The National Small Industries Corp Ltd., New Delhi V. ADDL. CIT, SPECIAL RANGE- 9, New Delhi

ITA 3204/DEL/2018

• Counselvise Citation: [2021] 107 COUNSELVISE.COM (IT) 8043 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 3 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-08-2021
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: G
• Assessment Year: 2014-2015
• Appeal Filed On: 03-05-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: NIDHI SRIVASTAVA
• Section: 37(1)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH B, NEW DELHI BEFORE SH. KUL BHARAT, JUDICIAL MEMBER DR. B. R. R. KUMAR, ACCOUNTANT MEMBER (THROUGH VIDEO CONFERENCING) ITA NO. 3203/DEL/2018 : ASSTT. YEAR : 2013-14 ITA NO. 3204/DEL/2018 : ASSTT. YEAR : 2014-15 THE NATIONAL SMALL INDUSTRIES CORP. LTD., NSIC BHAWAN, OKHLA INDUSTRIAL ESTATE, PHASE-III, NEW DELHI-110020 VS JCIT, RANGE-25, NEW DELHI (APPELLANT) (RESPONDENT) PAN NO. AA ACT0686N ASSESSEE BY : SH. M. P. RASTOGI, ADV. REVENUE BY : MS. NIDHI SRIVASTAVA, CIT DR DATE OF HEAR ING: 24 . 0 8 .20 2 1 DATE OF PRONOUNCEMENT: 25 .0 8 .20 2 1 ORDER PER DR. B. R. R. KUMAR, ACCOUNTANT MEMBER: THE PRESENT APPEALS HAVE BEEN FILED BY THE ASSESSE E AGAINST THE ORDER OF LD. CIT(A)-43, NEW DELHI DATED 20.03.2018. 2. SINCE, THE ISSUES INVOLVED IN BOTH THE APPEALS A RE IDENTICAL, WHICH WERE HEARD TOGETHER. 3. THE ASSESSEE IS A PSU CREATED FOR PROMOTING THE GROWTH OF MSME (MICRO, SMALL AND MEDIUM ENTERPRISES) AND ONE OF THE ACTIVITIES IS TO PROCURE RAW MATERIALS IN BULK AND SELL THEM TO MSME UNITS AT REASONABLE RATES -BY PASSING ON THE B ENEFITS OF BULK PROCUREMENT. THE COMPANY PROCURES / PURCHASES STEEL FROM ITA NOS. 3203 & 3204/DEL/2018 NATIONAL SMALL INDUSTRIES CORP. LTD. 2 RINL (RASHTRIYA ISPAT NIGAM LTD.,) AND SAIL (STEEL AUTHORITY OF INDIA LTD) AS PART OF ITS MAJOR OPERATIONS. 4. THE LD. CIT (A) CONFIRMED THE DISALLOWANCE OF DI SCOUNT OF RS.4,24,823/- OFFERED BY THE ASSESSEE TO THE CUSTOM ERS ON ACCOUNT OF SALES MADE DURING THE PRECEDING YEAR. 5. FACTS REVEAL THAT THE COMPANY DURING YEAR UNDER CONSIDERATION RECEIVED ADDITIONAL QUANTITATIVE DISC OUNT ON STEEL PURCHASED FROM RINL & SAIL ON PURCHASES MADE DURING THE PRECEDING YEAR AY 2012-13. THUS THE ADDITIONAL DISC OUNT FROM RINL & SAIL ACCRUED IN THE CURRENT YEAR BUT ON PURC HASES MADE IN THE PRECEDING YEAR. 6. KEEPING IN LINE WITH, ITS OBJECTIVE OF ASSISTING MSME UNITS PROCURING RAW MATERIALS AT COMPETITIVE PRICES AND I N ACCORDANCE TO THE GOVERNMENT GUIDELINES, THE COMPANY PASSED ON 50% OF THE ADDITIONAL DISCOUNT ON STEEL RECEIVED FROM RINL & SAIL ON PURCHASES DURING THE PRECEDING YEAR AY 2012-13, TO ITS MSME CUSTOMERS, IN THE CORRESPONDING PERIOD AND ALSO ACC OUNTED THE REMAINING 50% AS RECEIPTS OF THE ASSESSEE. 7. THUS IT IS EVIDENT THAT THE ADDITIONAL DISCOUNT RECEIVED FROM RINL &, SAIL, THOUGH ON PURCHASES MADE IN THE PRECEDING YEAR, ACCRUED IN THE CURRENT YEAR AS WELL AS 50% OF SUCH ADDITIONAL DISCOUNT WAS PASSED ON TO THE CUSTOMERS OF CORRESPONDING PERIOD ACCRUED IN THIS YEAR ONLY AS T HE DECISION WAS TAKEN IN THE CURRENT YEAR AND THUS THE LIABILIT Y TO PAY ALSO AROSE IN THE CURRENT YEAR ONLY. ITA NOS. 3203 & 3204/DEL/2018 NATIONAL SMALL INDUSTRIES CORP. LTD. 3 8. HENCE, THE CLAIM OF DISCOUNT IS ALLOWABLE IN TH IS YEAR ONLY IN ACCORDANCE WITH THE LAW. 9. WE FIND THAT THE ENTIRE CONFUSION AROSE DUE TO E RRONEOUS CLASSIFICATION OF THE DISCOUNT PAID TO CUSTOMERS AS A PRIOR PERIOD EXPENSES WHEREAS INFACT THE ASSESSEE RECEIVED ADDIT IONAL DISCOUNT ON THE PURCHASES MADE IN THE EARLIER YEARS , THE SAME HAS BEEN DISTRIBUTED AMONG THE CUSTOMERS AND TO THE ASSESSEE AT THE RATIO OF 50:50 OF THE DISCOUNT RECEIVED ON S TEEL PURCHASED FROM RINL & SAIL WHICH HAS BEEN DULY SHAR ED WITH CUSTOMERS. 10. HENCE, THE ACTION OF THE REVENUE AUTHORITIES IG NORING THE CREDIT OF 50% OF THE DISCOUNT AS THE INCOME OF THE ASSESSEE AND DISALLOWING THE SAME DISCOUNT BY STATING THAT THE C OMPANY IS FOLLOWING MERCANTILE METHOD OF ACCOUNTING, IGNORING THE PRINCIPLE OF CRYSTALLIZATION AND ACCEPTANCE OF LIAB ILITY CANNOT BE UPHELD. 11. THE OTHER GROUND RELATES TO DISALLOWANCE OF EXP ENSES CLAIMED IN P&L ACCOUNT UNDER CORPORATE SOCIAL RESPO NSIBILITY (CSR). 12. IN THIS REGARD, WE FIND THAT THE EXPLANATION (2 ) TO SECTION 37(1) HAS BEEN INSERTED BY THE FINANCE (NO. 2) ACT, 2014 W.E.F. 01.04.2015. THE INSERTION HAVING BEARING ON THE CHA RGEABILITY OF TAX AS PER SECTION 4 OF THE INCOME TAX ACT, 1961 IS TO BE TREATED AS APPLICABLE PROSPECTIVELY. ITA NOS. 3203 & 3204/DEL/2018 NATIONAL SMALL INDUSTRIES CORP. LTD. 4 13. HENCE, THE ACTION OF THE REVENUE AUTHORITIES DI SALLOWING THE CSR EXPENSES PERTAINING TO THE FINANCIAL YEARS 2012-13 2013-14 CANNOT BE HELD TO BE LEGALLY VALID. 14. IN THE RESULT, BOTH THE APPEALS OF THE ASSESSEE ARE ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 25/08/2021. SD/- SD/- (KUL BHARAT) ( DR. B. R. R. KUMAR) JUDICIAL MEMBER ACC OUNTANT MEMBER DATED: 25/08/2021 *SUBODH KUMAR, SR. PS* COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(APPEALS) 5. DR: ITAT ASSISTANT REGISTRAR