BASP CHEMICALS PRODUCT LTD,MUMBAI vs. DCIT CC 2(3), MUMBAI

Per Manoj Kumar Aggarwal (Accountant Member) 1. Aforesaid appeal by assessee for Assessment Year [AY] 2013-14 contest the order of the Ld. Commissioner of Income-Tax (Appeals)-48

BASP Chemical Product Ltd. Assessment Year: 2013-14 dealers had not paid the sales tax collected from the assessee to the sales tax department and the whereabouts of these parties was not known and Maharashtra VAT department had declared these dealers as Hawala Dealers and publish their name on the MVAT website though the assessee claimed that the transactions were genuine. Therefore, it was then decided to claim the sales tax payment as an expenditure in the impugned AY u/s 43B. 2.3 Similarly, the payment of Rs.253.18 Lacs paid by the assessee during AY 2013-14 was claimed as an expenditure during impugned AY. Lastly, similar payment made before due date of filing of return of income u/s 139(1) amounting to Rs.224.34 Lacs was claimed as an expenditure during impugned AY. 2.4 It was submitted that said liability arose out of goods purchased by the assessee from the defaulting dealers, who failed to pay the said liability and therefore, the liabilities pertained to business operations only. The proof of payment was also submitted during the assessment proceedings. Finally, it was also submitted that the payment made by the assessee was covered u/s 43B of the Act and allowable as a business expenditure in terms of CBDT Circular Nos. 496/25.09.1987 & 674/29.12.1993. 2.5 However, not convinced, Ld. AO opined that in terms of Section 43B, the deduction was to be allowed only in the year in which the sum was actually paid by the assessee and therefore, payment made in AY 2012-13 could not be allowed in impugned AY particularly in view of the fact that the assessee did not prove that the deduction of the same was not claimed in AY 2012-13. Therefore, the deduction of Rs.151.79 Lacs

BASP Chemical Product Ltd. Assessment Year: 2013-14 was denied to the assessee. The deduction of Rs.224.34 Lacs was also denied on the premise that liability arose on trading of goods purchased in FY 2013-14 and therefore, the same could not be allowed in AY 2013- 14. However, the deduction of Rs.253.18 Lacs was allowed to the assessee. Accordingly, the aggregate deduction as denied to the assessee in the aforesaid manner amounted to Rs.376.14 Lacs. 2.6 Aggrieved, the assessee agitated the same without any success before first appellate authority vide impugned order dated 27/09/2017 wherein the stand of Ld. AO got confirmed. Aggrieved, the assessee is in further appeal before us. 3.1 Explaining the nature of payment and drawing our attention to the submissions as made before first appellate authority, the Ld. Authorized Representative for Assessee [AR], Shri Suchek Anchaliya, submitted that the payment of Rs.151.79 Lacs was made in AY 2012-13 and the same was reflected as Temporary Advances in the Balance Sheet under the assumption that the assessee would claim the refund of sales tax payment. However, during impugned AY, it was realized that some of the dealers from whom purchases were made by the assessee, had not paid sales tax collected from the assessee to the Sales Tax Department and therefore, the assessee became illegible to claim input credit of VAT and hence, the aforesaid payment crystalized during impugned AY which was allowable u/s 37(1) of the Act. Our attention has been drawn to the submissions made, in this regard, during first appellate proceedings. Our attention has further been drawn to Schedule-6 of the financial statements of earlier AY 2012-13 to submit that the deduction of the same was never claimed by the assessee which is self-evidentiary from BASP Chemical Product Ltd. Assessment Year: 2013-14 the fact that the assessee had claimed deduction only to the extent of Rs.31.82 Lacs in that year. 3.2 So far as the deduction of Rs.224.34 Lacs is concerned, our attention is drawn to the fact the aforesaid payment, in fact, pertained to earlier years and lower authorities proceeded on wrong assumption that the payment arose from trading of goods purchased in FY 2013-14, which was not the case. The attention has been drawn to the various notices for payment of tax due according to a return under Section 20 of the Maharashtra Value Added Tax Act, 2002 raised by Ld. Assistant Commissioner of Sales Tax directing the assessee to pay the demand for earlier years starting from 2005-06 to 2011-12. Since the payment has been made before due date of filing of return of income and therefore, the same was allowable u/s 43B in terms of decision of Hon’ble Apex Court rendered in Allied Motors (P) Ltd. Vs. CIT [224 ITR 677]. 3.3 Per Contra, Ld. DR submitted that the aforesaid deduction was not allowable to the assessee either u/s 43B or u/s 37(1) since the expenditure should have either been paid in FY 2012-13 or belong to FY 2012-13 and paid before due date of filing of return of income u/s 139(1). Since none of the condition is being satisfied by the assessee, the payments did not qualify for deduction in impugned AY.

Sd/- Sd/- (Ravish Sood) (Manoj Kumar Aggarwal) �ाियक सद� / Judicial Member लेखा सद� / Accountant Member मुंबई Mumbai; िदनांक Dated : 23/04/2019 Sr. PS Thirumalesh/Sr.PS Jaisy Varghese आदेशकी�ितिलिपअ�ेिषत/Copy of the Order forwarded to : अपीलाथ�/ The Appellant 1. ��थ�/ The Respondent 2. आयकरआयु�(अपील) / The CIT(A) 3. आयकरआयु�/ CIT– concerned 4. िवभागीय�ितिनिध, आयकरअपीलीयअिधकरण, मुंबई/ DR, ITAT, Mumbai 5. गाड�फाईल / Guard File 6. आदेशानुसार/ BY ORDER,