Gujarat High Court
Pr.Commissioner Of ... vs Gujarat Gas Trading ... on 9 June, 2016
Author: Akil Kureshi
Bench: Akil Kureshi, A.J. Shastri
O/TAXAP/207/2016 ORDER
IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
TAX APPEAL NO. 207 of 2016
With
TAX APPEAL NO. 208 of 2016
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PR.COMMISSIONER OF INCOME-TAX-GANDHINAGAR....Appellant(s)
Versus
GUJARAT GAS TRADING CO.LTD.....Opponent(s)
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Appearance:
MR SUDHIR M MEHTA, ADVOCATE for the Appellant(s) No. 1
MR B S SOPARKAR, ADVOCATE for the Opponent(s) No. 1
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CORAM: HONOURABLE MR.JUSTICE AKIL KURESHI
and
HONOURABLE MR.JUSTICE A.J. SHASTRI
Date : 09/06/2016
ORAL ORDER
(PER : HONOURABLE MR.JUSTICE AKIL KURESHI)
1. Tax appeals are filed by the Revenue raising similar question. We may notice facts from Tax Appeal No.207/2016. For the assessment year 20042005, the assessee had filed return of income on 28.10.2004 declaring total income of Rs.12,95,33,579/. In the return, the assessee had claimed expenditure of Rs.3,20,07,330/ which was expended by the assessee by way of commission given to the suppliers. The assessee had however, placed note along with the return which reads as under :
"During the year under review the assessee company has made provision for commission for performance guarantee Page 1 of 7 HC-NIC Page 1 of 7 Created On Sat Jun 11 02:27:05 IST 2016 O/TAXAP/207/2016 ORDER given to supplier on behalf of the company of Rs.1.45.04.75/ and has also provided for commission on purchase aggregating to Rs.3,18,96,000/. The same has been disallowed and will be claimed at the time of actual payment with necessary documents as per law."
2. The return of the assessee was taken for scrutiny by the Assessing Officer. During the assessment proceedings, the assessee changed the stand and claimed the commission of Rs.3,20,07,330/ which the Assessing Officer disallowed making the following observations :
"Since, the assessee has claimed at Point No. 16 to reply dated 11/8/06 that the above commission expenses are allowable, he was time and again requested to substantiate the claim. In response to the request at Point No 2 to reply dated 20/10/06 it has submitted that this payment are as per the agreement, the copy of which is attached. In View of this specific submission, the agreement submitted by the assessee is verified. On verification of the agreement, it is seen that at page No.2 of the agreement at Clause(B), it is required that BG Energy Holdings Ltd guarantee the performance of the Cairn Contract by Gujarat Gas Company Ltd. It is also mentioned that BGEHL has provided Cairn with a guarantee to that effect. In another agreement dated 30/5/01 the calculation of this guarantee amount has been clarified. In the calculation formula, it is mentioned that it will be equal to 1% of the annual sum guaranteed. However, no details of annual sum guaranteed appear have been filed by the assessee. With a View to verify this, the assessee was time and again requested to submit the complete details. Till the date of finalisation of the assessment proceedings the assessee has not submitted further details.
As regard commission, the calculation formula has been provided in the agreement dated 30/5/01 at Clause4.3(a) Page 2 of 7 HC-NIC Page 2 of 7 Created On Sat Jun 11 02:27:05 IST 2016 O/TAXAP/207/2016 ORDER
(ii) to the agreement. On perusal of this clause, it is seen that the sum of commission will be 1% of the annual cost of gas purchased by GGCL at the ceiling prices there under. Vide various opportunities, therefore, the assessee was requested to clarify the ceiling price. The assessee, vide reply dated 7/ 11/06 has submitted that the ceiling price is Rs.7. However, no other evidences to substantiate the ceiling price have been submitted by the assessee despite requests.
Under the circumstances, it is difficult to believe as to how the withdrawal of the stand already taken in the statement of income is made. It is also not understood as to how these amounts are shown under the head purchase when title like "guarantee/commission" have been attached to these amounts. In the absence of clearcut details, despite so many requests, it is not clear as to what term the amount so shown be given during the assessment. In View of these, the stand taken by the assessee for withdrawal without filling revised return of income, is hereby rejected and amount of Rs. 1,11,330/ as discussed above vide para4 is added to the total income accordingly."
3. The assessee carried the matter in appeal. The appellate Commissioner also confirmed the view of CIT(Appeals) and concluded as under :
"6. On consideration of the above facts of the case and the submissions of the Id. A.R. , as the appellant has not filed revised return claiming the above expenses and has filed a simple letter before the Assessing Officer and further the full facts have not been placed before the A.O. and details and evidences have not been filed before the AO and further I find from whatever details have been filed before me the necessity of incurring the expenses is not established and also it is not established that services have been rendered by the payees, the claims made by the Page 3 of 7 HC-NIC Page 3 of 7 Created On Sat Jun 11 02:27:05 IST 2016 O/TAXAP/207/2016 ORDER appellant are dismissed. Further the addition of Rs.1,11,330/ made by the Assessing Officer is found to be proper and so the same is upheld."
4. The assessee carried the matter in further appeal before the Tribunal. The Tribunal allowed the appeal and observed as under :
"We find that the contention of the assesses is that the expenditure was required to be incurred under a contract, therefore being a contractual liability, the assesses was required to make the payment of commission as per the terms of the agreement. The liability of the expenditure is not disputed and the expenditure has been disallowed on the basis that the details were not available before the authorities below. Under these facts of the case and taking a note of the fact that the assessee has produced copies of various agreements relating to the payment of commission were required to be paid by the assessee, we are of the considered view that the AO should verify the evidences nature of services received by the assessee; Thus, grounds raised in this appeal are restored to file of A0 for verification and the appeal of the assessee for AY 200405 is treated as allowed hut for statistical purposes."
5. Before us the Revenue has raised a single issue namely, of the Tribunal entertaining the claim when assessee having made such a claim in the original return and without filing revised return. In short, case of the Revenue was confined to the contention that the assessee without filing a revised return could not have made such a claim and the Tribunal therefore, ought not to have accepted the same.
6. We may recall that the Assessing Officer had not rejected the claim on this ground. It was CIT(Appeals) who along side confirming the view of Assessing Officer on merits had Page 4 of 7 HC-NIC Page 4 of 7 Created On Sat Jun 11 02:27:05 IST 2016 O/TAXAP/207/2016 ORDER pressed this issue in service referring to the decision of Supreme Court in case of Goetz (India) Ltd. v, CIT reported in (2006) 284 ITR 323(SC). The Tribunal after rejecting such a contention held that the assessee was entitled to claim of expenditure but placed the matter back before the Assessing Officer for verification of records.
7. It is true that in Goetz (India) Ltd.(supra), the Supreme Court held that the Assessing Officer cannot entertain a fresh claim without assessee filing revised return. However, in the same breath, the Supreme Court also held that such limitation would not apply to the appellate Commissioner. This is how judgement of Supreme Court in case of National Thermal Power Company Ltd. v. CIT reported in (1998) 229 ITR 383 was distinguished. Division Bench of this Court in case of Commissioner of Incometax v. Mitesh Implex reported in (2014) 367 ITR 85(Guj) had occasion to consider whether CIT(Appeals) or the Tribunal can entertain a new ground or contention for the first time. In this context, after referring to the decisions of Supreme Court in case of Goetz (India) Ltd.(supra) and National Thermal Power Company Ltd.(supra), it was observed as under :
"38. It thus becomes clear that the decision of the Supreme Court in the case of Goetze (India) Ltd. vs. Commissioner of Incometax (supra) is confined to the powers of the assessing officer and accepting a claim without revised return. This is what Supreme Court observed in the said judgment while distinguishing the judgment in the case of National Thermal Power Co. Ltd. vs. Commissioner of Incometax (supra) and that is how various High Courts have viewed the dictum of the decision in the case of Page 5 of 7 HC-NIC Page 5 of 7 Created On Sat Jun 11 02:27:05 IST 2016 O/TAXAP/207/2016 ORDER Goetze (India) Ltd. vs. Commissioner of Incometax (supra). When it comes to the power of Appellate Commissioner or the Tribunal, the Courts have recognized their jurisdiction to entertain a new ground or a legal contention. A ground would have a reference to an argument touching a question of fact or a question of law or mixed question of law or facts. A legal contention would ordinarily be a pure question of law without raising any dispute about the facts. Not only such additional ground or contention, the Courts have also, as noted above, recognized the powers of the Appellate Commissioner and the Tribunal to entertain a new claim for the first time though not made before the assessing officer. Income Tax proceedings are not strictly speaking adversarial in nature and the intention of the Revenue would be to tax real income.
39. This is primarily on the premise that if a claim though available in law is not made either inadvertently or on account of erroneous belief of complex legal position, such claim cannot be shut out for all times to come,merely because it is raised for the first time before the appellate authority without resorting to revising the return before the assessing officer.
40. Therefore, any ground, legal contention or even a claim would be permissible to be raised for the first time before the appellate authority or the Tribunal when facts necessary to examine such ground, contention or claim are already on record. In such a case the situation would be akin to allowing a pure question of law to be raised at any stage of the proceedings. This is precisely what has happened in the present case. The Appellate Commissioner and the Tribunal did not need to nor did they travel beyond the materials already on record, in order to examine the claims of the assessees for deductions under section 80IB and 80HHC of the Act."
8. We may recall in the present case, the assessee had in the returns filed, appended a note suggesting that the Page 6 of 7 HC-NIC Page 6 of 7 Created On Sat Jun 11 02:27:05 IST 2016 O/TAXAP/207/2016 ORDER commission expenditure is not being currently claimed but would be claimed after actual payment. During the course of assessment, the assessee however, changed its position and sought to raise such a claim. The Assessing Officer did not reject the claim on the ground that no revised return was filed. In any case, when the material was already on record, the CIT(Appeals) and the Tribunal could have entertained such a claim.
9. Under the circumstances, we do not see any reason to interfere with the view of the Tribunal. Tax appeals are dismissed.
(AKIL KURESHI, J.) (A.J. SHASTRI, J.) raghu Page 7 of 7 HC-NIC Page 7 of 7 Created On Sat Jun 11 02:27:05 IST 2016