Tiriyogi Narayan Singh, Kolkata V. ACIT, Circle-28, Kolkata

ITA 245/KOL/2021

• Counselvise Citation: [2022] 106 COUNSELVISE.COM (IT) 0581 (ITAT-KOLKATA)
• Duration Of Justice: 4 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-01-2022
• Appeal Filed By: Assessee
• Order Result: PartlyAllowed
• Bench Allotted: C
• Assessment Year: 2014-2015
• Appeal Filed On: 11-08-2021
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RANU BISWAS
• Keywords: Charitable institution; TDS; Set aside
• Section: 43B; 37(1); 250; 139(1); 43

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, KOLKATA BENCH “C”, KOLKATA BEFORE SHRI SANJAY GARG, JUDICIAL MEMBER AND SHRI RAJESH KUMAR, ACCOUNTANT MEMBER ITA No.245/Kol/2021 Assessment Year: 2014-15 Tiriyogi Narayan Singh C/o. Subash Agarwal & Associates, Advocates Siddha Gibson, 1, Gibson Lane, Suite 213, 2 nd Floor, Kolkata – 700069. PAN: APMPS8395D Vs. ACIT, CIRCLE-28, KOLKATA (Appellant) (Respondent) Present for: Appellant by : Shri Siddharth Agarwal, Advocate Respondent by : Smt. Ranu Biswas, Addl. CIT. Date of Hearing : 13.12.2021 Date of Pronouncement : 05.01.2022 O R D E R PER RAJESH KUMAR, ACCOUNTANT MEMBER: The present appeal has been preferred by the assessee against the order passed u/s 250 of the Act dated 26.07.2021 of the Commissioner of Income Tax (Appeals), National Faceless Appeal Centre [hereinafter referred to as the CIT(A)] relevant to AY 2014-15. 2. The issue raised in ground no. 1 is against the order of CIT(A) upholding the order of AO confirming the disallowance of Rs. 24,286/- on account of delayed payment of employee’s contribution to Provident Fund and ESI. ITA No.245/KOL/2021 Tiriyogi Narayan Singh A.Y. 2014-15 2 3. At the outset, it is submitted that the issue is squarely covered in favour of the assessee by the decision of Jurisdictional High Court in the case of CIT Vs M/s. Vijay Shree Limited (2014) 43 taxman.com 396 (Cal) wherein the decision of Hon’ble Apex Court in the case of CIT vs Alom Extrusion Ltd. 390 ITR 306(SC) has been followed. The ld AR submitted before us that the Hon’ble Kolkata High Court has held the payment made by the assessee beyond the time as prescribed under the Provident Fund Act but before the due date of filing the return of income u/s 139(1) of the Act as allowable deduction by interpreting the amendment brought about by Finance Act 2003 to proviso to Section 43B of the Act to be curative in nature and is required to be applied retrospectively with effect from 1 st April, 1988. The ld AR therefore prayed the order of ld CIT(A) may kindly be reversed by allowing the ground no. 1. The ld DR on the other hand relied on the order of authorities below. 4. We have heard rival submissions and perused the materials available on record including the decisions cited by the learned counsel for the assessee. The undisputed facts are that employees contribution under the Employees Provident Fund Act was paid beyond the due date as has been stipulated under the Provident Fund Act but before the due date of filing the return u/s 139(1) of the Act. The contention of the learned counsel of the assessee is that since the payment of employees contribution was made before the due date of filing the return u/s 139(1) of the Act, the same deserves to be allowed in terms of ratio laid down in the above decisions cited. We have perused the decision in the case of CIT vs M/s. Vijay Shree Limited (supra) which has been passed by the Hon’ble Calcutta High Court after following the decision of the Apex Court in the case of CIT vs Alom Extrusion Ltd. (supra). We note that the it has been held by ITA No.245/KOL/2021 Tiriyogi Narayan Singh A.Y. 2014-15 3 the Honble High Court that amendment brought about by Finance Act 2003 to proviso to Section 43B of the Act was curative in nature and is required to be applied retrospectively with effect from 1 st April, 1988. Therefore since the assessee has paid the employees contribution to provident fund within the time as stipulated by section 139(1) of the Act for filing the return of income, the same is admissible as deduction while computing the income of the assessee for the previous year. Accordingly, we set aside the order of ld CIT(A) by directing the AO to allow the deduction of employees contribution to provident and ESI of Rs. 24,286/-. The ground no. 1 is allowed. 5.. The issue raised in ground no. 2 is against the order of CIT(A) confirming the disallowance of Rs. 35,500/- as made by the AO on account of donation and subscription made by the assessee during the year. 6. The facts in brief are that the assessee has incurred a sum of Rs. 35,500/- towards donations in connection with Durga Puja and subscriptions given to various association/trusts and claimed the same as business expenditure. The AO during the course of assessment proceedings noted that these expenses have no nexus with the business of the assessee and accordingly called upon the assessee to furnish the details and justify the claim. The AO added the same to the income of the assessee when the assessee failed to reply the same. 7. In the appellate proceedings, the Ld. CIT(A) upheld the order of the AO observing that the AO correctly disallowed the expenses as there is no nexus between the assessee’s business and these expenses . Even at the appellate stage, the assessee has failed to prove as to how expenses of donations and subscriptions incurred in ITA No.245/KOL/2021 Tiriyogi Narayan Singh A.Y. 2014-15 4 connection with the Durga Puja organized by local clubs/associations has benefited its business. 8. After hearing both the parties and perusing on records , we note that these expenses have incurred in connection with the local Kali/Durga puja organized by various clubs/associations the ledger copy whereof is filed at page 35 of the Paper Book. We observe from the examination of the ledger account that these expenses were incurred by way of donations given for Durga/Kali Puja and comprised of donations on various dates amounting to Rs. 9,500/- for Durpa Puja & Shyama Puja, Rs. 20,000/- paid to East Indian Charitable Trust, Rs. 4,000/- to Kalyankrit Sangha and Rs. 2,000/- to Calcutta Port Employees Association. The learned counsel has cited the decision of Bata India reported in 201ITR 884 (Cal) and submitted that although these expenses were not incurred directly in connection with the running and operation of business of the assessee but certainly in connection with the very famous Durga/Kali Puja. After taking into consideration the arguments of both the sides , we find that the Durga/Kali Puja is very famous in Bengal and certainly there is important bearing and relevant to the business of the assessee. Therefore these expenses have to be allowed as the expenses incurred in connection with the business o the assessee as the assessee place of business is located in Kolkata. Accordingly we are inclined to set aside the order of ld CIT(A) on this issue and direct the AO to allow the deduction. Ground No. 2 is allowed. 9. Ground no. 3 is against the confirmation of disallowance of Rs. 2,625/- by CIT(A) as made by the AO towards interest on late payment of TDS. ITA No.245/KOL/2021 Tiriyogi Narayan Singh A.Y. 2014-15 5 10. The facts in brief are that the AO during the assessment proceedings noted that the assessee is claimed interest of Rs. 2,625/- in the profit and loss account and the same is not admissible expenses in view of the interest being penal in nature. The Ld. CIT(A) confirmed the order of the AO on the ground that non-payment of TDS within time is a default on the part of the assessee in the payment of statutory dues and therefore not allowable. 11. After hearing parties and perused the material on record, we find that issue is covered in favour of the assessee by the two decisions namely Mahalakshmi Sugar Mills Co. vs CIT 123 ITR 429 (SC) and Lachmandas Mathuradas vs CIT 254 ITR 799 (SC). In the first decision the Hon’ble Supreme Court has held that interest paid u/s 3(3) of the Cess Act cannot be described as a penalty paid for an infringement of law whereas in the second decision, the interest paid the assessee to the Sales-tax Department on arrears of sales tax is held to be an admissible deduction u/s 37(1) of the Act. We, therefore, respectfully follow the same to set aside the order of ld CIT(A) and direct the AO to allow the deduction of interest on late payment of TDS of Rs. 2,625/-.The ground no. 3 is accordingly allowed. 12. The issue raised in ground no. 4 is against the order of CIT(A) confirming the disallowance of Rs. 25,36,129/- under various heads of expenses namely Oil & Fuel, Truck Running ,Truck Hire Charges and Tyre Expenses etc. 13. The facts in brief are that the assessee is a heavy goods transporter and is also engaged in cargo lifting business at ports etc. The assessee owns different types of trucks like Heavy Vehicles, Trailer, Tankers, Fork Lift, Hydra, Crane, Reach Stacker etc. Besides ITA No.245/KOL/2021 Tiriyogi Narayan Singh A.Y. 2014-15 6 the assessee is also hiring outside trucks/vehicles for the purpose of its business. The AO noted during the assessment proceedings that the assessee has incurred huge expenses under these heads and called upon the assessee to furnish bills, vouchers, invoices in respect of the these expenses. The Ld. AR of the assessee however could not furnish the bills and vouchers on the ground that due to nature of the business of the assessee and also the vast area of operation all over India it is not possible to furnish the bills/vouchers. Finally the AO disallowed the expenditure under these heads in proportionate to the turnover to which the Ld. AR expressed no objections as per the AO. The disallowance/addition made under the various heads is extracted below: Sl. No. Expenditure Head Total Expenditure % of Addition Addition 1 Oil & Fuel 5,54,74,183.82 2% 11,09,484/- 2 Truck Running 90,58,63/- 5% 4,52,908/- 3 Truck Hire Charges 1,30,32,230/- 5% 6,51,612/- 4 Tyre Expenses 64,42,504/- 5% 3,22,125/- Total 25,36,129/- Thus a sum of Rs. 25,36,129/- was disallowed and added to the income of the assessee. 14. In the appellate proceeding, the Ld. CIT(A) confirmed the order of AO on this issue by observing that the assessee did not produce before the AO the bills and vouchers relating to expenses incurred ITA No.245/KOL/2021 Tiriyogi Narayan Singh A.Y. 2014-15 7 under the head of oil & fuel, truck running, truck hire charges and tyre charges and thus the same could not be verified and thus justified the disallowance made by the AO on proportionate basis. 15. After hearing the rival contentions and perusing the records as placed before us , we note that the assessee could not furnish before the AO the bills/vouchers in respect of expenses incurred various heads such as oil & fuel, truck running, truck hire charges and tyre charges etc. citing the reason that due to vast area of operation these bills and vouchers could not be produced as the same are very voluminous and, therefore, the AO made disallowance on estimated basis in proportion to the business turnover. According to the AO, the disallowance was accepted by the counsel of the assessee however the same was denied by the ld AR before ld Ld. CIT(A) as well as before us. We note that though the assessee could not produce the evidences of expenses incurred under various heads as stated above but that does not mean that the business is carried on without incurring expenses. Even the AO has recognized the fact that the assessee has incurred the expenses carrying on the business of transportation and disallowed a fraction of the total expenses for not producing the records for verification. We have also noted that the total turnover of the assessee during the year was Rs. 15,02,78,365/- and the assessee has earned a net profit of Rs. 25,46,086/- from the business of transportation which approximately works out 1.69%. Thus making a disallowance almost of equal amount would be unfair and unreasonable. Under these circumstances it would be fair and reasonable if a lump sum disallowance made to cover the non vouched expenses. Considering all these facts and circumstances, we are of the opinion that Rs. 5 lacs would be reasonable amount of disallowance to cover all the non vouched expenses . Accordingly the ITA No.245/KOL/2021 Tiriyogi Narayan Singh A.Y. 2014-15 8 order of CIT(A) is modified and AO is directed to add only Rs. 5 lacs towards various disallowances under the above heads of expenses. The ground no. 4 is partly allowed. 16. In the result, the appeal of the assessee is partly allowed. Order pronounced in the open court on 05.01.2022. Sd/- Sd/- (SANJAY GARG) (RAJESH KUMAR) JUDICIAL MEMBER ACCOUNTANT MEMBER Kolkata, Dated: 05.01.2022. Biswajit, Sr. P.S. Copy to: The Appellant The Respondent The CIT, Concerned, Kolkata The CIT (A) Concerned, Kolkata The DR Concerned Bench //True Copy// [ By Order Sr. Private Secretary/DDO ITAT, Kolkata Benches, Kolkata