Income Tax Appellate Tribunal - Chandigarh
Dcit, Cc-Ii, Chandigarh vs M/S Steel Strips Wheels Limited, ... on 27 May, 2019
आयकर अपील य अ धकरण,च डीगढ़ यायपीठ "बी" , च डीगढ़
IN THE INCOME TAX APPELLATE TRIBUNAL,
CHANDIGARH BENCH 'B' , CHANDIGARH
ी संजय गग , याय क सद य एवं ीमती अ नपण
ू ा गु&ता, लेखा सद य
BEFORE: SHRI SANJAY GARG, JUDICIAL MEMBER
AND SMT.ANNAPURNA GUPTA, ACCOUNTANT MEMBER
आयकर अपील सं./ ITA No.756/Chd/2018
नधा रण वष / Assessment Year : 2011-12
The D.C.I.T, बनाम M/s Steel Strips Wheels Ltd.,
Central Circle-II, SCO 49-50, Sector-26,
Chandigarh. Madhya Marg, Chandigarh.
थायी लेखा सं./PAN NO.AACCS3003L
अपीलाथ /Appellant यथ /Respondent
आयकर अपील सं./ ITA No.730/Chd/2018
नधा रण वष / Assessment Year : 2012-13
M/s Steel Strips Wheels Ltd., बनाम The D.C.I.T,
SCO 49-50, Sector-26, Central Circle-II,
Madhya Marg, Chandigarh. Chandigarh.
थायी लेखा सं./PAN NO.AACCS3003L
अपीलाथ /Appellant यथ /Respondent
आयकर अपील सं./ ITA No.757/Chd/2018
नधा रण वष / Assessment Year : 2012-13
The D.C.I.T, बनाम M/s Steel Strips Wheels Ltd.,
Central Circle-II, SCO 49-50, Sector-26,
Chandigarh. Madhya Marg, Chandigarh.
थायी लेखा सं./PAN NO.AACCS3003L
अपीलाथ /Appellant यथ /Respondent
2 ITA Nos.730,731,756 to 758/Chd/2018
A.Ys.2012-13 & 2014-15
आयकर अपील सं./ ITA No.731/Chd/2018
नधा रण वष / Assessment Year : 2014-15
M/s Steel Strips Wheels Ltd., बनाम The D.C.I.T,
SCO 49-50, Sector-26, Central Circle-II,
Madhya Marg, Chandigarh. Chandigarh.
थायी लेखा सं./PAN NO.AACCS3003L
अपीलाथ /Appellant यथ /Respondent
&
आयकर अपील सं./ ITA No.758/Chd/2018
नधा रण वष / Assessment Year : 2014-15
The D.C.I.T, बनाम M/s Steel Strips Wheels Ltd.,
Central Circle-II, SCO 49-50, Sector-26,
Chandigarh. Madhya Marg, Chandigarh.
थायी लेखा सं./PAN NO.AACCS3003L
अपीलाथ /Appellant यथ /Respondent
नधा रती क ओर से/Assessee by : Shri Ashwani Kumar, CA
राज व क ओर से/ Revenue by : Shri G.S.Phani Kishore, CIT.DR
सन
ु वाई क तार$ख/Date of Hearing : 08.05.2019
उदघोषणा क तार$ख/Date of Pronouncement: 27 .05.2019
आदे श/ORDER
PER BENCH:
Al l the a b ove a pp e a l s re la te to th e sa me a sse ssee . The a pp e a l in I TA N o.7 5 6 /C hd /2 0 1 8 ha s b ee n f i le d by t he Re ve nue a n d p e rta i ns to A. Y 2 0 1 1 -1 2 , w hi l e the a pp e a ls i n I TA N o. 7 3 0, I TA N o.7 5 7 /C hd / 2 0 18 , a nd I TA N o.7 3 1 & 75 8 /C h d /2 0 1 8 a r e t he cr os s a p p e a l s fi le d b y t he a ss e ssee 3 ITA Nos.730,731,756 to 758/Chd/2018 A.Ys.2012-13 & 2014-15 a nd R e ve nue a gai ns t se pa ra te o rde r s o f the C o mmis si one r of I nc ome Ta x [( Ap p e a l s) -3 , Gu r ga on [ (i n sho rt 'CI T( A )] ' e a ch da t e d 3 0 .3 . 2 01 8 , p a s se d u/s 2 5 0 (6 ) o f the I n come Ta x Ac t, 19 6 1 ( h e re i na f te r r e fe r re d t o a s 'Act '), r e la t in g to a sse ssme nt ye a r s 2 0 12 -1 3 a nd 2 0 1 4 -15 r e spe cti ve ly .
I t w a s common g r oun d th a t t he i ssu e s i nv olve d in a l l the a p pe a l s w a s i d e n ti ca l . The se we re t he re fore t a k e n up toge t he r for he ar i ng a nd a r e bei n g d is p ose d o ff b y th is com mon a n d c on s oli d a te d or de r .
W e sh a ll fi r st be t a ki n g u p the a pp e a l of t he Re ve nue in ITA N o . 75 6/C h d /2 0 18 , r e l a ti ng t o a ss e ssm e nt y e a r 2 01 1- 12 .
2. G r oun d N os .i ) to i v ), i t w a s con te nde d , re l a te d to t he sa me is sue of tr ea t me n t of sa l e s ta x sub s id y re ce ive d b y the a sse sse e , w he ther c a p it a l or r e v e nue i n na tu r e a n d th e sa me re a d a s u nde r :
"i) Whether on the facts and in the circumstances of the case, the CIT(A) has erred in following the decision of the Hon'ble ITAT dated 21.10.2015 for AYs 2003-04, 2004-05 & 2008-09 in the case of the assessee itself and deleting the addition of Rs. 1,84,45,151/- holding the sales tax subsidy as capital receipt in nature.
ii) Whether on the facts and in the circumstances of the case the decision of the Hon'ble Supreme Court in the case Ponni Sugar and Chemicals Ltd. and treating the sales tax subsidy as capital receipts in nature was wrongly followed despite the observation of the AO in the 4 ITA Nos.730,731,756 to 758/Chd/2018 A.Ys.2012-13 & 2014-15 assessment order that the facts of the present case are distinguishable from that of Ponni Sugar and Chemicals Ltd.
iii) Whether on the facts and in the circumstances of the case the fact that sale tax subsidy was given to existing unit and not for setting up new unit or expansion of the same was not considered.
iv) Whether on the facts and in the circumstances of the case, the fact that the subsidy receipt after the commencement of production by the unit was not required to be treated as capital in nature was not considered."
3. Th e f a ct s re la t ing to the c a se a re th a t f r om the N o tes on Acc oun ts of the a sse s see co mpa n y, th e A .O . note d t ha t it ha d be e n g r a nte d e xe mp ti on on sa l e s t a x u nde r t he P un j a b I nd u str i a l Po li cie s , 1 9 8 9 & 1 9 96 . U n de r thi s the a ssessee comp a ny was g i ve n s a le s ta x e xe mp ti on on a c cou nt of e nh a n ci ng mod e rn iz a ti on of u n its a n d f ur the r i ng i n du str i a l gr ow th i n the S tate a n d a s pe r the s ch e me the s a les ta x w as de e me d to ha v e b ee n p a i d . Th e A. O ., h ow e ve r , n ote d th a t i n the c omp uta t io n of ta xa b le in come of th e a s se s se e , t he a sse sse e ha d r ed uc e d i ts ta x a bl e p r ofi ts by cl a i mi n g a de du cti on o f Rs.1 ,8 4 , 45 , 15 1 /- on a cc oun t of n oti ona l sa l e s ta x l i a b il i ty a ri si n g out of su ch s ub si d y, b y tr ea ti n g t he sa me a s c a p ita l r e ce ip t i ns te a d of re ve n ue re ce ip t. The a sse sse e w a s a sk e d to j u sti fy the sa me . I n res p ons e to wh i ch , th e a ss ess ee f ile d a de ta i le d re pl y e l a bor a ti ng t he sch e me of the Pu nj a b G ove r n men t a s p e r w h i ch the su bs idy 5 ITA Nos.730,731,756 to 758/Chd/2018 A.Ys.2012-13 & 2014-15 wa s r e ce ive d a nd st a ti ng th a t s in ce i t w a s g ra nte d the e xe mp ti on u nd e r the I nd us tr i a l Poli cy & I nce n tive Sc he me, 19 9 6 of the G ove r nme nt of P u nja b , w it h a v ie w to p r omote gr ow th of in d ust ry i n th e Sta t e a n d to p u sh a nd s up p or t f or con sol id a t ion and e xp a ns io n of e x is tin g i n du str i e s , t he na tu r e of s ub si dy w a s ca pi ta l a nd th us no t ta x abl e in t he ha n ds of t he a ss e s see . The A. O . re je cte d th e con te n ti on of the a sse ssee a nd n ote d th a t i d e n tic a l is sue had b e en de ci de d b y the Hon' bl e Jur i sd i cti on a l Hi gh C o ur t i n th e c a se of C I T V s. Ab hi s h e k I n d us tr ie s L td ., 2 8 6 I TR 1, h ol d i ng t he sub s id y to b e re ve nue i n na tu re . F ol low i ng th e s a id de ci si on a nd n oti n g t he fa ct tha t i t w a s a p ost p ro du cti o n s ub si d y, the A .O . tr e a te d th e sub s id y a s re ve nue i n n a tur e an d a d de d the s a me i n the inc ome of th e a sse ssee .
4. B e f ore t he Ld . C I T( A) , the a sse ssee c onte n de d that id e n ti ca l i ssue ha d a r i se n i n t he ca se of the a sse ssee i n the pr e ce d i ng ye a r al so, w he re in the ma tte r h a d tr a ve ll e d up to the H on' ble Hi gh C o ur t w h o h a d r e ma n de d th e i ssue b a ck to the I . T.A . T. a n d w ho in tu r n h a d d e c ide d the i ssu e in f a vou r of the a s se s se e in r e ma n d . The Ld .C I T(A ) a ft e r go in g thr ou gh the or de r of th e I . T.A . T. i n th e c a s e of the a sse ss ee i n I TA N o.8 9 7 /C hd /2 0 0 6 , I TA N o .3 4 1 /C hd /2 00 7 a nd I TA No 75 6 /C h d /2 0 1 1 f or a s se s sme nt ye a rs 20 0 3 -0 4, 20 0 4 -0 5 a n d 6 ITA Nos.730,731,756 to 758/Chd/2018 A.Ys.2012-13 & 2014-15 20 0 8 -0 9, f oun d t h a t th e is sue of sa l e s ta x su bs id y ha d b e e n de ci de d b y th e I .T. A. T. i n fa v our o f th e a sse ssee h ol d in g t he sa me to be ca p ita l i n na t ure . Ac cor d in gl y, th e a dd i ti on ma de b y th e A .O . w a s d e l e te d b y th e Ld .C I T(A ) . Re le v a nt fi nd i ng s of th e C IT( A) a t p a ge 1 2 of t he or de r a re a s u nd e r:
"I have gone through the Hon'ble ITAT's order in the case of the appellant in ITA No. 897/Chd/2006, ITA No. 341/Chd/2007 & ITA No. 756/Chd/2011 for A.Y 2003-04, A.Y 2004-05 and 2008-09 wherein the matter has been adjudicated as under:
"In these cases, the assessee have received Sales Tax Subsidy from Punjab Govt. under the scheme named 'Industrial Policy & Investment Code, 1996'. We have gone through the said policy and found that the scheme though not verbatim as that of West Bengal or Gujarat Scheme, but the sum and substance of all these schemes are the same, therefore, relying on our finding gives in ITA no. 773/Chd/2012, we hold that the Sales Tax Subsidy received by the assessee is Capital in nature."
As the addition made by the AO is covered by the order of the Hon'ble ITAT in favour of the appellant, the addition made on this account is deleted."
5. B e f ore u s, the Ld . D R ve he me ntly su p p or te d the o rd e r of t he A. O. th oug h h e f a i r ly con ce de d tha t th is is su e h ad be e n de ci de d i n fa v our of th e a sse ss ee b y the I . T. A . T. i n t he ca se of t he a s se sse e i tse l f in e a r l ie r ye a r s.
6. In vie w of th e s a me , s in ce th e i ss ue of sa l e s tax sub s id y r e ce ive d b y the a s se s se e b y vi r tue of s ch e me of Pu nj a b G ove r nme n t h a s a lre a d y b ee n de ci de d b y t he I. T. A . T. in the c a se o f th e a sse s see i tsel f i n th e p re ce d in g ye a r s, 7 ITA Nos.730,731,756 to 758/Chd/2018 A.Ys.2012-13 & 2014-15 hol d in g th e same to be ca pi ta l in na tu r e and w it h no di st in gu is hi ng fa c ts h a vi ng b ee n b r ough t to our n oti ce b y the Ld . D R, w e see n o r e a s on to int e r fe re i n th e or d e r o f t he Ld. C I T( A) a l l ow in g the a sse s see 's a p pe a l fol l ow in g w it h o rd e r of th e I . T. A. T. I n vie w of th e a bo ve , g r oun d of a p p e a l N os. i ) to i v) ra i se d b y the Re ve nue a re di smi ss e d .
7. G r oun d of a p p e a l N o .v) r a i se d b y the Re ve n ue re ad s a s un de r :
"v) Whether on the facts and in the circumstances of the case the CIT(A) was right in deleting the addition made on account of technical knowhow fees amounting to Rs.39,35,029/- on the basis the decision of the Hon'ble ITAT dated 26.09.2013 for AY 2009-10."
8. B r i e f f a cts re l a ting to th e i ss ue a r e th a t the asse ssee ha d c la i me d e xpe n se s on te ch n ic a l k now-h ow , of Rs. 39 , 3 5, 0 2 9/- a s r e ve nue e xpe nd i tur e i n it s Pr of i t & Loss Acc oun t. The same h a d bee n p ai d to M/s Ri ng Te ch . C o ., Ja pa n u nd e r a te c hn i ca l co ll a bor a ti on a gr ee men t e n te re d in to in 1 9 9 7 a nd e xte nde d fr om ti me t o ti me . Th e A .O . a s ke d the a s se s se e to j u sti fy as to h ow th e e xpe ndi tur e w as re ve n ue e xpe n d itur e a n d w h y i t sh oul d not b e t r e a te d a s ca p it a l e xpe n d itur e . I n re sp on se to th e s a me , the asse ssee sub mi tte d th a t t h e ma i n ob je cti ve of th e a gree men t w a s to 8 ITA Nos.730,731,756 to 758/Chd/2018 A.Ys.2012-13 & 2014-15 in cr e a se the pr od u cti vi ty a n d to r e d u ce the re je ction s f ro m the cu r re n t le ve ls. Th us i t w a s p o i nte d ou t t ha t the obje cti ve wa s to e f fe c t the e co nomy a n d e ff i ci e nc y in ma nu fac tur i ng a nd , t he re fore , had be e n ri gh tl y cl a i me d as r e ve n ue e xpe n d itu re . I t wa s con te n de d tha t th e comp a n y ha d not a cq ui r e d a n y c a pit a l a s se t i n t he na tur e of e xcl u sive use r of te ch n olo gy i n forma ti on . Th e a sse sse e f ur the r sub mi tte d tha t id e n ti ca l i ss ue ha d b ee n d e ci de d in f a vo ur o f the as se s se e b y the I . T. A. T. i n ea r l i e r ye a r s . Th e A .O . di d not a c ce pt t he con te n ti on of t he a s se s see . Re fe rr i n g t o t he c olla b or a ti on a gr ee me nt, the A. O . he ld th a t th e a sse ss ee had pu r ch a se d /a c q ui r e d te c hn ic a l k n ow -ho w to comp l e te ly ove r h a ul its de sign , p la n t a nd m a nu fa c tur i ng s ys t e ms th us ge tt in g e n du r in g b e ne fi t of pe r ma n e n ce a n d d ur ab i l ity . The A. O. he ld t ha t tec hn ic a l k n ow -h ow ob ta in e d b y t he assessee wa s li n ke d to su b sta n ti a l mod e rn i za ti on a nd e xp a ns ion of e xi sti ng u ni t/te ch ni q u e a nd pr oce d u re o f p r odu ct ion a nd , the re fo re , w a s in the na tu re of in ta n gi bl e a s set a nd of e nd u r in g na tu re . H e f ur th e r sta ted t ha t th e De pa r tme nt h a d cha ll e n ge d the or d e r of t he I . T. A. T. b e f or e the H on' bl e H i gh C our t in e a r l ie r ye a r s. Ac cor d ingl y, th e A. O. tr e a te d the te ch n ic a l kn ow -h ow e xpe n se s i ncur r e d a nd cl a i me d b y t he a sse sse e a s ca p i ta l i n na t ur e a nd d is a ll ow e d the s ame . 9 ITA Nos.730,731,756 to 758/Chd/2018
A.Ys.2012-13 & 2014-15
9. Th e Ld. C I T( A) a l l ow e d the a s se s se e 's a p pe a l on f i nd i ng tha t i de nti ca l issue h a d bee n a dj ud i ca te d b y t he C I T( A) i n e a r lie r ye a r s in f a vou r of the a sse ssee a n d a p pea l of t he Re ve nue a g a in st t he or de r of t he C I T( A) ha d b e e n d i smi sse d by th e I . T.A . T. vi d e i ts or de r da ted 2 6 .9 . 2 01 3 f or a sse ssme nt ye a r 20 0 9 -1 0.
10 . B e f ore u s, t he L d . D R h e a vi l y r e lie d u p on th e or de r of the A .O . th ough f a i r ly con ce d e d th a t id e n ti ca l i ss ue h ad be e n de c ide d in f a vou r of the a ss e ssee i n a sse ssme nt ye ar 20 0 9 -1 0 b y the C I T( A) , wh os e ord e r ha d be e n uphe ld b y t he I . T. A. T. a l so.
11 . I n vie w of th e f i nd i ng s of th e C I T( A) tha t i d e n tic a l is sue s ta nd s d e c id e d i n fa v our of t h e a sse sse e in asse ssme nt ye a r 2 0 0 9- 10 b y th e I . T. A. T. , w hi c h h a s b ee n a dmi tte d to b y the Re ve n ue a l so a n d no d is tin gu is hi n g f a ct s h a vi n g b e e n br ou gh t to our n oti ce b y th e Ld . D R, th e Ld .C I T(A ) , w e ho ld , ha s r ig htl y a ll ow e d the a sse ssee ' s a p p e a l f ol low i ng th e o rde r of t he I . T.A . T. i n a s se s se e 's own ca se f or a ss e ss me n t ye a r 20 0 9 -1 0. We th e re fore f in d n o r e a son t o i n te r fe re in t he or de r of the Ld. C I T( A) ho ld i ng th e te ch ni ca l kn ow h ow e xpe n se s o f Rs. 39 ,3 5 ,0 2 9 /- a s r e v e n ue i n na t ure . 10 ITA Nos.730,731,756 to 758/Chd/2018
A.Ys.2012-13 & 2014-15 Th e gr ou nd of a pp e a l N o.v ) r a ised b y the Re ve n ue I ,s the re fo re , d is mis se d.
12 . G r oun d of a p pe a l N o. vi ) r a ise d b y th e Re ve nue re a ds a s un de r :
"vi) Whether on the facts and in the circumstances of the case the CIT(A) was right in deleting the addition made on account of disallowances of prior period expenses amounting to Rs.4,85,459/- ignoring the fact that the assessee was following the mercantile system of accounting."
13 . Th e fa c ts r e la ti n g to th e i ss ue a re tha t the a ssess ee ha d c la ime d p ri or pe r iod e xpe n d itur e of Rs .8 ,0 6 , 616 /- in t he Pr of i t & Los s Acc oun t. Th e A .O . d i sa l lo we d th e sa i d e xpe n se s on the gr oun d th a t the a sse s see f ol lowe d me r ca n ti le sys te m of a c cou nt in g and, t he re for e , t he e xpe n se s s ho ul d h a ve b ee n de b ite d i n th e ye a r in wh i ch thos e e xpe n se s we re a ctu a ll y in cur r e d . The Ld .C I T( A ) d e le te d the di sa ll ow a nce on f in d in g th a t the a sse sse e h ad ma nu fa c tur i ng u n i ts a t th r ee d i sta n t l oc a ti ons on ac cou nt of wh i ch some bi l ls of d a il y e xpe n se s we re re ce i ve d la te a n d a ccor d i ng ly b ook e d a t the ti me of re ce i p t o f b i l ls . Th e C I T( A) a ls o not e d the fac t tha t e ve n some pr i or pe r i od i ncome w a s a ls o b ook e d at a l a te r d a te to th e pe r io d to w hi c h it pe r ta ine d a nd d uri n g th e imp u gne d ye a r p ri or pe riod i n come a moun ti ng to R s.7 , 2 8, 0 6 3/- had been b ooked by the 11 ITA Nos.730,731,756 to 758/Chd/2018 A.Ys.2012-13 & 2014-15 a sse sse e . Th e C I T( A) fu rt he r too k n ote of the f oll ow i ng de ci si ons on th e i ss ue of p r ior p e r i od e xp e n se s and d e l ete d the d i sa l lo wa n ce ma d e :
a) Sa u ra s ht ra C e me n ts & C he mic a l I n ds . Ltd . V s.
C I T( Gu j) , 2 1 3 I TR 5 2 3 , b ) Je t Lif e (I nd i a) Ltd . V s. C I T( D e l hi ) 3 7 9 I TR 1 8 5 a n d;
c) M un ja l S a le s C o rp or a ti on Vs . AC I T (2 0 0 4) 9 0 TT J 28 2 I TA T C h a nd i ga r h .
14 . B e f ore u s, t he L d . D R h e a vi l y r e lie d u p on th e or de r of the A. O . w hi le the Ld . C oun se l for the a sse s see re l ie d on t he or de r of t he Ld .C I T(A ) .
15 . We h a ve he a r d t he r iv a l co nte ntion s a nd pe r used t he or de r s of the auth or i tie s be low. Th e f a ctu a l su bmi ss io ns ma de b y th e a s se sse e t ha t the pr ior pe r iod e xpen se s were boo ke d o n a cc ou nt of la te re ce ipt o f b il l s of un it s of t he a sse sse e l oca te d a t faraway p l ace s a nd th a t ev e n p r ior pe r iod in come s we re a l so so b ook ed by th e a sse sse e , h a s not be e n con tr ove r te d by th e R e ve nue . The a sse ss ee ha s con te n de d th a t it w a s con si ste nt ly b ook i ng su ch p rio r p e r iod e xpe n se s a nd i n come f r om y e a r t o y e a r , a n d th i s has a l so not b ee n con tr ove r te d b y the Re ven ue .
16 . I n vie w o f th e a for e s a i d f a ct s, w e d o n ot f in d a ny re a son to i nte rfe r e i n the or de r of th e Ld. C I T( A ), d e le ti n g t he 12 ITA Nos.730,731,756 to 758/Chd/2018 A.Ys.2012-13 & 2014-15 di sa l l ow a nc e ma d e of p r i or pe r i od e xpe n se s, si n ce we fi nd tha t th e sa i d e xpe n se s had been b ooke d as per the e sta b l i she d a n d con si ste nt po li cy fo ll ow e d b y the ass e ssee .F ur th e r c ons ide ri n g th e f a ct that e ve n pr i or pe r iod i nc omes ha v e bee n b ooked , n o p ur p ose woul d be se r ve d , w e f i nd , b y di sa l l ow in g on l y p r ior p e r i od e xp e n se s s in ce in th at ca s e , e ve n p r i or p e r i od in co me w ou ld h a ve to b e re d uce d fr om t he ta xa b le p r of it s o f th e a s se sse e .
I n vie w of the ab ov e , gr ou nd of a pp e a l N o. vi ra i se d b y the Re ve nue i s d ismi sse d .
I n e ffe c t th e a ppe a l of the Re ve n ue i s d is mis se d . 17 . W e s ha l l n ow ta ke up the cr oss ap p e a l s of t he asse ssee a nd r e ve n ue for a ss e ss me n t ye a r 2 0 12 -13 in I TA N o.7 3 0 /C hd /2 0 1 8 a nd I TA N o. N o. 75 7 /C h d /2 0 1 8 re spe c ti ve l y. We fi r st ta k e up th e Re ve nue 's appeal in I TA. N o. 75 7 /C h d / 2 0 1 8.
ITA N o. 75 7 /C hd /20 18 : A. Y 2 01 2 -13 18 . G r oun d N o.i ) , i i ), i ii ) & iv ) ra i se d b y th e Re ve nue re a d s a s u nd e r:
"i) Whether on the facts and in the circumstances of the case, the CIT(A) has erred in following the decision of the Hon'ble ITAT dated 21.10.2015 for AYs 2003-04, 2004-05 & 2008-09 in the case of the assessee itself and deleting 13 ITA Nos.730,731,756 to 758/Chd/2018 A.Ys.2012-13 & 2014-15 the addition of Rs.8,89,51,004/- holding the sales tax subsidy as capital receipt in nature.
ii) Whether on the facts and in the circumstances of the case the decision of the Hon'ble Supreme Court in the case Ponni Sugar and Chemicals Ltd. and treating the sales tax subsidy as capital receipts in nature was wrongly followed despite the observation of the AO in the assessment order that the facts of the present case are distinguishable from that of Ponni Sugar and Chemicals Ltd.
iii) Whether on the facts and in the circumstances of the case the fact that sale tax subsidy was given to existing unit and not for setting up new unit or expansion of the same was not considered.
iv) Whether on the facts and in the circumstances of the case, the fact that the subsidy receipt after the commencement of production by the unit was not required to be treated as capital in nature was not considered."
19 . I t w a s common gr ou nd t ha t th e is sue r a i se d i n t he a bo ve gr ou nd s , pe r ta i n in g to t re atme n t of sa le s t ax su bs id y re ce i ve d by the a ss e s see w he th e r re ve nue or ca p i ta l in na tu r e , w a s i de nt ic a l to gr oun d N o s. i ) to i v) r a i se d in t he Re ve nue s a p pe a l i n I TA N o.7 5 6 /C hd /2 0 18 . 20 . O ur d e c is i on re nd e re d the re i n a t p a r a 6 of our o rd e r a bo ve w il l the re for e s q ua re l y a pp ly to the a bo ve gr ou nds a ls o, fo ll ow i ng w h ic h w e hol d t ha t th e sa le s ta x s ub si d y is ca p it a l in na tu re a nd a c cor d i ng ly d i smi ss th e g r oun d s r a i se d by th e Re ve n ue .
21 . G r oun d N o. v) ra i se d b y the Re ve nu e re a d s a s un der : 14 ITA Nos.730,731,756 to 758/Chd/2018
A.Ys.2012-13 & 2014-15 "v) Whether on the facts and in the circumstances of the case the CIT(A) was right in deleting the addition made on account of technical knowhow fees amounting to Rs.36,27,859/- on the basis the decision of the Hon'ble ITAT dated 26.09.2013 for AY 2009-10."
22 . I t w a s com mon gr ou nd th a t th e is sue r a is e d i n t he a bo ve gr ou nd s, p e r ta i ni ng t o tre a tme nt of te chn ic a l k n ow how f ee s p a i d b y the a sse ssee w he the r re ve nue or c ap ita l i n na tu r e , was i den ti ca l to gr ound N os . v) ra i sed in t he Re ve nue s a p pe a l i n I TA N o.7 5 6 /C hd /2 0 18 . 23 . O ur d e ci si on re nd e re d the re i n a t p a r a 1 1 of ou r o rd e r a bo ve w il l the re for e s q ua re l y a pp ly to the a b ove gr ou nds a ls o, fo ll ow i ng w hi ch w e h old th a t th e te c hn i ca l k n ow h ow fee s p a i d i s re ve n ue i n na tu re an d a c cor d i ngl y d i smi ss t he gr oun d N o. v) ra i s e d b y the Re ve nue .
24 . G r oun d N o. vi ) r a i se d b y t he Re ve nu e re a d s a s u nde r :
"vi) Whether on the facts and in the circumstances of the case the CIT(A) was right in deleting the addition made on account of disallowances of prior period expenses amounting to Rs.4,85,459/- ignoring the fact that the assessee was following the mercantile system of accounting."
25 . I t w a s com mon gr ou nd th a t th e is sue r a is e d i n t he a bo ve gr ou nd s , p e r ta i n in g to a l l ow a nc e of pr ior p e r i od e xpe n se s c la i med by th e a sse ssee , w a s i de nt ic a l to g r oun d N os. v i) r a is ed in th e Re ve n ue s a p pe a l in I TA N o.7 5 6 /C hd /2 0 1 8 .
15 ITA Nos.730,731,756 to 758/Chd/2018
A.Ys.2012-13 & 2014-15 26 . O ur d e c is ion r e nd e re d the re i n a t pa r a s 1 5 & 1 6 of ou r or de r a b ove w i ll t he re fore sq ua r e l y a pp l y to th e a b ove gr oun d s a l so, f ollow i ng w hi ch we h ol d th a t the p ri or p e r i od e xpe n se s a re a l l ow a b le a n d a c cor d i ngl y d is mis s t he g ro und no. vi ) r a i se d by the Re ve n ue .
I n e ffe c t the a p pe a l o f the Re ve nue is d i smi ss e d . We n ow ta ke up a s se s se e 's a p pe al i n IT A N o . 73 0/ C h d/2 01 8 fo r a ss e ssm e nt ye a r 20 12 -1 3 :
27 . Th e s ol e g r oun d r a i se d in t hi s a pp e a l re a d s a s u nd e r :
"1.That the Ld. CIT(Appeals) has grossly erred in not allowing the claim of the assesse for deduction of Rs.8,89,51,004/- from the Book Profits u/s 115JB on account of sales tax subsidy being in the nature of capital receipt. The deduction of Rs.8,89,51,004/- may kindly be allowed from the Book Profits u/s 115JB."
28 . B r i e f ly sta te d , the a sse ssee ha d s ub mi tte d th a t t he sa l e s ta x s ub si dy r e ce ive d by i t d ur i ng t he ye ar w as not cha rg e a b le to ta x b e i n g in th e n a tur e of ca p i ta l re ce ip t a n d wo ul d a l so the ref or e n ot be li a b le to ta x u/s 1 1 5 JB of the Act f or th e sa me r e a so n, d e s p ite the fa c t tha t i t w a s c re di te d to i ts P r of it & Lo ss Acc oun t. The Ld. C I T( A) h e l d th a t for t he pu r po se of se c ti on 1 1 5 JB of th e Ac t th e a ss e ssee c oul d not go b e yo nd the net pr of i ts s how n i n i ts b oo ks of a cco un t. H e re lie d up on th e de ci s ion o f the H on 'b le A ll a h a b a d H ig h C our t 16 ITA Nos.730,731,756 to 758/Chd/2018 A.Ys.2012-13 & 2014-15 in t he c a se of PC I T Vs. J.K. Syn th e ti cs ( 2 0 1 7) 3 90 I TR 1 2 9 a nd th e de ci si on of th e H on 'b le Ka r n a ta k a H i gh C ou rt i n t he ca se o f B & B I n fr a te ch . Ltd . ( 2 01 6 ) 7 6 Ta x ma nn .c om 18 8 . Acc or d in gl y, h e d is mi sse d th i s c on te n ti on o f th e a ss e ssee a nd i n cl ud e d t he sa le s t a x s ub si dy i n th e B ook P r of its of t he a sse sse e for the pu r po se of p a yme n t of Mi ni mu m Al te r n a te Ta x ( MA T) u /s 11 5 JB of th e A ct.
29 . B e f ore us , th e Ld . c oun se l fo r a ss e ssee p oi nt e d ou t tha t id e n ti ca l is sue ha d b e e n de a lt w ith by the I TA T C h and i ga r h B e n ch i n gr ou p of c a se s re l a ti n g t o M /s H. M. S te e ls Ltd . V s. Ad d l. C I T i n th e i r or d e r d a te d 5 .11 .2 0 1 8 a nd ha d d e c ide d i n fa vo ur of the as se s se e . Ou r a tte nt ion w a s dr aw n to t he fi nd i ng s of th e I .T. A . T. a t p a r a N os. 16 t o 19 of th e or de r a s un de r :
"16. Apart f rom that,the assessee has taken following additional ground of appeal:-
T hat the amoun t VAT Def erment of Rs.16,96,924/- may be excluded while computing book prof its u/s 115JB as being the capital receipt and not iable to tax in view of the proposition laid down in the case of Shree Balaji Alloys & Ors.
1 7 . T h ou g h th e L d . D R h a s o b j e c te d to ta k i n g of th e ad d i t i o n al g r o u n d a t th i s s t ag e , h o we v e r , c o n si d e r i n g th e f a c ts a n d c ir c u m s t an c e s of th e case and a l so considering the su bs e q u e n t d e c i s i o n s o f th e H o n ' b l e S u p r e m e C o u r t i n r e s p e c t of n a tu r e a n d c h ar a c te r of th e su b s id y r e c e i v e d 17 ITA Nos.730,731,756 to 758/Chd/2018 A.Ys.2012-13 & 2014-15 o n V A T d ef e r me n t a s ' c a p i ta l r e c e i p t' , we d e e m i t f i t to a d m i t th i s a d d i t i o n a l g r o u n d .
1 8 . In th e a d d i ti o n a l g r o u n d , th e a s se sse e h a s c l a i me d th a t s i n c e th e s u b s i d y o n a c c o u n t of V AT d ef er m e n t i s a s c a p i ta l r e c e i p t , th e s a m e i s n o t l i a b l e to b e ta x e d ta k in g i n to c o n s id e r i n g wh i l e c o mp u ti n g th e b o o k p r of i t u / s 1 1 5 J B of th e A c t. H e i n th i s r e s p e c t h a s r e l i e d u po n th e d e c i s i o n of th e L u c k n o w B e n c h of th e T r i b u n a l in th e c a se of ' A C IT V s. L . H . S u g ar F a c to r y L td a n d A n r " i n IT A Nos. 339, 417 & 418/LKW/2013, 518 & 5 3 /L K W / 5 6 9 & C O N o . 2 6 & 2 7 /L K W / 2 0 1 3 o r d e r d a te d l 9 . 2 . 2 0 1 6 . T h e r e l e v an t i s su e h a s b e e n d i s c u s se d i n p a r a 5 0 of th e s a i d o r d e r , wh i c h i s r e p r o d u c e d f o r th e sa k e o f c o n ve n i e n c e .
"50. From the above paras, we f ind that the Tribunal has duly considered the judgment of the Hon'ble Apex Court rendered in the case of Apollo T yres Ltd. ((Supra) and thereaf ter, it was noted by the T ribunal in this case that as per the decision of Special Bench of the Tribunal rendered in the case of Rain Commodities L td. Vs. DCIT , 41 DT R 449, if prof it and loss account is not in accordance with Part II & Part III of Schedule V I to the Companies Act, 1956 because it is prerequisite for Section 115JB of the Act. T he T ribunal in this case also considered two another Tribunal's orders rendered in the case of DCIT Vs. Bombay Diamond Company Ltd . 33 DTR 59 and Syndicate Bank Vs. ACIT , 7 SOT 51 Bangalore where it was held by the T ribunal af ter considering the decision of Hon'ble Apex Court rendered in the case of Apollo T yres Ltd.
(Supra), and af ter 28 explaining the same that adjustment to prof it and loss account is possible to make it compliant with Schedule VI Part II and Part III of the Companies Act, 1956 wh ich is prerequisite of Section 115JB of the Act. On this basis, the T ribunal in the case of Shree Cement L td. (Supra) decided this issue in f avour of the assessee and it was held that capital receipt in the f orm of sales tax subsidy needs to be excluded f rom prof it as per P&L 18 ITA Nos.730,731,756 to 758/Chd/2018 A.Ys.2012-13 & 2014-15 account f or the purpose of computing book prof it u/s 115JB of the Act. By respectf ully following these T ribunal's orders, we hold that in the presen t case also, the receipt on account of transf er of carbon credit which is held to be a capital receipt needs to be excluded f rom prof it as per P&L account f or the present year wh ile compu ting the book prof it u/s 115JB of the Act. This issue is decided in favour of the assessee and accordingly Ground Nos.1 to 5 are allowed. T he assessee gets relief of Rs.27,70,880/- and consequent interest being 10% of amount received by the assessee on sale of carbon credit of Rs.277,08,800/-. 1 9 . S i n c e i n t h e l i g h t of th e v a r io u s d e c i s i o n s of th e H o n ' b l e S u p r e me C o u r t i t h a s al r e a d y b e e n h e l d th a t th e s u b s i d y o n ac c o u n t of V A T d ef e r m e n t i s a c a p i ta l r e c e i p t, h e n c e , i n th e l i g h t of th e a bo v e d e c i s i o n o f th e T r i b u n a l , t h e s a me n e e d to b e e x c l u d e d f ro m th e p r of i t s a s p e r th e p r of i t a n d l o s s a c c o u n t of th e p r e s e n t y e a r wh i l e c o m p u ti n g th e b o o k p r of i t u / s 1 1 5 J B of th e A c t. T h i s a d d i ti o n al g r o u n d of th e a s s e s se e , i s th e r ef o re , a l l o we d .
In th e r e s u l t, th i s a p p e a l o f th e a s se s se e i s p a r tl y a l l o we d . "
30 . Th e Ld . D R, on th e othe r h a nd , re l ie d u p on the ord e r of the CI T(A ).
31 . W e h a ve h e a r d th e r i va l c onte nt ion s. Th e i ss ue to be a dj ud i ca t e d i s wh e the r sa le s ta x sub s id y i s to b e re d uce d wh i le comp u ti ng the B ook Pr of i ts for t he p ur p ose s of l e v yi ng Mi mi nu m A lt e r na t e Ta x ( MA T) as per the p r ov is ion s of se c tio n 1 15 JB of th e Ac t.
32 . W e h a ve go ne th rough th e or de r of th e I TA T i n th e c a se of H . M S te e l s , c it e d b y th e Ld . C oun se l for t he a ss e ssee 19 ITA Nos.730,731,756 to 758/Chd/2018 A.Ys.2012-13 & 2014-15 be fore u s. We f in d t ha t i d e nt ic a l i ss ue h a s b ee n de a lt w i th by th e I TA T in t h e s a id c a se hold i ng t he VA T su b s id y , b e i ng ca p it a l i n n a tur e , a s n ot in cl u di b le in the B ook P r of it s u/s 11 5 JB of th e Act . Th e I TA T , w hi l e h old i n g so ha s tak e n n ote of th e de ci si on of t he H on' ble a p e x cou r t in the case of Ap ol lo Tyr e s ( s up r a ) a s p e r w hich a ny a d j ust m e nt t o t he Pr of i t a nd Los s a cc oun t p r e p a re d b y th e a s se sse e w a s r u le d out for the p ur p ose s o f ca l cul a ti ng th e B ook P r of it a me n a b le to ta x . Th e I TA T h e l d a s pe r se ct ion 1 1 5 JB th e pr of i t a n d los s a c cou nt p r ep a r e d s ho ul d be i n a c cor d a nc e wi th Pa r t II & I II of S che dul e VI to the C ompa ni e s A ct, 1 9 56 and the re fo re a d j us tme n ts to the same ca n be ma d e to mak e it comp l ia n t w i th th e S che d ule . Th e I TA T a ccor d i ng l y he ld tha t Sa l e s ta x/V A T s u b si d y b e in g c a p ita l in n a tu re w ou ld h a ve to be re d u ce d fr om th e pr of i ts.
33 . Th e f a ct i n th e ca se be f ore us , w e fi nd is i d e n tica l to tha t i n H . M S te e ls ,w i th th e S a le s ta x su bs i dy h a vi ng b e e n he l d to be ca p i tal in na t ur e . I n v ie w of the s a me ,t he i ss ue we h ol d i s s q ua r e ly cove re d b y t he de c is ion o f the I TA T i n the c a se of H .M S tee ls , f ol low i n g wh i ch we hol d that t he sa l e s t a x su bs idy is to be re d u ce d f r om th e B ook P r of it s f or the p ur p ose s of pa yi n g t a x u /s 11 5 JB of th e Act .20 ITA Nos.730,731,756 to 758/Chd/2018
A.Ys.2012-13 & 2014-15 Th e g ro un d of appeal r a i se d by the a s se sse e is a ccor d i ng ly a l lo we d I n e ffe c t the a p pe a l o f the a s se sse e is a l l owe d .
34 . W e no w ta ke u p the c r oss a p pe a ls f or A .Y 2 01 4 -15 .W e sha ll f i rs t be de a l i ng w i th the Re ve nue 's a p pea l i n ITA N o. 75 8 /C hd /20 18 :
35 . G r oun d N os. i ), i i) & i ii ) ra i s e d by th e Re ve n ue rea d a s un de r :
"i) Whether on the facts and in the circumstances of the case, the CIT(A) has erred in following the decision of the Hon'ble ITAT dated 21.10.2015 for AY 2008-09 in the case of the assessee itself and deleting the addition of Rs.3,78,76,511/- holding the sales tax subsidy as capital receipt in nature.
ii) Whether on the facts and in the circumstances of the case the decision of the Hon'ble Supreme Court in the case Pony Sugar and Chemicals Ltd. and treating the sales tax subsidy as capital receipts in nature was wrongly followed despite the observation of the AO in the assessment order that the facts of the present case are distinguishable from that of Ponni Sugar and Chemicals Ltd.
iii) Whether on the facts and in the circumstances of the case the fact that sale tax subsidy was given to existing unit and not for setting up new unit or expansion of the same was not considered.
iv) Whether on the facts and in the circumstances of the case, the fact that the subsidy receipt after the commencement of production by the unit was not required to be treated as capital in nature was not considered."21 ITA Nos.730,731,756 to 758/Chd/2018
A.Ys.2012-13 & 2014-15 36 . I t w a s common gr ou nd t ha t th e is sue r a i se d i n t he a bo ve gr ou nd s , pe r ta i n in g to t re atme n t of sa le s t ax su bs id y re ce i ve d by the a ss e s see w he th e r re ve nue or ca p i ta l in na tu r e , w a s i de nt ic a l to gr oun d N o s. i ) to i v) r a i se d in t he Re ve nue s a p pe a l i n I TA N o.7 5 6 /C hd /2 0 18 .
O ur d e c is i on re nd e re d the re i n a t p a r a 6 of our o rd e r a bo ve w il l the re for e s q ua re l y a pp ly to the a b ove gr ou nds a ls o, fo ll ow i ng w h ic h w e hol d t ha t th e sa le s ta x s ub si d y is ca p it a l in na tu re a nd a c cor d i ng ly d i smi ss th e g r oun d s r a i se d by th e Re ve n ue .
I n e ffe c t th e a ppe a l of the Re ve n ue i s d is mis se d . 37 . G r oun d of a p pe a l N o. (v ) r a ise d b y th e Re ve nue re a ds a s un de r "v) Whether on the facts and in the circumstances of the case the CIT(A) was right in deleting the addition made on account of technical knowhow fees amounting to Rs.1,25,75,000/- on the basis the decision of the Hon'ble ITAT dated 26.09.2013 for AY 2009-10."
38 . I t w a s common gr ou nd t ha t th e is sue r a i se d i n t he a bo ve gr ou nd s, p e r ta i ni ng t o tre a tme nt of te chn ic a l k n ow how fe e s p a id b y t he a sse s see w heth e r re ve nue or ca p i ta l i n 22 ITA Nos.730,731,756 to 758/Chd/2018 A.Ys.2012-13 & 2014-15 na tu r e , was i den ti ca l to gr ound N os . v) ra i sed in t he Re ve nue s a p pe a l i n I TA N o.7 5 6 /C hd /2 0 18 . 39 . O ur d e ci si on re nd e re d the re i n a t p a r a 1 1 of o ur o rd e r a bo ve w il l the re for e s q ua re l y a pp ly to the a b ove gr ou nds a ls o, fo ll ow i ng w hi ch w e h old tha t th e te c hn i ca l k n ow h ow fee s p a i d i s re ve n ue i n na tu re an d a c cor d i ngl y d i smi ss t he gr oun d N o. v) ra i se d b y the Re ve nue .
I n e ffe c t th e a p pe a l of the Re ve n ue i s d is mis se d .
We n ow ta k e up a s se s see 's a pp e a l in ITA N o. 73 1 /C hd /20 18 : 40 . Th e gr oun d N o .1 of a p p e a l r a i se d i n th i s a p pe a l r e a d s a s u n de r:
1. That the Ld. CIT (Appeals) has grossly erred in law as well as on facts in confirming the disallowance of claim of the assessee for Rs.37876511/- on account of sales tax subsidy as deduction from the Book Profits u/s 115JB being in the nature of capital receipt. The deduction of Rs.37876511/- may kindly be allowed from the Book Profits u/s 115JB.
41 . I t w a s c ommon gr ou nd b e twee n th e pa rt ie s that the a bo ve gr ou nd ra i s e d by the asse ssee in th is appeal is id e n ti ca l to gr ou nd N o. 1 r a i se d in t he a p pea l of t he a sse sse e i n I TA N o.7 3 0 /C hd /2 0 18 . O ur d e ci si on re nde re d 23 ITA Nos.730,731,756 to 758/Chd/2018 A.Ys.2012-13 & 2014-15 the re i n a t p a r a 3 1 & 3 2 of our or de r w i ll a c cor di ng ly a p p ly muta ti s muta n d i s to th is gr ou nd a ls o. G ro un d of a p pe a l N o.1 r a is e d the ass e s see i s the re for e a ll owe d . 42 . G r oun d N o. 2 r a i se d b y the a s se s se e re a d s a s u nde r:
"2. That the Ld. CIT (Appeals) has grossly erred in law as well as facts in confirming the disallowance of deduction of bad debts written off being in the nature of irrecoverable advance as business loss u/s 37(1) read with section 28 of the Act. The addition made on this account amounting to Rs.60410/- may please be deleted."
43 . B r i e f f a cts re l a ti ng to t he i ss ue a re t ha t the A .O . du r in g th e a sse ss me nt p r oce e d ing s noti c e d t hat d e b tor s wh i ch had b ee n cl a i me d as ba d d e b ts d ur i ng th e ye a r a moun ti ng to R s. 6 0, 4 1 0/- w e re ne ve r ta k e n i nto a ccou nt wh i le c omp uti ng th e i nco me of th e a sse ssee . He , the re f ore, he l d th a t t he cl ai m of b a d d e b ts w a s n ot a l l ow a bl e si nce the a sse sse e d i d no t sa t is fy the b a sic con di ti on s l a i d do wn i n se c tio n 3 6 ( 2) ( i) of th e A ct, w hi ch cl e a r l y s ti pu la t e s t hat de du cti on u /s 36 ( 1 )( vi i ) of th e Ac t w ou l d no t b e a l lowe d un le ss t he de bt ha d been t ak e n in to a c count w h i le comp ut in g th e i nc ome . Th e Ld . C I T( A) up h e l d t he fi nd i ng s of the A .O .
24 ITA Nos.730,731,756 to 758/Chd/2018
A.Ys.2012-13 & 2014-15 44 . B e f ore u s, the Ld . c oun se l f or a sse ssee c onte n de d tha t it h a d c la i me d d e d uc ti on of ba d d e b ts o n a cc oun t of t he fol l ow in g:
i) Rs. 48 , 0 00 /-a d va n ce gi ve n to S hr i S a nto sh Du mb re .
i i) Rs. 12 , 4 10 /- a d va n ce a ga i ns t ma ter i a l w r it te n of f. 45 . Th e Ld . cou ns e l f or a s se s see c ont e nde d th a t b oth t he a dv a nc e s h a d bee n r oute d th r ough tr a d i ng a c cou nt a nd h ad be e n sh ow n un d e r the he a d 'cu r r e n t a s se t s' a s a d va n ce to ve n d or a n d a s ' tra de re ce i va b le s' r e spe cti ve ly a n d he nce w a s a ll ow a b le a s b a d d e bt s.
46 . Th e Ld . D R, o n th e ot he r h a nd p oi nt e d out tha t t he imp ug ne d a mou n ts w e re me re ly a d va n ce s w hi ch h a d not be e n t a ke n i n to a cc oun t w hi le comp ut in g th e i nc o me of t he a sse sse e e it he r in th e i mpu gn e d or a n y oth e r p rev io us y e a r . He , t he re fore , c on te n de d th a t th e w r i te o ff of th e se a moun ts ha d b ee n r i gh tly d i sa l low e d sinc e the ba s ic co nd i ti ons re q ui re d t o be fu l fi ll e d for cl a imi n g t he sa me w as th a t t he de bt s s hou ld h a ve bee n ta ke n i nto a cco un t w hi l e c ompu ti ng the i nc ome , w h ic h ha s n ot b e e n fu lf i ll e d in th e p re se nt ca se . Th e Ld . D R h e a vi l y r e l ie d u po n th e fi n di n gs of the lowe r a uth or it ie s.
25 ITA Nos.730,731,756 to 758/Chd/2018
A.Ys.2012-13 & 2014-15 47 . W e h a ve he a r d th e r i va l co nte ntion s a nd p e r u se d t he or de r s o f the a uth or it ie s be lo w. I t is n ot d is pu te d th a t t he a moun t cl a i me d a s b a d de b ts r e la te d to a d va n ce s gi ve n , a s a dmi tte d b y the Ld . cou ns e l f or a s se s see a l so. Th e r e i s, the re fo re , no q ue s ti on of the sa me h a vi ng b ee n d e b i te d or con si de re d w hi le co mpu ti ng t he i n come of th e a s se s se e . Fu r the r t he a sse ssee h a s bee n u na b l e to de mons tr a te t he sa me e ve n b e f ore the l ow e r a u th or it ie s or e ve n b e f ore u s. Al so un d oub te dl y, f or cl a i mi n g t he w r ite off of a ny a mou nt a s b a d d e b ts, th e ne ce ss a ry p re -re q u is ite i s tha t t he sa id a moun t s hou ld h a ve bee n e a r lie r ta k e n i nto a cc oun t w h ile comp ut in g th e in co me of th e a s ses see . I n vie w of th e a b ove fa ct s a nd po si tio n of l a w , we h a ve n o he s it a ti on i n up ho ld i ng the or de r of t he Ld . C I T( A) i n d i sa l lo wi n g th e cla i m of t he a sse sse e of b a d d e b ts a mou nt in g t o R s. 60 , 4 10 /-. Th e g r oun d of appeal N o. 2 r a i se d by the a sse ssee is , the re f ore, di smi ss e d .
48 . G r oun d N o. 3 r a i se d b y the a s se s se e re a d s a s u nde r :
"3. That the Ld. CIT (Appeals) has grossly erred in law as well as facts in confirming the disallowance of deduction of Rs.77000/- being in the nature of fine and penalties as business loss u/s 37(1) of the Act. The addition made on this account amounting to Rs.77000/- may please be deleted."26 ITA Nos.730,731,756 to 758/Chd/2018
A.Ys.2012-13 & 2014-15 49 . B r i e f ly sta te d , th e A. O. h a d d i sa l lo we d de d uc ti on of Rs. 77 , 0 00 /- cl a i me d b y th e a sse s see i n i ts P r of it & Loss Acc oun t u nd e r t he he a d "Pe na l ty " on the gr ou nd th a t i t w a s in the na t ure of fi n e /p e n a lt y a nd f ur th e r Rs. 7 5 ,0 0 0 /- cl a ime d d i d not pe r ta i n to t he yea r u nd e r c ons ide r atio n b ut to a s se ssme nt ye a r 2 0 13 -1 4 .
Th e C I T(A ) u ph e l d th e d is a ll ow a nce ma d e b y t he A.O . 50 . B e f ore us , t he Ld . cou ns e l fo r a ss e ssee d rew ou r a tte n ti on to th e p l e a d i ng s ma d e to th e a uth or it ie s be low sta ti n g th a t p e n a lt y of Rs. 75 , 0 0 0 /- w a s a le vy of Ar b i tr a l Tr i b un a l a nd that th e a sse ssee had i nc ur re d th e c ost pu r sua n t to i ts cl a im f il e d a ga i n st M /s Ta ta A I G G e ne r a l I ns ur a n ce C o mpa n y Ltd . Th a t t h e e xpe nse s i ncur r e d were le ga l e xpe nse s a nd f ur th e r t ha t in c a se the Tr i bu na l d e c ide d the ca se i n f a vou r of the a s se s see , the n the a mou n t of cl a i m re ce i ve d by t he a sse sse e w oul d ha v e b ee n sh ow n a s in co me a nd , th e re f ore , e xpe n se s in cu r re d t o e a r n the cl a im w e r e a ls o a l l ow a b le .
51 . Th e Ld . D R, on the ot he r h a nd , d r e w our a tte n tion to the fi n di n gs o f th e A. O. th a t Rs .2 0 0 0 /- r e l a te d to pe na l ty (c ha l l a n) fo r sl eep i ng d r iv e r , w h i le Rs. 7 5, 0 0 0/- w as th e c ost a wa r d e d or l e v ied on the a ss e ssee by Ar b it r a l Tr i bu na l to 27 ITA Nos.730,731,756 to 758/Chd/2018 A.Ys.2012-13 & 2014-15 comp e n sa te the r e s pon de n t, M /s Ta ta AI G G e ne r a l I ns ur a n ce C omp a n y Ltd . Th e Ld . DR c ont e nde d th a t sur e ly the s a id e xpe n se w a s n ot i ncu r r e d i n th e no rma l cou rs e of bu si ne ss a nd si nc e the or d e r of th e Tr i bu n a l was to comp e n sa te t he I ns ur a n ce C omp a n y in te r ms of cos t it w a s in th e n a ture of fi ne or de re d b y it. Fu r th e r the Ld . DR dre w our a t te n ti on to th e fa c t th a t t he or de r of th e Tri b un a l le vyi ng f i ne w as d a te d 1 7 .2 . 20 1 3 a nd a cco rd i n gly t he e xpe n se pe r ta i ne d t o a ss e ss me n t ye a r 20 1 3 -1 4 a nd to t he imp ug ne d y e a r . H e a c cor d in gl y, su pp or te d t he o rd e rs of the a uth or it ie s be lo w.
52 . W e h a ve he a r d th e co nte nti on s of b oth t he pa r tie s. W e do no t f in d a n y r e a s on to i n te r fe re in the or de r of th e C I T(A ) in di sa ll ow i ng t h e pe n a l ty a mo un ti ng to Rs. 7 7 , 0 0 0/-. The fa ct r e l a tin g t o the na t ure of th e p e n a l ty, a s p oi nte d out b y the Ld . DR b e f or e u s, i s n ot d i sp u te d . Thu s R s.2 0 0 0 /- b e i ng pe na l ty le vie d fo r sl ee pi n g dr i ve r, is c le a rl y no al l ow a ble be in g i n the na tu re of pe n a l ty f or i n fr i ng e men t of l a w . Si mil a r l y, a l so, th e a mo un t of Rs .7 5 , 00 0 /- l e v ie d b y t he Ar b itr a l Tr i bu n a l on the a s se sse e to comp e ns a te the re sp on de nt in a ca s e fi le d b y i t to th e Tr i bu na l i s , we ho ld , ri gh tl y h e l d b y th e C I T( A) to b e in th e n a tu re of pe n a lt y a n d thu s di sa ll ow e d u/s 3 7( 1 ) of t h e Ac t. Mor e ov er , i t i s a n 28 ITA Nos.730,731,756 to 758/Chd/2018 A.Ys.2012-13 & 2014-15 un di sp u te d f a ct th a t th e or de r le vy in g pe na l ty /cost b y the Tr i b un a l w a s da t e d 17 . 2. 2 0 13 . Th e re fore , we a g re e w i th the a uth or it ie s be low th a t the li a b i li ty to p a y the fi ne accr u e d in a sse ssme nt ye a r 20 1 3 -1 4 a n d , t h e re f ore , d i d n ot p e r ta i n to the i mp ugn e d yea r a t a l l. I n vie w of th e a b ove , we a gr ee w i th the Ld . C I T( A) th a t t he a mou nt o f Rs .7 7 ,0 0 0 /- w a s i n t he na tu r e of p e na l ty p a i d b y the a s se s se e a nd f ur th e r out of t he a bo ve Rs. 75 , 0 00 /- pe r ta in e d to th e e a r lie r ye a r a nd, the re fo re , f or th e a fo re sa i d r e a so ns, th e sa i d a mou nt w a s not a l l ow a bl e to. Gr ou nd of appeal N o.3 r a is e d by t he a sse sse e is , the re f ore , d i smi ss e d .
53 . G r oun d of a p p e a l N o. 4 r a is e d b y th e a sse s see r e ad s a s un de r :
"4. That the Ld. CIT (Appeals) has grossly erred in law as well as facts in confirming the disallowance of deduction of provision of warranty rejections of Rs.56162/-. The addition made on this account amounting to Rs.56162/- may please be deleted."
54 . Brief f a cts re la tin g to th e i ssue a re th a t dur i ng a sse ssme nt p r oce e d in gs th e A .O . n oti ce d th a t th e a sse ssee ha d cl a i me d e x pe nd i ture on a ccou n t of pr ov is io n u nd e r t he he a d " w a r r a n ty r e je c tio n" of Rs .7 , 82 ,3 03 /- and Rs. 3, 0 5 ,0 6 3 /- a s on 3 1. 3 .2 0 1 4. O n be i ng a ske d to s how ca us e a s to w hy th e sa me ma y n ot b e a d de d b ack to t he in come of th e a s se s see si nce th e se we re n ot a ctu a l ly 29 ITA Nos.730,731,756 to 758/Chd/2018 A.Ys.2012-13 & 2014-15 e xpe n d itu re i n cur r e d , i t w a s con te n de d b y the a sse ssee t ha t the sa i d p ro vi sion ha d bee n re ve r se d in the sub s e q ue nt ye a r s on r e ce i p t o f ne ce s sa r y b il l s fr om th e p a r ti e s . The a sse sse e e x pl a i ne d t ha t the a mou nt s ha d b ee n b ook e d a s pr ov is io n f or w a r r a n ty r e je ct ion on r e ce i p t of r e je cte d ma te r i a l a t the fa c tor y, p e nd i n g is su e of d e b it not e f or re je cti on b y the p a r ty wh i ch ha d r e je c te d the ma te r i a l. Tha t in th e bo oks of a c cou nt , pr ov is io n ha d b e e n cl ai me d s in ce the re je ct ion h ad be e n re ce i ve d b y t he a sse ssee a s a t t he cl ose of the ye a r a nd th us t he t ra ns a cti on h a d cr ys ta ll i ze d a nd , the re f ore , a s p e r t he p re va i l in g a c cou nti n g c o nv e nt io ns a nd st a nd a r d s, th e e xpe nse s ha d a c cr ue d . Th a t on ce t he re je cti on we re v er i fi e d th r oug h d eb i t n ote b y cus tome rs , t he pr ov is io ns we re n ul l if ie d a nd re ve r se d . Th e A .O . e xa mi ne d the c onte n tio n ma d e b y the a sse ss ee a n d f oun d tha t ou t of the tota l p r ov is io ns cr e a te d, pr ov is i ons of on ly Rs. 10 , 2 9, 2 0 7/- h a d b ee n re ve r se d b y the a sse ssee i n t he sub s e q ue nt ye a r. He , th e re f ore , f ou nd t ha t th e ba l an ce a moun t o f Rs. 5 6 , 1 6 2/- w a s onl y a p r ov is io n a nd no a ctu a l e xpe n d itu re ha d b ee n i nc ur r ed by the a sse ss ee and a ccor d i ng ly , d is a ll ow e d the sa me . The Ld .C I T(A ) u ph e l d t he di sa l l ow a nc e ma de b y the A. O. 30 ITA Nos.730,731,756 to 758/Chd/2018 A.Ys.2012-13 & 2014-15 55 . B e f ore us , the Ld . cou ns e l f or as se s se e re i te r ated t he con te n ti ons ma d e be f ore t he low e r a uth or i ti e s. H ow e ve r , t he Ld. D R r e l ie d u po n the or de r of th e CI T( A) . 56 . W e h a ve he a rd th e r i va l co nte ntion s. W e d o n ot fi n d a ny r e a son to i n te r fe re i n the or d e r of the Ld .C I T(A ). The fa ct ua l f i nd i ng s of th e lowe r a u tho ri ti e s th a t the imp u gne d pr ov is io n of Rs. 5 6 ,1 6 2/- had n ot b ee n re ve r sed in the sub s e q ue nt ye a r b y w a y of d e b t no te re ce ive d fr om a p a r ty on a cco un t of re je cte d ma te r i a l, ha s n ot be e n c ont ro ve r te d by th e a sse s see b e f ore u s. The r e for e , a s pe r the e xp la n a ti on of t he a sse ssee , a l so t he sa i d pr ovi si ons d i d n ot re la te to a ny r e je c te d ma t e r ia l re ce ive d ba c k b y the a s se s se e fr om a ny pa r ty b e ca u se a s p e r th e e xp la n ati on gi ve n b y th e a s se s se e, suc h p r ovi s ion s w e re cre a te d on r e ce i p t of re je cted ma te r i a l a s a t th e e nd o f the ye a r p e n di n g t he d e b it n ote s to b e i ss ue by t he c once r ned pa rt ie s. I n the i mp ugn e d ca se , t he f a ct tha t no de b it not e re l a ti ng to R s. 56 , 1 62 /- w a s is s u e d i n t he sub s e q ue nt ye a r s how s th a t th e re wa s n o r e ce ip t of r e je cte d ma te r i a l t o th a t e x te n t a s a t th e e nd of th e yea r an d t he a moun t di d n ot r e p re se n t any l ia b i li ty b ut wa s on l y a pr ov is io n fo r th e sa me . The d i sa l lo wa n ce o f th e sa me i s, the re fo re , r i ght ly u p he ld b y the CI T( A) . G r oun d of a p pe al N o.4 r a is e d b y the a sse ssee i s, ther e f ore , d i smi ss e d. 31 ITA Nos.730,731,756 to 758/Chd/2018
A.Ys.2012-13 & 2014-15 I n e ffe c t the a p pe a l o f the a s se sse e is p a r tl y a ll owe d . 57 . In t he re su l t, the a p pe a l s of the Re ve n ue in I TA N o.7 5 6 -7 58 /C h d /18 a r e di smi s sed a nd the a sse ss e s a p pe a l in I TA N o .7 3 0/C hd /1 8 is a l l ow e d , w hi le in I TA N o.7 3 1 /C hd /1 8 i s p a rt ly a l l ow e d .
O r de r p r o n o u n ce d i n t he O p e n C ou r t .
Sd/- Sd/-
संजय गग अ नपण
ू ा ग&ु ता
(SANJAY GARG ) (ANNAPURNA GUPTA)
याय क सद य/ Judicial Member लेखा सद य/ Accountant Member
*दनांक /Dated: 27th May, 2019
*रती*
आदे श क त*ल+प अ,े+षत/ Copy of the order forwarded to :
1. अपीलाथ / The Appellant
2. यथ / The Respondent
3. आयकर आयु-त/ CIT
4. आयकर आयु-त (अपील)/ The CIT(A)
5. +वभागीय त न0ध, आयकर अपील$य आ0धकरण, च2डीगढ़/ DR, ITAT, CHANDIGARH
6. गाड फाईल/ Guard File आदे शानस ु ार/ By order, सहायक पंजीकार/ Assistant Registrar