ACIT, Nashik V. M/s Galvi Engineering P.Ltd, Nashik

ITA 2373/PUN/2012

• Counselvise Citation: 237324514 RSA 2012
• Duration Of Justice: 1 year(s) 7 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-06-2014
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2007-2008
• Appeal Filed On: 30-11-2012
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: DR SANTO SH KUMAR
• Section: 194C; 10B

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH A, PUNE BEFORE SHRI SHAILENDRA KUMAR YADAV, JUDICIAL MEMBER, AND SHRI R.K. PANDA, ACCOUNTANT MEMBER ITA NO.2373/PN/2012 (A.Y: 2007-08) JCIT, RANGE-2, NASHIK APPELLANT VS. M/S. GALVI ENGINEERING PVT. LTD., 114, STICE, MALEGAON, SINNAR, NASHIK - 432108 RESPONDENT APPELLANT BY : DR. SANTOSH KUMAR RESPONDENT BY : SHRI PRAM OD S. SHINGTE DATE OF HEARING: 25.06.2014 DATE OF ORDER : 30.06.2014 ORDER PER SHAILENDRA KUMAR YADAV, J.M: THIS APPEAL HAS BEEN FILED BY THE REVENUE AGAINST THE ORDER OF COMMISSIONER OF INCOME TAX (APPEAL)-II, [IN SHOR T CIT(A)] NASHIK, DATED 24.09.2012 FOR A.Y. 2007-08 ON THE FO LLOWING GROUNDS. 1. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF TH E CASE, THE LD.CIT(A)-II, NASHIK WAS JUSTIFIED IN DEL ETING THE DISALLOWANCE OF RS.3,50,14,063/- U/S 40(A)(IA) OF T HE ACT BY TREATING THE PAYMENT SALE CONTRACT. 2. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF TH E CASE, THE LD.CIT(A)-II, NASHIK WAS JUSTIFIED IN HOL DING THAT THE PAYMENT OF RS.3,50,14,063/- IS SALE CONTRACT AN D NOT THE WORKS CONTRACT. 3. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF TH E CASE, THE LD.CIT(A)-II, NASHIK WAS JUSTIFIED IN DEV IATING FROM THE VIEW OF THE CIT(A)-I, NASHIK WHERE THE CIT(A) HAS DISMISSED THE ASSESSEE'S APPEAL FOR A.Y.2008-09 & 2 009-10 ON SIMILAR ISSUE I.E DISALLOWANCE U/S 40(A)(IA) OF THE ACT BY 2 ITA NO.2373 OF 12 M/S. GALVI ENGINEERING PVT LTD. HOLDING THAT THE PAYMENTS ARE UNDER THE PURVIEW OF SEC 194C OF THE ACT. 4. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF TH E CASE, THE LD.CIT(A)-II, NASHIK WAS JUSTIFIED IN DEL ETING THE DISALLOWANCE OF SCRAP SALES OF RS.1,02,015/- WHICH WAS CLAIMED FOR EXEMPTION U/S 10B OF THE ACT. 5. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF TH E CASE, THE LD.CIT(A)-II, NASHIK WAS JUSTIFIED IN DEL ETING THE DISALLOWANCE OF RECEIPT OF DELAYED PENALTY OF RS.1, 21,605/- WHICH WAS CLAIMED FOR EXEMPTION U/S 10B OF THE ACT. 6. THE APPELLANT PRAYS THE ORDER OF THE ASSESSING OFFI CER MAY BE RESTORED. 7. THE APPELLANT PRAYS TO ADDUCE SUCH FURTHER EVIDENCE TO SUBSTANTIATE HIS CASE. 8. THE APPELLANT PRAYS LEAVE TO ADD, ALTER, CLARIFY, A MEND AND OR WITHDRAW ANY GROUNDS OF APPEAL AS AND WHEN T HE OCCASION DEMANDS. 2. THE ASSESSEE IS A PRIVATE LIMITED COMPANY ENGAGE D IN MANUFACTURING AND EXPORT OF INDUSTRIAL BRAKES FOR H EAVY LIFTING AND ELECTRO HYDRAULIC THRUSTERS AND LIFTING EQUIPME NT. THE ASSESSMENT U/S.143(3) OF THE ACT WAS COMPLETED BY J CIT, RANGE- 2, NASHIK ON 24.12.2009 BY ASSESSING THE TOTAL INCO ME AT 27,13,550/- AGAINST THE RETURN OF INCOME AT 6,82,178/-. IT WAS NOTICED DURING THE COURSE OF SCRUTINY THAT THE ASSE SSEE HAD ENGAGED IN OUTSIDE VENDORS FOR GETTING ITS PRODUCTS MANUFACTURED AS PER SPECIFICATIONS PROVIDED BY THE ASSESSEE. TH E ASSESSING OFFICER HAS DISALLOWED AN AMOUNT OF 3,50,14,063/- U/S. 40(A)(IA) OF THE ACT TO THE TOTAL PROFIT BUSINESS O F PROVISION AS IT WAS FOUND TO BE PAID FOR WORK CONTRACT AND SO THE S UBJECT MATTER TO TDS U/S.194C OF THE ACT. FURTHER, THE ASSESSING OFFICER HAS ALSO DISALLOWED EXEMPTION U/S.10B ON SCRAP SALES, P ENALTY LEVIED ON DELAYED PAYMENTS, INCOME TAX REFUND AND INTEREST ON 3 ITA NO.2373 OF 12 M/S. GALVI ENGINEERING PVT LTD. DEPOSITS. ACCORDINGLY, THE INCOME WAS DETERMINED A T 27,13,550/-. 2.1 BEING AGGRIEVED WITH THE ORDER OF THE ASSESSING OFFICER, THE ASSESSEE PREFERRED APPEAL BEFORE THE CIT(A)-II, NAS HIK WHO VIDE ITS ORDER DATED 24.09.2012 PARTLY ALLOWED THE APPEA L. WHILE DECIDING THE APPEAL THE CIT(A) DELETED THE ADDITION OF 3,50,14,063/- MADE U/S 40(A)(IA) OF THE ACT AND FUR THER ALLOWED THE EXEMPTION U/S.10B OF THE ACT ON SCRAP SALES & P ENALTIES LEVIED ON DELAYED PAYMENTS AND DISALLOWED THE EXEMP TION U/S.10B OF THE ACT ON INCOME TAX REFUND AND INTERES T ON DEPOSITS. WHILE DECIDING THE ISSUE OF WORK CONTRAC TS AND SALE OF CONTRACTS, THE CIT(A) RELIED UPON THE DECISION OF T HE CIT VS. GLENMARK PHARMACEUTICALS LTD. (2010) 231 CTR (BOM) 10, WHEREIN, IT WAS HELD THAT THE SAID TRANSACTIONS WER E IN THE NATURE OF SALE CONTRACT ON WHICH PROVISIONS OF SECTION 194 C OF THE ACT WERE NOT APPLICABLE AND THEREFORE THE ASSESSING OFF ICER WAS NOT JUSTIFIED IN TREATING THE ASSESSEE'S TRANSACTION WI TH VARIOUS VENDORS AS WORK CONTRACT. ON THE ISSUE OF EXEMPTIO N U/S.10B OF THE ACT, THE CIT(A) HELD THAT THE ASSESSEE IS A 100 % EXPORT- ORIENTED UNDERTAKING AND REGISTERED AS EOU. THEREF ORE THE SCRAP GENERATED DURING THE MANUFACTURING PROCESS AND PENA LTIES ON DELAYED PAYMENT WOULD HAVE DIRECT NEXUS WITH ITS EX PORT BUSINESS. ACCORDINGLY, THE CIT(A) DELETED DISALLOW ED EXEMPTION U/S.10B OF THE ACT ON SALE OF SCRAP AND DELAYED PEN ALTIES RECEIPT MADE BY THE ASSESSING OFFICER. IN RESPECT OF DISAL LOWED EXEMPTION U/S.10B OF THE ACT ON INCOME TAX REFUND A ND INTEREST ON DEPOSITS THE CIT(A) DECIDED THE APPEAL AGAINST T HE ASSESSEE AND HAS CONFIRMED THE VIEW OF THE ASSESSING OFFICER . 3. THE LEARNED DEPARTMENTAL REPRESENTATIVE DR. SANT OSH KUMAR HAS POINTED OUT THAT IN THE CASE OF ASSESSEE, A SIMILAR 4 ITA NO.2373 OF 12 M/S. GALVI ENGINEERING PVT LTD. DISALLOWANCE U/S.40(A)(IA) WAS MADE ON SIMILAR NATU RE OF PAYMENT IN A.YS. 2008-09 AND 2009-10. THE ASSESSEE PREFERRED AN APPEAL BEFORE THE CONCERNED CIT(A), WHO DISMISSE D THE APPEAL OF ASSESSEE BY HOLDING THAT THE PAYMENTS ARE UNDER PURVIEW OF SECTION 194C OF THE ACT. THE LEARNED AUTHORIZED RE PRESENTATIVE FAIRLY ACCEPTED THAT THE APPEAL IN A.YS. 2008-09 AN D 2009-10 HAS BEEN DISMISSED BY THE CONCERNED CIT(A) ON SIMILAR I SSUE BY HOLDING THAT THE PAYMENTS ARE UNDER THE PURVIEW OF SECTION 194C OF THE ACT. IN VIEW OF ABOVE DISCUSSION, THE LEARN ED DEPARTMENTAL REPRESENTATIVE SUBMITTED THAT THE ORDER OF CIT(A) B E SET ASIDE AND THAT OF ASSESSING OFFICER BE RESTORED BECAUSE T HE FACTS AND CIRCUMSTANCES OF PAYMENT IN QUESTION ARE UNDER THE PURVIEW OF SECTION 194C OF THE ACT. THE SAME HAS NOT BEEN OBJ ECTED BY THE LEARNED AUTHORIZED REPRESENTATIVE IN ITS FACTS AND CIRCUMSTANCES AND MERIT AS WELL. IN VIEW OF DISALLOWANCES ARE UN DER THE PURVIEW OF PROVISIONS OF SECTION 40(A)(IA), THE ASS ESSEE SHOULD HAVE DEDUCTED TDS AS PER PROVISIONS OF SECTION 194( C) OF THE ACT. ACCORDINGLY, THE ORDER OF CIT(A) ON THE ISSUE BE SE T ASIDE AND THAT OF ASSESSING OFFICER BE UPHELD. 4. AS REGARDS THE EXEMPTION IN RESPECT OF SALE OF S CRAP, PENALTIES LEVIED ON DELAYED PAYMENTS, INCOME TAX RE FUND AND INTEREST ON DEPOSITS, THE STAND OF THE LEARNED DEPA RTMENTAL REPRESENTATIVE HAS BEEN THAT WHILE EXEMPTING, THE A SSESSING OFFICER HAS CONSIDERED ALL RECEIPTS AND PROFITS & A CCOUNTS OF THE ASSESSEE. THE SALE OF SCRAP IS NOT RELATED TO THE PROFIT DERIVED FROM EXPORT SHOWN BY THE ASSESSEE. SIMILARLY THE R ECEIPTS ON ACCOUNT OF LEVY OF PENALTY ON PARTIES TO WHOM GOODS SOLD HAVE NO NEXUS WITH THE EXPORT OF GOODS UNDERTAKEN BY THE AS SESSEE. THEREFORE, THE CIT(A) WAS NOT JUSTIFIED IN GRANTING RELIEF TO THE ASSESSEE. ACCORDINGLY, FOLLOWING THE SAME ANALOGY FOR A.Y. 2008- 09 AND 2009-10 AND ORDER OF CIT(A) ON THE ISSUE IS SET ASIDE AND 5 ITA NO.2373 OF 12 M/S. GALVI ENGINEERING PVT LTD. THAT OF ASSESSING OFFICER IS UPHELD. NOTHING CONTR ARY HAS BEEN BROUGHT TO OUR KNOWLEDGE ON BEHALF OF ASSESSEE RATH ER HE FAIRLY CONCEDED IN FAVOUR OF REVENUE. UNDER DUE FACTS AND CIRCUMSTANCES OF THE CASE, WE SET ASIDE THE ORDER O F CIT(A) ON THIS ACCOUNT AND RESTORE THAT OF ASSESSING OFFICER. IT IS PERTINENT TO MENTION HERE THAT EACH APPEAL IS BEING DECIDED IN I TS FACTS AND CIRCUMSTANCES, SO THE SAME MAY NOT BE FOLLOWED BLIN DLY IN EVERY CASE. 5. IN THE RESULT, APPEAL FILED BY THE REVENUE IS AL LOWED. PRONOUNCED IN THE OPEN COURT ON THIS THE DAY 30 TH OF JUNE, 2014. SD/- SD/- (R.K. PANDA) (SHAILENDRA KUMAR YADAV ) ACCOUNTANT MEMBER JUDICIAL MEMBER PUNE, DATED: 30 TH JUNE, 2014 GCVSR COPY TO:- 1) DEPARTMENT 2) ASSESSEE 3) THE CIT(A)-II, NASHIK 4) THE CIT-II, NASHIK 5) THE DR, A BENCH, I.T.A.T., PUNE. 6) GUARD FILE BY ORDER //TRUE COPY// SENIOR PRIVATE SECRETARY, I.T.A.T., PUNE