Siel Ltd., V. DCIT, Circle-8(1),

ITA 3367/DEL/2002

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 3990 (ITAT-DELHI)
• Duration Of Justice: 8 year(s) 9 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-05-2011
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: E
• Next Hearing Date: 11-05-2011
• Assessment Year: 1998-1999
• Appeal Filed On: 19-08-2002
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: SRUJANI MOHANTY
• Keywords: Capital asset; Business expenditure; Capital expenditure
• Section: 43B; 143(3)

Judgement Text

ITA NOS. 3367/DEL/2002 & 4518/DEL/2009 1 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH E NEW DELHI BEFORE SHRI RAJPAL YADAV, JUDICIAL MEMBER AND SHRI SHAMIM YAHYA, ACCOUNTANT MEMBER I.T.A. NO. 3367/DEL/2002 A.Y. : 1998-99 M/S SIEL LIMITED, 15, SHIVAJI MARG, NEW DELHI 110 015 (PAN : AAACS4902Q) VS. DY. COMMISSIONER OF INCOME TAX, CIRCLE 8(1), NEW DELHI ITA NO. 4518/DEL/2009 A.Y. 1998-99 M/S MAWANA SUGARS LIMITED, (FORMERLY KNOWN AS SIEL LIMITED, 5 TH FLOOR, KIRTI MAHAL, 19, RAJENDRA PLACE, NEW DELHI 110 008 (PAN : AAACS4902Q) VS. DY. COMMISSIONER OF INCOME TAX, LARGE TAX PAY UNIT, NBCC PLAZA, PUSHP VIHAR, SAKET, NEW DELHI (APPELLANT) (APPELLANT) (APPELLANT) (APPELLANT) (RESPONDENT ) (RESPONDENT ) (RESPONDENT ) (RESPONDENT ) ASSEESSEE BY : SH. TARANDEEP SINGH, CA DEPARTMENT BY : MS. SRUJANI MOHANTY, SR. D.R. ORDER ORDER ORDER ORDER PER PER PER PER SHAMIM YAHYA : AM SHAMIM YAHYA : AM SHAMIM YAHYA : AM SHAMIM YAHYA : AM THESE APPEALS BY THE ASSESSEE ARE DIRECTED AGAINS T THE ORDER OF THE LD. COMMISSIONER OF INCOME TAX (APPEALS) FOR ASS ESSMENT YEAR 1998-99. SINCE THE APPEALS WERE HEARD TOGETHER AN D THEY ARE BEING CONSOLIDATED AND DISPOSED OF BY THIS COMMON ORDER F OR THE SAKE OF CONVENIENCE. ITA NOS. 3367/DEL/2002 & 4518/DEL/2009 2 ITA NO. 4518 ITA NO. 4518 ITA NO. 4518 ITA NO. 4518 2. THE ISSUE RAISED IS THAT LD. COMMISSIONER OF INCOM E TAX (APPEALS) ERRED IN UPHOLDING THE DISALLOWANCE OF ` 18,49,950/- BEING AMOUNT CLAIMED BY THE ASSESSEE U/S 43B OF THE IT ACT . 3. IN THIS CASE ASSESSING OFFICER HAD MADE A TOTAL ADDITION ON THIS ISSUE OF ` 1,18,49,950/- FORMING PART OF CLAIM OF ` 2,22,34,324/- U/S 43B VIDE HIS ORDER DATED 25.1.2001. 4. THE LD. COMMISSIONER OF INCOME TAX (APPEALS) IN H ER ORDER HAS SUSTAINED THE ADDITION OF ` 1,00,000,000/- BUT SHE WAS SILENT REGARDING THE BALANCE AMOUNT OF ` 18,49,950/-. THE MATTER TR AVELLED TO THE ITAT AND THE ITAT VIDE ITS ORDER DATED 28.10.2003 RESTOR ED THE MATTER TO THE FILES OF THE LD. COMMISSIONER OF INCOME TAX (APPE ALS) ONLY RELATING TO ` 18,49,950/-. ACCORDINGLY, THE ISSUE WAS CONSI DERED BY THE LD. COMMISSIONER OF INCOME TAX (APPEALS) IN THE IMPUGNED ORDER. LD. COMMISSIONER OF INCOME TAX (APPEALS) HELD THAT WHETH ER THIS AMOUNT OF ` 18,49,950/- IS ALLOWABLE EXPENDITURE OR NOT IS ESSENTIALLY A QUESTION OF FACT. THE DECISION REGARDING THIS HAS TO BE ARRIVED AT FROM THE MATERIAL WHICH IS AVAILABLE ON RECORD OR FROM S UCH DOCUMENT AS ASKED FOR. LD. COMMISSIONER OF INCOME TAX (APPEALS ) FURTHER NOTED THAT BEFORE HIM THE ASSESSEE HAS PRODUCED ONLY THE E VIDENCE WHICH IS ZEROX COPY CERTIFIED ISSUED BY THE CA. THE ASSESSEE WAS ASKED TO ESTABLISH THE FACTS FROM THE RECORDS AND FROM THE BAN K ACCOUNTS, BUT THE SAME WAS NEVER PRODUCED. ASSESSEE CONTENDED BE FORE THE LD. COMMISSIONER OF INCOME TAX (APPEALS) THAT CERTIFICAT E OF CA IS SUFFICIENT FOR ALLOWING SUCH DEDUCTION. WHEN THE FACTUAL EVIDENCE WAS AGAIN CALLED FOR, IT WAS STATED THAT THE DETAILS WE RE RELATED TO 10 YEARS OLD BANK RECORD AND THE SAME IS NOT READILY AVAILAB LE. LD. ITA NOS. 3367/DEL/2002 & 4518/DEL/2009 3 COMMISSIONER OF INCOME TAX (APPEALS) NOTED THAT ASSE SSEE HAS FAILED TO ESTABLISH THE EVIDENCE OF SUCH PAYMENTS BEFORE T HE ASSESSING OFFICER AT THE ASSESSMENT STAGE AND ALSO BEFORE HIM. HENCE, HE SUSTAINED THE DISALLOWANCE OF ` 18,49,950/-. 5. AGAINST THIS ORDER THE ASSESSEE IS IN APPEAL BE FORE US. 6. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RECORDS. WE FIND THAT LD. COMMISSIONER OF INCOME TAX (APPEALS) HAS STATED THAT ASSESSEE HAS FAILED TO PRODUCE NECESSARY DOCUMENTS AND STATED THAT THE DETAILS WERE 10 YEARS OLD. THE ASSESSEE HAS O NLY SUBMITTED A CERTIFICATE FROM CA TO SUPPORT HIS CASE. IN THIS REG ARD, LD. COUNSEL OF THE ASSESSEE HAS PLACED RELIANCE UPON CBDT CIRCULAR NO. 601 DATED 4.6.1991 REPORTED IN 190 ITR 4 (ST.). THIS REFEREN CE WAS MADE BY THE LD. COUNSEL OF THE ASSESSEE IN SUPPORT OF THE CLAI M THAT FOR THE PURPOSE OF SECTION 43B IN CASE THERE IS DIFFICULTY IN ENCL OSING NECESSARY CHALLAN ETC. EVIDENCING PAYMENT, A CERTIFICATE FROM A CA, AS DEFINED IN THE EXPLANATION TO SECTION 288 OF THE ACT WOULD BE SUF FICIENT. 6.1 HOWEVER, WE NOTE THAT IN THIS CIRCULAR IN PARA 8 THEREOF IT HAS CLEARLY MENTIONED THAT THE SAME WILL BE SUFFICIENT FOR THE PURPOSE OF MAKING PRIMA FACIE ADJUSTMENTS UNDER SECTION 143(1)(A ). FURTHER EVIDENCE CAN BE CALLED FOR IN CASES SELECTED FOR S CRUTINY & 143(3) ASSESSMENT. ADMITTEDLY, WE ARE NOT CONCERNED WIT H ADJUSTMENT U/S 143(1)(A). HENCE, THIS CIRCULAR DOES NOT SUPPORT T HE CASE OF THE ASSESSEE. HENCE, WE ARE OF THE CONSIDERED OPIN ION THAT ASSESSEE HAS FAILED TO SUBMIT THE NECESSARY EVIDENCE IN THIS REGARD. 6.2 FURTHERMORE, IN THIS REGARD THE LD. COUNSEL OF THE ASSESSEE HAS ALSO PLACED RELIANCE UPON THE DECISION OF THE HONB LE JURISDICTIONAL HIGH COURT IN THE CASE OF ACIT VS. JAY ENGINEERING WORKS LTD. 114 ITR 289. ITA NOS. 3367/DEL/2002 & 4518/DEL/2009 4 IN THIS CASE IT WAS HELD THAT WHERE THE ORIGINAL B OOKS OF THE ASSESSEE HAD BEEN DESTROYED IN A FIRE IT WAS HELD THAT THE A PPELLATE TRIBUNAL, IN ALLOWING A DEDUCTION, COULD RELY UPON OTHER MATERI AL MAINLY CONSISTING OF THE AUDITORS REPORTS FROM WHICH IT COULD BE INFE RRED THAT THE DEDUCTIONS WERE PROPERLY SUPPORTED BY THE RELEVANT ENTRIES IN THE ACCOUNTS BOOKS. IN THIS BACKGROUND, THE HONBLE HIGH COURT DID NOT INTERFERE IN THE ORDER OF THE TRIBUNAL. IN OUR CONSIDERED OPINION , THIS CASE LAW IS NOT AT ALL APPLICABLE IN THE PRESENT CASE. IT IS NOT THE CASE THAT BOOKS OF ACCOUNT AND OTHER MATERIAL WERE LOST IN FIRE. HERE ASSESSEE HAS SIMPLY STATED THAT THE EVIDENCE CALLED FOR IN THIS REGARD IS 10 YEARS OLD. HENCE, THE SAME WAS NOT AVAILABLE. IN THIS BACKGR OUND, WE DO NOT FIND ANY INFIRMITY OR ILLEGALITY IN THE ORDER OF THE LD. COMMISSIONER OF INCOME TAX (APPEALS) AND ACCORDINGLY, WE UPHOLD THE SAME. 7. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS DISMISSED. ITA NO. ITA NO. ITA NO. ITA NO. 3367 3367 3367 3367 8. IN THIS CASE THE APPEAL WAS EARLIER HEARD BY THE TRIBUNAL AND NECESSARY ORDER WAS PASSED ON 28.10.2003. THEREAFTE R, MISC. APPLICATION WAS FILED BEFORE THE TRIBUNAL IN MA NO. 500/DEL/2007. IN THE MISC. APPLICATION, IT WAS PLEADED THAT THE GROUND RELATING TO DEDUCTION OF ` 1 CRORE IN RESPECT OF EXCISE DUTY PAID HAS BEEN OMITTED TO BE CONSIDERED. THE TRIBUNAL IN MISC. APPLICATIO N HAS ACCEPTED THAT TRIBUNAL HAD OMITTED TO CONSIDER THE DEDUCTION OF ` 1 CRORE WHICH WAS RAISED IN GROUND NO. 2. IT WAS NOTED THAT THE TRIBU NAL HAD GIVEN A ITA NOS. 3367/DEL/2002 & 4518/DEL/2009 5 FINDING ONLY IN RESPECT OF GROUND NO. 2.1 WHICH IS ALSO DEDUCTION UNDER SECTION 43B. ACCORDINGLY, THE ORDER WAS PARTIALLY RECALLED TO DECIDE THE GROUND NO. 2 RAISED IN THE APPEAL. THE SAID G ROUND NO. 2 READS AS UNDER:- THAT THE LD. COMMISSIONER OF INCOME TAX (APPEALS) ER RED IN NOT ACCEPTING THE DEDUCTION U/S 43B IN RESPECT OF SUM O F ` 1 CRORE PAID BY WAY OF EXCISE DUTY DURING THE PREVIOUS YEA R RELEVANT TO ASSESSMENT YEAR UNDER CONSIDERATION, WHICH WAS DISA LLOWED BY THE ASSESSING OFFICER. 9. IN THIS REGARD, UPON A PERUSAL OF NOTE 5(3) TO NOTES ON ACCOUNTS IT WAS OBSERVED THAT ASSESSEE COMPANY HAS GIVEN INDEMNI TY ON ACCOUNT OF SIEL CORPORATION LTD. WHICH IS KNOWN AS TECUMSEH PRODUCT INDIA LTD. (TPIL) WHICH WAS FORMERLY A UNIT OF ASSESSEE COMPANY A ND PRESENTLY RENAMED AS TECHMSEH PRODUCTS INDIA LTD. WAS TRANSFERR ED TO ANOTHER COMPANY AS GOING CONCERN AS ON 1.4.96 AND, ON SUCH TRANSFER THE ASSESESSEE HAD SHOWN CAPITAL GAIN/LOSS DURING THE A SSESSMENT YEAR 1997-98. THE ASSESSING OFFICER OBSERVED THAT A S UM OF ` 1 CRORE PAID BY WAY OF EXCISE DUTY PERTAINING TO THE PENDING CAS ES RELATING PRIOR TO 31 ST MARCH, 1997, WAS A LIABILITY ON ACCOUNT OF CAPITAL ASSETS WHICH STANDS TRANSFERRED. ACCORDING TO THE ASSESSING OF FICER THIS EXPENDITURE WAS ON CAPITAL ACCOUNT AND CANNOT BE A LLOWED AS REVENUE ACCOUNT. BEFORE THE LD. COMMISSIONER OF INCOME TAX (APPEALS) IT WAS SUBMITTED THAT THE AMOUNT OF ` 1 CRORE WAS PART OF T HE TOTAL EXCISE DUTY PAID ON 1,04,87,404/-. MOREOVER, THIS AMOUNT W AS NOT DEBITED TO THE P&L ACCOUNT AND THEREFORE, WHILE COMPUTING THE T OTAL INCOME THE QUESTION OF ADDING IT BACK DOES NOT ARISE, NOTWIT HSTANDING WHATEVER ITA NOS. 3367/DEL/2002 & 4518/DEL/2009 6 MAY BE THE FINDING ABOUT THE NATURE OF THIS PAYMENT . CONSIDERING THE ABOVE LD. COMMISSIONER OF INCOME TAX (APPEALS) REFER RED TO THE RELEVANT PROVISION OF SECTION 43B AND NOTED THAT TH E PAYMENT OF ` 1 CRORE HAS BEEN MADE TO THE TPIL FOR DEPOSITING THE SA ME WITH THE EXCISE AUTHORITIES. LD. COMMISSIONER OF INCOME TA X (APPEALS) FURTHER HELD THAT HE HAS PERUSED THE RECORDS AND ASSESSMENT ORDER OF THE COMPANY AND HE FOUND THAT THE PAYMENT IS INDEED OF C APITAL NATURE BECAUSE WHENEVER CHANGE IN HAND OF BUSINESS TAKES P LACE, IT IS TRANSFERRED WITH ALL ITS ASSETS AS WELL AS LIABILIT IES. THE OUTSTANDING PAYMENT OF EXCISE DUTY WAS A LIABILITY OF THE COMPAN Y KNOW AS TPIL AND, THEREFORE, IT SHOULD FORM A PART OF THE CAPITA L LOSS/GAIN OF THE COMPANY TO WHICH IT HAS BEEN TRANSFERRED, HENCE THE ORDER OF THE ASSESSING OFFICER ON THESE ISSUES AS ABOVE IS UPHE LD. IT WAS FURTHER OBSERVED THAT IN ANY CASE THE OBSERVATION OF THE AS SESSING OFFICER THAT IT IS OF CAPITAL NATURE, IT IS ALSO TO BE SEEN, T HAT THE LIABILITY IS NOT OF THE ASSESSEE BUT OF THE EARLIER COMPANY TPIL. THERE FORE, IT CANNOT BE ALLOWED IN THE HANDS OF THE ASSESSEE. FURTHER TH E CONTENTION OF THE ASSESSEE THAT IT HAS NOT BEEN DEBITED TO P&L ACCOUN T CANNOT BE ACCEPTED BECAUSE ULTIMATELY IT HAS BEEN DEDUCTED IN THE CALCULATION ON INCOME. 10. AGAINST THE ABOVE ORDER THE ASSESSEE IS IN APPE AL BEFORE US. 11. WE HAVE HEARD THE RIVAL CONTENTIONS IN LIGHT O F THE MATERIAL PRODUCED AND PRECEDENT RELIED UPON. THE SAID NOTE 5(E) REFERRED ABOVE READS AS UNDER:- INDEMNITY GIVEN BY THE COMPANY TO A PARTY TO WHOM IN VESTMENT IN 1,00,00,00/- EQUITY SHARES OF ` 10 EACH FULLY P AID UP OF SIEL COMPRESSORS LIMITED, PRESENTLY RENAMED AS TECEMSEH PR ODUCTS ITA NOS. 3367/DEL/2002 & 4518/DEL/2009 7 INDIA LIMITED (TPIL) HAS BEEN DISPOSED OFF FOR ANY L OSS, DAMAGE, CLAIM, ACTION, SUIT ETC. ARISING FROM VARIOUS REPRESE NTATIONS/ BREACH OF REPRESENTATIONS INCLUDING FOR CONTINGENT LIABILITIES EXISTING AS AT MARCH 31, 1997 OR PRIOR TO MARCH, 31, 1997, WHICH SIEL COMPRESSORS LIMITED MAY EVENTUALLY BE LIABLE TO P AY. THE COMPANY HAS PROVIDED A BANK GUARANTEE FOR AN AMOUNT OF ` 12600.00 LACS. THE COMPANY HAS RECEIVED A CLAIM FOR RS. 311.11 LACS TOWARDS EXCISE DUTY DEMAND PERTAINING TO PENDI NG CASES RELATING PRIOR TO MARCH 31, 1997 FROM TPIL. AGAINST THIS CLAIM, THE COMPANY HAS REIMBURSED ` 100 LACS TO TPIL FOR DEPO SITING WITH EXCISE AUTHORITIES AND HAS INCLUDED THE SAME U NDER THE HEAD ADVANCE RECOVERABLE IN CASH OR IN KIND OR FOR VALU E TO BE RECEIVED IN SCHEDULE AS TPIL HAS PREFERRED AN APPE AL IN THE SUPREME COURT AGAINST THE SAID EXCISE ORDER. 12. FROM THE ABOVE IT IS EVIDENT THAT THE IMPUGNED LIA BILITY OF ` 1 CRORE WAS ON ACCOUNT OF CAPITAL ASSET WHICH STANDS TRANSFERRED AND THEREFORE, IT HAS BEEN RIGHTLY HELD BY THE AUTHORIT IES BELOW THAT ` 1 CRORE PAID FOR TPIL STATUTORY LIABILITIES DOES NOT R EPRESENT THE BUSINESS EXPENDITURE OF THE ASSESSEE COMPANY. MOREOVER, IT I S ALSO RIGHTLY HELD THAT IT IS IN THE NATURE OF THE CAPITAL EXPENDITURE AS IT HAS ITS ORIGIN IN RELATION TO A CAPITAL ASSETS WHICH IS NO LONGER AN ASSET OF THE BUSINESS AND, THEREFORE, NOT AN ALLOWABLE DEDUCTION WHILE C OMPUTING THE TAXABLE INCOME. 13. ACCORDINGLY, IN THE BACKGROUND OF THE AFORESAID DISCUSSION, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE LD. COMMIS SIONER OF INCOME TAX (APPEALS) HOLDING THAT A SUM OF ` 1 CRORE WAS N OT ALLOWABLE, AS IT WAS IN THE NATURE OF CAPITAL ACCOUNT. THIS WAS SO BECAUSE BUSINESS ITA NOS. 3367/DEL/2002 & 4518/DEL/2009 8 HAD ALREADY CHANGED HANDS AND WHEN THE BUSINESS CH ANGES HAND THE ASSETS AS WELL AS LIABILITIES ARE TRANSFERRED. T HEREFORE, OUTSTANDING PAYMENT OF EXCISE DUTY WAS LIABILITY OF THE COMPANY KNOWN AS TPIL, AND, THEREFORE, IT SHOULD FORM A PART OF THE CAPI TAL LOSS/GAIN OF THE COMPANY TO WHICH IT HAS BEEN TRANSFERRED. ACCORDINGL Y, WE UPHOLD THE ORDERS OF THE AUTHORITIES BELOW AND DECIDE THE ISSU E IN FAVOUR OF THE REVENUE. 14. IN THE RESULT, BOTH THE APPEALS FILED BY THE ASSESSEE STAND DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 20/5/2011. SD/ SD/ SD/ SD/- -- - SD/ SD/ SD/ SD/- -- - [ [[ [RAJPAL YADAV RAJPAL YADAV RAJPAL YADAV RAJPAL YADAV] ]] ] [SHAMIM YAHYA] [SHAMIM YAHYA] [SHAMIM YAHYA] [SHAMIM YAHYA] JUDICIAL MEMBER JUDICIAL MEMBER JUDICIAL MEMBER JUDICIAL MEMBER ACCOUNTANT MEMBER ACCOUNTANT MEMBER ACCOUNTANT MEMBER ACCOUNTANT MEMBER DATE 20/5/2011 SRB COPY FORWARDED TO: COPY FORWARDED TO: COPY FORWARDED TO: COPY FORWARDED TO: - -- - 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT (A) 5. DR, ITAT TRUE COPY BY ORDER, DEPUTY REGISTRAR, ITAT, DELHI BENCHES