Nowrojee N Vakil & Co.,, Ahmedabad v. The Income tax Officer,Ward-2(3),, Ahmedabad

ITA 424/AHD/2011 | misc
Pronouncement Date: 29-07-2011 | Result: Dismissed

Appeal Details

RSA Number 42420514 RSA 2011
Assessee PAN AAFFM6798P
Bench Ahmedabad
Appeal Number ITA 424/AHD/2011
Duration Of Justice 5 month(s) 13 day(s)
Appellant Nowrojee N Vakil & Co.,, Ahmedabad
Respondent The Income tax Officer,Ward-2(3),, Ahmedabad
Appeal Type Income Tax Appeal
Pronouncement Date 29-07-2011
Appeal Filed By Assessee
Order Result Dismissed
Bench Allotted D
Tribunal Order Date 29-07-2011
Assessment Year misc
Appeal Filed On 15-02-2011
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH D BEFORE SHRI MUKUL KR. SHRAWAT JUDICIAL MEMBER AND SHRI A.N. PAHUJA ACCOUNTANT MEMBER DATE OF HEARING : 15/07/2011 DRAFTED ON: 18 /07/2011 ITA NO.424/AHD/2011 ASSESSMENT YEAR : 1988-89 NOWROJEE N VAKIL & CO. A/2 MATHURESH FLATS OPP.RAJASTHAN HOSPITAL CAMP ROAD AHMEDABAD VS. THE INCOME TAX OFFICER WARD-2(3) AHMEDABAD PAN/GIR NO. : AAFFM 6798 P ( APPELLANT ) .. ( RESPONDENT ) APPELLANT BY : SHRI RAJESH C.SHAH A.R. RESPONDENT BY: SHRI B.L. YADAV D.R. O R D E R PER SHRI MUKUL KR. SHRAWAT JUDICIAL MEMBER : THIS IS AN APPEAL AT THE BEHEST OF THE ASSESSEE WHICH HAS EMANATED FROM THE ORDER OF LEARNED CIT(APPEALS)-XVI AHMEDABAD DATED 06/12/2010 AND THE GROUND READS AS UNDER:- 1. THAT THE C.I.T. (APPEALS) ERRED IN CONFIRMING T HE DISALLOWANCE OF THE RETRENCHMENT COMPENSATION OF RS.284759 THOUGH THE SAME WAS PAID AS PER THE AGREEMENT WITH THE UNION AS PER THE INDU STRIAL DISPUTES ACT AS NOTICED BY THE A.O. ON THE GROUND THAT THE BUSI NESS OF THE APPELLANT HAD STOPPED W.E.F. 2-6-1986 AND ON THE BASIS OF A WRONG PRESUMPTION OF THE A.O. THAT THE SALES UPTO 22-10-1987 WAS REAL IZATION OF OLD STOCK IN SPITE OF THE CLEAR FINDING OF THE HONOURABLE TRI BUNAL THAT THE BUSINESS CANNOT BE SAID TO HAVE BEEN CLOSED FROM 2- 6-1986 MERELY BECAUSE POWER WAS DISCONNECTED WHEN THE PRODUCTION AND SALES HAD TAKEN PLACE UPTO 22-10-1987 AS IS EVIDENT FROM THE EXCISE RECORDS. IT IS THEREFORE SUBMITTED ON THE FACTS OF THE CASE T HAT THE RETRENCHMENT ITA NO .424/AHD/2011 NOWROJEE N VAKIL & CO. VS. ITO ASST.YEAR - 1988-89 - 2 - COMPENSATION OF RS.284759 BE HELD TO BE ALLOWABLE A ND THE SAME BE ALLOWED. 2. THE PAST HISTORY OF THIS CASE WAS NARRATED IN TH E IMPUGNED ORDER PASSED U/S.254 OF THE I.T.ACT DATED 22/12/2009 AND FOR THE SAKE OF COMPLETENESS; REPRODUCED BELOW:- ORDER GIVING EFFECT TO ITATS ORDER U/S.254 OF THE ACT ORDER GIVING EFFECT TO ITATS ORDER NO.ITA NO.244/A HD/1995 DATED 15/06/2005 AND M.A. NO.27/AHD/2006 DATED 23/0 5/2008 IN THIS CASE ORIGINAL ASSESSMENT U/S.143(3) WAS M ADE ON 12/11/1990 DETERMINING TOTAL INCOME OF RS.26 59 610 /-. THE CIT(A)-VII AHMEDABAD HAS VIDE HIS ORDER IN APPEAL NO.CIT(A)- VII/DC(A)-3/2/90-91 DATED 29/09/1994 PARTLY ALLOWED ASSESSEES APPEAL AND EFFECT TO THE SAME WAS GIVEN VIDE ORDER PASSED ON 14/11/1994 REVISING TOTAL INCOME AT RS.25 54 170/- . THE INCOME WAS SUBSEQUENTLY REVISED TO RS.24 24 170/- VIDE AN ORDER PASSED U/S.154 ON 04/01/1995. PARTIAL EFFECT TO ITATS OR DER WAS GIVEN ON 13/07/2007 REVISING THE INCOME TO RS.20 86 226/- & SAME WAS REVISED TO RS.19 56 230/- VIDE AN ORDER PASSED U/S. 154 ON 20/07/2009. 2.1. THE ASSESSEE WENT IN APPEAL BEFORE HON.ITAT AHMEDABAD. THE ITAT AHMEDABAD BENCH C VIDE ITS ORDER IN ITA NO.244/AHD/1995 DATED 15/06/2005 PARTLY ALLOWED TH E APPEAL AND THE FOLLOWING ISSUES SET ASIDE TO THE FILE OF ASSES SING OFFICER. THE ASSESSEE FILED A MISCELLANEOUS APPLICATION AGAINST THE SAID ORDER AND HON.ITAT VIDE ITS ORDER IN M.A. NO.27/AHD/2006 (ARISING OUT OF ITA NO.244/AHD/1995) DATED 23/05/2008 REJECTED T HE SAME. 2.1. HOWEVER THE ISSUE IS IN RESPECT OF CLAIM O F RETRENCHMENT COMPENSATION OF RS.2 84 760/-. THE ASSESSING OFFIC ER WAS OF THE VIEW THAT THE BUSINESS WAS CLOSED ON 2 ND JUNE 1986 AND DID NOT START LATER ON. HE HAS ALSO MENTIONED THAT THE PAYMENT WAS IN ACCOR DANCE WITH THE ITA NO .424/AHD/2011 NOWROJEE N VAKIL & CO. VS. ITO ASST.YEAR - 1988-89 - 3 - INDUSTRIAL DISPUTES ACT HENCE NOT TO BE ALLOWED A S HELD IN THE CASE OF NATHALAL ASHARAM REPORTED AT 194 ITR 110 (GUJ.). WITH THE RESULT THE DSIA WHICH WAS EARLIER MADE WAS REAFFIRMED. 3. THE LD.CIT(A) HAS HELD THAT THE IMPUGNED RETRENC HMENT COMPENSATION WAS PAID AFTER THE CLOSURE OF THE FACT ORY THEREFORE NOT AN ALLOWABLE EXPENDITURE RELEVANT PARAGRAPH REPRODUCE D BLEOW:- 2.3.2. THE AO HAS STATED THAT THE ASSESSEE HAS FI LED AN AGREEMENT DATED 29/09/1986 BETWEEN THE ASSESSEE AND THE UNION WHICH CLEARLY SHOWS THAT FROM 02/06/1986 THE FACTOR Y REMAIN CLOSED AND THERE WAS NO CHANCE FOR REVIVAL AND THE DISPUTES BETWEEN THE TWO PARTIES EXISTED AT THAT TIME. THE AGREEMENT ITSELF READS AS SETTLEMENT UNDER SECTION 2(P) OF INDUSTRI AL DISPUTES ACT 1947. THE AO STATED THAT IN VIEW OF THE ABOVE AG REEMENT IT IS CLEAR THAT THE ASSESSEE COULD NOT START PRODUCTION AFTER 02/06/1986 AND THE EMPLOYEES WERE RETRENCHED IN FULL WITHOUT A NY RAY OF HOPE TO BE REINSTATED. THE SALE OF RS.1 51 644/- AFTER THE CLOSURE OF FACTORIES IS NOTHING BUT REALIZATION OF ASSETS. TH E AO STATED THAT IT IS VERY CLEAR THAT THE RETRENCHMENT COMPENSATION HA S BEEN PAID AFTER THE CLOSURE OF BUSINESS AND THE PAYMENT HAS B EEN MADE IN ACCORDANCE WITH THE INDUSTRIAL DISPUTES ACT AFTER T HE CLOSURE OF BUSINESS AND HENCE THIS RETRENCHMENT COMPENSATION I S NOT ALLOWABLE. 2.3.3. I AGREE WITH THE AO THAT THE ENTIRE PAYMEN T KNOWN AS RETRENCHMENT COMPENSATION HAS BEEN PAID AFTER THE C LOSURE OF THE ITA NO .424/AHD/2011 NOWROJEE N VAKIL & CO. VS. ITO ASST.YEAR - 1988-89 - 4 - FACTORY WHICH IS CLEAR FORM THE AGREEMENT MADE WIT H THE UNION AND HENCE THE DECISION OF HONOURABLE GUJARAT HIGH C OURT IN THE CASE OF NATHALAL ASHARAM SUPRA IS CLEARLY APPLICABL E AND THE DISALLOWANCE MADE BY THE AO IS CORRECT. THIS GROU ND OF APPEAL IS DISMISSED. 4. FROM THE SIDE OF THE ASSESSEE THE LEARNED AUTHO RISED REPRESENTATIVE MR.RAJESH C.SHAH APPEARED AND VEHEME NTLY ARGUED THAT CERTAIN SALES HAVE BEEN EFFECTED LATER ON THEREFOR E IT WAS WRONG ON THE PART OF THE REVENUE OFFICERS TO HOLD THAT THE BUSIN ESS WAS CLOSED. IN SUPPORT HE HAS TRIED TO EXPLAIN THE MOVEMENT OF GO ODS AS PER THE RECORDS OF THE EXCISE DEPARTMENT. 5. ON THE OTHER HAND FROM THE SIDE OF THE REVENUE THE LEARNED DEPARTMENTAL REPRESENTATIVE SHRI B.L.YADAV HAS PLAC ED RELIANCE ON THE ORDERS OF THE ASSESSING OFFICER AND LEARNED CIT(APP EALS). 6. WE HAVE HEARD THE SUBMISSIONS OF BOTH THE SID ES. WE HAVE ALSO PERUSED THE MATERIAL PLACED BEFORE US. THIS ISSUE CAN BE DECIDED IN THE LIGHT OF DECISIONS IN THE CASE(S) OF CIT VS. GEMINI CASHEW SALES CORPORATION REPORTED AT [1967] 65 ITR 643 (SC) W.T. SUREN & CO. (P) LTD. REPORTED AT 230 ITR 643(SC) AND OF NATHAL AL ASHARAM VS. CIT REPORTED AT 194 ITR 110(GUJ). AS FAR AS THE DECI SION OF THE HON'BLE HIGH COURT IS CONCERNED THE RETRENCHMENT COMPENSAT ION BEING MADE AFTER THE CLOSE OF THE BUSINESS HENCE HELD AS NOT AN ALLOWABLE EXPENDITURE. IN OUR CONSIDERED OPINION HAVING HEA RD THE SUBMISSIONS OF BOTH THE SIDES WE ARE OF THE VIEW THAT THIS ISSUE NOW STOOD COVERED IN ITA NO .424/AHD/2011 NOWROJEE N VAKIL & CO. VS. ITO ASST.YEAR - 1988-89 - 5 - FAVOUR OF THE REVENUE BY THE DECISION OF JURISDICTI ONAL HIGH COURT IN THE CASE OF NATHALAL ASHARAM REPORTED AT 194 ITR 110(G UJ.). AN ANOTHER DECISION HAS ALSO CAME TO OUR NOTICE OF HON'BLE KAR NATAKA HIGH COURT IN THE CASE OF CIT VS. MARGARINE AND REFINED OILS CO.L TD. REPORTED AT [2006] 282 ITR 576 (KARN) WHEREIN IT WAS HELD AS U NDER: (RELEVANT PORTION REPRODUCED):- IN ORDER TO BE ELIGIBLE FOR DEDUCTION UNDER SECTIO N 37(1) OF THE INCOME-TAX ACT 1961 THE EXPENDITURE SHOULD BE LAID DOWN OR E XPENDED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS OR PROFESSI ON. THE EXPENDITURE INCURRED BY THE MANAGEMENT IN PAYING RETRENCHMENT C OMPENSATION FOR TERMINATION OF SERVICE IS A BUSINESS EXPENDITURE P ROVIDED THE EMPLOYER CONTINUES TO CARRY ON THE BUSINESS AFTER SUCH RETRE NCHMENT. HOWEVER IF THE RETRENCHMENT IS DONE CONSEQUENT TO CLOSURE OF BUSIN ESS THEN THE AMOUNT PAID TOWARDS RETRENCHMENT COMPENSATION CANNOT BE CLAIMED AS BUSINESS EXPENDITURE AS ON THE DATE THE RETRENCHMENT COMPEN SATION IS PAID THE ASSESSEE IS NOT CARRYING ON ANY BUSINESS. 6.1. RESPECTFULLY FOLLOWING THE DECISION ONCE IT WAS HELD THAT RETRENCHMENT COMPENSATION IS NOT AN ALLOWABLE EXPEN DITURE THEREFORE REST OF THE ARGUMENTS HAS NO FORCE HENCE REJECTED AND THIS GROUND IS ALSO DISMISSED. 7. IN THE RESULT THE APPEAL OF THE ASSESSEE IS D ISMISSED. ORDER SIGNED DATED AND PRONOUNCED IN THE COURT ON 29 TH JULY 2011. SD/- SD/- ( A.N. PAHUJA ) ( MU KUL KR. SHRAWAT ) ACCOUNTANT MEMBER JUDICIAL MEMBE R AHMEDABAD; DATED 29 / 07 /2011 T.C. NAIR SR. PS ITA NO .424/AHD/2011 NOWROJEE N VAKIL & CO. VS. ITO ASST.YEAR - 1988-89 - 6 - COPY OF THE ORDER FORWARDED TO : 1. THE ASSESSEE. 2. THE DEPARTMENT. 3. THE CIT CONCERNED 4. THE LD. CIT(APPEALS)-XVI AHMEDABAD 5. THE DR AHMEDABAD BENCH 6. THE GUARD FILE. BY ORDER //TRUE COPY// (DY./ASSTT.REGISTRAR) ITAT AHMEDABAD 1. DATE OF DICTATION.. 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER OTHER MEMBER 3. DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR.P. S./P.S.. 4. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE D ICTATING MEMBER FOR PRONOUNCEMENT 5. DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR.P .S./P.S29.7.11 6. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK 29.7.11 7. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK . 8. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT RE GISTRAR FOR SIGNATURE ON THE ORDER .. 9. DATE OF DESPATCH OF THE ORDER