DCIT, Hyderabad V. M/s News Toady Pvt. Ltd., Hyderabad

ITA 424/HYD/2010

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 53536 (ITAT-HYDERABAD)
• Duration Of Justice: 1 year(s) 4 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-08-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 19-07-2011
• Assessment Year: 2002-2003
• Appeal Filed On: 19-03-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: NIVEDITA BISWAS
• Assessee Lawyers: C N PRASAD
• Keywords: Depreciation
• Section: 147; 148; 143(3); 115JB

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH A, HYDERABAD BEFORE SHRI G.C. GUPTA, VICE PRESIDENT AND SHRI AKBER BASHA, ACCOUNTANT MEMB ER ITA NO.424/HYD/2010: ASST. YEAR: 2002-03 DCIT, CIR-16(1), HYDERABAD. VS M/S NEWS TODAY PVT. LTD. EENADU COMPLEX, SOMAJIGUDA, HYDERABAD. (PAN: AAACN 7323 G) (APPELLANT) (RESPONDENT) APPELLANT BY : SMT. NIVEDITA BISWAS RESPONDENT BY : SHRI C.N. PRASAD O R D E R PER AKBER BASHA, ACCOUNTANT MEMBER: THIS APPEAL FILED BY THE REVENUE IS DIRECTED AGAIN ST ORDER OF CIT (A)-V, HYDERABAD DATED 13-01-2010 AND IT PERTAIN S TO THE ASSESSMENT YEARS 2002-03. 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS A PRI VATE LIMITED COMPANY ENGAGED IN THE BUSINESS OF NEWS GATHERIN G AND SUPPLY OF NEWS TO PUBLISHERS. FOR THE ASSESSMENT YEAR UNDER CONSI DERATION, THE ASSESSEE COMPANY FILED ITS RETURN OF INCOME ON 30-10-2002 DECLARING NIL INCOME. THE RETURN OF INCOME WAS PROCESSED UNDER SECTION 143(1) ON 24-3-2003. AS THERE WAS A DIFFERENCE IN INCOME DISCLOSED AS PER THE TDS CERTIFICATES AND THE INCOME DISCLOSED IN THE BOOKS OF A CCOUNTS, A NOTICE UNDER SECTION 148 WAS ISSUED ON 27-4-2006. IN RESPO NSE TO THE ITA NO. 424/HYD/20 10 M/S. NEW TODAY P VT. LTD. HYD. ================ ====== 2 SAID NOTICE, THE ASSESSEE VIDE ITS LETTER DATED 8-5-2006 H AS STATED THAT THEY HAVE ALREADY FILED THEIR RETURN OF INCOME FOR T HE ASSESSMENT YEAR UNDER CONSIDERATION ON 30-10-2002 AND REQUESTED TO CONSI DER FILING OF THE EARLIER RETURN FOR THE ASSESSMENT YEAR UNDER REFERE NCE IN COMPLIANCE THEREOF. IN RESPONSE TO THE STATUTORY NOTICE ISSUED UND ER SECTION 143(2) OF THE ACT, THE AUTHORIZED REPRESENTATIVE OF THE ASSESSEE COMPANY ATTENDED FROM TIME TO TIME AND FURNISHED THE INFORMATION CALLED FOR AND THE BOOKS OF ACCOUNTS PRODUCED HAVE BEEN V ERIFIED. THE ASSESSING OFFICER HELD THAT AN AMOUNT OF RS.1,81,25,783/- WAS NOT OFFERED AS ITS INCOME AND THE CORRESPONDING TDS CLAIMED BY THE ASSESSEE DURING THE YEAR UNDER CONSIDERATION COULD NOT B E GIVEN CREDIT. ACCORDINGLY, CREDIT TO TDS AMOUNT OF RS.3,69,766/- IS W ITHDRAWN UNDER SECTION 199 OF THE ACT. WITH REGARD TO DISALLOWANCE OF G RATUITY PAID IT WAS HELD BY THE ASSESSING OFFICER THAT THE ASSESSEE HAS CLAIMED AN AMOUNT OF RS.4,31,014/- AND THIS EXPENDITURE IS NOT AN ALLOWABLE AS PER THE PROVISIONS OF SECTION 40A(7) OF THE ACT AND FURTHER HELD THAT AS PER THE PROVISIONS OF THIS ACT, THE DEDUCTION IS ALLOWABLE TO THE RETIRING EMPLOYEE ONLY IF IT IS PAID OUT OF APPROVED GRATUITY FUND. IN THE CASE OF THE ASSESSEE, THE PAYMENT WAS NOT MADE OUT OF THE APPROV ED GRATUITY FUND AND THEREFORE THE SAME IS NOT AN ALLOWABLE EXPEN DITURE. IT WAS HELD FURTHER BY THE ASSESSING OFFICER THAT WHILE ARRIVIN G TAXABLE INCOME UNDER THE SPECIAL PROVISIONS OF THE INCOME-TAX ACT UNDER SECTION 115 JB, THE ASSESSEE HAS DEDUCTED RS.13,85,285/- TOWARDS DEPRECIATIO N LOSS. BUT, AS PER INFORMATION FURNISHED BY THE ASSESSEE BEFORE THE ASSESSING OFFICER IN COLUMN NO.25 OF FORM NO.3CD, THE BROUGHT F ORWARD DEPRECIATION LOSS IS ONLY RS.4,78,112/- AND THE SAME WAS ALLOWED BY THE ASSESSING OFFICER WHILE COMPUTING TAXABLE INCOME UNDE R SPECIAL PROVISIONS OF THE ACT UNDER SECTION 115 JB OF THE ACT. A CCORDINGLY THE ITA NO. 424/HYD/20 10 M/S. NEW TODAY P VT. LTD. HYD. ================ ====== 3 ASSESSING OFFICER RAISED A DEMAND OF RS.6,68,283/- VIDE HI S ORDER DATED 31-12-2007 PASSED UNDER SECTION 143(3) READ WITH SECTION 147 OF THE ACT. AGGRIEVED AGAINST THE ORDER OF THE ASSESSING OFFICER , THE ASSESSEE WENT IN APPEAL BEFORE THE CIT (A). ON APPEAL, THE C IT (A) DISCUSSED THE POINTS INVOLVED IN THIS APPEAL AND HELD THAT HERE IS NO REASON TO DISALLOW TDS CREDIT AS THE ASSESSEE COMPANY DULY CREDITED THE RELA TED RECEIPTS IN ITS BOOKS OF ACCOUNTS. THE CIT (A) DIRECTED THE ASSESSING O FFICER TO ALLOW THE GRATUITY PAYMENT AND ALSO DIRECTED THE ASSESSING OFFI CER TO VERIFY AND ALLOW THE CORRECT FIGURE OF BROUGHT FORWARD DEPRE CIATION CLAIM AS PER THE COMPANIES ACT. THUS, HE ALLOWED THE APPEAL OF TH E ASSESSEE IN PART. AGGRIEVED AGAINST THE FINDINGS AND THE DECISION OF THE FIRST APPELLATE AUTHORITY, THE REVENUE IS IN APPEAL BEFORE US. 3. THE LEARNED DEPARTMENTAL REPRESENTATIVE SUBMITTED THAT THE CIT (A) IS NOT JUSTIFIED IN DIRECTING TO ALLOW CREDIT FOR TDS OF RS.3,69,766/- WITHOUT CONSIDERING THE FACT THAT THE SU M OF RS.1,81,25,783/- HAS NOT BEEN OFFERED AS INCOME BY THE ASSESSEE. FURTHER IT IS HELD THAT THE CIT (A) ERRED IN HOLDING THAT THE SUM OF RS.1,81,25,783/- NEED NOT BE PART OF INCOME SINCE IT IS REIMBURSEMENT OF EXPENSES ON BEHALF OF THE PAYEE, EVEN THOUGH SUCH R EIMBURSEMENT AROSE BECAUSE OF A CONTRACTUAL OBLIGATION WHICH IS NOT DIST INCT AND SEPARATE FROM OTHER PAYMENTS RECEIVED BY THE ASSESSEE IN L IEU OF SERVICES RENDERED BY IT TO M/S USHODAYA ENTERPRISES LTD., WHICH IS THE DEDUCTOR. ALTERNATIVELY, IT IS PRAYED THAT THE MATTE R MAY BE REMITTED BACK TO THE FILE OF THE ASSESSING OFFICER TO VERIFY THE CL AIM OF THE ASSESSEE. WITH REGARD TO THE GRATUITY PAYMENT, IT IS SUB MITTED THAT THE FIRST APPELLATE AUTHORITY WAS NOT JUSTIFIED IN DIRECTI NG THE ASSESSING OFFICER TO ALLOW THE PROVISION FOR GRATUITY OF RS.4,31 ,014/- IS AN ALLOWABLE ITA NO. 424/HYD/20 10 M/S. NEW TODAY P VT. LTD. HYD. ================ ====== 4 EXPENDITURE UNDER SECTION 40A(7) OF THE ACT. IN SUPPOR T OF HIS CONTENTIONS, HE RELIED ON THE JUDGMENT OF JURISDICTION AL HIGH COURT IN THE CASE OF RAASI CEMENTS LIMITED VS. CIT REPORTED IN 275 I TR 579. WITH REGARD TO THE DISALLOWANCE OF BROUGHT FORWARD DEPRECIA TION CLAIM, THE LEARNED DEPARTMENTAL REPRESENTATIVE RELIED ON THE GR OUNDS OF APPEAL AND THE ORDER OF THE ASSESSING OFFICER. 4. ON THE OTHER HAND, THE LEARNED COUNSEL FOR THE A SSESSEE WHILE RELYING ON THE ORDER OF THE CIT (A) SUBMITTED THAT THE TDS IS MADE BY THE PAYER ON AMOUNT OF RS.1,85,25,783/- BEIN G THE REIMBURSEMENT OF EXPENSES INCURRED ON BEHALF OF THE PAY ER BY THE ASSESSEE. THE ASSESSING OFFICER ERRED IN COMING TO THE CON CLUSION THAT THE SAID TDS HAS TO BE WITHDRAWN AS RS.1,85,25,783/- W AS SHORT ACCOUNTED AS INCOME. HOWEVER, THE FACT OF THE MATTER WA S THAT THE SAID AMOUNT OF RS.1,85,25,783/- WENT TO COMPLETELY RED UCE THE EXPENDITURE DEBITED TO THE PROFIT AND LOSS ACCOUNT OF T HE ASSESSEE COMPANY AND WAS VIRTUALLY BROUGHT INTO BOOKS OF ACCOUNT BY CHARGING TO THE PARTY WHILE CREDITING THE RELEVANT HEAD OF EXPEN DITURE. IT IS FURTHER SUBMITTED THAT THE ACCOUNTING EFFECT ON INCOME WHEN IT D OES NOT IMPACT THE INCOME OF THE YEAR IN ANY MANNER AS THE EXPENDITU RE INCURRED WAS REIMBURSED BY THE PAYER COMPLETELY AND HENCE WAS TAKEN INTO ACCOUNT FOR LEGITIMATELY CLAIMING TDS OF RS.3,69,766 AS ARRIVE D BY THE ASSESSING OFFICER. ON THE ISSUE OF GRATUITY PAYMENT, IT IS SUBM ITTED THAT THE GRATUITY PAID TO THE EMPLOYEES OUT OF PROVISION FOR G RATUITY MADE IN THE EARLIER YEAR, DISALLOWED AS UNPAID IN THE YEAR OF PRO VISION. THE PROVISIONS OF SECTION 40A (7)(B) CLEARLY PROVIDE FOR DE DUCTION FOR THE PURPOSE OF PAYMENT OF GRATUITY THAT HAS BECOME PAYABLE DURING THE PREVIOUS YEAR. HOWEVER, THERE IS NO SUCH PROHIBITION WH EN ANY ITA NO. 424/HYD/20 10 M/S. NEW TODAY P VT. LTD. HYD. ================ ====== 5 PROVISION IS MADE BY AN ASSESSEE FOR THE PURPOSE OF PAYME NT OF ANY GRATUITY THAT HAS BECOME PAYABLE DURING THE PREVIOUS YEAR, WHICH IS EVIDENT FROM A BARE READING OF CLAUSE (B) OF SECTION 40 A (7) WHICH IS UNDER:- NOTHING IN CLAUSE (A) SHALL APPLY IN RELATION TO ANY PROVISION MADE BY THE ASSESSEE FOR THE PURPOSE OF PAYMENT OF A SUM BY WA Y OF ANY CONTRIBUTION TOWARDS AN APPROVED GRATUITY FUND, O R FOR THE PURPOSE OF PAYMENT OF ANY GRATUITY, THAT HAS BECOME PA YABLE DURING THE PREVIOUS YEAR. THERE IS NO REFERENCE TO NAY APPROVED GRATUITY FUND W HILE REFERRING TO SUCH PROVISION MADE FOR PAYMENT OF ANY GRATUITY THAT H AS BECOME PAYABLE DURING THE PREVIOUS YEAR. INV VIEW OF THE A BOVE, PAYMENT MADE DURING THE PREVIOUS YEAR TO THE RETIRING EMPLOY EES TOWARDS GRATUITY, THAT HAS BECOME PAYABLE DURING THE PREVIOUS YEAR, OUGHT TO HAVE BEEN ALLOWED. WITH REGARD TO THE DEPRECIATION CL AIM, IT IS SUBMITTED THAT THE PROVISIONS OF SECTION 115JB FOR ARRIVING BOOK PROFIT HAS WRONGLY CONSIDERED UNABSORBED BROUGHT FORWARD DEPRECIATION OF R S.4,78,112/- UNDER INCOME-TAX RULES INSTEAD OF CONSIDERING THE BROUG HT FORWARD DEPRECIATION OF RS.13,55,825/- AS PER BOOKS OF ACCOUNT FO R COMPUTING BOOK PROFIT AS REQUIRED UNDER SECTION 115JB OF THE ACT RESULTING INTO HIGHER BOOK PROFIT OF RS.9,07,173/- FOLLOWED BY LEVY OF ADDITIONAL MAT ON THE ASSESSEE. 5. WE HAVE CONSIDERED THE SUBMISSIONS OF THE RIVAL PAR TIES AND PERUSED THE MATERIAL AVAILABLE ON RECORD. GROUND NO.1 AND 6 IS GENERAL IN NATURE AND HENCE, NO ADJUDICATION IS REQUIRED. GROU ND NO.2 AND 3 RELATES TO WITHDRAWAL OF CREDIT FOR TDS OF RS.3,69,766 /- UNDER SECTION ITA NO. 424/HYD/20 10 M/S. NEW TODAY P VT. LTD. HYD. ================ ====== 6 199 OF THE ACT BY THE ASSESSING OFFICER. THE LEARNED CO UNSEL FOR THE ASSESSEE CLEARLY DEMONSTRATED BEFORE US, DURING THE COURSE O F HEARING, THAT THE ASSESSEE COMPANY RECEIVED AN AMOUNT OF RS.1,81,25 ,783/- BEING REIMBURSEMENT OF EXPENSES INCURRED ON BEHALF OF U SHODAYA ENTERPRISES AND THE SAME IS DULY ACCOUNTED FOR, IN THE B OOKS OF ACCOUNT MAINTAINED BY THE ASSESSEE COMPANY. ALL THE ENTRIES ARE ROUTED PROPERLY THROUGH THE BOOKS OF ACCOUNT. UNDER THESE CIRCU MSTANCES, THERE IS NO REASON TO WITHDRAW THE TDS CREDIT BY THE A SSESSING OFFICER. IN VIEW OF THIS MATTER, WE DO NOT SEE ANY INFIRMITY I N THE ORDER OF THE CIT [A] AND HENCE, NO INTERFERENCE IS CALLED FOR. THE GROUND RAISED BY THE REVENUE ON THIS ISSUE IS REJECTED. GROUND NO. 4 RE LATES TO DISALLOWANCE OF RS.4,31,014/- BEING GRATUITY PAID TO E MPLOYEES OUT OF PROVISION OF GRATUITY RELATING TO RETIRING EMPLOYEES. IT IS UNDISPUTED FACT THAT THE ASSESSEE COMPANY ACTUALLY PAID THE GRATUITY TO T HE EMPLOYEES RESIGNED DURING THE YEAR UNDER CONSIDERATION, OUT OF THE PROVISION MADE IN THE EARLIER YEARS. THESE PAYMENTS ARE COVERED UNDE R CLAUSE [B] OF SECTION 40A [7] OF THE ACT WHICH ALLOWS DEDUCTION ON ACCOUN T OF ANY PROVISION FOR THE PURPOSE OF PAYMENT OF GRATUITY THAT HAS BECOME PAYABLE DURING THE PREVIOUS RELEVANT TO THE ASSESSMENT Y EARS UNDER CONSIDERATION. IN VIEW OF THIS MATTER, WE DO NOT SEE A NY INFIRMITY IN THE ORDER OF THE CIT [A] AND THE SAME IS UPHELD. THE GRO UND RAISED BY THE REVENUE ON THIS ISSUE IS REJECTED. GROUND NO.5 RELATES TO DISALLOWANCE OF BROUGHT FORWARD DEPRECIATION CLAIM OF RS.13,85,285/ -. WE AGREE WITH THE FINDINGS OF THE CIT [A] THAT FOR THE PURPOSE OF SE CTION 115JB OF THE ACT, DEPRECIATION AS PER THE COMPANIES ACT IS ONLY TO B E CONSIDERED. WE FIND THAT THE CIT [A] ONLY DIRECTED THE ASSESSING OFFICER TO VERIFY THE CORRECT FIGURE AS PER THE COMPANIES ACT AND ALLOW BROUGH T FORWARD DEPRECATION ACCORDINGLY AND HENCE, THERE SHOULD NOT BE A NY GRIEVANCE TO ITA NO. 424/HYD/20 10 M/S. NEW TODAY P VT. LTD. HYD. ================ ====== 7 THE DEPARTMENT ON THIS COUNT. HENCE, WE CONFIRM THE FIN DINGS OF THE FIRST APPELLATE AUTHORITY ON THIS ISSUE. THE GROUND RAI SED BY THE REVENUE IS REJECTED. 6. IN THE RESULT, APPEAL FILED BY THE REVENUE IS DISM ISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 05-8-2011. SD/- SD/- (G.C. GUPTA) (AKBER BASHA) VICE PRESIDENT. ACCOUNTANT MEMBER. DT/- 05-8-2011. COPY FORWARDED TO: 1. DCIT, CIR-16(1), HYDERABAD. 2. 3. 4 5. JMR* M/S. NEWS TODAY PVT. LTD., EENADU COMPLEX, SOMAJIGUDA , HYDERABAD. CIT (A)-V, HYDERABAD. CIT, AP, HYDERABAD. THE DR, ITAT, HYDERABAD. ITA NO. 424/HYD/20 10 M/S. NEW TODAY P VT. LTD. HYD. ================ ====== 8