Income Tax Appellate Tribunal - Pune
Vinod Pahumal Ramchandani,, Solapur vs Income-Tax Officer, Ward - 1(2),, ... on 11 March, 2019
आयकर अपीऱीय अधिकरण पण
ु े न्यायपीठ एक-सदस्य मामऱा पण
ु े में
IN THE INCOME TAX APPELLATE TRIBUNAL
PUNE BENCH "SMC", PUNE
सुश्री सुषमा चावऱा, न्याययक सदस्य एवं, श्री डी. करुणाकरा राव, ऱेखा सदस्य के समक्ष
BEFORE MS. SUSHMA CHOWLA, JM AND SHRI D. KARUNAKARA RAO, AM
आयकर अपीऱ सं. / ITA No.1320/PUN/2018
यििाारण वषा / Assessment Year : 2015-16
Vinod Pahumal Ramchandani,
14, Sindhu Nagar Complex,
Gandhi Nagar,
Solapur - 413003 .... अऩीऱाथी/Appellant
PAN: AARPR2214E
Vs.
The Income Tax Officer,
Wad 1(2), Solapur .... प्रत्यथी / Respondent
अऩीऱाथी की ओर से / Appellant by : Shri C.V. Deshpande
प्रत्यथी की ओर से / Respondent by : Shri M.K. Verma
सन
ु वाई की तारीख / घोषणा की तारीख /
Date of Hearing : 27.02.2019 Date of Pronouncement: 11.03.2019
आदे श / ORDER
PER SUSHMA CHOWLA, JM:
The appeal filed by assessee is against order of CIT(A)-7, Pune, dated 21.05.2018 relating to assessment year 2015-16 against order passed under section 143(3) of the Income-tax Act, 1961 (in short 'the Act').
2. The assessee has raised the following grounds of appeal:-
1. On the facts & in circumstances of the case & in law, the lower authorities have erred in incorrectly invoking provisions of section 37 of the Income Tax Act, 1961 and thereby incorrectly denying the expenditure on account of Local Body Tax (LBT) claimed by the assessee amounting to Rs.43,73,913/- for the reason that the said expenditure pertains to prior period though the said deduction was squarely available to the assessee under section 43B. ITA No.1320/PUN/2018
2 Vinod Pahumal Ramchandani
2. On the facts & in circumstances of the case & in law, alternatively it is submitted that the appellant shall be granted deduction of Rs.43,73,913/- under section 43B as the appellant has complied with provisions of the said section.
3. The only issue raised in the present appeal is against denial of expenditure incurred on account of Local Body Tax (LBT) amounting to ₹ 43,73,913/- which was claimed as deductible under section 43B of the Act, since the said amount was paid during the year under consideration, though it related to prior period.
4. Briefly, in the facts of the case, the assessee was engaged in the business of retail trade in liquor i.e. IMFL & Country liquor. The case of assessee was picked up for scrutiny. On going through Trading Account, the Assessing Officer noted that the assessee had debited Local Body Tax (LBT) of ₹ 99,67,827/-. The assessee was asked to give the details of LBT tax paid with supporting challans. The Assessing Officer noted that in addition to current year's LBT, un-assessed / unpaid LBT of earlier period was also recovered by SMC authorities totaling ₹ 99,67,827/-. As per LBT Rules, 10% of purchase cost was charged as LBT on liquors. The Assessing Officer thus, noted that LBT pertaining to current period worked out to ₹ 55,93,914/-. However, the assessee had debited sum of ₹ 99,67,827/-. The assessee explained that LBT of earlier period was allowable as per provisions of section 43B of the Act, since the said amount was paid during the year. The Assessing Officer observed that the assessee had not debited LBT expenses in earlier years and it was not disallowed in the computation of earlier year under section 43B of the Act. The Assessing Officer was of the view that the said expenditure claimed on actual payment basis, though was relatable to prior year and was not to be ITA No.1320/PUN/2018
3 Vinod Pahumal Ramchandani allowed as expenditure during the year. Hence, the disallowance of ₹ 43,73,993/-.
5. The CIT(A) upheld the aforesaid disallowance made by the Assessing Officer.
6. The assessee is in appeal against the order of CIT(A).
7. The learned Authorized Representative for the assessee pointed out that it was State levy by the Scheduled Municipal Corporation, which is parallel of octroi charges. He further pointed out that part of the amount paid during the year has been allowed but sum of ₹ 43.73 lakhs was disallowed on the basis of it related to prior year. He further pointed out that since the amount was actually paid during the year, hence the claim was made under section 43B of the Act, which was denied by the Assessing Officer on the ground that it was not debited to the accounts in the previous year. He further pointed out that reliance placed upon by the Assessing Officer on the decision of Ahmedabad Bench of Tribunal in Deepak Nitrite Ltd. Vs. DCIT (2012) 139 ITD 213 (Ahd - Trib.) is not correct as the disallowance in the case was on account of interest expenditure and not the State levy. He further placed reliance on the decision of Pune Bench of Tribunal in DCIT Vs. Eagle Agro Farms Pvt. Ltd. in ITA Nos.2649 & 2639/PUN/2016, relating to assessment years 2006-07 & 2007-08, order dated 08.02.2019, wherein the prior period expense which were covered under section 43B of the Act have been allowed in the year of payment.
8. The learned Departmental Representative for the Revenue placing reliance on the orders of authorities below, further placed reliance on the ITA No.1320/PUN/2018 4 Vinod Pahumal Ramchandani decision of Ahmedabad Bench of Tribunal in Deepak Nitrite Ltd. Vs. DCIT (supra).
9. We have heard the rival contentions and perused the record. The assessee for the year under consideration was engaged in the business of retail trading in liquor i.e. Indian made foreign liquor and Country liquor. For the year under consideration, the gross turnover of assessee was ₹ 6.87 crores. The assessee had debited sum of ₹ 99,67,827/- against payment of Local Body Tax (LBT). As per LBT Rules, 10% of purchase cost was charged as LBT on liquor. In accordance with the turnover of assessee for the year, the Assessing Officer allowed LBT of ₹ 55,93,914/- which was paid during the year. However, LBT paid for the earlier period of ₹ 43,73,913/- was disallowed in the hands of assessee. The claim of assessee was in line with the provisions of section 43B of the Act. The said section provides that deduction in respect of any sum payable by the assessee by way of tax, duty, cess or fees or whatever name called, under any law for the time being in force ..., to be allowed in the year of payment, irrespective of the previous year in which the liability to pay such sum was incurred by the assessee, according to the method of accounting regularly employed by it. The said deduction is to be allowed while computing the income under section 28 of that previous year in which such sum was actually paid by him. Such is the proposition laid down in section 43B of the Act, which opens with non abstinent clause 'Notwithstanding anything contained in any other provisions of the Act....". In other words, where the assessee is following a particular method of accounting and any amount was incurred for carrying out the business in any of the years, then the same if covered under the provisions of section 43B of the Act is to be allowed in the year of payment. ITA No.1320/PUN/2018
5 Vinod Pahumal Ramchandani
10. In the facts of present case, where the assessee was following mercantile system of accounting, then LBT which is 10% of purchase cost was chargeable to the Profit and Loss Account in the preceding year. However, no such charge was created by the assessee in the previous year since the amount was not paid by the assessee in the said year. Only on payment of said amount, the assessee debited the same to the Profit and Loss Account. It is undisputed that LBT is to be allowed as expenditure. However, the issue which is raised by the Assessing Officer is that where the assessee had not debited the said amount on accrual basis in the preceding year, can the expenditure be allowed in the year of payment. The answer to the same is 'yes', in view of express provisions of section 43B of the Act. The said payment made by the assessee which is State levy, is to be allowed only when the same is paid to the State Government. The said payment has been made during the year and hence, the assessee is entitled to claim the said expenditure of ₹ 43,73,913/-, in view of provisions of section 43B of the Act. We find no merit in the orders of authorities below in denying the same to the assessee on the ground that the amount was not shown as payable in the preceding year. The express provisions of section 43B of the Act provides that irrespective of previous year in which the liability to pay such sum was incurred by the assessee, according to the method of accounting regularly employed by him, the said sum would be allowed only in computing the income referred to in section 28 of that previous year in which such sum is actually paid by him. Accordingly, we hold that the assessee is entitled to the aforesaid claim under section 43B of the Act.
11. Coming to the reliance placed upon by the authorities below on the decision of Ahmedabad Bench of Tribunal in Deepak Nitrite Ltd. Vs. DCIT ITA No.1320/PUN/2018 6 Vinod Pahumal Ramchandani (supra), the issue which arose was the claim of deduction on account of penal interest and penalty of ₹ 1,70,186/-. The Tribunal held that interest paid on sales tax was not of penal in nature and was to be allowed as business expenditure and the matter was remitted to verify whether in earlier years, unpaid amount of sales tax was added to the income or not. The assessee had not claimed the said expenditure in earlier years and hence, the said proposition is not applicable to the facts of present case. The grounds of appeal raised by assessee are thus, allowed.
12. In the result, appeal of assessee is allowed.
Order pronounced on this 11th day of March, 2019.
Sd/- Sd/-
(D.KARUNAKARA RAO) (SUSHMA CHOWLA)
ऱेखा सदस्य / ACCOUNTANT MEMBER न्याययक सदस्य / JUDICIAL MEMBER
ऩुणे / Pune; ददनाांक Dated : 11th March, 2019.
GCVSR
आदे श की प्रयिलऱपप अग्रेपषि/Copy of the Order is forwarded to :
1. अऩीऱाथी / The Appellant;
2. प्रत्यथी / The Respondent;
3. आयकर आयुक्त(अऩीऱ) / The CIT(A)-7, Pune;
4. The Pr.CIT-6, Pune;
5. ववभागीय प्रतततनधध, आयकर अऩीऱीय अधधकरण, ऩुणे, एक-सदस्य मामऱा / DR 'SMC', ITAT, Pune;
6. गार्ड पाईऱ / Guard file.
ु ार/ BY ORDER, आदे शािस सत्यावऩत प्रतत //True Copy// वररष्ठ तनजी सधिव / Sr. Private Secretary आयकर अऩीऱीय अधधकरण ,ऩुणे / ITAT, Pune