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2015 (12) TMI 1024 - ITAT PUNE

2015 (12) TMI 1024 - ITAT PUNE - TMI - Disallowance u/s 43B on account of VAT collected but not paid - VAT was not claimed as expenditure in the profit and loss account - Held that:- In the facts of the present case, admittedly, the assessee had collected VAT amount of ₹ 22,68,716/- and had paid Rs.Rs.8,21,505/- against the said amount due during the accounting period, the balance amount of ₹ 14,47,211/- was not paid by the assessee before the close of year or before the date of audi .....

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return of income under section 139(1) of the Act and allow the claim in accordance with law. - ITA No.1806/PN/2013 - Dated:- 30-10-2015 - MS. SUSHMA CHOWLA, JM AND SHRI PRADIP KUMAR KEDIA, AM For The Appellant : Shri Sunil Ganoo For The Respondent : Shri Dheeraj Kumar Jain ORDER PER SUSHMA CHOWLA, JM: This appeal filed by the assessee is against the order of CIT(A)-I, Nashik, dated 08.08.2013 relating to assessment year 2009-10 against order passed under section 143(3) of the Act, 1961 (in short .....

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ion of Supreme Court in the case of Chowringhee Sales Bureau (P) Ltd. Vs. CIT (1973) 87 ITR 842 (SC) which was given in the context of the Income Tax Act, 1922, is not applicable in the context of section 43B disallowances, under the Income Tax Act, 1961. 3) The appellant craves leave to add/alter/amend/delete any of the grounds of appeal. 3. The issue raised in the present appeal is against the disallowance of ₹ 14,47,211/- made under section 43B of the Act on account of VAT collected but .....

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mitted by the statutory auditor, the Assessing Officer noted that as per column 21(b) of the audit report, the assessee had paid sum of ₹ 8,21,505/- out of the total dues of VAT tax of ₹ 22,68,716/-. The VAT tax re mained to be paid into government account till the date of report was ₹ 14,47,211/-. On query, it was explained by the assessee that the VAT was collected separately on each sale transaction from the customer. The Assessing Officer held that the same were government .....

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disallowable under section 43B of the Act. The CIT(A) noted that the appellant had not debited ₹ 14,47,211/- as VAT in P rofit & Loss Account and had directly shown the liability in the Balance Sheet. The claim of the assessee that the addition was not justified in view of the ratio laid down by the Hon ble Gauhati High Court in CIT Vs. India Carbon Ltd. reported in 262 ITR 327 (Gau), was not accepted by the CIT(A) in view of the decision of Hon ble Supreme Court in Chowringhee Sales .....

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r the assessee that under Maharashtra VAT Act, the sale price was not to include the VAT. It was further stressed by him that in view of Circular No.372 issued by the CBDT, the profit as per method of accounting followed by the assessee is to be applied. Further, reference was made to Circular No.772 issued by the CBDT. The learned Authorized Representative for the assessee further placed reliance on the following decisions:- 1. India Carbon Ltd. Vs. ACIT & Anr. (1993) 200 ITR 759 (Gau) 2. C .....

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CBDT, any tax, duties, cess or fees, that has been paid is to be included in the valuation of goods. It was further pointed out by the learned Departmental Representative for the Revenue that all the decisions relied upon by the learned Authorized Representative for the assessee were before the amendment which was w.e.f. 01.04.1999. Further the learned Departmental Representative for the Revenue pointed out that the judgment of the Hon ble Delhi High Court in CIT Vs. Noble and Hewitt (I) P. Ltd .....

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and hence, no merit in the addition. 11. We have heard the rival contentions and perused the record. Under section 145 of the Act for determining the income chargeable under the head profits and gains of business or profession or income from other sources, the same is to be computed in accordance with either cash or mercantile system of accounting regularly employed by the assessee. The said provisions were substituted by the Finance Act, 1995 w.e.f. 01.04.1997. Under section 145A of the Act, i .....

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assessee, to bring the goods to the place of its location and condition, as on the date of valuation. As per the explanation under the said clause, it is pointed out that for the purpose of this section, any tax, duties, cess or fees, by whatever name called, under any law for the time being in force, shall include all such payments, notwithstanding any right arising as a consequence to such payments. Sub-clause (b) talks of interest received by the assessee on compensation or enhanced compensa .....

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d no clause (b) was provided i.e. in respect of income received by the assessee on compensation or on enhanced compensation. In view of the amended provisions of the Act, which came into effect from 01.04.1999 for valuing the purchases and sales of goods and also for valuing the inventory, while determining the income chargeable under the head profits and gains of business or profession, it has been provided that the said valuation would be in accordance with the method of accounting regularly e .....

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on of purchase and sale of goods and also in the valuation of inventory to include the aforesaid amounts while determining the income chargeable under head profits and gains of business or profession. 13. In the facts of the present case, the assessee was dealing in food products and had purchased goods on which VAT tax was applicable. The VAT is value added tax to be paid on a transaction of purchase and sale of goods. The assessee for the year under consideration was due to pay VAT of ₹ .....

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y the assessee by way of tax, duties, cess or fees, by whatever name called, under any law for the time being in force, or any other sums which are covered by clauses (b) to (f), the same shall be allowed as a deduction in the hands of assessee, irrespective of the previous year, in which the liability to pay such sum was incurred by the assessee, according to the method of accounting regularly employed by him. Proviso further provides that the provisions of the said section shall not apply in r .....

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ssee has time and again stressed that the VAT payable account has shown in its Balance Sheet in the liabilities side and the same was not charged to the Profit & Loss Account and was not claimed as a deduction, hence, the same cannot be added back under the provisions of section 43B of the Act. 15. The first contention of the learned Authorized Representative for the assessee in this regard was that under the Maharashtra Value Added Tax Act, 2002, the sale price shall not include the tax pai .....

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ection 43B of the Act was to curb the practice of claiming the deduction on account of statutory liabilities on the ground that they were maintaining the accounts on mercantile or accrual basis. However, the liability was not discharged and in order to curb excessive claim of the statutory liabilities, section 43B of the Act was introduced. Further, reference was made to the Circular No.772 dated 23.12.1998 issued by CBDT, wherein, it was clarified that whether the value of closing of inputs, wo .....

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ed, actually paid or incurred by the assessee to bring the goods to the place of its location and condition, on the date of valuation. The said amendment was to take effect from 01.04.1999 and was to apply in relation to assessment year 1999-2000 and subsequent years. 16. In respect of first aspect of the issue that whether the assessee is correct in not recognizing the VAT re latable to its sales as part of the sale consideration in view of the Maharashtra Value Added Tax Act, 2002, we are of t .....

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In view of the provisions of the Act i.e. section 145A of the Act, we find no merit in the plea of the assessee in not recognizing the VAT attributable to its sales as part of the sale consideration of the goods while computing its Profit & Loss Account. The mandatory provisions of Central Act i.e. section 145A of the Act supersedes the provisions of any State Act i.e. Maharashtra Value Added Tax Act, 2002. Once the assessee recognized the VAT amount as part of the sale consideration, it ta .....

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section 43B of the Act attracted in the case? The said section was introduced in order to provide the deduction on account of statutory liabilities to be allowed only on payment basis, irrespective of the year to which it relates. The said section starts with a non-obstacle clause that notwithstanding anything contained in the Act, where the deduction which is otherwise allowable under the Act in respect of any amount payable by an assessee, by way of tax, duties, cess or fees, by whatever name .....

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ts and once the payment has not been made in the year to which the said liability relates, then the said amount is to be added back as income of the assessee for the relevant year. 18. The Hon ble Delhi High Court in CIT Vs. Noble and Hewitt (I) P. Ltd. (supra) while deciding the issue of question of service tax had observed that where the assessee was maintaining its accounts on mercantile system of accounting and had collected service tax during the assessment year 1999- 2000, out of which par .....

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ited amount to the Profit & Loss Account as expenditure nor the assessee claimed any deduction in respect of amount and considering that the assessee was following mercantile system of accounting, the question of disallowing the deduction not claimed, does not arise. 19. The said ratio laid down by the Hon ble Delhi High Court in CIT Vs. Noble and Hewitt (I) P. Ltd. (supra) is not applicable to the facts of the present case before us since the said ratio was in respect of service tax collect .....

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rough Profit & Loss Account. In case, the assessee pays the VAT amount within accounting period or before the due date of filing the return of income, no addition is to be made in the hands of the assessee as the amount collected on one hand is paid on the other hand and hence, Nil deduction to be allowed to the assessee. However, where the assessee collects the amount on account of VAT, but does not deposit the same within the accounting period or before due date of filing the return of inc .....

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