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TMI Blog2025 (1) TMI 1290X X X X Extracts X X X X X X X X Extracts X X X X ..... i S. L. Anuragi, CIT- DR ORDER PER ARUN KHODPIA, AM: The captioned appeal and cross objections are instituted at the instance of the department and assessee against/in favour of the order of Commissioner of Income Tax (Appeals), ADDL/ JCIT(A-1), Surat (in short "Ld. CIT(A)"), dated 21.10.2024, passed u/s 250 of the Income Tax Act, 1961 (in short "The Act"), for the Assessment Year 2017-18, which in turn arises from the intimation u/s 143(1) of the Act, issued on 24.03.2019 by Centralized Processing Centre (CPC), Income Tax Department, Bangaluru (in short "Ld. AO"). 2. First, we shall be taking up the appeal of the revenue in ITA No. 544/RPR/2024, wherein grounds of appeal raised, reads as under: 1. Whether on the facts and in the circumstance of the case and in law the Ld. Addl/JCIT (A)-1. Surat was justified in deleting the addition made by the OCIT CPC to the tune of Rs. 3,05,92,653/- on account of unpaid VAT liability (as shown in Balance Sheet as on 31.03.2017 as per Tax Audit Report), as per provision of section 43B of the Income Tax Act, 1961. 2. Whether on the facts and in the circumstance of the case and in law, the decision of Ld. Addl/JCIT (A)-1, Surat was justifi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt. The appellant has relied upon the various judgements of the appellate courts. The appellant has placed reliance on the judicial pronouncement of Chhatisgarh High Court in case of ACIT vs. M/s. Ganpati Motors having ITA NO. 30 of 2016 [Bilaspur] wherein the Hon'ble court has confirmed the findings of the lower appellate authority that when VAT has not been charged to the P&L account, it cannot be disallowed being claimed as deduction in Books of accounts. I hereby agree with the claim of the appellant and allow the ground raised. Unpaid VAT could have been disallowed had it been passed charged to Profit and loss account. 4.3. Another ground raised by the appellant is regarding addition of Rs. 7,42,500/- made by the AO CPC u/s. 40(a)(ia) of the I. T.Act, 1961.The AO CPC has disallowed Rs. 7,42,500/-as expense on Rent on account of non-deduction of TDS thereon. The appellant has requested that disallowance may kindly be restricted to 30% of the amount. Section 40(a)(ia) reads as under:- "Section 40(a){ia} {ia) thirty per cent of any sum payable to a resident, on which tax is deductible at source under Chapter XV/1-B and such tax has not been deducted or, after deduc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the issue regarding unpaid VAT liability which is not claimed as an expenditure/deduction in the books of accounts, also the same was not paid of on or before the due date of furnishing the return in relation to previous year u/s 139(1) of the I. T. Act, the same is not liable to be disallowed. The relevant findings including the arguments by the counsels of assessee and department are extracted as under: 6. Mr. S. Rajeswara Rao, learned counsel appearing for the appellant/ assessee, would submit that the appellant did not claim any deduction of indirect taxes including VAT/other taxes in computing the income for the previous year and the appellant is following the exclusive method of accounting for indirect taxes as in the past. He would further submit that Section 43B of the IT Act mandates that a deduction otherwise allowable under the Act shall be allowed only in computing the income referred in Section 28 of that previous year in which such sum is actually paid by the assessee and since the appellant did not claim any deduction of indirect taxes in computing the income for the previous year i.e. the profit and loss account as expenditure, therefore, the CIT(A) and the ITA ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y the First Appellate Authority that in such circumstances, the liability may still be unpaid, but it cannot be disallowed being not claimed as deduction in the Books of Accounts." 11. Similarly, the Delhi High Court in the matter of Commissioner of Income-tax v Noble & Hewitt (I) (P.) Ltd.2 held in paragraph 6 as under: - "6. In our opinion since the assessee did not debit the amount to the Profit & Loss Account as an expenditure nor did the assessee claim any deduction in respect of the amount and considering that the assessee is following the mercantile system of accounting, the question of disallowing the deduction nut claimed would not arise." 12. Reverting to the facts of the case, it is admitted position on record that the appellant/assessee did not claim the amount of 62,32,262/- in his profit and loss account as an expenditure/deduction, nor the appellant claim deduction in respect of that account under Section 43B of the IT Act. In that view of the matter, the Assessing Officer, the CIT(A) and the ITAT, all three authorities have concurrently erred in holding that the appellant has claimed deduction/expenditure under Section 43B of the IT Act adding t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd any infirmity in the order of Ld. CIT(A), the same, therefore, stands uphold. 12. Consequently, grounds of appeal of revenue raising the sole controversy stands dismissed. 13. Resultantly, ITA No. 544/RPR/2024 of the revenue stands dismissed. CO No. 1/RPR/2025 of the assessee 14. Grounds of Cross Objection: 1. The Ld. CIT(Appeal) has rightly deleted the addition of Rs. 30592653/- on account of vat which is not passed through profit and loss account. This issue has been decided by jurisdictional C.G. High Court in the case of Ganpati Motors vs State of Chhattisgarh and in the assessee's own sister concern case Grand Motor Bilaspur of AY 2018-19 2. The appellant reserves the right to add, alter and omit all or any of the grounds of appeal with the permission of the Hon'ble appellate authority. 15. Regarding grounds of CO raised by the assessee, it was the submission by Ld. AR that the CO is only supportive to the impugned order of Ld. CIT(A), which is challenged by the revenue and the assessee do not wish to raise any other contention. 16. Considering the aforesaid submission by the Ld.AR, since the appeal of revenue against the impugned orders of Ld. CIT(A) has ..... X X X X Extracts X X X X X X X X Extracts X X X X
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