DCIT, Jaipur V. GENUS INNOVATION LTD., Jaipur

ITA 231/JPR/2015

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 5168 (ITAT-JAIPUR)
• Duration Of Justice: 1 year(s) 3 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-06-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2011-2012
• Appeal Filed On: 04-03-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S K JAIN
• Assessee Lawyers: MANISH AGARWAL CA DHK
• Keywords: Opportunity of being heard; Earning of tax free income
• Section: 43B; 143(3); 14A; 15

Judgement Text

VK;DJ VIHYH; VF/KDJ.K] T;IQJ U;K;IHB] T;IQJ IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES, JAIPUR JH VH-VKJ-EHUK] YS[KK LNL; ,OA JH YFYR DQEKJ] U;KF; D LNL; DS LE{K BEFORE: SHRI T.R.MEENA, AM & SHRI LALIET KUMAR, JM VK;DJ VIHY LA-@ ITA NO. 231/JP/2015 FU/KZKJ.K O'K Z@ ASSESSMENT YEAR : 2011-12. DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE-2, JAIPUR. CUKE VS. M/S GENUS INNOVATION LTD., GANPATI ENCLAVE, B-9, AJMER ROAD, JAIPUR. LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN/GIR NO. AACCG 4460 D VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT VK;DJ VIHY LA-@ ITA NO. 165/JP/2015 FU/KZKJ.K O'K Z@ ASSESSMENT YEAR : 2011-12 M/S GENUS INNOVATION LTD., GANPATI ENCLAVE, B-9, AJMER ROAD, JAIPUR. CUKE VS. ADDITIONAL COMMISSIONER OF INCOME TAX, RANGE-2, JAIPUR. LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN/GIR NO. AACCG 4460 D VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT JKTLO DH VKSJ LS@ REVENUE BY : SHRI S.K. JAIN FU/KZKFJRH DH VKSJ LS@ ASSESSEE BY : SHRI MANISH AGARWAL (CA) LQUOKBZ DH RKJH[K@ DATE OF HEARING : 03/05/2016. MN?KKS'K .KK DH RKJH[K @ DATE OF PRONOUNCEMENT : 22/06/2016. VKNS'K@ ORDER PER T.R. MEENA, A.M. THESE ARE CROSS APPEALS ONE BY THE REVENUE AND THE ANOTHER BY THE ASSESSEE ARISE AGAINST THE ORDER DATED 19/12/20 14 PASSED BY THE LD 2 ITA NO. 231 & 165/JP/2015 DCIT VS M/S GENUS INNOVATION LTD., CIT(A)-I, JAIPUR FOR A.Y. 2011-12. THE EFFECTIVE GROU NDS OF BOTH THE APPEALS ARE AS UNDER:- GROUNDS OF REVENUES APPEAL:- 1. (I) WHETHER ON THE FACTS AND IN THE CIRCUMS TANCES OF THE CASE AND IN LAW THE ID. CIT (A) HAS ERRED IN DELETING ADDITION OF RS. 31,952/- MADE FOR DEPOSITING THE EMPLOYEES CONTRIBUTION TO PF AND ESI BEYOND THE PRESCRIBED TIME LIMIT PROVIDED IN THE RESPECTIVE ACTS. ' (II) WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE ID. CIT(A) HAS ERRED IN HOLDING THAT EMPLOYEES CONTRIBUTION UNDER PF AND ESI ARE GOVERNED BY THE PROVISIONS OF SECTION 43B AND NOT BY SECTION 36(1)(VA) READ WITH SECTION 2(24) (X) OF THE ACT. 2. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE ID. CIT (A) HAS ERRED IN DELETING THE DISALLOWANCE OF RS. 2,64,320/- MADE BY THE AO UNDER THE PROVISIONS OF SECTION 14A R.W. RULE 8D OF THE I T. RULES, 1962. 3. (I) WHETHER ON THE FACTS AND IN THE CIRCUMSTANCE S OF THE CASE AND IN LAW THE ID. CIT (A) HAS ERRED IN DELETING ADDITION OF RS. 37,05,685/- MADE ON ACCOUN T OF FOREIGN EXCHANGE GAIN. (II) WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE ID. CIT(A) HAS ERRED IN NOT FOLLOWING THE DECISIONS OF HONBLE SUPREME COURT IN THE CASE OF CIT VS. WOODWARD GOVERNOR INDIA LTD., (312 ITR 254) WHERE IT WAS HELD THAT THE LOSS/GAIN O N 3 ITA NO. 231 & 165/JP/2015 DCIT VS M/S GENUS INNOVATION LTD., ACCOUNT OF FOREIGN EXCHANGE FLUCTUATION ON RESTATEMENT OF THE LIABILITY ON THE BALANCE SHEET D ATE IS REQUIRED TO BE TAKEN INTO ACCOUNT IN COMPUTATION OF INCOME. GROUND OF ASSESSEES APPEAL:- 1. ON THE FACTS AND CIRCUMSTANCES LD. CIT(A) HAS G ROSSLY ERRED IN SUSTAINING THE ADDITION MADE BY LD. AO OF RS. 90,51,858/- U/S 43B ARBITRARILY, THUS ADDITION SUST AINED DESERVES TO BE DELETED IN TOTO. 1.1 THAT THE LD. CIT(A) HAS FURTHER ERRED IN IGNORING THE FACT THAT DEDUCTION U/S 43B IS ALLOWED (IRRESPECTIVE OF PREVIOUS IN WHICH THE LIABILITY TO PAY SUCH SUM WAS INCURRED BY THE ASSESSEE) IN YEAR IN WHICH PAYMENT I S MADE, IN CASE OF THE ASSESSEE PAYMENT OF VAT WAS MADE DURING THE YEAR, THUS THE DISALLOWANCE OF RS.90,51,858/- MADE BY THE LD. CIT(A) DESERVES TO BE DELETED. 1.2 THAT THE LD. CIT(A) HAS FURTHER ERRED IN IGNORING THE BINDING JUDGMENT OF HONBLE SUPREME COURT DELIVERED IN THE CASE OF ALLIED MOTORS P LTD. V. CIT REPORTED IN 139 CTR PAGE 364 AND HONBLE CALCUTTA HIGH COURT DELIVERED IN THE CASE OF PAHARPUR COOLING TOWERS LTD. V. CIT REPORTED IN 244 CTR 502, THUS THE CONSEQUENT ADDITION DESERVES TO BE DELETED. 2. THE ASSESSEE IS ENGAGED IN MANUFACTURING AND JOB WORK OF ELECTRONIC ENERGY METERS, INVERTERS, METER BOXES, H UPS, MODEM, SOLAR PANEL AND PARTS OF METERS. RETURN FOR A.Y. 2011-12 WAS FILED ON 28/09/2011 AT RS. 94,17,980/-. THE CASE WAS SCRUTINIZ ED U/S 143(3) OF THE INCOME TAX ACT (IN SHORT THE ACT) ON 30/03/2014. 4 ITA NO. 231 & 165/JP/2015 DCIT VS M/S GENUS INNOVATION LTD., NOW FIRST WE TAKE REVENUES APPEAL: 3. GROUND NO. 1 OF THE REVENUES APPEAL IS AGAINST ALLOWING THE APPEAL BY THE LD CIT(A) BY DELETING ADDITION OF RS. 31,952/- MADE FOR DEPOSITING THE EMPLOYEES CONTRIBUTION TO PF AND ESI BEYOND THE PRESCRIBED TIME LIMIT. THE LD ASSESSING OFFICER OBSE RVED THAT AS PER AUDIT REPORT, THE ASSESSEE HAS RECEIVED EMPLOYEES CONTRI BUTION ON ACCOUNT OF ESI & PF, WHICH HAS NOT BEEN DEPOSITED BEFORE DUE D ATE AMOUNTING TO RS. 31,952/-. AFTER GIVING SHOW CAUSE NOTICE, THE LD ASSESSING OFFICER OBSERVED THAT THE LIABILITY OF THIS EXPENDITURE IS GOVERNED BY PROVISIONS OF SECTION 36(1)(VA) READ WITH SECTION 2(24)(X) OF THE ACT. THIS AMOUNT RECEIVED FROM THE EMPLOYEE IS INCOME U/S 2(24)(X) O F THE ACT WHEREAS THE DEDUCTION ON PAYMENT BASIS IS ALLOWED ON THE BA SIS OF PAID BEFORE DUE DATE. THE DUE DATE UNDER PF AND ESI ACT WERE 15 TH AND 21 ST OF NEXT MONTH RESPECTIVELY. THE ASSESSEE FAILED TO DEPOSIT T HIS AMOUNT BEFORE DUE DATE AFTER RELYING THE DECISION OF HONBLE ITAT, KOLKATA IN THE CASE OF ASHIKA STOCK BROKING LTD. 139 TTJ 192 AND HONBLE GU JARAT HIGH COURT DECISION IN THE CASE OF CIT VS GUJARAT STATE ROAD TR ANSPORT CORPORATION DATED 26/12/2013. THEREFORE, HE MADE ADDITION OF RS . 31,952/-. 3.1 THE LD CIT(A) ALLOWED THE APPEAL ON THIS GROUND B Y OBSERVING THAT BY FOLLOWING THE DECISION OF HON'BLE SUPREME COURT I N THE CASE OF CIT VS 5 ITA NO. 231 & 165/JP/2015 DCIT VS M/S GENUS INNOVATION LTD., VINAY CEMENTS 213 CTR 268 AND HONBLE JURISDICTIONAL HIGH COURT DECISION IN THE CASE OF CIT VS. SBBJ 363 ITR 70 (RAJ) . DEDUCTION ONLY ON ACTUAL PAYMENT WITH REGARD TO PROVIDENT FUND AND ESI CONTRIBUTIONS MADE BEFORE FILING RETURN IS ALLOWABLE U/S 36(1)(VA) R.W.S. 43B OF THE ACT. ACCORDINGLY, HE DELETED THE ADDITION. 3.1 NOW THE REVENUE IS IN APPEAL BEFORE US. THE LD DR HAS VEHEMENTLY SUPPORTED THE ORDER OF THE ASSESSING OFFICER AND RE LIED ON THE CASE LAWS REFERRED BY THE LD ASSESSING OFFICER IN HIS ASSESSM ENT ORDER. AT THE OUTSET, THE LD AR OF THE ASSESSEE HAS REITERATED TH E ARGUMENTS MADE BEFORE THE LD CIT(A) AND ARGUED THAT AS THE AMOUNT H AS PAID BEFORE DUE DATE OF FILING OF RETURN AND CASE LAWS REFERRED BY THE LD CIT(A) IS SQUARELY APPLICABLE. ACCORDINGLY, HE PRAYED TO UPHOLD THE OR DER OF THE LD CIT(A). 3.2 WE HAVE HEARD THE RIVAL CONTENTIONS OF BOTH THE PARTIES AND PERUSED THE MATERIAL AVAILABLE ON THE RECORD. IT IS UNDISPUTED FACT THAT THE ASSESSEE HAD PAID BOTH THE AMOUNTS BEFORE DUE D ATE OF RETURN. THE HONBLE JURISDICTIONAL HIGH COURT DECISION IN THE C ASE OF CIT VS SBBJ (SUPRA) IS SQUARELY APPLICABLE, THEREFORE, WE UPHOLD THE ORDER OF THE LD. CIT(A). THIS GROUND OF REVENUES APPEAL IS DISMISSED. 4. GROUND NO. 2 OF THE REVENUES APPEAL IS AGAINST DELETING THE DISALLOWANCE OF RS. 2,64,320/- U/S 14A OF THE ACT RE AD WITH RULE 8D OF 6 ITA NO. 231 & 165/JP/2015 DCIT VS M/S GENUS INNOVATION LTD., THE INCOME TAX RULES, 1962 (IN SHORT THE RULES). THE LD ASSESSING OFFICER OBSERVED THAT THE ASSESSEE HAD DIVIDEND INCOME OF R S. 4,90,595/- ON INVESTMENT OF RS. 92,76,649/-. HE GAVE REASONABLE O PPORTUNITY OF BEING HEARD FOR DISALLOWANCE U/S 14A OF THE ACT. THE ASSESS EE REPLIED VIDE LETTER DATED 14/3/2014, WHICH HAS BEEN REPRODUCED BY THE ASSESSING OFFICER ON PAGE 4 OF THE ASSESSMENT ORDER. AFTER CO NSIDERING THE ASSESSEES REPLY, THE LD ASSESSING OFFICER HELD THA T THE ASSESSEE HAD NOT MAINTAINED SEPARATE BOOKS OF ACCOUNT OR BANK ACCOUN T FOR INVESTMENT IN SHARES AND MOVEMENT OF FUND FOR DAY TO DAY BUSINESS OF THE ASSESSEE. THE ASSESSEE HAS PAID INTEREST DURING THE YEAR UNDER CONSIDERATION AT RS. 28,26,009/-. AFTER CONSIDERING SECTION 14A AND VARI OUS DECISIONS ON THIS ISSUE, HE APPLIED RULE 8D OF THE RULES AND CLAUSE ( II) AND (III) OF SECTION 14A OF THE ACT AND DISALLOWANCE UNDER THIS SECTION H AD BEEN CALCULATED AT RS. 2,64,320/- AND MADE THE ADDITION. 4.1 THE LD CIT(A) ALLOWED THE APPEAL ON THIS GROUND B Y OBSERVING THAT SECTION 14A COULD ONLY BE TRIGGERED IF THE APPELLAN T HAD EARNED TAX FREE INCOME AGAINST ANY EXPENSES INCURRED. THE ASSESSEE H AS GOT ENOUGH INTEREST FREE FUND FOR MAKING INVESTMENT AND ALSO E ARNED EXEMPT INCOME OF RS. 4,90,495/-. THEREFORE, HE DELETED THE ADDITIO N MADE BY THE ASSESSING OFFICER. 7 ITA NO. 231 & 165/JP/2015 DCIT VS M/S GENUS INNOVATION LTD., 4.2 NOW THE REVENUE IS IN APPEAL BEFORE US. THE LD DR HAS VEHEMENTLY SUPPORTED THE ORDER OF THE ASSESSING OFFICER. AT TH E OUTSET, THE LD AR OF THE ASSESSEE HAS REITERATED THE ARGUMENTS MADE BEFO RE THE LD CIT(A). IT IS FURTHER SUBMITTED THAT THE ASSESSEE HAD INVESTED IN EQUITY SHARE AT RS. 33.59 LACS OF ITS GROUP COMPANY M/S GENUS POWER INFR ASTRUCTURE LTD. AND RS. 2.09 LACS IN THE SHARE OF BANK OF BARODA PRIOR TO F.Y. 2005-06 AND FOR MAKING SUCH INVESTMENTS, FOR THIS ASSESSEE COMPANY HAS UTILIZED ITS OWN INTEREST FREE FUNDS AVAILABLE IN THE SHAPE OF SHARE CAPITAL OF RS. 3.14 CRORES. THUS THERE WAS NO QUESTION OF INTEREST BEARIN G FUNDS WERE INVOLVED IN SUCH INVESTMENT. HE HAS DRAWN OUR ATTENT ION ON INVESTMENT MADE FROM A.Y. 2000-01 TO 2003-04. IT IS EVIDENT TH AT MAJORITY OF INVESTMENTS WERE MADE FROM THE SOURCE OF ASSESSEE NO T FROM THE BORROWED FUND,S NO EXPENDITURE WAS INCURRED BY IT IN RELATION TO THE SAID DIVIDEND INCOME AND THE INTEREST CLAIMED BY IT PERT AINED TO EARNING OF THE TAXABLE INCOME. THEREFORE NO DISALLOWANCE WAS POSS IBLE U/S 14A READ WITH RULES 80D OF THE RULES. THE LD ASSESSING OFFICER ALSO FAILED TO RECORD THE SATISFACTION BEFORE INVOKING THE PROVISIONS OF SECTION 14A THAT THE INTEREST BEARING FUNDS WERE UTILIZED FOR MAKING INVE STMENTS. HE HAS FURTHER RELIED ON THE DECISION OF HONBLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF CIT VS./ HERO CYCLES LTD. 323 ITR 518 AND VARIOUS OTHER 8 ITA NO. 231 & 165/JP/2015 DCIT VS M/S GENUS INNOVATION LTD., CASES OF THE HON'BLE HIGH COURTS AS WELL AS THE TRIBU NAL AND PRAYED TO CONFIRM THE ORDER OF THE LD CIT(A). 4.3 WE HAVE HEARD THE RIVAL CONTENTIONS OF BOTH THE PARTIES AND PERUSED THE MATERIAL AVAILABLE ON THE RECORD. IT IS UNDISPUTED FACT THAT THE INVESTMENTS IN SHARES WERE MADE UP TO F.Y. 2005- 06. DURING THE YEAR, NO INVESTMENT HAS BEEN MADE BY THE ASSESSEE. THE ASSESSEE HAD SHARE CAPITAL OF RS. 3.14 CRORES AND RESERVE AND SU RPLUS OF RS. 4.57 CRORES. IT IS FURTHER FOUND THAT INVESTMENTS MADE I N SUBSIDIARY COMPANY NOT IN THE SHARE OF ANY OTHER UNRELATED PARTY. THERE FORE, THE PRIMARY OBJECT OF THE INVESTMENT WAS HOLDING AND CONTROLLING STAKE IN THE GROUP CONCERN AND NOT EARNING ANY INCOME OUT OF INVESTMEN T. THE LD ASSESSING OFFICER HAD NOT ESTABLISHED ANY NEXUS BETWEEN BORROWE D FUND WITH INVESTMENTS MADE IN SHARES ON WHICH DIVIDEND EARNED. THE CASE LAWS RELIED BY THE LD. AR ARE SQUARELY APPLICABLE, THERE FORE, WE UPHOLD THE ORDER OF THE LD CIT(A). GROUND NO. 2 OF THE REVENUE S APPEAL IS DISMISSED. 5. GROUND NO. 3 OF THE REVENUES APPEAL IS AGAINST DELETING THE ADDITION OF RS. 37,05,685/- MADE ON ACCOUNT OF FORE IGN EXCHANGE GAIN. THE LD ASSESSING OFFICER OBSERVED THAT ON EXAMINATIO N OF THE POINT NO. 5 9 ITA NO. 231 & 165/JP/2015 DCIT VS M/S GENUS INNOVATION LTD., OF SCHEDULE Q, NOTES OF ASSESSEE TO THE FINAL ACC OUNT, IT IS NOTICED THAT THE AUDITOR HAS PUT FOLLOWING NOTE: 5. THE COMPANY HAS NOT RECOGNIZED THE EXCHANGE FLUC TUATION GAIN (NET) AMOUNTING TO RS. 3705685/- LACS ON UNREA LIZED EXPORT RECEIVABLE AND UNPAID IMPORT PAYABLE, WHICH I S CONTRARY TO THE ACCOUNTING POLICY OF THE COMPANY ON FOREIGN CURRENCY TRANSACTION AND ACCOUNTING STANDARD-11 (THE EFFECTS OR CHANGES IN FOREIGN EXCHANGE RATES). THIS HAS BEEN DONE IN VIEW OF HIGH VOLATILY IN FOREIGN EXCHAN GE RATES AND CONTINGENCY RELATED TO THE RATES OF FOREIGN CUR RENCY ON REALIZATION OF ASSETS. SIMILAR NOTE HAS ALSO BEEN GIVEN AT POINT NO. 4(F) OF AUDITORS REPORT AS UNDER:- (F) THE COMPANY HAS NOT RECOGNIZED THE EXCHANGE FLU CTUATION GAIN (NET) AMOUNTING TO RS. 37.06 LACS ON UNREALIZE D OLD EXPORT RECEIVABLE/IMPORT PAYABLE. (REFER NOTE NO. 5 OF NOTES OF ACCOUNT). DUE TO ABOVE, THE PROFITS OF THE COMPANY AND NET CURRENT ASSET OF THE COMPANY ARE UNDERSTATED TO THAT EXTENT. THE LD ASSESSING OFFICER GAVE REASONABLE OPPORTUNITY OF BEING HEARD ON FOREIGN EXCHANGE GAIN WHICH HAS NOT BEEN DISCLOSED ON THE INCOME OF RS. 37,05,685/-. THE ASSESSEE REPLIED VIDE LETTER DATED 14/3/2013 WHICH HAS BEEN REPRODUCED BY THE ASSESSING OFFICER ON PAGE NO . 12 AND 13 OF THE ASSESSMENT ORDER. AFTER CONSIDERING THE ASSESSEES REPLY, IT HAS BEEN 10 ITA NO. 231 & 165/JP/2015 DCIT VS M/S GENUS INNOVATION LTD., HELD BY THE ASSESSING OFFICER THAT THE ASSESSEE HAD FOLLOWED MERCANTILE SYSTEM OF ACCOUNTING, THEREFORE, THE FOREIGN EXCHAN GE GAIN OR LOSS HAS TO BE ACCOUNTED AT THE END OF THE RELEVANT FINANCIAL Y EAR. IF THE ASSESSEE WOULD NOT RECEIVE THESE PAYMENTS, HE CAN CLAIM THIS AMOUNT AS BAD DEBT BUT TILL 31/3/2011, THIS DEBT HAS NOT BEEN WRITTEN O FF. ACCORDINGLY, HE MADE ADDITION OF RS.37,05,685/-. 5.1 THE LD CIT(A) HAD DELETED THE ADDITION MADE BY TH E ASSESSING OFFICER BY OBSERVING THAT THE NOTIONAL INCOME ON AC COUNT OF FOREIGN EXCHANGE GAIN CANNOT BE TREATED AS INCOME BECAUSE I T IS A HYPOTHETICAL INCOME, WHICH WAS NEVER RECEIVED BY THE ASSESSEE. 5.2 NOW THE REVENUE IS IN APPEAL BEFORE US. THE LD DR HAS VEHEMENTLY SUPPORTED THE ORDER OF THE LD ASSESSING OFFICER. AT THE OUTSET, THE LD AR OF THE ASSESSEE HAS REITERATED THE ARGUMENTS MADE B EFORE THE LD CIT(A). IT IS SUBMITTED THAT IN F.Y. 2007-08 AND 2008-09, T HE ASSESSEE COMPANY HAD EXPORTED GOODS TO BRAZIL OUT OF CERTAIN BILLS REMAINED UNPAID TILL 31/3/2011 DUE TO THE FACT THAT THE GOODS WERE NOT AC CEPTED BY THE CUSTOMER BEING WAS OF SUB-STANDARD QUALITY. FURTHER SINCE THE RECOVERY OF ORIGINAL AMOUNT IS DOUBTFUL, EXCHANGE DIFFERENCE ON THE CLOSING VALUE OF DEBTORS WAS ALSO NOT RECOGNIZED. THE ASSESSEE RE QUESTED TO THE BANKER FOR GRANTING PERMISSION FOR WRITING OFF THE S AID AMOUNTS IN THE 11 ITA NO. 231 & 165/JP/2015 DCIT VS M/S GENUS INNOVATION LTD., BOOKS OF ACCOUNTS AND THE NECESSARY PERMISSION IN R ESPECT OF FEW BILLS WAS RECEIVED AND SUBMITTED BEFORE THE LD ASSESSING O FFICER DURING THE COURSE OF ASSESSMENT PROCEEDINGS. THE LD AR HAS DRAWN OUR ATTENTION ON PAGE NO. 15-17 OF THE PAPER BOOK. FINALLY THIS AMOU NT HAD BEEN WRITTEN OFF IN A.Y. 2014-15 IN THE BOOKS OF ACCOUNT. THE LD ASSESSING OFFICER MADE ADDITION ON THE BASIS OF REMARKS MADE BY THE A UDITOR IN AUDIT REPORT BUT THIS AMOUNT WAS RECEIVABLE AND ALSO NOT R ECEIVED, THEREFORE, THE LD ASSESSING OFFICER HAS TO ASSESSEE THE ASSESS EES INCOME ON REAL INCOME NOT ON THE BASIS OF NOTIONAL INCOME. THE AUDI TOR OF THE ASSESSEE COMPANY HAD MADE THIS REMARK AS PER A.S.-11 ISSUED BY THE INSTITUTE OF CHARTERED ACCOUNTANT OF INDIA. HE FURTHER RELIED ON THE FOLLOWING CASE LAWS:- (I) SHORJ VALLABH DAS & CO. 46 ITR 144 (SC) (II) GODHRA ELECTRICITY CO. LTD. VS CIT 225 ITR 746 (SC). (III) CIT VS VTC LEASING & FINANCE LTD. 39 TW 211. (IV) BRAHMAPUTRA CAPITAL & FINANCIAL SERVICES LTD. VS. ITO 119 ITD 266 (DELHI). 5.3 WE HAVE HEARD THE RIVAL CONTENTIONS OF BOTH THE PARTIES AND PERUSED THE MATERIAL AVAILABLE ON THE RECORD. IT IS UNDISPUTED FACT THAT THE DEBTORS WAS IN DISPUTE SINCE F.Y. 2007-08 AND 20 08-09, THERE WAS A REMARK BY THE AUDITOR ON ACCOUNT OF FOREIGN EXCHANG E GAIN IN THE AUDIT REPORT AND CLARIFIED THAT AMOUNTING TO RS. 37,05,68 5/- HAD NOT BEEN 12 ITA NO. 231 & 165/JP/2015 DCIT VS M/S GENUS INNOVATION LTD., CREDITED IN THE ACCOUNT OF THE ASSESSEE. THE ASSESSE E HAS EXPLAINED THE REASONS THAT IT HAS NOT RECEIVED THIS INCOME. THERE IS A DISPUTE WITH THE BRAZILIAN PARTY ON ACCOUNT OF QUALITY OF GOODS. THE ORIGINAL BILL AMOUNT WAS IN DISPUTE, THEREFORE HE HAS NOT SHOWN THIS INCRE ASE IN FOREIGN EXCHANGE GAIN. IT WAS NOTIONAL AS PER HON'BLE DELHI HIGH COURT DECISION IN THE CASE OF BRAHMAPUTRA CAPITAL & FINANCIAL SERV ICES LTD. VS. ITO (SUPRA). THE INTEREST INCOME ON STICKY LOANS, WHICH H AS CALCULATED ON THE BASIS OF HYPOTHETICAL INCOME NOT REAL INCOME OF THE FINANCE COMPANY. IN THIS CASE ALSO, THE LD ASSESSING OFFICER HAS CALCUL ATED THIS FOREIGN EXCHANGE GAIN ON NOTIONAL BASIS, WHICH WAS NOT REAL. THE OTHER CASE LAWS REFERRED BY THE ASSESSEE ARE ALSO SQUARELY APPLICAB LE ON REAL INCOME THEORY. ACCORDINGLY, WE UPHOLD THE ORDER OF THE LD C IT(A) AND THE REVENUES APPEAL ON THIS GROUND IS DISMISSED. NOW WE TAKE ASSESSEES APPEAL. 6. THE SOLE GROUND OF THE ASSESSEES APPEAL IS AGAI NST CONFIRMING THE ADDITION OF RS. 90,51,858/- U/S 43B OF THE ACT. THE LD ASSESSING OFFICER OBSERVED THAT THE ASSESSEE HAD CLAIMED DEDUCTION OF RS. 1,0436,084/- IN THE COMPUTATION U/S 43B ON ACCOUNT OF PAYMENTS MADE PERTAINING TO EARLIER YEAR. ON VERIFICATION OF DETAILS, IT IS FOU ND THAT THE ASSESSEE HAD CLAIMED ADVANCE VAT PAYMENT OF RS. 90,51,858/-. AS P ER ASSESSING 13 ITA NO. 231 & 165/JP/2015 DCIT VS M/S GENUS INNOVATION LTD., OFFICER, IT IS NOT ALLOWABLE U/S 43B, THEREFORE, HE GAVE REASONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE, WHICH WAS AVAILED BY THE ASSESSEE VIDE LETTER DATED 14/3/2014. IT IS SUBMITT ED BEFORE THE ASSESSING OFFICER THAT THIS EXPENSE IS ALLOWABLE ON THE BASIS OF PAYMENTS MADE DURING THE YEAR UNDER CONSIDERATION U/S 43B OF THE ACT. THE LD ASSESSING OFFICER CONSIDERED SECTION 43B OF THE ACT WHICH HAS BEEN REPRODUCED ON PAGE NO. 11 OF THE ASSESSMENT ORDER. AFTER CONSIDERING THE ASSESSEES REPLY, THE LD ASSESSING OFFICER HELD THAT THIS AMOUNT IS NOT ALLOWABLE U/S 43B, WHICH HAS BEEN CONFIRMED BY THE LD CIT(A) BY OBSERVING THAT THE ASSESSEE HAD CLAIMED ADVANCE VAT PAYMENT BY RELYING ON THE HON'BLE SUPREME COURT DECISION IN TH E CASE OF ALLIED MOTORS (P) LTD. VS CIT (1997) 224 ITR 667 AND HONBLE CALCUTTA HIGH COURT IN THE CASE OF PAHARPUR COOLING TOWERS LTD. VS CIT 244 CTR 502 IRRESPECTIVE OF THE FACT THAT LIABILITY OF PAYING S UCH AMOUNT WAS INCURRED OR NOT IN THE PREVIOUS YEAR RELEVANT TO ASSESSMENT YEAR UNDER APPEAL. HE FURTHER ANALYSED SECTION 43B OF THE ACT AND HELD TH AT DURING THE YEAR, THIS TAX WAS NOT DUE BUT PAID IN ADVANCE. THUS, THIS ADVANCE TAX IS NOT COVERED WITHIN THE MEANING OF DEFINITION OF ANY SUM PAYABLE. THIS VIEW HAS BEEN SUPPORTED BY THE DECISION OF HONBLE ITAT H YDERABAD BENCH IN THE CASE OF DCIT VS CWC WINES PVT. LTD. 268 ITR 23 ( AT). THE CASE LAWS 14 ITA NO. 231 & 165/JP/2015 DCIT VS M/S GENUS INNOVATION LTD., RELIED UPON BY THE ASSESSEE WAS WITH REFERENCE TO EXC ISE DUTY PAYMENT WHERE IT HAS BEEN INCURRED IN THE PREVIOUS YEAR WHERE AS IN THE PRESENT CASE, NO SUCH LIABILITY WAS INCURRED IN PREVIOUS YEA R. 6.1 NOW THE ASSESSEE IS IN APPEAL BEFORE US. THE LD A R OF THE ASSESSEE HAS SUBMITTED THAT THE ASSESSEE PAID ADVANCE VAT OF RS. 90,51,858/- AND CLAIMED DEDUCTION ON THE BASIS OF PAYMENT BASIS U/S 43B OF THE ACT IN COMPUTATION OF INCOME. HE HAS DRAWN OUR ATTENTION ON PAGE NO. 7 OF THE PAPER BOOK IRRESPECTIVE OF THE FACT THAT LIABIL ITY OF PAYING SUCH AMOUNT WAS INCURRED OR NOT IN THE PREVIOUS YEAR RELE VANT TO ASSESSMENT YEAR UNDER APPEAL. HE HAS FURTHER DRAWN OUR ATTENTI ON ON SECTION 53 AND ARGUED THAT ADVANCE VAT PAYMENT IS ALLOWABLE. HE FURT HER RELIED ON THE DECISIONS IN THE CASES OF ALLIED MOTORS (P) LTD. VS CIT AND PAHARPUR COOLING TOWERS LTD. VS CIT (SUPRA). HE FURTHER MADE RE FERENCE TO THE HONBLE DELHI HIGH COURT DECISION IN THE CASE OF CI T VS. SAMTEL COLOUR LTD. (2009) 184 TAXMAN 120 AND HONBLE ITAT (SB) CHAN DIGARH IN THE CASE OF DCIT VS GLAXO SMITHKLINE CONSUMER HEALTHCARE LTD. AND PRAYED TO ALLOW THE APPEAL. 6.2 AT THE OUTSET, THE LD DR HAS VEHEMENTLY SUPPORT ED THE ORDER OF THE LD CIT(A). 15 ITA NO. 231 & 165/JP/2015 DCIT VS M/S GENUS INNOVATION LTD., 6.3 WE HAVE HEARD THE RIVAL CONTENTIONS OF BOTH THE PARTIES AND PERUSED THE MATERIAL AVAILABLE ON THE RECORD. THERE IS NO DISPUTE ABOUT THE FACT OF THE AMOUNT PAYMENTS MADE AND DEDUCTION CLAIMED IN COMPUTATION OF INCOME AT THE TIME OF FILING OF RETU RN BUT IT IS ALSO UNDISPUTED FACT THAT THIS IS ADVANCE PAYMENT OF VAT. THE CASE LAWS RELIED UPON BY THE ASSESSEE ARE NOT SQUARELY APPLIC ABLE AS THE HON'BLE SUPREME COURT HAS ANALYSED THE OBJECT OF SECTION 43 B AND HELD THAT STATUTORY LIABILITY IS TO BE ALLOWED ON PAYMENT BASI S. THE LIABILITY FOR WHICH WAS INCURRED IN THE PREVIOUS YEAR WILL BE ALLOWED AS DEDUCTION AND THE LIABILITY SHOULD BE RELATED TO PREVIOUS YEAR. W HEREIN SALES TAX LIABILITY OF LAST QUARTER COULD NOT BE PAID BEFORE CLOSING DA TE OF THE EVERY YEAR, THEREFORE, THIS INCENTIVE WAS GIVEN U/S 43B OF THE A CT BY THE LEGISLATURE. THIS ISSUE HAS BEEN CONSIDERED BY THE COORDINATE BEN CH OF HYDERABAD IN THE CASE OF DCIT VS CWC WINES PVT. LTD. (SUPRA) AND HELD THAT ADVANCE PAYMENT IS NOT DEDUCTIBLE. SECTION 43 MAY NOT BE UN DERSTOOD AS AUTHORIZING PAYMENT WHICH HAVE NOT BECOME DUE BUT AL L THE SUM PAID IN ADVANCE. IN THE CASE OF CIT VS. SAMTEL COLOUR LTD. (SUPRA) THE ISSUE WAS BEFORE THE HON'BLE DELHI HIGH COURT REGARDING CUSTO M DUTY AND THE DECISION OF COORDINATE BENCH OF ITAT, CHANDIGARH IN THE CASE OF DCIT VS GLAXO SMITHKLINE CONSUMER HEALTHCARE LTD.(SUPRA) TH E ISSUE WAS EXCISE 16 ITA NO. 231 & 165/JP/2015 DCIT VS M/S GENUS INNOVATION LTD., DUTY AND MODVAT CREDIT. THEREFORE, WE ARE OF THE CONSI DERED VIEW THAT THE LD CIT(A) HAD RIGHTLY DISALLOWED THE DEDUCTION CL AIMED U/S 43B OF THE ACT FOR ADVANCE PAYMENT OF VAT AT RS. 90,51,858/-. A CCORDINGLY, WE CONFIRM THE ORDER OF THE LD CIT(A). 7. IN THE RESULT, APPEAL OF THE REVENUE AS WELL AS A SSESSEES APPEAL ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 22/06/2016 SD/- SD/- YFYR DQEKJ VH-VKJ-EHUK (LALIET KUMAR) (T.R. MEENA) U;KF;D LNL;@ JUDICIAL MEMBER YS[KK LNL;@ ACCOUNTANT MEMBER TK;IQJ@ JAIPUR FNUKAD@ DATED:- 22 ND JUNE, 2016 RANJAN* VKNS'K DH IZFRFYFI VXZSFKR @ COPY OF THE ORDER FORWARDED TO: 1. VIHYKFKHZ @ THE APPELLANT- THE DCIT/ADDL.CIT, CIRCLE/RANGE-2, JAIPUR. 2. IZR;FKHZ @ THE RESPONDENT- M/S GENUS INNOVATION LTD., JAIPUR. 3. VK;DJ VK;QDR @ CIT 4. VK;DJ VK;QDRVIHY @ THE CIT(A) 5. FOHKKXH; IZFRFUF/K] VK;DJ VIHYH; VF/KDJ.K] T;IQJ @ DR, ITAT, JAIPUR 6. XKMZ QKBZY @ GUARD FILE (ITA NO.231 &165/JP/2015) VKNS'KKUQLKJ @ BY ORDER, LGK;D IATHDKJ @ ASST. REGISTRAR