M/s. Shree Chanchal Ind. Pvt. Ltd., JODHPUR V. ACIT, JODHPUR

ITA 512/JODH/2014

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 4809 (ITAT-JODHPUR)
• Duration Of Justice: 2 year(s) 1 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-11-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 22-11-2016
• Assessment Year: 2008-2009
• Appeal Filed On: 01-10-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Capital asset; Depreciation; Capital receipt
• Section: 143(3); 142(1)

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL DIVISION BENCH, JODHPUR BEFORE SHRI B.P JAIN ACCOUNTANT MEMBER AND SHRI PARTHA SAR A THI CHAUDHURY JUDICIAL MEMBER ITA NO.512/JODH/2014 ASSESSMENT YEAR:2008 - 09 M/S SHREE CHANCHAL IND. PVT.LTD. VS. THE ACIT A - 45, MIA 2 ND PHASE, BASNI CENTRAL CIRCLE - 1 JODHPUR JODHPUR PAN NO. AAECS8583M (APPELLANT) (RESPONDENT) APPELLANT BY : NONE (WRITTEN SUBMISSION) RESPONDENT BY : SH. RAVINDER MITTAL DATE OF HEARING : 22/11/2016 DATE OF PRONOUNCEMENT : 30/11/2016 ORDER PER PARTHA SARATHI CHAUDHURY , JM THIS APPEAL HAS BEEN PREFERRED BY THE ASSESSEE AGAINST THE ORDER OF THE LD. CIT(A) ON THE FOLLOWING GROUNDS OF APPEAL: 1. THE LEARNED CIT(A) ERRED IN LAW AND ON FACTS IN NOT ALLOWING DEDUCTION OF NOTI ONAL SALES TAX INCENTIVES OF RS. 12,97,182/ - SANCTIONED BY THE SALES TAX AUTHORITY ALLEGING THAT THERE IS FUNDAMENTAL DIFFERENCES BETWEEN THE RAJASTHAN SALES TAX NEW INCENTIVE SCHEME 1989 AND THE SALE TAX INCENTIVE S CHEME OF THE MAHARASHTRA GOVT. THE OBSER VATIONS OF THE SPECIAL BENCH RELIED ON BY THE HON. ITAT JAIPUR BENCH WOULD NOT BE APPLICABLE TO THE FACTS OF THE CASE OF THE APPELLANT. 2. THE LEARNED CIT(A) ERRED IN LAW AND ON FACTS IN NOT EXCLUDING AMOUNT OF NOTIONAL SALES TAX INCENTIVES SANCTIONED BY THE SALES TAX AUTHORITY BY IGNORING 2 THE DECISION OF SPECIAL BENCH IN CASE OF DCIT VS. RELIANCE INDUSTRIES LTD. (2004), 88 ITD 273 (SB) (MUM) WHICH IS A CAPITAL RECEIPT. 3. THE APPELLANT CRAVES THE LEAVE TO ADD, SUBSTITUTE, MODIFY, DELETE OR AMEND ALL OR ANY GROUND OF APPEAL EITHER BEFORE OR AT THE TIME OF HEARING . 2. THE BRIEF FACTS IN THIS CASE ARE THAT ASSESSEE COMPANY IS ENGAGED IN THE BUSINESS OF MANUFACTURING, PROCESSING OF STAINLESS PATTA - PATTI, TRADING OF GUAR DAL REFINED, TRADING OF TIMER, FUTURE BUSINESS OF GUAR GUM AND CONSIGNMENT AGENT. 3. THAT , FOR THE RELEVANT ASSESSMENT YEAR RETURN WAS FILED SHOWN INCOME OF RS. 81,78,358/ - WHICH WAS E - FILED ON 18/09/2008. NOTICE UNDER SECTION 143(2) AND 142(1) OF THE ACT WERE DULY ISSUED AND SERVED ON THE ASSESSEE IS ON RECORD. THE ASSESSMENT WAS COMPLETED UNDER SECTION 143(3) OF THE ACT WITH TOTAL ASSESSED INCOME AT RS. 94,75,540/ - AS AGAINST THE RETURN OF INCOME OF RS. 81,78,358/ - . 4. THE GROUND NO. 3 OF APPEAL IS GENERAL IN NATURE HENCE NO ADJUDICAT ION IS REQUIRED. 5. THE GROUND NO. 1 & 2 IS DEALT IN THIS ORDER TOGETHER SINCE THE ISSUE INVOLVED IS SAME. 6. THE ASSESSEE HAD CLAIMED DEDUCTION OF RS. 12,97,182/ - ON ACCOUNT OF SALES TAX INCENTIVE IN RETURN FOR A.Y. 2008 - 09. THIS CLAIM OF THE ASSESSEE W AS REJECTED BY THE AO AFTER HE CONSIDERED THE SUBMISSION OF THE ASSESSEE. THE MAIN REASON GIVEN BY THE AO FOR REJECTING THE CLAIM OF THE ASSESSEE IS THAT THE ASSESSEE IS IN PLEA WAS SQUARELY COVERED BY THE SPECIAL BENCH DECISION IN THE CASE OF DCIT VS. REL IANCE INDUSTRIES LTD. (2004), 88 ITD 273 (SB) (MUM) WAS NOT 3 CORRECT BECAUSE THE FACTS OF THE CASE WERE DISTINGUISHABLE. MOREOVER THE PROVISION OF SALES TAX ACT OF RAJASTHAN STATE GOVERNMENT AND GOVERNMENT OF MAHARASHTRA WERE NOT IDENTICAL IN EVERY ASPECT. THE AO GOES ON TO STATE IN HIS ORDER THAT EVEN IF THE ASSESSEES CONTENTION IS ASSUMED BUT NOT ACCEPTED , T HE SALES TAX INCENTIVE WAS CAPITAL RECEIPT IN NATURE THIS WOULD LEA D TO REDUCTION OF COST OF INVESTMENT IN THE PROJECT. THE DEPARTMENT WOULD STILL H AVE OPTION TO REDUCE THE COST OF PLANT AND MACHINERY TO THE EXTENT OF SALES TAX INCENTIVE AVAILED BY THE ASSESSEE. AO FURTHER OBSERVED THAT THE ASSESSEE DID NOT CHARGE ANY SALES TAX FROM THE CUSTOMERS AND THE ASSESSEE HAS GOT REMISSION BY WAY OF EXEMPTION FROM SALES TAX AND THEREFORE THERE WAS NO GROUND FOR TAKING ANY NOTIONAL SALE TAX LIABILITY EVEN AS CAPITAL RECEIPT AND EXEMPTING THE SAME WHICH MEANT DOUBLE BENEFIT NOT WARRANTED UNDER THE SCHEME OF THE INCOME TAX ACT. 7. THE LD. CIT(A) IN HIS DETAILED O RDER CONSIDERED THE WRITTEN SUBMISSION OF THE ASSESSEE AND HAVE ARRIVED AT HIS DECISION ON RECORD. THE LD. CIT(A) CONSIDERED VARIOUS JUDICIAL DECISIONS ALSO TO ARRIVE AT HIS FINDINGS . LD. CIT(A) IN HIS ORDER STATED THAT THE AO HAS MADE A PERTINENT OBSERVAT ION THAT PROVISION S OF RAJASTHAN SALES TAX EXEMPTION SCHEME WERE DIFFERENT FROM THOSE OF THE EXEMPTION SCHEME OF MAHARASHTRA SALES TAX THEREFORE THE FINDINGS OF SPECIAL BENCH OF THE ITAT MUMBAI IN THE CASE OF DCIT VS. RIL(SUPRA) WOULD NOT BE APPLICABLE TO THE FACTS OF THE CASE OF THE ASSESSEE HEREIN. 4 8. THAT, DURING THE APPELLATE PROCEEDING THE LD. AR OF THE ASSESSEE HAS NOT REBUTTED THIS OBSERVATION BY ANY FACT OR ANY EVIDENCE AND DURING APPELLATE PROCEEDINGS BEFORE THE LD. CIT(A) NOT EVEN A COPY OF THE EXEMPTION SCHEME OF RAJASTHAN AND MAHARASHTRA SALES TAX WERE FILED TO DRAW OUT THE SIMILARITIES IF ANY. 8.1 THE LD. CIT(A) FURTHER POINTED OUT THAT THE AO HAS STATED THAT NO PROOF HAVE BEEN SUBMITTED THAT SALES TAX INCENTIVE COLLECTED BY THE ASSESSEE HAS NEXUS WITH INVESTMENT MADE IN FIXED ASSETS. THESE OBSERVATIONS WAS ALSO NOT REBUTTED BY THE ASSESSEE DURING THE APPELLATE PROCEEDINGS BEFORE THE LD. CIT(A) THAT IT IS ON RECORD AS MENTIONED BY THE LD. CIT(A) THAT NO DETAILS HAVE BEEN GIVEN AS TO HOW SALES TAX INCENTIVE COLLECTED HAD NEXUS WITH CAPITAL INVESTMENT. IN ABSENCE OF THESE DETAILS IT CANNOT BE SAID THAT SALES TAX COLLECTED WAS USED FOR CREATING CAPITAL ASSET AND SO WAS A CAPITAL RECEIPT. 8.2 THE THIRD POINT RAISED BY THE AO THAT IF SALES TAX I NCENTIVE WAS USED FOR INVESTMENT IN CAPITAL THIS WOULD LEAD TO DEDUCTION IN THE COST OF THE ASSET IN THE PROJECT AND WOULD HAVE TO BE REFLECTED IN REDUCED DEPRECIATION CLAIMED BUT THIS HAS NOT BEEN DONE. 8.3 THE LD. CIT(A) EVEN RELIED ON THE FINDINGS OF T HE APEX COURT IN THE CASE OF SAHANY STEELS & PRESS WORKS LTD. VS. CIT(1997) 228 ITR 253(SC) WHEREIN APEX COURT HELD THAT THE ISSUE TO BE DECIDED IN EACH CASE BASED ON FACTS AND ON BASIS OF THE FACTS AVAILABLE ON RECORD. THE LD. CIT(A) HELD THAT THE SALES T AX INCENTIVE COLLECTED BY THE ASSESSEE IS A TRADE RECEIPT, FURTHER IN VIEW OF THE FACTS AND FUNDAMENTAL DIFFERENCE BETWEEN RAJASTHAN SALES TAX NEW INCENTIVE 5 SCHEME 1989 AND THE SALES TAX INCENTIVE SCHEME OF THE MAHARASHTRA GOVERNMENT THE SPECIAL BENCH DECI SION OF THE HONBLE MUMBAI ITAT WILL NOT BE APPLICABLE TO THE ASSESSEES CASE AND THEREFORE DEDUCTION OF RS. 12,97,182/ - DISALLOWED BY THE AO AS SALES TAX INCENTIVE WAS CONFIRMED. 9. WE HAVE PERUSED THE RECORDS IN THIS CASE, FACTS AND CIRCUMSTANCES AND THE WRITTEN SUBMISSIONS AND PAPER BOOK FILED BY THE ASSESSEE HEREIN. 10. WE FIND THAT THE ASSESSEE HAS IN THE PAPER BOOK SUBMITTED COPY OF SCHEME OF SALES TAX INCENTIVE , COPY OF ORDER FOR ELIGIBILITY CERTIFICATE ALONGWITH ELIGIBILITY CERTIFICATE WH ICH FINDS MENTION EVEN IN THE WRITTEN SUBMISSIONS OF THE ASSESSEE THAT FURTHER THE ASSESSEE HAS ENCLOSED IN THE PAPER BOOK, COPY OF RST/CST EXEMPTION SCHEME FOR INDUSTRIES 1998. 11. THAT, AT THE SAME TIME WE HAVE ALSO OBSERVED THAT THE LD. CIT(A) IN HIS ORDER HAS CL EARLY MENTIONED THAT THE ASSESSEE HAS NOT REBUTTED THE OBSERVATION THAT PROVISIONS OF R AJASTHAN S ALES T AX ACT AND M AHARASHTRA S ALES T AX ACT WERE DIFFERENT FROM EACH OTHER AND WOULD NOT BE APPLICABLE IN THE FACTS OF THE CASE AND THIS OBSERVATION WAS NOT DENIED BY THE ASSESSEE THROUGH ANY FACTS OR EVIDENCE AT THE TIME OF APPEAL HEREIN BEFORE THE LD. CIT(A). 12. THAT, NO COPY OF THE EXEMPTION SCHEME OF RAJASTHAN AND MAHARASHTRA SALES TAX WERE FILED AT THE TIME OF HEARING BEFORE THE LD. CIT(A). FURTHER WE A LSO OBSERVE THAT AS PER THE LD. CIT(A) ORDER NO DETAILS HAVE BEEN GIVEN BY THE ASSESSEE AS TO HOW THE SALES TAX INCENTIVE COLLECTED BY IT HAD NEXUS WITH THE 6 CAPITAL INVESTMENT IN ABSENCE OF THESE DETAILS IT CANNOT BE SAID THAT SALES TAX COLLECTED WAS USED FOR CREATING CAPITAL ASSET AND SO WAS A CAPITAL RECEIPT. 13. THAT, THE ASSESSEE HAS SUBMITTED CERTAIN DOCUMENTS BEFORE US IN PAPER BOOK BUT AT THE TIME OF HEARING BEFORE FIRST APPELLATE AUTHORITY THE DOCUMENT S AS AND WHEN CALLED FOR WERE NOT PRODUCE D AND THIS FACT IS ON RECORD . THE PARAMETER OF JUSTICE DEMANDS THEREFORE THAT THIS ISSUE COVERING THE GROUND S OF APPEAL NUMBER 1 & 2 TO BE SET ASIDE BACK TO THE FILE OF THE LD. CIT(A) AND ACCORDINGLY WE ARRIVE AT OUR CONSIDERED VIEW THAT BOTH THESE SAID GROUNDS IS SET ASIDE BACK TO THE FILE OF THE LD. CIT(A) FOR FRESH ADJUDICATION AND WITH THE DIRECTION TO THE ASSESSEE THAT VARIOUS RELEVANT DOCUMENT S WHICH THE ASSESSEE THINKS STRENGTHEN ITS CLAIM AND HELP TO CLARIFY THE POSITION BEFORE THE REVENUE SHOULD BE PLACE D BEFORE THE LD. CIT(A) AND ON BASIS OF THEM HE MAY ARRIVE AT A CONSIDERED DECISION. 14. IN THE RESULT , THE APPEAL OF THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT . SD/ - SD/ - (B.P. JAIN) ( PARTHA SAR A THI CHAUDHURY ) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 30/11/2016 AG COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT 4. THE CIT(A) 7 5. THE DR ASSISTANT REGISTRAR