Unlisted cos. raising funds abroad to comply with SEBI's disclosure norms at time of listing in India
NOTIFICATION NO. GSR 282(E) [F.NO.4/13/2012-ECB.], DATED 15-4-2014
Central Government hereby amend the Foreign Currency Convertible Bonds and Ordinary Shares (Through Depositary Receipt Mechanism) Scheme, 1993, namely:—
1. This Scheme may be called the issue of Foreign Currency Convertible Bonds and Ordinary Shares (Through Depositary Receipt Mechanism) (Amendment) Scheme, 2014.
2. The Scheme shall be deemed to have come into force from the date of publication of Notification; and
3. In the Foreign Currency Convertible Bonds and Ordinary Shares (Through Depositary Receipt Mechanism) Scheme, 1993:
In Paragraph 3(1)(B)(b) the words "They shall comply with SEBI's disclosure requirements in addition to that of the primary exchange prior to the listing abroad" shall be substituted by the words "They shall comply with SEBI's disclosure requirements when they apply for listing in India".
IT : Assessee is eligible for deduction under section 80-IB(10) in relation to additional income offered in a statement under section 132(4) in course of search and subsequently declared in return filed in response to notice under section 153A(1)(a)
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[2014] 44 taxmann.com 242 (Pune - Trib.)
IN THE ITAT PUNE BENCH 'A'
Malpani Estates
v.
Assistant Commissioner of Income-tax, Central Circle -1(1), Pune*
G.S. PANNU, ACCOUNTANT MEMBER
AND R.S. PADVEKAR, JUDICIAL MEMBER
AND R.S. PADVEKAR, JUDICIAL MEMBER
IT APPEAL NOS. 2296 TO 2298 (PUNE) OF 2012
[ASSESSMENT YEARS 2008-09 TO 2010-11]
[ASSESSMENT YEARS 2008-09 TO 2010-11]
JANUARY 30, 2014
Section 80-IB, read with sections 132 & 153A to 153C, of the Income-tax Act, 1961 - Deduction - Profits and gains from certain industrial undertakings (Housing projects) - Assessment years 2008-09 to 2010-11 - Whether where in response to notice issued under section 153A(1)(a) after search, assessee-firm declared certain additional income pertaining to a housing project undertaken by it, nature of income has to be treated as 'business income' albeit same was not accounted for in books of account - Held, yes - Whether benefits of Chapter VI-A, which inter alia includes section 80-IB(10) are applicable to an assessment made under sections 153A to 153C - Held, yes - Whether assessee is eligible for deduction under section 80-IB(10) in relation to additional income pertaining to a housing project which was offered in a statement under section 132(4) in course of a search and subsequently declared in return filed in response to notice under section 153A(1)(a) - Held, yes [Paras 11, 14 & 19][In favour of assessee]
FACTS
Facts
| ■ | The assessee, a partnership firm engaged, in construction business was subject to a search action under section 132(1). In the course of search, partner of the assessee-firm in a statement deposed under section 132(4), declared certain additional income pertaining to the housing project undertaken by the firm. The additional income declared was on account of on-money received from the customers to whom flats were sold in the said project. The assessee duly reflected such additional income in the returns of income filed in response to notice issued under section 153A(1)(a) for the captioned assessment years as the profits from its housing project, and since the said housing project was eligible for deduction under section 80-IB(10), it claimed deduction under section 80-IB(10) in relation to such additional income. | |
| ■ | The Assessing Officer did not allow the claim of the assessee for deduction under section 80-IB(10). Firstly, according to the Assessing Officer enhancement of claim under section 80-IB(10), was not permissible in an assessment under section 153A. Secondly, the on-money received by the assessee on sale of flats was not taxable as 'business income' and hence assessee was not eligible for deduction under section 80-IB(10). | |
| ■ | The Commissioner (Appeals) affirmed the action of the Assessing Officer in denying the deduction under section 80-IB(10). As per the Commissioner (Appeals), the claim of the assessee was not maintainable because (i) the undisclosed income declared by the assessee could not be assessed under the head 'business income' but under the head 'income from other sources'; and, (ii) the benefits of Chapter VI-A, which include section 80-IB(10), are not applicable to assessments made under sections 153A to 153C. |
Issue involved
| ■ | Whether benefits of Chapter VI-A would be available in an assessment made under section 153A? |
HELD
| ■ | It is not in dispute that the assessee has derived income from undertaking a housing project, which is eligible for section 80-IB(10) benefits. In the return of income originally filed under section 139(1), assessee had claimed deduction under section 80-IB(10) in relation to the profits derived from the said housing project and the same stands allowed even in the impugned assessment which has been made under section 153A(1)(b) as a consequence of a search action under section 132(1). [Para 10] | |
| ■ | It cannot be denied that the additional income in question relates to the housing project undertaken by the assessee. The material seized in the course of search; the deposition made by the assessee's partner during search under section 132(4); and, also the return of income filed in response to notice issued under section 153A(1)(a) after the search, clearly show that the source of impugned additional income is the housing project. The aforesaid material on record depicts that the impugned income is nothing but unaccounted money received by the assessee from customers on account of sale of flats of its housing project. Clearly, the source of the additional income is the sale of flats in the housing project. Therefore, once the source of income is established the assessability thereof has to follow. The nature of income, thus on facts, has to be treated as 'business income' albeit, the same was not accounted for in the account books. In this manner, the stand of the Assessing Officer or of the Commissioner (Appeals) that the said income is not liable to be taxed as 'business income' cannot be accepted. [Para 11] | |
| ■ | In terms of clause (i) of the Explanation to section 153A(2), it is evident that all the provisions of the Act shall apply to an assessment made under section 153A save as otherwise provided in the said section, or in section 153B or section 153C. | |
| ■ | Section 153A(1)(b) requires the Assessing Officer to assess or reassess the 'total income' of the assessment years specified therein. Ostensibly, section 80A(1) prescribes that in computing the 'total income' of an assessee, there shall be allowed from his 'total income' the deductions specified in Chapter VI-A. The moot point is as to whether the aforestated position prevails in an assessment made under section 153A(1)(b) or not? | |
| ■ | Having regard to the expression 'all other provisions of this Act shall apply to the assessment made under this section' in Explanation (i) of section 153A, it clearly implies that in assessing or reassessing the 'total income' for the assessment years specified in section 153A(1)(b), the import of section 80A(1) comes into play, and there shall be allowed the deductions specified in Chapter VI-A, of course subject to fulfilment of the respective conditions. | |
| ■ | Therefore, the stand of the Commissioner (Appeals) to the effect that the benefits of Chapter VI-A, which inter alia include section 80-IB(10), are not applicable to an assessment made under sections 153A to 153C cannot be subscribed. The Phraseology of section 153A read with Explanation (i), does not support the premise arrived at by the Commissioner (Appeals) and accordingly, the same is rejected. Therefore, the assessee's claim for deduction under section 80-IB(10) even with regard to the enhanced income was well within the scope and ambit of an assessment under section 153A(1)(b) and the Assessing Officer was obligated to consider the same as per law. [Para 14] | |
| ■ | In fact, once it is factually explicit that the additional income in question is derived from the housing project, which is eligible for section 80-IB(10) benefits, such an income merely goes to enhance the 'business income' derived from the eligible housing project and shall be entitled for section 80-IB(10) benefits. [Para 18] | |
| ■ | In the result, on the basis of the aforesaid legal position and the material and evidence on record, assessee is eligible for deduction under section 80-IB(10) in relation to impugned additional income offered in a statement under section 132(4) in the course of search and subsequently declared in the return filed in response to notice under section 153A(1)(a). [Para 19] | |
| ■ | For all the above reasons, the order of the Commissioner (Appeals) is set aside and the Assessing Officer is directed to allow deduction under section 80-IB(10) for the captioned assessment years. [Para 22] |
CASE REVIEW
CIT v. Sun Eng. Works (P.) Ltd. [1992] 198 ITR 297/64 Taxman 442 (SC) (para 16) distinguished.
CASES REFERRED TO
CIT v. Sheth Developers (P.) Ltd. [2012] 210 Taxman 208 (Mag.)/25 taxmann.com 173 (Bom.) (para 8), CIT v. Gem Plus Jewellery India Ltd. [2010] 330 ITR 175/194 Taxman 192 (Bom.) (para 8) andCIT v. Sun Engg. Works (P.) Ltd. [1992] 198 ITR 297/64 Taxman 442 (SC) (para 12).
Nikhil Pathak for the Appellant. Mrs. M.S. Verma for the Respondent.
ORDER
G.S. Pannu, Accountant Member - The three captioned appeals relate to the same assessee and involve a common issue, therefore, they have been clubbed and heard together and a consolidated order is being passed for the sake of convenience and brevity.
2. The captioned three appeals by the assessee are directed against a consolidated order dated 25.09.2012 passed by the Commissioner of Income Tax (Appeals)-I, Pune which, in turn, has arisen from the respective assessment orders passed by the Assessing Officer dated 19.12.2011 u/s 153A r.w.s. 143(3) of the Income-tax Act, 1961 (in short "the Act") for assessment year 2008-09 and 2009-10 and u/s 143(3) of the Act for assessment year 2010-11.
3. Substantially speaking in all the appeals the solitary issue relates to assessee's claim for deduction u/s 80IB(10) of the Act in respect of income which was declared by the assessee in the course of search conducted u/s 132(1) of the Act.
4. In the context of controversy before us, the relevant facts can be summarized as follows. The appellant is a partnership firm engaged in construction business which was subject to a search action u/s 132(1) of the Act on 06.10.2009. In the course of search, Shri Rajesh Malpani, partner of the assessee firm in a statement recorded u/s 132(4) of the Act on 03.12.2009 admitted certain undisclosed income in relation to housing project undertaken by the firm i.e. 'The Crest' at Pimple Saudagar, Pune. The assessee duly reflected such additional income in the returns of income filed for the captioned assessment years as the profits from its housing project, and since the said housing project was eligible for deduction u/s 80IB(10) of the Act, it claimed deduction u/s 80IB(10) of the Act even in relation to such additional income. Such claim of the assessee has been denied, which is the subject-matter of dispute before us.
5. As the facts and circumstances pertaining to the aforesaid dispute are common in all the assessment years, the appeal for assessment year 2008-09 is taken as a lead case in order to appreciate the rival contentions. In assessment year 2008-09, assessee had originally filed a return of income on 28.09.2008 declaring 'NIL' income which, inter-alia, included profits from execution of a housing project amounting to Rs.2,10,86,083/-, which was claimed as exempt u/s 80IB(10) of the Act. Thereafter, on 06.10.2009 there was a search action u/s 132(1) of the Act and in response to a notice issued u/s 153A(1)(a) of the Act, assessee furnished a return of income on 24.06.2010 disclosing total income of Rs. 'NIL' after claiming deduction u/s 80IB(10) of the Act of Rs. 2,46,89,494/-, as against a deduction of Rs.2,10,86,083/- claimed in the return of income originally filed u/s 139(1) of the Act. The enhanced claim of deduction u/s 80IB(10) of the Act was on account of an additional income of Rs.36,03,411/- declared by the assessee in the return filed in response to notice issued u/s 153A(1)(a) of the Act. The said additional income was declared on account of on-money received by it from its customers on sale of flats. The claim of the assessee was that the additional consideration received from the customers which was hitherto not declared in the regular books of account but declared in the statement deposed u/s 132(4) of the Act during the course of search, was nothing but an income in respect of the project 'The Crest' at Pimple Saudagar, Pune, which was eligible for deduction u/s 80IB(10) of the Act. The claim of the assessee was that the additional income, which was on-money received on sale of flats was eligible for deduction u/s 80IB(10) of the Act.
6. The Assessing Officer has not allowed the claim of the assessee for deduction u/s 80IB(10) of the Act with respect of the aforesaid component of on-money on sale of flats received by the assessee. The Assessing Officer accepted the additional income of Rs. 36,03,411/- as a part of total income but did not treat it as 'business income' of the assessee and therefore he did not allow deduction u/s 80IB(10) of the Act with respect to such sum. Firstly, as per the Assessing Officer, assessee had claimed deduction u/s 80IB(10) of the Act, of Rs.2,10,86,083/- in the original return which was enhanced to Rs.2,46,89,494/- in the return filed u/s 153A of the Act, and, according to the Assessing Officer enhancement of claim u/s 80IB(10) of the Act, was not permissible in an assessment u/s 153A of the Act. Secondly, according to the Assessing Officer, the on-money received by the assessee on sale of flats was not taxable as 'business income' and hence assessee was not eligible for deduction u/s 80IB(10) of the Act. On being denied u/s 80IB(10) of the Act on the component of the on-money declared in the return filed u/s 153A(1)(a) of the Act, assessee carried the matter in appeal before the CIT(A).
7. In appeal, assessee assailed the action of the Assessing Officer in law and on facts. Assessee canvassed that there was no justification for not allowing the claim u/s 80IB(10) of the Act with respect to the impugned income which was ostensibly derived from the execution of the housing project, 'The Crest' at Pimple Saudagar, Pune, which was eligible for deduction u/s 80IB(10) of the Act. On facts, assessee canvassed out that the additional income in question was unaccounted sale consideration received from customers to whom flats were sold and accordingly the same was liable to be assessed as 'business income' and not as 'income from other sources'. The CIT(A) has since disagreed with the stand of the assessee and has affirmed the action of the Assessing Officer in denying the deduction u/s 80IB(10) of the Act with respect to the impugned income. As per the CIT(A), the claim of the assessee is not maintainable because (i) the undisclosed income declared by the assessee cannot be assessed under the head 'business income' but under the head 'income from other sources'; and, (ii) the benefits of Chapter VIA, which include section 80IB(10), are not applicable to an assessment made under sections u/s 153A to 153C of the Act. For the aforesaid reasons, the CIT(A) has upheld the action of the Assessing Officer. Not being satisfied with the order of the CIT(A), assessee is in further appeal before us.
8. Before us, the learned counsel for the assessee has vehemently pointed out that the lower authorities are not justified in denying the claim of deduction u/s 80IB(10) of the Act. The learned counsel pointed out that the additional income of Rs. 36,03,411/- was declared in the course of search as consideration received from customers on sale of flats. Accordingly, it was nothing but additional sale price received by the assessee which was liable to be taxed as 'business income' relating to its housing project, 'The Crest' at Pimple Saudagar, Pune and therefore the same is eligible for benefits of section 80IB(10) of the Act. It is further pointed out that there is no bar either in the provisions of section 80IB(10) or section 153A of the Act that the deduction u/s 80IB(10) is not allowable in respect of income by way of on-money received on sale of flats. In support of his submissions, the learned counsel has relied upon the judgment of the Bombay High Court in the case of CIT v. Sheth Developers (P.) Ltd. [2012] 210 Taxman 208 (Mag.)/25 taxmann.com 173 (Bom.) and in the case ofCIT v. Gem Plus Jewellery India Ltd. [2010] 330 ITR 175/194 Taxman 192 (Bom.).
9. On the other hand, the learned Departmental Representative appearing for the Revenue has relied upon the orders of the authorities below in support of the case of the Revenue.
10. In the present case, it is not in dispute that the assessee has derived income from undertaking a housing project, 'The Crest' at Pimple Saudagar, Pune, which is eligible for section 80IB(10) benefits. In the return of income originally filed u/s 139(1) of the Act, assessee had claimed deduction u/s 80IB(10) of the Act in relation to the profits derived from the said housing project and the same stands allowed even in the impugned assessment which has been made u/s 153A(1)(b) of the Act as a consequence of a search action u/s 132(1) of the Act.
11. In the course of search, in a statement deposed u/s 132(4) of the Act, assessee declared certain additional income pertaining to the housing project in question. The additional income declared was on account of on-money received from the customers to whom flats were sold in the said project. At the time of hearing, learned counsel referred to the copy of statement recorded u/s 132(4) of the Act of Shri Rajesh Malpani, a partner of the assessee firm and also copies of some of the seized papers, which indicated receipt of on-money, and the same have placed in the Paper Book at pages 35 to 52. A perusal of the seized material shows that a complete detail of that on-money received is enumerated, viz. name of the customers, amount and the respective flat sold in the project. Even in the deposition made u/s 132(4) of the Act, the partner of the assessee firm made a yearwise detail of additional income declared on account of on-money received on sale of flats in the project. Accordingly, the impugned sum has been declared as unaccounted income from the housing project in question. In the return of income filed in response of notice issued u/s 153A(1)(a) of the Act, assessee has declared such additional income as income from housing project, 'The Crest' at Pimple Saudagar, Pune. The declaration made in the return of income has not been disputed by the Assessing Officer. The only dispute raised by the Assessing Officer is with regard to nature of such income, which according to the Assessing Officer "does not fall under of the any heads of income as described u/s 14 of the I.T. Act". In coming to such conclusion, he has disagreed with the stand of the assessee that such additional income was a 'business income' of the assessee relating to the housing project, 'The Crest' at Pimple Saudagar, Pune. However, as per the CIT(A), the income in question is assessable under the head 'income from other sources'. Ostensibly, the CIT(A) has not agreed with the inference of the Assessing Officer that the impugned income does not fall under any heads of income u/s 14 of the Act because according to her such income is liable to be assessed under the head 'income from other sources. Thus, as of now, before us the inference of the Assessing Officer does not survive any longer since the order of the Assessing Officer has merged in the order of the CIT(A) and in any case the Revenue is not in appeal on this aspect. Be that as it may, factually speaking, it cannot be denied that the additional income in question relates to the housing project, 'The Crest' at Pimple Saudagar, Pune undertaken by the assessee. The material seized in the course of search; the deposition made by the assessee's partner during search u/s 132(4) of the Act; and, also the return of income filed in response to notice issued u/s 153A(1)(a) of the Act after the search, clearly show that the source of impugned additional income is the housing project, 'The Crest' at Pimple Saudagar, Pune. The aforesaid material on record depicts that the impugned income is nothing but unaccounted money received by the assessee from customers on account of sale of flats of its housing project, 'The Crest' at Pimple Saudagar, Pune. Clearly, the source of the additional income is the sale of flats in the housing project, 'The Crest'. Therefore, once the source of income is established the assessability thereof has to follow. The nature of income, thus on facts, has to be treated as 'business income' albeit, the same was not accounted for in the account books. In this manner, we are unable to accept the stand of the Assessing Officer or of the CIT(A) that the said income is not liable to be taxed as 'business income'.
12. Now, coming to the point as to whether such 'business income' qualifies to be eligible for deduction u/s 80IB(10) of the Act in the course of an assessment made u/s 153A(1)(b) of the Act. On this aspect, the learned Departmental Representative submitted that the assessment in cases of search action or requisition are made u/s 153A or 153C of the Act in order to assess undeclared incomes and such provisions are for the benefit of the Revenue and therefore a claim u/s 80IB(10) of the Act cannot be considered in such proceedings, especially when such a claim was not made in the return of income originally filed under section 139 of the Act. In this regard, the learned Departmental Representative has referred to the judgment of the Hon'ble Supreme Court in the case of CIT v. Sun Engg. Works (P.) Ltd. [1992] 198 ITR 297/64 Taxman 442 to point out that even in the cases of re-assessment u/s 147/148 of the Act fresh claims cannot be raised by the assessee. Secondly, it is pointed out by the learned Departmental Representative that even if the claim was to be considered then it was not allowable because the requisite condition that the return of income has to be accompanied by the prescribed audit report has not been complied with by the assessee. On the basis of aforesaid reasons, the claim of the assessee has been opposed.
13. Sections 153A to 153C of the Act contain provisions relating to assessments to be made in cases where search is initiated u/s 132 or a requisition is made u/s 132A of the Act after 31st May, 2003. Clause (b) of sub-section (1) of section 153A postulates assessment or re-assessment of total income of six assessment years preceding the assessment year relevant to the previous year in which such search is conduced or requisition is made. Shorn of other details, it would suffice for us to notice clause (i) of the Explanation below section 153A(2) of the Act, which reads as under :—
"Explanation. — For the removal of doubts, it is hereby declared that, —
| (i) | save as otherwise provided in this section, section 153B and section 153C, all other provisions of this Act shall apply to the assessment made under this section." |
14. In terms of the above referred clause (i) of the Explanation, it is evident that all the provisions of the Act shall apply to an assessment made u/s 153A of the Act save as otherwise provided in the said section, or in section 153B or section 153C of the Act. In the background of the expression "all other provisions of this Act shall apply" contained in Explanation (i) below section 153A of the Act, and in the context of the controversy before us, the moot point to be examined is as to whether or not deductions enumerated in Chapter VIA of the Act are to be considered in making an assessment made u/s 153A(1)(b) of the Act. Section 153A(1)(b) of the Act requires the Assessing Officer to assess or reassess the 'total income' of the assessment years specified therein. Ostensibly, section 80A(1) of the Act prescribes that in computing the 'total income' of an assessee, there shall be allowed from his 'total income' the deductions specified in Chapter VIA of the Act. The moot point is as to whether the aforestated position prevails in an assessment made u/s 153A(1)(b) or not? In our considered opinion, having regard to the expression "all other provisions of this Act shall apply to the assessment made under this section" in Explanation (i) of section 153A of the Act, it clearly implies that in assessing or reassessing the 'total income' for the assessment years specified in section 153A(1)(b) of the Act, the import of section 80A(1) of the Act comes into play, and there shall be allowed the deductions specified in Chapter VIA of the Act, of course subject to fulfillment of the respective conditions. Therefore, we are unable to subscribe to the stand of the CIT(A) to the effect that the benefits of Chapter VIA of the Act, which inter-alia include section 80IB(10) of the Act, are not applicable to an assessment made under sections 153A to 153C of the Act. In our considered opinion, the phraseology of section 153A r.w. Explanation (i) as noted above, does not support the premise arrived at by the CIT(A) and accordingly, the same is rejected. Therefore, assessee's claim for deduction u/s 80IB(10) of the Act even with regard to the enhanced income was well within the scope and ambit of an assessment u/s 153A(1)(b) of the Act and the Assessing Officer was obligated to consider the same as per law.
15. The other argument of the Ld. CIT-DR to the effect that the return of income was not accompanied by the prescribed audit report on the enhanced claim of deduction is too hyper-technical, and superficial. Pertinently, the Assessing Officer has not altogether denied the claim of deduction and in any case, the claim was initially made in the return originally filed, which was duly accompanied by the prescribed audit report.
16. The argument set-up by the learned Departmental Representative on the basis of the judgment of the Hon'ble Supreme Court in the case of Sun Engineering Works (P.) Ltd. (supra), in our view, is also untenable having regard to the facts of the present case. No doubt the Hon'ble Supreme Court has observed that reopening of an assessment u/s 147/148 is for the benefit of the Revenue. In the case before the Hon'ble Supreme Court, assessee wanted to set-off loss against the escaped income which was taxed in the re-assessment proceedings and the claim of such set-off was not made in the return of income originally filed. According to the Hon'ble Supreme Court, the claim was not entertainable because the said claim not connected with the assessment of escaped income. In-fact, the judgment of the Hon'ble Supreme Court in the case of Sun Engg. Works (P.) Ltd. (supra) is not an authority to say that assessee cannot raise a claim pertaining to an issue which is connected to the assessment of escaped income. In-fact, if a claim which is connected to the escaped income is set-up before the Assessing Officer in the course of re-assessment proceedings, the same is liable to be considered and the judgment of the Hon'ble Supreme Court in the case of Sun Engg. Works (P.) Ltd.(supra) only precludes such new claims by the assessee which are unconnected with the assessment of escaped income. In the present case, we are dealing with an assessment u/s 153A of the Act and the scope of such an assessment has already been examined by us in the context of the relevant specific provisions, which do not leave any scope for ambiguity. The judgment of the Hon'ble Supreme Court in the case of Sun Engineering Works Pvt. Ltd. (supra) has been rendered on a different footing and is strictly not applicable to the present proceedings. So, however, even if one were to import the reasoning raised by the learned Departmental Representative based on the judgment of the Hon'ble Supreme Court, to the present case, yet we do not find that it would debar the assessee from claiming deduction u/s 80IB(10) of the Act on the impugned additional income declared in the return filed in response to notice u/s 153A(1)(a) of the Act. In the present case, the claim of deduction u/s 80IB(10) of the Act was made in the return of income originally filed and in the return filed in pursuance to the notice u/s 153A(1)(a) of the Act, the claim u/s 80IB(10) of the Act is only enhanced and therefore, it is not a fresh claim. Therefore, in our view, the judgment of the Hon'ble Supreme Court in the case of Sun Engineering Works (P.) Ltd. (supra) does not help the Revenue in the present case.
17. In-fact, the Hon'ble Bombay High Court in the case of Sheth Developers (P) Ltd. (supra) was considering the claim of deduction u/s 80IB(10) of the Act in relation to the undisclosed income declared consequent to the search action. In the case before the Hon'ble High Court, it was factually emerging that undisclosed income was earned by the assessee in the course of carrying on his business activity of a 'builder' and the same was accepted by the Department, but the claim of the deduction u/s 80IB(10) was denied in relation to such income. However, the claim was upheld by the Hon'ble Bombay High Court. In the present case, factually, there is no material to negate the assertion of the assessee, which are borne out of the material on record, that the additional income in question has been received in the course of carrying on its business activity of developing the housing project, 'The Crest' at Pimple Saudagar, Pune, which is eligible for section 80IB(10) benefits. Therefore, in terms of the parity of reasoning laid down by the Hon'ble Bombay High Court in the case of Sheth Developers (P) Ltd. (supra), the claim of the assessee is justified.
18. In-fact, once it is factually explicit that the additional income in question is derived from the housing project, 'The Crest' at Pimple Saudagar, Pune, which is eligible for section 80IB(10) benefits, such an income merely goes to enhance the 'business income' derived from the eligible housing project and shall be entitled for section 80IB(10) benefits, even as per the ratio of the judgment of the Hon'ble Bombay High Court in the case of Gem Plus Jewellery India Ltd. (supra).
19. In the result, on the basis of the aforesaid legal position and the material and evidence on record, assessee is eligible for deduction u/s 80IB(10) of the Act in relation to impugned additional income offered in a statement u/s 132(4) of the Act in the course of search and subsequently declared in the return filed in response to notice u/s 153A(1)(a) of the Act. In the result, appeal of the assessee for assessment year 2008-09 is allowed.
20. In the other assessment years also the substantive dispute is similar to that adjudicated in the earlier paragraphs for assessment year 2008-09. Therefore, our decision in assessment year 2008-09 shall apply mutatis-mutandis in other two assessment years also.
21. Pertinently, in so far as the assessment year 2010-11 is concerned, the assessment has been completed u/s 143(3) of the Act in pursuance to return of income filed u/s 139 of the Act on 13.10.2010 and it is not an assessment made u/s 153A(1)(b) of the Act. Even in this assessment, claim of the assessee has been denied. In our considered opinion, the claim for deduction u/s 80IB(10) of the Act with regard to the additional income declared for assessment year 2010-11 stands on an even stronger footing than in the other assessment years because in assessment year 2010-11 there was no return of income originally filed but only a single return has been filed on 13.10.2010 as per the provisions of section 139 of the Act, though after the search action on 06.11.2009.
22. For all the above reasons, we therefore, deem it fit and proper to set-aside the order of the CIT(A) and direct the Assessing Officer to allow deduction u/s 80IB(10) of the Act for the captioned assessment years.
23. In the result, the captioned three appeals of the assessee are allowed, as above.
LATASECTION 36(1)(xii) OF THE INCOME-TAX ACT, 1961 - OTHER DEDUCTIONS - CORPORATE OR BODY CORPORATE ESTABLISHED UNDER A STATUTE - EXPENDITURE INCURRED BY - NOTIFIED CORPORATE BODY
NOTIFICATION NO.25/2014 [F.NO.225/229/2013/ITA.I], DATED 29-4-2014
In exercise of the powers conferred by clause (xii) of sub-section (1) of section 36 of the Income-tax Act, 1961 (43 of 1961), the Central Government hereby notifies for the purposes of the said clause, the National Bank for Agriculture and Rural Development (PAN: AAACT4020G) established under section 3 of the National Bank for Agriculture and Rural Development Act, 1981 (No. 61 of 1981) for providing and regulating credit and other facilities for promotion of agriculture and rural development, subject to the following conditions, namely.—
| (i) | the expenditure, claimed as deductible under the Income-tax Act, 1961, is incurred for the objects and purposes authorised by the National Bank for Agriculture and Rural Development Act, 1981 (No. 61 of 1981), under section 38 of the said Act. | |
| (ii) | such expenditure is not in the nature of capital expenditure; | |
| (iii) | such expenditure is not eligible for deduction under any other provision of the Income-tax Act, 1961; and | |
| (iv) | a separate account of the expenditure claimed under the said clause is maintained by the National Bank for Agriculture & Rural Development. |
2. This notification shall be applicable with effect from Assessment Year 2013-14 onwards, relevant to F.Y 2012-13 in which the application seeking notification u/s 36(1)(xii) of the Income Tax Act, 1961 was filed.
ST - Amounts paid after 01.03.2013 but before enactment of VCES, 2013 on 10.05.2013 cannot be excluded from declaration as such a stand would substantially mutilate the term 'tax dues' - Writ allowed: HC
By TIOL News Service
AHMEDABAD, MAY 03, 2014: THE Service Tax Voluntary Compliance Encouragement Scheme (VCES) proposed by the Finance Bill, 2013 came into effect from 10.5.2013.
One of the many issues that the CBEC had clarified in its Circular 170/5/2013-ST, Dated: August 8, 2013 reads -
| S No. | Issues | Clarification |
8 | A person has made part payment of his 'tax dues' on any issue before the scheme was notified and makes the declaration under VCES for the remaining part of the tax dues.Will he be entitled to the benefit of non-payment of interest/penalty on the tax dues paid by him outside the VCES, i.e., (amount paid prior to VCES)? | No. The immunity from interest and penalty is only for "tax dues" declared under VCES. If any "tax dues" have been paid prior to the enactment of the scheme, any liability of interest or penalty thereon shall be adjudicated as per the provisions of Chapter V of the Finance Act, 1994 and paid accordingly. |
This clarification is under scrutiny in the present Writ Petition filed.
Facts of the case:
Petitioner is a partnership firm engaged in the business of construction. One of its partners is also a petitioner.
On 8.3.2013 preventive officers of the Service Tax Department conducted inquiry at the premises of the petitioners regarding the petitioners' unpaid service tax dues. Statements of the representatives of the firm were recorded. Documents and registers were seized. According to the petitioners various postdated cheques were taken from the petitioners under duress. Against such postdated cheques during the period between 9.3.2013 to 15.4.2013, the petitioners deposited total sum of Rs.35.51 lakhs with the department.
On 14.7.2013 the petitioners deposited further amount with the department so that inclusive of the previous deposit of Rs.35.51 lakhs, the total deposit with the department made by the petitioners came to Rs.47,79,770/-. This was towards the petitioners' unpaid service tax liability upto 31.3.2013 as per the calculations of the department.
Under the Finance Act, 2013, the legislature introduced the VCES 2013. The controversy is with regard to the correct interpretation of term "tax dues" defined in section 105(1)(e) of the Finance Act, 2013.
On 24.8.2013 the petitioners declared tax dues of Rs.43,61,719/-. The petitioners filed a revised declaration on 30.12.2013 and revised the amount of tax dues to Rs.45,76,476/-. This amount included the sum of Rs.35.51 lakhs deposited by the petitioners with the department between 9.3.2013 till 15.4.2013. Case of the petitioners is that in terms of section 105(1)(e) tax dues would include any service tax which remained unpaid as on 1.3.2013. Since these amounts remained unpaid on 1.3.2013, it would qualify to be categorized as tax dues. The case of the department, however, is that these amounts were deposited before 10.5.2013 when the Scheme was promulgated. The declaration of amount, therefore, could not be a declaration under the Scheme.
On such premise the designated authority issued a notice on 13.9.2013 asking the petitioners to show cause as to why their claim under VCES, 2013 should not be rejected.
The petitioners in their reply contended that amount of Rs.35.51 lakhs was deposited after 8.3.2013 i.e. after the cut-off date of 1.3.2013. Such amount, therefore, would also qualify under the Scheme of 2013.
The designated authority, however, by his impugned order dated 31.12.2013 acknowledged the declaration of the petitioners only to the extent of tax dues to the tune of Rs.10,24,656/- and which amount was deposited by the petitioners after 10.5.2013.
The designated authority based his conclusion on the clarification contained in circular 170/5/2013-ST dated 8.8.2013.
After receiving such acknowledgment the petitioners made further representations to the respondents without any response from the respondents.
Hence the petitioners are before the Gujarat High Court.
They inter alia submitted -
++ The intention of the legislature while framing the Scheme was clear and was to give benefit to all declarants covering all tax dues, which remained unpaid on 1.3.2013 and, therefore, the respondents cannot rely on any circular or clarification to override statutory provision. [Inter Continental (India) vs. Union of India 2003 (154) E.L.T. 37(Guj.)]++ Parallels were also drawn to other similar schemes framed by the Parliament in the past for comparison viz. KarVivadSamadhan Scheme, 1998 and when the Parliament desired that only that amount of tax arrears which remained unpaid on the date of the scheme would qualify for immunity, it was so specifically provided in other schemes.
The Counsel for the department opposed the petition by contending that the intention of the VCES 2013 was to give immunity to the tax declared by a person under the Scheme. In the present case, the petitioners had already paid the tax even before the Scheme was promulgated. Quite apart from clarification contained in the circular dated 8.8.2013 the petitioners' declaration qua such amounts was rightly rejected by the designated authority.
The High Court extracted the definition of "tax dues" given in clause (e) of sub-section(1) of section 105, sections 106 (Person who may make declaration of tax dues), 107 (Procedure for making declaration and payment of tax dues), 108 (Immunity from penalty, interest and other proceedings) and after adverting to section 114 authorizing the Central government to make rules viz. Service Tax Voluntary Compliance Encouragement Rules, 2013 observed -
++ In terms of sub-section (1) of section 106 any person can make declaration of his tax dues in respect of which no notice or an order of determination under sections 72 or 73 or 73A of the Finance Act, 1994 has been issued before 1.3.2013.
++ Sub-section (2) of section 106 essentially provides that in cases where any inquiry or investigation against declarant is initiated for non-payment or short-payment of service tax dues which is pending on 1.3.2013, the designated authority would reject the declaration of such a person. In turn, the term "tax dues" defined under section 105(1)(e) means service tax or tax payable for the period between 1.10.2007 to 31.12.2012 but not paid as on 1.3.2013.
++ Combined reading of section 106 with section 105(1)(e) would make it clear that the position of a declarant vis-Ã -vis his service tax dues would have to be ascertained as on 1.3.2013. If any proceedings for determination of the tax dues of a person have been initiated before 1.3.2013, declaration of such a person would not be accepted. Likewise, arrear of tax which could be declared in such declaration would be the service tax due or payable for the period between 1.10.2007 to 31.12.2012 and which sum is not paid before 1.3.2013. In plain terms, therefore, if any service tax is due and payable by a person for the aforesaid period, the same would be included in the definition of the expression "tax dues" if the same has not been paid as on 1.3.2013.
++ In the present case, admittedly the disputed amounts of taxes were deposited by the petitioners with the department after 1.3.2013. However, the same having been deposited before 10.5.2013 that is the date on which the scheme was framed, the department contends that such amount cannot form part of the declaration under the Scheme.
++ In our opinion, the contention ignores the statutory provisions contained in the Scheme of 2013. As we have noticed, the declaration can be made in terms of section 106 of tax dues. The term "tax dues" is defined in section 105(1) (e). If we accept the stand of the department that any tax which is deposited before 10.5.2013 cannot form part of a declaration, the same would substantially mutilate the definition of term "tax dues' contained in section 105(1)(e).
++ If the intention of the legislature was to exclude any tax deposited before the framing of the scheme, the same could have been provided in plain language. On the contrary, the legislature excluded from the purview of declaration only those taxes which were already paid by 1.3.2013. The period between 1.3.2013 and 10.5.2013 would, by necessary application of the provision of the scheme, be covered for declaration under the Scheme itself.
++ In our understanding, for a valid declaration two of the essential conditions were that the proceedings for either declaration or recovery of the tax dues should not be pending on 1.3.2013 and secondly that the tax should not have been deposited before the said date. In the present case, both the conditions were fulfilled.
++ In response to a query whether the person who has made the payment of tax dues before the Scheme was notified and would later on make a declaration under the Scheme, would such a declaration be valid, the response was that the immunity from interest and penalty is only for tax dues declared under the Scheme. If any tax has been paid prior to the enactment of the Scheme, liability of interest and penalty would be adjudicated as per the Finance Act, 1994.
++ For several reasons this clarification cannot be pressed in service in the present case. It is well settled in law that an authority cannot, through a circular or clarification, override the provisions of the statute. If the clarification thus runs counter to the statutory provision, the same would be invalid.
++ We have already held that the Scheme permits a person to declare his tax dues, even the amount deposited before 10.5.2013, as long as the same was done after 1.3.2013. If the concept of making a declaration under the Scheme which cannot be done till the Scheme is formulated is brought into operation, the very same clarification to Point No.4 would run counter to this principle. The query here was whether a party against whom an inquiry, investigation or audit has been initiated after 1.3.2013 can make declaration under the scheme? Answer to the question was, there is no bar from filing of a declaration in such cases.
++ There is one more reason why the said clarification would not cover the case of the petitioners. The query was concerning a person who has made payment of his tax dues before the Scheme was framed. In the present case, the amount of Rs.35.51 lakhs deposited after 1.3.2013 at the relevant time was never offered as a tax by the petitioners. The same was only deposited under duress.
++ In the present case, till the Scheme was framed the amount remained with the department by way of a deposit. Once the scheme was framed, the petitioners made a declaration and even included such sum of Rs.35.51 lakhs by way of a declaration of their tax dues. Thus the admission on the part of the petitioners that the service tax was short-paid came only by way of declaration under the Scheme. The clarification thus even for this reason would not cover the situation on hand.
In fine, the communication dated 31.12.2013 is quashed to the extent the designated authority failed to cover the additional sum of Rs.35.51 lakhs against the item "tax dues" declared.
The designated authority was directed to issue a fresh acknowledgment or amend the acknowledgment forwarded to the petitioners under communication dated 31.12.2013 so as to include the said additional sum of Rs.31.51 lakhs as tax dues declared in addition to Rs.10,24,656/- for which such acknowledgment was already issued.
The Writ Petition was allowed.
No stay of demand by ITAT beyond 365 days after insertion of third proviso to sec. 254(2A)
IT: Even if Tribunal is unable to hear appeal within 365 days, stay of demand cannot be extended beyond 365 days
Sudden payment of commission to an employee for his routine work wasn't justifiable; HC confirms disallowance
IT: Commission paid to employee was not allowable where there was no material on record to prove that there was any contribution made by said employee, more than his liaison work, to assessee's business to justify payment of huge commission to him
Assessee can't either seek withdrawal of appeal or file revision petition when appeal was pending before CIT(A)
IT : Where an application is filed seeking withdrawal of appeal but no order is passed by Commissioner (Appeals), appeal will remain pending and subsequent revision petition will not be maintainable
IN THE INCOME TAX APPELLATE TRIBUNAL
MUMBAI BENCHES "C", MUMBAI
Before Shri I P Bansal, Judicial Member & Shri N K Billaiya, AM
ITA No. 7178/Mum/2011
Assessment Year 2003-04
Pune Heat Treat P. Ltd. Vs. ITO
Appellant By : Dr K Shivaram & Ms. Neelam C Jadhav
Respondent By : Shri M L Perumal
Date of Hearing :28.04.2014. Date of Pronouncement : 30.04.2014
ORDER
Per N K Billaiya, AM:
This appeal by the assessee is directed against the order of the CIT(A)-5, Mumbai, dated 09.08.2011 pertaining to A.Y. 2003-04. The grievance of the assessee reads as under:
"1. On the facts and circumstances of the case the learned Commissioner of Income Tax has erred in confirming the appeal for re-opening of the assessment /s. 148 without giving cogent reason.
2. The learned Commissioner of Income Tax appeals has erred in confirming the application of section 115JB in-spite of the fact that the provision are not applicable in this case.
3. The learned Commissioner of Income Tax Appeals was not justified in confirming the order of the Assessing Officer allowing him to make adjustment of Rs.1,21,61,961/- U/s. 115JB in spite of the fact that no such adjustment are required to be made as per law."
2. At the very outset the counsel for the assessee stated that he is not pressing ground no.1. Ground no.1 is accordingly, dismissed.
3. The grievance vide ground nos. 2 & 3 relates to the determination of book profit for the purposes of section 115JB of the Act. It is the claim of the assessee that no adjustments are required to be made as per law.
4. Briefly stated facts of the case are that for the year under consideration the return of income was filed on 28.10.2003 declaring total income at 'nil', which was accepted u/s. 143(1)(a) of the Act vide intimation dated 24.12.2003. Subsequently, on perusal of the record the AO noticed that the assessee has claimed higher depreciation @3.34% as against 1.63% prescribed in Schedule XIV of the Companies Act, 1956. According to the AO as the book profit taxable u/s. 115JB had escaped assessment, assessment was re-opened u/s. 147 of the Act and notice u/s. 148 was issued and served upon the assessee. In response to this, the assessee stated that return filed on 28.10.2003 may be treated as return filed in response to the notice u/s. 148.
5. Thereafter, the assessee was asked to explain the claim of depreciation viz-a- viz provisions of section 115JB of the Act. According to the AO the assessee did not respond to the queries raised during the proceedings. The AO was of the firm belief that as per the Companies Act normal depreciation calculated on the basis of the written down value method should be charged to the profit & loss account.
According to the AO the calculation of the depreciation and charging the same to the profit & loss account in the case of the assessee cannot be said to be in consonance with the provisions of section Part II & III of Schedule VI of the Companies Act, 1956. The AO proceeded to compute the book profit in the light of the provisions of section 115JB and computed the adjustment to be made u/s. 115JB at Rs.1,21,61,961/- The assessee carried the matter before the CIT(A) but without any success.
6. Before us the learned senior counsel for the assessee drew our attention to the audited statement of accounts, in particular , Schedule of fixed assets and depreciation. It is the say of the counsel that during the year under consideration the assessee changed the method of calculating depreciation from the straight line method to the written down value method. The counsel further stated that both the methods are acceptable under the Companies Act. The counsel concluded by saying that the AO doesn't have any power to make adjustment accept provided in section 115JB itself. In support of his submissions the counsel relied upon the decision of the Hon'ble Bombay High Court in the case of Kinetic Motors Co. Ltd. 262 ITR 330. Reliance was also placed in the case of Garden Silk Mills Ltd. 35 CCH 135- Ahmedabad Tribunal. Per contra, DR strongly supported the findings of the lower authorities.
7. We have carefully perused the orders of the lower authorities. We have also considered the decisions relied upon by the counsel. It is an admitted fact that the assessee has changed the method of depreciation from straight line method to written down value method. Deprecation has been calculated in accordance with the new method from the date of assets coming into use. Therefore depreciation for the current year was higher and profit was lower by the same amount. The Hon'ble jurisdictional High Court in the case of Kinetic Motors Co. Ltd. (supra) has held that -
"it was not in dispute that under the Companies Act both the straight line method and written down value method are recognized. Therefore, once the amount of depreciation actually debited to the profit and loss account was certified by the auditor, it was not permissible for the AO to make book adjustments."
The Hon'ble Jurisdictional High Court thus followed the ratio of the Hon'ble Supreme Court in the case of Apollo Tyres Ltd. 255 ITR 273. A perusal of the audited statement of account brought before us show that depreciation actually debited to the profit and loss account was certified by the auditors and, therefore, in view of the decision of the Hon'ble Jurisdictional High Court and the Hon'ble Supreme Court (supra), it is not permissible for the AO to make book adjustments. We accordingly direct the AO to delete the addition on account of adjustments made u/s. 115JB amounting to Rs.1,21,61,961/-.
8. In the result, appeal filed by the assessee is allowed.
Order pronounced in the open court on this 30th day of April, 2014.
By TIOL News Service
HYDERABAD, MAY 04, 2014: THE issues before the Bench are - Whether registration of a family arrangements is sine qua non for its authenticity; Whether under the Hindu Law an oral arrangement made between the coparceners of the family members have binding force and Whether in view of the provisions of section 64(2) every income from a property which belongs to an individual would be taxable in the hands of such individual and not in the hands of HUF if there is no proper transfer. And the verdict goes in favour of assessee.
The assessee is an individual filed his Return of Income for the impugned assessment year the same was processed under section 143(1) of the Act and later on the selected for scrutiny. During the course assessment proceedings the AO observed that assessee has claimed exemption of 54F of the Act. The AO framed the assessment. However, observing that the assessee has manipulated the capital gain reopened the assessment under section 147 of the act. During the course of re-assessment proceedings the AO observed that land on which exemption of 54F was claimed was belonging to assessee and subsequently transferred to HUF. Accordingly the AO issued notice under section 147 to all the coparceners of the HUF. Except the assessee the other coparceners could not file any return and informed the AO that they could not file any Income Tax Return originally as there were under impression that they were not liable to capital gain tax since there status is HUF and the sale consideration received by them in the capacity of coparceners was utilized by them in acquiring residential house in their individual names, they are not liable to Capital Gain Tax. The AO on going through the details of sale consideration shared between the family members noted that they have distributed the sale consideration among their family members under the guise of HUF.
In this back drop of the facts the AO took a view that without there being a proper transfer of the Individual property to HUF and as per the provision of section 64(2), income from a property, which has been thrown by an individual into the common hotch-pot of the HUF is taxable in the hands of that individual and not in the hands of HUF, therefore, the distribution done by the assessee and his family members is patently wrong and hence exemption of 54F is not available to the assess- CIT (A) affirmed the order of AO – Matter reached to the ITAT wherein the AR's of the assessee argued that there was an oral agreement between the assessee and his family members for the impugned sale and purchase of the HUF property and the AO has wrongly denied the exemption on the ground that the arrangement so made was not registered.
After hearing the parties ITAT held that,
++ the law laid down in the aforesaid decision is to the effect that family arrangement entered into with a view to resolve family dispute, which is bonafide, voluntary and not induced by fraud, coercion or undue influence does not require registration. Such family arrangement by itself would convey right, title and interest in immovable property without any further requirements;
++ the AR apart from submitting before us that the properties have been distributed amongst the family members as per the partition deed dt. 11-11-2005 has not produced any supporting evidence to show that the family arrangement as per the terms of the partition deed dated 11-11-2005 was actually acted upon. There is no evidence on record to show that the family members actually became owners of the properties falling into their irrespective shares as per the family arrangement. At least no document has been produced before us to establish ownership of the property in the name of the family members as per the partition deed. As it appears, no such evidence was also produced before the authorities below. In these circumstances, it is difficult to accept the assessee's claim of division of property as per the partition deed dt. 112005. Accordingly, we uphold the decision of the authorities below in taking the entire sale consideration at the hands of the assessee for computing capital gain.
The assessee is an individual filed his Return of Income for the impugned assessment year the same was processed under section 143(1) of the Act and later on the selected for scrutiny. During the course assessment proceedings the AO observed that assessee has claimed exemption of 54F of the Act. The AO framed the assessment. However, observing that the assessee has manipulated the capital gain reopened the assessment under section 147 of the act. During the course of re-assessment proceedings the AO observed that land on which exemption of 54F was claimed was belonging to assessee and subsequently transferred to HUF. Accordingly the AO issued notice under section 147 to all the coparceners of the HUF. Except the assessee the other coparceners could not file any return and informed the AO that they could not file any Income Tax Return originally as there were under impression that they were not liable to capital gain tax since there status is HUF and the sale consideration received by them in the capacity of coparceners was utilized by them in acquiring residential house in their individual names, they are not liable to Capital Gain Tax. The AO on going through the details of sale consideration shared between the family members noted that they have distributed the sale consideration among their family members under the guise of HUF.
In this back drop of the facts the AO took a view that without there being a proper transfer of the Individual property to HUF and as per the provision of section 64(2), income from a property, which has been thrown by an individual into the common hotch-pot of the HUF is taxable in the hands of that individual and not in the hands of HUF, therefore, the distribution done by the assessee and his family members is patently wrong and hence exemption of 54F is not available to the assess- CIT (A) affirmed the order of AO – Matter reached to the ITAT wherein the AR's of the assessee argued that there was an oral agreement between the assessee and his family members for the impugned sale and purchase of the HUF property and the AO has wrongly denied the exemption on the ground that the arrangement so made was not registered.
After hearing the parties ITAT held that,
++ the law laid down in the aforesaid decision is to the effect that family arrangement entered into with a view to resolve family dispute, which is bonafide, voluntary and not induced by fraud, coercion or undue influence does not require registration. Such family arrangement by itself would convey right, title and interest in immovable property without any further requirements;
++ the AR apart from submitting before us that the properties have been distributed amongst the family members as per the partition deed dt. 11-11-2005 has not produced any supporting evidence to show that the family arrangement as per the terms of the partition deed dated 11-11-2005 was actually acted upon. There is no evidence on record to show that the family members actually became owners of the properties falling into their irrespective shares as per the family arrangement. At least no document has been produced before us to establish ownership of the property in the name of the family members as per the partition deed. As it appears, no such evidence was also produced before the authorities below. In these circumstances, it is difficult to accept the assessee's claim of division of property as per the partition deed dt. 112005. Accordingly, we uphold the decision of the authorities below in taking the entire sale consideration at the hands of the assessee for computing capital gain.
ST - Club or Association - FICCI & ECSEPC undertake activities which amount to public service - services provided by them to their respective members and consideration received therefor is not exigible to tax: CESTAT
By TIOL News Service
NEW DELHI, MAY 05, 2014: THE appellant: FEDERATION OF INDIAN CHAMBERS OF COMMERCE AND INDUSTRY
Who are they? - Founded on 16.03.1956 FICCI is a company registered under Section 26 of the Indian Companies Act, 1913 and was established inter alia to serve India's national, social and economic goals through the promotion of appropriate policies covering increase in gainful employment through expansion of production of goods and services for domestic/ export markets;raising living standard of rural/ urban population by promoting balanced economic development through industry, commerce, and services;and for achievement of the foregoing, to promote growth of Indian business, to build international relations for making India a Global Player, to promote Indian business in matters of inland and foreign trade, transport, industry, manufacture, finance and all other economic subjects and to encourage Indian banking, shipping and insurance etc.
The Case & the Service Tax demand : Proceedings were initiated, on assumption by Revenue that all receipts by FICCI including amounts received towards Admission Fee/ Subscription from Ordinary, Associate and Corporate Members;receipts in respect of meetings;for organising seminars exhibitions, annual meetings;contributions received from allied organisations such as the All India Organisation of Employers;Indian Council of Arbitration;ICC India;Joint Business Councils;FICCI Ladies Organisation;Confederation of Indian Food & Trade Industry;Misc. Receipts;Receipts from its publications;Facilitation Fees;Hire Charges;Commission Room and receipts on museum rentals;Sale of Periodicals;sponsorship amounts and even Government grants, comprise as the gross consideration received (by FICCI) for having provided Club or Association-service, during the periods in issue.
Against FICCI, t he Commissioner, Service Tax, New Delhi passed a common adjudication order in respect of three show cause notices dated 19.10.2010;21.10.2011 and 28.12.2012 and confirmed service tax demand of Rs.49,61,32,867/-;Rs.21,73,55,168/- and Rs.5,67,38,578/- apart from interest and penalties as specified therein, in respect of the three show cause notices, respectively.
The appellant : ELECTRONIC AND COMPUTER SOFTWARE EXPORT PROMOTION COUNCIL
Who are they? ECSEPC is an Export Promotion Council registered under the Societies Registration Act, 1860. It is a registrant under the provisions of the Act and remits service tax after filing returns periodically. This assessee was constituted as per provisions of the Export-Import Policy.
The case & the Service Tax demand: ECSEPCs income includes subscription fee from its members and through other sources such as - (a) in discharge of administrative responsibilities by way of organizing promotional events such as marketing development schemes (introduced by the Commerce Department of Central Government and aided by the Government);(b) Fairs and Trade fairs including India Soft, within and outside India, where participation fee is charged from member companies for putting up stalls;on the participation fee received for fairs organized within India, the assessee is remitting service tax, under the taxable business exhibition service;(c) setting up of business incubation centres since outside India. The assessee sets up facilitation centres overseas under the market access initiative scheme promoted by the Department of Commerce, to enable participating member companies to enter overseas markets. This initiative is approved by the Department of Commerce and is funded by 50% contribution from the Department of Commerce and matching contribution borne by participating Indian companies;(d) subscriptions received towards periodicals and mailings. Assessee publishes a monthly journal, providing information regarding export of electronics and IT industry and receives subscriptions constituting sale consideration from member companies;(e) Assessee also provides information and news about tenders and procurement opportunities to its members by way of business opportunities news, on a daily basis through e-mail and receives consideration for providing the service. Service tax is remitted on this consideration under the taxable - business auxiliary service;(f) other incomes of miscellaneous nature such as income from TDS service, sale of miscellaneous items, tender fee etc. is also received. During 2005-09 this assessee earned income from conducting award ceremonies i.e. giving awards to deserving companies for outstanding export performances. Assessee incurred expenditure for organizing these ceremonies and received contributions/ sponsorship amounts from award winning companies, to meet only the expenditure incurred for conducting the ceremonies. In addition income was received from its publications and as contribution from the National Book Trust of India, for setting up a stall at the Frankfurt Book Fair. Proceedings were initiated alleging that the appellant is providing taxable service of 'Club or Association'.
Appeal is preferred by the assessee ECSEPC against the adjudication order dated 18.10.2012. Service tax demand of Rs.1,39,32,621/- and Rs.32,95,542/- stands confirmed for the period 2005-09 and 2010-11, covered by show cause notices dated 07.10.2010 and 18.10.2011, respectively, apart from interest and penalties.
The issues before the Bench& observations thereon:
A. Whether the assessee/ appellants (FICCI and ECSEPC) are engaged in activities having objectives which amount to public service and of a charitable nature and consequently fall outside the ambit of Club or Associationas defined in Section 65(25a) or 65(25aa), as the case may be?;++ Clause (iii) of the definition excludes any person or body of persons engaged in any activity having objectives which are in the nature of public service and are of a charitable, religious or political nature from the scope of Club or Association. The meaning of Charitable Purpose as per dictionaries Law Lexicons and in several statutory provisions such as the Charitable Endowments Act (6 of 1980), the Income Tax Act, 1961 or in Foreign Trade (Regulation) Rules, 1993, includes, gifts for general public use;for benefit of an indefinite number of persons;designed to benefit them from educational, religious, moral, physical or social standpoint;a charitable purpose containing elements of benefiting the public;a trust, the object and scope of which is public utility;and for advancement of any other object of general public utility. Public service normatively connotes a service performed for the benefit of the public specially by a non-profit organization see The American Heritage Dictionary of the English Language;++ All the purposes of an Institution/ body need not necessarily be charitable nor is it required that there should not be other objectives. If the primary or dominant purpose of a trust/ institution is charitable, other objects which may not be charitable but which are merely ancillary or incidental to the primary or dominant purpose would not detract from the character of the activity being a valid charity, as pointed out by the Supreme Court in Commissioner of Income Tax, Madras v. Andhra Chamber of Commerce [1965] 55 ITR 722 (SC). This principle is reiterated in Additional Commissioner of Income Tax vs. Surat Art Silk Cloth Manufacturers Association, Surat 2002-TIOL-839-SC-IT-CB.++ In FICCIs own case, the Supreme Court in CIT, New Delhi vs. Federation of Indian Chambers of Commerce and Industries, New Delhi AIR 1981 SC 1408 ruled that it is a charitable trust.++ The analyses of the respective facts and characteristics of several organizations, considered in the several judgments guide us to the singular conclusion that FICCI and ECSEPC are institutions having public service objectives and of a charitable nature.++ The analysis in the impugned adjudication order(s) leading to the conclusion that FICCI (and ECSEPC) is not engaged in activities having objectives which are in the nature of public service and of a charitable nature, is fundamentally misconceived.++ Instead, the Authority relied on a Board Circular dated 28.04.2008 which was issued in response to a dispute presented by trade associations, to the levy of service tax. The Board had clarified that these bodies fall within the scope of the taxable entity and services provided by them are not of charitable, religious or political nature, since they collect subscription fee and other charges from members and work for the interest of trade and industry.++ The adjudication order is stricken with the vice of gross judicial indiscipline. The learned Commissioner must be considered as having misconducted himself in refusing to follow the clear and direct judgment of the Supreme Court, which is conclusive on the principle and in the light of the analysis therein, that FICCI is a charitable organization having objectives and pursuing activities of general public utility, this being its dominant purpose.
On the aforesaid analysis, FICCI and ECSEPC fall outside the ambit of Club or Association as defined under the Act. This issue is answered accordingly.
B. Whether services provided by the appellants to their respective members and the consideration received therefor is exigible to tax, in view of the principle of mutuality declared in several judgments including in Ranchi Club Limited vs. Chief Commissioner of Central Excise & Service Tax 2012-TIOL-1031-HC-JHARKHAND-ST;
C. Whether service tax is leviable under the taxable category Club or Association-service, in the light of the judgment of the Gujarat High Court in Sports Club of Gujarat Ltd. Vs. Union of India 2013-TIOL-528-HC-AHM-ST;
++ On the basis of the precedential guidance adverted to, we conclude that in view of the decision in Ranchi Club Limited (supra), on application of the principle of mutuality, services provided by the appellants to their respective members would not fall within the ambit of the taxable Club or Association-service nor the consideration whether by way of subscription/ fee or otherwise received therefor be exigible to service tax. In view of the decision of the Gujarat High Court in Sports Club of Gujarat Limited, as the relevant provisions (namely Section 65(25a), Section 65(105)(zzze) and Section 66 of the Act), to the extent these provisions purport to levy service tax in respect of services provided by a Club or Association to its members is declared ultra vires, we hold that there are no operative legislative provisions of the Act legitimizing the levy and collection of service tax from the appellants, for providing Club or Association-service, in so far as these relate to any services provided to members of these appellants.
D. Whether services provided by FICCI and ECSEPC to non-members and consideration received for rendition of such services, is liable to be classified / computed as Club or Association-service;
E. Whether levy and demand of service tax on FICCI for the period subsequent to 01.05.2011 is sustainable;
++ The issue is whether services provided by FICCI / ECSEPC to non-members and consideration received for rendition of such services, are liable to be classified/ computed under Club or Association-service;and whether levy and demand of service tax on FICCI for the period subsequent to 01.05.2011, is sustainable?++ The three show cause notices (dated 19.10.2010, 21.10.2011 and 28.12.2012, covering the periods 01.07.2006 to 30.06.2010;01.07.2010 to 30.06.2011;and 01.07.2011 to 30.06.2012) pertaining to FICCI and two show cause notices (dated 07.10.2010 and 18.10.2011, covering the periods 2005 to 2009 and 2010 - 2011) pertaining to the other appellant - ECSEPC were issued on the premise that the entire consideration received by these appellants for a variety of services provided, whether to their members or others;and covering different facets, all fall within Club or Association-service;and also predicate the demand on provisions of Sections 65(25a) and 65(105)(zzze), as these provisions stood prior to their amendment by the Finance Act, 2011.++ By the 2011 amendatory process, the scope of Club or Association-service was expanded to cover facilities or advantages provided by a Club or Association to other than its members as well, provided such facilities or advantages are primarily intended for members vide amendment of the definition in Section 65(25a) pre-numbered as Section 65(25aa). Similarly Section 65(105)(zzze) was amended in 2011 to recast the taxable service to cover services provided by a Club or Association to any other personas well. The show cause notices however cover periods prior and subsequent to the amendments, but asserting that the liability attributed arises under Section 65(25a) and Section 65(105)(zzze), without indicating the effect of the amendments by the Finance Act, 2011.++ As there is no attribution in the show cause notices issued to either FICCI alleging liability to service tax on services provided to non-members, as arising consequent on amendments introduced by the Finance Act, 2011, it requires to be held that there was no specific charge alleged nor was conformation of the levy and demand of service tax recorded after following the due process of law.++ Amendments to the relevant provisions were introduced by the Finance Act, 2011 w.e.f. 01.05.2011. These show cause notices however neither referred nor adverted to the effect of the amendments nor even asserted that services provided by FICCI to non-members would fall within the ambit of the taxable service, in view of the amendments.++ FICCI was, therefore, denied the opportunity to respond to any such attribution of liability, on account of the amendments.++ A show cause notice is not an empty formality or a ritual without a purpose.++ In the present case the infirmity is not on account of mere mention of a wrong provision of the Act. The 2011 amendments expanded the scope of taxable service to cover services provided to non-members of a Club or Association, as well. The expanded scope of the taxable service is thus clearly prospective. It is therefore incumbent that the show cause notice should assert that FICCIs liability to tax (after 01.05.2011) arises under and in the context of the amended provisions.++ This is not a case of a mere mention of a wrong provision of law but one of substantial failure of natural justice resulting in transgression of due process.++ In any event, prior to the 2011 amendatory dynamics, services provided by FICCI to non-members would clearly be outside the scope of Club or Association-service, qua the un-amended definition of Club or Association-service under Section 65(25a) read with Section 65 (105) (zzze), of the Act.
We hold that services provided to non-members fall outside the ambit of Club or Association-service prior to 01.05.2011 and subsequent to this date there is no specific allegation that the services provided to non-members fall within the expanded scope of this taxable service qua provisions of the Finance Act, 2011. The period in issue, of the other appellant ECSEPC is prior to the amendments and hence services provided by this appellant to non-members is beyond the scope of the taxable service.
F. Whether ECSEPC is a body constituted by or under any law and therefore falls outside the purview of the definition of Club or Association, in view of clause (i) of Section 65(25a) of the Act;and
++ Clause (i) of Section 65(25a) excludes from the purview of the definition (of Club or Association), anybody established or constituted by or under any other law for the time being in force.++ ECSEPC claims that being an organization formed to effectuate the policy under the Foreign Trade (Development and Regulation) Act, 1992, and being an Export Promotion Council falling within the ambit of the Foreign Trade Policy it is outside the purview of Club or Association, as defined.++ As earlier noticed, the definition of Club or Association excludes from its ambit anybody established or constituted by or under a law for the time being in force. The appellant ECSEPC though a body registered under the Societies Registration Act, 1860, is notified to be an EPC and is enumerated to be so qua the Appendix to the FTP;the appellant is obliged to confirm to uniform bye-laws as may be periodically framed by the Central Government regulating the constitution and / or transaction of its business. ECSEPC is also chartered to function as an EPC and authorised to issue RCMC (Registration cum Membership Certificate).
We therefore conclude that the appellant - ECSEPC is a body established or constituted under a law for the time being in force, namely the Foreign Trade (Development and Regulation) Act, 1992 read with the Foreign Trade Policy and is excluded from the scope of the definition of Club or Association qua Clause (i) of Section 65 (25a) of the Act.
G. Whether invocation of the extended period of limitation and imposition of penalties is justified in the facts and circumstances;
++ During 27.07.2006 to 13.08.2010 (prior to issue of the first show cause notice dated 19.10.2010) over twenty letters were exchanged between Revenue and FICCI, concerning FICCIs liability to service tax on services provided to its members and others;and on amounts received under various heads including as subscription fee from its members. Further the essential information and material which would have enabled initiation of proceedings by Revenue was available at any rate by the middle of 2007, when FICCI submitted its financial records, MOA and AOA. On a holistic consideration and analyses of these facts and circumstances we find no justification for invocation of the extended period of limitation under the proviso to Section 73(1) of the Act, for initiation of proceedings against FICCI.++ Invocation of the extended period of limitation and imposition of penalties on the other appellant ECSEPC is equally illegal and unsustainable, for similar reasons as recorded by us in the case of FICCI, namely existence of a serious and bonafide dispute as to interpretation of the relevant provisions;whether this appellant falls within the taxable scope of the defined entity Club or Association-service, which is liable to tax and in the context of an additional disputed aspect as to whether this appellant falls outside the scope of the defined entity, being a body constituted under any law for the time being in force qua the exclusionary clause (i) in Section 65 (25a) of the Act.
Issue is accordingly answered, in favour of the appellants and against Revenue.
The appeals were allowed.
(See 2014-TIOL-701-CESTAT-DEL)
Case remanded to AO for deciding fate of sec. 11 relief after considering nature of receipts and objects of trust
May 5, 2014[2014] 44 taxmann.com 335 (Madras)
IT: Where Tribunal remanded matter back for purpose of considering assessee's claim under section 11, Assessing Officer shall consider nature of receipts keeping in mind objects of institution to find out as to whether income earned is incidental to objects of association and or whether income could only be treated as a separate business carried on by assessee
IT: Rectification application under section 254 filed within period of four years from actual receipt of judgment and order sought to be reviewed, should be admitted for consideration
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[2014] 44 taxmann.com 302 (Gujarat)
HIGH COURT OF GUJARAT
Peterplast Synthetics (P.) Ltd.
v.
Assistant Commissioner of Income-tax*
M.R. SHAH AND R.P. DHOLARIA, JJ.
SPECIAL CIVIL APPLICATION NO. 13504 OF 2013†
NOVEMBER 12, 2013
Section 254 of the Income-tax Act, 1961 - Appellate Tribunal - Powers of (Power to rectify mistakes) - Assessment year 1996-97 - Whether once it is found that rectification application under section 254(2) has been submitted within a period of four years from date of actual receipt of judgment and order passed by Tribunal, which is sought to be reviewed, same is required to be decided on merits and in such a situation assessee is not required to give any explanation for period between actual date of receipt of judgment and order, which is sought to be reviewed and date on which miscellaneous application is submitted - Held, yes [Paras 12 and 13] [In favour of assessee]
FACTS
| ■ | The Tribunal passed the judgment and order on 20-2-2007 dismissing assessee's appeal. | |
| ■ | Said order was received by the assessee on 19-11-2008. Assessee preferred the application on 9-5-2012. | |
| ■ | The Tribunal had rejected the said Miscellaneous Application solely on the ground that the said application had been preferred beyond the period of four years from the date of the judgment and order passed by the Tribunal. | |
| ■ | On appeal, the assessee submitted that the Tribunal ought to have considered the starting point of limitation from 19-11-2008, i.e., from the date of actual receipt of the judgment passed by the Tribunal, which was sought to be reviewed. |
HELD
| ■ | In view of the judicial precedents, the Tribunal has committed a grave error in dismissing the rectification application on the ground that the same is barred by limitation. From the date of receipt of the impugned judgment and order passed by the Tribunal, which is sought to be reviewed, it can be seen that the rectification application has been submitted within the period of four years from the date of actual receipt of the judgment and order and, therefore, it is to be held that the same is within the period of limitation as per section 254(2). Under the circumstances, the impugned order passed by the Tribunal cannot be sustained. [Para 11] | |
| ■ | The statute has conferred the right in favour of the assessee or even the revenue to prefer the rectification application within a period of four years and, therefore, even if the rectification application/miscellaneous application is submitted on the last day of completion of four years from the date of receipt of the order, which is sought to be reviewed, the same is required to be decided on merits and in such a situation assessee is not required to give any explanation for the period between actual date of receipt of the judgment and order, which is sought to be reviewed and the date on which the Miscellaneous Application is submitted provided such a rectification application is submitted within a period of four years from the date of actual receipt of the order of the Tribunal, which is sought to be reviewed. [Para 12] | |
| ■ | Under the circumstances, on the aforesaid ground the rectification application/miscellaneous application cannot be rejected and/or the petition is not required to be dismissed. Once it is found that the rectification application under section 254(2) has been submitted within a period of four years from the date of actual receipt of the judgment and order passed by the Tribunal, which is sought to be reviewed, the assessee is entitled to the relief as prayed for. [Para 13] |
CASE REVIEW
D. Saibaba v. Bar Council of India [2003] 6 SCC 186 [Para 11]; Petlad Bulakhidas Mills Co. Ltd. v.Raj Singh [1959] 37 ITR 264 (Bom.) (para 11); Sree Ayyanar Spg. & Wvg. Mills Ltd. v. CIT [2008] 301 ITR 434/171 Taxman 498 (SC) (para 11) and Vadilal Industries Ltd. v. Union of India 2006 (197) ELT 160 (Guj.) (para 11) followed.
CASES REFERRED TO
D. Saibaba v. Bar Council of India [2003] 6 SCC 186 (para 6.1), Petlad Bulakhidas Mills Co. Ltd. v.Raj Singh [1959] 37 ITR 264 (Bom.) (para 6.1), Sree Ayyanar Spg. & Wvg. Mills Ltd. v. CIT [2008] 301 ITR 434/171 Taxman 498 (SC) (para 6.1) and Vadilal Industries Ltd. v. Union of India 2006 (197) ELT 160 (Guj.) (para 6.1).
Manish J. Shah for the Petitioner. Manish Bhatt for the Respondent.
JUDGMENT
M.R. Shah, J. - Shri Manish Bhatt, learned Counsel waives service of notice of rule on behalf of the respondents.
2. In the facts and circumstances of the case and with the consent of the learned advocates appearing on behalf of the respective parties, the present petition is taken up for final hearing today.
3. By way of this petition under Article 226 of the Constitution of India the petitioner-assessee has prayed for an appropriate writ, order or direction quashing and setting aside the impugned order passed by the Income Tax Appellate Tribunal, Ahmedabad 'B' Bench, Ahmedabad (hereinafter referred to as 'ITAT') dated 03/05/2013 in M.A. No. 104/Ahd/2012 by which the tribunal has dismissed the said application on the ground that the same is barred by limitation as provided under Section 252(2) of the Income Tax Act.
4. The facts leading to the present Special Civil Application, which are relevant/necessary for determination, in nutshell are as under;
5. Being aggrieved and dissatisfied with the order passed by the CIT(A) for the Assessment Year 1996-97, the petitioner-assessee preferred appeal before the ITAT and vide impugned judgment and order dated 20/02/2007 the ITAT dismissed the appeal, being ITA No. 2116/Ahd/2003. The said order of the ITAT was received by the petitioner-assessee on 19/11/2008. After receiving the order, the petitioner-assessee preferred Miscellaneous Application/rectification application against the judgment and order dated 20/02/2007 before the ITAT on 09/05/2012 i.e. after a period of three years, six months and twenty days from the date of receipt of the judgment and order passed by ITAT dated 20/02/2007 in ITA No. 2116/Ahd/2003.The said rectification application/miscellaneous application has been dismissed by the ITAT by the impugned order on the ground that the same is barred by the law of limitation as provided under Section 252(2) of the Income Tax Act by observing that from the date of the order passed by ITAT i.e. 20/02/2007 the rectification application has been submitted after a period of four years. Being aggrieved and dissatisfied with the impugned order passed by the ITAT in dismissing the rectification application/miscellaneous application on the ground that the same is barred by limitation i.e. beyond the period of four years from the date of passing of the judgment and order passed by the ITAT, the petitioner-assessee has preferred the present Special Civil Application under Article 226 of the Constitution of India.
6. Shri Manish J. Shah, learned advocate appearing on behalf of the petitioner has vehemently submitted that the ITAT has materially erred in rejecting the rectification application/miscellaneous application on the ground that the same is barred by law of limitation i.e. beyond the period of four years. It is submitted that as such the rectification application/miscellaneous application was submitted by the petitioner-assessee within a period of four years from the date of receipt of the judgment and order passed by the ITAT. It is submitted that the ITAT has materially erred in considering the starting point of limitation in submitting the rectification application/miscellaneous application from the date of the order passed by the ITAT and not from the date of receipt of the judgment and order passed by the ITAT.
6.1 Shri Manish J. Shah, learned advocate appearing on behalf of the petitioner-assessee has heavily relied upon the following decisions of the Hon'ble Supreme Court, Bombay High Court as well as this Court.
| (i) | D. Saibaba v. Bar Council of India [2003] 6 SCC 186; | |
| (ii) | Petlad Bulakhidas Mills Co. Ltd. v. Raj Singh [1959] 37 ITR 264 (Bom.); | |
| (iii) | Sree Ayyanar Spg. and Wvg. Mills Ltd. v. CIT [2008] 301 ITR 434/171 Taxman 498 (SC); | |
| (iv) | the unreported decision of this Court in the case of Vadilal Industries Ltd. v. Union of India2006 (197) ELT 160 (Guj.). |
6.2 Shri Manish Shah, learned advocate appearing on behalf of the petitioner-assessee relying upon the decision of this Court in the case of Vadilal Industries Ltd. (supra) has submitted that with respect to the analogous provisions in the Central Excise Act, it is held by the Division Bench of this Court that the starting point of limitation to prefer the rectification application would be from the date of receipt of the order, which is sought to be reviewed/rectified and not from the actual date of the order. Making the above submissions, it is requested to allow the present Special Civil Application and quash and set aside the impugned order passed by the ITAT and direct the ITAT to decide and dispose of the rectification application/miscellaneous application submitted by the petitioner-assessee in accordance with law and on its own merits.
6.3 Shri Manish Bhatt, learned Counsel has appeared on behalf of the respondent-revenue. At the outset, it is required to be noted that he is not in position to dispute the proposition of law laid down by the Hon'ble Supreme Court as well as this Court in the aforesaid decisions to the fact that the starting point of limitation to prefer the rectification application/miscellaneous application would be the date on which the petitioner-assessee received the copy of the order of the tribunal, which is sought to be reviewed. However has requested to dismiss the present Special Civil Application considering the conduct on the part of the petitioner-assessee i.e. of preferring the rectification application/miscellaneous application after a period of three years and six months from the date of receipt of the judgment and order passed by the ITAT. It is submitted that considering the aforesaid conduct on the part of the petitioner-assessee, more particularly, when admittedly the petitioner-assessee received the order passed by the ITAT, which was sought to be reviewed, on 19/11/2008 and the petitioner-assessee submitted the Miscellaneous Application on 09/05/2012 i.e. after a period of three years and six months, it is requested that this Court may not exercise the discretion in favour of the petitioner under Article 226 of the Constitution of India.
7. Heard Shri Manish J. Shah, learned advocate appearing on behalf of the petitioner-assessee and Shri Manish Bhatt, learned Counsel appearing on behalf of the respondent- revenue.
7.1 The short question, which is posed for consideration of this Court is, whether the period of limitation to submit/prefer the rectification application under Section 254(2) of the Income Tax Act would commence from the judgment and order passed by the tribunal, which is sought to be reviewed or the date on which the petitioner-assessee actually received the judgment and order passed by the tribunal, which is sought to be reviewed/rectified?"
8. As observed by the Hon'ble Supreme Court in the case of Sree Ayyanar Spg. and Wvg. Mills Ltd.(supra), Section 254(2) of the Income Tax Act is in two parts. Under the first part, the appellate tribunal may, at any time, within four years from the date of the order, rectify any mistake apparent from the record and amend any order passed by it under Sub Section (1). Under the second part of Section 254(2), the reference is to the amendment of the order passed by the tribunal under Sub Section (1) when the mistake is brought to its notice by the assessee or the Assessing Officer. It is observed that therefore, in short, the first part of Section 254(2) refers to the suo motu exercise of the power of rectification by the tribunal whereas the second part refers to rectification and amendment on an application being made by the Assessing Officer or the assessee pointing out the mistake apparent from the record. In the present case, it is the assessee, who submitted the application before the tribunal and, therefore, the application for rectification was required to be made within a period of four years. In the present case, the tribunal passed the judgment and order on 20/02/2007, which is sought to be rectified, which has been admittedly received by the assessee on 19/11/2008. The petitioner-assessee preferred the application on 09/05/2012 i.e. after a period of three years, six months and twenty days from the date of receipt of the judgment and order passed by the tribunal dated 20/02/2007, however, beyond the period of four years from the actual date of the judgment and order passed by the tribunal i.e. 20/02/2007. The tribunal has rejected the said Miscellaneous Application solely on the ground that the said application has been preferred beyond the period of four years from the date of the judgment and order passed by the tribunal i.e. 20/02/2007. On the other hand, it is the case on behalf of the petitioner-assessee that the tribunal ought to have considered the starting point of limitation from 19/11/2008 i.e. from the date of actual receipt of the judgment and order passed by the tribunal, which is sought to be reviewed.
9. Under the circumstances, the short question, which is posed for consideration of this Court is, what will be the date of commencement of the period of limitation of four years as provided under Section 254(2) of the Income Tax Act? i.e. Whether to consider the date of the judgment and order passed by the tribunal, which is sought to be reviewed or the actual date of the judgment and order received by the assessee?
10. In the case of Petlad Bulakhidas Mills Co. Ltd. (supra) while considering the expression "order" in Section 33A(2) of the Income Tax Act, the Bombay High Court has held that the expression "order" in Section 33A(2) of the Income Tax Act means an order of which the party affected has actual or constructive notice. In the said decision, the Bombay High Court has observed and held as under;
"What we have to decide is what is the meaning to be attached to the word "order" used in the expression "from the date of the order". If "order" means a unilateral arriving at a decision by the Appellate Assistant Commissioner without the person affected having any knowledge of that decision, then undoubtedly limitation would begin to run from the date when the Appellate Assistant Commissioner chooses to pass the order. In this view of the case, the Appellate Assistant Commissioner may make the order, put it in a drawer, forget about it, and if a year has passed after it the right of the assessee to go in revision would be barred. Now that seems to us to be an entirely untenable contention. If the Legislature gave the right of revision to the assessee under Section 33A it was an effective right and if the Legislature provided a period of limitation that period must equally be an effective period. When we say "effective" what we mean is that the whole period must be permitted to the person affected by the order within which he can prefer the application for revision. The assessee should know that he has a year's time within which to make up his mind whether he should apply for revision or not. If Mr. Joshi's contention were to be accepted, we would be driven to this extraordinary conclusion that the period of limitation provided by the Legislature could be cut down by the action of the Appellate Assistant Commissioner. The Appellate Assistant Commissioner could at his sweet will determine what the period of limitation was. He need not promulgate the order for a month, two months, or six months, and the period of limitation would depend upon when he chose to intimate to the party affected the nature of his order. Surely that could not have been the intention of the Legislature."
It is further observed by the Bombay High Court in the said decision that the right of appeal is given to an assessee against the order, and that right of appeal can only be effectively exercised if the party affected has knowledge of that order.
10.1 While dealing with the provision of limitation for filing review/reference/appeal in the Advocates Act, 1961, more particularly, Section 48AA , which provides that the review petition can be filed within a period of sixty days from the date of the order, the Hon'ble Supreme Court in the case of D. Saibaba (Supra) has held that the words "from the date of that order" must be construed as meaning the date of communication or knowledge of the order to the review. In paragraph 9 to 14 the Hon'ble Supreme Court has observed and held as under;
"9. So far as the commencement of the period of limitation for filing the review petition is concerned we are clearly of the opinion that the expression "the date of that order" as occurring in Section 48-AA has to be construed as meaning the date of communication or knowledge of the order to the review petitioner. Where the law provides a remedy to a person, the provision has to be so construed in case of ambiguity as to make availing of the remedy practical and the exercise of power conferred on the authority meaningful and effective. A construction which would render the provision nugatory ought to be avoided. True, the process of interpretation cannot be utilized for implanting a heart into a dead provision; however, the power to construe a provision of law can always be so exercised as to give throb to a sinking heart.
10. An identical point came up for the consideration of this Court in Raja Harish Chandra Raj Singh V. Dy. Land Acquisition Officer. Section 18 of the Land Acquisition Act, 1894 contemplates an application seeking reference to the Court being filed within six months from the date of the Collector's award. It was held that "the date of the award" cannot be determined solely by reference to the time when the award is signed by the Collector or delivered by him in his office. It must involve the consideration of the question as to when it was known to the party concerned either actually or constructively. If that be the true position, then placing a literal and mechanical construction on the words "the date of the award" occurring in the relevant section would not be appropriate. It is fair and just that a decision is communicated to the party whose rights will ultimately be affected or who will be affected by the decision. The knowledge, either actual or constructive, of the party affected by such a decision, is an essential element which must be satisfied before the decision can be brought into force. Thus construed, the making of the award cannot consist merely of the physical act of writing an award or signing it or even filing it in the office of the Collector; it must involve the communication of the said award to the party concerned either actually or constructively. A literal or mechanical way of construing the words "from the date of the Collector's award" was held to be unreasonable. The Court assigned a practical meaning to the expression by holding it as meaning the date when the award is either communicated to the party or is known by him either actually or constructively.
11. The view taken in Raja Harish Chandra Raj Singh case by a two Judge Bench of this Court was affirmed by a three Judge Bench of this Court in State of Punjab v. Qaisar Jehan Begum. This Court added that the knowledge of the award does not mean a mere knowledge of the fact that an award has been made; the knowledge must relate to the essential contents of the award.
12. In Asstt. Transport Commissioner v. Nand Singh the question of limitation for filing an appeal under Section 15 of the U.P. Motor Vehicles Taxation Act, 1935 came up for the consideration of this Court. It provides for an appeal being preferred "within thirty days from the date of such order". The taxation officer passed an order on 20/10/1964 / 24/10/1964 which was received by the person aggrieved on 29/10/1964. The appeal filed by him was within thirty days - the prescribed period of limitation, calculated from 29/10/1964, but beyond thirty days of 24/10/1964. It was held that the effective date for calculating the period of limitation was 29/10/1964 and not 24/10/1964.
13. In Raj Kumar Dey v. Tarapada Dey this Court pressed into service two legal maxims guiding and assisting the court while resolving an issue as to calculation of the period of limitation prescribed, namely, (i) the law does not compel a man to do that which he could not possibly perform, and (ii) an act of the court shall prejudice no man. These principles support the view taken by us hereinabove. Any view to the contrary would lead to an absurdity and anomaly. An order may be passed without the knowledge of anyone except its author, maybe kept in the file and consigned to the record room or the file may lie unattended, unwittingly or by carelessness. In either case, the remedy against the order would be lost by limitation though the person aggrieved or affected does not even know what order has been passed. Such an interpretation cannot be countenanced.
14. How can a person concerned or a person aggrieved be expected to exercise the right of review conferred by the provision unless the order is communicated to or is known to him either actually or constructively? The words "the date of that order", therefore, mean and must be construed as meaning the date of communication or knowledge, actual or constructive, of the order sought to be reviewed."
10.2 Identical question came to be considered by the Division Bench of this Court in the case of Vadilal Industries Ltd. (Supra), however dealing with the similar analogous provision under the Central Excise Act i.e Section 35C(2) of the Central Excise Act. In the said decision, the Division Bench of this Court has held that the rectification application can be made within a period of six months from the date of receipt of the order, which is sought to be reviewed. While holding so in paragraph nos. 15 and 16 the Division Bench has observed and held as under;
"15. There is another angle from which the matter can be approached. It is only the party to the appeal who finds that the order contains a mistake apparent from the record and is aggrieved by such mistake, would be in a position to move an application seeking rectification of the order. Therefore also, unless and until a party to the appeal is in a position to go through and study the order it would be possible, nor can it be envisaged, that a party can claim to be aggrieved by the mistake apparent from the record. Hence, even on this count the period of limitation has to be read and understood so as to mean from the date of the receipt of the order.
16. Therefore, the action of the Technical Officer to return the papers of ROM Application without even placing the same before the Bench concerned is not only bad in law, but is not supported by the provisions of the Act."
11. In view of the above, the ITAT has committed a grave error in dismissing the rectification application on the ground that the same is barred by limitation. From the date of receipt of the impugned judgment and order passed by the tribunal, which is sought to be reviewed, it can be seen that the rectification application has been submitted within the period of four years from the date of actual receipt of the judgment and order and, therefore, it is to be held that the same is within the period of limitation as per Section 254(2) of the Income Tax Act. Under the circumstances, the impugned order passed by the ITAT cannot be sustained.
12. Now so far as the submission made by Shri Manish Bhatt, learned Counsel appearing on behalf of the revenue not to exercise the discretionary power under Article 226 of the Constitution of India submitting that looking to the conduct on the part of the petitioner-assessee, more particularly, when admittedly the petitioner-assessee received the order passed by the tribunal, which was sought to be reviewed on 19/11/2008 and the petitioner-assessee submitted the MA on 09/05/2012 after a period of three years and six months and there is no explanation whatsoever with respect to the period between 19/11/2008 and 09/05/2012 is concerned and to dismiss the present Special Civil Application on the aforesaid ground is concerned, the aforesaid cannot be accepted. At the outset, it is required to be noted that the statute has conferred the right in favour of the petitioner-assessee or even the revenue to prefer the rectification application within a period of four years and, therefore, even if the rectification application/miscellaneous application is submitted on the last day of completion of four years from the date of receipt of the order, which is sought to be reviewed, the same is required to be decided on merits and in such a situation the petitioner-assessee is not required to give any explanation for the period between actual date of receipt of the judgment and order, which is sought to be reviewed and the date on which the Miscellaneous Application is submitted provided such a rectification application is submitted within a period of four years from the date of actual receipt of the order of the tribunal, which is sought to be reviewed.
13. Under the circumstances on the aforesaid ground the rectification application/miscellaneous application cannot be rejected and/or the petition is not required to be dismissed. Once it is found that the rectification application under Section 254(2) of the Income Tax Act has been submitted within a period of four years from the date of actual receipt of the judgment and order passed by the tribunal, which is sought to be reviewed, the petitioner is entitled to the relief as prayed for.
14. In view of the above and for the reasons stated hereinabove, the petition succeeds. The impugned order passed by the ITAT dated 03/05/2013 in M.A. No. 104/Ahd/2012 is hereby quashed and set aside and it is held that the rectification application/miscellaneous application submitted by the petitioner-assessee before the ITAT was within the period of limitation as provided under Section 254(2) of the Income Tax Act and the matter is now remanded to the ITAT to decide the rectification application/miscellaneous application submitted by the petitioner-assessee in accordance with law and on its own merits. Rule is made absolute to the aforesaid extent. No order as to costs.
POOJA †Arising out of order of Tribunal in M.A. No. 104 (Ahd.) of 2012, dated 3-5-2013.
CST & VAT : Where assessee was engaged in execution of works contract and it had not maintained books of account and had also not produced bills and vouchers pertaining to labour charges, Assessing Authority was justified in allowing deduction towards labour charges and like expenses to an extent of 25 per cent as per rate specified under Entry No. 14 of Table given below rule 3(2)(m) of Karnataka Value Added Tax Rules, 2005
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[2014] 44 taxmann.com 159 (Karnataka)
HIGH COURT OF KARNATAKA
Creative Markings & Controls (P.) Ltd.
v.
Additional Commissioner of Commercial Taxes*
DILIP B. BHOSALE AND B. MANOHAR, JJ.
S.T.A. NOS. 45 & 50-64 OF 2011 (T-KVAT)†
MARCH 7, 2014
Section 2(34), read with sections 39 and 64, of the Karnataka Value Added Tax Act, 2003 and rule 3 of the Karnataka Value Added Tax Rules, 2005 - Taxable turnover - Deductions - Assessment years 2005-06 and 2006-07 - Assessee-company was engaged in execution of works contract of road marking - It claimed deduction towards labour charges and like expenses to extent of 30 per cent as per rate specified under Entry No. 5 of Table given below rule 3(2)(m) - It had not maintained books of account - It had not produced before Assessing Authority bills and vouchers pertaining to labour charges - Assessing Authority accordingly allowed deduction to an extent of 25 per cent as per rate specified under Entry No. 14 of Table given below rule 3(2)(m) - Whether in given situation Assessing Authority was justified in his action - Held, yes [Para 13] [In favour of revenue]
FACTS
| ■ | The assessee-company was engaged in the execution of works contract of road marking by using hot melt thermoplastic road marking materials and glass beads. In the returns filed for the assessment years 2005-06 and 2006-07, it claimed deduction towards labour charges and like expenses to the extent of 30 per cent as per the rate specified under Entry No. 5 of Table given below rule 3(2)(m). | |
| ■ | The Assessing Authority visited the business premises of the assessee for the audit of books of account and noticed that the assessee had not maintained books of account and bills and vouchers pertaining to the labour charges. He, therefore, issued on the assessee a proposition notice under section 39(1). The assessee filed objections to the proposition notice contending that it had maintained the books of account and other supporting documents like bills and vouchers, which were also audited by the Chartered Accountant. The Assessing Authority after considering the matter found that no document or bills and vouchers were produced to establish the expenditure incurred. Accordingly he allowed deduction to an extent of 25 per cent as per rate specified under Entry No. 14 of the Table given below rule 3(2)(m). | |
| ■ | The First Appellate Authority allowed the appeal on the ground that the assessee had produced the necessary records and the expenditure incurred in the execution of work contract was ascertainable as per the books of account. Hence, deduction of 25 per cent was erroneous and the assessee was entitled for deduction to an extent of 30 per cent under Entry No. 5 of the Table given below rule 3(2)(m). | |
| ■ | Thereafter the Revisional Authority invoking his powers under section 64(1) set aside the order passed by the First Appellate Authority and restored the order passed by the Assessing Authority. | |
| ■ | On appeal to High Court: |
HELD
| ■ | The provisions of the Act clearly disclose that if the expenditure incurred for executing the work contract is ascertainable from the books of account maintained by the dealer, then he is eligible for deduction as per the expenditure he has incurred. On the other hand, if the expenditure incurred for the work contract is not ascertainable, then the provision of rule 3(2)(m) has to be invoked. | |
| ■ | In the instant case, during the time of auditing the accounts of the assessee, the Assessing Authority clearly noticed that the assessee has failed to maintain books of account and also to produce the bills and vouchers pertaining to the labour charges in execution of the work contract. The assessee has not produced bills and vouchers with regard to the work contract carried on by it either before the First Appellate Authority or before the Revisional Authority. The First Appellate Authority without looking into the bills and vouchers set aside the order passed by the Assessing Authority only on the ground that the Assessing Authority has not verified the bills and vouchers. When the bills and vouchers have not been produced before the Assessing Authority, the question of verifying the said bills and vouchers does not arise. The order passed by the First Appellate Authority is contrary to law. | |
| ■ | The Revisional Authority taking into consideration all these aspects of the matter revised the order passed by the First Appellate Authority. The Revisional Authority also noticed that the assessee has failed to produce the bills and vouchers and books of account regarding the labour charges in executing the work contract. In the absence of necessary records, the expenditure incurred for the work contract has to be assessed invoking rule 3(2)(m). Since the work contract carried on by the assessee does not fall under any type of the contracts between Entries 1 to 13, invoking Entry 14 of the Table which is 'any other work contract', the Revisional Authority allowed the deduction to an extent of 25 per cent. [Para 13] | |
| ■ | Therefore, the order passed by the Revisional Authority deserved to be upheld. [Para 14] |
K.J. Kamath for the Appellant. T.K. Vedamurthy for the Respondent.
JUDGMENT
B. Manohar, J. - These Sales Tax Appeals are directed against the order dated 25-06-2011 in ZAC-I/BNG/SMR-70/10-11, passed by the Additional Commissioner of Commercial Taxes, Zone-I, Bangalore in exercise of power under Section 64(1) of the Karnataka Value Added Tax Act, 2003 (for short the KVAT Act) setting aside the order dated 26-02-2009 passed by the Joint Commissioner of Commercial Taxes (Appeals)-I (for short 'the First Appellate Authority') for the assessment years 2005-06 and 2006-07.
2. The appellant is a Private Limited Company and a dealer registered under the provisions of KVAT Act engaged in the execution of works contract of 'Road marking' by using hot melt Thermoplastic road marking materials and glass beads. The appellant filed monthly returns in Form No. 1 for the period from 01-04-2005 to 31-03-2006, 01-04-2006 to 31-03-2007 declaring total turnover and actual out put tax payable. The appellant has claimed deduction towards labour and like charges at 30% of the actual contract receipt.
3. The ACCT (Audit) visited the business premises of the appellant on 11-05-2007 for the audit of books of account for the tax period from April 2005 to March 2007. After verification of the books of account, the Assessing Authority noticed that the appellant-Company had not maintained the books of account pertaining to the labour charges and also found that the appellant-Company claimed 30% deduction towards the labour and other like charges which are contrary to law and issued proposition notice under Section 39(1) of the KVAT Act to the appellant on 15-06-2007 calling upon the appellant to file their objections to the proposition notice to reassessment.
4. A In pursuance of the notice dated 15-06-2007, the appellant filed detailed objections to the proposition notice on 22-06-2007 contending that they have maintained the books of account and other supporting documents like bills and vouchers which are also audited by the Chartered Accountant. The appellant is eligible to claim deduction on labour charges and like expenses to the extent of 30% as per Rule 3(2)(m) of the KVAT Rules at the rate specified in column No.3 of Entry 5 of the Table. Further, the expenditure incurred are ascertainable from the books of account maintained by the dealer and sought for dropping of the proposition notice.
5. The Assessing Officer after considering the objections to the proposition notice and after considering the materials produced before him, passed the reassessment order on 21-08-2007 under Section 39(1) of the KVAT Act and allowed 25% deduction towards labour and other like charges as per Rule 3(2)(m) under entry 14 of the KVAT Act and also levied interest and penalty.
6. The appellant being aggrieved by the order dated 21-08-2007 preferred an appeal before the First Appellate Authority challenging the same on various grounds contending that the expenditure incurred toward the labour and like charges in execution of work contract is ascertainable from the books of account and it falls under Entry 5 of the table. Hence, it is not open to the Assessing Officer to resort to Entry 14 of the said table. The First Appellate Authority by its order dated 26-02-2009 allowed the appeal and set aside the reassessment order and also levy if penalty and interest. The First Appellate Authority held that when the actual labour and like charges incurred in the execution of the work contract are ascertainable from the books of account, the Assessing Authority cannot resort to deduction of labour and like charges at the standard rate as provided under Rule 3(2)(m) of the KVAT Rules.
7. On scrutiny of the order passed by the First Appellate Authority, the Revisional Authority found that the order passed by the First Appellate Authority is erroneous in law and also prejudicial to the interest of the Government revenue. Accordingly, invoking its power under Section 64(1) of the Act issued notice to the appellant calling upon them to file statement of objections.
8. In pursuance of the notice issued by the Revisional Authority, the appellant entered appearance and filed detailed statement of objections contending that there is no infirmity or irregularity in the order passed by the First Appellate Authority setting aside the order passed by the Assessing Authority. Further, Section 64(1) cannot be invoked when the aggrieved party has got right of appeal. The appellant has produced necessary documents, bills and voucher before the Assessing Authority in support of claim of deduction. When the expenditure incurred towards the work contract is ascertainable by books of account maintained by the appellant and the same was assessed by the Income-Tax Authorities and other authorities, it is not open to the Assessing Authority to invoke Rule 3(2)(m) of Entry 14 of the Table. In fact, the appellant had incurred expenditure of more than 30%, but in view of the provisions of the Act they had claimed flat deduction of 30%. Further, the nature of work carried on by the appellant is marking of the road by using hot melt thermoplastic. The process involves melting the thermoplastic compounds at temperature exceeding 200 degrees centigrade in a boiler and laying the same on the road using the Screeding machine. The machinery and tools used for execution of the work contract are deductible expenses and sought for allowing the appeal.
9. On the other hand, Sri. Vedamurthy, the Advocate appearing for the Respondent argued in support of the order passed by the Revisional Authority and contended that the First Appellate Authority without verifying the records and without scrutinizing the bills and vouchers said to have been produced by the appellant allowed the appeal and extended the benefit of 30% deduction on the work contract. The specific case of the Assessing Officer is that no materials have been produced and the records are not maintained regarding labour charges and like expenses. In the absence of the same, the First Appellate Authority had observed that the appellant had produced the bills and vouchers. Even before the Revisional Authority also, the appellant has not produced any bills and vouchers in support of their contention. In the absence of necessary documents, such charges are not ascertainable from the books of account maintained by the dealer, the authority has recourse to the Rule 3(2)(m) at the rate specified at column No.3 of the entries 14 of the table. In the instant case, the appellant has executed the work contract of road marking using the hot melt thermoplastic road marking materials which do not fall under any of the entries between 1 to 13 of the table and 14th Table, is "any other work contract residuary section", for that, maximum deductable is 25%. Accordingly, the Assessing Authority had given the benefit of 25% deduction towards the work contract. Further, on scrutiny of the order passed by the First Appellate Authority, the Revisional Authority found that without taking into consideration the relevant materials the order has been passed by the First Appellate Authority which is erroneous and prejudicial to the interest of the Revenue. It is always open to the higher authorities to re-examine the matter and correct the error. The Revisional Authority after considering the entire matter, set aside the order passed by the First Appellate Authority and restored the order passed by the Assessing Authority. There is no infirmity in the said order and sought for dismissal of the appeals.
10. These appeals were admitted to consider the following substantial questions of law :
| 1. | In view of the fact that the First Appellate Authority has framed a speaking order dated 26.02.2009 (Annexure-E) and after recording findings of fact therein that the actual labour and other like charges incurred in execution of works contract are ascertainable from the books of account maintained by the Appellate and the deduction of the same has been allowed therein, after verification of the same in accordance with the provisions of the KVAT Act read with Rules framed thereunder, whether the action of the respondent to set aside the same and concluding the Revisional proceedings u/s.64(1) of the KVAT Act, 2003 vide his orders dated 25.06.2011 (Annexure-A) is sustainable in law as being erroneous and prejudicial to interest of the Revenue? | |
| 2. | In view of the fact that the actual labour and other like charges incurred in the execution of works contract are ascertainable from the books of account and other documents maintained by the Appellate whether the action of the Respondent to allow the deduction of labour and other like charges as per the provisions of Rule 3(2)(m) of the KVAT Rules, 2005 instead of under Rule 3(2)(1) of the KVAT Act, 2003 in contravention of the provisions of the KVAT Rules, 2005 is justified and in accordance with law? |
11. We have carefully considered the arguments addressed by the learned counsel for the parties and perused the order passed by the authorities below.
12. The records clearly disclose that the appellant has executed work contract of road marking using thermoplastic road marking materials. The process of road marking is essentially a hot extrusion process using a Screeder which involves laying at high temperature, thermoplastic ribbon of specified thickness, continuous and uniform in shape having clear sharp edges, on the roads, as distinguished from painting and other civil work. He has submitted the returns for few months of the assessment years 2005-06 and 2006-07 claiming deduction towards the labour charges and like expenses to an extent of 30% on the said work contract. During the audit of accounts of the appellant-Company it was noticed that, the appellant has not maintained books of account and bills and vouchers pertaining to the labour charges. In the absence of books of account, the expenditure incurred has to be ascertained as per the table specified in Rule 3(2)(m) of the KVAT Act. Hence, the proposition notice was issued. The appellant filed objections to the proposition notice. The Assessing Authority after considering the matter in detail found that no document or bills and vouchers were produced to establish the expenditure incurred. Accordingly, allowed deduction as per Rule 3(2) of column. No. 3 of Entry 14 to an extent of 25%. Being aggrieved by the said order, the appellant filed an appeal before the First Appellate Authority which came to be allowed the appeal on the ground that the assessee has produced the necessary records and the expenditure incurred in the execution of work contract ace ascertainable as per the books of account. Hence, deduction of 25% is erroneous and the appellant is entitled for deduction to an extent of 30% under column 3 of the V Schedule. Being aggrieved by the order passed by the First Appellate Authority, the Revisional Authority found that the order passed by the First Appellate Authority is erroneous and prejudicial to the interest of the Revenue. Accordingly, issued notice to the appellant. After hearing the appellant, the Revisional Authority passed the order impugned in this appeal.
13. The provisions of the Act clearly disclose that if the expenditure incurred for executing the work contract is ascertainable from the books of account maintained by the dealer, then he is eligible for deduction as per the expenditure he has incurred. On the other hand, if the expenditure incurred for the work contract is not ascertainable, then the provision of Rule 3(2)(m) has to be invoked. Rule 3(2)(1) of the KVAT Rules is not applicable to the facts of the present case. In the instant case, during the time of auditing the accounts of the appellant-company, the Assessing Officer clearly noticed that the appellant has failed to maintain books of account and also to produce the bills and vouchers pertaining to the labour charges in execution of the work contract. In the proposition notice, the specific allegation has been made that the appellant has not produced bills and voucher with regard to the work contract carried on by him. either before the First Appellate Authority or before the Revisional Authority. The First Appellate Authority without looking into the bills and vouchers set aside the order passed by the Assessing Authority only on the ground that the Assessing Authority has not verified the bills and vouchers. When the bills and vouchers have not been produced before the Assessing Authority, the question of verifying the said bills and vouchers does not arise. In our view, the order passed by the First Appellate Authority is contrary to law, The Revisional Authority taking into consideration all these aspects of the matter revised the order passed by the First Appellate Authority. The Revisional Authority also noticed that the appellant has failed to produce the bills and vouchers and books of account regarding the labour charges in executing the work contract. Accordingly invoked the revisional power under Section 64(1) of the KVAT Act. In the absence of necessary records, the expenditure incurred for the work contract has to be assessed invoking Rule 3(2)(m) of the KVAT Rules. Since the work contract carried on by the appellant do not fall under any type of the contracts between Entries 1 to 13, invoking clause Entry 14 of the table which is "any other work contract", the Revisional/Authority allowed the deduction to an extent of 25% as per clause 3 of the said table.
14. We find no infirmity or irregularity in the said order. Hence, substantial questions of law framed in these appeals are held against the appellant. Accordingly, these appeals are dismissed.
S.K.J. †Appeal arising out of order of Revisional Authority in ZAC/Bng/SMR-70/10-11, dated 25-6-2011.
Regards,
Pawan Singla , LLB
M. No. 9825829075AO's action of allowing sec. 80-IB relief in haste without making proper inquiry calls for sec. 263 revision
May 5, 2014[2014] 44 taxmann.com 319 (Kerala)
IT : Where Assessing Officer even though taking a view that there existed possibility of violation of approved building plan, allowed assessee's claim for deduction under section 80-IB(10) as assessment was getting time barred, it being a case of non-application of mind, Commissioner was justified in setting aside assessment in exercise of revisional power under section 263
Bombay HC lambasts Revenue for tardiness, highlights repeated cases of appeals not being filed in time and absolutely no explanation being offered for delay;
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