Mercury Car Rentals Limited, Kolkata V. D.C.I.T., Circle-4, Kolkata, Kolkata

ITA 2696/KOL/2013

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 4316 (ITAT-KOLKATA)
• Duration Of Justice: 2 year(s) 10 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-10-2016
• Appeal Filed By: Assessee
• Bench Allotted: A
• Next Hearing Date: 26-10-2016
• Assessment Year: 2007-2008
• Appeal Filed On: 02-12-2013
• Result in Favour of: Set Aside
• Court: TRIBUNAL
• Assessee Lawyers: ROHAN PODDAR
• Keywords: Business expenditure
• Section: 43B; 43D; 250

Judgement Text

ITA NO. 2696/KOL/2013 M/S. MERCURY CAR RENTALS LIMITED 1 IN THE INCOME TAX APPELLATE TRIBUNAL, KOLKATA A BEN CH, KOLKATA BEFORE SHRI M.BALAGANESH, ACCOUNTANT MEMBER AND SHRI S.S. VISWANETHRA RAVI, JUDICIAL MEMBER I.T.A. NO.2696/KOL/2013 ASSESSMENT YEAR: 2007-08 MERCURY CAR RENTALS LIMITED 4, MANGOE LANE,6 TH FLOOR, KOLKATA-700 001, PAN: AACCM0488P. APPELLANT -VS.- D.C.I.T., CIR-4, KOLKATA, AAYKAR BHAWAN, 8 TH FLOOR, P-7, CHOWRINGHEE SQUARE, KOLKATA-700 069. RESPONDENT APPEARANCES BY: SHRI ROHAN PODDAR, ADVOCATE, AR FOR THE ASSESSEE SHRI SALLONG YADEN, ADDL.CIT, DR, FOR THE DEPARTMEN T DATE OF HEARING : 26-10- 2016 DATE OF PRONOUNCEMENT : 31 -10-2016 SHRI. S.S.VISWANETHRA RAVI, JM: THIS APPEAL BY THE ASSESSEE AGAINST THE ORDER DT: 2 7-08-2013 PASSED BY THE COMMISSIONER OF INCOME TAX-(APPEALS), KOLKATA U /SEC 250 OF THE ACT FOR THE ASSESSMENT YEAR 2007-08. 2. THE APPELLANT ASSESSEE HAS RAISED FOLLOWING GROU NDS:- 1. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF TH E CASE THE LEARNED CIT (APPEALS) ERRED IN DISMISSING THE APPELLANT'S GROUND THAT PROVISION FOR LEAVE ENCASHMENT AMOUNTING TO RS.14,62,889/- IS AN ALLOWABLE BUSINESS EXPENDITURE. ITA NO. 2696/KOL/2013 M/S. MERCURY CAR RENTALS LIMITED 2 2. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE THE CIT (APPEALS) ERRED IN NOT APPRECIATING THAT THE PROVISION FOR LEAV E ENCASHMENT SHALL NOT BE ADDED BACK U/S 43B OF THE INCOME TAX ACT. 3. THAT THE APPELLANT CRAVES LEAVE TO ADD AND / OR AM END, ALTER, MODIFY OR RESERVED THE GROUNDS HEREINABOVE BEFORE OR AT THE TIME OF HEARING OF THE APPEAL. 3. GROUND NOS.1 & 2 ARE RELATING TO DISALLOWANCE ON ACCOUNT OF PROVISION OF LEAVE ENCASHMENT AMOUNTING TO RS.14,62,889/-. 4. DURING THE ASSESSMENT PROCEEDINGS THE AO OBSERVE D THAT THE ASSESSEE MADE PROVISION FOR LEAVE ENCASHMENT AND CLAIMED RS. 14,62,889/- AS DEDUCTION. IN EXPLANATION, THE ASSESSEE CLAIMED AS ALLOWANCE BY RELYING ON THE DECISION OF HONBLE CALCUTTA HIGH COURT IN THE CASE OF EXIDE INDUSTRIES LIMITED, REPORTED IN 292 ITR 470 (CAL), WHEREIN HEL D THAT PROVISION FOR LEAVE ENCASHMENT DOES NOT FALL UNDER THE PURVIEW OF SEC TION 43B OF THE I.T ACT, 1961. ACCORDING TO AO, THE RESPONDENT REVENUE HAS N OT ACCEPTED THE DECISION OF HONBLE CALCUTTA HIGH COURT AND A SLP WAS FILED BEFORE HONBLE SUPREME COURT AND SINCE THE ISSUE HAS NOT REACHED FINALITY, THE CLAIM OF THE ASSESSEE WAS DISALLOWED AND RS.14,62,889/- ADDED TO THE INC OME OF THE ASSESSEE. 5. BEFORE THE CIT-A, THE ASSESSEE SUBMITTED AS UND ER: '3.4 THE HONBLE SUPREME COURT IN THE CASE OF CIT VS. M/S. EXIDE INDUSTRIES LTD IN SLP (CIVIL) CC 12060/2008 DURING HEARING ON 8.9.2008 GAVE FOLLOWING ORDER:- UPON HEARING COUNSEL THE COURT MADE THE FOLLOWING ORD ER, ISSUE NOTICE, IN THE MEANTIME, THERE SHALL BE STAY OF THE IMPUGNED JUDGMENT, UNTIL FURTHER ORDERS. 3.5 THE HONBLE SUPREME COURT DURING THE HEARING IN T HE SAME CASE FURTHER ON 8.5.2009 HELD AS UNDER:- ITA NO. 2696/KOL/2013 M/S. MERCURY CAR RENTALS LIMITED 3 UPON HEARING COUNSEL THE COURT MADE THE FOLLOWING OR DER DELAY CONDONED. LEAVE GRANTED. PENDING HEARING AND F INAL DISPOSAL OF THE CIVIL APPEAL, DEPARTMENT IS RESTRAINED FROM REC OVERING PENALTY AND-INTEREST WHICH HAS ACCRUED TILL DATE. IT IS MAD E CLEAR THAT AS FAR AS THE OUTSTANDING INTEREST DEMAND AS OF DATE IS CONC ERNED, IT WOULD BE OPEN TO THE DEPARTMENT TO RECOVER THAT AMOUNT IN CAS E CIVIL APPEAL OF THE DEPARTMENT IS ALLOWED. WE FURTHER MAKE IT CLEAR THAT THE ASSESSEE WOULD, D URING THE PENDENCY OF THIS CIVIL APPEAL, PAY TAX AS IF SECTION 43B(F) I S ON THE STATUTE BOOK BUT AT THE SAME TIME IT WOULD BE ENTITLED TO MAKE A CLAIM IN ITS RETURNS. 3.6 THEREFORE, FOLLOWING THE ORDER OF THE HONBLE SUPR EME COURT IN THE CASE OF CIT VS. M/S. EXIDE INDUSTRIES LTD IN SLP (CIVIL) CC 12060/2008 DURING HEARING ON 8.9.2008 AND 8.5.2009, IT IS HELD THAT T HE ORDER OF THE HONBLE JURISDICTIONAL HIGH COURT HAS BEEN STAYED AND HELD T HAT THE PROVISIONS OF SECTION 43B(F) IS ON THE STATUTE AND THE ASSESSEES HAVE BEEN DIRECTED TO DEPOSIT THE TAXES ON THE SAME. 3.7 THEREFORE, IN THE FACTS AND CIRCUMSTANCES DURING THE PENDENCY OF SLP IT IS HELD THAT THE JUDGMENT OF THE HONBLE HIGH COURT BEING STAYED IS NOT APPLICABLE AND THE APPELLANT IS REQUIRED TO DEPOSIT THE TAXES. THEREFORE, THIS GROUND OF APPEAL IS DISMISSED. 6. AGGRIEVED BY SUCH ORDER OF THE CIT-A, NOW THE AS SESSEE IS IN SECOND APPEAL BEFORE US BY RAISING THE ABOVE MENTIONED GRO UNDS OF APPEAL. 7. THE LD.AR AT THE TIME OF HEARING BEFORE US SUBMI TTED THAT THE SIMILAR ISSUES HAVE BEEN DECIDED BY THIS TRIBUNAL, WHEREIN THE TRIBUNAL REMANDED SUCH ISSUES TO THE FILE OF AO TO DECIDE THE ISSUE I N PURSUANCE OF FINAL ORDER BY HONBLE SUPREME COURT. 8. HEARD RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. WE FIND THAT THE CO-ORDINATE BENCHES HAVE DECIDED THE SAME ISSU E BY OBSERVING AS UNDER:- 25. THE ISSUE RAISED IN GROUND NO. 8 RELATES TO THE D ISALLOWANCE OF 1.51 CRORES MADE BY THE ASSESSING OFFICER AND CONFIRMED BY THE LD. CIT(APPEALS) ON ACCOUNT OF PROVISION MADE BY THE AS SESSEE FOR LEAVE ENCASHMENT. 26. THE ASSESSEE-COMPANY DURING THE YEAR UNDER CONSID ERATION HAD MADE A PROVISION OF RS.1.51 CRORES FOR LEAVE ENCASHMENT ON T HE BASIS OF AN ITA NO. 2696/KOL/2013 M/S. MERCURY CAR RENTALS LIMITED 4 ACTURIAL VALUATION AND THE SAME WAS CLAIMED AS DEDU CTION BY RELYING ON THE DECISION OF THE HONBLE CALCUTTA HIGH COURT IN ASS ESESES OWN CASE REPORTED IN 292 ITR 470 AND THE DECISION OF THE HONB LE SUPREME COURT IN THE CASE OF BHARAT EARTH MOVERS REPORTED IN 245 ITR 42 8. THE ASSESSING OFFICER, HOWEVER, DISALLOWED THE CLAIM OF THE ASSESSE E FOR PROVISION OF LEAVE ENCASHMENT RELYING ON THE CLAUSE (F) INSERTED IN SECTION 43B BY THE FINANCE ACT, 2001 W.E.F. 1 ST APRIL, 2002. THE LD. CIT(APPEALS) CONFIRMED THE SAID DISALLOWANCE. THE ASSESSEE CHALLENGED THE CONSTITUTIONAL VALIDITY OF CLAUSE (F) INSERTED IN SECTION 43B BEFORE THE HONB LE CALCUTTA HIGH COURT BY WAY OF A WRIT PETITION AND ALTHOUGH THE SAME WAS INITIALLY DISMISSED BY THE SINGLE BENCH, IT WAS ADMITTED AND RULED IN FAVOUR OF THE ASSESSEE BY THE DIVISION BENCH OF THE HONBLE CALCU TTA HIGH COURT BY HOLDING THAT THE INTRODUCTION OF CLAUSE (F) TO SECTION 43B IS ULTRA VIRUS OF THE ACT IN THE ABSENCE OF DISCLOSURE OF THE OBJECTS A ND BEING INCONSISTENT WITH THE BASIC INTENT OF SECTION 43B. THEREAFTER THE DEPARTMENT FILED THE SLP AGAINST THE DECISION OF THE HONBLE CALCUTTA HIGH COURT AND WHILE ADMITTING THE SAME, THE HONBLE SUPREME COURT VIDE IT S JUDGMENT DATED 08.09.2008 STAYED THE JUDGMENT OF THE HONBLE CALCUT TA HIGH COURT UNTIL FURTHER ORDERS. 27. AT THE TIME OF HEARING BEFORE US, THE LD. COUNSE L FOR THE ASSESSEE HAS CONTENDED THAT EVEN THOUGH THE DECISION OF THE HONB LE CALCUTTA HIGH COURT HOLDING CLAUSE (F) OF SECTION 43D AS ULTRA VIRUS IS STAYED BY THE HONBLE SUPREME COURT WHILE ADMITTING THE SLP FILED BY THE REVENUE, THE SAME HAS NOT BEEN REVERSED AND THIS TRIBUNAL, THEREF ORE, IS BOUND TO FOLLOW THE SAME BEING A BINDING PRECEDENT. HE HAS AL SO CONTENDED THAT THE DECISION OF THE HONBLE CALCUTTA HIGH COURT WAS STAYED BY THE HONBLE APEX COURT VIDE ITS JUDGMENT DATED 08.09.2008 UNTIL FURTHER ORDERS AND THERE BEING ANOTHER INTERIM ORDER PASSED BY THE HONB LE SUPREME COURT ON 08.05.2009, THE STAY GRANTED EARLIER STANDS AUTOM ATICALLY VACATED. A COPY OF THE SAID INTERIM ORDER DATED 08.05.2009 IS P LACED ON RECORD BEFORE US, THE CONTENTS OF WHICH ARE EXTRACTED BELOW:- PEN DING HEARING AND FINAL DISPOSAL OF THE CIVIL APPEAL, DEPARTMENT IS RESTRAIN ED FROM RECOVERING PENALTY AND INTEREST WHICH HAS ACCRUED TILL DATE. I T IS MADE CLEAR THAT AS FAR AS THE OUTSTANDING INTEREST DEMAND AS OF DATE IS CONCERNED, IT WOULD BE OPEN TO THE DEPARTMENT TO RECOVER THE AMOUNT IN CA SE CIVIL APPEAL OF THE DEPARTMENT IS ALLOWED. WE FURTHER MAKE IT CLEAR THAT THE ASSESSEE WOULD DURING THE PENDENCY OF THIS CIVIL APPEAL, PAY TAX AS IF SECTION 43B(F) IS ON THE STATUTE BOOK BUT AT THE SAME TIME IT WOUL D BE ENTITLED TO MAKE A CLAIM IN ITS RETURNS. 28. WE HAVE CAREFULLY PERUSED THE INTERIM ORDER DAT ED 8T H MAY, 2009 PASSED BY THE HONBLE SUPREME COURT IN THE MATTER. IT IS OBSERVED THAT THE HONBLE APEX COURT IN THE SAID ORDER HAS MADE IT CLEAR THAT THE ITA NO. 2696/KOL/2013 M/S. MERCURY CAR RENTALS LIMITED 5 ASSESSEE, DURING THE PENDENCY OF THE CIVIL APPEAL, WOULD PAY TAX AS IF SECTION 43B(F) IS ON THE STATUTE BOOK, BUT AT THE SAME TIME, IT WOULD BE ENTITLED TO MAKE CLAIM IN ITS RETURN. KEEPING IN VI EW ALL THESE DEVELOPMENTS, THE COORDINATE BENCH OF THIS TRIBUNAL I N THE CASE OF DY. CIT VS.- BLA INDUSTRIES PVT. LTD. (ITA NO. 1434/KOL /2012 DATED 16.01.2015) HAS RESTORED THE SIMILAR ISSUE TO THE FI LE OF THE ASSESSING OFFICER WITH A DIRECTION TO AWAIT TILL THE FINAL DE CISION OF THE HONBLE SUPREME COURT ON THE ISSUE AND THEN TO DECIDE THE IS SUE ACCORDINGLY. FOLLOWING THE SAID DECISION OF THE COORDINATE BENCH, W E RESTORE THIS ISSUE TO THE FILE OF THE ASSESSING OFFICER WITH THE SIMILAR DIRECTION. GROUND NO. 8 IS ACCORDINGLY TREATED AS ALLOWED FOR STATISTICAL PURP OSES. 9. TAKING INTO CONSIDERATION THE ORDER SUPRA , WE REMAND THE ISSUE TO THE FILE OF AO TO DECIDE THE SAME IN ACCORDANCE WITH TH E JUDGMENT OF THE HONBLE SUPREME COURT THAT MAY BE PASSED IN CIVIL APPEAL FI LED BY THE REVENUE. GROUND NOS. 1 & 2 ARE ALLOWED FOR STATISTICAL PURPO SES. 10. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSE AS STATED ABOVE. ORDER PRONOUNCED IN THE OPEN COURT ON 31 ST OCTOBER, 2016. SD/- SD/- M.BALAGANESH S.S. VISWANETHRA RAVI ACCOUNTANT MEMBER JUDICIAL MEMBER DT: 31 -10-2016 COPIES TO : **PP/SPS (1) APPELLANT/ASSESSEE: (2) ASSESSEE/DEPARTMENT: (3)COMMISSIONER OF INCOME-TAX (APPEALS) (4) COMMISSIONER OF INCOME TAX, KOLKATA (5) THE DEPARTMENTAL REPRESENTATIVE (6) GUARD FILE BY ORDER ASSISTANT REGISTRAR, INCOME TAX APPELLATE TRIBUNAL, KOLKATA