TaxTMI 
TaxTMI 
2016 (11) TMI 1389
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....on of Apex Court on similar issue in the case of CIT Vs. T.V. Sundaram Iyangar & Sons (222 ITR 344). 2. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in treating the interest received from Oil Coordination Committee as business income as against income from other sources held by the Assessing Officer. 3. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in treating the disallowance of Rs. 40,36,741/- being payment to MRPL Education Trust and MRPL Janaseva Trust without appreciating the fact that such deduction is not allowable u/s 40A(9) of the Act. 4. On the facts and in the circumstances of the case and in law, the Ld. CITA erred in allowing higher depreciation consequent to deletion of the depreciation for A.Y 2001-02 which is disputed by the department. 5. The appellant prays that the order of CIT(A) on the above ground be set aside and that of the Assessing Officer be restored." 3. In brief, the relevant facts are that the assessee before us is a company incorporated under the provisions of Companies Act, 1956 and is, inter-alia, engaged in the business of refining of c....
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.... 4. Further, if the disallowance of provision for customs duty amounting to Rs. 173,35,28,049/- in A.Y. 2003-04 is upheld, then an amount of Rs. 75,99,01,495/- which already forms part of the total income of the current year i.e. A.Y. 2004-05 by way of reversal out of the said provision on the completion of export obligations should not be charged to tax, else it would amount to double taxation." 4. First, we shall take up the appeal of Revenue wherein the Ground of appeal no. 1 relates to an addition of Rs. 255.685 crores made by Assessing Officer by invoking provisions of Sec. 41(1) of the Act. 5. In this context, the brief facts are that the assessee company was granted incentive by the Government of Karnataka whereby assessee company availed sales tax deferment repayable in a period of 11 years in respect of Phase-I of its refinery and 14 years in respect of Phase-II of its refinery. Accordingly, the sales tax deferment loan outstanding as on 29th February, 2004 was Rs. 517.113 crores. The Government of Karnataka vide its Notification Nos. FD345CSL 2003(1) and FD345CSL 2003(2) both dated 31.03.2004, allowed the pre-payment of the sale tax deferment loan as on 29.02.2004 ....
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....n relied upon by the CIT(A) in the case of Associated Capsules (P.) Ltd. (supra) was also decided by the Hon'ble High Court. The Hon'ble High Court, considering the scheme of the Government of Maharashtra with respect to the premature repayment of deferred sales tax loan, had upheld the contention that the surplus arising on such repayment was not an amount falling for consideration in terms of section 41(1) of the Act. It was, therefore, contended that the impugned matter has been correctly decided by the CIT(A) inasmuch as the incentives granted by the Government of Karnataka by way of sales tax deferment to the assessee company are pari materia to those considered by the Hon'ble Bombay High Court in the case of Sulzer India Ltd. (supra). 8. The ld. DR has not contested the aforesaid factual matrix brought out by the learned representative for the respondent-assessee. So, however, it was argued that the sales tax collected forms a part of the trading receipt as held by the Hon'ble Supreme Court in the case of Chowringhee Sales Bureau P. Ltd. v. CIT [1973] 87 ITR 42 (SC), and therefore any cessation or remission in payment of such liability would invite the prov....
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....fore the CIT(A) who in para 4 of the order has allowed part relief. It is clear that so far as the income relating to interest on bank deposits, interest from New Mangalore Port Trust, interest and discount charges received from customers, interest on contractors' advances and interest on housing loans given to employees is concerned, it has been held to be taxable as 'business incomes'. Our attention has also been drawn to page 10 of the Statement of Facts filed before CIT(A), which also enumerates the detail of interest income of Rs. 7,35,65,982/-, which was considered by the Assessing Officer to be taxed as 'income from other sources'. It is clear that neither in the details of such interest income and nor in the reliefs allowed by CIT(A) there is any reference to interest received from Oil Coordination Committee and, therefore, the plea of assessee that the aforesaid Ground of appeal raised by Revenue is misconceived is emerging from record. The aforesaid factual matrix has also not been controverted by the ld. DR appearing for the Revenue. Be that as it may, we dismiss the Ground of appeal no. 2 raised by the Revenue as being misconceived. 12. Insofar as Ground of appeal no....
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....f the Act itself clearly suggests that only sums paid by the assessee as employer towards 'setting-up' or 'formation' of or as 'contribution' to any trust, fund, society, etc. is to be disallowed whereas the expenses in question are not of the nature covered by Sec. 40A(9) of the Act and are instead incurred by assessee wholly and exclusively for the welfare of its employees and same is deductible u/s 37(1) of the Act. At the time of hearing, the learned representative for the assessee had also relied upon the judgment of Hon'ble Bombay High Court in the case of Bharat Petroleum Corporation Ltd, 252 ITR 43 (Bom), which also clearly supports the proposition that such like expenses which are incurred not for 'setting-up' or for 'formation' of or as 'contribution' to any trust, etc. are not covered within the scope of Sec. 40A(9) of the Act. Therefore, under these circumstances, we hereby affirm the ultimate conclusion of CIT(A) in deleting the addition. As a consequence, Revenue fails in its Ground of appeal no. 3 also. 17. Insofar as Ground of appeal no. 4 is concerned, the same relates to the direction of CIT(A) contained in para 6 of his order whereby he has directed the As....
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....not be charged when income is taxable u/s 115JB of the Act. 2. The appellant prays that the order of CIT(A) on the above ground be set aside and that of the Assessing Officer be restored. 3. The appellant craves to amend or alter any ground or add a new ground which may be necessary." 21. In terms of the aforesaid Grounds, what is sought to be challenged is the decision of CIT(A) in holding that interest u/s 234B & 234C of the Act is not chargeable where the tax liability has been determined in terms of the 'book profits' calculated u/s 115JB of the Act. It is notable that the CIT(A) has relied upon the judgment of Hon'ble Karnataka High Court in the case of Kwality Biscuits Ltd., 243 ITR 519 (Kar) and the judgment of Hon'ble Madras High Court in the case of Revathi Equipment (ITA No. 49 of 2007) in deleting the levy of interest u/s 234B & 234C of the Act. 22. On this aspect, the only plea of the ld. DR is that the charging of interest u/s 234B & 234C of the Act is mandatory in nature and reliance was placed on the judgment of the Hon'ble Supreme Court in the case of Rolta India Ltd., 330 ITR 470 (SC) to say that interest u/s 234B & 234C of the A....
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....under MAT. Under these circumstances, it is quite clear that at the relevant point of time assessee had a justifiable and plausible reason to believe that no advance tax was payable by it, being a corporate entity, with respect to the liability u/s 115JB of the Act. No doubt, the judgment of Hon'ble Supreme Court in the case of Rolta India Ltd. (supra) prescribes that interest u/s 234B & 234C of the Act is leviable even with respect to the liability determined on the MAT, so however, the said decision is of a later date, i.e., 7.11.2011. The judgment of the Hon'ble Supreme Court in the case of Rolta India Ltd (supra) being a subsequent decision would not discredit a bona fide reason entertained by the assessee in not depositing advance tax on MAT in view of the then prevailing judgment of the Hon'ble Karnataka High Court. Therefore, under these circumstances, we find no reason to uphold the plea of the Revenue for levy of interest u/s 234B & 234C of the Act in the present case. During the relevant assessment under consideration, the available legal position, manifested by the judgment of the Hon'ble Karnataka High Court in the case of Kwality Biscuits Ltd. (supra), ....
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....with respect to the disallowance of Rs. 40,41,81,196/- being provision on account of Customs duty. Even in the Revised and Additional cross objections, the challenge remains the same although different facets of the dispute have been brought out. Therefore, the stand of the ld. DR to assail the filing of Revised/Consolidated and Additional cross objections, as being delayed, is based on a wrong perspective and is hereby rejected. 27. Now, we may take up the merits of the disallowance of Rs. 40,41,81,896/- made by the Assessing Officer, which is sought to be challenged by the assessee on various limbs. In order to appreciate the controversy, the following background of the dispute is relevant. The appellant-company procures a portion of its raw material (i.e. crude oil) through imports. A significant portion of the imports is against the Advance licences obtained for import of raw material for manufacture of products meant for exports. The Customs duty on the import of crude oil is provided on all imports and Provision to the extent of Rs. 40,75,50,184/- was outstanding as on 31.3.2004 towards Customs duty on crude oil imported against Advance licences pending completion of expor....
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....ner in which assessee has treated the amount relating to the Customs duty in its books of account, the entire exercise is unnecessary and is tax neutral over the years. The learned representative has in detail argued on the aforesaid propositions, which we shall elucidate further in the subsequent paras. 29. On the contrary, the stand of the ld. DR appearing for the Revenue is in support of the orders of authorities below. 30. Pertinently, the entire controversy revolves around the provisions of Sec. 43B of the Act. Sec. 43B of the Act was inserted by the Finance Act, 1983 w.e.f. 1.4.1984 and prescribes for certain deductions to be allowed only on actual payment while computing the income chargeable to tax under the head 'Profit and gains of business or profession'. Shorn of other details, insofar as it is necessary to appreciate the controversy in question, the salient features of Sec. 43B of the Act are as follows. Broadly speaking, Sec. 43B of the Act provides that deduction for any sums payable by the assessee by way of tax or duty, cess or fee or any other sum prescribed shall, irrespective of the previous year in which the liability to pay such sum was incurred, be allo....
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....u/s 43B of the Act. We may also briefly touch upon the accounting treatment accorded by the assessee to such transactions. At the time of import of raw material, assessee creates a 'Provision of Customs duty' on such imports by debiting 'Customs duty on raw material' account and crediting 'Customs duty - Advance licence' account. The 'Customs duty Advance licence' account is shown as a liability outstanding in the Balance-sheet and subsequently, on fulfilment of the export obligation, the 'Customs duty Advance licence' account is debited and 'Export licence benefit received' account is credited and is offered as income. In the context of the instant fact-situation, it may be appreciated that assessee had created a Provision of Rs. 40,75,50,184/- in the year under consideration, being Customs duty payable on import of raw material and the same was debited to the Profit & Loss Account. Subsequently, by 30.9.2004, assessee fulfilled its export obligations to the extent of Rs. 40,41,81,896/- and adjusted the same against liability, which was offered as income in the next year. Considering the fulfilment of export obligations to the extent of Rs. 40,41,81,896/- as a payment/discharge of....
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....itting clearance under sub-section (1), the [Assistant Commissioner of Customs or Deputy Commissioner of Customs] may require the importer to execute a bond with such surety or security as he thinks fit for complying with the conditions specified in sub-section (2)." 33. Sub-section (1) of Sec. 143A of Customs Act, 1962 prescribes that where any material is imported under an import licence belonging to the category of Advance licence, the competent authorities can permit clearance of such material "without payment of duty" leviable thereon. Sub-section (2) provides the conditions for grant of permission for clearance of goods without payment of duty. It is noteworthy that in terms of Sec. 12 of the Customs Act, 1962 the charge of Customs duty gets crystallised with the import of goods into India, which in the present case implies that the charge of Customs duty gets crystallised when assessee brings into India its raw material, i.e., crude oil from a place outside India. The competent authorities under the Customs Act, 1962 are empowered in terms of the specific provisions of Sec. 143A of the Customs Act, 1962 to permit clearance of such goods under Advance licence without payme....
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.... v. Jt. Commissioner of Income-tax, 81 ITD 118 where it has been observed under somewhat similar circumstances that the Customs duty liability is not to be regarded as a contingent liability. 34. Therefore, in view of the aforesaid discussion, it is reasonable to conclude that the liability represented by the Provision of Rs. 40,75,50,184/- being Customs duty payable on import of raw material arises during the previous year relevant to the assessment year under consideration as assessee brought the requisite goods into India from a place outside India. Therefore, under these circumstances, CIT(A) erred in taking the view that Sec. 43B of the Act is not applicable in the case of assessee on an erroneous ground that the liability of Customs duty did not arise in the instant year. 35. The first proviso to Sec. 43B of the Act prescribes that the disallowance u/s 43B of the Act would not apply in relation to any sum which is actually paid by the assessee on or before the due date applicable in his case for furnishing the return of income under Subsection (1) of Sec. 139 of the Act in respect of the previous year in which the liability to pay such sum was incurred. On the strength ....
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.... the Act the amount of Rs. 40,41,81,896/- is deductible in the instant assessment year, and the stand of the Assessing Officer in this context is legally misplaced. 38. Apart from the aforesaid, assessee had also made a plea that the accounting treatment accorded by the assessee was tax neutral and, therefore, the entire exercise undertaken by the Assessing Officer was unnecessary in the present case. In this context, it has been pointed out that assessee has claimed deduction of the liability for payment of Customs duty in the year of import, as reflected by the debit to the Profit & Loss Account of the Provision of Customs duty and has correspondingly offered for assessment, the credits made in the subsequent year by way of fulfilment of export obligations in order to comply with the terms of the Advance licence scheme. It was, therefore, pointed out that if one examines the position over a period of 2 to 3 years, the debits for Customs duty payable in the year of import would be equal to the credits made in the Profit & Loss Account in the subsequent years on the making of exports as per the Advance licence scheme. In fact, it was pointed out that the credits in the Profit & ....