ITO, Madurai V. M/s. P. Navaneethakrishnan (HUF), Madurai

MA 320/CHNY/2017

• Counselvise Citation: [2018] 123 COUNSELVISE.COM (IT) 5761 (ITAT-CHENNAI)
• Duration Of Justice: 2 month(s) 8 day(s)
• Appeal Type: Miscellaneous Application
• Pronouncement Date: 09-02-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2008-2009
• Appeal Filed On: 01-12-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S VIJAYAPRABHA
• Assessee Lawyers: SUSHMA HARINI
• Keywords: Tax effect

Judgement Text

, .. , IN THE INCOME TAX APPELLATE TRIBUNAL , SMC A BENCH, CHENNAI . , BEFORE SHRI A. MOHAN ALANKAMONY, ACCOUNTANT MEMBER MISCELLANEOUS PETITION NOS.320/CHNY/2017 INI.T.A.NO.3148/MDS/2016 ( / ASSESSMENT YEAR :2008-09) THE INCOME TAX OFFICER, NON CORPORATE CIRCLE 3(1), MADURAI VS SHRI P. NAVANEETHAKRISHNAN (HUF), 5A, PERIYAVAR STREET, S.S. COLONY, MADURAI 625 010. PAN: AAAHP3761R (PETITIONER) ( / RESPONDENT) APPLICANT BY : SMT. S. VIJAYAPRABHA, JCIT /RESPONDENT BY : MS. SUSHMAHARINI, ADVOCATE /DATE OF HEARING : 09.02.2018 /DATE OF PRONOUNCEMENT : 09.02.2018 / O R D E R THE MISCELLANEOUS PETITION IS FILED BY THE REVENUE PRAYING FOR RECALLING THE ORDER OF THE TRIBUNAL PASSED IN IN I. T.A. NO.3148/MDS/2016 DATED 24.07.2017 FOR THE ASSESSMEN T YEAR 2008- 09 WHEREIN THE APPEAL OF THE REVENUE WAS DISMISSED DUE TO ITS NON- MAINTAINABILITY BASED ON THE CIRCULAR NO.21/2013 DA TED 10.12.2015 ON MONETARY LIMIT. 2. AT THE OUTSET THE LD.DR SUBMITTED THAT THE CESS LEVIED ON THE ASSESSEE ALSO SHOULD BE TREATED AS TAX AND IN THAT CASE, THE TAX EFFECT HAS EXCEEDED RS.10 LAKHS AND THEREFORE THE APPEAL O F THE REVENUE IS 2 MP NO.320/CHNY/2017 MAINTAINABLE. THE LD.DR FURTHER SUBMITTED THAT THE BENCH OF THE TRIBUNAL WITHOUT CONSIDERING THE SAME HAS DISMISSED THE APPEAL OF THE REVENUE IN LIMINE BY TREATING THE TAX EFFECT TO BE LESS THAN RS.10 LAKHS. HENCE IT WAS PLEADED THAT IT IS A MISTAKE A PPARENT ON RECORD IN THE ORDER OF THE TRIBUNAL AND THEREFORE IT WAS REQU ESTED FOR RECALLING THE ORDER OF THE TRIBUNAL AND THEREAFTER TO PASS AP PROPRIATE ORDER ON MERIT AND LAW. 3. THE LD.AR VEHEMENTLY ARGUED STATING THAT CESS CA NNOT BE TREATED AS TAX AND SUBMITTED THE FOLLOWING WRITTEN SUBMISSI ON:- 1.A CESS IS IMPOSED BY THE CENTRAL GOVERNMENT FOR A SPECIFIC PURPOSE. GENERALLY, CESS IS EXPECTED TO BE LEVIED TILL THE TIME THE GOV ERNMENT GETS ENOUGH MONEY FOR THAT PURPOSE. 2. A CESS IS DIFFERENT FROM THE USUAL TAXES LIKE EX CISE DUTY AND PERSONAL INCOME TAX AS IT IS IMPOSED AS AN ADDITIONAL CHARGE BESIDE S THE EXISTING TAX. 3. REVENUE FROM MAIN TAXES LIKE PERSONAL INCOME TAX ES ARE KEPT AT CONSOLIDATED FUND OF INDIA (CFI). THE GOVERNMENT CAN USE IT FOR ANY PURPOSES. BUT THE TAX REVENUE FROM CESS ARE FIRST CREDITED TO THE CFI AND THE CENTRAL GOVERNMENT MAY, AFTER DUE APPROPRIATION MADE BY PARLIAMENT, UTILISE THE MONEY FOR THE SPECIFIED PURPOSES. IF THERE IS AN UNSPENT AMOUNT, IT IS SIMP LY CARRIED FORWARD FOR USE IN THE FOLLOWING YEAR. 4. ANOTHER MAJOR FEATURE OF CESS IS THAT THE CENTRE NEED NOT SHARE IT WITH STATES. BUT REGARDING ALL OTHER MAJOR TAXES THEY COME UNDER THE DIVISIBLE POOL AND HENCE THEY SHALL BE SHARED WITH THE STATES WITH THE RECOM MENDATIONS OF THEFINANCE COMMISSION 5. CESSES ARE NOT SUPPOSED TO BE RELIED UPON AS A R EGULAR SOURCE OF REVENUE. THEY ARE RESORTED TO ONLY FOR A PARTICULAR PURPOSE AND A RE TO BE DISCONTINUED AFTER THE OBJECTIVE IS MET, THOUGH THIS OFTEN DOESN'T HAPPEN IN PRACTISE. CESSES CAN BE COMPUTED IN DIFFERENT WAYS. FOR EXAMPLE, THE SWACHH BHARAT CESS (0.5 PER CENT) AND THE KRISHIKALYANCESS (0.5 PER CENT) BOTH APPLY ON TAXABLE SERVICES. THEY ARE 3 MP NO.320/CHNY/2017 SIMPLY ADDED TO THE 14 PER CENT SERVICE TAX RATE, T AKING THE FINAL RATE TO 15 PER CENT. THE CLEAN ENVIRONMENT CESS IS APPLIED AT A FL AT RATE OF RS. 400 ON EVERY TONNE OF COAL. 6. UNLIKE TAXES, CESSES CAN BE INTRODUCED, MODIFIED AND REMOVED ANY TIME WITHOUT MUCH TROUBLE. AS LONG AS THE GOVERNMENT HAS A SPECI FIC REASON FOR IMPOSING A CESS, ALL THAT IT HAS TO DO IS TO PUT OUT A NOTIFIC ATION TO THIS EFFECT. HOWEVER, EVEN A SMALL MODIFICATION IN A TAX RATE HAS TO BE FOLLOWED BY ACCOMPANYING AMENDMENTS IN THE TAX RULES AND REGULATIONS. EDUCATION CESS: THE EDUCATION CESS (WHICH IS IMPOSED ON ALL CENTRAL GOVERNMENT TAXES) IS TO BE SPENT ONLY FOR FINANCING PRIMARY EDUCATION AND NOT FOR ANY OTHER PURPOSES. IT WAS FIRST INTRODUCED IN FINANCE BILL, 2004 IN CHAPTER V I: 81. (1) WITHOUT PREJUDICE TO THE PROVISIONS OF SUB- SECTION (11) OF SECTION 2, THERE SHALL BE LEVIED AND COLLECTED, IN ACCORDANCE WITH T HE PROVISIONS OF THIS CHAPTER AS SURCHARGE FOR PURPOSES OF THE UNION, ACESS TO BE CA LLED THE EDUCATION CESS, TO FULFIL THE COMMITMENT OF THE GOVERNMENT TO PROVIDE ANDFINANCE UNIVERSALISED QUALITY BASIC EDUCATION. (2) THE CENTRAL GOVERNMENT MAY, AFTER DUE APPROPRIA TION MADE BY PARLIAMENT BY LAW IN THIS BEHALF, UTILISE, SUCH SUMS OF MONEY OF THE EDUCATION CESS LEVIED UNDER SUB-SECTION (11) OF SECTION 2 AND THISCHAPTER FOR T HE PURPOSES SPECIFIED IN SUB- SECTION (1), AS IT MAY CONSIDER NECESSARY. SURCHARGE AND CESS: DIFFERENCES BETWEEN THE TAXES, SURCHARGE AND CESS. 1. THE USUAL TAXES GOES TO THE CONSOLIDATED FUND OF INDIA AND CAN BE SPEND FOR ANY PURPOSES. 2. SURCHARGE ALSO GOES TO THE CONSOLIDATED FUND OF INDIA AND CAN BE SPENT FOR ANY PURPOSES. 3. CESS GOES TO CONSOLIDATED FUND OF INDIA BUT CAN BE SPEND ONLY FOR THE SPECIFIC PURPOSES. THE MAIN DIFFERENCE BETWEEN SURCHARGE AND CESS IS T HAT DESPITE THEY ARE NOT SHAREABLE WITH STATE GOVERNMENTS, SURCHARGE CAN BE KEPT WITH THE CFI AND SPENT LIKE ANY OTHER TAXES, THE CESS SHOULD BE KEPT AS A SEPARATE FUNDAFTER ALLOCATING TO CFI AND CAN BE SPENT ONLY FOR A SPECIFIC PURPOSE. T HIS MEANS CESS CAN BE SPENT 4 MP NO.320/CHNY/2017 ONLY FOR THE SPECIFIC PURPOSE FOR WHICH IT IS CREAT ED. IF THE PURPOSE FOR WHICH THE CESS IS CREATED IS FULFILLED, IT SHOULD BE ELIMINAT ED. UNDER THE CONSTITUTION OF INDIA, ARTICLE 270. TAXES LEVIED AND DISTRIBUTED BETWEEN T HE UNION AND THE STATES.- (1) ALL TAXES AND DUTIES REFERRED TO IN THE UNION L IST, EXCEPT THE DUTIES AND TAXES REFERRED TO IN ARTICLES 268 AND 269, RESPECTIVELY, SURCHARGE ON TAXES AND DUTIES REFERRED TO IN ARTICLE 271 AND ANY CESS LEVIED FOR SPECIFIC PURPOSES UNDER ANY LAW MADE BY PARLIAMENT SHALL BE LEVIED AND COLLECTED BY THE GOVERNMENT OF INDIA ANDSHALL BE DISTRIBUTED BETWEEN THE UNION AND THE S TATES IN THE MANNER PROVIDED IN CLAUSE (2). (2) SUET: PERCENTAGE, AS MAY BE PRESCRIBED, OF THE NET PROCEEDS OF ANY SUCH TAX OR DUTY IN ANY FINANCIAL YEAR SHALL NOT FORM PART OF T HE CONSOLIDATED FUND OF INDIA, BUT SHALL BE ASSIGNED TO THE STATES WITHIN WHICH TH AT TAX OR DUTY IS LEVIABLE IN THAT YEAR, AND SHALL BE DISTRIBUTED AMONG THOSE STATES I N SUCH MANNER AND FROM SUCH TIME AS MAY BE PRESCRIBED IN THE MANNER PROVIDED IN CLAUSE (3). (3) IN THIS ARTICLE, 'PRESCRIBED' MEANS, - (I) UNTIL A FINANCE COMMISSION HAS BEEN CONSTITUTED , PRESCRIBED BY THE PRESIDENT BY ORDER, AND (II) AFTER A FINANCE COMMISSION HAS BEEN CONSTITUTE D, PRESCRIBED BY THE PRESIDENT BY ORDER AFTER CONSIDERING THE RECOMMENDATIONS OF T HE FINANCE COMMISSION. ARTICLE 271.SURCHARGE ON CERTAIN DUTIES AND TAXES F OR PURPOSES OF THE UNION.-- NOTWITHSTANDING ANYTHING IN ARTICLES 269 AND 270, P ARLIAMENT MAY AT ANY TIME INCREASE ANY OF THE DUTIES OR TAXES REFERRED TO IN THOSE ARTICLES BY A SURCHARGE FOR PURPOSES OF THE UNION AND THE WHOLE PROCEEDS OF ANY SUCH SURCHARGE SHALL FORM PART OF THE CONSOLIDATED FUND OF INDIA. SUBMISSIONS: 1. EDUCATION CESS DOES NOT TAKE THE CHARACTER OF TA X. 2. THE PURPOSE, METHOD OF LEVY AND THE UTILISATION OF CESS AND TAXES ARE DIFFERENT. CESS HAS THE CHARACTERISTICS OF 'FEE' AS PER THE AP EX COURT'S DECISION IN DEWAN CHAND BUILDERS & CONSTRUCTORS VS UOI 2012 (1) SCC 1 01 3. IN ANY CASE, THE ISSUE IS DEBATABLE AS THERE ARE DECISIONS IN FAVOUR OF BOTH SIDES. HENCE, THE SAME CANNOT BE ADJUDICATED IN THE STAGE OF A MISCELLANEOUS PETITION. 5 MP NO.320/CHNY/2017 3.1 THE LD.AR ALSO RELIED IN THE DECISION OF THE HO NBLE APEX COURT IN THE CASE STATE OF WEST BENGAL AND ANOTHER VS. KESOR AM INDUSTRIES LTD. AND OTHERS REPORTED IN 266 ITR 721, WHEREIN TH E DECISION OF THE CONSTITUTION BENCH IS REFERRED EXPLAINING THE NATUR E OF CESS AND TAX. THE RELEVANT PORTION IS EXTRACTED HEREIN BELOW FOR REFERENCE-: PAGE NO.770 & 771 THE CONSTITUTION BENCH ENTERED INTO AN ENQUIRY AS T O WHAT IS THE PRIMARY OBJECT OF THE LEVY AND THE ESSENTIAL PURPOSE WHICH IT IS INTENDED TO ACHIEVE. IT WAS OBSERVED THAT ITS PRIMARY OBJECT AND THE ESSENTIAL PURPOSE MUST BE DI STINGUISHED FROM ITS ULTIMATE OR INCIDENTAL RESULTS OR CONSEQUENCES, AS THAT IS THE TRUE TEST IN DETERMINING THE CHARACTER OF THE LEVY. THE SUBMISSION THAT THE IMPUGNED LEVY COU LD BE EITHER DUTY OF EXCISE OR TAX, WAS DISMISSED. THE CONSTITUTION BENCH HELD THAT THE FOR M IN WHICH THE LEVY IS IMPOSED AND THE EXTENT OF THE LEVY, I.E., BEING TOO HIGH, DO NO T ALTER THE CHARACTER OF THE LEVY FROM A FEE INTO THAT OF A DUTY OF EXCISE. THE CONSTITUTION BEN CH LAID DOWN THE FEATURES WHICH WOULD DISTINGUISH EXCISE FROM A TAX OR FEE AND ALSO THE F EATURES WHICH DISTINGUISH A TAX FROM A FEE THOUGH THERE IS NO GENERIC DIFFERENCE IN A TAX AND A FEE, BOTH BEING COMPULSORY EXACTIONS OF MONEY BY PUBLIC AUTHORITIES. THE SCHEME OF THE IMPUGNED ORISSA ACT WAS EXAMINED IN-DEPTH AND THEIR LORDSHIPS FOUND THAT THE CESS LEVIED BY THE IMPUGNED ACT WAS A FEE. THE ACT WAS PASSED FOR THE PURPOSE OF THE DEVELOPMENT OF MINING AREAS IN THE STATE. ORISS A IS A POOR STATE CARRYING IN ITS WOMB A LOT OF MINERAL WEALTH OF GREAT POTENTIAL VALUE, B UT THE AREAS WHERE ITS MINERAL WEALTH IS LOCATED LACK INFRASTRUCTURE WHICH WOULD ENABLE THE EXPLOITATION OF MINERALS. THE PRIMARY AND THE PRINCIPAL OBJECT OF THE ACT WAS TO DEVELOP THE MINERAL AREAS IN THE STATE AND TO ASSIST MORE EFFICIENT AND EXTENDED EXPLOITATION OF ITS MINERAL WEALTH. THE CESS LEVIED DID NOT BECOME A PART OF THE CONSOLIDATED FUND AND WAS NOT SUBJECT TO AN APPROPRIATION IN THAT BEHALF ; IT WENT INTO THE SPECIAL FUND EARMARK ED FOR CARRYING OUT THE PURPOSE OF THE ACT AND THUS ITS EXISTENCE ESTABLISHED A CORRELATIO N BETWEEN THE CESS AND THE PURPOSE FOR WHICH IT WAS LEVIED, SATISFYING THE ELEMENT OF QUID PRO QUO IN THE SCHEME. THE SCHEME OF THE ACT SHOWED THAT THE CESS WAS LEVIED AGAINST THE CLASS OF PERSONS OWNING MINES IN THE NOTIFIED AREA AND TO ENABLE THE STATE GOVERNMENT TO RENDER SPECIFIC SERVICES TO THE SAID CLASS BY DEVELOPING THE NOTIFIED MINERAL AREA. ITS APPLICATION WAS REGULATED BY A STATUTE AND WAS CONFINED TO ITS PURPOSES. THERE WAS A DEFIN ITE CORRELATION BETWEEN THE IMPOST AND THE PURPOSE OF THE ACT WHICH WAS TO RENDER SERV ICES TO THE NOTIFIED AREA. THESE FEATURES OF THE ACT IMPRESSED UPON THE LEVY THE CHA RACTER OF A FEE AS DISTINCT FROM A TAX. 6 MP NO.320/CHNY/2017 3.2 THE LD.AR FURTHER SUBMITTED THAT THE ORDER OF T HE TRIBUNAL IN ITA NOS.1597, 1598 & 1599 FOR THE ASSESSMENT YEARS 2007 -08, 2008-09 AND 2011-12 DATED 30.11.2017 ONLY REFERS TO SURCHAR GE AND NOT CESS, HENCE IT IS NOT APPLICABLE TO THE FACTS OF THE CASE OF THE ASSESSEE. IT WAS THEREFORE PLEADED THAT THE MISCELLANEOUS APPLIC ATION OF THE REVENUE MAY BE DISMISSED. 4. I HAVE HEARD THE RIVAL SUBMISSION AND CAREFULLY PERUSED THE MATERIALS ON RECORD. I FIND MERIT IN THE ARGUMENTS ADVANCED BY THE LD.AR. AS CITED BY THE LD.AR IN THE CASE CITED HER EIN ABOVE A CLEAR DISTINCTION IS MADE BETWEEN CESS AND TAX. THOUGH IN THE CASE OF THE ASSESSEE THE LEVY OF CESS IS BASED ON THE TAX PAYAB LE, CESS CANNOT BE TREATED AS TAX BECAUSE IT IS COLLECTED FOR A SPECIF IC SERVICES AND NOT A DIRECT CHARGE ON THE INCOME OF THE ASSESSEE. FURTHE RAS POINTED OUT BY THE LD.AR THE CASE CITED BY THE LD.DR IS NOT APPLIC ABLE TO THE CASE OF THE ASSESSEE BECAUSE IT DEALS ONLY WITH SURCHARGE. CONSIDERING THE ARGUMENTS OF THE LD.AR AND THE DECISION CITED BY HE R, IM OF THE VIEW THAT THE CESS CANNOT BE TREATED AS TAX FOR THE PURP OSE OF DETERMINING THE MONETARY LIMIT SPECIFIED BY THE CBDT WITH REGAR D TO MAINTAINABILITY OF THE REVENUE APPEALS. THEREFORE, I DO NOT FIND AN Y INFIRMITY IN THE ORDER OF THE BENCH TREATING THE APPEAL OF THE REVEN UE AS NON- 7 MP NO.320/CHNY/2017 MAINTAINABLE DUE TO THE MONETARY LIMIT FIXED BY THE CBDT FOR FILING REVENUE APPEALS. 5. IN THE RESULT, THE MISCELLANEOUS PETITION FILED BY THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 9 TH FEBRUARY, 2018 AT CHENNAI. SD/- ( . ) (A. MOHAN ALANKAMONY) /ACCOUNTANT MEMBER /CHENNAI, ! /DATED 9 TH FEBRUARY, 2018 RSR . ' # $%&'()& /COPY TO: 1. APPLICANT 2. RESPONDENT 3. ' ' * ( ('% ) /CIT(A) 4. ' ' * /CIT 5. &,- . /DR 6. -/0% /GF.