The ACIT,Vapi Circle, Vapi V. Gujarat Themis Biosyn Ltd., Vapi

ITA 1780/AHD/2010

• Counselvise Citation: [2010] 135 COUNSELVISE.COM (IT) 9898 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-09-2010
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Assessment Year: 2006-2007
• Appeal Filed On: 26-05-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: K M MAHESH
• Assessee Lawyers: M K PATEL
• Keywords: Period of limitation
• Section: 43B; 195

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH AHMEDABAD (BEFORE S/SHRI BHAVNESH SAINI, JM AND D. C. AGRAWAL , AM) ITA NO.1780/AHD/2010 A. Y.: 2006-07 THE A. C. I. T., VAPI CIRCLE, ROOM NO.303, SHIVAM COMMERCIAL COMPLEX, N. H. NO.8, VAPI 396 195 VS GUJARAT THEMIS BIOSYN LTD., 69-C, GIDC, VAPI 396 195 PA NO. AABCG 0802C (APPELLANT) (RESPONDENT) APPELLANT BY SHRI K. M. MAHESH, DR RESPONDENT BY SHRI M. K. PATEL, AR O R D E R PER BHAVNESH SAINI: THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST THE ORDER OF THE CIT(A), VALSAD DATED 22-12 -2009 FOR ASSESSMENT YEAR 2006-07 ON THE FOLLOWING GROUNDS: 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) HAS GRANTED RELIEF TO THE ASSESSEE I N A SUM OF RS.2,94,419/- OUT OF CREDITORS FOR MORE THAN THREE YEARS. 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND I N LAW, THE LD. CIT(A) HAS ERRED IN DELETING THE DISALLOWAN CE OF RS.1,10,227/- MADE ON ACCOUNT OF BELAT4ED PAYMENT O F PF/ESIC. 2. ON GROUND NO.1 IT WAS NOTED BY THE LEARNED CIT(A) T HAT THE STATEMENT OF THE CREDITORS SHOWN OUTSTANDING BALANC ES FOR MORE THAN 3 YEARS AMOUNTING TO RS.32,99,575/-. THE LEARNED CIT( A) NOTED THAT THE AO HAS NOT BROUGHT ANYTHING ON RECORD TO PROVE HIS INFERENCE THAT EXISTENCE OF SUCH UNPAID CREDITORS CAN BE TREATED A S INCOME OF THE ASSESSEE DURING THE ASSESSMENT YEAR UNDER APPEAL. T HE LEARNED COUNSEL FOR THE ASSESSEE AT THE OUTSET SUBMITTED THAT IDENT ICAL ISSUE WAS CONSIDERED BY ITAT AHMEDABAD BENCH IN THE CASE OF T HE SAME ASSESSEE ITA NO.1780/AHD/2010 ACIT VAPI, CIRCLE VS GUJARAT THEMIS BIOSYN LTD. 2 FOR PRECEDING ASSESSMENT YEAR 2005-06 IN ITA NO.237 8/AHD/2008 AND THE TRIBUNAL DISMISSED THE DEPARTMENTAL APPEAL VIDE ORDER DATED 30-07-2010. THE FINDINGS OF THE TRIBUNAL IN PARA 14 AND 15 ARE REPRODUCES AS UNDER: 14. WE HAVE CAREFULLY CONSIDERED ARGUMENTS OF BOTH THE SIDES AND PERUSED THE MATERIAL PLACED BEFORE US. W E FIND THAT THE AO HAS MADE THE ADDITION MERELY ON THE GROUND T HAT THE CREDITORS ARE OUTSTANDING FOR MORE THAN THREE YEARS . THOUGH, THE AO HAS NOT MENTIONED THE SECTION UNDER WHICH TH E ADDITION IS MADE, HOWEVER, OBVIOUSLY, THE ADDITION IS MADE UNDER SECTION 41(1) BECAUSE THE AO PRESUMED THAT AF TER MORE THAN THREE YEARS, THE LIABILITY HAS CEASED. WE FIND THIS ISSUE IS SQUARELY COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF THE HONBLE APEX COURT IN THE CASE OF S UGAULI SUGAR WORKS P. LTD. (SUPRA) WHEREIN THEIR LORDSHIPS OF THE HONBLE APEX COURT HELD AS UNDER: .. THE PRINCIPLE THAT EXPIRY OF THE PERIOD OF LIMI TATION PRESCRIBED UNDER THE LIMITATION ACT COULD NOT EXTIN GUISH THE DEBT BUT IT WOULD ONLY PREVENT THE CREDITOR FROM EN FORCING THE DEBT. HAS BEEN WELL SETTLED. IF THAT PRINCIPLE IS APPLI ED, IT IS CLEAR THAT MERE ENTRY IN THE BOOKS OF ACCOUNT OF TH E DEBTOR MADE UNILATERALLY WITHOUT ANY ACT ON THE PART OF TH E CREDITOR WILL NOT ENABLE THE DEBTOR TO SAY THAT THE LIABILITY HAS COME TO AN END. APART FROM THAT, THAT WILL NOT BY ITSELF CONF ER ANY BENEFIT ON THE DEBTOR AS CONTEMPLATED BY THE SECTION. (EMP HASIS IS ADDED) THUS, THEIR LORDSHIPS OF THE APEX COURT HELD THAT O N EXPIRY OF PERIOD OF LIMITATION, PRESCRIBED UNDER THE LIMITATI ON ACT, DOES NOT EXTINGUISH THE DEBT BUT ONLY PREVENT THE CREDIT OR FROM ENFORCING THE DEBT. IN THE CASE OF THE ASSESSEE, T HOUGH THE PERIOD OF LIMITATION HAS EXPIRED THAT ITSELF WILL N OT EXTINGUISH THE DEBT. ADMITTEDLY, THERE IS NO REMISSION OR CESSATI ON OF THE LIABILITY FROM THE CREDITORS. IT IS ALSO STATED BY THE LEARNED COUNSEL THAT THE ASSESSEE STILL OWES THE LIABILITY AND IT COULD NOT PAY THE SAME DUE TO BAD FINANCIAL CONDITION. F ROM THE ORDER OF THE CIT(A) WE ALSO FIND THAT THE ASSESSEE IS A SICK COMPANY UNDER THE BIFR. ITA NO.1780/AHD/2010 ACIT VAPI, CIRCLE VS GUJARAT THEMIS BIOSYN LTD. 3 15. IN VIEW OF THE ABOVE, WE ARE OF THE OPINION THA T THE ADDITION MADE BY THE AO AMOUNTING TO RS.12,19,246/- WAS NOT JUSTIFIED AND THE CIT(A) RIGHTLY DELETED THE SAME. WE THEREFORE UPHOLD THE ORDER OF THIS CIT(A) ON THIS P OINT AND REJECT THE GROUND NO.4 OF THE REVENUES APPEAL. 3. ON GROUND NO.2 OF THE APPEAL, THE ASSESSEE RELIE D UPON THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE O F VINAY CEMENT LTD. 213 CTR 268 IN WHICH IT WAS HELD THAT CONTRIBUTION MADE TOWARDS PROVIDENT FUND ETC. AFTER THE CLOSE OF THE ACCOUNTI NG PERIOD BUT BEFORE THE DUE DATE OF FILING OF THE RETURN OF INCOME ARE ALLO WABLE DEDUCTION U/S 43B (B) OF THE IT ACT. THE AO HOWEVER, DISALLOWED T HE ABOVE AMOUNT BECAUSE OF THE LATE PAYMENT OF PF AND ESI AND MADE THE ADDITION. THE LEARNED CIT(A) FOLLOWING THE DECISION OF THE HONBL E SUPREME COURT IN THE CASE OF VINAY CEMENT LTD. (SUPRA) AND THE DECISION OF THE HONBLE GUJARAT HIGH COURT IN THE CASE OF ALEMBIC GLASS IND USTRIES LTD. 149 TAXMAN 15 ALLOWED THE APPEAL OF THE ASSESSEE BECAUS E THE PAYMENTS WERE MADE BEFORE FILING OF THE RETURN OF INCOME. TH E LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT SIMILAR ISSUE WAS ALSO CONSIDERED IN THE CASE OF THE SAME ASSESSEE IN THE PRECEDING ASSESSMENT YE AR IN ITA NO.2378/AHD/2008 (SUPRA) AND THE APPEAL OF THE REVE NUE HAS BEEN DISMISSED. THE FINDINGS GIVEN IN PARA 5 OF THE ORDE R OF THE TRIBUNAL ARE REPRODUCED AS UNDER: 5. WE FIND THAT THE HON'BLE DELHI HIGH COURT IN THE CASE OF P.M. ELECTRONICS LTD. (SUPRA) HAS DECIDED THIS ISSU E OF PAYMENT OF EMPLOYEES CONTRIBUTION TOWARDS PROVIDENT FUND AFTER CONSIDERING THE DECISION OF HON'BLE APEX COUR T IN THE CASE OF VINAY CEMENT (SUPRA) AND ALSO DISTINGUISHED THE CASE LAW REFERRED BY THE LD. DR OF BOMBAY HIGH COURT IN PAMWI TISSUES LTD. (SUPRA). EVEN NOW THIS ISSUE HAS BEEN CONSIDERED BY HONBLE APEX COURT IN THE CASE OF CIT VS. ALOM EXTRUSIONS LTD. (2009) 319 ITR 306 (SC) / (2009) 18 5 TAXMAN 416 (SC), WHEREIN, IT IS HELD THAT CONTRIBUTION T O PROVIDENT FUND, MADE BEFORE DUE DATE OF FILING OF RETURN ALLO WABLE AS DEDUCTION. THE DELETION OF THE SECOND PROVISO TO SE CTION 43B, AND THE AMENDMENT TO THE FIRST PROVISO, BY THE FINA NCE ACT, ITA NO.1780/AHD/2010 ACIT VAPI, CIRCLE VS GUJARAT THEMIS BIOSYN LTD. 4 2003 WAS TO OVERCOME IMPLEMENTATION PROBLEMS. CONSEQUENTLY, THE AMENDMENTS, THOUGH MADE APPLICABL E BY PARLIAMENT ONLY WITH EFFECT FROM 1-4-2004, WERE CUR ATIVE IN NATURE AND WOULD APPLY RETROSPECTIVELY W.E.F. 1-4-1 988. ACCORDINGLY, FOLLOWING APEX COURT IN THE CASE OF AL OM EXTRUSIONS LTD. (SUPRA) AND DELHI HIGH COURT IN P.M . ELECTRONICS LTD. (SUPRA), WE DISMISS THIS GROUND OF THE REVENUE. 4. THE LEARNED DR DID NOT DISPUTE THE ABOVE FACT TH AT IN EARLIER YEAR BOTH THE GROUNDS HAVE BEEN DISMISSED BY THE TRIBUNA L IN DEPARTMENTAL APPEAL VIDE ORDER DATED 30-07-2010. 5. IT IS, THEREFORE, ADMITTED FACT THAT THE ISSUE I S COVERED IN FAVOUR OF THE ASSESSEE BY THE ORDER OF THE TRIBUNAL IN THE CA SE OF THE SAME ASSESSEE FOR PRECEDING ASSESSMENT YEAR. BY FOLLOWIN G THE SAME DECISION OF THE TRIBUNAL, WE DISMISS THE DEPARTMENTAL APPEAL ON BOTH THE GROUNDS. 6. IN THE RESULT, THE DEPARTMENTAL APPEAL IS DISMIS SED. ORDER PRONOUNCED IN THE OPEN COURT ON 22-09-2010. SD/- SD/- (D. C. AGRAWAL) ACCOUNTANT MEMBER (BHAVNESH SAINI) JUDICIAL MEMBER DATE : 22-09-2010 LAKSHMIKANT/- COPY OF THE ORDER FORWARDED TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT CONCERNED 4. THE CIT(A) CONCERNED 5. THE DR, ITAT, AHMEDABAD 6. GUARD FILE BY ORDER D Y. REGISTRAR, ITAT, AHMEDABAD