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

ITA 1530/BANG/2010

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 51406 (ITAT-BANGALORE)
• Duration Of Justice: 11 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-12-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 20-12-2011
• Assessment Year: 1999-2000
• Appeal Filed On: 29-12-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SUSAN THOMAS JT
• Assessee Lawyers: B K MANJUNATH
• Keywords: Opportunity of being heard; Rule of consistency
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH : BANGALORE BEFORE SHRI N.K. SAINI, ACCOUNTANT MEMBER AND SHRI GEORGE GEORGE K., JUDICIAL MEMBER ITA NO.1530 & 1531/BANG/2010 ASSESSMENT YEARS : 1999-2000 & 2006-07 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 SUSAN THOMAS, JT.CIT(DR) RESPONDENT BY : SHRI B.K. MANJUNATH, C.A. DATE OF HEARING : 20.12.2011 DATE OF PRONOUNCEMENT : 20.12.2011 O R D E R PER N.K. SAINI, ACCOUNTANT MEMBER THESE TWO APPEALS BY THE DEPARTMENT ARE DIRECTED A GAINST THE SEPARATE ORDERS DATED 14.9.2010 AND 15.9.2010 OF THE CIT(APP EALS)-III, BANGALORE FOR THE ASSESSMENT YEARS 1999-2000 AND 2006-07 RESPECTI VELY. SINCE THE ISSUE INVOLVED IN BOTH THE APPEALS IS COMMON AND TH E APPEALS WERE HEARD ITA NOS.1530 & 1531/BANG/10 PAGE 2 OF 7 TOGETHER, SO THESE ARE BEING DISPOSED OF BY THIS CO NSOLIDATED ORDER FOR THE SAKE OF CONVENIENCE. 2. FIRST WE WILL DEAL WITH ITA NO.1530/BANG/2010. FOLLOWING GROUNDS HAVE BEEN RAISED IN THIS APPEAL: 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 EM PLOYEES' PF MADE IN EXCESS OF THE REGULAR CONTRIBUTION BY TH E ASSESSEE COMPANY AS AN EMPLOYER STATED TO HAVE BEEN PAID TO MAKE GOOD THE SHORTFALL IN THE AMOUNT OF INTEREST PAYABLE @ 1 3% ON THE RUNNING BALANCE IN THE PROVIDENT FUND TO THE MEMBER S WHEN SUCH CONTRIBUTION MADE IN EXCESS OF THE STATUTORY REQUIR EMENT 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 PROFI TS, GENERAL PROVISIONS CANNOT BE APPLIED FOR ALLOWING THE EXPEN DITURE OF THAT NATURE. 4. WITHOUT PREJUDICE TO THE ABOVE, THE CIT(A) OUGH T TO HAVE APPRECIATED THAT THE ASSESSEE FAILED TO FURNISH DET AILS CALLED FOR BY THE AO TO CONSIDER THE ALLOWABILITY OF DEDUCTION IN RESPECT OF THE EXCESS CONTRIBUTION TO P F MADE BY THE ASSESSEE IN SPITE OF OPPORTUNITIES GIVEN TO IT BY THE AO IN TERMS OF THE DIRECTIONS OF THE ITAT GIVEN IN ITS ORDER IN NO MP.152/BANG/2006 DATED 21/6/2007. 5. WITHOUT PREJUDICE TO THE GROUNDS MENTIONED AT 2 AND 3 ABOVE, THE CIT(A) ERRED IN GRANTING RELIEF TO THE ASSESSEE WITHOUT EXAMINING DETAILS PERTAINING TO THE PAYMENT MADE IN EXCESS OF THE REGULAR CONTRIBUTION SUCH DETAILS WERE NOT FURN ISHED BY THE ASSESSEE TO THE AO TO ENABLE HIM TO CONSIDER THE AL LOWABILITY OF DEDUCTION IN RESPECT OF THE EXCESS CONTRIBUTION TO PF MADE BY THE ASSESSEE AND THEREFORE THE ACTION OF THE CIT(A) IS IN CONTRADICTION TO THE DIRECTIONS OF THE ITAT GIVEN IN ITS ORDER IN NO. MP.152/BANG/2006 DATED 21/6/2007. 6. THE CIT(A) OUGHT TO HAVE EXAMINED WHETHER INTER EST AT 13% WAS ACTUALLY CREDITED TO PF ACCOUNT OF EMPLOYEES AND WHETHER THE SUM OF RS. 16,00,000/- HAS ACTUALLY BEEN UTILIZED ITA NOS.1530 & 1531/BANG/10 PAGE 3 OF 7 WHOLLY FOR PAYING INTEREST @ 13% TO THE MEMBERS AS CLAIMED BY IT AND NOT JUST A PROVISION MADE FOR THAT PURPOSE. 7. FOR THESE AND OTHER GROUNDS THAT MAY BE URGED A T 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 TH AT OF THE 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 RESPECT OF EXCESS CONTRIBUTION TO PF MADE BY THE ASSESSEE. 4. THE FACTS OF THE CASE IN BRIEF ARE THAT THE ASSE SSMENT IN THIS CASE WAS COMPLETED U/S. 143(3) OF THE INCOME-TAX ACT, 19 61 [HEREINAFTER REFERRED TO AS THE ACT IN SHORT], WHILE DOING SO THE AO M ADE CERTAIN ADDITIONS/DISALLOWANCES TO THE RETURNED INCOME. AG AINST THE ACTION OF THE AO, THE ASSESSEE PREFERRED AN APPEAL TO THE LD. CIT (APPEALS) AND ONE OF THE ISSUE WAS DISALLOWANCE OF CONTRIBUTION TO PF TO WARDS SHORTFALL IN INTEREST TO THE EXTENT OF RS.16 LAKHS. THE LD. CIT (A) CONFIRMED THE DISALLOWANCE AND THE ASSESSEE TOOK THE MATTER TO IT AT WHEREIN THE ISSUE WAS SET ASIDE TO THE FILE OF THE AO FOR FRESH CONSI DERATION, AFTER CALLING FOR DETAILS AND PROVIDING ADEQUATE OPPORTUNITY OF BEING HEARD. THE ASSESSEE FURNISHED A COPY OF THE BOARDS RESOLUTION AUTHORIZ ING THE PAYMENT. THE SAID RESOLUTION STATED THAT THE REQUEST MADE BY THE BOARD OF TRUSTEES OF THE ASSESSEE EMPLOYEES PROVIDENT FUND (A) FOR COVE RED EMPLOYEES TO MAKE GOOD THE AMOUNT REQUIRED TO PAY THE INTEREST @ 13% ON THE RUNNING BALANCE FOR THE YEAR ENDED 31 ST MARCH 1999 TO THE MEMBERS OF THE FUND BE ITA NOS.1530 & 1531/BANG/10 PAGE 4 OF 7 ACCEDED TO AND A SUM OF RS.18,99,175/- FOR THE PURP OSE BE PAID OUT OF THE COMPANYS FUNDS. THE AO VIEWED THAT IT WAS ONLY L ARGESSE PASSED ON TO THE MEMBERS OF PF OVER AND ABOVE THE STATUTORY LIAB ILITIES CAST ON THE ASSESSEE COMPANY, HENCE THIS AMOUNT WAS NOT ALLOWAB LE 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 DECI DED BY THE ITAT IN ASSESSEES OWN CASE AND FILED COPIES OF THE ORDER O F THE ITAT AND THE ORDER PASSED BY THE AO U/S. 254 GIVING EFFECT TO RE LIEF ALLOWED BY THE ITAT FOR THE A.Y. 1998-99 VIDE ORDER DATED 4.10.2003 IN ITA NO.611/BANG/2002 AND ALSO COPY OF THE ORDER OF THE CIT(A)-V, BANGALO RE IN ITA NO.35/84/AC 12(1)/CIT(A)-V/08-09 DATED 27.2.2009 FOR THE A.Y. 2 005-06. 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 OF THE EMPLOYEE, HENCE THE AO MAY 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 ) ALSO POINTED OUT THAT A SIMILAR ISSUE WAS SUBJECT MATTER OF APPEAL FOR EARL IER YEARS IN THE ASSESSEES OWN CASE WHEREIN THE CLAIM OF THE ASSESSEE FOR PAYMENT OF ADDITIONAL INTEREST TO EMPLOYEES PROVIDENT FUND TO MAKE GOOD THE SHORTFALL IN INTEREST HAD BEEN ALLOWED. THE LD. CIT(A) ALSO OBSERVED THAT THE CONTRIBUTION HAD BEEN MADE BEFORE THE D UE DATE FOR FILING OF RETURN OF INCOME FOR THE INSTANT ASSESSMENT YEAR. HE THEREFORE DIRECTED ITA NOS.1530 & 1531/BANG/10 PAGE 5 OF 7 THE AO TO DELETE THE ADDITION MADE BEING INTEREST O N PF TO THE TUNE OF RS.16 LAKHS. NOW THE DEPARTMENT IS IN APPEAL. 7. THE LD. DR STRONGLY SUPPORTED THE ORDER OF THE A O, BUT COULD NOT CONTROVERT THE OBSERVATIONS 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 A ND FURTHER SUBMITTED THAT FOR THE A.Y. 1998-99, SIMILAR ISSUE WAS REMAND ED BACK BY THE ITAT VIDE ORDER DATED 4.10.2003 TO THE AO, WHO VIDE ORDE R DATED 21.12.2004 REVISED THE EARLIER ORDER DATED 13.12.02 AND ALLOWE D THE CLAIM OF THE ASSESSEE FOR ADDITIONAL INTEREST PAYMENT TO PF CONT RIBUTION. COPY OF THE SAID ORDER WAS FURNISHED. IT WAS ALSO STATED 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 DATED 27.2.2009 DELETED THE ADDITION MADE BY THE AO AND T HE DEPARTMENT HAD NOT PREFERRED ANY APPEAL AGAINST THE SAID ORDER. T HEREFORE THE ORDER DATED 27.2.2009 FOR THE A.Y. 2005-06 PASSED BY THE LD. CI T(A) ATTAINED FINALITY. AS SUCH, THE LD. CIT(A) WAS FULLY JUSTIFIED IN DELE TING THE ADDITION MADE BY THE AO FOR THE YEAR UNDER CONSIDERATION. 9. WE HAVE CONSIDERED THE SUBMISSIONS OF BOTH THE P ARTIES AND GONE THROUGH THE MATERIAL AVAILABLE ON RECORD. IN THE I NSTANT 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 INVOLVED IN THE PRECEDING ASSESSMENT YEAR AND THE ITAT WHILE DECIDI NG THE APPEAL OF THE ASSESSEE IN ITA NO.611/BANG/2002 REMANDED THE ISSUE BACK TO THE FILE OF THE AO FOR FRESH ADJUDICATION VIDE ORDER DATED 4.10 .2003 AND THE AO ITA NOS.1530 & 1531/BANG/10 PAGE 6 OF 7 DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE VIDE OR DER DATED 21.12.04, COPY OF WHICH WAS FURNISHED BY THE LD. COUNSEL FOR THE ASSESSEE DURING THE COURSE OF HEARING AND IS AVAILABLE ON RECORD. IT I S ALSO NOTICED THAT FOR THE A.Y. 2005-06, SIMILAR ADDITION HAS BEEN DELETED BY THE LD. CIT(A) AND THE CONTENTION OF THE LD. COUNSEL FOR THE ASSESSEE THAT THE ORDER DATED 27.2.09 PASSED BY THE LD. CIT(A)-V, BANGALORE FOR THE 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 DEPARTME NT HAS ACCEPTED A SIMILAR CLAIM IN SIMILAR CIRCUMSTANCES FOR THE PRECEDING A. Y. 1998-99 AND ALSO FOR THE SUBSEQUENT A.Y. 2005-06. SO THERE WAS NO REASO N TO DEVIATE IN THE ASSESSMENT YEAR UNDER CONSIDERATION. THEREFORE, WE DO NOT SEE ANY VALID GROUND TO INTERFERE WITH THE FINDINGS OF THE LD. CI T(A). 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 ISOLATI ON ONLY FOR ONE YEAR IN THE CASE OF ONE ASSESSEE, WHILE ACCEPTING T HE FINDINGS ON THE SAME ISSUE IN THE CASE OF OTHER ASSESSEES AND F OR 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 A SIMILAR ISSUE FOR THE A.Y. 1998-9 9 AND 2005-06, THEREFORE THE PRINCIPLE OF CONSISTENCY WAS REQUIRED TO BE MAINTAINED BY THE DEPARTMENT AND THE DISALLOWANCE MADE BY THE AO WAS NOT JUSTIFIED. THEREFORE THE LD. CIT(A) RIGHTLY DELETED THE SAME. IN VIEW OF THE ABOVE, WE DO NOT SEE ANY MERIT IN THE APPEAL OF THE DEPARTMEN T. ITA NOS.1530 & 1531/BANG/10 PAGE 7 OF 7 12. NOW WE WILL DEAL WITH ITA NO.1531/BANG/2010 FOR THE A.Y. 2006-07. IN THIS APPEAL, IDENTICAL GROUNDS HAVE BEEN RAISED BY THE DEPARTMENT AS WERE IN ITA NO.1530/BANG/2010 FOR THE A.Y. 1999-200 0, THE ONLY DIFFERENCE RELATES TO THE AMOUNT OF INTEREST INVOLVED. SINCE THE FACTS FOR THE YEAR UNDER CONSIDERATION ARE IDENTICAL TO THE FACTS INVO LVED IN THE A.Y. 1999- 2000 AND EVEN THE RIVAL CONTENTIONS WERE SIMILAR, T HEREFORE OUR FINDINGS GIVEN IN THE FORMER PART OF THIS ORDER RELATING TO A.Y. 1999-2000 IN ITA NO.1530/BANG/2010 SHALL APPLY MUTATIS MUTANDIS FOR THE ISSUE INVOLVED IN ITA NO.1531/BANG/2010 FOR THE A.Y. 2006-07. 13. IN THE RESULT, BOTH THE APPEALS ARE DISMISSED. PRONOUNCED IN THE OPEN COURT ON THIS 20 TH DAY OF DECEMBER, 2011. SD/- SD/- ( GEORGE GEORGE K. ) ( N.K. SAINI ) JUDICIAL MEMBER ACCOUNTANT MEMBER BANGALORE, DATED, THE 20 TH DECEMBER, 2011. DS/- 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.