MILTEX LAMINATES P. LTD, MUMBAI V. ITO 6(3)(4), MUMBAI

ITA 697/MUM/2013

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 79066 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 4 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-06-2014
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Assessment Year: 2009-2010
• Appeal Filed On: 28-01-2013
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: AJAY C GOSALIA
• Keywords: Depreciation; Capital receipt

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, MUM BAI . . , , BEFORE SHRI I. P. BANSAL, JM AND SHRI SANJAY ARORA , AM ./ I.T.A. NO. 697/MUM/2013 ( / ASSESSMENT YEAR: 2009-10) MILTEX LAMINATES PVT. LTD. 40, GRAMODYOG WADI, DOCKYARD ROAD, MUMBAI-400 010 / VS. ITO, 6(3)(4), ROOM NO. 524, AAYAKAR BHAVAN, M. K. ROAD, MUMBAI-400 020 ./ ./PAN/GIR NO. AAACM 9283 C ( /APPELLANT ) : ( !' / RESPONDENT ) # $ / APPELLANT BY : SHRI AJAY C. GOSALIA !' # $ / RESPONDENT BY : SHRI ARVIND KUMAR % &'( # )* / DATE OF HEARING : 16.04.2014 +,- # )* / DATE OF PRONOUNCEMENT : 13.06.2014 . / O R D E R PER SANJAY ARORA, A. M.: THIS IS AN APPEAL BY THE ASSESSEE DIRECTED AGAINST THE ORDER BY THE COMMISSIONER OF INCOME TAX (APPEALS)-12, MUMBAI (CIT(A) FOR SH ORT) DATED 08.11.2012, PARTLY ALLOWING THE ASSESSEES APPEAL CONTESTING ITS ASSES SMENT U/S.143(3) OF THE INCOME TAX ACT, 1961 (THE ACT HEREINAFTER) FOR THE ASSESSMEN T YEAR (A.Y.) 2009-10 VIDE ORDER DATED 22.12.2011. 2 ITA NO. 697/MUM/2013 (A.Y. 2009-10) MILTEX LAMINATES PVT. LTD. VS. ITO 2. THE APPEAL RAISES FIVE ISSUES, PER GROUNDS (A) TO ( E), WHICH WE SHALL TAKE UP IN SERIATIM. THE FIRST ISSUE IS IN RESPECT OF SALES-TA X LIABILITY, OUTSTANDING IN ACCOUNTS AT RS.12,02,780/- AS AT THE YEAR-END. THE SAME WAS EX PLAINED AS THE SALES-TAX PERTAINING TO FINANCIAL YEARS (F.YS.) 1991-92 TO 1995-96 (AND NOT ASSESSMENT YEARS, AS STATED IN THE IMPUGNED ORDER), FOR WHICH PERIOD THE ASSESSEE WAS EXEMPTED FROM PAYMENT OF SALES TAX. IN FACT, THE SUBSIDY WAS FOR AN INITIAL PERIOD OF T EN YEARS, WHICH IN THE ASSESSEES CASE EXPIRED DURING F.Y.1990-91. THE SAID SCHEME WAS EXT ENDED BY THE GOVERNMENT OF GUJARAT (THE ASSESSEES UNIT BEING LOCATED IN VAPI, GUJARAT ) FOR A FURTHER PERIOD OF FIVE YEARS. HOWEVER, AS NO OFFICIAL COMMUNICATION IN ITS RESPEC T HAD BEEN RECEIVED BY THE ASSESSEE, IT, BY WAY OF PRUDENCE, PROVIDED FOR THE LIABILITY TOWARD THE SAME IN BOOKS. IT WAS CLEAR THAT THERE WAS NO OUTSTANDING LIABILITY IN-AS-MUCH AS NO ASSESSMENT COULD BE FRAMED UNDER THE SALES-TAX LAW BEYOND A PERIOD OF FOUR YEA RS FROM THE END OF THE RELEVANT YEAR, AS IN FACT STOOD CLARIFIED BY THE ASSESSEES OWN TAX C ONSULTANT VIDE HIS LETTER TO THE ASSESSEE DATED 12.10.2007 WITH REFERENCE TO THE RELEVANT PRO VISIONS OF LAW (PB PG 48). THERE IS ALSO NO DISPUTE WITH REGARD TO THE SAID LIABILITY, I.E., WITH THE SALES-TAX DEPARTMENT. THERE WAS THUS CLEAR EVIDENCE OF CESSATION OF LIABILITY, WHICH, HOWEVER, CONTINUED TO BE REFLECTED AS SUCH (LIABILITY) BY THE ASSESSEE FROM YEAR TO YEAR. THE SAME WAS ACCORDINGLY ADDED AS INCOME FOR THE YEAR, AND CONFIRMED ON THAT BASIS. 3. WE HAVE HEARD THE PARTIES, AND PERUSED THE MATER IAL ON RECORD. THAT THE IMPUGNED AMOUNT/S OF SALES-TAX, SHOWN IN THE ACCOUNTS AS SA LES TAX PAYABLE, IS NOT PAYABLE, AND IN FACT EVEN NOT RECOVERABLE UNDER LAW, IS BEYOND DOUB T. HOWEVER, ON A QUERY BY THE BENCH TO THE LD. AR THAT, SO HOWEVER, IN-AS-MUCH AS DEDUC TION QUA A STATUTORY LIABILITY, AS SALES- TAX, COULD, IN TERMS OF SECTION 43B, BE ALLOWED ONL Y SUBJECT TO ITS PAYMENT, HAD DEDUCTION BEEN CLAIMED FOR THE SAME FOR THE RESPECTIVE YEARS, HE COULD NOT FURNISH ANY SATISFACTORY ANSWER, EVEN AS WE FIND A CONTENTION TO THAT EFFECT HAVING BEEN RAISED BY THE ASSESSEE BEFORE THE REVENUE, WHICH WAS HOWEVER NOT ACCEPTED IN THE ABSENCE OF ANY EVIDENCE HAVING BEEN ADDUCED BY THE ASSESSEE OF THE SAID SUM HAVING BEEN ADD-BACK, EITHER SUO MOTU OR BY THE REVENUE IN ASSESSMENT FOR THE RELEVANT Y EARS. IF THE AMOUNT OF SAID 3 ITA NO. 697/MUM/2013 (A.Y. 2009-10) MILTEX LAMINATES PVT. LTD. VS. ITO LIABILITY HAS NOT BEEN NOT DEDUCTED, I.E., NOT ADDE D-BACK TO THE BOOK PROFIT, IN ARRIVING AT THE QUANTUM OF TAXABLE INCOME FOR THE RELEVANT YEAR S, WHICH COULD BE ON THE GROUND OF DEFERRAL OF SALES-TAX BEING CONSIDERED AS DEEMED PA YMENT (FOR THE PURPOSE OF SECTION 43B), SO THAT DEDUCTION IN ITS RESPECT STANDS CLAIM ED (AND ALLOWED), THE SAME COULD DEFINITELY BE CONSIDERED AS INCOME ON CESSATION OF LIABILITY. ON THE OTHER HAND, IF NO DEDUCTION HAD BEEN CLAIMED OR ALLOWED QUA THE SAID LIABILITY IN THE PAST, THERE IS NO QUESTION OF THE SAID AMOUNT/S BEING CONSIDERED AS T HE ASSESSEES INCOME, I.E., EVEN IF IT DOES NOT REPRESENT A LIABILITY, WHICH IS INDEED SO. THE ONUS FOR THE SAME WOULD BE CLEARLY ON THE ASSESSEE IN-AS-MUCH AS IT IS ITS CLAIM THAT NO DEDUCTION QUA THE SAID LIABILITY/S HAS IN FACT BEEN CLAIMED FOR THE RELEVANT YEAR/S. WE D ECIDE ACCORDINGLY, RESTORING THE MATTER BACK TO THE FILE OF THE AO FOR THE PURPOSE, WHO SHA LL DECIDE THE MATTER UPON VERIFICATION OF ASSESSEES CLAIM BY ISSUING DEFINITE FINDINGS OF FACT. BEFORE PARTING WITH THIS ISSUE, HOWEVER, WE MAY ADD RESS ANOTHER ARGUMENT RAISED, WHICH THOUGH WE CONSIDER AS MISPLACED. IT IS CLAIM ED, AGAIN WITHOUT SUBSTANTIATION, THAT THE IMPUGNED SALES-TAX WAS NOT COLLECTED FROM THE C USTOMERS. THIS, TO OUR MIND, IS OF NO CONSEQUENCE. WHETHER COLLECTED SEPARATELY OR NOT, T HE ENTIRE RECEIPT ARISING TO THE ASSESSEE FROM ITS CUSTOMERS ON ACCOUNT OF SALES TH ERETO IS A PART OF ITS TRADING RECEIPT, AND STANDS ACCORDINGLY BROUGHT TO TAX FOR THE RELEV ANT YEARS. THE QUESTION ARISING IN THIS APPEAL IS OF THE EXIGIBILITY FOR BEING ASSESSED A S INCOME, OF THE LIABILITY BOOKED CONSERVATIVELY BY THE ASSESSEE TOWARDS SALES-TAX FO R THE PRECEDING YEARS, WHICH STANDS FOUND AS NO LONGER REPRESENTING A LIABILITY. IT MA Y ALSO BE ARGUED THAT THE CESSATION OF LIABILITY HAS NOT OCCURRED DURING THE CURRENT YEAR. THE ARGUMENT, APPEALING AT FIRST SIGHT, FAILS ON SCRUTINY IN-AS-MUCH AS THE ASSESSEE HAVING REFLECTED IT AS A LIABILITY IN ITS ACCOUNTS FOR THE IMMEDIATELY PRECEDING YEAR (I.E., AS AT 31. 03.2008), IT IS NOT OPEN FOR IT TO CONTEND THAT IT WAS IN FACT NO SO. THE AMOUNT STANDS SHOWN AND ACCEPTED AS A LIABILITY AS AT THE END OF THE IMMEDIATELY PRECEDING YEAR AND, FURTHER, HAS BEEN FOUND BY THE REVENUE AS NOT REPRESENTING A LIABILITY AS AT THE END OF THE CURRE NT YEAR. AS SUCH, THE INFERENCE OF CESSATION OF LIABILITY WOULD ONLY BE FOR THE CURREN T YEAR, AND THE ASSESSEE CANNOT BE ALLOWED TO TAKE ADVANTAGE OF ITS OWN MIS-STATEMENT OR MISREPRESENTATION, WHERE SO. 4 ITA NO. 697/MUM/2013 (A.Y. 2009-10) MILTEX LAMINATES PVT. LTD. VS. ITO REFERENCE IN THIS CONTEXT MAY BE USEFULLY MADE TO T HE DECISION BY THE TRIBUNAL IN THE CASE OF SAJJANKUMAR DIDWANI (IN ITA NOS. 7716 & 7793/MUM/2012 DATED 28/5/2014) . 4. THE FACTS IN RELEVANT TO THE SECOND GROUND (B) A RE THAT THE ASSESSEE ENTERED INTO AN AGREEMENT FOR SALE OF A RESIDENTIAL PLOT AT VAPI WI TH ONE, SHRI SALMAN KHAN, DURING THE F.Y.1997-98, RECEIVING RS.50,000/- AS ADVANCE. HOW EVER, THE SALE DID NOT MATERIALIZE AND THE ASSESSEE FORFEITED THE SAID SUM, WHICH HOWEVER CONTINUES TO OUTSTAND IN ITS BOOKS OF ACCOUNT AS AN ADVANCE. 5. WE HAVE HEARD THE PARTIES, AND PERUSED THE MATER IAL ON RECORD. WE ARE COMPLETELY UNABLE TO SEE AS TO HOW TH AFORE-STATED PRIMARY F ACTS BEING UNDISPUTED AND UN-REBUTTED, COULD THE SAME BE CONSIDERED AS THE ASSESSEES INCO ME WHEN THE RELEVANT ASSET (PROPERTY) CONTINUES TO BE OWNED BY THE ASSESSEE AND, ACCORDIN GLY, REFLECTED IN ITS ACCOUNTS. THE ASSESSEE HAS CLARIFIED THAT THE ASSET SOLD BY IT DU RING THE F.Y.2006-07 WAS IN FACT ITS FACTORY BUILDING AT VAPI AND, THEREFORE, THE IMPUGNED AMOUN T HAS NOTHING TO DO WITH THE SAID SALE. THE SAID AMOUNT IS A CAPITAL RECEIPT IN THE A SSESSEES HANDS, AND WHICH CHARACTER WOULD NOT UNDERGO ANY CHANGE DUE TO LAPSE OF TIME. RATHER, IT WOULD STAND TO BE REDUCED FROM THE COST OF THE RELEVANT ASSET (RESIDENTIAL PL OT) ON ITS SALE, I.E., IF AND WHEN IT TAKES PLACE, IN TERMS OF SECTION 51 OF THE ACT. THE REVE NUES CASE IS WITHOUT ANY MERIT, AND THE ASSESSEE SUCCEEDS. WE DECIDE ACCORDINGLY. 6. THE THIRD ISSUE (C) PERTAINS TO THE DISALLOWANCE OF CLAIM OF RENT AT RS.25,000/-. STATED TO BE PAID TO ONE, SHRI Y.G.LAKDAWALLA, FOR HIRING A GODOWN AT VAPI FOR STORING MATERIALS, THE SAME CAME TO BE DISALLOWED IN THE AB SENCE OF ANY EVIDENCE BEING LED BY THE ASSESSEE TOWARD SUBSTANTIATING ITS CLAIM. THE SAME STOOD CONFIRMED IN APPEAL FOR THE SAME REASON; THE ASSESSEE EXPLAINING ITS INABILITY TO IMPROVE MATTERS AS THE RECIPIENT WAS NOT CO-OPERATING WITH IT. NO IMPROVEMENT IN ITS CA SE, BESIDES STATING THAT THE GODOWN HAD BEEN RENTED AT RS.2300/- PER MONTH W.E.F AUGUST 200 6 ONWARDS, STANDS MADE BY THE ASSESSEE BEFORE US. SO, HOWEVER, IN OUR VIEW, IF TH E ASSESSEE COULD DEMONSTRATE THE ACTUAL RENTING OF THE GODOWN FROM SHRI LAKDAWALLA AND PAYM ENT OF THE IMPUGNED SUM TO HIM, 5 ITA NO. 697/MUM/2013 (A.Y. 2009-10) MILTEX LAMINATES PVT. LTD. VS. ITO I.E., AS A FACT, THERE IS NO PARTICULAR REASON FOR DISBELIEVING THE ASSESSEES CLAIM. THE AMOUNT STANDS PAID AS AN ADVANCE, SO THAT IT HAVING BEEN FORFEITED BY THE LANDLORD, IT IS QUITE POSSIBLE THAT HE MAY NOT CO-OPERATE WITH THE ASSESSEE. THE ONUS TO ESTABLISH THE BASIC FACTS AFORE-STATED WOULD BE THOUGH ON THE ASS ESSEE. WE, ACCORDINGLY, RESTORE THIS MATTER BACK TO THE FILE OF THE AO FOR NECESSARY VER IFICATION AND A DECISION ON MERITS. WE DECIDE ACCORDINGLY. 7. THE FOURTH GROUND (D) IS QUA DEPRECIATION ON A STAFF QUARTER, AT RS.782/-. THE SAID CLAIM IS IN RESPECT OF A RESIDENTIAL PROPERTY AT VA PI, OUTSTANDING IN BOOKS UNDER THE ACCOUNT HEAD RESIDENTIAL PLOT (AT RS.86,490/-) AN D RESIDENTIAL BUILDING (AT RS.1,05,150/-), WHICH IS CLAIMED TO BEING USED BY A N EX-EMPLOYEE OF THE FACTORY, WHO HAD BEEN RETAINED FOR TAKING CARE OF THE EXCISE DUT Y/SALES-TAX MATTERS. THE SAME DID NOT FIND ACCEPTANCE IN THE ABSENCE OF ANY SUBSTANTIATIO N BY THE ASSESSEE, WHOSE BUSINESS AT VAPI HAD IN FACT CEASED, WITH ITS SELLING ITS FACTO RY PREMISES DURING THE FINANCIAL YEAR 2006-07. THE ASSESSEES ACCOUNTS DISCLOSED NIL E XPENDITURE ON STAFF COST. THE CLAIM WAS ACCORDINGLY DISALLOWED, AND CONFIRMED FOR BEING SO, SO THAT THE ASSESSEE IS IN APPEAL. 8. WE HAVE HEARD THE PARTIES, AND PERUSED THE MATER IAL ON RECORD. FOR THE SAME REASONS AS GUIDE AND INFORM THE ORDER OF THE REVENU E AUTHORITIES, WE FIND NO MERIT IN THE ASSESSEES CLAIM, WHICH THUS IS ONLY A BALD ONE. IN FACT, WE DO NOT OBSERVE EVEN THE NAME OF THE RELEVANT EMPLOYEE OR ANY EVIDENCE OF HIS WOR KING FOR THE ASSESSEE HAVING BEING ADDUCED AT ANY STAGE. WE DECIDE ACCORDINGLY, DISMI SSING THE ASSESSEES RELEVANT GROUND. 9. THE FIFTH AND THE LAST GROUND (E) OF THE APPEAL IS WITH REGARD TO THE NOTIONAL INCOME FROM HOUSE PROPERTY IN RESPECT OF RESIDENTIAL PROPE RTY AT VAPI. THE ASSESSEE FAILING TO FURNISH THE RELEVANT DETAILS OF THE PROPERTY, VIZ. LOCATION; BUILT-UP AREA; AMENITIES PROVIDED, ETC., AS WELL AS THAT QUA THE RENT IT COULD FETCH FROM YEAR TO YEAR ON BEING LET, THE AO ESTIMATED THE ANNUAL VALUE (AV) OF THE SAID HOUSE PROPERTY AT RS.20,000/- PER MONTH. ALLOWING STANDARD DEDUCTION U/S. 24(A) @30%, THE BALANCE AMOUNT OF RS.1,68,000/- WAS ASSESSED AS INCOME FROM HOUSE PRO PERTY FOR THE YEAR. THE LEARNED 6 ITA NO. 697/MUM/2013 (A.Y. 2009-10) MILTEX LAMINATES PVT. LTD. VS. ITO CIT(A) HAS DISCUSSED THIS MATTER, WHICH IS RELATED TO THAT RAISED PER GROUND (D), AT LENGTH VIDE PARA 4.3 OF HIS ORDER. HOWEVER, THE ASSESSEE F URNISHING A COPY OF THE MUNICIPAL CERTIFICATE FOR CHARGE OF MUNICIPAL TAX ON THE SAID PROPERTY FOR FINANCIAL YEAR 2010-11 AT RS.428/-, HE DIRECTED THE AO TO TAKE INTO ACCOUNT T HE MUNICIPAL VALUATION AS WELL AS THE MUNICIPAL TAXES PAID IN RESPECT OF THE SAID PROPERT Y IN ARRIVING AT ITS ANNUAL VALUE. AGGRIEVED, THE ASSESSEE IS IN APPEAL. 10. WE HAVE HEARD THE PARTIES, AND PERUSED THE MATE RIAL ON RECORD. OUR FIRST OBSERVATION IN THE MATTER IS THAT THE ASSESSEE WRON GLY AGITATES THE ADDITION ON THIS GROUND AT RS.1,68,000/-; THE CIT(A) HAVING ALLOWED IT SPEC IFIC AND, AS IT APPEARS, SUBSTANTIAL RELIEF IN-AS-MUCH AS THE ESTIMATION BY THE AO WAS A DHOC, WHILE THE MUNICIPAL VALUATION WOULD, BESIDES BEING CONSERVATIVE, MAKE FOR A OBJEC TIVE CRITERION. NO IMPROVEMENT IN ITS CASE STANDS MADE BY THE ASSESSEE. IN FACT, REFEREN CE TO THE MUNICIPAL TAX BILL DURING HEARING (PB PG 68) REVEALS MUNICIPAL TAX (AT RS.428 P.A) TO BE UNPAID NOT ONLY FOR FINANCIAL YEAR 2010-11 BUT ALSO FOR THE PRECEDING Y EARS AS WELL. UNDER THE CIRCUMSTANCES, WE FIND THE IMPUGNED ORDER AS BOTH REASONABLE AND O BJECTIVE, BESIDES BEING IN CONSISTENCE WITH THE PROVISIONS OF LAW. NO INFIRMI TY THEREIN STANDS OBSERVED OR OTHERWISE BROUGHT TO OUR NOTICE. WE, ACCORDINGLY, UPHOLD THE SAME. 11. IN THE RESULT, THE ASSESSEES APPEAL IS PARTLY ALLOWED AND PARTLY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON JUNE 13, 2014 SD/- SD/- (I. P. BANSAL) (SANJAY ARORA) / JUDICIAL MEMBER / ACCOUNTANT MEMBER % ( MUMBAI; /& DATED : 13.06.2014 '.&../ SA, SR. PS 7 ITA NO. 697/MUM/2013 (A.Y. 2009-10) MILTEX LAMINATES PVT. LTD. VS. ITO ! 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