M/s. Poona Shims Pvt. Ltd., Pune V. ITO, Pune

ITA 442/PUN/2008

• Counselvise Citation: [2010] 135 COUNSELVISE.COM (IT) 3073 (ITAT-PUNE)
• Duration Of Justice: 2 year(s) 8 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-12-2010
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2004-2005
• Appeal Filed On: 25-03-2008
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SHRI
• Assessee Lawyers: SUNIL PATHAK
• Keywords: Principle of natural justice; Capital receipt

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH B, PUNE BEFORE SHRI SHAILENDRAKUMAR YADAV AND SHRI D. KARUNAKARA RAO ITA NO. 442/PN/08 (ASSTT. YEAR 2004-05) M/S. POONA SHIMS PVT. LTD. 39/39, DARSHANGAD, PRABHAT ROAD, LANE NO. 9 C, PUNE-411004 PAN NO. AABCP0311R .... APPELLANT VS. ITO, (TECH)-II, PUNE . RESPONDENT APPELLANT BY : SHRI SUNIL PATHAK RESPONDENT BY : SHRI PANKAJ GARG ORDER PER D. KARUNAKARA RAO AM THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST TH E ORDER OF THE CIT(A)-II, PUNE DATED 17/01/2008 FOR THE ASSESSMENT YEAR 2004-0 5 AND THE GROUNDS RAISED ARE AS UNDER:- 1] THE LEARNED CIT(A) ERRED IN CONFIRMING AN ADDIT ION OF RS. 88,08,322/- ON ACCOUNT OF REDUCTION IN LIABILITY BE CAUSE THE ASSESSEE AGREED TO PREPAY THE SALES TAX DEFERRAL LI ABILITY WHICH WAS PAYABLE OVER THE YEARS IN ONE LUMPSUM. 2] THE LEARNED CIT(A) ERRED IN HOLDING THAT THE ABO VE AMOUNT WAS TAXABLE U/S. 28(IV) WITHOUT APPRECIATING THAT THE P ROVISIONS OF THE SAID SUB SECTION WERE NOT AT ALL APPLICABLE TO THE PRESENT CASE. 3] THE LEARNED CIT(A) FAILED TO APPRECIATE THAT THE ABOVE AMOUNT OF RS. 88,08,322/- WAS REPRESENTING THE DIFFERENCE ON ACCOUNT OF REPAYMENT OF THE LOAN LIABILITY PAYABLE OVER THE YE ARS AT ITS NET PRESENT VALUE IN THIS YEAR AND ACCORDINGLY, IN COMM ERCIAL TERMS THERE WAS NO GAIN TO THE ASSESSEE AND HENCE, THE AD DITION IS NOT JUSTIFIED. 4] THE LEARNED CIT(A) FAILED TO APPRECIATE THAT THE SALES TAX DEFERRAL WAS TREATED AS LOAN BY SICOM AND THE REDUCTION IN T HE SAID LOAN LIABILITY WAS NOT TAXABLE AS A REVENUE RECEIPT AND WAS A CAPITAL RECEIPT EXEMPT FROM TAX. 5] WITHOUT PREJUDICE TO THE ABOVE GROUNDS, THE ASSE SSEE SUBMITTED THAT IN CASE, IT IS HELD THAT THE CESSATION OF LOAN LIABILITY WAS ON CAPITAL ACCOUNT BUT ON REVENUE ACCOUNT, IT IS SUBMI TTED THAT THE GAIN ARISING ON ACCOUNT OF CESSATION OF SALES TAX L IABILITY WAS CAPITAL ITA NO. 442/PN/08 A.Y 2004-05 PAGE 2 OF 2 IN NATURE BECAUSE THE SUBSIDY IN THE FORM OF DEFERM ENT OF PAYMENT OF SALES TAX WAS GIVEN FOR SETTING UP A UNIT IN BAC KWARD AREA. 2. DURING THE PROCEEDINGS BEFORE THE TRIBUNAL LD. COUN SEL REFERRED TO THE GROUNDS RAISED IN HIS APPEAL AND MENTIONED THAT THE I SSUE IN THE GROUNDS REVOLVE AROUND THE CIT(A)S DECISION IN CONFIRMING THE ADDITI ON OF RS. 88,08,322/- ON ACCOUNT OF REDUCTION OF LIABILITIES BECAUSE THE ASSE SSEE AGREES TO PREPAY THE SALES TAX DEFERRAL LIABILITY WHICH IS OTHERWISE PAYABL E OVER THE YEARS IN ONE LUMPSUM. FURTHER THE LD. COUNSEL MENTIONED THE ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE BY THE SPECIAL BENCH DECISION IN THE C ASE OF SULZER INDIA LTD. VIDE ITA NO. 2944 & 2871/MUM/2007 FOR THE ASSESSMENT YEA R 2003-04 AND OTHERS. 3. FURTHER, BOTH THE PARTIES CONCURRED TO OUR PROPOSAL TO SEND THE APPEAL TO THE FILES OF THE A.O FOR EXAMINING THE FACTS OF THE ASSESSEES CASE IN THE LIGHT OF THE RATIO OF THE SAID SPECIAL BENCH DECISION. ACCORDI NGLY, WE SET ASIDE THIS APPEAL WITH ALL ITS GROUNDS TO THE FILES OF THE A.O FOR DECIDING THE ISSUE AFRESH AFTER STRICTLY ADHERING TO THE RATIO LAID DOWN BY THE S PECIAL BENCH IN THE CASE OF SULZER INDIA LTD. (SUPRA). A.O SHALL GRANT REASONABLE O PPORTUNITY OF BEING HEARD TO THE ASSESSEE AS PER THE ESTABLISHED PRINCIPLES OF NATURAL JUSTICE. ACCORDINGLY, ALL THE GROUNDS OF THE APPEAL ARE SET ASIDE. 4. IN THE RESULT APPEAL OF THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSE. ORDER PRONOUNCED ON 08 TH DECEMBER, 2010. SD/- SD/- (SHAILENDRAKUMAR YADAV) (D.KARUNAKAR A RAO) JUDICIAL MEMBER ACCOUNTANT MEMBE R PUNE DATED THE 08 TH DECEMBER, 2010 R COPY OF THE ORDER IS FORWARDED TO : 1. ASSESSEE 2. ITO (TECH)-II, PUNE 3. CIT(A)-II, PUNE 4. CIT-II, PUNE 5. D.R. ITAT B BENCH BY ORDER ASSISTANT REGISTRAR I.T.A.T PUNE