DCIT, Circle-1, Nashik V. Niphad SSK Ltd., Nashik

ITA 308/PUN/2013

• Counselvise Citation: 30824514 RSA 2013
• Duration Of Justice: 1 year(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-02-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2005-2006
• Appeal Filed On: 31-01-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S P WALIMBE
• Assessee Lawyers: PRASANN A L JOSHI
• Section: 43B; 143(3); 154; 15

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH B , PUNE BEFORE: SHRI R.S. PADVEKAR, JUDICIAL MEMBER AND SHRI R.K. PANDA, ACCOUNTANT MEMBER ITA NO. 3 08 /PN/20 1 3 ASSESSMENT YEAR : 200 5 - 06 ASSTT. COMMISSIONER OF INCOME TAX, CIRCLE - 1, NASHIK VS. NIPHAD SAHAKARI SAKHAR KARKHANA LTD., BHAUSAHEB NAGAR, TAL. - NIPHAD, DISTT. - NASHIK (APPELLANT) (RESPONDENT) PAN NO. AAAAN0688A APPELLANT BY: SHRI S.P. WALIMBE RESPONDENT BY: S HRI PRASANNA L. JOSHI DATE OF HEARING : 17 - 02 - 2014 DATE OF PRONOUNCEMENT : 27 - 0 2 - 2014 ORDER P ER R.S. PADVEKAR , JM : - IN THIS APPEAL , THE REVENUE HAS CHALLENGED T HE IMPUGNED ORDER OF THE LD. CIT(A) - I , NASHIK DATED 08 - 11 - 2012 FOR THE A.Y. 200 5 - 06. THE REVENUE HAS TAKEN THE FOLLOWING EFFECTIVE GRO UNDS IN THE APPEAL: 1. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE , THE LD. CIT(A) - I, NASHIK WAS JUSTIFIED IN CANCELING THE ORDER MADE U/S. 154 OF THE ACT. 2. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) - I, NASHIK W AS JUSTIFIED IN DELETING THE DISALLOWANCE OF RS.84,92,000/ - WHICH WAS NOT ALLOWABLE U/S. 43B OF THE ACT. 2. THE BRIEFLY STATED FACTS ARE AS UNDER. THE ASSESSEE IS A CO - OPERATIVE S OCIETY WHICH IS RUNNING A SUGAR FACTORY. THE ASSESSEE FI LED THE RETURN O F INCOME FOR THE A.Y. 2005 - 06 DECLARING LOSS OF RS.17,57,33,209/ - ON 30 - 10 - 2005 U/S. 139(1) WHICH WAS ASSESSED U/S. 143(3) VIDE ORDER DATED 27 - 12 - 2007. THEREAFTER THE ASSESSING OFFICER 2 ITA NO. 3 08/PN/2013, NIPHAD SAHAKARI SAKHAR KARKHANA LTD., NASHIK ISSUED NOTICE U/S. 154 AND BROUGHT TO THE NOTICE OF THE ASSESSEE THAT UNPAID GOVT. GUARANTEE FEE OF RS.84,92,000/ - THAT WAS CONVERTED INTO LOAN WAS NOT ACTUALLY PAID TO THE GOVERNMENT, THEREFORE, THE SAME WAS DISALLOWABLE U/S. 43B. IN RESPONSE TO THE NOTICE U/S. 154, THE ASSESSEE SUBMITTED TO THE ASSESSING OFFICER THAT INTE REST PAYABLE TO FINANCIAL INSTITUTIONS OR B ANKS IS COVERED BY CLAUSE (D) AND CLAUSE (E) OF SEC. 43B AND EXPLANATION 3C AND 3D PERTAIN TO INTEREST PAYABLE TO FINANCIAL INSTITUTIONS AND B ANKS RESPECTIVELY AND T HEREFORE, SAID EXPLANATION S DO NOT APPLY TO TAX, DUTY, CESS OR FEE WHICH FALLS UNDER CLAUSE (A) OF SEC. 43B. THE ASSESSEE CONTENDED THAT THERE WAS NO QUESTION OF APPLYING EXPLANATION S 3C OR 3D TO GUARANTEE FEES PAYABLE TO STATE GOVERNMENT FOR STANDING AS A GUARANTOR TO A BANK WHICH HAS LENT FUNDS. T HE ASSESSEE ALSO CONTENDED THAT THIS WAS NOT A SUBJECT MATTER OF A RECTIFICATION SINCE IT IS NOT A MISTAKE APPARENT FROM THE RECORDS AND IT IS DEBATABLE ISSUE . THE ASSESSING OFFICER, HOWEVER, DID NOT ACCEPT THE EXPLANATION OF THE ASSESSEE AND PROCEEDED TO MAKE DISALLOWANCE OF RS.84,92,000/ - U/S. 43B BY HOLDING THAT AS THE IMPUGNED AMOUNT HAS NOT BEEN PAID, NO DEDUCTION IS ALLOWABLE U/S. 43B. 3. THE ASSESSEE CHALLENGED THE ORDER PASSED BY THE ASSESSING OFFICER U/S. 154 OF THE ACT BEFORE THE LD. CIT(A) BY TA KING THE PLEA THAT ON MERIT THE UNPAID GOVT. GUARANTEE FEE IS NOT COVERED U/S. 43 B OF THE INCOME - TAX ACT AND THE SAID SUBJECT MATTER OF THE ORDER PASSED U/S. 154 CANNOT BE SAID TO BE THE MISTAKE APPARENT FROM THE RECORDS AS IT IS THE INTERPRETATION OF THE LAW MADE BY THE ASSESSING OFFICER. THE ASSESSEE ALSO PLACED HIS HEAVY RELIANCE ON THE DECISION OF THE HON'BLE SUPREME COURT IN THE CASE OF T.S. BALRAM VS. VOLKART BROS. 82 ITR 50 (SC) . THE LD. CIT(A) ACCEPTED THE PLEA OF THE ASSESSEE THAT THE SUBJECT MAT TER OF THE ORDER PASSED U/S. 154 CANNOT BE SAID TO BE THE MISTAKE APPARENT ON RECORD AS SEC. 154(1) CONFERS VERY LIMITED JURISDICTION ON THE ASSESSING OFFICER. THE OPERATIVE PART OF THE FINDING OF THE LD. CIT(A) IS AS UNDER: 3 ITA NO. 3 08/PN/2013, NIPHAD SAHAKARI SAKHAR KARKHANA LTD., NASHIK 6.1. THE ASSESSEE HAD OPPOSED BEFORE THE AO THAT IT WAS NOT A MISTAKE APPARENT FROM RECORD. ON MERITS ALSO, THE ASSESSEE SUBMITTED TO THE AO THAT THE IMPUGNED AMOUNT IS NOT DISALLOWABLE U/S 43B. THE AO DID NOT ADDRESS THE FIRST CONTENTION OF THE ASSESSEE WITH REGARD TO THE JURISDICTION AND ON MERITS REJECTED THE ASSESSEE'S CONTENTION AND MADE THE IMPUGNED DISALLOWANCE. AS MAY BE SEEN THE IMPUGNED DISALLOWANCE IS MADE U/S 43B. THIS IS A LEGAL ISSUE, ON WHICH MORE THAN TWO OPINIONS ARE POSSIBLE. IT IS SETTLED POSITION OF LAW THAT THE AO CANNOT ASSUME JURISDICTION U/S 154 ON AN ISSUE WHICH INVOLVES A DEBATABLE MATTER ON WHICH TWO OPINIONS ARE POSSIBLE. WHAT IS APPARENT IS SOMETHING WHICH IS EASILY SEEN WITHOUT LONG DRAWN PROCESS OF REASONING AND ARGUMENTATIVE DEBATE. ON THE GIVEN FACTS, THE ASSESSEE HAS CONTENDED THAT THE PROVISIONS OF SECTION 43B ARE NOT APPLICABLE IN RESPECT OF THE IMPUGNED ACCOUNT. THE AO, HOWEVER, HAS MERELY STATED THAT THE ASSESSEE'S OBJECTION TO THE JURISDICTION U/S 154 IS NOT TENABLE WITHOUT ASSIGNING ANY REASONS. IN THIS BACKGROUND, THEREFORE, IT IS CLEAR THAT THE IMPUGNED ISSUE INVOLVES A DEBATABLE ISSUE ON WHICH TWO OPINIONS ARE POSSIBLE. THEREFORE, IT CANNOT BE SAID THAT THERE WAS A MISTAKE APPARENT FROM RECORD. THIS VIEW IS FORTIFIED IN THE CASES OF T S BALRAM V. VOLKART BROS. 82 ITR 50 (SC); CIT VS. GODREJ BOYCE 151 ITR 496 (BOM.) AND 185 TAXMANN 409 (SC). IN MY CONSIDERED VIEWS, THE JURISDICTION ASSUMED BY THE A O U/S 154 IS NOT ACCORDING TO THE LAW, CONSEQUENTLY, THE IMPUGNED ORDER U/S 154 DATED 11/08/2012 IS CANCELLED. BOTH THE GROUNDS OF APPEAL ARE ALLOWED . NOW THE REVENUE BEING AGGRIEVED IS IN APPEAL BEFORE US. 4. WE HAVE HEARD THE RIVAL SUBMISSIONS OF THE PARTIES AND PERUSED THE RECORD. THE LD. DR SUBMITS THAT THE ISSUE OF THE GOVT. GUARANTEE FEE IS SQUA RELY COVERED U/S. 43B AND AS THE ASSESSEE HAS NOT PAID THE SAID AMOUNT , THE SAME WAS RIGHTLY DISALLOWED BY THE ASSESSING OFFICER INVOKING HIS POWERS U/S. 154(1) OF THE INCOME - TAX ACT. HE SUBMITS THAT THERE IS NO FORCE IN THE CONTENTION OF THE ASSESSEE THA T IT IS A DEBATABLE ISSUE WHEN THE LAW ITSELF IS A CLEAR. THE LD. DR PLEADED FOR RESTORING THE ORDER OF THE ASSESSING OFFICER. 4 ITA NO. 3 08/PN/2013, NIPHAD SAHAKARI SAKHAR KARKHANA LTD., NASHIK 5. PER CONTRA, THE LD. COUNSEL VEHEMENTLY ARGUES THAT ON MERIT ITSELF THE GOVT. GUARANTEE FEE PAYABLE TO THE GOVERNMENT IS NOT C OVERED U/S. 43B. HE SUBMITS THAT THE ASSESSING OFFICER HAS HELD THAT CLAUSE (D) AND CLAUSE (E) OF SEC. 43B ARE APPLICABLE TO THE SAID GUARANTEE FEE BUT THE SAID CLAUSES CANNOT BE APPLIED AS THOSE PERTAIN TO THE INTEREST PAYABLE TO THE FINANCIAL INSTITUTIO NS AND B ANK S RESPECTIVELY. HE SUBMITS THAT PRIMA - FACIE IT MAY APPEAR THAT CLAUSE (A) TO SEC. 43B MAY APPLY TO THE GOVT. GUARANTEE FEE AS THE WORD FEE IS MENTIONED IN THE SAID C LAUSES BUT GOVT. GUARANTEE FEE IS ANY STATUTORY LEVY NOR IT IS IMPOSE UNDER ANY LAW BUT AS THE GOVERNMENT UNDERSTOOD GUARANTOR TO THE FINANCIAL INSTITUTIONS ON BEHALF OF THE ASSESSEE SO IT IS A CONTRACTUAL OBLIGATION. HE, THEREFORE, PLEADS THAT ON MERIT ITSELF NO DISALLOWANCE CAN BE MADE IN RESPECT OF GOVT. GUARANTEE FEE. HE SUBMIT S THAT OTHERWISE ALSO IN THE LIMITED POWER VESTED TO THE ASSESSING OFFICER U/S. 1 5 4(1 ) OF THE ACT UNLESS A MISTAKE IS APPARENT ON THE RECORD , THE ASSESSING OFFICER CANNOT BE EXERCISED HIS JURISDICTION AND HENCE, THE ORDER PASSED BY THE ASSESSING OFFICER WA S WITHOUT ANY JURISDICTION. 6. WE FIND FORCE IN THE ARGUMENT OF THE LD. COUNSEL. THE GOVT. GUARANTEE FEE WHETHER IT IS COVER ED U/S. 43B CLAUSE S (A), (C) OR (D) ITSELF IS A DEBATABLE ISSUE . THE GOV T. GUARANTEE FEE CANNOT BE EQUATED WITH THE INTEREST PA YABLE ON THE LOANS BORROWED TO THE BANKS OR OTHER FINANCIAL INSTITUTIONS. THE NATURE OF THE GOVT. GUARANTEE FEE IS A CONTRACTUAL OBLIGATION AND IT IS NOT A STATUTORY LEVY HENCE IN OUR OPINION SEC. 43B (A) OF THE ACT ALSO MAY NOT BE APPLIED. LET US ASSUME FOR THE SAKE OF ARGUMENT THAT THE GOVT. GUARANTEE FEE IS COVERED U/S. 43B (A) THEN ALSO STILL IT REMAINS TO BE A DEBATABLE ISSUE WHETHER IT IS A STATUTORY LEVY OR CONTRACTUAL L IABILITY. THE LAW IS WELL SETTLED THAT SEC. 1 5 4(1) VESTS VERY LIMITED POWER TO T HE ASSESSING OFFICER AND IF THE SUBJECT MATTER IS DEBATABLE ONE OR DIFFERENT INTERPRETATIONS ARE POSSIBLE THEN THE SAID ISSUE CANNOT BE D ECIDED U/S. 154(1). IN OUR OPINION THE PRINCIPLES LAID DOWN 5 ITA NO. 3 08/PN/2013, NIPHAD SAHAKARI SAKHAR KARKHANA LTD., NASHIK IN THE CASE OF T.S. BALRAM VS. VOLKART BROS. (SUPRA) ARE S QUARELY APPLICABLE TO THE ASSESSEES CASE . T HE LD. CIT(A) HAS RIGHTLY CANCELLED THE ORDER PASSED BY THE ASSESSING OFFICER U/S. 154 OF THE INCOME - TAX ACT. WE FIND NO REASON TO INTERFERE WITH THE ORDER OF THE LD. CIT(A). ACCORDINGLY THE SAME IS CONFIRM. 7. IN THE RESULT, THE REVENUES APPEAL IS DISMISSED. PRONOUNCED IN THE OPEN COURT ON 27 - 0 2 - 201 4 SD/ - SD/ - ( R.K. PANDA ) ( R.S. PADVEKAR ) ACCOUNTANT MEMBER JUDICIAL MEMBER RK /PS PUNE , DATED : 27 TH FEBRU ARY, 2014 COPY TO 1 ASSESSEE 2 DEPARTMENT 3 THE CIT(A) - I , NASHIK 4 THE CIT - I, NASHIK 5 THE DR, ITAT, B BENCH, PUNE . 6 GUARD FILE. //TRUE COPY// BY ORDER PRIVATE SECRETARY INCOME TAX APPELLATE TRIBUNAL PUNE