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Income Tax Appellate Tribunal, “SMC” BENCH, AHMEDABAD
Before: Shri Pramod Kumar]
By way of this appeal, the Assessing Officer has challenged correctness of the order dated 26th May 2016 passed by the CIT(A)-1, Ahmedabad, in the matter of assessment under section 143(3) of the Income-tax Act, 1961, for the assessment year 2011-12.
In ground nos. 1 and 2, which we will take up together, the Assessing Officer has raised the following grievances:-
“(1) That the ld. CIT(A) erred in law and on facts in deleting the addition of Rs.36,02,450/- made on account of disallowance u/s 14A r.w.r. 8D of the Act. (2) That the ld. CIT(A) erred in law and on facts in deleting the addition of Rs.36,02,450/- made u/s 115JB of the Act.”
Learned representatives fairly agree that as there is no tax exempt income in the relevant previous year and in the light of Hon’ble jurisdictional High Court judgments in the cases of CIT vs. Corrtech Energy Pvt Ltd [(2015) 372 ITR 97 (Guj.)] and PCIT vs. Ambalal Sarabhai Enterprises (TA No.104 of 2017; judgment dated 24.03.2017), disallowances under section 14A cannot be made at all. Once disallowance under section 14A is held to be impermissible, there cannot be any occasion to make adjustment for the purpose of book profit under section 115JB either. On this view of the matter, I see no legally sustainable merits in the
SMC-ITA No. 2055/Ahd/2016 DCIT Vs. Acalmar Oils & Fats Ltd Assessment year: 2011-12 Page 2 of 4 grievances raised by the Assessing Officer. I confirm the order of the CIT(A), the relief given in respect of disallowance under section 14A, and decline to interfere in the matter.
Ground Nos. 1 & 2 are thus dismissed.
In ground no.3, the Assessing Officer has raised the following grievance:-
“(3) That the ld. CIT(A) erred in law and on facts in deleting the addition of Rs.1,40,433/- made on account of disallowance of bad debt claimed by the assessee.”
Briefly stated, the relevant material facts are like this. During the course of scrutiny assessment proceedings, the Assessing Officer noticed that out of total advances written off aggregating to Rs.1,40,433, and amount of Rs.1,03,129 was in the nature of advance to M/s. Impact Impex, and, accordingly, the same is not allowable as deduction under section 36(1)(vii). He, however, disallowed entire amount of Rs.1,40,433/- Aggrieved, assessee carried the matter in appeal before the CIT(A) who deleted the disallowance by relying upon Hon’ble Supreme Court’s judgment in the case of TRF Ltd vs. CIT (323 ITR 197). The Assessing Officer is aggrieved and is in appeal before me.
I have heard the rival contentions, perused the material on record and duly considered facts of the case in the light of applicable legal position.
I have noted that learned Departmental Representative’s short point is that all the requisite details were furnished for the first time before the CIT(A). There is no dispute that the amount involved is a very small amount vis-a-vis the scale of operations of business, that the transaction was in the course of business and that the amount was actually written off during the relevant previous year. In view of these discussions, as also bearing in mind entirety of the case, I approve learned CIT(A)’s order on this point as well, and decline to interfere in the matter.
Ground no.3 is thus dismissed.
During the course of scrutiny assessment proceedings, the Assessing Officer had noted that the assessee had claimed deduction for commission payments which actually pertained to a period prior to the relevant previous year. The Assessing Officer disallowed these commission payments, aggregating to Rs.1,58,046/-, by observing that “it is settled law that the income and the corresponding expenditure can be claimed in the year in which the same is incurred”. Aggrieved, assessee carried the matter in appeal before the CIT(A) who deleted the disallowance by observing as under:- “7.3 I have carefully considered the Assessment Order and the submission filed by the Appellant. The Assessing Officer has referred to Annexure-14 of written submission dated 23rd March, 2015 and observed that Appellant has claimed various commission expenditure pertaining to AY 2010-11 in current year. As expenditure is not crystallized in current Assessment Year, same cannot be allowed as deduction while computing total income and on that
SMC-ITA No. 2055/Ahd/2016 DCIT Vs. Acalmar Oils & Fats Ltd Assessment year: 2011-12 Page 3 of 4 ground, he made disallowance of Rs.19,77,075/-. On the other hand, Appellant has argued that looking to the total turnover of the Company as well as per materiality concept, expenditure debited is very insignificant hence it cannot be disallowed on the ground that it pertains to earlier Assessment Year. It is also argued that if such expenditure is pertaining to earlier Assessment Year, same may be allowed in those Assessment Years but entire exercise would be tax neutral hence no disallowance should be made. The Appellant in the paper book filed before undersigned has relied upon decision of Hon'ble Ahmedabad ITAT in the case of Adani Enterprise Limited V/s ACIT (ITA No. 1859/Ahd/2011) wherein similar disallowance was deleted.
On careful consideration of entire facts, it is observed that Assessing Officer has not doubted the genuineness of such expenditure and if such expenditure pertains to earlier year, it can be allowed as expenditure in said Assessment Year and even this exercise is tax neutral as held by Hon'ble Delhi High Court in the case of Vishnu Industrial Glasses and Shriram Piston & Rings Ltd. It is a/so observed that Hon'ble Ahmedabad ITAT in the case of Adani Enterprises Limited (ITA No. 1859/Ahd/2011, dated 1st January, 2016) has held as under:
"5. We have heard rival contentions. Page 13 to 16 of the paper book comprise all details of assessee's prior period expenditure amounting to Rs. 67,88,591/- falling under major heads of C&F, misc. expenditure, outward freight and travelling etc. Its ledger accounts reveals that the same have been recognized on various dates from 01-04-2005 to 31- 03-2006. There is hardly any dispute on genuineness aspect of the above stated expenditure heads. This is not the Revenue's case that the same is capital expenditure otherwise not allowable u/s. 37 of the Act. Both the lower authorities nowhere rebut assessee's case that it has been following past practice or the issue stands decided in its favour in earlier assessment years. Case law (1958) 33 ITR 681 (Bom) CIT vs. Nagri Mills Co. Ltd holds that when an assesses company is assessed at uniform rate, year of raising an expenditure claim is of no consequence, more particularly, when the same is allowable. Next judgment (2010) 194 TAXMANN 158 (Del) CIT vs. Jagatjit Industries accepts consistent accounting practice claiming identical expenditure in mercantile system of accounting wherein the necessary expenditure vouchers have been received after 31st March of the relevant accounting period. Case law (2014) 221 TAXMANN 80 (Bom) CIT vs. Mahanagar Gas Ltd supports assessee's case that prior period expenditure crystallize during the year on receipt of bills is allowable. This is followed by (2010) 328 ITR 17 (Del) CIT vs. Exxon Mobil Lubricants Pvt. Ltd upholding CIT(A)'s and tribunal's view that if the assesses admits prior period income which was not excluded while working out relevant previous year income, it is unreasonable to allow one part of prior period adjustment i.e. prior period expenditure. We come to Revenue's case law now. The first one is (2013) 33 taxmann.com 92 (Bang) Bearing Point Business Solutions vs. DCIT and (2013) 35 taxmann.com (Hyd) now Bharat Ventures Ltd vs. CIT deciding the issue in Revenue's favour. We find that these tribunal's
SMC-ITA No. 2055/Ahd/2016 DCIT Vs. Acalmar Oils & Fats Ltd Assessment year: 2011-12 Page 4 of 4 decisions do not confirm to different views of various hon'ble high courts hereinabove. Next case law (2013) 42 taxmann.com 142 (Guj) CIT vs. Gujarat Mineral Development Corporation is an admission order after framing substantial question of law wherein the main case is still pending for final disposal. We observe that this latter order does not settle a ratio. We take into account above stated discussions, relevant facts and case law to conclude that both the lower authorities have wrongly disallowed assessee's claim or prior period expenditure. The same stands deleted. This first substantive ground is treated as allowed." Following the above decisions of Hon'ble Ahmedabad ITAT which is directly on the issue, addition of Rs. 1,58,046/- made by Assessing Officer is deleted. This Ground of Appeal is allowed.” 12. The Assessing Officer is aggrieved of the relief so granted by the CIT(A) and is in appeal before me.
I have heard the rival contentions, perused the material on record and duly considered facts of the case in the light of applicable legal position.
I find that the issue in appeal, as rightly noted by the CIT(A), is covered by a decision of this Tribunal in the case of Adani Enterprises Ltd (ITA No.1859/Ahd/2011; order dated 01.01.2016) and the CIT(A) has merely followed the same. I see no infirmity in the action of the CIT(A) as such. I, therefore, approve the order of the CIT(A) on this point as well and decline to interfere in the matter.
Ground N.4 is also thus dismissed.
In the result, the appeal is dismissed. Pronounced in the open court today on the 14th February, 2018. Sd/-
Pramod Kumar (Accountant Member) Ahmedabad, the 14th day of February, 2018 **bt Copies to: (1) The appellant (2) The respondent (3) Commissioner (4) CIT(A) (5) Departmental Representative (6) Guard File By order TRUE COPY Assistant Registrar Income Tax Appellate Tribunal Ahmedabad benches, Ahmedabad