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TMI Blog2015 (12) TMI 1024X X X X Extracts X X X X X X X X Extracts X X X X ..... :- 30-10-2015 - MS. SUSHMA CHOWLA, JM AND SHRI PRADIP KUMAR KEDIA, AM For The Appellant : Shri Sunil Ganoo For The Respondent : Shri Dheeraj Kumar Jain ORDER PER SUSHMA CHOWLA, JM: This appeal filed by the assessee is against the order of CIT(A)-I, Nashik, dated 08.08.2013 relating to assessment year 2009-10 against order passed under section 143(3) of the Act, 1961 (in short the Act ). 2. The assessee has raised the following grounds of appeal:- 1) The disallowance u/s 43B of ₹ 14,47,211/- of VAT collected but not claimed as expenditure, should be deleted from the appellants total income assessed by following the ratio of 1) A.W. Figgis Co Vs. CIT (2002) 256 ITR 268 (Cal), 2) CIT Vs. India Carbon Ltd. (1993) 200 ITR 759 (Gauhati), 3) CIT Vs. Noble Hewitt (India)(P) Ltd. (2008) 305 ITR 324 (Del). 2) It may please be held that the ratio of the decision of Supreme Court in the case of Chowringhee Sales Bureau (P) Ltd. Vs. CIT (1973) 87 ITR 842 (SC) which was given in the context of the Income Tax Act, 1922, is not applicable in the context of section 43B disallowances, under the Income Tax Act, 1961. 3) The appellant craves lea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (A). 7. The learned Authorized Representative for the assessee before us stressed that the liability of VAT was payable. However, the assessee had never routed the same through Profit Loss Account as the sales were declared without declaring VAT. It was further pointed out by the learned Authorized Representative for the assessee that under Maharashtra VAT Act, the sale price was not to include the VAT. It was further stressed by him that in view of Circular No.372 issued by the CBDT, the profit as per method of accounting followed by the assessee is to be applied. Further, reference was made to Circular No.772 issued by the CBDT. The learned Authorized Representative for the assessee further placed reliance on the following decisions:- 1. India Carbon Ltd. Vs. ACIT Anr. (1993) 200 ITR 759 (Gau) 2. CIT Vs. Noble and Hewitt (I) P. Ltd. (2008) 305 ITR 324 (Del) 3. Hindustan Commercial Corp. Vs. ITO (1990) 32 ITD 295 (Pune) 8. It was further pointed out by the learned Authorized Representative for the assessee that the ratio laid down by Hon ble Supreme Court in Chowringhee Sales Bureau (P) Ltd. Vs. CIT (supra) was not applicable. 9. The learned Departme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... led, under any law for the time being in force, shall include all such payments, notwithstanding any right arising as a consequence to such payments. Sub-clause (b) talks of interest received by the assessee on compensation or enhanced compensation, which is not relatable to the issue before us. 12. The aforesaid provisions of section 145A of the Act have been substituted by the Finance (No.2) Act, 2009 w.e.f. 01.04.2010. Prior to its substitution, which was inserted by the Finance (No.2) Act, 1998 w.e.f. 01.04.1999, the section provided the provision relatable to the valuation of purchase and sale of goods and inventory, for the purpose of determining the income chargeable under the head profits and gains of business or profession and no clause (b) was provided i.e. in respect of income received by the assessee on compensation or on enhanced compensation. In view of the amended provisions of the Act, which came into effect from 01.04.1999 for valuing the purchases and sales of goods and also for valuing the inventory, while determining the income chargeable under the head profits and gains of business or profession, it has been provided that the said valuation would be in accor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of the year, no amount is to be disallowed by invoking the provisions of section 43B of the Act. The learned Authorized Representative for the assessee has time and again stressed that the VAT payable account has shown in its Balance Sheet in the liabilities side and the same was not charged to the Profit Loss Account and was not claimed as a deduction, hence, the same cannot be added back under the provisions of section 43B of the Act. 15. The first contention of the learned Authorized Representative for the assessee in this regard was that under the Maharashtra Value Added Tax Act, 2002, the sale price shall not include the tax paid or payable to a seller in respect of such sale and hence, there was no requirement for the assessee to recognize the VAT account in its Profit Loss Account. Another point raised by the learned Authorized Representative for the assessee was with reference to the Circular No.372 issued on 08.12.1983, under which the Explanatory Notes on the provisions of Finance Act, 1983 were elaborated upon with special reference to section 43B of the Act. The intention of introduction of provisions of section 43B of the Act was to curb the practice of claimi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt as part of the sale consideration, it tantamount to the said entry being routed through the Profit Loss Account, especially in the cases where the assessee is following mercantile system of accounting. Admittedly, in the facts of the present case, the assessee was following mercantile system of accounting. 17. Now, coming to second aspect of the issue that, where the assessee had not recognized the amount of VAT payable / paid in its Profit Los s Account and had only made entries in the Balance Sheet, are the provisions of section 43B of the Act attracted in the case? The said section was introduced in order to provide the deduction on account of statutory liabilities to be allowed only on payment basis, irrespective of the year to which it relates. The said section starts with a non-obstacle clause that notwithstanding anything contained in the Act, where the deduction which is otherwise allowable under the Act in respect of any amount payable by an assessee, by way of tax, duties, cess or fees, by whatever name called, under any law for the time being in force, shall be allowed as a deduction in the year of payment, irrespective of previous year to which the said liabil ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... amount within accounting period or before the due date of filing the return of income, no addition is to be made in the hands of the assessee as the amount collected on one hand is paid on the other hand and hence, Nil deduction to be allowed to the assessee. However, where the assessee collects the amount on account of VAT, but does not deposit the same within the accounting period or before due date of filing the return of income, as requisitioned under section 43B of the Act, the liability to pay arises and once that liability has not been discharged, even if the amount has not routed through the Profit Loss Account, the same is to be disallowed in the hands of assessee, as the provisions of section 145A of the Act come into play and the consequences thereto follow. However, in respect of the issue before the Hon ble Delhi High Court, the only issue was with regard to collection of service tax, which is not covered by the provisions of section 145A of the Act, which deals with the value of purchases, sales and closing stock to be adopted in the accounting period. 20. The learned Authorized Representative for the assessee has further placed reliance on the decisions of Hon b ..... X X X X Extracts X X X X X X X X Extracts X X X X
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