DCIT 9(2), MUMBAI V. OTIS ELEVATORS CO. (INDIA) LTD, MUMBAI

ITA 1480/MUM/2009

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 7688 (ITAT-MUMBAI)
• Duration Of Justice: 11 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-02-2010
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Assessment Year: 2002-2003
• Appeal Filed On: 04-03-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: D SONGATE
• Assessee Lawyers: FIROZE ANDHYARUJINA
• Keywords: Business expenditure

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH C,MUMBAI BEFORE SHRI R.V.EASWAR,SR.VICE PRESIDENT& SHRI T. R.SOOD (A.M) ITA NO.1480/MUM/09(A.Y.2002-03) THE DCIT 9(2), ROOM NO.218, AAYKAR BHAVAN, M.K.ROAD, MUMBAI. (APPELLANT) VS. M/S. OTIS ELEVATORS CO. (INDIA) LTD., 9 TH FLOOR, MAGNUS TOWERS, MINDSPACE , LINK ROAD, MALAD (W), MUMBAI 64. PAN:AAACO0481E (RESPONDENT) APPELLANT BY : SHRI D.SONGATE RESPONDENT BY : SHRI. FIROZE ANDHYARUJINA ORDER PER T.R.SOOD, A.M, THIS APPEAL FILED BY THE REVENUE IS DIRECTED AGAI NST THE ORDER OF LD. CIT(A)II, MUMBAI DATED 15/12/2008 FOR THE ASSESSMENT YEAR 200 2-03. IN THIS APPEAL THE REVENUE HAS RAISED THE FOLLOWING TWO GROUNDS:- 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE, THE LD. CIT(A) HAS ERRED IN LAW IN ALLOWING THE APPEAL OF THE ASSESSEE BY DIREC TING TO ALLOW THE LOSS OF RS.1,30,57,953/- ON INCOMPLETE CONTRACT WHICH WAS D ISALLOWED ON THE GROUND THAT THE VALUE OF INCOMPLETE CONTRACTS REFLECTED WAS NOT IN TERMS OF THE RECOGNIZED METHOD OF VALUATION OF WORK-IN-PROGRESS. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E, THE LD. CIT(A) WAS NOT CORRECT IN LAW IN ALLOWING THE PROVISIONS RELATING TO EX-GRATIA OF RS. 5.49 CRORES. 2. AT THE OUTSET THE LD. COUNSEL FOR THE ASSESSEE P OINTED OUT THAT THE FIRST ISSUE RAISED IN THIS APPEAL IS COVERED BY THE DECISION O F THE TRIBUNAL IN ASSESSEES OWN CASE FOR A.Y. 2000-01, WHEREIN EARLIER ORDERS WERE FOLL OWED. SIMILARLY THE SECOND ISSUE IS COVERED BY EARLIER YEARS ORDERS IN ASSESSEES OWN C ASE. IN THIS REGARD HE REFERRED TO PAGE 3 TO 5 OF THE TRIBUNAL ORDER IN ITA NO.4611/M/ 07 FOR A.Y 2003-04, WHEREIN IT WAS ITA NO.1480/M/09(A.Y.2002-03) 2 ULTIMATELY HELD THAT ASSESSEE IS ENTITLED TO DEDUC TION OF PROVISION FOR EX-GRATIA PAYMENT. ON THE OTHER HAND, LD. D.R RELIED ON THE GROUNDS OF APPEAL. 3. AFTER CONSIDERING THE RIVAL SUBMISSIONS WE FIND THAT LD. CIT(A) HAS DECIDED THE ISSUE RAISED IN GROUND NO.1 VIDE PARA -6 OF HIS ORD ER, WHICH IS AS UNDER:- 6. I HOWEVER FIND THAT, THE ASSESSING OFFICER, WHE N HE MADE THE ADDITION OF RS.8,69,75,255/- REPRESENTING THE LOSS PERTAINING T O INCOMPLETE CONTRACT THIS YEAR, HE HAS BEEN FAIR ENOUGH, AT PARA 5.1 OF THE IMPUGNED ORDER, TO ALSO REDUCE THE REVERSAL MADE BY THE APPELLANT IN THIS YEAR OF RS. 7,39,17,302/- REPRESENTING SIMILAR PROVISION DISALLOWED IN PRECEDING YEAR AND HAS MADE ONLY A NET ADDITION OF RS. 1,30,57,953/-. IT IS STATED THAT TRIBUNAL H AS DECIDED THIS ISSUE IN THE IMMEDIATELY PRECEDING YEAR (I.E. A.Y 2001-02) IN FA VOUR OF THE APPELLANT. 4. THE ABOVE PARA CLEARLY SHOWS THAT THE FIRST APPE LLATE AUTHORITY HAS FOLLOWED THE ORDER OF THE TRIBUNAL FOR EARLIER YEARS AND, THEREF ORE, WE FIND NOTHING WRONG FROM THIS ORDER AND CONFIRM THE SAME. 5. AS FAR AS ISSUE RAISED IN SECOND GROUND IS CONCE RNED THE SAME HAS BEEN DECIDED BY THE LD. CIT(A) BY RECORDING THE FOLLOWIN G OBSERVATIONS: THE APPELLANT CANVASSED BEFORE THE TRIBUNAL THAT THE EX-GRATIA PAYMENT TO STAFF WAS NOT ADHOC EX-GRATIA PAYMENT BUT DETERMINED AND QUANTIFIED ON THE BASIS OF VARIOUS FACTORS INCLUDING PRODUCTIVITY SO RELEVANT TO THE BUSINESS OF THE APPELLANT AND THIS EX-GRATIA, BASED ON PERFORMANCE WAS PAID O UT AT DIWALI TIME. THE APPELLANT FURTHER CANVASSED BEFORE THE TRIBUNAL THA T THE LIABILITY EXISTED IN THIS YEAR THOUGH WAS DISCHARGED IN THE NEXT YEAR AND HAS RELIED ON THE DECISION OF THE SUPREME COURT IN THE CASE OF BHARAT EARTH MOVERS V. CIT (245 ITR 428) AND OF JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS. UN ITED MOTORS (INDIA) LTD. (181 ITR 347). THE HONBLE TRIBUNAL RESPECTFULLY FOLLOWING THE DEC ISION OF BHARAT EARTH MOVERS (SUPRA) HELD THAT SUCH EX-GRATIA PAYMENT WAS NOT A CONTINGENT LIABILITY BUT A CRYSTALLIZED LIABILITY AND HELD SUCH PROVISION TO B E DEDUCTIBLE AS BUSINESS EXPENDITURE. ITA NO.1480/M/09(A.Y.2002-03) 3 6. IN VIEW OF THE ABOVE FINDING OF THE LD. CIT(A) A ND EARLIER YEARS ORDERS OF THE TRIBUNAL WE FIND NO INFIRMITY IN THE ORDER OF LD. CIT(A), THEREFORE, THE SAME IS CONFIRMED. 7. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISM ISSED. ORDER PRONOUNCED ON THE 12 TH DAY OF FEB.2010. SD/- SD/- (R.V.EASWAR) (T.R.SOOD) SR. VICE PRESIDENT ACC OUNTANT MEMBER MUMBAI, DT. 12 TH FEB.2010 COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3 . THE CIT(A)CONCERNED 4. THE CIT,CONCERNED. 5. THE D.RC BENCH. (TRUE COPY) BY ORDER ASST. REGISTRAR, I TAT, MUMBAI BENCHES MUMBAI. VM. ITA NO.1480/M/09(A.Y.2002-03) 4 DETAILS DATE INITIALS DESIGNATION 1 DRAFT DICTATED ON 10/2/2010 SR.PS/PS 2 DRAFT PLACED BEFORE AUTHOR 11/2/2010 SR.PS/PS 3 DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER JM/AM 4 DRAFT DISCUSSED/APPROVED BY SECOND MEMBER JM/AM 5. APPROVED DRAFT COMES TO THE SR.PS/PS SR.PS/PS 6. KEPT FOR PRONOUNCEMENT ON SR.PS/PS 7. FILE SENT TO THE BENCH CLERK SR.PS/PS 8 DATE ON WHICH THE FILE GOES TO THE HEAD CLERK 9 DATE OF DISPATCH OF ORDER ITA NO.1480/M/09(A.Y.2002-03) 5