INDOMAG STEEL TECHNOLOGY LTD.(NOW KNOWN AS SMS IRON TECHN. P.LTD.), V. ASST.C.I.T.,9(2),

ITA 5938/MUM/2008

• Counselvise Citation: 593820114 RSA 2008
• Duration Of Justice: 7 year(s) 2 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-12-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Next Hearing Date: 01-12-2015
• Assessment Year: 1997-1998
• Appeal Filed On: 29-09-2008
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ANIMA BARNWAL
• Section: 147; 37

Judgement Text

ITA NO.5938/MUM/2008 1 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH C, NEW DELHI BEFORE SHRI H.S. SIDHU, JUDICIAL MEMBER AND SHRI O.P. KANT, ACCOUNTANT MEMBER I.T.A. NO. 59 3 8 / M UM /2008 A.Y. : 1997 - 98 INDOMAG STEEL TECHNOLOGY LTD., (NOW KNOWN AS SMS IRON TECHNOLOGY PVT. LTD.) B-402, SOMDUTT CHAMBER- I, 5, BHIKAJI CAMA PLACE, NEW DELHI 110 066 (PAN: AAACI1682F) VS. ASSTT. COMMISSIONER OF INCOME TAX, CIRCLE 9(2) MUMBAI (APPELLANT) (APPELLANT) (APPELLANT) (APPELLANT) (RESPONDENT) (RESPONDENT) (RESPONDENT) (RESPONDENT) ASSESSEE BY : SH. RAJAN BHATIA, CA DEPARTMENT BY : MS. ANIMA BARNWAL, SR. DR DATE OF HEARING : DATE OF HEARING : DATE OF HEARING : DATE OF HEARING : 01 0101 01- -- -1 11 12 22 2- -- -201 201 201 2015 55 5 DATE OF ORDER : DATE OF ORDER : DATE OF ORDER : DATE OF ORDER : 18 1818 18- -- -1 11 12 22 2- -- -201 201 201 2015 55 5 ORDER ORDER ORDER ORDER PER PER PER PER H.S. SIDHU : JM H.S. SIDHU : JM H.S. SIDHU : JM H.S. SIDHU : JM THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGA INST THE ORDER DATED 11.7.2008 PASSED BY THE LD. CIT(A)-IX, MUMBAI PERTAINING TO ASSESSMENT YEAR 1997-98 ON THE FOLLOWING GROUNDS:- 1. THAT THE ORDER OF LD. CIT(A) IS BAD BOTH IN LAW AND ON FACTS OF THE CASE. 2. THAT THE LD. CIT(A) HAS ERRED IN UPHOLDING THE R EASSESSMENT U/S. 147 OF THE INCOME TAX ACT. ITA NO.5938/MUM/2008 2 3. THAT THE CIT(A) HAS ERRED IN UPHOLDING THE DISAL LOWANCE OF AMOUNT CLAIMED BY THE ASSESSEE TOWARDS CONTRACTUAL OBLIGATIONS/ LIQUIDATED DAMAGES AGGREGATING TO RS. 4,06,87,253/-. THE SAID SUM IS DULY ADMISSIBLE AS A DEDUCTION UNDER SECTION 37 OF THE INCOME TAX ACT, 1 961. 4. THAT THE LD. CIT(A) HAS ERRED IN HOLDING THAT DO CUMENTARY PROOF IN RESPECT OF CLAIM AS MADE WAS NOT PROVIDED. 5. THAT THE APPEAL IS WITHIN TIME AS THE ORDER OF T HE LD. CIT(A) WAS RECEIVED ON 6 TH AUGUST, 2008. 6. THAT THE ASSESSEE MAY BE ALLOWED TO MODIFY, ADD, SUPPLEMENT, REVISE, AMEND GROUNDS AS RAISED HEREINA BOVE. 2. THE FACTS NARRATED BY THE REVENUE AUTHORITY ARE NOT DISPUTED BY BOTH PARTIES, THEREFORE, NO NEED TO REPEAT THE SAME HERE FOR THE SAKE OF CONVENIENCE. 3. AT THE TIME OF HEARING SH. RAJAN BHATIA, LD. COU NSEL FOR THE ASSESSEE STATED THAT THE ISSUE INVOLVED IN GROUND NO. 3 HAS ALREADY BEEN ADJUDICATED AND DECIDED BY THE ITAT IN ASSESSEES OWN CASE FOR THE ASSESSMENT YEAR S 1996-97 AND 1998-99 IN ITA NO. 4057/MUM/2000 & ITA NO. 5367/MUM/2001 RESPECTIVELY VIDE ORDER DATED 12 TH MARCH, 2008 IN ASSESSEES FAVOUR. IN VIEW OF ABOVE SUBMISSIONS, HE REQUESTED THAT ADDITION INVOLVED IN GROUND NO. 3 MAY BE DELETED BY TAKING A CONSISTENT VIEW, AS STATED ABOVE. IN SUPPORT OF HIS CONTENTION, HE HAS ALSO FI LED THE PAPER BOOK CONTAINING PAGES 1 TO 72 WHICH INCLUDES THE COPY OF THE ITAT ORDER DA TED 12.3.2008 PASSED IN ASSESSEES OWN CASE FOR THE ASSESSMENT YEARS 1996-97 AND 1998- 99 IN ITA NO. 4057/MUM/2000 & ITA NO. 5367/MUM/2001 RESPECTIVELY . 4. ON THE CONTRARY, LD. DR RELIED UPON THE ORDERS O F THE AUTHORITIES BELOW. 5. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE R ECORDS AVAILABLE WITH US, ESPECIALLY THE EARLIER ORDERS OF THE TRIBUNAL DECID ED IN FAVOUR OF ASSESSEE IN ASSESSEES ITA NO.5938/MUM/2008 3 OWN CASE. WE FIND THAT IN THE ASSESSMENT YEARS 19 96-97 AND 1998-99, THE TRIBUNAL VIDE ORDER DATED 12.3.2008 PASSED IN ITA NO. 4057/M UM/2000 & ITA NO. 5367/MUM/2001 HAS ADJUDICATED THE SIMILAR ISSUE IN ASSESSEES OWN CASE IN ITS FAVOUR. FOR THE SAKE OF CONVENIENCE, THE RELEVANT FINDINGS OF THE TRIBUNAL FROM PARA 4.3 TO 4.7 AT PAGES 12 & 13 ARE REPRODUCED BELOW:- 4.3 THE THIRD GROUND RAISED BY THE ASSESSEE IS THA T THE CIT(A) HAS ERRED WITHOUT APPRECIATING THE FACT OF THE CASE IN CONFIRMING THE DISALLOWANCE OF RS. 62,36,462/- OUT OF PROVISION FOR CONTRACTUAL OBLIG ATION CLAIMED BY THE ASSESSEE. 4.4 ACCORDING TO THE ASSESSEE, THE AMOUNT REPRESENT ED THE REMAINING COST TO BE INCURRED AT THE TIME OF COMPLETION OF THE CONTRA CT. ACCORDING TO THE ASSESSEE, THE EXCESS OR SHORTFALL IN THE AMOUNT IS ADJUDICATE D ON FINAL ACCEPTANCE OF THE BILL BY THE CUSTOMERS. 4.5 THE ASSESSEE HAD CLAIMED AN AMOUNT OF RS. 2,63, 71,552/- ON ACCOUNT OF PROVISION FOR CONTRACTUAL OBLIGATION. THE AMOUNT RE PRESENTED EXPENDITURE TO BE INCURRED IN RESPECT OF PROJECTS COMPLETED DURING TH E YEAR UNDER CONSIDERATION. SUCH EXPENDITURE INCLUDES, LIQUIDATED DAMAGES, PROV ISIONS FOR MATERIAL, LABOUR AND OTHER EXPENSES, WHICH ARE DUE TO BE SPENT BY TH E ASSESSEE-COMPANY IN VIEW OF PENDING CONTRACTUAL OBLIGATIONS. THE AMOUNT OF CLAIMS MADE BUT NOT ACCEPTED BY THE CUSTOMERS AS WELL AS LIQUIDATED DAM AGES DEDUCTED BY THE CUSTOMERS ARE ALSO COVERED UNDER THE PROVISIONS OF CONTRACTUAL OBLIGATIONS. 4.6 THE ASSESSING AUTHORITY IN FACT DISALLOWED AN A MOUNT OF RS. 62,36,462 FROM THE CLAIM MADE BY THE ASSESSEE. WHAT HAS BEEN ALLOW ED BY THE ASSESSING AUTHORITY IS THE AMOUNT OF ACTUAL EXPENDITURE INCUR RED BY THE ASSESSEE TOWARDS THE CONTRACTUAL OBLIGATIONS. 4.7 THE FACT THAT THE ASSESSEE HAD INCURRED A SIZAB LE PORTION OF THE PROVISION AS EXPENDITURE AND THE SAME HAS BEEN ALLOWED BY THE AS SESSING AUTHORITY ITSELF IS ITA NO.5938/MUM/2008 4 SUPPORTING THE CLAIM OF THE ASSESSEE THAT THE EXPEN SES ARE ACCRUED AND THE LIABILITY ASCERTAINED AND THE PROVISIONS ARE MADE O N FACTUAL BASIS AND THEY WERE NOT IN THE NATURE OF ANY CONTINGENCY OF FUTURE EXPE NSES. THE LEGAL CHARACTER OF THE PROVISION FOR CONTRACTUAL OBLIGATION IS IN A WA Y SIMILAR TO THE PROVISION FOR WARRANTY/ GUARANTEE. THEREFORE, THE DISCUSSION MADE IN RESPECT OF THE ISSUE REGARDING PROVISION OF WARRANTY EQUALLY APPLIES TO THE PROVISION FOR CONTRACTUAL OBLIGATIONS ALSO. THERE IS NO DOUBT THAT THE ASSESS EE HAS TO INCUR EXPENDITURE TOWARDS THE CONTRACTUAL OBLIGATIONS PERTAINING TO T HE COMPLETED PROJECTS. THIS IS EVIDENT FROM THE FACT THAT THE ASSESSING OFFICER HI MSELF HAS DISALLOWED ONLY RS. 62,36,462 AS AGAINST THE TOTAL CLAIM OF RS. 2,63,71 ,552 MADE BY THE ASSESSEE- COMPANY. IT SHOWS THAT THE ASSESSEE HAS ALREADY INC URRED A MAJOR PORTION OF THE PROVISION BY WAY OF ACTUAL EXPENDITURE. THEREFORE, WE DO NOT FIND ANY REASON TO DISALLOW THE BALANCE PORTION OF RS. 62,36,462. THE SAID DISALLOWANCE IS DELETED. THE ASSESSING AUTHORITY IS DIRECTED TO ALL OW THE AMOUNT IN FULL. 5.1 IN THE BACKGROUND OF THE AFORESAID DISCUSSIONS AND RESPECTFULLY FOLLOWING THE PRECEDENT OF THE COORDINATE BENCH IN RESPECT OF TH E ASSESSMENT YEARS 1996-97 AND 1998-99 OF ITAT ORDER DATED 12.3.2008 PASSED IN IT A NO. 4057/MUM/2000 & ITA NO. 5367/MUM/2001, IN ASSESSEES OWN CASE IN ITS F AVOUR, WE DELETE THE ADDITION OF RS.4,06,87,253/- ON ACCOUNT OF CONTRACTUAL OBLIGATI ONS/LIQUIDATED DAMAGES AND DECIDE THE ISSUE INVOLVED IN GROUND NO. 3 IN FAVOUR OF THE ASSESSEE. ITA NO.5938/MUM/2008 5 6. SINCE WE HAVE DELETED THE ADDITION IN DISPUTE, A S AFORESAID VIDE GROUND NO. 3, HENCE, THE OTHER GROUNDS ARE NOT BEING ADJUDICATED. 7. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT 18-12-2015. SD/ SD/ SD/ SD/- -- - SD/ SD/ SD/ SD/- -- - [ [[ [O.P. KANT O.P. KANT O.P. KANT O.P. KANT] ]] ] [ [[ [H.S. SIDHU H.S. SIDHU H.S. SIDHU H.S. SIDHU] ]] ] ACCOUNTANT MEMBER ACCOUNTANT MEMBER ACCOUNTANT MEMBER ACCOUNTANT MEMBER JUDICIAL JUDICIAL JUDICIAL JUDICIAL MEMBER MEMBER MEMBER MEMBER DATE 18/12/2015 SRBHATNAGAR SRBHATNAGAR SRBHATNAGAR SRBHATNAGAR COPY FORWARDED TO: COPY FORWARDED TO: COPY FORWARDED TO: COPY FORWARDED TO: - -- - 1. APPELLANT - 2. RESPONDENT - 3. CIT 4. CIT (A) 5. DR, ITAT TRUE COPY BY ORDER, ASSISTANT REGISTRAR, ITAT, DELHI BENCHES ITA NO.5938/MUM/2008 6