DCIT, Hyderabad v. A.P.Meat Development Corporation Ltd.,, Hyderabad

ITA 451/HYD/2009 | 2002-2003
Pronouncement Date: 26-02-2010 | Result: Dismissed

Appeal Details

RSA Number 45122514 RSA 2009
Assessee PAN AADCA0884G
Bench Hyderabad
Appeal Number ITA 451/HYD/2009
Duration Of Justice 10 month(s) 19 day(s)
Appellant DCIT, Hyderabad
Respondent A.P.Meat Development Corporation Ltd.,, Hyderabad
Appeal Type Income Tax Appeal
Pronouncement Date 26-02-2010
Appeal Filed By Department
Order Result Dismissed
Bench Allotted A
Tribunal Order Date 26-02-2010
Date Of Final Hearing 15-02-2010
Next Hearing Date 15-02-2010
Assessment Year 2002-2003
Appeal Filed On 06-04-2009
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH A HYDERABAD BEFORE SHRI N.R.S. GANESAN JUDICIAL MEMBER AND SHRI CHANDRA POOJARI ACCOUNTANT MEMBER ITA NO:451/HYD/2009 ASSTT. YEAR 2002-0 3 THE DY. COMMISSIONER OF INCOME TAX CIRCLE 1 (1) HYDERABAD VS M/S A.P. MEAT DEVELOPMENT CORPORATION LTD. HYDERABAD (AADCA 0884 G/A-9) (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI K.K. TRIPATHY RESPONDENT BY : SHRI T.S. AJAY O R D E R PER CHANDRA POOJARI ACCOUNTANT MEMBER THIS APPEAL PREFERRED BY THE REVENUE IS DIRECTED AGA INST THE ORDER PASSED BY THE CIT (A)-II HYDERABAD DATED 19.1.2009 A ND PERTAINS TO THE ASSESSMENT YEARS 2002-03. 2. THE REVENUE RAISED THE FOLLOWING GROUNDS: 1. THE CIT(A) ERRED IN BOTH FACTS AND IN LAW 2. THE CIT(A) OUGHT TO HAVE UPHELD THE DISALLOWANCE OF RS.1 36 74 404/- MADE IN THE ASSESSMENT ORDER ON ACCOUNT OF ITS PRIO R PERIOD AND CAPITAL NATURE AS DISCUSSED IN DETAIL IN ASSESSMENT ORDER. 3. THE CIT(A) OUGHT TO HAVE APPRECIATED THE FACT OF NO SUCH LIABILITY ON THE PART OF THE CORPORATION FOR THE EMPLOYMENT OF G OVT. OF ANDHRA PRADESH WHO WERE MERELY DEPUTATIONISTS AND NEITHER BORNE ON ROLLS OF CORPORATION NOR ABSORBED ON PERMANENT BASIS. 4. THE CIT(A) OUGHT TO HAVE APPRECIATED THE FACT OF CO -RELATION OF AMOUNT OF RS.1 23 72 030/- RELEASED BY THE GOVT. OF ANDHRA PRADESH FOR STATED PURPOSE OF PENSION LIABILITY OF SUCH DEPUTATIONISTS . 2 2 3. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE HAD FIL ED ITS RETURN OF INCOME ON 20.10.2009 DECLARING A LOSS OF RS.2 28 803/-. THE ASSESSMENT WAS REOPENED U/S 147 BY THE ASSESSING OFFICER NOTICI NG THAT THE ASSESSEE HAD DEBITED RS.1 36 74 404/- TOWARDS PAYMEN T OF PENSION TO RETIRED EMPLOYEES WHICH RELATED TO EARLIER YEARS. THE ASSESSING OFFICER TREATED THIS EXPENDITURE AS PRIOR PERIOD ONE AND DISALLOWED THE SAME. 4. DURING THE COURSE OF ASSESSMENT ORDER THE ASSESSING OF FICER OBSERVED THAT THE EXPENDITURE OF RS.1 36 74 404/- WAS INCURRED ON ACCOUNT OF PENSION BENEFITS OF EMPLOYEES OF VARIOUS CATEGO RIES WHO WORKED ON DEPUTATION BASIS FROM 1977 TILL THEIR RETI REMENT. WHEN ASKED TO EXPLAIN THE AR OF THE ASSESSEE SUBMITTED BEFORE THE ASSESSING OFFICER THAT THE ASSESSEE HAD INCURRED THIS EXPENDITURE ON PURCHASE OF PENSION POLICY ON 30.3.2002 FOR PAYMENT OF PENSION TO THE RET IRED EMPLOYEES. IT WAS FURTHER SUBMITTED THAT DUE TO REVISION OF SCALES AND ITS ADOPTION TO SUCH RETIRED EMPLOYEES THE ASSESSEE HAD TO PAY THE AMOUNT TO LIC TO COVER THE PENSIONARY BENEFITS. THE ASSESSING OFFICER HOWEV ER DID NOT ACCEPT THE CONTENTION OF THE ASSESSEE. THE ASSESSING OFFICER O BSERVED THAT THE PENSION POLICY PURCHASED BY THE ASSESSEE COMPANY P ERTAIN TO EMPLOYEES WHO WERE BORNE ON THE ROLLS OF AP GOVT. AND THE ASSESSEE COMPANY HAS TAKEN THEM ON DEPUTATION BASIS WHO ALSO RET IRED SUBSEQUENTLY UNDER VOLUNTARY SCHEME. THE ASSESSING OFFICER ALSO OBSERVED THAT DURING THE YEAR AN AMOUNT OF RS.1 23 72 030/- WAS RELEASED BY THE GOVT. OF AP FOR THE PURPOSE OF PAYMEN T TO BE MADE BY THE ASSESSEE COMPANY FOR PENSION CONTRIBUTION TO ALL THE E MPLOYEES OF THE GOVT. ACCORDINGLY THE ASSESSEES CLAIM OF SUCH EXPENDIT URE WAS NOT ALLOWED BY THE ASSESSING OFFICER. AGGRIEVED AGAINST T HE ORDER OF THE ASSESSING OFFICER THE ASSESSEE WENT IN APPEAL BEFORE THE CI T (A). ON APPEAL THE CIT (A) AFTER ELABORATELY DISCUSSING THE P OINTS AT ISSUE 3 3 ALLOWED THE CLAIM OF THE ASSESSEE. AGGRIEVED AGAINST THE ORDER OF THE CIT (A) THE REVENUE IS IN APPEAL BEFORE US. 5. WE HAVE HEARD THE SUBMISSIONS OF RIVAL PARTIES AND P ERUSED THE MATERIAL AVAILABLE ON RECORD. THE CIT(A) HELD THAT THE ONLY DISPUTE RELATING TO DISALLOWANCE BY THE ASSESSING OFFICER OF THE PRIOR PERIOD EXPENDITURE AND THE ISSUE RELATING TO ALLOWABILITY OF PRIOR PERIOD EXPENDITURE IN A SUBSEQUENT YEAR HAS BEEN SUBJECT MATTER OF LITIGATION IN VARIOUS TRIBUNALS AND HIGH COURTS AND CERTAIN EXPENSES MAY RELATE TO AN EARLIER YEAR BUT IF IT IS AN ITEM UNDER DISPUTE WHICH GETS SETTLED DURING THE YEAR IT MIGHT NOT BE AN INSTANCE OF PRIOR PERIO D ITEM THOUGH IT IS NOT UNUSUAL THAT THEY ARE SO REPRESENTED IN THE ACCOUNT S. SUCH TYPE OF PRIOR PERIOD EXPENDITURE WAS HELD ALLOWABLE BY THE I TAT DELHI BENCH IN THE DCIT VS. INDAG RUBBER LIMITED 280 ITR (AT) 194 A ND THE CIT(A) FURTHER FOUND THAT THE HONBLE MADRAS HIGH COURT HAS T AKEN A SIMILAR VIEW IN THE CASE OF CIT VS. ANNA TRANSPORT CORPORATION LIMITED (243 ITR 35 AND ONE OF THE OFT-QUOTED DECISIONS ON THIS ISSUE IS THAT OF THE DECISION OF HONBLE GUJARAT HIGH COURT IN THE CASE OF SAU RASHTRA CEMENT AND CHEMICAL INDUSTRIES LIMITED VS. CIT (213 ITR 523) . IN THE SAID CASE IT WAS HELD THAT MERELY BECAUSE AN EXPENDITURE RELATES TO A TRANSACTION OF AN EARLIER YEAR AND IT DOES NOT BECOME A LIABILITY PAYABLE IN THE EARLIER YEAR UNLESS IT CANNOT BE SAID THAT THE LIABILITY WAS DET ERMINED AND CRYSTALLIZED IN THE YEAR IN QUESTION ON THE BASIS OF MAI NTAINING ACCOUNTS ON MERCANTILE BASIS AND IN EACH CASE WHERE THE ACCOUNTS ARE MAINTAINED ON MERCANTILE BASIS IT HAS TO BE FOUND IN RESPECT OF ANY CLAIM WHERE SUCH LIABILITY WAS CRYSTALLIZED AND QUANTIFIED DURING TH E PREVIOUS YEAR SO AS TO BE REQUIRED TO BE ADJUSTED IN THE BOOKS OF ACCOUNT OF THAT PREVIOUS YEAR. IT WAS FURTHER HELD THAT IF ANY LIABILITY T HOUGH RELATING TO THE EARLIER YEAR DEPENDED UPON MAKING A DEMAND AND ITS ACCEPTANCE BY THE ASSESSEE AND SUCH LIABILITY HAS BEEN ACTUALLY CLAIMED AN D PAID IN THE 4 4 LATTER PRECIOUS YEAR CANNOT BE DISALLOWED AS A DEDUCTION MERELY ON THE BASIS THE ACCOUNTS ARE MAINTAINED ON MERCANTILE BASIS AN D THAT RELATED TO A TRANSACTION OF THE PREVIOUS YEAR THE CIT(A) FOL LOWED THE DECISIONS OF THE TRIBUNAL AND HIGH COURTS AND HELD THAT IT IS VE RY CLEAR THAT PRIOR PERIOD EXPENSES COULD NOT BE DISALLOWED SIMPLY ON THE GR OUND THAT THE ASSESSEE HAS BEEN MAINTAINING MERCANTILE SYSTEM OF ACCOUNTIN G AND IF THE LIABILITY IS SETTLED OR CRYSTALLIZED DURING THE YE AR THEN THE EXPENSE IS TO BE ALLOWED IRRESPECTIVE OF THE FACT THAT THE SAME P ERTAINS TO AN EARLIER YEAR. THE CIT(A) FURTHER FOUND FROM THE PAPER BOO K FILED BY THE ASSESSEE THAT THE ASSESSEE HAD ALREADY SUBMITTED BEFORE THE ASSESSING OFFICER THE BASIS FOR CLAIMING THE EXPENDITURE OF RS.1 3 6 74 404 IN RESPECT OF THE PENSIONARY BENEFITS PAID TO 56 EMPLOYEES AND HE FOUND THAT GOVERNMENT OF A.P VIDE LETTER DATED 718/PE-II/ 1999 DATED 2-11- 2001 HAS INFORMED THE ASSESSEE CORPORATION FOR PAYMENT OF PENSION AND DEARNESS RELIEF TO 56 PENSIONERS BASED ON THE PAY TO BE FIXED AS ON A PARTICULAR DATE AND THE GOVERNMENT HAS ALSO INFORMED T O PAY THE DIFFERENTIAL AMOUNT TO BE PAID TO LIC. THE ASSESSEE HA D CORRESPONDENCE WITH LIC OF INDIA AND THE LIC VIDE LETTER DATED 28- 1-2002 INFORMED THE DIFFERENTIAL AMOUNT TO BE RS.1 36 74 404 AND THE ASSESSE E SUBMITTED THE PROPOSAL OF THE LIC TO THE PRINCIPAL SECRETARY P UBLIC ENTERPRISE DEPARTMENT GOVT. OF AP AND REQUESTED THE GOVERNMENT TO RELEASE AN AMOUNT OF RS.1 74 04 192 IN ORDER TO TAKE FURTHER COU RSE OF ACTION IN THE MATTER AND THIS AMOUNT WAS SOUGHT BASED ON THE PENSION ARREARS AND THE PURCHASE PRICE PAYABLE TO LIC FOR THE REVISED PENSIO N OF THE 56 PENSIONERS. THE CIT(A) FURTHER FOUND AFTER CONSIDERING THE CORRESPONDENCES AVAILABLE N THE PAPER BOOK HE HELD TH AT IT IS CLEAR THAT THE LIABILITY TO PAY THE AMOUNT TO LIC HAD IN FACT CRYSTALLIZED DURING THE YEAR UNDER CONSIDERATION AND THE EXPENDITURE HAS BEEN INCURRED BY THE ASSESSEE ON THE DIRECTION OF THE GOVT. OF ANDHRA PRADESH AND THEREFORE THE GENUINENESS OF THE EXPENDITURE CANNOT BE DOUBTED A ND IN THIS VIEW IT IS AN EXPENDITURE THOUGH RELATABLE TO THE EARLIER YEAR THE SAME IS 5 5 ALLOWABLE IN THE YEAR UNDER CONSIDERATION AND SINCE THE LIABILITY TO INCUR THE SAME HAS ARISEN AND CRYSTALLIZED AND AS REGARDS THE A MOUNT OF RS.1 23 72 026 SANCTIONED BY THE GOVERNMENT THE ASSESSEE HAD FILED IN THE PAPER BOOK THE GOVT. ORDER MS NO.41 DATED 22-9- 2000 WHICH SHOWS THAT THE GOVERNMENT HAD SANCTIONED THIS AMOUNT TO THE ASSESSEE CORPORATION AS A INTEREST BEARING LOAN TOWARDS PAYMENT OF LEAVE SALARY CONTRIBUTION AND PENSION CONTRIBUTION FOR 213 EMPLOYEE S WHO WORKED IN THE CORPORATION ON DEPUTATION. ACCORDINGLY THE CIT ( A) HELD THAT THIS AMOUNT HAS NOTHING TO DO WITH THE PAYMENT MADE BY TH E ASSESSEE TO THE LIC IN RESPECT OF PENSIONERY BENEFITS OF 56 EMPLOYE ES WHO HAD ALREADY RETIRED. THEREFORE AFTER CONSIDERING THE TO TALITY OF THE FACTS AND THE CIRCUMSTANCES OF THE CASE THE FIRST APPELLATE AUT HORITY WAS OF THE VIEW THAT THE EXPENDITURE OF RS.1 36 74 404 CLAIM ED BY THE ASSESSEE DESERVES BE ALLOWED IN THE YEAR UNDER CONSIDERATIO N AND HE DIRECTED THE ASSESSING OFFICER TO DELETE THE DISALLOWANCE M ADE IN THIS REGARD. THEREFORE WE ARE OF THE CONSIDERED OPINION T HAT THE CIT (A) IS PERFECTLY JUSTIFIED IN ALLOWING THE CLAIM OF THE ASSESSE E IN GIVING DIRECTION TO THE ASSESSING OFFICER TO DELETE THE SAID DI SALLOWANCE AND NO INTERFERENCE IS CALLED FOR IN THIS REGARD. HENCE WE CONFIR M THE ORDER OF THE FIRST APPELLATE AUTHORITY AND REJECT THE GROUNDS RAISED BY THE REVENUE. 6. IN THE RESULT THE APPEAL FILED BY THE REVENUE STA NDS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT : 26.2.2010 SD/- SD/- N.R.S. GANESAN CHANDRA POOJARI JUDICIAL MEMBER ACCOUNTANT MEMBER DATED THE 26 TH FEBRUARY 2010 6 6 JMR* COPY FORWARDED TO: 1. THE DY.CIT CIRCLE 1 (1) HYDERABAD 2. MS/ AP MEAT DEVELOPMENT CORPORATION LTD. 10-2-28 9/127 SHANTHI NAGAR HYDERABAD. 3. CIT(A)-II HYDERABAD. 4. CIT HYDERABAD 5. THE D.R. ITAT HYDERABAD.