ASIAN PPG INDUSTRIES LTD, MUMBAI V. DCIT LTU, MUMBAI

ITA 6496/MUM/2011

• Counselvise Citation: [2012] 119 COUNSELVISE.COM (IT) 8890 (ITAT-MUMBAI)
• Duration Of Justice: 11 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-09-2012
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2008-2009
• Appeal Filed On: 26-09-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ASHUTOSH RAJHANS
• Keywords: Principle of natural justice; Source of fund; Revised return; Reassessment proceedings

Judgement Text

ITA NO.6496 OF 2011 ASIAN PPG INDUSTRIES LTD MUMBAI PAGE 1 OF 7 IN THE INCOME TAX APPELLATE TRIBUNAL 'A' BENCH, MUMBAI BEFORE SHRI B.R. MITTAL, JUDICIAL MEMBER AND SHRI B. RAMAKOTAIAH, ACCOUNTANT MEMBER ITA NO.6496/MUM/2011 (ASSESSMENT YEAR: 2008-09) ASIAN PPG INDUSTRIES LTD, 6A SHANTI NAGAR, SANTA CRUZ (E) MUMBAI 400055 PAN: AAACA 8832 H VS. DCIT, LARGE TAX PAYER UNIT, 28 TH FLOOR, WORLD TRADE CENTRE-1, CUFFE PARADE, MUMBAI 400005 (APPELLANT) (RESPONDENT) ASSESSEE BY: SHRI DALPAT SHAH DEPARTMENT BY: SHRI ASHUTOSH RAJHANS, DR DATE OF HEARING: 29/08/2012 DATE OF PRONOUNCEMENT: 12/09/2012 O R D E R PER B. RAMAKOTAIAH, A.M. THIS IS AN ASSESSEES APPEAL AGAINST THE ORDERS OF THE CIT(A)-24 MUMBAI, DATED 22/06/2011 AGAINST THE ORDE R UNDER SECTION 115WE(3) OF THE I.T. ACT DATED 14/12/2010. 2. ASSESSEE FILED FRINGE BENEFIT TAX RETURN THROUGH E- FILING ON 23/09/2008 WITH A VALUE OF F.B AT ` 2,45,92,421/-. IN THE SCRUTINY PROCEEDINGS, ASSESSEE VIDE LETTER DATED 13/12/2010 SUBMITTED THAT THE TRIPS SCHEMES, ROYALTY PAID /PAYABLE AND COMMIS SION PAID OR PAYABLE, WERE OFFERED FOR FBT EVEN THOUGH IT IS NO T REQUIRED TO BE OFFERED FOR TAXATION. ASSESSEE GAVE DETAILED NOTE A BOUT THE TRIPS SCHEME, ROYALTY COMMISSION PAID OR PAYABLE TO THE M OTOR MANUFACTURERS. AO REJECTED ASSESSEES CLAIM FOLLOWI NG THE DECISION OF THE HON'BLE SUPREME COURT IN THE CAS OF GOETZE I NDIA LTD 284 ITR 323 ON THE REASON THAT IN THE ABSENCE OF REVISED R ETURN AO NEED NOT ENTERTAIN THE CLAIM. BEFORE THE CIT (A) IT WAS SUBMITTED THAT ASSESSEE INCLUDED THIS AMOUNT INCORRECTLY AND RELIE D ON THE BOARD CIRCULAR NO.8/2005 DATED 29/08/2005 WITH REFERENCE TO THE TRIPS SCHEME AND ON FACTS WITH REFERENCE TO ROYALTY OR CO MMISSION ITA NO.6496 OF 2011 ASIAN PPG INDUSTRIES LTD MUMBAI PAGE 2 OF 7 PAYABLE WHICH IS IN THE NATURE OF ORIGINAL SELLING COST WHICH DOES NOT FALL WITHIN THE SCOPE OF CLAUSE-D OF SUB SECTIO N 2 OF SECTION 115WE. THE CIT (A) WITHOUT GOING INTO THE MERITS HO WEVER, AGREED WITH AO THAT AO HAS NO POWERS TO ENTERTAIN THE CLAI M. HE ALSO DISTINGUISHED THE COORDINATE BENCH DECISION IN THE CASE OF ASIAN PAINTS VS. ACIT IN ITA NO.1686/MUM/2010 DATED 24/11 /2010 WHICH WAS RELIED UPON BY ASSESSEE BEFORE THE CIT (A ) ON THE REASON THAT THE CIT (A) DID NOT HAVE THE POWER TO ADMIT FR ESH CLAIM. 3. AT THE OUTSET THE LEARNED COUNSEL SUBMITTED THAT TH E ISSUE ON MERITS IS IN ITS FAVOUR BUT THE CLAIMS WERE NOT ENT ERTAINED BY THE REVENUE ON THE REASON THAT ASSESSEE ITSELF OFFERED THE AMOUNT UNDER FBT AND DID NOT FILE THE REVISED RETURN. HE R ELIED ON THE DECISION OF THE COORDINATE BENCH IN THE CASE OF ASI AN PAINTS VS. ACIT IN ITA NO.1686/MUM/2010 DATED 24/11/2010 WHERE IN SIMILAR CLAIMS MADE ON VARIOUS TRIPS SCHEMES WERE C ONSIDERED AND DIRECTED TO THE CIT (A) TO CONSIDER ASSESSEES CLAI M ON MERITS. 4. THE LEARNED DR HOWEVER, SUBMITTED THAT SINCE ASSESS EE ITSELF HAS OFFERED THE AMOUNT, REVENUE IS CORRECT IN NOT E NTERTAINING THE CLAIMS. 5. WE HAVE CONSIDERED THE ISSUE AND THE DECISION OF TH E ITAT MUMBAI IN THE CASE OF ASIAN PAINTS IN ITA NO.1686/M UM/2010 DATED 24/11/2010 (ONE OF US, AM IS THE AUTHOR OF TH AT ORDER). IN THAT CASE IT WAS HELD ON SIMILAR FACTS OF CLAIM ON THE FBT ON THE TRIPS SCHEME AS UNDER: 5. WE HAVE CONSIDERED THE ARGUMENTS AND EXAMINED T HE RECORD. THE ASSESSEE STATED TO HAVE MADE THE CLAIM ON 05.08.2008 BUT IN THE PAPER BOOK THE LETTERS SUBMIT TED TO ACIT DATED 05.11.2008 AND 19.12.2008 WERE PLACED WHEREIN THE ASSESSEE HAS SUBMITTED THE FOLLOWING TO THE A.O.: 'IN THE FBT RETURN FILED, INTERALIA WE HAVE INCLUDE D A SUM OF RS.152,91 MILLIONS ON ACCOUNT OF TRIP SCHEMES AN D ACCORDINGLY RS.30.58 MILLIONS (20% OF RS.152.91) HA S BEEN CONSIDERED AS VALUE FOR FRINGE BENEFIT. IN THIS CON TEXT, WE SUBMIT THAT OUR DEALERS ARE ENTITLED TO LOCAL/ INTE RNATIONAL TRIPS SCHEMES BASED ON TARGET BASED SCHEMES FLOATED BY ITA NO.6496 OF 2011 ASIAN PPG INDUSTRIES LTD MUMBAI PAGE 3 OF 7 THE COMPANY AT ITS VARIOUS LOCATIONS FROM TIME TO T IME. HENCE, TRIP SCHEMES ARE IN THE NATURE OF INCENTIVES AND ARE IN THE FORM OF ORDINARY SELLING COST. BASED ON QUESTION NO. 61 OF CBDT CIRCULAR NO 8/2005 DATED 29.08.2005, WE SUBMIT THAT THE EXPENSES ON TRIP SCHEME SHALL BE EXCLUDED FROM THE PAYMENT OF FBT.' AS SEEN FROM THE ASSESSMENT ORDER THERE IS NO DISCU SSION ABOUT THE ABOVE CLAIM BY THE A.O., HOWEVER, AO HAS CONSIDERED AN AMOUNT OF ADDITION VIDE ORDER SHEET D ATED 19.12.2008 SUBMITTED BY THE ASSESSEE. THE CIT(A) EXAMINED THE ISSUE ONLY ON LEGAL PERSPECTIVE WITHOU T CONSIDERING THE MERITS AND REJECTED THE SAME. WE AL SO NOTICE THAT THE ABOVE BOARD CIRCULAR WAS ALREADY IS SUED BY THE TIME THE ASSESSEE FILED THE RETURN INCLUDING THE ABOVE AMOUNTS ON ITS OWN. 6. THE COORDINATE BENCH IN ASSESSEE'S OWN CASE FOR AY 2003-04 HAS CONSIDERED A SIMILAR SITUATION OF REJEC TION OF CLAIM MADE BEFORE THE A.O. IN THE COURSE OF ASSESSM ENT PROCEEDINGS AND BY THE CIT(A) AND HELD AS UNDER: '21. WE HAVE HEARD THE LEARNED REPRESENTATIVES OF THE PARTIES AND PERUSED THE RECORD. ................................ IN THIS APPEAL, TH E PRELIMINARY QUESTION THAT FALLS FOR CONSIDERATION RELATES TO SC OPE OF POWERS OF CIT(A) WHETHER THE CIT(A) WAS HAVING POWER TO ADMIT ASSESSEE'S CLAIM WITHOUT FILING REVISED RETURN OF INCOME. TO PROPERLY APPRECIATE TH E ISSUE, WE WOULD LIKE TO REPRODUCE THE FINDING GIVEN BY HON'BLE SUPREME COURT IN CASE OF GOETZ INDIA LTD. CITED SUPRA, READS AS UNDER:- 'THE DECISION IN QUESTION IS THAT THE POWER OF THE TRIBUNAL UNDER SECTION 254 OF THE INCOME-TAX ACT, 1961, IS TO ENTERTAIN FOR THE FIRST TIME A POINT OF LAW PROVIDE D THE F ACT ON THE BASIS OF WHICH THE ISSUE OF LAW CA N BE RAISED BEFORE THE TRIBUNAL. THE DECISION DOES NO T IN ANY WAY RELATE TO THE POWER OF THE AO TO ENTERTAIN A CLAIM FOR DEDUCTION OTHERWISE THAN BY FILING A REVISED RETURN. IN THE CIRCUMSTANCES OF TH E CASE, WE DISMISS THE CIVIL APPEAL. HOWEVER, WE MAKE IT CLEAR THAT THE ISSUE IN THIS CASE IS LIMITE D TO THE POWER OF THE ASSESSING AUTHORITY AND DOES NOT IMPINGE ON THE POWER OF THE INCOME-TAX APPELLATE TRIBUNAL UNDER SECTION 254 OF THE INCOME-TAX ACT, 1961. THERE SHALL BE NO ORDER AS TO COSTS.' 21.1 FROM THE ABOVE FINDING OF THE APEX COURT, WE FIND THAT THE APEX COURT HAS DECIDED THE ISSUE FOR A LIMITED PURPOSE IN RESPECT OF POWER OF THE ASSESSIN G AUTHORITY. THE APEX COURT CLARIFIED IN ITS JUDGMENT ITA NO.6496 OF 2011 ASIAN PPG INDUSTRIES LTD MUMBAI PAGE 4 OF 7 ITSELF THAT THEIR FINDING DOES NOT IMPINGE ON THE POWER OF THE INCOME TAX APPELLATE TRIBUNAL UNDER SECTION 254 OF THE ACT. WE FIND THAT THE CIT (A) HA S ALSO SIMILAR POWER U/S 251(1)(C). THE SAID SECTION READS AS UNDER:- 'SECTION 251(1): IN DISPOSING OF AN APPEAL, THE COMMISSIONER (A) SHALL HAVE THE FOLLOWING POWERS- (A) IN AN APPEAL AGAINST AN ORDER OF ASSESSMENT, HE MAY CONFIRM, REDUCE, ENHANCE OR ANNUL THE ASSESSMENT (AA) IN AN APPEAL AGAINST THE ORDER OF ASSESSMENT I N RESPECT OF WHICH THE PROCEEDING BEFORE THE SETTLEME NT COMMISSION ABATES UNDER SECTION 245HA, HE MAY, AFTE R TAKING INTO CONSIDERATION ALL THE MATERIAL AND OTHE R INFORMATION PRODUCED BY THE ASSESSEE BEFORE, OR THE RESULTS OF THE INQUIRY HELD OR EVIDENCE RECORDED BY , THE SETTLEMENT COMMISSION, IN THE COURSE OF THE PROCEED ING BEFORE IT AND SUCH OTHER MATERIAL AS MAY BE BROUGHT ON HIS RECORD, CONFIRM, REDUCE, ENHANCE OR ANNUL THE ASSES SMENT. B) IN ANY APPEAL AGAINST AN ORDER IMPOSING A PENALT Y, HE MAY CONFIRM OR CANCEL SUCH ORDER OR VARY IT SO AS E ITHER TO ENHANCE OR TO REDUCE THE PENALTY; C) IN ANY OTHER CASE, HE MAY PASS SUCH ORDERS IN TH E APPEAL AS HE THINKS F IT.:' 21.2 THE ISSUE RELATED POWER OF FIRST APPELLATE AUTHORITY HAS BEEN EXAMINED BY THE HON'BLE SUPREME COURT IN THE CASE OF COMMISSIONER OF INCOME-TAX V. NIRBHERAM DELURAM 224 ITR 610(SC). THE BRIEF FACTS OF THAT CASE WERE THAT DURING REASSESSMENT PROCEEDINGS THE ITO MADE ADDITION TO THE ASSESSEE'S INCOME TO THE EXTENT OF RS. 2,45,000 ON ACCOUNT OF OSTENSIBLE TRANSACTIONS IN HUNDI LOAN S SHOWN BY THE ASSESSEE. ON APPEAL, THE AAC, WHILE SUSTAINING THE AFORESAID ADDITION ALSO TOOK NOTICE OF 10 OTHER ITEMS OF OSTENSIBLE HUNDI LOANS AMOUNTING TO ` 2,30,000 AND DIRECTED THAT THE TOTAL INCOME BE ENHANCED BY THE SUM OF RS. 2,30,000. THE TRIBUNAL, HOWEVER, DELETED THE SAID ADDITION HOLDING THAT THE AAO HAD EXCEEDED HIS JURISDICTION. THE HIGH COURT PLACING RELIANCE ON THE DECISION OF THE SUPREME COURT IN ADDL. CIT V. GURJARGRAVURES (P.) LTD. [197 8] 111 ITR 1 HELD THAT THE AAC HAD NO JURISDICTION TO CONSIDER THE NEW ENTRIES WHICH WERE NOT CONSIDERED AT ALL BY THE ITO AND TO ADD THE AMOUNT OF ` 2,30,000 TO THE TOTAL INCOME OF THE ASSESSEE. ACCORDING TO THE HIGH COURT, THE ITEMS REPRESENTING ITA NO.6496 OF 2011 ASIAN PPG INDUSTRIES LTD MUMBAI PAGE 5 OF 7 THE SAID AMOUNT CONSTITUTED NEW SOURCES OF INCOME WHICH WERE NOT THE SUBJECT-MATTER OF ASSESSMENT BEFORE THE ASSESSING OFFICER AND, THEREFORE, IT WAS NOT OPEN TO THE AAC IN APPEAL TO CONSIDER THE NEW SOURCES AND TO ASSESS THEM. 21.3 ON APPEAL TO THE SUPREME COURT, THE SUPREME COURT HAS HELD AS UNDER:- '(PAGES 612 TO 614)' IN JUTE CORPN. OF INDIA LTD'S CASE (SUPRA) THIS COURT HAS REFERRED TO THE EARLIER DECISION OF THIS COURT IN CIT V. KANPUR COAL SYNDICATE [1964] 53 ITR 225, WHICH WAS ALSO A DECISION OF A THREE JUDGE BENCH WHEREIN THE SCOPE OF SECTION 31(3)(A) OF THE INDIAN INCOME-TAX ACT, 1922 [WHICH WAS ALMOST IDENTICAL TO SECTION 251(1)(A) OF THE 1961 ACT] WAS CONSIDERED AND IT WAS HELD: 'IF AN APPEAL LIES, SECTION 31 OF THE ACT DESCRIBES THE POWERS OF THE APPELLATE ASSISTANT COMMISSIONER IN SUCH AN APPEAL. UNDER SECTION 31(3)(A), IN DISPOSIN G OF SUCH AN APPEAL, THE APPELLATE ASSISTANT COMMISSIONER MAY, IN THE CASE OF AN ORDER OF ASSESSMENT, CONFIRM, REDUCE, ENHANCE OR ANNUL THE ASSESSMENT; UNDER CLAUSE (B) THEREOF HE MAY SET ASIDE THE ASSESSMENT AND DIRECT THE INCOME-TAX OFFICER TO MAKE A FRESH ASSESSMENT. THE APPELLATE ASSISTANT COMMISSIONER HAS, THEREFORE, PLENARY POWERS IN DISPOSING OF AN APPEAL. THE SCOPE OF HIS POWER IS COTERMINOUS WITH THAT OF THE INCOME-TAX OFFICER. HE CAN DO WHAT THE INCOME-TAX OFFICER CAN DO AND ALSO DIRECT HIM TO DO WHAT HE HAS F AILED TO DO'.' (P. 693) AFTER REFERRING TO THESE OBSERVATIONS, THIS COURT I N JUTE CORPN. OF INDIA LTD'S CASE (SUPRA) HAS STATED : 'THE ABOVE OBSERVATIONS ARE SQUARELY APPLICABLE IN THE INTERPRETATION OF SECTION 251(1)(A) OF THE ACT. THE DECLARATION OF LAW IS CLEAR THAT THE POWER OF THE APPELLATE ASSISTANT COMMISSIONER IS CO-TERMINUS WITH THAT OF THE INCOME-TAX OFFICER, AND IF THAT IS SO, THERE APPEARS TO BE NO REASON AS TO WHY THE APPELLATE AUTHORITY CANNOT MODIFY THE ASSESSMENT ORDER ON AN ADDITIONAL GROUND EVEN IF NOT RAISED BEFORE THE INCOME-TAX OFFICER. NO EXCEPTION COULD B E TAKEN TO THIS VIEW AS THE ACT DOES NOT PLACE ANY RESTRICTION OR LIMITATION ON THE EXERCISE OF APPELL ATE POWER. EVEN OTHERWISE, AN APPELLATE AUTHORITY WHILE HEARING THE APPEAL AGAINST THE ORDER OF A ITA NO.6496 OF 2011 ASIAN PPG INDUSTRIES LTD MUMBAI PAGE 6 OF 7 SUBORDINATE AUTHORITY, HAS ALL THE POWERS WHICH THE ORIGINAL AUTHORITY MAY HAVE IN DECIDING THE QUESTIO N BEFORE IT SUBJECT TO THE RESTRICTIONS OR LIMITATION , IF ANY, PRESCRIBED BY THE STATUTORY PROVISIONS. IN THE ABSENCE OF ANY STATUTORY PROVISION, THE APPELLATE AUTHORITY IS VESTED WITH ALL THE PLENARY POWERS WHICH THE SUBORDINATE AUTHORITY MAY HAVE IN THE MATTER. THERE APPEARS TO BE NO GOOD REASON AND NONE WAS PLACED BEFORE US TO JUSTIFY CURTAILMENT OF THE POWER OF THE APPELLATE ASSISTANT COMMISSIONER IN ENTERTAINING AN ADDITIONAL GROUND RAISED BY THE ASSESSEE IN SEEKING MODIFICATION OF THE ORDER OF ASSESSMENT PASSED BY THE INCOME-TAX OFFICER.' (P. 693) TAKING NOTE OF THE DECISION IN GURJARGRAVURES (P.) LTD'S CASE (SUPRA), THE COURT HAS SAID : '... APPARENTLY, THIS VIEW TAKEN BY THE TWO JUDGE BENCH OF THIS COURT APPEARS TO BE IN CONFLICT WITH THE VIEW TAKEN BY THE THREE JUDGE BENCH OF THIS COURT IN KANPUR COAL SYNDICATE CASE [1964] 53 ITR 225. IT APPEARS FROM THE REPORT OF THE DECISION IN THE GUJARAT CASE THAT THE THREE JUDGE BENCH DECISION IN KANPUR COAL SYNDICATE CASE [1964] 53 ITR 225 (SC) WAS NOT BROUGHT TO THE NOTICE OF THE BENCH IN GURJARGRAVURES (P.) LTD. [1978] 111 ITR 1 (SC). IN THE CIRCUMSTANCES, THE VIEW OF THE LARGER BENCH IN KANPUR COAL SYNDICATE CASE [1964] 53 ITR 225 (SC) HOLDS THE FIELD....' (P. 694)' HAVING REGARD TO THE DECISION IN JUTE CORPN. OF INDIA LTD'S CASE (SUPRA) , IT MUST BE HELD THAT THE HIGH COURT WAS IN ERROR IN HOLDING THAT THE APPELLATE POWER CONFERRED ON THE AAC UNDER SECTION 251 WAS CONFINED TO THE MATTER WHICH HAD BEEN CONSIDERED BY THE ITO AND THE AAC EXCEEDED HIS JURISDICTION IN MAKING AN ADDITION OF RS. 2,30,000 ON THE BASIS OF THE OTHER 10 ITEMS OF HUNDIS WHICH HAD NOT BEEN EXPLAINED BY THE ASSESSEE.' 21.4 IN THE LIGHT OF THE ABOVE DISCUSSION, WE FIND THAT THE AO HAS NO POWER TO ADMIT FRESH CLAIM OTHERWISE THAN REVISED RETURN BUT APPELLATE AUTHORITIES INCLUDING CIT(A) & ITAT HAVE POWER TO ADMIT SUCH CLAIM. WITHOUT PREJUDICE TO THE ABOVE FINDING, WE ADMIT THE ASSESSEE'S CLAIM WHICH IS IN ACCORDANCE WITH THE JUDGMENT OF THE APEX COURT IN THE CASE OF GOETZ INDIA LTD. (SUPRA).IN THE INTERES T OF NATURAL JUSTICE AND KEEPING IN VIEW THE RATIO LAID DOWN BY THE APEX COURT IN THE CASE OF GOETZE (INDIA ) LTD., 284 ITR 323, WE REMIT THE MATTER BACK TO THE ITA NO.6496 OF 2011 ASIAN PPG INDUSTRIES LTD MUMBAI PAGE 7 OF 7 FILE OF THE CIT(A) WITH A DIRECTION TO DECIDE THE I SSUE ON MERIT IN ACCORDANCE WITH LAW AFTER PROVIDING REASONABLE OPPORTUNITY OF HEARING TO BOTH THE SIDES .' 6. IN VIEW OF THE DECISION OF THE COORDINATE BENCH, WE ARE OF THE VIEW THAT THE ITAT HAS POWER TO ADMIT SUCH CLAIMS A ND THEREFORE, WE ADMIT THE CLAIMS. WE DIRECT AO TO EXAMINE THE IS SUE ON MERITS AND GIVE CLEAR FINDINGS WHETHER THE AMOUNTS ARE INC LUDIBLE UNDER THE FBT OR NOT. IN ORDER TO EXAMINE THE SAME WE SET ASIDE THE ORDER OF AO AND CIT(A) TO THAT EXTENT AND ISSUES ARE REM ITTED TO THE FILE OF AO WITH THE DIRECTION TO DECIDE ON MERITS, IN ACCOR DANCE WITH THE LAW AND FACTS AFTER PROVIDING REASONABLE OPPORTUNIT Y OF BEING HEARD TO ASSESSEE. WITH THESE DIRECTIONS THE GROUNDS ARE CONSIDERED ALLOWED FOR STATISTICAL PURPOSES. 7. IN THE RESULT, APPEAL FILED BY ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 12 TH SEPTEMBER, 2012. SD/- SD/- (B.R. MITTAL) (B. RAMAKOTAIAH) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI, DATED: 12 TH SEPTEMBER, 2012. VNODAN/SPS COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CONCERNED CIT(A) 4. THE CONCERNED CIT 5. THE DR, A BENCH, ITAT, MUMBAI BY ORDER ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCHES, MUMBAI