SHREE PRECOATED STEELS LTD, MUMBAI v. DCIT 8(3), MUMBAI

ITA 4838/MUM/2014 | 2010-2011
Pronouncement Date: 20-10-2016

Appeal Details

RSA Number 483819914 RSA 2014
Assessee PAN AAGCA8466M
Bench Mumbai
Appeal Number ITA 4838/MUM/2014
Duration Of Justice 2 year(s) 2 month(s) 28 day(s)
Appellant SHREE PRECOATED STEELS LTD, MUMBAI
Respondent DCIT 8(3), MUMBAI
Appeal Type Income Tax Appeal
Pronouncement Date 20-10-2016
Appeal Filed By Assessee
Bench Allotted E
Tribunal Order Date 20-10-2016
Assessment Year 2010-2011
Appeal Filed On 22-07-2014
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL E BENCH MUMBAI BEFORE SHRI B.R. BASKARAN (AM) & RAMLAL NEGI (JM) I.T.A. NO. 4838 /MUM/20 14 (ASSESSMENT YEAR 20 10 - 11 ) M/S. SHREE PRECOATED STEELS LTD. 2 ND FLOOR CITIMALL NEW LINK ROAD ANDHERI WEST MUMBAI - 400 053. VS. DCIT CIRCLE 8(3) MUMBAI ( APPELLANT ) ( RESPONDENT ) PAN NO . AAGCA8466M ASSESSEE BY SHRI PRAKASH JOTWANI DEPARTMENT BY S HRI A.K. KARDAM DATE OF HEARING 20 .10 . 201 6 DATE OF PRONOUNCEMENT 20 . 10 . 201 6 O R D E R PER B.R. BASKARAN (AM) : - THE APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER DATED 9.5.2014 PASSED BY THE LEARNED CIT(A) - 18 MUMBAI AND IT RELATES TO A.Y. 2010 - 11. 2. THE ASSESSEE IS AGGRIEVED BY THE DECISION OF THE LEARNED CIT(A) IN HOLDING THAT THE EXPENDITURE OF ` 6.30 CRORES CLAIMED BY THE ASSESSEE IS NOT ALLOWABLE IN THE YEAR UNDER CONSIDERATION . 3. WE HAVE HEARD THE PARTIES AND PERUSED THE RECORD. FACTS RELATING TO THE ISSUE ARE STATED IN BRIEF. THE ASSESSING OFFICER NOTICED THAT THE ASSESSEE HAS CLAIMED A SU M OF ` 6.30 CRORES RELATING TO CLAIM PAID AGAINST LEGAL CASES AS DEDUCTION IN THE PROFIT AND LOSS ACCOUNT . THE ASSESSING OFFICER CALLED FOR THE DE TAILS RELATING TO THE SAME AND HE NOTICED THAT THE LEGAL CLAIM HAS BEEN SETTLED IN THE SUCCEEDING YEAR I.E. THE ASSESSEE HAS ENTERED INTO A SETTLEMENT AGREEMENT ON 30.4.2010 AND THE HON'BLE BOMBAY HIGH COURT HAS PASSED AN SHREE PRECOATED STEELS LTD. 2 ORDER IN TERM S OF THE SETTLEMENT AGREEMENT ON 4.5.2010. SINCE THE DATE OF SETTLEMENT AGREEMENT AND THE DATE OF ORDER OF BOMBAY HIGH COURT FEL L IN THE SUCCEEDING YEAR THE ASSESSING OFFICER TOOK THE VIEW THAT THE ASSESSEE CANNOT CLAIM DEDUCTION FOR ` 6.30 CRORES DURING THE YEAR UNDER CONSIDERATION. THE LEARNED CIT(A) ALSO CONFIRMED THE SAME. 4. LEARNED AR SUBMITTED THAT THE ASSESSEE HAD R EMITTED ` 6.30 CRORES IN THE ESCROW ACCOUNT OF M/S. MACSTEEL INTERNATIONAL LIMITED AS DIRECTED BY HON'BLE BOMBAY HIGH COURT ON 16.10.2009. M/S. MACSTEEL INTERNATIONAL LIMITED HAD FILED A CASE AGAINST THE ASSESSEE FOR BREACH OF CONTRACT OF SALE IN RESPECT O F CONTRACT ENTERED ON 6.4.2005 AND 3.5.2005. SINCE THE DISPUTE WAS PERSISTING ON THE DATE OF B ALANCE - SHEET OF THE YEAR UNDER CONSIDERATION AND SINCE THE SETTLEMENT TOOK PLACE BEFORE FINALIZATION OF THE ACCOUNT OF THE YEAR UNDER CONSIDERATION THE ASSESSEE CLAIMED THE AMOUNT OF ` 6.30 CRORES AS DEDUCTION IN THE YEAR UNDER CONSIDERATION. FURTHER THE ABOVE SAID AMOUNT HAS ALREADY BEEN REMITTED BY THE ASSESSEE TO ESCROW ACCOUNT. HE SUBMITTED THAT THE ACTION OF THE ASSESSEE IS IN ACCORDANCE WITH THE A CCOUNTING STANDARD - 4 ISSUED BY THE INSTITUTE OF CHARTERED ACCOUNTANTS OF INDIA. ACCORDINGLY HE SUBMITTED THAT THE LEARNED CIT(A) WAS NOT JUSTIFIED IN CONFIRMING THE DISALLOWANCE MADE BY THE ASSESSING OFFICER. 5. ON THE CONTRARY LEARNED DEPARTMENTAL REPRESENTATIV E SUBMITTED THAT THE ACTUAL SETTLEMENT HAS TAKEN PLACE IN THE SUCCEEDING YEAR AND HENCE THE IMPUGNED EXPENDITURE CANNOT BE TREATED AS EXPENDITURE PERTAINING TO THE YEAR UNDER CONSIDERATION. 6. HAVING HEARD THE RIVAL SUBMISSIONS WE ARE OF THE VIEW THAT T HERE IS MERIT IN THE CONTENTIONS OF THE ASSESSEE. WE HAV E NOTICED THAT THE DISPUTE IS RELATE D TO THE CONTRACT ENTERED INTO BETWEEN THE ASSESSEE AND M/S. MACSTEEL INTERNATIONAL LIMITED ON 6.4.2005 AND 3.5.200 5. THE ASSESSEE HAS REMITTED A SUM OF ` 6.30 C RORES TO ESCROW ACCOUNT OF M/S. MACSTEEL INTERNATIONAL LIMITED AS PER THE DIRECTION ISSUED BY HON'BLE BOMBAY HIGH COURT ON 16.10.2009 SHREE PRECOATED STEELS LTD. 3 MEANING THEREBY THE DISPUTE WAS PENDING ON THE DATE OF B ALANCE - SHEET OF THE YEAR UNDER CONSIDERATION (31.3.2010) AND THE OUTCOME THEREOF WAS AWAITED. WE HAVE NOTICED THAT THE PARTIES REACHED A SETTLEMENT ON 30.4.2010 AND THE HONBLE HIGH COURT OF BOMBAY HAS ALSO PASSED ORDER ON 4.5.2010 . ACCORDING TO THE ASSESSEE THE SETTLEMENT WAS REACHED BEFORE THE FINALIZATION OF THE A CCOUNTS OF THE YEAR ENDING 31.3.2010 AND H ENCE AS PER THE ACCOUNTING STANDARD - 4 OF ICA I THE ASSESSEE IS REQUIRED TO ACCOUNT FOR THE SAID LIABILITY ON 31.3.2010 . SINCE THE ASSESSEE BEING A LIMITED COMPANY IS GOVERNED BY THE ACCOUNTING STANDARD S AND SINC E THE ASSESSEE HAS FOLLOWED THE SAME IN MAKING THE IMPUGNED CLAIM WE ARE OF THE VIEW THAT THERE IS NO INFIRMITY IN THE CLAIM SO MADE BY THE ASSESSEE. ACCORDINGLY WE HOLD THE ABOVE SAID CLAIM IS ALLOWABLE DURING THE YEAR UNDER CONSIDERATION AND ACCORDINGL Y WE ARE OF THE VIEW THAT THE TAX AUTHORITIES ARE NOT JUSTIFIED IN REJECTING THE CLAIM OF THE ASSESSEE. ACCORDINGLY WE SET ASIDE THE ORDER PASSED BY THE LEARNED CIT(A) AND DIRECT THE ASSESSING OFFICER TO ALLOW THE IMPUGNED CLAIM OF THE ASSESSEE IN AY 2010 - 11 . 7. IN THE RESULT APPEAL FILED BY THE ASSESSEE IS ALLOWED. ORDER HAS BE EN PRONOUNCED IN THE COURT ON 20 . 10 .2016 SD/ - SD/ - (RAMLAL NEGI ) (B.R.BASKARAN) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI ; DATED : 20 / 10 / 20 1 6 COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) 4. CIT 5. DR ITAT MUMBAI 6. GUARD FILE. BY ORDER //TRUE COPY// ( DY./ASSTT. REGISTRAR) PS ITAT MUMBAI