Income Tax Appellate Tribunal - Pune
Ctr Manufacturing Industries Ltd.,, vs Assessee on 13 January, 2014
IN THE INCOME TAX APPELLATE TRIBUNAL
PUNE BENCH "A", PUNE
BEFORE SHRI SHAILENDRA KUMAR YADAV,
JUDICIAL MEMBER, AND
SHRI R.K. PANDA, ACCOUNTANT MEMBER
ITA Nos.2423 to 2425/PN/2012
(A.Ys.2004-05 to 2006-07)
Dy. CIT, Circle 1(1), Pune Appellant
Vs.
CTR Manufacturing Industries Ltd.,
Nagar Road, Pune - 411014
PAN: AAACC7256R Respondent
CO Nos.2 to 4/PN/2014
(Arising out of ITA Nos.2423 to 2425/PN/2012
(A.Ys.2004-05 to 2006-07)
CTR Manufacturing Industries Ltd.,
Nagar Road, Pune - 411014
PAN: AAACC7256R Cross Objector
Vs.
Dy. CIT, Circle 1(1), Pune Appellant
Assessee by : Shri Rajendra Agiwal
Department by : Shri P.L. Pathade
Date of Hearing : 13.01.2014
Date of order : 27.01.2014
ORDER
PER BENCH:
These appeals filed by revenue and Cross Objections filed by assessee are arising from respective orders of CIT(A)-I, Pune pertaining to the same assessee on almost common issues. So these were heard together and are being disposed off by this consolidated order for the sake of convenience.2
2. In ITA No.2423/PN/2012 for A.Y. 2004-05, the revenue raised the following grounds:
1. The order of the learned Commissioner of income-tax (Appeals) is contrary to law and to the facts and circumstances of the case.
2. The learned Commissioner of Income tax (Appeals) grossly erred in allowing the assessee's appeal with regard to extinguishments of the assessee's liability to pay the differential sales tax of Rs.17,77,716/- instead of confirming the Assessing Officer's stand that the foresaid amount represented cessation/ remission of the assessee's liability and hence taxable u/s 41(1) of the Income-tax Act, 1961.
3. The learned Commissioner of Income-tax (Appeals) grossly erred in allowing the assessee's ground of appeal by following his own decision in the case of Inox Air Products Pvt Ltd. for A.Y. 2008-09, whereas in the said decision he had also stated that" I am humbly of the view that the amount is taxable u/s 41 (1) of the Income tax Act, 1961."
4. The learned Commissioner of Income-tax (Appeals) grossly erred in following the decision of the ITAT Special Bench , Mumbai in the case of Suzler India Ltd. (2010) 134 TTJ (Mum) (SB) 385, and the decision of the ITAT, Pune Bench in the case of Rucha Engineers Pvt Ltd. in IT No. 67/PN/2006 and 1338/PN/207: A.Y. 2003-04, which are not all applicable to the fact in the present case since in the assessee's case the liability in respect of the entire differed sales tax of Rs.47,29,706/- had already accrued and had also been allowed as expenditure or trading liability ; and, therefore, the remission/ reduction of Rs. 17,77,716/- patently resulted in deemed income u/s 41(1) of the Income tax Act, 1961.
5. The learned Commissioner of Income-tax (Appeals) grossly erred in failing to appreciate that the ratio laid down by the Hon'ble Supreme Court in the case of CIT Vs Thirumalaiswamy Naidu & Sons (1998), 236ITR 534(SC) & the Hon'ble Kerala High Court in the case of XCIT Vs Marikar (Motors) Ltd.
(1981) 129 ITR 1 (Ker) clearly applies to the present case.
6. The learned Commissioner of Income-tax (Appeals) grossly erred in not considering the ratio of the decision in the case of CIT Vs Sahany Steels and Press Works Ltd. (1985) 152 ITR 39 (AP), wherein it was been held that refund of sales tax can be taxed u/s 41(1) and for this it is not necessary that the refund must have been obtained by the assessee in the form of sales tax only.
37. For these and such other grounds as may be urged at the time of the hearing, the order of the learned Commissioner of Income Tax (Appeals) may be vacated and that of the Assessing Officer be restored.
8. The appellant craves leave to add, alter or amend any or all the grounds of appeal
3. The assessee has filed its cross objections vide CO No.02/PN/2014 for the same year as under:
Based on the facts and circumstances of the case, the learned Commissioner of Income Tax (Appeals) I [CIT(A)] erred:
1. in confirming the action of the learned Deputy Commissioner of Income-tax, Circle 1(1) [the learned Assessing Officer - XAO'] in upholding the validity of proceedings initiated under section 147 of the Act on the ground that income had escaped assessment;
2. in not appreciating that re-opening made by the Assessing Officer under section 147 of the Act is purely based on the disclosure made by the Respondent itself in its return of income and notes to computation (assessed under section 143(1) of the Act) , without there being any- new tangible material on record so as to justify the re-opening of assessment.
3. in not appreciating the fact that the reassessment is not warranted as there has been no failure on the part of the appellant to disclose fully and truly all material facts necessary for the assessment.
Addition on account, of waiver of prepayment of sales tax deferral liability due to prepayment On the facts and in circumstances of the case the learned AO has erred:
4. in objecting the order of Hon'ble CIT(A) and contending that the waiver of sales tax deferral liability due to prepayment represents cessation/ remission of liability and hence taxable under section 41 (1) of the Act.
The Respondent craves, to consider each of the above grounds of cross objections without prejudice to each other and craves, leave to add, alter, delete or modify all or any of the above grounds of cross objections.
44. The assessee is a Public Limited Company engaged in the business of manufacturing of on-Load Tap Changers, Radiators for transformers, Flange Type Tap Changers etc. The assessee had started a unit at Chikhalthana Industrial Area which was notified as backward area and was entitled under the Government of Maharashtra (GOM) Modified Package Schemes of Incentive, 1988. The objective behind the scheme was to promote industrial development all over the State. To induce industrial development the GOM had given the option to defer the payment of Sales Tax collected for 10 years and thereafter to pay the same in annual installments. Thereafter the GOM introduced a Trade Circular dated 12.12.2002 according to which an offer was provided for premature payment of the sales tax deferral loan at its NPV. The assessee got entitlement certificate from SICOM for such deferral payment of sales tax. Accordingly, the assessee made payment of sales tax liability equal to NPV. The Sales tax waived was specified by the assessee in the note written in the return of income for A.Y. 2004-05, 2005-06 and 2006-07. The Assessing Officer reopened the cases for 3 years on the basis of notes mentioned by the assessee. The assessee requested to treat these waived sales tax as capital receipts however, the Assessing Officer taxed these receipts. Aggrieved by the assessment orders passed u/s 143(3) r.w.s 147 for AY 2004-05, 2005-06 and 2006-07, the assessee has filed three similar appeals. On merit all these appeals were allowed by the CIT(A).
5. The assessee has claimed that the similar issue has been decided in favour of the assessee by Special Bench, Mumbai in the case of Suzler India Ltd. (2010) 134 TTJ (Mum) (SB) 385, wherein the special bench held that out of the sales tax liability of Rs.4,14,87,984/- being difference between payment of Rs.3,37,13,393/- against the future liability of Rs.7,52,01,378/- carried by the assessee under capital reserves account, its books of accounts, its capital receipt and could not be retained as remission or cessation of liability in terms of section 41(1) of Act. We also find 5 that ITAT 'B' Bench, Pune in ITA No.686/PN/2001 in the case of Rohit Exhaust Systems Pvt. Ltd. following the ratio of Special Bench in Sulzer India Ltd. (supra) has held as under:
"9.1 We have considered the rival submissions made by both the sides, perused the orders of the AO and the CIT(A) and the Paper Book filed on behalf of the assessee. We have also considered the various decisions cited before us. We find the issue has been decided in favour of the assessee by the decision of the Pune Bench of the Tribunal in the case of Rucha Engineers Pvt. Ltd. vide ITA No. 667/PN/2006 and ITA No. 1338/PN/2007 for A.Y. 2003-04 order dated 19-01-2011. For the sake of convenience the facts of that case including the finding of the Tribunal are reproduced as under :
"3. As far as ground No.1 is concerned, the relevant facts of the case are that the assessee has collected sales tax from customers and has claimed deduction for the said amount in P&L account. The said deduction was allowed u/s.43B taking the sales tax collected as deemed payment for the purpose of section 43B. The sales tax collected and used was to be paid to State Government in five equal instalments. The assessee settled the sales tax deferral amount of Rs.163.22 lakhs by paying Rs.51.55 lakhs as full and final settlement. In this process, the assessee has gained Rs.111.67 lakhs and claimed the same as capital receipt which was not accepted by the Assessing Officer. The matte was carried in before the first appellate authority but without any success.
4. During the proceedings before us, the learned counsel for the assessee submitted that the issue raised in this appeal is squarely covered by the decision of Special Bench of the Tribunal in the case of Sulzer India Ltd. Vs. JCIT (2010) 42 SOT 457 (Bom.) which was not disputed by the learned DR except relying on the order of the CIT(A).
5. After hearing both the parties and perusing the material on record, we find that this ground is squarely covered in favour of the assessee by the decision of Special Bench of the Tribunal in the case of Sulzer India Ltd. (Supra), wherein the issue has been decided in favour of the assessee by observing as under:
"For the reasons as stated above, we hold that the deferred sales tax liability Rs.4,14,87,984/- being the difference between the payment of net present value Rs.3,37,13,393/- against the future liability of 6 Rs.7,52,01,378/- credited by the assessee under the capital reserve account in its books of account is a capital receipt and cannot be termed as remission/cessation of liability and consequently no benefit has arisen to the assessee in terms of section 41(1)(a) of the Income Tax Act, 1961. Accordingly, the modified question as framed in para 5 of this order is answered in favour of the assessee and against the revenue".
6. So, respectfully following the aforesaid decision of Special Bench of the Tribunal in the case of Sulzer India Ltd. (Supra), we hold that the CIT(A) was not justified in confirming the addition of Rs.1,11,66,935/- made by the Assessing Officer treating the sales tax loan waiver as revenue receipt. Assessing Officer is directed accordingly."
Respectfully following the decision of the Tribunal in the case of Rucha Engineers Pvt. Ltd. which has been passed after considering the decision of the Special Bench of the Tribunal in the case Sulzer India Ltd. (Supra) and in absence of any contrary material brought to our notice against the order of the Tribunal in the case of Rucha Engineers (P) Ltd. (Supra) we find no infirmity in the order of the CIT(A). Accordingly the same is upheld. The grounds raised by the revenue are accordingly dismissed."
Nothing contrary was brought to our knowledge on behalf of revenue. Facts being similar, so following the same reasoning, we are not inclined to interfere in the findings of CIT(A), who has allowed the assessee's claim with regard to extinguishment of assessee's liability to pay the differential sales tax of Rs.17,77,716/- because the said amount does not represent cessation / remission of assessee's liability and not liable u/s.41(1) of I.T. Act, 1961. We uphold the same. In ITA No.2424/PN/2012 and ITA No.2425/PN/2012 for A.Y. 2005-06 and 2006-07, the revenue has raised the similar grounds as raised in ITA No.2423/PN/2012 for A.Y. 2004-05. Facts being similar, so following the same reasoning, we are not inclined to interfere in the findings of CIT(A), who has allowed the assessee's claim with regard to extinguishment of assessee's liability to pay the differential sales tax of Rs.25,03,081/- and 17,28,214/- respectively because the said amount does not 7 represent cessation / remission of assessee's liability and have not liable u/s.41(1) of I.T. Act, 1961. We uphold the same.
6. Similar Cross Objection Nos.2/PN/2014, 3/PN/2014 and 4/PN/2014 arising out of ITA No.2423/PN/2012, 2424/PN/2012 and 2425/PN/2012 respectively have been filed by the assessee. Since the relief on merit as granted by the CIT(A) has been upheld by us on the merit in paras 8 & 9 of this order. So, the issue raised by way of cross objections goes academic. However, the assessee is at liberty to raise the same if necessity arises for same in future. So, the cross objections are dismissed being academic.
7. In result, the revenue's appeals as well as cross objections filed by the assessee are dismissed as indicated above.
Pronounced in the open Court on this the 27th day of January, 2014.
Sd/- Sd/-
(R.K. PANDA) (SHAILENDRA KUMAR YADAV)
Accountant Member Judicial Member
Pune, Dated: 27th January, 2014
GCVSR
Copy to:-
1. Department
2. Assessee
3. The CIT(A)-I, Pune
4. The CIT-I, Pune
5. The DR, "A" Bench, I.T.A.T., Pune.
6. Guard File
By Order
//True Copy//
Senior Private Secretary,
I.T.A.T., Pune