SIEMENS LTD, MUMBAI V. JCIT SP RG 30, MUMBAI

ITA 2018/MUM/2011

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 84515 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 9 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-12-2014
• Appeal Filed By: Assessee
• Bench Allotted: H
• Next Hearing Date: 23-07-2014
• Assessment Year: 1997-1998
• Appeal Filed On: 11-03-2011
• Court: TRIBUNAL
• Department Lawyers: K C P PATNAIK
• Keywords: Capital asset; Business income; Depreciation; Opportunity of being heard; Bad and doubtful debts; Capital expenditure
• Section: 154

Judgement Text

IN THE INCO ME TAX APPELLATE TRIBUNAL H BENCH, MUMBAI BEFORE SHRI JOGINDER SINGH , JUDICIAL MEMBER AND SHRI D. KARUNAKARA RAO, ACCOUNTANT MEMBER I.T.A. NO. 2018/M/2011 (ASSESSMENT YEAR : 1997 - 1998 ) SIEMENS LIMITED, 130, PANDURANG BUDHKAR, WORLI, MUMBAI 400 018. / VS. ACIT, RANGE 7(2), AAYAKAR BHAVAN, M.K. MARG, MUMBAI - 400 020. ./ PAN : AAACS0764L ( / APPELLANT) .. ( / RESPONDENT ) / APPELLANT BY : SHRI NITESH JOSHI / RESPONDENT BY : SHRI K.C.P. PATNAIK, CIT - DR / DATE OF HEARING : 10.11.2014 / DATE OF PRONOUNCEMENT : 15 .12.2014 / O R D E R PER D. KARUNAKARA RAO, AM: THIS APPEAL FILED BY THE ASSESSEE ON 11.3.2011 IS AGAINST THE ORDER OF THE CIT (A) - 13, MUMBAI DATED 26/10/2010 FOR THE ASSESSMENT YEAR 1997 - 1998. 2. GROUND NO.1 CONTAINS 4 SUB - GROUNDS IE.,1(A) TO 1(D). THE ISSUE INVOLVED IN GROUND NO.1 RELATES TO DISALLOWANCE OF ENTERTAINMENT EXPENDITURE. IN THIS REGARD, LD COUNSEL FAIRLY MENTIONED THAT THE ISSUE INVOLVED IN GROUND NO.1(A) STANDS COVERED AGAINST THE ASSESSEE IN VIEW OF THE ORDER OF THE TRIBUNAL IN THE ASSESSEES OWN CASE IN THE EARLIER YEARS 1985 - 86 AND OTHERS . IN THIS REGARD HE BROUGHT OUR ATTENTION TO PARA 3 TO 5 OF THE ORDER OF THE TRIBUNAL VIDE ITA NOS.4829/M/1989 (AY 1985 - 86) AND OTHERS DATED 31.10.2006 . 3. AFTER HEARING BOTH THE PARTIES AND ON PERUSAL OF THE SAID ORDER OF THE TRIBUNAL, WE FIND THE TRIBUNAL HAS DECIDED THE SIMILAR ISSUE AGAINST THE ASSESSEE VIDE PARAS 3 TO 5 OF ITS ORDER (SUPRA). FOR THE SAKE OF COMPLETENESS OF THIS ORDER, THE RELEVANT PARA 5 FROM THE SAID ORDER OF THE TRIBUNAL IS REPRODUCED HERE WHICH READ AS UNDER: 2 5. WE HAVE HEARD BOTH THE PARTIES A ND CONSIDERED THE MATERIAL BEFORE US. WE ACCEPT THE ASSESSEES CONTENTION THAT ON AN AVERAGE OF 50% EXPENDITURE CAN BE SAID TO BE ATTRIBUTABLE TO EMPLOYEES AND IS OUTSIDE THE SCOPE OF DISALLOWANCE OF SECTION 37(3A) OF THE ACT. WE ORDER ACCORDINGLY. IN T AKING THIS VIEW, WE RELY ON DECISIONS OF THE TRIBUNAL IN THE ASSESSEES OWN CASE FOR THE AY 1978 - 79. 4. CONSIDERING THE COVERED NATURE OF THE ISSUE, WE DISMISS THE SAID GROUND NO. 1(A) RAISED BY THE ASSESSEE. 5. IN CONNECTION WITH GROUND NOS.1(B), 1(C) AN D 1(D), LD COUNSEL MENTIONED THAT THE ISSUE STANDS COVERED BY THE ORDERS OF THE TRIBUNAL FOR THE EARLIER AYS 1985 - 86 AND OTHERS VIDE ORDER DATED 31.10.2006 AND AYS 1989 - 90 TO 1992 - 93, DATED 30.11.2006 ETC. IN THIS REGARD, LD COUNSEL SUBMITTED THAT CONSID ERING THE EARLIER ORDERS OF THE TRIBUNAL, THE SAID GROUNDS ARE SET ASIDE TO THE FILES OF THE CIT (A) FOR DECIDING THE SAME AFRESH. HE ALSO MENTIONED THAT THERE ARE CERTAIN RECTIFIABLE MISTAKES IN THE ORDER OF THE CIT (A) WHICH NEEDS TO BE ATTENDED TO IN TH E REMAND PROCEEDINGS. 6. ON THE OTHER HAND, LD DR RELIED ON THE ORDERS OF THE REVENUE AUTHORITIES. 7. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE ORDERS OF THE REVENUE AUTHORITIES AS WELL AS THE CITED ORDERS OF THE TRIBUNAL (SUPRA). GROUND NO.1(B) REL ATES TO EXPENDITURE INCURRED ON LUNCH, DINNER ETC BY STAFF MEMBERS OUTSIDE OFFICE PEREMISES; GROUND NO.1(C) RELATES TO EXPENDITURE ON REFRESHMENTS OFFERED TO THE INVITEES AT THE ANNUAL GENERAL MEETING AND GROUND NO.1(D) RELATES TO WELFARE EXPENSES. CONSI DERING THE EARLIER ORDERS OF THE TRIBUNAL ON THESE ISSUES AS WELL AS CONSIDERING THE LD ARS REQUEST, WE ARE OF THE OPINION THAT THERE IS A NEED FOR REMANDING THESE ISSUES TO THE FILE OF THE CIT (A) FOR DECIDING THE MATTER AFRESH. WE ORDER ACCORDINGLY. THUS, GROUND NOS.1(B), 1(C) AND 1(D) RAISED BY THE ASSESSEE ARE ALLOWED FOR STATISTICAL PURPOSES. 8. GROUND NO.2 RELATES TO MODVAT CREDIT. IN THIS REGARD, IT IS BROUGHT TO OUR NOTICE BY THE LD COUNSEL FOR THE ASSESSEE THAT THIS ISSUE NEEDS REMANDING FOR D ECIDING THE ISSUE AFRESH IN THE LIGHT OF THE FAVOURABLE ORDERS OF THE ITAT FOR THE ABOVE REFERRED EARLIER AYS IN THE ASSESSEES OWN CASE. ON OTHER HAND, LD DR DUTIFULLY RELIED ON THE ORDERS OF THE REVENUE AUTHORITIES. AFTER HEARING BOTH THE PARTIES AND ON PERUSAL OF THE ORDERS O F THE TRIBUNAL FOR THE EARLIER YEARS (AYS 1985 - 3 86 AND OTHERS VIDE ORDER DATED 31.10.2006 AND AYS 1989 - 90 TO 1992 - 93, DATED 30.11.2006 ETC.), WE FIND THE THIS GROUND NEEDS TO BE REMANDED TO THE FILE OF THE CIT (A) FOR FRESH ADJUDI CATION IN THE LIGHT OF THE ABOVE CITED ORDERS OF THE TRIBUNAL IN ASSESSEES OWN CASE AFTER AFFORDING A REASONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. ACCORDINGLY, GROUND NO.2 RAISED BY THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. 9. GROUND NO .3 RELATES TO THE TAXABILITY OF CERTAIN RECEIPTS UNDER PROPER HEAD OF INCOME. BRINGING OUR ATTENTION TO PAGE 75 OF THE PAPER BOOK, LD COUNSEL FOR THE ASSESSEE MENTIONED THAT THE INTEREST RECEIVED FROM THE DEBTORS FOR BELATED PAYMENTS IS TAXABLE AS BUSINE SS INCOME OF THE ASSESSEE. IN THIS REGARD, LD COUNSEL CITED CERTAIN DECISIONS IN ASSESSEES OWN CASE FOR THE AY 1993 - 94 TO 1996 - 97 (PARA 16) AND MENTIONED THAT IN VIEW OF THE SAID ORDER OF THE TRIBUNAL DATED 31.1.2007, THE RECEIPT HAS TO BE TAXED UNDER A S A BUSINESS INCOME. TO THAT EXTENT, ORDER OF THE CIT (A) REQUIRES NECESSARY AMENDMENT. AFTER HEARING BOTH THE PARTIES, WE FIND THAT THIS ISSUE NOW STANDS COVERED IN FAVOUR OF THE ASSESSEE BY THE EARLIER ORDERS OF THE TRIBUNAL (SUPRA). 10. REGARDING THE MISCELLANEOUS RECEIPTS AND THE INTEREST RECEIPTS FROM THE BANKS, LD COUNSEL FOR THE ASSESSEE FAIRLY MENTIONED THAT THE SAME IS REQUIRED TO BE TAXED UNDER THE HEAD INCOME FROM OTHER SOURCES. TO THAT EXTENT, ORDERS OF THE CIT ()A) IS FAIR. HOWEVER, I N CONNECTION WITH THE INTEREST RECEIPTS FROM THE STAFF LOANS GIVEN BY THE ASSESSEE, LD COUNSEL VEHEMENTLY ARGUED THAT THESE RECEIPTS CONSTITUTES BUSINESS RECEIPTS AND THEREFORE, THEY REQUIRED TO BE TREATED AS BUSINESS INCOME. LD COUNSEL MENTIONED THAT THE RE ARE CERTAIN DECISIONS IN FAVOUR OF THE ASSESSEE ON THE ISSUE OF INTEREST RECEIPTS FROM THE STAFF RELATING TO THE LOANS TAKEN BY THEM. ON THE OTHER HAND, LD DR RELIED ON THE ORDERS OF THE REVENUE AUTHORITIES. 11. WE HAVE HEARD BOTH THE PARTIES AND PERUS ED THE ORDERS OF THE REVENUE AUTHORITIES AS WELL AS THE CITED ORDERS OF THE TRIBUNAL IN ASSESSEES OWN CASE AND THE RELEVANT MATERIAL PLACED BEFORE US. AFTER HEARING BOTH THE PARTIES, WE ARE OF THE OPINION THAT REGARDING THE RECEIPTS OF INTEREST FROM STAF F IS REQUIRED TO BE DECIDED BY THE CIT (A) IN THE LIGHT OF THE DECISIONS TAKEN BY THE TRIBUNAL ON THIS ISSUE. THUS, THE ISSUES RELATING TO THE CHARGEABILITY OF INTEREST FROM THE DEBTORS IS DECIDED IN 4 FAVOUR OF THE ASSESSEE AND ISSUES RELATING TO THE TAXAB ILITY OF MISCELLANEOUS INCOME AND INTEREST FROM THE BANK INTERESTS ARE DECIDED AGAINST THE ASSESSEE. ACCORDINGLY, GROUND NO.3 IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. 12. GROUND NOS. 4, 5 AND 9 RELATE TO THE WRITE OFF OF THE LOANS AND ADVANCES, BAD - DEBTS. IN THIS REGARD, LD COUNSEL FOR THE ASSESSEE BROUGHT OUR ATTENTION TO THE ORDER OF THE INCOME TAX SETTLEMENT COMMISSION AND MENTIONED THAT THE COMMISSION HAS DENIED THE CLAIM AMOUNTING TO RS. 50 LAKHS, THEREFORE, THE SAID CLAIM WAS NOT MADE IN T HE RETURN OF THE ASSESSEE. HOWEVER, ASSESSEE MADE CLAIM OF ADVANCES WRITTEN OFF AMOUNTING TO RS. 10,19,238/ - AND THE SAME SHOULD BE ALLOWED IN FAVOUR OF THE ASSESSEE. HE FURTHER MENTIONED THAT THE DEBTS ARE NOT CLEARLY IDENTIFIABLE IN VIEW OF THE LANGUAG E USED IN THE ORDER OF THE SETTLEMENT COMMISSION DATED 7.1.2008. PER CONTRA, LD DR MENTIONED THAT THE ASSESSEE FAILED TO IDENTIFY THE DEBTS AMOUNTING TO RS. 10,19,238/ - . 13. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE ORDERS OF THE REVENUE AUTHORITIES AS WELL AS THE ORDER OF THE SETTLEMENT COMMISSION (SUPRA). AFTER HEARING BOTH THE PARTIES, WE ARE OF THE OPINION THAT THIS ISSUE INVOLVED IN GROUND NO.4 SHOULD ALSO BE REMANDED TO THE FILE OF THE CIT (A) FOR FRESH ADJUDICATION. ACCORDINGLY, WE REMAND TH IS MATTER TO THE FILE OF CIT (A) TO DECIDE THE ISSUE AFRESH AFTER AFFORDING A REASONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. WE ORDER ACCORDINGLY. 14. REGARDING THE BAD DEBTS RAISED IN GROUND NO.5 AMOUNTING TO RS. 46,85,460/ - , LD COUNSEL MENTIONE D THAT THIS ISSUE ALSO NEEDS TO REVISIT THE FILE OF THE CIT (A) FOR DECIDING THE MATTER AFRESH AFTER CONSIDERING THE DECISIONS OF THE HONBLE SUPREME COURT / HIGH COURT RELATING TO BAD DEBTS INVOLVING GOVERNMENTAL AUTHORITIES I.E., SOUTH INDIA SURGICALS LI MITED. AFTER HEARING BOTH THE PARTIES, WE FIND THAT THIS GROUND SHOULD BE REMANDED TO THE FILE OF THE CIT (A) TO THE DECIDE THE ISSUE AFRESH IN THE LIGHT OF THE ABOVE CITED JUDGMENTS OF THE HIGHER JUDICIARY AFTER AFFORDING A REASONABLE OPPORTUNITY OF BEIN G HEARD TO THE ASSESSEE. WE ORDER ACCORDINGLY. THUS, GROUND NOS.4,5 AND 9 ARE ALLOWED FOR STATISTICAL PURPOSES. 15. GROUND NO.7 RELATES TO THE DISALLOWANCE OF CONSULTANCY FEES OF RS. 3 LAKHS. IN THIS REGARD, LD COUNSEL FOR THE ASSESSEE SUBMITTED THAT THER E IS A RECTIFICATION 5 APPLICATION PENDING WITH THE CIT (A) REGARDING THE CLAIM OF CAPITAL EXPENDITURE. THE SAME HAS NOT BEEN DISPOSED OF TILL NOW. AFTER HEARING BOTH THE PARTIES, WE DIRECT THE CIT (A) TO ATTEND TO THE SAID RECTIFICATION APPLICATION DATED 11. 4.2000 IN A TIME BOUND MANNER AND REDRESS THE GRIEVANCE OF THE ASSESSEE. ACCORDINGLY, GROUND NO.7 IS REMANDED TO THE FILE OF THE CIT (A) FOR DECIDING THE MATTER AFRESH AFTER AFFORDING A REASONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. THUS, GRO UND NO.7 IS ALLOWED FOR STATISTICAL PURPOSES. 16. GROUND NO.6 RELATES TO CLAIM OF DEPRECIATION ON MACHINERY SHIFTING CHARGES AMOUNTING TO RS. 1,00,29,640/ - . AT THE OUTSET, LD COUNSEL FOR THE ASSESSEE MENTIONED THAT THE CLAIM OF THE ASSESSEE HAS BEEN ATTEN DED TO BY THE CIT IN THE PROCEEDINGS U/S 154 OF THE OF THE ACT. CONSEQUENTLY, THIS GROUND BECOMES INFRUCTUOUS AT THIS POINT OF TIME. AFTER HEARING BOTH THE PARTIES, WE DISMISS THE GROUND NO.6 AS INFRUCTUOUS. 17. GROUND NO.8 RELATES TO ALLOWING OF CAPITA L LOSS RELATING TO THE CURRENT ASSETS. IN THIS REGARD, LD COUNSEL MENTIONED THAT THE ONLY DISPUTE IS ALLOWING OF THE CAPITAL LOSS ON THE CURRENT ASSETS RELATING TO THE SALE OF DIVISIONS OF THE ASSESSEE. IN THIS REGARD, LD COUNSEL BROUGHT OUR ATTENTION TO THE CONTENTS OF PARA 26 TO 29 OF THE CIT (A)S ORDER AND MENTIONED THAT THIS ISSUE WAS NOT RAISED BEFORE THE ASSESSING OFFICER AND HOWEVER THE SAME WAS RAISED BEFORE THE CIT (A) AND FURNISHED NECESSARY INFORMATION IN SUPPORT OF THE CLAIM OF BUSINESS LOSS RELATING TO THE INVENTORIES / CAPITAL ASSETS. CIT (A) EXAMINED THE CLAIM AND MADE DISALLOWANCE BY MENTIONING THE FOLLOWING. ..HOWEVER, THE BASIS OF ARRIVING AT A FIGURE OF 838 MILLION WAS NOT BEEN GIVEN BY THE COMPANY / AUDITORS IN THE PAPER ANNEXED / P LACED ON RECORD. IN THE ABSENCE OF BASIS OF ARRIVING THE APPELLANTS CLAIM OF ALLOWING REVENUE LOSS ON NET CURRENT ASSETS (WORKED OUT BY THE ASSESSING OFFICER AT RS. 7,17,34,424/ - ) IS NOT MAINTAINABLE. THIS GROUND OF APPEAL IS DISMISSED. 18. EXPLAINING THE ABOVE, LD COUNSEL MENTIONED THAT THE BASIS OF WHICH THE CIT (A) DISMISSED THE CLAIM OF THE ASSESSEE IS NOT FAIR. HE MENTIONED THAT THERE IS NO NECESSITY FOR AUDITOR TO PROVIDE CERTIFICATION AND OTHER BREAKUP OF THE FIGURES GIVEN BY THE ASSESSEE. HE A LSO MENTIONED THAT FIGURE OF RS. 838 MILLIONS IS MERELY A GROSS SALE CONSIDERATION AND THE SAME IS BORNE ON THE AGREEMENT. 6 19. ON THE OTHER HAND, LD DR BROUGHT OUR ATTENTION TO THE FIGURES AVAILABLE AT PAGE 27, 28 AND 29 AND MENTIONED THAT THE BREAKUP OF C URRENT ASSETS IS NOT AVAILABLE AND THE MANNER OF ARRIVING AT THE VALUE OF THE NET CURRENT ASSET IS NOT CORRECT. IN THESE CIRCUMSTANCES, THE COMPUTATION OF THE CAPITAL LOSS OR GAIN IS NOT POSSIBLE. THEREFORE, THE LD DR IS OF THE OPINION THAT THE ISSUE SHO ULD BE REMANDED TO THE FILE OF THE CIT (A) FOR FRESH ADJUDICATION EVEN IF IT CALL FOR REMAND REPORT FROM THE ASSESSING OFFICER. 20. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE ORDERS OF THE REVENUE AUTHORITIES IN GENERAL AND THE DETAILS GIVEN IN CIT ( A)S ORDER IN PARTICULAR. ON PERUSAL OF THE SAID PARTICULAR FORM CIT (A)S ORDER, WE FIND THAT THE ORDER OF THE CIT (A) DOES NOT FALL UNDER CATEGORY OF THE SPEAKING ORDER. CONSIDERING THE ITEMIZED SALE OF THE ASSETS BY THE ASSESSEE, CIT (A) SHOULD HAVE E XAMINED THE INVENTORIES AND WORKED OUT THE REVENUE LOSS AS PER THE LAW BEFORE THE CLAIM IS REJECTED. THEREFORE, WE REMAND THIS MATTER TO THE FILE OF THE CIT (A) FOR DECIDING THE SAME AFTER AFFORDING A REASONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. ACCORDINGLY, GROUND NO.8 IS ALLOWED FOR STATISTICAL PURPOSES. 21. IN THE RESULT, APPEAL OF THE ASSESSEE IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN CO URT ON 15 TH DECEMBER, 2014. SD/ - SD/ - ( JOGINDER SINGH ) (D. KARUNAKARA RAO) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI ; 15 /12/2014 . . ./ OKK , SR. PS 7 / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ( ) / THE CIT(A) - 4. / CIT 5. , , / DR, ITAT, MUMBAI 6. / GUARD FILE . //TRUE COPY// / BY ORDER, / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI