TATA MOTORS LTD,MUMBAI vs. CIT LTU, MUMBAI

Order u/s.254(1)of the Income-tax Act,1961(Act) लेखा लेखा सद�य लेखा लेखा सद�य सद�य राजे�� सद�य राजे�� राजे�� केकेकेके अनुसार राजे�� अनुसार अनुसार PER RAJENDRA, AM- अनुसार Challenging the order of CIT (LTU),Mumbai, dt.28.3.14 passed u/s.263 of the Act, the assessee has filed the present appeal.Assessee-company,engaged in the business of manufac - turing of vehicles,filed its return of income on 30/10/2007, declaring total income of Rs . 12,84,54,70,964/-under the normal provisions and Rs.2188,13,41,552/- u/s. 115JB of the Act. The Assessing Officer (A.O) completed the assessment u/s.143(3) r.w.s. 144C of the Act on 26/05/11 determining its income at Rs.1287,74,27,650/-. 2.On verifying the records,the CIT-LTU observed that order passed by the AO was erroneous and prejudicial to the interest of the revenue, that the assessee had reduced from the total income an amount of Rs.15.23 crores, being the saving on the liability to sales tax by paying the amount in advance at a discounted value, that by meeting the liability in advance it benefitted to the extent of Rs.15.23 crores, that the benefit had accrued to assessee in the regular course of business, that the deduction was not allowable as per law, that the assessee had reduced Rs.60.74 crores on account of DEPB licences/focus market licences, that the said licences were not received or were not utilised though the amounts had already been credited to P&L account in the books of account,that the deduction claimed by it was not in order, that it had claimed deduction of Rs.17.90 crores, being the claim on account of loss of profit due to fire that was not received from insurance company during the year, that another claim of deduction of Rs.22.82 crores,being repairs and other expenditure incurred on account of fire was claimed,that both the claims of deduction were not allowable. 3.Accordingly,he issued a notice to the assessee,on 14.3.2014,asking it as to why the revisio -nary order should not be passed as per provisions of section 263 with regard to above

3519/M/14(07-08) Tata Motors Ltd. referred three items.In its reply,dated 27.3.2014,the assessee filed a detailed reply in that regard. After considering the same, the CIT held that the assessee had made claims in the return of income,that same were subject matter of assessment u/s. 143(3) of the Act, that filing an incorrect claim will not make it a valid claim with regard to pre-payment of sales tax.He observed that same being an indirect tax,the assessee was entitled to recover from the customers, that in the normal course it should have been handed over to the Government, that as per scheme announced by the state government the assessee was entitled to pay the same over a period of time in instalments,that it was also entitled to pre-pay the deferred liability and at discounted value,that sales tax would form part of the turn over that the benefit accrued to the assessee on pre-payment of sales tax would also form part of revenue, that the claim made by it that the amounts saved on account of pre-payment was capital receipt was not correct, that the AO had not considered the aspect of payment being of revenue nature. He held that order of AO was erroneous and prejudicial to the interest of revenue. He further held that the assessee had accounted the income of DEPB licenses/focus market licenses on accrual basis,that it followed the mercantile system of accounting, that excluding the value which not have been received was not correct,that it had not claimed insurance benefit on account of loss of profit due to fire and also on account of repairs and other expenses incurred on account of fire,that it had not received the full amount, that it was following mercantile system of accounting,that the exclusion of the portion of the claim, which had not been received during the year was not in order, that while passing the scrutiny order the AO had not considered the issue properly.Finally, he directed the AO to disallow the claim of Rs.15. 23 crores(amounts saved on account of pre-payment of sales tax),Rs.60.74 lakhs (On account of DEPB/focus market licences) and Rs.40.72 lakhs on account of insurance claims.

4.During the course of hearing before us, the Authorised Representative (AR) stated that pre- payment of sales tax liability at discounted value was not liable to tax, that the DEPB/focus market licences were taxable in the year in which licences were utilised, that compensation from insurance company was taxable in the year in which claim was accepted by the insurance company,that there was no justification for revising the order of the AO on account of any of the three issues,that decisions were available in favour of the assessee at the time of issue of notice u/s.263,that the AO had taken one of the possible views, that the order of the AO was neither erroneous nor prejudicial to the interest of revenue,that during the assess - ment proceedings the AO had called for various details, that in the submission,dated 25/11/ 2010 to the AO enclosing computation of income the assessee had furnished notes about sales 2

3519/M/14(07-08) Tata Motors Ltd. tax liability and other issues, that the AO had made certain disallowances after submissions filed by the assessee on various occasions including the letter dated 9.12.2010. He referred to the cases of Max India (295ITR282); Sulzer India (138ITD137); Excel Industries (358ITR 295) and Leisure Wear (13SOT184).The Departmental Representative (DR) supported the order of CIT-LTU.

5.We find that the CIT-LTU had invoked the revisionary powers with regard to three issues i.e., pre-payment of sales tax liability at discounted value, DEPB licence/focus market licences and compensation from insurance company. We find that all the three issues,at the time of issuing notice u/s. 263 of the Act,stood decided in favour of the assessee by various judgments of judicial forums.In these circumstances if,the AO had not made any disallow - ance about the claimws made by the assessee,then his order cannot be treated erroneous and prejudicial to the interest of the revenue.We find that in the case of Sulzer India (supra), Special Bench of the Tribunal has held that prepayment of sales tax liability at discounted value was not liable to tax.Similarly, in the case of Excel Industries it was held that DEPB/focus market licences were taxable in the year in which goods were actually imported. In the case of Leisure Wear (supra), the Tribunal had held that compensation from insurance company was taxable in the year in which claim was accepted.Thus, all the issues raised by the CIT, at the time of issuance of revisionary notice had attained finality. Therefore, he was not justified in issuing the notice to revise the order of the AO.Secondly,by directing the AO to make the disallowances,he has deprived the AO of taking any independent decision.Similarly,the hands of the assessee were also tied down.As the CIT did not restore the matter to the AO for fresh hearing,so,assessee was prevented from putting forth its stands before the AO.So,eversing the order of the CIT,we decide the effective Ground of appeal in favour of the assessee. As we have decided case on merits,we are not adjudicating the ground raised by assessee about validity of revisionary proceedings. As a result appeal filed by assessee stands allowed. फलतः िनधा�रती �ारा दािखल क� गई अपील मंजूर क� जाती है. Order pronounced in the open court on April 5th April, 2017. आदेश क� घोषणा खुले %यायालय म' (दनांक 5 अ)ैल, 2017 को क� गई । Sd/- Sd/- (राम लाल नेगी राम लाल नेगी राम लाल नेगी / Ram Lal Negi) (राजे�� / Rajendra) राम लाल नेगी �याियक सद�य / JUDICIAL MEMBER लेखा लेखा सद�य सद�य / ACCOUNTANT MEMBER लेखा लेखा सद�य सद�य मुंबई Mumbai; (दनांक/Dated : 05.04.2017. Jv.Sr.PS. आदेश क� क� �ितिलिप �ितिलिप अ�ेिषत अ�ेिषत/Copy of the Order forwarded to : आदेश आदेश आदेश क� क� �ितिलिप �ितिलिप अ�ेिषत अ�ेिषत 3

3519/M/14(07-08) Tata Motors Ltd.