M/s. Rako Agrochem Pvt. Ltd., Lucknow V. Deputy Commissioner of Income Tax,Range-V, Lucknow

ITA 349/LKW/2018

• Counselvise Citation: [2018] 119 COUNSELVISE.COM (IT) 0911 (ITAT-LUCKNOW)
• Duration Of Justice: 6 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-11-2018
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SB
• Assessment Year: 2012-2013
• Appeal Filed On: 27-04-2018
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: C K SINGH
• Assessee Lawyers: ASHOK SETH

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL LUCKNOW BENCH SMC , LUCKNOW BEFORE SHRI. T.S. KAPOOR, ACCOUNTANT MEMBER ITA NO. 349/LKW/2018 ASSESSMENT YEAR: 2012 - 13 M/S RAKO AGROCHEM PVT. LTD. 29, DURGAPURI, BLUNT SQUARE LUCKNOW V. DCIT RANGE V LUCKNOW T AN / PAN : AABCR3467Q (APP ELL ANT) (RESPONDENT) APPELLANT BY: SHRI ASHOK SETH, FCA RESPONDENT BY: SHRI C. K. SINGH, D.R. DATE OF HEARING: 14 11 201 8 DATE OF PRONOUNCEMENT: 20 11 201 8 O R D E R THIS APPEAL IS FILED BY THE ASSESSEE AGAINST THE ORDER OF LD. CIT(A) - 2, LUCKNOW DATED 1/3/2018. ASSESSEE HAS TAKEN THE FOLLOWING GROUNDS OF APPEAL: - 1. THAT THE LEARNED LOWER COURT ERRED IN FACTS AND LEGAL ASPECTS OF THE CASE IN DISALLOWING RS 5,99,859 / - U/S 36( 1 )(VA) 2. THAT THE LEARNED LOWER COURT ERRED IN F ACTS AND LEGAL ASPECTS OF THE CASE IN DISALLOWING RS. 60,278/ - BEING INTEREST PAID TO EXCISE/VAT DEPARTMENT. 3. THAT THE ORDER PASSED IS AGAINST THE MERITS, CIRCUMSTANCES AND LEGAL ASPECTS OF THE CASE. 4. THAT THE IN VIEW OF THE MATTER THE APPELLANT SEEKS PERMISSION TO MODIFY AND / OR ADD ANY FRESH GROUND OF APPEAL AS THE CIRCUMSTANCES OF THE CASE MIGHT REQUIRE OR JUSTIFY. ITA NO.349/LKW/2018 PAGE 2 OF 4 2 . AT THE OUTSET , LD. A.R. OF THE ASSESSEE INVITED OUR ATTENTION TO GROUND NO.1 OF THE GROUNDS OF APPEAL AND SUBMITTED THAT ASSESSING OFFI CER HAD MADE ADDITION UNDER SECTION 36(1)(VA) OF THE ACT FOR NOT DEPOSITING EMPLOYEES PROVIDENT FUND PAYABLE AND ESI PAYABLE OUTSTANDING AS ON THE CLOSE OF THE FINANCIAL YEAR AND IN THIS RESPECT OUR ATTENTION WAS ALSO INVITED TO PAGE 4 OF THE ORDER OF LD. CIT(A) WHERE IN NECESSARY DETAILS OF OPENING BALANCE AND CLOSING BALANCE OF PROVIDENT FUND AND ESI PAYABLE WERE PLACED. LD. A.R. OF THE ASSESSEE SUBMITTED THAT INSTEAD OF DISALLOWING WHOLE OUTSTANDING AMOUNT OF RS.7,77,658/ - , ASSESSING OFFICER SHOULD HAVE DISALLOWED ONLY AMOUNT RELATING TO THE YEAR UNDER CONSIDERATION , WHICH WAS RS.1,77,799/ - . AS REGARDS OTHER DISALLOWANCE OF RS.60,278/ - BEING INTEREST PAID TO EXCISE/VAT DEPARTMENT, LD. A.R. OF THE ASSESSEE SUBMITTED THAT INTEREST PAID ON DELAYED PAYMENT IS IN THE NATURE OF COMPENSATION AND NO DISALLOWANCE CAN BE MADE AND IN THIS RESPECT RELIANCE WAS PLACED ON THE JUDGMENT OF HON'BLE SUPREME COURT IN THE CASE OF LACHMANDAS MATHURADAS VS. CIT, [2002] 24 ITR 799 AND FURTHER RELIANCE WAS PLACED ON THE DECISIO N OF HON'BLE JURISDICTIONAL HIGH COURT IN THE CASE OF TRIVENI ENGINEERING WORKS LTD. VS. CIT, [1983] 144 ITR 732. 3 . THE LD. D.R., ON THE OTHER HAND, RELIED UPON THE ORDERS OF THE AUTHORITIES BELOW. 4 . I HAVE HEARD THE RIVAL PARTIES AND GONE THROUGH THE MATERIAL PLACED ON RECORD. AS REGARDS FIRST ISSUE OF DISALLOWANCE OF RS.5,99,859/ - UNDER SECTION 36(1)(VA), I FIND THAT THE ASSESSING OFFICER HAS MADE DISALLOWANCE OF RS.7,77,658/ - UNDER SECTION 36(1)(VA) OF THE ACT. THE SAID AMOUNT REPRESENTS CLOSING BALANCE OF OUTSTANDING EMPLOYEES PROVIDENT FUND PAYABLE AND EMPLOYEES ESI PAYABLE. ASSESSEE DURING APPELLATE PROCEEDINGS HAD PROVIDED BREAKUP OF SUCH AMOUNT WHICH ITA NO.349/LKW/2018 PAGE 3 OF 4 INCLUDED OPENING BALANCE OF RS.5,99,859/ - . HOWEVER, LD. CIT(A) HAS NOT ALLOWED RELIEF FOR THE OPENI NG BALANCES. IT IS SETTLED POSITION OF LAW THAT DISALLOWANCE UNDER SECTION 36(1)(VA) OF THE ACT CAN ONLY BE MADE FOR THE AMOUNT RELATING TO THE YEAR UNDER CONSIDERATION, THEREFORE, LD. CIT(A) SHOULD HAVE RESTRICTED THE DISALLOWANCE TO THE AMOUNT RELATING TO THE YEAR UNDER CONSIDERATION ONLY. FROM THE ORDER OF ASSESSING OFFICER, I DO NOT FIND ANY MATERIAL TO SUGGEST THAT PART OF OUTSTANDING BALANCES IN PROVIDENT FUND AND ESI WERE RELATING TO EARLIER YEARS, THEREFORE, THE ISSUE IS RESTORED TO THE ASSESSING OFFICER TO RE - ADJUDICATE THE SAME AND TO RESTRICT THE ADDITION ONLY TO THE AMOUNTS PAYABLE RELATING TO THE YEAR UNDER CONSIDERATION ONLY. IN VIEW OF THE ABOVE, GROUND NO.1 IS ALLOWED FOR STATISTICAL PURPOSES. 5 . NOW COMING TO GROUND NO.2, I FIND THAT ASSESSI NG OFFICER HAD DISALLOWED AN AMOUNT OF RS.60,278/ - WHICH ASSESSEE HAD CLAIMED UNDER THE HEAD INTEREST PAID. ASSESSING OFFICER OBSERVED THAT PAYMENT OF INTEREST WAS DUE TO DELAY IN PAYMENT OF EXCISE DUTY WHICH WAS PENAL IN NATURE AND, THEREFORE, HE MADE AD DITION AND LD. CIT(A) ALSO DID NOT ALLOW RELIEF TO THE ASSESSEE BY HOLDING THAT INTEREST ON DELAYED PAYMENT OF SALES TAX AND EXCISE DUTY IS PERSONAL LIABILITY OF APPELLANT. FURTHER, I FIND THAT TH E HON'BLE SUPREME COURT IN THE CASE OF LACHMANDAS MATHURADA S VS. CIT (SUPRA) HAD HELD THAT INTER EST ON ARREARS OF SALES TAX OR ON THE OUTSTANDING BALANCE OF SALES TAX IS NOT PENAL IN NATURE AND IT IS COMPENSATORY IN NATURE AND IS AN ALLOWABLE DEDUCTION IN COMPUTING THE PROFITS OF A BUSINESS. SIMILAR FINDING HAS B EEN MADE BY THE HON'BLE JURISDICTIONAL HIGH COURT IN THE CASE OF TRIVENI ENGINEERING WORKS LTD. VS. CIT (SUPRA). THEREFORE, FOLLOWING THE ABOVE JUDICIAL PRONOUNCEMENTS, I ALLOW GROUND NO.2 OF THE APPEAL. ITA NO.349/LKW/2018 PAGE 4 OF 4 6 . IN NUTSHELL, APPEAL OF THE ASSESSEE IS PARTLY ALLOW ED AND PARTLY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 20 / 11 / 201 8 . SD/ - [ T.S. KAPOOR ] ACCOUNTANT MEMBER DATED: 20 TH NOVEMBER , 201 8 JJ: 1911 COPY FORWARDED TO: 1 . APPELLANT 2 . RESPONDENT 3 . CIT(A) 4 . CIT 5 . DR BY ORDER ASSISTA NT REGISTRAR 1. DATE OF DICTATION 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER OTHER MEMBER 3. DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR. P.S./P.S. 4. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE DICTATING M EMBER FOR PRONOUNCEMENT 5. DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR. P.S./P.S 6. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK 7. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK 8. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT REGISTRA R FOR SIGNATURE ON THE ORDER 9. DATE OF DESPATCH OF THE ORDER