National Cooperative Consumers Federation of India Ltd., New Delhi V. ACIT, New Delhi

ITA 3626/DEL/2010

• Counselvise Citation: [2012] 119 COUNSELVISE.COM (IT) 7830 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 11 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-07-2012
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: E
• Next Hearing Date: 13-06-2012
• Assessment Year: 1998-1999
• Appeal Filed On: 29-07-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: R S NEGI
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH : E NEW DELHI DELHI BENCH : E NEW DELHI DELHI BENCH : E NEW DELHI DELHI BENCH : E NEW DELHI BEFORE SHRI I.C. SUDHIR, JUDICIAL MEMBER AND SHRI K.G. BANSAL, ACCOUNTANT MEMBER I.T.A NO. 3626/DEL/10 ASSTT. YEAR 1998-99 NATIONAL COOPERATIVE CONSUMERS FEDERATION OF INDIA LTD., DEEPALI, 5 TH FLOOR, 92, NEHRU PLACE, NEW DELHI. AAAAN0109N VS. ACIT, RANGE-23, C.R. BUILDING, I.P. ESTATE, NEW DELHI 110 002. (APPELLANT) (RESPONDENT) APPELLANT BY: SHRI K. SAMPATH, ADVOCATE RESPONDENT BY: SHRI R.S. NEGI, SR. DR DATE OF HEARING : 13-06-2012 DATE OF PRONOUNCEMENT : 04-07-2012 ORDER PER K.G. BANSAL, AM: THE ASSESSEE HAS RAISED THREE GROUNDS IN THIS APPE AL, THE SUM AND SUBSTANCE WHICH IS THAT THE LD. CIT(A) ERRED IN NOT ALLOWING THE DEDUCTION OF ` 28.48 LACS, BEING THE INTEREST PAID TO THE BAN K FOR EARLIER YEARS ON CRYSTALLIZATION OF LIABILITY. ITA NO. 3626/DEL/10 2 2. THE BRIEF FACTS ARE THAT ASSESSEE FILED NIL RETU RN ON 30.10.1998. ORIGINAL ASSESSMENT U/S 143(3) WAS COMPLETED ON 1.3 .2001 AT TOTAL INCOME OF ` 2,38,97,414/-. IN THIS ASSESSMENT, AN A DDITION OF ` 39,72,000/- WAS MADE, WHICH WAS DELETED BY THE LD. CIT(A). THE MATTER WAS AGITATED BEFORE THE TRIBUNAL AND THE APPELLATE ORDER WAS PAS SED ON 9.6.2006. IN THIS ORDER, THE MATTER REGARDING ADDITION OF ` 39,7 2,000/- WAS RESTORED TO THE FILE OF THE AO FOR EXAMINING AS TO WHETHER THIS LIABILITY OF EARLIER YEARS HAS CRYSTALLIZED IN THIS YEAR OR NOT. THE RELEVANT FINDING OF THE TRIBUNAL IS REPRODUCED BELOW FOR READY REFERENCE :- WE HAVE EXAMINED THE RIVAL SUBMISSIONS. WE ARE FOLLOWING THE ORDER OF THE ITAT, DELHI BENCH B, N EW DELHI IN ITA NO. 1564/DEL/2001 FOR ASSESSMENT YEAR 1996-97 D ATED 30.11.2005. THE RELEVANT PART OF WHICH IS REPRODUCE D AS GIVEN BELOW : THIS ORDER HAS BEEN FOLLOWED BY THE TRIBUNAL FOR ASSESSMENT YEAR 1991-92. SINCE THE FACTS ARE IDENTI CAL WE RESPECTFULLY FOLLOWING THE ORDER DATED 27.11.2002 ( SUPRA) SET ASIDE THIS ISSUE AND RESTORE BACK THE SAME TO ASSES SING OFFICER TO FIND OUT WHETHER ANY AMOUNT PERTAINING T O EARLIER YEARS HAS CRYSTALLIZED IN THIS YEAR. HE WILL TAKE T HE VIEW IN THE MATTER AFTER NECESSARY VERIFICATION. WE FIND THAT THIS ORDER HAS BEEN FOLLOWED BY THE TRIBUNAL FOR THE ASSESSMENT YEAR 1991-92. SINCE THE FACTS ARE IDENTICAL, WE RESPECTFULLY FOLLOWING THE ORDER DATE D 27.11.2002 (SUPRA) SET ASIDE THE ISSUE AND RESTORE BACK THE SA ME TO THE ASSESSING OFFICER TO FIND OUT WHETHER ANY AMOUNT PE RTAINING TO EARLIER YEARS HAS CRYSTALLIZED IN THIS YEAR. HE WILL TAKE A VIEW IN THIS MATTER AFTER NECESSARY VERIFICATION. 2.1 THE AO FRAMED FRESH ASSESSMENT U/S 254 READ WIT H SECTION 143(3) ON 28.12.2007. IN THIS ASSESSMENT AN ADDITION OF ` 28.48 LACS WAS MADE IN RESPECT OF INTEREST LIABILITY OF EARLIER YEARS WITH THE BANK, CLAIMED BY THE ASSESSEE IN THIS YEAR. ESSENTIALLY, THE FINDING OF THE AO IS THAT NO EVIDENCE ITA NO. 3626/DEL/10 3 HAS BEEN PRODUCED TO SHOW THAT THE ADDITIONAL LIABI LITY OF INTEREST AROSE IN THIS YEAR. FOR THE SAKE OF READY REFERENCE, HIS FIN DINGS ARE REPRODUCED BELOW :- THE ASSESSEE HAS NOT FILED ANY BANK STATEMENT REGARDING THE AMOUNT OF ` 28.48 LAKHS AS THESE ARE THE EXPENSES AS DIFFERENTIAL INTEREST TO BANK. THE ASSE SSEE HAS FILED COPY OF THE MINUTES OF THE CABINET SECRETARIA T DATED 24/12/1999, WHICH DOES NOT PERTAIN TO AY 1998-99 BU T IT PERTAINS TO LATER YEAR. HENCE, THE ASSESSEE CANNOT BE ALLOWED THE AMOUNT OF ` 28.48 LAKHS IN AY 1998-99. IT IS FU RTHER TO BE MENTIONED THAT THE ASSESSEE HAS FILED ONE LETTER FR OM UCO BANK REGARDING NIL MARGIN STANDING ON BEHALF OF THE ASSESSEE. AGAIN THIS LETTER DATED 16/02/2000. HENCE, ON THE B ASIS OF THESE LETTERS FROM BANK AND CABINET SECRETARIAT, WH ICH DO NOT PERTAIN TO AY 1998-99 THE ASSESSEE CANNOT BE ALLOWE D THE EXPENSES WORTH ` 28.48 LAKHS. IT IS FURTHER TO BE M ENTIONED THAT EVEN THE LETTER OF THE BANK IS NOT VERY CLEAR REGARDING THE FACT WHETHER THE ASSESSEE HAS PAID ` 28.48 LAKHS TO THE BANK. HENCE, THE SAME IS DISALLOWED AND ADDED BACK IN THE INCOME OF THE ASSESSEE. 2.2 BEFORE THE LD. CIT(A) XXIII, NEW DELHI, IT WAS SUBMITTED THAT THE BOOKS OF ACCOUNT OF THE ASSESSEE HAVE BEEN AUDITED AND AUDIT REPORT HAS ALSO BEEN PREPARED. THESE AUDITED ACCOUNTS SHOW THA T THE LIABILITY CRYSTALLIZED IN THIS YEAR AND, THEREFORE, IT HAS BE EN DEBITED TO THE ACCOUNTS OF THIS YEAR. HOWEVER, THE LD. CIT(A) DID NOT AGREE WITH THE ASSESSEE AND RECORDED A FINDING THAT THE ASSESSEE FAILED IN PROV ING THAT THE INTEREST EXPENDITURE OF EARLIER YEARS CRYSTALLIZED IN THIS Y EAR. FOR THE SAKE OF READY REFERENCE PARAGRAPH NO. 6 & 7 ARE REPRODUCED BELOW :- 6. ALONG WITH THE ABOVE, THE ACCOUNTS WERE GIVEN W HICH UNFORTUNATELY DID NOT MEET THE REQUIREMENT THAT WHE THER THE EXPENSES OF EARLIER YEARS HAD CRYSTALISED DURING T HE YEAR. ON THE SAME DATE, VOUCHER NO. 885 WAS ALSO GIVEN FROM THE BOOKS OF THE ASSESSEE, VIDE ANNEXURE-A1, A1 & A3. O N NONE OF THE SAME, IT COULD BE PROVED WITH ANY DEGREE OF CER TAINTY THAT ITA NO. 3626/DEL/10 4 THE SAME PERTAINED TO ` 28.48 LAKHS. WHILE ON THE I SSUE, IT IS MENTIONED THAT INSPITE OF GIVING OPPORTUNITY FOR MO RE THAN A MONTH AND A HALF, NO CORRESPONDENCE FROM UCO BANK W AS PROVIDED. NOR IS THERE ANY CRYSTAL CLEAR EVIDENCE T HAT THE MANAGEMENT OF THE ASSESSEE HAD ACCEPTED THE SETTLEM ENT DURING THE YEAR. 7. IN VIEW OF THE DISCUSSION ABOVE, I AM CONSTRAINED T O OBSERVE THAT THE ASSESSEE HAD FAILED DISMALLY IN PROVING TH AT THE EXPENSES OF EARLIER YEARS HAD CRYSTALISED DURING TH E YEAR, WHICH WOULD MAKE THE ASSESSEE ELIGIBLE FOR ALLOWANC E. IN SUCH CIRCUMSTANCES, THE ADDITION OF ` 28.48 LACS IS UPHE LD . 2.3 AGGRIEVED BY THIS ORDER, THE ASSESSEE HAS FILED APPEAL BEFORE US. 3. LD. COUNSEL FOR THE ASSESSEE FURNISHED A BRIEF H ISTORY THAT THE CASE HAS NOW COME UP BEFORE THE TRIBUNAL FOR THE SECOND TIME. OUR ATTENTION HAS BEEN DRAWN TOWARDS THE FINDING OF THE ITAT WHIC H HAS BEEN REPRODUCED EARLIER BY US. IT IS SUBMITTED THAT THE LIABILITY AROSE ON ACCOUNT OF DIFFERENCE IN THE INTEREST CHARGED BY THE BANK A ND PROVIDED BY THE ASSESSEE IN THE BOOKS OF EARLIER YEARS. THE ASSESSE E HAD BEEN UNDER THE IMPRESSION THAT IT IS LIABLE TO PAY SIMPLE INTEREST WHILE THE BANK CHARGED THE COMPOUND INTEREST. THE ASSESSEE REQUESTED THE B ANK TO WAIVE THE DIFFERENTIAL AMOUNT. IT WAS NOT DONE SO. THIS AMOUN T HAS BEEN DEBITED BY THE BANK IN THE ACCOUNT ON 31.3.1998 AS WILL BE SE EN FROM THE COPY OF THE ACCOUNT WITH UCO BANK, PLACED ON PAGE NOS. 34 & 35 OF THE PAPER BOOK. IT IS SEEN THAT THE BANK MADE A DEBIT OF ` 2,48,60,371 /- ON 31.3.1998. IT IS FURTHER SUBMITTED THAT SCHEDULE 4 OF UNSECURED LOA NS SHOWS INTEREST ACCRUED AND DUE AT ` 1,60,81,666/- WHICH INCLUDES T HE AFORESAID LIABILITY ARISEN ON ACCOUNT OF DIFFERENT METHODS OF CHARGING INTEREST. THE ISSUE HAS BEEN CLARIFIED IN NOTE ON ACCOUNTS NO.9, WHICH SHOW S THAT PRIOR PERIOD ITA NO. 3626/DEL/10 5 EXPENSES OF ` 39.72 LACS HAVE BEEN ACCOUNTED FOR UN DER RESPECTIVE HEADS IN THIS YEAR. THIS AMOUNT INCLUDES THE AFORESAID LI ABILITY OF ` 28.48 LACS. ON THESE FACTS IT HAS BEEN ARGUED THAT THE DEBIT BY TH E BANK IN THE ACCOUNT OF THE ASSESSEE SHOWS THAT THE LIABILITY AROSE IN THIS YEAR. THE LIABILITY IS REVENUE IN NATURE AND , THEREFORE, IT IS RIGHTLY AL LOWABLE IN COMPUTING THE INCOME OF THE ASSESSEE FOR THIS YEAR. 3.1 IN REPLY, THE LD. SR. DR SUBMITS THAT THE ONLY POINT TO BE SEEN IN THIS CASE IS WHETHER THE LIABILITY CRYSTALLIZED IN THIS YEAR OR NOT. THIS ASSESSMENT IS BEING FRAMED AS PER SPECIFIC DIRECTI ON OF THE TRIBUNAL TO ASCERTAIN AS TO WHETHER ANY AMOUNT OF INTEREST LIAB ILITY PERTAINING TO EARLIER YEARS HAS CRYSTALLIZED IN THIS YEAR. THE FA CT OF THE MATTER IS THAT NO EVIDENCE OF ASCERTAINMENT HAS BEEN PLACED ON RECORD AND NO EVIDENCE REGARDING SETTLEMENT OF DISPUTE HAS BEEN PLACED ON RECORD. THEREFORE, THE ASSESSEE HAS NOT FILED ANY EVIDENCE TO MEET THE DIR ECTION OF THE TRIBUNAL FURNISHED EARLIER. ACCORDINGLY, IT IS ARGUED THAT T HE ASSESSEE IS NOT ENTITLED TO DEDUCT THIS AMOUNT IN COMPUTING THE INCOME. 3.2 IN THE REJOINDER REPLY, LD. COUNSEL ASSERT ED THAT THE LIABILITY HAS CRYSTALLIZED IN THIS YEAR FOR THE SIMPLE REASON THA T BANK HAS DEBITED THIS AMOUNT IN THE ACCOUNT OF THE ASSESSEE 4. WE HAVE CONSIDERED THE FACTS OF THE CASE AND SUB MISSIONS MADE BEFORE US. THE FACTS ARE THAT THE DEBIT IN THE BANK ACCOUNT OF THE ASSESSEE ITA NO. 3626/DEL/10 6 WAS MADE AT ` 2,48,60,371/- ON 31.3.98. THE AMOUNT IS INTERALIA STATED TO INCLUDE THE LIABILITY ON ACCOUNT OF CHARGING COMPOU ND INTEREST IN RESPECT OF BORROWINGS MADE IN EARLIER YEARS. HOWEVER, THERE IS NO BREAK UP OF THE AMOUNT TO RECONCILE THE AFORESAID ASSERTION. HOWEVE R, PAGE 23, OF THE PAPER BOOK GIVES THE BREAK UP AND THE RECONCILIATIO N. 4.1 AT THIS STATE, WE MAY CONSIDER THE CASES CITED BY THE LD. COUNSEL. IN THE CASE OF LD. CIT VS. SHRIRAM PISTONS & RINGS LT D., DECIDED BY HONBLE DELHI HIGH COURT ON 5.5.2008 IN ITR 133 / 1991, A C OPY OF WHICH HAS BEEN PLACED ON RECORD, A REFERENCE HAS BEEN MADE TO THE DECISION OF BOMBAY HIGH COURT IN THE CASE OF CIT VS. NAGRI MILLS CO. L TD. (1958) 33 ITR 681, IN WHICH IT HAS BEEN MENTIONED THAT THERE IS NO DOUBT THAT THE ASSESSEE HAD INCURRED THE EXPENDITURE. THE ONLY DISPUTE IS REGAR DING THE DATE ON WHICH THE LIABILITY HAS CRYSTALLIZED. IT APPEARS THAT THE RE IS NO CHANGE IN THE RATE OF TAX FOR TWO YEARS. THEREFORE, THE QUESTION IS ON LY IN RESPECT OF YEAR OF DEDUCTION AND IT IS A PITY THAT ALL OF US HAVE TO E XPEND SO MUCH TIME AND ENERGY ONLY TO DETERMINE THE YEAR OF DEDUCTION. THE QUESTION BEFORE THE HONBLE DELHI HIGH COURT WAS ALSO REGARDING THE CRY STALLIZATION OF LIABILITY I.E. AS TO WHETHER IT ACCRUED ON 31.3.1981 OR 30.6. 1981. ON FACTS, THE HONBLE COURT MENTIONED THAT IN SO FAR AS DEALERS O F THE ASSESSEE ARE CONCERNED, THEY WOULD NOT HAVE ACQUIRED THE RIGHT T O GET ADDITIONAL INCENTIVE IN THE SENSE THAT ASSESSEE WOULD NOT HAVE KNOWN TILL 30.6.91 HOW MUCH INCENTIVE THE DEALERS HAD EARNED. IN SO FA R AS THE DEALERS ARE CONCERNED, THEIR ENTITLEMENT WOULD BE KNOWN ONLY WH EN THE SALES WERE ITA NO. 3626/DEL/10 7 ACTUALLY ASCERTAINED AND DETERMINED AND THAT WAS PO SSIBLE ONLY ON 30.6.1981 AND NOT ON A DATE PRIOR TO THAT. IN OTHER WORDS LOOKING TO THE AGREEMENT BETWEEN THE ASSESSEE AND THE DEALERS, IT WAS HELD THAT THE LIABILITY ACCRUED ON 30.6.1991. 4.2 IN THE CASE OF CIT VS. VISHNU INDUSTRIAL GASES PVT. LTD., DECIDED BY HONBLE DELHI HIGH COURT ON 6.5.2008 IN ITR 229/198 8, AGAIN A REFERENCE HAS BEEN MADE TO THE OBSERVATIONS OF BOMBAY HIGH CO URT IN THE CASE OF CIT VS. NAGRI MILLS CO. LTD. IN CONCLUDING PARAGRAP H IT HAS BEEN MENTIONED THAT THE SITUATION DOES NOT SEEM TO HAVE CHANGED FO R THE LAST 50 YEARS AND THE REVENUE CONTINUES TO RAISE THE QUESTION WHE THER THE TAX IS LEVIABLE IN A PARTICULAR YEAR OR IN SOME OTHER YEAR . ON THIS BASIS ITSELF, THE APPEAL OF THE REVENUE WAS RETURNED AS UNANSWERED. 4.3 THE QUESTION IN THE CASE OF CIT VS. DINESH KUMA R GOEL, (2011) 331 ITR 10 (DELHI) THE QUESTION WAS TOTALLY DIFFERENT R EGARDING THE AMOUNT RECEIVED AND WHEN IT ACCRUES TO THE ASSESSEE AS INC OME. IT HAS BEEN HELD THAT IT ACCRUES AS INCOME WHEN CORRESPONDING SERVIC E HAS BEEN RENDERED AND TILL THAT TIME THE MONEY REMAINS ONLY AN ADVANC E. 4.4 HAVING CONSIDERED THE FACTS MENTIONED ABOVE, I T IS SEEN FROM PAGE 23 OF THE PAPER BOOK THAT INTEREST DEBITED BY THE A SSESSEE IN ITS ACCOUNTS AND INTEREST DEBITED BY THE BANK IN ITS ACCOUNT STA RTED VARYING FROM THE QUARTER ENDING 30.6.95. THE BANK HAD DEBITED INTERE ST OF ` 1,89,27,986/- ITA NO. 3626/DEL/10 8 IN THE ACCOUNT FOR THE FINANCIAL YEARS 1995-96 AND 1996-97. HOWEVER, THE ASSESSEE DEBITED AN AMOUNT OF ` 1,60,81,666/- ONLY IN THE BOOKS, RESULTING IN THE DIFFERENCE OF ` 28,46,320/-, WHICH HAS BEEN CLAIMED IN THIS YEAR. THE DEBIT BALANCE AS ON 31.3.98 OF THE AMOUNT OF ` 2,48 ,60,371/- DOES NOT IN ANY MANNER EXPLAIN THE AFORESAID DIFFERENCE. HOWEVE R, THE FACT REMAIN THAT THERE WAS SOME DISPUTE OR AT LEAST MISUNDERSTA NDING IN THE MIND OF THE ASSESSEE ABOUT METHOD OF ACCOUNTING THE INTERE ST I.E. WHETHER IT SHOULD BE SIMPLE INTEREST OR COMPOUND INTEREST. THE DIFFERENCE FOR FINANCIAL YEARS 1995-96 AND 1996-97 HAS BEEN ACCOUN TED FOR IN THIS YEAR. IT APPEARS THAT THE AFORESAID AMOUNT OF ` 2,48,60,3 71/- MAY INCLUDE THIS DIFFERENTIAL AMOUNT ALSO . EVEN IF IT IS NOT SO, TH E ASSESSEE AFTER SEEKING CLARIFICATION FROM THE BANK, HAS DEBITED THIS DIFFE RENTIAL AMOUNT IN THIS YEAR. THEREFORE, IT CAN BE SAID THAT AS PER UNDERST ANDING OF THE ASSESSEE, THE LIABILITY CRYSTALLIZED IN THIS YEAR. THE RATE O F TAX FOR ALL THESE YEARS REMAINS THE SAME. THEREFORE, FOLLOWING THE DECISION IN THE CASE OF CIT VS. SHRIRAM PISTONS & RINGS LTD AND VS. VISHNU INDUSTR IAL GASES PVT. LTD., IT IS HELD THE ASSESSEE IS ENTITLED TO DEDUCT THIS AMOUNT IN COMPUTING THE INCOME. 5. IN THE RESULT, THE APPEAL IS ALLOWED. SD/- SD/- [I.C. SUDHIR] [K.G. BANSAL] JUDICIAL MEMBER ACCOUNTANT MEMBER VEENA COPY FORWARDED TO: - 1. APPELLANT ITA NO. 3626/DEL/10 9 2. RESPONDENT 3. CIT 4. CIT (A) 5. DR, ITAT TRUE COPY BY ORDER, DEPUTY REGISTRAR, ITAT