TaxTMI 
TaxTMI 
TaxTMI 
2016 (12) TMI 674
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....he Assessing Officer and the confirmation thereof by the CIT (Appeals), was upheld by the Tribunal. 3. This appeal was admitted on 13.06.2014 on the following substantial question of law. "Whether the learned Tribunal was justified in not permitting the assessee to claim deduction of Rs. 3,43,18,499 towards the Central Excise refund during the assessment year in question?" 4. The appellant was previously known as Kamakhya Cosmetics & Pharmaceuticals Pvt. Ltd. and the unit was setup in Guwahati's Bamunimaidam Industrial area, in pursuant to the new industrial policy resolution of the Central Government, notified on 24.12.1997. Under the Notification NO.32/99-CE and 33/99-CE, both dated 08.07.1999, the new industries setup in the designated tax free zones, were granted various tax exemption and concession, for a period of 10 years from the date of commercial production. The unit was setup in 2002 and was granted the Eligibility Certificate for refund of excise duty. As per the incentive mechanism, hundred percent refund of duty was given to the assessee until 31.03.2008 under the new industrial policy. 5. However the Government of India then issued the curtailment notification N....
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..../-. However the Assessing Authority on 15.11.2011 issued show-cause-notice as to why, the provision for the central excise duty, should not be disallowed for the assessment year 2009-2010. In their reply, the assessee submitted that since the litigation regarding entitlement to 100% exemption of duty has not attained finality, provision was made for the central excise duty liability, as a prudent assessee, who is following the mercantile system of accounting. 11. Thereafter the Deputy Commissioner, Income Tax under the assessment order dated 23.12.2011 computed the total income but in the process, disallowed the provision for central excise duty, for the claimed amount. Aggrieved by the assessment order, an Appeal was filed before the Commissioner of Income Tax (Appeals), Guwahati. However the Appeal was rejected on 10.04.2013 (Annexure-V). Then the matter was taken to the Appellate Tribunal but the Tribunal under its impugned verdict of 13.11.2013 (Annexure-VI), declared that the assessee is disentitled to claim deduction in respect of provision for central Excise duty and thus the order of assessment was affirmed. 12. ....
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....assessing authority, through his order dated 23.12.2011. As earlier noted, the appellate authority as well as the Appellate Tribunal have upheld the assessment order and accordingly the assessee questions those decisions in this Appeal. 15.1 Dr. Ashok Saraf, the learned Sr. counsel submits that when the assessee follows the mercantile system of accounting, they are entitled to make provision for their tax liability in the books even if, such liability may be determined at a future date and as the obligation of tax liability is not finally decided and the matter is pending in the Supreme Court, the provision made for payment of excise duty, must be deducted for the concerned assessment year. 15.2 The appellant contends that the assessee as a prudent business organization is bound to take into account their tax liability and since provision is made bonafide to take care of the excise duty liability, the assessee is entitled to deduction for the amount, kept aside towards taxation. 16.1 On the other hand, Mr. S. Sarma, the learned standing counsel for the Income Tax Department submits that the provision made by the assessee is nothing more than a contingent liability which may or m....
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.... amount in the accounts was found to be entertainable, in the following words:- "............. The principle emanating from the above discussion is that a provision in the accounts made by an assessee following the mercantile system of accounting, for liability to sales tax, (though disputed) is yet liable to be allowed as business expenditure, if there was a bona fide reasonable apprehension on the part of the assessee that the amount will become payable. Of course, it is not every fanciful claim, based on the ipse dixit of the assessee that could form the basis of any claim for deduction of such liability. But if the assessee had a genuine ground, or reasonable basis, for apprehending that the liability may be cast on it, having regard to the view adopted by the concerned Sales Tax Department, or having regard to the case of the assessee himself or other similar assessees or otherwise, the claim cannot be rejected merely because it is disputed. It could not then be said that the assessee had acted unreasonably or fancifully on misplaced apprehensions in making the provision. The court has to consider what a prudent businessman would have reasonably done in the state of affair....