DCIT, Circle - 10(2), Kolkata , Kolkata V. M/s. V2 Retail Ltd., New Delhi

ITA 1794/KOL/2018

• Counselvise Citation: [2019] 117 COUNSELVISE.COM (IT) 0283 (ITAT-KOLKATA)
• Duration Of Justice: 10 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-06-2019
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Assessment Year: 2012-2013
• Appeal Filed On: 20-08-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SHANKAR HALDER
• Assessee Lawyers: NIRAV SETH
• Keywords: Business income; Earning of tax free income; Capital receipt; TDS; Rule 8D
• Section: 143(3); 14A; 115JB; 139(1); 37

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL D, BENC H KOLKATA BEFORE SHRI S.S.GODARA, JM &DR. A.L.SAINI, AM ./ITA NO.1794/KOL/2018 ( / ASSESSMENT YEAR:2012-13) DCIT, CIRCLE-10(2), KOLKATA VS. M/S V2 RETAIL LTD. PLOT NO. 08, POCKET NO. 02, BLOCK-A, RANGPURI EXTENSION, MAHIPALPUR, NEW DELHI-110037. ./ ./PAN/GIR NO.: AABCV 5632 P (ASSESSEE) .. (REVENUE) ASSESSEEBY : SHRI SHANKAR HALDER, JCIT, SR. DR RESPONDENT BY :SHRI NIRAV SETH, FCA / DATE OF HEARING : 16/04/2019 /DATE OF PRONOUNCEMENT : 28/06/2019 / O R D E R PER DR. A. L. SAINI: THE CAPTIONED APPEAL FILED BY THE REVENUE, PERTA INING TO ASSESSMENT YEAR 2012-13, IS DIRECTED AGAINST THE ORDER PASSED BY TH E COMMISSIONER OF INCOME TAX (APPEAL)-4, KOLKATA, WHICH IN TURN ARISES OUT OF AN ASSESSMENT ORDER PASSED BY THE ASSESSING OFFICER U/S 143(3) OF THE INCOME TAX ACT, 1961 (IN SHORT THE ACT) DATED 16/03/2015. 2. GROUNDS OF APPEAL RAISED BY THE REVENUE ARE AS F OLLOWS: 1. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE LD. CIT(A) ERRED IN WHETHER THE LD. CIT(A) WAS CORRECT IN DELETING THE ADDITION OF RS. 97,75,000/- ON ACCOUNT OF CREDIT TO CAPITAL RESERVE BY HOLDING THAT PROFIT ARISING ON ACCOUNT OF FORFEITURE OF SHARES IS CAPIT AL RECEIPT IN NATURE? M/S V2 RETAIL LTD. ITA NO.1794/KOL/2018 ASSESSMENT YEAR:2012-13 2. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE LD. CIT(A) ERRED IN ALLOWING THE INTEREST ON UNSECURED LOAN OF RS.27,34 ,728/- WHEN THE ASSESSEE WAS GIVEN AMPLE OPPORTUNITY DURING ASSESSMENT PROC EEDINGS TO PROVE THE GENUINENESS OF LOAN CREDITORS BUT IT FAILED? 3. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE LD. CIT(A) ERRED IN DELETING THE DISALLOWANCES U/S 14A OF I.T. ACT, 196 1 ON GROUND THAT THERE IS NO EXEMPT INCOME CONTRARY TO CBDT CIRCULAR NO.5/201 4 DATED 11/02/2014? 4. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE LD. CIT(A) ERRED IN DELETING THE DISALLOWANCE MADE U/S 36(1)(VA) OF THE I.T. ACT, 1961 ON ACCOUNT OF THE ASSESSEES FAILURE TO DEPOSIT EMPLOY EES CONTRIBUTION TOWARDS STATUTORY ESI AND PF WITHIN THE DUE DATE A S PRESCRIBED? 5. THAT THE APPELLANT CRAVES TO ADD, DELETE OR MODI FY ANY OF THE GROUNDS OF APPEAL BEFORE OR AT THE TIME OF HEARING. 3. GROUND NO. 1 RAISED BY THE REVENUE RELATES TO AD DITION OF RS. 97,75,000/- ON ACCOUNT OF CREDIT TO CAPITAL RESERVE BY HOLDING THA T PROFIT ARISING ON ACCOUNT OF FORFEITURE OF SHARES IS CAPITAL RECEIPT IN NATURE. 4. BRIEF FACTS QUA THE ISSUE ARE THAT DURING THE F. Y. UNDER CONSIDERATION, IT HAS BEEN OBSERVED BY AO THAT THE BALANCE SHEET UNDER THE H EAD RESERVE & SURPLUS, AN AMOUNT OF' RS.3,29,01,250/- HAS BEEN CREDITED BY TH E ASSESSEE-COMPANY TOWARDS CAPITAL RESERVE'. HOWEVER, IN THE F.Y. 2011-12, RE LEVANT TO THE A.Y. 2012-13,IT WAS NOTED THAT THE ASSESSEE-COMPANY HAS NOT ADDED THE AMOUNT INCREASED ON ACCOUNT OF CAPITAL RESERVE EITHER IN THE NORMAL CO MPUTATION OR UNDER BOOK PROFIT U/S. 115JB OF THE I.T. ACT, 1961. ON BEING ASKED, T HE ASSESSEE-COMPANY HAS SUBMITTED THAT THE SAME ISSUE HAD BEEN RAISED IN TH E IMMEDIATELY PRECEDING YEAR WHEREIN THE BASIS OF ACCOUNTING FOR CAPITAL RESERVE AMOUNTING TO RS.605,23,24,263/- (EARLIER YEAR) WAS ON ACCOUNT OF , RESTRUCTURING OF BUSINESS OF THE ASSESSEE-COMPANY BY WAY OF SLUMP SALE OF ITS WH OLESALE AND RETAIL BUSINESS TO TPG WHOLESALE PVT. LTD. AND AIRPLAZA RETAIL HOLDING S PVT. LTD. RESPECTIVELY. THE ASSESSEE-COMPANY HAS ALSO, DURING THE PRECEDING F.Y . 2010-11, HAD VOLUNTARILY ADDED THE SURPLUS ON SALE OF BUSINESS IN THE COMPUT ATION OF INCOME UNDER NORMAL PROVISION ONLY. BUT, THE AMOUNT OF SUCH SURPLUS WAS ALSO ADDED TO THE BOOK PROFIT M/S V2 RETAIL LTD. ITA NO.1794/KOL/2018 ASSESSMENT YEAR:2012-13 U/S. 115JBOF THE ACT BY THE AO WHILE PASSING THE OR DER. DURING THE YEAR IN QUESTION, THE ASSESSEE-COMPANY HAS GIVEN THE BREAK- UP OF CAPITAL RESERVE WHICH IS WORKED OUT AS UNDER :- (I) ON ACCOUNT OF FORFEITURE AT SHARES : RS, 97,75, 000/- (II) DIFFERENTIAL AMTRECE ON ACCOUNT OF SALE OF BUS INESS, SLUMP SALE: RS,2,31.26,250/- TOTAL:RS.3.29,01.250/- THE ASSESSEE-COMPANY SUBMITTED BEFORE THE AO THAT O UT OF THE DIFFERENTIAL AMOUNT OF RS.2,31,26,250/-, THE ASSESSEE-COMPANY HAS TO RE PAY, RS. 2,57,26,012/- IN THE SUBSEQUENT YEAR, I.E., F.Y. 2013-14 AND IT WAS DEBI TEDTO CAPITAL RESERVE IN THE SAID YEAR. THE ASSESSEE HAS ALSO SUBMITTED THAT IN VIEW OF THE AFORESAID REASON, THE ASSESSEE-COMPANY HAS NOT OFFERED RS.2,31,26,250/-AS TAXABLE INCOME FOR THE YEAR. FURTHERMORE, AS TO THE ISSUE OF FORFEITURE OF SHARE S, IT HAS BEEN SUBMITTED BY THE ASSESSEE-COMPANY THAT THE COMPANY CAME OUT WITH PRE FERENTIAL ALLOTMENT OF 39,10,000 CONVERTIBLE SHARE WARRANTS TO ITS PROMOTE RS DURING F.Y. 2009-10 AT AN ISSUE PRICE OF RS 60/- CALCULATED UNDER SEBI (DIP) GUIDELINES, 2000 ON PREFERENTIAL BASIS DULY APPROVED BY SHAREHOLDERS AN D BOARD OF DIRECTORS OF THE COMPANY. THESE WARRANTS OF RS.10/- EACH WERE ISSUED ON 30.10.2009 (AGAINST WHICH RS. 2.50 PER WARRANT HAD BEEN RECEIVED ) AND WERE CONVERTIBLE INTO EQUITY SHARES ON OR BEFORE 18 MONTHS FROM THE DATE OF ISSU E. THE PROMOTERS FAILED TO PAY BALANCE AMOUNT OF SHARE WARRANTS AND CONSEQUENTLY T HE AMOUNT WHICH WAS PAID BY THEM (RS. 97,75,000/-) WAS FORFEITED ON APRIL, 2012 . AFTER GOING THROUGH THE REPLY OF THE ASSESSEE, THE AO NOTED THAT ASSESSEE HAS NOT SUBMITTED ANY EVIDENCE IN SUPPORT OF HIS VERSION. T HE AMOUNT OF RS. 97,75,000/- ADDED TO THE CAPITAL RESERVE ON ACCOUNT FORFEITURE OF SHARES IS INCOME OF THE ASSESSEE COMPANY AND SHOULD HAVE PASSED THROUGH PRO FIT AND LOSS ACCOUNT. SIMILARLY, THE AO NOTED THAT THE DIFFERENTIAL AMOUN T RECEIVED ON ACCOUNT OF SALE OF BUSINESS SLUMP SALE AMOUNTING TO RS. 2,31,26,250/- IS INCOME OF THE ASSESSEE AND SHOULD HAVE PASSED THROUGH PROFIT AND LOSS ACCOUNT. AS SUCH, THE AMOUNT OF RS. 3,29,01,250/- (RS. 2,31,26,250 +RS. 97,75,000) IN TOTAL, WAS CONSIDERED BY AO AS INCOME OF THE ASSESSEE-COMPANY DURING THE YEAR. M/S V2 RETAIL LTD. ITA NO.1794/KOL/2018 ASSESSMENT YEAR:2012-13 5. AGGRIEVED BY THE ORDER OF THE ASSESSING OFFICER, THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE LD. CIT(A) WHO HAS DELETED THE ADDITION MADE BY AO OBSERVING THE FOLLOWING: REGARDING RS. 2,31,26,250/- CREDITED TO CAPITAL R ESERVE ACCOUNT, IT IS SEEN THAT THE SAID SUM HAS BEEN CONTEMPLATED BY THE APPELLANT COMPANY AS DIFFERENTIAL AMOUNT RECEIVED ON BUSINESS SALE. TO ELABORATE IT, THE AR SUBMITTED THE AUDITED ACCOUNTS OF FY 2010-11 (AY 2011-12) WHEREIN THE TRA NSACTION OF SALE OF BUSINESS TOOK PLACE. REFERENCES WERE MADE TO THE 'SCHEDULE N O.3 - RESERVES & SURPLUS' AND 'SCHEDULE NO.20 - NOTES ON ACCOUNTS' OF THE SAI D ACCOUNTS WHEREIN THE ENTIRE NATURE OF THE BUSINESS RESTRUCTURING TRANSACTION WA S EXPLAINED. ALSO, THE AR SUBMITTED THE COPY OF AUDITED ACCOUNTS OF FY 2013-1 4 (AY 2014-15) WHEREIN THE CAPITAL RESERVE ACCOUNT WAS DEBITED FOR RS. 2,57,26 ,012/-. IT WAS ALSO SUBMITTED THAT CREDIT TO CAPITAL RESERVE ACCOUNT REPRESENT DI FFERENTIAL RECEIPTS, PURSUANT TO BUSINESS, RESTRUCTURING ARRANGEMENT DONE BY THE APP ELLANT COMPANY IN FY 2010- 11( A.Y 2011-12). FURTHER, THIS DEBIT, OF RS. 2,57, 26,012/- IN SUBSEQUENT YEAR I.E., FY 2013-14 (AY 2014-15) ALSO REPRESENT SIMILAR NATU RE OF TRANSACTION AND DEBITED TO CAPITAL RESERVE. IT WAS SUBMITTED THAT I N AY 2014-15, THE AMOUNT DEBITED TO CAPITALRESERVE OF RS. 2,57,26,012/- WAS NOT CLAIMED IN COMPUTATION OF INCOME. ON PERUSAL OF OBSERVATIONS OF THE AO AND SUBMISSION OF THE AR, IT IS SEEN THAT THERE IS NO DISPUTE TO THE FACT THAT THE APPELLANT COMPANY UNDERWENT A MAJOR RESTRUCTURING IN FY 2010-11 (AY 2011-12) WHEREBY TH E APPELLANT COMPANY CREDITED, RS. 605.23 CRORES TO ITS CAPITAL RESERVE ACCOUNT IN THE SAID YEAR. THE NOTE REFERRED TO IN SCHEDULE NO.20 READ WITH AUDITO R'S COMMENTS IN PAGE NO.109 OF PAPER BOOK / FILED BY THE AR OF THE ASSESSEE, CL EARLY ESTABLISHES THIS FACT. THE SAID YEAR, THE COMPANY BIFURCATED, ITS ASSETS AND L IABILITIES AS ON APPOINTED DATE BETWEENTHE ACQUIRING/TRANSFEREE COMPANIES AS PER MA STER RESTRUCTURING AGREEMENT AND THE DIFFERENCE BETWEEN ASSETS AND LIA BILITIES SO TRANSFERRED WAS SHOWN AS CAPITAL RESERVE. PURSUANT TO THIS MAJOR BUSINESS RESTRUCTURING AND AS CONTEMPLATED BY THE APPELLANT COMPANY, SETTLEMENT OF A NUMBER OF PARTIE S ACCOUNTS WERE CARRIED OUT AND SOME DIFFERENTIAL PAYMENTS WERE EITHER MADE OR RECEIVED IN SUBSEQUENT YEARSI.E., IN AY 2012-13 AND AY 2014-15. ACCORDINGL Y, FOLLOWING THE TREATMENT OF THE APPELLANT COMPANY DONE IN FY 2010-11 (AY 2011-1 2), SUCH SUMS WERE CREDITED / DEBITED TO CAPITAL RESERVE ACCOUNT AND N OT TREATED AS BUSINESS RECEIPTS OR BUSINESS PAYMENTS. THE COMPUTATION OF INCOME FOR AY 2014-15 WHEREIN A SUM OF RS. 2,57,26,012/- WAS PAID BY THE APPELLANT COMP ANY ALSO SHOW THAT THE SAID AMOUNT WAS NOT CLAIMED AS A DEDUCTION / EXPENSE BY THEAPPELLANTCOMPANY. I HAVE GONE THROUGH THE ASSESSMENT ORDER FOR ASSESS MENT YEAR FOR ASSESSMENT YEAR 2014-15, WHEREIN RS. 2,31,26,250/- WHICH HAS BEEN D EBITED TO CAPITAL RESERVE HAS NOT BEEN CLAIMED. AT THE ASSESSMENT HEARING STA GE, THE APPELLANT COMPANY HAS SUBMITTED THAT THE NATURE OF DEBIT TO CAPITAL RESER VE OF RS. 2,57,26,012/- IN F.Y. 2013-14 IS SIMILAR TO THE NATURE OF CREDIT TO CAPIT AL RESERVE OF RS. 2,31,26,250/- IN THE INSTANT ASSESSMENT YEAR AND UNIFORMITY SHOUL D BE THERE FOR ALLOWANCE / DISALLOWANCE OF THE SAME. NOW FOR THE SAKE OF ARGUM ENT, EVEN IF IT IS PRESUMED THAT SAME TREATMENT SHOULD HAVE BEEN GIVEN TWO ASSE SSMENT YEARS FOR SAME NATURE OF ITEM, BUT AS FAR AS PRESENT APPEAL IS CONCERNED, THE AMOUNT OF RS. 2,31,26,250/- CREDITED TO CAPITAL RESERVE CANNOT BE TREATED AS CA PITAL RECEIPT AND HENCE THE M/S V2 RETAIL LTD. ITA NO.1794/KOL/2018 ASSESSMENT YEAR:2012-13 ADDITION OF THIS ACCOUNT IS SUSTAINED. REGARDING TR EATMENT IN A.Y. 2014-15, SINCE THE SAID APPEAL IS NOT BEFORE ME, HENCE I AM NOT GI VING ANY DIRECTIONS WITH RESPECT TO ITS TREATMENT IN A.Y. 2014-15. IN VIEW OF ABOVE, I AM OF THE OPINION THAT THE A.O. HAS CORRECTLY TREATED RS. 2,31,26,250/- AS REVENUE RECEIPT AND ADDED IT BACK TO THE TOTAL INCOME. HENCE, THE ASSESSING OFFICER IS DIRECTED TO DELETE THE ADDITION OF RS. 97,75,000/- CREDITED TO THE CAPITAL RESERVE AND I UPHELD THE AD DITION OF RS. 2,31,26,250/- CREDITED TO CAPITAL RESERVE. AS SUCH THIS GROUNDS O F APPEAL IS PARTLY ALLOWED IN FAVOUR OF APPELLANT. 6. WE NOTE THAT LD. A.R. RELIED ON THE DECISION OF THE LD CIT(A). THE LD. DR COULD NOT BRING TO OUR NOTICE ANY CASE LAWS TO CONT ROVERT THE FINDINGS OF THE LD. CIT(A). IN THE AFORESAID FACTS AND CIRCUMSTANCES O F THE CASE, WE HOLD THAT CIT(A) WAS JUSTIFIED IN DELETING THE ADDITION OF RS.97,7 5,000/-.THAT BEING SO, WE DECLINE TO INTERFERE WITH THE ORDER OF ID. C.I T.(A) DELETI NG THE AFORESAID ADDITIONS. HIS ORDER ON THIS ADDITION IS, THEREFORE, UPHELD AND T HE GROUNDS OF APPEAL OF THE REVENUE ARE DISMISSED. 7. GROUND NO. 2 RAISED BY THE REVENUE RELATES TO I NTEREST ON UNSECURED LOAN OF RS. 27,34,728/- DISALLOWED BY ASSESSING OFFICER. 8. BRIEF FACTS QUA THE ISSUE ARE THAT THIS GROUND C ONSISTS OF TWO PARTS. ONE WITH RESPECT TO INTEREST ON UNSECURED LOAN OF RS. 27,34, 728/- AND OTHER BEING INTEREST ON TDS AND SALES TAX OF RS. 5,40,581/-. WITH RESPECT TO FIRST PART WITH RESPECT TO INTEREST ON UNSECURED LOAN OF RS. 27,34,728/-, THE SUBMISSION OF THE APPELLANT DURING THE COURSE OF APPELLATE PROCEEDINGS IS REPRODUCED BELOW: IN THIS CONNECTION, IT IS SUBMITTED THAT DISALLOWE D AMOUNT OF RS. 32,75,309/- REPRESENTS INTEREST NO UNSECURED LOANS OF RS. 27,34 ,728/- AND INTEREST ON OTHER TDS & SALES TAX OF RS. 5,40,581/- RESPECTIVELY AS P ER DETAILS BELOW: SL. NO. PARTICULARS AMOUNT(RS.) 1 INTEREST ON UNSECURED LOANS- A. FRAZER GOODS & SUPPLY PVT. LTD. B. KOTHARI PROJECTS PVT. LTD. C. KOTHARI RETAIL PVT. LTD. D. USHA METAL CLEANER 5,34,248 82,232 18,49,060 2,69,179 M/S V2 RETAIL LTD. ITA NO.1794/KOL/2018 ASSESSMENT YEAR:2012-13 PVT. LTD. TOTAL(A) 27,34,728 2 INTEREST ON OTHER TDS AND SALES TAX (B) 5,40,581 TOTAL (A+B) 32,75,309 IT IS EVIDENT FROM THE TAX AUDIT REPORT FOR THE INS TANT YEAR THAT THE COMPANY HAS TAKEN UNSECURED LOAN / REPAID THE SAME INFER-ALIA F ROM / TO THE ABOVE PARTIES. (REFER PAGE NO. OF PAPER BOOK). IT CAN BE SEEN THAT UNSECURED LOANS WERE TAKEN FROM THE ABOVE MENTIONED PARTIESAND INTEREST WAS PA ID THEREON. AS EVIDENT FROM THE TAX AUDIT REPORT, UNSECURED LOANS TAKEN FROM FR AZER GOODS & SUPPLY PVT. LTD, KOTHARI PROJECTS PVT. LTD. AND USHA METAL CLEA NER PVT. LTD. WERE SQUARED UP DURING INSTANT YEAR AND UNSECURED LOAN TAKEN FROM K OTHARI RETAIL PVT. LTD. WAS NOT SQUARED OFF AND CARRIED FORWARD TO SUBSEQUENT Y EAR (REFER PAGE NO. OF PAPER BOOK). THE LD. ASSESSING OFFICER, HAS DISALLOWED SUCH INTE REST ON UNSECURED LOANS AND INTEREST ON TDS & SALES TAX; AS THE SAME WAS NOT CO RROBORATED WITH ANY DOCUMENTARY EVIDENCE. IN THIS CONNECTION; IT IS SUB MITTED THAT BREAK-UP OF INTEREST ON UNSECURED LOANS AS SHOWN ABOVE WAS ALREADY PROVI DED AT THE ASSESSMENT HEARING STAGE (REFER PAGE NO OF PAPER BOOK). FURTH ER THE LD. ASSESSING OFFICER HAS NOT ISSUED ANY SHOW-CAUSE NOTICE BEFORE DRAWING ANY ADVERSE INFERENCE REGARDING DISALLOWANCE OF RS. 32,75,309/- . 9. HAVING GONE THROUGH THE REPLY OF THE ASSESSEE, T HE LD CIT(A) HELD AS FOLLOWS: FROM THE ABOVE, IT IS CLEAR THAT THE ONLY ISSUE TH AT THE AO HAD AND WHICH WAS THE BASIS OF ADDITION MADE BY THE AO WITH RESPECT TO IN TEREST ON UNSECURED LOAN WAS THAT NO SUPPORTING WAS GIVEN BY THE APPELLANT COMPA NY WITH RESPECT TO PAYMENTS MADE AGAINST UNSECURED LOANS TAKEN BY THE APPELLANT COMPANY. THE ASSESSING OFFICER HAS NOT GIVEN ANY ADVERSE INFERENCE WITH RE SPECT TO THE GENUINENESS OF THIS TRANSACTION OR ANY OTHER FINDINGS. WITH RESPECT TO THIS, THE AR OF THE ASSESSEE HAS SU BMITTED THAT THE SAID TRANSACTION WAS DULY REPORTED IN ANNEXURE - G OF TAX AUDIT REPO RT FILED BY THE ASSESSEE DURING THE COURSE OF ASSESSMENT PROCEEDINGS. THE SA ID ANNEXURE CLEARLY SHOWS THE AMOUNT OF LOAN TAKEN BY THE ASSESSEE DURING THE INS TANT YEAR, MAXIMUM AMOUNT OUTSTANDING AND WHETHER THIS AMOUNT WAS SQUARED UP DURING THE YEAR OR NOT. APART FROM THIS, IT ALSO GIVES INFORMATION ABOUT THE NAME OF THE LENDING COMPANY, ITS ADDRESS AND PAN NUMBER: M/S V2 RETAIL LTD. ITA NO.1794/KOL/2018 ASSESSMENT YEAR:2012-13 THE AFORESAID DETAILS CONTAINED IN ANNEXURE-G OF TA X AUDIT REPORT FOR THE INSTANT YEAR (AS MENTIONED ABOVE) ARE QUITE SUFFICIENT TO C ORROBORATE THE TRANSACTION DONE BY THE APPELLANT COMPANY WITH THE AFORESAID LOAN CR EDITORS. AS THESE DETAILS WERE AVAILABLE BEFORE THE ASSESSING OFFICER AT THE STAG E OF ASSESSMENT HEARING AND HE HAS NOT GIVEN ANY ADVERSE FINDING OR DRAWN ANY ADVE RSE INFERENCE WITH RESPECT TO THE GENUINENESS OF THESE TRANSACTIONS, I AM OF THE OPINION THAT THE AO HAS SUFFICIENT MATERIAL / DOCUMENTARY EVIDENCE AVAILABL E TO CORROBORATE THE TRANSACTION OF INTEREST ON UNSECURED LOAN PAID BY THE APPELLANT COMPANY. IF THE A.O. WANTED TO MAKE DISALLOWANCE HE SHOULD HAVE GIVEN THE ASSES SEE A SHOW CAUSE OR WOULD HAVE ASKED THE ASSESSEE TO ESTABLISH THE IDENTITY, CAPACITY AND GENUINESS OF THE LOAN CREDITOR AND IF THE AO WOULD HAVE FOUND THE LO AN TO BE SUSPICIOUS THEN THE CORRESPONDING INTEREST COULD HAVE BEEN DISALLOWED.A O NOT HAVING DONE THIS THE DISALLOWANCE CANT BE SUSTAINED. WITH RESPECT TO SECOND PART WITH RESPECT TO INTERES T ON TDS AND SALES TAX OF RS. 5,40,581/-, THE SUBMISSION OF THE APPELLANT DURING THE COURSE OF 'APPELLATE PROCEEDINGS IS REPRODUCED BELOW: 'IN CONNECTION WITH INTEREST ON TDS AND SALES TAX A MOUNTING TO RS.5,40,581/-, IT IS SUBMITTED THAT THE SAME ARE ALLOWABLE UNDER SECT ION 37 OF THE ACT, SINCE THE SAME ARE NOT PENAL IN NATURE. IT HAS BEEN HELD BY H ON'BLE ITAT, KOLKATA IN THE CASE OF DCIT, CIRCLE-3(1) V/S.-M/S. NARAYANIISPAT P VT LTD (ITA NO. 2127/KOL/2014), THAT THE DELAY IN PAYMENT OF SERVIC E TAX AND TDS IS COMPENSATORY IN NATURE. THE. RELEVANT EXTRACTS OF T HE SAME ARE RE-PRODUCED HEREUNDER: 'THE INTEREST ITA NO.2127/KOL/2014 A. Y. 2010-11 DC IT ,CIR-3(1) KOL. VS. M/S NARAUANIISPAT PVT. LTD. PAGE 5 FOR THE DELAY IN MAK ING THE PAYMENT OF SERVICE TAX & TDS IS COMPENSATORY IN NATURE. AS SUCH THE INTERE ST ON DELAYED PAYMENT IS NOT IN THE NATURE OF PENALTY IN THE INSTANT CASE ON HAN D. THE ISSUE OF DELAY IN THEPAYMENT OF SERVICE TAX IS DIRECTLY COVERED BY THE JUDGMENT OF HON'BLE APEX COURT IN THE CASE OF LACHMANDAS MAT HURA VS. CIT REPORTED IN 254 ITR 799 IN FAVOUR OF ASSESSEE. THE RELEVANT EXT RACT OF THE JUDGMENT IS REPRODUCED BELOW : 'THE HIGH COURT HAS PROCEEDED ON THE BASIS THAT THE INTEREST ON ARREARS OF SALES TAX IS PENAL IN NATURE AND HAS REJECTED THE CONTENT ION OF THE ASSESSEE THAT IT IS COMPENSATORY IN NATURE. IN TAKING THE SAID VIEW THE HIGH COURT HAS PLACED RELIANCE ON ITS FULL BENCH'S DECISION IN SARAYA SUG AR MILLS (P.) LTD. V. CIT [1979] 116 ITR 387 [ALL] THE LEARNED COUNSEL 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 ENGG. WORKS LTD. V. CIT [1983] 144 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. M/S V2 RETAIL LTD. ITA NO.1794/KOL/2018 ASSESSMENT YEAR:2012-13 CIT DECIDED ON 29-2- 1996. IN THAT VIEW OF THE MATT ER, THE APPEAL IS ALLOWED AND QUESTION NOS. 1 AND 2 WE ANSWERED IN FAVOUR OF THE ASSESSEE AND AGAINST THE REVENUE.' 10. IN VIEW OF THE ABOVE JUDGMENT, THERE REMAINS NO DOUBT THAT THE INTEREST EXPENSE ON THE DELAYED PAYMENT OF SERVICE TAX IS ALLOWABLE DED UCTION. ON THE BASIS OF ABOVE SUBMISSIONS, IT IS SUBMITTED THAT THE LD. ASSESSING OFFICER HAS ERRED IN MAKING DISALLOWANCE OF INTEREST PAID OF RS. 32,75,309/- ( RS. 27,34,728/- BEING. INTEREST ON UNSECURED LOANS AND RS. 5,40,581/- BEING INTEREST O N OTHERS TDS AND SALES TAX). HENCE, LD CIT(A) HAS RIGHTLY DELETED THE ADDITION O F RS.27,34,728/- ( INTEREST ON UNSECURED LOAN ) AND RS.5,40,581/-( INTEREST ON TDS AND SALES TAX). I HAVE CAREFULLY GONE THROUGH THE SUBMISSIONS, DET AILS AND DOCUMENTS AND THE JUDGMENTS RELIED UPON. I AM OF THE VIEW THAT THE A. O. HAS ERRED IN MAKING DISALLOWANCE OF RS. 27,34,728/- ON ACCOUNT OF INTER EST PAID. HENCE, THE A.O. IS DIRECTED TO DELETE THE DISALLOWA NCE MADE FOR THE PAYMENT OF INTEREST ON UNSECURED LOAN OF RS. 27,34,728/- AND I NTEREST ON TDS AND SALES TAX OF RS. 5,40,581/-. AS SUCH THIS GROUNDS OF APPEAL IS A LLOWED IN FAVOUR OF APPELLANT. THAT BEING SO, WE DECLINE TO INTERFERE WITH THE ORD ER OF ID. C.I T.(A) DELETING THE AFORESAID ADDITIONS. HIS ORDER ON THIS ADDITION IS, THEREFORE, UPHELD AND THE GROUNDS OF APPEAL OF THE REVENUE ARE DISMISSED. 11. GROUND NO. 3 RAISED BY THE REVENUE RELATES TO D ISALLOWANCE U/S 14A READ WITH RULE 8D OF THE INCOME TAX RULES. 12.WE HAVE HEAD BOTH THE PARTIES AND PERUSED THE MA TERIAL AVAILABLE ON RECORD. WE NOTE THAT ISSUE INVOLVED IN GROUND NO. 3 RAISED BY THE REVENUE IS NO LONGER RE- INTEGRA. THE SAID ISSUE OF THE REVENUE IS SQUARELY COVERED B Y THE JUDGMENT OF THE HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS. HOL CIM INDIA PVT. LTD. IN ITA NO.486/2014 WHEREIN IT WAS HELD THAT IN THE ABSENCE OF ANY TAX FREE INCOME, THE CORRESPONDING EXPENDITURE COULD NOT BE WORKED OUT F OR MAKING DISALLOWANCE U/S. 14A OF THE INCOME TAX ACT, 1961.THE HONBLE DELHI H IGH COURT IN THE CASE OF CHEMNIVEST VS. COMMISSIONER OF INCOME TAX-VL, ITA 7 49/2014 ORDER M/S V2 RETAIL LTD. ITA NO.1794/KOL/2018 ASSESSMENT YEAR:2012-13 DATED,02.09.2015 HELD THAT SECTION 14A WILL NOT APP LY IF NO EXEMPT INCOME IS RECEIVED DURING THE RELEVANT PREVIOUS YEAR. THEREFO RE, IN VIEW OF ABOVE, THE DISALLOWANCE MADE U/S 14A OF THE ACT R.W.R. 8D IS N OT SUSTAINABLE. THAT BEING SO, WE DECLINE TO INTERFERE IN THE ORDER PASSED BY THE LD. CIT(A), HIS ORDER ON THIS ISSUE IS HEREBY UPHELD AND THE GROUND RAISED BY THE REVEN UE IS DISMISSED. 13. GROUND NO. 4 RAISED BY THE REVENUE RELATES TO D ISALLOWANCE MADE U/S 36(1)(VA) OF THE ACT ON ACCOUNT OF THE ASSESSEES F AILURE TO DEPOSIT EMPLOYEES CONTRIBUTION TOWARDS STATUTORY ESI AND PF WITHIN TH E DUE DATE. 14. WE HAVE HEAD BOTH THE PARTIES AND PERUSED THE MATERIAL AVAILABLE ON RECORD. WE NOTE THAT ISSUE INVOLVED IN GROUND NO. 4 RAISED BY THE REVENUE IS NO LONGER RE- INTEGRA. IF THE ASSESSEE PAYS PF AND ESI CONTRIBUTION WITHI N THE TIME OF FILING RETURN OF INCOME UNDER SECTION 139(1) OF THE ACT, I T WOULD BE SUFFICIENT COMPLIANCE AND NO DISALLOWANCE IS ATTRACTED. THE LD CIT(A) HAS RIGHTLY DELETED THE ADDITION OBSERVING THE FOLLOWING: IN THE INSTANT CASE, THE LEARNED ASSESSING OFFICER HAS FAILED TO APPRECIATE THE SUBMISSION MADE BY THE ASSESSEE COMPANY DURING THE COURSE OF ASSESSMENT HEARING. ASSUBMITTED DURING ASSESSMENT HEARING, THO UGH CERTAIN PAYMENTS REPRESENTING EMPLOYEES CONTRIBUTION TOWARDS PF AND ESIC WAS NOT MADE WITHIN THE DUE DATES PRESCRIBED UNDER EMPLOYEES PROVIDENT FUND &..MISCELLANEOUS PROVISIONS ACT, 1952 AND EMPLOYEES STATE INSURANCE ACT, 1948 RESPECTIVELY BEYOND THE DATES, PRESCRIBED BY RELEVANT STATUTES, HOWEVER ALL SUCH PAYMENTS WERE DULY MADE WITHIN THE DUE DATE OF FILING OF INCOME T AX RETURN I.E., WITHIN 28.09.2012. IT IS FURTHER SUBMITTED THAT IF SUCH CO NTRIBUTION ARE PAID AFTER THE DUE DATE PRESCRIBED BY RELEVANT, STATUTES BUT BEFORE TH E DUE DATE OF FILING THE RETURN, THE SAME IS ALLOWABLE AS HELD IN FOLLOWING JUDGMENT S: KOLKATA I.T.A.T. IN ASSESSEE'S OWN CASE (ORDER PASS ED ON 19.01.2012) HELD THAT IF THE PAYMENT IS MADE WITHIN THE DUE DATE OF FILLING OF RETURN OF INCOME U/ S 139(1) OF THE ACT THEN ADDITION U/ S 36(1)(VA) READ WITH S EC 2(24)(X) OF THE ACT SHOULD BE DELETED IN FULL. KOLKATA I. T.A. T. IN REI AGRO LIMITED (ORDER PASSE D ON 14/05/2013) FOLLOWING THE DECISION OF HON'BLE JURISDICTIONAL HIGH COURT IN TH E CASE OF M/S VIJAY SHREE LIMITED VIDE ITAT NO-:245 OF 2011 IN GA NO.2607 OF 2011 DATED 7TH SEPTEMBER, 2011 ALLOW THE CLAIM OF ASSESSEE IN DELETING THE AD DITION AS MADE BY AO IN ADDITION U/S 36(1)(VA) READ WITH SEC 2(24)(X) OF TH E ACT. BOMBAY HIGH COURT IN COMMISSIONER OF INCOME-TAX- 4, MUMBAI V. HINDUSTAN ORGANICS CHEMICALS LTD REPORTED IN (2014) 48 TAXMAN N.COM 421 (BOMBAY)HAS HELD THAT WHERE ASSESSEE COMPANY MADE PAYMENT OF EM PLOYEES CONTRIBUTION M/S V2 RETAIL LTD. ITA NO.1794/KOL/2018 ASSESSMENT YEAR:2012-13 TOWARDS PROVIDENT FUND, ASSESSEE'S CLAIM COULD NOT BE DISALLOWED ON ACCOUNT OF DELAYED PAYMENT IN VIEW OF AMENDMENT TO SECTION 43 B. BOMBAY HIGH COURT IN THE CASE OF COMMISSIONER OF IN COME-TAX, (CENTRAL), PUNE V GHATGE PATIL TRANSPORTS LTD REPORTED IN [2015] 53TA XMANN.COM 141 (BOMBAY) HAS HELD THAT THE DECISION OF THE SUPREME COURT IN ALOM EXTRUSIONS LTD. ([2009) 319 ITR 306;185 TAXMANN. 416 ) APPLIES TO EMPLOYEES CONTRIBUTION AS WELL AS EMPLOYER'S CONTRIBUTION. THUS ADDITION CANNOT BE MA DE ADDITION U/S 36(1)(VA) READ WITH SEC 2(24)(X) OF THE ACT IF THE PAYMENT IS MADE WITHIN THE DUE DATE OF FILLING OF RETURN OF INCOME U/S 139(1) OF THE ACT. DELHI HIGH COURT IN COMMISSIONER OF INCOME-TAX VS. AIMIL LTD. REPORTED IN (2010) 188 TAXMAN 265 (DELHI), HAS HELD THAT 'IF TH E EMPLOYEES CONTRIBUTION IS NOT DEPOSITED BY THE DUE DATE PRESCRIBED UNDER THE RELEVANT ACTS AND IS DEPOSITED LATE, THE EMPLOYER NOT ONLY PAYS INTEREST ON DELAYE D PAYMENT BUT CAN INCUR PENALTIES ALSO, FOR WHICH SPECIFIC PROVISIONS ARE M ADE IN THE PROVIDENT FUND ACT AS WELL AS IN THE ESI ACT. THEREFORE, THE ACT PERMI TS THE EMPLOYER TO MAKE THE DEPOSIT WITH SOME DELAY, SUBJECT TO THE AFORESAID C ONSEQUENCES. INSOFAR AS THE INCOME-TAX ACT IS CONCERNED, THE ASSESSEE CAN GET T HE BENEFIT IF THE ACTUAL PAYMENT IS MADE BEFORE THE RETURN IS FILED' HENCE, THE LD. ASSESSING OFFICER HAS ERRED IN. DISA LLOWING RS. 6,62,695/- UNDER SECTION 36(1)(VA) OF THE INCOME TAX ACT, 1961, BEIN G PAYMENTS ON ACCOUNT OFEMPLOYEES STATE INSURANCE & PROVIDENT FUND, THOUG H ALL SUCH PAYMENTS WERE MADE BEFORE DUE DATE OF FILING OF RETURN. I HAVE PERUSED THE AOS OBSERVATIONS AND SUBMISSION OF THE ASSESSEE. I FIND THAT THE APPELLANT HAS MADE PAYMENT OF RS. 6,62,695/ - BEFORE THE DUE DATE OF FILING OF RETURN U/S 139(1) OF THE ACT AS PER THE MATERIALS O N RECORD AND THE ISSUE IS, SQUARELY COVERED BY THE DECISIONOF HON'BLE JURISDIC TIONAL ITAT IN ASSESSEE'S OWN CASE I.E., IN THE CASE OF DCIT, CIRCLE 10, KOLKATA VS. V2 RETAIL LIMITED IN' ITA 1705/KOL/2010. SIMILAR, VIEW HAS BEEN HELD IN THE CASE OF- KOLKATA I.T.A.T. IN REIAGRO LIMITED FOLLOWING THE DECISION OF HON'BLE JURISDICTIONAL HIGH COURT IN THE CASE OF M/S. VIJAY SHREE LIMITED VIDE ITAT NO.245 OF 2011 IN GA NO.2607 OF 2011 DATED 7 TH SEPTEMBER, 2011. BOMBAY HIGH COURT IN THE CASE OF COMMISSIONER OF INCOME-TAX, (CENTRAL), PUNE V.GHATGE PATIL TRANSPORTS LTD REPORTED 41 [2015] 53 TAXMANN.COM 141 (BOMBAY) HAS HELD THAT THE DECISION OF THE SUPREME COURT IN ALOM EXTRUSIONS LTD. [2009] 319 ITR 306/185 TAXMAN 416). DELHI HIGH COURT IN COMMISSIONER OF INCOME-TAX VS . AIMIL LTD. REPORTED IN [2010] 188 TAXMAN 265 (DELHI). FOLLOWING THE AFORESAID JUDGMENTS, I DIRECT THE ASS ESSING OFFICER TO DELETE THE ADDITION OF RS. 6,62,695/ -. 15. WE DO NOT FIND ANY INFIRMITY IN THE ORDER PASSE D BY THE LD CIT(A).THAT BEING SO, WE DECLINE TO INTERFERE IN THE ORDER PASSED BY THE LD. CIT(A), HIS ORDER ON THIS ISSUE IS HEREBY UPHELD AND THE GROUND RAISED BY THE REVENUE IS DISMISSED. M/S V2 RETAIL LTD. ITA NO.1794/KOL/2018 ASSESSMENT YEAR:2012-13 16. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISS ED. ORDER PRONOUNCED IN THE COURT ON 28.06.2019 SD/- ( S.S.GODARA ) SD/- (A.L.SAINI) / JUDICIAL MEMBER / ACCOUNTANT MEMBER / DATE: 28/06/2019 ( SB, SR.PS ) COPY OF THE ORDER FORWARDED TO: 1. DCIT, CIRCLE-10(2), KOLKATA 2. M/S V2 RETAIL LTD. 3. C.I.T(A)- 4. C.I.T.- KOLKATA. 5. CIT(DR), KOLKATA BENCHES, KOLKATA. 6. GUARD FILE. TRUE COPY BY ORDER ASSIST ANT REGISTRAR ITAT, KOLKA TA BENCHES