M/s. ELOF HANSON (INDIA) P. LTD., MUMBAI V. DCIT Rg. - 1(1), MUMBAI

ITA 5479/MUM/2006

• Counselvise Citation: 547919914 RSA 2006
• Duration Of Justice: 4 year(s) 7 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-06-2011
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: E
• Next Hearing Date: 14-06-2011
• Assessment Year: 2003-2004
• Appeal Filed On: 19-10-2006
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: R MURLIDHAR
• Section: 43B

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH E : MUMBAI BEFORE SHRI R.S. PADVEKAR,(JM) AND SHRI RAJENDRA S INGH ,(AM) ITA NO.5479/MUM/2006 ASSESSMENT YEAR :2003-04 ITA NO.3721/MUM/2008 ASSESSMENT YEAR :2004-05 ITA NO.315/MUM/2009 ASSESSMENT YEAR :2005-06 M/S. ELOF HANSON (INDIA)PVT. LTD. 5-F, COURT CHAMBERS 35, NEW MARINE LINES MUMBAI-400 020. ..( APPELLANT ) P.A. NO. (AAACE 2661 H) VS. DY. COMMISSIONER OF INCOME TAX RANGE-1(1), ROOM NO.533, 5 TH FLOOR AAYAKAR BHAVAN, M.K. ROAD MUMBAI-20. ..( RESPONDENT ) APPELLANT BY : SHRI R. MURLIDHAR RESPONDENT BY : SHRI R .K. GUPTA O R D E R PER RAJENDRA SINGH (AM). THESE APPEALS BY THE ASSESSEE ARE DIRECTED AGAINST DIFFERENT ORDERS OF THE CIT(A) DATED 21.8.2006, 19,3,2008 AND 2.11.2008 FOR THE ASSESSMENT YEARS 2003-04, 2004-05 AND 2005-06 RESPECTIVELY. T HE DISPUTES RAISED IN THESE APPEALS RELATE TO DETERMINATION OF INCOME FRO M YASLIK PROJECT, ADDITIONS ON ACCOUNT OF CONTRIBUTION TO SUPERANNUATION FUND, UNUTILIZED MODVAT CREDIT AND ON ACCOUNT OF DISALLOWANCE UNDER SECTION 14A. AS THESE APPEALS WERE HEARD TOGETHER AND ALSO INVOLVE COMMON ISSUES, THES E ARE BEING DISPOSED OF BY THIS SINGLE CONSOLIDATED ORDER FOR THE SAKE OF C ONVENIENCE. 2. WE FIRST TAKE UP THE DISPUTE IN RELATION TO ADDI TION ON ACCOUNT OF ADDITION FROM YASLIK PROJECT. DURING THE YEAR THE ASSESSEE WAS EXECUTING THE ITA NO.5479,3721 & 315/M/ A.Y:03-04 TO 05-06 2 YASLIK PROJECT WHICH WAS NOT COMPLETE. THE GROSS RE CEIPTS OF THE PROJECT DURING THE ASSESSMENT YEAR 2003-04 WERE RS.49,91,97 3/- AND AFTER DEDUCTING EXPENSES OF RS .21,44,849/- THERE WAS NET RECEIPT OF RS.28,47,124/-. THE ASSESSEE HOWEVER DID NOT DECLAR E ANY INCOME FROM THE PROJECT IN THE ASSESSMENT YEAR 2003-04 AS THE ASSES SEE WAS FOLLOWING PROJECT COMPLETION METHOD AND THE PROJECT WAS NOT C OMPLETE DURING THE YEAR. THE ASSESSING OFFICER HOWEVER TOOK THE VIEW THAT IN COME FROM PROJECT HAS TO BE ASSESSED EVEN IF THE PROJECT WAS PARTIALLY COMPL ETE. HE THEREFORE, ASSESSED THE SUM OF RS.28,47,124/- AS INCOME OF THE YEAR. IN APPEAL CIT(A) CONFIRMED THE ASSESSMENT MADE BY THE ASSESSING OFFI CER, AGGRIEVED BY WHICH THE ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL . 2.1 BEFORE US THE LD. AR FOR THE ASSESSEE AT THE V ERY OUTSET SUBMITTED THAT THOUGH THE ASSESSEE WAS FOLLOWING PROJECT COMP LETION METHOD AND INCOME ASSESSED BY ASSESSING OFFICER WAS NOT CORREC T THE ASSESSEE WAS AGREEABLE TO THE ASSESSMENT MADE BY THE ASSESSING O FFICER FOR THE ASSESSMENT YEAR 2003-04, PROVIDED THAT AMOUNT ASSES SED THIS YEAR IS DEDUCTED FROM THE INCOME DECLARED IN THE SUBSEQUENT YEAR SO THAT THERE IS NO DOUBLE ADDITION. THE LD. AR MADE IT CLEAR THAT HE WAS AGREEING TO THE ASSESSMENT AS RATE OF INCOME TAX IN ALL THE THREE Y EARS FROM 2003-04 TO 2005-06 WAS THE SAME. IT WAS POINTED OUT THAT IN A SSESSMENT YEAR 2004-05 AS PROJECT WAS SUBSTANTIALLY COMPLETE THE ASSESSEE HAD DECLARED INCOME OF RS.24,97,200/- ON THE GROSS AMOUNT RECEIVED TILL 31 .3.2004 OF RS .78,55,425/- WHICH ALSO INCLUDED RECEIPTS FOR ASSE SSMENT YEAR 2003-04. THE ASSESSING OFFICER ASSESSED THE SAID INCOME IN A SSESSMENT YEAR 2004-05 THOUGH PART OF THE INCOME RELATED TO ASSESSMENT YEA R 2003-04. IT WAS ALSO SUBMITTED THAT NET INCOME FROM THE RECEIPTS DURING ASSESSMENT YEAR 2004- 05 WHICH AMOUNTED TO RS.48,27,309/- WAS ONLY RS.14, 12,682/- AND THEREFORE, THE EXCESS AMOUNT ASSESSED THAT YEAR SHO ULD BE DELETED. SIMILARLY THE ASSESSEE DECLARED INCOME OF RS.17,52, 475/- AS PER METHOD OF ACCOUNTING FOLLOWED BY IT WHICH WAS ASSESSED BY ASS ESSING OFFICER AS SUCH FOR ASSESSMENT YEAR 2005-06 THOUGH ON THE BASIS OF RECEIPTS OF ITA NO.5479,3721 & 315/M/ A.Y:03-04 TO 05-06 3 RS.7,37,168/- FOR THAT YEAR THERE WAS NET LOSS OF R S.10,131/-. IT WAS THUS MADE CLEAR THAT AS PER METHOD FOLLOWED BY ASSESSING OFFICER INCOME ASSESSABLE FOR ASSESSMENT YEARS 2003-04 2004-05 AND 2005-06 WERE ONLY RS.28,47,124/-, RS .14,12,682/- AND MINUS RS .10,131/- RESPECTIVELY. THE TOTAL INCOME FRO THE ENTIRE PROJECT WAS RS.42,49,67 5/- WHICH THE ASSESSEE HAD DECLARED ONLY IN ASSESSMENT YEARS 2004-05 AND 2 005-06. THE LD. DR PLACED RELIANCE ON THE ORDERS OF THE AUTHORITIES BE LOW AND HAD NO SERIOUS OBJECTION TO THE SUBMISSION MADE BY THE LD. AR. 2.2 WE HAVE PERUSED THE RECORDS AND CONSIDERED THE MATERIAL CAREFULLY. THE DISPUTE IS REGARDING DETERMINATION OF INCOME FR OM YASLIK PROJECT. THE ASSESSEE WAS FOLLOWING PROJECT COMPLETION METHOD WH ICH IS AN ACCEPTED METHOD OF ACCOUNTING OF INCOME IN CASE OF CONSTRUCT ION PROJECT. THE ASSESSING OFFICER FOLLOWED PARTIAL COMPLETION METHO D AND ASSESSED INCOME ON THE BASIS OF RECEIPTS AND EXPENSES FOR A PARTICULAR YEAR. AS THE RATE OF TAX FOR ALL THE THREE YEARS WAS SAME, THE LD. AR AGREED WITH THE METHOD ADOPTED BY THE ASSESSING OFFICER PROVIDED IT WAS ENSURED TH AT THERE WAS NO DOUBLE TAXATION. AS PER THE ANNUAL RECEIPTS AND EXPENSES AS GIVEN BY THE ASSESSEE IN THE PAPER BOOK THE INCOME ASSESSABLE FROM THE PR OJECT FOR THREE YEARS WAS RS.28,47,124/- AND RS.14,12,682/- AND MINUS RS .10,131/- RESPECTIVELY. THE ASSESSEE HAD DECLARED THE INCOME ONLY FOR THE A SSESSMENT YEARS 2004- 05 AND 2005-06 AT RS.24,97,200/- AND 17,52,475/- RE SPECTIVELY. OBVIOUSLY THE INCOME DECLARED BY THE ASSESSEE ALSO INCLUDED T HE INCOME ASSESSED BY THE ASSESSING OFFICER IN ASSESSMENT YEAR 2003-04 AM OUNTING TO RS.28,47,124/-. THE INCOME DECLARED BY THE ASSESSE E IN ASSESSMENT YEARS 2004-05 AND 2005-06 HAS BEEN ACCEPTED BY THE ASSESS ING OFFICER WHICH MEANS THAT PART OF THE INCOME ASSESSED BY THE ASSES SING OFFICER IN ASSESSMENT YEAR 2003-04 HAS AGAIN BEEN ASSESSED IN THE SUBSEQUENT TWO YEARS. IN THE SUBSEQUENT YEARS, THE EXCESS AMOUNT A SSESSED HAS TO BE REDUCED. THEREFORE, WHILE CONFIRMING THE ASSESSMENT MADE BY THE ASSESSING OFFICER FOR ASSESSMENT YEAR 2003-04, WE DIRECT THE ASSESSING OFFICER TO COMPUTE THE INCOME FOR THE SUBSEQUENT YEARS ON THE BASIS OF RECEIPTS AND ITA NO.5479,3721 & 315/M/ A.Y:03-04 TO 05-06 4 EXPENSES FOR THOSE YEARS AFTER NECESSARY VERIFICATI ON SO THAT THERE IS NO DOUBLE ADDITION. WE DISPOSE OF THE GROUND RELATING TO ASSESSMENT OF INCOME FROM YASLIK PROJECT ACCORDINGLY. 3. THE SECOND DISPUTE WHICH IS RELEVANT FOR ALL THE THREE YEARS IS REGARDING ADDITION ON ACCOUNT OF CONTRIBUTION TO SU PERANNUATION FUND. THIS GROUND IS COMMON IN ALL THE YEARS. THE ASSESSEE HA D MADE PAYMENT OF RS.6,26,57/-, RS.6,81,390/- AND RS.6,81,570/- FOR T HE ASSESSMENT YEARS 2003-04, 2004-05 AND 2005-06 TO LIC IN RESPECT OF T HE SAID SUPERANNUATION FUND. THE PAYMENTS HAD BEEN MADE ON 30 TH OF NOVEMBER OF THE RELEVANT YEAR WHICH WAS THE RENEWAL DATE OF THE POLICY. THE ASSE SSING OFFICER ALLOWED ONLY PROPORTIONATE PAYMENT FOR THE PERIOD FROM 30 TH NOVEMBER TO 31 ST MARCH AND HELD THAT THE BALANCE PAYMENT RELATING TO NEXT YEAR WAS NOT ALLOWABLE. IN APPEAL THE CIT(A) CONFIRMED THE ADDITION MADE BY TH E ASSESSING OFFICER, AGGRIEVED BY WHICH THE ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL. 3.1 BEFORE US THE LD. AR SUBMITTED THAT CONTRIBUTI ON TO SUPERANNUATION FUND WAS ALLOWABLE AS DEDUCTION UNDER SECTION 36(1) (IV). THE LIABILITY ON ACCOUNT OF ANNUAL SUBSCRIPTION ARISES ON 30 TH NOVEMBER OF THE YEAR ON WHICH DATE THE ENTIRE AMOUNT BECOMES PAYABLE AND THEREFOR E THE WHOLE AMOUNT HAS TO BE ALLOWED SUBJECT TO ACTUAL PAYMENT UNDER S ECTION 43B OF THE INCOME TAX ACT (THE ACT). THE LD. DR PLACED RELIANCE ON THE ORDERS OF THE AUTHORITIES BELOW. 3.2 WE HAVE PERUSED THE RECORDS AND CONSIDERED THE MATTER CAREFULLY. THE DISPUTE IS REGARDING THE DEDUCTION ON ACCOUNT OF AN NUAL CONTRIBUTION TO LIC IN RELATION TO SUPERANNUATION FUND. CONTRIBUTION TO S UPERANNUATION FUND IS ALLOWABLE AS DEDUCTION (1)(IV) UNDER SECTION 36 OF THE ACT. THE CONTRIBUTION IS PAYABLE ANNUALLY ON 30 TH NOVEMBER OF EACH YEAR AND THEREFORE ON THAT DAY THE ENTIRE AMOUNT FOR THE YEAR BECOMES PAYABLE. WE THEREFORE DO NOT AGREE WITH THE AUTHORITIES BELOW THAT PROPORTIONATE PAYME NT IS TO BE ALLOWED AS ENTIRE CONTRIBUTION FOR THE YEAR BECAME PAYABLE DUR ING THE YEAR. HOWEVER, ITA NO.5479,3721 & 315/M/ A.Y:03-04 TO 05-06 5 SECTION 43B ALLOWS ONLY ACTUAL AMOUNT PAID DURING T HE YEAR. WE THEREFORE DIRECT THE ASSESSING OFFICER TO WORK OUT THE DEDUCT ION ACCORDINGLY AFTER NECESSARY VERIFICATION AND AFTER HEARING THE ASSESS EE. 4. THE THIRD DISPUTE IS REGARDING THE ADDITION ON A CCOUNT OF UN-UTILIZED MODVAT CREDIT IN THE CLOSING STOCK, WHICH IS RELEVA NT ONLY FOR ASSESSMENT YEARS 2004-05 AND 2005-06. UNDER THE PROVISIONS OF SECTION 145A, PURCHASES, SALES AND INVENTORY HAS TO BE VALUED AS PER METHOD OF ACCOUNTING REGULARLY FOLLOWED BY THE ASSESSEE AND H AS TO BE FURTHER ADJUSTED TO INCLUDE AMOUNT ON ANY TAX, DUTY, CESS OR FEES PA ID BY THE ASSESSEE TO BRING GOODS TO PLACE OF LOCATION AND CONDITION AS O N THE DATE OF VALUATION. THE ASSESSING OFFICER NOTED THAT THE ASSESSEE HAD N OT INCLUDED THE UN- UTILISED MODVAT IN RELATION TO RAW MATERIAL IN THE CLOSING STOCK AND HE THEREFORE, MADE ADDITIONS OF RS.2,20,406/- AND RS.1 ,90,811/- ON ACCOUNT OF UN-UTILISED MODVAT CREDIT WHICH IN APPEAL WAS CONFI RMED BY THE LD. CIT(A), AGGRIEVED BY WHICH THE ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL. 4.1 THE LD. AR FOR THE ASSESSEE SUBMITTED THAT THE ASSESSEE WAS FOLLOWING EXCLUSIVE METHOD OF ACCOUNTING. IT WAS ARGUED THAT ADJUSTMENT CANNOT BE MADE ONLY TO CLOSING STOCK. SIMILAR ADJUSTMENT HAS ALSO TO BE MADE IN THE OPENING STOCK AS WELL AS AT EACH STAGE I.E., PURCHA SE, PRODUCTION AND SALE. HE THEREFORE, SUBMITTED THAT THE ADDITION WAS REQUIR ED TO BE RE-WORKED. THE LD. DR PLACED RELIANCE ON THE ORDERS OF THE AUTHORI TIES BELOW. 4.2 WE HAVE PERUSED THE RECORDS AND CONSIDERED THE MATERIAL CAREFULLY. THE DISPUTE IS REGARDING ADDITION ON ACCOUNT OF UN- UTILISED MODVAT CREDIT. THE ASSESSEE IS FOLLOWING THE EXCLUSIVE METHOD. THE REFORE MODVAT ACCOUNT IS NOT ROUTED THROUGH TRADING ACCOUNT. UNDER THE PROVI SIONS OF SECTION 145A, ADJUSTMENT IS REQUIRED TO BE MADE ON ACCOUNT OF ANY AMOUNT PAID AS TAX, DUTY, CESS OR FEES ETC. HOWEVER, THE ADJUSTMENT HAS TO BE MADE AT EACH STAGE WHEN THE MODVAT IS REQUIRED TO BE DEBITED /CR EDITED INCLUDING ADJUSTMENT IN CLOSING STOCK. SIMILAR ADJUSTMENT IS ALSO REQUIRED TO BE MADE ITA NO.5479,3721 & 315/M/ A.Y:03-04 TO 05-06 6 TO THE OPENING STOCK IN VIEW OF JUDGMENT OF THE HON BLE HIGH COURT OF DELHI IN THE CASE OF MAHAVIR ALIMINIUM LIMITED (297 ITR 7 7). WE THEREFORE, DIRECT THE ASSESSING OFFICER TO MAKE ADJUSTMENT ON ACCOUNT OF MODVAT AT EACH STAGE INCLUDING OPENING AND CLOSING STOCK BY FOLLOW ING THE INCLUSIVE METHOD SO AS TO WORK OUT NET ADDITION IF ANY WHICH COULD B E MADE TO THE TOTAL INCOME. THE ASSESSING OFFICER WILL GIVE OPPORTUNITY OF HEARING TO THE ASSESSEE BEFORE MAKING ADJUSTMENT. 5. THE FOURTH DISPUTE WHICH IS RELEVANT ONLY TO ASS ESSMENT YEAR 2005-06 IS REGARDING DISALLOWANCE OF EXPENSES UNDER SECTION 14A. THE ASSESSEE HAS DECLARED DIVIDEND AMOUNTING TO RS.4,69,208/- WHICH BE EXEMPT FROM TAX . ADMITTEDLY THE INVESTMENT IN SHARES HAD NOT BEEN MA DE OUT OF BORROWED FUNDS. THE ASSESSING OFFICER HOWEVER IN ASSESSMENT DISALLOWED A SUM OF RS.50,000/- BEING EXPENSES ATTRIBUTABLE TO EARNING OF DIVIDEND INCOME WHICH IN APPEAL WAS CONFIRMED BY THE CIT(A), AGGRIEVED BY WHICH THE ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL. 5.1. BEFORE US THE LD. AR SUBMITTED THAT THE DISALL OWANCE MADE BY THE ASSESSING OFFICER WAS EXCESSIVE AS NOT MUCH EXPENDI TURE WAS REQUIRED IN RELATION TO DIVIDEND INCOME. THE LD. DR PLACED REL IANCE ON THE ORDERS OF THE AUTHORITIES BELOW. 5.2. WE HAVE PERUSED THE RECORDS AND CONSIDERED THE MATTER CAREFULLY. THE DISPUTE IS REGARDING ESTIMATED DISALLOWANCE OUT OF EXPENSES IN RELATION TO DIVIDEND INCOME OF RS.4,69,208/- WHICH IS EXEMPT F ROM TAX. THERE IS NO DISPUTE THAT THE EXPENSES RELATING TO DIVIDEND INCO ME ARE NOT ALLOWABLE UNDER SECTION 14A. THE DISPUTE IS ONLY REGARDING E STIMATE OF INCOME. IN OUR VIEW ON THE FACTS OF THE CASE THE EXPENSES INCURRED FOR EARNING DIVIDEND INCOME, CAN BE REASONABLY ESTIMATED AT 5% OF THE DI VIDEND INCOME. WE DIRECT ACCORDINGLY. ITA NO.5479,3721 & 315/M/ A.Y:03-04 TO 05-06 7 6. IN THE RESULT, ALL THE APPEALS OF THE ASSESSEE A RE PARTLY ALLOWED IN TERMS OF THE ORDER ABOVE. ORDER PRONOUNCED IN THE OPEN COURT ON 17.6.2011. SD/- SD/- (R.S. PADVEKAR) (RAJENDRA SINGH ) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI, DATED: 17.6.2011. JV. COPY TO: THE APPELLANT THE RESPONDENT THE CIT, CONCERNED, MUMBAI THE CIT(A) CONCERNED, MUMBAI THE DR BENCH TRUE COPY BY ORDER DY/ASSTT. REGISTRAR, ITAT, MUMBAI.