The ACIT, Circle-8, Ahmedabad V. The Ahmedabad Electricity Company Ltd., Ahmedabad

ITA 2326/AHD/2005

• Counselvise Citation: [2009] 115 COUNSELVISE.COM (IT) 0435 (ITAT-AHMEDABAD)
• Duration Of Justice: 4 year(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-11-2009
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 17-09-2009
• Assessment Year: 2001-2002
• Appeal Filed On: 31-10-2005
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: P M MEHTA; S N SOPARKAR

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH B AHMEDABAD BEFORE SHRI P.K.BANSAL, ACCOUNTANT MEMBER AND SHRI MAHAVIR SINGH, JUDICIAL MEMBER ITA NO.2326/AHD/2005 & CROSS OBJECTION NO.239/AHD/2005 ASSESSMENT YEAR:2001-02 DATE OF HEARING:17.9.09 DRAFTED:9.10.09 ACIT. CIRCLE-8, AHMEDABAD TORRENT POWER AEC LTD. (FORMERLY THE AHMEDABAD ELECTRICITY COMPANY LTD), ELECTRICITY HOUSE, LAL DARWAJA, AHMEDABAD PAN NO.AACT5739L V/S . V/S . THE AHMEDABAD ELECTRICITY COMPANY LTD., ACIT, CIRCLE-8, AHMEDABAD (APPELLANT) .. (RESPONDENT) ASSESSEE BY :- SHRI S.N.SOPARKAR & SHRI P.M.MEHTA, AR REVENUE BY:- SHRI ANIL KUMAR, CIT,DR O R D E R PER MAHAVIR SINGH JUDICIAL MEMBER:- THIS APPEAL BY THE REVENUE AND CROSS OBJECTION (CO ) BY THE ASSESSEE ARE ARISING OUT OF THE ORDER OF COMMISSIONER OF INCOME- TAX (APPEALS)-V, AHMEDABAD IN APPEAL NO. CIT(A)-V/ACIT CIR.1/131/2004-05 DATED 02 -08-2005. THE ASSESSMENT WAS FRAMED BY THE ACIT, CIRCLE-1, AHMEDABAD U/S. 14 3(3) OF THE INCOME-TAX ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT) VIDE HI S ORDER DATED 30-03-2004 FOR THE ASSESSMENT YEAR 2001-02. FIRST WE SHALL TAKE UP REVENUES APPEAL IN ITA NO.2 326/AHD/205. ITA NO.2326/AHD/005 & CO NO.239/AHD/2005 A.Y. 200 1-02 ACIT, CIR-8, ABD V. TORRENT AEC LTD. PAGE 2 2. THE ONLY ISSUE IN THIS APPEAL OF REVENUE IS AS R EGARDS TO THE ORDER OF CIT(A) IN DELETING THE DISALLOWANCE OF DEDUCTION OF RS.4.1 1 CRORES IN RESPECT OF UNASCERTAINED LIABILITY. 3. THE BRIEF FACTS LEADING TO THIS ISSUE THAT THE A SSESSEE-COMPANY IS ENGAGED IN BUSINESS OF GENERATION, TRANSMISSION AND DISTRIBUTI ON OF ELECTRICITY. THE ASSESSEE- COMPANY HAS FILED ITS RETURN OF INCOME ON 30-10-200 1. THE ASSESSING OFFICER DURING THE COURSE OF ASSESSMENT PROCEEDINGS NOTICED THAT T HE ASSESSEE HAS PUT FORWARD ONE CLAIM REGARDING THE LIABILITY IN THE FORM OF CO MPENSATION TO WORKERS. THE AO NOTED THAT THE INDUSTRIAL COURT PASSED AN AWARD DAT ED 15-04-2000 AND ON THE BASIS OF THE SAME, THE ASSESSEE HAS MADE CLAIM AND ESTIMA TED THE APPROXIMATE LIABILITY PURSUANT TO THIS WARD FOR THE RELEVANT ASSESSMENT Y EAR 2001-02 AT RS.4.11 CRORES. ACCORDING TO THE ASSESSING OFFICER, THIS CLAIM OF T HE ASSESSEE IS NOT MAINTAINABLE, REASON BEING THAT THIS IS NOT A STATUTORY LIABILITY AND ACTUALLY THIS IS A CONTRACTUAL LIABILITY. ACCORDING TO THE ASSESSING OFFICER, THE ASSESSEE HAS DISPUTED THIS LIABILITY BEFORE THE HIGHER COURTS AND THEREFORE THIS HAS BEC OME A DISPUTED CONTRACTUAL LIABILITY AND EVEN OTHERWISE THE LIABILITY HAS NOT BEEN ACTUALLY CRYSTALLIZED IN THIS YEAR. THEREFORE THE AO HELD THE SAME AS NOT ASCERTAIN LIA BILITY RATHER IT IS UNASCERTAINED LIABILITY. ACCORDINGLY HE DISALLOWED THE CLAIM OF DEDUCTION OF THE LIABILITY OF COMPENSATION TO THE WORKERS. AGGRIEVED, THE ASSESS EE PREFERRED APPEAL BEFORE CIT(A) AND CIT(A) ALLOWED THE CLAIM OF THE ASSESSEE BY TREATING THE LIABILITY AS ASCERTAIN LIABILITY IN VIEW OF AWARD PASSED BY THE INDUSTRIAL COURT ON 15-04-2000 AND ACCORDINGLY HE HELD THAT THE LIABILITY HAS ARISEN I N THIS YEAR ONLY. FOR THIS, HE HAS GIVEN THE FOLLOWING FINDING IN PARA-5.3 OF HIS APPELLATE ORDER:- 5.3 I HAVE CAREFULLY CONSIDERED THE ASSESSMENT ORD ER AND THE ABOVE SUBMISSIONS. A PERUSAL OF THE ORDER ITSELF SHOWS TH AT THE LIABILITY HAD ARISEN UPON THE ASSESSEE ON THE PASSING OF THE ORDER OF TH E COURT ON 15.04.2000. THIS LIABILITY HAS ARISEN IN THIS YEAR ITSELF. THE QUESTION WOULD, THEREFORE, NOW BE WHETHER SUCH LIABILITY CAN BE ALLOWED EVEN THOUG H IT IS DISPUTED BY THE ASSESSEE. IN VIEW OF THE SUPREME COURT DECISION IN THE CASE OF BHARAT CARBON & RIBBON MANUFACTURING CO. PVT. LTD. REPORTE D AT 239 ITR 505 (SC) LIABILITY IS HELD TO BE ACCRUED DURING THE ACCOUNTI NG PERIOD AS THE ORDER OF THE COURT WAS PASSED. AS FOR THE ASSESSING OFFICERS AR GUMENT THAT THE LIABILITY IS ON ESTIMATE BASIS AND IS NOT ASCERTAINED, AS RIGHTL Y POINTED BY THE ASSESSEE, THE LIABILITY HAS BEEN CLAIMED ON THE BASIS OF THE DIRECTIONS GIVEN IN THE INDUSTRIAL COURT ORDER AND, THEREFORE, IT CANNOT BE SAID THAT IT IS UNASCERTAINED LIABILITY. CONSIDERING TALL THESE ASPECTS I HOLD TH AT THE ASSESSING OFFICER WAS ITA NO.2326/AHD/005 & CO NO.239/AHD/2005 A.Y. 200 1-02 ACIT, CIR-8, ABD V. TORRENT AEC LTD. PAGE 3 NOT JUSTIFIED IN REJECTING THE CLAIM FOR DEDUCTION OF RS.4.11 CRORES. HE IS DIRECTED TO ALLOW THE DEDUCTION FOR THE SAME. AGGRIEVED, THE REVENUE CAME IN APPEAL BEFORE US. B EFORE US LD. DEPARTMENTAL REPRESENTATIVE ARGUED THAT THIS LIABILITY IS NOT ST ATUTORY LIABILITY AND IT IS ACTUALLY A CONTRACTUAL LIABILITY. HE FURTHER STATED THAT THE A SSESSEE HAS DISPUTED THIS LIABILITY BEFORE THE HIGHER COURTS AND CONSEQUENTLY IT HAS BE COME DISPUTED AS CONTRACTUAL LIABILITY. HE FURTHER SATED THAT THIS LIABILITY HAS NOT CRYSTALLIZED DURING THE YEAR UNDER CONSIDERATION AND THE ASSESSEE HAD MADE THE CLAIM O N THE BASIS OF ESTIMATES ONLY. ACCORDING TO HIM, THE CONTRACTUAL LIABILITY ACCRUED ONLY WHEN THE BASIS FOR CONFIGURATION IS SETTLED BY WAY OF AGREEMENT OR OTH ERWISE. HE RELIED ON VARIOUS CASE LAWS IN SUPPORT OF THIS CONTENTION. ON THE OTHER H AND, LD. SR. COUNSEL, SHRI S.N. SOPARKAR HEAVILY RELIED ON THE ORDERS OF CIT(A) AND STATED THAT THIS LIABILITY HAS ARISEN ON THE ASSESSEE AFTER PASSING OF THE ORDER BY THE I NDUSTRIAL COURT ON 15-04-2000 AND ACCORDINGLY LIABILITY PERTAINS TO THIS YEAR ONLY. LD. COUNSEL OF THE ASSESSEE RELIED ON THE SUPREME COURTS DECISION IN THE CASE OF CIT V. BHARAT CARBON & RIBBON MANUFACTURING CO. PVT. LTD. (1999) 239 ITR 505 (SC) AND RECENT DECISION OF HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF NAVJIVAN ROLLER FLOUR AND PULSE MILLS LTD. V. DCIT (2009) 315 ITR 190 (GUJ). IN VIEW OF THESE, LD. CO UNSEL URGED THE BENCH TO CONFIRM THE ORDER OF CIT(A). 4. WE HAVE HEARD THE RIVAL CONTENTIONS AND GONE THR OUGH THE FACTS AND CIRCUMSTANCES OF THE CASE. WE HAVE ALSO PERUSED THE CASE RECORDS INCLUDING THE ASSESSMENT ORDER AS WELL AS THE ORDER OF CIT(A). W E HAVE ALSO CONSIDERED THE ARGUMENTS OF BOTH THE SIDES. WE FIND THAT THE INDU STRIAL COURT HAS SAID THE DISPUTE AT BEST VIDE ORDER DATED 15-04-2000 AND THIS LIABILITY IS NOT ON ESTIMATE BASIS RATHER THIS IS A QUANTIFIED AND ASCERTAINED LIABILITY IN VIEW O F THE DECREE OF INDUSTRIAL DISPUTE COURT, SIMILAR VIEW HAS BEEN TAKEN EXACTLY ON SIMIL AR FACTS BY HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF NAVJIVAN ROLLER FLOUR AND PULSE MILLS LTD. (SUPRA). THE HONBLE HIGH COURT HAS HELD AS UNDER:- IN MERCANTILE SYSTEM OF ACCOUNTING IT IS WELL SETT LED THAT BOTH RECEIPT AND LIABILITY ACCRUE AT THE EARLIEST POINT OF TIME AND ARE NOT POSTPONED MERELY ON THE BASIS OF AN ENTRY MADE OR ABSENCE OF ANY ENTRY. ADMITTEDLY, THE ASSESSEE IS FOLLOWING THE MERCANTILE SYSTEM OF ACCOUNTING. ON MA 28, 1987, WHEN THE TRADE ASSOCIATION MADE AN AWARD FOR DAMAGES FOR BRE ACH OF CONTRACT THE LIABILITY TO PAY SUCH DAMAGES HAD ALREADY BEEN INCU RRED BY THE ASSESSEE. ITA NO.2326/AHD/005 & CO NO.239/AHD/2005 A.Y. 200 1-02 ACIT, CIR-8, ABD V. TORRENT AEC LTD. PAGE 4 MERELY BECAUSE THE AWARD WAS CHALLENGED IN APPEAL B Y THE ASSESSEE CANNOT BE A GROUND FOR HOLDING THAT THE LIABILITY HAD NOT BEEN INCURRED. THE TRIBUNAL HAS COMMITTED AN ERROR IN LAW IN PLACING RELIANCE UPON THE DECISION RELATABLE TO A CLAIM FOR ENHANCEMENT OF COMPENSATION IN LAND ACQUISITION CAS E AND APPLYING THE ANALOGY THEREOF FOR COMING TO THE CONCLUSION THAT THE LIABI LITY AROSE ONLY ON MARCH 22, 1989, WHEN THE APPELLATE FORUM CONFIRMED THE AWARD. THE ISSUE BEFORE THE TRIBUNAL WAS NOT IN RELATION TO ANY CLAIM FOR ENHANCEMENT IN THE AWARD NOR WAS THE ASSESSEE CLAIMING ANY AMOUNT OVER AND ABOVE THE AWARDED AMOU NT. AND FURTHER HELD AS UNDER:- IN THE RESULT, FOR THE REASONS AFORESTATED, IT IS NOT POSSIBLE TO HOLD THAT THE IMPUGNED ORDER OF THE TRIBUNAL IS CORRECT IN LAW. THE LIABI LITY TO MAKE PAYMENT OF RS.7,14,824 ARISING UNDER THE ARBITRATION AWARD DECLARED IN THE RELEVANT ACCOUNTING PERIOD FOR THE ASSESSMENT YEAR 1988-89 HAD ACCRUED IN THAT YEAR. T HE QUESTION STANDS ANSWERED ACCORDINGLY I.E. IN FAVOUR OF THE ASSESSEE AND AGAI NST THE REVENUE. 5. IN VIEW OF THE ABOVE FACTS, THE CASE LAW OF HON BLE JURISDICTIONAL HIGH COURT, WE ARE OF THE VIEW THAT THE LIABILITY HAS BEEN CRYSTALLIZED D URING THIS YEAR ONLY AND THE CIT(A) HAS RIGHTLY ALLOWED THE CLAIM OF THE ASSESSEE, WE CONFI RM THE SAME. THIS ISSUE OF THE REVENUES APPEAL IS DISMISSED. NOW COMING TO ASSESSEES CO NO.239/AHD/2005. 6. AT THE OUTSET, LD. COUNSEL FOR THE ASSESSEE HAS NOT PRESSED THE CO. HENCE, WE DISMISS THE CO AS NOT PRESSED. 7. IN THE RESULT, REVENUES APPEAL IS DISMISSED AND TH AT OF ASSESSEES CO IS DISMISSED AS NOT PRESSED. ORDER PRONOUNCED IN OPEN COURT ON 20/11/2009 SD/- SD/- (P.K.BANSAL) (MAHAVIR SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER AHMEDABAD, DATED : 20/11/2009 *DKP COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE CIT(APPEALS)-V, AHMEDABAD 4. THE CIT CONCERNS. 5. THE DR, ITAT, AHMEDABAD 6. GUARD FILE. BY ORDER, /TRUE COPY/ DEPUTY / ASSTT.REGISTRAR ITAT, AHMEDABAD