DCIT, New Delhi V. M/s. Beetel Teletech Limited, New Delhi

ITA 6560/DEL/2014

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 2793 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 8 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-08-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2004-2005
• Appeal Filed On: 03-12-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RAVIKANT GUPTA
• Section: 143(3)

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH A NEW DELHI BEFORE SHRI PRAMOD KUMAR, ACCOUNTANT MEMBER AND SHRI SUDHANSHU SRIVASTAVA, JUDICIAL MEMBER ITA NO. 6560/DEL/2014 ASSESSMENT YEA R: 2004-05 DCIT, CIRCLE 4(2) VS. M/S. BEETEL TELETECH LIMITE D, ROOM NO. 398D, (ERSTWHILE GOA TELECOMMUNICATION C.R. BUILDING, & SYSTEMS LTD.), NEW DELHI D-195, OKHLA INDUSTRIAL AREA, PHASE-I, NEW DELHI 19 (PAN: AABFG3990L) (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI RAVI KANT GUPTA, SR. DR RESPONDENT BY : SH. ANIL BHALLA, CA DATE OF HEARING: 31.05.2018 DATE OF PRONOUNCEMENT: 29.08.2018 ORDER PER SUDHANSHU SRIVASTAVA, JUDICIAL MEMBER THE APPEAL FILED BY THE REVENUE IS DIRECTED AGAINST THE ORDER DATED 28.8.2014 PASSED BY THE LD. CIT(APPEALS)-PANAJI F OR THE A.Y. 2004-05 AND THE ISSUES IN DISPUTE PERTAIN TO DELETION OF AD DITION OF RS. 44,38,848/- ON ACCOUNT OF DISALLOWANCE OUT OF MISC. EXPENSES AN D FURTHER DELETION OF ADDITION OF RS. 57,703/- ON ACCOUNT OF UNUTILISED M ODVAT CREDIT. 2. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E IS ENGAGED IN MANUFACTURING OF TELECOMMUNICATION EQUIPMENT AND RE NDERING TELECOM RELATED SERVICES. THE RETURN OF INCOME WAS FILED DECLARING LOSS OF RS.1,80,15,614/-. THE CASE OF THE ASSESSEE WAS SELE CTED FOR SCRUTINY AND 2 THE ASSESSMENT WAS COMPLETED U/S. 143(3) OF THE I.T . ACT AT A NET LOSS OF RS. 1,35,03,173/-, AFTER MAKING DISALLOWANCES OF M ISCELLANEOUS EXPENSES OF RS. 44,38,848/- AND ON ACCOUNT OF UNUTILISED MOD VAT CREDIT OF RS. 57,560/- AND EXPENDITURE PERTAINING TO ASSESSMENT Y EARS AMOUNTING TO RS. 15,837/-. 3. AGGRIEVED WITH THE ASSESSMENT ORDER, ASSESSEE AP PROACHED THE LD. CIT(A), WHO VIDE HIS IMPUGNED ORDER DATED 28.8.2014 HAS PARTLY ALLOWED THE ASSESSEES APPEAL BY DELETING THE ADDITION OF R S. 44,38,848/- AS WELL AS BY DELETING THE ADDITION OF RS. 57,703/-. NOW T HE REVENUE IS IN APPEAL BEFORE THE TRIBUNAL AND HAS RAISED THE FOLLOWING G ROUNDS OF APPEAL:- I) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE, THE LD. CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS. 44 ,38,848/- ON ACCOUNT OF DISALLOWANCE AS MISCELLANEOUS EXPENSES W ITHOUT APPRECIATING THE FACT THAT THE ASSESSEE HAD NOT PRO DUCED THE SUPPORTING BILLS AND VOUCHERS FOR VERIFICATION DUR ING THE COURSE OF ASSESSMENT PROCEEDINGS. II) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE, THE LD. CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS. 57 ,703/- ON ACCOUNT OF THE VALUE OF UNUTILISED MODVAT CREDIT WI THOUT APPRECIATING THAT THE SAME WAS NOT INCLUDED IN THE VALUE OF CLOSING STOCK AS SHOWN ON 31.3.2004 AND THUS, THERE WAS DEVIATIONS FROM THE METHOD OF ACCOUNTING AS PRESCRI BED UNDER SECTION 145A OF THE INCOME TAX ACT, 1961. 3 III) THE APPELLANT CRAVES LEAVE FOR RESERVING THE RIGHT TO AMEND, MODIFY, ALTER, ADD OR FOREGO ANY GROUND(S) OF APPEA L AT ANY TIME BEFORE OR DURING THE HEARING OF THIS APPEAL. 4. LD. SR. DR APPEARING ON BEHALF OF THE DEPARTMENT PLACED EXTENSIVE RELIANCE ON THE FINDINGS AND OBSERVATIONS OF THE AS SESSING OFFICER AND VEHEMENTLY ARGUED THAT LD. CIT(A) HAD ERRED IN DEL ETING THESE TWO DISALLOWANCES. 5. IN RESPONSE, THE LD. AR WITH RESPECT TO DISALLOW ANCE OF MISC. EXPENSES SUBMITTED THAT THE MISC. EXPENSES HAD BEE N DISALLOWED BY THE AO WITHOUT DULY CONSIDERING THE FACT THAT THE EXPEN SES WERE SUPPORTED BY DEBIT NOTES AND THESE EXPENSES PERTAINED TO CORPORA TE EXPENSES AND THERE WAS NO PERSONAL ELEMENT INVOLVED IN THESE EXP ENSES. IT WAS FURTHER SUBMITTED THAT THE ASSESSEE IS A GROUP COMP ANY AND MANY EXPENSES ARE INCURRED BY THE HEAD OFFICE FOR THE EN TIRE GROUP AND SUBSEQUENTLY SOME OF THE EXPENSES ARE ALLOCATED TO VARIOUS GROUP ENTITIES AT A FIXED AND REASONABLE BASIS AND DEBIT NOTES ARE ISSUED AND ON THIS BASIS THESE EXPENSES ARE BOOKED. LD. AR FURTHER SU BMITTED THAT THE AO HAD DISALLOWED THE ENTIRE EXPENDITURE ON THE GROUND THAT THE ASSESSEE DID NOT HAVE THE VOUCHERS RELATING TO THESE EXPENSES, B UT IT WAS INCORRECT AS THE DEBIT NOTES HAVE BEEN ISSUED FOR THE COMMON SER VICES ON THE BASIS OF SALES TURNOVER AND THIS METHOD IS BEING FOLLOWED BY THE GROUP FOR THE PAST MANY ASSESSMENT YEARS AND THE DEPARTMENT HAS ALSO A CCEPTED THE SAME. 5.1 WITH RESPECT TO DISALLOWANCE PERTAINING TO MODV AT CREDIT, IT WAS SUBMITTED BY THE LD. AR THAT THIS AMOUNT OF RS. 57 ,703/- WAS SHOWN BY 4 THE ASSESSEE IN SCHEDULE NO. 5 UNDER THE HEAD LOA NS & ADVANCES AND APPEARED AS BALANCE WITH THE EXCISE AUTHORITIES AND SIMILARLY THE CENVAT IMPACT ON CLOSING STOCK OF RAW MATERIAL AND WORK-IN-PROGRESS OF RS. 57,703/- WAS DULY REFLECTED IN ANNEXURE-II OF F ORM 3CD. IT WAS FURTHER SUBMITTED THAT THE AMOUNT WAS NOT INCOME AS THE ASSESSEE WAS FOLLOWING THE EXCLUSIVE METHOD OF ACCOUNTING OF M ODVAT CREDIT WHEREIN THE PURCHASES ARE DEBITED NET OF MODVAT CREDIT TO B E AVAILED AND THE MODVAT CREDIT TO BE AVAILED IS DEBITED TO SEPARATE ACCOUNT. THE LD. AR FURTHER SUBMITTED THAT THESE AMOUNTS HAD RIGHTLY BE EN DELETED BY THE LD. CIT(A) AFTER DULY ANALYSING THE PROVISIONS OF SECTI ON 145A OF THE INCOME TAX ACT. 6. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSE D THE MATERIAL ON RECORD. WE FIND THAT THE LD. CIT(A) WHILE DELETING THE DISALLOWANCE OF RS. 44,38,848/- OUT OF MISC. EXPENSES HAS RECORDED A CATEGORICAL FINDING THAT THE AMOUNT DEBITED IN THE BOOKS OF ACCOUNTS W AS DULY SUPPORTED BY THE DEBIT NOTES RAISED BY THE GROUP COMPANY AND IT HAS ALSO BEEN NOTED THAT THE ALLOCATION OF EXPENSES IS REVENUE NEUTRAL AS THE EXPENDITURE OF ONE COMPANY IS INCOME OF ANOTHER COMPANY. THE LD. CIT(A) HAS ALSO NOTED THAT THE CLAIM OF SUCH EXPENDITURE WAS MUCH M ORE IN EARLIER ASSESSMENT YEARS I.E. AY 2001-02, 2002-03 AND 2003- 04 AND THESE CLAIMS HAD BEEN ALLOWED BY THE DEPARTMENT. THE LD. CIT(A) HAS ALSO NOTED THAT DEBIT NOTES ARE SUFFICIENT TO ESTABLISH THE VERACITY OF CONSIDERATION FOR SERVICES RECEIVED FROM ONE GROUP COMPANY TO ANOTHER GROUP COMPANY. THE LD. CIT(A) HAS ALSO NOTED THA T IN SPITE OF THE DEBIT 5 NOTES AND DETAILS BEING AVAILABLE FOR VERIFICATION, THE DISALLOWANCE OF ENTIRE EXPENDITURE IN A SUMMARY MANNER WAS UNSUSTA INABLE. LD. SR. DR ALSO COULD NOT POINT OUT ANY FACTUAL INACCURACY IN THE FINDING OF THE LD. CIT(A). ACCORDINGLY, WE HAVE NO OTHER OPTION, BUT TO DISMISS THE GROUND RAISED BY THE DEPARTMENT IN THIS REGARD BY UPHOLDIN G THE ACTION OF THE LD. CIT(A). 6.1 COMING TO THE OTHER GROUND OF THE DEPARTMENT RE LATING TO DELETION OF ADDITION OF RS. 57,703/- ON ACCOUNT OF VALUE OF UNUTILIZED MODVAT CREDIT. IT IS AGAIN SEEN THAT LD. CIT(A) HAS DULY A NALYZED THE PROVISIONS OF SECTION 145A OF THE ACT IN THIS REGARD AND HAS DISC USSED THE ISSUE AT LENGTH AT PAGES 5 TO 14 IN HIS IMPUGNED ORDER. THE LD. CIT(A) HAS ALSO PLACED RELIANCE ON THE ORDER OF THE ITAT, MUMBAI BE NCH IN THE CASE OF JCIT VS. ALFA LAVAL (I) LTD. (2006) 104 TTJ 791 (MU MBAI) WHEREIN, IT HAS BEEN HELD THAT SINCE THE ASSESSEE COMPANY HAD REDUC ED THE MODVAT CREDIT IN RESPECT OF MATERIAL PURCHASED DIRECTLY FR OM THE MATERIAL COST, MODVAT CREDIT IS NOT TO BE INCLUDED IN THE VALUE OF CLOSING STOCK. LD. CIT(A) FURTHER PLACED RELIANCE IN THE CASES OF NATI ONAL PLASTIC INDUSTRIES LTD. AND GANGADHAR OIL REFINERY (I) LTD. WHEREIN, I T WAS HELD THAT THE AO SHOULD VERIFY THAT THE ASSESSEE DOES NOT CLAIM DOUB LE DEDUCTION ON ACCOUNT OF MODVAT BY INCLUDING THE SAME IN OPENING STOCK AND PURCHASES AND ALSO IN EXCISE DUTY PAYABLE AGAINST SALES, WHIC H IS NOT THE CASE OF THE ASSESSEE. LD. CIT(A) HAS FURTHER OBSERVED THAT IN VIEW OF THE ACCOUNTING SYSTEM FOLLOWED BY THE ASSESSEE, IF ADDITION HAS TO BE MADE IN THE CLOSING STOCK, THE COST OF MANUFACTURING ALSO NEEDS TO BE I NCREASED AND AS A 6 RESULT THEREOF THE IMPACT SHALL BE REVENUE NEUTRAL . THEREFORE, LD. CIT(A) HAS RIGHTLY DELETED THE ADDITION AMOUNTING TO RS. 5 7,560/- ON THIS ACCOUNT, WHICH DOES NOT NEED ANY INTERFERENCE ON OU R PART. THEREFORE, WE UPHOLD THE ACTION OF THE LD. CIT(A) ON THIS ISSUE A ND DISMISS THE GROUND RAISED BY THE REVENUE. 7. IN THE RESULT, THE APPEAL OF THE REVENUE STAN DS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 29.08.2018 . SD/- SD/- (PRAMOD KUMAR) (SUDHANSHU SRIVAS TAVA) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 29.08.2018 SRB COPY FORWARDED TO: - 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT BY ORDER ASSTT. REGISTRAR