Appeal details
Counselvise Citation
235919914 RSA 2012
Assessee PAN
Bench
Appeal Number
Duration Of Justice
3 year(s) 1 month(s) 5 day(s)
Appellant
Respondent
Appeal Type
Income Tax Appeal
Pronouncement Date
15-05-2015
Appeal Filed By
Department
Bench Allotted
D
Next Hearing Date
21-01-2015
Assessment Year
2008-2009
Appeal Filed On
10-04-2012
Judgement Text
, , IN THE INCOME TAX APPELLATE TRIBUNAL D , BENCH MUMBAI . . , , BEFORE SHRI R.C.SHARMA , A M & SHRI SANJAY GARG , J M ./ ITA N O. 2359 / MUM/20 1 2 ( / ASSESSMENT YEAR : 200 8 - 09 ) ACIT, CIRCLE - 1, THANE VS. MR. DEEPAK RAMCHAND MAKHIJA, PROP OF MAKHIJA ASSOCIATES, VISHWAS HOSPITAL BUILDING, 1 ST FLOOR, BEHIND GHANTALI TEMPLE, V.B.P. R OAD, VISHNU NAGAR, NAUPADA, THANE (E) - 400 602 ./ ./ PAN/GIR NO. : A ADCA 5682 N ( / APPELLANT ) .. ( / RESPONDENT ) /REVENUE BY : SHRI LOVE KUMAR /ASSESSEE BY : SHRI JAYANT BHATT / DATE OF HEARING : 13 /0 5 / 2015 / DATE OF PRONOUNCEMENT 15 /05 /2015 / O R D E R PER R.C.SHARMA (A.M) : THIS IS AN APPEAL FILED BY THE REVENUE AGAINST THE ORDER OF CIT(A) - II , MUMBAI , DATED 23 - 12 - 2011 FOR THE ASSESSMENT YEAR 200 8 - 09 IN THE MAT TER OF ORDER PASSED U/S.143(3) OF THE IT ACT. 2. IN THIS APPEAL, THE REVENUE IS AGGRIEVED FOR DELETION OF ADDITION OF RS.30,71,088/ - MADE ON A CCOUNT OF DISALLOWANCE U/S.43B OF IT. ACT. 3. RIVAL CONTENTIONS HAVE BEEN HEARD AND RECORD PERUSED. BRIEF FACTS OF THE ISSUE UNDER CONSIDERATION ARE THAT THE ASSESSEE HAD MADE A PROVISION FOR GOVERNMENT CHARGES AMOUNTING TO RS. 30,71,088/ - . THE AO ITA NO. 2359 /1 2 2 ASKED THE ASSESSEE TO PROVIDE THE NECESSARY DETAILS REGARDING THE ABOVE PROVISION MADE. ACCORDING TO THE AO, THE ASSESSEE SUBMITTED SOME OF THE DETAILS IN THE FORM OF L EDGER ACCOUNTS AND COMPUTER PRINTOUTS WITHOUT ANY DOCUMENTARY EVIDENCES FOR THE ABOVE PROVISION MADE. ON THE BASIS OF THE ABOVE ARGUMENTS, THE AO DISALLOWED THE ABOVE PROVISI ON MADE AMOUNTING TO RS. 30,7 1 ,088/ - A S PER PROVISIONS OF SECTION 43B AND ADDED BACK THIS AMOUNT TO THE INCOME OF THE ASSESSEE FOR THE YEAR UNDER CONSIDERATION. BY THE IMPUGNED ORDER THE CIT(A) DELETED THE ADDITION AFTER OBSERVING THAT THE PROVISION MADE FOR THE GOVERNMENT CHARGES AMOU NTING TO RS. 30,71,088/ - DOES NOT COME WITHIN THE PURVIEW OF PROVISIONS OF SECTION 43B OF THE IT ACT. 4. AGAINST THE ABOVE ORDER OF CIT(A), THE REVENUE IS IN FURTHER APPEAL BEFORE US. 5. WE HAVE CONSIDERED RIVAL CONTENTIONS AND FOUND THAT ASSESSEE WAS ENGAGED IN D ESIGNING SERVICES FOR INTELLECTUAL PROPERTY RIGHTS. THE ASSESSEE IS RENDERING PROFESSIONAL SERVICES FOR TRADEMARKS, PATENTS REGISTRATION TO THEIR CLIENTS. ONCE THE CLIENT APPROACHES THE ASSESSEE FOR TRADEMARKS OR PATENTS REGISTRATION, REGULAR BILL TOWARDS PROFESSIONAL FEE AND DEBIT NOTE FOR REGISTRATION CHARGES TO BE PAID TO THE GOVERNMENT, ARE RAISED. THE MOMENT THIS INVOICES AND DEBIT NOTES ARE RAISED, NECESSARY ENTRIES ARE PASSED IN THE BOOKS OF ACCOUNTS I.E. ONE ON ACCOUNT OF PROFESSIONAL FEE A/C. AND T HE OTHER AS REGISTRATION CHARGES TO BE PAID TO THE GOVERNMENT IN THE BOOKS OF ACCOUNTS. IF THE CLIENT ISSUES CHEQUE TOWARDS BOTH THESE ITEMS, THE ASSESSEE FORWARDS HIS APPLICATION AND PAYS ITA NO. 2359 /1 2 3 THE REGISTRATION CHARGES TO THE GOVERNMENT ON BEHALF OF THE CLIENT. AT TIMES THERE MIGHT BE A SHORTFALL OR SURPLUS UNDER THE HEAD REGISTRATION CHARGES. IN THE CASE OF SURPLUS, IT IS TREATED AS INCOME BY TRANSFERRING THE SAME TO THE PROFESSIONAL INCOME ACCOUNT AND THE SHORTFALL IF ANY ARE BORN BY THE ASSESSEE HIMSELF . AS T HE WORK ON THE PATENT TAKES 2 TO 2.5 YEARS INVOLVING LOTS OF PAPER AND PROCEDURAL WORK. IN CASE, THE CLIENT DOES NOT TURN UP AFTER TAKIN G THE QUOTE AND IF HE DOES NOT MAKE THE PAYMENT TOWARDS BOTH THE ITEMS, THE ASSESSEE HAS TO REVERSE THE ENTRIES IN BOTH THE ACCOUNTS WHICH ARE DULY REFLECTED IN THE EXTRACT OF LEDGER ACCOUNT PRODUCED BEFORE THE A O . IN ANY CASE, THE ABOVE PAYABLES AS REFLECTED IN THE GOVT. CHARGES ACCOUNT, ARE NOT THE STATUTORY LIABILITY OF THE ASSESSEE AND THIS AMOUNT IS HELD IN TRUST FOR A ND ON BEHALF OF THE CLIENT TO BE PAID TO THE GOVERNMENT AS AND WHEN THE REGISTRATION PROCESS IS INITIATED AND PAYMENTS ARE FALLING DUE . THE PROVISION FOR THE GOVERNMENT CHARGES MADE IN THE BOOKS OF ACCOUNTS BY THE ASSESSEE IS NOT A CRYSTALLIZED STATUTORY L IABILITY AT THE END OF THE FINANCIAL YEAR. THE PROVISION IS MADE BY THE ASSESSEE FOR GOVERNMENT CHARGES IN HIS BOOKS OF ACCOUNTS AS THE WORK O F THE PATENT TAKES 2 TO 2.5 YEARS INVOLVING LOTS OF PAPER AND PROCEDURAL WORK. AS THE GESTATION PERIOD FOR THE REG ISTRATION OF THE PATENTS IS LONG, THE AMOUNT OF REGISTRATION CHARGES RECEIVED BY THE ASSESSEE FROM THE CLIENTS IS HELD IN TRUST AND A PROVISION FOR THE SAME IS CREATED AS THESE CHARGES HAVE TO BE PAID WHEN THE REGISTRATION IS GRANTED. THE PROVISION CREATED AT THE END OF THE FINANCIAL YEAR IS NOT A STATUTORY LIABILITY TO BE HIT BY THE PROVISIONS OF SECTION 43 B . FROM THE DETAILS FILED . WE FOUND THAT THE GOVERNMENT ITA NO. 2359 /1 2 4 CHARGES ARE IMMEDIATELY PAID AS AND WHEN THE REGISTRATION FOR THE PATENTS IS GRANTED BY THE GOVE RNMENT. TILL THE REGISTRATION FOR THE PATENTS IS GRANTED TO THE CLIENT, NO STATUTORY LIABILITY IS CREATED TOWARDS THE GOVERNMENT. THE PROVISION MADE BY THE ASSESSEE ON ACCOUNT OF GOVERNMENT CHARGES, IS NOT IN THE NATURE OF ANY TAX, DUTY, CESS OR FEE . THE A SSESSEE HAS NOT ROUTED IT THROUGH THE PROFIT & LOSS ACCOUNT AND HAS NOT CLAIMED IT AS EXPENDITURE IN THE COMPUTATION OF INCOME , SO THERE IS NO QUESTION OF DISALLOWING THE SAME. 6. SIMILAR ISSUE IS CONSIDERED BY HONBLE DELHI HIGH COURT IN THE CASE OF CIT V S. NOBLE AND HEWITT(I)(P) LTD. (2008) 305 ITR 324 (DEL), WHEREIN THE HONBLE HIGH COURT HAS HELD AS UNDER : - 'ASSESSEE FOLLOWING MERCANTILE SYSTEM OF ACCOUNTING, NOT PAYING TO THE GOVERNMENT PART OF SERVICE TAX COLLECTED BY IT, NOT DEBITING THE SAME TO ITS P&L A/C AS AN EXPENDITURE NOR CLAIMING ANY DEDUCTION IN RESPECT OF THE SAID AMOUNT, THE QUESTION OF DISALLOWING THE SAME UNDER SECTION 438 DOES NOT ARISE'. 7. IN VIEW OF THE ABOVE DISCUSSION, SINCE THE ASSESSEE HAS NOT CLAIMED ANY EXPENDITURE FOR SUC H AMOUNT NO DISALLOWANCE IS WARRANTED U/S.43B OF THE I.T. ACT. 8 . IN THE RESULT, APPEAL OF THE REVENUE IS DISMISSED . O RDER PRONOUNCED IN THE OPEN COURT ON THIS 15/05 / 201 5 . SD/ - ( ) ( SANJAY GARG ) SD/ - ( . . ) ( R.C.SHARMA ) / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI ; DATED 15/05 /201 5 . . /PKM , . / PS ITA NO. 2359 /1 2 5 / COPY OF THE ORDER FORWARDED TO : / BY ORDER, / ( ASSTT. REGISTRAR) , / ITAT, MUMBAI 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ( ) / THE CIT(A), MUMBAI. 4. / CIT 5. , , / DR, ITAT, MUMBAI 6. / GUARD FILE. //TRUE COPY//
