Madhya Gujarat Vij Co.Ltd., Baroda V. The Income tax Officer,Ward-4(1), Baroda

ITA 2583/AHD/2010

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 0093 (ITAT-AHMEDABAD)
• Duration Of Justice: 6 year(s) 2 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-11-2016
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 29-09-2016
• Assessment Year: 2006-2007
• Appeal Filed On: 30-08-2010
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: JAGDISH
• Assessee Lawyers: J P SHAH
• Keywords: Capital asset; Business income; Depreciation; Rectification of order; Opportunity of being heard; Bad and doubtful debts
• Section: 43B; 143(3); 142(1); 115JB; 139(5); 28; 154

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD B BENCH AHMEDABAD BEFORE SHRI RAJPAL YADAV, JM, & SHRI MANISH BORA D, AM. ITA NO. 2583/AHD/2010 ASST. YEAR: 2006-07 MADHYA GUJARAT VIZ. CO. LTD. SARDAR PATEL VIDYUT BHAVAN, RACE COURSE CIRCLE, BARODA. VS. INCOME-TAX OFFICER, WARD 4(1), BARODA. APPELLANT RESPONDENT PAN AADCM7439H AND C.O. NO.145/AHD/2013 ASST. YEAR: 2006-07 ACIT, CIRCLE-4, BARODA. VS. MADHYA GUJARAT VIZ. CO. LTD. SARDAR PATEL VIDYUT BHAVAN, RACE COURSE CIRCLE, BARODA. APPELLANT RESPONDENT APPELLANT BY SHRI J. P. SHAH, AR RESPONDENT BY SHRI JAGDISH, CIT, DR DATE OF HEARING: 29/9/2016 DATE OF PRONOUNCEMENT: 9/11/2016 O R D E R PER MANISH BORAD, ACCOUNTANT MEMBER . THIS APPEAL BY THE ASSESSEE AND THE CROSS OBJECTIO N BY THE REVENUE FOR ASST. YEAR 2006-07 ARE DIRECTED AGAINST THE ORDER OF LD. CIT(A)-III, BARODA, DATED 18.03.2010 IN APPEAL NO.C AB/III/104/08-09 ITA NO. 2583/AHD/2010 WITH CO NO.145/AHD/2013 ASST. YEAR 2006-07 2 ARISING OUT OF ORDER U/S 143(3) OF THE IT ACT, 1961 (IN SHORT THE ACT) FRAMED ON 18.12.2008 BY ITO, WARD 4(1), BARODA. 2. BRIEFLY STATED FACTS OF THE CASE ARE THAT ASSESS EE IS A LIMITED COMPANY WHICH CAME INTO EXISTENCE IN PURSUANCE OF T HE ENACTMENT OF THE ELECTRICITY ACT, 2003 AND GUJARAT ELECTRICITY I NDUSTRY REORGANIZATION AND REGULATION) ACT 2003. ON THE BAS IS OF VARIOUS RESOLUTIONS AND TRANSFER SCHEME FOR VESTING OF ASSE TS, LIABILITIES, PROCEEDINGS AND PERSONNEL FROM ERSTWHILE GUJARAT EL ECTRICITY BOARD (GEB) TO THE GOVERNMENT AND THEN TO RE-VEST THE SA ME INTO SEVEN COMPANIES I.E. ONE GENERATION COMPANY, ONE TRANSMIS SION COMPANY AND FOUR DISTRIBUTION COMPANIES AND ONE WITH THE RE SIDUAL FUNCTIONS. THIS RE-ORGANIZATION OF GEB WAS EFFECTIVE FROM 1 ST APRIL, 2005 BY OPERATIONAL LAW IN THE NAME OF GUJARAT URJA NIGAM L TD. ASSESSEE IS ONE AMONG THE 7 DIFFERENT COMPANIES ENGAGED IN CARR YING OUT ACTIVITIES RELATING TO GENERATION, TRANSMISSION AND DISTRIBUTION. RETURN OF INCOME FOR ASST. YEAR 2006-07 WAS ELECTRONICALLY FILED ON 29.12.2006 DECLARING INCOME AT RS.NIL AND PAID TAXE S U/S 115JB OF THE ACT ON THE BOOK PROFIT OF RS.18,34,88,182/-. T HE CASE WAS SELECTED FOR SCRUTINY ASSESSMENT AND NOTICE U/S 143 (2) OF THE ACT DATED 24.10.2007 FOLLOWED BY NOTICE U/S 142(1) OF T HE ACT WAS DULY SERVED UPON THE ASSESSEE. NECESSARY DETAILS WERE CA LLED FOR AND SUPPLIED BY ASSESSEE. VARIOUS ADDITIONS WERE MADE. HOWEVER, DUE TO SET OFF OF BROUGHT FORWARD BUSINESS LOSS INCOME WAS ASSESSED AT NIL AND BOOK PROFIT U/S 115JB OF THE ACT WAS ASSESSED A T RS.19,12,33,031/-. APPEAL BEFORE LD. CIT(A) BROUGH T PART RELIEF TO THE ASSESSEE. ITA NO. 2583/AHD/2010 WITH CO NO.145/AHD/2013 ASST. YEAR 2006-07 3 3. NOW AGGRIEVED, ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL AND REVENUE HAS FILED THE CROSS OBJECTION. 4. FIRST WE WILL TAKE ASSESSEES APPEAL WHEREIN GRO UND NO.1 READS AS UNDER :- 1.0 THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS ) ERRED IN LAW AND ON FACTS HAS CONFIRMED THE AGGREGATE ADDITIONS OF RS.41,41,436/- MADE ON ACCOUNT OF (I BAD & DOUBTFUL DEBTS WRITTEN OFF RS.34,03,318/- AND (II) MISCELLANEOUS LOSSES) & WRITE OFF RS.7,38,118/- WITHOUT GIVING ANY COGENT REASONS WHA TSOEVER. 5. BRIEF FACTS RELATING TO THIS GROUND ARE THAT LD. ASSESSING OFFICER ON THE BASIS OF REPORT OF COMPTROLLER & AUDITOR GEN ERAL OF INDIA DATED 15.2.2007 OBSERVED THAT BAD DEBTS OF RS.41.41 LACS (BAD AND DOUBTFUL DEBTS WRITTEN OF RS.34.3 LACS AND MISCELLA NEOUS LOSS WRITTEN OFF OF RS.7.38 LACS) DUE TO NON-ADJUSTMENT OF THE S AME FROM PROVISIONS OF BAD AND DOUBT DEBTS DUE TO WHICH PROF IT IS UNDERSTATED. AGAINST THIS OBSERVATION ASSESSEE REPLIED THAT AS P ER THE FINANCIAL RESTRUCTURING PLAN (FRP) APPROVED BY THE GOVERNMENT OF GUJARAT THE FINAL OPENING BALANCE SHEET WAS IN REPLY OF GOVT. N OTIFICATION DATED 3 RD OCTOBER, 2006 WHICH INCLUDED OPENING BALANCE OF BA D DEBT ASSIGNING TO THE COMPANY. IN CONSONANCE TO THAT THE EXPENSES OF BAD DEBT AND MISCELLANEOUS LOSSES INCURRED DURING THE YEAR WERE TO BE ADJUSTED AGAINST THE AFORESAID PROVISIONS. REPLY OF THE ASSE SSEE WAS NOT CONVINCING TO THE LD. ASSESSING OFFICER, AS IT WAS NOT SUPPORTED BY RELEVANT COPY OF ACCOUNTS OR DOCUMENTARY EVIDENCES WHICH COULD HAVE PROVED THAT ACCOUNTING ENTRIES HAVE BEEN PASSE D IN THE SUBSEQUENT YEAR TO RECTIFY THE MISTAKE. ITA NO. 2583/AHD/2010 WITH CO NO.145/AHD/2013 ASST. YEAR 2006-07 4 6. WHEN THE ISSUE CAME UP BEFORE THE CIT(A) THE GRO UND OF ASSESSEE WAS DISMISSED BY CIT(A) BY OBSERVING AS BE LOW :- 5.2 I HAVE GIVEN MY CAREFUL CONSIDERATION TO THE SU BMISSION AND ALSO EXAMINED THE FACTS OF THE CASE. THERE IS NO ERROR I N THE FINDINGS OF THE AO IN THIS REGARD AND THEREFORE THE DISALLOWANCE MADE BY THE AO IS CONFIRMED. REGARDING ADJUSTMENT ENTRIES PASSED IN THE SUBSEQUE NT YEARS, THE APPELLANT IS FREE TO MAKE CLAIM IN THOSE YEARS WHIC H SHOULD BE DECIDED BY THE AO AS PER LAW IN THOSE YEARS. THIS GROUND IS TH EREFORE DISMISSED. 7. IN APPEAL BEFORE THE TRIBUNAL LD. AR SUBMITTED T HAT THERE EXISTED THE PROVISIONS OF BAD DEBT WHICH WAS ASSIGN ED TO THE COMPANY POST SPLIT OF GEB. THE EXPENSES OF BAD DEBT AND MISCELLANEOUS LOSSES INCURRED DURING THE YEAR WERE ADJUSTED AGAINST THESE PROVISIONS. FURTHER OUT OF 24 ACCOUNTING LOCA TIONS OF THE COMPANY A FEW LOCATIONS COULD NOT PASS THE ACCOUNTI NG ENTRIES DURING THE F.Y. 2005-06 AND THE SAME HAVE BEEN PASSED IN T HE SUBSEQUENT YEARS. SIMILARLY, AS REGARDS MISCELLANEOUS LOSS OF WRITE OFF THE TOTAL EXPENSES UNDER THIS HEAD AMOUNTED TO RS.25,01,509/- BUT AFTER ADJUSTING THIS AMOUNT AGAINST THE OPENING PROVISION S OF BAD DEBTS ASSIGNED TO THE COMPANY, THE BALANCE AMOUNT OF RS.7 ,38,118/- HAS BEEN CLAIMED AS AN EXPENDITURE. 8. ON THE OTHER HAND, LD. DR SUPPORTED THE ORDERS O F LOWER AUTHORITIES. 9. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RECORD PLACED BEFORE US. THE ISSUE RAISED BY ASSESSEE IN T HIS GROUND, AGAINST THE ORDER OF LD. CIT(A) SUSTAINING THE DISA LLOWANCE OF ITA NO. 2583/AHD/2010 WITH CO NO.145/AHD/2013 ASST. YEAR 2006-07 5 RS.41.41 LACS ON ACCOUNT OF BAD DEBTS OF RS.34,03,3 18/- AND MISCELLANEOUS LOSS WRITTEN OFF AT RS.7,38,118/-. 10. WE OBSERVE THAT THERE WAS A MAJOR RESHUFFLING I N GEB PURSUANT TO WHICH 7 DIFFERENT COMPANIES CAME INTO OPERATION FOR CARRYING OUT VARIOUS ACTIVITIES GENERATION, DISTRIBUTION, TRANSM ISSION ETC. ASSESSEE COMPANY IS ENGAGED IN POWER TRANSMISSION GOT ITS AS SETS AND LIABILITIES AS OPENING BALANCE W.E.F. 1.4.2005. AS SUBMITTED BY LD. AR THAT THERE EXISTED OPENING BALANCE OF BAD DEBT PROV ISIONS ASSIGNED TO THE COMPANY AGAINST WHICH BAD DEBTS AND BALANCE WRI TTEN OFF HAVE BEEN ADJUSTED. AS AGAINST BAD DEBTS OF RS.34,03,118 /- THEY RELATE TO BAD DEBTS WRITTEN OFF OF RS.305150/- TOWARDS DUES N OT RECOVERED FROM CONSUMERS AND RS.3098168/- FOR PROVISION FOR BAD DE BT FOR CONSUMER DUES. AS REGARDS MISCELLANEOUS LOSS WRITTEN OFF AT RS.7138118/- IS A RESIDUAL BALANCE LEFT OUT OF THE TOTAL EXPENSES INC URRED UNDER THIS HEAD AT RS.2501,509/-. 11. HOWEVER, WE OBSERVE THAT ASSESSEE HAS NOT PROVI DED NECESSARY INFORMATION AND EXPLANATION ALONG WITH RE LEVANT COPIES OF ACCOUNTS OR DOCUMENTARY EVIDENCES BEFORE THE LOWER AUTHORITIES IN ORDER TO EXHIBIT THE OPENING BALANCE OF BAD DEBTS P ROVISIONS TRANSFERRED TO THE BOOKS OF ACCOUNT OF ASSESSEE, DE TAILS OF BAD DEBTS OF CONSUMER DUES AS WELL AS PROVISIONS MADE FOR CON SUMERS FOR DUES OF DOUBTFUL DEBTS. WE ARE OF THE VIEW THAT IN THE G IVEN FACTS AND CIRCUMSTANCES THE ISSUE NEEDS TO BE RESTORED BACK T O THE ASSESSING OFFICER FOR VERIFICATION OF ASSESSEES CLAIM. BOTH THE ASSESSEE AND THE ITA NO. 2583/AHD/2010 WITH CO NO.145/AHD/2013 ASST. YEAR 2006-07 6 REVENUE HAVE NO OBJECTION IF THE ISSUE IS RESTORED BACK TO THE ASSESSING OFFICER. WE ACCORDINGLY DO SO. NEEDLESS T O MENTION PROPER OPPORTUNITY OF BEING HEARD TO THE ASSESSEE SHOULD B E GIVEN. AS A RESULT, THIS GROUND OF ASSESSEE IS ALLOWED FOR STAT ISTICAL PURPOSES. 12. GROUND NO.2 READS AS UNDER :- 2.0 THE LEARNED COMMISSIONER OF INCOME TAX (APPEAL S) ERRED IN LAW AND ON FACTS HAS CONFIRMED THE REDUCTION OF THE AMOUNT OF CAPITAL GR ANTS & SUBSIDIES AND CONSUMERS' CONTRIBUTION AGGREGATING TO RS.1,08,48,19,758/- FRO M THE TOTAL COST OF THE PLANT & MACHINERY FOR THE PURPOSE OF ALLOWING DEPRECIATION AND HAS THEREBY CONFIRMED THE RESTRICTION OF THE APPELLANT'S CLAIM OF DEPRECIATIO N TO RS.19,68,36,274/- AS AGAINST RS.30,53,18,250/- CLAIMED BY THE APPELLANT. 13. DURING THE COURSE OF ASSESSMENT PROCEEDINGS IT WAS OBSERVED BY ASSESSING OFFICER THAT 10% OF THE CAPITAL GRANT HAS BEEN ROUTED THROUGH PROFIT AND LOSS ACCOUNT AND THE REMAINING A MOUNT HAS BEEN SHOWN UNDER THE HEAD RESERVE. LD. ASSESSING OFFICER WAS OF THE VIEW THAT AS THE SUBSIDY/GRANT RECEIVED ARE TOWARDS CAPI TAL ASSET THE ASSESSEE SHOULD HAVE REDUCED THE SAME FROM THE CAPI TAL ASSET TO ARRIVE AT THE ACTUAL COST AND THEN CALCULATE THE DE PRECIATION WHEREAS ASSESSEE HAS JUST REDUCED 10% OF THE GRANT FROM THE FIXED ASSET AND HAS CLAIMED HIGHER AMOUNT OF DEPRECIATION AND ACCOR DINGLY CALCULATED DISALLOWANCE OF DEPRECIATION AT RS.10,84 ,81,976/-. 14. LD. CIT(A) WHILE ADJUDICATING THIS GROUND RAISE D BY ASSESSEE CONFIRMED THE DISALLOWANCE BY OBSERVING AS FOLLOWS :- 6. THIRD GROUND IS IN RESPECT OF DISALLOWANCE OF D EPRECIATION AMOUNTING TO RS. 10,84,81,976/-. THE FACTS IN THIS REGARD AS, NO TED BY THE AO ARE THAT IN THE BALANCE SHEET THE APPELLANT COMPANY HAS SHOWN R ESERVES AND SURPLUS ITA NO. 2583/AHD/2010 WITH CO NO.145/AHD/2013 ASST. YEAR 2006-07 7 AS ON 31.03.2006 AMOUNTING TO RS.115.04 CRORES. IT WAS NOTED BY THE AO THAT THESE RESERVES AND SURPLUS WERE GOVT. SUBSIDY TOWARDS COST OF CAPITAL ASSETS AND THEREFORE HE ASKED AS TO HOW THE ACCOUNT ING TREATMENT HAS BEEN GIVEN TO THESE RESERVES. IT WAS STATED BEFORE THE AO THAT OUT OF 115.04 CRORES RS.17.41 CRORES HAS BEEN ROUTED THROU GH PROFIT AND LOSS ACCOUNT AND THE BALANCE OF RS.97.63 CRORES RECEIVED TOWARDS GRANT AND CAPITAL CONTRIBUTION, 10% OF THE SAME IS ROUTED THR OUGH PROFIT AND LOSS ACCOUNT EVERY YEAR. THE AO RAISED A QUESTION AS TO WHY THE AMOUNT OF RS.97.63 CRORES SHOULD NOT BE BROUGHT TO TAX DURING THE YEAR INSTEAD OF ONLY 10%. IT WAS CONTENDED BEFORE THE AO THAT THE C ONSUMER CONTRIBUTION AND CAPITAL GRANT RECEIVED TOWARDS COST OF CAPITAL ASSETS HAS NOT BEEN REDUCED FROM THE COST OF CAPITAL ASSETS. THESE ARE TREATED AS DEFERRED CREDITS AND 10% OF THE YEAR END BALANCE IS TRANSFER RED TO PROFIT AND LOSS ACCOUNT. THE AO AFTER CONSIDERING THE APPELLANT'S R EPLY CAME TO THE CONCLUSION THAT SINCE THE CAPITAL GRANT AND CONSUME R CONTRIBUTION WERE RECEIVED TOWARDS COST OF CAPITAL ASSETS, THE COST O F THE ASSETS SHOULD BE REDUCED TO THAT EXTENT FOR THE PURPOSE OF DEPRECI ATION. HE ACCORDINGLY WORKED DISALLOWABLE DEPRECIATION AT RS.10.84 CRORES 6.1 BEFORE RNE, IT HAS BEEN ARGUED THAT SUCH SUBSID Y ARE NOT GRANTED TO MEET THE ACTUAL COST OF ASSET BUT AS AN INCENTIVE, TO ELECTRIFIED THE BACK WARD AREAS. IT WAS FURTHER HELD THAT THE APPELLANT' S CASE IS COVERED BY THE SUPREME COURT DECISION IN THE CASE OF PJ. CHEMICALS LTD. 121 CTR 201 6.2 I HAVE GIVEN MY CAREFUL CONSIDERATION TO THE SU BMISSIONS AND FACTS OF THE CASE. IT IS UNDISPUTED FACT THAT THE CAPITAL GR ANT AND CONSUMER CONTRIBUTION IS TOWARDS COST OF CAPITAL ASSETS AS D ESCRIBED IN THE BALANCE SHEET ITSELF. SINCE THESE GRANTS ARE TOWARDS COST O F CAPITAL ASSETS, THE ISSUE IS SQUARELY COVERED BY THE DECISION OF HON'BL E SUPREME COURT IN THE CASE OF SAWHNEY STEEL (P) LTD. THIS FACT IS UNDISPU TED. THEREFORE THERE IS NO ERROR IN THE FINDINGS OF THE AO. IN FACT, IF APP ELLANT'S SUBMISSION IS ACCEPTED, THE WHOLE AMOUNT WOULD BE LIABLE TO TAX D URING THE YEAR AS THE APPELLANT'S PRACTICE OF OFFERING 10% OF THE YEAR EN D BALANCE AS INCOME IS NOT SUSTAINABLE UNDER THE PROVISIONS OF I.T. ACT/19 61. THIS GROUND IS THEREFORE DISMISSED. 15. NOW IN APPEAL BEFORE THE TRIBUNAL LD. AR SUBMIT TED THAT AS PER ACCOUNTING POLICY FOLLOWED BY MADHYA GUJARAT VIZ. C O. LTD. CONSUMERS CONTRIBUTION CAPITAL GRANT RECEIVED TOWAR DS COST OF CAPITAL ASSET ARE NOT REDUCED FROM THE COST OF CAPITAL ASSE T. FURTHER ALL THE ITA NO. 2583/AHD/2010 WITH CO NO.145/AHD/2013 ASST. YEAR 2006-07 8 RECEIPTS OF CONSUMERS CONTRIBUTION AND CAPITAL GRAN T RECEIVED FROM 1.4.2005 ARE TREATED AS PREFERRED CREDIT AND 10% O F THE AMOUNT IS TRANSFERRED TO PROFIT AND LOSS ACCOUNT. THE CONSUME RS CONTRIBUTION AND CAPITAL GRANT RECEIVED IS SHOWN SEPARATELY UNDE R THE ACCOUNT RESERVE AND SURPLUS AS PER ACCOUNTING POLICY AS DIS CLOSED IN THE ANNUAL REPORT AND 10% IS TRANSFERRED TO THE PROFIT AND LOSS ACCOUNT AND, THEREFORE, THE RECEIPT BEING CAPITAL IN NATURE CANNOT BE CONSIDERED AS INCOME. LD. AR REFERRED AND RELIED ON THE DECISION OF CO-ORDINAE BENCH IN THE CASE OF GUJARAT ENERGY TRAN SMISSION CORPN. LTD. (GETC L) VS. ACIT IN ITA NO.704/AHD/2012 FOR A SST. YEAR 2008- 09 AND OTHER VIDE ORDER DATED 12.06.2015. 16. ON THE OTHER HAND LD. DR SUPPORTED THE ORDERS O F LOWER AUTHORITIES. 17. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL ON RECORD. THROUGH THIS GROUND ASSESSEE HAS CHALLEN GED THE ORDER OF LD. CIT(A) SUSTAINING THE DISALLOWANCE OF DEPRECIAT ION AT RS.10,84,81,976/- BY OBSERVING THAT CAPITAL SUBSIDY AND GRANT RECEIVED ARE TO BE REDUCED FROM FIXED ASSET AND DEP RECIATION TO BE ALLOWED ON THE REMAINING BALANCE. WE OBSERVE THAT T HE GOVERNMENT GIVES GRANT/SUBSIDY TO THE HOLDING COMPANY AND THEN IT IS ALLOCATED TO THE ASSESSEE WHICH IS ONE OF THE SUBSIDIARY COMPANY AND FURTHER SUCH SUBSIDY ARE NOT GRANTED TO ACTUALLY TO MEET TH E COST BUT ARE GRANTED AS AN INCLUSIVE OF RURAL ECONOMICALLY BACKW ARD UNVIABLE AREAS. ASSESSEE RECEIVED SUBSIDIES ON DIFFERENT SCH EMES VIZ. RURAL ITA NO. 2583/AHD/2010 WITH CO NO.145/AHD/2013 ASST. YEAR 2006-07 9 ELECTRIFICATION AND TRIBAL AREA ELECTRIFICATION AND THE ASSETS CANNOT BE BIFURCATED INTO RURAL/TRIBAL AREA ETC. 17.1 THERE IS NO DISPUTE TO THE FACT THAT THE GRANT S RECEIVED FROM THE GOVERNMENT ARE CAPITAL IN NATURE BUT THEY HAVE NOT BEEN GIVEN SPECIFICALLY FOR ACQUIRING A PARTICULAR ASSET. IN S UCH SITUATION PROVISION OF SECTION 43(1) EXPLANATION 10 OF THE ACT SQUARELY APPLIES FOR THE TREATMENT OF SUCH CAPITAL GRANT. RELEVANT PROVISION S OF SECTION 43(1) OF THE ACT READ AS UNDER :- 43. IN SECTIONS 28 TO 41 AND IN THIS SECTION, UNLESS THE CONTEXT OTHERWISE REQUIRES ( 1 ) 'ACTUAL COST' MEANS THE ACTUAL COST OF THE ASSETS TO THE ASSESSEE, REDUCED BY THAT PORTION OF THE COST THEREOF, IF ANY, AS HAS BEEN ME T 96 DIRECTLY OR INDIRECTLY BY ANY OTHER PERSON OR AUTHORITY: [ PROVIDED THAT WHERE THE ACTUAL COST OF AN ASSET, BEING A MO TOR CAR WHICH IS ACQUIRED BY THE ASSESSEE AFTER THE 31ST DAY OF MARCH, 1967, [B UT BEFORE THE 1ST DAY OF MARCH, 1975,] AND IS USED OTHERWISE THAN IN A BUSINESS OF RUNNING IT ON HIRE FOR TOURISTS, EXCEEDS TWENTY- FIVE THOUSAND RUPEES, THE EXCESS OF THE ACTUAL COST OVER SUCH AMOUNT SHALL BE IGNORED, AND THE ACTUAL COST THEREOF SHALL BE TAKEN TO BE TWENTY -FIVE THOUSAND RUPEES.] [ EXPLANATION 10. WHERE A PORTION OF THE COST OF AN ASSET ACQUIRED B Y THE ASSESSEE HAS BEEN MET DIRECTLY OR INDIRECTLY BY THE CENTRAL GOVE RNMENT OR A STATE GOVERNMENT OR ANY AUTHORITY ESTABLISHED UNDER ANY LAW OR BY ANY O THER PERSON, IN THE FORM OF A SUBSIDY OR GRANT OR REIMBURSEMENT (BY WHATEVER NAME CALLED), THEN, SO MUCH OF THE COST AS IS RELATABLE TO SUCH SUBSIDY OR GRANT OR RE IMBURSEMENT SHALL NOT BE INCLUDED IN THE ACTUAL COST OF THE ASSET TO THE ASSESSEE : PROVIDED THAT WHERE SUCH SUBSIDY OR GRANT OR REIMBURSEMENT IS OF SUCH NATURE THAT IT CANNOT BE DIRECTLY RELATABLE TO THE ASSET ACQUIRED, SO MUCH OF THE AMOUNT WHICH BEARS TO THE TOTAL SUBSIDY OR REIMBURSEMENT OR GRAN T THE SAME PROPORTION AS SUCH ASSET BEARS TO ALL THE ASSETS IN RESPECT OF OR WITH REFERENCE TO WHICH THE SUBSIDY OR GRANT OR REIMBURSEMENT IS SO RECEIVED, SHALL NOT BE INCLUDED IN THE ACTUAL COST OF THE ASSET TO THE ASSESSEE.] 17.2 PROVISO TO EXPLANATION -10 TO SECTION 43(1) CO NTEMPLATES THAT SUBSIDY OR GRANT OR REIMBURSEMENT WHICH CANNOT BE R ELATABLE TO THE ITA NO. 2583/AHD/2010 WITH CO NO.145/AHD/2013 ASST. YEAR 2006-07 10 ASSETS ACQUIRED THEN GRANT AMOUNT TO BE APPORTIONED IN THE ASSETS AT THE SAME PROPORTION AS SUCH ASSETS BEARS ALL THE AS SETS. WE FURTHER OBSERVE THAT LD. ASSESSING OFFICER HAS GIVEN FOLLOW ING FINDING FOR APPLICATION OF EXPLANATION -10 TO SECTION 43(1) BY OBSERVING AS FOLLOWS:- 4.2 THE CONTENTION OF THE ASSESSEE THAT CONSUMER'S CONTRIBUTION AND CAPITAL GRANT ARE CAPITAL IN NATURE IS FOUND TENABLE, BUT I TS TREATMENT, OF 10% THEREOF TRANSFERRED TO P & L ACCOUNT EVERY YEAR IS NOT IN A CCORDANCE WITH THE PROVISIONS OF THE ACT. AS ENVISAGED IN EXPLANATION 10 TO SECTI ON 43(1), WHERE A PORTION OF THE COST AN ASSET ACQUIRED BY THE ASSESSEE HAS BEEN MET DIRECTLY OR INDIRECTLY BY THE CENTRAL GOVERNMENT OR STATE GOVT. OR ANY AUTHOR ITY ESTABLISHED UNDER ANY LAW, OR BY ANY OTHER PERSON, IN THE FORM OF SUBSIDY OR GRANT O R REIMBURSEMENT THEN IN A CASE WHERE THE SUBSIDY IS DIRECTLY RELATA BLE TO THE ASSET, SUCH SUBSIDY SHALL NOT BE INCLUDED IN THE ACTUAL COST OF THE ASS ETS. IN A CASE, WHERE SUCH SUBSIDY OR GRANT OR REIMBURSEMENT, IS OF SUCH NATUR E THAT, IT CANNOT BE DIRECTLY RELATABLE TO ANY PARTICULAR ASSETS, SO MUCH OF THE AMOUNT WHICH BEARS TO THE TOTAL SUBSIDY OR REIMBURSEMENT OR GRANT THE SAME PROPORTI ON AS SUCH ASSET BEARS TO ALL THE ASSETS IN RESPECT OF WHICH OR WITH REFERENC E TO WHICH SUCH GRANT OR SUBSIDY OR REIMBURSEMENT IS RECEIVED SHALL NO BE INCLUDED I N THE ACTUAL COST OF THAT ASSETS TO THE ASSESSEE. 4.3 IN VIEW OF THE CLEAR PROVISIONS OF THE ACT AS S TATED SUPRA AND THE ASSESSEE HIMSELF HAVE ADMITTED THAT THE SUBSIDY AND GRANT RE CEIVED ARE TOWARDS CAPITAL ASSETS, THE ASSESSEE SHOULD HAVE REDUCED THE SAME F ROM THE CAPITAL ASSET TO ARRIVE AT THE ACTUAL COST. HOWEVER THE ASSESSEE HAS FAILED TO DO SO AND ALSO NOT FURNISHED THE DETAILS OF FIXED ASSETS IN RESPECT OF WHICH THE SUBSIDY AND GRANTS HAVE BEEN RECEIVED. HENCE AND INFERENCE IS DRAWN TH AT THE GOVT. GRANTS/SUBSIDY AND CONSUMERS' CONTRIBUTION ARE RELATABLE TO FIXED ASSETS OF PLANT & MACHINERY. THE ASSESSEE HAS CLAIMED DEPRECIATION ON PLANT & MA CHINERY AS UNDER: 17.3 WE FURTHER OBSERVE THAT SIMILAR TYPE OF ISSUE CAME UP BEFORE THE TRIBUNAL IN THE CASE OF GETCL(SUPRA) WHICH WAS ADJUDICATED BY THE CO-ORDINATE BENCH BY OBSERVING AS FOLLOWS :- 20. WE FIND THAT IN THE INSTANT CASE, THE CIT{A) HE LD THAT EXCESS DEPRECIATION CLAIMED ON ACCOUNT OF CAPITAL GRANT COMES TO RS.18.93 CRORE S BEING 15% OF RS.176,62,04,718/-, I.E. RS.26,49,30,708/- MINUS RS .17,20,37,655/-, WHICH AMOUNTS TO RS.9,28,93,053/-, AND 15% OF RS.6427.94 LAKHS AM OUNTING TO RS.964.191 LAKH. ITA NO. 2583/AHD/2010 WITH CO NO.145/AHD/2013 ASST. YEAR 2006-07 11 THE SUBMISSIONS OF THE ASSESSEE BEFORE US IS THAT T HE UNIFORM RATE OF 15% ADOPTED BY THE CIT(A) IS NOT JUSTIFIED. AS PER PROVISIONS O F SECTION 43(1} OF THE ACT, THE CAPITAL GRANT SHOULD BE REDUCED FROM THE COST/WDV OF THE RE LEVANT ASSET, AND THEREAFTER THE DEPRECIATION IS TO BE CALCULATED. THUS, THE CAPITAL GRANT RECEIPT IN RESPECT OF ASSET, ON WHICH DEPRECIATION IS ALLOWABLE AT THE RATE DIFFERE NT FROM 15% SHOULD BE WORKED OUT AS PER THE APPLICABLE RATE. THE DR COULD NOT POINT OUT ANY MISTAKE IN THE ABOVE SUBMISSION OF THE ASSESSEE. WHICH WE FIND IS IN ACC ORDANCE WITH LAW. WE, THEREFORE, SET ASIDE THE ORDERS OF THE LOWER AUTHORITIES ON TH IS ISSUE, AND RESTORE THE MATTER BACK TO THE FILE OF THE AO FOR ADJUDICATION AFRESH AFTER VERIFYING THE PROPORTIONATE AMOUNT OF GRANT RELATING TO DIFFERENT ASSET, AND AP PLYING THE ACTUAL RATE OF DEPRECIATION WHICH RELATE TO THESE ASSETS.THUS, THI S GROUND OF APPEAL OF THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSE. 17.4 IN THE LIGHT OF THE DECISION OF THE CO-ORDINAT E BENCH DISCUSSED ABOVE AND IN THE LIGHT OF PROVISO TO EXPLANATION -1 0 TO SECTION 43(1) OF THE ACT WE FIND IT JUSTIFIED TO RESTORE THE ISSUE B ACK TO THE FILE OF ASSESSING OFFICER TO ADJUDICATE AFRESH AFTER VERIFY ING THE APPORTIONED AMOUNT OF GRANT RELATING TO DIFFERENT ASSETS AND CA LCULATE THE DEPRECIATION AT THE RATES APPLICABLE TO SUCH ASSETS . NEEDLESS TO MENTION THAT ALL NECESSARY DETAILS WILL BE PROVIDED BY THE ASSESSEE TO THE ASSESSING OFFICER IN ORDER TO CALCULATE THE COR RECT AMOUNT OF DEPRECIATION, LD. ASSESSING OFFICER TO PROVIDE PRO PER OPPORTUNITY OF BEING HEARD SHOULD BE GIVEN TO THE ASSESSEE. ACCORD INGLY, THIS GROUND OF ASSESSEE IS ALLOWED FOR STATISTICAL PURPO SES. 18. GROUND NO.3 READS AS UNDER :- 3.0 THE LEARNED COMMISSIONER OF INCOME TAX (APPEAL S) HAS ERRED IN LAW AND FACTS IN CONFIRMING THE DISALLOWANCE OF RS.1,08,030/- UNDER THE HEAD SMALL & LOW VALUE ITEMS WRITTEN OFF. 19. ADDITION OF RS.1,08,030/- WAS MADE BY ASSESSING OFFICER TOWARDS THE CLAIM OF ASSESSEE OF WRITE OFF OF SMALL AND LOW VALUE ITA NO. 2583/AHD/2010 WITH CO NO.145/AHD/2013 ASST. YEAR 2006-07 12 ITEMS OF RS.1,08,030/- AS THE ACTUAL COST OF MACHIN ERY AND PLANT INDIVIDUALLY WAS NOT EXCEEDING RS.5,000/-. HOWEVER, LD. ASSESSING OFFICER WAS OF THE VIEW THAT W.E.F. 1.4.1996 NO SUC H PROVISION EXISTS FOR DEBITING THE COST OF ASSETS AS EXPENDITURE VALU E OF WHICH IS LESS THAN RS.5,000/-. EVEN BEFORE FIRST APPELLATE AUTHOR ITY, LD. CIT(A) DISMISSED THE GROUND OF ASSESSEE AS NO DETAILS WERE AVAILABLE ON RECORD BIFURCATING THE ASSETS AS PER BLOCK. 20. NOW BEFORE THE LD. TRIBUNAL LD. AR THE ITEMS BO OKED UNDER THE HEAD SMALL & LOW VALUE ITEMS INCLUDE CALCULATORS, M OBILE PHONES ETC. WHICH CONSIDERING THE NATURE, CANNOT BE CAPITALIZED AS THESE ITEMS DUE TO DAMAGE, THEFT, MISPLACED THEN IT BECOMES DIF FICULT TO ADJUST SUCH LOSS AS IT IS VERY DIFFICULT AND CUMBERSOME TO FIND OUT THE WDV OF THE LOST ITEM. 21. LD. DR SUPPORTED THE ORDERS OF LOWER AUTHORITIE S. 22. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL ON RECORD. THROUGH THIS GROUND ASSESSEE IS AGGRIEVE D THAT LD. CIT(A)S DECISION FOR SUSTAINING THE ADDITION OF RS .1,08,030/- BEING BALANCE OF SMALL AND LOW VALUE ITEMS. AS SUBMITTED BY LD. AR THAT THE AMOUNT OF RS.1,08,030/- MAINLY INCLUDES SMALL AND L OW VALUE ITEMS INCLUDING CALCULATORS, MOBILE PHONES ETC. WHICH IS PRACTICALLY DIFFICULT FOR KEEPING CONTROL. LOOKING TO THE OVERALL BUSINES S EXPOSURES OF THE COMPANY AND FROM THE PERSPECTIVE OF BUSINESS AND PR ACTICAL APPROACH WE ARE OF THE VIEW THAT EXPENDITURE IS REL ATING TO CARRYING ON ITA NO. 2583/AHD/2010 WITH CO NO.145/AHD/2013 ASST. YEAR 2006-07 13 AND CONDUCTING OF THE BUSINESS WHICH HAS NOT BEEN D ISPUTED BY THE REVENUE, THEREFORE, THE ASSESSEE NEEDS TO BE ALLOWE D THE CLAIM OF EXPENDITURE OF RS.1,08,030/- BEING VALUE OF SMALL A ND LOW VALUE ITEMS. THIS GROUND OF ASSESSEE IS ALLOWED. 23. GROUND NO.4 OF ASSESSEES APPEAL READS AS UNDER :- 4.0 THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS ) HAS ERRED IN LAW AND FACTS IN CONFIRMING THE DISALLOWANCE OF PRIOR PERIOD EXPENSE S AMOUNTING TO RS.20,69,096/- WITHOUT APPRECIATING THE FACT THAT SUCH EXPENDITURE CRYSTALLIZED DURING THE YEAR AS A RESULT OF DE-MERGER OF ERSTWHILE GEB. 24. IN THE PROFIT AND LOSS ACCOUNT ASSESSEE HAS CLA IMED RS.20,69,096/- TOWARDS PRIOR PERIOD COST OF EXPENSE S. DETAILS WHEN BEING ASKED BY LD. ASSESSING OFFICER ASSESSEE HAS S IMPLY SUBMITTED THAT EXPENDITURES ARE IN THE NATURE OF NORMAL BUSIN ESS EXPENDITURE UNDER THE PECULIAR TRANSACTION ON SPLIT TRANSFER OF RUNNING BUSINESS UNDERTAKING. BUT THE ASSESSEE COULD NOT BRING ANY D OCUMENTARY EVIDENCE SUCH AS COPY OF RELEVANT ACCOUNT OR PLAUSI BLE EXPLANATION TO SUBSTANTIATE ITS CLAIM. 25. IN APPEAL BEFORE FIRST APPELLATE AUTHORITY THE GROUND OF ASSESSEE WAS DISMISSED BY LD. CIT(A) OBSERVING THAT IF THE I MPUGNED EXPENDITURE HAS BEEN ALLOCATED TO THE ASSESSEE IT W OULD BE UNDISPUTED FACT THAT THE LIABILITY TO PAY EXPENDITU RE HAD ALREADY BEEN ACCRUED IN EARLIER YEARS AND THE ASSESSEE COMPANY H AS ONLY TAKEN OVER THE EXISTING LIABILITY. ITA NO. 2583/AHD/2010 WITH CO NO.145/AHD/2013 ASST. YEAR 2006-07 14 26. IN APPEAL BEFORE THE TRIBUNAL, LD. AR SUBMITTED THAT AFTER RESTRUCTURING IN THE YEAR UNDER APPEAL IT IS THE FI RST YEAR OF OPERATION OF THE ASSESSEE HENCE ASSESSEE COULD NOT BRING PRIOR P ERIOD EXPENSES WERE ALLOCATED TO THE COMPANY AS A RESULT OF SPLIT TRANSFER OF THE RUNNING BUSINESS AND THEREFORE, THESE EXPENDITURE C RYSTALLIZED DURING THE YEAR UNDER CONSIDERATION. 27. LD. DR SUPPORTED THE ORDERS OF LOWER AUTHORITIE S. 28. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RECORD. THE ISSUE RAISED IN THIS GROUND BY ASSESSEE IS AGAI NST THE ACTION OF LD. CIT(A) DISALLOWING PRIOR PERIOD EXPENDITURE OF RS.20,69,096/-. WE FIND THAT FOLLOWING PRIOR PERIOD EXPENDITURE WERE C LAIMED DURING THE YEAR:- OTHER GENERATION COST RS.900/- EMPLOYEES COST RS.5,17,070/- DEPRECIATION UNDER PROVIDED RS.03,478/- OTHER EXCESS PROVISION RS.4,28,098/- OTHER PRIOR PERIOD EXPENDITURES RS.11,19,550/- RS.20,69,096/- 29. WE FURTHER OBSERVE THAT APART FROM THE BIFURCAT ION OF PRIOR PERIOD EXPENSES AS REFERRED AND GENERAL SUBMISSION OF ASSESSEE THAT THE AMOUNT HAS BEEN RECEIVED PURSUANT TO TRANSFER O F RUNNING BUSINESS UNDERTAKING AND NO OTHER DOCUMENTARY EVIDE NCE HAS BEEN ITA NO. 2583/AHD/2010 WITH CO NO.145/AHD/2013 ASST. YEAR 2006-07 15 PLACED ON RECORD IN ORDER TO PROVE THAT THE LIABILI TY FOR THE EXPENDITURE CRYSTALLIZED DURING THE YEAR. IT IS TRUE THAT THE B OOKS OF ACCOUNT OF ASSESSEE ARE AUDITED AND NO MAJOR DEFECT HAS BEEN P OINTED OUT BY THE ASSESSING AUTHORITY AND THEY HAVE BEEN ACCEPTED . HOWEVER, DURING THE COURSE OF ASSESSMENT PROCEEDINGS LD. ASS ESSING OFFICER PICKED UP CERTAIN ITEMS FOR THE PURPOSE OF VERIFICA TION. DURING THIS COURSE NECESSARY DETAILS WERE CALLED FOR RELATING T O PRIOR PERIOD EXPENSES WHICH INVOLVED EXPENDITURE PRIOR TO 1.4.20 05. IN SUCH SITUATION IT IS INCUMBENT ON THE ASSESSEE TO PROVE WITH NECESSARY DETAILS TO SATISFY THE QUERY RAISED BY THE ASSESSIN G AUTHORITY. IN SUCH SITUATION WE FIND THAT THE ASSESSEE HAS BEEN MISERA BLY FAILED TO SUBSTANTIATE ITS CLAIM WITH NECESSARY EVIDENCES AND DOCUMENTS. WE HAVE NO REASON TO ALLOW THIS GROUND OF THE ASSESSEE . ACCORDINGLY THIS GROUND OF ASSESSEE IS DISMISSED. 30. GROUND NO. 5 READS AS UNDER :- 5.0 THE LEARNED COMMISSIONER OF INCOME TAX (A PPEALS) HAS ERRED IN LAW AND ON FACTS IN CONFIRMING THE DISALLOWANCE OF GRATUITY AMOUNTING T O RS.48,823/- BY INVOKING THE PROVISIONS OF SECTION 40A(9) OF THE I T ACT. THIS GROUND HAS NOT BEEN PRESSED, HENCE THE SAME IS DISMISSED AS NOT PRESSED. 31. GROUND NOS.6 & 7 RAISED READ AS UNDER - 6.0 THE LEARNED COMMISSIONER OF INCOME TAX (APP EALS) ERRED IN LAW AND ON FACTS HAS CONFIRMED THE DISALLOWANCE OF DEDUCTION OF DEFERRED TAX ASSET AMOUNTING TO RS.6,40,52,414/- WHILE COMPUTING THE BUSINESS INCOM E/LOSS FOR THE YEAR UNDER CONSIDERATION. ITA NO. 2583/AHD/2010 WITH CO NO.145/AHD/2013 ASST. YEAR 2006-07 16 7.0 THE LEARNED COMMISSIONER OF INCOME TAX (AP PEALS) ERRED IN LAW AND ON FACTS HAS CONFIRMED THE ACTION OF THE ASSESSING OFFICER IN NO T ALLOWING THE DEDUCTION OF DEFERRED TAX ASSET AMOUNTING TO RS.6,40,52,414/- WH ILE COMPUTING THE BOOK PROFITS UNDER SECTION 115JB OF THE INCOME TAX ACT, 1961. 32. GROUND NO.6 IS ARISING OUT OF THE OBSERVATION O F LD. ASSESSING OFFICER WITH REGARD TO TREATMENT OF DEFERRED TAX IN THE COMPUTATION OF INCOME. IN THE COMPUTATION OF INCOME ASSESSEE HAS R EDUCED DEFERRED TAX ASSETS FROM THE NET PROFIT BUT HAS NOT DONE SO WHILE CALCULATING BOOK PROFIT U/S 115JB OF THE ACT. DURIN G THE COURSE OF ASSESSMENT PROCEEDINGS NO FURTHER REASON WAS GIVEN BY ASSESSEE FOR DOING SO AS A RESULT OF WHICH DEDUCTION OF DEFE RRED TAX ASSETS AT RS. 6,40,52,414/- WAS DENIED FOR CALCULATING BUSINE SS INCOME OF THE ASSESSEE. AS FAR AS COMPUTATION OF BOOK PROFIT WAS CONCERNED ASSESSEE HAS HIMSELF NOT CLAIMED IT AS DEDUCTION FR OM BOOK PROFIT BUT MENTIONED BY WAY OF NOTE IN THE COMPUTATION OF INCO ME THAT IT WAS ELIGIBLE FOR DEDUCTION U/S 115JB OF THE ACT FOR DEF ERRED TAX ASSET AND RESERVE ITS RIGHTS TO CLAIM REFUND OF SUCH TAX IN T HE EVENT OF MATTER BEING DECIDED FAVOURABLY. 33. AGGRIEVED ASSESSEE THEN WENT IN APPEAL BEFORE L D. CIT(A) RAISING TWO GROUNDS. FIRSTLY AGAINST NON-ALLOWABILI TY OF DEDUCTION OF DEFERRED TAX ASSET WHILE COMPUTING BUSINESS INCOME AND SECONDLY FOR NOT ALLOWING DEDUCTION OF DEFERRED TAX ON ASSETS U/ S 115JB OF THE ACT WITHOUT GIVING ANY FINDING IN THE ASSESSMENT ORDER. LD. CIT(A) DISMISSED THE GROUND OF ASSESSEE CLAIMING DEDUCTION OF DEFERRED TAX ASSET FOR CALCULATION OF BUSINESS INCOME BY OBSERVI NG AS UNDER :- ITA NO. 2583/AHD/2010 WITH CO NO.145/AHD/2013 ASST. YEAR 2006-07 17 13.2 I HAVE GIVEN MY CAREFUL CONSIDERATION TO THE S UBMISSION AND ALSO CONSIDERED RELEVANT PROVISIONS OF LAW IN THIS REGAR D. THE APPELLANT HAS REDUCED DEFERRED TAX AMOUNTING TO RS.6.40 CRORE FRO M THE REGULAR COMPUTATION OF INCOME. IT IS TO BE NOTED THAT FOR T HE PURPOSE OF REGULAR COMPUTATION, THE TAX IS WORKED OUT ON. THE INCOME R ECORDED IN THE BOOK AS ADJUSTED BY VARIOUS FIGURES IN TERMS OF THE DIFFERE NT PROVISIONS OF I.T. ACT IE ADDITIONS AND DELETIONS ARE MADE FROM THE DECLARED PROFITS AS PER THE SPECIFIC PROVISIONS OF LT. ACT ONLY. THE APPELLANT HAS NOT BROUGHT ANY PROVISION OF LAW AS TO HOW AN AMOUNT ',MCH IS INCL UDED IN THE TAXABLE PROFIT IS TO BE REDUCED IF IT IS A PART OF TAXABLE PROFIT. IF ANY AMOUNT IS REDUCED FROM DECLARED PROFIT, THEN IT HAS TO BE EST ABLISHED THAT THE AMOUNT IS NOT TAXABLE AS PER I.T. ACT. IN THE ABSENCE OF S UCH EXERCISE THE CLAIM CANNOT BE ALLOWED. THIS GROUND IS ACCORDINGLY DISMI SSED. LD. CIT(A) ALSO DENIED THE ADJUSTMENT OF DEFERRED T AX U/S 115JB OF THE ACT AND DISMISSED THE SECOND GROUND OF ASSESSEE RELATING TO DEFERRED TAX ASSET. 34. AGGRIEVED, ASSESSEE IS NOW IN APPEAL BEFORE THE TRIBUNAL. THE LD. AR SUBMITTED THAT IT HAS RIGHTLY CLAIMED DEDUCT ION OF DEFERRED TAX ASSET FROM THE NET PROFIT IN THE PROFIT AND LOSS AC COUNT FOR CALCULATING BUSINESS INCOME AND THE FACT CAN BE VERIFIED FROM T HE COMPUTATION OF INCOME VIS--VIS AUDITED PROFIT AND LOSS ACCOUNT BY REFERRING TO PAGE 2 TO 27 AND 43 OF THE PAPER BOOK. AS FAR AS GROUND RE LATING TO DEDUCTION OF DEFERRED TAX ASSET FROM BOOK PROFIT IS CONCERNED LD. AR SUBMITTED THAT PROVISIONS OF SECTION 115JB EXPLANAT ION -1 CLAUSE (VIII) OF THE ACT CLEARLY SPECIFIES THAT IF THE AMOUNT OF DEFERRED TAX IS CREDITED TO THE PROFIT AND LOSS ACCOUNT THEN IT NEE DS TO BE REDUCED FROM THE NET PROFIT FOR THE PURPOSE OF CALCULATING BOOK PROFIT U/S 115JB OF THE ACT. LD. AR FURTHER REFERRED AND RELIED ON T HE DECISION OF CO- ORDINATE BENCH, AHMEDABAD IN THE CASE OF ZEN TOBACC O CO. [2016] ITA NO. 2583/AHD/2010 WITH CO NO.145/AHD/2013 ASST. YEAR 2006-07 18 65 TAXMANN.COM 320 (AHMEDABAD - TRIB.) IN SUPPORT OF HIS CLAIM FOR SEEKING RECTIFICATION OF MISTAKE ALONG WITH REVISED STATEMENT OF TOTAL INCOME. 35. ON THE OTHER HAND LD. DR VEHEMENTLY ARGUED AND SUPPORTED THE ORDERS OF LOWER AUTHORITIES. 36. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RECORD. GROUND NOS.6 & 7 ARE INTER CONNECTED. GROUND NO.6 A RISES OUT OF THE DISALLOWANCE OF DEDUCTION OF DEFERRED TAX ASSETS CL AIMED AT RS.6,40,52,414/- WHILE COMPUTING BUSINESS INCOME. I N GROUND NO.7 WHICH WAS RAISED BY ASSESSEE BEFORE LD. CIT(A) FOR ALLOWING CLAIM OF DEDUCTION OF DEFERRED TAX ASSET WHILE COMPUTING THE BOOK PROFIT U/S 115JB OF THE ACT CLAIM OF WHICH WAS NOT MADE WHILE FURNISHING RETURN OF INCOME. AS FAR AS GROUND NO.6 IS CONCERNED, WE O BSERVE THAT IN THE AUDITED PROFIT AND LOSS ACCOUNT FOR F.Y. 2005-06 EX HIBITING AT PAGE 27, SHOWING PROFIT AND LOSS BEFORE TAX AT RS.127180617/ -. AS THE DEFERRED TAX ASSET OF RS.6,40,52,414/- WAS MORE THAN OTHER TAX LIABILITIES, THE RESULTANT FIGURE WAS RS.44614193/- WHICH HAS TO BE ADDED TO THE PROFIT BEFORE TAX TO ARRIVE AT PROFIT AFTER TAX AT RS.171794810/-. CALCULATION OF TAX ADJUSTMENT OF RS.44614193/- IS A S FOLLOWS :- INCOME-TAX (MAT) RS.11693372 DEFERRED TAX ASSET (RS.64052414) WEALTH TAX RS.67361 ITA NO. 2583/AHD/2010 WITH CO NO.145/AHD/2013 ASST. YEAR 2006-07 19 FRINGE BENEFIT TAX RS.7677488 RS.44614193 NOW WHEN WE MOVE TO SEE THE EFFECT OF TAX EXPENDITU RE IN THE COMPUTATION OF INCOME WE FIND THAT ASSESSEE HAS RIG HTLY ADDED PROVISIONS FOR WEALTH TAX, PROVISIONS FOR INCOME-TA X AND FRINGE BENEFIT TAX TO THE NET PROFIT AS PER PROFIT AND LOSS ACCOUN T OF RS.174131929 (NET PROFIT AFTER TAX AT RS.171794810 + NET PRIOR P ERIOD CREDIT AT RS.2337119). FURTHER ASSESSEE HAS RIGHTLY DEDUCTED DEFERRED TAX ASSET FROM THE NET PROFIT FOR THE PURPOSE OF CALCUL ATING BUSINESS INCOME. TO THIS EXTENT ASSESSEE HAS MADE NO MISTAKE IN CALCULATING THE BUSINESS INCOME AND HAS RIGHTLY DEDUCTED DEFERR ED TAX ASSET. HAD IT BEEN DEFERRED TAX LIABILITY, IT WOULD HAVE B EEN ADDED TO THE NET PROFIT. WE ARE, THEREFORE, OF THE VIEW THAT LD. CIT (A) HAS ERRED IN CONFIRMING THE DISALLOWANCE OF DEDUCTION OF DEFERRE D TAX ASSET AT RS.6,40,52,414/- WHILE COMPUTING BUSINESS INCOME/LO SS FOR THE YEAR. ACCORDINGLY GROUND NO.6 OF ASSESSEE IS ALLOWED. 37. AS FAR AS GROUND NO.7 FOR ASSESSEES CLAIM OF REVISING ITS BOOK PROFIT BY REDUCING IT BY DEFERRED TAX ASSET OF RS.6 ,40,52,414/- IS CONCERNED, WE OBSERVE THAT IN THE COMPUTATION OF IN COME ASSESSEE HAS GIVEN FOLLOWING NOTE NO.3 :- ASSESSEE HAS PAID THE TAX OF RS.14780769/- AS PER THE PROVISIONS OF SECTION 115JV OF THE ACT. ASSESSEE HAS COMPUTED MAT LIABILITY ON PROFIT AFTER TAX BY RS.171794810/- AS SHOWN IN ITS PROFITS AND LOSS ITA NO. 2583/AHD/2010 WITH CO NO.145/AHD/2013 ASST. YEAR 2006-07 20 ACCOUNT AND HAS MADE POSITIVE ADJUSTMENT ONLY ON AC COUNT OF PROVISIONS OF RS.11693372/- MADE FOR INCOME-TAX WIT HOUT MAKING ANY ADJUSTMENT ON ACCOUNT OF DEFERRED TAX ASSET AMOUNTI NG TO RS.6,40,52,414/-. ASSESSEE IS OF THE OPINION THAT A S PER THE PROVISIONS OF SECTION 115JB OF THE ACT, THE PROVISI ONS FOR DEFERRED TAX ASSET IS ONLY ON ACCOUNTING ADJUSTMENT AND HAS NO B EARING ON THE PROFIT AND LOSS AND ACCORDINGLY THE PROFIT BEFORE T HE PROVISION OF DEFERRED TAX ASSET HAS TO BE CONSIDERED FOR DETERMI NING THE MAT LIABILITY. HOWEVER, TO AVOID LITIGATION IN THE MATT ER AND TO BUY PEACE ASSESSEE COMPANY HAS PAID TAXES ON PROFITS AFTER CO NSIDERING THE DEFERRED TAX ASSET. THE ASSESSEE RESERVES ITS RIGHT S TO CLAIM REFUND OF SUCH TAX IN THE EVENT OF MATTER BEING DECIDED FAVOU RABLY. 38. NOW IN ORDER TO APPRECIATE THE CLAIM OF ASSESSE E WE NEED TO REFER THE PROVISIONS OF SECTION 115JB OF THE ACT FO R CALCULATION OF BOOK PROFIT PROVIDED IN EXPLANATION-1 TO SECTION 115JB O F THE ACT WHICH ALLOWS THE ASSESSEE TO REDUCE ITS PROFITS BY THE AM OUNT OF DEFERRED TAX IF ANY SUCH AMOUNT IS CREDITED TO THE PROFIT AN D LOSS ACCOUNT. EXAMINING THE FACTS BEFORE US, WE FIND THAT IN THE AUDITED PROFIT AND LOSS ACCOUNT ASSESSEE HAS INCREASED IT PROFITS BEFO RE TAXES BY ADDING THE DEFERRED TAX ASSETS AT RS.6,40,52,414/-. IN SUC H SITUATION WHILE CALCULATING BOOK PROFIT FOR THE PURPOSE OF SECTION 115JB OF THE ACT ASSESSEE IS ELIGIBLE TO CLAIM DEDUCTION OF DEFERRED TAX ASSET OF RS.6,40,52,414/-. HOWEVER, LOOKING TO THE FACT THAT ASSESSEE HAS HIMSELF NOT CLAIMED THE DEDUCTION FROM ITS BOOK PRO FIT WHILE FURNISHING RETURN OF INCOME WE OBSERVE THAT IF THE ASSESSEE IS ELIGIBLE FOR SOME ITA NO. 2583/AHD/2010 WITH CO NO.145/AHD/2013 ASST. YEAR 2006-07 21 DEDUCTION BUT HAS NOT CLAIMED SO WHILE FURNISHING R ETURN OF INCOME, DEDUCTION CANNOT BE DENIED MERELY BECAUSE IT WAS NO T CLAIMED IN THE COMPUTATION OF INCOME. IF THE ASSESSEE HAS RIGHTLY MOVED AN APPLICATION U/S 154 OF THE ACT TO RECTIFY THE INTIM ATION SENT BY ASSESSING OFFICER THEN ASSESSING OFFICER SHOULD REC TIFY SUCH INTIMATION AND ALLOW THE CLAIM OF ASSESSEE. WE FIND THAT THE DECISION OF THE CO-ORDINATE BENCH, AHMEDABAD IN THE CASE OF ZEN TOBBACO CO. P. LTD. COMES TO RESCUE TO THE PLEA OF THE ASSE SSEE WHEREIN THE CO-ORDINATE BENCH HAS OBSERVED THAT IN THE PROVISIO NS OF SECTION 139(1), 139(5) AND 143(1) OF THE ACT, IT IS EVIDENT THAT IT IS NOT THE CASE THAT REVENUE AUTHORITIES HAVE TO ACCEPT WHATEV ER STATED IN THE RETURN OF INCOME COMPUTING THE INCOME MECHANICALLY. AS PER PROVISIONS OF SECTION 143(1) OF THE ACT IS CONCERNE D THE REVENUE HAS TO EXAMINE WHETHER ANY CLAIM AS MADE BY THE ASSESSE E IS CORRECT OR NOT. THIS INCLUDES UNDER STATEMENT AND OVER STATEME NT OF THE INCOME. IF REVENUE AUTHORITIES FAIL TO TAKE NOTE OF INCORRE CT CLAIM WITH REGARD TO TOTAL INCOME OF THE ASSESSEE, SUCH FAILURE WOULD NECESSARILY MEAN MISTAKE APPARENT FROM THE RECORD. RESPECTFULLY FOLL OWING THE DECISION OF THE CO-ORDINATE BENCH REFERRED ABOVE AND IN THE GIVEN FACTS AND CIRCUMSTANCES OF THE CASE, WE ARE OF THE VIEW THAT ASSESSEE WAS ELIGIBLE FOR DEDUCTION OF DEFERRED TAX ASSET OF RS. 6,40,52,414/- FROM THE NET PROFIT AS PER AUDITED PROFIT AND LOSS ACCOU NT FOR THE PURPOSE OF CALCULATING BUSINESS INCOME AS WELL AS BOOK PROFIT U/S 115JB OF THE ACT. FURTHER WE DIRECT THE ASSESSING OFFICER TO ALL OW THE ASSESSEE TO CLAIM DEDUCTION OF DEFERRED TAX FROM BOOK PROFIT SO AS TO ARRIVE AT THE ITA NO. 2583/AHD/2010 WITH CO NO.145/AHD/2013 ASST. YEAR 2006-07 22 CORRECT TAX U/S 115JB OF THE ACT. ACCORDINGLY, THE GROUND NOS. 6 & 7 ARE ALLOWED. 39. GROUND NOS. 8 TO 10 ARE OF GENERAL NATURE, WHIC H NEED NO ADJUDICATION. 40. NOW WE TAKE UP THE CROSS OBJECTION FILED BY THE REVENUE RAISING FOLLOWING GROUNDS:- 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE, THE LEARNED CIT (A) HAS PATENTLY ERRED IN HOLDING THAT UNPAID SERVICE TAX I S NOT COVERED U/S 43 B OF THE I.T. ACT AFTER RELYING UPON THE DECISION OF CIT VS. NOBLE & HEWITT (I)(P) LTD. [305 ITR 324 (DEL.)] THEREBY OVERLOOKING THE FACT T HAT UNPAID SERVICE TAX IS VERY MUCH COVERED U/S 43 B (A) OF THE I.T. ACT, 196 1 AND EVEN IN THE CASE OF CIT VS. NOBLE & HEWITT (I) (P) LTD.(SUPRA), THE HON 'BLE HIGH COURT, DELHI HA: NOWHERE HELD THAT SECTION 43 B OF THE I.T. ACT DOES NOT APPLY TO SERVICE TAX. 2. THE APPELLANT CRAVES LEAVE TO ADD, AMEND OR ALTER THE ABOVE GROUNDS AS MAY BE DEEMED NECESSARY. RELIEF CLAIMED IN APPEAL: THE ORDER OF THE LD. CIT (A) ON THE ISSUES RAISED I N THE AFORESAID GROUNDS BE SET ASIDE AND THAT OF THE ASSESSING OFFICER BE RESTORED. 41. THE ISSUE RAISED IN GROUND NO1. RELATES TO THE FACT THAT ASSESSEE HAS SUO MOTU ADDED SERVICE TAX PAYABLE AT RS.13.56 LACS TO THE PROFITS AS PROFIT AND LOSS ACCOUNT U/S 43B O F THE ACT. AT THE TIME OF COMPLETION OF ASSESSMENT PROCEEDINGS THERE WAS N O DISPUTE AS SERVICE TAX PAYABLE AT RS.13.56 LACS ADDED TO THE N ET PROFIT WAS ACCEPTED BY ASSESSING OFFICER AS TO THE COMPUTATION OF INCOME FILED BY THE ASSESSEE. LATER ON AT THE TIME OF FILING APP EAL BEFORE LD. CIT(A) ASSESSEE TOOK THE GROUND AGAINST THE ORDER OF ASSES SING OFFICER FOR ITA NO. 2583/AHD/2010 WITH CO NO.145/AHD/2013 ASST. YEAR 2006-07 23 NOT ALLOWING DEDUCTION OF UNPAID SERVICE TAX AMOUNT ING TO RS.13.56 LACS WITHOUT CONSIDERING THE FACT THAT PROVISIONS O F SECTION 43B OF THE ACT ARE APPLICABLE ON THE SERVICE TAX PAYABLE. LD. CIT(A) ALLOWED THE CLAIM OF ASSESSEE BY FOLLOWING THE JUDGMENT OF HON. DELHI HIGH COURT IN THE CASE OF CIT VS. NOBLE & HEWITT (I)(P) LTD. [ 305 ITR 324 (DEL.)]. 42. AGGRIEVED, REVENUE IS NOW IN CROSS OBJECTION BE FORE THE TRIBUNAL. 43. LD. DR SUBMITTED THAT PROVISIONS OF SECTION 43B SUB SEC.(A) REFERS TO ANY SUM PAYABLE BY THE ASSESSEE BY WAY OF TAX, DUTY, CESS OR FEE, BY WHATEVER NAME CALLED, UNDER ANY LAW FOR THE TIME BEING IN FORCE. SERVICE TAX PAYABLE RELATED TO SERVICE TAX W HICH HAS BEEN CHARGED BY THE ASSESSEE TO ITS CUSTOMERS AND IT STO OD AS LIABILITY AT THE END OF THE YEAR, LD. DR SUBMITTED THAT THERE CA NNOT BE ANY POSSIBILITY OF CLAIM OF SERVICE TAX PAYABLE AS EXPE NDITURE IN THE PROFIT AND LOSS ACCOUNT BECAUSE IT IS THE TAX COLLECTED BY ASSESSEE ON BEHALF OF THE GOVERNMENT AND IT NEEDS TO BE PAID TO THE GOVERNMENT ON THE DUE DATE. LD. DR FURTHER SUBMITTED THAT LIAB ILITY OF SERVICE TAX IS SAME TO THAT OF OTHER TAX OR DUTY WHICH ASSESSEE HA S CHARGED FROM ITS CUSTOMERS AND IF THE TAX SO PAYABLE IS NOT DEPOSITE D BEFORE THE DUE DATE OF FILING OF RETURN THEN IT NEEDS TO BE ADDED TO THE NET PROFIT OF THE ASSESSEE U/S 43B OF THE ACT. 44. LD. DR FURTHER DIFFERENTIATED THE FACT OF THE C ASE WITH THOSE DEALT BY HON. DELHI HIGH COURT IN THE CASE OF CIT V S. NOBLE & HEWITT ITA NO. 2583/AHD/2010 WITH CO NO.145/AHD/2013 ASST. YEAR 2006-07 24 (I)(P) LTD. (SUPRA) BY SUBMITTING THAT HON. HIGH CO URT IN THIS CASE HAS NEVER SAID THAT SECTION 43B OF THE ACT DOES NOT APP LY TO SERVICE TAX. IN FACT IN THAT CASE HON. HIGH COURT IN PARA 2 HAS OBSERVED AS BELOW:- THE ASSESSEE MAINTAINS MERCANTILE SYSTEM OF ACCOUN T AND HAD COLLECTED SERVICE TAX DURING THE PREVIOUS YEAR RELE VANT TO THE ASST. YEAR IN QUESTION. OUT OF THE SERVICE TAX COLLECTED ASSESSEE HAD DEPOSITED PART OF THE AMOUNT BUT AN AMOUNT OF RS.14 .40 LACS WAS NOT DEPOSITED BY THE ASSESSEE WITH CONCERNED AUTHORITIE S. THE ASSESSEE DID NOT CLAIM ANY DEDUCTION IN THIS REGARD NOR DEBI TED THE AMOUNT AS EXPENDITURE IN THE PROFIT AND LOSS ACCOUNT. ASSESSI NG OFFICER AS WELL AS CIT(A) DISALLOWED THE AMOUNT AND ADDED IT BACK T O THE INCOME OF ASSESSEE. LD. DR SUBMITTED THAT FROM THE ABOVE IT CAN BE SEEN THAT HON. DELHI HIGH COURT THOUGH OBSERVED THAT SECTION 43B WAS APP LICABLE TO SERVICE TAX HOWEVER, NO DISALLOWANCE CAN BE MADE NO R PROVISION HAS BEEN MADE TO THE P & L ACCOUNT ON ACCOUNT OF SERVIC E TAX. IN VIEW OF THIS FINDING OF LD. CIT(A) THAT SECTION 43B OF THE ACT IS NOT APPLICABLE TO IT ACT IS NOT CORRECT. 45. ON THE OTHER HAND LD. AR SUBMITTED THAT - 1. THE MOST IMPORTANT POINT TO NOTE IS THAT SERVI CE TAX OF RS.13,56,000/-, WHICH IS ADDED IN TOTAL INCOME BY THE ASSESSING OFFICER O N PAGE 11 OF THE ASSESSMENT ORDER IS NOT AN ITEM, WHICH IS DEBITED TO PROFIT AN D LOSS ACCOUNT. UNDER SECTION 43B, THE ITEMS LIKE TAXES ETC, WHICH ARE DEBITED TO PROFIT AND LOSS ACCOUNT, ARE ONLY TO BE DISALLOWED, IF NOT PAID AND THE FACT OF THE MATTER IN THE PRESENT CASE OF THE ASSESSSEE IS THAT THE ABOVE AMOUNT HAS NOT BEEN DEBITED TO THE PROFIT AND LOSS ACCOUNT, AND THEREFORE, IS NOT DISALLOWABLE UN DER SECTION 43B. ITA NO. 2583/AHD/2010 WITH CO NO.145/AHD/2013 ASST. YEAR 2006-07 25 2. THE CONCEPT OF SERVICE TAX HAS BEEN STATED AS UNDER: (I) BOMBAY HIGH COURT IN CIT VS. OVIRA LOGISTI CS (P) LTD. - (2015) 377 ITR 129 (BOM), IT IS HELD THAT: '... ..... SECTION 43B DOES NOT CONTEMPLATE LIABILI TY TO PAY THE SERVICE TAX BEFORE ACTUAL RECEIPT OF THE FUNDS IN THE ACCOUNT OF THE A SSESSEE. IN OUR VIEW, LIABILITY TO PAY SERVICE TAX INTO THE TREASURY WILL ARISE ONLY U PON THE ASSESSEE RECEIVING THE FUNDS AND NOT OTHERWISE. ACCORDINGLY, WHEN SERVICES ARE RENDERED, THE LIABILITY TO PAY THE SERVICE TAX IN RESPECT OF THE CONSIDERATION PAYABLE WILL ARISE ONLY UPON THE RECEIPT OF SUCH CONSIDERATION AND NOT OTHERWISE .' COPY OF ABOVE DECISION IS ENCLOSED HEREWITH. (II) FURTHER, UNDER RULE 6 OF SERVICE TAX RULES , 1994, AS APPLICABLE IN ASST. YEAR 2006-07, SERVICE TAX WAS TO BE PAID ONLY AFTER THE RECEIPT OF SERVICE TAX BY THE ASSESSEE FROM THE PERSONS TO WHOM HE HAS RENDER ED THE SERVICES. IN OTHER WORDS, THE ASSESSEE UNDER SERVICE TAX ACT IS ONLY A COLLECTING AGENT, WHO HAS LIABILITY TO PAY SERVICE TAX TO THE GOVERNMENT ON O R AFTER THE RECEIPT THEREOF. IN VIEW OF THE PECULIARITY OF THIS PROVISION, IT IS WORTH NOTING THAT IN ACCOUNTANCY, BECAUSE THE ASSESSEE IS A MERE COLLECTING AGENT, TH IS ITEM WILL NOT BE REFLECTED IN THE PROFIT AND LOSS ACCOUNT OF THE CONCERNED ASSESS EE UNDER THE SERVICE TAX ACT BUT WILL BE REFLECTED ONLY IN THE BALANCE SHEET TO KEEP TRACK OF THE PAYMENT OF SERVICE TAX TO BE PAID BY THE SERVICE RECEIVERS AND TO SQUARE OF THAT SERVICE TAX ACCOUNT WHEN THE SERVICE TAX IS PAID OFF TO THE GOV ERNMENT. THIS METHOD OF ACCOUNTING IS BEING FOLLOWED BY ALL ASSESSEES BECAU SE THEY ARE MERE COLLECTING AGENTS, AS IT HAS BEEN FOLLOWED IN THE CASE OF THE ASSESSEE. 46. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RECORD. THE CRUX OF THE ISSUE RAISED IN THIS CROSS OBJECTIO N IS WHETHER PROVISIONS OF SECTION 43B OF THE ACT APPLY TO THE S ERVICE TA PAYABLE AT THE END OF THE YEAR. IN THE CASE OF ASSESSEE AMOUNT OF RS.13.56 LACS WAS ADDED TO THE NET PROFIT AS PROFIT AND LOSS ACCO UNT TOWARDS INADMISSIBLE ITEMS AT THE TIME OF FILING RETURN OF INCOME. POST ASSESSMENT ,ASSESSEE PREFERRED APPEAL BEFORE LD. CI T(A) RAISING THE GROUND THAT SERVICE TAX PAYABLE WAS NOT WRONGLY ADD ED TO THE NET PROFIT BY APPLYING THE PROVISIONS OF SECTION 43B OF THE ACT BECAUSE SERVICE TAX PAYABLE WAS NOT REFLECTED IN THE PROFIT AND LOSS ACCOUNT ITA NO. 2583/AHD/2010 WITH CO NO.145/AHD/2013 ASST. YEAR 2006-07 26 AND IT WAS A MERE LIABILITY IN THE BALANCE SHEET FO R TRACKING THE TAX PAYABLE BECAUSE IN THIS CASE ASSESSEE IS A MERE COL LECTING AGENT. THIS GROUND OF THE ASSESSEE WAS ALLOWED BY LD. CIT( A). IN ORDER TO FURTHER EXAMINE THE ISSUE THAT WHETHER SERVICE TAX PAYABLE IS COVERED UNDER THE PROVISIONS OF SECTION 43B SUB-SECTION(A) OF THE ACT, WE FIND THAT SECTION 43B SUB-SEC.(A) OF THE ACT REFERS TO ANY SUM PAYABLE BY THE ASSESSEE BY WAY OF TAX, DUTY, CESS OR FEES. NOW TAKING EXAMPLE OF SERVICE TAX THERE CAN BE TWO POSSIBILITY FIRSTLY AN ASSESSEE HAS TAKEN SOME SERVICES AND HAS PAID SERVICE TAX ON SUC H SERVICES TAKEN FROM OTHER PERSONS. IN THIS CASE SERVICE TAX IS A M ERE EXPENDITURE WHICH THE ASSESSEE HAS BOOKED IN THE PROFIT AND LOS S ACCOUNT AND THERE IS NO LIABILITY IN THE NAME OF SERVICE TAX IN THE BALANCE SHEET. SECOND SITUATION IS WHERE ASSESSEE HAS CHARGED SER VICE TAX ON THE SERVICES RENDERED AND TAX SO CHARGED HAS NOT BEEN P AID TO THE CREDIT OF GOVERNMENT AND THE REMAINING BALANCE STANDS AT T HE CLOSE OF THE YEAR IN THE BALANCE SHEET. TAKING BOTH THE SITUATIO NS WE FIND THAT SITUATION SECOND IS RELEVANT TO THE ASSESSEE AS IN SITUATION ONE THERE CANNOT BE ANY LIABILITY TO PAY SPECIFIC TAX AMOUNT RATHER IT CAN BE ONLY BE A CREDITOR IN THE BOOKS. INTERPRETING THE PROVIS IONS OF SECTION 43B SUB-SEC.(A) OF THE ACT, WHICH IN OUR VIEW CONTEMPLA TES THAT THIS CLAUSE HAS BEEN ENACTED WITH REGARD TO TAXES CHARGED BY TH E ASSESSEE FROM ITS CUSTOMERS AND IF THE TAXES SO CHARGED ARE PAYAB LE AT THE END OF THE YEAR AND ARE NOT PAID TO THE CREDIT OF THE GOV ERNMENT EVEN BEFORE DUE DATE OF FILING RETURN THEN SUCH AMOUNT NEEDS TO BE ADDED BACK TO THE INCOME OF ASSESSEE AND CAN BE CLAIMED AS EXPEND ITURE IN THE FOLLOWING YEAR IN WHICH SUCH TAX OR DUE IS PAID. IN OUR VIEW SECTION ITA NO. 2583/AHD/2010 WITH CO NO.145/AHD/2013 ASST. YEAR 2006-07 27 43B SUB-SEC.(A) OF THE ACT DOES NOT HAVE A DIRECT L INK OF THE AMOUNT OF TAX TO BE PASSED THROUGH PROFIT AND LOSS ACCOUNT . RATHERIT IS IN THE NATURE OF CHECK BY THE STATUTE TO ENSURE THAT THE ASSESSEE MAKES PAYMENT OF THE TAX COLLECTED TO THE CONCERNED DEPAR TMENT AND IF HE IS UNABLE TO DO SO THE AMOUNT IS ADDED TO ITS INCOME. 47. LD. AR HAS REFERRED AND RELIED ON THE DECISION OF HON.BOMBAY HIGH COURT IN THE CASE OF CIT VS. OVIRA LOGISTICS ( P) LTD. (2015) 377 ITR 129 (BOM). WE FIND THAT THE FACTS OF THE CASE A RE COMPLETELY DIFFERENT AS IT REFERS TO SERVICE TAX AMOUNT WHICH WERE NOT PAYABLE AS ON 31.3.2007 AS PER THE PROVISIONS OF SERVICE TAX A CT WHEREIN IN SAME SITUATION THE LIABILITY TO PAY SERVICE TAX CEA SES ONLY WHEN THE VALUE OF SERVICE INCLUDING SERVICE TAX HAS BEEN REC EIVED FROM THE PARTIES. FURTHER IN THE DECISION SO RELIED ON BY TH E ASSESSEE, THERE WAS A BIFURCATION AVAILABLE ON RECORD ABOUT THE SER VICE TAX PAYABLE AND NOT PAYABLE AT THE CLOSE OF THE YEAR. HOWEVER, GOING THROUGH THE RECORD PLACED BEFORE US, WE FIND THAT ASSESSEE HAS BEEN UNABLE TO PLACE ON RECORD ANY DETAIL TO PROVE THAT SERVICE TA X PAYABLE OF RS.13,56,000/- WAS IN RELATION TO THOSE SERVICES ON WHICH SERVICE TAX ARE PAYABLE ONLY WHEN THE DUE AMOUNT FROM CUSTOMERS IS RECEIVED AND THE PARTICULAR PROVISIONS OF SERVICE TAX IS AP PLICABLE TO ASSESSEE FOR THE YEAR UNDER APPEAL. ASSESSEE CAME AWAY WITH THE MERE PLEA THAT IT IS A COLLECTING AGENT AND SERVICE TAX IS NO T REFLECTED IN THE PROFIT AND LOSS ACCOUNT SO AS TO KEEP SERVICE TAX PAYABLE OUT OF THE AMBIT OF PROVISIONS OF SECTION 43B SUB-SEC.(A) OF THE ACT. I N ABSENCE OF NECESSARY DETAILS AND IN THE GIVEN FACTS AND CIRCUM STANCES OF THE ITA NO. 2583/AHD/2010 WITH CO NO.145/AHD/2013 ASST. YEAR 2006-07 28 CASE, WE ARE OF THE VIEW THAT SERVICE TAX PAYABLE A T RS.13.56 LACS IS COVERED UNDER THE PROVISIONS OF SECTION 43B SUB-SEC .(A) OF THE ACT AND IF ASSESSEE HAS NOT DEPOSITED THE SERVICE TAX P AYABLE BEFORE THE DUE DATE OF FILING OF RETURN OF INCOME THEN THE AMO UNT NEEDS TO BE ADDED TO THE NET PROFIT OF ASSESSEE WHICH IN THIS C ASE HAS BEEN RIGHTLY DONE SO BY THE ASSESSEE AT THE TIME OF FILING RETUR N OF INCOME. ACCORDINGLY, WE ALLOW THE CROSS OBJECTION FILED BY THE REVENUE. 48. IN THE RESULT, ASSESSEES APPEAL IS PARTLY ALLO WED FOR STATISTICAL PURPOSES AND THE CROSS OBJECTION OF REVENUE IS ALLO WED. ORDER PRONOUNCED IN THE OPEN COURT ON 9 TH NOVEMBER, 2016 SD/- SD/- (RAJPAL YADAV) JUDICIAL MEMBER (MANISH BORAD) ACCOUNTANT MEMBER DATED 9/11/2016 MAHATA/- COPY OF THE ORDER FORWARDED TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT CONCERNED 4. THE CIT(A) CONCERNED 5. THE DR, ITAT, AHMEDABAD 6. GUARD FILE BY ORDER ASST. REGISTRAR, ITAT, AHMEDABAD ITA NO. 2583/AHD/2010 WITH CO NO.145/AHD/2013 ASST. YEAR 2006-07 29 1. DATE OF DICTATION: 4/11/2016 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE T HE DICTATING MEMBER: 8/11/2016 OTHER MEMBER: 3. DATE ON WHICH APPROVED DRAFT COMES TO THE SR. P. S./P.S.: 4. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE TH E DICTATING MEMBER FOR PRONOUNCEMENT: __________ 5. DATE ON WHICH THE FAIR ORDER COMES BACK TO THE S R. P.S./P.S.: 6. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK: 9/11/16 7. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK: 8. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT REGISTRAR FOR SIGNATURE ON THE ORDER: 9. DATE OF DESPATCH OF THE ORDER: