ITO, Ward - 7(1), Kolkata, Kolkata V. Millenium Writing Products Pvt. Ltd., Kolkata

ITA 721/KOL/2010

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 48081 (ITAT-KOLKATA)
• Duration Of Justice: 1 year(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-04-2011
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: C
• Assessment Year: 2006-2007
• Appeal Filed On: 12-04-2010
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: GOUTAM MONDAL
• Section: 43B; 143(3); 11A; 80IB; 194C

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH: KOL KATA () BEFORE , /AND , . . !' ) [BEFORE HONBLE SRI MAHAVIR SINGH, JM & HONBLE SHR I C. D. RAO, AM] # # # # / I.T.A NO. 721/KOL/2010 $% &' $% &' $% &' $% &'/ // / ASSESSMENT YEAR: 2006-07 INCOME-TAX OFFICER, WD-7(1), KOLKATA VS MILLENI UM WRITING PRODUCTS PVT. LTD. (PAN-AACCM 3396 E) ( )* /APPELLANT ) (+,)*/ RESPONDENT ) FOR THE APPELLANT: SHRI GOUTAM MONDAL FOR THE RESPONDENT: SMT. SHREYA LOYALKA !- / ORDER PER MAHAVIR SINGH, JM ( , , , , ) THIS APPEAL BY REVENUE IS ARISING OUT OF THE ORDER OF CIT(A)-VIII, KOLKATA IN APPEAL NO.522/CIT(A)-VIII/KOL/08-09 VIDE DATED 22.0 1.2010. THE ASSESSMENT WAS FRAMED BY ITO, WD-7(1), KOLKATA U/S. 143(3) OF THE INCOME TAX ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT) FOR ASSESSMENT YEAR 2006- 07 VIDE HIS ORDER DATED 26.12.2008. 2. THE ONLY ISSUE IN THIS APPEAL OF THE REVENUE IS AGAINST THE ORDER OF CIT(A) IN ALLOWING DEDUCTION U/S. 80IB OF THE ACT ON DELAYED PAYMENT OF EMPLOYEES CONTRIBUTION OF PROVIDENT FUND AND CONTRACT PAYMENTS ON WHICH PA YMENT OF TDS WAS DELAYED, CONSEQUENTLY, ASSESSING OFFICER DISALLOWED BY INVO KING PROVISIONS OF SECTION 4O(A)(IA) OF THE ACT. FOR THIS, REVENUE HAS RAISED THE FOLLO WING TWO GROUNDS: 1. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(APPEALS)-VIII, KOLKATA, HAS ERRED IN ALLOWING T HE DEDUCTION U/S. 80IB ON DISALLOWANCE OF RS.1,58,844/- ON DELAYED PAYMENT OF EMPLOYEES CONTRIBUTION TO THE PROVIDENT FUND AND RS.23,93,016/- U/S. 40(A)(IA ) FOR DELAYED PAYMENT OF TDS. 2. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THE LD. CIT(APPEALS)-VIII, KOLKATA, ERRED IN APPRECIATING T HAT THE ABOVE DISALLOWANCES ARE PENAL IN NATURE AND THE ASSESSEE IS ENTITLED FO R DEDUCTION OF THE SAME IN THE NEXT ASSESSMENT YEARS. 2 ITA 721/K/201 0 MILLENIUM WRITING PRODUCTS P. LTD.. A.Y. 06-07 3. BRIEF FACTS LEADING TO THE ABOVE ISSUES ARE THAT ASSESSEE HAS CLAIMED DEDUCTION OF EMPLOYEES CONTRIBUTION TO P.F AMOUNTING TO RS.1,58 ,844/- AND ALSO THE CONTRACT PAYMENT AT RS.23,93,016/-. THE ASSESSING OFFICER D URING THE COURSE OF ASSESSMENT PROCEEDINGS REQUIRED THE ASSESSEE TO GIVE THE DETAI LS OF EMPLOYEES CONTRIBUTION TO PF PAID IN THE PREVIOUS YEAR 2005-06 RELEVANT TO THIS ASSESSMENT YEAR 2006-07. THE ASSESSEE FILED THE DETAILS AND THE ASSESSING OFFICE R NOTED THE SAME AS UNDER: FOR THE MONTH AMOUNT DUE DATE DATE OF PAYMENT APRIL, 2005 JULY, 2005 AUGUST, 2005 SEPT., 2005 OCT., 2005 NOV., 2005 DEC., 2005 JAN., 2006 FEB., 2006 MARCH, 2006 RS.11065/- RS.13936/- RS.15874/- RS.15012/- RS.15976/- RS.14760/- RS.18717/- RS.19451/- RS.16695/- RS.17358/- RS.158844/- 15.05.05 15.08.05 15.09.05 15.10.05 15.11.05 12.12.05 12.01.06 15.02.06 15.03.06 15.04.06 27.05.05 30.12.05 03.11.05 06.12.05 06.12.05 30.12.05 02.02.06 17.02.06 12.04.06 02.05.06 THE ASSESSING OFFICER NOTED THAT THE PAYMENTS IN RE SPECT OF EMPLOYEES CONTRIBUTION TO PF ARE BELATED PAYMENT AND ACCORDINGLY IN VIEW OF T HE PROVISIONS OF SECTION 2(24)(X) R.W.S. 36(VA) OF THE ACT, DISALLOWED AND ADDED BACK TO THE RETURNED INCOME OF THE ASSESSEE AMOUNTING TO RS.1,58,844/-. SIMILARLY, IN RESPECT TO THE CONTRACT PAYMENT, THE ASSESSEE FILED DETAILS OF TDS DEDUCTED AS UNDER: DATE OF TDS AMOUNT PAID AMOUNT OF TDS DUE DATE OF PAYMENT ACTUAL DATE OF PAYMENT 31.01.2006 28.2.2006 15,43,919/- 8,49,097/- 23,93,016/- 34,586/- 19.021/- 7.2.2006 7.3.2006 10.7.2006 10.7.2006 THE ASSESSING OFFICER NOTED THAT TDS PAYMENTS IN TE RMS OF SECTION 200(1) OF THE ACT FROM CONTRACT PAYMENTS WERE DEDUCTED U/S. 194C OF T HE ACT BUT PAYMENT MADE BELATEDLY TO THE GOVERNMENT ACCOUNT. ACCORDINGLY, ASSESSING OFFICER BY INVOKING PROVISIONS OF SECTION 40(A)(IA) OF THE ACT, DISALLOWED THE CONTRA CT PAYMENTS AND ADDED BACK TO THE RETURNED INCOME OF THE ASSESSEE. AGGRIEVED, ASSESSE E PREFERRED APPEAL BEFORE CIT(A). THE ASSESSEE BEFORE CIT(A), CLAIMED THAT ADDITION ON THESE ITEMS ARE ELIGIBLE FOR DEDUCTION U/S. 80IB OF THE ACT AS THESE ARE MANUFAC TURING PROFITS. BEFORE CIT(A), THE ASSESSEE HAS NOT CLAIMED THAT THESE PAYMENTS ARE WI THIN THE DUE DATES OR DEDUCTION ON 3 ITA 721/K/201 0 MILLENIUM WRITING PRODUCTS P. LTD.. A.Y. 06-07 ACCOUNT OF EMPLOYEES CONTRIBUTION TO PF OR CONTRAC T PAYMENTS ARE ALLOWABLE RATHER IT WAS CLAIMED THAT ONCE THE BUSINESS PROFIT IS INCREA SED DEDUCTION U/S. 80IB OF THE ACT SHOULD BE ALLOWED. FOR THIS, THE ASSESSEE HAS RAIS ED THE FOLLOWING TWO GROUNDS BEFORE CIT(A): 1. THAT THE LEARNED ITO HAS WRONGLY CALCULATED AND ALLOWED DEDUCTIONS U/S. 80IB, WHICH IS WRONG AND BIASED. THE APPELLANT IS ELIGIBLE TO GET 30% OF DEDUCTION U/S. 80IB OF THE INCOME TAX ACT, 1961 ON MANUFACTURING INCOME. THE LEARNED ITO HAS DISALLOWED CERTAIN EXPENSES AND MADE CERTAIN ADDITIONS, WHICH RESULTED IN INCREASE OF MANUFACTURING INCOME AND HENCE THE DEDUCTIONS U/S. 80IB SHOULD BE RECALCULATED ACCORDINGLY. 2. FOR THAT OTHER GROUND OR GROUNDS MAY BE URGED AT THE TIME OF HEARING. 4. THE CIT(A) ALLOWED THE CLAIM OF THE ASSESSEE BY GIVING FOLLOWING FINDINGS IN HIS APPELLATE ORDER: IN THIS GROUND, THE APPELLANT IS DISPUTING THE ASS ESSING OFFICER (A.O)S ACTION IN NOT ALLOWING IT ENHANCED DEDUCTION UNDER SEC. 80IB OF THE INCOME TAX ACT, WHEN, AS A RESULT OF ADDITION MADE IN THE ASSESSMENT ORDE R ITS GROSS TOTAL INCOME HAS INCREASED. PERUSAL OF THE WORDING OF THE SEC. 80IB OF THE INCOME TAX ACT REVEALS THAT THE DEDUCTION IS TO BE WORKED OUT AT A PERCENT AGE OF PROFITS AND GAINS DERIVED BY THE APPELLANT IN BUSINESS WHICH IS ELIGIBLE FOR DEDUCTION UNDER SEC. 80IB OF THE INCOME TAX ACT. THE ADDITION MADE IN THE ASSESSMEN T ORDER HAS EFFECTIVELY ENHANCED SUCH PROFITS AND GAINS. IN MY OPINION, TH EREFORE, THE APPELLANT IS ELIGIBLE FOR THE STATUTORY DEDUCTION ON THIS ENHANC ED FIGURES OF PROFITS AND GAINS AS COMPUTED BY THE A.O. THE A.O. IS ACCORDINGLY DI RECTED TO DO SO. THIS GROUND OF APPEAL IS ALLOWED. AGGRIEVED, REVENUE IS IN APPEAL BEFORE US. 5. WE HAVE HEARD RIVAL CONTENTIONS AND GONE THROUGH FACTS AND CIRCUMSTANCES OF THE CASE. LD. DR ARGUED THAT THE ASSESSEE BEFORE CIT(A ) HAS NOT CHALLENGED THE FOLLOWING TWO ADDITIONS: I) RS.1,58,844/- U/S. 2(24)(X) READ WITH SECTION 3 6(VA) AS EMPLOYEES CONTRIBUTION TO PF WAS NOT DEPOSITED WITHIN DUE DA TE. II) RS.23,93,016/- U/S. 40(A)(IA) AS TAX WAS NOT DE DUCTED AT SOURCE. LD. DR STATED THAT THE DISALLOWANCE WITH RESPECT TO EMPLOYEES CONTRIBUTION TO PF IS NOT PART OF PROFITS OF ELIGIBLE BUSINESS; RATHER IT IS A DEDUCTION TO BE ALLOWED AFTER CONTRIBUTION MADE BY THE EMPLOYEE TO THE PF ACCOUNT AND THIS PAYMENT, IF ACTUALLY MADE WITHIN THE DUE DATE, IS ALLOWABLE AS DEDUCTION. AC CORDING TO HIM, IT IS NEITHER A BUSINESS 4 ITA 721/K/201 0 MILLENIUM WRITING PRODUCTS P. LTD.. A.Y. 06-07 PROFIT NOR AN EXPENDITURE RELATING TO PROFIT & LOSS ACCOUNT ITEM, WHICH IS DISALLOWED AND CONSEQUENTLY WHICH ENHANCES BUSINESS PROFITS. IN RESPECT TO CONTRACT PAYMENTS DISALLOWED BY INVOKING THE PROVISIONS OF SECTION 40 (A)(IA) OF THE ACT, HE ALSO MADE SIMILAR ARGUMENT. 6. ON THE OTHER HAND, LD. COUNSEL FOR THE ASSESSEE ARGUED THAT THE ASSESSEE IS A COMPANY REGISTERED UNDER THE COMPANIES ACT, 1956 AN D MANUFACTURES BALL PENS AND ITS COMPONENTS. THE ASSESSEE IS ELIGIBLE FOR DEDUCTION U/S. 80IB OF THE ACT ON ITS INCOME FROM MANUFACTURE OF BALL PENS AND ITS COMPONENTS AN D THE ASSESSING OFFICER NOT COMPUTED DEDUCTION U/S. 80IB OF THE ACT, SINCE PROF ITS OF BUSINESS HAS GONE UP ON ACCOUNT OF DISALLOWANCE OF EMPLOYEES CONTRIBUTION TO PF NOT DEPOSITED WITHIN THE DUE DATES AND CONTRACT PAYMENTS DISALLOWED BY INVOKING THE PROVISIONS OF SECTION 40(A)(IA) OF THE ACT. SHE STATED THAT CIT(A) HAS RIGHTLY ALL OWED THE CLAIM OF THE ASSESSEE BY DIRECTING THE ASSESSING OFFICER TO COMPUTE DEDUCTIO N U/S. 80IB OF THE ACT ON ENHANCED TOTAL INCOME, WHICH IS RESULTING INTO ADDITION MADE IN THE ASSESSMENT TO ITS GROSS TOTAL INCOME. ACCORDING TO LD. COUNSEL, BY MAKING ADDITI ON THE ASSESSING OFFICER HAS EFFECTIVELY ENHANCED BUSINESS PROFITS AND DEDUCTION SHOULD HAVE BEEN COMPUTED ON ENHANCED FIGURES AND CIT(A) HAS RIGHTLY DIRECTED TH E ASSESSING OFFICER ACCORDINGLY. 7. WE FIND THAT THE UNDISPUTED FACTS ARE THAT THE A SSESSEE HAS NOT CHALLENGED THE ADDITIONS IN RESPECT TO EMPLOYEES CONTRIBUTION TO PF NOT DEPOSITED WITHIN THE DUE DATES NOR CONTRACT PAYMENTS ON WHICH TAX DEDUCTED BUT DEP OSITED BEYOND DUE DATES PRESCRIBED U/S. 200(1) OF THE ACT. A) AS WE WILL TAKE UP THE ISSUE OF EMPLOYEES CONTR IBUTION TO PF, WHETHER ADDITION ON THIS ACCOUNT RESULTS INTO INCREASE IN B USINESS PROFITS OR NOT. THE FACT IS THAT EMPLOYEES CONTRIBUTION TO PF IS NOT PART OF PROFIT & LOSS ACCOUNT AND IT IS NEITHER A PROFIT OF MANUFACTURE NOR AN EXPENDITURE DISALLOWED BY ASSESSING OFFICER ON ACCOUNT OF ITEMS OF PROFIT & LOSS ACCOUNT. THIS IS MERELY A D EDUCTION TO BE ALLOWED TO THE ASSESSEE IN CASE EMPLOYEES CONTRIBUTION TO PF IS D EPOSITED WITHIN THE DUE DATES IN TERMS OF SECTION 43B READ WITH SECTION 36(VA) OF THE ACT. THE PROVISIONS OF SECTION 80IB OF THE ACT ALLOWS DEDUCTION IN TERMS OF SUB-SECTION (1 ) THAT WHETHER THE GROSS TOTAL INCOME 5 ITA 721/K/201 0 MILLENIUM WRITING PRODUCTS P. LTD.. A.Y. 06-07 OF THE ASSESSEE INCLUDES ANY PROFITS AND GAINS DERI VED FROM ANY BUSINESS REFERRED TO IN SUB-SECTIONS 3 TO 11, 11A AND 11B, I.E. THE ELIGIBL E BUSINESS, THE DEDUCTION OF SUCH PROFITS AND GAINS WILL BE ALLOWED EQUAL TO SUCH PER CENTAGE AND FOR SUCH NUMBER OF ASSESSMENT YEARS AS SPECIFIED IN THIS SECTION. REL EVANT PROVISIONS OF SECTION 80IB(1) OF THE ACT IS REPRODUCED HEREUNDER: (1) WHERE THE GROSS TOTAL INCOME OF AN ASSESSEE INC LUDES ANY PROFITS AND GAINS DERIVED FROM ANY BUSINESS REFERRED TO IN SUB-SECTIO NS (3) TO 41 [(11), (11A) AND (11B)] (SUCH BUSINESS BEING HEREINAFTER REFERRED TO AS THE ELIGIBLE BUSINESS), THERE SHALL, IN ACCORDANCE WITH AND SUBJECT TO THE PROVIS IONS OF THIS SECTION, BE ALLOWED, IN COMPUTING THE TOTAL INCOME OF THE ASSESSEE, A DE DUCTION FROM SUCH PROFITS AND GAINS OF AN AMOUNT EQUAL TO SUCH PERCENTAGE AND FOR SUCH NUMBER OF ASSESSMENT YEARS AS SPECIFIED IN THIS SECTION. WE FIND FROM THE ABOVE SECTION THAT DEDUCTION U/S. 80IB OF THE ACT IS AVAILABLE TO AN ASSESSEE WHOSE GROSS TOTAL INCOME INCLUDES ANY PROF ITS AND GAINS DERIVED FROM ELIGIBLE BUSINESS AS SPECIFIED IN THE SECTION. HERE THE ASS ESSEE IS CLAIMING DEDUCTION ON AN ITEM OF DISALLOWANCE MADE BY THE ASSESSING OFFICER ON AC COUNT OF EMPLOYEES CONTRIBUTION TO PF, WHICH WAS NOT DEPOSITED WITHIN THE DUE DATE. T HIS IS NEITHER AN ITEM OF PROFIT OR GAIN OF ELIGIBLE BUSINESS NOR AN ITEM OF PROFIT & L OSS ACCOUNT OR MANUFACTURING ACCOUNT RATHER IT IS JUST AN EMPLOYEES CONTRIBUTION TO PF, WHICH ASSESSEE HAS TO COLLECT FROM ITS EMPLOYEES AND TO DEPOSIT WITH THE PF AUTHORITIES WI THIN THE DUE DATE PRESCRIBED. IN CASE, THIS IS NOT PAID WITHIN THE DUE DATES THE SAME WILL BE DISALLOWED. HERE BEFORE US, THE ISSUE IS NOT WHETHER IT IS TO BE ALLOWED IN VIEW OF THE PAYMENT MADE WITHIN THE DUE DATE OR WITHIN THE DUE DATE OF FILING OF RETURN BUT THE ISSUE IS WHETHER THIS AMOUNT DISALLOWED, THE ASSESSEE IS ELIGIBLE FOR DEDUCTION U/S. 80IB OF THE ACT OR NOT. WE ARE OF THE CONSIDERED VIEW THAT THIS IS NOT AN ITEM OF MANUFAC TURING ACCOUNT OR P&L ACCOUNT AND IT IS NEITHER A PROFIT FROM ELIGIBLE BUSINESS NOR A DI SALLOWANCE OF EXPENDITURE PERTAINING TO THE ASSESSEES ELIGIBLE BUSINESS. HENCE, THE DEDUC TION U/S. 80IB(1) OF THE ACT CANNOT BE ALLOWED. HENCE THIS ISSUE OF THE REVENUES APPEAL IS ALLOWED. B) IN RESPECT OF DISALLOWANCE OF CONTRACT PAYMENTS U/S. 194C OF THE ACT, REASON BEING THE TDS DEDUCTED IS NOT DEPOSITED BEFO RE THE EXPIRY OF TIME PRESCRIBED U/S. 200(1) OF THE ACT, THEREBY, ASSESSING OFFICER DISAL LOWED BY INVOKING PROVISIONS OF SECTION 40(A)(IA) OF THE ACT. WE FIND THAT THESE C ONTRACT PAYMENTS ARE PART OF PROFIT AND LOSS ACCOUNT AND EXPENDITURE IS DISALLOWED BY ASSES SING OFFICER IN THE ABSENCE OF NON 6 ITA 721/K/201 0 MILLENIUM WRITING PRODUCTS P. LTD.. A.Y. 06-07 DEPOSIT OF TDS WITHIN THE DUE DATE. FIRST OF ALL, IT IS TO BE MENTIONED THAT NEITHER THE ASSESSING OFFICER NOR CIT(A) HAS DISCUSSED WHY THIS ITEM IS NOT ELIGIBLE FOR DEDUCTION U/S. 80IB OR WHY IT IS ELIGIBLE. BUT SEEING DATES OF PAYMENTS OF TDS, IT SEEMS THAT THESE ARE PAID WITHIN DUE DATE OF FILING OF RETURN OF INC OME, THE ASSESSEE EVEN OTHERWISE IS ELIGIBLE FOR DEDUCTION AND THE ASSESSING OFFICER CA NNOT INVOKE THE PROVISIONS OF SECTION 40(A)(IA) OF THE ACT FOR MAKING DISALLOWANCE. WE A RE OF THE VIEW THAT, LET THE ASSESSING OFFICER CONSIDER THIS ISSUE IN THE LIGHT OF THE ALL OWANCE OF DEDUCTION OF THIS EXPENDITURE AS THE ASSESSEE HAS MADE PAYMENT OF THIS TDS WITHIN THE DUE DATE OF FILING OF RETURN OF INCOME AND IN CASE, THE ASSESSEE IS NOT ALLOWED DED UCTION OF THIS EXPENDITURE BY INVOKING THE PROVISIONS OF SECTION 40(A)(IA) OF THE ACT, HE WILL GO INTO THE ELIGIBILITY OF DEDUCTION U/S. 80IB OF THE ACT. HENCE, THIS ISSUE OF THE REVENUES APPEAL IS SET ASIDE TO THE FILE OF THE ASSESSING OFFICER. 14. IN THE RESULT, REVENUES APPEAL IS ALLOWED PART LY FOR STATISTICAL PURPOSES 13. ORDER IS PRONOUNCED IN THE OPEN COURT ON 21.4.2 011 SD/- SD/- . . !' , (C. D. RAO) (MAHAVIR SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER ( ' ' ' ') )) ) DATED 21ST DAY OF APRIL, 2011 ./ $01 2 JD.(SR.P.S.) !- 3 +4 5!4&6- COPY OF THE ORDER FORWARDED TO: 1 . )* / APPELLANT ITO, WARD-7(1), KOLKATA. 2 +,)* / RESPONDENT M/S. MILLENIUM WRITING PRODUCTS PVT. LTD.,13, BRABOURNE ROAD, 4 TH FLOOR, SUBOL DUTA BUILDING, KOLKATA-700 001. 3 . -$ ( )/ THE CIT(A), KOLKATA 4. 5. -$ / CIT KOLKATA 4 <= +$ / DR, KOLKATA BENCHES, KOLKATA ,4 +/ TRUE COPY, !-$>/ BY ORDER, 1 /ASSTT. REGISTRAR .