South West Port Limited, Marmugao, Marmugao - Harbour, Goa V. Assistant Commissioner of Income Tax, Circle - 2, Margao

ITA 278/PAN/2017

• Counselvise Citation: [2019] 118 COUNSELVISE.COM (IT) 7722 (ITAT-PANAJI)
• Duration Of Justice: 1 year(s) 2 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-01-2019
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: DB
• Assessment Year: 2011-2012
• Appeal Filed On: 09-11-2017
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: Y V RAVIRAJ
• Assessee Lawyers: NARAYAN PRABHUDESAI
• Keywords: Opportunity of being heard; Bad and doubtful debts; Revised return
• Section: 43B; 14A; 115JB

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PANAJI BENCH, PANAJI BEFORE SHRI SHAMIM YAHYA , A M AND SHRI RAM LAL NEGI , J M ITA NO. 278 / PAN . / 2017 (ASSESSMENT YEAR: 2011 - 12 ) SOUTH WEST PORT LIMITED 1 ST FLOOR, PORT USERS COMPLEX, MORMUGAO HARBOUR - GOA VS. ASST. CIT, CIRCLE - 2, MARGAO - GOA PAN/GIR NO. AACCA 5270 B ( APPELLANT ) : ( RESPONDENT ) APPELLANT BY : SHRI NARAYAN PRABHUDESAI RESPONDENT BY : SHRI Y. V. RAVIRAJ DATE OF HEARING : 15.11. 201 8 DATE OF PRONOUNCEMENT : 15.01 .2019 O R D E R PER SHAMIM YAHYA, A. M.: THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) PANJAI - 1 , PERTAINING TO ASSESSMENT YEAR 2011 - 12. 2. THE GROUND S OF APPEAL READS AS UNDER: 1. THE LD. CIT(A) HAS ERRED IN UPHOLDING THE ACTION OF THE ASSESSING OFFICER ADDING BACK AMOUNT OF RS. 11,32,958 / - IN COMPUTATION OF BOOK PROFIT U/S 115JB OF THE INCOME TAX ACT, 1961 2. THE LD. CIT(A) HAS ERRED IN UPHOLDING THE ACTION OF THE ASSESSING OFFICER IN ADDING BACK AMOUNT OF RS.22,42,46 3 / - BEING PROVISION FOR LEAVE ENCASHMENT IN COMPUTATION OF BOOK PROFIT U/S 115JB OF THE INCOME TAX ACT, 1961. 3. THE LD. CIT(A) HAS ERRED IN UPHOLDING THE ACTION OF THE ASSESSING OFFICER IN EXCLUDING FROM DEDUCTION UNDER SECTION 80IA OF THE INCOME TAX ACT, AN AMOUNT OF RS.43,40,000/ - AS PROFIT ON SALE OF SCRAP. 4. THE LD. CIT(A) HAS ERRED IN UPHOLDING THE ACTION OF THE ASSESSING OFFICER IN ADDING AN AMOUNT OF RS. 1,89,56,021/ - TO THE INCOME U/S 115 JB OF THE INCOME TAX ACT, 1961. 5. THE LD. AO HAS ERRED I N CONSIDERING THE CORRECT FIGURES IN THE BALANCE SHEET PERTAINING TO 'SHAREHOLDERS FUNDS' AND 'RESERVES' AND 'INVESTMENT'. 6. THE REASONS FOR THE ADDITIONS/DEDUCTION AND THE INFERENCES DRAWN BY THE LEARNED ASSESSING OFFICER ARE OPPOSED TO FACTS AND LAW. 2 ITA NO. 278/PAN./2017 7 . YOUR APPELLANTS PRAY THAT THE LEARNED ASSESSING OFFICER'S ORDER BE MODIFIED TO ADMIT CLAIMS MADE IN THE FORGOING GROUNDS. APROPOS GROUND RELATING TO ADDITION U/S. 115JB FOR A SUM OF RS.11 , 32 , 958/ - : 3. BRIEF FACTS ON THIS ISSUE ARE THAT THE ASSESSEE HAD WRITTEN OFF A SUM OF RS. 1 1,32,958 IN THE ACCOUNTS AS BAD DEBTS BEING AMOUNT DUE FROM A DEBTOR, M/S SICAL LOGISTICS HAVING BECOME IRRECOVERABLE. THE ASSESSEE ERRONEOUSLY DISCLOSED THE SUM AS 'PROVISION FOR BAD AND DOUBTFUL DEBTS' INSTEAD OF THE CORRECT DIS CLOSURE AS 'BAD DEBTS'. THE ASSESSEE FURTHER ERRONEOUSLY ADDED THE SAID SUM IN THE COMPUTATION OF INCOME UNDER NORMAL PROVISIONS AS WELL AS IN THE BOOK PROFITS COMPUTED U/S 115JB OF THE ACT. THE ASSESSING OFFICER (A.O. FOR SHORT) ASKED THE ASSESSEE TO EXPL AIN THE SAID TREATMENT IN THE COURSE OF ASSESSMENT AND THE SAME WAS DULY EXPLAINED BY THE ASSESSEE VIDE THEIR LETTER DATED 17/01/2014. THE ASSESSEE MADE CLAIM FOR DELETING THE SAID ADDITION WRONGLY MADE BY THEM WHICH THE A .O. R EJECTED CITING ASSESSEES FAI LURE TO FILE REVISED RETURNS AS THE REASON THEREFOR. THE A .O. THEREAFTER ADDED THE SUM OF RS. 1 1,32,958 / - TO THE INCOME COMPUTED U/S. 115JB OF THE ACT. 4. IN APPEAL BEFORE THE LD. (CITA), T HE ASSESSEE PRODUCED COPIES OF LEDGER ACCOUNTS OF THE SAID MS/ SICAL LOGISTICS FOR THE PERIOD 01.04.2009 TO 31.03.2011 AND LETTER FROM DIRECTOR CONFIRMING THE WRITTEN OFF OF BAD DEBTS. ASSESSEE ALSO SUBMITTED BREAK - UP OF SUNDRY DEBTORS FOR FY 2009 - 10, 2010 - 11, FY 2011 - 12 AND FY 2012 - 13 LINKING TO THE BALANCE SHEETS WHEREIN THE SAID BALANCE OF RS. 11,32,958 / - CEASED TO APPEAR IN SUBSEQUENT YEARS. THE LD. CIT DISMISSED THE ASSESSEES GROUNDS HOLDING THAT THEIR CONTENTION IS NOT ACCEPTABLE AS AUDIT HAS NOT BEEN DONE FOR THE SECOND TIME AND REVISED RETURNS HAVE ALSO NOT BEEN FILED. 5. THE LD. CIT(A) IN THIS REGARD HAS OBSERVED AS UNDER: 3 ITA NO. 278/PAN./2017 8. HOWEVER, DURING THE ASSESSMENT AND APPELLATE PROCEEDINGS, THE AR OF THE ASSESSEE HAS COME UP WITH AN ALTERNATE ARGUMENT AND HAS REQUESTED TO REDUCE THE PROVISIONS FOR BAD AND DOUBTFUL DEBTS OF RS. 11,32,958/ - FROM THE INCOME COMPUTED U/S I15JB, AND CLAIMED THAT SAME PROVISIONS HAS WRONGLY WRITTEN AS PROVISIONS FOR B AD & DOUBTFUL DEBTS BUT ACTUALLY IT IS WRITTEN OFF. 9. THE ABOVE STATEMENT OF THE APPELLANT LEAD TO INFERENCE THAT THE AUDITED ACCOUNTS ARE NOT CORRECT. SOME PRINTOUTS ARE PROVIDED STATING THAT IT IS ACTUAL WRITE OFF AND NOT PROVISION, IF IT IS SO, THEN IT IS POSSIBLE THAT THERE COULD BE MANY MORE MISTAKES IN THE ACCOUNTS. IF THIS CONTENTION IS ACCEPTED, THEN IT LEADS TO CONCLUSION THAT THE ACCOUNTS OF THE ASSESSEE ARE NOT RELIABLE. FURTHER, AUDIT HAS NOT BEEN DONE SECOND TIME. REVISED RETURN HAS ALSO NOT B EEN FILED. THE CASE LAWS CITED BY THE AO ARE RELEVANT TO THE ISSUE UNDER CONSIDERATION. ACCORDINGLY, THE CONTENTION OF THE APPELLANT IS NOT ACCEPTABLE AND AO'S DECISION IS UPHELD. 6. AGAINST THE ABOVE ORDER, THE ASSESSEE IS IN APPEAL BEFORE US. 7. WE H AVE HEARD BOTH THE COUNSEL AND PERUSED THE RECORDS. WE FIND THAT ON THIS ISSUE ADVERSE INFERENCE HAS ALSO BEEN DRAWN BY THE AUTHORITIES BELOW T HAT THE ASSESSEE HAS NOT FILED THE REVISED RETURN. WE FIND THAT IN THE INTEREST OF JUSTICE, THE ASSESSEES PLEA N EEDS TO BE CONSIDERED , T HOUGH THE RE VISED RETURN HAS NOT BEEN FILED. I N THIS REGARD, HE PLACED RELIANCE UPON THE DECISION OF THE HONBLE APEX COURT IN THE CASE OF GOETZE INDIA LTD , 284 ITR 323 (SC) FOR THE PROPOSITION THAT THE ITAT IS EMPOWER ED TO ENTERTAI N THE GROUNDS WHICH ARE RAISED OTHERWISE THAN BY THE REVISED RETURN. ACCORDINGLY, THIS ISSUE IS REMITTED TO THE FILE OF THE A.O. THE A.O. IS DIRECTED TO CONSIDER THE ISSUE AFRESH AFTER GIVING THE ASSESSEE PROPER OPPORTUNITY OF BEING HEARD. APROPOS ADDING BACK RS.22,42,463/ - BEING PROVISION FOR LEAVE ENCASHMENT IN THE COMPUTATION OF BOOK PROFIT U/S. 115JB OF THE ACT: 8. ON THIS ISSUE, THE ASSESSEE HAD DEBITED THE PROFIT AND LOSS ACCOUNT WITH THE PROVISION FOR LEAVE ENCASHMENT I N THE PROFIT AND LOSS ACCOUN T. AS PER THE ASSESSEE, THE SAID PROVISION WAS MADE BY ASCERTAINING THE LIABILITY OF THE COMPANY IN RESPECT OF THE LEAVE ENCASHMENT EXPENDITURE OF THE EMPLOYEES AND WAS ASCERTAINED BASED ON THE ACTUARIAL VALUATION AND THE COMPUTATION WAS SAID TO BE IN ACCO RDANCE THERETO. HOWEVER, 4 ITA NO. 278/PAN./2017 THESE WE RE REJECTED BY THE AUTHORITIES BELOW AND THE PROVISION FOR LEAVE ENCASHMENT WAS ADDED BACK TO THE BOOK PROFIT U/S. 115JB OF THE ACT. 9. AGAINST THE ABOVE ORDER, THE ASSESSEE IS IN APPEAL BEFORE US. 10. WE HAVE HEARD BOTH THE COUNSEL AND PERUSED THE RECORDS. UPON CAREFUL CONSIDERATION, WE FIND THAT THE HONBLE SUPREME COURT IN THE CASE OF CIT VS. EXIDE INDUSTRIES LTD. AND OTHER S (IN SPECIAL LEAVE TO APPEAL (CIVIL) NO. CC 12060/2008 VIDE ORDER DATED 08.09. 2008 HAS CONSIDERED THE ISSUE . S. 43B (F) WAS INSERTED BY THE FINANCE ACT, 2001 W.E.F. 1.4.2002 TO PROVIDE THAT ANY SUM PAYABLE BY THE ASSESSEE AS AN EMPLOYER IN LIEU OF ANY LEAVE AT THE CREDIT OF HIS EMPLOYEE SHALL BE ALLOWED AS A DEDUCTION ONLY IN THE Y EAR OF ACTUAL PAYMENT. THE SAID AMENDMENT WAS ENACTED TO SUPERSEDE THE JUDGEMENT OF THE SUPREME COURT IN BHARAT EARTH MOVERS VS. CIT 245 ITR 428 WHERE IT WAS HELD THAT EVEN A PROVISION FOR LEAVE ENCASHMENT WAS DEDUCTIBLE ON ACCRUAL BASIS. IN EXIDE INDUSTRIES LTD VS. UOI 292 ITR 470, THE CALCUTTA HIGH COURTS STRUCK DOWN 43B (F) AS BEING ARBITRARY, UNCONSCIONABLE AND DE HORS THE APEX COURT DECISION IN THE CASE OF BEML ON THE GROUND THAT THE OBJECTS AND REASONS WERE SILENT AS TO WHY THE AMENDMENT WAS EFFECTED AND THAT THE AMENDMENT WAS NOT CONSISTENT WITH S. 43B WHICH WAS ORIGINALLY INSERTED TO PLUG EVASION OF STATUTORY LIABILITY. THE S AID JUDGEMENT OF THE CALCUTTA HIGH COURT HAS NOW BEEN STAYED BY THE SUPREME COURT AND IT HAS BEEN CLARIFIED THAT THE ASSESSEE MUST PAY TAX AS IF S. 43B (F) IS ON THE STATUTE THOUGH IT IS ENTITLED TO MAKE A CLAIM IN ITS RETURN. IN THESE FACTS, THE ITAT KOL KATA BENCH HAS R EMITTED THE SAME ISSUE IN ITA NO. 170/KOL/2013 VIDE ORDER DATED 02.03.2016 TO THE FILE OF THE A.O. TO AWAIT FOR THE HONBLE APEX COURT ORDER ON THIS ISSUE. WE DIRECT ACCORDINGLY. APROPOS ISSUE RELATING TO EXCLUSION FROM DEDUCTION U/S. 80I A AMOUNTING TO RS.43,40,000/ - BEING PROFIT ON SALE OF SCRAP : 11. ON THIS ISSUE, THE AUTHORITIES BELOW HAVE DISALLOWED THE PROFIT DERIVED BY THE ASSESSEE RELATING TO SALE OF SCRAP FOR COMPUTATION OF DEDUCTION U/S. 80IA. THE ASSESSEES EXPLANATION IN THIS R EGARD ARE AS UNDER: 5 ITA NO. 278/PAN./2017 6. THE APPELLANTS BEING ENGAGED IN THE BUSINESS OF PORT FACILITY AS INFRASTRUCTURE FACILITY HAD CLAIMED DEDUCTION U/S 80IA ON THE PROFITS FROM THE UNDERTAKING. THIS BUSINESS IS CARRIED OUT BY THE COMPANY ON A PPP BASIS BASED ON MOU WIT H MORMUGOA PORT TRUST AND IN TERMS OF ITS MEMORANDUM AND ARTICLES OF ASSOCIATION. IN THE COURSE OF CONDUCT OF ITS BUSINESS OF OPERATION OF PORT, THE APPELLANTS HANDLE CARGO OF COAL, IRON ORE ETC. WHILST HANDLING, SOME REMNANTS OF THE CARGO GET DEPOSITED AT THE DOCKS AND OTHER AREAS OF THE PORTS. OVER A PERIOD OF TIME THESE REMNANTS GET ACCUMULATED AND CAUSE HINDRANCE IN THE NORMAL OPERATIONS OF THE BUSINESS. HENCE, OVER TIME, THESE ARE DISPOSED OFF AS SCRAP. THEIR PROFITS DURING THE YEAR INCLUDED A SUM OF R S,43,40,000/ - BEING SALE OF SCRAP GENERATED DURING THE COURSE OF CARRYING ON ITS BUSINESS. 12. THE LD. CIT(A) IN THIS REGARD HAS UPHELD THE ACTION OF THE A.O. BY HOLDING THAT THE INCOME DERIVED FROM INFRASTRUCTURE UNDERTAKING HAS TO BE INTERPRETED IN A RE STRICTED/NARROWER SENSE AS COMPARED TO ATTRIBUTABLE TO. IN THIS REGARD, WE MAY GAINFULLY REFER TO THE ORDER OF THE LD. CIT(A) AS UNDER: 20. THE ASSESSEE CAN CLAIM DEDUCTION ON THE INCOME DERIVED BY THE INFRASTRUCTURE FACILITY I.E. BIRTH HIRE CHARGES & HANDLING INCOME IN THE PRESENT CASE. THE SAME HAS BEEN CLAIMED AND ALLOWED AND THERE IS NO DISPUTE ON THE SAME. H OWEVER, AS FAR AS SALE OF THE SCRAP IS CONCERNED IN THE PRESENT CASE; IT IS CLEAR THAT THE SCRAP HAS NOT BEEN MANUFACTURED/PRODUCED. THE AO HAS CLEARLY BROUGHT OUT IN THE ORDER THAT THE INCOME FROM SALE OF THE SCRAP CAN BE SAID TO BE ATTRIBUTABLE TO THE BUSINESS BUT IS CERTAINLY NOT DERIVED FROM THE BUSINESS. THE INCOME 'DERIVED FROM' INFRASTRUCTURE UNDERTAKING HAS TO BE INTERPRETED IN A RESTRICT ED/NARROWER SENSE AS COMPARED TO 'ATTRIBUTABLE TO', AND HENCE ONLY INCOME EARNED DIRECTLY FROM THE BUSINESS CARRIED ON BY THE INFRASTRUCTURE UNDERTAKING CAN BE TAKEN INTO CONSIDERATION FOR CALCULATING TOTAL INCOME AND DEDUCTION AVAILABLE UNDER THESE SECTIO NS. THE ACTION OF THE AO IS CORRECT THIS GROUND OF APPEAL IS THEREFORE, DISMISSED. 13. UPON CAREFUL CONSIDERATION, WE FIND THAT THE ORDER OF THE LD. CIT(A) IN THIS REGARD NEEDS TO BE UPHELD ON THE ANVIL OF HONBLE APEX COURT DECISION IN THE CASE OF LIBERT Y INDIA V. CIT 317 ITR 218 (SC) . THE SALE OF SCRAP CANNOT BE CONSIDERED TO BE INCOME DERIVED FROM INFRASTRUCTURE UNDERTAKING. IN THE CASE OF LIBERTY INDIA (SUPRA), IT WAS EXPOUNDED THAT THE TERM DERIVE D FROM IS NARR OWER THAT ATTRIBUTABLE TO. HENCE, THE S ALE OF SCRAP CANNOT BE CONSIDERED TO BE INCOME DERIVED FROM INFRASTRUCTURE FAC ILITY THOUGH IT MAY BE ATTRIBUTABLE TO IT. HENCE, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE LD. CIT(A). 6 ITA NO. 278/PAN./2017 APROPOS ISSUE RELATING TO ADDITION AN AMOUNT OF RS. 1,89,56,021/ - TO THE INCOME U/S. 115JB BEING DISALLOWANCE U/S. 14A: 14. UPON CAREFUL CONSIDERATION, WE NOTE THAT THE SPECIAL BENCH OF THE ITAT IN THE CASE OF VIREET INVESTMENT PVT. LTD. AND ANR . (2017) 165 ITD 0027 (DELHI) ((SB)) H AS UPHELD THAT THE DISAL LOWANCE U/S. 14A CANNOT BE ADDED TO THE INCOME COMPUTED U/S. 115JB. HOWEVER, THE SPECIAL BENCH OF THE TRIBUNAL HAS REMITTED THE MATTER TO THE FILE OF THE A.O. TO EXAMINE THE ISSUE IN VIEW OF E XPLANATION F TO SECTION 115JB. ACCORDINGLY, FOLLOWING THE SAME , WE REMIT THIS ISSUE TO THE FILE OF THE A.O. THE A.O. SHALL EXAMINE THE ISSUE IN ACCORDANCE WITH THE SPECIAL B ENCH OF THE TRIBUNAL DIRECTION AS ABOVE. 15. IN THE RESULT, THIS APPEAL BY THE ASSESSEE STANDS PARTLY ALLOWED. O RDER PRONOUNCED BY LISTING THE RESULT ON THE NOTICE BOARD OF THE BENCH UNDER RULE 34(4) OF THE APPELLATE TRIBUNAL RULES, 1963. SD/ - RAM LAL NEGI JUDICIAL MEMBER SD/ - SHAMIM YAHYA ACCOUNTANT MEMBER DATED : 1 5 . 0 1 . 2 0 1 9 COPY OF THE ORDER FORWARDED TO : (1) THE ASSESSEE; (2) THE REVENUE; (3) THE CIT(A); (4) THE CIT, PANJI CITY CONCERNED; (5) THE DR, ITAT, PANJI ; (6) GUARD FILE . BY ORDER ROSHANI , SR. PS ( SR. P.S. / P.S. ) ITAT