DEPUTY COMMISSIONER OF INCOME TAX vs. EAGLE AGRO FARMS PVT. LTD,, PUNE

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 :

2 ITA Nos. 2649 & 2639/PUN/2016 Eagle Agro Farms Pvt. Ltd.,

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.

material on record. We take up the items of disallowances one

by one.

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.,

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.

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.

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.

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.

already been sustained by the ld. CIT(A). As such, there can

be no cause of grievance to the Revenue against it.

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 :

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.

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.,

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. *