Appeal details
Counselvise Citation
[2010] 119 COUNSELVISE.COM (IT) 5492 (ITAT-DELHI)
Assessee PAN
Bench
Appeal Number
Duration Of Justice
3 year(s) 2 month(s) 22 day(s)
Appellant
Respondent
Appeal Type
Income Tax Appeal
Pronouncement Date
19-03-2010
Appeal Filed By
Department
Order Result
Dismissed
Bench Allotted
E
Next Hearing Date
16-12-2009
Assessment Year
2003-2004
Appeal Filed On
28-12-2006
Judgement Text
IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH E: NEW DELHI BEFORE SHRI A.D. JAIN, JUDICIAL MEMBER AND SHRI DEEPAK R. SHAH, ACCOUNTANT MEMBER I.T.A.NO.4159/DEL/2006 ASSESSMENT YEAR : 2003-04 INDIAN SUGAR EXIM CORPORATION LTD., DY. COMMISSIO NER OF INCOME-TAX, NEW DELHI. VS. CIRCLE 11(1), NEW DELHI. I.T.A.NO.4361/DEL/2006 ASSESSMENT YEAR : 2003-04 DY. COMMISSIONER OF INCOME-TAX, M/S. INDIAN SUGAR E XIM CORPN. LTD., CIRCLE 11(1), NEW DELHI. VS. C BLOCK 2 ND FLOOR ANSAL PLAZA, AUGUST KRANTI MARG, NEW DELHI. (APPELLANTS) (RESPONDENTS) ASSESSEE BY : DR. RAKESH GUPTA AND S/SH. ASHWANI TANEJA & SUMIT JAIN, FCA. DEPARTMENT BY : SHRI C. L AL, CIT-DR. O R D E R PER DEEPAK R. SHAH, ACCOUNTANT MEMBER THESE CROSS APPEALS BY THE ASSESSEE AND REVENUE ARE DIRECTED AGAINST THE ORDER OF THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS)-XIII, NEW 2 DELHI, DATED 3 RD OCTOBER, 2006 IN AN APPEAL AGAINST THE ASSESSMENT FRAMED UNDER SECTION 143(3) OF THE INCOME-TAX ACT, 1961 (T HE ACT). ITA NO.4159/DEL/2006. 2. WE FIRST TAKE UP THE APPEAL OF THE ASSESSEE. THE ASSESSEE IS ENGAGED IN THE BUSINESS OF EXPORT A ND IMPORT OF SUGAR AND ITS BY-PRODUCTS AS A MERCHANT EXPORTER. 3. FIRST GROUND OF APPEAL IS AGAINST DISALLOWANCE O F DEDUCTION UNDER SECTION 80HHC IN RESPECT OF DEPB CREDIT. AT THE TI ME OF HEARING THIS GROUND WAS NOT PRESSED AND HENCE FOR WANT OF PROSEC UTION GROUND NO.1 IS DISMISSED. 4. GROUND NO.2 IS AGAINST DISALLOWANCE OF RS.15,22, 234/- BEING PAYMENT ON ACCOUNT OF PROVIDENT FUND PAYMENTS. THE ASSESSE E IS HAVING A REGISTERED PROVIDENT FUND TRUST WHEREIN THE ASSESSEE HAD BEEN DEPOSITING EMPLOYERS CONTRIBUTION TO PROVIDENT FUND. THE CONTRIBUTION R S.15,22,234/- INTER ALIA INCLUDES EMPLOYEES CONTRIBUTION TO PROVIDENT FUND O F RS.6,90,434/-, VOLUNTARY CONTRIBUTION OF EMPLOYEES TO PROVIDENT FU ND OF RS.4,17,380/- AND PROVIDENT FUND LOAN RECEIVED BACK OF RS.75,030/-. BEFORE THE ASSESSING OFFICER IT WAS CONTENDED THAT THE PAYMENT TO THE FU NDS ARE WITHIN THE DUE DATE OR WITHIN THE GRACE PERIOD ALLOWED AND HENCE N O PART CAN BE DISALLOWED. THE ASSESSING OFFICER OBSERVED THAT THE ASSESSEE HA D GOT ITS OWN PROVIDENT 3 FUND TRUST NAMELY INDIAN SUGAR & GENERAL INDUSTRY E XPORT IMPORT CORPORATION LTD. DELHI PF ESTABLISHED IN THE YEAR 1970 AND IS RECOGNIZED BY THE COMMISSIONER OF INCOME-TAX DELHI. THE INCOME-T AX ASSESSMENT OF THE SAID TRUST WAS TAKEN SEPARATELY IN SCRUTINY FOR A.Y . 2003-04 AND IT WAS HELD THAT THE TRUST HAD NOT INVESTED FUNDS AS PER PRESCR IBED RULES OF INCOME-TAX RULES AND HENCE NOT ENTITLED TO BE CONSIDERED AS RE COGNIZED TRUST. THEREFORE, EMPLOYERS CONTRIBUTION DEPOSITED DURING THE YEAR T O ITS OWN PROVIDENT FUND TRUST IS NOT ALLOWABLE. 5. BEFORE THE LEARNED CIT(A) IT WAS CONTENDED THAT THE ASSESSING OFFICER ERRED IN CONSIDERING THE RECOGNIZED PROVIDENT FUND TRUST AS NON-RECOGNIZED. THE STATUS OF THE PROVIDENT FUND TRUST AS ON 31.3.2 003 WAS TAKEN AS RECOGNIZED PROVIDENT FUND TRUST AND THE RECOGNITION CONTINUES TILL DATE. THEREFORE, THERE CANNOT BE ANY DISALLOWANCE BY CONS IDERING THE PROVIDENT FUND TRUST AS NON-RECOGNIZED. COPY OF REGISTRATION CERTIFICATE ISSUED BY CIT, DELHI-III WAS FILED. THE LEARNED CIT(A) HELD THAT AS PER SECTION 2(38) THE PHRASE RECOGNIZED PROVIDENT FUND MEANS A PROV IDENT FUND WHICH HAS BEEN AND CONTINUES TO BE RECOGNIZED BY THE CCIT OR CIT IN ACCORDANCE WITH THE RULES CONTAINED IN PART A OF THE FOURTH SCHEDUL E, AND INCLUDES A PROVIDENT FUND ESTABLISHED UNDER A SCHEME FRAMED UN DER THE EMPLOYEES PROVIDENT FUNDS ACT, 1952. THE DEDUCTION ALLOWABLE UNDER SECTION 36(1)(IV) 4 SPEAKS ABOUT DEDUCTION BY AN ASSESSEE AS AN EMPLOYE R BY WAY OF CONTRIBUTION TO A RECOGNIZED PROVIDENT FUND. THE L ETTER FILED BY THE ASSESSEE DOES NOT SPEAK ABOUT THE RECOGNITION GRANTED BY THE CIT TO THE SAID TRUST AND THEREFORE, THE TRUST IS TO BE CONSIDERED AS NOT REC OGNIZED BY THE DEPARTMENT. THEREFORE, THE DISALLOWANCE IS TO BE CONFIRMED. 6. THE LEARNED COUNSEL FOR THE ASSESSEE DR. RAKESH GUPTA FILED BEFORE US THE ASSESSMENT ORDER OF THE PROVIDENT FUND TRUST. AS PER ASSESSMENT ORDER DATED 23.12.2005 PERTAINING TO A.Y. 2003-04, THERE IS NO DE-RECOGNITION OF THE TRUST BUT THE ASSESSMENT ORDER MERELY SAYS THAT THE EXEMPTION UNDER SECTION 10 TO THE REGISTERED PROVIDENT FUND IS NOT HELD ALLOWABLE. HE INVITED OUR ATTENTION TO PAGE 131 OF THE PAPER BOOK II, WHI CH IS A LETTER FROM THE CIT, DELHI-III, NEW DELHI DATED 25.8.1976 ADDRESSED TO THE ASSESSEE COMPANY ON THE SUBJECT OF RECOGNITION OF PROVIDENT FUND SCHEME. IN THE SAID LETTER IT HAS BEEN MENTIONED THAT SINCE THE PR OVIDENT FUND OF INDIAN SUGAR INDUSTRY EXPORT CORP. LTD. APPEARS TO BE ONE OF THE PROVIDENT FUND TO WHICH PROVIDENT FUND ACT OF 1925/1952 APPLIES, NO F URTHER RECOGNITION IS REQUIRED UNDER THE INCOME-TAX ACT, 1961. ACCORDING LY IT WAS SUBMITTED THAT THE CONDITION OF SECTION 36(1)(IV) HAS BEEN SATISFI ED AND HENCE THE PAYMENTS MADE BEFORE THE DUE DATE OF FILING THE RETURN OF IN COME ARE ALLOWABLE DEDUCTIONS. HE ALSO INVITED OUR ATTENTION TO PAGE 132 OF THE PAPER BOOK-II 5 BEING LETTER ISSUED BY THE REGIONAL PROVIDENT FUND COMMISSIONER WHEREIN IT WAS MENTIONED THAT THE ASSESSEE COMPANY IS COVERED UNDER EPF ACT, 1952 AND THE TRUST IS RECOGNIZED WITH THEM. ACCORDINGLY , IT WAS PLEADED THAT THE ASSESSEE IS ENTITLED TO DEDUCTION. THE LEARNED DR SHRI C. LAL ON THE OTHER HAND, RELIED UPON THE FINDING OF THE COMMISSIONER ( APPEALS). 7. WE HAVE HEARD THE PARTIES AND CONSIDERED THE MAT ERIAL AVAILABLE ON RECORD. SECTION 36(1)(IV) PROVIDES AS UNDER:- (IV) ANY SUM PAID BY THE ASSESSEE AS AN EMPLOYER B Y WAY OF CONTRIBUTION TOWARDS A RECOGNIZED PROVIDENT FUND OR AN APPROVED SUPERANNUATION FUND, SUBJECT TO SUCH LIMIT S AS MAY BE PRESCRIBED FOR THE PURPOSE OF RECOGNIZING THE PROVI DENT FUND OR APPROVING THE SUPERANNUATION FUND, AS THE CASE MAY BE; AND SUBJECT TO SUCH CONDITIONS AS THE BOARD MAY THINK F IT TO SPECIFY IN CASES WHERE THE CONTRIBUTIONS ARE NOT IN THE NAT URE OF ANNUAL CONTRIBUTIONS OF FIXED ON SOME DEFINITE BASIS BY RE FERENCE TO THE INCOME CHARGEABLE UNDER THE HEAD SALARIES OR TO T HE CONTRIBUTIONS OR TO THE NUMBER OF MEMBERS OF THE FU ND; READING THE AFORESAID SECTION IT IS CLEAR THAT TO C LAIM DEDUCTION BY WAY OF CONTRIBUTION TO A RECOGNIZED PROVIDENT FUND, IT HAS TO BE DEMONSTRATED THAT THE CONTRIBUTION IS TOWARDS A RECOGNIZED PROVIDENT FUND. THE PHRASE RECOGNIZED PROVIDENT FUND IS DEFINED IN SECTION 2 (38) OF THE ACT. AS PER THE DEFINITION IT MEANS A PROVIDENT FUND, WHICH HAS BEEN AND CONTINUES TO BE RECOGNIZED BY THE CHIEF COMMISSIONER OR COMMISSIONE R IN ACCORDANCE WITH RULES CONTAINED IN PART A OF THE FOURTH SCHEDULE, A ND INCLUDES A PROVIDENT FUND ESTABLISHED UNDER A SCHEME FRAMED UNDER THE EM PLOYEES PROVIDENT 6 FUNDS ACT, 1952. SINCE AS PER THE LETTER ISSUED BY CIT, DELHI-III DATED 28.5.1976 THE PROVIDENT FUND IS CONSIDERED AS FUND TO WHICH PROVIDENT FUND ACT, 1925/1952 APPLIES, IT AMOUNTS TO A RECOGNIZED PROVIDENT FUND WITHIN THE MEANING OF SECTION 2(38) OF THE ACT AND HENCE I N TERMS OF SECTION 36(1)(IV) THE CONTRIBUTION TO RECOGNIZED PROVIDENT FUND IS ALLOWABLE AS SUCH. SINCE THERE IS NO DISPUTE THAT THE AMOUNT WA S PAID WITHIN THE DUE DATES PRESCRIBED, THE DISALLOWANCE IS TO BE DELETED . WE, THEREFORE, DELETE THE DISALLOWANCE OF RS.15,22,234/-. 8. GROUND NO.3 IS RELATING TO DISALLOWANCE OF INTER EST ON LATE PAYMENT OF TDS. AT THE TIME OF HEARING THIS GROUND WAS NOT PR ESSED AND HENCE FOR WANT OF PROSECUTION, THE SAME IS DISMISSED. 9. GROUND NO.4 IS AGAINST NOT CONSIDERING THE REVIS ED COMPUTATION OF INCOME FILED DURING ASSESSMENT PROCEEDING TO EXCLUD E THE INTEREST ON REFUND INCLUDED ORIGINALLY IN THE RETURN OF INCOME. 10. THE LEARNED CIT(A) HELD THAT THE ASSESSING OFFI CER WAS JUSTIFIED IN VIEW OF THE DECISION OF HONBLE SUPREME COURT IN TH E CASE OF M/S. GOETZE INDIA LTD. VS. CIT, 284 ITR 323 WHEREIN IT WAS HELD THAT THE ASSESSING OFFICER IS JUSTIFIED IN IGNORING THE REVISED COMPUT ATION FILED DURING ASSESSMENT PROCEEDINGS AS THE CLAIMS CAN BE MADE BY FILING REVISED RETURN ONLY. 7 11. WE HAVE HEARD THE PARTIES. THE ASSESSEE FILED REVISED COMPUTATION TO EXCLUDE INTEREST ON REFUND, WHICH WAS ORIGINALLY GR ANTED BY TAKING THE LOSS ON EXPORT AS `NIL. HOWEVER, LATER ON AS PER THE D ECISION OF HONBLE SUPREME COURT IN THE CASE OF IPCA LABORATORY LTD. V S. DY. CIT, 266 ITR 521, THE ASSESSEE MAY NOT BE ALLOWED DEDUCTION UNDE R SECTION 80HHC AND HENCE REFUND RECEIVED WILL HAVE TO BE REFUNDED BACK AND SO ALSO THE INTEREST PAID ALONG WITH THE REFUND. THEREFORE, INTEREST CA NNOT BE SAID TO HAVE BEEN PAID AND SINCE THE ISSUE IS PENDING BEFORE THE HIGH COURT, THOUGH REFUND IS RECEIVED SUCH REFUND IS NOT DUE TO THE ASSESSEE AND HENCE INTEREST ON SUCH REFUND DOES NOT ACCRUE TO THE ASSESSEE. THEREFORE, THE ASSESSING OFFICER WAS REQUIRED TO EXAMINE WHETHER THE REFUND GRANTED TO T HE ASSESSEE HAS BEEN DUE TO IT AND IS NOT SUBJECT MATTER OF FURTHER LITIGATI ON. HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS. JAI PARABOLICS PVT. LTD., 30 6 ITR 42, HELD THAT THERE IS NO PROHIBITION ON THE POWERS OF THE TRIBUNAL TO ENT ERTAIN AN ADDITIONAL GROUND WHICH ACCORDING TO THE TRIBUNAL AROSE IN THE MATTER AND FOR THE JUST DECISION OF THE CASE. WE, THEREFORE, DIRECT THE AS SESSING OFFICER TO CONSIDER THE REVISED COMPUTATION FILED DURING THE ASSESSMENT PROCEEDINGS AND COMPUTE THE INCOME AS PER LAW. 8 12. GROUND NO.5 IS AGAINST NOT REDUCING THE INCOME OF GE CAPITAL DEBENTURES OFFERED FOR TAX. AT THE TIME OF HEARING , THIS GROUND WAS NOT PRESSED AND HENCE FOR WANT OF PROSECUTION, THIS GRO UND IS DISMISSED. 13. GROUND NO.6 IS AGAINST CHARGING OF INTEREST. I NTEREST UNDER SECTION 234B IS CONSEQUENTIAL. INTEREST UNDER SEC. 234D IS NOT LEVIABLE FOR A.Y. 2003-04 IN VIEW OF THE DECISION OF SPECIAL BENCH OF TRIBUNAL IN THE CASE OF EKTA PROMOTERS LTD., 305 ITR 1 (AT)(DEL). ITA NO.4361/DEL/06 14. WE NOW TAKE UP THE APPEAL OF THE REVENUE. GROUND NO.1 IS AGAINST DELETION OF ADDITION MADE ON ACCOUNT OF REVISING THE VALUE OF CLOSING STOCK. 15. THE ASSESSING OFFICER HELD THAT THE ASSESSEE IS FOLLOWING METHOD OF VALUATION OF STOCK ON THE BASIS OF COST OR MARKET P RICE WHICHEVER IS LOWER. IN A.Y. 1993-94 THE METHOD OF VALUATION OF CLOSING STOCK ADOPTED WAS REJECTED AND THE CLOSING STOCK WAS VALUED AT COST P RICE. THEREFORE, IF THE VALUE IS ADOPTED ON COST PRICE, THERE IS UNDER VALU ATION WHICH IS REQUIRED TO BE ADDED TO THE INCOME OF THE ASSESSEE. THE LEARNE D CIT(A) HELD THAT FOR A.Y. 1993-94 THOUGH THE ADDITION WAS CONFIRMED BY T HE COMMISSIONER (APPEALS), THE SAME WAS DELETED BY ITAT DELHI IN IT A NO.4362/DEL/1996 AND THE METHOD OF VALUATION ADOPTED BY THE ASSESSEE WAS ACCEPTED. 9 FOLLOWING THE SAID ORDER IN SUBSEQUENT YEARS I.E. 1 995-96, 1996-97, 1997-98 AND 1998-99 THE ISSUE IS DECIDED IN FAVOUR OF THE A SSESSEE AND THEREFORE, FOR THIS YEAR ALSO THE VALUATION BEING AS PER THE RECOG NIZED METHOD, THE ADDITION IS TO BE DELETED. 16. AFTER CONSIDERING THE RIVAL SUBMISSIONS, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE COMMISSIONER (APPEALS). THE CO MMISSIONER (APPEALS) HAVING FOLLOWED THE DECISION OF TRIBUNAL IN THE ASS ESSEES OWN CASE AND SINCE THE METHOD OF VALUATION IS RECOGNIZED, THE AS SESSING OFFICER IS NOT JUSTIFIED IN VALUATION THE STOCK AS PER HIS OWN CHO ICE. THEREFORE, THE ADDITION TO THE VALUE OF CLOSING STOCK IS NOT SUSTA INABLE. 17. NEXT GROUND OF APPEAL IS AGAINST DELETION OF DI SALLOWANCE OF RS.9,57,077/- MADE OUT OF FOREIGN TRAVEL EXPENSES. 18. THE ASSESSING OFFICER HELD THAT THE TRAVELING E XPENSES FOR ATTENDING MEETING OF GLOBAL ALLIANCE FOR SUGAR TRADE REFORM AND LIBERALIZATION WERE DISALLOWED IN EARLIER YEAR ALSO AND THEREFORE, SIMILAR EXPENSES ON FOREIGN TRAVEL FOR ATTENDING SAID MEETING IS NOT AL LOWABLE. THE LEARNED CIT(A) HELD THAT SIMILAR DISALLOWANCE MADE FOR A.Y. 2001-02 AND 2002-03 HAVE BEEN DELETED BY THE COMMISSIONER (APPEALS) AND THEREFORE, THE DISALLOWANCE IS TO BE DELETED FOR THIS YEAR ALSO. SINCE THE DISALLOWANCE HAS BEEN DELETED IN VIEW OF THE APPELLATE ORDER SUBSIST ING AND WHICH HAVING NOT 10 BEEN REVERSED BY ANY HIGHER FORUM AND THE RELIEF GR ANTED TO THE ASSESSEE HAVING BEEN ACCEPTED BY THE DEPARTMENT, THE ISSUE I S NO MORE OPEN. WE, THEREFORE, SUSTAIN THE DELETION OF DISALLOWANCE. 19. GROUND NO.3 IS AGAINST DISALLOWANCE OF LOSS ON ACCOUNT OF RE- STATEMENT OF FOREIGN EXCHANGE ASSETS. THE ASSESSEE HAD SHOWN IN THE PROFIT & LOSS ACCOUNT INCOME OF RS.22,00,632/- AND RS.62,5 0,634/- AS LOSS IN FOREIGN CURRENCY IN RESPECT OF SHIPMENT MADE IN THE LAST YEAR BUT REALIZED DURING THE YEAR. THE DIFFERENCE BEING FLUCTUATION IN PRICE OF DOLLARS WAS HELD NOT ALLOWABLE BY TREATING THE SAME AS NOTIONAL. TH E LEARNED CIT(A) HELD THAT THE RATE PER DOLLAR AS ON 31.3.2002 WAS RS.48.55 AN D THE SAME AS ON 31.3.2003 WAS RS.47.29 PER DOLLAR. THEREFORE, THE FOREIGN EXCHANGE ASSETS AT THE CLOSING RATE WERE TO BE VALUED ACCORDING TO AS- 2. ANY LOSS ON RE- STATEMENT OF SUCH ASSETS/LIABILITIES IS ALLOWABLE A S SUCH SINCE THE SAME IS ON REVENUE ACCOUNT. 20. IN VIEW OF THE LATEST DECISION OF HONBLE SUPRE ME COURT IN THE CASE OF CIT VS. WOODWARD GOVERNOR INDIA (P) LTD., 312 ITR 2 54, THE LOSS BEING ON REVENUE ACCOUNT IS ALLOWABLE AS SUCH AND IS NOT A N OTIONAL LOSS. THEREFORE, THE GROUND RAISED BY THE REVENUE FAILS. 21. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PA RTLY ALLOWED AND THAT OF REVENUE IS DISMISSED. PRONOUNCED IN THE OPEN COURT ON 19 TH MARCH, 2010. SD/- SD/- (A.D. JAIN) (DEEPAK R. SHAH) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 19 TH MARCH, 2010. 11 ITA NOS.4159 & 4361/DEL/2006 COPY OF THE ORDER FORWARDED TO:- 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR BY ORDER *MG DEPUTY REGISTRAR, ITAT.
