M/s. Terra Engergy Limited, CHENNAI V. ACIT, CHENNAI

ITA 795/CHNY/2012

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 61207 (ITAT-CHENNAI)
• Duration Of Justice: 2 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-06-2012
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2005-2006
• Appeal Filed On: 12-04-2012
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: DR S MOHARANA
• Section: 143(3); 115JB

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH : CHENNAI [BEFORE SHRI N.S. SAINI, ACCOUNTANT MEMBER AND SHRI CHALLA NAGENDRA PRASAD, JUDICIAL MEMBER] I.T.A.NOS.794 TO 797/MDS/2012 ASSESSMENT YEARS : 2004-05, 2005-06, 2006-07 & 2 007-08 M/S TERRA ENERGY LTD C/O SHRI R.VIJAYARAGHAVAN, ADVOCATE NEW NO.75A(OLD NO.105A) DR. RADHAKRISHNAN SALAI MYLAPORE, CHENNAI - 4 VS THE ACIT COMPANY CIRCLE III(2) CHENNAI (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI SAROJ KUMAR PARIDA, ADVOCATE RESPONDENT BY : DR. S.MOHARANA, CIT/DR DATE OF HEARING : 20.06.2012 DATE OF PRONOUNCEMENT : 22.06.2012 O R D E R PER N.S. SAINI, ACCOUNTANT MEMBER THESE ARE APPEALS FILED BY THE AS SESSEE AGAINST SEPARATE ORDERS OF THE CIT(A)-III, CHENNAI, BUT DATED 30.1.2 012, FOR ASSESSMENT YEARS 2004-05, 2005-06, 2006-07 & 2007-08. 2. THE ONLY ISSUE INVOLVED IN ALL THE APPEALS U NDER CONSIDERATION EXCEPT ASSESSMENT YEAR 2006-07, IS TH AT THE CIT(A) ERRED IN ALLOCATING THE CORPORATE OFFICE EXPENSES O N TURNOVER BASIS AS AGAINST NET ASSET BASIS. I.T.A.NOS. 794 TO 797/12 :- 2 -: 3. AT THE TIME OF HEARING, BOTH THE PARTIES BEFORE US AGREED THAT THIS ISSUE HAS BEEN DECIDED AGAINST THE ASSES SEE AND IN FAVOUR OF THE REVENUE BY THE TRIBUNAL IN ASSESSEES OWN CASE FOR ASSESSMENT YEAR 2003-04 IN I.T.A.NOS.601/MDS/2007 AND 540/MDS/ 2007, ORDER DATED 18.1.2008. 4. WE FIND THAT THE CIT(A) HAS DECIDED THE ISSUE IN AL L THE ASSESSMENT YEARS UNDER CONSIDERATION BY GIVING A CO MMON FINDING, THEREFORE, WE ARE EXTRACTING OUT THE FINDING OF THE CIT(A) FOR ASSESSMENT YEAR 2004-05 WHICH IS AS UNDER: 4 . THE FIRST ISSUE PERTAINS TO DISALLOWANCE IN RESPECT OF ALLOCATION OF EXPENDITU R E TO THE EXTENT OF RS . 17 ,23,111/-. THE AO NOTICED THAT THE ASSESSEE HAD DEBITED AN AMOUNT OF RS . 45,73,892/- AS ASSESSEE'S SHARE OF COMMON EXPENDITURE OF GR O UP COMPANIES OF T ASL . THE ASSESSEE SUBMITTED TO THE AO THAT THE ASSESSEE I S A GROUP COMPANY OF T ASL . ALL THE GROUP COMPANIES OF T ASL HAVE A REGISTERED OFF I CE AT ELDORADO BUILDING, NO . 112, N . H . ROAD, CHENNAI-34. HENCE ALL THE FUNCTIONS AT THE CORPORAT E LEVEL FOR ALL THE GROUP COMPANIES WERE TAKEN CARE BY THE SAME GROUP OF EMPLOYEES AND IN THE SAME BUILDING FOR EASY ADMINISTRATION . ALL THE COMMON EXPENDITURE AT THE CORPORATE LEVEL WERE INCURRED BY T ASL AND THE SAME ARE ALLO CATED TO THE GROUP COMPANIES ON THE BASIS OF NET WORTH OF GR OUP COMPANIES AT THE BEGINNING OF EVERY YEAR . THE AO OBSERVED THAT THIS SYSTEM OF ALLOCATION OF COMMON EXPENDITU RE BASED ON NET ASSET VALUE OF THE FIXED ASSETS WAS NOT PROP ER . ON THE BASIS OF TURNOVER SUBMITTED BY THE ASSESSEE, HE DISALLOWED THE EXCESS AMOUNT CLAIMED AS COMMON EXPENDITURE OF RS.17 , 23 , , 111/ - (RS . 46,73 , 892/ - - RS . 28 , 50,871/-) AND ADDED IT BACK TO THE TOTAL INCOME OF THE ASSESSEE. 4 . 1 THE ID . AR HAS ADMITTED THAT THE ISSUE WAS DECIDED AGAINST THE APPELLANT BY THE HON ' BLE ITAT IN ITS OWN CASE . FOR AY 2003-04 . HE HAS, HOWEVER , SUBMITTED AS UNDER : I.T.A.NOS. 794 TO 797/12 :- 3 -: ' THIRU AROORAN SUGARS LTD IS THE FLAGSHIP COMPANY OF THE GROUP OF THE APPELLANT . CERTAIN COMMON FACILITIES HAVE BEEN PROVIDED BY THIRU AROORAN SUGARS LTD TO THE APPELL ANT AS WELL AS ANOTHER COMPANY , SHREE AMBIKA SUGARS LTD. THESE INCLUDE PROVISIONS OF SPACE AT CORPORATE OFFICE, C OMMON STAFF, TELEPHONE FACILITIES ETC . THE EXPENSES FOR ALL THESE FACILITIES ARE INCURRED BY THIRU AROORAN SUGARS LTD AND THIRU AROORAN SUGARS LTD ALLOCTES THE SAME TO THE APPELLA NT AND OTHER COMPANY IN THE GROUP VIZ . SHREE AMBIKA SUGARS LTD. THE SAID ALLOCATION WAS BASED ON THE ASSETS OF THE AFORESAID COMPANIES . IN THE ASSESSMENT FOR THE ASSESSMENT YEAR 2003- , 04, THE ALLOCATION OF THE EXPENSES ON THE BASIS OF ASSETS OF THE COMPANIES WAS NOT ACCEPTED BY THE ASS ESSING OFFICER WHO HAD , ALLOCATED THE EXPENSES ON THE BASIS OF THE TURNOVER OF THE CONCERNED COMPANIES AND DISALLOWED THE BALANCE . THIS WAS CONFIRMED BY THE CIT (A) AND ALSO BY THE ITAT , CHENNAI IN THE APPELLANT ' S CASE FOR THE AY 2003-04 . COPY OF THE AFORESAID ORDERS OF THE CIT (A) AND IN COME TAX APPELLATE TRIBUNAL ARE ENCLOSED. HOWEVER , THE APPELLANT WOULD LIKE TO SUBMIT THAT THE APPEALS OF THIRU AROORAN SUGARS LTD FOR THE ABOVE YEARS AR E ALSO PENDING WITH THE LEARNED COMMISSIONER OF INCOME TA X (APPEALS)-III, IN ITA NOS 414/07-08 , 475/08 - 09 , 476/08 - 09,477/0809 , 644/09-10 , 739/09-10 AND 458/10 - 11- ASST YEARS 2000-01 TO 2003-04 AND 2005 - 06 TO 2007 - 08. IN VIEW OF THE DISALLOWANCE OF THE CORPORATE OVERHE ADS IN THE HANDS OF THE APPELLANT , THE APPELLANT PRAYS THAT THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) MAY GIVE A DI RECTION TO THE ASSESSING OFFICER OF THIRU AROORAN SUGARS LT D TO GIVE SUITABLE RELIEF IN THE HANDS OF THIRU AROORAN SUG ARS LTD. 4.2 I HAVE CAREFULLY CONSIDERED THE FACTS OF THE CA SE AND THE SUBMISSION OF THE ID . AR . I FIND THAT THERE WAS IDENTICAL ISSUE IN THE APPELLANT ' S OWN CASE FOR THE AY 2003-04 WHICH WAS DECIDED AGAINST THE APPELLANT IN ITA NO.601 & 540/2 007 DATED 18 . 01.2008 BY THE HON'BLE ITAT WHEREIN IT WAS HELD AS UNDER: ' WE HAVE HEARD BOTH THE COUNSELS AND PERUSED THE REL EVANT RECORDS . WE FIND THAT THOUGH THE LEARNED COUNSEL HAS SUBMITTED THAT THIS METHOD HAS BEEN FOLLOWED REGUL ARLY IT HAS NOT BEEN ESTABLISHED WHETHER THE EARLIER ASSESSMENT S WERE SCRUT I NY ASSESSMENTS UNDER SECTION 143(3) OR NOT : MOREOVER, THE DECISION OF THE TRIBUNAL CITED BY THE LEARNED COUNSEL OF THE ASSESSEE WAS RENDERED IN THE CONTEXT OF ALLOCATION IN EARLIER PERIODS . ON THE BASIS OF REPORT OF REPUTED CONSULTANT - PRICE WATERHOUSE COOPERS (PWC) . IN THIS CASE , IT IS NOT THE I.T.A.NOS. 794 TO 797/12 :- 4 -: CASE THAT THE EARLIER METHOD OF ALLOCATION HAS BEEN ARRIVED AT ON THE BASIS OF ANY EXPERT ADVICE . WE ALSO FIND THAT THE ASSESSEE BEING ENGAGED IN THE FIELD OF ENERGY, THE EXPENDITURE IN FIXED ASSETS I N SUCH A CASE IS LIABLE TO BE HIGH WHICH IS BOUND TO RESULT IN LARGER ALLOCATION OF C OMMON EXPENSES TO THE ASSESSEE COMPANY . IN THIS REGARD, WE AGREE WITH THE LEARNED COMMISSIONER OF INCOME TAX (APPEA LS) THAT THE ADMINISTRATIVE EXPENSES SUCH AS DIRECTORS REMU NERATION , SALARY , ELECTRICITY, RENT , FINANCE CHARGES AND OTHER ADMINISTRATIVE EXPENSES ARE MORE HAVING REGARD TO T HE NATURE OF ACTIVITIES OF EACH COMPANY AND IN THIS V IEW OF THE MATTER, ALLOCATION OF SUCH EXPENSES PROPORTIONATE T O TURNOVER OF EACH CONCERN SHOULD BE FOLLOWED. MERELY BECAUSE AN INAPPROPRIATE METHOD HAS BEEN FOLLOWED IN THE P AST WOULD NOT JUSTIFY IN PERPETUATING THE SAME . HENCE , WE AFFIRM THE ORDER OF AUTHORITIES BELOW IN THIS REGARD AND DECID E THE ISSUE AGAINST THE ASSESSEE .' RESPECTFULLY FOLLOWING THE ORDER OF THE HON ' BLE IT AT THE GROUND IS DISMISSED. 5. AS BOTH THE PARTIES HAVE AGREED BEFORE US THAT THE ISSUE IS COVERED BY THE ORDER OF THE TRIBUNAL IN ASSESSEE S OWN CASE IN ASSESSMENT YEAR 2003-04 AGAINST THE ASSESSEE AND T HE CIT(A) HAS FOLLOWED THE ORDER OF THE TRIBUNAL IN ASSESSMENT YE AR 2004-05 AND DISMISSED THE GROUND OF APPEAL OF THE ASSESSEE FOR ALL THE ASSESSMENT YEARS UNDER CONSIDERATION, WE DO NOT FIND ANY GOOD REASON TO INTERFERE WITH THE ORDER OF THE CIT(A). IT IS CONFIRMED AND THE GROUNDS OF APPEAL OF THE ASSESSEE FOR ALL THE ASSESSMENT YEAR S UNDER CONSIDERATION ARE DISMISSED. 6. THE ONLY OTHER ISSUE RAISED BY THE ASSESSEE IN ASS ESSMENT YEAR 2006-07 IS THAT THE CIT(A) ERRED IN CONFIRMI NG THE ADDING BACK I.T.A.NOS. 794 TO 797/12 :- 5 -: OF THE PROVISION FOR DEFERRED TAX WHILE COMPUTING T HE BOOK PROFIT U/S 115JB OF THE ACT. 7. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSING OFFICER, WHILE DETERMINING THE BOOK PROFITS U/S 115JB OBSER VED THAT AS PER AMENDED PROVISION OF SECTION 115JB CLAUSE(H) OF EXP LANATION 1, THE AMOUNT OF DEFERRED TAX AND THE PROVISION DEBITED IN THE PROFIT & LOSS ACCOUNT IS TO BE ADDED FOR THE PURPOSE OF COMPUTING BOOK PROFITS. HE, THEREFORE, MADE AN ADDITION OF ` 2,41,30,451/- ON ACCOUNT OF PROVISION FOR DEFERRED TAX TO THE BOOK PROFITS OF THE ASSESS EE U/S 115JB OF THE ACT. 8. ON APPEAL, THE CIT(A) CONFIRMED THE ACTION OF THE A SSESSING OFFICER FOR THE REASON THAT THE AMOUNT OF PROVISION FOR DEFERRED TAX HAS TO BE ADDED TO THE BOOK PROFITS IN VIEW OF THE AMEN DED PROVISION OF SECTION 115JB OF THE ACT. 9. AT THE TIME OF HEARING, THE A.R OF THE ASSESSEE VE RY FAIRLY CONCEDED THAT THE ISSUE HAS TO BE DECIDED AGAINST T HE ASSESSEE IN VIEW OF THE AMENDMENT MADE TO SECTION 115JB OF THE ACT AS PER CLAUSE (H) OF EXPLANATION 1 OF SUB-SECTION (2) OF SECTION 115JB WHICH PROVIDES THAT THE AMOUNT OF DEFERRED TAX AND PROVISION THERE FOR HAS TO BE ADDED BACK TO THE BOOK PROFITS PREPARED U/S 115JB . THEREFORE, WE DISMISS THIS GROUND OF APPEAL OF THE ASSESSEE. I.T.A.NOS. 794 TO 797/12 :- 6 -: 10. IN THE RESULT, ALL THE FOUR APPEALS FILED BY THE A SSESSEE ARE DISMISSED. ORDER PRONOUNCED ON FRIDAY, THE 22 ND OF JUNE, 2012, AT CHENNAI. SD/- SD/- (CHALLA NAGENDRA PRASAD) JUDICIAL MEMBER (N.S.SAINI) ACCOUNTANT MEMBER DATED: 22 ND JUNE, 2012 RD COPY TO: APPELLANT/RESPONDENT/CIT(A)/CIT/DR