DALMIA DSP LIMITED (FORMERLY KNOWN AS KALYANPUR CEMENTS LIMITED),KOLKATA V. DCIT, CIRCLE - 5(1) , KOLKATA

ITA 54/KOL/2019

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Dalmia DSP Ltd appealed against the order of the Commissioner of Income Tax (Appeals)-2, Kolkata, which upheld the disallowance of Rs.8754.71 lakhs on account of sales tax liability under section 43B of the Income Tax Act. The sales tax liability arose from an exemption granted under the Industrial Policy, 1995 by the Government of Bihar, which was later contested and led to a Supreme Court directive for the assessee to refund the equivalent to sales tax to the Government. The Tribunal found that the deduction for the unpaid sales tax liability is only allowed upon actual payment and remanded the matter for verification of payments made in subsequent years.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 469655 (ITAT-KOLKATA)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-01-2025
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Assessment Year: 2010-2011
• Laws Referred To: Income Tax Act
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Keywords: Revision of order
• Section: 143(3); 142(1); 143(2); 250; 143(1); 263; 43B

Judgement Text

"आयकर अपीलȣय अͬधकरण, कोलकाता पीठ, कोलकाता IN THE INCOME TAX APPELLATE TRIBUNAL “A” BENCH KOLKATA Before Shri Rajesh Kumar, Accountant Member and Shri Sonjoy Sarma, Judicial Member I.T.A. No.54/Kol/2019 Assessment Year: 2010-11 Dalmia DSP Ltd………………..………........………………....Appellant 2&3, LIC Building, Dr. Rajendra Prasad Sarani, (Clive Row), Kolkata-1. [PAN: AABCK1273H] vs. DCIT, Circle-5(1), Kolkata…….……….…............................…..…..... Respondent Appearances by: Shri Navin Verma, FCA, appeared on behalf of the appellant. Shri Subhendu Datta, CIT- DR, appeared on behalf of the Respondent. Date of concluding the hearing : December 11, 2024 Date of pronouncing the order : January 28, 2024 आदेश / ORDER Per Sonjoy Sarma, Judicial Member: The present appeal has been preferred by the assessee against the order dated 13.11.2018 of the Commissioner of Income Tax (Appeals)-2, Kolkata [hereinafter referred to as ‘CIT(A)’] passed u/s 250 of the Income Tax Act (hereinafter referred to as the ‘Act’) pertaining to assessment year 2010-11. 2. Brief facts of the case are that the assessee company filed its return of income on 25.09.2010 by declaring a total loss of Rs.63,97,05,090/-. The return was processed u/s 143(1) of the Act. Subseqeuntly, the case of the assessee was selected for scrutiny and a notice u/s 143(2) of the Act was issued and assessment order was passed u/s 143(3) of the Act on 24.01.2013 determining a total loss of Rs.60,17,78,201/-. Later on, the case was reviewed u/s 263 of the Act considering the assessment order dated 24.01.2013 as it was found erroneous and prejudicial to the interest of revenue as per order dated 30.03.2015 u/s 263 of the Act setting aside the file to the Assessing I.T.A. No.54/Kol/2019 Assessment Year: 2010-11 Dalmia DSP Ltd 2 Officer with a direction to re-examine the issue involved. After receiving the said order, the Assessing Officer issued notice u/s 142(1) of the Act and assessee appeared before the Assessing Officer in response to the notice and also provided submissions. While framing the assessment order, the key issue involved was relating to sales tax liability. The Assessing Officer noticed that the assessee had applied to Govt. of Bihar for sales tax exemption under Industrial Policy, 1995 and in view of the delay in decision, the assessee approached Hon’ble Patna High Court by filing a writ petition and the Hon’ble High Court ruled in favour of the assessee but the Govt. of Bihar filed an appeal before the Hon’ble Supreme Court. The Hon’ble Supreme Court through its interim order dated 18.11.2002 directed the state government to grant sales tax exemption to the assessee company. Thereafter, the state govt. granted sales tax exemption to the assessee for a period of 5 years. In view of this, the assessee company wrote back the sales tax liability of Rs.8754.71 lakhs upto 17.01.2009 in its account as on 31.12.2009. However, the Hon’ble Supreme Court vide its final order dated 08.01.2010 dismissed the appeal of the Govt. of Bihar by confirming the eligibility for sales tax exemption of the assessee under the Industrial Policy, 1995. Simultaneously, the Hon’ble Supreme Court directed the assessee to refund the equivalent to sales tax to the Govt. of Bihar and accordingly the assessee reversed the said amount of Rs.8754.71 lakhs in its financial statement. This has created an effect of increasing the liability by Rs.8754.71 lakhs and accumulated loss by Rs.815.00 lakhs over the accumulated loss on 31.03.2009. The Board for Industrial & Financial Reconstruction (BIFR) prepared a draft rehabilitation scheme (DRS) which provided for payment of the sales tax to the State Govt. in instalments i.e. 815.00 lakhs was classified as short-term liability (to be paid by 2010-11) and 7939.71 lakhs was classified as long-term liability (payable over the next six years). The Assessing Officer further observed I.T.A. No.54/Kol/2019 Assessment Year: 2010-11 Dalmia DSP Ltd 3 that unpaid sales tax liability was required to be disallowed u/s 43B of the Act and he added back the same to the total income of the assessee. 3. Aggrieved by the above order, the assessee went in appeal before the ld. CIT(A), wherein, the appeal was dismissed by upholding the order of the Assessing Officer. 4. Dissatisfied with the order of the ld. CIT(A), the assessee is in appeal before this Tribunal and the assessee raised an additional ground in addition to the main grounds of appeal. The additional ground states that the ld. CIT(A) was not justified and erred in law upholding the disallowance of Rs.8754.71 lakhs on account of sales tax liability u/s 43B of the Act and necessary directions may be given to the Assessing Officer to allow the deduction u/s 43B on payment basis for the sales tax paid in subsequent assessment order. 5. On the other hand, the ld. DR supported the decision of the authorities below. 6. We have heard the submissions of the parties examining the facts of the case and also legal provisions in relation to the issue, we find that the assessee’s sales tax liability of Rs.7939.71 lakhs was classified as long-term liability remained unpaid liability during the relevant assessment order as per section 43B. The deduction for such liability is allowed only upon actual payment made by the assessee irrespective of their recognition in the accounts. We, after considering the assessee’s request for deduction in subsequent years based on payment made, the Tribunal find it appropriate to remand the matter to the file of the Assessing Officer for verification of the instant issue and direct the Assessing Officer to verify the actual payment made by the assessee towards sales tax liability in subsequent assessment year and to allow the deduction u/s 43B accordingly if such payments were made. In I.T.A. No.54/Kol/2019 Assessment Year: 2010-11 Dalmia DSP Ltd 4 terms of the above, the appeal of the assessee is partly allowed for statistical purposes 7. In the result, the appeal of the assessee is partly allowed for statistical purposes. Kolkata, the 28th January, 2025. Sd/- Sd/- [Rajesh Kumar] [Sonjoy Sarma] लेखा सदèय/Accountant Member ÛयाǓयक सदèय/Judicial Member Dated: 28.01.2025. RS Copy of the order forwarded to: 1. Dalmia DSP Ltd 2. DCIT, Circle-5(1), Kolkata 3.CIT (A)- 4. CIT- , 5. CIT(DR), //True copy// By order Assistant Registrar, Kolkata Benches "