DCIT 7(3), MUMBAI V. VODAFONE INDIA LTD, MUMBAI

ITA 880/MUM/2014

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 4078 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 11 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-02-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: F
• Next Hearing Date: 01-10-2015
• Assessment Year: 2005-2006
• Appeal Filed On: 07-02-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SUMIT KUMAR
• Keywords: Retrospective amendment; Bad and doubtful debts
• Section: 143(3); 234B; 260A; 115JB

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH F, MUMBAI BEFORE SHRI JASON P. BOAZ ACCOUNTANT MEMBER AND SHRI SANDEEP GOSAIN, JUDICIAL MEMBER ITA NO. 880/MUM/2014 (ASSESSMENT YEAR : 2005-06) THE DCIT- 7(3), ROOM NO.615, 6 TH FLOOR, AAYKAR BHAVAN, MK ROAD, MUMBAI 400 020 ... APPELLANT VS. M/S. VODAFONE INDIA LTD., PENINSULA CORPORATE PARK, GANPATRAO KADAM MARG, MUMBAI 400 013 .... RESPONDENT APPELLANT BY : SHRI SUM IT KUMAR RESPONDENT BY : SHRI NISHA NT THAKKAR DATE OF HEARING : 28/01/2016 DATE OF PRONOUNCEMENT : 03/02/2016 ORDER PER JASON P. BOAZ, A.M: THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST T HE ORDER OF THE CIT(APPEALS)-13, MUMBAI DATED 27/11/2013 FOR ASSESS MENT YEAR 2005- 05. 2. THE FACTS OF THE CASE, BRIEFLY, ARE AS UNDER:- 2.1 THE ASSESSEE, A COMPANY ENGAGED IN THE BUSINESS OF CELLULAR SERVICES, FILED ITS RETURN FOR ASSESSMENT YEAR 200 5-06 ON 05/10/2005 DECLARING NIL INCOME AFTER CLAIMING DEDUCTION U/S. 80IA OF THE INCOME 2 ITA NO. 880/MUM/2014 (ASSESSMENT YEAR : 2005-06) TAX ACT, 1961(IN SHORT THE ACT). THE CASE WAS TA KEN UP FOR SCRUTINY AND THE ASSESSMENT WAS COMPLETED U/S.143(3) OF THE ACT VIDE ORDER DATED 3/9/2007, WHEREIN THE BOOK PROFIT U/S. 115JB OF T HE ACT WAS DETERMINED AT RS.3,48,58,12,526/- AFTER MAKING AN A DJUSTMENT OF RS.30,79,21,638/- FOR PROVISION FOR DOUBTFUL DEBTS U/S. 115JB(2) OF THE ACT. ON APPEAL, THE LD. CIT(A) DELETED THE ABOVE ADDITION OF RS. 30,79,21,638/- ON THE GROUND THAT THE PROVISIONS FO R DOUBTFUL DEBTS DID NOT FALL UNDER CLAUSE (C) OF EXPLANATION TO SECTION 115JB OF THE ACT. THIS ORDER OF THE LD. CIT(A) WAS UPHELD BY THE HONBLE ITAT. ON FURTHER APPEAL BY THE REVENUE AGAINST THE ORDER OF THE TRIB UNAL, THE HONBLE HIGH COURT OF PUNJAB & HARYANA IN ITS ORDER IN ITA NO.761 OF 2008 DATED 21/7/2011 HELD THAT SINCE CLAUSE (I) OF EXPLANATION 1 TO SECTION 115JB OF THE ACT HAS BEEN INSERTED RETROSPECTIVELY FROM 1/4/ 2001 BY FINANCE ACT (NO.2), 2009 THE SAME WOULD APPLY TO THE SUBJECT AS SESSMENT YEAR 2005-06 AND REMANDED THE MATTER FOR FRESH ADJUDICAT ION TO THE FILE OF THE ASSESSING OFFICER IN THE LIGHT OF THE RETROSPE CTIVE NATURE OF THE AMENDMENT. THE FRESH ASSESSMENT FOR ASSESSMENT YEA R 2005-06 WAS COMPLETED U/S. 143(3) R.W.S. 260A OF THE ACT VIDE O RDER DATED 4/3/2013, WHEREIN THE BOOK PROFIT U/S. 115JB OF THE ACT WAS DETERMINED AT RS.348,54,20,574/- IN VIEW OF THE ADDITION OF PROVI SION FOR BAD DEBTS AMOUNTING TO RS.30,79,21,638/-, TO WHICH ADJUSTMENT THE ASSESSEE HAD CONSENTED VIDE LETTER DATED 19/12/2011. 2.2 AGGRIEVED BY THE ORDER OF ASSESSMENT FOR ASSES SMENT YEAR 2005- 06 DATED 04/03/2013, THE ASSESSEE PREFERRED AN APPE AL BEFORE THE CIT(APPEALS)-13, MUMBAI CHALLENGING, INTER ALIA, TH E CHARGING OF INTEREST 3 ITA NO. 880/MUM/2014 (ASSESSMENT YEAR : 2005-06) U/S.234C AND 234D OF THE ACT IN ITS CASE. THE LD. CIT(A) DISPOSED OFF THE APPEAL VIDE ORDER DATED 27/11/2013 ALLOWING TH E ASSESSEE PARTIAL RELIEF I.E. DELETING THE INTEREST CHARGED U/S. 234 C OF THE ACT AND UPHOLDING THE CHARGING OF INTEREST U/S. 234D OF TH E ACT. 3. BEING AGGRIEVED BY THE ORDER OF THE LD. CIT(APPE ALS) FOR ASSESSMENT YEAR 2005-06 DATED 04/03/2013, THE REVEN UE HAS PREFERRED THIS APPEAL RAISING THE FOLLOWING GROUNDS:- (I) THE LEARNED CIT(A) HAS ERRED ON FACTS AND IN LAW IN DELETING INTEREST OF RS.14,99,379/- CHARGED U/S. 234C OF THE ACT WITHO UT PROPERLY APPRECIATING THE FACTUAL AND LEGAL MATRIX OF THE CASE AS CLEARLY BROUGHT OUT BY THE ASSESSING OFFICER. (II) THE LEARNED CIT(A) HAS ERRED ON FACTS AND IN L AW IN DELETING INTEREST OF RS.14,99,379/- CHARGED U/S. 234C OF THE ACT WITHOUT PROPERLY APPRECIATING THE FACTS THAT THE ASSESSEE HAS FAILED TO PAY ADVANCE TAX LIABILITY ARISING DUE TO RESPECTIVE AMENDMENT TO SE CTION 115JB WHICH WAS CLEARIFICATORY IN NATURE. 2. THE LD. CIT(A)S ORDER IS CONTRARY IN LAW AND ON FACTS AND DESERVES TO BE SETASIDE. 3. THE APPELLANT CRAVES LEAVE TO AMEND OR ALTER ANY GROUND OR ADD A NEW GROUND THAT MAY BE NECESSARY. 4. THE APPELLANT PRAYS THAT THE ORDER OF CIT(A) ON THE ABOVE GROUNDS BE SET ASIDE AND THAT OF THE AO RESTORED. 4.0 GROUND (I) & (II) - CHARGING OF INTEREST U/S. 234C OF THE ACT. 4.1 IN THESE GROUNDS, THE REVENUE CONTENDS THAT THE LD. CIT(A) ERRED IN DELETING THE INTEREST OF RS.14,99,379/- CHARGED U/S. 234C OF THE ACT WITHOUT FAILING TO APPRECIATE THAT THE ASSESSEE HAD FAILED TO PAY ADVANCE TAX ARISING DUE TO RETROSPECTIVE AMENDMENT TO SECTION 115JB OF THE ACT WHICH WAS CLARIFICATORY IN NATURE. THE LD. DEPARTMENTAL REPRESENTATIVE FOR THE REVENUE WAS HEARD IN SUPPORT OF THE GROUNDS RAISED AND PLACED STRONG RELIANCE ON THE ORDER OF T HE ASSESSING OFFICER IN THE MATTER. 4 ITA NO. 880/MUM/2014 (ASSESSMENT YEAR : 2005-06) 4.2.1 PER CONTRA, THE LD. REPRESENTATIVE FOR THE AS SESSEE SUPPORTED THE IMPUGNED ORDER OF THE LD. CIT(A) IN DELETING THE IN TEREST IT WAS CHARGED U/S. 234C OF THE ACT. IT WAS SUBMITTED THAT THE LD . CIT(A) WAS OF THE VIEW THAT NO ADVANCE TAX LIABILITY SUBSEQUENTLY AR ISING DUE TO AMENDMENT IN LAW, THAT TOO RETROSPECTIVELY, COULD BE FASTENED ON THE ASSESSEE AND, THEREFORE, THE ASSESSEE COULD NOT BE CHARGED INTEREST U/S. 234C OF THE ACT. IT IS SUBMITTED THAT IN COMING TO THIS FINDING, THE LD. CIT(A)FOLLOWED THE DECISION OF THE CO-ORDINATE BENC H OF THIS TRIBUNAL IN THE CASE OF S.R. INVESTMENT LTD., ITA NO.6444/MUM/ 2011 FOR ASSESSMENT YEAR 2005-06. 4.2.2 THE LD. REPRESENTATIVE FOR THE ASSESSEE SUBM ITTED THAT THE ISSUE OF CHARGEABILITY OF INTEREST U/S. 234C OF THE ACT W AS CONSIDERED BY VARIOUS COURTS AND TRIBUNALS AND THE DECISION HAS B EEN RENDERED IN FAVOUR OF THE ASSESSEE HOLDING THAT WHERE THE ASSES SEE HAD NO LIABILITY TO PAY ADVANCE TAX INSTALMENTS AND BECAME LIABLE T O DO SO BY VIRTUE OF A RETROSPECTIVE AMENDMENT MADE AFTER THE CLOSE OF T HE FINANCIAL YEAR, THE ASSESSEE COULD NOT BE HELD TO BE A DEFAULTER I N PAYMENT OF ADVANCE TAX AND NO INTEREST COULD BE CHARGED UPON IT UNDER SECTION 234C OF THE ACT. IN SUPPORT OF THIS PROPOSITION, THE LD. REPRE SENTATIVE FOR THE ASSESSEE PLACED RELIANCE UPON THE FOLLOWING DECISI ON OF HONBLE COURTS AND TRIBUNALS:- (I) EMAMI LTD. VS. CIT (2011),337 ITR 470 (CAL); (II) CIT V. JSW ENERGY LTD. (2015) 379 ITR 36 (BOM) ; (III)SHAKTI INSULATED WIRES (P) LTD. IN ITA NO. 581 4/MUM/2011 DATED 14/2/2014 FOR ASSESSMENT YEAR 2005-06. 5 ITA NO. 880/MUM/2014 (ASSESSMENT YEAR : 2005-06) (IV) UTTAM SUGAR MILLS LTD. (2012) 20 TAXMAN.COM 2 23 (V) GARWARE POLYSTER LTD.(2013) 23 ITR (T) 549. THE LD. REPRESENTATIVE FOR THE ASSESSEE CONTENDS TH AT IN VIEW OF THE ABOVE SUBMISSIONS AND JUDICIAL PRONOUNCEMENTS, THE REVENUES APPEAL IS LIABLE TO BE DISMISSED. 4.3.1 WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUS ED AND CAREFULLY CONSIDERED THE MATERIAL ON RECORD; INCLUDING THE JUDICIAL DECISIONS CITED. WE FIND THAT THE SIMILAR QUESTION OF WHET HER INTEREST UNDER SECTION 234B AND 234C OF THE ACT CAN BE CHARGED FO R DEFAULT IN PAYMENT OF ADVANCE TAX AND FOR DEFERMENT OF ADVANCE TAX, RESPECTIVELY, WHERE THE PAYMENT OF TAX BECAME DUE ONLY BECAUSE OF THE AMENDMENT BY WAY OF INSERTION OF CLAUSE(I) TO EXPLANATION 1 TO SECTION 115JB OF THE ACT BY FINANCE (NO.2) ACT,2009 WITH RETROSPECTI VE EFFECT FROM 1/4/2001, WAS CONSIDERED BY A CO-ORDINATE BENCH OF THIS TRIBUNAL IN THE CASE OF SHAKTI INSULATED WIRES (P) LTD. AND IN ITS ORDER IN ITA NO.5814/MUM/2011 DATED 14/2/2014, THE CO-ORDINATE B ENCH HELD AS UNDER AT PARA 6 TO 6.1 THEREOF:- 6. THE NEXT ISSUE RELATES TO THE COMPUTATION OF INT EREST U/S 234B AND 234C OF THE ACT. THE LD AR SUBMITTED THAT CLAUSE (I) TO EXP LANATION 1 TO SEC. 115JB WAS INSERTED BY FINANCE (NO.2) ACT 2009 WERE RETROS PECTIVE EFFECT FROM 1.4.2001. THE LD A.R FURTHER SUBMITTED THAT THE ASS ESSEE, WHILE COMPUTING THE CURRENT INCOME FOR THE PURPOSE OF COMPUTING T HE ADVANCE TAX TO BE PAID, COULD NOT HAVE FORESEEN THE AMENDMENT THAT WI LL BE MADE IN FUTURE WITH RETROSPECTIVE EFFECT. HENCE, THE ADVANCE TAX P AID BY THE ASSESSEE FELL SHORT. ACCORDINGLY HE SUBMITTED THAT THE INTEREST U /S 234B AND 234C COULD NOT BE LEVIED ON THE TAX COMPONENT ATTRIBUTABLE TO THE ADDITION OF PROVISION FOR BAD AND DOUBTFUL DEBTS. IN THIS REGARD, HE PLA CED RELIANCE ON THE DECISION OF CO-ORDINATE BENCH OF TRIBUNAL, WHEREIN ONE OF US WAS THE PARTY, IN THE CASE OF GARWARE POLYESTER LTD (2013)(33 TAXMANN.COM 164)(MUM). THE 6 ITA NO. 880/MUM/2014 (ASSESSMENT YEAR : 2005-06) ASSESSEE ALSO PLACED RELIANCE ON THE DECISION OF DE LHI BENCH OF TRIBUNAL IN THE CASE OF DCIT VS. UTTAM SUGAR MILLS LTD (2012)(20 TA XMANN.COM 223). 6.1 WE HEARD LD D.R AND ALSO HAVE GONE THROUGH THE DECISION RELIED UPON BY THE LD A.R. WE NOTICE THE CO-ORDINATE BENCHES HAVE TAKEN THE VIEW THAT THE INTEREST U/S 234B AND 234C CANNOT BE CHARGED FOR DE FAULT IN PAYMENT OF ADVANCE TAX AND FOR DEFERMENT OF ADVANCE TAX WHERE PAYMENT OF TAX BECAME DUE ONLY BECAUSE OF RETROSPECTIVE AMENDMENT. THE FO LLOWING OBSERVATIONS MADE BY THE DELHI BENCH OF TRIBUNAL IN THE CASE OF UTTAM SUGAR MILLS ARE EXTRACTED, FOR THE SAKE OF CONVENIENCE:- 7. THE QUESTION IS AS TO WHETHER INTEREST U/S 234B AND 234C OF THE ACT CAN BE CHARGED FOR DEFAULT IN PAYMENT OF ADVANC E TAX AND FOR DEFERMENT OF ADVANCE TAX, RESPECTIVELY, WHERE THE P AYMENT OF TAX BECAME DUE ONLY BECAUSE OF THE AMENDMENT BY WAY OF INSERTION OF EXPLANATION 1(H) TO SEC. 115JB(2) OF THE ACT, THE A MENDMENT HAVING BEEN MADE OPERATIVE RETROSPECTIVELY. IT WAS DUE T T HE FILING OF REVISED STATEMENT OF ASSESSABLE INCOME, THAT THE BOOK PROFI T WAS INCREASED BY THE AMOUNT OF THE DEFERRED TAX. BUT FOR THE RETR OSPECTIVE AMENDMENT, THE ASSESSEE WAS NOT LIABLE TO BE TAXED ON ACCOUNT OF ADJUSTMENT OF DEFERRED TAX. UNDENIABLE, THIS IS THE OBTAINING LEGAL POSITION AS PER APOLLO TYRES LTD VS. CIT (2002)(174 CTR (SC) 521; (2002)(255 ITR 273)(SC) AND ASST. CIT VS. BALARAMPU R CHINI MILLS LTD (2007)(111 TTJ (KOL) 230. NOW, THE AMENDMENT HAVING COME ABOUT ONLY BY VIRTUE OF FINANCE ACT, 2008, OBVIOUSLY THER E WAS NO MALAFIDE INTENTION ON THE PART OF THE ASSESSEE, AS HAS BEEN RECOGNIZED IN PRIYANKA OVERSEAS LTD VS. DY. CIT (2002)(75 TTJ (DE LHI) 783) : (2001)(79 ITD 353)(DELHI), IN A SIMILAR FACT SITUAT ION. IT WAS NOTED THEREIN THAT FROM CBDT ORDER NO. F 400/234/95-IT (B ) DT. 21 ST MAY, 1996, IT WAS CLEAR THAT THE INTENTION OF THE TAX AU THORITIES WAS NOT TO LEVY INTEREST WHERE ANY AMENDMENT CAME WITH RETROSP ECTIVE EFFECT. .. IN OUR VIEW, THE RATIO OF THE ABOVE SAID DECISION S HALL SQUARELY APPLY TO THE FACTS OF THE INSTANT CASE. ACCORDINGLY, WE SET ASID E THE ORDER OF LD CIT(A) ON THIS ISSUE AND RESTORE THE SAME TO THE FILE OF THE AO WITH THE DIRECTION TO COMPUTE THE INTEREST U/S 234B AND 234C OF THE ACT B Y EXCLUDING THE ADDITION RELATING TO PROVISION FOR BAD AND DOUBTFUL DEBTS FROM THE AMOUNT OF BOOK PROFIT. 4.3.2. WE, RESPECTFULLY, FOLLOWING THE DECISION OF THE CO-ORDINATE BENCH OF THIS TRIBUNAL IN THE CASE OF SHAKTI INSULATED WI RES (P) LTD. FOR ASSESSMENT YEAR 2005-06(SUPRA), WHICH RULING, IN OU R VIEW, IS SQUARELY APPLICABLE TO THE CASE ON HAND, CONFIRM THE IMPU GNED ORDER OF THE LD. CIT(A) IN HOLDING THAT THE ASSESSEE IN THE CASE ON HAND CANNOT BE 7 ITA NO. 880/MUM/2014 (ASSESSMENT YEAR : 2005-06) CHARGED INTEREST UNDER SECTION 234C OF THE ACT AS IT HAD NO LIABILITY TO PAY ADVANCE TAX UNDER SECTION 208 OF THE ACT ON AN Y OF THE DUE DATES FOR PAYMENT OF ADVANCE TAX IN THE PERIOD UNDER CONS IDERATION AND BECAME LIABLE TO PAY TAX BY VIRTUE OF A RETROSPECT IVE AMENDMENT MADE AFTER THE CLOSE OF THE RELEVANT FINANCIAL YEAR. IN THESE CIRCUMSTANCES, THE ASSESSEE COULD NOT BE BRANDED AS A DEFAULTER AN D BE CHARGED INTEREST UNDER SECTION 234C OF THE ACT. CONSEQUENT LY, REVENUES GROUNDS AT (I) AND (II) ARE DISMISSED. 5. GROUNDS NO.2 TO 4 RAISED BY THE REVENUE IN THIS APPEAL ARE GENERAL IN NATURE AND, THEREFORE, NO ADJUDICATION I S CALLED FOR THEREON. 6. IN THE RESULT, THE REVENUES APPEAL FOR ASSESSME NT YEAR 2005-06 IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 03/02/2016 SD/- SD/- (SANDEEP GOSAIN) (JASON P. BOAZ) JUDICIAL MEMBER ACCOUNTANT ME MBER MUMBAI, DATED 03/02/2016 VM , SR. PS COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT , 2. THE RESPONDENT. 3. THE CIT(A)- 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE. BY ORDER, //TRUE COPY// (DY./ASSTT. REGISTRAR) ITAT, MUMBAI 8 ITA NO. 880/MUM/2014 (ASSESSMENT YEAR : 2005-06) DETAILS DATE INITIALS DESIGNATION 1 DRAFT DICTATED ON 29/01/2016 SR.PS/PS 2 DRAFT PLACED BEFORE AUTHOR 01/02/2016 SR.PS/PS 3 DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER JM/AM 4 DRAFT DISCUSSED/APPROVED BY SECOND MEMBER JM/AM 5. APPROVED DRAFT COMES TO THE SR.PS/PS SR.PS/PS 6. KEPT FOR PRONOUNCEMENT ON SR.PS/PS 7. FILE SENT TO THE BENCH CLERK SR.PS/PS 8 DATE ON WHICH THE FILE GOES TO THE HEAD CLERK 9 DATE OF DISPATCH OF ORDER