DCIT, CHENNAI V. Arjun Technologies Ltd., CHENNAI

ITA 1381/CHNY/2013

• Counselvise Citation: [2017] 130 COUNSELVISE.COM (IT) 7941 (ITAT-CHENNAI)
• Duration Of Justice: 3 year(s) 7 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-02-2017
• Appeal Filed By: Department
• Bench Allotted: A
• Assessment Year: 2006-2007
• Appeal Filed On: 21-06-2013
• Court: TRIBUNAL
• Department Lawyers: SHIVA SRINIVAS
• Assessee Lawyers: MOHAMMED SHAFFIQ
• Keywords: Residential status; Double taxation relief; Earning of tax free income; Question of law
• Section: 43B; 14A; 147; 148

Judgement Text

, , IN THE INCOME - TAX APPELLATE TRIBUNAL A BENCH, CHENNAI , . , BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER & SHRI DUVVURU RL REDDY, JUDICIAL MEMBER I . T.A. NO S . 1381, 1382 AND 1383 /MDS/201 3 & 1573/MDS/2014 ASSESSMENT YEAR S :20 06 - 07, 2008 - 09, 2009 - 10 & 2007 - 08 THE DEPUTY COMMISSIONER OF INCOME TAX, CO MPANY CIRCLE 1(1 ) , CHENNAI 600 034 . VS. M/S. ARJUN TECHNOLOGIES LTD., PARKVIEW, II FLOOR, 94(85), G.N. CHETTY ROAD, T. NAGAR, CHENNAI 17. [PAN: AA A C A9340C ] ( / APPELLANT ) ( / RESPONDENT ) / APPELLANT BY : SHRI SHIVA SRINIVAS , J CIT / RESPONDENT BY : SHRI MOHAMMED SHAFFIQ, ADVOCATE / DATE OF HEARING : 1 0 . 1 1 .201 6 / DATE OF P RONOUNCEMENT : 07 . 0 2 .201 7 / O R D E R PER DUVVURU RL REDDY , JUDICIAL MEMBER : ALL THE FOUR APPEAL S FILED BY THE REVENUE , PERTAIN TO SAME ASSESSEE ARE DIRECTED AGAINST ONE COMMON ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) VI , CHENNAI DATED 1 1 . 0 2 .201 3 FOR THE ASSESSMENT YEAR S 2006 - 07, 2008 - 09 AND 2009 - 10 AND FOR THE ASSESSMENT YEAR 2007 - 08 ALSO, THE REVENUE HAS PREFERRED AN APPEAL AGAINST THE ORDER OF THE LD. CIT(A) I, CHENNAI DATED 18.02.2014 . I.T.A. NO S . 1381 - 1383/M/13 & I.T.A. NO. 1573/M/14 2 2. THE FIRST COMMON GROUND RAI SED IN THE ALL THE APPEALS OF THE REVENUE IS THAT THE LD. CIT(A) HAS ERRED IN DELETING THE ADDITION MADE TOWARDS RETENTION MONEY DEDUCTED FROM SALES . 2.1 THE FACTS RELATING TO THE GROUND RAISED BY THE ASSESSEE ARE THAT THE ASSESSING OFFICER HAS NOTICED IN THE MEMO OF INCOME THAT THE ASSESSEE HAS REDUCED FROM THE PROFITS AS PER PROFIT AND LOSS ACCOUNT AN AMOUNT OF .1,02,74,318/ - IN THE ASSESSMENT YEAR 2006 - 07 TOWARDS RETENTION MONEY DEDUCTED FROM SALES TO ARRIVE AT THE TAXABLE INCOME. AGAINST THE QUER Y RAISED BY THE ASSESSING OFFICER, VIDE ITS LETTER DATED 20.10.2008 THE ASSESSEE HAS SUBMITTED AS UNDER: 'AS PER THE AGREEMENT ENTERED BETWEEN ARJUN TECHNOLOGIES (I) LTD AND VARIOUS CUSTOMERS, 90% OF THE SALE VALUE TO PAID ON OR BEFORE THE DELIVERY OF THE MACHINES. THE BALANCE 10% IS PAYABLE (PEG TO RECEIVE) ONLY AFTER THE SUCCESSFUL PERFORMANCE OF THE MACHINERY SAY 12 TO 18 MONTHS. IN THE OPINION OF THE COMPANY THE 10% ACCRUES ONLY AFTER THE PERFORMANCE OF THE MACHINE TO THE SATISFACTION OF THE CUSTOMER. O UR OPINION IS ALSO UPHELD BY MADRAS HIGH COURT AND SUPREME COURT IN VARIOUS DECISIONS. HENCE, THIS AMOUNT IS DEDUCTED IN OUR TAX MEMO. (REF MADRAS HIGH COURT REPORTED IN 283 ITR 295 & 283 ITR 297)' THE ASSESSEE WAS ASKED TO FURNISH THE LIST OF CUSTOMERS WHO HAVE WITHHELD 10% OF THE INVOICE VALUE AS RETENTION MONEY. THE ASSESSEE WAS ALSO ASKED TO FURNISH WHETHER SUCH RETENTION MONEY WAS OFFERED TO TAX IN THE YEAR IN WHICH SUCH MONEY IS RECEIVED BY THE ASSESSEE. THE ASSESSEE SUBMITTED THAT AS PER THE CONTRA CT WITH THE CUSTOMERS, 10% OF THE INVOICE VALUE IS I.T.A. NO S . 1381 - 1383/M/13 & I.T.A. NO. 1573/M/14 3 RELEASED ONLY ON THE ASSESSEE TENDERING THE 'PERFORMANCE BANK GUARANTEE'. THE ASSESSEE FURNISHED THE FOLLOWING DETAILS: SL. NO. CUSTOMER S NAME SALES VALUE PERFORMANCE BANK GUARANTEE DATE OF MATURITY OF B ANK GUARANTEE DATE OF RECEIPT OF RETENTION MONEY 1. SUMIT AGRO INDUSTRIES 1,04,19,000 10,41,900 31.10.2006 17.09.2005 2. APR PACKING 5,10,000 51,000 15.08.2006 06.12.2005 3. EMAMI PAPERS 2,97,00,000 29,70,000 10.10.2007 25.04.2006 4. BALLARPUR IND USTRIES 63,25,000 6,32,500 31.12.2006 16.02.2005 5. K. LAMORT 32,58,100 3,25,810 31.10.2006 13.07.2005 6. APPM 5,03,10,000 50,31,000 23.01.2006 7. ITC LIMITED 1,65,47,175 16,54,718 14.06.2007 19.06.2006 2.2 FROM THE ABOVE TABLE, THE ASSESSING OFFIC ER HAS NOTICED THAT THE MONEY WHICH IS CLAIMED TO HAVE BEEN RETAINED BY THE ASSESSEE'S CUSTOMERS HAVE IN FACT BEEN RECEIVED BY THE ASSESSEE COMPANY DURING THE SAME FINANCIAL YEAR. WHEN THE ASSESSEE HAS ACTUALLY RECEIVED THE MONEY SUPPOSED TO HAVE BEEN RETA INED. IT IS ONLY PROPER THAT THE ENTIRE SALE VALUE IS RECOGNISED AS THE ASSE S SEE'S INCOME. AFTER ANALYZING THE DETAILS FURNISHED BY THE ASSESSEE, THE ASSESSING OFFICER HAS OBSERVED AS UNDER: (I) THE ASSESSEE HAS REDUCED AN AMOUNT OF .1,02,74,318/ - FROM TH E TAXABLE INCOME IN THE MEMO OF INCOME CITING THE REASON THAT SUCH MONEY HAS BEEN RETAINED BY ITS CUSTOMERS. (II) IT IS FOUND THAT SUCH MONEY HAS NOT BEEN RETAINED BY THE ASSESSEE'S CUSTOMERS BUT HAS BEEN RECEIVED ENTIRELY DURING THE SAME FINANCIAL YEAR FOR WHICH ASSESSMENT IS DONE NOW. (III) THE ASSESSEE COMPANY HAS ONLY GIVEN BANK GUARANTEE FOR THE AMOUNTS FOR 10% OF THE INVOICE VALUE TO ENSURE PERFORMANCE. (IV) EVEN AFTER THE MATURITY OF THE BANK G:JARANTEE, I.E., THE EXPIRY OF THE BANK GUARANTE E, THE ASSESSEE HAS NOT OFFERED SUCH SUM REPRESENTING 10% OF THE INVOICE VALUE FOR TAXATION. I.T.A. NO S . 1381 - 1383/M/13 & I.T.A. NO. 1573/M/14 4 (V) IN OTHER WORDS, THE AMOUNT REDUCED FROM THE TAXABLE INCOME IN THIS YEAR HAS NOT BEEN OFFERED SUBSEQUENTLY EVEN AFTER THE EXPIRY OF THE GUARANTEE PERIOD, I.E. , IN ASSESSMENT YEARS 2007 - 08 AND 2:008 - 09. (VI) FOR THE CONTRACTS REFERRED TO IN SI. NO.1, 2, 4 & 5, THE GUARANTEE PERIOD HAS CONCLUDED IN ASSESSMENT YEAR 2007 - 08. HOWEVER, AS ADMITTED BY THE ASSESSEE, THIS SUM SHOWN AS RETENTION MONEY HAS NOT BEEN OFF ERED TO TAX EVEN IN ASSESSMENT YEAR 2007 - 08. IN THE SAME WAY, FOR THE CONTRACTS REFERRED TO IN SI. NO.3 AND 7, THOUGH THE GUARANTEE PERIOD HAS CONCLUDED IN ASSESSMENT YEAR 2008 - 09, SUCH SUM SHOWN AS RETENTION MONEY HAS NOT BEEN OFFERED TO TAX IN ASSESSMENT YEAR 2008 - 09. (VII) THE RETURN OF INCOME OF THE ASSESSEE COMPANY FILED FOR EARLIER ASSESSMENT YEARS PRIOR TO THE ASSESSMENT IN SCRUTINY NOW AND THE RETURNS FOR THE SUBSEQUENT YEARS WERE EXAMINED, IT REVEALS THAT THE ASSESSEE COMPANY HAS NOT MADE ANY SU CH ADJUSTMENT TOWARDS RETENTION MONEY IN THE MEMO OF INCOME IN SUCH YEARS. IN ORDER WORDS, EXCEPT FOR THE ASSESSMENT YEAR UNDER SCRUTINY NOW, IN ALL THE OTHER YEARS, THE ASSESSEE COMPANY HAS OFFERED THE ENTIRE SALE VALUE WITHOUT REDUCING THE SO CALLED RETE NTION MONEY FOR TAXATION. ONLY FOR THE YEAR UNDER SCRUTINY, THE ASSESSEE HAS TAKEN A DIFFERENT STAND THAT THE 'SO CALLED' RETENTION MONEY HAS NOT ACCRUED TO IT SINCE BANK GUARANTEE TOWARDS PERFORMANCE OF THE CONTRACT HAS BEEN GIVEN TO ITS CUSTOMERS TO AN E XTENT OF 10% OF THE CONTRACT VALUE. (VIII) WHEN THE ADJUSTMENT HAS BEEN MADE IN THE MEMO OF INCOME ONLY FOR THE PURPOSES OF INCOME - TAX, IT BECOMES IMPERATIVE THAT A CORRESPONDING ADJUSTMENT IS MADE TO COVER THE SAID ITEM IN THE SUBSEQUENT YEARS. TO BE P RECISE, WHEN A SUM IS REDUCED FROM THE INCOME SHOWN IN THE BOOKS TO ARRIVE AT THE TAXABLE INCOME ON THE GROUND THAT IT HAS NOT ACCRUED, THE SAID INCOME SHOULD BE OFFERED TO TAX IN THE YEAR IN WHICH IT SUBSEQUENTLY ACCRUES. THE ASSESSEE HAS NOT MADE SUCH AD JUSTMENT OFFERING THE INCOME IN THE SUBSEQUENT YEARS. THEREFORE, THIS INCOME WHICH IS NOW BEEN REDUCED FROM THE PROFITS SHOWN IN THE BOOKS HAVE ESCAPED THE NET OF TAXATION ALTOGETHER. ON THE BASIS OF THE ABOVE OBSERVATION, THE ADJUSTMENT MADE BY THE ASSE SSEE COMPANY IN THE MEMO OF INCOME AMOUNT TO .1,02,74,318/ - WAS DISALLOWED AND BROUGHT TO TAX IN THE ASSESSMENT YEAR 2006 - 07. SIMILARLY, BY I.T.A. NO S . 1381 - 1383/M/13 & I.T.A. NO. 1573/M/14 5 FOLLOWING THE ABOVE OBSERVATION, THE ASSESSING OFFICER HAS DISALLOWED .1,22,33,053/ - IN THE ASSESSMENT YEAR 2007 - 08 , AND .2,31,95,886/ - IN THE ASSESSMENT YEAR 2008 - 09. 3. THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE LD. CIT(A). AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE AND MATERIAL FACTS, THE LD. CIT(A) HAS OBSERVED THAT THE WITHHELD CONSIDERATION HAS BEEN RECOGNIZED AS INCOME AS AND WHEN IT WAS RECEIVED, SPECIFICALLY IN THE NEXT FINANCIAL YEAR AND THE SAME WAS OFFERED TO TAXATION IN THE SUBSEQUENT FINANCIAL YEAR. BY CONSIDERING THE ACCOUNTING TREATMENT AND TAX COMPUTATION IN THE SUBSEQUENT YEARS, THE LD. CIT(A) WAS OF THE VIEW THAT THERE IS N O REASON TO SUSTAIN THE ADDITION MADE. HE ALSO OBSERVED THAT IT WAS NOT THE CASE OF THE ASSESSING OFFICER THAT THE MONIES REPRESENTING WITHHELD CONSIDERATION OFFERED FOR TAXATION IN THE SUBSEQUENT YEARS WERE NOT TAKEN INTO COMPUTATION OF INCOME. THEREFORE, WITH REGARD TO THE ISSUE OF RETENTION MONEY DEDUCTED FROM SALES , THE ADDITIONS MADE BY THE ASSESSING OFFICER IN VARIOUS ASSESSMENT YEARS WERE DELETED. 4. ON BEING AGGRIEVED, THE REVENUE IS IN APPEAL BEFORE THE TRIBUNAL. THE LD. DR HAS ARGUED THAT IT WAS NOT THE CASE OF THE ASSESSEE THAT IT HAS RECEIVED ONLY 90% OF THE CONSIDERATION ON THE SALE OF MACHINERY AND THE BALANCE 10% WAS HELD BY THE BUYER, BUT HE SUBMITS THAT THE ASSESSEE HAS BEEN RECEIVED 100% OF THE CONSIDERATION AND ONLY GAVE BANK GUARANTE E TO I.T.A. NO S . 1381 - 1383/M/13 & I.T.A. NO. 1573/M/14 6 THE EXTENT OF 10% OF THE INVOICE VALUE TO ENSURE PERFORMANCE. THEREFORE, THE BALANCE 10% VALUE RETAINED AND NOT BROUGHT TO TAX WHILE COMPUTING THE INCOME OF THE ASSESSEE WAS RIGHTLY BROUGHT TO TAX AND THE SAME SHOULD BE UPHELD. 5. PER CONTRA, THE L D. COUNSEL FOR THE ASSESSEE STRONGLY SUPPORTED THE ORDER OF THE LD. CIT(A). 6. WE HAVE HEARD BOTH SIDES, PERUSED THE MATERIALS AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF AUTHORITIES BELOW INCLUDING THE PAPER BOOKS FILED BY THE ASSESSEE. AS PER T HE PAYMENT TERMS FOR SUPPLY AND ENGINEERING SERVICES AS GIVEN IN PAGE 80 OF THE PAPER BOOK ARE REPRODUCED AS UNDER: 20% OF THE BASIC ORDER VALUE SHALL BE RELEASED AS AN ADVANCE AGAINST AN IRREVOCABLE ADVANCE BANK GUARANTEE IN THE PRESCRIBED FORMAT FOR THE EQUIVALENT AMOUNT, WITHIN 30 DAYS AFTER SUBMISSION OF BANK GUARANTEE. THE VALIDITY OF THE BANK GUARANTEE SHALL BE UNTIL COMMISSIONING. 70% OF THE BASIC ORDER VALUE PLUS 100% TAXES & DUTIES AND FREIGHT WILL BE PAID ON PRO - RATA BASIS WITHIN 15 DAYS AFTER RE CEIPT OF MATERIAL AT SITE. 10% OF THE BASIC ORDER VALUE WILL BE RELEASED ON COMPLETION OF SUCCESSFUL COMMISSIONING AND SUBMISSION OF PERFORMANCE BANK GUARANTEE FOR THE EQUIVALENT AMOUNT, AS PER OUR FORMAT, BEFORE RELEASE OF THE PAYMENT. I.T.A. NO S . 1381 - 1383/M/13 & I.T.A. NO. 1573/M/14 7 THE VALIDITY OF T HE BANK GUARANTEE SHALL BE 12 MONTHS FROM THE DATE OF SUCCESSFUL COMMISSIONING OR 24 MONTHS FROM THE DATE OF DESPATCH, WHICHEVER IS EARLIER. IN VIEW OF THE ABOVE TERMS AND CONDITIONS OF THE PAYMENT COMPONENT STIPULATED IN THE AGREEMENT FOR PURCHASE OF T HE EQUIPMENT, IT IS CLEAR THAT 10% OF THE BASIC ORDER VALUE WILL BE RELEASED ON COMPLETION OF SUCCESSFUL COMMISSIONING AND SUBMISSION OF PERFORMANCE BANK GUARANTEE [PBG] FOR THE EQUIVALENT AMOUNT THAT MEANS, WITHOUT EXECUTION OF PBG AND ITS SUBSEQUENT RELE ASE AFTER SUCCESSFUL COMMISSIONING AND ENSURING THE PERFORMANCE OF THE EQUIPMENT , THE SELLER WILL NOT GET THE10% OF THE BASIC VALUE OF THE SALES ORDER. IN VIEW OF THE ABOVE, WE ARE OF THE CONSIDERED OPINION THAT THE ASSESSING OFFICER HAS NOT PROPERLY EXAMI NED THE PURCHASE AGREEMENT AND INVOICE, ETC. TO ARRIVE AT A CONCLUSION THAT THE ASSESSEE COMPANY HAS ONLY GIVEN BANK GUARANTEE FOR THE AMOUNTS OF 10% OF THE INVOICE VALUE TO ENSURE PERFORMANCE. IT MAY BE A FACT THAT AGAINST THE 10% VALUE OF THE INVOICE, TH E ASSESSEE HAS RECEIVED PBG . HOWEVER, AS PER THE DETAILS FURNISHED BY THE ASSESSEE FOR THE ASSESSMENT YEAR 2006 - 07 BEFORE THE ASSESSING OFFICER AND REPRODUCED HEREIN ABOVE, IT IS EVIDENT THAT THE ASSESSEE HAS RECEIVED THE RETENTION MONEY IN THE FINANCIAL Y EAR RELEVANT TO THE ASSESSMENT YEAR UNDER CONSIDERATION EXCEPT IN THE CASE OF EMAMI PAPERS AND ITC LIMITED, WHERE THE ASSESSEE RECEIVED THE RETENTION MONEY IN THE SUBSEQUENT FINANCIAL YEAR I.E., 25.04.2006 AND 19.06.2006. I.T.A. NO S . 1381 - 1383/M/13 & I.T.A. NO. 1573/M/14 8 UNTIL THE PURCHASER SATISFIES THE PERFORMANCE OF THE EQUIPMENT PURCHASED AFTER ITS SUCCESSFUL COMMISSION, HE WILL NOT RELEASE THE BALANCE 10% PAYMENT TO THE ASSESSEE. AS PER THE COPY OF THE BANK GUARANTEE FILED IN THE PAPER BOOK PAGE 111 & 112, THE LIFE OF THE BANK GUARANTEE IS 15 MONTHS O F ITS EXECUTION. DEPENDING UPON THE SUCCESSFUL COMMISSION OF EQUIPMENT AND ITS PERFORMANCE, THERE IS EVERY POSSIBILITY TO GET THE 10% RETENTION MONEY WITHIN THE SAME FINANCIAL YEAR OR OTHERWISE, IT MAY BE EXTENDED . FROM THE TABLE GIVEN IN THE ASSESSMENT OR DER AND REPRODUCED HEREINABOVE, IT IS EVIDENT THAT IN THE FINANCIAL YEAR 2005 - 06, THE ASSESSEE HAS RECEIVED THE RETENTION MONEY FROM THE CUSTOMERS IN S. NO. 1, 2, 4, 5 AND 6, AND THIS SHOULD BE INCLUDED TO ARRIVE AT THE TAXABLE INCOME. THE RECEIPTS OF RETE NTION MONEY ON 25.04.2006 AND 19.06.2006 IN S. NO. 3 AND 7 RELATE TO THE FINANCIAL YEAR 2006 - 07, WHICH CANNOT BE INCLUDED TO ARRIVE AT THE TAXABLE INCOME F OR THE FINANCIAL YEAR 2005 - 06 IN VIEW OF THE RATIO LAID DOWN IN THE CASE OF ACIT V. B.G.R. ENERGY SYS TEMS LTD. IN I.T.A. NOS. 1244 & 1513/HYD/2011 & ORS DATED 05.09.2013 . THEREFORE, BRINGING ALL THE RETENTION MONIES RECEIVED FROM THE CUSTOMERS IN S. NO. 1 TO 7 OF THE ABOVE TABLE TO ARRIVE AT THE TAXABLE INCOME IN THE FINANCIAL YEAR 2005 - 06 IS NOT CORRECT . ACCORDINGLY, WE DIRECT THE ASSESSING OFFICER TO VERIFY AND INCLUDE SUCH RECEIPT S OF RETENTION MONEY RECEIVED IN THE PARTICULAR FINANCIAL YEAR ALONE TO ARRIVE AT THE TAXABLE INCOME OF FINANCIAL YEAR AND IF THE ASSESSEE HAS NOT RECOGNIZED AS ITS INCOME IN T HE PARTICULAR FINANCIAL YEAR, THE SAME CAN NOT BE I.T.A. NO S . 1381 - 1383/M/13 & I.T.A. NO. 1573/M/14 9 INCLUDED . THE ABOVE DIRECTIONS SHOULD BE FOLLOWED IN ALL OTHER ASSESSMENT YEARS SINCE THE ASSESSING OFFICER HAS SIMPLY FOLLOWED EARLIER ASSESSMENT ORDER AND MADE THE DISALLOWANCE IN OTHER ASSESSMENT YEARS . 7. THE NEXT GROUND RAISED IN THE APPEAL OF THE REVENUE IN ASSESSMENT YEAR 2006 - 07 IS THAT THE LD. CIT(A) HAS ERRED IN DELETING THE DISALLOWANCE UNDER SECTION 40(A)(IA) MADE ON PAYMENTS TO CLEARING AND FORWARDING CHARGES. 7.1 DURING THE COURSE OF ASSESSM ENT PROCEEDINGS, THE ASSESSING OFFICER HAS OBSERVED FROM THE DETAILS FURNISHED BY THE ASSESSEE THAT THE ASSESSEE HAS FAILED TO DEDUCT TAXES AT SOURCE AS PER THE PROVISIONS CONTAINED IN CHAPTER XVIIB OF THE ACT IN RESPECT OF THE PAYMENTS TOWARDS CLEARING & FORWARDING CHARGES PAID TO M/S. MEDORE EQUIPMENTS OF .1,43,500/ - , CAR LEASE CHARGES PAID TO R. SELVI & PADMA PRIYA OF .87,792/ - & .75,0000/ - RESPECTIVELY AND FREIGHT OUTWARD TRANSPORT CORPORATION OF .51,000/ - TOTALLING TO .3,57,292/ - . IN VIEW OF THE PROVISIONS OF SECTION 40(A)(IA) OF THE ACT, IF THE T AXES ARE NOT DEDUCTED AND REMITTED WITHIN THE DUE DATE FOR FILING OF THE RETURN, THE CORRESPONDING EXPENDITURE IS NOT TO BE ALLOWED IN THE COMPUTATION OF TOTAL INCOME. SINCE THE ASSESSEE HAS NOT FURNISHED ANY PROOF OF DEDUCTION OF TDS, THE ASSESSING OFFICE R DISALLOWED THE EXPENDITURE AND BROUGHT TO TAX. I.T.A. NO S . 1381 - 1383/M/13 & I.T.A. NO. 1573/M/14 10 7.2 ON APPEAL, AFTER EXAMINING THE DETAILS OF THE ASSESSEE, THE LD. CIT(A) HAS OBSERVED THAT THE PAYMENTS TOWARDS CLEARING & FORWARDING CHARGES PAID TO M/S. MEDORE EQUIPMENTS OF .1,43,500/ - RELATES TO CUSTOMS DUTY REIMBURSEMENT TO THE CLEARING AND FORWARDING AGENT AND THE ASSESSEE HAS NOT MADE THE PAYMENT FOR ANY SERVICES. FURTHER, THE PAYMENT TOWARDS CAR LEASE CHARGES WERE NOT PAID TO SINGLE AGENT BUT WERE PAID TO TWO OFFICERS W ITH A BREAK - UP OF .87,792/ - AND .75,000/ - , WHICH WERE BELOW THE QUALIFYING AMOUNT UNDER SECTION 194I OF THE ACT OF .1,20,000/ - , BOTH THE PAYMENTS ARE NOT LIABLE FOR SECTION 194I AND NOR UNDER SECTION 40A(IA) OF THE ACT. 7.3 WE HAVE HEARD RIVAL CONTENTI ONS. ON PERUSAL OF RECONCILIATION STATEMENT FOR THE ASSESSMENT YEAR 2006 - 07 FILED BY THE ASSESSEE IN PAPER PAGE NO. 114 TO 121 , IT IS EVIDENT AT PAGE 121 THAT M/S. MEDORE EQUIPMENTS RECEIVED THE AMOUNT OF .1,43,500/ - TOWARDS CUSTOMS DUTY AND THE ASSESSEE HAS NOT PAID THE AMOUNT TO THE AGENT. FURTHER, WITH REGARD TO CAR RENT PAID TO TWO DIFFERENT PERSON DID NOT EXCEED .1,20,000/ - INDIVIDUALLY AS PER PROVISO TO SUB - SECTION (B) TO SECTION 194I OF THE ACT. THUS, WE FIND NO INFIRMITY IN THE ORDER OF THE LD. CI T(A) ON THIS ISSUE AND THEREFORE, THE GROUND RAISED BY THE REVENUE IS DISMISSED. 8. THE NEXT GROUND RAISED IN THE APPEAL OF THE REVENUE IN ASSESSMENT YEAR 2007 - 08 IS THAT THE LD. CIT(A) HAS ERRED IN RESTRICTING THE DISALLOWANCE I.T.A. NO S . 1381 - 1383/M/13 & I.T.A. NO. 1573/M/14 11 UNDER SECTION 14A TO 5% OF THE EXEMPT INCOME EARNED BY HOLDING THA T INVOKING THE PROVISIONS OF RULE 8D IS NOT IN ORDER. 8.1 THE ASSESSEE HAS RECEIVED AN AMOUNT OF .5,03,300/ - AS DIVIDEND DURING THE YEAR WHICH HAS BEEN CLAIMED AS EXEMPT UNDER SECTION 10(34) OF THE ACT AND THE ASSESSEE HAS NOT DECLARED ANY EXPENDITURE INCURRED FOR EARNING THE DIVIDEND INCOME. BY INVOKING THE PROVISIONS OF SECTION 14A R.W.S. RULE 8D, THE ASSESSING OFFICER WORKED THE EXPENDITURE TO THE EXTENT OF .6,94,498/ - AND DISALLOWED THE SAME. 8.2 ON APPEAL, THE LD. CIT(A) RESTRICTED THE DISALLOWANCE TO THE EXTENT OF 5% OF THE EXEMPT INCOME EARNED BY HOLDING THAT INVOKING THE PROVISIONS OF RULE 8D IS NOT IN ORDER. 8.3 AFTER CONSIDERING THE RIVAL SUBMISSIONS, WE FIND THAT THE ASSESSMENT YEAR UNDER CONSIDERATION IS 2007 - 08 AND THEREFORE, THE PROVISIONS OF RULE 8D R.W.S. 14A HAS NO APPLICATION SINCE THE APPLICATION OF THE PROVISIONS OF RULE 8D HAS BEEN NOTIFIED WITH EFFECT FROM 24.03.2008 AND APPLICABLE WITH EFFECT FROM THE ASSESSMENT YEAR 2008 - 09 ONWARDS ONLY. FURTHER, T HE HON BLE MUMBAI HIGH COURT IN THE CASE OF GODREJ & BOYCE MFG. CO. LTD. V. DCIT 328 ITR 81 HAS HELD THAT RULE 8D CANNOT BE APPLIE D RETROSPECTIVELY BUT ONLY FROM THE ASSESSMENT YEAR 2008 - 09. HOWEVER, IT WAS ALSO HELD THAT APPLICATION OF PROVISIONS OF 14A ARE 'CONSTITUTIONALLY VALID' AND PROVISIONS OF S ECTION 14A ARE STILL APPLICABLE FOR EARLIER ASSESSMENT YEARS AND THE ASSESSING OFFI CER IS I.T.A. NO S . 1381 - 1383/M/13 & I.T.A. NO. 1573/M/14 12 DUTY BOUND TO DETERMINE EXPENDITURE BY ADOPTING A REASONABLE BASIS OR METHOD . IN THIS CASE, THE ASSESSING OFFICER DETERMINED THE EXPENDITURE BY APPLYING RULE 8D TO THE EXTENT OF .6,94,498/ - FOR EARNING DIVIDEND INCOME OF .5,03,300/ - . THEREFORE, THE LD. CIT(A) RESTRICTED THE DISALLOWANCE @ 5% OF GROSS DIVIDEND RECEIVED BY THE ASSESSEE BY FOLLOWING THE DECISION OF THE TRIBUNAL IN THE CASE OF ACIT V. CELEBRITY FASHIONS LTD. IN I.T. A. NOS. 1318 & 1319/MDS/2011 DATED 30.04.2012. 8.4 WHEN RULE 8D WAS NOT EXIST DURING THE ASSESSMENT YEAR 2007 - 08, THERE IS NO QUESTION OF ITS APPLICATION RETROSPECTIVELY SINCE RULE 8D WAS NOTIFIED ON 24.03.2008 AND APPLICABLE WITH EFFECT FROM THE ASSESSME NT YEAR 2008 - 09 ONWARDS ONLY. THEREFORE, THERE IS NO QUESTION OF APPLYING THE PROVISIONS OF RULE 8D FOR DETERMINING THE EXPENDITURE FOR EARNING DIVIDEND INCOME. SINCE APPLICATION OF PROVISIONS OF SECTION 14A OF THE ACT IS CONSTITUTIONALLY VALID , THE ASSE SSING OFFICER IS DUTY BOUND TO DETERMINE EXPENDITURE BY ADOPTING A REASONABLE BASIS OR METHOD. BUT, IN THIS CASE, THE ASSESSING OFFICER HAS ESTIMATED THE EXPENDITURE OVER AND ABOVE THE DIVIDEND INCOME EARNED BY THE ASSESSEE. BY FOLLOWING THE ORDER OF THE T RIBUNAL IN THE CASE OF ACIT V. CELEBRITY FASHIONS LTD. (SUPRA), THE LD. CIT(A) HAS RESTRICTED THE DISALLOWANCE TO THE EXTENT OF 5% OF GROSS DIVIDEND INCOME, WHICH WAS NOT ACCEPTED BY THE ASSESSEE. HENCE, WE FIND NO INFIRMITY IN THE ORDER OF THE LD. CIT(A) ON THIS ISSUE AND ACCORDINGLY, THE GROUND RAISED BY THE REVENUE IS DISMISSED. I.T.A. NO S . 1381 - 1383/M/13 & I.T.A. NO. 1573/M/14 13 9. THE NEXT GROUND RAISED IN THE APPEAL OF THE REVENUE FOR THE ASSESSMENT YEAR 2008 - 09 IS THAT THE LD. CIT(A) HAS ERRED IN DELETING THE DISALLOWANCE IN RESPECT OF SHORT PAYMENT OF TDS ON ROYALTY CHARGES PAID TO M/S. KADANT LAMART, FRANCE. 9.1 THE ASSESSEE HAS DEDUCTED AN AMOUNT OF . 51,48,385/ - UNDER ROYALTY CHARGES . THIS PAYMENT HAS BEEN MADE TO NON - RESIDENT NAMELY, KADANT LAMORT, FRANCE. FOR THE SUBJECT ASSESSMENT YEAR, TDS ON THE SAME SHOULD HAVE BEEN DEDUCTED AT 20%. HOWEVER, THE ASSESSEE HAS DEDUCTED TDS ONLY @ 10%. HENCE, S INCE THE ASSESSEE HAS DEDUCTED TDS ONLY AT 50% OF THE AMOUNT PAID ON THE CORRECT RATE, THE ASSESSING OFFICER DISALLOWED OTHER 50% AND ACCORDINGLY, AN AMOUNT OF .25,74,193/ - WAS ADDED TO THE INCOME OF THE ASSESSEE. 9.2 ON APPEAL, AFTER CONSIDERING THE SUB MISSIONS OF THE ASSESSEE THAT THE AGREEMENT WAS MADE AFTER 2005 AND HENCE THE RATE OF DEDUCTION WOULD BE 10.3% AS PER SECTION 195 IN LINE WITH THE DTAA WITH FRANCE, THE LD. CIT(A) HAS OBSERVED THAT THE ASSESSING OFFICER WAS WRONGLY OPINED THAT THE RATE OF TDS SHALL BE 20% AND DELETED THE DISALLOWANCE MADE ON THIS ACCOUNT. 9.3 AFTER HEARING BOTH THE PARTIES, WE FIND FROM THE ASSESSMENT ORDER THAT THE ASSESSING OFFICER HAS OBSERVED THAT THE ROYALTY CHARGES HAS BEEN PAID TO NON - RESIDENT NAMELY KADANT LAMO RT, 39, RUE DE LA FONTAINE LUDOT, B.O. I.T.A. NO S . 1381 - 1383/M/13 & I.T.A. NO. 1573/M/14 14 46, 513 02, VITRY LE FRANCOIS, CEDEX FRANCE. THE ASSESSEE HAS FILED COPY OF THE DTAA ENTERED INTO BETWEEN THE INDIA AND FRANCE. IN THIS CASE, THE ASSESSING OFFICER HAS NOT DISPUTED OVER THE RESIDENTIAL STATUS OF THE P ARTY TO WHOM THE ROYALTY WAS PAID BY THE ASSESSEE. THEREFORE, AT THIS STAGE, THE DEPARTMENT CANNOT DISPUTE OVER THE RESIDENTIAL STATUS OF THE PARTY. AFTER EXAMINING THE FACTS, THE LD. CIT(A) DELETED THE DISALLOWANCE MADE ON THE GROUND THAT ASSESSING OFFIC ER HAS WRONGLY TAKEN THE RATE OF TDS @ 20%. IN VIEW OF THE ABOVE, WE FIND NO INFIRMITY IN THE ORDER OF THE LD. CIT(A) ON THIS ISSUE AND ACCORDINGLY, THE GROUND RAISED BY THE REVENUE IS DISMISSED. 10. THE NEXT GROUND RAISED IN THE APPEAL OF THE REVENUE F OR THE ASSESSMENT YEAR 2008 - 09 IS THAT THE LD. CIT(A) HAS ERRED IN DELETING THE DISALLOWANCE UNDER SECTION 36(1)(VA) OF THE ACT BY HOLDING THAT THE PAYMENTS TOWARDS PF AND ESI MADE BEFORE THE DUE DATE OF FILING OF RETURN, BUT AFTER A FEW DAYS OF GRACE PERI OD WERE ALLOWABLE AS DEDUCTION. 10.1 IN THE ASSESSMENT ORDER, THE ASSESSING OFFICER HAS OBSERVED THAT THE ASSESSEE HAS DELAYED THE REMITTANCE OF EMPLOYEES CONTRIBUTION THE PF AMOUNTING TO .93,637/ - AND ESI AMOUNTING TO .10,038/ - TOTALLING TO .1,03,775 / - AND ACCORDINGLY, HE ADDED TO THE TOTAL INCOME OF THE ASSESSEE. 10.2 BEFORE THE LD. CIT(A), THE ASSESSEE HAS ARGUED THAT THE DELAY IN REMITTING THE ABOVE PAYMENT WAS LESS THAN 15 DAYS AND RELIED ON THE DECISIONS IN THE CASE OF M.N. CHARI 310 ITR 445 [KA R.] AND HARISONS I.T.A. NO S . 1381 - 1383/M/13 & I.T.A. NO. 1573/M/14 15 MALAYALAM LTD. 315 ITR 81. IN VIEW OF THE ABOVE DECISIONS AND SINCE THE DELAY WAS BEING LESS THAN 15 DAYS, THE LD. CIT(A) DIRECTED THE ASSESSING OFFICER TO DELETE THE DISALLOWANCE OF .1,03,775/ - . 10.3 BEFORE US, THE LD. DR HAS ARGUED THAT THE PROVISIONS OF SECTION 43B OF THE ACT COVERS ONLY THE SUMS PAYABLE BY WAY OF CONTRIBUTION BY THE ASSESSEE AS AN EMPLOYER, I.E., THE EMPLOYER S CONTRIBUTION TO THE PF AND ESI FUNDS AND IT DOES NO T COVER THE EMPLOYEES CONTRIBUTION. WHILE THE EMPLOYER S CONTRIBUTION IS ALLOWABLE UNDER SECTION 37(1), THE EMPLOYEE S CONTRIBUTION COLLECTED BY THE EMPLOYER IS DEEMED TO BE HIS INCOME UNDER SECTION 2(24)(X) OF THE ACT AND IS ALLOWABLE AS A DEDUCTION UNDER SECTION 36(1)(VA) OF THE ACT ONLY IF IT IS PAID TO THE RELEVANT FUND BY THE DUE DATE AS PRESCRIBED IN THE RELEVANT LEGISLATION. THEREFORE, THE LD. DR HAS PLEADED THAT THE ORDER OF THE LD. CIT(A) ON THIS ISSUE SHOULD BE REVERSED. PER CONTRA, THE LD. COUNSE L FOR THE ASSESSEE STRONGLY SUPPORTED THE ORDER OF THE LD. CIT(A). 10.4 WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. IN THIS CASE, THE ASSESSEE HAS FAILED TO REMIT THE STATUTORY WELFARE DUES BEING EMPLOYEE S CONTRIBUTION TO PF & ESI WITHIN THE DUE DATES STI PULATED, BUT THE REMITTANCE WERE MADE BEFORE THE DUE DATE FOR FILING OF THE RETURN. ON SIMILAR FACTS AND CIRCUMSTANCES, IN THE CASE OF DCIT V. M/S. DIAMOND ENGINEERING (CHENNAI) IN I.T.A. NO. 865/MDS/2016 DATED 07.10.2016, THE COORDINATE BENCH OF THIS TRIB UNAL HAS OBSERVED AND HELD AS UNDER: I.T.A. NO S . 1381 - 1383/M/13 & I.T.A. NO. 1573/M/14 16 6. WE HAVE HEARD BOTH SIDES, PERUSED THE MATERIALS AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF AUTHORITIES BELOW. THE FIRST ISSUE RELATES TO DISALLOWANCE OF .2,09,62,709/ - UNDER SECTION 36(1)(VA) OF THE ACT B EING EMPLOYEE S CONTRIBUTION MADE BY THE EMPLOYER TO PF AND ESI. IN THE ASSESSMENT ORDER, THE ASSESSING OFFICER HAS OBSERVED THAT THE ASSESSEE HAS FAILED TO REMIT THE STATUTORY WELFARE DUES BEING EMPLOYEE S CONTRIBUTION TO PF WITHIN THE DUE DATES STIPULATE D. WHEN THE ASSESSEE WAS ASKED TO EXPLAIN, THE ASSESSEE HAS SUBMITTED THAT DUE TO PAUCITY OF FUNDS, THE CONTRIBUTIONS WERE PAID LATE. THUS, THE ASSESSING OFFICER MADE THE DISALLOWANCE SINCE THE ASSESSEE WAS NOT REMITTED THE ABOVE CONTRIBUTIONS WITHIN THE D UE DATES. BY REITERATING THE SUBMISSIONS AS MADE BEFORE THE ASSESSING OFFICER, BEFORE THE LD. CIT(A), THE ASSESSEE HAS CONTENDED THAT THE REMITTANCE WERE MADE BEFORE THE DUE DATE FOR FILING OF THE RETURN, THE SAME SHOULD BE TREATED AS AN ALLOWABLE DEDUCTIO N. HE ALSO RELIED ON VARIOUS DECISIONS AND PLEADED THAT THE DISALLOWANCE SHOULD BE DELETED. AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE AND BY CONSIDERING VARIOUS INCLUDING THE DECISION IN THE CASE OF AIMIL LTD. 321 ITR 508, THE LD. CIT(A) DECIDED TH E ISSUE IN FAVOUR OF THE ASSESSEE. BEFORE US, THE LD. DR HAS SUBMITTED THAT THE PROVISIONS OF SECTION 43B OF THE ACT WILL BE APPLICABLE ONLY IN RESPECT EMPLOYER S CONTRIBUTION TO THE FUNDS FOR THE WELFARE OF EMPLOYEES AND NOT IN RESPECT OF THE EMPLOYER S C ONTRIBUTION TO THE FUNDS. PER CONTRA, BY FILING COPY OF THE DECISION OF THE HON BLE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT V. M/S. INDUSTRIAL SECURITY & INTELLIGENCE INDIA PVT. LTD. (SUPRA), THE LD. COUNSEL FOR THE ASSESSEE HAS SUBMITTED THAT THE ISS UE IS COVERED IN FAVOUR OF THE ASSESSEE. WE HAVE PERUSED THE ABOVE DECISION, WHEREIN, THE HON BLE HIGH COURT HAS OBSERVED AND HELD AS UNDER: 2. THE BRIEF FACTS OF THE CASE ARE AS FOLLOWS: THE RESPONDENT/ASSESSEE FILED ITS RETURN OF INCOME FOR THE ASSE SSMENT YEARS IN QUESTION. THE SAID RETURNS WERE PROCESSED AND WERE NOT SELECTED FOR SCRUTINY. SUBSEQUENTLY, THE ASSESSING OFFICER NOTICED THAT THERE WAS ESCAPEMENT OF INCOME AND HENCE REOPENED THE ASSESSMENTS UNDER SECTION 147 OF THE INCOME TAX ACT BY ISSUING NOTICE UNDER SECTION 148 OF THE INCOME TAX ACT. WHILE COMPLETING THE RE - ASSESSMENT, THE ASSESSING OFFICER DISALLOWED THE EXPENSES CLAIMED BY WA Y OF EMPLOYEE'S CONTRIBUTION TO PF AND ESI HOLDING THAT THE ASSESSEE HAD NOT PAID THE EMPLOYEE'S CONTRIBUTION OF PF AND ESI WITHIN THE DUE DATES SPECIFIED UNDER THE RESPECTIVE ACT. AGGRIEVED BY THE SAID ORDER OF ASSESSMENT, THE ASSESSEE PREFERRED APPEALS BEFORE THE COMMISSIONER OF INCOME TAX (APPEALS) CHALLENGING THE REOPENING AS WELL AS THE DISALLOWANCE. THE COMMISSIONER OF INCOME TAX (APPEALS) SUSTAINED THE ORDER OF THE ASSESSMENT, THEREBY DISMISSED THE APPEALS. AGGRIEVED BY THE I.T.A. NO S . 1381 - 1383/M/13 & I.T.A. NO. 1573/M/14 17 SAME, THE ASSESSEE PREF ERRED FURTHER APPEALS BEFORE THE TRIBUNAL. THE TRIBUNAL RELIED UPON THE DECISION OF THE SUPREME COURT IN THE CASE OF CIT V. ALOM EXTRUSIONS LTD . REPORTED IN 319 ITR 306, DECISION OF THE DELHI HIGH COUR T IN THE CASE OF CIT V. AMIL LTD . REPORTED IN 321 ITR 508 AND THAT OF THE CO - ORDINATE BENCH OF THE TRIBUNAL IN THE CASE OF M/S.VENKATESWARA ELECTRICAL INDUSTRIES P. LTD. V. DCIT IN ITA NOS.1344, 1345 AND 1636/MDS/2014 DATED 28.8.2014 HELD AS FOLLOWS: 5. HEARD BOTH SIDES. PERUSED ORDERS OF LOWER AUTHORITIES AND THE DECISIONS RELIED ON BEFORE US. IT IS NOT IN DISPUTE THAT ALL THESE PAYMENTS OF PROVIDENT FUND RS.16,20,571/ - AND ESI RS.17,51,490/ - WER E MADE BEYOND THE GRACE PERIOD/DUE DATE ALLOWED UNDER PROVIDENT FUND & ESI ACTS BUT BEFORE DUE DATE FOR FILING OF INCOME - TAX RETURN. THIS ISSUE HAS BEEN DECIDED IN FAVOUR OF THE ASSESSEE BY VARIOUS HIGH COURTS FOLLOWING THE DECISION OF THE HON'BLE SUPREME COURT IN THE CASE OF CIT VS. ALOM EXTRUSIONS LTD. (319 ITR 306), WHEREIN THE HON'BLE SUPREME COURT HELD THAT OMISSION OF SECOND PROVISO TO SECTION 43B AND AMENDMENT OF FIRST PROVISO BY FINANCE ACT , 2003 ARE CURATIVE IN NATURE AND ARE EFFECTIVE RETROSPECTIVELY AND THUS WITH EFFECT FROM 1.4.1988 I.E. THE DATE OF INSERTION OF FIRST PROVISO. THE CO - ORDINATE BENCH OF THIS TRIBUNAL CONSIDERING A SIMILAR ISS UE IN THE CASE OF M/S.VENKATESWARA ELECTRICAL INDUSTRIES P. LTD. VS. DCIT (SUPRA) FOLLOWING THE DECISION OF HON'BLE DELHI HIGH COURT IN THE CASE OF CIT VS. AMIL LTD. (321 ITR 508) HELD THAT EVEN THE EMPLOYEES CONTRIBUTION TO PROVIDENT FUND IS TO BE ALLOWED AS DEDUCTION IF IT IS PAID WITHIN DUE DATE FOR FILING OF RETURN. WHILE HOLDING SO, THE TRIBUNAL OBSERVED AS UNDER: - 6. WE HAVE HEARD THE SUBMISSIONS MADE BY THE REPRESENTATIVES OF BOTH THE SIDES AND HAVE PERUSED THE ORDERS OF THE AUTHORITIES BELOW, A S WELL AS THE JUDGMENTS/DECISIONS RELIED ON BY THE LD. COUNSEL FOR THE ASSESSEE. IT IS AN UN - DISPUTED FACT THAT THERE HAS BEEN DELAY IN REMITTANCE OF EMPLOYEES CONTRIBUTION OF ESI AND PROVIDENT FUND IN BOTH THE AYS I.E., 2008 - 09 & 2009 - 10. IT IS EQUALLY UN - DISPUTED THAT THE ASSESSEE HAS DEPOSITED THE AMOUNT TOWARDS EMPLOYEES CONTRIBUTION OF ESI AND PROVIDENT FUND BEFORE THE DUE DATE OF FILING OF RETURN. THE HON'BLE DELHI HIGH COURT IN THE CASE OF CIT VS. AMIL LTD., REPORTED AS 321 ITR 508 HAS HELD THAT I F THE ASSESSEE I.T.A. NO S . 1381 - 1383/M/13 & I.T.A. NO. 1573/M/14 18 HAD DEPOSITED EMPLOYEES CONTRIBUTION TOWARDS PROVIDENT FUND AND ESI AFTER DUE DATE AS PRESCRIBED UNDER THE RELEVANT ACT BUT BEFORE THE DUE DATE OF FILING OF RETURN UNDER THE INCOME TAX ACT , NO DISALLOWANCE COULD BE MADE IN VIEW OF THE PROVISIONS OF SECTION 43B AS AMENDED BY THE FINANCE ACT , 2003. THE DECISION OF THE HON'BLE DELHI HIGH COURT HAS BEEN FOLLOWED BY THE CO - ORDINATE BENCH OF THE TRIBUNAL IN THE CASE OF JCIT VS. M/S. S.M.APPARELS (P) LTD. (SUPRA). THE TRIBUNAL HAS BEEN CONSISTENTLY FOLLOWING THE VIEW TAKEN BY THE HON'BLE DELHI HIGH COURT. ACCORDINGLY, WE HOLD THAT THE ASSESS EE IS ENTITLED TO CLAIM EXPENDITURE ON EMPLOYEE'S CONTRIBUTION TOWARDS ESI AND PROVIDENT FUND FOR BOTH THE AYS. ACCORDINGLY, BOTH THE APPEALS OF THE ASSESSEE ARE ALLOWED. 6. RESPECTFULLY FOLLOWING THE ABOVE, DECISION, WE DIRECT THE ASSESSING OFFICER TO DELETE DISALLOWANCES MADE UNDER SECTION 43B OF THE ACT FOR BOTH THESE ASSESSMENT YEARS. THE GROUNDS OF APPEAL RAISED BY THE ASSESSEE ARE ALLOWED.' 3. AGGRIEVED BY THE SAID ORDER OF THE TRIBUNAL, THE REVENUE IS BEFORE THIS COURT. 4. HEARD LEARNED STANDING COUNSEL APPEARING FOR THE REVENUE AND PERUSED THE MATERIALS PLACED BEFORE THIS COURT. 5. WE FIND THAT THE TRIBUNAL HAS RIGHTLY RELIED ON THE DECISION OF THE SUPREME COURT IN THE CASE OF CIT V. ALOM EXTRUSIONS LTD . REPORTED IN 319 ITR 306, WHEREBY, THE SUPREME COURT HELD THAT OMISSION OF SECOND PROVISO TO SECTION 43B AND AMENDMENT TO FIRST P ROVISO BY FINANCE ACT , 2003 ARE CURATIVE IN NATURE AND ARE EFFECTIVE RETROSPECTIVELY, I.E., WITH EFFECT FROM 1.4.1988 I.E., THE DATE OF INSERTION OF FIRST PROVISO. THE DELHI HIGH COURT IN THE CASE OF CIT V. AMIL LTD . REPORTED IN 321 ITR 508 HELD THAT IF THE ASSESSEE HAD DEPOSITED EMPLOYEE'S CONTRIBUTION TOWARDS PROVIDENT FUND AND ESI AFTER DUE DATE AS PRESCRIBED UNDER THE RELEVANT ACT, BUT BEFORE TH E DUE DATE OF FILING OF RETURN UNDER THE INCOME TAX ACT , NO DISALLOWANCE COULD BE MADE IN VIEW OF THE PROVISIONS OF SECTION 43B AS AMENDED BY FINANCE ACT , 2003. 6. IN THE PRESENT CASE, THE ASSESSEE HAD REMITTED THE EMPLOYEES CONTRIBUTION BEYOND THE DUE DATE FOR PAYMENT, BUT WITHIN THE DUE I.T.A. NO S . 1381 - 1383/M/13 & I.T.A. NO. 1573/M/14 19 DATE FOR FILING THE RETURN OF INCOME. HENCE, FOLLOWING THE ABOVE - SAID DECISIONS, WE FIND NO REASON TO DIFFER WITH THE FINDINGS OF THE TRIBUNAL. ACCORDINGLY, WE FIND NO QUESTION OF LAW MUCH LESS ANY SUBSTANTIAL QUESTION OF LAW ARISES FOR CONSIDERATION IN THESE APPEALS. ACCORDINGLY, BOTH THE TAX CASE (APPEALS) ST AND DISMISSED. NO COSTS. CONSEQUENTLY, M.P.NO.1 OF 2015 IS ALSO DISMISSED. 7. RESPECTFULLY FOLLOWING THE ABOVE DECISION OF THE HON BLE HIGH COURT, WE FIND NO REASON TO INTERFERE WITH THE ORDER PASSED BY T HE LD. CIT(A) ON THIS ISSUE AND ACCORDINGLY, THE GROUND RAISED BY THE REVENUE IS DISMISSED. 10.5 IN THE PRESENT CASE ALSO , THE ASSESSEE HAD REMITTED THE EMPLOYEES CONTRIBUTION TO PF AND ESI BEYOND THE DUE DATE FOR PAYMENT, BUT WITHIN THE DUE DATE FOR FIL ING THE RETURN OF INCOME. HENCE, FOLLOWING THE ABOVE - SAID DECISIONS, WE FIND NO REASON TO DIFFER WITH THE FINDINGS OF THE LD. CIT(A) AND THUS, THE GROUND RAISED BY THE REVENUE IS DISMISSED. 11. THE ONLY GROUND RAISED IN THE APPEAL OF THE REVENUE FOR TH E ASSESSMENT YEAR 2009 - 10 IS THAT THE LD. CIT(A) HAS ERRED IN DELETING THE DISALLOWANCE OF PROVISION FOR LEAVE ENCASHMENT OF .19,67,943/ - MADE BY THE ASSESSING OFFICER. 11.1 ON PERUSAL OF THE FORM 3CD FILED BY THE ASSESSEE, THE ASSESSING OFFICER HAS NOT ICED IN CLAUSE 21 ANNEXURE 6 THAT THE ASSESSEE HAS CLAIMED UNPAID LEAVE ENCASHMENT OF .19,67,943/ - . BY APPLYING THE PROVISIONS OF SECTION 43B(F) OF THE ACT, THE ASSESSING OFFICER DISALLOWED THE SAME AND ADDED BACK TO THE TOTAL INCOME OF THE ASSESSEE. I.T.A. NO S . 1381 - 1383/M/13 & I.T.A. NO. 1573/M/14 20 1 1.2 ON APPEAL, AFTER EXAMINING THE LEDGER COPIES AND CASE LAW, THE LD. CIT(A) HAS OBSERVED AND HELD AS UNDER: 12.3 I HAVE GONE THROUGH THE LEDGER COPIES AND CASE LAWS RELIED UPON AND CONTRA - DISTINGUISHED WITH THE ORDERS OF THE AO. FIRSTLY, THE AO HAS WR ONGLY TAKEN THE ENTIRE AMOUNT OF RS.19,67,943/ - AS APPEARING IN THE BALANCE SHEET AS THE AMOUNT ELIGIBLE FOR DISALLOWANCE, SINCE RS. 9,96,787/ - ALONE HAS BEEN DEBITED AS PROVISION FOR LEAVE ENCASHMENT BASED ON ACTUARIAL EVALUATION. IF AT ALL THE DISALLOWAN CE IS TO BE CARRIED OUT, IT SHOULD BE CONFINED TO THIS AMOUNT ONLY WHICH HAS BEEN DEBITED TO THE PROFIT AND LOSS ACCOUNT BUT NOT THE ENTIRE AMOUNT OUTSTANDING IN THE BALANCE SHEET. THUS, THE AO HAS NOT APPRECIATED THE ACCOUNTING TREATMENT. GOING TO THE ELI GIBILITY OF THE SAID DEDUCTION, THE DEDUCTION HAS BEEN CLAIMED ON DEBITING THE SAID LIABILITY ARRIVED AT BY ACTUARIAL VALUATION. THE LIABILITY THUS ARRIVED BY THE ACTUARIAL VALUATION BECOMES CONTRACTUAL LIABILITY THEREBY EMPLOYING THAT THE LIABILITIES HAS CRYSTALLIZED AND THE EXPENSES ARE DEDUCTIBLE. IN SUCH A SCENARIO, THE ASSESSEE COMPANY IS BOUND TO PAY SUCH MONIES AS AND WHEN THE LEAVE ENCASHMENT IS CLAIMED BY THE EMPLOYEES. HENCE, I DO NOT FIND ANY INCONSISTENCY WITH THE PROVISIONS OF ACT NOR THERE IS SCOPE FOR SEC. 43B. ACCORDINGLY, THE ADDITION IS DIRECTED TO BE DELETED. 11.3 ON BEING AGGRIEVED, THE REVENUE IS IN APPEAL BEFORE THE TRIBUNAL. THE LD. DR HAS VEHEMENTLY ARGUED THAT THE HON BLE SUPREME COURT HAS STAYED THE OPERATION OF THE DECISION OF TH E HON BLE CALCUTTA HIGH COURT IN THE CASE OF EXIDE INDUSTRIES LTD. 292 ITR 470 BY HOLDING THAT THE ASSESSEE MUST PAY TAX AS IF SECTION 43B(F) OF THE ACT IS ON THE STATUTE BOOK THOUGH THE ASSESSEE IS ENTITLED TO MAKE A CLAIM IN ITS RETURN AND THEREFORE, HE PLEADED THAT THE ORDER OF THE LD. CIT(A) SHOULD BE REVERSED. 11.4 PER CONTRA, THE LD. COUNSEL FOR THE ASSESSEE HAS SUBMITTED THAT THE DISALLOWANCE SHALL BE CONFINED TO THE AMOUNT ONLY WHICH WAS DEBITED TO THE PROFIT AND LOSS ACCOUNT AND THEREFORE, THE A SSESSING OFFICER WAS NOT JUSTIFIED IN DISALLOWING THE ENTIRE AMOUNT. I.T.A. NO S . 1381 - 1383/M/13 & I.T.A. NO. 1573/M/14 21 11.5 WE HAVE HEARD BOTH SIDES AND GONE THROUGH THE ORDERS OF AUTHORITIES BELOW. NO DETAILS WERE AVAILABLE ON RECORD. BEFORE THE LD. CIT(A), THE ASSESSEE HAS SUBMITTED THAT THE ENTIRE AMO UNT OF .19,67,943/ - DOES NOT BELONG TO THE YEAR UNDER CONSIDERATION AS .9,71,066/ - WAS THE OPENING BALANCE AND .9,96,787/ - ALONG WAS DEBITED UNDER THE YEAR. IN VIEW OF THE ABOVE, THE ASSESSING OFFICER IS DIRECTED TO EXAMINE AND DECIDE THE ISSUE AFRESH IN ACCOR DANCE WITH LAW. 11.6 WITH REGARD TO ELIGIBILITY OF CLAIMING DEDUCTION OF PROVISIONS FOR LEAVE ENCASHMENT, AGAINST THE ORDER OF HON BLE CALCUTTA HIGH COURT IN THE CASE OF EXIDE INDUSTRIES LTD. (SUPRA), THE H ON BLE S UPREME C OURT HAS STAYED IT VIDE ITS ORDE R DATED 08 . 05 . 2009 AS UNDER : - PENDING HEARING AND FINAL DISPOSAL OF THE CIVIL APPEAL, DEPARTMENT IS RESTRAINED FROM RECOVERING PENALTY AND INTEREST WHICH HAS ACCRUED TILL DATE. IT IS MADE CLEAR THAT AS FAR AS THE OUTSTANDING INTEREST DEMAND AS OF DATE I S CONCERNED, IT WOULD BE OPEN TO THE DEPARTMENT TO RECOVER THAT AMOUNT IN CASE CIVIL APPEAL OF THE DEPARTMENT IS ALLOWED. WE FURTHER MAKE IT CLEAR THAT THE ASSESSEE WOULD, DURING THE PENDENCY OF THIS CIVIL APPEAL, PAY TAX AS IF SECTION 43B(F) IS ON THE STA TUTE BOOK BUT AT THE SAME TIME IT WOULD BE ENTITLED TO MAKE A CLAIM IN ITS RETURNS. IN VIEW OF THE ABOVE DIRECTIONS OF HON BLE SUPREME COURT , THE ASSESSEE IS NOT ELIGIBLE TO CLAIM DEDUCTION OF PROVISIONS FOR LEAVE ENCASHMENT. ACCORDING LY, WE SUSTAIN THE ADDITION TO THE EXTENT IT PERTAINS TO THE ASSESSMENT YEAR UNDER CONSIDERATION AGAINST THE DISALLOWANCE OF .19,67,943/ - , IF THE ENTIRE DISALLOWANCE IS NOT PERTAIN ING TO THE ASSESSMENT I.T.A. NO S . 1381 - 1383/M/13 & I.T.A. NO. 1573/M/14 22 YEAR UNDER CONSIDERATION. THUS, THE GROUND RAISED BY THE REVENUE IS ALLOWED FOR STATISTICAL PURPOSES. 12. IN THE RESULT, APPEALS IN I.T.A. NOS. 1381 & 1382/MDS/2013 & I.T.A. NO. 1573/MDS/2014 ARE PARTLY ALLOWED FOR STATISTICAL PURPOSES I.T.A. NO. 1383/MDS/2013 IS ALLOWED FOR STATISTICAL PURPOSES . ORDER PRONOUNCED ON THE 07 TH FEBRUARY , 201 7 AT CHENNAI. SD/ - SD/ - (CHANDRA POOJARI) ACCOUNTANT MEMBER ( DUVVURU RL REDDY ) JUDICIAL MEMBER CHENNAI, DATED, THE 07 . 0 2 .201 7 VM/ - / COPY TO: 1. / APPELLANT , 2. / RESPONDENT , 3. ( ) / CIT(A) , 4. / CIT , 5. / DR & 6. / GF.