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

ITA 6313/DEL/2013

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 97103 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 9 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 01-09-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: G
• Next Hearing Date: 20-08-2015
• Assessment Year: 2009-2010
• Appeal Filed On: 28-11-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Section: 154

Judgement Text

ITA NO. 6313/ DEL/ 2013 1 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH G , NEW DELHI BEFORE SHRI H.S. SIDHU, JUDICIAL MEMBER AND SHRI O.P. KANT, ACCOUNTANT MEMBER I.T.A. NO. 6313 /DEL/2013 A.Y. : 200 9 - 10 DCIT, CIRCLE - 7(1), NEW DELHI ROOM NO. 238 - A, 2 ND FLOOR, CR BUILDING, I.P. ESTATE, NEW DELHI VS. M/S SAGE METALS LTD., 346 - FIE, PATPARGANJ, DELHI - 92 (PAN: AAACS2801A) (APPELLANT) (RESPONDENT) DEPARTMENT BY : SH. SUJIT KUMAR, SR. DR ASSESSEE BY : SH. A NUNAV KUMAR, ADV. DATE OF HEARING : 2 0 - 8 - 201 5 DATE OF ORDER : 01 - 9 - 201 5 ORDER PER H.S. SIDHU : J M TH IS APPEAL BY THE REVENUE IS DIRECTED AGAINST THE ORDER OF THE LD. COMMISSIONER OF INCOME TAX (APPEALS ) - X , NEW DELHI DATED 20.9.2013 P ERTAINING TO ASSESSMENT YEAR 2009 - 10 ON THE FOLLOWING GROUNDS: - 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE LD. CIT(A) HAS ERRED IN LAW AND MERITS OF THE CASE IN DELETING THE ADDITION OF RS. 9,79,329/ - MADE BY THE AO ON ACCOUNT OF FOREIGN TRAVELLING EXPENSES. 2. ON THE FACTS A ND CIRCUMSTANCES OF THE CASE OF THE LD. CIT(A) ERRED IN LAW AND MERITS OF THE CASE IN DELETING THE ADDITION OF RS. 26,97,000/ - MADE BY THE AO ON ACCOUNT OF PROVISION OF GRATUITY AND LEAVE ENCASHMENT. ITA NO. 6313/ DEL/ 2013 2 3. THE APPELLANT CRAVES, LEAVE OR RESERVING THE RIGHT TO AMEND, MODIFY, ALTER, ADD OR FOREGO ANY GROUND(S) OF APPEAL AT ANY TIME BEFORE OR DURING THE HEARING OF THIS APPEAL. 2. FACTS NARRATED BY THE REVENUE AUTHORITIES ARE NOT DISPUTED BY BOTH THE PARTIES, THEREFORE, NEED NOT BEEN REPEATED HERE FOR THE SAKE OF BREVITY. 3. AT THE TIME OF HEARING, LD. COUNSEL OF THE ASSESSEE STATED THAT THE ISSUE NO. 1 RELATING TO DISALLOWANCE OF FOREIGN TRAVEL EXPENSES HA S ALREADY BEEN DECIDED BY THE ITAT, DELHI BENCH G , NEW DELHI IN ASSESSEE S OWN CASE, FOR THE ASSTT. YEAR 2008 - 09 PASSED IN ITA NO. 5187/DEL/2013 VIDE ORDER DATED 30.9.2014 TITLED AS ACIT VS. SAGE METALS PVT. LTD. DELHI AND THE ISSUE NO. 2 RELATING TO AD DITION ON ACCOUNT OF PROVISION OF GRATUITY AND LEAVE ENCASHMENT HAS BEEN DECIDED BY THE ITAT, DELHI BENCH G , NEW DELHI IN ASSESSEE S OWN CASE FOR THE ASSTT. YEAR 2008 - 09 PASSED IN ITA NO. 5808/DEL/2013 VIDE ORDER DATED 20.5.2015 TITLED AS DCIT VS. SAGE METALS LTD. ACCORDINGLY, HE REQUESTED THAT FOLLOWING THE AFORESAID DECISIONS IN ASSESSEE S OWN CASE RELEVANT FOR THE ASSESSMENT YEAR 2008 - 09, THE ISSUES INVOLVED IN THE PRESENT APPEAL FOR THE ASSTT. YEAR 2009 - 10 MAY BE ALLOWED ACCORDINGLY. 4. LD. DR RELIED UPON THE ORDER PASSED BY THE AO. 5. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE RECORDS, ESPECIALLY THE ORDERS PASSED BY THE REVENUE AUTHORITIES ALONGWITH THE ORDERS OF THE ITAT G BENCH IN ASSESSEE S OWN CASE FOR THE ASSTT. YEAR 2008 - 09 IN I TA NOS. ITA NO. 5187 & 5808/DEL/2013 TITLED AS ACIT VS. SAGE METALS PVT. LTD. DELHI DATED 30.9.2014 & 20.5.2015 RESPECTIVELY. THE RELEVANT PARAGRAPH NO. 4 TO 6 OF THE ITA NO. 6313/ DEL/ 2013 3 AFORESAID ITAT ORDER DATED 30.9.2014 RELATING TO ISSUE OF DISALLOWANCE OF FOREIGN TR AVELLING EXPENSES READ AS UNDER: - 4. WE HAVE HEARD RIVAL PARTIES AND HAVE GONE THROUGH THE MATERIAL PLACED ON RECORD. WE FIND THAT THE EXPENSES DISALLOWED BY THE A.O. NO DOUBT RELATE TO FOREIGN TRAVEL EXPENSES OF THE WIFE AND CHILDREN OF THE DIRECTORS O F THE COMPANY BUT AS PER THE FINDINGS OF LD. CIT(A) THESE EXPENSES WERE PART OF REMUNERATION PACKAGE OF THE DIRECTORS AND AS PER FORM 16, THE SAME WERE ADDED IN THE INCOME OF THE DIRECTORS OF THE COMPANY. THE RELEVANT FINDING OF LD. CIT(A) ARE REPRODUCED BELOW: 'AFTER CONSIDERING THE FACTS OF THE CASE AS WELL AS VARIOUS DETAILS SUBMITTED BY A.R. BEFORE THE A.O. AS WELL AS THE ARGUMENTS MADE BY HIM, I AM INCLINED TO AGREE WITH THE ARGUMENTS OF THE A.R. THAT THERE WAS NO JUSTIFICATION FOR MAKING THIS DIS ALLOWANCE. ACCORDINGLY THE AO IS DIRECTED TO DELETE THIS ADDITION SINCE THEY HAVE BEEN ALREADY REFLECTED IN FROM NO. 16 OF THE DIRECTORS AND ARE PART OF THEIR REMUNERATION PACKAGE APPROVED BY THE BOARD OF DIRECTORS OF THE COMPANY. AS A RESULT, THIS GROU ND IS TREATED AS ALLOWED. 5. WE DO NOT FIND ANY INFIRMITY IN THE FINDINGS OF THE LD. CIT(A) AND THEREFORE, THE ORDER OF THE LD. CIT(A) IS UPHELD. ITA NO. 6313/ DEL/ 2013 4 6. IN VIEW OF THE ABOVE, THE APPEAL FILED BY THE REVENUE IS DISMISSED. 5.1 RESPECTFULLY FOLLOWING THE ABOVE PRECEDENT OF THE COORDINATE BENCH IN ASSESSEE S OWN CASE, THE ISSUE INVOLVED IN GROUND NO. 1 IS DECIDED AGAINST THE REVENUE AND IN FAVOUR OF THE ASSESSEE AND THIS GROUND IS DISMISSED AS SUCH. 6. THE RELEVANT PARAGRAPH NO. 3 TO 9 OF THE AFORESAID ITAT ORDER DATED 20.5.2015 RELATING TO ISSUE NO. 2 OF DISALLOWANCE ON ACCOUNT OF PROVISION OF GRATUITY AND LEAVE ENCASHMENT READ AS UNDER: - 3. WE HAVE HEARD THE ARGUMENT OF BOTH THE SIDES AND CAREFULLY PERUSED THE RELEVANT MATERIAL PLA CED ON RECORD, INTER - ALIA, ASSESSMENT ORDER, ORDER OF THE CIT(A) DATED 12/7/2013, PAPER BOOK 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 INCOME 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 GRATUITY AND LEAVE ENCASHMENT ON UNJUSTIFIED AND INCORRECT PREMISE. THEREFORE, THE SAME MAY BE SET ASIDE BY RESTORING THAT OF THE AO ON THIS ISSUE. 5. THE LD. COUNSEL OF THE ASSESSEE DRAWN OUR ATTENTION 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 FULLY EXPLAINED DURING THE COURSE OF APPELLATE PROCEEDINGS AND THE SAME WAS COMPUTED ON THE BASIS OF A CERTIFICATE GIVEN BY ACTUARIAL EXPERT WHICH CLEARLY ESTABLISH THAT THE PROVISIONS FOR GRATUITY AND LEAVE ENCASHMENT ARE BASED ON A SCIENTIFIC METHODOLOGY WHICH IS ALSO CERTIFIED BY A SPECIALIST. THE LD. ITA NO. 6313/ DEL/ 2013 5 COUNSEL VEHEMENTLY CONTENDED THAT IN VIEW OF THE ABOVE FACTS OF THE PRESENT CASE THE ISSUE IS SQUARELY COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF HON BLE SUPREME COURT IN TH E CASE OF 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 DIMISSED 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 FROM THE ORDER OF THE CIT(A) PASSED U/S 154 OF THE ACT, WE OBSERVE THAT THE CIT(A) GRANTED RELIEF FOR THE ASSESSEE WITH FOLLOWING OBSE RVATIONS: 2. IT HAS BEEN CONTENDED BY THE AR OF THE APPELLANT THAT PROVISION FOR GRATUITY (RS. 49,01,000/ - ) AND LEAVE ENCASHMENT (RS. 11,36,000/ - ) HAD BEEN FULLY EXPLAINED DURING THE COURSE OF APPELLATE PROCEEDINGS AND IT HAD BEEN ALSO RECORDED THAT THE PROVISION WAS COMPUTED ON THE BASIS OF A CERTIFICATE GIVEN BY ACTUARIAL. THIS CLEARLY ESTABLISHED THAT THE PROVISION WAS BASED ON A SCIENTIFIC MYTHODOLOGY AND CERTIFIED BY A SPECIALIST. THIS ASPECT HAS ALSO BEEN MENTIONED ITSELF IN THE BODY OF THE APPEL LATE ORDER. IN VIEW OF THESE FACTS, THE ISSUE IS CLEARLY COVERED IN FAVOUR OF THE APPELLANT BY THE DECISIONS OF ROTORK CONTROLS LTD. 314 ITR (SC) AND, THEREFORE, IT APPEARS TO BE A MISTAKE APPARENT FROM RECORD. 3. AFTER CONSIDERING THE RECTIFICATION APPLI CATION OF THE AR AS WELL AS THE DETAILS IN THE APPELLATE ORDER, IT APPEARS THAT THROUGH OVERSIGHT THIS ASPECT HAS NOT BEEN ADJUDICATED BY CONSIDERING THIS FACT WHICH IS ALSO MENTINED IN THE ABOVE ORDER ITSELF. ACCORDINGLY, IN VIEW OF THE FACT THAT THE PRO VISIONS HAD BEEN MADE ON THE ITA NO. 6313/ DEL/ 2013 6 BASIS OF ACTUARIAL EXPERTS, THERE IS A SCIENTIFIC BASIS FOR ARRIVING AT THIS PROVISION, WHICH IS ALSO CONSITENTLY 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, THIS GROUND OF THE APPELLANT IS BEING ALLOWED IN VIEW OF THE ISSUE BEING COVERED BY THE APEX COURT JUDGMENT. 7. IN VIEW OF ABO V E, WE ARE INCLINED TO HOLD THAT SINCE THE PROVISION FOR GRATUITY AND LEA VE ENCASHMENT WERE FULLY EXPLAINED BY THE ASSESSEE BEFORE THE AUTHORITIES BELOW AND THE LD. CIT(A) ALSO RECORDED THAT THE PROVISION WAS COMPUTED ON THE BASIS OF SCIENTIFIC METHODOLOGY AND ALSO CERTIFIED BY THE ACTUARIAL SPECIALIST. UNDER ABOVE NOTED FACTS , WE RESPECTFULLY FOLLOW THE DECISION OF HON BLE 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 I S RECOGNIZED WHEN (A) AN ENTERPRISE HAS A PRESENT OBLIGATION AS A RESULT OF A PAST EVENT; (B) IT IS PROBABLE THAT AN OUTFLOW OF RESOURCES WILL BE RQUIRED TO SETTLE THE 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 RECOGNIZED. MEANING THEREBY FOR LEGAL RECOGNITION OF A PROVISION AFORESAID CONDITIONS ARE TO BE FULFILLED OR REQUIRED TO BE MET BY THE ASSESSEE. 8. IN THE PRESENT CASE, THE ASSESSEE BY WAY OF SCIENTIFI C METHODOLOGY HAD ESTABLISHED THAT THE IMPUGNED PROVISIONS WERE RECOGNIZED BY USING A SUBSTANTIAL SCIENTIFIC METHODOLOGY AND ESTIMATION WHICH WAS ALSO CERTIFIED BY AN ACTUARIAL SPECIALIST. IN THIS SITUATION, THE PROVISION FOR GRATUITY AND LEAVE ENCASHMENT ITA NO. 6313/ DEL/ 2013 7 MADE BY THE ASSESSEE ARE HELD TO BE FULLY EXPLAINED OR SUSTAINABLE AND THE SAME IS ALLOWABLE AS PER RATIO LAID DOWN BY THE HON BLE APEX COURT IN THE CASE OF ROTORK CONTROLS (SUPRA). ACCORDINGLY, WE ARE UNABLE TO SEE ANY INFIRMITY OR ANY OTHER VALID REASO N TO INTERFERE WITH THE IMPUGNED ORDER 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 DISMISSED. 6.1 RESPECTFULLY FOLLOWING THE ABOVE PRECEDENT OF THE COORDINATE BENCH IN ASSESSEE S OWN CASE, THE ISSUE INVOLVED IN GROUND NO. 2 IS DECIDED AGAINST THE REVENUE AND IN FAVOUR OF THE ASSESSEE AND THIS GROUND IS DISMISSED AS SUCH. 7 . IN THE RESULT, THE APPEAL FILED BY THE REVENUE STANDS DISMISSED. ORDER PRONOUNCED IN THE O PEN C OURT ON 0 1 / 9 /20 1 5 . S D / - S D / - [ O.P. KANT ] [ H.S. SIDHU ] ACCOUNTANT MEMBER JUDICIAL MEMBER DATE 0 1 / 9 /201 5 SRBHATNAGAR COPY FORWARDED TO: - 1. APPELLANT - 2. RESPONDENT - 3. CIT 4. CIT (A) 5. DR, ITAT TRUE COPY BY ORDER, ASSISTANT REGISTRAR, ITA NO. 6313/ DEL/ 2013 8 ITAT, DELHI BENCHES