OWENS CORNING (INDIA)LTD., MUMBAI V. ITO., WARD-7(1)(3), MUMBAI

ITA 4988/MUM/2011

• Counselvise Citation: [2019] 117 COUNSELVISE.COM (IT) 5750 (ITAT-MUMBAI)
• Duration Of Justice: 7 year(s) 10 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-05-2019
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: C
• Next Hearing Date: 30-09-2014
• Assessment Year: 2006-2007
• Appeal Filed On: 23-06-2011
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: ABI RAMA KARTIKIYEN
• Assessee Lawyers: J D MISTRY
• Keywords: Depreciation; Opportunity of being heard; Deemed to accrue or arise in india; Additional evidence; Corroborative evidences; TDS; Set aside
• Section: 143(3); 142(1); 40(a)(ia); 37(1)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH C MUMBAI BEFORE SHRI SANDEEP GOSAIN (JUDICIAL MEMBER) AND SHRI N.K. PRADHAN (ACCOUNTANT MEMBER) ITA NO. 4988/MUM/2011 ASSESSMENT YEAR: 2006 - 07 OWENS - CORNING (INDIA) PVT. LTD., ALPHA BUILDING, 7 TH FLOOR, HIRANANDANI GARDENS POWAI, MUMBAI - 400076. VS. THE INCOME TAX OFFICER - 7 (1)(3) MUMBAI, AAYAKAR BHAVAN, MAHARSHI KARVE ROAD, MUMBAI - 400020 PAN NO. AAACD1739M APPELLANT RESPONDENT ASSESSEE BY : MR. J.D. MISTRY , SR. ADVOCATE REVENUE BY : MR. ABI RAMA KARTIKIYEN, DR DATE OF HEARING : 19/02/2019 DATE OF PRONOUNCEMENT: 08/05/2019 ORDER PER N.K. PRADHAN, AM THIS IS AN APPEAL FILED BY THE ASSESSEE. THE RELEVANT ASSESSMENT YEAR IS 2006 - 07. THE APPEAL IS DIRECTED AGAINST THE ORDER PASSED BY THE COMMISSIONER OF INCOME TAX (APPEALS) - 13, MUMBAI [IN SHORT CIT(A) ] AND ARISE S OUT OF ASSESSMENT COMPLETED U/S 143(3) OF THE INCOME TAX ACT, 1961 (THE ACT). 2. THE 1 ST GROUND OF APPEAL RELA TES TO THE DISALLOWANCE OF RS.20,14,932/ - BEING THE AMOUNT OF PREMIUM PAID FOR ACQUIRING LEASE HOLD RIGHTS OVER A PLOT OF LAND BY THE ASSESSEE. OWENS - CORNING ITA NO. 4988/MUM/2011 2 THE LD. COUNSEL OF THE ASSESSEE HAS FILED A DECLARATION U/S 158A(1) OF THE ACT STATING WE FORWARD HEREWITH A DECLARATION IN FORM NO. 8 AS PRESCRIBED U/S 158A OF THE INCOME TAX ACT, 1961 R.W. RULE 16 OF THE INCOME TAX RULES, 1962 VIS - A - VIS GROUND NO. 1 RAISED IN THE CAPTIONED APPEAL VIZ. DISALLOWANCE OF AMORTIZATION OF PREMIUM PAID FOR THE LEASEHOLD LAND. WE FIN D THAT THE ABOVE ISSUE HAS BEEN DECIDED BY THE ITAT C BENCH, MUMBAI IN ASSESSEES OWN CASE FOR AY 2004 - 05 (ITA NO. 461 AND 849/MUM/2009). THE TRIBUNAL HELD AS UNDER: 8. AFTER HEARING BOTH THE SIDES AND IN VIEW OF THE DECISION OF THE TRIBUNAL IN ASSESSE ES OWN CASE IN THE IMMEDIATE PRECEDING ASSESSMENT YEAR ON THE SAME ISSUE WE HOLD THAT THE CIT(A) IS JUSTIFIED IN CONFIRMING THE DISALLOWANCE OF AMORTIZATION OF THE PREMIUM PAID FOR LEASEHOLD LAND AMOUNTING TO RS.20,16,264/ - . THE GROUND RAISED BY THE ASSES SEE IS ACCORDINGLY DISMISSED. 2.1 FACTS BEING IDENTICAL, WE FOLLOW THE ABOVE ORDER OF THE CO - ORDINATE BENCH IN ASSESSEES OWN CASE AND DISMISS THE 1 ST GROUND OF APPEAL. 3. THE 2 ND GROUND RAISED IN THIS APPEAL IS AGAINST THE AD - HOC DISALLOWANCE OF RS.77,35,100/ - BEING 5% OF THE EXPENSES INCURRED BY THE APPELLANT. THE AO HAVING GONE THROUGH THE TAX AUDIT REPORT NOTED THAT THE AUDITORS HAVE STATED IN CLAUSE 17(E)(I), WHICH REPRESENT S THE EXPENDITURE BY WAY OF PENALTY/FINE FOR VIOLATION OF ANY LAW FOR THE TIME BEING IN FORCE AS UNDER: OWENS - CORNING ITA NO. 4988/MUM/2011 3 THE SCOPE OF EXPENDITURE IN THIS ITEM, IT IS SUBMITTED, IS SUCH THAT IT IS NOT CAPABLE OF BEING IDENTIFIED AND/OR QUANTIFIED WITH REASONABLE ACCURACY, HAVING REGARD TO THE VOLUME OF DISBURSEMENT AS ALSO THE PLETHORA OF LAWS, RULES AND REGULATIONS IN INDIA . THE AO NOTED THAT THE ASSESSEE FAILED TO FURNISH THE DETAILS OF EXPENDITURE WHICH COULD ESTABLISH THAT IT HAD NOT DEBITED ANY EXPENDITURE WHICH IS PENAL IN NATURE. HOWEVER, THE AO HAS STATED THAT THE ASSESSEE HAD FILED BROAD BREAK UP OF CERTAIN EXPENSES AND DETAILS OF PURCHASES AND MANUFACTURING EXPENSES. IN ABSENCE OF THE DETAILS, EXCLUDING ROYALTY OF RS.3,22,71,590/ - FOR WHICH DETAILS WERE FILED AND LOSS ON SALE OF FIXED ASSETS OF RS.24,44,395/ - WHICH IS ADDED IN COMPU TATION OF INCOME , THE AO DISALLOWED ON AD - HOC BASIS 5% OF THE BALANCE AMOUNT OF RS.15,47,02,151/ - WHICH COMES TO RS.77,35,100/ - . 3.1 IN APPEAL, THE LD. CIT(A) AGREED WITH THE REASONS GIVEN BY THE AO AND CONFIRMED THE DISALLOWANCE. 3.2 BEFORE US, THE LD. COUNSEL OF THE ASSESSEE SUBMITS THAT DETAILED WRITTEN SUBMISSIONS WERE FILED BEFORE THE CIT(A) AND COMPLETE DETAILS OF EXPENSES WERE FILED BEFORE THE AO/CIT(A). IT IS FURTHER STATED THAT THE TRIBUNAL VIDE ITS ORDER DATED 18.12.2017 IN APPELLANTS OWN CASE FOR THE A.Y. 2005 - 06 HAS RESTORED THE ISSUE BACK TO THE AO FOR FRESH ADJUDICATION. ON THE OTHER HAND, THE LD. DR SUPPORTS THE ORDER PASSED BY THE LD. CIT(A). OWENS - CORNING ITA NO. 4988/MUM/2011 4 3.3 WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE RELEVANT MATERIALS ON RECORD. SIMILAR IS SUE AROSE BEFORE THE ITAT C BENCH, MUMBAI IN ASSESSEES OWN CASE FOR AY 2005 - 06 (ITA NO. 7055/MUM/2010). THE TRIBUNAL VIDE PARA 25 HELD AS UNDER: 25. WE HAVE CONSIDERED RIVAL SUBMISSIONS AND PERUSED MATERIALS ON RECORD. AS COULD BE SEEN FROM THE OBSERV ATIONS OF THE ASSESSING OFFICER AND THE COMMISSIONER (APPEALS), THE ADHOC DISALLOWANCE OUT OF THE EXPENDITURE CLAIMED WAS MADE ALLEGING NON FURNISHING OF RELEVANT DETAILS BY THE ASSESSEE. AS IT APPEARS THE PRIMARY REASON FOR WHICH THE ASSESSING OFFICER PRO CEEDED TO DISALLOW PART OF THE EXPENDITURE IS ON THE PRESUMPTION THAT IT MAY BE OF PENAL NATURE. HOWEVER, WITHOUT PROPERLY VERIFYING THE NATURE OF EXPENDITURE, IT CANNOT BE ASSUMED THAT CERTAIN EXPENDITURE INCURRED BY THE ASSESSEE ARE OF PENAL NATURE. CONS IDERING THE ABOVE, WE ARE INCLINED TO RESTORE THE ISSUE TO THE FILE OF ASSESSING OFFICER TO EXAMINE THE NATURE OF THE EXPENDITURE FROM THE DETAILS SUBMITTED/OR TO BE SUBMITTED BY THE ASSESSEE AND DECIDE THE ISSUE ACCORDINGLY KEEPING IN VIEW THE PROVISIONS OF SECTION 37(1) OF THE ACT. THIS GROUND IS ALLOWED FOR STATISTICAL PURPOSES. FACTS BEING IDENTICAL, WE SET ASIDE THE ORDER OF THE LD. CIT(A) AND RESTORE THE ABOVE MATTER TO THE FILE OF THE AO TO EXAMINE THE NATURE OF EXPENDITURE FROM THE DETAILS SUBMITT ED/OR TO BE SUBMITTED BY THE ASSESSEE AND DECIDE THE ISSUE ACCORDINGLY KEEPING IN VIEW THE PROVISIONS OF SECTION 37(1) OF THE ACT. THUS THE ABOVE GROUND OF APPEAL IS ALLOWED FOR STATISTICAL PURPOSES. 4. THE 3 RD GROUND RAISED IN THIS APPEAL IS AGAINST THE ORDER OF THE LD. CIT(A) CONFIRMING THE DISALLOWANCE OF RS.92,44,636/ - MADE BY THE AO U/S 40(A)(IA) OF THE ACT. OWENS - CORNING ITA NO. 4988/MUM/2011 5 DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE AO OBSERVED THAT THOUGH THE APPELLANT HAS MADE PROVISION FOR EXPENSES IN THE BOOKS OF ACCOUNT S BUT NOT DEDUCTED TAX AT SOURCE. THE AO NOTED THAT EVEN ON PROVISIONS MADE IN THE BOOKS OF ACCOUNTS, THE APPELLANT IS LIABLE TO DEDUCT TAX AT SOURCE. EXAMINING THE REPLY FILED BY THE ASSESSEE BEFORE HIM, THE AO FOUND THAT THE DETAILS OF PROVISIONS MADE OF THE EXPENSES WHICH ARE SUBJECT TO TDS ARE LEGAL AND PROFESSIONAL FEES OF RS.49,85,368/ - , RECRUITMENT CHARGES OF RS.7,32,255/ - , RENT EQUIPMENT OF RS.1,60,477/ - , SECURITY OF RS.1,22,025/ - , TRAINING AND DEVELOPMENT EXPENSES OF RS.4,60,845/ - , STAFF WELFARE EX PENDITURE OF RS.27,83,666/ - . THE AO OBSERVED THAT IN THE ABOVE CASES THE PARTIES ARE ASCERTAINED AND THEREFORE, THE ASSESSEE SHOULD HAVE MADE THE TAX DEDUCTED AT SOURCE. ACCORDINGLY, THE AO MADE A DISALLOWANCE OF RS.92,44,636/ - U/S 40(A)(IA) OF THE ACT. 4 .1 IN APPEAL, THE LD. CIT(A) AGREED WITH THE REASONS GIVEN BY THE AO AND CONFIRMED THE ABOVE DISALLOWANCE. 4.2 BEFORE US, THE LD. COUNSEL OF THE ASSESSEE REFERS TO THE RELEVANT LEDGER ACCOUNTS TO SHOW AD - HOC PROVISION . ALSO RELIANCE IS PLACED BY HIM ON TH E DECISION IN ADITYA BIRLA NUVO LTD. V. DCIT (ITA NO. 8427/MUM/2010) FOR THE AY 2006 - 07 , MAHINDRA & MAHINDRA LTD. V. DCIT (2012) 24 TAXMANN.COM 267 (MUMBAI), PFIZER LTD. V. ITO (TDS) (2012) 28 TAXMANN.COM 17 (MUMBAI) . ON THE OTHER HAND, THE LD. DR SUPPORTS THE ORDER PASSED BY THE LD. CIT(A). OWENS - CORNING ITA NO. 4988/MUM/2011 6 4.3 WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE RELEVANT MATERIALS ON RECORD. SIMILAR ISSUE AROSE BEFORE THE ITAT IN ADITYA BIRAL NUVO LTD. (SUPRA). THE BENCH FOLLOWING THE DECISION IN THE CASE OF MAHINDRA & MAHINDRA LTD. (SUPRA) HELD THAT THE ASSESSEE HAD MADE PROVISIONS BUT NOT RECEIVED THE BILLS, THAT IN THE SUBSEQUENT YEAR THE PROVISIONS MADE BY IT WERE OFFERED FOR TAXATION. THEREFORE, IT ALLOWED THE APPEAL FILED BY THE ASSESSEE. IN THE CASE OF MAHINDRA & MAHINDRA LTD . (SUPRA), IT IS HELD THAT TDS PROVISIONS WERE NOT APPLICABLE FOR THE PROVISIONS MADE AT THE YEAR END. IN APPELLANTS OWN CASE FOR THE A.Y. 2006 - 07, THE TRIBUNAL HAS HELD THAT IN THE CASE UNDER CONSIDERAT ION, THE ASSESSEE HAD MADE PROVISIONS BUT HAD NOT RECEIVED THE BILLS, THAT IN THE SUBSEQUENT YEAR THE PROVISIONS MADE BY IT WERE OFFERED FOR TAXATION. CONSIDERING THESE FACTS AND FOLLOWING THE ORDERS OF THE TRIBUNAL IN THE CASE OF MAHINDRA & MAHINDRA LTD & INDUSTRIAL DEVELOPMENT BANKING COMPANY (SUPRA), WE DECIDE GROUND NO 2 IN FAVOUR OF THE ASSESSEE. AN EXAMINATION OF THE LEDGER ACCOUNTS INDICATE S THAT THESE ARE AD - HOC PROVISIONS . BEING SO, FOLLOWING THE RATIO LAID DOWN IN ABOVE DECISIONS, WE DELETE THE DISALLOWANCE OF RS.92,44,636/ - U/S 40(A)(IA) OF THE ACT . THUS THE 3 RD GROUND OF APPEAL IS ALLOWED. 5. THE 4 TH GROUND OF APPEAL IS AGAINST THE ORDER OF THE LD. CIT(A) CONFIRMING THE ADDITION OF RS.42,33,362/ - U/S 41(1) OF THE ACT. OWENS - CORNING ITA NO. 4988/MUM/2011 7 IN RESPONSE TO A QUERY RAISED BY THE AO TO FURNISH THE CREDITORS OUTSTANDING FOR MORE THAN THREE YEARS , THE ASSESSEE FILED A STATEMENT SHOWING THE DETAILS. AS PER IT , THE CREDITORS OUTSTANDING TILL THE DATE OF ASSESSMENT ARE RS.42,33,362/ - . THE AO OBSERVED TH AT THE ASSESSEE DID NOT OFFER ANY EXPLANATION WHY THE SAME SHOULD NOT BE TREATED AS INCOME U/S 41(1). THEREFORE, THE AO MADE AN ADDITION OF THE ABOVE AMOUNT U/S 41(1) OF THE ACT. 5.1 IN APPEAL, THE LD. CIT(A) AGREED WITH THE REASONS GIVEN BY THE AO SINCE THE ASSESSEE ITSELF HAS WRITTEN BACK IN FINANCIAL YEAR 2009 - 10, THE SAID CREDITS OUTSTANDING FOR MORE THAN THREE YEARS. 5.2 BEFORE US, THE LD. COUNSEL OF THE ASSESSEE SUBMITS THAT DETAILS WERE FILED BEFORE THE LD. CIT(A) DURING THE COURSE OF APPELLATE PROCEEDINGS. REFERENCE IS MADE BY HIM TO THE OBSERVATION MADE BY THE LD. CIT(A) IN HIS ORDER THAT IN FINANCIAL YEAR 2009 - 10, THE ASSESSEE HAS WRITTEN BACK THE SAID CREDITS. ALSO RELIANCE IS PLACED BY HIM ON THE DECISION IN CIT V. BHOGILAL RAMJIBHAI ATARA (2014) 43 TAXMANN.COM 55 (GUJ), CIT V. SUGAULI SUGAR WORKS (P.) LTD . (1999) 102 TAXMAN 713 (SC). ON THE OTHER HAND, THE LD. DR SUPPORTS THE ORDER PASSED BY THE LD. CIT(A). 5.3 WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE RELEVANT MATERIALS ON RECORD. IT HAS BEEN CATEGORICALLY HELD IN THE CASE OF BHOGILAL RAMJIBHAI ATARA (SUPRA) BY THE HONBLE GUJARAT HIGH COURT THAT WHERE ASSESSEE IN RETURN OF INCOME FOR THE ASSESSMENT YEAR 2007 - 08 HAD SHOWN CERTAIN AMOUNT BY WAY OF HIS DEBTS AND ASSESSING OFFICER, OWENS - CORNING ITA NO. 4988/MUM/2011 8 APPLYING PROVISIONS OF SECTION 41(1) ADDED BACK SAID AMOUNT IN INCOME OF ASSESSEE AS DEEMED INCOME, SINCE THERE WAS NOTHING ON RECORD TO SUGGEST THAT THERE WAS REMISSION OR CESSATION OF LIABILITY THAT TOO DURING ASSESSMENT YEAR 2007 - 08, ABOVE AMOUNT COULD NOT BE ADDED BACK IN INCOME OF ASSESSEE. IN THE INSTANT CASE, THERE IS NOTHING ON RECORD TO SUGGEST THAT THERE WAS REMISSION OR CESSATION OF LIABILITY DURING THE IMPUGNED ASSESSMENT YEAR. WE FAIL TO UNDERSTAND HOW THE LD. CIT(A) DISMISSED THE ABOVE GROUND OF APPEAL, AFTER OBSERVING AT PARA 6.2 OF THE IMPUGNED ORDER THAT THE ASSESSEE HIMSELF IN FY 2009 - 10 HAS WRITTEN BACK THE SA ID CREDITS OUTSTANDING FOR MORE THAN THREE YEARS. WE FOLLOW THE RATIO LAID DOWN IN BHOGILAL RAMJIBHAI ATARA (SUPRA) AND ALLOW THE 4 TH GROUND OF APPEAL. 6. THE 5 TH GROUND RAISED IN THIS APPEAL IS AGAINST THE ORDER OF THE LD. CIT(A) CONFIRMING THE DISALLOW ANCE OF DEPRECIATION CLAIMED BY THE ASSESSEE ON ADDITIONS MADE DURING THE YEAR TO THE FIXED ASSETS. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE AO NOTED THAT THE ASSESSEE HAD MADE ADDITION TO FIXED ASSETS AND CLAIMED DEPRECIATION OF RS.93,40,242/ - . IN RESPONSE TO THE NOTICE U/S 142(1) DATED 21.08.2009 ISSUED BY THE AO, THE ASSESSEE FURNISHED DETAILS OF ADDITION TO THE FIXED ASSETS BUT DID NOT FURNISH SUPPORTING EVIDENCE SUCH AS BILLS, DATE ON WHICH PUT TO USE ETC. ON VERIFICATION OF APPENDIX E SUBMIT TED BY THE ASSESSEE, THE AO OBSERVED THAT THE APPELLANT HAD INTIMATED THE EXCISE AUTHORITY REGARDING LOSS OF MATERIALS DUE TO HEAVY RAIN AND FLOOD OWENS - CORNING ITA NO. 4988/MUM/2011 9 IN TALOJA FACTORY IN JULY 2005. OBSERVING THAT BILLS ARE MOSTLY KEPT IN H EAD O FFICE SITUATED AT BOMBAY AND TH E ASSESSEE HAD ACQUIRED MOST OF THE ASSETS AFTER THE DATE OF FLOOD, THE AO DECLINE D TO ACCEPT THE ARGUMENTS OF THE ASSESSEE THE DOCUMENTARY EVIDENCE ARE DESTROYED AND NOT TRACEABLE, MADE A DISALLOWANCE OF THE ABOVE CLAIM OF RS.93,40,242/ - . 6.1 IN APPEAL, THE LD. CIT(A) AGREED WITH THE REASONS GIVEN BY THE AO AND CONFIRMED THE ABOVE DISALLOWANCE OF CLAIM OF DEPRECIATION OF RS.93,40,242/ - . 6.2 BEFORE US, THE LD. COUNSEL OF THE ASSESSEE SUBMITS THAT THERE WAS NO DISALLOWANCE OF DEPRECIATION IN THE AYS 2007 - 0 8 AND 2008 - 09, WHEREAS THE SAME WAS DISALLOWED FROM AY 2009 - 10 TO AY 2014 - 15. FURTHER, IT IS STATED THAT ADDITIONAL EVIDENCE BY WAY OF SAMPLE COPIES OF BILLS IN RESPECT OF ADDITION TO FIXED ASSETS WERE PROVIDED, HOWEVER, THESE WERE NOT CONSIDERED BY THE LD . CIT(A). ON THE OTHER HAND, THE LD. DR SUPPORTS THE ORDER PASSED BY THE LD. CIT(A). 6.3 WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE RELEVANT MATERIALS ON RECORD. WE ARE OF THE CONSIDERED VIEW THAT THE ADDITIONAL EVIDENCE BEING PHOTOCOPIES OF SA MPLE INVOICES PLACED AT PAGE 367 - 383 OF THE PAPER BOOK FILED BEFORE US, WHICH WERE ALSO SUBMITTED BEFORE THE CIT(A) WOULD RESOLVE THE CONTENTIOUS ISSUE ARISING OUT OF THE ABOVE GROUND OF APPEAL. THEREFORE, WE SET ASIDE THE ORDER OF THE LD. CIT(A) AND RESTO RE THE MATTER TO THE AO TO EXAMINE THE ADDITIONAL EVIDENCE AND PASS AN ORDER AFTER GIVING REASONABLE OPPORTUNITY OF BEING HEARD TO THE OWENS - CORNING ITA NO. 4988/MUM/2011 10 ASSESSEE. WE DIRECT THE ASSESSEE TO FILE THE RELEVANT DOCUMENTS/EVIDENCE BEFORE THE AO. THUS THE 5 TH GROUND OF APPEAL IS ALLOWED FOR STATISTICAL PURPOSES. 7. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 08/05/2019. SD/ - SD/ - (SANDEEP GOSAIN) (N.K. PRADHAN) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI ; DATED: 08/05/2019 RAHUL SHARMA, SR. P.S. COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT. 3. THE CIT(A) - 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE . BY ORDER, //TRUE COPY// (SR. PRIVATE SECRETARY) ITAT, MUMBAI