RAMBAL PRIVATE LIMITED,KANCHIPURAM vs. COMMISSIONER OF INCOME TAX (APPEAL), DELHI

This appeal by the assessee is arising out of the order of the Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (NFAC), Delhi in order No.ITBA/NFAC/S/250/2023- 24/1055164224(1) dated 16.08.2023. The assessment was framed by the Assessing Officer, National e-Assessment Centre, Delhi for the assessment year 2018-19 u/s.143(3) r.w.s. 143(3A) & 143(3B) of - 2 - Income Tax Act, 1961 (hereinafter ‘the Act’), vide order dated 08.07.2020.

The only issue remains for adjudication is whether the assessee’s turnover is exceeding Rs.50 crores or it is below Rs.50 crores for charging of rate of tax at 35% or 25%.

At the outset, the ld.counsel for the assessee filed copy of Tribunal’s order in assessee’s own case in vide order dated 22.04.20222 which is against the processing of return u/s.143(1) of the Act by the CPC, Bangalore and subsequently, the matter was taken up for scrutiny and the impugned order is against the scrutiny assessment. According to the CIT(A), the assessee’s income is above Rs.50 crores and for this, he noted this fact as under:- Now, the appellant submits that it is a ‘manufacturer and seller of precision turned engineering components’. Its total receipts as per Profit & Loss Account for the year ended 31/03/2016 was Rs.50,60,28,522/-. However, this receipt included some ‘other income’ of Rs.7,78,26,420/-, the break up of which was as under:-

We noted that the Tribunal has recorded this fact and held that the assessee’s income is below Rs.50 crores after reducing the income from profit on sale of asset amounting to Rs.22,89,312/- and interest on deposits amounting to Rs.52, 87,561/-. The Tribunal recorded this finding of fact in para 5 as under:- 5. We have heard both the parties, perused the materials available on record and gone through orders of the authorities below. As per ITR-6 filed by the assessee for the AY 2018-19, the Revenue from operations was at Rs.42.82 Crs. The assessee had also shown other income of Rs.7.78 Crs. The total of credits to P & L A/c was at Rs.50.60 Crs. If you take income from operations, being sales Revenue, it is less than Rs.50 Crs. If you take total of credits to P & L A/c, which includes other income, which is more than Rs.50 Crs. The rate of tax applicable for domestic companies for the impugned AY, if turnover is less than Rs.50 Crs. was at 25%. In case, the turnover is above Rs.50 Crs. then the rate of tax is 30%. The DCIT-CPC has adopted 30% rate of tax on the ground that the turnover of the assessee for the year under consideration was more than Rs.50 Crs., which is based on total of credits to P & L A/c as reported by the assessee in ITR6. Otherwise, there is no dispute with regard to rate of tax applicable to domestic companies if turnover is less than Rs.50 Crs. In this case, the Revenue from operations being sale of goods/services was at Rs.42.82 Crs. The assessee has reported other income including interest income and profit on sale of fixed assets, which is at Rs.7.78 Crs. The total of sum credits to P & L A/c is Rs.50.60 Crs. The arguments of the assessee that interest income and profit on sale of fixed assets, cannot be considered as - 4 - part of turnover. We find merit in the arguments of the assessee, because interest is in the nature of income from other sources, which cannot be part of operations from the Revenue. Similarly, profit on sale of fixed assets cannot be formed part of turnover. If you exclude above two items, the turnover of the assessee for the impugned assessment year comes below Rs.50 Crs. even if you include other items like miscellaneous income, profit on account of currency fluctuation, compensation received, etc. Therefore, we are of the considered view that the AO was erred in applying 30% rate of tax for computing tax liability of the assessee. Hence, we direct the AO to re-compute the turnover by excluding those items, which are not part of turnover of the assessee and apply 25% rate of tax as applicable to domestic company, in case the turnover of the assessee comes below Rs.50 Crs. as prescribed under the Act.

In the result, the appeal filed by the assessee is allowed.