Shriram Equipment Finance Co. Ltd., CHENNAI V. DCIT, CHENNAI

ITA 576/CHNY/2015

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 90516 (ITAT-CHENNAI)
• Duration Of Justice: 3 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-06-2015
• Appeal Filed By: Assessee
• Bench Allotted: A
• Assessment Year: 2011-2012
• Appeal Filed On: 20-03-2015
• Court: TRIBUNAL
• Department Lawyers: P RADHAKRISHNAN
• Assessee Lawyers: R SIVARAMAN
• Keywords: Diversion of income
• Section: 115JB

Judgement Text

, , IN THE INCOME-TAX APPELLATE TRIBUNAL A BENCH, CHE NNAI , . ! ! ! ! , ' ' ' ' #$ #$ #$ #$ BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER & SHRI V. DURGA RAO, JUDICIAL MEMBER I.T.A. NO. 576/MDS/2015 ASSESSMENT YEAR : 2011-12 SHRIRAM EQUIPMENT FINANCE CO. LTD., MOOKAMBIKA COMPLEX, NO. 4, LADY DESIKA ROAD, MYLAPORE, CHENNAI 600 004. [PAN: AANCS6957N] VS. THE DEPUTY COMMISSIONER OF INCOME TAX, CORPORATE CIRCLE 6(1), CHENNAI. ( %& %& %& %& /APPELLANT ) ( '(%& '(%& '(%& '(%& / RESPONDENT ) %& ) * / APPELLANT BY : SHRI R. SIVARAMAN ADVOCATE '(%& ) * / RESPONDENT BY : SHRI P. RADHAKRISHNAN, JCIT ) + / DATE OF HEARING : 25.05.2015 ,-. ) + /DATE OF PRONOUNCEMENT : 25.06.2015 / / / / / O R D E R PER V. DURGA RAO, JUDICIAL MEMBER : THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAI NST THE ORDER OF THE LD. COMMISSIONER OF INCOME TAX (APPEALS) 15, CHEN NAI DATED 12.02.2015 RELEVANT TO THE ASSESSMENT YEAR 2011-12. 2. THE FIRST GROUND OF APPEAL OF THE ASSESSEE RELA TES TO ADDITION OF AMOUNT TRANSFERRED TO STATUTORY RESERVE. THE LD. CI T(A), BY FOLLOWING THE DECISION OF THE TRIBUNAL IN ASSESSEES GROUP CASE F OR THE ASSESSMENT YEAR 2009-10, DISMISSED THE GROUND RAISED BY THE ASSESSE E. I.T.A. I.T.A. I.T.A. I.T.A. NO NONO NO. .. .5 55 576 7676 76/M/1 /M/1 /M/1 /M/15 55 5 2 3. AT THE TIME OF HEARING, THE LD. COUNSEL FOR THE ASSESSEE HAS FAIRLY ACCEPTED THAT THE ISSUE INVOLVED IN THIS APPEAL IS SQUARELY COVERED AGAINST THE ASSESSEE BY THE DECISION OF THE TRIBUNAL IN ASS ESSEES GROUP CASE FOR THE ASSESSMENT YEAR 2009-10. 4. AFTER HEARING BOTH SIDES, WE FIND THAT THE LD. CIT(A), BY FOLLOWING THE DECISION OF THE TRIBUNAL IN ASSESSEES GROUP CASE F OR THE ASSESSMENT YEAR 2009-10 IN I.T.A. NO. 1744/MDS/2012 ORDER DATED 11. 04.2013, AS FAIRLY ACCEPTED BY THE LD. COUNSEL FOR THE ASSESSEE, DISMI SSED THE GROUND RAISED BEFORE HIM ON THIS ISSUE, WHEREIN THE TRIBUNAL HAS HELD AS UNDER: 4. WE HAVE PERUSED THE ORDERS AND HEARD THE RIVAL SUBMISSIONS. VIS--VIS GROUND TAKEN BY THE ASSESSEE ON TRANSFER TO STATUTORY RESERVE AND TRANSFER TO RESERVE FUND WHILE COMPUTING INCOME UNDER REGULAR PROVISIONS AND FOR ARRIVING AT THE INCOME UNDER SEC TION 115JB OF THE ACT, RESPECTIVELY, THE ISSUES HAD ALREADY COME UP B EFORE THIS TRIBUNAL IN ASSESSEES APPEALS IN I.T.A. NO. 701/MDS/2012 AN D I.T.A. NO. 702/MDS/2012. VIDE ITS ORDER DATED 28.6.2012, IT W AS HELD BY THIS TRIBUNAL AT PARAS4 TO 6 OF I.T.A. NO. 701/MDS/2012 AND I.T.A. NO. 702/MDS/2012, AS UNDER:- 4. THE COUNSEL FOR THE ASSESSEE FAIRLY CONCEDED T HAT THE ISSUE OF DISALLOWANCE OF AMOUNT TRANSFERRED TO STATUTORY RESERVE AND AMOUNT TRANSFERRED TO RESERVE FUND WHILE COMPUTING NORMAL PROVISIONS AND ALSO WHILE COMPUTING THE BOOK PROFIT S UNDER SECTION 115JB ARE DECIDED AGAINST THE ASSESSEE BY T HIS TRIBUNAL IN THE CASE OF SHRIRAM TRANSPORT FINANCE COMPANY LT D. IN I.T.A. NO. 23/MDS/2011 DATED 10.10.2011, COPY OF THE ORDER IS PLACED BEFORE US. 5. WE HAVE GONE THROUGH THE ORDER OF THIS TRIBUNAL IN THE CASE OF THE ASSESSEE DATED 10.10.2011 AND FIND THA T THIS TRIBUNAL FOLLOWED COORDINATE BENCH DECISION IN ASSE SSEES OWN CASE FOR THE ASSESSMENT YEAR 2005-06 IN I.T.A. NO. 235/MDS/2009 DATED 16.07.2009, WHEREIN THIS TRIBUNA L DECIDED I.T.A. I.T.A. I.T.A. I.T.A. NO NONO NO. .. .5 55 576 7676 76/M/1 /M/1 /M/1 /M/15 55 5 3 THE ISSUES AGAINST THE ASSESSEE. IN THAT APPEAL, TH E ASSESSEE HAS RAISED THE FOLLOWING GROUNDS: I. THE ORDER OF THE CITA, TO THE EXTENT THAT IT HAS CONFIRMED I) DISALLOWANCE OF AMOUNT TRANSFERRED TO STATUTORY RESERVE `7,55,53,760/- IN COMPLIANCE WITH MANDATORY PROVISI ONS OF RESERVE BANK OF INDIA IN COMPUTING INCOME UNDER THE REGULAR PROVISIONS OF THE INCOME TAX ACT, 1961; AND II) ADDITION OF`10,00,00,000/- TRANSFERRED TO RESER VE FUND IN COMPUTING INCOME AND U/S. 115JB OF THE INCOME TAX A CT, IS AGAINST LAW AND FACTS OF THE CASE. THE TRIBUNAL HAS HELD AS UNDER: 2. THE ONLY ISSUE BROUGHT BEFORE US FOR ADJUDICAT ION IS WHETHER THE CIT(APPEALS) HAS ERRED IN CONFIRMING TH E ADDITION OF AMOUNT TRANSFERRED TO STATUTORY RESERVE AS PER R ESERVE BANK OF INDIA GUIDELINES. 3. AT THE TIME OF HEARING, THE LEARNED COUNSEL FOR THE ASSESSEES RELIED ON THE GROUNDS OF APPEAL AND REITE RATED THE SAME AS HIS SUBMISSION. 4. ON THE OTHER HAND, THE LEARNED D.R. FILED ON RE CORD COPIES OF THE ORDERS DATED 6TH FEBRUARY, 2009 AND 6 TH MAY, 2009 OF ITAT, CHENNAI IN I.T.A. NOS. 570, 571, 806 &807/MDS/2008 AND I.T.A. NOS. 1944 TO 1946/MDS/2008 RESPECTIVELY, IN THE ASSESSEES' OWN CASE. BY PLACIN G THE ABOVE ORDERS, THE LEARNED D.R. SUBMITTED THAT AN IDENTICA L ISSUE HAS BEEN CONSIDERED BY THE TRIBUNAL IN THE SAID ORDERS AND THE ASSESSEES APPEALS WERE DISMISSED BY UPHOLDING THE ORDERS OF THE LOWER AUTHORITIES. 5. WE HAVE HEARD THE RIVAL SUBMISSIONS AND CONSIDE RED THE FACTS AND MATERIAL ON RECORD INCLUDING THE ORDERS O F THIS TRIBUNAL CITED SUPRA. WE FIND THAT AN IDENTICAL ISS UE HAD BEEN CONSIDERED BY THIS TRIBUNAL IN THE SAID ORDERS AND THE APPEALS OF THE ASSESSEES WERE DISMISSED. IN I.T.A. NOS. 570, 5 71, 806 & I.T.A. I.T.A. I.T.A. I.T.A. NO NONO NO. .. .5 55 576 7676 76/M/1 /M/1 /M/1 /M/15 55 5 4 807/MDS/2008, WHILE DISMISSING THE APPEALS OF THE A SSESSEE, THE TRIBUNAL HAS OBSERVED AS FOLLOWS: '2.11 NOW, WE EXAMINE THE PRESENT CASE ON THE ANVIL OF ABOVE. BY NO STRETCH OF IMAGINATION, IT CAN BE SAID THAT T HE AMOUNT SOUGHT TO BE DEDUCTED HAS IN FACT NOT REACHED THE A SSESSEE. THE AMOUNT INVOLVED IS ONLY AN APPROPRIATION OUT OF COM PANY'S OWN PROFITS BEFORE DECLARATION OF DIVIDEND. THE AMOUNT HAS VERY MUCH REACHED AND IS IN THE BUSINESS OF THE ASSESSEE . RBI HAS NOT ATTACHED ANY OBLIGATION THAT THE FUND BE KEPT IN AN Y EARMARKED SECURITY NOR THE PURPOSE OF UTILIZATION OF THE FUND HAS BEEN SPECIFIED. EVEN IF SOME OBLIGATION IS SUBSEQUENTLY ATTACHED FOR SPECIFIC APPROPRIATION OF THE FUND, IT WILL ONLY BE AN APPLICATION OF INCOME, WHICH WILL NEED TO BE DEALT WITH AS PER RELEVANT TAX LAW. THE TRANSFER OF RESERVE FUND IN THIS CASE CAN CERTAINLY NOT BE CALLED A DIVERSION OF INCOME BY OVERRIDING CHARG E. 2.12. .THE RATIO FROM THE HONBLE APEX COURT I N THE CASE OF CIT VS. SITALDAS TIRATHDAS (41 ITR 367) AND HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF SESHASAYEE PAPER & BOARDS LTD. (237 ITR 488) IS CLEARLY APPLICABLE IN THIS CASE. THE COMPANIES ACT, 1956 ALSO MANDATES TRANSFER TO RESER VE FUND A CERTAIN PERCENTAGE OF THE PROFITS BEFORE DECLARATIO N OF DIVIDEND. THE HON'BLE HIGH COURT IN THE CASE OF SESHASAYEE PA PER & BOARDS LTD. HAD HELD THAT IN SUCH A CASE, THERE IS NO DIVERSION OF INCOME BY OVERRIDING TITLE NOR CAN THE AMOUNT SET A PART BE CLAIMED AS EXPENDITURE AND IT CANNOT ALSO BE STATED THAT IT WAS LOSS. THE RATIO FROM THIS DECISION IS VERY MUCH APP LICABLE IN THIS CASE, BECAUSE AS PER THE RESERVE BANK OF INDIA ACT, THE ASSESSEE HAS TO CREATE A RESERVE FUND AND TO TRANSFER THEREI N CERTAIN PERCENTAGE OF ITS PROFITS BEFORE ANY DIVIDEND IS DE CLARED. THIS TRANSFER TO RESERVE FUND WAS TO BE UTILIZED FOR SUC H PURPOSES AS SPECIFIED BY THE RESERVE BANK OF INDIA FROM TIME TO TIME. NO SUCH SPECIFICATION OF UTILIZATION. OF THAT FUND HAD BEEN ISSUED BY THE RESERVE BANK OF INDIA. HENCE, IT CANNOT BE SAID THAT THERE WAS ANY DIVERSION OF INCOME BY OVERRIDING TITLE NOR CAN THE AMOUNT SET APART BE CLAIMED AS EXPENDITURE AND IT A LSO CANNOT BE STATED THAT IT WAS A LOSS. .. . .. . .. . .. . . .. . . . 2.17 MOREOVER, AS DISCUSSED EARLIER, THIS IS ONLY AN APPROPRIATION OF PROFITS FOR PURPOSES WHICH HAVE NO T YET BEEN I.T.A. I.T.A. I.T.A. I.T.A. NO NONO NO. .. .5 55 576 7676 76/M/1 /M/1 /M/1 /M/15 55 5 5 SPECIFIED. MOREOVER, AMOUNT INVOLVED IS VERY MUCH U NDER THE CONTROL OF THE ASSESSEE AND IS LYING IN ITS BUSINES S. HENCE, IN THE BACKGROUND OF AFORESAID DISCUSSION AND PRECEDENTS, WE UPHOLD THE WELL REASONED ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) IN THIS REGARD AND DECIDE THE ISSUE A GAINST THE ASSESSEES.' 6. SINCE THE FACTS IN THE PRESENT CASE ON OUR HAND ARE IDENTICAL TO THAT OF THE CASE DEALT WITH BY THE TRI BUNAL IN THE SAID ORDERS, FOLLOWING THE SAME, WE ARE DISMISSING THE A PPEALS OF THE ASSESSEES. 7. IN THE RESULT, THE APPEALS FILED BY THE ASSESSE ES ARE DISMISSED. 6. RESPECTFULLY FOLLOWING THE ORDER OF THIS TRIBUNA L IN I.T.A. NO. 235/MDS/2009 DATED 16.07.2009, WE DISMISS THE G ROUNDS OF APPEALS OF BOTH THE ASSESSES ON THESE ISSUES BOTH U NDER REGULAR COMPUTATION AND WHILE COMPUTING THE BOOK PROFIT UND ER SECTION 115JB OF THE ACT. FOLLOWING THE ABOVE ORDER, WE DISMISS THE GROUNDS O F APPEAL OF THE ASSESSEES, BOTH ON THE ISSUE OF REGULAR COMPUTATION AND FOR COMPUTATION OF BOOK PROFIT INSOFAR AS IT CONCERNS T RANSFER TO STATUTORY RESERVE AND TRANSFER TO RESERVE FUND RESPECTIVELY. 5. IN VIEW OF THE ABOVE, WE FIND NO INFIRMITY IN T HE ORDER PASSED BY THE LD. CIT(A) ON THIS ISSUE. ACCORDINGLY, THE GROUND RAISE D BY THE ASSESSEE IS DISMISSED. 6. THE GROUND NO.2 RELATES TO CLAIM OF CREDIT FOR TDS TO THE EXTENT OF .10,34,323/-. FROM THE ASSESSMENT ORDER, IT APPEARS THAT THE ASSESSEE HAS NOT FILED ANY DETAILS OF TDS AND EVEN BEFORE THE LD . CIT(A) ALSO. BEFORE US, THE LD. COUNSEL FOR THE ASSESSEE HAS SUBMITTED THAT ALL THE DETAILS ARE I.T.A. I.T.A. I.T.A. I.T.A. NO NONO NO. .. .5 55 576 7676 76/M/1 /M/1 /M/1 /M/15 55 5 6 AVAILABLE WITH THE ASSESSEE AND PRAYED THAT ONE MOR E OPPORTUNITY MAY BE GIVEN TO THE ASSESSEE. 7. WE HAVE HEARD BOTH SIDES, PERUSED THE MATERIALS ON RECORD AND GONE THROUGH THE ORDERS OF AUTHORITIES BELOW. THE ASSESS ING OFFICER HAS REJECTED THE CLAIM OF THE ASSESSEE ON THE GROUND THAT NO DET AILS WERE FURNISHED IN RESPECT OF TDS. NOW, THE ASSESSEE IS READY TO FILE ALL THE DETAILS IN RESPECT OF TDS CLAIM AND IN THE INTEREST OF JUSTICE, WE SET AS IDE THE ORDER PASSED BY THE LD. CIT(A) ON THIS ISSUE AND DIRECT THE ASSESSING O FFICER TO VERIFY THE DETAILS AND DECIDE THE ISSUE IN ACCORDANCE WITH LAW. 8. THE NEXT GROUND RELATES TO INTEREST UNDER SECTI ON 234D OF THE ACT. THE LD. CIT(A) IN HIS ORDER HAS OBSERVED THAT IT WAS TH E STAND OF THE ASSESSEE THAT NO REFUND WAS GRANTED TO THE ASSESSEE UNDER SE CTION 143(1) OF THE ACT AND HENCE INTEREST UNDER SECTION 234D IS NOT CHARGE ABLE. THE INCOME TAX COMPUTATION FORM FILED WITH THE APPEAL FORM CONTAIN S THE DETAILS SUCH AS AMOUNT ALREADY REFUNDED OF .7,42,524/-. THEREFORE, THE LD. CIT(A) HAS HELD THAT THE CLAIM OF THE ASSESSEE IS NOT CORRECT AND R EJECTED AND ALSO DIRECTED THE ASSESSING OFFICER TO VERIFY THE AMOUNT OF REFUN D ALREADY GRANTED TO THE ASSESSEE AND PASS A SPEAKING ORDER. THUS, WE FIND N O INFIRMITY IN THE ORDER PASSED BY THE LD. CIT(A) ON THIS ISSUE AND ACCORDIN GLY, THE GROUND RAISED BY THE ASSESSEE IS DISMISSED. I.T.A. I.T.A. I.T.A. I.T.A. NO NONO NO. .. .5 55 576 7676 76/M/1 /M/1 /M/1 /M/15 55 5 7 9. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED ON THURSDAY, THE 25 TH OF JUNE, 2015 AT CHENNAI. SD/- SD/- (CHANDRA POOJARI) ACCOUNTANT MEMBER (V. DURGA RAO) JUDICIAL MEMBER CHENNAI, DATED, THE 25.06.2015 VM/- / ) ''+01 21.+ /COPY TO: 1. %& / APPELLANT, 2. '(%& / RESPONDENT, 3. 3 ( ) /CIT(A), 4. 3 /CIT, 5. 14 ''+' /DR & 6. 5! 6 /GF.