Naran Lala Pvt.Ltd.,, Navsari v. The Dy.CIT.,Navsari Circle,, Navsari

ITA 610/AHD/2011 | 2007-2008
Pronouncement Date: 22-07-2011 | Result: Allowed

Appeal Details

RSA Number 61020514 RSA 2011
Bench Ahmedabad
Appeal Number ITA 610/AHD/2011
Duration Of Justice 4 month(s) 27 day(s)
Appellant Naran Lala Pvt.Ltd.,, Navsari
Respondent The Dy.CIT.,Navsari Circle,, Navsari
Appeal Type Income Tax Appeal
Pronouncement Date 22-07-2011
Appeal Filed By Assessee
Order Result Allowed
Bench Allotted C
Tribunal Order Date 22-07-2011
Date Of Final Hearing 01-07-2011
Next Hearing Date 01-07-2011
Assessment Year 2007-2008
Appeal Filed On 25-02-2011
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL AT AHMEDABAD C BENCH (BEFORE S/SHRI G.D. AGARWAL VICE-PRESIDENT AND MUKUL KUMAR SHRAWAT JUDICIAL MEMBER) ITA NO.610/AHD/2011 [ASSTT. YEAR : 2007-2008] NARAN LALA LIMITED NR.RAILWAY STATION NAVSARI. PAN : AACN 7719 C VS. DCIT NAVSARI CIRCLE NAVSARI. (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI SUNIL H. TALATI REVENUE BY : SHRI G.S.SURYABANSHI O R D E R PER G.D. AGARWAL VICE-PRESIDENT : THIS IS ASSESSEES APPEAL AGAINST THE ORDER OF LEARNED COMMISSIONER OF INCOME -TAX (APPEALS) VALSAD DATED 29.11.2010 ARISING OUT OF THE ORDER OF THE AO UNDER SECTION 143(3) OF THE INCOME TAX ACT 1961. 2. IN THIS APPEAL THE ASSESSEE HAS RAISED THE FOLL OWING GROUNDS: 1. THE LEARNED C.I.T.(A) ERRED BOTH IN LAW AND ON FACT S IN UPHOLDING THE ADDITION OF RS.15 26 152/- ON ACCOUNT OF DISALLOWAN CE OF LIQUIDATED DAMAGES AND INTEREST CLAIMED HOLDING THAT THE CONTESTANT PA RTY HAD NOT ACCEPTED THE ORDER OF ARBITRATION TRIBUNAL AND THE LIABILITY IS NOT FINAL. 2. THE LEARNED C.I.T.(A) OUGHT TO HAVE HELD THAT THE A T LEAST THE AMOUNT OF RS.15 26 152/- CRYSTALLIZED AS PERFECT LIABILITY ON 18-01-2007 I.E ON THE ORDER OF ARBITRATION TRIBUNAL WHICH MAY INCREASE ON FURTHER APPEAL BY THE CONTESTANT PARTY. DEDUCTION OF LIQUATED DAMAGES AS CLAIMED BE ALLOWED NOW. 3. THE LEARNED CIT(A) ERRED IN CONFIRMING THE LUMP SUM DISALLOWANCE OF RS.15 000/- OUT OF PRINTING AND STATIONERY EXPENSES POST AND TELEGRAM EXPENSES OFFICE EXPENSES AND OTHER EXPENSES. 4. THE LEARNED C.I.T.(A) OUGHT TO HAVE ALLOWED THE APP EAL IN TOTO. ITA NO.610/AHD/2011 -2- 3. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E COMPANY IS ENGAGED IN THE BUSINESS OF MANUFACTURE OF INDUSTRIAL PLANT & MACHINERY. IN THE RETURN THE ASSESSEE CLAIMED LIQUIDATED DAMAGES AND INTEREST AMOUNTING TO RS.15 26 152/-. TO THE QUERY BY THE AO THE ASSESS EE PRODUCED COPY OF THE ORDER OF THE ARBITRATION TRIBUNAL DATED 18.01.2 007 IN WHICH THE AO FOUND THAT THERE WAS DISPUTE BY THE CUSTOMER VIZ; S HREE SAYAN VIBHAG SAHAKARI KHAND UDYOG MANDLI LTD. REGARDING QUALITY INSTALLED CAPACITY AND PERFORMANCE OF THE ALCOHOL PLANT SUPPLIED TO IT AS PER AGREEMENT ENTERED INTO WITH THE ASSESSEE. DUE TO DISPUTE BET WEEN THE PARTIES THE ARBITRATOR APPOINTED AWARDED RS.14 07 502/- PLUS IN TEREST OF RS.1 18 650/- THEREON TO THE CUSTOMER AS AGAINST RS .85 26 062/- CLAIMED BY THEM. THE AWARD WAS PAYABLE WITH INTEREST WITHI N THREE MONTHS OF THE DATE OF AWARD. ACCORDINGLY AS THE ASSESSEE WAS FO LLOWING MERCHANTVILLE SYSTEM OF ACCOUNTING CLAIMED THE SAID EXPENSES DURI NG THE PREVIOUS YEAR HOWEVER THE AWARD OF THE ARBITRATION TRIBUNAL WAS NOT ACCEPTED BY THE COMPLAINANT. ACCORDING TO THE AO SINCE THE CUSTOM ER I.E. THE COMPLAINANT DID NOT ACCEPT THE ARBITRAL AWARD THE LIABILITY DID NOT BECOME FINAL AND CONCLUSIVE DURING THE PREVIOUS YEAR AND T HEREFORE THE CLAIM OF THE ASSESSEE IN THE PREVIOUS YEARS RELEVANT TO A.Y. 2007-08 IS NOT PROPER AS NO LIABILITY IS CRYSTALLIZED FOR THE YEAR UNDER CONSIDERATION. HENCE THE AO REJECTED THE ASSESSEES CLAIM. 4. IN THE FIRST APPEAL THE CIT(A) CONFIRMED THE AC TION OF THE AO IN REJECTING THE IMPUGNED CLAIM ON THE GROUND THAT THE CUSTOMER I.E. THE COMPLAINANT HAS NOT ACCEPTED THE AWARD GIVEN BY THE ARBITRATOR HENCE THE LIABILITY WAS NOT FINAL AND CONCLUSIVE AND THEREFOR E NOT ELIGIBLE FOR DEDUCTION. THE AGGRIEVED ASSESSEE IS IN FURTHER AP PEAL BEFORE US. ITA NO.610/AHD/2011 -3- 5. THE LEARNED COUNSEL FOR THE ASSESSEE HAS REITERA TED THE SUBMISSIONS MADE BEFORE BOTH THE AUTHORITIES BELOW AND SUBMITTE D THAT THE ASSESSEE HAS TO HONOUR THE AWARD GIVEN BY THE TRIBUNAL THAT TOO WITHIN THREE MONTHS FROM THE DATE OF THE AWARD. SINCE THE ASSES SEE IS FOLLOWING MERCANTILE SYSTEM OF ACCOUNTING THE SAME HAS TO BE ACCOUNTED FOR DURING THE PREVIOUS YEAR. THE LEARNED COUNSEL FOR THE ASS ESSEE HAS ALSO RELIED UPON THE JUDGMENT OF THE HONBLE JURISDIDCTIONAL HI GH COURT IN THE CASE OF NAVJIVAN ROLLAR FLOUR AND PULSE MILLS LTD. VS. D CIT 315 ITR 190 TO SUPPORT HIS CONTENTION THAT SIMPLY BECAUSE THE AWAR D WAS NOT ACCEPTED BY THE COMPLAINANT AND CHALLENGED IN APPEAL THAT COULD NOT BE A GROUND FOR HOLDING THAT THE ASSESSEE DID NOT INCUR THE LIABILI TY. IN VIEW OF THIS IT IS SUBMITTED BY THE LEARNED COUNSEL THAT THE ORDERS OF THE BOTH THE AUTHORITIES BELOW BE SET ASIDE AND CLAIM OF THE ASSESSEE BE ALL OWED. ON THE OTHER HAND THE LEARNED DR RELIED UPON THE ORDERS OF THE AUTHORITIES BELOW. 6. WE HAVE HEARD BOTH PARTIES AND PERUSED THE MATER IAL PLACED BEFORE US. IT IS NOT IN DISPUTE THAT THE AWARD OF THE TRI BUNAL HAS TO BE HONOURED BY THE ASSESSEE WITHIN THREE MONTHS FROM THE DATE O F THE AWARD. THE AO AND THE CIT(A) HAVE REJECTED THE CLAIM OF THE ASSES SEE ON THE GROUND THAT THE LIABILITY HAS NOT BEEN CRYSTALLIZED DURING THE RELEVANT YEAR UNDER CONSIDERATION. WE FIND THAT THE ISSUE IS COVERED I N FAVOUR OF THE ASSESSEE BY THE DECISION OF THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF NAVJIVAN ROLLAR FLOUR AND PULSE MILLS LTD. (SUPRA) WHERE IT IS HELD AS UNDER: .. ALLOWING THE APPEAL THAT THE ASSESSEE WAS FOLL OWING MERCANTILE SYSTEM OF ACCOUNTING AND THE LIABILITY TO PAY DAMAG ES WAS INCURRED BY THE ASSESSEE WHEN THE TRADE ASSOCIATION PASSED A N AWARD FOR DAMAGES FOR BREACH OF CONTRACT. MERELY BECAUSE THE AWARD WAS CHALLENGED IN APPEAL BY THE ASSESSEE THAT COULD NOT BE A GROUND FOR ITA NO.610/AHD/2011 -4- HOLDING THAT THE ASSESSEE DID NOT INCUR THE LIABILI TY. THE LIABILITY TO MAKE PAYMENT AROSE UNDER THE ARBITRATION AWARD DECL ARED IN THE RELEVANT ACCOUNTING PERIOD FOR THE ASSESSMENT YEAR 1988-90 HAD ACCRUED IN THAT YEAR. RATIO OF THE ABOVE DECISION WOULD BE SQUARELY APPLI CABLE TO THE CASE UNDER APPEAL BEFORE US. IN FACT IN THE APPEAL BEFO RE US THE ASSESSEE HAS NOT CHALLENGED THE AWARD BUT THE COMPLAINANT HAS C HALLENGED THE SAME THAT IS FOR ENHANCEMENT OF DAMAGES. THEREFORE RESP ECTFULLY FOLLOWING THE ABOVE JUDGMENT OF THE HONBLE JURISDICTIONAL HIGH C OURT WE DELETE THE ADDITION OF RS.15 26 152/- ON ACCOUNT OF DISALLOWAN CE OF LIQUIDATED DAMAGES AND INTEREST AND ALLOW GROUND NOS.1 AND 2 O F THE ASSESSEES APPEAL. 7. COMING TO GROUND NO.3 REGARDING DISALLOWANCE OF RS.15 000/- OUT OF PRINTING AND STATIONERY POST AND TELEGRAM E XPENSES OFFICE EXPENSES AND OTHER EXPENSES AFTER HEARING BOTH THE SIDES WE ARE OF THE VIEW OF THAT CONSIDERING THE SMALLNESS OF THE AMOUN T SPENT ON VARIOUS ABOVE EXPENSES THERE WAS NO JUSTIFICATION FOR AD HO C DISALLOWANCE. WE DELETE THE SAME AND ALLOW THIS GROUND OF THE ASSESS EE. 8. REST OF THE GROUNDS ARE GENERAL IN NATURE AND DO NOT REQUIRE ANY SEPARATE ADJUDICATION. 9. IN THE RESULT ASSESSEES APPEAL IS ALLOWED. ORDER PRONOUNCED IN OPEN COURT ON 22 ND JULY 2011 SD/- SD/- (MUKUL KR. SHRAWAT) JUDICIAL MEMBER (G.D. AGARWAL) VICE-PRESIDENT ITA NO.610/AHD/2011 -5- PLACE : AHMEDABAD DATE : -07-2011 C OPY OF THE ORDER FORWARDED TO: 1) : APPELLANT 2) : RESPONDENT 3) : CIT(A) 4) : CIT CONCERNED 5) : DR ITAT. BY ORDER DR/AR ITAT AHMEDABAD