DEPUTY COMMISSIONER OF INCOME TAX , Jaipur V. M/S MODERN SYNTEX(INDIA)LTD., Jaipur

ITA 50/JPR/2018

• Counselvise Citation: [2018] 121 COUNSELVISE.COM (IT) 6226 (ITAT-JAIPUR)
• Duration Of Justice: 2 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-04-2018
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: B
• Assessment Year: 2010-2011
• Appeal Filed On: 12-01-2018
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: D S KOTHARI CIT DR DHK
• Assessee Lawyers: MADHUKAR GARG
• Keywords: Capital asset; Capital receipt; Revenue expenditure
• Section: 43B

Judgement Text

VK;DJ VIHYH; VF/KDJ.K] T;IQJ U;K;IHB] T;IQJ IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES, JAIPUR JH FOT; IKY JKO] U;KF;D LNL; ,O JH HKKXPUN] YS[KK LNL; LNL; DS LE{K BEFORE: SHRI VIJAY PAL RAO, JM & SHRI BHAGCHAND, AM VK;DJ VIHY LA-@ ITA NO. 50 & 51/JP/2018 FU/KZKJ.K O'K Z@ ASSESSMENT YEAR: 2010-11 2011-12 THE DCIT CIRCLE 6 JAIPUR CUKE VS. M/S. MODERN SYNTEX (INDIA) LTD A-4, VIJAY PATH, TILAK MARG JAIPUR LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN/GIR NO .: AABCM 1851 B VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT FU/KZKFJRH DH VKSJ LS@ ASSESSEE BY: SHRI MADHUKAR GARG, CA JKTLO DH VKSJ LS@ REVENUE BY:SHRI D.S. KOTHARI, CIT - DR LQUOKBZ DH RKJH[K@ DATE OF HEARING : 01/03/2018 ?KKS'K .KK DH RKJH[K@ DATE OF PRONOUNCEMENT : 9/04/2018 VKNS'K@ ORDER PER BHAGCHAND, AM BOTH THESE APPEALS HAVE BEEN FILED BY THE REVENUE AGAINST SEPARATE ORDERS OF THE LD. CIT(A)-1 JODHPUR (CAMP A T JAIPUR) DATED 21- 09-2017 FOR THE ASSESSMENT YEARS 2010-11 AND 2011- 12 RESPECTIVELY RAISING THEREIN FOLLOWING GROUNDS OF APPEAL. ITA NO. 50/JP/2018 A.Y. 2010-11 (I) WHETHER ON THE FACTS IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW THE LD. CIT(A) IS JUSTIFIED IN DELETING THE A DDITION OF RS. 87,94,53,100/- MADE BY AO ON ACCOUNT OF REMISSION O F LIABILITY U/S 41(1) OF THE I.T. ACT, 1961. ITA NO.50/JP/2018 DCIT, CIRCLE -6, JAIPUR VS M/S. MODERN SYNTEX (INDIA) LTD ,JAIPU R 2 (II) WHETHER IN THE FACTS OF THE PRESENT CASE REM ISSION OF PRINCIPAL AMOUNT OF LOAN OBTAINED FROM FINANCIAL IN STITUTION AND BANKS DOES NOT CONSTITUTE A BENEFIT OR PERQUISITE ARISING FROM BUSINESS AND DOES NOT FALL WITHIN THE AMBIT OF SECTION 28(IV) OF THE ACT. ITA NO. 51/JP/2018 A.Y. 2011-12 (I) WHETHER ON THE FACTS IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW THE LD. CIT(A) IS JUSTIFIED IN DELETING THE A DDITION OF RS. 1,40,00,000/- MADE BY AO ON ACCOUNT OF REMISSION OF LIABILITY U/S 41(1) OF THE I.T. ACT, 1961. (II) WHETHER IN THE FACTS OF THE PRESENT CASE REMI SSION OF PRINCIPAL AMOUNT OF LOAN OBTAINED FROM FINANCIAL INSTITUTION AND BANKS DOES NOT CONSTITUTE A BENEFIT OR PERQUISITE ARISING FROM BUS INESS AND DOES NOT FALL WITHIN THE AMBIT OF SECTION 28(IV) OF THE ACT. (III) WHETHER ON THE FACTS IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE LD. CIT(A) IS JUSTIFIED IN DELETING THE A DDITION OF RS. 11,193/- MADE BY THE AO FOR DEPOSITING THE EMPLOYEES CONTRI BUTION TO ESI/PF BEYOND THE PRESCRIBED TIME LIMIT PROVIDED IN RESPEC TIVE ACTS. (IV) WHETHER ON THE FACTS IN THE CIRCUMSTANCES OF T HE CASE AND IN LAW THE LD. CIT(A) IS JUSTIFIED IN HOLDING THAT E MPLOYEES CONTRIBUTION TO PF & ESI ARE GOVERNED BY THE PROVISION OF SEC 43 B AND NOT BY SECTION 36(1)(VA) R.W.S. 2(24)(X) OF THE I.T. ACT. 2.1 IN GROUND NO. 1 AND 2 OF BOTH THESE APPEALS OF THE REVENUE, THE ISSUE IS TAXABILITY OF REMISSION OF PRINCIPAL AMOUN T OF LOAN OBTAINED FROM BANKS AND FINANCIAL INSTITUTIONS. 2.2 WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIALS AVAILABLE ON RECORD. WE HAVE ALSO CONSIDERED THE CA SE LAWS RELIED UPON. IN THIS CASE, THE AO HELD THAT THE AMOUNT OF RS. 87 94.53 LACS AS INCOME ARISING DUE TO REMISSION OF LIABILITY AND ADDED THE SAME TO THE TOTAL ITA NO.50/JP/2018 DCIT, CIRCLE -6, JAIPUR VS M/S. MODERN SYNTEX (INDIA) LTD ,JAIPU R 3 INCOME OF THE ASSESSEE. IN FIRST APPEAL, THE SAME HAS BEEN DELETED BY THE LD. CIT(A) FOLLOWING THE DECISION OF HON'BLE RAJAST HAN HIGH COURT IN THE ASSESSEE'S OWN CASE IN DBIT NO. 144, 145, 146 & 148 /2010 DATED 26-04- 2017. HOWEVER, THE ACTUAL NATURE OF THE LOAN IS NOT CLEAR FROM THE RECORDS. THE ASSESSEE CLAIMS THAT IT WAS THE ONE TIME SETTL EMENT WITH BANK THEN HOW THIS AMOUNT HAS BEEN REMISSIONED IN VARIOUS YEA RS, WHETHER IT IS SAME LOAN OR DIFFERENT LOAN IS NOT CLEAR FROM THE RECORDS. TO APPLY THE DECISION OF HON'BLE HIGH COURT (SUPRA), THE LD. CIT (A) MUST HAVE RECORDED THE TRUE CHARACTER OF LOAN TAKEN BY THE AS SESSEE FROM BANK/ FINANCIAL INSTITUTION. WHETHER THE REMISSIONED LOAN WAS THE SAME LOAN AS IT WAS IN EARLIER YEARS OR IT WAS A SEPARATE LOAN O F SAME NATURE OR DIFFERENT, NO SUCH FACTS ARE ON RECORDS. THUS THE FINDING OF F ACTS WITH REGARD TO THE NATURE OF LOAN, PURPOSE OF LOAN AND UTILIZATION OF LOAN IS NECESSARY TO DECIDE THE TAXABILITY OF REMISSIONED PRINCIPAL LOA N AMOUNT. THE FACTS AVAILABLE ON RECORD DO NOT ESTABLISH OR REFLECT THE PURPOSE FOR WHICH LOAN WAS OBTAINED/ UTILIZED BY THE ASSESSEE. WHETHER IT WAS DURING ORDINARY COURSE OF BUSINESS TOWARDS REVENUE EXPENDITURE OR T OWARDS ACQUISITION OF CAPITAL ASSET NOT ASCERTAINABLE FROM RECORDS. HENCE , THE ISSUE NEEDS TO BE RESTORED TO THE FILE OF THE LD. CIT(A) TO ASCERTAIN THE FACTS AND NATURE OF ITA NO.50/JP/2018 DCIT, CIRCLE -6, JAIPUR VS M/S. MODERN SYNTEX (INDIA) LTD ,JAIPU R 4 LOAN AND THEN DECIDE IT AS PER LAW LAID DOWN BY THE COURTS IN THE CASE OF SOLID CONTAINERS LTD VS DCIT AND ANOTHER, (2009) 3 08 ITR 417 (BOM) AND HON'BLE SUPREME COURT IN THE CASE OF CIT VS T. V. SUNDRARAM IYENGER AND SONS LTD (1996) 222 ITR 344. IF THE AM OUNT IS RECEIVED IN THE COURSE OF TRADING TRANSACTION, EVEN THOUGH IT I S NOT TAXABLE IN THE YEAR OF RECEIPT AS BEING OF REVENUE CHARACTER, THE AMOUN T CHANGES ITS CHARACTER WHEN THE AMOUNT BECOMES THE ASSESSEE'S OWN MONEY B ECAUSE OF LIMITATION OR ANY OTHER STATUTORY OR CONTRACTUAL RI GHTS. ALTHOUGH IT WAS TREATED AS DEPOSIT AND WAS OF CAPITAL NATURE, AT TH E POINT OF TIME IT WAS RECEIVED, BY EFFLUX OF TIME THE MONEY HAS BECOME TH E ASSESSEE'S OWN MONEY. WHAT REMAINS AFTER ADJUSTMENT OF DEPOSIT HAS NOT CLAIMED BY THE CUSTOMER. THE CLAIM OF CUSTOMER HAS BECOME BARRED B Y LIMITATION. THUS EVEN CAPITAL RECEIPTS IN LOANS OF ASSESSEE BECAME TAXABLE BY EFFLUX OF TIME AND IT BECAME ASSESSEE'S MONEY BY ANY STATUTOR Y/ CONTRACTUAL RIGHTS. WHERE THE ASSESSEE RECEIVED DEPOSITS IN THE COURSE OF TRADING TRANSACTIONS, THE AMOUNT OF SUCH CREDIT BALANCES WHICH WERE BARRE D BY LIMITATION AND WHICH WERE WRITTEN BACK BY THE ASSESSEE TO THE PROF IT AND LOSS ACCOUNT WERE TO BE ASSESSED AS THE ASSESSEE'S INCOME. THE H ELD PARA IN THE CASE OF SOLID CONTAINERS LTD VS DCIT (SUPRA) IS AS UNDER:- ITA NO.50/JP/2018 DCIT, CIRCLE -6, JAIPUR VS M/S. MODERN SYNTEX (INDIA) LTD ,JAIPU R 5 HELD, DISMISSING THE APPEAL, THAT IT WAS A LOAN TAK EN FOR TRADING ACTIVITY AND ULTIMATELY, UPON WAIVER TH E AMOUNT WAS RETAINED IN THE BUSINESS BY THE ASSESSEE. THE A MOUNT HAD BECOME THE ASSESSEE'S INCOME AND WAS ASSESSABLE . AFTER CONSIDERING THE ABOVE PROPOSITION OF LAW, TH E ISSUE RAISED BY THE REVENUE AS GROUND NO. 1 AND 2 ARE RESTORED TO THE F ILE OF THE LD. CIT(A) TO BE DECIDED AFRESH IN VIEW OF THE RATIO IN THE D ECISION OF HON'BLE SUPREME COURT CIT VS T.V. SUNDRAM IYENGAR AND SONS LTD (SUPRA) AND SOLID CONTAINERS LTD. VS DCIT, (SUPRA). THUS GROUND NO. 1 & 2 OF THE REVENUE ARE ALLOWED FOR STATISTICAL PURPOSES. 3.1 NOW WE TAKE UP THE APPEAL OF THE REVENUE FOR TH E ASSESSMENT YEAR 2011-12 FOR ADJUDICATION. 4.1 AS REGARDS GROUND NO. 1 AND 2 OF THE REVENUE (S UPRA), WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIA LS AVAILABLE ON RECORD AND FURTHER NOTED THAT SIMILAR ISSUE HAS BEEN RAIS ED BY THE REVENUE IN ITA NO.50/JP/2018 FOR THE ASSESSMENT YEAR 2010-11 W HICH HAS BEEN RESTORED TO THE FILE OF THE LD. CIT(A) FOR AFRESH A DJUDICATION . SINCE THE GROUND NO. 1 AND 2 OF THE REVENUE FOR THE ASSESSMEN T YEAR 2011-12 ARE SIMILAR TO THE FACTS OF THE REVENUES APPEAL FOR TH E ASSESSMENT YEAR 2010-11, THEREFORE, THE DECISION TAKEN THEREIN SHAL L APPLY MUTATIS ITA NO.50/JP/2018 DCIT, CIRCLE -6, JAIPUR VS M/S. MODERN SYNTEX (INDIA) LTD ,JAIPU R 6 MUTANDIS. THUS GROUND NO. 1 AND 2 OF THE REVENUE AR E ALLOWED FOR STATISTICAL PURPOSES. 5.1 APROPOS GROUND NO. 3 AND 4 OF THE REVENUE, THE FACTS AS EMERGES FROM THE ORDER OF THE LD. CIT(A) ARE AS UNDER:- 5.2 I HAVE CONSIDERED THE ASSESSMENT ORDER AND SUBMISSIONS OF THE APPELLANT. THE AO MADE THE ADDIT ION OF RS. 11,193/- OBSERVING THAT THE ASSESSEE FAILED TO DEPOSIT THE CONTRIBUTIONS TOWARDS PF & ESI WITHIN THE DUE DATES . THE APPELLANT HAS SUBMITTED THAT IT HAD MADE PAYMENT WI THIN THE GRACE PERIOD OR BEFORE DUE DATE OF FILING OF RETURN OF INCOME HENCE THE SAME IS ALLOWABLE DEDUCTION AS PER SEC 43 B OF THE ACT. I HAVE ALSO GONE THROUGH VARIOUS JUDICIAL PREC EDENTS ON THIS ISSUE AND I FIND THAT THE HON'BLE SUPREME COUR T IN THE CASE OF CIT VS ALOM EXTRUSIONS LTD REPORTED IN 319 ITR 306 HELD THAT OMISSION OF SECOND PROVISO TO SEC 43B AND THE AMENDMENT OF FIRST PROVISO BY FINANCE ACT, 2003, BR INGING ABOUT UNIFORMITY IN PAYMENT OF TAX, DUTY, CESS, AND FEE ON ONE HAND AND CONTRIBUTION TO EMPLOYEES WELFARE FUN DS ON THE OTHER ARE, CURATIVE IN NATURE, AND THUS, EFFECT IVE RETROSPECTIVELY W.E.F. 1-4-88 I.E. THE ATE OF INSER TION OF FIRST PROVISO. IT WAS FURTHER HELD THAT WHERE PROVIDENT F UND AND EMPLOYEES STATE INSURANCE CONTRIBUTION WERE PAID BY THE ASSESSEE BEFORE FILING OF THE RETURN AND PROOF OF P AYMENT WAS SUBMITTED BEFORE THE ASSESSING OFFICER, THE AMOUNTS WERE DEDUCTIBLE AS DEDUCTION. THE HON'BLE DELHI HIGH COURT IN CASES OF CIT VS AIMIL LTD & OTHERS REPORTED IN 321 ITR 508 HELD AS UNDER:- AS SOON AS EMPLOYEES CONTRIBUTION TOWARDS PF OR ESI IS RECEIVED BY THE ASSESSEE BY WAY OF DEDUCTION OR OTH ERWISE FROM THE SALARY/ WAGES OF THE EMPLOYEES, IT WILL BE TREATED AS INCOME AT THE HANDS OF THE ASSESSEE. IT CLEARLY FOLLOWS THEREFROM THAT IF THE ASSESSEE DOES NOT DEPOSIT THIS CONTRIBUTION WITH PF/ESI AUTH ORITIES, IT WILL BE TAX ITA NO.50/JP/2018 DCIT, CIRCLE -6, JAIPUR VS M/S. MODERN SYNTEX (INDIA) LTD ,JAIPU R 7 AS INCOME AT THE HANDS OF ASSESSEE. HOWEVER, ON MAK ING DEPOSIT WITH THE CONCERNED AUTHORITIES, THE ASSESSEE BECOMES ENT ITLED TO DEDUCTION UNDER THE PROVISIONS OF S36(1)(VA). SECTION 43B(B) HOWEVER STIPULATES THAT SUCH DEDUCTION WOULD BE PERMISSIBLE ONLY ON AC TUAL PAYMENTS. THIS IS THE SCHEME OF THE ACT FOR MAKING AN ASSESSE E ENTITLED TO GET DEDUCTION FROM INCOME INSOFAR AS EMPLOYEES CONTRIB UTION IS CONCERNED. DELETION OF SECOND PROVISO HAS BEEN TREA TED AS RETROSPECTIVE IN NATURE AND WOULD NOT APPLY AT ALL. THE CASE IS T O BE GOVERNED WITH THE APPLICATION OF THE FIRST PROVISO. IF THE EMPLOY EES CONTRIBUTION IS NOT DEPOSITED BY THE DUE DATE PRESCRIBED UNDER THE RELEVANT ACTS AND IS DEPOSITED LATE, THE EMPLOYER NOT ONLY PAYS INTEREST ON DELAYED PAYMENT BUT CAN INCUR PENALTIES ALSO FOR WHICH SPECIFIC PRO VISION ARE MADE IN THE PROVIDENT FUND ACT AS WELL AS THE ESI ACT. THER EFORE, THE ACTS PERMIT THE EMPLOYER TO MAKE THE DEPOSIT WITH SOME D ELAYS, SUBJECT TO THE AFORESAID CONSEQUENCES. INSOFAR AS THE I.T. ACT IS CONCERNED, THE ASSESSEE CAN GET THE BENEFIT IF THE ACTUAL PAYMENT IS MADE BEFORE THE RETURN IS FILED CIT VS VINAY CEMENT LTD (2007) 2 13 CTR (SC) 268, CIT VS DHARMENDRA SHARMA (2007) 213 CTR (DEL.) 609 : (2008) 297 ITR 320 (DEL.) AND CIT VS P.M. ELECTRONICS LTD (200 8) 220 CTR (DEL.) 635 : (2008) 15 DTR (DEL.) 258 FOLLOWED. APART FROM THE ABOVE DECISIONS, THE FOLLOWING DECISIONS ARE ALSO APPLICABLE ON THE ISSUE AT HAND: - (I) DY. CIT VS ORBIT RESORTS (P) LTD (48 SOT 23 (URO). (II) ACIT VS RANBAXY LABORATORY LTD (2011) 7 ITR (TRIB) 161 (DEL). (III) ACIT VS M/S. ANIL SPECIAL STEEL INDUSTRIES LT D (DECISION OF JAIPUR BENCH IN ITA NO. 1100/JP/2011) FROM THE ABOVE DECISIONS, IT IS CLEAR THAT PAYMENT OR CONTRIBUTION MADE TO THE PROVIDENT FUND AUTHORITY A NY TIME BEFORE FILING OF THE RETURN FOR THE YEAR IN WHICH T HE LIABILITY TO PAY ACCRUED IS AN ALLOWABLE EXPENDITURE. IT IS S EEN THAT IN THE PRESENT CASE, ALL THE PAYMENTS WERE DEPOSITED B Y THE APPELLANT BEFORE DUE DATE OF FILING OF RETURN OF IN COME, ITA NO.50/JP/2018 DCIT, CIRCLE -6, JAIPUR VS M/S. MODERN SYNTEX (INDIA) LTD ,JAIPU R 8 THEREFORE, IN VIEW OF THE DECISION OF THE HON'BLE S UPREME COURT IN THE CASE OF LD. CIT VS ALOM EXTRUSIONS LTD (SUPRA) AND DECISION OF HON'BLE DELHI HIGH COURT IN THE CAS E OF CIT VS AIMIL LTD & ORS (SUPRA), THE PAYMENTS MADE BEFOR E DUE DATE FOR FILING OF RETURN OF INCOME ARE ALLOWABLE. CONSIDERING THE FACTUAL AND LEGAL POSITION AS DISCUSSED ABOVE, THE ADDITION MADE AT RS. 11,193/- IS DIRECTED TO BE DEL ETED THIS GROUND OF APPEAL IS ALLOWED. 5.2 WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIALS AVAILABLE ON RECORD. IN THIS CASE THE AO DURING THE COURSE OF ASSESSMENT PROCEEDING OBSERVED THAT THE ASSESSEE HAD FAILED TO DEPOSIT EMPLOYEES PF AMOUNTING TO RS. 9,274/- AND ESI AMOUNTING TO RS.1 ,919/- ON OR BEFORE THE PRESCRIBED DUE DATES. THE AO DISALLOWED THE ABO VE SUMS I.E. AMOUNTING TO RS. 11,193/- AND ADDED THE SAME TO TH E TOTAL INCOME OF THE ASSESSEE. IN FIRST APPEAL, THE LD. CIT(A) HAS DELET ED THE ADDITION MADE BY THE AO AMOUNTING TO RS. 11,193/- UNDER THE HEAD OF PF AND ESI. IT IS FURTHER NOTED THAT THE LD. CIT(A) HAS TAKEN THE REC OURSE OF HON'BLE SUPREME COURT DECISION IN THE CASE OF CIT VS ALOM EXTRUSIONS LTD (SUPRA) AND HON'BLE DELHI HIGH COURT DECISION IN TH E CASE OF CIT VS AIMIL LTD & ORS (SUPRA) IN DELETING THE ADDITION MA DE BY THE AO. WE NOTED THAT THE LD. CIT(A) HAS EXPLICITLY DEALT WITH THE ISSUE OF PF & ESI AND ALLOWED THE RELIEF TO THE ASSESSEE IN VIEW OF H ON'BLE SUPREME COURT ITA NO.50/JP/2018 DCIT, CIRCLE -6, JAIPUR VS M/S. MODERN SYNTEX (INDIA) LTD ,JAIPU R 9 AND HIGH COURT DECISIONS. TAKING INTO CONSIDERATION THE FACTS, CIRCUMSTANCES OF THE CASE AND CASE LAWS RELIED ON B Y THE LD. CIT(A), WE CONCUR WITH THE FINDINGS OF THE LD. CIT(A). THUS GR OUND NO. 3 AND 4 OF THE REVENUE ARE DISMISSED. 6.0 IN THE RESULT, THE APPEAL OF THE REVENUE FOR T HE ASSESSMENT YEAR 2010-11IS ALLOWED FOR STATISTICAL PURPOSES AND APPEAL FOR THE ASSESSMENT YEAR 2011-12 IS PARTLY ALLOWED FOR STATISTICAL PURP OSES. ORDER PRONOUNCED IN THE OPEN COURT ON 09-04-2018 . SD/- SD/- FOT; IKY JKO HKKXPUN (VIJAY PAL RAO) ( BHAGCHAND) U;KF;D LNL; / JUDICIAL MEMBER YS[KK LNL;@ ACCOUNTANT MEMBER TK;IQJ@ JAIPUR FNUKAD@ DATED:- 09 /04/ 2018 *MISHRA VKNS'K DH IZFRFYFI VXZSF'KR@ COPY OF THE ORDER FORWARDED TO: 1. VIHYKFKHZ@ THE APPELLANT- THE DCIT, CIRCLE 6, JAIPUR 2. IZR;FKHZ@ THE RESPONDENT- M/S. MODERN SYNTEX (INDIA) LTD., JAIPUR 3. VK;DJ VK;QDRVIHY@ CIT(A). 4. VK;DJ VK;QDR@ CIT, 5. FOHKKXH; IZFRFUF/K] VK;DJ VIHYH; VF/KDJ.K] T;IQJ@ DR, ITAT, JAIPUR 6. XKMZ QKBZY@ GUARD FILE (ITA NO.50/JP/2018) VKNS'KKUQLKJ@ BY ORDER, LGK;D IATHDKJ@ ASSISTANT. REGISTRAR