Gujarat High Court
Principal Commissioner Of Income Tax vs Jmc Projects India ... on 30 March, 2017
Author: M.R. Shah
Bench: M.R. Shah, B.N. Karia
O/TAXAP/194/2017 ORDER
IN THE HIGH COURT OF GUJARAT AT
AHMEDABAD
TAX APPEAL No. 194 of 2017
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PRINCIPAL COMMISSIONER OF INCOME TAX-
2,....Appellant(s)
Versus
JMC PROJECTS INDIA LIMITED....Opponent(s)
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Appearance :
Mrs MAUNA M BHATT, ADVOCATE for the Appellant(s) No. 1
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CORAM: HONOURABLE Mr. JUSTICE M.R. SHAH
and
HONOURABLE Mr. JUSTICE B.N. KARIA
30th March 2017
ORAL ORDER (PER : HONOURABLE Mr. JUSTICE M.R. SHAH)
1. Feeling aggrieved and dissatisfied by the impugned Order dated 8th September 2016 passed by the Income Tax Appellate Tribunal, Ahmedabad ["hereinafter referred to as, "the Tribunal"] passed in I.T.A Nos. 86/Ahd/2008 & 2566/Ahd/2009 for A.Y 2005- 2006, the Revenue has preferred the present Tax Appeal with the following proposed question of law :
"Whether the Appellate Tribunal has Page 1 of 8 HC-NIC Page 1 of 8 Created On Tue Aug 15 14:54:28 IST 2017 O/TAXAP/194/2017 ORDER substantially erred in law and on facts in deleting the disallowance of provision for expected loss/defect liability amounting to Rs. 2,37,99,162/=, where the same is not ascertained and contingent in nature ?"
2. The facts leading to the present Appeal in nutshell are as under :
2.1 The assessee filed return of income on 30th October 2005 for A.Y 2005-2006 declaring loss of Rs.
20,79,62,690/=. The Assessing Officer framed the scrutiny assessment under Section 143 [3] of the Income-tax Act, 1961 ["Act" for short] determining loss at Rs. 16,96,15,838/=. While determining the aforesaid loss, the Assessing Officer made the following addition/disallowance :
[1] Delayed Payment of PF & ESI u/s. 43B, Gift, Boni & Chandla Expenses of Rs. 2,17,622/=; [2] Provision for expected loss of Rs. 2,37,99,162/=.
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2.2 It appears that the Assessing Officer made
disallowance of Rs. 2,37,99,162/= on account of provision for expected loss/defect liability mainly on the ground that the same is not ascertained and it is contingent in nature.
3. Feeling aggrieved and dissatisfied with the order passed by the Assessing Officer making disallowance of Rs. 2,37,99,162/= on the provision for expected losses/defect liability, the assessee preferred appeal before the CIT [A].
3.1 The learned CIT [A] allowed the said appeal and deleted the disallowances of the provisions for expected loss/defect liability amounting Rs. 2,37,99,162/=. Feeling aggrieved and dissatisfied with the order passed by the learned CIT [A] deleting the aforesaid disallowance made by the Assessing Officer, the Revenue preferred Appeal before the learned Tribunal.
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4. By the impugned judgment and order, following the decision of the Hon'ble Supreme Court in the case of Rotork Controls India Private Limited v. Commissioner of Income-Tax, [2009] 314 ITR 62 [SC] and considering the reasons given by the learned CIT [A] made in para 4.2 to 4.5, the learned Tribunal has dismissed the said appeal preferred by the Revenue.
5. Feeling aggrieved and dissatisfied with the impugned judgment and order dated 8th September 2016 passed by the learned Tribunal, the Revenue has preferred the present Tax Appeal with the aforestated proposed question of law.
6. Ms. Mauna Bhatt, learned counsel for the Revenue has vehemently submitted that in the facts and circumstances of the case, the learned Tribunal has materially erred in straightway relying upon the decision of the Apex Court in the case of Rotork Controls India Private Limited [Supra]. It is submitted that even assuming that the decision of Page 4 of 8 HC-NIC Page 4 of 8 Created On Tue Aug 15 14:54:28 IST 2017 O/TAXAP/194/2017 ORDER Hon'ble Supreme Court in the case of Rotork Controls India Private Limited [Supra] was applicable and the estimation was permissible, in that case also, the learned Tribunal ought to have remanded the matter to the Assessing Officer to consider the actual estimated loss.
6.1 It is further submitted by Ms. Bhatt, learned counsel appearing on behalf of the Revenue that as such, the Assessing Officer, while framing the scrutiny assessment has rightly made disallowance of the aforesaid amount by specifically observing that the same was not ascertained and it was contingent in nature. It is further submitted by Ms. Bhatt, learned counsel for the Revenue that in the present case, even the Assessing Officer failed to prove that the provisions made by the assessee in the agreement was on scientific basis.
6.2 Making the above submissions, it was requested by learned counsel for the Revenue to admit the present Tax Appeal.
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7. Heard learned counsel for the Revenue at length. We have perused the order of assessment passed by the Assessing Officer as well as the order passed by the learned CIT [A] as well as learned Tribunal.
8. At the outset, it is required to be noted that in the present case, the Assessing Officer disallowed the provision for expected loss/defect liability amounting Rs. 2,37,99,162/= @ 1%, as mentioned in the agreements [executed between the assessee and other companies] on the ground that the same was not ascertained and it was contingent in nature. By giving cogent reasons in para 4.2 to 4.5, the learned CIT [A] has directed to delete disallowance made by the Assessing Officer. The same has been confirmed by the learned ITAT, relying upon a decision of the Apex Court in the case of Rotork Controls India Private Limited [Supra].
9. Having heard learned counsel for the Revenue and more particularly considering the fact that the assessee accumulated loss of Rs. 16.50 Crores as on 31st March Page 6 of 8 HC-NIC Page 6 of 8 Created On Tue Aug 15 14:54:28 IST 2017 O/TAXAP/194/2017 ORDER 2005 and has got total carried forward loss of Rs. 25.59 Crores at the end of A.Y 2006-2007, as rightly observed by the learned CIT [A], no motive of reduction tax liability can be assigned to the assessee for the change in the method of accounting of provision for liability. It is not in dispute that the assessee had no tax liability even in the subsequent year. Under the circumstances and even otherwise in the facts and circumstances of the case, it cannot be said that the learned ITAT has committed any error in deleting the disallowance made by the Assessing Officer.
10. No substantial question of law arises, as sought to be contended on behalf of the appellant-Revenue.
11. In view of the above and for the reasons aforestated and in the facts and circumstances of the case, as narrated hereinabove, the present Tax Appeal deserves to be dismissed and is accordingly dismissed.
{M.R Shah, J.}
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{B.N Karia, J.}
Prakash
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