M/S PERFECT TURNERS, JAIPUR V. DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE-4, JAIPUR

ITA 1115/JPR/2019

• Counselvise Citation: [2020] 111 COUNSELVISE.COM (IT) 7821 (ITAT-JAIPUR)
• Duration Of Justice: 4 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-01-2020
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Assessment Year: 2016-2017
• Appeal Filed On: 13-09-2019
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Keywords: Business expenditure; TDS
• Section: 37; 143(3); 37(1); 201; 13

Judgement Text

VK;DJ VIHYH; VF/KDJ.K] T;IQJ U;K;IHB] T;IQJ IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES,A JAIPUR JH LAANHI XKSLKBZ] U;KF;D LNL; ,OA JH FOE FLAG ;KNO] YS[KK LNL; DS LE{K BEFORE: SHRI SANDEEP GOSAIN, JM & SHRI VIKRAM SING H YADAV, AM VK;DJ VIHY LA- @ ITA NO. 1115/JP/2019 FU/KZKJ.K O'K Z @ ASSESSMENT YEAR : 2016-17 M/S. PERFECT TURNERS G1-135, ROAD NO. 14, VKI IND. AREA, VKI EXTN JAIPUR CUKE VS. THE DCIT CIRCLE 4 JAIPUR LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN/GIR NO.: AABFP 9896 L VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT FU/KZKFJRH DH VKSJ L S@ ASSESSEE BY : SHRI S.L. PODDAR, ADVOCATE JKTLO DH VKSJ LS @ REVENUE BY: SHRI K.C. GUPTA, JCIT DR LQUOKBZ DH RKJH[ K@ DATE OF HEARING : 21/01/2020 MN?KKS'K.KK DH RKJH[ K@ DATE OF PRONOUNCEMENT: 23/01/2020 VKNS'K@ ORDER PER SANDEEP GOSAIN, J.M. THE PRESENT APPEAL HAS BEEN FILED BY THE ASSESSEE AGAINST THE ORDER OF CIT(A) -2, JAIPUR DATED 21.08.2019 FOR THE ASSE SSMENT YEAR 2016-17 WHEREIN THE ASSESSEE HAS RAISED THE FOLLOWING GRO UNDS OF APPEAL. (1) IN THE FACTS AND CIRCUMSTANCES OF THE CASE TH E LD. CIT(A) HAS ERRED IN CONFIRMING THE ADDITION OF RS. 3,94,946/- AS PER THE PROVISIONS OF SECTION2(24)(X) READ WITH SECTION 36(1)(VA) OF THE I.T. ACT, 1961 ON ACCOUNT OF DELAY IN PAYMENT OF ESI AND PF MADE BY THE AO. ITA NO. 115/JP/2019 M/S. PERFECT TURNERS VS DCIT, CIRCLE 4, JAIPUR 2 (2) IN THE FACTS AND CIRCUMSTANCES OF THE CASE THE LD. CIT(A) HAS ERRED IN CONFIRMING THE ADDITION OF RS. 11,45,410/- ON ACCOUNT OF CLAIM OF LOSS BY THEFT. 2.1 BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE I S A PARTNERSHIP FIRM AND DERIVES INCOME FROM MANUFACTURING AND JOB WORK OF B EARINGS. THE RETURN WAS FILED ON 16-10-2016 DECLARING INCOME AT RS. 48, 90,340/-. THE AO COMPLETED THE ASSESSMENT 08-12-2018 U/S 143(3) OF T HE I.T. ACT, 1961 DETERMINING TOTAL INCOME AT RS. 78,59,130/- INTER A LIA MAKING THE FOLLOWING ADDITIONS. (I) ADDITION OF RS. 15,96,562/- BY DISALLOWING THE PAYMENT OF INTEREST ON STATUTORY LIABILITIES. (II) ADDITION OF RS. 11,45,410/- BY DISALLOWING THE CLAIM OF EXPENDITURE ON ACCOUNT OF THEFT OF MONEY DEBITED IN P&L A/C. 2.2 AGGRIEVED BY THE ORDER OF THE AO, THE ASSESSEE PREFERRED APPEAL BEFORE THE LD.CIT(A) WHO HAS SUSTAINED THE FOLLOWIN G ADDITIONS. (I) ADDITION OF RS. 3,94,946/- BY DISALLOWING THE PAYMENT OF INTEREST ON STATUTORY LIABILITIES. (II) ADDITION OF RS. 11,45,410/- ON ACCOUNT OF CLAI M OF LOSS BY THEFT. ITA NO. 115/JP/2019 M/S. PERFECT TURNERS VS DCIT, CIRCLE 4, JAIPUR 3 2.3 AGGRIEVED BY THE ORDER OF THE LD. CIT(A), THE A SSESSEE HAS PREFERRED THE PRESENT APPEAL BEFORE US BY RAISING T HE GROUNDS MENTIONED HEREINABOVE. 3.1 THE GROUND NO. 1 OF THE ASSESSEE RELATES TO CHA LLENGING THE ORDER OF THE LD. CIT(A) IN CONFIRMING THE ADDITION OF RS. 3,94,946/- AS PER THE PROVISIONS OF SECTION 2(24)(X) R.W.S. 36(1)(VA) O T HE I.T. ACT, 1961 ON ACCOUNT OF DELAY IN PAYMENT OF ESI AND PF MADE BY T HE AO. 3.2 THE LD.AR OF THE ASSESSEE REITERATED THE SAME A RE ARGUMENTS AS WERE RAISED BEFORE THE LD. CIT(A). HOWEVER, THE LD. CIT(A) HAS FILED THE WRITTEN SUBMISSION ON THE ISSUE OF THIS GROUND WHIC H ARE REPRODUCED AS UNDER:- GROUND NO. 1:- IN THE FACTS AND CIRCUMSTANCES OF THE CASE THE LEAR NED CIT(A) HAS ERRED IN CONFIRMING THE ADDITION OF RS. 3,94,946/- AS PER THE PROVISIONS OF SECTION 2(24)(X) READ WITH SECTION 36 (1)(VA) OF THE INCOME TAX ACT, 1961 ON ACCOUNT OF DELAY IN PAYMENT OF ESI AND PF M ADE BY THE LEARNED AO. THE ASSESSSEE HAS DEBITED FOLLOWING EXPENSES ON ACC OUNT OF INTEREST EXPENSES IN P&L A/C DURING THE YEAR UNDER CONSIDERATION: - S.NO. PARTICULARS AMOUNT 1 INTEREST ON DELAY PAYMENT TO PARTIES 1144231.00 2 INTEREST ON LATE PAYMENT OF EXCISE & SERVICE TAX, EPF 188449.00 3 INTEREST ON LC (BANK LIMIT) FOR EXPORT 57385.19 4 INTEREST ON LATE PAYMENT OF SALES TAX PAYMENT 12 2729.00 5 INTEREST ON LATE PAYMENT OF TDS 83768.00 TOTAL 1596562.19 ITA NO. 115/JP/2019 M/S. PERFECT TURNERS VS DCIT, CIRCLE 4, JAIPUR 4 DURING THE ASSESSMENT PROCEEDINGS THE LEARNED AO HA S MENTIONED IN THE ASSESSMENT ORDER THAT THE ABOVE PAYMENTS WERE MADE IN VIOLATIO N OF LAW AS THE ABOVE PAYMENTS WERE MADE DUE TO LATE DEPOSIT OF STATUTORY LIABILIT IES AND THE PAYMENTS ARE EXPENDITURE FOR VIOLATION OF ANY LAW FOR THE TIME BEING IN FORC E AND HENCE UNDER SUCH CIRCUMSTANCES SUCH PAYMENT OF INTEREST CANNOT BE HE LD AS EXPENSES INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS, HENCE DISALLOWED. THE LEARNED AO DID NOT APPRECIATE THE HEADS OF INTE REST PAYMENT CORRECTLY. FIRST OF ALL THAT ALL THE PAYMENTS OF INTEREST IN ABOVE CHART AR E NOT FOR DELAYED PAYMENT OF STATUTORY LIABILITIES. THE ABOVE INTEREST PAYMENT C AN BE BIFURCATED IN TWO CATEGORIES AS UNDER: - (A) PAYMENT OF INTEREST UNDER THE NORMAL BUSINESS TRANS ACTION (I) INTEREST ON DELAY PAYMENT TO PARTIES 1144231.0 0 (II) INTEREST ON LC (BANK LIMIT) FOR EXPORT 57385.19 TOTAL 1201616.19 THE ABOVE PAYMENTS WERE MADE TO THE VARIOUS PARTIES FROM WHOM PURCHASES WERE MADE AND SERVICES WERE TAKEN. ALL THESE PARTIES ARE PRIVATE PARTIES AND DUE TO SHORTAGE OF FUNDS PAYMENTS WERE MADE DELAYED AS PER TERMS OF PURCHASE FOR WHICH INTEREST WAS PAID. THIS INTEREST PAYMENT WAS MADE UNDER THE NORM AL BUSINESS CIRCUMSTANCES AND THERE ARE NO VIOLATION OF LAW OF LAND. THEREFORE TH E ABOVE INTEREST PAYMENT WAS MADE EXCLUSIVELY FOR THE PURPOSE OF BUSINESS AND ALLOWAB LE. THERE IS NO REASON FOR DISALLOWANCE OF ABOVE INTEREST EXPENDITURE WHICH IS MADE TO PRIVATE PARTIES AND BANKS FOR DELAYED PAYMENT AND LOANS. THEREFORE THE ABOVE ADDITION DESERVES TO BE DELETED. (B) PAYMENT OF INTEREST FOR DELAYED PAYMENT OF STATUTOR Y LIABILITIES - (I) INTEREST ON LATE PAYMENT OF EXCISE & SERVICE TA X, EPF 188449.00 (II) INTEREST ON LATE PAYMENT OF SALES TAX PAYMENT 122729.00 (III) INTEREST ON LATE PAYMENT OF TDS 83768.00 TOTAL 394946.00 THE ASSESSEE HAS MADE DELAY IN PAYMENT OF EXCISE, S ERVICE TAX, SALES TAX AND TDS TO THE GOVERNMENT ACCOUNT FOR WHICH INTEREST PAYMENT W AS MADE. THE ABOVE INTEREST PAYMENT WAS NOT IN PENAL IN NATURE. IT IS ONLY COMP ENSATORY IN NATURE TO THE GOVERNMENT FOR DELAYED PAYMENT OF LIABILITIES. IT I S PAID IN THE NAME OF INTEREST AND NOT IN THE NAME OF PENALTY. THEREFORE IT CANNOT BE DISALLOWED. DURING THE ASSESSMENT PROCEEDINGS THE ASSESSEE HAS SUBMITTED AS UNDER: - IT IS SUBMITTED THAT ACCORDING TO THE PROVISIONS OF SECTION 37(1) OF THE ACT, ANY EXPENDITURE INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSES OF BUSINESS IS ALLOWABLE AS DEDUCTION, PROVIDED THE SAME WAS NOT INCURRED FO R THE PURPOSE OF ANY OFFENCE OR WHICH IS PROHIBITED BY LAW. THE PAYMENT MADE BY TAX PAYER ON ACCOUNT OF INTEREST ON LATE DEPOSIT OF ANY STATUTORY LIABILITY WAS COMP ENSATORY IN NATURE. THE SAME WAS NOT IN THE NATURE OF PENALTY FOR SAID DEFAULT. RELI ANCE IN THIS REGARD IS PLACED ON THE ITA NO. 115/JP/2019 M/S. PERFECT TURNERS VS DCIT, CIRCLE 4, JAIPUR 5 DECISION OF KARNATAKA HIGH COURT IN THE CASE OF CIT V ORIENTAL INSURANCE CO. LTD: 315 ITR 102 , WHEREIN, IT HAS BEEN HELD THAT INTEREST PAID UNDE R SECTION 201(1A) OF THE ACT FOR LATE DEPOSIT OF TDS IS COMPENSATORY TO GOVERNMENT TREASURY AND NOT PENAL IN NATURE. IT IS FURTHER SUBMITTED THAT THE INTEREST PARTAKES THE CHARACTER OF PRINCIPAL IN RESPECT OF WHICH THE SAME IS PAID. THE AMOUNT OF TDS/SERVICE T AX/SALES TAX PAYMENT/ EXCISE ETC, BEING PART OF A PARTICULAR PAYMENT IS ALLOWABL E AS DEDUCTION IN THE RETURN OF INCOME AS EXPENSES INCURRED FOR THE PURPOSES OF BUS INESS. THEREFORE, THE AMOUNT OF INTEREST PAID IN RESPECT OF LATE DEPOSIT OF STATUTO RY/ GOVERNMENT LIABILITIES ALSO PARTAKES THE CHARACTER OF AN EXPENSE, WHICH IS ALLOWABLE AS EXPENDITURE UNDER SECTION 37(1) OF THE ACT. THE AO ACCEPTED THE ARGUMENT OF THE TAXPAYER THAT T HE INTEREST UNDER SECTION 75 OF THE FINANCE ACT 1994 FOR LATE PAYMENT OF SERVICE TAX IS COMPENSATORY IN NATURE, HAS THE SAME CHARACTER AS SERVICE TAX AND IT IS NOT IN NATU RE OF ANY PENALTY OR FINE ALLOWABLE UNDER SECTION 37 OF THE INCOME TAX ACT 1961. ACCORDINGLY, HE ALLOWE D THE SAID INTEREST PAID ON LATE DEPOSIT OF SERVICE TAX. BUT THE LEARNED AO DID NOT MENTION ANYTHING IN THE ORDER AND DISALLOWED THE WHOLE PAYMENT WITHOUT CONSIDERING THE NATURE OF PAYMENT. THE LEARNED CIT(A) DELETED THE ADDITION ON ACCOUNT OF INTEREST PAYMENT FOR DELAYED PAYMENT OF PURCHASES AS WELL AS FOR LC PAYMENTS BUT CONFIRMED THE INTEREST ON LATE PAYMENT OF EXCISE, SERVICE TAX, SALES TAX AND TDS AND CONFIRMED THE ADDITION OF RS. 3,94,946/- ON THIS ACCOUNT. IN THIS REGARD OUR SUBMISSION IS THAT THE HONBLE J AIPUR TRIBUNAL HAS ALSO DECIDED THAT THE INTEREST PAYMENT OF DELAYED PAYMENT OF STATUTOR Y LIABILITIES IS ALLOWABLE AS BUSINESS EXPENDITURE. CIT V. WESTERN INDIAN STATE MOTORS [1988] 174 ITR 1 16 (RAJ.). WHOLLY AND EXCLUSIVELY FOR PURPOSES OF BUSINESSINT EREST PAID ON SALES-TAX ARREARS IS ALLOWABLE BUSINESS EXPENDITURE UNDER S. 37. THEREFORE IT IS CLEAR THAT WHEN ANY STATUTORY DUES ARE PAID DELAYED AND INTEREST IS PAID FOR DELAYED PAYMENT THEN IT IS COMPENSATORY IN NATU RE AND ALLOWABLE EXPENDITURE FOR BUSINESS U/S 37 OF THE INCOME TAX ACT, 1961. IN THE CASE LACHMANDAS MATHURA V. CIT 254 ITR 799 THE APEX COURT HAS HELD THAT THE HIGH COURT HAS P ROCEEDED ON THE BASIS THAT THE INTEREST ON ARREARS OF SALES TAX IS PENAL IN NATURE AND HAS REJECTED THE CONTENTION OF THE ASSESSEE THAT IT IS COMPENSATORY IN NATURE. IN TAKING THE SAID VIEW THE HIGH COURT HAS PLACED RELIANCE ON ITS FULL BENCHS DECISION IN SARAYA SUGAR MILLS (P) LTD. V. CIT (1979) 116 ITR 387 (ALL.) THE LEARNED C OUNSEL APPEARING FOR THE APPELLANT-ASSESSEE STATES THAT THE SAID JUDGMENT OF THE FULL BENCH HAS BEEN REVERSED BY THE LARGER BENCH OF THE HIGH COURT IN TRIVENI EN GG. WORKS LTD. V. CIT (1983) 144 ITA NO. 115/JP/2019 M/S. PERFECT TURNERS VS DCIT, CIRCLE 4, JAIPUR 6 ITR 732 (ALL.) (FB), WHEREIN IT HAS BEEN HELD THAT INTEREST ON ARREARS OF TAX IS COMPENSATORY IN NATURE AND NOT PENAL. THIS QUESTION HAS ALSO BEEN CONSIDERED BY THIS COURT IN CIVIL APPEAL NO. 830 OF 1979 TITLED SARAYA SUGAR MILLS (P) LTD. V. CIT DECIDED ON 29-2-1996. IN THAT VIEW OF THE MATTE R, THE APPEAL IS ALLOWED AND QUESTION NOS. 1 AND 2 ARE ANSWERED IN FAVOUR OF THE ASSESSEE AND AGAINST THE REVENUE. THE SAME VIEW WAS FURTHER APPROVED BY THE ITAT KOLK ATA IN THE CASE OF DCIT VS NARAYANI ISPAT (P) LTD. APPEAL NUMBER : ITA NO. 2127/KOL/2014 DATE OF JUDGEMENT/ORDER : 30/08/2014 WHEREIN IT HAS BEEN HE LD THAT INTEREST WAS PAID FOR DELAYED PAYMENT OF SERVICE TAX & TDS. THE INTEREST FOR THE DELAY IN MAKING THE PAYMENT OF SERVICE TAX & TDS IS COMPENSATORY IN NAT URE. AS SUCH THE INTEREST ON DELAYED PAYMENT IS NOT IN THE NATURE OF PENALTY IN THE INSTANT CASE ON HAND. IN VIEW OF THE ABOVE JUDGMENTS, THERE REMAINS NO DO UBT THAT THE INTEREST EXPENSE ON THE DELAYED PAYMENT DISALLOWED BY THE LEARNED AO FO R RS. 3,94,946/- DESERVES TO BE ALLOWED. COPY OF INTEREST PAID ON DELAYED PAYMENT A CCOUNT IS PLACED ON PAPER BOOK PAGE NO. 1. COPY OF REPLY SUBMITTED BEFORE THE LEARNED AO IS AV AILABLE ON PAPER BOOK PAGE NO. 2 TO 4 . COPY OF REPLY FILED BEFORE THE LEARNED CIT(A) IS AVAILABLE ON PAPER BOOK PAGE NO. 15 TO 18. 3.3 ON THE OTHER HAND, THE LD. DR RELIED ON THE ORD ER PASSED BY THE LD. CIT(A). 3.4 WE HAVE HEARD THE BOTH THE LD. COUNSELS OF THE PARTIES AND PERUSED THE MATERIALS AVAILABLE ON RECORD AND THE ALSO THE JUDGEMENT CITED BY THE PARTIES. FROM THE FACTS, WE NOTICED THAT THE ADDITI ON MADE BY DISALLOWING THE INTEREST ON LATE PAYMENT OF TDS IS CONCERNED, T HE SAID ISSUE HAS ALREADY BEEN DECIDED BY THE ITAT COORDINATE BENCH, JAIPUR IN ITA NO. 294/JP/2019 FOR THE ASSESSMENT YEAR 2015-16 IN ASSE SSEE'S OWN CASE VIDE ORDER DATED 8-01-2020. THE SAID ADDITION WAS U PHELD BY THE ITA NO. 115/JP/2019 M/S. PERFECT TURNERS VS DCIT, CIRCLE 4, JAIPUR 7 COORDINATE BENCH AND THE OPERATIVE PORTION OF THE O RDER OF THE COORDINATE BENCH IS REPRODUCED BELOW. 4. ON APPEAL, THE LD CIT(A) HAS RECORDED A FINDING T HAT DURING THE COURSE OF ASSESSMENT PROCEEDINGS, IT WAS ADMITTED BY THE ASSESSEE THAT THE SAME WAS MISSED TO BE ADDED BACK TO THE TOTAL INCOME OF THE ASSESSEE, HOWE VER, DURING THE COURSE OF APPELLATE PROCEEDINGS, THE SAM E WAS CLAIMED AS ALLOWABLE U/S 37(1) OF THE ACT. AS PER LD . CIT(A), TDS IS A PAYMENT UNDER DIRECT TAX AND BY NOT DEPOSIT ING TDS IN TIME IS A VIOLATION OF LAW AND THEREFORE, LEVY OF INTEREST ON SUCH LATE PAYMENT IS PENAL IN NATURE AN D CANNOT BE ALLOWED AS DEDUCTION. AGAINST THE SAID FINDING, T HE ASSESSEE IS IN APPEAL BEFORE US AND IN SUPPORT OF H IS CONTENTION, THE LD AR HAS RELIED ON THE DECISION OF HONBLE KARNATAKA HIGH COURT IN CASE OF CIT VS. ORIENTAL INS URANCE COMPANY LTD. REPORTED IN 315 ITR 102 FOR THE PROPOS ITION THAT LEVY OF INTEREST U/S 201(1)(A) OF THE ACT CANN OT BE CONSTRUED AS PENAL IN NATURE. 5. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. WE HAVE ALSO GONE THR OUGH THE DECISION OF HONBLE KARNATAKA HIGH COURT IN CAS E OF ORIENTAL INSURANCE COMPANY LTD. HOWEVER, THE SAID DECISION DOESNT SUPPORT THE CASE OF THE ASSESSEE A S THE ISSUE BEFORE US IS ABOUT DEDUCTIBILITY OF INTEREST ON LATE DEPOSIT OF TDS AND NOT WHETHER SUCH INTEREST IS PEN AL IN NATURE OR NOT. WE HAD AN OCCASION TO EXAMINE SIMIL AR MATTER IN CASE OF M/S SAND PLAST INDIA LIMITED VS. DCIT, ALWAR (IN ITA NO. 310/JP/2018 DATED 24/07/2018) WHEREIN WE HAVE HELD AS UNDER:- 11. AS FAR AS INTEREST ON LATE PAYMENT OF TDS U/S 201 (1A) IS CONCERNED, USEFUL REFERENCE CAN BE DRAWN TO THE DECISION OF HONBLE BOMBAY HIGH COURT IN CASE OF FERRO ALLOYS CORPORATION LTD VS. CIT (1992) 196 ITR ITA NO. 115/JP/2019 M/S. PERFECT TURNERS VS DCIT, CIRCLE 4, JAIPUR 8 406 (BOM) WHERE INTEREST PAYMENT U/S 201(1A) FOR FAILURE TO DEDUCT OR PAY TAX DEDUCTED AT SOURCE WAS HELD NOT DEDUCTIBLE. A SIMILAR VIEW HAS BEEN TAKEN BY THE MADRAS HIGH COURT IN CASE OF CIT VS. CHENNAI PROPERTIES & INVESTMENT LTD., (1999) 239 ITR 435 (MAD) WHEREIN IT WAS HELD AS UNDER (HEAD NOTES): THE LIABILITY FOR DEDUCTION OF TAX ARISES BY REASON OF THE PROVISIONS OF THE ACT. UNDER SECTION 201, THE CONSEQUENCE OF FAILURE TO COMPLY WITH THE SAME RENDERS THAT PERSON LIABLE TO B E DEEMED AS AN ASSESSEE IN DEFAULT WITH ALL THE CONSEQUENCES ATTACHED THERETO. THE LIABILITY TO PAY INTEREST ON THE AMOUNT NOT DEDUCTED OR DEDUCTED, BUT NOT PAI D IS DIRECTLY RELATED TO THE FAILURE TO DEDUCT OR REMIT THE AMOUNT. THE AMOUNT REQUIRED TO BE DEDUCTED IS THE AMOUNT PAYABLE AS INCOME-TAX. THE INTEREST PAID FOR THE PERIOD OF DELAY TAKES COLOUR FROM THE NATURE OF THE PRINCIPAL AMOUNT REQUIRED TO BE PAID BUT NOT PAID WITHIN TIME. THE PRINCIPAL AMOUNT HERE WOULD BE THE INCOME-TAX AND TH E INTEREST PAYABLE FOR DELAYED PAYMENT IS THE CONSEQU ENCE OF FAILURE TO PAY THE TAX AND IN THE CIRCUMSTANCES, IS IN THE NATURE OF A PENALTY THOUGH NOT DESCRIBED AS SUCH IN SECTION 201(1A). THE FACT THAT THE INCOME-TAX REQUIRED TO BE REMITTED IS NOT INCOME-TAX PAYABLE BY THE ASSESSEE BUT IS ULTIMATELY FOR THE BENEFIT OF AND TO THE CREDIT OF THE RECIPIENT OF THE INCOME ON WHICH THAT TAX IS PAYABLE , DOES NOT IN ANY MANNER ALTER THE CHARACTER OF THE PAYMEN T, NAMELY, ITS CHARACTER AS INCOME-TAX. THE INTEREST PA ID UNDER SECTION 201(1A), THEREFORE, WOULD NOT ASSUME T HE CHARACTER OF BUSINESS EXPENDITURE AND COULD NOT BE REGARDED AS A COMPENSATORY PAYMENT. INCOME-TAX IS N OT ALLOWABLE AS BUSINESS EXPENDITURE. THE AMOUNT DEDUCT ED AS TAX IS NOT AN ITEM OF EXPENDITURE. THE AMOUNT NOT DEDUCTED AND REMITTED HAS THE CHARACTER OF TAX AND HAS TO BE REMITTED TO THE STATE AND CANNOT BE UTILISED BY THE ASSESSEE FOR ITS OWN BUSINESS. THE SUPREME COURT IN THE CASE OF BHARAT COMMERCE & INDUSTRIES LTD. V. CIT [19 98] 230 ITR 733/ 98 TAXMAN 151 REJECTED THE ARGUMENT THAT RETENTION OF MONEY PAYABLE TO THE STATE AS TAX OR I NCOME- TAX WOULD AUGMENT THE CAPITAL OF THE ASSESSEE AND TH E ITA NO. 115/JP/2019 M/S. PERFECT TURNERS VS DCIT, CIRCLE 4, JAIPUR 9 EXPENDITURE INCURRED, NAMELY, INTEREST PAID FOR THE PERIOD OF SUCH RETENTION, WOULD ASSUME THE CHARACTER OF BU SINESS EXPENDITURE. IT HELD THAT AN ASSESSEE COULD NOT POS SIBLY CLAIM THAT IT WAS BORROWING FROM THE STATE THE AMOUNT S PAYABLE BY IT AS INCOME-TAX, AND UTILISING THE SAME AS CAPITALIZATION IN ITS BUSINESS, TO CONTEND THAT THE INTEREST PAID FOR THE PERIOD OF DELAY IN PAYMENT OF TAX AMOU NTED TO A BUSINESS EXPENDITURE. THEREFORE, THE INTEREST PAID UNDER SECTION 201(1A) COULD NOT BE ALLOWED AS BUSINESS DEDUCTION. 12. THE CONTENTION REGARDING SECTION 40(A)(II) IS A LSO NOT TENABLE AS THE SAME IS IN CONTEXT OF TAXES LEVI ED ON THE PROFITS OR GAINS OF BUSINESS AND NOT IN CONTEXT OF TAXES BY WAY OF TDS ON PAYMENTS MADE BY THE ASSESSEE AND IN AN Y CASE, THE INTEREST WILL PARTAKE THE CHARACTER OF THE PRINCIPAL WHICH IS NOT OTHERWISE ALLOWABLE. RESPECTFULLY FOLLOWIN G THE DECISIONS REFERRED SUPRA, INTEREST ON LATE DEPOSIT OF TDS U/S 201(1A) CANNOT BE ALLOWED TO THE ASSESSEE AND THE SA ME HAS RIGHTLY BEEN DISALLOWED BY THE AO. IN THE RESULT , GROUND NO. 7 IS PARTLY ALLOWED. IN THE RESULT, APPEAL OF TH E ASSESSEE IS PARTLY ALLOWED.' 6. FOLLOWING THE AFORESAID DECISION, THE GROUND NO. 2 OF THE ASSSESSEES APPEAL IS DISMISSED. RESPECTFULLY FOLLOWING THE DECISION OF THIS COORDIN ATE BENCH IN ASSESSEE'S OWN CASE (SUPRA), WE SUSTAIN THE ADDITIO N OF RS. 83,768/- ON ACCOUNT OF LATE PAYMENT OF TDS. HOWEVER, ON ACCOUNT OF INTEREST PAID BY THE ASSESSEE ON ACCOUNT OF LATE PAYMENTS OF SALES T AX, EXCISE & SERVICE TAX AND EPF ARE CONCERNED, IN THIS RESPECT, WE RELY UPON THE DECISION OF ITA NO. 115/JP/2019 M/S. PERFECT TURNERS VS DCIT, CIRCLE 4, JAIPUR 10 ITAT COORDINATE BENCH IN THE CASE OF CIT VS WESTER N INDIA STATE MOTORS (1988) 174 ITR 116 (RAJ) WHEREIN IT HAS BEEN SAID THAT INTEREST PAYMENT OF DELAYED PAYMENT OF STATUTORY LIABILITIES IS ALLOWABLE AS BUSINESS EXPENDITURE. THEREFORE, THE AMOUNT OF INTE REST PAID IN RESPECT OF LATE DEPOSIT OF STATUTORY/GOVT. LIABILITIES ALSO P ARTAKE THE CHARACTER OF AN EXPENSES WHICH IS ALLOWABLE AS EXPENDITURE U/S 37(1 ) OF THE I.T. ACT, 1961. WE ARE ALSO FORTIFIED BY THE DECISION OF HON' BLE SUPREME COURT IN THE CASE OF LACHMANDAS MATHURA VS CIT , 254 ITR 799 WHEREIN IT WAS HELD THAT WHEN ANY STATUTORY DUES ARE PAID DELAYED AND INTEREST IS PAID FOR DELAYED PAYMENT THEN IT IS COMPENSATORY IN NATURE A ND ALLOWABLE EXPENDITURE FOR BUSINESS U/S 37 OF THE I.T. ACT, 19 61. IN VIEW OF THE ABOVE DECISION, THERE REMAINS NO DOUBT THAT DELAY IN MAKI NG PAYMENT OF STATUTORY LIABILITIES OR INTEREST EXPENSES ON DELAY ED PAYMENT ARE COMPENSATORY IN NATURE AND THIS IS ALLOWABLE EXPEND ITURE IN BUSINESS U/S 37 OF THE I.T. ACT, 1961. THEREFORE, WE DIRECT THE AO TO ALLOW THE CLAIM OF PAYMENT OF INTEREST MADE BY THE ASSESSEE ON ACCO UNT OF LATE PAYMENT OF SALES TAX, ON ACCOUNT OF LATE PAYMENT OF EXCISE AND SERVICE TAX AND ON ACCOUNT OF LATE PAYMENT OF EPF. THEREFORE, THE GROU ND NO. 1 OF THE ASSESSEE IS PARTLY ALLOWED. ITA NO. 115/JP/2019 M/S. PERFECT TURNERS VS DCIT, CIRCLE 4, JAIPUR 11 4.1 IN GROUND NO. 2, THE ASSESSEE IS AGGRIEVED THAT THE LD. CIT(A) HAS ERRED IN CONFIRMING THE ADDITION OF RS. 11,45,410/- ON ACCOUNT OF CLAIM OF LOSS BY THEFT. 4.2 APROPOS GROUND NO. 2 OF THE ASSESSEE, THE FACTS AS EMERGES FROM THE ORDER OF LD. CIT(A) ARE AS UNDER:- 3.3 I HAVE PERUSED THE FACTS OF THE CASE, THE ASSESSMENT ORDER AND THE SUBMISSIONS OF THE APPELLA NT. ASSESSEE CLAIMED DEDUCTION OF RS. 11,45,410/- ON A CCOUNT OF LOSS BY THEFT. FROM RECORDS, IT IS SEEN THAT THE FT AT BUSINESS PREMISES IN F.Y. 2013-14 AND FIR WAS LODGED ON 14-1 2- 2013. THE LOSS PERTAINED TO A.Y. 2014-15. BUT THIS AMOUNT IS CLAIMED IN THIS YEAR. ASSESSING OFFICER DISALLOWED THE SAME AS IT DID NOT PERTAIN TO YEAR UNDER APPEAL. ASSESSE E'S AUTHORIZED REPRESENTATIVE RELIED ON CERTAIN CASE LA WS WHICH ARE DISTINGUISHABLE AS IN THOSE CASES, THE EXPENSES WERE CLAIMED IN THE YEAR WHEN LOSS OCCURRED. IN PRESENT CASE, THE LOSS WAS OF A.Y. 2014-15 AND ASSESSEE KEPT ITS BOOK S ON MERCANTILE BASIS WHERE LOSS IS TO BE ACCOUNTED FOR IN YEAR OF OCCURRENCE. THUS, CLAIM IS NOT ACCEPTABLE AND ADDIT ION IS CONFIRMED. THIS GROUND OF APPEAL IS DISMISSED. 4.3 AFTER HEARING BOTH THE PARTIES AND PERUSING THE MATERIALS AVAILABLE ON RECORDS, WE FOUND THAT THERE IS NO DISPUTE WITH REGARD TO THE FACT THAT THE ASSESSEE HAD SUFFERED LOSS ON ACCOUNT OF THEFT AND ONLY REASON FOR DISALLOWING THE SAID LOSS IS THAT THEFT IN THE BUSI NESS PREMISES OF THE ASSESSEE HAD TAKEN PLACE IN F.Y. 2013-14 AND THEREF ORE, THE LOSS CLAIMED BY THE ASSESSEE PERTAINS TO A.Y. 2014-15. HOWEVER, THE ASSESSEE HAS ITA NO. 115/JP/2019 M/S. PERFECT TURNERS VS DCIT, CIRCLE 4, JAIPUR 12 CLAIMED THE SAID LOSS IN THE YEAR UNDER CONSIDERATI ON I.E. A.Y. 2016-17. IN THIS RESPECT, WE NOTICED DURING THE COURSE OF ARGU MENTS THAT INVESTIGATION ON THE FIR LODGED BY THE ASSESSEE WAS IN PROGRESS A ND THE ASSESSEE WAS HOPEFUL OF GETTING HIS AMOUNT BACK. THE LD.AR OF TH E ASSESSEE RELIED ON THE DECISION OF HON'BLE MADRAS HIGH COURT IN THE CA SE OF CIT VS DURGA JEWELLERS, 172 ITR 0134 WHEREIN IT WAS HELD AS UNDE R:- BUSINESS LOSS OR TRADING LOSS YEAR OF ALLOWABIL ITY OF LOSS CAUSED BY EMBEZZLEMENT LOSS DU9E TO EMBEZZLEMENT IS ALLOWABLE AS DEDUCTION ONLY WHEN RECOVERY IS IMPOSS IBLE OR CHANCE OR RECOVERY BECOME REMOTE OR IN THE YEAR IN WHICH FIR WAS LODGED. THEREFORE, AS PER FACTS OF THE PRESENT CASE, SINCE THE ASSESSEE WAS HOPEFUL OF GETTING THE RECOVERY OF AMOUNT BUT IT WAS ONLY W HEN THE ASSESSEE DURING THE YEAR UNDER CONSIDERATION HAD COME TO CON CLUSION THAT RECOVERY IS IMPOSSIBLE OR CHANCE OF RECOVERY BECAME REMOTE, THEREFORE, THE ASSESSEE HAD RIGHTLY MADE HIS CLAIM DURING THE YEAR UNDER CONSIDERATION. THEREFORE, IN VIEW OF THE DECISION OF HON'BLE MADR AS HIGH COURT IN THE CASE OF CIT VS DURGA JEWELLERS (SUPRA), WE ALLOW TH E CLAIM OF THE ASSESSEE AND DIRECT THE AO TO DELETE THE ADDITION M ADE ON ACCOUNT OF CLAIM OF LOSS OF THEFT. THUS GROUND NO. 2 OF THE AS SESSEE IS ALLOWED. ITA NO. 115/JP/2019 M/S. PERFECT TURNERS VS DCIT, CIRCLE 4, JAIPUR 13 5.0 IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED WITH NO ORDER AS TO COST. ORDER PRONOUNCED IN THE OPEN COURT ON 23/01/2020 . SD/- SD/- FOE FLAG ;KNO LANHI XKSLKBZ (VIKRAM SINGH YADAV) (SANDEEP GOSAIN) YS[KK LNL;@ ACCOUNTANT MEMBER U;KF;D LNL;@ JUDICIAL MEMBER TK;IQJ@ JAIPUR FNUKAD@ DATED:- 23 /01/2020. *MISHRA VKNS'K DH IZFRFYFI VXZSFKR@ COPY OF THE ORDER FORWARDED TO: 1. VIHYKFKHZ@ THE APPELLANT- M/S. PERFECT TURNERS, JAIPUR 2. IZR;FKHZ@ THE RESPONDENT- DCIT, CIRCLE 4, JAIPUR 3. VK;DJ VK;QDR@ CIT 4. VK;DJ VK;QDR@ CIT(A) 4. FOHKKXH; IZFRFUF/K] VK;DJ VIHYH; VF/KDJ.K] T;IQJ@ DR, ITAT, JAIPUR . 5. XKMZ QKBZY@ GUARD FILE {ITA NO. 1115/JP/2019} VKNS'KKUQLKJ@ BY ORDER, LGK;D IATHDKJ@ ASSTT. REGISTRAR