Dy. Commissioner of Income Tax, Circle-1(1)(1), Ahmedabad V. M/s. Acalmar Oils & Fats Ltd., Ahmedabad

ITA 2055/AHD/2016

• Counselvise Citation: [2018] 126 COUNSELVISE.COM (IT) 6102 (ITAT-AHMEDABAD)
• Duration Of Justice: 1 year(s) 6 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-02-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: SMC
• Assessment Year: 2011-2012
• Appeal Filed On: 08-08-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SANTOSH KARNANI
• Keywords: Earning of tax free income; Question of law; Capital expenditure
• Section: 143(3); 14A; 115JB; 37

Judgement Text

SMC-ITA NO. 2055/AHD/2016 DCIT VS. ACALMAR OILS & FATS LTD ASSESSMENT YEAR: 2011-12 PAGE 1 OF 4 IN THE INCOME TAX APPELLATE TRIBUNAL SMC BENCH, AHMEDABAD [ BEFORE SHRI PRAMOD KUMAR, ACCOUNTANT MEMBER ] ITA NO. 2055/AHD/2016 ASSESSMENT YEAR : 2011-12 DY. COMMISSIONER OF INCOME-TAX ........ ....APPELLANT CIRCLE 1(1)(1), AHMEDABAD VS. ACALMAR OILS & FATS LIMITED .......................RESPONDENT A WING, ROOM NO.309, 3 RD FLOOR, PRATYAKHASH KAR BHAVAN, AMBAWADI, AHMEDABAD-380015 [PAN : AADCA 3673 P] APPEARANCES BY: SANTOSH KARNANI FOR THE APPELLANT IRA KAPOOR FOR THE RESPONDENT DATE OF CONCLUDING THE HEARING : 20.11.2017 DATE OF PRONOUNCING THE ORDER : 14.02.2018 O R D E R 1. BY WAY OF THIS APPEAL, THE ASSESSING OFFICER HAS CHALLENGED CORRECTNESS OF THE ORDER DATED 26 TH MAY 2016 PASSED BY THE CIT(A)-1, AHMEDABAD, IN THE MATTER OF ASSESSMENT UNDER SECTION 143(3) OF THE INCOME-TAX A CT, 1961, FOR THE ASSESSMENT YEAR 2011-12. 2. IN GROUND NOS. 1 AND 2, WHICH WE WILL TAKE UP TO GETHER, THE ASSESSING OFFICER HAS RAISED THE FOLLOWING GRIEVANCES:- (1) THAT THE LD. CIT(A) ERRED IN LAW AND ON FACTS IN DELETING THE ADDITION OF RS.36,02,450/- MADE ON ACCOUNT OF DISALLOWANCE U/S 14A R.W.R. 8D OF THE ACT. (2) THAT THE LD. CIT(A) ERRED IN LAW AND ON FACTS I N DELETING THE ADDITION OF RS.36,02,450/- MADE U/S 115JB OF THE ACT. 3. LEARNED REPRESENTATIVES FAIRLY AGREE THAT AS THE RE IS NO TAX EXEMPT INCOME IN THE RELEVANT PREVIOUS YEAR AND IN THE LIGHT OF HON BLE JURISDICTIONAL HIGH COURT JUDGMENTS IN THE CASES OF CIT VS. CORRTECH ENERGY P VT LTD [(2015) 372 ITR 97 (GUJ.)] AND PCIT VS. AMBALAL SARABHAI ENTERPRISES (TA NO.10 4 OF 2017; JUDGMENT DATED 24.03.2017), DISALLOWANCES UNDER SECTION 14A CANNOT BE MADE AT ALL. ONCE DISALLOWANCE UNDER SECTION 14A IS HELD TO BE IMPERM ISSIBLE, THERE CANNOT BE ANY OCCASION TO MAKE ADJUSTMENT FOR THE PURPOSE OF BOOK PROFIT UNDER SECTION 115JB EITHER. ON THIS VIEW OF THE MATTER, I SEE NO LEGALL Y SUSTAINABLE MERITS IN THE SMC-ITA NO. 2055/AHD/2016 DCIT VS. ACALMAR OILS & FATS LTD ASSESSMENT YEAR: 2011-12 PAGE 2 OF 4 GRIEVANCES RAISED BY THE ASSESSING OFFICER. I CONF IRM THE ORDER OF THE CIT(A), THE RELIEF GIVEN IN RESPECT OF DISALLOWANCE UNDER SECTI ON 14A, AND DECLINE TO INTERFERE IN THE MATTER. 4. GROUND NOS. 1 & 2 ARE THUS DISMISSED. 5. IN GROUND NO.3, THE ASSESSING OFFICER HAS RAISED THE FOLLOWING GRIEVANCE:- (3) THAT THE LD. CIT(A) ERRED IN LAW AND ON FACTS IN DELETING THE ADDITION OF RS.1,40,433/- MADE ON ACCOUNT OF DISALLOWANCE OF BA D DEBT CLAIMED BY THE ASSESSEE. 6. BRIEFLY STATED, THE RELEVANT MATERIAL FACTS ARE LIKE THIS. DURING THE COURSE OF SCRUTINY ASSESSMENT PROCEEDINGS, THE ASSESSING OFFI CER NOTICED THAT OUT OF TOTAL ADVANCES WRITTEN OFF AGGREGATING TO RS.1,40,433, AN D AMOUNT OF RS.1,03,129 WAS IN THE NATURE OF ADVANCE TO M/S. IMPACT IMPEX, AND, AC CORDINGLY, THE SAME IS NOT ALLOWABLE AS DEDUCTION UNDER SECTION 36(1)(VII). H E, HOWEVER, DISALLOWED ENTIRE AMOUNT OF RS.1,40,433/- AGGRIEVED, ASSESSEE CARRI ED THE MATTER IN APPEAL BEFORE THE CIT(A) WHO DELETED THE DISALLOWANCE BY RELYING UPON HONBLE SUPREME COURTS JUDGMENT IN THE CASE OF TRF LTD VS. CIT (323 ITR 19 7). THE ASSESSING OFFICER IS AGGRIEVED AND IS IN APPEAL BEFORE ME. 7. I HAVE HEARD THE RIVAL CONTENTIONS, PERUSED THE MATERIAL ON RECORD AND DULY CONSIDERED FACTS OF THE CASE IN THE LIGHT OF APPLIC ABLE LEGAL POSITION. 8. I HAVE NOTED THAT LEARNED DEPARTMENTAL REPRESENT ATIVES SHORT POINT IS THAT ALL THE REQUISITE DETAILS WERE FURNISHED FOR THE FIRST TIME BEFORE THE CIT(A). THERE IS NO DISPUTE THAT THE AMOUNT INVOLVED IS A VERY SMALL AM OUNT VIS-A-VIS THE SCALE OF OPERATIONS OF BUSINESS, THAT THE TRANSACTION WAS IN THE COURSE OF BUSINESS AND THAT THE AMOUNT WAS ACTUALLY WRITTEN OFF DURING THE RELE VANT PREVIOUS YEAR. IN VIEW OF THESE DISCUSSIONS, AS ALSO BEARING IN MIND ENTIRETY OF THE CASE, I APPROVE LEARNED CIT(A)S ORDER ON THIS POINT AS WELL, AND DECLINE T O INTERFERE IN THE MATTER. 9. GROUND NO.3 IS THUS DISMISSED. 10. DURING THE COURSE OF SCRUTINY ASSESSMENT PROCEE DINGS, THE ASSESSING OFFICER HAD NOTED THAT THE ASSESSEE HAD CLAIMED DEDUCTION F OR COMMISSION PAYMENTS WHICH ACTUALLY PERTAINED TO A PERIOD PRIOR TO THE RELEVAN T PREVIOUS YEAR. THE ASSESSING OFFICER DISALLOWED THESE COMMISSION PAYMENTS, AGGRE GATING TO RS.1,58,046/-, BY OBSERVING THAT IT IS SETTLED LAW THAT THE INCOME AND THE CORRESPO NDING EXPENDITURE CAN BE CLAIMED IN THE YEAR IN WHICH THE SAME IS INC URRED. AGGRIEVED, ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE CIT(A) WHO DELETED THE DISALLOWANCE BY OBSERVING AS UNDER:- 7.3 I HAVE CAREFULLY CONSIDERED THE ASSESSMENT OR DER AND THE SUBMISSION FILED BY THE APPELLANT. THE ASSESSING OFFICER HAS REFERRED TO ANNEXURE-14 OF WRITTEN SUBMISSION DATED 23 RD MARCH, 2015 AND OBSERVED THAT APPELLANT HAS CLAIMED VARIOUS COMMISSION EXPENDITURE PERTAINING T O AY 2010-11 IN CURRENT YEAR. AS EXPENDITURE IS NOT CRYSTALLIZED IN CURREN T ASSESSMENT YEAR, SAME CANNOT BE ALLOWED AS DEDUCTION WHILE COMPUTING TOTA L INCOME AND ON THAT SMC-ITA NO. 2055/AHD/2016 DCIT VS. ACALMAR OILS & FATS LTD ASSESSMENT YEAR: 2011-12 PAGE 3 OF 4 GROUND, HE MADE DISALLOWANCE OF RS.19,77,075/-. ON THE OTHER HAND, APPELLANT HAS ARGUED THAT LOOKING TO THE TOTAL TURN OVER OF THE COMPANY AS WELL AS PER MATERIALITY CONCEPT, EXPENDITURE DEBITED IS VERY INSIGNIFICANT HENCE IT CANNOT BE DISALLOWED ON THE GROUND THAT IT PERTAINS TO EARLIER ASSESSMENT YEAR. IT IS ALSO ARGUED THAT IF SUCH EXPENDITURE IS PERTAINING TO EARLIER ASSESSMENT YEAR, SAME MAY BE ALLOWED IN THOSE ASSES SMENT YEARS BUT ENTIRE EXERCISE WOULD BE TAX NEUTRAL HENCE NO DISAL LOWANCE SHOULD BE MADE. THE APPELLANT IN THE PAPER BOOK FILED BEFORE UNDERS IGNED HAS RELIED UPON DECISION OF HON'BLE AHMEDABAD ITAT IN THE CASE OF A DANI ENTERPRISE LIMITED V/S ACIT (ITA NO. 1859/AHD/2011) WHEREIN SIMILAR D ISALLOWANCE WAS DELETED. ON CAREFUL CONSIDERATION OF ENTIRE FACTS, IT IS OBS ERVED THAT ASSESSING OFFICER HAS NOT DOUBTED THE GENUINENESS OF SUCH EXPENDITURE AND IF SUCH EXPENDITURE PERTAINS TO EARLIER YEAR, IT CAN BE ALLOWED AS EXPE NDITURE IN SAID ASSESSMENT YEAR AND EVEN THIS EXERCISE IS TAX NEUTRAL AS HELD BY HON'BLE DELHI HIGH COURT IN THE CASE OF VISHNU INDUSTRIAL GLASSES AND SHRIRA M PISTON & RINGS LTD. IT IS A/SO OBSERVED THAT HON'BLE AHMEDABAD ITAT IN THE CA SE OF ADANI ENTERPRISES LIMITED (ITA NO. 1859/AHD/2011, DATED 1ST JANUARY, 2016) HAS HELD AS UNDER: '5. WE HAVE HEARD RIVAL CONTENTIONS. PAGE 13 TO 16 OF THE PAPER BOOK COMPRISE ALL DETAILS OF ASSESSEE'S PRIOR PERIOD EXP ENDITURE AMOUNTING TO RS. 67,88,591/- FALLING UNDER MAJOR HEADS OF C&F , MISC. EXPENDITURE, OUTWARD FREIGHT AND TRAVELLING ETC. ITS LEDGER ACCO UNTS REVEALS THAT THE SAME HAVE BEEN RECOGNIZED ON VARIOUS DATES FROM 01- 04-2005 TO 31- 03-2006. THERE IS HARDLY ANY DISPUTE ON GENUINENESS ASPECT OF THE ABOVE STATED EXPENDITURE HEADS. THIS IS NOT THE REV ENUE'S CASE THAT THE SAME IS CAPITAL EXPENDITURE OTHERWISE NOT ALLOW ABLE U/S. 37 OF THE ACT. BOTH THE LOWER AUTHORITIES NOWHERE REBUT ASSES SEE'S CASE THAT IT HAS BEEN FOLLOWING PAST PRACTICE OR THE ISSUE STAND S DECIDED IN ITS FAVOUR IN EARLIER ASSESSMENT YEARS. CASE LAW (1958) 33 ITR 681 (BOM) CIT VS. NAGRI MILLS CO. LTD HOLDS THAT WHEN AN ASSE SSES COMPANY IS ASSESSED AT UNIFORM RATE, YEAR OF RAISING AN EXPEND ITURE CLAIM IS OF NO CONSEQUENCE, MORE PARTICULARLY, WHEN THE SAME IS AL LOWABLE. NEXT JUDGMENT (2010) 194 TAXMANN 158 (DEL) CIT VS. JAGAT JIT INDUSTRIES ACCEPTS CONSISTENT ACCOUNTING PRACTICE CLAIMING IDE NTICAL EXPENDITURE IN MERCANTILE SYSTEM OF ACCOUNTING WHEREIN THE NECESSA RY EXPENDITURE VOUCHERS HAVE BEEN RECEIVED AFTER 31ST MARCH OF THE RELEVANT ACCOUNTING PERIOD. CASE LAW (2014) 221 TAXMANN 80 ( BOM) CIT VS. MAHANAGAR GAS LTD SUPPORTS ASSESSEE'S CASE THAT PRI OR PERIOD EXPENDITURE CRYSTALLIZE DURING THE YEAR ON RECEIPT OF BILLS IS ALLOWABLE. THIS IS FOLLOWED BY (2010) 328 ITR 17 (DEL) CIT VS. EXXON MOBIL LUBRICANTS PVT. LTD UPHOLDING CIT(A)'S AND TRIBUNAL 'S VIEW THAT IF THE ASSESSES ADMITS PRIOR PERIOD INCOME WHICH WAS NOT E XCLUDED WHILE WORKING OUT RELEVANT PREVIOUS YEAR INCOME, IT IS UN REASONABLE TO ALLOW ONE PART OF PRIOR PERIOD ADJUSTMENT I.E. PRIOR PERI OD EXPENDITURE. WE COME TO REVENUE'S CASE LAW NOW. THE FIRST ONE IS (2013) 33 TAXMANN.COM 92 (BANG) BEARING POINT BUSINESS SOLUTI ONS VS. DCIT AND (2013) 35 TAXMANN.COM (HYD) NOW BHARAT VENTURES LTD VS. CIT DECIDING THE ISSUE IN REVENUE'S FAVOUR. WE FIND THA T THESE TRIBUNAL'S SMC-ITA NO. 2055/AHD/2016 DCIT VS. ACALMAR OILS & FATS LTD ASSESSMENT YEAR: 2011-12 PAGE 4 OF 4 DECISIONS DO NOT CONFIRM TO DIFFERENT VIEWS OF VARI OUS HON'BLE HIGH COURTS HEREINABOVE. NEXT CASE LAW (2013) 42 TAXMANN .COM 142 (GUJ) CIT VS. GUJARAT MINERAL DEVELOPMENT CORPORATION IS AN ADMISSION ORDER AFTER FRAMING SUBSTANTIAL QUESTION OF LAW WHE REIN THE MAIN CASE IS STILL PENDING FOR FINAL DISPOSAL. WE OBSERVE THAT T HIS LATTER ORDER DOES NOT SETTLE A RATIO. WE TAKE INTO ACCOUNT ABOVE STAT ED DISCUSSIONS, RELEVANT FACTS AND CASE LAW TO CONCLUDE THAT BOTH T HE LOWER AUTHORITIES HAVE WRONGLY DISALLOWED ASSESSEE'S CLAIM OR PRIOR P ERIOD EXPENDITURE. THE SAME STANDS DELETED. THIS FIRST SUBSTANTIVE GRO UND IS TREATED AS ALLOWED.' FOLLOWING THE ABOVE DECISIONS OF HON'BLE AHMEDABAD ITAT WHICH IS DIRECTLY ON THE ISSUE, ADDITION OF RS. 1,58,046/- MADE BY AS SESSING OFFICER IS DELETED. THIS GROUND OF APPEAL IS ALLOWED. 12. THE ASSESSING OFFICER IS AGGRIEVED OF THE RELIE F SO GRANTED BY THE CIT(A) AND IS IN APPEAL BEFORE ME. 13. I HAVE HEARD THE RIVAL CONTENTIONS, PERUSED THE MATERIAL ON RECORD AND DULY CONSIDERED FACTS OF THE CASE IN THE LIGHT OF APPLIC ABLE LEGAL POSITION. 14. I FIND THAT THE ISSUE IN APPEAL, AS RIGHTLY NOT ED BY THE CIT(A), IS COVERED BY A DECISION OF THIS TRIBUNAL IN THE CASE OF ADANI ENTE RPRISES LTD (ITA NO.1859/AHD/2011; ORDER DATED 01.01.2016) AND THE C IT(A) HAS MERELY FOLLOWED THE SAME. I SEE NO INFIRMITY IN THE ACTION OF THE CIT( A) AS SUCH. I, THEREFORE, APPROVE THE ORDER OF THE CIT(A) ON THIS POINT AS WELL AND DECLI NE TO INTERFERE IN THE MATTER. 15. GROUND N.4 IS ALSO THUS DISMISSED. 16. IN THE RESULT, THE APPEAL IS DISMISSED. PRONOUN CED IN THE OPEN COURT TODAY ON THE 14 TH FEBRUARY, 2018. SD/- PRAMOD KUMAR (ACCOUNTANT M EMBER) AHMEDABAD, THE 14 TH DAY OF FEBRUARY, 2018 **BT COPIES TO: (1) THE APPELLANT (2) THE RESPONDENT (3) COMMISSIONER (4) CIT(A) (5) DEPARTMENTAL REPRESENTATIVE (6) GUARD FILE BY ORDER TRUE COPY ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCHES, AHMEDABAD