Asstt. Comm. Of Income Tax Circle 2, Madagaon V. Goa Shipyard Ltd., Goa

ITA 65/PAN/2013

• Counselvise Citation: [2013] 120 COUNSELVISE.COM (IT) 5231 (ITAT-PANAJI)
• Duration Of Justice: 4 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-08-2013
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2005-2006
• Appeal Filed On: 03-04-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SONAL L SONKAVDE
• Assessee Lawyers: CHYTHANYA K K

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PANAJI BENCH, PANAJI BEFORE SHRI P.K. BANSAL, HONBLE ACCOUNTANT MEMBER AND SHRI D.T. GARASIA, HONBLE JUDICIAL MEMBER ITA NO. 65 /PNJ/2013 : (ASST. YEAR : 200 5 - 0 6 ) ASST. COMMISSIONER OF INCOME TAX, CIRCLE - 2 , MARGAO , GOA (APPELLANT) VS. M/S. GOA SHIPYARD LTD., VADDEM HOUSE, VADDEM, VASCO - DA - GAMA, GOA (RESPONDENT) PAN : AAACG7569F APPELLANT BY : SMT. SONAL L. SONKAVDE, DR RESPONDENT BY : CHYTHANYA K.K., ADV. DATE OF HEARING : 01 /0 8 /2013 DATE OF PRONOUNCEMENT : 14 /08/2013 O R D E R PER P.K. BANSAL : 1. THIS APPEAL HAS BEEN FILED BY THE REVENUE AGAINST THE ORDER OF CIT(A) DT. 6.2.2013 BY TAKING THE FOLLOWING EFFECTIVE GROUNDS OF APPEAL : 2. THE LD. CIT(A) HAS ERRED IN ALLOWING THE EXPENDITURE CLAIMED BY THE ASSESSEE ON ACTUAL EXPENDITURE ON GUARANTEE REPAIRS WHICH DOES NOT CONSTITUTE AS AN ALLOWABLE EXPENDITURE UNDER ANY PROVISIONS STIPULATED UNDER SECTION 30 TO 36 OF THE IT ACT. 2. THE BRIEF FACTS RELATING TO THE SAID GROUND ARE THAT DURING THE ASSESSMENT, THE AO NOTED THAT A SUM OF RS.1,04,01,114/ - WAS CLAIMED BY THE ASSESSEE AS DEDUCTION ON ACCOUNT OF ACTUAL EXPENDITURE INCURRED ON RECTIFYING THE DEFECTS OF THE VESSEL GUARANTE ED BY THE ASSESSEE DURING THE YEAR UNDER CONSIDERATION. THE AMOUNT HAS NOT BEEN DEBITED IN THE PROFIT & LOSS ACCOUNT AND HAS BEEN DEBITED IN THE PROVISION AMOUNTING TO RS.1,95,00,000/ - MADE DURING THE A.Y 2004 - 05 2 ITA NO. 65/PNJ/2013 (ASST. YEAR : 2005 - 06) WHEN THE VESSEL WAS DELIVERED. AT THE TIM E OF COMPUTATION OF TAXABLE INCOME, THE ASSESSEE HAS ADDED BACK THE SUM OF RS.1,95,00,000/ - IN THE A.Y 2004 - 05. THE ACTUAL EXPENDITURE WAS CLAIMED AS DEDUCTION AS LIABILITY WAS CRYSTALLIZED DURING THE YEAR. THE AO DID NOT AGREE WITH THE ASSESSEE. THE AO DISALLOWED THE SAME AND THE MATTER WENT BEFORE THE CIT(A). CIT(A) ALLOWED THE DEDUCTION BY OBSERVING AS UNDER : 6. I HAVE GONE THROUGH THE ASSESSMENT ORDERS AND THE BRIEF ARGUMENTS OF THE APPELLANT COMPANY. THE ASSESSING OFFICER HAS DISALLOWED THE CLA IM OF THE ASSESSEE, TREATING IT AS PRIOR PERIOD EXPENSES. IN THIS CASE, NO DEDUCTION ON ACCOUNT OF GUARANTEE DEFECT WAS CLAIMED AND THE PROVISION CREATED WAS ADDED BACK FOR THE PURPOSE OF COMPUTATION OF TOTAL INCOME, IN THE YEAR OF SALE. THE DEDUCTION HA S BEEN CLAIMED ONLY WHEN THE APPELLANT COMPANY HAD TO ACTUALLY INCUR EXPENSES TOWARDS GUARANTEE REPAIRS IN THE SUBSEQUENT YEAR. GUARANTEE REPAIR IS A PART AND PARCEL OF AGREEMENT TO SALE IN SUCH A BUSINESS. SINCE THE EXPENSES HAVE BEEN ACTUALLY INCURRED AND NO DOUBT HAS BEEN RAISED ON THE FACT THAT THE EXPENSES ARE INCURRED WHOLLY AND NECESSARILY FOR THE PURPOSES OF THE BUSINESS OF THE APPELLANT, THERE IS NO DOUBT ABOUT THE ALLOWABILITY OF SUCH ACTUAL EXPENDITURE. IN MY OPINION THE EXPENSES HAVE RIGHTLY BEEN CLAIMED IN THE YEAR IN WHICH, IT HAS ACTUALLY BEEN INCURRED AND I DIRECT THE A.O. TO DELETE THE ADDITION AMOUNTING TO RS.1,04,01,114/ - . 3. WE HAVE HEARD THE RIVAL SUBMISSIONS AND CAREFULLY CONSIDERED THE SAME. WE NOTED THAT THE ASSESSEE HAS GUARANTEED THE REPAIR AS A PART AND PARCEL OF THE AGREEMENT TO SALE . THE EXPENDITURE HAS BEEN INCURRED DURING THE YEAR. THE LIABILITY HAS CRYSTALLIZED DURING THE YEAR. THE ASSESSEE IS FOLLOWING THE MERCANTILE SYSTEM OF ACCOUNTING AND AS PER THE SYST EM FOLLOWED BY THE ASSESSEE, THE LIABILITY ACCRUED DURING THE YEAR HAS TO BE ALLOWED. NO DOUBT, THE ASSESSEE HAS CREATED PROVISION IN THE EARLIER YEAR BUT THAT PROVISION WAS DULY ADDED BACK BY THE ASSESSEE WHILE COMPUTING THE TOTAL TAXABLE INCOME OF THE E ARLIER YEAR. THE ASSESSEE IS CLAIMING DEDUCTION IN RESPECT OF EXPENDITURE INCURRED TOWARDS CARRYING OUT THE REPAIRS ON THE BASIS OF THE EXPENDITURE ACTUALLY INCURRED. IN FACT, THIS IS A CASE WHERE THE ASSESSEE HAS CLAIMED THE ACTUAL 3 ITA NO. 65/PNJ/2013 (ASST. YEAR : 2005 - 06) LIABILITY WHICH HAS A CCRUED DURING THE YEAR. IN OUR OPINION, NO INTERFERENCE IS CALLED FOR IN THE ORDER OF CIT(A). CIT(A) HAS RIGHTLY ALLOWED THE DEDUCTION. 4. IN THE RESULT, THE APPEAL FILED BY THE REVENUE STANDS DISMISSED. 5. ORDER PRONOUNCED IN THE OPEN COURT ON 14 /08/ 2013. SD/ - (D.T.GARASIA) JUDICIAL MEMBER SD/ - (P.K. BANSAL) ACCOUNTANT MEMBER PLACE : PANAJI / GOA DATED : 14 /08/ 2013 *SSL* COPY TO : (1) APPELLANT (2) RESPONDENT (3) CIT, PANAJI (4) CIT(A), PANAJI (5) D.R (6) GUARD FILE TRUE COPY, BY ORDER SR. P RIVATE S ECRETARY ITAT, PANAJI, GOA