ACIT, C.C. - IV, Kolkata, Kolkata V. M/s. Merino Industries Ltd., Kolkata

ITA 748/KOL/2011

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 54462 (ITAT-KOLKATA)
• Duration Of Justice: 3 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-08-2011
• Appeal Filed By: Department
• Bench Allotted: A
• Assessment Year: 2007-2008
• Appeal Filed On: 16-05-2011
• Court: TRIBUNAL
• Department Lawyers: S K ROY
• Assessee Lawyers: S S JHA
• Section: 43B; 14A

Judgement Text

, , , IN THE INCOME TAX APPELLATE TRIBUNAL, BENCH A , KOLKATA [ () , , . .. . ! ! ! !. .. . , , , , '# ] ]] ] [BEFORE HONBLE SRI MAHAVIR SINGH, JM & HONBLE S RI C. D. RAO, AM] % % % % /ITA NO.748/KOL/2011 &' ()/ ASSESSMENT YEAR : 2007-08 (+, / APPELLANT ) - & - ( ./+, /RESPONDENT) A.C.I.T., CENTRAL CIRCLE-IV, M/S.MERINO INDUSTRIE S LTD. KOLKATA -VERSUS- KOLKATA (PAN:AAACC 9186 C) +, 0 1 '/ FOR THE APPELLANT: SHRI S.K.ROY ./+, 0 1 '/ FOR THE RESPONDENT: SHRI S.S.JHA '2 / ORDER ( (( ( . .. . ! ! ! !. .. . ) )) ), , , , '# PER SHRI C.D.RAO, AM THIS IS AN APPEAL FILED BY THE REVENUE AGAINST ORDE R DATED 24.02.2011 OF THE CIT(A)-CENTRAL-I, KOLKATA PERTAINING TO A.YR. 2007- 08. 2. THE REVENUE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL :- 1. THAT THE LEARNED CIT(A) ERRED IN DELETING THE DISALLOWANCE OF RS.852500/- ON ACCOUNT OF LEAVE ENCASHMENT PAID TO THE MANAGING DIRECTOR PERTAINING TO EARLIER YEARS DESPITE THE FACT THAT THE EXPENDITURE WAS RELATED TO THE PERIOD FROM 11-04-2000 TO 31-04-2005 AND THAT THE ASSESSEE MAINTAINED ITS ACCOUNTS ON MERCANTILE BASIS AND THAT THE PRIOR PERIOD EXPEN DITURE WAS NOT ALLOWABLE. 2. THAT THE LEARNED CIT(A) ERRED IN RESTRICTING THE DISALLOWANCE UNDER RULE 8D(III) TO 1% OF THE DIVIDEND INCOME ALTHOUGH SECTI ON 14A READ WITH RULE 8D DID NOT PRESCRIBE ANY SUCH RESTRICTION AND THAT THE JUDGEMENTS OF LOWER COURTS COULD NOT BE TAKEN AS FINAL AND CONCLUSIVE IN THE A BSENCE OF ANY JUDGEMENT FROM THE SUPREME COURT. 3. THAT THE LEARNED CIT(A) ERRED IN GIVING RELIEF O F DISALLOWANCE MADE A.O. UNDER SECTION 40(A)(IA) BECAUSE THE ASSESSEE DISALL OWED RS.18089560/- HIMSELF IN THE COMPUTATION OF INCOME FILED ALONG WITH THE R ETURN. 4. THAT THE APPELLANT CRAVES LEAVE TO ADD, ALTER OR ABROGATE ANY GROUND OF APPEAL AT THE TIME OF HEARING. 2 3. THE FIRST GROUND IS RELATING TO THE LEAVE ENCAS HMENT PAID TO THE MANAGING DIRECTOR. THE RELEVANT OBSERVATIONS OF AOP ARE AS U NDER :- FURTHER DURING THE F.Y. 2006-07 ASSESSEE HAS PAID LEAVE ENCASHMENT AMOUNTING TO RS.8,52,500/- TO ITS MANAGING DIRECTOR MR.PRAKASH LOHIA. BUT THIS EXPENDITURE WAS RELATED TO THE PERIOD 1.4.2000 TO 31.04.2005. SINCE, THE ASSESEE IS MAINTAINING ITS ACCOUNTS ON MERCANTILE B ASIS, PRIOR PERIOD EXPENDITURE IS NOT ALLOWABLE. HENCE A SUM OF RS.8,5 2,500/- IS DISALLOWED AND ADDED BACK TO THE TOTAL INCOME. 3.1. ON APPEAL LD. CIT(A) HAS DELETED THE SAME BY O BSERVING AS UNDER :- 3.1. I HAVE CAREFULLY CONSIDERED THE SUBMISSION OF THE LD.A.R. IN EXIDE INDUSTRIES LTD VS UOI 292 ITR 470, THE CALCUTTA HIG H COURTS STRUCK DOWN 43B (F) AS BEING ARBITRARY, UNCONSCIONABLE AND DE HORS THE APEX COURT DECISION IN THE CASE OF BEML ON THE GROUND THAT THE OBJECTS AND REASONS WERE SILENT AS TO WHY THE AMENDMENT AS EFFECTED AND THAT THE AMENDMEN T WAS NOT CONSISTENT WITH S.43B WHICH WAS ORIGINALLY INSERTED TO PLUG EV ASION OF STATUTORY LIABILITY. THE SAID JUDGEMNET OF THE CALCUTTA HIGH COURT HAS N OW BEEN STAYED BY THE SUPREME COURT AND IT HAS BEEN CLARIFIED THAT THE AS SESSEE MUST PAY TAX AS OF S.43B (F) IS ON THE STATUTE THOUGH IT IS ENTITLED T O MAKE A CLAIM IN ITS RETURN. CONSIDERING ABOVE THE DISALLOWANCE OF RS.14,34,350/ - MADE BY THE AO ON ACCOUNT OF UNPAID LEAVE ENCASHMENT IS CONFIRMED. HO WEVER THE DISALLOWANCE OF RS.8,52,500/- ON ACCOUNT OF LEAVE ENCASHMENT PAI D TO THE MANAGING DIRECTOR PERTAINING TO EARLIER YEAR WILL NOT SURVIVE BECAUSE AS PER PROVISION OF SECTION 43B(F ANY AMOUNT PAYABLE IN LIEU OF LEAVE ENCASHMEN T SHALL BE ALLOWED IN THE PREVIOUS YEAR IN WHICH THE SUM IS ACTUALLY PAID. AC CORDINGLY THE DISALLOWANCE OF RS.8,52,500/- IS DELETED. IN RESULT THE GROUND N O.1 IS PARTLY ALLOWED. AGGRIEVED BY THIS THE REVENUE IS IN APPEAL BEFORE U S. 4. AT THE TIME OF HEARING THE LD. DR APPEARING ON B EHALF OF THE REVENUE RELIED ON THE ORDERS OF THE AO. 5. ON THE OTHER HAND, THE LD. COUNSEL APPEARING ON BEHALF OF THE ASSESSEE RELIED ON THE ORDERS OF LD. CIT(A) AND FURTHER CONTENDED THAT LD. CIT(A) HAS GIVEN RELIEF TO ASSESSEE BASED ON SPECIFIC PROVISION OF SECTION 43B (F) OF THE ACT. THEREFORE, HE REQUESTED TO UPHELD THE SAME. 6. AFTER HEARING THE RIVAL SUBMISSIONS AND ON CAREF UL PERUSAL OF MATERIALS AVAILABLE ON RECORD, IN VIEW OF THE FACT THAT THE L D. DR COULD NOT CONTRADICT THE 3 OBSERVATIONS MADE BY LD. CIT(A). WE FIND NO INFIRMI TY IN THE ORDERS OF LD. CIT(A) TO BE INTERFERED WITH. GROUND NO.1 OF THE REVENUES AP PEAL IS DISMISSED. 7. THE SECOND ISSUE IS RELATING TO DISALLOWANCE MAD E U/S 14A OF THE ACT READ WITH RULE 8D OF IT RULES. 8. AFTER HEARING THE RIVAL SUBMISSIONS AND ON CAREF UL PERUSAL OF MATERIALS AVAILABLE ON RECORD, WE FIND THAT LD. CIT(A) HAS FO LLOWED THIS TRIBUNALS DECISION WHEREIN THIS TRIBUNAL HAS CONSISTENTLY RESTRICTED T HE DISALLOWANCE AT 1% OF THE DIVIDEND INCOME UPTO ASSESSMENT YEAR 2007-08. THERE FORE, WE FIND NO INFIRMITY IN THE ORDERS OF LD. CIT(A) TO BE INTERFERED WITH. GRO UND NO.2 OF THE REVENUES APPEAL IS DISMISSED. 9. AS REGARDING GROUND NO.3 RAISED BY THE REVENUE I S RELATING TO DISALLOWANCE MADE U/S 40(A)(IA) OF THE IT ACT . 10. AFTER HEARING THE RIVAL SUBMISSIONS AND ON CARE FUL PERUSAL OF MATERIALS AVAILABLE ON RECORD, IT IS OBSERVED THAT LD. CIT(A) HAS DIRECTED AO TO VERIFY THE FACT FROM THE RECORD WHETHER THE TDS AMOUNT RELEVANT TO THE EXPENDITURE AMOUNTING TO RS.1,79,11,418/- WAS DEDUCTED IN THE MONTH OF MARCH AND PAID BEFORE THE DATE OF FILING OF RETURN OF INCOME AND RESTRICT THE DISALLO WANCE ACCORDINGLY. IN OUR CONSIDERED OPINION THERE IS NO GRIEVANCE CAUSED TO THE REVENUE IN SUCH DIRECTIONS. WE FURTHER OBSERVE THAT AO HAS NOT MENTIONED ANYTHING WHILE DI SALLOWING THE SAME U/S 40(A)(IA) OF THE ACT. GROUND NO.3 OF THE REVENUES APPEAL IS ALSO DISMISSED. 11. IN THE RESULT THE APPEAL OF THE REVENUE IS DISM ISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 17.08.2011. SD/- SD/- [ , ] [ . !., '# ] [ MAHAVIR SINGH ] [ C. D. RAO ] JUDICIAL MEMBER ACCOUNTANT MEMBER ( (( (!# !# !# !#) )) ) DATE: 17.08.2011. R.G.(.P.S.) 4 '2 0 .3 4'3(5- COPY OF THE ORDER FORWARDED TO: 1. M/S. MERINO INDUSTRIES LTD., 5, ALEXANDRA ROAD, KOL KATA-700020. 2 THE A.C.I.T., CENTRAL CIRCLE-IV, KOLKATA 3. THE CIT, 4. THE CIT(A)-CENTRAL-I, KOLKATA 5. DR, KOLKATA BENCHES, KOLKATA /3 ./ TRUE COPY, '2&:/ BY ORDER, DEPUTY /ASST. REGISTRAR , ITAT, KOLKATA BENCHES