Tax v. Ita. Nos.121 & 147 Of 2010

IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT THE HONOURABLE MR.JUSTICE K.VINOD CHANDRAN & THE HONOURABLE MR. JUSTICE ASHOK MENON MONDAY, THE 01ST DAY OF OCTOBER 2018 / 9TH ASWINA, 1940 ITA. No.121 of 2010 AGAINST THE ORDER IN ITA NO.41/2008 OF THE INCOME TQAXAPPELLATE TRIBUNAL, COCHIN BENCH DATED 25-09-2009 APPELLANT/APPELLANT: THE COMMISSIONER OF INCOME TAX,COCHIN. BY ADVS.SRI.JOSE JOSEPH, SC FOR INCOME TAX RESPONDENT/RESPONDENT: THE FERTILIZERS AND CHEMICALS TRAVANCORE LTD., UDYOGAMANDAL, ELOOR, ERNAKULAM.BY ADVS.SRI.E.K.NANDAKUMAR (SR.)SRI.K.JOHN MATHAISRI.P.BENNY THOMASSRI.P.GOPINATH OTHER PRESENT: SRI PKR MENON SR COUNSEL FOR GOI TAXES .THIS INCOME TAX APPEAL HAVING BEEN FINALLY HEARD ON ITA. Nos.121 & 147 of 2010 01.10.2018, ALONG WITH ITA.147/2010, THE COURT ON THE SAMEDAY DELIVERED THE FOLLOWING: JUDGMENT K. Vinod Chandran, J. Both the appeals are from the order of theTribunal for the year 2002-2003. Both the assesseeand Department filed appeals before the Tribunal.The appeal of the Department was rejected and thatof the assessee was allowed. Hence the Departmentfiled two appeals before us under Section 260A ofthe Income Tax Act, 1961 [for brevity, the Act]. Thequestions raised are with respect to allowance ofprior period expenses amounting to Rs.60.75 lakhsand the claim of deductions for periods prior to theprevious year relevant to the assessment year 2002-2003, which claim was made in the assessment year2002-2003. On the question of foreseeable loss ofcontract, the Tribunal remanded the matter forconsideration by the Assessing Officer. 2. The learned Standing Counsel Government ofIndia [Taxes] would rely on Commissioner of Income ITA. Nos.121 & 147 of 2010 Tax v. Swadeshi Cotton & Flour Mills Private Ltd.[1964 (LIII) ITR 134]. The issue raised in theappeals were with respect to the claim made by theassessee Company under Section 10(2)(x) of theIndian Income Tax Act, 1922 in the year 1949 of thebonus payable to the employees in the year 1947. Thepayment of bonus coming to Rs.1,08,325/- for thecalender year 1947 was in terms of an award made in03.01.1949. The Department raised two contentionsbefore the Hon'ble Supreme Court, one of them wasthat, since the assessee is following the mercantilesystem of accounting, the year to which theliability is properly attributable is the calenderyear 1947, and not 1949. In the alternative, theDepartment also had a contention that the accountsof the year 1947 could be re-opened as per theprevalent practice that is obtained in England. TheHon'ble Supreme Court specifically rejected thecontention of the Department that there could be are-opening of the accounts prior to the previousyear. On the question of expenditure, the contention ITA. Nos.121 & 147 of 2010 of the assessee was allowed in the following manner: “On the facts of this case, it is clearthat it was only in 1949 that the claim toprofit bonus was settled by an award of theIndustrial tribunal. Therefore, the onlyyear the liability can be properlyattributed to is 1949, and hence we are ofthe opinion that the High Court was rightin answering the question in favour of theassessee.” 3. We are unable to discern as to what was the expenditure, which was claimed by the assessee andthe time when actually the amounts were disbursed,whether it be in the previous year or not. 4. In such circumstances, we are of the opinionthat the Assessing Officer would have to considerthe same on facts, based on the decision inSwadeshi [supra]. I.T.A. No.147 of 2010 is allowed for the limited purpose of the remand. 5. I.T.A. No.121 of 2010 is against the rejection of the Department appeal. On the questionof Section 14A of the Act, the issue is coveredagainst the Revenue in Commissioner of Income Tax ITA. Nos.121 & 147 of 2010 5 3. We are unable to discern as to what was the expenditure, which was claimed by the assessee andthe time when actually the amounts were disbursed,whether it be in the previous year or not. 4. In such circumstances, we are of the opinionthat the Assessing Officer would have to considerthe same on facts, based on the decision inSwadeshi [supra]. I.T.A. No.147 of 2010 is allowed for the limited purpose of the remand. 5. I.T.A. No.121 of 2010 is against the rejection of the Department appeal. On the questionof Section 14A of the Act, the issue is coveredagainst the Revenue in Commissioner of Income Tax ITA. Nos.121 & 147 of 2010 5 v. Essar Teleholding [2018 (401) ITR 445 (SC)]. Theother question is on whether the deduction underSection 80 HHC can be granted even under 115JBMinimum Alternative Tax . The said issue isalso covered in favour of the assessee and againstthe Revenue by a decision of the Hon'ble SupremeCourt in Commissioner of Income Tax v. BhariInformation Tech. Sys. (P) Ltd. [(2012) 340 ITR 593(SC)], which upheld the decision of a Special Benchof the Tribunal in the case of Deputy CIT v.Syncome Formulations (I) Ltd. [(2007) 292 ITR AT144 (Mum) (SB)]. 6. The further question raised is as to whetherthe disallowance of provision of obsolescence ofstocks amounting to Rs.86,35,000/- could be deletedor not. The Tribunal relied on the assessees' owncase of the earlier assessment year 1992-1993 in ITR203/Coch/1996. The assessee submits that the issuehas become final. In such circumstances, we refuseto answer the question, which was never raised inthe case of the assessee in the previous assessment year also, by the Department. We hence reject I.T.A. No.121 of 2010. Parties to suffer their respective costs. sp/03/10/18 Sd/-K.VINOD CHANDRAN JUDGESd/-ASHOK MENONJUDGE APPENDIX PETITIONER'S/S EXHIBITS:ANNEXURE ACOPY OF ORDER U/S.143(3) R.W.S.147DATED 19.12.2006 FOR THE ASSESSMENTYEAR 2002-03.ANNEXURE BCOPY OF THE ORDER DATED 18.10.2007 OFTHE COMMISSIONER OF INCOME TAX(APPEALS).ANNEXURE CCOPY OF THE ORDER DATED 25.9.2009 OFTHE INCOME TAX APPELLATE TRIBUNAL,COCHIN BENCH IN ITA.NO.41/COCH/2008.ANNEXURE D COPY OF SPECIAL BENCH ORDER IN THE CASE OF DAGA CAPITAL MANAGEMENT PVT. LTD. 117, ITD 169.RESPONDENT'S EXHIBITS:- NIL //TRUE COPY// P.A. TO JUDGE