Express Publications (Madurai) Limited, CHENNAI V. DCIT, CHENNAI

ITA 1885/CHNY/2012

• Counselvise Citation: [2013] 120 COUNSELVISE.COM (IT) 0945 (ITAT-CHENNAI)
• Duration Of Justice: 2 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-01-2013
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: C
• Assessment Year: 2007-2008
• Appeal Filed On: 25-10-2012
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: T N BETGIRI
• Assessee Lawyers: T N SEETHARAMAN
• Section: 43B; 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH, CHENNAI BEFORE SHRI ABRAHAM P. GEORGE, ACCOUNTANT MEMBER AND SHRI CHALLA NAGENDRA PRASAD, JUDICIAL MEMBER I.T.A. NO. 1885/MDS/2012 (ASSESSMENT YEAR : 2007-08) M/S EXPRESS PUBLICATIONS (MADURAI) LTD., NO.29, 2 ND MAIN ROAD, AMBATTUR INDUSTRIAL ESTATE, CHENNAI - 600 058. PAN : AAACI 0842 D (APPELLANT) V. THE DEPUTY COMMISSIONER OF INCOME TAX, COMPANY CIRCLE II(1), CHENNAI - 600 034. (RESPONDENT) APPELLANT BY : SHRI T.N. SEETHARAMAN, ADVOCATE RESPONDENT BY : SHRI T.N. BETGIRI, JCI T DATE OF HEARING : 22.01.2013 DATE OF PRONOUNCEMENT : 22.01.2013 O R D E R PER ABRAHAM P. GEORGE, ACCOUNTANT MEMBER : IN THIS APPEAL FILED BY THE ASSESSEE, ITS FIRST G RIEVANCE IS THAT THE CIT(APPEALS) CONFIRMED A DISALLOWANCE OF ` 1,99,20,639/- BEING REMITTANCES OF EMPLOYEES CONTRIBUTION TO PROVIDENT FUND / ESI. AS PER THE ASSESSEE, CIT(APPEALS) FELL IN ERROR IN NOT FOLLOWING THE I.T.A. NO. 1885/MDS/12 2 DECISION OF HONBLE KARNATAKA HIGH COURT IN THE CAS E OF CIT V. SABARI ENTERPRISES (298 ITR 141). 2. FACTS APROPOS ARE THAT ASSESSEE HAD REMITTED EMP LOYEES CONTRIBUTION TOWARDS PF AND ESI BEYOND THE DUE DATE S MENTIONED IN THE RESPECTIVE ENACTMENTS. AS PER THE A.O., REMITT ANCE OF SUCH AMOUNT WAS TO BE DONE WITHIN FIFTEEN DAYS PLUS FIVE GRACE DAYS FROM THE DATE OF PAYMENT OF WAGES TO THE EMPLOYEES. HE WAS OF THE OPINION THAT SUCH REMITTANCES EFFECTED AFTER THE DA TES MENTIONED IN RESPECTIVE ENACTMENTS COULD NOT BE ALLOWED. THUS, HE DISALLOWED THE CLAIM OF THE ASSESSEE. 3. IN ITS APPEAL BEFORE CIT(APPEALS), ARGUMENT OF T HE ASSESSEE WAS THAT THE REMITTANCES WERE MADE BEFORE THE DUE D ATE OF FILING THE RETURN. RELYING ON THE DECISION OF HONBLE APEX CO URT IN THE CASE OF CIT V. ALOM EXTRUSIONS LTD. (319 ITR 306) AND THAT OF HONBLE KARANATAKA HIGH COURT IN THE CASE OF SABARI ENTERPR ISES (SUPRA), ASSESSEE PLEADED THAT THE AMOUNT HAVING BEEN REMITT ED BEFORE THE DUE DATE FOR FILING RETURN OF INCOME, IT WAS UNJUST IFIABLY DISALLOWED. HOWEVER, LD. CIT(APPEALS) WAS NOT IMPRESSED. ACCOR DING TO HIM, ONCE DEDUCTIONS MADE FOR PROVIDENT FUND AND ESI FRO M SALARIES PAID I.T.A. NO. 1885/MDS/12 3 TO EMPLOYEES, WERE NOT REMITTED WITHIN THE DUE DATE MENTIONED IN THE ENACTMENT, THEN IT WAS TO BE CONSIDERED INCOME UNDE R SECTION 2(24)(X) OF INCOME-TAX ACT, 1961 (IN SHORT 'THE ACT '). SECTION 43B(6), AS PER LD. CIT(APPEALS), WAS ONLY RELEVANT FOR EMPL OYERS CONTRIBUTION AND NOT EMPLOYEES CONTRIBUTION. IN THIS VIEW OF T HE MATTER, HE CONFIRMED THE DISALLOWANCE MADE BY THE A.O. 4. NOW BEFORE US, LEARNED A.R., ASSAILING THE ORDER S OF AUTHORITIES BELOW, SUBMITTED THAT HONBLE CALCUTTA HIGH COURT I N THE CASE OF CIT V. VIJAY SHREE LTD. IN GA NO.2607 OF 201, VIDE ITS JUDGMENT DATED 6 TH SEPTEMBER, 2011, AFTER CONSIDERING THE DECISION OF HONBLE APEX COURT IN THE CASE OF ALOM EXTRUSTIONS LTD. (SUPRA), HAD HELD THAT EMPLOYEES CONTRIBUTION TO ESI AND PF, IF MADE BEFO RE THE DUE DATE OF FILING THE RETURN, COULD NOT BE DISALLOWED BY IN VOKING SECTION 36(1)(VA) AND SECTION 2(24)(X) OF THE ACT. RELIANC E WAS ONCE AGAIN PLACED ON THE DECISION IN THE CASE OF SABARI ENTERP RISES OF HONBLE KARNATAKA HIGH COURT (SUPRA). LEARNED D.R., ON THE OTHER HAND, SUPPORTED THE ORDER OF CIT(APPEALS). 5. WE HAVE PERUSED THE ORDERS AND HEARD THE RIVAL SUBMISSIONS. CO-ORDINATE BENCH OF THIS TRIBUNAL IN THE CASE OF M /S MILL STORES I.T.A. NO. 1885/MDS/12 4 (MADRAS) PVT. LTD. V. ACIT IN I.T.A. NO. 973(MDS)/2 012 DATED 13 TH JULY, 2012, HAD HELD THAT EMPLOYEES CONTRIBUTION R EMITTED BEYOND THE DUE DATE AS PER THE RESPECTIVE ENACTMENTS, BUT BEFO RE THE DUE DATE FOR FILING THE TAX RETURNS WERE DEDUCTIBLE UNDER SE CTION 43B OF THE ACT. HERE, THERE IS NO DISPUTE THAT THE ASSESSEE HAD EFF ECTED THE PAYMENT BEFORE THE DUE DATE OF FILING THE RETURN. IN OUR V IEW, THE DECISION OF HONBLE CALCUTTA HIGH COURT IN THE CASE OF M/S VIJA Y SHREE LTD. (SUPRA) AS WELL AS THAT OF HONBLE KARNATAKA HIGH C OURT IN THE CASE OF SABARI ENTERPRISES (SUPRA) WOULD DEFINITELY COME TO THE AID OF THE ASSESSEE. IN OTHER WORDS, LAW LAID DOWN BY HON'BLE APEX COURT IN THE CASE OF ALOM EXTRUSIONS LTD. (SUPRA) SQUARELY A PPLIES TO EMPLOYEES CONTRIBUTION AS WELL. WE ARE, THEREFORE , OF THE OPINION THAT ASSESSEE HAS TO SUCCEED ON THIS ISSUE. 6. RELEVANT GROUND NOS.2 TO 8 OF THE ASSESSEE STAND ALLOWED. 7. NEXT GRIEVANCE RAISED BY THE ASSESSEE IS WITH RE GARD TO A DISALLOWANCE MADE UNDER SECTION 14A, WHICH WAS SCAL ED DOWN BY THE CIT(APPEALS) TO ` 10 LAKHS FROM ` 1,58,43,410/- MADE BY THE ASSESSING OFFICER. I.T.A. NO. 1885/MDS/12 5 8. FACTS APROPOS ARE THAT ASSESSING OFFICER HAD NOT ED DURING THE ASSESSMENT PROCEEDINGS THAT ASSESSEE HAD MADE INVES TMENTS, WHICH CALLED FOR DISALLOWANCE UNDER SECTION 14A OF THE ACT. ACCORDING TO HIM, THOUGH ASSESSEE HAD NOT CLAIMED A NY DIVIDEND INCOME AS EXEMPT DURING THE RELEVANT ASSESSMENT YEA R, IT WOULD HAVE INCURRED ROUTINE EXPENDITURE IN MAINTAINING ES TABLISHMENT AND ADMINISTRATION OF INVESTMENT, WHICH COULD GIVE RISE TO DIVIDEND INCOME. HE APPLIED RULE 8D OF INCOME-TAX RULES, 19 62 AND RELYING ON THE DECISION OF SPECIAL BENCH OF THIS TRIBUNAL I N THE CASE OF ITO V. DAGA CAPITAL MANAGEMENT (P) LTD. (117 ITD 169) (SB ) HELD THAT A DISALLOWANCE OF ` 1,58,43,410/- WAS REQUIRED. 9. IN ITS APPEAL BEFORE CIT(APPEALS), ARGUMENT OF T HE ASSESSEE WAS THAT RULE 8D COULD NOT BE APPLIED PRIOR TO ASSE SSMENT YEAR 2008-09. RELIANCE WAS PLACED ON THE DECISION OF HO NBLE BOMBAY HIGH COURT IN THE CASE OF GODREJ AND BOYCE MFG. CO. LTD VS. DY. CIT (328 ITR 81). LD. CIT(APPEALS) WAS APPRECIATIVE OF THESE CONTENTIONS OF ASSESSEE. ACCORDING TO HIM, THOUGH RULE 8D COULD NOT BE APPLIED, IT COULD NOT BE CONSIDERED THAT NO EXPE NDITURE WAS INCURRED FOR THE PURPOSE OF MANAGING THE INVESTMENT S. HE RESTRICTED THE DISALLOWANCE TO ` 10 LAKHS. I.T.A. NO. 1885/MDS/12 6 10. NOW BEFORE US, LEARNED A.R. SUBMITTED THAT ASSE SSEE HAD NOT INCURRED ANY EXPENDITURE FOR INVESTMENTS AND IT HAD NEVER CLAIMED DIVIDEND INCOME AS EXEMPT. ACCORDING TO HIM, SECTI ON 14A WOULD NOT BE APPLICABLE AT ALL. LEARNED D.R., ON THE OTH ER HAND, SUPPORTED THE ORDER OF CIT(APPEALS). 11. WE HAVE PERUSED THE ORDERS AND HEARD THE RIVAL SUBMISSIONS. THERE IS NO DISPUTE THAT RULE 8D WOULD NOT BE APPLI CABLE FOR IMPUGNED ASSESSMENT YEAR BY VIRTUE OF DECISION OF H ONBLE BOMBAY HIGH COURT IN THE CASE OF GODREJ AND BOYCE MFG. CO. LTD. (SUPRA). AS PER THE ASSESSEE, IT HAD INCURRED NO EXPENDITURE FO R THE INVESTMENTS. THERE IS ALSO NO DISPUTE THAT ASSESSEE HAD NOT EARN ED ANY DIVIDEND INCOME, STILL ASSESSING OFFICER HAD APPLIED RULE 8D . WE ARE OF THE OPINION THAT THE MATTER REQUIRES A FRESH LOOK BY TH E ASSESSING OFFICER. ASSESSING OFFICER HAS TO CONSIDER APPLICATION OF SE CTION 14A WITH REGARD TO FACTS AND CIRCUMSTANCES OF THE CASE AND P ROCEED IN ACCORDANCE WITH LAW. ORDERS OF AUTHORITIES BELOW ARE SET ASIDE AND MATTER REMITTED BACK TO THE FILE OF ASSESSING OFFIC ER. 12. GRIEVANCE RAISED THROUGH GROUND NOS.9 TO 11 ARE ALLOWED FOR STATISTICAL PURPOSES. I.T.A. NO. 1885/MDS/12 7 13. TO SUMMARIZE THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED PRO TANTO. THE ORDER WAS PRONOUNCED IN THE COURT ON TUESDAY, T HE 22 ND OF JANUARY, 2013, AT CHENNAI. SD/- SD/- (CHALLA NAGENDRA PRASAD) (ABRAHAM P. GEORGE) JUDICIAL MEMBER ACCOUNTANT MEMBER CHENNAI, DATED THE 22 ND JANUARY, 2013. KRI.JJJ COPY TO: (1) APPELLANT (2) RESPONDENT (3) CIT(A)-I, COIMBATORE (4) CIT-I, CHENNAI (5) D.R. (6) GUARD FILE