Assistant Commissioner of Income-tax, V. Prima Private Ltd., Pune

ITA 2162/PUN/2016

• Counselvise Citation: [2018] 119 COUNSELVISE.COM (IT) 4045 (ITAT-PUNE)
• Duration Of Justice: 2 year(s) 1 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 02-11-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2008-2009
• Appeal Filed On: 14-09-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RAJESH GAWLI
• Keywords: Capital receipt; Reassessment proceedings
• Section: 147

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, PUN E , , . ! , ' , # BEFORE MS. SUSHMA CHOWLA, JM AND SHRI D. KARUNAKARA RAO, AM $ / ITA NOS. 2161 & 2162/PUN/2016 % & & / ASSESSMENT YEARS: 2007-08 & 2008-09 THE ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE-10, PUNE. .... / APPELLANT '% / V/S. PRIMA PRIVATE LIMITED. (FORMERLY KNOWN AS PRIMA PAPER ENGINEERING PVT. LTD.) T-73, MIDC, BHOSARI, PUNE-411 026 PAN : AABCP1938J / RESPONDENT REVENUE BY : SHRI RAJESH GAWLI ASSESSEE BY : SHRI SHARAD SHAH / DATE OF HEARING : 22.10.2018 / DATE OF PRONOUNCEMENT : 02.11.2018 ( / ORDER PER D. KARUNAKARA RAO, AM : THESE ARE TWO APPEALS FILED BY THE REVENUE AGAINST THE ORDER OF CIT(A)-6, PUNE COMMONLY DATED 30.06.2016 FOR THE ASSESSMENT YEAR S 2007-08 & 2008- 09. 2 ITA NOS.2161 & 2162 /PUN/2016 A.YS.2007-08 & 2008-09 ITA NO.2161/PUN/2016 A.Y. 2007-08 2. THE GROUNDS RAISED BY THE REVENUE READS AS UNDER: 1. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) WAS JUSTIFIED IN HOLDING THAT DISCOUNT OF RS .87,16,195/- RECEIVED ON PRE-PAYMENT OF LIABILITY UNDER THE SALES TAX D EFERRAL SCHEME, AS NOT A REMISSION OR CESSION OF LIABILITY U/S.41(2)? 2. THE APPELLANT CRAVES LEAVE TO ADD, AMEND OR ALTE R ANY OF THE ABOVE GROUNDS OF APPEAL. IDENTICAL GROUNDS ARE RAISED BY THE REVENUE FOR THE AS SESSMENT YEAR 2008-09 TOO. 3. BRIEFLY STATED RELEVANT FACTS INCLUDE THAT THE ASSESSE E IS ENGAGED IN THE BUSINESS OF PLASTIC MOULDING PRODUCTS ETC. THE ASSESSEE FILED RETURN OF INCOME ON 13.11.2007 DECLARING TOTAL INCOME AT RS.3,21,03,243/-. DURIN G ASSESSMENT PROCEEDINGS U/S.143(3) OF THE INCOME TAX ACT, 1961, THE AS SESSING OFFICER DETERMINED THE TOTAL INCOME OF ASSESSEE AT RS.6,12,42,590/- . DURING THE SCRUTINY, ASSESSING OFFICER NOTED THAT ON THE PREPAID OF SA LES TAX LIABILITY UNDER SALES TAX DEFERRAL SCHEME, ASSESSEE GOT THE BENEFIT OF RS.87,16,195/-. ASSESSING OFFICER ADDED THE SAME AS INCOME OF THE ASSESS EE. BACKGROUNDS FACTS OF THIS ISSUE INCLUDE THAT THE ASSESSEE CREDITED AN AMOUNT TO THE CAPITAL RESERVE ON THE BASIS OF DIFFERENCE BETWEEN THE DEFERRED S ALE TAX LIABILITY AMOUNT AND THE AMOUNT ACTUALLY PREPAID TO THE GOVERNM ENT OF MAHARASHTRA BASED ON NET PRESENT VALUE (NPV) UNDER REPAYMENT SCHEM E PERTAINING TO DEFERRED SALE TAX LIABILITY TREATING THE SAME AS REVENUE R ECEIPTS. ON THIS INFORMATION, THE REASSESSMENT PROCEEDINGS WERE INITIATED BY ISSUING NOTICE U/S.148 R.W.S. 147 IN THE CASE OF THE ASSESSEE FOR A.Y.2007 -08. AT THE END OF THE REASSESSMENT PROCEEDINGS U/S.143(3) R.W.S 147 OF THE ACT, ASSESSING OFFICER ASSESSED TOTAL INCOME OF ASSESSEE AT RS.4,02,98,220/- AND MADE THE SAID ADDITION OF RS.87,16,195/-. 3 ITA NOS.2161 & 2162 /PUN/2016 A.YS.2007-08 & 2008-09 4. AGGRIEVED WITH THE ASSESSMENT ORDER, ASSESSEE FILED AP PEAL BEFORE THE CIT(A). THE CIT(A) ALLOWED THE APPEAL OF THE ASSESSEE ON TH E ISSUE RELATING TO ADDITION MADE U/S.41(1) OF THE ACT AS PER DISCUSSION GIVEN IN PARA 4 AND ITS SUB-PARAS OF THE APPELLATE ORDER. 5. AGGRIEVED WITH THE ORDER OF CIT(A), THE REVENUE IS IN AP PEAL BEFORE THE TRIBUNAL BY RAISING GROUNDS AS EXTRACTED ABOVE. 6. DURING THE PROCEEDINGS BEFORE US, LD. DR FOR THE REV ENUE RELIED HEAVILY ON THE ORDER OF ASSESSING OFFICER. LD. DR ALSO SUBMITTED TH AT THE DISCOUNT RECEIVED BY THE ASSESSEE ON PRE-PAYMENT OF LIABILITY UNDER THE SALES TAX DEFERRAL SCHEME, IS NOT A REMISSION OR CESSATION OF LIABILITY U /S.41(1) OF THE ACT. 7. THE LD. COUNSEL FOR THE ASSESSEE BROUGHT OUR ATTENT ION TO THE CONTENTS OF PARA 4.3 OF THE ORDER OF CIT(A) AND SUBMITTED THAT CIT(A ) HAS RIGHTLY ALLOWED THE APPEAL OF THE ASSESSEE BY RELYING ON THE RATIO LAID D OWN IN THE CASE OF CIT VS. SULZER INDIA LTD. (2014) 369 ITR 0717 (BOM.). THE CIT(A) ALSO RELIED ON THE DECISION OF PUNE BENCH OF THE TRIBUNAL IN THE CASE OF AURAN GABAD ELECTRICALS LTD., ITA NO.388/PN/2012 AND 1269/PN/2010 DATED 30.05.20 12 FOR A.Y.2005-06. 8. WE HAVE HEARD BOTH THE PARTIES ON THE ISSUE OF TAXA BILITY OF DEFERRAL AMOUNT CREDITED TO THE CAPITAL RESERVE AND FOUND THAT T HE SIMILAR ISSUE HAS BEEN DECIDED BY THE HON'BLE JURISDICTIONAL HIGH COURT IN TH E CASE OF CIT VS. SULZER INDIA LTD.(SUPRA.) AND THE HELD PORTION OF THE SAID JU DGMENT READS AS UNDER : HELD, DISMISSING THE APPEALS, THAT THE PREMATURE PA YMENT OF SALES TAX ALREADY COLLECTED BUT ITS REMITTANCE TO THE GOVERNMENT LATE R WAS NOT COVERED BY SECTION 43B(1). THE APPLICABILITY OF SECTION 41(1)(A) WAS T O BE CONSIDERED IN THE LIGHT OF 4 ITA NOS.2161 & 2162 /PUN/2016 A.YS.2007-08 & 2008-09 THE LIABILITY. IT IS A LOSS, EXPENDITURE OR TRADING LIABILITY. THE SCHEME UNDER WHICH THE SALES TAX LIABILITY WAS DEFERRED ENABLES THE AS SESSEE TO REMIT THE SALES TAX COLLECTED FROM THE CUSTOMERS OR CONSUMERS TO THE GO VERNMENT NOT IMMEDIATELY BUT AS AGREED AFTER 7 TO 12 YEARS. IF THE AMOUNT WA S NOT TO BE IMMEDIATELY PAID TO THE GOVERNMENT UPON COLLECTED BUT CAN BE REMITTE D LATER ON IN TERMS OF THE SCHEME, THEN THE EXERCISE UNDERTAKEN BY THE GOVERNM ENT OF MAHARASHTRA IN TERMS OF THE AMENDMENT MADE TO THE BOMBAY SALES TAX ACT, 1959, RELIEVED THE ASSESSEE OF THIS OBLIGATION BUT THAT WAS NOT BY WAY OF OBTAINING REMISSION. THE WORTH OF THE AMOUNT WHICH HAD TO BE REMITTED AFTER 7 TO 12 YEARS HAS BEEN DETERMINED PREMATURELY. THAT HAD BEEN DONE BY FINDI NG OUT ITS NET PRESENT VALUE. IF THAT WAS THE VALUE OF THE MONEY THAT THE STATE GOVERNMENT WOULD BE ENTITLED TO RECEIVE AFTER THE END OF 7 TO 12 YEARS THEN THE INGREDIENTS OF SUB SECTION (1) OF SECTION 41 COULD NOT BE SAID TO BE F ULFILLED. THE OBLIGATION TO REMIT TO THE GOVERNMENT THE SALES TAX AMOUNT ALREADY RECOVER ED AND COLLECTED FROM THE CUSTOMERS WAS IN NO WAY WIPED OUT OR DILUTED. THE O BLIGATION REMAINS. AL THAT HAD HAPPENED WAS AN OPTION WAS GIVEN TO THE ASSESSE E TO APPROACH THE SICOM WHICH IS THE NODAL AUTHORITY, AND REQUEST IT TO CON SIDER THE APPLICATION OF THE ASSESSEE OF PREMATURE PAYMENT AND DISCHARGE OF THE LIABILITY BY FINDING OUT ITS NET PRESENT VALUE. IF THAT WAS A PERMISSIBLE EXERCI SE AND IN TERMS OF THE SETTLED LAW, THEN THE ASSESSEE COULD NOT BE SAID TO HAVE BE EN BENEFITED. THE FIRST REQUIREMENT OF SECTION 41(1) IS THAT THE ALLOWANCE OR DEDUCTION IS MADE IN RESPECT OF THE LOSS, EXPENDITURE OR A TREATING LIABILITY IN CURRED BY THE ASSESSEE AND THE OTHER REQUIREMENT IS THE ASSESSEE HAS SUBSEQUENTLY OBTAINED ANY AMOUNT IN RESPECT OF SUCH LOSS AND EXPENDITURE OR OBTAINED AN Y AMOUNT IN RESPECT OF SUCH LOSS AND EXPENDITURE OR OBTAINED A BENEFIT IN RESPE CT OF SUCH TRADING LIABILITY BY WAY OF A REMISSION OR CESSATION THEREOF. THE SALES TAX COLLECTED BY THE ASSESSEE DURING THE RELEVANT YEAR AMOUNTING TO RS.7,52,01,37 8/- WAS TREATED BY THE STATE GOVERNMENT AS A LOAN LIABILITY PAYABLE AFTER 12 YEARS IN 6 ANNUAL/EQUAL INSTALLMENTS. SUBSEQUENTLY AND PURSUANT TO THE AMEN DMENT MADE TO THE FOURTH PROVISO TO SECTION 38 OF THE 1959 ACT, THE ASSESSEE ACCEPTED THE OFFER OF THE SICOM PAID AN AMOUNT OF RS.3,37,13,393 TO THE SICOM , WHICH REPRESENTED THE NET PRESENT VALUE OF THE FUTURE SUM AS DETERMINED A ND PRESCRIBED OF 12 YEARS AND IN INSTALLMENTS. HOWEVER, THE STATUTORY ARRANGE MENT AND BY SECTION 38, FOURTH PROVISO DID NOT AMOUNT TO REMISSION OR CESSA TION OF THE ASSESSEES LIABILITY ASSUMING THE LIABILITY TO BE A TRADING ONE. RATHER THAT OBTAINS A PAYMENT TO THE STATE PREMATURELY AND IN TERMS OF THE CORRECT VALUE OF THE DEBT DUE TO IT. THERE WAS NO EVIDENCE TO SHOW THAT THERE HAD BEEN ANY REM ISSION OR CESSATION OF THE LIABILITY BY THE STATE GOVERNMENT. II) THAT THE GOVERNMENT RESOLUTION DATED MAY 4, 19 83, EVOLVED A PACK AGE OF INCENTIVES TO DISPERSE THE INDUSTRIES FROM BOMBAY-T HANE PUNE BELT AND TO ATTRACT THEM TO UNDERDEVELOPED AND DEVELOPING AREAS OF THE STATE OF MAHARASHTRA. THIS PACKAGE EVOLVED SEVERAL MEASURES TO ACHIEVE THIS OBJECT. THEN, THERE IS A NEW PACKAGE SCHEME OF INCENTIVES, 1988. BOTH SCHEMES HAVE CLAUSES AND PARAGRAPHS CONTAINING SALES TAX DEFERRA L INCENTIVES. TO CARRY THIS OBJECT FURTHER AND ALSO TO ACHIEVE THE PURPOSE OF E ARLY REMITTANCE OF DEFERRED SALES TAX COLLECTED BY THE UNITS AVAILING OF THE SC HEMES, THE STATUTORY OPTION WAS INCORPORATED IN SECTION 38 BY SUBSTITUTING THE FOUR TH PROVISO TO SUB SECTION (4) OF SECTION 38 OF THE 1959 ACT. THAT IS INFORMED BY THE TRADE CIRCULAR DATED DECEMBER, 12, 2002, ISSUED BY THE COMMISSIONER OF S ALES TAX, MAHARASHTRA. A COMBINED READING OF THE SCHEMES AND THIS CIRCULAR R EVEALS THE LEGISLATIVE INTENT. IN SUCH CIRCUMSTANCES, A PROPER UNDERSTANDING OF AL L THIS BY THE TRIBUNAL COULD NOT BE TERMED AS PERVERSE. A PERUSAL OF THE ABOVE DECISION, WE FIND THE SAME IS RELEVA NT FOR THE FACTS OF THE PRESENT APPEAL. WE ALSO FIND THAT THE CIT(A), FO LLOWING THE ABOVE RATIO, DECIDED THE ISSUE RAISED IN APPEAL AS PER DISCUSSION GIVEN IN PARA 4.3, 5 ITA NOS.2161 & 2162 /PUN/2016 A.YS.2007-08 & 2008-09 4.4 AND 4.5 OF THE ORDER OF CIT(A). FOR THE SAKE OF COMPLETE NESS, THE SAME ARE EXTRACTED AS UNDER: 4.3 THE APPELLANT RELIED ON THE DECISION OF THE BOM BAY HIGH COURT IN THE CASE OF CIT VS. SULZER INDIA LD. (2014) 369 ITR 071 7 ( BOM) IN WHICH IT HAS BEEN HELD THAT THE DIFFERENCE BETWEEN THE SALES TAX LIABILITY AND THE NET PRESENT VALUE OF THE LIABILITY IS NOT LIABLE TO BE TREATED AS REMISSION/CESSATION OF A LIABILITY AND HELD IT AS A CAPITAL RECEIPT. THE BOMBAY HIGH COURT THUS CONFIRMED THE DECISION OF SP L. BENCH IN SULZER INDIA LTD. REPORTED IN 42 SOT 457 ( MUM) (SB). 4.4 THE APPELLANT ALSO RELIED ON THE ITAT PUNE BENC H DECISION IN THE CASE OF AURANGABAD ELECTRICALS LTD. IN APPEAL ORDER NO. ITA NO.388/PUN/2012 AND 1269/PUN/2010 DATED 30.05.2012, FOR A.Y.2005-06 . 4.5. I HAVE CONSIDERED CAREFULLY THE FACTS OF THE C ASE AND SUBMISSIONS OF THE APPELLANT ON THE ISSUE. AS THE ISSUE HAS BEEN D ECIDED IN FAVOUR OF THE APPELLANT BY THE JURISDICTIONAL HIGH COURT AND THE JURISDICTIONAL ITAT, THE ADDITION MADE BY THE AO IS DELETED. FROM THE ABOVE, IT IS A SETTLED LEGAL PROPOSITION THAT THE DIFFERENCE BETWEEN THE SALES TAX LIABILITY AND THE NET PRESENT VALUE OF THE LIABILITY IS NOT LIABLE TO BE TREATED AS REMISSION/CESSATION OF A LIABILITY. THER EFORE, CONSIDERING THE ABOVE SETTLED POSITION OF THE LAW, WE ARE OF THE OPINION THAT THE ORDER OF CIT(A) IS FAIR AND REASONABLE AND IT DOES NOT CALL FOR ANY INT ERFERENCE. ACCORDINGLY, GROUND RAISED BY THE REVENUE IS DISMISSED. 9. IN THE RESULT, APPEAL OF THE REVENUE FOR THE ASSESSM ENT YEAR 2007-08 IS DISMISSED. ITA NO.2162/PUN/2016 A.Y. 2008-09 10. DURING THE ASSESSMENT YEAR 2008-09, ASSESSEE FILED R ETURN OF INCOME ON 13.09.2008 DECLARING TOTAL INCOME AT RS.3,06,36,920/-. DURING A SSESSMENT PROCEEDINGS U/S.143(3) OF THE ACT THE ASSESSING OFFICER DETE RMINED THE TOTAL INCOME OF ASSESSEE AT RS.4,19,30,573/-. AT THE END OF THE REASSESSMENT PROCEEDINGS U/S.143(3) R.W.S 147 OF THE ACT, ASSESSING OFFICER ASSESSED TOTAL INCOME OF ASSESSEE AT RS.3,90,43,240/- AND MADE ADDITION OF RS.53,44,987 /-. 6 ITA NOS.2161 & 2162 /PUN/2016 A.YS.2007-08 & 2008-09 11. BACKGROUNDS FACTS OF THE ASSESSMENT YEAR I.E. 2008-0 9 ARE IDENTICAL TO THE FACTS IN A.Y.2007-08. SINCE THE BACKGROUNDS FACTS, ISSU E, ARGUMENTS OF THE LD. DR AS WELL AS LD. COUNSEL FOR THE ASSESSEE ARE IDENTIC AL TO A.Y. 2007-08, OUR DECISION GIVEN IN A.Y.2007-08 WILL APPLY TO THE A.Y.2008- 09 TOO. ACCORDINGLY, GROUND RAISED BY REVENUE FOR THE ASSESSMEN T YEAR 2008-09 IS DISMISSED. 12. IN THE RESULT, BOTH APPEALS OF THE REVENUE FOR A.YS. 2007-08 AND 2008- 09 ARE DISMISSED. ORDER PRONOUNCED ON 2ND DAY OF NOVEMBER, 2018. SD/- SD/- ( / SUSHMA CHOWLA ) ( . ! / D. KARUNAKARA RAO ) / JUDICIAL MEMBER / ACCOUNTANT MEMBER / PUNE; !' / DATED : 2 ND NOVEMBER, 2018. SB ()*+,-.-+ / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT. 2. / THE RESPONDENT. 3. THE CIT(APPEALS)-6, PUNE. 4. THE PR. CIT-5, PUNE. 5. %&' () , * () , +,- , / DR, ITAT, A BENCH, PUNE. 6. './ 01 / GUARD FILE. // TRUE COPY // * 2 / BY ORDER, 3 (- /PRIVATE SECRETARY * () , / ITAT, PUNE.