M/s. Kashmir Tubes, Jammu V. The DY.Commissioner of Incomet-ax, Jammu

ITA 417/ASR/2011

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 63488 (ITAT-AMRITSAR)
• Duration Of Justice: 1 year(s) 1 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-09-2012
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 28-08-2012
• Assessment Year: 2005-2006
• Appeal Filed On: 18-07-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: S K BANSAL
• Keywords: Capital receipt; Commercial expediency
• Section: 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.417(ASR)/2011 ASSESSMENT YEAR 2005-06 PAN :AAAFK9392D M/S. KASHMIR TUBES VS. THE DY. COMMR. OF INCOME-TA X, JAMMU. CIRCLE-1, JAMMU. (APPELLANT) (RESPONDENT) I.T.A. NO. 449(ASR)/2011 ASSESSMENT YEAR:2005-06 THE ASSTT. COMMR. OF INCOME-TAX, VS. M/S. KASHMIR T UBES, CENTRAL CIRCLE, BARI BRAHMANA, JAMMU. JAMMU (APPELLANT) (RESPONDENT) APPELLANT BY: SH. S.K. BANSAL, ADV. RESPONDENT BY:SH. TARSEM LAL, DR DATE OF HEARING:28/08/2012 DATE OF PRONOUNCEMENT:03/09/2012 ORDER PER BENCH ; THE ASSESSEE AS WELL AS THE REVENUE IS IN APPEAL A GAINST THE ORDER OF THE CIT(A), JAMMU, DATED 26.04.2011 RELATING TO ASS ESSMENT YEAR 2005-06. 2. THE FACTS NARRATED BY THE REVENUE ARE NOT DISPUT ED BY BOTH THE PARTIES; THEREFORE, THERE IS NO NEED TO REPEAT THE SAME FOR THE SAKE OF CONVENIENCE. 3. AT THE TIME OF HEARING BOTH THE PARTIES AGREED T HAT THE ISSUE REGARDING ALLOWABILITY OF DEDUCTION UNDER SECTION 80IB OF THE ACT ON THE EXCISE DUTY 2 REFUND BEING THE INCOME DERIVED FROM THE INDUSTRIAL UNDERTAKING, WAS TREATED AS CAPITAL RECEIPT AS HAS BEEN HELD BY THE HON BLE JURISDICTIONAL HIGH COURT OF J & K IN THE CASE OF SHREE BALAJI ALLOYS V . CIT AND ANOTHER (2011) 333 ITR 335 (J&K). THE HONBLE HIGH COURT HELD THAT THE EXCISE DUTY REFUND IS TO BE TREATED AS CAPITAL RECEIPT AND NO T LIABLE TO BE TAXED. THIS ISSUE INVOLVED IN THE PRESENT APPEALS IS COMMON, WH ICH THE HONBLE HIGH COURT HAS DECIDED IN FAVOUR OF THE ASSESSEE, IN THE AFORESAID CASE. KEEPING IN VIEW THE ADMITTED FACTS AND THE LEGAL POSITION, THE ISSUE REGARDING ALLOWABILITY OF DEDUCTION UNDER SECTION 80IB OF THE INCOME-TAX ACT, 1961 OF THE AMOUNT IN DISPUTE TO THE TUNE OF RS.1,22,05,284 /- IS TO BE TREATED AS CAPITAL RECEIPT AND AO IS DIRECTED TO RECOMPUTE THE RELIEF ALLOWABLE UNDER SECTION 80-IB OF THE ACT, AS CLAIMED BY THE ASSESSE E IN THE RETURN OF INCOME AND THE APPEAL OF THE ASSESSEE IS ACCORDINGLY ALLO WED AND GROUND NO.1 & 2 OF THE REVENUE ARE DISMISSED. 4. AS REGARDS THE APPEAL OF THE DEPARTMENT IN ITA N O.449ASR)/2011, THE SECOND ISSUE REGARDING DELETION OF ADDITION OF INTE REST OF RS. 2,85,336/- MADE ON ACCOUNT OF DISALLOWANCE OF INTEREST, THE LD . FIRST APPELLATE AUTHORITY HAS DELETED THE ADDITION BY FOLLOWING THE ORDER OF THE ITAT, AMRITSAR BENCH, IN THE CASE OF M/S. NEW KASHMIR STEEL ROLLI NG MILLS AND M/S. KASHMIR STEEL ROLLING MILLS IN ITA NO.242(ASR).2008 DATED 19.01.2009. THE LD. FIRST APPELLATE AUTHORITY HAS ALSO REPRODUC ED THE FINDINGS OF THIS 3 BENCH IN THE SAID CASE IN PARA 5G, THE RELEVANT PORTION OF THE SAME IS REPRODUCED FOR CLARITY, AS UNDER: 5G. I HAVE CAREFULLY CONSIDERED THE SUBMISSION OF ASSESSEE. IN RESPECT OF DISALLOWANCE OF INTEREST PAID TO SAME P ERSON THE HONBLE ITAT, AMRITSAR BENCH, IN THE CASE OF M/S. NEW KASHM IR STEEL ROLLING MILLS AND M/S. KASHMIR STEEL ROLLING MILLS IN ITA N O.242(ASR).2008 DATED 19.01.2009: FIRST, WE WILL DEAL WITH APPEALS IN ITA NOS. 242, 243, 467 & 294(ASR)/2008, WHERE THE FIRST COMMON GROUND RAISE D IN ALL THESE FOUR APPEALS RELATE TO DISALLOWANCE OF INTEREST. IN THESE CASES, THE ASSESSEES HAVE BORROWED FUNDS FROM VARIOUS PARTIES. THE ASSESSEES HAVE PAID INTEREST @ 10% PER ANNUM. HOWEVER, IN FEW CASES, THE ASSESSEES HAVE PAID INTEREST @ 15% P.A. HENCE, THE AO DISALLOWED INTEREST OVER AND ABOVE 10% P.A. IN OUR OPINION, TH E ACTION OF THE LOWER AUTHORITIES IS NOT JUSTIFIED. THERE IS NO DO UBT THAT THE ASSESSEE HAS BORROWED MONEY AND THERE IS NO DISPUTE REGARDIN G MONEY BORROWED FOR THE PURPOSE OF BUSINESS AND ALSO THER E IS NO DISPUTE THAT THE ASSESSEES HAVE PAID INTEREST. THE ONLY OBSERVA TION OF THE LOWER AUTHORITIES IS THAT THE ASSESSEES HAVE PAID INTERES T OVER AND ABOVE 10% P.A. AND ASSESSEES MUST HAVE PAID INTEREST @ 10 % AT UNIFORM RATE TO ALL THE PARTIES. THIS CONTENTION OF THE DE PARTMENT HOLDS NO MERIT IN OUR OPINION, INTEREST PAID FOR THE PURPOSE OF BUSINESS ON ACCOUNT OF COMMERCIAL EXPEDIENCY IS ALLOWABLE AS DE DUCTION. THE REVENUE AUTHORITIES CANNOT JUSTIFIABLE CLAIM TO PUT ITSELF IN THE ARM CHAIR OF BUSINESSMAN IN ASSUMING THE ROLE TO DECIDE HOW MUCH IS REASONABLE EXPENDITURE HAVING REGARD TO THE CIRCUMS TANCES OF THE CASE. NO BUSINESSMAN CAN BE COMPELLED TO MAXIMISE I TS PROFIT. THE INCOME-TAX AUTHORITIES MUST PUT THEMSELVES IN THE SHOES OF THE ASSESSEE AND SEE HOW A PRUDENT BUSINESSMAN WOULD AC T. THE AUTHORITIES MUST NOT LOOK AT THE MATTER FROM THEIR OWN VIEW POINT BUT THAT OF A PRUDENT BUSINESSMAN. WE HAVE TO SEE INCUR RING OF EXPENDITURE ON COMMERCIAL EXPEDIENCY. IN THE PRESE NT CASE, THE PAYMENT OF INTEREST TO OTHER PARTIES CANNOT BE TREA TED AS PAYMENT FOR PERSONAL BENEFIT OF THE ASSESSEE AND EXPENDITURE IN CURRED ON COMMERCIAL EXPEDIENCY IS TO BE ALLOWED. THIS GROUND OF THE ASSESSEE IN ALL THE APPEALS IS ALLOWED. 5. KEEPING IN VIEW THE FACTS AND CIRCUMSTANCES OF T HE CASE AND THE ORDER PASSED BY THE LD. FIRST APPELLATE AUTHORITY BY FOLL OWING THE ORDER OF THIS 4 BENCH (SUPRA) AS REPRODUCED ABOVE, WE ARE OF THE V IEW THAT THE LD. FIRST APPELLATE AUTHORITY HAS RIGHTLY DELETED THE ADDITIO N AND AS SUCH NO INTERFERENCE IS CALLED FOR IN THE IMPUGNED ORDER OF THE LD. FIRST APPELLATE AUTHORITY ON THE ISSUE RAISED IN GROUND NO. 3 OF REVENUES APPEAL. 6. AS REGARDS THE ISSUE INVOLVED IN GROUND NO.4 OF THE REVENUES APPEAL REGARDING DISALLOWANCE OUT OF CAR REPAIRS MAINTENA NCE, SCOOTER REPAIRS MAINTENANCE AND TELEPHONE TO 5% OF THE AMOUNT CLAI MED ON ADHOC BASIS. AFTER GOING THROUGH THE ORDER PASSED BY THE REVENUE AUTHORITY, WE ARE OF THE VIEW THAT THE LD. FIRST APPELLATE AUTHORITY HAS GIV EN SUFFICIENT RELIEF TO THE ASSESSEE AND RIGHTLY RESTRICTED THE ADDITION TO 5% OF THE SAID EXPENDITURE. THEREFORE, NO INTERFERENCE IS CALLED FOR IN THE IMP UGNED ORDER AND THIS GROUND OF APPEAL OF THE REVENUE IS DISMISSED. 7. IN THE RESULT, THE APPEAL OF THE ASSESSEE IN ITA NO.417(ASR)/2011 IS ALLOWED AND APPEAL OF THE REVENUE IN ITA NO.449(ASR )/2011 IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 3RD SEPTEMBER, 2012. SD/- SD/- (B.P. JAIN) (H.S. SIDHU) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 3RD SEPT., 2012 /SKR/ COPY OF THE ORDER FORWARDED TO: 1. THE ASSESSEE:M/S. KASHMIR TUBES, JAMMU. 2. THE ACIT/DCIT C.C.I. JAMMU. 3. THE CIT(A), JAMMU. 4. THE CIT, JAMMU. 5. THE SR DR, ITAT, AMRITSAR. TRUE COPY BY ORDER