ACIT, New Delhi V. M/s. NTPC Vidyut Vyapar Nigam Ltd., New Delhi

ITA 4246/DEL/2011

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 53135 (ITAT-DELHI)
• Duration Of Justice: 2 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-11-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: E
• Next Hearing Date: 23-11-2011
• Assessment Year: 2008-2009
• Appeal Filed On: 22-09-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: R S NEGI
• Assessee Lawyers: MRS RANO JAIN CAS

Judgement Text

ITA NO. 4246/DEL/2011 1 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH E NEW DELHI BEFORE SHRI A.D. JAIN, JUDICIAL MEMBER AND SHRI SHAMIM YAHYA, ACCOUNTANT MEMBER I.T.A. NO. 4246/DEL/2011 A.Y. : 2008-09 ACIT, CIRCLE 13(1), ROOM NO. 406, CR BUILDING, IP ESTATE, NEW DELHI VS. M/S NTPC VIDYUT VYAPAR NIGAM LTD., NTPC BHAVAN, CORE-7, SCOPE COMPLEX, LODHI ROAD, NEW DELHI PAN/GIR NO. : AABCN 7433J) (APPELLANT ) (APPELLANT ) (APPELLANT ) (APPELLANT ) (RESPONDENT ) (RESPONDENT ) (RESPONDENT ) (RESPONDENT ) ASSEESSEE BY : SH. VED JAIN AND MRS. RANO JAIN, CAS DEPARTMENT BY : SH. R.S. NEGI, SR. D.R. ORDER ORDER ORDER ORDER PER SHAMIM YAHYA: AM PER SHAMIM YAHYA: AM PER SHAMIM YAHYA: AM PER SHAMIM YAHYA: AM THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST TH E ORDER OF THE LD. COMMISSIONER OF INCOME TAX (APPEALS) DATED 14.6.2 011 PERTAINING TO ASSESSMENT YEAR 2008-09. 2. THE ISSUE RAISED IS THAT LD. COMMISSIONER OF INCOM E TAX (APPEALS) ERRED IN DELETING THE DISALLOWANCE OF ` 1 ,13,58,312/- MADE BY THE ASSESSING OFFICER ON ACCOUNT OF PROVISION OF W AGE REVISION. 3. IN THIS CASE ASSESSING OFFICER NOTED THAT ASSES SEE IN SCHEDULE 18 NOTES ON ACCOUNTS ANNEXED WITH AUDITED BALANCE SH EET AND PROFIT AND LOSS ACCOUNT, THE ASSESSEE COMPANY AT POINT NO. 9 HAS CLAIMED PROVISION MADE FOR WAGE REVISION, THE RELEVANT PARA READ AS UNDER:- ITA NO. 4246/DEL/2011 2 THE PAY REVISION OF THE EMPLOYEES OF THE COMPANY I S DUE W.E.F. 1 ST JANUARY, 2007. PENDING DECISION OF THE COMMITTEE FORMED BY THE GOI, A PROVISION OF ` 1,13,58,312/- (PREVIOUS YEAR ` 2922055/-) HAS BEEN MADE ON ESTIMATE BASIS A S APPORTIONED BY HOLDING COMPANY I.E. NTPC LTD. 3.1 ASSESSING OFFICER ASKED THE ASSESSEE TO JUSTI FY THE CLAIM OF THE PROVISION MADE IN THE BOOKS OF ACCOUNTS AND TO JUSTIF Y THE ALLOWABILITY OF THE SAME DURING THE YEAR. THE ASSESSEE SUBMITTE D AS UNDER:- THE PROVISION FOR THE SAID LIABILITY HAS BEEN MAD E BY THE MANAGEMENT ON A REASONABLE ESTIMATE BASED ON LAW OF CERTAINTY. THIS FACT HAS BEEN DISCLOSED IN NOTES ON ACCOUNTS. THE WAGE REVISION OF THE EMPLOYEES OF N TPC VIDYUT VYAPAR NIGAM LTD. WAS DUE FOR REVISION W.E.F. 1.1.2007. THE GOVERNMENT OF INDIA HAS SET UP A COMMI TTEE FOR REVISION OF PAY SCALES OF EXECUTIVES AND SUPERV ISORS OF CENTRAL PSUS. THE RECOMMENDATION OF THE COMMITTEE HA S ALREADY BEEN DECLARED. EARLIER TO RECOMMENDATION OF THE COMMITTEE, BASED ON THE DEMANDS OF THE EMPLOYEES OF NV/VN HAS SANCTIONED PAYMENT OF ADHOC PAYMENT TO TH E EMPLOYEES OF THE COMPANY, SUBJECT TO ADJUSTMENT AGAIN ST THE AMOUNT PAYABLE UNDER PENDING WAGE REVISION W.E. F. 1.1.2007. THIS PRACTICE OF CLAIMING ADHOC PAYMENT , RELEASED TO EMPLOYEES PENDING FINAL PAY SETTLEMENT H AVE BEEN ALLOWED AS DEDUCTION BY THE DEPARTMENT CONSIST ENTLY IN THE PAST. THE ACTUAL PAYMENT AGAINST THE PROVISION MADE IN THE A.Y. 2008-09 HAS BEEN RELEASED IN OCTOBER, 2009, AND TAX AT ITA NO. 4246/DEL/2011 3 SOURCE HAS BEEN DEDUCTED FROM THE EMPLOYEES ON SUCH PAYMENT AND DEPOSITED WITH THE DEPARTMENT. IT THERE FORE CANNOT BE TREATED AS HYPOTHETICAL OR CONTINGENT. EVEN THE FINAL LIABILITY HAS BEEN QUALIFIED AND DISCHARGED. 3.2 HOWEVER, THE ASSESSING OFFICER WAS NOT SATISFI ED WITH THE AFORESAID ARGUMENTS OF THE ASSESSEE. HE OPINED TH AT THE PROVISION HAS BEEN MADE WITH RESPECT TO REVISED WAGES FOR THE EMPLOYEES WHICH WERE NOT CRYSTALLIZED. ACCORDINGLY, HE MADE T HE ADDITION OF ` 1,13,58,312/-. 4. UPON ASSESSEES APPEAL LD. COMMISSIONER OF INCOME TAX (APPEALS) HELD AS UNDER:- I HAVE CONSIDERED THE FACTS OF THE CASE AND THE OBSERVATIONS OF THE ASSESSING OFFICER IN THE ASSE SSMENT ORDER. AS FAR AS GROUNDS NOS. 3(I) & (II) ARE CONC ERNED, IT HAS BEEN SUBMITTED THAT WAGES OF THE EMPLOYEES OF TH E APPELLANT COMPANY WERE DUE FOR REVISION WITH EFFE CT FROM 1.1.2007 AND THAT A COMMITTEE FOR REVISION OF PAY SC ALES IN CENTRAL PSUS HAD BEEN SETUP. THE RECOMMENDATIONS OF THE COMMITTEE WERE RECEIVED SUBSEQUENTLY BUT IN THE MEANTIME, BASED ON THE DEMANDS OF THE EMPLOYEES, THE BOARD OF DIRECTORS OF THE APPELLANT COMPANY SANCTIONE D ADHOC PAYMENT TO THE EMPLOYEES, WITH THE CONDITION THAT THE SAME WOULD BE ADJUSTED AGAINST THE AMOUNT PAYABL E ITA NO. 4246/DEL/2011 4 ON REVISION OF WAGES. THE PAYMENT AGAINST THE PROVI SION SO MADE BY THE APPELLANT COMPANY IN ASSESSMENT YEAR 200 8- 09 WAS STATED TO HAVE BEEN MADE IN OCTOBER, 2009, A FTER DEDUCTION OF TAX AT SOURCE. THUS THE FINAL LIABI LITY WAS QUANTIFIED AND DISCHARGED AND WAS NOT HYPOTHETICAL OR CONTINGENT. IT WAS SUBMITTED THAT THIS PRACTICE WA S APPROVED BY THE CENTRAL GOVERNMENT IN ITS CAPACITY A S PRINCIPAL SHAREHOLDER ON THE BOARD OF DIRECTORS I N NTPC LTD., ALSO ACCEPTED BY COMPTROLLER AND AUDITOR GENER AL OF INDIA AS WELL AS PLACED BEFORE PARLIAMENT. THE AP PELLANT HAS RELIED ON THE JUDGEMENT OF THE APEX COURT IN TH E CASE OF M/S BHARAT EARTH MOVERS VS. C.I.T. (2000) 112 TAXMAN 61 AS PER WHICH IF A BUSINESS LIABILITY HAS DEFINITELY ARISEN IN TH E ACCOUNTING YEAR, THE DEDUCTION SHOULD BE ALLOWED AL THOUGH THE LIABILITY MAY HAVE TO BE QUANTIFIED AND DISCHAR GED AT A FUTURE DATE. WHAT SHOULD BE CERTAIN IS THE INCURRI NG OF THE LIABILITY. IT SHOULD ALSO BE CAPABLE OF BEING ESTI MATED WITH REASONABLE CERTAINTY THOUGH THE ACTUAL QUANTIFICATI ON MAY NOT BE POSSIBLE. IF THESE REQUIREMENTS ARE SATISFI ED, THE LIABILITY IS NOT A CONTINGENT ONE. THE LIABILITY IS IN PRAESENTI THOUGH IT WILL BE DISCHARGED AT A FUTURE DATE. IT DOES NOT ITA NO. 4246/DEL/2011 5 MAKE ANY DIFFERENCE IF THE FUTURE DATE ON WHICH THE LIABILITY SHALL HAVE TO BE DISCHARGED IS NOT CERTAIN. IN THE CASE OF THE APPELLANT COMPANY, THE WAGE REVISION WAS DUE WIT H EFFECT FROM 1.1.2007 AND THE YEAR UNDER APPEAL IS FY 2007- 08, RELEVANT TO ASSESSMENT YEAR 2008-09, ALTHOUGH THE RECOMMENDATIONS OF THE COMMITTEE SET UP FOR THE PURPO SE WERE RECEIVED LATER AND THE ACTUAL AND FINAL PAYME NT WAS RELEASED IN OCTOBER, 2009. ACCORDINGLY, THE JUDGEM ENT OF THE HONBLE APEX COURT IN THE CASE OF BHARAT EARTH MOVERS VS. C.I.T. (SUPRA) WOULD BE APPLICABLE TO THE CASE OF THE APPELLANT AND THE PROVISION MADE BY THE APPELLANT FO R WAGE REVISION DURING THE YEAR UNDER APPEAL IS AN ALLOWAB LE DEDUCTION. IT HAS ALSO BEEN SUBMITTED THAT IN CASE O F NTPC LTD. A SIMILAR ISSUE WAS DECIDED IN FAVOUR OF THE AS SESSEE AND THAT THE COMMITTEE ON DISPUTES DECLINED PERMISSION TO THE CBDT TO PURSUE THE APPEAL BEFORE THE ITAT BECAU SE IT DID NOT FIND ANY INFIRMITY IN THE DECISION OF THE L D. COMMISSIONER OF INCOME TAX (APPEALS) THAT THE ADDITI ON U/S. 154 OF THE IT ACT MADE BY THE ASSESSING OFFICER ON ACCOUNT OF RECOVERABLE ADHOC ADVANCE PAID TO EMPLOYEES PEND ING APPROVAL OF WAGE REVISION FROM 1.1.1997 WAS NOT COR RECT. ITA NO. 4246/DEL/2011 6 RESPECTFULLY FOLLOWING THE JUDGEMENT IN THE CASE OF M/S BHARAT EARTH MOVERS VS. C.I.T. (SUPRA) AS WELL AS T HE DECISION OF THE COMMITTEE ON DISPUTES, I HEREBY DELETE THE DISALLOWANCE MADE BY THE ASSESSING OFFICER ON ACCOU NT OF PROVISION FOR WAGE REVISION PENDING THE FINAL RECOMMENDATION OF THE COMMITTEE FOR WAGE REVISION. THESE GROUNDS OF APPEAL ARE ALLOWED. 5. AGAINST THE ABOVE ORDER THE REVENUE IS IN APPEAL BEFORE US. 6. WE HAVE HEARD THE RIVAL CONTENTIONS IN LIGHT OF THE MATERIAL PRODUCED AND PRECEDENT RELIED UPON. LD. COUNSEL O F THE ASSESSEE SUBMITTED THAT THIS ISSUE IS SQUARELY COVERED BY TH E DECISION OF THE HONBLE APEX COURT IN THE CASE OF BHARAT EARTH MOVER S VS. C.I.T. 112 TAXMAN 61. 6.1 LD. DEPARTMENTAL REPRESENTATIVE COULD NOT CONTRO VERT THE SUBMISSIONS OF THE LD. COUNSEL OF THE ASSESSEE. 7. WE HAVE CAREFULLY CONSIDERED THE SUBMISSIONS AND PERUSED THE RECORDS. WE FIND THAT HONBLE APEX COURT IN THE CA SE OF BHARAT EARTH MOVERS VS. C.I.T. (SUPRA) HAS HELD THAT IF A BUSINESS LIABILITY HAS DEFINITELY ARISEN IN THE ACCOUNTING YEAR, THE DEDUC TION SHOULD BE ALLOWED ALTHOUGH THE LIABILITY MAY HAVE TO BE QUANT IFIED AND DISCHARGED AT A FUTURE DATE. WHAT SHOULD BE CERTAI N IS THE INCURRING OF THE LIABILITY. IT SHOULD ALSO BE CAPABLE OF BEING ESTIMATED WITH REASONABLE CERTAINTY THOUGH THE ACTUAL QUANTIFICATI ON MAY NOT BE ITA NO. 4246/DEL/2011 7 POSSIBLE. IF THESE REQUIREMENTS ARE SATISFIED, TH E 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 DIFFERENC E IF THE FUTURE DATE ON WHICH THE LIABILITY SHALL HAVE TO BE DISCHARGED IS NOT CERTAIN. 8. APPLYING THE RATIO FROM THE AFORESAID CASE LAW I N 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 ASSES SMENT YEAR 2008- 09. THE LIABILITY IN THIS REGARD HAS CERTAINLY CR YSTALIZED AND CANNOT BE CONSIDERED CONTINGENT. IN OUR CONSIDERED OPINION, T HIS ISSUE IS SQUARELY COVERED BY THE DECISION OF THE HONBLE APEX COURT I N THE CASE OF BHARAT EARTH MOVERS VS. C.I.T., HENCE, WE DO NOT FIN D ANY INFIRMITY IN THE ORDER OF THE LD. COMMISSIONER OF INCOME TAX (APP EALS) AND ACCORDINGLY, WE UPHOLD THE SAME. 9. IN THE RESULT, THE APPEAL FILED BY THE REVENUE S TANDS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 23/11/2011, UPON CONCLUSION OF HEARING. SD/- SD/- [ [[ [A.D. JAIN A.D. JAIN A.D. JAIN A.D. JAIN] ]] ] [SHAMIM YAHYA] [SHAMIM YAHYA] [SHAMIM YAHYA] [SHAMIM YAHYA] JUDICIAL MEMBER JUDICIAL MEMBER JUDICIAL MEMBER JUDICIAL MEMBER ACCOUNTANT MEMBER ACCOUNTANT MEMBER ACCOUNTANT MEMBER ACCOUNTANT MEMBER DATE 23/11/2011 SRB COPY FORWARDED TO: COPY FORWARDED TO: COPY FORWARDED TO: COPY FORWARDED TO: - -- - 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT (A) 5. DR, ITAT TRUE COPY BY ORDER, ASSISTANT REGISTRAR, ITAT, DELHI BENCHES