ACIT, New Delhi V. M/s. Natiional Fertilizers Ltd., New Delhi

ITA 4076/DEL/2013

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 91058 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 10 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-05-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: E
• Next Hearing Date: 31-03-2015
• Assessment Year: 2009-2010
• Appeal Filed On: 02-07-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Business income; Question of law
• Section: 143(3)

Judgement Text

0 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH ES: E , NEW DELHI BEFORE SHRI J. SUDHAKAR REDDY, ACCOUNTANT MEMBER AND SHRI CM GARG, JUDICIAL MEMBER ITA NO. 4076 /DEL/2013 AY: 200 9 - 10 ACIT, CIRCLE 13(1) VS. NATIONAL FERTILIZERS LTD. ROOM NO.406 CORE III, SCOPE COMPLEX 7 C.R.BUILDING, IP ESTATE INSTITUTIONAL AREA, LODHI ROAD NEW DELHI NEW DELHI PAN: AAACN 0 189 N (APPELLANT) (RESPONDENT) A SSESSEE BY : SH. VED JAIN, C.A. MS.RANO JAIN, ADV. SH. VM CHOURASIYA, ADV. DEPT. BY : SH. GUNJAN PRASAD, CIT, D.R. ORDER PER J. SUDHAKAR REDDY, ACCOUNTANT MEMBER THIS IS AN APPEAL FILED BY THE REVENUE AGAINST THE ORDER OF THE LD.CIT(A) - XVI , NEW DELHI DATED 29.4.2013 PERTAINING TO THE A SSESSMENT YEAR (A.Y.) 200 9 - 10 . 2. FACTS IN BRIEF : - THE ASSESSEE IS A COMPANY ENGAGED IN THE BUSINESS OF MANUFACTURING AND TRADING OF NITROGENOUS FERTILISERS AND OTHER RELATED INDUSTRIAL PRODUCTS. IT FILED ITS RETURN OF INCOME ON 29.9.2009 DECLARING INCOME OF RS.253,15,13,265/ - . IT WAS REVISED ON 30.3.2011 DECLARING THE VERY SAME INCOME. THE AO PASSED AN ORDER U/S 143(3) OF THE ACT O N 14.11.2011 DETERMINING THE TOTAL INCOME AT RS.350,78,38,270 INTER ALIA MAKING THE FOLLOWING ADDITIONS/DISALLOWANCES. I. BUSINESS INCOME RS.253,15,13,265 II. UNDISCLOSED INTEREST INCOME RS. 6,48,20,000 ITA 4076/DEL/2013 AY: 2009 - 10 NATIONAL FERTILIZERS LTD. 2 III. DISALLOWANCE OF DEMURRAGE CHARGES RS. 2,36,00,000 IV. DIMINUTION OF SLOW MOVING SPARES RS. 6,98,38,000 V. PROVISION OF POST RETIREMENT BENEFITS RS. 7,79,00,000 VI. PROVISION OF WAGE ARREARS RS. 74,01,67,000 TOTAL INCOME RS. 350,78,38,265 TOTAL INCOME ROUNDED OFF: RS. 350,78,38,270 3. AGGRIEVED THE ASSESSEE CARRIED THE MATTER IN APPEAL. THE FIRST APPELLATE AUTHORITY HAS GRANTED PART RELIEF. THE REVENUE HAS FILED APEPAL BEFORE US ON THE FOLLOWING GROUNDS. 1. T HE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN DELETING THE ADDITION MADE BY THE ASSESSING OFFICER AMOUNTING TO RS. 6,48,20,000/ - CRORES ON ACCOUNT OF INTEREST ACCRUED ON ADVANCES GIVEN TO M/S KARSAN ; 2. THE LD. C IT(A) HAS ERRED IN LAW AND ON FACTS IN ALLOWING RS. 2, 36,00,000/ - ON ACCOUNT OF DEMURRAGE & WHARFAGE EXPENSES BY NOT CONSIDERING THESE EXPENSES OF PENAL NATURE; 2.1 THE LD. C I T(A) HAS ERRED IN LAW AND ON FACTS IN NOT APPRECIATING THE PROVISION LAID DOWN IN EXPLANATION TO SEC.37(1) WHEREIN IT HAS BEEN LAID TH AT ANY AMOUNT PAID FOR THE PURPOSE WHICH IS AN OFFENCE OR WHICH IS PROHIBITED BY LAW SHALL NOT BE ALLOWED AS EXPENDITURE INCURRED FOR BUSINESS PURPOSE; 2.2 THE LD. C I T(A} HAS ERRED IN LAW AND FACTS IN IGNORING THE FACT THAT THE RAILWAY ACT HAS DEFINED THE DEMURRAGE AND WHARFAGE AS THE CHARGE LEVIED, CHARGE MEANS THE BLAME OR ACCUSATION, HENCE IS OF PENALTY NATURE; 3. THE LD. C I T (A) HAS ERRED IN LAW AND FACTS IN DELETING THE ADDITION OF RS. 7,79,00,000/ - ON ACCOUNT OF DISALLOWANCE OF PROVISION FOR POST R ETIREMENT BENEFITS IGNORING THE FACT THAT THESE ARE UNASCERTAINED LIABILITIES AND CANNOT BE ALLOWED AS PER PROVISIONS OF AS - 15; 4. THE LD. C IT ( A) HAS ERRED IN LAW AND FACTS IN DELETING THE ADDITION OF RS. 74 ;01,67,000/ - ON ACCOUNT OF DISALLOWANCE OF P ROVISION FOR WAGE ARREARS IGNORING THE FACT THAT AS PER ASSESSEE COMPANY, THE CALCULATION WAS MADE ON ESTIMATED BASIS. THUS, THESE ARE UNASCERTAINED LIABILITIES AND CANNOT BE ALLOWED AS PER PROVISION OF SECTION 37{1) OF THE ACT; 5. THE APPELLANT CRAVES TO BE ALLOWED TO ADD ANY FRESH GROUNDS OF APPEAL AND/OR DELETE OR AMEND ANY OF THE GROUNDS OF APPEAL. 4. WE HAVE H EARD MR.GUNJAN PRASAD, LD.CIT(A), D.R. ON BEHALF OF THE REVENUE AND MR.VED JAIN, THE LD.COUNSEL FOR THE ASSESSEE. ITA 4076/DEL/2013 AY: 2009 - 10 NATIONAL FERTILIZERS LTD. 3 5 . ON A CAREFUL CONSIDERATION OF THE FACTS AND CIRCUMSTANCES OF THE CASE, ON PERUSAL OF MATERIAL ON RECORD, ORDERS OF THE AUTHORITIES BELOW, CASE LAWS CITED, WE HOLD AS FOLLOWS. 6 . THE FIRST GROUND THAT ARISES FOR OUR CONSIDERATION IS THE DELETION OF AN ADDITION BEING AC CRUED INTEREST ON ADVANCES GIVEN TO M/S KARSAN. THIS ISSUE HAS BEEN DISCUSSED AT PAGE 2 PARA 3 OF THE ASSESSMENT ORDER. THE LD.CIT(A) HAS DEALT WITH THE SAME AT PAGE 41 PARA 4.1 ONWARDS. BOTH THE PARTIES SUBMITTED THAT THE ISSUE IS SQUARELY COVERED IN F AVOUR OF THE ASSESSEE BY AN ORDER PASSED BY THE ITAT ON THE VERY SAME ISSUE FOR THE AY 2004 - 05 AND 2005 - 06. THE HON BLE JURISDICTIONAL HIGH COURT HAD AFFIRMED THE ORDER OF THE TRIBUNAL IN ITA 541/2012 DT. 24 TH SEPTEMBER, 2012 AND AT PAGE 19 HAS HELD AS FOLLOWS. THE TRIBUNAL ENDORSED THE FINDING OF THE CIT(A). IT RELIED UPON ITS DECISION FOR THE AY 2004 - 05, AS IS APPARENT FROM ITS DISCUSSION IN PARA 9. THE TRIBUNAL S FINDING WOULD SHOW THAT IT HAD ALSO RELIED UPON THE DECISION OF THE SUPREME COURT IN F UERST DAY LAWSON LTD. VS. JINDAL EXPORTS LTD. (AIR 2001 SC 2293). THIS COURT ALSO NOTICED THAT HAVING REGARD TO THE TERMS OF THE REPEATED ARBITRATION ACT, 1940, AN AWARD COULD NOT BE ENFORCEABLE. THE SAME WAS THE CASE WITH THE FOREIGN AWARD, THE COURT HAD TO FIRST ADJUDICATE AS TO THE ENFORCEABILITY. IN THESE CIRCUMSTANCES, THE ASSESSEE S RIGHT TO INTEREST WAS A MERE CLAIM, TILL THE DATE OF THE JUDGEMENT OF THE COURT DT. 4 TH DEC.2006. IN OTHER WORDS, THE RIGHT TO INTEREST CRYSTALLISED AFTER THE JUDGEMENT OF THE COURT. TILL THEN, IT WAS INCHOATE. FOR THIS REASON, THE TRIBUNAL S FINDING CANNOT BE FAULTED WITH. NO SUBSTANTIAL QUESTION OF LAW ARISES. THE APPEAL IS THEREFORE DISMISSED. 6.1. RESPECTFULLY FOLLOWING THE SAME, WE DISMISS THIS GROUND OF REVENUE . ITA 4076/DEL/2013 AY: 2009 - 10 NATIONAL FERTILIZERS LTD. 4 7. GROUND NO.2 IS AGAINST THE DELETION OF ADDITION OF RS.2,36,00,000 BEING DEMURRAGE & WHARFAGE CHARGES. THESE CHARGES ARE PAID TO THE RAILWAYS TOWARDS DELAY IN LOADING AND UNLOADING OPERATIONS BEYOND THE TIME FRAME FIXED BY THE INDIAN RAILWAYS. TH E AO WAS OF THE VIEW THAT THE AMOUNT PAID AS DEMURRAGE AND WHARFAGE TO THE RAILWAYS IS A FINE OR PENALTY AND HENCE DISALLOWED THE EXPENDITURE. THE LD.CIT(A) HAS DEALT WITH THE ISSUE AT PAGE 44 PARA 5. THE PAYMENT IN QUESTION IS NOT THE PENALTY OR FINE FOR VIOLATION OF ANY STATUTE. IT IS COMPENSATORY IN NATURE. THE ISSUE STANDS COVERED BY THE FOLLOWING DECISIONS. I. NANHOOMAL JYOTI PRASAD VS. CIT (1980) 123 ITR 269 (ALL.) II. MAHALAXMI SUGAR MILL CO.LTD. VS. CIT (1986) 157 ITR 683 (DEL.) IMCOLA (EXPOR TS) LTD. ITA 974/MUM/2009. RESPECTFULLY FOLLOWING THE SAME WE UPHOLD THE FINDING OF THE FIRST APPELLATE AUTHORITY AND DISMISS THIS GROUND OF REVENUE. 8. GROUND NO.3 IS AGAINST DELETION OF DISALLOWANCE MADE BY THE AO OF RS.7,79,00,000 BEING PROVISION FOR PO ST RETIREMENT BENEFITS. 8.1. THE FIRST APPELLATE AUTHORITY HAS AT PAGE 49 PARA 7.1 TO 7.6 HAS DEALT WITH THIS ISSUE. THE HON BLE SUPREME COURT IN THE CASE OF BHARAT EARTH MOVERS VS. CIT (SC) 245 ITR 428 HAS HELD THAT LIABILITY BEING A DETERMINED ONE, THOU GH TO BE DISCHARGED IN FUTURE, DID NOT MAKE IT A CONTINGENT LIABILITY AND IT IS AN ALLOWABLE LIABILITY. THE FIRST APPELLATE AUTHORITY IN THIS CASE HAS FOLLOWED THE JUDGEMENT OF HON BLE SUPREME COURT. THUS WE FIND NO REASON TO INTERFERE WITH THE SAME. GR OUND NO.3 IS DISMISSED. 9. GROUND NO.4 IS AGAINST THE DELETION OF DISALLOWANCE OF RS.74,01,67,000 BEING A PROVISION MADE FOR WAGE ARREARS. THE FIRST APPELLATE AUTHORITY HAS DEALT WITH THIS ISSUE AT PARAS 8.1 TO 8.10. THE PROVISION IN THIS CASE WAS MADE B ASED ON AN OFFICE MEMORANDUM DT. 26.11.2008 ISSUED BY THE GOVERNMENT ON THE RECOGNITION OF THE PAY REVISION COMMITTEE, FOR REVISION OF PAY SCALES W.E.F. 1.1.2007. THIS IS NOT A CONTINGENT LIABILITY. IN THE CASE OF ACIT VS. NTPC IN ITA 4246/DEL/2011 ORDER DT. 23.11.2011, THE TRIBUNAL AT PAGE 6 PARA 7 ONWARDS HELD AS FOLLOWS. ITA 4076/DEL/2013 AY: 2009 - 10 NATIONAL FERTILIZERS LTD. 5 7. WE HAVE CAREFULLY CONSIDERED THE SUBMISSIONS AND PERUSED THE RECORDS. WE FIND THAT HON BLE APEX COURT IN THE CASE OF BHARAT EARTH MOVERS VS CIT HAS HELD THAT IF A BUSINESS LIABILITY HAS DEFINITELY ARISEN IN THE ACCOUNTING YEAR, THE DEDUCTION SHOULD BE ALLOWED ALTHOUGH THE LIABILITY MAY HAVE TO BE QUANTIFIED AND DISCHARGED AT A FUTURE DATE. WHAT SHOULD BE CERTAIN IS THE INCURRING OF THE LIABILITY. IT SHOULD ALSO BE CAPABLE OF BEING ESTIMATED WITH REASONABLE CERTAINTY THOUGH THE ACTUAL QUANTIFICATION MAY NOT BE POSSIBLE. IF THESE REQUIREMENTS ARE SATISFIED, THE LIABILITY IS NOT A CONTINGENT ONE. THE LIABILITY IS IN PRESENTI THOUGH IT WILL BE DISCHARGED AT A FUTURE DATE. IT DOES NOT MAKE ANY DIFFERENCE IF THE FUTURE DATE ON WHICH THE LIABILITY SHAL L HAVE TO BE DISCHARGED IS NOT CERTAIN. 8. APPLYING THE RATIO FROM THE AFORESAID CASE LAW IN THE PRESENT CASE, WE FIND THAT WAGE REVISION WAS DUE W.E.F. 1.1.2007 AND THE ORDER UNDER APPEAL IS FOR YEAR 2007 - 08 RELEVANT TO AY 2008 - 09. THE LIABILITY IN THIS REGARD HAS CERTAINLY CRYSTALLISED AND CANNOT BE CONSIDERED CONTINGENT. IN OUR CONSIDERED OPINION, THIS ISSUE IS SQUARELY COVERED BY THE DECISION OF THE HON BLE APEX COURT IN THE CASE OF BHARAT EARTH MOVERS VS. CIT, HENCE , WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE LD.CIT(A) AND ACCORDINGLY, WE UPHOLD THE SAME. 9.1. THE ISSUE IS COVERED BY THE DECISION OF THE HON BLE DELHI HIGH COURT IN THE CASE OF CIT VS. BHEL 352 ITR 88 ( DEL) WHEREIN IT WAS HELD THAT PROVISION FOR WAGE REVISION WAS BASED ON PAST E XPERIENCE, PREVIOUS PAY COMMISSION S REPORTS AND OTHER RELEVANT FACTORS AND THE DEDUCTION CLAIMED FOR PERIOD, BETWEEN THE EXPIRY OF ONE WAGE SETTLEMENT OR AGREEMENT, CANNOT BE TERMED AS CONTINGENT BECAUSE THE WAGE AND THE PROBABLE REVISION OR RATES OF REVI SION WOULD BE WITHIN THE FAIR ESTIMATION OF THE EMPLOYER THUS, DEDUCTION CLAIMED ON ACCOUNT OF WAGE REVISION ARE PERMISSIBLE. 9.2. RESPECTFULLY FOLLOWING THE SAME WE DISMISS THIS GROUND OF THE REVENUE. ITA 4076/DEL/2013 AY: 2009 - 10 NATIONAL FERTILIZERS LTD. 6 10. IN THE RESULT THE APPEAL BY THE REVENUE STANDS DISMISSED . ORDER PRONOUNCED IN THE OPEN COURT ON 20 TH MAY , 2015. SD/ - SD/ - ( C.M. GARG ) (J. SUDHAKAR REDDY) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 20 TH MAY , 2015 MANGA COPY FORWARDED TO: - 1 . APPELLANT 2 . RESPONDENT 3 . CIT 4 . CIT(A) 5 . DR, ITAT TRUE COPY BY ORDER, ASSISTANT REGISTRAR