Orissa Power Transmission Corporation Ltd., Bhubaneswar V. ACIT, Corporate Circle-1(2), Bhubaneswar

ITA 275/CTK/2017

• Counselvise Citation: [2020] 110 COUNSELVISE.COM (IT) 4199 (ITAT-CUTTACK)
• Duration Of Justice: 3 year(s) 3 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-10-2020
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Assessment Year: 2009-2010
• Appeal Filed On: 04-07-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: M K GAUTAM
• Assessee Lawyers: DINKAR MOHANTY
• Keywords: Set aside
• Section: 37(1); 264; 64; 113; 73; 22

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL CUTTACK BENCH CUTTACK BEFORE SHRI C.M. GARG, JM & SHRI L.P. SAHU, AM . / ITA NO. 275 /CTK/20 1 7 ( / A SSESSMENT Y EAR : 20 09 - 20 10 ) M/S ODISHA POWER TRANSMISSION C ORPORATION LTD, JANPATH, BHUBANESWAR - 22 V S ACIT, CORPORATE CIRCLE - 1(2), BHUBANESWAR PAN NO. : A AACO 7873 L ( / APPELLANT ) .. ( / RESPONDENT ) /ASSESSEE BY : SHRI DINKAR MOHANTY, CA /REVENUE BY : SHR I M.K.GAUTAM, CIT - DR / DATE OF HEARING : 16 / 10 /20 20 / DATE OF PRONOUNCEMENT : 27 / 10 /20 20 / O R D E R PER L.P.SAHU, AM : TH IS IS AN APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER DATED 09.03.2017 PASSED BY THE CIT(A ) - 1, BHUBANESWAR, ON THE FOLLOWING GROUNDS OF APPEAL : - 1. FOR THAT THE ORDER OF THE LD. ASST. COMMISSIONER OF INCOME TAX, CORPORATE CIRCLE - 1(2), BHUBANESWAR U/S 143(3J/263 OF THE INCOME TAX ACT, 1961 IS AGAINST LAW AND WEIGHT OF EVIDENCE. 2. (A)THE APPELLANT PREPARES ITS ACCOUNTS ON ACCRUAL BASIS. HENCE, AS PER GOVT. OF ODISHA ORDER DATED 24/12/2008 IN TERMS OF RECOMMENDATION OF SIXTH PAY COMMISSION ADDITIONAL PROVISION FOR PAY REVISION AMOUNTING TO RS 20.05 CRORES WAS ACCOUNTED FOR AS AN EVENT OC CURRING AFTER BALANCE SHEET DATE ITEM, THE ACCOUNTS BEING OPEN. (B ) THE LD. AO HAS FAILED TO UNDERSTAND THAT THE SAID PROVISION IS A PURELY ASCERTAINED LIABILITY AS PER THE ORDER OF GOVT, OF ODISHA AND THEREFORE THE LIABILITY IS ACTUALLY EXISTING ON TH E BALANCE SHEET DATE. (C ) HENCE, IT IS PURE MISINTERPRETATION OF FACTS TO TERM SUCH EXISTING LIABILITY FOR THE FY 2008 - 09 AS CONTINGENT LIABILITY. ITA NO. 275 /CTK/201 7 2 (D) FURTHER THE CASE LAW OF MOLASSES COMPANY PRIVATE LIMITED VS CIT (1959) 37ITR 66(SC) WAS OVERRULED BY KOLKATA HIGH COURT IN CIT VS MOLASSES COMPANY PRIVATE LIMITED IN 166 ITR 740 CAL AND HENCE IS NOT APPLICABLE IN OUR CASE. (E ) HENCE, THE ADDITION MADE BY THE LD.AO IS BAD IN LAW AND MAY PLEASE BE DELETED. 3. THAT THE APPELLANT CRAVES LEAVE TO ADD OR TO AMEND THE ABOVE GROUNDS OF APPEAL BEFORE OR AT THE TIME OF HEARING OF THE APPEAL. 4. FOR THESE AND AMONG OTHER GROUNDS TO BE URGED AT THE TIME OF HEARING, ADEQUATE RELIEF AS MAY BE DEEMED FIT BE GRANTED IN THE MATTER. 2. THE ASSESSEE HAS TAKEN FOUR G ROUNDS IN WHICH HE HAS CHALLENGED THE ADDITION AMOUNTING TO RS.20.05 CRORES, WHICH WAS DISALLOWED BY THE AO ON THE DIRECTION OF REVISIONARY PROCEEDINGS PASSED BY THE CIT U/S.263 OF THE ACT. THE AO HAS PASSED THE ORDER ON THE DIRECTION OF LD. CIT IN RESPECT OF CLAIM OF PROVISIONS MADE BY THE ASSESSEE COMPANY TOWARDS ARREARS, SALARY AND ALLOWANCES PAYABLE UPTO 31.03.2009 BEING IN THE NATURE OF CONTINGENT LIABILITY. WE NOTICED FROM THE FACTS SUBMITTED BY THE ASSESSEE THAT THE ASSESSEE HAS MADE PROVISION FOR AR REAR OF SALARY AS PER THE PAY REVISION OF 6 TH PAY COMMISSION IMPLEMENTED BY THE GOVERNMENT OF ODISHA DATED 22.07.2009 AND THE ASSESSEE ORISSA POWER TRANSMISSION CORPORATION LTD.(OPTCL) ORDER DATED 20.04.2009. IN THE BOOKS OF ACCOUNTS OF THE ASSESSEE, THE A SSESSEE HAS MADE PROVISION OF RS.53.62 CRORES TOWARDS ARREAR SALARY AND ALLOWANCE PAYABLE TO THE EMPLOYEES OF THE CORPORATION UPTO 31.03.2009 AND RS.33.57 CRORES UPTO 31.03.2008, THEREFORE, A NET RESULTANT DIFFERENCE OF RS.20.05 CRORES WAS MADE PROVISION F OR THE ITA NO. 275 /CTK/201 7 3 FINANCIAL YEAR 31.03.2009 WHICH WAS PAID 40% IN THE FINANCIAL YEAR 2009 - 2010 AND 60% IN THE FINANCIAL YEAR 2010 - 2011 AS PER THE OPTCL ORDER NO.6479 DATED 19.04.2010, 13432 DATED 31.07.2010 AND 13671 DATED 12.08.2009, RESPECTIVELY. THE AO AFTER FOLLO WING THE REVISIONARY ORDER AND JUDGMENT OF THE HONBLE SUPREME COURT IN THE CASE OF MOLASSES COMPANY PRIVATE LIMITED VS. CIT (1959) 37 ITR 66 (SC) HELD THAT IT WAS AN UNASCERTAINED LIABILITY. ACCORDINGLY, HE DISALLOWED THE PROVISIONS MADE BY THE ASSESSEE O F RS.20.05 CRORES FOR THE IMPUGNED ASSESSMENT YEAR. 3. FEELING AGGRIEVED FROM THE ORDER OF AO, THE ASSESSEE APPEALED BEFORE THE CIT(A0 AND THE CIT(A) AFTER CONSIDERING THE SUBMISSIONS MADE BY THE ASSESSEE, DISMISSED THE APPEAL OF THE ASSESSEE AFTER HAVING THE FOLLOWING OBSERVATIONS : - 5. I HAVE GIVEN CAREFUL CONSIDERATION TO THE MATTER. THE MOOT QUESTION TO BE ANSWERED IS WHETHER THE PROVISION OF RS.20.05 CRORES PROVIDED IN THE BOOKS AS ADDITIONAL PROVISION WAS AN UNASCERTAINED CONTINGENT LIABILITY OR AN A SCERTAINED LIABILITY. IT HAS BEEN EXPLAINED BY THE ASSESSEE THAT THE ADDITIONAL PROVISION OF RS.20.05 CRORES WAS MADE ON ACCOUNT OF PAY REVISION AFTER ISSUE OF GOVT, OF ODISHA ORDER DT.22.7.2009 AND THE OPTC'S ORDER DT.20.4.2009. IT IS CLEAR FROM THE DATES OF THESE ORDERS THAT THE SAME WERE PASSED AFTER THE END OF THE PREVIOUS YEAR 2008 - 09 RELEVANT FOR THE AY 2009 - 10. THE PROVISION WAS MADE PERHAPS IN ANTICIPATION OF THE ORDERS TO BE PASSED IN THE SUBSEQUENT YEAR. THIS BEING SO, THE PROVISION HAS TO BE TREA TED AS A MERE PROVISION AND NOT AN ASCERTAINED LIABILITY THAN CAN BE ALLOWED AS AN EXPENDITURE FOR THE PREVIOUS YEAR 2008 - 09. IN THIS VIEW OF THE MATTER, I CONFIRM THE ACTION OF THE AO TO DISALLOW THE PROVISION OF RS.20.05 CRORES IN THE ASSESSMENT. HENCE, THE DISALLOWANCE OF RS.20.05 CRORES IS CONFIRMED. 4. FURTHER FEELING AGGRIEVED FROM THE ORDER OF CIT(A), THE ASSESSEE IS IN APPEAL BEFORE THE INCOME TAX APPELLATE TRIBUNAL. ITA NO. 275 /CTK/201 7 4 5. BEFORE US, LD. AR REITERATED THE SUBMISSIONS MADE BEFORE THE LOWER AUTHORITIES AND STATED THAT AS PER THE ACCOUNTING STANDARD - 4 ISSUED BY THE INSTITUTE OF CHARTERED ACCOUNTANT OF INDIA (ICAI) THAT THE EVENTS OCCURRING AFTER THE DATE OF THE BALANCE SHEET DATE BUT BEFORE THE CLOSING OF THE BOOKS OF ACCOUNTS OF THE ASSESSEE. THE BOOKS O F ACCOUNTS WERE CLOSED BY THE ASSESSEE MUCH AFTER ISSUING NOTIFICATION BY THE GOVERNMENT OF ODISHA. LD. AR REFERRED TO ACCOUNTING STANDARD - 4, WHICH READS AS UNDER: - 8. EVENTS OCCURRING AFTER THE BALANCE SHEET DATE 8.1 EVENTS WHICH OCCUR BETWEEN THE BALA NCE SHEET DATE AND THE DATE ON WHICH THE FINANCIAL STATEMENTS ARE APPROVED, MAY INDICATE THE NEED FOR ADJUSTMENTS TO ASSETS AND LIABILITIES AS AT THE BALANCE SHEET DATE OR MAY REQUIRE DISCLOSURE. 8.2 ADJUSTMENTS TO ASSETS AND LIABILITIES ARE REQUIRED FOR EVENTS OCCURRING AFTER THE BALANCE SHEET DATE THAT PROVIDE ADDITIONAL INFORMATION MATERIALLY AFFECTING THE DETERMINATION OF THE AMOUNTS RELATING TO CONDITIONS EXISTING AT THE BALANCE SHEET DATE. FOR EXAMPLE, AN ADJUSTMENT MAY BE MADE FOR A LOSS ON A TRADE RECEIVABLE ACCOUNT WHICH IS CONFIRMED BY THE INSOLVENCY OF A CUSTOMER WHICH OCCURS AFTER THE BALANCE SHEET DATE. LD. AR ALSO SUBMITTED THAT THE BOOKS OF ACCOUNTS WERE OPENED ON THE DATE OF NOTIFICATION ISSUED BY THE GOVERNMENT OF ODISHA ON 24.12.2008, T HEREFORE, AS PER THE AS - 4 THE ASSESSEE HAS RIGHTLY MADE THE PROVISIONS AND IT WAS DULY CALCULATED BY THE ASSESSEE CORRECTLY AND PAID ACCORDINGLY IN THE SUBSEQUENT YEARS. THUS, IT CANNOT BE SAID THAT IT IS A CONTINGENT LIABILITY. IT WAS THE KNOWN LIABILITY DUE TO PAY REVISION DECLARED BY THE OPTCL AND APPROVED BY THE GOVERNMENT OF ODISHA, ITA NO. 275 /CTK/201 7 5 THEREFORE, THE CIT(A) IS NOT JUSTIFIED IN CONFIRMING THE ADDITION MADE BY THE AO. 6. ON THE OTHER HAND, LD. DR RELIED ON THE ORDER OF THE LOWER AUTHORITIES AND SUBMITTED TH AT THE NOTIFICATION ISSUED BY THE OPTCL AND GOVERNMENT OF ODISHA DATED 24.12.2008, ARE AFTER CLOSURE OF THE FINANCIAL YEAR. ON THE DATE OF FINANCIAL YEAR ENDING THERE WAS NO SUCH LIABILITY KNOWN TO THE ASSESSEE COMPANY, THEREFORE, IT CANNOT BE SAID THAT IT WAS AN ASCERTAINED LIABILITY. THE LIABILITY MUST BE EXISTED AT THE END OF THE YEAR. TO SUPPORT HIS CONTENTIONS, LD. DR RELIED ON THE FOLLOWING CASE LAWS : - I ) INDIAN SMELTING & REFINING CO. LTD. [2001] TAXMAN 606 (SC); II) GORDON WOODROFFE LEATHER MFG. C O [1962] 44 ITR 551 (SC) III) HOUSING & URBAN DEVELOPMENT CORPORATION LTD. [2019] 101 TAXMANN.COM 403(DELHI - TRIB); FURTHER LD. DR DREW OUR ATTENTION TO PARA 3.1 & 3.2 OF THE DECISION IN THE CASE OF HOUSING & URBAN DEVELOPMENT CORPORATION LTD.(SUPRA) : - 3 .1 IN THE FACTS OF THE CASE BEFORE US, WE HAVE ALREADY NOTICED THAT THAT THE PAY REVISION COMMITTEE HAD NOT COMPLETED ITS DELIBERATIONS BEFORE THE END OF THE FY 2006 - 07 AND WAS YET TO SUBMIT ITS REPORT AT THE TIME WHEN THE FY 2006 - 07 CAME TO AN END; AND FU RTHERMORE, THAT THE PAY REVISION WAS FINALLY IMPLEMENTED IN PURSUANCE OF AFORESAID OFFICE MEMORANDUM DATED 26.11.2008 IN NO.2(70)/08 - DPE(WC) OF MINISTRY OF HEAVY INDUSTRIES & PUBLIC ENTERPRISES. UNDER THESE FACTS AND CIRCUMSTANCES, WE CONCLUDE THAT THE LIA BILITY FOR RS. 1,60,00,000 DEDUCTION FOR WHICH WAS CLAIMED BY THE ASSESSEE ON ACCOUNT OF AD HOC PROVISION FOR PAY REVISION, HAD NOT ACCRUED DURING THE RELEVANT FY I.E. 2006 - 07 (AY 2007 - 08). MERELY BECAUSE PAY REVISION COMMITTEE WAS CONSTITUTED DURING THE Y EAR, IT CANNOT BE SAID THAT LIABILITY TOWARDS PAY REVISION HAD ACCRUED DURING THE YEAR, WHEN WE CONSIDER THE FACTS THAT THE PAY REVISION COMMITTEE HAD NOT COMPLETED ITS DELIBERATIONS BEFORE THE END OF THE FY 2006 - 07 AND WAS YET TO SUBMIT ITS REPORT AT THE TIME WHEN THE FY 2006 - 07 CAME TO AN END; AND FURTHERMORE, THAT THE PAY REVISION WAS FINALLY IMPLEMENTED IN PURSUANCE OF AFORESAID OFFICE ITA NO. 275 /CTK/201 7 6 MEMORANDUM DATED 26.11.2008 IN NO.2(70)/08 - DPE(WC) OF MINISTRY OF HEAVY INDUSTRIES & PUBLIC ENTERPRISES. DURING FY 2006 - 07 (AY 2007 - 08), THERE WAS NEITHER ANY STATUTORY LIABILITY NOR ANY LEGALLY ENFORCEABLE LIABILITY AGAINST THE ASSESSEE IN RESPECT OF THE ASSESSEE'S CLAIM FOR RS. 1,60,00,000 DEDUCTION FOR WHICH WAS CLAIMED BY THE ASSESSEE ON ACCOUNT OF AD HOC PROVISION FOR PAY REVISION. IN FACT, THERE WAS NO SUCH LIABILITY AT ALL. EVEN IF THERE WAS A LIABILITY, IT WAS PURELY A CONTINGENT LIABILITY WHICH IS NOT DEDUCTIBLE FOR INCOME TAX PURPOSES. 3.2 WE HAVE GIVEN ANXIOUS CONSIDERATION TO THE SUBMISSION MADE BY THE LD. AR O F THE ASSESSEE THAT IF THIS CLAIM IS NOT ALLOWED IN THIS YEAR, IT WILL CAUSE HARDSHIP TO THE ASSESSEE BECAUSE THE AFORESAID CLAIM OF RS. 1,60,00,000 TOWARDS AD HOC PROVISION ON ACCOUNT OF PAY REVISION HAS NOT BEEN CLAIMED BY THE ASSESSEE IN THE SUBSEQUENT YEARS. HOWEVER, IN VIEW OF SIR KIKABHAI PREMCHAND V. CIT [1953] 24 ITR 506 (SC) , ITO V. MURLIDHAR BHAGWAN DAS [1964] 52 ITR 335 (SC) , CIT V. BRITISH PAINTS INDIA LTD. [1991] 54 TAXMAN 499/188 ITR 44 (SC) AND CIT V. BASANT RAI TAKHAT SINGH [1933] 1 ITR 197 (PC) , IT IS WELL SETTLED THAT EACH YEAR IS SEPARATE AND SELF - CONTAINED PERIOD, INCOME TAX IS ANNUAL IN ITS STRUCTURE AND ORGANIZATION. THUS, EACH PREVIOUS YEAR IS A DISTINCT UNIT OF TIME FOR THE PURPOSES OF ASSESSMENT. THE PROFITS MADE; AND THE LIABILITIES OR LOSSES MADE BEFORE OR AFTER THE RELEVANT PREVIOUS YEAR ARE IMMATERIAL IN ASSESSING INCOME OF A PARTICULAR YEAR; UNLESS IN ACCORDANCE WITH PROVISO TO SECTION 4(1) OF I.T. ACT, THERE IS STATUTORY PROVISION TO THE CONTRARY. MOREOVER, IT WAS HELD IN CIT V. KASTURI & SONS LTD. [1999] 103 TAXMAN 342/237 ITR 24 (SC) ; FEDERATION O F ANDHRA PRADESH CHAMBERS OF COMMERCE & INDUSTRY V. STATE OF AP [2001] 115 TAXMAN 143/247 ITR 36 (SC) ; CIT V. R.J. TRIVEDI & SONS [1990] 53 TAXMAN 485/183 ITR 420 (MP) ; GREATWAY (P.) LTD. V. ASSTT. CIT [1992] 64 TAXMAN 421/[1993] 199 ITR 391 (PUNJ. & HAR.) ; BM PARMAR V. CIT [1999] 102 TAXMAN 552/235 ITR 679 (PUNJ. & HAR.) ; MODIPON V. CIT [2000] 113 TAXMAN 44/[2001] 247 ITR 40 (DELHI) ; CIT V. M.S.S. RAJAN [2002] 120 TAXMAN 680/[2001] 252 ITR 126 (MAD.) ; CWT V. TULSI DASS [2002] 123 TAXMAN 790/256 ITR 73 (RAJ.) ; VIVEK JAIN V. ASSTT. CIT [2011] 14 TAXMANN.COM 146/202 TAXMAN 499/337 ITR 74 (AP) THAT THE COURTS OR THE TRIBUNAL CANNOT EXTEND RELIEF WHEN THE LEGISLATIVE INTENT IS OTHERWISE. IT WAS HELD IN SMT. TARULATA SHYAM V. CIT [1977] 108 ITR 345 (SC) THAT ONCE IT IS SHOWN THAT THE CASE OF THE ASSESSEE COMES WITHIN THE LETTER OF THE LAW, HE MUST BE TAXED, HOWEVER, GREAT THE HARDSHIP MAY APPEAR TO THE JUDICIAL MIND. MOREOVER, IT WAS HELD IN STATE BANK OF TRAVANCORE V. CIT [1986] 24 TAXMAN 337/158 ITR 102 (SC) THAT CONSIDERATIONS OF HARDSHIP, INJUSTICE OR ANOMALIES DO NOT PLAY ANY USEFUL ROLE IN CONSTRUING TAXING STATUTES UNLESS THERE BE SOME REAL AMBIGUI TY. ALSO, THE OBSERVATION THAT 'IN A TAXING ACT ONE HAS TO LOOK MERELY AT WHAT IS CLEARLY SAID. THERE IS NO ROOM FOR ANY INTENDMENT. THERE IS NO EQUITY ABOUT A TAX. THERE IS NO PRESUMPTION AS TO TAX. NOTHING IS TO BE READ IN, NOTHING IS TO BE IMPLIED.' WAS APPROVED BY HON'BLE SUPREME COURT IN CIT V. AJAX PRODUCTS LTD. [1965] 55 ITR 741 (SC) AND CIT V. SHAHZADA NAND & SONS [1966] 60 ITR 392 (SC) . IN VIEW OF THE FOREGOING, THE CONTENTION OF THE ASSESSEE; THAT IF THIS CLAIM IS NOT ALLOWED IN THIS YEAR, IT WILL CAUSE HARDSHIP TO THE ITA NO. 275 /CTK/201 7 7 ASSESSEE BECAUSE THE AFORESAID CLAIM OF RS. 1,60,00,000 T OWARDS AD HOC PROVISION ON ACCOUNT OF PAY REVISION HAS NOT BEEN CLAIMED BY THE ASSESSEE IN THE SUBSEQUENT YEARS; DOES NOT MERIT ANY FAVOURABLE CONSIDERATION. A CLAIM WRONGLY MADE BY AN ASSESSEE IN AN EARLIER YEAR CANNOT BE ALLOWED IN THAT YEAR, MERELY BECA USE THE ASSESSEE DID NOT MAKE THE CLAIM CORRECTLY IN A SUBSEQUENT YEAR. DURING THE PENDENCY OF A DISPUTE AS TO THE YEAR IN WHICH A CLAIM OF THE ASSESSEE IS TO BE ALLOWED; A PRUDENT ASSESSEE CAN MAKE THE CLAIM IN OTHER YEAR(S), ON PROTECTIVE BASIS, SUBJECT TO FINAL OUTCOME OF SUCH A DISPUTE, BY EXPLAINING SUCH A PROTECTIVE CLAIM IN OTHER YEAR(S). THE ASSESSEE, HAVING FAILED TO MAKE PROTECTIVE CLAIM IN SUBSEQUENT YEAR(S) IN WHICH IT WAS LAWFULLY ALLOWABLE, CANNOT FORCE THE CLAIM IN AN EARLIER YEAR IN WHICH IT WAS NOT LAWFULLY ALLOWABLE. HOWEVER, THE ASSESSEE IS FREE TO EXERCISE ITS LEGAL OPTIONS IN RESPECT OF THE SUBSEQUENT YEAR(S) IN WHICH THE CLAIM WAS LAWFULLY ALLOWABLE; SUCH AS U/S. 264 OF I.T. ACT WITH PARTICULAR REFERENCE TO PROVISO TO SECTION 264(3) OF I.T. ACT. AS THE PRESENT APPEAL BEFORE US PERTAINS TO AY 2007 - 08; BY WAY OF ABUNDANT CAUTION, WE CLARIFY, HOWEVER, THAT WE PRESENTLY DECLINE TO GIVE ANY DIRECTIONS TO REVENUE FOR ANY SUBSEQUENT YEAR; AND THAT ALL QUESTIONS OF LAW, FACT, AND MIXED QUESTIONS ARE LEFT OPEN IN CASE THE ASSESSEE EXERCISES. 7. ON THE REJOINDER, LD. AR AGAIN REITERATED THAT THE AS - 4 AS ALLEGED BY HIM THAT THE ASSESSEE COMPANY IS FOLLOWING THE PREPARATION AND FINALIZATION OF THE BOOKS OF ACCOUNTS AS PER THE COMPANIES ACT, 1956 AND THE BOOKS OF ACCOUNTS OF THE COMPANIES ARE PREPARED AS PER THE ACCOUNTING STANDARD ISSUED BY THE ICAI, WHICH ARE MANDATORY TO BE FOLLOWED BY THE COMPANIES, THEREFORE, THE ASSESSEE HAS RIGHTLY CLAIMED IT AS A KNOWN LIABILITY IN HIS BOOKS OF ACCOUNTS WHICH IS ALLOWABLE AS PER SECTION 37(1) OF THE ACT. HE ALSO SUBMITTED THAT THE AO HAS RELIED ON THE JUDGMENT IN THE CASE OF MOLASSES COMPANY PRIVATE LIMITED (SUPRA) . HE FURTHER SUBMITTED THAT THE JUDGMENT OF THE HONBLE SUPREME COURT RELIED ON BY THE AO HAS BEEN OVERRULED BY THE HONBLE CALCUTTA HIGH COURT. ITA NO. 275 /CTK/201 7 8 8. IN REPLY TO THE ABOVE CONTENTION OF THE LD.AR, THE LD.DR FURTHER SUBMITTED THAT THE HONBLE HIGH COURT CANNOT OVERRULE ANY JUDGMENT OF THE HONBLE APEX COURT AND EVERY HIGH COURT ARE BOUND TO FOLLOW THE JUD GMENTS OF THE HONBLE SUPREME COURT, THEREFORE, LD. DR SUBMITTED THAT HOW THE LD. AR OF THE ASSESSEE IS SUBMITTING LIKE THIS. 9. AFTER HEARING BOTH THE SIDES AND PERUSING THE ENTIRE MATERIAL AVAILABLE ON RECORD AND ORDER OF THE AUTHORITIES BELOW, WE FIND T HAT THE GOVERNMENT OF INDIA ANNOUNCED 6 TH PAY REVISION ON 24.03.2008. SUBSEQUENTLY, THE OPTCL ISSUED ORDER ON 20.04.200 9 FOR IMPLEMENTATION OF THE 6 TH PAY COMMISSION TO HIS EMPLOYEES W.E.F.01.01.2006 IN CASE OF EXECUTIVE EMPLOYEES AND FROM 01.04.2005 FOR N ON - EXECUTIVE EMPLOYEES . SUBSEQUENTLY, THE MODE OF ACCOUNT OF PAY REVISION WAS ISSUED BY THE GOVERNMENT OF ODISHA ON 22.07.200 9 IN INSTALMENTS, WHICH WAS PAID IN THE FINANCIAL YEAR 2009 - 2010 AND 2010 - 2011. IN THE IMPUGNED CASE, THE BOOKS OF ACCOUNTS OF TH E ASSESSEE WAS CLOSED MUCH AFTER THE NOTIFICATION ISSUED BY THE GOVERNMENT OF ODISHA, THEREFORE, HE MADE PROVISION IN THE PAY REVISION OF RS.20.05 CRORES IN THE FINANCIAL YEAR 2008 - 2009 AS PER THE AS - 4 EVENTS OCCURRING AFTER THE DATE OF BALANCE SHEET ISSU ED BY THE ICAI FOR THE PREPARATION AND FINALISATION OF THE BOOKS OF ACCOUNTS IN CASE OF COMPANIES. FROM THE STATEMENT OF THE LD. AR OF THE ASSESSEE THAT IT WAS AN ASCERTAINED LIABILITY, WHICH WAS KNOWN AT THE TIME OF FINALIZATION OF THE BOOKS OF ITA NO. 275 /CTK/201 7 9 ACCOUNTS O F THE ASSESSEE, THEREFORE, IT WAS NECESSARY TO MAKE THE PROVISIONS IN THE BOOKS OF ACCOUNTS OF THE ASSESSEE, THIS VIEW HAS NOT BEEN ACCEPTED BY THE AO AND THE AO HELD THAT IT WAS AN UNASCERTAINED AND CONTINGENT LIABILITY. BEING A COMPANY, THE ASSESSEE HAS TO FOLLOW THE ACCOUNTING STANDARD ISSUED BY THE ICAI FOR THE PREPARATION AND FINALIZATION OF THE BOOKS OF ACCOUNTS AS PER THE COMPANIES ACT . THE ASSESSEE COMPANY IS A STATE GOVERNMENT COMPANY; THEREFORE, HE HAS TO FOLLOW THE RULES AND REGULATION OF THE GOV ERNMENT OF ODISHA. THE STATE GOVERNMENT OF ODISHA HAS ISSUED ORDER IN THIS REGARD MUCH AFTER THE CLOSING OF THE IMPUGNED FINANCIAL YEAR W.E.F.01.01.2006 FOR THE SIXTH PAY REVISION . WE NOTICED THAT THE GOVERNMENT OF ODISHA DECLARED SIXTH PAY COMMISSION ON 2 2.07.200 9 WHICH WAS MANDATORY TO BE FOLLOWED BY THE ORGANIZATIONS AND STATE GOVERNMENT DEPARTMENTS WHICH ARE RUN AND CONTROLLED BY THE STATE GOVERNMENT OF ODISHA. THE LIABILITY FOR PAYMENT OF ARREARS OF SALARY WAS IMPOSED BY THE STATE GOVERNMENT OF ODISHA, WHICH CANNOT BE REVERSED, THEREFORE, THE LIABILITY IMPOSED WAS A CERTAIN LIABILITY. THE ASSESSEE COMPANY IS RUN AND GOVERNED BY THE STATE GOVERNMENT OF ODISHA, THEREFORE, IT HAS TO FOLLOW THE INSTRUCTIONS OF ITS OWNER, I.E. STATE GOVERNMENT OF ODISHA, LAT ER ON THE SAME HAS BEEN PAID AS PER THE INSTRUCTIONS OF THE STATE GOVERNMENT. THE SIXTH PAY COMMISSION HAS BEEN IMPLEMENTED BY THE ASSESSEE COMPANY AS ON 20.04.2009 LATER ON THE GOVERNMENT OF ODISHA HAS ALSO DECLARED ON ITA NO. 275 /CTK/201 7 10 22.07.2009 . AFTER THE NOTIFICATION I SSUED, THE ASSESSEE COMPANY CALCULATED HIS LIABILITY AND MADE PROVISION IN HIS BOOKS OF ACCOUNTS AND CLAIMED AS EXPENDITURE, WHICH ARE PLACED IN THE RECORD. THE LIABILITY CALCULATED BY THE ASSESSEE COMPANY WAS A FIXED LIABILITY WHICH WAS TO BE PAID TO ITS EMPLOYEES TOWARDS ARREAR SALARY WHICH CANNOT BE ALSO TAKEN BACK FROM THE EMPLOYEES. THEREFORE, IT WAS A CERTAIN LIABILITY FOR THE IMPUGNED ASSESSMENT YEAR. THE ASSESSEE COMPANY CAN MAKE PROVISION FOR THE CERTAIN LIABILITY WHICH IS CERTAINLY TO BE PAID, THE REFORE, THE ASSESSEE COMPANY HAS RIGHTLY MADE PROVISION FOR THE ARREARS OF SALARY IN HIS BOOKS OF ACCOUNTS. AS PER OUR CONSIDERED OPINION, THIS IS A NECESSARY EXPENDITURE, WHICH IS REQUIRED TO BE DEDUCTED FROM THE PROFIT OF THE ASSESSEE COMPANY FOR THE IMP UGNED ASSESSMENT YEAR WHILE CALCULATING THE TAXABLE PROFIT BECAUSE THE LIABILITY HAS BEEN IMPOSED BY THE STATE GOVERNMENT OF ODISHA. THE LD. DR HAS RELIED ON THE DECISION IN THE CASE OF HUDCO AS CITED SUPRA IS NOT APPLICABLE IN THE PRESENT CASE BECAUSE IN THAT CASE THE ASSESSEE HAS MADE ADHOC PROVISION AND THE ADHOC PROVISION IS NOT ASCERTAINED LIABILITY BUT IN THE IMPUGNED CASE THE ASSESSEE HAS CALCULATED EXACT FIGURE WHICH HAS TO BE PAID IN DIFFERENT INSTALMENTS LATER ON AS PER INSTRUCTIONS FROM THE STATE GOVERNMENT ODISHA WHICH ACTUALLY HAS BEEN PAID TO THE ASSESSEES EMPLOYEES. OTHER CASE LAWS RELIED ON BY THE LD. DR ARE ALSO NOT APPLICABLE IN THE PRESENT FACTS OF THE CASE. IN VIEW OF ITA NO. 275 /CTK/201 7 11 THIS, WE ARE OF THE OPINION THAT THE LD. CIT(A) IS NOT JUSTIFIED IN C ONFIRMING THE ADDITION MADE BY THE AO IN THIS REGARD. ACCORDINGLY, WE SET ASIDE THE IMPUGNED ORDER PASSED BY THE CIT(A) AND ALLOW THE GROUNDS OF APPEAL OF THE ASSESSEE. CONSEQUENTLY, APPEAL OF THE ASSESSEE IS ALLOWED. 10 . IN THE RESULT, THE APPEAL OF THE A SSESSEE IS ALLOWED ORDER PRONOUNCED IN THE OPEN COURT ON 27 / 10 / 20 20 . SD/ - ( C.M.GARG ) SD/ - (L.P.SAHU) / JUDICIAL MEMBER / ACCOUNTANT MEMBER CUTTACK ; DATED 27 /1 0 /20 20 PRAKASH KUMAR MISHRA, SR.P.S. / COPY OF THE ORDER FORWARDED TO : / BY ORDER, ( SENIOR PRIVATE SECRETARY ) , /ITAT, CUTTACK 1. / THE APPELLANT - M/S ODISHA POWER TRAN SMISSION CORPORATION LTD, JANPATH, BHUBANESWAR - 22 2. / THE RESPONDENT - ACIT, CORPORATE CIRCLE - 1(2), BHUBANESWAR 3. ( ) / THE CIT(A), 4. / CIT 5. , , / DR, ITAT, CUTTACK 6. / GUARD FILE. //TRUE COPY//