DCIT CC-38, MUMBAI vs. UNITED PHOSPHORUS LTD ( FORMERLY KNOWN AS SEARCH CHEM INDL.L TD), MUMBAI
Before: SHRI PAWAN SINGH & SHRI GIRISH AGRAWAL
PER GIRISH AGRAWAL, ACCOUNTANT MEMBER: All these captioned seven appeals and one cross appeal filed by both, assessee and revenue are against the orders of Ld. CIT(A) passed against the assessment/penalty orders by ACIT/DCIT, CC-38, Mumbai. Consolidated details of these appeals and cross appeal are tabulated below:
3
ITA No. 7027/MUM/2010 and ors.
United Phosphorus Ltd.
AYs 2004-05 to 2007-08
Sr.
No.
ITA No.
Order of CIT(A)
Assessment order
Assess- ment year
Appeal by No.
Date
Passed by Date
Passed u/s.
1. 6807/MUM/2010
CIT(A)-
15/IT-
205/DCIT/C
C-38/06-07
22.07.2010
DCIT,
CC-38,
Mumbai
20.12.2006
143(3)
2004-
2005
Department
2. 6709/MUM/2010
CIT(A)-
15/IT-
326/DCIT/C
C-38/08-09
07.07.2010
DCIT,
CC-38,
Mumbai
18.12.2008
143(3)
2005-
06
Department
3. C.O.No.
188/MUM/2011
CIT(A)-
15/IT-
326/DCIT/C
C-38/08-09
07.07.2010
DCIT,
CC-38,
Mumbai
18.12.2008
143(3)
2005-
06
Assessee
4. 7027/MUM/2010
CIT(A)-
15/IT-
205/DCIT/C
C-38/06-07
22.07.2010
DCIT,
CC-38,
Mumbai
20.12.2008
143(3)
2004-
05
Assessee
5. 7028/MUM/2010
CIT(A)-
15/IT-
326/DCIT/C
C-38/08-09
07.07.2010
DCIT,
CC-38,
Mumbai
18.12.2008
143(3)
2005-
06
Assessee
6. 6950/Mum/2013
CIT(A)-
41/ACCC-
38/IT-
159/12-13
29.08.2013
ACIT,
CC-38,
Mumbai
04.05.2012
and 31.03.2012
154 and 271(1)(c)
2004-
05
Assessee
7. 2172/Mum/2013
CIT(A)-
39/IT-
119/2011-12
12.12.2012
DCIT,
CC-38,
Mumbai
18.12.2008
143(3) r.w.s.
147
2005-
06
Assessee
8. 5344/Mum/2013
CIT(A)-
15/Arr.301/
DCIT-CC-
38/13-14
21.05.2013
DCIT,
CC-38,
Mumbai
15.02.2011
144C(3)( a)/
144c(4)
2007-
08
Assessee
Grounds taken by the revenue and the assessee in their respective appeals/cross objection are reproduced as under:
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ITA No. 7027/MUM/2010 and ors.
United Phosphorus Ltd.
AYs 2004-05 to 2007-08
ITA No. No.6807/Mum/2010 (A.Y.2004-05) by the Dept
1. "On the facts and in the circumstances of the case and in law, the Id. CIT(A) erred in holding that 90% of DEPB receipts is not to be reduced from the business income while computing the allowable deduction u/s. 80 HHC of the Income-tax
Act, as the assessee has utilized the DEPB licenses in its own business, when no such contention was raised before the Assessing Officer."
"On the facts and in the circumstances of the case and in law, Ld. CIT(A) should have referred the issue of utilization of DEPB licenses to the file of the Assessing Officer, as the assessee never claimed before the Assessing Officer that it has utilized the DEPB licenses in its own business and this claim was made for the first time before CIT(A)."
ITA No. 6709/Mum/2010 (A.Y.2005-06) by the Dept
1. "On the facts and in the circumstances of the case and in law, the Id. CIT(A) erred in deleting the addition of Rs. 6,52,414/-made by the A.O. u/s.36(1)(va) read with section 2(24)(x) in respect of employee's contribution to Provident Fund paid after the due date but during the previous year without considering the fact that the due dates prescribed under respective Acts i.e. Provident Fund Act and ESIC Act are mandatory and can not be extended".
"On the facts and in the circumstances of the case and in law, Ld. CIT(A) ought to have held that allowability of deduction on account of employee's contribution is governed by provisions of section 36(1) (va) and hence, deduction is not allowable if the same are not paid within due dates.
CO No. 188/Mum/2011 (A.Y.2005-06) by the assessee
On the facts and in the circumstances of the case and in Law, it is submitted that the incentives received under the Industrial Policy introduced in the state of Jammu and Kashmir in the form of excise duty refund amounting to Rs
3,83,24,412 ought to be treated as a capital receipt not liable to tax.
ITA No. 7027/Mum/2010 (A.Y.2004-05) by the assessee
1.DISALLOWANCE UNDER SECTION 14A: Rs 14,87,500
On the facts and in the circumstances of the case and in law, the Commissioner of Income-tax (Appeals) erred in confirming the action of the Deputy
Commissioner of Income-tax in computing disallowance under section 14A of the Income-tax Act, 1961 ('the Act') in respect of expenditure incurred for earning tax-free income at Rs 14,87,500/- as per Rule 8D inserted by the Income-tax
(Fifth Amendment) Rules, 2008
ADDITION UNDER SECTION 92C(4) IN RESPECT OF COMMISSION ON CORPORATE FINANCIAL GUARANTEES PROVIDED ON BEHALF OF ASSOCIATED ENTERPRISES. Rs 70,00,000 On the facts and in the circumstances of the case and in law, the Commissioner of Income-tax (Appeals) erred in confirming the action of Deputy Commissioner
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ITA No. 7027/MUM/2010 and ors.
United Phosphorus Ltd.
AYs 2004-05 to 2007-08
of Income-tax in making an addition under section 92C(4) on the basis of the order passed by the Transfer Pricing Officer under section 92CA(3) of Rs
70,00,000 being commission @0.6% on corporate financial guarantees amounting to Rs1,169,880,000 lacs provided on behalf of associated enterprises to meet with the arm's length principle
DEDUCTION UNDER SECTION 80HHC 3.1. On the facts and in the circumstances of the case and in law, the Commissioner of Income-tax (Appeals) erred in upholding the action of the Deputy Commissioner of Income-tax in the following respects while computing deduction under section 80HHC
2. While computing the 'profits of the business":
(i)In reducing 90% of the amounts relating to job work charges, management service charges, refund of sales tax and miscellaneous receipts;
(ii) In not appreciating the fact that only the net amount of interest received by the appellant ought to have been reduced as per Explanation
(baa) below section 80HHC(4A), and in view of the fact that the interest paid being more than the interest received, no portion of the interest received ought to have been reduced for the purpose of working out deduction under section 80HHC;
(iii) In not appreciating the fact that the word "receipts" as referred to in the Explanation (baa) below section 80HHC(4A) refers only to the net receipts and accordingly, gross receipts ought not to be reduced from the profits of the business.
ITA No. 7028/Mum/2010 (A.Y.2005-06) by the assessee
1. On the facts and in the circumstances of the case and in law, the Commissioner of Income-tax (Appeals) erred in confirming the action of the Deputy Commissioner of Income-tax in computing disallowance under section 14A of the Income-tax Act,
1961 ('the Act') in respect of expenditure incurred for earning tax-free income at Rs 11,18,645/- as per Rule 8D inserted by the Income-tax (Fifth Amendment)
Rules, 2008. 2. On the facts and in the circumstances of the case and in law, the Commissioner of Income-tax (Appeals) erred in confirming the action of Deputy Commissioner of Income-tax in making an addition under section 92C(4) on the basis of the order passed by the Transfer Pricing Officer under section 92CA(3) of Rs 98,13,540
being commission @ 0.6% on corporate financial guarantees amounting to Rs1,633,500,000 provided on behalf of associated enterprises to meet with the arm's length principle
3 On the facts and in the circumstances of the case and in law, the appellant submits that an amount of Rs 193,037,733 transferred to debenture redemption reserve ought not to be added back while computing the book profit under section 115JB
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ITA No. 7027/MUM/2010 and ors.
United Phosphorus Ltd.
AYs 2004-05 to 2007-08
ITA No. No.6950/Mum/2013 (A.Y.2004-05) by the assessee
1. On the facts and in the circumstances of the case and in law, the Commissioner of Income-tax (Appeals) erred in upholding the action of the Assistant
Commissioner of Income-tax in levying penalty under section 271(1)(c) of the Act.
2 On the facts and in the circumstances of the case and in law, the Commissioner of Income-tax (Appeals) erred in confirming the action of the Assistant
Commissioner of Income-tax in levying penalty in respect of excess deduction claimed under section 80HHC due to adjustment made on account of reducing
90% of job work charges and management service charges while computing the profits of business for the purpose of deduction under section 80HHC.
ITA No. 2172/Mum/2013 (A.Y.2005-06) by the assessee
1. Disallowance under section 14A
On the facts and in the circumstances of the case and in law, the Commissioner of Income-tax (Appeals) erred in confirming the disallowance of Rs 2,02,612/- under section 14A of the Income-tax Act, 1961 in respect of expenditure incurred for earning tax-free income to the extent of 10% of exempt income amounting to Rs 20,26,113/-
ITA No. No.5344/Mum/2013 (A.Y.2007-08) by the assessee
1. On the facts and in the circumstances of the case and in law, the learned
Commissioner of income-tax (Appeals) erred in confirming the action of the Assessing Officer in not excluding the refund of excise duty amounting to Rs.
18,51,08,685/- received as an incentive under the New Industrial Policy for the State of Jammu & Kashmir, 2002, from the total income as capital receipt not eligible to tax.
Brief facts of the case are that assessee is engaged in manufacturing of phosphorous and its compounds, pesticides and its intermediates. Assessee was formerly known as Search Chem Industries Ltd (SCIL). Name of the assessee was changed to United Phosphorous Ltd. (UPL) for which a fresh certificate of incorporation dated 11.2010.13 was issued by the