Asstt.CIT Cir. 1(2), Pune V. Electronica Machine Tools Ltd., Pune

ITA 802/PUN/2009

• Counselvise Citation: [2010] 135 COUNSELVISE.COM (IT) 3186 (ITAT-PUNE)
• Duration Of Justice: 1 year(s) 4 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-11-2010
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2004-2005
• Appeal Filed On: 07-07-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: PANKAJ GARG SR
• Keywords: Revenue expenditure
• Section: 37(1); 37

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH B, PUNE BEFORE SHRI SHAILENDRA KUMAR YADAV JUDICIAL MEMBER & SHRI G.S.PANNU ACCOUNTANT MEMBER ITA NO 802/PN/09 (A.Y. 2004-05) ASSTT.CIT, CIR. 1(2), PUNE, APPELLANT VS. ELECTRONICA MACHINE TOOLS LTD. RESPONDENT ELECTRA HOUSE, 691/1A, PUNE SATARA ROAD, PUNE 411 037. PAN AAACE4196L APPELLANT BY : SHRI PANKAJ GARG, SR.AR RESPONDENT BY : SHRI C.H.NANIWADEKAR, C.A. ORDER PER G.S.PANNU, AM THIS APPEAL BY THE REVENUE PERTAINING TO ASSESSMENT YEAR 2004-05 IS DIRECTED AGAINST THE ORDER OF THE CIT (A) I, PUNE DATED 21-04-2009, WHICH IN TURN HAS ARISEN FROM ORDER OF THE ASSESSING OFFICER DATED 28/12/2006 PASSED U/S.143(3) OF THE INCOME-TAX ACT, 1961 (IN SHORT T HE ACT). 2 THE ONLY GRIEVANCE RAISED BY THE REVENUE IS AGA INST THE ACTION OF THE CIT(A) IN DELETING THE ADDITION OF RS.42,96,777/- M ADE BY THE ASSESSING OFFICER ON ACCOUNT OF RETRENCHMENT COMPENSATION. IN THE C ONTEXT OF THIS DISPUTE, THE REVENUE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL. 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LEARNED CIT (APPEALS) ERRED IN DELETING THE ADDITION OF RS.42,9 6,777/- MADE ON ACCOUNT OF DISALLOWANCE OF RETRENCHMENT COMPENSATIO N. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE THE LEARNED CIT [APPEAL] ERRED IN TREATING THAT RETRENCHMENT COMPEN SATION IS AN EXPENDITURE INCURRED FOR THE PURPOSE OF BUSINESS IN NATURE OF REVENUE EXPENDITURE. ITA NO 802/PN/09 (A.Y. 2004-05) ELECTRONICA MACHINE TOOLS LTD . . 1998 2 3. BRIEFLY PUT, THE FACTS ARE THAT THE ASSESSEE CLA IMED DEDUCTION OF RS.42,96,777/- IN THE RETURN OF INCOME ON ACCOUNT O F RETRENCHMENT COMPENSATION PAID TO ITS EMPLOYEES. IN THE BOOKS OF ACCOUNT, THE ASSESSEE HAD TREATED THE SAME AS DEFERRED REVENUE EXPENDITURE AN D CLAIMED 1/5 TH OF THE SAME IN THE YEAR UNDER CONSIDERATION. THE ASSESSI NG OFFICER DISALLOWED THE CLAIM OF THE ASSESSEE WHICH WAS SUCCESSFULLY CONTES TED BY THE ASSESSEE BEFORE THE CIT(A). THE CIT(A) HAS DELETED THE ADDITION ON THE GROUND THAT THE EXPENDITURE ON RETRENCHMENT COMPENSATION IS OF A RE VENUE NATURE AND IN THIS CONTEXT, HE RELIED UPON JUDGMENT OF THE HONBLE ORI SSA HIGH COURT IN THE CASE OF CIT VS. J.C. BUDHARAJ & CO. 204 ITR 656 (ORISSA) CI TED BY THE ASSESSEE. 4. BEFORE US, APART FROM RELYING ON ASSESSMENT ORDE R IN SUPPORT OF THE GROUNDS OF APPEAL, THE LEARNED DR HAS NOT BROUGHT O N RECORD ANY DECISION CONTRARY TO THAT RELIED UPON CIT(A) TO DELETE THE I MPUGNED ADDITION. 5. ON THE OTHER HAND, LEARNED COUNSEL FOR THE RESPO NDENT ASSESSEE DEFENDED THE ORDER OF THE CIT(A) AND ALSO RELIED UPON FOLLOW ING JUDGMENTS : A) SASSOON J. DAVID & CO. P.LTD. VS. CIT 118 ITR 261 (SC), B) K. RAVINDRANATHAN NAIR VS. CIT, 247 ITR 178, (S C) ACCORDING TO THE LEARNED COUNSEL, ASSESSEE PAID RET RENCHMENT COMPENSATION IN ACCORDANCE WITH THE PROCEDURE PRESCRIBED IN SECTION 25F OF THE INDUSTRIAL DISPUTES ACT, 1947. IN THIS CONNECTION, OUR ATTEN TION WAS INVITED TO PAGES 11 TO 17 OF THE PAPER BOOK WHEREIN IS PLACED THE COPIES O F PRESCRIBED FORMS UNDER THE INDUSTRIAL DISPUTES ACT, 1947 FURNISHED TO THE STAT UTORY AUTHORITIES. 6. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS CAREFUL LY. EVIDENTLY THERE IS NO COGENT MATERIAL ON RECORD TO DISLODGE THE FINDING O F THE CIT(A) WHICH IS BASED ON THE JUDGMENT OF THE ORISSA HIGH COURT IN THE CASE OF CIT VS. J.C. BUDHARAJ & CO. ITA NO 802/PN/09 (A.Y. 2004-05) ELECTRONICA MACHINE TOOLS LTD . . 1998 3 (SUPRA). AS PER THE SAID PRECEDENT, RETRENCHMENT C OMPENSATION U/S 25F OF THE INDUSTRIAL DISPUTES ACT, 1947 IS AN ALLOWABLE BUSIN ESS EXPENDITURE U/S. 37(1) OF THE ACT. IN COMING TO THE SUCH DECISION THE HONBLE HIGH COURT RELIED UPON THE JUDGMENT OF THE SUPREME COURT IN THE CASE OF SASSOO N J. DAVID & CO. P.LTD. VS. CIT (SUPRA). FOLLOWING THE AFORESAID PRECEDENTS TO WHICH THERE IS NO CONTROVERSION BY THE REVENUE BEFORE US WE HEREBY AF FIRM THE CONCLUSION OF THE CIT(A) THAT RETRENCHMENT COMPENSATION IS AN ALLOWAB LE EXPENDITURE UNDER SECTION 37 (1) OF THE ACT. 7. ACCORDINGLY, THE APPEAL OF THE REVENUE IS DISMISSED. ORDER PRONOUNCED ON NOVEMBER, 2010. (SHAILENDRA KUMAR YADAV) (G.S.PANNU) JUDICIAL MEMBER ACCOUNTANT MEMBER PUNE DATED THE NOVEMBER , 2010 ASHWINI TRUE COPY COPY OF THE ORDER IS FORWARDED TO : 1. ASSESSEE 2. ASSTT.CIT, CIR. 1(2), PUNE , 3. CIT(A)-I, PUNE 4. CIT- I, PUNE , 5. D.R. ITAT B BENCH 6. GUARD FILE BY ORDER ASSTT. REGISTRAR I.T.A.T PUNE