Orissa Forest Development Corporation, Bhubaneswar V. ACIT, Bhubaneswar

ITA 16/CTK/2010

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 4401 (ITAT-CUTTACK)
• Duration Of Justice: 1 year(s) 4 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-05-2011
• Appeal Filed By: Assessee
• Bench Allotted: DB
• Next Hearing Date: 23-05-2011
• Assessment Year: 2003-2004
• Appeal Filed On: 18-01-2010
• Court: TRIBUNAL
• Keywords: Capital expenditure; Set aside
• Section: 43B

Judgement Text

IN THE INCME TAX APPELLATE TRIBUNAL, CUTTACK BENCH, CUTTACK BEFORE : HONBLE SHRI K.K.GUPTA, ACCOUNTANT MEMBER, AND HONBLE SHRI K.S.S.PRASAD RAO, JUDICIAL MEMBER. ITA NO. APPELLANT RESPONDENT ASST. YEAR 16/CTK/2010 ORISSA FOREST CORPN.LTD.,BHUBANES WAR ACIT,CIRCLE 1(1),BHUBANESWAR 2003 - 04 17/CTK/2010 - DO - - DO - 2004 - 05 08/CTK/2010 ACIT,CIRCLE 1(1),BBSR OFC LTD., BBSR 2003 - 04 09/CTK/2010 - DO - - DO - 2004 - 05 249/CTK/2009 - DO - - DO - 1993 - 94 77/CTK/2010 C.O.NO.7/CTK/2010 (FILED BY ASSESSEE) - DO - - DO - 20 00 - 01 79/CTK/2010 OFC LTD.,BBSR ACIT, CIRCLE 1(1),BBSR 2000 - 01 305/CTK/2010 C.O.NO. 27/ CTK/2010 (FILED BY ASSESSEE) ACIT,CIRCLE 1(1),BBSR OFC LTD.,BBSR 2007 - 08 FOR THE ASSESSEE : SHRI B.K.MOHAPATRA, AR FOR THE DEPARTMENT: SMT. PARAMITA TRIPAT HY, DR ORDER SHRI K.K.GUPTA, ACCOUNTANT MEMBER : THESE APPEALS HAVE BEEN FILED BY BOTH THE ASSESSEE AS WELL AS THE REVENUE. THE ASSESSEE HAS ALSO FILED C.OS. ALL THESE APPEALS AND C.OS WERE HEARD TOGETHER AS SOME OF ISSUES BEING COMMON ARE NOW BEING DISP OSED OF BY THIS COMMON ORDER FOR THE SAKE OF CONVENIENCE . 2. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATERIAL ON RECORD. 3. THE ASSESSEE IS ENGAGED IN THE BUSINESS OF FORESTRY, TIMBER, BAMBOO, SAL - SEEDS AND OTHER FOREST PRODUCTS AND IS THE SOLE SEL LING AGENT OF KENDU LEAF APPOINTED BY THE GOVERNMENT OF ORISSA. FOR THE AYS UNDER CONSIDERATION, THE ASSESSING OFFICER MADE ADDITIONS UNDER VARIOUS HEADS AND ON APPEAL, THE LEARNED CIT(A) RELIED ON THE ORDERS OF THE TRIBUNAL AS ISSUES COVERED IN FAVOUR OF THE ASSESSEE. THE REVENUE HAS FILED THESE APPEALS AGAINST THOSE ADDITIONS, WHICH HAVE BEEN DELETED BY THE LEARNED CIT(A) . THE ASSESSEE HAS FILED APPEALS AGAINST CONFIRMATION OF ADDITIONS MADE BY THE ASSESSING OFFICER. 2 3. FIRST COMMON ISSUE INVOLVED IN IT A NO.279/CTK/2009, 77, 08, 09 AND 305/CTK/20010 FOR THE ASSESSMENT YEARS 1993 - 94, 2000 - 01, 2003 - 04, 2004 - 05 AND 2007 - 08 FILED BY THE REVENUE IS REGARDING DELETION OF THE ADDITION MADE ON ACCOU NT OF CONSTRUCTION OF KENDU LEAVE GODOWN . 4. ON PERUSAL OF THE IMPUGNED ORDER S OF THE AUTHORITIES BELOW, WE FIND THAT THE ASSESSING OFFICER HAD MADE THE SAID ADDITION TREATING THE SAME AS CAPITAL EXPENDITURE. BUT THE LEARNED CIT(A) HAS DELETED THE SAME RELYING ON THE ORDER OF THE ITAT, CUTTACK BENCH IN ASSESSEES OWN CASE IN ITA NO.142/CTK/2006 DT.18.1.2008 FOR THE ASSESSMENT YEAR 1990 - 91. THE FACTS UNDISPUTED FACTS ARE THAT SUCH EXPENDITURE IS A CONTINUING ONE FROM YEAR TO YEAR AND THE ISSUE STANDS COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF THE TRIBUNAL. THE REFORE, SINCE THE LEARNED CIT(A) HAS FOLLOWED THE ORDER OF THE TRIBUNAL IN DELETING THE IMPUGNED ADDITION, WE DO NOT FIND ANY INFIRMITY IN HIS ORDERS AND AS SUCH, WE UPHOLD THE SAME AND DISMISS THE GROUND RAISED BY THE REVENUE IN THIS REGARD IN THE RESPECT IVE AYS. IN CONSEQUENT THERETO , THE CROSS OBJECTION NOS.7 AND 27/CTK/2010 FILED BY THE ASSESSEE SUPPORTING THE IMPUGNED ORDERS OF THE LEARNED CIT(A) ARE ALLOWED. 5. THE NEXT COMMON ISSUE AGITATED BY THE ASSESSEE IN ITA NOS. 79, 16, 17 AND 305/CTK/2010 IS RE GARDING DELETION OF ADDITION MADE ON ACCOUNT OF PRIOR PERIOD ADJUSTMENT IN THE AYS 2000 - 01, 2003 - 04, 2004 - 05 AND 2007 - 08 RESPECTIVELY. BOTH THE PARTIES AGREED THAT THIS ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF THE ITAT,CUTTACK BENCH IN ASSESSEES OWN CASE IN ITA NO.118 AND 119/CTK/1993 DT.4.2.2003 FOR THE ASSESSMENT YEAR 1988 - 89 AND 1989 - 90 , WHEREIN WHILE DEALING WITH THE ISSUE THE TRIBUNAL, VIDE PARAGRAPH 4, HAS OBSERVED AS UNDER: 4. WE HAVE CONSIDERED THE SUBMISSIONS OF RIVAL PARTIE S AND HAVE ALSO PERUSED THE MATERIAL AVAILABLE ON RECORD. WE HAVE ALSO GONE THROUGH THE PAPER BOOKS SUBMITT ED BEFORE US. WITH RESPECT TO DE L E TION ON PRIOR PERIOD ADJUSTMENTS IT TRANSPIRES THAT THE ASSESS EE WAS HANDICAPPED IN FO LLOWING RIGID SYSTEM OF ACCOU NTING AS IT WAS EQUIPPE D WITH EMPLOYEES WHO FUNCTION IN REMOTE AREAS TRYING TO KEEP RECORDS IN THE MANNER WHICH RESULTED IN FORMULATION OF 3 FINANCIAL STATEMENTS PENDING STATUTORY AUDIT FOR THEIR CONFIRMATION. THE A. O IN HIS AS SESSMENT HAS INDICATED THAT PR IOR PERIOD EXPENSES WERE GROSSED UP AS PER THE RETURNS FROM THESE UNITS OF THE ASSE SSEE UNDERTAKING AT HEAD OFFICE. ADJUSTMENTS WERE C ARRIED OUT AN D RESIDUAL REMAINED UNADJUSTED B UT CONSISTENTLY ACCOUNTED FOR ON THE SAME BASIS. THE A.O. WAS NOT ABLE TO BRI NG OUT AS TO THE NATURE OF THESE PRIOR PE RIOD EXPENSES CLAIMED IN THE ASSESSMENT AS EXPEND ITURE WHICH SHOULD HAVE SET A CHAIN REACTION FOR THE TWO CONSECUTIVE YEARS. THE LD. CIT(A) HAS RIGHTLY CONSIDERED THAT THE ACCOUNTING OF PRIOR PERIOD EXPENSES LITERAL LY ACCOUNTED FOR BY THE ASSESSEE WAS ON ACCOUNT OF ARREAR PAYMENTS AND ALLOWANCES AND OTHER STAFF BENEFITS PAID SUBSEQUENTLY. THEY WERE ACCOUNTED FOR IN THE YEAR OF PAYMENT AND AS THE NONE SUGGESTS GENERATING WITH ONE YEAR WOULD HAVE LED TO ALLOWANCES FOR A PRIOR YEAR AND RELEVANT FOR THE LATER YEAR WHICH HAS NOT BEEN DONE IN THIS CASE. THEREFORE, THE LD. CIT(A) DEEMED IT FAIR AND PROPER NOT TO SUSTAIN ANY ADDITION IN BOTH THE YEARS. WE UPHOLD THE FINDING OF THE CIT(A) ON THIS ISSUE. IN VIEW OF THE ABOVE, WE SET ASIDE THE IMPUGNED ORDER OF THE LEARNED CIT(A) AND DIRECT THE ASSESSING OFFICER TO ALLOW THE CLAIM OF THE ASSESSEE IN THIS REGARD AFTER VERIFICATION OF BOOKS OF ACCOUNT OF THE RESPECTIVE AYS UNDER CONSIDERATION. 6. THE NEXT ISSUE RAISED BY THE REV ENUE , WHICH IS COMMON IN ITA NOS. 08, 09 AND 305/CT/2010 FOR THE A YS 2003 - 04, 2004 - 05 AND 2007 - 08 IS REGARDING DELETION OF ADDITION MADE BY THE ASSESSING OFFICER DISALLOWING THE PLANTATION EXPENSES . THE LEARNED AR OF THE ASSESSEE SUBMITTED THAT THIS IS A C ONTINUING ISSUE AND HAS BEEN DECIDED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF ITAT, CUTTACK BENCH IN THEIR CONSOLIDATED ORDER DT.30.4.2001 IN ITA NOS.7 TO 19/CTK/2001 FOR THE AYS 1980 - 81 TO 1991 - 92. THE LEARNED DR DID NOT DISPUTE THE ABOVE FACT. IN THE SAID ORDER DT.30.4.2001, THE TRIBUNAL HAS HELD THE SAID EXPENDITURE TO BE REVENUE IN NATURE AND DIRECTED THE AO TO ALLOW THE SAME. RELEVANT PORTION OF THE SAID ORDER IN PARAGRAPHS 13 AND 14 THEREIN IS QUOTED HEREUNDER. 13. TAKING CLUE FROM THE ABOVEMEN TIONED JUDGMENT, WE ARE OF THE OPINION THAT, INASMUCH AS, NO ASSET OR EVEN ANY ENDURING BENEFIT WAS ACQUIRED BY THE PROCESS OF INCURRING OF PLANTATION EXPENSES BY THE ASSESSEE, THE EXPENSES HAS GOT TO BE TREATED AS REVENUE EXPENSE. THE FACT THAT IN SOME OF THE YEARS, THE EXPENSE WAS CAPITALIZED IN THE 4 ACCOUNTS OF THE ASSESSEE OR THAT THE A.G. OPINED THAT THE EXPENSE SHOULD BE SHOWN AS CAPITAL EXPENSE IN THE ASSESSEES ACCOUNTS, IS OF LITTLE CONSEQUENCE IN DETERMINING THE NATURE OF THE EXPENSE. WE, THEREFORE , CONSIDER THE EXPENSE TO BE OF REVENUE NATURE. 14. ULTIMATELY, THEREFORE, WE HOLD THAT THE PLANTATION EXPENSE INCURRED BY THE ASSESSEE OVER THE DIFFERENT YEARS ARE NOT ONLY EXPENSES LAID OUT WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF THE BUSINESS OF THE A SSESSEE, BUT ALSO ARE NON - AGRICULTURAL AS WELL AS REVENUE IN NATURE. WE REVERSE THE ORDER OF THE LOWER AUTHORITIES AND DIRECT THAT THE EXPENSES TO BE ALLOWED IN THE ASSESSMENTS FOR ALL THE YEARS UNDER CONSIDERATION. WE FIND THAT THE LEARNED CIT(A) HAS DE LETED THE ADDITION BY FOLLOWING AFORESAID DECISION OF THE ITAT IN ASSESSEES OWN CASE FOR EARLIER YEARS. THEREFORE, THE FACTS BEING UNDISPUTEDLY IDENTICAL, WE DO NOT FIND ANY INFIRMITY IN THE IMPUGNED ORDER IN DELETING THE IMPUGNED ADDITION IN THE RESPECT IVE AYS STATED ABOVE. THE GROUND RAISED BY THE REVENUE IS, THEREFORE, DISMISSED AND THE IMPUGNED ORDER OF THE LEARNED CIT(A) IS UPHELD IN THIS REGARD. 7. AS REGARDS THE ISSUE RAISED BY THE REVENUE IN ITA NO.08/CTK/2010 FOR THE AY 2003 - 04 AGAINST THE ORDER OF THE LEARNED CIT(A) IN DELETING THE ADDITION MADE ON ACCOUNT OF CONTRIBUTION TO INSURANCE RESERVE FUND, THE LEARNED DR CONTENDED THAT THE ACTION OF THE LEARNED CIT(A) IS NOT JUSTIFIED WHEN THE ASSESSEE HAS FULL CONTROL OVER THE FUND AND THE SAME WAS MER E PROVISION FOR MISHAPPENING TO COVER FUTURE RISK OR DAMAGE TO THE STOCK AS SELF INSURANCE . THE LEARNED AR OF THE ASSESSEE, ON THE OTHER HAND, SUBMITTED THAT THIS ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISIONS OF ITAT, CUTTACK IN ASSESSEES OW N IN ITA NOS.546 & 547/CTK/1992 DT.29.1.2003 FOR AYS 1998 - 89 AND 1989 - 90 AND IN ITA NOS.8 & 38/CTK/2004 DT.29.8.2005 FOR THE AY 1992 - 93. WE FIND THAT THE LEARNED CIT(A) HAS DELETED THE IMPUGNED ADDITION RELYING ON THE ORDER OF THE ITAT, CUTTACK BENCH, IN C ASE OF THE ASSESSEE, DT.2.5.2001 IN ITA NO.438 TO 450/CTK/2000 FOR THE AYS 1999 - 2000 TO 2002 - 03. THE LEARNED DR HAS NOT BROUGHT ANY CONTROVERTING MATERIAL ON RECORD TO THIS EFFECT. THEREFORE, THE ORDER OF THE LEARNED CIT(A) ON THIS ISSUE RELIED UPON BY TH E DECISION OF THE ITAT, CUTTACK BENCH STATED SUPRA, WE UPHOLD THE IMPUGNED ORDER OF THE LEARNED CIT(A) AND DISMISS THE GROUND OF THE REVENUE RAISED IN THIS REGARD. 5 8. THE ISSUE RAISED BY THE ASSESSEE IN ITA NO.79/CTK/2010 FOR THE ASSESSMENT YEAR 2001 - 02 IS AGAINST THE ORDER OF THE LEARNED CIT(A) IN SUSTAINING THE ADDITION/DISALLOWANCE OF RS.3,42,00,000 UNDER SURCHARGE & OST U/S.43B OF THE I.T.ACT,1961. 9. DURING THE ASSESSMENT YEAR 2001 - 02, THE ASSESSING OFFICER FOUND THE ASSESSEE TO HAVE DEBITED RS.3,42 ,17,128 ON ACCOUNT OF SURCHARGE ON OST (KENDU LEAVE). IN CLAUSE 2(D) OF THE NOTES ON ACCOUNT, THE ASSESSING OFFICER NOTICED THAT THE ASSESSEE WAS ACTING AS SELLING AGENT FOR THE MARKETING KENDU LEAVE AND SURCHARGE ON SALES - TAX IS REIMBURSABLE FROM GOVERNME NT. IN VIEW OF THIS, THE ASSESSING OFFICER WAS OF THE VIEW THAT THIS AMOUNT IS NOT ALLOWABLE AS EXPENDITURE. AGGRIEVED, THE ASSESSEE APPEALED BEFORE THE FIRST APPELLATE AUTHORITY. IT WAS CONTENDED BEFORE THE LEARNED CIT(A) THE DETAI LS PERTAINING TO SECTION 43B HAD BEEN GIVEN IN THE RETURN AS ALSO IN THE TAX AUDIT REPORT. THE LEARNED CIT(A) IN HIS ORDER OBSERVED THAT THERE IS NO EVIDENCE REGARDING PAYMENT OF THE ABOVE SURCHARGE AND THE ASSESSEE BEING SILENT ON THE ISSUE RAISED BY THE ASSESSING OFFICER HELD THAT THIS AMOUNT WAS NOT ALLOWABLE AS EXPENDITURE AS IT WAS A REIMBURSE MENT FROM GOVERNMENT. BUT, WE FIND THAT THE LEARNED CIT(A) HAS FAILED TO CONSIDER THE SUBMISSION OF THE ASSESSEE THAT THE DETAILS PERTAINING TO SECTION 43B HA D BEEN GIVEN IN THE RETURN AS ALSO IN THE TAX AUDIT REPORT. IT WAS CATEGORICALLY STATED BY THE ASSESSEE BEFORE THE ASSESSING OFFICER THAT AN AMOUNT OF RS.3.42 CRORES HAS ACTUALLY BEEN PAID DURING THE YEAR TOWARDS THE SAID SURCHARGE - KL AND HAS BEEN DEBITED TO THE P/L ACCOUNT. THEREFO RE, CONSIDERING THE FACTS AND CIRCUMSTANCES OF THE CASE, WE ARE OF THE CONSIDERED VIEW THAT THIS ISSUE NEEDS EXAMINATION ON VERIFICATION OF THE BOOKS OF ACCOUNTS IN DETAIL. ACCORDINGLY, WE SET ASIDE THE IMPUGNED ORDER OF THE LEARNED CIT(A) AND RESTORE THE MATTER TO THE FILE OF THE ASSESSING OFFICER FOR THE PURPOSE OF DETERMINING IS ALLOWANCE U/S.43B AND PASS NECESSARY ORDER IN ACCORDANCE WITH LAW AND ON THE FACTS CLARIFIED. 10. AS REGARDS THE ISSUE RAISED BY THE ASSESSEE IN ITA NO.17/CTK/2010 FOR THE ASSESS MENT YEAR 2004 - 05 AGAINST THE ORDER OF THE LEARNED CIT(A) IN SUSTAINING DISALLOWANCE OF RS.6,49,791 UNDER PROVIDENT FUND CONTRIBUTIONS, THE LEARNED AR OF THE ASSESSEE SUBMITTED THAT THE SAID DISALLOWANCE U/S.43B IN RESPECT OF PF 6 CONTRIBUTION OF EMPLOYEES I S CONTRARY TO FACTS, INCORRECT AND WRONG. GOING THROUGH THE IMPUGNED ORDERS OF THE AUTHORITIES BELOW, WE FIND THAT NONE OF THEM HAVE DISCUSSED IN DETAIL ON THIS ISSUE BUT SIMPLY STAT ED THAT THE ASSESSEE HAS MADE PAYMENT IN RESPECT OF CONTRIBUTION OF EMPLOY EES BEYOND THE DUE DATE. THEREFORE, WE DEEM IT PROPER TO RESTORE THE MATTER TO THE FILE OF THE AO TO CONSIDER THIS ISSUE IN DETAIL AND ALLOW THE CLAIM AS PER LAW. WE, SET ASIDE THE IMPUGNED ORDER OF THE LEARNED CIT(A) ON THIS ISSUE AND RESTORE IT TO THE F ILE OF THE ASSESSING OFFICER FOR VERIFYING THE ALLOWABILITY THEREOF AS PROVIDED IN THE INCOME - TAX ACT . 11. IN THE RESULT, ITA NOS. 249/CTK/2009, 08, 09,77 AND 305/CTK/2010 FOR THE AYS 1993 - 94, 2003 - 04,2004 - 05,2000 - 01 AND 2007 - 08 RESPECTIVELY ARE DISMISSED . THE C.O.NO.7 AND 27/CTK/2010 FILED BY THE ASSESSEE FOR THE AYS 2000 - 01 AND 2007 - 08 ARE ALLOWED. ITA NOS.16,17 AND 79/CTK/2010 FOR THE ASSESSMENT YEAR 2003 - 04, 2004 - 05 AND 2000 - 01 RESPECTIVELY ARE PARTLY ALLOWED FOR STATISTICAL PURPOSES. PRONOUNCED IN OPE N COURT ON DT. 27 TH MAY, 2011 SD/ - SD/ - (K.S.S.PRASAD RAO) JUDICIAL MEMBER (K.K.GUPTA) ACCOUNTANT MEMBER DATE: 27 TH MAY, 2011 H.K.PADHEE, SENIOR PRIVATE SECRETARY. COPY OF THE ORDER FORWARDED T O : 1. THE APPELLANT: 2. THE RESPONDENT: 3. THE CIT, 4. THE CIT(A), 5. THE DR, CUTTACK 6. GUARD FILE (IN DUPLICATE) TRUE COPY, BY ORDER, SENIOR PRIVATE SECRETARY.