ACIT, Trichur V. M/s.Kerala Feeds Ltd, Trichur

ITA 180/COCH/2013

• Counselvise Citation: [2013] 120 COUNSELVISE.COM (IT) 4723 (ITAT-COCHIN)
• Duration Of Justice: 5 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-09-2013
• Appeal Filed By: Department
• Bench Allotted: DB
• Next Hearing Date: 18-07-2013
• Assessment Year: 2009-2010
• Appeal Filed On: 12-04-2013
• Court: TRIBUNAL
• Department Lawyers: S VIJAYAPRABHA
• Assessee Lawyers: C A VARGHESE
• Keywords: Competent authority
• Section: 43B

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL COCHIN BENCH, COCHIN BEFORE S/SHRI N.R.S.GANESAN, JM AND B.R.BASKAR AN, AM I.T.A. NOS. 179 & 180/COCH/2013 ASSESSMENT YEARS : 2008-09 & 2009-10 THE ASSISTANT COMMISSIONER OF INCOME-TAX, CIRCLE-1(1),THRISSUR. VS. M/S. KERALA FEEDS LTD., KALLETTUMKARA, THRISSUR-680 683. [PAN: AAACK 9796N] (REVENUE-APPELLANT) (ASSESSEE-R ESPONDENT) REVENUE BY SMT. S. VIJAYAPRABHA, JR. DR ASSESSEE BY SHRI C.A.VARGHESE, CA DATE OF HEARING 18/07/2013 DATE OF PRONOUNCEMENT 27/09/2013 O R D E R PER B.R.BASKARAN, ACCOUNTANT MEMBER: BOTH THE APPEALS FILED BY THE REVENUE ARE DIRECTED AGAINST THE COMMON ORDER DATED 22-01-2013 PASSED BY THE LD. CIT(A)-V, KOCHI AND THEY RELATE TO THE ASSESSMENT YEARS 2008-09 AND 2009-10. 2. THE DISALLOWANCE OF CLAIM MADE UNDER THE HEAD P ROVISION OF LEAVE ENCASHMENT AND PROVISION OF GRATUITY IN BOTH THE YEARS, HAVING BEEN REVERSED BY THE LD. CIT(A), THE REVENUE HAS FILED THESE APPE ALS BEFORE US IN BOTH THE YEARS. 3. THE FACTS RELATING TO THE CASE ARE STATED IN BRI EF. THE ASSESSEE IS A KERALA STATE PUBLIC SECTOR UNDERTAKING MANUFACTURING CATTL E FEEDS. IN BOTH THE YEARS, THE ASSESSEE CLAIMED DEDUCTION OF PROVISION CREATED FOR LEAVE ENCASHMENT AND GRATUITY AS DETAILED BELOW:- NATURE OF CLAIM 2008-09 2009-10 PROVISION FOR LEAVE ENCASHMENT 983019 1444179 PROVISION FOR GRATUITY 2298789 997012 I.T.A. NOS.179&180/COCH/2013 2 4. THE CLAIM OF PROVISION FOR LEAVE ENCASHMENT WA S DISALLOWED BY THE AO U/S. 43B(F) OF THE ACT, SINCE IT WAS NOT PAID BY TH E DUE DATE FOR FILING RETURN OF INCOME. THE ASSESSEE, INVITED THE ATTENTION OF THE AO TO THE DECISION RENDERED BY THE HONBLE CALCUTTA HIGH COURT IN THE CASE OF EX IDE INDUSTRIES LTD. 292 ITR 470, WHEREIN THE HONBLE HIGH COURT HAD HELD THAT P ROVISION OF SECTION 43B(F) AS UNCONSTITUTIONAL. ACCORDINGLY, IT WAS CONTENDED BY THE ASSESSEE THAT THE AO WAS NOT JUSTIFIED IN INVOKING THE PROVISIONS OF SEC. 43 B FOR DISALLOWING THE CLAIM OF PROVISION FOR LEAVE ENCASHMENT. HOWEVER, THE ASSESS ING OFFICER DID NOT ACCEPT THE SAID CONTENTION ON THE REASONING THAT THE REVEN UE HAS FILED SLP BEFORE THE HONBLE APEX COURT. 5. THE CLAIM OF PROVISION FOR GRATUITY WAS DISALL OWED BY THE ASSESSING OFFICER ON THE GROUND THAT THE GRATUITY FUND WAS NO T APPROVED BY THE COMMISSIONER OF INCOME-TAX. THOUGH THE ASSESSEE CON TENDED THAT THE APPLICATION FILED BY THE ASSESSEE SEEKING APPROVAL OF THE COMPETENT AUTHORITY IS PENDING AS ON THE DATE OF THE ASSESSMENT, THE ASSES SING OFFICER PROCEEDED TO DISALLOW THE CLAIM WITH THE OBSERVATION THAT THE SA ME WILL BE REVIEWED AS AND WHEN THE APPROVAL OF THE COMPETENT AUTHORITY IS REC EIVED. 6. IN THE APPELLATE PROCEEDINGS, THE LD. CIT(A) ALL OWED THE CLAIM OF THE PROVISION OF LEAVE ENCASHMENT BY FOLLOWING THE DECI SION DATED 07-06-2012 OF THE HONBLE JURISDICTIONAL KERALA HIGH COURT IN THE CAS E OF CIT VS. HINDUSTHAN LATEX LTD. IN I.T.A. 64/2012 WHEREIN THE HONBLE HIGH COU RT HAD CONCURRED WITH THE VIEW EXPRESSED BY THE HONBLE HIGH COURT OF CALCUTT A IN THE CASE OF EXIDE INDUSTRIES LTD.(REFERRED SUPRA). WITH REGARD TO TH E CLAIM OF PROVISION FOR GRATUITY, IT WAS CONTENDED BEFORE THE LD. CIT(A) TH AT THE APPROVAL SHOULD BE DEEMED TO HAVE BEEN GRANTED, SINCE THE APPLICATION FILED BY IT BEFORE THE COMPETENT HAVE NOT BEEN REJECTED BY THE COMPETENT AUTHORITY SO FAR. THE LD. CIT(A) OPINED THAT IT WAS NOT FAIR TO DISALLOW THE CLAIM OF THE ASSESSEE WHEN THE APPLICATION IS PENDING BEFORE THE COMPETENT AUTHORI TY. ACCORDINGLY, THE LD. I.T.A. NOS.179&180/COCH/2013 3 CIT(A) ALLOWED THE CLAIM MADE BY THE ASSESSEE UNDER BOTH THE HEADS IN BOTH THE YEARS. AGGRIEVED, THE REVENUE HAS FILED THESE APPE ALS BEFORE US. 7. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERU SED THE RECORD. WITH REGARD TO THE CLAIM OF PROVISION FOR LEAVE ENCASHMENT, T HE LD COUNSEL PLACED RELIANCE ON THE DECISION OF HONBLE KERALA HIGH COURT IN THE CASE OF HINDUSTAN LATEX LTD (SUPRA) AND ALSO ON THE DECISION RENDERED BY HONBL E RAJASTHAN HIGH COURT IN THE CASE OF CIT VS. RAJ. STATE BRIDE AND CONSTRUCTI ON CORPORATION LTD (2012)(346 ITR 53). WE NOTICE THAT THE RAJASTHAN HIGH COURT, IN THE ABOVE CITED CASE, HAS CONSIDERED THE CLAIM OF DEDUCTION OF PROVISION FOR LEAVE ENCASHMENT FOR ASSESSMENT YEAR 2000-01. HOWEVER, THE PROVISIONS O F SEC. 43B(F) WAS INSERTED INTO THE ACT BY FINANCE ACT,2001 W.E.F. 1.4.2002, W HICH COULD NOT HAVE BEEN CONSIDERED BY HONBLE RAJASTHAN HIGH COURT. HENCE, RELIANCE PLACED BY THE ASSESSEE ON THE SAID DECISION MAY NOT BE USEFUL FOR THE YEAR UNDER CONSIDERATION. 8. WE HAVE ALSO CAREFULLY GONE THROUGH THE DECI SION RENDERED BY THE JURISDICTIONAL KERALA HIGH COURT IN THE CASE OF HIN DUSTAN LATEX LTD (SUPRA) AND NOTICE THAT THE HIGH COURT HAS ALLOWED THE CLAIM OF THE ASSESSEE ON TWO GROUNDS VIZ., (A) THE HONBLE KERALA HIGH COURT, IN PARA 5 OF ITS ORDER, HAS CONCURRED WITH THE VIEW EXPRESSED BY THE HONBLE CALCUTTA HIG H COURT IN THE CASE OF EXIDE INDUSTRIES LTD (SUPRA) THAT CLAUSE (F) OF SECT ION 43B IS UNCONSTITUTIONAL. (B) THE DECISION RENDERED BY THE HONBLE CALCUTTA HIGH COURT HAS NOT BEEN CHALLENGED BEFORE THE SUPREME COURT. (PARA 5 A ND 8). ACCORDINGLY, THE HONBLE KERALA HIGH COURT, BY FOLLOWING THE DEC ISION RENDERED BY THE HONBLE SUPREME COURT IN THE CASE OF BERGER PAINTS LTD VS. CIT (266 ITR 99), HAS FURTHER HELD THAT THE REVENUE HAVING NOT C HALLENGED THE CORRECTNESS OF THE LAW LAID DOWN BY THE CALCUTTA HI GH COURT, IT IS NOT OPEN TO THE REVENUE TO CHALLENGE ITS CORRECTNESS IN THE CASE OF ANOTHER ASSESSEE. I.T.A. NOS.179&180/COCH/2013 4 9. HOWEVER, WE NOTICE THAT THE DEPARTMENT HAS C HALLENGED THE DECISION RENDERED BY THE HONBLE CALCUTTA HIGH COURT IN THE CASE OF EXIDE INDUSTRIES LTD, BY FILING APPEAL BEFORE HONBLE SUPREME COURT AND THE HONBLE APEX COURT HAS STAYED THE JUDGMENT OF THE HONBLE CALCUT TA HIGH COURT. IN FACT, THE HONBLE APEX COURT HAS PASSED TWO INTERIM ORDER S IN THIS REGARD, WHICH ARE DETAILED BELOW:- (A) THE FIRST ORDER WAS PASSED ON 08-09-2008 IN TH E PETITION FOR SPECIAL LEAVE TO APPEAL (CIVIL) CC 12060/2008 IN THE CASE OF CIT VS. EXIDE INDUSTRIES LTD (FROM THE JUDGMENT AND ORDER DATED 2 7-6-2007 IN APO NO.301/2005 OF THE HIGH COURT OF CALCUTTA). THE OR DER READS AS UNDER:- UPON HEARING COUNSEL THE COURT MADE THE FOLLOWING ORDER ISSUE NOTICE. IN THE MEANTIME, THERE SHALL BE STAY OF THE IMPUGNE D JUDGMENT, UNTIL FURTHER ORDERS. (B) THE SECOND ORDER WAS PASSED ON 08-05-2009 IN T HE PETITION FOR SPECIAL LEAVE TO APPEAL (CIVIL) NO(S) 22889/2008 (FROM THE VERY SAME JUDGMENT OF THE HIGH COURT OF CALCUTTA). THE ORDER READS AS UN DER:- PENDING HEARING AND FINAL DISPOSAL OF THE CIVIL AP PEAL, DEPARTMENT IS RESTRAINED FROM RECOVERING PENALTY AND INTEREST WHI CH HAS ACCRUED TILL DATE. IT IS MADE CLEAR THAT AS FAR AS THE OUTSTAND ING INTEREST DEMAND AS OF DATE IS CONCERNED, IT WOULD BE OPEN TO THE DEPAR TMENT TO RECOVER THAT AMOUNT IN CASE CIVIL APPEAL OF THE DEPARTMENT IS AL LOWED. WE FURTHER MAKE IT CLEAR THAT THE ASSESSEE WOULD, D URING THE PENDENCY OF THIS CIVIL APPEAL, PAY TAX AS IF SECTIO N 43B(F) IS ON THE STATUTE BOOK BUT AT THE SAME TIME IT WOULD BE E NTITLED TO MAKE A CLAIM IN ITS RETURNS. THUS, IT IS NOTICED THAT THE HONBLE APEX COURT HAS NOT ONLY STAYED THE OPERATION OF THE HONBLE CALCUTTA HIGH COURT IN THE CASE OF EX IDE INDUSTRIES LTD (SUPRA), BUT ALSO OBSERVED THAT THE ASSESSEE WOULD, DURING T HE PENDENCY OF THIS CIVIL APPEAL, PAY TAX AS IF SECTION 43B(F) IS ON THE STAT UTE BOOK. THOUGH THE INTERIM ORDERS WERE PASSED BY THE HONBLE APEX COURT IN THE YEARS 2008/2009, IT WAS NOT BROUGHT TO THE NOTICE OF HONBLE JURISDICTIONAL HIGH COURT. WE FURTHER NOTICE I.T.A. NOS.179&180/COCH/2013 5 THAT THE HONBLE SUPREME COURT HAS MODIFIED THE DEC ISION RENDERED IN THE CASE OF BERGER PAINTS (SUPRA) IN ITS SUBSEQUENT DECISION IN THE CASE OF GANGADHARAN (304 ITR 61). THE OPERATIVE PART OF THE SAID DECIS ION READS AS UNDER:- IN ANSWERING THE REFERENCE, WE HOLD THAT MERELY BE CAUSE IN SOME CASES THE REVENUE HAS NOT PREFERRED APPEAL THAT DOES NOT OPERATE AS A BAR FOR THE REVENUE TO PREFER AN APPEAL IN ANOTHER CASE WHE RE THERE IS JUST CAUSE FOR DOING SO OR IT IS IN PUBLIC INTEREST TO DO SO O R FOR A PRONOUNCEMENT BY THE HIGHER COURT WHEN DIVERGENT VIEWS ARE EXPRESSED BY THE TRIBUNALS OR THE HIGH COURTS. 10. WE ALSO NOTICE THAT THE CALCUTTA BENCH OF TR IBUNAL HAS CONSIDERED AN IDENTICAL ISSUE IN THE CASE OF S.R BATLIBOY & CO. I N ITA NO.1598/KOL/2011 AND THE TRIBUNAL, VIDE ITS DECISION DATED 13-03-2012, HAS S ET ASIDE THE MATTER TO THE FILE OF THE AO WITH THE DIRECTION TO CONSIDER THE ISSUE AFRESH AS PER THE DECISION OF HONBLE APEX COURT IN THE CASE OF EXIDE INDUSTRIES L TD (SUPRA). ACCORDINGLY, WE SET ASIDE THE ORDERS OF LD CIT(A) ON THIS ISSUE IN BOTH THE YEARS UNDER CONSIDERATION AND RESTORE THEM TO THE FILE OF THE AO WITH THE DIRECTION TO EXAMINE THE ISSUE AFRESH IN THE LIGHT OF DISCUSSION S MADE SUPRA. 11. THE NEXT ISSUE RELATES TO THE DISALLOWANCE O F CLAIM OF PROVISION FOR GRATUITY. IT IS NOTICED THAT THE GRATUITY FUND TR UST HAS TIED UP WITH LIC. HOWEVER, IT IS AN ADMITTED FACT THAT THE ASSESSEE H AD FILED APPLICATION BEFORE THE COMPETENT AUTHORITY SEEKING APPROVAL OF THE GRATUIT Y FUND, BUT THE RESULT OF THE SAME WAS NOT KNOWN. THERE IS NO DISPUTE WITH REGAR D TO THE FACT THAT THE CONTRIBUTION MADE TO APPROVED GRATUITY FUND ONLY IS ALLOWABLE U/S 36(1)(V) R.W.S. 40A(7) OF THE ACT. HOWEVER, IN THE INSTANT CASE, THE FATE OF APPLICATION FILED BY THE ASSESSEE SEEKING APPROVAL IS NOT KNOWN . WE NOTICE THAT THE AO HAS MADE THE DISALLOWANCE PROVISIONALLY WITH THE RIDER THAT THE SAID DISALLOWANCE WOULD BE REVIEWED ON RECEIPT OF APPROVAL FROM THE C OMPETENT AUTHORITY. WHEN THE AO IS ACCEPTING THE FACT THAT THE ASSESSEE HAS FILED APPLICATION AND THE SAME IS PENDING BEFORE THE COMPETENT AUTHORITY, IT MAY N OT BE JUSTIFIABLE TO DISALLOW THE CLAIM WITHOUT ASCERTAINING THE FATE OF THE SAID APPLICATION. BEFORE US, THE LD COUNSEL FOR THE ASSESSEE COULD NOT EXPLAIN ABOUT TH E STEPS TAKEN BY THE ASSESSEE I.T.A. NOS.179&180/COCH/2013 6 TO PURSUE THE APPLICATION FILED BY IT BEFORE THE CO MPETENT AUTHORITY. UNDER THESE CIRCUMSTANCES, WE ARE UNABLE TO EXPRESS ANY OPINION ON THIS ISSUE AND ACCORDINGLY, IN OUR VIEW, THIS MATTER ALSO REQUIRES FRESH EXAMINATION AT THE END OF THE AO BY DULY CONSIDERING THE FATE OF APPLICATI ON, REFERRED ABOVE. ACCORDINGLY, WE SET ASIDE THE ORDERS OF LD CIT(A) O N THIS ISSUE IN BOTH THE YEARS AND RESTORE THEM TO THE FILE OF THE AO WITH THE DIR ECTION TO EXAMINE THE ISSUE AFRESH BY DULY ASCERTAINING THE FATE OF APPLICATION FILED BEFORE THE COMPETENT AUTHORITY SEEKING APPROVAL OF THE GRATUITY FUND. T HE ASSESSEE IS ALSO DIRECTED TO PURSUE THE MATTER WITH THE OFFICE OF THE COMPETENT AUTHORITY AND FURNISH THE DETAILS THEREOF TO THE ASSESSING OFFICER. 12. IN THE RESULT, THE APPEALS FILED BY THE REV ENUE ARE TREATED AS ALLOWED FOR STATISTICAL PURPOSES. PRONOUNCED ACCORDINGLY ON 27-09-2 013. SD/- SD/- (N.R.S.GANESAN) (B.R.BASKARAN) JUDICIAL MEMBER ACCOUNTANT MEMBER PLACE: KOCHI DATED: 27 TH SEPTEMBER, 2013 GJ COPY TO: 1. M/S. KERALA FEEDS LTD., KALLETTUMKARA, THRISSUR- 680 683. 2. THE ASSISTANT COMMISSIONER OF INCOME-TAX, CIRCLE -1(1), THRISSUR. 3. THE COMMISSIONER OF INCOME-TAX(APPEALS)-V, KOCHI . 4. THE COMMISSIONER OF INCOME-TAX, THRISSUR. 5. D.R., I.T.A.T., COCHIN BENCH, COCHIN. 6. GUARD FILE. BY ORDER (ASSISTANT REGISTRAR) I.T.A.T, COCHIN