Mateshwari Indarani Contractors Pvt. Ltd., UDAIPUR V. ACIT, UDAIPUR

ITA 57/JODH/2013

• Counselvise Citation: [2013] 120 COUNSELVISE.COM (IT) 4917 (ITAT-JODHPUR)
• Duration Of Justice: 6 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-08-2013
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 27-08-2013
• Assessment Year: 2009-2010
• Appeal Filed On: 11-02-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: N A JOSHI
• Assessee Lawyers: S C AJMERA
• Keywords: Unexplained cash credit; Business expenditure
• Section: 143(3); 37; 28

Judgement Text

IN THE INCOME TAX APPELALTE TRIBUNAL: JODHPUR BENCH : JODHPUR BEFORE SHRI HARI OM MARATHA, JUDICIAL MEMBER AND SHRI N.K. SAINI, ACCOUNTANT MEMBER. ITA NO. 57/JODH/2013 (A.Y. 2009-10) MATESHWARI INDRANI CONTRACTORS PVT. LTD. VS ACIT, CIRCLE-1, 24, VARDHMAN COMPLEX, HIRAN MAGRI, UDAIPUR. SECTOR-4, UDAIPUR. PAN NO. AAECM2334A (APPELLANT) (RESPONDENT) ASSESSEE BY : SH. S.C. AJMERA. DEPARTMENT BY : SH. N.A. JOSHI- DR. DATE OF HEARING : 27/08/2013. DATE OF PRONOUNCEMENT : 29/08/2013. O R D E R PER HARI OM MRATHA, J.M. : THIS APPEAL OF THE ASSESSEE FOR A.Y. 2009-10 IS DI RECTED AGAINST THE ORDER OF LD. CIT(A), UDAIPUR, DATED 29/11/2012. 2. BRIEFLY STATED, THE FACTS OF THE CASE ARE THAT T HE ASSESSEE IS A PRIVATE LIMITED COMPANY, WHICH IS ENGAGED IN THE BU SINESS OF COLLECTION OF SALES TAX ROYALTY ON CONTRACT BASIS WITH VARIOUS GOVERNMENT 2 DEPARTMENTS. FOR A.Y. 2009-10, THE ASSESSEE-COMPANY FILED ITS RETURN OF INCOME (ROI) ON 31/03/2010 DECLARING TOTAL INCOM E OF RS. 19,62,570/-. THE A.O. HAS MADE HIS ORDER U/S 143(3) ON 26/12/2011 AFTER MAKING ADDITIONS ON ACCOUNT OF TRADING ADDITI ON, ON ACCOUNT OF UNEXPLAINED CASH CREDITS, DISALLOWANCE OF INTEREST ON UNEXPLAINED CASH CREDITS, DISALLOWANCE OF INTEREST ON LATE PAYMENT O F INSTALLMENT TO THE MINING, SALES-TAX DEPARTMENTS AND DISALLOWANCE OF I NTEREST ON EARLIER YEARS UNEXPLAINED CASH CREDITS. 2.1 BRING AGGRIEVED, THE ASSESSEE WENT BEFORE LD. C IT(A) WHO HAS, IN TURN, DELETED SOME OF THE ABOVE ADDITIONS. HOWEVER, THE LD. CIT(A) HAS SUSTAINED AN ADDITION OF RS. 7,06,539/- MADE IN RES PECT OF INTEREST CHARGED ON DELAYED PAYMENT OF INSTALLMENTS UNDER CO NTRACTUAL OBLIGATION WHICH HAS BEEN CLAIMED AS ALLOWABLE U/S 37 OF THE ACT. 2.2 AGAINST THE ABOVE SUSTAINED ADDITION THE ASSESS EE HAS COME IN SECOND APPEAL BY RAISING GROUND NO. 1 AND 2 IN THIS REGARD. GROUND NOS. 3 AND 4 ARE GENERAL IN NATURE. THE MORE RELEVANT FA CTS OF THE CONTENTIOUS ISSUE ARE THAT ON VERIFICATION OF P&L A CCOUNT IT WAS NOTICED THAT THE ASSESSEE HAS DEBITED A SUM OF RS. 7,06,539 /- IN RESPECT OF INTEREST PAID ON DELAYED, INSTALLMENTS PAID. THE AS SESSEE EXPLAINED 3 THAT THE MINING DEPARTMENT AND SALES TAX DEPARTMENT HAVE CHARGED INTEREST ON LATE DEPOSITION OF MONTHLY / WEEKLY INS TALLMENTS. IT WAS EXPLAINED THAT IN THIS BUSINESS IT IS A ROUTINE MAT TER AS THE DAILY COLLECTION OF ROYALTY / SALES TAX IS RECEIVED LATE. IN THIS CASE ALSO THE DELAY OCCURRED DUE TO DELAYED RECEIPT OF THE COLLEC TION. BUT THE A.O. DID NOT AGREE AND HE DISALLOWED RS. 7,06,539/- DEPO SITED BY THE ASSESSEE. THE LD. CIT(A) HAS ALSO CONFIRMED THIS AD DITION. 2.3 BEFORE US BOTH PARTIES HAVE REITERATED THEIR EA RLIER STAND. IT WAS ARGUED BY LD. A.R. THAT THE ASSESSEE HAS PAID INTER EST IN TERM OF THE AGREEMENT AND THE ALLEGED DEFAULT IN TIMELY PAYMENT IS NOT ATTRIBUTABLE TO THE ASSESSEE BUT IT IS A ROUTINE PR ACTICE IN THIS BUSINESS THAT IS WHY A CONDITION HAS BEEN LAID DOWN IN THE A GREEMENT ITSELF. ON THE OTHER HAND THE LD. D.R. HAS RELIED ON THE ORDER OF THE A.O. AS WELL AS ON THE ORDER OF LD. CIT(A). 2.4 WE HAVE DEEPLY MUSED OVER THIS ISSUE. THE CRUX OF LD. ARS SUBMISSION IS AS UNDER :- THE NATURE OF ASSESSEE COMPANY'S BUSINESS IS TO CO LLECT ROYALTY, SALES TAX ETC. ON BEHALF OF MINING AND SAL ES TAX DEPARTMENTS ON THE TERMS AND CONDITIONS OF THE WORK CONTRACT. 4 AS PER THE TERMS OF THE WORKS CONTRACT, THE ASSESSE E COMPANY HAS TO DEPOSIT A CERTAIN MINIMUM AMOUNT WEEKLY/ FORTNIGHTLY/ MONTHLY AS DEFINED IN THE WORK ORDER, IRRESPECTIVE OF THE FACT, WHETHER COLLECTION DURING THIS PERIOD IS MORE OR LESS FROM THE FIXED AMOUNT. MANY TIMES DUE TO SEASONAL NATURE, THE COLLECTION OF ROYALTY/ SALES TAX MAY BE LESS AND NECESSARY INTEREST AT PRESCRIBED RA TE HAS TO BE PAID TO THE GOVT. DEPARTMENT. THIS PAYMENT OF INTEREST IS ROUTINE AND REGULAR FEATURE/ NATURE OF THE BUSINESS TRANSACTION. IT IS NOT A PENALTY IN NATURE . THIS PAYMENT OF INTEREST IS TOWARDS FULFILLMENT OF ONE O F THE MANY CONDITIONS OF THE WORK ORDER. IT MAY BE NOTED THAT DURING 12 MONTHS PERIOD, THERE IS LOW COLLECTION IN RAINY SEASONS THAN OTHER SEASONS. EVEN IN SUMMERS, COLLEC TIONS OF SALES TAX/ ROYALTY MAY FLUCTUATE RESULTING IN PA YMENT OF INTEREST. THE ASSESSEE HAS NOT COMMITTED ANY STA TUTORY DEFAULT. THE A.O. HAS NOT CONSIDERED THE ABOVE FACTS AND WRO NGLY DISALLOWED THE BUSINESS EXPENDITURE TREATING THE SA ME AS PENAL IN NATURE. FURTHER, LD. AR HAS RELIED ON THE FOLLOWING DECISIO NS IN SUPPORT OF HIS ARGUMENTS THAT THERE BEING THE STATUTORY LIABILITY OF THE ASSESSEE THIS EXPENDITURE IS ALLOWABLE U/S 37 OF THE ACT. THESE D ECISIONS ARE AS FOLLOWS : 5 I. CIT VS. K. NATARAJAN [1990] 185 ITR 352 [KER] SINCE THE PAYMENTS OF THE INTEREST WAS AN OBLIGATI ON INCURRED UNDER A CONTRACT, THE QUESTION WHETHER THE ASSESSEE WAS ENTITLED TO CLAIM DEDUCTION OF THE INT EREST PAID FOR NON-PAYMENT OF THE KIST AFTER THE 20TH OF THE MONTH DID NOT ARISE FOR CONSIDERATION. II. CIT VS. T.M. CHACKO & PARTNERS [1978]115 ITR 4 0 KER PAYMENT OF KIST OR RENTAL WAS NECESSARY FOR THE AS SESSEE TO CARRY ON BUSINESS AS AN ABKARI CONTRACTOR. UNDE R THE PROVISION OF SECTION 18A AND 28 OF THE ABKARI ACT READ WITH CLAUSE 27 OF THE STATUTORY LICENCE, PAYMENT OF THE RENTAL IN INSTALLMENTS IS PERMITTED ON OR BEFORE TH E 10 TH OF EVERY MONTH OR WITH INTEREST. PENAL ACTION IS THRE ATENED ONLY IF DEFAULT IS COMMITTED AFTER THE 20 TH OF THE MONTH. THEREFORE, THE LIABILITY TO PAY INTEREST IS AN OPTI ON GIVEN TO THE ASSESSEE BY THE VERY TERMS OF THE STATUTORY LICENCE. IN PAYING INTEREST THE ASSESSEE COMMITS NO WRONG AN D NO INFRACTION OF THE LAW. THE PAYMENT OF THE INTEREST IN THE CIRCUMSTANCES CONSTITUTED AN EXPENDITURE INCURRED W HOLLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS. THE A MOUNT PAID AS INTEREST WAS DEDUCTIBLE. 6 3. WE HAVE FOUND THAT THERE IS A STIPULATION IN THE AGREEMENT BETWEEN THE ASSESSEE-COMPANY AND THE DEPARTMENTS T HAT THE ASSESSEE SHALL COLLECT SALES TAX / ROYALTY AND DEPOSIT THE S AME ON RECURRING BASIS AND IN CASE OF FAILURE TO DO SO A SETTLED INTEREST HAS TO BE PAID THEREON. THE ASSESSEE COULD NOT MAKE TIMELY PAYMENT DUE TO THE REASONS STATED ABOVE. THEREFORE, THIS PAYMENT IS AS THE TERMS OF THE AGREEMENT AND CANNOT BE DUBBED AS A PENAL PAYMENT. THE ASSESSEE WOULD NOT BENEFIT IN MAKING PAYMENT OF INTEREST. IT IS NOT THE CASE OF THE REVENUE THAT THE ASSESSEE HAS NOT PAID THIS MUC H INTEREST AMOUNT. RATHER THIS IS AN ACCEPTED FACT. THE PAYMENT IS MAD E TO GOVERNMENT DEPARTMENT. WHEN THE ASSESSEE HAS REALLY PAID INTER EST UNDER AN AGREEMENT TO EARN INCOME IT HAS TO BE ALLOWED U/S 3 7 OF THE ACT. OUR THIS VIEW IS IN CONSONANCE WITH THE SIMILAR VIEW TA KEN BY HONBLE APEX COURT IN THE CASE OF MAHALAKSHMI SUGAR MILLS CO. VS . CIT (1980) 123 ITR 429 (SC). THEIR LORDSHIPS HAVE HELD THAT PAYMENT OF INTEREST MADE UNDER A CONTRACT THE DEDUCTION HAS TO BE ALLOWED. N O CONTRARY DECISIONS HAVE BEEN CITED BY LD. D.R. THEREFORE, BY FOLLOWING THE ABOVE DECISIONS OF HONBLE APEX COURT AND THAT OF H ONBLE KERALA HIGH COURT. WE ALLOW THIS CLAIM OF THE ASSESSEE BY ALLOW ING GROUND NO. (1) AND (2) OF THIS APPEAL. 7 4. IN THE RESULT, THIS APPEAL OF THE ASSESSEE STAND S ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 29 TH AUGUST, 2013. SD/- SD/- [N.K. SAINI] [HARI OM MARATHA] ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 29 TH AUGUST, 2013. VL/ COPY TO : 1. THE APPELLANT 2. THE RESPONDENT BY ORDER 3. THE CIT 4. THE CIT(A) 5. THE DR ASSISTANT REGISTRAR ITAT, JODHPUR