Cell Com Teleservices Pvt. Ltd., Ghaziabad V. DCIT, Circle- 1, Ghaziabad

CO 51/DEL/2018

• Counselvise Citation: [2018] 123 COUNSELVISE.COM (IT) 3954 (ITAT-DELHI)
• Duration Of Justice: 4 month(s) 26 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 31-07-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: G
• Assessment Year: 2010-2011
• Appeal Filed On: 05-03-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: KAUSHLENDRA TIWARI
• Keywords: Business expenditure; Audit objection; Additional evidence; Tax effect; Onus to prove
• Section: 43B; 115JB; 12AA; 37

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH E, NEW DELHI BEFORE SH. N. K. SAINI, AM AND SMT. SUCHITRA KAMBLE , JM ITA NO. 2683/DEL/2016 : ASSTT. YEAR : 2010-11 DCIT CIRCLE-1 GHAZIABAD VS CELL COM TELESERVICES PVT. LTD., A- 52, A-36, UPSIDC INDUSTRIAL AREA, SIKANDARABAD, BULANDSHAHAR- 203205 PAN-AACCC1688D (APPELLANT) (RESPONDENT) CO NO. 51/DEL/2018 : ASSTT. YEAR : 2010-11 CELL COM TELESERVICES PVT. LTD., A- 52, A-36, UPSIDC INDUSTRIAL AREA, SIKANDARABAD, BULANDSHAHAR-203205 PAN-AACCC1688D VS DCIT CIRCLE-1 GHAZIABAD (APPELLANT) (RESPONDENT) PAN NO- AACCC1688D ASSESSEE BY : SH. KAUS HLENDRA TIWARI, SR. DR REVENUE BY : SH. AKHILE SH KUMAR, ADVOCATE DATE OF HEARING : 30.05.2018 DATE OF PRONOUNCEMENT : 31.07.2018 ORDER PER N. K. SAINI, AM: THE APPEAL BY THE DEPARTMENT AND THE CROSS OBJECTIO N BY THE ASSESSEE ARE DIRECTED AGAINST THE ORDER DATED 09.02 .2016 OF THE LEARNED CIT(A), MUZAFFARNAGAR. IN THE DEPARTMENTAL APPEAL FOLLOWING GROUNDS HAVE BEEN TAKEN:- ITA NO. 2683/DEL/2016 CO NO. 51/DEL/2018 2 I. THE LD. CIT(A) HAS ERRED IN LAW AS WELL AS ON FACT BY ALLOWING THE AMOUNT OF RS. 1,27,284/- OUT OF DISALLOWANCE OF RS. 12,36,720/- MADE U/S 43B IGNORI NG THE FACT THAT IT HAS BEEN LEVIED ON ACCOUNT OF NON- REGISTRATION WITH VAT AUTHORITIES WHICH BEING MANDA TED BY LAW AND AN EXPENDITURE IN INFRINGEMENT OF LAW IS NOT ALLOWABLE U/S 43B. II. THE LD. CIT(A) HAS ERRED IN LAW AS WELL AS ON FACTS BY DELETING ADDITION OF RS. 30,12,580/- MADE U/S 68 OF THE I.T. ACT, 1961 AS THE ASSESSEE HAS FAILED TO DISCHA RGE HIS ONUS TO PROVE THE IDENTITY, GENUINENESS AND CAPACIT Y OF THE CREDITORS. III. THE LD. CIT(A) HAS ERRED IN LAW IN IGNORING THE DEC ISION OF HONBLE KERELA HIGH COURT IN THE CASE OF UNNEERI KUTTY WHICH HAS BEEN AFFIRMED BY THE HONBLE SUPREM E COURT IN THE CASE IN (SLP (CIVIL) NO. 4789 OF 1993) 201 ITR 23 (ST.). 2. WE HAVE CONSIDERED THE SUBMISSIONS OF BOTH THE P ARTIES AND PERUSED THE MATERIAL ON RECORD. IT IS NOTICED THAT THE TAX EFFECT INVOLVED IN THE DEPARTMENTAL APPEAL IS LESS THAN RS . 20,00,000/- THEREFORE, THE DEPARTMENT OUGHT NOT TO HAVE FILED T HE APPEAL IN VIEW OF THE CIRCULAR NO. 3/2018 DATED 12.7.2018. 3. AFTER CONSIDERING THE SUBMISSIONS OF BOTH THE PA RTIES AND THE MATERIAL AVAILABLE ON RECORD, IT IS NOTICED THAT SE CTION 268A HAS BEEN INSERTED BY THE FINANCE ACT, 2008 WITH RETROSP ECTIVE EFFECT FROM 01/04/99. THE SAID SECTION 268 OF THE ACT PROV IDES THAT THE BOARD MAY ISSUE INSTRUCTION OR DIRECTIONS TO THE OT HER INCOME-TAX AUTHORITIES FIXING MONETARY LIMITS FOR NOT FILING T HE APPEALS BEFORE THE APPELLATE TRIBUNAL OR THE COURTS, SAID INSTRUCT IONS/DIRECTIONS ARE BINDING ON THE INCOME TAX AUTHORITIES. ITA NO. 2683/DEL/2016 CO NO. 51/DEL/2018 3 4. IT IS NOTICED THAT THE CBDT HAS ISSUED CIRCULAR NO. 3 OF 2018 DATED 11.07.2018, VIDE WHICH IT HAS REVISED THE MON ETARY LIMIT TO RS.20,00,000/- FOR NOT FILING THE APPEAL BEFORE TH E TRIBUNAL, THE SAID CIRCULAR READS AS UNDER: SUBJECT: REVISION OF MONETARY LIMITS FOR FILING OF APPEALS BY THE DEPARTMENT BEFORE INCOME TAX APPELLATE TRIBU NAL, HIGH COURTS AND SLPS/APPEALS BEFORE SUPREME COURT- MEASURES FOR REDUCING LITIGATION-REG. REFERENCE IS INVITED TO BOARDS CIRCULAR NO. 21 OF 2015 DATED 10.12.2015 WHEREIN MONETARY LIMITS AND OTHER CONDITIONS FOR FILING DEPARTMENTAL APPEALS (IN INCO ME-TAX MATTERS) BEFORE INCOME TAX APPELLATE TRIBUNAL, HIGH COURTS AND SLPS/ APPEALS BEFORE SUPREME COURT WERE SPECIFIED. 2. IN SUPERSESSION OF THE ABOVE CIRCULAR, IT HAS BE EN DECIDED BY THE BOARD THAT DEPARTMENTAL APPEALS MAY BE FILED ON MERITS BEFORE INCOME TAX APPELLATE TRIBUNA L AND HIGH COURTS AND SLPS/ APPEALS BEFORE SUPREME COURT KEEPING IN VIEW THE MONETARY LIMITS AND CONDITIONS SPECIFIED BELOW. 3. HENCEFORTH, APPEALS/ SLPS SHALL NOT BE FILED IN CASES WHERE THE TAX EFFECT DOES NOT EXCEED THE MONETARY L IMITS GIVEN HEREUNDER: S NO APPEALS/SLPS IN INCOME-TAX MATTERS MONETARY LIMIT (IN RS) 1 BEFORE APPELLATE TRIBUNAL 20,00,000/- 2 BEFORE HIGH COURT 50,00,000/- 3 BEFORE SUPREME COURT 1,00,00,000/- IT IS CLARIFIED THAT AN APPEAL SHOULD NOT BE FILED MERELY BECAUSE THE TAX EFFECT IN A CASE EXCEEDS THE MONETA RY LIMITS PRESCRIBED ABOVE. FILING OF APPEAL IN SUCH CASES IS TO BE DECIDED ON MERITS OF THE CASE. ITA NO. 2683/DEL/2016 CO NO. 51/DEL/2018 4 4. FOR THIS PURPOSE, TAX EFFECT MEANS THE DIFFERE NCE BETWEEN THE TAX ON THE TOTAL INCOME ASSESSED AND TH E TAX THAT WOULD HAVE BEEN CHARGEABLE HAD SUCH TOTAL INCO ME BEEN REDUCED BY THE AMOUNT OF INCOME IN RESPECT OF THE ISSUES AGAINST WHICH APPEAL IS INTENDED TO BE FILED (HEREINAFTER REFERRED TO AS DISPUTED ISSUES). FURT HER, TAX EFFECT SHALL BE TAX INCLUDING APPLICABLE SURCHARGE AND CESS. HOWEVER, THE TAX WILL NOT INCLUDE ANY INTERES T THEREON, EXCEPT WHERE CHARGEABILITY OF INTEREST ITSELF IS IN DISPUTE. IN CASE THE CHARGEABILITY OF INTEREST IS THE ISSUE UND ER DISPUTE, THE AMOUNT OF INTEREST SHALL BE THE TAX EFFECT. IN CASES WHERE RETURNED LOSS IS REDUCED OR ASSESSED AS INCOM E, THE TAX EFFECT WOULD INCLUDE NOTIONAL TAX ON DISPUTED A DDITIONS. IN CASE OF PENALTY ORDERS, THE TAX EFFECT WILL MEAN QUANTUM OF PENALTY DELETED OR REDUCED IN THE ORDER TO BE AP PEALED AGAINST. 5. THE ASSESSING OFFICER SHALL CALCULATE THE TAX EF FECT SEPARATELY FOR EVERY ASSESSMENT YEAR IN RESPECT OF THE DISPUTED ISSUES IN THE CASE OF EVERY ASSESSEE. IF, IN THE CASE OF AN ASSESSEE, THE DISPUTED ISSUES ARISE IN MORE T HAN ONE ASSESSMENT YEAR, APPEAL CAN BE FILED IN RESPECT OF SUCH ASSESSMENT YEAR OR YEARS IN WHICH THE TAX EFFECT IN RESPECT OF THE DISPUTED ISSUES EXCEEDS THE MONETARY LIMIT S PECIFIED IN PARA 3. NO APPEAL SHALL BE FILED IN RESPECT OF A N ASSESSMENT YEAR OR YEARS IN WHICH THE TAX EFFECT IS LESS THAN THE MONETARY LIMIT SPECIFIED IN PARA 3. IN OTHER WO RDS, HENCEFORTH, APPEALS CAN BE FILED ONLY WITH REFERENC E TO THE TAX EFFECT IN THE RELEVANT ASSESSMENT YEAR. HOWEVER , IN CASE OF A COMPOSITE ORDER OF ANY HIGH COURT OR APPELLATE AUTHORITY, WHICH INVOLVES MORE THAN ONE ASSESSMENT YEAR AND COMMON ISSUES IN MORE THAN ONE ASSESSMENT YEAR, APPEALS SHALL BE FILED IN RESPECT OF ALL SUCH ASSES SMENT YEARS EVEN IF THE TAX EFFECT IS LESS THAN THE PRESC RIBED MONETARY LIMITS IN ANY OF THE YEAR(S), IF IT IS DEC IDED TO FILE APPEAL IN RESPECT OF THE YEAR(S) IN WHICH TAX EFFEC T EXCEEDS THE MONETARY LIMIT PRESCRIBED. IN CASE WHERE A COMP OSITE ORDER/JUDGEMENT INVOLVES MORE THAN ONE ASSESSEE, EA CH ASSESSEE SHALL BE DEALT WITH SEPARATELY. ITA NO. 2683/DEL/2016 CO NO. 51/DEL/2018 5 6. FURTHER, WHERE INCOME IS COMPUTED UNDER THE PROV ISIONS OF SECTION 115JB OR SECTION 115JC, FOR THE PURPOSES OF DETERMINATION OF TAX EFFECT, TAX ON THE TOTAL INC OME ASSESSED SHALL BE COMPUTED AS PER THE FOLLOWING FOR MULA- (A B) + (C D) WHERE, A = THE TOTAL INCOME ASSESSED AS PER THE PROVISIONS OTHER THAN THE PROVISIONS CONTAINED IN SECTION 115JB OR S ECTION 115JC (HEREIN CALLED GENERAL PROVISIONS); B = THE TOTAL INCOME THAT WOULD HAVE BEEN CHARGEABL E HAD THE TOTAL INCOME ASSESSED AS PER THE GENERAL PROVISIONS BEEN REDUCED BY THE AMOUNT OF THE DISPUT ED ISSUES UNDER GENERAL PROVISIONS; C = THE TOTAL INCOME ASSESSED AS PER THE PROVISIONS CONTAINED IN SECTION 115JB OR SECTION 115JC; D = THE TOTAL INCOME THAT WOULD HAVE BEEN CHARGEABL E HAD THE TOTAL INCOME ASSESSED AS PER THE PROVISIONS CONTAINED IN SECTION 115JB OR SECTION 1I5JCWAS REDU CED BY THE AMOUNT OF DISPUTED ISSUES UNDER THE SAID PROVISIONS: HOWEVER, WHERE THE AMOUNT OF DISPUTED ISSUES IS CON SIDERED BOTH UNDER THE PROVISIONS CONTAINED IN SECTION 115J B OR SECTION 115JC AND UNDER GENERAL PROVISIONS, SUCH AM OUNT SHALL NOT BE REDUCED FROM TOTAL INCOME ASSESSED WHI LE DETERMINING THE AMOUNT UNDER ITEM D. 7. IN A CASE WHERE APPEAL BEFORE A TRIBUNAL OR A C OURT IS NOT FILED ONLY ON ACCOUNT OF THE TAX EFFECT BEING L ESS THAN THE MONETARY LIMIT SPECIFIED ABOVE, THE PR. COMMISS IONER OF INCOME-TAX/ COMMISSIONER OF INCOME TAX SHALL SPECIF ICALLY RECORD THAT EVEN THOUGH THE DECISION IS NOT ACCEPT ABLE, APPEAL IS NOT BEING FILED ONLY ON THE CONSIDERATION THAT THE TAX EFFECT IS LESS THAN THE MONETARY LIMIT SPECIFIE D IN THIS CIRCULAR. FURTHER, IN SUCH CASES, THERE WILL BE NO PRESUMPTION THAT THE INCOME-TAX DEPARTMENT HAS ITA NO. 2683/DEL/2016 CO NO. 51/DEL/2018 6 ACQUIESCED IN THE DECISION ON THE DISPUTED ISSUES. THE INCOME-TAX DEPARTMENT SHALL NOT BE PRECLUDED FROM F ILING AN APPEAL AGAINST THE DISPUTED ISSUES IN THE CASE O F THE SAME ASSESSEE FOR ANY OTHER ASSESSMENT YEAR, OR IN THE CASE OF ANY OTHER ASSESSEE FOR THE SAME OR ANY OTHER ASS ESSMENT YEAR, IF THE TAX EFFECT EXCEEDS THE SPECIFIED MONET ARY LIMITS. 8. IN THE PAST, A NUMBER OF INSTANCES HAVE COME TO THE NOTICE OF THE BOARD, WHEREBY AN ASSESSEE HAS CLAIME D RELIEF FROM THE TRIBUNAL OR THE COURT ONLY ON THE GROUND T HAT THE DEPARTMENT HAS IMPLICITLY ACCEPTED THE DECISION OF THE TRIBUNAL OR COURT IN THE CASE OF THE ASSESSEE FOR A NY OTHER ASSESSMENT YEAR OR IN THE CASE OF ANY OTHER ASSESSE E FOR THE SAME OR ANY OTHER ASSESSMENT YEAR, BY NOT FILING AN APPEAL ON THE SAME DISPUTED ISSUES. THE DEPARTMENTAL REPRESENTATIVES/COUNSELS MUST MAKE EVERY EFFORT TO BRING TO THE NOTICE OF THE TRIBUNAL OR THE COURT THAT THE AP PEAL IN SUCH CASES WAS NOT FILED OR NOT ADMITTED ONLY FOR T HE REASON OF THE TAX EFFECT BEING LESS THAN THE SPECIFIED MON ETARY LIMIT AND, THEREFORE, NO INFERENCE SHOULD BE DRAWN THAT T HE DECISIONS RENDERED THEREIN WERE ACCEPTABLE TO THE DEPARTMENT. ACCORDINGLY, THEY SHOULD IMPRESS UPON T HE TRIBUNAL OR THE COURT THAT SUCH CASES DO NOT HAVE A NY PRECEDENT VALUE AND ALSO BRING TO THE NOTICE OF THE TRIBUNAL/ COURT THE PROVISIONS OF SUB SECTION (4) O F SECTION 268A OF THE INCOME-TAX ACT, 1961 WHICH READ AS UNDE R : (4) THE APPELLATE TRIBUNAL OR COURT, HEARING SUCH APPEAL OR REFERENCE, SHALL HAVE REGARD TO THE ORDER S, INSTRUCTIONS OR DIRECTIONS ISSUED UNDER SUB-SECTION (1) AND THE CIRCUMSTANCES UNDER WHICH SUCH APPEAL OR APPLICATION FOR REFERENCE WAS FILED OR NOT FILED IN RESPECT OF ANY CASE. 9. AS THE EVIDENCE OF NOT FILING APPEAL DUE TO THI S CIRCULAR MAY HAVE TO BE PRODUCED IN COURTS, THE JUDICIAL FOL DERS IN THE OFFICE OF PR. CSIT/CSIT MUST BE MAINTAINED IN A SYSTEMIC MANNER FOR EASY RETRIEVAL. ITA NO. 2683/DEL/2016 CO NO. 51/DEL/2018 7 10. ADVERSE JUDGMENTS RELATING TO THE FOLLOWING ISS UES SHOULD BE CONTESTED ON MERITS NOTWITHSTANDING THAT THE TAX EFFECT ENTAILED IS LESS THAN THE MONETARY LIMITS SP ECIFIED IN PARA 3 ABOVE OR THERE IS NO TAX EFFECT: (A) WHERE THE CONSTITUTIONAL VALIDITY OF THE PROVIS IONS OF AN ACT OR RULE IS UNDER CHALLENGE, OR (B) WHERE BOARDS ORDER, NOTIFICATION, INSTRUCTION OR CIRCULAR HAS BEEN HELD TO BE ILLEGAL OR ULTRA FIRES , OR (C) WHERE REVENUE AUDIT OBJECTION IN THE CASE HAS B EEN ACCEPTED BY THE DEPARTMENT, OR (D) WHERE THE ADDITION RELATES TO UNDISCLOSED FOREI GN ASSETS/ BANK ACCOUNTS. 11. THE MONETARY LIMITS SPECIFIED IN PARA 3 ABOVE S HALL NOT APPLY TO WRIT MATTERS AND DIRECT TAX MATTERS OTHER THAN INCOME TAX. FILING OF APPEALS IN OTHER DIRECT TAX M ATTERS SHALL CONTINUE TO BE GOVERNED BY RELEVANT PROVISION S OF STATUTE AND RULES. FURTHER, IN CASES WHERE THE TAX EFFECT IS NOT QUANTIFIABLE OR NOT INVOLVED, SUCH AS THE CASE OF REGISTRATION OF TRUSTS OR INSTITUTIONS UNDER SECTIO N 12A/ 12AA OF THE IT ACT, 1961 ETC., FILING OF APPEAL SHA LL NOT BE GOVERNED BY THE LIMITS SPECIFIED IN PARA 3 ABOVE AN D DECISION TO FILE APPEALS IN SUCH CASES MAY BE TAKEN ON MERITS OF A PARTICULAR CASE. 12. IT IS CLARIFIED THAT THE MONETARY LIMIT OF RS. 20 LAKHS FOR FILING APPEALS BEFORE THE ITAT WOULD APPLY EQUALLY TO CROSS OBJECTIONS UNDER SECTION 253(4) OF THE ACT. CROSS O BJECTIONS BELOW THIS MONETARY LIMIT, ALREADY FILED, SHOULD BE PURSUED FOR DISMISSAL AS WITHDRAWN/ NOT PRESSED. FILING OF CROSS OBJECTIONS BELOW THE MONETARY LIMIT MAY NOT BE CONS IDERED HENCEFORTH. SIMILARLY, REFERENCES TO HIGH COURTS AN D SLPS/ APPEALS BEFORE SUPREME COURT BELOW THE MONETARY LIM IT OF RS. 50 LAKHS AND RS. 1 CRORE RESPECTIVELY SHOULD BE PURSUED FOR DISMISSAL AS WITHDRAWN/ NOT PRESSED. REFERENCES BEFORE ITA NO. 2683/DEL/2016 CO NO. 51/DEL/2018 8 HIGH COURT AND SLPS/ APPEALS BELOW THESE LIMITS MAY NOT BE CONSIDERED HENCEFORTH. 13. THIS CIRCULAR WILL APPLY TO SLPS/ APPEALS/ CRO SS OBJECTIONS/ REFERENCES TO BE FILED HENCEFORTH IN SC/HCS/TRIBUNAL AND IT SHALL ALSO APPLY RETROSPECTI VELY TO PENDING SLPS/ APPEALS/ CROSS OBJECTIONS/REFERENCES. PENDING APPEALS BELOW THE SPECIFIED TAX LIMITS IN P ARE 3 ABOVE MAY BE WITHDRAWN/ NOT PRESSED. 14. THE ABOVE MAY BE BROUGHT TO THE NOTICE OF ALL CONCERNED. 15. THIS ISSUES UNDER SECTION 268A OF THE INCOME-TA X ACT 1961. 5. FROM CLAUSE 12 & 13 OF THE ABOVE SAID CIRCULAR I T IS CLEAR THAT THESE INSTRUCTIONS ARE APPLICABLE TO THE PENDING AP PEALS ALSO AND AS PER CLAUSE 13, THERE IS CLEAR CUT INSTRUCTION TO TH E DEPARTMENT TO WITHDRAW OR NOT TO PRESS THE APPEALS FILED BEFORE T HE ITAT WHEREIN TAX EFFECT IS LESS THAN RS.20,00,000/-. THESE INSTR UCTIONS ARE OPERATIVE RETROSPECTIVELY TO THE PENDING APPEALS. 6. KEEPING IN VIEW THE CBDT CIRCULAR NO. 3 OF 2018 DATED 11.07.2018 AND ALSO THE PROVISIONS OF SECTION 268A OF INCOME TAX ACT, 1961, WE ARE OF THE VIEW THAT THE REVENUE SHOU LD NOT HAVE FILED THE INSTANT APPEAL BEFORE THE TRIBUNAL. 7. IN ITS CROSS OBJECTION, THE ONLY GROUND RAISED B Y THE ASSESSEE READ AS UNDER:- I. THE LD. CIT(A) HAS ERRED IN LAW AS WELL AS ON F ACT BY ALLOWING THE AMOUNT OF RS. 1,27,284/- OUT OF DISALL OWANCE OF RS. 12,36,720/- MADE UNDER SECTION 43B IGNORING THE FACT THAT IT HAS BEEN LEVIED ON ACCOUNT OF NON-REGISTRAT ION WITH ITA NO. 2683/DEL/2016 CO NO. 51/DEL/2018 9 VAT AUTHORITIES WHICH BEING MANDATED BY LAW AND AN EXPENDITURE IN INFRINGEMENT OF LAW IS NOT ALLOWABLE U/S 43B. II. THE LD. CIT(A) HAS ERRED IN LAW AS WELL AS ON F ACTS BY DELETING ADDITION OF RS. 30,12,580/- MADE U/S 68 OF THE I.T. ACT, 1961 AS THE ASSESSEE HAS FAILED TO DISCHARGE H IS ONUS TO PROVE THE IDENTITY, GENUINENESS AND CAPACITY OF THE CREDITORS. III. THE LD. CIT(A) HAS ERRED IN LAW IN IGNORING T HE DECISION OF HONBLE KERELA HIGH COURT IN THE CASE OF UNNEERI KUTTY WHICH HAS BEEN AFFIRMED BY THE HONBLE SUPREME COUR T IN THE CASE IN (SLP (CIVIL) NO. 4789 OF 1993) 201 ITR 23 (ST.). IV. THE LD. CIT(A) HAS ERRED IN LAW AS WELL AS ON FACTS IN ADMITTING THE ADDITIONAL EVIDENCE FURNISHED BEFORE HIM BY THE ASSESSEE WHEN THERE WAS NO EXCEPTIONAL CIRCUMST ANCES AS PROVIDED UNDER RULE 46A. 8. FACTS OF THE CASE RELATED TO THIS ISSUE IN BRIEF ARE THAT THE ASSESSEE E-FILED ITS RETURN OF INCOME ON 30.9.2010 DECLARING AN INCOME OF RS. 1,33,73,720. LATER ON, THE CASE WAS S ELECTED FOR SCRUTINY. DURING THE COURSE OF ASSESSMENT PROCEEDIN GS, THE AO NOTICED THAT THE ASSESSEE HAD SHOWN WORK CONTRACT T AX (WCT) TO THE TUNE OF RS. 12,36,720/- WRITTEN OFF IN DETAILS GIVE N ON COMPARATIVE EXPENSES. THE AO ASKED THE ASSESSEE TO GIVE THE DOC UMENTARY EVIDENCES OF THE SAME. IN RESPONSE THE ASSESSEE SUB MITTED AS UNDER:- THAT THE CUSTOMERS OF THE ASSESSEE COMPANY HAD DED UCTED THE WORK CONTRACT TAX OF RS. 12,36,720/-, WHICH IS BEING CLAIMED AS EXPENSES. THE DETAILS OF WCT ARE BEING SUBMITTED ALONGWITH THE SPECIMEN COPY OF WCT DEDUCTION. THE DETAILS ARE ALSO VERIFIABLE FROM THE CONCERNED PARTIES. IT WAS FURT HER STATED THAT THE DETAILS OF THE WCT WERE SUBMITTED BY US IN EARL IER LETTERS DATED 25.3.2013. IN THIS CONNECTION, WE ARE SUBMITT ING HERE WITH THE COMPLETE CHARTS OF WCT DEDUCTIONS BY THE PARTIE S IN THE ITA NO. 2683/DEL/2016 CO NO. 51/DEL/2018 10 VARIOUS OTHER STATES OTHER THAN UTTAR PRADESH, WHER E THE ASSESSEE WAS NOT REGISTERED WITH THE VAT DEPPTT, AND WHICH C OULD NOT BE CLAIMED BY THE ASSESSEE IN HIS VAT ASSESSMENTS OR C OULD GET THE REFUND OF THE WCT DECUTIONS. THE COPY OF SPECIMEN B ILLS, ARE ALSO BEING SUBMITTED ALONGWITH THE WCT CHARTS. 9. THE AO DISALLOWED THE CLAIM OF THE ASSESSEE BY O BSERVING THAT THE ASSESSEE COULD NOT GET THE REFUND OF THE W ORKS CONTRACT TAX (WCT) DEDUCTIONS IN THE STATES OTHER THAN UTTAR PRADESH BECAUSE THE ASSESSEE WAS NOT REGISTERED IN THOSE ST ATES WITH THE VAT DEPARTMENT AND THAT IT WAS AN INFRINGEMENT OF L AW AND NOT LIABLE TO BE WRITTEN OFF IN THE BOOKS OF ASSESSEE. 10. BEING AGGRIEVED THE ASSESSEE CARRIED THE MATTER TO THE LEARNED CIT(A) AND SUBMITTED AS UNDER:- THAT THE SAID EXPENSE IS A LEVY OF STATE TAX CAUSE D DUE TO THE TURNOVER MADE BY THE APPELLANT. THE DETAILS OF THESE EXPENSES WERE SUBMITTED BY US IN OUR LETTER DT. 28 TH MARCH, 2013 ALONGWITH ALL THE DOCUMENTARY EVIDENCES, THE COPY OF WHICH AR E ALSO BEING SUBMITTED BEFORE YOUR GOOD SELF, WHICH COMPRISES OF THE LEDGER A/C OF THE SAID EXPENSE AND THE CHART SHOWING THE B ILL WISE ENTRIES OF THE TAX DEDUCTIONS. THAT THIS TAX IS NOT A TAX WHICH HAS ARISEN ON THE INCOME OF THE APPELLANT BUT IT HAS ARISEN ON THE WORKS EXECUT ED BY THE APPELLANT. THE STATE TAXES , LIKE SALES TAX/VAT ARE THE PART OF COST OF GOODS AND HAS TO BE CONSIDERED WHILE DECLARING T HE VALUE OF GOODS. SIMILARLY THE WCT IS ALSO A STATE TAX AND A BONAFIDE COST TO THE ASSESSEE. THAT THE CONTENTION OF THE LD AO THAT THE APPELLANT MIGHT GET THE REFUND OF THE SAID TAXES DEDUCTED BY THE CU STOMERS OF THE APPELLANT, DOES NOT HOLD GOOD AS THE PROCESS, OF CL AIMING REFUND IS A LONG PROCESS , UNDER WHICH THE APPELLANT HAD T O FIRST GET THE REGISTRATION IN THE CONCERNED STATE BY ESTABLISHING A FULL FLEDGED OFFICE AFTER OBTAINING THE PREMISES ON RENT AND THE N CERTAIN RETURNS WERE TO BE FILED STATING THE TURNOVER AND T O MAINTAIN THE ACCOUNTS RELATING TO THAT STATE. THE STATE LEVEL AO HAD TO THEN ITA NO. 2683/DEL/2016 CO NO. 51/DEL/2018 11 ASSESS THE SAID CASE AND THEN MIGHT ISSUE THE REFUN D, IF NO FURTHER DEMANDS ARE RAISED BY HIM. THAT THE REFUND OF RS. 1236720.00 SPREAD OVER EIGHT STATES, EVEN IF ASSESSED IN FAVOUR OF THE APPELLANT, WAS NO T SO EASILY TO BE RECEIVED, WHICH IS A VERY PRACTICAL THING. THAT THE APPELLANT HAD MADE SUCH TRANSACTIONS, ON W HICH THE SAID WCT WERE DEDUCTED, IN EIGHT STATES AND IT WAS NEITHER PRACTICAL NOR FEASIBLE TO GET THE REFUND AFTER OBTA INING THE EIGHT STATES REGISTRATIONS AND EMPLOYING THE STAFFS TO GE T THE WORK DONE, RATHER THE APPELLANT MIGHT LAND AT SHELLING O UT ANOTHER EQUIVALENT SUM LIKE THE WCT EXPENSE OF RS. 12.36 LA CS INSTEAD OF GETTING A REFUND. THAT NO PRUDENT BUSINESSMAN WOULD GO FOR SUCH A VEN TURE BY WASTING HIS PRECIOUS TIME.THAT THE SAID EXPENSE OF RS. 12,36,720/- OF WCT IS AN ALLOWABLE EXPENSE AND MAY BE ALLOWED. 11. IT WAS FURTHER SUBMITTED THAT THE DISALLOWANCE MADE BY THE AO WAS ALSO AGAINST THE PROVISIONS CONTAINED IN THE VAT ACCOUNT. THE ASSESSEE FURNISHED THE DETAILS OF THE RAJASTHAN VAT ACCOUNT TO SHOW THAT THE PROVISIONS CONTAINED IN THE SAID ACT AND THE SIMILAR OTHER VAT ACTS OF OTHER STATES. IT WAS FURTHER SUBM ITTED THAT THE CONTRACTEES IN THOSE STATES HAD DEDUCTED TDS ERRONE OUSLY AND THIS DEDUCTION HAD BECOME UNWITTING BUSINESS EXPENSES OF THE ASSESSEE WHICH WAS ALLOWABLE EXPENSES AND BY CONSIDERING THE COMPLEXITIES OF WORKS CONTRACT TAX (WCT), AN EXEMPTION METHOD WA S LAUNCHED IN THE CASE OF CONTRACT, WHOSE TAXES WERE DEDUCTED UNDER THE WCT AND THEY COULD OPT FOR THE SCHEME. IT WAS CONTENDED THAT IN WORKS CONTRACT TAXATION, THE SCHEME OF EXEMPTION FEES WAS A MECHANISM PROVIDED FOR THE COLLECTION OF THE WORKS CONTRACT T AX FROM THE CONTRACTOR IN SUCH A WAY THAT CAUSES MINIMUM INCONV ENIENCE TO THE CONTRACTOR ASSESSES AND ALSO TO THE DEPARTMENT COLL ECTING THE TAX IN ITA NO. 2683/DEL/2016 CO NO. 51/DEL/2018 12 COMPUTING AND ASSESSING THE TAXABLE FIGURES. IT WAS ALSO CONTENDED THAT IN THE EXEMPTION FEE METHOD THE FOLLOWING DEDU CTIONS ARE MADE FROM THE GROSS VALUE OF THE WORKS CONTRACT PER FORMED BY THE CONTRACTOR:- I. LABOUR CHARGES FOR EXECUTION OF WORKS. II. AMOUNT PAID TO SUB CONTRACTOR FOR LABOUR AND SERVIC ES. III. CHARGES PAID FOR OBTAINING ON HIRE THE EQUIPMENT OR MACHINERY USED FOR EXECUTION OF WORKS CONTRACT. IV. CHARGES FOR PLANNING AND DESIGNING AND ARCHITECTS FEES. V. COST OF CONSUMABLE USED IN EXECUTION OF WORKS CONTRACT. VI. COST OF ESTABLISHMENT OF THE CONTRACTOR TO THE EXTE NT IT IS RELATABLE TO SUPPLY OF LABOUR AND SERVICES. VII. OTHER SIMILAR EXPENSES RELATING TO SUPPLY OF LABOUR AND SERVICES. VIII. PROFITS EARNED BY CONTRACTOR TO THE EXTENT IT RELAT ES TO SUPPLY OF LABOUR AND SERVICES. 12. IT WAS STATED THAT AFTER DEDUCTING THE ABOVE ITEMS, THE REMAINING FIGURES WOULD BE THE TAXABLE TURNOVER OF THE CONTRACTOR. IT WAS ALSO STATED THAT THE SAID SCHEME WAS JUST LI KE THE PROVISIONS CONTAINED U/S 14AD OF THE ACT WHERE A CONTRACTOR, W HOSE TAX HAS BEEN DEDUCTED UNDER THE ACT MAY OPT FOR DEEMED INCO ME @ 8% OF THE TURNOVER. IN THAT CASE HE SHALL NOT BE OBLIGED TO MAINTAIN THE BOOKS OF ACCOUNTS AND PRODUCE BEFORE AN AO. SIMILAR LY, UNDER THE VAT PROVISION, A CONTRACTOR WHOSE TAXES HAD BEEN DE DUCTED, IF HE DID NOT WANT A PROPER ASSESSMENT TO BE MADE MAY, OP T FOR SCHEME AND THE TAXES DEDUCTED UNDER WCT MAY BE DEEMED AS H IS TAX LIABILITY AND HE SHALL BE TREATED AS ASSESSED FOR H IS PART OF VAT TAX LIABILITIES. IT WAS SUBMITTED THAT THE AO DISALLOWE D THE IMPUGNED AMOUNT OF RS. 12,36,720/- BY CONSIDERING THE SAME A S AN ITA NO. 2683/DEL/2016 CO NO. 51/DEL/2018 13 INFRINGEMENT OF LAW WHEREAS THE SAID EXPENDITURE WA S DEDUCTED AT SOURCE AND PAID AS VAT ON BEHALF OF THE ASSESSEE, H AD IT BEEN AN INFRINGEMENT OF LAW AND PENALTY WAS IMPOSSIBLE TO T HE TUNE OF RS. 12,36,720/-, THEN A SHOW CAUSE NOTICE MIGHT HAVE BE EN SERVED ON THE ASSESSEE AND AN OPPORTUNITY MIGHT HAVE ALSO BEE N OFFERED TO THE ASSESSEE BUT THE FACTUAL POSITION IS SUCH THAT THE SAID TAXES ARE DEEMED TO HAVE BEEN PAID UNDER THE SELF ASSESSMENT SCHEME OF THE STATES, WHERE NO REGISTRATION IS REQUIRED AND THE W CT DEDUCTED ARE THE TAXES WHICH ARE REQUIRED TO BE PAID BY THE ASSE SSEE. THEREFORE, THE SAID AMOUNT MAY BE ALLOWED AS AN EXPENDITURE OF THE ASSESSEE. IT WAS SUBMITTED THAT THE WCT OF RS. 12,36,720/- WA S DEDUCTED FROM THE INVOICES RAISED BY THE ASSESSEE IN THE NAM ES OF THE DEDUCTEES AND THE TOTAL VALUE OF THE INVOICES WERE DECLARED AS INCOME WHEREAS THE ASSESSEE HAS RECEVIVED ONLY THE REMAINING AMOUNT AFTER THE DEDUCTION OF AN AMOUNT OF RS. 12,3 6,720/- THEREFORE, THE SAID EXPENSES WERE ALLOWABLE EXPENDI TURE RELATED TO THE BUSINESS OF THE ASSESSEE AND THE INCOME AGAINST WHICH HAD BEEN DECLARED BY THE ASSESSEE. 13. THE LEARNED CIT(A) AFTER CONSIDERING THE SUBMIS SIONS OF THE ASSESSEE OBSERVED THAT THE ASSESSEE IS BASED IN U.P . WHEREAS THESE WCT DEDUCTIONS HAD BEEN MADE BY THE CUSTOMERS IN VA RIOUS OTHER STATES OTHER THAN U.P. WHERE THE ASSESSEE IS NOT RE GISTERED WITH VAT DEPARTMENT AND THEREFORE, COULD NOT CLAIM THE S AID DEDUCTION IN ITS VAT ASSESSMENTS OR COULD GET THE REFUND OF T HOSE WCT DEDUCTIONS. HE FURTHER OBSERVED THAT THE ASSESSEE I S IN THE BUSINESS OF MANUFACTURING OF STEEL STRUCTURES FOR THE TELECO M OPERATORS ALONGWITH THEIR INSTALLATION/ERECTION ETC. AND THAT WHENEVER THE ITA NO. 2683/DEL/2016 CO NO. 51/DEL/2018 14 ASSESSEE RAISES AN INVOICE IN THE NAME OF CUSTOMER (TELECOM OPERATOR) AGAINST THE INSTALLATION/ERECTION CONTRAC T, THE CUSTOMER DEDUCTED WCT AT THE RATES APPLICABLE AND MADE THE N ET PAYMENT TO THE ASSESSEE AFTER THE DEDUCTION OF WCT. THE CUSTOM ER DEPOSITED THE WCT DEDUCTED WITH THE STATE GOVERNMENT ON BEHAL F OF THE ASSESSEE AND THE ASSESSEE CREDITED THE GROSS AMOUNT OF INVOICE AS TURNOVER OR SALES AND DEBITED THE AMOUNT ON ACCOUNT OF WCT IN THE MANUFACTURING / PROFIT & LOSS ACCOUNT. THE LEARNED CIT(A) WAS OF THE VIEW THAT THE ALLOWABILITY WAS GOVERNED BY THE PROVISIONS OF SECTION 43B OF THE INCOME TAX ACT AS IT WAS IN THE NATURE OF TAX AND TO BE ALLOWED IN THE YEAR OF PAYMENT TO THE RES PECTIVE AUTHORITIES. HE ALSO POINTED OUT THAT THE WCT COMPO NENT OF RS. 11,09,436/- HAD BEEN PAID TO THE RESPECTIVE STATE G OVERNMENTS IN RESPECTIVE FINANCIAL YEARS 2005-06 TO 2008-09 BY TH E CUSTOMERS ON BEHALF OF THE ASSESSEE, THEREFORE, THE CLAIM OF THE ASSESSEE FOR WCT OF RS. 11,09,436/- WAS NOT AN ALLOWABLE EXPENDITURE FOR A.Y. 2010- 11 UNDER SECTION 43B OF THE ACT, HOWEVER, THE AMOUN T OF RS. 1,27,284/- (RS. 12,36, 720/- (-) RS. 11,09,436/-) R ELATING TO THE ASSESSMENT YEAR 2010-11 WAS HELD AS ALLOWABLE UNDER SECTION 43B OF THE ACT. 14. NOW THE ASSESSEE IS IN APPEAL. 15. THE LEARNED COUNSEL FOR THE ASSESSEE REITERATED THE SUBMISSIONS MADE BEFORE THE AUTHORITIES AND FURTHER SUBMITTED THAT THE AMOUNT WHICH WAS DEDUCTED BY THE CUSTOMERS HAD BEEN SHOWN BY THE ASSESSEE IN ITS BALANCE-SHEET, A REFERENCE W AS MADE TO PAGE NO. 4 OF THE ASSESSEES PAPER BOOK WHICH IS A COPY OF THE BALANCE- ITA NO. 2683/DEL/2016 CO NO. 51/DEL/2018 15 SHEET AS ON 31 ST MARCH, 2010. IT WAS FURTHER SUBMITTED THAT THE ASSESSEE HAS WRITTEN OFF THE AMOUNT WHICH HAS BEEN PAID BY THE CUSTOMERS DURING THE YEAR UNDER CONSIDERATION IN IT S PROFIT & LOSS ACCOUNT A REFERENCE WAS MADE TO PAGE NO. 5 OF THE A SSESSEES PAPER BOOK WHICH IS THE COPY OF MANUFACTURING, TRADING AN D PROFIT & LOSS ACCOUNT FOR THE YEAR ENDED ON 31 ST MARCH, 2010. IT WAS ACCORDINGLY SUBMITTED THAT THE ASSESSEE HAD SHOWN THE INCOME UN DER THE HEAD SALES AND THE AMOUNT DEDUCTED WAS SHOWN UNDER THE H EAD WCT WRITTEN OFF AS EXPENSES THEREFORE THE PROVISIONS OF SECTION 43B WERE NOT APPLICABLE. THE LEARNED COUNSEL FOR THE AS SESSEE ALSO DREW OUR ATTENTION TOWARDS PAGE NO. 168 AND 169 OF THE A SSESSEES PAPER BOOK WHICH IS THE COPY OF THE LEDGER ACCOUNT RELATI NG TO WCT WRITTEN OFF. IT WAS ACCORDINGLY SUBMITTED THAT THE EXPENSES CLAIMED BY THE ASSESSEE WERE RELATED TO ITS BUSINESS THEREF ORE THESE WERE ALLOWABLE UNDER SECTION 37 OF THE ACT. 16. IN HIS RIVAL SUBMISSIONS, THE LEARNED SR. DR ST RONGLY SUPPORTED THE ORDERS OF THE AUTHORITIES BELOW. 17. WE HAVE CONSIDERED THE SUBMISSIONS OF BOTH THE PARTIES AND CAREFULLY GONE THROUGH THE MATERIAL AVAILABLE ON TH E RECORD. IN THE PRESENT CASE, IT IS NOTICED THAT THE ASSESSEE WAS E NGAGED IN THE BUSINESS OF MANUFACTURING OF STEEL STRUCTURES FOR T HE TELECOM OPERATORS AND RAISED INVOICES IN THE NAME OF THE CU STOMERS AGAINST THE INSTALLATION / ERECTION CONTRACT, THOSE CUSTOME RS DEDUCTED CONTRACT TAX AND MADE THE NET PAYMENTS TO THE ASSES SEE. AFTER SUCH DEDUCTION, THE AMOUNT DEDUCTED WAS DEPOSITED WITH T HE STATE GOVERNMENT ON BEHALF OF THE ASSESSEE BY THE CUSTOME RS. IN THE ITA NO. 2683/DEL/2016 CO NO. 51/DEL/2018 16 INSTANT CASE, THERE IS NO DISPUTE THAT THE LIABILIT Y CRYSTALLIZED DURING THE YEAR UNDER CONSIDERATION AND THE PAYMENTS WERE MADE BY THE CUSTOMERS ON BEHALF OF THE ASSESSEE DURING THE YEAR UNDER CONSIDERATION. THE ASSESSEE HAD ALREADY CREDITED TH E GROSS AMOUNT OF INVOICES AS TURNOVER FOR SALES IN ITS PROFIT & L OSS ACCOUNT AND ALSO DEBITED THE AMOUNT WHICH WAS DEDUCTED BY THE C USTOMERS IN THE MANUFACTURING / PROFIT & LOSS ACCOUNT. IN OUR O PINION, WHEN THE LIABILITY RELATING TO THE BUSINESS OF THE ASSESSEE WAS CRYSTALLIZED AND PAID DURING THE YEAR UNDER CONSIDERATION THEN I T WAS AN ALLOWABLE EXPENDITURE. IN THAT VIEW OF THE MATTER T HE IMPUGNED ADDITION MADE BY THE AO AND SUSTAINED BY THE LEARNE D CIT(A) IS DELETED. 18. IN THE RESULT, APPEAL OF THE DEPARTMENT IS DISM ISSED AND CROSS OBJECTION OF THE ASSESSEE IS ALLOWED. (ORDER PRONOUNCED IN THE COURT ON 31/07/2018) SD/- SD/- (SUCHITRA KAMBLE) (N. K. SAINI) JUDICIAL MEMBER ACCOUNTANT M EMBER DATED: 31/07/2018 SH COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(APPEALS) 5. DR: ITAT ASSISTANT REGISTRAR ITA NO. 2683/DEL/2016 CO NO. 51/DEL/2018 17 DATE INITIAL 1. DRAFT DICTATED ON 27 .07.2018 PS 2. DRAFT PLACED BEFORE AUTHOR 30.07.2018 PS 3. DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER JM/AM 4. DRAFT DISCUSSED/APPROVED BY SECOND MEMBER. JM/ AM 5. APPROVED DRAFT COMES TO THE SR.PS/PS PS/PS 6. KEPT FOR PRONOUNCEMENT ON PS 7. FILE SENT TO THE BENCH CLERK PS 8. DATE ON WHICH FILE GOES TO THE AR 9. DATE ON WHICH FILE GOES TO THE HEAD CLERK. 10. DATE OF DISPATCH OF ORDER. 11. DATE OF UPLOADING 31.07.2018