The Commissioner Of Income Tax,Chennai v. M/S.tractor And Farm Equipment Ltd

IN THE HIGH COURT OF JUDICATURE AT MADRAS DATED: 15.04.2021 CORAM THE HON'BLE MR.JUSTICE M. DURAISWAMYANDTHE HON'BLE MRS.JUSTICE R.HEMALATHA Tax Case Appeal No.1023 of 2014 The Commissioner of Income Tax,Chennai.... Appellant Vs. M/s.Tractor and Farm Equipment Ltd.,35, Nungambakkam High Road,Nungambakkam, Chennai – 600 034. ... Respondent PRAYER : Tax case Appeal filed under Section 260A of theIncome Tax Act, 1961 against the order of the Income TaxAppellate Tribunal, Madras "A" Bench, dated 25.05.2012 passedin I.T.A.No.607/Mds/2012 for the assessment year 2002-03. and Preferred against the order of the Office of theCommissioner of Income Tax (Appeals)-III, No.121, MahatmaGandhi Road, Chennai 600 034, ITA.No.827/10-11/A.III, dated30.12.2011 G.I.No./PAN.No. , Year of the assessment2003-2004 and Date of order 30.12.2011. and Against the order of the Office of the Commissioner ofIncome Tax (Appeals)-III, No.121, Mahatma Gandhi Road, Chennai600034,ITA.No.697/09-10/A.III,Dated30.12.2011,G.I.No/PAN.No. , Year of the Assessment 2002-2003 anddate of order 30.12.2011. and Against the Order of the Office of the AssistantCommissioner of Income Tax, Company Cirlce III (2), Chennai –34, GIR No./PAN. , Status Company, Assessment Year31.03.2003 and date of Assessment order: 31.12.2010. and Against the Order of the Office of the DeputyCommissioner of Income Tax, Company Circle III (2), Chennai600 034, GIR.No/PAN , status: Company, AssessmentYear 2002-2003 and Date of Assessment Order 29 December 2009. For Appellant : Mr.M.Swaminathan, Senior Standing Counsel assisted by Ms.V.Pushpa, Standing Counsel https://hcservices.ecourts.gov.in/hcservices/ For Respondent: Mr.Vikram Vijayaraghavan J U D G M E N T (Delivered by M.DURAISWAMY, J.) Challenging the order passed in I.T.A.No.607/Mds/2012 inrespect of the assessment year 2002-03 on the file of theIncome Tax Appellate Tribunal, Madras "A" Bench, Chennai, theRevenue has filed the above appeal. Against the Order of the Office of the DeputyCommissioner of Income Tax, Company Circle III (2), Chennai600 034, GIR.No/PAN , status: Company, AssessmentYear 2002-2003 and Date of Assessment Order 29 December 2009. For Appellant : Mr.M.Swaminathan, Senior Standing Counsel assisted by Ms.V.Pushpa, Standing Counsel https://hcservices.ecourts.gov.in/hcservices/ For Respondent: Mr.Vikram Vijayaraghavan J U D G M E N T (Delivered by M.DURAISWAMY, J.) Challenging the order passed in I.T.A.No.607/Mds/2012 inrespect of the assessment year 2002-03 on the file of theIncome Tax Appellate Tribunal, Madras "A" Bench, Chennai, theRevenue has filed the above appeal. 2.It is the case of the appellant – Revenue that theassessee – Company filed its return of income on 31.10.2002declaring an income of Rs.26,16,02,820/- and the return wasprocessed under Section 143 (1) on 27.06.2003. Thereafter,notice under Section 148 dated 18.03.2009 was served on theassessee and the assessee filed a letter stating that theoriginal return filed may be treated as one in response to thenotice issued under Section 148. Thereafter, notice underSection 143(2) dated 26.08.2009 was served on the assessee andbased on the particulars filed by the assessee, the assessmentwas finalized. The Assessing Officer found that the assesseehad debited an amount of Rs.2,30,30,088/- towards Entry Feeunder the head Miscellaneous Charges in the Profit and Lossaccount and therefore, explanation was sought from theassessee as to why it was debited as Entry Fee since the entrytax was adjustable only from sales tax and will not form partof expenditure debited to Profit and Loss account. Further,the assessee has not accounted for sales tax collected andpaid through the Profit and Loss account. The assessee haspaid tax on receipt of raw material, component, parts andinputs within the State of Karnataka and outside the State.There is no provision to adjust the entry tax paid underSection 3(1) against the payment of tax made under KarnatakaSalex Tax Act for any final product. Therefore, the payment ofentry tax, receipt of raw material, etc., which are used inthe manufacture of an intermediate or finished product has tobe charged to the Profit and Loss account. Entry tax ispayable under Section 4B(1) on purchase value of motorvehicles at the time of entry of such vehicles in the localarea for use or sale which is liable for registration. Afterconsidering the explanation of the assessee, the AssessingOfficer held that the assessee's claim of entry tax in theProfit and Loss account is to be disallowed and added back tothe total income. Aggrieved over the order passed by theAssessing Officer, the assessee filed an appeal before theCommissioner of Income Tax (Appeals) and the AppellateAuthority allowed the appeal following the decision renderedin the case of TVS motors Limited for the assessment year2003-04. Aggrieved over the same, the Revenue filed an appealbefore the Income Tax Appellate Tribunal and the Tribunal alsoconfirmed the order of the CIT (Appeals) and dismissed theappeal. Challenging the order passed by the Income TaxAppellate Tribunal, the Revenue has filed the above appeal. 3.The above appeal was admitted on the followinghttps://hcservices.ecourts.gov.in/hcservices/substantial questions of law: “1)Whether on the facts and in thecircumstances of the case, the Income Tax AppellateTribunal was right in upholding the order of CIT(A)who deleted the disallowance of entry tax on rawmaterials and the inputs that are brought intoassessee factory at Bangalore for manufacture ofTractors? 2)Whether the finding of the Tribunal is properespecially when the assessee has debited an amountof Rs.2,30,30,088/- towards entry fees against themiscellaneous charges in the Profit and Lossaccount?” 3.The above appeal was admitted on the followinghttps://hcservices.ecourts.gov.in/hcservices/substantial questions of law: “1)Whether on the facts and in thecircumstances of the case, the Income Tax AppellateTribunal was right in upholding the order of CIT(A)who deleted the disallowance of entry tax on rawmaterials and the inputs that are brought intoassessee factory at Bangalore for manufacture ofTractors? 2)Whether the finding of the Tribunal is properespecially when the assessee has debited an amountof Rs.2,30,30,088/- towards entry fees against themiscellaneous charges in the Profit and Lossaccount?” 4.Heard Mr.M.Swaminathan, learned senior standing counselappearing for the appellant – Revenue and Mr.VikramVijayaraghavan, learned counsel appearing for the respondent –assessee. 5.When the appeal is taken up for hearing,Mr.M.Swaminathan, learned senior standing counsel appearingfor the appellant – Revenue fairly submitted that thequestions of law that were framed in the above appeal at thetime of admission were already decided against the Revenue bythe Hon'ble Division Bench of this Court in Commissioner ofIncome Tax, Chennai Vs. TVS Motors Ltd., reported in [2014]364 ITR 1 (Madras), wherein the Hon'ble Division Bench of thisCourt held as follows: “... 33. On the question of deduction under EntryTax, the Tribunal rightly considered the claim of theassessee for deduction of entry tax payment made bythe assessee. The Assessing Officer admitted that thededuction on account of Entry Tax is allowable if thepayment is actually made and admittedly, payment ofentry tax has been made by the assessee; the entrytax paid would get the adjustment as against theSales Tax liability, consequently, any deductionwould amount to total deduction.34. We do not agree with the said line of reasoning.The payment made on the entry tax demand and itsadjustment against the Sales Tax assessment hasnothing to do with deduction provision under theIncome Tax Act on the entry tax paid. Consequently,we reject the Revenue's plea on double deduction. Theprovisions of Sales Tax Act and the Income Tax Actare on the different lines. The adjustment or thetreatment given under the Sales Tax Act cannot beread in to the Income Tax Act and the only questionis whether the entry tax actually paid by theassessee during the year under consideration isallowable as deduction or not. The Tribunal rightlyallowed the deduction claimed by the assessee onhttps://hcservices.ecourts.gov.in/hcservices/account of tax payment made under Entry Tax Act. Consequently, we reject the Revenue's appeal.35. Insofar as T.C.(A). No. 173 of 2009 is concerned,the first question on the claim of foreign exchangefluctuation of forward contract is concerned, thematter stands remitted back to the Assessing Officerfor de novo consideration to the extent as indicatedabove. The order of the Tribunal is set aside.36. As regards the claim of 100% depreciation by theassessee on the temporary parking shed, the Revenue'sappeal stands allowed.37. In the result, T.C.(A).173 of 2009 stands partlyallowed.38. Insofar as T.C.(A). No. 174 of 2009 is concerned,as regards the first question on Research andDevelopment under Section 35(1)(iv) of the Act, thesame is held against the Revenue. So too theexpenditure on replacement of dies and moulds, wehold that the expenditure falls under Section 31 ofthe Act and not under Section 37 of the Act. To thatextent, the Tribunal's order stands modified. 39.As regards the Entry Tax under Section 43B of theAct, the question is answered against the Revenue.Consequently, the Tax Case (Appeal) No. 174 of 2009stands dismissed. No costs.” 6.Mr.Vikram Vijayaraghavan, the learned counsel appearingfor the respondent – assessee submitted that in view of theratio laid down by the Hon'ble Division Bench of this Courtreported in [2014] 364 ITR 1 (Madras), cited supra, thequestions of law may be decided against the Revenue and theappeal may be dismissed. 7.In view of the submissions made by the learned counselon either side, following the ratio laid down by the Hon'bleDivision Bench of this Court in the judgment in Commissionerof Income Tax, Chennai Vs. TVS Motors Ltd., reported in [2014]364 ITR 1 (Madras), cited supra, the questions of law aredecided against the Revenue and the Tax Case Appeal isdismissed. No costs. Sd/- Assistant Registrar (CS-III) //True Copy// va Sub Assistant Registrar To 1. Income Tax Appellate Tribunal, Madras "A" Bench. https://hcservices.ecourts.gov.in/hcservices/ 2.The Commissioner of Income Tax (Appeals)-III, No.121, Mahatma Gandhi Road, Chennai 600 034. 3.The Assistant Commissioner of Income Tax, Company Circle III (2), Chennai – 34. 4.The Deputy Commissioner of Income Tax, Company Circle III (2), Chennai 600 034. +1cc to Mr.M.Swaminathan, Senior Standing Counsel, (Income taxDepartment) Advocate, S.R.No. 22930 +1cc to Mr.Subbaraya Aiyar, Advocate, S.R.No. 22931 Tax Case Appeal No.1023 of 2014 JP II(CO)GN(16/08/2021)