RICOH INDIA LTD, MUMBAI V. DCIT CIR 3(3), MUMBAI

ITA 3145/MUM/2012

• Counselvise Citation: [2013] 120 COUNSELVISE.COM (IT) 5034 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 4 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-09-2013
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: D
• Assessment Year: 2006-2007
• Appeal Filed On: 08-05-2012
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: KISHAN VYAS
• Assessee Lawyers: R SANTHAN AM; SUR ESH MALIK
• Keywords: Opportunity of being heard; Revised return
• Section: 37(1); 6

Judgement Text

, , , , , IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES D, MUMBAI .. , ! ' # , $ ', % BEFORE SHRI R.S.SYAL, AM AND SHRI VIVEK VARMA, JM ITA NO.3145/MUM/2012 : ASST.YEAR 2006-2007 ITA NO.3146/MUM/2012 : ASST.YEAR 2007-2008 M/S.RICOH INDIA LIMITED 1201, FIRST FLOOR, BUILDING NO.12 SOLITAIRE CORPORATE PARK ANDHERI GHATKOPAR LINK ROAD ANDHERI (EAST), MUMBAI 400 093. PAN : AAACR4151J. THE DY.COMMISSIONER OF INCOME-TAX CIRCLE 3(3) MUMBAI. ( &' / // / APPELLANT) ) ) ) ) / VS. ( *+&'/ RESPONDENT) &' , ,, , - - - - / APPELLANT BY : S/SHRI R.SANTHANAM & SURESH MALIK *+&' , - , - , - , - / RESPONDENT BY : SHRI KISHAN VYAS ) , .! / / / / DATE OF HEARING : 11.09.2013 /01 , .! / DATE OF PRONOUNCEMENT : 13.09.2013 ' 2 ' 2 ' 2 ' 2 / / / / O R D E R PER R.S.SYAL (AM) : THESE TWO APPEALS BY THE ASSESSEE RELATING TO THE A SSESSMENT YEARS 2006-2007 AND 2007-2008 INVOLVE SOME COMMON I SSUES. WE ARE, THEREFORE, PROCEEDING TO DISPOSE THEM OFF BY T HIS CONSOLIDATED ORDER FOR THE SAKE OF CONVENIENCE. ASSESSMENT YEAR 2006-2007 2. FIRST GROUND IS AGAINST THE CONFIRMATION OF DISA LLOWANCE OF ` 2,31,918. BRIEFLY STATED THE FACTS OF THIS GROUND A RE THAT THE ASSESSEE INCURRED EXPENSES OF ` 2,89,898 ON ACCOUNT OF SHARE ISSUE EXPENSES AND CLAIMED DEDUCTION FOR THIS SUM IN ENTIRETY. ON BEING CALLED UPON ITA NOS.3145 & 3146/MUM/2012. M/S.RICOH INDIA LIMITED. 2 TO EXPLAIN AS TO WHY SUCH EXPENSES SHOULD NOT BE PA RTLY DISALLOWED, THE ASSESSEE SUBMITTED THAT IN PURSUANCE TO THE SCH EME OF AMALGAMATION OF GESTETNER INDIA LIMITED (GIL) WITH RICOH INDIA LIMITED (RIL) AS APPROVED BY THE HONBLE BOMBAY AN D CALCUTTA HIGH COURTS, ONE SHARE IN GIL WAS ALLOTTED SIX EQUI TY SHARES TO RIL. THE SAID EXPENDITURE OF ` 2.89 LAKH WAS CLAIMED TO HAVE BEEN INCURRED ON ACCOUNT OF ISSUANCE OF SHARE CERTIFICAT ES OF RIL TO THE ERSTWHILE SHAREHOLDERS OF GIL. IT WAS, THEREFORE, C LAIMED THAT THE ENTIRE EXPENDITURE SHOULD BE ALLOWED AS DEDUCTION U /S 37(1) OF THE ACT. THE ASSESSING OFFICER DID NOT ACCEPT THE ASSES SEES CONTENTION AND HELD THAT ONLY A SUM OF ` 57,980 WAS DEDUCTIBLE U/S 35DD. RESULTANTLY THE REMAINING AMOUNT OF ` 2,31,918 WAS DISALLOWED TO BE AMORTIZED IN SUBSEQUENT FOUR YEARS. NO RELIEF WAS A LLOWED IN THE FIRST APPEAL. 3. AFTER CONSIDERING THE RIVAL SUBMISSIONS AND PERU SING THE RELEVANT MATERIAL ON RECORD, WE FIND THAT THE ASSES SEE INCURRED THE EXPENDITURE OF ` 2.89 LAKH ON ISSUANCE OF SHARES. BY NO STANDARD THI S EXPENDITURE CAN BE CONSIDERED AS REVENUE. SINCE THE ASSESSING OFFICER HIMSELF HAS ALLOWED DEDUCTION U/S 35DD AT T HE RATE OF 1/5 TH OF THE TOTAL EXPENSES, WE HOLD THAT NO FURTHER RELIEF CAN BE ALLOWED. THIS GROUND IS, THEREFORE, NOT ALLOWED. 4. SECOND GROUND IS AGAINST THE CONFIRMATION OF DIS ALLOWANCE OF ` 1,11,918 ON ACCOUNT OF POSTAL EXPENSES INCURRED IN RELATION ISSUANCE OF SHARES. THE ASSESSEE CLAIMED EXPENDITURE OF ` 1,31,718 AS ITA NOS.3145 & 3146/MUM/2012. M/S.RICOH INDIA LIMITED. 3 DEDUCTIBLE U/S 37(1). THE ASSESSING OFFICER ALLOWED DEDUCTION U/S 35DD AT 1/5 TH OF THE EXPENSE AND DISALLOWED THE REMAINING PART . THE LEARNED CIT(A) CONFIRMED THE ORDER ON THIS ISSUE. 5. WE HAVE HEARD THE RIVAL SUBMISSIONS. SUCH P OSTAL EXPENSES WERE INCURRED IN RELATION TO THE ISSUE OF SHARES, B EING THE SUBJECT MATTER OF GROUND NO.1, WHICH HAS BEEN DISMISSED BY US ABOVE. FOLLOWING THE SAME VIEW, WE APPROVE THE IMPUGNED OR DER ON THIS SCORE. 6. GROUND NOS. 3 TO 8 ARE AGAINST THE DENIAL OF DEP RECIATION ON GOODWILL AND OTHER EXPENSES, THE CLAIM FOR WHICH W AS LODGED FOR THE FIRST TIME DURING THE COURSE OF ASSESSMENT PROCEEDI NGS. THE ASSESSEE FILED REVISED COMPUTATION OF TOTAL INCOME CLAIMING CERTAIN ADDITIONAL DEDUCTIONS INCLUDING DEDUCTION ON ACCOUNT OF AMORTI ZATION OF GOODWILL AMOUNTING TO ` 3,58,16,000. THE ASSESSING OFFICER REFUSED TO ADMIT SUCH CLAIM FOR DEDUCTIONS CLAIMED THROUGH REVISED COMPUTATION IN VIEW OF THE JUDGMENT OF THE HONBLE SUPREME COURT IN THE CASE OF GOETZE (INDIA) LTD. V. CIT [(2006) 284 ITR 323 (SC) ] . THE LEARNED CIT(A) APPROVED THE ACTION TAKEN BY THE ASSESSING OFFICER. 7. AFTER CONSIDERING THE RIVAL SUBMISSIONS AND PERU SING THE RELEVANT MATERIAL ON RECORD, WE FIND THAT THE HONB LE SUPREME COURT IN GOETZE (INDIA) LTD. (SUPRA) HAS HELD THAT THE AO CANNOT ENTERTAIN A CLAIM MADE OTHERWISE THAN BY WAY OF REVISED RETURN. THE HONBLE ITA NOS.3145 & 3146/MUM/2012. M/S.RICOH INDIA LIMITED. 4 SUPREME COURT IN PARA 4 OF THE SAME JUDGMENT HAS CL ARIFIED THE POSITION BY FURTHER HOLDING : HOWEVER, WE MAKE IT CLEAR THAT THE ISSUE IN THIS CASE IS LIMITED TO THE POWER OF THE A SSESSING AUTHORITY AND DOES NOT IMPINGE ON THE POWER OF THE INCOME-TAX APPELLATE TRIBUNAL U/S 254 OF THE INCOME-TAX ACT, 1961. FROM THIS JUDGMENT IT IS OBVIOUS THAT THE RESTRICTION HAS BEEN PLACED ON THE ASSESSING OFFICER FOR NOT ENTERTAINING ANY CLAIM FOR DEDUCTIO N OTHERWISE THAN BY FILING A REVISED RETURN AND NOT ON THE APPELLATE AU THORITIES. WE, THEREFORE, SET ASIDE THE IMPUGNED ORDER AND REMIT T HE MATTER TO THE FILE OF THE ASSESSING OFFICER FOR DECIDING THE QUESTION OF DEDUCTIBILITY OR OTHERWISE IN RESPECT OF SUCH FRESH CLAIMS AS PER LA W AFTER ALLOWING A REASONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESS EE. 8. 3 .4 5 6, 78 9 : :2 . , ;. <= > IN THE RESULT, THE APPEAL IS PARTLY ALLOWED FOR STATISTICA L PURPOSES. ASSESSMENT YEAR 2007-2008 9. FIRST GROUND OF THE APPEAL IS AGAINST THE CONFIR MATION OF DISALLOWANCE OF ` 1,29,855 WRITTEN OFF IN RESPECT OF SECURITY DEPOSIT S NOT RECOVERABLE. THE ASSESSEE CLAIMED DEDUCTION FOR THIS AMOUNT. THE ASSESSING OFFICER OBSERVED THAT THIS DEDUCTION WAS NOT PERMISSIBLE BECAUSE THE AMOUNT WAS GIVEN AS DEPOSIT TO GOVERNME NT TOWARDS ELECTRICITY DEPOSITS ETC. HE, THEREFORE, REFUSED TO ALLOW DEDUCTION. THE LEARNED CIT(A) UPHELD THE ASSESSMENT ORDER ON T HIS ISSUE. ITA NOS.3145 & 3146/MUM/2012. M/S.RICOH INDIA LIMITED. 5 10. AFTER CONSIDERING THE RIVAL SUBMISSIONS AND PER USING THE RELEVANT MATERIAL ON RECORD, WE FIND THAT DETAIL OF SUCH DEPOSITS WRITTEN OFF IS PLACED AT PAGE 78 OF THE PAPER BOOK. MAJOR AMOUNT IS AGAINST DEPOSITS GIVEN TO ELECTRICITY BOARD; TO COL LECTOR OF CUSTOM AGAINST IMPORT CLEARANCE; TO INDIAN OIL CORPORATION AGAINST GAS CYLINDERS; AND TO POSTS & TELEGRAPHS DEPARTMENT AG AINST TELEPHONE CONNECTIONS. EXCEPT FOR SOME MINOR AMOUNTS INCLUDED IN THIS SUM, THE LARGER CHUNK REPRESENTS DEPOSITS GIVEN TO THE G OVERNMENT DEPARTMENTS / PSUS. ON A SPECIFIC QUERY RAISED FROM THE BENCH, THE LEARNED AR CONCEDED THAT THE BUSINESS OF THE ASSESS EE-COMPANY WAS CONTINUING. WE FAIL TO UNDERSTAND THE RATIONALE IN CLAIMING DEDUCTION FOR SECURITY DEPOSITS GIVEN DURING THE CURRENCY OF BUSINESS TO VARIOUS GOVERNMENT DEPARTMENTS. WHEN THE BUSINESS IS GOING ON AND THE ELECTRICITY AND OTHER FACILITIES AS PROVIDED AGAINS T SUCH SECURITY DEPOSITS ARE BEING USED, HOW THESE DEPARTMENTS CAN REFUND THE SECURITY DEPOSIT GIVEN AT THE TIME OF INSTALLATION OF METERS OR AVAILING THE FACILITY. THE ASSESSEE HAS WRITTEN OFF THE SAID AMOUNT BY CLAIMING IT TO BE IRRECOVERABLE, WHICH IN OUR CONSIDERED OPI NION, IS NOT ACCEPTABLE. ONE CANNOT ACCEPT THAT THE GOVERNMENT H AS FAILED TO REFUND ANY SUM LEGITIMATELY BECOMING DUE TO ITS CIT IZENS. WHEN THE AMOUNT HAS NOT BECOME DUE FOR REFUND BECAUSE OF THE CONTINUATION OF BUSINESS, HOW THE ASSESSEE BECOMES ENTITLED TO ITS REFUND, IS BEYOND OUR COMPREHENSION. UNDER SUCH CIRCUMSTANCES, WE ARE OF THE CONSIDERED OPINION THAT THE AUTHORITIES BELOW WERE JUSTIFIED IN REFUSING DEDUCTION FOR SUCH AMOUNT ON A MERE WRITE OFF. ITA NOS.3145 & 3146/MUM/2012. M/S.RICOH INDIA LIMITED. 6 11. SECOND GROUND IS AGAINST THE CONFIRMATION OF DI SALLOWANCE OF ` 8,59,952 IN RESPECT OF CUSTOM DUTY DRAW BACK NOT RE COVERABLE. HERE ALSO THE FACTS ARE ALMOST SIMILAR TO THE FIRST GROU ND. THE ASSESSEE WROTE OFF THIS SUM DUE FROM GOVERNMENT BEING DUTY D RAW BACK. NO MATERIAL HAS BEEN PLACED ON RECORD TO SHOW AS TO HO W THE AMOUNT OF DUTY DRAW BACK BECAME IRRECOVERABLE FROM GOVERNMENT . FOLLOWING THE VIEW TAKEN HEREINABOVE IN RESPECT OF GROUND NO. 1, WE APPROVE THE LEARNED CIT(A)S OPINION ON THIS GROUND AS WELL. TH IS GROUND IS ALSO NOT ALLOWED. 12. THIRD GROUND IS AGAINST THE CONFIRMATION OF DIS ALLOWANCE OF ` 13,19,872 IN RESPECT OF TAX DEDUCTED AT SOURCE FOR WHICH TDS CERTIFICATES WERE NOT RECEIVED FROM PARTIES. THE AS SESSEE CLAIMED DEDUCTION FOR THIS SUM ON WRITING OFF THE AMOUNT OF TDS RECEIVABLE BY CONTENDING THAT IT WAS NOT IN A POSITION TO RECO VER THE TDS CERTIFICATE FROM THE PARTIES, WHO DEDUCTED TAX AT S OURCE. IT WAS CLAIMED THAT THIS AMOUNT WAS NOTHING BUT SHORT RECO VERY OF THE REVENUE RECEIPTS FROM THE PAYERS. THE A.O. REFUSED THIS CLAIM ON THE GROUND THAT IT WAS NOTHING BUT PAYMENT OF INCOME TA X WHICH CANNOT BE ALLOWED AS DEDUCTION. THE LEARNED CIT(A) APPROVE D THE ACTION OF THE A.O. 13. HAVING HEARD THE RIVAL SUBMISSIONS AND PERUSED THE RELEVANT MATERIAL ON RECORD, WE FIND THAT THE CLAIM OF THE A SSESSEE IS THAT CERTAIN PARTIES MADE PAYMENTS TO THE ASSESSEE AFTER DEDUCTION OF TAX AT SOURCE, BUT FAILED TO ISSUE TDS CERTIFICATES AND HE NCE THE AMOUNT OF ITA NOS.3145 & 3146/MUM/2012. M/S.RICOH INDIA LIMITED. 7 TDS CERTIFICATES NOT RECOVERED SHOULD BE ALLOWED AS DEDUCTION AS BUSINESS LOSS. WE ARE NOT CONVINCED WITH THIS SUBMI SSION BECAUSE THE PARTIES, ON DEDUCTION OF TAX AT SOURCE, MADE THE PA YMENT TO THE ASSESSEE FOR THE REMAINING AMOUNT AND DULY DEPOSITE D TAX AT SOURCE WITH THE TREASURY. ONCE THE ASSESSEE RECEIVED THE N ET AMOUNT AND FURTHER THE AMOUNT OF TDS CERTIFICATES ALSO STOOD D EPOSITED IN THE GOVERNMENT EXCHEQUER, THE POSITION OF THE ASSESSEE VIS--VIS THE PARTIES STANDS NEUTRALIZED AS NOTHING REMAINS DUE F ROM THEM. IN SUCH A SITUATION, THERE CAN BE NO QUESTION OF INCURRING ANY BUSINESS LOSS OR TREATING THE AMOUNT OF TDS CERTIFICATES NOT RECEIVE D AS SHORT RECEIPTS. SINCE THIS AMOUNT REPRESENTS TAX DEDUCTED AT SOURCE BY THE PARTIES ON BEHALF OF THE ASSESSEE, THE SAME IS IN THE NATURE O F TDS RECEIVABLE. IT IS SETTLED POSITION THAT TAX PAYMENT IS NOT A CHARG E AGAINST BUT APPLICATION OF INCOME. THAT IS WHY SECTION 40(A)(II ) CLEARLY PROVIDES THAT ANY SUM PAID ON ACCOUNT OF TAXES ON THE PROFIT S OR GAINS OF ANY BUSINESS OR PROFESSION, IS NOT DEDUCTIBLE. THE HON BLE SUPREME COURT IN THE CASE OF BHARAT COMMERCE AND INDUSTRIES LTD. V. CIT [(1998) 230 ITR 733 (SC)] AND THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT V. GHATKOPAR ESTATE AND FINANCE CORPORATION PVT . LTD. [(1989) 177 ITR 222 (BOM.)] HAVE HELD THAT THAT EVEN THE EXPENDITURE INCURRED ON INTEREST PAID TO INCOME-TAX DEPARTMENT FOR DELAYED PAYMENT OF INCOME-TAX IS NOT ALLOWABLE AS DEDUCTION . EVEN OTHERWISE, EXCEPT FOR INTERNAL DOCUMENTS, THERE IS NO MATERIAL ON RECORD TO INDICATE AS TO WHY SO MANY PARTIES REFUSE D TO ISSUE TDS CERTIFICATES TO THE ASSESSEE AFTER DULY DEDUCTING T HE SAME. NO REASON WORTH THE NAME HAS BEEN STATED AS TO WHY THE ASSESS EE DID NOT TAKE ITA NOS.3145 & 3146/MUM/2012. M/S.RICOH INDIA LIMITED. 8 ANY ACTION AS PRESCRIBED UNDER THE LAW AGAINST SUCH ERRING PARTIES. IN VIEW OF THE FOREGOING REASONS, WE ARE OF THE CONSID ERED OPINION THAT THE AUTHORITIES BELOW WERE JUSTIFIED IN NOT ALLOWIN G DEDUCTION FOR THIS AMOUNT. THIS GROUND FAILS. 14. GROUND NOS.4 TO 6 ARE AGAINST THE REJECTION OF THE ASSESSEES CLAIM MADE FOR THE FIRST TIME DURING THE COURSE OF ASSESSMENT PROCEEDINGS BY RELYING ON THE JUDGMENT OF THE HONB LE JURISDICTIONAL HIGH COURT IN THE CASE OF GOETZE (INDIA) LTD. (SUPRA) . BOTH THE SIDES ARE IN AGREEMENT THAT THE FACTS AND CIRCUMSTANCES O F THESE GROUNDS ARE MUTATIS MUTANDIS SIMILAR TO THOSE OF THE PRECEDING YEAR. FOLLOWING THE VIEW TAKEN HEREINABOVE FOR THE PRECEDING YEAR, WE SET ASIDE THE IMPUGNED ORDER AND REMIT THE MATTER TO THE FILE OF THE ASSESSING OFFICER FOR CONSIDERING THESE ISSUES FOR DECISION O N MERITS AS PER LAW. 15. 3 .4 5 6, 78 9 : :2 . , ;. <= > IN THE RESULT, THE APPEAL IS PARTLY ALLOWED FOR STATISTICA L PURPOSES. ORDER PRONOUNCED ON THIS 13 TH DAY OF SEPTEMBER, 2013. ' 2 , /01 ?')4 0 , @ SD/- SD/- (VIVEK VARMA) (R.S.SYAL) $ ' $ ' $ ' $ ' / JUDICIAL MEMBER ! ' ! ' ! ' ! ' / ACCOUNTANT MEMBER MUMBAI ; ?') DATED : 13 TH SEPTEMBER, 2013. DEVDAS* ITA NOS.3145 & 3146/MUM/2012. M/S.RICOH INDIA LIMITED. 9 ' 2 , *$.:# A #1. ' 2 , *$.:# A #1. ' 2 , *$.:# A #1. ' 2 , *$.:# A #1./ COPY OF THE ORDER FORWARDED TO : 1. &' / THE APPELLANT 2. *+&' / THE RESPONDENT. 3. B () / THE CIT, MUMBAI. 4. B / CIT(A) 7, MUMBAI. 5. #E@ *$.$) , , / DR, ITAT, MUMBAI 6. @ F / GUARD FILE. ' 2) ' 2) ' 2) ' 2) / BY ORDER, +#. *$. //TRUE COPY// 7 7 7 7/ // /< ; < ; < ; < ; ( DY./ASSTT. REGISTRAR) , , , , / ITAT, MUMBAI