The judgment of the court was delivered by
Dr. Satish Chandra, J. - The present appeal is filed by the Department against the impugned order dated April 30, 2004, passed by the Income-tax Appellate Tribunal, New Delhi in I.T.A. Nos. 6412 and 622/Del/1994 for the assessment year 1991-92.
2. On November 6, 2012, the appeal was admitted by a co-ordinate Bench on the following substantial questions of law :
| "(1) |
Whether, on the facts and in the circumstances of the case, the Tribunal was legally justified in upholding the order of the Commissioner of Income-tax (Appeals) in deleting the addition made on account of closing stock amounting to Rs. 2,85,81,310 ? |
(2) |
Whether, on the facts and in the circumstances of the case, the Tribunal was legally justified in upholding the order of the Commissioner of Income-tax (Appeals) in deleting the addition on account of understatement of sale proceeds of bagasse, disallowance on account of treatment of capital expenses as revenue expenses in molasses fund ? |
(3) |
Whether, on the facts and in the circumstances of the case, the Tribunal was justified in directing the Assessing Officer to allow depreciation on tubewell treating it as plant and machinery ? |
(4) |
Whether, on the facts and in the circumstances of the case, the Tribunal was justified in upholding the order of the Commissioner of Income-tax (Appeals) in treating the gratuity payable as excess provision of gratuity ? |
(5) |
Whether, on the facts and in the circumstances of the case, the Tribunal was justified in upholding the order of the Commissioner of Income-tax (Appeals) in treating the expenditure incurred by the assessee against export quota sales of sugar as loss amounting to Rs. 25,02,825 ?" |
3. The brief facts of the case are that during the assessment year under consideration, the assessee was engaged in the manufacturing and sale of the sugar. While passing the order under section 143(3) of the Act, the Assessing Officer made various additions which were partly allowed by the first appellate authority. The Tribunal upholds the same. Being aggrieved, the Department has filed the present appeal.
4. With this background, heard Sri R.K. Upadhyay, learned counsel for the appellant-Department and Sri R.S. Agrawal assisted by Sri Suyash Agrawal, learned counsel for the assessee. We also perused the materials available on record.
5. Question No. 1. The grievance of the Department is pertaining to undervaluation of the closing stock for Rs. 2,85,81,310.
6. After hearing both the parties, it appears that an identical issue has come up before this court in the assessee's case (In I.T.A. No. 211 of 2011), where, vide order dated September 18, 2013, (CIT v.Dhampur Sugar Mills Ltd. [2014] 360 ITR 82/226 Taxman 24/[2013] 40 taxmann.com 94 (All) it was held that the changed method of accounting was more scientific and did not result any evasion of tax. Thus, the issue was decided in favour of the assessee.
7. By following the earlier order (supra), we find no reason with the impugned order passed by the Tribunal and the same is hereby sustained. Hence, answer to the substantial question of law is in favour of the assessee and against the Department.
8. Question No. 2. It is pertaining to the sale of the bagasse to its sister concern. The Assessing Officer made addition of Rs. 1,07,92,714 on estimate basis pertaining to the sale price to M/s. U. P. Straw and Agro Products Ltd., a sister concern of the assessee. The Assessing Officer observed that the sale rate to the sister concern was lower than the average rate in all other cases. The Commissioner of Income-tax (Appeals) as well as the Tribunal have deleted the addition by following their earlier decisions.
9. After hearing both the parties, it appears that the identical issue has come up before this court in assessee's case (In ITA No. 461 of 2007), where, vide order dated December 16, 2013, the issue was decided in favour of the assessee.
10. By following our earlier decision (supra), we find no reason to interfere with the impugned order. Thus, the answer to the substantial question of law is in favour of the assessee and against the Department.
11. Question No. 3. It relates to the depreciation on tubewell in the factory premises. This issue has also been decided by this court in ITA No. 461 of 2007 in the assessee's case, vide order dated December 16, 2013, in favour of the assessee. When it is so then we decline to interfere with the impugned order passed by the Tribunal on this issue. Hence, the answer to substantial question of law is in favour of the assessee and against the Department.
12. Question No. 4. It is pertaining to the excess provision of gratuity. The Assessing Officer in its order observed that as per section 43B, the amount of gratuity, which the assessee has returned back amounting to Rs. 16,06,569 is not pertaining to any particular assessment year but relating to many assessment years. The assessee has not given any break up of the assessment year-wise gratuity written back so the amount was added back during the current assessment year. However, the liberty was granted to the assessee to produce the evidence and if the amount is pertaining to the assessment year 1984-85 onwards then assessment order will be rectified to that extent.
13. But both the appellate authorities have observed that the amount was returned back pertaining to the gratuity but without mentioning any reason.
14. By considering the totality of the facts and circumstances, it may be mentioned that deduction of gratuity is allowable as per section 43B on the basis of actual payment. The Assessing Officer, in its order has observed that if this amount is pertaining to the assessment year 1984-85 onwards, then assessment order will be rectified on this point to that extent. None of the parties was able to tell whether any rectification was made out or not. In view of the above, we set aside the impugned orders passed by the appellate authorities pertaining to this issue and restore the matter back to the Assessing Officer to examine whether any rectification order has been passed or not. The Assessing Officer is directed to decide the issued de novo whether the claim is merely written back of the provision or the actual payment but after providing necessary opportunity to the assessee as per law.
15. When we have restored the matter back then answer to the substantial question of law is not required.
16. Question No. 5. It is pertaining to the addition of Rs. 25,82,825 claimed as a business loss on account of export of sugar. The assessee was under an obligation to provide sugar produced in its factory for the purpose of export in terms of the Sugar Export Promotion Act, 1958. The scheme provides that the sugarmills will have to export the sugar failing which an amount will have to paid. In the instant case, the assessee has not provided the sugar for export so an amount of Rs. 25,82,825 was paid to the Government and same was claimed as business loss which was disallowed by the Assessing Officer. However, the appellate authorities have allowed the same as a business loss.
17. By considering rival submissions and on perusal of the records, it is not evident whether the amount in question is penal in nature or not, if it is penal in nature then the same cannot be allowed as a business loss, if it was optional either to export the sugar or to pay the amount then the same can be allowed as business loss. Hence, we set aside the impugned order and restore the issue to the Assessing Officer to decide the same on the merits in view of above discussion and by providing reasonable opportunity to the assessee. When we restore the matter back then answer to the substantial question of law is not required.
18. In the result, the appeal filed by the Department is partly allowed as stated above.