ACIT CC 34, MUMBAI V. NITCO TILES LTD, MUMBAI

ITA 6009/MUM/2010

• Counselvise Citation: 600919914 RSA 2010
• Duration Of Justice: 1 year(s) 4 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-12-2011
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 21-12-2011
• Assessment Year: 2003-2004
• Appeal Filed On: 02-08-2010
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Keywords: Capital receipt
• Section: 143(3); 80HHC

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, B BENCH, MUMBAI. BEFORE SHRI N.V.VASUDEVAN, JUDICIAL MEMBER AND PRAMOD KUMAR, ACCOUNTANT MEMBER I.T.A NO. 6009/ MUM/2010 ASSESSMENT YEAR: 2003-04 ACIT, CENT. CIRCLE 34, .. APPELLANT R.NO.658, 6 TH FLOOR, AAYAKAR BHAVAN, M.K. ROAD, MUMBAI VS NITCO TILES LTD., .. RESPONDENT 85-86, MAKER CHAMBERS III, NARIMAN POINT, MUMBAI-21. PA NO.AAACN 1674 N APPEARANCES: ,PRAVIN KUMAR, FOR THE APPELLANT VIMAL PUNMIYA, FOR THE RESPONDENT DATE OF HEARING : 21.12.2011 DATE OF PRONOUNCEMENT : 28 -12-2011 O R D E R PER PRAMOD KUMAR: 1. BY WAY OF THIS APPEAL, THE ASSESSING OFFICER HAS CALLED INTO QUESTION CORRECTNESS OF CIT(A)S ORDER DATED 28.5.2010, IN THE MATTER OF ASSESSMENT UNDER SECTION 143(3) OF THE INCOME TAX ACT, 1961, FOR THE ASSESSMENT YE AR 2003-04. 2. IN GROUND NOS.1 TO 4, THE ASSESSING OFFICER HAS RAISED THE FOLLOWING GRIEVANCES: I.T.A NO. 6009/ MUM/2010 ASSESSMENT YEAR: 2003-04 2 1.ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LD CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS.1,9 6,85,581 BY PLACING RELIANCE ON THE ORDERS OF THE BOMBAY HIGH COURT IN ASSESSEES OWN CASE FOR AY 1998-99 AND 1999-2000, SINCE FOR THOSE ASSESSMENT YEARS, THE APPEAL OF THE REVENUE WAS REJECTED ON TECHNICAL GROUND ONLY WITHOUT GOING INTO THE MERIT OF THE CASE. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE, THE LD CIT(A) ERRED IN LAW IN NOT UPHOLDING THE ACTION OF THE AO IN INVOKING PROVISIONS OF SECTION 145(3) OF THE I.T.ACT IN VIEW OF THE ASSESSEES FAILURE TO PRODUCE REQUISITE EVIDENCE TO ESTABLISH THAT THE INVOICE RATES WERE VARYING ACCORDING TO THE QUALITY OF THE MARBLE SOLD. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LD CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS.12, 65,917 IGNORING THAT ASSESSEE COMPANY HAD INDULGED IN DIVERTING ITS PROF ITS TO ITS RELATED PARTY, BEING A PERSON SPECIFIED U/S.40A(2)(B) OF TH E I.T.ACT, VIZ, M/S. MAHARASHTRA MARBLE COMPANY, A PROPRIETARY CONCERN O F THE DIRECTOR OF THE COMPANY, BY ENTERING TRADING TRANSACTIONS WI TH IT AT LOWER SALE RATE AS AGAINST THE RATE WORKED OUT BY THE AO BY AP PLYING THE PROVISIONS OF SEC.145(3) OF THE ACT. 4. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LD CIT(A) ERRED IN IGNORING THE FACT THAT THE DECISION OF THE ITAT FOR A.Y. 2001-02 AND FOR A.Y. 2002-03 IN ASSESSEES OWN CASE WAS NOT ACCEPTED BY THE DEPARTMENT AND APPEAL FILED U/S.260A OF THE ACT WAS PENDING BEFORE THE HONBLE HIGH COURT. 3. FACTS IN BRIEF ARE THAT THE ASSESSEE IS ENGAGED IN MANUFACTURING AND SALE OF DIFFERENT KINDS OF TILES. DURING THE COURSE OF ASS ESSMENT PROCEEDINGS, THE ASSESSING OFFICER NOTICED THAT THERE IS BIG DIFFERENCE BETWEE N THE SALE PRICES OF VARIOUS KINDS OF MARBLES. THE AO FURTHER NOTICED THAT THE ASSESS EE HAS MADE SALE OF MARBLE @ 169 PER SQ.FT TO NON INSTITUTIONAL CUSTOMERS, AS AGAIN ST RS.282.20 PER SQ.FT TO INSTITUTIONAL CUSTOMERS. THE AO ALSO NOTICED THAT THE ASSESSEE HAS SOLD MARBLE TO M/S. MAHARASHTRA CO. @ RS139.96 PER SQ.FT IN WHICH DIRECTOR OF THE COMPANY, MR VIVEK TALWAR IS SUBSTANTIAL INTEREST. THE QUALITY OF MARBLE HAS NOT BEEN MENTIONED IN THESE BILLS. IN VIEW OF THIS AND ALSO WITHOUT H AVING ANY SATISFACTORY EXPLANATION FROM THE ASSESSEE, THE ASSESSING OFFICER REJECTED T HE BOOK RESULTS AND MADE AN ADDITION OF RS.1,96,85,581 AS SUPPRESSED SALES ON A CCOUNT OF THREE DIFFERENT TYPE OF SALES ONE TO INSTITUTIONAL CUSTOMER AND SECOND TO O THER CUSTOMERS AND THIRD TO THE I.T.A NO. 6009/ MUM/2010 ASSESSMENT YEAR: 2003-04 3 PROPRIETORSHIP OF THE DIRECTIONS OF THE COMPANY AND ADDED THE SAME TO THE TOTAL INCOME OF THE ASSESSEE. AGGRIEVED, ASSESSEE CARRIE D THE MATTER IN APPEAL BEFORE THE CIT(A), WHO RELYING ON THE DECISION OF THE TRIBUNAL IN ASSESSEES OWN CASE FOR THE ASSESSMENT YEARS 1997-98 TO 1999-2000 AS AFFIRMED B Y HONBLE BOMBAY HIGH COURT, DELETED THE DISALLOWANCE MADE BY THE ASSESSI NG OFFICER. AGGRIEVED, ASSESSING OFFICER IS IN APPEAL BEFORE US. 5. HAVING HEARD BOTH THE SIDES, WE FIND THAT THERE IS NO DISPUTE THAT THE CIT(A) HAS DELETED THE DISALLOWANCE IN RESPECT OF SUPPRESS ED SALES RELYING ON IDENTICAL ISSUE BY THE DECISION OF THE TRIBUNAL IN ASSESSEES OWN CASE FOR THE ASSESSMENT YEARS 1997-98 TO 1999-2000, WHICH HAS BEEN AFFIRMED BY H ONBLE HIGH COURT. AS REGARDS ADDITION OF RS.12,65,917 EARNED BY THE DIRECTOR OF THE COMPANY AS PER PROVISIONS OF SECTION 40A(2)(B), THE SALE AND PURCHASE OF STOCK B Y M/S. MAHARASHTRA MARBLE IS DULY RECORDED IN THE BOOKS OF ACCOUNT AND, THEREFOR E, THERE IS NOTHING WRONG IN THIS SALE. THE MERE FACT THAT THE REVENUE HAS FILED APP EAL BEFORE THE HONBLE HIGH COURT AGAINST THE DECISION OF THE TRIBUNAL ON SIMILAR FAC TS FOR THE ASSESSMENT YEARS 2001- 02 AND 2002-03 IS OF NO GROUND TO TAKE ANY ADVERSE VIEW THAN THE DECISION TAKEN BY THE COORDINATE BENCH. THE REVENUE HAS NOT PLACED O N RECORD ANY CONTRARY DECISION OF THE HIGHER FORUM BEFORE US TO INTERFERE WITH THE ORDER OF THE CIT(A) ON THIS ISSUE. THEREFORE, RESPECTFULLY FOLLOWING THE DECISIONS OF THE TRIBUNAL IN ASSESSEES OWN CASE (SUPRA), APPROVE THE STAND SO TAKEN BY THE CIT (A) AND DECLINE TO INTERFERE. 6. GROUND NOS.1 TO 4 ARE THUS DISMISSED. 7. IN GROUND NO.5, THE ASSESSING OFFICER HAS RAISED THE FOLLOWING GRIEVANCE: ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD CIT(A) ERRED IN LAW IN DIRECTING TO ALLOW DEDUCTION U/S. 80 HHC ON LABOUR CHARGES THOUGH THE FACTS OF THE ASSESSEES CASE WERE DISTIN GUISHABLE FROM THOSE IN THE CASE OF CIT VS. BANGALORE CLOTHING CO. , 260 ITR 371(BOM), SINCE IN ASSESSES CASE THERE WAS NO DIRECT NEXUS B ETWEEN LABOUR CHARGES RECEIPT AND EXPORT BUSINESS OF THE ASSESSEE . 8. HAVING HEARD BOTH THE SIDES, WE FIND THAT THIS I SSUE IS COVERED IN FAVOUR OF THE ASSESSEE BY THE JUDGMENT OF HONBLE BOMBAY HIGH COU RT IN THE CASE OF BANGALORE I.T.A NO. 6009/ MUM/2010 ASSESSMENT YEAR: 2003-04 4 CLOTHING CO.(SUPRA), WHEREIN, IT HAS BEEN OBSERVED THAT ) OBSERVED THAT EXPLANATION ( BAA) CANNOT BE INVOKED IN EVERY MATTER INVOLVING RECEI PTS BY WAY OF BROKERAGE, COMMISSION, INTEREST, RENT, LABOUR CHARGES, ETC. M OREOVER, THE CIT(A) HAS DECIDED THE ISSUE FOLLOWING THE JUDGMENT OF HONBLE BOMBAY HIGH COURT IN THE CASE OF BANGALORE CLOTHING CO.(SUPRA). THEREFORE, WE SEE NO REASON TO INTERFERE WITH THE ORDER OF THE CIT(A). 9. GROUND NO.5 IS THUS DISMISSED. 10. GROUND NO.6 READS AS UNDER: ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD CIT(A) ERRED IN LAW IN DIRECTING TO ALLOW DEDUCTION U/S. 80 HHC ON DEPB IF THE TURNOVER WAS NOT EXCEEDING RS.10 CRORE IGNORING THE DECISION OF THE HONBLE BOMBAY HIGH COURT IN THE CASE OF M/S. KALPA TARU COLOURS AND CHEMICALS LTD. 11. LEARNED REPRESENTATIVES FAIRLY AGREE THAT THIS ISSUE IS COVERED AGAINST THE ASSESSEE BY HONBLE JURISDICTIONAL HIGH COURT IN TH E CASE OF KALPATARU COLOURS AND CHEMICALS, 328 ITR 451(BOM), WHEREIN, IT HAS BEEN H ELD THAT DEPB SALE PROCEEDS CANNOT BE BIFURCATED INTO PROFITS AND FACE VALUE . THE ENTIRE AMOUNT IS PROFITS FOR S. 80HHC R.W.S. 28(IIID). ACCORDINGLY, WE UPHOLD THE GRIEVANCE OF THE ASSESSING OFFICER AND REVERSE THE ACTION SO TAKEN BY THE CIT(A). 12. GROUND NO.6 IS THUS ALLOWED. 13. IN GROUND NO.7, THE ASSESSING OFFICER HAS RAISE D THE FOLLOWING GRIEVANCE: ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD CIT(A) HAS ERRED IN LAW IN DELETING THE ADDITION OF RS.6,79,18 ,85 RELATING TO SALES TAX SUBSIDY BY ACCEPTING THE ASSESSEES CLAIM THAT IT WAS CAPITAL RECEIPT AND HENCE EXEMPT, BY RELYING UPON THE DECIS ION OF DCIT VS. RELIANCE INDUSTRIES IN ITA NO.4045/M/91, IGNORING T HAT THOUGH THE HONBLE BOMBAY HIGH COURT HAS CONFIRMED THE ITATS DECISION, THE DEPARTMENT HAS FILED SLP AGAINST THE DECISION OF BO MBAY HIGH COURT AND THE SAME WAS PENDING. I.T.A NO. 6009/ MUM/2010 ASSESSMENT YEAR: 2003-04 5 14. HAVING HEARD THE RIVAL CONTENTIONS, WE FIND THA T THIS ISSUE IS COVERED BY THE DECISION OF ITAT MUMBAI(SB) IN THE CASE OF DCIT VS. RELIANCE INDUSTRIES LTD, REPORTED IN 88 ITD 273, WHICH HAS NOW BEEN AFFIRMED BY THE HONBLE JURISDICTIONAL HIGH COURT REPORTED IN 2010-TIOL-228-HC-MUM-IT, WHE REIN, IT HAS BEEN HELD THAT NOTIONAL SALES TAX INCENTIVES RECEIVED BY THE COMPA NY UNDER THE EXEMPTION SCHEME IS A CAPITAL RECEIPT AND IS NOT LIABLE TO TAX. NO CONTRARY DECISION HAS BEEN PLACED BY LEARNED DEPARTMENTAL REPRESENTATIVE AGAINST THE JUD GEMENT OF HONBLE BOMBAY HIGH COURT IN THE CASE OF RELIANCE INDUSTRIES (SUPR A). IN THIS VIEW OF THE MATTER, WE SEE NO REASON TO INTERFERE WITH THE ORDER OF THE CI T(A) DIRECTING THE ASSESSING OFFICER TO REDUCE THE SALES TAX INCENTIVES AVAILED BY THE ASSESSEE OF RS.6,79,18,854 AND, ACCORDINGLY, UPHOLD THE SAME. 15. GROUND NO.7 IS THUS DISMISSED. 16. IN THE RESULT, APPEAL IS PARTLY ALLOWED. PRONOUNCED IN THE OPEN COURT ON 28 TH DECEMBER, 2011 SD/- (N.V.VASUDEVAN) JUDICIAL MEMBER SD/- (PRAMOD KUMAR) ACCOUNTANT MEMBER MUMBAI, DATED 28 TH DECEMBER 2011 PARIDA COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A)-41 4. COMMISSIONER OF INCOME TAX, CENT-III , MUMBAI 5. DEPARTMENTAL REPRESENTATIVE, BENCH B MUMBAI //TRUE COPY// BY ORDER ASSTT. REGISTRAR, ITAT, MUMBAI