Income Tax Appellate Tribunal - Jabalpur
Jila Sahakari Bhoomi Vikas Bank Ltd. vs Deputy Commissioner Of Income Tax. ... on 1 February, 1998
ORDER
G.D. Agrawal, A.M.
1. ITA No. 383/Jab/1994 is the assessee's appeal against the order of CIT(A), Jabalpur. ITA No. 352/Jab/1997 is also the assessee's appeal against the order of CIT(A), Jabalpur dt. 7th January, 1997, while the ITA No. 530/Jab/1997 is the Revenue's appeal against the order of CIT(A), Jabalpur dt. 22nd August, 1997.
ITA No. 352/Jab/1994 - Assessee's appeal2. The first ground of the assessee's appeal is of general nature and needs no comments.
3. Ground No. 2 of the assessee's appeal is against the disallowance of Rs. 1,25,000 made under s. 43B towards unpaid audit fee.
4. At the time of hearing before us, it was contended by the learned counsel for the assessee that the audit fee though payable to the Audit Department of the State Government is not covered by s. 43B. He submitted that the meaning of the word "Fee" has to be considered in the light of the preceding words, namely, tax, duty or cess. That is, the fee is a sort of levy, which is collected by the Government on account of its sovereign power. The audit fee payable to the State Government is just a professional charges as payable to any auditor. Therefore, it is not covered by the s. 43B at all. However, he submitted that even though it is not covered by the s. 43B, the assessee would be satisfied if a direction is issued to allow the deduction in the year of actual payment, because there is loss in the year under consideration.
As the final request made by the learned counsel for the assessee is only with regard to the direction for allowing the deduction in the year of payment, we do not express any opinion with regard to his earlier argument regarding the nature of audit fee payable to the State Government. The final prayer of the assessee for direction of allowing the expenditure in the year of actual payment is accepted and we direct the AO to allow the deduction in the year of actual payment.
5. Ground No. 3 is against the disallowance of Rs. 1,46,953 towards the interest payable.
6. At the time of hearing before us, it was submitted by the learned counsel for the assessee that the AO made the disallowance of Rs. 1,46,953 being interest payable to NABARD Bank. He submitted that under s. 43B for the relevant year provision for interest payable to financial institution was disallowance. The financial institution has been defined under Expln. 4 of s. 43B to have the same meaning as assigned to it under s. 4A of the Companies Act, 1956. He further submitted that under s. 4A of the Companies Act, 1956, NABARD is not specified as public financial institution. The learned Departmental Representative relied upon the order of the authorities below.
7. We have considered the arguments of both the sides. Sec. 4A of the Companies Act specifies the public financial institutions, which are -
(i) Industrial Credit & Investment Corporation of India;
(ii) Industrial Financial Corporation of India;
(iii) Industrial Development Bank of India;
(iv) Life Insurance Corporation of India; and
(v) Unit Trust of India.
Thus, NABARD is not financial institution as specified in s. 4A of the Companies Act. Therefore, for the purpose of s. 43B also, it has not to be considered as a public financial institution. Accordingly, we delete the disallowance of Rs. 1,46,953 made under s. 43B.
ITA No. 383/Jab/1994 - Assessee's appeal8. The only ground raised in this appeal is against the prima facie adjustment made by disallowance of audit fee of Rs. 1,25,000 under s. 143(1)(a).
9. At the time of hearing before us, it was contended by the learned counsel for the assessee that the assessee is a co-operative society. For the year under consideration, the assessee filed the return disclosing net loss of Rs. 41,09,423. The AO made the following disallowances by way of prima facie adjustment under s. 143(1)(a).
Rs.
(a) Liability of audit fee 1,25,000 (b) Sales-tax liability 29,136 (c) Depreciation 45,417
The assessee moved an application under s. 154 and claimed that none of the above adjustments were within the ambit of prima facie adjustment as permissible under s. 143(1)(a). The AO accepted the assessee's contention with regard to the sales-tax liability as well as depreciation. However, he upheld the prima facie adjustment with regard to the liability of audit fee. The assessee moved an appeal to the CIT(A) against the order under s. 154. The same was upheld by the CIT(A). Hence this appeal by the assessee.
10. At the time of hearing before us, it was contended by the learned counsel for the assessee that the disallowance of audit fee by way of prima facie adjustment under s. 143(1)(a) was not permissible. He submitted that the audit fee is payable to the Audit Department of the State Government on account of professional services rendered by it. The payment is in the nature of professional charges as payable to any other auditor. It is not a fee in the sense in which it is used in s. 43B. In s. 43B, the word "fee" is used along with the word tax, duty and cess. While interpreting the meaning of the word "fee", we have to keep in mind the earlier words used along with it. He further submitted that in any case it was a debatable issue whether an audit fee would be the fee within the meaning of s. 43B. The debatable matters cannot be considered, while making the prima facie adjustment. The learned Departmental Representative relied upon the orders of the authorities below and he submitted that the matter was fully covered by s. 43B(a) and, therefore, the AO rightly made the prima facie adjustment.
11. We have considered the arguments of both the sides and have perused the material placed before us. We agree with the submissions of the learned counsel for the assessee that whether the audit fee payable to the Audit Department of the State Government is covered by the s. 43B or not is certainly a debatable matter and, therefore, it cannot be disallowed by way of prima facie adjustment under s. 143(1)(a). We accordingly direct the AO to rectify his order issued under s. 143(1)(a) and exclude the audit fee therefrom.
ITA No. 530/Jab/1997 - Revenue's Appeal12. The facts of the case are that the AO rectified his order passed under s. 143(3), so as to include the additional tax, which was levied after making the prima facie adjustment by disallowing audit fee. The order under s. 154 is cancelled by the CIT(A). Hence this appeal by the Revenue.
13. We have already considered this issue on merit, while disposing of the assessee's appeal vide ITA No. 383/Jab/1994. We have already arrived at a conclusion that a sum of Rs. 1,25,000 on account of audit fee was not disallowable by way of prima facie adjustment. Accordingly, there could not be any levy of additional tax. In view of this finding, the order under s. 154 passed by the AO levying the additional tax does not survive. Accordingly, we uphold the order of the CIT(A) dt. 22nd August, 1997, cancelling the order under s. 154 dt. 25th November, 1994.
14. In the result, the assessee's appeal vide ITA No. 352/Jab/1997 is partly allowed, the assessee's appeal vide ITA No. 383/Jab/1994 is allowed and the Revenue's appeal vide ITA No. 530/Jab/1997 is dismissed.