ACIT (LTI), New Delhi V. M/s. Simplex Engg. Foundry Work Ltd., New Delhi

ITA 5007/DEL/2011

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 81518 (ITAT-DELHI)
• Duration Of Justice: 2 year(s) 8 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-08-2014
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: G
• Next Hearing Date: 17-07-2014
• Assessment Year: 2001-2002
• Appeal Filed On: 11-11-2011
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Section: 80IB

Judgement Text

ITA NO. 5007/DEL/2011 ASSTT.YEAR: 2001-02 1 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH `G NEW DELHI BEFORE SHRI S.V. MEHROTRA, ACCOUNTANT MEMBER AND SHRI CHANDRA MOHAN GARG, JUDICIAL MEMBER I.T.A.NO.5007/DEL/2011 ASSESSMENT YEAR : 2001-02 ASSTT.COMMISSIONER OF INCOME TAX VS SIMPLEX ENGG. FOUNDRY WORK (LTI), NBCC PLAZA, LTD., 1503, HEMKUNT TOWER, PUYSHP VIHAR, 98, NEHRU PLACE, NEW DELHI-110017 NEW DELHI-110019 (PAN:AABCS4930P) (APPELLANT) (RESPONDENT) APPELLANT BY: SHRI RAKESH KUMAR, SR. DR RESPONDENT BY : NONE O R D E R PER CHANDRA MOHAN GARG, JUDICIAL MEMBER THE ABOVE APPEAL HAS BEEN FILED BY THE REVENUE AGAI NST THE ORDER OF CIT(A)-XV, NEW DELHI DATED 3.9.2012 IN APPEAL NO. 3 67/11-12/CIT(A)- XXXII, MUMBAI DATED 23.5.2011 FOR AY 2001-02. 2. THE GROUNDS RAISED BY THE REVENUE READ AS UNDER: - 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE CIT (A) HAS ERRED IN LAW AND ON FAC TS IN DIRECTING THE AO TO VERIFY THE NATURE OF EXTRA CLAI M RECEIPTS OF THE ASSESSEE AND ALLOW DEDUCTION U/S 80 -IA IN RESPECT OF SUCH RECEIPTS IF THE SAME HAVE A DIRECT NEXUS WITH THE INDUSTRIAL UNDERTAKING SINCE THE ABOVE DIR ECTIONS ARE BEYOND THE APPELLATE POWERS OF THE CIT (A) AS STIPULATED UNDER THE PROVISIONS OF S. 251 (1) (A) O F THE INCOME TAX ACT, 1961. ITA NO. 5007/DEL/2011 ASSTT.YEAR: 2001-02 2 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND I N LAW, THE CIT (A) INSTEAD OF ISSUING THE DIRECTIONS MENTIONED IN THE GROUND NO. (1) OUGHT TO HAVE DECID ED THE MATTER AFTER CALLING FOR A REMAND REPORT FROM T HE AO IN THE MATTER'. 3. WHEN THE CASE WAS CALLED FOR HEARING, NEITHER THE A SSESSEE NOR HIS REPRESENTATIVE APPEARED NOR ANY ADJOURNMENT APPLICA TION HAS BEEN FILED. ON CAREFUL PERUSAL OF THE APPEAL FILE AND RELEVANT REC ORD, WE FIND IT APPROPRIATE TO DECIDE THE APPEAL AFTER HEARING THE LD. DR AND W E PROCEED TO DECIDE THE APPEAL ON MERITS. 4. APROPOS THESE GROUNDS, WE HAVE HEARD ARGUMENTS O F THE DEPARTMENTAL REPRESENTATIVE (DR) AND CAREFULLY PERUSED THE RELEV ANT MATERIAL PLACED ON RECORD, INTER ALIA IMPUGNED ORDER AS WELL AS THE AS SESSMENT ORDER. LD. DR SUBMITTED THAT THE CIT(A) ERRED IN LAW AND ON FACT IN DIRECTING THE AO TO VERIFY THE NATURE OF EXTRA CLAIM RECEIPTS OF THE AS SESSEE AND ALLOW DEDUCTION U/S 80-IA IN RESPECT OF SUCH RECEIPTS IF THE SAME H AVE A DIRECT NEXUS WITH THE INDUSTRIAL UNDERTAKING SINCE THE ABOVE DIRECTIONS A RE BEYOND THE APPELLATE POWERS OF THE CIT (A) AS STIPULATED UNDER THE PROVI SIONS OF S. 251 (1) (A) OF THE INCOME TAX ACT, 1961. THE DR FURTHER CONTENDED THAT THE CIT(A), INSTEAD OF ISSUING THE DIRECTIONS TO THE AO, OUGHT TO HAVE DECIDED THE MATTER AFTER CALLING A REMAND REPORT FROM THE AO IN THE MA TTER. THE DR LASTLY ITA NO. 5007/DEL/2011 ASSTT.YEAR: 2001-02 3 SUBMITTED THAT IF IT IS FOUND JUST AND PROPER TO RE STORE THE ISSUE TO THE FILE OF EITHER CIT(A) OR AO, THE REVENUE HAS NO SERIOUS OBJ ECTION TO THAT. 5. ON CAREFUL PERUSAL OF THE IMPUGNED ORDER, WE OBS ERVE THAT THE CIT(A) HAS DECIDED THE APPEAL OF THE ASSESSEE WITH FOLLOWI NG OBSERVATIONS AND FINDINGS ASKING THE AO TO VERIFY THE NATURE OF RECE IPTS OF THE ASSESSEE AND ALSO THAT WHETHER THE SAME HAS DIRECT NEXUS WITH IN DUSTRIAL UNDERTAKING AND THE CIT(A) FURTHER DIRECTED THAT IF THE SAME IS HAV ING DIRECT NEXUS WITH THE INDUSTRIAL UNDERTAKING, THEN THE AO IS DIRECTED TO ALLOW THE DEDUCTION ON SUCH INCOME. THE RELEVANT OPERATIVE PORTION OF THE IMPUGNED ORDER READS AS UNDER:- 5.3 IN VIEW OF THE AFORESAID ORDER OF MY PREDECES SOR, WHICH WAS AFFIRMED BY THE JURISDICTIONAL HON'BLE IT AT, I DIRECT THE A.O. TO ALLOW THE DEDUCTION U/S 80IA TO THE APPELLANT ON HIRE CHARGES RECEIVED ON PLANT AND MAC HINERY AS THE SAME ARE INTEGRAL PART OF THE INDUSTRIAL UND ERTAKING. HOWEVER THE A.O. IS ALSO DIRECTED TO BIFURCATE, THE HIRE CHARGES RECEIVED PERTAINING TO PLANT AND MACHINERY AND THE VEHICLE, WHICH DOES NOT CONSTITUTE PART OF INDU STRIAL UNDERTAKING. THE OTHER RECEIPTS OF DIVIDEND, PROFIT ON SALE OF ASSETS, MISC. RECEIPTS & MACHINE WILL NOT QUALIF Y FOR DEDUCTION IN VIEW OF THE JUDGEMENT OF HON'BLE SUPRE ME COURT IN THE CASE OF LIBERTY INDIA & ORS VS. CIT 18 3 TAXMAN 349. THUS, THE CLAIM OF THE APPELLANT ON THE SE RECEIPTS ARE REJECTED. 5.4 FURTHER TO THAT, IN MY CONSIDERED VIEW, ON EXC ISE AND SALES TAX RECEIPTS AND WORK CONTRACT TAX DEDUCTION U/S 80IB OF THE IT ACT ALSO CANNOT BE ALLOWED IN VIEW OF THE DECISION OF HON'BLE SUPREME COURT IN THE CASE OF LIBERTY IND IA & ORS VS. CIT 183 TAXMAN 349, AS IT IS CLEARLY HELD T HAT THE ITA NO. 5007/DEL/2011 ASSTT.YEAR: 2001-02 4 DEDUCTION IS PERMITTED ONLY WHERE THERE IS DIRECT N EXUS IN DERIVING THE INCOME. ACCORDINGLY, DENIAL OF THE DED UCTION U/S 80IB TO THE APPELLANT COMPANY BY THE AO ON THIS ACCOUNT IS ALSO UPHELD. 5.5 HOWEVER, AS FAR AS EXTRA CLAIM IS CONCERNED, TH E AIR OF THE APPELLANT HAS SUBMITTED THAT THE SAID IN COME HAS ARISED TO THE APPELLANT COMPANY ON ACCOUNT OF CARRYING OUT SOME ADDITIONAL WORK & PROJECT UNDERTA KEN. FURTHER IT IS ALSO SUBMITTED THAT THE EXTRA CLAIM R ECEIPT WAS ON ACCOUNT OF EXTRA WORK CARRIED OUT BY THE APPELLA NT. HENCE THE INCOME ON SUCH ACCOUNT IS RELATED TO INDU STRIAL UNDERTAKING. HOWEVER IN THE ORDER OF THE A.O., THE A.O. HAS NOT SPECIFICALLY MENTIONED ANYTHING ON THIS ACC OUNT. TAKING NOTE OF THE APPELLANT SUBMISSION, I DIRECT T HE A.O. TO VERIFY THE NATURE OF RECEIPTS OF THE APPELLANT T HAT THE SAME HAS DIRECT NEXUS WITH INDUSTRIAL UNDERTAKING. IF THE SAME IS HAVING DIRECT NEXUS TO THE INDUSTRIAL UNDER TAKING AS PER THE DECISION OF THE SUPREME COURT OF INDIA I N THE CASE OF LIBERTY INDIA & ORS VS. CIT 183 TAXMAN 349, THEN THE AO IS DIRECTED TO ALLOW THE DEDUCTION ON SUCH I NCOME ACCORDINGLY. WITH THIS OBSERVATION, THE APPELLANT'S THESE GROUNDS OF APPEAL ARE PARTLY ALLOWED. 6. IN VIEW OF ABOVE, WE ARE OF THE VIEW THAT IN THE HIERARCHY OF THE REVENUE, THE AO IS EMPOWERED TO VERIFY THE NATURE O F RECEIPTS OF THE ASSESSEE AND TO ALSO VERIFY THIS FACT THAT WHETHER THE SAME IS HAVING DIRECT NEXUS TO THE INDUSTRIAL UNDERTAKING AS PER DECISION OF HONBLE APEX COURT IN THE CASE OF LIBERTY INDIA & ORS VS. CIT (SUPRA). BU T THE AO COULD NOT GET THE OPPORTUNITY TO VERIFY THE SAME AND THE CIT(A) W AS NOT EMPOWERED TO REMIT OR RESTORE THE ISSUE TO THE FILE OF THE AO AS PER PROVISIONS OF THE ACT. ITA NO. 5007/DEL/2011 ASSTT.YEAR: 2001-02 5 7. FROM BARE READING OF THE IMPUGNED ORDER, WE CLEA RLY OBSERVE THAT THE CIT(A) TOOK A VERY BALANCED APPROACH AND HAS FOLLOW ED THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF LIBERTY INDIA & ORS VS. CIT (SUPRA). ALTHOUGH THE CIT(A) COULD HAVE CALLED A REMAND REPO RT ON THE SUBMISSIONS OF THE ASSESSEE AND DECIDED THE ISSUE IN THE IMPUG NED ORDER BUT THE CIT(A) DIRECTED THE AO TO VERIFY THE NATURE OF IMPUGNED RE CEIPTS AND ALSO DIRECTED THE AO TO ALLOW THE SAME AS PER RATIO OF THE DECISI ON OF HONBLE SUPREME COURT IN THE CASE OF LIBERTY INDIA & ORS VS. CIT (S UPRA). AS IT IS A WELL- KNOWN LEGAL PROPOSITION THAT THE CIT(A) ENJOYS COTE RMINOUS POWERS WITH THE AO BUT SOMETIMES SPECIFIC EXAMINATION AND VERIF ICATION AT THE END OF AO IS REQUIRED, THEREFORE, THE PROCEDURE OF CALLING REMAND REPORT IS THERE IN THE ACT. IN THE PRESENT CASE, THE CIT(A) DIRECTED THE AO TO VERIFY THE NATURE OF RECEIPTS AND TO ALLOW THE SAME AS PER DECISION O F HONBLE APEX COURT IN THE CASE OF LIBERTY INDIA & ORS VS. CIT (SUPRA). BUT THE CIT(A) IS NOT EMPOWERED TO REMIT OR REMAND THE MATTER TO THE AO A S PER PROVISIONS OF SECTION 25(1)(A) OF THE ACT, THUS, WE ARE OF THE CO NSIDERED OPINION THAT THE DIRECTION OF THE CIT(A) TO THE AO ARE NOT SUSTAINAB LE AND WE SET ASIDE THE SAME. 8. HOWEVER, WE FURTHER OBSERVE THAT AS PER CONTENT IONS OF THE ASSESSEE, THE NATURE OF IMPUGNED RECEIPTS OF THE APPELLANT HA S DIRECT NEXUS WITH ITA NO. 5007/DEL/2011 ASSTT.YEAR: 2001-02 6 INDUSTRIAL UNDERTAKING AND WE ALSO HOLD THAT IF THE SAME HAS DIRECT NEXUS TO THE INDUSTRIAL UNDERTAKING AS PER DECISION OF HONB LE APEX COURT IN THE CASE OF LIBERTY INDIA (SUPRA), THEN THE DEDUCTION IS ALL OWABLE TO THE ASSESSEE. THIS ISSUE REQUIRES VERIFICATION AND EXAMINATION AT THE END OF THE AO, HENCE, WE FIND IT APPROPRIATE TO RESTORE THIS ISSUE TO THE FILE OF THE AO WITH A DIRECTION THAT CLAIM OF DEDUCTION PLACED BY THE ASS ESSEE SHALL BE ADJUDICATED AS PER DECISION OF HONBLE APEX COURT IN THE CASE O F LIBERTY INDIA (SUPRA) WITHOUT BEING PREJUDICED FROM EARLIER ASSESSMENT OR DER AS WELL AS IMPUGNED ORDER. 9. IN THE RESULT, APPEAL OF THE REVENUE IS DEEMED T O BE ALLOWED AS DIRECTED ABOVE. ORDER PRONOUNCED IN THE OPEN COURT ON 7.8.2014. SD/- SD/- (S. V. MEHROTRA) (CHANDRAMOHAN GARG) ACCOUNTANT MEMBER JUDICIAL MEMBER DT. 7 TH AUGUST, 2014 GS COPY FORWARDED TO:- 1. APPELLANT 2. RESPONDENT 3. C.I.T.(A) 4. C.I.T. 5. DR BY ORDER ASSTT.REGISTRAR