IN THE INCOME TAX APPELLATE TRIBUNAL
DELHI BENCHES : "B" NEW DELHI
BEFORE SHRI G.C. GUPTA, VICE PRESIDENT
AND SHRI T.S. KAPOOR, ACCOUNTANT MEMBER
ITA No: 5767/Del/2011
AY : - 2003-04
Dy. CIT vs. M/s. Escorts Assets Management (P) Ltd.
Circle-11(1), 11, Scindia House, Connaught Circle,
New Delhi. New Delhi 110 001.
(PAN AAACE2671E)
(Appellant) (Respondent)
Appellant by : Smt. Parwinder Kaur, Sr. DR
Respondent by :Shri R.M. Mehta, Advocate
Date of hearing :16.2.2015
Date of pronouncement :4.3.2015
ORDER
PER G.C. GUPTA, VICE PRESIDENT
This is an appeal filed by the revenue for the assessment year 2003-04 is
directed against the order of the Ld. CIT(A). Ground No. 1 of the appeal of the
revenue is as under :-
1. "On the facts and circumstance of the case and in law, the Ld. CIT(A) has
erred in deleing the addition of Rs. 12,35,472/- made on account of
disallowance of deferred revenue expenditure."
2. Ld. DR submitted that the assessee has not given effect to the last year
addition of Rs. 994298/-( Rs. 21,82,298/- - Rs. 11,88,000/- being depreciation
allowed) under the head " deferred revenue expenditure" disallowed in the
assessment year 2002-03. She submitted that the deferred revenue expenditure
should have only Rs. 20,91,155/- whereas the assessee has shown the same at Rs.
33,26,627/- and therefore the addition made was justified. She relied on the order of
the AO. The Ld. Counsel for the assessee has opposed the submissions of the Ld.
ITA No. 5767/Del/2011
DCIT vs. Escorts Assets Management (P) Ltd.
DR. He submitted that the amount charged to the P & L account has been duly
added back to the income as is evident from the computation of income of the
assessee , copy filed in the compilation before the Tribunal. He submitted that
therefore there was no case for making any disallowance on account of deferred
revenue expenditure when the assessee has not claimed any such amount as
deduction during the relevant assessment year 2003-04. He submitted that the sum
of Rs.6,42,598/- in the nature of deferred revenue charged to be expenditure in the
P & L account has been suo moto written back in the statement of computation of
income and is included under the head `miscellaneous expenses' of Rs. 10,80,773/- ,
which has been added back.
3. We have considered the rival submissions and have perused the order of
the AO and also the copies of documents filed in the compilation before us. We find
that assessee is an asset management company which manages the assets of
Escorts Mutual Fund. We find that the assessee has debited a sum of Rs.
10,80,773/- to the P & L account under the head `Administrative and other
expenses'- Schedule K and this amount includes deferred revenue expenditure
written off to the extent of Rs. 6,42,598/- out of the deferred revenue expenditure
of the earlier years. The amount charged to the P & L account has been duly added
back to the income as is evident from the computation of income of the assessee for
the asst. Year 2003-04, copy of which has been filed at page 4 of the compilation
filed before us. In these facts we find that there could not be any case for making
any disallowance of account of deferred revenue expenditure when the assessee had
not claimed any such amount as deduction during the asstt. year 2003-04. A sum of
Rs. 6,42,598/- in the nature of deferred revenue charged to the expenditure in the
2
ITA No. 5767/Del/2011
DCIT vs. Escorts Assets Management (P) Ltd.
P & L account has been suo motto written back in the statement of computation of
income by the assessee. It is included in the miscellaneous expenses of Rs.
10,80,773/- which has been added back. The CIT(A) has given a finding that the P &
L account and accompanying schedules do not reflect any other deferred revenue
expenditures. In these facts of the case we are of the considered view that there
was no basis for making disallowance of deferred revenue expenditure of Rs.
12,35,472/- and the disallowance was rightly deleted by the CIT(A). In this view of
the matter the order of the CIT(A) on this issue is confirmed and the ground no. 1 of
the appeal of the revenue is dismissed.
4. Ground No. 2 of the revenue is as under :-
2. "On the facts and circumstances of the case and in law, the Ld. CIT(A) has
erred in deleting the addition of Rs. 69,158/- made on account of disallowance
of expenses pertaining to prior period."
4.1 The Ld. DR submitted that the expenditure pertains to earlier assessment
years and was not ascertained liability for the assessment year 2003-04 and
therefore was rightly disallowed by the AO. She relied on the order of the AO. The
Ld. Counsel for the assesee has relied the order of the CIT(A)
5. We have considered the rival submissions and perused the material on
record. We find that although the bills for certain expenditure pertains to the
previous assessment year but were settled in period relevant to the assessment year
2003-04 and the expenditure was fully verified and relates to the business
operations of the assessee and therefore was allowable in the asstt. year 2003-04.
The CIT(A) has given a finding that the bills in dispute relates to travelling,
entertainment claim of employees as also the full and final settlement of the
employees and that as the liability was ascertained after verification in the asstt year
3
ITA No. 5767/Del/2011
DCIT vs. Escorts Assets Management (P) Ltd.
2003-04 and the expenditure was admissible for deduction in asstt. year 2003-04.
There being no mistake in the order of the CIT(A) the same is confirmed and the
ground no. 2 of the appeal of the revenue is dismissed.
6. Ground No. 3 and 4 of the revenue are as under :-
3. "On the facts and circumstances of the case and in law, the Ld. CIT(A) has erred in
deleting the addition of Rs. 5,46,251/- made on account of provision for expenses.
4. On the facts and circumstances of the case and in law, the Ld. CIT(A) has erred in
deleting the addition of Rs. 5,46,251/- made on account of adjustment made of
provision for expenses while computing book profit u/s 115JB of the I.T. Act."
6.1 The Ld. DR submitted that the expenditure was merely provision for
ascertained liabilities and the assessee could not file the necessary details before the
AO. She submitted that the expenditure was incurred by the group company and
not by the assessee itself and assessee could not prove that it was incurred for
business purposes only. She relied on the order of the AO. The Ld. Counsel for the
assessee submitted that the identical disallowance made in the earlier assessment
year 2002-03 was deleted by the CIT(A) and there was no further appeal to the
Tribunal. The expenditure was made for ascertained liabilities and therefore
allowable. He submitted that even the amount is added in assessment u/s 143(3), it
could not be under provision of 115JB while computing the book profit of the
assessee and the issue is covered in favour of the assessee with the decision of
Special Bench of the Tribunal in the case of Joint Commissioner of Income Tax vs.
Usha Martin Industries Ltd. 288 ITR (AT) 63 (Kolkata) (SB). He relied on the order of
the CIT(A) .
4
ITA No. 5767/Del/2011
DCIT vs. Escorts Assets Management (P) Ltd.
7. We have considered the rival submissions and perused the material on
record. We find that the submission that identical disallowance made by the AO in
immediately preceding assessment year 2002-03 was deleted by the CIT(A) and
there was no appeal by the revenue to the Tribunal, has not been controverted.
We find that the provision was made for expenditure in the form of repairs,
electricity expenses, travelling and other office expenses which are ascertained
liabilities. The CIT(A) has recorded in his order that the copy of the bills of the
expenses filed before the AO were filed before him and the relevant bills have been
raised between 1.4.2002 to 31.3.2003 the CIT(A) has given a finding that the
expenditure is specific in nature and the term provision for expenses appears to be a
mere misnomer. We find that the expenditure incurred was for business purposes
only and no case for disallowance could be made out by the revenue. With regard to
the adjustment made u/s 115JB of the Act we find that since the provision of Rs.
5,46,251/- was not in relation to contingent liabilities and since the expenditure for
which the provision was created was fully ascertained, the adjustment of Rs.
5,46,251/- under the provision of 115JB was not justified. In this view of the matter
the order of the CIT(A) was issued is confirmed and the ground no. 3 and 4 of the
appeal of the revenue are dismissed.
8. In the result the appeal of the revenue is dismissed.
Order pronounced in the Open Court on 4th March, 2015.
Sd/- Sd/-
(T.S. KAPOOR) (G.C. GUPTA)
ACCOUNTANT MEMBER VICE PRESIDENT
Dated: the 2015
*veena
5
ITA No. 5767/Del/2011
DCIT vs. Escorts Assets Management (P) Ltd.
Copy of the Order forwarded to:
1. Appellant
2. Respondent
3. CIT
4. CIT(A)
5. DR
6. Guard File
By Order
Dy. Registrar
Sl. Description Date
No.
1. Date of dictation by the Author 16.2.2015
2. Draft placed before the Dictating Member 16.2.2015
3. Draft placed before the Second Member
4. Draft approved by the Second Member
5. Date of approved order comes to the Sr.
PS
6. Date of pronouncement of order
7. Date of file sent to the Bench Clerk
8. Date on which file goes to the Head Clerk
9. Date of dispatch of order
6
|
