Income Tax Appellate Tribunal - Delhi
Tirupati Udyog Ltd., New Delhi vs Department Of Income Tax on 29 December, 2014
ITA No.5618/Del/2012
Asstt.Year: 2009-10
IN THE INCOME TAX APPELLATE TRIBUNAL
DELHI BENCHES 'H' NEW DELHI
BEFORE SHRI J.SUDHAKAR REDDY, ACCOUNTANT MEMBER
AND
SHRI CHANDRAMOHAN GARG, JUDICIAL MEMBER
ITA NO. 5618/DEL/2012
ASSTT.YEAR: 2009-10
ACIT, vs Tirupati Udyog Ltd.
Circle 16(1), D-14, Second Floor,
New Delhi. Preet Vihar,
Delhi-110092
(PAN:AABCT3941R)
(Appellant) (Respondent)
Appellant by: Shri Amit Goel, FCA
Respondent by: Shri J.P. Chandrakar, Sr.DR
O R D E R
PER CHANDRAMOHAN GARG, J.M.
This appeal has been filed by the revenue against the order of the CIT(A)- XIX, New Delhi dated 09.08.2012 in Appeal No. 224/2011-12 for AY 2009-10. The sole ground raised by the revenue reads as under:-
"1. On the facts and in the circumstances of the case and in law the learned CIT(A) has erred in deleting the addition made by the AO under section 43B of the I.T. Act amounting to Rs.18,76,023/- for the following reasons:
i) The CIT(A) failed to appreciate that the accountant of the assessee has himself reported that the expense was incurred but not paid.1 ITA No.5618/Del/2012 Asstt.Year: 2009-10
ii) Even if we accept the contention of the assessee that the amount was not payable as export duty and could not be disallowed u/s 43B of the I.T. Act, the amount was not an allowable expense as it was not incurred for the purpose of business.
iii) Contention of the assessee that the amount was not debited to the Profit & Loss account could not be accepted when the assessee's accountant has reported u/s 44AB of the Act that the amount was incurred."
2. Apropos aforementioned ground, we have heard arguments of both the sides and carefully perused the relevant material placed on record. Ld. DR submitted that the learned CIT(A) has erred in deleting the addition made by the AO under section 43B of the I.T. Act amounting to Rs.18,76,023/- because the CIT(A) failed to appreciate that the accountant of the assessee has himself reported that the expense was incurred but not paid. Even if we accept the contention of the assesee that the amount was not payable as export duty and could not be disallowed u/s 43B of the Act, the amount was not an allowable expense as it was not incurred for the purpose of assessee's business. Ld. DR vehemently contended that when the assessee's accountant has reported u/s 44AB of the Act that the amount was incurred, then the contention of the assessee that the amount was not debited to Profit & loss account could not be accepted. Supporting the assessment order, ld. DR submitted that the AO made impugned disallowance u/s 43B of the Act which was deleted by the CIT(A) without any justified and cogent reasoning. He finally prayed that the impugned order may be set aside by restoring that of the AO. 2 ITA No.5618/Del/2012 Asstt.Year: 2009-10
3. Replying to the above, ld. AR reiterated its arguments which were placed before the CIT(A) and submitted that the AO made disallowance without assigning any reason or uttering any word for making such disallowance and, on the other hand, the CIT(A) rightly held that since the assessee did not debit the amount of the Profit and loss account as an expenditure nor claimed any deduction in respect of the amount and, therefore, the question of disallowing the deduction not claimed would not arise and there was no case for the AO for invoking provisions of section 43B of the Act in respect of export duty payable. Ld. AR vehemently contended that the AO has not given any reason for making impugned disallowance and the CIT(A) after considering and accepting the explanation of the assessee rightly deleted the addition.
4. On careful consideration of above submissions and contentions, we observe that from the assessment order, we clearly note that the AO has not assigned any reason for making disallowance u/s 43B of the Act. During first appellate proceedings, the assessee submitted detailed written submissions before the CIT(A) and main relevant part of these submissions reads as under:-
"It may be submitted that the appellant has not claimed this amount of Rs.1876023/- as expenditure. As a conservative approach, the appellant has merely created a provision by debited the customer A/c (SEZ Units) and crediting the export duty payable account. The appellant has, as a matter of abundant precaution raised debit note on these units so that, if in future, the amount becomes payable, the appellant does not have to suffer any loss. Your honour will appreciate that the position of the appellant is more like a agent in as much as 3 ITA No.5618/Del/2012 Asstt.Year: 2009-10 that it has to collect duty from the customers (SEZ Units) and pay it to the Govt. Alc. The appellant has neither debited this amount to its profit & loss account nor has it claimed the deduction of this amount in any other manner. Since no deduction has been claimed, there is case of making disallowance thereof under any manner, either as made by the A.O. u/s 43B or otherwise. In the case of CIT vs Noble and Hewrit m Pvt. Ltd. (2008) 305 ITR 324 (Del), the Hon'ble Delhi High Court held that where the amount was not debited to P&L A/c, amount could not be disallowed u/s 43B.
It is further submitted that the amount of Rs.1876023/- is not a "revenue receipt" or "income by any stretch of imagination. The amount has neither been recovered from the customers nor they have admitted to there liability for this amount to the appellant. The appellant has, as an abundant precaution raised a debit note on them to safeguard its interest in view of uncertainty prevailing at that time. The judgment of Hon'ble High Court has held that no duty was payable. Accordingly there is no way by which the impugned amount of Rs.1876023/- can be covered u/s 43B."
5. From the operative part of the impugned order, we observe that the CIT(A) deleted the addition with following observations and conclusion:-
"The AR contended that the amount was not claimed as expenditure and hence it cannot be disallowed u/ s 43B and relied on the decision in the case of CIT vs. Noble and Hewitt (I) Pvt. Ltd. (305 ITR 324) (Delhi).
The head notes reads as under:
"Held, dismissing the appeal, that since the assessee did not debit the amount to the profit and loss account as an expenditure nor claim any deduction in respect of the amount and considering that the assessee was following the mercantile system of accounting, the question of disallowing the deduction not claimed would not arise."
The AR further contended that the amount was not payable to the Government by way of tax, duty, cess, fee and hence the amount is outside the scope of the provisions of S.43B.
4 ITA No.5618/Del/2012 Asstt.Year: 2009-10
The Hon'ble High Court has upheld that supplies made to SEZ Units are outside the liability from taxes/ customs duty. After careful consideration of the facts of the case, there is no case for invoking provisions of S.43B in respect of export duty payable. The AO has not given any reasons for making disallowance. I am in agreement with the contentions of the AR. The disallowance is hereby deleted."
6. Under above set of facts and circumstances of the case, we may point out that the AO made alleged disallowance u/s 43B of the Act without assigning any reason or without pointing out this issue to the assessee. On appeal before the CIT(A), the assessee alleged that assessee has neither debited this amount to its P&L account nor has it claimed the deduction of this amount in any other manner. Placing reliance on the decision of Jurisdictional High Court of Delhi in the case of CIT vs Noble and Hewitt (I) Pvt. Ltd. (supra), the CIT(A) granted relief for the assessee with a final conclusion that there was no case for invoking provisions of section 43B of the Act in respect of export duty payable. As noted above, the Hon'ble Jurisdictional High Court of Delhi in the case of CIT vs Noble and Hewitt (I) Pvt. Ltd. (supra) granted relief for the assessee with a final conclusion that there was no case for invoking provisions of section 43B of the Act in respect of export duty payable. As noted above, the Hon'ble Jurisdictional High Court of Delhi in the case of CIT vs Noble and Hewitt (I) Pvt. Ltd. (supra) dismissing the appeal of the revenue has held that since the assessee did not debit the amount to the Profit and loss account as an expenditure nor claimed any deduction in this respect, therefore, since the assessee was following mercantile system of accounting, the question of 5 ITA No.5618/Del/2012 Asstt.Year: 2009-10 disallowing the deduction which was not claimed would not arise. Ld. DR has not disputed this factum that the assessee has neither debited the amount to the Profit & loss account as an expenditure nor claimed any deduction in respect of the impugned amount. Thus, we are unable to see any valid reason to interfere with the conclusion of the CIT(A) and we uphold the same. Accordingly, sole ground of the revenue being devoid of merits is dismissed.
7. In the result, the appeal of revenue is dismissed.
Order pronounced in the open court on 29th December, 2014.
sd/- sd/-
(J.S. REDDY) (CHANDRAMOHAN GARG)
ACCOUNTANT MEMBER JUDICIAL MEMBER
DT. 29th DECEMBER, 2014
'GS'
Copy forwarded to:-
1. Appellant
2. Respondent
3. C.I.T.(A)
4. C.I.T. 5. DR
By Order
Asstt. Registrar
6