DCIT, Cir-1(2), Kolkata, Kolkata V. M/s. Reliance Jute Mills International Ltd., Kolkata

ITA 1459/KOL/2016

• Counselvise Citation: [2018] 126 COUNSELVISE.COM (IT) 1832 (ITAT-KOLKATA)
• Duration Of Justice: 1 year(s) 6 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-01-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2009-2010
• Appeal Filed On: 11-07-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ARINDAM BHATTACHERJEE
• Assessee Lawyers: S M SURANA
• Section: 43B; 2

Judgement Text

1 ITA NO.1459/KOL/2016 RELIANCE JUTE MILLS INTERNATIONAL LTD., AY: 2009-10 , D , IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH: KOL KATA ( ) BEFORE . . , /AND , ) [BEFORE SHRI A. T. VARKEY, JM & SHRI WASEEM AHMED, AM] I.T.A. NO. 1459/KOL/2016 ASSESSMENT YEAR: 2009-10 DEPUTY COMMISSIONER OF INCOME-TAX, CIRCLE-1(2), KOLKATA. VS. M/S. RELIANCE JUTE MILLS INTERNATIONAL LTD. (PAN: AABCR4761R) APPELLANT RESPONDENT DATE OF HEARING 04.01.2018 DATE OF PRONOUNCEMENT 17.01.2018 FOR THE APPELLANT SHRI ARINDAM BHATTACHERJEE, ADDL. CIT FOR THE RESPONDENT SHRI S. M. SURANA, ADVOCATE ORDER PER SHRI A.T.VARKEY, JM THIS APPEAL HAS BEEN FILED BY THE REVENUE AGAINST T HE ORDER OF LD. CIT(A)-1, KOLKATA DATED 13.05.2016 FOR AY 2009-10 ON THE FOLLOWING SO LE GROUND: 1. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES O F THE CASE AND IN LAW, THE LD. CIT(A) HAS IN DELETING THE ADDITION OF RS.2,32,27,159/- AND AL LOWED THE CLAIM OF GRATUITY LIABILITY IN THE COMPUTATION OF TOTAL INCOME THROUGH THE SAME WAS NO T DEBITED IN THE P&L A/C. 2. THE ONLY ISSUE IN THIS APPEAL RELATES TO THE ADD ITION MADE BY THE AO OF R.2,32,27,159/- AND DELETED BY THE LD. CIT(A) ON AC COUNT OF GRATUITY LIABILITY. THE AO IN THE ASSESSMENT ORDER OBSERVED THAT THE ASSESSEE HAS NOT DEBITED THE GRATUITY LIABILITY FOR RS.2,32,27,159/- IN RESPECT OF RETIRED EMPLOYEES TO THE P&L ACCOUNT FOR THE YEAR ENDED ON 31.03.2009. ACCORDING TO AO, THE ASSESSEE IS REGUL ARLY FOLLOWING THE MERCANTILE SYSTEM OF ACCOUNTING AND SINCE ENTRY REGARDING THE GRATUITY W AS NOT MADE IN THE BOOKS OF ACCOUNT THERE IS NO ACCRUAL OF SUCH LIABILITY RELEVANT TO A Y 2009-10 AND HENCE, THE SAME IS NOT ALLOWED AS DEDUCTION. AS SUCH, THE CLAIM OF DEDUCT ION OF GRATUITY LIABILITY FOR RS.2,32,27,159/- IN RESPECT OF RETIRED EMPLOYEES NO T DEBITED TO THE P&L ACCOUNT, IN THE COMPUTATION OF TOTAL INCOME, IT WAS DISALLOWED BY T HE AO AS PER THE PROVISIONS OF SECTION 2 ITA NO.1459/KOL/2016 RELIANCE JUTE MILLS INTERNATIONAL LTD., AY: 2009-10 36(1)(V), 43B AND 40A(7) OF THE INCOME-TAX ACT, 196 1 (HEREINAFTER REFERRED TO AS THE ACT). ON APPEAL, THE LD. CIT(A) FOLLOWING THE DECISION OF COORDINATE BENCH OF THIS TRIBUNAL IN ASSESSEES OWN CASE IN ITA NO. 1832/KOL/2007 FOR AY 2004-05 VIDE ORDER DATED 21.09.2007 DIRECTED THE AO TO DELETE THE SAID DISAL LOWANCE OF RS.2,32,27,159/-. AGGRIEVED, REVENUE IS IN APPEAL BEFORE US. 3. WE HAVE HEARD RIVAL SUBMISSIONS AND CAREFULLY C ONSIDERED THE MATERIAL AVAILABLE ON RECORDS. WE NOTE THAT THE FACTS AS STATED ABOVE ARE UNDISPUTED. WE NOTE THAT THE ISSUE IS SQUARELY COVERED IN FAVOUR OF THE ASSESSEE BY THE D ECISION OF COORDINATE BENCH IN ASSESSEES OWN CASE IN ITA NO. 1832/KOL/2007 FOR AY 2004-05 VI DE ORDER DATED 21.09.2007, WHEREIN THE TRIBUNAL VIDE PARA 7 OF ITS ORDER HAS HELD AS U NDER: 7. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. WE F OUND THAT THERE WAS NO DISPUTE THAT THE ASSESSEE WAS FOLLOWING MERCANTILE SYSTEM OF ACCOUNT ING. THERE WAS ALSO NO DISPUTE THAT THE GRATUITY CLAIMED IN THE COMPUTATION OF TOTAL INCOME WAS ON ACCOUNT OF THE EMPLOYEES WHO WERE ACTUALLY SUPERANNUATED DURING THE YEAR. THE ON LY DISPUTE RAISED BY THE AO WAS THAT SINCE NO ENTRY WAS MADE IN THE ACCOUNTS IT CANNOT B E SAID THAT THE LIABILITY HAS ACTUALLY ACCRUED. THE LD. CIT(A) HAS IN FACT IN SO FAR AS TH E ACCRUAL OF LIABILITY IS CONCERNED HAS NOT DISPUTED THE SAME. THE LD CIT(A) HAS ALSO NOT SUPPO RTED THE REASONING OF THE AO THAT NO LIABILITY CAN BE SAID TO HAVE ACCRUED SIMPLY BECAUS E NO ENTRY WAS MADE IN THE ACCOUNT BOOKS. IT IS ALSO CLEAR FROM THE FINDINGS OF THE AUTHORITI ES BELOW THAT THE LIABILITY CLAIMED RELATED TO THE EMPLOYEES WHO RETIRED DURING THE YEAR ITSELF. T HEREFORE THE LIABILITY HAS ACCRUED DURING THE YEAR ITSELF AND UNDER THE MERCANTILE SYSTEM OF ACCO UNTING THE LIABILITY WHICH HAS ACCRUED DURING THE YEAR IS ALLOWABLE EVEN IF THE ASSESSEE H AS NOT MADE ANY ENTRY IN THE BOOKS OF ACCOUNT AND HAS CLAIMED THE SAME WHILE COMPUTING TH E TOTAL INCOME. APART FROM THE JUDGEMENTS CITED ABOVE, ALLAHABAD HIGH COURT IN THE CASE OF KANPUR TEXTILE LTD. REPORTED IN 276 ITR PAGE 140 AND U P ELECTRONICS CORPORATION LT D. REPORTED IN 282 ITR PAGE 470, FOLLOWING KEDARNATH'S CASE HAVE HELD THAT IF UNDER THE MERCANTILE SYSTEM OF ACCOUNTING A LIABILITY HAS ACCRUED, THE SAME IS TO BE ALLOWED IR RESPECTIVE OF THE FACT THAT THE ASSESSEE DID NOT MAKE ANY ENTRY IN THE BOOKS OF ACCOUNTS. IN FACT IF UNDER THE PROVISIONS OF THE I.T.ACT SOME DEDUCTION IS ALLOWABLE THE AO SHOULD ALLOW IT AS HA S BEEN ACCEPTED BY THE CBDT IN ITS CIRCULAR AS BACK AS ON 11.4.55 BEING CIRCULAR NO. 1 4(XI-35). THE VIEW IS ALSO SUPPORTED BY THE JUDGEMENT IN THE CASE OF NATHMAL BANKATLAL PARAKH & CO. 122 ITR PAGE 168 (AP FB) (SLP REJECTED BY SC IN 140 ITR ST. PAGE 5) AND EASTER CO LD STORAGE PVT LTD. 139 ITR PAGE 664(CAL). MOREOVER THERE CANNOT BE TWO VIEWS IN THE PROPOSITION THAT IF THE MERCANTILE SYSTEM OF ACCOUNTING IS FOLLOWED THE ASSESSEE IS ENTITLED TO THE DEDUCTION OF THE ACCRUED LIABILITY EVEN IF NO ENTRY IS MADE IN THE ACCOUNT BOOKS. THEREFORE THE ASSESSEE IS ENTITLED TO THE DEDUCTION OF THE LIABILITY CLAIMED BY IT WHILE COMPUTING THE TOT AL INCOME IN THE RETURN. SINCE THE ISSUE IS SQUARELY COVERED IN FAVOUR OF TH E ASSESSEE BY THE DECISION OF COORDINATE BENCH OF THIS TRIBUNAL IN ASSESSEES OWN CASE, CITE D SUPRA, RELYING ON THE AFORESAID DECISION AND SINCE THE LD. DR COULD NOT POINT OUT ANY CHANGE IN FACTS OR LAW AT THE TIME OF HEARING, 3 ITA NO.1459/KOL/2016 RELIANCE JUTE MILLS INTERNATIONAL LTD., AY: 2009-10 WE CONFIRM THE ORDER OF LD. CIT(A) DELETING THE DIS ALLOWANCE OF RS.2,32,27,159/- ON ACCOUNT OF GRATUITY LIABILITY. THE APPEAL OF THE RE VENUE IS DISMISSED. 4. IN THE RESULT, THE APPEAL OF REVENUE IS DISMISSE D. ORDER IS PRONOUNCED IN THE OPEN COURT ON 17.01.2018 . SD/- SD/- (WASEEM AHMED) (ABY. T. VARKEY) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 17TH JANUARY, 2018 JD.(SR.P.S.) COPY OF THE ORDER FORWARDED TO: 1. APPELLANT DCIT, CIRCLE-1(2), KOLKATA 2 RESPONDENT . M/S. RELIANCE JUTE MILLS INTERNATIO NAL LTD., SOUTH BLOCK, 4 TH FLOOR, IDEAL PLAZA, KOLKATA-700 020. 3. THE CIT(A) KOLKATA. 4. 5. CIT KOLKATA DR, ITAT, KOLKATA / TRUE COPY, BY ORDER, SR. PVT. SECRETARY