A zerox copy of CA’s certificate in place of original tax challan is not sufficient to prove that payment was deposited for claiming deduction under s 43B

Deduction under s 43B

A zerox copy of CA’s certificate in place of original tax challan is not sufficient to prove that payment was deposited for claiming deduction under s 43B — as held by DelTrib in Siel Ltd v Dy CIT — In favour of: The Revenue ; ITA No. 3367/Del/2002 : Assessment Year: 1998–1999

SIEL LTD v Dy. CIT1

ITAT BENCH 'E' NEW DELHI

ITA No. 3367/Del/2002

Assessment Year: 1998-99

Rajpal Yadav, JM and Shamim Yahya, AM

Decided on: 20 May 2011

Counsel appeared:

Sh. Tarandeep Singh, CA for the appellant

Srujani Mohanty, Sr. D.R. for the respondent

Order

Per: Shamim Yahya, AM:

These appeals by the assessee are directed against the order of the Ld. Commissioner of Income

Tax (Appeals) for assessment year 1998-99. Since the appeals were heard together and they are

being consolidated and disposed of by this common order for the sake of convenience.

ITA No. ITA 4518

2. The issue raised is that Ld. Commissioner of Income Tax (Appeals) erred in upholding the

disallowance of Rs. 18,49,950/- being amount claimed by the assessee u/s 43B of the IT Act.

3. In this case Assessing Officer had made a total addition on this issue of Rs. 1,18,49,950/-

forming part of claim of Rs. 2,22,34,324/- u/s 43B vide his order dated 25.1.2001.

4. The Ld. Commissioner of Income Tax (Appeals) in her order has sustained the addition of Rs.

1,00,000,000/- but she was silent regarding the balance amount of Rs. 18,49,950/-. The matter

travelled to the ITAT and the ITAT vide its order dated 28.10.2003 restored the matter to the files

of the Ld. Commissioner of Income Tax (Appeals) only relating to Rs. 18,49,950/-. Accordingly,

the issue was considered by the Ld. Commissioner of Income Tax (Appeals) in the impugned

order. Ld. Commissioner of Income Tax (Appeals) held that whether this amount of Rs.

18,49,950/- is allowable expenditure or not is essentially a question of fact. The decision

regarding this has to be arrived at from the material which is available on record or from such

document as asked for. Ld. Commissioner of Income Tax (Appeals) further noted that before him

1

Mawana Sugars Ltd v Dy. CIT

ITA No. 4518/DEL/2009

Assessment Year: 1998-99

the assessee has produced only the evidence which is zerox copy certified issued by the CA. The

assessee was asked to establish the facts from the records and from the bank accounts, but the

same was never produced. Assessee contended before the Ld. Commissioner of Income Tax

(Appeals) that certificate of CA is sufficient for allowing such deduction. When the factual

evidence was again called for, it was stated that the details were related to 10 years old bank

record and the same is not readily available. Ld. Commissioner of Income Tax (Appeals) noted

that assessee has failed to establish the evidence of such payments before the Assessing Officer at

the assessment stage and also before him. hence, he sustained the disallowance of Rs. 18,49,950/-

5. Against this order the assessee is in appeal before us.

6. We have heard the rival contentions and perused the records. We find that Ld. Commissioner

of Income Tax (Appeals) has stated that assessee has failed to produce necessary documents and

stated that the details were 10 years old. The assessee has only submitted a certificate from CA to

support his case. In this regard, ld. counsel of the assessee has placed reliance upon CBDT

Circular No. 601 dated 4.6.1991 reported in 190 ITR 4 (St.). This reference was made by the ld.

counsel of the assessee in support of the claim that for the purpose of section 43B in case there is

difficulty in enclosing necessary challan etc. evidencing payment, a Certificate from a CA, as

defined in the Explanation to section 288 of the Act would be sufficient.

6.1 However, we note that in this Circular in para 8 thereof it has clearly mentioned that the same

will be sufficient for the purpose of making prima facie adjustments under section 143(1)(a).

Further evidence can be called for in cases selected for scrutiny & 143(3) assessment.

Admittedly, we are not concerned with adjustment u/s 143(1)(a). Hence, this Circular does not

support the case of the assessee. Hence, we are of the considered opinion that assessee has failed

to submit the necessary evidence in this regard.

6.2 Furthermore, in this regard the ld. counsel of the assessee has also placed reliance upon the

decision of the Hon’ble Jurisdictional High Court in the case of ACIT v. Jay Engineering Works

Ltd. 114 ITR 289. In this case it was held that “where the original books of the assessee had been

destroyed in a fire it was held that the Appellate Tribunal, in allowing a deduction, could rely

upon other material mainly consisting of the auditor’s reports from which it could be inferred that

the deductions were properly supported by the relevant entries in the accounts books.�

In this background, the Hon’ble High Court did not interfere in the order of the tribunal. In our

considered opinion, this case law is not at all applicable in the present case. It is not the case that

books of account and other material were lost in fire. Here assessee has simply stated that the

evidence called for in this regard is 10 years old. Hence, the same was not available. In this

background, we do not find any infirmity or illegality in the order of the Ld. Commissioner of

Income Tax (Appeals) and accordingly, we uphold the same.

7. In the result, the appeal filed by the assessee is dismissed.

ITA No. 3367

8. In this case the appeal was earlier heard by the tribunal and necessary order was passed on

28.10.2003. Thereafter, misc. application was filed before the tribunal in MA no. 500/Del/2007.

In the misc. application, it was pleaded that the ground relating to deduction of Rs. 1 crore in

respect of Excise Duty paid has been omitted to be considered. The tribunal in misc. application

has accepted that tribunal had omitted to consider the deduction of Rs. 1 crore which was raised

in ground no. 2. It was noted that the tribunal had given a finding only in respect of ground no.

2.1 which is also deduction under section 43B. Accordingly, the order was partially recalled to

decide the ground no. 2 raised in the appeal. The said ground no. 2 reads as under:-

“That the Ld. Commissioner of Income Tax (Appeals) erred in not accepting the deduction u/s

43B in respect of sum of Rs. 1 crore paid by way of Excise Duty during the previous year relevant

to assessment year under consideration, which was disallowed by the Assessing Officer.�

9. In this regard, upon a perusal of note 5(3) to notes on accounts it was observed that assessee

company has given Indemnity on account of Siel Corporation Ltd. which is known as Tecumseh

Product India Ltd. (TPIL) which was formerly a unit of assessee company and presently renamed

as Techmseh Products India Ltd. was transferred to another company as going concern as on

1.4.96 and, on such transfer the assessee had shown capital gain/loss during the assessment year

1997-98. The Assessing Officer observed that a sum of Rs. 1 crore paid by way of excise duty

pertaining to the pending cases relating prior to 31st March, 1997, was a liability on account of

capital assets which stands transferred. According to the Assessing Officer this expenditure was

on capital account and cannot be allowed as revenue account. Before the Ld. Commissioner of

Income Tax (Appeals) it was submitted that the amount of Rs. 1 crore was part of the total excise

duty paid on 1,04,87,404/-. Moreover, this amount was not debited to the P&L account and

therefore, while computing the total income the question of adding it back does not arise,

notwithstanding whatever may be the finding about the nature of this payment. Considering the

above Ld. Commissioner of Income Tax (Appeals) referred to the relevant provision of section

43B and noted that the payment of Rs. 1 crore has been made to the TPIL for depositing the same

with the excise authorities. Ld. Commissioner of Income Tax (Appeals) further held that he has

perused the records and assessment order of the company and he found that the payment is indeed

of capital nature because whenever change in hand of business takes place, it is transferred with

all its assets as well as liabilities. The outstanding payment of excise duty was a liability of the

company know as TPIL and, therefore, it should form a part of the capital loss/gain of the

company to which it has been transferred, hence the order of the Assessing Officer on these

issues as above is upheld. It was further observed that in any case the observation of the

Assessing Officer that it is of capital nature, it is also to be seen, that the liability is not of the

assessee but of the earlier company TPIL. Therefore, it cannot be allowed in the hands of the

assessee. Further the contention of the assessee that it has not been debited to P&L account

cannot be accepted because ultimately it has been deducted in the calculation on income.

10. Against the above order the assessee is in appeal before us.

11. We have heard the rival contentions in light of the material produced and precedent relied

upon. The said note 5(e) referred above reads as under:-

“Indemnity given by the Company to a party to whom investment in 1,00,00,00/- equity shares of

Rs. 10 each fully paid up of Siel Compressors Limited, presently renamed as Tecemseh Products

India Limited (TPIL) has been disposed off for any loss, damage, claim, action, suit etc. arising

from various representations/ breach of representations including for contingent liabilities

existing as at March 31, 1997 or prior to March, 31, 1997, which Siel Compressors Limited may

eventually be liable to pay. The company has provided a bank guarantee for an amount of Rs.

12600.00 lacs. The company has received a claim for Rs. 311.11 lacs towards excise duty

demand pertaining to pending cases relating prior to March 31, 1997 from TPIL. Against this

claim, the company has reimbursed Rs. 100 lacs to TPIL for depositing with excise authorities

and has included the same under the head ‘Advance recoverable in cash or in kind or for value to

be received in ‘Schedule’ as TPIL has preferred an appeal in the Supreme Court against the said

excise order.�

12. From the above it is evident that the impugned liability of Rs. 1 crore was on account of

capital asset which stands transferred and therefore, it has been rightly held by the authorities

below that Rs. 1 crore paid for TPIL statutory liabilities does not represent the business

expenditure of the assessee company. Moreover, it is also rightly held that it is in the nature of the

capital expenditure as it has its origin in relation to a capital assets which is no longer an asset of

the business and, therefore, not an allowable deduction while computing the taxable income.

13. Accordingly, in the background of the aforesaid discussion, we do not find any infirmity in

the order of the Ld. Commissioner of Income Tax (Appeals) holding that a sum of Rs. 1 crore

was not allowable, as it was in the nature of capital account. This was so because business had

already changed hands and when the business changes hand the assets as well as liabilities are

transferred. Therefore, outstanding payment of excise duty was liability of the company known as

TPIL, and, therefore, it should form a part of the capital loss/gain of the company to which it has

been transferred. Accordingly, we uphold the orders of the authorities below and decide the issue

in favour of the Revenue.

14. In the result, both the appeals filed by the assessee stand dismissed.