SHREE PRECOATED STEELS LTD, MUMBAI V. DCIT 8(3), MUMBAI

ITA 4838/MUM/2014

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 2338 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 2 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-10-2016
• Appeal Filed By: Assessee
• Bench Allotted: E
• Assessment Year: 2010-2011
• Appeal Filed On: 22-07-2014
• Court: TRIBUNAL
• Department Lawyers: A K KARDA M

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL E BENCH, MUMBAI BEFORE SHRI B.R. BASKARAN (AM) & RAMLAL NEGI (JM) I.T.A. NO. 4838 /MUM/20 14 (ASSESSMENT YEAR 20 10 - 11 ) M/S. SHREE PRECOATED STEELS LTD. 2 ND FLOOR, CITIMALL NEW LINK ROAD ANDHERI WEST MUMBAI - 400 053. VS. DCIT CIRCLE 8(3) MUMBAI ( APPELLANT ) ( RESPONDENT ) PAN NO . AAGCA8466M ASSESSEE BY SHRI PRAKASH JOTWANI DEPARTMENT BY S HRI A.K. KARDAM DATE OF HEARING 20 .10 . 201 6 DATE OF PRONOUNCEMENT 20 . 10 . 201 6 O R D E R PER B.R. BASKARAN (AM) : - THE APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER DATED 9.5.2014 PASSED BY THE LEARNED CIT(A) - 18, MUMBAI AND IT RELATES TO A.Y. 2010 - 11. 2. THE ASSESSEE IS AGGRIEVED BY THE DECISION OF THE LEARNED CIT(A) IN HOLDING THAT THE EXPENDITURE OF ` 6.30 CRORES CLAIMED BY THE ASSESSEE IS NOT ALLOWABLE IN THE YEAR UNDER CONSIDERATION . 3. WE HAVE HEARD THE PARTIES AND PERUSED THE RECORD. FACTS RELATING TO THE ISSUE ARE STATED IN BRIEF. THE ASSESSING OFFICER NOTICED THAT THE ASSESSEE HAS CLAIMED A SU M OF ` 6.30 CRORES RELATING TO CLAIM PAID AGAINST LEGAL CASES AS DEDUCTION IN THE PROFIT AND LOSS ACCOUNT . THE ASSESSING OFFICER CALLED FOR THE DE TAILS RELATING TO THE SAME AND HE NOTICED THAT THE LEGAL CLAIM HAS BEEN SETTLED IN THE SUCCEEDING YEAR, I.E., THE ASSESSEE HAS ENTERED INTO A SETTLEMENT AGREEMENT ON 30.4.2010 AND THE HON'BLE BOMBAY HIGH COURT HAS PASSED AN SHREE PRECOATED STEELS LTD. 2 ORDER IN TERM S OF THE SETTLEMENT AGREEMENT ON 4.5.2010. SINCE THE DATE OF SETTLEMENT AGREEMENT AND THE DATE OF ORDER OF BOMBAY HIGH COURT FEL L IN THE SUCCEEDING YEAR, THE ASSESSING OFFICER TOOK THE VIEW THAT THE ASSESSEE CANNOT CLAIM DEDUCTION FOR ` 6.30 CRORES DURING THE YEAR UNDER CONSIDERATION. THE LEARNED CIT(A) ALSO CONFIRMED THE SAME. 4. LEARNED AR SUBMITTED THAT THE ASSESSEE HAD R EMITTED ` 6.30 CRORES IN THE ESCROW ACCOUNT OF M/S. MACSTEEL INTERNATIONAL LIMITED AS DIRECTED BY HON'BLE BOMBAY HIGH COURT ON 16.10.2009. M/S. MACSTEEL INTERNATIONAL LIMITED HAD FILED A CASE AGAINST THE ASSESSEE FOR BREACH OF CONTRACT OF SALE IN RESPECT O F CONTRACT ENTERED ON 6.4.2005 AND 3.5.2005. SINCE THE DISPUTE WAS PERSISTING ON THE DATE OF B ALANCE - SHEET OF THE YEAR UNDER CONSIDERATION AND SINCE THE SETTLEMENT TOOK PLACE BEFORE FINALIZATION OF THE ACCOUNT OF THE YEAR UNDER CONSIDERATION, THE ASSESSEE CLAIMED THE AMOUNT OF ` 6.30 CRORES AS DEDUCTION IN THE YEAR UNDER CONSIDERATION. FURTHER THE ABOVE SAID AMOUNT HAS ALREADY BEEN REMITTED BY THE ASSESSEE TO ESCROW ACCOUNT. HE SUBMITTED THAT THE ACTION OF THE ASSESSEE IS IN ACCORDANCE WITH THE A CCOUNTING STANDARD - 4 ISSUED BY THE INSTITUTE OF CHARTERED ACCOUNTANTS OF INDIA. ACCORDINGLY HE SUBMITTED THAT THE LEARNED CIT(A) WAS NOT JUSTIFIED IN CONFIRMING THE DISALLOWANCE MADE BY THE ASSESSING OFFICER. 5. ON THE CONTRARY, LEARNED DEPARTMENTAL REPRESENTATIV E SUBMITTED THAT THE ACTUAL SETTLEMENT HAS TAKEN PLACE IN THE SUCCEEDING YEAR AND HENCE THE IMPUGNED EXPENDITURE CANNOT BE TREATED AS EXPENDITURE PERTAINING TO THE YEAR UNDER CONSIDERATION. 6. HAVING HEARD THE RIVAL SUBMISSIONS, WE ARE OF THE VIEW THAT T HERE IS MERIT IN THE CONTENTIONS OF THE ASSESSEE. WE HAV E NOTICED THAT THE DISPUTE IS RELATE D TO THE CONTRACT ENTERED INTO BETWEEN THE ASSESSEE AND M/S. MACSTEEL INTERNATIONAL LIMITED ON 6.4.2005 AND 3.5.200 5. THE ASSESSEE HAS REMITTED A SUM OF ` 6.30 C RORES TO ESCROW ACCOUNT OF M/S. MACSTEEL INTERNATIONAL LIMITED AS PER THE DIRECTION ISSUED BY HON'BLE BOMBAY HIGH COURT ON 16.10.2009 , SHREE PRECOATED STEELS LTD. 3 MEANING THEREBY THE DISPUTE WAS PENDING ON THE DATE OF B ALANCE - SHEET OF THE YEAR UNDER CONSIDERATION (31.3.2010) AND THE OUTCOME THEREOF WAS AWAITED. WE HAVE NOTICED THAT THE PARTIES REACHED A SETTLEMENT ON 30.4.2010 AND THE HONBLE HIGH COURT OF BOMBAY HAS ALSO PASSED ORDER ON 4.5.2010 . ACCORDING TO THE ASSESSEE, THE SETTLEMENT WAS REACHED BEFORE THE FINALIZATION OF THE A CCOUNTS OF THE YEAR ENDING 31.3.2010 AND H ENCE , AS PER THE ACCOUNTING STANDARD - 4 OF ICA I , THE ASSESSEE IS REQUIRED TO ACCOUNT FOR THE SAID LIABILITY ON 31.3.2010 . SINCE THE ASSESSEE , BEING A LIMITED COMPANY, IS GOVERNED BY THE ACCOUNTING STANDARD S AND SINC E THE ASSESSEE HAS FOLLOWED THE SAME IN MAKING THE IMPUGNED CLAIM, WE ARE OF THE VIEW THAT THERE IS NO INFIRMITY IN THE CLAIM SO MADE BY THE ASSESSEE. ACCORDINGLY, WE HOLD THE ABOVE SAID CLAIM IS ALLOWABLE DURING THE YEAR UNDER CONSIDERATION AND ACCORDINGL Y WE ARE OF THE VIEW THAT THE TAX AUTHORITIES ARE NOT JUSTIFIED IN REJECTING THE CLAIM OF THE ASSESSEE. ACCORDINGLY, WE SET ASIDE THE ORDER PASSED BY THE LEARNED CIT(A) AND DIRECT THE ASSESSING OFFICER TO ALLOW THE IMPUGNED CLAIM OF THE ASSESSEE IN AY 2010 - 11 . 7. IN THE RESULT, APPEAL FILED BY THE ASSESSEE IS ALLOWED. ORDER HAS BE EN PRONOUNCED IN THE COURT ON 20 . 10 .2016 SD/ - SD/ - (RAMLAL NEGI ) (B.R.BASKARAN) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI ; DATED : 20 / 10 / 20 1 6 COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE. BY ORDER, //TRUE COPY// ( DY./ASSTT. REGISTRAR) PS ITAT, MUMBAI