The DCIT, Bharuch Circle, Bharuch V. M/s. Gujarat Borosil Ltd., Bharuch

ITA 2463/AHD/2012

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 94840 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 1 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-12-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Next Hearing Date: 30-11-2015
• Assessment Year: 2008-2009
• Appeal Filed On: 02-11-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Revised return
• Section: 43B

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD D BENCH AHMEDABAD BEFORE SHRI SHAILENDRA KUMAR YADAV, JUDICIAL MEMBER, AND SHRI RAJESH KUMAR, ACCOUNTANT MEMBER. ITA. NO.2463/AHD/2012 (ASSESSMENT YEARS:2008-09) DEPUTY COMMISSIONER OF INCOME TAX, BHARUCH CIRCLE, BHARUCH APPELLANT VS. GUJARAT BOROSIL LIMITED, VILLAGE-GOVALI, TAL. JHAGADIA, DIST. BHARUCH - 393110 RESPONDENT PAN: AAACG8440M /BY APPELLANT : MS. SANYOGITA NAGPAL, SR. D.R. /BY RESPONDENT : SHRI SUNIL TALATI, A.R. /DATE OF HEARING : 03.12.2015 /DATE OF PRONOUNCEMENT : 07.12.2015 ORDER PER RAJESH KUMAR, A.M: THIS APPEAL FILED BY THE REVENUE IS AGAINST THE ORD ER OF CIT(A)-IV, BARODA, DATED 27.08.2012 FOR A.Y. 2008-09 ON FOLLOW ING GROUNDS: 2 ITA NO.2463/ AHD/ 2012 (DCIT VS. GUJARAT BOROSIL L TD.) 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, (I) LEARNED CIT(A) ERRED IN DELETING DISALLOWANCE OF RS.3,71,42,093/- U/S. 43B OF THE ACT, DISREGARDING THE FACT THAT ASSESSEE HAS CLAIMED DEDUCTION WITHOUT TREATING THE SAME AS ACTUAL LIABILITY IN ITS BOOKS OF ACCOUNT. (II) LEARNED CIT(A) ERRED IN LAW IN DELETING DISALLOWANCE OF RS.3,66,000/- WRONGLY CLAIMED ON ACCOUNT OF PRIOR PERIOD EXPENSES, DISREGARDING THE FACT THAT ASSESSEE FOLLOWS MERCANTILE SYSTEM OF ACCOUNTING. (III) LEARNED CIT(A) ERRED IN LAW IN DELETING ADDITION OF RS.29,382/- MADE ON A/C OF DISALLOWANCE OF FOREIGN COMMISSION U/S40(A)(I) OF THE IT ACT DISREGARDING THE FACT THAT ASSESSEE COMPANY FAILED TO DEDUCT TAX AT SOURCE IN TERMS OF THE PROVISIONS OF SECTION 195. 2. THE GROUND NO.1 RELATES TO DELETION OF DISALLOWA NCE OF RS.3,71,42,093/- U/S.43B OF THE ACT BY THE CIT(A). 3. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E FILED ITS RETURN OF INCOME ON 16.09.2008 DECLARING AN INCOME OF RS.2,99 ,04,390/-. THE SAID RETURN WAS REVISED ON 09.04.2009 DECLARING A GROSS TOTAL LOSS OF RS.90,91,037/-. THE RETURN WAS REVISED BECAUSE IN THE ORIGINAL RETURN RS.3,71,42,093/- WAS NOT CLAIMED U/S.43B OF THE ACT BEING THE REFUND OF EXCISE DUTY ADJUSTED AGAINST THE EXCISE LIABILITY A S THE SAME WAS OMITTED TO BE CLAIMED INADVERTENTLY. THE ASSESSEE WAS SLAPPED WI TH A DEMAND OF RS.4.55 CRORE BY THE EXCISE DEPARTMENT PERTAINING TO THE PE RIOD FEB 1999 TO JUNE 2005, WHICH WAS DISPUTED BY THE ASSESSEE AND THE SA ME WAS ALSO SHOWN AS CONTINGENT LIABILITY AS PER NOTE NO. 2(C) OF THE AC COUNTING POLICIES TO THE ANNUAL ACCOUNTS OF THE COMPANY. THE SAID DEMAND WA S RAISED DURING THE YEAR AND THE REFUND OF 3.71 CRORES WAS ADJUSTED AGA INST THE SAME DEMAND AND THUS, THE ASSESSEE CLAIMED THE SAME ON THE PAYMENT BASIS AS PER THE PROVISION OF SECTION 43B BY FILING REVISED RETURN. 3.1 THE LD. A.O. REJECTED THE CLAIM OF THE ASSESSEE U/S.43B ON THE GROUND THAT THE EXCISE DEMAND OF RS.4.55 CORES WAS OF PENA L NATURE AND THEREFORE, 3 ITA NO.2463/ AHD/ 2012 (DCIT VS. GUJARAT BOROSIL L TD.) THE PROVISION OF SECTION 43B WERE NOT APPLICABLE. FURTHER, NO YEAR-WISE BIFURCATION WAS FURNISHED BY THE ASSESSEE. 3.2 THE LD. CIT(A) DELETED THE ADDITION BY HOLDING THAT THE ASSESSEE WAS ENTITLED TO CLAIM THE DEDUCTION OF RS.3,71,42,093/- U/S.43B OF THE ACT PROVIDED THAT THE SAID AMOUNT WAS NOT CLAIMED BY TH E ASSESSEE IN EARLIER YEAR. THE RELEVANT PARA NO.4.6 OF CIT(A) IS REPRODUCED AS UNDER: 4.6 AS THE APPELLANT HAS PAID THE AMOUNT OF RS.3,71,42,093/-TOWARDS EXCISE DUTY BY WAY OF ADJUSTMENT OF REFUND AGAINST THE ABOVE DEMAND OF RS.4.55 CRORES AND THEREFORE, IT IS ENTITLED FOR DEDUCTION OF THIS AMOUNT OF RS.3,71,42,093/- U/S 43B OF THE IT ACT PROVIDED THAT SUCH AMOUNT OF RS.3,71,42,093/- HAS NOT BEEN CLAIMED BY THE APPELLANT IN EARLIER YEARS U/S 43B OR UNDER ANY OTHER SECTI ON OF THE IT ACT. THE APPELLANTS AR AND THE APPELLANT IN ABOVE SUBMISSION DATED 27-07- 2012 AND SUBMISSION DATED 17-08-2012 HAVE STATED THAT THE REFUND OF RS.3,71,42,093/- HAS NOT BEEN CLAIMED IN ANY OF THE EARLIER PREVIOUS YEARS U/S.43B. IN VIEW OF THIS THE AO IS DIRECTED TO VERIFY WHETHER THIS AM OUNT OF REFUND OF RS.3,71,42,093/- HAS BEEN CLAIMED BY THE APPELLANT U/S.43B OR UNDER ANY OTHER SECTION OF THE IT ACT IN EARLIER YEAR OR YEARS. IF ON VERIFICAT ION OF RELEVANT RECORDS/BOOKS OF ACCOUNTS OF THE APPELLANT IT IS FOUND BY THE AO THAT NO DEDUCT ION OF ABOVE AMOUNT OF REFUND OF RS.3,71,42,093/- HAS BEEN CLAIMED BY THE APPELLANT EITHER U/S.43B OR UNDER ANY OTHER SECTION OF THE IT ACT, THEN THE AO IS DIRECTED TO ALLOW THE CLAIM OF THE APPELLANT OF THIS AMOUNT OF RS.3,71,42,093/- U/S 43B OF THE IT ACT. THUS, THE GROUND OF APPEAL NO.3 OF THE APPELLANT IS DECIDED SUBJECT TO ABOVE DIRECTION. 3.3 THE LD. D.R. RELIED ON THE ORDER OF A.O. AND PR AYED FOR RESTORING THE SAME. THE LD. A.R., ON THE OTHER HAND, SUPPORTED T HE ORDER PASSED BY THE CIT(A) BY PLACING STRONG RELIANCE ON THE DECISIONS PASSED BY THE HONBLE SUPREME COURT IN THE CASE OF CIT VS. BHARAT CARBON AND RIBBON MANUFACTURING CO. PVT. LTD. (1999) 239 ITR 505 AND KEDARNATH JUTE MANUFACTURING CO. LTD. VS. CIT 82 ITR 363. THE LD. COUNSEL SUBMITTED THAT THE LIABILITY OF THE EXCISE DEMAND WAS CRYSTALLIZED DURING THE YEAR AND ADJUSTMENT OF REFUND DUE TO THE ASSESSEE AGAINST TH E EXCISE DEMAND ALSO HAPPENED DURING THE YEAR AND THEREFORE, IT WAS ALLO WABLE. 3.4 WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PE RUSED THE MATERIAL ON RECORD. WE FIND THAT A REFUND OF RS.3.71CRORE WAS ADJUSTED AGAINST THE DEMAND RAISED OF RS.4.55CRORE BY THE EXCISE DEPARTM ENT WHICH MEANS THAT 4 ITA NO.2463/ AHD/ 2012 (DCIT VS. GUJARAT BOROSIL L TD.) THE DEMAND RAISED BY THE DEPARTMENT STANDS DISCHARG ED TO THE EXTENT OF RS.3.71 CRORE. WE NOTE THAT THE ORDER PASSED BY TH E CIT(A) HAD TAKEN INTO CONSIDERATION ALL THE ISSUES RAISED CONCERNING THE ALL THE MATERIAL ASPECTS OF THE CASE AND CLEAR CUT FINDING WAS GIVEN THAT ASSE SSEE WAS ENTITLED TO THE SAID DEDUCTION U/S.43B OF THE ACT ON THE PAYMENT BASIS A ND FURTHER HELD THAT THE DEMAND RAISED WAS NOT ON ACCOUNT OF PENALTY AS CLAI MED BY THE A.O.BUT WAS A ROUTINE DEMAND. WE ARE IN FULL AGREEMENT WITH CI T(A) ON THIS POINT. THE ASSESSEE HAS ALSO GIVEN NOTE IN THE NOTES TO ACCO UNTS TO THE ANNUAL ACCOUNT MENTIONING THE FACTS QUA THE SAID DEMAND RAISED BY THE EXCISE DEPARTMENT AND ADJUSTMENT OF REFUND OF RS.3.71CRORE AGAINST TH AT DEMAND THOUGH NOT ACCOUNTED FOR IN THE BOOKS OF ACCOUNTS. THE HONBL E SUPREME COURT IN THE CASE OF CIT VS. BHARAT CARBON AND RIBBON MANUFACTU RING CO. PVT. LTD. (1999) 239 ITR 505 WHILE FOLLOWING ITS EARLIER DECI SION IN CASE OF KEDARNATH JUTE MANUFACTURING CO. LTD. VS. CIT 82 ITR 363 HAS HELD THAT THE LIABILITY ACCRUES OVER THE ACCOUNTING PERIOD BECAUSE OF THE D EMAND NOTICES ISSUED BY THE EXCISE DEPARTMENT AND OBLIGATION TO PAY EXCISE DUTY AROSE ON THAT STAGE. THE COURT FURTHER HELD THAT RAISING OF THE DISPUTE BY THE ASSESSEE BY FILING WRIT PETITION FOR QUASHING OF DEDUCTION OF THAT LIABILIT Y WOULD NOT BE A GROUND FOR HOLDING THAT LIABILITY TO PAY EXCISE DUTY AS PER DE MAND NOTICE WAS NOT INCURRED. THE COURT ALSO REFERRED TO THE DECISION OF KEDARNATH JUTE TO HOLD THAT IRRESPECTIVE OF THE FACT THAT THE LIABILITY WA S NOT ACCOUNTED FOR IN THE BOOKS, IT WAS DEDUCTIBLE UNDER MERCANTILE SYSTEM OF ACCOUNTING WHEN LIABILITY HAS ACCRUED. THEREFORE, ONCE THE COMPANY MAKES THE PAYMENT, WHETHER UNDER PROTEST OR OTHERWISE, BY DEBTING PROF IT & LOSS ACCOUNT OR BY SHOWING IN THE BALANCE SHEET OR AS CONTINGENT LIABI LITY THE SAME WILL BE AVAILABLE AS DEDUCTION U/S43B ON MAKING PAYMENT. F URTHER, IN THE CASE OF GLAXO SMITHLINE CONSUMER HEALTHCARE LTD. ITA NO.343 /CHANDIGARH/2005, THE FIVE MEMBERS SPECIAL BENCH OF ITAT, CHANDIGARH, IT HAS BEEN HELD THAT THE SECTION 43B IS NOT RESTRICTIVE OF PROHIBITING S ECTION BY THE REVENUE BUT IT IS EQUALLY AN ENABLING PROVISION UNDER WHICH DEDUCT IONS ARE ALLOWED ON THE 5 ITA NO.2463/ AHD/ 2012 (DCIT VS. GUJARAT BOROSIL L TD.) PAYMENT OF DUTIES AND TAXES. IN OTHER WORDS, THE P ROVISION OF SECTION 43B OVERRIDES THE METHOD OF ACCOUNTING CONSISTENTLY FOL LOWED AND PROVIDES FOR THE DEDUCTION OF STATUTORY LIABILITIES IN THE YEAR OF PAYMENT IRRESPECTIVE OF THE YEAR IN WHICH THE LIABILITY IS INCURRED. THE CASE OF THE ASSESSEE IS SQUARELY COVERED BY THE RATIO LAID DOWN IN THE VARIOUS DECIS IONS DISCUSSED ABOVE AND BY RESPECTFULLY FOLLOWING THESE DECISIONS, WE DISMI SS THE APPEAL OF THE REVENUE ON THIS POINT. 4. THE ISSUE IN THE SECOND GROUND OF APPEAL RELATES TO THE DELETION OF DISALLOWANCE ON ACCOUNT OF PANCHAYAT TAX OF RS.3,66 ,000/-. 5. THE BRIEF FACTS ARE THAT THE ASSESSEE RECEIVED N OTICE FOR PANCHAYAT TAX DURING THE YEAR WHICH INCLUDED THE TAX PERTAINING T O EARLIER YEARS. THE LD. A.O. DISALLOWED RS.3,66,000/- AS BEING RELATED TO E ARLIER YEARS ON THE BASIS OF AUDITORS CLASSIFYING THESE EXPENSES AS PRIOR PERIOD EXPENSES IN THE P&L ACCOUNT. THE LD. CIT(A) DELETED THE DISALLOWANCE B Y HOLDING THAT THE LIABILITY TO PAY PANCHAYAT TAX CRYSTALLIZED DURING THE YEAR W HEN THE ASSESSEE RECEIVED BILL AND THIS IS CONSISTENT WITH THE PRACTICE OF TH E APPELLANT. 5.1 LD. D.R. SUBMITTED THAT THE LIABILITY ON ACCOUN T OF PANCHAYAT TAX PERTAIN TO EARLIER YEARS AND RELIED HEAVILY ON THE ORDER OF A.O. ON OTHER HAND, THE LD. A.R. SUBMITTED THAT THE LIABILITY ON ACCOUNT OF PANCHAYAT TAX CRYSTALLIZED DURING THE YEAR AS THE NOTICE OF DEMAN D WAS RECEIVED DURING THE YEAR WHICH IS IN ACCORDANCE WITH THE PRACTICE FOLLO WED BY THE ASSESSEE AND THEREFORE THE ORDER PASSED BY THE CIT(A) WAS IN ACC ORDANCE WITH LAW AND WAS NOT REQUIRED TO BE DISTURBED. 5.2 WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. WE FIND THAT THE EXPENSES ON ACCOUNT OF P ANCHAYAT TAX WAS DEBITED UNDER THE HEAD PRIOR PERIOD EXPENSES BY THE AUDIT OR OF THE COMPANY. WE FURTHER NOTE THAT THE SAID EXPENSES WERE CRYSTALLIZ ED DURING THE YEAR UPON THE 6 ITA NO.2463/ AHD/ 2012 (DCIT VS. GUJARAT BOROSIL L TD.) ASSESEE BEING SERVED A NOTICE OF DEMAND. THOUGH, T HE SOME PART OF THE DEMAND PERTAINED TO EARLIER YEARS, WE ARE IN FULL A GREEMENT WITH THE CONCLUSION DRAWN BY THE CIT(A) ON THIS POINT THAT T HE EXPENSES PERTAIN TO CURRENT YEAR AS THE NOTICE OF DEMAND WAS RECEIVED D URING THE CURRENT YEAR WHICH IS CONSISTENT TO THE PRACTICE FOLLOWED BY THE ASSESSEE. WE, THEREFORE, DISMISS THE APPEAL OF REVENUE ON THIS GROUND. 6. THE THIRD GROUND OF APPEAL RELATED TO DELETION O F ADDITION OF RS.29,382/- MADE DISALLOWANCE ON ACCOUNT OF FOREIGN COMMISSION. 7. DURING THE YEAR, THE ASSESSEE DEBITED RS.29,382/ - ON ACCOUNT OF EXPORT COMMISSION. THE LD. A.O. DISALLOWED THE SAID EXPEN SE BY HOLDING THAT THE ASSESSEE HAS NOT COMPLIED WITH THE PROVISION OF TAX DEDUCTION AT SOURCE AND THEREFORE, THE SAID EXPENSE WAS NOT DEDUCTIBLE UNDE R THE PROVISIONS OF SECTION 40(A)(I) OF THE ACT AND ALSO OBSERVED THAT SIMILAR EXPENSES WERE ALSO DISALLOWED IN THE EARLIER YEARS. THE LD. CIT(A) DE LETED THE DISALLOWANCE ON THE GROUND THAT THE SIMILAR ISSUE WAS DECIDED IN FA VOUR OF ASSESSEE BY CIT(A), BARODA VIDE ORDER NO.CAB/VI-317/09-10 DATED 29.03.2010. THE LD. D.R. RELIED ON THE ORDER OF A.O., WHEREAS, THE LD. A.R. FOR THE ASSESSEE RELIED ON THE ORDER OF CIT(A) BY SUBMITTING THAT TH E PROVISIONS OF TAX DEDUCTION AT SOURCE WAS NOT APPLICABLE ON THE EXPOR T COMMISSION. THE LD. COUNSEL REFERRED TO THE CIRCULAR NO.23 DATED 23/07 /1969 AND CIRCULAR NO.786 DATED 07.02.2000 ISSUED BY CBDT WHICH PROVID ED FOR NON DEDUCTION OF TDS FROM THE EXPORT COMMISSION IN CASE OF NON RE SIDENT AGENT OPERATED OUTSIDE THE COUNTRY AND NO PART OF THE INCOME AROSE IN INDIA AND THE PAYMENT WERE REMITTED DIRECTLY ABROAD. 7.1 WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. WE FIND THAT THE ASSESSEE HAS MADE PAYMENT OF EXPORT COMMISSION WHICH WAS DIRECTLY REMITTED OUT OF THE COUNTRY AS T HE NON RESIDENT AGENT BASED AND OPERATED OUTSIDE THE COUNTRY AND NO PART OF THE INCOME ON ACCOUNT 7 ITA NO.2463/ AHD/ 2012 (DCIT VS. GUJARAT BOROSIL L TD.) OF THE EXPORT COMMISSION AROSE IN INDIA. IN THE CIR CULAR NO.23 DATED 23/07/1969 AND CIRCULAR NO.786 DATED 07.02.2000 ISS UED BY CBDT, IT HAS BEEN PROVIDED THAT NO TDS WAS REQUIRED TO BE DEDUCT ED FROM THE EXPORT COMMISSION WHERE THE NON RESIDENT AGENT OPERATED FR OM THE OUTSIDE OF THE COUNTRY AND THE PAYMENT IS REMITTED DIRECTLY ABROAD . WE ALSO NOTE THAT THE SIMILAR ISSUE CROPPED UP IN THE A.Y. 2007-08 IN THE ASSESSEES OWN CASE WHICH WAS DECIDED IN FAVOUR OF ASSESSEE VIDE ORDER DATED 29.03.2010 BY CIT(A) VI, BARODA. THEREFORE, WE ARE IN COMPLETE AGREEMENT WITH THE ORDER PASSED BY THE CIT(A) ON THIS ISSUE AND THE AP PEAL OF THE REVENUE ON THIS POINT IS DISMISSED. 8. IN THE RESULT, THE APPEAL OF REVENUE IS DISMISSE D. PRONOUNCED IN THE OPEN COURT ON THIS THE 07 TH DAY OF DECEMBER, 2015. SD/- SD/- (SHAILENDRA KUMAR YADAV) (RAJESH KUMAR) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD: DATED 07/12/2015 TRUE COPY / COPY OF ORDER FORWARDED TO:- / REVENUE 2 / ASSESSEE $%&%'( ) / CONCERNED CIT 4 )- / CIT (A) ,-./00'(1 '(123& / DR, ITAT, AHMEDABAD 4/5678 / GUARD FILE. BY ORDER / 1 /2% '(123&