ACIT, Kota V. MODER MOTORS, Kota

ITA 92/JPR/2016

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 4826 (ITAT-JAIPUR)
• Duration Of Justice: 10 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-12-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: Not Allotted
• Assessment Year: 2012-2013
• Appeal Filed On: 01-02-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: R A VERMA CIT DHK
• Section: 43B

Judgement Text

VK;DJ VIHYH; VF/KDJ.K] T;IQJ U;K;IHB] T;IQJ IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHE S, JAIPUR JH DQY HKKJR] U;KF;D LNL; ,OA JH FOE FLAG ;KNO] YS [KK LNL; DS LE{K BEFORE: SHRI KUL BHARAT, JM & SHRI VIKRAM SINGH YAD AV, AM VK;DJ VIHY LA-@ ITA NO. 92/JP/16 FU/KZKJ.K O'K Z@ ASSESSMENT YEAR : 2012-13 THE ASSTT. COMMISSIONER OF INCOME TAX, CIRCLE-1, KOTA CUKE VS. M/S MODERN MOTORS, 1 & 2 JHALAWAR ROAD, KOTA LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN NO. AAIFM 9003 D VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT FU/KZKFJRH DH VKSJ LS@ ASSESSEE BY : SHRI MAHENDRA GARGIEYA (CA) JKTLO DH VKSJ LS@ REVENUE BY : SHRI R.A.VERMA (ADDL. CIT ) LQUOKBZ DH RKJH[K@ DATE OF HEARING : 23.12.2016 ?KKS'K .KK DH RKJH[K @ DATE OF PRONOUNCEMENT : 23/12/2016. VKNS'K@ ORDER PER SHRI VIKRAM SINGH YADAV, A.M. THIS IS AN APPEAL FILED BY THE REVENUE AGAINST THE ORDER OF LD. CIT(A) KOTA DATED 27.11.2015 WHEREIN THE REVENUE HAS TAKEN FOLL OWING GROUNDS OF APPEAL: (I) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE T HE LD. CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS.26,21,774/- MA DE BY AO ON ACCOUNT OF PROVISION OF ENTRY TAX WITHOUT APPRECIATING THE FACTS CONTAINED IN THE CASE LAWS OF CIT VS. ASSAM ROLLER FLOUR MILLS (226 ITR 876)(RAJ) AND CIT VS. PADMAVATI RAJE COTTON MILLS LTD. (203 ITR 375 ((CA.) (II) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE THE LD. CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS. 28,66,947/- M ADE BY AO DISALLOWING REMUNERATION TO THE PARTNERS WITHOUT APPRECIATING THE CONTENTS OF CBDT, NEW DELHIS CIRCULAR NO. 739 DATED 25.03.1996 . ITA NO. 92/JP/2016 THE ACIT, CIRCLE-1, KOTA VS. M/S MODERN MOTORS, KOT A 2 2. IN GROUND NO.1 OF THE APPEAL THE ASSESSEE HAS SU BMITTED SIMILAR ISSUE RAISED IN THE PRECEDING YEAR IN A.Y. 2010-11 WHEREI N ALSO, SIMILAR DISALLOWANCES WERE MADE BY THE AO WHICH WAS DELETED BY THE CIT(A) AND IN FURTHER APPEAL BY THE DEPARTMENT, THIS HONBLE ITAT CONFIRMED THE DELETION BY THE CIT(A) VIDE PARA 2.5 OF THEIR ORDER DATED 29.02 .2016 IN ITA NO. 719/JP/13 (48 ITR (TRIB.) 579. THE HIMSELF HAS FOLLOWED A .Y. 2020-11 AT PAGE 9 PARA 2. HE HAS NOT REPORTED ANY SUBSTANTIAL CHANGE IN THE F ACTS AND CIRCUMSTANCES OF THE CASE OR ANY CHANGE IN THE LEGAL POSITION JUSTIF YING DISALLOWANCE SO MADE. THUS, THE ISSUE IS DIRECTLY AND FULLY COVERED FROM THE ITAT ORDER IN ASSESSEES OWN CASE. FURTHER, IN FACT IN THAT YEAR, THERE WAS AN OPENING BALANCE OF RS. 19,47,349/- AND A PROVISION OF RS. 20,56,504/- WAS CREATED TOTALLING TO RS.40,03,853/- AND HE AO MADE DISALLOWANCE OF ENTI RE RS. 40,03,853/- IN THAT YEAR. HOWEVER, IN THIS YEAR THERE IS AN ADDITIONA L FEATURE THAT EVEN NO PROVISION OF ALL WAS MADE BY THE ASSESSEE AND RS.66 ,25,627/- WAS NOTHING BUT THE OPENING BALANCE ITSELF NOT AT ALL CALLING FOR ANY DISALLOWANCE UNDER ANY PROVISION OF THE ACT. 2.1 IN GROUND NO.2 THE ASSESSEE HAS FURTHER SUBMIT TED SIMILAR ISSUE WAS RAISED IN THE PRECEDING YEAR IN A.Y. 2010-11 WHEREI N ALSO, SIMILAR DISALLOWANCES WERE MADE BY THE AO WHICH WERE DELETED BY THE CIT(A ) AND IN FURTHER APPEAL BY THE DEPARTMENT, THIS HONBLE ITAT CONFIRMED THE DELETION BY THE CIT() VIDE PARA 3.4 OF THEIR ORDER DATED 29.02.2016 IN ITA N O.719/JP/13. THE AO HIMSELF HAS FOLLOWED AY 2010-11 AT PAGE 12-13 PARA 3. HE HAS NOT REPORTED ANY SUBSTANTIAL CHANGE IN THE FACTS AND CIRCUMSTANCES O F THE CASE OR ANY CHANGE IN THE LEGAL POSITION JUSTIFYING HE DISALLOWANCE SO MA DE. THUS THE ISSUE IS DIRECTLY AND FULLY COVERED FROM THE ITAT ORDER IN ASSESSEES OWN CASE. ITA NO. 92/JP/2016 THE ACIT, CIRCLE-1, KOTA VS. M/S MODERN MOTORS, KOT A 3 2.2 THE CO-ORDINATE BENCH HAS GIVEN DECISION IN SIM ILAR ISSUES IN THE ASSESSEES OWN CASE IN ITA NO. 719/JP/13 DATED 29.0 2.016 FOR A.Y.2010-11 ARE AS UNDER: (2.5) WE HAVE HEARD THE RIVAL CONTENTIONS AND PURS UED THE MATERIAL ON RECORD. FIRSTLY, IT IS NOT THE CASE OF THE REVENUE THAT THE APPELLANT HAS COLLECTED ENTRY TAX FROM ITS CUSTOMERS AND TAX SO C OLLECTED HAS NOT BEEN DEPOSITED WITH THE ENTRY TAX AUTHORITIES. THE LIMI TED ISSUE RELATES TO ACCOUNTING ENTRY TOWARDS LIABILITY TOWARDS THE ENTR Y TAX PASSED BY THE APPELLANT IN ITS BOOKS OF ACCOUNTS AND WHETHER PROV ISIONS OF SECTION 43B OF THE ACT ARE ATTRACTED. THE ASSESSEE HAS SUBMITTE D THAT IN VIEW OF THE ONGOING LITIGATION BEFORE THE SUPREME COURT, AS A M ATTER OF PRECAUTION, IT HAS CREATED A LIABILITY BEING THE PROVISION FOR EN TRY TAX ON ONE HAND AND AT THE SAME TIME TO NULLIFY THE EFFECT OF SUCH A PR OVISION, IT HAS ALSO PASSED ANOTHER ENTRY ON THE ASSET SIDE AS ADVANCE AGAINST ENTRY TAX. THUS, FOLLOWING THE DOUBLE ENTRY SYSTEM OF ACCOUNTI NG, THE APPELLANT HAS CREATED A LIABILITY BY WAY OF A PROVISION TOWARDS T HE ENTRY TAX AND A CORRESPONDING ASSET IN ITS BALANCE SHEET AND THERE IS NO CHARGE/TRANSFER OF PROVISION TO THE PROFIT/LOSS ACCOUNT. THE APPEL LANT HAS BEEN CONSISTENTLY PASSING THESE ENTRIES FOR EARLIER YEAR S AS WELL I.E, A.Y. 2008- 09, 2009-10. GIVEN THAT THERE IS NO CLAIM OF PROVI SION OF ENTRY TAX IN THE PROFIT/LOSS ACCOUNT AND HENCE IN ABSENCE OF A CLAIM OF AN EXPENSE, THE QUESTION OF SECTION 43B GETTING ATTRACTED DOESNT A RISE AT FIRST PLACE. SECTION 43B POSTULATES A SITUATION WHERE THE EXPENS E OTHERWISE ALLOWABLE UNDER THE ACT IS SUBJECT TO DISALLOWANCE ON NON-FULFILLMENT OF CONDITIONS STIPULATED THEREIN. UNLIKE CLAIM OF DEPR ECIATION WHERE THE STATUE STIPULATES A MANDATORY ALLOWANCE OF DEPRECIA TION EVEN IF NOT CLAIMED, THERE IS NO SUCH STATUTORY PROVISIONS IN R ESPECT OF CLAIM OF STATUTORY LIABILITY WHICH EVEN THOUGH NOT CLAIMED B UT WOULD STILL BE DEEMED TO BE ALLOWED FOR TAX PURPOSES. WE HAVE ALS O GONE THROUGH THE ORDER OF CIT VS. ASSAM ROLLER FLOUR MILLS (226 ITR8 76)(RAJ.) AND CIT VS. PADMAVATI RAJE COTTON MILL LTD. (203 ITR 375) (CAL. ) WHICH DOESNT ADVANCE THE CASE OF THE REVENUE. IN LIGHT OF ABOVE , THERE IS NO NEED TO INTERFERE WITH THE FINDING OF LD CIT(A) WHICH IS HE REBY CONFIRMED. HENCE, GROUND NO 1 OF REVENUES APPEAL IS DISMISSED. (3.4) WE HAVE HEARD THE RIVAL CONTENTIONS AND PURSU ED THE MATERIAL ON RECORD. AS APPARENT FROM THE ASSESSMENT ORDER, CLAUSE 6 OF THE PARTNERSHIP DEED PROVIDES THE MANNER OF QUANTIFYING THE REMUNERATION WHICH IS PAYABLE TO THE PARTNERS. THE REMUNERATION HAS TO BE WORKED OUT BASED ON CERTAIN ITA NO. 92/JP/2016 THE ACIT, CIRCLE-1, KOTA VS. M/S MODERN MOTORS, KOT A 4 PERCENTAGE OF THE BOOK PROFIT WHICH WILL BE DETERMI NED AT THE END OF THE YEAR. IT IS ALSO PROVIDED THAT THE TOTAL AMOUNT OF THE REMUNERATION SO WORKED OUT IS TO BE SHARED EQUALLY AMONGST ALL THE THREE PARTNERS AND IN CASE OF LOSS, NO SALARY WOULD BE ALLOWABLE TO THE P ARTNERS. THE CBDT CIRCULAR SIMILARLY PROVIDES THAT WHERE EITHER THE Q UANTUM OR THE MANNER OF QUANTIFICATION OF REMUNERATION TO THE PARTNERS H AS BEEN SPECIFIED IN THE PARTNERSHIP, THE SAME SHALL BE ALLOWABLE UNDER SECTION 40(B)(V) OF THE ACT AND NOT OTHERWISE. IN THE INSTANT CASE, GIVEN THAT THE SALARY HAS BEEN MADE A FUNCTION OF ANNUAL BOOK PROFIT WHICH CAN BE DETERMINED ONLY AT THE END OF THE YEAR, THE EXACT QUANTUM OF REMUNERAT ION HAS NOT BEEN SPECIFIED. AT THE SAME TIME, THE PARTNERSHIP DEED CLEARLY PROVIDES FOR THE MANNER OF QUANTIFICATION OF REMUNERATION. IT IS NO T A CASE SIMPLICITER THAT THE PARTNERS HAVE LEFT THE DOORS OPEN TO CLAIM THE REMUNERATION AS PER SECTION 40(B)(V) OF THE ACT WHICH APPARENTLY IS THE BACKDROP FOR ISSUANCE OF CBDT CIRCULAR NO. 739 DATED 25.03.1996. GIVEN THE CLEAR FACTS AND CDBT GUIDANCE WHICH RATHER SUPPORTS THE C ASE OF THE APPELLANT THAN THE REVENUE, THE LD CIT(A) HAS RIGHTLY DELETED THE DISALLOWANCE WHERE IS HEREBY CONFIRMED. HENCE, GROUND NO. 2 OF REVENUE IS DISMISSED. 2.3 WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. GIVEN THAT THERE IS NO CHANGE IN THE FA CTS AND CIRCUMSTANCES OF THE CASE OR ANY CHANGE IN THE LEGAL POSITION. RESPECTFU LLY FOLLOWING THE DECISION OF COORDINATE BENCH BOTH THE GROUNDS TAKEN BY THE REVE NUE ARE DISMISSED. IN THE RESULT THE GROUNDS TAKEN BY THE REVENUE IS DISMISSED . ORDER PRONOUNCED IN THE OPEN COURT ON 23/12 /2016. SD/- SD/- (KUL BHARAT ) (VIKRAM SINGH YADAV) U;KF;D LNL;@ JUDICIAL MEMBER YS[KK LNL;@ ACCOUNTANT MEMBER JAIPUR DATED:- 23/12/2016 ITA NO. 92/JP/2016 THE ACIT, CIRCLE-1, KOTA VS. M/S MODERN MOTORS, KOT A 5 PILLAI VKNS'K DH IZFRFYFI VXZSF'KR@ COPY OF THE ORDER FORWARDED TO: 1. VIHYKFKHZ@ THE APPELLANT- THE ACIT, CIRCLE-1, KOTA 2. IZR;FKHZ@ THE RESPONDENT- M/D MODERN MOTORS, KOTA 3. VK;DJ VK;QDR@ CIT KOTA 4. VK;DJ VK;QDRVIHY@ THE CIT(A)-KOA 5. FOHKKXH; IZFRFUF/K] VK;DJ VIHYH; VF/KDJ.K] T;IQJ@ DR, ITAT, JAIPUR 6. XKMZ QKBZY@ GUARD FILE (ITA NO.92/JP/2016.) VKNS'KKUQLKJ@ BY ORDER, LGK;D IATHDKJ@ ASSISTANT. REGISTRAR.