Income Tax Appellate Tribunal - Kolkata
Linc Pen & Plastics Ltd., Kolkata vs Assessee on 13 August, 2015
I . T. A . N os . 43 & 44/ KOL ./ 201 3
Ass es sm e nt y e ars : 2 0 06 - 20 07 & 20 09 - 2 01 0
&
I .T.A . N o. 2 40 9 /KOL /2 013
As s essm e nt Ye a r : 2 00 9- 2 0 10
Page 1 of 10
IN THE INCOME TAX APPELLATE TRIBUNAL,
KOLKATA 'B' BENCH, KOLKATA
Before Shri S.V. Me hrotra, Accounta nt Me mber
and Shri Maha vir Singh, Judicial Member
I.T .A. No s. 4 3 & 44 /KOL/ 2013
Assess ment years : 20 0 6- 200 7 & 2 009 -20 10
Linc Pen & Pla stic s Limited ,......................... ..........................A pp ella nt
3, A lip ore Road ,
Kol ka ta -700 027
[PA N : AA AC L 642 6 C]
-Vs.-
Dep u ty Com mis si one r of Income Ta x,... .................................Re sp ond e nt
Ce ntral Circle -VII, Kolka ta,
A a ya ka r Bha wa n (Poorv a ),
110 , Sha n ti Pa lly,
Kol ka ta -700 107
&
I.T .A. No . 240 9 /KOL/ 2 01 3
Assess ment year : 2009 -2 01 0
Dep u ty Com mis si one r of Income Ta x,... .................................A pp ella nt
Ce ntral Circle -11, Kolka ta,
A a ya ka r Bha wa n (Poorv a ),
110 , Sha n ti Pa lly,
Kol ka ta -700 107
-Vs.-
Linc Pen & Pla stic s Limited ,......................... ..........................Resp ond e nt
3, A lip ore Road ,
Kol ka ta -700 027
[PA N : AA AC L 642 6 C]
Appeara nces by :
Shri S. L. Kochar , Ad vocate & Shri Anil Kochar, Advocate, f or the ass ess ee
Shri Kalya n Nath, JCIT, Sr. D.R., fo r the Departm ent
Dat e of concluding t he hearin g : August 12, 2 015
Dat e of pr onouncing th e order : August 13, 2 015
O R D E R
Per S.V. Mehrotra:
We fi rst t ake up the ITA No. 43/ KOL/2013. This appeal has been filed by the assessee against the ord e r of ld. Commissioner of I ncome Tax I . T. A . N os . 43 & 44/ KOL ./ 201 3 Ass es sm e nt y e ars : 2 0 06 - 20 07 & 20 09 - 2 01 0 & I .T.A . N o. 2 40 9 /KOL /2 013 As s essm e nt Ye a r : 2 00 9- 2 0 10 Page 2 of 10 (Appeals), Cent ral-I, Kolkata dated 02.11.201 2 for the asses sment yea r 2006-07.
2. Brief fact s of the ca se a re th at in the origin al as se ssment, the Assessing Of ficer allowed the d eduction of entire amount clai med by the as se sse e. Ho wever, in pu rsu ance to hi s orde r p ass ed on 17.1 0.2011 under sect ion 263 read with section 143(3) he with d rew th e clai m und e r s ection 80IB amou nting to R s.69,86,940/- after det erminin g the eli gib le cl ai m at Rs. 1,73,39,56 3/-. This withdrawn wa s mad e in view of th e d ecision of the Hon'ble Sup rem e Court in the ca se of L iberty In dia -vs.- CIT report ed in 317 ITR 2 18. Before we proceed fu rther we may obse rve that the Assessing Officer had withd rawn the entire amount of Rs.2,43,26,503/- aft er o bserving th at the assess ee clai med d eduction unde r sect ion 80 IB for th ree B ran ches which we re create d at lat er d ate s sinc e the ori gin al business st arted and fun ds and asset s were di st rib uted and acco unted fo r by the Head office which p rep a red th e consolidated accounts an d acted as the sole as ses see an d none of un it s wa s an asse ssee, and as such the ded uction under section 80IB was not allowable. However, the ld. CIT(App eals) ha s d ecided the i s sue regardin g eli gibility fo r deduction under s ection 80IB in resp ect of as sessee's th ree units in favo ur of as se sse e and, therefo re, as far as eli gibility of assesee fo r d eduction under s ection 80IB is conce rned, the said issue is not before us. Th e only issu e befo re us i s regardin g the di s allowa nces mad e while co mputin g the ded uction unde r s ection 80 IB of th e Ac t.
3. Ld. counsel fo r the as sesse e, at the outset, ref erred to pa ra 9 of ld. CIT(App eals)' o rder and point ed out that th e ld. CIT(App eal s) h as excluded f rom th e profits eli gible for deductio n under sect ion 8 0IB, on the followin g t wo item s :-
(a) Reb ate on Central Sal es Tax payable at Rs.17 ,05,208.76 as per Schedule 10 of Pilern e Unit ;
I . T. A . N os . 43 & 44/ KOL ./ 201 3 Ass es sm e nt y e ars : 2 0 06 - 20 07 & 20 09 - 2 01 0 & I .T.A . N o. 2 40 9 /KOL /2 013 As s essm e nt Ye a r : 2 00 9- 2 0 10 Page 3 of 10
(b) Commi ss ion on High Sea Sal es pay able at Rs.64,0 52/- as per Schedule 11 of other op erational in c ome.
Ld. counsel for the a ssessee po inted out th at fo r thes e two it ems, there i s no discus sion eith e r in the a ss ess ment order o r in the ord er of ld. CIT(App eals). He h as filed a note before us in regard to rebate on Central Sales Tax pay able which i s rep rodu ced h ereunder:-
"8. The ap pellant submits rel eva nt s ch edule of Pilern e Unit as appea ring in the aud ited accounts . C ommission on high sea sale is in respect of th e t ransa ctions r elating to exp ort. Further, asses es e's ind ustrial und erta king a t Pilern e is under the jurisdiction of Goa Sales Tax Autho rities and rebat e was r eceived.
Back Grou nd : Ea rner New SSI Manufacturing Units w er e ex empted from Sales Tax in Goa under en et ry 6 8 under Goa Sales Tax Act, 196 4, but d uring the implementation of nationwide VAT syst em, exemptions were withdrawn and a new sch eme called NPV was desig ned for the ex empted units for the balan ce period of ex emption. Under the NPV s cheme th e assess ee was allowed to charge full rate of tax and get 75% r ebat e from payment of tax".
As re gard s co mmission on High Se as sal e, ld. co unsel fo r th e assessee pointed out that imports mad e by the ass ess ee were sold on high s ea on which commi ssion was ea rned. However, this asp ect h as not b een co nsidered by the lower authorit ies while applying th e decision of the Hon'ble Sup reme Co u rt in th e c ase of Li berty Indi a ( supra).
4. Ld. Dep art me ntal Rep resentativ e for the Revenue relied on the order of ld. CIT(App e als).
5. We have h eard th e rival contention s an d gone thro ugh th e ord ers of tax authorities belo w alon g with the mate rial avail able on reco rd. By co nsiderin g th e totality of the facts, we resto re both the issues to the file of Asses sin g Offi cer for consid ering it a fresh re gardin g eligibility of these two items, deduction under s ection 80IB in accord anc e with la w in the I . T. A . N os . 43 & 44/ KOL ./ 201 3 Ass es sm e nt y e ars : 2 0 06 - 20 07 & 20 09 - 2 01 0 & I .T.A . N o. 2 40 9 /KOL /2 013 As s essm e nt Ye a r : 2 00 9- 2 0 10 Page 4 of 10 light of deci sion o f the Ho n'ble Supreme Court in the case of Libe rty India
-vs.- CIT report ed in 317 ITR 218.
6. In the resu lt, the appea l filed by the assessee is allowed for statisti cal pu rposes.
7. Now we t ake up the ITA 44/KOL/2013. Th is appeal h as been filed by the assessee against the ord e r of ld. Commissioner of In come Tax (Appeals), Cent ral-I, Kolkata dated 02.11.201 2 for the asses sment yea r 2009-10.
8. Brief f act s of th e ca se are that the asse ses e filed its retu rn of inco me showin g total inco me of R s.3,63,23,36 3/-. The asses sment wa s co mplet ed at a total in come of R s.6,19,89,391/- afte r makin g the following additions / di sallowan ces :-
Disallowanc e of los s cl ai med fro m SEZ Unit. .....Rs.10,40,736 /- Sho rt Term Capital Gai n........................................Rs.1,19,66,299 /-
The ld. CIT(Appeals) confi rmed both the additions. Bein g ag grieved, the as se sse e is in appeal before the Tri bunal on the fo llowing effective grounds of appe al:-
(1) For that the ld. CIT(A) ought to have allowed deduction s u/s. 8 0IB as claimed by th e appellant.
(2) For that the claim for ded uction u/s 80IB inclu ded items of inco me not ed u nder th e h ead 'other income' an d that the same fo rmed part o f the income derived by the app ellant eligible for dedu ction u/s. 8 0IB. (3) For th at th e ld. CIT (A) err ed in co nfirming disallowance of Rs.10,40,736/- bein g lo ss suffered by the appellan t in its SEZ Unit which was claimed by the a ppellant adjustable against busin ess income.
(4) For th at the ld. CIT(A ) err ed in confirm in g action of the AO in working out S.T. ca pital ga in s at Rs.1,19,66,299/-
as against Rs. NIL a s claimed by the appellant.
I . T. A . N os . 43 & 44/ KOL ./ 201 3 Ass es sm e nt y e ars : 2 0 06 - 20 07 & 20 09 - 2 01 0 & I .T.A . N o. 2 40 9 /KOL /2 013 As s essm e nt Ye a r : 2 00 9- 2 0 10 Page 5 of 10
9. Gro unds No. 1 & 2 h ave not be en p ress ed by the ld. counsel for the as se sse e at th e ti me of h ea rin g. The ref ore, Ground s No. 1 & 2 are b ein g dismi ssed as not p ress ed.
10. Brief fact s ap ropo s Gro und No. 3 are that the assessee had a Unit in Falta- SEZ . It had claimed dedu ction un der section 10AA. The Ass es sin g Officer notic ed that as ses se e suf fered a loss of Rs.10 ,40,736/- in its Link Pen & Plastics Limi ted- Falt a Unit i n resp ect o f which he clai med eligib ility for exemption under section 10AA which was includ ed in th e co nsolidate prof it. H e pointed ou t t hat befo re filin g of retu rn, the as se sse e had not filed any de clarat ion in writin g that the p ro visions of this section m ay no t be made applic able to it as is provided in sub-s ection (8) of section 10. He, acco rdingly, dis allowed th e loss and add ed back to the total inco me o f the ass es see.
11. Ld. CIT(Appeal s) confi rm ed the addition . Ld. counsel for th e as se sse e pointed out th at the exemp tion has been cl ai med u nder s ection 10AA and the re is no mention fo r furnishin g p articulars in th e said sect ion as mention ed by the Asse ss in g Officer in his ord er. He pointed out that there i s no correspondin g p rovision to section 10A (8) in s ection 10AA of the I.T. Act.
12. Ld. Sr. D.R. submitted th at since th e f acts a re not clear only the Assessing Off icer is in a position to point out under which s ection he wants to take action. Therefore, the matter may be restored to the fil e of Assessing Officer fo r f resh adjudication.
13. Having h eard the rival submi ssion s and after p erusin g the mate rial av ailable on record, we find that th e Assessin g Offi ce r as well as the ld. CIT(App eals) have not p roperly appreciated unde r which p rovisio n the as se sse e was required to furn ish the details. Th e Asses sin g Officer ha s I . T. A . N os . 43 & 44/ KOL ./ 201 3 Ass es sm e nt y e ars : 2 0 06 - 20 07 & 20 09 - 2 01 0 & I .T.A . N o. 2 40 9 /KOL /2 013 As s essm e nt Ye a r : 2 00 9- 2 0 10 Page 6 of 10 hims elf observ ed that the dedu ction was clai med unde r section 10AA, but he ref erred to the det ails a s we re required to be furnish ed as pe r s ection 10AA(8). Under such ci rcu mstan ces an d for p roper app re ciation of fa cts and law, we re sto re th e matt er back to the file of A sse ssin g Office r fo r fresh ad ju dication aft er p rov id in g reasonable opportunity of being hea rd to the a sse ss ee.
14. Brief fact s ap ropos G ro und No. 4 are that durin g the y ear, M/s. Sh ree W ritin g Aid s Pvt. Ltd., a company which was subsequently am al gamated wi th the assessee-compa ny had disposed o ff th e office at Mumb ai being Un it No. F, Phase No. 32 on the ground floor in the Shree Lax mi Unit, Vijay Indu st rial P remi ses Co operative Society Limi ted, Phase Nos. 30, 32, 34 & 35, L axmi Indust rial Estate, New L ink Road, Ahdheri (West), Mumbai alongwith fiv e sha res b ea rin g Dist inctive No s. 621 & 625 under share certific at e No. 90 to Mrs. Saroj B. Singhala for a total co nsideration of Rs.1,21,0 0,000/-. The Assessing Offic er noticed that on peru sal of the d epreci ation sch edule of the Incom e Tax Act a nd detail s of sal e of fi xed ass ets as per claus e no. 14 (d), Annexu re-C, it wa s found that the as ses se e d educted only R s.6 ,34,845/- in ste ad of R s.1,21,00,000/- the sal e consid eration rec eived on sale of office at Mu mbai which wa s only as se t having writt en down value at the beginn in g of the yea r Rs. 1,33,701/- in the block of asset s bein g building used for other than resid ential pu rpos es in th e dep reciatio n sch edule as p er In co me Tax A ct in the acco unts o f M/s. Sh re e Wri tin g Aids Pv t. Ltd., the amal ga matin g co mpany .
15. The plea of ass ess ee was that sin ce the flat wa s fully furnished by way of fu rniture & fixtu res, elect ric in stallation, ai r conditioners, office equ ip ment what the as se ssee-comp any did was that th e total co nsideration of Rs.1,21,00,000/- was p ro-rata d iv ided in p roportio n of the written down value a s ap p earin g th e state ment of dep reciatio n as pe r Incom e Tax Act and deducted th e sa me out of the written down v alue I . T. A . N os . 43 & 44/ KOL ./ 201 3 Ass es sm e nt y e ars : 2 0 06 - 20 07 & 20 09 - 2 01 0 & I .T.A . N o. 2 40 9 /KOL /2 013 As s essm e nt Ye a r : 2 00 9- 2 0 10 Page 7 of 10 brought forward. The Assessin g offic er did not accept this con tention of ld. counsel of the as se ssee by observing as und er:-
"Ther efore, sale consideration of Rs.1,21,00,00 0/- receiv ed by the Shr ee Wri ting Aids Pvt. L td., amalgamating comp any with assess ee is only for sa le o f office as des cribed in the sch edule as abo ve. Ther efor e, under th e facts a nd circumstan ces as discussed abo ve, th e assess ee was r equired t o redu ce th e above sale consid eratio n in the block of build ing other than the resid ential a s per provisions of sec. 43(6) read with sec. 50(1) of the I.T. Act, 1961 instead o f appo rtioning it amongst building, plant and machinery and fu rniture pro-ra ta basis in propo rtion to th eir w.d.v. Accord in gly, the sh ort t erm cap ital gain arising from the sa le o f sa id office at Mu mbai and allowa bility of depreciation o f other a ssets ar e b eing r eca lculated as fo llo ws:-
S hort t erm capital gain chargeable as per s ec. 50(1) of th e I. T. Act Block-Building used fo r o ther than residentia l purposes (rat e 10 %) Full value o f consideration received on -
(1) Sale of Mumbai Office. Rs.1,21,00,000/-
(being only asset in this block of Amalgamating co. M/s. Shr ee W riting Aids Pvt. Ltd. in th e block) W.D.V. of th e block at th e beginnin g of the y ear- Rs. 1,3 3,701/-
____________________ Sho rt t er m capital gain on sale of depreciation a sset s : Rs.1,19,66 ,299/-
Therefo re, th e sho rt t erm capital gain of Rs.1,19,66,2 99/- is added back to the total income.
16. Ld. CIT(Appe als) confi rmed the action o f the Asse ssin g o ffic er by observin g as unde r:-
"13. I fin d tha t the o ffice whi ch was acquired in March, 1994 was disposed off on 16.03.2009. It has been h eld as a busin ess asset . Th e deed o f conveyance reco rds the sale o f office space only and there is no mention of other fix ed asset s. In this factua l backgrou nd, I am of the opin ion th at the AO h as computed the cap ital gain in accordance with the p rovision s of law. The ord er of the AO is uph eld. Ground No . 9 & 10 is dismissed. Ground No. 1,2,3,11 & 12 is gen eral in natur e".
17. We h ave h eard th e riv al sub missions and perused the materi al av ailable on reco rd. Admitt edly in the books of account the ass es see's block of assets was R s. 1,33,701/- which was liquidated by way of sale at a I . T. A . N os . 43 & 44/ KOL ./ 201 3 Ass es sm e nt y e ars : 2 0 06 - 20 07 & 20 09 - 2 01 0 & I .T.A . N o. 2 40 9 /KOL /2 013 As s essm e nt Ye a r : 2 00 9- 2 0 10 Page 8 of 10 total consid eration of R s.1,21, 00,000/-. Therefore, there was no justificatio n in allocatin g the sale co n si deration against va rious items, i.e. furnitu re & fixtu res, el ect ric in st al lation, air con ditione rs, office equ ip ment s, etc. The ld. CIT( Ap peals) has observ ed th at in the sale d eed, there i s no such bifu rcation, though such bifurcation was m ade at the time of amalgamation. Und er such circumst anc es, we do no t find any infirmity in the ord er of ld. CIT(App eals). Accordin gly this g rou nd is dismi ssed.
18. Now we take up the ITA 2409/KOL/2013. This appe al ha s been filed by the Revenu e again st the o rde r of ld. Commi ssion er of In come Tax (Appeals), Cent ral-I, Kolkata dated 02.11.201 2 for the asses sment yea r 2009-10.
19. There is d elay only for t wo days. Ld. D.R. submitted th at del ay may kindly be co ndoned and has o ccu rred due to administ rativ e reason. Ld. co unsel fo r the assessee did not seri ously oppo se it. We acco rdin gly co ndone the del ay and admit the appeal.
20. The only issue in the p re sen t app eal is re gardin g allo cation of expen s es amo ngst various Units. Th e As sessing Officer h as observ ed as under:-
"Furth er, thoug h the two units of th e ass ess ee situ ated in Kolka ta and Goa is eng aged in the manufactu ring of the similar ran ges of produ ct, th e pro fit marg in in Kolkata Unit is much less tha n in comparison to Goa Unit. This is ma in ly due to the facts that th e a ssessee has not app ortioned pro portion ately the exp en diture which are also attribu table and common to th e ma nu fa cturin g unit at Goa.....".
21. The ld. CIT(Ap peals) followin g his earlie r deci sion held that the order p as sed by the As se ssi ng Offi cer was not sustainable. Bein g ag gri eved, the D epa rt men t is in app eal before the T ribun al by taking th e following eff ective ground of app eal :-
I . T. A . N os . 43 & 44/ KOL ./ 201 3 Ass es sm e nt y e ars : 2 0 06 - 20 07 & 20 09 - 2 01 0 & I .T.A . N o. 2 40 9 /KOL /2 013 As s essm e nt Ye a r : 2 00 9- 2 0 10 Page 9 of 10 "That on the facts an d cir cumstan ces of the ca se, ld. CIT(Appeals) err ed in allowing apportionment expen ses of Rs.1,34,0 8,126/- without apprecia ting the find in gs of the AO p ut fo rward in the ass essment ord er".
22. At the out set, ld. counsel for the ass ess ee po in ted out that Tribunal has re stored the issu e in ass ess ee's own case in IT A Nos. 11 70 & 1171/KOL/2011 for th e as ses sment year 2005-06 & 2008-09 to the file of Assessing Officer by observin g as under:-
"3. The l earned DR had no obj ection to s uc h pr ayer insof ar as the l ear ned Co uns el of the as s es s ee has relied on the appor tionm ent f or both the As s es s ment Year s in accor dance with the provis ions of the I. T. Act and in accor dance with the his tor y of the as ses see's case w hen the aud itor s have certif ied the app or tionm ent of Head Of fice expenses to be co ns ider ed f or cl aiming deduction u/s . 80IB to b e on the bas is of the pr ovisions of Section 80l B has to be com puted in a j ud icious m an ner and not as com puted b y the As s es s ing Of f icer insof ar as t he As s es sing Of f icer has com puted the inc ome f r om bus iness as per the Net Pr of it account of the Head Of f ice but has com puted the cl aim of d ed uction/s . 80IB unit-wise. It was s ubm itted that t he As s es sing Of f icer's obs ervation that t he thr ee units were created at a l ater stag e s ince orig inal b us ines s was started and that t he j oint as s ets wer e d is tr ibuted and accou nted for b y t he Head Of f ice were not onl y agains t f act fin ding as per a udited accounts and c er tif icate f or m atter of d ed uctio n cl aim ed u/s . 80IB ins of ar as al l the u nits are inde pendent. T he l ear ned Co uns el of the ass es s ee theref or e pra yed that t he As sess ing Of ficer may b e d irected to r ewor k the d ed uctio n al lowabl e u/s . 80IB b y cons idering the dis cou nt in pur chas es al so f or ming part of income for t he p urp os e of ded uction u/s. 80IB f or the As s es sm ent Y ear 2005-06 ins of ar as the ass ess ee has pr ayed to withdr aw t he g ro und rel ating to com puting the d eduction without incl uding d uty dra w back and e xpor t be nef its . W ith r es pect to the ass es s ment yeaer 2008-09, the as s es s ing Of f icer is d irected to cons ider the appor tionme nt of the Head Of f ice expe ns es in accor dance with the pr ovis ions of the I. T. A ct to al l ow ded uction u/s . 80IB ".
23. We have heard th e rival submi ssion s an d going th rough the orde r of this Tribunal dat ed 23.05. 2013 in ITA Nos. 1170 & 1171/KOL/20 11 in as se sse e's o wn case. By respectfully following the o rd er of this Tribunal, we resto re th is issue to the file of A ss es sin g o fficer fo r decidin g the i ssu e af resh in acco rdanc e with law after p roviding reason able opportun ity of I . T. A . N os . 43 & 44/ KOL ./ 201 3 Ass es sm e nt y e ars : 2 0 06 - 20 07 & 20 09 - 2 01 0 & I .T.A . N o. 2 40 9 /KOL /2 013 As s essm e nt Ye a r : 2 00 9- 2 0 10 Page 10 of 10 being heard to the as sessee. Resulta ntly , this ground is allowed for stati stic al pu rpose s.
24. To sum up, in the result, the appeal being ITA No. 43/ KOL/2013 file d by the asse ssee is allowe d for statisti cal purposes. The appeal being ITA No. 44/ KOL/2013 filed by t he assessee is pa rtly a llowed for statisti cal purposes. The appeal being ITA No. 2409/KOL/2013 filed by the Revenue is allowed for sta tisti cal pu rposes.
Orde r p ronounced in th e open Co urt on 13 t h Au gust, 2015.
Sd/- S d/-
Mahav ir Singh S .V. Mehrotra
(Judi cial Member) (A ccounta nt M ember)
Kolkata, th e 13 t h day of August, 2015
Co pies to : (1) Linc Pen & Pla stic s Limited ,
3, A lip ore Road ,
Kol ka ta -700 027
(2) Dep u ty Com mis si one r of Income Ta x,
Ce ntral Circle -VII, Kolka ta,
A a ya ka r Bha wa n (Poorv a ),
110 , Sha n ti Pa lly,
Kol ka ta -700 107
(3) Comm iss ioner of Income-tax (Appeal s), Centr al -I, Kol kata (4) Com mis sioner of Incom e Tax- , Kol kata (5) The Depar tmental R epr es entative (6) Guard Fil e B y order Assistant Registrar Income Tax App ellate Tribunal Kolkata Ben ch es, Kolkata Laha/Sr. P.S.