ITO, Ward 2(2), Pune V. M/s. Lipid Technologies, Pune

ITA 272/PUN/2013

• Counselvise Citation: 27224514 RSA 2013
• Duration Of Justice: 1 year(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-02-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2009-2010
• Appeal Filed On: 30-01-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S P WALIME
• Section: 43B; 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCHE B, PUNE BEFORE SHRI SHAILENDRA KUMAR YADAV, JUDICIAL MEMBER AND SHRI G.S. PANNU, ACCOUNTANT MEMBER ITA NO.272/PN/2013 (ASSESSMENT YEAR : 2009-10) INCOME TAX OFFICER, WARD 2(2), PUNE. . APPELLANT VS. M/S LIPID TECHNOLOGIES, B-2, CLOVER HIGHLANDS, NIBM ROAD, PUNE-411 048. PAN : AACFL5981D . RESPONDENT DEPARTMENT BY : SHRI S.P. WALIME ASSESSEE BY : NONE DATE OF HEARING : 13-02-2014 DATE OF PRONOUNCEMENT : 18-02-2014 ORDER PER G. S. PANNU, AM THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST AN ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS),-II, PUNE DATE D 21.09.2012 WHICH, IN TURN, HAS ARISEN FROM AN ORDER DATED 30.12.2011 PAS SED BY THE ASSESSING OFFICER U/S 143(3) OF THE INCOME-TAX ACT, 1961 (IN SHORT THE ACT), PERTAINING TO THE ASSESSMENT YEAR 2009-10. 2. IN THIS APPEAL, THE REVENUE HAS RAISED THE FOLLO WING GROUNDS OF APPEAL :- 1. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ER RED IN HOLDING THAT THE INCREASE IN PROFITS ON ACCOUNT OF DISALLOW ANCE U/S 40(A)(IA) WOULD FORM PART OF ELIGIBLE PROFITS FOR THE PURPOSES OF WORKIN G OUT DEDUCTION U/S 80IC. 2. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN NOT APPRECIATING THAT THE RATIONALE BEHIND THE INT RODUCTION OF PENAL SEC 40(A)(IA) IS TO ENSURE SCRUPULOUS ADHERENCE TO T DS PROVISIONS. 3. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN NOT APPRECIATING THAT IF DISALLOWANCE U/S 40(A)(IA) WAS TO BE TREATED AS PROFIT 'DERIVED FROM' THE ASSESSEE'S BUSINESS, THEN IT WOULD RESULT IN ENHANCED BENEFIT TO AN ASSESSEE CLAIMING EXEMPTION WHEN I N FACT THE LEGISLATURE ITA NO.272/PN/2013 A.Y. 2009-10 INTENDED THAT THE ASSESSEE SHOULD BE PENALIZED FOR NOT ADHERING TO TDS PROVISIONS. 4. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS ) ERRED IN NOT RELYING ON THE DECISION OF THE HON'BLE ITAT AHMADAB AD 'C' BENCH IN THE CASE OF DCIT VS RAMESHBHAI C PRAJAPATI IN ITA NO. 226(AH D) OF 2010 WHEREIN IT WAS HELD THAT THE DISALLOWANCE OF EXPENDITURE MADE DUE TO THE DEEMING FICTION CREATED UNDER ANY PROVISIONS OF THE ACT CANNOT BE I MPORTED INTO A BENEFICIAL PROVISION OF THE ACT. 5. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS ) ERRED IN RELYING UPON THE DECISION OF THE HON'BLE ITAT, PUNE IN THE CASE OF RAVIRAJ KOTHARI DEVELOPERS VS ITO (ITA NO 726/PN/11) WHEREIN IT WAS HELD THAT THE EFFECT OF DISALLOWANCE U/S 40(A)(IA) IS AN INCREASE IN THE PR OFITS OF THE ELIGIBLE BUSINESS PROJECTS. 6. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS ) ERRED IN NOT APPRECIATING THAT THE DECISION OF THE HON'BLE BOMBA Y HIGH COURT IN THE CIT VS GEMS PLUS JEWELLERY INDIA LTD (2011) 330 ITR 175(BO M) WAS RENDERED IN THE CONTEXT OF DISALLOWANCE MADE U/S 43B OF THE ACT WHE REAS A DISALLOWANCE U/S 40(A)(IA) IS IN THE NATURE OF DEFERMENT OF AN ALLOW ANCE WITH REFERENCE TO AN EXPENDITURE WHICH HAS ALREADY BEEN INCURRED BY THE ASSESSEE. 3. IN BRIEF, THE RELEVANT FACTS OF THE CASE ARE SUM MARIZED AS FOLLOWS. THE ASSESSEE IS A FIRM ENGAGED IN THE BUSINESS OF DESIG NING AND MANUFACTURING OF PLANT AND MACHINERIES FOR AGRO BASED AND BIO-FUEL I NDUSTRIES. FOR THE YEAR UNDER CONSIDERATION, ASSESSEE FILED A RETURN OF INC OME DECLARING TOTAL INCOME OF RS.NIL, AFTER CLAIMING DEDUCTION U/S 80IC OF T HE ACT EQUAL TO 100% OF THE INCOME FROM BUSINESS OR PROFESSION, I.E. RS.1,02, 20,636/-. THE SAID RETURN WAS SELECTED FOR SCRUTINY ASSESSMENT U/S 143(3) OF THE ACT WHEREBY THE TOTAL INCOME WAS ASSESSED AT RS.68,47,222/- AFTER MAKING CERTAIN DISALLOWANCE U/S 40(A)(IA) OF THE ACT. THE ASSESSING OFFICER NOTICE D THAT THE DISALLOWANCE OF RS.68,47,222/- MADE U/S 40(A)(IA) OF THE ACT HAS AL SO BEEN INCLUDED IN THE PROFITS DERIVED FROM THE BUSINESS OF PROFESSION B Y THE ASSESSEE THEREBY CLAIMING DEDUCTION U/S 80IC OF THE ACT ON SUCH AMOU NT. HOWEVER, THE ASSESSING OFFICER WHILE ALLOWING THE DEDUCTION U/S 80IC OF THE ACT, RESTRICTED THE DEDUCTION TO INCOME FROM BUSINESS OR PROFESSION OTHER THAN THE SUM OF RS.68,47,222/- WHICH WAS DISALLOWABLE U/S 40(A)(IA) OF THE ACT ON THE GROUND THAT THE SAID AMOUNT COULD NOT BE SAID TO HAVE BEEN DIRECTLY DERIVED FROM THE BUSINESS OR PROFESSION. ITA NO.272/PN/2013 A.Y. 2009-10 4. ASSESSEE CARRIED THE MATTER BEFORE THE CIT(A) AN D MADE WRITTEN SUBMISSION DATED 13.09.2012 WHICH IS REPRODUCED IN PARA 3.1 OF THE APPELLATE ORDER AND PLACED RELIANCE ON THE FOLLOWING JUDICIAL DECISIONS IN SUPPORT OF THE CLAIM : (I) RAVIRAJ KOTHARI DEVELOPERS VS. ITO, (IT A NO.726/PN/2011) DATED 26.06.2012; (II) CIT VS. GEM PLUS JEWELLERY INDIA L TD. (2011) 330 ITR 175 (BOM); AND, (III) S B BUILDERS & DEVELOPERS VS. ITO (2011) 136 TTJ 420). THE CIT(A), AFTER CONSIDERING THE WRITTEN SUBMISSION OF THE ASSESSEE AND FOLLOWING THE RATIO OF THE AFORESAID JUDICIAL DECISIONS, HAS DIRECTED THE ASSESSING OFFICER TO ALLOW DEDUCTION U/S 80IC OF THE ACT EVEN IN RELA TION TO THE DISALLOWANCE OF RS.68,47,222/- MADE U/S 40(A)(IA) OF THE ACT ON THE GROUND THAT THE PLAIN CONSEQUENCE OF THE DISALLOWANCE IS THAT THE BUSINES S PROFITS OF THE ASSESSEE GET ENHANCED AND THAT THERE IS NO STATUTORY BAR AGA INST THE ASSESSEES CLAIM. AGAINST SUCH ACTION OF THE CIT(A), REVENUE IS IN AP PEAL BEFORE US. 5. BEFORE US, THE LEARNED DEPARTMENTAL REPRESENTATI VE APPEARING FOR THE REVENUE HAS REITERATED THE ACTION OF THE ASSESSING OFFICER WHICH WE HAVE ALREADY NOTED IN EARLIER PARAGRAPH AND IS NOT BEING REPEATED FOR THE SAKE OF BREVITY. 6. WE FIND NO ERROR ON THE PART OF THE CIT(A) IN HO LDING THAT THE INCREASE IN PROFITS ON ACCOUNT OF DISALLOWANCE U/S 40(A)(IA) OF THE ACT WOULD FORM PART OF THE PROFITS ELIGIBLE FOR DEDUCTION U/S 80IC OF THE ACT, AS THE SAME IS BASED ON THE DECISION OF THE PUNE BENCH OF THE TRIBUNAL IN T HE CASE OF RAVIRAJ KOTHARI DEVELOPERS (SUPRA). THE PUNE BENCH OF THE TRIBUNAL HAS FOLLOWED THE PARITY OF REASONING LAID DOWN BY THE HONBLE BOMBAY HIGH COUR T IN THE CASE OF GEM PLUS JEWELLERY INDIA LTD. (SUPRA), AND IT HAS NOT B EEN SHOWN BY THE REVENUE THAT THE DECISION OF THE PUNE BENCH OF THE TRIBUNAL HAS BEEN ALTERED BY ANY HIGHER AUTHORITY. THUS, THE ORDER OF THE CIT(A) IS HEREBY AFFIRMED AND THE REVENUE HAS TO FAIL ON THE AFORESTATED GROUNDS OF A PPEAL. 7. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISM ISSED. ITA NO.272/PN/2013 A.Y. 2009-10 ORDER PRONOUNCED IN THE OPEN COURT ON 18 TH FEBRUARY, 2014. SD/- SD/- (SHAILENDRA KUMAR YADAV) (G . S. PANNU) JUDICIAL MEMBER ACCOUNT ANT MEMBER PUNE, DATED : 18 TH FEBRUARY, 2014 SUJEET COPY OF THE ORDER IS FORWARDED TO : - 1) THE ASSESSEE; 2) THE DEPARTMENT; 3) THE CIT(A)-II, PUNE; 4) THE CIT-II, PUNE; 5) THE DR, B BENCH, I.T.A.T., PUNE; 6) GUARD FILE. BY ORDER //TRUE COPY// SR. PRIVATE SECRETARY I.T.A.T., PUNE