Income Tax Appellate Tribunal - Kolkata
D.C.I.T Cir-1, Kolkata, Kolkata vs The Jute Corparation Of India Ltd., ... on 10 November, 2016
1
ITA No. 1520/Kol/2013 & CO No.103/Kol/2013
The Jute Corpn. Of India Ltd ., AY 2005-06
IN THE INCOME TAX APPELLATE TRIBUNAL "B" BENCH: KOLKATA
[Before Shri P. M. Jagtap, AM & Shri K. Narasimha Chary, JM]
I.T.A No. 1520/Kol/2013
Assessment Year: 2005-06
Deputy Commissioner of Income-tax, Vs. The Jute Corporation of India Ltd.
Circle-1, Kolkata. (PAN: AABCT8820B)
(Appellant) (Respondent)
&
C.O. No.103/Kol/2013
In I.T.A No. 1520/Kol/2013
Assessment Year: 2005-06
The Jute Corporation of India Ltd. Vs. Deputy Commissioner of Income-tax,
Circle-1, Kolkata.
(Cross Objector) (Respondent)
Date of hearing: 07.11.2016
Date of pronouncement: 10.11.2016
For the Revenue: Shri Pinaki Mukherjee, JCIT, Sr. DR
For the Assessee: S/ Shri B. Shyam & S. Ghosh, CA
ORDER
Per Shri K. Narasimha Chary, JM:
This appeal by revenue and Cross Objection by assessee are arising out of order of CIT(A)-XX, Kolkata vide appeal No. 122/CIT(A)-XX/Range-1/2011-12/Kol dated 01.02.2013. Assessment was framed by Addl.CIT, Range-1, Kolkata u/s. 143(3) of the Income-tax Act, 1961(hereinafter referred to as the "Act") for AY 2005-06 vide his order dated 27.12.2007.
2. Brief facts of the case are that the Assessee Company is engaged in jute business. For the AY 2005-06 they had filed their return of income along with audited Balance Sheet and tax audit report on 31.10.2005 declaring a total income of Rs.2,21,49,318/-. The return was processed and demand was raised on 25.07.2006 for Rs.10,42,797/-. In that process the AO disallowed a sum of Rs.3,14,49,281/- which was claimed as prior period expenses under twelve heads. Challenging this order, assessee preferred appeal before the Ld. CIT(A). It was submitted before the Ld. CIT(A) that the Assessee Corporation, since its inception, booked certain expenses as prior period adjustments following the principles of accountancy 2 ITA No. 1520/Kol/2013 & CO No.103/Kol/2013 The Jute Corpn. Of India Ltd ., AY 2005-06 and the Accounting Standards governed the preparation of accounts, and in strict compliance with the provisions of law. However, the AO disallowed the same without going through the facts including nature of expenses and the genuineness of meeting the same. It was submitted that the Jute Corporation of India has to act as a nodal agency for procurement of raw jute from jute growers or cultivators to prevent the distress sales by way of minimum support price, in that exercise at places where they do not have infrastructure they have been procuring the raw jute through State Level Cooperatives, and the expenses incurred by such State Level Cooperatives have to be reimbursed on freight and conversion charges in the form of service charges apart from the purchase value of the jute. Since the assessee will come to know the details of such charges only after the year of procurement such charges are booked as prior period charges. So also, in respect of freight charges price support also there were no ascertained expenses during the year as such, expenses were crystallized only in the assessment year. Further, the VRS scheme was introduced and though 18 number of employees were given VRS in 2003-04 invoking a payment of Rs.52.29 lakhs, the final approval and the amounts were received only in 2004-05 as such, these amounts were also to be booked in the relevant assessment year. Likewise, in respect of the interest on bank loan also the amount was not booked in the earlier year as it was not known to the assessee before the end of March, 2003. Ld. CIT(A) by way of order dated 01.02.2013 confirmed the order of AO in respect of certain items but allowed the appeal in respect of the expenses relating to the freight charges, purchase price support, service charges, ex gratia payment on VRS and interest on bank loan holding that due to the peculiar circumstances of the business of the assessee such expenses would not be ascertained till last date of the year and such expenses were only crystallized in the relevant assessment year as such, they could be allowed as deduction.
3. Challenging the said order of Ld. CIT(A), the revenue came in appeal before us on the following grounds:
"1. That on the facts and in the circumstances of the case, the Ld. CIT(A) has erred in deleting the disallowance made on account of service charges amounting to Rs. 5,91,284/- .
2. That on the facts and in the circumstances of the case, the Ld. CIT(A) has erred in deleting the disallowance made on account of freight amounting to Rs.18,12,110/- .
3. That on the facts and in the circumstances of the case, the Ld. CIT(A) has erred in deleting the disallowance made on account of purchase price support amounting to Rs. 64,83,852/- .3 ITA No. 1520/Kol/2013 & CO No.103/Kol/2013
The Jute Corpn. Of India Ltd ., AY 2005-06
4. That on the facts and in the circumstances of the case, the Ld. CIT(A) has erred in deleting the disallowance made on account of exgratia payment of VRS amounting to Rs. 52,29,554/- .
5. That on the facts and in the circumstances of the case, the Ld. CIT(A) has erred in deleting the disallowance made on account of interest on bank loan amounting to Rs. 2,25,0001- ."
Assessee preferred Cross Objections on the following grounds:
"Item no 1, 2 & 3 of the grounds For that the AO without going through the actual facts of the transactions and without considering the submission and related documentary evidences has disallowed Rs 5,91,284/- on account of Service Charges, Rs 18,12,180/- as Freight and Rs.64,83,852/- as purchase price of Raw Jute paid/payable procured through State Co-operatives, who acts as an extended arms of the corporation to arrest MSP operation of raw jute in most remote localities where there is no procurement centre of JCI. It was explained to AO that as per agreed arrangement the corporation is liable to pay freight, raw jute (fibre) value and conversion charges to State level co-operative society to reimburse their cost involved in the statutory procurement. The argument was brought before the Ld CIT(A) as to why such expenses were booked under Prior Period Adjustment as there was no amount of certainty for occurrence of the same in previous year and the amount was booked as per policy adopted by the corporation. Ld CIT(A) after considering the contention has allowed the same as genuine payments made by the corporation for business expenses.
Item no 4 That the AO was not justified by rejecting the claims to allow payments made as ex-gratia to retired employees under Voluntary Retirement Scheme(VRS) as per approved scheme of GOI and Rs 52,29,554/-, was paid following the norms of the Scheme. In spite of our submission in course of assessment proceeding. We have explained the actual fact for booking such expenses under head Prior Period Expenses considering that the related order passed by the corporation, to Ld CIT(A), who has perused and ordered for allowing the same as business expenses.
Item no 5 The AO in his assessment proceeding has disallowed the payment made to bank as interest charges on loan drawn from them though booked under Prior period expenses due to debiting the same in the month of April in bank statement. The Ld CIT(A) was apprised of the actual fact of the case and has ordered for deletion."
4. Ld. AR argued in support of the order of the Ld. CIT(A) by reiterating the same arguments that were addressed before the Ld. CIT(A), whereas the Ld. DR vehemently disputed the order of the Ld. CIT(A) on the ground that the material that was placed before the Ld. CIT(A) was not properly verified and the AO was not given an opportunity to verify the correctness of all these documents. He further submits that the order of Ld. CIT(A) suffers lack of reasons and though the Ld. CIT(A) stated that he 4 ITA No. 1520/Kol/2013 & CO No.103/Kol/2013 The Jute Corpn. Of India Ltd ., AY 2005-06 had regard to the peculiarity of the circumstances of the business of the assessee, failed to assign any particular reason for disagreeing with the AO on any particular ground.
5. We have heard rival submissions and gone through the facts and circumstances of the case. Ld. AR brought to our notice that the Ld. CIT(A) considered so many documents which are enumerated in the 5th column of the table given at page 7 of his order in support of his contention that the order of the Ld. Cit(A) is well considered one and does not warrant any interference by the Tribunal at this stage. However, we find some substance and force in the arguments of the Ld. DR that though the documents are said to have been furnished in support of the contentions of the assessee, the order of the Ld. CIT(A) does not reflect the consideration of such documents. The very basis for the AO to disallow the claim of the assessee is that though it was submitted before him that the liability was crystallized during the previous year, no documents or evidence or supporting papers in respect of such claim were filed before him. It is purely observing so and for lack of evidence the AO disallowed the claim of the assessee. In such circumstances, it is imperative for the Ld. CIT(A) to give an opportunity to the AO or to refer and discuss all such documents in his order to base his conclusion on sound reasons.
6. It is the further argument of the Ld. DR that it is not as though all the expenses were incurred either by the State Level Cooperatives or by the assessee in the last month of the earlier previous year so that the assessee could gather the information only during the relevant previous year. He submitted that the assessee could have gathered information relating to the service charges, freight charges, purchase price support expenses etc. on monthly basis as such there would not have been any impediment for the assessee to claim such expenses in the relevant year itself instead of pooling them up till the next year. We also find some substance in the argument of the Ld. DR that when the VRS scheme was declared and 18 number of employees opted for VRS, relevant expenses could have been crystallized in that year itself but for which formal approval of the Ministry of Textiles at a later point of time.
6. We find that the order of the Ld. CIT(A) does not advert to any of these details as to what necessitated the culmination of all these expenses to be crystallized only in the relevant assessment year and how much part of the expenses that could have been 5 ITA No. 1520/Kol/2013 & CO No.103/Kol/2013 The Jute Corpn. Of India Ltd ., AY 2005-06 crystallized in the relevant previous year. There is no material before us on these aspects to make the things clear as to which part of the expenses could not be crystallized in the prior previous year and which part of the expenses could be crystallized only during the previous your. It is also not known what are the documents that were considered by the Ld. CIT(A) lead him to come to a conclusion that the disallowance of these expenses had to be deleted. It is also not known whether any opportunity was given to the AO to verify such documents and to submit a report. Under these circumstances, in the interest of justice, we find it just and proper to set aside the impugned order of the Ld. CIT(A) on this score and restore the matter to the file of AO for deciding the same afresh after giving the assessee an opportunity of being heard to substantiate its claim by producing relevant documents. The appeal of revenue is accordingly, allowed for statistical purpose.
7. The cross objection filed by the assessee is in support of the order of Ld. CIT(A) and since we restore the matter to the file of AO for deciding afresh, the Cross objection filed by assessee has become infructuous and being dismissed.
8. In the result, the appeal of revenue is allowed for statistical purpose and the Cross Objection of assessee is dismissed being infructuous.
Order is pronounced in the open court on 10.11.2016
Sd/- Sd/-
(P. M. Jagtap) (K. Narasimha Chary)
Accountant Member Judicial Member
Dated :10th November, 2016
Jd.(Sr.P.S.)
Copy of the order forwarded to:
1. APPELLANT - DCIT, Circle-1, Kolkata.
2 Respondent -M/s. The Jute Corporation of India Ltd., 15N, Nellie
Sengupta Sarani, Kolkata-700087.
3. The CIT(A), Kolkata
4. CIT , Kolkata
5. DR, Kolkata Benches, Kolkata
/True Copy, By order,
Asstt. Registrar.