Ita/856/2008 Of The Commissioner Of Income Tax v. M/S.motor Industries Co. Ltd

IN THE HIGH COURT OF KARNATAKA AT BANGALORE DATED THIS THR 25 DAY OF AUGUST, 2014. PRESENT THR HON’BLE MR.JUSTICE N. KUMAR AND THR HON’BLE MRS..JUSTICK RATHNAKALA INCOME TAX APPEAL NO.856 OF 2008 BRHTIWHR 1.THE COMMISSIONER OF INCOME-TAX,C R BUILDING,QUEENS ROAD,BANGALORE.|C R BUILDING,QUEENS ROAD,BANGALORE.| 2.THE AsSsT. COMMISSIONER OF INCOME-TAX,CIRCLE-12(1).C.R. BUILDING, QUEENS ROAD,BANGALORE.| .. APPBLLANTS (BY SRI K.V.ARAVIND, ADV.) AND:M/S. MOTOR INDUSTRIES CO. LTD.,(BOSCH LTD..,)HOSUR ROAD, ©ADUGODI,BANGALORE-560 O30. RBSPONDENT (BY SRI. K P KUMAR, SR.COUNSEL FOR:M/S.KING & PARTRIDGE, ADVS.) THIS INCOMB TAX APPKAL [IS FILED UNDERSECTION 260-A OF I.T. ACT, 1961 ARISING OUT OF ORDER|DATED 14-03-2008 PASSED IN ITA NO.277/BNG/2005,|FOR THE ASSESSMENT YEAR 2000-2001, PRAYING THAT|THIS HON'BLE COURT MAY BEB PLEASED TO: iFORMULATE THE SUBSTANTIAL QUESTIONS OFLAW STATED THEREIN,LAW STATED THEREIN, Il.ALLOW THR APPEAL AND SET ASIDE THE ORDER|PASSEDBY|THERINCOME-TAXAPPBRLLATETRIBUNAL, BANGALORE IN ITA NO.277/BNG/20059,DATED 14-03-2008 CONFIRM THE ORDERS OF THEASSISTANTCOMMISSIONBROF|INCOME|TAX,CIRCLE-12(1), BANGALORE IN THE INTEREST OFJUSTICE AND EQUITY.PASSEDBY|THERINCOME-TAXAPPBRLLATETRIBUNAL, BANGALORE IN ITA NO.277/BNG/20059,DATED 14-03-2008 CONFIRM THE ORDERS OF THEASSISTANTCOMMISSIONBROF|INCOME|TAX,CIRCLE-12(1), BANGALORE IN THE INTEREST OFJUSTICE AND EQUITY. THIS APPBAL COMING ON FOR FINAL HBARING THIS)DAY,N.KUMAR J°*DELIVBRED THR FOLLOWING: JU DBGMENT This appeal is preferred by the Revenue challenging|the order passed by the Tribunal. 2. The appeal was admitted on 23.06.2009, to considerthe following substantial questions of law: “1) Whether the Appellate Authorities were inholding that excise duty and sales tax amountingto Rs.2,45,85,33,998/- cannot be included in thetotal turnover in the light of the judgment of thisHon'ble Court in ITA.No.81/2003 applicable toassessment year 1994 - 95 without taking intoconsideration the amended Section 145 A of theAct introduced w.e.f. 01.04.1999 and applicableto the current assessment year? 2) Whether the Appellate Authorities were correctin holding that receipts of Rs.5,12,54,198/- fromsale of scrap cannot be included in the totalturnover for the purpose of computation ofdeduction u/s.8OHHC of the Act? 3) Whether the Appellate Authorities were correctin holding that 90% of the fees received fromRobert Bosch of Rs.4,77,65,406/- cannot beexcluded in accordance with Explanation tosection SOHHC of the Act? 4) Whether the Appellate Authorities were correctin holding that the provision for warranty is anallowable deduction despite the assessee havingnot expended the same which is a contingentliability? 5) Whether the Appellate Authorities were correctin holding that TDS made towards royalty andfees for technical services remitted on 07.06.2000is allowable despite the same being beyond theperiod of two months stipulated u/w.200(1) r/w.Rule 3O(1)(b)(y(1) and the same is not allowableas a deduction u/s.40(a}(t) of the Act?| The substantial questions of law No.1 to 4 are alreadyanswered in favour of the same assessee and against theRevenue in ITA.Nos.7/76/2007 and connected matters for theassessment years 1993 - 94 to 1997 - 98 on 13.06.2014.| Hence, substantial questions of law No.1 to 4 need not beconsidered again. 3. Insofar as the substantial question of law No.o isconcerned, it revolves around interpretation of Section 200(1)r/w. Rule 30(1)(b)(i)(1) and 4O(a)(i) of the Act. The point of|controversy is in respect of royalty, where tax was deductedat source before 31.03.2000. However, it was remitted on07.06.2001, beyond two months period prescribed undersection 30(1)(b)(i)(1) of the Act. Therefore, the question for|consideration is,in which financial year the payment ofdeduction is to be taken into account? 4 Learned Counsel tor the Revenue relied on Section| 40(a)(i) of the Act which reads as under: Hence, substantial questions of law No.1 to 4 need not beconsidered again. 3. Insofar as the substantial question of law No.o isconcerned, it revolves around interpretation of Section 200(1)r/w. Rule 30(1)(b)(i)(1) and 4O(a)(i) of the Act. The point of|controversy is in respect of royalty, where tax was deductedat source before 31.03.2000. However, it was remitted on07.06.2001, beyond two months period prescribed undersection 30(1)(b)(i)(1) of the Act. Therefore, the question for|consideration is,in which financial year the payment ofdeduction is to be taken into account? 4 Learned Counsel tor the Revenue relied on Section| 40(a)(i) of the Act which reads as under: 40.Notwithstanding anything to the contrary in|sections 30 to 38, the following amounts shall notbe deducted in computing the income chargeableunder the head “Profits and gains of business orprofession” ,— (a)in the case of any assessee—| [fyany interest (not being interest on aloan issued for public subscription before the 1stday of April, 1938), royalty, fees for technicalservices or other sum chargeable under this Act,which ts payable,— (A)outside India; or (B)in India to a non-resident, not being acompany or to a foreign company, on which tax isdeductible at source under Chapter XVI-B andsuch tax has not been deducted or, afterdeduction, has not been paid during the previousyear, or in the subsequent year before the expiryof the time prescribed under sub-section (1) ofsection 200 : Provided that where in respect of any suchsum, tax has been deducted in any subsequentyear or, has been deducted in the previous yearbut paid in any subsequent year after the expiryof the time prescribed under sub-section (1) ofsection 200, such sum shall be allowed as adeduction in computing the income of the previousyear in which such tax has been paid. Explanation.—For the purposes of this sub-clause,— (A)“royalty ~Shallhavethe SCITMmeaning as in Explanation 2 to clause (vi) of sub-section (1) of section 9; (B)“fees for technical services” shallhave the same meaning as in Explanation 2 toclause (vu) of sub-section (1) of section 9; o. He submits that the proviso makes it very clear thatin respect of any such sum, if the tax has been deducted in subsequent year or has been deducted in the previous year| and paid in the subsequent year after the expiry of the timeprescribed under Section 200(1) of the Act, such sum shall|be allowed as deduction in computing the income of theprevious year in which such tax has been paid. The saidproviso was inserted by Finance (No.2) Act of 2004 witheffect from 01.04.2005. _ 6. However, we are concerned with the assessmentyear 2000 —- O1. During that period the proviso to Section 40ot the Act read as under:- “Provided that where in respect of any such sum, tax has been paid or deducted under ChapterXVU-B in any subsequent year, such sum shall beallowed as a deduction in computing the income.of the previous year in which such tax has beenpaid or deducted”. 7. Therefore, it is clear that prior to 2004, even if the|amount is deducted and not paid during the relevant year|and when it is paid subsequently, the benefit of the|deduction is given to the previous year prior to the date ofdeduction. That is precisely what the tribunal has held.|Therefore, we answer the substantial question of law in|favour of the assessee and against the Revenue. We do not| 255�3>;�D571<�1>�<012�344536����@@B791>A6;��<05�344536�12� 912D12259�� ��������������� ������ >=I ��������������