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2016 (1) TMI 683 - ITAT AHMEDABAD

2016 (1) TMI 683 - ITAT AHMEDABAD - TMI - Disallowance u/s.43B - excise demand - CIT(A) deleted the addition - Held that:- Once the company makes the payment, whether under protest or otherwise, by debting Profit & Loss account or by showing in the Balance Sheet or as contingent liability the same will be available as deduction u/s 43B on making payment. Further, in the case of Glaxo Smithline Consumer Healthcare Ltd. ITA [2007 (7) TMI 334 - ITAT CHANDIGARH] it has been held that the Section 43B .....

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(A) deleted the addition - Held that:- We find that the expenses on account of panchayat tax was debited under the head 'prior period expenses' by the Auditor of the Company. We further note that the said expenses were crystallized during the year upon the assesee being served a notice of demand. Though, the some part of the demand pertained to earlier years, we are in full agreement with the conclusion drawn by the CIT(A) on this point that the expenses pertain to current year as the notice of .....

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rose in India. In the Circular No.23 dated 23/07/1969 and Circular No.786 dated 07.02.2000 issued by CBDT, it has been provided that no TDS was required to be deducted from the export commission where the non resident agent operated from the outside of the country and the payment is remitted directly abroad. We also note that the similar issue cropped up in the A.Y. 2007-08 in the assessee's own case which was decided in favour of assessee - ITA No.2463/Ahd/2012 - Dated:- 7-12-2015 - SHAILENDRA .....

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deduction without treating the same as actual liability in its books of account. (ii) learned CIT(A) erred in law in deleting disallowance of ₹ 3,66,000/- wrongly claimed on account of prior period expenses, disregarding the fact that assessee follows mercantile system of accounting. (iii) learned CIT(A) erred in law in deleting addition of ₹ 29,382/- made on a/c of disallowance of foreign commission u/s40(a)(i) of the IT Act disregarding the fact that assessee company failed to ded .....

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claimed u/s.43B of the Act being the refund of excise duty adjusted against the excise liability as the same was omitted to be claimed inadvertently. The assessee was slapped with a demand of ₹ 4.55 crore by the Excise Department pertaining to the period Feb 1999 to June 2005, which was disputed by the assessee and the same was also shown as contingent liability as per Note no. 2(c) of the accounting policies to the annual accounts of the company. The said demand was raised during the year .....

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by holding that the assessee was entitled to claim the deduction of ₹ 3,71,42,093/- u/s.43B of the Act provided that the said amount was not claimed by the assessee in earlier year. The relevant para no.4.6 of CIT(A) is reproduced as under: "4.6 As the appellant has paid the amount of ₹ 3,71,42,093/-towards excise duty by way of adjustment of refund against the above demand of ₹ 4.55 crores and therefore, it is entitled for deduction of this amount of ₹ 3,71,42,093/- .....

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,42,093/- has been claimed by the appellant u/s.43B or under any other section of the IT Act in earlier year or years. If on verification of relevant records/books of accounts of the appellant it is found by the AO that no deduction of above amount of refund of ₹ 3,71,42,093/- has been claimed by the appellant either u/s.43B or under any other section of the IT Act, then the AO is directed to allow the claim of the appellant of this amount of ₹ 3,71,42,093/- u/s 43B of the IT Act. Th .....

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el submitted that the liability of the excise demand was crystallized during the year and adjustment of refund due to the assessee against the excise demand also happened during the year and therefore, it was allowable. 3.4 We have considered the rival submissions and perused the material on record. We find that a refund of ₹ 3.71crore was adjusted against the demand raised of ₹ 4.55crore by the Excise Department which means that the demand raised by the department stands discharged .....

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en note in the "notes to accounts" to the annual account mentioning the facts qua the said demand raised by the Excise Department and adjustment of refund of ₹ 3.71Crore against that demand though not accounted for in the books of accounts. The Hon'ble Supreme Court in the case of CIT vs. Bharat Carbon And Ribbon Manufacturing Co. Pvt. Ltd. (1999) 239 ITR 505 while following its earlier decision in case of Kedarnath Jute Manufacturing Co. Ltd. vs. CIT 82 ITR 363 has held that .....

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fact that the liability was not accounted for in the books, it was deductible under mercantile system of accounting when liability has accrued. Therefore, once the company makes the payment, whether under protest or otherwise, by debting Profit & Loss account or by showing in the Balance Sheet or as contingent liability the same will be available as deduction u/s43B on making payment. Further, in the case of Glaxo Smithline Consumer Healthcare Ltd. ITA No.343/Chandigarh/2005 the five members .....

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assessee is squarely covered by the ratio laid down in the various decisions discussed above and by respectfully following these decisions, we dismiss the appeal of the Revenue on this point. 4. The issue in the second ground of appeal relates to the deletion of disallowance on account of Panchayat tax of ₹ 3,66,000/-. 5. The brief facts are that the assessee received notice for panchayat tax during the year which included the tax pertaining to earlier years. The ld. A.O. disallowed ₹ .....

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er hand, the ld. A.R. submitted that the liability on account of panchayat tax crystallized during the year as the notice of demand was received during the year which is in accordance with the practice followed by the assessee and therefore the order passed by the CIT(A) was in accordance with law and was not required to be disturbed. 5.2 We have heard the rival submissions and perused the material on record. We find that the expenses on account of panchayat tax was debited under the head 'p .....

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e, dismiss the appeal of Revenue on this ground. 6. The third ground of appeal related to deletion of addition of ₹ 29,382/- made disallowance on account of foreign commission. 7. During the year, the assessee debited ₹ 29,382/- on account of export commission. The ld. A.O. disallowed the said expense by holding that the assessee has not complied with the provision of tax deduction at source and therefore, the said expense was not deductible under the provisions of Section 40(a)(i) o .....

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