DCIT, New Delhi V. M/s. Sage Metals Ltd., New Delhi

ITA 5808/DEL/2013

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 91061 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 6 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-05-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: G
• Next Hearing Date: 08-05-2015
• Assessment Year: 2008-2009
• Appeal Filed On: 30-10-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: B R R KUMAR; RAMESH CHANDRA
• Section: 154

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH G: NEW DELHI BEFORE SHRI S.V. MEHROTRA, ACCOUNTANT MEMBER AND SHRI C.M. GARG, JUDICIAL MEMBER ITA NO. 5808/DEL/2013 ASSESSMENT YEAR: 2008-09 DCIT, VS. SAGE METALS LTD., CIRCLE 7(1), ROOM NO. 238A, 346, FUNCTIONAL INDU STRIAL 2 ND FLOOR, C.R. BLDG., I.P. ESTATE, ESTATE, PATPARGA NJ, NEW DELHI. NEW DELHI. AAACS2801A (APPELLANT) (RESPONDENT) APPELLANT BY : SH. RAMESH CHANDRA, CIT DR & SH. B.R.R. KUMAR, SR. DR RESPONDENT BY : SH. V.P. GUPTA, ADV. DATE OF HEARING: 08.05.2015 DAT E OF PRONOUNCEMENT: 20.05.2015 ORDER PER SHRI C.M. GARG, J.M. THIS APPEAL HAS BEEN PREFERRED BY THE REVENUE AGAI SNT THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS)-X, DATE D 12/07/2013 IN APPEAL NO. 13/2011-12 FOR A.Y. 2008-09 AND DATED 21 /08/2013 PASSED U/S 154 OF THE ACT. 2. THE SOLE GROUND RAISED BY THE REVENUE READS AS U NDER: 2 THE LD. CIT(A) HAS ERRED IN LAW AND ON THE FACTS AND CIRCUMSTANCES OF THE CASE, IN DELETING THE ADDITION OF RS. 603700 0/- BEING MADE BY THE ASSESSING OFFICER ON ACCOUNT OF PROVISIONS FOR GRAT UITY AND LEAVE ENCASHMENT. 3. WE HAVE HEARD THE ARGUMENT OF BOTH THE SIDES AND CAREFULLY PERUSED THE RELEVANT MATERIAL PLACED ON RECORD, INT ER-ALIA, ASSESSMENT ORDER, ORDER OF THE CIT(A) DATED 12/7/2013, PAPER B OOK FILED BY THE ASSESSEE SPREAD OVER 34 PAGES AND IMPUGNED ORDER OF THE CIT(A) DATED 21/08/2013FOR A.Y. 2008-09 PASSED U/S 154 OF THE IN COME TAX ACT, 1961 (FOR SHORT THE ACT). 4. THE LD. DEPARTMENTAL REPRESENTATIVE (DR) POINTED OUT THAT THE CIT(A) IN HIS ORDER DATED 21/08/2013 PASSED U/S 154 OF THE ACT DELETED THE ADDITION MADE ON ACCOUNT OF PROVISION FOR GRATU ITY AND LEAVE ENCASHMENT ON UNJUSTIFIED AND INCORRECT PREMISE. T HEREFORE, THE SAME MAY BE SET ASIDE BY RESTORING THAT OF THE AO ON THI S ISSUE. 5. THE LD. COUNSEL OF THE ASSESSEE DRAWN OUR ATTENT ION TOWARDS ORDER OF THE CIT(A) PASSED U/S 154 OF THE ACT (SUPRA) AND SUBMITTED THAT THE PROVISION FOR GRATUITY AND LEAVE ENCASHMENT WAS FUL LY EXPLAINED DURING THE COURSE OF APPELLATE PROCEEDINGS AND THE SAME WA S COMPUTED ON THE BASIS OF A CERTIFICATE GIVEN BY ACTUARIAL EXPERT WH ICH CLEARLY ESTABLISH THAT THE PROVISIONS FOR GRATUITY AND LEAVE ENCASHMENT AR E BASED ON A SCIENTIFIC METHODOLOGY WHICH IS ALSO CERTIFIED BY A SPECIALIST. THE LD. COUNSEL VEHEMENTLY CONTENDED THAT IN VIEW OF THE AB OVE FACTS OF THE 3 PRESENT CASE THE ISSUE IS SQUARELY COVERED IN FAVOU R OF THE ASSESSEE BY THE DECISION OF HONBLE SUPREME COURT IN THE CASE O F ROTORK CONTROLS LTD. VS. CIT, 314 ITR 62 (SC) . THE LD. COUNSEL POINTED OUT THAT THE CIT(A) IN THE ORIGINAL ORDER DATED 12/07/2013 DIMIS SED THE GROUND NO. 2 OF THE ASSESSEE IGNORING THE RELEVANT FACTS OF THE CASE WHICH WAS SUBSEQUENTLY RECTIFIED BY PASSING IMPUGNED ORDER U/ S 154 OF THE ACT AND THE SAME IS SUSTAINABLE. 6. ON CAREFUL CONSIDERATION OF ABOVE SUMISSIONS FRO M THE ORDER OF THE CIT(A) PASSED U/S 154 OF THE ACT, WE OBSERVE THAT T HE CIT(A) GRANTED RELIEF FOR THE ASSESSEE WITH FOLLOWING OBSERVATIONS : 2. IT HAS BEEN CONTENDED BY THE AR OF THE APPELL ANT THAT PROVISION FOR GRATUITY (RS. 49,01,000/-) AND LEAVE ENCASHMENT (RS. 11,36,000/-) HAD BEEN FULLY EXPLAINED DURING T HE COURSE OF APPELLATE PROCEEDINGS AND IT HAD BEEN ALSO RECORDED THAT THE PROVISION WAS COMPUTED ON THE BASIS OF A CERTIFICAT E GIVEN BY ACTUARIAL. THIS CLEARLY ESTABLISHED THAT THE PROVI SION WAS BASED ON A SCIENTIFIC MYTHODOLOGY AND CERTIFIED BY A SPEC IALIST. THIS ASPECT HAS ALSO BEEN MENTIONED ITSELF IN THE BODY O F THE APPELLATE ORDER. IN VIEW OF THESE FACTS, THE ISSUE IS CLEARL Y COVERED IN FAVOUR OF THE APPELLANT BY THE DECISIONS OF ROTORK CONTROLS LTD. 314 ITR (SC) AND, THEREFORE, IT APPEARS TO BE A MIS TAKE APPARENT FROM RECORD. 3. AFTER CONSIDERING THE RECTIFICATION APPLICATION OF THE AR AS WELL AS THE DETAILS IN THE APPELLATE ORDER, IT APPE ARS THAT THROUGH OVERSIGHT THIS ASPECT HAS NOT BEEN ADJUDICATED BY C ONSIDERING THIS FACT WHICH IS ALSO MENTINED IN THE ABOVE ORDER ITSELF. ACCORDINGLY, IN VIEW OF THE FACT THAT THE PROVISION S HAD BEEN MADE ON THE BASIS OF ACTUARIAL EXPERTS, THERE IS A SCIENTIFIC BASIS FOR ARRIVING AT THIS PROVISION, WHICH IS ALSO CONSI TENTLY BELONG FOLLOWED BY THE APPELLANT. 4. SINCE THIS IS AN OVERSIGHT AND MISTAKE APPARENT FROM RECORD, THE CONTENTINS OF THE APPELLANT ARE FULLY JUSTIFIED AND, THEREFORE, 4 THIS GROUND OF THE APPELLANT IS BEING ALLOWED IN VI EW OF THE ISSUE BEING COVERED BY THE APEX COURT JUDGMENT. 7. IN VIEW OF ABVOE, WE ARE INCLINED TO HOLD THAT S INCE THE PROVISION FOR GRATUITY AND LEAVE ENCASHMENT WERE FULLY EXPLAI NED BY THE ASSESSEE BEFORE THE AUTHORITIES BELOW AND THE LD. CIT(A) ALS O RECORDED THAT THE PROVISION WAS COMPUTED ON THE BASIS OF SCIENTIFIC M ETHODOLOGY AND ALSO CERTIFIED BY THE ACTUARIAL SPECIALIST. UNDER ABOVE NOTED FACTS, WE RESPECTFULLY FOLLOW THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF ROTORK CONTROLS INDIA PVT. LTD. (SUPRA), WHEREIN IT WAS HELD THAT A PROVISION IS A LIABILITY WHICH CAN BE MEASURED ONLY BY USING A SUBSTANTIAL DEGREE OF ESTIMATION AND THE SAME IS RECOGNIZED WHE N (A) AN ENTERPRISE HAS A PRESENT OBLIGATION AS A RESULT OF A PAST EVEN T; (B) IT IS PROBABLE THAT AN OUTFLOW OF RESOURCES WILL BE RQUIRED TO SETTLE T HE OBLIGATION, AND (C) A RELIABLE ESTIMATE CAN BE MADE OF THE AMOUNT OF THE OBLIGATION AND IF THESE CONDITIONS ARE NOT MET NO PROVISION CAN BE RE COGNIZED. MEANING THEREBY FOR LEGAL RECOGNITION OF A PROVISION AFORES AID CONDITIONS ARE TO BE FULFILLED OR REQUIRED TO BE MET BY THE ASSESSEE. 8. IN THE PRESENT CASE, THE ASSESSEE BY WAY OF SCI ENTIFIC METHODOLOGY HAD ESTABLISHED THAT THE IMPUGNED PROVI SIONS WERE RECOGNIZED BY USING A SUBSTANTIAL SCIENTIFIC METHOD OLOGY AND ESTIMATION WHICH WAS ALSO CERTIFIED BY AN ACTUARIAL SPECIALIST . IN THIS SITUATION, THE PROVISION FOR GRATUITY AND LEAVE ENCASHMENT MADE BY THE ASSESSEE ARE 5 HELD TO BE FULLY EXPLAINED OR SUSTAINABLE AND THE S AME IS ALLOWABLE AS PER RATIO LAID DOWN BY THE HONBLE APEX COURT IN TH E CASE OF ROTORK CONTROLS (SUPRA). ACCORDINGLY, WE ARE UNABLE TO SE E ANY INFIRMITY OR ANY OTHER VALID REASON TO INTERFERE WITH THE IMPUGNED O RDER AND WE UPHELD THE SAME. ACCORDINGLY, SOLE GROUND OF THE REVENUE BEING DEVOID OF MERITS BEING DISMISSED. 9. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISM ISSED. THIS DECISION WAS PRONOUNCED IN THE OPEN COURT ON 20.05.2015 SD/- SD/- (S.V. MEHROTRA) (C.M. GARG) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 20.05.2015 *KAVITA, P.S. COPY TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT, NEW DELHI. TRUE COPY BY ORDER ASSISTANT REGISTRAR 6 SL. NO. DESCRIPTION DATE 1. DATE OF DICTATION BY THE AUTHOR 19.05.2015 2. DRAFT PLACED BEFORE THE DICTATING MEMBER 19.05.2 015 3. DRAFT PLACED BEFORE THE SECOND MEMBER 4. DRAFT APPROVED BY THE SECOND MEMBER 5. DATE OF APPROVED ORDER COMES TO THE SR. PS 6. DATE OF PRONOUNCEMENT OF ORDER 7. DATE OF FILE SENT TO THE BENCH CLERK 8. DATE ON WHICH FILE GOES TO THE HEAD CLERK 9. DATE OF DISPATCH OF ORDER