The DCIT, Circle-4, Ahmedabad V. Karnavati Infrastructure Pvt. Ltd., Ahmedabad

ITA 1596/AHD/2007

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 5891 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 1 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-06-2010
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: C
• Next Hearing Date: 16-06-2010
• Assessment Year: 2004-2005
• Appeal Filed On: 20-04-2007
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: K M MAHESH
• Keywords: Gift; Business expenditure
• Section: 43B; 37(1); 80G; 139

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH 'C' [BEFORE S/SHRI D T GARASIA,JM & A N PAHUJA,AM] ITA NO.1596/AHD/2007 WITH C O NO.133/AHD/2007 (ASSESSMENT YEAR:- 2004-05) DEPUTY COMMISSIONER OF INCOME-TAX, CIRCLE-4, NAVJIVAN TRUST BUILDING,OFF ASHRAM ROAD, AHMEDABAD V/S KARNAVATI INFRASTRUCTURE PVT. LTD., D/501, STATUS OPP. T V TOWER, DRIVE-IN- ROAD, GURUKUL, AHMEDABAD [PAN: AAACK 4583 D] [APPELLANT] [RESPONDENT] REVENUE BY :- SHRI K M MAHESH, DR ASSESSEE BY:- SHRI SAKAR SHARMA, AR O R D E R A N PAHUJA: THIS APPEAL BY THE REVENUE AND THE CORRESPONDING CROSS OBJECTION(CO) BY THE ASSESSEE AGAINST AN ORDE R DATED 10-01- 2007 OF THE LD. CIT(APPEALS)-VII, AHMEDABAD, FOR TH E ASSESSMENT YEAR2004-05,RAISES THE FOLLOWING GROUNDS: ITA NO.1596/AHD/2007 : 1. THE LD. CIT(A) ERRED IN LAW AND ON THE FACTS OF THE CASE IN DIRECTING THE AO TO ALLOW THE DEDUCTION IN RESPECT OF BANK GUARANTEE COMMISSION OF RS.2,76,784/- WHICH WAS DISALLOWED DURING THE AY 20 03-04 AFTER HOLDING THAT THE SAID CLAIM WAS ALLOWABLE DURING THE PRESEN T ASSESSMENT YEAR. 2. THE LD. CIT(A) HAS ERRED IN LAW AND ON THE FACTS OF THE CASE IN DIRECTING THE AO TO DELETE THE DISALLOWANCE OF RS.1,03,085/- BEING DELAYED PAYMENT OF EMPLOYERS CONTRIBUTION TO THE PROVIDENT FUND. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E, THE LD. CIT(A) OUGHT TO HAVE UPHELD THE ORDER OF THE ASSESS ING OFFICER 4. IT IS , THEREFORE PRAYED THAT THE ORDER OF THE L D. CIT(A) MAY BE CANCELLED AND THAT OF THE ASSESSING OFFICER MAY BE RESTORED TO THE ABOVE EFFECT. ITA NO.1596/A/07 & C O NO. 133/A/07 KARNAVATI INFRASTRUCTURE PVT. LTD. 2 CO NO.133/AHD/2007 1 THE LD. CIT(A) ERRED ON FACTS AND IN LAW IN CONFI RMING DISALLOWANCE OF RS.12000/- BEING DONATION MADE TO SARPANCH OF GANGP UR VILLAGE FOR FLOOD RELIEF. 2 THE LD. CIT(A) ERRED ON FACTS AND IN LAW IN CONFI RMING DIWALI GIFTS OF RS.27,345/- GIVEN TO THE EMPLOYEES. 2. ADVERTING FIRST TO GROUND NO.1 IN THE APPEA L OF THE REVENUE, RELATING TO DEDUCTION OF BANK GUARANTEE COMMISSION OF RS.2,76,784/-,FACTS IN BRIEF, AS PER RELEVANT ORDERS ARE THAT RETURN D ECLARING INCOME OF RS.31,42,155/- FILED ON 31-10-2004 BY THE ASSESSEE, AFTER BEING PROCESSED ON 04-04-2005 U/S 143(1) OF THE INCOME-TA X ACT,1961[HEREINAFTER REFERRED TO AS THE ACT], WAS SELECTED FOR SCRUTINY WITH THE ISSUE OF NOTICE U/S 143(2) OF THE ACT ON 26-07-2005. DURING THE ASSESSMENT PROCEEDINGS, THE AO NOTICED T HAT THE ASSESSEE INCURRED BANK COMMISSION EXPENSES AMOUNTIN G TO RS.6,63,741/-. TO A QUERY BY THE AO, THE ASSESSEE R EPLIED VIDE THEIR LETTER DATED 10-03-2006 THAT THE FOLLOWING AMOUNTS WERE PAID TOWARDS BANK GUARANTEE COMMISSION DURING THE YEAR UNDER CONSIDER ATION. SINCE THE ISSUE OF DEDUCTION OF BANK GUARANTEE COMMISSION DID NOT ATT AIN FINALITY IN THE PRECEDING YEARS, THE ASSESSEE SUBMITTED A WORKING OF THE BANK GUARANTEE COMMISSION ALLOWABLE AND DISALLOWABLE ON THE LINES OF THE EARL IER ASSESSMENTS, AS UNDER: DATE OF BANK GUARANTEE PERIOD OF BANK GUARANTEE AMOUNT DEBITED IN THE BOOKS AMOUNT ALLOWABLE IN A.Y. 03-04 AMOUNT DISALLOWABLE AND TO BE CARRIED FORWARD TO SUBSEQUENT YEARS 22.07.2003 12 MONTHS 219154 164366 54788 31.07.2003 12 MONTHS 37700 25133 12567 3L.J7.2003 12 MONTHS 149163 99442 49721 ITA NO.1596/A/07 & C O NO. 133/A/07 KARNAVATI INFRASTRUCTURE PVT. LTD. 3 11.08.2003 12 MONTHS 129024 80640 48384 30.09.2003 12 MONTHS 18950 9475 9475 27.1I.2003 12 MONTHS 37700 12567 25133 28.02.2004 12 MONTHS 15200 2533 12667 07.01.2004 12 MONTHS 18950 4738 14212 13.01. 2004 12 MONTHS 22700 4729 17971 31.01.2004 12 MONTHS 15200 2533 12667 663741 406156 257585 2.1 THE ASSESSEE FURTHER EXPLAINED THAT EXCEPT LA ST THREE TRANSACTIONS, REMAINING TRANSACTIONS WERE DEBITED TO BANK CHARGES ACCOUNT DUE TO OVERSIGHT BY THE ACCOUNTANT. SINCE IN THE ASSESSMENT FOR A.Y. 20 03-04, THE AO HAD DISALLOWED AN AMOUNT OF RS.2,76,784/- ON THE GROUND THAT THE A MOUNT RELATED TO THE SUBSEQUENT YEAR, THE ASSESSEE CLAIMED DEDUCTION OF THE SAID AMOUNT IN THE YEAR UNDER CONSIDERATION. HOWEVER, THE AO WHILE RELYING UPON HIS FINDINGS FOR THE PRECEDING ASSESSMENT YEARS, ALLOWED BANK GUARANTEE COMMISSION OF RS.4,06,156/- FOR THE YEAR UNDER CONSIDERATION AND DISALLOWED THE REMAINING AMOUNT OF RS.2,57,585/- . 3. ON APPEAL, THE ASSESSEE WHILE RELYING UPON TH E DECISIONS IN THE CASE OF ADDL. CIT VS. AKKAMBA TEXTILES LTD. 227 ITR 464 (SC),CIT VS. SHIVAKAMI MILLS LTD. 227 ITR 465 (SC),MIHIR TEX TILES LTD. VS. CIT 251 ITR 686 (GUJ) AND KINETIC ENGINEERING LTD. VS. CIT 233 ITR 762 (BOM) CONTENDED THAT THE AMOUNT OF RS.2,76,784/- DISALLOWED IN AY 2003-04 MAY BE ALLOWED IN THE YEAR UNDER CONSIDERA TION. CONSIDERING THESE SUBMISSIONS, THE LD. CIT(A) WHILE UPHOLDING THE DISALLOWANCE OF RS.2,57,585/- ON THE BASIS OF HIS O WN FINDINGS IN THE AY 2002- 03 AND 2003-04, DIRECTED TO ALLOW DEDUCTION FOR AN AMOUNT OF RS.2.76,784/- ITA NO.1596/A/07 & C O NO. 133/A/07 KARNAVATI INFRASTRUCTURE PVT. LTD. 4 DISALLOWED DURING A.Y. 2003-04 AND PERTAINING TO TH E YEAR UNDER CONSIDERATION IN THE LIGHT OF HIS ORDER DATED 12.10.2006 IN THE APP EAL FOR THE A.Y. 2003-04 4. THE REVENUE IS NOW IN APPEAL BEFORE US AGAINST T HE AFORESAID FINDINGS OF THE LD. CIT(A). THE LEARNED DR SUPPORTE D THE ORDER OF THE AO WHILE THE LEARNED AR ON BEHALF OF THE ASSESSEE S UPPORTED THE FINDINGS OF THE LD. CIT(A). 5. WE HAVE HEARD BOTH THE PARTIES AND GONE THROUG H THE FACTS OF THE CASE. UNDISPUTEDLY, THE LD. CIT(A) MERELY ALLOW ED THE CLAIM OF RS.2,76,784/- ON THE BASIS OF HIS OWN FINDINGS IN THE PRECEDING ASSESSMENT YEAR I.E AY 2003-04. THE LD. DR APPEARIN G BEFORE US DID NOT POINT OUT ANY INFIRMITY IN THESE FINDINGS OF TH E LD. CIT(A) NOR INFORMED THE FATE OF ORDER OF THE LD. CIT(A) FOR TH E AY 2003-04 IN FURTHER APPEAL. IN THESE CIRCUMSTANCES, ESPECIALLY WHEN THERE IS NO MATERIAL BEFORE US TO TAKE A DIFFERENT VIEW IN THE MATTER, WE ARE NOT INCLINED TO INTERFERE WITH THE FINDINGS OF THE LD. CIT(A). THEREFORE, GROUND NO.1 IN THE APPEAL IS DISMISSED. 6 GROUND NO 2 IN THE APPEAL OF THE REVENUE RELATES TO DISALLOWANCE OF RS.1,03,085/- ON ACCOUNT OF DELAYED PAYMENT OF CONTRIBUTION TOWARDS THE PROVIDENT FUND. SINCE THE ASSESSEE DID NOT FURNISH ANY EVIDENCE OF PAYMENT OF PF ON OR BEFORE THE DUE DATE ALONG WITH RETURN OF INCOME, THE AO ASKED THE ASSES SEE TO FURNISH THE DETAILS OF PAYMENT OF EMPLOYERS' AND EMPLOYEES' CONTRIBUTION TOWARDS PROVIDENT FUND. IN RESPONSE, THE ASSESSEE V IDE THEIR LETTER DATED 10.03.2006 WHILE RELYING UPON DECISION DATED 28-5-2001 IN THE CASE OF KANAI PAPER & INDUSTRIES LTD., CALCUTTA VS . AC1T CO. CIRCLE, 7(2), CALCUTTA [ITA NO. 1260 (CAL) OF 1996] AND THE DECIS ION OF AHMEDABAD TRIBUNAL IN THE CASE OF SHREE VALLABH GLASS WORKS LTD, SUBMITTE D THAT EMPLOYER'S CONTRIBUTION HAVING BEEN PAID MUCH BEFORE THE DUE D ATE FOR FILING OF THE RETURN OF INCOME, NO DISALLOWANCE U/S. 43B IS REQUIRED TO BE MADE. HOWEVER , THE AO FOUND ON PERUSAL OF THE DETAILS OF PAYMENT OF EMPL OYER'S CONTRIBUTION ITA NO.1596/A/07 & C O NO. 133/A/07 KARNAVATI INFRASTRUCTURE PVT. LTD. 5 AND EMPLOYEE'S CONTRIBUTION TO PROVIDENT FUND THAT ON SEVERAL OCCASIONS PAYMENTS OF EMPLOYER'S AND EMPLOYEES' CON TRIBUTION TO THE PROVIDENT FUND HAD BEEN MADE AFTER THE DUE DATE FOR MAKING SUCH PAYMENT, AS DETAILED HEREUNDER: CONTRIBUTION TO PROVIDENT FUND:- MONTH EMPLOYEES CONTRIBUTION EMPLOYERS CONTRIBUTION TOTAL ACTUAL DATE OF PAYMENT DUE DATE OF PAYMENT APRIL,04 10,058 10,478 20,536 08-06-04 20-05-04 MAY,04 9,880 10,292 20,172 30-07-04 20-06-04 JUNE,04 8,449 8,801 17,250 09-08-04 20-07-04 JULY,04 8,188 8,529 16,717 19-09-04 20-08-04 AUG. 04 7,236 7,538 14,774 29-12-04 20-09-04 SEPT.04 7,980 8,312 16,292 29-12-04 20-10-04 OCT.04 7,729 8,051 15,780 29-12-04 20-11-04 NOV.04 7,051 7,345 14,396 29-12-04 20-12-04 DEC.04 7,743 8,066 15,809 23-02-05 20-01-05 JAN.05 7,303 7,613 14,916 23-02-05 20-02-05 166642 6.1 AS IS EVIDENT FROM THE AFORESAID DETAILS, TH E AFORESAID PAYMENTS MADE DURING THE FY 2004-05 RELATE TO THE P ERIOD RELEVANT TO THE AY 2005-06 & NOT THE YEAR UNDER CONSIDERATIO N. IN ANY CASE, THE AO WHILE REFERRING TO PROVISIONS OF SEC. 43B OF THE ACT DISALLOWED THE CLAIM FOR DEDUCTION OF RS.1,03,085/- CONTRIBUT ED TOWARDS PROVIDENT FUND ON THE GROUND THAT THESE WERE PAID BEYOND DUE DATES . THE RELEVANT DETAILS OF AMOUNT OF RS. 1,03,085/- ARE NOT EVIDENT FROM THE O RDER OF THE AO. 7. ON APPEAL, THE LEARNED CIT(A) ALLOWED THE CLAIM FOR DEDUCTION OF RS.103085/- , THE ASSESSEE HAVING MADE THE PAYMENT OF PF BEFORE FILING OF THE RETURN. THE LEARNED CIT(A) ALSO NOWHERE REFERRED TO THE DETAILS RELEVANT FOR THE YEAR UNDER CONSIDERATION AND MERELY REPRODUCED THE DETAILS REFERRED TO BY THE AO IN HIS ORDER. ITA NO.1596/A/07 & C O NO. 133/A/07 KARNAVATI INFRASTRUCTURE PVT. LTD. 6 8. THE REVENUE IS NOW IN APPEAL BEFORE US AGAINST THE AFORESAID FINDINGS OF THE LD. CIT(A).THE LEARNED DR SUPPORTED THE ORDER OF THE AO WHILE THE LD. AR RELIED ON THE FINDINGS OF THE L D. CIT(A) , EVEN WHEN THE EXACT DATE(S) OF PAYMENT TOWARDS PF WERE N OT SUBMITTED WHILE THE DETAILS REFERRED TO IN THE IMPUGNED ORDER S RELATE TO THE PERIOD RELEVANT TO THE AY 2005-06. 9. WE HAVE HEARD BOTH THE PARTIES AND GONE THROUGH THE FACTS OF THE CASE. AS REGARDS EMPLOYERS AS WELL AS EMPLOYE ES CONTRIBUTION TOWARDS PF/ESI , WE FIND THAT THE ITAT AHMEDABAD B ENCHES NOW HAVE BEEN CONSISTENTLY FOLLOWING THE DECISION OF THE HON BLE DELHI HIGH COURT IN THE CASE OF CIT V. P.M.ELECTRONICS LTD., 220 CTR 635 (D ELHI), WHEREIN FOLLOWING THE DECISION OF HONBLE APEX COURT IN THE CASE OF CIT VS. VINAY CEMENT LTD.,213 CTR (SC) 268 , THE HONBLE COURT CONCURRED WITH TH E VIEW TAKEN BY THE HONBLE MADRAS HIGH COURT IN NEXUS COMPUTER (P) LTD.,219 CT R(MAD) 54 IN HOLDING THAT EMPLOYER/EMPLOYEES CONTRIBUTION TOWARDS PROVIDENT FUND PAYMENTS MADE AFTER THE DUE DATE PRESCRIBED UNDER THE EMPLOYEES PROVIDE NT FUND ACT AND RULES MADE THEREUNDER AND BEFORE THE DUE DATE FOR FURNISH ING THE RETURN OF INCOME UNDER SUB SEC. 1 OF SEC. 139 OF THE ACT, ARE ALLOWA BLE UNDER S.36(1)(VA) READ WITH SEC. 2(24(X) AND SEC. 43B OF THE ACT. 9.1 MOREOVER, RECENTLY HONBLE APEX COURT IN THE CASE O F CIT VS ALOM EXTRUSIONS LTD 319 ITR 306 (SC) HELD THAT THE OMISS ION OF THE SECOND PROVISO TO SECTION 43B OF THE ACT BY THE FINANCE ACT, 2003, OP ERATED, RETROSPECTIVELY, IS WITH EFFECT FROM, APRIL 1, 1988 AND NOT PROSPECTIVELY FR OM APRIL 1, 2004. HONBLE COURT OBSERVED THAT EARLIER UNDER THE SECOND PROVISO TO SECTION 43B AS AMENDED BY THE FINANCE ACT, 1989, THE ASSESSEES WERE ENTITLED TO DEDUCTION ONLY IF THE CONTRIBUTION STOOD CREDITED ON OR BEFORE THE DUE DA TE GIVEN IN THE PROVIDENT FUNDS ACT. THIS CREATED FURTHER DIFFICULTIES AND O N A REPRESENTATION MADE TO THE FINANCE MINISTRY ONE MORE AMENDMENT WAS MADE BY THE FINANCE ACT, 2003. THOUGH THIS AMENDMENT WAS MADE APPLICABLE WITH EFFE CT FROM APRIL 1, 2004, THE AMENDMENT WAS CURATIVE IN NATURE AND APPLIED RETROS PECTIVELY WITH EFFECT FROM APRIL 1, 1988.IT WAS CLARIFIED THAT WHEN A PROVISO IN A SECTION IS INSERTED TO REMEDY ITA NO.1596/A/07 & C O NO. 133/A/07 KARNAVATI INFRASTRUCTURE PVT. LTD. 7 UNINTENDED CONSEQUENCES AND TO MAKE THE SECTION WOR KABLE, THE PROVISO WHICH SUPPLIES AN OBVIOUS OMISSION THEREIN IS REQUIRED TO BE READ RETROSPECTIVELY IN OPERATION, PARTICULARLY TO GIVE EFFECT TO THE SECTI ON AS A WHOLE. 9.2 HONBLE DELHI HIGH COURT IN ANOTHER DECISION DATED 23.12.2009 IN CIT VS. AIMIL LTD.(DELHI)IN ITA NO. 1063/2008 OBSERVED THAT SEC. 2(24)(X) PROVIDES THAT AMOUNTS RECEIVED BY AN ASSESSEE FROM EMPLOYEES TOWA RDS PF CONTRIBUTIONS ETC SHALL BE INCOME. S. 36 (1) (VA) PROVIDES THAT IF SUCH SUMS ARE CONTRIBUTED TO THE EMPLOYEES ACCOUNT IN THE RELEVANT FUND ON OR BEFORE THE DUE DATE SPECIFIED IN THE PF LEGISLATION, THE ASSESSEE SHALL BE ENTITLED TO A DEDUCTION. THE SECOND PROVISO TO S. 43B (B) PROVIDED THAT ANY SUM PAID BY THE ASS ESSEE AS AN EMPLOYER BY WAY OF CONTRIBUTION TO ANY PROVIDENT FUND SHALL BE ALLO WED AS A DEDUCTION ONLY IF PAID ON OR BEFORE THE DUE DATE SPECIFIED IN 36(1)(VA) OF THE ACT. AFTER THE OMISSION OF THE SECOND PROVISO W.E.F 1.4.2004, THE DEDUCTION IS ALLOWABLE UNDER THE FIRST PROVISO IF THE PAYMENT IS MADE ON OR BEFORE THE DUE DATE FOR FURNISHING THE RETURN OF INCOME. THE HONBLE HIGH COURT WHILE CONSIDERING WHETHER THE BENEFIT OF S. 43B CAN BE EXTENDED TO EMPLOYEES CONTRIBUTION AS W ELL WHICH ARE PAID AFTER THE DUE DATE UNDER THE PF LAW BUT BEFORE THE DUE DATE F OR FILING THE RETURN, HELD THAT (I) THOUGH THE REVENUE HAS ARGUED THAT A DISTINCTIO N IS TO BE MADE BETWEEN EMPLOYERS CONTRIBUTION AND EMPLOYEES CONTRIBUT ION AND THAT EMPLOYEES CONTRIBUTION BEING IN THE NATURE OF TRUST MONEY IN THE HANDS OF THE ASSESSEE CANNOT BE ALLOWED AS A DEDUCTION IF NOT PAID ON OR BEFORE THE DUE DATE SPECIFIED IN THE PF ETC LAW, THE SCHEME OF THE ACT IS THAT EM PLOYEES CONTRIBUTION IS TREATED AS INCOME U/S 2 (24) (X) ON RECEIPT BY THE ASSESSEE AND ALLOWED AS A DEDUCTION U/S 36 (1) (VA) ON MAKING DEPOSIT WITH THE CONCERNE D AUTHORITIES. S. 43B (B) STIPULATES THAT SUCH DEDUCTION WOULD BE PERMISSIBLE ONLY ON ACTUAL PAYMENT; (II) THE QUESTION AS TO WHEN ACTUAL PAYMENT SHOULD BE MADE IS ANSWERED BY VINAY CEMENTS 213 CTR 268 WHERE THE DELETION OF THE SECOND PROVI SO TO S. 43B W.E.F 1.4.2004 WAS HELD APPLICABLE TO EARLIER YEARS AS WELL. AS THE DELETION OF THE 2ND PROVISO IS RETROSPECTIVE, THE CASE HAS TO BE GO VERNED BY THE FIRST PROVISO. DHARMENDRA SHARMA 297 ITR 320 (DEL) & P.M. ELECTRONICS 313 ITR 161 (DELHI) FOLLOWED; (III) IF THE EMPLOYEES CONTRIBUTION IS NOT DEPOSIT ED BY THE DUE DATE PRESCRIBED UNDER THE RELEVANT ACTS AND IS DEPOSITED LATE, THE EMPLOYER NOT ONLY PAYS INTEREST ON DELAYED PAYMENT BUT CAN INCUR PENALTIES ALSO, FO R WHICH SPECIFIC PROVISIONS ARE MADE IN THE PROVIDENT FUND ACT AS WELL AS THE ESI A CT. THEREFORE, THE ACT PERMITS ITA NO.1596/A/07 & C O NO. 133/A/07 KARNAVATI INFRASTRUCTURE PVT. LTD. 8 THE EMPLOYER TO MAKE THE DEPOSIT WITH SOME DELAYS, SUBJECT TO THE AFORESAID CONSEQUENCES. INSOFAR AS THE INCOME-TAX ACT IS CONCERNED, THE ASS ESSEE CAN GET THE BENEFIT IF THE ACTUAL PAYMENT IS MADE B EFORE THE RETURN IS FILED, AS PER THE PRINCIPLE LAID DOWN IN VINAY CEMENT . 9.3 IN VIEW OF THE FOREGOING, SINCE THE RELEVAN T DETAILS FOR THE PERIOD RELEVANT TO THE YEAR UNDER CONSIDERATION ARE NOT AV AILABLE BEFORE US NOR HAVE BEEN REFERRED TO IN THE IMPUGNED ORDERS, W E CONSIDER IT FAIR AND APPROPRIATE TO VACATE THE FINDINGS OF THE LD. C IT(A) AND RESTORE THE MATTER TO THE FILE OF THE AO WITH THE DIRECTION S TO VERIFY THE DETAILS OF PAYMENTS TOWARDS PF FOR THE YEAR UNDER C ONSIDERATION AND IN THE EVENT THESE HAVE BEEN PAID ON OR BEFORE THE DUE DATE FOR FILING OF THE RETURN, THE CLAIM OF THE ASSESSEE SHOULD BE ALLOWED IN ACCORDANCE WITH LAW IN THE LIGHT OF AFORESAID JUDIC IAL PRONOUNCEMENTS. THE ASSESSEE IS ALSO DIRECTED TO SU BMIT THE RELEVANT DETAILS BEFORE THE AO SUO MOTU IN ORDER TO ENABLE HIM TO DECIDE THE ISSUE EXPEDITIOUSLY. WITH THESE DIRECTIO NS, GROUND NO.2 IN THE APPEAL OF THE REVENUE IS DISPOSED OF. 10. COMING NOW TO GROUND NO.1 IN THE CO OF THE ASSE SSEE FOR THE AY 2004-05,THE AO NOTICED THAT ASSESSEE CLAIMED D EDUCTION ON ACCOUNT OF DONATION OF RS.L2,000/- TO THE SARPANCH (VILLAGE HEAD) OF GANGPUR VILLAGE FOR FLOOD RELIEF. SINCE THE DONATIO N PAID WAS NEITHER BUSINESS EXPENDITURE NOR COVERED U/S 80G OF THE AC T, THE AO CONCLUDED THAT THE SAID DONATION WAS NOT ALLOWABLE AS BUSINESS EXPENDITURE. 11. ON APPEAL, THE LEARNED CIT(A) CONFIRMED THE D ISALLOWANCE, THE ASSESSEE HAVING NOT EXPLAINED AS TO HOW IT COULD BE CONSIDERED A BUSINESS EXPENDITURE, RELYING, INTER ALIA, ON THE DECISION I N THE CASE OF VOLTAS LTD. VS. CIT, 207 ITR 47-54, HOLDING THAT DONATION MADE FOR FLOOD RELIEF IS NOT DEDUCTIBLE AS BUSINESS EXPENDITURE. ITA NO.1596/A/07 & C O NO. 133/A/07 KARNAVATI INFRASTRUCTURE PVT. LTD. 9 12. THE ASSESSEE IS NOW IN APPEAL BEFORE US. THE L EARNED AR ON BEHALF OF THE ASSESSEE REITERATED THEIR SUBMISSIONS BEFORE THE LD. CIT(A) WHILE THE LD. DR SUPPORTED THE FINDINGS OF T HE LD. CIT(A) 13. WE HAVE HEARD BOTH THE PARTIES AND GONE THRO UGH THE FACTS OF THE CASE. THE LD. AR APPEARING BEFORE US HAS NOT EX PLAINED AS TO HOW THE AMOUNT CAN BE ALLOWED AS BUSINESS EXPENDITU RE NOR MADE ANY SUBMISSION THAT AMOUNT IS ADMISSIBLE U/S 80G OF THE ACT. THE LD. AR HAS NOT PRODUCED BEFORE US ANY EVIDENCE EST ABLISHING NEXUS OF THE DONATION WITH THE BUSINESS CARRIED ON BY THE ASSESSEE. HONBLE BOMBAY HIGH COURT IN THE CASE OF VOLTAS LTD . VS. CIT,207 ITR 47 HELD THAT THE ONUS IS ON THE ASSESSEE CLAIM ING DONATION TOWARDS FLOOD RELIEF AS BUSINESS EXPENDITURE U/S 37(1) OF THE ACT , TO ESTABLISH THAT WHAT IS APPARENT IS NOT REAL; IT IS FOR HIM TO LIFT THE VEI L TO SHOW THE REAL NATURE OF THE PAYMENT. ACCORDINGLY, THE HONBLE HIGH COURT HELD THAT THEREBEING NO NEXUS BETWEEN THE BUSINESS AND THE DONATION, THE AMOUNT W AS NOT ADMISSIBLE AS A DEDUCTION. IN THE INSTANT CASE BEFORE US , THE ASSE SSEE CLAIMED THAT THE PAYMENT WAS MADE TO THE SARPANCH FOR FLOOD RELIEF TO HELP THE FLOOD AFFECTED PEOPLE. WE ARE OF THE OPINION THAT THIS, IN FACT, IS A CASE OF APPLICATION OF INCOME. THERE IS NO EVIDENCE ON RECORD , ESTABLISHING THE NEXUS BETWEEN THE DONATION AND BUSINESS CARRIED ON BY THE ASSESSEE NOR THE ASSESSEE CLAIMED THAT IT WAS ENTITLED TO DEDUCTION U/S 80G OF THE ACT. IN THESE CIRCUMSTANCE S, WE ARE NOT INCLINED TO INTERFERE WITH THE FINDINGS OF THE LD. CIT(A). THER EFORE GROUND NO.1 IN THE CO IS DISMISSED. 14. GROUND NO.2 IN THE CROSS OBJECTION RELATES TO T HE DISALLOWANCE OF RS.27,345/-. ON ACCOUNT OF DIWALI GIFTS. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE AO NOTICED THAT THE ASS ESSEE CLAIMED DEDUCTION OF RS.27,345/- DEBITED UNDER THE HEAD 'A DMINISTRATIVE EXPENSES' IN THE P&L ACCOUNT. TO A QUERY BY THE AO, THE ASSESSEE FURNISHED VIDE LETTER DATED 10.03.2006 A COPY OF DI WALI GIFT ACCOUNT, WHEREFROM IT TRANSPIRED THAT THE DIWALI GIFT ITEMS OF RS.27,345/- WERE ITA NO.1596/A/07 & C O NO. 133/A/07 KARNAVATI INFRASTRUCTURE PVT. LTD. 10 PURCHASED FROM WELCOME HOME APPLIANCES. SINCE THE A SSESSEE DID NOT FURNISH ANY EXPLANATION OR JUSTIFICATION AS TO HOW THESE EXPENSES WERE ALLOWABLE AS BUSINESS EXPENDITURE NOR ANY EVID ENCE AS TO WHOM THESE GIFTS WERE GIVEN, THE AO DISALLOWED THE CLAIM. 15. ON APPEAL, THE ASSESSEE SUBMITTED THAT VARIOUS GIFTS ITEMS WERE GIVEN TO EMPLOYEES OF THE COMPANY ON THE OCCAS ION OF DIWALI TO BOOST THEIR MORALE AND THEREFORE, THE SAID EXPEN DITURE WAS ALLOWABLE. HOWEVER, THE LD. CIT(A) OBSERVED THAT NO EVIDENCE HAD BEEN FILED BEFORE HIM IN SUPPORT OF THE CLAIM THAT THE G IFTS WERE GIVEN TO THE EMPLOYEES NOR SUCH EVIDENCE HAD BEEN FILED BEFORE THE AO. IN THE ABSENCE OF ANY EVIDENCE, THE LD. CIT(A) UPHELD THE DISALLOWANCE. 16. THE ASSESSEE IS NOW IN APPEAL BEFORE US. THE L EARNED AR ON BEHALF OF THE ASSESSEE REITERATED THEIR SUBMISSIONS BEFORE THE LD. CIT(A) WHILE THE LD. DR SUPPORTED THE FINDINGS OF T HE LD. CIT(A) 17. WE HAVE HEARD BOTH THE PARTIES AND GONE THROUG H THE FACTS OF THE CASE. WE FIND THAT BEFORE THE AO THE ASSESSEE DID NOT FURNISH ANY EXPLANATION OR JUSTIFICATION AS TO HOW THE AMOU NT CAN BE ALLOWED AS BUSINESS EXPENDITURE WHILE BEFORE THE LD. CIT(A) THE ASSESSEE CLAIMED THAT GIFTS WERE GIVEN TO EMPLOYEES . HOWEVE R, THE ASSESSEE DID NOT SUBSTANTIATE THEIR CLAIM. THE LD. AR APPEAR ING BEFORE US HAS NOT EXPLAINED AS TO HOW THE AMOUNT CAN BE ALLOWED A S BUSINESS EXPENDITURE, WHEN THERE IS NO EVIDENCE ON RECORD T HAT AFORESAID GIFTS WERE GIVEN TO THE EMPLOYEES. SINCE NEITHER BE FORE THE AO/LD. CIT(A) NOR EVEN BEFORE US , THERE IS ANY EVIDENCE, SUGGESTING THAT THE GIFTS WERE GIVEN TO THE EMPLOYEES ON THE OCCASI ON OF DIWALI, WE ARE NOT INCLINED TO INTEREFERE WITH THE FINDINGS OF THE LD. CIT(A). THEREFORE, GROUND NO.2 IN THE CO IS ALSO DISMISSED. ITA NO.1596/A/07 & C O NO. 133/A/07 KARNAVATI INFRASTRUCTURE PVT. LTD. 11 18. GROUND NOS. 3 & 4 IN THEIR APPEAL FOR THE AY 2 004-05,BEING GENERAL IN NATURE, DO NOT REQUIRE ANY SEPARATE ADJU DICATION AND ARE, THEREFORE, DISMISSED. 19. IN THE RESULT, APPEAL OF THE REVENUE IS PARTLY ALLOWED FOR STATISTICAL PURPOSES WHILE CO OF THE ASSESSEE IS D ISMISSED. ORDER PRONOUNCED IN THE COURT TODAY ON 18 -6-2010 SD/- SD/- (D T GARASIA) JUDICIAL MEMBER (A N PAHUJA) ACCOUNTANT MEMBER DATE : 18-6-2010 COPY OF THE ORDER FORWARDED TO: 1. KARNAVATI INFRASTRUCTURE PVT. LTD., D/501, STAT US OPP. T V TOWER, DRIVE-IN-ROAD, GURUKUL, AHMEDABAD 2. THE DCIT, CIRCLE-4, AHMEDABAD 3. CIT CONCERNED 4. CIT(A)-VII, AHMEDABAD 5. THE DR, C BENCH, ITAT, AHMEDABAD 6. GUARD FILE BY ORDER DEPUTY REGISTRAR ASSISTANT REGISTRAR ITAT, AHMEDABAD