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Asian Paints Ltd. Versus Commissioner of Income Tax Large Taxpayer Unit, LTU, Mumbai

2015 (10) TMI 10 - ITAT MUMBAI

Revision u/s 263 - disallowance u/s 43B being provision made for liability on account of pension scheme - Held that:- There is a complete lack of enquiry on the part of the Assessing Officer so far as the issue of provision towards the pension scheme liability. The lack of enquiry and non application of mind itself renders the assessment order erroneous so far as prejudicial to the interest of revenue as held by the Hon'ble Supreme Court in the case of Malabar Ind. Co. Ltd. Vs. CIT (2000 (2) TMI .....

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per Accounting Standard 15 then the Commissioner was supposed to examine the claim on its own or ought to have directed the Assessing Officer to examine the same as there was no enquiry on this issue at the time of framing the original assessment u/s 143(3 ).

The assessee has submitted that the pension scheme in question does not make any regular contribution to any fund or trust and, therefore, the liability on this account would not fall under the provisions of section 43B. Since th .....

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d:- 25-3-2015 - SHRI VIJAY PAL RAO, JUDICIAL MEMBER AND SHRI D. KARUNAKARA RAO, ACCOUNTANT MEMBER For The Revenue By Shri K. Shivaram For The Assessee By Shri. S. D. Srivastava ORDER Per Vijay Pal Rao, JM This appeal by the assessee is directed against the order dated 22.03.2013 passed u/s 263 of Income Tax Act for A.Y. 2007-08. The assessee has raised following grounds in this appeal:- The Ld. Commissioner of Income Tax, LTU, Mumbai erred in invoking the proceedings u/s 263 of the Income Tax Ac .....

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ores. Subsequently, on perusal of records, the Commissioner found that the assessee has charged a sum of ₹ 273.60 lacs to P&L account, being the liability towards Pension Scheme whereas the tax audit report does not indicate whether the same was actually paid or not before due date of filing of return of income. Accordingly, the Commissioner has issued a showcause notice dated 30.01.2013 u/s 263 on the issue of disallowance u/s 43B of the Income Tax Act. In response the assessee filed .....

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by the Institute of Chartered Accountants of India. The said provision for liability for pension scheme was based on the actuarial valuation done by an independent actuary. Accordingly, the assessee claimed that the provision for pension is an allowable expenditure. The Commissioner has not accepted the contention of the assessee on the ground that the assessee has only made a provision and has not actually paid the amount which has been provided of ₹ 273.60. Accordingly, the Commissioner .....

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submitted that the assessee provided ₹ 273.60 lacs as liability for the pension scheme as per the accounting standards (AS 15) and, therefore, the liability was ascertained on the basis of actuarial valuation report. He has further submitted that the assessee made the necessary disclosure and furnished all the requisite details before the Assessing Officer including the note to return of income as item no. 12, Schedule -M of audited balance sheet and profit & loss account and tax audi .....

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ion and, therefore, the Commissioner is not permitted to take a different view merely because he does not agree with the view taken by the Assessing Officer. In support of his contention he has relied upon the judgment of Hon ble Delhi High Court in the case of CIT Vs. Ranbaxy Laboratories (2011) 334 ITR 341 (Del). He has also relied upon the Judgment of Hon'ble Jurisdictional High Court in the case of Idea Cellular Ltd Vs. Dy. CIT (2008) 301 ITR 407 (Bom.) and submitted that the Hon ble Hig .....

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DR has submitted that there is nothing on record to indicate that the Assessing Officer has conducted any enquiry on the issue . The assessment order is completely silent on the issue of liability of provision made by the assessee on account of pension scheme, therefore, the assessment order passed by the Assessing Officer is erroneous for want of application of mind and lack of enquiry on the part of Assessing Officer. 5. We have heard the Ld. AR as well as Ld. DR and considered the relevant ma .....

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clusion that the Assessing Officer has not applied its mind. However, in the case in hand, there is nothing on record to suggest or indicate that the Assessing Officer has raised any query regarding the issue of liability of claim of ₹ 273.60 lacs being provision made by the assessee in the Books of Accounts towards the pension scheme liability. When the Assessing Officer has not raised any query and the record and details on this issue were not filed by the assessee in response to the que .....

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ught process on the part of the Assessing Officer on this issue. Therefore, we are of the considered opinion that there is a complete lack of enquiry on the part of the Assessing Officer so far as the issue of provision of ₹ 273.60 lacs towards the pension scheme liability. The lack of enquiry and non application of mind itself renders the assessment order erroneous so far as prejudicial to the interest of revenue as held by the Hon'ble Supreme Court in the case of Malabar Ind. Co. Ltd .....

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Standard 15 then the Commissioner was supposed to examine the claim on its own or ought to have directed the Assessing Officer to examine the same as there was no enquiry on this issue at the time of framing the original assessment u/s 143(3 ). Instead of conducting a proper enquiry on the issue of allowability of the claim the Commissioner has applied the provisions of section 43B and held that the amount is not allowable and the same has to be disallowed. Therefore, to the extent of finding of .....

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gislature behind enacting section 43B(b) of the Act was to disallow the statutory liabilities. The Commissioner of Income-tax (Appeals), under these circumstances, was right in his opinion that the Legislature never intended to disallow a claim for an ascertained liability which is computed scientifically in respect of the retiral benefits of its employees and which is not to be contributed to a fund. The Commissioner of Income-tax (Appeals) has supported its view by referring to clause (f) of s .....

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