TCG Refineries Ltd., Kolkata V. I.T.O Wd - 8(3),Kol., Kolkata

ITA 4/KOL/2013

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 1747 (ITAT-KOLKATA)
• Duration Of Justice: 4 year(s) 4 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-05-2017
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 28-03-2017
• Assessment Year: 2002-2003
• Appeal Filed On: 01-01-2013
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: SALLONG YADAN
• Assessee Lawyers: A K TIBREWAL
• Keywords: Rule of consistency; Reassessment proceedings
• Section: 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL KOLKATA BENCH A KOLKATA BEFORE SHRI WASEEM AHMED, ACCOUNTANT MEMBER AND SHRI S.S.VISWANETHRA RAVI, JUDICIAL MEMBER ITA NO.04/KOL/2013 ASSESSMENT YEAR:2002-03 TCG REFINERIES LTD., 9B, WOOD STREET 4 TH FLOOR, KOLKATA-700 016 [ PAN NO.AAACT 9916 B ] / V/S . INCOME TAX OFFICER, WARD-8(3), P-7, CHOWRINGHEE SQUARE, KOLKATA-700 069 /APPELLANT .. /RESPONDENT /BY APPELLANT SHRI A.K.TIBREWAL, FCA /BY RESPONDENT SHRI SALLONG YADAN, ADDL. CIT-DR /DATE OF HEARING 28-03-2017 /DATE OF PRONOUNCEMENT 12-05-2017 /O R D E R PER WASEEM AHMED, ACCOUNTANT MEMBER:- THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF COMMISSIONER OF INCOME TAX (APPEALS)-XXXII, KOLKATA DATED 10.10.201 2. ASSESSMENT WAS FRAMED BY ITO WARD-8(3), KOLKATA U/S 147/144 OF THE INCOME TA X ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT) VIDE HIS ORDER DATED 03.0 7.2007 FOR ASSESSMENT YEAR 2002-03. SHRI A.K. TIBREWAL, LD. AUTHORIZED REPRESENTATIVE A PPEARED ON BEHALF OF ASSESSEE AND SHRI SALLONG YADAN, LD. DEPARTMENTAL REPRESENTA TIVE REPRESENTED ON BEHALF OF REVENUE. 2. THE ISSUE RAISED BY ASSESSEE IN THIS APPEAL IS T HAT LD. CIT(A) ERRED IN UPHOLDING THE ORDER OF ASSESSING OFFICER BY SUSTAIN ING THE DISALLOWANCE OF 30,46,320/- ON ACCOUNT OF CONSULTANCY INCOME. 3. BRIEFLY STATED FACTS ARE THAT ASSESSEE IS A LIMI TED COMPANY AND ENGAGED IN THE BUSINESS OF REFINERIES. THE ASSESSEE IN THE YEAR UN DER CONSIDERATION HAS CLAIMED TAX DEDUCTED AT SOURCE (TDS) OF 1,55,363/- ONLY IN ITS RETURN OF INCOME, HOWEVER IT WAS ITA NO.04/KOL/2013 A.Y. 2 002-03 TCG REFINERIES LTD. VS. ITO W D-9(3) KOL. PAGE 2 OBSERVED NO CORRESPONDENCE INCOME WAS SHOWN IN THE PROFIT AND LOSS A/C OF THE ASSESSEE, IN FACT, NO PROFIT AND LOSS A/C WAS PREPA RED BY ASSESSEE AND FILED WITH ITS RETURN OF INCOME. IT WAS OBSERVED THAT THE CONSULTA NCY INCOME RECEIVED BY ASSESSEE WAS CAPITALIZED IN THE BOOKS OF ACCOUNT ON THE GROU ND THAT THE COMPANY HAS NOT COMMENCED COMMERCIAL PRODUCTION. HOWEVER, THE AO WA S OF THE VIEW THAT THE CONSULTANCY INCOME IS NOT RELATED TO THE REFINERIES BUSINESS OF ASSESSEE AND THEREFORE SAME WAS LIABLE TO TAX UNDER THE HEAD INCOME FROM OTHER SOURCES. ACCORDINGLY, AO TREATED THE SAME AS INCOME FROM OTHER SOURCE. 4. AGGRIEVED, ASSESSEE PREFERRED AN APPEAL BEFORE L D. CIT(A). THE ASSESSEE BEFORE LD CIT(A) SUBMITTED THAT COMMERCIAL ACTIVITY HAS NOT BEEN STARTED AND THEREFORE ALL THE EXPENSES INCLUDING THE CONSULTANC Y INCOME WAS CAPITALIZED UNDER CAPITAL WORK-IN-PROGRESS IN THE YEAR UNDER CONSIDER ATION. SOME ENGINEERS WERE DEPUTED TO BOULEVARD SERVICE PVT. LTD. (BSPL FOR SH ORT) FOR THE PROJECT AT HALIDA PETRO-CHEMICALS AND THE BSPL HAD REIMBURSED 30,46,316/- WHICH WAS CREDITED IN THE CAPITAL WORK-IN-PROGRESS. HOWEVER, THE BSPL ON THE AMOUNT OF REIMBURSEMENT OF SALARY HAS DEDUCTED TDS U/S. 194J OF THE ACT WHICH WAS MADE BY VIRTUE OF PROVISION OF LAW. HOWEVER, THE LD. CIT(A) DISREGARDED THE CON TENTION OF THE ASSESSEE BY OBSERVING THAT THERE IS NO RELATIONSHIP BETWEEN THE CONSULTANCY INCOME RECEIVED BY THE ASSESSEE AND THE COST INCURRED IN RELATION TO CAPIT AL WORK-IN-PROGRESS IN CONNECTION TO THE REFINERIES BUSINESS. THEREFORE, LD. CIT(A) UPHE LD THE ORDER OF AO. BEING AGGRIEVED BY THIS ORDER OF LD. CIT(A) ASSESSE E CAME IN SECOND APPEAL BEFORE US ON THE FOLLOWING GROUNDS:- 01. FOR THAT THE LD. CIT(A) ERRED IN UPHOLDING THE VALIDITY OF IMPUGNED NOTICE DATED 12.03.2007 ISSUED U/S. 148 OF THE INCOME TAX ACT, 1 961 AND THE REASSESSMENT PROCEEDINGS THEREON. 02. FOR THAT LD. CIT(A) ERRED IN UPHOLDING THE ADDI TION OF RS.30,46,320 TOWARDS SECONDMENT CHARGES (CONSULTANCY CHARGES). 5. BEFORE US LD. AR FILED PAPER BOOK WHICH IS RUNNI NG PAGES FROM 1 TO 25AND CITED INDEX OF CASE LAW WHICH IS RUNNING PAGES FROM 1 TO 74 AND SUBMITTED THAT FOR THE ASSESSMENT YEAR 2004-05 THE REVENUE HAS ACCEPTED TH E IMPUGNED CONSULTANCY CHARGE IN RELATION TO BUSINESS OF ASSESSEE AND ACCORDINGLY IT WAS ADJUSTED AGAINST THE CAPITAL ITA NO.04/KOL/2013 A.Y. 2 002-03 TCG REFINERIES LTD. VS. ITO W D-9(3) KOL. PAGE 3 WORK-IN-PROGRESS. LD. AR ALSO SUBMITTED THAT ONCE A VIEW HAS BEEN ACCEPTED BY THE LD. CIT(A) THEN THE SAME VIEW SHOULD BE APPLIED TO ALL THE ASSESSMENT YEARS. ON THE OTHER HAND, LD. DR SUBMITTED THAT EACH YEAR IS A SEPARATE YEAR AND THEREFORE THE VIEW ONCE ADOPTED SHOULD NOT NECESSARILY BE TAK EN FOR ALL THE YEARS. HE VEHEMENTLY RELIED ON THE ORDER OF AUTHORITIES BELOW . 6. WE HAVE HEARD RIVAL CONTENTIONS OF BOTH THE PART IES AND PERUSED AND CAREFULLY CONSIDERED THE MATERIALS ON RECORD; INCLUDING THE J UDICIAL PRONOUNCEMENTS CITED AND PLACED RELIANCE UPON. THE ISSUE IN THE INSTANT CASE RELATES TO THE TREATMENT OF CONSULTANCY CHARGE RECEIVED BY THE ASSESSEE WHETHER IT HAS CONNECTION WITH THE BUSINESS OF ASSESSEE OR IT SHOULD BE TREATED AS INC OME FROM THE OTHER SOURCES. IT IS UNDISPUTED FACT THAT ASSESSEE HAS NOT STARTED ITS C OMMERCIAL PRODUCTION AND ALL THE COST WHICH HAS BEEN INCURRED FOR THE PURPOSE OF THE BUSI NESS WAS DULY CAPITALIZED. HOWEVER, THE ASSESSEE IN THE INSTANT CASE, HAS RECE IVED CONSULTANCY INCOME BEFORE THE COMMENCEMENT OF COMMERCIAL ACTIVITIES FOR 30,46,320/- AND THE VIEW TAKEN BY AUTHORITIES BELOW THAT INCOME HAS NOTHING TO DO WIT H THE PROJECT OF THE ASSESSEE AND THEREFORE SAME SHOULD BE TAXABLE UNDER THE HEAD INCOME FROM OTHER SOURCE , WHEREAS THE ARGUMENT OF LD. AR IS THAT IT HAS A DIR ECT CONNECTION AND CO-RELATION WITH THE BUSINESS OF THE ASSESSEE AND THEREFORE, SAME SH OULD BE CAPITALIZED IN THE BOOKS OF ACCOUNT OF THE ASSESSEE. NOW THE ISSUE BEFORE US AR ISES SO AS TO WHETHER THE IMPUGNED CONSULTANCY INCOME RECEIVED BY THE ASSESSEE HAS DIR ECT CO-RELATION WITH ITS ACTIVITIES. AT THE OUTSET, WE FIND THAT SIMILAR ISSUE WAS RAISE D BY ASSESSEE BEFORE LD. CIT(A) FOR A.Y 2004-05 VIDE ITA 217CIT(A)-VIII/KOL/06-07 WHERE IN LD. CIT(A) VIDE ITS ORDER DATED 16.03.2012 HAS ALLOWED THE APPEAL OF ASSESSEE BY HOLDING THAT THE CONSULTANCY INCOME HAS DIRECT NEXUS WITH THE PROJECT ACTIVITIES OF THE ASSESSEE. THE COPY OF LD. CIT(A) IS PLACED ON PAGES 15 TO 22 OF THE PAPER BOO K. THE RELEVANT FINDING OF THE LD. CIT-A FOR THE AY 2004-05 IS REPRODUCED BELOW :- I HAVE CAREFULLY CONSIDERED THE SUBMISSION MADE BY THE APPELLANT ALONG WITH THE CASE LAWS REFERRED TO, PERUSED THE IMPUGNED ASSESSM ENT ORDER AND THE FACTS OF THE CASE AND THE OTHER MATERIALS ON RECORDS. I FIND THA T THERE IS SUBSTANTIAL FORCED IN THE ARGUMENT OF THE AR OF THE APPELLANT. IT IS OBSERVED THAT THE AO HAS TAKEN INTO ACCOUNT THE FACT THAT SINCE THE APPELLANT HAS CLAIMED CREDI T OF TDS, THE PROVISIONS OF THE SEC. 199(1) SHOULD BE APPLICABLE AND WITH THAT VIEW IN M IND HE TREATED THE RECEIPT AS TAXABLE INCOME OF THE APPELLANT. IT IS EXPLAINED TH AT SHRI RABIN MUKHOPADHYAY, HAS BEEN SECONDED/DEPUTED FOR A SHORT PERIOD TO BOULEVA RD SERVICES PVT. LTD. 9BSPL) FOR ITA NO.04/KOL/2013 A.Y. 2 002-03 TCG REFINERIES LTD. VS. ITO W D-9(3) KOL. PAGE 4 THEIR WORKS AT HALDIA PETROCHEMICALS TO HAVE A LINK WITH HALDIA PETROCHEMICALS AND PART OF THE SALARY OF RS.1,93,333/- PLUS SERVICE TA X OF THIS ENGINEER HAS BEEN REIMBURSED BY BSPL TO THE APPELLANT. THIS AMOUNT RE CEIVED FROM BSPL HAS BEEN CREDITED IN THE BOOKS OF ACCOUNT AS SECONDMENT CHAR GES RECEIVED BSPL HAS DEDUCTED TAX AT SOURCE ON THE AFORESAID AMOUNT PAID BY THEM TO THE APPELLANT COMPANY U/S 194J. THE TOTAL SALARY PAYMENT MADE BY THE APPELLAN T COMPANY TO THIS ENGINEER FOR THE ENTIRE YEAR WAS OF RS.17,16,118/- AND THAT HAS ALSO BEEN DEBITED TO SECONDMENT CHARGES. THEREAFTER, THE NET AMOUNT OF RS.15,22,785 /- (DEBIT) IN THE SECONDMENT CHARGES HAS BEEN CAPITALIZED BY THE APPELLANT BY DE BITING CWIP ALONG WITH ALL OTHER EXPENSES. IT IS FURTHER SUBMITTED THAT THE COMPANY WAS IN THE PROCESS OF SETTING UP A REFINERY PROJECT IN THE HALDIA. THE PROJECT WAS THEREFORE UN DER CONSTRUCTION AND NO ACTIVITIES WHETHER IN THE NATURE OF BUSINESS OR OTHERWISE HAS BEEN CARRIED OUT DURING THE YEAR UNDER CONSTRUCTION BY IT. THE BUSINESS HAS NOT COMM ENCED. NO PROFIT & LOSS HAS BEEN PREPARED. ALL THE EXPENSES INCLUDING SALARY AND SEC ONDMENT CHARGES INCURRED BY IT HAS BEEN CAPITALIZED IN THE CAPITAL WORK IN PROGRES S (CWIP) FOR THE PROJECT. THE AMOUNT OF CWIP HAS BEEN CARRIED FORWARD YEAR AFTER YEAR. IT IS ARGUED THAT THE COMPANY HAS IN ITS ROLL NUMBER OF EMPLOYEES INCLUDI NG ENGINEERS FOR THE PURPOSES OF ITS PROJECT AND THE SALARY AMOUNTING TO RS.114,63,4 96/- ( DEBITED UNDER THE HEAD SALARY ) AND RS.17,16,118/- ( DEBITED UNDER SECONDMENT CHARGES ) HAVE BEEN RIGHTLY CAPITALIZED BY THE COMPANY. IT IS FURTHER ARGUED TH AT THE PART OF SALARY RECEIVED BY THE ENGINEER AS SECONDMENT CHARGES CANNOT BE THE INCOME OF THE COMPANY IN ISOLATION. IN SUPPORT OF ITS CONTENTION, MY ATTENTION IS DRAWN TO THE DECISION OF THE HON'BLE SUPREME COURT IN THE CASE OF BONGAIGAON REFINERY V S. CIT (SUPRA) DELIVERED ON THE SIMILAR FACTS AND CIRCUMSTANCES WHEREIN IT HAS BEEN HELD THAT SUCH RECEIPTS WERE NOT TAXABLE INCOME BUT TO BE ADJUSTED AGAINST PROJECT C OST OF THE BUSINESS. THE FOLLOWING QUESTION HAS BEEN REFERRED TO THE HON'BLE SUPREME C OURT. THE AR OF THE APPELLANT FURTHER SUBMITTED THAT IN A NY EVENT, ASSUMING BUT NOT ADMITTING THE SAME, EVEN IF THE RECEIPT IS AN INCOM E THAN IN SUCH EVENT THE OUTGOING EXPENSES INCURRED BY THE APPELLANT DURING THE YEAR UNDER CONSIDERATION IS DEDUCTABLE FROM SUCH INCOME. IT IS ARGUED THAT DURING THE YEAR THE APPELLANT HAS INCURRED A SUM OF RS.97,80,001/- TOWARDS VARIOUS EXPENSES AND LOSS ES INCLUDING SALARY, SECONDMENT CHARGES AND OTHER EXPENSES TO RUN AND MAINTAIN THE COMPANY. AFTER CAREFULLY CONSIDERING THE SUBMISSIONS OF THE APPELLANT, PERUSING THE IMPUGNED ASSESSMENT ORDER, THE FACTS OF THE CASE AND THE OTH ER MATERIALS BROUGHT ON RECORDS AND RESPECTFULLY FOLLOWING THE DECISION OF THE HON' BLE SUPREME COURT IN THE CASE OF BONGAIGAON REFINERY VS CIT (SUPRA) REFERRED TO BY T HE APPELLANT, I AM OF THE CONSIDERED VIEW THAT THE AO IS NOT JUSTIFIED IN TRE ATING THE PART OF SALARY RECEIVED BY THE APPELLANT COMPANY IN LIEU OF THE SERVICES RENDE RED BY ONE OF ITS ENGINEER AS THE TAXABLE INCOME OF THE COMPANY IN CONTRARY TO THE EN TIRETY OF THE FACTS AND CIRCUMSTANCES OF THE APPELLANTS CASE. THEREFORE, T HE AO IS DIRECTED TO DELETE THE ADDITION SO MADE ON WRONG FACTS OF THE CASE. THUS, THIS GROUND OF APPEAL OF THE APPELLANT IS ALLOWED. IT WAS ALSO BROUGHT TO OUR NOTICE THAT NO APPEAL HA S BEEN PREFERRED BY THE REVENUE AGAINST SUCH ORDER BEFORE TRIBUNAL. IN REJOINDER, L D. DR HAS ALSO NOT BROUGHT ANYTHING ITA NO.04/KOL/2013 A.Y. 2 002-03 TCG REFINERIES LTD. VS. ITO W D-9(3) KOL. PAGE 5 ON RECORD CONTRARY TO THE ARGUMENTS PLACED BY LD. A R BEFORE US. ON PERUSAL OF THE ORDER OF LD. CIT(A) PASSED DATED 16.03.2012 FOR THE AY 2004-05 WE OBSERVE THAT THE FACTS OF THE INSTANT CASE ARE EXACTLY IDENTICAL AND THERE IS NO CHANGE IN THE FACTS. THUS, IN OUR CONSIDERED VIEW THE PRINCIPLE OF CONSISTENCY CAN BE APPLIED AS ENUNCIATED BY THE HONBLE APEX COURT IN THE CASE OF IN THE CASE O F RADHASOAMI SATSANG VS. COMMISSIONER OF INCOME TAX (1992) 193 ITR 0321 (SC) WHEREIN IT WAS OBSERVED I N THE ABSENCE OF ANY MATERIAL CHANGE IN THE FACTS AND THEN THE REVENUE SHOULD NOT TAKE A DIFFERENT VIEW IN THE OTHER YEAR. THE APPELLATE ORDER PASSED BY LD. CIT(A) FOR THE AY 2004-05 VIDE ORDER DATED 16.3.2012 WHERE THE PLEA OF THE ASSESSEE WAS ACCEPT ED WHEREAS THE LD. CIT(A) FOR THE AY 2002-03 HAS TAKEN A CONTRARY VIEW VIDE ORDER DAT ED 10.10.2012. THE IMPUGNED ORDER WAS PASSED BY THE LD. CIT(A) AFTER THE DATE O F THE ORDER OF THE LD. CIT(A) FOR THE AY 2004-05. THUS, IN OUR VIEW THE IMPUGNED ORDER WA S PASSED BY THE LD. CIT(A) WITHOUT CONSIDERING THE EARLIER ORDER IN THE OWN CA SE OF THE ASSESSEE. IN VIEW OF ABOVE FOLLOWING THE RULE OF CONSISTENCY, WE ALLOW THE APP EAL OF THE ASSESSEE. 7. AS WE HAVE DECIDED THE ISSUE IN FAVOUR OF ASSESS EE THEN OTHER GROUNDS OF ASSESSEE BECOME ACADEMIC AND INFRUCTUOUS AND WE DIS MISS THE SAME AS HAVING BECOME INFRUCTUOUS. 8. IN THE RESULT, ASSESSEES APPEAL STANDS ALLOWED PAR TLY. ORDER PRONOUNCED IN OPEN COURT ON 12/05/2017 SD/- SD/- (S.S.VISWANETHRA RAVI) (WASEEM AHMED) JUDICIAL MEMBER ACCOUNTANT MEMBER *DKP, SR.P.S ! - 12/05/2017 / KOLKATA / COPY OF ORDER FORWARDED TO:- 1. /APPELLANT-TCG REFINERIES LTD., 9B, WOOD STREET, 4 TH FLOOR, KOL-16 2. /RESPONDENT-ITO, WARD-8(3),P-7, CHOWRINGHEE SQUARE, K OLKATA-69 3. '# % / CONCERNED CIT 4. % - / CIT (A) 5. &'( ))'# , '# / DR, ITAT, KOLKATA 6. (*+ / GUARD FILE. BY ORDER/ , /TRUE COPY/ SR. PR IVATE SECRETARY/ HEAD OF OFFICE/DDO / / '#,