Income Tax Appellate Tribunal - Ahmedabad
Tyco Valves & Controls (India) Pvt. ... vs Department Of Income Tax on 23 August, 2012
आयकर अपीलीय अिधकरण,
अिधकरण, अहमदाबाद Ûयायपीठ 'डȣ
डȣ'
डȣ अहमदाबाद ।
IN THE INCOME TAX APPELLATE TRIBUNAL
" D" BENCH, AHMEDABAD
सव[ौी मुकुल कुमार ौावत, Ûयाियक सदःय एवं ौी अिनल चतुवद
ȶ ȣ, लेखा सदःय के सम¢ ।
BEFORE SHRI MUKUL Kr.SHRAWAT, JUDICIAL MEMBER And
SHRI ANIL CHATURVEDI, ACCOUNTANT MEMBER
Sl. ITA No(s) / Assessment Appeal(s) / CO by
No(s). CO No Year(s)
Appellant (s) Respondent(s)
1. 2981/Ahd/08 2003-04 Dy.CIT M/s.Tyco Valves &
Cir-4 Control India
Baroda Pvt.Ltd.
302 A, Ivory
Terrace
R.C.Dutt Road
Alkapuri, Baroda
PAN : AAACK
8809L
2. 322/Ahd/2009 2004-05 Revenue Assessee
3. CO 2004-05 Assessee Revenue
44/Ahd/2009
(in ITA
No.322/Ahd/09)
Revenue by : Shri D.P.Gupta, CIT-D.R. with
Shri P.Oram Sr.D.R.
Assessee by : Shri J.P.Shah, A.R.
सुनवाई कȧ तारȣख / Date of Hearing : 23/08/2012
घोषणा कȧ तारȣख /Date of Pronouncement : 2/11/12
आदे श / O R D E R
PER SHRI MUKUL Kr. SHRAWAT, JUDICIAL MEMBER :
[A] Revenue's appeal, ITA No.2981/Ahd/2008 for A.Y. 2003-04 Before we deal with the legal issue in question, it is pertinent to mention that for A.Y. 2003-04 earlier an order has been passed by ITAT ITA Nos.2981/Ahd/08 & 322/Ahd/2009 (By Revenue) CO No.44/Ahd/09 (By Assessee) Dy.CIT vs. M/s.Tyco Valves & Control India P.Ltd.
Asst.Years - 2003-04 & 2004-05 -2- "D" Bench Ahmedabad dated 4.2.2011 and this appeal of the Revenue, i.e. ITA 2981/Ahd/2008 was partly allowed for statistical purposes. We have noted that the impugned ground No.2 was reproduced by the Tribunal and it was adjudicated vide para 7 to 10 and thereupon held that the matter requires reconsideration at the stage of the AO. There were alleged to be certain factual error from the side of the assessee, yet to be examined, therefore, the matter was restored back to the file of the Assessing Officer. Questioning the setting aside a miscellaneous petition was moved and that petition was allowed by ITAT "D" Bench Ahmedabad in MA No.182/Ahd/2011 (ITA No.2981/Ahd/2008 - A.Y. 2003-04) vide order dated 2.3.2012 and ground No.2 was directed to be decided afresh. Since the said earlier order of the Tribunal dated 4.2.2011 has been recalled for the limited purpose to adjudicate upon ground No.2, hence this order.
2. Ground No.2 is reproduced below:-
The learned CIT(A) erred on facts and in law in allowing deduction u/s.10B observing that the activities carried on by the assessee were manufacturing overlooking the fact that it was polishing the valves which is in contradiction to Apex Court's ratio laid down in CIT vs. N.C.Budhiraja (1993) 204 ITR 412 (SC).
2. The learned CIT(A) erred on facts and in law in allowing deduction u/s.10B observing that the assessee had purchased the machineries, completely disregarding the fact that the assessee had employed used machinery value of which exceeded 20% of the total value of the machinery employed by the assessee:ITA Nos.2981/Ahd/08 &
322/Ahd/2009 (By Revenue) CO No.44/Ahd/09 (By Assessee) Dy.CIT vs. M/s.Tyco Valves & Control India P.Ltd.
Asst.Years - 2003-04 & 2004-05 -3- 2.1. The A.O. in the impugned assessment order passed u/s.143(3) dated 30.3.2006 has made an observation that the assessee had claimed an exemption u/s.10B of the Act of Rs.2,79,90,231/- in respect of Chennai Unit. The said claim of exemption was later on revised at Rs.2,53,24,882/-. The AO has disallowed the claim u/s.10B by assigning a reason that the Chennai Unit had more than 20% of the value of the plant and machinery consisting old machinery used earlier for the production purposes. The main objection of the AO was that section 10B requires that the industrial unit should not be formed by the transfer of previously used machinery. An another fact has also been noted that the original cost of the plant & machinery of Chennai Unit as per the balance-sheet drawn as on 01/04/2002 was at Rs.8,23,63,972/-. In a show-cause notice issued by the AO, he has acknowledged the fact that the assessee had claimed that during the F.Y. 2001-02, the assessee had taken plant & machinery on lease for Chennai Unit from Sakhi Raimondi Valves (India) Ltd. It was an "Associate Concern" of the assessee covered u/s.40A(2)(b) of IT Act. The AO has also acknowledged that the Chennai Unit was set up in F.Y. 1998-99 and most of the machinery were purchased in the year 1996. According to him, both those machineries were acquired during that period. At that juncture, the AO has also noted that while finalizing the assessment of M/s.Sakhi Raimondi it was informed that the said assessee had transferred the machinery to the assessee's Chennai Unit, therefore it was not on lease basis but it was an outright purchase. He has therefore proposed to disallow the exemption u/s.10B on the ground that on the date of transfer, ITA Nos.2981/Ahd/08 & 322/Ahd/2009 (By Revenue) CO No.44/Ahd/09 (By Assessee) Dy.CIT vs. M/s.Tyco Valves & Control India P.Ltd.
Asst.Years - 2003-04 & 2004-05 -4- i.e. in the year 1998 the machinery was transferred for a sum of Rs.4,03,13,086/- which was in excess of the required percentage of 20% as per Explanation-2 of section 10B of the Act. He has concluded that a secondary machinery was used due to which the exemption claimed in respect of the profits of Chennai Unit and consequent thereupon exemption u/s.10B of Rs.2,79,90,231/- was rejected. The matter was carried before the first appellate authority.
3. Ld.CIT(A) has first of all corrected the figure and noted that the AO had denied the claim of deduction u/s.10B of Rs.2,53,24,882/-. It was noted by ld.CIT(A) that the assessee is a manufacturer of various types castings, gate-walls and flow control devices. The assessee has a Plant at Chennai and that Unit is registered as 100% EOU, thus covered for deduction u/s.10B of IT Act in respect of the profits of the said Unit. At this juncture, ld.CIT(A) has noted that the said claim was allowed to the assessee in the past and the year under consideration was found to be the 5th year of the claim. An another fact has also been brought to the notice of ld.CIT(A) that in the case of the assessee in the past the matter had gone upto Hon'ble Gujarat High Court and in a Special Civil Application Nos. 29650 & 29651 of 2007 vide an order dated 11.4.2008 an issue was raked-up that the assessee although a manufacturing concern and eligible for deduction u/s.10B which was allowed u/s.143(3) but vide a notice u/s.148 for A.Ys. 2000-01, 2001-02 & 2002-03, it was reopened for the denial of the said claim. The Hon'ble Court has opined that for A.Y. 2001-02, the deduction was ITA Nos.2981/Ahd/08 & 322/Ahd/2009 (By Revenue) CO No.44/Ahd/09 (By Assessee) Dy.CIT vs. M/s.Tyco Valves & Control India P.Ltd.
Asst.Years - 2003-04 & 2004-05 -5- already allowed and it was found eligible for claim u/s.10B of IT Act and since there was no new material, therefore reopening after the four years was not justifiable. The argument of the assessee was, therefore, that the activity of the assessee was approved by the Hon'ble High Court and once the claim was allowed in the past, then for subsequent year the claim should not be denied. The ld.CIT(A) has accepted that legal position and vide para 3.3.1 concluded as under:-
"3.3.1 In view of the clear finding of the jurisdictional High Court in appellant's own case, there is no scope for doubt on this account. Accordingly, it is held that the A.O. was not justified in denying the claim of deduction u/s.10B on the ground that the assessee was not engaged in the manufacture of an article or thing. With regard to the alternate argument that the value of used machines exceeded 20% of the total value, it is interesting to note that the appellant has shown payment of lease rental in respect of plant and machinery leased from M/s.Sakhi Raimondi Valves (India) Ltd. The A.O has concluded that the lease was not in fact a lease but a case of outright purchase of the machines, based on the findings of the A.O of Sakhi Raimondi to the effect that the transactions involving the impugned plant and machinery constituted outright sales and not a leasing operation. In the case of the present appellant there is no finding to show that the lease transactions were sham and merely a cover to camouflage the outright purchase of the machinery. This inference has been drawn only by reference to the order of the ACIT, Circle-10(2), Mumbai, i.e. the A.O. of Sakhi Raimondi. This issue has been decided by the ld.CIT(A) in Sakhi's case vide order dated 17-6-
2008. The ld.CIT(A), in appeal No.CIT(A)-VI/ACIT.10(2)/Trs. 29/07-08 for A.Y. 2003-04, has held that the conclusion reached by the A.O. that the transaction relating to the machinery constituted outright sale is not evident from the records. The receipt of share application money from a group company of the present appellant cannot be equated to receipt of sales consideration. It was held that the receipt by Sakhi Raimondi was lease rental only and not ITA Nos.2981/Ahd/08 & 322/Ahd/2009 (By Revenue) CO No.44/Ahd/09 (By Assessee) Dy.CIT vs. M/s.Tyco Valves & Control India P.Ltd.
Asst.Years - 2003-04 & 2004-05 -6- sales consideration in respect of plant and machinery. When the findings of the A.O. in the case of Sakhi Raimondi has been overturned by the ld.CIT(A), the consequential addition made in the case of the present appellant cannot survive. The A.O. in this case has based the addition on the treatment accorded to the impugned transaction by the A.O. of Sakhi Raimondi as a transaction of sale and purchase. Since the very basis of the addition has been overturned, it is held that the A.O. was not justified in treating the lease transaction as outright purchase. Hence, the A.O. is directed to allow the claim amounting to Rs.2,53,24,882/- u/s.10B."
4. Being aggrieved, the Revenue is before us and ld.CIT-DR Mr.D.P.Gupta appeared and vehemently supported the view taken by the AO. He has argued that the reason for denial for the year under consideration was that the transaction in respect of the said machinery had taken place in the year under consideration. The assessee has kept on changing its stand. It was initially informed that the machinery was purchased but later on during appellate proceedings the stand of the assessee was that the machinery was taken on lease. According to him, a lease agreement was placed before ld.CIT(A), however that was not before the AO, therefore in the interest of natural justice the matter deserves to be restored back to the file of the AO. At this juncture, he has placed reliance on the earlier finding of the Tribunal given vide para- 10 of the IT Act through which it was observed that the lease agreement was required to be examined whether it was equivalent to an outright sale or not and also to take into account the decision of the Tribunal to be pronounced in the case of M/s.Sakhi Riamondi.
ITA Nos.2981/Ahd/08 &322/Ahd/2009 (By Revenue) CO No.44/Ahd/09 (By Assessee) Dy.CIT vs. M/s.Tyco Valves & Control India P.Ltd.
Asst.Years - 2003-04 & 2004-05 -7-
5. From the side of the Respondent-assessee, ld.AR Mr.J.P.Shah appeared and at the outset, placed reliance on an order of Hon'ble Gujarat High Court pronounced in the case of Saurashtra Cement & Chemical Industries 123 ITR 669 (Guj.). He has also placed reliance on Tata Communications Internet Services 130 TTJ 509 (Del.) and Bajaj Tempo Ltd. 196 ITR 188 (SC). His main plank of argument was that such a deduction could not be denied in the succeeding year without disturbing relief granted for the initial year. Using his eloquence; Mr.Shah has also argued that it was not all an outright purchase but purely a lease transaction as is evident from the lease agreement which was duly established before the Revenue Authorities. Rather in the case of M/s.Sakhi Raimondi, from whom it was alleged that the machinery was purchased, while deciding the first appeal for A.Y. 2003-04, ld.CIT(A)-VI, Mumbai vide an order dated 17.6.2008 has held that although AO had treated the lease transaction of the machinery as outright sales but that was not evident from the record. There was no question of any capital gain as well, quoted by ld.CIT(A). Ld. AR has drawn our attention para 3.6 of the said order, wherein it was concluded that the lease rentals received by M/s.Sakhi Raimondi was in fact lease rentals and not outright sale. Ld.AR has then informed that the said decision of ld.CIT(A) was contested by the Revenue and ITAT "E" Bench Mumbai in ITA No.5479/Mum./2008 for A.Y. 2003-04 order dated 23.03.2010 has contested other issues but not contested the aforesaid finding of Lease Rental of ld.CIT(A). Mr.Shah has then pleaded that an inference can be drawn that the fact of earning of lease ITA Nos.2981/Ahd/08 & 322/Ahd/2009 (By Revenue) CO No.44/Ahd/09 (By Assessee) Dy.CIT vs. M/s.Tyco Valves & Control India P.Ltd.
Asst.Years - 2003-04 & 2004-05 -8- rental was thus accepted by the Revenue Department being not challenged before the Tribunal.
6. We have heard both the sides at some length. We have also perused the orders referred before us. Before we appreciate the facts of the case, we may like to place on record the scope of the introduction of section 10B in the Statute. Under the provisions of section 10A of the Income-tax Act, a five year tax holiday is allowed to industrial undertakings manufacturing or producing articles or things in a free trade zone subject to certain conditions. The exemption is available to industrial undertakings which have begun or begin to manufacture or produce articles or things during the previous year relevant to the assessment year commencing on or after April 1, 1981. The tax holiday is at the option of the assessee for five consecutive assessment years falling within the block of eight years beginning within the assessment year relevant to the previous year in which the industrial undertaking begins to manufacture or produce articles or things. The term "manufacture" includes processing or assembling or recording of programmes on any disc, tape, perforated media or other information storage device. The above tax holiday was not available to a hundred per cent export-oriented undertaking. Such undertakings were eligible only for deduction out of their export profits under section 80HHC of the Income-tax With a view to providing further incentive for earning foreign exchange, a new section 10B has been inserted by the Act, so as to secure that the income of a hundred per cent, export-oriented ITA Nos.2981/Ahd/08 & 322/Ahd/2009 (By Revenue) CO No.44/Ahd/09 (By Assessee) Dy.CIT vs. M/s.Tyco Valves & Control India P.Ltd.
Asst.Years - 2003-04 & 2004-05 -9- undertaking shall be exempt from tax for a period of five consecutive assessment year falling within the block of eight assessment years. The exemption provided under the new section is similar to the one provided to industrial undertakings operating in free trade zones. The exemption under the new provisions will be subject to the following conditions:-
(i) That the unit manufactures or produces any articles or things. The term "manufacture" will include any processing or assembling or recording of programmes on disc, tape, perforated, media or other information storage device;
(ii) That the unit has not been formed by the splitting up or reconstruction of an existing business;
(iii) That it has not been formed by the transfer to a new business of machinery or plant previously used for any purpose.
Unlike the provisions of section 10A of the Income-tax Act, even the existing hundred per cent export-oriented undertakings will be eligible to avail of the tax holiday for a full period of five assessment years in a block of eight years.
Therefore, the start point of the limitation for claiming the benefit flowing from section 10B would commence from the year of manufacture or production of the undertaking. If the conditions prescribed in the section are not satisfied in the year of commencement of production, it would not be able to claim such deduction in the subsequent years, unless the said initial test on the date of the starting point has been satisfied. Section 10B therefore do not give any indication that in each year of claim it's eligibility should be newly ITA Nos.2981/Ahd/08 & 322/Ahd/2009 (By Revenue) CO No.44/Ahd/09 (By Assessee) Dy.CIT vs. M/s.Tyco Valves & Control India P.Ltd.
Asst.Years - 2003-04 & 2004-05
- 10 -
established; because the relevance of the phrase "newly established undertaking" is only to identify initial year of period for which assessee is eligible for claim of exemption u/s.10B of IT Act. Therefore, at the outset, it is justifiable to concentrate on the fact that whether the Chennai Unit was established in the year under consideration or not. On examination of the facts recorded by the AO, it was noticed that the Chennai Unit was established/acquired in the year 2000-01. This fact was rather noted by the Hon'ble Gujarat High Court in the aforecited decision dated 11.4.2008 and made an observation that the year 2001-02 was found to be the first year of the claim of deduction u/s.10B of IT Act. Due to this reason, reliance can be placed on Saurashtra Cement & Chemical Industries 123 ITR 669 (Guj.) and thus we hold that in the absence of any disturbance in respect of relief granted in initial year, there was no legal justification to disturb the continuous deduction of section 10B in any of the subsequent assessment year. The first year is the year in which the inquiry about the formation of the undertaking is required to be made by the AO. Although it is possible, as in the present case, that in any of the subsequent years the assessee had acquired new plant & machinery, may be of substantial value, as also may be increase the turnover or efficiency, nonetheless the act subscribes that the undertaking must not be formed by the splitting up or the reconstruction of a business already in existence. The Act also subscribes that the profits shall not to be included in the total income in respect of the prescribed consecutive assessment years beginning with the assessment years undertaking begins to manufacture an article. Therefore, the initial ITA Nos.2981/Ahd/08 & 322/Ahd/2009 (By Revenue) CO No.44/Ahd/09 (By Assessee) Dy.CIT vs. M/s.Tyco Valves & Control India P.Ltd.
Asst.Years - 2003-04 & 2004-05
- 11 -
year is the year to establish the eligibility of the claim. Even the Ahmedabad Benches are also consistently subscribing this view as held in the case of Gateway Technolabs Pvt.Ltd., ITAT "C" Bench Ahmedabad (in ITA No.2473 & 2519/Ahd/2006 - AY 2003-04) order dated 4.9.2009.
6.1. As far as the question of alleged purchase of the machinery in question is concerned, there are few facts which indicate that the AO has wrongly held that it was an outright purchase by the Chennai Unit. In this regard, the first appellate authority has given a finding of fact that it was not evident from the records that the transaction relating to the machinery constituted outright sale. Likewise, as also simultaneously in the case of M/s.Sakhi Raimondi the first appellate authority has given a clear-cut finding that lease-rentals were received, relevant order of ld.CIT(A) has already been referred supra. Because of these facts and other evidences, such as the agreement, etc. we hereby hold that the AO has wrongly presumed that the transaction in question was a purchase of machinery by Chennai Unit. Because of this finding on facts a conclusion can be drawn that the rejection of deduction u/s.10B was bad in law.
6.2. An alternate plea has also been raised by ld.AR that the machinery which was taken on hire had costed less than the 20% of the total value of the machinery, therefore the impugned restrictive clause of section 10(b) was otherwise incorrectly invoked by the AO. For this ITA Nos.2981/Ahd/08 & 322/Ahd/2009 (By Revenue) CO No.44/Ahd/09 (By Assessee) Dy.CIT vs. M/s.Tyco Valves & Control India P.Ltd.
Asst.Years - 2003-04 & 2004-05
- 12 -
proposition case laws cited was CIT vs. Nayyars Minerals Exports Pvt.Ltd. 231 ITR 864 (H.P.). A calculation in this regard has also been furnished; however, at this stage of second appeal no verification about the correctness of the said calculation is possible. Let it be as it is; notwithstanding this alternate plea do not survive anymore because we have already taken a view in assessee's favour as discussed in above paras. In the result, we hereby confirm the findings of ld.CIT(A), therefore the claim of deduction u/s.10B is directed to be allowed.
7. In the result, ground No.2 which was recalled for readjudication is hereby decided in favour of the assessee and against the Revenue, however the final outcome of the order as already held by the ITAT "D" Bench Ahmedabad in respect of ITA No.2981/Ahd/2008 vide order dated 4.2.2011 shall stand as it was, hence Revenue's appeal is partly allowed for statistical purposes.
[B] Revenue's appeal, ITA No.322/Ahd/2009 for A.Y. 2004-05
8. The following grounds have been raised by the Revenue in its appeal:-
1. The learned CIT(A) erred on facts and in law in allowing deduction u/s.10B observing that the activities carried on by the assessee were manufacturing overlooking the fact that it was polishing the valves which is in contradiction to Apex Court's ratio laid down in CIT Vs N.C. Budhiraja (1993) 204 ITYR 412 (SC).ITA Nos.2981/Ahd/08 &
322/Ahd/2009 (By Revenue) CO No.44/Ahd/09 (By Assessee) Dy.CIT vs. M/s.Tyco Valves & Control India P.Ltd.
Asst.Years - 2003-04 & 2004-05
- 13 -
2 The learned CIT(A) erred on facts and in law in allowing deduction u/s.10B observing that the assessee had purchased the machineries, completely disregarding the fact that the assessee had employed used machinery value of which exceeded 20% of the total value of the machinery employed by the assessee.
3. The learned CIT(A) erred on facts and in law in holding that interest income of Rs.1,30,66,020/- was not to be included in the total turn over for the purpose of computation of deduction u/s.80HHC of the Act.
4. The learned CIT(A) erred in deleting the addition of commission of Rs.15,08,500/- by admitting fresh evidence in contravention to rule 46A, though the assessee could to substantiate its claim before the assessing officer to prove the legitimacy of the expenditure.
8.1. Ground Nos.1 & 2 are in respect of disallowance of deduction u/s.10B of the IT Act. Regarding Sr.No.1 now the Revenue is agitating the manufacturing process as well by contending that "polishing of valves" may not tantamount to manufacturing activity. In this regard, we are governed by the findings of the Hon'ble Jurisdictional High Court pronounced in assessee's own case cited supra order dated 11.4.2008; wherein it is held as under:-
"At page 6 of the petition, the petitioner has shown various manufacturing steps which the raw castings have to undergo [viz.Turning, boring, milling, radial drillings and boring, de- burning, etc.]. He purchased raw valves and thereafter put them under the aforesaid process. Therefore, after processing that raw valves, that becomes altogether a new product, which is distinct from raw casting and is commercially marketable, and that comes under the manufacturing activity. Mr.Shah placed reliance on the ITA Nos.2981/Ahd/08 & 322/Ahd/2009 (By Revenue) CO No.44/Ahd/09 (By Assessee) Dy.CIT vs. M/s.Tyco Valves & Control India P.Ltd.
Asst.Years - 2003-04 & 2004-05
- 14 -
decision of the Madras High Court in the case of CIT v/s. Perfect Liners - [1983] 142 ITR 654. Following its earlier decision i.e. CIT v. M.R. Gopal - [1965] 58 ITR 598, the Madras High Court has taken the view that the word "manufacture" has to be understood in a wide sense. After the rough casting was polished, the product was a new product which was utilized as a component in internal combustion engines. It is to be seen whether after some processes under which the raw goods have undergone, the type is different from the original goods which were put under the process. Here, considering the processes of the raw valves for final use, when the different product has come out, then it cannot be said that it is the same goods, as the raw goods could not be used without the processes under which the goods of the assessee have gone. Therefore, once it was allowed after seeing all these facts and when there was no concealment of facts for deduction under section 10B of the Act, we see no justification in issuing notices under section 148 for reopening of the assessment."
This entire issue has already been dealt with by us in Revenue's appeal for A.Y. 2003-04(supra). Therefore, on identical facts both the grounds of the Revenue for this year as well are hereby dismissed.
9. Apropos to Ground No.3, it was noted that the AO had included certain amount in the total turnover while computing the deduction u/s.80HHC of IT Act. Due to this increase in the total turnover, i.e. denominator, the resultant figure of deduction u/s.80HHC got reduced. One of the item which was included pertained to interest on deposit with banks amounting to Rs.1,30,66,020/-. Identical addition was made in A.Y. 2003-04 and while deciding the Revenue's appeal the Respected ITA Nos.2981/Ahd/08 & 322/Ahd/2009 (By Revenue) CO No.44/Ahd/09 (By Assessee) Dy.CIT vs. M/s.Tyco Valves & Control India P.Ltd.
Asst.Years - 2003-04 & 2004-05
- 15 -
Coordinate Bench in the order cited supra dated 4.2.2011 has held as under:-
"15. We have heard the parties. In our considered view there is no case for interference in the order of ld. CIT(A). The reasons are that interest only constitutes income and it can never be part or equivalent to turnover. Further it is assessable under the head income from other sources and in no case it will form part of computation mechanism as provided under section 80HHC unless it is held as business income and if it is so then 90% thereof would be required to be excluded. Hon'ble Delhi High Court in CIT vs. Delhi Brass & Metal Works (2009) 313 ITR 352 (Del) has held that when there is no immediate nexus of interest on F.D. with export even they are to be treated as income from other sources. Accordingly ld. CIT(A) was justified in excluding interest from computation mechanism of section 80HHC. As a result, this ground of Revenue is rejected."
9.1. Even for A.Y. 2002-03 (ITAT "C" Bench Ahmedabad) while deciding assessee's appeal bearing ITA No.981/Ahd/2006 order dated 10.12.2009, it was held that the interest income was not to be considered for total turnover by following Kantilal Chotalal 246 ITR 439 (Mum.) and Hero Cycles 84 TTJ 485 (Chandigarh ITAT). Respectfully following the decisions of the Coordinate Benches as also the verdict of the Hon'ble Courts, we hereby affirm the findings of the ld.CIT(A) and dismiss this ground of the Revenue.
10. Apropos to Ground No.4, the assessee has stated that a sum of Rs.15,08,500/- was paid to several parties and the tax thereon wherever required has also been deducted. We have noted that in a cryptic manner the AO had disallowed the claim. However, when the matter reached to ITA Nos.2981/Ahd/08 & 322/Ahd/2009 (By Revenue) CO No.44/Ahd/09 (By Assessee) Dy.CIT vs. M/s.Tyco Valves & Control India P.Ltd.
Asst.Years - 2003-04 & 2004-05
- 16 -
ld.CIT(A), it was held that the payments were made to independent unrelated parties. It was also held that the payments were made to procure the business. In support, the details of the commission agents and the details of the TDS payments were also placed on record. On that basis, ld.CIT(A) has held that the AO had not found payment of commission as a bogus payment. He has also commented that the AO had not examined the commission agents. A relief was granted which is now challenged by the Revenue. Now before us, all those details have been furnished running from page Nos.92 to 112 of the paper-book. The assessee has furnished statement of sale commission, describing the name of the commission agent and the services rendered by those parties. For example, Sai Enterprises was paid commission against MSEB order. Likewise, WIT Electronics was paid for IFCO Kandla Order. There is a long list of those parties giving the description of documents, voucher numbers, date of payment, their PAN numbers, amount of invoices, the rate of commission, etc. The rate of commission had vary from 2.2% to 5% and in few cases it had reached upto 16%. The details of the debit- notes and the commission paid through those debit-notes have also been enclosed. We have been informed that certain basic information about the payment of commission was very much part of the record as also had been enquired by the Auditor, hence very much part of the assessment record. So the argument is that if the AO had any doubt, then he could have investigated. Without any investigation he has wrongly disallowed claim. We find force in the submissions of ld.AR considering the surrounding circumstances and the evidences placed on record. We, ITA Nos.2981/Ahd/08 & 322/Ahd/2009 (By Revenue) CO No.44/Ahd/09 (By Assessee) Dy.CIT vs. M/s.Tyco Valves & Control India P.Ltd.
Asst.Years - 2003-04 & 2004-05
- 17 -
therefore, confirm the factual finding of ld.CIT(A) and dismiss this ground of the Revenue.
11. In the result, the Revenue's appeal is dismissed.
[C] Assessee's CO No.44/Ahd/2009 (in ITA No.322/Ahd/2009) The following grounds have been raised by the Assessee in its cross objection:-
Tyco Valves & Controls India Private Limited [hereinafter referred to as 'the respondent'] objects to the appeal preferred by the Deputy Commissioner of Income tax, Baroda - Circle 4 [hereinafter referred to as 'the appellant'] and the order dated November 27, 2008 passed under section 250 of the Income Tax Act, 1961 [hereinafter referred to as 'the Act'] by the Commissioner of Income Tax (Appeals)-III, Baroda [hereinafter referred to as (CIT (Appeals)] for the Income Tax assessment year 2004-05 on the following grounds:
I. Cross-Objection to Ground no.2 of the Appeal preferred by the appellant The respondent submits that the appellant has erred in raising the ground relating to use of second hand machinery as he had not called for any details or explanation from the respondent in the course of assessment proceedings and has no where mentioned about the same in the assessment order. However, the CIT(Appeals) has, after considering this very issue, allowed the deduction under section 10.
The respondent prays that the order of CIT(Appeals) be upheld in this matter.ITA Nos.2981/Ahd/08 &
322/Ahd/2009 (By Revenue) CO No.44/Ahd/09 (By Assessee) Dy.CIT vs. M/s.Tyco Valves & Control India P.Ltd.
Asst.Years - 2003-04 & 2004-05
- 18 -
II. Cross-Objection to Ground no.10 of the CIT (Appeals) order The respondent submits that the CIT(Appeals) has erred in making an ad-hoc disallowance of Rs.1,00,000 out of miscellaneous expenses.
The respondent prays that the ad-hoc disallowance be deleted. Your respondents crave leave to add, to amend, to alter, to substitute, to modify and / or withdraw any or all the above grounds of cross-objections as they may be advised to do so at or before the time of hearing of the cross-objection.
12. Having heard the submissions of both the sides, we have noted that the part relief was granted by ld.CIT(A) in the following manner:-
"11.3. I have considered the submissions of the counsel and facts of the case. Since most of these expenses are incurred on cash basis and incurred for snacks, food and hotel expenses etc. Various gift items were also purchased for different persons including guest. Since the business purpose of these expenses cannot be fully verifiable part disallowance is justified. However looking to the quantum of expense 10% disallowance is on higher side. I restrict the same to Rs.1 lac. The balance disallowance of Rs.5,70,800/- is deleted."
12.1. We find no fallacy in the aforesaid view taken by ld.CIT(A), hence hereby confirmed. Ground raised by the Cross Objection is dismissed.
ITA Nos.2981/Ahd/08 &322/Ahd/2009 (By Revenue) CO No.44/Ahd/09 (By Assessee) Dy.CIT vs. M/s.Tyco Valves & Control India P.Ltd.
Asst.Years - 2003-04 & 2004-05
- 19 -
13. We summarize the result as under:-
(a) Revenue's appeal, ITA No.2981/Ahd/2008 for A.Y. 2003-04 is partly allowed for statistical purposes.
(b) Revenue's appeal, ITA No.322/Ahd/2009 for A.Y. 2004-05 is dismissed.
(c) Assessee's Cross Objection No.44/Ahd/2009 is dismissed.
Sd/- Sd/-
( अिनल चतुवद
ȶ ȣ) ( मुकुल कुमार ौावत )
लेखा सदःय Ûयाियक सदःय
( ANIL CHATURVEDI ) ( MUKUL Kr. SHRAWAT )
ACCOUNTANT MEMBER JUDICIAL MEMBER
Ahmedabad; Dated 2/ 11 /2012
टȣ.सी.नायर, व.िन.स./T.C. NAIR, Sr. PS
आदे श कȧ ूितिलǒप अमेǒषत/Copy
षत of the Order forwarded to :
1. अपीलाथȸ / The Appellant
2. ू×यथȸ / The Respondent.
3. संबंिधत आयकर आयुƠ / Concerned CIT
4. आयकर आयुƠ(अपील) / The CIT(A)-III, Baroda
5. ǒवभागीय ूितिनिध, आयकर अपीलीय अिधकरण, अहमदाबाद / DR, ITAT, Ahmedabad
6. गाड[ फाईल / Guard file.
आदे शानुसार/ BY ORDER, स×याǒपत ूित //True Copy// उप/सहायक पंजीकार (Dy./Asstt.Registrar) उप/ आयकर अपीलीय अिधकरण, अिधकरण, अहमदाबाद / ITAT, Ahmedabad
1. Date of direct dictation on computer on 18.10.12 & 19.10.12/31.10.12
2. Date on which the typed draft is placed before the Dictating Member 22.10.12/31.10.12.................. Other Member.....................
3. Date on which the approved draft comes to the Sr.P.S./P.S.................
4. Date on which the fair order is placed before the Dictating Member for pronouncement......
5. Date on which the fair order comes back to the Sr.P.S./P.S...................2.11.12
6. Date on which the file goes to the Bench Clerk.................................2.11.12
7. Date on which the file goes to the Head Clerk..................................
8. The date on which the file goes to the Assistant Registrar for signature on the order..........................
9. Date of Despatch of the Order..................