M/s Saraswaty Press Limited, Kolkata V. DCIT -IV, Kolkata, Kolkata

ITA 1668/KOL/2016

• Counselvise Citation: [2018] 126 COUNSELVISE.COM (IT) 1367 (ITAT-KOLKATA)
• Duration Of Justice: 1 year(s) 6 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-03-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2009-2010
• Appeal Filed On: 19-08-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL KOLKATA BENCH A, KOLKATA [BEFORE SHRI P.M. JAGTAP, AM AND SHRI ABY. T. VARKEY, JM] I.T.A. NO. 1668/KOL/2016 ASSESSMENT YEAR: 2009-10 M/S. SARASWATY PRESS LTD............................................................APPELLANT 11, BARRACKPORE TRUNK ROAD, KOLKATA 700 056 [PAN : AAECS 6328 J] DCIT UNDER CIT IV...............................RESPONDENT 11, BARRACKPORE TRUNK ROAD, KOLKATA 700 056 APPEARANCES BY: SHRI RIP DAS, CA APPEARING ON BEHALF OF THE ASSESSEE. SHRI SALLONG YADEN, CIT (DR) APPEARING ON BEHALF OF THE REVENUE. DATE OF CONCLUDING THE HEARING : MARCH 09, 2018 DATE OF PRONOUNCING THE ORDER : MARCH14, 2018 ORDER PER P.M. JAGTAP, AM THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF LD. CIT(A) 12, KOLKATA DATED 06.02.2013 AND THE SOLITARY ISSUE RAISED THEREIN RELATES TO THE DISALLOWANCE OF RS. 2,04,38,145/- MADE BY THE A.O. AND CONFIRMED BY THE LD. CIT(A) ON ACCOUNT OF PROVISIONS MADE FOR SALARY AND WAGES AS PER THE PAY COMMISSION. 2. THE ASSESSEE IN THE PRESENT CASE IS A STATE GOVERNMENT UNDERTAKINGS. THE RETURN OF INCOME FOR THE YEAR UNDER CONSIDERATION WAS FILED BY IT ON 29.09.2009 DECLARING A TOTAL INCOME OF RS. 70,29,410/-. IN THE PROFIT AND LOSS ACCOUNT FILED ALONG WITH THE SAID RETURN, A SUM OF RS. 2,04,38,145/- WAS DEBITED BY THE ASSESSEE ON ACCOUNT OF PROVISION FOR ARREARS OF SALARY AND WAGES PAYABLE AS PER PAY COMMISSION. SINCE THE SAID AMOUNT REPRESENTING PROVISION WAS 2 I.T.A. NO. 1668/KOL/2016 ASSESSMENT YEAR: 2009-10 M/S. SARASWATY PRESS LTD. NOT PAID BY THE ASSESSEE DURING THE YEAR UNDER CONSIDERATION, THE A.O. DISALLOWED THE SAME IN THE ASSESSMENT COMPLETED UNDER SECTION 143(3). 3. AGAINST THE ORDER PASSED BY THE A.O. UNDER SECTION 143(3), AN APPEAL WAS PREFERRED BY THE ASSESSEE BEFORE THE LD. CIT(A) AND CONSIDERING THAT THE AMOUNT IN QUESTION REPRESENTING PROVISION MADE FOR SALARY AND WAGES HAD NOT BEEN PAID BY THE ASSESSEE, THE LD. CIT(A) CONFIRMED THE DISALLOWANCE MADE BY THE A.O. ON THIS ISSUE. AGGRIEVED BY THE ORDER OF THE LD. CIT(A), THE ASSESSEE HAS PREFERRED THIS APPEAL BEFORE THE TRIBUNAL. 4. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE PROVISION IN QUESTION WAS MADE BY THE ASSESSEE ON ACCOUNT OF SALARY AND WAGES PAYABLE TO ITS EMPLOYEES FOR THE YEAR UNDER CONSIDERATION AS PER THE PAY REVISION RECOMMENDED BY THE PAY COMMISSION. HE CONTENDED THAT THE SAID PROVISION THUS REPRESENTED ASCERTAINED LIABILITY AND ALTHOUGH THE SAME WAS REQUIRED TO BE PAID IN FUTURE, IT WAS ALLOWABLE AS DEDUCTION AS PER THE MERCANTILE SYSTEM OF ACCOUNTING FOLLOWED BY THE ASSESSEE. IN SUPPORT OF THIS CONTENTION, HE FILED THE RELEVANT DOCUMENTARY EVIDENCE IN THE FORM OF NOTIFICATIONS ISSUED BY THE FINANCE DEPTT. OF THE GOVT. OF WEST BENGAL FROM TIME TO TIME. 5. THE LEARNED DR, ON THE OTHER HAND, SUBMITTED THAT THE RECOMMENDATIONS OF THE PAY COMMISSION WERE ACCEPTED BY THE GOVERNMENT OF WEST BENGAL AND GUIDELINES WERE ISSUED IN THE MATTER OF REVISION OF PAY AND ALLOWANCES OF THE EMPLOYEES OF THE VARIOUS 3 I.T.A. NO. 1668/KOL/2016 ASSESSMENT YEAR: 2009-10 M/S. SARASWATY PRESS LTD. STATE GOVERNMENT UNDERTAKINGS INCLUDING THE ASSESSEE BY NOTIFICATION ISSUED ON 23 RD JULY, 2009. HE CONTENDED THAT THE LIABILITY ON ACCOUNT OF SALARY AND WAGES AS REVISED BY THE PAY COMMISSION THUS HAD ARISEN ONLY ON 23 RD JULY, 2009 I.E. MUCH LATER THAN THE CLOSER OF THE YEAR UNDER CONSIDERATION AND THE ASSESSEE THUS WAS NOT ENTITLED FOR DEDUCTION OF THE SAME. IN SUPPORT OF THIS CONTENTION, HE RELIED ON THE DECISION OF HYDERABAD BENCH OF THIS TRIBUNAL IN THE CASE OF ANDHRA PRADESH GRAMEENA VIKAS BANK VS ACIT RENDERED VIDE ITS ORDER DATED 10.04.2015 PASSED IN ITA NO. 88/HYD/2015. 6. WE HAVE HEARD THE ARGUMENTS OF BOTH THE SIDES AND ALSO PERUSED THE RELEVANT MATERIAL AVAILABLE ON RECORD. A PERUSAL OF THE RELEVANT DOCUMENTARY EVIDENCE FILED BY THE ASSESSEE IN THE FORM OF NOTIFICATIONS ISSUED BY THE GOVERNMENT OF WEST BENGAL SHOWS THAT A PAY COMMISSION WAS CONSTITUTED UNDER THE GOVERNMENT RESOLUTION NO. 6020-F DATED 28.08.2008 READ WITH RESOLUTION NO. 6021-F DATED 28.08.2008 FOR EXAMINING THE STRUCTURE OF PAY AND CONDITION OF SERVICES OF STATE GOVERNMENT EMPLOYEES ALONG WITH THE EMPLOYEES OF A NUMBER OF STATE GOVERNMENT UNDERTAKINGS INCLUDING THE ASSESSEE. THE SAID PAY COMMISSION SUBMITTED ITS REPORT TO THE GOVERNMENT OF WEST BENGAL ON 12 TH FEBRUARY, 2009 AND AFTER DUE CONSIDERATION OF THE SAID REPORT, THE STATE GOVERNMENT NOT ONLY ACCEPTED SUBSTANTIALLY THE RECOMMENDATIONS OF THE PAY COMMISSION BUT ALSO ISSUED A NOTIFICATION NO. 1690-F ON 23 RD FEBRUARY, 2009 MAKING RULES FOR THE IMPLEMENTATION OF THE PAY COMMISSION RECOMMENDATIONS REVISING THE STRUCTURE OF PAY AND CONDITION OF SERVICES OF STATE GOVERNMENT EMPLOYEES. NO DOUBT, A NOTIFICATION NO. 7220-F WAS SEPARATELY ISSUED BY THE GOVERNMENT OF WEST BENGAL ON 23.07.2009 LAYING DOWN 4 I.T.A. NO. 1668/KOL/2016 ASSESSMENT YEAR: 2009-10 M/S. SARASWATY PRESS LTD. GUIDELINES IN THE MATTER OF REVISION OF PAY AND ALLOWANCES OF THE EMPLOYEES OF THE VARIOUS STATE GOVERNMENT UNDERTAKINGS INCLUDING THE ASSESSEE, THE FACT REMAINS TO BE SEEN IS THAT THE PAY COMMISSION HAD SUBMITTED ITS REPORT GIVING ITS RECOMMENDATION ON THE REVISES STRUCTURE OF PAY AND CONDITION OF THE STATE GOVERNMENT EMPLOYEES AS WELL AS THE EMPLOYEES OF THE VARIOUS STATE GOVERNMENT UNDERTAKINGS INCLUDING THE ASSESSEE ON 12 TH FEBRUARY, 2009 ITSELF AND THE RECOMMENDATIONS SO MADE BY THE PAY COMMISSION IN THE SAID REPORT WERE NOT ONLY SUBSTANTIALLY ACCEPTED BY THE GOVERNMENT OF WEST BENGAL BUT EVEN THE RULES WERE MADE FOR IMPLEMENTING THE SAME IN THE CASE OF STATE GOVERNMENT EMPLOYEES BY A NOTIFICATION ISSUE ON 23 RD FEBRUARY, 2009. AS PER THE SAID RECOMMENDATIONS MADE BY THE PAY COMMISSION AND ACCEPTED BY THE WEST BENGAL GOVERNMENT, SALARY AND WAGES TO THE EMPLOYEES AT THE REVISED RATE HAD BECOME PAYABLE FOR THE A.Y. 2008-09 RELEVANT TO THE A.Y. 2009-10 UNDER CONSIDERATION AND SINCE THE BASIS OF SUCH REVISION AS RECOMMENDED BY THE PAY COMMISSION AND ACCEPTED BY THE GOVERNMENT OF WEST BENGAL WAS VERY WELL KNOWN BY THE NOTIFICATION ISSUED DURING THE YEAR UNDER CONSIDERATION ITSELF, WE ARE OF THE VIEW THAT THE LIABILITY ON ACCOUNT OF SALARY ARREARS IN QUESTION HAD NOT ONLY ARISEN DEFINITELY DURING THE YEAR UNDER CONSIDERATION BUT IT WAS POSSIBLE TO ASCERTAIN AND QUANTIFY THE SAME WITH REASONABLE CERTAINTY. IT IS WELL SETTLED THAT IF A BUSINESS LIABILITY HAS DEFINITELY ARISEN IN RELEVANT PREVIOUS YEAR, THE DEDUCTION SHOULD BE ALLOWED ALTHOUGH THE LIABILITY MAY HAVE TO BE QUANTIFIED AND DISCHARGED AT A FUTURE DATE. WHAT SHOULD BE CERTAIN IS THE INCURRING OF THE LIABILITY AND IT SHOULD BE CAPABLE OF BEING ESTIMATED WITH REASONABLE CERTAINTY THOUGH THE ACTUAL QUANTIFICATION MAY NOT BE POSSIBLE. IF THESE REQUIREMENTS ARE SATISFIED, THE LIABILITY IS NOT 5 I.T.A. NO. 1668/KOL/2016 ASSESSMENT YEAR: 2009-10 M/S. SARASWATY PRESS LTD. CONTINGENT ONE AND THE PROVISION FOR SUCH LIABILITY IN PRESENTI IS ALLOWABLE AS DEDUCTION. THE DECISION OF HYDERABAD BENCH OF THIS TRIBUNAL IN THE CASE OF ANDHRA PRADESH GRAMEENA VIKAS BANK (SUPRA) CITED BY THE LEARNED DR IS DISTINGUISHABLE ON FACTS IN AS MUCH AS THE LIABILITY IN THE SAID CASE WAS FOUND TO HAVE NEITHER ARISEN NOR CRYSTALLISED DURING THE RELEVANT PREVIOUS YEAR AND THE SAME, THEREFORE, WAS HELD TO BE NOT ALLOWABLE AS DEDUCTION. WE, THEREFORE, DELETE THE DISALLOWANCE OF RS. 2,04,38,145/- MADE BY THE A.O. AND CONFIRMED BY THE LD. CIT(A) ON ACCOUNT OF PROVISION MADE BY THE ASSESSEE FOR SALARY AND WAGES PAYABLE TO THE EMPLOYEES AT THE REVISED RATE AS PER THE PAY COMMISSION AND ALLOW THIS APPEAL OF THE ASSESSEE. 7. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 14 TH MARCH, 2018. SD/- SD/- (ABY.T. VARKEY) (P.M. JAGTAP) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 14/03/2018 BISWAJIT, SR. PS COPY OF ORDER FORWARDED TO: 1. M/S. SARASWATY PRESS LTD., 11, BARRACKPORE TRUNK ROAD, KOLKATA 700 056. 2. DCIT UNDER CIT IV, 11, BARRACKPORE TRUNK ROAD, KOLKATA 700 056. 3. THE CIT(A) 4. THE CIT 6 I.T.A. NO. 1668/KOL/2016 ASSESSMENT YEAR: 2009-10 M/S. SARASWATY PRESS LTD. 5. DR TRUE COPY, BY ORDER, SR. P.S. / H.O.O. ITAT, KOLKATA