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Income Tax Appellate Tribunal, “C” BENCH : KOLKATA
Before: Hon’ble Shri S.S. Godara, JM & Shri M.Balaganesh, AM ]
ORDER Per M.Balaganesh, AM
This appeal by the Revenue arises out of the order of the Learned Commissioner of Income Tax(Appeals)-10, Kolkata [in short the ld CIT(A)] in Appeal No. 377/CIT(A)- 10/Cir-5/13-14/2014-15/Kol dated 02.09.2016 against the order passed by the DCIT, Circle-5, Kolkata [ in short the ld AO] under section 143(3) of the Income Tax Act, 1961 (in short “the Act”) dated 22.03.2013 for the Assessment Year 2010-11.
The first issue to be decided in this appeal is as to whether the Ld. CIT(A) was justified in deleting the disallowance made in the sum of Rs. 13,42,617/- towards prior period expense, in the facts and circumstances of the case.
M/s Somani Ceramics Ltd. A.Yr. 2010-11 3. The brief facts of this issue is that the assessee is a limited company engaged in the manufacturing and trading of Ceramic tiles and allied products. The return of income for the assessment year 2010-11 was filed by the assessee on 12.10.2010 declaring total income of Rs. 36,30,05,571/-. The assessee has debited prior period expenses of Rs. 13,42,617/- in its profit and loss account, which was disallowed by the ld. AO as expenses not relatable to the year under appeal. The assessee argued that the details of expenses of prior period items (net) of Rs. 13,42,617/- debited in the profit and loss account were reflected in the annexure to the tax audit report. These are regular business expenses and since this expenditure though relates to earlier period, it crystallized in the year under consideration and accordingly as per the disclosure mandatorily to be made in accordance with accounting standard (AS)-5 issued by ICAI, these items were shown separately as prior period expenses in the profit and loss account. It was also argued that this practice of separately disclosure of the prior period expenses was being carried out by the assessee in the past and the same has been allowed by the ld. AO in the earlier assessment proceedings. The assessee placed reliance on the decision of Hon’ble Delhi High Court in the case of CIT vs. Modipan Ltd. reported in 334 ITR 102. The Ld. CIT(A) having verified the entire details of each of the prior period items (net) debited to the profit and loss account observed that these expenses (net) had been crystallized only during the year under appeal. He also observed that the assessee has been consistently following this method of accounting and the same has been accepted by the revenue in the past. Accordingly, he held that there is no reason to taken a divergent view during the year under appeal on the impugned issue. He also placed reliance on the assessee’s own case for the assessment years 2011-12 and 2012-13 wherein similar addition was deleted by his predecessor. Accordingly, he deleted the disallowance and granted relief to the assessee. Aggrieved, the revenue is in appeal before us.
M/s Somani Ceramics Ltd. A.Yr. 2010-11 4. We have heard the rival submissions. We find that the Ld. CIT(A) duly examined the entire details of each of the items debited/credited under the head prior period expenses/income and had given a categorical finding that these expenses (net) had been crystallized during the year under appeal. This finding is not controverted by the revenue before us. It is not the case of the revenue that the subject mentioned expenses included in the prior period items are not meant for business purposes of the assessee. Accordingly, we do not find any justifiable reason to interfere in the order of the Ld. CIT(A) granting relief to the assessee in this regard. Accordingly, ground no. 1 raised by the revenue is dismissed.
The next ground to be decided in this appeal is as to whether the Ld. CIT(A) was justified in deleting the disallowance made on account of ESI Employees Contribution to the tune of Rs. 3,30,940/-, in the facts and circumstances of the case.
The ld. AO observed that the assessee had not remitted the employee’s contribution of ESI in the sum of Rs. 3,30,940/- within the due date prescribed u/s 36(1)(va) of the Act. Accordingly he treated the same as income u/s 2(24)(x) of the Act. The Ld. CIT(A) by following the decision of Hon’ble Jurisdictional High Court in the case of CIT vs. Vijayshree Ltd. reported in 43 Taxmann.com 396 (Calcutta High Court), wherein it was held that payment though made after the prescribed date but were made within the previous year are to be allowed as deduction. Accordingly, the Ld. CIT(A) granted relief to the assessee. Aggrieved, the revenue is in appeal before us.
We have heard rival submissions. We find that the Ld. CIT(A) had granted relief to the assessee by following the decision rendered by the Hon’ble Jurisdictional High Court supra. Hence we do not find any reason to interfere in his order in this regard. Accordingly, ground no.2 of the revenue is dismissed.
M/s Somani Ceramics Ltd. A.Yr. 2010-11 8. The last ground to be decided in this appeal is as to whether the Ld. CIT(A) was justified in deleting the addition of Rs. 54,66,960/- towards undisclosed investment in fixed asset, in the facts and circumstances of the case.
The brief facts of this issue is that the Ld.AO made an addition towards investment in immovable properties amounting to Rs. 54,66,960/- for want of explanation of source thereon. During the appellate proceedings, the assessee stated as under:
“The ld. AO has in fact not understood the matter of transfer of land and has unnecessary made the addition on this account. The assessee co. in fact had acquired a plot of land in GIDC from one M/s Sagar Trading Co. at a consideration of Rs. 65,00,000/-. A copy of transfer order and deed of assignment were duly filed. The co applied for the registration of such land in the name of the co. While registration the same the stamping authority valued the plot of land at Rs. 54,66,960/- and accordingly, charged the stamping value. The same was reported in AIR. Here the ld. AO simply added the above value without examining the details. The investment by the appellant co. is more than the addition made by the AO i.e. Rs. 65 lacs and the same are duly reflected in the accounts. There is nothing which can be said to have not been disclosed. The acquisition is from the own fund of the co and has been shown. Such addition is uncalled for and therefore be deleted.”
The Ld. CIT(A) requested the ld. AO to offer his comments vide letter dated 09.09.2014 in respect of submissions made by the assessee with regard to this addition. The Ld. CIT(A) observed that the ld. AO had not sent any report in the matter of verification that was required to be done. He observed that the assessee had already disclosed the investment in the subject mentioned property at Rs. 65 lacs in its balance sheet, whereas the value determined by the Stamp Valuation Authority for the purpose of levy of stamp duty was in Rs. 54,66,960/-. Since the assessee has disclosed more value than the value determined by the Stamp Valuation Authority, there is no case for the ld. AO to make any addition towards undisclosed investment in the property. Accordingly, he deleted the addition. Aggrieved the revenue is in appeal before us. 4
M/s Somani Ceramics Ltd. A.Yr. 2010-11 10. We have heard the rival submissions. From the facts narrated above, we do not find any merit in the ground raised by the revenue before us. We hold that the Ld. CIT(A) had rightly deleted the disallowance in this regard hence the ground no. 3 raised by the revenue is dismissed.
Ground no. 4 is general in nature and does not require any specific adjudication.
In the result, the appeal of the revenue is dismissed.
Order pronounced in the Court on 25.05.2018