TaxTMI 
TaxTMI 
2016 (4) TMI 899
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....d" with a Note 12 (II)(F) to Schedule-17 of financial statements.. The Assessing Officer observed that the assessee had entered into a Distribution Agreement on 30/07/2001 for import of alcoholic beverages from Diageo B.V. Netherlands, in accordance with which the assessee continued to import beverages till the period relevant to assessment year 2010-11. In Nov.2009, the Directorate of Revenue Intelligence ('DRI') investigated the imports made by the assessee, in respect of the import value declared before the Customs Department, for the period November,2004 to November, 2009. The assessee and Diageo B.V., Netherlands entered into an Indemnity Agreement dated 7/4/2010, whereby the assessee was to receive reimbursement of amounts paid / to be paid to the Customs Dept. The assessee was required to deposit Rs. 62,50,00,000/- as advance towards liability likely to arise under the Customs Act, 1961. As per the DRI's show cause notice dated 30/03/2011, the additional customs duty liability was worked out at Rs. 58,04,28,000/-. 2.2 The assessee preferred an application in this regard before the Customs & Central Excise Settlement Commission and vide their order dated 9/2/2012 the followi....
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....ds:- 1. " The learned CIT (A) erred in assessing the total income of the appellant at Rs. 61,79,86,690/- instead of loss of Rs. 71,83,096/- claimed in the return of income. 2. The learned CIT (A) erred in holding that the Indemnity proceeds amounting to Rs. 62,50,00,000/- received towards Custom Duty (disclosed as 'loans and advances') is a taxable receipt for the AY 2011-12 instead of AY 2012-13. 3. The learned CIT(A) erred in not appreciating the fact that the appellant has already offered the indemnity proceeds to tax in the assessment year 2012- 13, as the liability crystallized only in that year. 4. Without prejudice to Ground 2 and 3 above, the learned CIT(A) erred in not allowing the deduction of custom duty paid of Rs. 62,50,00,000/- in accordance with the provisions of section 43D of the Act. 5. The learned CIT(A) erred in confirming the levy of interest under section 234B and 234D of the Act amounting to Rs. 7,24,22,568/- and Rs. 5,93,106/- respectively". 3.2.1 Vide letter dated 27/11/2015, the assessee has preferred to raise the following additional grounds of appeal:- 1.0 Re.: Taxability of the amount of Rs. 62.50 crores received from Diageo Holdings N....
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....ad entered into a Distribution Agreement dated 30/07/2001 with M/s. Diageo Brands B.V for distribution of imported alcoholic beverages in India. In November,2009, the DRI initiated investigations for re-determination of the assessable value of goods imported by the assessee in the period November, 2004 to November, 2009, since it was of the view that the reported assessable value of the imported goods did not reflect the correct import cost as the same were being undervalued. The DRI went about the re-determination of the assessable value declared by the assessee vis-à-vis the import prices of alcoholic beverages of the Diageo Group imported by duty free shops at duty free areas of the international airports. In the course of DRI's investigations, the assessee deposited the following amounts with the Customs Department:- Date Amount(Rs.) 18/11/2009 7,50,00,000 23/11/2009 25,00,00,000 09/12/2009 25,00,00,000 18/02/2010 2,50,00,000 12/05/2010 2,50,00,000 Total 62,50,00,000 4.2.2. It was submitted by the Ld. Sr. Counsel that the assessee entered into an Indemnity Agreement dated 7/4/2010 (placed at page 39 to 51 of the Paper Book) with Diageo Holdings B.....
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....elhi regions respectively and imposed a penalty of Rs. 20,00,000/- on the assessee. 4.2.5 The Ld. Sr. Counsel submitted that in pursuance of the order of the Settlement Commission dated 9/2/2012, the custom duty liability of Rs. 58,04,28,400/- was adjusted against the aforesaid deposit of Rs. 62,50,00,000/- and the balance amount of Rs. 4,45,71,600/- was adjusted against the interest liability. On 14/03/2012, the assessee made all the required payments of balance of interest liability, redemption fines and penalty, and accordingly the matter was settled. It was further submitted by the Ld. Sr. Counsel that the balance amounts, over and above the advance of Rs. 62,50,00,000/-, were received during the financial year 2011-12 relevant to the subsequent assessment year 2012-13. It was contended that since the matter was settled by the order of the Settlement Commission dated 9/02/2012,when the matter attained finality/liability had crystallized, the total amount of reimbursement received both in assessment year 's 2011-12 and 2012-13 was offered to tax in assessment year 2012-13 and has been accepted as such and taxed by the Assessing Officer as the assessee's income for the said year....
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....he decision of the Hon'ble Apex Court in the case of Taparia Tools Ltd. (2015), 372 ITR 605(SC). 4.2.8 The Ld. Sr. Counsel also drew the attention of the Bench to clauses of the 'Indemnity Agreement' dated 7/4/2010 (placed at page 39 to 51 of Paper Book) would bring out the fact that the amount of Rs. 62,50,00,000/- received by the assessee thereunder in the year under consideration is purely an advance in respect of likely additional customs duty payable by the assessee pursuant to the DRI investigations in its case, which liability had not yet crystallized. It was also pointed out that clauses 3 to 10 also clearly demonstrates the fact that the receipt of Rs. 62,50,00,000/- during the year is only an advance against likely customs duty and that any excess or shortfall would have to be refunded or received from/to the indemnifier after completion of the proceedings of the Settlement Commission. The Ld. Sr.Counsel submitted that accordingly the aforesaid amount has been reflected in the assessee's books of account as Advance in Note-15 of the Final Accounts for the year ended 31/03/2011 relevant to assessment year 2011-12, from where it is clearly evident that the customs duty of ....
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....reliance was placed on the decision of the Hon'ble Apex Court in the case of Laxmipat Singhania (1969) 72 ITR 291, wherein it has been held that it is a fundamental rule of the laws of taxation that income cannot be taxed twice, unless otherwise expressly provided in the statute. 4.3.1 Per contra, the Ld. Departmental Representative strongly supported and relied the orders of the authorities below in bringing the amount of Rs. 62,50,00,000/- to tax in assessment year 2011-12. It was also contended that even though the assessee had suo-moto declared the impugned amount of Rs. 62,50,00,000/-, alongwith other amounts reimbursed, in the return of income for assessment year 2012-13, which was admittedly accepted by the Department, the same amount has rightly been brought to tax in the year under consideration. 4.4.1 We have heard the rival contentions and perused and carefully considered the material on record, including the judicial pronouncements cited. The facts of the matter on this issue as emanate from the record are that the company was , inter-alia, engaged in the business of import and trading in alcoholic beverages till November, 2009, pursuant to a distribution agreement da....
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....Note-9 'Loans and Advances' to the Balance Sheet as on 31/3/2011 for assessment year 2011-12, was to be taxed in the same assessment year as held by Revenue or was exigible to tax in assessment year 2012- 13, pursuant to the crystallization of this liability consequent to the order of the Customs & Central Excise Settlement Commission dated 9/2/2012 and its final settlement thereof on 14/03/2012. 4.4.3 From the facts on record, as brought out above, we find that the said amount of Rs. 62.50 crores received by the assessee from Diageo Brands B.V. Netherlands pursuant to the 'Indemnity Agreement' dated 7/4/2010 is only a reimbursement of expenses paid by the assessee on account of probable future customs duty liability that may arise to the assessee on account of DRI investigation and was , therefore, correctly shown as 'customs duty & advance payment of taxes' in Note 15 to the Balance Sheet as on 31/3/2011 under 'Short Terms Loans and advances'. In our view, this amount of Rs. 62.50 crores would accrue to the assessee and be exigile to tax in the assessee's hands only in the year in which the liability to pay the additional customs duty crystallized. The facts on record establish ....
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....x in the immediately following financial year ending 31/3/2012 relevant to the assessment year 2012-13 and the same has been accepted by the Department in the order of assessment for assessment year 2012-13 passed under section. 143(3) of the Act vide order dated 23/3/2015. Having brought to tax the aforesaid amount of Rs. 62.50 crores, as declared by the assessee, in the assessment for assessment year 2012- 13, we are of the view that it is not open to Revenue to tax the same amount once again in the assessment year 2011-12. In coming to this finding, we place reliance on the decision of the Hon'ble Apex Court in the case of Laxmipat Singhania (79 ITR 291) wherein the Hon'ble Court has held that the fundamental rule of taxation is that, unless expressly provided the same income cannot be taxed twice. 4.4.5 Taking into consideration the factual and legal matrix of the case, as discussed above from paras 4.1 to 4.4.4 (supra), we are of the considered opinion that the said amount of Rs. 62.50 crores is exigible to tax, as declared by the assessee, only in the financial year relevant to assessment year 2012-13 and not in the period relevant to assessment year 2011-12 as held by the a....