ACIT Corporate Circle 3(1), CHENNAI V. Tamilnadu Civil Supplies Corporation Limited, CHENNAI

ITA 2861/CHNY/2018

• Counselvise Citation: [2019] 118 COUNSELVISE.COM (IT) 2822 (ITAT-CHENNAI)
• Duration Of Justice: 4 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-02-2019
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: B
• Assessment Year: 2012-2013
• Appeal Filed On: 08-10-2018
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: B SAGADEVAN
• Assessee Lawyers: P SELVAMOORTHY
• Keywords: Opportunity of being heard

Judgement Text

, , IN THE INCOME-TAX APPELLATE TRIBUNAL B BENCH, CHENNAI . , . , BEFORE SHRI A. MOHAN ALANKAMONY, ACCOUNTANT MEMBER & SHRI DUVVURU RL REDDY, JUDICIAL MEMBER ./ I.T.A.NOS.2861 AND 2862/CHNY/2018 / ASSESSMENT YEARS: 2012-13 AND 2015-16 THE ASSISTANT COMMISSIONER OF INCOME TAX, CORPORATE CIRCLE 3(1), NEW BLOCK, 4 TH FLOOR, 121, M.G. ROAD, NUNGAMBAKKAM, CHENNAI 600 034. VS. M/S. TAMILNADU CIVIL SUPPLIES CORPORATION LIMITED, NO. 12, THAMBUSAMY ROAD, KILPAUK, CHENNAI 600 010. [PAN: AABCT0551H] ( /APPELLANT) ( /RESPONDENT) / APPELLANT BY : SHRI B. SAGADEVAN, JCIT / RESPONDENT BY : SHRI P. SELVAMOORTHY, C.A. / DATE OF HEARING : 27.02.2019 /DATE OF PRONOUNCEMENT : 28.02.2019 / O R D E R PER DUVVURU RL REDDY, JUDICIAL MEMBER: BOTH THE APPEALS FILED BY THE REVENUE PERTAINING TO THE SAME ASSESSEE ARE DIRECTED AGAINST DIFFERENT ORDERS OF THE LD. COMMISSIONER OF INCOME TAX (APPEALS) 11, CHENNAI DATED 31.07.2018 AND 02.08.2018 RELEVANT TO THE ASSESSMENT YEARS 2012-13 AND 2015-16. THE FIRST COMMON GROUND RAISED IN BOTH THE APPEALS OF THE REVENUE IS THAT THE LD. CIT(A) HAS ERRED IN DELETING THE DISALLOWANCE ON THE CLAIM OF PROVISION FOR LEAVE SALARY IGNORING THE FACT THAT THE PAYMENTS WERE NOT MADE BEFORE THE DUE DATE OF FILING OF RETURN OF INCOME AS PER THE PROVISIONS OF SECTION 43(B)(F) OF THE I.T.A. NO. 2861 & 2862/CHNY/18 2 INCOME TAX ACT, 1961 [ACT IN SHORT]. .2,25,15,000/- OUT OF THE TOTAL ADDITION OF .4,38,15,000/- MADE BY THE ASSESSING OFFICER TOWARDS OUTSTANDING LAND ADVANCE TREATED AS INCOME UNDER SECTION 41(1) OF THE INCOME TAX ACT, 1961 [ACT IN SHORT]. 2. AT THE OUTSET, THE LD. DR HAS SUBMITTED THAT THE ISSUE INVOLVED IN THESE APPEALS IS SQUARELY COVERED IN FAVOUR OF THE REVENUE BY THE DECISION OF THE TRIBUNAL IN ASSESSEES OWN CASE FOR THE ASSESSMENT YEAR 2014-15 AND PLEADED THAT THE SAME MAY BE FOLLOWED FOR THE ASSESSMENT YEARS UNDER CONSIDERATION. ON THE OTHER HAND, THE LD. COUNSEL FOR THE ASSESSEE STRONGLY SUPPORTED THE ORDER PASSED BY THE LD. CIT(A). 3. WE HAVE HEARD BOTH THE SIDES, PERUSED THE MATERIALS AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF AUTHORITIES BELOW. WITH REGARD TO THE PROVISIONS FOR LEAVE ENCASHMENT, THE ASSESSING OFFICER HAS OBSERVED THAT CONSEQUENT TO AMENDMENT TO SECTION 43(B)(F) OF THE ACT, ANY PROVISION DEBITED TOWARDS LEAVE ENCASHMENT IS NOT ALLOWABLE AND ONLY THE ACTUAL PAYMENT OUT OF SUCH PROVISION IS TO BE ALLOWED. ACCORDINGLY, THE ASSESSING OFFICER DISALLOWED THE EXPENDITURE CLAIMED BY THE ASSESSEE TOWARDS PROVISIONS FOR LEAVE ENCASHMENT AND BROUGHT TO TAX. ON APPEAL, BY FOLLOWING THE DECISION IN THE CASE OF ACIT V. TAMILNADU WAREHOUSING CORPORATION IN I.T.A NO.924/MDS/2011 DATED 22.07.2011 AS WELL AS IN THE CASE OF ACIT V. I.T.A. NO. 2861 & 2862/CHNY/18 3 TAMILNADU SMALL INDUSTRIES CORPORATION IN I.T.A. NOS. 1565 TO 1567/MDS/2014, THE LD. CIT(A) DIRECTED THE ASSESSING OFFICER TO ALLOW THE EXPENDITURE TOWARDS LEAVE ENCASHMENT. HOWEVER, AS RELIED UPON BY THE LD. DR, IN ASSESSEES OWN CASE FOR THE ASSESSMENT YEAR 2014-15 IN I.T.A. NO. 1685/CHNY/2018 DATED 04.02.2019, THE COORDINATE BENCHES OF THE TRIBUNAL HAS OBSERVED AND HELD AS UNDER: 4. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS ON EITHER SIDE AND PERUSED THE RELEVANT MATERIAL AVAILABLE ON RECORD. ADMITTEDLY, SECTION 43B(F) OF THE ACT WAS INTRODUCED BY FINANCE ACT, 2001 WITH EFFECT FROM 01.04.202. IN VIEW OF SECTION 43B(F) OF THE ACT, A PROVISION FOR LEAVE ENCASHMENT CANNOT BE ALLOWED. WHILE EXAMINING THE CONSTITUTION OF VALIDITY OF PROVISIONS OF SECTION 43B(F) OF THE ACT, THE CALCUTTA HIGH COURT IN EXIDE INDUSTRIES LIMITED (292 ITR 470), FOUND THAT SECTION 43B(F) IS UNCONSTITUTIONAL AND ACCORDINGLY IT WAS STRUCK DOWN. ON APPEAL BY THE REVENUE BEFORE THE APEX COURT, THE APEX COURT STAYED THE OPERATION OF JUDGMENT OF CALCUTTA HIGH COURT. IN VIEW OF THE ABOVE, THE JUDGMENT OF CALCUTTA HIGH COURT IS NOT IN OPERATION. IN OTHER WORDS, THE PROVISIONS OF SECTION 43B(F) OF THE ACT CONTINUES TO BE IN STATUTE BOOK. 5. THE KERALA HIGH COURT IN SOUTH INDIAN BANK LIMITED (SUPRA) EXAMINED THE ISSUE AFTER THE STAY GRANTED BY THE APEX COURT, AND FOUND THAT THE PROVISIONS OF SECTION 43B(F) WOULD BE APPLICABLE. THE DIVISION BENCH OF THIS TRIBUNAL HAS ALSO EXAMINED THIS ISSUE IN WARDEX PHARMACEUTICALS LTD. (SUPRA) AND FOUND THAT THE PROVISIONS OF SECTION 43B(F) OF THE ACT HAS TO BE APPLIED, THEREFORE, THE PROVISION FOR LEAVE ENCASHMENT CANNOT BE ALLOWED. WHEREAS, ANOTHER DIVISION BENCH OF THIS TRIBUNAL IN TAMIL NADU WAREHOUSING CORPORATION (SUPRA) HAS FOUND THAT PROVISION FOR LEAVE ENCASHMENT HAS TO BE ALLOWED. HOWEVER, THE PROVISIONS OF SECTION 43B(F) OF THE ACT WAS NOT BROUGHT TO THE NOTICE OF THE DIVISION BENCH. THEREFORE, THE EARLIER BENCH HAD NO OCCASION TO CONSIDER THE SAME. IN VIEW OF THE ABOVE, THE ORDER OF THE DIVISION BENCH OF THIS TRIBUNAL IN TAMIL NADU WAREHOUSING CORPORATION (SUPRA) MAY NOT BE APPLICABLE TO THE FACTS OF THE CASE. SINCE THE PROVISION FOR LEAVE ENCASHMENT CANNOT BE ALLOWED IN VIEW OF SECTION 43B(F) OF THE ACT, THIS TRIBUNAL IS UNABLE TO UPHOLD THE ORDER OF THE CIT(APPEALS). ACCORDINGLY, ORDER OF THE CIT(APPEALS) IS SET ASIDE AND THAT OF THE ASSESSING OFFICER IS RESTORED. 4. RESPECTFULLY FOLLOWING THE ABOVE DECISION OF THE COORDINATE BENCHES I.T.A. NO. 2861 & 2862/CHNY/18 4 OF THE TRIBUNAL IN ASSESSEES OWN CASE, WE REVERSE THE APPELLATE ORDER AND RESTORE THAT OF THE ASSESSMENT. THUS, THE GROUND RAISED BY THE FOR BOTH THE ASSESSMENT YEARS IS ALLOWED. 5. THE NEXT GROUND RAISED IN THE APPEAL OF THE REVENUE FOR THE ASSESSMENT YEAR 2012-13 IS THAT THE LD. CIT(A) HAS ERRONEOUSLY DELETED THE ADDITION MADE TOWARDS EXCESS CLAIM OF EXPENDITURE ON SUBSIDY OF KEROSENE BASED ON THE SUBMISSIONS OF THE ASSESSEE WITHOUT CALLING FOR ANY REMAND REPORT. THE ASSESSING OFFICER OBSERVED FROM THE NOTES ON ACCOUNTS THAT FOR THE SUBSIDY RECEIVED FOR KEROSENE ALONE COMES TO .357.59 LAKHS, WHEREAS THE ASSESSEE HAD SPENT .3940.76 LAKHS ON PDS SUBSIDY FOR KEROSENE. THUS, THE DIFFERENCE IN PAYMENT OF SUBSIDY BY THE ASSESSEE AMOUNTING TO .3583.41 LAKHS WAS DISALLOWED AND BROUGHT TO TAX. 6. ON APPEAL, BEFORE THE LD. CIT(A), THE ASSESSEE HAS SUBMITTED THAT THE IT HAD RECEIVED A TOTAL SUBSIDY OF .467414.84 LAKHS FROM THE GOVERNMENT OF TAMIL NADU AND THAT THE ENTIRE SUBSIDY COST INCURRED BY THE ASSESSEE HAS BEEN SUBSUMED IN THE SUBSIDY RECEIVED OF .467414.84 LAKHS FROM THE GOVERNMENT OF TAMIL NADU. THE LD. CIT(A) NOTED THAT AS A BUSINESS PRACTICE, THE ENTIRE SUBSIDY COST INCURRED BY THE ASSESSEE HAS BEEN FUNDED BY THE GOVERNMENT OF TAMIL NADU BY ALLOCATING NECESSARY SUBSIDY. THE SUBSIDY RECEIVED HAS BEEN FURTHER ACCOUNTED AS INCOME BY THE ASSESSEE FOR I.T.A. NO. 2861 & 2862/CHNY/18 5 EACH OF THE YEARS AND THEREFORE, THERE WAS NO SUBSIDY COST INCURRED BY THE ASSESSEE ON ITS OWN ACCOUNT. ACCORDINGLY, THE LD. CIT(A) HELD THE ADDITION MADE BY THE ASSESSING OFFICER AS INFRUCTUOUS AND DELETED THE SAME HOWEVER, WE FIND THAT, AS RIGHTLY CONTENDED BY THE LD. DR, BEFORE CONCLUDING THE APPELLATE ORDER, THE LD. CIT(A) HAS NOT OBTAINED THE REMAND REPORT FROM THE ASSESSING OFFICER ON THE SUBMISSIONS MADE BEFORE THE LD. CIT(A). ACCORDINGLY, WE DIRECT THE LD. CIT(A) TO OBTAIN THE REMAND REPORT FROM THE ASSESSING OFFICER ON THE SUBMISSIONS MADE BY THE ASSESSEE AND DECIDE THE ISSUE AFRESH AFTER AFFORDING AN OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. ACCORDINGLY, THE GROUND RAISED BY THE REVENUE IS ALLOWED FOR STATISTICAL PURPOSES. 7. IN THE RESULT, THE APPEAL FILED BY THE REVENUE FOR THE ASSESSMENT YEAR 2015-16 IS ALLOWED AND APPEAL FOR THE ASSESSMENT YEAR 2012-13 IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED ON THE 28 TH FEBRUARY, 2019 AT CHENNAI. SD/- SD/- (A.MOHAN ALANKAMONY) ACCOUNTANT MEMBER (DUVVURU RL REDDY) JUDICIAL MEMBER CHENNAI, DATED, 28.02.2019 VM/- I.T.A. NO. 2861 & 2862/CHNY/18 6 /COPY TO: 1. / APPELLANT, 2. / RESPONDENT, 3. ( ) /CIT(A), 4. /CIT, 5. /DR & 6. /GF.