2022 (6) TMI 688 - AT - Income Tax

Disallowance of Provision for Entry Tax - HELD THAT - Assessee had paid advance entry tax to the tune of Rs. 1,44,64,585/- which is shown under the other current asset under Schedule E of balance sheet and during the year entry tax of Rs. 8,95,771/- debited into profit and loss A/c and also shown the said entry tax amount under the current liabilities, as the assessee already advance payment was made under entry tax and such provision will be adjusted from advance entry tax after disposal of writ petition which is still pending before the Hon ble Gauhati High Court and the assessee had already paid the entry tax in advance, although the said provision was made only for adjustment after the disposal of the writ petition by the Hon ble Gauhati High Court and accordingly we allowed Rs. 8,95,771/- on account of provision of entry tax made by the assessee since assessee had already paid advance entry tax. As made clear that the provision made by the assessee will be adjusted from the advance payment entry tax after the disposal of the writ petition which is still pending before the Hon ble Gauhati High Court and consequential tax effects should be taken into consideration in terms of such order passed by the Hon ble Gauhati High Court. Appeal of assessee allowed.

Summary

Issues:
Appeal against order of National Faceless Appeal Centre regarding addition of provision for entry tax.

Analysis:
The appellant, a firm engaged in manufacturing coke, filed an appeal against the order of the National Faceless Appeal Centre, challenging the addition of Rs. 8,95,771 on account of provision for entry tax. The original assessment determined the total income at Rs. 43,13,44,440, with an addition made by the Assessing Officer. Subsequently, a proceeding under section 263 was initiated, leading to a revised assessment. The appellant contended that the provision for entry tax was made to protect its liability and was debited to the profit and loss account. The appellant had paid advance entry tax, and the provision was to be adjusted after the disposal of a pending writ petition regarding the applicability of entry tax. The tribunal noted that the appellant had already paid the entry tax in advance and allowed the appeal, directing that the provision made would be adjusted from the advance payment after the disposal of the writ petition by the High Court. The consequential tax effects were to be considered as per the High Court's order.

The tribunal considered the submissions of both parties and found that the appellant had paid advance entry tax and made a provision for entry tax, which was to be adjusted after the disposal of a pending writ petition. The tribunal allowed the appeal, stating that the provision made by the appellant would be adjusted from the advance payment entry tax after the disposal of the writ petition. The tribunal emphasized that the consequential tax effects should be taken into account in accordance with the High Court's order. The appeal was allowed, and the order was pronounced in open court on 09.06.2022.