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Income Tax Appellate Tribunal, DELHI BENCH: ‘B’ NEW DELHI
Before: SHRI SHAMIM YAHYA & SHRI YOGESH KUMAR US
This appeal is filed by the assessee for assessment year 2014-15 against the order of the ld. Commissioner of Income Tax (Appeals)–3, Laxmi Nagar, dated 20/07/2018.
The assessee is a State Government Corporation, engaged in the activities of Industrial Development of National Capital Region of Delhi. The assessment proceedings initiated u/s 143(3) of the Income Tax Act against the assessee and assessment order came to be passed on 30/12/2006 against the ACIT Vs. Delhi State Industrial & Infrastructual assessee by assessing the income of the assessee at Rs. 171,99,15,937/- under normal provisions and adjusted book profit of Rs. 149,71,32,000/- u/s 115JB of the Act. As against the assessment order, the assessee preferred an Appeal before the CIT(A). The Ld.CIT(A) has allowed the Appeal filed by the assessee vide order dated 20/07/2018.
Aggrieved by the order dated 20/07/2018, the Revenue has preferred the present Appeal on following grounds:-
1. “Ld. Commissioner of Income-tax(Appeals) erred in law allowing appeal of the assessee and directing to delete the addition of Rs. 6,74,00,000/- made by the A.O. on account of unclaimed & unpaid interest shown as Current Liabilities and other Long Term Liabilities.
2. Ld. Commissioner of Income-tax(Appeals) erred in law allowing appeal of the assessee and directing to delete the addition of Rs. 10,78,70,832/- made by the A.O. on account of prior period expenses.
3. The appellant craves leave to modify, add or forego any ground(s) of appeal at any time before or during the hearing of this appeal”.
5. The Ld. DR vehemently submitted that, the CIT(A) has erred in law allowing the Appeal of the assessee and in directing to delete the addition of Rs. 6,74,00,000/- made by the A.O on account of unclaimed and unpaid interest shown as current liabilities and other long term liabilities. Further submitted that, the Ld.CIT(A) committed a grave error in directing to delete the addition of Rs. 10,74,70,832/- made by the A.O on account of prior period expenses. The Ld. DR has relied on the assessment order and prayed for interference by this Tribunal.
ACIT Vs. Delhi State Industrial & Infrastructual
Per contra, the Ld. Counsel for the assessee submitted that, the assessee has already offered the old outstanding liabilities aggregate to Rs. 18.51 lacks in the subsequent Assessment Years i.e. Assessment Year 2015-16. Therefore, submitted that, there is no basis for making addition in the Assessment Year 2014-15. Further submitted that, the said income has already been subjected to tax in the Assessment Year 2015-16, therefore, the said disallowance in the year 2014-15, will amounts to double taxation. The Ld. Counsel further submitted that, he has produced financial statement for Assessment Year 2019-20 along with the paper book, which makes it clear that the State Government has recovered the said amount in the subsequent years from the assessee and the amount due as on the date is 4.48 crores only. The recovery of the amount by Government demonstrates that the amount provided in the books of the assessee is payable to the Government and Government has not waved off its right to receive the amount from the assessee.
The Ld. Counsel for the assessee addressing on Ground No. 2 submitted that, the similar addition made for the Assessment Year 2005-06 and 2011-12 have been deleted by the CIT(A) which has reached the Tribunal and the Tribunal has decided the said issue in favour of the assessee in and ITA No. 6353/Del/2014, A.Y 2011-12).
We have heard parties, perused the material on record and gave our thoughtful consideration.
Ground No. 1 It is the case of the assessee is that, the assessee has already paid the old outstanding liabilities aggregating to Rs. 18.51 lacks in the subsequent years. Therefore, the disallowance for the year 2014-15 will amounts to double taxation. The Ld. Counsel has produced financial statement for the year 2019- 20, wherein an amount of Rs. 4.48 crore is the due. Since, the financial
ACIT Vs. Delhi State Industrial & Infrastructual statement for Financial Year 2019-20 was neither before A.O nor before the CIT(A), both the authorities could not examine the said contentions of the assessee. Therefore, we deem it fit to remand the Ground No. 1 to the file of Ld. A.O by admitting the financial statement for Financial Year 2019-20 produced by the assessee with a direction to A.O to examine the same as to whether the assessee has already offered the old outstanding liabilities in the subsequent years or not and the same is subject to tax or not and pass the order in accordance with law. Accordingly, we allow the Ground No. 1 of the Revenue for statistical purpose.
Ground No. 2
The Ground No. 2 of the Revenue is in respect of deletion of addition of Rs. 10,78,70,832/- made by the A.O on account of prior period expenses. The identical issue involved in Ground No. 2 has been already decided by the Coordinate Bench of the Tribunal in for Assessment Year 2005-06 and also in ITA No. 6353/Del/2014 for Assessment Year 2011- 12. The relevant portion of the order for the Assessment Year 2005-06 is as under:-
We have heard rival submission and perused the material on record. The CIT(A) has categorically found that the impugned expenses were revenue in Assessment Year : 2005-2006 nature and same had crystallized in the current assessment year, when the designated authorities approved the said expenditure. It was also found by the CIT(A) that this system of amounting was followed by the assessee for the past assessment year, both in respect of income as well as expenses also. The relevant finding of the CIT(A) reads as follows:
ACIT Vs. Delhi State Industrial & Infrastructual
"Decision (at Page 12) I have carefully considered the facts of the case and submission of the appellant. The appellant is a Government of Delhi Undertaking and there is no dispute that appellant is following mercantile system of accounting. It was contented that the claim of prior period expenses is on the basis of liability crystallized during the year and as such the concept of prior period is not relevant particularly when the claim is in accordance with system of accounting being regularly followed by the appellant.
It was further submitted that the claim of income or expenses are accounted for on the basis of liability crystallized during the year and as such same is permissible deduction under the law. It was contended that in case of Government of Delhi Undertaking, income or expenses are accounted for as and when same are approved by designated authorities and same system is being followed in respect of income and expenses both. My attention was drawn to the details of prior period income and expenses as per schedule of the audited balance sheet as per which all these expenses are of revenue nature and correctness and eligibility of the claim has not been disputed even by the Assessing Officer as only ground of disallowance is that the claim is pertaining to prior period.
It is further noted that the Assessing Officer has only disallowed net claim of prior period expenses after adjusting prior period income and as such Assessing Officer himself has partially accepted claim of prior period expenses and disallowance is only in respect of net claim as per details given in schedule of the balance sheet. It has to be appreciated that in case of Government Undertakings, Assessment Year 2005-2006 there is a code of office management and system of supervision and regulation and as such it is not permissible to "book any income or expenses without proper
ACIT Vs. Delhi State Industrial & Infrastructual approval and recognization. There is a merit in the contention of the appellant that adjustment of prior period income and expenses are accounted for as and when income or liability is approved and crystallized. The reference to decision of ITAT in the case of Rites Ltd. is also relevant. Further, principle laid down by Delhi High Court in the case of CIT Vs. Exxon Mobil Lubricant Pvt. Ltd. 328 ITR 17 (Del.) and Gujarat High Court in the case of Saurashtra Cement & Chemical Industries vs. CIT 213 ITR 525 also support the claim of the appellant.
It is further noted that the claim of prior period expenses were accepted in the original assessment passed u/s. 143(3) and even in the impugned reassessment, the Assessing Officer has not disputed the correctness of the liability or the fact that same had crystallized during the year or that there is any change "in the system of accounting. In fact, the appellant company has positive income in the preceding subsequent years and as such there is no advantage to the appellant or any loss the revenue for claiming such expenes in the year under reference.
Taking into consideration, facts of the case, nature of the claim and past history of the case and relevant legal precedents, there is no legal or factual basis for any disallowance. Further, Assessing Officer has not made out any case for disallowance and only ground for reopening and consequential disallowance is on the basis of use of term prior period, which in itself is not a valid basis for disallowance when the claim is on the basis of liability crystallized during the year. As per the above discussion, there is no justification for disallowance of Rs.70,63,292/-........." (Page 13 of CIT(A).
ACIT Vs. Delhi State Industrial & Infrastructual
6. This finding of the CIT(A) has not been dispelled by the revenue by placing any material/document on record. Hence, we hold that the order of the CIT(A) on this issue is correct and in accordance with and we confirm the same. It is ordered accordingly.”
By respectfully following the above decision, we do not find any merit in the Revenue’s Ground No.2. Accordingly, dismiss the Ground No. 2 of the Revenue.
In the result, the appeal of the Revenue is allowed for statistical purpose.
Order pronounced in the open court on 26th July, 2022