Tayo Rolls Limited, Jamshepur V. ACIT, Jamshepur

CO 9/RAN/2012

• Counselvise Citation: [2013] 122 COUNSELVISE.COM (IT) 8596 (ITAT-RANCHI)
• Duration Of Justice: 1 year(s) 23 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 08-05-2013
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: Not Allotted
• Assessment Year: 2006-2007
• Appeal Filed On: 15-04-2012
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: DEEPAK ROUSHAN SR S C
• Assessee Lawyers: SURES

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, RANCHI CIRCUI T BENCH, RANCHI (BEFORE SHRI P.K.BANSAL, HONBLE A.M.& SHR I D,T. GARASIA, HONBLE J.M.) I.T.A. NO. 07/RAN/2012 : ASSESSMENT YEAR 2006-07 ACIT, CIRCLE 3, JAMSHEDPUR -VS- M/S. TAYO ROLLS LIMITED, JAMSHEDPUR (APPELLANT) PAN: AABCT 0210 H (RESPONDENT) C.O.NO.09/RAN/2012 : ASSESSMENT YEAR 2006-07 (ARISING OUT OF I.T.A. NO. 07/RAN/2012) M/S. TAYO ROLLS LIMITED, JAMSHEDPUR -VS- ACIT, CIR CLE 3, JAMSHEDPUR (CROSS OBJECTOR) (RESPONDENT) DEPARTMENT BY : SHRI DEEPAK ROUSHAN, SR.S.C. ASSESSEE BY : SHRI R.R.MITTAL WITH SHRI R.G.A GARWAL, CA AND SHRI SURESH PADMANABHAN, G.M . DATE OF CONCLUDING THE HEARING : 07.05.2013 DATE OF PRONOUNCING THE ORDER : 08.05.2013 O R D E R PER BENCH : THE APPEAL BY THE REVENUE AND THE CROSS OBJECTION B Y THE ASSESSEE HAVE BEEN FILED AGAINST THE ORDER PASSED BY THE COM MISSIONER OF INCOME-TAX (APPEALS), JAMSHEDPUR DATED 31/10/2011 F OR ASSESSMENT YEAR 2006-07. 2. GROUND NO.1 OF THE APPEAL FILED BY THE REVENUE R ELATES TO THE DELETION OF THE ADDITION MADE BY THE ASSESSING OFFI CER IN RESPECT OF PROVISION FOR WARRANTY AMOUNTING TO RS.15,93,000/-. 3. AFTER HEARING THE RIVAL SUBMISSIONS AND AFTER PE RUSING THE MATERIALS ON RECORD, WE NOTED THAT WHEN THE MATTER WENT BEFORE THE CIT(A), THE CIT(A) DELETED THE DISALLOWANCE AFTER S EEING THE CALCULATION OF CLAIM OF THE PROVISION FOR WARRANTY CHARGES FOR EARLIER YEARS AS WELL AS FOR THIS YEAR AND ALSO FOLLOWING T HE DECISION OF THE HONBLE ITAT, PATNA BENCH IN ASSESSEES OWN CASE IN ITA NO.442 & 443/PAT FOR THE ASSESSMENT YEAR 1971-72 AND 1972-73 IN WHICH THE HONBLE TRIBUNAL HAS OBSERVED AS UNDER: THE ASSESSEE HAS FILED A CHART FROM WHICH IT IS CL EAR THAT THE ASSESSEE INCURRED THE LIABILITY OF MORE AMOUNTS THAN IT MADE PROVISION FOR. FURTHER THE PROVISION WAS MADE FOR THE LIABILITY WHICH ARISES DUE TO THE WARRANTY OF SALE OF ROLLS. THE LIABILITY ARISING FROM WARRANTY WAS NOT IN THE NATURE OF CONTINGENT LIABILITY BUT LIABILITY WAS ATTACHED WIT H EACH EVERY SALE AND ROLLS DID NOT WORK SATISFACTORILY FO R A STIPULATED PERIOD THE ASSESSEE WAS UNDER OBLIGATION TO MAKE GOOD THE LOSS TO THE PURCHASER. IT IS WELL SETTLED THAT CONTINGENT LIABILITY CANNOT BE ALLOWED DEDUCTION WH ILE COMPUTING THE INCOME OF THE ASSESSEE. FURTHER, IT I S ALSO WELL SETTLED THAT IF THE ASSESSEE IS FOLLOWING MERCANTIL E SYSTEM OF ACCOUNTING THE LIABILITY ACCRUED BUT NOT QUANTIFIED AND PAID WELL HAVE TO BE ALLOWED AS DEDUCTION FROM THE TOTAL INCOME OF THE ASSESSEE. THE ASSESSEE IN THE PRESENT CASE H AS MADE SALES OF ROLLS DURING THE YEAR. THE SALE OF ROLLS C ONTAINED A WARRANTY. THE WARRANTY CREATED A LIABILITY UPON THE ASSESSEE. THE SALE TOOK PLACE DURING THE YEAR AND, THEREFORE, THE LIABILITY CANNOT BE TAKEN AWAY TO A DIFFERENT YEAR BUT IT MUST BE CHARGED ON THE PROFITS ARISING DURING THE YEAR B ECAUSE THE ASSESSEE WAS FOLLOWING THE MERCANTILE SYSTEM OF ACC OUNTING. HOWEVER, THERE DOES NOT APPEAR TO BE ANY DISPUTE ON THIS ISSUE. THE INCOME TAX OFFICER DISALLOWED 2/3 OF THE EXPENDITURE DURING THE ASSESSMENT YEAR 1971-72 IN 1 972. HE DISALLOWED ONLY 1/3 ON THE GROUND THAT IN THE ABSEN CE OF THE DETAILS HE COULD NOT DETERMINE WHETHER THE EXPENSES CLAIMED BY THE ASSESSEE WERE INCIDENTAL TO ITS BUSINESS. TH E AMOUNT WAS CLAIMED FOR THE LIABILITY UNDER THE PERFORMANCE CHARGES. THE AMOUNT WAS DETERMINED AT A PARTICULAR RATE AND NO DETAILS WERE CALLED FOR THIS AMOUNT. UNDER THE CIRCUMSTANCES, THE GROUND ITSELF ON WHICH IT WAS DI SALLOWED WAS NOT CORRECT. UNDER THE CIRCUMSTANCES, WE AGREE WITH THE FINDING OF THE APPELLATE ASSISTANT COMMISSIONER AND , THEREFORE, THE ORDER OF THE APPELLATE ASSISTANT COM MISSIONER ON THIS ISSUE IS MAINTAINED. 3.1. THE CIT(A) HAS FURTHER GIVEN THE FINDING OF FA CT THAT THE FACTS IN MAKING THE PROVISION FOR WARRANTY CHARGES ARE SIMIL AR AS IN THE CASE OF THE ASSESSEE FOR THE ASSESSMENT YEAR 1971=72 AND 19 72-73. WE MAY ALSO POINT OUT THAT THE HONBLE SUPREME COURT HAS ALSO H ELD IN THE CASE OF ROTORK CONTROLS INDIA (P) LTD. 314 ITR 62 (SC) THAT THE PROVISIONS FOR WARRANTY IS NOT A CONTINGENT LIABILITY. IN VIEW OF THIS FACT, WE DO NOT FIND ANY ILLEGALITY OR INFIRMITY IN THE ORDER OF TH E CIT(A) AND IN OUR OPINION, THE CIT(A) HAS RIGHTLY DELETED THE DISALLO WANCE. 4. GROUND NO.2 RELATES TO THE DISALLOWANCE ON ACCOU NT OF STAFF WELFARE EXPENSES BY THE ASSESSING OFFICER AND DELET ED BY THE CIT(A). 5. AFTER HEARING THE RIVAL SUBMISSIONS AND CAREFULL Y GOING THROUGH THE ORDERS OF THE AUTHORITIES BELOW, WE NOTED THAT THIS ADDITION HAS BEEN DELETED BY THE CIT(A), FOLLOWING THE ORDER OF THE H ONBLE JHARKHAND HIGH COURT, RANCHI IN THE CASE OF THE ASSESSEE FOR THE ASSESSMENT YEAR 2001-02 IN TAX APPEAL NO.81 OF 2007, DELETED THE AD DITION MADE BY THE ASSESSING OFFICER. THE LD. D.R., EVEN THOUGH VEHEME NTLY RELIED ON THE ORDER OF THE ASSESSING OFFICER BUT COULD NOT BRING ANY MATERIAL AGAINST THIS CASE DURING THE YEAR AS COMPARED TO THE EARLIE R YEAR, AS HAS BEEN DECIDED BY THE HONBLE HIGH COURT. THE DECISION OF THE JURISDICTIONAL HIGH COURT IS BINDING ON US AND RESPECTFULLY FOLLOW ING THE DECISION OF THE HONBLE JURISDICTIONAL HIGH COURT, IN OUR OPINI ON, THE DECISION OF THE CIT(A) IS CORRECT IN DELETING THE ADDITION MADE BY THE ASSESSING OFFICER. THEREFORE, NO INTERFERENCE IS CALLED FOR I N THE ORDER OF THE CIT(A). HENCE, THE GROUND NO.2 IS DISMISSED. 6. THE CROSS OBJECTION FILED BY THE ASSESSEE BEING SUPPORTIVE TO THE ORDER OF THE CIT(A) AND AS THE APPEAL OF THE REVENU E HAS BEEN DISMISSED, HENCE THE CROSS OBJECTION FILED BY THE A SSESSEE IS ALSO DISMISSED BEING INFRUCTUOUS. 7 IN THE RESULT, THE APPEAL FILED BY THE REVENUE IS DISMISSED WHEREAS THE CROSS OBJECTION FILED BY THE ASSESSEE IS ALSO D ISMISSED AS BEING INFRUCTUOUS. ORDER PRONOUNCED IN THE COURT ON 8 TH MAY, 2013. SD/- SD/- [D.T.GARASIA] [P.K.BANSAL] JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 8 TH MAY, 2013 COPY OF ORDER FORWARDED TO : 1. M/S. TAYO ROLLS LIMITED, JAMSHEDPUR 2. ACIT, CIRCLE 3, JAMSHED 3. C.I.T.(A), 4. THE .C.I.T., RANCHI 5. THE D.R., I.T.A.T., TRUE COPY, BY ORDER, [MST, SR.PS] SR. PRIVATE SECRETARY (ON T OUR) ITAT, RANCHI