Joint CIT(OSD), Ernakulam V. South India Corporation Ltd, Cochin

ITA 581/COCH/2011

• Counselvise Citation: [2013] 140 COUNSELVISE.COM (IT) 69075 (ITAT-COCHIN)
• Duration Of Justice: 2 year(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-11-2013
• Appeal Filed By: Department
• Bench Allotted: DB
• Next Hearing Date: 17-09-2013
• Assessment Year: 2007-2008
• Appeal Filed On: 04-11-2011
• Court: TRIBUNAL
• Department Lawyers: S VIJAYAPRABHA
• Assessee Lawyers: V JAYARAMAN
• Keywords: Depreciation
• Section: 143(3); 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL COCHIN BENCH, COCHIN BEFORE S/SHRI N.R.S.GANESAN, JM AND B.R.BASKAR AN, AM I.T.A. NO. 581/COCH/2011 ASSESSMENT YEAR : 2007-08 JOINT COMMISSIONER OF INCOME- TAX(OSD), CIRCLE-1(4), ERNAKULAM. VS. M/S. SOUTH INDIA CORPORATION LTD., NO. 5, RANI MEYYAMMAI BUILDING, KPK MENON ROAD, WELLINGTON ISLAND, KOCHI-682 003. [PAN: AADCS 3193C] (REVENUE-APPELLANT) (ASSESSEE -RESPON DENT) REVENUE BY SMT. S. VIJAYAPRABHA, JR. DR ASSESSEE BY SHRI V. JAYARAMAN, CA DATE OF HEARING 17/09/2013 DATE OF PRONOUNCEMENT 13/11/2013 O R D E R PER B.R.BASKARAN, ACCOUNTANT MEMBER: THE APPEAL FILED BY THE REVENUE IS DIRECTED AGAINS T THE ORDER DATED 19-08-2011 PASSED BY THE LD. CIT(A)-II, KOCHI AND IT RELATES T O THE ASSESSMENT YEAR 2007-08. 2. THE REVENUE IS ASSAILING THE DECISION OF THE LD. CIT(A) IN GRANTING RELIEF IN RESPECT OF THE FOLLOWING ITEMS: (A) DETERMINATION OF INCOME FROM SHIPPING BUSINESS . (B) DEPRECIATION ALLOWABLE ON PRINTERS. (C) DISALLOWANCE OF ITEMS NOTED IN COLUMN 17 TO FO RM NO. 3 CD. (D) DISALLOWANCE OF EXPENDITURE U/S. 14A R.W. RULE 8D. 3. THE FACTS RELATING TO THE CASE ARE STATED IN BRI EF. THE ASSESSEE IS ENGAGED IN THE BUSINESS OF SHIPPING, CLEARING AND FORWARDING, UNDE RTAKING ENGINEERING CONTRACTS, TRADING ETC. THE ASSESSMENT IN THE HANDS OF THE AS SESSEE WAS COMPLETED U/S. 143(3) OF I.T.A. NO. 581/COCH/2011 2 THE ACT FOR THE YEAR UNDER CONSIDERATION BY MAKING VARIOUS ADDITIONS. THE ASSESSEE CHALLENGED THE ASSESSMENT ORDER BEFORE THE LD. CIT( A) AND IT WAS PARTLY ALLOWED. AGGRIEVED BY THE RELIEF GRANTED BY THE LD. CIT(A), THE REVENUE HAS FILED THIS APPEAL BEFORE US. 4. THE FIRST ISSUE RELATES TO THE DETERMINATION OF INCOME FROM SHIPPING BUSINESS. THE ASSESSEE OPTED TO OFFER INCOME FROM SHIPPING BU SINESS UNDER TONNAGE TAX SCHEME AS PER THE PROVISIONS OF SEC. 115VT TO SEC. 115VX O F THE ACT. THE ASSESSING OFFICER REJECTED THE SAID CLAIM OF THE ASSESSEE ON THE REAS ONING THAT THERE EXISTS FACTUAL DOUBT ABOUT THE APPLICABILITY OF RELEVANT PROVISIONS TO T HE ASSESSEE, SINCE THE ASSESSEE HAS NOT OFFERED ANY SATISFACTORY EXPLANATION. THE LD. CIT( A) ALLOWED THE CLAIM OF THE ASSESSEE BY FOLLOWING HIS ORDER DATED 25-10-2010 PASSED IN T HE ASSESSEES OWN CASE IN I.T.A. NO. 25/2007-08. 4.1 WE HEARD BOTH THE PARTIES ON THIS ISSUE. A T THE TIME OF HEARING, THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED A COPY OF THE ORDER DATE D 14-09-2012 PASSED BY THIS BENCH OF THE TRIBUNAL IN THE ASSESSEES OWN CASE IN I.T.A . NOS. 80 &17/COCH/2011 RELATING TO THE ASSESSMENT YEAR 2005-06, WHICH IS PASSED AGAIN ST THE ORDER DATED 25.10.2010 PASSED BY LD CIT(A). WE NOTICE THAT THE TRIBUNAL HAS SET ASIDE THE ORDER OF THE LD. CIT(A) ON THIS ISSUE ON THE REASONING THAT THE LD C IT(A) HAS DECIDED THE ISSUE BY CONSIDERING THE MATERIAL RELATING TO THE SUBSEQUENT YEARS, INSTEAD OF CONSIDERING THE MATERIALS RELATING TO THE CURRENT YEAR. ACCORDINGL Y, THE TRIBUNAL HAS RESTORED THE MATTER TO THE FILE OF LD CIT(A) FOR CONSIDERATION OF THE M ATTER AFRESH ON THE BASIS OF RELEVANT MATERIALS. WE HAVE ALREADY NOTICED THAT THE LD. CI T(A) IN THE PRESENT CASE HAS FOLLOWED HIS ORDER DATED 25-10-2010, REFERRED SUPRA WHICH HAS ALREADY BEEN SET ASIDE TO HIS FILE FOR FRESH EXAMINATION BY THE TRIBUNAL. THE DETAILS OF THE RESULT OF FRESH EXAMINATION CONDUCTED BY LD CIT(A) HAVE NOT BEEN FU RNISHED BEFORE US. UNDER THESE CIRCUMSTANCES, WE FEEL IT FIT TO RESTORE THIS ISSUE TO THE FILE OF THE LD. CIT(A) SO THAT THE FIRST APPELLATE AUTHORITY CAN TAKE A UNIFORM VIEW O N THIS ISSUE. ACCORDINGLY, WE SET ASIDE THE ORDER OF THE LD. CIT(A) ON THIS ISSUE AND RESTORE THE SAME TO HIS FILE WITH A I.T.A. NO. 581/COCH/2011 3 DIRECTION TO EXAMINE THIS ISSUE AFRESH IN THE LIGHT OF THE DISCUSSIONS MADE BY THE TRIBUNAL IN THE ORDER DATED 14-09-2012, REFERRED SU PRA. 5. THE NEXT ISSUE RELATES TO THE RATE OF DEPRECIATI ON ALLOWABLE ON PRINTERS USED ALONG WITH THE COMPUTERS. THE ASSESSEE CLAIMED DEP RECIATION ON PRINTERS AT THE RATE OF 60%, WHICH IS APPLICABLE TO THE COMPUTERS. HOWEVER, THE ASSESSING OFFICER RESTRICTED THE RATE OF DEPRECIATION ON PRINTERS TO 15%, I.E., AT THE RATE APPLICABLE TO PLANT & MACHINERY. THE LD. CIT(A), BY FOLLOWING UNDER MENT IONED DECISIONS OF THE TRIBUNAL, ALLOWED DEPRECIATION ON PRINTERS AT THE RATE OF 60% . (A) EXPEDITORS INTERNATIONAL INDIA PRIVATE LTD. VS. ADDL. CIT, THE HONBLE ITAT DELHI F BENCH (13 DTR) (DEL) (TRIB) 435. (B) DCIT VS. C.M.Y.K. PRINTECH LTD., THE HONBLE I TAT DELHI B BENCH (2011) 53 DTR (DEL) (TRIB) 59. (C) DCIT VS. DATACRAFT INDIA LTD. (2010) 133 TTJ (MUMBAI) (SB) 377: 45 DTR (MUMBAI) (SB) (TRIB) 121. THE REVENUE IS AGGRIEVED AGAINST THE DECISION OF LD CIT(A) ON THIS ISSUE. 5.1 WE HAVE HEARD RIVAL CONTENTIONS ON THIS ISS UE. WE NOTICE THAT THE LD. CIT(A) HAS FOLLOWED THE SPECIAL BENCH DECISION RENDERED IN THE CASE OF DATACRAFT INDIA LTD (SUPRA) IN HOLDING THAT THE PRINTERS ARE ELIGIBLE FOR DEPRE CIATION @ 60%. SINCE HE HAS FOLLOWED THE DECISION RENDERED BY THE SPECIAL BENCH OF TRIBU NAL, WE DO NOT FIND IN INFIRMITY IN HIS ORDER ON THIS ISSUE. 6. THE NEXT ISSUE RELATES TO THE ADDITION OF RS. 4,11,000/- AS PER COLUMN 17 TO FORM 3CD. WE NOTICE THAT THE AO HAS MADE THIS ADDITION WITHOUT DISCUSSING ANYTHING IN THE BODY OF THE ASSESSMENT ORDER, BUT ADDED TWO AMOUNTS VIZ., RS.4,32,500/- AND RS.4,11,600/- WHILE COMPUTING TOTAL INCOME BY MAKIN G REFERENCE TO COLUMN 17 TO FORM 3CD. HOWEVER, THE ASSESSEE HAS CONTESTED THE ADDIT ION OF RS.4,11,600/- BEFORE LD CIT(A) WITH THE SUBMISSION THAT THE SAID AMOUNT REP RESENTS PAYMENT MADE TO MOTOR VEHICLE AUTHORITIES TOWARDS OVERLOADING OF LORRIES AND IT IS NOT IN THE NATURE OF FINE OR PENALTY WARRANTING DISALLOWANCE. BEFORE LD CIT(A), THE ASSESSEE HAS PLACED RELIANCE ON I.T.A. NO. 581/COCH/2011 4 THE ORDER DATED 18-01-2008 PASSED BY THE TRIBUNAL I N THE ASSESSEES OWN CASE RELATING TO ASSESSMENT YEARS 2002-03 & 2003-04 IN ITA NOS. 4 54 & 455/COCH/2006, WHEREIN THE TRIBUNAL HAD HELD THAT THE PAYMENT MADE TO MOTOR VE HICLES ACT AUTHORITIES AS FINE FOR OVERLOADING CAN BE CONSIDERED AS PAYMENTS TOWARDS A N IRREGULARITY ONLY AND IT IS NOT A CASE OF ILLEGALITY. THE LD CIT(A), BY FOLLOWING TH E DECISION OF TRIBUNAL, DELETED THE IMPUGNED DISALLOWANCE. 6.1 WE HAVE HEARD THE PARTIES ON THIS ISSUE. B OTH THE PARTIES HAVE FAILED TO FURNISH A COPY OF FORM NO. 3CD, WHERE FROM THE AMOUNT OF RS.4 ,11,600/- WAS FOUND BY THE AO. IT IS NOT CLEAR AS TO WHETHER THE LD CIT(A) HAS VER IFIED THE COPY OF FORM 3CD/BOOKS OF ACCOUNT IN ORDER TO ASCERTAIN ABOUT THE NATURE OF P AYMENT OF RS.4,11,600/-. IT APPEARS THAT THE AO HAS ALSO NOT EXAMINED THE BOOKS OF ACCO UNT IN ORDER TO ASCERTAIN ABOUT THE NATURE OF PAYMENT. IT APPEARS THAT THE LD CIT(A) HA S ACCEPTED THE SUBMISSION OF THE ASSESSEE THAT THE ABOVE SAID PAYMENT IS ONLY IN THE NATURE OF PENALTY PAID FOR OVERLOADING OF VEHICLES, WITHOUT CARRYING OUT OR CA USING ANY VERIFICATION. WE ALSO NOTICE THAT THE ASSESSEE DID NOT BRING THE ORDER PASSED BY THE TRIBUNAL TO THE NOTICE OF THE ASSESSING OFFICER DURING THE COURSE OF ASSESSMENT P ROCEEDINGS. THUS, IT IS SEEN THAT THE TAX AUTHORITIES HAVE FAILED TO EXAMINE THE NATURE O F PAYMENT OF RS.4,11,600/-. UNDER THESE CIRCUMSTANCES, IN OUR VIEW, THIS ISSUE REQUIR ES FRESH EXAMINATION AT THE END OF THE AO. ACCORDINGLY, WE SET ASIDE THE ORDER OF LD CIT( A) AND RESTORE THIS MATTER TO THE FILE OF THE ASSESSING OFFICER WITH THE DIRECTION TO EXAM INE THE NATURE OF PAYMENT OF RS.4,11,600/- AND DECIDE THE SAME BY FOLLOWING THE DECISION RENDERED BY THE TRIBUNAL IN THE ASSESSEES OWN CASE FOR ASSESSMENT YEARS 200 2-03 AND 2003-04, REFERRED SUPRA IN RESPECT OF PAYMENTS MADE FOR OVERLOADING OF VEHI CLES AND TAKE APPROPRIATE DECISION IN ACCORDANCE WITH LAW IN RESPECT OF OTHER TYPES OF PAYMENTS. 7. THE LAST ISSUE RELATES TO THE DISALLOWANCE M ADE U/S 14A R.W. RULE 8D OF INCOME TAX RULES. THE AO DISALLOWED A SUM OF RS.8,54,595/- WI TH THE OBSERVATION THAT THE ASSESSEE HAS EARNED TAX FREE INCOME. HOWEVER, THE DETAILS OF EXEMPTED INCOME AND ALSO THE METHOD OF COMPUTATION ADOPTED FOR ARRIVING AT THE DISALLOWANCE OF RS.8,54,595/- WERE NOT DISCUSSED IN THE ASSESSMENT ORDER. THE LD CIT(A) HAS ALSO I.T.A. NO. 581/COCH/2011 5 OBSERVED THAT THE AO HAS NOT FURNISHED ANY DETAILS, AS MENTIONED ABOVE. HOWEVER, THE LD CIT(A) CHOSE TO DELETE THE DISALLOWANCE BY FOLLO WING THE DECISION RENDERED IN THE CASE OF CIT VS. HERO CYCLES LTD (323 ITR 518). 7.1 WE HAVE HEARD THE PARTIES ON THIS ISSUE. TH E LD CIT(A) HIMSELF HAS OBSERVED THAT THE ASSESSING OFFICER HAS NOT FURNISHED ANY DE TAILS RELATING TO THIS DISALLOWANCE. HENCE, WE ARE UNABLE TO UNDERSTAND AS TO HOW HE COU LD DECIDE THIS ISSUE WITHOUT EXAMINING THE DETAILS RELATING THERETO. IN THE ABS ENCE OF ANY DETAILS RELATING TO EXEMPTED INCOME AND ALSO ABOUT THE DETAILS OF EXPEN DITURE WHICH WERE DISALLOWED BY THE AO, WE ARE UNABLE TO EXPRESS ANY OPINION ON THI S ISSUE. WE NOTICE THAT THE HONBLE JURISDICTIONAL KERALA HIGH COURT IN THE CASE OF CIT VS. DHANALAKSHMY BANK LTD (344 ITR 259) HAS CONSIDERED AN IDENTICAL ISSUE, WHICH WAS N OT CONSIDERED BY THE AO. IN THE GROUNDS OF APPEAL, THE REVENUE HAS PLACED RELIANCE ON ANOTHER DECISION OF JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS. POPULAR VEHICLES AND SERVICES LTD (228 CTR 346). ACCORDINGLY, IN OUR VIEW, THIS ISSUE ALSO REQUIRED FRESH EXAMINATION AT THE END OF THE AO. ACCORDINGLY, WE SET ASIDE THE ORDER OF LD CIT( A) ON THIS ISSUE AND RESTORE THE SAME TO THE FILE OF THE ASSESSING OFFICER WITH THE DIRECTION TO EXAMINE THIS ISSUE AFRESH AND TAKE APPROPRIATE DECISION IN ACCORDANCE WITH LA W. 8. IN THE RESULT, THE APPEAL FILED BY THE REVEN UE IS TREATED AS PARTLY ALLOWED FOR STATISTICAL PURPOSES. PRONOUNCED ACCORDINGLY ON 13-11-2 013. SD/- SD/- (N.R.S.GANESAN) (B.R.BASKARAN) JUDICIAL MEMBER ACCOUNTANT MEMBER PLACE: KOCHI DATED: 13TH NOVEMBER, 2013 GJ I.T.A. NO. 581/COCH/2011 6 COPY TO: 1. M/S. SOUTH INDIA CORPORATION LTD., NO. 5, RANI M EYYAMMAI BUILDING, KPK MENON ROAD, WELLINGTON ISLAND, KOCHI-682 003. 2. THE JOINT COMMISSIONER OF INCOME-TAX(OSD), CIRCL E-1(4), ERNAKULAM. 3 THE COMMISSIONER OF INCOME-TAX(APPEALS)-II, KOCHI . 4.THE COMMISSIONER OF INCOME-TAX, KOCHI. 5. D.R., I.T.A.T., COCHIN BENCH, COCHIN. 6. GUARD FILE. BY ORDER (ASSISTANT REGISTRAR ) I.T.A.T, COCHIN