The DCIT, Circle-4, Ahmedabad V. Kalyan Industries Pvt.Ltd., Ahmedabad

ITA 495/AHD/2008

• Counselvise Citation: 49520514 RSA 2008
• Duration Of Justice: 3 year(s) 8 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-10-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Next Hearing Date: 17-10-2011
• Assessment Year: 2003-2004
• Appeal Filed On: 11-02-2008
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: B L YADAV
• Assessee Lawyers: VIJAY RANJAN
• Section: 143(3)

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL AT AHMEDABAD, D BENCH BEFORE S/SHRI BHAVNESH SAINI, JUDICIAL MEMBER AND A.L. GEHLOT, ACCOUNTANT MEMBER ITA NO.495/AHD/2008 [ASSTT. YEAR : 2003-2004] DCIT, CIR.4 AHMEDABAD. /VS. KALYAN INDUSTRIES P. LTD. 8 TH FLOOR, SAROVAR COMPLEX ST. XAVIER COLLEGE ROAD, NAVRANGPURA, AHMEDABAD. ( / APPELLANT) ( / RESPONDENT) ! / REVENUE BY : SHRI B.L. YADAV '#$ ! / ASSESSEE BY : SHRI VIJAY RANJAN %& $' / DATE OF HEARING : 17 TH OCTOBER, 2011 ()* $' / DATE OF PRONOUNCEMENT : 21 ST OCTOBER, 2011 !+ / O R D E R A.L. GEHLOT, ACCOUNTANT MEMBER : THIS IS REVENUES APPEAL AGAINST THE ORDER OF THE COMMISSIONER OF INCOME-TAX (APPEALS)-VIII, A HMEDABAD DATED 28.11.2007 ARISING OUT OF THE ORDER OF THE ASSESSING OFFICER PASSED UNDER SECTION 143(3) OF THE INCOME TAX ACT, 1961. 2. THE ONLY GROUND RAISED IN THIS APPEAL IS IN RESP ECT OF DISALLOWANCE OF RS.61,83,859/- TOWARDS INTEREST ON OVERDUE PAYMENTS TO SUPPLIERS. 3. DURING THE ASSESSMENT PROCEEDINGS, THE AO NOTICE D THAT THE ASSESSEE-COMPANY HAS CLAIMED EXPENDITURE OF RS.61,83,859/- AS PER NOTE-5 OF STATEMENT OF COMPUTATION OF TOTAL INCOME. AFTER CONSIDERING THE ASSESSEES SUBMISSIO N, THE AO WAS OF THE VIEW THAT THE CLAIM OF THE EXPENDITURE IS NOTHING BUT A WELL-THOUGHT OU T PLAN TO REDUCE THE INCIDENCE OF TAX. THE LIABILITY OF SUCH EXPENDITURE WAS NOT ASCERTAINED O R PROVIDED FOR IN THE BOOKS OF ACCOUNTS AS ON 31-3-2003, THEREFORE, THE SAME IS NOT ALLOWABLE AS EXPENDITURE. IN THE FIRST APPEAL BY THE ITA NO.495/AHD/2008 -2- ASSESSEE, THE CIT(A) AFTER CONSIDERING THE ASSESSEE S SUBMISSION AND REMAND REPORT OF THE AO DELETED THE SAID ADDITION BY OBSERVING THAT THE ASS ESSEE HAS CLAIMED LIABILITY TOWARDS INTEREST ON OVERDUE PAYMENTS TO SUPPLIERS AND THE LIABILITY HAS ARISEN DURING THE YEAR IN THE CASE OF THE ASSESSEE ON RECEIPT OF THE DEBIT NOTE. THE AGGRIEV ED REVENUE IS APPEAL BEFORE US. 4. THE LEARNED DR HAS RELIED UPON THE ORDER OF THE AO AND SUBMITTED THAT THE ASSESSEE DID NOT MAKE ANY CLAIM IN THE BOOKS OF ACCOUNTS AND THEREFORE THE SAME WAS NOT CLAIMED WHILE FILING THE RETURN. THEREFORE, THE CLAIM OF T HE ASSESSEE IS NOT JUSTIFIABLE. THE LEARNED AR, ON THE OTHER HAND, RELIED UPON THE ORDER OF THE CIT(A) AND SUBMITTED THAT THERE IS NO DISPUTE ABOUT THE ALLOWABILITY OF THE ASSESSEES CL AIM AND THE ONLY DISPUTE IS WITH REGARD TO PERIOD OF CLAIM. THEREFORE, THE CIT(A) IS JUSTIFIE D IN DELETING THE ADDITION. 5. WE HAVE HEARD BOTH THE PARTIES AND RECORD PERUSE D. WE FIND THAT BEFORE DELETING THE ADDITION, THE CIT(A) HAS CONSIDERED THE FACTS OF TH E CASE AFTER OBTAINING REMAND REPORT FROM THE AO. THE MAIN REASON FOR THE DISALLOWANCE BY TH E AO IS THAT THE ASSESSEE DID NOT ACCOUNT FOR THE INTEREST CLAIM IN THE BOOKS OF ACCOUNTS AND SAME WAS CLAIMED BY WAY OF NOTE ATTACHED TO THE RETURN OF INCOME. WE DO NOT FIND ANY SUBSTA NCE IN THIS REASON GIVEN BY THE AO FOR DISALLOWING THE CLAIM OF THE ASSESSEE AS THE NOTE T O THE RETURN OF INCOME IS PART OF THE RETURN AND SUCH CLAIM IS REQUIRED TO BE TREATED AS A CLAIM IN THE RETURN OF INCOME. IT IS SETTLED PROPOSITION OF LAW THAT POSTING OF THE ACCOUNTING E NTRIES IN THE BOOKS OF ACCOUNTS DOES NOT DECIDE THE ALLOWABILITY OR DISALLOWABILITY OF THE E XPENDITURE. THE CLAIM OF THE EXPENDITURE IS ALLOWABLE IN ACCORDANCE WITH LAW. IN THE CASE UNDE R CONSIDERATION, THE ASSESSEE FOLLOWED MERCANTILE SYSTEM OF ACCOUNTING, INTEREST EXPENDITU RE HAS BEEN CRYSTLISED/ACCRUED DURING THE YEAR AS THE ASSESSEE IN SUPPORT OF THE CLAIM FURNIS HED THE DEBIT NOTE FROM THE RESPECTIVE PARTIES. THESE DEBIT NOTES AND DETAILS SHOWED THAT THE SUPPLIERS HAVE MADE CLAIM FOR SUCH INTEREST AGAINST THE ASSESSEE DURING THE YEAR ITSEL F. THE CIT(A) HAS ALSO CONSIDERED VARIOUS JUDGMENTS AND THE SAME WERE DISTINGUISHED; THAT THE FACTS IN THE JUDGMENTS CITED WHERE THAT THERE WERE LITIGATIONS BEFORE THE COURTS AND THE LI ABILITIES WERE IN DISPUTE. WHEREAS IN THE INSTANT CASE UNDER CONSIDERATION THERE WAS NO LITIG ATION. THE CIT(A) RELIED UPON THE JUDGMENT OF THE HONBLE SUPREME COURT IN THE CASE O F KEDARNATH JUTE MANUFACTURING CO. LTD., 82 ITR 363 (SC) AND HELD THAT THE LIABILITY H AS BEEN ARISEN DURING THE YEAR AND THE SAME IS ALLOWABLE. THE CIT(A) ALSO NOTED THAT THE ASSES SEE HAS CLAIMED INTEREST ON OVERDUE PAYMENTS TO SUPPLIERS AND THE LIABILITY HAS ARISEN ON RECEIPT OF DEBIT NOTES FROM THE PARTIES. SINCE THE LIABILITY HAS BEEN ACCRUED DURING THE YEA R, THE SAME IS ALLOWABLE. IN THE LIGHT OF THE ABOVE DETAILED DISCUSSION MADE BY THE CIT(A) AND CO NTRARY TO THAT NO MATERIAL HAS BEEN EITHER ITA NO.495/AHD/2008 -3- AVAILABLE ON RECORD NOR HAS BEEN POINTED OUT, UNDER THE CIRCUMSTANCES, WE CONFIRM THE ORDER OF THE CIT(A) ON THIS ISSUE. 6. IN THE RESULT, REVENUES APPEAL IS DISMISSED. ORDER PRONOUNCED IN OPEN COURT ON THE DATE MENTIONE D HEREINABOVE. SD/- SD/- (BHAVNESH SAINI) JUDICIAL MEMBER (A.L. GHELOT) ACCOUNTANT MEMBER COPY OF THE ORDER FORWARDED TO: 1) : ASSESSEE 2) : DEPARTMENT 3) : CIT(A) 4) : CIT CONCERNED 5) : DR, ITAT. BY ORDER DR/AR, ITAT, AHMEDABAD