ITO, Wd 4, Ratnagiri, V. Omega Wine Mart,

ITA 397/PUN/2009

• Counselvise Citation: [2010] 135 COUNSELVISE.COM (IT) 3333 (ITAT-PUNE)
• Duration Of Justice: 1 year(s) 4 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-08-2010
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2005-2006
• Appeal Filed On: 01-04-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MANJU AJWANI
• Section: 43B

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH, B PUNE BEFORE SHRI I.C. SUDHIR, JM AND SHRI R.C. SHARMA, AM I.T.A. NO. 397/PN/2009: 2005-06 I.T.O. WARD 4, RATNAGIRI APPELLANT VS. OMEGA WINE MART MAIN ROAD, BAZARPETH, CHIPLUN TAL. CHIPLUN, DIST. RATNAGIRI PAN AAAFO2583L RESPONDENT APPELLANT BY : SMT. MANJU AJWANI RESPONDENT BY: NONE ORDER PER I.C. SUDHIR, JM THE REVENUE HAS QUESTIONED THE FIRST APPELLATE ORD ER ON THE GROUND THAT THE LEARNED CIT(A) HAS ERRED IN ALL OWING SALES- TAX LIABILITY OF RS. 8,00,000/- CLAIMED BY THE ASSE SSEE, IGNORING THE CONDITIONS LAID DOWN U/S 43B OF THE AC T. 2. IN SUPPORT OF THE CLAIM, THE LEARNED DR SUBMITTE D THAT WHILE ALLOWING SALES-TAX LIABILITY, THE LEARNED CIT (A) HAS FAILED TO APPRECIATE THAT SUCH PAYMENT IS TO BE ALLOWED ON LY ON PAYMENT BASIS. 3. ON HAVING GONE THROUGH THE ORDERS OF THE LOWER AUTHORITIES, WE FIND THAT THE A.O REMAINED OF THE V IEW THAT AS ITA NO. 397/PN/2009 OMEGA WINE MART A.Y. 2005-06 2 PER EXPLANATION 2 TO SECTION 43B DEDUCTION U/S 43B IS ALLOWED ONLY IN RESPECT OF THE SUM PAYABLE FOR WHICH LIABIL ITY WAS INCURRED IN THE PREVIOUS YEAR EVEN THOUGH SUCH SUM MIGHT NOT HAVE BEEN PAYABLE WITHIN THE YEAR. THE LEARNED CIT (A) ON THE OTHER HAND, REMAINED OF THE VIEW THAT THE RELEVANT DATE IS THAT ON WHICH THE LIABILITY TO PAY CRYSTALLIZED. IN THE CASE OF THE ASSESSEE, THE YEAR FOR WHICH THE TAX WAS PAID WAS 2 000-01. THE ADVANCE TAX PAYMENTS WERE MADE IN F.YS. 2001-02 TO 2003-04. THE ASSESSEE CLAIMED THAT THE LIABILITY T O ADDITIONAL TAX AROSE AFTER THE ASSESSMENT ORDER IN SALES-TAX W AS ISSUED IN FINANCIAL YEAR 2004-05 AND THE AMOUNTS OF ADVANCE T OWARDS SALES-TAX APPROPRIATED BY THE GOVERNMENT THAT THE P ROVISIONS OF SECTION 43B APPLIED WHEN THE LIABILITY CRYSTALLI ZED DURING THE PREVIOUS YEAR. THE LEARNED CIT(A) TAKEN STRENG TH TO SUPPORT HIS VIEW FROM THE DECISIONS IN THE CASE OF CIT VS. JAMNADASS RAM KRISHAN (2001) 250 ITR 155 (DEL) AND CIT VS. NEW GUJARAT COTTON MILLS LTD. (1998) 230 ITR 595 (C AL) HOLDING THAT THE LIABILITY TO TAX COULD NOT BE ANTI CIPATED IN EARLIER YEAR ALTHOUGH IT PERTAINED TO THAT YEAR. F OR A READY REFERENCE PARAS 7 AND 8 OF THE FIRST APPELLATE ORDE R ARE BEING REPRODUCED HEREUNDER. 7. I AGREE WITH THE CONTENTION OF THE APPELLANT. THE MATTER HAS BEEN INTERPRETED IN THE APPELLANT'S FAVOUR IN A NUMBER OF DECISIONS WHERE IT HAS BEEN HELD THAT THE RELEVANT DATE IS THAT ON WHICH THE LIABILITY TO PAY CRYSTALLIZED. IN JAMNADAS RAMKRISHNA 250 ITR BEFORE THE DELHI HIGH COURT, LIABILITY TO SALES TAX WAS NOT ACCEPTED BY THE ITA NO. 397/PN/2009 OMEGA WINE MART A.Y. 2005-06 3 ASSESSEE FOR THE YEAR 73-74 DUE TO CERTAIN JUDICIAL DECISIONS IN ITS FAVOUR. IN 1978, HOWEVER, THE SALE S TAX DEPARTMENT RAISED A DEMAND WHICH WAS PAID BY THE ASSESSEE. THE COURT HELD THAT THE AMOUNT PAID WAS ALLOWABLE U/S.43B SINCE THE LIABILITY AROSE ONLY IN 1978 WHEN THE DEMAND WAS RAISED ON THE ASSESSEE AND AMOUNT WAS PAID. IN NEW GUJRAT COTTON MILLS 230 ITR, THE CALCUTTA HIGH COURT HELD IN SIMILAR CIRCUMSTANCES THAT THE LIABILITY TO TAX COULD NOT BE ANTICIPATED IN THE EARLIER YEAR ALTHOUGH IT PERTAINED TO THAT YEAR. IN THIS CASE, ASSESSMENT WAS COMPLETED BY THE SALES TAX DEPARTMENT AND ADDITIONAL LIABILITY RAISED FOR EARLIER PERIOD 65-66 TO 75-76. THE CALCUTTA HIGH COURT ALLOWED THE PLEA ON THE GROUND THAT THE LIABILITY HAD ARISEN ON THE COMPLETION OF THE ASSESSMENT DURING THE PREVIOUS YEAR. IN THE APPELLANT'S CASE ALSO, THERE IS NO EVIDENCE THAT TH E LIABILITY HAD ARISEN PRIOR TO F.Y.2004-05 WHEN THE ASSESSMENT WAS COMPLETED. IT IS DIFFERENT MATTER THAT THE APPELLANT HAD ANTICIPATED SOME ADDITIONAL LIABILITY AND MADE ADVANCE PAYMENT. THE APPELLANT HOWEVER, HAD NOT DEBITED THE SALES TAX ACCOUNT WITH THE PAYMENT AND CLAIMED DEDUCTION U/S 43B FOR THE SAME. THE CLAIM HAS BEEN MADE IN THE CURRENT ASSESSMENT YEAR WHEN THE DEMAND HAS BEEN RAISED ON COMPLETION OF ASSESSMENT. 8. THE AO HAS MADE THE ADDITION PRIMARILY RELYING ON EXPLANATION 2 TO SEC.43B. EXPLANATION 2 HAS BEEN INSERTED TO TAKE CARE OF SUCH SITUATION WHERE ALTHOUGH THE LIABILITY AROSE TOWARDS THE END OF THE FINANCIAL YEAR, THE PAYMENT OF TAX OR OTHER SUM WAS NOT DUE TILL A DATE IN THE SUBSEQUENT FINANCIAL YEAR. IN SUCH CASE, THE SITUATION WAS THAT THE LIABILITY AROSE IN ONE YEAR AND THE PAYMENT IS MADE IN ANOTHER YEAR. THE EXPLANATION IN FACT SUPPORTS THE CASE OF THE APPELLANT IN AS MUCH AS IN THE APPELLANT'S CASE, THE LIABILITY AROSE ONLY DURING THE PREVIOUS YEAR. THE ADDITION IS THEREFORE DELETED AND THE APPEAL IS ALLOWED. 4. THE FIRST APPELLATE ORDER ON THE ISSUE IS COMPREHENSIVE AND REASONED ONE. WE ARE THUS NOT ITA NO. 397/PN/2009 OMEGA WINE MART A.Y. 2005-06 4 INCLINED TO INTERFERE THEREWITH. THE SAME IS UPHELD . THE GROUND IS ACCORDINGLY REJECTED. 5. IN THE RESULT, THE APPEAL IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 31 ST AUGUST 2010. SD/- SD/- (R.C. SHARMA) (I.C. SUDHIR) ACCOUNTANT MEMBER JUDICIAL MEMBER PUNE,DATED THE 30 TH AUGUST 2010 ANKAM COPY FORWARDED TO: (1) ASSESSEE (2) DEPARTMENT (3) CIT(A) KOLHAPUR (4) CIT KOLHAPUR (4) THE D.R. B BENCH, PUNE TRUE COPY BY ORDER, ASSISTANT REGISTRAR INCOME-TAX APPELLATE TRIBUNAL, PUNE BENCHES, PUNE