Smt. Harbhajan Kaur, Prop., Kathua V. The Income-tax Officer, Kathua

ITA 331/ASR/2013

• Counselvise Citation: 33120914 RSA 2013
• Duration Of Justice: 6 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-12-2013
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 02-12-2013
• Assessment Year: 2009-2010
• Appeal Filed On: 16-05-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: P N ARORA
• Section: 40A(3); 234B; 80IB

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AMRITSAR BENCH; AMRITSAR. BEFORE SH. H.S. SIDHU, JUDICIAL MEMBER AND SH. B.P.JAIN, ACCOUNTANT MEMBER I.T.A. NO.331(ASR)/2013 ASSESSMENT YEAR:2009-10 PAN :AAWPK6944R SMT. HARBHAJAN KAUR, PROP. VS. INCOME TAX OFFICER, M/S. SAINICO ENGINEERS, WARD-1(4), KATHUA. VILLAGE JAGATPUR, KATHUA (J&K). (APPELLANT) (RESPONDENT) APPELLANT BY:SH.P.N.ARORA, ADVOCATE RESPONDENT BY:SH.TARSEM LAL, DR DATE OF HEARING: 02/12/2013 DATE OF PRONOUNCEMENT:06/12/2013 ORDER PER BENCH ; THIS APPEAL OF THE ASSESSEE ARISES FROM THE ORDER OF THE CIT(A), JAMMU, DATED 15.03.2013 FOR THE ASSESSMENT YEAR 200 9-10. THE ASSESSEE HAS RAISED FOLLOWING GROUNDS OF APPEAL: 1. THAT THE ASSESSMENT ORDER AS WELL AS THE ORDER OF THE LD. CIT(A) ARE BOTH AGAINST THE FACTS OF THE CASE AND UNTENABLE IN LAW. 2. THAT THE LD. CIT(A) HAS GROSSLY ERRED IN CONFIRMING THE DISALLOWANCE OF RS.44,626/- MADE B THE A.O. THE LD. CIT(A) ITA NO.331(ASR)/2013 2 FAILED TO APPRECIATE THAT THIS AMOUNT WAS PAID ON A CCOUNT OF CONTRIBUTIONS TOWARDS EMPLOYEES PROVIDENT FUND WHIC H WAS DULY PAID BEFORE THE DUE DATE OF FILING THE RETURN OF INCOME AND AS SUCH THE SAME SHOULD HAVE BEEN ALLOWED AS BUSINE SS EXPENDITURE. 3. AGAIN, THE LD. CIT(A) HAS GROSSLY ERRED IN CONFIRMI NG THE DISALLOWANCE OF RS.13,74,074/- MADE BY THE AO ON AC COUNT OF PROFITS ATTRIBUTABLE TOWARDS INSTALLATION AND TESTI NG CHARGES OF DG SETS U/S 80IB(4) ON THE BASIS THAT THE SAME IS N OT DERIVED FROM INDUSTRIAL UNDERTAKING. THE LD. CIT(A) FAILED TO APPRECIATE THAT THE SAID CHARGES WERE PART AND PARC EL OF OUR SALE PRODUCTS AND SALE IS ONLY COMPLETED AFTER TESTING AND INSTALLATION OF THE DG SETS IN THE PREMISES OF THE CUSTOMER. HENCE, THE CLAIM U/S 80IB(4) OF THE INCOME TAX ACT, 1961 SHOULD ALSO HAVE BEEN ALLOWED AT RS.13,74,074/- AS CLAIMED. 4. AGAIN, THE LD. CIT(A) HAS GROSSLY ERRED IN CONFI RMING THE DISALLOWANCE OF THE CASH PAYMENT OF RENT TO THE LA NDLORD AT RS.35,000/-. THE AUTHORITIES BELOW DID NOT APPRECI ATE THAT THE PAYMENT WAS A GENUINE PAYMENT AND WAS MADE UNDER T HE COMPELLING CIRCUMSTANCES AND AS SUCH THE SAME SHOU LD HAVE BEEN ALLOWED AS CLAIMED. ALTERNATIVELY, IT IS REQUESTED THAT DEDUCTION U/S 80IB OF THE INCOME-TAX ACT, 1961 SHOULD HAVE BEEN ALLOWED ON T HIS DISALLOWANCE OF RS.35,000/-. 5. THAT THE AUTHORITIES BELOW HAVE GROSSLY ERRED IN CHARGING/WITHDRAWING PENALTY INTERESTS UNDER SECTI ONS 234B & 234A OF THE INCOME-TAX ACT, 1961. NO INTEREST UNDE R THESE SECTIONS OF THE INCOME-TAX ACT, 1961, MAY BE DELET ED. ALTERNATIVELY, THE INTEREST CHARGED U/S 234B & 244 A OF THE INCOME-TAX ACT, 1961 IS VERY HIGH AND EXCESSIVE. 6. ANY OTHER GROUND OF APPEAL WHICH MAY BE URGED AT THE TIME OF HEARING OF THE APPEAL. ITA NO.331(ASR)/2013 3 2. GROUNDS NO. 1 & 6 ARE GENERAL IN NATURE AND THER EFORE, DO NOT REQUIRE ANY ADJUDICATION. 3. AS REGARDS GROUND NO.2, THE BRIEF FACTS ARE THAT THE AO OBSERVED THAT THERE IS A DELAY IN DEPOSIT OF EMPLOYEES CONTRIBUTI ONS OF PROVIDENT FUND IN RESPECT OF AN AMOUNT OF RS.44,626/-. THE REPLY FILE D BY THE ASSESSEE DID NOT FOUND FAVOUR TO THE A.O.S. THE AO OBSERVED THAT AS PER PROVISIONS OF SECTION 36(1)(VA) OF THE ACT, THE ASSESSEE WAS REQUIRED TO DEPOSIT EMPLOYEES CONTRIBUTIONS OF PROVIDENT FUND ON OR BEFORE THE 15 TH OF THE FOLLOWING MONTH, WHICH THE ASSESSEE HAS FAILED TO DO TO THE E XTENT OF RS.44,626/- AND ACCORDINGLY THE ASSESSEE HAS VIOLATED THE PROVISION S OF SECTION 36(1)(VA) OF THE ACT AND THE SAME WAS ADDED TO THE INCOME OF THE ASSESSEE. 3.1. THE LD. COUNSEL FOR THE ASSESSEE, MR. P.N.AROR A, ADVOCATE, AT THE OUTSET RELIED UPON THE DECISION OF THE ITAT, AMRITS AR BENCH IN THE CASE OF DCIT, CIR.1, JAMMU VS. M/S. TRG INDUSTRIES PVT. LTD . JAMMU, IN ITA NOS. 483 & 484(ASR)/2011 FOR THE ASSESSMENT YEARS 2003-0 4 & 2004-05 DATED 08.06.2011, WHERE ON IDENTICAL ISSUE, IT HAS BEEN H ELD THAT THAT IF THE EMPLOYEES PROVIDENT FUND IS PAID BEFORE THE DUE DAT E OF FILING THE RETURN, NO ADDITION CAN BE MADE. COPY OF THE ORDER IS PLACED A T PAGES 19 TO 25 OF THE PAPER BOOK. THE LD. COUNSEL FOR THE ASSESSEE, MR. P .N.ARORA, ALSO RELIED UPON THE DECISION IN THE CASE OF ASSESSEE HERSELF WHEREON IDENTICAL ISSUE, ITA NO.331(ASR)/2013 4 THE ITAT, AMRITSAR BENCH IN ASSESSEES OWN CASE HAS DECIDED THE ISSUE IN ASSESSEES FAVOUR. THEREFORE, THE LD. COUNSEL FOR T HE ASSESSEE, MR. P.N. ARORA, ADVOCATE PRAYED TO ALLOW THE GROUND IN FAVOU R OF THE ASSESSEE. 3.2. THE LD. DR, ON THE OTHER HAND, RELIED UPON THE ORDERS OF BOTH THE AUTHORITIES BELOW. 4. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE FACTS OF THE CASE. ON PERUSAL OF THE DECISIONS IN THE CASE OF DCIT VS. M/S. TRG INDUSTRIES PVT. LTD. IN ITA NOS. 483 & 484(ASR)/2009 (SUPRA) AND IN ASSESSEES OWN CASE IN ITA NO.139(ASR)/2012 (SUPRA) ON IDENTICAL ISSUE, WH ERE EPF WAS PAID BEFORE THE DUE DATE OF FILING THE RETURN WAS ALLOWE D BY THE LD. CIT(A) AND THE REVENUES APPEAL IN BOTH THE CASES WAS DISMISSE D BY THE ITAT AMRITSAR BENCH, AS MENTIONED HEREINABOVE FOLLOWING THE DECIS IONS HEREINABOVE, WE DIRECT THE A.O. TO ALLOW THE PAYMENT OF EPF CONTRIB UTIONS SINCE THE SAME HAS BEEN PAID BEFORE THE DUE DATE OF FILING THE RETURN. ACCORDINGLY, THE AO IS DIRECTED TO DELETE THE ADDITION SO MADE. THUS, GROU ND NO.2 OF THE ASSESSEE IS ALLOWED. 5. AS REGARDS GROUND NO.3, THE BRIEF FACTS ARE THAT THE ASSESSEE HAS RECEIVED INSTALLATION AND TESTING CHARGES OF RS.19. 73 LAKHS AND AFTER INCURRING AN EXPENDITURE OF RS.5,98,926/- HAS DECLA RED NET INCOME OF RS.13,74,074/-. THE ASSESSEE HAS CLAIMED DEDUCTION U/S 80IB OF THE ACT. IN ITA NO.331(ASR)/2013 5 RESPONSE TO SHOW CAUSE NOTICE FROM THE AO, THE ASSE SSEE HAS SUBMITTED AS UNDER: THAT REGARDING INSTALLATION CHARGES OF RS.13,74,07 4/- FOR WHICH DEDUCTION U/S 80IB CLAIMED, IN THIS REGARD IT IS SUBMITTED THAT ASSESSEE IS ENGAGED IN MANUFACTURING AND SALES OF G ENERATING SET OF VARIOUS CAPACITIES. BECAUSE INSTALLATION IS AN INSE PARABLE PART OF THE SALE TRANSACTION. THE SALE BILL BE COMPLETE ONLY W HEN THE GENERATING SETS ARE INSTALLED/COMMISSIONED STRICTLY IN ACCORDA NCE WITH THE SPECIFICATION PROVIDED BY THE PURCHASING PARTY. FOR THE PURPOSE OF INSTALLATION VARIOUS MATERIAL ARE REQUIRED SAME HAS BEEN PURCHASED AND DEBITED TO THE PURCHASE A/C. THE AMOUNT ON THES E TRANSACTIONS HAS BEEN CREDITED IN THE INSTALLATION A/C. SINCE IT IS COMPOSITE SALES COMPRISING VARIOUS STAGES AND STEPS OUT OF WHICH INSTALLATION/COMMISSION IS ONE OF THE STEPS. IT IS, THEREFORE, INSTALLATION IS ONE OF THE PARTS OF MAIN SALES AFTER MANUFACTURI NG AND LIABLE TO DEDUCTION U/S 80IB OF THE ACT ON THESE SALES. 5.1. THE AO AFTER CONSIDERING THE SAID EXPLANATION OF THE ASSESSEE WAS NOT SATISFIED AND OBSERVED THAT INSTALLATION IS MAINLY WORK OF CONTRACT NATURE AND CANNOT BE TERMED TO BE A PART OF MANUFACTURING ACTI VITY AND CANNOT BE SAID TO BE DERIVED FROM INDUSTRIAL UNDERTAKING IN VIEW OF T HE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF CIT VS. STERLI NG FOODS 237 ITR 579 (SC) AND ACCORDINGLY ADDED TO THE INCOME OF THE ASS ESSEE. 6. THE LD. CIT(A) CONFIRMED THE ACTION OF THE ASSES SING OFFICER. 7. THE LD. COUNSEL FOR THE ASSESSEE, MR. P.N.ARORA, ADVOCATE, INVITED OUR ATTENTION TO THE MANUFACTURING PROCESS PLACED A T PB-10 AND ARGUED THAT INSTALLATION IS AN INSEPARABLE PART OF THE SALE TRA NSACTION. THE SALE BILL IS COMPLETED AS WHEN THE GENERATING SETS ARE INSTALLED OR COMMISSIONED STRICTLY ITA NO.331(ASR)/2013 6 IN ACCORDANCE WITH THE SPECIFICATION PROVIDED BY TH E PURCHASING PARTY. THE LD. COUNSEL FOR THE ASSESSEE, MR. P.N.ARORA, ADVOCA TE, ALSO PLACED ON RECORD COPIES OF THE CONTRACT, WHERE THE ASSESSEE WAS REQU IRED TO COMMISSION DG SETS AT THE SITES OF THE BUYER AT PB 8-9 AND ACCORD INGLY PRAYED THAT THIS IS INSEPARABLE PART OF THE SALE TRANSACTION AND PART O F THE MANUFACTURING ACTIVITY AND THEREFORE, ELIGIBLE FOR DEDUCTION U/S 80IB OF T HE ACT. 8. THE LD. DR, ON THE OTHER HAND, RELIED UPON THE O RDERS OF THE AUTHORITIES BELOW. 9. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE FACTS OF THE CASE. ON PERUSAL OF THE RECORD AND THE CONTRACT PLACED ON RECORD, WE ARE OF THE VIEW THAT IN THE PRESENT CASE, THE ASSESSEE HAS SU PPLIED DG SETS TO THE CUSTOMERS WHICH INCLUDES INSTALLATION, TESTING AND COMMISSIONING, WHICH IS INTRICATE AND INSEPARABLE PART OF MANUFACTURING ACT IVITY AND THEREFORE, ANY SURPLUS ARISING THEREFROM SHALL BE TERMED AS DERIVE D FROM AN INDUSTRIAL UNDERTAKING AND ELIGIBLE FOR DEDUCTION U/S 80IB OF THE ACT ACCORDINGLY, THE ORDER OF THE LD. CIT(A) IS REVERSED AND THE AO IS DIRECTED TO ALLOW DEDUCTION U/S 80IB OF THE ACT TO THE TUNE OF RS.13, 74,074/-. THUS, GROUND NO.3 OF THE ASSESSEE IS ALLOWED. 10. AS REGARDS GROUND NO.4, THE BRIEF FACTS ARE THA T THE ASSESSEE HAS PAID RENT OF RS.30,000/- IN CASH ON 17.02.2009 IN VIOLAT ION OF PROVISIONS OF ITA NO.331(ASR)/2013 7 SECTION 40A(3) OF THE ACT. THE AO ADDED THE SAME TO THE INCOME OF THE ASSESSEE. THE AO FURTHER OBSERVED THAT SINCE THE AS SESSEE HAS CONTRAVENED THE PROVISION OF THE INCOME TAX ACT, 1961, ACCORDIN GLY, THE ASSESSEE IS NOT ENTITLED TO DEDUCTION U/S 80IB OF THE ACT. 10.1. THE LD. CIT(A) CONFIRMED THE ACTION OF THE AS SESSING OFFICER. 10.2. THE LD. COUNSEL FOR THE ASSESSEE, MR. P.N.ARO RA, ADVOCATE, ARGUED THAT THOUGH THERE IS CONTRAVENTION OF PROVISIONS OF SECTION 40A(3) OF THE ACT BUT FURTHER ARGUED THAT DISALLOWANCE MAKES ENHANCEM ENT OF INCOME AND ACCORDINGLY ELIGIBLE FOR DEDUCTION U/S 80IB OF THE ACT, IN VIEW OF THE DECISION IN THE CASE OF ASSESSEE ITSELF IN ITA NO.1 39(ASR)/2012 FOR THE A.Y. 2008-09 DATED 03.07.2012. 10.3. THE LD. DR, ON THE OTHER HAND, RELIED UPON TH E ORDERS OF THE AUTHORITIES BELOW. 11. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE FACTS OF THE CASE. THERE IS NO DISPUTE TO THE FACT THAT THE RENT HAS B EEN PAID IN CASH IN VIOLATION OF PROVISIONS OF SECTION 40A(3) AND THE LD. CIT(A) HAS RIGHTLY CONFIRMED THE ACTION OF THE AO IN DISALLOWING THE SAME. IT IS ALSO FACT THAT THE DISALLOWANCE OF SUM CLAIMED ENHANCES THE INCOME O F THE ASSESSEE AND THE INCOME SO ENHANCED IS AVAILABLE U/S 80IB OF THE ACT . THEREFORE, IN THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) IS NO T JUSTIFIED IN NOT ALLOWING ITA NO.331(ASR)/2013 8 DEDUCTION U/S 80IB OF THE ACT. THEREFORE, WE DIRECT THE A.O. TO ALLOW DEDUCTION U/S 80IB OF THE ACT, IN VIEW OF OUR DECIS ION MENTIONED HEREINABOVE. THUS, GROUND NO.4 OF THE ASSESSEE IS A LLOWED. 12. GROUND NO.5 IS WITH REGARD TO THE INTERESTS UND ER SECTION 234B & 234A OF THE INCOME TAX ACT, 1961, WHICH IS CONSEQUE NTIAL AND MANDATORY IN NATURE. 13. IN THE RESULT, THE APPEAL FILED BY THE ASSESSE E IN ITA NO.331(ASR)/2013 IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 6TH DECEMBER., 2013. SD/- SD/- (H.S. SIDHU) (B.P. JAIN) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 6TH DECEMBER, 2013 /SKR/ COPY OF THE ORDER FORWARDED TO: 1. THE ASSESSEE:SMT. HARBHAJAN KAUR PROP. M/S. SAINIC O ENGINEERS, KATHUA. 2. THE WARD 1(4), KATHUA 3. THE CIT(A), JAMMU 4. THE CIT, JAMMU 5. THE SR DR, ITAT, AMRITSAR. TRUE COPY BY ORDER (ASSISTANT REGISTRAR) INCOME TAX APPELLATE TRIBUNAL, AMRITSAR BENCH: AMRITSAR.