M/s. Shree Rajasthan Syntex Ltd., UDAIPUR V. ACIT, UDAIPUR

ITA 379/JODH/2010

• Counselvise Citation: 37923314 RSA 2010
• Duration Of Justice: 3 year(s) 5 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-11-2013
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 12-11-2013
• Assessment Year: 2006-2007
• Appeal Filed On: 04-06-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: DR DEEPAK SEHGAL
• Keywords: Business income; Depreciation; Opportunity of being heard; Bad and doubtful debts
• Section: 143(3); 194C; 32

Judgement Text

IN THE INCOME TAX APPELALTE TRIBUNAL : JODHPUR BENC H : JODHPUR BEFORE SHRI HARI OM MARATHA, JUDICIAL MEMBER AND SHRI N.K. SAINI, ACCOUNTANT MEMBER. ITA NO.379/JU/2010 (A.Y. 2006-07) M/S. SHREE RAJASTHAN SYNTEX LTD., VS. ACIT, CIRCLE -2, PULLA BHUWANA ROAD, NH 8, UDAIPUR. UDAIPUR. PAN NO. AACCS 8784 L (APPELLANT) (RESPONDENT) ITA NO.392/JU/2010 (A.Y. 2006-07) DCIT, CIRCLE-2, VS. SHREE RAJASTHAN SYNTEX UDAIPUR LTD., PULLA BHUWANA ROAD, NH 8, UDAIPUR. PAN NO. AACCS 8784 L (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI AMIT KOTHARI DEPARTMENT BY : DR. DEEPAK SEHGAL- CIT-DR DATE OF HEARING : 12/11/2013. DATE OF PRONOUNCEMENT : 13/11/2013. O R D E R PER N.K.SAINI, A.M 2 THESE CROSS APPEALS BY THE ASSESSEE AND THE DEPART MENT ARE DIRECTED AGAINST THE ORDER DATED 31/03/2010 OF LD. CIT (A), UDAIPUR. 2 . FIRST WE WILL DEAL WITH ITA NO. 392/JU/2010. THE FOLLOWING GROUNDS HAVE BEEN RAISED IN THIS APPEAL: ON THE FACTS AND IN THE PRESENT CIRCUMSTANCE OF TH E CASE, THE LD. CIT(A) HAS ERRED IN 1. DELETING THE ADDITION MADE ON ACCOUNT OF LEASE INCO ME TAKEN FOR FACILITIES TO SHREE RAJASTHAN TAXCHEM LTD. 2. DELETING THE DISALLOWANCE OF RS. 1,68,59,311/- MADE U/S 40(A)(IA) OF THE I.T. ACT. THAT THE APPELLANT CRAVES TO ADD, AMEND, ALTER, DEL ETE OR MODIFY ANY OR ALL THE ABOVE GROUNDS OF APPEAL BEFORE OR AT THE TIME O F HEARING. 3. FIRST GROUND OF THIS APPEAL RELATES TO THE DELETIO N OF ADDITION MADE BY THE ASSESSING OFFICER ON ACCOUNT OF LEASE INCOME . REGARDING THIS ISSUE, LEARNED COUNSEL FOR THE ASSESSEE AT THE VERY OUTSET STATED THAT IT IS COVERED IN FAVOUR OF THE ASSESSEE IN ASSESSEES OWN CASE IN I.T.A.NO. 540/JU/2007 FOR THE A.Y. 2004-05 DATED 09/10/2013. THE SAID CONTENTION OF THE LEARNED COUNSEL FOR THE ASSESSEE WAS NOT CON TROVERTED BY THE LEARNED CIT D.R. 4. AFTER CONSIDERING THE SUBMISSIONS OF BOTH THE PAR TIES, IT IS NOTICED THAT AN IDENTICAL ISSUE HAVING SIMILAR FACTS HAS AL READY BEEN DECIDED IN 3 FAVOUR OF THE ASSESSEE VIDE AFORESAID REFERRED TO O RDER DATED 09/10/2013 WHEREIN THE RELEVANT FINDINGS HAVE BEEN GIVEN IN PA RA 8 TO 11, WHICH READ AS UNDER:- 8 . VIDE GROUND NO. 1 & 2, THE GRIEVANCE OF THE DEPAR TMENT RELATES TO THE DELETION OF DISALLOWANCE OF DEPRECIATION OF LEA SED ASSETS AND THE DIRECTION FOR NOT TREATING THE LEASE RENT INCOME AS INCOME FROM OTHER SOURCES INSTEAD OF BUSINESS INCOME. 9 . AS REGARDS TO THIS ISSUE, LEARNED COUNSEL FOR THE ASSESSEE AT THE VERY OUTSET STATED THAT THIS ISSUE IS COVERED IN FA VOUR OF THE ASSESSEE BY THE EARLIER DECISION OF THIS BENCH OF THE TRIBUNAL IN ASSESSEES OWN CASE FOR THE A.YS. 1996-97 & 1997-98 IN ITA NO. 67 & 68/ JU/2003 REPORTED IN (2005) 93 TTJ (JD) 41 : (2005) 93 ITD 78 (JD), WHIC H HAS BEEN AFFIRMED BY THE HON'BLE JURISDICTIONAL HIGH COURT IN THE CASE O F CIT VS. SHREE RAJASTHAN SYNTEX LTD. (2008) 7 DTR (RAJ) 393. THE ABOVE CONTENTION OF THE LEARNED COUNSEL FOR THE ASSESSEE WAS NOT CONTRO VERTED BY THE LEARNED C.I.T. D.R. 10. AFTER CONSIDERING THE SUBMISSIONS OF BOTH THE PART IES AND MATERIAL ON RECORD, IT IS NOTICED THAT THE ISSUE UN DER CONSIDERATION IS COVERED BY THE RATIO LAID DOWN IN THE AFORESAID REF ERRED TO ORDER REPORTED AT (2008) 7 DTR 393 (SUPRA), WHEREIN IT HA S BEEN HELD AS UNDER:- THE BASIC DISTINGUISHING FEATURE BETWEEN THE LEAS E BEING FINANCE LEASE OR OPERATING LEASE WOULD BE, THAT IN CASE OF FINANCE LEASE, AT SOME POINT OF TIME, THE OWNERSHIP TRANSFERS TO THE LESSEE, OR THE LESSEE HAS THE OPTION TO PURCHASE, THE HIRED ASSETS , IN CONSIDERATION OF A TOKEN PRICE. OBVIOUSLY, IN THAT EVENT, THE LEASE RENT, OR HIRE CHARGES, CALLED BY WHATEVER NAME, WIT H PASSAGE OF TIME, PARTAKE THE CHARACTER OF THE PRICE OF THE ASS ET IN POSSESSION OF THE LESSEE, OR HIRER, UNDER THE FINANCE LEASE AG REEMENT, AS DISTINCT FROM THE LEASE IN QUESTION, WHERE THERE IS A VERY SPECIFIC STIPULATION THAT ON TERMINATION OF THE LEASE, THE L EASED PLANT AND MACHINERY ARE TO BE RETURNED TO THE LESSOR, IN THE CONDITION, AS THEY WERE TAKEN, EXCEPT NORMAL WEAR AND TEAR. TRIB UNAL WAS THEREFORE JUSTIFIED IN HOLDING THAT THE ASSESSEE IS ENTITLED TO GET DEPRECIATION UNDER S. 32 ON THE ASSETS CLAIMED TO B E GIVEN ON 4 LEASE, AS OWNER OF THE ASSETS. CIT VS. SHAAN FINA NCE (P) LTD./FIRST LEASING CO. OF INDIA LTD. (1998) 146 CT R (SC) 110 : (1998) 231 ITR 308 (SC) RELIED ON; SHREE RAJASTHAN SYNTEX LTD. VS. ASSTT. CIT (2005) 93 TTJ (JD) 41 AFFIRMED. 11 . SO, BY RESPECTFULLY FOLLOWING THE AFORESAID REFER RED TO ORDER IN ASSESSEES OWN CASE FOR THE A.YS. 1996-97 & 1997-98 , WE DO NOT SEE ANY MERIT IN THESE TWO GROUNDS OF THE DEPARTMENTAL APPE AL. SO, BY RESPECTFULLY FOLLOWING THE AFORESAID REFERRE D TO ORDER, WE DO NOT SEE ANY MERIT ON THIS ISSUE AGITATED BY THE DEP ARTMENT. 5. THE NEXT ISSUE VIDE GROUND NO.2 RELATES TO THE DE LETION OF DISALLOWANCE OF RS. 1,68,59,311/- MADE BY THE ASSES SING OFFICER UNDER SECTION 40(A)(IA) OF THE I.T. ACT, 1961 (HEREINAFTE R REFERRED TO AS ACT, IN SHORT). 6. REGARDING THIS ISSUE, LEARNED COUNSEL FOR THE ASSE SSEE AT THE VERY OUTSET STATED THAT THIS ISSUE HAS ALSO BEEN DECIDED BY THIS BENCH OF THE TRIBUNAL VIDE ORDER DATED 09/10/2013 IN ASSESSEES OWN CASE IN I.T.A.NO. 360/JU/2008 FOR THE A.Y. 2005-06. THE SAID CONTENT ION OF THE LEARNED COUNSEL FOR THE ASSESSEE WAS NOT CONTROVERTED BY TH E LEARNED CIT D.R. 7 . AFTER CONSIDERING THE SUBMISSIONS OF BOTH THE PAR TIES, IT IS NOTICED THAT THE SIMILAR ISSUE HAVING IDENTICAL FACTS HAS A LREADY BEEN DECIDED IN FAVOUR OF THE ASSESSEE VIDE AFORESAID REFERRED TO O RDER DATED 09/10/2013 5 IN THE PRECEDING A.Y. 2005-06, WHEREIN THE RELEVANT FINDING HAS BEEN GIVEN IN PARA 39, WHICH READS AS UNDER:- 39 . WE HAVE CONSIDERED THE SUBMISSIONS OF BOTH THE PA RTIES AND HAVE GONE THROUGH THE MATERIAL AVAILABLE ON THE RECORD. IN THE PRESENT CASE, IT IS AN ADMITTED FACT THAT THE IMPUGNED AMOUNT WAS PAID BY THE ASSESSEE ON ACCOUNT OF SEA FREIGHT, TO THE AGENTS O F NON-RESIDENT SHIP OWNERS. THEREFORE NO TDS WAS TO BE DEDUCTED UNDER SECTION 194C OR SECTION 195 OF THE ACT AS SUCH THE DISALLOWANCE MAD E BY THE ASSESSING OFFICER BY INVOKING THE PROVISIONS OF SECTION 40(A) (IA) OF THE ACT, WAS NOT JUSTIFIED AND THE LEARNED CIT(A) RIGHTLY DELETED TH E ADDITION MADE BY THE ASSESSING OFFICER BY CONSIDERING THE CIRCULAR NO. 7 23 DATED 19/12/1995 ISSUED BY THE CBDT. THE PRESENT ISSUE IS ALSO COVE RED BY THE DECISION OF THIS BENCH OF THE TRIBUNAL IN THE CASE OF ACIT VS. MINPRO INDUSTRIES (SUPRA) WHEREIN IT HAS BEEN HELD THAT REIMBURSEMENT OF THE PAYMENT TOWARDS SEA FREIGHT TRANSPORT, CCI CHARGES, STEAMER FREIGHT CHARGES AND REPO CONTAINER CHARGES MADE BY THE ASSESSEE TO THE C & F AGENTS WHO HAVE ALREADY MADE THE PAYMENT ON BEHALF OF THE ASSE SSEE WAS COVERED BY THE PROVISIONS OF SECTION 172 OF THE ACT AND NOT BY SECTION 194C OR SECTION 195 AND THAT THE AGENT HAVING ALREADY DEDUC TED TDS FROM THE TRANSPORTATION CHARGES AND SHIPPING BILL BEFORE MAK ING THESE PAYMENTS TO THE PRINCIPAL WHICH HAVE BEEN REIMBURSED BY THE ASSESSEE, THE ASSESSEE WAS NOT LIABLE TO DEDUCT TAX AT SOURCE FRO M SUCH PAYMENTS AND CONSEQUENTLY, SAME COULD NOT BE DISALLOWED BY INVOK ING THE PROVISIONS OF SECTION 40(A)(IA) OF THE ACT. 8. SO, BY RESPECTFULLY FOLLOWING THE AFORESAID REFERRE D TO ORDER DATED 09/10/2013 IN ASSESSEES OWN CASE FOR THE PRECEDING A.Y. 2005-06, WE DO NOT SEE ANY MERIT IN THIS GROUND OF THE DEPARTMENT APPEAL. 9. NOW WE WILL DEAL WITH THE ASSESSEES APPEAL IN I.T.A. NO. 379/JU/2010 . 6 10. THE FIRST ISSUE VIDE GROUND NO.1 IN THIS APPEAL RE LATES TO THE CONFIRMATION OF DISALLOWANCE OF RS. 9,00,000/- MADE BY THE ASSESSING OFFICER OUT OF REBATES AND CLAIMS. 11. THE FACTS RELATED TO THIS ISSUE IN BRIEF ARE THAT D URING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER NOTIC ED THAT THE ASSESSEE HAD CLAIMED RS. 18,21,027/- UNDER THE HEAD REBATE A ND CLAIMS. IN SUPPORT OF THE SAME, THE ASSESSEE FILED PARTY-WISE DETAILS IN WHICH THE YEAR OF SUBMISSION OF EACH CLAIM HAD BEEN SHOWN AS THE FINA NCIAL YEAR 2005-06. THE ASSESSING OFFICER DID NOT ALLOW THE CLAIM OF TH E ASSESSEE AND DISALLOWED A SUM OF RS. 9,00,000/- BY OBSERVING THA T THE ASSESSEE FILED EVIDENCES ONLY FOR 3-4 CASES OUT OF 206 CASES. 12. BEING AGGRIEVED, THE ASSESSEE CARRIED THE MATTER TO THE LEARNED CIT(A) AND SUBMITTED THAT THE CLAIM WAS CRYSTALLIZ ED AFTER NEGOTIATIONS WHICH TAKES 8-10 MONTHS TIME AND SIMILAR CLAIM HAD BEEN ALLOWED IN THE EARLIER YEARS. LEARNED CIT(A) DID NOT FIND MERIT I N THE SUBMISSIONS OF THE ASSESSEE BY OBSERVING THAT ALTHOUGH THE SETTLED AMO UNT HAD BEEN RECORDED IN THE BOOKS OF ACCOUNTS, BUT THE EVIDENCES FILED P ERTAINED TO THE ASSESSMENT YEAR 2005-06 AND NOT THE RELEVANT ASSESS MENT YEAR. NOW, THE ASSESSEE IS IN APPEAL. 7 13. LEARNED COUNSEL FOR THE ASSESSEE REITERATED THE SU BMISSIONS MADE BEFORE THE AUTHORITIES BELOW AND FURTHER SUBMITTED THAT THE LIABILITY WAS CRYSTALLIZED DURING THE YEAR UNDER CONSIDERATION AN D WAS RECORDED IN THE BOOKS OF ACCOUNTS. SO, IT WAS ALLOWABLE IN THE YEA R UNDER CONSIDERATION AS WAS DONE IN ALL THE EARLIER YEARS WHILE FRAMING THE ASSESSMENT UNDER SECTION 143(3) OF THE ACT. 14. IN HIS RIVAL SUBMISSIONS, LEARNED CIT D.R. SUPPORT ED THE ORDERS OF THE AUTHORITIES BELOW AND FURTHER SUBMITTED THAT THE AS SESSEE DID NOT FURNISH ANY EVIDENCE IN SUPPORT OF ITS CLAIM THAT THE AMOUN T PERTAINED TO THE YEAR UNDER CONSIDERATION. THEREFORE, THE DISALLOWANCE W AS RIGHTLY MADE BY THE ASSESSING OFFICER AND CONFIRMED BY THE LEARNED CIT( A). 15. WE HAVE CONSIDERED THE SUBMISSIONS OF BOTH THE PART IES AND THE MATERIAL AVAILABLE ON RECORD. IN THE PRESENT CASE, IT IS NOTICED THAT THE ASSESSING OFFICER DISALLOWED A SUM OF RS. 9,00,000/ - ONLY ON THE BASIS OF ESTIMATION AND NO COGENT REASON HAS BEEN GIVEN FOR THE SAME. SIMILARLY, LEARNED CIT(A) CONFIRMED THE DISALLOWANCE MADE BY T HE ASSESSING OFFICER IN SLIP SHOD MANNER WITHOUT ASSIGNING ANY COGENT RE ASON. AT THE SAME TIME, THE ASSESSEE ALSO DID NOT FURNISH ALL THE EVI DENCE IN SUPPORT OF ITS CLAIM. WE, THEREFORE, ARE OF THE VIEW THAT THIS IS SUE REQUIRES A FRESH ADJUDICATION AT THE ASSESSING OFFICER LEVEL. ACCOR DINGLY, THIS ISSUE IS SET 8 ASIDE TO THE FILE OF THE ASSESSING OFFICER FOR FRES H ADJUDICATION IN ACCORDANCE WITH LAW AFTER PROVIDING DUE AND REASONA BLE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. 16. THE NEXT ISSUE VIDE GROUND NO.2 RELATES TO THE CON FIRMATION OF DISALLOWANCE OF RS.4,85,829 CLAIMED BY THE ASSESSEE ON ACCOUNT OF SHORT RECEIPTS OF TARGET PLUS EXPORT BENEFITS. 17. THE FACTS RELATED TO THIS ISSUE IN BRIEF ARE THAT T HE ASSESSEE HAD WRITTEN OFF A SUM OF RS. 4,85,829/- IN RESPECT OF T ARGET PLUS LICENSE FOR DUTY FREE IMPORT AS EXPENSES. IT WAS STATED THAT T HIS AMOUNT WAS DEBITED AS EXCESS INCOME IN THE PRECEDING YEAR AND HAD WRIT TEN OFF IN THE YEAR UNDER CONSIDERATION. THE ASSESSING OFFICER DISALLO WED THE SAID AMOUNT BY OBSERVING THAT IT DID NOT PERTAIN TO THE YEAR UNDER CONSIDERATION. 18. BEING AGGRIEVED, THE ASSESSEE CARRIED THE MATTER TO THE LEARNED CIT(A) AND MADE THE FOLLOWING SUBMISSIONS:- A) THE APPELLANT HAS PROVIDED THE RECOVERABLE AMOU NT WHILE CLOSING BOOKS OF ACCOUNT FOR THE YEAR ENDED 31/03/2005 FOR $ 664714.13 @ 43.75 AMOUNTING TO RS. 2,90,81,265/- AND APPLIED TO THE MINISTRY OF COMMERCE FOR ISSUE OF TARGET PLUS LICENSE FOR DUTY FREE IMPORT. B) HOWEVER, THE MINISTRY OF COMMERCE HAS ISSUED LIC ENSES FOR RS. 2,85,95,436/- BY A LETTER DATED 01/05/2006. C) THE DIFFERENCE IN DUE TO FOREIGN EXCHANGE FLUCTU ATION RATE AND ALSO DUE TO RECEIPT OF EXPORT FOREIGN CURRENCY IN FUTURE YEAR. 9 D) THUS THE ASSESSEE HAD WRITTEN OFF THE AMOUNT AS EXPENSES FOR THE A.Y. 2006-07, WHICH IS ALSO IN NATURE OF BAD DEBTS. 19. LEARNED CIT(A) AFTER CONSIDERING THE SUBMISSIONS O F THE ASSESSEE OBSERVED THAT THIS AMOUNT WAS ADDED BECAUSE IT DID NOT RELATE TO THE YEAR UNDER CONSIDERATION AND THE ASSESSEE HAD NOT SATISF ACTORILY EXPLAINED OR FURNISHED ANY EVIDENCE IN THIS REGARD TO PROVE THAT THIS AMOUNT PERTAINED TO THE YEAR UNDER CONSIDERATION. NOW THE ASSESSEE IS IN APPEAL. 20. LEARNED COUNSEL FOR THE ASSESSEE REITERATED THE SUB MISSIONS MADE BEFORE THE AUTHORITIES BELOW AND FURTHER SUBMITTED THAT IT WAS DUE TO FOREIGN EXCHANGE FLUCTUATION RATE AND ALSO DUE TO R ECEIPT OF EXPORT FOREIGN CURRENCY IN FUTURE YEAR AND THAT THE ASSESSEE HAD W RITTEN OFF THE AMOUNT AS EXPENSES WHICH WERE IN THE NATURE OF BAD DEBTS. THEREFORE, THE CLAIM WAS ALLOWABLE AND THE LEARNED CIT(A) WAS NOT JUSTIF IED IN CONFIRMING THE ADDITION MADE BY THE ASSESSING OFFICER. 21. IN HIS RIVAL SUBMISSIONS, LEARNED CIT D.R. SUPPORTE D THE ORDERS OF THE AUTHORITIES BELOW. 22. AFTER CONSIDERING THE SUBMISSIONS OF BOTH THE PART IES AND THE MATERIAL AVAILABLE ON RECORD, IT APPEARS THAT THE D ISALLOWANCE WAS MADE BY THE ASSESSING OFFICER AND SUSTAINED BY THE LEARN ED CIT(A) BECAUSE THE 10 ASSESSEE COULD NOT FURNISH THE RELEVANT EVIDENCES/D OCUMENTS. ON THE OTHER HAND, CLAIM OF THE ASSESSEE WAS THAT THE SAID AMOUNT WAS IN THE NATURE OF BAD DEBTS AND WAS NOT RECOVERABLE, SO IT WAS WRITTEN OFF. IN OUR OPINION, THE AUTHORITIES BELOW HAD NOT APPRECIATED THE FACTS IN RIGHT PERSPECTIVE AND THE ASSESSEE ALSO COULD NOT EXPLAIN PROPERLY BEFORE THEM. WE, THEREFORE, TO MEET THE ENDS OF JUSTICE, DEEM IT PROPER TO SET ASIDE THIS ISSUE BACK TO THE FILE OF ASSESSING OFFICER FO R FRESH ADJUDICATION IN ACCORDANCE WITH LAW AFTER PROVIDING DUE AND REASONA BLE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. 23. IN THE RESULT, APPEAL OF THE DEPARTMENT IS DISMISSE D AND THAT OF THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSE. (ORDER PRONOUNCED IN THE COURT ON 13 TH NOVEMBER, 2013). SD/- SD/- (HARI OM MARATHA) (N.K.SAINI) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 13 TH NOVEMBER , 2013. VR/- COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE LD.CIT 4. THE CIT(A) 5. THE D.R ASSISTANT REGISTRAR, ITAT, JODHPUR.