ESTRELA BATTERIES LTD, MUMBAI V. DCIT (OSD) CIR 2(1), MUMBAI

ITA 447/MUM/2017

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 0244 (ITAT-MUMBAI)
• Duration Of Justice: 5 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-06-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2010-2011
• Appeal Filed On: 20-01-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: T A KHAN

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES SMC, MUMBAI BEFORE SHRI B R BASKARAN, ACCOUNTANT MEMBER ITA NO.447/MUM/2017 ASSESSMENT YEAR : 2010-11 ESTRELA BATTERIES LTD. C/O KARNAVAT & CO. 2A KITAB MAHAL, 1 ST FLOOR, 192, DR. D N ROAD, MUMBAI 400 001 PAN AABCE3092Q VS. DCIT (OSD) MUMBAI (APPELLANT) RESPONDENT) APPELLANT BY : SHRI SUNIL HIRAWAT RESPONDENT BY : SHRI T A KHAN DATE OF HEARING : 22 .0 6 .201 7 DATE OF PRONOUNCEMENT : 22 .0 6 . 201 7 O R D E R THE APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAINS T THE ORDER DATED 25.11.2016, PASSED BY LD CIT(A)-3, MUMBAI, AND IT R ELATES TO THE ASSESSMENT YEAR 2010-11. THE ASSESSEE IS AGGRIEVED BY THE DEC ISION OF LD CIT(A) IN CONFIRMING THE DISALLOWANCE OF RS.20.00 LAKHS RELAT ING TO CONTRIBUTION MADE TO LABOUR WELFARE FUND. 2. I HEARD THE PARTIES AND PERUSED THE RECORD. THE ASSESSEE IS ENGAGED IN THE BUSINESS OF REAL ESTATE DEVELOPMENT. IT IS DEV ELOPING A PLOT OF LAND LOCATED AT DHARAVI AREA, WHERE ITS MANUFACTURING UN IT WAS FUNCTIONING EARLIER. SINCE THE WORKERS WERE AGITATING AGAINST THE DEVELO PMENT, THE ASSESSEE ENTERED INTO A SETTLEMENT WITH THE WORKERS BEFORE T HE HONBLE HIGH COURT, AS PER WHICH THE ASSESSEE IS REQUIRED TO PAY RS.2.00 L AKHS AS COMPENSATION TO EACH WORKER. THE ASSESSEE CONSIDERED THIS PAYMENT AS PART OF COST OF ITA NO.447/MUM/2017 ESTRELA BATTERIES LTD 2 DEVELOPMENT AND, ACCORDINGLY, SHOWN THE SAME AS WOR K IN PROGRESS. THE ASSESSING OFFICER HAS ALSO ACCEPTED THE SAME. 3. THE ASSESSEE ALSO CONTRIBUTED A SUM OF RS.20. 00 LAKHS TO THE LABOUR WELFARE FUND AND INCLUDED THE SAME IN WORK IN PROG RESS. AS THIS PAYMENT WAS BEYOND THAT WHAT WAS ACCEPTED UNDER THE SETTLEM ENT, THE AO TOOK THE VIEW THAT THIS PAYMENT WAS NOT INCURRED WHOLLY AND EXCLUSIVELY TO THE BUSINESS OF THE ASSESSEE. ACCORDINGLY, HE HELD THA T THE AMOUNT OF RS.20.00 LAKHS SHALL BE EXCLUDED FROM THE VALUE OF WORK IN P ROGRESS. HOWEVER, WHILE COMPUTING THE INCOME, THE AO ALSO ADDED RS.20.00 LA KHS TO THE TOTAL INCOME OF THE ASSESSEE. 4. BEFORE LD CIT(A), THE ASSESSEE CONTESTED THE DISALLOWANCE OF RS.20.00 LAKHS, I.E., ADDITION OF THE SAME TO THE TOTAL INCO ME OF THE ASSESSEE WITH THE PLEA THAT IT DID NOT CLAIM THE AMOUNT OF RS.20.00 L AKHS AS AN EXPENDITURE IN THE PROFIT AND LOSS ACCOUNT AND, HENCE, NO SEPARATE ADDITION IS CALLED FOR. HOWEVER, THE LD CIT(A) CONFIRMED THE ADDITION BY HO LDING THAT THIS PAYMENT IS NOT COVERED BY THE SETTLEMENT TERMS. 5. THE ASSESSEE IS NOW CONTESTING BEFORE US NOT ONLY THE ADDITION CONFIRMED BY LD CIT(A), BUT ALSO THE REDUCTION OF R S.20.00 LAKHS FROM THE WORK IN PROGRESS. 6. THE ADDITION OF RS.20.00 LAKHS CONFIRMED BY L D CIT(A) IS LIABLE TO BE DELETED, SINCE THE QUESTION OF DISALLOWANCE OF ANY EXPENDITURE WILL ARISE ONLY IF THE SAID EXPENDITURE HAD BEEN CLAIMED AS DEDUCTI ON. SINCE THE ASSESSEE HAS NOT CLAIMED THE AMOUNT OF RS.20.00 LAKHS RELATI NG TO CONTRIBUTION TO LABOUR WELFARE FUND AS DEDUCTION, THE QUESTION OF D ISALLOWING THE SAME DOES NOT ARISE. ACCORDINGLY, I SET ASIDE THE ORDER PASS ED BY LD CIT(A) ON THIS ISSUE AND DIRECT THE AO TO DELETE THE DISALLOWANCE OF RS.20.00 LAKHS. ITA NO.447/MUM/2017 ESTRELA BATTERIES LTD 3 7. THE ASSESSEE IS ALSO CONTESTING THE DECISION OF THE AO IN REDUCING THE AMOUNT OF RS.20.00 LAKHS FROM WORK IN PROGRESS. TH E LD A.R SUBMITTED THAT THE PROJECT IS STILL IN PROGRESS, SINCE THE LABOUR SETTLEMENT HAS NOT BEEN COMPLETED. HE SUBMITTED THAT THIS AMOUNT WAS GIVEN TO THE FUND BELONGING TO LABOUR UNION, WHO IN TURN, WOULD PERSUADE THE WO RKERS TO ACCEPT THE CONSENT TERMS. ACCORDINGLY, HE SUBMITTED THAT THIS PAYMENT SHOULD BE CONSIDERED AS WHOLLY AND EXCLUSIVE INCURRED FOR THE PURPOSE OF BUSINESS. HE SUBMITTED THAT IDENTICAL PAYMENT MADE IN THE EARLIE R YEAR AND INCLUDED IN WIP HAS BEEN ACCEPTED BY THE AO. 8. I HEARD LD D.R AND PERUSED THE RECORD. I NOTI CE THAT THE ASSESSEE HAS NOT RAISED ANY GROUND CHALLENGING THE REDUCTION OF RS.20.00 LAKHS FROM WIP BEFORE LD CIT(A), I.E., THE ASSESSEE HAS CHALLENGED THE DISALLOWANCE OF THE SAID AMOUNT ONLY. HENCE, THERE WAS NO OCCASION FOR THE LD CIT(A) TO CONSIDER THIS CLAIM OF THE ASSESSEE. SINCE THIS CL AIM IS ALSO ARISING ON THE SAME SET OF FACTS, I AM OF THE VIEW THIS GROUND NEE DS TO BE SET ASIDE TO THE FILE OF LD CIT(A) FOR ADJUDICATING THE SAME. ACCOR DINGLY, I RESTORE THIS ISSUE RELATING TO REDUCTION FROM WIP TO THE FILE OF LD CI T(A) FOR HIS CONSIDERATION. 9. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS TREATED AS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON THIS DAY OF 2 2 ND JUNE 2017 SD/- (B R BASKARAN) ACCOUNTANT MEMBER MUMBAI, DATED : 22 ND JUNE, 2017. SA ITA NO.447/MUM/2017 ESTRELA BATTERIES LTD 4 COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE C I T(A), MUMBAI. 4. THE C I T 5. THE DR, SMC BENCH, ITAT, MUMBAI BY ORDER //TRUE COPY// (ASSISTANT REGISTRAR) INCOME TAX APPELLATE TRIBUNAL, MUMBAI