The DCIT, Circle-4, Ahmedabad V. Gujarat State Road Transport Corpn., Ahmedabad

ITA 1192/AHD/2014

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 6094 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-04-2017
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 27-04-2017
• Assessment Year: 2009-2010
• Appeal Filed On: 21-04-2014
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: JAGDISH
• Assessee Lawyers: ASSESSING OFFICER SUNIL TALATI
• Keywords: Business income; Capital expenditure
• Section: 143(3)

Judgement Text

.T.A. NO.1192/AHD/14 ASSESSMENT YEAR: 2009 - 10 PAGE 1 OF 5 IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD B BENCH, AHMEDABAD [CORAM: PRAMOD KUMAR AM AND MAHAVIR PRASAD JM ] I.T.A. NO. 1192/AHD/14 ASSESSMENT YEAR: 2009 - 10 DEPUTY COMMISSIONER OF INCOME TAX CIRCLE 4, AHMEDABAD ............ .APPELLANT VS. GUJARAT STATE ROAD TRANSPORT CORP . . . RESPONDENT VAAHAN VYACHAR BHAWAN, GITA MANDIR ROAD, ASTODIA, AHMEDABAD 3800 01 [PAN: AAACG5587H ] APPEARANCES BY: JAGDISH FOR THE APPELLANT ASSESSING OFFICER SUNIL TALATI FOR THE RESPONDENT ASSESSEE DATE OF CONCLUDING THE HEARING : APRIL 27 , 201 7 DATE OF PRONOUNC ING THE ORDER : APRIL 28 , 201 7 O R D E R PER PRAMOD KUMAR , AM : 1. THIS APPEAL, FILED BY THE ASSESSING OFFICER, SEEKS TO CHALLENGE THE ORDER DATED 28 TH JANUARY 2014 PASSED BY THE CIT(A) IN THE MATT ER OF ASSESSMENT UNDER SECTION 143(3) OF THE INCOME TAX ACT, 1961, FOR THE ASSESSMENT YEAR 2009 - 10. 2. LEARNED COUNSEL FOR THE ASSESSEE, AT THE TIME OF THIS APPEAL BEING CALLED OUT FOR HEARING, FAIRLY CONCEDES THAT GROUNDS OF APPEALS NOS. 2 AND 4 ARE COVER ED AGAINST THE ASSESSEE, BY THE ORDER DATED 24 TH JANUARY 2013 PASSED BY THIS TRIBUNAL, IN ASSESSEE S OWN CASE FOR THE ASSESSMENT YEAR 2005 - 06. HE, THEREFORE, SUBMITS THAT THESE TWO GROUNDS OF APPEAL ARE TO BE DECIDED AGAINST THE ASSESSEE, AT THIS FORUM, AS ON NOW, AND THE MATTER CAN NOW ONLY BE TAKEN UP AT THE HIGHER FORUMS, IF SO ADVISED. THESE TWO GROUNDS OF APPEAL ARE AS FOLLOWS: 2. THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN DELETING THE ADDITION OF RS.7,22,40,666/ - MAD E ON RECONDITIONING OF BUSES TREATING THE .T.A. NO.1192/AHD/14 ASSESSMENT YEAR: 2009 - 10 PAGE 2 OF 5 SAME A S CAPITAL EXPENDITURE, WITHOUT PROPERLY APPRECIATING THE FACTS OF THE CASE AND THE MATERIAL BROUGHT ON RECORD. 4. THE LD. CIT(A) HAS ERRED IN LAW AND ON F ACTS IN TREATING THE INCOME FROM LICENSE FEE OF CANTEEN AMOUNTIN G TO RS.4,13,89,16 2/ - AS BUSINESS INCOME, WITHOUT PROPERLY APPRECIATING THE FACTS OF THE CASE AND THE MATERIAL BROUGHT ON RECORD. 3. LEARNED COMMISSIONER (DR) DOES NOT, AND CANNOT, HAVE ANYTHING AGAINST THESE FAIR SUBMISSIONS OF THE LEARNED COUNSEL OF THE ASSESSEE. THESE GROUNDS HAVE TO BE, THEREFORE, ALLOWED. OF COURSE, AS LEARNED COUNSEL RIGHTLY SUBMITS, THIS DOES STAND OF THE ASSESSEE DOES NOT PREJUDICE, OR ACTS TO THE DETRIMENT OF ASSESSEE S RIGHT TO CARRY THE MATTER, IF SO ADVISED, BEFORE THE HIGHER FORUMS. 4. GROUND NOS. 2 AND 4 ARE THUS ALLOWED 5. IN GROUND NO. 1, THE ASSESSEE HAS RAISED THE FOLLOWING GRIEVANCE: 1 . THE LD. CIT(A) HAS ERRED IN LAW AND ON F ACTS IN DELETING THE ADDITION OF RS.41,44,80,439/ - MADE ON ACCOUNT OF MOTOR ACCIDENT CLAIMS OF EARLIER YEARS, WIT HOUT PROPERLY APPRECIATING THE FACTS OF THE CASE AND THE MATERIAL BROUGHT ON RECORD, 6. SO FAR AS THIS GRIEVANCE OF THE ASSESSING OFFICER IS CONCERNED, THE RELEVANT MATERIAL FACTS ARE LIKE THIS. THE ASSESSE IS ENGAGED IN RENDERING TRANSPORTATION SERVICE S, AND OTHER ALLIED SERVICES, TO THE PUBLIC. DURING THE COURSE OF SCRUTINY ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER NOTICED THAT THE ASSESSEE HAD CLAIMED A DEDUCTION IN RESPECT OF PAYMENTS, AGGREGATING TO RS 41,44,80,439, TOWARDS MOTOR ACCIDENT CLAIM S, BUT ALL THESE PAYMENTS DONOT PERTAIN TO THE CURRENT YEAR ALONE. WHEN MATTER WAS PROBED FURTHER, IT WAS DISCOVERED THAT IN MANY CASES THE COMPENSATION AWARD BY MOTOR ACCIDENTS CLAIM TRIBUNAL (MACT) WAS GIVEN MUCH EARLIER, BUT ASSESSEE DID NOT CREATE AN Y PROVISION OR LIABILITY AT THAT POINT OF TIME. ON THESE FACTS, THEREFORE, THE ASSESSING OFFICER DECLINED THE DEDUCTION. IN APPEAL, HOWEVER, LEARNED CIT(A) DID NOT APPROVE THIS APPROACH OF THE ASSESSING OFFICER, AND HELD AS FOLLOWS: I HAVE CAREFULLY CONS IDERED THE FACTS OF THE CASE, THE ASSESSMENT ORDER AND THE WRITTEN SUBMISSION OF THE APPELLANT. THE AO HAS DISALLOWED PAYMENT MADE TOWARDS MOTOR ACCIDENT CLAIMS AS IT WAS HELD BY HIM THAT THE EXPENDITURE DID NOT PERTAIN TO THE YEAR UNDER CONSIDERATION. THE APPELLANT HAS SUBMITTED THAT AS PER THE CONSISTENT ACCOUNTING POLICY THE CLAIMS ARE BEING .T.A. NO.1192/AHD/14 ASSESSMENT YEAR: 2009 - 10 PAGE 3 OF 5 PAID AFTER THE AWARD BY MOTOR ACCIDENT CLAIMS TRIBUNAL. THE AWARDS ARE PASSED BY MACT AFTER 6 - 7 YEARS AND AFTER THE RECEIPT OF ORDER THROUGH ADVOCATES THE LIABILITY IS DISCHARGED, SUBJECT TO THE AVAILABILITY OF THE FUND WITH THE CORPORATION. THEREFORE, IT HAS BEEN SUBMITTED BY THE APPELLANT THAT THE LIABILITY TAKES TIME TO GET CRYSTALLIZED AND ALL THESE CLAIMS BECAME DUE ONLY IN THIS ASSESSMENT YEAR AND WERE ACCORDING LY HONOURED. THE ACCOUNTS OF THE APPELLANT WERE AUDITED BY C&AG OF INDIA AND THERE HAS CERTIFIED THE AMOUNT OF RS.414480439/ - WHICH HAS BEEN CLAIMED DURING THE ASSESSMENT YEAR UNDER CONSIDERATION. IT HAS BEEN FURTHER SUBMITTED BY THE APPELLANT THAT NO PROV ISION IS BEING MADE AS THE SAME CANNOT BE DONE MERELY ON THE BASIS OF CLAIMS MADE BY THE PARTIES OR ROUTES FIVE BY THE COURT BY DEAD OR INJURED PARTIES/RELATED IS DUE TO ACCIDENTS. THE LIABILITIES ARE THEREFORE, CRYSTALLIZED; MADE KNOWN AND DEBITED IN THE BOOKS ONLY WHEN AWARDS/ORDERS OF THE COURT ARE RECEIVED FROM THE ADVOCATES. ACCORDINGLY, IT HAS BEEN SUBMITTED BY THE APPELLANT THAT THIS IS NOT IN THE NATURE OF PREVIOUS YEAR'S EXPENDITURE. IT IS ALSO FURTHER BEEN POINTED OUT BY THE APPELLANT THAT THE CLA IM HAS BEEN ALLOWED CONSISTENTLY ON THE SAME BASIS FOR ALL EARLIER YEARS. IN SUPPORT OF ITS CLAIM OF CONSISTENCY THE APPELLANT HAS PRODUCED COPIES OF ASSESSMENT ORDER OF ASSESSMENT YEAR 2004 - 05 ONWARDS WHEREIN NO DISALLOWANCE OR ADDITION ON THIS ACCOUNT HAS APPARENTLY BEEN MADE. AFTER CONSIDERING ALL THE FACTS OF THE ISSUE I'M INCLINED TO ACCEPT THE SUBMISSION GIVEN BY THE APPELLANT. THE CLAIM OF THE APPELLANT THAT THE LIABILITY CRYSTALLIZES ONLY AFTER THE AWARD BY THE MACT AND THE PAYMENT IS MADE THERE AFTER IS CORRECT. THE APPELLANT CANNOT MAKE A PROVISION MERELY ON THE BASIS OF CLAIMS MADE BY THE DISPUTED PARTY. THE PROVISION MADE ON THAT BASIS WOULD BE TOTALLY ERRONEOUS AND WITHOUT ANY BASIS. THE DISPUTED LIABILITY CAN ONLY BE CRYSTALLIZED AFTER THE A WARD OF THE COURT WHICH DECIDES THE MATTER. ACCORDINGLY THE CLAIM OF THE APPELLANT IS ACCEPTABLE. IT IS FURTHER OBSERVED THAT THE ACCOUNTS OF THE APPELLANT ARE AUDITED BY THE C&AG AND THESE FIGURES HAVE BEEN DULY CERTIFIED BY THEM. THE AO IS HOWEVER DIRECT ED T O VERIFY THE CLAIM OF THE APPELLANT THAT THE LIABILITIES HAVE BEEN CRYSTALLIZED DURING THE YEAR AFTER THE AWARD OF MACT. SUBJECT TO THE VERIFICATION BY THE AO THE DISALLOWANCE MADE IS DIRECTED TO BE DELETED. THE GROUND OF APPEAL IS ACCORDINGLY, PARTL Y ALLOWED. 7. AGGRIEVED BY THE RELIEF SO GRANTED BY THE CIT(A), THE ASSESSING OFFICER IS IN APPEAL BEFORE US. 8. WE HAVE HEARD THE RIVAL CONTENTIONS, PERUSED THE MATERIAL ON RECORD AND DULY CONSIDERED FACTS OF THE CASE IN THE LIGHT OF THE APPLICABLE LEG AL POSITION. 9. WE FIND THAT MERELY BECAUSE THE MACT AWARDS ARE BOOKED BY THE ASSESSEE AT A LATER POINT OF TIME THAN THE DATE OF THE AWARD CANNOT BE REASON ENOUGH TO .T.A. NO.1192/AHD/14 ASSESSMENT YEAR: 2009 - 10 PAGE 4 OF 5 DECLINE THE CLAIM FOR DEDUCTION IN RESPECT OF THESE AWARDS. IT IS SOMETIMES POSSIBLE, RAT HER ITS INHERENT MECHANISM OF THE SYSTEM AS IT EXISTS, THAT SOMETIMES THERE IS CONSIDERABLE DELAY IN COMMUNICATING THE AWARDS GRANTED BY MACT. THE AWARDS ARE GENERALLY CONVEYED THROUGH THE LAWYERS REPRESENTING THE ASSESSEE AND IT DOES TAKE TIME IN MANY CAS ES. IT IS NOT THE CASE OF THE ASSESSING OFFICER THAT THE SUBSEQUENT CLAIMS ARE DUPLICATION OF CLAIMS IN RESPECT OF THE SAME LIABILITY, AND THE ASSESSEE DOES NOT STAND TO GAIN AS A RESULT OF THIS DELAY IN ACCOUNTING. IN ANY EVENT, THE QUANTIFICATION OF CLAI MS IS VERIFIED BY THE STATUTORY AUDITORS AS ALSO THE CAG AUDIT TEAMS, AND THE SAME METHOD OF ACCOUNTED IS BEING FOLLOWED BY THE ASSESSEE FOR LAST 50 YEARS. AS THERE IS NO CHANGE IN M ETHOD OF ACCOUNTING, AS THERE IS NO DUPLICATION OF CLAIMS, AND, AS ASSESSE E DOES NOT ANYWAY GAIN ANYTHING FROM DELAYING ACCOUNTING FOR THESE CLAIMS, WE SEE NO REASONS TO REJECT THE CLAIMS MERELY BECAUSE THESE CLAIMS ARE ACCOUNTING FOR, IN THE BOOKS OF ACCOUNTS, AT A POINT OF TIME LATER THAN AWARDS BEING GRANTED I.E. WHEN THE ASS ESSEE GETS TO KNOW ABOUT THE SAME. IN ANY EVENT, THE CIT(A) HAS GIVEN A CATEGORICAL DIRECTION TO THE ASSESSING OFFICER FOR VERIFICATION OF CLAIM ON ACCOUNT OF THE LIABILITY HAVING BEEN CRYSTALLIZED IN THE RELEVANT PREVIOUS YEAR. GRIEVANCE OF THE ASSESSING OFFICER, REGARDING CRYSTALLIZATION OF LIABILITY, DOES NOT, THEREFORE, SURVIVE ANY LONGER . IN VIEW OF THESE DISCUSSIONS, AS ALSO BEARING IN MIND ENTIRETY OF THE CASE, WE APPROVE THE CONCLUSIONS ARRIVED AT BY THE CIT(A) AND DECLINE TO INTERFERE IN THE MATTE R. 10. GROUND NO. 1 IS THUS DISMISSED. 11. IN GROUND NO. 3, THE ASSESSEE HAS RAISED THE FOLLOWING GRIEVANCE: 3. THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN DELETING THE ADDITION OF RS.31,17,322/ - MADE ON ACCOUNT OF SHORTAGE OF SPARE PARTS, WITHOUT PR OPERLY APPRECIATING THE FACTS OF THE CASE AND THE MATERIAL BROUGHT ON RECORD. 1 2. SO FAR AS THIS GROUND OF APPEAL IS CONCERNED, THE RELEVANT MATERIAL FACTS ARE AS FOLLOWS. DURING THE COURSE OF THE SCRUTINY ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER NO TICED THAT THE ASSESSEE CLAIMED A SHORTAGE OF STOCK OF RS 31,77,322. WHEN THIS ISSUE WAS PROBED, IT WAS EXPLAINED BY THE ASSESSEE THAT DURING THE RELEVANT PREVIOUS YEAR, THE ASSESSEE HAS CONSUMED DIESEL FOR RS 592.18 CRORES AND CNG WOR TH RS 67.04 CRORES, A ND THE INHERENT NATURE OF THESE PRODUCTS IS SUCH THAT THERE IS .T.A. NO.1192/AHD/14 ASSESSMENT YEAR: 2009 - 10 PAGE 5 OF 5 SCOPE FOR EVAPORATION OF DIESEL AND CNG. HOWEVER, THE ASSESSING OFFICER REJECTED THIS EXPLANATION AND PROCEEDED TO MAKE A DISALLOWANCE OF RS 31,77,322 FOR WANT OF COMPLETE DETAILS. IN APPEAL, LEARNED CIT(A) REVERSED THE ACTION OF THE ASSESSING OFFICER AND HELD THAT THE LOSS, WHICH IS DULY CERTIFIED BY THE AUDITORS, IS UNDERSTANDABLE IN VIEW OF THE NATURE OF PRODUCTS, AND, ACCORDINGLY, DEDUCTION WAS ALLOWED. THE ASSESSING OFFICER IS AGGRIEVED O F THE RELIEF SO GRANTED BY THE CIT(A) AND IS IN APPEAL BEFORE US. 13. WE HAVE HEARD THE RIVAL CONTENTIONS, PERUSED THE MATERIAL ON RECORD AND DULY CONSIDERED FACTS OF THE CASE IN THE LIGHT OF THE APPLICABLE LEGAL POSITION. 14. THE STAND OF THE CIT(A) IN TH IS REGARD IS VERY WELL REASONED AND IT DOES NOT INDEED CALL FOR ANY INTERFERENCE. WHEN AN ASSESSEE IS DEALING WITH SUCH A HUGE VOLUME OF DIESEL AND CNG, AS THE ASSESSEE BEFORE US, IT IS QUITE UNDERSTANDABLE THAT THERE CAN BE SOME LOSS BY WAY OF EVAPORATI ON AND IN THE PROCESS OF DISTRIBUTING THE DIESEL AND CNG TO THE MOTOR VEHICLES. THIS LOSS HAS BEEN CERTIFIED BY THE AUDITORS AS WELL. IT IS ALSO NOT THE CASE OF THE ASSESSING OFFICER THAT THE LOSS IS EXCESSIVE OR UNREASONABLE. IN VIEW OF THESE DISCUSSIONS, AS ALSO BEARING IN MIND ENTIRETY OF THE CASE, WE APPROVE THE CONCLUSIONS ARRIVED AT BY THE CIT(A) AND DECLINE TO INTERFERE IN THE MATTER. 15. GROUND NO. 3 IS THUS DISMISSED. 16. IN THE RESULT, THE APPEAL IS PARTLY ALLOWED IN THE TERMS INDICATED ABOVE. PRO NOUNCED IN THE OPEN COURT TODAY ON THE 28 TH DAY OF APRIL, 2017. SD/ - SD/ - MAHAVIR PRASAD PRAMOD KUMAR (JUDICIAL MEMBER) (ACCOUNTANT MEMBER) DATED: AHMEDABAD, THE 28 TH DAY OF APRIL , 201 7 . COPIES TO: (1) THE APPE LLANT (2) THE RESPONDENT (3) COMMISSIONER (4) CIT(A) (5) DEPARTMENTAL REPRESENTATIVE (6) GUARD FILE BY ORDER ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCHES, AHMEDABAD