Income Tax Appellate Tribunal - Kolkata
Lmj Construction Pvt. Ltd., Kolkata vs Department Of Income Tax
आयकर अपीलीय अधीकरण, बी " , कोलकाता,
अधीकरण Ûयायपीठ - "बी कोलकाता
IN THE INCOME TAX APPELLATE TRIBUNAL "B" BENCH : KOLKATA
सम¢) एस भी.मे
सम¢ ौी एस.
(सम¢ भी मेहरोऽा , लेखा सदःय एवं ौी महावीर िसंह, Ûयायीक सदःय,
सदःय )
[Before Sri S.V. Mehrotra, A.M. & Sri Mahavir Singh, J.M.]
आयकर अपील संÉया / I.T.A No. 1790/Kol/2010
िनधॉरण वषॅ/Assessment Year : 2004-2005
Income Tax Officer, Ward-2(3), Kolkata -vs.- M/s. L.M.J. Construction Pvt. Ltd., Kolkata
(PAN : AAACL 4494 Q)
(अपीलाथȸ /Appellant) (ू×यथȸ/Respondent)
&
आयकर अपील संÉया / I.T.A No. 1791/Kol/2010
िनधॉरण वषॅ/Assessment Year : 2007-2008
Deputy Commissioner of Income Tax, -vs.- M/s. L.M.J. Construction Pvt. Ltd., Kolkata
Kolkata (PAN : AAACL 4494 Q)
(अपीलाथȸ /Appellant) (ू×यथȸ/Respondent)
For the Assessee : S/Shri S. Khemka and M. Bajoria, A.R.
For the Department : Shri S.K. Malakar, D.R.
आदे श/ORDER
Per Shri S.V. Mehrotra, Accountant Member/ ौी एस. भी.मे
भी मेहरोऽा , लेखा सदःय :-
We first take up the appeal being ITA No. 1790/Kol./2010. This appeal filed by the Revenue is against the order of ld. Commissioner of Income- Tax (Appeals)-I, Kolkata dated 09.07.2010 for the assessment year 2004-05. The only ground of appeal is as under :-
"That on facts and in the circumstances of the case, the ld. CIT(A.) has erred in deleting the addition of Rs.18,17,811/- on account of sales of scrap which was not credited to profit & Loss Account holding that sale proceeds of scrap was not in the nature of business receipt".
2. Brief facts of the case are that the assessee-Company in the relevant assessment year was carrying on the business of Logistics & warehousing. It had filed its return of income declaring NIL income. The Assessing Officer, however, computed total income at Rs.18,26,683/-, inter alia, making addition of Rs.18,17,811/- on account of receipt of cash 2 ITA Nos. 1790 & 1791/Kol./2010 against sale of scrap. In respect of this addition, the relevant facts are that from the Bank a/c. of assessee with Canara Bank, Chowringhee Branch being A/c. No. BACA 000001904, the Assessing Officer noticed that there were cash deposits to the tune of Rs.15,70,000/- in the month of June, 2003 as under :-
13.06.2003 Cash Rs.4,00,000/-
16.06.2003 Cash Rs.3,20,000/-
16.06.2003 Cash Rs.5,00,000/-
17.06.2003 Cash Rs.3,50,000/-
It was explained that the deposits were made by the assessee itself out of the proceeds of sale of scrap made during the year. The Assessing Officer noticed that this sale was not shown in the Profit & Loss A/c. He, therefore, required the assessee to explain this aspect. The assessee pointed out as under :-
"Sale proceeds were totaling to Rs.18,17,811/-. Out of this Rs.18,17,811/-, the assessee had adjusted Rs.15,00,000/- against the payment of Rs.90,00,000/- made to Avery India Limited. The balance of Rs.3,17,811/- has been adjusted with the repairs and maintenance account. Hence, nothing appeared in the profit & loss account of the assessee regarding the sale of scrap".
Assessing Officer examined the assessee's plea and noted that the Ledger A/c. of Avery India Limited showed opening debit balance of Rs.90 lakhs. He noted that on 30.03.2003, there was a credit adjustment of Rs.15 lakhs, which, as per the assessee, was out of sale proceeds of scrap. The Assessing Officer after examining the agreement between LMG Construction and Avery India Limited concluded that Avery India Limited enjoys no further right at all in any respect over 51, Hide Road Extension, Kolkata-88. Hence, the scrap lying at the premises became assessee's property and, therefore, the assessee was required to disclose the income. He further noted that in the agreement dated 14.03.2003 between Avery India Limited and LMJ Construction Pvt. Ltd. relating to the transfer of lease rights over 51, Hide Road Extension, Kolkata-88, there was no mention of any scrap materials in Schedules annexed thereto which provide an inventory of all Items as per the agreement. He, therefore, concluded that the scrap sold by the assessee was not a part of the capital assets involved in the agreement. The Assessing Officer concluded that the sale of scrap primarily represented current assets and, therefore, treated the sale thereof as revenue receipt. He, therefore, concluded that assessee was required to account for the same in its Profit & Loss A/c and accordingly, made an addition of Rs.18,17,811/-.
3 ITA Nos. 1790 & 1791/Kol./20103. Before the ld. CIT(Appeals), the assessee had given detailed submissions, which have been reproduced in para 3 at page 6 of ld. CIT(Appeals)'s order and after considering the submissions, ld. CIT(Appeals) observed at page 8 as under :-
"3. After going through the facts of the case and submissions made by the appellant, it appears that the scrap sold out of the structures & items mentioned in the agreement. Hence, the same cannot be considered as the business income of the assessee per se. Further, the block of the assets under which the items had been sold was not exhausted. The question of capital gain also does not arise".
4. Learned Departmental Representative for the Revenue referred to the finding of ld. CIT(Appeals) as reproduced above and submitted that the order is completely non-speaking and, therefore, the matter needs to be restored back to the file of ld. CIT(Appeals).
5. On the other hand, ld. counsel for the assessee submitted that as far as adjustment to the extent of Rs.3,17,811/- is concerned, the same has been made against repairs and maintenance and, therefore, no addition is called for in respect of the said amount. As regards the balance sum of Rs.15,00,000/- adjusted against the value of fixed assets, ld. counsel for the assessee relied on the order of ld. CIT(Appeals).
6. We have considered the rival submissions and perused the material available on record. The assessee's claim is that it had adjusted sale of scrap against the total sale consideration. Admittedly, the agreement had been entered into between Avery India Limited and the assessee on 14.03.2003. M/s. Avery India Ltd. vide this agreement had transferred, assigned and surrendered absolutely and without any reservation to the asssessee-company all its rights, title and interest in respect of the said premises, building and structures standing in the said premises, all plant, machinery and equipment lying in the said premises. In consideration of this transfer, the assessee-company had agreed to pay a total sum of Rs.90,00,000/- to AIL for the building, super structures, machineries, goods etc. lying at 51, Hide Road, Kolkata. Therefore, the assessee was required to capitalize the entire purchase consideration of Rs.90,00,000/- in its books of account on 14.03.2003. However, the assessee had shown the entire amount under 'Deposit'. The scrap was allegedly sold in June, 2003 for Rs.15,70,000/- and, therefore, how the assessee accounted for Rs.15,00,000/- on 30.03.2003 is not clear. Ld. CIT(Appeals) has proceeded on the assumption that there was block of assets but the claim of 4 ITA Nos. 1790 & 1791/Kol./2010 assessee itself is that sale consideration of scrap had been adjusted against the purchase consideration as on 30.03.2003 which admittedly was kept in deposit account and not capitalized. The fact needs to be re-verified in order to arrive at correct conclusion. The Assessing Officer has observed that the assessee was not clear in ascertaining the nature of the sale of scrap and, therefore, partly adjusted the scrap against repairs and maintenance and partly treated the same as capital receipt. This treatment per se is contradictory, particularly when the assessee's claim was that the entire sale consideration from scrap was capital in nature. This aspect needs to be clarified. Further, ld. CIT(Appeals) has accepted the assessee's contention regarding scrap being generated from items purchased but he has not examined the same with reference to the agreement. Further, it is not clear as to whether scrap was generated from the assets purchased from Avery India Ltd. or not. We, therefore, restore the matter back to the file of Assessing Officer to examine the facts afresh in regard to the sum of Rs.15,70,000/- in light of above observations. However, we confirm the finding of ld. CIT(Appeals) in regard to Rs.3,17,811/-, which has been adjusted against repairs and maintenance by the assessee and, therefore, any further addition will amount to double addition. Resultantly, this ground of appeal is partly allowed for statistical purposes
7. In the result, this appeal is partly allowed for statistical purposes.
8. Now we take up the appeal being ITA No. 1791/Kol./2010
9. This appeal filed by the Revenue is against the order of ld. Commissioner of Income- Tax (Appeals)-I, Kolkata dated 09.07.2010 for the assessment year 2004-05. The only ground of appeal is as under :-
"That on facts and in the circumstances of the case, the ld. CIT(A.) erred in deleting the addition made under section 40a(ia) of the Act on account of non-deduction of tax at source as per section 194I".
10. Brief facts apropos this issue are that the assessee had claimed an expenditure towards payment of rent to Kolkata Port Trust of Rs.21,78,342/-. The Assessing Officer has noted that as per assessee's submissions, the same was as per the Instructions/ Decree passed by the Hon'ble High Court. The Assessing Officer observed that Kolkata Port Trust is a resident local authority and, therefore, deduction of tax was to be statutorily done on credit of such amount. He, therefore, disallowed the whole amount of Rs.21,78,342/- under section 40(a)(ia). Ld. CIT(Appeals) deleted the disallowance following the decision of the Hon'ble Bombay High 5 ITA Nos. 1790 & 1791/Kol./2010 Court in the case of Madhusudhan Shrikrishna -vs.- Emkay Exports [2010] 188 Taxman 195 (Bombay), inter alia, observing that the payment of rent by the assessee to Kolkata Port Trust was on the Instruction/ Decree from the Hon'ble High Court.
11. We have considered the submissions of both the parties and perused the records of the case. We find that before the Assessing Officer, the assessee's submission was that the payment of rent was as per the Instruction/Decree passed by the Hon'ble High Court. However, before ld. CIT(Appeals), the contention was that the order was passed by the Estate Officer, Kolkata Port Trust, who had all the powers vested in a Civil Court for holding enquiry by the Court. Therefore, he was a quasi-judicial body. We find that ld. CIT(Appeals), however, has proceeded on the premise that the payment of rent by the assessee to Kolkata Port Trust was as per the Instruction/ Decree from the Hon'ble High Court. Thus, it is evident that the facts have not correctly been appreciated before arriving at the conclusion. We, therefore, restore the matter back to the file of ld. CIT(Appeals) to decide the issue de novo. Resultantly, this appeal of Revenue is allowed for statistical purposes.
12. In the result, both the appeals of Revenue are allowed for statistical purposes.
ORDER PRONOUNCED IN THE OPEN COURT ON 25/ 11/2011.
खुली अदालत मɅ ःपƴ आदे श 25/11/2011.
Sd/- Sd/-
महावीर िसंह]
[ Mahavir Singh /महावीर एस भी.मे
[S.V. Mehrotra/ (एस. भी मेहरोऽा)]
रोऽा
Judicial Member/ Ûयायीक सदःय Accountant Member/ लेखा सदःय
Dated : 25/ 11/ 2011
Copy of the order forwarded to:
1. M/s. LMJ Construction Pvt. Ltd., 26B, Camac Street, Flat No. 2A, 2nd floor, Kolkata-16.
2 ITO, Ward-2(3), Kolkata, P-7, Chowringhee Square, Kolkata-700 069.
3. Commissioner of Income-tax (Appeals)- ,Kolkata
4. CIT, WB- , Kolkata
5. DR, Kolkata Benches, Kolkata (True Copy) By Order Assistant Registrar, I.T.A.T., Kolkata Laha, Sr. P.S.