ASIAN PAINTS LTD, MUMBAI V. CIT LTU, MUMBAI

ITA 3773/MUM/2013

• Counselvise Citation: [2015] 120 COUNSELVISE.COM (IT) 9191 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 10 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-03-2015
• Appeal Filed By: Assessee
• Bench Allotted: K
• Next Hearing Date: 04-02-2015
• Assessment Year: 2007-2008
• Appeal Filed On: 13-05-2013
• Court: TRIBUNAL
• Assessee Lawyers: PASSED
• Keywords: Difference of opinion; Valuation report; Change of opinion
• Section: 43B; 143(3); 263

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL K BENCH, MUMBAI BEFORE SHRI VIJAY PAL RAO , JUDICIAL MEMBER AND SHRI D. KARUNAKARA RAO , ACCOUNTANT MEMBER ITA NO. 3773 /MUM/2013 ASSESSMENT YEAR: - 2007 - 08 ASIAN PAINTS LTD. 6A, SHANTI NAGAR, SANTACRUZ, (EAST), MUMBAI 400055. VS.` COMMISSIONER OF INCOME TAX LARGE TAXPAYER UNIT, LTU, 29 TH FLOOR, WORLD TRADE CENTRE, CUFFE PARADE, MUMBAI 400 005. APPELLANT RESPONDENT ORDER PER VIJAY PAL RAO, JM THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER DATED 22.03.2013 PASSED U/S 263 OF INCOME TAX ACT FOR A.Y. 2007 - 08. THE ASSESSEE HAS RAISED FOLLOWING GROUNDS IN THIS APPEAL: - THE LD. COMMISSIONER OF INCOME TAX, LTU, MUMBAI ERRED IN INVOKING THE PROCEEDINGS U/S 263 OF THE INCOME TAX ACT, 1961. THE APPELLANT SUBMITS, THE PROCEEDINGS INITIATED & ORDER PASSED BY COMMISSIONER OF INCOME TAX (LTU), MUMBAI U/S 263 IS UNWARRANTED & NEEDS TO BE QUASHED. THE LD. COMMISSIONER OF INCOME TAX, LTU, MUMBAI ERRED IN GIVING DIRECTION TO DISALLOW RS. 273.60 LACS U/S 43B BEING PROVISION MADE FOR LIABILITY ON ACCOUNT OF PENSION SCHEME. REVENUE BY SHRI K. SHIVARAM ASSESSEE BY SHRI. S. D. SRIVASTAVA DATE OF HEARING 10.02.2015 DATE OF PRONOUNCEMENT 25 .03.2015 ASIAN PAINTS LTD. 2 | P A G E 2. THE ASSESSMENT WAS COMPLETED U/S 143(3) ON 16.12.2010 WHEREBY, THE ASSESSING OFFICER ASSESSED THE TOTAL INCOME OF THE ASSESSEE AT RS. 490.59 CRORES. SUBSEQUENTLY, ON PERUSAL OF RECORDS, THE COMMISSIONER FOUND THAT THE ASS ESSEE HAS CHARGED A SUM OF RS. 273.60 LACS TO P&L ACCOUNT, BEING THE L IABILITY TOWARDS PENSION SCHEME W HEREAS THE TAX AUDIT REPORT DOES NOT INDICATE WHETHER THE SAME WAS ACTUALLY PAID OR NOT BEFORE DUE DATE OF FILING OF RETURN OF INCOME. ACCORDINGLY, THE C OMMISSIONER HAS ISSUED A SHOW - CAUSE NOTICE DATED 30.01.2013 U/S 263 ON THE ISSUE OF DISALLOWANCE U/S 43B OF THE INCOME TAX ACT. IN RESPONSE THE ASSESSEE FILED DETAILED REPLY AND CONTENDED THAT IN ORDER TO RETAIN THE SENIOR MANAGERIAL EMPLOYEES, THE ASSESSE E CREATED A PENSION SCHEME IN 1974 TITLED AS ASIAN PAINTS PENSION SCHEME. THE SCHEME IS UNFUNDED AND IS APPLICABLE ONLY TO THE MANAGEMENT EMPLOYEES MENTIONED IN THE SCHEME AND ANY AMENDMENTS THEREON. DURING THE YEAR UNDER CONSIDERATION, THE LIABILITY FO R THE SAID SCHEME AMOUNTING TO RS. 273.60 LACS WAS PROVIDED IN THE BOOKS OF ACCOUNTS BASED ON THE ADOPTION OF ACCOUNTING STANDARDS (AS 15) ISSUED BY THE INSTITUTE OF CHARTERED ACCOUNTANTS OF INDIA. THE SAID PROVISION FOR LIABILITY FOR PENSION SCHEME WAS BA SED ON THE ACTUARIAL VALUATION DONE BY AN INDEPENDENT ACTUARY. ACCORDINGLY, THE ASSESSEE CLAIMED THAT THE PROVISION FOR PENSION IS AN ALLOWABLE EXPENDITURE. THE COMMISSIONER HAS NOT ACCEPTED THE CONTENTION OF THE ASSESSEE ON THE GROUND THAT THE ASSESSEE H AS ONLY MADE A PROVISION AND HAS NOT ACTUALLY PAID THE AMOUNT WHICH HAS BEEN PROVIDED OF RS. 27 3.60. ACCORDINGLY, THE COMMISSIONER HELD THAT THE ORDER PASSED BY THE ASSESSING OFFICER U/S 143(3) IS ERRONEOUS TO THE EXTENT OF AMOUNT OF RS. 273.60 LACS WHICH HAS NOT BEEN DISALLOWED U/S 43B OF THE ACT, AND, THEREFORE, IT IS PREJUDICIAL TO THE INTEREST OF REVENUE. CONSEQUENTLY, THE COMMISSIONER SET ASIDE THE ORDER PASSED BY ASSESSING OFFICER WITH THE ASIAN PAINTS LTD. 3 | P A G E DIRECTION TO MODIFY THE ORDER BY DISALLOWING THE PROVISION OF RS. 273.60 LACS U/S 43B. 3. BEFORE US, THE LD. AUTHORIZED REPRESENTATIVE OF THE ASSESSEE HAS SUBMITTED THAT THE ASSESSEE PROVIDED RS. 273.60 LACS AS LIABILITY FOR THE PENSION SCHEME AS PER THE ACCOUNTING STANDARDS (AS 15) AND, THEREFORE, THE LIABILITY WAS ASCERTAINED ON THE BASIS OF ACTUARIAL VALUATION REPORT. HE HAS FURTHER SUBMITTED THAT THE ASSESSEE MADE THE NECESSARY DISCLOSURE AND FURNISHED ALL THE REQUISITE DETAILS BEFORE THE ASSESSING OFFICER INCLUDING THE NOTE TO RETURN OF INCOME AS ITEM NO. 12, SCHEDULE M OF AUDITED BALANCE SHEET AND PROFIT & LOSS ACCOUNT AND TAX AUDIT REPORT WHICH SHOWS THAT THE ASSESSEE HAS MADE ALL THESE PROVISIONS BASED ON THE ASCERTAINED LIABILITY AS PER THE ACTUARIAL VALUATION REPORT. THE ASSESSING OFFICER HAS ACCEPTED THE CLAIM OF THE ASSESSEE WHILE PASSING THE ASSESSMENT ORDER U/S 143(3). THEREFORE, THE REVISION ORDER IS BAD IN LAW AS BASED ON CHANGE OF OPINION. THE ASSESSING OFFICER AFTER DUE APPLICATION OF MIND ON ALL DETAILS AND AFTER CONSIDERING BOTH THE LAW AND FACTS HAS PASSED ASSESSMENT ORDER U/S 143(3) AND HAD TAKEN THE DECISION AND, THEREFORE, THE COMMISSIONER IS NOT PERMITTED TO TAKE A DIFFERENT VIEW MERELY BECAUSE HE DOES NOT AGREE WITH THE VIEW TAKEN BY THE ASSESSING OFFICER. IN SUPPORT OF HIS CONTENTION HE HAS RELIED UPON THE JUDGMENT OF HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS. RANBAXY LABORATORIES (2011) 334 ITR 341 (DEL) . HE HAS ALSO RELIED UPON THE JUDGMENT OF HON'BLE JURISDICTIONAL HIGH COURT IN THE CASE OF IDEA CELLULAR LTD VS. DY. CIT (2008) 301 ITR 407 (BOM.) AND SUBMITTED THAT THE HONBLE HIGH COURT HAS HELD THAT ONCE ALL THE MATERIAL WAS WITH ASSESSING OFFICER AND HE CHOSE NOT TO DEAL WITH A CONTENTION RAISED BY THE PETITIONER WHILE PASSING THE ASSESSMEN T ORDER, IT CANNOT BE SAID THAT HE HAS NOT ASIAN PAINTS LTD. 4 | P A G E APPLIED HIS MIND TO THE RELEVANT ISSUES. HE HAS ALSO RELIED UPON THE FOLLOWING DECISIONS: - (I) CIT VS. MAX INDIA LTD. (2007) 295 ITR 282 (SC) (II) MALABAR IND. CO. LTD. VS. CIT 243 ITR 83 (SC) (III) GRASIM INDUSTRIES LTD. VS. CIT (2010) 321 ITR 92 (BOM. ) (HC). 4. ON THE OTHER HAND, THE LD. DR HAS SUBMITTED THAT THERE IS NOTHING ON RECORD TO INDICATE THAT THE ASSESSING OFFICER HAS CONDUCTED ANY ENQUIRY ON THE ISSUE . THE ASSESSMENT ORDER IS COMPLETELY SILENT ON THE ISSUE OF L IABILITY OF PROVISION MADE BY THE ASSESSEE ON ACCOUNT OF PENSION SCHEME, THEREFORE, THE ASSESSMENT ORDER PASSED BY THE ASSESSING OFFICER IS ERRONEOUS FOR WANT OF APPLICATION OF MIND AND LACK OF ENQUIRY ON THE PART OF ASSESSING OFFICER. 5. WE HAVE HEARD TH E LD. AR AS WELL AS LD. DR AND CONSIDERED THE RELEVANT MATERIAL ON RECORD. ON CAREFUL PERUSAL OF THE ASSESSMENT ORDER PASSED U/S 143(3) ON 16.12.2010, WE FIND THAT THE ASSESSING OFFICER HAS NOT DISCUSSED ANYTHING ABOUT THE CLAIM OF RS. 273.60 LACS PROVIDED IN THE BOOKS OF ACCOUNTS AS LIABILITY TOWARDS PENSION SCHEME. WE ARE CONSCIOUS THAT IF THE ASSESSING OFFICER HAS RAISED A QUERY REGARDING A PARTICULAR ISSUE AND AFTER CONSIDERING THE REPLY AND CONTENTIONS OF THE ASSESSEE ALLOWED THE CLAIM WITHOUT ANY DISC USSION THE SAME WOULD NOT LEAD TO THE CONCLUSION THAT THE ASSESSING OFFICER HAS NOT APPLIED ITS MIND. HOWEVER, IN THE CASE IN HAND, THERE IS NOTHING ON RECORD TO SUGGEST OR INDICATE THAT THE ASSESSING OFFICER HAS RAISED ANY QUERY REGARDING THE ISSUE OF LIA BILITY OF CLAIM OF RS. 273.60 LACS BEING PROVISION MADE BY THE ASSESSEE IN THE BOOKS OF ACCOUNTS TOWARDS THE PENSION SCHEME LIABILITY. WHEN THE ASSESSING OFFICER HAS NOT ASIAN PAINTS LTD. 5 | P A G E RAISED ANY QUERY AND THE RECORD AND DETAILS ON THIS ISSUE WERE NOT FILED BY THE ASSESS EE IN RESPONSE TO THE QUERY OF THE ASSESSING OFFICER BUT THE SAME WERE FILED ALONG WITH THE RETURN OF INCOME OR BY THE ASSESSEE ON ITS OWN THEN IT CANNOT BE PRESUMED THAT THE ASSESSING OFFICER HAS EXAMINED THE RECORD AND DETAILS PERTAINING TO THE CLAIM OF RS. 273.60 LACS BEING THE PROVISION MADE IN THE BOOKS OF ACCOUNTS AND DEBITED TO THE P&L ACCOUNT DURING THE YEAR UNDER CONSIDERATION TOWARDS THE LIABILITY OF PENSION SHCEME. THE ASSESSMENT ORDER IS COMPLETELY SILENT ON THIS ISSUE AND IT DOES NOT EXHIBIT ANY THOUGHT PROCESS ON THE PART OF THE ASSESSING OFFICER ON THIS ISSUE. THEREFORE, WE ARE OF THE CONSIDERED OPINION THAT THERE IS A COMPLETE LACK OF ENQUIRY ON THE PART OF THE ASSESSING OFFICER SO FAR AS THE ISSUE OF PROVISION OF RS. 273.60 LACS TOWARDS THE PENSION SCHEME LIABILITY. THE LACK OF ENQUIRY AND NON APPLICATION OF MIND ITSELF RENDERS THE ASSESSMENT ORDER ERRONEOUS SO FAR AS PREJUDICIAL TO THE INTEREST OF REVENUE AS HELD BY THE HON'BLE SUPREME COURT IN THE CASE OF MAL ABAR IND. CO. LTD. VS. CIT (SUPRA) . THUS WE ARE OF THE VIEW THAT THE COMMISSIONER WAS JUSTIFIED IN INVOKING THE PROVISIONS OF SECTION 263 AS THERE WAS A LACK OF ENQUIRY AND NON APPLICATION OF MIND ON THE PART OF THE ASSESSING OFFICER WHILE FRAMING THE ASS ESSMENT U/S 143(3) DATED 16.12.2010. HOWEVER, WHEN THE ASSESSEE IN THE REVISION PROCEEDINGS HAS BROUGHT TO THE NOTICE OF COMMISSIONER THAT THE SAID CLAIM IS AN ALLOWABLE CLAIM BEING ASCERTAINED LIABILITY BASED ON ACTUARIAL VALUATION REPORT AND AS PER ACCOU NTING STANDARD 15 THEN THE COMMISSIONER WAS SUPPOSED TO EXAMINE THE CLAIM ON ITS OWN OR OUGHT TO HAVE DIRECTED THE ASSESSING OFFICER TO EXAMINE THE SAME AS THERE WAS NO ENQUIRY ON THIS ISSUE AT THE TIME OF FRAMING THE ORIGINAL ASSESSMENT U/S 143(3 ) . I NSTE AD OF CONDUCTING A PROPER ENQUIRY ON THE ISS UE OF ALLOWABILITY OF THE CLAIM T HE COMMISSIONER HAS APPLIED THE PROVISIONS OF SECTION 43B AND HELD THAT THE AMOUNT IS NOT ALLOWABLE AND THE SAME HAS TO BE ASIAN PAINTS LTD. 6 | P A G E DISALLOWED. THEREFORE, TO THE EXTENT OF FINDING OF COMMI SSIONER THE IMPUGNED ORDER SUFFER FROM SERIOUS ERROR AS THE FINDING IS NOT BASED ON THE PROPER EXAMINATION OF THE ALLOWABILITY OF THE CLAIM IN QUESTION. THE LD. AUTHORIZED REPRESENTATIVE OF THE ASSESSEE HAS RELIED UPON THE JUDGMENT OF HONBLE DELHI HIGH CO URT IN THE CASE OF CIT VS. RANBAXY LABORATORIES (SUPRA), WHEREIN THE HONBLE DELHI HIGH COURT WHILE DEALING WITH A SIMILAR ISSUE HAS OBSERVED IN PARA 7 TO 9 AS UNDER: - 7. IT IS STATED AT THE COST OF REPETITION THAT THE INTENTION OF THE LEGISLATURE BEHIND ENACTING SECTION 43B(B) OF THE ACT WAS TO DISALLOW THE STATUTORY LIABILITIES. THE COMMISSIONER OF INCOME - TAX (APPEALS), UNDER THESE CIRCUMSTANCES, WAS RIGHT IN HIS OPINION THAT THE LEGISLATURE NEVER INTENDED TO DISALLOW A CLAIM FOR AN ASCERTAINED LI ABILITY WHICH IS COMPUTED SCIENTIFICALLY IN RESPECT OF THE RETIRAL BENEFITS OF ITS EMPLOYEES AND WHICH IS NOT TO BE CONTRIBUTED TO A FUND. THE COMMISSIONER OF INCOME - TAX (APPEALS) HAS SUPPORTED ITS VIEW BY REFERRING TO CLAUSE (F) OF SECTION 43B OF THE ACT WHICH WAS INSERTED, WITH EFFECT FROM APRIL 1, 2002. THUS, BY ADDING THIS CLAUSE, THE LEGISLATURE MADE IT CLEAR THAT ANY SUCH PROVISION FOR LEAVE ENCASHMENT WOULD IPSO FACTO NOT BE ELIGIBLE FOR DEDUCTION UNLESS THE ACTUAL PAYMENT IS MADE. FOR DISQUALIFYING A PROVISION FOR LEAVE ENCASHMENT, A SPECIFIC CLAUSE HAD TO BE INSERTED BY THE LEGISLATURE AS THE LEGISLATURE WAS CONSCIOUS OF THE FACT THAT THIS CLAUSE WOULD NOT BE COVERED BY THE EXISTING CLAUSE (B) OF SECTION 43B OF THE ACT. 8. WE ARE IN AGREEMENT WITH T HE VIEW OF THE COMMISSIONER OF INCOME - TAX (APPEALS) THAT THE PENSION SCHEME OF THE ASSESSEE DOES NOT ENVISAGE ANY REGULAR CONTRIBUTION TO ANY FUND OR TRUST OR ANY OTHER ENTITY. THE PENSION SCHEME PROVIDES THAT PENSION WOULD BE PAID BY THE APPELLANT TO ITS EMPLOYEES ON THEIR ATTAINING THE RETIREMENT AGE OR RESIGNING AFTER HAVING RENDERED SERVICES FOR SPECIFIED YEARS. THUS, WHERE THE LIABILITY ON THIS ACCOUNT ACCRUES FROM YEAR TO YEAR, THE SAME IS PAYABLE ON RETIREMENT/RESIGNATION OF THE ELIGIBLE EMPLOYEES. I N VIEW THEREOF, THE RATIO OF THE JUDGMENT OF THE SUPREME COURT IN METAL BOX COMPANY OF INDIA LTD. V. THEIR WORKMEN [1969] 73 ITR 53 (SC) ANDBHARAT EARTH OVERS V. CIT [2000] 245 ITR 428 (SC) WOULD CLEARLY GET ATTRACTED. 6. T HE ASSESSEE HAS SUBMITTED THAT THE PENSION SCHEME IN QUESTION DOES NOT MAKE ANY REGULAR CONTRIBUTION TO ANY FUND OR TRUST AND, THEREFORE, THE LIABILITY ON THIS ACCOUNT WOULD NOT FALL UNDER THE PROVISIONS OF SECTION 43B. SINCE THIS ASPECT HAS NOT BEEN EXAMINED BY THE ASSESSING OFFICER, THEREFORE, IN THE FACTS AND CIRCUMSTANCES OF T HE CASE AND IN THE INTEREST OF JUSTICE, WE ASIAN PAINTS LTD. 7 | P A G E MODIFY THE IMPUGNED ORDER OF THE COMMISSIONER AND SET ASIDE THIS ISSUE TO THE RECORD OF ASSESSING OFFICER FOR PROPER VERIFICATION AND EXAMINATION OF CLAIM OF THE ASSESSEE AND THEN DECIDED THE SAME AS PER LAW BY CO NSIDERING THE DECISIONS RELIED UPON BY THE ASSESSEE. 7. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUCNED IN THE OPEN COURT ON THIS 25 TH DAY OF MARCH 2015 SD/ - SD/ - ( D. KARUNAKARA RAO ) (VIJAY PAL RAO) ( ACCOUNTANT MEMBER ) (JUDICIAL MEMBER ) MUMBAI DATED 25 .03.2015 SKS SR. P.S, COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CONCERNED CIT(A) 4. THE CONCERNED CIT 5. THE DR, K BENCH, ITAT, MUMBAI BY ORDER ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCHES, MUMBAI