The ITO, Vapi Ward-3, Vapi V. Gujarat Themis Biosyn Ltd., Vapi

ITA 2378/AHD/2008

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 5467 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 1 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-07-2010
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Next Hearing Date: 06-07-2010
• Assessment Year: 2005-2006
• Appeal Filed On: 24-06-2008
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: GAURAV BATHAN
• Assessee Lawyers: M K PATEL
• Keywords: Unexplained cash credit; Depreciation; Period of limitation; Question of law
• Section: 43B; 143(3); 143(2); 37

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AT AHMEDABAD AHMEDABAD D BENCH (BEFORE S/SHRI G.D. AGARWAL, VICE-PRESIDENT AND MAHAVIR SINGH , JUDICIAL MEMBER) ITA.NO.2378/AHD/2008 ASSTT.YEAR : 2005-2006 ITO, WARD-3 VAPI. VS. GUJARAT THEMIS BIOSYN LTD. 69-C, GIDC INDUSTRIAL ESTATE VAPI. (APPELLANT) (RESPONDENT) REVENUE BY : SHRI GAURAV BATHAN ASSESSEE BY : SHRI M.K. PATEL O R D E R PER G.D. AGRAWAL, VICE-PRESIDENT: THIS IS REVENUES APPEAL AGAINST THE ORDER OF THE COMMISSIONER OF INCOME-TAX (APPEALS)-III, BARODA DATED 14.03.2008 ARISING OUT OF THE ORDER OF THE AS SESSING OFFICER PASSED UNDER SECTION 143(3) OF THE INCOME TAX ACT, 1961. 2. THE FIRST GROUND RAISED IN THIS APPEAL READS AS UNDER: ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD.CIT(A), VALSAD HAD ERRED IN DELETING THE FOLLOWING ADDITION S: 1. ADDITION OF RS.1,10,606/- ON ACCOUNT OF BELATED PAYMENT OF PROVIDENT FUND ACCOUNT; 3. AT THE TIME OF HEARING, IT IS SUBMITTED BY THE L EARNED COUNSEL THAT THIS ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE BY THE D ECISION OF DELHI HIGH COURT IN THE CASE OF CIT VS. P.M.ELECTRONICS LTD., (2008) 220 CTR 635 (DELHI) WHEREIN THE HON'BLE DELHI HIGH COURT HAS DISCUSSED IN PARA-4 AS UNDER:- 4. ON 27 TH NOV., 1998 THE ASSESSEE HAD FILED A RETURN OF INCO ME DECLARING A LOSS OF RS.8,92,888. ON 11 TH MAY, 1999 THE RETURN WAS PROCESSED UNDER S. 143(1)(A) OF THE ACT. THE CASE OF THE ASSESSEE WAS SELECTED FOR SCRUTINY. ACCORDINGLY, A NOTICE DT. 27 TH SEPT., 1999 UNDER S. 143(2) OF THE ACT WAS ISSUED TO THE ASSESSEE. IN RESPONSE TO THE NOTICE A ND ON EXAMINATION OF THE ITA.NO.2378/AHD/2008 -2- DETAILS SUBMITTED BY THE ASSESSEE WITH RESPECT TO P ROVIDENT FUND PAYMENTS MADE BOTH ON ACCOUNT OF EMPLOYERS AND EMPLOYEES S HARE REVEALED THAT PAYMENTS IN THE SUM OF RS.17,94,042 WERE LATE AS PE R THE PROVISIONS OF S. 36(1)(VA) R.W S. 2(24)(X) AND S. 43B. CONSEQUENTLY , THE AO DISALLOWED THE DEDUCTION AND ADDED A SUM OF RS.17,94,042 TOWARDS E PF CONTRIBUTION. AND SUBSEQUENTLY DECIDE THIS ISSUE IN PARA-10 TO 14 OF HON'BLE DELHI HIGH COURT, WHICH READ AS UNDER:- 10. IN VIEW OF THE ABOVE, IT IS QUITE EVIDENT THAT THE SPECIAL LEAVE PETITION WAS DISMISSED BY A SPEAKING ORDER AND WHILE DOING SO TH E SUPREME COURT HAD NOTICED THE FACT THAT THE MATTER IN APPEAL BEFORE I T PERTAINS TO A PERIOD PRIOR TO THE AMENDMENT BROUGHT ABOUT IN S. 43B OF THE ACT. T HE AFORESAID POSITION AS REGARDS THE STATE OF THE LAW FOR A PERIOD PRIOR TO THE AMENDMENT TO S. 43B HAS BEEN NOTICED BY A DIVISION BENCH OF THIS COURT IN DHARMENDRA SHARMA (SUPRA) . APPLYING THE RATIO OF THE DECISION OF THE SUPREME COURT IN VINAY CEMENT (SUPRA) A DIVISION BENCH OF THIS COURT DISMISSED T HE APPEALS OF THE REVENUE. IN THE PASSING WE MAY ALSO NOTE THAT A DIV ISION BENCH OF THE MADRAS HIGH COURT IN THE CASE OF CIT VS. NEXUS COMPUTER (P) LTD. BY A JUDGMENT DT. 19 TH AUG., 2008, PASSED IN TAX CASE (APPEAL) NO.1192/20 08 [REPORTED AT (2008) 219 CTR (MAD.) 54 ED.] DISCUS SED THE IMPACT OF BOTH THE DISMISSAL OF THE SPECIAL LEAVE PETITION IN THE CASE OF GEORGE WILLIAMSON (ASSAM) LTD. (SUPRA) AND VINAY CEMENT (SUPRA) AS WELL AS A CONTRARY VIEW OF THE DIVISION BENCH OF ITS OWN COURT IN SYNERGY FINANCIAL EXCHANGE (SUPRA). THE DIVISION BENCH OF THE MADRAS HIGH COURT HAS EXP LAINED THE EFFECT OF THE DISMISSAL OF A SPECIAL LEAVE PETITION BY A SPEAKING ORDER BY RELYING UPON THE JUDGMENT OF THE SUPREME COURT IN THE CASE OF KUNHAYAMMED & ORS.VS. STATE OF KERALA & ANR. (2000) 162 CTR (SC) 97: 119 STC 505 AT P. 526 IN PARA 40 AND NOTED THE FOLLOWING OBSERVATIONS : IF THE ORDER REFUSING LEAVE TO APPEAL IS A SPEAKIN G ORDER, I.E., GIVES REASONS FOR REFUSING THE GRANT OF LEAVE, THEN THE O RDER HAS TWO IMPLICATIONS. FIRSTLY, THE STATEMENT OF LAW CONTAIN ED IN THE ORDER IS A DECLARATION OF LAW BY THE SUPREME COURT WITHIN THE MEANING OF ART. 141 OF THE CONSTITUTION. SECONDLY, OTHER THAN THE D ECLARATION OF LAW, WHATEVER IS STATED IN THE ORDER ARE THE FINDINGS RE CORDED BY THE SUPREME COURT WHICH WOULD BIND THE PARTIES THERETO AND ALSO THE COURT. TRIBUNAL OR AUTHORITY IN ANY PROCEEDINGS SUB SEQUENT THERETO BY WAY OF JUDICIAL DISCIPLINE, THE SUPREME COURT BEING THE APEX COURT OF THE COUNTRY. BUT, THIS DOES NOT AMOUNT TO SAYING TH AT THE ORDER OF THE COURT. TRIBUNAL OR AUTHORITY BELOW HAS STOOD MERGED IN THE ORDER OF THE SUPREME COURT REJECTING SPECIAL LEAVE PETITION OR T HAT THE ORDER OF THE SUPREME COURT IS THE ONLY ORDER BINDING AS RES JUDICATA IN SUBSEQUENT PROCEEDINGS BETWEEN THE PARTIES. 11. UPON NOTING THE OBSERVATIONS OF THE SUPREME COU RT IN KUNHAYAMMED & ORS. (SUPRA) THE DIVISION BENCH OF THE MADRAS HIGH COUR T IN THE CASE OF NEXUS COMPUTER (P) LTD. (SUPRA) CAME TO THE CONCLUSION THAT THE VIEW TAKEN BY THE SUPREME COURT IN VINAY CEMENT (SUPRA) WOULD BIND THE HIGH COURT AS IT WAS LAW DECLARED BY THE SUPREME COURT UNDER A RT. 141 OF THE CONSTITUTION. 12. WE ARE IN RESPECTFUL AGREEMENT WITH THE REASONI NG OF THE MADRAS HIGH COURT IN NEXUS COMPUTER (P) LTD. (SUPRA). JUDICIAL DISCIPLINE REQUIRES US TO ITA.NO.2378/AHD/2008 -3- FOLLOW THE VIEW OF THE SUPREME COURT IN VINAY CEMEN T (SUPRA) AS ALSO THE VIEW OF THE DIVISION BENCH OF THIS COURT IN I DHARM ENDRA SHARMA (SUPRA). 13. IN THESE CIRCUMSTANCES, WE RESPECTFULLY DISAGRE E WITH THE APPROACH ADOPTED BY A DIVISION BENCH OF THE BOMBAY HIGH COUR T IN PAMWI TISSUES LTD. (SUPRA). 14. IN THESE CIRCUMSTANCES INDICATED ABOVE, WE ARE OF THE OPINION THAT NO SUBSTANTIAL QUESTION OF LAW ARISES FOR OUR CONSIDER ATION IN THE PRESENT APPEAL. THE APPEAL IS, THUS, DISMISSED. 4. THE LEARNED DR HAS NOT CONTROVERTED TO THE ABOVE AUTHORITIES OF THE SUPERIOR COURTS ON THE ISSUE UNDER CONSIDERATION.. 5. WE FIND THAT THE HON'BLE DELHI HIGH COURT IN THE CASE OF P.M. ELECTRONICS LTD. (SUPRA) HAS DECIDED THIS ISSUE OF PAYMENT OF EMPLOYEES CONTRIBUTION TOWARDS PROVIDENT FUND AFTER CONSIDERI NG THE DECISION OF HON'BLE APEX COURT IN THE CASE OF VINAY CEMENT (SUPRA) AND ALSO DISTINGUISHED THE CASE LAW REFERRED BY THE LD. DR OF BOMBAY HIGH COUR T IN PAMWI TISSUES LTD. (SUPRA). EVEN NOW THIS ISSUE HAS BEEN CONSIDERED B Y HONBLE APEX COURT IN THE CASE OF CIT VS. ALOM EXTRUSIONS LTD. (2009) 319 ITR 306 (SC) / (2009) 185 TAXMAN 416 (SC), WHEREIN, IT IS HELD THAT CON TRIBUTION TO PROVIDENT FUND, MADE BEFORE DUE DATE OF FILING OF RETURN ALLOWABLE AS DEDUCTION. THE DELETION OF THE SECOND PROVISO TO SECTION 43B, AND THE AMENDMEN T TO THE FIRST PROVISO, BY THE FINANCE ACT, 2003 WAS TO OVERCOME IMPLEMENTATIO N PROBLEMS. CONSEQUENTLY, THE AMENDMENTS, THOUGH MADE APPLICABL E BY PARLIAMENT ONLY WITH EFFECT FROM 1-4-2004, WERE CURATIVE IN NATURE AND WOULD APPLY RETROSPECTIVELY W.E.F. 1-4-1988. ACCORDINGLY, FOLL OWING APEX COURT IN THE CASE OF ALOM EXTRUSIONS LTD. (SUPRA) AND DELHI HIGH COU RT IN P.M. ELECTRONICS LTD. (SUPRA), WE DISMISS THIS GROUND OF THE REVENUE. 6. GROUND NO.2 READS AS UNDER: 2. ADDITION OF RS.2,53,005/- OUT OF TELEPHONE EXPE NSES OF RS.4,65,557/-, VEHICLE RUNNING EXPENSES OF RS.2,77,404/-, VEHICLE MAINTENANCE EXPENSES OF RS.2,07,265/- AND DEPRECIATION ON VEHIC LE OF RS.3,14,801/- BEING NON-BUSINESS IN NATURE. ITA.NO.2378/AHD/2008 -4- 7. WE HAVE HEARD BOTH THE PARTIES AND GONE THROUGH THE MATERIAL PLACED BEFORE US. WE FIND NO INFIRMITY IN THE ORDER OF TH E CIT(A) ON THIS ISSUE AS THE SAME IS BASED ON THE DECISION OF THE JURISDICTIONAL HIGH COURT IN THE CASE OF SAYAJI IRON & ENG. CO. LTD. (SUPRA) WHEREIN IT IS H ELD THAT THE COMPANY BEING A JURISTIC AND DISTINCT ENTITY THERE CANNOT BE ANYTHI NG PERSONAL ABOUT SUCH AN ENTITY. IN THIS VIEW OF THE MATTER, WE ARE NOT INC LINED TO INTERFERE WITH THE ORDER OF THE CIT(A), WHICH WE UPHOLD, AND THIS GROUND OF THE REVENUE IS DISMISSED. 8. THE THIRD GROUND OF THE REVENUES APPEAL READS A S UNDER: ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD.CIT(A), VALSAD HAD ERRED IN DELETING THE FOLLOWING ADDITION S: 3. ADDITION OF RS.42,515/- OUT OF TRAVELLING EXPENS ES OF RS.2,12,573/- BEING PERSONAL AND NON-BUSINESS IN NA TURE; 9. AT THE TIME OF HEARING BEFORE US, THE LEARNED DR HAS STATED THAT THE TRAVELLING EXPENSES OF RS.42,515/- WAS NOT GENUINE AND NOT SUPPORTED BY GOOD EVIDENCES. IT IS FURTHER STATED THAT THE SECTION 3 7 MANDATES ONLY THE EXPENSES RELATING TO THE BUSINESS ACTIVITIES AND NOT THE PER SONAL EXPENSES. THE LEARNED CIT(A) WAS NOT JUSTIFIED IN ALLOWING THE CLAIM OF T HE ASSESSEE. THE LEARNED COUNSEL FOR THE ASSESSEE ON THE OTHER HAND CONTENDE D THAT COMPLETE DETAILS REGARDING THE TRAVELLING EXPENSES HAVE BEEN FURNISH ED BEFORE THE AO DURING THE ASSESSING PROCEEDINGS AND THE AO MADE THE ADDITION BASED ON PRESUMPTIONS. THE LEARNED CIT(A) CONSIDERING ALL THE ASPECTS AND THE DECISION OF THE JURISDICTIONAL HIGH COURT IN THE CASE OF SAYAJI IRO N & ENGGINER CO. (SUPRA) HAS ALLOWED THE CLAIM OF THE ASSESSEE, WHICH IS JUST AN D PROPER. 10. WE HAVE CONSIDERED THE ARGUMENTS OF BOTH THE SI DES AND PERUSED MATERIAL PLACED BEFORE US. THE ADDITION MADE BY TH E AO IS BASED ON THE PRESUMPTION THAT PART OF THE EXPENSES ARE OF PERSON AL NATURE. THE ASSESSEE IS A COMPANY AND HONBLE JURISDICTIONAL HIGH COURT IN TH E CASE OF SAYAJI IRON & ENGG. CO. (SUPRA) HELD THAT COMPANY BEING A JURISTI C AND DISTINCT ENTITY THERE CANNOT BE ANY PERSONAL EXPENSE OF THE COMPANY. THE CIT(A) HAS ALLOWED ITA.NO.2378/AHD/2008 -5- RELIEF FOLLOWING THE SAID DECISION OF THE HONBLE J URISDICTIONAL HIGH COURT. WE THEREFORE FIND NO JUSTIFICATION TO INTERFERE WITH T HE ORDER OF THE CIT(A), ACCORDINGLY, GROUND NO.3 OF THE REVENUES APPEAL IS REJECTED. 11. THE LAST GROUND OF THE REVENUES APPEAL READS A S UNDER: 4. ADDITION OF RS.12,91,246/- BEING UNEXPLAINED CREDIT ORS. 12. AT THE TIME OF HEARING BEFORE US, THE LEARNED D R HAS STATED THAT THE AO HAS RIGHTLY MADE THE ADDITION OF RS.12,91,246/- BEI NG UNEXPLAINED SUNDRY CREDITORS AS THE ASSESSEE COULD NOT PROVE THE GENUI NENESS OF THE CREDIT. IT IS STATED THAT IT IS SETTLED POSITION OF THE LAW THAT THE ONUS IS ON THE ASSESSEE TO PROVE THE GENUINENESS OF SUCH CREDIT. THEREFORE, T HE AO WAS JUSTIFIED IN MAKING ADDITION OF RS.12,19,246/-. 13. THE LEARNED COUNSEL FOR THE ASSESSEE, ON THE OT HER HAND, STATED THAT THE AO MADE THE ADDITION OF RS.12,19,246/- ON THE ONLY GROUND THAT THE CREDITORS HAVE BECOME MORE THAN THREE YEARS OLD. HE HAS STAT ED THAT THE ASSESSEE COMPANY SUFFERED LOSS IN VARIOUS YEARS AND THEREFOR E BECAUSE OF BAD FINANCIAL CONDITIONS COULD NOT MAKE THE PAYMENT TO THE CREDIT ORS. BUT THE ASSESSEE STILL OWES THE LIABILITY AND NONE OF THE CREDITORS HAS WA IVED THE AMOUNT RECEIVABLE BY THEM. THAT THE AO HAS NOT MENTIONED THE SECTION UNDER WHICH THE ADDITION IS MADE. HOWEVER, SECTION 41(1) WOULD NOT BE APPLIC ABLE, BECAUSE THERE WAS NO REMISSION OR CESSATION OF THE LIABILITY IN THE YEAR UNDER CONSIDERATION. IN SUPPORT OF THIS CONTENTION, HE RELIED UPON THE DECI SION OF THE HONBLE APEX COURT IN THE CASE OF CIT VS. SUGAULI SUGAR WORKS P. LTD., 236 ITR 518 (SC). 14. WE HAVE CAREFULLY CONSIDERED ARGUMENTS OF BOTH THE SIDES AND PERUSED THE MATERIAL PLACED BEFORE US. WE FIND THAT THE AO HAS MADE THE ADDITION MERELY ON THE GROUND THAT THE CREDITORS ARE OUTSTAN DING FOR MORE THAN THREE YEARS. THOUGH, THE AO HAS NOT MENTIONED THE SECTIO N UNDER WHICH THE ADDITION IS MADE, HOWEVER, OBVIOUSLY, THE ADDITION IS MADE U NDER SECTION 41(1) BECAUSE THE AO PRESUMED THAT AFTER MORE THAN THREE YEARS, T HE LIABILITY HAS CEASED. WE ITA.NO.2378/AHD/2008 -6- FIND THIS ISSUE IS SQUARELY COVERED IN FAVOUR OF TH E ASSESSEE BY THE DECISION OF THE HONBLE APEX COURT IN THE CASE OF SUGAULI SUGAR WORKS P. LTD. (SUPRA) WHEREIN THEIR LORDSHIPS OF THE HONBLE APEX COURT H ELD AS UNDER: .. THE PRINCIPLE THAT EXPIRY OF THE PERIOD OF LIMI TATION PRESCRIBED UNDER THE LIMITATION ACT COULD NOT EXTINGUISH THE DEBT BU T IT WOULD ONLY PREVENT THE CREDITOR FROM ENFORCING THE DEBT. HAS BEEN WELL SETTLED. IF THAT PRINCIPLE IS APPLIED, IT IS CLEAR THAT MERE EN TRY IN THE BOOKS OF ACCOUNT OF THE DEBTOR MADE UNILATERALLY WITHOUT ANY ACT ON THE PART OF THE CREDITOR WILL NOT ENABLE THE DEBTOR TO SAY THAT THE LIABILITY HAS COME TO AN END. APART FROM THAT, THAT WILL NOT BY ITSELF CONF ER ANY BENEFIT ON THE DEBTOR AS CONTEMPLATED BY THE SECTION. (EMPHASIS I S ADDED) THUS, THEIR LORDSHIPS OF THE APEX COURT HELD THAT O N EXPIRY OF PERIOD OF LIMITATION, PRESCRIBED UNDER THE LIMITATION ACT, DO ES NOT EXTINGUISH THE DEBT BUT ONLY PREVENT THE CREDITOR FROM ENFORCING THE DE BT. IN THE CASE OF THE ASSESSEE, THOUGH THE PERIOD OF LIMITATION HAS EXPIR ED THAT ITSELF WILL NOT EXTINGUISH THE DEBT. ADMITTEDLY, THERE IS NO REMIS SION OR CESSATION OF THE LIABILITY FROM THE CREDITORS. IT IS ALSO STATED BY THE LEARNED COUNSEL THAT THE ASSESSEE STILL OWES THE LIABILITY AND IT COULD NOT PAY THE SAME DUE TO BAD FINANCIAL CONDITION. FROM THE ORDER OF THE CIT(A) WE ALSO FIND THAT THE ASSESSEE IS A SICK COMPANY UNDER THE BIFR. 15. IN VIEW OF THE ABOVE, WE ARE OF THE OPINION THA T THE ADDITION MADE BY THE AO AMOUNTING TO RS.12,19,246/- WAS NOT JUSTIFIED AN D THE CIT(A) RIGHTLY DELETED THE SAME. WE THEREFORE UPHOLD THE ORDER OF THIS CIT(A) ON THIS POINT AND REJECT THE GROUND NO.4 OF THE REVENUES APPEAL. 16. IN THE RESULT, THE REVENUES APPEAL IS DISMISSE D. ORDER PRONOUNCED IN OPEN COURT ON 30 TH JULY, 2010. SD/- SD/- (MAHAVIR SINGH) JUDICIAL MEMBER (G.D. AGARWAL) VICE-PRESIDENT ITA.NO.2378/AHD/2008 -7- PLACE : AHMEDABAD DATE : 30-07-2010 VK* COPY OF THE ORDER FORWARDED TO: 1) : APPELLANT 2) : RESPONDENT 3) : CIT(A) 4) : CIT CONCERNED 5) : DR, ITAT. BY ORDER DR/AR, ITAT, AHMEDABAD