ACIT, CHENNAI V. M/s. Tamil Nadu Salt Corporation Ltd., CHENNAI

ITA 368/CHNY/2010

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 57981 (ITAT-CHENNAI)
• Duration Of Justice: 1 year(s) 10 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-02-2012
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 23-02-2012
• Assessment Year: 1997-1998
• Appeal Filed On: 26-03-2010
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: G BASKAR

Judgement Text

IN THE INCOME-TAX APPELLATE TRIBUNAL CHENNAI A BENCH, CHENNAI. BEFORE SHRI N.S. SAINI, ACCOUNTANT MEMBER & SHRI GEORGE MATHAN, JUDICIAL MEMBER I.T.A. NO. 368/MDS/2010 ASSESSMENT YEAR: 1997-98 THE ASSISTANT COMMISSIONER OF INCOME TAX, COMPANY CIRCLE III(1), CHENNAI 600 034. VS. M/S. TAMIL NADU SALT CORPORATION LTD., LLA BUILDING, NO. 735, ANNA SALAI, CHENNAI 2. [PAN: AAACT2482L] (APPELLANT) (RESPONDENT) REVENUE BY : SHRI SHAJI P. JACOB, ADDL. CIT ASSESSEE BY : SHRI G. BASKAR, ADVOCATE DATE OF HEARING : 23.02.2012 DATE OF PRONOUNCEMENT : 24.02.2012 ORDER PER N.S. SAINI, ACCOUNTANT MEMBER THIS IS AN APPEAL FILED BY THE REVENUE AGAINST THE ORDER OF THE LD. CIT(A) III, CHENNAI DATED 14.12.2010 PASSED IN ITA NO.304/07-08/A.III IN ASSESSMENT YEAR 1997-98. SHRI SHAJI P. JACOB, ADDL. CIT REPRESENTED ON BEHALF OF THE REVENUE AND SHRI G. BASKAR, ADVOCATE REPRESENTED ON BEHALF OF THE ASSESSEE. 2. GROUND NO. 1 AND 5 OF THE APPEAL ARE GENERAL IN NATURE AND REQUIRES NO ADJUDICATION BY US. 3. IN GROUND NO. 2 OF THE APPEAL, THE GRIEVANCE OF THE REVENUE IS THAT THE LD. CIT(A) ERRED IN DELETING THE DISALLOWANCE OF ` .68,78,642/- MADE BY THE ASSESSING OFFICER TOWARDS PRIOR PERIOD INTEREST. I.T.A. I.T.A. I.T.A. I.T.A. NO. NO. NO. NO.368 368368 368/ // /M/ M/M/ M/10 1010 10 2 4. WE HAVE HEARD THE RIVAL SUBMISSIONS, PERUSED TH E ORDERS OF LOWER AUTHORITIES AND MATERIALS AVAILABLE ON RECORD. THE UNDISPUTED FACTS IN THE INSTANT CASE ARE THAT THE ASSESSEE IS A GOVERNMENT CORPORATION AND OWNED BY THE STATE GOVERNMENT. IT TOOK LOAN FROM THE STAT E GOVERNMENT ON WHICH PENAL INTEREST WAS CHARGED BY THE STATE GOVERNMENT. THE ASSESSEE DID NOT PROVIDE THE LIABILITY FOR PENAL INTEREST IN ITS BOO KS OF ACCOUNT FROM 01.04.1989 TO 31.03.1996, WHICH AMOUNT TO ` .68,78,642/-. THE ASSESSEE CORPORATION FILED A PRAYER FOR WAIVER OF PENAL INTEREST BEFORE THE STATE GOVERNMENT. HOWEVER, THE APPROPRIATE AUTHORITY REJECTED THE CLA IM OF THE ASSESSEE ON 14.10.1996 AND THEREFORE, THE ASSESSEE DURING THE Y EAR PROVIDED THE SAID INTEREST IN ITS BOOKS OF ACCOUNT AND CLAIMED AS DED UCTION. 5. THE ASSESSING OFFICER DISALLOWED THE ABOVE CLAI M ON THE GROUND THAT THE RELEVANT PENAL INTEREST EXPENDITURES WERE RELAT ING TO PRIOR PERIODS. 6. ON APPEAL, THE LD. CIT(A) ALLOWED THE APPEAL OF THE ASSESSEE. 7. BEING AGGRIEVED, THE DEPARTMENT IS IN APPEAL BE FORE US. 8. THE LD. DR SUPPORTED THE ORDER OF THE ASSESSING OFFICER AND SUBMITTED THAT AS THE EXPENDITURE IN QUESTION RELATES TO PRIO R PERIOD, THE LD. CIT(A) WAS NOT JUSTIFIED IN ALLOWING THE SAME. 9. WE FIND THAT IT IS NOT IN DISPUTE THAT DEDUCTIO N FOR THE INTEREST IN QUESTION WAS NOT ALLOWED TO THE ASSESSEE IN ANY EAR LIER PERIOD. FURTHER, IT IS ALSO NOT IN DISPUTE THAT THE ASSESSEE MADE A CLAIM FOR THE WAIVER OF THE SAID PENAL INTEREST BEFORE THE APPROPRIATE AUTHORITY, WH ICH WAS REJECTED DURING I.T.A. I.T.A. I.T.A. I.T.A. NO. NO. NO. NO.368 368368 368/ // /M/ M/M/ M/10 1010 10 3 THE YEAR UNDER CONSIDERATION. THEREFORE, THE CLAIM OF THE ASSESSEE THAT THE EXPENDITURE IN QUESTION WAS CRYSTALLIZED DURING THE YEAR ONLY ON REJECTION OF THE ASSESSEES PRAYER FOR WAIVER OF THE SAME IS FOU ND TO BE BONAFIDE. IT IS A SETTLED POSITION OF LAW THAT UNDER MERCANTILE SYSTE M OF ACCOUNTING, AN EXPENDITURE IS ALLOWABLE AS DEDUCTION IN THE YEAR I N WHICH IT IS CRYSTALLIZED. AS WE FIND THAT THE RELEVANT INTEREST EXPENDITURE W AS CRYSTALLIZED DURING THE YEAR RELEVANT TO THE ASSESSMENT YEAR UNDER CONSIDER ATION, ON REJECTION OF ASSESSEES PRAYER BEFORE THE APPROPRIATE AUTHORITY, WE DO NOT FIND ANY GOOD REASON TO INTERFERE WITH THE ORDER OF THE LD. CIT(A ). IT IS CONFIRMED AND THE GROUNDS OF APPEAL OF THE REVENUE ARE DISMISSED. 10. GROUND NO. 3 OF THE APPEAL OF THE REVENUE IS D IRECTED AGAINST THE ORDER OF THE LD. CIT(A) IN DELETING THE DISALLOWANC E TOWARDS PROVISION FOR ARREAR OF SALARY, BONUS, EMPLOYEES WELFARE, PAY REV ISION ETC. 11. WE HAVE HEARD THE RIVAL SUBMISSIONS, PERUSED T HE ORDERS OF LOWER AUTHORITIES AND MATERIALS AVAILABLE ON RECORD. IN T HE INSTANT CASE, THE DEDUCTION CLAIMED FOR ` .1,58,176/- ON ACCOUNT OF PROVISION MADE FOR PAY REVISION ON THE BASIS OF CMDS INSTRUCTION DATED 29 .10.1996 WAS DISALLOWED BY THE ASSESSING OFFICER IN THE ABSENCE OF ANY GOVE RNMENT ORDER APPROVING PAY REVISION. 12. ON APPEAL, THE LD. CIT(A) DELETED THE ADDITION ON THE GROUND THAT THE COPY OF THE GOVERNMENT ORDER WHERE THE REVISION OF PAY SCALE HAD BEEN ORDERED AND WAGE NEGOTIATION AND SETTLEMENT WITH TH E EMPLOYEES WERE I.T.A. I.T.A. I.T.A. I.T.A. NO. NO. NO. NO.368 368368 368/ // /M/ M/M/ M/10 1010 10 4 PRODUCED BEFORE HIM. 13. WE FIND THAT BOTH THE LOWER AUTHORITIES HAVE N OT VERIFIED WHETHER THE PROVISIONS MADE DURING THE YEAR WAS IN ACCORDANCE W ITH THE PAY REVISION ACTUALLY MADE FOR THE SERVICES RENDERED DURING THE YEAR UNDER CONSIDERATION. IN OUR CONSIDERED OPINION, THE PROVISIONS FOR PAY R EVISION, WHICH RELATES TO THE SERVICES RENDERED DURING THE YEAR UNDER CONSIDE RATION IS ONLY ALLOWABLE AS DEDUCTION AND EXCESS PROVISION, IF ANY, MADE IS NOT ALLOWABLE. WE, THEREFORE, RESTORE THIS ISSUE TO THE FILE OF THE AS SESSING OFFICER FOR PROPER VERIFICATION IN THE LIGHT OF THE OBSERVATIONS MADE HEREINABOVE. THUS, THIS GROUND OF APPEAL OF THE REVENUE IS ALLOWED FOR STAT ISTICAL PURPOSE. 14. GROUND NO. 4 OF THE APPEAL OF THE REVENUE IS D IRECTED AGAINST THE ORDER OF THE LD. CIT(A) IN DELETING THE DISALLOWANC E OF PROVISION MADE BY THE ASSESSEE ON OF ` .1,08,632/- PAYABLE TO TNEB. 15. WE HAVE HEARD THE RIVAL SUBMISSIONS, PERUSED TH E ORDERS OF LOWER AUTHORITIES AND MATERIALS AVAILABLE ON RECORD. IN T HE INSTANT CASE IT IS NOT IN DISPUTE THAT THE ELECTRICITY EXPENDITURE OF ` .1,08,632/- RELATES TO THE PREVIOUS YEAR RELEVANT TO THE ASSESSMENT YEAR IN QUESTION. T HE ASSESSING OFFICER DISALLOWED THE CLAIM MERELY ON THE GROUND THAT THE BILL FOR SUCH ELECTRICITY EXPENDITURE WAS RECEIVED BY THE ASSESSEE ON 06.05.1 997, WHICH IS RELATING TO THE ASSESSMENT YEAR 1998-99. 16. IN OUR CONSIDERED OPINION, THE DISALLOWANCE WA S MADE BY THE ASSESSING OFFICER ON A WRONG FOOTING. AN EXPENDITUR E, WHICH RELATES TO THE I.T.A. I.T.A. I.T.A. I.T.A. NO. NO. NO. NO.368 368368 368/ // /M/ M/M/ M/10 1010 10 5 PERIOD UNDER ASSESSMENT AND FOR WHICH A PROVISION W AS MADE ON A REASONABLE BASIS AND NO MATERIAL WAS FOUND TO SHOW THAT THE PROVISION WAS EXCESSIVE COULD NOT BE LEGALLY DISALLOWED BY THE AS SESSING OFFICER. WE, THEREFORE, UPHOLD THE ORDER OF THE LD. CIT(A) AND D ISMISS THE GROUNDS OF APPEAL OF THE REVENUE. 17. NO OTHER POINT HAS BEEN URGED BY THE REVENUE E XCEPT THE ABOVE POINT. 18. IN THE RESULT, THE APPEAL OF THE REVENUE IS PA RTLY ALLOWED FOR STATISTICAL PURPOSE. ORDER PRONOUNCED IN THE OPEN COURT ON 24.02.2012. SD/ - SD/ - (GEORGE MATHAN) JUDICIAL MEMBER (N.S.SAINI) ACCOUNTANT MEMBER CHENNAI, DATED, THE 24.02.2012 VM/- TO: THE ASSESSEE//A.O./CIT(A)/CIT/D.R.