TMI Blog2019 (4) TMI 1675X X X X Extracts X X X X X X X X Extracts X X X X ..... these Appeals is thus academic and does not give rise to any substantial question of law. Disallowance of the deferred revenue expenditure - Assessee had claimed deduction at the rate of 1/17th of the said expenditure while filing the return of income in the impugned assessment year - Tribunal held that since the liability was as per interpretation of the accrual towards the said expenditure in the Assessment Year 2011-12 and since the Assessees had made payment on 5th March, 2010, and held that the said sum was also not hit by the provisions of Section 40(a)(ia) - HELD THAT:- Tribunal held that following the rule of consistency, deduction to the Assessee amounting to ₹ 9,87,993/- being 1/17th of ₹ 1,67,95,982/- was allowed. These findings of fact rendered by the Tribunal in the impugned order are admittedly not impugned by the Revenue and have attained finality. In our view, the issue raised by the Revenue recorded in paragraph 3(D) aforesaid is also academic and does not raise any substantial question of law. - TAX APPEALS NO.52/2018, 55/2018, 56/2018 & 60/2018 - - - Dated:- 15-4-2019 - R.D. DHANUKA PRITHVIRAJ K. CHAVAN, JJ. Ms. Susan Linhares, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... -10 comes to ₹8,63,95,982/- is divided into 17 installments by the assessee and claimed deferred expenditure of ₹ 50,82,117/- in each year which the AO has disallowed and added to the income ? 4. Some of the relevant facts for the purpose of deciding these appeals are as under : (A) The Assessees were engaged in the business of extraction and sale of iron ore. In so far as the facts in Tax Appeal No.52/2018 and Tax Appeal No.60/2018 are concerned, the assessee Mr. Rajesh Prakash Timblo was granted mining lease by the State Government, which was renewed for a period of 20 years from 2008 upto 2018 on 21/09/2000. The Assessee entered into an agreement for extraction and transportation of iron ore with M/s. Timblo Minerals Pvt. Ltd. and granted extraction of iron ore right in such mining lease to the said M/s. Timblo Mineral Pvt. Ltd.. The said extraction agreement was renewable automatically every five years till the iron ore contained therein were economically explorable. (B) On 5th March, 2010, the Assessee and the said M/s. Timblo Mineral Pvt. Ltd. entered into an agreement with other parties as well, consisting of said M/s. Timblo Minera ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hort 'Tribunal') being ITA No.215/PAN/2017. (E) By an order dated 5th September, 2017, the Tribunal allowed the said Appeal filed by the Assessee on the issue of deferred revenue expenditure in respect of payment made towards liquidated damages amounting to ₹ 6,96,00,000/- and deduction amounting to ₹ 9,87,993/- being 1/17th of ₹ 1,67,95,982/-. (F) In so far as Assessment Year 2012-13 is concerned, the said Assessee Mr. Rajesh Prakash Timblo filed his return of income on 28th September, 2012, declaring total income of ₹ 1,47,12,570/-. The Assessing Officer, by order dated 4th March, 2015 made various additions, amounting to ₹ 34,90,325/-. The Assessee being aggrieved by the disallowance of deferred expenditure of ₹ 50,82,117/-, preferred an appeal before the CIT(A). The learned CIT(A), by an order dated 7th June, 2017, upheld the additions made by the Assessing Officer and dismissed the appeal filed by the said Assessee. The Tribunal, by an order dated 5th September, 2017, allowed the appeal filed by the said Assessee bearing ITA No 216/PAN/2017 filed by the said Assessee on the issue of deferred revenue expenditur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Assessing Officer and dismissed the appeal filed by the said Assessee. The Tribunal by an order dated 5th September, 2017, allowed the Appeal No.218/PAN/2017 filed by the said Assessee on the issue of deferred revenue expenditure related to payment of liquidated damages amounting to ₹ 6,96,00,000/- and deduction amounting to ₹ 9,87,993/- being 1/17 of ₹ 1,67,95,982/-. 5. Being aggrieved by the order dated 5th September, 2107, passed by the Tribunal, the Revenue has filed these four Appeals under Section 260-A of the Act. 6. Ms. Linhares, learned Counsel for the Revenue invited our attention to various findings rendered by the Assessing Officer in the order dated 13 March 2015 and also in the order dated 27 June 2017 passed by the CIT(A) and would submit that the Assessing Officer had rightly disallowed the expenditure incurred by the Assessees in respect of the payment towards liquidated damages for cancellation of the contract and deferred revenue expenditure in the Assessment Year 2011-12. She submits that the agreement was entered into between the Assessees and the said M/s. Timblo Minerals Pvt. Ltd. in the Assessment Year 2010-11 and, thus, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ith by this Court in this Appeal under Section 260-A of the Act. 11. The learned Counsel for the Assessee strongly relied on the Judgment of the Supreme Court in the case of Taparia Tools Ltd. vs. Joint Commissioner of Income-tax, Nasik , [2015] 55 taxmann.com 361 (SC) and more particularly paragraphs 17 and 18 wherein it has been held by the Supreme Court that though the entire expenditure was incurred in that particular year, it was the Assessee who wanted the spread over. The Court was conscious of the principle that normally revenue expenditure is to be allowed in the same year in which it is incurred, but at the instance of the Assessee, who wanted spreading over, the Court agreed to allow the Assessee that benefit when it was found that there was a continuing benefit to the business of the company over the entire period. If the Assessee claimed that expenditure in that year, the IT Department cannot deny the same. However, in those cases where the Assessee himself wants to spread the expenditure over a period of ensuing years, it can be allowed only if the principle of 'Matching Concept' is satisfied, which upto then had been restricted to the cases of de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rious clauses of the agreement entered into between the Assessee and the said M/s. Timblo Minerals Pvt. Ltd. and more particularly clauses 1, 4, 5 and 6, which recorded the terms of payment of the said sum in three installments. Admittedly, the second and the third installments fell after 1st April, 2010 and during the Assessment Year 2011-12. The Tribunal also interpreted those terms and has rightly held that the said agreement dated 5th March, 2010 would not have any effect till the full and final sum of ₹ 6.96 crores was released to the said M/s. Timblo Minerals Pvt. Ltd. and would have stand cancelled only if the amount mentioned therein would have been paid in installments as provided therein. 16. In our view, the Tribunal rightly held that the agreement dated 5th March, 2010 would not have become effective on the date of its execution, but would stand effective only when the said amount of ₹ 6.96 crores was received by the said M/s. Timblo Minerals Pvt. Ltd. The Tribunal rightly held that the liability of the Asseessee accrued when the said agreement became effective, which was only after making full payment by the Assessee to the said M/s. Timblo Miner ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... his Court in the case of Commissioner of Income-tax vs. Nagri Mills Co. Ltd. (supra) and in the case of Commissioner of Income-tax-15 vs. Aditya Builders (supra) squarely apply to the facts of this case. We are respectfully bound by the said Judgments. We are in agreement with the view expressed by the Delhi High Court in the case of Commissioner of Income-tax vs. Triveni Engg. Industries Ltd (supra) and the Judgment of the Gujarat High Court in the case of Commissioner of Income-tax vs. Gujarat State Forest Department (supra). 20. Hon ble Supreme Court in the case of Taparia Tools Ltd. vs. Joint Commissioner of Income-tax, Nasik (supra) has considered the facts where the Assessee wanted to spread over the entire expenditure incurred in a particular financial year. It is held that the Court was conscious of the principle that normally revenue expenditure is to be allowed in the same year in which it is incurred, but at the instance of the Assessee who wanted spreading over, the Court agreed to allow the Assessee that benefit when it was found that there was a continuing benefit to the business of the company over the entire period. It is further held ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... /- which were deducted from the amounts paid under those three installments and were deposited on 29th May, 2010, 18th August, 2010 and 5th September 2011 respectively, the Tribunal held that the deductions for the second and third installment were made during the Assessment Year 2011-12 and thus no disallowance under Section 40(a)(ia) could be made. The deductions for both the payments were to be made even on the basis of Section 40(a)(ia) during the Assessment Year 2011-12. 24. In so far as the tax deducted during the Assessment Year 2010-11 is concerned, it is held by the Tribunal that since the liability was as per interpretation of the accrual towards the said expenditure in the Assessment Year 2011-12 and since the Assessees had made payment on 5th March, 2010, they were bound to deduct the tax at source even if the liability had accrued during the Assessment Year 2010-11 and accordingly, tax was deducted at source and was paid. The Tribunal, accordingly, held that the said sum of ₹ 2,32,13,982/- was also not hit by the provisions of Section 40(a)(ia) of the Act and no disallowance under the said provision could be made during the Assessment Year 2011-12. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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