Income Tax Appellate Tribunal - Kolkata
Mount Distilleries Ltd., Gangtok vs Ito, Ward - 2(4), Gangtok, Sikkim, ... on 1 March, 2018
MA No.209/K/2017 in ITA No.191/K/2014 Mount Distilleries Ltd. A.Y.2010-11 1
IN THE INCOME TAX APPELLATE TRIBUNAL "C" BENCH : KOLKATA
[Before Hon'ble Sri N.V.Vasudevan, JM & Shri M.Balaganesh, AM]
M.A.No.209/Kol/2017
in
I.T.A No. 191/Kol/2014
Assessment Year : 2010-11
Mount Distilleries Ltd. -vs.- I.T.O., Ward-2(4)
Gangtok, Sikkim Gangtok, Sikkim.
[PAN : AAHCM 0027 H]
(Applicant) (Respondent)
For the Appellant : Shri Anand Sen, Advocate
For the Respondent : Shri S.Das Gupta, Addl. CIT, Sr.DR
Date of Hearing : 23.2.2018.
Date of Pronouncement : 01.03.2018.
ORDER
Per N.V.Vasudevan, JM
This is a Miscellaneous application filed by the Assessee u/s.254(2) of the Income Tax Act, 1961 (Act) praying for rectification of certain apparent errors in the order of the Tribunal dated 22.9.2017 passed in the aforesaid appeal.
2. The Assessee is a company engaged in the business of brewery and bottling plant. The assessee claimed deduction u/s 80IE of the Income Tax Act, 1961 (Act) on income derived from bottling charges. The AO was of the view that income derived from bottling charges is not eligible for deduction u/s 80IE of the Act as the condition precedent for claiming such deduction was that the assessee was required to manufacture or produce of an article or thing as listed in the fourteenth schedule of the Act. Besides the above, the AO also noticed that the return of income has been filed by the assessee for A.Y.2010-11 only on 31.03.2011 which was beyond the due date for filing the return u/s 139(1) of the Act. The AO was of the view that as per the provision of section 80AC of the Act any deduction under Chapter-VI A of the Act (Sec.80IE of the Act is part of Chapter VIA of the Act) can be claimed only if the MA No.209/K/2017 in ITA No.191/K/2014 Mount Distilleries Ltd. A.Y.2010-11 2 return of income for the relevant assessment year is filed on or before the due date prescribed u/s 139(1) of the Act. Since the assessee has not complied with the aforesaid conditions, the AO refused to allow deduction u/s 80IE of the Act.
3. On appeal by the Assessee, the CIT(A) confirmed the order of the AO. On further appeal by the Assessee, the Tribunal upheld the order of the CIT(A) with the following observations:
"5. We have heard the submissions of the ld. Counsel for the assessee, who submitted that the provision of section 80AC of the Act is directory and not mandatory. We have considered the submissions and are of the view that the same cannot be accepted.
6. In Saffire Garments Vs. ITO 140 ITD 0006(SB)(Rajkot), the special bench of the Tribunal in the context of deduction u/s.10A of the Act had to consider the effect of the proviso to Sec.10A(1A) of the Act which is similar to the provisions of Sec.80AC of the Act. Sec.10A(1A) and the proviso thereto is as follows:
" (1A) Notwithstanding anything contained in sub-section (1), the deduction, in computing the total income of an undertaking, which begins to manufacture or produce articles or things or computer software during the previous year relevant to any assessment year commencing on or after the 1st day of April, 2003, in any special economic zone, shall be,--
(i) hundred per cent of profits and gains derived from the export of such articles or things or computer software for a period of five consecutive assessment years beginning with the assessment year relevant to the previous year in which the undertaking begins to manufacture or produce such articles or things or computer software, as the case may be, and thereafter, fifty per cent of such profits and gains for further two consecutive assessment years, and thereafter;
(ii) for the next three consecutive assessment years, so much of the amount not exceeding fifty per cent of the profit as is debited to the profit and loss account of the previous year in respect of which the deduction is to be allowed and credited to a reserve account (to be called the "Special Economic Zone Re-investment Allowance Reserve Account") to be created and utilised for the purposes of the business of the assessee in the manner laid down in sub-section (1B) :
MA No.209/K/2017 in ITA No.191/K/2014 Mount Distilleries Ltd. A.Y.2010-11 3 Provided that no deduction under this section shall be allowed to an assessee who does not furnish a return of his income on or before the due date specified under sub-section (1) of section 139."
7. The Special Bench, held that as per proviso to Sec.10A(1A) of the Act, the assessee was required to file the ROI within the prescribed time as per the provisions of Section 139(1) of the Act and the proviso to sect 10A(1A) was nothing but a consequence of failure of the assessee to file the ROI within the due date prescribed u/s 139(1). For such a failure of the assessee to file his ROI within the due date prescribed u/s 139(1), disallowance of deduction u/s.10A of the Act was not the only consequence. Another consequence of such failure was prescribed in sect 234A also as per which, the assessee was liable to pay interest on the tax payable by him after reducing advance tax and TDS/TCS if any paid by him apart from some other reductions. The legal position is by now settled that charging of interest under various sections including u/s 234A was mandatory. When one of the consequences for not filing ROI within the due date prescribed u/s 139(1) was mandatory then, other consequence for the same failure of the assessee could not be directory and the same was also mandatory. The provisions of the proviso to Section 10A(1A) was therefore held to be mandatory and not directory.
8. Another argument put forth before the Special Bench was that Sec.139(4) is a proviso to Sec.139(1) of the Act and therefore return filed before the time limit prescribed in Sec.139(4) should also be considered as a return filed u/s.139(1) of the Act. This argument was also considered and rejected by the special Bench and the Special Bench held that the Hon'ble Supreme Court in the case of Prakash Nath Khanna vs. CIT as reported in 266 ITR 01 (S.C.) has held that filing of return of income within the time allowed u/s 139(4) of the Income tax Act, 1961 cannot dilute the infraction in not furnishing return in due time as prescribed u/s 139(1) of the Income tax Act, 1961.
9. We are of the view that the ruling of the Special Bench will equally apply to the provisions of Sec.80AC of the Act which are identical to proviso to Sec.10A(1A) of the Act. The provisions of Sec.80AC of the Act reads thus:
" 80AC. Deduction not to be allowed unless return furnished.-Where in computing the total income of an assessee of the previous year relevant to the assessment year commencing on the 1st day of April, 2006 or any subsequent assessment year, any deduction is admissible under section 80- IA or section 80-IAB or section 80-IB or section 80-IC or section 80-ID or section 80-IE, no such deduction shall be allowed to him unless he furnishes a return of his income for such assessment year on or before the due date specified under sub-section (1) of section 139."
10. In view of the decision of the Special Bench of the Tribunal in the case of M/s. Saffire Garments (supra), we hold that the provisions under section MA No.209/K/2017 in ITA No.191/K/2014 Mount Distilleries Ltd. A.Y.2010-11 4 80AC requiring the assessee to furnish the return of income before due date specified under section 139(1) is mandatory and not directory.
11. The Hon'ble Calcutta High Court in the case of CIT Vs. Shelcon Properties (P) Ltd., G.A.No.3069 of 2013, ITAT No.162 of 2013 order dated 16.1.2014 held that provisions of Sec.80AC of the Act are mandatory. The learned counsel however made submission that the question whether return filed within the time limit prescribed u/s.139(4) of the Act should be construed as compliance with the condition of filing return on or before due date u/s.139(1) of the Act by treating the provisions of Sec.139(4) as proviso to Sec.139(1) of the Act, was not considered by the Hon'ble Calcutta High Court in the aforesaid decision. But this argument does not hold water in view of the decision of the Special Bench which has considered this question and held in the negative by relying on the decision of the Hon'ble Supreme Court in the case of Prakash Nath Khanna (supra).
12. In view of the above discussion and considering the facts and circumstances of the case, we do not find any error or illegality in the orders of authorities below. In view of the above conclusion we are of the view that the question that the assessee satisfies the requirement of claiming deduction u/s 80 IE of the Act does not require any examination."
4. It is the plea of the Assessee in this MA that a written submission was filed on behalf of the Assessee before the Tribunal which contained inter alia copy of a number of judicial decisions, namely the (a) Division decision of Tribunal ' A ' Bench, Delhi in the case of M/s Fiberfill Engineers [ITA No.1853/Del/2015 dated 25th February, 2016] (b) Division Bench judgment of the High Court at Delhi in the case of CIT - versus - M/s Unitech Limited [ITA No. 239/2015 dated 05th October, 2015] and decisions of the Honourable Supreme Court of India in the case of (a) Straw Board Manufacturing Ltd dated 28th April,1989 and (b) CIT -versus- Poddar Cements Private Ltd dated 27th May, 1997 to support the case of the assessee. It has further been contended that in the impugned order of Tribunal dated 22nd September, 2017, there was no mention or discussion or reference to any of the aforesaid decisions nor there was any finding, after discussion of the facts of the case/s that the cases cited above did not support the case of the Assessee or the arguments made on behalf of the appellant. It is claimed that the above omission constitutes mistake apparent from the record, which requires rectification within the meaning of section 254(2). It has also MA No.209/K/2017 in ITA No.191/K/2014 Mount Distilleries Ltd. A.Y.2010-11 5 been contended that even if it is presumed, without accepting, that such decisions had no relevance or any bearing on its decision, such action, without any reason in- support of such conclusion, would constitute serious breach of the principle of natural justice (audi alteram partem) and would constitute arbitrariness. It has also been contended that unless the adjudicator is specifically seen to have considered the arguments or submissions and then rejected them, with reason/s, after consideration, a mistake apparent from record would creep in. It is claimed that in the order of the Tribunal there is no reference to any of the decisions cited on behalf of the Assessee. It is claimed that there is a mistake, as above, apparent from record, within the meaning of section 254(2), in the order of the Tribunal dated 22nd September, 2017 in I.T.A. No. 191/ Kol 2014, which requires to be rectified.
5. The learned counsel for the Assessee made submissions which was a reiteration of what is contained in the MA set out in the earlier paragraph of this order. He made reference to the decision of the Hon'ble Supreme Court in the case of Honda SielPower Proudcts Ltd. 295 ITR 466 (SC) wherein it was held by the Hon'ble Supreme Court that the purpose behind enactment of sec.254(2) of the Act is to ensure that no party appearing before the Tribunal should suffer on account of any mistake committed by the Tribunal and that prejudice should not be caused to the parties. According to him the assssee is prejudiced by the action of the tribunal in not making a reference to the decision of the Hon'ble Delhi ITAT in the case of M/s Fiberfill Engineers (supra) of the Hon'ble Delhi High Court in the case of M/s. Unitech Ltd. (supra) and decisions of Hon'ble Supreme Court in the case of StrawBoard Manufacturing Ltd. (supra) and Poddar Cements Ltd (supra), in its order. The Ld. Counsel for the assesee fairly admitted that the issue was also covered against the assessee by the decision of the Hon'ble Calcutta High Court in the case of Shalcon Properties (P)Ltd (supra). However according to him the Hon'ble Delhi High Court in the case of M/s. Unitech Ltd. (supra) has held that the question whether provisions of sec. 80AC is mandatory or not is left open. The revenue has filed appeal before the Hon'ble Supreme Court against the said decision of the Hon'ble Delhi High Court in Unitech Ltd.'s (supra) case and the same for adjudication in Civil Appeal No.1460 of MA No.209/K/2017 in ITA No.191/K/2014 Mount Distilleries Ltd. A.Y.2010-11 6 2017. According to him therefore the last word on the issue is yet to be pronounced by the Hon'ble Supreme Court. According to him therefore all these aspects should have been spelt out in the order of the Tribunal so that the appellate forum when the issue is taken up on appeal, can appreciate the case of the assessee.
6. The Ld. DR pointed out that when the issue is covered against the assessee by the decision of the Hon'ble Calcutta High Court in the case of Shelcon Properties (P)Ltd (supra), which is the Jurisdiction High Court, as far as the assessee and ITAT are concerned, the Tribunal has no other option but to follow the same. According to him, there is no mistake apparent on the face of the order of the Tribunal.
7. We have carefully considered the rival submissions. As rightly contented by the ld. DR, when the issue is squarely and admittedly covered by the decision of the Hon'ble Calcutta High Court, reference to the decision of ITAT, Delhi Bench in the case of M/s Fibrefill Engineers (supra) is not necessary. As far as the decision of the Hon'ble Delhi High Court in the case of M/s Unitech Ltd. (supra) is concerned, it did not deal with the question whether provisions of sec.80AC of the Act are mandatory or directory. The fact that an appeal against the said decision is pending before the Hon'ble Supreme Court is not of any relevance because as on the date when the Tribunal passed its order it was bound to follow the decision of Hon'ble Calcutta High Court in the case of M/s. Shelcon Properties (P)Ltd (supra). Therefore, not making a reference to the decision of Delhi High Court in the case of M/s. Unitech Ltd. (supra) is neither a mistake apparent from the record nor does it cause any prejudice to the assessee. For the very same reasons not making a reference to the decisions of the Hon'ble Supreme Court in the case of Straw Board Manufacturing Ltd. (supra) and Poddar Cements Pvt. Ltd. (supra) by the Tribunal in it's order does not give rise to any mistake apparent on the face of the order of the Tribunal. The decisions of the Hon'ble Supreme Court are on the principle (a) a liberal construction should be put on the language of a statute when concessional rates are provided for encouraging an industrial activity and (b) when two interpretations are possible, the view in favour of the assessee has to be adopted. Both these decisions cannot be applied by the Tribunal MA No.209/K/2017 in ITA No.191/K/2014 Mount Distilleries Ltd. A.Y.2010-11 7 to hold that provisions of sec.80AC of the Act are directory only, contrary to the decision of Hon'ble Calcutta High Court in the case of M/s Shelcon Properties (P)Ltd. (supra). We are therefore of the view that there is no mistake apparent on the face of the record of the Tribunal. Hence the Miscellaneous Application is dismissed.
8. In the result the Miscellaneous Application of the assessee is dismissed.
Order pronounced in the open Court on 01.03.2018.
Sd/- Sd/-
[M.Balaganesh] [ N.V.Vasudevan ]
Accountant Member Judicial Member
Dated : 01.03.2018.
[RG Sr.PS]
Copy of the order forwarded to:
1.M/s. Mount Distilleries Ltd., Palzor Stadium Road, Gangtok, Sikkim. 2 I.T.O., Ward-2(4), Gangtok, Sikkim.
3. C.I.T.(A)-Jalpaiguri 4. C.I.T.-Jalpaiguri, Siliguri
5. CIT(DR), Kolkata Benches, Kolkata.
True Copy By order, Senior Private Secretary Head of Office/D.D.O., ITAT, Kolkata Benches