TMI Blog2024 (3) TMI 1115X X X X Extracts X X X X X X X X Extracts X X X X ..... ll other companies selected by the TPO are engaged in manufacture and sale of commercial vehicles and are therefore, functionally not comparable with the assessee, a company engaged in the manufacture and sale of passenger vehicles. - Decided against revenue. Deduction u/s 43B - disallowance of amount of Excise Duty actually paid on purchase inputs and included in RG 23A Part II - HELD THAT:- A similar issue was considered by this Tribunal in [ 2018 (10) TMI 1398 - ITAT DELHI] and Hon'ble High Court of Delhi in assessee s own case [ 2017 (12) TMI 590 - DELHI HIGH COURT] . The Assessing Officer is directed to decide the issue as per the directions given in earlier A.Ys 2009-10 and 20101-11 mentioned hereinabove to verify the claim and if found proper be allowed for deduction for amount forming part of RG 23A balance to the extent it has been directly paid to custom authorities. Ground Nos. 2.3 and 2.4 are allowed for statistical purposes. Excess consumption of raw materials and components to be deleted placing reliance on two factors, namely, that the net difference of stock is negligible in tune with the observations of the Hon ble Apex Court in M/s Maruti Suzuki India Ltd [ 20 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... paid under protest' by holding that first the Profit and loss account be recast as per 'Inclusive method' in terms of section 145A and then some adjustments as stated above be separately made. Such directions are fully applicable pro tanto to the customs duty paid under protest. The AO is directed to follow the same - While following the same for AY 2007-08, Tribunal set aside the matter to the file of the Assessing Officer to decide it afresh as decided above by the ITAT after affording opportunity of being heard to the assessee. Thus this Ground is allowed for statistical purposes. Disallowing liabilities on account of increased prices - HELD THAT:- There is no dispute that the same method of accounting is regularly and consistently followed by the assessee as such rule of consistency is applicable as per which under the similar facts and circumstances, department ought to follow same approach on an issue in other assessment years. We, therefore, respectfully following the reasoning adopted by the coordinate Bench of this ITAT for the AY 2007-08 [ 2016 (5) TMI 1469 - ITAT DELHI] set aside the matter to the file of the AO with direction to decide the issue afresh after ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... en considered and decided by this Tribunal in earlier years in assessee s own case. 4. The ld. DR fairly stated that wherever the Tribunal has restored the matter to the file of the Assessing Officer, the same should be followed. 5. On such concession, we have heard the rival submissions and have carefully perused the orders of the authorities below and considered the relevant documentary evidences brought on record in light of Rule 18(6) of the ITAT Rules. Judicial decisions relied upon duly considered. 6. We will first take up assessee s appeal in ITA No. 4081/DEL/2010. 7. Ground No. 1 with its sub grounds relate to Transfer Pricing adjustment in respect of international transactions entered into during the year. 8. Briefly stated, the assessee is a subsidiary of Suzuki Motor Corporation, Japan with a 45.54% shareholding of the Government of India and is engaged in the manufacture and sale of passenger cars primarily for sale in Indian market. It also exports vehicles and spare part to various countries in Europe, South and Central America, Africa and Asia. It has only one manufacturing facility in India situated in Gurgaon. 9. During the year under consideration, the assessee ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... list of comparables exhibited elsewhere, we find that except for Hindustan Motors Limited, all other companies selected by the TPO are engaged in manufacture and sale of commercial vehicles and are therefore, functionally not comparable with the assessee, a company engaged in the manufacture and sale of passenger vehicles. 16. Considering the facts of the case from all possible angles, we do not find any merit in the TP adjustment made by the TPO. We accordingly, direct the Assessing Officer/TPO to delete the impugned adjustment. Ground No. 1 with all its sub-grounds is allowed and those of the Revenue s appeal are dismissed. 17. Ground No. 2 with its sub-grounds relates to the claim of deduction of Rs. 1,99,79,84,644/- made u/s 43B of the Act. 18. This quarrel is coming out from A.Ys 1999-2000 onwards and the co-ordinate bench since A.Ys 1999-2000 to 2009-10 has been deciding this issue. 19. The co-ordinate bench in ITA No. 467/DEL/2014 for A.Y 2009-10 has considered this issue at Para 16 of its order. The relevant findings read as under: 16. As regards to Ground No. 3.5, relating to Customs Duty paid on import of components for export purposes for which exports has been made. Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rent and inconsistent methods while computing the income of the present year. The aforesaid sum was duly declared as the income of the immediately succeeding year on receipt, a method consistently adopted by the assessee company and accepted by the AO since inception. The Tribunal has decided the aforesaid issue in favour of assessee in the assessment years 1999-00, 2000-01, 2001- 02, 2002-03, 2004-05, 2005-06, AY 2006-07, 2007-08 and 2008-09. The orders of the Delhi Tribunal have been affirmed by the Delhi High Court for assessment years 1999-00 (ITA No.250/2005), 2000- 01 (ITA No.976/2005), 2005-06 (ITA Nos. 171 and 172/2012) and 2006-07 (ITA No. 381/2016). Further, the issue stand covered in favour of the assessee in view of the decision of the Hon'ble Punjab and Haryana High Court in the case of CIT v. Sriyansh Knitters P. Ltd. 336 ITR 235 wherein the High Court, while affirming the finding of the Tribunal held that duty drawback accrues in the year in which rate is fixed by the competent authority after verification of claim of the assessee and amount is quantified and not in the year of export. Similar view has been held in the case of CIT v. Manav Tools (India) P. Ltd: 3 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ction 43 B of the Act. The Assessing Officer, however, disallowed the aforesaid amount following the assessment orders for the preceding years. 22. The Ld. AR submitted that the Special Bench of the Tribunal in the case of DCIT v Glaxo SmithKline Consumer Healthcare Ltd: 107 ITD 343/ 299 ITR (AT) 1 (Chd.) (SB), has held that, unutilized MODVAT credit is not an allowable deduction, since such credit does not amount to payment of duty. Therefore, the Ld. AR pointed out that, as a result of the order of the Tribunal, such deduction may be held as not allowable to the assessee in the instant year but would be allowable in the year when the same is adjusted against excise duty payable. The principle laid down is that deduction is allowable in the year when adjustment is made and not in the year of purchase of raw material/input. Following the order of the Special Bench in Glaxo (supra), the ITAT in assessee's own case for AY 2001-02 decided the issue against the assessee. However, the Supreme Court has held that deduction is allowable u/s 43B of the Act for the amount lying credited in the Modvat account at the end of the accounting year, dismissing the SLP (No. 23461/2012) filed by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... een payable within that year under the relevant law. 33. There are two kinds of payment envisaged by Section 43B of the Act. Tax payable could be in the form of excise duty on the raw material/inputs purchased by the manufacturer. The second kind of payment could be of excise duty that is payable by manufacturer on the final product at the time of clearance of such final products from the factory. 34. In Eicher Motors (supra), a challenge was raised to the validity of Rule 57F (4A) of the CE Rules under which credit which was lying unutilised as of 16th March 1995 with the manufacturers stood lapsed in the manner set out therein. The Supreme Court upheld the challenge by the manufacturers to the aforementioned Rule 57F (4A) of the CE Rules on the ground that under the MODVAT scheme as it existed on the date of change, i.e. 16th March 1995, MODVAT credit lying in the balance with the Assessee represented a vested right accrued or acquired by the Assessee under the existing law . It was observed as under: 5............ when on the strength of the Rules available, certain acts have been done by the parties concerned, incidents following thereto must take place in accordance with the S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t; that is to say, it is not as if credit can be taken only on a final product that is manufactured out of the particular raw material to which the credit is related. The credit may be taken against the excise duty on a final product manufactured on the very day that it becomes available. 19. It is, therefore, that in the case of Eicher Motors Ltd. vs. Union of India (1999) 2 SCC 361 this Court said that a credit under the MODVAT scheme was as good as tax paid. 37. Now turning to the treatment of the said payment of excise duty which has any MODVAT credit in the books of accounts, a reference may be made first to the AS-2 issued by the ICAI, para 7 of which reads as under: Costs of Purchase 7. The costs of purchase consist of the purchase price including duties and taxes (other than those subsequently recoverable by the enterprise from the taxing authorities), freight inwards and other expenditure directly attributable to the acquisition. Trade discounts, rebates, duty drawbacks and other similar items are deducted in determining the costs of purchase. 38. The ICAI has also issued a Guidance Note for treatment of MODVAT/CENVAT. Paras 16 and 18 of the Guidance Note reads thus: 16. S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... th other entities for the purchase of imported palm stearin fatty acid ('imported material') from the said importers. In terms of the said agreement, the imported material was to be purchased by the Appellant at landed cost, i.e. CIF price, customs duty, clearing charges, etc. and 3% of the total cost. Under Clause 11 of the agreements, any liability arising after the sale of the imported material in respect of customs duty, excise duty, penalty, sales tax, etc. would be paid by the appellant and included in the landed cost of imported material. 41.2 At the time of actual import of material, the Customs Department demanded 100% of the applicable customs duty as additional customs duty on the CIF value of the imported material. The additional demand was challenged by the importers before the Supreme Court. As an interim measure, the Supreme Court allowed the clearance of imported material on payment of 15% of the disputed additional customs duty. A stay was granted for the balance 85% subject to furnishing of bank guarantees by the importers in favour of the Customs Department. In terms of the agreement between the appellant and the importers, the appellant provided counter ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e case, this Court held that subject liability was a contingent liability in respect thereof could not be allowed as a deduction for the AY in question. 41.6. Specific to Section 43B, the Court considered whether it was in fact an obligation of the Appellant therein to pay additional customs duty and whether such obligation could be considered to be a Court observed: Although the Assessee is obliged to pay the additional customs duty as and when the importers are called upon to pay the same, nonetheless, it cannot be considered as a statutory liability because the same is not imposed on the Assessee by virtue of any statute. Customs duty is an incident of import of goods and an importer is obliged to pay the same under the Customs Act. Therefore, the liability to pay the additional customs duty is a statutory liability of the importers. However, in the hands of the Assessee, the liability to pay the quantum of custom duty imposed on the importers, either directly to them or on their behalf, cannot be considered as a statutory liability as this obligation is not imposed by any statute but from the contracts entered into between the Assessee and the importers. The liability in questi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... id by the Appellant to the customs authorities (and not to the Appellant's suppliers) and therefore, this amount should also be allowed under Section 43B of the Act. 44. The Court would only like to observe that it would be for the AO to give effect to the order pertaining to the aforementioned amounts paid by the Assessee to be made in respect of those goods already consumed as on 31st March 1999 and in respect of additional countervailing duty paid directly to the customs authorities. If indeed such payment has been made, the credit for the same would be allowable as a deduction under Section 43B of the Act. 45. However, it is also to be noted that in para 35 of the impugned order, the ITAT has accepted the alternate contention of the Assessee that unutilized MODVAT credit of an earlier year which has been adjusted in the year in question should be allowed as a deduction in as much as such adjustment would have to be treated as an actual payment of excise duty. In view of the Court agreeing with the ITAT on the non-allowability of unutilized MODVAT credit as a deduction under Section 43B of the Act for the AY in question, this Court also agrees with the ITAT's acceptance ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hought. Secondly, the ITAT has already accepted another alternate plea made before it by the Assessee by allowing deduction in respect of the unutilized MODVAT credit of the earlier AY, the Court is not inclined to disagree with the reasoning and conclusion of the ITAT. The assessee cannot be allowed to go back and forth on the above plea. There has to be consistency. Thirdly, balance sheet of the Assessee for AY 1999-00 shows that the turnover for the year was over Rs. 8,000 crores. The corresponding sum claimed as deduction representing the unutilized MODVAT credit is not very significant in comparison. 49. Consequently, Question (ii) is answered in the negative, i.e. in favour of the Revenue and against the Assessee. In view of the finding of the Hon'ble High Court, this issue is remanded back to the file of the A.O to verify the claim as per the directions of the Hon'ble High Court and if found proper be allowed for deduction for amount forming part of RG 23A balance to the extent it has been directly paid to custom authorities. Needless to say the assessee be given opportunity of hearing by following principles of natural justice. 23. This decision of the co-ordinate b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the year in question should be allowed as a deduction in as much as such adjustment would have to be treated as an actual payment of excise duty. In view of the Court agreeing with the ITAT on the non-allowability of unutilized MODVAT credit as a deduction under Section 43B of the Act for the AY in question, this Court also agrees with the ITAT's acceptance of the Assessee's alternate contention with regards to the unutilized MODVAT credit of the earlier year being allowable as a deduction in the AY in question to the extent that it has been adjusted by treating as actual payment of the credit for the AY in question. As the ITAT has already pointed out, the Assessee would be entitled to such deduction subject to verification provided the same was not allowed as deduction in the earlier year. 24. The Assessing Officer is directed to decide the issue as per the directions given in earlier A.Ys 2009-10 and 20101-11 mentioned hereinabove. Ground Nos. 2.3 and 2.4 are allowed for statistical purposes. 25. Ground No. 5 relates to the disallowance of Rs. 36,16,02,097/- being custom duty included in the closing inventory. 26. A similar issue was decided in A.Y 1999-2000 by this Tr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... esent custom duty/CVD paid by the assessee during the financial year 2007-08, and since the aforesaid amount represents actual custom duty/CVD paid by the assessee during the year under consideration, the same was claimed as deduction under section 43B of the Act. But the assessing officer disallowed the aforesaid following assessment order for the assessment year 2005-06. Ld. AR submitted that this issue was also decided in favour of assessee by the Supreme Court in Civil Appeal No. 6449/2012 wherein the SLP filed by the department against the order of the Delhi High Court in the case of CIT vs. Samtel Color Ltd.: 184 Taxman 120 was dismissed holding that Custom duty paid is allowable deduction u/s 43B of the Act. He further submits that apart from this, the issue stands covered in favour of the assessee by the order of a coordinate bench of this Tribunal for the Assessment years 1999-00, 2000-01, AY 2002-03, AY 2005-06, AY 2006- 07 and 2007-08 wherein it was held that since the duty is paid, deduction claimed u/s 43B of the Act has to be allowed. 3.26 Per Contra, on these Grounds 3.6 and 3.7, Ld. DR submitted that in respect of the amount of Rs. 13,51,93,089/- being customs duty ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r considered opinion, there can be no dispute on the otherwise availability of deduction of advance customs duty paid by the assessee, which has to be allowed in the year of payment. In this judgment also, the Hon'ble High Court has noticed vide para 3 that the provisions of section 145A were not applicable as the assessment year under consideration was 1995-96. In view of the detailed discussion supra with reference to the applicability of section 145A to the year in question, there can be no escape from valuation of purchase, sale and inventories under the inclusive method. We, therefore, direct the AO to recast Profit and loss account under 'Inclusive method' as per the mandate of section 145A, thereby, inter alia, increasing the purchase value with the above customs duty. Then the AO will allow separate deduction for the above referred sums to the extent not getting eventually deducted separately by way of increased purchase price, as has been discussed above. At the same time, we also direct the AO to make sure that such amount separately getting deducted in this year does not get deduction once again in the next year. In the like manner, the last year's simila ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has been considered in earlier A.Ys from 1999-2000 till 2010-11. The co-ordinate bench in A.Y 2009-10 in ITA No. 467/DEL/2014 has considered this issue at Para 41 of its order. The relevant findings read as under: 41. Ground No. 4 to 4.2 is regarding non allowing withdrawal of add back u/s 43B. The assessee company had in the instant assessment year 2009-10 offered an amount of Rs. 69,50,54,573/- in its return of income. This amount represents amounts received back/ adjusted in the profit and loss account during the financial year 2008-09 out of the amounts which have already been claimed as deduction on payment basis under section 43B of the Act in the preceding assessment years. This amount was offered to tax by the assessee during AY 2009-10 on the presumption that deduction would be allowed in preceding years on payment basis. 42. The Ld. AR submitted that the aforesaid total amount has not been allowed to the assessee on payment basis in the preceding assessment years and thus the assessee has prayed that it should be allowed a withdrawal of add back of the aforesaid amount. Not allowing withdrawal of add back has resulted in the claim not being allowed in any year. To the ex ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the following manner: 6.3. Ground nos. 4 to 6.1 deal with a sum of Rs. 1,41,59,08,897, which has been stated to be a total of certain amounts claimed by the assessee as deductible in the preceding year u/s 43B as excise duty and customs duty and voluntarily offered for taxation in the current year's income. The ld. AR contended that since such deductions have been denied by the AO, the corresponding offering of the same to tax in the current year, be eliminated. 6.4. We agree with the ld. AR that one amount cannot be taxed twice. It is but natural that if an amount claimed as deduction by the assessee in the earlier year has not been allowed, then on the assessee's suo motu offering of it as an item of income for the current year on the strength of deduction claimed in the earlier year, which finally stands denied, should not be charged to tax. On being called upon to furnish the detail of such amount, it was stated that it, inter alia, includes a sum of Rs. 71,63,89,449, which is subject matter of ground no. 3.5, that we have discussed immediately hereinbefore. We note that apart from the sustenance of disallowance of Rs. 71.63 crore in the preceding year, there is no ot ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has considered a similar issue at para 5 of its order. The relevant findings read as under: 5. In respect of disallowance to a tune of Rs. 1,70,45,000/- on account of alleged excess consumption of raw materials and components, it is the argument of the Ld. AR that in the manufacturing process of automobiles, the assessee procures and utilizes more than 12000 items of raw material and components for manufacturing the range of automobiles, and during the previous year relevant to the assessment year 2008-09, the year under consideration, the turnover of the assessee (excluding excise duty) amounted to Rs. 17,860 crores. He explained that the assessee followed the elaborate system of book keeping for receipt and issue of raw material and component as also manufacture of finished goods. The assessee followed Just in Time system for management and reorder of inventory, whereby the inventories are ordered just in time when the requirement for said inventory arises in respect of production shops, in that process the material so required is delivered straight to the shop floor in the relevant department and at a time there remain only a few hour inventories except for certain items, and o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ourt held that when the shortage of inputes as corrected is only 0.24%, that would be immaterial and correction of the total input is in use. Besides placing reliance on the decisions reported in Setia Plastic Industries: 316 ITR 133(Del.), R.B. 379 ITA No.-6021/Del/2012 36 Bansilal Abhirchand Spng Wvng Mills v. CIT: 75 ITR 260 (Bom.), Surat District Co-operative Milk Producers Union Ltd: 99 TTJ 390 (Ahd.), Geetanjali Woollens Pvt. Ltd.v. ACIT: (1991) 121 CTR (Trib) (Ahd.), and ITO vs. Himalaya Drug Company : 17 TTJ 9 (Del.) Ld. AR submitted that the issue is squarely covered in favour of appellant by ITAT orders for assessment years 1999-2000 to 2002-03, AY 2005-06, 2006-07 and 2007-08. 5.1. Per contra, it is the argument of the Ld. DR that though AO held that while the system of accounting employed by the assessee is not being challenged, at the same time, it is noted that the system has produced an error, which has also been accepted by the assessee, as such, there is no reason why revenue authorities should continue with the error and allow the assessee excess consumption. Further according to him even if the amount of variation is insignificant and arises out of a systematic p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ock as per stock register was less than the physical stock, leaving the net difference of Rs. 1.62 crore. The AO disallowed Rs. 4.48 crore ignoring the excess amount of Rs. 2.86 crore. The assessee is aggrieved against this addition. 14.2. It is manifest that the net difference of Rs. 1.62 crore is nothing, but, excess consumption over the standard consumption. Such shortage of Rs. 1.62 crore is only 0.018% of total consumption of material debited to the Profit Loss Account. In view of the fact that this amount has actually been consumed in the manufacturing of goods, it cannot call for any disallowance. There may be production efficiencies or inefficiencies leading to under or over consumption of inputs visa-vis standard consumption. Such under or over consumption becomes a part of the cost of production. In our considered opinion, there can be no logic in disallowing such amount, which is nothing but excess consumption of inputs. Similar view has been taken by the Tribunal in the assessee s own case for earlier assessment years including the immediately preceding assessment year. This ground is allowed . 5.3. Following the above decision, this Tribunal for AY 2007-08, directed th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . 23,91,54,836/- deduction claimed by the assessee u/s 35DDA of the Act, the assessee company had, during the assessment year 2008-09 claimed deduction of Rs. 23,91,54,836/- u/s 35DDA of the Act, being 1/5th of the payment of Rs. 119.58 crores made by the assessee company during AY 2004- 05 to its employees under VRS scheme, and the AO has held that payments under VRS made in earlier years, is violative of Section 35DDA of the Act and as such all claims made as a consequence of the original claim are also violative of that section. Ld. AR submitted that this issue of claim u/s 35DDA is covered in favour of assessee by the order of the ITAT for AY 2002-03, AY 2004-05, AY 2005-06, AY 2006-07 and AY 2007-08. Further, reliance is placed on CIT vs. Sony India (P) Ltd : 210 Taxman 149 (Del) and State Bank of Mysore vs. CIT, 139 ITD 526 (Bang) where it has been held that compliance with the conditions of rule 2BA is mandatory only to avail the exemption under section 10(10C) by employees and not for the purposes of deduction under section 35DDA. 7.1. Per contra, it is the argument of the Ld. DR that this issue was also adjudicated upon by the coordinate Bench of this Tribunal in favour of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the disallowance made by the AO came to be knocked down by the tribunal. In the absence of any distinguishing factor having been pointed out by the ld. DR, respectfully following the precedent, we 393 ITA No.-6021/Del/2012 50 direct to allow deduction u/s 35DDA for a sum of Rs. 38.63 crore. 7.4. Following the same for the AY 2007-08 also, this Tribunal directed the Assessing Officer to allow the claimed deduction under sec. 35DDA of the Act at Rs. 23,91,54,586. Since facts are similar in assessee s own case, we follow the decisions above and direct the Assessing Officer to allow the deduction under section 35DDA of Rs. 23,91,54,836/- (being 1 /5th of the total expenditure of Rs. 119.58 crores incurred by the appellant company, in respect of payment made to its employees under the voluntary retirement scheme during the F.Y. 2003- 04). Ground Nos 7 to 7.3 are allowed accordingly. 45. Respectfully following the findings of the co-ordinate Bench [supra], this ground is allowed. 46. Ground No. 11 to 11.2 relates to the disallowance of payments made outside India u/s 40(a)(ia) of the Act. 47. This issue has been decided by this Tribunal in A.Ys 2001-02 and 2002-03 and in A.Y 2001-02, th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... visions of Section 195 will not be attracted in the case of these payments and the CIT (A) was right in deleting the disallowances made. In the circumstances, ground No.14 of the Revenue s appeal stands dismissed and the findings of the CIT (A) stands upheld. 49. Respectfully following the findings of the co-ordinate Bench [supra], we direct the Assessing Officer to delete the impugned disallowance. This ground is allowed. 50. Ground Nos. 12 to 12.4 relates to claim of Sales Tax Subsidy as capital receipt. 51. The quarrel relating to the claim traveled upto the Hon'ble High Court of Delhi in A.Ys 2005-06 and 2006-07. The Hon'ble High Court of Delhi in ITA 171/2012 order dated 07.12.2017 was inter alia seized with the following question of law: (4) Whether on the facts and circumstances of case, the ITAT was correct in law in deleting the addition on account of sales tax subsidy of Rs. 16,04,07,733 made by AO treating it to be revenue receipt? 52. The Hon'ble High Court answered as under: 4. Question (4) pertains to sales tax subsidy being added to the income of the Assessee by treating it as revenue expenditure. With regard to the very same sales tax subsidy provided in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... adjustment. 60. This issue has been discussed at length in assessee s appeal [supra]. For our detailed discussion therein, Ground Nos. 1 and 2 are dismissed. 61. Ground No 3 relates to deletion of disallowance of Rs. 21,32,46,724/- made by the Assessing Officer on account of Customs Duty paid on import of components for export purposes for which exports have been made. 62. This dispute is coming since A.Y 1999-2000 and it has been decided by this Tribunal, which decision has been affirmed by the Hon'ble High Court of Delhi in ITA Nos. 250/2005, 171/2012, 172/2012, 381/2016, 1999-2000, 2005-06 and 2006-07 respectively. 63. In A.Y 2009-10, this Tribunal has considered this issue at Para 16 of its order. The relevant findings read as under: 16. As regards to Ground No. 3.5, relating to Customs Duty paid on import of components for export purposes for which exports has been made. The assessee has been consistently following exclusive method of accounting in respect of custom duty paid on import of components for export purposes. Accordingly, duties paid on purchases are not included in the cost of purchases and the value of closing stock in the profit and loss account. Addition of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sue in favour of assessee in the assessment years 1999-00, 2000-01, 2001- 02, 2002-03, 2004-05, 2005-06, AY 2006-07, 2007-08 and 2008-09. The orders of the Delhi Tribunal have been affirmed by the Delhi High Court for assessment years 1999-00 (ITA No.250/2005), 2000-01 (ITA No.976/2005), 2005-06 (ITA Nos. 171 and 172/2012) and 2006-07 (ITA No. 381/2016). Further, the issue stand covered in favour of the assessee in view of the decision of the Hon ble Punjab and Haryana High Court in the case of CIT v. Sriyansh Knitters P. Ltd. 336 ITR 235 wherein the High Court, while affirming the finding of the Tribunal held that duty drawback accrues in the year in which rate is fixed by the competent authority after verification of claim of the assessee and amount is quantified and not in the year of export. Similar view has been held in the case of CIT v. Manav Tools (India) P. Ltd: 336 ITR 237 (P H). It has been held similarly by the Delhi High Court in assessee s own case for assessment years 1994-95, 1995-96, 1996-97, 1997-98, 1998-99, 1999-00, 2001-02 and 2004-05. 18. The Ld. DR relied upon the assessment orders. 19. We have heard both the parties and perused the records. It is pertinent t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erein 528 49 ITA No. 467/Del/2014 the High Court has held that amount paid by the assessee against excise duty demand raised by excise authorities was allowable deduction as it was statutory liability which was allowable on payment basis under section 43B of the Act. Similarly, the Mumbai Bench of the Tribunal in the case of Euro RSCG Advertising (P) Ltd v. ACIT [2013] 154 TTJ 389 (Mum) held that service tax liability along with the interest paid on the basis of the show cause notice issued by the service tax authorities, is allowable deduction under section 43B of the Act in the year in which the payment was made irrespective of the fact that such demand was paid under protest and the matter was subjudice before the authorities. The issue stands covered in favour of the assessee by the order of the Tribunal in the assessee s own case for A.Y s 1999-00, 2000-01, 2001- 02, 2002-03 2005-06, 2006-07, 2007-08 and 2008-09. 37. The Ld. DR relied upon the order of the Assessing Officer. 38. We have heard both the parties and perused the records. It is pertinent to note that the Tribunal in Assessee s own case held as under: 3.28. With regard to the disallowance of claim for deduction unde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under protest amounting to Rs. 1,34,25,787. We have discussed similar issue supra while dealing with 'Excise duty paid under protest' by holding that first the Profit and loss account be recast as per 'Inclusive method' in terms of section 145A and then some adjustments as stated above be separately made. Such directions are fully applicable pro tanto to the customs duty paid under protest. The AO is directed to follow the same. 3.30. While following the same for AY 2007-08, Tribunal set aside the matter to the file of the Assessing Officer to decide it afresh as decided above by the ITAT after affording opportunity of being heard to the assessee. Ld. DR fairly concedes that the decision of the Tribunal on the issue of Excise duty paid under protest , in A.Y. 2006- 07 and 2007- O8 was acceptable to the Revenue, and accordingly, no further appeal was preferred on this issue. In these circumstances, while following the same, we set aside Ground No. 3.8 to the file of the Assessing Officer to decide it afresh as decided by the ITAT for the Assessment Years 2006-07 and 2007-08 after affording opportunity of being heard to the assessee. Thus, the issue is squarely covere ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... system of accounting. The same was claimed as business deduction in the computation of income. Vendor-wise details of total provision of Rs. 36,38,43,197/- made during the relevant year was submitted before the Assessing Officer. The said practice was in consonance with the provisions of the Companies Act and generally accepted accounting principles and practices of Institute of Chartered Accountants of India. The assessing officer however, disallowed the aforesaid claim of the assessee on the ground that assessee has quantified the liability without acknowledging the quantified liability to the creditors. The Ld. AR submitted that liability for FPI was provided in the books of accounts on a scientific analysis of increase in price of components due to change in input cost. The liability of FPI was estimated by the purchase department with substantial degree of accuracy as they are in constant touch with suppliers and have knowledge of the claims of suppliers, trend of the cost of inputs, etc. The personnel in the purchase department updates the foreseen price of each component for each supplier and effective date, based on their input and available information. The accounting of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the goods. Since the liability accrued during the relevant assessment year, even though was finally paid in the following assessment years, the same was allowable deduction. The Ld. AR relied upon the following decisions wherein it has been held that liability which has arisen in the relevant accounting year is an allowable deduction even though its actual quantification and discharge is deferred to a future date: a) Calcutta Discount Co. Ltd.: 37 ITR 1 (SC) b) Metal Box (P) Limited (1969): 73 ITR 53 (SC) c) United Commercial Bank v. CIT 240 ITR 355 (SC) d) Bharat Earth Movers: 245 ITR 428 (SC) e) Kelvinator of India Ltd. reported in 256 ITR 1 confirmed by SC in 320 ITR 561 f) CIT v Vinitec Corpn. (P) Ltd.: 278 ITR 337 (Delhi) g) National Mineral Development Corporation Ltd. v. JCIT : 98 ITD 278 (Hyd. ITAT) The Hon ble Supreme Court in the case of CIT v. Woodward Governor India (P) Ltd. 312 ITR 254 has held that:- g) 21. In conclusion, we may state that in order to find out if an expenditure is deductible the following have to be taken into account (i) whether the system of accounting followed by the assessee is mercantile system, which brings into debit the expenditure amount for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e accordingly made which has been duly accepted by Revenue in all the preceding years except in assessment year AY 2003-04 There has been no change in method of accounting or estimation. The Ld. AR submitted that it is a well settled position of law that while the principle of res judicata does not apply to the income- tax proceedings, the Courts have emphasized there must be consistency in the position that the Revenue takes on an issue in different assessment years. The Ld. AR relied upon the following decisions: CIT vs. Excel Industries (P) Limited: 358 ITR 295 (SC) Radhasoami Satsang v. CIT 193 ITR 321 (SC) DIT (E) v. Apparel Export Promotion Council: 244 ITR 734 (Del) CIT v. Neo Polypack (P) Ltd: 245 ITR 492 (Del.) CIT v. Girish Mohan Ganeriwala: 260 ITR 417 (P H) CIT V. Dalmia Promoters Developers (P) Ltd: 200 CTR 426 (Del.) Escorts Cardiac Diseases Hospital: 300 ITR 75 (Del) The Ld. AR further submitted that against the total accrued liability claimed during the year amounting to Rs. 36.38 crores, the entire amount has either been paid or written-back and offered for tax as part of his chargeable income in assessment year 2010-11. The amount of write-back could, in law, be t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... with substantial degree of accuracy as they are in constant touch with suppliers and have knowledge of the claims of suppliers, trend of the cost of inputs, etc. The personnel in the purchase department updates the foreseen price of each component for each supplier and effective date, based on their input and available information in computer system regarding quantity purchased and price paid. The liability in respect of each component was worked out considering the weight of each material, the quantity procured, the old rate and new rate worked by the assessee considering the price changes occurred during the period. It is on the basis of analysis of the claims, price trend, and correspondences/ discussions/negotiations with the suppliers during the year and past dealings that the assessee had computed the impact of change in price of components, and, therefore, it is not a case of provisional liability/contingent liability, incurring of which is dependent on happening of an event, but in fact it is in respect of such purchases already made by the assessee and duly debited in the books of accounts resulting in that the amount of FPI is a liability which accrues simultaneously wit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ut cost, representing additional purchase price of the goods. It is submitted that since the liability accrued during the relevant assessment year, even though was finally paid in the following assessment years, the same was allowable deduction. 12.2. Ld. AR placed reliance on the decision of the Hon ble Supreme Court in the case of CIT vs Woodward Governor India (P) Ltd.: 312 ITR 254 wherein it is held that:- 21. In conclusion, we may state that in order to find out if an expenditure is deductible the following have to be taken into account (i) whether the system of accounting followed by the assessee is mercantile system, which brings into debit the expenditure amount for which a legal liability has been incurred before it is actually disbursed and brings into credit what is due, immediately it becomes due and before it is actually received; (ii) whether the same system is followed by the assessee from the very beginning and if there was a change in the system, whether the change was bona fide; (iii) whether the assessee has given the same treatment to losses claimed to have accrued and to the gains that may accrue to it; (iv) whether the assessee has been consistent and definite ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 44 ITR 734 (Del), CIT v. Neo Polypack (P) Ltd: 245 ITR 492 (Del.), CIT v. Girish Mohan Ganeriwala: 260 ITR 417 (P H), CIT V. Dalmia Promoters Developers (P) Ltd: 200 CTR 426 (Del.), Escorts Cardiac Diseases Hospital: 300 ITR 75 (Del). Since the issue now stands covered in favour of the assessee by the order of the Tribunal in the assessee own case for the assessment year 2007- 08, wherein the Tribunal held that provision for foreseen price increase made by the appellant represented an accrued/crystallized liability, which is an allowable business deduction, Ld. AR submits that the addition on this account may be deleted. 12.5. Per contra, Ld. DR submitted that the decision of ITAT for AY 2007-08 is not acceptable because the assessee s methodology is unique and no case law applies to the modus operandi adopted by the assessee. Further according to him Assessee s reliance on the case of Hon ble Supreme Court in the case of Radha Saomi Satsang v. CIT reported in 193 ITR 321 and, Berger Paints v. CIT reported in 266 ITR 199, is also misplaced because in these cases Hon ble Supreme Court was considering the situation where the liability was certain, but what was not certain was the qua ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... opportunity of being heard to the assessee as per the first appellate order on the issue in the assessment year 2003-04 against which no appeal was preferred by the Revenue before the ITAT. 12.7. When a similar question was dealt with by the first appellate authority and the Revenue accepted the same without preferring any appeal thereon, it is not open for the Revenue now to contend that Assessee s reliance on the case of Hon ble Supreme Court in the case of Radha Saomi Satsang v. CIT reported in 193 ITR 321 and, Berger Paints v. CIT reported in 266 ITR 199, is also misplaced because in these cases Hon ble Supreme Court was considering the situation where the liability was certain, but what was not certain was the quantum of such liability. There is no dispute that the same method of accounting is regularly and consistently followed by the assessee as such rule of consistency is applicable as per which under the similar facts and circumstances, department ought to follow same approach on an issue in other assessment years. We, therefore, respectfully following the reasoning adopted by the coordinate Bench of this Tribinal for the AY 2007-08, set aside the matter to the file of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion of disallowance of long term capital loss as speculative loss. 79. The co-ordinate bench in A.Y 2001-02 in ITA No. 300/DEL/2006 has considered this issue at Paras 31 and 32 of its order. The relevant findings read as under: 31. In regard to Ground No.15, which was against the deletion of the disallowance of the long-term capital loss held as speculative loss within the meaning of Explanation to Section 73 of the Act, it was submitted that the issue was squarely covered by the decision of the jurisdictional High Court of Delhi in the case of Sahara India Financial Corporation reported in 206 ITR 258. It was the submission that the shares have been held as investment and the appellant has not purchased or sold shares of any company other than the trade investments. In reply, the Ld. DR vehemently supported the order of the Assessing Officer. 32. We have considered the rival submissions. It is noticed that the assessee has incurred the capital gains loss on account of the redemption of the preference share of the ICICI and the loss is due to the effect of indexation on the cost of purchase as the redemption was at par. Obviously, the redemption of the preference shares cannot be t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eduction. The aforesaid issue is covered by the decision of the Supreme Court in the case of Samtel Color Ltd (Civil appeal No 6449/2012) wherein the Court dismissed the SLP filed by Revenue against the order of Dr Delhi High Court (referred infra) allowing the claim for deduction representing 6 expenditure incurred on club membership. The Ld. AR relied upon the following judicial pronouncements: Nestle India Limited: 296 ITR 682 (Del.) CIT v. Samtel Color Ltd.: 326 ITR 425 (Del.) - SLP filed by the Revenue dismissed in C.A No.6449/2012 Otis Elevators Co. (India) Ltd v. CIT 195 ITR 682 (Bom) CIT v. Citibank N.A.: 264 ITR 18 (Bom) CIT v. Force Motors Ltd.: ITA No. 5296 of 2010 (Bom) CIT v. Sundaram Industries Ltd 240 ITR 335 (Mad) Gujarat State Export Corporation Ltd. v. CIT: 209 ITR 649 (Guj.) CIT v. Infosys Technologies Ltd.: 205 Taxman 59 (Kar) Assam Brook Ltd. v CIT: 267 ITR 121 (Cal) DCIT v. Max India Ltd (2007) 112 TTJ (Asr.) 726 (Bom); American Express International Banking Corporation v CIT 258 ITR 601. The Ld. AR further submitted that the aforesaid issue is also covered in favour of the assessee by the decisions of the Tribunal in the assessee s own case for the assessment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2004-05, 2005-06, 2006-07 and 2007- 08. 8.1 On this aspect, the Ld. DR submitted that in view of the decision of Hon ble Supreme Court cited above, the decision of the ITAT was accepted and further appeal before the Hon ble High Court u/s 260A was not preferred on this issue for AY 2006-07 and 2007-08. In view of this submission of Ld. DR this ground is allowed and the Assessing Officer is directed to allow a sum of Rs. 10,06,470/- being expenditure incurred on account of club membership fees. Thus, this issue is squarely covered by the decision of the Tribunal in assessee s own case. Hence Ground No. 12 is allowed. 83. In result, Ground No. 12 is allowed. 83. Respectfully following the findings of the co-ordinate bench, this ground is dismissed. 84. Ground No. 10 with its sub grounds relates to levy of interest u/s 234B of the Act. 85. This levy of interest is mandatory and the Assessing Officer is directed to charge interest as per provisions of law. 86. As a result, the appeal of the Revenue is allowed in part for statistical purposes. 87. To sum up, in the result, the appeal of the assessee in ITA No. 4081/DEL/2010 as well as the revenue s appeal in ITA No. 4174/DEL/2010 is al ..... X X X X Extracts X X X X X X X X Extracts X X X X
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