DCIT, New Delhi V. M/s. Central Cottage Industries Corporation of India Ltd., Delhi

ITA 1733/DEL/2014

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 6505 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 11 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-03-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 16-03-2016
• Assessment Year: 2010-2011
• Appeal Filed On: 24-03-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: V R SONBHADRA
• Assessee Lawyers: SUNIL JAIN
• Section: 143(3)

Judgement Text

1 ITA NO.1733/DEL/2014 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH: B NEW DELHI BEFORE SHRI N. K. SAINI, ACCOUNTANT MEMBER AND SMT SUCHITRA KAMBLE , JUDICIAL MEMBER I.T.A .NO.- 1733/DEL/2014 (ASSESSMENT YEA R-2010-11) DCIT CIRCLE-3(1) NEW DELHI (APPELLANT) VS CENTRAL COTTAGE INDUSTRIES CORPORATION OF INDIA LTD. 1 ST FLOOR, WEAVERS SERVICE CENTRE, (DC HANDLOO), BHARAT NAGAR DELHIAAACC2702H (RESPONDENT) APPELLANT BY SH.V. R. SONBHADRA, SR. DR RESPONDENT BY SH. SUNIL JAIN, CA ORDER PER SUCHITRA KAMBLE, JM THIS APPEAL IS FILED BY THE REVENUE AGAINST THE ORD ER DATED 26/12/2013 PASSED BY THE CIT(A)- VI, NEW DELHI. 2. THE GROUNDS OF APPEAL ARE AS FOLLOWS:- THE DCIT, CIRCLE -3(1), NEW DELHI IS HEREBY DIRECTE D TO FILE APPEAL IN THE ABOVE MENTIONED CASE BEFORE THE ITAT, NEW DELHI ON THE FOLLOWING GROUND OF APPEAL. 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE CIT(A) HAS ERRED IN DELETING THE ADDITION MADE ON ACCOUNT OF DISALLOWANCE OF PROVISION FOR PAY REVISION BY FAILI NG TO DATE OF HEARING 17.03.2016 DATE OF PRONOUNCEMENT 17.03.2016 2 ITA NO.1733/DEL/2014 APPRECIATE THAT THE PROPOSAL FOR PAY REVISION IS PE NDING FOR APPROVAL FROM GOVERNMENT AND AS SUCH DOES NOT QUALI FY AS ASCERTAINED LIABILITY. 3. THE ASSESSEE IS A PUBLIC SECTOR UNDERTAKING, ENG AGED IN PROMOTION AND TRADING OF HANDICRAFTS AND ALLIED ITE MS. THE RETURN OF INCOME FOR ASSESSMENT YEAR 2010-11 WAS FILED DEC LARING AN INCOME OF RS.1,10,06,000/-. THE ASSESSING OFFICER C OMPLETED THE ASSESSMENT U/S 143(3) VIDE ORDER DATED 30/11/2012 A T A TOTAL INCOME OF RS.3,05,97,850/-. THE ASSESSING OFFICER M ADE DISALLOWANCE OF PROVISION MADE TOWARDS LIABILITY ON ACCOUNT OF PAY REVISION OF EMPLOYEES AMOUNTING TO RS. 1,95,58,000/ -. THE ASSESSEE CLAIMED AN EXPENSE OF RS. 198.58 LAKHS ON ACCOUNT OF PROVISION FOR PAY REVISION, PENDING APPROVAL OF THE SAME FROM THE GOVERNMENT. THE REVISION OF PAY SCALE WAS DUE AS P ER DPE GUIDELINES. FOLLOWING ACCRUAL SYSTEM OF ACCOUNTING , THE ASSESSEE ESTIMATED THE LIABILITY ON A REASONABLE BASIS AND P ROVIDED THE SAME IN THE BOOKS OF ACCOUNT. THE LIABILITY WAS AN ASCE RTAINED LIABILITY. THE ASSESSING OFFICER HOWEVER DID NOT ACCEPT THE CO NTENTION OF THE ASSESSEE AND HELD THAT THE ASSESSEES LIABILITY IS CONTINGENT IN NATURE AND ACCORDINGLY DISALLOWED THE ENTIRE EXPEND ITURE. 4. THE ASSESSEE FILED APPEAL BEFORE THE CIT(A). THE CIT(A) HELD THAT IN THE PAST SUCH PROVISION WAS ALLOWED TOWARDS LIABILITY ON ACCOUNT OF PAY REVISION OF EMPLOYEES AND THE SAME I S NOT BEING A CONTINGENT LIABILITY, THEREFORE DELETED THE SAID AD DITION. 3 ITA NO.1733/DEL/2014 5. THE LD. DR RELIED UPON THE ASSESSMENT ORDER. 6. THE LD. AR SUBMITTED THAT THE ISSUE RELATED TO D EDUCTION IN RESPECT OF PROVISION MADE ON ACCOUNT OF PAY REVISIO N IS COVERED BY THE FOLLOWING JUDGMENTS IN FAVOUR OF THE ASSESSEE. THE CASE LAWS ARE AS UNDER: 1. CIT VS. KERALA STATE FINANCIAL ENTERPRISES LTD. (2009 178 TAXMANN 449 (KER. HC) 2. CIT VS. BHARAT HEAVY ELECTRICAL LTD. (2012) 26 T AXMANN. COM 252 (DELHI HC) 3. ELECTRONICS CORP. OF INDIA LTD. VS. ACIT CIR 2(2 ) HYD. (2012) 28 TAXMANN. COM 280 (ITA HYD.) 7. THE LD. DR COULD NOT DISTINGUISH THE FACTS OF TH E CASE LAWS SUBMITTED BY THE ASSESSEE. 8. WE HAVE PERUSED ALL THE RECORDS AND HEARD BOTH T HE COUNSELS. IN CASE OF CIT VS. BHARAT HEAVY ELECTRICAL LTD. (2012) 26 TAXM ANN. COM 252 (DELHI HC) IT WAS HELD THAT WITH THE EXPIRY OF ONE WAGE SETTLEMENT OR AGREEMENT, INVARIABLY, THERE IS A TIM E LAG WHEN ANOTHER FRESH WAGE REVISION AGREEMENT IS NEGOTIATED AND ENTERED. THE DEDUCTION CLAIMED FOR THAT PERIOD CANNOT BE TER MED AS CONTINGENT BECAUSE THE WAGE AND PROBABLE REVISION O R RATES OF REVISION WOULD BE WITHIN THE FAIR ESTIMATION OF THE EMPLOYER. THE ISSUE IS FULLY COVERED IN ASSESSEES FAVOUR AND THE CIT (A) HAS RIGHTLY DELETED THE SAID ADDITION IN RESPECT OF PROVISION F OR PAY REVISION. 4 ITA NO.1733/DEL/2014 9. IN RESULT, THE APPEAL OF THE REVENUE IS DISMISSE D. THE ORDER IS PRONOUNCED IN THE OPEN COURT ON 17 TH OF MARCH 2016. SD/- SD/- ( N. K. SAINI) (SUCHITRA KAMBLE) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 17/03/2016 *R. NAHEED* COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(APPEALS) 5. DR: ITAT ASSISTANT REGISTRAR ITAT NEW DELHI DATE 1. DRAFT DICTATED ON 17/03/2016 PS 2. DRAFT PLACED BEFORE AUTHOR 17/03/2016 PS 3. DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER .2016 JM/AM 4. DRAFT DISCUSSED/APPROVED BY SECOND MEMBER. JM/AM 5. APPROVED DRAFT COMES TO THE SR.PS/PS 18/03/2016 PS/PS 6. KEPT FOR PRONOUNCEMENT ON PS 5 ITA NO.1733/DEL/2014 7. FILE SENT TO THE BENCH CLERK 18/03/2016 PS 8. DATE ON WHICH FILE GOES TO THE AR 9. DATE ON WHICH FILE GOES TO THE HEAD CLERK. 10. DATE OF DISPATCH OF ORDER.