M/s Prysmian Cavi e Systemi Telecom S.RL. (formerly Pirelli Cavi e Systemi Telecom S.P.A) India Project Office, Hyderabad V. The DCIT, Circle - 16(3), Hyderabad

ITA 249/HYD/2012

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 78023 (ITAT-HYDERABAD)
• Duration Of Justice: 2 year(s) 5 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-07-2014
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 15-07-2014
• Assessment Year: 2005-2006
• Appeal Filed On: 15-02-2012
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: P SOMASEKHAR REDDY
• Assessee Lawyers: P J PARDIWALLA; MILIND THAK O R E
• Keywords: Business income
• Section: 234B

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCHES A : HYDERABAD BEFORE SHRI B. RAMAKOTAIAH, ACCOUNTANT MEMBER AND SMT. ASHA VIJAYARAGHAVAN, JUDICIAL MEMBER ITA.NO.249/HYD/2012 ASSESSMENT YEAR 2005-2006 M/S. PRYSMIAN CAVI E SISTEMI S.R.L. (FORMERLY PIRELLI CAVI E SISTEMI TELECOM S.P.A. (INDIA PROJECT OFFICE), HYDERABAD. PAN AABCP-2267-Q VS. DCIT, CIRCLE 16(3) HYDERABAD. (APPELLANT) (RESPONDENT) ITA.NO.202/HYD/2012 ASSESSMENT YEAR 2005-2006 ADIT (IT)-II, HYDERABAD. VS. M/S. PRYSMIAN CAVI E SISTEMI S.R.L., (FORMERLY PIRELLI CAVI E SYSTEMI TELECOM S.P.A.) INDIA PROJECT OFFICE, HYDERABAD. PAN AABCP-2267-Q (APPELLANT) (RESPONDENT) FOR ASSESSEE MR. P.J. PARDIWALLA & MR. MILIND THAKORE FOR REVENUE MR. P. SOMASEKHAR REDDY DATE OF HEARING 15.07.2014 DATE OF PRONOUNCEMENT 25.07.2014 ORDER PER BENCH THESE TWO CROSS-APPEALS ARE BY ASSESSEE AND REVENUE AGAINST THE ORDERS OF THE CIT(A)-V, HYDERAB AD DATED 29.11.2011. 2. BRIEFLY STATED FACTS ARE THAT THE ASSESSEE COMP ANY IS ENGAGED IN THE BUSINESS OF MANUFACTURE AND TRADI NG OF 2 ITA.NO.249/HYD/2012 & ITA.NO.202/HYD/2012 M/S. PRYSMIAN CAVI E SYSTEMI TELECOM S.R.L. INDIA PROJECT OFFICE, HYDERABAD. CABLES FOR TELECOM AND POWER. ADMITTEDLY, DURING TH E YEAR THERE ARE NO PROJECT RECEIPTS EITHER OFF SHORE OR O N SHORE. ASSESSEE HAS ONLY FILED THE LOSS RETURN CLAIMING EX PENDITURE INCURRED IN INDIA. A.O. DISALLOWED THE ENTIRE EXPEN DITURE CLAIMED ON THE REASON THAT THERE ARE NO CONTRACT RE CEIPTS. FURTHER, BROUGHT THE OTHER INCOME OF RS.9,72,184/- AS INCOME FROM OTHER SOURCES AND TAXED SEPARATELY. ASSESSEE I S CONTESTING THE DISALLOWANCE OF EXPENDITURE AS WELL AS TAXING THE OTHER INCOME SEPARATELY. IT WAS CONTENDED THAT A.O. CANNOT DISALLOW THE ENTIRE CLAIM IN THE P & L ACCOUNT PART ICULARLY TOWARDS COST OF SALES AND OPERATING AND ASSESSMENT EXPENSES. WITH REFERENCE TO OTHER INCOME SHOWN IN P & L ACCOU NT, THE DETAILS SHOWN IN SCHEDULE-9 ARE AS UNDER : 31 ST MARCH, 2005 RS. SCHEDULE-9 OTHER INCOME INTEREST OTHERS PROVISION NO LONGER REQUIRED WRITTEN BACK 24,092 PROFIT ON SALE OF FIXED ASSETS - DUTY DRAWBACK RECEIVED - INTEREST ON INCOME TAX REFUND - RECOVERIES FROM SALARIES 1,061 DAMAGES CLAIMED FROM STEEL PRODUCTS LTD., 9,47,031 9,72,184 2.1. IT WAS SUBMITTED THAT AS CAN BE SEEN FROM THE ABOVE, THERE WAS NO INTEREST RECEIVED DURING THE YE AR AND THE ALL THE AMOUNTS RECEIVED ARE BUSINESS RECEIPTS MAIN LY AN AMOUNT OF RS.9,47,031/- AS DAMAGES CLAIMED FROM STE EL PRODUCTS. A.O. SHOULD HAVE SET OFF THIS AMOUNT TO T HE LOSS DISALLOWED RATHER THAN BRINGING THEM TO TAX SEPARAT ELY. IT WAS FAIRLY ADMITTED BY THE LD. COUNSEL THAT DISALLOWANC E OF 3 ITA.NO.249/HYD/2012 & ITA.NO.202/HYD/2012 M/S. PRYSMIAN CAVI E SYSTEMI TELECOM S.R.L. INDIA PROJECT OFFICE, HYDERABAD. EXPENDITURE HAS NO BEARING AS THE ASSESSEE HAS CLOS ED THE PROJECT AND HAS ALREADY LEFT INDIA AND THEREFORE, I T DOES NOT HAVE ANY BEARING ON ANY FUTURE ASSESSMENTS BUT ON P RINCIPLE ASSESSEE WAS OBJECTING TO DISALLOWANCE OF THE EXPEN DITURE. 3. CONSIDERING THE RIVAL CONTENTIONS, WE ARE OF TH E OPINION THAT A.O. HAS WRONGLY BROUGHT TO TAX OTHER SOURCES INCOME WHICH IS IN FACT BUSINESS RECEIPTS TAXABLE I N INDIA UNDER SECTION 41(1). THEREFORE, INSTEAD OF DISALLOW ING THE ENTIRE EXPENDITURE, THE SAME SHOULD HAVE BEEN SET OFF TO T HE EXPENSES CLAIMED DURING THE YEAR AND ONLY NET AMOUNT COULD H AVE BEEN DISALLOWED BY THE A.O, IF AT ALL. BE THAT AS IT MAY , EVEN THOUGH WE DO NOT APPROVE IN PRINCIPLE DISALLOWANCE OF EXPE NDITURE WHICH IS GENUINELY INCURRED FOR THE PURPOSE OF BUSI NESS, CONSIDERING THE FACT THAT ASSESSEE HAS CLOSED DOWN ITS OPERATIONS AND ALLOWANCE OR DISALLOWANCE OF EXPENDI TURE HAS NO BEARING IN ANY LATER YEAR AND ALSO ON THE FACT T HAT INCOMES IN EARLIER YEARS WERE ESTIMATED BY REJECTING THE BO OKS OF ACCOUNTS, WE, IN THE INTEREST OF JUSTICE, DETERMINE THE TOTAL INCOME AT NIL AND ASSESSEE GETS RELIEF ACCORDINGLY. GROUND NO.1 OF THE ASSESSEE IS PARTLY ALLOWED. 4. GROUND NO.2 PERTAINS TO CHARGING OF INTEREST UN DER SECTION 234B AT RS.1,42,230/- WHICH IS OF CONSEQUEN TIAL IN NATURE. SSINCE THE MAIN ADDITION ITSELF IS DELETED, THERE IS NO LEVY OF INTEREST UNDER SECTION 234B ON THE FACTS OF THE CASE. ACCORDINGLY, GROUND NO.2 OF THE ASSESSEE IS ALLOWED . 5. IN THE RESULT, ITA.NO.249/HYD/2012 OF THE ASSESSEE IS PARTLY ALLOWED. 4 ITA.NO.249/HYD/2012 & ITA.NO.202/HYD/2012 M/S. PRYSMIAN CAVI E SYSTEMI TELECOM S.R.L. INDIA PROJECT OFFICE, HYDERABAD. ITA.NO.202/HYD/2012 A.Y. 2005-06 (REVENUES APPEA L) 6. IN THE REVENUE APPEAL THE GROUND IS THAT THE CIT(A) ERRED IN ADOPTING THE RATE APPLICABLE TO DOM ESTIC COMPANY WHEREAS, ASSESSEE IS A PROJECT OFFICE OF TH E FOREIGN COMPANY. THIS GROUND DOES NOT SURVIVE. THERE IS NO OTHER INCOME LIKE INTEREST INCOME TO THE ASSESSEE. THEREF ORE, THERE IS NO NEED TO ADJUDICATE THIS GROUND. REVENUE GROUND I S ACCORDINGLY REJECTED. 7. IN THE RESULT, ITA.NO.202/HYD/2012 OF THE REVENUE IS DISMISSED. 8. TO SUM-UP, ITA.NO.249/HYD/2012 OF THE ASSESSEE IS PARTLY ALLOWED FOR STATISTICAL PURPOSES AND ITA.NO.202/HYD/2012 OF THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 25.07.2014. SD/- SD/- (ASHA VIJAYARAGHAVAN) (B.RAMAKOTAIAH) JUDICIAL MEMBER ACCOUNTANT MEMBER HYDERABAD, DATED 25 TH JULY, 2014 VBP/- COPY TO : 1. M/S. PRYSMIAN CAVI E SISTEMI S.R.L., (FORMERLY P IRELLI CAVI E SYSTEMI TELECOM S.P.A.) INDIA PROJECT OFFICE, H .NO.5-7-64, EWHS-128, GROUND FLOOR, APHB COLONY, MOULALI, HYDERABAD. PAN AABCP-2267-Q 2. DCIT, CIRCLE-16(3), AYAKAR BHAVAN, HYDERABAD. 3. CIT (OSD) & CIT-IV, HYDERABAD 4. CIT(A)-V, HYDERABAD. 5. ADIT (INTERNATIONAL TAXATION), HYDERABAD 6. ADDL.CIT, RANGE-16, HYDERABAD 7. D.R. ITAT, A BENCH, HYDERABAD.