Orbit Industries Limited , Kolkata V. DCIT, Circle - 6(2), Kolkata, Kolkata

ITA 458/KOL/2018

• Counselvise Citation: [2019] 115 COUNSELVISE.COM (IT) 9860 (ITAT-KOLKATA)
• Duration Of Justice: 1 year(s) 6 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-09-2019
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 23-07-2019
• Assessment Year: 2013-2014
• Appeal Filed On: 16-03-2018
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: ROBIN CHOUDHUR Y
• Assessee Lawyers: S M SURANA
• Keywords: Business expenditure
• Section: 40A(3); 143(3); 37(1); 37

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B, BENC H KOLKATA BEFORE SHRI S.S.GODARA, JM &DR. A.L.SAINI, AM ./ITA NO.458/KOL/2018 ( / ASSESSMENT YEAR:2013-14) ORBIT INDUSTRIES LTD. 7/1A, GRANT LANE, ROOM NO. 2F/10, 2 ND FLOOR, KOLKATA-700012 VS. DCIT, CIRCLE-6(2), KOLKATA ./ ./PAN/GIR NO.: AAACO 2993 F (ASSESSEE) .. (REVENUE) ASSESSEE BY : SHRI S. M. SURANA, ADVOCATE RESPONDENT BY : SHRI ROBIN CHOUDHURY, ADDL. CIT DR / DATE OF HEARING : 23/07/2019 /DATE OF PRONOUNCEMENT : 25/09/2019 / O R D E R PER DR. A. L. SAINI: THE CAPTIONED APPEAL FILED BY THE ASSESSEE, PERT AINING TO ASSESSMENT YEAR 2013-14, IS DIRECTED AGAINST THE ORDER PASSED BY TH E COMMISSIONER OF INCOME TAX (APPEAL)-2, KOLKATA, WHICH IN TURN ARISES OUT OF AN ASSESSMENT ORDER PASSED BY THE ASSESSING OFFICER U/S 143(3) OF THE INCOME TAX ACT , 1961 (IN SHORT THE ACT) DATED 14/03/2016. 2. THE GROUNDS OF APPEAL RAISED BY THE ASSESSEE A RE AS FOLLOWS: 1. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE LD. CIT(A)-2, KOLKATA HAS ERRED IN NOT DELETING THE DISALLOWANCE OF RS. 3 ,62,423/- MADE BY THE ASSESSING OFFICER ON THE GROUND THAT THE SAME IS I NCURRED AS PENALTY FOR SALES TAX EVEN WHILE THE SAID PAYMENTS ARE ON ACCO UNT OF TAX ON MISSING C FORM UNDER CENTRAL SALES TAX; ON ACCOUNT OF INTERES T OF DELAYED PAYMENT OF SALES TAX AND LATE FILING OF RETURN. ORBIT INDUSTRIES LTD. ITA NO458/KOL/2018 ASSESSMENT YEAR:2013-14 P PP PA AA AG GG GE EE E | || | 2 22 2 2. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE LD. CIT(A)-2, KOLKATA HAS ERRED IN NOT DELETING THE DISALLOWANCE OF RS. 2 0,870/- MADE BY THE A.O. U/S 40A(3) OF THE ACT, EVEN WHEN THIS AMOUNT WAS TH E CONSOLIDATED BILL RAISED / PAYMENT MADE TO SHRI C.R. DAMANI, FOR MUTA TION OF PROPERTY, WHICH CONTAINED REIMBURSEMENT TOWARDS COST OF STAM PS, CLERKAGE, OUT OF POCKET EXPENSES, XEROX CHARGES ETC. AND A PAYMENT TOWARDS MUTATION TO SH. DAMANI FOR ONLY RS. 19,000/-. 3. GROUND NO. 1 RAISED BY THE ASSESSEE RELATES TO D ISALLOWANCE OF RS. 3,62,423/- MADE BY THE ASSESSING OFFICER ON THE GROUNDS THAT T HE SAME IS INCURRED AS PENALTY FOR SALES TAX EVEN WHILE THE SAID PAYMENT IS ON ACC OUNT OF TAX ON MISSING C FORM UNDER CENTRAL SALES TAX; ON ACCOUNT OF INTEREST OF DELAYED PAYMENT OF SALES TAX AND LATE FILING OF RETURN. 4. BRIEF FACTS QUA THE ISSUE ARE THAT DURING THE C OURSE OF SCRUTINY ASSESSMENT, THE ASSESSING OFFICER NOTICED THAT THE ASSESSEE COMPAN Y HAS ERRONEOUSLY DEBITED OF RS. 3,62,423/-. PENALTY ON SALES TAX UNDER THE HEAD OTHER EXPENSES. THE SAME WAS POINTED OUT TO THE ASSESSEE DURING THE COURSE O F ASSESSMENT PROCEEDINGS BUT ASSESSEE DID NOT FILE ANY REPLY TO SUBSTANTIATE ITS CASE. THEREFORE, THE AMOUNT OF RS. 3,62,423/- WAS DISALLOWED AND ADDED TO THE TOTAL I NCOME OF THE ASSESSEE COMPANY. 5. AGGRIEVED BY THE ORDER OF THE ASSESSING OFFICER, THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE LD. CIT(A) WHO HAS CONFIRMED T HE ADDITION MADE BY THE ASSESSING OFFICER. 6. AGGRIEVED BY THE ORDER OF THE LD. CIT(A), THE AS SESSEE IS IN APPEAL BEFORE US. 7. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE M ATERIAL AVAILABLE ON RECORD. WE NOTE THAT THE LD. ASSESSING OFFICER HAS MADE TH E DISALLOWANCE UNDER THE HEAD PENALTY ON SALES TAX FOR AN AMOUNT OF RS. 3,62,42 3/- WHICH IS FORMING PART OF NOTE NO. 30 OF THE FINANCIAL STATEMENT UNDER THE JO URNAL HELD OTHER EXPENSES. WE NOTE THAT THE LD. ASSESSING OFFICER HAS MADE TH E DISALLOWANCE MERELY BASED ON THE ABOVE NOMENCLATURE AS APPEARING IN THE BOOKS OF ACCOUNTS OF THE ASSESSEE COMPANY AND WITHOUT SEEKING ANY EXPLANATION / DETAI LS FROM THE ASSESSEE ORBIT INDUSTRIES LTD. ITA NO458/KOL/2018 ASSESSMENT YEAR:2013-14 P PP PA AA AG GG GE EE E | || | 3 33 3 COMPANY. WE NOTE THAT THIS PAYMENT IS ON ACCOUNT O F TAX ON MISSING C FORMS UNDER CENTRAL SALES TAX AS DETERMINED BY THE VAT O FFICER; ON ACCOUNT OF INTEREST ON DELAYED PAYMENTS OF SALES TAX AND LATE FILING OF VAT RETURN WHICH ARE ALL ALLOWABLE BUSINESS EXPENSES UNDER THE ACT AS THESE ARE NOT PAYMENTS MADE FOR ANY VIOLATION OF LAW BUT ARE BASICALLY COMPENSATORY PAY MENTS TO THE STATUTORY AUTHORITY UNDER THE SALES TAX. THE ENTIRE PAYMENTS OF RS. 3,6 2,423/- IS THEREFORE AN ALLOWABLE BUSINESS EXPENSE U/S 37(1) OF THE ACT. THE ASSESSEE SUBMITTED THE DETAILED CHART OF VAT AND CST PAID DURING F.Y. 2012-13 WHEREIN TH E DATE OF DEPOSIT, CHALLAN NO. AND THE REASON FOR MAKING SUCH PAYMENT IS MENTI ONED. WE NOTE THAT IT IS AN ALLOWABLE EXPENDITURE U/S 37(1) OF THE ACT. FOR THA T WE RELY ON THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF CIT VS. AHMEDA BAD COTTON MANUFACTURING COMPANY LTD. (205 ITR 163) WHERE THE COURT HAS MADE THE FOLLOWING OBSERVATION WITH RESPECT TO ALLOWABILITY OF AN EXPENSE AS HAS B EEN INCURRED IN CASE OF THE ASSESSEE WHICH IS AS UNDER: 12. THEREFORE, WHAT NEED TO BE DONE BY AN ASSESSIN G AUTHORITY UNDER THE IT ACT, 1961, IN EXAMINING THE CLAIM OF AN ASSESSEE THAT TH E PAYMENT MADE BY SUCH ASSESSEE WAS A DEDUCTIBLE EXPENDITURE UNDER S. 37 O F THE IT ACT ALTHOUGH CALLED PENALTY IS, TO SEE WHETHER THE LAW OR SCHEME UNDER WHICH THE AMOUNT WAS PAID REQUIRED SUCH PAYMENT TO BE MADE, AS PENALTY OR AS SOMETHING AKIN TO PENALTY THAT IS IMPOSED BY WAY OF PUNISHMENT FOR BREACH OR INFRA CTION OF THE LAW OR THE STATUTORY SCHEME, IF THE AMOUNT SO PAID IS FOUND TO BE NOT A PENALTY OR SOMETHING AKIN TO PENALTY DUE TO THE FACT THAT THE AMOUNT PAI D BY THE ASSESSEE WAS IN EXERCISE OF THE OPTION CONFERRED UPON HIM UNDER THE VERY LAW OR SCHEME CONCERNED, TO REGARD SUCH PAYMENT AS BUSINESS EXPEN DITURE OF THE ASSESSEE, ALLOWABLE UNDER S. 37 OF THE IT ACT, AS AN INCIDENT OF BUSINESS LAID OUT AND EXPENDED WHOLLY AND EXCLUSIVELY FOR THE PURPOSES OF THE BUSINESS. HOWEVER, SUCH PAYMENT OF THE ASSESSEE IS THAT WHICH IS MADE IN EX ERCISE OF THE OPTION GIVEN TO SUCH ASSESSEE BY THE LAW OR THE STATUTORY SCHEME TH ERE ARISES NO NEED FOR ASSESSING AUTHORITY TO GO INTO THE QUESTION WHETHER THE PAYMENT COULD BE REGARDED AS THAT MADE AS A MEASURE OF BUSINESS EXPE DIENCY, FOR IT CANNOT IGNORE THE FACT IN THAT, THE LAW OR THE STATUTORY SCHEME E NABLES INCURRING OF SUCH EXPENDITURE IN THE COURSE OF ASSESSEE'S BUSINESS. 13. AS IS POINTED OUT BY US ALREADY, THE HIGH COURT HA S ANSWERED THE QUESTIONS REFERRED TO IN RUSTAM MILLS, CASE AS WELL AS IN TAR UN MILLS' CASE, TAKING INTO CONSIDERATION THE FACTS THAT THE PAYMENTS CONCERNED THEREIN WERE MADE IN COMPLIANCE WITH LAW OR SCHEME CONCERNED THEREIN AND NOT FOR COMMITTING ANY BREACH OR INFRACTION OF THE LAW OR STATUTORY SCHEME . THEREFORE, THE JUDGMENT OF THE HIGH COURT UNDER THE PRESENT APPEAL BEING RENDE RED FOLLOWING ITS EARLIER JUDGMENTS RUSTAM MILLS' CASE AND TARUN MILLS' CASE, WHICH ARE FOUND BY US TO HAVE BEEN RENDERED IN CONSONANCE WITH LAW, THE SAME IS NOT LIABLE TO BE INTERFERED WITH. ORBIT INDUSTRIES LTD. ITA NO458/KOL/2018 ASSESSMENT YEAR:2013-14 P PP PA AA AG GG GE EE E | || | 4 44 4 RESPECTFULLY FOLLOWING THE JUDGMENT OF THE HONBLE SUPREME COURT IN THE CASE OF AHMEDABAD COTTON MANUFACTURING COMPANY (SUPRA), WE DELETE THE ADDITION OF RS. 3,62,423/-. 8. GROUND NO. 2 RAISED BY THE ASSESSEE RELATES TO D ISALLOWANCE OF RS. 20,870/- MADE BY THE ASSESSING OFFICER U/S 40A(3) OF THE ACT . AT THE OUTSET ITSELF, THE LD. COUNSEL FOR THE ASSESSEE INFORMS THE BENCH THAT THE ASSESSEE DOES NOT WANT TO PRESS THIS GROUND THEREFORE WE DISMISS GROUND NO. 2 AS NOT PRESSED. 9. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PAR TLY ALLOWED. ORDER PRONOUNCED IN THE COURT ON 25.09.2019 SD/- ( S.S.GODARA ) SD/- (A.L.SAINI) / JUDICIAL MEMBER / ACCOUNTANT MEMBER / DATE: 25/09/2019 ( SB, SR.PS ) COPY OF THE ORDER FORWARDED TO: 1. ORBIT INDUSTRIES LTD. 2. DCIT, CIRCLE-6(2), KOLKATA 3. C.I.T(A)- 4. C.I.T.- KOLKATA. 5. CIT(DR), KOLKATA BENCHES, KOLKATA. 6. GUARD FILE. TRUE COPY BY ORDER ASSIST ANT REGISTRAR ITAT, KOLKA TA BENCHES