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Income Tax Appellate Tribunal, “A” BENCH, AHMEDABAD
Before: SHRI RAJPAL YADAV & SHRI PRADIP KUMAR KEDIA
आदेश/O R D E R
PER PRADIP KUMAR KEDIA - AM:
The captioned appeal has been filed at the instance of the Revenue against the order of the Commissioner of Income Tax (Appeals)-4, Vadodara (‘CIT(A)’ in short), dated 15.03.2018 arising in the assessment order dated 15.12.2017 passed by the Assessing (DCIT vs. M/s. Charotar Gas Sahakari Mandali Ltd.) A.Y. 2015-16 - 2 - Officer (AO) under s. 143(3) of the Income Tax Act, 1961 (the Act) concerning AY 2015-16.
2. The grounds of appeal raised by Revenue read hereunder:
“1.1 That in the facts and circumstances of the case, and in law, the Ld. C.I.T.(Appeals) erred in deleting the addition of Rs.7,92,41,327/- made on account of disallowance of deduction of debit note without appreciating the facts discussed in the assessment order. 1.2 That in the facts and circumstances of the case, and in law, the Ld. C.I.T.(Appeals) erred in deleting the addition of Rs.7,92,41,327/- made on account of disallowance of deduction of debit note without appreciating that the debit note was stated to have been issued on 18.11.2015, after the end of the financial year, and after the return was filed, and the assessee had not made any provision towards this expenditure, and had failed to demonstrate that the liability crystallized during the year under consideration.”
3. Briefly stated, the assessee is a co-operative society and engaged in providing CNG Gas and purchase and sale of natural gas to domestic and commercial consumers and earns commission on CNG. In the course of the scrutiny assessment, the AO observed that a revised return was filed by the assessee wherein deduction of Rs.7,92,41,327/- was claimed as expenses. To support such claim, it was contended on behalf of the assessee before the AO that as per terms and conditions with supplier GAIL Limited, the gas purchased for domestic customer is to be distributed to the domestic customers only. The purchase price of gas for domestic customer is less as compared to gas purchased for industrial customer. During the year, certain amount of gas purchased for domestic customer was sold to the industrial gas customer. The GAIL Limited worked out difference of gas sold to industrial customer out of gas purchased for domestic customer. Therefore, a debit note of Rs.7,92,41,327/- for gas purchase was issued on 18.11.2015. It was contended that the claim for revision in cost of gas pertains to F.Y. 2014-15 and therefore revised return is filed claiming increase in value of purchase of gas and consequent reduction of total income to the extent. It was contended (DCIT vs. M/s. Charotar Gas Sahakari Mandali Ltd.) A.Y. 2015-16 - 3 - that the enhancement of rate of cost of gas made by GAIL is in accordance with clause (a) of the agreement with GAIL.
4. The AO, however, did not find merit in the claim of the assessee. The AO observed that the accounts have been audited and return of income was filed. The debit note issued on 18.11.2015 falls in F.Y. 2015-16 relevant to AY 2016-17. The AO observed that the liability on account of debit note was not crystallized during the year under consideration and also no provision for this liability was made in the books. He accordingly disallowed the claim so made and added to same to the total income.
5. Aggrieved, the assessee preferred appeal before the CIT(A). The CIT(A) on consideration of facts and circumstances recorded his finding in favour of the assessee which is extracted hereunder:
“4.3. I have considered the submission of the Ld. Authorized Representative and order of the Assessing Officer. The A.O. has observed that certain amount of gas purchased for domestic customer was sold to the industrial gas customer. The GAIL Limited worked out difference of gas sold to industrial customer out of gas purchased for domestic customer. Therefore, a debit note of Rs.7,92,41,327/- for gas purchase was issued on 18.11.2015 it pertains to F.Y.2014-15 and therefore revised return is filed claimed increase in value of purchased of gas and reduced total income to the extent. The A.R. of the appellant vehemently argued that (i) Quantity of domestic gas purchased sold to industrial customer realizing higher price for which GAIL Ltd. issued debit note affecting increase in cost of purchase equivalent to Rs. 7,92,41,327/- on dtd. 18.11.2015. (ii) Board of directors approved and entry made in books of accounts in F.Y.2015-16 relevant to A.Y.2016- 17. From the copy of return, it transpiration that debit note of Rs.7,92,41,327/- for gas purchase was issued on dtd.18.11.2015 which is pertaining to F.Y. 2014-15 and therefore revised return is filed claiming increase in value of purchase of gas and reduced total income to the extent. The enhancement of rate of cost of gas made by GAIL Ltd. is in accordance with clause (a) of the agreement with GAIL Ltd. Looking to the facts and circumstances of the present case, the action of A.O. is unwarranted. Accordingly, the Assessing Officer is directed to delete the addition. Thus, this ground of appeal is allowed.”
6. Aggrieved by the relief granted by the CIT(A), the AO is in appeal before the Tribunal. (DCIT vs. M/s. Charotar Gas Sahakari Mandali Ltd.) A.Y. 2015-16 - 4 - 7. We have carefully perused the rival submissions on the issue. We find no error in the process of reasoning adopted by the CIT(A) as noted above. It was inter alia noted by the CIT(A) that debit note issued by supplier (GAIL) for purchase relates to F.Y. 2014-15 on account of difference in gas price. Thus, without taking into account, the extra price payable to the gas supplier, the true and fair state of affairs of the assessee society cannot be deduced. Hence, we see no reason to interfere with the tax neutral claim made by the assessee. It is not the case of the Revenue that expenditure is not bonafide and not allowable at all. The expenditure, in view of the AO, is probably allowable in the next assessment year i.e. AY 2016-17 with which we do not concur. The action of the CIT(A) is completely rational and thus endorsed.
8. In the result, the appeal of the Revenue is dismissed.
This Order pronounced on 04/03/2021
Sd/- Sd/- (RAJPAL YADAV) (PRADIP KUMAR KEDIA) VICE PRESIDENT ACCOUNTANT MEMBER Ahmedabad: Dated 04/03/2021 True Copy S. K. SINHA आदेश क� ��त�ल�प अ�े�षत / Copy of Order Forwarded to:- 1. राज�व / Revenue 2. आवेदक / Assessee 3. संबं�धत आयकर आयु�त / Concerned CIT 4. आयकर आयु�त- अपील / CIT (A) 5. �वभागीय ��त�न�ध, आयकर अपील�य अ�धकरण, अहमदाबाद / DR, ITAT, Ahmedabad 6. गाड� फाइल / Guard file. By order/आदेश से,
उप/सहायक पंजीकार आयकर अपील�य अ�धकरण, अहमदाबाद ।
आयकर अपील�य अ�धकरण, अहमदाबाद �यायपीठ ‘A’ अहमदाबाद । IN THE INCOME TAX APPELLATE TRIBUNAL “A” BENCH, AHMEDABAD (Convened through Virtual Court) BEFORE SHRI RAJPAL YADAV, VICE PRESIDENT AND SHRI PRADIP KUMAR KEDIA, ACCOUNTANT MEMBER
आयकर अपील सं./ (�नधा�रण वष� / Assessment Year : 2015-16)
The Deputy बनाम/ M/s. Charotar Gas Commissioner of Income- Sahakari Mandali Vs. tax Limited Anand Circle, 204, 3rd GAS House, 11, GIDC Floor, S. P. Patel Estate, Anand Sojitra Complex, Near Old C. K. Road, Anand-388121 Hall, Mayfair Road, Anand - 388001 �थायी लेखा सं./जीआइआर सं./PAN/GIR No. : AAATC1831F .. (अपीलाथ� /Appellant) (��यथ� / Respondent)
अपीलाथ� ओर से /Appellant by : Shri Virendra Ojha, CIT.DR Smt. Arti N. Shah, A.R. ��यथ� क� ओर से / Respondent by : सुनवाई क� तार�ख / Date of 10/02/2021 Hearing घोषणा क� तार�ख /Date of 04/03/2021 Pronouncement
आदेश/O R D E R
PER PRADIP KUMAR KEDIA - AM:
The captioned appeal has been filed at the instance of the Revenue against the order of the Commissioner of Income Tax (Appeals)-4, Vadodara (‘CIT(A)’ in short), dated 15.03.2018 arising in the assessment order dated 15.12.2017 passed by the Assessing (DCIT vs. M/s. Charotar Gas Sahakari Mandali Ltd.) A.Y. 2015-16 - 2 - Officer (AO) under s. 143(3) of the Income Tax Act, 1961 (the Act) concerning AY 2015-16.
The grounds of appeal raised by Revenue read hereunder:
“1.1 That in the facts and circumstances of the case, and in law, the Ld. C.I.T.(Appeals) erred in deleting the addition of Rs.7,92,41,327/- made on account of disallowance of deduction of debit note without appreciating the facts discussed in the assessment order. 1.2 That in the facts and circumstances of the case, and in law, the Ld. C.I.T.(Appeals) erred in deleting the addition of Rs.7,92,41,327/- made on account of disallowance of deduction of debit note without appreciating that the debit note was stated to have been issued on 18.11.2015, after the end of the financial year, and after the return was filed, and the assessee had not made any provision towards this expenditure, and had failed to demonstrate that the liability crystallized during the year under consideration.”
Briefly stated, the assessee is a co-operative society and engaged in providing CNG Gas and purchase and sale of natural gas to domestic and commercial consumers and earns commission on CNG. In the course of the scrutiny assessment, the AO observed that a revised return was filed by the assessee wherein deduction of Rs.7,92,41,327/- was claimed as expenses. To support such claim, it was contended on behalf of the assessee before the AO that as per terms and conditions with supplier GAIL Limited, the gas purchased for domestic customer is to be distributed to the domestic customers only. The purchase price of gas for domestic customer is less as compared to gas purchased for industrial customer. During the year, certain amount of gas purchased for domestic customer was sold to the industrial gas customer. The GAIL Limited worked out difference of gas sold to industrial customer out of gas purchased for domestic customer. Therefore, a debit note of Rs.7,92,41,327/- for gas purchase was issued on 18.11.2015. It was contended that the claim for revision in cost of gas pertains to F.Y. 2014-15 and therefore revised return is filed claiming increase in value of purchase of gas and consequent reduction of total income to the extent. It was contended (DCIT vs. M/s. Charotar Gas Sahakari Mandali Ltd.) A.Y. 2015-16 - 3 - that the enhancement of rate of cost of gas made by GAIL is in accordance with clause (a) of the agreement with GAIL.
The AO, however, did not find merit in the claim of the assessee. The AO observed that the accounts have been audited and return of income was filed. The debit note issued on 18.11.2015 falls in F.Y. 2015-16 relevant to AY 2016-17. The AO observed that the liability on account of debit note was not crystallized during the year under consideration and also no provision for this liability was made in the books. He accordingly disallowed the claim so made and added to same to the total income.
Aggrieved, the assessee preferred appeal before the CIT(A). The CIT(A) on consideration of facts and circumstances recorded his finding in favour of the assessee which is extracted hereunder:
“4.3. I have considered the submission of the Ld. Authorized Representative and order of the Assessing Officer. The A.O. has observed that certain amount of gas purchased for domestic customer was sold to the industrial gas customer. The GAIL Limited worked out difference of gas sold to industrial customer out of gas purchased for domestic customer. Therefore, a debit note of Rs.7,92,41,327/- for gas purchase was issued on 18.11.2015 it pertains to F.Y.2014-15 and therefore revised return is filed claimed increase in value of purchased of gas and reduced total income to the extent. The A.R. of the appellant vehemently argued that (i) Quantity of domestic gas purchased sold to industrial customer realizing higher price for which GAIL Ltd. issued debit note affecting increase in cost of purchase equivalent to Rs. 7,92,41,327/- on dtd. 18.11.2015. (ii) Board of directors approved and entry made in books of accounts in F.Y.2015-16 relevant to A.Y.2016- 17. From the copy of return, it transpiration that debit note of Rs.7,92,41,327/- for gas purchase was issued on dtd.18.11.2015 which is pertaining to F.Y. 2014-15 and therefore revised return is filed claiming increase in value of purchase of gas and reduced total income to the extent. The enhancement of rate of cost of gas made by GAIL Ltd. is in accordance with clause (a) of the agreement with GAIL Ltd. Looking to the facts and circumstances of the present case, the action of A.O. is unwarranted. Accordingly, the Assessing Officer is directed to delete the addition. Thus, this ground of appeal is allowed.”
6. Aggrieved by the relief granted by the CIT(A), the AO is in appeal before the Tribunal. (DCIT vs. M/s. Charotar Gas Sahakari Mandali Ltd.) A.Y. 2015-16 - 4 - 7. We have carefully perused the rival submissions on the issue. We find no error in the process of reasoning adopted by the CIT(A) as noted above. It was inter alia noted by the CIT(A) that debit note issued by supplier (GAIL) for purchase relates to F.Y. 2014-15 on account of difference in gas price. Thus, without taking into account, the extra price payable to the gas supplier, the true and fair state of affairs of the assessee society cannot be deduced. Hence, we see no reason to interfere with the tax neutral claim made by the assessee. It is not the case of the Revenue that expenditure is not bonafide and not allowable at all. The expenditure, in view of the AO, is probably allowable in the next assessment year i.e. AY 2016-17 with which we do not concur. The action of the CIT(A) is completely rational and thus endorsed.
In the result, the appeal of the Revenue is dismissed.
This Order pronounced on 04/03/2021
Sd/- Sd/- (RAJPAL YADAV) (PRADIP KUMAR KEDIA) VICE PRESIDENT ACCOUNTANT MEMBER Ahmedabad: Dated 04/03/2021 True Copy S. K. SINHA आदेश क� ��त�ल�प अ�े�षत / Copy of Order Forwarded to:- 1. राज�व / Revenue 2. आवेदक / Assessee 3. संबं�धत आयकर आयु�त / Concerned CIT 4. आयकर आयु�त- अपील / CIT (A) 5. �वभागीय ��त�न�ध, आयकर अपील�य अ�धकरण, अहमदाबाद / DR, ITAT, Ahmedabad 6. गाड� फाइल / Guard file. By order/आदेश से,
उप/सहायक पंजीकार आयकर अपील�य अ�धकरण, अहमदाबाद ।