ASST.COMMISSIONER OF INCOME TAX,BHILAI vs. M/S SHAKTI LIQUORS

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TAXC/51/2011HC ChhattisgarhCGHC01014227201020 March 2014Bench: HON'BLE THE CHIEF JUSTICE,HON'BLE SHRI JUSTICE PRASHANT KUMAR MISHRA4 pages
AI SummaryRemanded

What did the High Court hold?

The High Court held that the orders passed by the CIT(A) and the Tribunal were illegal and set them aside. The Court reasoned that regardless of whether the case was covered under section 43B, any expenditure cannot be allowed unless it was actually paid. There was no finding by the CIT(A) or the Tribunal that the entire amount of licence fee was paid at any time. Consequently, the case was remanded back to the CIT(A) for a fresh decision. The CIT(A) was directed to record findings on whether the licence fee is covered by section 43B and whether it has been actually paid. The appeal was allowed, and the matter was remanded.

What were the facts?

The Assessee, M/s. Shakti Liquors, engaged in the liquor business, filed its return for AY 2001-2002 showing a loss of ₹72,82,084. The Assessing Officer (AO) reduced this loss to ₹16,60,155. The Commissioner of Income Tax (CIT) revised the AO's order under section 263 and sent it back for re-decision. The AO then disallowed a licence fee deduction of ₹1,99,17,109, assessing total income at ₹1,42,49,860. The CIT (Appeals) allowed the Assessee's appeal, and the Income Tax Appellate Tribunal (ITAT) dismissed the Department's appeal against the CIT(A)'s order. The Department has filed this appeal before the High Court.

What were the issues?

1. Whether the ITAT, Bilaspur was justified in holding that the licence fees payable to the State Excise department is not disallowable u/s. 43B of the Income Tax Act, 1961 in a situation where the licence fees is not actually paid? The Assessee contended that the licence fee was not disallowable under section 43B as it was not actually paid. The Department argued that the AO held the case was covered by section 43B and disallowed the deduction due to lack of evidence of payment during the relevant previous year. The CIT-A allowed the deduction without recording a finding on whether the entire licence fee was paid, stating the case was not covered by section 43B. The Tribunal affirmed the CIT-A's findings.

Which sections of the Income-tax Act were involved?

Section 260-A,Section 143(3),Section 263,Section 43B

AI-generated summary — verify with the full judgment below

'i^, IN THE HIGH COURT OF JUDICATURE AT BILASPUR. CHHATTISGARH TAX CASE N0. S \ /^Olb VQ ll Lppellant Assistant Commissioner of Income Tax-1, Bhilai, Dist. Durg, Chhattisgarh Versus BetSpondent ¥-'t';'.'...^o •^,^^7 rs Shakti Liquors, Santrabadi, Station Road, Durg, Chhattisgarh 'tf,?.^-'-'-"" INCOME TAX APPEAL UNDER SECTION 260-A OF THE INCOME TAX, 1961

HIGH COURT OF CHHATTISGARH AT BILASPUR CORAM: HON'BLE SHRI YATINDRA SINGH, C.J. HON'BLE SHRI PRASHANT KUMAR MISHRA, J. TaxCaseNo.51 of 2011 APPELLANT : Assistant Commissioner of Income Tax-1, Bhilai. VERSUS RESPONDENT : M/s. Shakti Liquors. INCOME TAX APPEAL UNDER SECTION 260-A OF THE INCOME TAX ACT. 1961 Appearance: Shri Anand Dadariya, Advocate for the Appellant. JUDGEMENT (21stMarch,2014) 1. This is an appeal under section 260-A of the Income Tax Act, 1961 (the Act) by the tncome Tax Department (the Department) against the order dated 19.01.2010 passed by the Income Tax Appellate Tribunal, Bilaspur Bench, Bilaspur (the Tribunal) in respect of M/s. Shakti Liquors (the Assessee) for the Assessment Year (the AY) 2001-2002. THE FACTS 2. The Assessee wa^ engaged in liquor business and had filed its return on 31.01.2001 showing a loss of ^72,82,084/-. 3. An assessment under section 143(3) of the Act was done on 25.03.2004 by the Assessing Officer (the AO) reducing the loss to ^16,60,1557- only. 4. The Commissioner of Income Tax (the CIT) revised the order of the AO on 28.03.2006 under section 263 of the Act and sent back the case for re- decision. 5. The AO, by his order dated 28.12.2006, disallowed the deduction of ^1,99,17,1097-, the amount of licence fee deducted by the Assessee and assessed the total income at ^1,42,49,860/-.

^ '•-^^.^. J "-^. ^y ^in. "L 6. Aggrieved by the aforesaid order, the Assessee filed an appeal before the Commissioner Income Tax (Appeals), Raipur {the CIT(A)}. It was allowed on 10.10.2007. 7. Aggrieved by the aforesaid order, the Department filed an appeal before the Tribunal which was dismissed on 19.01.2010. Hence the present appeal by the Department. THE DECISION 8. We have heard counsel for the Department. No one has put up appearance on behalf of the Assesse and we have requested Shri Neelabh Dubey, Advocate to appear as a friend of the court on behalf of the Assessee. 9. This appeal was admitted on 24.11.2011 on the following question of law: Whether the ITAT, Bilaspur was justified in holding that the license fees payable to the State Excise department is not disallowable u/s. 43B of the Income Tax Act, 1961 in a situation were the license fees is not actually paid? / 10. The AO held that the case was covered by section 43B of the Act. As there was no evidence of payment during the relevant previous year, the deduction of licence fee could not be claimed, and as such, it was disallowed. 11. The CIT-A did not record any finding whether the entire licence fee was paid or not paid, yet it allowed the deduction on the ground that the case was not covered by section 43B of the Act. The Tribunal has affirmed the findings ofthe CIT-A. 12. There is no finding by the CIT-A or the Tribunal that the entire amount of licence fee was paid at any time. Whether the case is coveredunder section 43B of the Act or not; any expenditure cannot be allowed unless it was done. 13. In view of above, the orders passed by the CIT-A as well as the Tribunal are illegal and are set aside. The case is sent back to the CIT-A to pass a fresh order.

':^^^^ ...^" ..^. "' ^" ,, .•" ^•-.e\. ;' i';l] ^&^ 3 14. In view of the fact that we are remanding the case back to the CIT-A for fresh decision; the entire case is reopened. The appeal may be decided in accordance with law without being influenced by any observation or finding made in this judgement or in the earlier order passed by the CIT-A dated 10.10.2007 orthe orderofthe Tribunal dated 19.01.2010. 15. The CIT-A while deciding the appeal will also record its findings on the following points: '1. Whether the licence fee paid by the Assessee is covered by section 43B of the Act or not; 2. Whether the licence fee has been actually paid or not.' 16. With the aforesaid observations, this appeal is allowed and the matter is remandedto theCIT-A, Raipur. Sd/- Chief Justice Sd//- Prashant Kumar Mishra Judge Subbu

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