BASP CHEMICALS PRODUCT LTD, MUMBAI V. DCIT CC 2(3), MUMBAI

ITA 6704/MUM/2017

• Counselvise Citation: [2019] 117 COUNSELVISE.COM (IT) 7898 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 4 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-04-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2013-2014
• Appeal Filed On: 24-11-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: CHAITANYA ANJARIA LD DRS
• Assessee Lawyers: TUSHAR NAGORI LD ARS
• Keywords: Business expenditure
• Section: 43B; 143(3); 37(1)

Judgement Text

ITA NO. 6704/MUM/2017 BASP CHEMICAL PRODUCT LTD. ASSESSMENT YEAR: 2013-14 1 IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, MUMBAI , , BEFORE HONBLE SHRI MANOJ KUMAR AGGARWAL, AM AND HONBLE SHRI RAVISH SOOD, JM ./ I.T.A. NO.6704/MUM/2017 ( / ASSESSMENT YEAR: 2013-14) BASP CHEMICAL PRODUCT LTD . 105/106, 1 ST FLOOR PARESHWA CHAMBERS 17/21, ISSAR STREET VADGADI, MASJID BUNDAR MUMBAI- 400 056 / VS. DEPUTY C O MMISSIONER OF INCOME TAX, CENTRAL CIRCLE-2(3) 10 TH FLOOR PRATISHTHA BHAWAN MUMBAI ./ ./PAN/GIR NO. AAACB-5939-Q ( /APPELLANT ) : ( !' / RESPONDENT ) ASSESSEE BY : S/SHRI SUCHEK ANCHALIYA & TUSHAR NAGORI- LD. ARS REVEN UE BY : S/SHRI PRAKASH MANE & CHAITANYA ANJARIA- LD.DRS % &' / DATE OF HEARING : 12/04/2019 % &' / DATE OF PRONOUNCEMENT : 23/04/2019 / O R D E R PER MANOJ KUMAR AGGARWAL (ACCOUNTANT MEMBER) 1. AFORESAID APPEAL BY ASSESSEE FOR ASSESSMENT YEAR [AY] 2013-14 CONTEST THE ORDER OF THE LD. COMMISSIONER OF INCOME -TAX (APPEALS)-48 ITA NO. 6704/MUM/2017 BASP CHEMICAL PRODUCT LTD. ASSESSMENT YEAR: 2013-14 2 [CIT(A)], MUMBAI, APPEAL NO. CIT(A)-48/I.T-27/DCCC-2(3)/2016-17 DATED 29/09/2017 ON FOLLOWING SOLE GROUND OF APPEAL: - 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND I N LAW THE LD. COMMISSIONER OF INCOME TAX(APPEALS) ERRED IN CONFIRMING THE DISA LLOWANCE OF VAT EXPENSE OF RS.3,76,14,295/-, WITHOUT APPRECIATING THE FACT THAT THE SAME IS INCURRED IN NORMAL COURSE OF BUSINESS AND ALLOWABLE EXPENSES AS PER IT ACT, 1961 THE ASSESSMENT FOR IMPUGNED AY WAS FRAMED BY LD. DEPUTY COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE-2(3), MU MBAI [AO] IN SCRUTINY ASSESSMENT U/S 143(3) OF THE INCOME TAX ACT, 1961 ON 31/03/2016 WHEREIN THE RETURNED LOSS OF RS.532.60 L ACS WAS REDUCED TO RS.156.46 LACS ON ACCOUNT OF DISALLOWANCE OF VALUE ADDED TAX [VAT] FOR RS.376.14 LACS. AS EVIDENT FROM GROUNDS OF APPE AL, THE DISALLOWANCE OF VAT MADE BY LD. AO AND AS CONFIRMED BY FIRST APPELLATE AUTHORITY IN THE IMPUGNED ORDER IS THE SOLE SUBJECT MATTER OF PR ESENT APPEAL BEFORE US. 2.1 DURING ASSESSMENT PROCEEDINGS, IT TRANSPIRED TH AT THE ASSESSEE DEBITED A SUM OF RS.629.33 LACS AS VAT EXPENSES IN THE PROFIT & LOSS ACCOUNT. THE DETAILS OF THE SAME COULD BE TABULATED AS UNDER: - NO. PAID IN AY AMOUNT (RS.) 1. 2012-13 1,51,79,860/- 2. 2013-14 2,53,18,814/- 3. 2014-15 [PAID BEFORE RETURN FILING U/S 139(1)] 2,24,34.435/- TOTAL 6,29,33,109/- 2.2 THE ASSESSEE SUBMITTED THAT THE AMOUNT OF VAT PAID IN AY 2012- 13 WAS NOT CLAIMED IN AY 2012-13 UNDER EXPECTATION OF REFUND AND CONSIDERING THE SAME TO BE TEMPORARY ADVANCE. HOWEV ER, SUBSEQUENTLY IT WAS REALIZED AND ADVISED BY THE CONSULTANT THAT THE SINCE THE SUPPLIER ITA NO. 6704/MUM/2017 BASP CHEMICAL PRODUCT LTD. ASSESSMENT YEAR: 2013-14 3 DEALERS HAD NOT PAID THE SALES TAX COLLECTED FROM T HE ASSESSEE TO THE SALES TAX DEPARTMENT AND THE WHEREABOUTS OF THESE P ARTIES WAS NOT KNOWN AND MAHARASHTRA VAT DEPARTMENT HAD DECLARED THESE DEALERS AS HAWALA DEALERS AND PUBLISH THEIR NAME ON THE MVAT WEBSITE THOUGH THE ASSESSEE CLAIMED THAT THE TRANSACTIONS WERE GENUINE . THEREFORE, IT WAS THEN DECIDED TO CLAIM THE SALES TAX PAYMENT AS AN E XPENDITURE IN THE IMPUGNED AY U/S 43B. 2.3 SIMILARLY, THE PAYMENT OF RS.253.18 LACS PAID B Y THE ASSESSEE DURING AY 2013-14 WAS CLAIMED AS AN EXPENDITURE DUR ING IMPUGNED AY. LASTLY, SIMILAR PAYMENT MADE BEFORE DUE DATE OF FIL ING OF RETURN OF INCOME U/S 139(1) AMOUNTING TO RS.224.34 LACS WAS CLAIMED AS AN EXPENDITURE DURING IMPUGNED AY. 2.4 IT WAS SUBMITTED THAT SAID LIABILITY AROSE OUT OF GOODS PURCHASED BY THE ASSESSEE FROM THE DEFAULTING DEALERS, WHO FAILE D TO PAY THE SAID LIABILITY AND THEREFORE, THE LIABILITIES PERTAINED TO BUSINESS OPERATIONS ONLY. THE PROOF OF PAYMENT WAS ALSO SUBMITTED DURIN G THE ASSESSMENT PROCEEDINGS. FINALLY, IT WAS ALSO SUBMITTED THAT TH E PAYMENT MADE BY THE ASSESSEE WAS COVERED U/S 43B OF THE ACT AND ALLOWAB LE AS A BUSINESS EXPENDITURE IN TERMS OF CBDT CIRCULAR NOS. 496/25.09.1987 & 674/29.12.1993. 2.5 HOWEVER, NOT CONVINCED, LD. AO OPINED THAT IN T ERMS OF SECTION 43B, THE DEDUCTION WAS TO BE ALLOWED ONLY IN THE YE AR IN WHICH THE SUM WAS ACTUALLY PAID BY THE ASSESSEE AND THEREFORE, PA YMENT MADE IN AY 2012-13 COULD NOT BE ALLOWED IN IMPUGNED AY PARTICU LARLY IN VIEW OF THE FACT THAT THE ASSESSEE DID NOT PROVE THAT THE DEDUC TION OF THE SAME WAS NOT CLAIMED IN AY 2012-13. THEREFORE, THE DEDUCTION OF RS.151.79 LACS ITA NO. 6704/MUM/2017 BASP CHEMICAL PRODUCT LTD. ASSESSMENT YEAR: 2013-14 4 WAS DENIED TO THE ASSESSEE. THE DEDUCTION OF RS.224 .34 LACS WAS ALSO DENIED ON THE PREMISE THAT LIABILITY AROSE ON TRADI NG OF GOODS PURCHASED IN FY 2013-14 AND THEREFORE, THE SAME COULD NOT BE ALLOWED IN AY 2013- 14. HOWEVER, THE DEDUCTION OF RS.253.18 LACS WAS AL LOWED TO THE ASSESSEE. ACCORDINGLY, THE AGGREGATE DEDUCTION AS D ENIED TO THE ASSESSEE IN THE AFORESAID MANNER AMOUNTED TO RS.376 .14 LACS. 2.6 AGGRIEVED, THE ASSESSEE AGITATED THE SAME WITHO UT ANY SUCCESS BEFORE FIRST APPELLATE AUTHORITY VIDE IMPUGNED ORDE R DATED 27/09/2017 WHEREIN THE STAND OF LD. AO GOT CONFIRMED. AGGRIEVE D, THE ASSESSEE IS IN FURTHER APPEAL BEFORE US. 3.1 EXPLAINING THE NATURE OF PAYMENT AND DRAWING OU R ATTENTION TO THE SUBMISSIONS AS MADE BEFORE FIRST APPELLATE AUTHORIT Y, THE LD. AUTHORIZED REPRESENTATIVE FOR ASSESSEE [AR], SHRI SUCHEK ANCHALIYA, SUBMITTED THAT THE PAYMENT OF RS.151.79 LACS WAS MADE IN AY 2 012-13 AND THE SAME WAS REFLECTED AS TEMPORARY ADVANCES IN THE BALANCE SHEET UNDER THE ASSUMPTION THAT THE ASSESSEE WOULD CLAIM THE RE FUND OF SALES TAX PAYMENT. HOWEVER, DURING IMPUGNED AY, IT WAS REALIZ ED THAT SOME OF THE DEALERS FROM WHOM PURCHASES WERE MADE BY THE ASSESS EE, HAD NOT PAID SALES TAX COLLECTED FROM THE ASSESSEE TO THE SALES TAX DEPARTMENT AND THEREFORE, THE ASSESSEE BECAME ILLEGIBLE TO CLAIM I NPUT CREDIT OF VAT AND HENCE, THE AFORESAID PAYMENT CRYSTALIZED DURING IMP UGNED AY WHICH WAS ALLOWABLE U/S 37(1) OF THE ACT. OUR ATTENTION H AS BEEN DRAWN TO THE SUBMISSIONS MADE, IN THIS REGARD, DURING FIRST APPE LLATE PROCEEDINGS. OUR ATTENTION HAS FURTHER BEEN DRAWN TO SCHEDULE-6 OF THE FINANCIAL STATEMENTS OF EARLIER AY 2012-13 TO SUBMIT THAT THE DEDUCTION OF THE SAME WAS NEVER CLAIMED BY THE ASSESSEE WHICH IS SEL F-EVIDENTIARY FROM ITA NO. 6704/MUM/2017 BASP CHEMICAL PRODUCT LTD. ASSESSMENT YEAR: 2013-14 5 THE FACT THAT THE ASSESSEE HAD CLAIMED DEDUCTION ON LY TO THE EXTENT OF RS.31.82 LACS IN THAT YEAR. 3.2 SO FAR AS THE DEDUCTION OF RS.224.34 LACS IS CO NCERNED, OUR ATTENTION IS DRAWN TO THE FACT THE AFORESAID PAYMEN T, IN FACT, PERTAINED TO EARLIER YEARS AND LOWER AUTHORITIES PROCEEDED ON WR ONG ASSUMPTION THAT THE PAYMENT AROSE FROM TRADING OF GOODS PURCHASED I N FY 2013-14, WHICH WAS NOT THE CASE. THE ATTENTION HAS BEEN DRAW N TO THE VARIOUS NOTICES FOR PAYMENT OF TAX DUE ACCORDING TO A RETUR N UNDER SECTION 20 OF THE MAHARASHTRA VALUE ADDED TAX ACT, 2002 RAISED BY LD. ASSISTANT COMMISSIONER OF SALES TAX DIRECTING THE ASSESSEE TO PAY THE DEMAND FOR EARLIER YEARS STARTING FROM 2005-06 TO 2011-12. SINCE THE PAYMENT HAS BEEN MADE BEFORE DUE DATE OF FILING OF RETURN O F INCOME AND THEREFORE, THE SAME WAS ALLOWABLE U/S 43B IN TERMS OF DECISION OF HONBLE APEX COURT RENDERED IN ALLIED MOTORS (P) LTD. VS. CIT [224 ITR 677]. 3.3 PER CONTRA, LD. DR SUBMITTED THAT THE AFORESAID DEDUCTION WAS N OT ALLOWABLE TO THE ASSESSEE EITHER U/S 43B OR U/S 37( 1) SINCE THE EXPENDITURE SHOULD HAVE EITHER BEEN PAID IN FY 2012 -13 OR BELONG TO FY 2012-13 AND PAID BEFORE DUE DATE OF FILING OF RETUR N OF INCOME U/S 139(1). SINCE NONE OF THE CONDITION IS BEING SATISFIED BY T HE ASSESSEE, THE PAYMENTS DID NOT QUALIFY FOR DEDUCTION IN IMPUGNED AY. 4. WE HAVE CAREFULLY HEARD RIVAL SUBMISSIONS AND PE RUSED RELEVANT MATERIAL ON RECORD AS PLACED BEFORE US. THE UNDISPU TED POSITION THAT EMERGES IS THAT THE ASSESSEE HAS BEEN SADDLED WITH SALES TAX DEMAND PERTAINING TO FINANCIAL YEARS 2005-06 TO 2011-12 WH ICH IS EVIDENT FROM VARIOUS NOTICES OF TAX DEMAND ISSUED BY THE SALES TAX DEPARTMENT / ITA NO. 6704/MUM/2017 BASP CHEMICAL PRODUCT LTD. ASSESSMENT YEAR: 2013-14 6 VAT DEPARTMENT AGAINST THE ASSESSEE AND AS PLACED BEFORE US. THE SAME IS CORROBORATED BY THE COPIES OF CHALLANS PLAC ED IN THE PAPER-BOOK. THIS DEMAND HAS BEEN PAID BY THE ASSESSEE IN DIFFER ENT INSTALLMENTS OVER AY 2012-13 TO 2014-15 AND CLAIMED AS DEDUCTION IN IMPUGNED AY U/S 43B AND U/S 37(1). THE DEDUCTION OF AMOUNT OF R S.253.18 LACS HAS ALREADY BEEN ALLOWED BY THE REVENUE DURING ASSESSME NT PROCEEDINGS ITSELF AND THEREFORE, THERE IS NO DISPUTE WITH RESP ECT TO DEDUCTION TO THAT EXTENT. THE PAYMENT OF THE DEMAND IS ALSO NOT IN DI SPUTE SINCE THE ASSESSEE HAS ALREADY PLACED ON RECORD PROOF OF PAYM ENT DURING ASSESSMENT PROCEEDINGS. THEREFORE, THE PAYMENT MADE BY ASSESSEE DURING AY 2014-15 BUT BEFORE DUE DATE OF FILING OF RETURN U/S 139(1) WAS CLEARLY COVERED BY THE PROVISIONS OF SECTION 43B. B OTH THE LOWER AUTHORITIES, IN OUR OPINION, FELL IN ERROR, TO OBSE RVE THAT THE AFORESAID LIABILITY PERTAINED TO FY 2013-14, WHICH IS NOT THE CASE HERE. UPON PERUSAL OF DEMAND NOTICES AND COPIES OF CHALLANS, W E HAVE ALREADY NOTED THAT DEMAND PERTAINED TO EARLIER SEVERAL FINA NCIAL YEARS. THIS BEING THE CASE, THE CONDITIONS OF SECTION 43B WERE FULFIL LED AND THE ASSESSEE WAS ELIGIBLE TO CLAIM THE DEDUCTION OF RS. 224.34 L ACS AS PER THE JUDGMENT OF HONBLE APEX COURT RENDERED IN ALLIED MOTORS (P) LTD. VS. CIT [224 ITR 677]. WE HOLD SO. 5. SO FAR AS THE DEDUCTION OF RS.151.79 LACS IS CON CERNED, WE FIND THAT THIS PAYMENT ALSO PERTAINS TO EARLIER SEVERAL FINANCIAL YEARS. THE LD. AO DENIED THE SAME PRIMARILY ON THE GROUND THAT THE ASSESSEE FAILED TO DEMONSTRATE THAT THE DEDUCTION THEREOF WAS NOT CLAI MED IN PRECEDING AY 2012-13. UPON PERUSAL OF FINANCIAL STATEMENTS FOR A Y 2012-13, WE FIND THAT THE ASSESSEE HAS CLAIMED AN EXPENDITURE OF RS. 31.82 LACS ONLY IN ITA NO. 6704/MUM/2017 BASP CHEMICAL PRODUCT LTD. ASSESSMENT YEAR: 2013-14 7 THAT AY AND THEREFORE, THIS DEDUCTION WAS NOT CLAIM ED IN EARLIER AY, AS ALLEGED BY LD. AO. WITH A VIEW TO FORTIFY THIS FACT FURTHER, THE ASSESSEE HAS PLACED ON RECORD AN AFFIDAVIT OF ONE OF THE DIR ECTORS OF THE ASSESSEE COMPANY WHICH WOULD DISPEL THE APPREHENSIONS RAISED BY LD. AO. THEREFORE, CONSIDERING THE FACTUAL MATRIX, THIS DED UCTION WAS ALLOWABLE TO THE ASSESSEE U/S 37(1). WE HOLD SO. 6. HOWEVER, WITH A VIEW TO PROTECT THE INTEREST OF THE REVENUE, IT IS MADE CLEAR THAT IF ANY BENEFIT / REFUND ACCRUES TO THE ASSESSEE IN FUTURE AGAINST THESE PAYMENTS, IN ANY MANNER, THE SAME WOU LD BE CHARGEABLE TO TAX AS AFFIRMED IN THE AFFIDAVIT. 7. THE APPEAL STANDS ALLOWED IN TERMS OF OUR ABOVE ORDER. ORDER PRONOUNCED IN THE OPEN COURT ON 23 RD APRIL, 2019. SD/- SD/- (RAVISH SOOD) (MAN OJ KUMAR AGGARWAL) / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI; DATED : 23/04/2019 SR. PS THIRUMALESH/SR.PS JAISY VARGHESE / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. ! / THE RESPONDENT 3. ' '# ( ) / THE CIT(A) 4. ' '# / CIT CONCERNED 5. $% &' , ' ' , / DR, ITAT, MUMBAI 6. %)* / GUARD FILE / BY ORDER, / (DY./ASSTT.REGISTRAR) , / ITAT, MUMBAI.