Madras High Court
The Commissioner Of Income Tax vs P.Damodaran on 29 July, 2015
Bench: R.Sudhakar, K.B.K.Vasuki
IN THE HIGH COURT OF JUDICATURE AT MADRAS DATED: 29.7.2015 CORAM THE HON'BLE MR.JUSTICE R.SUDHAKAR AND THE HON'BLE MS.JUSTICE K.B.K.VASUKI T.C.(A).No.391 of 2008 The Commissioner of Income Tax Chennai. .. Appellant Vs. P.Damodaran .. Respondent PRAYER: Appeal under Section 260A of the Income Tax Act against the order of the Income Tax Appellate Tribunal, 'B' Bench, Chennai, dated 4.4.2007 made in I.T.A.No.1638/ Mds/2005 for the assessment year 1996-1997. For Appellant : Mr.M.Swaminathan For Respondent : Mr.M.P.Senthilkumar for M/s.Philip George J U D G M E N T
(Delivered by R.SUDHAKAR, J.) The assessee has filed this appeal under Section 260A of the Income Tax Act, 1961 challenging the order of the Income Tax Appellate Tribunal, 'B' Bench, Chennai, dated 4.4.2007 made in I.T.A.No.1638/Mds/2005 for the assessment year 1996-1997 and the same was admitted on the following questions of law:
(i) Whether the Tribunal was right in holding that the assessee is eligible for the benefit of Section 80IA/80IB of the Income Tax Act when the records clearly show that the assessee had not possessed machinery for manufacture during the relevant year?
(ii)Whether the Tribunal was right in directing the Assessing Officer to telescope the addition relating to the unexplained credit of Rs.2,67,200/- against the disallowance of expenditure of Rs.5,35,000/-?
2.1. In a nutshell, the facts are as under: The respondent/ assessee is an individual carrying on business of supplying Cable Jointing Kits to telecom industries. For the assessment year 1996-1997, the assessee claimed deduction under Section 80IA of the Act in respect of the profits arising in respect of the industrial undertaking manufacturing cable jointing kits. However, the Assessing Officer held that the assessee is not entitled to claim deduction under Section 80IA of the Act, as the activity carried on by assessee does not tantamount to manufacture and also that the assessee has not satisfied the requirements of the said provision. That apart, the Assessing Officer treated a sum of Rs.2,67,200/- as assessee's income from undisclosed sources under Section 68 of the Act.
2.2. On appeal by the assessee, the Commissioner of Income Tax (Appeals) confirmed the order passed by the Assessing Officer and dismissed the appeal.
2.3. On further appeal by the assessee, the Tribunal following its earlier order in the assessee's own case for the assessment years 1995-1996 and 1997-1998, which was on appeal upheld by a Division Bench of this Court in Commissioner of Income Tax v. P.Damodaran, (2006) 282 ITR 466 (Mad), took the view that the assessee is entitled to claim deduction under Section 80IA of the Act. With regard to the unexplained credit of Rs.2,67,200/- under Section 68 of the Act, the Tribunal accepted the plea of the assessee and held that when Rs.5,35,000/- worth of expenditure is being disallowed, the credit addition of Rs.2,67,200/- should be telescoped against the same and accordingly, directed the Assessing Officer to telescope this addition against the disallowances made.
3. Assailing the said order, the Revenue has filed this appeal on the questions of law, referred supra.
4.1. At the time of hearing, the learned Standing Counsel for the Revenue fairly conceded that the first question of law raised in this appeal was squarely answered against the Revenue by the decision of this Court rendered in the assessee's own case for the earlier assessment year in Commissioner of Income Tax v. P.Damodaran, (2006) 282 ITR 466 (Mad).
4.2. In Commissioner of Income Tax v. P.Damodaran, (2006) 282 ITR 466 (Mad), this Court has held as under:
6. We heard the arguments of the counsel. The assessee had claimed that he had started his factory at Pondicherry where manufacturing activity was done, whereas the stand of the Revenue was that, at Pondicherry, no manufacturing activity was carried on other than using the premises for correspondence and for despatching the goods by the assessee. The Tribunal had given a finding that the Assessing Officer had not made any enquiry to find out whether the assessee had carried out any manufacturing activity at Pondicherry, even after the matter was remanded back to his file. Similarly, there was nothing to suggest that the Central Excise Authorities ever visited the assessee's factory to find out the veracity of his claim that the manufacturing activities were being carried out at his factory premises at Pondicherry. Also, it is found that the Central Excise authorities visited only the office premises of the assessee and examined certain documents. Hence, we find no justification in rejecting the assessee's claim for deduction under Section 80IAmerely relying on the observation of the Central Excise authorities. Further, it was a factual finding by the authorities below that the machineries installed in the premises and the raw materials utilised by the assessee, suggest that there was a production of article or thing for the purpose of using the same in the telecommunication industry. When the factual finding itself is that the asessee manufactured telephone cables joining kits, the assessee is entitled for benefit available under Section 80IA of the Act. (emphasis supplied) 4.3. In the light of the above said decision, the first question of law is answered against the Revenue and in favour of the assessee.
5.1. With regard to the second question of law, we find that the Tribunal after considering the plea of the assessee has directed the Assessing Officer to telescope the addition of Rs.2,67,200/- against the disallowances made. The relevant portion of the order of the Tribunal is extracted hereunder:
7.1. The learned counsel for the assessee submitted that the Assessing officer had made a disallowance of Rs.5,00,000/- out of the commission and brokerage expenditure incurred and further disallowed a sum of Rs.35,000/- out of traveling and conveyance expenses incurred. Under the circumstances, the learned counsel pleaded that Rs.2,67,200/- further addition made by the Assessing Officer on account of unexplained fresh capital introduced by the assessee may be telescoped against the above said disallowance of expenditure.
7.2. Upon a careful consideration of the issue, in our opinion, the assessee's plea is a fair one. When Rs.5,35,000/- worth of expenditure is being disallowed the credit addition of Rs.2,67,200/- should be telescoped against the same. Hence, we allow this plea of the learned counsel and direct the Assessing Officer to telescope this addition against those disallowances made.
5.2. The Tribunal, being a final fact finding authority, on a conspectus of the factual scenario, has directed the Assessing Officer to telescope the addition of Rs.2,67,200/- as against the other disallowances. The said direction given by the Tribunal was purely based on facts and we find no reason to interfere with such a factual finding rendered by the Tribunal.
5.3. In such view of the matter, the second question of law does not require to be answered as it is a issue on fact.
For the foregoing reasons, this appeal is dismissed. No costs.
(R.S.J.) (K.B.K.V.J.)
29.7.2015
Index : No
Internet : Yes
sasi
To:
1. The Assistant Registrar,
Income Tax Appellate Tribunal
Chennai Bench "B", Chennai.
2. The Commissioner of Income Tax (Appeals) - V
Chennai.
3. The Income Tax Officer
Company Ward VI(1), Chennai.
R.SUDHAKAR,J.
and
K.B.K.VASUKI,J.
(sasi)
T.C.(A).No.391 of 2008
29.7.2015