DANGAT MEDIA P. LTD, MUMBAI V. ITO 1(1)(2), MUMBAI

ITA 3046/MUM/2011

• Counselvise Citation: 304619914 RSA 2011
• Duration Of Justice: 1 year(s) 1 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-05-2012
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Next Hearing Date: 24-05-2012
• Assessment Year: 2007-2008
• Appeal Filed On: 18-04-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: C G K NAIR
• Assessee Lawyers: VIJAY MEHTA
• Section: 43B; 143(3); 194C

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, MUMBAI BEFORE SHRI J. SUDHAKAR REDDY, ACCOUNTANT MEMBER, A ND SHRI R.S. PADVEKAR, JUDICIAL MEMBER ITA NO. 3046/MUM./2011 (ASSESSMENT YEAR : 200708 ) M/S. DANGAT MEDIA P. LTD. 1 ST FLOOR, DANGAT SADAN 63, MODI STREET, FORT MUMBAI 400 001 PAN AACCD2611F .. APPELLANT V/S INCOME TAX OFFICER WARD1(1)(2), MUMBAI .... RESPONDENT ASSESSEE BY : MR. VIJAY MEHTA REVENUE BY : MR. C.G.K. NAIR DATE OF HEARING 24.05.2012 DATE OF ORDER 24.05.2012 O R D E R PER J. SUDHAKAR REDDY THE PRESENT APPEAL PREFERRED BY THE ASSESSEE, IS DI RECTED AGAINST IMPUGNED ORDER DATED 8 TH NOVEMBER 2010, PASSED BY THE COMMISSIONER (APPEALS)I, MUMBAI, FOR ASSESSMENT YEARS 200708. 2. FACTS IN BRIEF: THE ASSESSEE, A COMPANY, IS ENGAGE D IN THE BUSINESS OF PRINTING OF NEWSPAPERS AND PERIODICALS. IT FILED ITS RETURN OF INCOME DECLARING TOTAL INCOME AT ` NIL ON 30 TH OCTOBER 2007. THE ASSESSING OFFICER PASSED AN ORDER UNDER SECTION 143(3) OF THE INCOME TAX ACT, 1961 (FOR SHORT M/S. DANGAT MEDIA P. LTD. 2 THE ACT) ON 29 TH DECEMBER 2009. HE MADE DISALLOWANCE UNDER SECTION 40(A)(IA) AND UNDER SECTION 43B OF THE ACT. 3. AGGRIEVED, THE ASSESSEE CARRIED THE MATTER BEFORE T HE FIRST APPELLATE AUTHORITY, WHEREIN THE COMMISSIONER (APPEALS) GRANT ED PART RELIEF. FURTHER AGGRIEVED, THE ASSESSEE IS IN APPEAL BEFORE THE TRI BUNAL, ON THE FOLLOWING GROUNDS: 1. THE ASSESSING OFFICER HAS ERRED IN DISALLOWING ` 19,13,123 UNDER SECTION 40(A)(IA) OF THE ACT. 2. THE ASSESSING OFFICER HAS ERRED IN DISALLOWING ` 31,05,699, UNDER SECTION 43B OF THE ACT. 4. WE HAVE HEARD THE LEARNED COUNSEL, MR. VIJAY MEHTA, REPRESENTING THE ASSESSEE AND THE LEARNED DEPARTMENTAL REPRESENTATIV E, MR. 5. ON THE FIRST GROUND, THE BASIS OF DISALLOWANCE IS B ROUGHT OUT AT PARA 5.4/PAGE4 OF THE ASSESSMENT ORDER, WHICH IS EXTRAC TED BELOW FORE READY REFERENCE: 5.4 IT IS OBSERVED FROM THE PARTY-WISE DETAILS OF P URCHASES THAT THE FOLLOWING PARTIES HAVE SUPPLIED GRAPHIC MATERIAL, V ULCAN PLATES, TAURAS PLATES ETC. WHICH INCLUDES THE SUPPLIES AS PER CUST OMER SPECIFICATION. FOR EXAMPLE, THE SPECIFICATIONS OF VULCAN PLATES AR E AS UNDER: THESE ARE MEDIUM RUN ECONOMY PLATES USED IN MID-RAN GE SHEET-FED AND WEB-OFFSET PRINTING. THE FEATURES OF THIS PLATE S INCLUDES PRINTED IDENTIFICATION NUMBER FOR QUALITY ASSURANCE, DEPEND ABLE RUN LENGTH OF UPTO 50000 IMPRESSIONS, STRONG IMAGE CONTRAST, WIDE EXPOSURE AND DEVELOPMENT LATITUDE, RESISTANCE TO PRESS CHEMICALS ETC. THESE PLATES COMES WITH PRODUCT SPECIFICATION LIKE PLATE TYPE, S UBSTRATE, GAUGE, MAXIMUM WIDTH, SAFE LIGHT, SPECTRAL SENSITIVITY, RE COMMENDED UGRA, RECOMMENDED STOUFFER, MICRO-LINES RESOLUTION, COLOU R CHANGE, STORAGE & HANDLING, SHELF-LIFE ETC. FOR EXAMPLE, THE SPECIFICATIONS OF TAURAS PLATES AR E AS UNDER: THESE ARE MEDIUM RUN ECONOMY PLATES USED IN MID-RAN GE SHEET-FED ARID WEB-OFFSET PRINTING. THE FEATURES OF THESE PLA TES INCLUDES PRINTED IDENTIFICATION NUMBER FOR QUALITY ASSURANCE, DEPEND ABLE RUN LENGTH OF UPTO 150000 IMPRESSIONS, STRONG IMAGE CONTRAST, WID E EXPOSURE AND DEVELOPMENT LATITUDE, RESISTANCE TO PRESS CHEMICALS ETC. THESE PLATES COMES WITH PRODUCT SPECIFICATION LIKE PLATE TYPE, S UBSTRATE, GAUGE, MAXIMUM WIDTH, SAFE LIGHT, SPECTRAL SENSITIVITY, RE COMMENDED UGRA, M/S. DANGAT MEDIA P. LTD. 3 RECOMMENDED STOUFFER, MICRO-LINES RESOLUTION, COLOU R CHANGE, STORAGE & HANDLING, SHELF-LIFE ETC. 6. THE ASSESSEE HAS FILED A PAPER BOOK RUNNING INTO 69 PAGES. IT CONTAINS COPIES OF BILLS / INVOICES OF PURCHASES MADE BY THE ASSESSEE. A PERUSAL OF PARA5.4 OF THE ASSESSMENT ORDER, MAKES IT CLEAR TH AT IT IS A CASE WHERE ALL GOODS PURCHASED, ARE HAVING CERTAIN FEATURES AND CE RTAIN SPECIFICATIONS. THIS IS NOT A CASE WHERE GOODS ARE TAYLOR MADE TO SUIT T HE REQUIREMENTS OF THE ASSESSEE. IN FACT, NO MATERIALS WERE SUPPLIED BY TH E ASSESSEE FOR MANUFACTURING OF THE PRODUCT PURCHASED. IN FACT, TH E DEFINITION OF THE WORD WORK , AS APPEARING IN SUBCLAUSE (IV)(E) OF EXPLANATION BELOW SECTION 194C, READS AS FOLLOWS: MANUFACTURING OR SUPPLYING A PRODUCT ACCORDING TO T HE REQUIREMENT OR SPECIFICATION OF A CUSTOMER BY USING MATERIAL PURCH ASED FROM SUCH CUSTOMER; BUT DOES NOT INCLUDE MANUFACTURING OR SUPPLYING A P RODUCT ACCORDING TO THE REQUIREMENT OR SPECIFICATION OF A CUSTOMER B Y USING MATERIAL PURCHASED FROM A PERSON OTHER THAN SUCH CUSTOMER. 7. THUS, ON FACTS, IT IS CLEAR THAT THIS IS A CASE OF PURCHASE OF GOODS OF CERTAIN SPECIFICATION AND FEATURES AND NOT A CASE O F A WORK CONTRACT. THEREFORE, PROVISIONS OF SECTION 194C IS NOT ATTRAC TED AND THE QUESTION OF DISALLOWANCE UNDER SECTION 40(A)(IA) DOES NOT ARISE . CONSEQUENTLY, THE GROUND RAISED BY THE ASSESSEE IS ALLOWED. 8. GROUND NO.2, IS ON THE DISALLOWANCE UNDER SECTION 4 3B OF THE ACT. THE ASSESSEE HAS OBTAINED A TERM LOAN FROM THE MAHANAGA R COOPERATIVE BANK LTD., FORT BRANCH. IT HAD ALSO OBTAINED AN OVER DRA FT FACILITY. THE BANK DEBITED THE TERM LOAN ACCOUNT PERIODICALLY WITH INT EREST DUE AND THEREAFTER CREDITED THE TERM LOAN ACCOUNT WITH INTEREST AS REC EIVED BY DEBITING THE OVER DRAFT ACCOUNT IN THE BANK. IN EFFECT, THE TERM LOAN INTEREST WAS PAID BY DEBITING THE OVERDRAFT ACCOUNT. THE ASSESSING OFFIC ER HELD THIS TO BE A CONVERSION OF INTEREST LIABILITY INTO A LOAN OR ADV ANCE AND, HENCE, NOT LIABLE FOR DEDUCTION UNDER SECTION 43B. M/S. DANGAT MEDIA P. LTD. 4 9. AFTER CONSIDERING THE ARGUMENTS OF BOTH THE SIDES, WE FIND THAT THE OVER DRAFT ACCOUNT IN QUESTION HAS A POSITIVE BALAN CE AS ON 31 ST JULY 2007. THUS, PRIOR TO THE DUE DATE OF FILING OF THE RETURN OF INCOME, THE ASSESSEE HAS REPAID THE BANK NOT ONLY THE INTEREST ON THE TERM LOAN BUT ALSO THE INTEREST ON THE OVER DRAFT ACCOUNT AS WELL AS THE PRINCIPAL AMOUNT IN THE OVER DRAFT ACCOUNT. ON THESE FACTS, WE HAVE TO NECESSARILY ALL OW THE CLAIM OF THE ASSESSEE. 10. AS ON FACTS, WE HAVE ALLOWED THE CLAIM OF THE ASSES SEE, WE DO NOT WISH TO CONSIDER THE OTHER ARGUMENTS THAT THIS IS NOT A CASE OF CONVERSION THAT NO DISALLOWANCE CAN BE MADE AS INTEREST ON OVERDRAFT, ETC. CONSEQUENTLY, THIS GROUND OF THE ASSESSEE IS ALLOWED. 11. IN THE RESULT, ASSESSEES APPEAL IS ALLOWED ORDER PRONOUNCED IN THE OPEN COURT ON 24 TH MAY 2012. SD/- R.S. PADVEKAR JUDICIAL MEMBER SD/- J. SUDHAKAR REDDY ACCOUNTANT MEMBER MUMBAI, DATED: 24 TH MAY 2012 COPY TO : (1) THE ASSESSEE; (2) THE RESPONDENT; (3) THE CIT(A), MUMBAI, CONCERNED; (4) THE CIT, MUMBAI CITY CONCERNED; (5) THE DR, D BENCH, ITAT, MUMBAI. TRUE COPY BY ORDER PRADEEP J. CHOWDHURY ASSISTANT REGISTRAR SR. PRIVATE SECRETARY ITAT, MUMBAI BENCHES, MUMBAI