DCIT, Bhubaneswar V. M/s Orissa Sponge Iron & Steels Ltd, Bhubaneswar

ITA 121/CTK/2014

• Counselvise Citation: [2015] 120 COUNSELVISE.COM (IT) 8812 (ITAT-CUTTACK)
• Duration Of Justice: 11 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-03-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2009-2010
• Appeal Filed On: 11-04-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: N K NEB
• Assessee Lawyers: M UDAYPURIABINOD AGARWAL
• Section: 43B

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL CUTTACK BENCH, CUTTACK BEFORE SHRI P.K. BANSAL, HONBLE ACCOUNTANT MEMBER AND SHRI D.T. GARASIA, HONBLE JUDICIAL MEMBER ITA NO. 82/CTK/2014 : (A.Y : 2009 - 10) M/S. ORISSA SPONGE IRON & STEEL LTD., OSIL HOUSE, GANGADHAR MEHER MARG, BHUBANESWAR 751 024 (APPELLANT) PAN : AAACO2568G VS ASST. COMMISSIONER OF INCOME TAX, CIRCLE - 1(1), BHUBANESWAR (RESPONDENT) ITA NOS. 121 & 379/CTK/2014 : (A.YS : 2009 - 10 & 2010 - 11) DY. COMMISSIONER OF INCOME TAX, CIRCLE - 1(1), BHUBANESWAR (APPELLANT) VS M/S. ORISSA SPONGE IRON & STEEL LTD., OSIL HOUSE, GANGADHAR MEHER MARG, BHUBANESWAR 751 024. PAN:AAACO2568G ( RESPONDENT) ASSESSEE BY : M. UDAYPURIA /BINOD AGARWAL REVENUE BY : N.K. NEB, DR DATE OF HEARING : 03/02/2015 DATE OF PRONOUNCEMENT : 12 /03/2015 O R D E R PER P.K. BANSAL : 1. THESE CROSS APPEALS ARE ARISING OUT OF THE ORDER OF CIT(A) DT. 30.1.2014. THE ASSESSEE IN ITS APPEAL HAS TAKEN THE FOLLOWING EFFECTIVE GROUNDS OF APPEAL : 1. FOR THAT THE OF INCOME LEARNED COMMISSIONER TAX (APPEALS) IS WHOLLY UNJUSTIFIED TO SUSTAIN DISALLOWANCE OF PRIOR PERIOD EXPENSES AMOUNTING TO RS.3,38,00,787/ - ON FLIMSY AND CAPRICIOUS GROUNDS WITHOUT APPRECIATION OF FACTS INVOLVED IN THE CASE AND THEREFORE THE SUSTAINANCE OF DISALLOWANCE OF PRIOR PERIOD EXPENSES BEING ARBITRARY, UNFAIR AND ILLEGAL SHOULD BE FULLY ALLOWED IN THE FACTS AND CIRCUMSTANCES OF THE CASE. 2 ITA NOS. 82, 121 & 379/CTK/2014 (A.YS : 2009 - 10 & 2010 - 11) 2. FOR THAT THE OF INCOME LEARNED COMMISSIONER TAX (APPEALS) ERRED IN LAW TO SUSTAIN DISALLOWANCE OF FOLLOWING PRIOR PERIOD EXPENSES ON WRONG, ILLEGAL AND VICIOUS GROUNDS AND SHOULD BE ALLOWED AS PER LAW IN THE FACTS AND CIRCUMSTANCES OF THE CASE. I. ELECTRICITY CHARGES RS. 1,33,83,670/ - II. INTEREST ON SALES TAX & ELECTRICITY DUTY LOAN RS. 1,92,04,468/ - III. CENTRAL SALES TAX DEMAND RS. 12,12,649/ - RS. 3,38,00,787/ - THE REVENUE IN ITS APPEALS HAS TAKEN THE FOLLOWING COMMON GROUNDS OF APPEAL EXCEPT FOR THE CHANGE IN FIGURES : A.Y 2009 - 10 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) IS NOT JUSTIFIED IN DELETING THE ADDITION OF RS.36,84,755/ - MADE BY THE AO ON ACCOUNT OF EMPLOYEES' CONTRIBUTION TO PROVIDENT FUND, WHEN THE SAME HAS NOT BEEN DEP OSITED WITHIN THE DUE DATE AS STIPULATED UNDER THE RELEVANT ACT. 2. I N THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) IS NOT JUSTIFIED IN HOLDING THAT THE AMENDMENT MADE BY THE FA 2003 IN OMITTING THE SECOND PROVISO TO SECTION 43B WAS RETR OSPECTIVELY APPLICABLE FROM 01.04.1988. ITA NOS. 121 & 379/CTK/2014 (REVENUES APPEALS) 2. THE ONLY ISSUE INVOLVED IN THE REVENUES APPEALS RELATE TO DISALLOWANCE OF EMPLOYEES CONTRIBUTION FOR P.F NOT BEING PAID ON DUE DATE AMOUNTING TO RS.36,84,755/ - WHICH WAS ALLOWED BY THE CIT(A) AS THE SAME WAS PAID BY THE ASSESSEE BEFORE THE DUE DATE. THIS ISSUE IS NO MORE RES INTEGRA IN VIEW OF THE DECISION OF THE HON'BLE SUPREME COURT IN THE CASE OF CIT VS. ALOM EXTRUSIONS LTD. , 319 ITR 306 (SC) IN WHICH THE HON'BLE SUPREME COURT TOOK THE VIEW THAT AMENDMENT MADE W.E.F. 1.4.2004 IS CURATIVE IN NATURE AND APPLIED RETROSPECTIVELY W.E.F. 1.4.1988. THUS, THE GROUND S TAKEN BY THE REVENUE STAND DISMISSED. ITA NO. 82/CTK/2014 (ASSESSEES APPEAL) 3 ITA NOS. 82, 121 & 379/CTK/2014 (A.YS : 2009 - 10 & 2010 - 11) 3. THE ONLY ISSUE INVOLVED IN BOTH THE GROUNDS TAKEN BY THE ASSESSEE RELATES TO THE DISALLOWANCE OF THE PRIOR PERIOD EXPENSES. THE AO NOTED THAT THE ASSESSEE HAS DEBITED PRIOR PERIOD EXPENSES AMOUNTING TO RS. 3,52,16,648/ - DETAILED AS UNDER : DETAILS AMOUNT (RS.) I) ELECTRICITY CHARGES 1,33,83,670 II) INTEREST ON SALES TAX LOAN 1,92,04,468 III) SALES TAX 12,12,649 IV) EXCISE DUTY 14,15,861 3,52,16,648 THE AO DISALLOWED THE SAME. WHEN THE MATTER WENT BEFORE CIT(A), CIT(A) SUSTAINED THE DISALLOWANCE. 4. WE HEARD THE RIVAL SUBMISSIONS AND CAREFULLY CONSIDERED THE SAME ALONGWITH THE ORDER OF THE TAX AUTHORITIES BELOW. WE NOTED ON THE BASIS OF PG. 4 OF THE PAPER BOOK THAT SUM OF RS. 1,17,36,34 5 / - RELATE TO THE IMPUGNED ASSESSMENT YEAR WHILE BALANCE AMOUNT R ELATE TO THE PRIOR PERIOD. SINCE THE AMOUNT RELATES TO THE IMPUGNED ASSESSMENT YEAR I.E. BILL RAISED FOR APRIL, 2008 TO MARCH, 2009 IT CANNOT BE SAID THAT THE EXPENSES SO INCURRED DID NOT ARISE OR CRYSTALLIZE D DURING THE IMPUGNED ASSESSMENT YEAR. MERELY THE LIABILITY WAS SETTLED IN JULY, 2009 DOES NOT MEAN THAT THE EXPENDITURE HAS NOT ACCRUED DURING THE IMPUGNED ASSESSMENT YEAR. THE AUTHORITIES BELOW, IN OUR OPINION, HAVE NOT APPRECIATED THE DEFINITION OF THE WORD ACCRUAL GIVEN UNDER PARA 6(B) OF THE ACCOUNTING STANDARD - 1 (AS - 1) WHICH STANDS NOTIFIED BY THE CENTRAL GOVERNMENT IN PURSUANCE OF THE POWERS GIVEN UNDER SEC. 145(2). THE WORD ACCRUAL HERE REFERS TO THE ASSUMPTION THAT REVENUES AND COSTS ARE ACCRU ED, THAT IS, RECOGNISED AS THEY ARE EARNED OR INCURRED (AND NOT AS MONEY IS RECEIVED OR PAID) AND RECORDED IN THE FINANCIAL STATEMENTS OF THE PERIOD TO WHICH THEY RELATE . SINCE THE EXPENSES RELATING TO ELECTRICITY RELATE TO THE IMPUGNED ASSESSMENT 4 ITA NOS. 82, 121 & 379/CTK/2014 (A.YS : 2009 - 10 & 2010 - 11) YEAR, T HEREFORE, IN VIEW OF THE AS - 1 THE EXPENSES STAND ACCRUED DURING THE IMPUGNED YEAR AND THEREFORE WE DELETE THE ADDITION OF RS. 1,17,36,345/ - AND SUSTAIN THE REST OF THE DISALLOWANCE. THE SUM OF RS. 3,38,00,787/ - INCLUDES SUM OF RS. 1,92,04,468/ - IN RESPECT OF INTEREST ON SALES TAX AND ELECTRICITY DUTY LOAN. AFTER HEARING THE RIVAL SUBMISSIONS WE NOTED THAT CIT(A) HAS CONFIRMED THE DISALLOWANCE ON THE BASIS THAT FROM THE DETAILS FILED THERE IS NO CLARITY WHETHER ANY OF THESE INTEREST AMOUNT RELATE TO THE IM PUGNED ASSESSMENT YEAR. WE PERUSED PGS. 47 AND 48 OF THE PAPER BOOK WHICH CONSISTS OF THE DETAILS OF SALES TAX LOAN PAYMENT AS WELL AS ELECTRICITY DUTY LOAN PAYMENT AS WELL AS THE INTEREST THEREON. SUM OF RS. 1,92,04,468/ - CONSISTS OF RS. 1,05,40,093/ - T OWARDS INTEREST ON SALES TAX LOAN AND RS. 86,64,375/ - TOWARD THE ELECTRICITY DUTY LOAN. THE ASSESSEE HAS MADE PAYMENT OF RS. 25 LACS DURING THE IMPUGNED ASSESSMENT YEAR A S S A L E S T A X L O A N AS PER DETAILS GIVEN AT PG. 47. THE INTEREST PAID BY THE AS SESSEE, IN OUR OPINION, IS CLEARLY ALLOWABLE DURING THE IMPUGNED YEAR AS THE LIABILITY FOR THE SAME HAS CRYSTALLIZED DURING THE IMPUGNED ASSESSMENT YEAR. WE ACCORDINGLY DELETE THE DISALLOWANCE OF RS. 1,92,04,468/ - AS THIS AMOUNT DOES NOT RELATE TO THE PAY MENT OF THE LOAN. THE THIRD AMOUNT WHICH HAS BEEN DISALLOWED IS CENTRAL SALES TAX PAYMENT AMOUNTING TO RS. 12,12,649/ - INCLUDED IN THE DISALLOWANCE OF RS. 3,38,00,787/ - . WE NOTED THAT THIS AMOUNT HAS BEEN CLAIMED BY THE ASSESSEE AS DEDUCTION IN THE IMPUG NED ASSESSMENT YEAR. THE AMOUNT RELATES TO CENTRAL SALES TAX DEMAND FOR NON - SUBMISSION OF C FORM IN RESPECT OF SALES MADE BY THE ASSESSEE DURING THE F.Y 1995 - 96. THE ASSESSEE EVEN THOUGH WENT IN APPEAL BUT THE APPEAL OF THE ASSESSEE WAS FINALLY DISPOSE D OFF ON 25.8.2001, THEREFORE THE PAYMENT WAS MADE BY THE ASSESSEE IN THE YEAR 2002. THE ASSESSEE CLAIMED THE DEDUCTION DURING THE IMPUGNED ASSESSMENT YEAR MENTIONING THAT THE ASSESSEE SINCE MADE EFFORTS FOR THE RECOVERY OF THE SAID AMOUNT BUT THE ASSESSE E COULD NOT RECOVER IT. THE ASSESSEE SINCE CLAIMED THIS AMOUNT UNDER THE HEAD PRIOR PERIOD EXPENSES AND THE EXPENSES DO NO RELATE TO THE IMPUGNED ASSESSMENT YEAR NOR ACCRUED DURING THE IMPUGNED ASSESSMENT 5 ITA NOS. 82, 121 & 379/CTK/2014 (A.YS : 2009 - 10 & 2010 - 11) YEAR, THEREFORE, IN OUR OPINION, THERE IS NO ILL EGALITY OR INFIRMITY IN THE ORDER OF CIT(A) IN SUSTAINING THE DISALLOWANCE. IT IS NEITHER THE CASE OF THE ASSESSEE NOR THE PLEA RAISED BY THE LD. AR THAT THIS AMOUNT REPRESENTS TAX RECOVERABLE FROM THE CUSTOMERS AND HAS BEEN WRITTEN OFF DURING THE IMPUGNE D YEAR SO THAT THE ASSESSEE MIGHT HAVE BEEN ENTITLED FOR DEDUCTION U/S 36(1)(VII). FOR CLAIMING DEDUCTION U/S 36(1)(VII) ASSESSEE SHOULD HAVE WRITTEN OFF THIS AMOUNT IN ITS PROFIT & LOSS ACCOUNT. WE, THEREFORE, CONFIRM THE ORDER OF CIT(A) ON THE DISALLOWA NCE. THUS, GROUND NOS. 1 & 2 TAKEN BY THE ASSESSEE IN ITS APPEAL ARE PARTLY ALLOWED. 5. IN THE RESULT, THE APPEALS FILED BY THE REVENUE STANDS DISMISSED WHILE THE APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED. 6. ORDER PRONOUNCED IN PURSUANCE OF RULE 34(4) OF ITAT RULES, 1963 BY PUTTING ON NOTICE BOARD OF THE BENCH AT CUTTACK ON 1 2 /03/2015. S D / - (D.T.GARASIA) JUDICIAL MEMBER S D / - (P.K. BANSAL) ACCOUNTANT MEMBER PLACE : PANAJI / GOA DATED : 1 2 /03/ 201 5 *SSL* COPY TO : (1) APPELLANT (2) RESPONDENT (3) CIT(A) CONCERNED (4) CIT CONCERNED (5) D.R (6) GUARD FILE TRUE COPY, BY ORDER ,