Creative Processing Ltd., Surat V. The ACIT, Central Circle-1, Surat

MA 177/AHD/2013

• Counselvise Citation: [2013] 124 COUNSELVISE.COM (IT) 1061 (ITAT-AHMEDABAD)
• Duration Of Justice: 1 month(s) 29 day(s)
• Appeal Type: Miscellaneous Application
• Pronouncement Date: 29-11-2013
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Assessment Year: 2005-2006
• Appeal Filed On: 30-09-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: O P BATHEJA SRDR
• Assessee Lawyers: J P SHAH

Judgement Text

, , , , , , , , IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH D BENCH, AHMEDABAD .., ! '# '# '# '# $ %&, ! BEFORE SHRI N.S. SAINI, ACCOUNTANT MEMBER AND SHRI KUL BHARAT, JUDICIAL MEMBER MA NO.177/AHD/2013 ( IN #./ IN I.T.A. NO.721/AHD/2009) ( ) '*) ) '*) ) '*) ) '*) / / / / ASSESSMENT YEAR : 2005-06) CREATIVE PROCESSING LTD. GARDEN MILLS COMPLEX SAHARA GATE SURAT (ORIGINAL RESPONDENT) / VS. ASST.CIT CENTRAL CIRCLE-I SURAT (ORIGINAL APPELLANT) !+ #./,- #./ PAN/GIR NO. : AABCP 4345 H ( +. / // / APPLICANT ) .. ( /0+. / RESPONDENT ) +. 1 / APPLICANT BY : SHRI J.P.SHAH /0+. 2 1 / RESPONDENT BY : SHRI O.P.BATHEJA, SR.D.R. $'3 2 & / / / / DATE OF HEARING : 15/11/2013 45* 2 & / DATE OF PRONOUNCEMENT : 29/11/2013 6 / O R D E R PER SHRI KUL BHARAT, JUDICIAL MEMBER : BY THIS MISCELLANEOUS APPLICATION FILED ON 30/ 09/2013, THE ASSESSEE HAS REQUESTED FOR RECALLING THE ORDER DATE D 06/08/2013 PASSED BY THE ITAT BENCH D AHMEDABAD IN ITA NO.721/AHD/20 09 FOR AY 2005-06. 2. THE LD.COUNSEL FOR THE ASSESSEE SUBMITTED THAT I N THE TRIBUNAL ORDER DATED 06/08/2013(SUPRA) ERRORS HAVE CREPT IN WHICH REQUIRE RECTIFICATION BY WAY OF RECALLING THE SAID TRIBUNAL ORDER. HE SU BMITTED THAT THE MA NO.177/AHD/2013 (IN ITA NO.721/AHD/2009) CREATIVE PROCESSING LTD. VS. ACIT ASST.YEAR 2005-06 - 2 - HONBLE TRIBUNAL IN PARAGRAPH NO.6 OF ITS ORDER REC ORDED THAT LD.SR.DR FOR THE REVENUE SUPPORTED THE ASSESSMENT ORDER WHER EAS THE LD.AR OF THE ASSESSEE SUPPORTED THE ORDER OF LD.CIT(A). HE ALSO SUBMITTED THAT THIS ISSUE IS SQUARELY COVERED IN FAVOUR OF ASSESSEE BY TRIBUNALS ORDER FOR AYS 2003-04 AND 2004-05 AND COPY OF WHICH ARE ALSO AVAILABLE ON PAGES 105 TO 108 HAVE 109 TO 110 RESPECTFULLY OF THE PAPE R-BOOK. HE FURTHER SUBMITTED THAT IN PARAGRAPH NO.7 OF ITS ORDER, THE HONBLE TRIBUNAL DISTINGUISHED ORDER FOR ASST.YEARS 2003-04 AND 2004 -05 BY HOLDING THAT IN AY 2005-06, THE AO HAS INVOKED SECTION 40A(2)(B) , WHEREAS IN EARLIER YEARS THAT WAS NOT THE CASE. THE LD.COUNSEL FOR TH E ASSESSEE SUBMITTED THAT IT IS AN APPARENT ERROR BECAUSE IN PARAGRAPH 3 OF TRIBUNALS ORDER AT PAGE 106 OF THE PAPER BOOK FOR AY 2003-04 RECORDS T HAT THE INCOME TAX OFFICER IN AY 2003-04 WHILE DISALLOWING THE SELF-SA ME INTEREST PAID TO THE SAME PAYEE STATED THAT FINALLY THE ASSESSEES C ONTENTION OF THE LOANER- COMPANY, TO WHOM THE INTEREST STOOD ALLOWED, BEING NOT A PERSON COVERED U/S.40A(2)(A) OF THE ACT IS ALSO NOT CORRECT, WHICH MEANS EVEN IN AY 2003-04, THE AO HAD INVOKED SECTION 40A(2)(B). HE SUBMITTED THAT IN RESPECT OF AY 2005-06, THE AO IN HIS ASSESSMENT ORD ER RECORDED THAT THE ISSUE HAS ALSO CONSIDERED AND DISCUSSED IN DETAIL I N PREVIOUS YEARS ASSESSMENT ORDER. HE SUBMITTED THAT THESE ARE APPA RENT MISTAKE ARISING OUT OF THE ORDER OF THE TRIBUNAL HE SUBMITTED THA T THE HONBLE TRIBUNAL POINTED OUT THAT THE DECISION OF LD.CIT(A) ON THE BASIS OF SANCTION LETTER OF DENA BANK IN THE NAME OF SURAT TEXTILE MILLS LTD . IS ALSO NOT JUSTIFIED. HE SUBMITTED THAT THE LD.CIT(A) IN HIS ORDER HAS RE CORDED THAT THE FACTS IN THIS YEAR ARE ALSO EXACTLY SAME AS IN THE AY 2003-0 4. THE AO HAS NOT MADE OUT ANY CASE THAT THE ISSUE IS COVERED BY THE PROVISIONS OF SECTION MA NO.177/AHD/2013 (IN ITA NO.721/AHD/2009) CREATIVE PROCESSING LTD. VS. ACIT ASST.YEAR 2005-06 - 3 - 40A(2)(B). ACCORDING TO THE AO, THE ASSESSEE AND T HE LENDER ARE COMPANIES WHICH ARE INTERRELATED. THE ENTIRE CASE OF THE AO IS THAT THE PAYMENT IS EXCESSIVE AND WITHOUT ANY BUSINESS PRUDE NCE. THE AO HAS NOT DOUBTED THE GENUINENESS OF PAYMENT. IN VIEW OF THESE FACTS BEING SAME AS IN AY 2003-04, RESPECTFULLY FOLLOWING THE D ECISION OF ITAT DATED 28.2.07 IN ITA NO.2878/AHD./2006 FOR AY 2003- 04, THE DISALLOWANCE MADE DURING THE YEAR IS DELETED. HE SUBMITTED THAT THE ABOVE OBSERVATION OF THE TRIBUNAL THAT CIT HAS BASE D HIS DECISION ON SANCTION LETTER OF DENA BANK IS ALSO AN APPARENT ER ROR. DENA BANKS LOAN WAS A SECURED LOAN, WHICH WAS GRANTED AT THE R ATE OF 16.25%, WHEREAS THE LOAN OF VARELI FABRICS PVT.LTD. TO THE APPLICANT AT 18% IS UNSECURED LOAN AND THIS WAS THE AGREEMENT OF THE AP PLICANT BEFORE CIT(APPEALS) WHICH HE MERELY RECORDED IN PARA 3.1 O F HIS DECISION SHOWS. HE SUBMITTED THAT ANOTHER GROUND RASIED BY THE REVENUE WAS THAT THE LD.CIT(A) HAS ERRED IN LAW AND ON FACTS IN DELETING THE ADDITION MADE BY THE AO U/S.40A(2)(B) OF THE IT ACT ON EXCES S DISCOUNT ALLOWED TO THE SISTER-CONCERN. THE APPLIED SECTION 40A(2)( B) TO DISALLOW THE DISCOUNT AFFORDED TO KAMALA ASSOCIATES. THE CIT AT PAGE 33 & 34 OF HIS ORDER FOLLOWED A DIRECT MADRAS HIGH COURT DECISION IN THE CASE OF CIT VS. A.SUBRAYA CHETTY & SONS (123 ITR 592), WHEREIN 6% DISCOUNT WAS GIVEN BY THE ASSESSEE AND THE HIGH COURT HELD THAT SECTION 40A(2)(B) DID NOT APPLY AS THERE WAS NO EXPENDITURE WHEN THE DISC OUNT FROM SALE PRICE GIVEN, AND THEREFORE, SECTION 40A(2)(B) WILL NOT AP PLY. HE SUBMITTED THAT THE HONBLE DELHI HIGH COURT DECISION IN UNITE D EXPORTS VS. CIT (2011) 330 ITR 549, WHEREIN IT HAS BEEN HELD THAT D ISCOUNT IS NOT EXPENDITURE AND, THEREFORE, SECTION 40A(2)(B) WILL NOT APPLY. IN THIS MA NO.177/AHD/2013 (IN ITA NO.721/AHD/2009) CREATIVE PROCESSING LTD. VS. ACIT ASST.YEAR 2005-06 - 4 - CASE, BULK DISCOUNT WAS 11%. HE SUBMITTED THAT THE RE IS A DIRECT AHMEDABAD BENCH DECISION IN VIKSHARA TRADING & INVE STMENTS PVT.LTD. VS. DCIT (1998) 61 TTJ 6, WHEREIN THE BENCH HELD TH AT SECTION 40A(2)(B) CONTEMPLATES THE ASSESSEE INCURRING ANY E XPENDITURE IN RESPECT OF WHICH PAYMENT HAS BEEN MADE OR IS TO BE MADE. I N ORDER TO INVOKE S.40A(2)(B) THERE MUST BE A PAYMENT, WHICH IS AN EX PENDITURE. HE FURTHER SUBMITTED THAT GROUND NO.3 OF DEPARTMENTS APPEAL WAS THAT THE LD.CIT(A) HAS ERRED IN LAW AND ON FACTS IN DELETING THE ADDITION MADE U/S.40A(2)(B) OF THE I.T.ACT ON ACCOUNT OF SUPPRESS ION OF CHARGES RECEIVED ON ACCOUNT OF JOB WORK CHARGES FOR DYEING AND PRINTING FROM THE SISTER-CONCERN. HE SUBMITTED THAT LD.CIT(A) HELD T HAT THIS IS NOT A CASE OF 40A(2)(B) OF THE ACT AND THE TRIBUNAL COMMITTED AN ERROR OF NOT DECIDING THIS NEAT POINT OF LAW AND ON THE CONTRARY SENT THE MATTER BACK TO CIT(A). 2.1. THE LD.SR.DR SUBMITTED THAT BY MAKING SUCH SUB MISSION BY THE LD.COUNSEL FOR THE ASSESSEE IS TRYING TO GET THE EN TIRE ORDER REVIEWED WHICH IS NOT PERMISSIBLE UNDER THE LAW. THE LD.SR .DR SUBMITTED THAT THERE IS NO APPARENT ERROR FROM THE RECORDS. 3. WE HAVE HEARD THE RIVAL SUBMISSIONS, PERUSED THE MATERIAL AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW AS WELL AS THE WRITTEN SUBMISSIONS OF THE ASSESSEE. AFTER CONSIDERING ALL THE ASPECTS OF THE MATTER, WE FIND MERIT IN THE CON TENTION OF THE LD.COUNSEL FOR THE ASSESSEE THAT THE ERROR HAS CREPT IN THE TR IBUNALS ORDER DATED 06/08/2013(SUPRA). SINCE ONE OF THE GROUNDS OF THE DEPARTMENTS APPEAL IS THAT THE LD.CIT(A) ERRED IN LAW AND ON FACTS IN DELETING THE ADDITION MA NO.177/AHD/2013 (IN ITA NO.721/AHD/2009) CREATIVE PROCESSING LTD. VS. ACIT ASST.YEAR 2005-06 - 5 - MADE BY THE AO U/S.40A(2)(B) OF THE I.T.ACT ON EXCE SS DISCOUNT ALLOWED TO THE SISTER-CONCERN, THE LD.COUNSEL FOR THE ASSES SEE HAS BROUGHT TO OUR NOTICE THE JUDGEMENT OF THE HONBLE DELHI HIGH COUR T IN THE CASE OF UNITED EXPORTS VS. CIT REPORTED AT (2011) 330 ITR 5 49 AND DECISION OF HONBLE COORDINATE BENCH IN THE CASE OF VIKSHARA TR ADING & INVESTMENTS PVT.LTD. VS. DCIT REPORTED AT (1998) 61 TTJ 6 (AHD.). THE HONBLE DELHI HIGH COURT IN THE CASE OF UNITED EXPO RTS VS. CIT(SUPRA) HAS HELD THAT THE PROVISION OF SECTION 40A(2) DID NOT APPLY TO THE FACTS OF THE PRESENT CASE IN AS MUCH AS THE TRADE DISCOUNT I S NOT AN EXPENDITURE WHICH IS INCURRED OR WITH RESPECT TO WHICH A PAYMEN T IS MADE. AFTER CONSIDERING THE TOTALITY OF THE FACTS AND MORE PART ICULARLY NON- CONSIDERATION OF THE DECISIONS OF THE HONBLE DELHI HIGH COURT AND CO- ORDINATE BENCH OF THIS TRIBUNAL TANTAMOUNT TO MISTA KE APPARENT FROM THE RECORD, THEREFORE WE HEREBY RECALL THE ORDER DATED 06/08/2013 IN ITA NO.721/AHD/2009. THE REGISTRY IS DIRECTED TO RE-FI X THE ASSESSEES APPEAL IN DUE COURSE FOR ADJUDICATING THE APPEAL AF RESH. THE REGISTRY IS FURTHER DIRECTED TO ISSUE REQUISITE NOTICE OF HEARI NG TO THE CONCERNED PARTIES. 4. IN THE RESULT, MISCELLANEOUS APPLICATION FILED B Y THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN COURT ON THE DATE MENTIONED HER EINABOVE AT CAPTION PAGE SD/- SD/- ( .. ) ($ %&) ! ! ( N.S. SAINI ) ( KUL BHARAT ) ACCOUNTANT MEMBER JUDICIAL MEMBER AHMEDABAD; DATED 29/ 11 /2013 MA NO.177/AHD/2013 (IN ITA NO.721/AHD/2009) CREATIVE PROCESSING LTD. VS. ACIT ASST.YEAR 2005-06 - 6 - 8.., '.../ T.C. NAIR, SR. PS 6 2 /&9 :9*& 6 2 /&9 :9*& 6 2 /&9 :9*& 6 2 /&9 :9*&/ COPY OF THE ORDER FORWARDED TO : 1. +. / THE APPELLANT 2. /0+. / THE RESPONDENT. 3. ## & $; / CONCERNED CIT 4. $;() / THE CIT(A)-I, SURAT 5. 9'%< /& , , / DR, ITAT, AHMEDABAD 6. <) =3 / GUARD FILE. 6$ 6$ 6$ 6$ / BY ORDER, 09& /& //TRUE COPY// > >> >/ // / #, #, #, #, ( DY./ASSTT.REGISTRAR) , , , , / ITAT, AHMEDABAD 1. DATE OF DICTATION .. 27.11.13 (DICTATION-PAD 15-P AGES ATTACHED AT THE END OF THIS FILE) 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER 27.11.13 3. DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR.P. S./P.S.. 4. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE D ICTATING MEMBER FOR PRONOUNCEMENT 5. DATE ON WHICH FAIR ORDER PLACED BEFORE OTHER MEMBER 6. DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR.P .S./P.S.29.11.13 7. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK 29.11.13 8. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK ... 9. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT RE GISTRAR FOR SIGNATURE ON THE ORDER.. 10. DATE OF DESPATCH OF THE ORDER