Commissioner Of Income Tax, ... vs M/S Dcm Limited
2011 Latest Caselaw 3250 Del

*                  THE HIGH COURT OF DELHI AT NEW DELHI

%                              Judgment delivered on: 11.07.2011


+                       ITR No. 66/1995


COMMISSIONER OF INCOME TAX, CENTRAL-II               ...... PETITIONER


                                  Vs


M/s DCM LIMITED                                     ..... RESPONDENT

Advocates who appeared in this case:

For the Petitioner : Mr Kamal Sawhney, Advocate For the Respondent: Mr S.K. Aggarwal, Advocate

CORAM :-

HON‟BLE MR JUSTICE SANJAY KISHAN KAUL HON'BLE MR JUSTICE RAJIV SHAKDHER

1. Whether the Reporters of local papers may be allowed to see the judgment ? No

2. To be referred to Reporters or not ? No

3. Whether the judgment should be reported Yes in the Digest ?

RAJIV SHAKDHER, J (ORAL)

1. The captioned reference has been made at the behest of

the revenue. The reference pertains to assessment year 1981-

82. By virtue of the said reference we have been called upon to

adjudicate on the following question of law:

"(i) Whether on the facts and in the circumstances of the case, the Income-tax Appellate Tribunal was correct in law in allowing the corresponding liability against

excise duty collected from customers as deduction when the decision of the High Court upholding the levy has been challenged by the assessee in the Supreme Court?

(ii) Whether on the facts and in the circumstances of the case, the Income Tax Appellate Tribunal was correct in law in allowing the deduction/provision for property tax payable to the extent of 7,73,636/-?

(iii) Whether on the facts and circumstances of the case, the Income Tax Appellate Tribunal was justified in law in allowing as revenue expenditure expenses incurred on tours for the purpose of project and for expansion of existing business?"

QUESTION NO. (i)

2. The brief facts pertaining to the aforementioned question

are that the assessee had been collecting excise duty on the

goods sold by it out of the State of Utter Pradesh (U.P.). Till the

assessment year 1975 the assessee had been paying the excise

duty collected from its customers to the concerned authorities. It

appears that a challenge was laid by the assessee to the levy of

the excise duty, in and around 1975-76, by institution of a writ

petition before the Allahabad High Court. The Allahabad High

Court, as an interim measure, had granted a stay; as a

consequence of which the assessee continued to credit the

amount to a separate account. It is not disputed that the

Allahabad High Court finally, on 13.03.1980 decided the issue

against the assessee.

2.1 The assessee being aggrieved, preferred an appeal to the

Supreme Court. It is stated; (a fact which also borne out from the

orders of the authorities below) that the Supreme Court granted

an ad-interim stay.

2.2 To be noted that both counsels could not supply us either

the registration number of the proceeding instituted in the

Supreme Court nor were they able to apprise us about the final

outcome of the proceedings in the Supreme Court.

2.3 Continuing with the narrative, it is in these circumstances

that the Assessing Officer came to the conclusion that the

amount received towards excise duty from its customers was a

trading receipt and hence had to be taxed as income.

2.4 Being aggrieved, the assessee preferred an appeal with the

Commissioner of Income Tax (Appeals) [hereinafter referred to as

„CIT(A)‟]. The CIT(A) deleted the addition towards excise duty

which was quantified at ` 9,84,340/- by the Assessing Officer. In

coming to this conclusion, the CIT(A) was persuaded by the

assessee‟s submission that since the Allahabad High Court had

rendered its decision in the writ petition against the assessee in

the accounting year relevant to the assessment year in question,

there was a corresponding trading liability and hence, no addition

in regard to sums collected towards excise duty received from its

customers could be made vis-a-vis the assessee.

2.5 The Tribunal sustained the view taken by the CIT(A). The

Tribunal noted that the receipt was neutralized by accrual of

liability of an equivalent amount against the assessee.

2.6 During the course of arguments Mr S.K. Aggarwal, who

appears for the assessee accepted the fact that the amount

received from the customers towards excise duty was a trading

receipt. If this position is accepted then the fact that the matter

was pending before the Supreme Court and a stay was operating

against the decision of the Allahabad High Court attained

significance. As indicated above, both counsels were unable to

inform us as regards the outcome of the proceedings in the

Supreme Court. In these circumstances, we are of the view that,

given the facts available on record, the order of the Tribunal

cannot be sustained. The decision taken by the Assessing Officer

will, therefore, continue to operate. Accordingly, the question of

law is answered in the negative and against the assessee.

QUESTION NO. (ii)

3. The brief facts pertaining to question no.(ii) are as follows:

The municipal corporation had proposed an enhancement in the

rateable value. The rateable value proposed was a sum of

` 25,36,640/-. On the said proposed rateable value property tax

payable was a sum of ` 9,24,514/-. The assessee disputed the

proposed enhancement in the rateable value as communicated to

it by the municipal corporation. The assessee maintained that

the rateable value ought to be ` 4,47,760/-/- on which it would be

liable to pay towards property tax a sum of ` 1,50,878/-.

3.1 The assessee, however, while objecting to proposed

enhancement in the rateable value, sought deduction in respect

of the entire amount, though not paid in view of the decision of

the Supreme Court in the case of Kedarnath Jute Mfg. Co. Ltd. vs

Commissioner of Income Tax (1971) 82 ITR 363.

3.2 The Assessing officer rejected the claim for deduction on

the ground that the enhancement of ratable value was a mere

proposal, it had not been accepted by the assessee. He,

therefore, allowed the deduction to the extent agreed to by the

assessee while disallowing the remaining amount in respect of

which provision had been made, i.e., a sum of ` 7,73,636/-

3.3 The assessee being aggrieved preferred an appeal to the

CIT(A). The CIT(A) deleted the addition by placing reliance on the

Tribunal‟s decision in favour of the assessee for assessment year

1978-79.

3.4 The Tribunal in a further appeal by the revenue sustained

the view taken by the CIT(A). The Tribunal observed that the

municipal corporation had proposed an enhancement in the

rateable value qua property of the assessee; the dispute with

regard to which was pending before the Appellate Authority and

hence, being in the nature of a statutory liability the CIT(A) had

allowed the same. On a reading of the CIT(A) order we find that

there is no such observation. The CIT(A) had simply followed the

earlier view of the Tribunal apparently on the said issue, taken in

respect of the assessment year 1978-79; though that may have

been the purport.

4. We were informed by Mr S.K. Aggarwal, learned counsel for

the assessee, that the revenue‟s reference was returned

unanswered by this court vide its order dated 08.08.2007.

Notwithstanding the above, we are of the view that there is no

discussion in the order of the Tribunal by reference to provisions

of the relevant municipal law to indicate as to whether a mere

proposal for enhancement of property tax would result in

crystallization of liability qua that portion of rateable value which

was sought to be enhanced. There can be no dispute that liability

does not cease to exist merely because the quantification of the

liability is deferred. From the facts ascertainable from the

records, it appears there is a dispute with regard to the

quantification as reflected in the proposal for enhancement.

Evidently at the stage, at which the proceedings were pivoted in

the assessment year in issue, there was no demand raised by the

municipal corporation. In these circumstances, the question of

law has to be answered in the negative and against the assessee.

QUESTION NO. (iii)

5. The learned counsel for the assessee says that this question

is covered by the decision of the Delhi High Court in the case of

Delhi Cloth & General Mills Co. Ltd. vs CIT (1986) 158 ITR 64

(Delhi). This position has not been disputed by the learned

counsel for the revenue. The question of law is thus answered in

the negative and consequently in favour of the assessee.

6. The reference is disposed of in the aforesaid terms.

RAJIV SHAKDHER, J

SANJAY KISHAN KAUL,J

JULY 11, 2011 kk