ADDL.C.I.T. RG. 2(2), MUMBAI V. PHARMED LTD., MUMBAI

ITA 5956/MUM/2012

• Counselvise Citation: 595619914 RSA 2012
• Duration Of Justice: 1 year(s) 1 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-11-2013
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Assessment Year: 2009-2010
• Appeal Filed On: 01-10-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SANJIV JAIN
• Assessee Lawyers: VIJAY MEHTA
• Keywords: Rule of consistency

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL 'C' BENCH, MUMBAI BEFORE SHRI P.M. JAGTAP, ACCOUNTANT MEMBER AND SHRI VIVEK VARMA, JUDICIAL MEMBER ITA NO.5956/MUM/2012 (ASSESSMENT YEAR: 2009-10) ACIT - 2(2) R. NO. 577, 5 TH FLOOR, AAYAKAR BHAVAN, M.K. ROAD MUMBAI-400 020 VS. M/S. PHARMED LTD. 141, PHARMED HOUSE, WALCHAND HIRCACHAND MARG, MUMBAI-400 001 (APPELLANT) (RESPONDENT) P.A. NUMBER : AAACP 2191 A ASSESSE E BY : SHRI VIJAY MEHTA REVENUE BY : SHRI SANJIV JAIN DATE OF HEARING : 28/11/2013 DATE OF PRONOUNCEMENT : 29/11/2013 O R D E R PER P.M. JAGTAP, ACCOUNTANT MEMBER: THIS APPEAL IS PREFERRED BY THE REVENUE AGAINST THE ORDER OF THE LD. CIT(A)-5, MUMBAI, ORDER DATED 26/07/2012 FOR THE AS SESSMENT YEAR 2009-10. THE SOLITARY ISSUE RELATING TO THE DELETIO N BY LD. CIT(A) OF THE ADDITION MADE BY AO ON ACCOUNT OF SALES INCENTIVE P AYABLE TO EMPLOYEES IS RAISED BY THE REVENUE THEREIN BY TAKING THE FOLL OWING GROUNDS . 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LD.CIT(A) ERRED IN ALLOWING ASSESSEES APP EAL IGNORING THE FACT THAT SALES INCENTIVE PAYABLE TO T HE EMPLOYEES WAS ONLY A PROVISION, WHICH IS CONTINGENT IN NATURE , NOT A ALLOWABLE DEDUCTION. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW, THE LD.CIT(A) ERRED IN RELYING UPON THE JUDGME NT IN THE ITA NO.5956/M/12 A.Y.09-10 2 CASE OF M/S. BHARAT EARTH MOVERS [245 ITR 428](S.C. ) AND M/S. ROTARK CONTROLS & INDIA P. LTD. [180 TAXMAN 42 2] (S.C.) WHERE THE LIABILITIES WERE ASCERTAINED, AND IN THE PROCESS IGNORING THE FACT THAT IN THE INSTANT CASE LIABILIT Y IN AN UNASCERTAINED ONE. 2. AT THE TIME OF HEARING BEFORE US, THE LD. REPRES ENTATIVE OF BOTH THE SIDES HAVE AGREED THAT THE SOLITARY ISSUE INVOLVED IN THIS APPEAL OF THE REVENUE IS SQUARELY COVERED BY THE DECISION OF THE TRIBUNAL IN ASSESSEES OWN CASE FOR THE IMMEDIATELY PRECEDING YEAR I.E. ASSESSMENT YEAR 2008- 09 VIDE ITS ORDER DATED 31/12/2012 PASSED IN ITA NOS.6569 & 7005/MUM/2011 , WHEREIN A SIMILAR ISSUE WAS DECIDED BY THE TRIBUN AL IN FAVOUR OF THE ASSESSEE VIDE PARA-16 OF ITS ORDER WH ICH READS AS UNDER :- 16. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND P ERUSED THE ORDERS OF THE LOWER AUTHORITIES. WE HAVE ALSO T HE BENEFIT OF GOING THROUGH THE INCENTIVE SCHEME AS EXHIBITED FRO M PAGE 1 TO 6 OF T HE PAPER BOOK FILED BY THE ASSESSEE. WE F IND THAT SIMILAR INCENTIVE HAVE BEEN PAID IN EARLIER YEARS A LSO. WE ALSO FIND THAT EARLIER YEARS RETURN WAS SUBJECTED FOR SC RUTINY ASSESSMENT. HOWEVER, SUCH ADDITIONS HAVE BEEN MADE FOR THE FIRST TIME. WE AGREE WITH THE LD. CIT(A) THAT THIS IS IN GROSS VIOLATION OF THE RULE OF CONSISTENCY , WHEN NO NEW FACTS HAVE BE EN BROUGHT ON RECORD. IT IS NOT IN DISPUTE THAT THE LIABILITY HAS BEEN CRYSTALLIZED DURING THE YEAR UNDER CONSIDE RATION. THE AO BASED HIS FINDING SOLELY ON THE BASIS THAT T HE SAME HAVE BEEN PAID IN SUBSEQUENT YEARS I.E. 2008-0 9 AN D 2009- 10 AS THE ASSESSEE IS MAINTAINING BOOKS OF ACCOUNT ON MERCANTILE SYSTEM OF ACCOUNTING. THE LIABILITY WHIC H HAS CRYSTALLIZED IN THE YEAR HAS TO BE ACCOUNTED FOR IN THE BOOKS OF ACCOUNT WHICH THE ASSESSEE HAS RIGHTLY DONE AS THE BUSINESS LIABILITY HAS DEFINITELY ARISEN IN THE ACCOUNTING Y EAR. THE RATIO LAID DOWN BY THE SUPREME COURT IN THE CASE OF BHARA T EARTH MOVERS (SUPRA) SQUARELY APPLIES ON THE FACTS OF THE INSTANT CASE. RELIANCE PLACED BY THE DR ON THE DECISION OF THE HONBLE DELHI HIGH COURT (SUPRA) IS ON DIFFERENT FACTS INAS MUCH AS IN THAT CASE THE LIABILITY DID NOT CRYSTALLIZED IN THE IMPUGNED YEAR. HOWEVER, IN THE PRESENT CASE, THE LIABILITY H AS CRYSTALLIZED DURING THE IMPUGNED YEAR, IT CANNOT BE SAID TO BE CONTINGENT LIABILITY. MERELY BECAUSE THE RECIPIENTS WOULD BE DISCLOSING THE RECEIPT OF SALES INCENTIVE IN SUBSEQ UENT YEARS WHEN THEY WILL RECEIVE THE PAYMENT WOULD NOT IPSO F ACTO ITA NO.5956/M/12 A.Y.09-10 3 ENTITLE THE AO TO DISALLOW THE SAME IN THE IMPUGNED YEAR IN THE CASE OF THE ASSESSEE. THEREFORE, WE DO NOT FIND ANY ERROR OR INFIRMITY IN THE FINDINGS OF THE LD. CIT(A). ACC ORDINGLY, WE CONFIRM THE ORDER OF THE LD. CIT(A) AND APPEAL FIL ED BY THE REVENUE IS DISMISSED. 2.1 AS THE ISSUE INVOLVED IN THIS YEAR IS SIMILAR T O THAT OF ASSESSMENT YEAR 2008-09, WE RESPECTFULLY FOLLOWING THE DECISIO N OF THE CO-ORDINATE BENCH OF THIS TRIBUNAL RENDERED IN ASSESSEES OWN C ASE FOR THE ASSESSMENT YEAR 2008-09 UPHOLD THE IMPUGNED ORDER O F THE LD. CIT(A) DELETING THE DISALLOWANCE MADE BY AO ON ACCOUNT OF SALES INCENTIVE PAYABLE TO THE EMPLOYEES. 3. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISM ISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 29 TH NOVEMBER, 2013. SD/- SD/- (VIVEK VARMA) JUDICIAL MEMBER (P.M. JAGTAP ) ACCOUNTANT MEMBER MUMBAI, DATED: 29/11/2013. JV. COPY TO: THE APPELLANT THE RESPONDENT THE CIT, CONCERNED, MUMBAI THE CIT(A) CONCERNED, MUMBAI THE DR BENCH TRUE COPY BY ORDER DY/ASSTT. REGISTRAR, ITAT, MUMBAI.