ASSISTANT COMMISSIONER OF INCOME-TAX vs. PRIMA PRIVATE LTD.,, PUNE

आदेश / ORDER

PER D. KARUNAKARA RAO, AM :

These two appeals filed by Revenue are directed against the order of Commissioner of Income Tax (Appeals), Pune-9 commonly dated 15.01.2016 for assessment years 2006-07 & 2009-10.

2 ITA Nos. 997 & 998/PUN/2016 A.Ys.2006-07 & 2009-10

“1.Whether on the facts and in the circumstances of the case, the Ld. CIT(A) was justified in holding that discount of Rs.83,30,151/- received on pre-payment of liability under the ‘Sales Tax Deferral Scheme’, as not a remission of cessation of liability u/s.41(1)? 2. The appellant craves leave to add, amend or alter any of the above grounds of appeal.”

Identical grounds have been raised by Revenue in ITA

No.998/PUN/2016.

discount received on pre-payment of liability under the ‘Sales Tax Deferral

Scheme’, as not a remission or cessation of liability u/s.41(1) of the Income

Tax Act, 1961 ( hereinafter referred to as ‘the Act’).

in the business of manufacturing of plastic moulded products and filed

return of income on 30.11.2006 declaring total income of Rs. Nil. The

assessee claimed deduction u/s. 80IA of the Act of Rs.76,10,648/- in

respect of Wind Mill Activities for power generation. During assessment

proceedings, the Assessing Officer assessed total income of assessee at

Rs.1,04,33,236/- u/s. 143(3) of the Act. Eventually, reassessment

proceedings were initiated by issuing notice under section 148 r.w.s 147 of

the Act in the case of assessee for A.Y. 2006-07. The Assessing Officer

completed the reassessment order dated 04.03.2014 by assessing total

income of assessee at Rs.1,87,63,387/- by making addition of

Rs.83,30,151/- being the discount by way of early payment of sales tax

liability under “ Sales Tax Deferral Scheme”. In the reassessment Assessing

Officer found the earning of the said benefit and held the same is chargeable

to tax.

3 ITA Nos. 997 & 998/PUN/2016 A.Ys.2006-07 & 2009-10

Assessing Officer completed assessment assessing total income of assessee

at Rs.4,20,14,270/- by making addition of Rs.35,53,766/- with the same

reasoning. Aggrieved with both the additions i.e. Rs.83,30,151/- in

A.Y.2006-07 and Rs.35,53,766/- in A.Y.2009-10, the assessee filed the

appeal before CIT(A) for both the assessment years.

vide letter dated 22.12.2015 and 07.01.2016 which were reproduced by

CIT(A) in para-5.2 of his order. The CIT(A), after considering the

submissions of the assessee and relying on the decision of Pune Bench of

the Tribunal in the case of M/s. Aurangabad Electricals Ltd Vs. Addl. CIT

for assessment year 2005-06 in ITA No. 388/PN/2012 order dated

30.05.2012, decided the issue in favour of assessee and deleted both the

additions i.e. Rs.83,30,151/- in A.Y.2006-07 and Rs.35,53,766/- in

A.Y.2009-10, as mentioned above. In fact, CIT(A) relied on the Tribunal’s

order in the assessee’s own case for assessment year 2004-05 vide ITA No.

1384/PUN/2007 vide para 5.3 of Tribual’s order. Ignoring the principles

relating to binding nature of the Co-ordinate Bench decisions of the

Tribunal, the Revenue is in appeal before us raising grounds extracted

above.

Officer.

the assessee earned discount of Rs.83,30,151/- for assessment year 2006-

07 and Rs.35,53,766/- for assessment year 2009-10. These amounts were

4 ITA Nos. 997 & 998/PUN/2016 A.Ys.2006-07 & 2009-10

received by assessee towards (i) sale tax liability amount (ii) Net Present

Value (NPV) repayment. The Assessing Officer treated the same as income of

the assessee as per discussion at page 5 to 7 of the assessment order. The

CIT(A) deleted the said additions as per discussion given in Para 5 and its

sub-paragraphs. CIT(A) also relied on the decision of Mumbai Bench of

Tribunal in the case of CIT Vs. Sulzer India Ltd. reported as 369 ITR

extracted as under:

“5.3 I have considered carefully the facts of the case and submissions of the appellant on the issue. The Hon'ble ITAT, Pune in the case of M/s. Aurangabad Electricals Ltd. for A.Y. 2005-06 in ITA No. 388/PN/2012 has deleted the addition by holding as under:

"2. After hearing both the sides we find the AO following the order for assessment year 2004-05 made addition of Rs.57,19,206/- being discount allowed by the State Government on early repayment of deferred sales tax, loan holding the same to be income of the assessee for the year and not a capital receipt as claimed by the assessee. In appeal, the learned CIT(A) following the order of his predecessor on this issue for Assessment Year 2004-05 upheld the action of the AO. We find the Tribunal in assessee's own case in ITA No.1384/PN/2007 for the assessment year 2004-05 has deleted the addition by holding as under:

"We have considered the rivet submissions carefully, It was a common ground between the parties that identical issue has been adjudicated by the Larger Bench of Tribunal in the case of Suzler India Ltd. 42 SOT 457 (Mum) (SB), a copy of which has been placed on record. As per the Special Bench, the difference between the payment made against the future liability on account of deferred sales-tax is a capital receipt and could not be treated as a remission of cessation of liability assessable under section 41(1)(1) of the Act. As a' result thereof, the addition of Rs. 67,34,793/- made by the Assessing Officer in the instant case by invoking the provision of section 41 (1) of the Act· is untenable. Accordingly, we set aside the order of the Commissioner of Income Tax (Appeals) and direct the Assessing Officer to delete the addition of Rs.67,34,793/- made under section 41(1) of the Act. Thus, on this ground assessee succeeds”

5 ITA Nos. 997 & 998/PUN/2016 A.Ys.2006-07 & 2009-10

As the facts of this case on the issue are similar to that of M/s. Aurangabad Electricals Ltd. by following the decision of the jurisdictional ITAT, the A.O. is directed to delete the addition of Rs.83,30,151/-. Thus, the ground raised by the appellant is allowed.”

From the above, it is evident that the Pune Bench of Tribunal in the 9.

case of M/s. Aurangabad Electricals Ltd Vs. Addl. CIT (supra.), while

granting relief, relied on the decision of Mumbai Bench of Tribunal in the

case of CIT Vs. Sulzer India Ltd. reported (supra.), which has been

subsequently affirmed by the Hon’ble High Court. The Ld. Counsel for the

assessee filed copy of Supreme Court judgment in the case of CIT Vs.

Balkrishna Industries Ltd. reported in 300 CTR 209 (SC) and submitted that

there is no case of remission of tax liability in such a matter of discount

involved in ‘Sales Tax Deferral Scheme’ and the prepayment of the sales tax

to the Government under the said scheme.

Rs.67,34,793/- for the assessment year 2004-05 and the same was

eventually allowed in favour of the assessee by virtue of order of Tribunal

(supra.). Therefore, the issue constitutes a covered case from that point of

view. Such earnings, if any, does not amount to a case of remission or

cessation of liability by the Government. Hence the amount in question

cannot be treated as deemed income under section 41(1) of the Act. This

view has the strength of ratio laid down by the Hon'ble Supreme Court in

the case of CIT Vs. Balkrishna Industries Ltd. (supra.). In this case, Hon'ble

Supreme Court decided the similar issue on facts. Held portion of the

judgment is relevant and the same is extracted as under:

“………..As rightly noted by the Tribunal, the Sales Tax collected by the Assessee during the relevant year amounting to Rs.7,52,01,378/- was treated by the State Government as loan liability payable after 12 years in 6 annual/equal installments.

6 ITA Nos. 997 & 998/PUN/2016 A.Ys.2006-07 & 2009-10

Subsequently and pursuant to the amendment made to the 4th proviso to section 38 of the Bombay Sales Tax Act, 1959, the Assessee accepted the offer of SICOM, the implementing agency of the State Government, paid an amount of Rs.3,37,13,393/- to SICOM, which, according to the Assessee, represented the NPV of the future sum as determined and prescribed by the SICOM. In other words, what the Assessee was required to pay after 12 years in 6 equal installments was paid by the Assessee prematurely in terms of the NPV of the same. That the State may have received a higher sum after the period of 12 years and in installments.However, the statutory arrangement and vide section 38, 4th proviso does not amount to remission or cessation of the Assessee's liability assuming the same to be a trading one. Rather that obtains a payment to the State prematurely and in terms of the correct value of the debt due to it. There is no evidence to show that there has been any remission or cessation of the liability by the State Government. Supreme Court agree with the Tribunal that one of the requirement of section 41(1)(a) has not been fulfilled in the facts of the present case."

Thus, it is a covered issue in assessee’s own case for A.Y.2004-05

and also in the case of CIT Vs. Balkrishna Industries Ltd. (supra.).

on this issue, similar in both the appeals of Revenue, is fair and reasonable

and does not call for any interference. Accordingly, grounds raised by

Revenue in both the appeals are dismissed.

Order pronounced on this 06th day of June, 2018.

Sd/- Sd/- (�वकास अव�थी /Vikas Awasthy) (डी. क�णाकरा राव/D. KARUNAKARA RAO) �या�यक सद�य/JUDICIAL MEMBER लेखा सद�य/ACCOUNTANT MEMBER

पुणे / Pune; �दनांक / Dated : 06th June, 2018. SB

7 ITA Nos. 997 & 998/PUN/2016 A.Ys.2006-07 & 2009-10

आदेश क� ��त�ल�प अ�े�षत / Copy of the Order forwarded to : अपीलाथ� / The Appellant. 1. ��यथ� / The Respondent. 2. 3. The CIT (Appeals), Pune-9. 4. The Pr. CIT-5, Pune. �वभागीय ��त�न�ध, आयकर अपील�य अ�धकरण, “ए” ब�च, 5. पुणे / DR, ITAT, “A” Bench, Pune. गाड� फ़ाइल / Guard File. 6.

// True Copy // आदेशानुसार / BY ORDER,

�नजी स�चव /Private Secretary आयकर अपील�य अ�धकरण, पुणे / ITAT, Pune.