SETH INDUSTRIES P. LTD, MUMBAI V. ACIT (OSD) 2(3), MUMBAI

ITA 5851/MUM/2012

• Counselvise Citation: [2018] 126 COUNSELVISE.COM (IT) 0030 (ITAT-MUMBAI)
• Duration Of Justice: 5 year(s) 5 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-02-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: E
• Next Hearing Date: 28-05-2015
• Assessment Year: 2005-2006
• Appeal Filed On: 25-09-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: POOJA SWAROOP

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL F BENCH, MUMBAI BEFORE SHRI SAKTIJIT DEY , JUDICIAL MEMBER AND SHRI RAJESH KUMAR, ACCOUNTANT MEMBER ITA NO .5851/MUM./2012 ( ASSESSMENT YEAR : 2005 06 ) SETH INDUSTRIES PVT. LTD. 14/15, ASHOKA SHOPPING CENTRE L.T. MARG, MUMBAI 400 001 PAN AAECS9189D . APPELLANT V/S ASSTT. COMMISSIONER OF INCOME TAX OSD, CIRCLE 2(3), MUMBAI . RESPONDENT REVENUE BY : MS. POOJA SWAROOP ASSESSEE BY : S HRI SALIL KAPOOR DATE OF HEARING 19.02.2018 DATE OF ORDER 28.02.2018 O R D E R PER SAKTIJIT DEY, J.M. T HIS IS AN APPEAL BY THE ASSESSEE AGAINST THE ORDER DATED 31 ST JULY 2012, PASSED BY THE LEARNED COMMISSIONER (APPEALS) 6, MUMBAI, FOR THE ASSESSMENT YEAR 2005 06. 2 . THOUGH, IN THE MEMORANDUM OF APPEAL, THE ASSESSEE HAS RAISED A NUMBER OF GROUNDS, HOWEVER, AT THE TIME OF HEARING, THE LEARNED AUTHORISED REPRESENTATIVE ON THE INSTRUCTIONS OF THE ASSESSEE WANTED TO ARGUE ONLY ON GROUNDS NO.5, 6 AND 7 AND EXPRESSED HIS INTENTION NOT TO PRESS THE OTHER GROUNDS. HENCE, ALL OTHE R GROUNDS EXCEPT THE AFOREMENTIONED GROUNDS ARE DISMISSED. 2 SETH INDUSTRIES PVT. LTD. 3 . THE ONLY ISSUE R A IS ED IN GROUNDS NO.5, 6 AND 7 IS WITH REGARD TO DISALLOWANCE OF GRATUITY PAYABLE AMOUNTING TO ` 1,78,35,353. 4 . BRIEF FACTS ARE, DURING THE ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER NOTICING THAT THE ASSESSEE HAS DEBITED AN AMOUNT OF ` 1,78,35,353, TOWARDS GRATUITY AND TERMINAL BENEFITS PAYABLE TO EMPLOYEES / WORKERS CALLED UPON THE ASSESSEE TO EXPLAIN WHY SUCH DEDUCTION CLAIME D SHOULD NOT BE DISALLOWED AS THE ASSESSEE DID NOT HAVE ANY BUSINESS ACTIVITY DURING THE RELEVANT PREVIOUS YEAR. THOUGH, THE ASSESSEE FILED A DETAILED SUBMISSION OBJECTING TO THE PROPOSED DISALLOWANCE AND STATING WHY THE DEDUCTION CLAIMED SHOULD BE ALLOWED , HOWEVER, THE ASSESSING OFFICER REJECTING THE EXPLANATION OF THE ASSESSEE DISALLOWED ASSESSEES CLAIM OF DEDUCTION REFERRING TO SECTION 40A(7) OF THE ACT, A S ACCORDING TO HIM IT IS ONLY IN THE NATURE OF A PROVISIONS AND ASSESSEE DID NOT HAVE ANY BUSINESS ACTIVITY. BEING AGGRIEVED OF SUCH DISALLOWANCE, ASSESSEE PREFERRED APPEAL BEFORE THE LEARNED COMMISSIONER (APPEALS). 5 . THE LEARNED COMMISSIONER (APPEALS) AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE, THOUGH, DISAGREED WITH THE FINDINGS OF THE ASSES SING OFFICER THAT THE ASSESSEE W AS NOT CARRYING ON ANY BUSINESS ACTIVITY, HOWEVER, HE UPHELD THE DISALLOWANCE BY REFERRING TO SECTION 40A(7) AND ON THE GROUND THAT THE AMOUNT DEBITED TO THE 3 SETH INDUSTRIES PVT. LTD. PROFIT & LOSS ACCOUNT ON ACCOUNT OF GR ATUITY IS A MERE PROVISION, SINC E THE ACTUAL PAYMENT WAS MADE IN SUBSEQUENT YEARS. 6 . WE HAVE HEARD RIVAL SUBMISSIONS AND PERUSED MATERIAL ON RECORD. THE ONLY SUBMISSION MADE BY THE LEARNED AUTHORISED REPRESENTATIVE IS THE PAYMENT OF GRATUITY SHOULD BE ALLOWED AS A DEDUCTION IN THE YEAR OF ACTUAL PAYMENT. THE LEARNED DEPARTMENTAL REPRESENTATIVE SUBMITTED, SINCE THE GRATUITY WAS NOT PAID IN THE IMPUGNED ASSESSMENT YEAR DEDUCTION CLAIMED WAS RIGHTLY DISALLOWED. HAVING CONSIDERED THE SUBMISSIONS OF THE PARTIES AND EXAMINED THE RELEVANT STATUTO RY PROVISIONS, WE ARE OF THE VIEW THAT THE PAYMENT OF GRATUITY SHOULD BE ALLOWED AS DEDUCTION TO THE ASSESSEE IN THE ASSESSMENT YEAR , WHEREIN , IT WAS ACTUALLY PAID. THEREFORE, WE DIRECT THE ASSESSING OFFICER TO VERIFY THE YEAR OF ACTUAL PAYMENT OF GRATUITY BY THE ASSESSEE AND ALLOWED THE DEDUCTION ACCORDINGLY. THESE GROUNDS ARE ALLOWED FOR STATISTICAL PURPOSES. 7 . IN THE RESULT, ASSESSEES APPEAL IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 28.02.2018 SD/ - RAJESH KUMAR ACCOUNTANT MEMBER SD/ - SAKTIJIT DEY JUDICIAL MEMBER MUMBAI, DATED: 28.02.2018 4 SETH INDUSTRIES PVT. LTD. COPY OF THE ORDER FORWARDED TO : ( 1 ) THE ASSESSEE; ( 2 ) THE REVENUE; ( 3 ) THE CIT(A); ( 4 ) THE CIT, MUMBAI CITY CONCERNED; ( 5 ) THE DR, ITAT, MUMBAI; ( 6 ) GUARD FILE . TRUE COPY BY ORDER PRADEEP J. CHOWDHURY SR. PRIVATE SECRETARY (ASSTT. REGISTRAR/SR.P.S) ITAT, MUMBAI