Sea Food park India Ltd, Alappuzha V. DCIT, Cochin

ITA 762/COCH/2013

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 73919 (ITAT-COCHIN)
• Duration Of Justice: 4 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-03-2014
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: DB
• Next Hearing Date: 25-03-2014
• Assessment Year: 2008-2009
• Appeal Filed On: 27-11-2013
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: KK JOHN SR DR SMT LATA V KUMAR
• Assessee Lawyers: VEDANGA R PRABHU
• Keywords: Depreciation

Judgement Text

1 ITA NO.762/COCH/2013 IN THE INCOME TAX APPELLATE TRIBUNAL COCHIN BENCH, COCHIN BEFORE SHRI N.R.S. GANESAN (JM) AND SHRI B.R. BASKA RAN(AM) I.T.A NO. 762/COCH/2013 (ASSESSMENT YEAR 2008-09) SEA FOOD PARK INDIA LIMITED VS DY.CIT, CIR.4(1) XIII/99A, KELTRON ROAD, AROOR KOCHI ALAPPUZHA 688 535 PAN : AAFCS2622A (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI VEDANGA R PRABHU RESPONDENT BY : SHRI KK JOHN, SR DR / SMT. LATA V KUMAR, JR DR DATE OF HEARING : 25-03-2014 DATE OF PRONOUNCEMENT : 31-03-2014 O R D E R PER N.R.S. GANESAN (JM) THE ASSESSEE FILED THE APPEAL CHALLENGING THE CORR ECTNESS OF THE ORDER OF CIT(A)-II, KOCHI DATED 27-09-2013 FOR THE ASSESSMENT YEAR 2008- 09. 2 ITA NO.762/COCH/2013 2. THE FIRST GROUND OF APPEAL IS WITH REGARD TO DIS ALLOWANCE OF RS. 62,34,000 U/S 40(A)(IA) OF THE ACT. 3. SHRI VEDANGA R PRABHU, THE LD.REPRESENTATIVE FOR THE ASSESSEE SUBMITTED THAT THE ASSESSEE COMPANY WAS PROMOTED BY SEA FOOD EXPORT ASSOCIATION OF INDIA, SEA FOOD EXPORTERS AND MIDCON (MARINE PRODUCTS INFRASTRUCTURE DEVELOPMENT CO-OPERATION (P) LTD, A SUBSIDIARY OF MPEDA TO PROMOTE SEA FOOD PROCESSING UNITS. ACCORDING TO THE LD.REPRESENTTIVE, THE ASSESSEE IS A FUNCTIONAL INDUSTRIAL ESTATE TO C REATE BASIC INFRASTRUCTURE FACILITY AND TO LET THEM OUT TO SEA FOOD EXPORTERS. THE COMPANY WAS SET UP AND STARTED COMMERCIAL PRODUCTION FROM THE ASSESSME NT YEAR 2004-05. ACCORDING TO THE LD.REPRESENTTIVE, THE ASSESSEE CLA IMED DEDUCTION OF RS. 62,34,040 BEING THE ROYALTY PAID TO SEA FOOD EXPORT ASSOCIATION OF INDIA. ACCORDING TO THE LD.REPRESENTATIVE, AS PER THE AGRE EMENT DATED 03-05-2006 EXECUTED BY THE ASSESSEE COMPANY AND SEA FOOD EXPOR T ASSOCIATION OF INDIA, THE ASSESSEE HAD TO PAY 20% OF GROSS REVENUE TO THEM. ACCORDING TO THE LD.REPRESENTATIVE, THE ASSESSEE, HOWEVER, CO ULD NOT DEDUCT TAX AT SOURCE AT THE TIME OF PAYMENT. REFERRING TO SECTIO N 40(A)(IA) OF THE ACT, THE LD.REPRESENTATIVE SUBMITTED THAT WHEN THE ASSESSEE PAYS ROYALTY, ACCORDING TO THE LD.REPRESENTATIVE, TAX HAS TO BE D EDUCTED. HOWEVER, BY MISTAKE, IT COULD NOT BE DEDUCTED. ACCORDING TO TH E LD.REPRESENTATIVE, THE RECIPIENT, VIZ. SEA FOOD EXPORT ASSOCIATION OF INDI A, HOWEVER, PAID TAX IN 3 ITA NO.762/COCH/2013 RESPECT OF THE AMOUNT RECEIVED FROM THE ASSESSEE. THEREFORE, ACCORDING TO THE LD.REPRESENTATIVE, THERE CANNOT BE ANY FURTH ER LIABILITY ON THE PART OF THE ASSESSEE SO AS TO CALL FOR ANY DISALLOWANCE U/S 40(A)(IA). REFERRING TO PROVISIONS OF SECTION 40(A)(IA), MORE PARTICULARLY, SECOND PROVISO, THE LD.REPRESENTATIVE SUBMITTED THAT WHEN THE ASSESSEE WAS NOT DEEMED TO BE AN ASSESSEE IN DEFAULT UNDER PROVISO TO SUB SECTION (1) OF SECTION 201 IT SHALL BE DEEMED THAT THE ASSESSEE HAS DEDUCTED AND PAID SUCH TAX ON SUCH SUM ON THE DATE OF FURNISHING OF RETURN OF INC OME BY THE RECIPIENT OF THE AMOUNT. ACCORDING TO THE LD.REPRESENTATIVE, TH OUGH THIS PROVISION CAME INTO EFFECT WITH EFFECT FROM 01-04-2013 IT WILL OPE RATE RETROSPECTIVELY, THEREFORE, FOR THE ASSESSMENT YEAR UNDER CONSIDERAT ION ALSO, THE SECOND PROVISO INTRODUCED BY PARLIAMENT IS APPLICABLE. 4. ON THE CONTRARY, SMT. LATHA V KUMAR, THE LD.DR S UBMITTED THAT ADMITTEDLY THE TAX WAS NOT DEDUCTED. THE PARLIAMEN T INTRODUCED SECOND PROVISO TO SECTION 40(A)(IA) IN FINANCE ACT, 2012 W ITH EFFECT FROM 01-04- 2013. THE KERALA HIGH COURT IN M/S PRUDENTIAL LOGI STICS AND TRANSPORTS VS ITO IN I.T.A. NO.1 OF 2014 BY JUDGMENT DATED 13- 01-2014 CONSIDERING THE SECOND PROVISO TO SECTION 40(A)(IA) FOUND THAT THE AMENDMENT GIVING BREATHING SPACE TO THE PAYER OF THE AMOUNT IS WITH EFFECT FROM 01-04-2013, THEREFORE, THE SAID BENEFIT IS NOT APPLICABLE TO TH E ASSESSEE FOR THE ASSESSMENT YEAR 2007-08. IN VIEW OF THIS JUDGMENT OF THE KERALA HIGH 4 ITA NO.762/COCH/2013 COURT, ACCORDING TO THE LD.REPRESENTATIVE, SECOND P ROVISO TO SECTION 40(A)(IA) WHICH WAS INTRODUCED BY FINANCE ACT, 2012 WITH EFFECT FROM 01- 04-2013 CANNOT BE APPLIED RETROSPECTIVELY. THEREFO RE, IN THE INSTANT CASE, MERELY BECAUSE THE RECIPIENT OF THE AMOUNT HAS PAID THE TAX CANNOT BE A REASON TO EXTEND THE BENEFIT AVAILABLE UNDER SECOND PROVISO TO SECTION 40(A)(IA) OF THE ACT. 5. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS ON EITH ER SIDE AND ALSO PERUSED THE MATERIAL AVAILABLE ON RECORD. ADMITTED LY, THE ASSESSEE IS LIABLE TO DEDUCT AND PAY TAX ON THE ROYALTY PAID TO SEA FOOD EXPORTERS ASSOCIATION OF INDIA. IT IS ALSO AN ADMITTED FACT THAT THE ASSESSEE HAS NOT DEDUCTED TAX WHILE MAKING THE PAYMENT. THE ASSESSE E NOW CLAIMS THAT THE RECIPIENT OF THE AMOUNT, VIZ. SEA FOOD EXPORTER S ASSOCIATION OF INDIA HAS PAID THE TAX, THEREFORE, THERE CANNOT BE ANY DI SALLOWANCE U/S 40(A)(IA) OF THE ACT IN VIEW OF SECOND PROVISO TO SECTION 40( A)(IA) WHICH WAS INTRODUCED BY FINANCE ACT, 2012 WITH EFFECT FROM 01 -04-2013. THE KERALA HIGH COURT WHILE EXAMINING THE PROVISIONS IN SECOND PROVISO TO SECTION 40(A)(IA) FOUND THAT THE BENEFITS CONFERRED BY PROV ISO TO SECTION 40(A)(IA) IS NOT AVAILABLE FOR THE ASSESSMENT YEAR 2007-08. IN OTHER WORDS, SECOND PROVISO TO SECTION 40(A)(IA) OPERATES PROSPECTIVELY AND NOT RETROSPECTIVELY. IN VIEW OF THIS JUDGMENT OF THE KERALA HIGH COURT I N M/S PRUDENTIAL LOGISTICS AND TRANSPORTS (SUPRA), THIS TRIBUNAL IS OF THE CONSIDERED OPINION 5 ITA NO.762/COCH/2013 THAT THE BENEFITS EXTENDED BY PARLIAMENT BY FINANCE ACT, 2012 WITH EFFECT FROM 01-04-2013 BY SECOND PROVISO TO SECTION 40(A)( IA) CANNOT BE APPLICABLE TO THE ASSESSEE FOR THE ASSESSMENT YEAR UNDER CONSIDERATION. THEREFORE, WE DO NOT FIND ANY INFIRMITY IN THE ORDE R OF THE LOWER AUTHORITY. ACCORDINGLY, THE SAME IS CONFIRMED. 6. THE SECOND GROUND OF APPEAL IS WITH REGARD TO DI SALLOWANCE OF DEPRECIATION. ACCORDING TO THE LD.REPRESENTATIVE, THE BUSINESS OF THE ASSESSEE IS TO CREATE INFRASTRUCTURE FACILITY AND L ET THEM OUT TO SEA FOOD EXPORTERS. ACCORDING TO LD.REPRESENTATIVE, THE MOM ENT THE UNIT WAS HANDED OVER TO THE CUSTOMER, THE ASSESSEE PUT THE U NIT FOR USE IN THE BUSINESS. ACCORDING TO THE LD.REPRESENTATIVE, CREA TION OF THE FACILITY AND LETTING THEM OUT TO SEA FOOD EXPORTERS IS THE BUSIN ESS OF THE ASSESSEE. THEREFORE, AS SOON AS THE PROCESSING UNITS ARE CREA TED AND THEY WERE HANDED OVER TO SEA FOOD EXPORTERS, ACCORDING TO THE LD.REPRESENTATIVE, THE ASSESSEE PUT THE PROCESSING UNIT IN USE. IF THE UN IT WAS NOT USED BY SEA FOOD EXPORTERS FOR THEIR BUSINESS FOR ANY REASONS, WHATEVER MAY BE, IT IS NONE OF THE CONCERN OF THE ASSESSEE. THE BUSINESS OF THE ASSESSEE IS LETTING OUT THE PROCESSING UNIT ON HIRE. THEREFORE , MERELY BECAUSE SEA FOOD EXPORTERS, WHO TOOK THE PROCESSING UNIT ON HIR E FROM THE ASSESSEE COULD NOT USE THE SAME FOR WHATEVER REASONS THEY MA Y HAVE, THE DEPRECIATION CLAIMED BY THE ASSESSEE CANNOT BE DENI ED. 6 ITA NO.762/COCH/2013 7. ON THE CONTRARY, THE LD.DR SUBMITTED THAT THE AS SESEE HAS NOT PUT THE PROCESSING UNIT TO USE. THEREFORE, THE LOWER A UTHORITIES HAVE RIGHTLY DISALLOWED THE CLAIM OF THE ASSESSEE. 8. WE HAVE CAREFULLY GONE THROUGH THE ORDERS OF THE LOWER AUTHORITIES AND ALSO CONSIDERED THE ARGUMENTS MADE ON EITHER SI DE. IT IS NOT IN DISPUTE THAT THE BUSINESS OF THE ASSESSEE IS TO CRE ATE PROCESSING UNITS AND LET THEM OUT TO SEA FOOD EXPORTERS. ONCE THE ASSES SEE CREATED THE PROCESSING UNIT AND HANDED OVER THE SAME TO SEA FOO D EXPORTES ON HIRE OR LEASE IT HAS TO BE TREATED THAT THE ASSESSEE HAS USED THE PROCESSING UNIT FOR ITS BUSINESS. MERELY BECAUSE SEA FOOD EXP ORTERS, WHO TOOK THE PROCESSING UNIT ON HIRE COULD NOT USE THE ASSET FOR WHATEVER REASONS THEY MAY HAVE, THAT CANNOT BE A REASON TO DENY DEPRECIAT ION TO THE ASSESSEE. AS FAR AS THE ASSESSEE IS CONCERNED, THE PROCESSING UNIT WAS PUT TO USE THE MOMENT IT WAS HANDED OVER TO SEA FOOD EXPORTERS . THEREFORE, THIS TRIBUNAL IS OF THE CONSIDERED OPINION THAT THE LOWE R AUTHORITIES ARE NOT JUSTIFIED IN REJECTING THE CLAIM OF DEPRECIATION. ACCORDINGLY, THE ORDERS OF THE LOWER AUTHORITIES ARE SET ASIDE AND THE ASSESSI NG OFFICER IS DIRECTED TO ALLOW THE CLAIM OF DEPRECIATION IN RESPECT OF THE P ROCESSING UNITS WHICH WERE HANDED OVER TO SEA FOOD EXPORTERS. 7 ITA NO.762/COCH/2013 9. IN THE RESULT, APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 31 ST MARCH, 2014. SD/- SD/- (B.R. BASKARAN) (N.R.S. GANESAN) ACCOUNTANT MEMBER JUDICIAL MEMBER COCHIN, DT : 31 ST MARCH, 2014 PK/- COPY TO: 1. SEA FOOD PARK INDIA LIMITED, XIII/99A, KELTRON R OAD, AROOR, ALAPPUZHA 688 534 2. DY.CIT, CIR.4(1), KOCHI 3. THE COMMISSIONER OF INCOME-TAX, KOCHI 4. THE COMMISSIONER OF INCOME-TAX(A)-II, KOCHI 5. THE DR (TRUE COPY) BY ORDER ASSTT. REGISTRAR, INCOME-TAX APPELLATE TRIBUNAL, COCHIN BENCH