Ita/97/2009 Of Kerala Minerals And Metals Limited v. Commissioner Of Income Tax

IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT : THE HONOURABLE MR. JUSTICE C.N.RAMACHANDRAN NAIR & THE HONOURABLE MR. JUSTICE C.K.ABDUL REHIM MONDAY, THE 8TH JUNE 2009 / 18TH JYAISHTA 1931 ITA.No. 97 of 2009() -------------------- ITA.483/COCH/2007 of I.T.A.TRIBUNAL,COCHIN BENCH .................... APPELLANT ----------------------------- KERALA MINERALS AND METALS LIMITED, SANKARAMANGALAM,CHAVARA, KOLLAM. BY ADV. SRI.A.KUMAR RESPONDENT(S): --------------- COMMISSIONER OF INCOME TAX APPEALS, TRIVANDRUM. BY SC SRI. JOSE JOSEPH THIS INCOME TAX APPEAL HAVING COME UP FOR ADMISSION ON 08/06/2009, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: -------------------------------------------- -------------------------------------------- Dated this the 8th day of June, 2009 JUDGMENT Ramachandran Nair,J. Standing counsel for the Revenue took notice on admission. 2. Heard counsel for the appellant and standing counsel for therespondent. Appellant is a company under the control of Governmentof Kerala. During the assessment year 2004-05 appellant claimeddeduction of an amount of above Rs. 20 crores being arrears of wagespayable to the employees for four years that is from 2001-04. Theclaim was based on settlement between the management and employeesfor wage revision on 8.10.2003. However, the claim was rejected bythe assessing officer for the reason that Govt.'s approval was only inthe subsequent year, that is relevant for the assessment year 2005-06.Admittedly company was under the control of Government of Keralaand without Govt.'s approval wage settlement could not be given effectto. Government granted approval on 17.6.2004 which falls in theaccounting year 2004-05. Therefore we are of the view that the claimshould be allowed in the assessment year 2005-06. Counsel for theappellant submitted that department declined the benefit for 2004-05 and for 2005-06 as well. We do not think the claim could be rejectedfor 2005-06 because assessee is following mercantile system ofaccounting and once wage increase settlement between themanagement and employees is approved by Govt., the balance is onlypayment. Liability got crystalised in the accounting year when theGovt. granted approval. The assessee should have created provision inthe accounts only for the accounting year 2004-05 and claimeddeduction in the assessment for the year 2005-06. We thereforedismiss the appeal, but with an observation that the claim should beallowed for the next year. Even though standing counsel submitted thatthe assessee has not provided for liability in the accounts for the nextyear, we do not think that is a ground for disallowing the claim becauseprovision is made this year, and once disallowance is made assessee isentitled to write back and provide the same for claim in the next year.Assessee is therefore free to move rectification or other remedy forgetting the claim allowed for subsequent or any later year. (C.N.RAMACHANDRAN NAIR)Judge.Judge. (C. K. ABDUL REHIM) kk Judge.