M/s. Bhushan Steels Ltd, New Delhi V. DCIT, New Delhi

ITA 807/DEL/2009

• Counselvise Citation: [2009] 115 COUNSELVISE.COM (IT) 1300 (ITAT-DELHI)
• Duration Of Justice: 8 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-11-2009
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 10-11-2009
• Assessment Year: 2006-2007
• Appeal Filed On: 05-03-2009
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: A K PANDEY MS
• Keywords: Depreciation; Capital receipt
• Section: 115JB

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH A NEW DELHI BEFORE SHRI G.E. VEERABHADRAPPA : VICE PRESIDENT; A ND SHRI I.P. BANSAL : JUDICIAL MEMBER ITA NO. 1075/DEL/09 ASSTT. YR: 2006-07 DCIT CIRCLE- 2(1), VS M/S BHUSHAN STEELS LTD., NEW DELHI (FORMERLY M/S BHUSHAN STEEL & STRIPS LTD.), F-BLOCK, 1 ST FLOOR, INTERNATIONAL TRADE TOWER, NEHRU PLACE, NEW DELHI. PAN/GIR NO. AAACB1247M AND ITA NO. 807/DEL/09 ASSTT. YR: 2006-07 M/S BHUSHAN STEELS LTD., VS. DCIT CIRCLE-2(1), (ADDRESS AS ABOVE) NEW DELHI. ( APPELLANT ) ( RESPONDENT ) REVENUE BY : SHRI A.K. PANDEY MS. CIT DR ASSESSEE BY : SHRI ASHWANI KUMAR CA O R D E R PER G.E. VEERABHADRAPPA, V.P: THESE CROSS APPEALS ARISE OUT OF THE ORDER DATED 1 6-12-2008 OF THE CIT(APPEALS)-V, NEW DELHI FOR A.Y. 2006-07. ITA NO. 1075/DEL/09 ( REVENUES APPEAL FOR A.Y. 200 6-07): 2. THE FIRST GROUND RAISED IN THE REVENUES APPEAL READS AS UNDER: ITA 1075 & 807/DEL/09 BHUSHAN STEEL LTD. 2 ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) ERRED IN LAW AND ON FACTS IN DELETING THE AD DITION OF RS. 62,59,97,849/- MADE ON ACCOUNT OF SALES TAX SUBSID Y WHICH WAS CLAIMED AS CAPITAL RECEIPTS BY THE ASSESSEE, BU T RIGHTLY TREATED AS REVENUE RECEIPTS BY THE ASSESSING OFFIC ER. 2.1. THE ASSESSEE IS RUNNING A PLANT LOCATED AT SAH IBABAD DISTRICT GHAZIABAD, U.P, A NOTIFIED BACKWARD AREA, CONSEQUEN TLY ENTITLED TO EXEMPTION UNDER THE PROVISIONS OF THE U.P. SALES TA X ACT. THE QUANTUM AND PERIOD OF THE SUBSIDY DEPENDANT ON THE POINT OF TIM E AT WHICH THE PLANT COMMENCED PRODUCTION AND IS DETERMINABLE AS A PERCE NTAGE OF THE FIXED CAPITAL INVESTMENT. IN THE COMPUTATION OF INCOME FI LED ALONG WITH THE RETURN OF INCOME, THE AMOUNT OF SUBSIDY AVAILED BY THE COM PANY DURING THE YEAR UNDER CONSIDERATION HAS BEEN TREATED AS CAPITAL SUB SIDY AND CONSEQUENTLY REDUCED FROM THE TAXABLE INCOME. THE STAND OF THE A SSESSEE BEFORE THE ASSESSING OFFICER WAS THAT ON SIMILAR FACTS, ASSESS EES CLAIM FOR A.Y. 1994- 95 TO 2001-02, HAS BEEN ALLOWED BY THE ITAT. THE AS SESSING OFFICER, HOWEVER, DISALLOWED THE CLAIM OF THE ASSESSEE ON TH E GROUND THAT THE DEPARTMENT HAD NOT ACCEPTED THE CLAIM OF THE ASSESS EE AND THE MATTER WAS SUBJUDICE BEFORE THE HIGH COURT. IN APPEAL, THE C IT(A) ALLOWED THE CLAIM OF THE ASSESSEE BY PLACING RELIANCE ON EARLIER ORDE RS OF THE ITAT IN ASSESSEES OWN CASE AS ALSO THE ORDERS OF CIT(A) I N ASSESSEES OWN CASE FOR ITA 1075 & 807/DEL/09 BHUSHAN STEEL LTD. 3 A.Y. 2002-03 TO 2005-06. AGGRIEVED, THE REVENUE IS IN APPEAL BEFORE THE TRIBUNAL. 2.2. AFTER HEARING BOTH SIDES WE FIND THAT THE ISSU E STANDS ALREADY CONCLUDED AGAINST THE DEPARTMENT BY THE AFORESAID O RDERS OF THE TRIBUNAL IN ASSESSEES OWN CASE. WE ALSO FIND THAT THE ISSUE I S ALSO COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF SPECIAL BENCH OF TH E ITAT IN THE CASE OF DCIT VS. RELIANCE INDUSTRIES LTD. (2004) 88 ITD 273 . THE ORDER OF THE CIT(A) ON THE ISSUE IN QUESTION BEING IN CONFORMITY WITH EARLIER ORDERS OF THE TRIBUNAL, WE UPHOLD THE SAME. 3. GROUND NO. 2 : GROUND NO. 2 IN REVENUES APPEAL READS AS UNDER: ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) ERRED IN LAW AND ON FACTS IN DELETING THE DI SALLOWANCE OF DEPRECIATION OF 12,28,921/- MADE ON ACCOUNT OF BUIL DING NOT REGISTERED IN THE NAME OF THE ASSESSEE. 3.1. THE ASSESSEE CLAIMED DEPRECIATION ON ASSETS, W HICH WERE NOT REGISTERED IN THE ASSESSEES NAME. THERE IS NO DISP UTE AS TO THE FACT THAT THOSE ASSETS WERE USED IN THE COURSE OF ASSESSEES BUSINE SS AND THE CIT(A) FOUND THAT THE ITAT IN THE ASSESSEES OWN CASE FOR ALL TH E EARLIER YEARS I.E. 1994-95 TO 2005-06 HAS DECIDED THE ISSUE IN FAVOUR OF THE A SSESSEE BY FOLLOWING THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE O F PODDAR CEMENT LTD. 226 ITR 625 AND MYSORE MINERALS LTD. 239 ITR 775. ITA 1075 & 807/DEL/09 BHUSHAN STEEL LTD. 4 3.2. AFTER HEARING BOTH SIDES WE FIND THAT THE CIT( A) HAS NOT COMMITTED ANY ERROR IN FOLLOWING THE DECISIONS OF THE ITAT IN ASSESSEES OWN CASE WHICH THEMSELVES ARE BASED UPON THE BINDING PRECEDE NT OF THE APEX COURT, AS CITED SUPRA. WE DECLINE TO INTERFERE. 4. GROUND NO. 3: THIS GROUND IS GENERAL IN NATURE AND REQUIRES NO ADJUDICATION. ITA NO. 807/DEL/09 ( ASSESSEE S APPEAL FOR A.Y. 20 06-07): 5. GROUND NO. 1: GROUND NO. 1 IN ASSESSEES APPEAL RELATES TO ACTION OF THE AO IN REDUCING A SUM OF RS. 1,72,82,880/- ON AC COUNT OF SYNCHRONIZATION CHARGES FROM THE PROFITS FOR THE P URPOSE OF COMPUTING DEDUCTION U/S 80-IA EVEN THOUGH THE SAID LIABILITY HAD NOT BEEN CRYSTALLIZED AND THE AMOUNTS IN QUESTION HAVE NOT BEEN DEBITED T O THE P&L A/C. 5.1. THE FACTS ARE THAT U.P. POWER CORPORATION HAD LEVIED CERTAIN SYNCHRONIZATION CHARGES, WHICH THE ASSESSEE CHALLEN GED BEFORE THE LUCKNOW BENCH OF HONBLE ALLAHABAD HIGH COURT. THE HIGH COU RT VIDE ITS INTERIM ORDER DATED 28-11-2003 DIRECTED THE ASSESSEE TO PAY HALF OF THE AMOUNT OF SYNCHRONIZATION CHARGES EVERY MONTH TILL THE FINALI ZATION OF THE APPEAL. THE ASSESSEE DID NOT DEBIT THE AMOUNT TO THE P&L A/C ON THE GROUND THAT THE MATER WAS SUBJUDICE AND FINAL LIABILITY OR OTHERWIS E WOULD BE KNOWN ONLY AFTER DISPOSAL OF THE APPEAL. THE ASSESSING OFFICER , HOWEVER, WAS OF THE ITA 1075 & 807/DEL/09 BHUSHAN STEEL LTD. 5 VIEW THAT THE SYNCHRONIZATION CHARGES CONSTITUTED A N ASCERTAINED LIABILITY AND WOULD HAVE TO BE REDUCED FROM THE PROFITS OF THE EL IGIBLE UNIT. 5.2. BEFORE US THE LEARNED COUNSEL FOR THE ASSESSEE WAS FAIR ENOUGH TO ADMIT THAT IN A.Y. 2005-06 THE ISSUE IN QUESTION HA S BEEN DECIDED BY THE ITAT IN FAVOUR OF REVENUE BY UPHOLDING THE ORDER O F THE CIT(A). HE, HOWEVER, SUBMITTED THAT THE ASSESSEE HAS NOT GIVEN UP ITS STAND. ON THE OTHER HAND, THE LEARNED DR SUPPORTED THE ORDER OF CIT(A). 5.3. WE HAVE HEARD RIVAL SUBMISSIONS. IN A.Y. 2005- 06 THE VERY SAME ISSUE CAME UP BEFORE THE ITAT AND THE ITAT DELHI BE NCH A VIDE ITS ORDER DATED 28-8-2009 IN ITA NO. 2104/DEL/08 HAS DECIDED THE ISSUE AGAINST THE ASSESSEE BY UPHOLDING THE ORDER OF THE CIT(A) FOR THAT YEAR IN THE FOLLOWING MANNER: 6.4. WE HAVE CONSIDERED THE RIVAL CONTENTIONS. THE ASSE SSEES MAIN CONTENTION THAT THE ASSESSING OFFICER WAS NOT RIGHT IN REDUCING SYNCHRONIZATION CHARGES FROM THE PROFITS OF THE ELI GIBLE UNITS FOR COMPUTATION OF EXEMPTION U/S 80-IA, CANNOT BE ACCEP TED. THE ASSESSEE IS FOLLOWING MERCANTILE SYSTEM OF ACCOUNTING. THE SYNC HRONIZATION CHARGES THAT WERE LEVIED BY THE U.P. POWER CORPORATION WERE NOT CRYSTALIZED AND CONSEQUENTLY THE ACCRUAL OF LIABILITY HAS TAKEN PL ACE DURING THE RELEVANT PREVIOUS YEAR. ALTHOUGH THE ASSESSEE HAS NOT DEBIT ED THE SAME TO THE P&L A/C THE ASSESSING OFFICER IS DUTY BOUND TO REDUCE T HE SAID SUM FROM THE PROFITS OF THE ELIGIBLE UNIT FOR PROPER COMPUTATION OF DEDUCTION U/S 80-IA OF THE ACT. THE PAYABILITY OF THESE LIABILITIES MAY DEPEND UPON THE DECISION OF THE HIGH COURT BUT THE LIABILITY ITSELF HAS CRYSTALIZED DURING THE YEAR IN QUESTION. IN OUR VIEW THE LEARNED CIT(A) WA S RIGHT IN REJECTING THE MAIN CONTENTION OF THE ASSESSEE. WE SEE NO REASON T O INTERFERE. 6.5. AS REGARDS THE ALTERNATIVE CONTENTION OF THE ASSESSEE ON THE AFORESAID ISSUE, IT WAS CLAIMED THAT THE ASSESSING OFFICER WAS NOT CORRECT IN REDUCING THE AMOUNT OF SYNCHRONIZATION CHARGES F ROM THE PROFITS OF THE ELIGIBLE UNITS FOR THE PURPOSE OF COMPUTING DEDUCTI ON U/S 80-IA OF THE ACT WITHOUT APPRECIATING THE FACT THAT THE ASSESSEE HAS NOT DEBITED SYNCHRONIZATION CHARGES TO THE P&L A/C ON THE GROUN D THAT IT WAS NOT ITA 1075 & 807/DEL/09 BHUSHAN STEEL LTD. 6 ASCERTAINED LIABILITY. IT WAS SUBMITTED THAT IN CAS E SYNCHRONIZATION CHARGES WERE TO BE REDUCED FROM THE PROFITS OF THE ELIGIBLE UNIT, THE SAME WOULD HAVE BEEN DEBITED TO THE P&L A/C AND SUCH WOULD HA VE TO BE REWORKED ACCORDINGLY. THIS ASPECT HAS BEEN CORRECTLY APPRECI ATED BY THE CIT(A) AND THE AO WAS DIRECTED TO VERIFY THE FACTUM OF DEBIT T O THE P&L A/C. IN OUR VIEW THE DIRECTION GIVEN BY THE LEARNED CIT(A) IS FAIR AND REASONABLE AND DOES NOT CALL FOR ANY INTERFERENCE. . 5.4. NO CHANGE IN FACTS FOR THE ASSESSMENT YEAR UND ER CONSIDERATION HAS BEEN POINTED OUT BY EITHER OF THE PARTIES. THEREFO RE, WE SEE NO REASON TO INTERFERE IN THE ORDER OF CIT(A). 6. GROUND NO. 2: GROUND NO. 2 IN ASSESSEE S APPEAL RELATES TO THE ACTION OF THE AO IN NOT REDUCING THE BOOK PROFITS COMPUTED U/S 115JB BY AN AMOUNT OF RS. 33,74,03,462/-CLAIMED TO BE THE AMOUN T OF PROFIT FROM EXPORT BUSINESS UNDER SECTION 80 HHC OF THE ACT. 6.1. BEFORE US THE LEARNED COUNSEL FOR THE ASSESSEE WAS FAIR ENOUGH TO ADMIT THAT IN A.Y. 2005-06 THIS ISSUE ALSO HAS BEE N DECIDED BY THE ITAT IN FAVOUR OF REVENUE BY UPHOLDING THE ORDER OF THE CI T(A). HE, HOWEVER, SUBMITTED THAT THE ASSESSEE HAS NOT GIVEN UP ITS ST AND. ON THE OTHER HAND, THE LEARNED DR SUPPORTED THE ORDER OF CIT(A). 6.2. WE HAVE HEARD RIVAL SUBMISSIONS. IN A.Y. 2005- 06 THE VERY SAME ISSUE CAME UP BEFORE THE ITAT AND THE ITAT DELHI BE NCH A VIDE ITS ORDER DATED 28-8-2009 IN ITA NO. 2104/DEL/08 HAS DECIDED THE ISSUE AGAINST THE ITA 1075 & 807/DEL/09 BHUSHAN STEEL LTD. 7 ASSESSEE BY UPHOLDING THE ORDER OF THE CIT(A) FOR THAT YEAR IN THE FOLLOWING MANNER: 8.1. THE LEARNED COUNSEL FOR THE ASSESSEE ALTHOUGH ARGUED THAT DECISIONS OF THE ITAT DATED 7-11-2008 IN ITA NO. 3191/DEL/96 AND ITA NO. 2477/DEL/07 FOR A.Y. 2003-04 AND 2004-05 RESPECTIVE LY, IN ASSESSEE S OWN CASE, ARE IN FAVOUR OF THE ASSESSEE, WHICH ARE BASED ON THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF CIT VS. LAKSHMI MACHINE WORKS (2007) 219 ITR 697 AND THAT OF SPECIAL BENCH OF THE ITAT IN THE CASE OF DCIT VS. SYNCOM FORMULATIONS INDIA LTD. (20 07) 106 ITD 227, HE WAS FAIR ENOUGH TO ADMIT THAT DECISION OF THE SPEC IAL BENCH OF THE ITAT IN THE CASE OF SYNCOM FORMULATION INDIA LTD. (SUPRA ) HAS NOT BEEN APPROVED BY THE HONBLE MUMBAI HIGH COURT IN THE CA SE OF ACIT VS. AJANTA PHARMA LTD. 8.2. AFTER HEARING BOTH THE PARTIES WE FIND NO INFI RMITY IN THE ORDER OF THE CIT(A) ON THE ISSUE IN QUESTION. IN TAKING THIS VIEW WE MAY MENTION THAT WE HAVE FOLLOWED THE RATIO OF DECISION OF HON BLE MUMBAI HIGH COURT IN THE CASE OF AJANTA PHARMA LTD. (SUPRA).(2 23 CTR 441 (BOM.). 6.3. ADMITTEDLY, FACTS OF THE CASE FOR THE ASSESSME NT YEAR IN QUESTION REMAINING THE SAME AS IN A.Y. 2005-06, WE SEE NO R EASON TO INTERFERE WITH THE ORDER OF CIT(A). GROUND IS REJECTED. 7. IN THE RESULT, BOTH THE APPEALS, FILED BY THE RE VENUE AS WELL AS THE ASSESSEE STAND DISMISSED. ORDER PRONOUNCED IN OPEN COURT ON 13-11-2009. SD/- SD/- (I.P. BANSAL ) ( G.E. VEERABHADRAPP A ) JUDICIAL MEMBER VICE PRESIDENT DATED: 13-11-2009. MP COPY TO : 1. ASSESSEE 2. AO 3. CIT 4. CIT(A) 5. DR ITA 1075 & 807/DEL/09 BHUSHAN STEEL LTD. 8