PRISM IND. LTD., V. THE JOINT CIT, (ASSTT.) SPL. RANGE -2,

ITA 300/AHD/2003

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 6661 (ITAT-AHMEDABAD)
• Duration Of Justice: 8 year(s) 3 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-05-2011
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: C
• Next Hearing Date: 13-04-2011
• Assessment Year: 1998-1999
• Appeal Filed On: 21-01-2003
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: RAJESH OJHA SRDR
• Keywords: Business income; Depreciation; Initiation of penalty proceedings
• Section: 43B; 80HHC

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AT AHMEDABAD AHMEDABAD C BENCH BEFORE SHRI G.D. AGARWAL, HONBLE VICE-PRESIDENT (AZ) AND SHRI D.K. TYAGI, HONBLE JUDICIAL MEMBER ITA NO.300/AHD/2003 ASSESSMENT YEAR:1998-99 DATE OF HEARING: 13.4.11 DRAFTED:18.4.11 PRISM INDUSTRIES LTD., 11, RUTU COMPLEX, NR. HARNI HOSPITAL, HARNI, BARODA PAN NO.AABCP7162Q V/S . JCIT (ASSTT.) SR-2, BARODA (APPELLANT) .. (RESPONDENT) APPELLANT BY :- SHRI SAKAR SHARMA, AR RESPONDENT BY:- SHRI RAJESH OJHA, SR-DR O R D E R PER D.K. TYAGI, JUDICIAL MEMBER:- THIS IS ASSESSEES APPEAL AGAINST THE ORDER OF COM MISSIONER OF INCOME-TAX (APPEALS)-III, BARODA IN APPEAL NO.CAB/III-234/2001 -2002 DATED 23-07-2002 FOR ASSESSMENT YEAR 1998-99. 2. THE GROUND NO.1 READS AS UNDER:- 1. LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN CON FIRMING DISALLOWANCE OF RS.29,924/- BEING 10% OUT OF STAFF WELFARE AND FACT ORY EXPENSES WITHOUT THERE BEING ANY COGENT REASONS FOR THE SAME. UNDER THE FA CTS AND CIRCUMSTANCES OF THE CASE LD. CIT(A) OUGHT TO HAVE DELETED THE SAID DISALLOWANCE. 3. THE ASSESSING OFFICER DURING ASSESSMENT PROCEEDI NGS OBSERVED THAT ASSESSEE HAS INCURRED EXPENSES AMOUNTING TO RS.2,99 ,244/- UNDER THE HEAD STAFF WELFARE / FACTORY EXPENDITURE. THIS EXPENSE INCLUD E EXPENDITURE OF TEA, COFFEE, LUNCH, SNACKS, HOTEL BILLS ETC AND SOME OF THEM ARE IN THE NATURE OF ENTERTAINMENT. THE AO DISALLOWED 1/10 TH OF SUCH EXPENSES WHICH COMES TO RS.29,924/-. THIS ACTION OF AO WAS CONFIRMED BY THE LD. CIT(APPEALS) AFTER TAKING INTO CONSIDERATION THE SUBMISSION OF ASSESSEE. NOTHING SUBSTANTIAL WAS ARGUED BEFORE US TO DEVIATE FROM THE FINDINGS ITA NO.300/AHD/2003 A.Y. 1998-99 PRISM INDS. LTD. V. JCIT(ASSTT) SR-2 BRD PAGE 2 OF LOWER AUTHORITIES, THEREFORE THE DISALLOWANCE MA DE BY ASSESSING OFFICER AND SUSTAINED BY LD. CIT(A) IS HEREBY CONFIRMED. THIS G ROUND OF ASSESSEES APPEAL IS DISMISSED. 4. GROUND NO.2 TO 7 READ AS UNDER:- 2. LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN CON FIRMING THE ACTION OF AO IN INCLUDING THE AMOUNTS OF EXCISE DUTY, CENTRAL SALES TAX AND LOCAL SALES TAX TO THE AMOUNT OF TOTAL TURNOVER FOR THE PURPOSE OF CALCULATING DEDUCTION U/S.80HHC OF THE ACT. 3. LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN CONF IRMING THE ACTION OF AO IN EXCLUDING 90% OF THE INSURANCE CLAIM, GROSS INTERES T, DUTY DRAWBACK AND EXPORT INCENTIVES FROM THE PROFITS OF THE BUSINESS FOR THE PURPOSE OF CALCULATING DEDUCTION U/S.80HHC OF THE ACT. 4. ALTERNATIVELY AND WITHOUT PREJUDICE, IF THE INTE REST INCOME IS REQUIRED TO BE EXCLUDED FROM THE PROFIT OF THE BUSINESS, THEN ONLY THE NET INTEREST INCOME I.E. GROSS INTEREST RECEIPT LESS INTEREST EXPENDITURE CA N BE REDUCED FROM THE PROFIT OF THE BUSINESS. LD. CIT(A) HAS THUS ERRED IN NOT A LLOWING THE NETTING OFF OF THE INTEREST RECEIPT AGAINST INTEREST EXPENDITURE. 5. LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN SETT ING ASIDE THE ISSUE OF THE REALIZATION OF THE EXPORT PROCEEDS TO THE FILE OF T HE AO FOR FURTHER VERIFICATION. AS A MATTER OF FACT LD. CIT(A) HAS NO POWER TO SET AIDE ANY GROUND TO THE FILE THE AO AND IN ANY CASE, ALL THE INFORMATION NECESSA RY FOR DETERMINING AS TO WHETHER REMITTANCES WERE RECEIVED BEFORE THE DUE DA TE FOR FILING THE RETURN WAS VERY MUCH THERE BEFORE THE LD. CIT(A) AND THERE FORE LD. CIT(A) OUGHT TO HAVE DECIDED THE ISSUE RATHER THEN SETTING IT ASIDE TO THE FILE OF THE AO. 6. LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN CONF IRMING THE ACTION OF AO IN INCLUDING THE NEGATIVE FIGURE IN THE CALCULATION OF THE DEDUCTION U/S.80HHC OF THE ACT LD. CIT(A) HAS NOT APPRECIATED THAT WHILE C ALCULATING THE DEDUCTION U/S.80HHCOTA AT ANY STAGE IF THE RESULT IS NEGATIVE , THE SAME HAS TO BE IGNORED AND DEDUCTION HAS TO BE ALLOWED ONLY ON THE POSITIVE COMPONENTS. 7. IN ANY CASE LD. CIT(A) HAS ERRED IN LAW IN GROSS LY IGNORING THAT THE APPELLANT HAS INCURRED LOSS IN TRADING EXPORT ACTIVITIES AND THE SAME HAS BEEN COMPENSATED BY THE PROFIT EARNED FROM EXPORT OF THE MANUFACTURED GOODS WHILE CALCULATING THE PROFIT OF THE BUSINESS AND TH EREFORE, PROFIT OF THE BUSINESS MUST BE INCREASED TO THE EXTENT OF LOSS IN TRADING EXPORT ACTIVITIES TO FIND OUT THE ACTUAL PROFIT FROM EXPORT OF THE MANUFACTURED G OODS AND THUS THE APPELLANT MUST GET ADDITIONAL DEDUCTION U/S.80HHC TO THAT EXT ENT. 5. AT THE TIME OF HEARING LD. COUNSEL FOR THE ASSES SEE SUBMITTED THAT THESE GROUNDS ARE ACADEMIC IN NATURE AND DO NOT REQUIRE A NY ADJUDICATION IN VIEW OF THE INSERTION OF PROVISO-3 TO SUB-SECTION3 OF 80HHC WIT H EFFECT FROM 01-04-1998 BY ITA NO.300/AHD/2003 A.Y. 1998-99 PRISM INDS. LTD. V. JCIT(ASSTT) SR-2 BRD PAGE 3 FINANCE ACT, 2005 THE ASSESSEES TURNOVER BEING MOR E THAN RS.10 CRORES. HENCE GROUNDS ARE DISMISSED. 6. THE GROUND NOS.8 TO 10 READ AS UNDER:- 8. LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN CON FIRMING THE ACTION OF AO IN NOT PROPERLY CALCULATING DEDUCTION U/S 80IA OF THE ACT. 9. LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN CONF IRMING THE ACTION OF AO IN NOT GRANTING DEDUCTION U/S.80IA OF THE ACT ON EXPOR T INCENTIVES AND INTEREST ON MARGIN MONEY DEPOSITS PLACED WITH THE BANKS FOR ENJ OYING VARIOUS CREDIT FACILITIES. 10. LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN NOT APPRECIATING THAT THE APPELLANT HAS INCURRED LOSS IN TRADING ACTIVITIES A ND THE SAME HAS BEEN COMPENSATED BY THE PROFIT EARNED FROM THE MANUFACTU RING ACTIVITIES WHILE CALCULATING THE GROSS TOTAL INCOME OF THE BUSINESS AND THEREFORE, GROSS TOTAL INCOME OF THE BUSINESS MUST BE INCREASED TO THE EXT ENT OF LOSS IN TRADING ACTIVITIES TO FIND OUT THE ACTUAL PROFIT FROM ACTIV ITIES OF THE MANUFACTURING AND THUS THE APPELLANT MUST GET ADDITIONAL DEDUCTION U/ S.80IA TO THAT EXTENT SUBMITTED BEFORE LD. CIT(A). 7. THE ASSESSING OFFICER OBSERVED THAT GROSS TOTAL INCOME INCLUDES OTHER INCOME ON ACCOUNT OF EXPORT INCENTIVE AMOUNTING TO RS.38,9 0,874/-, INTEREST RECEIVED OF RS.3,44,559/- AND INSURANCE CLAIM RECEIVED OF RS.2, 66,081/- TOTALING TO RS.45,01,524/-. ACCORDING TO HIM, THESE INCOMES WER E NOT DERIVED FROM THE INDUSTRIAL UNDERTAKING AND THEREFORE DO NOT QUALIFY FOR DEDUCT ION U/S.80IA OF THE ACT. IF THESE INCOMES ARE DEDUCTED FROM THE GROSS TOTAL INCOME, T HE SAME BECOMES NEGATIVE AND HENCE NO DEDUCTION U/S 80IA WAS ALLOWED. HE ALSO OB SERVED THAT ASSESSEE HAS UNDERTAKEN TRADING ACTIVITY IN ADDITION TO BUSINESS OF MANUFACTURING AND SALE FOR WHICH NO SEPARATE ACCOUNTS ARE MAINTAINED AND, THER EFORE TOTAL PROFIT WORKED OUT WAS REQUIRED TO BE PROPORTIONATELY BIFURCATED IN TH E RATIO OF TOTAL TURNOVER ON ACCOUNT OF TRADING AND MANUFACTURING BUSINESS AND ONLY PROF IT DERIVED FROM INDUSTRIAL UNDERTAKING WOULD BE ELIGIBLE FOR DEDUCTION U/S 80I A. BUT IN THE PRESENT CASE, THE GROSS TOTAL INCOME BECAME NEGATIVE HE DID NOT GIVE EFFECT TO HIS ABOVE OBSERVATIONS BECAUSE DEDUCTION U/S.80IA WAS OTHERWISE ALSO NOT A LLOWABLE AS DISCUSSED ABOVE. 8. BEFORE LD. CIT(A) ASSESSEES SUBMISSION WAS THAT EXPORT INCENTIVE ARE NOTHING BUT INDIRECT COMPENSATION FOR VARIOUS TAXES REALIZED ON PRODUCTS BEING EXPORTED AND HENCE IT IS PART AND PARCEL OF THE NOR MAL BUSINESS INCOME. FURTHER, AS PER CIRCULAR NO.572 DATED 03-08-1990 AND CIRCULAR N O.621 DATED 19-12-1991 EXPORT ITA NO.300/AHD/2003 A.Y. 1998-99 PRISM INDS. LTD. V. JCIT(ASSTT) SR-2 BRD PAGE 4 INCENTIVE HAS TO BE TREATED AS PART OF PROFIT IN TH E CASE OF VIKSHARA TRADING & INVESTMENT LTD. 63 TTJ 141 (AHD). THE ITAT AHMEDABAD BENCH HAS HEL D THAT PROFIT ON SALE OF ADVANCE LICENCE OR MATERIALS IMPORTED AN D TRADED OUT OF THAT AS WELL AS INTEREST ON FD, MAINTAINED WITH THE BANK TO OBTAIN LETTER OF CREDIT (L/C FOR SHORT) OR MARGIN MONEY IS ENTITLED FOR DEDUCTION U/S.80IA. FU RTHER, INTEREST RECEIVED ON MARGIN MONEY KEPT WITH THE BANK FOR VARIOUS LIABILITIES AN D L/C IS NOTHING BUT THE BUSINESS INTEREST AS WITHOUT THESE MARGIN DEPOSITS, NO BANK WILL OPEN L/C AND BUSINESS WILL NOT TAKE PLACE. OUT OF INTEREST INCOME OF RS.3,44,5 69/- INTEREST ON SUCH MARGIN AND SECURITY DEPOSITS WAS OF RS.2,93,245/-. THE ASSESSE ES COUNSEL ALSO PLACED RELIANCE IN THE CASE OF ANAND & CO.V. ACIT (1995) 54 ITD 82 (CAL), WHEREIN IT HAS BEEN HELD THAT INTEREST EARNED ON FD KEPT WITH THE BANK ASS S ECURITY FOR AVAILING CREDIT FACILITY HAS TO BE TREATED AS BUSINESS INCOME FOR COMPUTING VARIOUS DEDUCTIONS. IT WAS ALSO CONTENDED THAT IF THE LEGISLATURE HAS ANY INTENTION TO BAR ANY INCOME FOR DEDUCTION U/S 80IA, THE SAME WOULD HAVE BEEN PROVIDED IN THE ACT SPECIFICALLY AS IN THE CASE OF SECTION 80HHC OF THE ACT. IT WAS THEREFORE SUBMITTE D THAT THESE INCOMES ARE TO BE CONSIDERED AS INCOME DERIVED FROM INDUSTRIAL UNDERT AKING AND HENCE QUALIFY FOR DEDUCTION U/S 80IA. LD. CIT(A) HOWEVER, UPHELD THE ORDER OF ASSESSING OFFICER BY OBSERVING AS UNDER:- I HAVE CONSIDERED THE FACTS OF THE CASE AND SUBMIS SIONS OF THE APPELLANTS COUNSEL. IT IS SEEN THAT THE SUPREME COURT IN THE C ASE OF STERLING FOODS LTD. (237 ITR 579) HAS HELD THAT THE IMMEDIATE SOURCE OF EXPORT BENEFITS CAN ONLY BE SAID TO BE THE EXPORT PROMOTION SCHEME OF T HE CENTRAL GOVERNMENT WHEREUPON THE EXPORT BENEFITS IN THE FORM DUTY DRAW BACK AND EXCISE REBATE BECOME ALLOWABLE. THERE MUST BE FOR THE APPLICATION OF THE WORDS DERIVED FROM DIRECT NEXUS BETWEEN THE PROFIT AND GAINS AND THE I NDUSTRIAL UNDERTAKING. IN THAT CASE, THE APEX COURT HELD THAT THE NEXUS BETWEEN THE PROFIT AND GAINS AND THE INDUSTRIAL UNDERTAKING IS NOT DIRECT, BUT INCIDENTAL. IF THE RATIO OF THE CASE IS APPLIED TO THE APPELLANTS CASE, IT CAN BE SAID THAT THE EXPORT BENEFITS EMANATE FROM THE EXPORT INCENTIVE S CHEME OF THE CENTRAL GOVERNMENT AND NOT FROM THE INDUSTRIAL UNDERTAKING AND AS SUCH THE EXPORT INCENTIVES CAN NOT BE SAID TO HAVE BEEN DERIVED FRO M THE INDUSTRIAL UNDERTAKING. THE SIMILAR DECISION HAS BEEN GIVEN BY THE KERALA HIGH COURT IN THE CASE OF A.N.MOOSA (237 ITR 867) WHEREIN IT HAS BEEN HELD THAT INCOME BY WAY OF SALE OF IMPORT LICENSE, EXPORT HOUSE PREMIUM AND CUSTOM DRAW BACK ARE NOT ENTITLED TO DEDUCTION UNDER SECTION 80HH. T HIS DECISION WILL BE EQUALLY APPLICABLE TO SECTION 80IA AS IN BUT THE SECTIONS T HE CLAUSE USED IS DERIVED FROM . HENCE, EXPORT INCENTIVES IN THE APPELLANTS CASE DID NOT QUALIFY FOR DEDUCTION UNDER SECTION 80IA. SIMILARLY, THE INCOME BY WAY OF INTEREST WILL NOT QUALIFY FOR DEDUCTION UNDER SECTION 80IA AS THE SAM E IS INCOME FROM OTHER SOURCE AS HELD BY THE MADRAS HIGH COURT IN THE CASE OF PANDYAN CHEMICALS LTD. (233 ITR 497) WHERE THE HIGH COURT HAS FOLLOWED TH E DECISION OF THE ITA NO.300/AHD/2003 A.Y. 1998-99 PRISM INDS. LTD. V. JCIT(ASSTT) SR-2 BRD PAGE 5 SUPREME COURT IN THE CASE OF CAMBAY ELECTRIC SUPPLY INDUSTRIAL CO. LTD. (113 ITR 84). THE ITAT, AHMEDABAD BENCH FOLLOWING THE SA ID DECISION OF THE MADRAS HIGH COURT HAS TAKEN THE SAME VIEW IN THE CA SE OF J.C. CORPORATION (ITA NO.1853/AHD/1993 DATED 14.6.1999) HENCE THE IN COME BY WAY OF INTEREST WILL ALSO NOT QUALIFY FOR DEDUCTION UNDER SECTION 8 0IA OF THE ACT AS THE SAME CAN NOT BE SAID TO HAVE BEEN DERIVED FROM INDUSTRIA L UNDERTAKING. HENCE THE ACTION OF THE ASSESSING OFFICER IS UPHELD. HOWEVER, THERE IS ANOTHER ASPECT OF THE CASE, WHICH NEEDS TO BE CONSIDERED. THIS ASPECT IS DISCUSSED BELOW:- WHEN THE REPORT OF THE ASSESSING OFFICER DATED 13. 02.2002 INCORPORATING THE RECALCUALTION OF DEDUCTION UNDER SECTION 80HHC WAS FORWARDED TO THE APPELLANT, THE APPELLANT CAME FORW ARD WITH A PLEA THAT IN THE SAID CALCULATION, THE ASSESSING OFFICER HAS CALCULATED PROFIT ON ACCOUNT OF TRADING GOODS AT A NEGATIVE FIGURE OF RS .60,62,999/-. IF THIS BE CONSIDERED, THE DEDUCTION UNDER SECTION 80IA CAN BE CONSIDERED AS UNDER:- (RS) GROSS TOTAL INCOME AS PER COMPUTATION OF INCOME 61,49,340 LESS: AMOUNT OF EXPORT INCENTIVE 38, 90,874 INSURANCE CLAIM 2,66,081 (BOTH THESE DEDUCTIONS DISALLOWED BY THE ASSESSING OFFICER UNDER ASSESSMENT ORDER VIDE PARA NO.6 OF PAGE 3). NET PROFIT 19,92,385 ADD: NET LOSS IN EXPORT TRADING AS COMPUTED BY THE ASSESSING OFFICER VIDE HIS REPORT DATED 13.2.2002 60,62,999 TOTAL PROFIT ON MANUFACTURING AND LOCAL TRADING ACTIVITY 80,55,384 THE TURNOVER OF MANUFACTURING DURING THE YEAR WAS R S.25,45.85 LACS. LOCAL TRADING WAS RS.205.98 LACS. THUS TOTAL TURNOV ER OF MANUFACTURING AS WELL AS LOCAL TRADING WAS RS.2741.83 LACS. IF WE CONSIDER RATIO WISE, MANUFACTURING TURNOVER COMES TO 92.49% AND LOCAL TR ADING COMES TO 7.51% FOR CLAIM UNDER SECTION 80(1)(A). WE REQUEST YOU TO DIVIDE THE PROFIT AS CALCULATED AMOUNTING TO RS.80,55,384/-. T HEN THE PROFIT ATTRIBUTED LOCAL TRADING COMES TO RS.6,05,160 AND FOR MANUFACTURING ACTIVITY IT COMES TO RS.74,50,223/-. THEREFORE, 30% OF RS.74,50,023 OF THAT COMES TO RS.22,35,066/- FOR 80(I)A BENEFITS TO OUR UNIT FOR A.Y. 98- 99. THIS WAS SENT TO THE ASSESSING OFFICER FOR COMMENT, WHO, VIDE HIS REPORT DATED 3.5.2002 COMMENTED AS UNDER:- THE DEDUCTION UNDER SECTION 80HHC IS TO BE ALLOWED TO THE ASSESSEE IN RESPECT OF TRADING GOODS, MANUFACTURING GOODS AND ALSO IN RESPECT OF EXPORT INCENTIVE. ON THE OTHER H AND, DEDUCTION UNDER SECTION 80IA IS TO BE ALLOWED TO THE ASSESSEE IN RESPECT OF PROFITS DERIVED FROM AN INDUSTRIAL UNDERTAKINGS. TH EREFORE, THE ASSESSEES ADDITIONAL GROUND FOR DEDUCTION UNDER SE CTION 80IA OF THE ACT, ON THE BASIS OF THE CALCULATION FORWARD ED TO YOU BY THIS OFFICE LETTER DATED 13.02.2002, MAY NOT BE ENT ERTAINED. ITA NO.300/AHD/2003 A.Y. 1998-99 PRISM INDS. LTD. V. JCIT(ASSTT) SR-2 BRD PAGE 6 6.2 I AGREE WITH THE SUBMISSION OF THE ASSESSING OF FICER SECTION 80HHC IS A CODE IN ITSELF AS HELD BY BOMBAY HIGH COURT IN SHIRKE CONSTRUCTION EQUIPMENTS (246 ITR 429) AND THE CALCULATION MADE UNDER THE S ECTION WILL NOT DETERMINE THE PROFIT OF THE BUSINESS FOR ANY OTHER PURPOSE. FURTHER, WHAT HAS BEEN CALCULATED AS DEDUCTION UNDER SECTION 80HHC IS TOTALLY BASED ON THE FIGURES GIVEN BY THE APPELLANT IN ITS RETURN AND AC COMPANYING DOCUMENTS. SIMILARLY, DEDUCTION UNDER SECTION 80I IS ALSO BASE D ON THE FIGURES GIVEN BY THE APPELLANT IN THE RETURN. NOW, THE APPELLANT CAN NOT CHANGE ITS STAND TO COME TO A DIFFERENT FIGURE OF PROFIT THAN WHAT HAS BEEN SHOWN IN THE RETURN TAKING A CLUE FROM THE CALCULATION OF DEDUCTION UND ER SECTION 80HHC. THE LATER HAS BEEN CALCULATED UNDER A DIFFERENT PROVISI ON WHICH IS INDEPENDENT OF THE OTHER SECTIONS. IT IS ALSO SEEN THAT THE APPELL ANT HAS GOT LOCAL TRADING SALES APART FROM EXPORT OF THE TRADING GOODS IN RESPECT O F WHICH LOSS HAS BEEN CALCULATED UNDER SECTION 80HHC(3). THE APPELLANT HA S NOT KEPT A SEPARATE ACCOUNT FOR LOCAL TRADING SALES AND HENCE IT IS NOT POSSIBLE TO BIFURCATE THE PROFIT FROM MANUFACTURING ACTIVITIES AND TRADING AC TIVITIES BASED ON THE CALCULATION OF DEDUCTION UNDER SECTION 80HHC. HENCE , THIS CONTENTION OF THE APPELLANT CANNOT BE ENTERTAINED. SINCE, LD CIT(A) ORDER CONFIRMING THE ACTION OF ASS ESSING OFFICER IS IN CONFORMITY WITH THE DECISION OF HONBLE APEX COURT IN THE CASE OF CIT V. STERLING FOODS (1999) 237 ITR 579(SC); PANDIAN CHEMICALS LTD. V. CIT (2003) 262 ITR 278 (SC) LIBERTY INDIA V. CIT (2009) 317 ITR 218 (SC) AND THE HONBLE BOMBAY HIG H COURT IN THE CASE OF CIT V. SHIRKE CONSTRUCTION (2000) 246 ITR 429 (BOM) WE FIND NO INFIRMITY IN THE ORDER PASSED BY HIM AND SAME IS HEREBY UPHELD. 9. GROUND NO.11 READ AS UNDER:- 11. LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN HO LDING THAT THE APPELLANT IS NOT ELIGIBLE FOR DEPRECIATION @ 100% ON THE EFFLUEN T TREATMENT PLANT PURCHASED IN EARLIER YEARS AND FURTHER ERRED IN LAW IN NOT GRANTING DEDUCTION @ 100% ON THE BUILDING USED AS INTEGRATED PART FOR TH E PURPOSES OF EFFLUENT TREATMENT PLANT. 10. AT THE TIME OF HEARING LD. COUNSEL FOR THE ASSE SSEE FAIRLY CONCEDED THAT THIS GROUND HAS BEEN DECIDED AGAINST THE ASSESSEE DURING THE ASSESSMENT YEAR 1996-97 BY THE TRIBUNAL IN ITA NO.1696/AHD/2002 DATED 30-04-2010, WHEREIN FOLLOWING WAS HELD:- AS REGARDS CLAIM OF THE ASSESSEE FOR 100% DEPRECI ATION ON WDV OF EFFLUENT TREATMENT PLANT AS AT THE BEGINNING OF THE YEAR, WE FIND THAT THE CLAIM OF THE ASSESSEE FOR DEPRECIATION WAS ALLOWED AS SUCH IN TH E PRECEDING ASSESSMENT YEAR. THE LD. CIT(A) HAS NO POWERS TO GIVE FINDINGS AND DIRECTIONS IN RESPECT OF THE YEAR/PERIOD WHICH IS NOT IN APPEAL BEFORE HI M. SINCE THE RELEVANT FACTS AND CIRCUMSTANCES FOR THE PRECEDING ASSESSMENT YEAR WERE NOT BEFORE THE ITA NO.300/AHD/2003 A.Y. 1998-99 PRISM INDS. LTD. V. JCIT(ASSTT) SR-2 BRD PAGE 7 LOWER AUTHORITIES NOR WERE SUBJECT MATTER OF APPEAL BEFORE THE LD. CIT(A) AND EVEN BEFORE US, WE ARE OF THE OPINION THAT THE LD. CIT(A) RIGHTLY DID NOT ENLARGE THE SCOPE OF APPEAL BEFORE HIM. THEREFORE THIS GROU ND OF THE ASSESSEE IS DISMISSED. IN VIEW OF THE ABOVE THIS GROUND OF ASSESSEES APPE AL IS DISMISSED. 11. GROUND NO.12 READS AS UNDER:- 12. LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN CO NFIRMING THE ACTION OF AO IN DISALLOWING THE PAYMENT OF PF AND PFP OF RS.1,73,90 0/- AND ESI OF RS.2,51,646/- U/S 43B OF THE ACT. 12. AT THE TIME OF HEARING BOTH THE PARTIES HAVE AG REED THAT THE ISSUE IS NOW COVERED IN FAVOUR OF ASSESSEE BY THE DECISION OF HO NBLE DELHI HIGH COURT IN THE CASE OF CIT V. AIMIL LTD. (2010) 321 ITR 508 (DEL), WHEREIN THE DELETION WIT H EFFECT FROM APRIL 1, 2004 BY THE FINANCE ACT, 2003 OF THE SECOND PROVISO TO SECTION 43B OF THE INCOME-TAX AT, 1961, WHICH STIPULATES THAT CONT RIBUTIONS TO THE PROVIDENT FUND AND EMPLOYEES STATE INSURANCE FUND SHOULD BE MADE WITHI N THE TIME MENTIONED IN SECTION 36(1)(VA), THAT IS, THE TIME ALLOWED UNDER THE EMPLOYEES PROVIDENT FUNDS AND MISCELLANEOUS PROVISIONS ACT, 1952, AS WELL AS THE EMPLOYEES STATE INSURANCE ACT, 1948, IS TREATED AS RETROSPECTIVE IN NATURE. I F THE EMPLOYEES CONTRIBUTION IS NOT DEPOSITED BY THE DUE DATE PRESCRIBED UNDER THE RELE VANT ACTS AND IS DEPOSITED THEREAFTER, THE EMPLOYER NOT ONLY PAYS INTEREST ON DELAYED PAYMENT BUT CAN INCUR PENALTIES ALSO, FOR WHICH SPECIFIC PROVISIONS ARE M ADE IN THE THOSE ACTS. IN SO FAR AS THE INCOME-TAX ACT, 1961, IS CONCERNED, THE ASSESSE E CAN GET THE BENEFIT OF DEDUCTION OF THE PAYMENTS, IF THE ACTUAL PAYMENT IS MADE BEFORE THE RETURN IS FILED. WHERE FOR THE ASSESSMENT YEAR 2002-03 THE ASSESSEE HAD DEPOSITED EMPLOYERS CONTRIBUTION AS WELL AS EMPLOYEES CONTRIBUTION TOW ARDS PROVIDENT FUND AND ESI AFTER THE DUE DATE, AS PRESCRIBED UNDER THE RELEVANT ACT/ RULES BUT BEFORE THE DUE DATE FOR FILING THE RETURN UNDER THE INCOME-TAX ACT, IT WAS HELD THAT NO DISALLOWANCE COULD BE MADE IN VIEW OF THE PROVISIONS OF SECTION 43B AS AM ENDED BY FINANCE ACT, 2003. SINCE IN THE INSTANT CASE ALSO ALL PAYMENTS WERE MA DE BEFORE DUE DATE OF FILING OF RETURN OF INCOME DISALLOWANCE MADE BY ASSESSING OFF ICER AND SUSTAINED BY LD. CIT(A) IS NOT SUSTAINABLE IN LAW AND SAME IS HEREBY DELETED. THIS GROUND OF ASSESSEES APPEAL IS ALLOWED. ITA NO.300/AHD/2003 A.Y. 1998-99 PRISM INDS. LTD. V. JCIT(ASSTT) SR-2 BRD PAGE 8 13. GROUNDS NO.13 READS AS UNDER:- 13. BOTH THE LOWER AUTHORITIES HAVE ERRED IN LAW A ND ON FACTS IN PASSING THE ORDERS WITHOUT PROPERLY APPRECIATING THE FACT AND F URTHER ERRED IN GROSSLY IGNORING VARIOUS SUBMISSIONS, EXPLANATIONS AND INFO RMATION SUBMITTED BY THE APPELLANT FROM TIME TO TIME WHICH OUGHT TO HAVE BEE N CONSIDERED BEFORE PASSING THE IMPUGNED ORDERS 14. THIS GROUND IS GENERAL IN NATURE DOES NOT REQUI RE ANY ADJUDICATION. 15. GROUND NO.14 READS AS UNDER:- 14. LD. CIT(A) HAS ERRED IN LAW IN CONFIRMING THE LEVY OF INTEREST U/S.234A/B/C OF THE ACT. 16. THIS GROUND IS CONSEQUENTIAL IN NATURE AND DOES NOT REQUIRE ANY ADJUDICATION. 17. GROUND NO.15 READS AS UNDER:- 15. LD. CIT(A) HAS ERRED IN LAW IN CONFIRMING THE INITIATION OF PENALTY PROCEEDINGS U/S.271(1)(C) OF THE ACT. 18. THIS GROUND IS NOT MAINTAINABLE AND IS DISMISSE D. 19. IN THE RESULT, ASSESSEES APPEAL IS PARTLY ALLOWED . ORDER PRONOUNCED ON THIS DAY OF 19 TH MAY, 2011 SD/- SD/- ( G.D.AGARWAL ) ( D.K. TYAGI ) (VICE PRESIDENT) (JUDICIAL MEMBER) AHMEDABAD, DATED : 19/05/2011 *DKP COPY OF THE ORDER FORWARDED TO :- 1. THE ASSESSEE. 2. THE REVENUE. 3. THE CIT(APPEALS)- III, BARODA 4. THE CIT CONCERNS. 5. THE DR, ITAT, AHMEDABAD 6. GUARD FILE. BY ORDER, /TRUE COPY/ DEPUTY / ASSTT.REGISTRAR ITAT, AHMEDABAD