Gujarat Themis Biosyn Ltd., Vapi vs Department Of Income Tax

Asstt. Commissioner of Income- Vs Gujarat Themis Biosyn Ltd., 69- tax, Vapi Circle, Vapi C, GIDC, Vapi-396 195. (Appellant) (Respondent) PA No.AABCG 0802C

Appellant by Shri B. L. Yadav, Sr. DR Respondent by Shri M. K. Patel, AR

Date of hearing: 13/5/2015 Date of pronouncement: 15/5/2015

ORDER

PER Shri Rajpal Yadav, Judicial Member.

The Revenue is in appeal before us against the order of CIT(A)

dated 20th December, 2010 passed for AY 2007-08. In the first

ground of appeal it has been pleaded by the Revenue that ld. CIT(A)

erred in deleting the addition of R.17,77,820.

2. Brief facts of the case are that assessee has filed its return

electronically on 30.10.2007 declaring total income at NIL. The case ITA NOo.1010/Ahd/2011 2 Asst. Year 2007-08

of the assessee was selected for scrutiny assessment and notice

under section 143(2) of the I.T. Act, 1961 was issued and served

upon the assessee. On scrutiny of the records it revealed to the AO

that assessee has shown creditors with whom no

transaction/movement of money has taken place since last three

years. In the understanding of the AO, after expiry of three years the

creditors would not be in a position to press the assessee for

recovery of these amounts because the limitation to file a suit for

recovery is only for three years. Thus he constructed that the liability

to pay has ceased and assessee ought to have offered these

amounts with its income. Accordingly with the help of section 41(1) he

made the addition of Rs.17,77,820/-..

3. On appeal the CIT(A) has deleted the disallowance.

4. At the very outset the ld. counsel for the assessee submitted

that similar issue was considered in AY 2006-07 and the Tribunal has

upheld the order of CIT(A) in ITA No.1780/Ahd/2010. He placed on

record a copy of the Tribunal's order.

5. On the other hand, the ld. DR relied upon the order of A.O. ITA NOo.1010/Ahd/2011 3 Asst. Year 2007-08

6. On due consideration of the facts and circumstances, we are of

the view that section 41(1) has been incorporated in the Act to cover

a particular fact situation. This section applies where a trading liability

was allowed as a deduction in earlier years in computing the

business income of the assessee and the assessee has obtained the

benefit in respect of such trading liability in later year by way of

remission or cessation of the liability. In such a case the section says

that whatever benefit has arisen to the assessee in later year by way

of remission of the liability will be brought to tax in that year. The

principle behind the section is that a provision intended to ensure that

assessee does not get away with a double benefit, once by way of

deduction in an earlier AY and again by not being taxed on the

benefit received by him in a later year with reference to the liability

earlier allowed as a deduction. Merely lapse of three years is not

sufficient to say that the liabilities ceased to exist unless it has been

written back in the books of account. The ITAT in AY 2005-06 in the

assessee's own case has considered a similar issue in ITA

No.2378/Ahd/2008 and observed that Hon'ble Supreme Court in the

case of Sugaul Sugar Works P. Ltd. Reported in 236 ITR 518 has ITA NOo.1010/Ahd/2011 4 Asst. Year 2007-08

held that on expiry of period of limitation prescribed in the Limitation

Act does not extinguish the debt but only prevent the creditor from

enforcing the debt. The expiry of limitation will not automatically

extinguish the liability. It has to be written back in the accounts. No

such step has been done in the present year. Therefore, the addition

cannot be made by the AO on automatic basis.

7. Respectfully following the order of co-ordinate Bench in

assessee's own case we do not find any merit in this ground of

appeal. It is rejected.

8. In the next ground the grievance of Revenue is that ld. CIT(A)

has erred in deleting the addition of Rs.2,34,064/-.

9. The brief facts of the case are that assessee has collected the

amounts from the employees to be contributed to PF/ESI accounts,

but it failed to deposit the amounts within the due date prescribed

under those PF and ESI Acts. The ld. AO, therefore, disallowed the

claim of assessee.

ITA NOo.1010/Ahd/2011 5 Asst. Year 2007-08

10. The ld. counsel for the assessee conceded that this issue has

been decided against the assessee by the Hon'ble Jurisdictional High

Court in the case of Gujarat State Road Transport Corporation

reported at 366 ITR 170. Since the assessee failed to deposit the

employees contributions in the PF/ESI accounts within the due date,

therefore, in view of Hon'ble Gujarat High Court's decision, it is not

entitled for any deduction. The ld. CIT(A) has wrongly allowed this

ground of assessee. We allow the second ground of Revenue and set

aside the findings of CIT(A). We restore the assessment order on this

issue.

11. In the result, appeal of the Revenue is partly allowed .

Order was pronounced in the open court on 15/5/2015.

Sd/- Sd/- (G. D. Agrawal) (Rajpal Yadav) Vice President Judicial Member

Mahata/- Copy of the order forwarded to: 1. The Appellant 2. The Respondent 3. The CIT concerned 4. The CIT(A) concerned 5. The DR, ITAT, Ahmedabad 6. Guard File BY ORDER Dy. Registrar, ITAT, Ahmedabad ITA NOo.1010/Ahd/2011 6 Asst. Year 2007-08

1. Date of dictation: 13/5/2011

2. Date on which the typed draft is placed before the Dictating Member: 14/5/2011 other Member:

3. Date on which approved draft comes to the Sr. P. S./P.S.:

4. Date on which the fair order is placed before the Dictating Member for pronouncement: __________

5. Date on which the fair order comes back to the Sr. P.S./P.S.:

6. Date on which the file goes to the Bench Clerk:

7. Date on which the file goes to the Head Clerk:

8. The date on which the file goes to the Assistant Registrar for signature on the order:

9. Date of Despatch of the Order: