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Income Tax Appellate Tribunal, PUNE BENCH “A”, PUNE
Before: SHRI R.S. SYAL & SHRI VIKAS AWASTHY
आदेश / ORDER PER R.S.SYAL, VP : These two appeals by the Revenue relate to the assessment years 2006-07 & 2007-08. For the sake of convenience, we have clubbed them for disposal.
A.Y. 2006-07 :
First ground raised in this appeal is against the deletion of addition of Rs.70,59,534/- made by the Assessing Officer (AO) on account of “Prior year expenses”.
2 ITA Nos. 2649 & 2639/PUN/2016 Eagle Agro Farms Pvt. Ltd.,
Briefly stated, the facts of the case are that the assessee
suspended its business activity from the year 2003. Deduction
of Rs.70,59,534/- was claimed in the year under consideration
towards “Prior period expenses” under different heads. The
AO made disallowance without assigning any specific reasons
in respect of each of these items separately. The ld. CIT(A)
partly allowed the same, against which the Revenue has come
up in appeal before the Tribunal.
We have heard both the sides and perused the relevant
material on record. We take up the items of disallowances one
by one.
First item of disallowance is Rs.3,10,512/-, being,
payment of Provident Fund. The ld. CIT(A) recorded that the
deduction of provident fund was admissible on payment basis
in terms of section 43B of the Income-tax Act, 1961
(hereinafter also called `the Act’). He, therefore, directed the
AO to delete the same after ascertaining if the assessee
actually made the payment during the year. There is no
fallacy in the reasoning given by the ld. first appellate
authority. The impugned order is upheld on this score.
3 ITA Nos. 2649 & 2639/PUN/2016 Eagle Agro Farms Pvt. Ltd.,
The second item of disallowance is a sum of Rs.10 lakh
on account of “Export obligation payment”. The ld. CIT(A)
recorded that it was actually a payment towards property tax
payable to Talegaon Municipality on the properties owned by
the assessee. Such taxes were paid in two instalments of Rs.5
lakhs each on 31-01-2006 and 01-03-2006. The ld. CIT(A),
therefore, held that these taxes were allowable expenses on
payment basis u/s.43B. Nothing has been argued to controvert
the correctness of the finding given in the first appeal. We do
not find any reason to deviate from such a finding.
The next item of disallowance is payment of rent at
Rs.9,82,000/-. The ld. CIT(A) recorded, after considering the
remand report from the AO, that the assessee entered into an
agreement on 26-11-1008 with M/s Atma Hatcheries for
running their hatcheries plant. A Civil suit was filed by M/s
Atma Hatcheries against the assessee company and the
Hon’ble Civil Judge directed the assessee company to pay a
sum of Rs.16,59,740/-. An out of Court settlement for
Rs.9,82,000/- was made by M/s Shirdi Estate, a sister concern
of the assessee, who paid this sum vide Demand Draft dated
28-03-2006. Since the settlement took place in the year
4 ITA Nos. 2649 & 2639/PUN/2016 Eagle Agro Farms Pvt. Ltd.,
relevant to the assessment year under consideration and the
amount was actually paid, we hold that the ld. CIT(A) was
justified in treating this expenditure as not a prior period
expenses and hence, eligible for deduction.
The next amount is disallowance of interest of
Rs.43,93,619/-. M/s. Shirdi Estate, a sister concern of the
assessee, paid this sum to Bank of Maharashtra on 23-05-
2006 on behalf of the assessee. This led the ld. CIT(A) to hold
that the amount was to be allowed as deduction on payment
basis u/s.43B. Again, we are unable to find any infirmity in
the impugned order on this score. The same is, therefore,
countenanced.
The last component of the overall disallowance is
Rs.3,73,403/- made by the AO on account of interest charges.
On consideration of the remand report, the ld. CIT(A) allowed
deduction for a sum of Rs.1,91,000/- which was paid by the
assessee’s sister concern during the year on entering into a
MOU with M/s. M.J. Construction company and 3 other
entities for settlement of their dues including interest. Since
the interest was paid in the year under consideration, we hold
5 ITA Nos. 2649 & 2639/PUN/2016 Eagle Agro Farms Pvt. Ltd.,
that the view taken by the ld. CIT(A) in deleting the addition
to this extent is unexceptionable.
The second part of this disallowance at Rs.1,28,000/- has
already been sustained by the ld. CIT(A). As such, there can
be no cause of grievance to the Revenue against it.
The only other ground which survives in this appeal is
against the deletion of disallowance u/s.43B amounting to
Rs.28,88,148/-. The assessee company debited Rs.28.88 lakhs
as “Interest and bank charges”. The AO made disallowance
for the same as it was not paid. On perusal of the remand
report from the AO, the ld. CIT(A) noticed that payment of
interest and bank charges totaling to Rs.28.88 lakh was made
by the assessee’s sister concern within the previous year
relevant to the assessment year under consideration. In our
considered opinion, the ld. CIT(A) was right in deleting the
disallowance as it was a case of payment of interest by the
sister concern for and on behalf of the assessee during the year
in question.
6 ITA Nos. 2649 & 2639/PUN/2016 Eagle Agro Farms Pvt. Ltd.,
A.Y. 2007-08 :
The only issue raised in this appeal is against deletion of
disallowance of outstanding liabilities of Rs.1,68,95,875/-.
The AO observed that there was outstanding liability of
Rs.1.68 crore mainly to creditors and customers etc., which
was shown as outstanding since 31-03-2006. On being called
upon to explain as to why the amount should not be charged to
tax as “cessation of trading liability”, the assessee contended
that the same amount was voluntarily offered for taxation in
the return for the A.Y. 2009-10. Not convinced, the AO made
addition for the same, which came to be deleted in the first
appeal.
Having heard both the sides and gone through the
material available on record, it is seen that the AO has himself
stated that the amount was outstanding since 31-03-2006. We
fail to appreciate as to which event has happened in the year
under consideration resulting into the “cessation of liability”.
Further, since the assessee has himself admittedly offered this
amount for taxation in its return for the A.Y. 2009-10, as was
contended before the AO as well, we hold that the ld. CIT(A)
was justified in deleting the addition.
7 ITA Nos. 2649 & 2639/PUN/2016 Eagle Agro Farms Pvt. Ltd.,
In the result, both the appeals stand dismissed.
Order pronounced in the Open Court on 08th February, 2019.
Sd/- Sd/- (VIKAS AWASTHY) (R.S.SYAL) JUDICIAL MEMBER VICE PRESIDENT
पुणे Pune; �दनांक Dated : 08th February, 2019 सतीश
आदेश आदेश क� आदेश आदेश क� क� �ितिलिप क� �ितिलिप �ितिलिप अ�ेिषत �ितिलिप अ�ेिषत अ�ेिषत/Copy of the Order is forwarded to: अ�ेिषत
अपीलाथ� / The Appellant; 1. ��यथ� / The Respondent; 2. आयकर आयु�(अपील) / 3. The CIT (Appeals)-6, Pune 4. The Pr.CIT-5, Pune िवभागीय �ितिनिध, आयकर अपीलीय अिधकरण, पुणे “ए” / DR 5. ‘A’, ITAT, Pune; गाड� फाईल / Guard file. // True copy // 6.
आदेशानुसार आदेशानुसार/ BY ORDER, आदेशानुसार आदेशानुसार
// True Copy // Senior Private Secretary आयकर अपीलीय अिधकरण ,पुणे / ITAT, Pune
ITA Nos. 2649 & 2639/PUN/2016 Eagle Agro Farms Pvt. Ltd.,
Date 1. Draft dictated on 07-02-2019 Sr.PS 2. Draft placed before author 08-02-2019 Sr.PS 3. Draft proposed & placed JM before the second member 4. Draft discussed/approved JM by Second Member. 5. Approved Draft comes to Sr.PS the Sr.PS/PS 6. Kept for pronouncement on Sr.PS 7. Date of uploading order Sr.PS 8. File sent to the Bench Clerk Sr.PS 9. Date on which file goes to the Head Clerk 10. Date on which file goes to the A.R. 11. Date of dispatch of Order. *