DCIT, New Delhi V. M/s. Revere Pentland Pvt. Ltd, New Delhi

ITA 4201/DEL/2010

• Counselvise Citation: 420120114 RSA 2010
• Duration Of Justice: 4 year(s) 5 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-02-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: F
• Next Hearing Date: 05-02-2015
• Assessment Year: 2006-2007
• Appeal Filed On: 10-09-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: B K ANAND
• Assessee Lawyers: VIKRAM SAHAY
• Keywords: Revenue expenditure; Capital expenditure
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH F : NEW DELHI BEFORE SHRI R.S. SYAL, ACCOUNTANT MEMBER AND SMT. DIVA SINGH, JUDICIAL MEMBER I.T.A. NO. 4201/DEL/2010 ASSESSMENT YEAR : 2006 - 07 DCIT VS. REVERE PE NTLAND PVT. LTD. CIRCLE 15(1), B - 1, F4, C.R. BUILDING, MOHAN CO - OPERATIVE INDUSTRIAL AREA, C.R. BUILDING, I.P. ESTATE MAIN MATHURA ROAD, BADARPUR NEW DELHI. NEW DELHI (PAN AABCR5951P) (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI B.K. ANAND, FCA RESPONDENT BY : SHRI VIKRAM SAHAY, SR. DR O R D E R PER DIVA SINGH, JM THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER DATED 21.5.2010 OF C IT (A) XVIII, NEW DELHI PERTAINING TO 2006 - 07 ASSESSMENT YEAR ON THE FOLLOWING GROUNDS : - 1. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE AN D IN LAW, THE LD. CIT(A) HAS ERRED IN HOLDING THAT THE AMOUNT OF RS. 59,77,538/ - ON ACCOUNT OF FINANCIAL CHARGES REIMBURSED TOWARDS COST OF GOODS SOLD ARE PART OF THE ASSESSABLE INCOME DERIVED FROM THE INDUSTRIAL UNDERTAKING AND HENCE IS ENTITLED TO BENEFI TS OF SECTION 80 - IC OF THE I.T. ACT. 2. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) HAS ERRED IN HOLDING THAT THE AMOUNT OF RS. 28,66,235/ - ON ACCOUNT OF COMMISSION RECEIVED ON CONSIGNMENT SALE AND RS. 8,01,754/ - AS DISCOUNT REC EIVED ARE PART OF THE ASSESSABLE INCOME DERIVED FROM THE INDUSTRIAL UNDERTAKING AND HENCE IS ENTITLED TO BENEFITS OF SECTION 80 - IC OF THE I.T. ACT. ITA 4201/DEL/2010 2 3. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) HAS ERRED IN DELETING THE ADDITIO N OF RS. 3,40,450/ - ON ACCOUNT OF DISALLOWANCE OF LOAN PROCESSING CHARGES BEING CAPITAL IN NATURE BY THE AO. 2. THE RELEVANT FACTS OF THE CASE RELATABLE TO THE ISSUE UNDER CONSIDERATION ARE THAT THE ASSESSEE ENGAGED IN THE BUSINESS OF MANUFACTURING CUM TRADING OF SHOES AND APPAREL RETURNED NIL INCOME. THE SAID RETURN WAS PICK ED UP FOR SCRUTINY . T HE AO VIDE HIS ORDER U/S 143(3) OBSERVED THAT THE ASSESSEE IN ITS CLAIM OF DEDUCTION U/S 80IC FOR ITS TWO UNITS AT VILLAGES BANGRAN AND BHUPPUR AT PAONTA SAHIB, DISTRICT SIRMOUR, HIMACHAL PRADESH HAD INCLUDED AMONGST THE VARIOUS INCOMES FINANCIAL CHARGES AND COMMISSION ON CONSIGNMENT BASIS AMOUNT TO RS. 59,77,538/ - AND RS. 28,66,235/ - IN ITS CLAIM OF DEDUCTION U/S 80IC. THE AO HELD THAT TO THE ABOVE EXTENT THE CLAIM WAS NOT ALLOWABLE AS DEDUCTION WAS ALLOWED ON LY TO THE EXTENT THAT THE PROFITS AND GAINS WERE DIRECTLY GENERATED FROM BUSINESS OF MANUFACTURING OR PRODUCTION TO UNITS IN CERTAIN SPECIAL CATEGORY STATES WHICH HAVE BEGUN OR BEGINS TO MANUFACTURE O R PRODUCE ANY ARTICLE OR THING, NOT BEING ANY ARTICLE OR THING SPECIFIED IN 13 TH SCHEDULE. THE INCOME SO ACCRUED TO THE ABOVE EXTENT ACCORDING TO THE AO COULD NOT BE SAID TO BE DIRECTLY CONNECTED WITH THE BUSINES S OF MANUFACTURE OR PRODUCTION . ACCORDINGL Y THE ASSESSEE S CLAIM TO THE SAID EXTENT WAS DISALLOWED. THESE FACTS WOULD ADDRESS GROUND 1 AND 2 RAISED BY THE REVENUE IN THE PRESENT PROCEEDINGS. THE CIT(A) CONSIDERING THE FACTS AND THE JUDICIAL PR ECEDENT ALLOWED THE ASSESSE E S CLAIM . AGGR IEVED BY T H IS THE REVENUE IS IN APPEAL BEFORE THE TRIBUNAL. ITA 4201/DEL/2010 3 3. LD. SR. DR INVITING ATTENTION TO THE ASSESSMENT ORDER AND THE IMPUGNED ORDER ALONGWITH THE PAPER BOOK FILED ON BEHALF OF THE ASSESS E E SUBMITTED THAT NO DOUBT THE CIT (A) HAS REMANDED THE ISS UE TO THE AO AND IN THE REMAND REPORT WHICH HAS BEEN PLACED BY THE ASSESSEE AT PAPER BOOK BETWEEN PAGES 10 AND 11 THE AO MAINLY REPEATS WHAT HAS BEEN SAID IN THE ASSESSMENT ORDER. HOWEVER IT WAS HIS SUBMISSION T HAT IT IS NOT CLEAR FROM THE FACTS QUA GROUND NO. 1 AND 2 WHETHER THE FINANCIAL CHARGES AND THE DISCOUNTING OF BILLS TO THE CUSTOMERS PERTAINS TO ONLY THE ELIGIBLE UNITS OR THE SOME OTHER NON ELIGIBLE UNITS ALSO . SIMILARLY THE CLAIM OF THE ASSESSEE THAT THESE WERE NOT APPEARING AS PART OF THE INCOME FOR THE ELIGIBLE UNITS THE REDUCTION OF THE SAID INCOME BY THE SAID AMOUNTS WHICH ARE GIVEN HAS BEEN ACCEPTED BY THE CIT(A). ACCORDIN G L Y IT WAS HIS SUBMISSION THAT THE ISSUE MAY BE REMANDED SO AS TO BRING OUT THE CORRECT FACTS. 4. THE LD. AR ON THE OTHER RELYING UPON THE IMPU GNED ORDER AND INVITING ATTENTION TO THE ASSTT. ORDER AND THE PAPER BOOK PLACED ON RECORD SUBMITTED THAT THE ASSESSEE S CLAIM IS CONFINED TO ELIGIBLE UNITS ONLY AND THERE IS NO MATERIAL ON RECORD ON THE BASIS OF WHICH THE LD. SR. DR . IS TRYING TO CREATE DOUBTS. THE JUDICIAL PRECEDENT RELIED UPON ON FACTS IT WAS HIS SUBMISSION HAS NOT BEEN ASSAILED. IN THE CIRCUMSTANCES IT WAS HIS PRAYER THAT THE REQUEST FOR REMAND SHOULD NOT BE ACCEPTED. 5. WE HAVE HEARD THE RIVAL SUBMISSION S AND PER USED THE MATERIAL AVAILABLE ON RECORD. A PERUSAL OF THE SAME SHOWS THAT THE FACTS ON RECORD HAVE NOT BEEN ITA 4201/DEL/2010 4 DISPUTED AND ALL EVIDENCES HAVE ALREADY BEEN LOOKED INTO BY THE AO WHEREIN NO INFIRMITY ON FACTS HAS BEEN BROUGHT TO OUR NOTICE. IT IS ALSO SEEN THAT T HE LAW AS LAID DOWN BY THE JURISDICTIONAL HIGH COURT IN CIT VS DELUXE ENTERPRISES IN ITA NO. - 1270/2008 DTD. 03.11.2008 AND NIRMA INDUSTRIES LTD. VS DCIT 283 ITR 402 (GUJ.) HAS BEEN CONSIDERED . IN THE LIGHT OF THESE DECISIONS WE ARE OF THE VIE W THAT THE FOLLOWING FINDING ON FACTS ARRIVED AT BY THE CIT(A) WHICH STAND UNREBUTTED CANNOT BE FAULTED WITH: - 4.4. I HAVE CAREFULLY CONSIDERED THE ASSESSMENT ORDER, REMAND REPORT OF THE AO AS WELL AS THE WRITTEN SUBMISSIONS MADE BY THE LD. AR. AS REGARD S THE FIRST GROUND, IT IS ARGUED BY THE LD. AR THAT FOR THE TWO INDUSTRIAL UNDERTAKINGS OF THE APPELLANT COMPANY SET UP IN THE HILLY REGION OF HIMACHAL PRADESH ON WHICH DEDUCTION U/S 80IC IS BEING CLAIMED, THE APPELLANT HAS TAKEN BOTH TERM AND WORKING CAPI TAL LOANS FROM BANKS AND FINANCIAL INSTITUTIONS . THE APPELLANT HAS PAID DURING THE RELEVANT YEAR RS.52,43,626 AS INTEREST ON WORKING CAPITAL LOAN BY WAY OF BILL DISCOUNTING CHARGES. THE AMOUNT OF RS.59,77,538 SHOWN AS INCOME IN ACCOUNTS WAS IN FACT A REC OVERY OF SUCH INTEREST/CHARGES FROM ITS CUSTOMERS FOR DISCOUNTING THEIR BILLS IN ADVANCE AND THIS BEING A MODE OF RECOVERY OF PRICE OF GOODS SOLD FROM THESE UNITS, IT HAS A DIRECT NEXUS TO THE SALES MADE. UNDER SUCH CIRCUMSTANCES IT COULD NOT BE SAID THAT THE INCOME WAS NOT DERIVED FROM THE INDUSTRIAL UNDERTAKING. THE LD. A.R. FURTHER HAS PLACED RELIANCE ON JUDGEMENT OF THE HON BLE DELHI HIGH COURT IN THE CASE OF CIT DELHI - VIII V. DELUXE ENTERPRISES (SUPRA) AND THE HON BLE GUJARAT HIGH COURT IN NIRMA INDU STRIES LTD. VS DY.CIT 283 ITR 402. IT IS FURTHER ARGUED THAT THE BASIC REQUIREMENTS OF SECTION 80 I, 80 IB AND 80 IC ARE THE SAME AND THE ABOVE PRINCIPLES OF LAW LAID DOWN BY THE HON BLE HIGH COURTS WOULD APPLY EQUALLY TO THE CASE OF THE APPELLANT UNDER 8 0 IC. ON CAREFUL EXAMINATION OF THE MATTER, I FIND THAT THE AO IN HIS REMAND REPORT HAS ALSO NOT GIVEN ANY COMMENTS ON THE ABOVE ISSUE EXCEPT FOR MECHANICALLY REPRODUCING THE PARA FROM THE HON BLE HIGH COURTS. I AM OF THE OPINION THAT THE FINANCIAL CHAR GES OF RS.59,77,538/ - ARE TO BE TREATED AS INCOME DERIVED FROM T H E UNITS AND ARE NOT BE REDUCED FROM THE PROFIT OF THE INDUSTRIAL UNDERTAKING FOR COMPUTING DEDUCTION U/S 80IC OF THE ACT. THE AO IS ACCORDINGLY DIRECTED TO RECOMPUTED THE DEDUCTION U/S80IC O N THE ABOVE BASIS. GROUND NOS. 1 AND 2 OF THE APPELLANT ARE ACCORDINGLY ALLOWED. ITA 4201/DEL/2010 5 4.6. AS REGARDS GROUND NO.3 RELATING TO REDUCTION OF RS.28,66,235/ - BEING COMMISSION ON CONSIGNMENT SALE AND RS.8,01,754/ - BEING DISCOUNT RECEIVED IN RESPECT OF PROFIT DERIV ED FROM INDUSTRIAL UNDERTAKING, IT IS SUBMITTED BY THE LD. AR THAT BOTH THESE AMOUNTS WERE APPEARING AS PART OF THE INCOME OF THE APPELLANT FOR THE RELEVANT PREVIOUS YEAR. HOWEVER, NEITHER OF THEM WAS INCLUDED IN THE WORKING STATEMENT FOR DETERMINING THE ELIGIBLE DEDUCTION U/S 80IC ARRIVED BY THE APPELLANT AT RS.2,10,16,799/ - . THEREFORE, THERE WAS NO SCOPE FOR THE AO TO HAVE REDUCED THESE AMOUNTS IN COMPUTING THE PROFIT OF INDUSTRIAL UNDERTAKING. I FIND THAT THE AO IN HIS REMAND REPORT HAS ALSO NOT REFUT ED THE ABOVE CLAIM OF THE LD. AR. IN VIEW OF THE ABOVE, I AM OF THE OPINION THAT THE SAID AMOUNTS SHOULD NOT BE REDUCED IN THE ASSESSMENT ORDER IN COMPUTING THE PROFIT ELIGIBLE FOR DEDUCTION U/S 80 IC OF THE ACT. THE AO IS ACCORDINGLY DIRECTED TO DO RECO MPUTED THE DEDUCTION U/S 80 IC ON THE ABOVE BASIS. GROUND NO.3 OF THE APPELLANT IS ACCORDINGLY ALLOWED. 5.1. IN VIEW OF THE ABOVE AND IN THE ABSENCE OF ANY ARGUMENT ON FACTS AND LAW THE DEPARTMENTAL GROUND NOS. 2 & 3 ARE REJECTED. 6. THE FACTS RELATABL E TO GROUND NO.3 OF THE DEPARTMENT HAVE BEEN ADDRESSED BY THE CIT(A) IN PARAS 6 TO 6.1. FOR READY - REFERENCE WE REPRODUCE PARA 6.1 FROM THE IMPUGNED ORDER: - 6.1. I HAVE CAREFULLY CONSIDERED THE ASSESSMENT ORDER, THE REMAND REPORT AND TH E W RITTEN SUBMISSIO NS MADE BY THE LD. AR OF THE ABOVE ISSUE. IT IS ARGUED BY THE LD. AR THAT THE AMOUNT OF RS.3,40,450/ - WAS PA I D BY THE APPELLANT AS LOAN PROCESSING CHARGES TO PUNJAB NATIONAL BANK AND HIMACHAL PRADESH FINANCE CORPORATION. THE AO HAS SIMPLY STATED IN THE A SSESSMENT ORDER THAT FROM PERUSAL OF THE RECORD IT WAS ALSO GATHERED THAT THE ASSESSEE HAS DEBITED RS.3,40,450/ - IN ITS PROFIT AND LOSS ACCOUNTS UNDER THE HEAD LOAN PROCESSING CHARGES. THIS LOAN PROCESSING CHARGE BEING CAPITAL IN NATURE IS BEING DISALLOW ED . THE LD. AR IN HIS WRITTEN SUBMISSIONS HAS ARGUED THAT THE ABOVE LOAN PROCESSING CHARGES WAS PAID TO THE BANK/FINANCIAL INSTITUTION FOR PROCESSING THE LOAN APPLICATION PRIOR TO SANCTION OF THE LOAN. THE LOAN HAD BEEN USED FOR THE PURPOSE OF APPELLANT S BUSINESS. THE LD. AR HAS RELIED ON THE DECISION OF THE HON BLE SUPREME COURT IN THE CASE OF INDIA CEMENT LTD. V CIT 60 ITR 52 WHEREIN THE HON BLE APEX COURT HAD HELD THAT THE LOAN PROCESSING CHARGES PAID TO THE FINANCIAL INSTITUTION WAS NOT IN THE NATU RE OF CAPITAL EXPENDITURE AND WAS LAID OUT OR EXPANDED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF ASSESSEE S BUSINESS AND WAS THEREFORE ALLOWABLE AS A REVENUE ITA 4201/DEL/2010 6 EXPENDITURE. I ALSO FIND THAT THE REMAND REPORT OF THE AO IS COMPLETELY SILENT ON THE ABOVE MATTE R. IN ANY CASE, THE AO HAS NOT MADE ANY ADVERSE COMMENT ON THE APPELLANT S SUBMISSION OF THE ABOVE ISSUE. IN VIEW OF THE ABOVE, AND RESPECTFULLY FOLLOWING THE HON BLE APEX COURTS DECISION AS CITED ABOVE, I AM OF THE OPINION THE IMPUGNED AMOUNT OF RS.3,40 ,450/ - IS A REVENUE EXPENDITURE ALLOWABLE U/S 371(1) OF THE ACT. THE SAID ADDITION IS THEREFORE DELETED. 7. LD. DR RELIES ON THE ASSESSMENT ORDER AND LD. AR ON THE OTHER HAND SUBMITS THAT IN THE ABSENCE OF ANY SPECIFIC ARGUMENT BY THE LD. DR HE HAS NO ALTERNATE BUT TO RELY ON THE IMPUGNED ORDER. 8. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. CONSIDERING THE PECULIAR FACTS AND CIRCUMSTANCES OF THE CASE, WE FIND THAT THE DEPARTMENTAL GROUND DESERVES TO BE DISMISSED. 9. IN THE RESULT THE APPEAL OF THE REVENUE IS DISMISSED. PRONOUNCED IN THE OPEN C O URT ON 18 TH FEB.2015. SD/ - SD/ - ( R.S. SYAL ) (DIVA SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 18 TH FEBRUARY, 2015 * V EENA & AMIT KUMAR* COPY OF THE ORDER FORWARDED TO: - 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR BY ORDER DEPUTY REGISTRAR, ITAT.