The ACIT, 2 (1), V. M/s M.P.United Polypropylene Ltd,

ITA 303/IND/2008

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 3002 (ITAT-INDORE)
• Duration Of Justice: 1 year(s) 9 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-04-2010
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 12-04-2010
• Assessment Year: misc
• Appeal Filed On: 07-07-2008
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: APARNA KARAN

Judgement Text

PAGE 1 OF 5 - I.T.A.NO. 303/IND/2008 M.P.UNITED POLYPROPYLENE LIMITED, BHOPAL. IN THE INCOME TAX APPELLATE TRIBUNAL INDORE BENCH : INDORE BEFORE SHRI JOGINDER SINGH, JUDICIAL MEMBER AND SHRI V.K. GUPTA, ACCOUNTANT MEMBER PAN NO. : AABCM0304P I.T.A.NO.303/IND/2008 A.Y. : 2002-03 ACIT, M.P.UNITED POLYPROPYLENE LIMITED, 2(1), VS BHOPAL. BHOPAL. APPELLANT RESPONDENT APPELLANT BY : SMT.APARNA KARAN, SR.DR RESPONDENT BY : NONE (WRITTEN SUBMISSIONS) DATE OF HEARING : 12.04.2010 O R D E R PER V.K. GUPTA, A.M. THIS APPEAL FILED BY THE REVENUE ARISES OUT OF ORDE R OF THE LD. CIT(A)-I, BHOPAL, DATED 18.03.2008, FOR THE ASSESSM ENT YEAR 2002-03. 2. WE HAVE HEARD BOTH THE PARTIES AND HAVE ALSO PERUSE D THE MATERIAL AVAILABLE ON RECORD. 3. NONE APPEARED ON BEHALF OF THE ASSESSEE. HOWEVER, W RITTEN SUBMISSIONS HAD BEEN FILED. HENCE, WE PROCEED TO DE CIDE THIS APPEAL ON THE BASIS OF SUCH WRITTEN SUBMISSIONS AFTER HEARING THE LD. DEPARTMENTAL REPRESENTATIVE AND PERUSING THE MATERIAL ON RECORD. PAGE 2 OF 5 - I.T.A.NO. 303/IND/2008 M.P.UNITED POLYPROPYLENE LIMITED, BHOPAL. 4. IN THIS APPEAL, THOUGH THE DEPARTMENT HAS RAISED TH REE GROUNDS, BUT THE SINGLE ISSUE OF ALLOWABILITY OF EXPENSES OF RS. 44,52,000/- IS INVOLVED. 5. THE FACTS, IN BRIEF, ARE THAT THE A.O., IN THE COUR SE OF ASSESSMENT PROCEEDINGS, FOUND THAT THE ASSESSEE HAD CLAIMED RE NT OF BUSINESS PREMISES TO THE TUNE OF RS. 21,12,000/- AND VEHICLE HIRE CHARGES TO THE TUNE OF RS. 33,40,000/-, WHICH PERTAINED TO FINANCI AL YEAR 1998-99 TO 2000-01. THE A.O. REQUIRED THE ASSESSEE TO JUSTIFY ITS CLAIM FOR DEDUCTION THEREOF IN THE YEAR UNDER CONSIDERATION, AS IN THE OPINION OF THE A.O., THESE EXPENSES PERTAINED TO EARLIER YEARS, HENCE, N OT ALLOWABLE. THE ASSESSEE MADE DETAILED SUBMISSIONS AS REGARDS TO TH E STATUS OF THE ASSESSEE I.E. THE ASSESSEE COMPANY WAS A SICK COMPA NY AND HAD BEEN REFERRED TO BIFR AND, THEREFORE, IT WAS BOUND TO FO LLOW THE INSTRUCTIONS OF BIFR. AS REGARDS TO THE INCURRENCE OF LIABILITY OF THESE EXPENSES IN THE YEAR UNDER CONSIDERATION , THE ASSESSEE SUBMITTED T HAT THE NORMAL RATE WAS RS. 75/- AND RS. 100/- PER SQ.FT. PER MONTH, THEREF ORE, THE ASSESSEE COMPANY HAD PAID THE RENT FOR THE SAME PREMISES @ RS. 32.50 PER SQ.FT. PER MONTH AND THAT TOO AFTER THE PROLONGED NEGOTIAT ION, WHICH WERE FINALIZED IN THE YEAR UNDER CONSIDERATION . HENCE, THE LIABILITY TO PAY CRYSTALLIZED IN THIS YEAR. SIMILAR CLAIMS WERE MADE AS REGARDS TO VEHICLE HIRE CHARGES. THE ASSESSEE ALSO PLACED RELIANCE ON THE DECISION OF THE PAGE 3 OF 5 - I.T.A.NO. 303/IND/2008 M.P.UNITED POLYPROPYLENE LIMITED, BHOPAL. HON'BLE SUPREME COURT IN THE CASE KEDARNATH JUTE MF G. COMPANY VS. CIT, AS REPORTED IN 82 ITR 363, AND OTHER JUDICIAL DECISIONS. THE A.O., HOWEVER, HELD THAT IN THE INSTANT CASE, THERE WERE NO EXTRANEOUS CIRCUMSTANCES BEYOND THE CONTROL OF THE ASSESSEE, W HICH PREVENTED THE ASSESSEE FROM SETTLING OR/QUANTIFYING SUCH LIABILIT Y DURING THE RELEVANT FINANCIAL YEAR, ESPECIALLY WHEN SUCH LIABILITIES WE RE TOWARDS ITS ASSOCIATE COMPANY. THE A.O. ALSO HELD THAT THE ASSESSEE HAD C LAIMED THESE EXPENSES IN THE YEAR UNDER CONSIDERATION AS PER HIS CONVENIENCE. THE A.O. ALSO HELD THAT HE SHOULD HAVE MADE PROVISIONS OF SUCH LIABILITY IN THE RELEVANT YEAR AS PER THE MERCANTILE SYSTEM OF ACCOU NTING FOLLOWED BY IT. AGGRIEVED BY THIS, THE ASSESSEE CARRIED THE MATTER INTO APPEAL BEFORE THE LD. CIT(A), WHEREIN DETAILED SUBMISSIONS WERE MADE IN RESPECT OF CONTENTIONS MADE BEFORE THE A.O. AND IT WAS STRONGL Y ARGUED THAT THE LIABILITY TO PAY SUCH EXPENSES ACTUALLY CRYSTALLIZE D IN THE YEAR UNDER CONSIDERATION . IT WAS ALSO SUBMITTED THAT AS PER T HE SCHEDULE OF BIFR, THE ASSESSEE COULD NOT GO FOR EXPANSION AND RAISED LIAB ILITY TILL SUCH TIME IT WAS ABLE TO WIPE OUT ITS LOSSES. IT WAS FURTHER SUB MITTED THAT IN THE YEAR UNDER CONSIDERATION , THE LIABILITY TO PAY RENT AND VEHICLE HIRE CHARGES WERE SETTLED MUTUALLY AS PER THE CAPACITY OF THE AS SESSEE COMPANY AND SINCE THESE WERE NOT FINALLY SETTLED AND QUANTIFIED IN THE EARLIER YEARS, HENCE, NO PROVISION WAS MADE. THE LD. CIT(A) AGREEI NG WITH THESE PAGE 4 OF 5 - I.T.A.NO. 303/IND/2008 M.P.UNITED POLYPROPYLENE LIMITED, BHOPAL. SUBMISSIONS OF THE ASSESSEE DELETED THE ADDITIONS M ADE BY THE ASSESSING OFFICER. AGGRIEVED BY THIS, THE REVENUE IS IN APPEA L BEFORE US. 6. WE HAVE CONSIDERED THE SUBMISSIONS MADE BY THE LD. DEPARTMENTAL REPRESENTATIVE AND WRITTEN SUBMISSIONS FILED BY THE ASSESSEE AND ORDERS OF THE AUTHORITIES BELOW. 7. IT IS NOTED THAT THE ASSESSEE PLEADED BEFORE THE A. O. THAT IN THE COMPELLING CIRCUMSTANCES AND DUE TO PRECARIOUS FINA NCIAL POSITION OF THE ASSESSEE COMPANY, THE PARTIES BY WHOM SUCH SERVICES WERE RENDERED WERE ASKED TO NEGOTIATE THE PAYMENT TO BE MADE BY THE AS SESSEE COMPANY AND SUCH NEGOTIATIONS HAVE BEEN FINALIZED IN THE YEAR U NDER CONSIDERATION. IT IS ALSO NOT IN DISPUTE THAT THE CHARGES PAID BY THE AS SESSEE COMPANY ARE SUBSTANTIALLY LOWER FROM THE MARKET RATE. IN THE BA CKGROUND OF THESE FACTS, WE ARE OF THE VIEW THAT LIABILITY TO PAY SUCH EXPEN SES AS CRYSTALLIZED IN THE YEAR UNDER CONSIDERATION . HENCE, EVEN THOUGH THESE EXPENSES PERTAIN TO EARLIER YEARS, THE SAME ARE ALLOWABLE IN THE YEAR U NDER CONSIDERATION. THUS, ALL THE GROUNDS RAISED BY THE REVENUE ARE DI SMISSED. 8. IN THE RESULT, THE APPEAL FILED BY THE REVENUE IS DISMISSED. PAGE 5 OF 5 - I.T.A.NO. 303/IND/2008 M.P.UNITED POLYPROPYLENE LIMITED, BHOPAL. THIS ORDER HAS BEEN PRONOUNCED IN THE OPEN COURT ON 16 TH APRIL, 2010. SD/- SD/- (JOGINDER SINGH) (V. K. GUPTA) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 16 TH APRIL, 2010. CPU* 13154