CONSTRUCTION CATALYSERS PRIVATE LIMITED,PUNE vs. DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE-1(1), PUNE, PUNE

ITAT-Pune Page 1 of 4

Briefly stated facts of the case are; 2.1 The return of income filed by the assessee company was initially processed u/s 143(1) of the Act by computing tax @30% payable on the total income determined by it after making certain additions/disallowance.

During the course of physical hearing, the Ld. AR submitted that, the appellant company is entitled to a concessional rate of taxation over normal rate of taxation as its turnover for the financial year 2015-16 did not exceed the ceiling prescribed. It is also claimed that, the turnover as reflected in the audited profit & loss account [hereinafter ‘P&L A/c’] of the appellant company is inclusive of written back of certain liabilities of ₹42,36,987/- which should have been excluded for the purpose of determining the eligibility qua turnover, as in terms Guidance Note issued by ICAI such written back liabilities do not partake the charter of turnover.

Per contra, without disputing the applicability of concessional rate of taxation in applicable cases, the Ld. DR Mr Murkunde stated that, the appellant being a company is following mercantile system of accounting; therefore determination of sales, turnover or gross receipts should be based on accruals irrespective of receipt. In the instant case, the appellant did fail to provide details and nature of the liabilities written back and the schedule 22 of Companies Audit Report is also silent on the point. Mr Murkunde further submits that, the words ‘Sales’, ‘Turnover’ and ‘Gross receipts’ are commercial terms and they should be understood in view of provisions of Section 145(1) of the Act, which provide that income chargeable under the head ‘Profits and gains of business or profession’ or ‘Income from other sources’ should be computed in accordance with system of accounting regularly employed by the assessee. The appellant itself shown revenue from other income ₹72,48,601/- which consist of written back liability of ₹42,36,987/- and the gross receipts/turnover are above 50 Crore. The guidelines use the word ‘turnover’ only but for the purpose of computation of tax @25% the requirement is that turnover/gross receipts should be less than 50 Crore FY 2015-16 and the written back liability naturally form part of income thus turnover/gross receipts, therefore, the Ld. CPC is right in applying tax rate of 30%. Adverting to para 5 placed at page 29 of the impugned order Mr Murkunde further submitted that, in an appeal before Ld. NFAC the appellant failed to prove the nature of liabilities claimed have been written ITAT-Pune Page 3 of 4

After hearing to rival contentions of both the parties; and subject to the provisions of rule 18 of ITAT, Rules 1963 perused material placed on record; and without going into the merits of the case, we note that, before Ld. NFAC the appellant failed to bring on records the details of liabilities written back so to vouch it as to whether they form part of turnover qua eligibility for application of concessional rate of taxation for the year under consideration, which resulted into dismissal of the claim. Faced with the situation, in the larger interest of justice, for this limited issue we deem it fit to remand the matter back to the file of Ld. NFAC with a direction to deal the issue in accordance with the law after according three effective hearings to the appellant to supports its claim.

In result, the appeal is ALLOWED FOR STATISTICAL PURPOSE. U/r 34 of ITAT Rules, order pronounced in open court on this Wednesday 08th day of November, 2023.