The ACIT, 1 (1), v. M/s Bhopal Wires Pvt Ltd,

ITA 300/IND/2008 | misc
Pronouncement Date: 23-04-2010 | Result: Dismissed

Appeal Details

RSA Number 30022714 RSA 2008
Assessee PAN AAACB6102D
Bench Indore
Appeal Number ITA 300/IND/2008
Duration Of Justice 1 year(s) 9 month(s) 16 day(s)
Appellant The ACIT, 1 (1),
Respondent M/s Bhopal Wires Pvt Ltd,
Appeal Type Income Tax Appeal
Pronouncement Date 23-04-2010
Appeal Filed By Department
Order Result Dismissed
Bench Allotted DB
Tribunal Order Date 23-04-2010
Date Of Final Hearing 22-04-2010
Next Hearing Date 22-04-2010
Assessment Year misc
Appeal Filed On 07-07-2008
Judgment Text
1 THE INCOME TAX APPELLATE TRIBUNAL INDORE BENCH INDORE BEFORE SHRI JOGINDER SINGH JUDICIAL MEMBER AND SHRI V.K. GUPTA ACCOUNTANT MEMBER ITA NO. 300/IND/08 A.YS. 2005-06 ASSTT. COMMISSIONER OF INCOME TAX 1(1) BHOPAL APPELLANT VS M/S BHOPAL WIRES PVT. LTD. BHOPAL PAN AAACB6102D RESPONDENT APPELLANT BY : SMT. APARNA KARAN SR. DR RESPONDENT BY : SHRI ANIL KHABYA O R D E R PER BENCH THIS APPEAL IS BY THE REVENUE CHALLENGING THE ORDER OF THE LD. FIRST APPELLATE AUTHORITY DATED 25.7.2008. THE FIRST GRO UND RAISED IS THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) ERRED IN DELET ING THE ADDITION ON ACCOUNT OF DIFFERENCE BETWEEN MODVAT CREDIT CLAIMED FOR EXCISE 2 PAYMENT AND MODVAT CREDITED TO PROFIT AND LOSS ACCO UNT OF RS. 9 69 619/- BY MERELY GIVING EXCLUSION RATHER THAN D EALING WITH THE REASONS GIVEN IN THE ASSESSMENT ORDER THAT TOO WITH OUT PROVIDING ANY OPPORTUNITY TO HIM WITH RESPECT TO THE EXPLANATION PROVIDED BY THE ASSESSEE. DURING HEARING OF THIS APPEAL WE HAVE HE ARD SMT. APARNA KARAN SR. DR AND SHRI ANIL KHABYA LD. COUNSEL FOR THE ASSESSEE. THE CRUX OF ARGUMENTS ON BEHALF OF THE REVENUE IS IN SU PPORT TO THE ASSESSMENT ORDER WHEREAS THE LD. COUNSEL FOR THE AS SESSEE DEFENDED THE IMPUGNED ORDER BY CLAIMING THAT THE DIFFERENCE WAS DULY EXPLAINED BY THE ASSESSEE AND RECONCILIATION WAS ALSO DONE. 2. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PER USED THE MATERIAL AVAILABLE ON RECORD. BRIEF FACTS ARE THAT THE ASSESSEE COMPANY IS ENGAGED IN THE BUSINESS OF MANUFACTURING AND DIS TRIBUTION OF TRANSFORMERS AND CLAIMED EXPENDITURE OF RS.62 62 3 39/- TOWARDS CENTRAL EXCISE DUTY AND CREDITED THE EXCISE MODVAT TO PROFIT AND LOSS ACCOUNT AMOUNTING TO RS. 40 98 840/-. THE ASSESSEE WAS ASKED TO VERIFY AND ALSO TO SUBMIT THE DETAILS OF EXCISE PAY MENTS ACCOUNT WHICH WERE FURNISHED BY THE ASSESSEE. AS PER THE DEPARTM ENT THE ASSESSEE CLAIMED PAYMENT OF EXCISE DUTY OF RS. 62 62 339/- O UT OF MODVAT AS WELL AS THE PLA. MODVAT CREDIT OF RS. 50 68 459/- WAS CLAIMED AGAINST THE GOODS PURCHASED DURING THE YEAR AND IN ITS PROF IT AND LOSS ACCOUNT THE ASSESSEE INDICATED CREDITING THE AMOUNT OF RS.4 0 98 840/- IN ITS 3 PROFIT AND LOSS ACCOUNT CONSEQUENTLY THE DIFFEREN CE OF RS.9 69 619/- (MODVAT CREDIT CLAIMED FOR EXCISE PAYMENT OFRS.50 6 8 459/- MINUS MODVAT CREDITED TO PROFIT AND LOSS ACCOUNT TO THE TUNE OF RS.40 98 840/-) WAS ADDED TO THE INCOME OF THE ASSE SSEE. BEFORE THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) IT WAS CLAIMED THAT LEARNED ASSESSING OFFICER COULD NOT PROPERLY APPREC IATE THE METHOD OF ACCOUNTING FOLLOWED BY THE ASSESSEE WHICH IS BEING FOLLOWED FOR THE LAST SEVERAL YEARS AND THE ALLEGED DIFFERENCE OF RS.9 69 619/- DID NOT EXIST. THE USED MODVAT CREDIT OF RS.50 68 459/- FOR CLEAR ANCE OF GOODS AND THE LIABILITY WAS MET AS UNDER :- (I) OPENING BALANCE OF RG23A PART II AS ON 31.03.2004 RS.6 88 433/- (II) MODVAT CREDIT IN OPENIONG STOCK RS.8 03 900/- (III) MODVAT CREDIT OF INPUT CONSUMED DURING THE YEAR RS.32 94 940/- (IV) MODVAT CREDIT OF CLOSING STOCK UTILISED RS. 2 84 172 RS.50 71 445 LESS : BALANCE IN RG23A PART II AS ON 31.03.2005 RS. 2 986 RS.50 68 459/- THE MODVAT CREDIT OF RS. 40 98 840/- WAS CREDITED T O TRADING ACCOUNT AS PER FOLLOWING : MODVAT CREDIT IN OPENING STOCK RS. 8 03 900 (COST INCLUDING EXCISE WAS DEBITED IN TRADING ACCOUNT) ADD : MODVAT CREDIT DURING THE YEAR RS.35 79 112 LESS: MODVAT CREDIT OF CLOSING STOCK RS. 2 84 172 RS.40 98 840 4 THE ASSESSEE PAID RS. 6 88 483/- AS EXCISE DUTY OUT OF ADVANCE BALANCE AS ON 1.4.2004 AND BY UTILIZING CRE DIT OF RS.2 84 172/- EMBEDDED IN VALUATION OF CLOSING STOC K THEREFORE THE TOTAL OF THESE TWO FIGURES COMES TO RS.9 72 655/- THEREBY AFTER DEDUCTING THE BALANCE OF RS. 2 986/- AS AVAILABLE ON 31.3.2005 DULY RECONCILED THE DIFFERENCE OF RS. 9 69 619/-. THE ACCOUNTS OF THE ASSESSEE ARE AUDITED THEREFORE THE IMPUGNED AMOUNT CANNOT BE SUSTAINED CONSEQUENTLY THERE IS NO INFIRMITY IN THE STAND OF THE THE LEARNED COMMIS SIONER OF INCOME TAX (APPEALS). WE UPHOLD THE SAME. 3. THE NEXT GROUND PERTAINS TO DELETING THE ADDITIO N ON ACCOUNT OF DISALLOWANCE OF PRIOR PERIOD EXPENSES OF RS.29 330/- U/S 43B FURTHER A NON SPEAKING ORDER HAS BEEN MADE BY THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS). DURIN G HEARING IDENTICAL PLEA WAS RAISED BY THE LEARNED S ENIOR DEPARTMENTAL REPRESENTATIVE AS MENTIONED IN THE IM PUGNED GROUND HOWEVER THE LD. COUNSEL FOR THE ASSESSEE D EFENDED THE IMPUGNED ORDER. 5 4. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS OF LD. REPRESENTATIVES OF BOTH SIDES AND PERUSED THE MATER IAL AVAILABLE ON RECORD. AS PER THE REVENUE DURING SCR UTINY PROCEEDINGS IT WAS NOTICED THAT THE ASSESSEE DEBIT ED RS.6 517/- AS SALES TAX (FINANCIAL YEAR 2001-02) R S.11 789/- AS ENTRY TAX (FINANCIAL YEAR 2001-02) RS.6 272/- AS E NTRY TAX (FINANCIAL YEAR 1997-98) AND RS. 4 752/- AS ENTRY TAX (FINANCIAL YEAR 1998-99) AS PRIOR PERIOD EXPENSES IN ITS PROFI T AND LOSS ACCOUNT. THE ASSESSING OFFICER IN VIEW OF PROVISIO NS OF SECTION 43B OF THE ACT HELD THAT THE ASSESSEE IS NOT ENTIT LED TO PRIOR PERIOD EXPENSES AMOUNTING TO RS. 29 330/- AND ADDED THE SAME TO THE INCOME OF THE ASSESSEE. ON APPEAL BEFOR E THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) IT WA S CLAIMED BY THE ASSESSEE THAT THE ASSESSEE PAID COMMERCIAL T AX LIABILITIES WHICH AROSE ON ACCOUNT OF ASSESSMENTS AND WERE CLAIMED U/S 43B ON PAYMENT BASIS. IF THE TOTALITY O F FACTS IS ANALYSED WE ARE OF THE VIEW THAT THE METHOD OF ACC OUNTING IS NOT ALWAYS RELEVANT FOR CLAIMING DEDUCTION BUT ACTU AL PAYMENT THEREOF IS THE MATERIAL FACT FOR ALLOWING SUCH DEDU CTION. THE 6 DEDUCTION OF ANY EXPENDITURE DOES NOT DEPEND UPON B OOK ENTRIES RATHER THE FACTS AND THE PROVISIONS OF THE ACT HAVE TO BE CONSIDERED. SECTION 43B READS AS UNDER :- 91 43B. 92 NOTWITHSTANDING ANYTHING CONTAINED IN ANY OTHER PROVISION OF THIS ACTA DEDUCTION OTHERWISE ALLOWABL E UNDER THIS ACT IN RESPECT OF 93 [( A ) ANY SUM PAYABLE BY THE ASSESSEE BY WAY OF TAX 94 DUTY CESS OR FEE BY WHATEVER NAME CALLED UNDER ANY LAW FOR THE TIME BEING IN FORCE OR] ( B ) ANY SUM PAYABLE BY THE ASSESSEE AS AN EMPLOYER BY WAY OF CONTRIBUTION TO ANY PROVIDENT FUND OR SUPERANNUATIO N FUND OR GRATUITY FUND OR ANY OTHER FUND FOR THE WELFARE OF EMPLOYEES 95 [OR] 95 [( C ) ANY SUM REFERRED TO IN CLAUSE ( II ) OF SUB-SECTION (1) OF SECTION 36 ] 96 [OR] 96 [( D ) ANY SUM PAYABLE BY THE ASSESSEE AS INTEREST ON AN Y LOAN OR BORROWING FROM ANY PUBLIC FINANCIAL INSTITUTION 97 [OR A STATE FINANCIAL CORPORATION OR A STATE INDUSTRIAL INVESTM ENT CORPORATION] IN ACCORDANCE WITH THE TERMS AND COND ITIONS OF THE AGREEMENT GOVERNING SUCH LOAN OR BORROWING 98 [ OR] 98 [( E ) ANY SUM PAYABLE BY THE ASSESSEE AS INTEREST ON AN Y 99 [LOAN OR ADVANCES] FROM A SCHEDULED BANK IN ACCORDANCE WITH THE TERMS AND CONDITIONS OF THE AGREEMENT GOVERNING SUC H LOAN 1 [OR ADVANCES] ] 2 [OR] 2 [( F ) ANY SUM PAYABLE BY THE ASSESSEE AS AN EMPLOYER IN LIEU OF ANY LEAVE AT THE CREDIT OF HIS EMPLOYEE ] SHALL BE ALLOWED (IRRESPECTIVE OF THE PREVIOUS YEAR IN WHICH THE LIABILITY TO PAY SUCH SUM WAS INCURRED BY THE A SSESSEE ACCORDING TO THE METHOD OF ACCOUNTING REGULARLY EMP LOYED BY HIM) ONLY IN COMPUTING THE INCOME REFERRED TO IN SECTION 28 OF THAT PREVIOUS YEAR IN WHICH SUCH SUM IS ACTUALLY PAID BY HIM : 3 [ PROVIDED THAT NOTHING CONTAINED IN THIS SECTION SHALL APPLY IN RELATION TO ANY SUM 4 [***] WHICH IS ACTUALLY PAID BY THE ASSESSEE ON OR BEFORE THE DUE DATE APPLICABLE IN HI S CASE FOR FURNISHING THE RETURN OF INCOME UNDER SUB-SECTION ( 1) OF SECTION 139 IN RESPECT OF THE PREVIOUS YEAR IN WHICH THE LIABILITY TO PAY SUCH SUM WAS INCURRED AS AFORESAID AND THE EVIDENCE OF SUCH PAYMENT IS FURNISHED BY THE ASSESS EE ALONG WITH SUCH RETURN 5 . 6 [***]] EXPLANATION 7 [ 1 ].FOR THE REMOVAL OF DOUBTS IT IS HEREBY DECLARED THAT WHERE A DEDUCTION IN RESPECT OF ANY S UM 7 REFERRED TO IN CLAUSE ( A ) OR CLAUSE ( B ) OF THIS SECTION IS ALLOWED IN COMPUTING THE INCOME REFERRED TO IN SECTION 28 OF THE PREVIOUS YEAR (BEING A PREVIOUS YEAR RELEVANT T O THE ASSESSMENT YEAR COMMENCING ON THE 1ST DAY OF APRIL 1983 OR ANY EARLIER ASSESSMENT YEAR) IN WHICH THE LIABIL ITY TO PAY SUCH SUM WAS INCURRED BY THE ASSESSEE THE ASSESSEE SHALL NOT BE ENTITLED TO ANY DEDUCTION UNDER THIS SECTION IN RESPECT OF SUCH SUM IN COMPUTING THE INCOME OF THE PREVIOUS YE AR IN WHICH THE SUM IS ACTUALLY PAID BY HIM.] 8 [ EXPLANATION 2. FOR THE PURPOSES OF CLAUSE ( A ) AS IN FORCE AT ALL MATERIAL TIMES ANY SUM PAYABLE MEANS A SU M FOR WHICH THE ASSESSEE INCURRED LIABILITY IN THE PREVIO US YEAR EVEN THOUGH SUCH SUM MIGHT NOT HAVE BEEN PAYABLE WITHIN THAT YEAR UNDER THE RELEVANT LAW.] 9 [ 10 [ EXPLANATION 3 ].FOR THE REMOVAL OF DOUBTS IT IS HEREBY DECLARED THAT WHERE A DEDUCTION IN RESPECT OF ANY S UM REFERRED TO IN CLAUSE ( C ) 11 [OR CLAUSE ( D )] OF THIS SECTION IS ALLOWED IN COMPUTING THE INCOME REFERRED TO IN SECTION 28 OF THE PREVIOUS YEAR (BEING A PREVIOUS YEAR RELEVANT T O THE ASSESSMENT YEAR COMMENCING ON THE 1ST DAY OF APRIL 1988 OR ANY EARLIER ASSESSMENT YEAR) IN WHICH THE LIABIL ITY TO PAY SUCH SUM WAS INCURRED BY THE ASSESSEE THE ASSESSEE SHALL NOT BE ENTITLED TO ANY DEDUCTION UNDER THIS SECTION IN RESPECT OF SUCH SUM IN COMPUTING THE INCOME OF THE PREVIOUS YE AR IN WHICH THE SUM IS ACTUALLY PAID BY HIM.] 12 [ EXPLANATION 3A. FOR THE REMOVAL OF DOUBTS IT IS HEREBY DECLARED THAT WHERE A DEDUCTION IN RESPECT OF ANY S UM REFERRED TO IN CLAUSE ( E ) OF THIS SECTION IS ALLOWED IN COMPUTING THE INCOME REFERRED TO IN SECTION 28 OF THE PREVIOUS YEAR (BEING A PREVIOUS YEAR RELEVANT TO TH E ASSESSMENT YEAR COMMENCING ON THE 1ST DAY OF APRIL 1996 OR ANY EARLIER ASSESSMENT YEAR) IN WHICH THE LIABIL ITY TO PAY SUCH SUM WAS INCURRED BY THE ASSESSEE THE ASSESSEE SHALL NOT BE ENTITLED TO ANY DEDUCTION UNDER THIS SECTION IN RESPECT OF SUCH SUM IN COMPUTING THE INCOME OF THE PREVIOUS YE AR IN WHICH THE SUM IS ACTUALLY PAID BY HIM.] 13 [ EXPLANATION 3B. FOR THE REMOVAL OF DOUBTS IT IS HEREBY DECLARED THAT WHERE A DEDUCTION IN RESPECT OF ANY S UM REFERRED TO IN CLAUSE ( F ) OF THIS SECTION IS ALLOWED IN COMPUTING THE INCOME REFERRED TO IN SECTION 28 OF THE PREVIOUS YEAR (BEING A PREVIOUS YEAR RELEVANT TO TH E ASSESSMENT YEAR COMMENCING ON THE 1ST DAY OF APRIL 2001 OR ANY EARLIER ASSESSMENT YEAR) IN WHICH THE LIABIL ITY TO PAY SUCH SUM WAS INCURRED BY THE ASSESSEE THE ASSESSEE SHALL NOT BE ENTITLED TO ANY DEDUCTION UNDER THIS SECTION IN RESPECT OF SUCH SUM IN COMPUTING THE INCOME OF THE PREVIOUS YE AR IN WHICH THE SUM IS ACTUALLY PAID BY HIM.] 14 [ EXPLANATION 3C. FOR THE REMOVAL OF DOUBTS IT IS HEREBY DECLARED THAT A DEDUCTION OF ANY SUM BEING INTERES T PAYABLE 8 UNDER CLAUSE ( D ) OF THIS SECTION SHALL BE ALLOWED IF SUCH INTEREST HAS BEEN ACTUALLY PAID AND ANY INTEREST RE FERRED TO IN THAT CLAUSE WHICH HAS BEEN CONVERTED INTO A LOAN OR BORROWING SHALL NOT BE DEEMED TO HAVE BEEN ACTUALLY PAID.] 15 [ EXPLANATION 3D. FOR THE REMOVAL OF DOUBTS IT IS HEREBY DECLARED THAT A DEDUCTION OF ANY SUM BEING INTERES T PAYABLE UNDER CLAUSE ( E ) OF THIS SECTION SHALL BE ALLOWED IF SUCH INTEREST HAS BEEN ACTUALLY PAID AND ANY INTEREST RE FERRED TO IN THAT CLAUSE WHICH HAS BEEN CONVERTED INTO A LOAN OR ADVANCE SHALL NOT BE DEEMED TO HAVE BEEN ACTUALLY PAID.] 16 [ EXPLANATION 4. FOR THE PURPOSES OF THIS SECTION ( A ) PUBLIC FINANCIAL INSTITUTIONS SHALL HAVE THE ME ANING ASSIGNED TO IT IN SECTION 4A 17 OF THE COMPANIES ACT 1956 (1 OF 1956); 18 [( AA ) SCHEDULED BANK SHALL HAVE THE MEANING ASSIGNED TO IT IN THE EXPLANATION TO CLAUSE ( III ) OF SUB-SECTION (5) OF SECTION 11 ;] ( B ) STATE FINANCIAL CORPORATION MEANS A FINANCIAL C ORPORATION ESTABLISHED UNDER SECTION 3 OR SECTION 3A OR AN INS TITUTION NOTIFIED UNDER SECTION 46 OF THE STATE FINANCIAL CO RPORATIONS ACT 1951 (63 OF 1951); ( C ) STATE INDUSTRIAL INVESTMENT CORPORATION MEANS A GOVERNMENT COMPANY 19 WITHIN THE MEANING OF SECTION 617 OF THE COMPANIES ACT 1956 (1 OF 1956) ENGAGED IN THE BUS INESS OF PROVIDING LONG-TERM FINANCE FOR INDUSTRIAL PROJECTS AND 20 [ELIGIBLE FOR DEDUCTION UNDER CLAUSE ( VIII ) OF SUB-SECTION (1) OF SECTION 36 ] . ] IF THE TOTALITY OF FACTS IS KEPT IN JUXTAPOSITION W ITH THE AFORESAID PROVISION ONE FACT IS OOZING OUT THAT CERTAIN DEDUCTIONS ARE TO BE ALLOWED ONLY ON ACTUAL PAYMENT. THE AMENDMENT WHICH WAS MADE BY TH E FINANCE ACT 1987 IN SECTION 43B BY INSERTING INTER ALIA T HE FIRST PROVISO WAS REMEDIAL IN NATURE DESIGNED TO ELIMINATE UNINTENDE D CONSEQUENCES WHICH MAY CAUSE UNDUE HARDSHIP TO THE ASSESSEE AND WHICH MADE THE PROVISION UNWORKABLE OR UNJUST IN A SPECIFIC SITUAT ION. THE DEDUCTION OF SALESTAX IS ADMISSIBLE ONLY IN THE YEAR OF ACTUAL P AYMENT. IT IS NOT RELEVANT THAT THERE IS NO SPECIFIC PROVISION IN THE ACT. OUR VIEW FINDS SUPPORT FROM THE DECISION IN S.SUBBARAO & COMPANY V. UNION OF INDIA; 9 173 ITR 708 (AP) SANGHI MOTORS V. UNION OF INDIA; 187 ITR 703 (DEL). EVEN THE HONBLE JURISDICTIONAL HIGH COURT IN CIT V . KN OIL INDUSTRIES; 226 ITR 547 (MP) HELD THAT IN VIEW OF CIRCULAR OF C BDT NO. 496 DATED 25.9.1997 SALESTAX PAID UNDER THE DEFERRED PAYMENT SCHEME CANNOT BE DISALLOWED U/S 43B. IN VIEW OF THESE FACTS/JUDICIAL PRONOUNCEMENTS MENTIONED ABOVE THERE IS NO INFIRMITY IN THE CONCL USION OF THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS). WE THEREFORE UPHOLD THE SAME. FINALLY THE APPEAL OF THE REVENUE IS HAVING NO MER IT THEREFORE DISMISSED. ORDER PRONOUNCED IN OPEN COURT ON 23 RD APRIL 2010. SD SD (V.K. GUPTA) (JOGINDER SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER APRIL 23 RD 2010 COPY TO: APPELLANT RESPONDENT CIT CIT(A) DR G UARD FILE *DBN/