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TMI Blog2016 (4) TMI 899X X X X Extracts X X X X X X X X Extracts X X X X ..... relevant to assessment year 2012-13 and not in the period relevant to assessment year 2011-12 as held by the authorities below. We, therefore, reverse the impugned order of the CIT(Appeals) - Decided in favour of assessee - ITA No. 5087/MUM/2015 - - - Dated:- 29-2-2016 - SHRI JASON P. BOAZ ACCOUNTANT MEMBER AND SHRI RAMLAL NEGI, JUDICIAL MEMBER For The Appellant : S/Shri J.D.Mistry/Madhur Agarwal/ Ketan Ved For The Respondent : Shri Manjunatha Swamy ORDER PER JASON P. BOAZ, A.M: This appeal by the assessee is directed against the order of the CIT(Appeals)-3, Mumbai dated 30/09/2015 for assessment year 2011- 12. 2. The facts of the case, briefly, are as under:- 2.1 The assessee company, engaged in the business of trading in Foreign Made Foreign Liquors, pigments and paintings (Art work) filed its return of income for assessment year 2011-12 on 30/09/2011. The return was processed under section 143(1) of the Income Tax Act, 1961 (in short the Act ) and the case was subsequently taken up for scrutiny. In the course of assessment proceeding, the Assessing Officer ( AO ) noticed that assessee had received ₹ 62.50 crores from Diageo Brands B. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... amount of ₹ 62,50,00,000/- received from Diageo Holdings B.V, Netherlands should not be brought to tax in the assessee s hands in this year. The assessee submitted that the customs duty liability got crystallized only in the period relevant to assessment year 2012-13 pursuant to the order of the Customs Central Excise Settlement Commission order dated 9/2/2012 and for which it made the payment on 14/03/2012. The same being offered for tax in assessment year 2012-13, it cannot be taxed again in assessment year 2011-12. The Assessing Officer after considering the assessee s explanation was of the view and held that this amount of ₹ 62.50 crores was exigible to tax in the assessee s hands for the reasons that, the liability to Customs Dept. is of the importer and not Diageo Holdings B.V, Netherlands and that it is a trading receipt. The assessment was finally concluded under section 143(3) of the Act vide order dated 28/03/2014, wherein the assessee s income was determined at ₹ 61,79,86,690/- in view of the following additional disallowances:- (i) Payment received from Diageo Holdings B.V, Netherlands - ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the Assessing Officer be directed to recomputed its total income for the year without considering the amount received in terms of te aforesaid Indemnity Agreement. 2 Re.: General: 2.1 The Appellant craved leave to add, alter , amend, substitute and/or modify in any manner whatsoever all or any of the foregoing grounds of appeal at or before the hearing of the appeal. 3.2.2 Before us, the Ld. Senior Counsel for the assessee submitted that the additional grounds (supra) be admitted for consideration since it raises a purely legal issue and would not require the examination of any new fact other than those already on the record. We have heard the rival contentions of both sides in the matter and carefully considered the issue before us. On an appreciation of the same, we are of the considered opinion that the issue raised in the additional grounds (supra) is purely a legal issue which would not require examination of any new facts, other than the material on record and, therefore, in the interest of equity and justice admit the same for consideration. 4. Grounds Nos.: 1 to 3: 4.1 In these grounds, the assessee assails the orders of the authorities below in h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the relevant tax that arose as a consequence of the re-determination of the assessable value. This agreement at clause 10 also provided for the return to Diageo Holdings Netherlands, B.V from the assessee of any amount received back from the authorities concerned. 4.2.3 The Ld. Sr. Counsel submitted that the DRI issued a show cause notice dated 30/03/2011 to the assessee alleging undervaluation of the imported goods and worked out the customs duty liability in this regard at ₹ 58,04,28,400/-. According to the Ld. Sr. Counsel, the amount paid to the Customs Authority amounting to ₹ 62,50,00,000/- was shown as Advance payment of taxes in Note -9 Loan and Advances to the Balance Sheet as on 31/03/2011 (placed at page 79 of Paper Book). It is submitted that since this receipt was only an advance received and the additional duty paid was only an advance payment towards probable future tax, no effect was given to these items in the return of income filed for the year under consideration i.e. for assessment year 2011-12. 4.2.4 The Ld. Sr. Counsel further submitted that in view of commercial expediency and since it has not been engaged in the import of alcohol bever ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... consideration, i.e. assessment year 2011-12, the Assessing Officer held that the amount of ₹ 62,50,00,000/- received by the assessee by virtue of the Indemnity Agreement dated 7/4/2010 is exigible to the tax. It is contended that this order of assessment is a non-speaking order; which does not give any cogent reason for holding this amount to be a trading receipt and taxing this amount in this year and without establishing any linkage of any factual event of the case that proved that the said customs liability had crystallized in this year 2011-012. The Ld. Sr.Counsel further contended that on appeal the CIT(Appeals) in a nonspeaking order confirmed the addition of ₹ 62,50,00,000/- without assigning any proper reasons for his action. It was also contended by the Ld. Sr.Counsel that the CIT(Appeals) by wrongly relying on the provisions of section 43B of the Act even rejected the assessee s alternate claim that, if the reimbursement of ₹ 62,50,00,000/- was to be held as exigible to tax during the period relevant to assessment year 2011-12, then a corresponding deduction should be allowed for the corresponding payment towards customs duty liability. 4.2.7 The Ld. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ar ended 31/03/2012 which also reports the relevant figures for assessment year 2011-12 also). 4.2.8 The Ld. Sr.Counsel contends that the said amount of ₹ 62,50,00,000/- is an amount received in advance to defray a possible liability and, therefore, it cannot be treated as income until the corresponding liability has crystallized. In the case on hand the customs duty liability crystallized pursuant to the order of the Customs Central Excise Settlement Commission dated 9/2/2012, which is in the subsequent period relevant to assessment year 2012-13 and, therefore, the amount of ₹ 62,50,00,000/- can be taxed only in that year and not in the year under consideration i.e. assessment year 2011- 12 as has been erroneously made out by the authorities below. In support of this proposition, Ld. Sr.Counsel placed reliance on the decision of the Hon ble Delhi High Court in the case of Dalmia Cement(Bharat) Ltd. (2013) 357 ITR 459(Delhi), in which it is contended is an identical case of possible levy of Sales Tax liability , it was held that when the assessee collected refundable security deposit towards possibly levy of Sales Tax on packing charges, on the understanding tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ₹ 62.50 crores from Diageo Brands B.V, Netherlands , which was disclosed by the assessee as reimbursement received with a Note 12(II)(F) to Schedule 17 to financial statements. In this regard, the Assessing Officer observed that in November, 2009 the DRI had initiated investigations in respect of undervaluation of the assessee s imports before the Customs Dept. for the period November 2004 to November,2009. Pursuant to this, the assessee entered into an Indemnity Agreement dated 7/4/2010 with Diageo Brands BV Netherlands, whereby the assessee was to receive reimbursement of amounts paid/to be paid to the Customs Department and received the said amount of ₹ 62.50 cores as an advance towards liability likely to arise under the Customs Act. This amount was shown as Advance payment of taxes in Note-9, Loans and Advances to the Balance Sheet as on 31/03/2011. The DRI s show cause notice dated 30/3/2011 indicated that the additional customs duty liability on account of under valuation of imports by the assessee would be ₹ 58,04,28,000/-. The assessee then approached the Customs Central Excise Settlement Commission, which by order dated 09/02/2012 worked out the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d by the authorities below but only during the subsequent financial year relevant to assessment year 2012-13 when the assessee s liability to pay the additional customs duty arose, pursuant to the order of the Settlement Commission dated 9/2/2012 which was discharged by the assessee on 14/3/2012. The position that the payment of ₹ 62.50 crores received by the assessee is purely an advance in respect of likely additional customs duty payable, which had not yet crystallized, is brought out in clause 3 and 10 of the Indemnity Agreement dated 07/04/2010 specifying that any excess received by the assessee in this regard would have to be refunded to Diageo Brands B.V. Netherlands after finalization of the proceedings of the Customs Central Excise Settlement Commission. In this factual matrix, we are of the considered opinion that since the additional customs duty liability crystallized pursuant to the order of the Customs Central Excise Settlement Commission order dated 09/02/2012, which is in the subsequent period relevant to assessment year 2012-13, it is exigible to tax only in that year and not in the period under consideration i.e. assessment year 2011-12. This amount of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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