M/s LG Polymers India Pvt Ltd., Visakhapatnam V. The ACIT, Circle-3(1), Visakhapatnam

ITA 95/VIZ/2007

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 0646 (ITAT-VISAKHAPATNAM)
• Duration Of Justice: 3 year(s) 2 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-06-2010
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 17-05-2010
• Assessment Year: 2000-2001
• Appeal Filed On: 09-04-2007
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: G S S GOPINATH
• Assessee Lawyers: C V S MURTHY
• Keywords: Deemed to accrue or arise in india
• Section: 244A; 263; 11

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL VISAKHAPATNAM BENCH: VISAKHAPATNAM BEFORE: SRI SUNIL KUMAR YADAV, JUDICIAL MEMBER AND SRI B.R. BASKARAN, ACCOUNTANT MEMBER I.T.A. NO.95/VIZAG/2007 ASSESSMENT YEAR : 2000-01 LG POLYMERS INDIA (P) LTD., VISAKHAPATNAM VS. ACIT, CIRCLE-3(1), VISAKHAPATNAM (APPELLANT) (RESPONDENT) PAN NO.AAACL 8528 P APPELLANT BY : SHRI C.V.S. MURTHY, CA RESPONDENT BY : SHRI G.S.S. GOPINATH, DR O R D E R PER SHRI B.R. BASKARAN, ACCOUNTANT MEMBER : THE APPEAL OF THE ASSESSEE IS DIRECTED AGAINST THE ORDER DATED 05-03-2007 PASSED BY LD. CIT-1 VISAKHAPATNAM U/S 263 OF THE AC T AND IT RELATES TO THE ASSESSMENT YEAR 2000-01. 2. THE SOLITARY ISSUE THAT NEEDS TO BE ADJUDIC ATED IS WHETHER LD CIT IS JUSTIFIED IN INITIATING PROCEEDINGS U/S 263 OF THE ACT AND IN HOLDING THAT THE INTEREST ALLOWED U/S 244A OF THE ACT IS ERRONEOUS. 3. THE FACTS RELATING TO THE ISSUE ARE STATED IN BR IEF. IN ORDER TO GIVE EFFECT TO THE APPELLATE ORDER PASSED BY THE LD CIT(A)-1 VISAK HAPATNAM, THE ASSESSING OFFICER PASSED A CONSEQUENTIAL ORDER DATED 19-10-2 004, WHEREIN THE TAX AMOUNT REFUNDABLE TO THE ASSESSEE WAS DETERMINED AT RS.85, 40,326/-. IN THAT ORDER, THE AO DID NOT ALLOW INTEREST U/S 244A OF THE ACT W ITH THE FOLLOWING NOTE: 2 NO INTEREST U/S.244A WAS ALLOWED AS PER THE PROVIS O TO SECTION 115JAA (2) OF THE IT ACT, WHICH READS AS PROVIDED THAT NO INTEREST SHALL BE PAYABLE ON THE TAX CREDIT ALLOWED UNDER SU B-SECTION 1. THE ASSESSEE FILED A RECTIFICATION PETITION SEEKING INTEREST U/S 244A OF THE ACT ON THE REFUND SO DETERMINED. ACTING UPON THE SAID PET ITION, THE AO GRANTED AN INTEREST OF RS.35,35,685/- BY ACCEPTING THE CONTENT IONS OF THE ASSESSEE. IN THE REVISION PROCEEDING, THE LD CIT SET ASIDE THE SAID ORDER OF THE AO AND THUS INTEREST GRANTED TO THE ASSESSEE WAS CANCELLED. AC CORDING TO THE LD CIT, INTEREST U/S 244A IS NOT ALLOWABLE TO THE ASSESSEE, AS THE R EFUND HAS ARISEN ONLY DUE TO CREDIT OF MAT PAYMENT. THE ASSESSEE IS AGITATING T HE DECISION OF THE LD CIT BY FILING THIS APPEAL. 4. WE HAVE HEARD THE PARTIES AND ALSO PERUSED THE R ECORD. TO APPRECIATE THE FACTS OF THE ISSUE IN A PROPER PERSPECTIVE, WE EXTR ACT BELOW THE TAX COMPUTATION MADE BY THE AO FOR THE YEAR UNDER CONSIDERATION IN THE CONSEQUENTIAL ORDER DATED 19-10-2004: TOTAL INCOME AS PER CONSEQUENTIAL ORDER DATED 10-0 3-2004 RS.10,96,24,710 TAX THEREON - RS. 3,83,68,650 ADD : SURCHARGE - RS. 38,36,865 TAX PAYABLE - RS. 4, 22,05,515 ADD: INTEREST U/S 234C - RS. 11,07,402 _______________ TAX PAYABLE - RS. 4,33,12,917 LESS : TAX CREDIT ALLOWED, AS DIRECTED BY THE CIT (A) - RS. 1,29,76,268 TAX PAYABLE - RS. 3,03,36,649 LESS: PREPAID TAXES TDS - RS. 4,76,975 ADVANCE TAX - RS. 3,84,00,000 - RS. 3,88,76,975 NOW REFUNDABLE - RS.85,40,326 THE VIEW OF THE LD CIT IS THAT THE REFUND OF RS.85, 40,326/- HAS ARISEN ONLY DUE TO THE CREDIT GIVEN IN RESPECT OF TAX CREDIT U/S 11 5JAA OF THE ACT AMOUNTING TO 3 RS.1,29,76,268/-. ACCORDINGLY, THE LD CIT HAS OPIN ED THAT THE ASSESSEE IS NOT ENTITLED FOR INTEREST U/S 244A OF THE ACT. HOWEVER , THE CONTENTION OF THE ASSESSEE IS THAT THE REFUND HAS ARISEN OUT OF TDS A ND ADVANCE TAX PAYMENT AND HENCE IT IS ENTITLED TO INTEREST U/S 244A OF THE A CT. 5. IN THIS REGARD IT IS NECESSARY TO UNDERSTAND THE PROVISIONS OF SEC.115JA AND 115JAA OF THE ACT. BROADLY STATED, ANY ASSESSE E BEING A COMPANY SHALL BE LIABLE TO PAY TAX ON THE DEEMED INCOME COMPUTED AS PER PROVISIONS OF THE SEC.115JA OF THE ACT, IF THE TOTAL INCOME COMPUTED UNDER THE ACT IS LESS THAN 30% OF THE BOOK PROFIT AS DEFINED U/S 115JA OF THE ACT. SINCE THE COMPANIES ARE MADE TO THE TAX WHICH IS NOT OTHERWISE PAYABLE UNDE R THE ACT, THE COMPANIES ARE ALLOWED TO SET OFF THE TAX SO PAID U/S 115JA IN THE SUBSEQUENT YEARS AS PER THE PROVISIONS OF SEC.115JAA OF THE ACT BY WAY OF TAX C REDIT. THE TAX CREDIT SHALL BE ALLOWED AT AN AMOUNT WHICH IS EQUIVALENT TO THE AMO UNT OF TAX PAYABLE IN THAT YEAR. IF TAX CREDIT ELIGIBLE FOR SET OFF IS NOT FU LLY ABSORBED IN THAT YEAR, IT SHALL BE CARRIED FORWARD IN SUCCEEDING ASSESSMENT YEAR/YEARS AS PROVIDED U/S 115JAA. THUS IT CAN BE SEEN THAT THE TAX CREDIT IS ALLOWED U/S 115JAA ONLY TO THE EXTENT OF AMOUNT OF TAX THAT HAS BECOME PAYABLE IN THAT YEAR. THUS IT CAN BE INFERRED THAT IF THE TAX CREDIT IS SO ALLOWED, THE TAX PAYABLE MA Y BECOME ZERO AND IN ANY CASE, IT WILL NOT GIVE RISE TO ANY REFUND. THAT IS TO SAY , A REFUND CANNOT ARISE TO THE ASSESSEE OUT OF THE TAX CREDIT GIVEN U/S 115JAA OF THE ACT. 6. IN THE INSTANT CASE, THE ASSESSEE WAS STILL LIABLE TO PAY A TAX OF RS.3.03 CRORES AFTER ADJUSTMENT OF TAX CREDIT U/S 115JAA OF THE ACT. AGAINST THAT TAX LIABILITY, THE TDS AND ADVANCE TAX PAID BOTH AGGREG ATING TO RS.3.88 CRORES WAS GIVEN CREDIT, WHICH HAS RESULTED IN A REFUND OF RS. 0.85 CRORES. WE HAVE ALREADY CLARIFIED THAT THE TAX CREDIT GIVEN U/S 115JAA WILL NOT GIVE RISE TO ANY REFUND. IN ANY CASE, THE ASSESSEE WAS LIABLE TO PAY FURTHER TA X OF RS.3.03 CRORES EVEN AFTER THE ADJUSTMENT OF TAX CREDIT THAT WAS AVAILABLE U/S 115JAA. IN VIEW OF THE LEGAL 4 POSITION STATED ABOVE, IT CAN BE CONCLUDED THAT THE REFUND OF RS.0.85 CRORES HAS ARISEN ONLY OUT OF THE TDS AND ADVANCE TAX PAYMENT. HENCE THE AO WAS RIGHT IN LAW IN GRANTING INTEREST U/S 244A OF THE ACT ON THE SAID REFUND. WE FIND SUPPORT FOR OUR VIEW IN THE DECISION OF CHENNAI BENCH OF IT AT IN THE CASE OF HYUNDAI MOTOR INDIA LTD V DCIT (2010) (123 ITD 445 (CHENNAI )). ACCORDINGLY, WE DO NOT FIND ANY ERROR IN THE ORDER PASSED BY THE AO. IN V IEW OF THE FOREGOING WE ARE OF THE VIEW THAT THE ORDER PASSED BY THE LD CIT U/S 26 3 OF THE ACT IS NOT IN ACCORDANCE WITH LAW AND ACCORDINGLY SET ASIDE THE O RDER SO PASSED. 6. IN THE RESULT THE APPEAL FILED BY THE ASSESSEE I S ALLOWED. PRONOUNCED ACCORDINGLY ON 29.6.2010. SD/- SD/- (SUNIL KUMAR YADAV) (B.R. BASKARAN) JUDICIAL MEMBER ACCOUNTANT MEMBER PVV/SPS VISAKHAPATNAM DATE : 29 TH JUNE, 2010 A COPY OF THIS ORDER IS FORWARDED TO : 01 M/S. L.G. POLYMERS INDIA (P) LTD., R.R. VENKATAP URAM PO, VISAKHAPATNAM 02 THE ACIT, CIRCLE-3(1) VISAKHAPATNAM 03 THE CIT-1, VISAKHAPATNAM 04 THE DR, ITAT, VISAKHAPATNAM 05 GUARD FILE. BY ORDER SENIOR PRIVATE SECRETARY ITAT, VISAKHAPATNAM BENCH