DCIT, Circle 1(1), Pune V. CTR Manufacturing Industries Ltd., Pune

ITA 2423/PUN/2012

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 76062 (ITAT-PUNE)
• Duration Of Justice: 1 year(s) 1 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-01-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2004-2005
• Appeal Filed On: 07-12-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: P L PATHADE
• Keywords: Deemed to accrue or arise in india; Tangible material; Capital receipt
• Section: 143(3); 147

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 NOS.2423 TO 2425/PN/2012 (A.YS.2004-05 TO 2006-07) DY. CIT, CIRCLE 1(1), PUNE APPELLANT VS. CTR MANUFACTURING INDUSTRIES LTD., NAGAR ROAD, PUNE - 411014 PAN: AAACC7256R RESPONDENT CO NOS.2 TO 4/PN/2014 (ARISING OUT OF ITA NOS.2423 TO 2425/PN/2012 (A.YS.2004-05 TO 2006-07) CTR MANUFACTURING INDUSTRIES LTD., NAGAR ROAD, PUNE - 411014 PAN: AAACC7256R CROSS OBJECTOR VS. DY. CIT, CIRCLE 1(1), PUNE APPELLANT ASSESSEE BY : SHRI RAJENDR A AGIWAL DEPARTMENT BY : SHRI P.L. PATHADE DATE OF HEARING : 13.01.2014 DATE OF ORDER : 27.01.2014 ORDER PER BENCH: THESE APPEALS FILED BY REVENUE AND CROSS OBJECTION S FILED BY ASSESSEE ARE ARISING FROM RESPECTIVE ORDERS OF CIT( A)-I, PUNE PERTAINING TO THE SAME ASSESSEE ON ALMOST COMMON IS SUES. SO THESE WERE HEARD TOGETHER AND ARE BEING DISPOSED OFF BY T HIS CONSOLIDATED ORDER FOR THE SAKE OF CONVENIENCE. 2 2. IN ITA NO.2423/PN/2012 FOR A.Y. 2004-05, THE REV ENUE RAISED THE FOLLOWING GROUNDS: 1. THE ORDER OF THE LEARNED COMMISSIONER OF INCOME- TAX (APPEALS) IS CONTRARY TO LAW AND TO THE FACTS AND C IRCUMSTANCES OF THE CASE. 2. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) GR OSSLY ERRED IN ALLOWING THE ASSESSEE'S APPEAL WITH REGARD TO EXTINGUISHMENTS OF THE ASSESSEE'S LIABILITY TO PAY THE DIFFERENTIAL SALES TAX OF RS.17,77,716/- INSTEAD O F CONFIRMING THE ASSESSING OFFICER'S STAND THAT THE FO RESAID AMOUNT REPRESENTED CESSATION/ REMISSION OF THE ASSESSEE'S LIABILITY AND HENCE TAXABLE U/S 41(1) OF THE INCOME-TAX ACT, 1961 . 3. THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) GR OSSLY ERRED IN ALLOWING THE ASSESSEE'S GROUND OF APPEAL B Y FOLLOWING HIS OWN DECISION IN THE CASE OF INOX AIR PRODUCTS P VT LTD. FOR A.Y. 2008-09, WHEREAS IN THE SAID DECISION HE HAD A LSO STATED THAT' I AM HUMBLY OF THE VIEW THAT THE AMOUNT IS TA XABLE U/S 41 (1) OF THE INCOME TAX ACT, 1961.' 4. THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) GR OSSLY ERRED IN FOLLOWING THE DECISION OF THE ITAT SPECIAL BENCH , MUMBAI IN THE CASE OF SUZLER INDIA LTD. (2010) 134 TTJ (MUM) (SB) 385, AND THE DECISION OF THE ITAT, PUNE BENC H IN THE CASE OF RUCHA ENGINEERS PVT LTD. IN IT NO. 67/PN/2006 AN D 1338/PN/207: A.Y. 2003-04, WHICH ARE NOT ALL APP LICABLE TO THE FACT IN THE PRESENT CASE SINCE IN THE ASSESSEE' S CASE THE LIABILITY IN RESPECT OF THE ENTIRE DIFFERED SALES T AX OF RS.47,29,706/- HAD ALREADY ACCRUED AND HAD ALSO BEE N ALLOWED AS EXPENDITURE OR TRADING LIABILITY ; AND, THEREFORE, THE REMISSION/ REDUCTION OF RS. 17,77,716/- PATENTLY RE SULTED IN DEEMED INCOME U/S 41(1) OF THE INCOME TAX ACT, 1961 . 5. THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) GR OSSLY ERRED IN FAILING TO APPRECIATE THAT THE RATIO LAID DOWN BY THE HON'BLE SUPREME COURT IN THE CASE OF CIT VS THIRUMA LAISWAMY NAIDU & SONS (1998), 236ITR 534(SC) & THE HON'BLE KERALA HIGH COURT IN THE CASE OF XCIT VS MARIKAR (MOTORS) LTD. (1981) 129 ITR 1 (KER) CLEARLY APPLIES TO THE PRESE NT CASE. 6. THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) GR OSSLY ERRED IN NOT CONSIDERING THE RATIO OF THE DECISION IN THE CASE OF CIT VS SAHANY STEELS AND PRESS WORKS LTD. (1985) 15 2 ITR 39 (AP), WHEREIN IT WAS BEEN HELD THAT REFUND OF SALES TAX CAN BE TAXED U/S 41(1) AND FOR THIS IT IS NOT NECESSARY TH AT THE REFUND MUST HAVE BEEN OBTAINED BY THE ASSESSEE IN THE FORM OF SALES TAX ONLY. 3 7. FOR THESE AND SUCH OTHER GROUNDS AS MAY BE URGED AT THE TIME OF THE HEARING, THE ORDER OF THE LEARNED COMMI SSIONER OF INCOME TAX (APPEALS) MAY BE VACATED AND THAT OF THE ASSESSING OFFICER BE RESTORED. 8. THE APPELLANT CRAVES LEAVE TO ADD, ALTER OR AMEND A NY OR ALL THE GROUNDS OF APPEAL 3. THE ASSESSEE HAS FILED ITS CROSS OBJECTIONS VIDE CO NO.02/PN/2014 FOR THE SAME YEAR AS UNDER: BASED ON THE FACTS AND CIRCUMSTANCES OF THE CASE, T HE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) I [CIT(A)] ERR ED: 1. IN CONFIRMING THE ACTION OF THE LEARNED DEPU TY COMMISSIONER OF INCOME-TAX, CIRCLE 1(1) [THE LEARN ED ASSESSING OFFICER - X AO'] IN UPHOLDING THE VALIDITY OF PROCEEDINGS INITIATED UNDER SECTION 147 OF THE ACT ON THE GROUND THAT INCOME HAD ESCAPED ASSESSMENT; 2. IN NOT APPRECIATING THAT RE-OPENING MADE BY THE ASSESSING OFFICER UNDER SECTION 147 OF THE ACT IS P URELY BASED ON THE DISCLOSURE MADE BY THE RESPONDENT ITSELF IN ITS RETURN OF INCOME AND NOTES TO COMPUTATION (ASSESSED UNDER SECTION 143(1) OF THE ACT) , WITHOUT THERE BEING ANY- NEW TANGIBLE MATERIAL ON RECORD SO AS TO JUSTIFY THE RE -OPENING OF ASSESSMENT. 3. IN NOT APPRECIATING THE FACT THAT THE REASSESSMENT IS NOT WARRANTED AS THERE HAS BEEN NO FAILURE ON THE PART OF THE APPELLANT TO DISCLOSE FULLY AND TRULY ALL MATERI AL FACTS NECESSARY FOR THE ASSESSMENT. ADDITION ON ACCOUNT, OF WAIVER OF PREPAYMENT OF SAL ES TAX DEFERRAL LIABILITY DUE TO PREPAYMENT ON THE FACTS AND IN CIRCUMSTANCES OF THE CASE THE L EARNED AO HAS ERRED: 4. IN OBJECTING THE ORDER OF HON'BLE CIT(A) AND CONTENDING THAT THE WAIVER OF SALES TAX DEFERRAL LIABILITY DU E TO PREPAYMENT REPRESENTS CESSATION/ REMISSION OF LIA BILITY AND HENCE TAXABLE UNDER SECTION 41 (1) OF THE ACT. THE RESPONDENT CRAVES, TO CONSIDER EACH OF THE ABOV E GROUNDS OF CROSS OBJECTIONS WITHOUT PREJUDICE TO EACH OTHER AND CRAVES, LEAVE TO ADD, ALTER, DELETE OR MODIFY ALL OR ANY OF THE ABOVE GROUNDS OF CROSS OBJECTIONS. 4 4. THE ASSESSEE IS A PUBLIC LIMITED COMPANY ENGAGED IN THE BUSINESS OF MANUFACTURING OF ON-LOAD TAP CHANGERS, RADIATORS FOR TRANSFORMERS, FLANGE TYPE TAP CHANGERS ETC. THE AS SESSEE HAD STARTED A UNIT AT CHIKHALTHANA INDUSTRIAL AREA WHIC H WAS NOTIFIED AS BACKWARD AREA AND WAS ENTITLED UNDER THE GOVERNMENT OF MAHARASHTRA (GOM) MODIFIED PACKAGE SCHEMES OF INCEN TIVE, 1988. THE OBJECTIVE BEHIND THE SCHEME WAS TO PROMOTE INDU STRIAL DEVELOPMENT ALL OVER THE STATE. TO INDUCE INDUSTRI AL DEVELOPMENT THE GOM HAD GIVEN THE OPTION TO DEFER THE PAYMENT O F SALES TAX COLLECTED FOR 10 YEARS AND THEREAFTER TO PAY THE SA ME IN ANNUAL INSTALLMENTS. THEREAFTER THE GOM INTRODUCED A TRADE CIRCULAR DATED 12.12.2002 ACCORDING TO WHICH AN OFFER WAS PROVIDED FOR PREMATURE PAYMENT OF THE SALES TAX DEFERRAL LOAN AT ITS NPV. THE ASSESSEE GOT ENTITLEMENT CERTIFICATE FROM SICOM FOR SUCH DEFERRA L PAYMENT OF SALES TAX. ACCORDINGLY, THE ASSESSEE MADE PAYMENT OF SAL ES TAX LIABILITY EQUAL TO NPV. THE SALES TAX WAIVED WAS SPECIFIED B Y THE ASSESSEE IN THE NOTE WRITTEN IN THE RETURN OF INCOME FOR A.Y. 2 004-05, 2005-06 AND 2006-07. THE ASSESSING OFFICER REOPENED THE CA SES FOR 3 YEARS ON THE BASIS OF NOTES MENTIONED BY THE ASSESSEE. T HE ASSESSEE REQUESTED TO TREAT THESE WAIVED SALES TAX AS CAPITA L RECEIPTS HOWEVER, THE ASSESSING OFFICER TAXED THESE RECEIPTS. AGGRIEV ED BY THE ASSESSMENT ORDERS PASSED U/S 143(3) R.W.S 147 FOR A Y 2004-05, 2005-06 AND 2006-07, THE ASSESSEE HAS FILED THREE S IMILAR APPEALS. ON MERIT ALL THESE APPEALS WERE ALLOWED BY THE CIT( A). 5. THE ASSESSEE HAS CLAIMED THAT THE SIMILAR ISSUE HAS BEEN DECIDED IN FAVOUR OF THE ASSESSEE BY SPECIAL BENCH, MUMBAI IN THE CASE OF SUZLER INDIA LTD. (2010) 134 TTJ (MUM) (SB) 385, WHEREIN THE SPECIAL BENCH HELD THAT OUT OF THE SALES TAX LIABIL ITY OF RS.4,14,87,984/- BEING DIFFERENCE BETWEEN PAYMENT O F RS.3,37,13,393/- AGAINST THE FUTURE LIABILITY OF RS .7,52,01,378/- CARRIED BY THE ASSESSEE UNDER CAPITAL RESERVES ACCO UNT, ITS BOOKS OF ACCOUNTS, ITS CAPITAL RECEIPT AND COULD NOT BE RETA INED AS REMISSION OR CESSATION OF LIABILITY IN TERMS OF SECTION 41(1) OF ACT. WE ALSO FIND 5 THAT ITAT B BENCH, PUNE IN ITA NO.686/PN/2001 IN THE CASE OF ROHIT EXHAUST SYSTEMS PVT. LTD. FOLLOWING THE RATIO OF SPECIAL BENCH IN SULZER INDIA LTD. (SUPRA) HAS HELD AS UNDER: 9.1 WE HAVE CONSIDERED THE RIVAL SUBMISSIONS MADE BY BOTH THE SIDES, PERUSED THE ORDERS OF THE AO AND THE CIT (A) AND THE PAPER BOOK FILED ON BEHALF OF THE ASSESSEE. WE HAV E ALSO CONSIDERED THE VARIOUS DECISIONS CITED BEFORE US. WE FIND THE ISSUE HAS BEEN DECIDED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF THE PUNE BENCH OF THE TRIBUNAL IN THE CASE OF RU CHA ENGINEERS PVT. LTD. VIDE ITA NO. 667/PN/2006 AND IT A NO. 1338/PN/2007 FOR A.Y. 2003-04 ORDER DATED 19-01-201 1. FOR THE SAKE OF CONVENIENCE THE FACTS OF THAT CASE INCL UDING THE FINDING OF THE TRIBUNAL ARE REPRODUCED AS UNDER : 3. AS FAR AS GROUND NO.1 IS CONCERNED, THE RELEVAN T FACTS OF THE CASE ARE THAT THE ASSESSEE HAS COLLECTED SAL ES TAX FROM CUSTOMERS AND HAS CLAIMED DEDUCTION FOR THE SA ID AMOUNT IN P&L ACCOUNT. THE SAID DEDUCTION WAS ALLO WED U/S.43B TAKING THE SALES TAX COLLECTED AS DEEMED PA YMENT FOR THE PURPOSE OF SECTION 43B. THE SALES TAX COLL ECTED AND USED WAS TO BE PAID TO STATE GOVERNMENT IN FIVE EQUAL INSTALMENTS. THE ASSESSEE SETTLED THE SALES TAX DE FERRAL AMOUNT OF RS.163.22 LAKHS BY PAYING RS.51.55 LAKHS AS FULL AND FINAL SETTLEMENT. IN THIS PROCESS, THE AS SESSEE HAS GAINED RS.111.67 LAKHS AND CLAIMED THE SAME AS CAPI TAL RECEIPT WHICH WAS NOT ACCEPTED BY THE ASSESSING OFF ICER. THE MATTE WAS CARRIED IN BEFORE THE FIRST APPELLATE AUTHORITY BUT WITHOUT ANY SUCCESS. 4. DURING THE PROCEEDINGS BEFORE US, THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ISSUE R AISED IN THIS APPEAL IS SQUARELY COVERED BY THE DECISION OF SPECIAL BENCH OF THE TRIBUNAL IN THE CASE OF SULZER INDIA L TD. VS. JCIT (2010) 42 SOT 457 (BOM.) WHICH WAS NOT DISPUTE D BY THE LEARNED DR EXCEPT RELYING ON THE ORDER OF THE C IT(A). 5. AFTER HEARING BOTH THE PARTIES AND PERUSING THE MATERIAL ON RECORD, WE FIND THAT THIS GROUND IS SQU ARELY COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION O F SPECIAL BENCH OF THE TRIBUNAL IN THE CASE OF SULZER INDIA L TD. (SUPRA), WHEREIN THE ISSUE HAS BEEN DECIDED IN FAVO UR OF THE ASSESSEE BY OBSERVING AS UNDER: FOR THE REASONS AS STATED ABOVE, WE HOLD THAT THE DEFERRED SALES TAX LIABILITY RS.4,14,87,984/- B EING THE DIFFERENCE BETWEEN THE PAYMENT OF NET PRESENT VALUE RS.3,37,13,393/- AGAINST THE FUTURE LIABILITY OF 6 RS.7,52,01,378/- CREDITED BY THE ASSESSEE UNDER THE CAPITAL RESERVE ACCOUNT IN ITS BOOKS OF ACCOUNT IS A CAPITAL RECEIPT AND CANNOT BE TERMED AS REMISSION/CESSATION OF LIABILITY AND CONSEQUENTLY N O BENEFIT HAS ARISEN TO THE ASSESSEE IN TERMS OF SECT ION 41(1)(A) OF THE INCOME TAX ACT, 1961. ACCORDINGLY, THE MODIFIED QUESTION AS FRAMED IN PARA 5 OF THIS ORDER IS ANSWERED IN FAVOUR OF THE ASSESSEE AND AGAINST THE REVENUE. 6. SO, RESPECTFULLY FOLLOWING THE AFORESAID DECISIO N OF SPECIAL BENCH OF THE TRIBUNAL IN THE CASE OF SULZER INDIA LTD. (SUPRA), WE HOLD THAT THE CIT(A) WAS NOT JUSTI FIED IN CONFIRMING THE ADDITION OF RS.1,11,66,935/- MADE BY THE ASSESSING OFFICER TREATING THE SALES TAX LOAN WAIVE R AS REVENUE RECEIPT. ASSESSING OFFICER IS DIRECTED ACC ORDINGLY. RESPECTFULLY FOLLOWING THE DECISION OF THE TRIBUNAL IN THE CASE OF RUCHA ENGINEERS PVT. LTD. WHICH HAS BEEN PASSED AFT ER CONSIDERING THE DECISION OF THE SPECIAL BENCH OF TH E TRIBUNAL IN THE CASE SULZER INDIA LTD. (SUPRA) AND IN ABSENCE O F ANY CONTRARY MATERIAL BROUGHT TO OUR NOTICE AGAINST THE ORDER OF THE TRIBUNAL IN THE CASE OF RUCHA ENGINEERS (P) LTD. (S UPRA) WE FIND NO INFIRMITY IN THE ORDER OF THE CIT(A). ACCORDING LY THE SAME IS UPHELD. THE GROUNDS RAISED BY THE REVENUE ARE ACCO RDINGLY DISMISSED. NOTHING CONTRARY WAS BROUGHT TO OUR KNOWLEDGE ON B EHALF OF REVENUE. FACTS BEING SIMILAR, SO FOLLOWING THE SAM E REASONING, WE ARE NOT INCLINED TO INTERFERE IN THE FINDINGS OF CI T(A), WHO HAS ALLOWED THE ASSESSEES CLAIM WITH REGARD TO EXTINGUISHMENT OF ASSESSEES LIABILITY TO PAY THE DIFFERENTIAL SALES TAX OF RS.1 7,77,716/- BECAUSE THE SAID AMOUNT DOES NOT REPRESENT CESSATION / REMI SSION OF ASSESSEES LIABILITY AND NOT LIABLE U/S.41(1) OF I. T. ACT, 1961. WE UPHOLD THE SAME. IN ITA NO.2424/PN/2012 AND ITA NO.2425/PN/2012 FOR A.Y. 2005-06 AND 2006-07, THE R EVENUE HAS RAISED THE SIMILAR GROUNDS AS RAISED IN ITA NO.2423 /PN/2012 FOR A.Y. 2004-05. FACTS BEING SIMILAR, SO FOLLOWING TH E SAME REASONING, WE ARE NOT INCLINED TO INTERFERE IN THE FINDINGS OF CIT(A), WHO HAS ALLOWED THE ASSESSEES CLAIM WITH REGARD TO EXTINGU ISHMENT OF ASSESSEES LIABILITY TO PAY THE DIFFERENTIAL SALES TAX OF RS.25,03,081/- AND 17,28,214/- RESPECTIVELY BECAUSE THE SAID AMOUN T DOES NOT 7 REPRESENT CESSATION / REMISSION OF ASSESSEES LIABI LITY AND HAVE NOT LIABLE U/S.41(1) OF I.T. ACT, 1961. WE UPHOLD THE SAME. 6. SIMILAR CROSS OBJECTION NOS.2/PN/2014, 3/PN/2014 AND 4/PN/2014 ARISING OUT OF ITA NO.2423/PN/2012, 2424/ PN/2012 AND 2425/PN/2012 RESPECTIVELY HAVE BEEN FILED BY TH E ASSESSEE. SINCE THE RELIEF ON MERIT AS GRANTED BY THE CIT(A) HAS BEEN UPHELD BY US ON THE MERIT IN PARAS 8 & 9 OF THIS ORDER. SO, THE ISSUE RAISED BY WAY OF CROSS OBJECTIONS GOES ACADEMIC. HOWEVER, TH E ASSESSEE IS AT LIBERTY TO RAISE THE SAME IF NECESSITY ARISES FOR S AME IN FUTURE. SO, THE CROSS OBJECTIONS ARE DISMISSED BEING ACADEMIC. 7. IN RESULT, THE REVENUES APPEALS AS WELL AS CROS S OBJECTIONS FILED BY THE ASSESSEE ARE DISMISSED AS INDICATED ABOVE. PRONOUNCED IN THE OPEN COURT ON THIS THE 27 TH DAY OF JANUARY, 2014. SD/- SD/- (R.K. PANDA) (SHAILENDRA KUMAR YADAV) ACCOUNTANT MEMBER JUDICIAL MEMBER PUNE, DATED: 27 TH JANUARY, 2014 GCVSR COPY TO:- 1. DEPARTMENT 2. ASSESSEE 3. THE CIT(A)-I, PUNE 4. THE CIT-I, PUNE 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