ITO, Hyderabad v. M/s Fabricon (P) Ltd., Hyderabad

ITA 405/HYD/2007 | 2003-2004
Pronouncement Date: 18-02-2010 | Result: Allowed

Appeal Details

RSA Number 40522514 RSA 2007
Assessee PAN AAACF3074A
Bench Hyderabad
Appeal Number ITA 405/HYD/2007
Duration Of Justice 2 year(s) 11 month(s) 2 day(s)
Appellant ITO, Hyderabad
Respondent M/s Fabricon (P) Ltd., Hyderabad
Appeal Type Income Tax Appeal
Pronouncement Date 18-02-2010
Appeal Filed By Department
Order Result Allowed
Bench Allotted B
Tribunal Order Date 18-02-2010
Date Of Final Hearing 03-02-2010
Next Hearing Date 03-02-2010
Assessment Year 2003-2004
Appeal Filed On 16-03-2007
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH B HYDERABAD BEFORE SHRI N.R.S. GANESAN JUDICIAL MEMBER AND SHRI AKBER BASHA ACCOUNTANT MEMBER ITA NOS. 404 &405/HYD/07 : ASST. YEARS 2000-0 1 & 2003-04 ITO WARD-1(2) M/S. FABRICON (P) LTD. HYDERABAD. VS LTD. HYDERABAD. (APPELLANT) (RESPONDENT) [AAACF3074A] APPELLANT BY : SRI E.S. NAGENDRA PRASAD RESPONDENT BY : SRI B. SATYANARAYANA MURTHY O R D E R PER AKBER BASHA ACCOUNTANT MEMBER THESE APPEALS BY THE REVENUE ARE DIRECTED AGAINST SEPAR ATE ORDERS OF CIT (A)-II HYDERABAD BOTH DATED 18-12-2006 AND T HEY RELATE TO THE ASSESSMENT YEARS 2000-01 AND 2003-04. SINCE COMMON AND ID ENTICAL ISSUES ARE INVOLVED IN THESE APPEALS THESE ARE TAKEN UP TOGETHER AND DISPOSED OFF BY THIS COMBINED ORDER FOR THE SAKE OF CONVE NIENCE. ITA NO.404/HYD/07-ASST. YEAR 2000-01:- 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE COMPANY E NGAGED IN THE BUSINESS OF FABRICATION WORK HAD FILED RETURN OF IN COME FOR THE ASSESSMENT YEAR UNDER CONSIDERATION DECLARING AN INCOME OF RS.NIL AFTER CLAIMING SET OFF OF BUSINESS LOSS OF RS.32 49 681 AND THE CASE WAS REOPENED BY ISSUE OF NOTICE UNDER SEC. 148 ON 14-8-2002. IN COURSE OF 2 THE ASSESSMENT PROCEEDINGS THE ASSESSING OFFICER FOUND THAT THE ASSESSEE HAS REDUCED AN AMOUNT OF RS.31 66 172 UNDER SEC. 115JA(2)(I) OF THE ACT FROM THE BOOK PROFIT WHILE CAL CULATING THE INCOME UNDER SEC. 115JA OF THE ACT. WHEN ASKED TO EXPLAIN A NOTE WAS SUBMITTED BEFORE THE CIT(A) MENTIONING THAT THE COMPA NY MADE AN APPLICATION TO THE BANK FOR ONE-TIME SETTLEMENT AND T HIS PROPOSAL WAS ACCEPTED BY THE BANK DURING THE FINANCIAL YEAR 1999-20 00. ON ACCOUNT OF THIS THE COMPANY HAD A WAIVER OF INTEREST OF AN AM OUNT OF RS.31 66 172 AND THIS AMOUNT IS WRITTEN BACK FROM THE A MOUNT PROVIDED BY WAY OF INTEREST. IN THE COMPUTATION OF BO OK PROFITS U/S `115JA THE AMOUNT OF RS.31 66 172 CREDITED IN THE P & L A/C IS DEDUCTED IN VIEW OF CLAUSE (I) IN EXPLANATION TO SUB-SEC. (2) OF SEC. 115JA OF THE ACT. HOWEVER THIS EXPLANATION OF THE ASSE SSEE WAS NOT ACCEPTABLE TO THE ASSESSING OFFICER. THE ASSESSING OFFICER TOO K THE STAND THAT AS PER SEC. 115JA(2)(I) THE AMOUNT WITHDRAW N FROM ANY RESERVE OR PROVISIONS TO BE REDUCED IF ANY SUCH AMOUNT IS CREDITED TO THE P & L A/C PROVIDED THAT WHERE THIS SECTION IS APPLICA BLE TO AN ASSESSEE IN ANY PREVIOUS YEAR INCLUDING THE RELEVANT PREV IOUS YEAR THE AMOUNT WITHDRAWN FROM RESERVES CREATED OR PROVISIONS MAD E IN A PREVIOUS YEAR RELEVANT TO THE ASSESSMENT YEAR COMMENCING O N OR AFTER 1ST APRIL 1997. ACCORDINGLY WHILE CALCULATING THE BOO K PROFIT THE ASSESSING OFFICER DID NOT ALLOW THE REDUCTION OF THE AMOU NT OF RS.31 66 172. 3. AGGRIEVED AGAINST THE SAME THE ASSESSEE WENT IN APP EAL BEFORE THE CIT (A). THE CIT (A) FOUND THAT HIS PREDECESSOR IN ITA NO.13/CIT(A)-2/HYD/04-05 DATED 19-12-2005 FOR THE ASS ESSMENT YEAR 1999-2000 HAD DIRECTED THE ASSESSING OFFICER TO EXAMINE T HE CLAIM OF THE ASSESSEE THAT THE AMOUNT NOW CREDITED TO THE P & L A /C ON ACCOUNT 3 OF INTEREST WAIVED BY THE BANK WAS IN FACT PART OF THE PROVISION/RESERVE CREATED IN THE EARLIER YEARS AFTER VERIFYING WHETHER THE ASSESSEE FULFILLS THE CONDITIONS LAID DOWN IN THE EXPLANATION TO SUB-SECTI ON 2 OF SECTION 115JA OF THE ACT THEN THE AMOUNT OF INTEREST WAIVED BY THE BANK AS PART OF ONE-TIME SETTLEMENT SHOULD BE REDUCED FOR TH E PURPOSE OF COMPUTATION OF BOOK PROFIT. HIS PREDECESSOR AFTER DISCUSSI NG THE ISSUE IN DETAIL WHETHER RENTAL RECEIPTS FROM LEASED OUT SHEDS AS BUSINESS INCOME OR NOT HAD DIRECTED TO ASSESS THE RENTAL RECEIPTS FROM LEASED OUT SHEDS AS BUSINESS INCOME AS PER THE PROVISIONS OF THE ACT. THE FACTS AND THE CIRCUMSTANCES OF THE CASE FOR THE YEAR UNDER CONSID ERATION IS NOT MATERIALLY DIFFERENT FROM WHAT IT WAS IN THE IMM EDIATELY PRECEDING ASSESSMENT YEAR AND ACCORDINGLY FOLLOWING THE STAND TAKEN BY HIS PREDECESSOR IN ASSESSEE'S OWN CASE THE CIT A DIRECTED THE ASSESSI NG OFFICER TO TREAT THE RENTAL RECEIPTS FROM THE FACTORY SHED AS INCOME FROM BUSINESS AND TO THAT EXTENT THE GROUND OF APPEAL IS DISP OSED OF IN FAVOUR OF THE ASSESSEE. SINCE THE ASSESSING OFFICER IS DIRE CTED TO TREAT THE RENTAL INCOME FROM FACTORY SHED AS INCOME FROM BUSINE SS THE EXPENDITURE LAID OUT FOR THE PURPOSE AND DEBITED TO THE P & L A/C SHOULD BE ALLOWED AS PER THE PROVISIONS OF THE ACT AND HE AL SO ALLOWED UNABSORBED DEPRECIATION AVAILABLE IF ANY AS PER THE A SSESSMENT RECORDS SHOULD ALSO BE ALLOWED FOR SET OFF AS PER THE PROVISIONS OF THE ACT. HENCE HE ALLOWED THE APPEAL OF THE ASSESSEE IN PART. 4. STILL AGGRIEVED BY THE ORDER OF THE CIT(A) THE ASSESSEE IS IN APPEAL BEFORE US. WE HAVE HEARD BOTH THE PARTIES AN D PERUSED THE MATERIAL AVAILABLE ON RECORD. DURING THE COURSE OF HE ARING THE LEARNED COUNSEL FOR THE ASSESSEE PLACED BEFORE US COPIES OF THE ORD ERS OF THE TRIBUNAL IN ITA NOS. 1035 AND 1036/HYD/2006 FOR THE A SSESSMENT YEARS 2002-03 AND 2003-04 IN THE CASE OF KREBS BIOCHEMICALS AND INDUSTRIES 4 LTD. HYDERABAD VS. DCIT DATED 29TH JANUARY 2008 IT A NO. 980/HYD/2005 IN THE CASE OF GAUTAMI ENGG. & CONSTRUCTIO N CO. PVT. LTD. VS. ITO DATED 29TH DEC. 2005 AND IN THE ASSESSEE'S O WN CASE IN ITA NO.235/HYD/06 ORDER DATED14-11-2007 AND IN WTA NO S. 19A AND 19B/HYD/04 IN THE CASE OF THE SAME ASSESSEE ORDER DATED 30 TH SEPT. 2005 WHEREIN ON SIMILAR AND IDENTICAL ISSUES THE TRIBU NAL HELD IN FAVOUR OF THE ASSESSEE. WE ALSO FIND FROM THE ORDER OF THE FIR ST APPELLATE AUTHORITY AFTER DISCUSSING THE ISSUE IN DETAIL AND IN AP PRECIATION OF THE FACTS AND CIRCUMSTANCES OF THE CASE CIT A DIRECTED TO ASSESS THE RENTAL RECEIPTS FROM LEASED OUT SHEDS AS BUSINESS INCOME AS PER THE PROVISIONS OF THE ACT AND ACCORDINGLY FOLLOWING THE STAND TAKEN BY HIS PREDECESSOR IN ASSESSEE'S OWN CASE HE DIRECTED THE ASSESSING OFFICER TO TRE AT THE RENTAL RECEIPTS FROM THE FACTORY SHED AS INCOME FROM BUSIN ESS. HENCE THE CIT (A) ALLOWED THE GROUND RAISED BY THE ASSESSEE IN THIS REGARD. WE HAVE ALSO GONE THROUGH THE ORDERS OF THE TRIBUNAL MENTIONED ABOVE AND FIND THAT THE TRIBUNAL DECIDED THIS ISSUE IN FAVOU R OF THE ASSESSEE. CONSIDERING THE TOTALITY OF FACTS AND THE CIRCUMSTANCES OF THE CASE AND CONSISTENT WITH THE VIEW TAKEN BY THE TRIBUNAL IN ALL THE ABOVE CASES WE ARE OF THE OPINION THAT THE FIRST APPELLATE AUTHORIT Y IS PERFECTLY JUSTIFIED IN ALLOWING THE CLAIM OF THE ASSESSEE ON THIS ISSUE. THER EFORE NO INTERFERENCE IS CALLED FOR AND ACCORDINGLY WE UPHOLD THE ACTION OF THE CIT (A) IN THIS REGARD AND THE GROUND RAISED BY THE REVEN UE STANDS DISMISSED. 5. THE NEXT EFFECTIVE GROUND OF APPEAL IS WITH REGARD TO THE COMPUTATION OF BOOK PROFITS U/S 115JA OF THE ACT. BEFOR E THE FIRST APPELLATE AUTHORITY THE ASSESSEE SUBMITTED A STATEMENT W HEREIN IT HAS SHOWN THE LOSS AS PER P & L A/C BEFORE DEBITING INTEREST AND AFTER DEBITING THE INTEREST AND THE DETAILS WERE REPRODUCED AS IT IS EVIDENT 5 FROM THE STATEMENT SUBMITTED BEFORE THE CIT(A) THAT T HE ASSESSEE HAS INCURRED LOSS EVEN BEFORE DEBITING THE INTEREST AMOUNT. WHETHER THE SAID INTEREST IS THE SAME AS THE INTEREST WHICH IS WAIVED B Y THE BANK IS NOT CLEAR WHICH THE ASSESSING OFFICER NEEDS TO EXAMINE IN D ETAIL AND THE BOOK PROFITS HAVE BEEN COMPUTED BY THE ASSESSING OFFICER W ITHOUT GIVING ANY DETAILED REASON IN THE INTEREST OF NATURAL JUSTICE THE ASSESSEE SHOULD BE GIVEN AN OPPORTUNITY BEFORE MAKING ADJUSTME NT TO THE BOOK PROFIT RAISING A DEMAND THEREON. IN VIEW THIS TH E CIT(A) DIRECTED THE ASSESSING OFFICER TO EXAMINE THE CLAIM OF THE ASSESSEE THAT T HE AMOUNT CREDITED TO THE P & L A/C ON ACCOUNT OF INTEREST WAIVED BY THE BANK WAS IN FACT PART OF THE PROVISION/RESERVE CREATE IN THE EA RLIER YEARS. 6. WE HAVE CONSIDERED THE SUBMISSIONS OF THE RIVAL PARTI ES AND PERUSED THE MATERIAL AVAILABLE ON RECORD. AFTER CONSID ERING THE FACTS OF THE CASE WE FIND THAT THE FIRST APPELLATE AUTHORITY HAS RESTORED THIS ISSUE TO THE FILE OF ASSESSING OFFICER TO EXAMINE THIS CLAIM OF THE ASSESSEE THAT THE AMOUNT CREDITED TO THE P & L A/C ON ACCOUNT OF INT EREST WAIVED BY THE BANK AND FURTHER HELD THAT IT IS FOUND THAT THE ASSESSEE FULFILLS THE CONDITIONS LAID DOWN IN THE EXPLANATION TO SUB-SECTION ( 2) OF SECTION 115JA THE THEN THE AMOUNT OF INTEREST WAIVED BY THE BANK AS PART OF ONE TIME SETTLEMENT SHOULD BE REDUCED FOR THE PURPOSE O F COMPUTATION OF BOOK PROFIT. IN VIEW OF THE ABOVE THERE SHOULD NOT BE ANY GRIEVANCE TO THE REVENUE AS THE CIT (A) HAS ALREADY RESTORED THI S MATTER TO THE ASSESSING OFFICER TO EXAMINE THIS CLAIM IN DETAIL. THEREF ORE NO INTERFERENCE IS CALLED FOR AND ACCORDINGLY WE UPHOLD TH E ACTION OF THE FIRST APPELLATE AUTHORITY ON THIS ISSUE AND DISMISS THE GROUND RAISED BY THE REVENUE. 7. IN THE RESULT THE APPEAL FILED BY THE REVENUE STA NDS DISMISSED. 6 ITA NO.405/HYD/07-ASST. YEAR 2003-04: 8. THE GROUNDS RAISED BY THE REVENUE READ AS FOLLOWS 1. THE CIT (A) IS NOT CORRECT IN ALLOWING THE ASSESSEE'S CLA IM OF EXPENSES WITHOUT TAKING INTO ACCOUNT THE PROVISIONS U/S 37 OF THE IT ACT. 2. THE CIT(A) OUGHT TO HAVE APPRECIATED THE OBSERVATI ONS OF THE ASSESSING OFFICER THAT THE BUSINESS ACTIVITY WAS CLOSE D WAY BACK IN THE F.Y. 1997-98 AND IT WAS NOT REVIVED A ND THE ASSESSEE HAD NO INTENTION TO REVIVE THE SAME BASING ON T HE GROUNDS DISCUSSED IN DETAIL IN THE ASST. ORDER. 3. THE CIT (A) OUGHT TO HAVE APPRECIATED THE FACT TH AT THE ASSESSEE DID NOT TAKE UP SINGLE JOB WORK SINCE 1997-98 AND HE SHOULD NOT HAVE ACCEPTED THE FRESH EVIDENCE OF BILLS FURNISHED BY THE ASSESSEE BEFORE CIT (A) WITHOUT EXAMI NING THE GENUINENESS OF THE SAME AS PER RULE 46A OF IT RULES. ' 9. BRIEF FACTS OF THIS CASE ARE THAT THE ASSESSEE-COMPANY FIL ED ITS RETURN OF INCOME FOR THE YEAR UNDER CONSIDERATION DECLA RING A TOTAL LOSS OF RS.2 60 697 AND IN RESPONSE TO THE QUERY FROM THE A SSESSING OFFICER ABOUT THE BUSINESS CARRIED ON BY THE ASSESSEE THE ASSESSEE SUB MITTED A NOTE EXPLAINING THE SAME AND THE ASSESSING OFFICER REJECT ING THE EXPLANATION OFFERED AND HOLDING THAT THE BUSINESS IS NO T BEING REVIVED SO FAR BY THE ASSESSEE THE ASSESSING OFFICER DISALLOWED THE EXP ENDITURE OF RS.2 60 697 CLAIMED AND COMPLETED THE ASSESSMENT OF THE COM PANY ON NIL INCOME. AGGRIEVED THE ASSESSEE WENT IN APPEAL BEF ORE THE FIRST APPELLATE AUTHORITY. THE LEARNED COUNSEL FOR THE ASSESSE E STATED THAT DURING THE MONTH OF JUNE 2006 THE ASSESSEE HAD RAISED I NVOICES FOR 7 WORK DONE FOR M/S NARAYANA CONCEPT SCHOOL BRANCH AMOUN TING TO A TOTAL OF RS.1 87 000 AND IT WAS ALSO STATED THAT THEY A RE TRYING TO OBTAIN ORDERS FROM APSRTC IN JUNE 2006 AND THE ASSESSEE HAS ALSO SUBMITTED A COPY OF THE APPELLATE ORDER IN THE CASE OF THE ASSESSEE FOR THE ASST. YEAR 1999-2000 WHEREIN THE CIT(A) HAD HELD THAT THE LEASE RENT RECEIVED FROM LEASE OF FACTORY SHEDS WAS DIRECTED TO BE T REATED AS BUSINESS INCOME. 10. WE HAVE CONSIDERED THE SUBMISSIONS OF RIVAL PARTIES AN D PERUSED THE MATERIAL AVAILABLE ON RECORD. WE FIND THAT THE C IT (A) ALLOWED THE APPEAL OF THE ASSESSEE HOLDING THAT THE ASSESSEE HAD INTENT ION TO REVIVE ITS BUSINESS AFTER ACCEPTING THE FRESH EVIDENCE IN THE FOR M OF JOB WORK BILL FURNISHED BY THE ASSESSEE. UNDER THESE CIRCUMSTANCES W E FEEL IT PROPER TO RESTORE THIS ISSUE TO THE FILE OF THE ASSESSING OFFICER FOR RECONSIDERATION IN ACCORDANCE WITH LAW AFTER EXAMINING T HE GENUINENESS OF THE ABOVE BILL PRODUCED BY THE ASSESSEE AS PER RULE 46 A OF INCOME- TAX RULES. IN VIEW OF THE ABOVE THIS GROUND OF THE REVENUE IS TREATED AS ALLOWED FOR STATISTICAL PURPOSES. 11. IN THE RESULT APPEAL OF THE REVENUE IN ITA NO.4 04/HYD/07 IS DISMISSED WHEREAS ITA NO.405/HYD/07 IS TREATED AS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE COURT ON 18-2-2010. SD/- SD/- (N.R.S. GANESAN) (AKBER BASHA) JUDICIAL MEMBER ACCOUNTANT MEMBER DT/- 18TH FEBRUARY 2010 8 COPY FORWARDED TO: 1. M/S. FABRICON PVT. LTD. B-2B INDUSTRIAL DEVELOPM ENT AREA UPPAL HYDERABAD. 2. ITO WARD-1(2) 4TH FLOOR AAYAKAR BHAVAN BASHEE RBAGH HYDERABAD. 3. COMMISSIONER OF INCOME-TAX HYDERABAD. 4. COMMISSIONER OF INCOME TAX(A)-II HYDERABAD. 5. DEPARTMENTAL REPRESENTATIVE ITAT HYDERABAD. JMR*