DCIT, CC-VI, Kolkata, Kolkata V. M/s. Magma Fincorp Ltd., Kolkata

ITA 1658/KOL/2011

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 75043 (ITAT-KOLKATA)
• Duration Of Justice: 2 year(s) 1 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-01-2014
• Appeal Filed By: Department
• Bench Allotted: C
• Assessment Year: 2006-2007
• Appeal Filed On: 02-12-2011
• Court: TRIBUNAL
• Department Lawyers: P K CHAKRABORTY
• Assessee Lawyers: S K TULSIYAN
• Keywords: Rectification of order
• Section: 43B; 143(3); 54; 28; 154

Judgement Text

, C , IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH: KOL KATA () BEFORE , /AND , ! ) [BEFORE SHRI MAHAVIR SINGH, JM & SHRI SHAMIM YAHYA, AM] ' ' ' ' / I.T.A NO. 1 658/KOL/2011 #$ %& #$ %& #$ %& #$ %&/ // / ASSESSMENT YEAR: 2006-07 DEPUTY COMMISSIONER OF INCOME-TAX, VS. M/S. MAGMA FINCORP LTD. CENTRAL CIRCLE-VI, KOLKATA. (PAN:AACCM9380J) (() /APPELLANT ) (*+()/ RESPONDENT ) DATE OF HEARING: 27.12.2013 DATE OF PRONOUNCEMENT: 30.01.2014 FOR THE APPELLANT: SHRI P. K. CHAKRABORTY, JCIT, S R. DR FOR THE RESPONDENT: SHRI S. K. TULSIYAN, ADVOCAT E / ORDER PER SHRI MAHAVIR SINGH, JM : THIS APPEAL BY REVENUE IS ARISING OUT OF ORDER OF C IT(A), CENTRAL-1, KOLKATA IN APPEAL NO. 02/CC-VI/CIT(A),C-1/10-11 DATED 19.09.2011. AS SESSMENT WAS FRAMED BY DCIT, CC-VI, KOLKATA U/S. 154 R.W.S 143(3) OF THE INCOME-TAX ACT , 1961 (HEREINAFTER REFERRED TO AS THE ACT) FOR ASSESSMENT YEAR 2006-07 VIDE HIS ORDER DATED 15 .03.2010. 2. THE FIRST ISSUE IN THIS APPEAL OF REVENUE IS AGA INST THE ORDER OF CIT(A) IN CANCELLING THE RECTIFICATION ORDER PASSED BY AO U/S. 154 OF THE AC T FOR MAKING ADDITION OF EXPENDITURE. FOR THIS, REVENUE HAS RAISED FOLLOWING GROUND NOS. 1 AN D 2: 1. THAT, IN THE FACTS AND CIRCUMSTANCES OF THE CAS E, LD. CIT(A) ERRED IN HOLDING THAT NO MISTAKE APPARENT FROM THE RECORD OCCURRED IN THE OR DER PASSED U/S. 143(3) OF INCOME TAX ACT, 1961 DT. 31.12.2008 AND CONSEQUENTLY, DELETING THE ADDITION OF RS.21,99,790/-. 2. THAT, IN DOING SO, LD. CIT(A) OVERLOOKED THE FAC T THAT A CLEAR MISTAKE APPARENT FROM THE RECORD OCCURRED IN THE ASSESSMENT ORDER INASMUC H AS THE EXPENDITURE PERTAINING TO THE AY 2005-06 WAS WRONGLY ALLOWED IN AY 2006-07. 3. BRIEFLY STATED FACTS ARE THAT THE ORIGINAL ASSESSME NT WAS COMPLETED U/S. 143(3) OF THE ACT ON 31.12.2008. THEREAFTER, AO ISSUED NOTICE U/S. 1 54 OF THE ACT STATING THAT THERE ARE CERTAIN 2 ITA NO. 1658/K/2011 M/S. MAGMA FINCORP. LTD. AY:2006-07 MISTAKE APPARENT FROM RECORDS ON ACCOUNT OF CLAIM O F PROVISION FOR LEAVE ENCASHMENT U/S. 43B OF THE ACT IN THE RELEVANT ASSESSMENT YEAR FOR AN A MOUNT OF RS.21,99,790/-. THE ASSESSEE BEFORE THE AO EXPLAINED HOW THE PROVISION FOR LEAVE ENCASHMENT IS NIL U/S. 43B OF THE ACT. THE ASSESSEE EXPLAINED THAT IN FY 2005-06 RELEVANT TO THIS AY 2006-07 MADE A PAYMENT OF RS.21,99,790/- TO ITS EMPLOYEES ON ACCOUNT OF ENCAS HMENT OF LEAVE SALARY AND CLAIMED THE SAME AS DEDUCTION U/S. 43B OF THE ACT. ACCORDING TO AO, THIS WAS ALLOWABLE FOR AY 2005-06. FOR THIS, HE OBSERVED AS UNDER: PROVISION FOR LEAVE ENCASHMENT OF RS.32,45,855/- W AS DEBITED TO P/L. THE SAME WAS ADDED BACK, IN COMPUTATION BUT ANOTHER AMOUNT OF RS .36,85,732/- ON ACCOUNT FOR PROVISION OF LEAVE ENCASHMENT WAS ALLOWED. THIS RS. 36,85,732/- INCLUDED AN AMOUNT OF RS. 14,85,942/-. THE BALANCE RS.21,99,790/- PAID DU RING THE YEAR 2005-06 OUT OF PROVISION FOR LEAVE ENCASHMENT OF RS.40,50,000/- DI SALLOWED IN A. Y. 2005-06. THE AMOUNT OF RS. 21,99,790/- PERTAINING TO A.Y. 2005-0 6 AND ALLOWED IN A.Y.2006-07 WAS ACTUALLY PAID IN MAY, 2005. THEREFORE THE AMOUNT OF RS.21,99,790/- WAS ALLOWABLE U/S 43B IN A.Y. 2005-06 INSTEAD OF . Y. 2006-07 BEING THE PAID BEFORE FILING OF RETURN OF INCOME FOR A.Y. 2005-06. AGGRIEVED, ASSESSEE PREFERRED APPEAL BEFORE CIT(A). 4. BEFORE CIT(A) IT WAS EXPLAINED BY ASSESSEE COMPA NY THAT IN THE RELEVANT PREVIOUS YEAR IT MADE A PROVISION FOR LEAVE ENCASHMENT AMOUNTING TO RS.40,50,000/- AND DECIDED TO MAKE COMPULSORY PAYMENT OF OUTSTANDING LEAVE FOR 50% OF ACCUMULATED LEAVE IN EXCESS OF 60 DAYS PERTAINING TO THE EARLIER YEARS. HENCE, COMPANY AL LOWS A MAXIMUM 20 DAYS LEAVE TO BE CARRIED FORWARD, AS IT STANDS CLEAR THAT THE LEAVE SALARY E NCASHMENT MADE IN THIS ASSESSMENT YEAR PERTAINED TO EARLIER YEARS AND NOT AY 2005-06. ACC ORDING TO ASSESSEE, IT WAS PAID IN AY 2006- 07 AND ASSESSEE COMPANY RIGHTLY CLAIMED DEDUCTION U /S. 43B OF THE ACT IN AY 2006-07. THE ASSESSEE COMPANY MADE PAYMENT OF RS.21,99,790/- ON 31.05.2005 AND CLAIMED THIS DEDUCTION IN THE RELEVANT AY 2006-07. THE ASSESSEE SUBMITTED COMPLETE CALCULATION PERTAINING TO ACCUMULATED LEAVE FOR THE PREVIOUS YEAR AS PER COMP ANYS LEAVE ENCASHMENT POLICY, WHICH READS AS UNDER: F.Y. UTILIZED LEAVE FOR THE YEAR TOTAL ACCUMULATED LEAVE 2001-02 20 20 2002-03 20 40 2003-04 20 60 2004-05 20 80 THE RELEVANT PROVISION OF SECTION 43B(F) READS AS F OLLOWS: 3 ITA NO. 1658/K/2011 M/S. MAGMA FINCORP. LTD. AY:2006-07 43B NOTWITHSTANDING ANYTHING CONTAINED IN ANY OTHE R PROVISIONS OF THIS ACT, A DEDUCTION OTHERWISE ALLOWABLE UNDER THIS ACT IN RESPECT OF [(F) ANY SUM PAYABLE BY THE ASSESSEE AS AN EMPLOYER IN LIEU OF ANY LEAVE AT THE CREDIT OF HIS EMPLOYEE.] SHALL BE ALLOWED (IRRESPECTIVE OF THE PREVIOUS YEAR IN WHICH THE LIABILITY TO PAY SUCH WAS INCURRED BY THE ASSESSEE ACCORDING TO THE METHOD O F ACCOUNTING REGULARLY EMPLOYED BY HIM) ONLY IN COMPUTING THE INCOME REFERRED TO IN SE CTION 28 OF THAT PREVIOUS YEAR IN WHICH SUCH SUM IS ACTUALLY PAID BY HIM. IT WAS ALSO EXPLAINED BY ASSESSEE BEFORE US THAT TH E DECISION IN THE CASE OF EXIDE INDUSTRIES LTD. VS. UNION OF INDIA (2007) 292 ITR 470 (CAL) HAS BEE N STAYED BY HONBLE SUPREME COURT. THIS ASSESSMENT WAS FRAMED, ALLOWING DEDUCTION U/S. 43B OF THE ACT, AND ORDER WAS PASSED ON 31.12.2008 AND THE OPERATION OF HONBLE CALCUTTA HI GH COURT WAS NOT STAYED AT THAT POINT OF TIME AND HENCE, THE AO WAS RIGHT IN ALLOWING THE CL AIM. ACCORDING TO LD. COUNSEL BEFORE US NOW, THIS CANNOT BE THE SUBJECT MATTER OF SECTION 1 54 OF THE ACT BECAUSE THIS IS A HIGHLY DEBATABLE ISSUE AND HONBLE SUPREME COURT IN THE CA SE OF EXIDE INDUSTRIES LTD. HAS TO TAKE CALL ON THIS ISSUE. 5. WE FIND THAT THE CIT(A) HAS ALSO CONSIDERED THI S ISSUE I.E. ALLOWANCE OF EXPENSES ON ACCOUNT OF LEAVE ENCASHMENT WHETHER ALLOWABLE IN RE LEVANT ASSESSMENT YEAR ON PAYMENT BASIS OR AN EARLIER YEAR, IT WAS NEITHER PAID NOR CLAIMED BY THE ASSESSEE. THERE ARE CLEARLY TWO POSSIBLE VIEWS AND CIT(A) HAS ADJUDICATED THE ISSUE VIDE PARA 3.1 AND 3.2 AS UNDER: 3.1. I HAVE CAREFULLY CONSIDERED THE SUBMISSION O F THE L.D A.R. THE PRINCIPLE GOVERNING THE APPLICABILITY OF SECTION 154 HAS BEEN LAID DOWN IN THE DECISION OF THE SUPREME COURT IN THE CASE OF T. S. BALARAM, INCOME- TAX OFFICER V. V OLKART BROTHERS. THE SUPREME COURT OBSERVED THAT A MISTAKE APPARENT ON THE RECORD MUST BE AN OBVIOUS AND PATENT MISTAKE AND NOT SOMETHING WHICH HAD TO BE ESTABLISHED BY A LONG-DRAWN PROCESS OF REASONING ON POINTS ON WHICH THERE MIGHT BE CONCEIVABLY TWO OPIN IONS. A DECISION ON A DEBATABLE POINT OF LAW WAS NOT A MISTAKE APPARENT FROM THE RECORD. HERE REFERENCE MAY ALSO BE MADE TO THE DECISION OF THE APEX COURT IN THE CASE OF HARBA NS LAL MALHOTRA & SONS PRIVATE LTD. V. INCOME- TAX OFFICER, WHERE IT WAS HELD THAT A QUEST ION WHICH INVOLVED INTERPRETATION OF LAW AND DETERMNATION OF CONTROVERSIAL FACTS COULD NOT BE RECTIFIED UNDER SECTION 154 OF THE INCOME-TAX ACT, 1961. LIKEWISE IN DEVA METAL POWDER S (P.) LTD. V. COMMISSIONER, TRADE TAX, UP [2008] 2 SCC 439, A DIVISION BENCH OF THE A PEX COURT HELD THAT A RECTIFIABLE MISTAKE MUST EXIST AND THE SAME MUST BE APPARENT FR OM THE RECORD. IT MUST BE A PATENT MISTAKE, WHICH IS OBVIOUS AND WHOSE DISCOVERY IS NO T DEPENDENT ON ELABORATE ARGUMENTS. TO THE SAME EFFECT IS THE JUDGMENT OF THE APEX COUR T IN THE CASE OF CCE V. A.S.C.U LTD. 2003 (151) ELT 481, WHEREIN IT HAS BEEN HELD THAT A RECTIFIABLE MISTAKE IS A MISTAKE WHICH IS OBVIOUS AND NOT SOMETHING WHICH HAS TO BE ESTABL ISHED BY A LONG DRAWN PROCESS OF 4 ITA NO. 1658/K/2011 M/S. MAGMA FINCORP. LTD. AY:2006-07 REASONING OR WHERE TWO OPINIONS ARE POSSIBLE. DECIS ION ON DEBATABLE POINT OF LAW CANNOT BE TREATED AS MISTAKE APPARENT FROM THE RECORD. 3.2. NOW THE ISSUE TO BE EXAMINED IS, WHETHER THE V IEW TAKEN BY THE ASSESSING OFFICER PREVIOUSLY AND THE PRESENT VIEW ARE TWO CONCEIVABLE DIFFERENT POSSIBLE VIEWS OR WHETHER THE PREVIOUS VIEW OF THE ASSESSING OFFICER WAS A VI EW WHICH WAS NOT POSSIBLE BUT WAS ONLY A MISTAKE. HOWEVER IN THE CASE UNDER CONSIDERATION THE ISSUE OF DISPUTE IS WHETHER THE DEDUCTION ON ACCOUNT OF LEAVE ENCASHMENT WAS ALLOWA BLE IN THE RELEVANT ASSESSMENT YEAR ON PAYMENT BASIS OR IN THE EARLIER YEAR EVEN THOUGH IT WAS NEITHER PAID NOR CLAIMED BY THE ASSESSEE . THE ABOVE QUESTIONS IS NOT FREE FROM THE MISCHIEF OF TWO POSSIBLE VIEWS. FURTHER WHETHER THE MANUFACTURE/ DEALER DISCOUNT IS INCLUDE D IN THE TDS CERTIFICATE ISSUED UNDER THE HEAD BROKERAGE AND COMMISSION OR WHETHER THE IN TEREST FROM LOAN MARGIN, INVESTMENTS ETC SHOULD BE ASSESSED UNDER THE HEAD BUSINESS INCO ME OR INCOME FROM OTHER SOURCES BY NO STRETCH OF IMAGINATION CAN BE SAID TO BE A OBVIO US MISTAKE WHICH IS APPARENT FROM RECORD. CONSIDERING ABOVE, I AM OF THE OPINION THA T HE ISSUE IS DEBATABLE AND DEPENDENT ON ELABORATE ARGUMENTS AND HAS TO BE ESTABLISHED B Y A LONG DRAWN PROCESS OF REASONING. HENCE ON THIS GROUNDS SECTION 154 CANNOT BE REFERRE D TO. WE FIND NO INFIRMITY IN THE ORDER OF CIT(A). HENCE, WE CONFIRM THE SAME AND THIS ISSUE OF REVENUES APPEAL IS DISMISSED. 6. COMING TO SECOND ISSUE AS REGARDS TO THE ORDER O F CIT(A) IN CANCELLING THE RECTIFICATION ORDER PASSED BY AO U/S. 154 OF THE ACT BY DELETING THE ADDITION OF RS.24,57,260/- ON ACCOUNT OF INCOME ARISING OUT OF DISCOUNTS. FOR THIS, REVENUE HAS RAISED FOLLOWING GROUND NO. 3: 3. THAT IN THE FACTS AND CIRCUMSTANCES OF THE CASE , LD. CIT(A) ERRED IN HOLDING THAT NO MISTAKE APPARENT FROM THE RECORD OCCURRED IN THE ORDER PASSED U/S. 143(3) OF INCOME TAX ACT, 1961 DT. 31.12.2008 AND CONSEQUENTL Y, DELETING THE ADDITION OF RS.24,57,260/- ON ACCOUNT OF INCOME ARISING OUT OF DISCOUNT OVERLOOKING THE FACT THAT THE INCOME OF RS.24,57,260/- WAS NOT ADDED IN THE A SSESSMENT ORDER. 7. WE HAVE HEARD RIVAL SUBMISSIONS AND GONE THROUGH FACTS AND CIRCUMSTANCES OF THE CASE. BRIEFLY STATED FACTS ARE THAT THE AO COMPLETED ASSE SSMENT U/S. 143(3) OF THE ACT AND ALLOWED DEALERS/MANUFACTURERS DISCOUNT AT RS.24,57,260/- A ND ACCEPTED THE CONTENTIONS OF THE ASSESSEE. CONSEQUENTLY, HE ISSUED NOTICE U/S. 154 OF THE ACT AND MADE ADDITION OF DISCOUNT FROM DEALERS/MANUFACTURERS AT RS.24,57,760/-. IT WAS EX PLAINED BY ASSESSEE THAT IT IS IN THE BUSINESS OF FINANCING ASSETS AND EARNED BROKERAGE AND COMMIS SION INCOME BY MEANS OF BUYING ASSETS, MANAGING/CLUBBING FEES AND ARRANGING PROCUREMENT OF ASSETS ON HIRE PURCHASE BASIS ON BEHALF OF ITS CUSTOMERS. THE ASSESSEE EXPLAINED BEFORE TH E AO VIDE LETTER DATED 23.10.2008 AND FILED DETAILS PERTAINING TO BROKERAGE AND COMMISSION INCO ME EARNED BY IT IN THE RELEVANT YEAR. IT WAS EXPLAINED BEFORE THE AO THAT THE DISCOUNT FROM DEAL ERS AND MANUFACTURERS AMOUNTING TO RS.24,57,260/- WAS ALSO DERIVED BY ASSESSEE IN THE RELEVANT ASSESSMENT YEAR BY PLACING ORDER ON 5 ITA NO. 1658/K/2011 M/S. MAGMA FINCORP. LTD. AY:2006-07 BEHALF OF ITS CUSTOMERS FOR PURCHASE OF CARS/VEHICL ES. THE DISCOUNT IS BASICALLY IN THE NATURE OF COMMISSION GIVEN BY MANUFACTURER/DEALER ON THE VALU E OF EVERY VEHICLE BOOKED BY ASSESSEE. ACCORDING TO ASSESSEE, DUE TO LONG TERM POLICY AND TO MAINTAIN LONG TERM BUSINESS RELATIONS AN UNDERSTANDING HAS EVOLVED BETWEEN THE ASSESSEE COMP ANY AND THE DEALERS WHICH ENTITLES THE LATTER TO A CERTAIN PERCENTAGE OF DISCOUNT/COMMISSI ON ON EVERY BOOKING OF VEHICLES MADE BY IT. THE RELEVANT DETAILS OF INCOME WAS FILED BY THE ASS ESSEE BEFORE THE LOWER AUTHORITIES AND EVEN NOW BEFORE US AT PAGE 8 OF CIT(A) AS UNDER: HIRE PURCHASE FINANCE INCOME RS.15,60,48,950/- DEALER/MANUFACTURER DISCOUNT RS.24,57,260/- MANAGING AND COLLECTION FEES RS.1,70,44,256 /- TOTAL : RS.17,55,50,736/- 8. AS REGARDS THE DISCOUNT FROM DEALER/MANUFACTURER THE SAME WAS SUBJECT TO TDS AND THE RELEVANT DETAILS ARE AS UNDER: NAME OF THE PERSON WHO DEDUCTED THE TAX AMOUNT RECEIVED TDS BHANDARI AUTOMOBILES (P) LTD. HYUNDAI MOTORS INDIA LTD. HYUNDAI MOTORS INDIA LTD. TATA MOTORS LTD. TATA MOTORS LTD. TATA MOTORS LTD. TATA MOTORS LTD. TATA MOTORS LTD. , TATA MOTORS LTD. , TATA MOTORS LTD. , TATA MOTORS LTD. , TATA MOTORS LTD. , GENERAL MOTORS INDIA PVT. LTD. 25,000 70,500 100,000 342,500 277,000 35,000 90,000 350,000 1 84,000 210,000 430,000 111,250 232,000 2,457,250 1 ,403 3,955 5,610 19,215 15,540 1,964 5,049 19,635 1 0,322 11,781 24, 123 6,241 13,015 137,853 THE ASSESSEE HAS CONSIDERED THE ENTIRE COMMISSION R ECEIVED AND ALSO CONSIDERED THE DISCOUNT UNDER THE HEAD DEALER/MANUFACTURER DISCOUNT AND SAM E IS PAID AND RIGHTLY ALLOWED BY AO WHILE FRAMING ASSESSMENT U/S. 143(3) OF THE ACT. THE ASS ESSEE ALSO REITERATED THE SAME ARGUMENT BEFORE CIT(A) AND CIT(A) ALSO ALLOWED AS NOTED IN P ARA ABOVE. WE FIND THAT THE MANUFACTURER/DEALER DISCOUNT IS INCLUDED IN THE TDS CERTIFICATES AND ALSO ACCOUNTED FOR BY THE ASSESSEE UNDER THE HEAD BROKERAGE AND COMMISSION. WHETHER THE DISCOUNT IS ALLOWABLE AS 6 ITA NO. 1658/K/2011 M/S. MAGMA FINCORP. LTD. AY:2006-07 DISCOUNT FROM DEALER/MANUFACTURER IS CLEARLY AN ALL OWABLE DEDUCTION. EVEN THOUGH, IF AT ALL, IT IS TO BE CONSIDERED NOT TO BE ALLOWABLE, IT IS A HI GHLY DEBATABLE ISSUE AND THIS CANNOT BE DISALLOWED U/S. 154 OF THE ACT BECAUSE THIS IS NOT A MISTAKE APPARENT FROM RECORD. CIT(A) HAS RIGHTLY DELETED THE ADDITION AND WE CONFIRM THE SAM E. GROUND OF APPEAL OF REVENUE IS DISMISSED. 9. IN THE RESULT, APPEAL OF REVENUE IS DISMISSED. 10. ORDER IS PRONOUNCED IN THE OPEN COURT ON 30.01. 2014 SD/- SD/- , ! , (SHAMIM YAHYA ) (MAHAVIR SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 30TH JANUARY, 2014 PRONOUNCED BY SD/- A. P. GEORGE SD/- (M. SINGH) AM JM ./ #01 2 JD.(SR.P.S.) 3 *4 5 4%6- COPY OF THE ORDER FORWARDED TO: 1 . () / APPELLANT DCIT, C.C. VI, KOLKATA 2 *+() / RESPONDENT M/S. MAGMA FINCORP LTD., MAGMA HOUSE , 24 PARK STREET, KOLKATA-700 016 3 . # ( )/ THE CIT(A), KOLKATA 4. 5. # / CIT KOLKATA 4:; *# / DR, KOLKATA BENCHES, KOLKATA +4 */ TRUE COPY, #