The Deputy Commissioner of Income tax, Pathankot V. M/s. Maken Cement Industries, Pathankot

ITA 70/ASR/2011

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 63546 (ITAT-AMRITSAR)
• Duration Of Justice: 1 year(s) 8 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-11-2012
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 07-11-2012
• Assessment Year: 2002-2003
• Appeal Filed On: 01-03-2011
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: VAIBHAV AGGARWAL
• Keywords: Question of law
• Section: 80IB; 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AMRITSAR BENCH; AMRITSAR. BEFORE SH. H.S. SIDHU, JUDICIAL MEMBER AND SH. B.P.JAIN, ACCOUNTANT MEMBER I.T.A. NO.63(ASR)/2011 ASSESSMENT YEAR:2002-03 PAN :AAFFM7968L M/S. MAKEN CEMENT INDUSTRIES VS. DY. COMMR. OF INC OME TAX, KATHUA ( J & K ) CIRCLE PATHANKOT, PATHANKOT. (APPELLANT) (RESPONDENT) I.T.A. NO.70(ASR)/2011 ASSESSMENT YEAR:2002-03 PAN :AAFFM7968L DY. COMMR. OF INCOME TAX, VS. M/S. MAKEN CEMENT IND USTRIES, CIRCLE, PATHANKOT. KATHUA. (APPELLANT) (RESPONDENT) ASSESSEE BY: SH. VAIBHAV AGGARWAL, CA RESPONDENT BY:SH. TARSEM LAL, DR DATE OF HEARING:07/11/2012 DATE OF PRONOUNCEMENT:08/11/2012 ORDER PER BENCH ; THE ASSESSEE AS WELL AS THE REVENUE HAVE FILED THE PRESENT APPEALS AGAINST THE ORDER OF THE CIT(A), AMRITSAR, DATED 01 .12.2010 FOR THE ASSESSMENT YEAR 2002-03. ITA NO.63(ASR)/2011 & ITA NO.70(ASR)/2011 2 2. IN ITA NO.63(ASR)/2011, THE ASSESSEE HAS RAISED FOLLOWING GROUNDS OF APPEAL: 1. THAT THE LD. CIT(A) HAS ERRED BOTH QUESTION OF LAW AND FACTS IN DISALLOWING THE REBATE U/S 80IB ON THE TRANSPORT SU BSIDY RECEIVED, AS THE SAME IS A BUSINESS/MANUFACTURING INCOME FOR THE PURPOSE OF SECTION 80IB, THE TRANSPORT SUBSIDY IS GIVEN FOR TH E BETTER WORKING OF THE INDUSTRIAL UNITS IN THE BACKWARD STATE OF JAMMU AND KASHMIR BY THE STATE GOVERNMENT. THE TRANSPORT SUBSIDY IS MERE LY THE RECOUPMENT OF THE PART MANUFACTURING EXPENSES MADE BY THE UNIT AND ARE PART AND PARCEL OF THE MANUFACTURING INCOME. 2. THE TRANSPORT SUBSIDY HAS A DIRECT NEXUS WITH T HE MANUFACTURING INCOME AND THUS ELIGIBLE FOR REBATE U/S 80IB. 3. THE LD. CIT(A) HAS NOT APPRECIATED THE FACTS THA T THE REOPENING OF THE CASE U/S 148 IS BAD IN LAW AS THE TOTAL FACT S AND FIGURES OF THE CASE WERE ON RECORD AT THE TIME OF THE INITIAL ASSE SSMENT OF THE CASE U/S 143(1). 4. THE APPELLANT CRAVES LEAVE TO AMEND, ALTER OR AD D ANY GROUND OF APPEAL BEFORE THE APPEAL IS HEARD OR DISPOSED OFF. 2. THE REVENUE IN ITA NO.70(ASR)/2011 HAS RAISED FO LLOWING GROUNDS OF APPEAL: 1. THE LD. CIT(A) UNDER THE LAW & CIRCUMSTANCES WA S ERRED IN DELETING THE ADDITION OF RS.16,11,477/- OUT OF TOTA L ADDITION OF RS.21,28,603/- HAS BEEN MADE UNDER THE HEAD TRANSPO RT SUBSIDY ON THE PLEA THE ASSESSEE HAS RECEIVED ACTUAL TRANSPORT SUBSIDY 5,17,123/- WHEREAS, THE ASSESSEE HAS CREDITED RS.21,28,603/- I N THE SUBSIDY RECEIVABLE ACCOUNT. ITA NO.63(ASR)/2011 & ITA NO.70(ASR)/2011 3 2. THE LD. CIT(A) UNDER THE LAW & CIRCUMSTANCES WAS ERRED IN DELETING THE ADDITION OF RS.16,11,477/- OUT OF TOTA L ADDITION OF RS.21,28,603/- HAS BEEN MADE UNDER THE HEAD TRANSPO RT SUBSIDY ON THE PLEA THE ASSESSEE HAS RECEIVED ACTUAL TRANSPORT SUBSIDY 5,17,123/- WHEREAS, THE ASSESSEE HAS ADOPTED MERCANTILE SYSTE M OF ACCOUNTING. 3. APPELLANT CRAVE LEAVE TO AMEND OR ADD ANY OR MOR E GROUNDS OF APPEAL. 4. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E FILED ITS RETURN OF INCOME ON 30.10.2002 DECLARING NIL INCOME AND THE S AME WAS PROCESSED U/S 143(1) OF THE INCOME TAX ACT, 1961 (HEREINAFTER CAL LED, THE ACT) ON 27/01/2003. THE AO NOTICED THAT THE TRANSPORT SUBSI DY OF RS.21,18,637/- HAS BEEN RECEIVED BY THE ASSESSEE FROM THE J & K GOVT. WHICH THE ASSESSEE HAS NOT DECLARED AS A INCOME IN ITS RETURN AND AFTER R ECORDING THE REASONS AND WITH THE APPROVAL OF THE ADDL. CIT, RANGE VI PATHAN KOT, REOPENED THE CASE OF THE ASSESSEE BY ISSUING NOTICE U/S 148 OF THE AC T ON 16.07.2008. IN RESPONSE TO THE SAID NOTICE, THE ASSESSEE FILED ITS WRITTEN REPLY ON 20.08.2008 STATING THEREIN THAT THE RETURN ALREADY FILED BY T HE ASSESSEE ON 30.10.2002 MAY BE TREATED AS RETURN FILED IN RESPONSE TO NOTIC E U/S 148 OF THE ACT. A COPY OF THE REASONS WAS SUPPLIED TO THE ASSESSEE AN D ASSESSEE HA ALSO FILED OBJECTIONS ON 10.09.2009, WHICH WAS DECIDED BY THE AO IN VIEW OF THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE O F GKN DRIVE SHAFT INDIA LTD. VS. ITO REPORTED AT 259 ITR 19. THEREAFT ER, THE ASSESSEE WAS ITA NO.63(ASR)/2011 & ITA NO.70(ASR)/2011 4 ASKED TO FILE REQUISITE DETAILS, WHICH WERE FILED B Y THE ASSESSEE AND THE CASE WAS DISCUSSED WITH THE ASSESSEES COUNSEL AND FINAL LY THE AO AFTER ELABORATELY DISCUSSING THE PROVISIONS OF SECTION 8 0IB ALONGWITH VARIOUS DECISIONS RENDERED BY THE HONBLE SUPREME COURT OF INDIA, WHICH INCLUDES THE IMPORTANT CASES OF CIT VS. STERLING FOODS (199 9) 237 ITR 579 (SC) AND CIT VS. PANDIAN CHEMICALS LTD. 262 ITR 278 (SC) AND THE AO BY RESPECTFULLY FOLLOWING THE AFORESAID DECISIONS REND ERED BY THE HONBLE SUPREME COURT AND VARIOUS OTHER DECISIONS OF THE HO NBLE HIGH COURTS AND ITAT HELD THAT THE TRANSPORT SUBSIDY RECEIVED BY TH E ASSESSEE FROM THE STATE GOVERNMENT HAS NO DIRECT NEXUS WITH THE INDUS TRIAL UNDERTAKING AND IT CANNOT BE SAID THAT THE TRANSPORT SUBSIDY IS DERIVE D FROM INDUSTRIAL UNDERTAKING. THE A.O. ALSO STATED IN THE ASSESSMENT ORDER THAT THE ASSESSEE DURING THE ASSESSMENT PROCEEDINGS CONTENDED THAT TH E ASSESSEE HAS RECEIVED TRANSPORT SUBSIDY OF RS.5,17,123/- ONLY THOUGH HE H AS MADE THE PROVISION OF TRANSPORT SUBSIDY TO THE TUNE OF RS.21,18,637/- IN THE BOOKS OF ACCOUNTS FOR THE ASSESSMENT YEAR 2002-03 AND AS PER AUDIT R EPORT ATTACHED WITH THE RETURN, THE ASSESSEE IS FOLLOWING MERCANTILE SYSTEM OF ACCOUNTING EXCEPT TELEPHONE, ELECTICITY & INSURANCE WHICH IS ON CASH BASIS. THE AO ALSO HELD THAT THE ASSESSEE HAS CREDITED HIS SUBSIDY RECEIVAB LE ACCOUNT WITH A SUM OF RS.21,28,603/- ON 31.03.2002. THEREFORE, THIS AMOUNT IS TO BE CONS IDERED AS RECEIVABLE AS ON ITA NO.63(ASR)/2011 & ITA NO.70(ASR)/2011 5 31.03.2002 I.E. DURING THE ASSESSMENT YEAR 2002-03 BECAUSE THE CERTIFICATE ISSUED BY THE GENERAL MANAGER, DISTRICT INDUSTRIES CENTRE, KATHUA IS DATED 05.09.2008 AND RELEVANT TO ASSESSMENT YEAR 2009-10 . FINALLY, THE AO HAS HELD THAT TRANSPORT SUBSIDY OF RS.21,28,603/- CRED ITED ON 31.03.2002 IS NOT AN INCOME DERIVED FROM INDUSTRIAL UNDERTAKING AND I S LIABLE TO TAX AND DEED TO THE RETURNED INCOME OF THE ASSESSEE VIDE HIS ORD ER DATED 04.12.2009 U/S 143(3)/147 OF THE I.T. ACT, 1961. 5. AGGRIEVED BY THE ASSESSMENT ORDER, THE ASSESSEE FILED AN APPEAL BEFORE THE LD.FIRST APPELLATE AUTHORITY, WHO VIDE IMPUGNED ORDER DATED 01.12.2010 PARTLY ALLOWED THE APPEAL OF THE ASSESSEE AND HELD THAT THE ASSESSEE HAS RECEIVED ACCRUAL TRANSPORT SUBSIDY FROM J & K GOVT. AMOUNTING TO RS.5,17,123/- AGAINST THE PROVISION OF RS.21,28,603 /- DURING THE YEAR UNDER CONSIDERATION AND THE RECEIPT OF TRANSPORT SUBSIDY IS NOT ELIGIBLE FOR DEDUCTION U/S 80IB OF THE ACT BECAUSE IT HAS NOT DE RIVED INCOME FROM INDUSTRIAL UNDERTAKING. HE, THEREFORE, RESTRICTED THE DISALLOWANCE U/S 80IB TO RS.5,17,123/- BECAUSE THE ASSESSEE HAS NOT RECEI VED THE AMOUNT OF RS.16,11,480/- AND AS SUCH THE AMOUNT NEED NOT BE T AXED IN THE HANDS OF THE ASSESSEE. 5.1. THE LD. FIRST APPELLATE AUTHORITY HAS ALSO DEC IDED THE LEGAL ISSUE AGAINST THE ASSESSEE REGARDING ISSUANCE OF NOTICE U /S 148 OF THE ACT BY ITA NO.63(ASR)/2011 & ITA NO.70(ASR)/2011 6 PASSING THE IMPUGNED ORDER DATED 01.12.2010. NOW TH E ASSESSEE AS WELL AS THE REVENUE ARE AGGRIEVED WITH THE ORDER OF THE LD. CIT(A) AND HAVE FILED THE PRESENT APPEALS BEFORE THIS BENCH. 6. AT THE TIME OF HEARING BOTH THE PARTIES AGREED T HAT THE ISSUE INVOLVED IN ASSESSEES APPEAL REGARDING DISALLOWANCE OF REBA TE U/S 80IB OF THE ACT ON TRANSPORT SUBSIDY RECEIVED HAS ALREADY BEEN DECIDED BY THE HONBLE SUPREME COURT IN THE CASES OF CIT VS. STERLING FOODS (1999 ) 237 ITR 579 (SC) AND CIT VS. PANDIAN CHEMICALS LTD. 262 ITR 278 (SC) AND THEY AGREED THAT THE ISSUE IN DISPUTE MAY BE DECIDED AGAINST THE ASSESSE E. 7. AFTER HEARING BOTH THE PARTIES AND PERUSING THE MATERIAL AVAILABLE WITH US, ESPECIALLY THE ORDERS PASSED BY THE REVENU E AUTHORITIES ON THE ALLOWABILITY OF TRANSPORT SUBSIDY FOR THE PURPOSE O F SECTION 80IB OF THE ACT, WE ARE OF THE CONSIDERED OPINION THAT THIS ISSUE HA S ALREADY BEEN ADJUDICATED AND DECIDED IN FAVOUR OF THE REVENUE BY THE HONBL E SUPREME COURT IN VARIOUS CASES AS WELL AS BY THE HONBLE HIGH COURTS AND THE TRIBUNAL AND THIS BENCH HAS ALSO FOLLOWED THE DECISIONS OF VARIO US COURTS OF LAW. RESPECTFULLY FOLLOWING THE DECISIONS OF THE HONBL E SUPREME COURT IN THE CASES OF CIT VS. STERLING FOODS (1999) 237 ITR 579 (SC) AND CIT VS. PANDIAN CHEMICALS LTD. 262 ITR 278 (SC), WE HOLD T HAT THE RECEIPT ON ACCOUNT OF TRANSPORT SUBSIDY DO NOT FALL IN THE CAT EGORY OF DIRECT SOURCE OF ITA NO.63(ASR)/2011 & ITA NO.70(ASR)/2011 7 PROFIT OF THE INDUSTRIAL UNDERTAKING BUT ARE IN FAC TS ANY OTHER PROFITS. THE SOURCE OF TRANSPORT SUBSIDY RECEIVED BY THE ASSESSE E IS NOT INDUSTRIAL UNDERTAKING IN ITSELF BUT THE SOURCE IS THE POLICY OF THE GOVERNMENT. IN VIEW OF THIS THE TRANSPORT SUBSIDY RECEIVED BY THE ASSES SEE DURING THE FINANCIAL YEAR 2001-02 RELEVANT TO ASSESSMENT YEAR 2002-03 IS NOT ELIGIBLE FOR DEDUCTION U/S 80IB OF THE ACT. KEEPING IN VIEW THE AFORESAID DISCUSSIONS, THE ISSUE INVOLVED IN ASSESSEES APPEAL IS DECIDED AGAINST THE ASSESSEE AND THE APPEAL FILED BY THE ASSESSEE IS DISMISSED. 8. NOW WE TAKE UP THE APPEAL OF THE REVENUE IN ITA NO.70(ASR)/2011, IN WHICH THE REVENUE HAS CHALLENGED THE DELETION OF ADDITION OF RS.16,11,477/- OUT OF TOTAL ADDITION OF RS.21,28,60 3/- UNDER THE HEAD TRANSPORT SUBSIDY. 9. AFTER HEARING BOTH THE PARTIES, WE ARE OF THE CO NSIDERED OPINION THAT THE LD. FIRST APPELLATE AUTHORITY HAS NOT PASSED TH E IMPUGNED ORDER ON THIS ISSUE UNDER THE LAW AND ACCORDING TO THE FACTS. NO DOUBT, THE ASSESSEE HAS CONTENDED THAT THE ASSESSEE HAS RECEIVED TRANSPORT SUBSIDY OF RS.5,17,123/- ONLY THOUGH HE HAS MADE THE PROVISION OF TRANSPORT SUBSIDY TO THE TUNE OF RS.21,18,637/- IN THE BOOKS OF ACCOUNT FOR THE ASSE SSMENT YEAR IN DISUTE. BUT AS PER AUDIT REPORT WHICH THE ASSESSEE HAS ATTACHED WITH ITS RETURN FILED, THE ASSESSEE IS FOLLOWING MERCANTILE SYSTEM OF ACCOUNT EXCEPT TELEPHONE, ITA NO.63(ASR)/2011 & ITA NO.70(ASR)/2011 8 ELECTRICITY AND INSURANCE WHICH IS ON CASH BASIS. T HE ASSESSEE HAS NOT FILED ANY DOCUMENTARY EVIDENCE SUPPORTING ITS CLAIM BUT O NLY FILED ONE CERTIFICATE ISSUED BY THE GENERAL MANAGER, DISTRICT INDUSTRIES CENTRE, KATHUA DATED 15.09.2008, WHICH IS ONLY RELEVANT TO THE ASSESSMEN T YEAR 2009-10 AND NOT FOR THE ASSESSMENT YEAR IN DISPUTE. AS DISCUSSED A BOVE, THE ASSESSEE IS ADOPTING MERCANTILE SYSTEM OF ACCOUNTING AND HAS CR EDITED HIS SUBSIDY RECEIVABLE ACCOUNT WITH A SUM OF RS.21,28,603/- ON 21.03.2002. IN OUR CONSIDERED OPINION, THIS AMOUNT IS TO BE CONSIDERED AS RECEIVABLE AS ON 21.03.202 I.E DURING THE ASSESSMENT YEAR 2002-03 B ECAUSE THE CERTIFICATE ISSUED BY THE GENERAL MANAGER, DISTRICT INDUSTRIES CENTRE, KATHUA, IS DATED 15.09.2008, WHICH IS RELEVANT TO ASSESSMENT YEAR 20 09-10. 9.1. KEEPING IN VIEW THE FACTS AND CIRCUMSTANCES DI SCUSSED ABOVE, WE HOLD THAT THE TRANSPORT SUBSIDY OF RS.21,28,603/- CREDIT ED IN THE BOOKS OF ACCOUNT ON 31.03.2002 IS NOT A INCOME DERIVED FROM INDUSTRIAL UNDERTAKING AND IS LIABLE TO TAX AND THE A.O. HAS RIGHTLY ADDE D THIS INCOME TO THE RETURNED INCOME OF THE ASSESSEE WHILE COMPLETING TH E ASSESSMENT U/S 143(3)/147 OF THE ACT ON 04.12.2009. ACCORDINGLY, W E UPHOLD THE ASSESSMENT ORDER 04.12.2009 AND REVERSE THE ORDER O F THE LD. CIT(A) ON THIS ISSUE. ACCORDINGLY, THE APPEAL OF THE REVENUE IS A LLOWED. ITA NO.63(ASR)/2011 & ITA NO.70(ASR)/2011 9 10. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IN ITA NO.63(ASR)/2011 IS DISMISSED AND APPEAL OF THE REVENUE IN ITA NO.70 (ASR)/2011 IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 8TH NOVEMBER, 2012. SD/- SD/- (B.P. JAIN) (H.S. SIDHU) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 8TH NOVEMBER, 2012 /SKR/ COPY OF THE ORDER FORWARDED TO: 1. THE ASSESSEE:M/S. MAKEN CEMENT INDUSTRIES, KATHUA. 2. THE DCIT, CIRCLE PATHANKOT. 3. THE CIT(A), JAMMU. 4. THE CIT, JAMMU. 5. THE SR DR, ITAT, AMRITSAR. TRUE COPY BY ORDER (ASSISTANT REGISTRAR) INCOME TAX APPELLATE TRIBUNAL, AMRITSAR BENCH: AMRITSAR.