The Dy. Commissioner of Income Tax 1(1), Indore v. M/s Indore Dugdh Sangh Sahakari Mydt., Indore

ITA 457/IND/2010 | 2004-2005
Pronouncement Date: 21-07-2011 | Result: Dismissed

Appeal Details

RSA Number 45722714 RSA 2010
Assessee PAN AAAJI0016N
Bench Indore
Appeal Number ITA 457/IND/2010
Duration Of Justice 1 year(s) 12 day(s)
Appellant The Dy. Commissioner of Income Tax 1(1), Indore
Respondent M/s Indore Dugdh Sangh Sahakari Mydt., Indore
Appeal Type Income Tax Appeal
Pronouncement Date 21-07-2011
Appeal Filed By Department
Order Result Dismissed
Bench Allotted Not Allotted
Tribunal Order Date 21-07-2011
Assessment Year 2004-2005
Appeal Filed On 09-07-2010
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL INDORE BENCH INDORE BEFORE SHRI JOGINDER SINGH J.M. AND SHRI R.C.SHARMA A.M. PAN NO. : AAAJI0016N I.T.A.NO. 457 & 459 / IND /20 10 A.Y. : 2004 - 05 & 2007 - 08 DY. CIT M/S. INDORE DUGDHA SANGH SAHAKARI MARYADIT 1(1) VS TALAWALI INDORE CHANDA MANGLIYA INDORE. APPELLANT RESPONDENT APPELLANT BY : S/SHRI DARSHAN SINGH AND ARUN DEWAN DRS. RESPONDENT BY : SHRI SURESH KIMTEE C. A. O R D E R PER R. C. SHARMA A.M. TH ESE ARE APPEALS FILED B Y THE REVENUE AGAINST THE ORDER OF CIT(A) FOR THE ASSESSMENT YEARS 2004 - 05 AND 2007 - 08. 2. IN THE ASSESSMENT YEAR 2004 - 05 THE REVENUE IS AGGRIEVED FOR DELETING DISALLOWANCE OF RS. 5.91 CRORES MADE U/S 36(1)(III) OF THE INCOME - TAX ACT 1961. 3. AT THE OUT - SET T HE LD. AUTHORIZED REPRESENTATIVE PLACED ON RECORD ORDER OF I.T.A.T. IN ASSESSEE S OWN CASE FOR - : 2 : - 2 THE ASSESSMENT YEAR 2002 - 03 ORDER DATED 20 TH FEBRUARY 2009 WHEREIN EXACTLY SIMILAR ISSUE WITH REGARD TO DISALLOWANCE U/S 36(1 ) (III) WAS DECIDED IN FAVOUR OF TH E ASSESSEE. THIS ORDER OF THE TRIBUNAL HAD BEEN CONFIRMED BY THE HOWEVER JURIS DICTIONAL HIGH COURT VIDE THEIR ORDER DATED 23RD MARCH 2011. FOLLOWING WAS THE PRECISE OBSERVATION OF THE HON'BLE HIGH COURT : - THE TRIBUNAL DISMISSED THE APPEAL FILED BY THE APPELLANT REVENUE HOLDING THAT THE ASSESSEE HAD FOLLOWED MERCANTILE SYSTEM OF ACCOUNTING AND IT HAS PREPARED BALANCE SHEET PROFIT AND LOSS ACCOUNT ON THE BASIS OF ACCRUAL. THE LIABILITY TO PAY INTEREST IS ASCERTAINED LIABILITY WHICH HAS BEEN ACCRUED IN THE YEAR UNDER CONSIDERATION. THE TRIBUNAL FURTHER HELD THAT THE ASSESSEE HAS FOLLOWED THIS MATTER OF ACCOUNTING SINCE BEGINNING AND THE DEPARTMENT HAS ACCEPTED THE SAME IN THE PAST. HAVING HELD SO THE TRIBUNAL DISMISSED THE APPEAL FILED BY THE APPELLANT REVENUE. - : 3 : - 3 HAVING HEARD LD. SENIOR COUNSEL FOR THE APPELLANT AND HAVING GONE THROUGH THE IMPUGNED ORDER PASSED BY THE LD. CIT(A) AND THE TRIBUNAL WE ARE OF THE VIEW THAT THE FINDINGS RECORDED BY THE CIT(A) AND THE TRIBUNAL THAT THE ASSESSEE IS FOLLOWING MERCANTILE SYSTEM OF ACCOUNTING AND HAS PREPARED BALANCE SHEET PROFIT AND LOSS ACCOUNT ON THE BASIS OF ACCRUAL THE LIABILITY TO PAY INTEREST IS ASCERTAINED LIABILITY CANNOT BE SAID TO BE UNJUST FOR HOLDING THE ASSESSEE BEING ELIGIBLE FOR THE BENEFIT OF SECTION 36(1)(3) OF THE ACT 1961. WE FIND THAT THE ASSESSEE WAS FOLLOWING THE MERCANTILE SYSTEM OF ACCOUNTING RIGHT FROM THE BEGINNING AND THE REVENUE WAS ACCEPTING THE SAME. IN OUR CONSIDERED VIEW THE TRIBUNAL HAS COMMITTED NOR ERROR IN ENDORSING THE VIEW TAKEN BY CIT(A). IT IS NOT THE CASE OF THE REVENUE THAT THE ASSESSEE HAS ADOPTED COLORABLE DEVICE TO DEFRAUD THE REVENUE. - : 4 : - 4 4. AS THE ISSUE IS WELL SETTLED BY THE DECISION OF THE TRIBUNAL IN ASSESSEE S OWN CASE WHICH HAVE BEEN FURTHER AFFIRMED BY THE HO N'BLE JURISDICTIONAL HIGH COURT U/S 260A R ESPECTFULLY FOLLOWING THE DECISION OF THE HON'BLE JURISDICTIONAL HIGH COURT WE DO NOT FIND ANY REASON TO INTERFERE IN THE ORDER OF THE CIT(A) FOR DELETING THE DISALLOWANCE OF RS. 5.91 CRORES MADE U/S 36(1)(III) O F THE INCOME - TAX ACT 1961. 5. IN THE RESULT THE I.T.A.NO. 457/IND/2010 IS DISMISSED. 6. IN THE ASSESSMENT YEAR 2007 - 08 THE REVENUE IS AGGRIEVED FOR DELETING ADDITION OF RS. 31 LAKHS MADE ON ACCOUNT OF DISALLOWANCE OF PROVISION FOR PAYMENT OF ARREARS. 7. RIVAL CO NTENTIONS HAVE BEEN HEARD AND RECORDS PERUSED. FROM THE RECORD WE FOUND THAT PROVISIONS FOR REVISED PAY HAVE BEEN DEBITED TO PROFIT AND LOSS ACCOUNT AT RS. 31 00 000/ - . IN RESPONSE TO A QUERY ON THE QUESTION OF ADMISSIBILITY OF AMOUNT IT HAS BEEN CONTENDE D THAT THE 5 TH PAY COMMISSION TO THE EMPLOYEES OF THE ASSESSEE WAS SANCTIONED BY THE REGISTRAR OF COOPERATIVE SOCIETIES BHOPAL VIDE ORDER NO.1690 DATED 23.11.2006 W.E.F. 01.01.2006. IT HAS BEEN ADDED IN THE REPLY THAT THE PROVISION WAS MADE ON THE BASIS OF - : 5 : - 5 WORKING OF DIFFERENCE OF PRE REVISED AND REVISED SALARY. IT HAS BEEN FURTHER ARGUED THAT THE DIFFERENCE OF SALARY WAS REQUIRED TO BE PAID FOR THE PERIOD FROM JANUARY 06 TO OCTOBER 06 AND SINCE MOST OF THE PERIOD WAS FALLING IN THE ACCOUNTING YEAR 200 6 - 07 RELEVANT TO ASSESSMENT YEAR 2007 - 08 AND ENTIRE AMOUNT WAS CRYSTALLIZED IN THE ACCOUNTING PERIOD 2006 - 07 AND AFTER FINALIZATION OF BALANCE SHEET AS ON 31.3.2006. IT HAS BEEN FURTHER SUBMITTED THAT PART OF PAYMENT HAS ALREADY BEEN MADE IN THE SUBSEQUEN T YEAR. 8. BY THE IMPUGNED ORDER THE LD. CIT(A) DELETED THE DISALLOWANCE OF RS. 31 LAKHS ON ACCOUNT OF PROVISION FOR PAYMENT OF ARREARS AFTER HAVING FOLLOWING OBSERVATIONS : - 1.02 THE ISSUE IS EXAMINED. THE FACTS ARE THAT PAYMENT OF REVISED PAY AS PER RE COMMENDATIONS OF THE 5 TH PAY COMMISSION FROM JAN. 2006 TO OCTOBER 06 WAS APPROVED. THE APPELLANT ACCORDINGLY PROVIDED ARREAR OF REVISED PAY FOR THE PERIOD JAN 06 TO OCT 06. THE AO DISALLOWED THE SAME ON THE GROUND THAT IT IS AN UNCERTAINED LIABILITY. THE APPELLANT IN THE - : 6 : - 6 WRITTEN SUBMISSIONS STATED THAT PAYMENT FOR JAN 06 TO MARCH 06 WAS CRYSTALLIZED ON 23.11.2006 I.E. IN THE PREVIOUS YEAR 2006 - 07 RELEVANT TO THE ASSESSMENT YEAR 2007 - 08 AS A RESULT OF ORDER OF THE REGISTRAR AND COMMISSIONER OF COOP. SOCIE TIES BHOPAL MP DATED 23.11.06 AND HENCE THE SAME IS ALLOWABLE IN THE YEAR UNDER CONSIDERATION BEING MERCANTILE SYSTEM OF ACCOUNTING HAS BEEN FOLLOWED. 1.03 THE PLEA OF THE APPELLANT IS TENABLE AND HENCE CLAIM OF ARREARS OF PAY OF RS. 31 00 000/ - MADE B Y THE APPELLANT IS ALLOWABLE. DISALLOWANCE MADE BY THE ASSESSING OFFICER IS THEREFORE DELETED. 9. IT IS CLEAR FROM THE ABOVE FINDINGS OF CIT(A) THAT PAYMENT MADE FOR JANUARY 2006 TO MARCH 2006 WAS CRYSTALLIZED ON 23.11.2006 I.E. IN THE PREVIOUS YEAR 20 06 - 07 RELEVANT TO ASSESSMENT YEAR 2007 - 08. I N TERMS OF THE ORDER OF REGISTRAR AND COMMISSIONER OF COOP. SOCIETIES DATED - : 7 : - 7 23.11.2006. AS THE LIABILITY WAS CRYSTALLIZED DURING THE YEAR UNDER CONSIDERATION THERE IS NO INFIRMITY IN THE ORDER OF THE CIT(A) FOR ALLOWING THE CLAIM OF DEDUCTION IN RESPECT OF THE LIABILITY WHICH WAS CRYSTALLIZED DURING THE YEAR UNDER CONSIDERATION . 10. IN THE RESULT BOTH THE APPEALS OF THE REVENUE ARE DISMISSED. THIS ORDER HAS BEEN PRONOUNCED IN THE OPEN COURT ON 21 ST JU LY 2011. S D/ - S D/ - (JOGINDER SINGH) ( R.C.SHARMA) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 21 ST JU LY 2011 . CPU* 1213 21