HINDUSTAN CONSTRUCTION CO.LTD, MUMBAI V. ASST CIT CEN CIR 22, MUMBAI

ITA 208/MUM/2012

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 88606 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 2 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-03-2015
• Appeal Filed By: Assessee
• Bench Allotted: L
• Next Hearing Date: 09-03-2015
• Assessment Year: 2006-2007
• Appeal Filed On: 10-01-2012
• Court: TRIBUNAL
• Department Lawyers: NEENA SINGH PANDEY
• Assessee Lawyers: H P MAHAJAN
• Keywords: Business income; Depreciation; Opportunity of being heard; Additional depreciation
• Section: 143(3); 90

Judgement Text

, , , IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES L , MUMBAI , , , BEFORE SHRI JOGINDER SINGH, JUDICIAL MEMBER, AND SHRI SANJAY ARORA, ACCOUNTANT MEMBER ITA NO. 281 /MUM/201 2 ASSESSMENT YEAR: 200 5 - 06 DCIT CENTRAL CIRCLE - 22 ROOM NO.403, AAYAKAR BHAVAN MUMBAI - 400 0 20 . / VS. M/S. HINDUSTAN CONSTRUCTION CO. LTD. LBS MARG, VIKHROLI (W) MUMBAI - 4000 83 . ( / APPEL LANT) ( / R ESPONDENT) P.A. NO. AAACH 0968 B / CROSS OBJECTION NO.85/MUM/2013 ( ARIS I NG OUT OF ITA NO. 281 /MUM/201 2 ) ASSESSMENT YEAR: 200 5 - 06 M/S. HINDUSTAN CONSTRUCTION CO. LTD. LBS MARG, VIKHROLI (W) MUMBAI - 4000 83. / VS. DCIT CENTRAL CIRCLE - 22 ROOM NO.403, AAYAKAR BHAVAN MUMBAI - 400 020. ( / CROSS OBJECTOR ) ( / R ESPONDENT) 2 ITA NO. 281, 208/M/12 ,CO 85/13 M/S. HINDUSTAN CONSTRUCTION CO. LTD. ITA NO. 208 /MUM/201 2 ASSESSMENT YEAR: 200 6 - 07 M/S. HINDUSTAN CONSTRUCTION CO. LTD. LBS MARG, VIKHROLI (W) MUMBAI - 4000 83. / VS. DCIT CENTRAL CIRCLE - 22 ROOM NO.403, AAYAKAR BHAVAN MUMBAI - 400 020. ( / APPELLANT) ( / R ESPONDENT) / REVENUE BY: MS. NEENA SINGH PANDEY - DR / ASSESSEE BY SHRI H.P. MAHAJAN / DATE OF HEARING : 09 /03/2015 / DATE OF PRONOUNCEMENT : 17 /03/2015 / O R D E R PER JOGINDER SINGH (JUDICIAL MEMBER) : THE ASSESSEE AS WELL AS THE REVENUE ARE IN CROSS APPEALS FOR AY 2005 - 06, WHEREAS THE AS SESSEE HAS ALSO PREFERRED CROSS OBJECTION ARISING OUT OF ITA NO.281/MUM/12 AGAINST THE ORDER DATED 11/10/2011 OF THE LD. FIRST APPELLATE AUTHORITY, MUMBAI. 2. DURING HEARING SHRI H.P. MAHAJAN, LD. COUNSEL, APPEARED FOR THE ASSESSEE WHEREAS MS. NEENA SINGH PANDEY, LD. CIT - DR APPEARED FOR THE REVENUE. THE CRUX OF THE ARGUMENT IS THAT THE IMPUGNED ISSUES ARE ALREADY COVERED BY THE ORDER OF THE TRIBUNAL FOR AY 2003 - 04 TO 2006 - 07 3 ITA NO. 281, 208/M/12 ,CO 85/13 M/S. HINDUSTAN CONSTRUCTION CO. LTD. (ITA NOS.6438 TO 6441/MUM/2008) ORDER DATED 28/9/2012. THIS FACTUAL MATRIX WAS NOT CONTROVERTED BY EITHER SIDE. 3. IN THE APPEAL OF THE REVENUE (ITA NO.281/ M UM/12) THE ONLY GROUND RAISED PERTAINS TO DIRECTING THE ASSESSING OFFICER TO RE - WORK THE RELIEF AFTER TAKING THE DOUBLY TAXED INCOME AS TOTAL INCOME DETERMINED AT RS.54,93,56,539/ - WITHOUT APPRECIATING THE FACT THAT THE ASSESSEE DID NOT PROVE THAT INCOME FROM BHUTAN OPERATION WAS INCLUDED UNDER THE HEAD CAPITAL GAINS TOO . THE LD. CIT - DR ADVANCED HER ARGUMENTS WHICH ARE IDENTICAL TO THE GROUND RAISED. 3.1 WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. BEFORE COMING TO ANY CONCLUSION WE ARE REPRODUCING HEREUNDER THE RELEVANT PORTION FROM THE AFORESAID ORDER DT. 28/9/2012 OF THE TRIBUNAL FOR PERUSAL AND READY REFERENCE : - 53 GROUND NO. 9 IS REGARDING DISALLOWANCE OF RELIEF U/S 91 OF THE I T ACT BEING THE TAX PAID IN BHUTAN AS CLAIMED BY THE ASSESSEE, 54 THE ASSESSEE HAS EARNED INCOME IN RESPECT OF HYDROELECTRIC PROJECT AND PAID TAX UNDER BHUTAN TAX LAW. THE SAME INCOME IS AGAIN SUBJECTED TO INDIAN TAX LAW BY VIRTUE OF RESIDENCE STATUS OF THE ASSESSEE. ACCORDINGLY, THE ASSESSEE CLAIMED RELIEF U/S 91 OF THE IT ACT ON THE TAX PAID IN BHUTAN AT RS. 6,22,69,958/ - AS THERE WAS NO DTTTA BETWEEN INDIA AND BHUTAN. THE ASSESSING OFFICER GRANTED RELIE F U/S 91 FOR THE TAX PAID IN BHUTAN TO THE EXTENT OF RS. 3,10,64,236/ - BY WORKING OUT THE AVERAGE RATE OF TAX IN INDIA AT 35.87% AND COMPARING THE SAME WITH THE AVERAGE RATE OF TAX IN BHUTAN, WHICH IS AT 8.53%. ACCORDINGLY, THE ASSESSING OFFICER HAS GRANT ED THE RELIEF U/S 91 @ 8.53% OF THE INCOME TAX PAYABLE IN INDIA AT RS. 3,10,64,236/ - . ON APPEAL, THE COMMISSIONER OF INCOME TAX(APPEALS) HAS CONFIRMED THE ACTION OF THE ASSESSING OFFICER. 4 ITA NO. 281, 208/M/12 ,CO 85/13 M/S. HINDUSTAN CONSTRUCTION CO. LTD. 55 BEFORE US, THE LD AR HAS SUBMITTED THAT AS PER THE PROVISIONS O F SECTION 91, RELIEF IN RESPECT OF TAX PAID IN BHUTAN IS ALLOWABLE AT THE AVERAGE RATE OF TAX IN BHUTAN, WHICH IS LOWER THAN THE INDIAN TAX RATE AND THEREFORE, THE BENEFIT IS REQUIRED TO BE COMPUTED @ 8.53% ON THE INCOME FROM BHUTAN OPERATIONS INCLUDED TO THE TOTAL INCOME OF THE ASSESSEE. THUS, THE LD AR HAS SUBMITTED THAT 8.53% SHOULD BE CALCULATED ON RS. 68.36 CRORES INSTEAD OF RS. 36.41 CRORES. 55.1 ON THE OTHER HAND, THE LD DR HAS RELIEF UPON THE ORDERS OF THE AUTHORITIES BELOW. 57 WE HAVE CONSIDERE D THE RIVAL SUBMISSIONS AS WELL AS THE RELEVANT MATERIAL ON RECORD. SECTION 91 STIPULATES THE RELIEF IN RESPECT OF THE INCOME, WHICH IS SUBJECTED TO DOUBLE TAX IN THE COURTIERS OUTSIDE INDIA AS WELL AS IN INDIA AND THERE IS NO AGREEMENT U/S 90 OF THE I T A CT FOR THE RELIEF OR AVOIDANCE OF DOUBLE TAXATION. WE QUOTE SEC 91(1) AS UNDER: 91. (1) IF ANY PERSON WHO IS RESIDENT IN INDIA IN ANY PREVIOUS YEAR PROVES THAT, IN RESPECT OF HIS INCOME WHICH ACCRUED OR AROSE DURING THAT PREVIOUS YEAR OUTSIDE INDIA (AND W HICH IS NOT DEEMED TO ACCRUE OR ARISE IN INDIA), HE HAS PAID IN ANY COUNTRY WITH WHICH THERE IS NO AGREEMENT UNDER SECTION 90 FOR THE RELIEF OR AVOIDANCE OF DOUBLE TAXATION, INCOME - TAX, BY DEDUCTION OR OTHERWISE, UNDER THE LAW IN FORCE IN THAT COUNTRY, HE SHALL BE ENTITLED TO THE DEDUCTION FROM THE INDIAN INCOME - TAX PAYABLE BY HIM OF A SUM CALCULATED ON SUCH DOUBLY TAXED INCOME98 AT THE INDIAN RATE OF TAX OR THE RATE OF TAX OF THE SAID COUNTRY, WHICHEVER IS THE LOWER, OR AT THE INDIAN RATE OF TAX IF BOTH TH E RATES ARE EQUAL. 57.1 THE BENEFIT OF TAX PAID OUTSIDE INDIA IS CALCULATED BY TAKING INTO ACCOUNT THE RATE OF TAX IN INDIA AND RATE OF TAX IN THE OTHER SUCH COUNTRY WHICHEVER IS LOWER IN RESPECT OF THE INCOME WHICH IS SUBJECTED TO DOUBLE TAXATION. THE A SSESSING OFFICER HAS COMPUTED THE RELIEF U/S 91 WHICH IS REPRODUCED BY THE CIT(A) IN PARA 59 AS UNDER: BOOK PROFIT FROM OPERATION IN BHUTAN : RS.72,97,38,000/ - TAX PAID IN BHUTAN : RS.6,22,69,958/ - AVERAGE RATE OF TAX ON INCOME PAID IN BHUTAN : RS.8.53% PROFITS FROM BHUTAN OPERATION AFTER A TTRIBUTING PROPORTIONATE ADDITIONAL DEPRECIATION AS PER ACT : RS.68,63,57,400/ - 5 ITA NO. 281, 208/M/12 ,CO 85/13 M/S. HINDUSTAN CONSTRUCTION CO. LTD. BHUTAN INCOME DOUBLY TAXED IN INDIA SUBJECT TO TOTAL BUSINESS INCOME : RS.36,41,76,280/ - TAX AND SURC HARGE PAYABLE DOUBLY IN INDIA ON DOUBLE TAXED INCOME (TAX ON TOTAL INCOME AS THE SAME IS LOWER THAN BHUTAN INCOME) : RS.13,06,48,204/ - AVERAGE RATE OF TAX IN INDIA : 35.87% AS THE AVERAGE RATE OF TAX IN BHUTAN IS LOWER THAN TAX RATE IN INDIA, RE LIEF ALLOWABLE U/S.91 IN INDIA @8.53% OF INCOME TAXED IN INDIA SUBJECT TO TOTAL TAX PAID IN BHUTAN : RS.3,10,64,236/ - 57.2 THE WORKING OF THE ASSESSING OFFICER CLEARLY SHOWS THAT THE ASSESSEE PAID THE TAX IN BHUTAN AT RS.6,22,69,958/ - ON PROFIT OF R S. 72,97,38,000/ - FROM OPERATION IN BHUTAN AT THE AVERAGE RATE OF 8.53%. THE PROFIT FROM THE BHUTAN OPERATIONS ARE INCLUDED IN THE TOTAL INCOME OF THE ASSESSEE AFTER GRANTING THE DEDUCTION OF ADDITIONAL DEPRECIATION AT RS. 68,63,57,400/ - . THOUGH THE TOTAL BUSINESS INCOME OF THE ASSESSEE WAS COMPUTED BY THE ASSESSING OFFICER AT RS. 36,41,76,280/ - ON WHICH THE TAX PAYABLE HAS BEEN WORKED OUT TO RS. 13,06,48,240/ - . SINCE THE AVERAGE RATE OF TAX IN INDIA IS HIGHER THAN THE BHUTAN; THEREFORE, THE RELIEF U/S 9 1 IS ALLOWABLE AT THE RATE OF AVERAGE TAX PAID IN BHUTAN BEING LOWER RATE OF TAX THAN IN INDIA. THE ASSESSING OFFICER COMPUTED THE RELIEF @ 8.53% BEING THE AVERAGE RATE OF TAX PAID IN BHUTAN ON THE TOTAL INCOME COMPUTED BY THE ASSESSING OFFICER AT RS. 36. 41.CRORES AND NOT ON THE INCOME FROM BHUTAN OPERATIONS WHICH IS SUBJECTED TO DOUBLE TAXATION. THEREFORE, THE COMPUTATION OF RELIEF BY THE ASSESSING OFFICER IS CONTRARY TO THE RELEVANT PROVISIONS OF THE ACT AS PROVIDED U/S 91 OF THE ACT. THE ASSESSING OFFIC ER HAS COMPUTED THE INCOME FROM BHUTAN OPERATIONS AT RS. 68,63,57,400/ - AND INCLUDED THE SAME IN THE TOTAL INCOME OF THE ASSESSEE, THEN THE RELIEF U/S 91 OF THE I T ACT IS ALLOWABLE @ 8.53% ON THE SAID INCOME, WHICH IS SUBJECTED TO TAX IN BOTH THE COUNTRI ES. ACCORDINGLY, WE DIRECT THE ASSESSING OFFICER TO GIVE RELIEF U/S 91 BY CALCULATING THE AVERAGE RATE OF TAX OF 8.53% ON RS. 68,63,57,400/ - SUBJECT TO THE TOTAL TAX PAID /PAYABLE IN EITHER OF THE COUNTRIES. 6 ITA NO. 281, 208/M/12 ,CO 85/13 M/S. HINDUSTAN CONSTRUCTION CO. LTD. 3.2 IN VIEW OF THE ABOVE , AND IN THE ABSENCE OF ANY CONTRARY FACTS /DECISION FROM HONBLE HIGHER FORUM BROUGHT TO OUR NOTICE BY EITHER SIDE, WE DIRECT THE ASSESSING OFFICER TO DECIDE THE ISSUE IN ACCORDANCE WITH THE DIRECTIONS CONTAINED IN AFORESAID ORDER DT.28/9/2012 AND DECIDE ACCORDINGLY. THE ASSES SEE BE GIVEN OPPORTUNITY OF BEING HEARD WITH FURTHER LIBERTY TO FURNISH EVIDENCE, IF ANY, IN SUPPORT OF ITS CLAIM. 4. NOW WE SHALL TAKE UP THE APPEAL OF THE ASSESSEE, WHEREIN THE ASSESSEE HAS CHALLENGED THE IMPUGNED ORDER IN NOT ALLOWING RELIEF U/S.91 OF THE ACT WITH RESPECT TO TAXES PAID IN BHUTAN, IGNORING THE FACT THAT THE SAME WAS ALLOWED IN ORIGINAL ORDER U/S. 143(3) OF THE ACT. KEEPING IN VIEW THE TOTALITY OF FACTS AND THE ORDER OF THE TRIBUNAL DATED 28.9.2012 THIS GROUND OF THE ASSESSEE IS ALSO REM ANDED BACK TO THE FILE OF THE ASSESSING OFFICER TO EXAMINE THE CLAIM OF THE ASSESSEE IN THE LIGHT OF SEC.91 OF THE ACT AND DECIDE AFTER PROVIDING DUE OPPORTUNITY OF BEING HEARD WITH FURTHER LIBERTY TO FURNISH EVIDENCE, IF ANY IN SUPPORT OF ITS CLAIM . IF TH E ASSESSEE SATISFIES THE ASSESSING OFFICER THAT TAX HAS ALREADY BEEN PAID BY HIM IN THAT COUNTRY AND DOUBLE TAXATION HAS BEEN IMPOSED, THEN, BESIDE THE TAXATION WHICHEVER IS LOWER OR AT THE INDIA RATE OF TAX IF BOTH THE TAXES ARE EQUAL IN BOTH THE COUNTRIE S. THIS GROUND IS ALLOWED FOR STATISTICAL PURPOSES. 5. THE ASSESSEE HAS ALSO FILED CROSS OBJECTION (CO NO.85/MUM/2013) WHICH IS ARISING OUT OF ITA NO.281/MUM/2012 IN NOT UPHOLDING THE CONTENTION OF THE ASSESSEE THAT IT WAS ENTITLED TO RELIEF OF 7 ITA NO. 281, 208/M/12 ,CO 85/13 M/S. HINDUSTAN CONSTRUCTION CO. LTD. RS.8,50,46, 827/ - U/S.91 OF THE ACT AGAINST RS.6,38,64,145/ - ALLOWED BY THE ASSESSING OFFICER IN ORDER PASSED U/S. 143(3) R.W.S. 250 OF THE ACT. SINCE WE HAVE ALREADY SENT THE ISSUE TO THE FILE OF THE LD. ASSESSING OFFICER FOR FRESH ADJUDICATION, THIS CROSS OBJECTION OF THE ASSESSEE IS ALSO REMANDED BACK FOR FRESH ADJUDICATION. THE ASSESSEE BE GIVEN OPPORTUNITY OF BEING HEARD. THUS, THE CROSS OBJECTION OF THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. FINALLY, THE APPEAL OF THE REVENUE AS WELL AS THAT OF THE ASSESS EE ALONG WITH CROSS OBJECTION ARE ALLOWED FOR STATISTICAL PURPOSES. THIS ORDER WAS PRONOUNCED IN THE OPEN COURT IN THE PRESENCE OF LD. REPRESENTATIVES FROM BOTH SIDES AT THE CONCLUSION OF THE HEARING ON 17 /03/2015. 17 / 0 3 / 2015 SD/ - ( SANJAY ARORA ) SD/ - ( JOGINDER SINGH ) / ACCOUNTANT MEMBER / JUDICIAL MEMBER MUMBAI; DATED : 17 /03/2015 JV, SR. P.S./ . . . 8 ITA NO. 281, 208/M/12 ,CO 85/13 M/S. HINDUSTAN CONSTRUCTION CO. LTD. / COPY OF THE ORDER FORW ARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ( ) / THE CIT, MUMBAI. 4. / CIT(A) - , MUMBAI 5. , , / DR, ITAT, MUMBAI 6. / GUARD FILE. / BY ORDER, //TRUE COPY// / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI