Income Tax Appellate Tribunal - Kolkata
Sparsh Agro - Pro (P) Ltd., Asansol vs Department Of Income Tax on 9 June, 2015
I .T.A . N o. 16 / KOL ./ 20 1 3
Ass es sm e nt ye a r: 2 00 8- 2 00 9
Page 1 of 9
IN THE INCOME TAX APPELLATE TRIBUNAL,
KOLKATA 'B' BENCH, KOLKATA
Before Shri P.K. Bansal, Accounta nt M em be r
and Shri Maha vir Singh, Judicial Member
I.T .A. No . 16 /KOL/ 20 13
Assess ment year : 2008 -2 00 9
Dep u ty Com mis si one r of Income Ta x,... ......................Ap p ella nt
Circle-3, A sa nsol,
Pa rma r Build ing,
54, G.T. Roa d (West),
A sa nsol-713 304
-Vs.-
M/s. Sp a rsh A gro-Pro (P) Limited ,...........................Re sp ond en t
240 , P.N . Ma lia Roa d ,
Ra niga nj-713 347,
District-Burd wa n
[PA N : AA JCS 2982 H]
Appeara nces by :
Shri Pinaki Mu kh erjee, JCIT, Sr. D.R., for th e Depa rtment
Shri S. M. Surana, Advocate, f or the ass ess ee
Dat e of concluding t he hearin g : M ay 27, 2 015
Dat e of pr onouncing th e order : Jun e 09 , 201 5
O R D E R
Per P.K. Bansal:
This app eal h as b een filed by the Revenue again st the ord er o f ld. Commissioner of Inco me Ta x (App eals), Asan sol dated 12.10.2012 fo r the as se ssm ent year 2008-09 by taking th e followin g eff ective g round s of app eal:-
(1) That the ld . CIT (A), Asansol has er red in law and on facts by allowing the relief of Rs.90,000/- disallowed by the Assessing Officer und er section 40 (a)(ia) for failure to deduct ta x as r eq uired under s ectio n 194C.
(2) That the ld . CIT (A), Asansol has er red in law and on facts by allowing th e relief of Rs.9 4,741/-, disallowed by the Assessing Officer on accoun t of ROC exp ens es t rea ting a s capita l expenditur e wh ich led to the incr ease in Authorized cap ital.
I .T.A . N o. 16 / KOL ./ 20 1 3 Ass es sm e nt ye a r: 2 00 8- 2 00 9 Page 2 of 9 (3) That the ld . CIT (A), Asansol has er red in law and on facts by allowing th e relief of Rs.6 9,826/-, disallowed by the Assessing o fficer on accou nt of tr eatin g the amount a s capita l expenditur e d ebit ed in Profit & Loss A/c.
(4) That the ld . CIT (A), Asansol has er red in law and on facts by allowing the relief of Rs.75,00,000/- disallowed by th e Assessing Officer on account of differ ence in closing stock betw een au dited balance sh eet an d stock shown in insura nce policy certified by Ban k.
2. Gro und No. 1 in this app eal rel ate s to the deletion of additio n of Rs. 90,000/-. Brief fa cts relatin g to this g rou nd are th at the Ass es sin g office r noted th at the as se ssee has not deducted any tax in respe ct of pay ment of Rs.90,000/- on which TDS was d edu ctible. He, therefo re, disallowed th e said su m und er s ectio n 40(a)(ia) of th e A ct. When the matter wen t in app eal before the CIT(A ppeals), CIT(App eals) d elet ed the disallowance followin g the d eci sion d ated 2 9.03.2012 of ITAT, Sp ecial Bench, Vishakhapatn a m in the case of Merilyn Shipping & Transpo rt Limited i n ITA No. 477/Vi zag./2008, whe rein it was h eld that the disallowance under section 40(a)(ia) can be mad e only in resp ect to the expendi ture which is payable as on 31 s t March of the ye ar.
3. After h earin g th e rival submissio n s an d carefully consid erin g the same we noted th at th e de cision o f ITA T, Speci al Ben ch, Vish akhapatnam, dated 29.03.2012 o f Merilyn Shippin g & Transpo rt Li mit ed report ed in 16 ITR (T ribunal) 1, but the said d eci sio n has not been app rov ed b y the Hon'ble jurisdi ctional High Cou rt in the c ase of Crescent Expo rt s Sy ndicat e in ITA No . 23 of 2013. The Hon'ble High Court took the following view:-
"Before dealing with the submissions of the learned Counsel appearing for the assessees in both the appeals we have to examine the correctness of the majority views in the case of Merilyn Shipping and Transports.
We already have quoted extensively both the majority and the minority views expressed in the aforesaid case. The main thrust of the majority view is based on the I .T.A . N o. 16 / KOL ./ 20 1 3 Ass es sm e nt ye a r: 2 00 8- 2 00 9 Page 3 of 9 fact "that the Legislature has replaced the expression "amounts credited or paid"
with the expression 'payable' in the final enactment.
Comparison between the pre-amendment and post amendment law is permissible for the purpose of ascertaining the mischief sought to be remedied or the object sought to be achieved by an amendment. This is precisely what was done by the Apex Court in the case of CIT Vs. Kelvinator reported in 2010(2) SCC 723. But the same comparison between the draft and the enacted law is not permissible. Nor can the draft or the bill be used for the purpose of regulating the meaning and purport of the enacted law. It is the finally enacted law which is the will of the legislature.
The Learned Tribunal fell into an error in not realizing this aspect of the matter.
The Learned Tribunal held "that where language is clear the intention of the legislature is to be gathered from the language used". Having held so, it was not open to seek to interpret the section on the basis of any comparison between the draft and the section actually enacted nor was it open to speculate as to the effect of the so-called representations made by the professional bodies.
The Learned Tribunal held that "Section 40(a)(ia) of the Act creates a legal fiction by virtue of which even the genuine and admissible expenses claimed by an assessee under the head "income from business and profession": if the assessee does not deduct TDS on such expenses are disallowed".
Having held so was it open to the Tribunal to seek to justify that "this fiction cannot be extended any further and, therefore, cannot be invoked by Assessing Officer to disallow the genuine and reasonable expenditure on the amounts of expenditure already paid"? Does this not amount to deliberately reading something in the law which is not there?
We, as such, have no doubt in our mind that the Learned Tribunal realized the meaning and purport of Section 40(a)(ia) correctly when it held that in case of omission to deduct tax even the genuine and admissible expenses are to be disallowed. But they sought to remove the rigour of the law by holding that the disallowance shall be restricted to the money which is yet to be paid. What the Tribunal by majority did was to supply the casus omissus which was not permissible and could only have been done by the Supreme Court in an appropriate case. Reference in this regard may be made to the judgment in the case of Bhuwalka Steel Industries vs. Bombay Iron & Steel Labour Board reported in 2010(2) SCC 273.
I .T.A . N o. 16 / KOL ./ 20 1 3 Ass es sm e nt ye a r: 2 00 8- 2 00 9 Page 4 of 9 'Unprotected worker' was finally defined in Section 2(11) of the Mathadi Act as follows:-
''unprotected worker' means a manual worker who is engaged or to be engaged in any scheduled employment."
The contention raised with reference to what was there in the bill was rejected by the Supreme Court by holding as follows:
"It must, at this juncture, be noted that in spite of Section 2(11), which included the words "but for the provisions of this Act is not adequately protected by legislation for welfare and benefits of the labour force in the State", these precise words were removed by the legislature and the definition was made limited as it has been finally legislated upon. It is to be noted that when the Bill came to be passed and received the assent of the Vice-President on 05-06-1969 and was first published in the Maharashtra Government Gazette Extraordinary, Part IV on 13-06-1969, the aforementioned words were omitted. Therefore, this would be a clear pointer to the legislative intent that the legislature being conscious of the fact and being armed with all the Committee reports and also being armed with the factual data, deliberately avoided those words. What the appellants are asking was to read in that definition, these precise words, which were consciously and deliberately omitted from the definition. That would amount to supplying the casus omissus and we do not think that it is possible, particularly, in this case. The law of supplying the casus omissus by the courts is extremely clear and settled that though this Court may supply the casus omissus, it would be in the rarest of the rate case and thus supplying of this casus omissus would be extremely necessary due to the inadvertent omission on the part of the legislature. But, that is certainly not the case here.
We shall now endeavour to show that no other interpretation is possible.
The key words used in Section 40(a)(ia), according to us, are "on which tax is deductible at source under Chapter XVII-B". If the question is "which expenses are sought to be disallowed?" The answer is bound to be "those expenses on which tax is deductible at source under Chapter XVII-B. Once this is realized nothing turns on the basis of the fact that the legislature used the word 'payable' and not 'paid or credited'. Unless any amount is payable, it can neither be paid nor credited. If an amount has neither been paid nor credited, there can be no occasion for claiming any deduction.
The language used in the draft was unclear and susceptible to giving more than one meaning. By looking at the draft it could be said that the legislature wanted to treat the payments made or credited in favour of a contractor or sub-contractor differently than the payments on account of interest, commission or brokerage, fees I .T.A . N o. 16 / KOL ./ 20 1 3 Ass es sm e nt ye a r: 2 00 8- 2 00 9 Page 5 of 9 for professional services or fees for technical services because the words "amounts credited or paid" were used only in relation to a contractor or sub-contractor. This differential treatment was not intended. Therefore, the legislature provided that the amounts, on which tax is deductible at source under XVII-B payable on account of interest, commission or brokerage, rent, royalty, fees for professional services or fees for technical services or to a contractor or sub-contractor shall not be deducted in computing the income of an assessee in case he has not deducted, or after deduction has not paid within the specified time. The language used by the legislature in the finally enacted law is clear and unambiguous whereas the language used in the bill was ambiguous.
A few words are now necessary to deal with the submission of Mr. Bagchi and Ms. Roychowdhuri. There can be no denial that the provision in question is harsh. But that is no ground to read the same in a manner which was not intended by the legislature. This is our answer to the submission of Mr. Bagchi. The submission of Mr. Roychowdhuri that the second proviso sought to become effective from 1stApril, 2013 should be held to have already become operative prior to the appointed date cannot also be acceded to for the same reason indicated above. The law was deliberately made harsh to secure compliance of the provisions requiring deductions of tax at source. It is not the case of an inadvertent error.
For the reasons discussed above, we are of the opinion that the majority views expressed in the case of Merilyn Shipping & Transports are not acceptable. The submissions advanced by learned advocates have already been dealt with and rejected."
Sinc e th e Ho n'ble Ju ri sdictional Hi gh Court did not app rove the deci sion of the Sp eci al Bench of th e Tribunal in the case of Merily n Shipping & Tran spo rt Ltd -vs.- ACIT, o n the basis of which the ld. CIT(Appeals) has allowed th e relief to the ass ess ee, we, therefo re, set aside the o rder of the ld. CIT(Appeals) and re store this i s sue to the fil e of the CIT(Appe als) with a di rection th at the ld. CIT( Appeals) shall re-d ecid e the app eal of th e as se sse e af resh i n acco rdanc e with law after giv ing pro p er a nd suffici en t opportunity to the assess ee.
4. Gro und No. 2 relates to the allowance of reli ef of Rs.94,74 1/- by the CIT(App eals). After hearin g the rival submis sions, we noted that the CIT(App eals) ha s n ot allowed the relief to the as sesse e amountin g to Rs. 94,741/-. Before th e CIT(Ap peals ), the as ses se e submitted that the I .T.A . N o. 16 / KOL ./ 20 1 3 Ass es sm e nt ye a r: 2 00 8- 2 00 9 Page 6 of 9 ROC expen se s i s p art of p reli minary exp ens es and p re-operativ e expen ses as mentioned in Schedule 8 a nd only 1/5 t h of such expen ses h as been claimed as deduction. CIT(App eals ) restored this issu e to the file o f the Assessing Officer ment ioning that As ses sin g Offi cer while givin g eff ect to this order will re-check the amount actually claimed by the as ses se e and give cons equential reli ef. This g roun d o f appeal is allowed subject to the directions given above.
5. In view of this findin g of CIT(App eals), in ou r opinion, the ground taken by the revenue i s misconc eived. We accord in gly dismis s thi s ground.
6. The third g rou nd relat es to th e relie f given by th e CIT( Appeals) amountin g to R s.6 9,825/-, which was di sallowed by th e Ass essin g Of ficer.
7. After h ea rin g th e riv al submis sions, we noted th at the se expen ses hav e been i ncurred by the ass essee a s inspection, proces sin g and ratin g ch arg es for o btainin g bank loan durin g the course of busin ess. These expen s es by no stretch of imagin ation can be reg arded to the capit al expendi ture. The exp en ses relate to obtaining cash credi t facilities and are of recu rrin g natu re. We, the refore, do not find any infirmity or illegality in the o rder of CIT(App eal s) treatin g thi s expen diture to be th e reven u e exp enditure an d allowin g t he relie f to the ass ess ee. W e acco rdingly confi rm the ord er of CIT(A ppeals) on this gro und. Thus this ground st ands di smis sed.
8. Gro und No. 4 relates to the allowin g re lief to the ass essee o f a sum of Rs.75,00,000/- disallowed by th e Ass essin g Offi cer.
9. After h earin g th e rival submissio n s an d carefully consid erin g the same, we noted th at the Assessin g Of f icer no ted th at the assessee ha s deb ited a su m of R s. 1,05,729/- u nder the head "in surance". On examin ation of the insu rance p roposal it was no ticed by the A ss essin g I .T.A . N o. 16 / KOL ./ 20 1 3 Ass es sm e nt ye a r: 2 00 8- 2 00 9 Page 7 of 9 Officer that th ere i s mat erial in godown for Rs.1,25, 00,000/-. There was ano the r policy for building o f Rs.15,00,00 0/-, and stock/contents of Rs. 40,00,000/-, plant and machin ery for Rs.32,00,000/-, Spa re for ma chinery and spare electric motor for R s. 3,00,000/- and electri cal installa tion /elect rical equipment for R s.5,00 ,000/-. The Assessin g Of fice r noted that the ass es see h as sho wn stock in it s au dited bal ance sh eet as on 31.03.2008 at Rs. 74,09,486/-. The Assessin g O fficer, therefo re, noted that the av era ge by applying the average rate of purchase, the value of closing stock was almo st the same, i.e. Rs.75,00 ,000/- approx. The difference between the insu rance value and the st ock shown by the asse ssee is the same and the A ss essin g Officer treated the sa me as undisclosed stock and mad e the addition of R s.75,0 0,000/-.
10. When the matter wen t before the CIT(Appeal s), ld. counsel for the as se sse e pointed o ut that the ass ess ee has taken the in suranc e policy for Rs. 1.25 cro res whil e the stock a s p er the books were R s.75 lakhs. The difference was Rs.50,00,000/- by mis take. The Assessin g Offic er has worked ou t the same at R s. 75,00,000/-, in fact, he mad e an additio n of Rs. 50,00,000/-. CIT(Appeal s) aft er h earin g th e submi ssion s of the as se sse e and aft er noting th at the insu ranc e policy was taken on 12.02.2008 took the v iew t hat th e asses see was not h aving stock for which the in suranc e policy h as be en taken and, therefo re, he del eted th e add ition by observ ing as under:-
"As stated above, th e AO ha s r elied o n th e case o f Dha nsi Ram Agarwal 201 ITR 1 92 (Supreme Court0 but the facts of the app ellant's case are en tirely differ ent . The AO is s een to conclud e tha t th e appella nt has submitted false details of its sto ck a s on 31.03.2008 to the Ban k. No evidence to suppo rt this conclusion has been brought ton reco rd by the AO. If the AO had doubts rega rding the appella nt's statemen ts to the bank, I do not see what preven ted him from makin g direct en quiries and fin ding ou t what details of finished goods, as on 31.03.2008 has been submitt ed to the Ba nk. No su ch en quiry is eviden t on r ecord. The implications drawn by th e AO fail in the face of the failure to conduct su ch en quiries. It is no ted tha t the AO had written a let t er to th e Bank which was not replied to before th e p assing o f the order. In th at event, en quiries I .T.A . N o. 16 / KOL ./ 20 1 3 Ass es sm e nt ye a r: 2 00 8- 2 00 9 Page 8 of 9 could have been conduct ed through a n Insp ector or su mmon s to the ban k manager could have been issu ed. To dra wn surmises witho ut making any enquiries cann ot be held to be justifia ble. The decision reli ed o n by the AO is th erefore, not s een to be app licable to th e facts of th e case.
As already sta ted above, the AO has held , in ter alia, that the ap pellant has submitt ed false details of its stock of finished goo ds to the bank a s on 31.0 3.2008 to en able it to certify the same befo re the insu rer. Ho wever, since th e insurance po licy was taken out on 12.02.2008 no question of submission of su ch details ca n arise. Ther efor e, it is clear th at the insu rance policy, ta ken on 1 2.02.2008, has estimated th e valu e of sto ck to be insu r ed . In th at cas e, th e conclusion drawn by th e AO cannot be said to be justified as p er fa ct s on r ecord. K eeping in view the facts discussed abo ve, I dir ect th e d eletion of this addition. This ground o f appea l is allowed".
11. We hav e heard the rival submission s and ca refully conside red th e same along with the o rde r of t ax auth oritie s belo w. In ou r opinion, no interfe rence is c alled fo r in the o rd er of CIT(App eal s). The as sessee held the insurance of the stock of Rs.1.25 crores, but it do es no t mean that the as se sse e wa s having the said stock in its bo oks of accounts. Even otherwi se, the stock policy has b een taken on 12.02.20 08 while the v alue of stock in the balan ce sheet h as to be taken at th e end of th e year, i.e. 31.03.2008 in the impu gn ed c as e. Th e basic p resu mption made by the Assessing Offic er i s inco rrect wh ile m aking the addition on the ba sis of difference in the stock a s taken in th e books of accoun ts. W e acco rdin gly co nfirm the ord er of CIT(Appeals ). Th us this grou nd st ands di smiss ed.
12. In th e result, the app eal filed by the R ev enue i s pa rtly allowed fo r stati stic al pu rpose s.
Orde r p ronounced in th e open Co urt on 9 t h June, 2015.
Sd /- Sd /-
Mahav ir Singh P.K. Bansa l
(Judi cial Member) (A ccounta nt M ember)
Kolkata, th e 9 t h day of June, 2015
I .T.A . N o. 16 / KOL ./ 20 1 3
Ass es sm e nt ye a r: 2 00 8- 2 00 9
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Co pies to :
(1) Dep u ty Com mis si one r of Income Ta x,
Circle-3, A sa nsol,
Pa rma r Build ing,
54, G.T. Roa d (West),
A sa nsol-713 304
(2) M/s. Sp a rsh A gro-Pro (P) Limited ,
240 , P.N . Ma lia Roa d ,
Ra niga nj-713 347,
District-Burd wa n
(3) Comm iss ioner of Income-tax (Appeal s)
(4) Com mis sioner of Incom e Tax
(5) The Depar tmental R epr es entative
(6) Guard Fil e
B y order
Assistant Registrar
Income Tax App ellate Tribunal
Kolkata Ben ch es, Kolkata
Laha/Sr. P.S.