Income Tax Appellate Tribunal - Kolkata
Brahmaputra Carbon Ltd, Kolkata vs Assessee on 18 April, 2012
आयकर अपीलीय अधीकरण, Ûयायपीठ - " ऐ" कोलकाता,
IN THE INCOME TAX APPELLATE TRIBUNAL "A" BENCH: KOLKATA
(सम¢)Before ौी महावीर िसंह, Ûयायीक सदःय एवं/and ौी, सी.डȣ.राव लेखा सदःय)
[Before Shri Mahavir Singh, JM & Shri C. D. Rao, AM]
आयकर अपील संÉया / I.T.A No. 282/Kol/2010
िनधॉरण वषॅ/Assessment Year: 2005-06
Brahmaputra Carbon Ltd. Vs. Additional Commissioner of Income-tax,
(PAN: AAACH7120D) Range-3, Kolkata
(अपीलाथȸ/Appellant) (ू×यथȸ/Respondent)
Date of hearing: 18.04.2012
Date of pronouncement: 18.04.2012
For the Appellant: Shri Soumitra Chowdhury
For the Respondent: Shri Niraj Kumar
आदे श/ORDER
Per Mahavir Singh, JM ( महावीर िसंह, Ûयायीक सदःय)
सदःय This appeal by assessee is arising out of order of CIT(A)-XIII, Kolkata in Appeal No. 93/CIT(A)-XIII/Range-3/08-09 dated 30.10.2009. Assessment was framed by Addl. CIT, Range-3, Kolkata u/s. 143(3) of the Income-tax Act, 1961 (hereinafter referred to as "the Act") for Assessment Year 2005-06 vide his order dated 28.11.2007.
2. At the outset, Ld. Counsel for the assessee stated that he has raised additional ground which is enclosed at assessee's paper book. Ld. Counsel for the assessee stated that the additional ground raised are purely legal in nature and these grounds are arising out of the facts mentioned in the order of CIT(A) and were missed out in the original ground due to inadvertence while preparing Memorandum of Appeal. Ld. DR has not objected to take up the additional grounds. Ld. Counsel for the assessee stated that the following two are additional grounds:
"3. For that the Ld. CIT(A) erred in partly confirming the addition to the extent of Rs.3,39,68,495/- made by the A.O. u/s. 40(a)(ia) out of the total addition of Rs.8,12,70,683/- and not allowing the relief in full.
4. For that the Ld. CIT(A) erred in holding that the aforesaid disallowance of Rs.3,39,68,495/- made u/s. 40(a)(ia) is not eligible for deduction u/s. 80IC"
3. We have heard rival submissions and gone through facts and circumstances of the case. Brief facts leading to the above additional grounds stated by the Ld. Counsel for the assessee 2 ITA 282/K/2010 Brahmaputra Carbon Ltd.. A.Y. 05-06 are that the Assessing Officer noted in his assessment order that the amount of TDS on expenditure debited to P&L Account was deducted as under:
"Delayed payments of TDS:
Amt. of tax deducted at source Amt. of exp. On which such tax is deducted at source
Rs. 1,07,008/- Rs. 49,68,495/-
Rs,15,95,479/- Rs.7,63,02,188/-
Rs.17,02,487/- Rs.8,12,70,683/-
According to Ld. Counsel, the following are the details of expenditure incurred TDS deducted and paid to government account:
Name, Address & PAN of the Amount of Date of Credit/ Amount Date on
Deductee credit/payment Payment Deducted which paid
(Rs.) (Rs.) to Central
Govt.
Campbells Minerals Co. Pvt. 7,63,02,188 31.03.2005 15,95,479 21.10.2005
Ltd. 9, Mangoe Lane, Kolkata-
700 001.PAN:AABCC0806C
Hanman Road Carriers, Room 49,68,495 31.03.2005 1,03,891 17.06.2005
No.301,37A,BentinckSt, Kolkata
- 700 069. PAN:AADCS7338H
In view of this, ld. Counsel for the assessee stated that the relevant assessment year involved is 2005-06 and TDS for the payment as on 31.03.2005 credited/paid as on that date was deducted as on 31.03.2005 but was paid as on 17.06.2005 and 21.10.2005. Ld. Counsel for the assessee stated that these payments are within the due date of filing of return and as per amendment carried out by Finance Act, 2010 in section 40(a)(ia) of the Act which is held by Hon'ble Calcutta High Court as remedial and curative in nature and retrospective in application. We find from the above facts that these facts are not in dispute as much as deducted during the year and was paid to the credit of Central Government before the due date of filing of return of income u/s. 139(1) of the Act. We find that the facts are not in dispute and this issue is now squarely covered in favour of the assessee and against revenue by the decision of Hon'ble Calcutta High Court in the case of CIT Vs. Virgin Creations in ITAT No.302 of 2011, GA No.3200/2011 dated 23.11.2011, wherein Hon'ble High Court has confirmed coordinate bench decision of ITAT in ITA No.267/K/2009 "A" Bench, in the case of Virgin Creations Vs. ITO dated 15.12.2010. Tribunal has considered the decisions of Mumbai Bench of this ITAT in the case of M/s. Bansal Parivahan (India) P. Ltd. Vs. ITO in ITA No.2355/Mum/10 and of Ahmedabad Bench "B" in ITA No. 3983/Ahd/2008 for AY 2005-06 dated 03.12.2010. Tribunal considered the amendment made in the provisions of section 40(a)(ia) of the Act by the Finance Act, 2010 as curative and remedial in nature by holding as under:
3 ITA 282/K/2010 Brahmaputra Carbon Ltd.. A.Y. 05-06 "After hearing the rival submissions and on careful perusal of the materials available on record, keeping in view of the fact that though the Ld. D.R. submitted that the decisions of the Coordinate Benches are not binding and the Kolkata benches may take a different view, since Mumbai Bench after analyzing the provisions of section 40(a)(ia) since its inception and various amendments made to the same including the suggestion made by the Industry in the form of representation in their pre-budget memorandum to the Hon'ble Finance Minister and by applying the decision of the Hon'ble Apex Court in the case of Alom Extrusions Ltd., has observed that "The provisions of section 40(a)(ia) as stood prior to the amendments made by the Finance Act 2010 thus were resulting into unintended consequences and causing grave and genuine hardships to the assessees who had substantially complied with the relevant TDS provisions by deducting the tax at source and by paying the same to the credit of the Government before the due date of filing of their returns u/s 139(1). In order to remedy this position and to remove the hardships which was being caused to the assessees belonging to such category, amendments have been made in the provisions of section 40(a)(ia) by the Finance Act 2010. The said amendments, in our opinion, thus are clearly remedial/curative in nature as held by Hon'ble Supreme Court in the case of Allied Motors Pvt. Ltd. (supra) and Mom Extrusions Ltd. (supra) and the same therefore would apply retrospectively w.e.f. 1st April, 2005. In the case of R.B. Jodha Mal Kuthiala 82 ITR 570, it was held by the Hon'ble Supreme Court that a proviso which is inserted to remedy unintended consequences and to make the provision workable, requires to be treated as retrospective in operation so that a reasonable interpretation can be given to the section as a whole. In the present case, the amount of tax deducted at source from the freight charges during the period 01/04/2005 to 28/02/2006 was paid by the assessee in the months of July and August 2006 i.e. well before the due date of filing of its return of income for the year under consideration. This being the undisputed position, we hold that the disallowance made by the A.O. and confirmed by the learned CIT(A) on account of freight charges by invoking the provisions of section 40(a)(ia) is not sustainable as per the amendments made in the said provisions by the Finance Act, 2010 which, being remedial/curative in nature, have retrospective application", we find no reason to deviate from the decisions of the ITAT's Mumbai Bench and Ahmedabad Bench, in the absence of a contrary view, except the other benches decision or any other High Court. Therefore, respectfully following the decision of the Coordinate Benches (supra), we allow the ground nos. 1 to 3 of the assessee's appeal."
4. We find that the above view of this Tribunal was confirmed by Hon'ble Calcutta High Court in the case of Virgin Creations (supra) by holding as under:
"We have heard Mr. Nizamuddin and gone through the impugned judgment and order. We have also examined the point formulated for which the present appeal is sought to be admitted.
It is argued by Mr. Nizamuddin that this court needs to take decision as to whether section 40(A) (ia) is having retrospective operation or not.
The learned Tribunal on fact found that the assessee had deducted tax at source from the paid charges between the period April 1, 2005 and April 28, 2006 and the same were paid by the assessee in July and August 2006, i.e. well before the due date of filing of the return of income for the year under consideration. This factual position was undisputed. Moreover, the Supreme Court, as has been recorded by the learned Tribunal, in the case of Allied Motors Pvt. Ltd. and also in the case of Alom Extrusions Ltd., has already decided that the aforesaid provision has retrospective application. Again, in the case reported in 82 ITR 570, the Supreme Court held that the provision, which has inserted the remedy to make the provision workable, requires to be treated with retrospective operation so that reasonable deduction can be given to the section as well. In view of the authoritative pronouncement of the Supreme Court, this court cannot decide otherwise. Hence we dismiss the appeal without any order as to costs.
4 ITA 282/K/2010 Brahmaputra Carbon Ltd.. A.Y. 05-06
5. Once the issue is decided by Hon'ble jurisdictional High Court that the amendment in the provisions of section 40(a)(ia) of the Act by Finance Act, 2010 is remedial and curative in nature and TDS paid on or before the due date of filing of return u/s. 139(1) of the Act, deduction in respect to the amount on which TDS is so paid, is allowable. In the present case the assessee deducted tax in March, 2005 but the same was deposited on two different dates i.e. 17.06.2005 and 21.10.2005 for the AY 2005-06, that means the TDS was paid before due date of filing of return u/s. 139(1) of the Act by the assessee, hence, we allow the claim of assessee. This issue of assessee's appeal is allowed.
6. The Ld. Counsel for the assessee further stated that the assessee has revised the ground and the revised grounds are filed in assessee's paper book-1. The Ld. DR has not objected to the revised grounds. The first revised ground raised by assessee is against the order of CIT(A) in directing the Assessing Officer to treat the interest income in FDRs i.e. deposit/RIP with Bank as income from other sources.
7. We have heard rival submissions and gone through facts and circumstances of the case. The Assessing Officer has not considered the interest income as business income and not allowed deduction u/s. 80IC of the Act on this. Aggrieved, assessee carried the matter before CIT(A), who confirmed the action of Assessing Officer by considering the decision of Hon'ble Supreme Court in the case Pandian Chemicals Ltd. Vs. CIT (2003) 262 ITR 278 (SC). Before us, Ld. Counsel for the assessee has not seriously pressed this issue and even otherwise, we are of the view that this issue is squarely covered against the assessee and in favour of the revenue by the decision of Hon'ble Supreme Court in the case of Pandian Chemicals Ltd. (supra), wherein the meaning of word 'derived from' is discussed in detail. Even the provisions of section 80IC of the Act are similar to the provisions of section 80HHC of the Act in respect to the word 'derived from', wherein any profit and gains derived by an undertaking or an enterprise from any business referred to in sub-section (2), the interest cannot be treated as derived from industrial undertaking or business enterprises because this is FDRs interest. Hence, we decide the issue against the assessee. This ground of appeal of assessee is dismissed.
8. The next issue in this appeal of assessee is against the order of CIT(A) directing the Assessing Officer to exclude excise duty refund from business income of the assessee while allowing the deduction u/s. 80IC of the Act by treating the same as income from other sources.
5 ITA 282/K/2010 Brahmaputra Carbon Ltd.. A.Y. 05-06
9. We have heard rival submissions and gone through facts and circumstances of the case. We find that the Assessing Officer as well as CIT(A) after considering the decision of Hon'ble Calcutta High Court in the case of CIT Vs. Andaman Timber Industries Ltd. (2000) 242 ITR 204 (Cal) treated the excise duty refund as not derived from industrial undertaking of the assessee and not eligible for deduction u/s. 80IC of the Act. We find that as referred by Ld. Counsel for the assessee, this issue is squarely covered in favour of assessee and against the revenue by the decision of Hon'ble Guwahati High Court in the case of CIT Vs. Meghalaya Steels Ltd. (2011) 332 ITR 91 (Gau) wherein it has been held as under:
"The Central Board of Excise and Customs in its circular dated December 19, 2002 clarified that the refund is not on account of excess payment of excise duty but is basically designed to give effect to the exemption and to operationalise the exemption given by the notifications. In that sense, the Central excise duty refund does not appear to bear the character of income since what is refunded to the assessee is the amount paid under the modalities provided by the Department of Revenue for giving effect to the exemption notifications. There is also nothing to suggest that the assessee has recovered or passed on the excise duty element to its customers.
Even assuming the refund does amount to income in the hands of the assessee, it is a profit or gain directly derived by the assessee from its industrial activity. The payment of Central excise duty has a direct nexus with the manufacturing activity and similarly, the refund of the Central excise duty also has a direct nexus with the manufacturing activity. The issue of payment of Central excise duty would not arise in the absence of any industrial activity. There is, therefore, an inextricable link between the manufacturing activity, the payment of Central excise duty and its refund. In the circumstances, we are of the opinion that question No. 2 must be answered in the affirmative in favour of the assessee and against the Revenue."
As the issue is squarely covered in favour of assessee, we allow the claim of assessee. This ground of assessee's appeal is allowed.
10. The next issue in this appeal of assessee is against the order of CIT(A) confirming the action of Assessing Officer in treating the transport subsidy as income from other sources and not eligible for deduction u/s. 80IC of the Act Brief facts leading to the above issue are that the Assessing Officer noticed from the P & L Account that the assessee has credited an amount of Rs.1,22,89,642/- under the head transport subsidy and claimed deduction u/s. 80IC of the Act treating the same as business income. The Assessing Officer required the assessee to explain the nature of other income in the shape of transport subsidy received by assessee from Govt. The assessee filed details and stated that he has only one source of income i.e. from business of manufacturing of CPC in this plant, which is enjoying 100% tax exemption. There is no other source or business and all incomes are from this business. As such all such other incomes also enjoys such exemption from taxes, being income of said business. It was submitted that wordings of Sections 80IA, 80IB and 80IC have wider coverage and includes all kinds of income relating to the business and the income as given in the details do relate to this 6 ITA 282/K/2010 Brahmaputra Carbon Ltd.. A.Y. 05-06 business hence exempt from taxes. The Assessing Officer after noting the provisions of section 80IC of the Act as well as the decision of Hon'ble Supreme Court in the case of Pandian Chemicals Ltd. (Supra) disallowed the claim by giving following finding in para 4.4 of his order:
"4.4. A reading of the above ruling would show that the Hon'ble Apex Court has laid down the parameters for the meaning of the words 'derived from'. Here, reference also is made to the judgment of Hon'ble Calcutta High Court in the case of CIT vs. Andaman Timber Industries Ltd. 244 ITR 204 in which it was held with reference to transport subsidy that "considering the undisputed fact that the subsidy is an aid to the assessee for which the immediate source is the Government, it is an incidental income on account of the newly established industrial undertaking which has been given by the Government under the scheme. Therefore, it cannot be treated as part of the profits and gains 'derived from' an industrial undertaking of the assessee"."
Considering the above, in the case of M/s. Brahmaputra Carbon Limited, the assessee, the income under narration "Other Income" consisting of interest income of Rs.28,108/- and transport subsidy of Rs. 1,22,89,642/- is held not to be eligible for deduction u/s.80- IC as claimed by the assessee. Therefore, if the "other income" of Rs. 1,23,17,750/ - is taken aside and not considered for deduction U/s.801C, the total income which would be eligible for deduction u/s.80-IC would be as under:
Aggrieved, assessee preferred appeal before CIT(A), who also confirmed the action of Assessing Officer. Aggrieved, assessee came in appeal before us.
11. We find that the assessee before us contended that this income also does fall under the category of exempted income as the same relates to business of unit. The main argument of Ld. Counsel for the assessee was that the wordings as used u/s. 80IA, 80IB and 80IC is totally different from the wordings of Sec. 80HH/80I etc. the wordings of Sec. 80HH etc. says "Profits and gains derived from an industrial undertaking" which has narrow coverage while under Sec.
80IA, 80IB and 80IC - it says "Profits and gains derived from the business of an industrial undertakings." Therefore, According to him, it has wider coverage and it includes all kinds of income derived from business of the undertaking. He also contended that the goods produced by the unit have got to be transported to the buyers' places for delivery and for that transport expenses have to be incurred. No producer produces the goods to keep it in his factory. During the year the company has incurred as expenditure of Rs.50444158/- for this purpose. Against this Govt. has allowed a transportation subsidy as an incentive to partly cover the extra expenditure incurred by company for this purpose. He also contended that Assam is far away place from the mainland and extra expenditure has to be incurred for transportation of goods from Assam to main land, hence this incentive. This is an incentive for setting up the industries in that state. This falls under the category of income from business of unit and not out of purview of this exemption. But we find that this issue is now squarely covered against 7 ITA 282/K/2010 Brahmaputra Carbon Ltd.. A.Y. 05-06 the assessee and in favour of revenue by the decision of Hon'ble Guwahati High Court in the case of Meghalaya Steels Ltd. (supra) wherein it is held as under:
"The expression "derived from" occurring in section 80-IB of the Act in relation to the business of an industrial undertaking is narrower in con- notation than the expression "attributable to" the business of an industrial activity. This was so held long back in Cambay Electric Supply Industrial Co. Ltd. v. CIT [1978] 113 ITR 84 (SC). Therefore, while "attributable to" as used in some other sections of the Act, may cover sources of income beyond the first degree, "derived from" as used in section 80-IB of the Act is not intended to cover sources beyond the first degree. It is keeping this distinction in mind that it must be held that transport subsidy and interest subsidy cannot be said to be "derived from" the industrial undertaking of the assessee. At best, it can only be ancillary to the profits and gains relatable to or "attributable to" the business of the industrial undertaking and not in the category of profits and gains "derived from" its industrial activity."
Respectfully following the Hon'ble Guwahati High Court, we confirm the order of CIT(A) and this issue of assessee's appeal is dismissed.
12. In the result, the appeal of assessee is partly allowed.
13. Order pronounced in the open court.
Sd/- Sd/-
सी.डȣ
सी डȣ.राव
डȣ राव लेखा सदःय महावीर िसंह, Ûयायीक सदःय
(C. D. Rao) (Mahavir Singh)
Accountant Member Judicial Member
तारȣख)
तारȣख) Dated : 18th April, 2012
(तारȣख
वǐरƵ िनǔज सिचव Jd.(Sr.P.S.)
आदे श कȧ ूितिलǒप अमेǒषतः- Copy of the order forwarded to:
1. अपीलाथȸ/APPELLANT - Brahmaputra Carbon Ltd., 37A, Bentinck Street, Room No.31, 3rd floor, Kolkata-700 069 2 ू×यथȸ/ Respondent - Addl.CIT, Range-3, Kolkata.
3. आयकर किमशनर (अपील)/ The CIT(A), Kolkata
4. आयकर किमशनर/ CIT Kolkata
5. ǒवभािगय ूितनीधी / DR, Kolkata Benches, Kolkata स×याǒपत ूित/True Copy, आदे शानुसार/ By order, सहायक पंजीकार/Asstt. Registrar.