DIT, CHENNAI V. GEA Cooling Tower Technologies (India) Private Limited, CHENNAI

ITA 3438/CHNY/2016

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 4271 (ITAT-CHENNAI)
• Duration Of Justice: 6 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-06-2017
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: C
• Next Hearing Date: 30-05-2017
• Assessment Year: 2012-2013
• Appeal Filed On: 22-12-2016
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: V M PRASAD
• Assessee Lawyers: R VIJAYARAGHAVAN

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH, CHENNAI . . . , , ' # BEFORE SHRI N.R.S. GANESAN, JUDICIAL MEMBER AND SHRI S. JAYARAMAN, ACCOUNTANT MEMBER ./ ITA NO.3438/MDS/2016 & C.O. NO.18/MDS/2017 (IN I.T.A. NO.3438/MDS/2016) & '& / ASSESSMENT YEAR : 2012-13 THE DEPUTY COMMISSIONER OF INCOME TAX, CORPORATE CIRCLE 2(1), CHENNAI - 600 034. V. M/S ENEXIO POWER COOLING SOLUTIONS INDIA PVT. LTD. (FORMERLY KNOWN AS M/S GEA COOLING TOWER TECHNOLOGIES (INDIA) PVT. LTD.), 443, ANNA SALAI, GUNA BUILDING, TEYNAMPET, CHENNAI - 600 018. PAN : AAACG 7891 G ()*/ APPELLANT) ( RESPONDENT & CROSS-OBJECTOR) )* + , / APPELLANT BY : SHRI M.S.V.M. PRASAD, CIT -.)* + , / RESPONDENT BY : SH. R. VIJAYARAGHAVAN, ADVOCATE / + 0' / DATE OF HEARING : 30.05.2017 12' + 0' / DATE OF PRONOUNCEMENT : 22.06.2017 / O R D E R PER N.R.S. GANESAN, JUDICIAL MEMBER: THIS APPEAL OF THE REVENUE IS DIRECTED AGAINST T HE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS)-6, CHENNAI , DATED 24.10.2016 AND PERTAINS TO ASSESSMENT YEAR 2012-13. THE 2 I.T.A. NO.3438/MDS/16 C.O. NO.18/MDS/17 ASSESSEE HAS ALSO FILED CROSS-OBJECTION AGAINST THE VERY SAME ORDER OF THE CIT(APPEALS). THEREFORE, WE HEARD BOTH THE APPEAL AND CROSS-OBJECTION TOGETHER AND DISPOSING OF THE SAME BY THIS COMMON ORDER. 2. SHRI M.S.V.M. PRASAD, THE LD. DEPARTMENTAL REPRE SENTATIVE, SUBMITTED THAT THE ASSESSING OFFICER DISALLOWED PRO PORTIONATE EXPENDITURE AGAINST THE RETENTION MONEY CLAIMED AS EXEMPT. ACCORDING TO THE LD. D.R., THE ASSESSEE EXCLUDED A SUM OF ` 17,72,15,608/- AS AMOUNT WITHHELD WHILE COMPUTING U NDER NORMAL PROVISIONS OF THE INCOME-TAX ACT, 1961 (IN SHORT 'T HE ACT'). HOWEVER, THE CORRESPONDING EXPENDITURE WAS NOT EXCLUDED. AC CORDING TO THE LD. D.R., WHEN THE AMOUNT WITHHELD BY THE ASSESSEE WAS EXCLUDED FROM COMPUTATION, THE CORRESPONDING EXPENDITURE ON THAT WITHHELD AMOUNT ALSO SHOULD BE EXCLUDED. HOWEVER, ACCORDING TO THE LD. D.R., THE ASSESSEE EXCLUDED THE ENTIRE GROSS RECEIP T WHILE LEAVING THE EXPENDITURE UNTOUCHED, THEREFORE, THE ASSESSING OFFICER DISALLOWED THE EXPENDITURE RELATABLE TO THE AMOUNT WITHHELD. HOWEVER, ON APPEAL BY THE ASSESSEE, THE CIT(APPEALS ) BY PLACING RELIANCE IN THE ASSESSEE'S OWN CASE FOR ASSESSMENT YEAR 2007-08, DELETED THE DISALLOWANCE MADE BY THE ASSESSING OFFI CER. ACCORDING 3 I.T.A. NO.3438/MDS/16 C.O. NO.18/MDS/17 TO THE LD. D.R., THE ORDER OF THIS TRIBUNAL IN THE ASSESSEE'S OWN CASE FOR ASSESSMENT YEAR 2007-08 IS NOT IN RESPECT OF EXPENDITURE IN RELATION TO THE AMOUNT WITHHELD, BUT IT IS ON WI THHELD MONEY ITSELF. THEREFORE, ACCORDING TO THE LD. D.R., THE CIT(APPEA LS) IS NOT JUSTIFIED IN ALLOWING THE CLAIM OF THE ASSESSEE. A CCORDING TO THE LD. D.R., IN FACT, THE EXPENDITURE RELATABLE TO RETENTI ON MONEY IS NOT THE SUBJECT MATTER OF DISCUSSION BEFORE THIS TRIBUNAL, THEREFORE, THE ORDER OF THIS TRIBUNAL IN THE ASSESSEE'S OWN CASE F OR ASSESSMENT YEAR 2007-08 IS NOT APPLICABLE AT ALL. 3. ON THE CONTRARY, SH. R. VIJAYARAGHAVAN, THE LD.C OUNSEL FOR THE ASSESSEE, SUBMITTED THAT THE ASSESSEE CLAIMED A N AMOUNT OF ` 17,72,15,608/- AS MONEY WITHHELD. THE ASSESSING OF FICER FOUND THAT THE EXPENDITURE RELATABLE TO THAT AMOUNT ALSO NEEDS TO BE EXCLUDED. THE ASSESSING OFFICER FOUND THAT DURING THE YEAR UNDER CONSIDERATION THE TOTAL EXPENDITURE INCURRED WAS ` 174.05 CRORES AS AGAINST THE INCOME OF ` 192.19 CRORES. THE NET PROFIT WAS 9.43%. ACCORDING TO THE LD. COUNSEL, THE ASSESSING OFFICER FURTHER FOUND THAT THE EXPENDITURE INCURRED IN RESPECT OF WITHHEL D AMOUNT TO THE EXTENT OF ` 16,05,04,176/- NEEDS TO BE DISALLOWED. ACCORDING T O THE LD. COUNSEL, THE CIT(APPEALS) FOUND THAT THE AMOUNT WITHHELD 4 I.T.A. NO.3438/MDS/16 C.O. NO.18/MDS/17 CANNOT BE DISALLOWED. BY PLACING HIS RELIANCE ON T HE ORDER OF THIS TRIBUNAL IN THE ASSESSEE'S OWN CASE FOR ASSESSMENT YEAR 2007-08, THE CIT(APPEALS) HELD THAT THE MONEY RETAINED / WIT HHELD IS NOT AUTOMATICALLY PAYABLE AS SOON AS THE CONTRACT WAS E XECUTED, THEREFORE, THE TRIBUNAL HAS RIGHTLY FOUND THAT THE SAME CANNOT BE TAKEN AS INCOME OF THE ASSESSEE. ACCORDING TO THE LD. COUNSEL, THE EXPENDITURE WAS IN FACT INCURRED EVEN THOUGH THE MO NEY WAS RETAINED BY THE ASSESSEE. THEREFORE, ACCORDING TO THE LD. COUNSEL, THE CIT(APPEALS) HAS RIGHTLY ALLOWED THE CLAIM OF T HE ASSESSEE. 4. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS ON EITH ER SIDE AND PERUSED THE RELEVANT MATERIAL AVAILABLE ON RECORD. THE ASSESSEE EXCLUDED ` 17,72,15,608/- FROM COMPUTATION UNDER THE NORMAL PROVISIONS OF THE ACT. HOWEVER, THE CORRESPONDING EXPENDITURE WAS NOT EXCLUDED. THEREFORE, THE ASSESSING OFFICER FOU ND THAT THE CORRESPONDING EXPENDITURE WHEN COMPARING TO THE NET PROFIT OF 9.43% OF THE ASSESSEE COMES TO ` 16,05,04,176/-. THE CIT(APPEALS) FOUND THAT THE RETENTION MONEY CANNOT BE TREATED AS INCOME OF THE ASSESSEE SINCE IT IS NOT AUTOMATICALL Y PAYABLE AS SOON AS THE CONTRACT WAS EXECUTED, THEREFORE, HE DE LETED THE ADDITION MADE BY THE ASSESSING OFFICER. THE CIT(AP PEALS) HAS NOT 5 I.T.A. NO.3438/MDS/16 C.O. NO.18/MDS/17 CONSIDERED WHETHER THE EXPENDITURE RELATABLE TO RET ENTION / WITHHELD MONEY HAS TO BE ALLOWED OR NOT. 5. AS RIGHTLY SUBMITTED BY THE LD. D.R., THE ORDER OF THIS TRIBUNAL FOR THE ASSESSMENT YEAR 2007-08 IS ONLY IN RESPECT OF MONEY WITHHELD / RETAINED FOR DUE PERFORMANCE OF CONTRACT . THE EXPENDITURE RELATABLE TO THE MONEY WITHHELD WAS NOT THE SUBJECT MATTER BEFORE THIS TRIBUNAL FOR THE ASSESSMENT YEAR 2007-08. THEREFORE, THIS TRIBUNAL IS OF THE CONSIDERED OPINI ON THAT THE CIT(APPEALS) HAS TO RECONSIDER WHETHER THE EXPENDIT URE RELATABLE TO MONEY WITHHELD IS ALLOWABLE DEDUCTION OR NOT. SINC E THAT POINT WAS NOT CONSIDERED, THE ISSUE NEEDS TO BE RECONSIDERED BY THE CIT(APPEALS) AT THE FIRST INSTANCE. ACCORDINGLY, T HE ORDER OF THE CIT(APPEALS) IS SET ASIDE AND THE ISSUE RAISED BY T HE ASSESSEE IS REMITTED BACK TO THE FILE OF THE CIT(APPEALS). THE CIT(APPEALS) SHALL RECONSIDER THE ISSUE AND THEREAFTER DECIDE TH E SAME IN ACCORDANCE WITH LAW, AFTER GIVING A REASONABLE OPPO RTUNITY TO THE ASSESSEE. 6. NOW COMING TO THE CROSS-OBJECTION FILED BY THE A SSESSEE, THE ONLY ISSUE ARISES FOR CONSIDERATION IS TDS CREDIT O F ` 7,30,058/-. 6 I.T.A. NO.3438/MDS/16 C.O. NO.18/MDS/17 7. WE HAVE HEARD SH. R. VIJAYARAGHAVAN, THE LD.COUN SEL FOR THE ASSESSEE AND SHRI M.S.V.M. PRASAD, THE LD. DEPA RTMENTAL REPRESENTATIVE. THE CIT(APPEALS) CONFIRMED THE ORD ER OF THE ASSESSING OFFICER BY PLACING RELIANCE ON THE ORDER OF THIS TRIBUNAL IN EAST COAST CONSTRUCTIONS & INDUSTRIES LTD. HOLDING THAT WHEN THE RETENTION MONEY IS NOT TAXABLE, THE CORRESPONDING T DS ON THAT AMOUNT CAN BE ALLOWED IN THE YEAR IN WHICH THE RETE NTION MONEY IS OFFERED TO TAX. THE ISSUE BEFORE THIS TRIBUNAL IS NOT IN RELATION TO RETENTION MONEY, BUT EXPENDITURE INCURRED IN RELATI ON TO RETENTION MONEY. THEREFORE, THIS ISSUE ALSO NEEDS TO BE RECO NSIDERED BY THE CIT(APPEALS). ACCORDINGLY, THE ORDER OF THE CIT(AP PEALS) IS SET ASIDE AND THE ISSUE OF TDS CREDIT IS ALSO REMITTED BACK TO THE FILE OF THE CIT(APPEALS). THE CIT(APPEALS) SHALL RECONSIDE R THE ISSUE AFRESH IN ACCORDANCE WITH LAW, AFTER GIVING A REASO NABLE OPPORTUNITY TO THE ASSESSEE. 8. IN THE RESULT, BOTH THE APPEAL OF THE REVENUE AN D THE CROSS- OBJECTION OF THE ASSESSEE ARE ALLOWED FOR STATISTIC AL PURPOSES. 7 I.T.A. NO.3438/MDS/16 C.O. NO.18/MDS/17 ORDER PRONOUNCED ON 22 ND JUNE, 2017 AT CHENNAI. SD/- SD/- ( ) ( . . . ) (S. JAYARAMAN) (N.R.S. GANESAN) ' / ACCOUNTANT MEMBER /JUDICIAL MEMBER /CHENNAI, 4 /DATED, THE 22 ND JUNE, 2017. KRI. + -056 76'0 /COPY TO: 1. )* /APPELLANT 2. -.)* /RESPONDENT 3. / 80 () /CIT(A)-6, CHENNAI 4. PRINCIPAL CIT-2, CHENNAI 5. 69 -0 /DR 6. :& ; /GF.