 5 OF 7 SINCE THE TAX ON MAT PROVISION IS HIGHER THAN THE N ORMAL PROVISION THE SAME IS ADOPTED. 5. ON APPEAL BY THE ASSESSEE THE CIT(A) CONFIRMED T HE ORDER OF THE AO BY PLACING RELIANCE ON A DECISION OF THE ITAT DE LHI BENCH IN THE CASE OF PANACEA BIOTEC LTD. VS. ACIT 122 ITD 199 (TRIB-DEL) WHICH WAS A CASE OF A NEW INDUSTRIAL UNDERTAKING, WHEREAS THE ASSESSEE IS AN EXISTING INDUSTRIAL UNDERTAKING AND THIS DIFFERENCE IN FACTS WAS NOT TA KEN NOTE OF BY THE CIT(A). 6. AGGRIEVED BY THE ORDER OF CIT(A), THE ASSESSEE H AS PREFERRED THE PRESENT BEFORE THE TRIBUNAL. 7. AT THE TIME OF HEARING IT WAS AGREED BY THE PART IES THAT IDENTICAL ISSUE HAD COME FOR CONSIDERATION IN ASSESSEES OWN CASE IN AY 2011-12 AND THIS TRIBUNAL IN IT(TP)A.NO.431/BANG/2016 BY ORDER DATED 30.6.2016 WAS PLEASED TO HOLD AS FOLLOWS:- 7. AS REGARDS DISALLOWANCE OF THE CLAIM U/S 80JJA OF THE ACT, THE AO HAS DISALLOWED THE CLAIM BY HOLDING THAT THE AASESSEE- COMPANY HAD NOT EMPLOYED NEW EMPLOYEES MORE THAN 10 0 DURING THE PREVIOUS YEAR RELEVANT TO ASSESSMENT YEAR UNDER CONSIDERATION. ON A PERUSAL OF THE PROVISIONS OF SE CTION 8033A OF THE ACT, WHICH IS EXTRACTED BELOW, WE DO NOT FIND T HAT ANY SUCH CONDITION IS IMPOSED IN THE SAID PROVISION. THE PRO VISIONS OF SECTION 8OJJA ARE REPRODUCED BELOW: 'DEDUCTION IN RESPECT OF EMPLOYMENT OF NEW WORKMEN. 80JJAA. (1) WHERE THE GROSS TOTAL INCOME OF AN ASSES SEE, BEING AN INDIAN COMPANY, INCLUDES ANY PROFITS AND G AINS DERIVED FROM ANY INDUSTRIAL UNDERTAKING ENGAGED IN THE MANUFACTURE OR PRODUCTION OF ARTICLE OR THING, THER E SHALL, SUBJECT TO THE CONDITIONS SPECIFIED IN SUB-SECTION (2), BE ALLOWED A DEDUCTION OF AN AMOUNT EQUAL TO THIRTY PE R CENT OF ADDITIONAL WAGES PAID TO THE NEW REGULAR WORKMEN EMPLOYED BY THE ASSESSEE IN THE PREVIOUS YEAR FOR T HREE ASSESSMENT YEARS INCLUDING THE ASSESSMENT YEAR RELE VANT TO THE PREVIOUS YEAR IN WHICH SUCH EMPLOYMENT IS PROVIDED. ITA NO. 1961/BANG/2017 PAGE 6 OF 7 (2) NO DEDUCTION UNDER SUB-SECTION (1) SHALL BE ALL OWED (A) IF THE INDUSTRIAL UNDERTAKING IS FORMED BY SPLI TTING UP OR RECONSTRUCTION OF AN EXISTING UNDERTAKING OR AMALGAMATION WITH ANOTHER INDUSTRIAL UNDERTAKING; (B) UNLESS THE ASSESSEE FURNISHES ALONG WITH THE RE TURN OF INCOME THE REPORT OF THE ACCOUNTANT, AS DEFINED IN THE EXPLANATION BELOW SUBSECTION (2) OF SECTION 288 GIV ING SUCH PARTICULARS IN THE REPORT AS MAY BE PRESCRIBED . HOWEVER, IT REQUIRES TO BE SATISFIED THAT ALL OTHER CONDITIONS MENTIONED IN PROVISIONS OF SECTION 8033A ARE FULFIL LED BEFORE ALLOWING DEDUCTION U/S 8033A OF THE ACT. THEREFORE, THIS GROUND OF APPEAL IS ALSO RESTORED TO THE FILE OF THE AO FO FRESH ADJUDICATION IN ACCORDANCE WITH PROVISIONS OF LAW. 8. WE ARE OF THE VIEW THAT A SIMILAR ORDER IN THE P RESENT AY 2010-11 WOULD BE JUST AND APPROPRIATE. ACCORDINGLY, WE SET ASIDE THE ORDER OF CIT(A) ON THIS ISSUE AND REMAND THE QUESTION OF DED UCTION U/S.80JJAA OF THE ACT, TO THE AO FOR CONSIDERATION ON SATISFACTIO N OF THE OTHER CONDITIONS FOR GRANT OF DEDUCTION AS HELD BY THE TRIBUNAL IN T HE ORDER REFERRED TO ABOVE. 9. IN THE RESULT, APPEAL OF THE ASSESSEE IS PARTLY ALLOWED FOR STATISTICAL PURPOSE. PRONOUNCED IN THE OPEN COURT ON THIS 19 TH DAY OF JULY, 2019. SD/- SD/- ( JASON P. BOAZ ) ( N.V . VASU DEVAN ) ACCOUNTANT MEMBER VICE PRESIDENT BANGALORE, DATED, THE 19 TH JULY, 2019. / D ESAI S MURTHY / ITA NO. 1961/BANG/2017 PAGE 7 OF 7 COPY TO: 1. THE APP ELLANT 2. THE R ESPONDENT 3. THE CIT 4. THE CIT(A) 5. THE DR, ITAT, BANGALORE. 6. GUA R D F ILE BY ORDER ASSISTANT REGISTRAR, ITAT, BANGALORE.