Loading judgment…
No AI summary yet for this case.
Income Tax Appellate Tribunal, ‘C’BENCH,
Before: Shri J.Sudhakar Reddy & Shri S.S.Viswanethra Ravi
This appeal by the Revenue is against the order dt: 20-09- 2013 passed by the Commissioner of Income Tax (Appeals), XII, Kolkata for the assessment year 2006-07.
At the time of hearing it is noticed that neither the assessee nor its authorised representative was present nor there was any adjournment petition filed. Therefore, we proceed to hear the ld.DR and dispose of the appeal after perusing the material available on record.
The brief facts of the issue are that during the assessment proceedings the AO on perusal of TAR (Form No.3CD) as filed before him found that an amount of Rs.39.24 lacs and Rs. 11.87 lacs towards sales tax liability and VAT were not paid on or before the specified date. For non submission of any evidence or explanation for such payment, the AO by invoking the provisions of section 145A r.w.s 43B of the Act added the sum of Rs. 51,11,000/- (Rs.39.24 lacs + Rs.11.87 lacs) being outstanding sales tax and VAT liability to the total income of the assessee.
The assessee challenged the same before the CIT-A and contended that the impugned additions are contingent in nature and as such the provisions of section 43B of the Act is not applicable. The assessee also contended before him that the said liabilities were not shown in the balance sheet for the year ending as on 31-03-2006 and urged to delete the impugned addition as made by the AO.
The CIT-A after considering the submissions of assessee disposed of the issue by stating as under:- “5.2.5 Decision: I have carefully considered the facts of the case, the material placed on record and the arguments advanced by the A/R of the appellant. I have also considered the contents of the detailed remand report and perused the tax audit report, which was filed along with the return of income and the clarification given by the auditor that the information given in columns 21A(b) and 21B(b) of the tax audit report with regard to unpaid liability was a typographical error. I am afraid the Assessing Officer has not given though to the issue involved in this case. The case of the Assessing Officer is that since books of accounts and bills and vouchers were not produced for the purpose of verification whether sales- tax/VAT liability was debited in the profit and loss account. He has simply opined that if liability was taken into account, then the disallowance was justified and that even if the said liability has not been taken into account, the liability should be treated as unaccounted liability as the appellant could not give specific details either about the liabilities mentioned in the Tax Audit Report or the liabilities shown in the balance sheet for A.Y 2006-07. I am unable to subscribe to the view of the Assessing Officer. The appellant has furnished ample material to show that the sales-tax demand to the extent of Rs.17 lakhs was set aside. Explanation has also been given regarding the other part of 22 lakhs of the disputed demand. The clarification given by the auditor that it was due to mistake that the figure was shown as unpaid demand in col. 21A & 21B of the Tax Audit
Report conversely states that there was no unpaid liability to be disallowed under sec. 43B(a) of the Act. Section 43B of the Act in itself is not a provision providing for deduction of any item of expenditure which is otherwise not allowable under any of the provisions of the Act. The opening words of section 43B show that the section deals with deductions otherwise allowable under the provisions of the Act. The opening words of section 43B show that the section deals with deductions otherwise allowable under the provisions of the Act. The section only lays down the conditions for eligibility for deduction of certain allowances which are otherwise admissible under the Act. The scheme of the section is to allow the deductions only on payment basis, even though the assessee follows the mercantile system of accounting. It is an exception of section 145 in as much as even if the claim is an allowable deduction of the assessee based on the system of accounting followed, it will still be inadmissible under section 43B if it is not paid on or before the end of the relevant previous year or at least before the date of filing of return. Hence, section 43B is only supplementary to section 145 and it is only an additional condition for allowance of deductions otherwise admissible under the other provisions of the Act [ CIT v. Kerala Solvent Extractions Ltd. (2008) 306 ITR 54, 59 (Ker). When section 43B can be applied? In the case of A.W Figgis & Co. Ltd v. CIT (2002) 256 ITR 268, 272 (Cal)], it has been held that from a careful perusal of the provisions made in section 43B, it can be said that section 43B can be applied only when the tax or duty has been claimed as expenditure but the said tax or duty had not been paid. In that view of the matter, where, admittedly, the appellant has not claimed any amount by way of sales-tax as a deduction, the question of disallowing any such tax or duty under section 43B of the Act is totally misconceived. To put it differently, section 43B of the Act is not attracted at all when the assessee has not claimed any deduction of the amounts collected by it as the Central Sales Tax and the State Sales Tax [ CIT v. India Carbon Ltd. (2003) 262 ITR 327, 329(Gauh). In this case, the dispute is not in respect of the sales-tax/VAT collected by the appellant, but the dispute has been in respect of the demand raised by the Commercial tax Department. Section 43B could not be made applicable only in a case where any tax, duty, cess, etc., of the like nature are collected by an assessee, not paid to the account of Government entitled to such impost, and yet a deduction is claimed against taxable income [ CIT v. Dinesh Mills Ltd (2008) 302 ITR 181, 186 (Guj)/Deputy CIT v. Arvind Mills Ltd (2009) 314 ITR 251, 256 (Guj.). Even if it is held that the liabilities are disputed liabilities, in the light of the decisions in the case of CIT v. Central Provinces Manganese Ore Co. Ltd [ 1978] 112 ITR 734 (Bom.)/CIT v. Dalmia Dadri Cement Ltd [ 1992] 195 ITR 290(Delhi), a statutory liability of an assessee following the mercantile system, is allowable in the year in which it arises even though it is disputed by assessee. Similar is the case in respect of contingent liabilities in view of the ratio laid down by the Hon’ble Supreme Court in the case of Metal Box Co. of India Ltd. V. Their Workmen [ 1969] 73 ITR 53 (SC). In view of the facts of the case and the ratio laid down in the cases cited supra, I am of the opinion, that there was no justification for the disallowance of the disputed sales-tax/VAT liability of Rs.51,11,000/- under sec. 43B(a) of the IT Act, 1961. The impugned addition made by the AO is, therefore, deleted. Thus, this ground of appeal of the appellant is allowed.
The ld.DR submits that no books of account were filed before the AO. During the course of assessment proceedings the AO sought explanation from the assessee to produce evidence to show that the sales tax have been paid. The assessee did not produce anything before the AO. He relied on the order of the AO.
Heard the ld.DR and perused the material available on record. We find that the assessee did not claim the said sales tax and VAT as expenditure in the return and also did not claim any deduction in the return. Therefore, the order of the CIT-A deleting the disallowance being sales tax/VAT outstanding liabilities made u/s. 43B of the Act is justified. We uphold the same. Therefore, the ground raised by the revenue is dismissed.
In the result, the appeal of the revenue is dismissed. ORDER PRONOUNCED IN OPEN COURT ON 28/04/2017
Sd/- Sd/- J.Sudhakar Reddy S.S. Viswanethra Ravi Accountant Member Judicial Member Dated 28 -04-2017 *PP/SPS: Copy of the order forwarded to: 1. The Appellant/Revenue: The Income Tax Officer, Ward 12(3), 7th Floor, P-7 Chowringhee Square,Kolkata-69. 2 The Respondent/Assessee: M/s. Khol Bros. Communications Pvt. Ltd 1 Paul Mansion, 6 Bishop Lefroy Road, Kolkata-20. 3 The CIT(A) The CIT 4. DR, Kolkata Bench 5.