Income Tax Appellate Tribunal - Pune
Haldex India Limited,, vs Department Of Income Tax on 19 August, 2015
आयकर अपील
य अ धकरण "बी" यायपीठ पण
ु े म ।
IN THE INCOME TAX APPELLATE TRIBUNAL "B" BENCH, PUNE
ी आर. के. पांडा, लेखा सद य, एवं ी #वकास अव थी, या%यक सद य के सम& ।
BEFORE SHRI R.K. PANDA, AM AND SHRI VIKAS AWASTHY, JM
आयकर अपील सं. / ITA Nos. 638 & 639/PN/2014
%नधा(रण वष( / Assessment Years : 2004-05 & 2008-09
Asstt. Commissioner of Income Tax,
Circle - 1, Nashik
.......अपीलाथ / Appellant
बनाम / V/s.
Haldex India Limited,
B-71, MIDC, Ambad,
Nashik - 422010
PAN : AABCH9044B
......
यथ / Respondent
Assessee by : Shri R.D. Onkar
Revenue by : Shri Hitendra Ninave
सन
ु वाई क तार ख / Date of Hearing : 11-08-2015
घोषणा क तार ख / Date of Pronouncement : 19-08-2015
आदे श / ORDER
PER VIKAS AWASTHY, JM :
ITA No. 638/PN/2014 has been filed by the Revenue against the
order of Commissioner of Income Tax (Appeals)-I, Nashik dated 30-01-2014 for the assessment year 2004-05. In appeal, the Revenue has impugned deleting of penalty levied u/s. 271(1)(c) of the Act. 2
ITA Nos. 638 & 639/PN/2014, A.Ys. 2004-05 & 2008-09 In ITA No. 639/PN/2014 the Revenue has assailed the order of Commissioner of Income Tax (Appeals)-I, Nashik dated 31-01-2014 for assessment year 2008-09. In the said appeal, the Revenue has challenged the findings of Commissioner of Income Tax (Appeals) in deleting the addition made on account of :
i. Provision for Management Incentive Bonus (MIPB) and Leave Travel assistance (LTA) of Rs.2,86,964/-.
ii. Delay in deposit of Employees share of contribution towards Provident Fund and ESIC Rs.98,061/-.
iii. Depreciation claimed on unproved assets Rs.16,99,760/-.ITA No. 638/PN/2014 (A.Y. 2004-05)
2. The assessee is a company registered under the provisions of Companies Act, 1956 and is engaged in manufacturing of brake adjuster (AMBA and SABA). For the assessment year 2004-05 the income of the assessee was assessed at Rs.5,28,58,006/- vide order dated 28-12-2006 passed u/s. 143(3) of the Act. Thereafter, reassessment proceedings were initiated. In the course of reassessment proceedings the Assessing Officer made addition of Rs.7,47,155/- u/s. 40(a)(ia) for non-deduction of tax on payment of commission on sales to the overseas entities. Another addition of Rs.1,96,381/- was made on account of wrong claim of deduction u/s. 80HHC of the Act. The assessee had claimed deduction u/s. 80HHC on account of export sales. During the course of reassessment proceedings, it was found that export sales to the extent of Rs.13,39,318/- were not realized from export debtors. However, the assessee had included the said amount while computing deduction u/s. 80HHC of the Act. The Assessing Officer disallowed the proportionate deduction of Rs.1,96,381/- claimed 3 ITA Nos. 638 & 639/PN/2014, A.Ys. 2004-05 & 2008-09 by the assessee u/s. 80HHC of the Act. On account of these additions penalty proceedings were initiated against the assessee. The Assessing Officer vide order dated 28-06-2011 levied penalty of Rs.3,19,860/- u/s. 271(1)(c) of the Act.
3. Aggrieved by the order of penalty u/s. 271(1)(c), the assessee preferred appeals before the Commissioner of Income Tax (Appeals). Before the Commissioner of Income Tax (Appeals), it was submitted on behalf of the assessee that sales commission to the overseas entities were paid for the services rendered outside India. The overseas parties are non-residents and have provided services of procuring export orders for the assessee. The services rendered by the overseas entities were not in the nature of managerial, technical or consultancy services within the meaning of section 9(1)(vii) of the Act. The provisions of Income Tax Act are not applicable on the payment of sales commission to the overseas parties, hence, no TDS was liable to be deducted. The Commissioner of Income Tax (Appeals) in the light of un-rebutted facts, deleted the penalty on account of addition made u/s. 40(a)(ia). In respect of disallowance u/s. 80HHC, it was observed that the total income assessed is to the tune of Rs.5,28,58,006/-. The assessee had claimed total deduction of Rs.87,29,808/- u/s. 80HHC on the export sales. However, during reassessment proceedings, it transpired that an amount of Rs.13,39,318/- was not realized from export debtors and the assessee had claimed deduction on the said amount u/s. 80HHC. The excess deduction of Rs.1,96,381/- was claimed due to oversight and there was no deliberate intention of the assessee to claim the higher deduction. It was further pointed out that unrealized export debtors were discovered during the reassessment proceedings. It is not a case where any facts were suppressed dishonestly or the income was 4 ITA Nos. 638 & 639/PN/2014, A.Ys. 2004-05 & 2008-09 concealed deliberately. The Commissioner of Income Tax (Appeals) deleted the penalty on the aforesaid amount by placing reliance on the decision of Hon'ble Supreme Court of India in the case of CIT Vs. Reliance Petro Products P. Ltd. reported as 322 ITR 158 (SC). The Commissioner of Income Tax (Appeals) held that the appellant's income has been assessed at Rs.5,00,19,300/- which inter alia include deduction of Rs.87,29,808/- u/s. 80HHC. The appellant would not furnish inaccurate particulars to claim additional deduction of Rs.1,96,381/-. This seems to be a case of bonafide error in calculation of deduction u/s. 80HHC. Against these findings of the Commissioner of Income Tax (Appeals) the Revenue has come in appeal before the Tribunal.
4. Shri Hitendra Ninave representing the Department submitted that the Commissioner of Income Tax (Appeals) has erred in deleting the penalty. The ld. DR submitted that the assessee had claimed higher deduction u/s. 80HHC in a wrongful manner. The ld. DR vehemently supported the order of Assessing Officer in levying penalty and prayed for setting aside the impugned order.
5. On the other hand Shri R.D. Onkar appearing on behalf of the assessee supported the order of Commissioner of Income Tax (Appeals). The ld. AR reiterated the submissions made on behalf of the assessee before Commissioner of Income Tax (Appeals). The ld. AR submitted that the sales commission was paid to the overseas entities for procuring export orders. The said services were provided outside India. The services provided were not in the nature which would attract the provisions of section 9 of the Income Tax Act. In support of his submissions the ld. AR placed reliance on the decision of Hon'ble 5 ITA Nos. 638 & 639/PN/2014, A.Ys. 2004-05 & 2008-09 Madras High Court in the case of Faizan Shoes P. Ltd. reported as 367 ITR 155 (Madras). The ld. AR further submitted that penalty for disallowance of claim u/s. 80HHC cannot be levied, as the assessee had complied with all the formalities. It is not a case where the assessee has not exported the goods worth the amount. It was due to oversight that the assessee claimed deduction on unrealized export sales of Rs.13,39,318/-. The ld. AR further submitted that as per the provisions of section 155(13), if deduction u/s. 80HHC is not allowed on the ground that export income was not received by the assessee, the deduction u/s. 80HHC would be allowed subsequently when the export income is received. The ld. AR in order to strengthen his submissions draws support from the order of Hon'ble Supreme Court of India in the case of CIT Vs. Reliance Petro Products P. Ltd. (supra).
6. We have heard the submissions made by the representatives of both the sides and have perused the orders of authorities below. In appeal the Revenue has assailed the order of Commissioner of Income Tax (Appeals) in deleting the penalty levied u/s. 271(1)(c). The penalty has been levied on account of disallowance made u/s. 40(a)(ia) and restricting the claim of deduction u/s. 80HHC.
7. The Assessing Officer made disallowance u/s. 40(a)(ia) for non- deduction of tax on the payment of sales commission amounting to Rs.7,47,155/- to overseas entities. The said commission was paid to foreign entities for carrying out marketing activities and soliciting export orders from foreign buyers. It has not been disputed that the payments made were not for any services falling within the ambit of section 9(1)(vii) of the Act. The Hon'ble Supreme Court of India in the case of GE India Technology Centre P. Ltd. Vs. CIT reported as 327 ITR 6 ITA Nos. 638 & 639/PN/2014, A.Ys. 2004-05 & 2008-09 456 (SC) has held that if the remittances are not assessable to tax under the provisions of Act, there is no question of deducting tax at source. The services were admittedly rendered outside India by the foreign entities. The said foreign entities were having no PE in India. Therefore, payment of sales commission were not assessable to tax in India. We find that the issue in present appeal is squarely covered by the judgment of Hon'ble Madras High Court in the case of Faizan Shoes P. Ltd. (supra). The Hon'ble Court in similar circumstances has held, that disallowance on payment of sales commission without TDS to foreign parties for procuring export orders, u/s. 40(a)(i) is not sustainable. Hence, no penalty can be levied on such unsustainable disallowance.
8. The second ground for levy of penalty is excess claim of deduction u/s. 80HHC. It is an undisputed fact that the assessee had substantial export turnover and is eligible to claim deduction u/s. 80HHC. During the relevant period the assessee has claimed deduction of Rs.87,29,808/- u/s. 80HHC. It was during the reassessment proceedings that it transpired that the assessee had claimed excess deduction of Rs.1,96,381/- u/s. 80HHC on unrealized exports of Rs.13,39,318/-. It is not the case of Revenue that the assessee has not exported the goods worth the amount. The amount of excess deduction claimed only is a miniscule part of the total deduction claimed u/s. 80HHC. It seems to be bonafide error in calculating the deduction. The Hon'ble Supreme Court of India in the case of CIT Vs. Reliance Petro Products P. Ltd. (supra) has held that a mere making of a claim, which is not sustainable in law, by itself, will not amount to furnishing inaccurate particulars regarding the income of the assessee. Such a claim made in the return cannot amount to furnishing of inaccurate 7 ITA Nos. 638 & 639/PN/2014, A.Ys. 2004-05 & 2008-09 particulars. In the present case, the assessee is rather on a better footing. The assessee is eligible to claim deduction u/s. 80HHC on exports. The only shortcoming is that the assessee has not recovered the export proceeds on which the deduction has been claimed. We do not find any reason to deviate from the findings of the Commissioner of Income Tax (Appeals) on the issue.
9. The impugned order of the Commissioner of Income Tax (Appeals) in deleting the penalty levied u/s. 271(1)(c) is well reasoned and warrants no interference. The appeal of the Revenue is dismissed being devoid of any merits.
ITA No. 639/PN/2014 (A.Y. 2008-09)
10. In appeal, the Revenue has raised following grounds:
1. Whether on the facts and in the circumstances of the case, the Ld.CIT(A)-
I, Nashik was justified in deleting the addition of Rs.2,86,964/-on account of Management Incentive Bonus( MIPB) and Leave Travel Assistance (LTA) ?
2. Whether on the facts and in the circumstances of the case, the Ld.CIT(A)- I, Nashik was justified in deleting the addition of Rs.98,061/- on account of Employees contribution towards PF & ESIC, Ignoring the fact that they were deposited in the subsequent year?
3. Whether on the facts and in the circumstances of the case, the Ld.CIT(A)- I, Nashik was justified in deleting the addition of Rs.16,99,760/-on account of depreciation, ignoring the fact that the assessee failed to produce documentary evidence to support it ?
4. The appellant prays the order of the Assessing Officer may be restored.
5. The appellant prays to adduce such further evidence to substantiate his case.
6. The appellant prays leave to add, alter, clarify, amend and or withdraw any grounds of appeal as and when the occasion demands. 8
ITA Nos. 638 & 639/PN/2014, A.Ys. 2004-05 & 2008-09
11. In the first ground, the Revenue has impugned the order of Commissioner of Income Tax (Appeals) in deleting the addition of Rs.2,86,964/- on account of Management Incentive Bonus (MIPB) and Leave Travel Assistance (LTA). The assessee has created provision for the staff welfare expenses in the form of Medical Incentive Bonus and Leave Travel Assistance to its employees. The aforesaid incentives are paid by the assessee to its employees in accordance with the terms and conditions of employment. It has been contended on behalf of the assessee that the liability is ascertained and definite and the amounts have been paid in full in the succeeding year. It is an admitted position that the assessee is following mercantile system of accounting and has been making provision for the aforesaid incentives. It has come on record that the incentives are paid to the assessee in the subsequent year, if they are not claimed by the employees in the year in which provision is made. The assessee has been consistently following this method of creating provision and making payments in respect of aforesaid incentives. The assessee has brought on record ledger extracts to show that the liability has been paid in the subsequent year, where not claimed in the year of creating provision.
The Hon'ble Supreme Court of India in the case of Bharat Earth Movers Vs. CIT reported as 245 ITR 428 has held that, "if a business liability has definitely arisen in the accounting year, the deduction should be allowed although the liability may have to be quantified and discharged at a future date". The Hon'ble Apex Court further held, "What should be certain is the incurring of the liability. It should also be capable of being estimated with reasonable certainty though the actual quantification may not be possible. If these requirements are satisfied the liability is not a contingent one. The liability is in praesenti though it will be discharged at a future date. It does not make any difference if 9 ITA Nos. 638 & 639/PN/2014, A.Ys. 2004-05 & 2008-09 the future date on which the liability shall have to be discharged is not certain". Thus, in view of undisputed facts and the law laid down in the case of Bharat Earth Movers Vs. CIT (supra), we do not find any merit in this ground of appeal of the Revenue. Accordingly, the same is rejected.
12. The second ground raised in the appeal is with respect to deleting addition of Rs.98,061/- on account of Employees share of Contribution towards Provident Fund (PF) and ESIC. The ld. AR submitted that the amount towards PF and ESIC was deposited with the minor delay under the provisions of respective Acts. However, the amount was deposited well before the due date of filing of return u/s. 139 of the Act. The ld. AR submitted that the issue is squarely covered in favour of the assessee by the recent decision of Bombay High Court in the case of Hindustan Organics Chemicals Ltd. reported as 366 ITR 1.
13. The Revenue has not disputed that the payment of Employees contribution towards PF and ESIC were deposited by the assessee before the due date of filing of return under the provisions of the Act. We find that this issue has already been settled by the Hon'ble Supreme Court of India in the case of Alom Extrusions Ltd. reported as 319 ITR 306. The Hon'ble jurisdictional High Court in the case of Hindustan Organics Chemicals Ltd. (supra) and in the case of CIT Vs. Ghatge Patil Transport Ltd. reported as 368 ITR 749, following the law laid down by the Hon'ble Supreme Court of India has held that the assessee would be entitled to deduction on contribution to the employee welfare funds, if the amount has been credited on or before the due date of filing of the return. We do not find any infirmity in the 10 ITA Nos. 638 & 639/PN/2014, A.Ys. 2004-05 & 2008-09 impugned order in deleting the addition on this count. Accordingly, this ground of appeal of the Revenue is dismissed.
14. The third ground in the appeal of the Revenue is with regard to deleting the addition of Rs.16,99,760/- on account of depreciation. The assessee had claimed depreciation of Rs.4,20,10,089/- on additions made to machinery, furniture and fitting, building and computers. During the course of scrutiny assessment proceedings, the assessee failed to produce/furnish bills for the newly added assets amounting to Rs.94,51,713/-. Accordingly, the Assessing Officer disallowed the claim of depreciation to the tune of Rs.16,99,760/- on the fixed asset for which the bills were not produced. In appeal, the Commissioner of Income Tax (Appeals) deleted the addition on the ground that the assessee has not been able to furnish the bills for assets amounting to Rs.15,95,990/- which is only 1.64% of the total assets on which depreciation has been claimed. The Commissioner of Income Tax (Appeals) further held that the Assessing Officer has not brought on record that the assessee had inflated its purchase of fixed assets or has claimed excessive depreciation.
The ld. DR submitted that the Assessing Officer had disallowed depreciation on assets, the purchase of which were not proved by the assessee. It was the stand of the assessee that due to the shifting of office some of the bills are misplaced. However, the Commissioner of Income Tax (Appeals) in his order has stated that the assessee has furnished bills amounting to Rs.9,53,63,384/- out of Rs.9,72,40,253/-. The observations of Commissioner of Income Tax (Appeals) are contrary to the submissions of the assessee. If the assessee has produced certain more bills before the Commissioner of Income Tax (Appeals), 11 ITA Nos. 638 & 639/PN/2014, A.Ys. 2004-05 & 2008-09 same were not sent to Assessing Officer for comments or report. On the other hand the ld. AR vehemently supported the findings of the Commissioner of Income Tax (Appeals) on this issue. The ld. AR submitted that the assessee had produced the copies of purchase orders raised on suppliers were the bills/invoices were missing.
15. From the perusal of records, we find that the Commissioner of Income Tax (Appeals) has admitted the contentions of assessee without verification of the bills/invoices in respect of newly acquired assets. The Assessing Officer has categorically observed in his order that the assessee has failed to produce bills in respect of assets amounting to Rs.94,51,713/-. Whereas, the Commissioner of Income Tax (Appeals) in his order has reduced this amount to Rs.15,95,990/- without recording the reasons. It is not clear from the order of the appellate authority, whether some more bills/invoices were furnished by the assessee before him. The Commissioner of Income Tax (Appeals) has further erred in observing that the Assessing Officer has not brought on record that the assessee has inflated the purchase or has claimed excessive depreciation. The Assessing Officer restricted the claim of depreciation on account of failure of assessee to furnish the bills for purchase of assets and not on account of inflated purchases or excessive depreciation claim. We find that there is disparity between the bills produced by the assessee before the Assessing Officer and as recorded by the Commissioner of Income Tax (Appeals). In such circumstances, we deem it appropriate to remit this issue back to the Assessing Officer for reconsideration of the bills/invoices. The Assessing Officer shall decide this issue afresh after verification of the bills/invoices produced by the assessee. Before de-novo deciding this issue, the Assessing Officer shall grant opportunity of hearing to the 12 ITA Nos. 638 & 639/PN/2014, A.Ys. 2004-05 & 2008-09 assessee, in accordance with law. Accordingly, this ground of appeal is allowed for statistical purpose.
16. The ground Nos. 4 to 6 of the appeal are general in nature and hence require no adjudication.
17. In the result, this appeal of the Revenue is party accepted for statistical purpose.
Order pronounced on Wednesday, the 19th day of August, 2015.
Sd/- Sd/-
(आर. के. पांडा / R.K. Panda) (!वकास अव"थी / Vikas Awasthy)
लेखा सद"य / ACCOUNTANT MEMBER $या%यक सद"य / JUDICIAL MEMBER
पण
ु े / Pune; &दनांक / Dated : 19th August, 2015
RK
आदे श क+ ,%त.ल#प अ/े#षत / Copy of the Order forwarded to :
1. अपीलाथ / The Appellant.
2. यथ / The Respondent.
3. आयकर आयु'त (अपील) / The CIT(A)-I, Nashik
4. आयकर आयु'त / The CIT-I, Nashik
5. !वभागीय %त%न,ध, आयकर अपील य अ,धकरण, "बी" ब/च, पुणे / DR, ITAT, "B" Bench, Pune.
6. गाड1 फ़ाइल / Guard File.
//स या!पत %त // True Copy// आदे शानुसार / BY ORDER, %नजी स,चव / Private Secretary, आयकर अपील य अ,धकरण पुणे / ITAT, Pune