DCIT, Cir-4, Kolkata, Kolkata V. Rahee Industries ltd., Kolkata

ITA 704/KOL/2008

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 75098 (ITAT-KOLKATA)
• Duration Of Justice: 5 year(s) 10 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-03-2014
• Appeal Filed By: Department
• Bench Allotted: A
• Assessment Year: 2002-2003
• Appeal Filed On: 02-05-2008
• Court: TRIBUNAL
• Assessee Lawyers: K K KHEMKA
• Keywords: Question of law; Commercial expediency
• Section: 40A(3); 143(3); 80HHC; 28; 139

Judgement Text

, B , IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH: KOL KATA () BEFORE , /AND . . . . ' '' ''# '#'# '#, $% ) [BEFORE SHRI MAHAVIR SINGH, JM & SHRI ABRAHAM P. GEORGE, AM] & & & & / I.T.A NO. 220/KOL/2008 '( )* '( )* '( )* '( )*/ // / ASSESSMENT YEAR: 2002-03 RAHEE INDUSTRIES LTD. VS. ASSISTANT COMMISSION ER OF INCOME-TAX, (PAN:AABCR2809Q) CIRCLE-4, KOLKATA. (,- /APPELLANT ) (./,-/ RESPONDENT ) & & & & & / I.T.A NO. 704/KOL/2008 '( )* '( )* '( )* '( )*/ // / ASSESSMENT YEAR: 2002-03 DEPUTY COMMISSIONER OF INCOME-TAX, VS. RAHEE INDU STRIES LTD. CIRCLE-4, KOLKATA. (,- /APPELLANT ) (./,-/ RESPONDENT ) DATE OF HEARING: 05.03.2014 DATE OF PRONOUNCEMENT: 13.03.2014 FOR THE ASSESSEE: SHRI K. K. KHEMKA, ADVOCATE FOR THE REVENUE : SHRI SANJAY MUKHERJEE, JCIT, SR.DR $0 / ORDER PER SHRI MAHAVIR SINGH, JM: THESE CROSS APPEALS BY ASSESSEE AND REVENUE ARE ARI SING OUT OF ORDER OF CIT(A)-IV, KOLKATA IN APPEAL NO. 9/CIT(A)-IV/05-06 DATED 13.02 .2008. ASSESSMENT WAS FRAMED BY ACIT, CIRCLE-4, KOLKATA U/S. 143(3) OF THE INCOME-T AX ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT) FOR ASSESSMENT YEARS 2002-03 VIDE HIS ORDER DATED 18.03.2005. 2. FIRST WE TAKE UP REVENUES APPEAL I.E. ITA NO.70 4/K/2008. THE FIRST ISSUE IN THIS APPEAL OF REVENUE IS AGAINST THE ORDER OF CIT(A) DELETING THE DISALLOWANCE OF PF & ESI CONTRIBUTION. FOR THIS, REVENUE HAS RAISED FOLLOWING GROUND NO.1: 1.THAT THE LD. CIT(A) HAS ERRED IN LAW AS WELL AS ON FACTS BY DELETING THE DISALLOWANCE OF PROVIDENT FUND CONTRIBUTION FOR RS. 7,68,522/- AND ESI CONTRIBUTION FOR RS.2,50,539/-. 3. WE HAVE HEARD RIVAL SUBMISSIONS AND GONE THROUGH FACTS AND CIRCUMSTANCES OF THE CASE. WE FIND THAT THE P& & ESI CONTRIBUTIONS WERE PAID W ITHIN THE DUE DATE OF FILING OF RETURN AS DETAILED OUT CALCULATING THE DUE DATES OF PAYMENTS IN THE ORDER OF CIT(A) PAGES 4 TO 6 THAT ALL THE PAYMENTS ARE MADE WITHIN THE DUE DATE OF FILING OF RETURN OF INCOME FOR THE RELEVANT AY 2 ITA NO.220/K/2008 & ITA NO.704/K/2008 RAHEE INDUSTRIES LTD. , AY:2002-03 2002-03 BY THE ASSESSEE AS FALLING U/S. 139(1) OF T HE ACT. AS THE PAYMENTS ARE MADE WITHIN THE DUE DATE OF FILING OF RETURN AS PRESCRIBED U/S. 139 (1) OF THE ACT, THE ISSUE IS SQUARELY COVERED IN FAVOUR OF THE ASSESSEE AND AGAINST THE REVENUE BY T HE DECISION OF HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS. M/S. VIJAY SHREE LIMIT ED VIDE ITAT NO. 245 OF 2011 IN GA NO.2607 OF 2011 DATED 7 TH SEPTEMBER, 2011, WHEREIN IT HAS BEEN HELD AS UNDER : AFTER HEARING MR. SINHA, LEARNED ADVOCATE, APPEARI NG ON BEHALF OF THE APPELLANT AND AFTER GOING THROUGH THE DECISION OF THE SUPREME COU RT IN THE CASE OF COMMISSIONER OF INCOME TAX VS. ALOM EXTRUSION LTD., WE FIND THAT TH E SUPREME COURT IN THE AFORESAID CASE HAS HELD THAT THE AMENDMENT TO THE SECOND PROVISO T O THE SEC. 43(B) OF THE INCOME TAX ACT, AS INTRODUCED BY FINANCE ACT, 2003, WAS CURATI VE IN NATURE AND IS REQUIRED TO BE APPLIED RETROSPECTIVELY WITH EFFECT FROM 1 ST APRIL, 1988. SUCH BEING THE POSITION, THE DELETION OF THE AMOUNT PAID BY THE EMPLOYEES CONTRIBUTION BEYOND DUE DATE WAS DEDUCTIBLE BY INVOKING THE AFOR ESAID AMENDED PROVISIONS OF SECTION 43(B) OF THE ACT. WE, THEREFORE, FIND THAT NO SUBSTANTIAL QUESTION OF LAW IS INVOLVED IN THIS APPEAL AND CONSEQUENTLY, WE DISMISS THIS APPEAL. 4. ONCE THE ISSUE IS DECIDED BY HONBLE JURISDICTIO NAL HIGH COURT IN THE CASE OF VIJAYSHREE LTD. SUPRA, WHERE IN IT IS HELD THAT THE PF & ESI ARE PAID ON OR BEFORE THE DUE DATE OF FILING OF RETURN U/S. 139(1) OF THE ACT, DEDUCTI ON IN RESPECT TO THE AMOUNT ON WHICH PF &ESI IS SO PAID, IS ALLOWABLE. IN THE PRESENT CASE THE ASSESSEE HAS PAID THE PF & ESI BEFORE DUE DATE OF FILING OF RETURN U/S. 139(1) OF THE ACT BY THE A SSESSEE, HENCE, WE DISMISS THIS GROUND OF APPEAL OF REVENUE. 5. COMING TO SECOND ISSUE OF REVENUES APPEAL WHICH IS AS REGARDS TO DELETION OF DISALLOWANCE MADE BY AO U/S. 40A(3) OF THE ACT ON T HE FOLLOWING: I) PAYMENTS MADE TO SHIPPING AND CLEARING AGENTS A T RS.50,000/-, II) PAYMENTS MADE TO LAWYERS AT RS.50,000/- AND III) PAYMENTS MADE TO TRANSPORTERS AT RS.20,26,071/ -. THE AO MADE DISALLOWANCE AS THE ASSESSEE FAILED TO OBSERVE THE PROVISIONS OF SECTION 40A(3) OF THE ACT IN REGARD TO THE ABOVE PAYMENTS. AGGRIE VED, ASSESSEE PREFERRED APPEAL BEFORE CIT(A), WHO DELETED THE DISALLOWANCE OF PAYMENT MAD E TO SHIPPING & CLEARING AGENT, FEE BILLS OF LAWYERS AND PAYMENT OT TRANSPORTERS. AGGR IEVED REVENUE PREFERRED APPEAL BEFORE TRIBUNAL AND FOR THIS, REVENUE HAS RAISED FOLLOWING GROUND NOS. 2 TO 4: 2. THAT THE LD. CIT(A) HAS ERRED IN LAW AS WELL AS ON FACTS BY DELETING THE DISALLOWANCE MADE U/S. 40A(3) IN RESPECT OF PAYMENTS OF RS.50,00 0/- MADE IN CASH TO SHIPPING AND CLEARING AGENT. 3 ITA NO.220/K/2008 & ITA NO.704/K/2008 RAHEE INDUSTRIES LTD. , AY:2002-03 3. THAT THE LD. CIT(A) HAS ERRED IN LAW AS WELL AS ON FACTS BY DELETING THE DISALLOWANCE MADE U/S. 40A(3) IN RESPECT OF PAYMENTS OF RS.50,00 0/- MADE IN CASH ON ACCOUNT OF LAYERS BILLS. 4. THAT THE LD. CIT(A) HAS ERRED IN LAW AS WELL AS ON FACTS BY DELETING THE DISALLOWANCE MADE U/S. 40(A)(3) IN RESPECT OF PAYMENTS OF RS.20, 26,071/- MADE IN CASH TO TRANSPORTERS. 6. WE HAVE HEARD RIVAL SUBMISSIONS AND GONE THROUGH FACTS AND CIRCUMSTANCES OF THE CASE. WE FIND THAT AS REGARDS TO SHIPPING AND CLEARING AG ENTS PAYMENT OF RS.50,000/-, CIT(A) HAS RECORDED THE FACTS THAT THESE PAYMENTS MADE ARE TO STATUTORY AUTHORITIES AND THIS BEING STATUTORY PAYMENTS ARE NOT HIT BY THE PROVISIONS OF SECTION 4 0A(3) READ WITH RULE 6DD OF THE I. T. RULES, 1962 (HEREINAFTER REFERRED TO AS THE RULES). AS TH ESE PAYMENTS ARE STATUTORY PAYMENTS, IN OUR VIEW THESE ARE NOT HIT BY THE PROVISIONS OF SECTION 40A(3) OF THE ACT READ WITH RULES 6DD. ACCORDINGLY, WE CONFIRM THE ORDER OF CIT(A) ON THIS ISSUE. AS REGARDS TO PAYMENTS MADE TO THREE LAWYERS, THE PAYMENT DOES NOT EXCEED RS.20,00 0/- IN EACH OF THE BILLS ON SINGLE DATE. HENCE, THE PROVISION OF SECTION 40A(3) OF THE ACT W ILL NOT APPLY. THE CIT(A) ON THIS PREMISE DELETED THE ADDITION. AT THE TIME OF HEARING, LD. SR. DR COULD NOT POINT OUT RATHER HE SPECIFICALLY REFERRED TO PAPER BOOK OF THE ASSESSEE FROM WHERE IT IS CLEARLY DEPICTED THAT THE PAYMENTS MADE TO THREE LAWYERS ON DIFFERENT DATES D OES NOT EXCEED THE LIMIT OF RS.20,000/-. ONCE THIS IS THE POSITION, THE CIT(A) HAS RIGHTLY D ELETED THE ADDITION AND WE CONFIRM THE SAME. THESE TWO ISSUES OF REVENUES APPEAL ARE DISMISSED. AS REGARDS THE PAYMENT TO TRANSPORTERS, WE FIND FROM THE STATEMENT OF TRANSPORT PAYMENTS E NCLOSED IN ASSESSEES PAPER BOOK WHEREIN THE PAYMENT MADE ON SINGLE DAY DOES NOT EXCEED RS.2 0,000/- TO EACH OF THE TRANSPORTERS AND ONCE THIS IS THE POSITION, WE FIND THAT THERE IS NO INFIRMITY IN THE FINDING OF THE CIT(A). THE CIT(A) RECORDED THIS FACT IN PARA (VII) PAGE 10 OF HIS APPELLATE ORDER AS UNDER: VII) AS REGARDS PAYMENTS TO TRANSPORT RS.20,26,071 /- I FIND FROM THE BOOKS OF A/CS AND THE RELEVANT VOUCHERS THAT THE TRANSPORTERS WANTED CASH PAYMENTS AS APPEARING FROM TRANSPORT RECEIPTS & NO PAYMENT TO A PARTICULAR TRA NSPORT ON A SINGLE DAY EXCEEDED RS.20000/-. I FIND THAT ASSESSEE PAYS TO THE TRANS PORTERS FROM TIME TO TIME FOR CARRYING OUT THE GOODS AND PAYS FULL PAYMENTS ON RECEIPT OF THE GOODS IN FACTORY. AFTER EXAMINING THE VOUCHERS & BOOKS OF A/CS (CASH BOOK) PRODUCED BEFORE ME. I HOLD THAT THE SINGLE PAYMENT TO SINGLE TRANSPORTER NEVER EXCEEDED RS.200 00/- & HENCE THE PAYMENT OF RS.20,26,071/- IS NOT HIT BY SEC. 40A(3). I ALSO A DD THAT EVEN OTHERWISE, THE KOL. TRIBUNAL IN CASE OF BIRENDRA KR. JAIN QUOTED SUPRA ALLOWED CASH PAYMENT OF RS.99301/- AS TRANSPORT CHARGES ON THE GROUND OF COMMERCIAL EXPED IENCY. SINCE THE A.O. DID NOT CONSIDER THE FACTS ON RECORD PROPERLY & ALSO DID NO T CONSIDER COMMERCIAL EXPEDIENCY, I DIRECT TO DELETE THE DISALLOWANCE OF 20% ON THE SUM OF RS.20,26,071/- ALSO. AS THE SINGLE PAYMENT ON A SINGLE DAY DOES NOT EXCE ED RS.20,000/- THERE IS NO VIOLATION OF PROVISIONS OF SECTION 40A(3) OF THE ACT AS IS EVIDE NT FROM THE STATEMENT OF TRANSPORT CHARGES PAYMENT IN CASH. EVEN THE CIT(A) VERIFIED THE BOO KS OF ACCOUNT AND RELEVANT VOUCHERS. IN 4 ITA NO.220/K/2008 & ITA NO.704/K/2008 RAHEE INDUSTRIES LTD. , AY:2002-03 VIEW OF THE ABOVE, WE HAVE NO HESITATION IN CONFIRM ING THE ORDER OF CIT(A) AND THIS ISSUE OF REVENUES APPEAL IS DISMISSED. 7. THE NEXT ISSUE IN THIS APPEAL OF REVENUE IS AS REGARDS TO THE ORDER OF CIT(A) IN DIRECTING THE AO NOT TO EXCLUDED THE FABRICATION CHARGES FRO M THE ELIGIBLE PROFIT WITHIN THE MEANING OF SECTION 80HHC(1) OF THE ACT. FOR THIS, REVENUE HAS RAISED FOLLOWING GROUND NO.5: 5. THAT THE LD. CIT(A) HAS ERRED IN LAW AS WELL AS ON FACTS BY DIRECTING THE ASSESSING OFFICER NOT TO EXCLUDE THE SUM OF RS.2,41,29,613/- FROM THE ELIGIBLE PROFITS WITHIN THE MEANING OF SECTION 80HHC(1) OF THE I. T. ACT, 1961. 8. WE HAVE HEARD RIVAL SUBMISSIONS AND GONE THROUGH FACTS AND CIRCUMSTANCES OF THE CASE. WE FIND THAT THE FABRICATION CHARGES ARE INCLUDED I N THE TOTAL TURNOVER AND FABRICATION CHARGES IS PART OF MANUFACTURING ACTIVITY. FABRICATION CHARGE S ARE RECEIVED FOR VARIOUS ENGINEERING PROCESS I.E. CUTTING, MACHINING, DRILLING, SIZING, PAINTING INCLUDING USE OF FITTINGS AND ACCESSORIES AS REQUIRED AS PER CONTRACT. THE ASSES SEE IS A MANUFACTURER AND EXPORTER AND THE ENTIRE PLANT IS USED FOR MANUFACTURING OF ITEMS EXP ORTED AND ITEMS FABRICATED. IT IS ALSO A FACT THAT FABRICATION CHARGES RECEIVED BY ASSESSEE ARE D ECLARED IN THE TOTAL RECEIPTS AND PART OF TOTAL TURNOVER. AS ALLEGED BY REVENUE THAT THESE FABRICA TION CHARGES ARE PART OF THE RECEIPTS FALLING UNDER CLAUSE (IIIC) OF SECTION 28 OF THE ACT IS NO T CORRECT. ONCE THESE ARE PART OF TOTAL TURNOVER, THIS IS TO BE INCLUDED IN THE ELIGIBLE PROFIT FOR T HE COMPUTATION OF DEDUCTION U/S. 80HHC OF THE ACT. WE FIND THAT THE CIT(A) HAS GIVEN HIS FINDING S AND FINAL CONCLUSION IN PARA 7 OF HIS APPELLATE ORDER READS AS UNDER: 7. THE LD. ACIT IS TOTALLY WRONG/INCORRECT IN HOLD ING THAT FABRICATION CHARGES IS A RECEIPT OF SIMILAR NATURE AS PER EXPLANATION (BAS )(1) TO SEC. 80HHC. UNDER NO IMAGINATION (AND AS DISCUSSED IN PARA 4 ABOVE), THE FABRICATION CHARGES RS.2,41,29,613/- COULD FALL IN AS RECEIPT OF SIMILAR NATURE I.E. ( 1) RECEIPTS OF LETTER 28(IIIA), (IIIB), (II) BROKERAGE, (III) COMMISSION AND (IV) INTEREST. THE EXCLUSION OF 90% OF 2,41,29,613/- FROM BUSINESS PROFIT, AS MADE BY LD. ACIT, IS WRONG, ILL EGAL, BAD IN LAW AS WELL AS ON FACTS. AS DISCUSSED ABOVE, WE ARE OF THE VIEW THAT THE FA BRICATION CHARGES CANNOT BE EXCLUDED FROM THE ELIGIBLE PROFIT WHILE COMPUTING DEDUCTION U/S. 80HHC OF THE ACT. THEREFORE, WE CONFIRM THE ORDER OF CIT(A) AND DISMISS THIS GROUND OF REVENUES APPEAL. 9. NOW, WE TAKE UP ASSESSEES APPEAL I.E. ITA NO. 2 20/K/2008. THE ONLY ISSUE IN THIS APPEAL OF ASSESSEE ISAGAINST THE ORDER OF CIT(A) CO NFIRMING THE DISALLOANCE OF DEDUCTION U/S. 80HHC(3) OF THE ACT I.E. PROFIT ON SALE OF DEPB LIC ENCE. FOR THIS, ASSESSEE HAS RAISED FOLLOWING GROUND NOS. 1, 2A AND 2B: 1. FOR THAT THE LD. CIT(A) ERRED IN LAW AND ON FAC TS IN CONFIRMING DISALLOWANCE OF CLAIM U/S. 80HHC(3) OF THE I. T. ACT FOR PROFIT/SALE OF D EPB LICENSE RS.17,65,344/-. ALTERNATIVE GROUNDS (WITHOUT PREJUDICE 5 ITA NO.220/K/2008 & ITA NO.704/K/2008 RAHEE INDUSTRIES LTD. , AY:2002-03 2A. FOR THAT THE LD. CIT(A) ERRED IN LAW & ON FACTS IN NOT ALLOWING DEDUCTION U/S. 80HHC(1) ON VALUE OF DEPB LICENSE RS.16,27,120/- EV EN AFTER TREATING THE SAME AS BUSINESS PROFIT U/S. 28(IV) OF THE ACT AND TO WHI CH PROVISIONS OF SEC. 28(IIID) ARE NOT ATTRACTED. 2B. FOR THAT THE LD. CIT(A) ERRED IN LAW & ON FACTS IN NOT ALLOWING CLAIM U/S. 80HHC ON RS.17,65,344/- AND SHOULD HAVE HOLD THAT IT IS NOT POSSIBLE TO DETERMINE PROFIT ON SAL OF DEPB LICENSE. 10. WE HAVE HEARD RIVAL SUBMISSIONS AND GONE THROUG H FACTS AND CIRCUMSTANCES OF THE CASE. WE FIND THAT NOW THIS ISSUE IS SQUARELY COVERED BY THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF TOPMAN EXPORTS VS. CIT (2012) 342 ITR 4 9 (SC). AS THE ISSUE IS SQUARELY COVERED, WE DIRECT THE AO TO RECOMPUTE THE ELIGIBLE PROFIT FROM DEPB LICENSE FOR COMPUTING DEDUCTION U/S. 80HHC(3) OF THE ACT ON THE PRINCIPLE LAID DOWN BY HONBLE SUPREME COURT IN THE CASE OF TOPMAN EXPORTS (SUPRA). WE DIRECT THE AO ACCORDINGLY. THIS ISSUE OF ASSESSEES APPEAL IS ALLOWED PARTLY FOR STATISTICAL PURPOSES. 11. IN THE RESULT, APPEAL OF REVENUE IS DISMISSED A ND THAT OF ASSESEE IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. 12. ORDER IS PRONOUNCED IN THE OPEN COURT ON 13.03. 2014. SD/- SD/- . . . . ' '' ''# '#'# '# , $% , (ABRAHAM P. GEORGE) (MAHAVIR SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 13TH MARCH, 2014 12 '3' 4 JD.(SR.P.S.) $0 5 . 6$ )7- COPY OF THE ORDER FORWARDED TO: 1 . ,- / APPELLANT- RAHEE INDUSTRIES LTD., FLAT 1C, 1 ST FLOOR, 4, HO CHI MINH SARANI, KOLKATA-700 071. 2 ./,- / RESPONDENT DCIT/ACIT, CIRCLE-4, KOLKATA. 3 . 0' ( )/ THE CIT(A), KOLKATA 4. 5. 0' / CIT KOLKATA <= .' / DR, KOLKATA BENCHES, KOLKATA / ./ TRUE COPY, $0'>/ BY ORDER, ' /ASSTT. REGISTRAR .