Case Number: ITA 1454/DEL/2019
Appellant: Vedanta Ltd. (Earlier known as Sterlite Industries (India) Ltd.), Gurgaon
Respondent: ACIT, Circle-26(1), New Delhi
Assessment Year: 2010-11
Case Filed On: February 21, 2019
Order Type: Final Tribunal Order
Date of Order: October 9, 2019
Pronounced On: October 9, 2019
The case involves Vedanta Ltd. (earlier known as Sterlite Industries (India) Ltd.), Gurgaon, challenging the disallowance of a copper concentrate purchase provision amounting to Rs. 259.31 lakhs by the ACIT, Circle-26(1), New Delhi. The appellant filed the case against the order dated December 28, 2018, passed by the Commissioner of Income Tax (Appeals)-9, New Delhi, for the assessment year 2010-11.
The appellant, represented by Shri Sachit Jolly, Advocate, raised several grounds of appeal:
The respondent, represented by Smt. Sulekha Verma, CIT DR, argued that the CIT(A) provided multiple opportunities to the appellant, but the appellant failed to comply with the notices issued. The respondent supported the disallowance made by the AO, stating that the provision for copper concentrate was contingent and not an ascertained liability.
The case was heard by Shri Amit Shukla, Judicial Member, and Shri Prashant Maharishi, Accountant Member, of the Income Tax Appellate Tribunal, Delhi Bench ‘F’. The Tribunal noted that the provision for copper concentrate was made based on substantial estimation and was disclosed in the appellant’s financial statements. The Tribunal analyzed the appellant’s contention that the provision was in line with the accounting standards and industry practices.
The Tribunal acknowledged that the appellant had consistently followed this accounting practice since the financial year 2003-04 and that the methodology was accepted by other statutory authorities, including the Ministry of Corporate Affairs and the auditors. The Tribunal also considered the appellant’s argument that similar provisions were allowed in the past, citing orders from the CIT(A) and ITAT for the assessment years 2004-05, 2005-06, and 2006-07, where similar issues were resolved in favor of the appellant.
However, the Tribunal emphasized that the treatment of an item in the books of accounts does not determine its taxability. The Tribunal examined whether the provision was ascertainable or contingent and concluded that the appellant failed to provide a reasonable basis or justification for the provision, thus deeming it unascertainable and contingent.
The Tribunal upheld the disallowance of Rs. 259.31 crores made by the AO, stating that the provision was not an ascertained liability. The Tribunal dismissed the grounds of appeal raised by the appellant and confirmed the addition made by the AO.
In conclusion, the appeal filed by Vedanta Ltd. was dismissed, and the addition of Rs. 259.31 crores was upheld. The Tribunal emphasized the importance of providing a reasonable basis for provisions and distinguished between contingent and ascertained liabilities. The order was pronounced in the open court on October 9, 2019.
Signatories:
(Amit Shukla) Judicial Member
(Prashant Maharishi) Accountant Member
Date: October 9, 2019
Assistant Registrar: Subodh Kumar, Sr. PS
Copy of the Order is forwarded to:
BY ORDER
Assistant Registrar, ITAT, New Delhi
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