Oswal Industries Limited, Ahmedabad V. The ACIT, Mehsana Circle, Mehsana

ITA 2843/AHD/2015

• Counselvise Citation: [2018] 126 COUNSELVISE.COM (IT) 5934 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 4 month(s) 30 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-03-2018
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: Not Allotted
• Assessment Year: 2012-2013
• Appeal Filed On: 08-10-2015
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: P D SHAH
• Keywords: Capital expenditure
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD C BENCH BEFORE: SHR I RAJPAL YADAV , JUDICIAL MEMBER AND SHRI AMARJIT SINGH, ACCOUNTANT MEMBER OSWAL INDUSTRIES LTD., VILLAGE: BILESHWARPURA CHHATRAL, TAL: KALOL, DIST. GANDHINAGAR PAN: AAACO03443L (APPELLANT) VS THE ACIT, MEHSANA CIRCLE, MEHSANA - 384315 (RESPONDENT) REVENUE BY : S H RI PRASOON KABRA , SR. D . R. ASSESSEE BY: S H RI P.D. SHAH , A.R. DATE OF HEARING : 23 - 01 - 2 018 DATE OF PRONOUNCEMENT : 07 - 03 - 2 018 / ORDER P ER : AMARJIT SINGH, ACCOUNTANT MEMBER : - THIS AS SESSEE S APPEAL FOR A.Y. 2012 - 13 , ARIS ES FROM ORDER OF THE CIT(A) , GANDHINAGAR, AHM EDABAD DATED 28 - 08 - 2015 , IN PROCEEDINGS UNDER SECTION 143(3) OF THE INCOME TAX ACT, 1961; IN SHORT THE ACT . 2. THE ASSESSEE HAS RAISED FOLLOWING GROUNDS OF APPEAL: - 1. THAT THE LEARNED CIT(A) HAS ERRED IN LAW AND FACTS BY C ONFIRMING THE ADDITION U/S. 36(1 )(VA) R.W. SUB CLAUSE (X) OF CLAUSE 24 OF SECTION 2 OF THE INCOME TAX ACT RELATED TO LATE PAYMENT OF PROVIDENT F UND CONTRIBUTION OF RS 2,81,895/ - MADE BY THE LEARNED A O AND THEREFORE THE LEARNED AO SHOULD BE DIRECTED TO DELE TE THE ADDITION OF RS. 2,81,895/ - . I T A NO . 2843 / A HD/20 15 A SSE SSMENT YEAR 2012 - 13 I.T.A NO. 2843 /AHD/20 15 A.Y. 2012 - 13 PAGE NO OSWAL INDUSTRIES LTD. VS. ACIT 2 2. THAT THE LEARNED CIT(A) HAS ERRED IN LAW AND FACTS BY CONFIRMING THE DISALLOWANCE OF TRA VELLING EXPENSES OF RS.2,44,625/ - MADE BY THE LEARNED AO AND THEREFORE THE LEARNED AO SHOULD BE DIRECTED TO DELETE THE DISALLOWANCE OF RS. 2,44, 625/ - . THE B RIEF FACTS OF THE CASE ARE DISCUSSED UNDER THE GROUNDS OF APPEAL AS FOLLOWS: - A DDITION U/S. 36(1)(VA) R.W. SUB CLAUSE (X) OF CLAUSE 24 OF SECTION 2 OF THE INCOME TAX AC T 3. THE ASSESSEE HAS FILED RETURN OF INCOME ON 30 TH SEPTEMBER, 2012 DECLARING INCOME OF RS.5 , 79 , 64 , 490/ - . SUBSEQUENTLY, THE CASE WAS SELECTED UNDER SCRUTINY BY ISSUING OF NOTICE U/S. 143(2) OF THE ACT ON 17 TH AUGUST, 2013. ON SCRUTINY THE ASSESSING OFF ICER NOTICED THAT ASSESSEE HAS DEBITED RS. 18 , 38 , 515/ - TOWARDS CONTRIBUTION TO PROVIDENT FUND. ON VERIFICATION OF THE DETAILS AS PER AUDIT REPORT IN FORM NO. 3CD, THE ASSESSING OFFICER NOTICED THAT ASSESSEE HAD DEPOSITED THE AMOUNT PERTAINING TO EMPLOYE E S CONTRIBUTION TO PF AFTER THE DUE DATES PRESCRIBED IN THE PF ACT AS UNDER: - SR. NO. AMOUNT (RS.) DUE DATE DATE OF PAYMENT 1. 96,893/ - 15/05/2011 17/05/2011 2. 73,387/ - 15/06/2011 16/06/2011 3. 93,363/ - 15/07/2011 18/07/2011 4. 97,07 8/ - 15/08/2011 2 3/08/2011 5. 98,446/ - 15/09/2011 16/09/2011 6. 96.360/ - 15/10/2011 17/10/2011 7. 93,727/ - 15/11/2011 21/11/2011 8. 1, 18, 257/ - 15/12/2011 19/12/2011 9 92,980/ - 15/01/2012 20/01/2012 I.T.A NO. 2843 /AHD/20 15 A.Y. 2012 - 13 PAGE NO OSWAL INDUSTRIES LTD. VS. ACIT 3 10 91,090/ - 15/04/2012 01/05/2 012 TOTAL 9,51,581/ - CONSEQUENTLY AFTER FOLLOWING THE DECISION OF HON BLE GUJARAT HIGH COURT IN THE CASE OF GUJARAT STATE ROAD TRANSPORT T HE ASSESSING OFFICER HAS DISALLOWED THE AMOUNT OF RS . 9 , 51 , 581/ - ACCORDING TO THE PROVISION OF SECTION 36(1)(VA ) R.W SUB - CLAUSE (X) OF CLAUSE 24 OF SECTION 2 OF IT ACT, 1961 FOR FAILING TO DEPOSIT WITHIN THE STIPULATED DATES . 4 . AGGRIEVED ASSESSEE FILED APPEAL BEFORE THE LD. CIT(A). THE LD. CIT(A) HAS PARTLY ALLOWED THE APPEAL OF THE ASSESSEE BY OBSERVING AS UN DER: - 5.3 I HAVE CONSIDERED THE FACTS OF THE CASE, ASSESSMENT ORDER, SUBMISSION MADE BY THE APPELLANT AND THE, CASE LAWS RELIED UPON. AO HAS MADE THE IMPUGNED DISALLOWANCE OF RS.9,51,581/ - RELYING ON THE DECISION OF GUJARAT STATE ROAD TRANSPORT CORP N., REPORTED AT 223 TAXMAN 398 WHEREIN THE HON'BLE GUJARAT HIGH COURT HAD HELD THAT EMPLOYEES' PF/ES1 CONTRIBUTION IS NOT COVERED UNDER S.436 AND IS ONLY ALLOWABLE AS A DEDUCTION U/S 36(L)(VA) IF PAID BY THE DUE DATE PRESCRIBED THEREIN. AO HAS CONTENDED TH AT THE CONTRIBUTION TOWARDS PF PAYABLE BY THE EMPLOYEES SHALL BE PAID BEFORE THE STIPULATED DATES AS PER PF RULES AND DISALLOWED RS. 9,51,581/ - . ON THE OTHER HAND HAS CONTENDED THAT NO DISALLOWANCE IS WARRANTED IN THE CASE OF THE APPELLANT ON AC COUNT OF PAYMENT OF EMPLOYEES' PF AS ALL THE PAYMENTS WERE MADE BEFORE THE DUE DATE INCLUDING GRACE PERIOD OF PAYMENT ALLOWED UNDER THE PF ACT OF 5 DAYS. APPELLANT FURTHER CONTENDED THAT AS PER SECTION 38 OF THE EPF SCHEME, 1952, THE PAYMENT IS REQUIRED TO BE MADE WITHIN 15 DAYS FROM THE CLOSE OF THE MONTH AND EACH WELFARE FUND SCHEME PROVIDES A GRACE PERIOD FOR DELAYED PAYMENTS. WITH REGARD TO THE GUJARAT HIGH COURT DECISION IN THE CASE OF GUJ'ARAT STATE ROAD TRANSPORT CORPN (SUPRA) RELIED UPON BY THE AO I T IS CONTENDED THAT IT IS NOT RELEVANT IN THE CASE OF THE APPELLANT AS APPELLANT HAD DEPOSITED THE EMPLOYEES' PF CONTRIBUTION WITHIN THE GRACE PERIOD WHEREAS IN THE CASE RELIED UPON BY THE AO THE CONTRIBUTION IS MADE TO THE GOVERNMENT ACCOUNT BEYOND THE GR ACE PERIOD ALLOWED. IN THE ENTIRETY OF THE FACTS OF THE CIRCUMSTANCES OF THE CASE, IT IS SEEN THAT IN THE CASE OF THE APPELLANT, PAYMENTS IN RESPECT OF EMPLOYEES' CONTRIBUTION HAVE BEEN MADE ON OR BEFORE THE DUE DATE AS PER THE RELEVANT ACT WITHIN THE GRA CE PERIOD. IN THE CASE OF INDO SWISS ANTI SHOCK LTD, HON'BLE AHMEDABAD TRIBUNAL HAS HELD THAT PAYMENT OF EMPLOYEES' CONTRIBUTION WITHIN THE GRACE PERIOD IS ALLOWABLE AND HAS BEEN TREATED AS PAID ON OR BEFORE THE DUE DATE AS PER EXPLANATION TO SECTION 36(L) (VA) OF ACT. SIMILARLY, THE IN THE CASE OF SONY INDIA (P) OTD REPORTED AT 315 ITR 150, HON'BLE DELHI TRIBUNAL RELYING ON THE DECISION TAKEN BY THE H ON'BLE MADRAS HIGH COURT IN THE CASE OF GANAPATHY MILLS CO. I.T.A NO. 2843 /AHD/20 15 A.Y. 2012 - 13 PAGE NO OSWAL INDUSTRIES LTD. VS. ACIT 4 LTD (2000) 243 ITR 879, HAD DELETED THE ADDITION MADE BY THE AO HOLDING THAT THE \ DUE DATE' FOR PAYMENT OF PF CONTRIBUTION AS DEFINED IN EXPLANATION TO SECTION 36(L)(VA) GETS EXTENDED BY THE GRACE PERIOD OF 5 DAYS ALLOWED UNDER THE RELEVANT STATUTE. FROM THE DISCUSSION MADE ABOVE, IT IS CLEAR THAT FOR T HE PURPOSE OF COMPUTING THE DUE DATE U/S 36(L)(VA), THE GRACE PERIOD OF 5 DAYS IS TO BE ADDED TO THE DUE DATE. IN THE CASE OF THE APP ELLANT, THE EMPLOYEES' CONTRIBUTION HAD BEEN DEPOSITED TO THE GOVERNMENT ACCOUNT WITHIN THE GRACE PERI OD ALLOWED AS PER THE RELEVANT PF ACT AND THEREFORE, THE CONTENTION OF THE APPELLANT IS ALLOWABLE. FOLLOWING THE JUDICIAL PRONOUNCEMENTS AS ABOVE, THE DISALLOWANCE AND ADDITION MADE BY THE AO ON ACCOUNT OF EMPLOYEES' PF PAID WITHIN THE GRACE PERIOD IS ALLOWABLE. HOWEVER, FROM THE SUBMISSION MADE BY THE APPELLANT, ALL THE PAYMENTS ARE NOT MADE WITHIN THE GRACE PERIOD ALLOWED. AN AMOUNT OF RS.2,81,895/ - IS PAID INTO THE GOVERNMENT BEYOND THE GRACE PERIOD ALLOWED BY THE PF ACT. THEREFORE, THIS AMOUNT WILL NOT BE ALLOWED TO THE APP ELLANT AND ADDITION TO THIS EXTENT IS CONFIRMED AND THE BALANCE AD DITION OF RS.6,69,686/ - (RS.9,51,895/ - LESS RS.2,81,8 95/ - ) IS DIRECTED TO BE DELETED. RELEVANT GROUND OF APPEAL IS ALLOWED IN PART. 5 . DURING THE COURSE OF APPELLATE PROCEEDINGS BEFORE US, THE LEARNED COUNSEL HAS CONTENDED THAT RELEVANT DUE DATE HAS TO BE SEEN NOT FROM THE RELEVANT MONTH OF SALARY BUT FROM THE MONTH IN WHICH THE PAYMENT WAS MADE. THEREFORE, HE HAS FILED THE RELEVANT DETAIL AND COMPUTATION AS UNDER: - MONTH EMPLOYEES' ACTU AL DUE DATE DUE DATE ACTUAL CONTRIBUTION DATE OF OF OF DATE OF PAYMENT PAYMENT PAYMENT PAYMENT OF SALARY OF PF AS AS PER ACT PER ASSESSING OFFICER MARCH,2012 91,090 10.04.2012 15.04.201 2 20.05.2012 01.05.2012 JULY,2011 97,078 10.08.2011 15.08.2011 20.09.2011 23.08.2011 OCTOBER,2011 93,727 10.11.2011 15.11.2011 20.12.2011 21.11.2011 TOTAL 2,81,895 THE LD. AUTHORIZED REPRESENTATIVE HAS ALSO PLACED RELIANCE O N THE DECISION OF CO - ORDINATE BENCH OF ITAT IN THE CASE OF RAJJRATNA METAL INDUSTRIES LTD. I.T.A NO. 2843 /AHD/20 15 A.Y. 2012 - 13 PAGE NO OSWAL INDUSTRIES LTD. VS. ACIT 5 VS. ADDL. CIT IN ITA NO. 940/AHD/2015 DATED 22 - 09 - 2017. THE LD. DR SUPPORTED THE ORDER OF CIT(A). 6 . WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATERIAL ON RECO RD CAREFULLY. WE HAVE NOTICED THAT THE IDENTICAL ISSUE HAS BEEN DECIDED BY THE ABOVE REFERRED DECISION OF CO - ORDINATE BENCH OF THE ITAT, AHMEDABAD IN WHICH IT WAS HELD THAT THE RELEVANT DATE IN SUCH CASE IS THE DATE OF MONTH OF ACTUAL PAYMENT OF WAGES AND SALARIES. F OLLOWING THE DECISION OF THE CO - ORDINATE BENCH , WE ALLOW THE APPEAL OF THE ASSESSEE . THEREFORE, THE APPEAL OF THE ASSESSEE ON THIS ISSUE IS ALLOWED. D ISALLOWANCE OF TRAVELLING EXPENSES OF RS.2,44,625/ - 7 . DURING THE COURSE OF AS SESSMENT PROCEEDINGS, THE ASSESSING OFFICER NOTICED THAT ASSESSEE HAS DEBITED TRAVELLING EXPENSES INCURRED FOR FOREIGN VISIT TO THE AMOUNT OF RS. 9 , 78 , 500/ - . THE ASSESSEE FAILED TO SUBSTANTIATE ITS CLAIM OF FOREIGN EXP E NSES WITH RELEVANT MATERIAL CONSEQU ENTLY THE ASSESSING OFFICER HAS DISALLOWED 25% OF THESE EXPENSES AMOUNTING TO RS. 2 , 44 , 625/ - . 8 . AGGRIEVED ASSESSEE FILED APPEAL BEFORE THE LD. CIT(A). THE LD. CIT(A) HAS SUSTAINED THE ADDITION BY OBSERVING AS UNDER: - 8.3 I HAVE CONSIDERED THE FAC TS OF THE CASE, ASSESSMENT ORDER, SUBMISSION MADE BY THE APPELLANT AND THE CASE LAWS RELIED UPON. AO HAS MADE THE DISALLOWANCE AS THE APPELLANT FURNISHED A VERY GENERAL REPLY DURING THE ASSESSMENT PROCEEDINGS. AO HAS CONTENDED THAT UNLESS MOTIVE OR PURPOS E OF FOREIGN VISIT IS SOLELY FOR PROMOTING THE BUSINESS IS NOT PROVED, THE EXPENDITURE CLAIMED WILL NOT QUALIFY FOR DEDUCTION. AO HAS FURTHER CONTENDED THAT FOR ALLOWINTG A CLAIM WITHIN THE AMBIT OF SEC. 37(1), THE FOLLOWING CONDITION ARE TO BE SATISFIED C UMULATIVELY, (A) THE EXPENDITURE SHOULD NOT BE OF THE NATURE DESCRIBED IN SEC. 30 TO 36. (B) THE EXPENDITURE SHOULD NOT BE IN THE NATURE OF CAPITAL EXPENDITURE. (C) THE EXPENDITURE SHOULD NOT BE IN THE NATURE OF PERSONAL EXPENDITURE. (D) THE EXPENDITURE SH OULD BE LAID OUT OR EXPENDED WHOLLY AND EXCLUSIVELY FOR THE PURPOSES OF BUSINESS. I.T.A NO. 2843 /AHD/20 15 A.Y. 2012 - 13 PAGE NO OSWAL INDUSTRIES LTD. VS. ACIT 6 APPELLANT BEFORE THE AO HAD ONLY COPY OF ACCOUNT AND INVOICE OF IMPORTED GOODS AND NO FURTHER DETAILS OF DOCUMENTARY PROOFS OF THE PERSONS WHO VISITED EXHIBITION ETC WAS MAD E AVAILABLE. IN ABSENCE OF SUCH DETAILS, AO CONTENDED THAT ELEMENT OF PERSONAL VISIT CANNOT BE RULED OUT. IN SUCH FACTS AN AMOUNT EQUAL TO 25% OF THE EXPENSES CLAIMED BY THE APPELLANT OF RS.2,44,625/ - OUT OF TRAVELLING EXPENSES IS DISALLOWED. ON THE OTHER HAND, APPELLANT HAS CONTENDED THAT THE EXPENDITURE IS INCURRED FOR THE PURPOSE OF ITS BUSINESS TOUR TO FOREIGN COUNTRIES FOR THE PURPOSE OF PROCUREMENT OF RAW MATERIALS AND TO ATTEND THE EXHIBITION AND THEREFORE, NO PART OF EXPENDITURE CAN BE DISALLOWED ON THE GROUND OF PERSONAL EXPENSES ON ESTIMATE BASIS. IN SUPPORT OF THIS CONTENTION, APPELLANT HAS SUBMITTED DETAILS OF THE EXPENSES, COPY OF ACCOUNTS AND .INVOICE OF IMPORTED GOODS AND URGED TO DELETE THE ADDITION MADE. IN THE ENTIRETY OF FACTS OF THE CASE, IT IS SEEN THAT AO HAS CONTENDED THAT PERSONAL FOREIGN VISIT CANNOT BE RULED OUT IN ABSENCE OF DOCUMENTARY PROOF OF THE PERSONS WHO VISITED EXHIBITION ETC. IT IS THE CONTENTION OF THE APPELLANT THAT EXPENDITURE IS INCURRED FOR THE PURPOSE OF PROCUREMENT O F RAW MATERIALS AND TO ATTEND THE EXHIBITION AND THEREFORE, NO PART OF EXPENDITURE CAN BE DISALLOWED ON THE GROUND OF PERSONAL EXPENSES ON ESTIMATE BASIS AND FURNISHED DETAILS OF THE EXPENSES, COPY OF ACCOUNTS AND INVOICE OF IMPORTED GOODS. APPELLANT HAS N OT BEEN ABLE TO SUBMIT THE DETAILS OF THE PERSONS WHO UNDERTOOK FOREIGN TOUR AND ALSO COULD NOT PROVE WITH EVIDENCES THAT THE TOUR WAS UNDERTAKEN WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS. THOUGH APPELANT FURNISHED A COPY OF IMPORT BILL BUT APPELL ANT HAS NOT BEEN ABLE TO PROVE HOW THE BUSINESS OF THE APPELLANT WAS BENEFITTED BY THE FOREIGN VISIT. APPELLANT THOUGH STATED THAT EXPENDITURE WAS INCURRED FOR VISIT OF EXHIBITION, NO DETAILS WHATSOEVER OF THE PLACE OF EXHIBITION, INVITATION LETTER, DATE O F EXHIBITION COULD BE FURNISHED. IN ABSENCE OF DOCUMENTARY EVIDENCES, THE CLAIM OF THE APPELLANT OF TRAVELLING EXPENSES CANNOT BE ALLOWED. THE ACTION OF THE AO IN DISALLOWING RS.2,44,625/ - BEING 25% OF THE TOTAL EXPENSES CLAIMED IS HELD JUSTIFIED AND IS HE REBY CONFIRMED. THE RELEVANT GROUND OF APPEAL IS REJECTED. 9. DURING THE COURSE OF APPELLATE PROCEEDINGS BEFORE US, LD. COUNSEL HAS CONTENDED THAT ASSESSEE HAS NOT UNDERTAKEN FOREIGN VISIT FOR PERSONAL PURPOSES. THEREFORE, THE DECISION OF THE LD. CIT(A) OF TREATING THE EXPENSES INCURRED FOR THE COMPANY AS A PERSONAL EXPENSES IS NOT CORRECT. ON THE OTHER HAND, LD. DEPARTMENTAL REPRESENTATIVE SUPPORTED THE ORDER OF CIT(A). 10. WE HAVE HEARD BOTH THE SIDES AND PERUSED THE MATERIAL ON RECORD CAREFULLY. W E HAVE NOTICED THAT IN RESPECT OF FOREIGN TRAVELLING EXPENSES T HE I.T.A NO. 2843 /AHD/20 15 A.Y. 2012 - 13 PAGE NO OSWAL INDUSTRIES LTD. VS. ACIT 7 ASSESSEE HAS SUBMITTED A COPY OF ACCOUNT AND INVOICES OF IMPORT ED GOODS ETC. THE ASSESSING OFFICER HAS DISALLOWED 25% OF THE AFORESAID EXPENSES ON ESTIMATE D BASIS AS THE ASSESSEE FAILED T O SUBSTANTIATE THE SAME WITH ANY SPECIFIC EVIDENCES OF PERSONS VISITING FOREIGN COUNTRY. THE LD. CIT(A) HAS STATED THAT THE ASSESSEE HAS FURNISHED ONLY COPY OF ACCOUNT AND INVOICE OF IMPORTED GOODS AND NO T FURNISHED FURTHER DETAILS OF DOCUMENTARY PROOFS O F THE PERSONS WHO VISITED EXHIBITION ETC . WE OBSERVE THAT THE ASSESSEE HAS FAILED TO FURNISH THE RELEVANT DETAILS OF THE PERSONS WHO UNDERTOOK FOREIGN TOUR AND ALSO COULD NOT PROVE WITH EVIDENCES THAT THE TOUR WAS UNDERTAKEN WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS BEFO R E THE ASSESSING OFFICER AND LD. CIT(A) EVEN AT THE THIRD STAGE DURING THE COURSE OF APPELLATE PROCEEDINGS BEFORE US THE ASSESSEE HAS ALSO FAILED TO DEMONSTRATE WITH BASIC RELEVANT MATERIAL THAT THE TOUR WAS UNDERTAKEN FOR BUSINES S PURPOSES. UNDER SUCH CIRCUMSTANCES WE DO NOT FIND ANY REASON TO INTERFERE IN THE DECISION OF THE LD. CIT(A) . ACCORDINGLY, THE APPEAL OF THE ASSESSEE ON THIS ISSUE IS DISMISSED. 11 . IN THE RESULT , THE APPEAL OF THE ASSESSEE IS PARTLY ALLOWED . ORDER PR ONOUNCED IN THE OPEN C OURT ON 07 - 03 - 201 8 SD/ - SD/ - ( RAJPAL YADAV ) ( AMARJIT SINGH ) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD : DATED 07 /03 /2018 / COPY OF ORDER FORWARDED TO: - 1 . ASSESSEE 2. REVENUE 3. CONCERNED CIT 4. CIT (A) 5. DR, ITAT, AHMEDABAD 6. GUARD FILE. BY ORDER/ , / ,