DCIT, Bangalore V. M/s. M.N. Dastur & Co. Ltd, Bangalore

ITA 124/BANG/2011

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 57488 (ITAT-BANGALORE)
• Duration Of Justice: 1 year(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-02-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 27-02-2012
• Assessment Year: 2007-2008
• Appeal Filed On: 10-02-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: B SARAVANAN
• Assessee Lawyers: B K MANJUNATH
• Keywords: Rule of consistency
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH : BANGALORE BEFORE SMT. P. MADHAVI DEVI, JUDICIAL MEMBER AND SHRI JASON P. BOAZ, ACCOUNTANT MEMBER ITA NO.124/BANG/2011 ASSESSMENT YEAR : 2007-08 THE DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE 12(1), BANGALORE. VS. M/S. M.N. DASTUR & CO. PVT. LTD., NO.26/27, 7 TH FLOOR, RAHEJA TOWERS, M.G. ROAD, BANGALORE 560 001. PAN: AABCM 2136M APPELLANT RESPONDENT APPELLANT BY : SHRI B. SARAVANAN , JCIT (DR) RESPONDENT BY : SHRI B.K. MANJUNATH, CA. DATE OF HEARING : 27.2.2012. DATE OF PRONOUNCEMENT : 27.2.2012. O R D E R PER SHRI JASON P BOAZ, ACCOUNTANT MEMBER : THIS APPEAL FILED BY THE DEPARTMENT IS DIRECTED AG AINST THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS)-III, BANGALORE DATED 1.10.2010 FOR THE ASSESSMENT YEAR 2007-08. 2. FOLLOWING GROUNDS HAVE BEEN RAISED IN THIS APPEA L: 1. THE ORDER OF THE LEARNED CIT(A) IS OPPOSED TO LAW AND FACTS OF THE CASE. 2. THE CIT(A) ERRED IN ALLOWING CONTRIBUTION TO RS .80,32,839 TO EMPLOYEES' PF MADE IN EXCESS OF THE REGULAR CONTRIB UTION BY THE ITA NO.124/BANG/2011 PAGE 2 ASSESSEE COMPANY AS AN EMPLOYER STATED TO HAVE BEEN PAID TO MAKE GOOD THE SHORTFALL IN THE AMOUNT OF INTEREST @ 9.5% ON THE RUNNING BALANCE IN THE PROVIDENT FUND TO THE MEMBERS WHEN S UCH CONTRIBUTION MADE IN EXCESS OF THE STATUTORY REQUIREMENT CANNOT BE TREATED AS AN ALLOWABLE DEDUCTION UNDER SECTION 36(1)(IV) OF THE INCOME TAX ACT, 1961. 3. THE CIT(A) OUGHT TO HAVE APPRECIATED THAT WHEN AN EXPENDITURE OF A PARTICULAR NATURE IS ALLOWABLE UND ER A SPECIFIC SECTION OF THE ACT FOR COMPUTING THE BUSINESS PROFITS, GENE RAL PROVISIONS CANNOT BE APPLIED FOR ALLOWING THE EXPENDITURE OF T HAT NATURE. 4. WITHOUT PREJUDICE TO THE ABOVE, THE CIT(A) OUGH T TO HAVE APPRECIATED THAT THE ASSESSEE FAILED TO SUBSTANTIAT E ITS CLAIM FOR DEDUCTION BY SHOWING THAT IT WAS STATUTORILY REQUIR ED TO MAKE THE SAID PAYMENT AND NOT A LARGESSE PASSED ON TO THE MEMBERS OF PF SO AS TO ENTITLE IT FOR DEDUCTION UNDER SECTION 36(1)(IV) OF THE INCOME TAX ACT, 1961. 5. THE CIT(A) OUGHT TO HAVE EXAMINED WHETHER INTER EST 2 9.5% WAS ACTUALLY CREDITED TO PF ACCOUNT OF EMPLOYEES AN D WHETHER THE SUM OF RS.80,3,839 /- HAS ACTUALLY BEEN UTILIZED WHOLLY FOR PAYING INTEREST @ 9.5% TO THE MEMBERS AS CLAIMED BY IT AND NOT JUST A PROVISION MADE FOR THAT PURPOSE. 6. WITHOUT PREJUDICE TO THE ABOVE, THE CIT(A) OUGH T TO HAVE APPRECIATED THAT THE BOARDS RESOLUTION FOR APPROVI NG PAYMENT OF RS.80,32,839 TO MAKE GOOD THE SHORTFALL IN THE AMOU NT OF INTEREST PAYABLE @ 9.5% ON THE RUNNING PF BALANCE OF THE MEM BERS WAS PASSED ON 12.1.2008 AND, THEREFORE, THE SAID AMOUNT WAS NOT AN ACCRUED LIABILITY AS ON 31.3.2007 AND WAS NOT ALLOW ABLE AS DEDUCTION FOR THE A.Y. 2007-08. 7. FOR THE AND OTHER GROUNDS THAT MAY BE URGED AT THE TIME OF HEARING, IT IS PRAYED THAT THE ORDER OF THE CIT(A) IN SO FAR AS IT RELATES TO THE ABOVE GROUNDS MAY BE REVERSED AND THAT OF TH E ASSESSING OFFICER MAY BE RESTORED. 8. THE APPELLANT CRAVES LEAVE TO ADD, ALTER. AMEND AND/OR DELETE ANY OF THE GROUNDS MENTIONED ABOVE. 3. FROM THE ABOVE GROUNDS, IT IS GATHERED THAT THE ONLY GRIEVANCE OF THE DEPARTMENT IN THIS APPEAL RELATES TO DEDUCTION IN R ESPECT OF EXCESS CONTRIBUTION TO PF MADE BY THE ASSESSEE. ITA NO.124/BANG/2011 PAGE 3 4. THE FACTS OF THE CASE IN BRIEF ARE THAT THE ASSE SSMENT IN THIS CASE WAS COMPLETED BY AN ORDER U/S. 143(3) OF THE INCOME-TAX ACT, 1961 [HEREINAFTER REFERRED TO AS THE ACT IN SHORT]. WHILE DOING SO , THE AO MADE A DISALLOWANCE OF THE INTEREST ON PROVIDENT FUND PAID, TO THE EXTE NT OF RS.80,32,839 OUT OF PROVISION FOR SHORTFALL OF INTEREST OF RS.81,50,000 . THE ASSESSING OFFICER NOTED THAT THIS AMOUNT OF INTEREST ON PROVIDENT FUND IS S UPPORTED BY A RESOLUTION OF THE BOARD OF DIRECTORS. THE SAID RESOLUTION STATED THAT THE REQUEST MADE BY THE BOARD OF TRUSTEES OF THE ASSESSEE EMPLOYEES PR OVIDENT FUND (A) FOR COVERED EMPLOYEES TO MAKE GOOD THE AMOUNT REQUIRED TO PAY THE INTEREST @ 9.5% ON THE RUNNING BALANCE FOR THE YEAR ENDED 31 ST MARCH 2007 TO THE MEMBERS OF THE FUND BE ACCEDED TO AND A SUM OF RS.8 0,32,839/- FOR THE PURPOSE BE PAID OUT OF THE COMPANYS FUNDS. THE A SSESSING OFFICER, HOWEVER, WAS OF THE VIEW THAT IT WAS ONLY LARGESSE PASSED ON TO THE MEMBERS OF PF OVER AND ABOVE THE STATUTORY LIABILITIES CAST ON THE ASS ESSEE COMPANY, HENCE THIS AMOUNT WAS NOT ALLOWABLE AS AN EXPENDITURE U/S. 36( 1)(IV) OF THE ACT. 5. BEING AGGRIEVED, THE ASSESSEE CARRIED THE MATTER TO THE LD. CIT(A) AND SUBMITTED THAT THIS ISSUE HAD ALREADY BEEN DECIDED BY THE ITAT IN ASSESSEES OWN CASE AND FILED COPIES OF THE ORDER OF THE ITAT AND THE ORDER PASSED BY THE AO U/S. 254 GIVING EFFECT TO RELIEF ALLOWED BY THE ITAT FOR THE A.Y. 1998-99 VIDE ORDER DATED 4.10.2003 IN ITA NO.611/BANG/2002 AND A LSO COPY OF THE ORDER OF THE CIT(A)-V, BANGALORE IN ITA NO.35/84/AC 12(1)/CI T(A)-V/08-09 DATED 27.2.2009 FOR THE A.Y. 2005-06. 6. THE LD. CIT(A) AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE OBSERVED THAT THE EXPENDITURE CLAIMED BY THE ASSESS EE IN THE FORM OF EMPLOYERS CONTRIBUTION TO PROVIDENT FUND AMOUNTS T O PERQUISITES IN THE HANDS ITA NO.124/BANG/2011 PAGE 4 OF THE EMPLOYEE. THE ASSESSING OFFICER, WAS DIRECT ED TO VERIFY THE APPLICABILITY OF OTHER PROVISIONS OF THE INCOME TAX ACT, 1961 TO BRING THE AFORESAID PERQUISITE PAID BY THE ASSESSEE IN THE FORM OF CONTRIBUTION TO WARDS PROVIDENT FUND TO TAX IN EXCESS OF PRESCRIBED LIMITS. THE LD. CIT(A) AL SO POINTED OUT THAT THE SAME ISSUE WAS SUBJECT MATTER OF APPEAL BEFORE THE TRIBU NAL FOR EARLIER YEARS IN THE ASSESSEES OWN CASE WHEREIN THE CLAIM OF THE ASSESSEE FOR PAYMENT OF ADDITIONAL INTEREST TO EMPLOYEES PROVIDENT FU ND TO MAKE GOOD THE SHORTFALL IN INTEREST HAD BEEN ALLOWED. THE LD. CIT(A) ALSO OBSERVED THAT THE CONTRIBUTION HAD BEEN MADE BEFORE THE DUE DAT E FOR FILING OF RETURN OF INCOME FOR THE INSTANT ASSESSMENT YEAR. HE THEREF ORE DIRECTED THE AO TO DELETE THE ADDITION MADE BEING INTEREST ON PF TO TH E TUNE OF RS.80,32,839. NOW THE DEPARTMENT IS IN APPEAL BEFORE US. 7. THE LD. DR STRONGLY SUPPORTED THE ORDER OF THE A O, BUT COULD NOT CONTROVERT THE FINDINGS MADE BY THE LD. CIT(A). 8. IN HIS RIVAL SUBMISSIONS, THE LD. COUNSEL FOR TH E ASSESSEE REITERATED THE SUBMISSIONS MADE BEFORE THE AUTHORITIES BELOW AND F URTHER SUBMITTED THAT FOR THE A.Y. 1998-99, SIMILAR ISSUE WAS REMANDED BACK T O THE FILE OF THE ASSESSING OFFICER BY THE ITAT VIDE ORDER DATED 4.10.2003 AND THE AO, WHO VIDE ORDER DATED 21.12.2004 REVISED THE EARLIER ORDER DATED 13 .12.02 AND ALLOWED THE CLAIM OF THE ASSESSEE FOR ADDITIONAL INTEREST PAYME NT TO PF CONTRIBUTION. COPY OF THE SAID ORDER WAS FURNISHED. IT WAS ALSO STATE D THAT FOR THE A.Y. 2005-06, A SIMILAR DISALLOWANCE WAS AGAIN MADE BY THE AO AND T HE ASSESSEE PREFERRED AN APPEAL TO THE CIT(A)-V, BANGALORE, WHO VIDE ORDER D ATED 27.2.2009 DELETED THE ADDITION MADE BY THE AO AND THE DEPARTMENT HAD NOT PREFERRED ANY APPEAL AGAINST THE SAID ORDER. THEREFORE THE ORDER DATED 27.2.2009 FOR THE A.Y. 2005- ITA NO.124/BANG/2011 PAGE 5 06 PASSED BY THE LD. CIT(A) ATTAINED FINALITY. AS SUCH, THE LD. CIT(A) WAS FULLY JUSTIFIED IN DELETING THE ADDITION MADE BY THE AO F OR THE YEAR UNDER CONSIDERATION. FURTHER, THE LEARNED COUNSEL FOR TH E ASSESSEE ALSO PLACED RELIANCE ON THE DECISION OF THE ITAT IN ITA NO.1530 & 1531/BANG/2010 DT.20.12.2011 IN THE ASSESSEES OWN CASE FOR A.Y. 1 999-2000 AND A.Y. 2006- 07 WHEREIN THE SAME ISSUE WAS ADJUDICATED IN FAVOUR OF THE ASSESSEE AND THE DEPARTMENT APPEAL WAS DISMISSED. 9. WE HAVE CAREFULLY CONSIDERED THE SUBMISSIONS OF BOTH THE PARTIES AND HAVE PERUSED THE MATERIAL AVAILABLE ON RECORD. IN THE INSTANT CASE, IT IS NOT IN DISPUTE THAT THE AO MADE THE DISALLOWANCE OF THE IN TEREST PAID BY THE ASSESSEE ON THE RUNNING BALANCE OF PF. THIS ISSUE WAS INVOL VED IN AN EARLIER ASSESSMENT YEAR 1998-98, IN THE ASSESSEES CASE, A ND THE ITAT WHILE DECIDING THE APPEAL OF THE ASSESSEE IN ITA NO.611/B ANG/2002 REMANDED THE ISSUE BACK TO THE FILE OF THE AO FOR FRESH ADJUDICA TION VIDE ORDER DATED 4.10.2003. THE AO IN ACCORDANCE WITH THE TRIBUNAL S DIRECTIONS CONSIDERED THE MATTER AND DECIDED THE ISSUE IN FAVOUR OF THE ASSES SEE VIDE ORDER DATED 21.12.04, A COPY OF WHICH WAS FURNISHED BY THE LD. COUNSEL FOR THE ASSESSEE DURING THE COURSE OF HEARING AND IS AVAILABLE ON RE CORD. IT IS ALSO SEEN THAT FOR THE A.Y. 2005-06, AN ADDITION ON THE SAME ISSUE HAS BEEN DELETED BY THE LD. CIT(A). THE CONTENTION OF THE LD. COUNSEL FOR THE ASSESSEE THAT THIS ORDER DATED 27.2.09 PASSED BY THE LD. CIT(A)-V, BANGALORE FOR T HE A.Y. 2005-06 WAS NOT CHALLENGED BY THE DEPARTMENT IN FURTHER APPEAL HAS NOT BEEN REBUTTED. FROM THE ABOVE FACTS, IT IS CLEAR THAT THE DEPARTMENT HA S ACCEPTED A SIMILAR CLAIM IN SIMILAR CIRCUMSTANCES IN A.Y. 1998-99 AND ALSO FOR THE A.Y. 2005-06. FURTHER, THE TRIBUNAL IN A.Y. 1999-2000 AND 2006-07 IN ITA NOS.1530 & ITA NO.124/BANG/2011 PAGE 6 1531/BANG/2010 (SUPRA) HAS ALSO HELD IN FAVOUR OF T HE ASSESSEE ON THE VERY SAME ISSUE. THEREFORE, WE DO NOT SEE ANY VALID GRO UND TO INTERFERE WITH OR DEVIATE FROM THE FINDINGS OF THE LD. CIT(A) FOR THE ASSESSMENT YEAR UNDER CONSIDERATION I.E. 2007-08. 10. FOR THE AFORESAID VIEW, WE ARE FORTIFIED BY THE RATIO LAID DOWN BY THE HONBLE PUNJAB & HARYANA HIGH COURT IN CIT V. LEADER VALVES LTD. [2007] 295 ITR 273 , WHEREIN IT HAS BEEN HELD AS UNDER: THAT KEEPING IN VIEW THE PRINCIPLE OF CONSISTENCY, THE REVENUE COULD NOT BE PERMITTED TO RAISE AN ISSUE IN ISOLATION ONL Y FOR ONE YEAR IN THE CASE OF ONE ASSESSEE, WHILE ACCEPTING THE FINDINGS ON THE SAME ISSUE IN THE CASE OF OTHER ASSESSEES AND FOR OTHER YEARS IN THE CASE OF THE ASSESSEE. 11. IN THE PRESENT CASE ALSO, THE DEPARTMENT HAD AC CEPTED THE CLAIM OF THE ASSESSEE ON THE SAME ISSUE FOR THE A.Y. 1998-99 AND 2005-06. THE PRINCIPLE OF CONSISTENCY IS REQUIRED TO BE MAINTAINED. WE, THER EFORE, HOLD THAT THE DISALLOWANCE MADE BY THE AO WAS NOT JUSTIFIED AND T HAT THE LD. CIT(A) RIGHTLY DELETED THE SAME. IN VIEW OF THE ABOVE, WE DO NOT SEE ANY MERIT IN THE APPEAL OF THE DEPARTMENT. 12. IN THE RESULT, THE APPEAL IS DISMISSED. PRONOUNCED IN THE OPEN COURT ON THIS DAY 27TH OF FEB., 2012. SD/- SD/- ( P. MADHAVI DEVI ) ( JASON P. BOAZ ) JUDICIAL MEMBER ACCOUNTANT MEMBE R BANGALORE, DATED, THE 27 TH FEB., 2012. * REDDY GP ITA NO.124/BANG/2011 PAGE 7 COPY TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT, BANGALORE. 6. GUARD FILE (1+1) BY ORDER ASSISTANT REGISTRAR ITAT, BANGALORE.