The DCIT, 1(1), Bhopal V. M/s. GEI Industrial Ltd., Bhopal

ITA 87/IND/2014

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 5830 (ITAT-INDORE)
• Duration Of Justice: 2 year(s) 5 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-07-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 04-07-2016
• Assessment Year: 2008-2009
• Appeal Filed On: 31-01-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: N D PATWA
• Assessee Lawyers: R P MOURYA
• Section: 43B

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL INDORE BENCH, INDORE BEFORE SHRI D.T.GERASIA, HON'BLE JUDICIAL MEMBER AN D SHRI N.S. SAINI, HONBLE ACCOUNTANT MEMBER ITA NO. 87/IND/2014 (ASST. YEAR : 2008-09) DY. CIT, 1(1), BHOPAL VS. M/S. GEI INDUSTRIAL LIMITED, BHOPAL. PAN NO. AABCG1403B (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI R.P.MOURYA, DR. DEPARTMENT BY : SHRI ASHISH GOYAL AND SHRI N. D. PATWA, ADV. DATE OF HEARING : 04/07/2016. DATE OF PRONOUNCEMENT : 04/07/2016. O R D E R PER N.S.SAINI, ACCOUNTANT MEMBER THIS IS AN APPEAL FILED BY THE REVENUE AGAINST THE ORDER OF COMMISSIONER OF INCOME TAX (APPEALS)-I, BHOPAL, DA TED 28/11/2013. 2. IN THIS APPEAL, THE GRIEVANCE OF THE REVENUE IS THAT THE LD. CIT(A) HAS ERRED IN DELETING THE ADDITION OF :- RS. ON ACCOUNT OF 18,49,192/- EXPENSES ON SALES TAX 97,75,891/- GRATUITY EXPENSES 2,02,194/- PROVIDENT FUND INTEREST 1,81,65,259/- INTEREST PAID TO BANK 2 3. THE BRIEF FACTS OF THE CASE ARE THAT THE AO FOUN D THAT IN THE BOOKS OF ACCOUNTS MAINTAINED BY THE ASSESSEE ON MERCANTIL E SYSTEM OF ACCOUNTING, THE ASSESSEE HAS SHOWN THE FOLLOWING EX PENSES UNDER THE HEAD PRIOR PERIOD EXPENSES :- RS. ON ACCOUNT OF 18,49,192/- EXPENSES ON SALES TAX 97,75,891/- GRATUITY EXPENSES 2,02,194/- PROVIDENT FUND INTEREST 1,81,65,259/- INTEREST PAID TO BANK THEREFORE, HE DISALLOWED DEDUCTION FOR THE SAME TO THE ASSESSEE. 4. ON APPEAL, THE LD. CIT(A) ALLOWED THE DEDUCTION FOR THE SAME ON THE GROUND THAT THEY WERE ALLOWABLE DEDUCTION IN T HE YEAR OF PAYMENT IN ACCORDANCE WITH THE PROVISIONS OF SECTION 43B OF THE INCOME-TAX ACT, 1961. 5. THE LD. DEPARTMENTAL REPRESENTATIVE RELIED ON T HE ORDER OF THE AO. 6. THE LD. AUTHORIZED REPRESENTATIVE OF THE ASSESSE E SUPPORTED THE ORDER OF THE AO. 7. WE HAVE HEARD THE RIVAL SUBMISSIONS AND HAVE PER USED THE MATERIAL AVAILABLE ON RECORD. WE FIND THAT THE SALE S TAX EXPENSES OF RS. 18,49,192/- PERTAINED TO SALES TAX ASSESSMENT MADE IN FINANCIAL YEAR 2007-08 AT RS. 5,55,937/-, INTEREST FOR FIRST AND T HIRD QUARTER OF 3 FINANCIAL YEAR 2007-08 AT RS. 12,388/- AND FOR VARI OUS ASSESSMENT ORDERS PASSED IN FINANCIAL YEAR 2007-08 RS. 12,80,8 67/- AGGREGATING TO, RS. 18,49,192/-. THUS, THE ENTIRE AMOUNT CRYSTALLIZ ED AND BECAME DUE DURING THE FINANCIAL YEAR 2007-08 RELEVANT TO THE A SSESSMENT YEAR 2008-09, WHEN THE ASSESSMENT ORDERS WERE PASSED BY THE SALES TAX AUTHORITIES. ACCORDINGLY, THE SAME WERE LIABLE TO D EDUCTION DURING THE YEAR UNDER CONSIDERATION . 8. REGARDING GRATUITY PAYMENT OF RS. 97,75,891/-, T HE LIC DEMANDED PAYMENT DURING THE FINANCIAL YEAR 2007-08 AS ADDITIONAL CONTRIBUTION FOR GRATUITY FUND AS WELL AS BALANCE P AYMENT AGAINST THE FINANCIAL YEAR 2006-07. THEREFORE, THE LIABILITY CR YSTALLIZED AND BECAME DUE FOR PAYMENT DURING THE FINANCIAL YEAR 2007-08 R ELEVANT TO ASSESSMENT YEAR 2008-09 AND ACCORDINGLY WAS ALLOWAB LE DEDUCTION TO THE ASSESSEE. 9. AS REGARDS PROVIDENT FUND INTEREST OF RS. 2,02,1 94/-, THE REGIONAL PROVIDENT FUND COMMISSIONER VIDE HIS ORDER DATED 9. 2.2007 RAISED A DEMAND OF PROVIDENT FUND DAMAGES AND INTEREST, WHIC H WAS SERVED ON THE ASSESSEE ON 2.4.2007 TO PAY THE DEMAND WITHIN 1 5 DAYS OF THE SERVICE OF THE ORDER. THUS, THE LIABILITY CRYSTALLI ZED AND BECAME DUE FOR PAYMENT IN THE FINANCIAL YEAR 2007-08 RELEVANT TO A SSESSMENT YEAR 2008-09 AND WAS, ACCORDINGLY, ALLOWABLE DEDUCTION T O THE ASSESSEE. 10. AS REGARDS INTEREST OF RS. 1,81,65,259/- PAID T O THE BANK, IT IS OBSERVED THAT THE ASSESSEE HAD OBTAINED LOANS FROM STATE BANK OF INDIA AND IDBI BANK. DUE TO LOSSES SUSTAINED BY THE ASSES SEE FOR THE YEAR 4 2003-04, IT WAS DIFFICULT FOR THE ASSESSEE TO MAKE REPAYMENT OF PRINCIPAL AND INTEREST AND, ACCORDINGLY, THE ASSESS EE HAD WRITTEN TO THE CORPORATE DEBT RESTRUCTURING CELL AND THE CORPORATE DEBT RESTRUCTURING CELL HAD GRANTED VARIOUS RELIEFS AND CONCESSIONS VI DE LETTER DATED 23.2.2004 TO THE ASSESSEE. CORPORATE DEBT RESTRUCTU RING CELL PERIODICALLY REVIEWED AND MONITORED THE PERFORMANCE OF THE ASSESSEE AND SINCE THE ASSESSEE HAS PERFORMED WELL, THE CORP ORATE DEBT RESTRUCTURING CELL REQUIRED THE ASSESSEE TO PAY RS. 1,81,65,259/- TOWARDS INTEREST DURING THE YEAR UNDER CONSIDERATIO N , WHICH WAS PAID BY THE ASSESSEE IN INSTALLMENTS OF RS. 5 LAKHS TO I DBI FROM 1.4.2007 TO 20.3.2008 AND FURTHER PAYMENT OF RS. 61,65,259/- ON 20.3.2008 TO STATE BANK OF INDIA. THUS, THE LIABILITY TO PAY TH E INTEREST CRYSTALIZED AND BECAME DUE DURING THE YEAR UNDER CONSIDERATION AND HENCE THE SAME WAS ALLOWABLE DEDUCTION TO THE ASSESSEE. 11. WE FIND THAT THE HON'BLE GUJARAT HIGH COURT IN THE CASE OF SAURASHTRA CEMENT AND CHEMICALS INDUSTRIES LIMITED VS. CIT , (1995) 213 ITR 523 (GUJ), HELD THAT MERELY BECAUSE AN EXPE NSE RELATES TO A TRANSACTION OF AN EARLIER YEAR IT DOES NOT BECOME A LIABILITY PAYABLE IN THE EARLIER YEAR UNLESS IT CAN BE SAID THAT THE LIA BILITY WAS DETERMINED AND CRYSTALLIZED IN THE YEAR IN QUESTION ON THE BAS IS OF MAINTAINING ACCOUNTS ON THE MERCANTILE BASIS. IN EACH CASE, WHE RE THE ACCOUNTS ARE MAINTAINED ON MERCANTILE BASIS, IT HAS TO BE FOUND IN RESPECT OF ANY CLAIM, WHETHER SUCH LIABILITY WAS CRYSTALLIZED AND QUANTIFIED DURING THE PREVIOUS YEAR SO AS TO BE REQUIRED TO BE ADJUSTED I N THE BOOKS OF 5 ACCOUNTS OF THAT PREVIOUS YEAR. IF ANY LIABILITY TH OUGH RELATING TO EARLIER YEAR DEPENDS UPON MAKING A DEMAND AND ITS ACCEPTANC E BY THE ASSESSEE AND SUCH LIABILITY HAS BEEN ACTUALLY CLAIM ED AND PAID IN THE LATTER PREVIOUS YEAR, IT CANNOT BE DISALLOWED AS DE DUCTION MERELY ON THE BASIS OF THE ACCOUNTS ARE MAINTAINED ON MERCANTILE BASIS AND THAT IT RELATED TO A TRANSACTION OF THE PREVIOUS YEAR. RESP ECTFULLY FOLLOWING THE ABOVE QUOTED DECISION OF HON'BLE GUJARAT HIGH COURT , WE SET-ASIDE THE ORDERS OF THE LOWER AUTHORITIES AND VACATE THE DISA LLOWANCE OF THE FOLLOWING EXPENSES :- RS. ON ACCOUNT OF 18,49,192/- EXPENSES ON SALES TAX 97,75,891/- GRATUITY EXPENSES 2,02,194/- PROVIDENT FUND INTEREST 1,81,65,259/- INTEREST PAID TO BANK 12. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS AL LOWED. ORDER PRONOUNCED IN THE COURT AT THE CLOSE OF THE H EARING ON MONDAY, THE 4 TH DAY OF JULY, 2016 AT INDORE. SD/- (D.T.GERASIA) SD/- (N.S.SAINI) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 4 TH JULY, 2016. CPU 6 COPY TO: 1. THE ASSESSEE. 2. THE REVENUE. 3. THE CIT 4. THE CIT(A) 5. THE D.R. 6. GUARD FILE. BY ORDER ASSISTANT REGISTRAR I.T.A.T., INDORE 7