CIT, FARIDABAD V. M/S NUCHEM LTD. FARIDABAD

ITA/609/2009

AI Insights

The case involves multiple appeals by the Commissioner of Income Tax, Faridabad, against M/s Nuchem Limited concerning various disallowances and additions made by the Assessing Officer for the assessment years 1994-95 to 1999-2000. The primary legal questions revolved around the interpretation and application of various sections of the Income Tax Act, 1961, particularly Section 35D related to expenses for raising share capital, and Section 37 concerning the allowability of certain business expenses. The Tribunal and CIT(A) had previously ruled in favor of the respondent, M/s Nuchem Limited, leading to the present appeals by the revenue. The High Court's decision affirmed the lower authorities' findings, emphasizing the legal precedents and the factual matrix of the case.

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 720535 (HC-MISC)
• Appeal Type: Others
• Pronouncement Date: 22-09-2014
• Assessment Year: misc
• Other Referred Cases: CIT vs. Indian Aluminium Cables Limited, CIT vs. Multi Metals Limited, Goa Carbon Limited vs. CIT, L.H. Sugar Factories and Oil Mills Pvt. Limited vs. CIT
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Others
• Court: HIGH COURT
• Assessee Lawyers: TEJINDER JOSHI
• Keywords: Assessment years; Guarantee commission; Guest House Expenses; Income Tax; Trading addition; Capital Raising Expenses
• Section: 143(3); 260A; 36(1)(va); 40A(2)(b); 2(24)(x); 35D; 37(2A); 37(3)

Judgement Text

"ITA No.609 of 2009 (O&M) 1 IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH ITA No.609 of 2009 (O&M) Date of decision: 22.9.2014 Commissioner of Income Tax, Faridabad ……Appellant Vs. M/s Nuchem Limited …..Respondent CORAM: HON’BLE MR. JUSTICE AJAY KUMAR MITTAL HON’BLE MR. JUSTICE FATEH DEEP SINGH Present: Mr. Tejinder K.Joshi, Advocate for the appellant. None for the respondent. Ajay Kumar Mittal,J. 1. This order shall dispose of ITA Nos.609 to 613 and 615 of 2009 as according to the learned counsel for the appellant-revenue, all the appeals arise out of one consolidated order dated 27.3.2009 passed by the Income Tax Appellate Tribunal, Delhi Bench 'I', New Delhi (in short, “the Tribunal”) relating to the assessment years from 1994-95 to 1999-2000. In all, five substantial questions of law arise for consideration in ITA No.609 of 2009. ITA Nos.611 to 613 of 2009 would be covered by the decision in ITA No.609 of 2009 as the question(s) claimed therein are similar. However, one additional question regarding addition of ` 47,32,919/- made by the Assessing Officer on account of late deposit of employees' contribution to ESI and PF has been claimed in ITA No.615 of 2009 and in ITA No.610 of 2009, an additional question relating to disallowance of ` 40,000/- on account of survey report has been raised. The facts are being extracted from GURBAX SINGH 2014.11.05 16:56 I attest to the accuracy and integrity of this document High Court Chandigarh ITA No.609 of 2009 (O&M) 2 ITA No.609 of 2009. 2. ITA No.609 of 2009 has been preferred by the revenue under Section 260A of the Income Tax Act, 1961 (in short, “the Act”) against the order dated 27.3.2009, Annexure A.III passed by the Tribunal in ITA No.3756/Del./2000 for the assessment year 1994-95. All the appeals were admitted on 22.1.2010 to consider following substantial questions of law:- “A. Whether on the facts and in the circumstances of the case, the ITAT was right in law in confirming the order of the CIT(A) in deleting the addition of ` 2,97,924/- made by the Assessing Officer on account of expenses incurred on raising share capital even though the expenditure to raise share capital do not fall within the ambit of provisions of section 35D of the Income Tax Act, 1961? B. Whether on the facts and in the circumstances of the case, the ITAT was right in law in confirming the order of the CIT(A) in deleting the addition of ` 3,60,000/- made by the Assessing Officer on account of commitment charges/guarantee commission paid to M/s Nuchem Investment (P) Limited for pledging their land as collateral security to bank for loans even though the assessee had failed to file an agreement for payment of guarantee commission and furnished no explanation as to why assets have to be used as collateral security by M/s Nuchem Investment (P) limited for raising loan for themselves? C. Whether on the facts and in the circumstances of the case, the ITAT was right in law in confirming the order of the CIT(A) in upholding the order of the CIT(A) in deleting the addition of ` 37,667/- made by the Assessing Officer on account of maintenance of Guest House disregarding the fact that such expenses are not allowable in view of provisions of Section 37 (3) of the Income Tax Act, 1961? D. Whether on the facts and in the circumstances of the case, the ITAT was right in law in confirming the order of the CIT(A) GURBAX SINGH 2014.11.05 16:56 I attest to the accuracy and integrity of this document High Court Chandigarh ITA No.609 of 2009 (O&M) 3 in deleting the addition of ` 3,735/- made by the Assessing Officer on account of “Inauguration expenses” as per provisions of Section 37(2A) of the Income Tax Act, 1961 disregarding the fact that such expenses are not allowable as per provisions of section 37(2A) of the Income Tax Act, 1961? E. Whether on the facts and in the circumstances of the case, the ITAT was right in law in confirming the order of the CIT(A) in deleting the addition of ` 30,26,723/- made by the Assessing Officer on account of trading addition without appreciating the magnitude of defects pointed out by the Assessing Officer on this score? 3. A few facts relevant for the decision of the controversy involved as narrated in ITA No.609 of 2009 may be noticed. Return declaring net loss of ` 4,71,39,320/- was filed on 30.11.1994. First revised return was filed on 12.12.1994 declaring net loss of ` 4,71,98,910/-. Second revised return was filed on 22.2.1996 declaring net loss of ` 4,75,57,488/-. Assessment was completed under Section 143(3) of the Act vide order dated 28.1.1997, Annexure I at an income of ` 4,84,38,074/- in which many additions/disallowances were made as per the assessment order. The assessee filed appeal against the order before the Commissioner of Income Tax (Appeals) [CIT(A)]. Vide order dated 8.6.2000, Annexure II, the CIT (A) partly allowed the appeal. Not satisfied with the order, the revenue filed appeal before the Tribunal. With regard to first issue regarding expenses incurred on raising share capital, the Assessing Officer made disallowance of ` 2,97,924/- claimed under Section 35D of the Act in respect of capital raising expenses being 1/10th of ` 29,79,237/- on the ground that these were not covered under section 35D of the Act. On appeal, the CIT(A) deleted the addition of ` 2,97,924/- observing that expenditure on debentures was GURBAX SINGH 2014.11.05 16:56 I attest to the accuracy and integrity of this document High Court Chandigarh ITA No.609 of 2009 (O&M) 4 raised for expansion of business and the same fell under the provisions of Section 35D of the Act. On appeal by the revenue, the Tribunal confirmed the order passed by the CIT(A). As regards commitment charges/guarantee commission paid to the assessee for pledging them land as collateral security, the Assessing Officer made addition of ` 3,60,000/-. On appeal, the CIT(A) deleted the guarantee commission paid to sister concern for pledging them 321 acres of land as collateral security by following the decision of the Delhi High Court in CIT vs. Indian Aluminium Cables Limited, (1990) 184 ITR 516 (Del). The Tribunal upheld the order passed by the CIT(A). Similarly, addition made by the Assessing officer on account of maintenance of guest house on the ground that such expenses were not allowable under section 37(3) of the Act was deleted by the CIT(A) which was upheld by the Tribunal on the ground that the expenditure had been incurred for accommodation of employees. With regard to disallowance of ` 3735/- under Section 37(2A) of the Act on account of inauguration expenses of Nuwud Corner was deleted by the CIT(A) which was upheld by the Tribunal. Lastly, the addition of ` 30,26,723/- made by the Assessing Officer on account of trading addition by applying GP rate of 52% instead of 51.7% shown by the assessee after rejecting book results declared in MDF division was deleted by the CIT(A) which order was affirmed by the Tribunal. Hence the instant appeals by the revenue. 4. We have heard learned counsel for the appellant revenue and perused the record. 5. In order to effectively adjudicate the appeals, it would be essential to notice the relevant findings given by the authorities below on GURBAX SINGH 2014.11.05 16:56 I attest to the accuracy and integrity of this document High Court Chandigarh ITA No.609 of 2009 (O&M) 5 each issue separately. A. Share Capital Expenses: 6. The Assessing Officer made disallowance of ` 2,97,924/- claimed under Section 35D of the Act in respect of capital raising expenses being 1/10th of ` 29,79,237/- on the ground that these were not covered under the said provision. It was recorded thus:- “14. In the 4th revised statement of computation of income/loss filed on 18.11.1996, the assessee has claimed deduction under Section 35D with the remarks that without prejudice to their claim of expenditure in respective assessment year pending before the ITAT and Commissioner of Income Tax (Appeals) for adjudication. The claim was at ` 784424/- out of which ` 2,97,924/- had been claimed as 1/10th of expenses incurred during the period relevant to the assessment year 1994-95 amounting to ` 29,79,237/- being capital raising expenses. The balance amount pertained to assessment years 1991-92 and 1992-93. The claim for the assessment years 1991-92 and 1992-93 is not being allowed as the matter is pending in respective assessment years before the ITAT and Commissioner of Income Tax (A) for adjudication Necessary rectification will be carried out under sections 154/155 of the IT Act 1961 as and when the matter is finally adjudicated by the Hon'ble ITAT and CIT(A). As regards the claim of expenses of ` 2,97,924/-, the same is also not allowed on the ground that the expenses incurred for raising capital are not covered by provisions of section 35D of the Income Tax Act. Therefore,subject to above findings the claim is disallowed.” 7. The CIT(A) deleted the addition of ` 2,97,924/- holding that expenditure on debentures was raised for expansion of business and the same fell under the provision of Section 35D of the Act. The CIT(A) drew GURBAX SINGH 2014.11.05 16:56 I attest to the accuracy and integrity of this document High Court Chandigarh ITA No.609 of 2009 (O&M) 6 support from the judgments of the Rajasthan High Court in CIT vs. Multi Metals Limited, (1991) 188 ITR 151 and Bombay High Court in Goa Carbon Limited vs. CIT, (1994) 73 Taxman 68. It was held as under:- “7. Ground No.5 is with regard to the disallowance of expenditure of ` 29,79,237/- incurred for raising working capital. The appellant has stated that the expenditure have been incurred for raising working capital and claimed 1/10th of expenditure i.e.` 2.97,924/-. The appellant has relied upon the following cases of CIT vs. Multi Metals Limited, (1991) 188 ITR 151 (Raj.), Goa Carbon Limited vs.CIT, (1994)73 Taxman 68(Bom.). 7.1.The Assessing Officer has disallowed the expenditure on the basis that expenditure incurred for raising working capital are not covered under the proviso to section 35D of the Income Tax Act. There is no dispute as to the expenditure. The assessee has mentioned that whole of the expenditure of ` 29,79,237/- is allowable under Section 37. The full allowability has not been pressed. 7.2.I have carefully considered the written submissions of the appellant and find that the 1/10th of the expenditure is allowable in view of the cases referred above. Therefore, I delete the disallowance of ` 2,97,924/- in this regard.” 8. The Tribunal upheld the order passed by the CIT(A) holding thus:- “17. In regard to the issue of the expenses incurred on the raising of the share capital, which is ground No.4 in ITA No.3756 for the assessment year 1994-95, ground No.11 in ITA No.2049 for the assessment year 1995-96, it was submitted that the CIT(A) erred in directing allowance of 1/10th of the said expenditure by invoking the provision of section 35D of the Act. In the reply, learned AR vehemently supported the order of the CIT(A). GURBAX SINGH 2014.11.05 16:56 I attest to the accuracy and integrity of this document High Court Chandigarh ITA No.609 of 2009 (O&M) 7 18. We have considered the rival submissions. We have also perused the orders of the CIT(A). It is noticed that this issue is squarely covered by the decision of the Rajasthan High Court in the case of Multi Metal Limited, reported in 188 ITR 151 as also the decision of the Bombay High Court in the case of Goa Carbon Limited, reported in 73 Taxman 68. It is noticed that the expenditures on debentures were raised for the expansion of the business and the same falls under the provisions of section 35D of the Act. In view of this, we are of the view that the finding of the CIT(A) in directing 1/10th of the expenditure as allowable by applying the provisions of section 35D is on right footing and calls for no interference. In the circumstances, the finding of the CIT(A) on this issue stands confirmed.” In Multi Metals Limited and Goa Carbon Limited's cases (supra), it has been held by the Rajasthan and Bombay High Courts respectively that any expenditure incurred by way of fees paid to Registrar of Companies for enhancement of authorised capital is deductible over a period of ten years under Section 35D(2)(c)(iv) of the Act. We are in agreement with the aforesaid view and do not find any infirmity in the order of the CIT(A) or the Tribunal in this behalf. B. Guarantee charges 9. The Assessing Officer made addition of ` 3,60,000/- on account of commitment charges/guarantee commission paid to M/s Nuchem Investment (P) Limited Faridabad in the following terms:- “6. It has been informed during the assessment proceeding by the assessee in its letter dated 10th January 1997 that the company has paid guarantee commission to M/s Nuchem Investment (P) Limited of ` 3,60,000/- for placement of GURBAX SINGH 2014.11.05 16:56 I attest to the accuracy and integrity of this document High Court Chandigarh ITA No.609 of 2009 (O&M) 8 their land as collateral security to banks for loans. A letter dated 24th September 1993 to M/s Nuchem Investment (P) Limited was filed addressed to the Managing Director of M/s Nuchem Limited for remitting the guarantee commission at the rate of ` 30,000/- PM w.e.f 2nd October 1992 till date. The assessee was asked to furnish the copy of agreement for M/s Nuchem Investment (P) Limited for payments of guarantee commission vide note sheet dated 10th January 1997. It was also asked as to why the asset has not been used as collateral security by M/s Nuchem Investment (P) Limited and why guarantee commission may not be disallowed. Moreover part of the guarantee commission pertains to the period relevant to assessment year 1993-94 also. On the next date of hearing i.e. 17th January 1997, the assessee has not filed any document regarding guarantee commission as per note sheet dated 17th January 1997. On 27th January 1997, the assessee has stated that photo copy of letter dated 24th September 1993 received from the party has been submitted vide letter dated 10th January 1997 but no agreement for payment of guarantee commission has been filed. Without any agreement for the payment of guarantee commission the same could not be allowed as a business expenses. There is no explanation as to why asset have not been used as collateral security by M/s Nuchem Investment (P) Limited,for raising loan for themselves. Part of the payment period is not relevant to this assessment year. In view of these facts the guarantee commission paid to M/s Nuchem Investment (P) Limited of ` 3,60,000/- is disallowed. Moreover,the payment is also covered by the provisions of section 40A(2)(b) of the Income Tax Act as M/s Nuchem Investment (P) Limited is sister concern of this group.” GURBAX SINGH 2014.11.05 16:56 I attest to the accuracy and integrity of this document High Court Chandigarh ITA No.609 of 2009 (O&M) 9 10. The CIT(A) deleted the guarantee commission paid to sister concern for pledging them 321 acres of land as collateral security by following the decision of the Allahabad High Court in L.H.Sugar Factories and Oil Mills Pvt. Limited vs. CIT, (1982) 137 ITR 277 (All.) and Delhi High Court in the case of CIT vs. Indian Aluminium Cables Limited, (1990) 184 ITR 516 (Del). It was recorded thus: “8. Group No.6 is with regard to the disallowance of ` 3,60,000/- being the commitment charges/guarantee commission paid to Nuchem Investment Pvt. Limited for pledging their land as collateral security with Canbank Mutual Fund. The appellant has submitted that the amount has been paid for pledging title deeds for release of bridge loan by Canbank Mutual Fund. The appellant further stated that the guarantee commission even when paid to the directors was allowed as deductible expenditure as decided in case of L.H.Sugar factories and Oil Mills Pvt. Limited vs. CIT (1982) 137 ITR 277 (All.) and CIT vs.Indian Aluminium Cables Limited, (1990) 184 ITR 516 (Del.). 8.1 I have considered the written submissions and arguments of the learned counsel for the assessee and find that the commitment charges/guarantee commission have been paid for business purposes. Therefore, the disallowance made in this respect is deleted. The appellant gets relief of ` 3,60,000/-.” 11. The Tribunal upheld the order of the CIT(A) holding as under:- “19. In regard to the issue of the commitment charges/guarantee commission paid to M/s Nuchem Investment Pvt. Limited for pledging their land as collateral security, which is ground No.5 in ITA No.3756 for the assessment year 1994-95, ground No.1 in ITA No.2049 for the assessment year 1995-96, ground No.1 in ITA No.2828 GURBAX SINGH 2014.11.05 16:56 I attest to the accuracy and integrity of this document High Court Chandigarh ITA No.609 of 2009 (O&M) 10 for the assessment year 1996-97, ground No.4 in ITA No.2827 for the assessment year 1997-98, ground No.6 in ITA No.299 for the assessment year 1998-99, ground No.4 in ITA No.2236 for the assessment year 1999-2000, it was submitted by the learned DR that the CIT(A) erred in deleting the guarantee commission paid to its sister concerns for pledging their 321 acres of land as collateral security to M/s Canbank Mutual Funds for the loan taken by the assessee. In reply, learned AR submitted that the assessee had taken a loan for which the assessee's sister concern, M/s Nuchem Pvt. Limited had pledged their land as collateral security. For this, the assessee had given a guarantee commission/commitment charges. It was also his submission that this issue had been allowed for the assessment year 1993-94 in the assessee's own case in the security assessment passed under section 143 (3) of the Act. He vehemently supported the order of the CIT (A). 20.We have considered the rival submissions. It is noticed that the CIT(A) has considered the issue and has also followed the decision of the Hon'ble Jurisdictional High Court in the case of Indian Aluminium Cables Limited, reported in 184 ITR 516 (Del.) It is further noticed that the fact that the loan was taken for which the immovable property of the sister concern of the assessee has been pledged was for the purpose of the business of the assessee is not in dispute. Obviously,if the property of the sister concern of the assessee is pledged for the business purpose of the assessee, the sister concern is entitled to be given a guarantee commission/commission charges. In the circumstances, we are of the view that the finding of the CIT(A) by respectfully following the decision of the Hon'ble Jurisdictional High Court in the case of Indian Aluminium Cables Limited, referred to supra is on a right footing and the same is upheld.” GURBAX SINGH 2014.11.05 16:56 I attest to the accuracy and integrity of this document High Court Chandigarh ITA No.609 of 2009 (O&M) 11 The order of CIT(A) and the Tribunal being based on judgments of Allahabad and Delhi High Courts in L.H.Sugar Factories and Oil Mills Pvt. Limited and Indian Aluminium Cables Limited's cases (supra) do not call for any interference. C. Maintenance of Guest house expenses: 12. The Assessing Officer made addition of ` 37,667/- on account of maintenance of guest house on the ground that such expenses were not allowable under Section 37(3) of the Act. It was observed as under:- “9. A sum of ` 37,716/- was incurred for the maintenance and running of guest house. The assessee was asked as to why these expenses may not be disallowed? The assessee has furnished an explanation stating that the guest house is being used for the persons attending Marketing division meeting and no charges are being charged from these employees. Neither they are being paid any boarding and lodging expenses. Explanation has been considered and as per the provision of Income Tax Act, any expenditure on the maintenance and running of guest house is disallowable. Hence the guest house expenses of ` 37,767/- are disallowed.” 13. The CIT(A) deleted the addition holding that the expenditure had been incurred for accommodation of employees. It was noticed as under:- “12. Ground No.9 is with regard to the disallowance of ` 37,767/- amount spent in maintaining accommodation for as guest house. The appellant has stated that the expenditure has been incurred in maintaining accommodation for the employees of the company and not on any guests. The expenditure was incurred on the following heads:- Rent ` 25,600/- Electricity ` 6445/- Miscellaneous `5722/- GURBAX SINGH 2014.11.05 16:56 I attest to the accuracy and integrity of this document High Court Chandigarh ITA No.609 of 2009 (O&M) 12 ` 37,767/- The Assessing Officer has not denied that the expenditure is only for employees and that the expenditure has been incurred for maintenance of place, which has been used for the purpose of staying of employees of the company, who has visited the factory for official business purposes. The addition made for the expenditure incurred for the accommodation for employees for business purposes is, therefore, deleted. The assessee gets relief of ` 37,767/-.” 14. The Tribunal upheld the deletion in the following terms:- “25. In regard to the issue of the disallowance of the maintenance expenses of the guest house, which is ground No.9 in ITA No.3756 for the assessment year 1994-95, it was submitted by the learned DR that the CIT(A) erred in deleting the said addition. In reply, learned AR submitted that the addition had been made on the ground that the expenditure had been incurred for the maintenance of the place for the staying of the company's employees for the business of the assessee company. It was his submission that the CIT(A) had rightly deleted the addition. 26. We have considered the rival submissions. It is noticed that the revenue has not disputed the fact that the expenditure is only for the employees and that the expenditure has been incurred for maintaining the place which has been used for the purpose of staying by the employees of the company who had visited factory for official purposes. It is further noticed that the CIT(A) has deleted the addition on the ground that the expenditure had been incurred for the accommodation of the employees, for the business purpose of the assessee. We are of the view that the finding of the CIT(A) on this issue is on a right footing and calls for no interference. In the circumstances, the finding of the CIT(A) on this issue stands upheld.” The CIT(A) and the Tribunal concurrently concluded that the expenditure GURBAX SINGH 2014.11.05 16:56 I attest to the accuracy and integrity of this document High Court Chandigarh ITA No.609 of 2009 (O&M) 13 was incurred for maintenance of the place for the employees who visited the factory for official purposes for the purpose of business. In the light of the aforesaid findings, no infirmity is found in the order of CIT(A) and the Tribunal deleting this disallowance. D. Inauguration expenses 15. The Assessing Officer disallowed expenses of ` 3735/- under Section 37(2A) of the Act on account of inauguration of Nuwud Corner. The CIT(A) following the decision in the case of the assessee for assessment year 1993-94 in appeal No.48/96-97 deleted the addition. The finding recorded by the CIT(A) reads thus: “18. Ground No.14(b) is with regard to the inauguration expenses amounting to ` 7470/-. The appellant has stated that the Assessing officer has disallowed 50% of the expenses of ` 7470/- incurred by the assessee at Lord Banguet at Rajkot in respect of 'Nuwud Corner', the shop of M/s Capital Enterprises. Since the amount pertains to inauguration expenses of the corner at Rajkot is an allowable expense. Following decision in the appellant own case for assessment year 1993-94 in appeal No.48/96-97, the addition made in this respect is deleted.” 16. The Tribunal affirmed the finding recorded by the CIT(A) holding: “31. In regard to the issue of the disallowance of the inauguration expenses which is ground No.14 in ITA No.3756 for the assessment year 1994-95, it was fairly agreed by both the sides that the issue was squarely covered by the decision of this Tribunal in the assessee's own case for the assessment year 1993- 94, referred to para, wherein para 92 of the said order, the issue has been held against the revenue. Respectfully following the decision of this Tribunal in the assessee's own case for the GURBAX SINGH 2014.11.05 16:56 I attest to the accuracy and integrity of this document High Court Chandigarh ITA No.609 of 2009 (O&M) 14 assessment year 1993-94, the finding of the CIT(A) on this issue stands upheld.” In view of finding of fact recorded by CIT(A) and the Tribunal deleting the addition, no error is noticed in the approach adopted by them which may require intervention of this Court. E. Trading additions 17. The Assessing Officer made addition of ` 30,26,723/- on account of trading addition by applying GP rate of 52% instead of 51.7% shown by the assessee after rejecting book results declared in MDF Division. The CIT(A) deleted the said addition holding that the GP rate declared by the assessee was quite reasonable and also followed his own order for the assessment year 1993-94 in appeal No.48/96-97. The finding recorded by the CIT(A) reads thus:- “21. Ground No.16 is with regard to trading addition of ` 30,26,723/-. The Assessing Officer has made addition by increasing the sale from ` 49,75,88,677/- to ` 50,06,15,400/- by rejecting books of account under section 145 pointing out certain deficiencies and applied GP rate of 52% as against 51.7% declared by the assessee as per audited books of account. The GP rate has increased from 46.88% to 51.7% during the year under consideration. The similar addition has also been made by the Assessing Officer on the similar facts and pointed out similar deficiencies in assessment year 1993-94,wherein the issue has been examined in length by me. After considering the written submissions and arguments of learned counsel and reply of the Assessing Officer, I am of considered opinion that there is no need to make an arbitrary addition during the year under consideration also. The addition in the sale made by the Assessing Officer is not correct, when all the records of the sales have been maintained and are produced for examination. The Assessing GURBAX SINGH 2014.11.05 16:56 I attest to the accuracy and integrity of this document High Court Chandigarh ITA No.609 of 2009 (O&M) 15 Officer has also not detected any mistake in the books of account of the assessee and not detected any sales which have not been recorded in the books of account. In the circumstances, the sales made by the assessee and recorded in the books of account are to be accepted. The Assessing Officer has not been able to establish that the assessee has shown lower GP rate by suppressing sales/stock or increasing manufacturing expenses. In fact, the GP rate declared by the assessee seems to be quite reasonable. Following my order for the assessment year 1993-94 in appeal No.48/96-97, rejection of books of account is not in order and the addition of ` 30,26,723/- is deleted.” 18. The Tribunal confirmed the finding recorded by the CIT(A) as under:- “35. In regard to the issue of the deletion of the trading addition which is ground No.17 in ITA No.3756 for the assessment year 1994-95, it was fairly agreed that this issue was covered by the decision of the coordinate bench of this Tribunal in the assessee's own case for the assessment year 1993-94, referred to supra wherein paras 76-80 of the said order this issue has been decided in favour of the assessee and the finding of the CIT(A) on this issue has been upheld. Respectfully following the decision of this Tribunal in the assessee's own case for the assessment year 1993- 94, the finding of the CIT(A) on this issue stands upheld.” The CIT(A) and the Tribunal have followed the earlier decision in the case of the assessee for the assessment year 1993-94 which was not shown to have been upset by any higher court. Thus, the approach of the CIT(A) and the Tribunal cannot be faulted on this deletion. 19. The findings recorded by the CIT(A) and upheld by the Tribunal on all the issues are based on appreciation of evidence on record which have not been shown to be illegal or perverse in any manner. Only an effort GURBAX SINGH 2014.11.05 16:56 I attest to the accuracy and integrity of this document High Court Chandigarh ITA No.609 of 2009 (O&M) 16 has been made to reappraise and reappreciate the evidence which is not permissible within the domain of Section 260A of the Act. 20. With regard to the issue regarding deleting the addition of ` 47,32,919/- made by the Assessing Officer in ITA No.615 of 2009 on account of late deposit of employees' contribution to PDF and ESI disregarding the fact that the payments were made beyond the due dates and were therefore not allowable under section 36(1)(va) and were to be treated as income under section 2(24)(x) of the Act, the Tribunal while upholding the finding recorded by the CIT(A) observed that the amounts had been paid before the due date of filing the return and, therefore, the same is allowable. The issue raised herein is covered by the decision of this Court in the case of the assessee in Nuchem Limited vs. Income Tax Appellate Tribunal and others, ITA No.116 of 2008 decided on 13.8.2012 wherein it has been so held. 21. Taking up the claim of the assessee regarding addition of ` 40,000/- made by the Assessing Officer on account of amount paid for market survey in ITA No.610 of 2009, the Assessing Officer had disallowed the same on the premise that the assessee had not utilized the survey report in its business activities as the activity of powder quoting for which the report was obtained had not been carried out. The CIT(A) had allowed the said expenditure holding that the survey was carried out to determine the potential of powder coatings as the company was manufacturing UF/MF powders. The expenditure was held to be for business purposes as it was carried out during the course of business activities of the assessee. Support was drawn from the decision of the Gauhati High Court judgment in CIT GURBAX SINGH 2014.11.05 16:56 I attest to the accuracy and integrity of this document High Court Chandigarh ITA No.609 of 2009 (O&M) 17 vs. India Carbon Limited, (1996) 221 ITR 265. It was upheld by the Tribunal. We do not find any error or fault in the approach of CIT(A) or the Tribunal. It was not mandatory that the survey report should have essentially resulted in enhancement of the profits of the company by taking action thereupon except that it was required to be in the course of the business activity. It was not in dispute that the survey report was obtained during the course of business activities of the assessee for exploring the feasibility of powder coatings as the company was manufacturing UF/MF powder. The plea of the revenue is, thus, rejected. 22. In view of the above, all the substantial questions of law are answered against the revenue and the appeals being devoid of any merit stand dismissed. (Ajay Kumar Mittal) Judge September 22, 2014 (Fateh Deep Singh) 'gs' Judge GURBAX SINGH 2014.11.05 16:56 I attest to the accuracy and integrity of this document High Court Chandigarh "