ACIT, Coimbatore V. M/s. Bannari Amman Sugars Ltd., Coimbatore

ITA 698/CHNY/2010

• Counselvise Citation: [2011] 119 COUNSELVISE.COM (IT) 6501 (ITAT-CHENNAI)
• Duration Of Justice: 1 year(s) 1 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-06-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 20-06-2011
• Assessment Year: 2005-2006
• Appeal Filed On: 13-05-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: R VIJAYARAGHAVAN
• Keywords: Tangible material; Difference of opinion; Change of opinion; Reassessment proceedings
• Section: 43B; 143(3); 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL BENCH A CHENNAI (BEFORE SHRI ABRAHAM P. GEORGE, ACCOUNTANT MEMBER AND SHRI GEORGE MATHAN, JUDICIAL MEMBER) .. I.T.A. NOS. 697 & 698/MDS/2010 ASSESSMENT YEARS : 2004-05 & 2005-06 THE ASSISTANT COMMISSIONER OF INCOME TAX, COMPANY CIRCLE I(2), COIMBATORE. (APPELLANT) V. M/S BANNARI AMMAN SUGARS LTD., 1212, TRICHY ROAD, COIMBATORE 641 018. PAN : AAACB8933G (RESPONDENT) APPELLANT BY : SHRI SHAJI P. JACOB RESPONDENT BY : SHRI R. VI JAYARAGHAVAN O R D E R PER ABRAHAM P. GEORGE, ACCOUNTANT MEMBER : IN BOTH THESE APPEALS OF THE REVENUE, GROUNDS RAIS ED ARE SIMILAR. FIRST GRIEVANCE OF THE REVENUE IS THAT LD . CIT(APPEALS) HELD THE REOPENING FOR THE RESPECTIVE ASSESSMENT YEARS T O BE INVALID. SECOND GRIEVANCE IS THAT PURCHASE TAX AND CANE CESS OUTSTANDING, SUBSEQUENTLY CONVERTED AS LOAN, DISALLOWED BY THE A .O. WAS ALLOWED BY LD. CIT(APPEALS). I.T.A. NOS. 697 & 698/MDS/10 2 2. SHORT FACTS APROPOS ARE THAT RETURN FILED BY THE ASSESSEE FOR ASSESSMENT YEAR 2004-05 WAS SUBJECTED TO SCRUTINY P ROCEEDINGS AND ORDER UNDER SECTION 143(3) OF INCOME-TAX ACT, 1961 (IN SHORT THE ACT) WAS PASSED ON 29.12.2006. SIMILARLY RETURN F OR ASSESSMENT YEAR 2005-06 WAS ALSO SUBJECTED TO SCRUTINY PROCEED INGS AND ORDER UNDER SECTION 143(3) OF THE ACT WAS PASSED ON 29.12 .2007. AGAINST DETERMINATION OF INCOME, THE ASSESSEE MOVED IN APPE AL BEFORE LD. CIT(APPEALS), WHO HAD DISMISSED SUCH APPEALS. NEVE RTHELESS, THE A.O. WAS OF THE OPINION THAT CERTAIN INCOMES OF THE ASSESSEE HAD ESCAPED ASSESSMENT FOR THE RESPECTIVE ASSESSMENT YE ARS. THESE RELATED TO A CLAIM OF DEDUCTION UNDER SECTION 43B O F THE ACT ON CONVERSION OF PURCHASE TAX AND CANE CESS DUES, TO L OAN. TO THE NOTICE ISSUED UNDER SECTION 148 OF THE ACT, ASSESSE ES SUBMISSION WAS THAT IT HAD CLAIMED DEDUCTION FOR PURCHASE TAX AND CESS, CONVERTED INTO INTEREST FREE LOAN BASED ON AN ORDER OF GOVERNMENT OF KARNATAKA. AS PER THE ASSESSEE, PURCHASE TAX WAS N OTHING BUT AKIN TO SALES TAX SINCE IT WAS LEVIED IN TERMS OF SECTIO N 25B OF THE KARNATAKA SALES TAX ACT. ASSESSEE ALSO RELIED ON C IRCULAR NO.674 DATED 29.12.1993 OF CBDT. HOWEVER, THE A.O. WAS OF THE OPINION I.T.A. NOS. 697 & 698/MDS/10 3 THAT AMOUNT OUTSTANDING SUBSEQUENT TO CONVERSION IN TO LOAN, COULD NOT BE CONSIDERED AS PAYMENTS UNDER SECTION 43B OF THE ACT. AS PER THE A.O., EXPLANATION 3C TO SECTION 43B OF THE ACT CLEARLY SPECIFIED THAT INTEREST TO FINANCIAL INSTITUTIONS, WHEN CONVE RTED INTO LOAN, WOULD NOT BE DEEMED AS ACTUAL PAYMENT. AS PER THE A.O., THEREFORE, PURCHASE TAX AND CESS DUES WHEN CONVERTED INTO LOAN ALSO COULD NOT BE DEEMED AS PAYMENT UNDER SECTION 43B OF THE ACT. IN THE OPINION OF THE A.O., CIRCULAR NO.674/93 DATED 29.12.1993 RE LIED ON BY THE ASSESSEE, WAS APPLICABLE TO SALES TAX LIABILITY AND NOT TO PURCHASE TAX LIABILITY. HE, THEREFORE, MADE AN ADDITION IN THE AMOUNT OF PURCHASE TAX AND CANE CESS CLAIMED BY THE ASSESSEE UNDER SEC TION 43B OF THE ACT. 3. IN ITS APPEAL BEFORE LD. CIT(APPEALS), ASSESSEE ASSAILED THE REOPENING PRIMARILY. ACCORDING TO IT, THE ASSESSME NTS WERE ORIGINALLY COMPLETED UNDER SECTION 143(3) OF THE ACT. THEREFO RE, EVEN THOUGH THE REOPENINGS WERE DONE WITHIN FOUR YEARS LIMIT, S UCH REOPENINGS WERE BAD IN LAW SINCE IT WAS BASED ON A MERE CHANGE OF OPINION. IN THIS REGARD, RELIANCE WAS PLACED ON THE DECISION OF HON'BLE APEX COURT IN THE CASE OF CIT V. KELVINATOR OF INDIA LTD . (320 ITR 561). IN I.T.A. NOS. 697 & 698/MDS/10 4 SO FAR AS MERITS OF THE CASE WERE CONCERNED, ARGUME NT OF THE ASSESSEE WAS THAT PURCHASE TAX WAS CONVERTED INTO L OAN AND CLAIMED AS ALLOWABLE EXPENDITURE. AS PER THE ASSESSEE, PUR CHASE TAX WAS NOTHING BUT SALES TAX AND LEVIED UNDER THE SALES TA X STATUTE. LD. CIT(APPEALS) WAS APPRECIATIVE OF BOTH THESE CONTENT IONS. ACCORDING TO HIM, ASSESSING OFFICER HAD REOPENED THE ASSESSME NTS MERELY BASED ON CHANGE OF OPINION. SECONDLY, LD. CIT(APPE ALS) HELD THAT ASSESSEES CLAIM FOR PURCHASE TAX CONVERTED TO LOAN HAD TO BE ALLOWED UNDER SECTION 43B OF THE ACT. THUS, ASSESS EE SUCCEEDED BOTH ON MERITS AS WELL AS ON LAW. 4. NOW BEFORE US, LEARNED D.R., STRONGLY ASSAILING THE ORDER OF LD. CIT(APPEALS), SUBMITTED THAT IN THE ORIGINAL ASSESS MENTS, NO OPINION WAS FORMED BY THE ASSESSING OFFICER REGARDING TREAT MENT OF PURCHASE TAX CONVERTED INTO LOAN AND AS TO HOW IT HAD TO BE CONSIDERED IN THE ASSESSMENTS. ACCORDING TO LEARNED D.R., WHEN NO OP INION WAS FORMED BY THE A.O., THERE WAS NO QUESTION OF ANY CH ANGE IN OPINION. THEREFORE, IT WAS THE SUBMISSION OF LEARNED D.R. TH AT DECISION OF HON'BLE APEX COURT IN THE CASE OF KELVINATOR OF IND IA LTD. (SUPRA) WOULD NOT APPLY TO THE FACTS HERE. RELIANCE WAS PL ACED ON THE I.T.A. NOS. 697 & 698/MDS/10 5 DECISION OF SPECIAL BENCH OF THIS TRIBUNAL IN THE C ASE OF ACIT V. MAHINDRA HOLIDAYS & RESORTS (INDIA) LTD. (2010) 3 I TR (TRIB) 600. 5. PER CONTRA, LEARNED A.R. RELYING ON THE DECISION OF PUNE BENCH OF THIS TRIBUNAL IN THE CASE OF MULA SAHAKARI SAKHA R KARKHANA LTD. V. ITO (1996) 55 TTJ (PUNE) 375, SUBMITTED THAT STATE GOVERNMENT HAD EXERCISED ITS EXECUTIVE POWERS TO CONVERT PURCHASE TAX LIABILITY INTO LOAN AND THEREFORE, TAX LIABILITY SHOULD BE DEEMED TO HAVE BEEN PAID AND SECTION 43B OF THE ACT COULD BE APPLIED. 6. WE HAVE PERUSED THE ORDERS AND HEARD THE RIVAL C ONTENTIONS. IN SO FAR AS THE ISSUE REGARDING REOPENING IS CONCERNE D, REVENUE WAS UNABLE TO PRODUCE THE ORIGINAL ORDERS OF ASSESSMENT S, TO SHOW THAT THERE WAS NO CONSIDERATION OF PURCHASE TAX LIABILIT Y CLAIMED BY THE ASSESSEE THEREIN, OR IN THE COURSE OF SUCH PROCEEDI NGS. THERE WAS NO NEW MATERIAL AVAILABLE WITH THE REVENUE FOR COMI NG TO A CONCLUSION THAT SUCH CLAIM OF THE ASSESSEE WAS NOT ALLOWABLE. THE PURCHASE TAX THOUGH NOMENCLATURED SO, IS A TAX LEVI ED UNDER SECTION 25B OF KARNATAKA SALES TAX ACT. IT WAS CALLED SO, ONLY SINCE COLLECTION OF TAX WAS AT THE POINT OF LAST PURCHASE . THERE CAN NEVER I.T.A. NOS. 697 & 698/MDS/10 6 BE A PURCHASE WITHOUT A SALE. HENCE IT COULD NOT B E DEEMED SOMETHING DIFFERENT FROM SALES TAX. THE POINT OF L EVY OF TAX ALONE VARIED. LD. CIT(APPEALS) WAS ABSOLUTELY JUSTIFIED IN CONSIDERING THE CONVERSION OF PURCHASE TAX INTO LOAN AS ALLOWABLE C ONSIDERING IT TO BE EQUIVALENT TO A PAYMENT UNDER SECTION 43B OF THE AC T. THE CASE OF THE ASSESSEE WAS CONSIDERABLY SUPPORTED BY THE DECI SION OF PUNE BENCH OF THIS TRIBUNAL IN THE CASE OF MULA SAHAKARI SAKHAR KARKHANA LTD. (SUPRA). IN SO FAR AS THE RELIANCE PLACED ON THE DECISION OF SPECIAL BENCH OF THIS TRIBUNAL IN MAHINDRA HOLIDAYS & RESORTS (INDIA) LTD. (SUPRA) BY LEARNED D.R. IS CONCERNED, IN THAT CASE THERE WAS TANGIBLE MATERIAL AVAILABLE WITH A.O. TO SHOW THAT ASSESSEE HAD DECLARED ONLY A PORTION OF ITS RECEIPTS AS INCOME I N RELATION TO TIME- SHARE SUBSCRIPTIONS. AS ALREADY MENTIONED BY US, R EVENUE COULD NOT PLACE BEFORE US THE ORIGINAL ASSESSMENT ORDERS PASS ED UNDER SECTION 143(3) OF THE ACT, OR CORRESPONDENCE CONNECTED THER ETO, TO CORROBORATE ITS ARGUMENT THAT THERE WAS NO CONSIDER ATION OF THE ASPECT OF PURCHASE TAX LIABILITY AT ALL. WE ARE, T HEREFORE, OF THE CONSIDERED OPINION THAT LD. CIT(APPEALS) WAS JUSTIF IED IN HOLDING THAT THE REASSESSMENT PROCEEDINGS WERE NOT VALIDLY INITI ATED AND ALSO IN I.T.A. NOS. 697 & 698/MDS/10 7 DECIDING THE CASE IN FAVOUR OF ASSESSEE ON MERITS A S WELL. WE FIND NO REASON TO INTERFERE WITH THE ORDERS OF LD. CIT(APPE ALS). 7. IN THE RESULT, BOTH THE APPEALS FILED BY THE REV ENUE ARE DISMISSED. THE ORDER WAS PRONOUNCED IN THE COURT ON 30 TH JUNE, 2011. SD/- SD/- (GEORGE MATHAN) (ABRAHAM P. GEORGE) JUDICIAL MEMBER ACCOUNTANT MEMBER CHENNAI, DATED THE 30 TH JUNE, 2011. KRI. COPY TO: (1) APPELLANT (2) RESPONDENT (3) CIT(A)-I, COIMBATORE (4) CIT-I, COIMBATORE (5) D.R. (6) GUARD FILE