Vinod Pahumal Ramchandani, Solapur V. Income-tax Officer, Ward - 1(2), Solapur

ITA 1320/PUN/2018

• Counselvise Citation: [2019] 118 COUNSELVISE.COM (IT) 2526 (ITAT-PUNE)
• Duration Of Justice: 6 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-03-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Next Hearing Date: 27-02-2019
• Assessment Year: 2015-2016
• Appeal Filed On: 16-08-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: CESS OR FEES OR WHATEVER NAME
• Keywords: Business expenditure; Cost of acquisition
• Section: 37; 28; 43B; 143(3); 201; 20

Judgement Text

- IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH SMC , PUNE , , . , BEFORE MS. SUSHMA CHOWLA, JM AND SHRI D. KARUNAKARA RAO , AM . / ITA NO. 1 320 /P U N/201 8 / ASSESSMENT YEAR : 20 15 - 16 VINOD PAHUMAL RAMCHANDANI, 14, SINDHU NAGAR COMPLEX, GANDHI NAGAR, SOLAPUR 413003 . / APPELLANT PAN: A ARPR2214E VS. THE INCOME TAX OFFICER, WAD 1 ( 2 ), S OLAPUR . / RESPONDENT / APPELLANT BY : SHRI C.V. DESHPANDE / RESPONDENT BY : SHRI M.K. VERMA / DATE OF HEARING : 27 . 0 2 .201 9 / DATE OF PRONOUNCEMENT: 11 . 0 3 .201 9 / ORDER PER SUSHMA CHOWLA, J M : TH E APPEAL FILED BY ASSESSEE IS AGAINST ORDER OF CIT (A) - 7 , PUNE , DATED 21 . 0 5 .201 8 RELATING TO ASSESSMENT YEAR 20 15 - 16 AGAINST ORDER PASSED UNDER SECTION 143(3) OF THE INCOME - TAX ACT , 1961 (IN SHORT THE ACT) . 2. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL: - 1. ON THE FACTS & IN CIRCUMSTANCES OF THE CASE & IN LAW, THE LOWER AUTHORITIES HAVE ERRED IN INCORRECTLY INVOKING PROVISIONS OF SECTION 37 OF THE INCOME TAX ACT, 1961 AND THEREBY INC ORRECTLY DENYING THE EXPENDITURE ON ACCOUNT OF LOCAL BODY TAX (LBT) CLAIMED BY THE ASSESSEE AMOUNTING TO RS.43,73,913/ - FOR THE REASON THAT THE SAID EXPENDITURE PERTAINS TO PRIOR PERIOD THOUGH THE SAID DEDUCTION WAS SQUARELY AVAILABLE TO THE ASSESSEE UNDER SECTION 43B. ITA NO. 1 320 /P U N/201 8 VINOD PAHUMAL RAMCHANDANI 2 2. ON THE FACTS & IN CIRCUMSTANCES OF THE CASE & IN LAW, ALTERNATIVELY IT IS SUBMITTED THAT THE APPELLANT SHALL BE GRANTED DEDUCTION OF RS.43,73,913/ - UNDER SECTION 43B AS THE APPELLANT HAS COMPLIED WITH PROVISIONS OF THE SAID SECTION. 3. TH E ONLY ISSUE RAISED IN THE PRESENT APPEAL IS AGAINST DENIAL OF EXPENDITURE INCURRED ON ACCOUNT OF LOCAL BODY TAX (LBT) AMOUNTING TO 43,73,913/ - WHICH WAS CLAIMED AS DEDUCTIBLE UNDER SECTION 43B OF THE ACT, SINCE THE SAID AMOUNT WAS PAID DURING THE YEAR UNDER CONSIDERATION, THOUGH IT RELATED TO PRIOR PERIOD. 4. BRIEFLY, IN THE FACTS OF THE CASE, THE ASSESSEE WAS ENGAGED IN THE BUSINE SS OF RETAIL TRADE IN LIQUOR I.E. IMFL & COUNTRY LIQUOR. THE CASE OF ASSESSEE WAS PICKED UP FOR SCRUTINY. ON GOING THROUGH TRADING ACCOUNT, THE ASSESSING OFFICER NOTED THAT THE ASSESSEE HAD DEBITED LOCAL BODY TAX (LBT) OF 99,67,827/ - . THE ASSESSEE WAS ASKED TO GIVE THE DETAILS OF LBT TAX PAID WITH SUPPORTING CHALLANS. THE ASSESSING OFFICER NOTED THAT IN ADDITION TO CURRENT YEARS LBT, UN - ASSESSED / UNPAID LBT OF EARLIER PERIOD WAS ALSO RECOVERED BY SMC AUTHORITIES TOTALING 99,67,827/ - . AS PER LBT R ULES, 10% OF PURCHASE COST WAS CHARGED AS LBT ON LIQUORS. THE ASSESSING OFFICER THUS, NOTED THAT LBT PERTAINING TO CURRENT PERIOD WORKED OUT TO 55,93,914/ - . HOWEVER, THE ASSESSEE HAD DEBITED SUM OF 99,67,827/ - . THE ASSESSEE EXPLAINED THAT LBT OF EAR LIER PERIOD WAS ALLOWABLE AS PER PROVISIONS OF SECTION 43B OF THE ACT, SINCE THE SAID AMOUNT WAS PAID DURING THE YEAR. THE ASSESSING OFFICER OBSERVED THAT THE ASSESSEE HAD NOT DEBITED LBT EXPENSES IN EARLIER YEARS AND IT WAS NOT DISALLOWED IN THE COMPUTAT ION OF EARLIER YEAR UNDER SECTION 43B OF THE ACT. THE ASSESSING OFFICER WAS OF THE VIEW THAT THE SAID EXPENDITURE CLAIMED ON ACTUAL PAYMENT BASIS, THOUGH WAS RELATABLE TO PRIOR YEAR AND WAS NOT TO BE ITA NO. 1 320 /P U N/201 8 VINOD PAHUMAL RAMCHANDANI 3 ALLOWED AS EXPENDITURE DURING THE YEAR. HENCE, THE DIS ALLOWANCE OF 43,73,993/ - . 5. THE CIT(A) UPHELD THE AFORESAID DISALLOWANCE MADE BY THE ASSESSING OFFICER. 6. THE ASSESSEE IS IN APPEAL AGAINST THE ORDER OF CIT(A). 7. THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE POINTED OUT THAT IT WAS STATE LEVY BY THE SCHEDULED MUNICIPAL CORPORATION, WHICH IS PARALLEL OF OCTROI CHARGES. HE FURTHER POINTED OUT THAT PART OF THE AMOUNT PAID DURING THE YEAR HAS BEEN ALLOWED BUT SUM OF 43.73 LAKHS WAS DISALLOWED ON THE BASIS OF IT RELATED TO PRIOR YEAR. HE F URTHER POINTED OUT THAT SINCE THE AMOUNT WAS ACTUALLY PAID DURING THE YEAR, HENCE THE CLAIM WAS MADE UNDER SECTION 43B OF THE ACT, WHICH WAS DENIED BY THE ASSESSING OFFICER ON THE GROUND THAT IT WAS NOT DEBITED TO THE ACCOUNTS IN THE PREVIOUS YEAR. HE FUR THER POINTED OUT THAT RELIANCE PLACED UPON BY THE ASSESSING OFFICER ON THE DECISION OF AHMEDABAD BENCH OF TRIBUNAL IN DEEPAK NITRITE LTD. VS. DCIT (2012) 139 ITD 213 (AHD TRIB.) IS NOT CORRECT AS THE DISALLOWANCE IN THE CASE WAS ON ACCOUNT OF INTEREST EX PENDITURE AND NOT THE STATE LEVY. HE FURTHER PLACED RELIANCE ON THE DECISION OF PUNE BENCH OF TRIBUNAL IN DCIT VS. EAGLE AGRO FARMS PVT. LTD. IN ITA NOS.2649 & 2639/PUN/2016, RELATING TO ASSESSMENT YEARS 2006 - 07 & 2007 - 08, ORDER DATED 08.02.2019, WHEREIN THE PRIOR PERIOD EXPENSE WHICH WERE COVERED UNDER SECTION 43B OF THE ACT HAVE BEEN ALLOWED IN THE YEAR OF PAYMENT. 8. THE LEARNED DEPARTMENTAL REPRESENTATIVE FOR THE REVENUE PLACING RELIANCE ON THE ORDERS OF AUTHORITIES BELOW, FURTHER PLACED RELIANCE ON T HE ITA NO. 1 320 /P U N/201 8 VINOD PAHUMAL RAMCHANDANI 4 DECISION OF AHMEDABAD BENCH OF TRIBUNAL IN DEEPAK NITRITE LTD. VS. DCIT (SUPRA). 9. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RECORD. THE ASSESSEE FOR THE YEAR UNDER CONSIDERATION WAS ENGAGED IN THE BUSINESS OF RETAIL TRADING IN LIQUOR I.E. INDIAN MADE FOREIGN LIQUOR AND COUNTRY LIQUOR. FOR THE YEAR UNDER CONSIDERATION, THE GROSS TURNOVER OF ASSESSEE WAS 6.87 CRORES. THE ASSESSEE HAD DEBITED SUM OF 99,67,827/ - AGAINST PAYMENT OF LOCAL BODY TAX (LBT). AS PER LBT RULES, 10% OF PURCHASE C OST WAS CHARGED AS LBT ON LIQUOR. IN ACCORDANCE WITH THE TURNOVER OF ASSESSEE FOR THE YEAR, THE ASSESSING OFFIC ER ALLOWED LBT OF 55,93,914/ - WHICH WAS PAID DURING THE YEAR. HOWEVER, LBT PAID FOR THE EARLIER PERIOD OF 43,73,913/ - WAS DISALLOWED IN THE HANDS OF ASSESSEE. THE CLAIM OF ASSESSEE WAS IN LINE WITH THE PROVISIONS OF SECTION 43B OF THE ACT. THE SAID SECTION PROVIDES THAT DEDUCTION IN RESPECT OF ANY SUM PAYABLE BY THE ASSESSEE BY WAY OF TAX, DUTY, CESS OR FEES OR WHATEVER NAME CALLED, UNDER A NY LAW FOR THE TIME BEING IN FORCE , TO BE ALLOWED IN THE YEAR OF PAYMENT, IRRESPECTIVE OF THE PREVIOUS YEAR IN WHICH THE LIABILITY TO PAY SUCH SUM WAS INCURRED BY THE ASSESSEE, ACCORDING TO THE METHOD OF ACCOUNTING REGULARLY EMPLOYED BY IT. THE SAID DED UCTION IS TO BE ALLOWED WHILE COMPUTING THE INCOME UNDER SECTION 28 OF THAT PREVIOUS YEAR IN WHICH SUCH SUM WAS ACTUALLY PAID BY HIM. SUCH IS THE PROPOSITION LAID DOWN IN SECTION 43B OF THE ACT, WHICH OPENS WITH NON ABSTINENT CLAUSE NOTWITHSTANDING ANYTH ING CONTAINED IN ANY OTHER PROVISIONS OF THE ACT. . IN OTHER WORDS, WHERE THE ASSESSEE IS FOLLOWING A PARTICULAR METHOD OF ACCOUNTING AND ANY AMOUNT WAS INCURRED FOR CARRYING OUT THE BUSINESS IN ANY OF THE YEARS, THEN THE SAME IF COVERED UNDER THE PROVIS IONS OF SECTION 43B OF THE ACT IS TO BE ALLOWED IN THE YEAR OF PAYMENT. ITA NO. 1 320 /P U N/201 8 VINOD PAHUMAL RAMCHANDANI 5 10. IN THE FACTS OF PRESENT CASE, WHERE THE ASSESSEE WAS FOLLOWING MERCANTILE SYSTEM OF ACCOUNTING, THEN LBT WHICH IS 10% OF PURCHASE COST WAS CHARGEABLE TO THE PROFIT AND LOSS ACCO UNT IN THE PRECEDING YEAR. HOWEVER, NO SUCH CHARGE WAS CREATED BY THE ASSESSEE IN THE PREVIOUS YEAR SINCE THE AMOUNT WAS NOT PAID BY THE ASSESSEE IN THE SAID YEAR. ONLY ON PAYMENT OF SAID AMOUNT, THE ASSESSEE DEBITED THE SAME TO THE PROFIT AND LOSS ACCOUNT. IT IS UNDISPUTED THAT LBT IS TO BE ALLOWED AS EXPENDITURE. HOWEVER, THE ISSUE WHICH IS RAISED BY THE ASSESSING OFFICER IS THAT WHERE THE ASSESSEE HAD NOT DEBITED THE SAID AMOUNT ON ACCRUAL BASIS IN THE PRECEDING YEAR, CAN THE EXP ENDITURE BE ALLOWED IN THE YEAR OF PAYMENT. THE ANSWER TO THE SAME IS YES, IN VIEW OF EXPRESS PROVISIONS OF SECTION 43B OF THE ACT. THE SAID PAYMENT MADE BY THE ASSESSEE WHICH IS STATE LEVY, IS TO BE ALLOWED ONLY WHEN THE SAME IS PAID TO THE STATE GOVE RNMENT. THE SAID PAYMENT HAS BEEN MADE DURING THE YEAR AND HENCE, THE ASSESSEE IS ENTITLED TO CLAIM THE SAID EXPENDITURE OF 43,73,913/ - , IN VIEW OF PROVISIONS OF SECTION 43B OF THE ACT. WE FIND NO MERIT IN THE ORDERS OF AUTHORITIES BELOW IN DENYING TH E SAME TO THE ASSESSEE ON THE GROUND THAT THE AMOUNT WAS NOT SHOWN AS PAYABLE IN THE PRECEDING YEAR. THE EXPRESS PROVISIONS OF SECTION 43B OF THE ACT PROVIDES THAT IRRESPECTIVE OF PREVIOUS YEAR IN WHICH THE LIABILITY TO PAY SUCH SUM WAS INCURRED BY THE AS SESSEE, ACCORDING TO THE METHOD OF ACCOUNTING REGULARLY EMPLOYED BY HIM, THE SAID SUM WOULD BE ALLOWED ONLY IN COMPUTING THE INCOME REFERRED TO IN SECTION 28 OF THAT PREVIOUS YEAR IN WHICH SUCH SUM IS ACTUALLY PAID BY HIM. ACCORDINGLY, WE HOLD THAT THE AS SESSEE IS ENTITLED TO THE AFORESAID CLAIM UNDER SECTION 43B OF THE ACT . 11. COMING TO THE RELIANCE PLACED UPON BY THE AUTHORITIES BELOW ON THE DECISION OF AHMEDABAD BENCH OF TRIBUNAL IN DEEPAK NITRITE LTD. VS. DCIT ITA NO. 1 320 /P U N/201 8 VINOD PAHUMAL RAMCHANDANI 6 (SUPRA), THE ISSUE WHICH AROSE WAS THE C LAIM OF DEDUCTION ON ACCOUNT OF PENAL INTEREST AND PENALTY OF 1,70,186/ - . THE TRIBUNAL HELD THAT INTEREST PAID ON SALES TAX WAS NOT OF PENAL IN NATURE AND WAS TO BE ALLOWED AS BUSINESS EXPENDITURE AND THE MATTER WAS REMITTED TO VERIFY WHETHER IN EARLIER YEARS, UNPAID AMOUNT OF SALES TAX WAS ADDED TO THE INCOME OR NOT. THE ASSESSEE HAD NOT CLAIMED THE SAID EXPENDITURE IN EARLIER YEARS AND HENCE, THE SAID PROPOSITION IS NOT APPLICABLE TO THE FACTS OF PRESENT CASE. THE GROUNDS OF APPEAL RAISED BY ASSESSEE ARE THUS, ALLOWED. 1 2 . IN THE RESULT, APPEAL OF ASSESSEE IS ALLOWED. ORDER PRONOUNCED ON THIS 11 TH DAY OF MARCH , 201 9 . SD/ - SD/ - ( D.KARUNAKARA RAO ) (SUSHMA CHOWLA ) / ACCOUNTANT MEMBER / JUDICIAL MEMBER / PUNE ; DATED : 11 TH MARCH , 201 9 . GCVSR / COPY OF THE ORDER IS FORWARDED TO : 1. / T HE APPELLANT ; 2. / THE RESPONDENT; 3. ( ) / THE CIT(A) - 7 , PUNE ; 4. THE PR. CIT - 6 , PUNE ; 5. 6. , , , - / DR SMC , ITAT, PUNE; / GUARD FILE . / BY ORDER , // TRUE COPY // / SR. PRIVATE SECRETARY , / ITAT, PUNE