Ita/501/2013 Of Commissoner Of Income Tax v. M/S Shaw Wallace

IN THE HIGH COURT OF KARNATAKA AT BENGALURU DATED THIS THE STH DAY OF NOVEMBER 27072 PRESENT| THE HON’BLE MR. JUSTICE ALOK ARADHE AND| THE HON’BLE MR. JUSTICE H.T.NARENDRA PRASAD 1LT.A. NO.501 OF 2013 BEITWEEN 1.COMMISSIONER OF INCOME TAX| C.R. BUILDING, QUEENS ROAD| BANGALORE-OL. 2D.DEPUTY COMMISSIONER OF INCOME TAX CIRCLE-6(3), ROOM No.555 ADYAKAR BHAVAN. M.K. ROAD, MUMBAI-20. _.. APPELLANTS (BY SRI. JEEVAN J. NEERALGI, &| SRI. E.I. SANMATHI, ADVS.,) AND M/S. SHAW WALLACE DISTILLERIES LTD.,BANK OF BARODA BUILDINGWALLCHAND HIRACHAND MARG BALLARD ESTATE, MUMBAI-400018. ~-.. RESPONDENT (BY SRI. SURYANARAYANA T, ADV.) THIS I.T.A. IS. FILED UNDER SECTION 260-A OFI.T.ACT, 1961, ARISING OUT OF ORDER DATED 17-05-2013 PASSED|IN|TTANO.5534/MUM/06AND|ITANO.5655/MUM/06, FOR THE ASSESSMENT YEAR 2002-03,PRAYING TO:I. DECIDE THE FOREGOING QUESTION OF LAW AND/ORSUCH OTHER QUESTIONS OF LAW AS MAY BE FORMULATEDBY THE HON BLE COURT AS DEEMED FIT. Il. SET ASIDE THE APPELLATE ORDER DATED 1/-05-2013PASSED BY THE ITAT, A BENCH, BANGALORE, AS SOUGHTFOR, IN THE RESPONDENT-ASSESSEES CASE, IN APPEALPROCEEDINGS|NO. ITANO.5534/MUM/06.ANDLITANO.5655/MUM/06. THIS IL.T.A. COMING ON FOR HEARING, THIS DAY,ALOK ARADHE J.,DELIVERED THE FOLLOWING: JUDGMENT Mr.jeevan J.Neeralagl,jiearnedcounselWItnMr.E.I.Sanmathi, learned counsel for the revenue. Mr.T.Suryanarayana,learnedcounselfortheaSSeSSA2E. 2. This appeal under Section 260-A of the IncomeTax Act, 1961 (hereinafter referred to as ‘the Act’, forsnort) nas been preferred by the revenue. Tne subject matter of the appeal pertains to the Assessment Year2002-03. The appeal was admitted by a Bench of this. Court vide order dated 21.09.2015 to consider the'following substantial questions of law: J.Whetner,Of)thefactsand.circumstances of the case, tne Tribunal is rignt.in law in holding that assessee is entitled for|priorperiodexpensesaggregatingto Rs.2,56,28,132/- even thougn the same was notclaimedInoriginalreturnand|assessingautnority nas not made any aadition in tnisregard or otherwise whether tne Tribunal is rigntin law in not remitting back the matter back to.assessing autnority to consider the issue assame was not adjudicated earlier. 2D.Whether,Of)thefactsandcircumstances of the case, the Tribunal ts right.in law in holding that assesssee Is eligible for.deduction of the claim of expenditure/liability to.an extent of Rs.1,35,73,930/- in respect of.excise transport fees even though the same was|not claimed in original return and assessing.autnority nas not made any aadition in tnisregard or otherwise whether tne Tribunal is rigntin law in not remitting back the matter back to.assessing autnority to consider the issue assame was not adjudicated earlier. 3. Facts giving rise to the filing of this appeal|briefly stated are that the assessee is a companyengaged in the business of breweries and distilleries. |The assessee filed return of income for the Assessment|Year 2002-03 which was processed under Section143(3) of the Act. The Assessing Officer vide order|dated 30.03.7005 disallowed the claims of the assessee|in respect of merger expenses, interest on income tax,|interest of delayed payment to SSI, commission paid toM/s. Mysore Sales, allocated charges, prior period|expenses, debts and advances written off, bad debts,cessation of liabilities under Section 41(1) of the Act,providentfund paymentsanddisallowanceunder.Section 14A of tne Act. The assessee thereupon filed an-appealpeforetheCommissionerOT Income.Tax(Appeals), who by an order dated 03.07.2006 partlyallowed the appeal preferred by the assessee. Theassessee as well as the revenue approached the Income.Tax Appellate Tribunal by filing appeals. The Tribunal, by an order dated 17.05.2013 partly allowed the appealspreferred by the revenue as well as the assessee. The.claim of the assessee in respect of prior period expensesas well as deduction of claim towards expenditure /liability to the extent of Rs.1,35,73,930/- in respect ofexcise transport fees was allowed by the Tribunal. In.the aforesaid factual background, the revenue Nas filed|this appeal. — 4 Learned counsel for the revenue submitted that|the Tribunal ought to Nave appreciated that the claim|with regard to prior period expenses to the tune!Rs.2,56,28,132/- was not made in the return of income|Dut was made pefore tne Commissioner of Income Tax.(Appeals). It is further submitted that that the assesseecannot make a fresh claim without filing the revised|return of income and the Tribunal ought to Nave!appreciated tnat all the expenses, irrespective of tnenomenclature,WeretO.De|reconciled|witnintne accounting period and before finalization of the accounts|and therefore, the Tribunal ought to have called for theremand report from the assessing authority. It is also|urged that the Tribunal grossly erred in holding that the|assessee is entitled to deduction of claim of expenditure/ liability towards provision of expenditure / liability to.the extent of Rs.1,35,73,930/- in respect of excisetransport fee even though the same was not claimed inthe original return. It is further submitted that theTribunal ought to Nave appreciated that the aforesaid|pleaWaStakenfor.thefirst.time|beforetheCommissioner of Income Tax (Appeals) and the same.was rightly rejected. It is also urged that the aforesaidamount was not incurred towards a statutory liabilityunder Section 43B of the Act and tnerefore, cannot be)claimed as business liability as only a provision was.made by the assessee and no actual payment wasdebited in the books of accounts. It is further submittedthat the amount payable to the Government is covered under Section 43B of the Act. It is urged that in view of |Rule 36(A)(3) of the Income Tax Rules, the Tribunalought to have sent for the remand report from the|Assessing Officer. In Support of aforesaid submissions,|reliance has been placed on the decision of the Supreme.Court in'GOETZE INDIA LTD. Vs. CIT’ J84 ITR 323 5. On the other hand, learned counsel for the|assessee while inviting our attention to substantialquestions of law framed by this Court submitted that therevenue has not challenged the findings recorded by the|Tribunal on the ground that the same are perverse. It|nas only been urged tnat the TridDunal committed anerror of law in not remitting the matter to the assessing.autnority. Learned counsel for the assessee nas takenus through paragraphs 5.7.3 to 5.7.7 of the order|passed by the Tribunal with regard to the first!substantial question of law and has submitted that theTribunal on meticulous appreciation of evidence on. record has recorded a finding of fact which does not!suffer from any perversity. While taking us through.paragraphs 5.8 to 5.8.5 of the order passed by the|Tribunal, it is urged that the findings recorded on the|2nd issue is also based on meticulous appreciation ofevidence on record and does not suffer from anyinfirmity. It is also urged that the entries made in the|books of accounts are neither determinative nor.conciusive and the crucial question whicn has to be.determined is as to when the expenditure was incurred.It is also submitted that the Tribunal is the final fact|finding authority and could have recorded the findings of fact on the basis of the material placed before it. It isalso urged that the aforesaid material was placed before.the Commissioner of Income Tax (Appeals) also who did.not take note of the same and Rule 46A(3) of theIncome Tax Rules has no application to the fact situationof the case as the aforesaid Rule applies to the Appellate’Autnority and not to the Tribunal. In Support of aforesaid submissions, reliance has been placed on the.decision of the Supreme Court in|'TAPARIA TOOLSLTD. Vs. JOINT COMMISSIONER OF INCOME-TAX,NASIK’(2015)55TAXMANN,.COM361(SC),'BHARAT EARTH MOVERS Vs. COMMISSIONER OF.INCOME-TAX' (2000) 112 TAXMAN 61 (SC) AND'NATIONALTHERMALPOWERCO.LTD,Vs.COMMISSIONER OF INCOME-TAX' 229 ITR 383. | 6. We have considered the submissions made onboth sides and have perused the record. It is wellsettied in law that Tribunal is the final fact finding|autnority and this Court in exercise of powers underSection 260A of the Act can interfere witn tne findings offact only wnen the same are shown to be perverse. |(See:“SUDARSHAN SILKS & SAREES VS. CIT’, 300ITR 205 SCC @ 211(and‘MANGALORE GANESHBEEDI WORKS VS. CIT’, 378 ITR 640 (SC) @ 648|.In‘HERO VINOTH (MINOR) VS. SESHAMMAL/,, (2006) 5 SCC 545while dealing with the scope ofSection 260A of the Act, it was held that this court willnot interfere with findings of the court, unless the courtshave ignored material evidence or acted on no evidence|or have drawn wrong inferences from proved facts by applying the law erroneously or the decision is based on|no evidence. The aforesaid decisions were referred to.with approval in“‘VIJAY KUMAR TALWAR VS. CIT,|(2011) 196 TAXMAN 136 (SC)fas well as InNUNIONOF INDIA V. IBRAHIM UDDIN., (2012) 8 SCC 148and has been followed by a division bench of this courtIn‘CIT VS. SOFT BRANDS (P.) LTD.,” (2018) 406ITR 513 6. Before proceeding further, we may advert to|Rule 46A(3) of the Income Tax Rules, 1962. From.perusal of the aforesaid Rule, it is evident that theaforesaid Rule applies to the appellate authority namely.Commissioner of Income Tax (Appeals) and not the Income Tax Appellate Tribunal. It is not in dispute thatthe assessee had produced the material which it hadproducedbeforetheTribunal,|evenbeforetheCommissioner of Income Tax (Appeals). However, the.Commissioner of Income Tax (Appeals) failed to takenote of the material produced by the assessee and didnot call for the remand report. The Supreme Court, in.NATIONAL THERMAL POWER,Supra, while dealing|with the power of the Tribunal, neld that Tribunal may.pass such orders as it thinks fit after giving both the|parties an opportunity of being heard and there is no/reason to restrict the power of the Tribunal only to.decide the grounds which arise from the order of theCommissioner of Income Tax (Appeals). 7. In view of aforesaid enunciation of law, we maynow advert to the order passed by the Tribunal. TheTribunal, in paragraph 5.7.1 has recorded a finding tnattneaSS@SS€AENactakenadgroundpeforetne Commissioner.OF IncomeTax(Appeals)claimingdeduction of Rs.2,56,28,132/- towards prior periodexpenses as the same was not claimed originally on an|erroneous impression that the same was not allowableUnder the Act. The Tribunal has further noted that a.detailed submission was made before the Commissioner|of Income Tax (Appeals) in the form of a paper DOoK.However, the Commissioner of Income Tax (Appeals).has rejected the assessee's claim on the ground that theexpenses did not pertain to the Assessment Year 2002-03. The Tribunal thereupon has recorded the finding|that the expenses were incurred during the relevant|Assessment Year and therefore, the claim was allowable, by placing reliance on the decision of Supreme Court in-‘'KEDARNATH JUTE MFG. COMPANY LIMITED Vs.CIT’ 82 ITR 363 (SC). —The aforesaid finding is afinding of fact which is based on meticulous appreciationof evidence on record. The Tribunal, by placing relianceon the decision of the Supreme Court inBHARAT EARTH MOVERS,SUDIa,has held that a business.liability should arise in the accounting year and it shouldbe capable of estimated with reasonable certainty and ifthese requirements are satisfied, the liability cannot besaid to be contingent one. The Tribunal thus has held|that the ratio laid down by the Supreme Court inBHARAT EARTH MOVERS, supraapplies to the caseof |the assessee in respect of his claim for disallowance ofRs.1,35,73,930/- in respect of excise transport fees. Atthe cost of repetition, we may state that the aforesaidfindings have not been challenged as perverse Dy the|revenue. The only ground which has been taken is that|the matter ought have been remitted by the Tribunal to.the Assessing Officer. Since the Commissioner ofIncome Tax (Appeals) has dealt with the claims of theassessee on merits, therefore, the Tribunal Nas rightly|dealt with the claims of the assessee on merits and|there Is no need of remand in the fact situation of the|CaSe, In view of preceding analysis, both the substantialquestions of law are answered against the revenue and.in favour of the assessee.. In the result, the appeal fails and is hereby|dismissed. Sd/-JUDGESd/-'JUDGE RV