Chakra Cements Limited, Hyderabad V. Dy.CIT., Circle-3(2), Hyderabad

ITA 1458/HYD/2014

• Counselvise Citation: [2015] 121 COUNSELVISE.COM (IT) 1914 (ITAT-HYDERABAD)
• Duration Of Justice: 1 year(s) 1 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-10-2015
• Appeal Filed By: Assessee
• Bench Allotted: A
• Next Hearing Date: 07-10-2015
• Assessment Year: 2005-2006
• Appeal Filed On: 04-09-2014
• Court: TRIBUNAL
• Department Lawyers: RAMAKRISHNA BANDI
• Assessee Lawyers: RAVI SESHAGIRI RAO
• Keywords: Depreciation; Bad and doubtful debts; Condonation of delay
• Section: 43B

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCHES A, HYDERABAD BEFORE SMT. P. MADHAVI DEVI, JUDICIAL MEMBER AND SHRI B. RAMAKOTAIAH, ACCOUNTANT MEMBER I.T.A. NO. 1458/HYD/2014 ASSESSMENT YEAR: 2005-06 SRI CHAKRA CEMENTS LTD., HYDERABAD [PAN: AACCS6959B] VS DY. COMMISSIONER OF INCOME TAX, CIRCLE-3(2), HYDERABAD (APPELLANT) (RESPONDENT) FOR ASSESSEE : SHRI RAVI SESHAGIRI RAO , AR FOR REVENUE : SHRI RAMA KRISHNA, BANDI, DR DATE OF HEARING : 07 - 1 0 - 201 5 DATE OF PRONOUNCEMENT : 14 - 1 0 - 2015 O R D E R PER B. RAMAKOTAIAH, A.M. : THIS IS ASSESSEES APPEAL AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS)-IV, HYDERABAD DATED 20-06-2014. ASSESSEE HAS FILED THE APPEAL WITH ONE DAY DELAY. APPEAL SHOULD HAVE BEEN FILED ON 03-09-2014, WHEREA S IT WAS FILED ON 04-09-2014, EVEN THOUGH THE CHALLAN WAS PAID IN TIME. IT WAS EXPLAINED THAT THE MD WHO HAS TO SIGN THE PAPERS HA D PROCEEDED TO FACTORY SITE AT KARAMPUDI IN GUNTUR DISTRICT AND COULD NOT RETURN IN TIME FOR FILING ON 04-09-2014. CONSIDERI NG THE PRAYER FOR CONDONATION OF DELAY AND HEARING OBJECTIONS FROM DR , WE ARE OF THE I.T.A. NO. 1458/HYD/2014 M/S. SRI CHAKRA CEMENTS LTD., :- 2 -: OPINION THAT THERE IS SUFFICIENT CAUSE FOR FILING T HE APPEAL BELATEDLY BY ONE DAY. THE DELAY IS CONDONED AND THE APPEAL I S ADMITTED. 2. ASSESSEE HAS RAISED AS MANY AS 5 GROUNDS PERTAIN ING TO VARIOUS ISSUES AS UNDER: 2. THE LEARNED COMMISSIONER OF INCOME TAX (APPEAL S) ERRED IN CONFIRMING THE ACTION OF THE ASSESSING OFFICER I N HOLDING THAT RS. 1,92,50,788/- IS DISALLOWABLE U/S. 43B OF THE I .T.ACT. 3. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN CONFIRMING THE ACTION OF THE ASSESSING OFFICER IN D ISALLOWING DEPRECIATION OF RS. 22,49,900/-. 4. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN CONFIRMING THE ACTION OF THE ASSESSING OFFICER IN D ISALLOWING THE BONUS PAYMENT OF RS. 6 LAKHS U/S. 43B OF THE I. T.ACT. 5. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN CONFIRMING THE ACTION OF THE ASSESSING OFFICER IN D ISALLOWING THE CLAIM FOR BAD DEBTS OF RS. 22,77,546/-. 6. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN CONFIRMING THE ACTION OF THE ASSESSING OFFICER IN M AKING ADDITION OF RS. 1,28,528/- ON ACCOUNT OF EXCISE DUT Y ON CLOSING STOCK OF THE FINISHED GOODS. 3. GROUND NOS. 1 & 7 ARE GENERAL IN NATURE. IN THE COURSE OF PRESENT PROCEEDINGS, GROUND NO. 5 WAS NOT PRESSED A S THEY HAVE RAISED THE ISSUE BY MISTAKE EVEN THOUGH, LD. CIT(A) ALLOWED THE RELIEF. WE HAVE HEARD THE LD. COUNSEL AND LD. DR I N DETAIL. 4. GROUND NO.1 IS PERTAINING TO ISSUE OF DISALLOWAN CE OF RS. 1,92,50,788/- U/S. 43B OF THE INCOME TAX ACT [ACT]. ASSESSEE CLAIMED THIS AMOUNT AS THE ROYALTY TO THE STATE G OVERNMENT. THE STATE GOVERNMENT VIDE THIRD G.O. NO. 4343/M-II(2)/2 004-I, DT. 19- 06-2004 ISSUED TO THE COMPANY GRANTED DEFERMENT OF PAYMENT OF ROYALTY FOR THREE YEARS W.E.F. 01-01-2004. STATE G OVERNMENT ALSO I.T.A. NO. 1458/HYD/2014 M/S. SRI CHAKRA CEMENTS LTD., :- 3 -: DIRECTED THAT THE DEFERRED ROYALTY BE PAID WITH THE REGULAR ROYALTY OF 4 TH , 5 TH AND 6 TH YEARS. BY VIRTUE OF THIS ORDER, ROYALTY WHICH WAS PAYABLE BY ASSESSEE IN NORMAL COURSE BECAME NOT DUE . HOWEVER, ON THE REASON THAT THE AMOUNT HAS ACCRUED AS A LIAB ILITY, ASSESSEE PROVIDED THE AMOUNT IN THE BOOKS OF ACCOUNTS. ASSES SING OFFICER (AO) DISALLOWED THE SAME UNDER THE PROVISIONS OF SE CTION 43B AS THE AMOUNT WAS NOT PAID. LD. CIT(A) WHILE AGREEING THAT THERE IS NO DISPUTE THAT THE ROYALTY PAYABLE BY ASSESSEE WAS IN THE NATURE OF TAX AS CONTEMPLATED IN SECTION 43B, HOWEVER, SEC TION 43B APPLIES TO SUCH AMOUNTS WHICH ARE PAYABLE BUT NOT P AID. LD. CIT(A) HELD THAT AS A RESULT OF THE GO THE ROYALTY WAS NOT PAYABLE BY ASSESSEE AT ALL, SECTION 43B CANNOT BE APPLIED F OR DISALLOWING THIS AMOUNT. ON THIS OPINION OF THE LD. CIT(A), RE VENUE IS NOT IN APPEAL. HOWEVER, LD. CIT(A) DID NOT ALLOW THE AMOU NT ON THE REASON THAT UNDER THE MERCANTILE SYSTEM OF ACCOUNTI NG, SINCE IT WAS NOT A SUM THAT HAD BECOME DUE FOR PAYMENT, AMOU NT CANNOT BE ALLOWED. SHE UPHELD THE DISALLOWANCE ON A DIFFE RENT GROUND BUT NOT U/S. 43B. 5. LD. COUNSEL REITERATED THE SUBMISSIONS MADE BEFO RE THE CIT(A). ON THE ISSUE OF 43B, THERE IS NO DISPUTE. EVEN THE CIT(A) ACCEPTS THAT PROVISIONS OF SECTION 43B CANNOT BE AP PLIED FOR DISALLOWING THIS SUM. HOWEVER, ASSESSEE HAS NOT ST ATED HOW THE AMOUNT WHICH HAS NOT BECOME PAYABLE CAN BE CLAIMED IN THE YEAR UNDER CONSIDERATION. SINCE THE AMOUNT HAS NOT BECO ME DUE FOR PAYMENT, IT CAN BE CONSIDERED THAT SAME HAS NOT ACC RUED AS A LIABILITY TO ASSESSEE. IN VIEW OF THIS, THE AMOUNT CANNOT BE ALLOWED AS A DEDUCTION. THE GROUND RAISED BY ASSESSEE CANN OT BE ALLOWED FOR THE ABOVE REASONS. THE SAME IS REJECTED. I.T.A. NO. 1458/HYD/2014 M/S. SRI CHAKRA CEMENTS LTD., :- 4 -: 6. GROUND NO.2 PERTAINS TO THE ISSUE OF CLAIM OF DE PRECIATION OF RS. 42,49,900/-. ASSESSEE CLAIMED DEPRECIATION OF R S. 2,34,88,636/-. SINCE OPENING WDV HAS VARIED CONSEQ UENT TO THE ORDERS IN EARLIER YEAR, AO ASKED ASSESSEE TO RE-WOR KOUT. ON THE BASIS OF REVISED STATEMENT, AO ALLOWED DEPRECATION OF RS. 2,12,38,736/-, THE EXCESS CLAIM OF DEPRECATION OF R S. 22,49,900/- WAS DISALLOWED. LD. CIT(A) AFTER CONSIDERING THE O BJECTIONS OF ASSESSEE HELD THAT THERE IS NO DISPUTE THAT THE ASS ETS ON WHICH DEPRECIATION HAD BEEN CLAIMED WERE AVAILABLE WITH A SSESSEE. THE REASON FOR MAKING THE DISALLOWANCE WAS THAT THE WDV REPORTED BY ASSESSEE AS ON 01-04-2004 HAS NOT BEEN CORRECTLY WO RKED OUT. CIT(A) DIRECTED THE AO TO PROVIDE THE SCHEDULE OF W DV AND DEPRECATION TO ASSESSEE, SO THAT IT WOULD ALSO BE P ART OF RECORD FOR CLAIM OF DEPRECIATION. WE DO NOT FIND ANY REASON T O INTERFERE WITH THE ORDER OF THE CIT(A). AS STATED THEREIN, THE DI SALLOWANCE IS ON THE BASIS OF REVISED STATEMENT FURNISHED BY ASSESSE E ITSELF. IN CASE THERE ARE ANY OMISSIONS OR COMMISSIONS IN THE SAID SCHEDULE FURNISHED BY ASSESSEE, ASSESSEE WOULD CERTAINLY KNO W, HOW THE DIFFERENCE AROSE. THEREFORE, WHILE REITERATING THE DIRECTION OF THE CIT(A) THAT AO SHOULD PROVIDE THE SCHEDULE OF DEPRE CIATION INCLUDING OPENING WDV, ADDITION TO THE ASSETS, DEPR ECIATION ALLOWED AND CLOSING WDV OF THE YEAR UNDER CONSIDERA TION, WE DISMISS THE GROUND. 7. GROUND NO.4 PERTAINS TO THE ISSUE OF DISALLOWING BONUS PAYMENT OF RS. 6 LAKHS U/S. 43B OF THE ACT. ASSESS EE HAS PROVIDED FOR BONUS AMOUNT OF RS. 6 LAKHS WHICH WAS TO BE DISALLOWED U/S. 43B AS ASSESSEE HAS NOT PAID THE AM OUNT AS PER THE PROVISIONS. CIT(A) UPHELD THE DISALLOWANCE WIT H THE DIRECTION THAT THE CLAIM SHOULD BE ALLOWED IN THE YEAR OF PAY MENT. THIS I.T.A. NO. 1458/HYD/2014 M/S. SRI CHAKRA CEMENTS LTD., :- 5 -: DIRECTION IS ACCORDING TO THE PROVISIONS OF THE ACT . THEREFORE, WE DO NOT SEE ANY REASON TO INTERFERE WITH THE DIRECTION. AO SHOULD ALLOW THE AMOUNT IN THE YEAR OF PAYMENT, AS PER THE PROVI SIONS OF THE ACT. WITH THESE DIRECTIONS, THE GROUND IS REJECTED . 8. GROUND NO.6 PERTAINS TO THE ISSUE OF ADDITION OF RS. 1,28,528/- ON ACCOUNT OF EXCISE DUTY ON CLOSING STO CK. AO RE- WORKED OUT THE VALUE ON FINISHED GOODS BY MAKING AD DITION OF RS. 1,28,528/- TOWARDS EXCISE DUTY ON CLOSING STOCK. A O RELIED ON THE ORDERS IN THE EARLIER YEAR, WHEREIN ALSO SIMILAR AD DITION WAS MADE INVOKING THE PROVISIONS OF SECTION 145A. LD. CIT(A ) CONFIRMED THE ADDITION WITH A DIRECTION THAT AMOUNT WOULD BE ALLO WED AS A DEDUCTION IN THE YEAR OF PAYMENT. IN THE ABSENCE O F ANY EVIDENCE ON RECORD TO CONTRARY, WE HAVE NO OPTION THAN TO UP HOLD THE ORDER OF CIT(A). IN CASE, THE AMOUNT ADDED IN EARLIER YE AR GETS CONFIRMED IN THAT YEAR RELEVANT TO OPENING STOCK, BENEFIT SHO ULD BE ALLOWED IN THIS YEAR. AO IS DIRECTED TO VERIFY AND ALLOW THE BENEFIT OF LAST YEARS ADDITION AS OPENING STOCK IN THIS YEAR AND R E-WORK OUT THE INCOME COMPUTATION ACCORDINGLY, IF THE ADDITION IN EARLIER WAS SUSTAINED BY THE APPELLATE AUTHORITIES. WITH THESE DIRECTIONS, THE GROUND IS CONSIDERED REJECTED. 9. IN THE RESULT, APPEAL IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 14 TH OCTOBER, 2015 SD/- SD/- (P. MADHAVI DEVI) (B. RAMAKOTAIAH) JUDICIAL MEMBER ACCOUNTANT MEM BER HYDERABAD, DATED 14 TH OCTOBER, 2015 TNMM I.T.A. NO. 1458/HYD/2014 M/S. SRI CHAKRA CEMENTS LTD., :- 6 -: COPY TO : 1. SRI CHAKRA CEMENTS LTD., HYDERABAD. C/O. SRI S. RAMA RAO, ADVOCATE, FLAT NO. 102, SHRIYAS ELEGANCE, H.NO. 3-6-643, ST.NO.9, HIMAYATNAGAR, HYDERABAD. 2 THE DY. COMMISSIONER OF INCOME TAX, CIRCLE-3(2), INCOME TAX TOWERS, A.C. GUARDS, HYDERABAD. 3. CIT (APPEALS)-IV, HYDERABAD. 4. CIT - III , HYDERABAD. 5 . D.R. ITAT, HYDERABAD. 6 . GUARD FILE.