Calcutta High Court
Principal Commissioner Of Income ... vs M/S. Paharpur Cooling Towers Ltd on 12 September, 2022
OD-23
IN THE HIGH COURT AT CALCUTTA
SPECIAL JURISDICTION (INCOME TAX)
ORIGINAL SIDE
ITAT/181/2021
IA No.GA/2/2021
PRINCIPAL COMMISSIONER OF INCOME TAX, CENTRAL-1, KOLKATA
VS.
M/S. PAHARPUR COOLING TOWERS LTD.
BEFORE :
THE HON'BLE JUSTICE T.S. SIVAGNANAM
And
THE HON'BLE JUSTICE SUPRATIM BHATTACHARYA
Date : 12th September, 2022
Appearance :
Mr. Vipul Kundalia, Adv.
Mr. Soumen Bhattacharjee, Adv.
....for appellant
Mr. J.P. Khaitan, Sr. Adv.
Mr. Somak Basu, Adv.
...for respondent
The Court : We have heard Mr. Vipul Kundalia, learned standing Counsel,
assisted by Mr. Soumen Bhattacharjee, learned Advocate appearing for the
appellant/revenue and Mr. J.P. Khaitan, Sr. Advocate, assisted by Mr. Somak
Basu, learned Advocate for the respondent/assessee.
The appeal is admitted on the following substantial questions of law :-
i) Whether on facts and circumstances of the case and in law, the
Hon'ble Tribunal has erred in upholding the order of the Ld. CIT(A)
allowing the claim of the assessee for additional depreciation for the
previous year amounting to Rs.7,93,98,262/- relying on the NTPC case
without corresponding express enabling provision in the statute and
without considering the amendment for allowing balance additional
depreciation is only prospectively operative from A.Y.-2016-17 ?
ii) Whether on facts and circumstances of the case and in law, the
Hon'ble Tribunal has erred in holding that Education Cess is allowable
deduction under section 40(a)(ii) of the Income Tax Act, 1961 by not
appreciating that Education Cess is a part of income tax in accordance
with provisions of the Finance Act of the respective year ?
iii) Whether on facts and circumstance of the case and in law, the
Hon'ble Tribunal has erred in not taking into consideration the view of the
jurisdictional High Court on the issue of Education Cess as conveyed in
the case of SREI Infrastructure vs. DCIT (72 taxmann.com 239 )?
iv) Whether the Hon'ble ITAT was correct on facts and in law in holding
that the employee's contributions to PF & ESI are governed by the
provisions of Section 43B of the Income Tax Act, 1961, while the same is
separately dealt in section 36(va) of the Income tax Act and the declaratory
explanation introduced in the clauses 8 & 9 of the Finance Bill, 2020 ?
v) Whether on the facts and circumstances of the case and in law, the
Hon'ble Tribunal has erred in deleting the Transfer Pricing adjustment
made by the TPO on account of Corporate Guarantee provided by the
assessee to its foreign associate enterprises (AE) ?
vi) Whether on the facts and circumstances of the case and in law, the
Hon'ble Tribunal has erred in holding that the Corporate Guarantee does
not amount to an International Transaction whereas the provision of
Guarantee is specifically covered within the definition of International
Transaction as per the Explanation to Section 92B of the Income Tax Act,
inserted by the Finance Act, 2012 with retrospective effect from
01.04.2002 ?
vii) Whether on the facts and circumstances of the case and in law, the
Hon'ble Tribunal has erred in summarily rejecting Revenue's Appeal by
way of affirming the CIT(A)'s findings and not passing a speaking order
with respect to the issue of determination of ALP of interest on loan?
On going through the findings recorded by the Commissioner of Income
Tax (Appeal) [CIT(A)] and the learned Tribunal, we find that the entire issue is
fully factual. Learned Tribunal has, in fact, extracted elaborately the factual
findings recorded by the CIT(A) and thereafter proceeded to render its opinion,
which is as hereunder :-
"20. We have given our thoughtful consideration to rival
pleadings against and in support of the CIT (A)'s above extracted
discussion deleting the impugned disallowance. The assessee had
admittedly debited these sum(s) to its profit and loss account in
relation to "provision for foreseeable loss" in contract revenue for
the purpose of normal as well as MAT computation. The Assessing
Officer disallowed the same as a contingent liability since not
crystallized in the relevant previous year. Learned counsel invited
our attention to pages-12 & 13 in the assessment order containing
tabulations of the corresponding project's job details. The Assessing
Officer was of the view that the alleged project qua foreseeable loss
in contract revenue; had been substantially completed and revenue
therefrom also stood recognized during earlier years. He thus held
that the assessee's provision was against a liability which might
arise in future due to any defect in the projects and liabilities
incurred by removing those defects. And that in such a liability
which was to be incurred by a future rate was in the nature of a
contingent liability disallowable u/s 37(1) of the Act. He included it
in book profits' computation u/s. 115JB Explanation-1(c) of the Act.
He lastly concluded that if at all the assessee had to make any such
provision of liability to be incurred in future, the same therefore
amounted to a contingent liability only not allowable u/s 37(1) of the
Act which deserved to be included in book profits computation as
well. The CIT(A) has admittedly reversed the Assessing Officer's
action in above extracted detailed discussion.
21. It is in this backdrops of facts that we notice that this
assessee; engaged in real estate business as well, had claimed the
impugned liability provision based on scientific estimation going by
the corresponding tabulation in page-122 of the assessment order in
assessment year 2012-13 and the very basis stood adopted in the
latter assessment year 2013-14. Learned departmental
representative fails to dispute that the assessee's impugned
provision also confirms AS-7 applicable "accounting for
construction contracts" as per various judicial precedents taken
note of the CIT(A)'s discussion. Hon'ble apex court's landmark
judgment in Commissioner of Income Tax vs. Chainrup Sampatram
(1953) 24 ITR 481 (SC) held long back that although the principles
of conservatism and prudence in accounting require that no
anticipated profits are to be recorded as income until realised, the
converse is not true regarding anticipated losses which could be
booked at the first sign of reasonable probability. We conclude in
view of all these foregoing facts that the assessee was very well
justified in claiming the impugned foreseeable liability provision in
these two assessment year(s) regarding its project works by in
compliance of AS-7 of the Act. The Revenue's instant substantive
grievance fails therefore."
On going through the above findings, we are of the considered view that
the above issue in the said case is fully factual. Therefore, the substantial
question of law no.(8) is not admitted.
Learned Advocate for the appellant shall file requisite number of informal
paper books prepared out of Court within a period of 10 (ten) weeks from date
including therein all relevant papers and documents serving a copy thereof on
the learned Advocate for the respondent.
Let the appeal be listed after 12 (twelve) weeks.
Since the respondent is represented by their learned Advocate, service of
notice of this appeal on the respondent stands waived.
Settlement of index and all other formalities are dispensed with.
The stay application stands closed.
(T.S. SIVAGNANAM, J.)
(SUPRATIM BHATTACHARYA, J.)
RS/SN.
