HITECH PLAST LTD, MUMBAI V. DCIT (OSD) RG 8(1), MUMBAI

ITA 4358/MUM/2016

• Counselvise Citation: [2018] 126 COUNSELVISE.COM (IT) 0536 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 7 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-01-2018
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: Not Allotted
• Assessment Year: 2011-2012
• Appeal Filed On: 23-06-2016
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: POOJA SWAROOP
• Section: 143(3); 115JB; 37

Judgement Text

IN THE INC OME TAX APPELLATE TRIBUNAL F BENCH, MUMBAI BEFORE SH. B. R. BASKARAN , AM & SH. SANDEEP GOSAIN, JM ./ I.T.A. NO . 4358 / MUM/ 2016 ( / ASSESSMENT YEAR: 2011 - 12 ) HITECH PLAST LTD EARLIER KNOWN AS CLEAR MIPAK PACKAGING SOLUTIONS L TD. UNIT NO. 201, 2 ND FLOOR, WELSPUN HOUSE, KAMALA CITY, SENAPATI BPAT MARG, LOWER PAREL (W), MUMBAI - 400013 / VS. DCIT (OSD) RG 8(1) AAYAKAR BHAVAN, M. K. ROAD, MUMBAI - 20 ./ ./ PAN NO. AA ACC 4489 N ( / APPELLANT ) : ( / RESPONDENT ) / APPELLANT BY : SHRI DALPAT SHAH / RESPONDENTBY : MS. POOJA SWAROOP / DATE OF HEARING : 25.01 .1 8 / DATE OF PRONOUNCEMENT : 30.01.18 / O R D E R PER SANDEEP GOSAIN, J UDICIAL MEMBER : THE P RESENT APPE AL FILED BY THE ASSESSEE IS AGAINST THE ORDER OF LD. CIT (APPEAL) - 16, MUMBAI DATED 31.03.16 F OR AY 20 11 - 12 ON THE GROUNDS MENTIONED HEREIN BELOW: - 2 I.T.A. NO. 4358 /MUM/201 6 HITECH PLAST LTD 1. GROUND NO. 1 :DISALLOWANCE OF INTEREST ON TAXES OF RS.5,27,541/ - 1.1 THE CJ.T.(APPEALS) - 16, MUMBAI, ERRED IN CONFIRMING THE DISALLOWANCE OF INTEREST EXPENDITURE OF RS.5,27,541/ - BEING INTEREST PAID ON LATE PAYMENT T.D.S.(RS.9,815/ - ), SERVICE TAX (RS.31,977/ - ), INCOME TAX (RS.1,90,948/ - ) AND INCOME TAX PEN ALTY (RS.2,94,801/ - ) IGNORING THE FACT THAT THE SAME IS COMPENSATORY IN NATURE AND NOT PENAL IN NATURE. 1.2 THE SAID CIT(APPEALS) ALSO ERRED IN NOT CONSIDERING THE JUDICIAL DECISIONS ALLOWING THE INTEREST PAID ON SUCH STATUTORY PAYMENTS ON THE GROUND THAT THE SAME ARE NOT PENAL IN NATURE AND THEREFORE THE SAME IS ALLOWABLE U/SEC. 37 (1). GROUND NO :2 THE APPELLANT CRAVES LEAVE TO ADD, AMEND, ALTER, MODIFY, DELETE AND/OR CHANGE ALL OR ANY OF THE ABOVE GROUNDS ON OR BEFORE THE DATE OF HEARING. 2. THE B RIEF FACTS OF THE CASE ARE THAT T HE RETURN OF INCOME FOR THE Y EAR UNDER CONSIDERATION WAS FILED ON 30.09.11 DECLARING TOTAL INCOME OF RS. 5,57,84,220 AND BOOK PROFIT U/S 115JB OF THE I.T. 3 I.T.A. NO. 4358 /MUM/201 6 HITECH PLAST LTD ACT AT RS. 6,30,32,502/ - . THEREAFTER THE CASE WAS SELECTED FOR SCRUTINY A ND AFTER SERVING STATUTORY NOTICE AND SEEKING REPLY ASSESSMENT U/S 143(3) W AS COMPLET ED BY THE AO ON 14.03.1 4 THEREBY MAKING DISALLOWANCES ON SEVERAL GROUNDS. AGGRIEVED BY THE ORDER OF AO, ASSESSEE PREFERRED APPEAL BEFORE LD. CIT(A) AND LD. CIT(A) AFTER CO NSIDERING THE CASE OF BOTH THE PARTIES PARTLY ALLOWED THE APPEAL OF THE ASSESSEE BUT SUSTAINED THE DI SALLOWANCE OF INTEREST ON TAXES OF RS. 5,27,541/ - . NOW BEFORE US, THE ASSESSEE HAS PREFERRED THE PRESENT APPEAL BY RAISING THE ABOVE GROUNDS. GROUND NO. 1 (1.1 & 1.2) 3. THESE GROUND RAISED BY THE ASSESSEE ARE INTER CONNECTED AND INTER RELATED AND RELATES TO CHA LLENGING THE ORDER OF LD. CIT(A) IN CONFIRMING THE DISALLOWANCE OF INTEREST ON TAXES, ETC. THEREFORE WE THOUGHT IT FIT TO DISPOSE OF THE SAME BY THIS COMMON ORDER. 4. LD. AR APPEARING ON BEHALF OF THE ASSESSEE REITERATED THE SAME ARGUMENTS AS WERE RAISED BEFORE LD. CIT(A) AND IN THIS 4 I.T.A. NO. 4358 /MUM/201 6 HITECH PLAST LTD RESPECT, OUR ATTENTION WAS DRAWN TOWARDS PARA NO. 4 OF WRIT TEN SUBMISSIONS FILED BEFORE LD. CIT(A). IT WAS ALSO SUBMITTED THAT THE INTEREST EXPENDITURE INCURRED BY THE ASSESSEE IS COMPENSATORY IN NATURE AND HAS RELIED UPON THE FOLLOWING JUDGMENTS: - 1. CIT V/S ORIENTAL INSURANCE CO. LTD. 183 TAXMAN 186 (KAR) 2. CI T V/S MESSEE DUSSELDORF INDIA (P) LTD. 129 TTJ 81 (DEL)(URO 3. LACHMANDAS MATHURADAS 254 ITR 799 (SC) 4. ARTHUR ANDERSON & CO. V/S ACIT 324 ITR 240 (BORN) 5. HARSHAD SHANTILAL MEHTA V/S CUSTODIAN 231 ITR 871 (SC) 6. BHARAT COMMERCE & INDUSTRIES LTD. 230 ITR 733 (SC) 5. ON THE OTHER HAND , LD. DR DEFENDED THE FINDINGS OF REVENUE AUTHORITIES AND RELIED UPON THE JUDGMENT OF HONBLE 5 I.T.A. NO. 4358 /MUM/201 6 HITECH PLAST LTD SUPREME COURT IN THE CASE OF BHARAT COMMERCE & INDUSTRIES LTD. VRS. CIT 230 ITR 733 (SC) . 6. WE HAVE HEARD COUNSELS FOR BOTH TH E PARTIES AT LENGTH AND WE HAVE ALSO PERUSED THE MATERIAL PLACED ON RECORD AS WELL AS THE ORDERS PASSED BY REVENUE AUTHORITIES. BEFORE WE DECIDE THE MERITS OF THE CASE, IT IS NECESSARY TO EVALUATE THE ORDERS PASSED BY LD. CIT(A). THE LD. CIT(A) HAS DEALT WITH THE ABOVE GROUNDS RAISED BY THE REVENUE IN PARA NO. 6 OF ITS DETAILED ORDER. THE OPERATIVE PORTION OF THE ORDER OF LD. CIT(A) IS CONTAINED IN PARA NO. 6.4.2 OF ITS ORDER AND THE SAME IS REPRODUCED BELOW: - 6.4.2 DURING APPELLATE PROCEEDINGS A WRITTEN SUBMISSION WAS FILED WHICH FIND PLACE IN PARA 5 OF THIS ORDER. I HAVE CONSIDERED THE WRITTEN SUBMISSION FILED BY THE APPELLANT AND CASE LAWS RELIED UPON IN THIS REGARD. THE CASE LAWS RELIED UPON BY THE APPELLANT ARE NOT DIRECTLY ON THE ISSUE INVOLVED. THE FACTS OF THE CASES CITED BY THE APPELLANT ARE DIFFERENT AND NOT APPLICABLE IN THIS CASE. INTEREST ON LATE PAYMENT OF TDS, INCOME TAX, SERVICE TAX OR PENALTY ARE DEFINITELY PENAL IN NATURE 6 I.T.A. NO. 4358 /MUM/201 6 HITECH PLAST LTD AND IT IS NOT AN ALLOWABLE EXPENDITURE ALSO. THE APPEAL OF THE APPELLANT ON THIS GROUND IS DISMISSED AND DISALLOWANCE MADE BY THE A.O. IS CONFIRMED. AFTER HEARING THE ARGUMENTS OF BOTH THE PARTIES AND THE JUDGMENTS CITED BY BOTH THE PARTIES AS WELL AS ORDER S PASSED BY REVENUE AUTHORITIES, WE FIND THAT THE PARA MATER IAL AND THE FACTS CONTAINED IN THOSE JUDGMENTS ARE DIFFERENT, THUS THE JUDGMENT S CITED BY LD. AR ARE NOT APPLICABLE TO THE FACTS OF THE PRESENT CASE WHEREAS THE JUDGMENTS CITED BY LD. DR IN THE CASE BHARAT COMMERCE & INDUSTRIES LTD. VRS. CIT 230 ITR 733 (S C) IS DIRECTLY APPLICABLE TO THE FACTS OF THE PRESENT CASE WHEREIN IT HAS CATEGORICALLY BEEN HELD THAT W HEN INTEREST IS PAID FOR COMMITTING A DEFAULT IN RESPECT OF A STATUTORY LIABILITY TO PAY ADVANCE TAX, THE AMOUNT PAID AND THE EXPENDITURE INCURRED IN T HAT CONNECTIO N IS IN NO WAY CONNECTED WITH PRESERVING OR PROMOTING THE BUSINESS OF THE ASSESSEE. T HIS IS NOT EXPENDITURE WHICH IS INCURRED AND WH ICH HAS TO B E TAKEN INTO ACCOUNT BEFORE THE PROFITS OF THE BUSINESS ARE CA LCULATED . THE LIABILITY IN THE CASE OF PAYMENT OF INCOME - TAX AND INTEREST FOR DELAYED PAYMENT OF 7 I.T.A. NO. 4358 /MUM/201 6 HITECH PLAST LTD INCOME - TAX OF ADVANCE TAX ARISES ON THE COMPUTATION OF THE PROFITS AND GAINS OF BUSINESS. THE TAX WHICH IS PAYBLE IS ON THE ASSESSEES INCOME AFTER THE INCOME IS DETE RMINED. THIS CANNOT, THEREFORE, BE CONSIDERED AS AN EXPENDITURE FOR THE PURPOSE OF EARNING ANY INCOME OR PROFITS. IT WAS FURTHER HELD AS UNDER : - WE ARE CONCERNED WITH THE TAX WHICH WAS REQUIRED TO BE PAID AFTER THE ASCERTAINMENT OF THE NET INCOME OF THE A SSESSEE FOR THE RELEVANT ASSESSMENT YEAR. INTEREST WHICH IS PAID FOR DELAYED PAYMENT OF ADVANCE TAX ON SUCH INCOME CAN NOT BE CONSIDERED AS EXPENDITURE WHOLLY AND EXCLUSIVE LY FOR THE PURPOSE OF BUSINESS. UNDER THE INCOME TAX ACT THE PAYMENT OF SUCH INTERES T IS INEXTRICABLY CONNECTED WITH THE ASSESSEE'S TAX LIABILITY. IF INCOME TAX ITSELF IS NOT PERMISSIBLE DEDUCTION UNDER SECTION 37 , ANY INTEREST PAYABLE FOR DEFAULT COMMITTED BY THE ASSESSEE IN DISCHARGING HIS STATUTORY OBLIGATION UNDER THE I.T. ACT. WHICH IS CALCULATED WITH REFERENCE TO THE TAX ON THE INCOME CANNOT BE ALLOWED AS A DEDUCTION. 8 I.T.A. NO. 4358 /MUM/201 6 HITECH PLAST LTD KEEPING IN THE VIEW THE PRINCIPLES LAID DOWN BY THE SUPREME COURT IN THE AFOREMENTIONED CASE, WE ARE OF THE VIEW THAT THE EXPENSES INCURRED BY THE ASSESSEE CANNOT BE CONSIDERED AN EXPENDITURE FOR THE PURPOSE OF EARNING ANY INCOME OR PROFITS AS THE TAX WHIC H IS PAYBLE IS ON THE ASSESSEES INCOME AFTER THE INCOME IS DETERMINED, THEREFORE THE INTEREST PAID ON LATE PAYMENT OF TDS, SERVICE TAX, INCOME TAX AND INCOME TAX PENALTY CANNOT BE CONSIDERED AS EXPENDITURE WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS. N O NEW FACTS OR CONTRARY JUDGMENTS HAVE BEEN BROUGHT ON RECORD BEFORE US I N ORDER TO CONTROVERT OR REBUT THE FINDINGS SO RECORDED BY LD CIT (A) . THEREFORE, THERE ARE NO REASON S FOR US TO INTERFERE INTO OR DEVIATE FROM THE FINDINGS RECORDED BY THE LD. CIT (A). HENCE , WE ARE OF THE CONSIDERED VIEW THAT THE FINDINGS SO RECORDED BY THE LD. CIT (A) ARE JUDICIOUS AND ARE WE LL REASONED. RESULTANTLY, THESE GROUND S RAISED BY TH E ASSESSEE STANDS DISMISSED . 9 I.T.A. NO. 4358 /MUM/201 6 HITECH PLAST LTD GROUND NO. 2. 7 . THIS GROUND IS GENERAL IN NATURE, THUS REQUIRES NO SPECIFIC ADJUDICATION. 8 . IN THE NET RESULT, THE APPEAL FILED BY THE ASSESSEE STANDS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 30 TH JAN, 2018 SD/ - SD/ - ( B. R. BASKARAN ) (SANDEEP GOSAIN) / ACCOUNTANT MEMBER / JUDICIAL MEMBER MUMBAI ; DATED : 30 . 01 .201 8 SR.PS . DHANANJAY / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT 3. ( ) / THE CIT(A) 4. / CIT - CONCERNED 5. , , / DR, ITAT, MUMBAI 6. / GUARD F I LE / BY ORDER, . / (DY./ASSTT.REGISTRAR) , / ITAT, MUMBAI