Principal Commissioner Of Income Tax, Jaipur-Ii, Jaipur v. M/S Rajasthan State Seed Corporation Ltd

1 IN THE HIGH COURT OF JUDICATURE FOR RAJASTHANBENCH AT JAIPUR. D.B. Income Tax Appeal No.136/2016 Principal Commissioner of Income Tax, Jaipur-II, Jaipur Vs. M/s Rajasthan State Seed Corporation Ltd. DATE OF JUDGMENT ::: 8[th] September, 2016 HON'BLE MR. JUSTICE K.S. JHAVERIHON'BLE MR. JUSTICE BANWARI LAL SHARMA Mr. Nikhil Simlote, for the appellant. ***** (1)By way of this appeal, the Department haschallenged the judgment & order of the Income TaxAppellate Tribunal dismissing the appeal preferred by theDepartment, confirming the order of the CIT (Appeals). (2) This court while admitting the appeal framed followingsubstantial questions of law:- “1. Whether in the facts and circumstances ofthe case, the Tribunal was justified in deletingdisallowance of prior period expenses ofRs.252468/- made by the Assessing Officer evenwhen it was not in accordance with theaccounting policies followed by the assessee.2.Whether in the facts and circumstances ofthe case, the Tribunal was justified in allowingdeduction for the contribution of Rs.4731494/-made to an unapproved Gratuity Fund. 3.Whether in the facts and circumstances ofthe case, the Tribunal was justified in holdingcontribution of Rs.1516912/- to State RenewalFund as an allowable expenditure though it is notan actual expenditure.” (3)Identical controversy came up for considerationbefore this court in D.B. Income Tax Appeal No.4/2016(Principal Commissioner of Income Tax Vs. M/sRajasthan State Seed Corporation Ltd.) decided on29.4.2016, wherein it was held in para nos.7,8 & 9 asunder:- “7.Insofar as the prior period expenses isconcerned a finding of fact has been recordedby the Appellate Authorities that approval forpayment of the said expenditure was givenduring the year under appeal therefore theliability crystallized during the year andsimilar method was being regularly followedby the assessee consistently and when thereis a finding recorded by the AppellateAuthorities that the expenditure crystallizedduring the year, was written in the books thisyear and on year to year basis was claimed inthe same manner and fashion was rightlyclaimed and allowed during the year, is afinding of fact.8.Insofar as disallowance of claim of Rs.19282605/- is concerned, admittedly, theassessee-respondent has claimed to haveapplied for according approval of GroupGratuity Scheme to the concernedCommissioner on 31st March, 1981. Once theassessee files an application for approval ofthe scheme, it was for the Commissioner tohave taken recourse of disposing of the saidapplication either to approve or to reject thesame. The same having not been done for thelast more than almost 25 years, the assesseecould not have been blamed for the same.There is no denial by the AO that applicationfor approval has not been filed by theassessee on 31.3.1981. Even the AssessingOfficer admits that the application forapproval was submitted on 31st March, 1981and both the Appellate Authorities have cometo a definite finding of fact that once anapplication has been moved for approval and having not been rejected then the claim couldnot have been disallowed or the claim couldnot have been rejected merely because theCommissioner did not accord approval of thesame. The assessee cannot be made to sufferfor inaction of the revenue, admittedly therespondent-assessee is a Government ofRajasthan Undertaking or even otherwise theCommissioner ought not have slept over theapplication for approval for more than 25years. The Appellate Authorities are welljustified in coming to the said conclusion.Needless to mention that a finding has beengiven by the Tribunal that the amounts arebeing disallowed by the learned AO from yearto year at least from the assessment year1996-97 i.e. almost 20 years but is beingallowed regularly in appeal therefore, for thisreason also we reject the claim of therevenue. The Assessing Officer ought nothave made a repeated addition merely for thispurpose and a litigation of this nature oughtnot to have come before this court asappeals all throughout is being allowed yearafter year. On the one hand the revenue doesnot decide the application for approval andthe amount is being disallowed by theAssessing Officer from year to year which isnot at all justified. The Revenue is welladvisednottomakerepetitiveadditions/disallowance for this purpose andexpose its weakness before the Courts as onthe one hand application for accordingapproval has not been granted and forinaction of Commissioner amounts aredisallowed and to incur wasteful public moneyeither way as at least the respondent has alsoto incur public money to defend its case beinga Government of Rajasthan Undertaking infiling repetitive appeals though succeedingyear after year. Merely because the tax effectis more than what is prescribed in theCirculars be it old or the latest being inDecember 2015 is no ground to file suchappeals, we though were inclined to levy coston the Revenue but stop ourselves in doingthe same to make it clear to the Revenue tobe more careful in future that such kind of litigation deserves to be avoided as theCourts are choked with such frivolouslitigation and is not able to concentrate onother important issues. 9.Insofar as the expenditure incurred onState Renewal Fund is concerned, saidexpenditure also goes to show that therenewal fund was set up by the StateGovernment and was created with the objectof providing a safety net for the workers likelyto be effected by restricting in the StatePublic Enterprise and that a finding of fact hasbeen recorded that the contribution made tothe State Renewal fund is solely for thepurposes of the welfare and benefit of theemployees. In our view, it is for the assesseeto decide whether any expenditure should beincurred in the course of business andexpenditure of this nature being for businessexpediency is certainly allowable deductionunder Section 37(1) of the Act. In our viewany normal expenditure for the welfare andbenefit of employees is allowable expenditureunder Section 37(1), the Tribunal has come toa finding of fact that it was a legal obligationoftherespondent-assesseetowardscontribution of the said amount to the StateRenewal Fund and there being a legalobligation as well in our view the Tribunal hascome to a correct conclusion. (4)In view of the order, the appeal is liable to bedismissed. The view taken by CIT (Appeals) & Tribunal isrequired to be affirmed. Therefore, we answer the questionraised in the present appeal in favour of the assessee andagainst the Department. (Banwari Lal Sharma), J. (K.S. Jhaveri), J. Brijesh9.