Deputy Commissioner of Income-tax, V. M/s. Finolex Cables Ltd., Pune

ITA 1975/PUN/2013

• Counselvise Citation: 197524514 RSA 2013
• Duration Of Justice: 10 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-09-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2004-2005
• Appeal Filed On: 08-11-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: P S NAIK
• Assessee Lawyers: J G PENDSE
• Keywords: Capital receipt
• Section: 143(3); 80IB; 11

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH B , PUNE BEFORE SHRI SHAILENDRA KUMAR YADAV, JUDICIAL MEMBER AND SHRI G.S. PANNU, ACCOUNTANT MEMBER ITA NO. 1 9 7 5 /PN/20 1 3 (ASSESSMENT YEAR : 20 04 - 05 ) DEPUTY COMMISSIONER OF INCOME - TAX, CENTRAL CIRCLE 1(2) , PUNE . APPELLANT VS. M/S. FINOLEX CABLES LTD., 26/27, MUMBAI PUNE ROAD, PIMPRI, PUNE PAN: AA ACF2637D . RESPONDENT DEPARTMENT BY : MR. P. S. NAIK ASSESSEE BY : MR. J. G. PENDSE DATE OF HEARING : 2 4 - 0 9 - 2014 DATE OF PRONOUNCEMENT : 29 - 0 9 - 201 4 ORDER PER G . S. PANNU, AM T H E CAPTIONED APPEAL BY THE REVENUE IS DIRECTED AGAINST AN ORDER OF THE COMMISSIONER OF INCOME T AX (APPEALS) - V, PUNE DATED 2 3 .0 8 .2013 WHICH, IN TURN, HA S ARISEN FROM AN ORDER DATED 28 . 1 2 .20 06 PASSED BY THE ASSESSING OFFICER U /S 143(3) OF THE INCOME - TAX ACT, 1961 (IN SHORT THE ACT ) PERTAINING TO THE ASSESSMENT YEAR 20 04 - 05 . 2. ALTHOUGH REVENUE HAS RAISED MULTIPLE GROUNDS OF APPEAL BUT ESSENTIALL Y THE GRIEVANCE IS WITH RESPECT TO TWO ISSUES . FIRSTLY, THE REVENUE IS AGGRIEVED BY THE DECISION OF THE CIT(A) IN HOLDING THAT INCOME BY WAY OF SALE OF SCRAP WAS ELIGIBLE FOR THE DEDUCTION U/S. 80IB OF THE ACT FOR THE PIMPRI UNIT - II AND GOA UNIT OF THE AS S ESSEE COMPANY . 3. IN THE COURSE OF THE ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER NOTED THAT ASSESSEE HAD CLAIMED DEDUCTION U/S. 80IB OF THE ACT IN RESPECT OF THE PROFITS EARNED FROM PIMPRI UNIT - II AMOUNTING TO RS.3,58,27,563/ - . THE ITA NO.1 9 7 5 /PN/2013 A.Y. : 20 04 - 05 2 ASSESSING OFFICER DISALLOWED THE CLAIM OF THE ASSESSEE FOR DEDUCTION U/S. 80IB OF THE ACT IN RESPECT OF THE PIMPRI UNIT - II HOLDING THAT THE SAID UNIT WAS NOT A NEW INDEPENDENT UNDERTAKING. THE AFORESAID STAND OF THE ASSESSING OFFICER WAS BASED ON A SIMILAR STAND TAKEN IN THE EARLIER YEARS. NOTABLY, WHILE DENYING THE DEDUCTION U/S. 80IB OF THE ACT, THE ASSESSING OFFICER ALSO HELD THAT THE INCOME BY WAY OF SALE OF SCRAP AMOUNTING TO RS. 1,85,68,938/ - WAS NOT ENTITLED TO THE DEDUCTION U/S. 80IB OF THE ACT, AS SUCH INCOME COUL D NOT BE SAID TO BE DERIVED FROM THE INDUSTRIAL UNDERTAKING . W ITH RESPECT TO THE GOA UNIT ALSO THE ASSESSING OFFICER DENIED THE CLAIM OF DEDUCTION U/S 80IB OF THE ACT IN RELATION TO INCOME FROM SALE OF SCRAP. 4. THE CIT(A) NOTED THAT THE HON'BLE BOMBAY HI GH COURT IN THE CASE OF THE ASSESSEE VIDE ITS ORDER IN ITA NO. 162 OF 2010 DATED 01.03.2012 UPHELD THE ORDER OF THE TRIBUNAL FOR ASSESSMENT YEAR 1995 - 96, BEING THE FIRST YEAR IN WHICH THE PIMPRI UNIT - II UNDERTAKING WAS FORMED AND SET UP BY THE ASSESSEE. F OLLOWING THE JUDGMENT OF THE HON'BLE BOMBAY HIGH COURT THE CIT(A) ALLOWED THE CLAIM OF THE ASSESSEE FOR DEDUCTION U/S. 80IB OF THE ACT IN RELATION TO THE PROFITS OF PIMPRI UNIT - II. WITH RESPECT TO THE ENTITLEMENT OF THE INCOME BY WAY OF SALE OF SCRAP, THE CIT(A) ALLOWED THE CLAIM OF THE ASSESSEE BY NOTICING THAT FOR ASSESSMENT YEAR 2002 - 03 IN ASSESSEES OWN CASE, THE TRIBUNAL IN ITS ORDER IN ITA NO. 105/PN/2007 AND ORS. DATED 15.07.2011 HELD THAT THE SCRAP GENERATED OUT OF MANUFACTURING PROCESS HAS A DIREC T NEXUS WITH THE INDUSTRIAL UNDERTAKING. 5. AGAINST THE AFORESAID DECISION OF THE CIT(A) RELATING TO INCOME ON ACCOUNT OF SALE OF SCRAP FOR PIMPRI UNIT - II AND ALSO FOR THE GOA UNIT, THE REVENUE IS IN APPEAL BEFORE US. 6. AT THE TIME OF HEARING, IT WA S THE COMMON POINT BETWEEN THE PARTIES THAT THE ISSUE RELATING TO ELIGIBILITY OF SALE OF SCRAP FOR SEC. 80IB BENEFITS IS NO LONGER RES - INTEGRA BUT HAS BEEN DECIDED BY THE TRIBUNAL IN THE ASSESSEES OWN ITA NO.1 9 7 5 /PN/2013 A.Y. : 20 04 - 05 3 CASE FOR ASSESSMENT YEAR 2002 - 03 VIDE ORDER DATED 15.0 7.2011 (SUPRA) IN FAVOUR OF THE ASSESSEE. IT WAS ALSO A COMMON POINT BETWEEN THE PARTIES THAT THE SAID PRECEDENT CONTINUES TO HOLD THE FIELD AS IT HAS NOT BEEN ALTERED BY ANY HIGHER AUTHORITY. IN VIEW OF THE AFORESAID PRECEDENT WE UPHOLD THE STAND OF THE CIT(A) AND AS A RESULT THE G ROUNDS OF APPEAL NOS. 1 AND 2 RAISED BY THE REVENUE STAND DISMISSED. 7 . THE ONLY OTHER ISSUE RAISED IN THIS APPEAL BY THE REVENUE IS AGAINST THE ACTION OF THE CIT(A) IN HOLDING THAT A SUM OF RS.12,73,99,650/ - WAS EXCLUD I BLE FROM THE TAXABLE INCOME. THE SAID AMOUNT REPRESENTED SURPLUS CREDITED BY THE ASSESSEE IN ITS INCOME ON ACCOUNT OF PRE - PAYMENT OF DEFERRED SALES TAX LOAN LIABILITY. THE ASSESSEE HAS AVAILED OF THE DEFERRED SALES TAX SCHEME OF THE GOVT. OF MAHARASHTRA IN E ARLIER YEARS. SUBSEQUENTLY, THE MAHARASHTRA GOVT. VIDE A NOTIFICATION STR 12.02/CR - 102/TAXATION 1 DATED 16.11.2002 PERMITTED PAYMENT OF SALES TAX AT NET PRESENT VALUE OF THE DEFERRED SALES TAX LOAN LIABILITY. THE ASSESSEE AVAILED SUCH SCHEME AND ON ACCOUNT OF SUCH PRE - PAYMENT OF THE LIABILITY AT NET PRESENT VALUES, THERE AROSE A SURPLUS OF RS.12,73,99,650/ - , WHICH WAS CREDITED TO THE PROFIT AND LOSS ACCOUNT. IN THE RETURN OF INCOME FILED , ASSESSEE OFFERED THE SAID AMOUNT AS INCOME TREATING IT TO BE A R EVENUE RECEIPT. HOWEVER, BEFORE THE CIT(A) ASSESSEE RAISED AN ADDITIONAL GROUND CONTENDING THAT SUCH SURPLUS WAS A CAPITAL RECEIPT NOT CHARGEABLE TO TAX FOLLOWING THE DECISION OF THE SPECIAL BENCH OF THE TRIBUNAL IN THE CASE OF SULZER INDIA LIMITED VS. JT. CIT, 134 TTJ (MUM)(SB)385. THE CIT(A) HAS ADMITTED SUCH ADDITIONAL GROUND OF APPEAL AS ACCORDING TO HIM THE ISSUE WAS LEGAL IN NATURE. THEREAFTER , HE HAS APPLIED THE DECISION OF THE SPECIAL BENCH OF THE TRIBUNAL IN THE CASE OF SULZER INDIA LIMITED ( SUPRA) AND DIRECTED THE ASSESSING OFFICER TO EXCLUDE THE S UM OF RS.12,73,99,650/ - FROM THE COMPUTATION OF INCOME. AGAINST THE AFORESAID DECISION , REVENUE IS IN APPEAL BEFORE US. ITA NO.1 9 7 5 /PN/2013 A.Y. : 20 04 - 05 4 8 . FIRSTLY AS PER THE LD. DR THE CIT(A) ERRED IN ADMITTING SUCH ADDITIONAL GROUND. FURTHER IT IS CONTENDED THAT ASSESSEE HAD ITSELF CREDITED SUCH SUM AS INCOME IN ITS P ROFI T & LOSS ACCOUNT AND THEREFORE THE CLAIM BEFORE THE CIT(A) WAS NOT JUSTIFIED. 9 . ON THE OTHER HAND THE LD. REPRESENTATIVE FOR THE ASSESSEE HAS DEFEND THE ORDER OF THE CIT(A) BY POINTING OUT THAT THE ISSUE STOOD COVERED BY THE DECISION OF THE SPECIAL BENCH OF THE TRIBUNAL IN THE CASE OF SULZER INDIA LIMITED (SUPRA). 1 0 . WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSIONS. AT THE OUTSET WE MAY STATE THAT SO FAR AS THE COMPETENCE OF THE CIT(A) TO ADMIT THE IMPUGNED ISSUE AS AN ADDITIONAL GROUND IS CONCERNED , NO FAULT CAN BE FOUND WITH THE SAME. OSTENSIBLY, THE ISSUE WHICH WAS RAISED BY THE ASSESSEE FOR THE FIRST TIME BEFORE THE CIT(A) INVOLVED A POINT OF LAW AND THE NECESSARY FACTS TO ADJUDICATE THE SAME, WERE ALREADY ON RECORD. IN OTHER WORDS , THE ADJUDICATION OF THE NEW CLAIM SOUGHT TO BE RAISED BY THE ASSESSEE FOR THE FIRST TIME BEFORE THE CIT(A) DID NOT REQUIRE ANY FRESH INVESTIGATION OF FACTS. THEREFOR E , IN TERMS OF THE JUDGMENT OF THE HON'BLE SUPREME COURT IN THE CASE OF NATIONAL THERMAL POWER CO. LTD VS. COMMISSIONER OF INCOME - TAX ( 1998 ) 2 29 ITR 3 8 3 (SC) T HE CIT(A) MADE NO MISTAKE IN ADMITT ING SUCH A DDITIONAL G ROUND OF APPEAL. IT IS PERTINENT TO NOT E THAT BEFORE ADJUDICATING ON THE ADDITIONAL G ROUND OF APPEAL, THE CIT(A) DULY CALLED FOR THE COMMENTS OF THE ASSESSING OFFICER , AND ONLY AFTER CONSIDERING THE COMMENTS , HE HAS ADMITTED THE ADDITIONAL G ROUNDS OF APPEAL FOR ALL THE ABOVE REASONS, THE AC TION OF THE CIT(A) IS HEREBY AFFIRMED. 11 . IN SO FAR AS THE MERITS OF THE CLAIM IS CONCERNED, IT WAS A COMMON POINT BETWEEN THE PARTIES THAT THE CONTROVERSY IS TO BE ADJUDICATED IN THE LIGHT OF THE DECISION OF THE SPECIAL BENCH OF THE TRIBUNAL IN THE CA SE OF SULZER INDIA LIMITED (SUPRA). FOLLOWING THE DECISION OF THE SPECIAL BENCH, THE ORDER OF THE ITA NO.1 9 7 5 /PN/2013 A.Y. : 20 04 - 05 5 CIT(A) IS HEREBY AFFIRMED. IN THE RESULT, THE G ROUNDS OF APPEAL NOS. 3 TO 6 RAISED BY THE REVENUE ARE LIABLE TO BE DISMISSED. WE HOLD SO. 12 . RESULTANTLY, THE APPEAL OF THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 29 TH SE PTEMBER, 2014. SD/ - SD/ - ( SHAILENDRA KUMAR YADAV ) ( G. S. PANNU ) JUDICIAL MEMBER ACCOUNTANT MEMBER PUNE, DATED : 29 TH SE PTEMBER, 2014 . RK COPY OF THE ORDER IS FORWARDED TO : - 1) THE ASSESSEE ; 2) THE DEPARTMENT ; 3) THE CIT(A) - V, PUNE ; 4) THE CIT - V, PUNE ; 5) THE DR B BE NCH, I.T.A.T., PUNE ; 6) GUARD FILE. //TRUE COPY// BY ORDER ASSISTANT REGISTRAR I.T.A.T., PUNE