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DCIT, Circle-1 (1) , New Delhi Versus Amar Ujala Publications Ltd.

2015 (11) TMI 639 - ITAT DELHI

Disallowance of deduction u/s 80 JJAA - CIT(A) allowed the claim - Held that:- In assessee's own case for the A.Y. 2008-09 the Tribunal had upheld the observations of the Ld.CIT(A) that as per provisions of S.80 JJAA(1) of the Act the benefit is to be allowed for three years starting from the P.Y. in which the employment was provided, and as such the benefit will be available for the succeeding two years also. The Tribunal also considered the Proviso to S.80 JJAA of the Act and held that the sam .....

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r three consecutive years in respect of the additional employment created by the assessee company during the first year itself i.e. A.Y. 2007-08 and, therefore, the fact that the assessee has employed 1022 new work men during the A.Y. 2009-10 is irrelevant for adjudication of the claim of deduction in respect of employment created by the assessee during the A.Y. 2007-08. Under the above noted facts and circumstances and respectfully following the propositions laid down by the Tribunal in the ord .....

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with the conclusion of the Ld.CIT(A) that there was a difference between the disallowance of expenditure and the accrual of income and as per prudent concept of accountancy the income cannot be charged until and unless it is realised or accrued to the assessee. On this issue the AO tried to charge alleged excessive sales returns to tax by taking 4.5% average sales returns which is not a correct approach. The amount of sales return is an expenditure accrued to the assessee when sold newspapers re .....

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tainable. In this situation we are in agreement with the conclusion of the Ld.CIT(A) that the assessee has duly accounted sales returns on the basis of evidence produced and brought on record, therefore, disallowance made by the A.O. cannot be held as sustainable and in accordance with law and the Ld.CIT(A) rightly followed the proposition laid down by the ITAT Agra Bench in assessee's own case for the A.Y. 2003-04. Accordingly we incline to hold that the AO made disallowance and addition withou .....

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against the order of the Ld.CIT(A)-IV, New Delhi dated 11.05.2012 in appeal no.296/11-12 for the A.Y. 2009-10. 1.1. The main grounds for adjudication of the Revenue read as under. "1. The Ld.CIT(A) erred on fact in law on allowing deduction u/s 80 JAA amounting ₹ 1,10,28,251/-. 2. The Ld.CIT(A) erred on fact in law in deleting the addition of ₹ 1,34,10,746/- on account of sales returns." 2. Briefly stated the facts giving raise to this appeal are that the case was selected .....

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und No.1: Apropos ground no.1, we have heard arguments of both sides and carefully perused relevant material placed on record. The Ld.Sr.D.R. submitted that the A.O. noticed that the assessee has employed 1022 regular workers during the current F.Y. and it has taken deduction only of 288 regular workers who were employed in the earlier years. The Ld.Sr.D.R. further pointed out that this means that the assessee has not taken deduction u/s 80 JJAA of the Act on newly employed regular workers engag .....

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ugned order and submitted that the Ld.CIT(A) granted relief to the assessee without any justified reason, therefore, the impugned order may be set aside by restoring that to the A.O. 4. Replying to the above, the Ld.Counsel for the assessee submitted that a similar issue was raised by the Revenue before the Tribunal in ITA no.1808/Del/12 for the A.Y. 2008-09 and the same was dismissed by the Tribunal vide order dt. 22.2.2013 and the issue has attained finality at the level of the Tribunal, there .....

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appeal in DCIT vs. Amar Ujala Publications in the assessee's own case dismissed ground no.1 of the Revenue on a similar set of facts and circumstances by observing as under. "24. So far as regards ground No.l, the Assessing Officer made a disallowance of ₹ 1,42,27,908/- u/s 80JjJA of the Act on the ground that the deduction under the said Section is allowable only if there is an increase in the regular workmen employed during the year of at lease 10% of the existing number of wor .....

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ree years for which the deduction u/s 80JJAA is to be granted. However, this interpretation is not borne out by the provisions of the statute as discussed herein above. On a plain reading of section 80-JJAA it is clear that the benefit of deduction of 30% of additional wages paid to the new regular workmen is available for three years including the assessment year relevant to the previous year in which such employment is provided. The meaning of these words is that once an employment is created .....

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increase of 10%, meaning thereby that not only 10% of 100 but also the assessee needs to create 10% of 110 meaning thereby that it should have minimum 121 workmen in the second year. Further, in the third year it needs to create 10% more of the preceding year, which in this case will be at least 134. This number will further increase in case in the first year the new employment generated by the assessee is more than 10%, as in the second year the assessee needs to add not only 10% of the old nu .....

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ted this benefit will be available for succeeding two years. The proviso referred to by the A.O. is applicable in the first year only whereby in the case "of an existing undertaking the additional wages shall be 'nil' if the increase in the number of workmen during the year is less than 10% of workmen employed in such undertaking as on the last day of the preceding year. In view of the above, I find that the addition of ₹ 1,42,27,908/- made by the A.O. by disallowing the deduc .....

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day, such regular workmen were 1419 in number, there was a discrepancy in the number of workmen employed as on the last day of the immediately preceding year; that during the relevant previous year, as submitted on behalf of the assessee, the regular workmen were 974; that as such, the requirement of the Section did not stand satisfied, as the number of workers at the end of the year were not 10% more than the number of workers at the end of the earlier previous year; that deduction of 30% of ad .....

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he condition has to be met for each of the years for which the deduction is being claimed. 26. The ld. counsel for the assessee, on the other hand, has submitted that deduction u/s 80JJAA is allowable, if the following conditions are satisfied:- i) it should be an Indian company; ii) The profit and gains should be derived from an industrial undertaking engaged in manufacturing or production of an article or thing; iii) The benefit allowed shall be 30% of the additional wages paid to the new regu .....

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it of Section 80JJAA, the assessee needs to create employment every year; the interpretation given by the Assessing Officer would mean that in the first year the assessee needs to create 10% additional employment. which will mean that if the in the preceding year there were 100 employees, then in the next year there need to be 110, in the second year again there has to be an increase of 10%, meaning thereby that not only 10% of 100 but also the assessee needs to create 10% of 110 meaning thereby .....

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sions of sub-section (I) of Section 80JJAA, whereby the benefit is to be allowed for three years starting from the previous year in which such employment is provided. 27. Having considered the rival contentions on this issue with reference to the material on record, we find that indeed the requirement of Section, i.e., Section 80JJAA of the Act are duly met in this case. The assessee is an Indian company deriving profits from an industrial undertaking engaged in manufacture or production of an a .....

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created every year. The explicit provisions of Section 80JJAA(1) require the benefit to be allowed for three years starting from the previous year in which such employment is provided. For ready reference, the relevant provisions of section 80JJAA(1) are reproduced hereunder. "Where the gross total income of an assessee, being an Indian company, includes any profits and gains derived from any industrial undertaking engaged in the manufacture or production of article or thing, there shall, s .....

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n, the' expressions, "additional. wages" means the wages paid to the new regular workmen in excess of one hundred workmen employed during the previous year: Provided that in the case of an existing undertaking, the additional wages shall be nil if the increase in the number of regular workmen employed during the year is less than ten per cent of existing number of workmen employed in such undertaking as on the last day of the preceding year." 29. The Ld. CIT (A), in our consid .....

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g undertaking, the additional wages shall be nil if the increase in the number of workmen during the year is less than 10% of the work men employed in such undertaking as on the last day of the preceding year. 30. Accordingly, the grievance of the Department by way of ground no.1 does not carry any merit and the same is hereby rejected." 4.1. In view of the above in assessee's own case for the A.Y. 2008-09 the Tribunal had upheld the observations of the Ld.CIT(A) that as per provisions .....

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less than 10% of the work men employed in such undertaking on the last date of the preceding year. 4.2. In view of above legal proposition when we analyse the facts and circumstances of the A.Y. 2009-10 we clearly observe that as per provisions of S.80 JJAA of the Act the deduction is available for three consecutive years in respect of the additional employment created by the assessee company during the first year itself i.e. A.Y. 2007-08 and, therefore, the fact that the assessee has employed 1 .....

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that the impugned addition made by the A.O. was misconceived and not sustainable on the facts and in law and the same was rightly directed to be deleted by the Ld.CIT(A). Accordingly ground no.1 of the Revenue is dismissed. 5. Ground No.2:- Apropos ground no.2 we have also heard rival arguments of both sides and carefully perused the relevant material placed on record including paper book of the assessee spread over 41 pages. The Ld.D.R. supporting the action of the AO submitted that the averag .....

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hown by the assessee. The Ld.D.R. supporting the action of the A.O. further submitted that based on the method of estimation which was purely scientific and accepting the average sales returns of 4.5% the amount of excess sales returns was rightly added to the returned income of the assessee. The Ld.D.R. vehemently contended that the Ld.CIT(A) granted relief to the assessee without any justified reason and basis. Therefore, the impugned order may be set aside by restoring it to the file of A.O. .....

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or the preceding A.Ys deleting the similar addition made for the current year on identical facts and circumstances. Therefore, no interference in the impugned order is called for. The Ld.Counsel argued that a final submissions that the A.O. ignored an important fact while making this addition that the quantity of sales return varies from place to place as per local condition of law and order and high competition between the assessee and other news paper publishers therefore average percentage of .....

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squarely covered in favour of the assessee by the order of the Tribunal. 6. On a careful consideration of above submissions at the very outset we note that similar ground/issue was raised by the Revenue before ITAT Agra Bench in ITA 360/A/2007 for the A.Y. 2003-04 and the Tribunal decided the issue with following observations and conclusions. "8. We have carefully considered the rival submissions along with the orders of the tax authorities below. We noted that in this case, the Assessing O .....

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K-... anpur Allahabad Jhansi Varanasi Moradabad AY 1998-99 Gross Sales 49925447 13920066 6053788 3599193 22204240 Less returns 660033 1897553 835090 291871 621136 Net Sales 49265414 12022513 5218697 3307322 21583104 %ge to gross sales 1.32% 13.60% 13.79% 8.11% 2.80% AY 1999-00 Gross Sales 56777387 18117826 17310903 6874889 26321086 Less returns 901674 2483508 2380748 481778 643109 Net Sales 55875623 15634317 14930154 6393111 25677977 %ge to gross sales 1.59% 13.70 13.75% 7.01% 2.44% AY 2000-01 G .....

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7 433111 3689903 1024793 Net Sales 80577643 31691676 9574781 30311878 39476969 %ge to gross sales 1.50% 7.91% 4.33% 10.85% 2.53% AY 2003-04 Gross Sales 86026933 34889589 10472644 31916338 37622676 Less returns 1951107 2512856 525372 2308859 1075444 Net Sales 84075816 32376733 9947272 29607479 36547231 %ge to gross sales 2.27% 7.20% 5.02% 7.23% 2.86% From this chart itself it is apparent that in respect of Allahabad unit, the percentage of sales return in the initial years, i.e., A.Y. 1998-99, 19 .....

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year as per the chart were only 7.2% and 7.23% for the Allahabad and Varanasi units. If compared with earlier year, these percentages are the best comparative instance in the case of the assessee. 9. Coming to the facts of the case, we noted that the assessee has duly submitted the details of unsold Dainik Ujala, which were sent by the Agents alongwith the credit notes for the same. We noted in respect of one of the agents at Allahabad, Om Agencies has raised the credit note giving details of un .....

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e assessee has duly accepted the credit note. The credit note and the statement which are available on the file cannot be regarding to have been prepared by the assessee. If the Assessing Officer doubted the documents/evidences filed by the assessee, in our opinion, the onus is on the Assessing Officer to prove that these documents/evidences are not genuine. We also noted that the assessee has submitted before the Assessing Officer about the maintenance of the sales return record in the shape of .....

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simply rejected the sales tax return shown by the assessee treating them to be abnormal. The assessee has duly explained the system of accounting in respect of newspaper. At the time of dispatch of newspaper packed in bundles, entries are made in taxi dispatch register and in delivery challans. In the books of account all the agents are debited on the basis of monthly bills raised and sales are credited. The return of the unsold newspaper is noted on daily basis and recorded in the manual sales .....

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in this regard. In fact, we noted that during the year, the sales return in Allahabad and Varanasi Branches were 7.2% not 7.7%, as mentioned in the assessment order or by the CIT(A). The Assessing Officer without giving any basis allowed 4% sales return while the Assessing Officer allowed 4% of the sales return while the Assessing Officer allowed 7% of the sales return for both the units. No basis for allowing 4% or 7% sales return was given by any of the authorities below. Neither any comparati .....

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ccrual of income. The assessee in this case, in our opinion, claims that he has not made the sales for a particular quantity of the newspapers as the newspapers so sent returned back. If the newspapers are not sold on the day for which it is published it would become out dated, obsulate and remains unsold. The Assessing Officer in this case alleged that the assessee has sold much more what has been shown by the assessee as sales. This is the settled law that apparent is real. Onus is on the pers .....

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ow the question arises what material or evidence the Assessing Officer has brought on record so as to discharge the onus of revenue. We find that except allegations for which the assessee has duly submitted the evidence, there is no iota of evidence on record which may point out that the income has accrued to the assessee during the year as the assessee has made the sale much more than what has been shown in the books of account. There is difference between the disallowance of an expenditure and .....

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. 37 or other relevant provisions, under which the deduction has been claimed. The assessee has duly accounted the sales return on the basis of evidence produced and brought on record. Therefore, we set aside the order of the CIT(A) and delete the disallowance made by the Assessing Officer in toto in respect of the sales return at Varanasi and Allahabad Benches. Thus, the ground No. 2 to 4 of assessee's appeal and ground No. 1 of the cross objection are allowed while ground No. 1(i) of Reven .....

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lowance on the basis of similar disallowances made in the assessment order for AYs 2003-04 to 2005-06. In this regard, it is pointed out by the Ld.A.R. that the above matter regarding sales return has been decided in favour of the appellant for A.Y. 2003-04 by the Hon'ble ITAT, Agra Bench vide consolidated order dated 28.7.2011 in cross appeals in ITA nos. 331, 360 (Agra) of 2007 and C.O.No.52 (Agra) of 2007. Following the above, the Hon'ble ITAT Delhi has decided the matter in favour of .....

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is deleted." 8. In view of above conclusion of the Ld.CIT(A) based on the order of the ITAT Agra Bench (supra) we are in agreement with the conclusion of the Ld.CIT(A) that there was a difference between the disallowance of expenditure and the accrual of income and as per prudent concept of accountancy the income cannot be charged until and unless it is realised or accrued to the assessee. On this issue the AO tried to charge alleged excessive sales returns to tax by taking 4.5% average sal .....

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