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Income Tax Appellate Tribunal, “B” BENCH, AHMEDABAD
Before: SHRI PRAMOD KUMAR&
PER Ms. MADHUMITA ROY - JM:
These two instant appeals filed by the assessee are against the order dated 31.12.2014 passed by the Commissioner of Income Tax (Appeals)-9, Ahmedabad arising out of the order dated 18.03.2013 & 30.01.2014 passed under section 143(3) of the Income Tax Act, 1961 (The Act) for the Assessment Years 2010-11 & 2011-12.
Both the appeals have been filed by the same assessee, thus the same are heard analogously and are being disposed of by a common order.
- 2 - ITA Nos.744 & 745/Ahd/2015 Oracle Granito Ltd. vs. ACIT Asst.Years – 2010-11 & 2011-12 First we take up ITA No.744/Ahd/2015 for A.Y. 2010-11. Following grounds are preferred by the assessee:
“1. The Learned Commissioner of Income Tax (Appeals) has erred in confirming disallowance made by the Assessing officer for preliminary expenses of Rs.1,13,068/- u/s.35D(2) of the I.T.Act,1961 treating the same as Capital expenses. 2. The Learned Commissioner of Income Tax (Appeals) has erred in confirming the disallowance made by the Assessing Officer of Rs.55,776/- on account of alleged late payments made in respect of Employees' contribution to Provident Fund treating the same as income u/s.2(24)(x) of the I.T. Act, 1961. 3. The Learned Commissioner of Income Tax (Appeals) has erred in confirming the addition made by the Assessing Officer of Rs.8,37,699/- by re computing the deduction u/s.80IB of the I.T. Act at Rs.1,26,86,992/- eliminating the profit from Windmill business and disallowing the expenses thereof as against that of Rs.1,35,24,691/- claimed by the appellant in the return of income filed. 4. The Learned Commissioner of Income Tax (Appeals) has erred in confirming the disallowance made by the Assessing Officer of the deduction u/s.80IB(5) of the Act in respect of Windmill business. He ought to have allowed the deduction of profit of wind mill at 100% of 20,52,724/- u/s.80IA(4)(iv) of the I.T.Act,1961. 5. The Learned Commissioner of Income Tax (Appeals) has erred in confirming the action of the Assessing Officer in rejecting the claim of Sec.80IB on the ground that a revised return of income has to be filed in view of the ratio of the judgement in the case of Goetze India Ltd. 157 Taxman 1(SC). 6. The Appellant craves leave to add, alter, amend or modify any of the grounds of appeal on or before the date of hearing of appeal.”
Ground No.1 3. The assessee having business of manufacturing of Vitrified Tiles, filed its return of income on 29.09.2010 for A.Y. 2010-11 declaring total income at Rs.3,15,57,610/-. Notice u/s 143(2) of the Act was issued on 26.08.2011 followed by further notice u/s 143(2) dated 03.01.2013 due to change of incumbent. Required details were submitted on
- 3 - ITA Nos.744 & 745/Ahd/2015 Oracle Granito Ltd. vs. ACIT Asst.Years – 2010-11 & 2011-12 behalf of the assessee at the time of the assessment proceeding. Upon perusal of the P&L Account of the company it is seen that the assessee has debited a sum of Rs.1,13,068/- as preliminary expenses written off. The assessee accepted the same on 29.01.2013 that the preliminary expenses written off were essentially the ROC charges paid for increasing share capital and the same have been wrongly claimed as revenue expenditure. It is a settled principle of law laid down by the Hon’ble Supreme Court in the matter of Brooke Bond India-vs-CIT reported in 225 ITR 798 (SC) that the expenses for increase in authorized share capital are capital expenses which cannot be allowed as deduction as revenue expenses. Further that, as per Section 35D(2), the nature of expenses eligible for deduction u/s 35D have been specified which do not include expenses for increase in authorized share capital. Relying upon the judgment passed by the Jurisdictional High Court in the matter of M/s. Vareli Textile Ltd. 284 ITR 238 (Guj.) following the ratio laid down by the Supreme Court in the matter of Brooke Bond India (supra) such expenses was not allowed u/s 35D of the Act, the said sum of Rs.1,13,068/- claimed as revenue expenditure has been disallowed by the Learned AO which was further confirmed by the First Appellate Authority. Hence, the instant appeal.
At the time of hearing of the appeal, the Learned AR submitted before us that claim made in the return is in respect of the pre-operative expense of Rs.5,63,340/- brought forward from the earlier year. 1/5th of the said expenditure have been written off in accordance with the provisions of section 35D. The said expenditure was incurred for filing and stamping charges of ROC documents for increase in the authorized capital which was in the scrutiny assessment made u/s 143(3) of the Act for immediately preceding A.Y. 2008-09 was not disallowed. However, with all his fairness, the Learned AR submitted that similar disallowance made by the Learned AO for A.Y. 2009-10 and confirmed by the Learned CIT(A) was appealed by the assessee before the Learned ITAT
- 4 - ITA Nos.744 & 745/Ahd/2015 Oracle Granito Ltd. vs. ACIT Asst.Years – 2010-11 & 2011-12 which is still pending. He, ultimately prayed for deletion of such addition. On the contrary, the Learned DR relied upon the order passed by the authorities below.
We have heard the Learned Counsel appearing for the parties, we have perused the relevant materials available on record. It appears, admittedly this expenditure pertain to filing and stamping charges of ROC for increase in the authorized capital is nothing but a capital expenditure. This proposition has been upheld by catena of judgments as already relied upon by the Learned AO. Further that, in the judgment of CIT-vs-Tungabhadra Industries Ltd. 207 ITR 553 (1994) categorically held that fees paid for increasing authorized capital is a capital expenditure. Thus, the same are not eligible for deduction u/s 35D of the Act. Further that, the judgment passed in the matter of Punjab State Industrial Development Corporation Ltd.-vs-CIT 225 ITR 792(SC) passed by the Hon’ble Supreme Court dealing with the issue further held that the expenses incurred on increasing the share capital and fees paid to Registrar of Companies for increase in authorized capital is capital expenditure and cannot be allowed for revenue expenditure which was duly taken care of by the Learned CIT(A) while confirming such addition. We find no ambiguity in the said order. In the absence of any infirmity, we confirm the same. Hence the ground preferred by the assessee is dismissed.
Ground No.2 6. The assessee has challenged the disallowance of Rs.55,776/- made u/s 2(24)(x) of the Act.
In the instant case, it is found from the Tax Audit Report filed by the assessee that certain PF and ESIC payments on behalf of the employees were made by the assessee beyond the stipulated due date. In terms of Section 36(1)(va), such payments are to be treated as income of the assessee since this payment is made in contravention to the due
- 5 - ITA Nos.744 & 745/Ahd/2015 Oracle Granito Ltd. vs. ACIT Asst.Years – 2010-11 & 2011-12 date specified in the relevant Acts. Since the payment was not made within due dates mentioned in the Provident Funds Act, the sum of Rs.55,776/- was disallowed by the Assessing Officer which was further confirmed in appeal. Hence, assessee’s appeal before us. The Learned AR during hearing submitted that similar disallowance was made by the Learned AO for A.Y. 2008-09 in assessee’s own case which was deleted by the Learned CIT(A) by his order dated 24.04.2012. Since the matter was decided in favour of the assessee for A.Y. 2008-09 and 2009-10, the addition made herein by the Learned AO is not sustainable in the eye of law as contended by the Learned AR before us. However, the Learned DR relied upon the orders passed by the authorities below.
Heard the respective parties, perused the relevant materials on record. We find that admittedly the PF received from the employees were deposited by the assessee company in the PF account beyond the due dates as prescribed in PF Act. The Hon’ble Jurisdictional High Court in the case of CIT vs. Gujarat State Road Transport Corporation (2014) 265 CTR 64 (Guj.) pleased to hold that where the employer has not credited the sum received by it as employees’ contribution to employees’ account in relevant funds on or before due date as prescribed in Explanation to Section 36(1)(va), the assessee shall not be entitled to deduction of such amount though he deposits the said sum before the due date prescribe u/s 43B i.e. prior to filing of return u/s 139(1) of the Act. Since in this particular case, the employees’ contribution toward PF was not deposited before due date in terms of statutory rules as mentioned hereinabove, the Learned CIT(A) confirmed such addition of Rs.55,776/- without any ambiguity, hence the same is hereby confirmed.
Ground No.3, 4 & 5 are interconnected : 9. The assessee has challenged the disallowance of the claim of deduction u/s 80IB of the Act to the tune of Rs.8,37,699/-.
- 6 - ITA Nos.744 & 745/Ahd/2015 Oracle Granito Ltd. vs. ACIT Asst.Years – 2010-11 & 2011-12 10. It appears from the return of income that the assessee has claimed a sum of Rs.1,35,24,691/- as deduction u/s 80IB. This is the seventh year of scrutiny claim of deduction u/s 80IB. The amount so claimed has been worked out at 30% of the income from business and profession as per the computation of income of Rs.4,50,82,300/-. It appears that the assessee has included the profit derived from a windmill unit located at Kutch. The Learned AO reduced the sale profit from the claim of deduction u/s 80IB of the Act on the ground that it was not a part of the profit of manufacturing unit eligible for deduction u/s 80IB of the Act for the unit located at Sabarkantha District. In terms of the letter dated 13.03.2013 on this issue as issued by the Revenue the assessee explained the entire terms and conditions as claimed to have been fulfilled by the assessee to specified claim of deduction u/s 80IB(5). Further that, the capacity of the windmill installation period and cost of such installation along with supporting documents including invoices, certificates from authorities and income and expenditure accounts in the books were also duly submitted by the assessee before the Learned AO. The assessee further contended that during the year under assessment the windmill income has been computed at Rs.20,54,724/-. It was further contended that profit from windmill is also eligible for deduction u/s 80IA(4)(iv) of Chapter VIA. Profit derived from the power generation is allowed in computing the total income of the assessee. Deduction of any amount equal to 100% to profit derived from such business for ten consecutive assessment years is permissible. Since it is the 3rd year of the commencement of the windmill operation and the assessee fulfills all the conditions and criterion of the section under reference. The assessee is entitled to get the relief. It is relevant to mention that in the immediate preceding two assessment year there was no profit of windmill and therefore the company has not opted for claims of such deduction. Since during the current year under assessment year 2010-11 the profit derived from the windmill is Rs. 20,54,724/- and the company has claimed the deduction u/s 80IB(5) at 30% of the income instead of eligible 100% of the profit u/s 80IA(4)(iv) of the Act. However, the working done by the Learned
- 7 - ITA Nos.744 & 745/Ahd/2015 Oracle Granito Ltd. vs. ACIT Asst.Years – 2010-11 & 2011-12 AO on this issue is to certain extent different from the claim of the assessee and the Learned AO ultimately came to a finding that the assessee is eligible for deduction u/s 80IB only to the extent of Rs.1,26,86,992/- and not Rs. 1,35,24,691/- as claimed by the Assessee. In the result a sum of Rs.8,37,699/- has been treated as income of the assessee and added to its total income.
In fact, such claim of the assessee for allowance of deduction u/s 80IA(4) with regard to the income of wind mill by and under the submission dated 13.03.2013 was not found acceptable by the Learned AO, following the judgment of Hon’ble Supreme Court in the case of M/s. Goetze India Ltd. reported in 157 taxman 1 (SC) by observing that the assessee was not entitled to additional deduction since it has not filed a revised return of income. Against the said order the assessee went up in appeal but without any result. Hence, the instant appeal.
At the time of hearing of the appeal, the Learned AR submitted before us that the Assessing Officer has not disputed the entitlement of deduction of assessee u/s 80IB of the Act. Further that the right of the assessee cannot be denied merely on the technical ground that the assessee has not claimed deduction in respect of its windmill unit u/s 80IA(4) neither filed a revised return within the stipulated time. More so, the same issue in assessee’s own case came up before the Learned ITAT in an appeal preferred by Revenue where the Co-ordinate Bench was pleased to reject the same. On the contrary the Learned DR relied upon the orders passed by the authorities below.
Heard the respective parties and perused the relevant materials on records. The issue is covered by the Judgment passed by the Learned Co-ordinate Bench in assessee’s own case for A.Y. 2009-10. The appeal being ITA No.1602/Ahd/2013 for A.Y. 2009-10
- 8 - ITA Nos.744 & 745/Ahd/2015 Oracle Granito Ltd. vs. ACIT Asst.Years – 2010-11 & 2011-12 preferred by the Revenue has been rejected by the Co-ordinate Bench with the following observation:
“21. On the other hand, ld. AR submitted that there is no dispute that the assessee is entitled to deduction u/s 80IB of the Act Rs.54,36,002/- claimed by the assessee. There is no new claim rather the claim made u/s 80IB was revised and a correct claim of deduction u/s 80IB in accordance with the provisions of the Act was made. It is significant to mention that ld. Assessing Officer has not disputed with respect to the entitlement of deduction of assessee u/s 80IB of the Act and in this context the reliance placed by ld Assessing Officer on the judgment of Hon. Supreme Court in the case of M/s Goetze India Ltd. (supra) is misplaced because in the present case of assessee no new claim for deduction u/s 80IB has been made and Ld assessing officer should not have taken undue mistake on the part of assessee in taking legitimately entitled claim. Ld AR further submitted that the Hon. Surprem Court in numerous decisions including Ramlal and Ors. Vs. Rewa Coalfields Ltd., AIR 1962 SC 361, The state of West Bengal vs. The Administrator, Howrah Municipality and Ors., AIR 1972 SC 749 and Babumal Raichand Oswal vs. Laxmibai R. Torte, AIR 1975 SC, 1297 stated that the State authorities should not raise technical pleas if the citizens have lawful right and the lawful right is being denied to them merely on technical grounds. The State authorities cannot adopt the attitude which private litigants might adopt. 22. We have heard the rival contentions and perused the material placed before us. Through this ground Revenue has challenged the ld. CIT(A)'s order allowing addition deduction claimed u/s 80IB of the Act at Rs.11,22,920/-. We observe that assessee is eligible to claim deduction u/s 80IB of the Act. In the return of income Rs. 54,36,002/- was claimed as deduction u/s 80IB of the Act which was revised to Rs.65,58,922/- during the course of assessment proceedings duly supported by necessary calculation and report of Chartered Account. Ld. Assessing Officer denied the additional deduction by taking a view that assessee should have revised the return which has not been done so. We further observe that ld. Assessing Officer has not objected to the revised quantum of deduction claimed by assessee at Rs. 65,58,922/- which as per assessee was the correct and legitimate amount as per the provisions of section 80IB of the Act. Ld. Assessing Officer has merely disallowed the claim for not filing revised return of income. It is an established proposition of law that the correct income of the assessee has to be assessed by the Assessing Officer and if there is a rightful claim then the same should be allowed to the assessee. More particularly in this case of assessee claimed a deduction u/s 80IB of the Act in the return of income so there is no new claim
- 9 - ITA Nos.744 & 745/Ahd/2015 Oracle Granito Ltd. vs. ACIT Asst.Years – 2010-11 & 2011-12 made during the course of assessment proceedings but it is just a correct claim which has been put forward with due supporting before ld. Assessing Officer and the same should have been allowed to the assessee. 22.1 We observe that ld. CIT(A) has allowed assessee's claim of additional deduction of Rs.11,22,920/- in a right perspective by observing as follows :- 10.3 I have carefully considered the rival contentions. It is seen that in the original return the appellant has claimed deduction u/s. 80IB of Rs. 54,36,002/-. This deduction was revised to Rs. 65,58,922/- during the assessment proceedings. The appellant has filed the report of Chartered Accountant as required by the provisions of sec.80IB along with its application dated 22.8.2009 for revising the claim of deduction u7s.80IB. The A.O. had not accepted the revised claim of deduction u7s.80IB in view the ratio of Goetz India Ltd. 157 Taxman 1 (SC). The above facts make it very clear that the revised claim of deduction u7s.80IB was rejected on technical grounds. The facts available on record clearly indicate that the appellant has made claim for deduction u7s.80IB in the original return and it was revised during the assessment proceedings. Since the appellant has not made a fresh claim of deduction u/s.80IB during the assessment proceedings, accordingly, I am of the considered opinion that ratio of Goetz India Ltd. (supra) will not be applicable. Secondly, the Hon'ble Supreme Court in Goetz India Ltd. (supra) had curtailed the powers of the Assessing Authority, however, powers of Appellate Authorities were no curtailed, in view of above, I am of the considered opinion that the ratio of Goetz India Ltd. (supra) is not applicable in this case. It is also an established proposition of law that the A.O. should assess the correct taxable income in the assessment order. In case, the appellant has not made a right claim of deduction u/s.80IB in the original return, the A.O. is duty bound to revise the same in the assessment proceedings. In this regard the appellant has rightly placed reliance on S.R. Koshti vs. CIT 276 ITR 165 (Guj.). In view of above, I am of the considered opinion that the ratio of Goetz India Ltd. (Supra) will first be attracted in this case and accordingly, the A.O. is directed to accept the revised deduction claimed u/s.80IB of Rs. 65,58,922/-. This ground of appeal is allowed. 23. We are therefore, of the view that ld. CIT(A) has rightly allowed the revised claim of assessee u/s 80IB of the Act at Rs.65,58,922/-. We therefore, find no reason to interfere with the order of ld. CIT(A). We uphold the same. This ground of Revenue is dismissed.”
- 10 - ITA Nos.744 & 745/Ahd/2015 Oracle Granito Ltd. vs. ACIT Asst.Years – 2010-11 & 2011-12 Respectfully, following the judgment passed by the Co-ordinate Bench, we delete such addition to the tune of Rs.8,37,699/- which was recomputed by the Assessing Officer for calculating the deduction u/s 80IB of the Act and delete the addition of Rs.20,52,724/- towards the 100% profit of windmill u/s 80IA(4)(iv) of the Act. Hence, appeal of the assessee is partly allowed.
Now we take up ITA No.745/Ahd/2015 for A.Y. 2011-12.
The assessee has challenged the order passed by the Commissioner of Income Tax (Appeals) mainly in not adjudicating the ground of appeal as raised by the appellant challenging the action of the Assessing officer in computing the total income at Rs.4,19,85,472/- taking the figure as per original return of income ignoring the revised return of income filed by the appellant declaring the income of Rs.3,69,65,780/- holding the same as general in nature.
It appears from the assessment order that the assessee has filed its return of income for A.Y. 2011-12 through electronic media on 28.09.2011 declaring total income at Rs.3,80,52,880/-. However, the assessee thereafter filed a revised return on 28.02.2013 declaring the total income at Rs.3,69,65,780/-. Thus, it is evident that the revised return so filed by the appellant was within the prescribed period of one year from the date of completion of A.Y. 2011-12 i.e. by 31.03.2013. The assessment proceeding regarding A.Y. 2011-12 was also not completed by the time when the revised return was filed by the appellant on 28.02.2013. Hence, the Assessing Officer proceeded with the assessment proceeding by issuing notice u/s 143(2) of the Act on 28.06.2013 upon the assessee. Certain additions were also made by the Assessing Officer but surprisingly it appears that while computing the total income of the assessee the Learned AO considered the income as per the original return of income being Rs.3,80,52,880/- and not Rs.3,69,65,780/- in
- 11 - ITA Nos.744 & 745/Ahd/2015 Oracle Granito Ltd. vs. ACIT Asst.Years – 2010-11 & 2011-12 terms of revised return. Needless to mention that the same is an error apparent on the face of the records which needed to be rectified by the authorities below either suo moto or upon application made by the assessee. However, the said mistake committed by the Assessment Officer was brought to the notice of the Learned CIT(A) in appeal by the appellant by raising the ground that the Assessing Officer has erred in computing the total income at Rs.4,19,85,472/- as against the total income of the appellant declared in original return of income filed on 28.09.2011 at Rs.3,80,52,880/- and not the figure as it appears from the revised return filed by the assessee on 28.02.2013 of Rs.3,69,65,780/-. Though the said ground was the first ground as raised to be considered by the Learned CIT(A) the same was dismissed considering it general in nature and does not require any adjudication.
At the time of hearing of the instant appeal, the Learned Counsel appearing for the assessee pointed us this particular defect apparent on the face of the records of the assessment order. He further contended that since the very basis of computation of assessment order by the Assessing Officer is wrong; instead of the figure of declared income available with the revised return the figure appearing in the original return has been taken into account without rejecting the revised return so filed by the assessee on 28.02.2013 within the one year from the date of completion of the A.Y. 2011-12, the entire assessment proceeding is liable to set aside. The order impugned since not taken into consideration this particular aspect of the matter which is germane to the issues involved in this matter is therefore bad in law and liable to be quashed. However, no forceful argument was advanced by the Learned DR against the said submission made by the Learned Counsel appearing for the assessee.
We have heard the respective parties, perused the relevant materials available on record. It is a fact as already discussed above that the error as committed by the Learned
- 12 - ITA Nos.744 & 745/Ahd/2015 Oracle Granito Ltd. vs. ACIT Asst.Years – 2010-11 & 2011-12 AO needs to be rectified. Rather the same ought to have been directed to be rectified by the Learned First Appellate Authority when the same was brought to his notice in appeal by the appellant. Having not doing so, we are of the considered opinion that the issue is to be set aside to the file of the AO for de novo proceeding taking into consideration the figure appearing for the revised return filed on 28.02.2013 by the appellant. In that view of the matter, the additions made on the basis of a wrong calculation is deleted. Hence, the AO is further directed to reconsider the matter and to make de nove assessment taking into consideration the total income of Rs. 3,69,65,780/- as declared by the assessee by following his revised return on 28.02.2013 as on records. Hence, the appeal preferred by the assessee is allowed for statistical purposes.
In the result, appeal in ITA No.744/Ahd/2015 is partly allowed and in ITA No.745/Ahd/2015 is allowed for statistical purposes. This Order pronounced in Open Court on 24/01/2019
Sd/- Sd/- ( PRAMOD KUMAR ) ( Ms. MADHUMITA ROY ) VICE PRESIDENT JUDICIAL MEMBER Ahmedabad; Dated 24/01/2019 Priti Yadav, Sr.PS आदेश क� ��त�ल�प अ�े�षत/Copy of the Order forwarded to : 1. अपीलाथ� / The Appellant 2. ��यथ� / The Respondent. 3. संबं�धत आयकर आयु�त / Concerned CIT 4. आयकर आयु�त(अपील) / The CIT(A)-9, Ahmedabad. 5. �वभागीय ��त�न�ध, आयकर अपील�य अ�धकरण, अहमदाबाद / DR, ITAT, Ahmedabad 6. गाड� फाईल / Guard file. आदेशानुसार/ BY ORDER, स�या�पत ��त //True Copy// उप/सहायक पंजीकार (Dy./Asstt.Registrar) आयकर अपील�य अ�धकरण, अहमदाबाद / ITAT, Ahmedabad