TATA MOTORS LTD, MUMBAI V. CIT LTU, MUMBAI

ITA 3519/MUM/2014

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 1427 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 10 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-04-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: E
• Next Hearing Date: 31-05-2016
• Assessment Year: 2007-2008
• Appeal Filed On: 16-05-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MANJUNATHA SWAMY
• Assessee Lawyers: DINESH VYAS
• Keywords: Capital receipt
• Section: 143(3); 115JB; 263

Judgement Text

, , , , INCOME-TAX APPELLATE TRIBUNAL -EBENCH MUMBAI , , , BEFORE S/SHRI RAJENDRA,ACCOUNTANT MEMBER AND RAM LAL NEGI,JUDICIAL MEMBER ./I.T.A./3519/MUM/2014, /ASSESSMENT YEAR: 2007-08 TATA MOTORS LTD. BOMBAY HOUSE, 24 HOMI MODY STREET HUTATMA CHOWK, MUMBAI-400 001. PAN:AAACT 2727 Q VS. CIT-LARGE TAX PAYER UNIT, 29TH FLOOR, CENTER NO.1 WORLD TRADE CENTRE, CUFFE PARADE MUMBAI-400 005. ( /APPELLANT ) ( / RESPONDENT ) REVENUE BY: SHRI MANJUNATHA SWAMY-CIT-DR ASSESSEE BY: SHRI DINESH VYAS / DATE OF HEARING: 16.03.2017 / DATE OF PRONOUNCEMENT: 05.04.2017 ,1961 254(1) ORDER U/S.254(1)OF THE INCOME-TAX ACT,1961(ACT) PER RAJENDRA, AM - CHALLENGING THE ORDER OF CIT (LTU),MUMBAI, DT.28.3. 14 PASSED U/S.263 OF THE ACT, THE ASSESSEE HAS FILED THE PRESENT APPEAL.ASSESSEE-COMP ANY,ENGAGED IN THE BUSINESS OF MANUFAC - TURING OF VEHICLES,FILED ITS RETURN OF INCOME ON 30 /10/2007, DECLARING TOTAL INCOME OF RS . 12,84,54,70,964/-UNDER THE NORMAL PROVISIONS AND RS .2188,13,41,552/- U/S. 115JB OF THE ACT. THE ASSESSING OFFICER (A.O) COMPLETED THE ASSESSMEN T U/S.143(3) R.W.S. 144C OF THE ACT ON 26/05/11 DETERMINING ITS INCOME AT RS.1287,74,27,65 0/-. 2. ON VERIFYING THE RECORDS,THE CIT-LTU OBSERVED THAT ORDER PASSED BY THE AO WAS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE REVENUE, THA T THE ASSESSEE HAD REDUCED FROM THE TOTAL INCOME AN AMOUNT OF RS.15.23 CRORES, BEING THE SAVI NG ON THE LIABILITY TO SALES TAX BY PAYING THE AMOUNT IN ADVANCE AT A DISCOUNTED VALUE, THAT B Y MEETING THE LIABILITY IN ADVANCE IT BENEFITTED TO THE EXTENT OF RS.15.23 CRORES, THAT T HE BENEFIT HAD ACCRUED TO ASSESSEE IN THE REGULAR COURSE OF BUSINESS, THAT THE DEDUCTION WAS NOT ALLOWABLE AS PER LAW, THAT THE ASSESSEE HAD REDUCED RS.60.74 CRORES ON ACCOUNT OF DEPB LICE NCES/FOCUS MARKET LICENCES, THAT THE SAID LICENCES WERE NOT RECEIVED OR WERE NOT UTILISED THO UGH THE AMOUNTS HAD ALREADY BEEN CREDITED TO P&L ACCOUNT IN THE BOOKS OF ACCOUNT,THAT THE DED UCTION CLAIMED BY IT WAS NOT IN ORDER, THAT IT HAD CLAIMED DEDUCTION OF RS.17.90 CRORES, BEING THE CLAIM ON ACCOUNT OF LOSS OF PROFIT DUE TO FIRE THAT WAS NOT RECEIVED FROM INSURANCE COMPAN Y DURING THE YEAR, THAT ANOTHER CLAIM OF DEDUCTION OF RS.22.82 CRORES,BEING REPAIRS AND OTHE R EXPENDITURE INCURRED ON ACCOUNT OF FIRE WAS CLAIMED,THAT BOTH THE CLAIMS OF DEDUCTION WERE NOT ALLOWABLE. 3. ACCORDINGLY,HE ISSUED A NOTICE TO THE ASSESSEE,ON 14.3.2014,ASKING IT AS TO WHY THE REVISIO -NARY ORDER SHOULD NOT BE PASSED AS PER PROVISIONS OF SECTION 263 WITH REGARD TO ABOVE 3519/M/14(07-08) TATA MOTORS LTD. 2 REFERRED THREE ITEMS.IN ITS REPLY,DATED 27.3.2014, THE ASSESSEE FILED A DETAILED REPLY IN THAT REGARD. AFTER CONSIDERING THE SAME, THE CIT HELD TH AT THE ASSESSEE HAD MADE CLAIMS IN THE RETURN OF INCOME,THAT SAME WERE SUBJECT MATTER OF A SSESSMENT U/S. 143(3) OF THE ACT, THAT FILING AN INCORRECT CLAIM WILL NOT MAKE IT A VALID CLAIM WITH REGARD TO PRE-PAYMENT OF SALES TAX.HE OBSERVED THAT SAME BEING AN INDIRECT TAX,THE ASSESSEE WAS ENTITLED TO RECOVER FROM THE CUSTOMERS, THAT IN THE NORMAL COURSE IT SHOULD HAVE BEEN HANDED OVER TO THE GOVERNMENT, THAT AS PER SCHEME ANNOUNCED BY THE STATE GOVERNMENT THE ASSESSEE WAS ENTITLED TO PAY THE SAME OVER A PERIOD OF TIME IN INSTALMENTS,THAT IT WAS AL SO ENTITLED TO PRE-PAY THE DEFERRED LIABILITY AND AT DISCOUNTED VALUE,THAT SALES TAX WOULD FORM P ART OF THE TURN OVER THAT THE BENEFIT ACCRUED TO THE ASSESSEE ON PRE-PAYMENT OF SALES TA X WOULD ALSO FORM PART OF REVENUE, THAT THE CLAIM MADE BY IT THAT THE AMOUNTS SAVED ON ACCOUNT OF PRE-PAYMENT WAS CAPITAL RECEIPT WAS NOT CORRECT, THAT THE AO HAD NOT CONSIDERED THE ASP ECT OF PAYMENT BEING OF REVENUE NATURE. HE HELD THAT ORDER OF AO WAS ERRONEOUS AND PREJUDIC IAL TO THE INTEREST OF REVENUE. HE FURTHER HELD THAT THE ASSESSEE HAD ACCOUNTED THE INCOME OF DEPB LICENSES/FOCUS MARKET LICENSES ON ACCRUAL BASIS,THAT IT FOLLOWED THE MERCANTILE SYSTE M OF ACCOUNTING, THAT EXCLUDING THE VALUE WHICH NOT HAVE BEEN RECEIVED WAS NOT CORRECT,THAT I T HAD NOT CLAIMED INSURANCE BENEFIT ON ACCOUNT OF LOSS OF PROFIT DUE TO FIRE AND ALSO ON A CCOUNT OF REPAIRS AND OTHER EXPENSES INCURRED ON ACCOUNT OF FIRE,THAT IT HAD NOT RECEIVED THE FUL L AMOUNT, THAT IT WAS FOLLOWING MERCANTILE SYSTEM OF ACCOUNTING,THAT THE EXCLUSION OF THE PORT ION OF THE CLAIM, WHICH HAD NOT BEEN RECEIVED DURING THE YEAR WAS NOT IN ORDER, THAT WHI LE PASSING THE SCRUTINY ORDER THE AO HAD NOT CONSIDERED THE ISSUE PROPERLY.FINALLY, HE DIREC TED THE AO TO DISALLOW THE CLAIM OF RS.15. 23 CRORES(AMOUNTS SAVED ON ACCOUNT OF PRE-PAYMENT O F SALES TAX),RS.60.74 LAKHS (ON ACCOUNT OF DEPB/FOCUS MARKET LICENCES) AND RS.40.72 LAKHS O N ACCOUNT OF INSURANCE CLAIMS. 4. DURING THE COURSE OF HEARING BEFORE US, THE AUTHORI SED REPRESENTATIVE (AR) STATED THAT PRE- PAYMENT OF SALES TAX LIABILITY AT DISCOUNTED VALUE WAS NOT LIABLE TO TAX, THAT THE DEPB/FOCUS MARKET LICENCES WERE TAXABLE IN THE YEAR IN WHICH L ICENCES WERE UTILISED, THAT COMPENSATION FROM INSURANCE COMPANY WAS TAXABLE IN THE YEAR IN W HICH CLAIM WAS ACCEPTED BY THE INSURANCE COMPANY,THAT THERE WAS NO JUSTIFICATION F OR REVISING THE ORDER OF THE AO ON ACCOUNT OF ANY OF THE THREE ISSUES,THAT DECISIONS WERE AVAI LABLE IN FAVOUR OF THE ASSESSEE AT THE TIME OF ISSUE OF NOTICE U/S.263,THAT THE AO HAD TAKEN ON E OF THE POSSIBLE VIEWS, THAT THE ORDER OF THE AO WAS NEITHER ERRONEOUS NOR PREJUDICIAL TO THE INTEREST OF REVENUE,THAT DURING THE ASSESS - MENT PROCEEDINGS THE AO HAD CALLED FOR VARIOUS DETA ILS, THAT IN THE SUBMISSION,DATED 25/11/ 2010 TO THE AO ENCLOSING COMPUTATION OF INCOME THE ASSESSEE HAD FURNISHED NOTES ABOUT SALES 3519/M/14(07-08) TATA MOTORS LTD. 3 TAX LIABILITY AND OTHER ISSUES, THAT THE AO HAD MAD E CERTAIN DISALLOWANCES AFTER SUBMISSIONS FILED BY THE ASSESSEE ON VARIOUS OCCASIONS INCLUDIN G THE LETTER DATED 9.12.2010. HE REFERRED TO THE CASES OF MAX INDIA (295ITR282); SULZER INDIA (1 38ITD137); EXCEL INDUSTRIES (358ITR 295) AND LEISURE WEAR (13SOT184).THE DEPARTMENTAL R EPRESENTATIVE (DR) SUPPORTED THE ORDER OF CIT-LTU. 5. WE FIND THAT THE CIT-LTU HAD INVOKED THE REVISIONAR Y POWERS WITH REGARD TO THREE ISSUES I.E., PRE-PAYMENT OF SALES TAX LIABILITY AT DISCOUN TED VALUE, DEPB LICENCE/FOCUS MARKET LICENCES AND COMPENSATION FROM INSURANCE COMPANY. W E FIND THAT ALL THE THREE ISSUES,AT THE TIME OF ISSUING NOTICE U/S. 263 OF THE ACT,STOOD DE CIDED IN FAVOUR OF THE ASSESSEE BY VARIOUS JUDGMENTS OF JUDICIAL FORUMS.IN THESE CIRCUMSTANCES IF,THE AO HAD NOT MADE ANY DISALLOW - ANCE ABOUT THE CLAIMWS MADE BY THE ASSESSEE,THEN HI S ORDER CANNOT BE TREATED ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE REVENUE.WE FIND THAT IN THE CASE OF SULZER INDIA (SUPRA), SPECIAL BENCH OF THE TRIBUNAL HAS HELD THAT PREPAYM ENT OF SALES TAX LIABILITY AT DISCOUNTED VALUE WAS NOT LIABLE TO TAX.SIMILARLY, IN THE CASE OF EXCEL INDUSTRIES IT WAS HELD THAT DEPB/FOCUS MARKET LICENCES WERE TAXABLE IN THE YEAR IN WHICH GOODS WERE ACTUALLY IMPORTED. IN THE CASE OF LEISURE WEAR (SUPRA), THE TRIBUNAL H AD HELD THAT COMPENSATION FROM INSURANCE COMPANY WAS TAXABLE IN THE YEAR IN WHICH CLAIM WAS ACCEPTED.THUS, ALL THE ISSUES RAISED BY THE CIT, AT THE TIME OF ISSUANCE OF REVISIONARY NOT ICE HAD ATTAINED FINALITY. THEREFORE, HE WAS NOT JUSTIFIED IN ISSUING THE NOTICE TO REVISE THE O RDER OF THE AO.SECONDLY,BY DIRECTING THE AO TO MAKE THE DISALLOWANCES,HE HAS DEPRIVED THE AO OF TAKING ANY INDEPENDENT DECISION.SIMILARLY,THE HANDS OF THE ASSESSEE WERE A LSO TIED DOWN.AS THE CIT DID NOT RESTORE THE MATTER TO THE AO FOR FRESH HEARING,SO,ASSESSEE WAS PREVENTED FROM PUTTING FORTH ITS STANDS BEFORE THE AO.SO,EVERSING THE ORDER OF THE CIT,WE D ECIDE THE EFFECTIVE GROUND OF APPEAL IN FAVOUR OF THE ASSESSEE. AS WE HAVE DECIDED CASE ON MERITS,WE ARE NOT ADJUDICATING THE GROUND RAISED BY ASSESSEE ABOUT VALIDITY OF REVISIONARY PR OCEEDINGS. AS A RESULT APPEAL FILED BY ASSESSEE STANDS ALLOWED . . ORDER PRONOUNCED IN THE OPEN COURT ON APRIL 5 TH APRIL, 2017. 5 , 2017 SD/- SD/- ( / RAM LAL NEGI ) ( / RAJENDRA ) / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI; /DATED : 05.04.2017. JV.SR.PS. / COPY OF THE ORDER FORWARDED TO : 3519/M/14(07-08) TATA MOTORS LTD. 4 1. APPELLANT / 2. RESPONDENT / 3. THE CONCERNED CIT(A)/ , 4. THE CONCERNED CIT / 5. DR A BENCH, ITAT, MUMBAI / , , . . . 6. GUARD FILE/ //TRUE COPY// / BY ORDER, / DY./ASST. REGISTRAR , /ITAT, MUMBAI.