JCT Electronics Limited, Mohali V. DCIT, Mohali

ITA 729/CHANDI/2011

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 80975 (ITAT-CHANDIGARH)
• Duration Of Justice: 3 year(s) 3 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-10-2014
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 29-10-2014
• Assessment Year: 2008-2009
• Appeal Filed On: 13-07-2011
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: J S NAGAR
• Assessee Lawyers: MAHESH SAHAI; S K SOOD
• Section: 115JB

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL CHANDIGARH BENCH B, CHANDIGARH BEFORE SHRI BHAVNESH SAINI, JUDICIAL MEMBER AND SHRI T.R.SOOD, ACCOUNTANT MEMBER ITA NO.551/CHD/2011 ASSESSMENT YEAR : 2007-08 AND ITA NO.729/CHD/2011 ASSESSMENT YEAR : 2008-09 JCT ELECTRONICS LIMITED, VS. THE D.C.I.T., A-32, INDUSTRIAL AREA, CIRCLE 6(1) PHASE VIII, MOHALI. CHANDIGARH. PAN: AAACJ4084A (APPELLANT) (RESPONDENT) APPELLANT BY : S/SHRI MAHESH SAHAI & S.K.SOOD RESPONDENT BY : SHRI J.S.NAGAR, DR DATE OF HEARING : 29.10.2014 DATE OF PRONOUNCEMENT : 31.10.2014 O R D E R PER BHAVNESH SAINI, J.M. : BOTH THESE APPEALS FILED BY THE SAME ASSESSEE ARE DIRECTED AGAINST DIFFERENT ORDERS OF LEARNED COMMIS SIONER OF INCOME TAX (APPEALS), CHANDIGARH DATED 31.3.2011 FO R ASSESSMENT YEAR 2007-08 AND DATED 31.5.2011 FOR ASS ESSMENT YEAR 2008-09. 2. THE ISSUE IS SAME IN BOTH THE APPEALS AND BOTH T HE PARTIES MAINLY ARGUED IN ASSESSMENT YEAR 2007-08 AN D STATED THAT THE ORDER IN THAT CASE MAY BE FOLLOWED IN OTHE R YEAR AS WELL. 2 3. WE HAVE HEARD THE LEARNED REPRESENTATIVES OF BOT H THE PARTIES AND PERUSED THE FINDINGS OF THE AUTHORITIES BELOW. ITA NO.551/CHD/2011 : 4. THIS APPEAL IS FILED BY THE ASSESSEE ON THE FOLL OWING GROUND OF APPEAL :- 1. THE CIT(APPEALS) HAS ERRED IN TAKING A NARROW V IEW OF THE WORDS 'TO CONSIDER' USED BY THE BIFR IN THE REHABILITATION SCHEME SANCTIONED BY THEM IN WHICH THEY HAVE ASKED THE TAX DEPARTMENT 'TO CONSIDER' EXEMPTING THE COMPANY FROM THE APPLICATION OF FBI WHEREAS WHERE WORDS ARE CAPABLE OF ALTERNATE MEANING, THE INTERPRETATION WHICH IS FAVOURABLE TO THE APPELLANT COMPANY SHOULD ORDINARILY BE FOLLOWED . THAT BY MAKING AN ADVERSE INTERPRETATION THE CIT(A) WILL HAMPER, IF NOT TOTALLY FRUSTRATE THE INTENTION OF BIFR TO REHABILITATE THE COMPANY. 5. THE ASSESSEE FILED IT RETURN OF FBT FOR THE ASSE SSMENT YEAR UNDER APPEAL DECLARING THE VALUE OF FRINGE BEN EFITS AS NIL ON 26.10.2007 AND WHEN ASKED TO EXPLAIN WHY FBT SHO ULD NOT BE PAID AS PER THE PROVISIONS OF INCOME TAX ACT, IT WAS SUBMITTED THAT THE ASSESSEE HAD STARTED INCURRING L OSSES FROM 1997-98 DUE TO NON-AVAILABILITY OF WORKING CAPITAL AND LOW CAPACITY UTILIZATION AND BY MARCH, 31, 2002 THE ACC UMULATED LOSSES EXCEEDED THE NET WORTH AND A REFERENCE WAS M ADE TO THE BIFR, WHO HAS DECLARED THE ASSESSEE TO BE SICK INDU STRIAL UNDERTAKING ON 12.12.2005. WHILE SUBMITTING THE S CHEME FOR GRANTING RELIEF AN APPLICATION HAD MADE TO CONSIDER EXEMPTION FROM THE APPLICATION OF FBT AND SECTION 115JB OF TH E INCOME TAX ACT. THE LEARNED COUNSEL FOR THE INCOME TAX D EPARTMENT 3 SUBMITTED THAT THE DRS MAY PROVIDE FOR THE TERM TO CONSIDER BEFORE THE RELIEF AND CONCESSIONS RELATING TO FBT A ND SECTION 115JB OF THE INCOME TAX ACT ENVISAGED FROM THE DEPA RTMENT. BIFR HAS STATED THAT THE INCOME TAX DEPARTMENT SHOU LD CONSIDER TO EXEMPT THE COMPANY FROM THE PROVISIONS OF SECTION 115JB OF THE INCOME TAX ACT AND FRINGE BENEFIT TAX AND CAPITAL GAINS TAX ON SALE OF MOHALI ASSETS UNDER TH E INCOME TAX ACT DURING THE PERIOD OF REHABILITATION. THE R EHABILITATION SCHEME OF BIFR WAS CIRCULATED IN ACCORDANCE WITH SE CTION 19(2) OF THE ACT AMONGST ALL PERSONS REQUIRED TO GI VE RELIEF AND IF CONSENT OR DENIAL OR AN EXTENSION WAS NOT SOUGHT WITHIN 60 DAYS, THE SECTION STIPULATES THAT CONSENT IS DEEMED TO HAVE BEEN GIVEN. THEREFORE, THE CONSENT OF THE TAX DEP ARTMENT AS PER SECTION 19(2) OF SICA IS DEEMED TO HAVE BEEN GI VEN AUTOMATICALLY. DURING THE PROCESS OF REHABILITATIO N, THE ASSESSEE COMPANY TILL ITS NET WORTH BECOMES ATLEAST EQUAL TO 50% OF ITS SHARE CAPITAL AND RESERVES IS GRANTED RE LIEF FROM THE APPLICATION OF SECTION 41(1) APPLICABLE ON PROFITS ARISING OUT OF WRITE BACK OF INTEREST LIABILITY. SECTION 115JB OF THE INCOME TAX ACT BEING TAX ON BOOK PROFITS, SECTION 115WA ON FRINGE BENEFITS AND TAX ON CAPITAL GAINS ARISING OUT OF TH E SALE OF ASSETS AT MOHALI AND/OR ANY OTHER SECTIONS OF INCOM E TAX ACT, WHICH IMPOSES A LIABILITY ON THE COMPANY TO PAY TAX ARISING OUT OF THE SCHEME OF REHABILITATION. THIS EXEMPTI ON SHOULD CONTINUE TO BE OPERATIVE AS LONG AS OUR COMPANY REM AINS UNDER REHABILITATION UNDER WHICH THE SCHEME WAS SAN CTIONED. 4 6. ACCORDING TO THE ASSESSING OFFICER, PLAIN READIN G OF THE ORDER REFERRED TO SUGGESTED THAT THE INCOME TAX DEP ARTMENT HAS BEEN ASKED TO CONSIDER EXEMPTION AND NOT THAT I T HAS BEEN GRANTED ANY EXEMPTION AS SUCH. REJECTING THE PLEA THE VALUE OF FRINGE BENEFIT WAS WORKED OUT AT RS.58,27, 370/-. THE LEARNED CIT (APPEALS) CONSIDERING THE SUBMISSIO NS OF THE ASSESSEE DISMISSED THE APPEAL OF THE ASSESSEE. HI S FINDINGS IN PARAS 5 TO 10 OF THE APPELLATE ORDER ARE REPRODU CED AS UNDER:- 5. I HAVE CONSIDERED THE RIVAL CONTENTIONS AND MAT ERIAL ON RECORD. DURING THE COURSE OF APPELLATE PROCEEDINGS, THE LD. C OUNSEL ARGUED AND PRODUCED BEFORE ME A NUMBER OF LETTERS WR ITTEN TO HON'BLE CHAIRMAN, CBDT, DGIT(ADMN), ADIT(RECOVERY) WHEREIN AN EARNEST APPEAL FOR CONFIRMING EXEMPTION FROM THE APP LICATION OF FBT & MAT U/S 115JB OF THE INCOME TAX ACT WAS MADE IN VIEW OF THE FACT THAT THE BIFR HAD STATED THAT 'THE INCOME TAX DEPARTMENT SHOULD CONSIDER TO EXEMPT THE COMPANY FROM THE PROVIS IONS OF SECTION 115JB AND FRINGE BENEFIT TAX AND CAPITAL GAINS TAX ON SALE OF MOHALI ASSETS UNDER THE INCOME TAX ACT DURING TH E PERIOD OF REHABILITATION.' 6. HOWEVER THE APPELLANT HAS NOT BEEN ABLE TO PRO VIDE ANY COMMUNICATION TO SAY THAT THE REQUEST HAS BEEN CONSIDERED . 7. BEFORE ME ALSO, THE LD. COUNSEL CONTENDED THAT IT WAS NOT FAIR ON THE PART OF THE DEPARTMENT TO INTERPRET THE WORD 'T O CONSIDER' SO NARROWLY AS TO DENY THIS EXEMPTION WHICH COULD SERIO USLY HINDER REHABILITATION PROGRAMME. 8. IN THIS CONTEXT, IT IS IMPORTANT TO REFER TO PARA 6 OF THE LETTER OF THE APPELLANT DATED 7.10.2010 ADDRESSED TO THE HON'BLE CHAIR MAN, CBDT IS EXTRACTED BELOW : 'BASED ON THE ABOVE DECISION WE SHALL BE GRATEFUL IF YOU COULD KINDLY CLARIFY THE MEANING OF THE WORDS ' TO CON SIDER' AS THEY WOULD APPLY IN OUR CASE AND TO CONSIDER WHET HER THIS IMPOSES AN OBLIGATION ON THE REVENUE AUTHORITIES TO EXEMPT US FROM THE APPLICABILITY OF THE FRINGE BENE FIT TAX, OR NOT. IN THE CASE OF MAHINDRA & MAHINDRA LIMIT ED THE HON'BLE DELHI HIGH COURT HAD GRANTED BIFR TWO MONT HS TO RESPOND. IT IS URGENTLY PLEADED THAT PAYMENT OF SUCH A LARGE AMOUNT OF FBT WOULD SEVERELY HINDER THE PROCESS OF REHABILITATION OF OUR COMPANY AND YOU ARE THEREFORE REQUESTED TO INTERPRET THE WORDS 'TO CONSIDER' IN O UR FAVOUR. AGAINST THE DECISION OF THE ASSESSING WE H AD FILED AN APPEAL AND WE ARE REQUESTING THE CIT(APPEALS ) TO 5 KEEP HIS DECISION PENDING AND IN ABEYANCE TILL WE RE CEIVE YOUR CLARIFICATION. ' 9. THOUGH THE ENTIRE ISSUE IS WELL APPRECIATED, YET IN MY VIEW THE CLARIFICATION ON THIS NEEDS TO COME FROM THE HIGHER A UTHORITIES. THE WORD 'TO CONSIDER' IS NO DIRECTION TO GRANT EXEMP TION AS INTERPRETED BY THE A.O. WITH THE MATERIAL ON RECOR D, AND NO FURTHER CLARIFICATION FROM DGIT(EXEMPTION) AND CBDT, I T IS NOT POSSIBLE TO EXEMPT THE COMPANY FROM THE FBT. 10. KEEPING IN VIEW THE ABOVE FACTS, THE LIABILITY OF FBT IS CONFIRMED DISMISSING THE APPEAL. 7. ON CONSIDERATION OF THE RIVAL SUBMISSIONS, WE DO NOT FIND ANY MERIT IN THIS APPEAL OF THE ASSESSEE. TH E LEARNED COUNSEL FOR THE ASSESSEE ARGUED THAT THE INCOME TAX DEPARTMENT SHOULD HAVE GRANTED EXEMPTION TO THE ASS ESSEE AS WAS DIRECTED BY THE BIFR. HOWEVER, HE HAS FAIRLY CONCEDED THAT NO SUCH APPROVAL OF EXEMPTION OF FBT TAX HAS Y ET BEEN GRANTED BY THE INCOME TAX DEPARTMENT. IT, THEREFO RE, APPEARS THAT THE ASSESSEE MAY HAVE SOME OTHER REMED Y UNDER DIFFERENT LAWS BUT IN THE PROCEEDINGS BEFORE THE AS SESSING OFFICER IN CHARGING FBT TAX, NO SATISFACTORY EXPLAN ATION HAS BEEN FILED AND NO ORDER FROM CBDT HAS BEEN FILED TO SHOW THAT ANY EXEMPTION HAS BEEN GRANTED TO THE ASSESSEE COMPANY FROM PAYING FBT OR ANY OTHER TAX UNDER THE INCOME T AX ACT. ON THE FACE OF IT, THE APPEAL OF THE ASSESSEE WOULD HAVE NO MERIT AND IS LIABLE TO BE DISMISSED. THE ASSESSEE SEEKS EXEMPTION FROM PAYING TAX ON FBT, WHICH IS NOT WITH IN THE POWERS OF THE ASSESSING OFFICER OR THE LEARNED CIT (APPEALS). THE AUTHORITIES BELOW WERE, THEREFORE, JUSTIFIED IN REJECTING THE CLAIM OF THE ASSESSEE. THE APPEAL OF THE ASSE SSEE HAS NO MERIT AND THE SAME IS DISMISSED. 8. THE APPEAL OF THE ASSESSEE IS DISMISSED. 6 ITA NO.729/CHD/2011 : 9. THE ISSUE IS SAME IN THIS APPEAL AS IS IN ITA NO.551/CHD/2011. BY FOLLOWING THE REASONING FOR DE CISION IN ASSESSMENT YEAR 2007-08 ABOVE, WE DISMISS THIS APPE AL OF THE ASSESSEE AS WELL. 10. THE APPEAL OF THE ASSESSEE IS DISMISSED. 11. IN THE RESULT, BOTH THE APPEALS OF THE ASSESSE E ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 31 ST DAY OF OCTOBER, 2014. SD/- SD/- (T.R.SOOD) (BHAVNESH SAINI) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 31 ST OCTOBER, 2014 *RATI* COPY TO: THE APPELLANT/THE RESPONDENT/THE CIT(A)/TH E CIT/THE DR. ASSISTANT REGISTRAR, ITAT, CHANDIGARH