Dy. C.I.T., Circle -5, Firozabad V. M/s Hind Lamps Ltd., Firozabad

ITA 257/AGR/2014

• Counselvise Citation: [2019] 117 COUNSELVISE.COM (IT) 0781 (ITAT-AGRA)
• Duration Of Justice: 4 year(s) 7 month(s) 23 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 16-05-2019
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: DB
• Assessment Year: 2007-2008
• Appeal Filed On: 23-09-2014
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Assessee Lawyers: SAHEB P SATSANGI
• Keywords: Assessment record; TDS
• Section: 43B; 40(a)(ia); 37(1); 201; 192; 263

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AGRA BENCH: AGRA BEFORE SHRI A. D. JAIN, JUDICIAL MEMBER, AND D R . MITHA LAL MEENA, ACCOUNTANT MEMBER I.T.A NO. 2 57 /AGRA/201 4 (ASSESSMENT YEAR 200 7 - 0 8 ) DY. CIT, CIRCLE - 5, FIROZABAD. (REVENUE) V S .. M/S HIND LAMPS LTD., SHIKOHABAD, DISTT. FIROZABAD (U.P.) PANNO. AAACH3973Q (ASSESSEE) C.O. NO. 06 /AGRA/201 5 (IN ITA NO.257/AGRA/2014) (ASSESSMENT YEAR 2007 - 08) M/S HIND LAMPS LTD., SHIKOHABAD, DISTT. FIROZABAD (U.P.) PANNO. AAACH3973Q (ASSESSEE) VS .. DY. CIT, CIRCLE - 5, FIROZABAD. (REVENUE) I.T.A NO. 186 /AGRA/201 5 (ASSESSMENT YEAR 20 10 - 11 ) M/S HIND LAMPS LTD., SHIKOHABAD, DISTT. FIROZABAD (U.P.) PANNO. AAACH3973Q (ASSESSEE) VS .. DY. CIT, CIRCLE - 5, FIROZABAD. (REVENUE) 2 REVENUE BY SHRI WASEEM ARSHAD , SR. DR . A SSESSEE BY SHRI SAHEB P. SATSANGI , AR ORDER PER , A. D. JAIN, JUDICIAL MEMBER: THIS IS A DEPARTMENTAL APPEAL FOR A.Y. 200 7 - 0 8, TAKING THE FOLLOWING GROUNDS: 1. T H AT TH E L D . C I T(A) - II , AGRA HAS ERRED IN LAW AND ON FACTS IN DELETING THE ADDITION OF RS.60,47,469/ - IGNORING THAT THE PROVISIONS OF SECTION 2(24)(X) READ WITH SECTION 36(1)(VA) IN RESPECT OF DELAY IN DEPOSIT OF THE AMOUNT RECEIVED FROM EMPLOYEES TOWARDS THEIR CONTRIBUTION TO PROVIDENT FUND WAS RIGHTLY APPLICABLE IN THE CASE OF THE ASSESSEE & THE DISALLOWANCE WAS RIGHTLY MADE BY THE AO WITHIN T HE PROVISIONS STIPULATED IN THE INCOME TAX ACT. THE DISALLOWANCE IS LIABLE TO BE RESTORED. 2 . T H AT TH E L D . C I T(A) - II , AGRA HAS ERRED IN LAW AND ON FACTS IN DELETING THE ADDITION OF RS 4 L , 41 , 857 / - (R S .286500 / - + RS.38 , 55 , 357 / - ) UNDER SECTION 40(A)(IA) OF THE INCOMETAX A CT , 1 9 61. T H E A O HAD RIGHTLY MADE THE DISALLOWANCES WITHIN THE PROVISIONS SPECIFIED UNDER SECT I O N 40 (A) (I A) OF TH E INCOME TAX ACT , 1961 , IN VIEW OF THE DECISIONS OF HON'BLE CALCUTTA H I G H C OURT A ND H O N ' BLE GUJARAT HIGH COURT IN THE CASE OF COMMISSIONER OF INCOME - TA X, K OLK A T A - XI V. C RESCENT EXPORTS SYNDICATE AND COMMISSIONER OF INCOME - TAX - IV V . SIKANDARKH A N N TUNVAR RESPECTIVELY, THEREFORE THE DISALLOWANCES ARE LIABLE TO BE RESTORED. 3 . T H A T TH E L D.CI T(A) - II , AGRA HAS ERRED IN LAW AND ON FACTS IN DELETING THE ADDITION OF R S. 9 ,5 7 , 416 / - OUT OF COMMISSION ON SALE TO M/ S BAJAJ ELECTRICALS LTD. IGNORING DATE OF HEARING 27 . 10 .2016 DATE OF PRONOUNCEMENT 29 .1 1 . 201 6 3 THAT THE SAME HAS BEEN INCURRED @ 16 . 4% WHICH BY ANY STANDARD IS EXCESSIVE FOR HEAVY LOSS MAKING COMPANY & THE A SSE SSEE COMPANY COULD ALSO NOT SUBSTANTIATE THIS EXPE ND ITU R E. 4 . THAT THE ID . CIT(A) - II , AGRA HAS ERRED IN LAW AND ON FACTS IN D E L ET IN G T H E ADDITION OF RS.6 , 13 , 874 / - IN RESPECT OF THE OBSOLETE STOCK WRITTEN OFF DURING T H E YEAR IGNORING THAT THE A SSES S EE COMPANY COULD NOT SUBSTANTIATE THE BUSINESS EXPEDIENCY AN D J U S TI F IC A TI ON FOR WRITING OF F O F STOCK AMOUNTING TO RS.6 , 13 , 874/ - AS BEING 'OBSOLETE ' . THEREFORE, T HE AO WAS JUSTIFIED TO MAKE THE S AME DISALLOWANCE & THE ADDITION IS LIABLE TO BE RESTORED . ITA NO. 257/AGRA/2015 2. GROUND NO. 1 IS AGAINST THE LD. CIT(A) S ACTION OF DELETING ADDITION OF RS. 60,47,469/ - FOR THE ALLEGED V IOLA TION OF SECTION 2(24)(X) R.W.S. 36(1)(VA) OF THE IT ACT, REGARDING DELAY IN DEPOSIT OF THE AMOUNT RECEIVED FROM EMPLOYEES TOWARD THEIR CONTRIBUTION TO PROVIDENT FUND. 3. THE LD. DR HAS CONTENDED THAT THE LD. CIT(A) HAS ERR ED IN LAW AND ON FACTS IN DELETIN G THE ADDITION OF RS.60,47,469/ - IGNORING THAT THE PROVISIONS OF SECTION 2(24)(X) READ WITH SECTION 36(1)(VA) IN RESPECT OF DELAY IN DEPOSIT OF THE AMOUNT RECEIVED FROM EMPLOYEES TOWARDS THEIR CONTRIBUTION TO PROVIDENT FUND WAS RIGHTLY APPLICABLE IN THE CA SE OF THE ASSESSEE & THE DISALLOWANCE WAS RIGHTLY MADE BY THE AO WITHIN THE PROVISIONS STIPULATED IN THE INCOME TAX ACT. THE DISALLOWANCE IS LIABLE TO BE RESTORED. 4 4. ON THE OTHER HAND, THE LD. COUNSEL FOR THE ASSESSEE HAS PLACED STRONG RELIANCE ON THE IMP UGNED ORDER. 5. WE HAVE HEARD THE PARTIES ON THIS ISSUE AND HAVE PERUSED THE MATERIAL ON RECORD WITH REGARD THERETO. THE ADDITION IN QUESTION WAS MADE IN RESPECT OF DELAY IN DEPOSIT OF THE AMOUNT RECEIVED BY THE ASSESSEE FROM THEIR EMPLOYEES TOWARDS THEIR CONTRIBUTION TO PROVIDENT FUND. THE EXPLANATION OFFERED BY THE ASSESSEE IS THAT THE ASSESSEE FALLS UNDER THE SICK INDUSTRIAL COMPAN IES (SPECIAL PROVISION S ) ACT, 1985 AND THAT IT HAS BEEN REFERRED TO THE BOARD OF INDUSTRIAL & FINANCIAL RECONSTRUCTION (BIFR) AND THE INORDINATE DELAY IN DEPOSIT OF THE PROVIDENT FUND DUES OF THE EMPLOYEES OCCURRED ON ACCOUNT OF REASONS BEYOND THE CONTROL OF THE ASSESSEE, BECAUSE OF ITS S ICK STATUS. ALL THE PAYMENTS WERE FOUND TO HAVE BEEN MADE BEYOND THE DUE DATE. HOWEVER, THEY WERE MADE BEFORE FILING OF THE RETURN OF INCOME. 6. IT IS PATENT THAT TILL A.Y. 2003 - 04, BOTH EMPLOYER S, AS WELL AS EMPLOYEES PROVIDENT FUND CONTRIBUTIONS WERE ALLOWABLE AS DEDUCTION ONLY IF THE AMOUNTS WE R E PAID BEFORE THE DUE DATE UNDER THE PROVIDENT FUND LAW. HOWEVER, W.E.F. A.Y. 2004 - 05, THE PROVISO TO SECTION 43B OF THE IT ACT WAS AMENDED TO PROVIDE THAT SECTION 43B WOULD NOT APPLY FOR THE PAYMENTS MADE BEFORE THE DUE DATE OF FILING OF RETURN OF INCOME U/S 139(1). AFTER THE AMENDMENT, EMPLOYERS PROVIDENT 5 FUND CONTRIBUTION IS ALLOWED AS DEDUCTION IN THE SAME PREVIOUS YEAR IN WHICH THE LIABILITY TO PAY THE AMOUNT IS INCURRED, SO LONG AS THE PAYMENT IS MADE BEFORE THE DUE DATE OF FILING OF RETURN OF INCOME FOR THAT YEAR. THOUGH, NO CORRE SPONDING AMENDMENT HAS BEEN MADE IN SECTION 36(1) (VA) RELATING TO PAYMENT OF EMPLOYEES CONTRIBUTION TO PROVIDENT FUND. IT HAS, HOWEVER, BEEN JUDICIAL L Y SETTLED THAT THE ISSUE ABOUT THE APPLICABILITY OF DUE DATE OF FILING OF RETURN OF INCOME, AS PROVIDED F OR EMPLOYERS PROVIDENT FUND CONTRIBUTION UNDER THE PROVISO TO SECTION 43B CAN ALSO BE TAKEN AS THE DUE DATE FOR THE PURPOSE OF ALLOWABILITY OF EMPLOYEES PROVIDENT FUND CONTRIBUTION. THE FOLLOWING ARE S OME OF THE DECISIONS IN THIS REGARD : 1. CIT VS. SABAR I ENTERPRISES (2008) 298 ITR 141 (KARNATAKA) 2. CIT VS. AIMIL LTD (2010) 321 ITR 508 (DELHI) 3. CIT VS. HEMLA EMBRIODERY MILLS PVT. LTD. (2013) 37 TAXMANN.COM 160 (P & H) 4. CIT VS. NIPSO POLYFABRICKS LTD. (2013) 350 ITR 327 (HP) 5. SPECTRUM CONSULTANTS IND IA PVT. CIT (2013) 34 TAXMANN. COM (RAJ) 6. CIT VS. UDAIPUR DUG D H UTPADAK SAHAKARI SAN G H LTD (2013) 35 TAXMANN. COM (RAJ) 6 7. CIT VS. KICHHA SUG A R COMPANY (ITA NO. 50 OF 2009) 8. ITO VS. JAIPUR VIDYUT VITRAN NIGAM LTD. (ITA NO.278/2011) 9. ESSAE TERAOKA (P) LTD. VS. DCIT (2014) 366 ITR 1 (BOM.) 7. D ECISIONS HAVE BEEN RENDERED TO THE CONTRAY ALSO, SINCE TWO DIVERGENT VIEWS THUS EXIST ON THE ISSUE, THE DECISION OF THE HONBLE SUPREME COURT IN CIT VS. VEGETABLE PRODUCTS LTD., 88 ITR 192 (SC), WHICH HOLDS THAT IF TWO REASONABLE CONSTRUCTIONS OF A TAXING PROVISION ARE POSSIBLE, THAT CONSTRUCTION WHICH FAVOURS THE ASSESSEE MUST BE ADOPTED, HAS RIGHTLY BEEN FOLLOWED BY THE LD. CIT(A) TO DECIDE THIS MATTER IN FAVOUR OF THE ASSESSEE. 8. ACCORDINGLY, FINDING NO ERRO R IN THE ACTION OF THE LD. CIT(A) IN DELETING THE ADDITION OF RS.60,47,469/ - , THE ORDER OF THE LD. CIT(A) IN THIS REGARD IS CONFIRMED. 9. THUS, GROUND NO. 1 IS REJECTED. 10. GROUND NO.2 CHALLENGES THE CIT(A)S ACTION IN DELETING THE ADDITION OF RS. 41,41, 857/ - (RS.2,86,500/ - (+) RS.38,55,357/ - ) U/S 40(A) (IA) OF THE IT ACT. THE AO MADE ADDITION OF RS.2,86,500/ - U/S 40(A)(IA) DUE TO NON TDS ON PAYMENTS OF RS.1,06,500/ - AND RS.1,80,000/ - TO M/S K. TRIVEDI & CO. AND M/S S H V ENERGY P. LTD., TOWARDS RETAINERS HIP AND RENT, RESPECTIVELY. FURTHER, ADDITION OF RS.38,55,357/ - WAS MADE BY THE AO FOR SHORT TDS OF RS.14 ,867/ - ON PAYMENTS 7 MADE TO VARIOUS PAYEES, THE PAYMENT CORRESPONDING TO SUCH SHORT TDS AMOUNTING TO RS.38,55,357/ - . APROPOS THE AMOUNT OF RS.1,80,00 0/ - , THE ASSESSEE CONTENDED THAT SINCE TAX WAS NOT DEDUCTED, THE PAYMENT OF RENT FOR LPG STORAGE TANK, MADE TO M/S S H V ENERGY P. LTD. HAD BEEN ADDED BACK TO THE ASSESSEES INCOME. HOWEVER, THE AO FOUND NO SUCH ADD BACK IN THE COMPUTATION OF INCOME. REGAR DING THE AMOUNT OF RS.1,06,500/ - , THE ASSESSEE STATED THAT NO TDS WAS MADE FROM THE PAYMENT MADE TO M/S K. TRIVEDI AND CO. AS H ONORARIUM, AS THE SAME WAS IN THE NATURE OF SALARY. THE AO FOUND THIS SUBMISSION TO BE GENERAL IN NATURE AND THUS, NOT ACCEPTABLE . SO FAR AS REGARDS THE SHORT TDS OF RS.14,867/ - , THE AO ASKED THE ASSESSEE TO FURNISH DETAILS OF PAYMENTS CORRESPONDING TO EACH SHORT DEDUCTION, THE DETAILS OF THE AMOUNT CREDITED/PAID CORRESPONDING TO EACH SHORT DEDUCTION AND THE HEAD OF EXPENDITURE DEBI TED IN THE REVENUE ACCOUNT. SINCE NOTHING WAS SUBMITTED BY THE ASSESSEE IN RESPONSE, THE AO MADE THE ADDITION OF RS.38,55,357/ - , I.E., THE AGGREGATE PAYMENTS CORRESPONDING TO THE TOTAL SHORT DEDUCTION AMOUNTING TO RS.14,867/ - . 11. THE LD. CIT(A) DELETED B OTH THESE ADDITIONS OF RS.41,41,857/ - (RS.2,86,500/ - (+) RS.38,55,357/ - ). 12 . THE LD. DR HAS SUBMITTED THAT THE LD. CIT(A) HAS ERRED IN DELETING THE ABOVE ADDITION S. 8 13. T HE LD. COUNSEL FOR THE ASSESSEE HAS AGAIN PLACED RELIANCE ON THE ORDER UNDER APPEAL. 14. APROPOS THE ADDITION 2,85,500/ - AND 1,06,500/ - , IT REMAINS UNDISPUTED ALL THROUGH THAT THE AMOUNTS ON WHICH TDS WAS REQUIRED TO BE MADE, WERE PAID DURING THE YEAR UNDER CONSIDERATION. NOTHING WAS OUTSTANDING AS AT THE END OF THE RELEVANT FINANCIAL YEAR, I.E., ON 31.3.2007. NOW, IN VECTOR SHIPPING P. LTD. VS. CIT, 38 TAXMANN.COM 77, (ALL.), IT HAS BEEN HELD BY THE HONBLE JURISDICTIONAL HIGH COURT THAT FOR DISALLOWING THE EXPENSES FROM BUSINESS AND PROFESSION ON THE GROUND THAT TDS HAS NO T BEEN MADE, THE AMOUNT SHOULD BE PAYABLE AND NOT THAT WHICH HAS BEEN PAID BY THE END OF THE YEAR. 15. THE LD. CIT(A), IT IS SEEN, HAS FOLLOWED VECTOR SHIPPING (SUPRA) WHILE DELETING THE ADDITION. AS DISCUSSED, NO AMOUNT ON WHICH TDS WAS REQUIRED TO BE MADE, REMAINED OUTSTANDING AS AT THE END OF THE RELEVANT FINANCIAL YEAR. NO DECISION CONTRARY TO VECTOR SHIPPING P. LTD. (SUPRA) RENDERED BY THE HONBLE JURISDICTIONAL HIGH COURT HAS BEEN CITED BEFORE US. THEREFORE, THE DELETION OF THE ADDITION OF RS.2,8 5,500/ - IS CONFIRMED. 16. SO FAR AS REGARDS THE ADDITION OF RS.38,55,357/ - , HERE ALSO, THE LD. CIT(A) HAS CORRECTLY FOLLOWED, THE KOLKATA TRIBUNAL DECISION IN THE CASE OF DY.CIT VS. S. K. 9 TEKRIWAL, 15 TAXMANN.COM 289 (KOL.) AND THAT OF THE DELHI BENCH O F THE TRIBUNAL IN THE CASE OF M/S V.E. TRADE CORPORATION (INDIA) LTD. VS. DY. CIT, 28 TAXMANN.COM 77 (DEL), IN BOTH OF WHICH CASES, IT HAS BEEN HELD THAT WHEN THERE IS SHORT - FALL IN TDS DUE TO ANY DIFFEREN CE OF OPINION AS TO THE TAXABILITY OF ANY ITEM IN THE NATURE OF PAYMENT FALLING UNDER VARIOUS TDS PROVISION S , THOUGH, THE ASSESSEE CAN BE DECLARED TO BE A N ASSESSEE - IN - DEFAULT U/S 201 OF THE IT ACT, NO DISALLOWANCE CAN BE MADE INVOKING THE PROVISIONS OF SECTION 40(A)(IA) THEREOF. THE LD. CIT(A) HAS ALSO RIGHTLY FOLLOWED VECTOR SHIPPING P. LTD. (SUPRA), TO HOLD THAT NO ADDITION U/S 40(A)(IA) OF THE ACT CAN BE MADE, IF THE EXPENSES ON WHICH TDS WAS REQUIRED TO BE MADE, HAVE BEEN PAID DURING THE RELEVANT YEAR AND NOTHING IS PAYABLE AT THE END OF THAT YEAR. ACCORDINGLY, THIS DELETION OF THE ADDITION OF RS.38,55,357/ - IS ALSO FOUND TO BE IN ORDER. 17. AS SUCH, GROUND NO. 2 IS ALSO REJECTED. 18. COMING TO GROUND NO. 3, THE AO MADE ADDITION OF RS.9,57,416/ - BY DISALLOWING THE COMMISSION SHOWN BY THE ASSESSEE TO HAVE BEEN PAID TO M/S B AJAJ ELECTRICALS LTD. FOR MAKING SALE AMOUNTING TO RS.58,22,685/ - ON BEHALF OF THE ASSESSEE COMPANY TO M/S SUBHASH ELECTRICALS, NEW DELHI. THE AO FOUND THAT THE ASSESSEE COMPANY HAD INCURRED HEAVY LOSSES DURING THE YEAR UNDER CONS IDERATION AND THAT THE RATE OF GROSS LOSS HAD BEEN SHOWN AT THE RATE OF 9.62% OF THE SALES. 10 THE AO WAS THUS OF THE VIEW THAT THE BUSINESS EXPEDIENCY EXPLAINED IN RESPECT OF PAYMENT OF COMMISSION ON SALES WAS NOT CONVINC ING . THE AO ENQUIRED ABOUT THE BUSINE SS EXPEDIENCY OF MAKING SUCH PAYMENT. THE ASSESSEE COMPANY DID NOT MAKE ANY SUBMISSION TO SUBSTANTIATE THE BUSINESS EXPEDIENCY IN RESPECT OF PAYMENT OF COMMISSION ON SALES. IT ALSO DID NOT FURNISH ANY DOCUMENTARY EVIDENCE TO INDICATE THE INVOLVEMENT OF M/S BAJAJ ELECTRICALS LTD. IN THE SALES MA D E TO M/S SUBHASH ELECTRICALS, NEW DELHI. ACCORDINGLY, THE AO HELD THAT M/S BAJAJ ELECTRICALS WAS NOT ESTABLISHED TO BE ELIGIBLE FOR ANY COMMISSION PAYMENT. IT WAS, THEREFORE, THAT THE CLAIM OF PAYMENT OF COMMISSION O F RS.9,57,416/ - WAS DISALLOWED AND THE AMOUNT WAS ADDED TO THE INCOME OF THE ASSESSEE COMPANY. 19. BEFORE THE LD. CIT(A), THE ASSESSEE CONTENDED THAT THE AO, WHILE WRONGL Y MAKING THE ADDITION, HAD IGNORED THE FACT THAT THE EXPENDITURE BY WAY OF PAYMENT OF COMMISSION HAD BEEN INCURRED WHOL LY AND EXCLUSIVELY FOR THE ASSESSEES BUSINESS. IT WAS CONTENDED THAT DURING THE ASSESSMENT PROCEEDINGS, THE ASSESSEE HAD FILED A COPY OF THE DEBIT NOTE RAISED BY M/S BAJAJ ELECTRICALS LTD. COPIES OF THE CORRESPONDENCE MAD E BETWEEN THE SAID PARTIES AND THE INVOICE NOS. AND INVOICE AMOUNTS AND THE DATE OF PAYMENTS WERE ALSO FURNISHED. THESE DOCUMENTS WERE ALSO PRODUCED BEFORE THE LD. CIT(A). THE ASSESSEE CONTENDED THAT THE COMMISSION HAD BEEN PAID IN RESPECT OF SALES SOLICIT ED THROUGH M/S BAJAJ 11 ELECTRICALS LTD. AND ON PAYMENT OF SUCH COMMISSION, TDS HAD ALSO BEEN MADE. IT WAS SUBMITTED THAT THE COMMISSION HAD BEEN THUS PAID DULY AND EXCLUSIVELY FOR THE PURPOSES OF THE ASSESSEES BUSINESS. IT WAS ALSO STATED THAT THE ASSESSEE WAS A CONCERN WHICH HAD HAD SUBSTANTIAL LOSSES, WHEREAS M/S BAJAJ ELECTRICALS LTD. WAS A PROFIT MAKING COMPANY AND THAT PAYMENT OF THE ALLEGED EXCESSIVE COMMISSION WAS DISADVANTAGEOUS FOR ANY TAX PLANNING, BUT SINCE THERE WAS GENUINE TRANSACTION OF SALE OF GOODS TO M/S SUBHASH ELECTRICAL, NEW DELHI, THROUGH M/S BAJAJ ELECTRICALS LTD. THE PAYMENT OF COMMISSION WAS AN OBLIGATION OF THE ASSESSEE FOR PRUDENT BUSINESS TRANSACTION, JUSTIFYING THE PAYMENT OF COMMISSION TO M/S BAJAJ ELECTRICALS LTD. 20. THE LD. CIT (A), WHILE DELETING THE ADDITION MADE , INTER ALIA, OBSERVED THAT ALL THE DOCUMENTS PRODUCED SHOWED PAYMENT OF COMMISSION PAID TO M/S BAJAJ ELECTRICALS LTD. , THAT THE DEBIT NOTES RAISED WERE ON THE ASSESSMENT RECORD AND THAT THERE - FROM, THE FACTUM OF PAYMEN T OF COMMISSION MADE BY THE ASSESSEE TO M/S BAJAJ ELECTRICALS LTD. COULD NOT BE DOUBTED. 21. BEFORE US, NOTHING HAS BEEN BROUGHT ON RECORD TO DISPROVE THE OBSERVATION S MADE BY THE LD. CIT(A). AS CORRECTLY OBSERVED BY THE LD. CIT(A), PAYMENT OF COMMISSION IS NOT RELATED TO PROFIT OR LOSS INCURRED BY A BUSINESS CONCERN AT THE END OF THE YEAR. CO MMISSION IS PAID TO FACILITATE SALE WHICH, IN THE 12 INSTANT CASE, STOOD PROVED B Y ASSESSEE THROUGH DOCUMENTARY EVIDENCE, WHICH EVIDENCE HAS CORRECTLY BEEN APPRECIATED BY THE LD. CIT(A). TH E DOCUMENTARY EVIDENCE IN THE SHAPE OF DEBIT NOTE RAISED BY M/S BAJAJ ELECTRICALS LTD., THE CORRESPONDENCE BETWEEN M/S BAJAJ ELECTRICALS LTD. AND M/ S SUBHASH ELECTRICALS, NEW DELHI, THE INVOICE NOS. , THE INVOICE AMOUNTS AND THE DATES OF PAYMENTS MADE AMPLY S H O W THE COMMISSION PAID BY THE ASSESSEE TO M/S BAJAJ ELECTRICALS LTD. THE DEBIT NOTE RAISED AND THE OTHER DOCUMENTARY EVIDENCE PRODUCED DULY FORME D PART OF THE ASSESSMENT RECORD. NONE OF THIS DOCUMENTARY EVIDENCE HAS BEEN REBUTTED SHOWN TO OR HAVE BEEN FABRICATED. M/S BAJAJ ELECTRICALS LTD. STANDS PROVED TO HAVE FACILITATED SALE OF GOODS ON BEHALF OF THE ASSESSEE COMPANY TO M/S SUBHASH ELECTRICALS, NEW DELHI. 22. MOREOVER, IT IS ALSO PATENT ON RECORD , AND ALSO ADMITTED BY THE AO HIMSELF , THAT THE ASSESSEE COMPANY IS A CONCERN HAVING INCURRED SUBSTANTIAL LOSSES. PER CONTRA , M/S BAJAJ ELECTRICALS LTD. IS A PROFIT MAKING CONCERN. THEREFORE, AS CORRECTL Y APPRECIATED BY THE LD. CIT(A), IF THERE WERE ANY TAX PLANNING BY SHOWING EXCESSIVE COMMISSION EXPENSES BY THE ASSESSEE, THE ASSESSEE COMPANY BEING A LOSS MAKING CONCERN, IT WOULD BE ENTIRELY DISADVANTAGEOUS FOR SUCH TAX PLANNING. HAD THE COMMISSION EXPEN SES BEEN INFLATED, IT WERE THE LOSSES OF THE ASSESSEE COMPANY WHICH WOULD GET INCREASED. THE ASSESSEE , AS OBSERVED, IS A SICK UNIT AND IS BEFORE 13 THE (BIFR) FOR REHABILITATION, INDUSTRIAL AS WELL AS FINANCIAL . I N SUCH A CIRCUMSTANCE, BY INFLATING ITS COMMIS SION EXPENSES, IT WOULD ONLY LAND UP INCREASING THE INCOME OF THE RECIPIENT OF THE COMMISSION, WHICH WOULD RESULT IN THE ASSESSEE BEING REQUIRED TO PAY MORE TAXES. THIS, EVIDENTLY, CANNOT BE EITHER THE INTENT OR PURPOSE OF THE ASSESSEE, BY ANY STRETCH OF B USINESS ACUMEN AND IMAGINATION. 23. IN VIEW OF THE ABOVE, THE OBSERVATION S MADE BY THE LD. CIT(A) FOR DELETING THE ADDITION OF RS.9,57,416/ - , ARE FOUND TO BE WELL VERSED. THEY ARE, HENCE, UPHELD. 24. GROUND NO. 3 IS REJECTED. 25. CONCERNING GROUND NO. 4 , ADDITION OF RS.6,13,874/ - WAS MADE BY THE AO DISALLOWING THE CLAIM OF THE ASSESSEE FOR WRITE OF F OF ALL OBSOLETE STOCK UNDER THE HEAD OTHER OPERATING CHARGES. THE AO ASKED THE ASSESSEE COMPANY TO FURNISH T HE DETAILS IN RESPECT OF WRITE OFF OF OBSOLETE STOCK AND TO ESTABLISH HOW THE SAID COMPONENT OF CLOSING STOCK BECAME OBSOLETE AND, THEREFORE, LIABLE TO BE WRITTEN OFF. THE DETAILS FILED BY THE ASSESSEE WERE EXAMINED BY THE AO. HE AGAIN ASKED THE ASSESSEE TO EXPLAIN AS TO HOW THE STOCK F ALLING IN RS. 6,13,874/ - PERTAINED TO 282 ITEMS WHICH BECAME OBSOLETE. AS OBSERVED BY THE AO , NOTHING WAS SUBMITTED ON BEHALF OF THE ASSESSEE COMPANY TO INDICATE THAT THE SAID COMPONENT OF CLOSING 14 STOCK WAS ACTUALLY OBSOLETE. IT WAS, THEREFORE, THAT THE AO DISALLOWED THE CLAIM OF THE ASSESSEE. THE LD. CIT(A) DELETED THE ADDITION. 26. THE LD. DR CONTENDS THAT THE LD. CIT(A) HAS ERRED IN DELETED THE ADDITION. 27. THE LD. COUNSEL FOR THE ASSESSEE HAS PLACED RELIANCE ON THE IMPUGNED ORDER. 28. IT IS NOT DISPU TED THAT THE ASSESSEE HAD MAINTAINED FULL AND CONSOLIDATED DETAILS AND THAT THE ITEMS WRIT TEN OFF WERE THOSE ITEMS THAT HAD ALREADY L OST THEIR VALUE. IT ALSO REMAINS UNDISPUTED T HAT IT IS THE ASSESSEES CONSISTENT ACCOUNTING POLICY THAT EVERY YEAR, PHYSIC AL STOCK OF ALL MATERIALS, SPARES AND FINISHED GOODS IS UNDERTAKEN AND EXCESS/SHORTAGE IS ACCOUNTED FOR AS INCOME/EXPENSES FOR THE YEAR. IN THE ASSESSMENT PROCEEDINGS, THE ASSESSEE FILED STATEMENT OF OBSOLETE STOCK WRITTEN OFF, MENTIONING NAMES OF ITEMS, A ND THEIR QUANTITY AND VALUE. THE SAME WAS PRODUCED BEFORE THE LD. CIT(A) ALSO. IN THE EARLIER YEAR, SUCH WRITING OFF OF OBSOLETE STOCK WAS ACCEPTED BY THE DEPARTMENT ITSELF. 29. IN THE ABOVE FACTS AND CIRCUMSTANCES, THE LD. CIT(A) HAS CORRECTLY OBSERVED T HAT IN THE INDUSTRY LIKE THAT OF THE ASSESS COMPANY, I.E., MANUFACTUR E , OF LIGHTING BULBS, POSSIBILITY OF CERTAIN ITEMS OF STOCK GETTING OBSOLETE, CANNOT BE RULED OUT. MOREOVER, IN THE PAST ALSO, SUCH WRITING OFF WAS CLAIMED. IT WAS ALLOWED BY THE DEPARTME NT ITSELF. IN THE YEAR UNDER CONSIDERATION, NOTHING WAS BROUGHT ON 15 RECORD BY THE AO TO THE EFFECT THAT NO SUCH STOCK HAD BECOME OBSOLETE. THE DETAILS OF THE STOCK WERE ASSIDUOUSLY MAINTAINED BY THE ASSESSEE, AS ABOVE, YEAR AFTER YEAR, AS A CONSISTENT ACCOU NTING POLICY. SUCH DETAILS OF OB SOLETE STOCK WERE MAINTAINED BY PHYSICAL VERIFICATION. IN THE ABSENCE OF ANY EVIDENCE TO THE CONTRARY, THESE DETAILS CANNOT BE DOUBTED. 30. THE ABOVE FACTS HAVE RIGHTLY BEEN TAKEN INTO CONSIDERATION BY THE LD. CIT(A) AND THE ADDITION HAS CORRECTLY BEEN DELETED. THIS DELETION IS UPHELD. 31. GROUND NO. 4 IS ALSO REJECTED. C.O. NO.06/AGRA/2015 THIS CROSS OBJECTION HAS BEEN FILED BY THE ASSE SSEE IN THE APPEAL (SUPRA) FILED BY THE DEPARTMENT IN ITA NO.257/AGRA/2014 FOR A.Y. 2007 - 08, CONT ENDING THAT THE TAXING AUTHORITIES HAVE ERRED IN DISALLOWING A SUM OF RS.20,22,000 / - OUT OF PROVISION MADE FOR LEAVE ENCASHMENT, AS PER CONSISTENT PRACTICE BASED ON THE LIABILITY FOR LEAVE ENCASHMENT ON ACTUARIAL VALUATION, WHICH IS A GENUINE LIABILITY. 32. THE AO OBSERVED THAT WITH REGARD TO THE JUSTIFICATION FOR ALLOWANCE OF EXPENDITURE CLAIMED IN RESPECT OF THE PROVISION MADE, THE ASSESSEE COMPANY SUBMITT ED ONLY A GENERAL REPLY TO THE EFFECT THAT THE SAME WAS ALLOWABLE IN VIEW OF JUDICIAL PRONOUNCEMENT S; THAT IT WAS UNDISPUTED THAT PROVISION IN RESPECT OF 16 ANY EXPENDITURE CANNOT BE ALLOWED AS DEDUCTION IN THE COMPUTATION OF PROFIT S AND GAINS OF BUSINESS OR PROFESSION; AND THAT SO, THE PROVISION IN RESPECT OF LEAVE ENCASHMENT COULD NOT BE ALLOWED AS EXPENDITURE. IT WAS IN THIS MANNER THAT THE PROVISION OF LEAVE ENCASHMENT CLAIMED AS DEDUCTION BY THE ASSESSEE TO THE EXTENT OF RS.20,22,000/ - ARE DISALLOWED BY T HE AO. 33. CONFIRMING THE DISALLOWANCE, THE LD. CIT(A) OBSERVED AS UNDER: 6.2 IN T HE WRITTE N SUBMISSION I N SUPPORT OF HIS CLAIM FOR ALLOWING DEDUCTION FO R M A KIN G O F PROVISION FOR LEAVE ENCASHMENT ON ACTUARIAL BASIS, THE LD AR HAS REFERRED T O THE DECIS I ON S OF HON ' BLE KERALA HIGH COURT IN THE CASE OF CIT VS HINDUSTAN LATEX L TD ( 2012) 74 DTR (KER . ) 122 AND ANOTHER DECISION OF HON'BLE ITAT AHMADABAD IN T HE CASE OF EIMCO ELECON (INDIA) LTD VS ACIT (2013) 33 TAXMANN.COM. 476. IN THE F ORMER DECISION , I HAVE FOUND THAT IT IS RELATING TO PAYMENT MADE FOR INSURANCE POLICIES T O COVE R FUTURE PAYMENT TO BE MADE TO EMPLOYEES WHEN THEY AVAIL THEIR LEAVE EN CASHMENT AND AS PER THE DECISION OF THE KERALA HIGH COURT, SUCH PAYMENT IS HELD TO BE NOT FOR ANY CONTINGE NT LIABILITY AND THEREFORE, IT HAS BEEN HELD THAT THE ASSESSEE CAN C LAIM THE PAYMENT MADE BY IT TO LIE AS AN EXPENDITURE INCURRED WHOLLY AND EXCLUSIVELY FO R THE PURPOSE OF BUSINESS AND 17 ALLOWABLE UNDER SECTION 37(1) OF THE ACT . SINCE IN THE ABOVE CITED CASE , THE ASSESSEE ITSELF WAS NOT MAINTAINING ANY FUND FOR MAKING P AYMENT TO ITS EMPLOYEES TOWARDS THEIR LEAVE ENCASHMENT AND FOR THIS PURPOSE, IT HAS TAKEN AN I NSURANCE POLICY FOR WHICH PREMIUM WAS BEING PAID, THE KERALA HIGH COURT H AS ALLOWED THE PAYMENT OF PREMIUM TO THE L1C AS ALLOWABLE BUSINESS DEDUCTION U/S 37(1) . IN THIS DECISION , AS THE ASSESSEE ITSELF WAS NOT MAINTAINING SUCH FUND, THE APPLICABILITY O F PROVISION OF SECTION 43B(F) OF THE ACT HAS NOT BEEN EXAMINED RELATING TO ANY SUM PAYABLE BY THE ASSES SEE AS AN EMPLOYER IN VIEW OF ANY LEAVE AT THE CREDIT OF HI S EMPLOYEES AND AS PER THE AMENDMENT THAT HAS BEEN BROUGHT IN THE INCO M E TAX ACT BY FINANCE ACT 2001 W.E . F . 01.04 . 2002, SUCH PAYMENT MADE BY THE EMPLOYER TO HIS EMPLOYEES SHOULD BE ALLOWED ON THE BASIS OF ACTUAL PAYMENT . HOWEVER, IN THE L ATER DECISION OF THE HON ' BLE ITAT AHMADABAD AFTER CONSIDERING THIS PROVISION, IT IS M ENTIONED THAT THIS PROVIS I ON HAS BEEN STRUCK DOWN BY THE HON'BLE KOLKATA HIGH COURT I N , THE CASE OF MIS EXIDE INDUSTRY LTD VS UNION OF INDIA (2007) 292 ITR 4701164 TEXMER I T BY FOLLOWING A JUDGMENT OF HON ' BLE SUPREME COURT IN THE CASE OF M/S BHARAT EARTH MOVERS VS CIT 45 ITR 428 WHEN IT WAS HELD THAT EVEN A PROVISION FOR LEAVE ENCASHMENT WAS DEDUCTIBLE ON ACCRUAL 18 BASIS . AFTER FOLLOWING THE DECISION' OF KOLKATA HIGH COURT , THE HON ' BLE AHMEDABAD BENCH HAS DELETED THE DISALLOWANCE MADE BY THE AO ON THE BASIS OF CLAUSE (F) OF SECTION 43B. BY RELYING ON THE ABOVE TWO DECISIONS THE LD. AR HAS PLEADED FOR DELETIO N OF RS.20,22,000/ - MADE ON ACCOUNT OF PROVISION FOR LEAVE ENCASHMENT. 6.3 I HAVE EXAMINED THE ABOVE TWO DECISIONS ABOUT THE ISSUE UNDE R D I SP UT E RELATING TO THE DISALLOWANCE OF PROVISIONS FOR LEAVE ENCASHMENT, ESPECIALLY UNDE R T H E PROVISION OF SECTION 43B(F). THE FIRST DECISION CITED BY THE LD . AR OF THE HON ' BLE KERALA HIGH COURT IN THE CASE OF M/S HINDUSTAN LATEX LTD (SUPRA) HAS NOT BEEN FOUND T O BE APPLICABLE IN CASE OF THE ASSESSEE COMPANY BECAUSE NO EV I DENCE HAS BEE N PRODUCE D ABOUT PAYMENT OF ANY PR EMIUM TO ANY INSURANCE COMPANY FOR TAKING A POL I CY TO CO V ER FUTURE PAYMENT TO BE MADE TO THE EMPLOYEES WHEN THEY AVAIL LEAVE ENCASHM ENT . FROM THE DETAILS AVAILABLE ON RECORD , IT HAS BEEN FOUND THAT THE ASSESSEE I TS ELF IS MAINTAINING A FUND ON ACTUARIAL BASIS FOR MAKING PAYMENTS TO ITS EMPLOYEES WH EN THEY AVAIL THE LEAVE ENCASHMENT AT THEIR CREDIT . THEREFORE, PROVISIONS OF SECTION 43B( F) HAS BEEN FOUND TO BE APPLICABLE IN CASE OF THE ASSESSEE COMPANY . WITH RESPECT TO STRIKING DOWN OF SECTION 43B(F) BY TH E HON ' BLE KOL K ATA HIGH COURT IN THE CASE OF EXIDE INDUSTRY LTD VS UNION OF INDIA (SUPRA) , I HAVE FOUND T H A T THE DECISION OF THE HON'BLE KOLKATA HIGH COURT HAS BEEN STAYED BY THE HON'BLE SUP R E ME COURT IN THE CASE OF CIT & OTHERS VS EXCIDE INDUSTRY LTD ( CC 12060/2008) I N ITS ORDER DATED 08.09.2008 STAYING THE IMPUGNED JUDGMENT UNTIL FURTHER ORDER 19 AND THE R EA F T ER , IN THE ORDER PASSED ON 08 . 05.2009, IT HAS BEEN HELD THA T ' WE FURTHER MAKE IT CLE AR THAT THE ESS E SSEE WOULD DURING THE PENDENCY OF CIVIL APPEAL , PAY TAX AS IF SEC T IO N 43B(F) IS ON THE STATUTE BOOK BUT AT THE SAME TIME, IT WOULD BE ENTITLED TO MAKE A C LA IM IN ITS RETURN. THE ABOVE ORDER OF HON'BLE SUPREME COURT STAYING THE ORDER O F T H E HON'BLE KOLKATA HIGH COURT IN THE CASE OF EXIDE INDUSTRY LTD (SUPRA ) HAS BEEN CO N S I D ERED BY THE HON'BLE IT AT, BANGALORE BENCH IN THE CASE OF MYSORE SALE INTERNATIONA L LTD VS . CIT (2012) 23 TAXMANN . COM 241 . IN THIS CASE, THE AO HAS EARLIE R A LL O WED THE PROVISION FOR LEAVE ENCASHMENT BUT LATER ON THE CIT REVISED ORDER U/S 2 6 3 VIDE BY DISALLOWING THE PROVISION OF LEAVE ENCASHMENT AS PER SECTION 43B(F) . WHILE DECIDING THIS CASE, THE HON'BLE ITAT , BANGALORE HAS HELD THAT WE ARE OF OPINION THAT CIT IS JUSTIFIED IN STATING THAT HON'BLE SUPREME CO U R T HAS STAYED THE OPERATION OF JUDGMENT OF HONBLE KOLKOTA HIGH COURT IN THE CASE OF M/S EXIDE INDUSTRY LTD ( SUPRA) WH I CH HAS STRUCK DOWN CLAUSE (F) OF SECTION 43B'. IT HAS BEEN FURTHER STA T ED IN THIS D EC I SION THAT HON ' BLE SUPREME COURT, WHILE ADMITTING SLP FILED BY THE REVENUE AG A IN S T T HE HON ' BLE HIGH COURT , OBSERVED THAT ' WE FURTHER MAKE I T CLEAR THAT THE ASSESSEE WOULD DURING THE PENDENCY OF A CIVIL APPEAL , PAY TAXES AS IF SECTION 43B(F) IS I N THE STATUTE BOOK BUT AT THE SAME TIME IT WOULD BE ENTITLED TO MAKE CLAIM I N ITS R ETURN . ' THEREFORE , THE HON'BLE ITAT , BANGALORE HAS HELD THAT FROM READING OF THE ABOVE HON ' BLE SUPREME COURT ORDER, IT IS CLEAR THAT SECTION 43B(F) IS IN THE STATUTE BOO K DURING THE PENDENCY OF CIVIL APPEAL AND IT CANNOT BE SAID THAT SECTION 43B(F) IS IN RESPECT OF ONLY 20 THOSE ASSESSEE BEFORE THE SUPREME COURT AND IT HAS BEEN FURTHER EXPLAINED IN THIS ORDER THAT THE ORDER OF THE HON'BLE SUPREME COURT CANNOT BE INTERPRETED TO MEAN THAT THE PARTIES BEFORE THE HON ' BLE SUPREME COURT ALONE NEED TO TAKE NOTE O F THE PROVISION OF SECTION 43B(F) OF THE ACT AND THEREFORE, THE ORDER PASSED BY THE LD . CI T U/S 263 MAKING ADDITION FOR LEAVE ENCASHMENT U/S 43B(F) HAS BEEN CONFIRMED. 6.4 FOL L OWING THE ABOVE DECISION OF THE HON ' BLE I TAT , BANGALORE AND IN VIEW OF THE FACT THAT DECISION OF THE HON'BLE KOLKATA HIGH COURT I N THE CASE OF EXIDE INDUSTRY LTD (SUPRA) HAS BEEN STAYED BY THE HON ' BLE SUPREME COURT HOLDING THAT PROVISION OF SECTION 43B(F) IS IN THE STATUTE BOOK TILL THE PENDENCY OF CIVIL APPEAL FILED BEFORE IT AND S I N C E NOTHING HAS BEEN BROUGHT BEFORE ME WHETHER THIS CIVIL APPEAL BEFORE THE HON ' BLE SUPREME COURT HAS FINALLY BEEN DECIDED, I HOLD THAT ADDITION OF RS.20,22,000/ - AS MAD E BY THE AO, IN VIEW OF THIS AMOUNT BEING ONLY PROVISION FOR LEAVE ENCASHMENT AND NOT ACTUALLY PAID IS HEREBY, CONFIRMED AS PER THE PROVISION OF SECTION 43B(F) AND ACCORDINGLY, GROUND NO. 4 IS DISMISSED. 34. THE LD. COUNSEL FOR THE ASSESSEE, BESIDES REIT ERATING THE CROSS OBJECTION RAISED, HAS PLACED RELIANCE ON DCIT VS. M/S BIRLA INSURANCE ADVISORY & BROKING SERVICES LTD., RENDERED BY THE MUMBAI BENCH OF THE TRIBUNAL IN ITA NO.7531/MUM/2010 , VIDE ORDER (APB 78 - 79) DATED 24/06/2013. 21 35 . ON THE OTHER HAND, THE LD. DR HAS RELIED ON THE IMPUGNED ORDER. 36. IN THIS REGARD, WE FIND THAT IN M/S BIRLA INSURANCE ADVISORY & BROKING SERVICES LTD. (SUPRA), THE CO - ORDINATE MUMBAI BENCH OF THE TRIBUNAL, UNDER SIMILAR FACTS AND CIRCUMSTANCES, HAS RES TORED THE MATTER TO THE AO, FOLLOWING THE ORDER DATED 8.8.2012 PASSED BY THE MUMBAI BENCH OF THE TRIBUNAL IN ITA NO. 6189/MUM/2011, PASSED IN THE CASE OF ESSAR EXPLORATION & PRODUCTION (INDIA) LTD. VS. ACIT, DIRECTING THE AO TO ADJUDICATE THE MATTER AS P ER THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF EXCIDE INDUSTRIES LTD., (SUPRA). 37. FOLLOWING THE M/S BIRLA INSURANCE ADVISORY & BROKING SERVICES LTD. (SUPRA), THE ISSUE INVOLVED BEING HITHERTO PENDING DISPOSAL BEFORE THE HONBLE SUPREME COURT, THE PRESENT CROSS - OBJECTION IS ALSO REMITTED TO THE FILE OF THE AO, TO ADJUDICATE THE MA T TER AS PER THE DECISION TO BE ARRIVED AT BY THE HONBLE SUPREME COURT IN THE CASE OF EXCIDE INDUSTRIES LTD., (SUPRA). ITA NO.186/AGRA/2015 3 8 . THIS IS ASSESS EES APPEAL FOR A.Y. 2010 - 11, CONTENDING THAT THE INCOME TAX AUTHORIT IES HAVE ERRED IN DISALLOWING A SUM OF RS.95,18,278/ - IN RESPECT OF OUTSTANDING BALANCE OF CENTRAL SALES TAX AT THE YEAR END ON ACCOUNT OF SALES TAX 22 DEFERRED BY THE STATE GOVERNMENT U/S 2 8 OF THE UP TRADE TAX ACT R.W.S. 43B OF THE IT ACT. 39. THE AO MADE THE ADDITION U/S 43B, SINCE IT WAS FOUND THAT THE AMOUNT OF RS.95,18,278/ - HAD BEEN SHOWN OUTSTANDING ON ACCOUNT OF CENTRAL SALES TAX AT THE YEAR END AND DUE TO SALES TAX PAYMENT DEFERRED BY THE STATE GOVERNMENT U/S 38 OF THE UP TRADE TAX ACT. 40. THE LD. CIT(A) CONFIRMED THE ADDITION, HOLDING AS UNDER : 6 . 2 I HAVE CONSIDERED THE ABOVE ARGUMENTS OF THE LD . AR . HE HAS RELIED ON TWO CIRCULARS OF CBDT I . E . NO. 496 DATED 25 . 09.1987 AND NO 674 DATED 29 . 12 . 1993 TO CONSIDER THE AMOUNT OF DEFERRED SALES TAX AS DEEMED TO HAVE BEEN PAID . FOR SUCH DEEMING PAYMENT , THERE SHOULD BE AN AMENDMENT IN UP STATE SALES TAX ACT TO THE EFFECT THE SALES TAX DEFERRED UNDER THE SCHEME SHALL BE TREATED AS ACTUALLY PAID O R THERE SHOULD BE NOTIFICATION OF THE STATE GOV ERNMENT PROVIDING THAT THE DEFERRED SALES TAX IS CONVERTED IN LOANS IN WHICH ENTRIES SHALL BE MADE IN THE GOVERNMENT ACCOUNT GIVING EFFECT TO DEEMED COLLECTIONS BY CREDITING THE APPROPRIATE RECEIPT HEADS RE L AT I NG TO SALES TAX COLLECTIONS AND DEBITING THE H EADS RELATING TO DISBURSAL OF LOANS . 6.3 AS PER LD. AR , THE ABOVE REQU I REMENT IS COMPLIED WITH BECAUSE OF A NOTE PUT UP BY THE AUDITOR IN SCHEDULE R OF NOTES TO ACCOUNT . IN THIS NOTE , IT HAS BEEN MENTIONED THAT TRADE TAX COLLECTED ON SALE UP TO 31 ST MARCH, 2010 HAS BEEN CONVERTED INTO SECURED LOANS FROM PRADESH I YA INDUSTR I A L INVESTMENT CORPO R AT I ON O F U . P . UP TO 23 RS . 4 , 18 , 38 , 822/ - AND REMAINING AMOUNT OF RS . 5 , 25 , 33 , 721/ - AS UNSECURED LOAN. IN TH I S REGA R D , THE LD. AR HAS BEEN ASKED TO PRODUCE THE RELEVANT NOT I FICAT I ON OF U . P . STATE GOVERNMENT PROVIDING THAT SUCH CONVERSION OF SALES TAX LIABILITY OF THE ASSESSEE INTO SECURED LOAN BY PRADESHIYA INDUSTRIAL INVESTMENT CORPORATION OF U . P . WOULD BE DEEMED TO BE PAYMENT OF SALES TAX TO THE TRADE TAX DEPARTMENT OF UP STATE . IT IS ALSO NOT CLEAR AS TO WHAT IS THE STATUS OF UNSECURED LOAN , WHETHER THE SAME HAS BEEN CONVERTED BY THE PRADESHIYA INDUSTRIAL INVESTMENT CORPORATION OF U . P . OR BY STATE GOVERNMENT AND ALSO NOTHING IS CLEAR ABOUT ACCOUNTING ENTRI ES MADE AT THE TIME OF SUCH CONVERSION . SUCH DETAILS SHOULD BE AVAILABLE IN RELEVANT NOTIFICATION HOWEVER , THE LD. AR HAS FAILED TO SHOW ANY SUCH NOTIFICATION AS ENVISAGED IN CIRCULAR NO. 674 DATED 29.12.1993 . THEREFORE, I FIND THAT IN ABSENCE OF ANY EVIDE NCE TO SHOW DEEMED PAYMENT OF DEFERRED SALES TAX LIABILITY, THE AO HAS CORRECTLY DISALLOWED RS.95,18,278/ - U/S 438. ACCORDINGLY, ADDITION OF RS.95,18,278/ - IS CONFIRMED AND GROUND N. 5 IS DISMISSED. 41. BEFORE US, THE ASSESSEE HAS FILED A COPY OF LETTER D ATED 4.4. 2008 (APB 80 - 82) FROM THE PRADESHIYA INDUSTRIAL & INVESTMENT CORPORATION OF U.P. LTD. OR PICUP, TRADES TO THE IDBI, KANPUR . F OR READY REFERENCE , THIS LETTER IS BEING REPRODUCED AS UNDER: REF: NO. INC - 9 - TTD/134/2006 - 07/61 DATED: APRIL 4, 2008 TO, THE INDUSTRIAL DEVELOPMENT BANK OF INDIA LIMITED. 24 VIRENDRA SMRITI. 2 ND FLOOR, 15/54 - B. CIVIL LINES. KANPUR - 208001 (U.P.) DEAR SIRS, HIND LAMPS LIMITED (THE COMPANY) FINANCIAL ASSISTANCE - LETTER FOR CEDING PRIOR CHARGE. WE, THE PRADESHIYA INDUSTRIAL AND INVESTMENT CORPORATION OF U.P. LTD. , (HEREINAFTER CALLED 'PICUP') HEREBY AGREE AND CONFIRM THAT NOTWITHSTANDING ANYTHING TO THE CONTRARY CONTAINED IN OR IMPLIED BY VIRTUE OF VARIOUS SECURITIES CREATED/TO BE CREATED BY THE SUBJECT COMPANY IN FAVOUR OF OURSELVES/STATE GOVT, OF U.P. FOR SECURING THE INTEREST FREE LOAN UNDER THE TRADE TAX DEFERMENT LOAN SCHEME U/S 38 OF TRADE TAX ACT 1948, TO THE EXTENT OF RS.2000 LAKHS ONLY IN RESPECT OF COMPANY'S IMMOVEABLE AND MOVEABLE PROP ERTIES. (A) SITUATED AT MAUZA NIZAMPUR GARHUMA AND MAUZA UBTI, SHIKOHABAD ADMEASURING ABOUT 63.57 ACRES AND LEASE - HOLD LAND ADMEASURING ABOUT 23.69 ACRES SITUATED AT MAUZA NIZAMPUR GARHUMA, (B) SITUATE AT MAUZA NIZAMPUR GARHUMA, SHIKOHABAD ADMEASURING 0.364 HECT ARES OR 0.90 DECIMALS AND FREEHOLD LAND ADMEASURING 0.174 HECTARES OR 0.43 DECIMALS A MAUZA NIZAMPUR GARHUMA, SHIKOHABAD ALL IN THE STATE OF UTTAR PRADESH, (C) SITUATE AT VILLAGE DAUTANA, TEHSIL CHHATA, DISTRICT MATHURA IN THE STATE OF UTTAR PRADESH, THE CHARGES CREATED / TO BE CREATED BY THE COMPANY IN OUR FAVOUR FOR OUR INTEREST FREE LOAN IN LIEU OF DEFERRED TRADE TAX UNDER TRADE TAX DEFERMENT SCHEME OF U.P. GOVT. RS.2000 LACS SHALL BE SECOND AND SUBSERVIENT TO THE CHARGE CREATED BY THE COMPANY IN FAVOUR OF: - 1) INDUSTRIAL DEVELOPMENT BANK OF INDIA LTD.(HEREINAFTER CALLED 'IDBI') OF ITS TERM LOAN OF RS. 450.00 LACS; AND(IDBI IS HEREINAFTER REFERRED TO AS 'THE FIRST CHARGE HOLDERS') TOGETHER WITH INTEREST AND ALL OTHER MONEYS PAYABLE TO THEM UNDER THEI R RESPECTIVE . LOAN AGREEMENTS AS AMENDED FROM TIME TO . TIME. WE FURTHER AGREE, CONFIRM AND UNDERTAKE AS FOLLOWS: (A) ANY FURTHER ASSISTANCE GRANTED BY THE FIRST CHARGE HOLDERS WILL ALSO BE 25 SECURED BY A FIRST CHARGE OVER THE FIXED ASSETS, PRESENT AND FUTURE RANKING PARI PASSU WITH THE EXISTING FIRST CHARGES. SUCH CHARGE WILL THUS RANK PRIOR TO THE SECOND CHARGE, PRESENT OR FUTURE, IN OUR FAVOUR ON THE FIXED ASSETS. (B) WE AGREE THAT WE, AS SECOND CHARGE . HOLDERS ON THE FIXED ASSETS, MAY TAKE LEGAL PROCEEDINGS TOUCHING THE MORTGAGED PROPERTY ONLY AFTER - (I) EXHAUSTING OUR REMEDIES AS FIRST CHARGE HOLDER ON THE CURRENT ASSETS OF THE COMPANY;(LT IS CLARIFIED THAT IN THE EVENT OF BANK OBTAININ G A DECREE AGAINST BOTH THE FIXED ASSETS AND THE CURRENT ASSETS, IT SHALL FIRST TAKE STEPS FOR THE SATISFACTION OF THE DECREE AGAINST THE CURRENT ASSETS AND ONLY THEREAFTER PROCEED AGAINST FIXED ASSETS) ; (II) GIVING YOU A NOTICE OF AT LEAST 60 D A YS OF OUR INTENTION TO INITIATE LEGAL PROCEEDINGS AS ABOVE: AND (III) YOU HAVE AGREED TO INITIATION OF SUCH LEGAL PROCEEDINGS BY US. IF WE DECIDE TO PROCEED AS ABOVE, YOU WILL BE FREE TO REQUIRE THE COMPANY TO FORTHWITH REPAY YOUR LOANS AND ADVANCES AS I F THEY BECOME DUE UNDER YOUR RESPECTIVE LOAN DOCUMENTS. YOU MAY ALSO EXERCISE ANY OF THE RIGHTS OR REMEDIES AVAILABLE TO YOU AS FIRST MORTGAGEES UNDER THE LAW. (C) PROCEEDS OF ANY COMPENSATION RECEIVED FROM ACQUISITION OF THE MORTGAGED PROPERTY OR FOR ITS LOSS OR DESTRUCTION, WILL BE PAYABLE FIRST TO YOU AND ONLY THE BALANCE WILL BE PAYABLE TO US AS SECOND CHARGE HOLDERS. (D) WE WILL NOT CLAIM THE RIGHT OF MARSHALLING SECURITIES IN TERMS OF SECTION 81 OF THE TRANSFER OF PROPERTY ACT, 1882 AS AGAINST YOU. (E) IF THE CASH ACCRUALS OF THE COMPANY SO PERMIT, YOU MAY REQUIRE THE COMPANY TO UTILIZE A PORTION OF SUCH CASH ACCRUATS TOWARDS THE DISCHARGE OF YOUR DUES AND ALSO TO ACCELERATE PAYMENT OF YOUR LOAN INSTALMENTS (F) THE COMPANY WILL NOT MAKE ANY PAYMENT TO US IN DISCHARGE OF ITS OBLIGATIONS OTHER THAN ARISING OUT OF THE INTEREST FREE LOAN UNDER TRADE TAX DEFERMENT LOAN SCHEME EXTENDED BY US UNLESS ALL MONEYS THEN DUE BY THE COMPANY TO YOU ARE PAID. ( G) WE, AS SECOND CHARGE HOLDERS AND THE COMPANY SHALL ENTER INTO AN INTER SE AGREEMENT/ ARRANGEMENT WITH YOU FOR GIVING EFFECT TO THE ABOVE UNDERSTANDING AND OTHER INCIDENTAL MATTERS. (H) THE COPIES OF THE RELEVANT DOCUMENTS TO BE EXECUTED BY THE COMPANY I N OUR FAVOUR SHALL BE FORWARDED TO THE FIRST CHARGE HOLDERS FOR THEIR PERUSAL AND RECORDS. (I) WE AGREE TO SHARE ON A PRO - RATA BASIS THE EXPENSES INCURRED BY THE FIRST CHARGE HOLDERS TOWARDS THE PAYMENT OF INSURANCE PREMIUM, PRESERVATION OF ASSETS AND/OR ENFORCEMENT OF SECURITY, IN CASE THE SURPLUS OUT OF REALIZATION AVAILABLE FOR DISTRIBUTION IS PAYABLE TO US. (J) THE CUSTODY OF THE TITLE DEEDES AND INSURANCE POLICIES SHALL BE RETAINED BY IDBI ON OUR BEHALF AND AS OUR AGENTS, TO BE DELIVERED AND DISPOSED OFF WITH OUR PRIOR CONSENT IN WRITING; 26 (K) WE SHALL NOT MODIFY THE CONDITIONS RELATION TO THE PREPAYMENT OF THE FACILITIES SANCTIONE D BY US UNDER THE SCHEME. (3) WE HAVE NO OBJECTION TO YOUR ENCLOSING A COPY OF THIS LETTER TO THE FORMS OF PARTICULARS OF CHARGE THAT MAY BE FILED BY YOU/THE COMPANY WITH THE REGISTRAR OF COMPANIES PURSUANT TO THE PROVISIONS OF THE COMPANIES ACT, 1956. Y OURS FAITHFULLY, (S.A.Q. RIZVI) MANAGER (LAW) CC TO : MR. P.K. DHWAN, GENERAL MANAGER, M/S HIND LAMPS LTD., SHIKOHABAD, DISTT. FIROZABAD FOR FURTHER NECESSARY ACTION IMMEDIATELY AT YOUR END IN REFERENCE TO YOUR REQUEST LETTER DATED 28.9.2007 AND 5.1.2008 . SD/ - (S.A.Q. RIZVI) MANAGER (LAW) 42. ACCORDING TO THE ASSESSEE THIS LETTER CONFIRMS THE ASSESSEES INTEREST FREE LOANS UNDER THE U.P. TRADE TAX DEFERMENT LOAN SCHEME U/S 38 OF THE U.P. TRADE TAX AC T, 1948. THE ASSESSEE MAINTAINS THAT IT IS A SICK INDUSTRIAL UNIT, FALLING UNDER THE S I CK INDUST RIAL C OMPANIES (SPECIAL PROVISION S ) ACT, 1985 AND IT HAS BEEN REFERRED TO THE BOARD OF INDUSTRIAL AND FINANCIAL RECONSTRUCTION (BIFR) , BEING COVERED UNDER THE BIFR SCHEME. ACCORDING TO THE ASSESSEE , THE PICUP, VIDE ITS LETTER (SUPRA) HAS CONFIRMED THE INTE REST FREE LOAN UNDER THE TRADE TAX DEFERMENT LOAN SCHEME U/S 38 OF THE U.P. TRADE TAX ACT, 1948. IT HAS BEEN SUBMITTED THAT SECTION 38 OF THE U.P. TRADE TAX ACT, 1948 MAKES SPECIAL PROVISION REGARDING SICK INDUSTRIAL UNIT , LIKE THE ASSESSEE AND PROVIDES TH AT THE STATE GOVERNMENT MAY ALLOW THE DEFERMENT OF PAYMENT OF ANY EXISTING OR FUTURE DUES UNDER THE ACT AND IS APPROVED FOR REHABILITATION BY AN AGENCY APP ROVED BY THE CENTRAL GOVERNMENT, 27 OR THE STATE GOVERNMENT. IT HAS BEEN CONTENDED THAT SINCE THE PICUP HAS, VIDE ITS LETTER (SUPRA), CONFIRMED THE INTEREST FREE LOAN, THE ASSESSEE SQUARELY FALLS UNDER THE CBDT CIRCULAR NO. 674 DATED 29.12.1993, WHEREBY , THE DECISION OF THE CBDT THAT THE AMOUNT OF SALES TAX LIABILITY CON VERTED INTO LOANS MAY BE ALLOWED AS DE DUCTION IN THE ASSESSMENT FOR THE PREVIOUS YEAR IN WHICH SUCH CONVERSION HAS BEEN PERMITTED BY OR UNDER GOVERNMENT ORDERS, HAS BEEN ANN OUNCE D. THE ASSESSEE SUBMITS THAT AS SUCH, THE LD. CIT(A) BE DIRECTED TO ALLOW THE DEDUCTION CLAIM ED . 43. THE LD. DR HAS PLACED RELIANCE ON THE ORDER UNDER APPEAL. 44. IN VIEW OF THE LETTER (SUPRA) FROM THE PICUP TO THE IDBI, KANPUR , THE MATTER IS REMITTED TO THE LD. CIT(A), TO BE DECIDED AFRESH IN ACCORDANCE WITH LAW, ON AFFORDING DUE AND ADEQUATE OPPORTUNITY TO THE ASSESS EE, TAKING THE SAID LETTER INTO CONSIDERATION. THIS LETTER DOES NOT FIND MENTIONED IN THE IMPUGNED ORDER, WHEREAS THE CERTIFICATE APPENDED IN THE FOOT OF THE INDEX TO APB PAGES 77 - 82 FILED BEFORE US, STATES THAT NO NEW EVIDENCE IS BEING ADDUCED AT THIS STAGE. ANYHOW , THIS LETTER IS FOUND TO BE NECESSARY FOR BEING TAKEN INTO CONSIDERATION, IN THE INTEREST OF JUSTICE, FOR A JUST AND PROPER ADJUDICATION OF THE ISSUE AT HAND. 28 45. IN THE RESULT, ITA NO. 257/AGRA/2014 IS DISMISSED, C.O. NO.06/AGRA/2015 IN ITA NO.257/AGRA/2014 IS ALLOWED AND ITA NO.186/AGRA/2015 IS TREATED AS ALLOWED FOR STATISTICAL PURPOSES. O RDER PRONOUNCED IN THE OPEN COURT ON 29 /1 1 / 2016. SD/ - SD/ - ( D R . MITHA LAL MEENA) (A. D. JAIN) ACCOU N TANT MEMBER JU DICIAL MEMBER DATED: 29 /1 1 /2016 * AKV * COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(APPEALS) 5. DR: ITAT ASSISTANT REGISTRAR ITAT AGRA 29 DATE 1. DRAFT DICTATED (DNS) 1 6 .1 1 .201 6 PS 2. DRAFT PLACED BEFORE AUTHOR 17.11 . 201 6 PS 3. DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER JM/AM 4. DRAFT DISCUSSED/APPROVED BY SECOND MEMBER. JM/AM 5. APPROVED DRAFT COMES TO THE SR.PS/PS 29.11.2016 PS/PS 6. KEPT FOR PRONOUNCEMENT ON PS 7. FILE SENT TO THE BENCH CLERK 29.11.2016 PS 8. DATE ON WHICH FILE GOES TO THE AR 9. DATE ON WHICH FILE GOES TO THE HEAD CLERK. 10. DATE OF DISPATCH OF ORDER.