Income Tax Appellate Tribunal - Mumbai
Servotech Pharma Impex Ltd, Mumbai vs Department Of Income Tax on 22 July, 2015
आयकर अपीऱीय अधिकरण, मुंबई न्यायपीठ 'ई', मुंबई । IN THE INCOME TAX APPELLATE TRIBUNAL "E", BENCH MUMBAI सर्वश्री आय.सी.शभमव, रेखम सदस्म एवुं सश्र ु ी सष ु भम चमर्रम, न्ममयमक सदस्म BEFORE SHRI R.C.SHARMA, AM & MS. SUSHMA CHOWLA, JM आमकय अऩीर सं./ITA No.5644/Mum/2012 ( नििाारण वषा / Assessment Year :2009-10) ITO 8(3)(1), Mumbai Vs.M/s Servotech Pharma Impex Pvt. Ltd., 209/10, Bonanza, Sahar Plaza, J.B.Nagar, Andheri(E), Mumbai-59 स्थममी रेखम सं ./ जीआइआय सं ./ PAN/GIR No. : AABCS 6035 P (अऩीरमथी /Appellant) .. (प्रत्मथी / Respondent) यमजस्र् की ओर से /Revenue by : Shri Neil Philip यनधमवरयती की ओर से /Assessee by : Shri Rajesh Gupte सन ु र्मई की तमयीख / Date of Hearing : 02/06/2015 घोषणम की तमयीख/Date of Pronouncement 22/07/2015 आदे श / O R D E R PER R.C.SHARMA (A.M):
This is an appeal filed by the revenue against the order of CIT(A)-
18, Mumbai, dated 8-6-2012 for the assessment year 2009-10, in the matter of order passed u/s.143(3) of the Act.
2. The grievance of revenue relates to CIT(A)'s action in directing the AO to delete the addition/disallowance of Rs.25,41,633/- made u/s.28(iv)/41(1) of the Act.
3. We have considered the rival contentions and perused the record. Facts in brief are that the assessee company is engaged in business of Chemicals. The sister concern of assessee namely Sarvotech 2 ITA No.5644/12 International, Dubai had exported material to one M/s Veekay Products Pvt. Ltd. in June, 1998. Since M/s Veekay Products Pvt. Ltd. was in serious financial problems with its banker, it was not able to remit the payment to Dubai as a result they gave the amount due of Rs.25,41,633/- by cheque to the assessee company who is a sister concern of M/s Servotech International-Dubai through their mutual broker Mr. Jagdish Doshi, to keep it as security deposit till they are informed to remit the same to Dubai. The said amount was received and shown as security deposit in the books of assessee. The assessee company had no role to play in the above transaction - further correspondence by M/s Servotech International asking M/s Veekay Products to make payment is clear evidence that the assessee company had no role to play in the transaction and also that the amount paid by M/s Veekay products was just security deposit on behalf of M/s Servotech International-Dubai. During the course of scrutiny assessment, the AO asked M/s Veekay Products Pvt. Ltd. to confirm the above, however, in reply to AO's letter it was stated that their records were destroyed by fire and company's business has been closed from many years. Accordingly, the AO added the security deposit of Rs.25,41,633/- to the total income of the assessee applying provisions of Sections 41(1)/28(iv) of the Act.
4. By the impugned order the CIT(A) deleted the addition so made by the Assessing Officer after having following observations :-
"2.3. I have considered the submissions of Ld. Counsel and the case laws relied upon by him and the fact that the appellant acted only as guarantor in this case - which is clear from the fact that the appellant has no business dealings at all with M/s. Veekay Products 3 ITA No.5644/12 Pvt. Ltd. - who have advanced the said amount - clearly shows that the provisions of Section 28(iv) and Section 41 (I) or Explanation( I)
- are not applicable because neither the Security Deposit arises from any business activity of the assessee as required by Section 28(iv) nor does it fall to be considered u/s 41 (1) because at no stage has the appellant been given any allowance or deduction in respect of the expenditure or trading liability - which it is not so and therefore the action of the A.O. in taxing it u/s 28(iv) and uls 41(1) is struck down and the appeal of the assessee on this ground is allowed.
Further, the case laws as relied upon by the appellant - as follows also reiterate the above principle:-
(a) CCIT vs. Kesaria Tea Co. Ltd. 254lTR 434 (SC)
(b) ClT vs. Sugauli Sugar Works (P) Ltd. 236lTR 518 (SC)
(c) Smartalk (P) Ltd. vs. lTO 119 lTD 13 (ITAT Mumbai 'C' Bench)
(d) Universal Radiators Vs. ClT 201lTR 800 (SC)
(e) ClT Vs. Bhavnagar Bone & Fertiliser Co. Pvt. Ltd. 166lTR 316 (Guj)
(f) ClT Vs Nitin S.Garg 71DTR73 (Gujarat) Moreover as stated by Ld. Counsel - the right to recover this 'security money' vests and continues to exist with M/s. Servotech International-Dubai and therefore there can be no cessation of liability.
In view of the above, the A.O. is directed to delete the addition/disallowance of Rs.25,41,633/- made uls 28(iv) and also 41(1) of LT. Act, 1961."
5. We have considered rival contentions and perused the record carefully. We found that the assessee company has received amount of Rs.25,41,633/- from M/s Veekay Products Pvt. Ltd. as a security deposit on behalf of its sister concern M/s Servotech International-Dubai. This amount of security deposit was never claimed by the assessee company as expenditure or trading liability. This amount was not received by assessee in the course of its business of trading in chemicals. Under the provisions of Section 28(iv) of the Act, the value of any benefit or perquisites, whether convertible into money or not, arising from business or exercise of profession, can be brought to tax. The said amount was 4 ITA No.5644/12 shown as security deposit in the books of the assessee. The assessee company had no role to play in the above transaction - further correspondence by M/s Servotech international asking M/s Veekay Products to make payment is clear evidence that the assessee company had no role to play in the transaction and also that the amount paid by M/s Veekay Products in 2000 was just security deposit on behalf of M/s Servotech International-Dubai. Furthermore, the assessee did not receive any benefit or perquisite arising from business as the assessee company is not in the business of taking security deposit or loans. The transaction between the sister concern and Veekay Products Pvt. Ltd. also proves this fact. Further there is no cessation liability as no deduction or allowance on loss has been claimed by assessee with regard to the amount of security deposit received in any of previous year. Also the deposit amount was never claimed by the assessee company as expenditure or trading liability. The security deposit kept with the assessee is not a revenue 'receipt but it is of a capital nature. The assessee company acted as a guarantor by receiving the money on behalf of M/s. Servotech international-Dubai for safe keeping, as Veekay Products were not in a position to directly remit the amount to Dubai as it was having some problems with its bankers for remittance abroad. Thus the security deposit being in the nature of capital receipt and does not take the character of revenue receipt hence cannot be brought into account in computing profits and gains of business under section 28(iv) of the I.T.Act. Hon 'ble Supreme Court in the case of Universal Radiators Vs. 5 ITA No.5644/12 CIT 201 ITR 800 (SC) has observed that for being taxable the income should have accrued out of the business carried on by the assessee. Any amount received by assessee carrying on business does not become an income from business unless the necessary relationship between the two is established. In the case of the assessee there was no business relationship or any business nexus with Veekay Products Pvt. Ltd. Further the assessee's case is neither covered by section 41 (1) or Explanation (I)
- as no allowance or deduction has been claimed in any year in respect of loss, expenditure or trading liability by the assessee company.
6. After going through the order of the CIT(A), we find that the finding recorded by the CIT(A) is just and proper for which our interference is not called for. Accordingly, we uphold the order the CIT(A).
7. In the result, appeal of the revenue is dismissed.
Order pronounced in the open court on this 22/07/2015.
Sd/- Sd/-
(सष
ु भम चमर्रम) (आय.सी.शभमव)
(SUSHMA CHOWLA) (R.C.SHARMA)
न्यानयक सदस्य / JUDICIAL MEMBER ऱेखा सदस्य / ACCOUNTANT MEMBER
भुंफई Mumbai; ददनमंक Dated 22/07/2015
प्र.कु.मभ/pkm, यन.स/ PS
आदे श की प्रनिलऱपप अग्रेपषि/Copy of the Order forwarded to :
1. अऩीरमथी / The Appellant
2. प्रत्मथी / The Respondent.
3. आमकय आमुक्त(अऩीर) / The CIT(A), Mumbai.
4. आमकय आमुक्त / CIT
5. वर्बमगीम प्रयतयनधध, आमकय अऩीरीम अधधकयण, भुंफई / DR, ITAT, Mumbai आदे शािसार/ BY ORDER,
6. गमर्व पमईर / Guard file.
सत्ममवऩत प्रयत //True Copy/ उप/सहायक पुंजीकार (Asstt. Registrar) आयकर अपीऱीय अधिकरण, भंफ ु ई / ITAT, Mumbai