M/s. National Fertilizers Ltd., New Delhi V. DCIT, New Delhi

ITA 5122/DEL/2014

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 2722 (ITAT-DELHI)
• Duration Of Justice: 2 year(s) 10 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-07-2017
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: C
• Next Hearing Date: 21-06-2017
• Assessment Year: 2010-2011
• Appeal Filed On: 17-09-2014
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: SEFALI SAWROP
• Assessee Lawyers: ASHISH GOEL; VED JAIN ADV MS JYOTI GUPTA
• Keywords: Question of law
• Section: 43B; 37(1); 145

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH : E , NEW DELHI BEFORE SH. H.S. SIDHU , JUDICIAL M EMBER AND SH. O.P. KANT , ACCOUNTANT MEMBER ITA NO. 5122 /DE L/ 2014 ASSESSMENT YEAR : 2010 - 11 NATIONAL FERTILIZERS LTD., SCOPE COMPLEX CORE - III, 7 - INSTITUTIONAL AREA, LODHI ROAD, NEW DELHI VS. DCIT, CIRCLE - 13(1), NEW DELHI PAN : AAACN0189N (APPELLANT) (RESPONDENT) AND ITA NO. 5201/DEL/2014 ASSESSMENT YEAR : 2010 - 11 DCIT, CIRCLE - 13(1), NEW DELHI VS. NATIONAL FERTILIZERS LTD., SCOPE COMPLEX, CORE - III, 7 - INSTITUTIONAL AREA, LODHI ROAD, NEW DELHI PAN : AAACN0189N (APPELLANT) (RESPONDENT) ASSESSEE BY SH. VED JAIN, ADV; MS. JYOTI GUPTA, CA & SH. ASHISH GOEL, CA DEPARTMENT BY MS. SEFALI SA WROP, CIT(DR) DATE OF HEARING 13.07.2017 DATE OF PRONOUNCEMENT 28.07.2017 ORDER PER O.P. KANT , A. M. : THESE APPEALS BY THE ASSESSEE AS WELL AS BY THE REVENUE HAVE BEEN FILED AGAINST THE ORDER OF LEARNED COMMISSIONER OF INCOME TAX (APPEALS) - XVI, DELHI [IN SHORT THE CIT(A) ] DATED 09.04.2013 . SINCE BOTH 2 ITA NO. 5122/DEL/2014 & 5201/DEL/2014 THE APPEALS EMANATE FROM THE SAME IMPUGNED ORDER, THEY ARE BEING DECIDED BY A CONSOLIDATED ORDER. T HE ASSESSEE IN ITA NO. 5122/DEL/2014, RAISED THE FOLLOWING GROUNDS OF APPEAL: 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) [CIT(A)] IS BAD IN THE EYE OF LAW AND ON FACTS. 2(I) ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LEARNED CIT(A) HAS ERRED BOTH ON FACTS AND IN LAW IN CONFIRMING THE ADDITION OF AN AMOUNT OF RS.4,20,00,000/ - MADE BY THE AO ON ACCOUNT OF SLOW MOVING, NON - MOVING AND OBSOLETE STORES WRITTEN OFF DURING THE YEAR. (II) THAT THE SAID ADDITION HAS BEEN CONFIRMED REJECTING THE EXPLANATION AND EVIDENCES BROUGHT O N RECORD BY THE ASSESSEE. 3. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LEARNED CIT(A) HAS ERRED BOTH ON FACTS AND IN LAW IN CONFIRMING THE ADDITION OF RS.14,02,00,000/ - MADE BY THE AO ON ACCOUNT OF DEFINED CONTRIBUTION OF PENSION SCHEME. THAT THE APPELLANT CRAVES LEAVE TO ADD, AMEND OR ALTER ANY OF THE GROUNDS OF APPEAL. 2. THE REVENUE RAISED THE FOLLOWING GROUNDS OF APPEAL IN ITA NO. 5201/DEL/2014: 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) ERRED IN LAW AND IN FACTS OF THE CASE BY IGNORING THE FACT THAT SEC. 145 OF THE I T ACT, PERMITS USE OF ONE TYPE OF ACCOUNTING SYSTEM IN A PARTICULAR YEAR AND MIXED ACCOUNTING SYSTEM IS NOT AT ALL A LLOWED. 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) ERRED IN LAW AND IN FACTS OF THE CASE BY NOT CONSIDERING THE FACT THAT AS PER PROVISIONS OF SEC - 145 OF THE ACT, WHICH IS MANDATORY FOR EVERY ASSESSEE. 3. ON THE FACTS AND CIRCUMSTANCE S OF THE CASE, THE LD. CIT(A) ERRED IN LAW AND IN FACTS OF THE CASE BY IGNORING THE PROVISIONS OF AS - 15 3 ITA NO. 5122/DEL/2014 & 5201/DEL/2014 WHERE IN THE PROVISIONS ARE LAID THAT ONLY ASCERTAINED AMOUNT IS ALLOWABLE. 4. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) ERRED IN LAW AND IN FACTS OF THE CASE BY PASSING THE ORDER ON THE BASIS OF DECISION IN THE CASE OF THE ASSESSEE IN AY 2009 - 10 AND IGNORING THE FACT THAT AN APPEAL IS PENDING BEFORE THE HON'BLE ITAT ON THE ISSUE OF ACCRUED INTEREST AND DECISION IS STILL AWAITED. 5. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS BY NOT CONSIDERING THE DEMURRAGE & WHARFAGE EXPENSES AS PENALTY. 6. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. CIT(A)HAS ERRED IN LAW AND ON FACTS IN NOT APP RECIATING THE PROVISION LAID DOWN IN EXPLANATION TO SECTION 37(1) WHEREIN IT HAS BEEN SAID ANY AMOUNT PAID FOR THE PURPOSE WHICH IS AN OFFENCE OR WHICH IS PROHIBITED BY LAW SHALL NOT BE ALLOWED AS EXPENDITURE. 7. ON THE FACTS AND CIRCUMSTANCES OF THE CASE , THE LD. CIT(A)HAS ERRED IN LAW AND ON FACTS BY IGNORING THE FACT THAT THE RAILWAY ACT HAS DEFINED THE DEMURRAGE AND WHARFAGE AS THE CHARGE LEVIED, CHARGE MEANS THE BLAME OR ACCUSATION HENCE PENALTY. 8. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) ERRED IN LAW AND IN FACTS OF THE CASE BY PASSING THE ORDER ON THE BASIS OF DECISION IN THE CASE OF THE ASSESSEE IN AY 2009 - 10 AND IGNORING THE FACT THAT AN APPEAL IS PENDING BEFORE THE HON'BLE I TAT ON THE ISSUE OF DISALLOWANCE OF THE DEMURRAGE & WHARFAGE EXPENSES AND DECISION IS STILL AWAITED. 9. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS BY IGNORING THE FACT THAT THE PROVISIONS OF AS - 15 LAYS DOWN TH AT THE ASCERTAINED LIABILITIES SHALL BE ALLOWED ON PAYMENT BASIS ONLY. 10. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. CIT(A)HAS ERRED IN LAW AND ON FACTS BY IGNORING THE PROVISIONS OF SECTION 43B CLAUSE F SAYS THAT THE POST RETIREMENT BENEFITS AR E ALLOWABLE ONLY AT THE TIME OF ACTUAL PAYMENT. 4 ITA NO. 5122/DEL/2014 & 5201/DEL/2014 11. ON THE FACTS AND CIRCUMSTANCES OF CASE, THE APPELLANT CRAVES TO BE ALLOWED TO ADD ANY FRESH GROUNDS OF APPEAL AND/OR DELETED OR AMEND ANY OF THE GROUNDS OF APPEAL. 3. BRIEFLY STATED FACTS OF THE CASE ARE THAT THE ASSESSEE COMPANY IS A PUBLIC SECTOR UNDERTAKING ENGAGED IN THE BUSINESS OF MANUFACTURING AND TRADING OF FERTILIZERS AND OTHER RELATED PRODUCTS. THE ASSESSEE COMPANY FILED ITS RETURN OF INCOME ON 01.10.2010 DECLARING INCOME OF RS.247,29,13,433/ - . THE RETURN WAS PROCESSED AND THE CASE WAS SELECTED FOR SCRUTINY. CONSEQUENTLY, THE ASSESSING OFFICER COMPLETED THE ASSESSMENT AND ASSESSED THE INCOME AT RS.292,64,33,430/ - BY MAKING THE FOLLOWING ADDITIONS: A . ADDITION ON ACCOUNT OF INTEREST ACCRUED ON ADVANCE GIVEN TO M/S. MARSAN (RS.6,48,20,000/ - B . DISALLOWANCE OF DEMURRAGE CHARGES (RS.6,55,00,000/ - ) C . DIMINUTION OF SLOW MOVING SPARES (RS.4,20,00,000/ - ) D . PROVISION OF RETIREMENT BENEFITS (RS.14,10,00,000/ - ) E . PROVISIO N FOR DEFINED CONTRIBUTION PENSION SCHEME (RS.14,02,00,000/ - ) 3.1 AGGRIEVED, THE ASSESSEE FILED A N APPEAL BEFORE THE CIT(A) WHO PARTLY ALLOWED THE APPEAL AND CONFIRMED THE ADDITION OF RS.4,20,00,000/ - ON ACCOUNT OF SLOW MOVING, NON - MOVING AND OBSOLETE STO RES WRITTEN OFF DURING THE YEAR AND RS. 14,02,00,000/ - ON ACCOUNT OF PENSION SCHEME. AGGRIEVED, THE ASSESSEE AS WELL AS THE REVENUE IS BEFORE US. ITA NO. 5122/DEL/2014 4. FIRST, WE TAKE UP THE APPEAL OF THE ASSESSEE. GROUNDS NO. 1 & 4 ARE GENERAL IN NATURE, NOT NEED TO ADJUDICATE UPON. 5 ITA NO. 5122/DEL/2014 & 5201/DEL/2014 5. IN GROUND NO. 2(I) AND (II), THE ASSESSEE HAS CHALLENGED THE ADDITION OF RS.4,20,00,000/ - MADE ON ACCOUNT OF SLOW MOVING, NON - MOVING AND OBSOLETE STORES WRITTEN OFF. 5.1 AT THE TIME OF HEARING, LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ISSUE IN DISPUTE IS SQUARELY COVERED BY THE JUDGMENT OF HON BLE JURISDICTIONAL HIGH COURT IN ASSESEE S OWN CASE FOR ASSESSMENT YEARS 2006 - 07, 2007 - 08, 2008 - 09 AND 2009 - 10 IN ITA NOS. 783,785,815 AND 816 OF 2016 DATED 08.02.2 017 . 5.2 ON THE OTHER HAND, THE SR. DEPARTMENTAL REPRESENTATIVE RELIED ON THE ORDER OF ASSESSING OFFICER AND CONTENTED THAT THE ASSESSEE HAS NOT GIVEN ANY SATISFACTORY REASONS FOR CHANGING THE METHOD OF ACCOUNTING, THEREFORE, THE ADDITION MADE BY THE AS SESSING OFFICER IS JUSTIFIED. 5.3 WE HAVE HEARD THE RIVAL SUBMISSION AND PERUSED THE RELEVANT MATERIAL ON RECORD. WE FIND THAT THE ISSUE IN DISPUTE IS SQUARELY COVERED BY THE DECISION OF HON BLE JURISDICTIONAL HIGH COURT IN THE ASSESSEE S OWN CASE (SUPRA) WHEREIN THE HON BLE HIGH COURT OBSERVED AS UNDER: 6. HAVING REGARD TO THESE CIRCUMSTANCES, THE REVENUE S CONTENTION THAT THE ACCEPTED OF 5% AS THE BASIS FOR VALUING THE SLOW MOVING STOCK BEING UNSCIENTIFIC, IS BASELESS IN OUR OPINION. ON CE THE ENGINEERING EXPERT EXAMINED ALL THE HEADS OF STOCK VALUED THEM, TO THE BEST OF HIS JUDGMENT, AND IN THE ABSENCE OF ANY FINDING THAT THE 5% WAS NOT RELATABLE TO SUCH VALUATION WITHOUT AN ALTERNATIVE VALUATION OR THAT IT IS A FLAWED METHOD OF VALUATIO N, THE AO COULD NOT HAVE REJECTED WHAT WAS OFFERED AS THE REDUCED VALUE OF THE SLOW - MOVING STOCK. IN OTHER WORDS, THERE IS NOTHING ON THE RECORD TO DOUBT THE BONAFIDES OF THE VALUATION. IN THE EVENT OF LIKELIHOOD OF THE STOCKS REALIZING A HIGHER AMOUNT THA N THE VALUE SHOWN, THE SAME WOULD BE REFLECTED IN THE SUBSEQUENT YEAR IN THE INCOME OR PROFIT OF THE ASSESSEE, THE REVENUE S CONTENTION IS WITHOUT ANY MERIT. 6. RESPECTFULLY FOLLOWING THE DECISION OF THE HON BLE JURISDICTIONAL HIGH COURT, WE DELETE THE ADDITION OF RS.4,20,00,000/ - MADE BY THE ASSESSING OFFICER. ACCORDINGLY, GROUND NOS. 2(I) & (II) ARE ALLOWED. 6 ITA NO. 5122/DEL/2014 & 5201/DEL/2014 7. IN GROUND NO. 3, THE ASSESSEE DISPUTED THE ADDITION OF RS. 14,02,00,000/ - MADE BY THE ASSESSING OFFI CER ON ACCOUNT OF DEFINED CONTRIBUTION TO PENSION SCHEME . 7.1 LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT THIS ISSUE IS ALSO SQUARELY COVERED BY THE JUDGMENT OF HON BLE JURISDICTION HIGH COURT IN ASSESSEE S OWN CASE FOR ASSESSMENT YEARS 2006 - 07 TO 20 09 - 10 (SUPRA) . LEARNED COUNSEL ALSO RELIED ON THE DECISION HON BLE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS. RANBAXY LABORATORIES LTD. [2011] 334 ITR 341. 7.2 ON THE CONTRARY, THE LEARNED SR.DR RELIED ON THE ORDER OF THE ASSESSING OFFICER. 7.3 WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE RELEVANT MATERIAL ON RECORD. WE FIND THAT THE ISSUE IN DISPUTE IS SQUARELY COVERED BY THE DECISION OF HON BLE JURISDICTIONAL HIGH COURT IN THE ASSESSEE S OWN CASE (SUPRA) WHEREIN THE HON BLE HIGH COURT OB SERVED AS UNDER: 9. THE COURT IS UNABLE TO ACCEPT THIS SUBMISSION. THE MAKING OF A PROVISION TO MEET A CONTINGENT LIABILITY NEED NOT BE IN ORDER TO MEET SUCH LIABILITY ENTIRELY IN THE YEAR OF ITS CREATION. THE PROVISION HAVING BEEN MADE ON THE BASIS OF AN ACTUARIAL REPORT, WHICH IS NOT SHOWN BY THE REVENUE TO BE UNACCEPTABLE ON THE GROUND THAT IT IS NOT BASED ON KNOWN ACCOUNTING OF FINANCIAL PRINCIPLES, THE MERE FACT THAT THE ACTUAL PAY OUT IN A PARTICULAR AY MAY BE FAR LESS THAN THE PROVISION CANNOT PROV IDE A JUSTIFICATION TO DENY THE DEDUCTION. THE COURT CONCURS WITH THE VIEW OF THE CIT(A) AND ITAT THAT THE PROVISIONS DOES NOT ATTRACT SECTION 43B OF THE ACT. THE CONCURRENT FINDING OF THE CIT(A) AND THE ITAT ON THE ABOVE ISSUE DOES NOT GIVE RISE TO ANY SU BSTANTIAL QUESTION OF LAW. 7.4 RESPECTFULLY FOLLOWING THE ABOVE DECISION OF THE HON BLE HIGH COURT, WE UPH O LD THE ADDITION OF RS.14,02,00,000/ - MADE THE ASSESSING OFFICER AND CONFIRMED BY THE CIT(A). ACCORDINGLY, THE GROUNDS OF APPEAL IS DISMISSED. 8. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. 7 ITA NO. 5122/DEL/2014 & 5201/DEL/2014 ITA NO. 5201/DEL/2014 9. NOW, WE TAKE UP THE APPEAL OF THE REVENUE. IN THE GROUNDS NO. 1 TO 4 ARE REGARDING THE INTEREST ACCRUED ON ADVANCE GIVEN TO M/S. KARSAN. 9.1 L EARNED SR. DR RELIED ON THE ORDER THE ASSESSING OFFICER. 9.2 LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ISSUE IS SQUARELY COVERED BY THE JUDGMENT OF HON BLE JURISDICTIONAL HIGH COURT IN ASSESSEE S OWN CASE FOR ASSESSMENT YEARS 2006 - 07 TO 2009 - 10 (SUPRA). 9.3 WE HAV E HEARD THE RIVAL SUBMISSION AND PERUSED THE RELEVANT MATERIAL ON RECORD. WE FIND THAT THE ISSUE IN DISPUTE IS SQUARELY COVERED BY THE DECISION OF HON BLE JURISDICTIONAL HIGH COURT IN THE ASSESSEE S OWN CASE (SUPRA) WHEREIN THE HON BLE HIGH COURT OBSERVED AS UNDER: 10. THE THIRD GROUND URGED BY THE REVENUE IS REGARDING THE FAILURE BY ITAT TO DISCLOSE AS PART OF ITS INCOME, THE INTEREST ACCRUED ON THE ADVANCE MADE BY IT TO M/S. KARSAN. LEARNED COUNSEL FOR THE REVENUE POINTED OUT THAT BY A JUDGMENT DATED 4 TH DECEMBER 2006 OF THIS COURT, THE ARBITRAL AWARD IN FAVOUR OF THE ASSESSEE UNDER THE ARBITRATION ACT, 1940 WAS MADE RULE OF THE COURT. HE SUBMITTED THAT ALTHOUGH UP TO THAT DATE IT COULD BE SAID THAT THE INTEREST ON THE ADVANCE HAD NOT CRYSTALLIZED (AS W AS HELD BY THIS COURT IN ITS ORDER DATED 24TH SEPTEMBER, 2012 IN ITA 541/2012 IN THE ASSESSEE'S OWN CASE FOR THE AY 2005 - 2006), FOR THE SUBSEQUENT AYS THE RIGHT TO RECEIVE INTEREST HAD ACCRUED TO THE ASSESSEE AND SHOULD HAVE BEEN ADDED TO ITS INCOME. 11. LEARNED COUNSEL FOR THE ASSESSEE, ON THE OTHER HAND, STATES THAT THE CONCEPT OF 'REAL INCOME HAS BEEN ACCEPTED BY THE SUPREME COURT IN GODHRA ELECTRICITY CO. LTD. V. CIT, (1997) 225 ITR 746 (SC) AND THIS WAS FOLLOWED BY THIS COURT IN ITS DECISION DATED 19 LH MAY, 2015 IN ITA NO.268/2008 (LIQUIDATOR POLYMERLAND INDIA PVT. LTD. V. DCLT). IT IS POINTED OUT THAT WHERE NO PART OF THE ADVANCE HAS BEEN ABLE TO BE RECOVERED BY THE ASSESSEE, NOTWITHSTANDING THE AWARD IN ITS FAVOUR, NO 'REAL INCOME' CAN BE SAID TO HA VE ACCRUED TO IT. 12.THE ITAT HAS IN THE IMPUGNED ORDER HELD AS UNDER: 8 ITA NO. 5122/DEL/2014 & 5201/DEL/2014 'THERE IS NO DISPUTE THAT THE ICA HAS AWARDED INTEREST TO THE ASSESSEE @5% P.A. ON THE ADVANCE MADE TO M/S. KARSAN. IT IS ALSO NOT DISPUTED THAT THE ASSESSEE COULD NOT MAKE RECOVERY A GAINST THE ADVANCE (PRINCIPAL AMOUNT) OF RS.130.69 CRORES, AN AMOUNT OF RS.1.05 CRORES ONLY COULD BE RECOVERED LEAVING BALANCE ADVANCE OF RS.129.64 CRORES WHICH COULD NOT BE RECOVERED TILL DATE. THE NOTATIONAL INTEREST AWARDED BY THE INTERNATIONAL COURT OF ARBITRATION, WHICH HAS NOW ATTAINED FINALITY IS A HYPOTHETICAL INCOME WHICH CANNOT BE SUBJECTED TO TAX. MERELY BECAUSE THE SAIE AMOUNT HAS BEEN AWARDED BY WAY OF AN ORDER, DOES NOT MEAN THAT THE ASSESSEE HAS RECEIVED SUCH INCOME. THE ASSESSEE FOLLOWED ME RCANTILE SYSTEM OF ACCOUNTING WHERE THERE CANNOT BE A SITUATION OF HYPOTHETICAL INCOME BEING TAXED. 13. INDEED, IT IS SEEN THAT NO PART OF THE ADVANCE GIVEN BY THE ASSESSEE TO M/S. KARSAN HAS BEEN ABLE TO BE RECOVERED BY IT. AS POINTED OUT BY LEARNED COUNSEL FOR THE ASSESSEE, THERE WAS A CASE REGISTERED WITH THE CENTRAL BUREAU OF INVESTIGATION (CBI) IN THAT REGARD AND ANY PROSPECT OF THE MONEY BEING RECOVERED HAS ALL BUT VANISHED. SINCE NO PART OF THE PRINCIPAL AMOUNT COULD ACTUALLY BE RECOVERED BY THE ASSESSEE, THERE WAS NO REAL INCOME' AND THE QUESTION OF ADDING ANY NOTIONAL ACCRUED INTEREST TO ITS INCOME ON SUCH AMOUNT DOES NOT ARISE. IN THE ENTIRE FACTS AND CIRCUMSTANCES OF THE CASE, T HE COURT AGREES WITH THE CONCURRENT FINDINGS OF THE CIT (A) AND ITAT. NO SUBSTANTIAL QUESTION OF LAW ARISES AS REGARD THIS ISSUE AS WELL. 9.4 RESPECTFULLY FOLLOWING THE ABOVE DECISION OF HON BLE HIGH COURT, WE UPHOLD THE ORDER OF THE CIT(A) REGARDING T HE ISSUE IN DISPUTE. ACCORDINGLY, GROUNDS NO. 1 TO 4 ARE DISMISSED. 10. GROUND NO. 5 TO 8 ARE REGARDING THE ADDITION MADE ON ACCOUNG OF DISALLOWANCE OF DEMURRAGE AND W H ARFAGE EXPENSES. 10. 1 LEARNED SR. DEPARTMENTAL REPRESENTATIVE RELIED ON THE ORDER OF THE LEARNED ASSESSING OFFICER. 10. 2 LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT THIS ISSUE IS SQUARELY COVERED BY THE JUDGMENT OF HON BLE JURISDICTIONAL HIGH COURT IN 9 ITA NO. 5122/DEL/2014 & 5201/DEL/2014 THE ASSESEE S OWN CASE FOR ASSESSMENT YEAR 2006 - 07, 2007 - 08, 2008 - 09 AND 2009 - 10 IN ITA NOS. 551,782,784 AND 817 OF 2016, DATED 24.04.2017. 10.3 WE HAVE HEARD THE RIVAL SUBMISSION OF THE PARTIES AND PERUSED THE RELEVANT MATERIAL ON RECORD. WE FIND THAT THIS ISSUE IS ALSO SQUARELY COVERED BY THE DECISIONS OF HON BLE JURISDICTIONAL HIGH C OURT (SUPRA), WHERE THE HON BLE COURT HELD AS UNDER: 3. THESE FOUR APPEALS SEEK TO RAISE A COMMON QUESTION WHETHER THE ITAT WAS JUSTIFIED IN DELETING THE DISALLOWANCE OF DEMURRAGE AND WHARFAGE CHARGES, WHICH ACCORDING TO THE REVENUE WAS IN THE NATURE OF PENALTY AND, THEREFORE, NOT AMENABLE TO DEDUCTION UNDER SECTION 37(1) OF THE INCOME TAX ACT, 1961? 4. THE SAID QUESTION ALREADY STANDS ANSWERED IN FAVOUR OF THE ASSESSEE AND AGAINST THE REVENUE BY THE JUDGMENT OF THIS COURT IN MAHALAXMI SUGAR MILLS COMPANY V. COMMISSIONER OF INCOME TAX, (1986) 157 ITR 683 (DELHI) AND OF THE ALLAHABAD HIGH COURT IN NANHOOMAL JYOTI PRASAD V. COMMISSIONER OF INCOME TAX, (1980) 123 ITR 269 (ALL.) 5. HOWEVER, LEARNED COUNSEL FOR THE REVENUE SEEKS TO REPLY O F THE JUDGMENT OF THE RAJASTHAN HIGH COURT IN TATA IRON & STEEL CO. LTD. V. UNION OF INDIA (DECISION DATED 28 TH JANUARY, 2014 IN SB CIVIL MISC. APPEAL NO. 65/1997 ). HAVING PERUSED THE SAID JUDGMENT, THE COURT IS NOT PERSUADED TO TAKEN A VIEW DIFFERENT FROM THAT EARLIER TAKEN BY THIS COURT MAHALAXMI SUGAR MILLS COMPANY V. COMMISSIONER OF INCOME - TAX (SUPRA). 10.3 RESPECTFULLY FOLLOWING THE ABOVE DECISION OF THE HON BLE JURISDICTIONAL HIGH COURT, WE UPHOLD THE ORDER OF THE LEARNED CIT(A). ACCORDINGLY, GROUN DS NO. 5 TO 8 OF THE REVENUE ARE DISMISSED. 11. IN GROUND NO. 9 & 10 IS REGARDING THE ADDITION MADE ON ACCOUNT OF PROVISION OF POST RETIREMENT BENEFITS. 11.1 LEARNED SR. DR RELIED ON THE ORDER OF THE ASSESSING OFFICER. 11.2 LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT THIS ISSUE IS ALSO SQUARELY COVERED BY THE JUDGMENT OF HON BLE JURISDICTIONAL HIGH COURT IN 10 ITA NO. 5122/DEL/2014 & 5201/DEL/2014 THE ASSESEE S OWN CASE FOR ASSESSMENT YEAR 2006 - 07, 2007 - 08, 2008 - 09 AND 2009 - 10 (SUPRA). 10.3 WE HAVE HEARD THE R IVAL SUBMISSION OF THE PARTIES AND PERUSED THE RELEVANT MATERIAL ON RECORD. WE FIND THAT THIS ISSUE IS ALSO SQUARELY COVERED BY THE DECISIONS OF HON BLE JURISDICTIONAL HIGH COURT (SUPRA), WHERE IN THE HON BLE COURT HELD AS UNDER: 6. THE OTHER QUESTION R AISED BY THE REVENUE CONCERNS THE PROVISION MADE FOR SUPERANNUATION/POST - RETIREMENT BENEFITS OF THE EMPLOYEES OF THE ASSESSEE. THE ASSESSEE MADE THE PROVISION N THE BASIS OF AN ACTUARIAL REPORT. ITS CONSISTENT STAND WAS ACCEPTED BY THE COMMISSIONER OF INCO ME TAX (APPEALS) [CIT(A)] WHO CAME TO THE CONCLUSION THAT IT WAS NOT AN ITEM OF DEDUCTION COVERED UNDER SECTION 43B OF THE ACT. THE ITAT IN THE IMPUGNED ORDER FOLLOWED THE DECISION OF THE SUPREME COURT IN BHARAT EARTH MOVERS V CIT, [2 000] 245 1TR 428 (SC) AND THE DECISION OF THIS COURT IN CIT VS . BHARAT HEAVY ELECTRICAL LT D. [2013] 352 ITR 08 (DEL) AND UPHELD THE ORDER OF THE CIT (A). 7. THE COURT'S ATTENTION IS DRAWN BY LEARNED COUNSEL FOR THE ASSESSEE TO THE DECISION IN CIT V RANBAXY LABORATORIES LTD. ( 2011) 334 ITR 341 (DEL). THE RATIO OF THE ABOVE DECISION IS THAT WHERE THERE ARE ACTUARIAL REPORTS SUPPORTING THE PROVISION TO MEET A CONTINGENT LIABILITY, IT CANNOT BE GONE BEHIND BY THE ASSESSING OFFICER (AO) UNLESS IT IS SHOWN TO BE NOT BASED ON ANY SCI ENTIFIC OR KNOW FINANCIAL PRINCIPLES. 8. IT IS SOUGHT TO BE URGED BY LEARNED COUNSEL FOR THE REVENUE THAT ONLY BECAUSE THE ACTUAL PAYOUTS BY WAY OF POST - RETIREMENT BENEFITS TO THE EMPLOYEES IN THE AYS IN QUESTION WERE FAR LESS THAN THE PROVISION MADE FOR THAT PURPOSE, THE ACTUARIAL REPORT CANNOT BE SAID TO HAVE BEEN PREPARED ON A SCIENTIFIC BASIS AND WAS THEREFORE NOT BINDING ON THE AO. 9. THE COURT IS UNABLE TO ACCEPT THIS SUBMISSION. THE MAKING OF A PROVISION TO MEET A CONTINGENT LIABILITY NEED NOT BE IN ORDER TO MEET SUCH LIABILITY ENTIRELY IN THE YEAR OF ITS CREATION. THE PROVISION HAVING BEEN MADE ON THE BASIS OF AN ACTUARIAL REPORT, WHICH IS NOT SHOWN BY THE REVENUE TO BE UNACCEPTABLE ON THE GROUND THAT IT IS NOT 11 ITA NO. 5122/DEL/2014 & 5201/DEL/2014 BASED ON KNOWN ACCOUNTING OR FINANC IAL PRINCIPLES, THE MERE FACT THAT THE ACTUAL PAY OUT IN A PARTICULAR AY MAY BE FAR LESS THAN THE PROVISION CANNOT PROVIDE A JUSTIFICATION TO DENY THE DEDUCTION. THE COURT CONCURS WITH THE VIEW OF THE CIT (A) AND ITAT THAT THE PROVISION DOES NOT ATTRACT SE CTION 43 B OF THE ACT. THE CONCURRENT FINDING OF THE CIT(A) AND THE ITAT ON THE ABOVE ISSUE DOES NOT GIVE RISE TO ANY SUBSTANTIAL QUESTION OF LAW. 10.4 RESPECTFULLY FOLLOWING THE ABOVE DECISION OF THE HON BLE JURISDICTIONAL HIGH COURT, WE UPHOLD THE OR DER OF THE LEARNED CIT(A). ACCORDINGLY, GROUNDS NO. 9 & 10 OF THE REVENUE ARE DISMISSED. 11. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISMISSED. 12. TO SUM UP, THE APPEAL OF THE ASSESSEE IS PARTLY ALLOWED AND THE APPEAL OF THE REVENUE IS DISMISSED. THE DECISION IS PRONOUN CED IN THE OPEN COURT ON 2 8 T H JULY , 201 7 . S D / - S D / - ( H.S. SIDHU ) ( O.P. KANT ) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 2 8 T H JULY , 201 7 . RK / - (D.T.D) COPY FORWARDED TO: 1 . APPELLANT 2 . RESPONDENT 3 . CIT 4 . CIT(A) 5 . DR ASST. REGISTRAR, ITAT, NEW DELHI