Case Law Details
Case Name : DCIT Vs Loknath Pd. Gupta (ITAT Kolkata)
Appeal Number : ITA No. 645/KOL/2014
Date of Judgement/Order : 10/06/2015
Related Assessment Year :
Brief of the case:
Assessee claimed deductions on account of excise duty paid and interest thereon which was originally allowed by AO but subsequently rectified u/s 154 by making addition of the same. ITAT examined the facts and circumstances of the case and held that decision on a debatable point of law is not a mistake apparent from record and cannot rectified u/s 154.
Facts of the case:
- Assessee filed return of income at loss Rs.29,09,33,405/- which was selected for scrutiny.
- An assessment was completed under section 143(3) allowing the claim of the assessee in respect of payments made for excise duty amounting to Rs.29,17,01,515/- and interest thereon at Rs. 12,93,62,086/- on various dates from the period 1.04.2008 to 31.03.2009, which pertains to the period or previous years 2001-02 to 2005-06.
- The assessee, in the return for the assessment year 2009-10, filed on 23.09.2009, has shown towards the excise duty and excise deduction. The AO allowed the claim in the assessment order passed u/s 143(3).
- The assessee filed settlement application before the Customs & Central Excise Settlement Commission for the period 10.05.2001 to 31.03.2006. In terms of the final order of the Settlement Commission dated 29.02.2008 read with corrigendum dated 28.03.2008, the case was settled for an amount of Rs.57,43,83,420/- towards excise duty and penalty of Rs.40 crores and the payment of interest. Assessee paid various amount in different years as per direction of settlement commission and order passed by High Court in a writ petition filed by assessee.
- The assessee also filed the application before the Income-Tax Settlement Commission for the assessment years 2001-02 to 2007-08. In terms of the order of the Settlement Commission dated 28.03.2008, the case was settled for total additional income of Rs.105 crores for the aforesaid assessment years.
- During the impugned assessment year, the assessee claimed deduction of aforesaid central excise duties of Rs.29,17,01,515/- and interest of Rs.12,93,62,086/- as paid.
- During the impugned assessment year, the assessee did not claim any deduction for the penalty of Rs.40 crores paid by it. In the assessment order passed under section 143(3), the said payments were allowed as per the provisions of section 43B(a) of the Income Tax Act.
- Subsequently, after issuing the notice under section 154, the AO, vide order dated 24.05.2013, disallowed the payment in respect of excise duty of Rs.29.17 crores and interest payment of Rs.12.93 crores and similar payment of excise duty and interest of Rs.3.42 crores.
- After hearing the assessee, ultimately the AO rectified the assessment order and made the addition in respect of excise duty of Rs.29,17,01,515/-, interest thereon Rs.12,93,62,086/- and also excise duty of Rs.3,42,56,200/-.
Contention of the revenue:
- Expenses claimed for payment of Excise Duty of Rs.29,17,01,515/- and Interest Rs.12,93,62,086/- and also Rs.3,42,56,200/- is factually incorrect and totally different from the normal Excise Duty which becomes payable regularly as on 31st March of every year and not paid by the end of financial year or within the due date for filing of return due to any reason end also taxed accordingly for the relevent year.
Contention of the assessee:
- Payments towards excise duty and interest are paid in various years on the direction of Settlement commission of custom & excise and settlement commission for income tax.
Held by CIT (A):
- The CIT(A) noted that the assessee had made an application to the Settlement Commission for Customs & Central Excise and consequently also to the Settlement Commission of Income-Tax for the financial year 2001-02 to 2005-06 for the Central excise matters.
- Central Excise Settlement Commission passed the final order of settlement dated 29.02.2008 thereby excise liabilities for the assessment years 2001-02 to 2005-06 were determined which consisted excise duty, interest thereon and some penalties.
- Consequently, Income Tax Settlement Commission passed final order of settlement which matter by and large follows from the Central Excise Settlement Commission’s settlement order.
- The CIT(A) also noted from the assessment record that there was revenue audit observation raised on the issue for the earlier assessment year 2008-09 that part of the excise duty paid in the previous year relevant to assessment year 2008-09 relied to prior period and therefore, under the mercantile system of accounting, they were not allowable.
- The AO, therefore, took the recourse to rectify the same in the impugned assessment year. The CIT(A) took the view that the AO indeed and in fact made the reassessment in the guise of rectification and therefore he annulled the impugned rectification order.
- On merit, he held that the excise duty is a deductible expense, in view of the provisions of section 43B in the year when the same is paid irrespective of the previous year, in which the liability to pay was incurred.
- He also allowed interest as it, being a compensatory, becomes a part and parcel of the same and even is allowable as business expenditure under section 28 or section 37 of the Income-Tax Act.
- Similarly, in respect of sum of Rs.3,42,56,200/- which includes central excise of Rs.2,84,26,761/- and interest thereon at Rs.58,29,439/-, he decided in favour of the assessee.
Held by ITAT:
- These payments were made by the assessee in terms of the order passed by the Customs & Excise Settlement Commission and the Hon’ble High Court. The provisions of section 43B(a) mandates that the deduction in respect of any tax, duty, cess or fee, by whatever name called, under any law shall be allowed (irrespective of previous year, in which liability to pay such sum, was incurred by the assessee according to the method of accounting regularly employed by him) only in the previous year, in which such sum is actually paid by the assessee.
- Revenue could not bring to notice of the bench that there can be two conceivable opinions in respect of deduction of excise duty that it will not be allowed in the year in which payment has been made by the assessee. It further failed to prove that there is a mistake in respect of allowing the deduction was for excise duty.
- In case, there is a mistake and such mistake must be apparent where there can be conceivably two opinions, it cannot be said that mistake is apparent on record.
- So far the deduction of the interest in respect of excise duty is concerned ITAT took a view that there was a mistake apparent in the order of the AO passed under section 143(3) and therefore, the AO has rightly taken the action under section 154, as non-deductibility of the interest during the impugned assessment year was not debatable and there cannot be two conceivable views in this regard. So this issue was restored to AO.