TMI Blog2020 (5) TMI 259X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee, had applied his mind. His view was that the amendment are not applicable in the case of the assessee for the year under consideration which is a possible view. Section 263 of the Act does not empower him to take action on these facts to arrive at the conclusion that the order passed by the ITO is erroneous and prejudicial to the interest of the revenue. Since the material was there on record and the said material was considered by the ITO and a particular view was taken, the mere fact that different view can be taken, should not be the basis for an action U/s 263 of the Ac and it cannot be held to be justified. - Decided in favour of assessee. - ITA No. 171/Jodh/2018 - - - Dated:- 20-3-2020 - Shri R. C. Sharma, Accountant Member And Shri Sandeep Gosain, Judicial Member For the Assessee : Shri Amit Kothari And Ashok Mundra (CAs) For the Revenue : Shri K.C. Badhok CIT-DR ORDER PER SANDEEP GOSAIN, J.M. The present appeal has been filed by the assessee against the order of Ld. Pr. CIT, Bikaner dated 16.03.2018 passed U/s 263 of the Income Tax Act, 1961 (in short, the Act) for the assessment year 2013-14. Following grounds have been taken: ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessment proceedings were being conducted which is bad in law and bad on facts. 14. The appellant pray for suitable costs. 15. The appellant pray for stay of impugned order. 16. The appellant crave liberty to add, amend, alter, and modify any of the ground of appeal on or before its hearing before your honour. 2. The main grievance of the assessee relates to passing of order U/s 263 of the Act by the Pr.CIT. 3. The ld AR appearing on behalf of the assessee has reiterated the submissions as were made before the ld. Pr.CIT and also filed written submissions. The main contents of the written submissions filed before the ld Pr.CIT was reproduced as under: It appears from the notice that present proceeding have been initiated by considering the assessment order to be erroneous and prejudicial to the interest of the revenue for the reason that following facts have not been enquired and investigated before passing the assessment order: i) claim of net interest ₹ 75,81,296/- allowed without verification of nature of interest, business need of loans on which interest paid, ii) Godown rent allowed ₹ 10,15,93,864/- at Head office against deduction c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly because Assessing officer did not meticulously dealt with the issue of commission payments and genuineness of credit entries it can t be said that there was no application of mind by him, CIT was in error in exercising his revisionary power, impugned order quashed. We submit point wise reply in details against your observations in the following paras:- (1) EXPLANATION IN RESPECT OF CLAIM OF NET INTEREST ₹ 75,81,296/- In show cause notice your honour has stated that from appraisal of assessment record it is observed that assessee firm has received interest income ₹ 84,20,153/- against which interest paid during the year ₹ 1,60,01,449/- as such net interest of ₹ 75,81,296/- claimed as expenditure. The A.O. has not enquired and verified the nature of interest paid, necessity of heavy loan taken on interest for business need. As such claim of net interest is not only wrongly claimed but wrongly allowed by the A.O. without any enquiry and verification of the facts. The proposed revision u/s 263 for issue of non verification and enquiry of net interest allowed as expenditure is unwarranted and unsustainable due to the following reasons:- i) D ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 8377; 10,15,93,864/- in Head office account, neither assessment record kept such details nor the A.O. asked and verified the facts that assess has paid godown rent while deduction u/s 80IB(11A) claimed against ware house receipt. As per provision of section 80IB (11A) deduction against ware house receipts allowed only to those assessee which have own ware house. The proposed disallowance of claim of Godown rent of ₹ 10,15,93,864/- paid by H.O. is unwarranted and unsustainable due to the following reasons:- i) The learned DCIT Circle 2, Bikaner (A.O.) in his assessment order clearly stated That During the course of assessment proceedings, as stated above the issues for allowing claim of deduction u/s 801B (11A) were elaborately discussed with the A/R and detailed queries as stated below were raised: In this regard, in continuation of assessment proceeding your attention is drawn towards the first questionnaire issued by the undersigned dated 25.01.2016 whereby it was pointed out in query no. 18 that for claiming deduction u/s 80IB, it is mandatory that as per rule 18BBB of IT Rules, a report of audit in form no. 10CCB is appended with tax audit report given in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ory. Therefore it was construed that like report u/s 44AB, only one report can be e-filed hence, composite report comprising of the aggregate deduction was electronically filed at the portal of the income tax department. After end of the year separate trial balances are generated with reference to each unit and financial statements are clubbed out. Even interest on capital paid by the units situated at Boranada and Nokha to its Khara office against investment of capital at these locations which is shown in the Profit and Loss account of the respective Branches. The assessee is hereby furnishing separate reports in form no. 10CCB u/s 80IB of the I.T. Act in relation to all the eligible business activity which qualify for deduction u/s 80IB (11A). The assessee have made a consolidated claim of the 80IB in his computation is ₹ 21131163.00. Statement showing how the assessees have calculated the amount of claim u/s 80IB is enclosed with the letter. The learned A.O. in his order stated that during the course of assessment proceedings the A/R of the assessee was queried regarding working and justification of the amount of the claim made u/s 80IB by the firm as the working giv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Ratio between the above two - 85:15 3. Godown Salary Against Rental Receipts - ₹ 37,62,531/- Against Infrastructure receipt - ₹ 7,48,813/- Ratio between the above two - 83:17 4. Bardana Expenses Against Rental Receipts - ₹ 5,93,185/- Against Infrastructure receipt - ₹ 98,327/- Ratio between the above two - 86:14 5. NCDEX Charges Against Rental Receipts - ₹ 30,91,044/- Against Infrastructure receipt - ₹ 7,00,863/- Ratio between the abo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ses which are not owned by the assessee. Your view that A.O. has not verified and investigate the Godown rent paid at H.O. ₹ 10,15,93,864/- against which assessee has claimed deduction u/s 80IB (11A) is not correct because assessee has not claimed deduction u/s 80IB(11A) on this rental income. So your holding that order of A.O. is erroneous and prejudicial to the interest of revenue is not correct. (3) EXPLANATION IN RESPECT OF NON VERIFICATION OF MUNICIPAL TAX AND INSURANCE CHARGES ₹ 3,29,282/- AND 40,36,507/- RESPECTIVELY. In show cause notice your honour have stated that from appraisal of assessment record it is observed that assessee has claimed municipal tax and insurance charges ₹ 3,29,282/- and 40,36,507/- respectively. Assessment records neither kept any details and evidence for such payment nor any explanation about the expenditure incurred for which properties. The A.O. has not verified the claim of expenditure so order of A.O. is erroneous and prejudicial to the interest of revenue. The proposed disallowances are unwarranted and unsustainable due to the following reasons:- i) In the course of assessment proceeding learned A.O. has scruti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessment order A.O. held that This year the assessee firm has claimed 25% of deduction u/s 80IB(11A) on its first unit stared commencing business at 18th KM Stone, NH-15, Khara from AY 2008-09, being the sixth year of the claim and in respect of other two undertakings situated at Nokha (year of commencement of business AY 2012-13) and Boranada, Jodhpur (year of commencement of business AY2009-10), the firm has claimed 100% of deduction u/s 80IB . ii) In the assessment order learned A.O. has specifically stated that You are claiming three independent undertakings as according to you initial assessment year of commencement of operation of each of the unit is different but the online submission of the audit report in form 10CCB is only in respect of Ist unit at Khara and not mentioning of other units situated at Boranada (Jodhpur) and Nokha is done therein. It is not understandable that how you have made a consolidated claim of 80IB in your computation of ₹ 2,11,31,163/-. The assessee in his reply stated that The year under review was the first year in which the e-filing of the audit report in form 10CCB under section 80IB became mandatory. Therefore it was construed t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er the entire combat of the scheme relating to the tax holiday provided by the Legislature, we find that the deductions are available under various provisions when the assessee has contributed something towards the infrastructure development of the country. The same views were expressed in the case of Shankar K. Bhanage, Mumbai Vs Department of Income Tax on 29 August, 2012 (INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH 'J' MUMBAI) Further in the case of A. P. State Warehousing Corporation V/s. Dy. Commissioner of Income-tax, Hyderabad (Income Tax Appellate Tribunal Hyderabad- 24/01/2014) it was held that: The insertion of sub-section (11A) is intended to encourage building of storage capacities, by providing that any undertaking engaged in integrated bulk handling, storage and transportation would be allowed hundred per cent deduction for the first five years and thirty per cent deduction for the next five years. Thus, Sec 80IB (11A) is applicable to income derived from the integrated business of handling, storage and transportation of food grains. A perusal of the activities of the assessee in association with the Food Corporation of India, as demonstrated by the le ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ee by ITO is that the assessee is not providing facility of transportation of food grains. In this connection authority said The wordings transportation of food grains does not indicate that transportation has to be done by the assessee own trucks or transport system. The transportation of food grains may be through hired vehicles as well. The assessee should not be deprived of beneficial provisions of section 80IB (11A) of the Act because certainly he is engaged in the handling, storage and some part of transportation of food grains cannot be ruled out. It was held that taking over all situations under consideration and to encourage the storage of food grains at doorsteps of farmers. The storage of food grains in warehousing at door steps will certainly improve the economic conditions of farmers by ensuring them proper cost at proper time and they will also be saved perpetual exploitation of middle men. Such beneficial provisions should not be sacrificed for technical narrow interpretation of relevant provisions. Even minor transportation facility should help assessee for claiming benefit of provisions of section 80IB (11A) of the Act. In the interest of justice, we set as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of The DCIT, Circle-4, Ahemdabad V/s. Mahadev Pulses Pvt. Ltd., Kalupur (IN THE INCOME TAX APPELLATE TRIBUNAL AHMADABAD, 24/08/2016) it was held that the Legislative intent is not to encourage transportation or handling of food grains but the Legislative intent is to encourage construction of godowns and warehouses with a view to providing storage of food grains . Hence in views of all the above orders and business activities carried by assessee firm it is clear that the present case is definitely covered under the eligibility criteria of section 80IB (11A). v. During the course of assessment proceeding the A.O. has accepted the claim of exempted income of handling and transportation only after detailed scrutiny of receipts and expenditure claimed their against. vi. Your honour has failed to consider that H.O. (Khara) has tractor shown in fixed assets schedule of which w.d.v. is ₹ 2,47,459.00 used for transportation of goods stored in warehouse. vii. Yours honour has not considered the fats that Branches have received handling and transportation receipts of ₹ 6,74,730/- against which wages for handling and transportation charges paid ₹ 1,64,487/-. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t and fire extinguisher having very nominal value required at ware houses. All these fixed assets are owned by the assessee and wholly used for ware housing business so assessee is entitled to claim depreciation on such assets. Balance sheet with schedules, Form No 3CD and Annexure of depreciation claimed are part of assessment record so your view that A.O. has not verified the records before allowing depreciation is neither correct nor tenable in the eyes of law. Hence your holding that order of A.O. is erroneous and prejudicial to the interest of revenue is not correct and not justified. (8) EXPLANATION IN RESPECT OF CLAIM OF DUNNAGE MATERIAL In show cause notice your honour have stated that on appraisal of Trading account assessee has claimed dunnage material of ₹ 23,10,287/-, in support of the claim no evidence is kept on assessment record. Dunnage material is capital expenditure and not consumed or wasted in a year but having some useful life over years. If part of the dunnage material is destroyed same is saleable as scrap. The A.O. has not enquired and verified before allowing the claim as expenditure. In this connection we beg to draw your kind attention ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ase may be. iii. Your honour has wrongly considered that provision of section 40(b)(v) of the Income Tax Act, 1961 mandatorily while it is discretionary for the assessee to have made such a claim. All partners of the firm were agreeing not to pay remuneration to working partners. iv. In case of TULSA RAM KANHIYALAL SONS vs. INCOME TAX OFFICER , ITAT, JODHPUR SMC BENCH, ITA No. 226/Jd/2008; Asst. yr. 2005-06 decision given in the favour of the assessee that the finding reached by learned CIT(A) that the assessee has circumvented the tax liability by not claiming the deduction on account of salary and interest to partners so as to take benefit of set off of brought forward losses will not result into tax evasion but was merely on legitimate tax planning done by the appellant. Keeping in view the overall conspectus of the case, no justification in the action of the learned CIT (A) in upholding the decision of learned Assessing authority in enforcing deduction of interest on capital and remuneration to working partners of the firm while computing the assessable income for the year under consideration. v. As per provision of section 40(b) remuneration must be authorised a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 83 (SC) wherein the Hon ble Supreme Court had observed that Section 263 of the Income Tax Act, 1961, makes it clear that the prerequisite for the exercise of jurisdiction by the Commission suo moto under it, is that the order of the Income Tax Officer is erroneous in so far as it is prejudicial to the interests of the revenue. Even if one of them recourse cannot be held to Section 263(1) of the Act. The A.O. after going through the material on record and after considering the explanation of the assessee, had applied his mind. His view was that the amendment are not applicable in the case of the assessee for the year under consideration which is a possible view. The CIT did not agree with the conclusion reached by the ITO. However, Section 263 of the Act does not empower him to take action on these facts to arrive at the conclusion that the order passed by the ITO is erroneous and prejudicial to the interest of the revenue. Since the material was there on record and the said material was considered by the ITO and a particular view was taken, the mere fact that different view can be taken, should not be the basis for an action U/s 263 of the Ac and it cannot be held to be justifi ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
