Khaitan India Limited, Kolkata V. ACIT, Circle - 11, Kolkata

ITA 1841/KOL/2008

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 75075 (ITAT-KOLKATA)
• Duration Of Justice: 5 year(s) 4 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-02-2014
• Appeal Filed By: Assessee
• Bench Allotted: A
• Next Hearing Date: 23-08-2011
• Assessment Year: 2003-2004
• Appeal Filed On: 24-09-2008
• Court: TRIBUNAL
• Department Lawyers: KALYAN NATH
• Keywords: Period of limitation; Bad and doubtful debts
• Section: 43B; 143(3); 14A; 115JB; 263

Judgement Text

, A , IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH: KOL KATA () BEFORE , /AND . . . . ' '' ''# '#'# '#, $% ) [BEFORE SHRI MAHAVIR SINGH, JM & SHRI ABRAHAM P. GEORGE, AM] & & & & / I.T.A NOS. 1841 TO 1843/KOL/2008 '( )* '( )* '( )* '( )*/ // / ASSESSMENT YEARS: 2003-04 & 2005-06 KHAITAN INDIA LTD. VS. ASSISTANT COMMISSIONER OF INCOME-TAX, (PAN:AABCK2326B) CIRCLE-11, KOLKATA. (,- /APPELLANT ) (./,-/ RESPONDENT ) & & & & & / I.T.A NOS. 216 & 217/KOL/2011 '( )* '( )* '( )* '( )*/ // / ASSESSMENT YEARS: 2006-07 & 2007-08 & & & & & / I.T.A NO. 1866/KOL/2008 '( )* '( )* '( )* '( )*/ // / ASSESSMENT YEAR: 2004-05 & & & & & / I.T.A NO. 215/KOL/2011 '( )* '( )* '( )* '( )*/ // / ASSESSMENT YEAR: 2004-05 DEPUTY COMMISSIONER OF INCOME-TAX, VS. M/S. KHAIT AN INDIA LTD. CIRCLE-11, KOLKATA. (,- /APPELLANT ) (./,-/ RESPONDENT ) DATE OF HEARING: 31.01.2014 DATE OF PRONOUNCEMENT: 13.02.2014 FOR THE ASSESSEE: SHRI SANJAY BHATTACHARYA, FCA FOR THE REVENUE: SHRI KALYAN NATH, JCIT, SR. DR $0 / ORDER PER SHRI MAHAVIR SINGH, JM: THESE THREE APPEALS BEING ITA NOS.1841 TO 1843/K/20 08 BY ASSESSEE ARE ARISING OUT OF SEPARATE ORDERS OF CIT(A)-XI, KOLKATA IN APPEAL NOS . 174/CIT(A)-XI/CIR-11/05-06 DATED 08.07.2008, APPEAL NO. 195/CIT(A)-XI/CIR-11/06-07 D ATED 21.07.2008 AND APPEAL NO. 156/CIT(A)-XI/CIR-11/07-08 DATED 25.07.2008 RESPECT IVELY. ITA NO.1866/K/2008 BY REVENUE IS ARISING OUT OF ORDER OF CIT(A)-XI, KOLKATA IN AP PEAL NO. 195/CIT(A)-XI/CIR-11/06-07 DATED 2 ITA NOS. 1841-1843/K/2008 & 215 TO 217/K/2011 & 1866/K/2008 KHAITAN INDIA LTD. , AY:2003-04 TO 2007-08 21.07.2008 ASSESSMENTS WERE FRAMED SEPARATELY BY ACIT, CIRCLE-11, KOLKATA U/S. 143(3) OF THE INCOME-TAX ACT, 1961 (HEREINAFTER REFERRED TO A S THE ACT) FOR ASSESSMENT YEARS 2003-04 TO 2005-06 VIDE HIS ORDERS DATED 17.02.2006, 29.12. 2006 AND 31.12.2007 RESPECTIVELY. THREE APPEALS BEING ITA NOS.215 TO 217/K/2011 BY REVENUE ARE ARISING OUT OF SEPARATE ORDERS OF CIT(A)-XI, KOLKATA IN APPEAL NOS. 809/CIT(A)/XII/CI R-11/09-10 DATED 23.11.2010, APPEAL NO. 343/CIT(A)/XII/CIR-11/09-10 DATED 22.11.2010 AN D APPEAL NO.810/CIT(A)/XII/CIR-11/09- 10 DATED 23.11.2010. ASSESSMENTS WERE FRAMED SEPARA TELY BY DCIT, CIRCLE-11, KOLKATA U/S. 263 OF THE ACT FOR ASSESSMENT YEAR 2004-05, U/S. 14 3(3) OF THE ACT FOR AYS. 2006-07 AND 2007- 08 VIDE HIS ORDERS DATED 24.12.2009, 31.12.2008 AND 29.12.2009 RESPECTIVELY. 2. AT THE OUTSET, IT IS TO BE MENTIONED THAT REGIST RY HAS BROUGHT TO OUR NOTICE THAT APPEALS FOR AYS 2003-04 AND 2004-05 FILED BY ASSESSEE ARE D ELAYED BY ONE DAY AND ASSESSEE HAS FILED CONDONATION PETITION SUPPORTED BY AFFIDAVIT. LD. C OUNSEL FOR THE ASSESSEE SHRI S. BHATTACHARYA STATED THAT THE IMPUGNED ORDER PASSED BY CIT(A) U/S . 250 READ WITH SECTION 143(3) DATED 8 TH JULY, 2008 SERVED ON ASSESSEE ON 25.07.2008 AND APP EAL WAS FILED ON 23.09.2008. LD. COUNSEL EXPLAINED THAT THE APPEAL AGAINST THE IMPUGNED ORDE RS WAS TO BE FILED ON 23.09.2008 WITHIN THE STATUTORY PERIOD OF LIMITATION OF 60 DAYS AND THE S AME WAS FILED ON THE VERY LAST DAY OF LIMITATION. ACCORDINGLY, THERE IS NO DELAY ACCORDI NG TO HIM. BUT EVEN IN CASE THERE IS DELAY OF ONE DAY, THIS IS UNINTENTIONAL AND BEYOND THE CONTR OL OF MANAGEMENT. WE FEEL THAT THERE IS NO DELAY AND REVENUE HAS NOT OBJECTED FOR ADJUDICATION OF THESE APPEALS. ACCORDINGLY, THERE IS NO QUESTION OF NON-ADMISSION OF THE APPEALS. ACCORDIN GLY, WE TREAT IT AS WITHIN TIME. 3. THE FIRST COMMON ISSUE IN ASSESSEES APPEALS IN ITA NOS.1841 TO 1843/K/2008 FOR AYS 2003-04 TO 2005-06 IS AS REGARDS TO THE ORDER OF CI T(A) CONFIRMING THE DISALLOWANCE OF INTEREST PAYABLE ON MONEY BORROWED FROM GOVT. OF WEST BENGAL AND SUGAR DEVELOPMENT FUND ON THE GROUND THAT THE INTEREST DOES NOT REPRESENT AS AN A SCERTAINED LIABILITY. FOR THIS, ASSESSEE HAS RAISED FOLLOWING GROUND NOS. 1 TO 3 IN AY 2003-04, GROUND NOS. 1 TO 2 IN AY 2004-05 AND GROUND NO. 6 IN AY 2005-06. AY 2003-04: I. THAT THE LD. CIT(A), KOLKATA ERRED IN ARBITRARILY A ND WRONGLY CONFIRMING THE DISALLOWANCE OF RS.52,16,428/- REPRESENTING INTERES T PAYABLE ON MONIES BORROWED FROM THE GOVERNMENT OF WEST BENGAL ON THE ALLEGED GROUND THAT IT DID NOT REPRESENT AN ASCERTAINED LIABILITY FOR THE YE AR UNDER APPEAL. II. THAT THE LD. CIT(A) ERRED IN CONFIRMING DISALLOWANC E OF RS.18,15,870/- REPRESENTING INTEREST PAYABLE BY THE APPELLANT ASSE SSEE COMPANY TO SUGAR 3 ITA NOS. 1841-1843/K/2008 & 215 TO 217/K/2011 & 1866/K/2008 KHAITAN INDIA LTD. , AY:2003-04 TO 2007-08 DEVELOPMENT FUND ON THE ALLEGED GROUND THAT IT DID NOT REPRESENT AN ASCERTAINED LIABILITY FOR THE YEAR UNDER APPEAL. III. THAT THE OBSERVATIONS MADE AS WELL AS THE FINDINGS RECORDED AND CONCLUSIONS DRAWN BY THE LD. CIT(A) IN HIS IMPUGNED ORDER DATED 25 TH JULY, 2008 IN RESPECT OF EACH OF THE SAID TWO ISSUES, NOW UNDER APPEAL, A RE HOLLY AGAINST THE FACTS AND EVIDENCES ON RECORD, UNREASONABLE AND/OR OTHERWISE PERVERSE. AY 2004-05: I. THAT THE LD. CIT(A), KOLKATA ERRED IN ARBITRARILY A ND WRONGLY CONFIRMING THE DISALLOWANCE OF RS.60,32,722/- REPRESENTING INTERES T PAYABLE ON MONIES BORROWED FROM THE GOVERNMENT OF WEST BENGAL ON THE ALLEGED GROUND THAT IT DID NOT REPRESENT AN ASCERTAINED LIABILITY FOR THE YE AR UNDER APPEAL. II. THAT THE LD. CIT(A) ERRED IN CONFIRMING DISALLOWANC E OF RS.18,96,475/- REPRESENTING INTEREST PAYABLE BY THE APPELLANT ASSE SSEE COMPANY TO SUGAR DEVELOPMENT FUND ON THE ALLEGED GROUND THAT IT DID NOT REPRESENT AN ASCERTAIED LIABILITY FOR THE YEAR UNDER APPEAL. AY 2005-06: I. THAT THE LD. CIT(A) ERRED IN CONFIRMING DISALLOWANC E OF RS.21,81,725/- REPRESENTING INTEREST PAYABLE BY THE APPELLANT ASSE SSEE COMPANY TO SUGAR DEVELOPMENT FUND ON THE ALLEGED GROUND THAT IT DID NOT REPRESENT AN ASCERTAINED LIABILITY FOR THE YEAR UNDER APPEAL. 4. AS THE ABOVEMENTIONED ISSUE IS COMMON IN ALL THE THREE APPEALS, WE WILL TAKE THE FACTS AND CIRCUMSTANCES FROM THE LEAD YEAR I.E. AY 2003-0 4 IN ITA NO.1841/K/2008. BRIEFLY STATED FACTS ARE THAT THE ASSESSEE COMPANY IS ENGAGED IN T HE BUSINESS OF MARKETING OF ELECTRICAL FANS AND OTHER PRODUCTS, MANUFACTURING OF SUGAR AND AGRI CULTURAL ACTIVITIES. THE ASSESSEE FURNISHED CONSOLIDATED P&L ACCOUNT AND BALANCE SHEET ALONG WI TH THE RETURN OF INCOME FOR THE RELEVANT ASSESSMENT YEAR 2003-04 ON 28.11.2003. ASSESSMENT WAS COMPLETED U/S. 143(3) OF THE ACT. DURING THE COUSE OF ASSESSMENT PROCEEDINGS THE AO N OTED THAT THE ASSESSEE HAS CLAIMED INTEREST PAYABLE TO GOVT. OF WEST BENGAL IN ITS RETURN OF IN COME AT RS.52,16,428/- BUT THE SAME HAS NOT BEEN CONSIDERED IN THE P&L ACCOUNT IN RESPECT OF SU GUAR DIVISION OF ASSESSEE COMPANY AND THE SAME HAS NOT BEEN PAID. THE AO FURTHER NOTED T HAT THIS AMOUNT WAS DISBURSED TO THE ASSESSEE THROUGH WEST BENGAL INDUSTRIAL DEVELOPMENT CORPORLATION (WBIDC). ACCORDING TO AO, THE WBIDC IS A FINANCIAL INSTITUTION THROUGH WH ICH GOVT. OF WEST BENGAL RENDERS FINANCIAL ASSISTANCE FOR THE DEVELOPMENT OF INDUSTRIES AND SU ICH LOAN CONSTITUTES LOAN FROM FINANCIAL INSTITUTIONS ONLY. ACCORDINGLY, HE MADE DISALLOWAN CE BY INVOKING THE PROVISIONS OF SECTION 43B OF THE ACT. SIMILARLY, INTEREST PAYABLE TO SUG AR DEVELOPMENT FUND WAS ALSO DISALLOWED BY THE AO AMOUNTING TO RS.18,15,870/-. ACCORDING TO A O, SUGAR DEVELOPMENT FUND IS AGAIN A FINANCIAL INSTITUTION, WHICH LENDS MONEY FOR DEVELO PMENT OF PRODUCTION OF SUGAR. AGGRIEVED, ASSESSEE PREFERRED APPEAL BEFORE CIT(A), WHO RELYIN G ON THE DECISION OF ITAT, KOLKATA 4 ITA NOS. 1841-1843/K/2008 & 215 TO 217/K/2011 & 1866/K/2008 KHAITAN INDIA LTD. , AY:2003-04 TO 2007-08 BENCHES, KOLKATA IN ASSESSEES OWN CASE FOR EARLIER YEAR I.E. ITA NO.1194/CAL/1999 FOR AY 1995-96 DATED 04.11.2004, VIDE PARAS 9 AND 10, HELD AS UNDER: 9. THE LAST GROUND AGITATED BY THE REVENUE RELATES TO THE DISALLOWANCE U/S. 43B DELETED BY THE LEARNED CIT(A) HOLDING THE SAME AS A LOAN FR OM THE GOVT. OF WEST BENGAL AS AGAINST THE AOS TREATING THE AMOUNT BEING CAPITAL ISED NOT PAID FOR INVOKING THE PROVISIONS OF SECTION 43B. WE ARE APPRISED OF THE PART RELIEF DIRECTED BY THE LD. CIT(A) WHICH IN TURN HAS NOT BEEN AGITATED BY THE ASSESSEE BEFORE THE TRIBUNAL. IN VIEW OF THIS FACT THE AO IS DIRECTED TO DELETE THE DISALLOWANCE WITH RESPECT TO THE INTEREST REMAINING UNPAID ON ACCOUNT OF LOAN FROM THE GOVERNMENT OF WE ST BENGAL DISBURSED TO THE WEST BENGAL INDUSTRIAL DEVELOPMENT CORPORATION WHICH WAS CONSIDERED BY THE AO AS STATE FINANCIAL INSTITUTION FOR THE PURPOSE OF INVOKING THE PROVISIONS OF SECTION 43B. 10. IN THE LIGHT OF THE ABOVE, THE APPEAL FILED BY THE REVENUE FOR THE ASSESSMENT YEAR 1995-96 IS DISMISSED. THE CIT(A) DELETED THE ADDITION MADE BY AO ON THE G ROUND OF NON-PAYMENT WITHIN THE PRESCRIBED TIME U/S. 43B OF THE ACT BUT CONSIDERED ANOTHER FACT THAT THIS YEAR FACTS ARE DIFFERENT FROM THE FACTS OF ALL THE EARLIER YEARS. HE PERUSED SCHEDULE TO NOTES ON ACCOUNTS AT SR. NO. 6, WHICH READS AS UNDER: THE COMPANY HAS SUBMITTED ITS PROPOSAL FOR CONCESS ION/WAIVER OF INTEREST TO WEST BENGAL GOVERNMENT AND SUGAR DEVELOPMENT FUND. PEND ING APPROVAL OF THE SAME, INTEREST PAYABLE ON TERM LOANS FROM THEM AMOUNTING TO RS.70,32,298/- FOR THE CURRENT YEAR (PREVIOUS YEAR RS.61,23,706/-) IS NOT PROVIDED IN THE ACCOUNTS. ACCORDINGLY, PROFIT FOR THE CURRENT YEAR IS OVERSTATED BY RS.70, 32,298/- AND RESERVES BY RS.2,29,26,376/-. AND FINALLY, HE MADE DISALLOWANCE. FIRSTLY, ACCORDI NG TO CIT(A), ASSESSEE HAS NOT RECOGNISED THIS AS AN EXPENSE. SECONDLY, IT HAS MOVED AN APPL ICATION FOR WAIVER AND THIRDLY, APPLICATION FOR WAIVER WAS ACCEPTED IN LATER YEARS AND SOME OF IT WAS OFFERED FOR TAX, THOUGH NOT WHOLE OF AMOUNT. ACCORDING TO HIM, IN VIEW OF THE ABOVE FAC TS, IT IS NOT AN ASCERTAINED LIABILITY AND HENCE, IT IS NOT ALLOWABLE AT ALL. AGGRIEVED, NOW ASSESSEE IS IN APPEAL BEFORE US. 5. WE HAVE HEARD RIVAL SUBMISSIONS AND GONE THROUGH FACTS AND CIRCUMSTANCES OF THE CASE. FIRST OF ALL, BEFORE US LD. COUNSEL FOR THE ASSESSE E FILED COMPLETE DETAILS OF INTEREST PAYABLE TO WBIDC AND SUGAR DEVELOPMENT FUND. THESE DETAILS AR E AVAILABLE IN ASSESSEES PAPER BOOK AT PAGE 1 AND THE SAME READS AS UNDER: ASST.YEAR FIINANCIAL YEAR W.B.GOVT SDF TOTAL 2000-2001 1999-2000 2,879,455.41 1,730,693.15 4, 610,148.56 2001-2002 2000-2001 3,398,763.92 1,761,460.00 5, 160,223.92 2002-2003 2001-2002 4,010,587.60 2,113,118.21 6, 123,705.81 2003-2004 2002-2003 4,716,427.97 2,315,869.67 7, 032,297.64 5 ITA NOS. 1841-1843/K/2008 & 215 TO 217/K/2011 & 1866/K/2008 KHAITAN INDIA LTD. , AY:2003-04 TO 2007-08 2004-2005 2003-2004 5,658,906.10 2,270,291.34 7, 929,197.44 2005-2006 2004-2005 2,181,725.00 2,181,725.00 2006-2007 2005-2006 2,432,623.00 2,432,623.00 TOTAL 20,664.141.00 14,805,780.37 35,469.921.37 FURTHER, THE LD. COUNSEL ALSO DREW OUR ATTENTION TO INTEREST FOR WEST BENGAL GOVERNMENT LOAN YEAR WISE FROM AY 1994-95 TO 2010-11 AND DETAILS OF WAIVER OF INTEREST ON WEST BENGAL GOVT. LOAN. THE RELEVANT DETAILS ARE GIVEN IN ASSESSEES PAPER BOOK AT PAGE 2 AND THE SAME READS AS UNDER: ASSESSMENT YEAR FINANCIAL YEAR NET INTEREST PAYABLE INTEREST DEBITED IN P&L A/C INTEREST NOT PROVIDED IN BOOKS BUT DISCLOSED IN NOTES ON A/CS DEDUCTIONS CLAIMED IN RETURN DEDUCTIONS ALLOWED REMARKS 1994-1995 1993-1994 1995-1996 1994-1995 1,508,841 1,508,841 1,508,841 1,508.841 AS PER APPEAL 1996-1997 1995-1996 1,806,525 1,806,525 1,806,525 1,806,525 AS PER APPEAL 1997-1998 1996-1997 2,072,668 2,072,668 2,072,668 2,072,668 AS PER APPEAL 1998-1999 1997-1998 2,733,151 2,733,151 2,733,151 2,733.151 AS PER APPEAL 1999-2000 1998-1999 2,913,940 2,13,940 2,913,940 2 ,913,940 AS PER INTIMATION 2000-2001 1999-2000 2,879.455 2,879,455 2,879,455 2,879,455 AS PER INTIMATION 2001-2002 2000-2001 3,398,764 3,398,7640 3,398,764 3,398,764 AS PER APPEAL 2002-2003 2001-2002 4,010,588 4,010,588 4,010,588 AS PER ASSESSMENT 2003-2004 2002-2003 4,716,428 4,716,428 4,716,428 2004-2005 2003-2004 5,658,906 5,658,906 5,658,906 2005-2004 2004-2005 (20,664,141) (2,664,141) OFF ERED IN RETURN 2006-2007 2005-2006 (2,206,495) (2,206,495) (2,206 ,495) (2,206,495) LIABILITY WRITTEN BACK TOTAL 29,492,771 8,828,630 20,664,141 8,828,630 (1 ,546,704) FURTHER, LD. COUNSEL DREW OUR ATTENTION TO CALCULAT ION OF INTEREST OF WEST BENGAL GOVT. LOAN AFTER CONSIDERING WAIVER AS ON 13.05.2005 AND THE D ETAILS ARE PROVIDED BY ASSESSEES COUNSEL IN ASSESSEES PAPER BOOK AT PAGE 3 AND THE SAME READS AS UNDER: FROM TO NO OF DAYS RATE OF INTEREST ON PRI NCIPLE AMOUNT INTEREST AMOUNT 11- MAR-94 25-MAY-94 76 7.50% 5250000 81,9 86,30 26-MAR-94 31-AUG-94 98 7.50% 10500000 211,438. 36 1-SEP-94 31-MAR-95 212 7.50% 10500000 457,397.26 1-APR-95 31-MAR-96 365 7.50% 10500000 789,657.53 1-APR-96 31-MAR-98 365 7.50% 10500000 787,500.00 1-APR-97 31-MAR-98 365 7.50% 10500000 787,500.00 1-APR-98 31-MAR-99 365 7.50% 10500000 787,500.00 1-APR-99 31-MAR-00 366 7.50% 10500000 789,657.53 1-APR-00 31-MAR-01 365 7.50% 10500000 787,500.00 1-APR-01 31-MAR-02 365 7.50% 10500000 787,500.00 1-APR-02 31-MAR-03 365 7.50% 10500000 789,657.53 1-APR-04 31-MAR-05 365 7.50% 10500000 787,500.00 1-APR-05 30-JUN-05 91 7.50% 10500000 196,335.62 8,828,630.14 6 ITA NOS. 1841-1843/K/2008 & 215 TO 217/K/2011 & 1866/K/2008 KHAITAN INDIA LTD. , AY:2003-04 TO 2007-08 ANOTHER DETAILS I.E. INTEREST FOR SUGAR DEVELOPMENT FUND IS ALSO PROVIDED FOR AY 1994-95 TO 2010-11 AT ASSESSEES PAPER BOOK PAGE 4 AND ASSESSE E ALSO CERTIFIED THAT WAIVER NOT YET APPROVED. LD. COUNSEL FOR THE ASSESSEE ALSO FILED COPY OF LETTER ISSUED BY GOVT. OF WEST BENGAL, INDUSTRIAL RECONSTRUCTION DEPARTMENT DATED 16.05.19 94 AND ALSO THE COPY OF LETTER OF WBIDC REGARDING ONE TIME SETTLEMENT AGAINST THE LOAN OF R S.105 LACS. ACCORDING TO LD. COUNSEL, THESE DETAILS ARE INCORPORATED IN ABOVE CHARTS. WHEN LD. SR DR FAIRLY CONCEDED THAT THESE DETAILS ARE NOT VERIFIED BY THE AO AND EVEN CIT(A) HAS NOTED TH AT THE ASSESSEE HAS NOT RECOGNISED THIS INTEREST AS AN EXPENSES AND SECONDLY ASSESSEE HAS M OVED A WAIVER PETITION. ACCORDING TO HIM, THIS CANNOT BE CALLED AS ASCERTAINED LIABILITY. MO REOVER, ACCORDING TO HIM, THESE DETAILS NEED VERIFICATION. BUT HE COULD NOT EXPLAIN HOW THIS LIA BILITY OF INTEREST IN RESPECT OF WBIDC AND SUGAR DEVELOPMENT FUND IS NOT ASCERTAINED. 6. WE HAVE GONE THROUGH THE DETAILS OF INTEREST AS FILED BY ASSESSEE BEFORE US AND WE HAVE EXAMINED THE ISSUE. AS FAR AS THE CALCULATION OR C OMPUTATION OF INTEREST IS CONCERNED, WE FEEL THAT THIS REALLY REQUIRES VERIFICATION AT THE LEVE L OF THE AO BUT AS EXPLAINED BY THE ASSESSEE INTEREST PAYABLE TO THE INSTITUTIONS IS ASCERTAINED LIABILITY UNLESS AND UNTIL THIS IS WAIVED BY THE INSTITUTIONS. IN CERTAIN CASES, ACCORDING TO US, T HERE MAY BE SOME DIFFICULTY IN ASCERTAINING THE QUANTUM OF THE LIABILITY WITH REASONABLE PRECISION BUT AS LAID DOWN BY HONBLE SUPREME COURT IN THE CASE OF CALCUTTA CO. LTD. VS. CIT (1959) 37 ITR 1 THAT DIFFICULTY IN ESTIMATION OF THE AMOUNT DOES NOT PREVENT THE ACCRUAL OF LIABILITY. IF THE ESTIMATE IS WRONG, THE TAXING OFFICER WOULD BE COMPETENT TO SUBSTITUTE HIS OWN ESTIMATE I GNORING THE ASSESSEES ESTIMATION. THUS, ACCORDING TO US, AN ESTIMATED LIABILITY, SO, IN RES PECT OF THIS INTEREST IS DEBITABLE TO THE P&L ACCOUNT AS AN ASCERTAINED LIABILITY UNDER THE MARCE NTILE SYSTEM OF ACCOUNTING. EVEN IF THIS IS NOT DEBITED TO THE P&L ACCOUNT, THIS CAN BE CLAIMED IN THE RETURN OF INCOME. IT IS A FACT THAT IN THE PRESENT CASE, THIS BUSINESS LIABILITY I.E. INTE REST PAYABLE, HAS DEFINITELY ARISEN IN THE ACCOUNTING YEARS RELEVANT TO ASSESSMENT YEARS ABOVE , DEDUCTION SHOULD BE ALLOWED ALTHOUGH THE LIABILITY MAY HAVE TO BE ESTIMATED AND DISCHARGED A T A FUTURE DATE. HONBLE SUPREME COURT IN THE CASE OF PUNE ELECTRIC SUPPLY CO. LTD. VS. CIT ( 1965) 57 ITR 521 (SC) HELD THE SAME VIEW. AT THE SAME TIME, IF LIABILITY TO A PARTICULAR SUM HAS BEEN INCURRED DURING THE YEAR AND IF OTHERWISE, THE SAME IS ALLOWABLE AS A REVENUE EXPE NSES, THEN WHETHER THE SAME HAS BEEN ACTUALLY PAID OR NOT IS IMMATERIAL AND THE LIABILIT Y SO INCURRED HAS GOT TO BE ALLOWED AS REVENUE 7 ITA NOS. 1841-1843/K/2008 & 215 TO 217/K/2011 & 1866/K/2008 KHAITAN INDIA LTD. , AY:2003-04 TO 2007-08 EXPENSES. HONBLE SUPREME COURT IN THE CASE OF KED ARNATH JUTE MFG. CO. LTD. VS. CIT (1971) 82 ITR 363 (SC) HAS HELD AS UNDER: THE MAIN CONTENTION OF THE LEARNED SOLICITOR-GENER AL IS THAT THE ASSESSEE FAILED TO DEBIT THE LIABILITY IN ITS BOOKS OF ACCOUNTS AND, THEREFO RE, IT WAS DEBARRED FROM CLAIMING THE SAME AS DEDUCTION EITHER UNDER SECTION 10(1) OR UND ER SECTION 10(2)(XV) OF THE ACT. WE ARE WHOLLY UNABLE TO APPRECIATE THE SUGGESTION THAT IF AN ASSESSEE UNDER SOME MISAPPREHENSION OR MISTAKE FAILS TO MAKE AN ENTRY I N THE BOOKS OF ACCOUNT AND ALTHOUGH, UNDER THE LAW, A DEDUCTION MUST BE ALLOWED BY THE I NCOME-TAX OFFICER, THE ASSESSEE WILL LOSE THE RIGHT OF CLAIMING OR WILL BE DEBARRED FROM BEING ALLOWED THAT DEDUCTION. WHETHER THE ASSESSEE IS ENTITLED TO A PARTICULAR DE DUCTION OR NOT WILL DEPEND ON THE PROVISION OF LAW RELATING THERETO AND NOT ON THE VI EW WHICH THE ASSESSEE MIGHT TAKE OF HIS RIGHTS NOR CAN THE EXISTENCE OR ABSENCE OF ENTR IES IN THE BOOKS OF ACCOUNT BE DECISIVE OR CONCLUSIVE IN THE MATTER. THE ASSESSEE WHO WAS M AINTAINING ACCOUNTS ON THE MERCANTILE SYSTEM WAS FULLY JUSTIFIED IN CLAIMING D EDUCTION OF THE SUM OF RS. 1,49,776 BEING THE AMOUNT OF SALES TAX WHICH IT WAS LIABLE U NDER THE LAW TO PAY DURING THE RELEVANT ACCOUNTING YEAR. IT MAY BE ADDED THAT THE LIABILITY REMAINED INTACT EVEN AFTER THE ASSESSEE HAD TAKEN APPEALS TO HIGHER AUTHORITIE S OR COURTS WHICH FAILED. THE APPEAL IS CONSEQUENTLY ALLOWED AND THE JUDGMENT OF THE HIG H COURT IS SET ASIDE. THE QUESTION WHICH WAS REFERRED IS ANSWERED IN FAVOUR OF THE ASS ESSEE AND AGAINST THE REVENUE. THE ASSESSEE WILL BE ENTITLED TO COSTS IN THIS COURT AN D IN THE HIGH COURT. APPEAL ALLOWED. IN VIEW OF THE ABOVE, WE ARE OF THE VIEW THAT THIS INTEREST PAYABLE OR ESTIMATED BY THE ASSESSEE IS ASCERTAINED LIABILITY AND IN NO WAY THE REVENUE IS RIGHT TO CALL IT AS UNASCERTAINED AND THIS IS AN ALLOWABLE EXPENSE. HOWEVER, THE AO IS FREE TO E XAMINE THE QUANTUM OR ESTIMATION AND IN CASE, THERE IS A DISCEPANCY FACTUALLY, THE AO CAN C ORRECT IT. THE ASSESSEE HAS TO PRODUCE THE EVIDENCE BEFORE THE AO, WE DIRECT THE AO ACCORDINGL Y. SIMILAR IS THE ISSUE IN OTHER TWO YEARS, HENCE, IN THOSE TWO YEARS ALSO WE DIRECT THE AO ACC ORDINGLY. 7. NEXT ISSUE IN ITA NO.1841/K/2008 FOR AY 2003-04 IS AS REGARDS TO THE ORDER OF CIT(A) CONFIRMING THE CHARGING OF INTEREST U/S. 234D OF TH E ACT. FOR THIS, ASSESEE HAS RAISED FOLLOWING GROUND NO.4: 4. THAT THE LD. CIT(A) ERRED IN CONFIRMING THE CHA RGE OF INTEREST UNDER SECTION 234D OF THE INCOME TAX ACT, 1961 EVEN WHEN THE SAID SECTION WAS BROUGHT ON THE STATUTE BOOKS BY THE FINANCE ACT, 2003 ONLY W.E.F. 01.06.2003. 8. AT THE OUTSET, LD. COUNSEL FOR THE ASSESSEE FAIR LY CONCEDED THAT THIS PROVISION IS HELD TO BE RETROSPECTIVE AND HENCE, ASSESSEE IS NOT INTERES TED TO ARGUE THIS ISSUE. AS THE ASSESSEE HAS NOT PRESSED THIS ISSUE, WE DISMISS THE SAME AS NOT PRESSED. 9. THE NEXT COMMON ISSUE IN ASSESSEES APPEAL IN IT A NOS. 1842 AND 1843/K/2008 FOR AY 2004-05 AND 2005-06 AND REVENUE APPEALS IN ITA NOS. 215, 216 AND 217/K/2011 FOR AYS 2004- 8 ITA NOS. 1841-1843/K/2008 & 215 TO 217/K/2011 & 1866/K/2008 KHAITAN INDIA LTD. , AY:2003-04 TO 2007-08 05, 2006-07 AND 2007-08 IS AS REGARDS TO THE ORDER OF CIT(A) RESTRICTING THE DISALLOWANCE U/S. 14A OF THE ACT. FOR THIS, ASSESSEE AND REVENUE BOT H HAVE RAISED THE ISSUES VIDE THEIR RESPECTIVE GROUNDS AS MENTIONED BELOW. GROUNDS RAISED BY ASSE SSEE IN ITA NO.1842/K/2008 VIDE GROUND NOS. 3 TO 5 READ AS UNDER: 3. THAT THE LD. CIT(A), KOLKATA ERRED IN ARBITRAR ILY AND WRONGLY HOLDING THAT THE AMOUNT COVERED BY AND/OR DISALLOWABLE UNDER SEC TION 14A OF THE INCOME TAX ACT, 1961 WAS RS.12,39,521/-, AS AGAINST RS.3,44,112 CON SIDERED FOR DISALLOWANCE ON THIS ACCOUNT BY THE APPELLANT ASSESSEE COMPANY IN FILING ITS RETURN OF TOTAL INCOME FOR THE YEAR UNDER APPEAL. 4. THAT THE LD. CIT(A) FAILED TO APPRECIATE THAT T HE INVESTMENTS IN SHARES AND SECURITIES HELD BY THE APPELLANT ASSESSEE COMPANY W ERE ALL ALONG MADE FROM THE FUNDS OF THE MARKETING DIVISION, ALTHOUGH REFLECTED IN THE D IVISIONAL ACCOUNTS IN THE CORPORATE DIVISION; AND THAT THE TOTAL INTEREST ON BORROWINGS /OVERDRAFTS FROM THE BANKS, AS REFLECTED IN THE ACCOUNTS OF MARKETING DIVISION DUR ING THE YEAR UNDER APPEAL WAS RS.25,1,882 ONLY. 5. THAT THE LD. CIT(A) FAILED TO APPRECIATE THAT T HE INVESTMENTS IN SHARES AND SECURITIES HELD BY THE APPELLANT ASSESSEE COMPANY W ERE FULLY COVERED BY THE INTERNAL ACCRUALS REPRESENTING THE PROFITS EARNED BY IT YEAR AFTER YEAR IN THE MARKETING DIVISION, WHICH PROFITS WERE ALL ALONG DEPOSITED IN THE OVERD RAFT ACCOUNTS MAINTAINED WITH THE BANKS, AS ATTRIBUTABLE TO THE MARKETING DIVISION. GROUNDS RAISED BY ASSESSEE IN ITA NO.1843/K/2008 VI DE GROUND NOS. 1 AND 2 READ AS UNDER: 1. THAT THE LD. CIT(A), KOLKATA ERRED IN ARBITRARI LY AND WRONGLY HOLDING THAT THE AMOUNT COVERED BY AND/OR DISALLOWABLE UNDER SECTION 14A OF THE INCOME TAX ACT, 1961 WAS RS.8,55,518/- AS AGAINST RS.1,88,078 CONSIDERED FOR DISALLOWANCE ON THIS ACCOUNT BY THE APPELLANT ASSESSEE COMPANY IN FILING ITS RETURN OF TOTAL INCOME FOR THE YEAR UNDER APPEAL. 2. THAT THE LD. CIT(A) ERRED IN ARBITRARILY AND WRO NGLY ADDING BACK BY WAY OF DISALLOWANCE ANOTHER SUM OF RS.3,45,45,495 UNDER SE CTION 14A OF THE SAID ACT READ WITH RULE 8D OF THE INCOME TAX RULES, 1962 UNDER THE HEA DING COMPUTATION OF AGRICULTURAL INCOME AND THEREBY ENHANCING THE TAXABLE INCOME OF THE APPLLANT ASSESSEE COMPANY FOR THE YEAR UNDER APPEAL BY THE SAID IMPUGNED SUM OF RS.3,45,45,495/-. GROUNDS IN ITA NO.217/K/2011 FOR AY 2007-08 RAISED BY REVENUE IS AS REGARDS TO THE ISSUE OF DISALLOANCE U/S. 14A READ WITH PROVISIONS OF SECTIO N 115JB OF THE ACT WHILE COMPUTING BOOK PROFIT VIDE FOLLOWING GROUND: THAT IN THE FACTS AND CIRCUMSTANCES OF THE CASE AN D IN LAW, THE LD. CIT(A) ERRED IN DELETING THE ADDITION OF RS.3,88,16,436/- MADE BY T HE AO IN COMPUTING THE BOOK PROFIT U/S. 115JB IN COMPLIANCE TO SEC. 14A OF I. T. ACT. SIMILARLY, REVENUE IN ITA NO. 216/K/2011 IN AY 2006 -07 RAISED THE GROUNDS REGARDING DISALLOWANCE U/S. 14A OF THE ACT, VIDE GROUND NO 2 AS UNDER: 2. THAT IN THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) ERRED IN DELETING THE ADDITION OF RS.3,48,82,040/- MADE BY T HE AO UNDER SECTION 14A FOR THE ASSESSMENT YEAR 2006-07. 9 ITA NOS. 1841-1843/K/2008 & 215 TO 217/K/2011 & 1866/K/2008 KHAITAN INDIA LTD. , AY:2003-04 TO 2007-08 10. WE HAVE HEARD RIVAL SUBMISSIONS AND GONE THROUG H FACTS AND CIRCUMSTANCES OF THE CASE. AT THE OUTSET, IT IS TO BE MENTIONED THAT NOW THE I SSUE REGARDING APPLICABILITY OF THE PROVISIONS OF SECTION 14A OF THE ACT READ WITH RULE 8D OF THE I. T. RULES, 1962 IS SETTLED BY THE DECISION OF HONBLE BOMBAY HIGH COURT IN THE CASE OF GODREJ & BOYCE MFG. CO. LTD. VS. DCIT [2010] 328 ITR 81 (BOM.), WHEREIN IT IS HELD THAT RULE 8D OF THE RULES AS INSERTED BY THE I. T (FIFTH AMENDMENT) RULES, 2008 W.E.F. 24.3.2008 IS PROSPECT IVE AND NOT RETROSPECTIVE. THE CIT(A) WHILE DELETING THE DISALLOWANCE OBSERVED THAT IN T HE CASE OF THE ASSESSEE THE AMOUNT OF DIVIDEND RECEIVED WAS RS.30,30,374/- AND AS AGAINST THE ASSESSEE ITSELF HAS MADE DISALLOANCE U/S. 14A AT RS.5,37,272/- WHICH IS MUCH MORE THAN T HE 1% OF DIVIDEND INCOME AS HELD BY THE HONBLE JURISDICTIONAL ITAT. UNDER THE CIRCUMSTANCE S, THE AO WAS NOT JUSTIFIED IN MAKING THE HUGE AMOUNT OF DISALLOWANCE U/S. 14A READ WITH RULE 8D AND SAME DESERVES TO BE DELETED. SINCE THE ISSUE IS COVERED BY THE DECISION OF GODRE J & BOYCE MFG. CO. LTD. CITED SUPRA, WE HOLD THAT THE PROVISION IS PROSPECTIVE W.E.F. AY 20 08-09 AND IT WILL NOT APPLY TO EARLIER YEARS, WE DIRECT THE AO ACCORDINGLY. 11. THE SECOND ISSUE IS AS REGARDS TO DISALLOWANCE U/S. 14A OF THE ACT QUA EXEMPTED INCOME. THE LD. COUNSEL FOR THE ASSESSEE FAIRLY CON CEDED THAT THE TRIBUNAL IS TAKING A CONSISTENT VIEW ALL ALONG THAT DISALLOWANCE SHOULD BE RESTRICT ED AT 1% OF THE EXEMPTED INCOME. LD. COUNSEL FOR THE ASSESSEE FAIRLY CONCEDED THAT THE A SSESSEE ON ITS OWN HAS DISALLOWED MORE THAN 1% IN SOME YEARS AND IN SOME YEARS IT IS RESTRICTED TO 1%, THE AO CAN VERIFY THE FACTUAL POSITION AND RESTRICT THE DISALLOWANCE EITHER AT 1% OR AS DISALLOWED BY ASSESSEE ITSELF, IF IT IS MORE THAN 1%. WE DIRECT THE AO ACCORDINGLY. 12. ONE MORE ASPECT IN THIS APPEAL OF ASSESSEE IS R EGARDING DISALLOWANCE U/S. 14A OF THE ACT ON AGRICULTURAL INCOME. WE FIND THAT THE AGRICULTU RAL INCOME IS EXEMPT UNDER PROVISIONS SECTION 10(1A) OF THE ACT AND IT IS IN THE NATUE OF EXEMPTED INCOME UNDER THE ACT AND DISALLOWANCE U/S. 14A OF THE ACT CAN BE ATTRIBUTED TO THIS INCOME BUT QUA NET AGRICULTURAL INCOME ONLY. WE DIRECT THE AO ACCORDINGLY. 12. THE LAST COMMON ISSUE IN THESE APPEALS OF REVEN UE I.E. ITA NOS. 216, 217/K/2011 AND 1866/K/2008 IS AS REGARDS TO THE ADDITION OF PROVIS ION FOR BAD DEBTS WHILE COMPUTING BOOK PROFIT U/S. 115JB OF THE ACT. FOR EXAMPLE, THE REV ENUE HAS RAISED GROUND IN AY 2004-05 AS UNDER: 10 ITA NOS. 1841-1843/K/2008 & 215 TO 217/K/2011 & 1866/K/2008 KHAITAN INDIA LTD. , AY:2003-04 TO 2007-08 THAT THE LD. CIT(A) HAS ERRED IN DELETING THE ADDI TION OF RS.13,10,487/- TOWARDS PROVISION FOR BAD DEBTS IN COMPUTATION OF BOOK PROF ITS U/S. 115JB OF I. T. ACT WHEN IT HSAS BEEN PROVIDED IN THE SAID SECTION THAT IF ANY PROVI SIONS IS MADE THEN THE SAME HAS TO BE ADDED TO COMPUTATION OF THE BOOK PROFIT. THAT THE LD. CIT(A) HAS ERRED IN DELETING THE ADDIT ION OF RS.13,10,487/- TOWARDS PROVISIONS FOR BAD DEBTS IN COMPUTATION OF BOOK PRO FIT U/S. 115JB OF THE ACT SINCE BAD AND DOUBTFUL DEBTS ARE REQUIRED TO BE ADDED BACK SINCE THEY ARE UNDERASCERTAINED IN NATURE. 13. AT THE OUTSET, LD. COUNSEL FOR THE ASSESSEE CON CEDED THAT THIS ISSUE IS NOW COVERED IN FAVOUR OF REVENUE AND HENCE, WE CONFIRM THE ADDITIO N AND REVERSE THE ORDER OF CIT(A) ON THIS ISSUE. 14. IN THE RESULT, APPEALS OF ASSESSEE AND THAT OF REVENUE ARE PARTLY ALLOWED AS INDICATED ABOVE. 15. ORDER IS PRONOUNCED IN THE OPEN COURT ON 13 TH FEBRUARY, 2014 SD/- SD/- . . . . ' '' ''# '#'# '# , $% , (ABRAHAM P. GEORGE) (MAHAVIR SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 13TH FEBRUARY, 2014 12 '3' 4 JD.(SR.P.S.) $0 5 . 6$ )7- COPY OF THE ORDER FORWARDED TO: 1 . ,- / APPELLANT KHAITAN INDIA LTD., G. P. AGRAWAL & ASS OCIATES, 7A, K. S. ROY ROAD, 2 ND FLOOR, KOLKATA-700 001. 2 ./,- / RESPONDENT DCIT/ ACIT, CIRCLE-11, KOLKATA 3 . 0' ( )/ THE CIT(A), KOLKATA 4. 5. 0' / CIT KOLKATA <= .' / DR, KOLKATA BENCHES, KOLKATA / ./ TRUE COPY, $0'>/ BY ORDER, ' /ASSTT. REGISTRAR .