9911796707
TMI Blog2024 (3) TMI 1115X X X X Extracts X X X X X X X X Extracts X X X X ..... ted, all other companies selected by the TPO are engaged in manufacture and sale of commercial vehicles and are therefore, functionally not comparable with the assessee, a company engaged in the manufacture and sale of passenger vehicles. - Decided against revenue. Deduction u/s 43B - disallowance of amount of Excise Duty actually paid on purchase inputs and included in RG 23A Part II - HELD THAT:- A similar issue was considered by this Tribunal in [ 2018 (10) TMI 1398 - ITAT DELHI] and Hon ble High Court of Delhi in assessee s own case [ 2017 (12) TMI 590 - DELHI HIGH COURT] . The Assessing Officer is directed to decide the issue as per the directions given in earlier A.Ys 2009-10 and 20101-11 mentioned hereinabove to verify the claim and if found proper be allowed for deduction for amount forming part of RG 23A balance to the extent it has been directly paid to custom authorities. Ground Nos. 2.3 and 2.4 are allowed for statistical purposes. Excess consumption of raw materials and components to be deleted placing reliance on two factors, namely, that the net difference of stock is negligible in tune with the observations of the Hon ble Apex Court in M/s Maruti Suzuki India Ltd [ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... der protest by holding that first the Profit and loss account be recast as per Inclusive method in terms of section 145A and then some adjustments as stated above be separately made. Such directions are fully applicable pro tanto to the customs duty paid under protest. The AO is directed to follow the same - While following the same for AY 2007-08, Tribunal set aside the matter to the file of the Assessing Officer to decide it afresh as decided above by the ITAT after affording opportunity of being heard to the assessee. Thus this Ground is allowed for statistical purposes. Disallowing liabilities on account of increased prices - HELD THAT:- There is no dispute that the same method of accounting is regularly and consistently followed by the assessee as such rule of consistency is applicable as per which under the similar facts and circumstances, department ought to follow same approach on an issue in other assessment years. We, therefore, respectfully following the reasoning adopted by the coordinate Bench of this ITAT for the AY 2007-08 [ 2016 (5) TMI 1469 - ITAT DELHI] set aside the matter to the file of the AO with direction to decide the issue afresh after affording opportunity ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d decided by this Tribunal in earlier years in assessee's own case. 4. The ld. DR fairly stated that wherever the Tribunal has restored the matter to the file of the Assessing Officer, the same should be followed. 5. On such concession, we have heard the rival submissions and have carefully perused the orders of the authorities below and considered the relevant documentary evidences brought on record in light of Rule 18(6) of the ITAT Rules. Judicial decisions relied upon duly considered. 6. We will first take up assessee's appeal in ITA No. 4081/DEL/2010. 7. Ground No. 1 with its sub grounds relate to Transfer Pricing adjustment in respect of international transactions entered into during the year. 8. Briefly stated, the assessee is a subsidiary of Suzuki Motor Corporation, Japan with a 45.54% shareholding of the Government of India and is engaged in the manufacture and sale of passenger cars primarily for sale in Indian market. It also exports vehicles and spare part to various countries in Europe, South and Central America, Africa and Asia. It has only one manufacturing facility in India situated in Gurgaon. 9. During the year under consideration, the assessee has reported ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... list of comparables exhibited elsewhere, we find that except for Hindustan Motors Limited, all other companies selected by the TPO are engaged in manufacture and sale of commercial vehicles and are therefore, functionally not comparable with the assessee, a company engaged in the manufacture and sale of passenger vehicles. 16. Considering the facts of the case from all possible angles, we do not find any merit in the TP adjustment made by the TPO. We accordingly, direct the Assessing Officer/TPO to delete the impugned adjustment. Ground No. 1 with all its sub-grounds is allowed and those of the Revenue's appeal are dismissed. 17. Ground No. 2 with its sub-grounds relates to the claim of deduction of Rs. 1,99,79,84,644/- made u/s 43B of the Act. 18. This quarrel is coming out from A.Ys 1999-2000 onwards and the co-ordinate bench since A.Ys 1999-2000 to 2009-10 has been deciding this issue. 19. The co-ordinate bench in ITA No. 467/DEL/2014 for A.Y 2009-10 has considered this issue at Para 16 of its order. The relevant findings read as under: "16. As regards to Ground No. 3.5, relating to Customs Duty paid on import of components for export purposes for which exports has been m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... two different and inconsistent methods while computing the income of the present year. The aforesaid sum was duly declared as the income of the immediately succeeding year on receipt, a method consistently adopted by the assessee company and accepted by the AO since inception. The Tribunal has decided the aforesaid issue in favour of assessee in the assessment years 1999-00, 2000-01, 2001- 02, 2002-03, 2004-05, 2005-06, AY 2006-07, 2007-08 and 2008-09. The orders of the Delhi Tribunal have been affirmed by the Delhi High Court for assessment years 1999-00 (ITA No.250/2005), 2000- 01 (ITA No.976/2005), 2005-06 (ITA Nos. 171 and 172/2012) and 2006-07 (ITA No. 381/2016). Further, the issue stand covered in favour of the assessee in view of the decision of the Hon'ble Punjab and Haryana High Court in the case of CIT v. Sriyansh Knitters P. Ltd. 336 ITR 235 wherein the High Court, while affirming the finding of the Tribunal held that duty drawback accrues in the year in which rate is fixed by the competent authority after verification of claim of the assessee and amount is quantified and not in the year of export. Similar view has been held in the case of CIT v. Manav Tools (India) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... een claimed as deduction under section 43 B of the Act. The Assessing Officer, however, disallowed the aforesaid amount following the assessment orders for the preceding years. 22. The Ld. AR submitted that the Special Bench of the Tribunal in the case of DCIT v Glaxo SmithKline Consumer Healthcare Ltd: 107 ITD 343/ 299 ITR (AT) 1 (Chd.) (SB), has held that, unutilized MODVAT credit is not an allowable deduction, since such credit does not amount to payment of duty. Therefore, the Ld. AR pointed out that, as a result of the order of the Tribunal, such deduction may be held as not allowable to the assessee in the instant year but would be allowable in the year when the same is adjusted against excise duty payable. The principle laid down is that deduction is allowable in the year when adjustment is made and not in the year of purchase of raw material/input. Following the order of the Special Bench in Glaxo (supra), the ITAT in assessee's own case for AY 2001-02 decided the issue against the assessee. However, the Supreme Court has held that deduction is allowable u/s 43B of the Act for the amount lying credited in the Modvat account at the end of the accounting year, dismissin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Assessee "incurred liability in the previous year even though such sum might not have been payable within that year under the relevant law. 33. There are two kinds of payment envisaged by Section 43B of the Act. Tax payable could be in the form of excise duty on the raw material/inputs purchased by the manufacturer. The second kind of payment could be of excise duty that is payable by manufacturer on the final product at the time of clearance of such final products from the factory. 34. In Eicher Motors (supra), a challenge was raised to the validity of Rule 57F (4A) of the CE Rules under which credit which was lying unutilised as of 16th March 1995 with the manufacturers stood lapsed in the manner set out therein. The Supreme Court upheld the challenge by the manufacturers to the aforementioned Rule 57F (4A) of the CE Rules on the ground that under the MODVAT scheme as it existed on the date of change, i.e. 16th March 1995, MODVAT credit lying in the balance with the Assessee represented "a vested right accrued or acquired by the Assessee under the existing law". It was observed as under: "5............ when on the strength of the Rules available, certain ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ble product. The credit is, therefore, indefeasible. It should also be noted that there is no corelation of the raw material and the final product; that is to say, it is not as if credit can be taken only on a final product that is manufactured out of the particular raw material to which the credit is related. The credit may be taken against the excise duty on a final product manufactured on the very day that it becomes available. 19. It is, therefore, that in the case of Eicher Motors Ltd. vs. Union of India (1999) 2 SCC 361 this Court said that a credit under the MODVAT scheme was as good as tax paid." 37. Now turning to the treatment of the said payment of excise duty which has any MODVAT credit in the books of accounts, a reference may be made first to the AS-2 issued by the ICAI, para 7 of which reads as under: "Costs of Purchase 7. The costs of purchase consist of the purchase price including duties and taxes (other than those subsequently recoverable by the enterprise from the taxing authorities), freight inwards and other expenditure directly attributable to the acquisition. Trade discounts, rebates, duty drawbacks and other similar items are deducted in d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ve decision were that the Appellant therein was engaged in the manufacture and trade of products like de-oiled meals, industrial hard oil, edible oils etc. The Assessee entered into agreements with other entities for the purchase of imported palm stearin fatty acid ('imported material') from the said importers. In terms of the said agreement, the imported material was to be purchased by the Appellant at landed cost, i.e. CIF price, customs duty, clearing charges, etc. and 3% of the total cost. Under Clause 11 of the agreements, any liability arising after the sale of the imported material in respect of customs duty, excise duty, penalty, sales tax, etc. would be paid by the appellant and included in the landed cost of imported material. 41.2 At the time of actual import of material, the Customs Department demanded 100% of the applicable customs duty as additional customs duty on the CIF value of the imported material. The additional demand was challenged by the importers before the Supreme Court. As an interim measure, the Supreme Court allowed the clearance of imported material on payment of 15% of the disputed additional customs duty. A stay was granted for the balance ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... P. Ltd. v. CIT [2009] 314 ITR 62 (SC) where three conditions were laid down while considering where a provision made for future claims against warrantees was allowable as a deduction. On the facts of the case, this Court held that subject liability was a contingent liability in respect thereof could not be allowed as a deduction for the AY in question. 41.6. Specific to Section 43B, the Court considered whether it was in fact an obligation of the Appellant therein to pay additional customs duty and whether such obligation could be considered to be a Court observed: "Although the Assessee is obliged to pay the additional customs duty as and when the importers are called upon to pay the same, nonetheless, it cannot be considered as a statutory liability because the same is not imposed on the Assessee by virtue of any statute. Customs duty is an incident of import of goods and an importer is obliged to pay the same under the Customs Act. Therefore, the liability to pay the additional customs duty is a statutory liability of the importers. However, in the hands of the Assessee, the liability to pay the quantum of custom duty imposed on the importers, either directly to them o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nents and the inputs. This, according to the Assessee, is borne out by the RG-23 (Part-II) Register maintained by the Assessee and verified and audited from time to time by the excise authorities. It is asserted that the said amount "has actually been paid by the Appellant to the customs authorities (and not to the Appellant's suppliers)" and therefore, this amount should also be allowed under Section 43B of the Act. 44. The Court would only like to observe that it would be for the AO to give effect to the order pertaining to the aforementioned amounts paid by the Assessee to be made in respect of those goods already consumed as on 31st March 1999 and in respect of additional countervailing duty paid directly to the customs authorities. If indeed such payment has been made, the credit for the same would be allowable as a deduction under Section 43B of the Act. 45. However, it is also to be noted that in para 35 of the impugned order, the ITAT has accepted the alternate contention of the Assessee that unutilized MODVAT credit of an earlier year which has been adjusted in the year in question should be allowed as a deduction in as much as such adjustment would have ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ot; However, Section 145A of the Act- 5 prospective and does not apply to the AY in question. 48. The Court is not inclined to permit the Assessee to raise the plea for more than one reason. In the first place, it is a plea taken for the first time in these proceedings. It appears to be an afterthought. Secondly, the ITAT has already accepted another alternate plea made before it by the Assessee by allowing deduction in respect of the unutilized MODVAT credit of the earlier AY, the Court is not inclined to disagree with the reasoning and conclusion of the ITAT. The assessee cannot be allowed to go back and forth on the above plea. There has to be consistency. Thirdly, balance sheet of the Assessee for AY 1999-00 shows that the turnover for the year was over Rs. 8,000 crores. The corresponding sum claimed as deduction representing the unutilized MODVAT credit is not very significant in comparison. 49. Consequently, Question (ii) is answered in the negative, i.e. in favour of the Revenue and against the Assessee." In view of the finding of the Hon'ble High Court, this issue is remanded back to the file of the A.O to verify the claim as per the directions of the Hon' ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... such payment has been made, the credit for the same would be allowable as a deduction under Section 43B of the Act. 45. However, it is also to be noted that in para 35 of the impugned order, the ITAT has accepted the alternate contention of the Assessee that unutilized MODVAT credit of an earlier year which has been adjusted in the year in question should be allowed as a deduction in as much as such adjustment would have to be treated as an actual payment of excise duty. In view of the Court agreeing with the ITAT on the non-allowability of unutilized MODVAT credit as a deduction under Section 43B of the Act for the AY in question, this Court also agrees with the ITAT's acceptance of the Assessee's alternate contention with regards to the unutilized MODVAT credit of the earlier year being allowable as a deduction in the AY in question to the extent that it has been adjusted by treating as actual payment of the credit for the AY in question. As the ITAT has already pointed out, the Assessee would be entitled to such deduction "subject to verification provided the same was not allowed as deduction in the earlier year." 24. The Assessing Officer is directed to dec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the disallowance of deduction under Section 43B of the Act for a sum of Rs. 13,51,93,089/- representing custom duty (CVD) paid to be adjusted against excise duty payable on finished products, and a sum of Rs. 1,93,27,627/- representing custom duty in respect of the goods in transit/under inspection is concerned, the case of the assessee is that these amounts represent custom duty/CVD paid by the assessee during the financial year 2007-08, and since the aforesaid amount represents actual custom duty/CVD paid by the assessee during the year under consideration, the same was claimed as deduction under section 43B of the Act. But the assessing officer disallowed the aforesaid following assessment order for the assessment year 2005-06. Ld. AR submitted that this issue was also decided in favour of assessee by the Supreme Court in Civil Appeal No. 6449/2012 wherein the SLP filed by the department against the order of the Delhi High Court in the case of CIT vs. Samtel Color Ltd.: 184 Taxman 120 was dismissed holding that Custom duty paid is allowable deduction u/s 43B of the Act. He further submits that apart from this, the issue stands covered in favour of the assessee by the order of a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n record. The Ld. AR contended that this issue has been decided in earlier years in the assessee's favour by the Tribunal. He further referred to the judgment of the Hon'ble Delhi High Court in CIT vs. Samtel Colour Ltd. (2009) 184 Taxman 120 (Del) in which it has been held that advance customs duty paid in the year in question is an admissible deduction u/s 43B. In our considered opinion, there can be no dispute on the otherwise availability of deduction of advance customs duty paid by the assessee, which has to be allowed in the year of payment. In this judgment also, the Hon'ble High Court has noticed vide para 3 that the provisions of section 145A were not applicable as the assessment year under consideration was 1995-96. In view of the detailed discussion supra with reference to the applicability of section 145A to the year in question, there can be no escape from valuation of purchase, sale and inventories under the inclusive method. We, therefore, direct the AO to recast Profit and loss account under 'Inclusive method' as per the mandate of section 145A, thereby, inter alia, increasing the purchase value with the above customs duty. Then the AO will allow ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he alternate claim for deduction in respect of Sales Tax paid during the preceding A.Y and adjusted during the year under consideration after affording reasonable and adequate opportunity of being heard to the assessee. We order accordingly. Ground No. 2.7 is allowed for statistical purposes. 34. Ground Nos. 3 to 5.3 relate to not allowing withdrawal of add back u/s 43B of the Act. 35. This issue has been considered in earlier A.Ys from 1999-2000 till 2010-11. The co-ordinate bench in A.Y 2009-10 in ITA No. 467/DEL/2014 has considered this issue at Para 41 of its order. The relevant findings read as under: "41. Ground No. 4 to 4.2 is regarding non allowing withdrawal of add back u/s 43B. The assessee company had in the instant assessment year 2009-10 offered an amount of Rs. 69,50,54,573/- in its return of income. This amount represents amounts received back/ adjusted in the profit and loss account during the financial year 2008-09 out of the amounts which have already been claimed as deduction on payment basis under section 43B of the Act in the preceding assessment years. This amount was offered to tax by the assessee during AY 2009-10 on the presumption that deduction would ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... owed by AO for AY 2007-08, which has been confirmed by DRP. He submitted that identical claims have been allowed in the assessee's own case by ITAT in AY 1999-2000, 2000-01 AY 2005-06 and AY 2006- 07 and by CIT(A) in AY 2001-02 and 2002-03. 4.1. As submitted by the Ld. AR, in the order dt 24.08.2015 for the AY 2006-07, this Tribunal in assessee's own case, vide paragraph No 6.3 and 6.4 dealt with this issue in the following manner: "6.3. Ground nos. 4 to 6.1 deal with a sum of Rs. 1,41,59,08,897, which has been stated to be a total of certain amounts claimed by the assessee as deductible in the preceding year u/s 43B as excise duty and customs duty and voluntarily offered for taxation in the current year's income. The ld. AR contended that since such deductions have been denied by the AO, the corresponding offering of the same to tax in the current year, be eliminated. 6.4. We agree with the ld. AR that one amount cannot be taxed twice. It is but natural that if an amount claimed as deduction by the assessee in the earlier year has not been allowed, then on the assessee's suo motu offering of it as an item of income for the current year on the strength of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessing Officer to decide the issue afresh as decided by this Tribunal in earlier A.Ys. Thus, this ground is allowed in part for statistical purposes. 37. Ground No. 6 relates to the addition of Rs. 9.20 crores in respect of alleged excess consumption of raw materials and components. 38. Similar issue was considered by this Tribunal in assessee's own case in A.Y 2000-01 till A.Y 2008-09. In A.Y 2008-09, this Tribunal in ITA No. 6021/DEL/2012 has considered a similar issue at para 5 of its order. The relevant findings read as under: "5. In respect of disallowance to a tune of Rs. 1,70,45,000/- on account of alleged excess consumption of raw materials and components, it is the argument of the Ld. AR that in the manufacturing process of automobiles, the assessee procures and utilizes more than 12000 items of raw material and components for manufacturing the range of automobiles, and during the previous year relevant to the assessment year 2008-09, the year under consideration, the turnover of the assessee (excluding excise duty) amounted to Rs. 17,860 crores. He explained that the assessee followed the elaborate system of book keeping for receipt and issue of raw material and com ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... inst advance licenses, having regard to nature and skill of the operation and that similar issue raised by the Excise Authorities in the earlier year(s) has been decided in favour of the assessee by the CESAT in financial years 2000-01, 2001-02 and 2002-03. He placed reliance on a decision of the Hon'ble Apex Court in Commnr. Of Central Excise Vs. M/s Maruti Suzuki India Ltd in Civil Appeal No 7829/2004 decided on 3.4.2015 wherein the Hon'ble Apex Court held that when the shortage of inputes as corrected is only 0.24%, that would be immaterial and correction of the total input is in use. Besides placing reliance on the decisions reported in Setia Plastic Industries: 316 ITR 133(Del.), R.B. 379 ITA No.-6021/Del/2012 36 Bansilal Abhirchand Spng & Wvng Mills v. CIT: 75 ITR 260 (Bom.), Surat District Co-operative Milk Producers Union Ltd: 99 TTJ 390 (Ahd.), Geetanjali Woollens Pvt. Ltd.v. ACIT: (1991) 121 CTR (Trib) (Ahd.), and ITO vs. Himalaya Drug Company : 17 TTJ 9 (Del.) Ld. AR submitted that the issue is squarely covered in favour of appellant by ITAT orders for assessment years 1999-2000 to 2002-03, AY 2005-06, 2006-07 and 2007-08. 5.1. Per contra, it is the argument of the Ld. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ks of account at the end of the year. Some items of stock may be eventually under-consumed while others over consumed. The net effect of under/over consumption is nothing, but, the deviation from the standard consumption. During the year in question, the variation between physical stock and stock register was Rs. 4.48 crore negative, which means items where stock as per stock register was more than physical stock and Rs. 2.86 crore positive i.e., items where stock as per stock register was less than the physical stock, leaving the net difference of Rs. 1.62 crore. The AO disallowed Rs. 4.48 crore ignoring the excess amount of Rs. 2.86 crore. The assessee is aggrieved against this addition. 14.2. It is manifest that the net difference of Rs. 1.62 crore is nothing, but, excess consumption over the standard consumption. Such shortage of Rs. 1.62 crore is only 0.018% of total consumption of material debited to the Profit & Loss Account. In view of the fact that this amount has actually been consumed in the manufacturing of goods, it cannot call for any disallowance. There may be production efficiencies or inefficiencies leading to under or over consumption of inputs visa-vis standard ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ench [supra], we direct the Assessing Officer to delete the impugned addition. This ground is allowed. 43. Ground Nos. 8 to 10 relate to the disallowance u/s 35DDA of the Act amounting to Rs. 14,72,09,512/-. 44. Similar issue has been considered by the Tribunal in A.Ys 2002- 03, 2004-05 to 2008-09. In A.Y 2008-09, this Tribunal in ITA No. 6021/DEL/2012 has considered this issue at Para 7 of its order. The relevant findings read as under: "7. Now turning to the disallowance of Rs. 23,91,54,836/- deduction claimed by the assessee u/s 35DDA of the Act, the assessee company had, during the assessment year 2008-09 claimed deduction of Rs. 23,91,54,836/- u/s 35DDA of the Act, being 1/5th of the payment of Rs. 119.58 crores made by the assessee company during AY 2004- 05 to its employees under VRS scheme, and the AO has held that payments under VRS made in earlier years, is violative of Section 35DDA of the Act and as such all claims made as a consequence of the original claim are also violative of that section. Ld. AR submitted that this issue of claim u/s 35DDA is covered in favour of assessee by the order of the ITAT for AY 2002-03, AY 2004-05, AY 2005-06, AY 2006-07 and AY 2007-08 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dealing with the same issue for the AY 2006-07 noticed that an identical issue has been decided by the ITAT in the earlier assessment years in the case of assessee itself and lastly in the appeal for the assessment year 2006-07 (supra), held that "…After making a thorough discussion on the issue, the Tribunal has held that Rule 2BA is relevant only for the purpose of availing exemption u/s 10 by employees and not for the purpose of allowing deduction to the employer u/s 35DDA of the Act. Resultantly, the disallowance made by the AO came to be knocked down by the tribunal. In the absence of any distinguishing factor having been pointed out by the ld. DR, respectfully following the precedent, we 393 ITA No.-6021/Del/2012 50 direct to allow deduction u/s 35DDA for a sum of Rs. 38.63 crore." 7.4. Following the same for the AY 2007-08 also, this Tribunal directed the Assessing Officer to allow the claimed deduction under sec. 35DDA of the Act at Rs. 23,91,54,586. Since facts are similar in assessee's own case, we follow the decisions above and direct the Assessing Officer to allow the deduction under section 35DDA of Rs. 23,91,54,836/- (being 1 /5th of the total expenditure ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is Act" clearly shows that the payment which is made by the assessee to the non- resident is liable to be taxed in India in the hands of the non-resident. Here it is noticed that the commission has been paid to the agents for the sale of the vehicles and re- imbursement of advertisement expenses incurred outside India. Obviously, these expenditures incurred outside India does not make them taxable in India under the Act and the non-resident itself is not taxable in India. In the circumstances, we are of the view that the provisions of Section 195 will not be attracted in the case of these payments and the CIT (A) was right in deleting the disallowances made. In the circumstances, ground No.14 of the Revenue's appeal stands dismissed and the findings of the CIT (A) stands upheld." 49. Respectfully following the findings of the co-ordinate Bench [supra], we direct the Assessing Officer to delete the impugned disallowance. This ground is allowed. 50. Ground Nos. 12 to 12.4 relates to claim of Sales Tax Subsidy as capital receipt. 51. The quarrel relating to the claim traveled upto the Hon'ble High Court of Delhi in A.Ys 2005-06 and 2006-07. The Hon'ble High Court of Delhi i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Assessing Officer placing reliance on pre-amended provision of section 32 of the Act. 57. We are of the considered view that the Assessing Officer should consider the set off as per the amended provisions of the Act. We order accordingly and direct the Assessing Officer to consider the same as per relevant provisions of law. This ground is allowed for statistical purposes. 58. In the result, the appeal of the assessee is allowed in part for statistical purposes. ITA No. 4174/DEL/2010 [Revenue's appeal]. 59. Ground Nos. 1 and 2 relate to the TP adjustment. 60. This issue has been discussed at length in assessee's appeal [supra]. For our detailed discussion therein, Ground Nos. 1 and 2 are dismissed. 61. Ground No 3 relates to deletion of disallowance of Rs. 21,32,46,724/- made by the Assessing Officer on account of Customs Duty paid on import of components for export purposes for which exports have been made. 62. This dispute is coming since A.Y 1999-2000 and it has been decided by this Tribunal, which decision has been affirmed by the Hon'ble High Court of Delhi in ITA Nos. 250/2005, 171/2012, 172/2012, 381/2016, 1999-2000, 2005-06 and 2006-07 respectively. 63. In A. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... received in the instant year but which allegedly accrued in the previous year, as per the principle adopted by the assessing officer is not taxable in the year under consideration. The Ld. AR submitted that there is no justification for adopting two different and inconsistent methods while computing the income of the present year. The aforesaid sum was duly declared as the income of the immediately succeeding year on receipt, a method consistently adopted by the assessee company and accepted by the AO since inception. The Tribunal has decided the aforesaid issue in favour of assessee in the assessment years 1999-00, 2000-01, 2001- 02, 2002-03, 2004-05, 2005-06, AY 2006-07, 2007-08 and 2008-09. The orders of the Delhi Tribunal have been affirmed by the Delhi High Court for assessment years 1999-00 (ITA No.250/2005), 2000-01 (ITA No.976/2005), 2005-06 (ITA Nos. 171 and 172/2012) and 2006-07 (ITA No. 381/2016). Further, the issue stand covered in favour of the assessee in view of the decision of the Hon'ble Punjab and Haryana High Court in the case of CIT v. Sriyansh Knitters P. Ltd. 336 ITR 235 wherein the High Court, while affirming the finding of the Tribunal held that duty drawba ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r. The Assessing Officer, following the orders for preceding assessment years, disallowed the said claim on the ground that since the assessee was contesting these liabilities and there was no finality regarding the liabilities and that the same were not debited to the P&L A/c. 36. The Ld. AR submitted that the Tribunal has held in assessee's own case that, since the duty has been paid, deduction claimed under section 43B of the Act has to be allowed. The Ld. AR relied upon the decision of Delhi High Court in the case of CIT v. Dharampal Satyapal Sons (P.) Ltd. 50 DTR 287 wherein 528 49 ITA No. 467/Del/2014 the High Court has held that amount paid by the assessee against excise duty demand raised by excise authorities was allowable deduction as it was statutory liability which was allowable on payment basis under section 43B of the Act. Similarly, the Mumbai Bench of the Tribunal in the case of Euro RSCG Advertising (P) Ltd v. ACIT [2013] 154 TTJ 389 (Mum) held that service tax liability along with the interest paid on the basis of the show cause notice issued by the service tax authorities, is allowable deduction under section 43B of the Act in the year in which the payment was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 00-01, 2001-02, 2002-03, 2005-06, 2006-07 and 2007-08, coordinate Benches of this Tribunal have held that, since the duty is paid, deduction claimed u/s 43B of the Act has to be allowed. 3.29. This aspect of disallowance of claim for deduction under section 43B of the Act for the amount of Customs Duty paid under protest has been one of the subject of matters in assessee's own case for the AY 2006-07 and 2007- 08 successively, and for the AY 2006-07 vide para 5.5 of the order dated 24.8.2015, the following finding was returned by the Tribunal, " 5.5. Next item is Customs duty paid under protest amounting to Rs. 1,34,25,787. We have discussed similar issue supra while dealing with 'Excise duty paid under protest' by holding that first the Profit and loss account be recast as per 'Inclusive method' in terms of section 145A and then some adjustments as stated above be separately made. Such directions are fully applicable pro tanto to the customs duty paid under protest. The AO is directed to follow the same." 3.30. While following the same for AY 2007-08, Tribunal set aside the matter to the file of the Assessing Officer to decide it afresh as decided above by th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 67/DEL/2014A.Y 2009-10. The relevant findings read as under: "68. Ground No. 9 to 9.5 is regarding disallowance on account of Provisional Liability Expenditure on account of FPI-OE Components. The assessee had accounted for liability on account of foreseen price increase (FPI) based on scientific analysis of increase in input prices, on purchases already made by the company at provisional prices, and on which the final price is yet to be settled with the supplier. FPI of Rs. 36,38,43,197/- was debited to consumption of raw material and components in the profit and loss account in accordance with mercantile system of accounting. The same was claimed as business deduction in the computation of income. Vendor-wise details of total provision of Rs. 36,38,43,197/- made during the relevant year was submitted before the Assessing Officer. The said practice was in consonance with the provisions of the Companies Act and generally accepted accounting principles and practices of Institute of Chartered Accountants of India. The assessing officer however, disallowed the aforesaid claim of the assessee on the ground that assessee has quantified the liability without acknowledging the quantifie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... each purchase made by assessee and is allowable as deduction in determining the income of the relevant assessment year. The aforesaid is further in accordance with practice prevalent in motor vehicles industry. Reference in this regard is invited to a notification dated 28.7.2003 issued by the Excise Authorities on the subject of charging of interest under section 11AB wherein the excise authorities recognized prevailing commercial practice of supplementary invoices being made in addition to the original invoices. The liability on account of FPI was an ascertained liability representing additional purchase price of the goods. Since the liability accrued during the relevant assessment year, even though was finally paid in the following assessment years, the same was allowable deduction. The Ld. AR relied upon the following decisions wherein it has been held that liability which has arisen in the relevant accounting year is an allowable deduction even though its actual quantification and discharge is deferred to a future date: a) Calcutta Discount Co. Ltd.: 37 ITR 1 (SC) b) Metal Box (P) Limited (1969): 73 ITR 53 (SC) c) United Commercial Bank v. CIT 240 ITR 355 (SC) d) Bhara ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hatsoever. The liability estimated in a particular year finally settled in the subsequent year gets reflected in the profit & loss account. The income as well as the charge on settlement in the subsequent year is brought to the income or expenses statement of the assessee company to the extent of variation from the actual FPI liability. It is well settled that mere timing difference should not be used to disturb the method of accounting and books of accounts of a tax payer consistently maintained and accepted year after year. The Ld. AR further submitted that the aforesaid method of accounting has been regularly followed by assessee and claims were accordingly made which has been duly accepted by Revenue in all the preceding years except in assessment year AY 2003-04 There has been no change in method of accounting or estimation. The Ld. AR submitted that it is a well settled position of law that while the principle of res judicata does not apply to the income- tax proceedings, the Courts have emphasized there must be consistency in the position that the Revenue takes on an issue in different assessment years. The Ld. AR relied upon the following decisions: * CIT vs. Excel Indust ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed the liability without acknowledging the quantified liability to the creditors. However, according to the assessee the change in price of the components takes place to give effect to the increase in the cost of the inputs required for manufacturing of the components. The same is, as per the agreement with the suppliers, to ensure uninterrupted supply of components, even when their cost has increased. According to the assessee FPI is an existing liability as per the understanding arrived at with the suppliers of the components, who are original manufacturers of the components. It is submitted on behalf of the assessee that the liability of FPI was estimated by the purchase department with substantial degree of accuracy as they are in constant touch with suppliers and have knowledge of the claims of suppliers, trend of the cost of inputs, etc. The personnel in the purchase department updates the foreseen price of each component for each supplier and effective date, based on their input and available information in computer system regarding quantity purchased and price paid. The liability in respect of each component was worked out considering the weight of each material, the quanti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... In respect of the vendor-wise and item-wise details of total provision of Rs. 32,11,63,153 made during the relevant year in the paper book, it is submitted that the said details contain name of the vendor, the amount of additional value in respect of the component, the invoices, raised by the suppliers, were provisional and each invoice was liable to be reviewed/ amended once the quantum is determined and that this quantum of increase would apply to re-compute the prices payable by assessee on all supplies made by the suppliers during the year, and the liability for FPI was provided in the books of accounts on a scientific analysis of increase in price of components due to change in input cost, representing additional purchase price of the goods. It is submitted that since the liability accrued during the relevant assessment year, even though was finally paid in the following assessment years, the same was allowable deduction. 12.2. Ld. AR placed reliance on the decision of the Hon'ble Supreme Court in the case of CIT vs Woodward Governor India (P) Ltd.: 312 ITR 254 wherein it is held that:- "21. In conclusion, we may state that in order to find out if an expenditure is deducti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... company to the extent of variation from the actual FPI liability. Ld. AR argued that it is well settled that mere timing difference should not be used to disturb the method of accounting and books of accounts of a tax payer consistently maintained and accepted year after year. In support of his argument that while the principle of res judicata does not apply to the income-tax proceedings, the Courts have emphasized there must be consistency in the position that the Revenue takes on an issue in different assessment years, Ld. AR cited the decisions reported in CIT vs. Excel Industries (P) Limited: 358 ITR 295 (SC), Radhasoami Satsang v. CIT 193 ITR 321(SC), DIT (E) v. Apparel Export Promotion Council: 244 ITR 734 (Del), CIT v. Neo Polypack (P) Ltd: 245 ITR 492 (Del.), CIT v. Girish Mohan Ganeriwala: 260 ITR 417 (P&H), CIT V. Dalmia Promoters Developers (P) Ltd: 200 CTR 426 (Del.), Escorts Cardiac Diseases Hospital: 300 ITR 75 (Del). Since the issue now stands covered in favour of the assessee by the order of the Tribunal in the assessee own case for the assessment year 2007- 08, wherein the Tribunal held that provision for foreseen price increase made by the appellant represented an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... der consideration, such disallowance has been made. Of course, principles of res- judicata is not application in the incometax matters but rule of consistency is applicable as per which under the similar facts and circumstances, department ought to follow same approach on an issue in other assessment years. It is an established proposition of law that a method of accounting regularly and consistently followed does not lead to any loss of Revenue, whatsoever. The liability estimated in a particular year finally settled in the subsequent year gets reflected in the profit and loss account. We thus set aside the matter to the file of the Assessing Officer with direction to decide the issue afresh after affording opportunity of being heard to the assessee as per the first appellate order on the issue in the assessment year 2003-04 against which no appeal was preferred by the Revenue before the ITAT." 12.7. When a similar question was dealt with by the first appellate authority and the Revenue accepted the same without preferring any appeal thereon, it is not open for the Revenue now to contend that Assessee's reliance on the case of Hon'ble Supreme Court in the case of Radha Saomi Sat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng the documents submitted by the assessee, the ld. CIT(A) was convinced that the assessee has maintained complete records, matching of returned vehicles with sales returned report, finished goods stock report and finished goods stock valuation report. The ld. CIT(A) gave a factual finding that the vehicles which have been returned during the year and have remained unsold have been included in the closing stock of finished goods and have been accounted in the books of account. 77. No factual error has been pointed out in the findings of the ld. CIT(A). We, therefore, do not find any reason to interfere with the findings of the ld. CIT(A). This ground is dismissed. 78. Ground No. 8 with its sub-grounds relates to the deletion of disallowance of long term capital loss as speculative loss. 79. The co-ordinate bench in A.Y 2001-02 in ITA No. 300/DEL/2006 has considered this issue at Paras 31 and 32 of its order. The relevant findings read as under: "31. In regard to Ground No.15, which was against the deletion of the disallowance of the long-term capital loss held as speculative loss within the meaning of Explanation to Section 73 of the Act, it was submitted that the issue was sq ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . 6,41,060/- on account of club membership fees to profit & loss account. The said expenditure is incurred on subscription to clubs provided to various employees and directors. The Assessing Officer has, in the impugned assessment order disallowed the said expenditure of Rs. 6,41,060/- by holding that the same cannot be considered as business expenditure. At the outset, the Ld. AR submitted that the aforesaid expenditure has been incurred for business purposes on the grounds of commercial expediency and there is no element of any personal benefit being granted either to the employee or director. The Tax Auditors have amply clarified this position vide clause 17(b) of the Tax Audit Report. The aforesaid expenditure is, thus, allowable as deduction. The aforesaid issue is covered by the decision of the Supreme Court in the case of Samtel Color Ltd (Civil appeal No 6449/2012) wherein the Court dismissed the SLP filed by Revenue against the order of Dr Delhi High Court (referred infra) allowing the claim for deduction representing 6 expenditure incurred on club membership. The Ld. AR relied upon the following judicial pronouncements: * Nestle India Limited: 296 ITR 682 (Del.) * CIT ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... membership, he argued that this expenditure is allowable as deduction. He submitted that besides being covered by the decisions in Nestle India Limited: 296 ITR 682 (Del.), CIT v. Samtel Color Ltd.: 326 ITR 425 (Del.), Otis Elevators Co. (India) Ltd. v. CIT 195 ITR 682 (Bom); American Express International Banking Corporation v. CIT 258 ITR 601 (Bom.); CIT v. Citibank N.A.:264 ITR 18 (Bom), CIT v. Force Motors Ltd.:ITA No. 5296 of 2010 (Bom), CIT v. Sundharam Industries Ltd. 240 ITR 649 (Guj.), CIT v. Infosys Technologies Ltd.: 205 Taxman 59 (Kar), Assam Brook Ltd. v. CIT: 267 ITR 121 (Cal), DCIT v Max India Ltd. (2007) 112 TTJ (Asr.)726, this issue is also covered in favour of the assessee by the decisions of the Tribunal in the assessee's own case for the assessment years 2001-02, 2002-03, 2004-05, 2005-06, 2006-07 and 2007- 08. 8.1 On this aspect, the Ld. DR submitted that in view of the decision of Hon'ble Supreme Court cited above, the decision of the ITAT was accepted and further appeal before the Hon'ble High Court u/s 260A was not preferred on this issue for AY 2006-07 and 2007-08. In view of this submission of Ld. DR this ground is allowed and the Assessing Officer is d ..... X X X X Extracts X X X X X X X X Extracts X X X X
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