BHARAT INSULATION COMPANY (I) LTD, MUMBAI V. ASST CIT CEN CIR 31, MUMBAI

ITA 1401/MUM/2013

• Counselvise Citation: 140119914 RSA 2013
• Duration Of Justice: 2 year(s) 3 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-05-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 20-05-2015
• Assessment Year: 2010-2011
• Appeal Filed On: 19-02-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, MUMBAI BEFORE SHRI G.S. PANNU, ACCOUNTANT MEMBER AND SHRI SANJAY GARG, JUDICIAL MEMBER ITA NO 1401/MUM/2013 ASSESSMENT YEAR: 2010-11 BHARAT INSULATION COMPANY (I) LTD. B-32, WAGLE INDUSTRIAL ESTATE, ROAD NO. 18, THANE (W) 400 064. VS.` ASST. COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE 31, ROOM NO. 409, AAYKAR BHAVAN, MAHARSHI KARVE ROAD, MUMBAI -400020. PAN/GIR NO. AAACJ3727E APPELLANT RESPONDENT ORDER PER G.S. PANNU, AM THE CAPTIONED APPEAL PREFERRED BY THE ASSESSEE IS DI RECTED AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) [HEREIN AFTER REFERRED TO AS THE CIT(A)]DATED 16.01.2013 WHICH IN-TURN HAS ARISEN F ROM AN ORDER PASSED BY THE ASSESSING OFFICER U/S 143(3) OF THE INCOME TAX ACT, 1961( HEREINAFTER REFERRED TO AS THE ACT) DATED 07.08.2012 PERTAINING TO ASSESSMENT YEAR 2010-11. 2. IN THIS APPEAL, ALTHOUGH ASSESSEE HAS RAISED MU LTIPLE GROUNDS OF APPEAL BUT THE SOLITARY GRIEVANCE IS WITH REGARD TO A DISALLOW ANCE OF RS. 38,98,474/-, WHICH REPRESENTED INTEREST EXPENDITURE PAID TO M/S. HINDAL CO INDUSTRIES LTD. THE ASSESSEE BY SHRI YOGESH KAMAT REVENUE BY SHRI M. SUBRAMANIAM DATE OF HEARING 20.05.2015 DATE OF PRONOUNCEMENT 29.05.2015 2 ITA NO 1401/MUM/2013 ASSESSMENT YEAR 2010-11 PAGE 2 OF 5 APPELLANT IS A COMPANY, ENGAGED IN THE BUSINESS OF P RODUCTION OF WINDING WIRE AND ENAMELLED WIRE. ASSESSEE PURCHASES ITS PRINCIPAL RA W MATERIAL, NAMELY, COPPER FROM M/S HINDALCO INDUSTRIES LTD. THE AFORESAID AMOU NT REFLECTED INTEREST CHARGED BY HINDALCO INDUSTRIES LTD, ON ACCOUNT OF DELAYED PAY MENT OF DUES BY ASSESSEE. THE ASSESSING OFFICER NOTED THAT THE INTEREST EXPENDITU RE RELATED TO THE PERIOD ENDING ON 31.03.2009, WHICH CORRESPONDED TO IMMEDIATELY PRECE DING ASSESSMENT YEAR OF 2009-10 AND, THEREFORE, THE SAID EXPENDITURE RELATE D TO AN EARLIER ASSESSMENT YEAR. SINCE THE ASSESSEE WAS FOLLOWING THE MERCANTILE SYS TEM OF ACCOUNTING, THE ASSESSING OFFICER HELD THAT SUCH EXPENDITURE WAS NOT ALLOWABL E WHILE COMPUTING THE INCOME IN THE YEAR UNDER CONSIDERATION. HE, THEREFORE, DISALL OWED THE SAID EXPENSE AS A PRIOR PERIOD EXPENDITURE. THE CIT(A) HAS ALSO UPHELD THE ACTION OF THE ASSESSING OFFICER AND ACCORDINGLY ASSESSEE IS IN APPEAL BEFORE US. 3. BEFORE US, THE LD. REPRESENTATIVE FOR THE ASSESS EE POINTED OUT THOUGH THE EXPENDITURE IN QUESTION PERTAINED TO EARLIER YEAR, SO HOWEVER, THE LIABILITY FOR THE SAME HAS CRYSTALLIZED DURING THE PREVIOUS YEAR RELEV ANT TO ASSESSMENT YEAR UNDER CONSIDERATION. IN SUPPORT, A REFERENCE HAS BEEN MADE TO PAGES 8 TO 15 OF THE PAPER BOOK, WHEREIN ARE PLACED COPIES OF THE DEBIT NOTES I SSUED BY HINDALCO INDUSTRIES LTD., IN TERMS OF WHICH THE INTEREST OF RS. 38,98,4 74/- HAS BEEN CHARGED FROM ASSESSEE ON DELAYED PAYMENT. IT HAS BEEN SUBMITTED TH AT THE SAID DEBIT NOTES ARE ISSUED ON THE DATES FALLING WITHIN THE PREVIOUS YEA R RELEVANT TO THE ASSESSMENT YEAR UNDER CONSIDERATION AND ON THIS BASIS, THE EXPENDITU RE IS DEEMED TO HAVE CRYSTALLIZED DURING THE YEAR UNDER CONSIDERATION AND THUS IS AN ALLOWABLE EXPENDITURE WHILE COMPUTING THE INCOME OF THE ASSES SEE FOR THE INSTANT ASSESSMENT YEAR. 3 ITA NO 1401/MUM/2013 ASSESSMENT YEAR 2010-11 PAGE 3 OF 5 4. ON THE OTHER HAND, THE LD. DR APPEARING FOR THE REVENUE HAS SUBMITTED THAT THE EXPENDITURE CLEARLY WAS RELATABLE TO THE PURCHAS ES EFFECTED FROM HINDALCO INDUSTRIES LTD. IN THE PRECEDING YEAR AND, THEREFOR E, IT WAS A PRIOR PERIOD EXPENDITURE, THUS THE LOWER AUTHORITIES HAVE RIGHTL Y DISALLOWED THE IMPUGNED EXPENDITURE. 5. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSIO NS. FACTUALLY SPEAKING, THERE IS CONSIDERABLE STRENGTH IN THE PLEA SET-UP BY THE A SSESSEE THAT LIABILITY IN RESPECT OF THE IMPUGNED EXPENDITURE OF RS. 38,98,474/- HAS CRY STALLIZED ONLY ON THE RECEIPT OF DEBIT NOTES FROM HINDALCO INDUSTRIES LTD, IN THE CURR ENT ASSESSMENT YEAR. NO DOUBT, INTEREST HAS BEEN CHARGED BY HINDALCO INDUSTRIES LTD, IN RESPECT OF PURCHASES EFFECTED BY THE ASSESSEE IN THE EARLIER YEAR, BUT THE LIABILITY TO PAY INTEREST HAS INDEED CRYSTALLIZED ONLY WHEN THE DEBIT NOTES FOR THE SAME WERE RAISED BY HINDALCO INDUSTRIES LTD, AND SUCH DATES FALL IN THE CURRENT ASSESSMENT YEAR. THEREFORE, IN SO FAR AS THE CRYSTALLIZATION OF LIABILITY OF THE IMPUGN ED EXPENDITURE IS CONCERNED, WE ARE IN AGREEMENT WITH THE APPELLANT THAT THE SAME H AS OCCURRED IN THE CURRENT ASSESSMENT YEAR. THE LD. REPRESENTATIVE HAD ALSO AS SERTED IN THE COURSE OF HEARING, THAT THE ASSESSEE HAS ACCOUNTED FOR THE IMPUGNED EX PENDITURE IN THIS YEAR IN THE SAME MANNER AS IN THE PAST YEARS. THIS ASPECT HAS N OT BEEN CONTRAVERTED BY THE REVENUE BEFORE US. 6. IN THE AFORESAID FACTUAL BACKGROUND, WE FIND THAT THE PLEA OF THE ASSESSEE FOR DEDUCTION OF IMPUGNED EXPENDITURE IN THE CURRENT AS SESSMENT YEAR IS WHOLLY JUSTIFIED AND IS IN LINE WITH THE RATIO OF JUDGMENT OF HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. MAHANAGAR GAS LTD. [2014] 42 TAXMANN.COM 40 (BO MBAY). 7. WE FIND THAT THE CIT(A) HAS DISAGREED WITH THE A SSESSEE ON THE BASIS OF THE JUDGMENT OF HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS. EXXON MOBIL 4 ITA NO 1401/MUM/2013 ASSESSMENT YEAR 2010-11 PAGE 4 OF 5 LUBRICANTS P. LTD. [2010] 328 ITR 17 (DELHI). WE HAVE CAREFULLY PERUSED THE JUDGMENT OF HONBLE DELHI HIGH COURT, WHEREIN, THE ASS ESSMENT YEAR INVOLVED WAS ASSESSMENT YEAR 2003-04. THE ASSESSEE HAD CLAIMED D EDUCTION FOR EXPENDITURE INCURRED DURING THE PERIOD JANUARY 2002 TO MARCH 20 02, WHICH WAS DISALLOWED BY THE ASSESSING OFFICER ON THE GROUND THAT THE SAME W AS A PRIOR PERIOD EXPENDITURE AND NOT RELATABLE TO THE PREVIOUS YEAR RELEVANT TO T HE ASSESSMENT YEAR UNDER CONSIDERATION BEFORE HIM I.E. ASSESSMENT YEAR 2003-0 4. SO HOWEVER, THE PLEA OF THE ASSESSEE WAS THAT THE EXPENDITURE WAS INCURRED IN T ERMS OF AN AGREEMENT ENTERED IN AUGUST 2002, BUT THE SAME WAS RETROSPECTIVELY EFFECT IVE FROM JANUARY 1, 2002. ON THE STRENGTH OF THE SAID AGREEMENT, IT WAS CANVASSE D THAT THOUGH THE IMPUGNED EXPENSES WERE INCURRED DURING THE PERIOD JANUARY 20 02, TO MARCH 2002 BUT THE LIABILITY THEREIN HAD CRYSTALLIZED ONLY ON EXECUTION OF THE AGREEMENT IN AUGUST 2002 AND, THEREFORE, SUCH EXPENSE WAS AN ALLOWABLE DEDUCT ION IN THE ASSESSMENT YEAR 2003-04. THE SAID POSITION WAS AFFIRMED BY THE HONBL E DELHI HIGH COURT IN THE CASE OF CIT VS. EXXON MOBIL LUBRICANTS P. LTD. (SUPRA). THE AFORESAID DISCUSSION WOULD REVEAL THAT DECISION OF THE HONBLE DELHI HIGH COURT D OES NOT SUPPORT THE CASE OF THE REVENUE BEFORE US, AND, RATHER IT SUPPORTS THE PROPO SITION CANVASSED BY THE ASSESSEE TO THE EFFECT THAT THE LIABILITY IS TO BE AL LOWED AS DEDUCTION IN THE YEAR IN WHICH IT HAS CRYSTALLIZED. FACTUALLY SPEAKING, THE LIABILITY IN QUESTION HAS CRYSTALLIZED DURING THE YEAR UNDER CONSIDERATION, AS NOTED BY US IN THE EARLIER PARAS AND, THEREFORE, IN OUR VIEW, THE LOWER AUTHORITIES HAVE ERRED IN DISALLOWING THE IMPUGNED EXPENSE. AS A CONSEQUENCE, WE SET ASIDE THE ORDER OF CIT(A) AND DIRECT THE ASSESSING OFFICER TO DELETE THE ADDITION OF RS. 38, 98,474/- 5 ITA NO 1401/MUM/2013 ASSESSMENT YEAR 2010-11 PAGE 5 OF 5 8. IN THE RESULT APPEAL, OF THE ASSESSEE IS ALLOWED . ORDER PRONOUNCED IN THE OPEN COURT ON THIS 29 TH DAY OF MAY 2015. SD/- SD/- (SANJAY GARG) (G.S. PANNU) (JUDICIAL MEMBER) (ACCOUNTANT MEMBER ) MUMBAI DATED 29-05-2015 SKS SR. P.S, COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CONCERNED CIT(A) 4. THE CONCERNED CIT 5. THE DR, B BENCH, ITAT, MUMBAI BY ORDER ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCHES, MUMBAI