Apara Enterprises Solutions Pvt. Ltd., Bangalore V. DCIT, Bangalore

ITA 531/BANG/2010

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 5583 (ITAT-BANGALORE)
• Duration Of Justice: 1 year(s) 1 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-05-2011
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 30-05-2011
• Assessment Year: 2006-2007
• Appeal Filed On: 16-04-2010
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: G V GOPALA RAO CITI
• Assessee Lawyers: K SRIRAM
• Keywords: Depreciation; Revised return; Revenue expenditure
• Section: 43B; 143(3); 80HHC

Judgement Text

PAGE 1 OF 9 ITA NO.531/BANG/2010 1 IN THE INCOME TAX APPELLATE TRIBUNAL, BANGALORE BENCH A BEFORE SHRI GEORGE GEORGE K, J.M. AND SHRI A MOHAN ALANKAMONY, A.M ITA NO.531/BANG/2010 (ASSESSMENT YEAR 2006-07) M/S APARA ENTERPRISE SOLUTIONS PRIVATE LTD., NO.139, 7 TH FLOOR, OXFORD TOWERS, AIRPORT ROAD, KODIHALLI, BANGALORE-17. - APPELLANT VS THE DEPUTY COMMISSIONER OF INCOME TAX, CO.CIRCLE-11(1), BANGALORE. - RESPONDENT APPELLANT BY : SHRI K SRIRAM, C.A. RESPONDENT BY : SHRI G V GOPALA RAO, CIT-I ORD ER PER GEORGE GEORGE K : THIS APPEAL INSTITUTED BY THE ASSESSEE IS DIRECTE D AGAINST THE ORDER OF LEARNED CIT(A)-I, BANGALORE DA TED 10/02/2010. THE ASST. YEAR CONCERNED IS 2006-07. 2. THE ASSESSEE HAS IN ALL RAISED 22 GROUNDS OF AP PEAL; HOWEVER, ALL THE GROUNDS RELATE TO THE SOLITARY ISS UE, NAMELY, WHETHER SALES TAX AND CENTRAL SALES TAX COLLECTED F ROM THE PAGE 2 OF 9 ITA NO.531/BANG/2010 2 CUSTOMERS HAS TO BE TREATED AS REVENUE EXPENDITURE AND WHETHER THE SAME HAS TO BE ADDED TO THE RETURNED INCOME. 3. BRIEFLY STATED THE FACTS ARE AS FOLLOWS:- THE ASSESSEE IS A PRIVATE LIMITED COMPANY. FOR TH E CONCERNED ASST. YEAR, RETURN OF INCOME WAS FILED ON 30.11.2006 DECLARING AN INCOME OF RS.2,95,35,002/-. SUBSEQUEN TLY, REVISED RETURN WAS FILED ON 5.9.2007 RETURNING A TOTAL INCO ME OF RS.31,87,650/-. SCRUTINY ASSESSMENT PROCEEDINGS WER E INITIATED BY ISSUANCE OF NOTICE U/S 143(2) OF THE ACT AND ASSESS MENT WAS COMPLETED U/S 143(3) OF THE ACT VIDE ORDER DATED 31 .12.2008. WHILE COMPLETING THE ASSESSMENT, THE AO MADE THE FO LLOWING ADDITIONS TO THE INCOME RETURNED BY THE ASSESSEE:- 1. DISALLOWANCE OF UNPAID SALES TAX AND CENTRAL SALES TAX U/S 43B RS.1,37,30,994 2. DEDUCTION U/S 35AC DISALLOWED RS. 1,00,000 3. DEPRECIATION ON LAND AT 50% RS. 4,21,895 4. SUNDRY BALANCES WRITTEN OFF RS. 11,94,029 5. DONATION RS. 13,500 THE TOTAL INCOME OF THE ASSESSEE WAS DETERMINED AT RS.2,61,51,488/- AND NET TAX PAYABLE THEREON WAS FIX ED AT RS.1,0,61,245/-. 4. AGGRIEVED BY THE ASSESSMENT COMPLETED, THE ASSES SEE PREFERRED AN APPEAL BEFORE THE FIRST APPELLATE AUTH ORITY. 5. THE FIRST APPELLATE AUTHORITY DISPOSED OFF THE A PPEAL FILED BY THE ASSESSEE VIDE ORDER DATED 10.12.2010. W HILE DECIDING PAGE 3 OF 9 ITA NO.531/BANG/2010 3 THE APPEAL, THE FIRST APPELLATE AUTHORITY UPHELD THE ADDITION MADE BY THE AO ON ACCOUNT OF UNPAID SALES TAX AND CENTRAL SALES TAX AMOUNTING TO RS.1, 37,30,994/-. 6. BEING AGGRIEVED BY THE ORDER OF THE FIRST APPELL ATE AUTHORITY IN CONFIRMING THE AOS ACTION OF ADDITION OF RS.1,37,30,994/-, THE ASSESSEE HAS FILED THE PRESEN T APPEAL BEFORE US. 7. THE GROUNDS RAISED HEREIN ARE ARGUMENTATIVE AND THEREFORE, FOR READY REFERENCE, THE GROUNDS ARE REPR ODUCED BELOW:- 1) THE HONBLE CIT(A) ERRED IN CONFIRMING THE ADDITION OF RS.1,37,30,994/- MADE BY THE AO ON ACCOUNT OF UNPAID SALES TAX AND CENTRAL SALES TAX. 2) THE HONBLE CIT(A) ERRED IN STATING THAT THE GROUNDS OF APPEAL OF THE APPELLANT WAS TOTALLY MISDIRECTED TO MISLEAD THE JUDGE. 3) THE HONBLE CIT(A) ERRED IN HOLDING THAT THE AO HAD NOT DISALLOWED THE UNPAID ST AND CST U/S 43B OF THE I T ACT. 4) THE HONBLE CIT(A) FAILED TO APPRECIATE THAT THE AO HAD IN FACT APPLIED THE PROVISIONS OF SECTION 43B TO DISALLOW THE AMOUNT OF ST AND CST AND HAD ALSO MENTIONED THE SAME IN THE ASSESSMENT ORDER. 5) THE HONBLE CIT(A) ERRED IN HOLDING THAT THE AO HAD ADDED BACK THE UNPAID ST AND CST AS A TRADING RECEIPT. 6) THE HONBLE CIT(A) ERRED IN RELYING ON THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF CHOWRINGHEE SALES BUREAU (1973) 87 ITR 542 IN DECIDING ON THE CASE OF THE APPELLANT. PAGE 4 OF 9 ITA NO.531/BANG/2010 4 7) THE HONBLE CIT(A) FAILED TO APPRECIATE THAT THE CASE OF CHOWRINGHEE SALES BUREAU IS NOT RELEVANT TO THE CASE OF THE APPELLANT AS IT DEALS WITH THE QUESTION OF WHETHER ST COLLECTED FORMED PART OF TRADING RECEIPTS OR NOT. 8) THE HONBLE CIT(A) FAILED TO APPRECIATE THE GROUND RAISED BY THE APPELLANT THAT THE ADDITIONOF THE UNPAID ST AND CST MADE BY THE AO U/S 43B IS BAD IN LAW SINCE SECTION 43B IS APPLICABLE ONLY IN CASE OF A DEDUCTION CLAIMED FROM THE TOTAL INCOME. 9) THE HONBLE CIT(A) ERRED IN RELYING ON THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF SINCLAIR MURRAY & CO. PRIVATE LIMITED V CIT (1974) 97 ITR 615 WHILE DECIDING THE CASE OF THE APPELLANT. 10) THE APPELLANT SUBMITS THAT THE CASE OF SINCLAIR MURRAY & CO. PRIVATE LIMITED IS NOT RELEVANT TO THE CASE OF THE APPELLANT. 11) THE APPELLANT SUBMITS THAT THE HONBLE SUPREME COURT HAS RELIED UPON ITS OWN DECISION IN THE CASE OF CHOWRINGHEE SALES BUREAU AND IS IDENTICAL TO THAT CASE WHICH DEALS WITH THE ISSUE OF WHETHER SALES TAX FORMS PART OF TRADING RECEIPT OR NOT. 12) THE APPELLANT SUBMITS THAT THE AFORESAID CASE DOES NOT DEAL WITH THE QUESTION OF APPLICABILITY OF SECTION 43B WHICH IS THE ISSUE IN THE PRESENT APPEAL. 13) THE HONBLE CIT(A) ERRED IN RELYING ON THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF CIT V THIRUMALASWAMY NAIDU & SONS (1998) 230 ITR 534. 14) THE HONBLE CIT(A) ERRED IN CONCLUDING THAT THE CASE OF INDIA CARBON LIMITED ON WHICH THE APPELLANT HAD PLACED RELIANCE, HAS BEEN TAKENC ARE OF BY THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF CIT V THIRUMALASWAMY NAIDU & SONS. 15) THE HONBLE CIT(A) FAILED TO APPRECIATE THAT THE HONBLE SUPREME COURT IN THE AFORESAID CASE HAS DEALT WITH THE ISSUE OF TAXABILITY OF AMOUNTS PAGE 5 OF 9 ITA NO.531/BANG/2010 5 RECEIVED AS REFUND FROM THE SALES TAX DEPARTMENT AND DOES NOT DEAL WITH THE ISSUE OF APPLICABILITY FO THE PROVISIONS OF SECTION 43B OF THE I T ACT. 16) THE HONBLE CIT(A) ERRED IN RELYING ON THE DECISION OF THE HONBLE RAJASTHAN HIGH COURT IN THE CASE OF WOLKERN PRIVATE LIMITED V CIT (2003) 259 ITR 430 WHILE DECIDING ON THE CASE OF THE APPELLANT. 17) THE APPELLANT SUBMITS THAT THE CASE OF WOLKERN PRIVATE LIMITED DEALS WITH THE ISSUE OF INCLUSION O F SALES TAX OR EXCISE DUTY AS PART OF TURNOVER FOR THE PURPOSES OF SECTION 80HHC WHICH IS NOT RELEVANT TO THE CASE OF THE APPELLANT. 18) NOTWITHSTANDING THE ABOVE, THE HONBLE RAJASTHAN HIGH COURT HAS IN FACT HELD THAT ST AND EXCISE DUTY WOULD NOT FORM PART OF TURNOVER FOR THE PURPOSES OF SECTION 80HHC WHICH NEGATES THE DECISION OF THE HONBLE CIT(A) IN THE PRESENT APPEAL. 19) THE HONBLE CIT(A) FAILED TO TAKE COGNIZANCE OF THE FOLLOWING DECISIONS ON WHICH RELIANCE HAS BEEN PLACED BY THE APPELLANT IN SUPPORT OF ITS CONTENTION : - CIT V INDIA CARBON LIMITED 262 ITR 327 - IAC V INDIA CARBON LIMITED 200 ITR 759 - DCIT V AMINES AND PLASTICIZENS LIMITED 199 TAXATION 411 - CIT V SB FOUNDRY 185 ITR 555 - CIT V NOBLE & HEWITT PRIVATE LIMITED 305 ITR 324 20) THE HONBLE CIT(A) FAILED TO APPRECIATE THE CONTENTION OF THE APPELLANT THAT THE QUESTIONOF WHETHER ST FORMED PART OF TRADING RECEIPT OR NOT WAS NOT AT ALL PART OF THE APPEAL. 21) NOTWITHSTANDING THE ABOVE, THE HONBLE CIT(A) FAILED TO TAKE COGNIZANCE OF THE SUBMISSION MADE BY THE APPELLANT DURING THE COURSE OF THE APPEAL PROCEEDINGS THAT THE PROVISIONS OF SECTION 145A WOULD APPLY ONLY FOR THE PURPOSE OF VALUATION OF PAGE 6 OF 9 ITA NO.531/BANG/2010 6 INVENTORY AND THAT THE VIEW TAKEN BY THE AO WAS ERRONEOUS. 22) THE APPELLANT THEREFORE SUBMITS THAT THE ORDER OF THE CIT(A) IN CONFIRMING THE ADDITION MADE BY THE AO WAS BASED ON INCORRECT APPRECIATION OF FACTS AND LAW AND IS THEREFORE BAD IN LAW. 8. THE LEARNED DR, ON THE OTHER HAND, SUPPORTED TH E FINDINGS/CONCLUSIONS OF THE INCOME TAX AUTHORITIES. 9. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. WE ARE OF THE VIEW THAT THE AO AND THE CIT(A) CORRECTLY ANALYSED THE ISSUE IN VIEW OF VARIOU S JUDGEMENTS OF THE HONBLE SUPREME COURT, MOST NOTABLY, THE FOLL OWING CASE LAWS:- 1. CHOWRIGHEE SALES BUREAU P. LTD. V CIT (87 ITR 542) 2. SINCLAIR MURRAY AND CO. P. LTD. V CIT (97 ITR 615) IN THE ORIGINAL RETURN FILED ON 30.11.2006, THE ASS ESSEE HIMSELF HAS ADDED BACK UNPAID SALES TAX AMOUNTING TO RS.1,37,30 ,994/-. IN THE REVISED RETURN, THIS IS EXCLUDED, SINCE ACCORDING T O THE ASSESSEE, HE HAS NOT CLAIMED IT AS A DEDUCTION IN THE P&L ACCOUN T AND THE SAME IS TAKEN AS LIABILITY IN THE BALANCE SHEET. HOWEVER, T HE AO HAS CLEARLY NOTED THAT THE SALES TAX AND CENTRAL SALES TAX COLL ECTED BY THE ASSESSEE AMOUNTS TO TRADING RECEIPTS AND AS SUCH, S HOULD HAVE BEEN INCLUDED IN THE GROSS TOTAL TURNOVER SHOWN IN THE P &L ACCOUNT. THIS STAND OF THE AO IS CORRECT IN VIEW OF THE ABOVE MEN TIONED JUDGEMENTS OF THE HONBLE SUPREME COURT CITED SUPRA . PAGE 7 OF 9 ITA NO.531/BANG/2010 7 9.1 THE HONBLE SUPREME COURT IN THE CASE OF SINCL AIR MURRAY AND CO. P. LTD. V CIT 97 ITR 615 HAD CATEGORI CALLY HELD AS FOLLOWS:- HELD, AFFIRMING THE DECISION OF THE HIGH COURT, (I ) THAT, ASSUMING THAT SECTION 9B(3) OF THE ORISSA SALES TAX ACT, 1947, WAS VALID, THE FACT THAT THE DEALER WAS COMPELLED TO DEPOSIT THE AMOUNT OF SALES TAX IN THE STATE EXCHEQUER DID NOT PREVENT THE APPLICABILITY OF THE PRINCIPLE LAID DOWN BY THE SUPREME COURT IN CHOWRINGHEE SALES BUREAU P. LTD. V CIT (1973) 87 ITR 542. II) THAT THE AMOUNT COLLECTED BY THE APPELLANT AS SALES TAX CONSTITUTED ITS TRADING RECEIPT AND HAD T O BE INCLUDED IN ITS TOTAL INCOME; III) THAT IF AND WHEN THE APPELLANT PAID THE AMOUNT COLLECTED TO THE STATE GOVERNMENT OR REFUNDED ANY PART THEREOF TO THE PURCHASER, THE APPELLANT WOULD BE ENTITLED TO CLAIM DEDUCTION OF THE SUM SO PAIR OR REFUNDED. 9.2 IN VIEW OF THE ABOVE DICTUM LAID DOWN BY THE H ONBLE SUPREME COURT, THE CORRECT PROCEDURE FOR THE ASSESS EE WAS TO INCLUDE ST AND CST AS PART OF TURNOVER AND SHOW THE SAME AS INCOME. WHEN ST/CST IS PAID OVER TO GOVERNMENT EXC HEQUER, THE ASSESSEE OUGHT TO HAVE CLAIMED THE PAYMENT AS EXPEN DITURE BY DEBITING THE SAME IN THE P&L ACCOUNT. IN THIS CASE , THE ASSESSEE HAS NOT INCLUDED THE ST AND CST COLLECTED AS PART O F THE TURNOVER OF THE ASSESSEE AND THEREBY NOT SHOWING IT AS INCOME . IN VIEW OF THE SAME, THE AO AND THE CIT(A) ARE JUSTIFIED IN MA KING THE PAGE 8 OF 9 ITA NO.531/BANG/2010 8 ADDITION TO THE INCOME RETURNED TO THE EXTENT OF SA LES TAX AND CENTRAL SALES TAX COLLECTED FROM THE CUSTOMERS. 9.3 THE ISSUE OF 43B DOES NOT ARISE IN THIS CASE. IN THE INSTANT CASE, THE SOLE ISSUE FOR OUR CONSIDERATION IS WHETHER THE ST AND CST COLLECTED FROM THE CUSTOMERS ARE PART OF TH E TRADING RECEIPTS OR NOT. NO DOUBT, THE ASSESSEE HAS NOT DE BITED ST AND CST IN THE P&L ACCOUNT AND THEREFORE, 43B CANNOT BE INVOKED. HOWEVER, AS STATED EARLIER, THIS IS NOT THE ISSUE F OR OUR CONSIDERATION. THE DECISIONS RELIED ON BY THE LEARN ED AR STANDS ON A DIFFERENT FOOTING. IN THOSE CASES, THE ISSUE WAS THE INVOCATION OF SECTION 43B WHEN THE EXPENDITURE HAS NOT BEEN CLAIM ED AS A DEDUCTION IN THE P&L ACCOUNT. IN VIEW OF THE AFORE SAID REASONING, WE ARE OF THE VIEW THAT THE AUTHORITIES BELOW ARE J USTIFIED IN ADDING THE ST AND CST COLLECTED FROM THE CUSTOMERS TO THE TOTAL TURNOVER OF THE ASSESSEE AND BRINGING IT TO TAX AS INCOME OF THE ASSESSEE. 10. IN THE RESULT, THE APPEAL FILED BY THE ASSESSE E IS DISMISSED. THE ORDER PRONOUNCED ON TUESDAY, THE 31 ST DAY OF MAY, 2011 AT BANGALORE. SD/- SD/- (A MOHAN ALANKAMONY) (GEORGE GEORGE K) ACCOUNTANT MEMBER JUDICIAL MEMBER PAGE 9 OF 9 ITA NO.531/BANG/2010 9 COPY TO : 1. THE REVENUE 2. THE ASSESSEE 3. THE C IT CONCERNED. 4. THE CIT(A) CONCERNED. 5. DR 6. GF MSP/31/5. BY ORDER ASST. REGISTRAR, ITAT, BANGALORE.