Assistant Commissioner of Income-tax, V. M/s. Swati Minerals, Kolhapur

ITA 1022/PUN/2015

• Counselvise Citation: [2018] 112 COUNSELVISE.COM (IT) 5352 (ITAT-PUNE)
• Duration Of Justice: 3 year(s) 3 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-10-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 27-08-2018
• Assessment Year: 2001-2002
• Appeal Filed On: 14-07-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: PRATEEK JHA SHRI PRAYAG JHA
• Keywords: Opportunity of being heard
• Section: 43B; 143(3); 201

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, PUNE . , , , BEFORE SHRI D. KARUNAKARA RAO, AM AND SHRI VIKAS AWASTHY, JM . / ITA NO S . 1022 TO 1024 /P U N/201 5 / ASSESSMENT YEAR S : 20 0 1 - 02 TO 2003 - 04 ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE - 1, KOLHAPUR. ....... / APPELLANT / V/S. M/S. SWATI MINERALS, 23 K, DONGALE APARTMENT, RANKALA CHOUPATY, KOLHAPUR. PAN : AAKFS4394P / RESPONDENT ASSESSEE BY : SHRI PRATEEK JHA SHRI PRAYAG JHA REVENUE BY : SHRI ALOK SINGH / DATE OF HEARING : 2 7 - 0 8 - 201 8 / DATE OF PRONOUNCEMENT : 24 - 10 - 201 8 / ORDER PER VIKAS AWASTHY, JM : TH ESE T HREE APPEALS BY THE REVENUE ARE DIRECTED AGAINST THE ORDER OF COMMI SSIONER OF INCOME TA X (APPEALS) - 1&2, KOLHAPUR DATED 26.03.2015 COMMON FOR THE ASSESSMENT YEARS 2001 - 02, 2002 - 03 AND 2003 - 04. SINCE, THE ISSUE RAISED IN ALL THESE APPEALS IS IDENTICAL AND IS ARISING FROM SAME SET OF FACTS, THESE APPEALS ARE TAKEN UP TOGETHER FOR ADJUDICATION AND ARE BEING DISPOSED OF VIDE THIS COMMON ORDER. 2 ITA NO S. 1022 TO 1024 /PUN/2015 2. THE BRIEF FACTS OF THE CASE AS EMANATING FROM RECORDS ARE : THE ASSESSEE IS A FIRM ENGAGED IN THE BUSINESS OF MINING AND SALE OF MINERALS (BAUXITE). THE RE - ASSESSMENT PROCEEDINGS WERE INITIATED AGAIN ST THE ASSESSEE IN ASSESSMENT YEAR 2001 - 02. THE ASSESSING OFFICER INTER - ALIA MADE D ISALLOWANCE U/S 43B(A) OF THE INCOME TAX ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT) OF RS.49,53,173/ - ON ACCOUNT OF ROYALTY PAYABLE ON MINING OF BAUXITE . SIMILAR DIS ALLOWANCE WAS MADE IN THE ASSESSMENT YEAR S 2002 - 03 AND 2003 - 04 IN SCRUTINY ASSESSMENT PROCEEDINGS U/S 143(3) OF THE ACT. AGGRIEVED BY THE ASSESSMENT ORDER FOR THE RESPECTIVE ASSESSMENT YEARS, THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE COMMISS ION ER OF INCOME TAX (APPEALS). IN FIRST APPELLATE PROCEEDINGS, THE COMMISSIONER OF INCOME TAX (APPEALS) VIDE ORDER DATED 22.08.2006 CONFIRMED THE DISALLOWANCE MADE U/S 43B OF THE ACT. THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE TRIBUNAL , I N ITA NOS .194 TO 196/PN/2007 FOR THE ASSESSMENT YEARS 2001 - 02 TO 2003 - 04 RESPECTIVELY , THE TRIBUNAL VIDE ORDER DATED 24.03.2008 RESTORED THE ISSUE BACK TO THE FILE OF COMMISSIONER OF INCOME TAX (APPEALS) FOR DE - NOVO CONSIDERATION. THE COMMISSIONER OF INCOME TAX (A PPEALS) IN SECOND ROUND DELETED THE ADDITION MADE U/S 43B OF THE ACT. HENCE, THE PRESENT APPEAL S BY THE REVENUE. 3. THE REVENUE HAS ASSAILED THE FINDINGS OF THE COMMISSIONER OF INCOME TAX (APPEALS) BY RAISING FOLLOWING GROUNDS OF APPEAL FOR THE ASSESSM ENT YEAR 2001 - 02 : - 1) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) WAS NOT JUSTIFIED IN DELETING THE ADDITIONS MADE BY THE ASSESSING OFFICER ON ACCOUNT OF UNPAID ROYALTY WHICH COVERS UNDER PROVISIONS OF SECTION 43B? 2) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) WAS NOT JUSTIFIED IN HOLDING THAT UNPAID ROYALTY AS STATED BY THE ASSESSEE THAT THE SAME WILL REFLECTED ON LIABILITY SIDE. HOWEVER, AS PER ACCOUNTING PRINCIPLES THE SAME NEEDS TO BE REFLECTED ON ASSETS SIDE OF THE BALANCE SHEET UNDER THE HAND CURRENT ASSETS AS ROYALTY PAID IN ADVANCE IS NOTHING BUT ADVANCE PAYMENT OF EXPENDITURES. 3 ITA NO S. 1022 TO 1024 /PUN/2015 3) THE APPELLANT CRAVES LEAVE TO ADD, ALTER, AMEND OR MODIFY ANY OTHER GROUND OF APPEAL AT THE TIME OF H EARING. IDENTICAL GROUNDS HAVE BEEN RAISED BY THE DEPARTMENT AGAINST THE FINDINGS OF THE COMMISSIONER OF INCOME TAX (APPEALS) IN ASSESSMENT YEARS 2002 - 03 AND 2003 - 04. 4 . SHRI ALOK SINGH REPRESENTING THE DEPARTMENT SUBMITTED THAT THE ASSESSEE WAS REQUIR ED TO PAY ROYALTY TO THE GOVERNMENT FOR MINING OF B AUXITE. A PERUSAL OF THE BALANCE SHEET SHOWS THAT THE ASSESSEE HAS SHOWN ROYALTY PAYABLE FOR THE RESPECTIVE ASSESSMENT YEAR S, WHICH IS AS UNDER : - ASSESSMENT YEAR ROYALTY PAYABLE (IN RS.) 2001 - 02 - 49 ,53,173/ - 2002 - 03 - 1,42,13,164/ - 2003 - 04 - 88,58,017/ - PAYMENT OF ROYALTY IS AKIN TO CESS/FEE PAYABLE TO THE GOVERNMENT. THUS, IN THE LIGHT OF THE PROVISIONS OF SECTION 43B(A) , UNPAID LIABILITY TOWARDS PAYMENT OF ROYALTY IS NOT ALLOWABLE. THE LD. DR SUBMITTED THAT THE COMMISSIONER OF INCOME TAX (APPEALS) IN PARA 6 OF THE IMPUGNED ORDER HAS GIVEN WRONG FINDING OF FACT THAT T HE ASSESSEE HAS PAID ADVANCE ROYALTY. THE LD. DR PRAYED F OR SETTING - ASIDE THE FINDINGS OF THE COMMISSIONER OF INCOME TAX (APPEAL S) AND RESTORING THE DISALLOWANCE MADE BY THE ASSESSING OFFICER. 5. ON THE OTHER HAND , SHRI PRATEEK JHA APPEARING ON BEHALF OF THE ASSESSEE VEHEMENTLY DEFENDED THE ORDER OF COMMISSIONER OF INCOME TAX (APPEALS) IN DELETING THE DISALLOWANCE MADE U/S 43B OF THE ACT. THE LD. AR SUBMITTED THAT THE ACTIVITIES OF MINING CARRIED OUT BY THE ASSESSEE ARE REGULATED BY THE MINES AND MINERALS (DEVELOPMENT AND REGULATION) ACT, 4 ITA NO S. 1022 TO 1024 /PUN/2015 1957. THE ROYALTY IS PAYABLE AT THE RATES PRESCRIBED IN S ECOND S CHEDULE OF THE ACT. AS PER THE S ECOND S CHEDULE, ROYALTY IS PAID AT THE PRESCRIBED RATES ON THE CONTENTS OF ALUMINIUM METAL IN ORE PRODUCED FOR THOSE DISPATCHED FOR USE IN ALUMINA AND ALUMINIUM METAL EXTRACTION. THE RE WOULD ALWAYS BE DIFFERENCE BETWEEN THE ORE EXTRACTED AND ORE DISP ATCHED. THE AR SUBMITTED THAT THE ROYALTY IS PAID IN ADVANCE AND IS NOT DEBITED TO THE PROFIT & LOSS ACCOUNT. THE SAME IS REFLECTED ONLY IN TH E YEAR WHEN IT IS DUE . T ILL THEN SUCH AMOUNT IS KEPT IN ROYALTY PAYABLE ACCOUNT. THE LD. AR ASSERTED THAT SINC E THE AMOUNT IS NOT DEBITED TO PROFIT & LOSS ACCOUNT AND IS NOT CLAIMED AS EXPENDITURE , THE SAME CANNOT BE DISALLOWED. THE LD. AR REFERRED TO PROFIT & LOSS ACCOUNT AT PAGE 22 & 23 OF THE PAPER BOOK TO SHOW THAT NO AMOUNT HAS BEEN CLAIMED TOWARDS PAYMENT OF ROYALTY. THE COMMISSIONER OF INCOME TAX (APPEALS) HAS APPRECIATED THIS FACT AND HAS GRANTED RELIEF TO THE ASSESSEE. 6. W E HAVE HEARD THE SUBMISSIONS MADE BY REPRESENTATIVES OF RIVAL SIDES AND HAVE PERUSED THE ORDERS OF AUTHORITIES BELOW . IN THE FI RST ROUND OF APPEAL BY THE ASSESSEE , THE TRIBUNAL VIDE ORDER DATED 24.03.2008 REMITTED THIS ISSUE BACK TO THE FILE OF THE COMMISSIONER OF INCOME TAX (APPEALS) WITH FOLLOWING DIRECTIONS : - 12. . WE HAV E GONE THROUGH THE ORDER OF THE CIT(A) ON THIS ISSUE AND FIND THAT THE CIT(A) HAS ONLY DECIDED THE POINT AS TO WHETHER THE ROYALTY FALLS WITHIN THE EXPRESSION TAX, DUTY, CESS OR FEE, BY WHATEVER NAME CALLED, UNDER ANY LAW FOR THE TIME BEING IN FORCE AS USED IN CLAUSE (A) OF SECTION 43B OF THE ACT. THE IS SUE AS TO WHETHER SECTION 43B IS AT ALL APPLICABLE TO THE ASSESSEES CASE WHEN THE CLAIM ON ACCOUNT OF ROYALTY WAS NOT MADE BY THE ASSESSEE BY DEBITING THE SAME IN THE P&L A/C, HAS NOT BEEN ADDRESSED OR ADJUDICATED UPON BY THE CIT(A). IN SUPPORT OF THE AS SESSEES CONTENTION, THE ASSESSEE HAS RELIED UPON THE RECENT DECISION OF HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS. NOBLE & HEWITT (I) (P) LTD. (DECIDED ON SEPTEMBER 10, 2007) REPORTED IN (2008) 166 TAXMAN 48 (DELHI) IN ADDITION TO THE DECISION OF I.T .A.T. PUNE BENCH A, PUNE IN THE CASE OF DY. CIT, CIR.1, SOLAPUR VS. LAXMI HYDRAULICS PVT. LTD. DATED 29 TH MARCH, 2007 IN I.T.A. NO.1293, 1406 AND 1407/PNB/2002. IN THE AFORESAID ORDER OF THE I.T.A.T. A BENCH, THE IDENTICAL ISSUE WAS INVOLVED AND THE M ATTER WAS RESTORED BACK TO THE FILE OF THE CIT(A) FOR FURTHER EXAMINATION, VERIFICATION AND THEN TO DECIDE THE ISSUE IN THE LIGHT OF THE PROVISIONS OF SECTION 43B OF THE ACT AND IN THE LIGHT OF THE DECISIONS CITED BEFORE THEM. BEFORE THE I.T.A.T. A BENC H IN THE CASE OF LAXMI HYDRAULICS PVT. LTD. (SUPRA), TWO MORE DECISIONS WERE ALSO CITED, VIZ. CIT VS. NATIONAL DUNCAN LTD. (2003) 260 ITR 97 (CAL) AND CIT VS. INDIA CARBON LTD. (2003) 262 ITR 327 (GAU). SINCE THE CIT(A) HAS NOT DELIBERATED 5 ITA NO S. 1022 TO 1024 /PUN/2015 UPON THIS ISSUE AND SINCE THE MATTER HAS ALSO TO BE EXAMINED IN THE LIGHT OF THE HONBLE SUPREME COURT DECISION IN THE CASE OF CHOWRINGHEE SALES BUREAU (P) LTD. REPORTED IN 87 ITR 542 (SC) AS REFERRED TO BY THE I.T.A.T. PUNE BENCH A IN THE CASE OF LAXMI HYDRAULICS P. L TD. (SUPRA), WE HAVE NO OTHER ALTERNATIVE THAN TO RESTORE THE MATTER BACK TO THE FILE OF THE CIT(A) FOR HIS DECISION AFTER PROVIDING A REASONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE AS WELL AS TO THE A.O. THE WHOLE MATTER SHALL REMAIN WIDE OPEN BEF ORE THE CIT(A). THE CIT(A) SHALL BE AT LIBERTY TO DECIDE THIS ISSUE AS PER LAW AFTER TAKING INTO ACCOUNT THE POSITION OF LAW AS SETTLED OR DECIDED BY THE DIFFERENT COURTS FROM TIME TO TIME IN RESPECT OF THE ISSUE AS TO WHETHER ANY AMOUNT IN THE NATURE OF TAX, DUTY, CESS OR FEE, BY WHATEVER NAME CALLED, UNDER ANY LAW FOR THE TIME BEING IN FORCE COLLECTED BY THE ASSESSEE AND CREDITED TO THE SEPARATE ACCOUNT INSTEAD OF INCORPORATING THE SAME IN THE P&L A/C CAN BE HIT BY THE PROVISIONS OF SECTION 43B OF THE ACT. THE CIT(A) SHALL NOT BE GUIDED BY ANY OBSERVATIONS, IF ANY, INCIDENTALLY MADE BY US ON MERITS OF THE ISSUE IN HIS ORDER. 13. THE OTHER ASPECT OF THE MATTER AS TO WHETHER THE ROYALTY FALLS WITHIN THE EXPRESSION TAX, DUTY, CESS OR FEE, BY WHATEVER NAM E CALLED, UNDER ANY LAW FOR THE TIME BEING IN FORCE AS CONTEMPLATED IN CLAUSE (A) OF SECTION 43B SHALL ALSO BE FRESHLY DECIDED BY THE CIT(A) AFTER CONSIDERING THE SUBMISSIONS AND CONTENTIONS OF THE ASSESSEE AS WELL AS THE A.O. WE DO NOT WISH TO EXPRESS A NY OPINION ON MERITS ON THAT PART OF THE ISSUE, AND THE MATTER SHALL BE FRESHLY DECIDED BY THE CIT(A) AS PER LAW. RESULTANTLY, THE ISSUE WITH REGARD TO THE DISALLOWANCE OF PAYMENT OF ROYALTY U/S 43B STANDS RESTORED BACK TO THE FILE OF THE CIT(A) FOR HIS D E - NOVO CONSIDERATION AND ADJUDICATION AS PER LAW. 7 . IN THE SECOND ROUND, THE COMMISSIONER OF INCOME TAX (APPEALS) DECIDED THE ISSUE AFRESH IN LINE WITH THE DIRECTIONS OF TRIBUNAL. A FTER DECIDED THE ISSUE AFRESH IN LINE WITH THE DIRECTIONS OF TRIBUNAL. A FTER CONSIDERING THE FACTS AND VARIOUS CASE LAWS , COMMISSIONER OF INCOM E TAX (APPEALS) DELETED THE DISALLOWANCE MADE U/S 43B HOLDING AS UNDER : - 8. THE RATIO OF ABOVE CASE, DECIDED IN RESPECT OF SALES TAX DUES, CANNOT BE UNIVERSALLY APPLIED IN RESPECT OF ALL TYPES OF PAYMENTS. AS PER ACCOUNTING PRACTICE, THE SALES TAX COLLE CTED FROM CUSTOMERS IS NORMALLY CREDITED IN PROFIT AND LOSS ACCOUNT ALONG WITH THE SALE CONSIDERATION. THE SALES TAX WHEN INCURRED IS THEN DEBITED IN THE PROFIT AND LOSS ACCOUNT. BY APPLICATION OF SECTION 43B, IT IS LOGICAL TO ALLOW THE SALES TAX ONLY WH EN ACTUALLY PAID. IT IS IMMATERIAL WHETHER THE ASSESSEE HAS CREDITED THE AMOUNT IN SALES TAX PAYABLE ACCOUNT IN THE BALANCE SHEET. HOWEVER, IN THE CASE OF ROYALTY, AS HAS BEEN SUBMITTED BY THE ASSESSEE, IF THE ROYALTY HAS BEEN PAID IN ADVANCE, IT IS NOT DEBITED, AS IT IS DEBITED ONLY IN THE YEAR WHEN IT IS DUE. TILL THEN, SUCH AMOUNT IS KEPT IN ROYALTY PAYABLE ACCOUNT. SINCE THE AMOUNT HAS NOT BEEN CLAIMED, IT CANNOT BE DISALLOWED. THE ADDITIONS MADE BY THE ASSESSING OFFICER ARE THEREFORE, DELETED AND THE GROUND TAKEN BY THE ASSESSEE IS ALLOWED. 8 . THE REVENUE HAS ASSAILED THE FINDINGS OF THE COMMISSIONER OF INCOME TAX (APPEALS) ON THE GROUND THAT THE ASSESSEE HAS NOT PAID THE ROYALTY AMOUNT, THEREFORE, IN VIEW OF THE PROVISIONS OF SECTION 43B, THE DE DUCTION CLAIMED BY THE ASSESSEE HAS TO BE ADDED BACK. A PERUSAL OF THE IMPUGNED ORDER SHOWS THAT THE COMMISSIONER OF INCOME TAX (APPEALS) HAS 6 ITA NO S. 1022 TO 1024 /PUN/2015 GIVEN CATEGORICAL FINDING S THAT THE ROYALTY AMOUNT HAS NOT BEEN DEBITED IN THE PROFIT & LOSS ACCOUNT. THIS FACT IS FURTHER EVIDENT FROM THE PROFIT & LOSS ACCOUNT FOR THE YEAR ENDED ON 31 ST MARCH, 2003 , COPY OF WHICH IS PLACED ON RECORD AT PAGE 22 AND 23 OF THE PAPER BOOK FILED BY THE REVENUE. WE CONCUR WITH THE FINDINGS OF THE COMMISSIONER OF INCOME TAX (APPEALS) , IF THE AMOUNT HAS NOT BEEN CLAIMED BY THE ASSESSEE AS EXPENDITURE , THERE IS NO QUESTION OF MAKING ANY DISALLOWANCE. WE DO NOT FIND ANY INFIRMITY IN THE IMPUGNED ORDER. ACCORDINGLY, THE SAME IS UPHELD AND THE APPEALS OF THE REVENUE ARE DISMISSED BEING DOV OID OF ANY MERIT. 9 . IN THE RESULT, ALL THE THREE APPEALS OF THE REVENUE ARE DISMISSED. ORDER PRONOUNCED ON WEDNESDAY , THE 24 TH DAY OF OCTOBER, 201 8 . SD/ - SD/ - SD/ - SD/ - ( . /D. KARUNAKARA RAO ) ( / VIKAS AWASTHY) / ACCOUNTANT MEMBER / JUDICIAL MEMBER / PUNE; / DATED : 24 TH OCTOBER, 2018 SUJEET / COPY OF THE ORDER FORWAR DED TO : 1. / THE APPELLANT. 2. / THE RESPONDENT. 3. ( ) / THE CIT(A) - 1&2, KOLHAPUR 4. THE CIT - I/II, KOLHAPUR/CIT (CENTRAL), PUNE 5. , , , / DR, ITAT, A BENCH, PUNE. 6. / GUARD FILE. / / // TRUE COPY// / BY ORDER, //TRUE COPY// SENIOR PRIVATE SECRETARY , / ITAT, PUNE