ACIT, New Delhi V. M/s DCM Engineering Ltd., New Delhi

ITA 29/DEL/2011

• Counselvise Citation: 2920114 RSA 2011
• Duration Of Justice: 1 year(s) 1 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-02-2012
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 21-02-2012
• Assessment Year: 2007-2008
• Appeal Filed On: 04-01-2011
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: PRADEEP KUMARDR
• Keywords: Depreciation; Earning of tax free income; Initiation of penalty proceedings; Unabsorbed depreciation
• Section: 43B; 14A; 115JB; 139

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI B BENC H BEFORE SHRI R.P. TOLANI, JM & SHRI A.N. PAHUJA, A M ITA NO.29/D/2011 ASSESSMENT YEAR:2007-08 A.C.I.T., CIRCLE 10(1), NEW DELHI V/S . M/S D.C.M. ENGINEERING LTD., 6 TH FLOOR, VIKRANT TOWER, RAJENDRA PLACE, NEW DELHI [PAN:AABCD 2472 M] ITA NO.296/D/2011 ASSESSMENT YEAR: 2007-08 M/S D.C.M. ENGINEERING LTD., 6 TH FLOOR, VIKRANT TOWER, RAJENDRA PLACE, NEW DELHI V/S . A.C.I.T., CIRCLE 10(1), NEW DELHI (APPELLANT) (RESPONDENT) ASSESSEE BY SHRI V.P. GUPTA, AR REVENUE BY SHRI PRADEEP KUMAR,DR DATE OF HEARING 21-02-2012 DATE OF PRONOUNCEMENT 29-02-2012 O R D E R A.N.PAHUJA:- THESE CROSS APPEALS FILED ON 4 TH JANUARY, 2011 BY THE REVENUE AND ON 18 TH JANUARY, 2011 BY THE ASSESSEE AGAINST AN ORDER DAT ED 25 TH OCTOBER, 2010 OF THE LD. CIT(A)-XVII, NEW DELHI, RAISE THE F OLLOWING GROUNDS:- I.T.A. NO.29/D/2011[REVENUE] 1 ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND I N LAW, THE ORDER OF THE CIT(A) IS WRONG, PERVERSE, ILLEGAL AND AGAINST THE PROVISIONS OF LAW WHICH IS LIABLE TO BE SET ASI DE.. 2 ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED CIT(A) HAS ERRED IN DELETING THE ADDITION M ADE ON A/C OF EXCESS DEPRECIATION. I.T.A. NOS.29&296/DEL./2011 2 3 ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED CIT(A) HAS ERRED IN DELETING THE DISALLOWAN CE MADE U/S 2(24)(X) READ WITH SECTION 36(1)(VA) OF THE ACT . 4 ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED CIT(A) HAS ERRED TO DIRECT THE AO TO RE-COM PUTE THE DISALLOWANCE U/S 14A OF THE ACT. 5 ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED CIT(A) HAS ERRED IN DELETING THE ADDITION M ADE ON A/C OF PROVISIONS FOR GRATUITY AND LEAVE ENCASHMENT . 6 THE APPELLANT CRAVES LEAVE, TO ADD, ALTER OR AMEN D ANY GROUND OF APPEAL RAISED ABOVE AT THE TIME OF HEARIN G. I.T.A. NO.296/D/2011[ASSESSEE] 1. THAT IN THE FACTS AND CIRCUMSTANCES OF THE CASE OF THE APPELLANT COMPANY THE CIT(A) HAS ERRED IN NOT DELET ING DISALLOWANCE OF ` ` 10.81 LACS MADE BY THE ASSESSING OFFICER U/S 14A OF THE INCOME-TAX ACT READ WITH RULE 8D OF I.T. RULES AGAINST THE DISALLOWANCE OF ` ` 1.5 LACS OFFERED BY THE APPELLANT COMPANY, THOUGH NO EXPENDITURE WAS INCURR ED DIRECTLY OR INDIRECTLY IN RELATION TO EXEMPT INCOME AND PROVISIONS OF RULE 8D OF I.T. RULES WERE NOT APPLIC ABLE TO THE ASSESSMENT YEAR UNDER APPEAL. 2. THAT CIT(A) HAS ALSO ERRED IN REMANDING THE CASE TO THE ASSESSING OFFICER FOR RE-DETERMINATION OF EXPENDITU RE DISALLOWABLE U/S 14A OF THE ACT READ WITH RULE 8D O F INCOME TAX RULES IN THE FACTS OF THE CASE AND PARTICULARLY , WHEN HE HAD NO POWER OF REMANDING THE MATTER U/S 251 OF THE ACT. HE OUGHT TO HAVE DECIDED THE GROUND HIMSELF CONSIDE RING THE FACTS AND THE LEGAL POSITION. 3. THAT THE CIT(A) ERRED IN UPHOLDING THE INITIATIO N OF PENALTY PROCEEDINGS U/S 271(1)(C) OF THE ACT IN THE FACTS A ND CIRCUMSTANCES OF THE APPELLANT. 4. THAT THE ORDER PASSED BY THE ASSESSING OFFICER A ND UPHELD BY CIT(A) IS BAD IN LAW. 5. THAT THE APPELLANT COMPANY CRAVES LEAVE TO ALTER, A MEND, VARY AND/OR ADD ANY OF THE GROUNDS OF APPEAL AT ANY TIME HEREIN AFTER. I.T.A. NOS.29&296/DEL./2011 3 2. ADVERTING FIRST TO GROUND NO.2 IN THE APPEAL OF THE REVENUE, FACTS, IN BRIEF, AS PER RELEVANT ORDERS ARE THAT E-RETURN DECLARING NIL INCOME, AFTER CLAIMING SET OFF OF BROUGHT FORWARD UNABSORBED DEPRECIATION UNDER T HE NORMAL PROVISIONS AND BOOK PROFIT OF ` ` 7, ` 98,63,440/- IN TERMS OF PROVISIONS OF SEC. 115JB OF THE INCOME-TAX ACT,1961 (HEREINAFTER REFERRED TO AS THE ACT) FILED ON 31.10.2007 BY THE ASSESSEE, ENGAGED IN THE BUSINESS OF MANUFACTUR E AND TRADING OF GREY IRON CASTINGS, PATTERNS, JIGS AND FIXTURES, AFTER BEING PROCESSED U/S 143(1) OF THE ACT WAS SELECTED FOR SCRUTINY WITH THE SERVICE OF A NOT ICE U/S 143(2) OF THE ACT ON 30 TH SEPTEMBER, 2008. DURING THE COURSE OF ASSESSMENT P ROCEEDINGS, THE ASSESSING OFFICER (A.O. IN SHORT) NOTICED THAT THE ASSESSEE C LAIMED EXCESS DEPRECIATION AMOUNTING TO `45,774/-ON SWITCHES FOR NETWORK & ROC KET BATTERIES @60%, TREATING IT AS PART OF COMPUTERS. HOWEVER, THE AO ALLOWED DEPRECIATION AT THE NORMAL RATES, RESULTING IN DISALLOWANCE OF ` ` 45,774/-. 3. ON APPEAL, THE LD. CIT(A), FOLLOWING THE DECISIO NS OF THE ITAT IN THE CASE OF EXPEDITOR INTERNATIONAL (P) LTD. VS. ACIT, 118 T TJ (DEL.) 652 AND I.T.O VS. SAMIRAN MAJUMDAR, 98 ITD 119 (KOL) AS ALSO DECISION DATED 31.08.2010 OF HONBLE JURISDICTIONAL HIGH COURT IN CIT VS. B.S.E. S RAJDHANI POWERS LTD. IN I.T.A. NO.1266/2010, ALLOWED THE CLAIM OF THE ASSES SEE. 4. THE REVENUE IS NOW IN APPEAL BEFORE US AGAINST T HE AFORESAID FINDINGS OF THE LD. CIT(A).THE LD. DR SUPPORTED THE ORDER OF TH E AO WHILE THE LD. AR ON BEHALF OF THE ASSESSEE RELIED ON THE FINDINGS OF TH E LD. CIT(A). 5. WE HAVE HEARD BOTH THE PARTIES AND GONE THROUGH THE FACTS OF THE CASE. WE FIND THAT THE HONBLE DELHI HIGH COURT IN THE C ASE OF CIT V. BSES RAJDHANI POWER LTD. IN I.T. APPEAL NO. 1266 (DELHI) OF 2010, IN THEIR DECISION DATED 31-8- 2010 WHILE ADJUDICATING A SIMILAR ISSUE, HELD AS UN DER: 'WE ARE IN AGREEMENT WITH THE VIEW OF THE TRIBUNAL THAT COMPUTER ACCESSORIES AND PERIPHERALS SUCH AS, PRINTERS, SCANNERS AND SER VER ETC. FORM AN INTEGRAL PART OF THE COMPUTER SYSTEM. IN FACT, THE COMPUTER ACCESSORIES AND PERIPHERALS CANNOT BE USED WITHOUT THE COMPUTER. CO NSEQUENTLY, AS THEY ARE I.T.A. NOS.29&296/DEL./2011 4 THE PART OF THE COMPUTER SYSTEM, THEY ARE ENTITLED TO DEPRECIATION AT THE HIGHER RATE OF 60 PER CENT.' 5.1 FOLLOWING THE SAID DECISION, A CO- ORDINATE BENCH IN ITO VS. . OMNI GLOBE INFORMATION TECHNOLOGIES INDIA (P.) LTD., 13 1 ITD 280(DELHI) HELD THAT IF PERIPHERALS SUCH AS PRINTERS, SCANNERS AND SERVERS ETC. FORM INTEGRAL PART OF THE COMPUTER SYSTEM, UPS WILL ALSO BE AN INTEGRAL PART OF THE COMPUTER SYSTEM, ENTITLED FOR DEDUCTION OF DEPRECIATION AT THE RATE OF 60 PER CENT. EARLIER KOLKATA BENCH IN THE CASE OF INCOME TAX OFFICER VS. SAMIRA N MAJUMDAR (2006) 98 ITD 119, HELD THAT THE PRINTER AND SCANNER ARE INTEGRA L PART OF THE COMPUTER SYSTEM AND, THEREFORE, ENTITLED TO HIGHER RATE OF DEPRECIA TION @ . 60 PER CENT . A SIMILAR VIEW WAS TAKEN BY THE DELHI BENCH IN THEIR DECISION IN THE CASE OF CONTAINER CORPORATION OF INDIA LTD. VS. ACIT(2009) 30 SOT 284 (DELHI). IN THE LIGHT OF VIEW TAKEN IN THE AFORESAID DECISIONS, ESPECIALLY WHEN T HE REVENUE HAVE NOT PLACED BEFORE US ANY CONTRARY DECISION NOR ANY OTHER MATER IAL SO AS TO ENABLE US TO TAKE A DIFFERENT VIEW IN THE MATTER, WE HAVE NO HESITATI ON IN UPHOLDING THE FINDINGS OF LEARNED CIT(A). THEREFORE, GROUND NO.2 IN THE APPE AL OF THE REVENUE IS DISMISSED. 6. GROUND NO.3 RELATES TO DISALLOWANCE OF ` `2,54,784/- ON ACCOUNT OF ESI CONTRIBUTION OF THE EMPLOYEES AND ` ` 8,28,651/- ON ACCOUNT OF THEIR CONTRIBUTION TO SUPERANNUATION FUND ON THE GROUND THAT THESE PAYMEN TS WERE MADE AFTER THE DUE DATES STIPULATED UNDER THE RELEVANT ENACTMENTS. 7. ON APPEAL, THE LD. CIT(A) ALLOWED THE CLAIM OF T HE ASSESSEE IN THE FOLLOWING TERMS: 5.1 BEFORE ME, THE LEARNED AR FOR THE APPELLA NT SUBMITTED THAT DETAILS IN RESPECT OF CONTRIBUTIONS UNDER REFERENCE WERE GIVEN IN TAX AUDIT REPORT. HE ALSO SUBMITTED THE COPIES OF RELEVANT ANNEXURE CONTAINING DETAILS OF PAYMENTS OF CONTRIBU TIONS WHICH HAVE BEEN CONSIDERED TO HAVE BEEN MADE AFTER THE DU E DATE AND HAVE BEEN DISALLOWED VIDE PAGE 37 OF THE PAPER BOOK PLACED ON THE RECORD. AS PER THE DETAILS GIVEN THEREIN, FOLLOWIN G CONTRIBUTIONS I.T.A. NOS.29&296/DEL./2011 5 HAVE BEEN CONSIDERED BY THE ASSESSING OFFICER TO HA VE BEEN MADE AFTER THE DUE DATE:- CONTRIBUTIONS TO ESI MONTH AMOUNT [IN ` ] ` DUE DATE DATE OF DEPOSIT OF CHEQUE DATE OF CLEARING OF CHEQUE SEPT, 2006 24,484 21.10.06 20.10.06 24.10.06 DEC, 2006 227300 21.01.07 20.01.07 22.01.07 TOTAL 2,54,784 CONTRIBUTIONS TO SUPERANNUATION FUND MONTH AMOUNT [IN ` ] ` DUE DATE DATE OF DEPOSITING CHEQUE DATE OF CLEARING OF CHEQUE NOV,2006 198298 15.12.06 22.12.06 04.01.07 JAN,2007 352258 15.02.07 17.02.07 22.02.07 FEB,2007 278085 15.03.07 17.03.07 24.03.07 TOTAL 8,28,641 THE ABOVE DETAILS SHOW THAT THE COMPANY HAD D EPOSITED TAX IN CASE OF ESI WITHIN THE DUE DATES. THE LEARNED AR S UBMITTED THAT AS PER PROVISIONS OF SECTION 43B OF THE ACT PRIOR T O AMENDMENT, CHEQUES COULD HAVE BEEN CLEARED WITHIN A PERIOD OF 15 DAYS FROM THE DUE DATE. MOREOVER, DATE OF DEPOSITING THE CHE QUES IS TO BE CONSIDERED AS DATE OF PAYMENT IN CASE CHEQUES IS CL EARED AS PER THE RBI/CBDT GUIDELINES EVEN IN REGARD TO PAYMENT O F TAXES. AS REGARDS CONTRIBUTIONS TO SUPERANNUATION FUND IT WAS SUBMITTED THAT IT IS NOT A STATUTORY FUND. SUPERANNUATION FUND HA S BEEN FORMED BY THE APPELLANT COMPANY FOR PROVIDING PENSION BENEFIT TO ITS EMPLOYEES VOLUNTARILY. ACCORDINGLY, THERE IS NO DU E DATE AS PER ANY LEGAL PROVISION. THE LEARNED AR FURTHER SUBMITTED THAT THERE IS NO DISTINCTION FOR THE PURPOSE OF ALLOWABILITY OF CONTRIBUTION BETWEEN EMPLOYERS CONTRIBUTION AND EMPLOYEES CONTRIBUTION. HE SUBMI TTED THAT THE ISSUE IS NOW WELL SETTLED AND IS COVERED BY THE DEC ISION OF HONBLE SUPREME COURT IN THE CASE OF CIT VS. VINAY CEMENT L TD., 313 ITR (ST.) 1 AND OF HONBLE DELHI HIGH COURT IN NUMBER O F CASES, LATEST BEING CIT VS. AIMIL LTD. (2010) 321 ITR 508 (DEL.). IN VIEW OF I.T.A. NOS.29&296/DEL./2011 6 ABOVE, LEARNED AR SUBMITTED THAT DISALLOWANCES MADE BY THE ASSESSING OFFICER SHOULD BE DELETED. 5.2 I HAVE CAREFULLY CONSIDERED THE SUBMISSIONS OF THE LEARNED AR AND PERUSED THE ORDER PASSED BY THE ASSESSING OF FICER. IT IS NOTED THAT THE PAYMENT IN QUESTION WERE MADE BEFORE THE DUE DATE OF THE FILING OF THE INCOME-TAX RETURN. I FIND FOR CE IN THE SUBMISSIONS OF THE LEARNED AR THAT THE SAME CANNOT BE DISALLOWE D U/S 43B. THEREFORE, THE ADDITION OF ` `10,83,425/- ON ACCOUNT OF DISALLOWANCE MADE BY THE ASSESSING OFFICER IS DELETED. THESE GR OUNDS OF APPEAL ARE ALLOWED. 8. THE REVENUE IS NOW IN APPEAL BEFORE US AGAINST THE AFORESAID FINDINGS OF THE LD. CIT(A). THE LD. DR SUPPORTED THE ORDER OF T HE AO WHILE THE LD. AR ON BEHALF OF THE ASSESSEE RELIED ON THE FINDINGS OF TH E LD. CIT(A). 9. WE HAVE HEARD BOTH THE PARTIES AND GONE THR OUGH THE FACTS OF THE CASE AS ALSO THE AFORESAID DECISIONS AS REGARDS EMPLOYERS AND EMPLOYEES CONTRIBUTION TOWARDS PF/ESI , HONBLE DELHI HIGH COURT IN THE CA SE OF CIT V. P.M.ELECTRONICS LTD., 220 CTR 635 (DELHI) WHILE RELYING UPON THE D ECISION OF HONBLE APEX COURT IN THE CASE OF CIT VS. VINAY CEMENT LTD.,213 CTR ( SC) 268 , CONCURRED WITH THE VIEW TAKEN BY THE HONBLE MADRAS HIGH COURT IN NEXUS COMPUTER (P) LTD.,219 CTR(MAD) 54 THAT EMPLOYER/EMPLOYEES CONT RIBUTION TOWARDS PF/ESI, AFTER THE DUE DATE PRESCRIBED UNDER THE EMPLOYEES PROVIDENT FUND ACT & ESI ACT AND RULES MADE THEREUNDER AND BEFORE THE DUE DA TE FOR FURNISHING THE RETURN OF INCOME UNDER SUB SEC. 1 OF SEC. 139 OF THE ACT, ARE ALLOWABLE 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 OF CIT VS ALOM EXTRUSIONS LTD., 319 ITR 306 (SC) HELD THAT THE OMI SSION OF THE SECOND PROVISO TO SECTION 43B OF THE ACT BY THE FINANCE ACT, 2003, OP ERATED, RETROSPECTIVELY, WITH EFFECT FROM, APRIL 1, 1988 AND NOT PROSPECTIVELY FR OM APRIL 1, 2004. HONBLE COURT OBSERVED THAT EARLIER UNDER THE SECOND PROVI SO TO SECTION 43B AS AMENDED BY THE FINANCE ACT, 1989, THE ASSESSEES WE RE ENTITLED TO DEDUCTION ONLY IF THE CONTRIBUTION STOOD CREDITED ON OR BEFOR E THE DUE DATE GIVEN IN THE I.T.A. NOS.29&296/DEL./2011 7 PROVIDENT FUNDS ACT. THIS CREATED FURTHER DIFFICULT IES AND ON A REPRESENTATION MADE TO THE FINANCE MINISTRY, ONE MORE AMENDMENT WA S MADE BY THE FINANCE ACT, 2003. THOUGH THIS AMENDMENT WAS MADE APPLICAB LE WITH EFFECT FROM APRIL 1, 2004, THE AMENDMENT WAS CURATIVE IN NATURE AND APPL IED RETROSPECTIVELY WITH EFFECT FROM APRIL 1, 1988.IT WAS CLARIFIED THAT WHE N A PROVISO IN A SECTION IS INSERTED TO REMEDY UNINTENDED CONSEQUENCES AND TO M AKE THE SECTION WORKABLE, THE PROVISO WHICH SUPPLIES AN OBVIOUS OMISSION THER EIN IS REQUIRED TO BE READ RETROSPECTIVELY IN OPERATION, PARTICULARLY TO GIVE EFFECT TO THE SECTION AS A WHOLE. 9.2 HONBLE KARNATAKA HIGH COURT IN THEIR DECIS ION IN ANZ INFORMATION TECHNOLOGY P LTD., 318 ITR 123 WHILE FOLLOWING THEI R EARLIER DECISION IN CIT VS. SABARI ENTERPRISES,298 ITR 141(KAR.) CONCLUDED THA T DEPOSITS MADE BY THE EMPLOYER OF THE EMPLOYEES CONTRIBUTION BELATEDLY A ND CONTRIBUTION TOWARDS ESI & PF UNDER THE RELEVANT ENACTMENTS CANNOT BE TREATED AS INCOME OF THE ASSESSEE U/S 36(1)(VA) READ WITH SEC. 2(24)(X) IN VIEW OF P ROVISIONS OF SEC. 43B OF THE ACT. 9.3 HONBLE DELHI HIGH COURT IN ANOTHER DECISION DATED 23.12.2009 IN CIT VS. AIMIL LTD.(DELHI)IN ITA NO. 1063/2008 NOW REPORTED IN 321 ITR 508 OBSERVED THAT SEC. 2(24)(X) PROVIDES THAT AMOUNTS RECEIVED B Y AN ASSESSEE FROM EMPLOYEES TOWARDS PF CONTRIBUTIONS ETC. SHALL BE I NCOME. S. 36 (1) (VA) PROVIDES THAT IF SUCH SUMS ARE CONTRIBUTED TO THE E MPLOYEES ACCOUNT IN THE RELEVANT FUND ON OR BEFORE THE DUE DATE SPECIFIED I N THE PF LEGISLATION, THE ASSESSEE SHALL BE ENTITLED TO A DEDUCTION. THE SECO ND PROVISO TO S. 43B (B) PROVIDED THAT ANY SUM PAID BY THE ASSESSEE AS AN EM PLOYER BY WAY OF CONTRIBUTION TO ANY PROVIDENT FUND SHALL BE ALLOWED AS A DEDUCTION ONLY IF PAID ON OR BEFORE THE DUE DATE SPECIFIED IN 36(1)(VA) OF TH E ACT. AFTER THE OMISSION OF THE SECOND PROVISO W.E.F 1.4.2004, THE DEDUCTION IS ALL OWABLE UNDER THE FIRST PROVISO IF THE PAYMENT IS MADE ON OR BEFORE THE DUE DATE FO R FURNISHING THE RETURN OF INCOME. THE HONBLE HIGH COURT WHILE CONSIDERING W HETHER THE BENEFIT OF S. 43B CAN BE EXTENDED TO EMPLOYEES CONTRIBUTION AS WELL, WHICH ARE PAID AFTER THE DUE DATE UNDER THE PF LAW BUT BEFORE THE DUE DATE FOR F ILING THE RETURN, HELD THAT I.T.A. NOS.29&296/DEL./2011 8 ( I) THOUGH THE REVENUE HAS ARGUED THAT A DISTINCTION 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 PROVISO 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. ELECTRON ICS 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 E SI ACT. THEREFORE, THE ACT PERMITS THE EMPLOYER TO MAKE THE DEPOSIT WITH SOME DELAYS, SUBJECT TO THE AFORESAID CONSEQUENCES. INSOFAR AS THE INCOME-TAX A CT IS CONCERNED, THE ASSESSEE CAN GET THE BENEFIT IF THE ACTUAL PAYMENT IS MADE BEFORE THE RETURN IS FILED, AS PER THE PRINCIPLE LAID DOWN IN VINAY CEME NT. 9.4 IN VIEW OF THE FOREGOING AND IN THE LIGHT OF VIEW TAKEN IN THE AFORESAID DECISIONS , WE HAVE NO HESITATION IN HOLDING THAT T HE EMPLOYEES CONTRIBUTION TOWARDS ESI & SUPERANNUATION FUND PAID BY THE ASS ESSEE BEFORE THE DUE DATE OF FILING OF RETURN U/S 139(1) OF THE ACT FOR THE A SSESSMENT YEAR UNDER CONSIDERATION IS ADMISSIBLE. CONSEQUENTLY, THE FIN DINGS OF THE LD. CIT(A) ARE UPHELD . THEREFORE, GROUND NO.3 IN THE APPEAL OF T HE REVENUE IS DISMISSED. 10. GROUND NO.4 IN THE APPEAL OF REVENUE AND GROUND NOS. 1 & 2 IN THE APPEAL OF THE ASSESSEE RELATE TO DISALLOWANCE U/S 14A OF THE ACT. THE AO NOTICED DURING THE COURSE OF ASSESSMENT PROCEEDING S THAT THE ASSESSEE CLAIMED EXEMPTION OF ` ` 12.66 LACS ON ACCOUNT OF DIVIDEND INCOME WHILE NO E XPENDITURE ATTRIBUTABLE TO THIS INCOME WAS OFFERED FOR DISALLO WANCE IN TERMS OF PROVISIONS OF SEC. 14A OF THE ACT. TO A QUERY BY THE AO, THE ASSE SSEE REPLIED THAT THEY HAVE NOT INCURRED ANY EXPENSES FOR EARNING THE AFORESAID DIVIDEND INCOME. HOWEVER, THE AO WHILE OBSERVING THAT THE ASSESSEE DEBITED IN TEREST AMOUNTING TO ` ` 723.24 LACS, COMPRISING ` `452.24 LACS ON ACCOUNT OF INTEREST ON DEBENTURES O F UTI AND I.T.A. NOS.29&296/DEL./2011 9 ` ` 270.82 LACS ON CASH CREDIT/CASH LOAN AND REFERRING TO DECISIONS IN CIT VS. UNITED GENERAL TRUST LTD., 200 ITR 455 (SC); H.H.S IR RAMA VARMA VS. CIT, 205 ITR 433 (SC); CIT VS. PODAR CEMENT (P) LTD. , 226 I TR 625 (SC); CIT VS. SHELLY PRODUCTS LTD., 261 ITR 367(SC); S. SUBHASH VS. CIT 248 ITR 512 (MADRAS) AS ALSO DECISION DATED 5.8.2009 OF THE SPECIAL BENCH IN THE CASE OF M/S CHEMINVEST LTD. VS. I.T.O. AND DECISION OF THE ITAT MUMBAI SPECIAL BENCH IN THE CASE OF ITO VS. DAGA CAPITAL INVESTMENT (P) LTD . IN ITA. NO.8057/MUM/2003 AND M/S MAX OPP INVESTMENT LTD. VS. ACIT, IN ITA. N O.1372/D/2005 INVOKED RULE 8D OF I.T. RULES, 1962 AND DISALLOWED AN AMOUN T OF ` 10,81,453/- HAVING RECOURSE TO PROVISIONS OF SEC. 14A OF THE ACT. 11. ON APPEAL, THE LD. CIT(A), FOLLOWING THE VIEW T AKEN BY HONBLE BOMBAY HIGH COURT IN GODREJ & BOYCE CO. LTD. VS. DCIT,234 CTR 1(BOM.) DIRECTED THE AO TO RECOMPUTE THE DISALLOWANCE IN TERMS OF THE SA ID JUDGMENT. 12. BOTH THE REVENUE AND THE ASSESSEE ARE NOW IN APPEAL BEFORE US AGAINST THE AFORESAID DIRECTIONS OF THE LD. CIT(A).AT THE O UT SET, BOTH THE PARTIES AGREED THAT THE ISSUE IS REQUIRED TO BE RE-ADJUDICATED IN TERMS OF DECISION DATED 18.11.2011 OF THE HONBLE JURISDICTIONAL HIGH COURT IN MAXOPP INVESTMENT LTD. VS. CIT,[2011] 15 TAXMANN.COM 390 (DELHI). 13. . WE HAVE HEARD BOTH THE PARTIES AND GONE THR OUGH THE FACTS OF THE CASE AS ALSO THE AFORESAID DECISION. WE FIN D THAT HONBLE BOMBAY HIGH COURT IN THE CASE OF GODREJ & BOYCE MANUFACTURING C OMPANY LTD. (SUPRA) WHILE ADJUDICATING A SIMILAR ISSUE IN THE CONTEXT OF PROV ISIONS OF SEC. 14A OF THE ACT AND RULE 8D OF THE IT RULES,1962 CONCLUD ED THAT RULE 8D, INSERTED W.E.F 24.3.2008 CANNOT BE REGARDED AS RETROSPECTIVE BECAUSE IT ENACTS AN ARTIFICIAL METHOD OF ESTIMATIN G EXPENDITURE RELATABLE TO TAX-FREE INCOME. IT APPLIES ONLY W.E.F AY 2008-09. FOR THE ASSESSMENT YEARS WHERE RULE 8D DOES NOT APPLY, THE AO WILL HAVE TO DETERMINE THE QUANTUM OF DISALLOWABLE EXPEN DITURE BY A I.T.A. NOS.29&296/DEL./2011 10 REASONABLE METHOD HAVING REGARD TO ALL THE FACTS AN D CIRCUMSTANCES, THE HONBLE HIGH COURT CONCLUDED. 13.1 WE FIND THAT HONBLE SUPREME COURT IN THEIR DECISION DATED 6.7.2010 IN CIT V. WALFORT SHARE & STOCK BRO KERS (P.) LTD.,326 ITR 1, INTER ALIA, OBSERVED THAT FOR ATTRA CTING SECTION 14A OF THE ACT THERE HAS TO BE A PROXIMATE CAUSE FOR DIS ALLOWANCE, WHICH IS ITS RELATIONSHIP WITH THE TAX EXEMPT INCOME. HON BLE APEX COURT OBSERVED IN THE CONTEXT OF PROVISIONS SEC.14A OF T HE ACT IN THE FOLLOWING TERMS: 17. THE INSERTION OF SECTION 14A WITH RETROSPECTIV E EFFECT IS THE SERIOUS ATTEMPT ON THE PART OF THE PARLIAMENT NOT TO ALLOW DEDUCTION IN RESPECT OF ANY EXPENDITURE INCURRED BY THE ASSES SEE IN RELATION TO INCOME, WHICH DOES NOT FORM PART OF THE TOTAL INCOM E UNDER THE ACT AGAINST THE TAXABLE INCOME (SEE CIRCULAR NO. 14 OF 2001, DATED 22- 11-2001). IN OTHER WORDS, SECTION 14A CLARIFIES THA T EXPENSES INCURRED CAN BE ALLOWED ONLY TO THE EXTENT THEY ARE RELATABLE TO THE EARNING OF TAXABLE INCOME. IN MANY CASES THE NATURE OF EXPENSES INCURRED BY THE ASSESSEE MAY BE RELATABLE PARTLY TO THE EXEMPT INCOME AND PARTLY TO THE TAXABLE INCOME. IN THE ABS ENCE OF SECTION 14A, THE EXPENDITURE INCURRED IN RESPECT OF EXEMPT INCOME WAS BEING CLAIMED AGAINST TAXABLE INCOME. THE MANDATE O F SECTION 14A IS CLEAR. IT DESIRES TO CURB THE PRACTICE TO CLAIM DEDUCTION OF EXPENSES INCURRED IN RELATION TO EXEMPT INCOME AGAI NST TAXABLE INCOME AND AT THE SAME TIME AVAIL THE TAX INCENTIVE BY WAY OF EXEMPTION OF EXEMPT INCOME WITHOUT MAKING ANY APPOR TIONMENT OF EXPENSES INCURRED IN RELATION TO EXEMPT INCOME. THE BASIC REASON FOR INSERTION OF SECTION 14A IS THAT CERTAIN INCOME S ARE NOT INCLUDIBLE WHILE COMPUTING TOTAL INCOME AS THESE ARE EXEMPT UN DER CERTAIN PROVISIONS OF THE ACT. IN THE PAST, THERE HAVE BEEN CASES IN WHICH DEDUCTION HAS BEEN SOUGHT IN RESPECT OF SUCH INCOME S WHICH IN EFFECT WOULD MEAN THAT TAX INCENTIVES TO CERTAIN IN COMES WAS BEING USED TO REDUCE THE TAX PAYABLE ON THE NON-EXEMPT IN COME BY DEBITING THE EXPENSES, INCURRED TO EARN THE EXEMPT INCOME, AGAINST TAXABLE INCOME. THE BASIC PRINCIPLE OF TAXATION IS TO TAX THE NET INCOME, I.E., GROSS INCOME MINUS THE EXPENDITURE. O N THE SAME ANALOGY THE EXEMPTION IS ALSO IN RESPECT OF NET INC OME. EXPENSES ALLOWED CAN ONLY BE IN RESPECT OF EARNING OF TAXABL E INCOME. THIS IS THE PURPORT OF SECTION 14A. IN SECTION 14A, THE FIR ST PHRASE IS 'FOR THE PURPOSES OF COMPUTING THE TOTAL INCOME UNDER THIS C HAPTER' WHICH I.T.A. NOS.29&296/DEL./2011 11 MAKES IT CLEAR THAT VARIOUS HEADS OF INCOME AS PRES CRIBED UNDER CHAPTER IV WOULD FALL WITHIN SECTION 14A. THE NEXT PHRASE IS, 'IN RELATION TO INCOME WHICH DOES NOT FORM PART OF TOTA L INCOME UNDER THE ACT'. IT MEANS THAT IF AN INCOME DOES NOT FORM PART OF TOTAL INCOME, THEN THE RELATED EXPENDITURE IS OUTSIDE THE AMBIT OF THE APPLICABILITY OF SECTION 14A. FURTHER, SECTION 14 S PECIFIES FIVE HEADS OF INCOME WHICH ARE CHARGEABLE TO TAX. IN ORDER TO BE CHARGEABLE, AN INCOME HAS TO BE BROUGHT UNDER ONE OF THE FIVE HEAD S. SECTIONS 15 TO 59 LAY DOWN THE RULES FOR COMPUTING INCOME FOR T HE PURPOSE OF CHARGEABILITY TO TAX UNDER THOSE HEADS. SECTIONS 15 TO 59 QUANTIFY THE TOTAL INCOME CHARGEABLE TO TAX. THE PERMISSIBLE DEDUCTIONS ENUMERATED IN SECTIONS 15 TO 59 ARE NOW TO BE ALLOW ED ONLY WITH, REFERENCE TO INCOME WHICH IS BROUGHT UNDER ONE OF T HE ABOVE HEADS AND IS CHARGEABLE TO TAX. IF AN INCOME LIKE DIVIDEN D INCOME IS NOT A PART OF THE TOTAL INCOME, THE EXPENDITURE/DEDUCTION THOUGH OF THE NATURE SPECIFIED IN SECTIONS 15 TO 59 BUT RELATED T O THE INCOME NOT FORMING PART OF TOTAL INCOME COULD NOT BE ALLOWED A GAINST OTHER INCOME INCLUDIBLE IN THE TOTAL INCOME FOR THE PURPO SE OF CHARGEABILITY TO TAX. THE THEORY OF APPORTIONMENT OF EXPENDITURES BETWEEN TAXABLE AND NON-TAXABLE HAS, IN PRINCIPLE, BEEN NOW WIDENED UNDER SECTION 14A. READING SECTION 14 IN JUXTAPOSITION WITH SECT IONS 15 TO 59, IT IS CLEAR THAT THE WORDS 'EXPENDITURE INCURRED' IN SECT ION 14A REFERS TO EXPENDITURE ON RENT, TAXES, SALARIES, INTEREST, ETC . IN RESPECT OF WHICH ALLOWANCES ARE PROVIDED FOR (SEE SECTIONS 30 TO 37) 13.2 HONBLE PUNJAB & HARYANA HIGH COURT IN TH EIR DECISION IN CIT VS. HERO CYCLES LTD.,323 ITR 518 HAVE OBSERVED THAT DISALLOWANCE UNDER SECTION 14A REQUIRES FINDING OF INCURRING OF EXPENDITURE AND WHERE IT IS FOUND THAT FOR EARNING EXEMPTED INCOME NO EXPENDITURE HAS BEEN INCURRED, DISALLOWANCE UNDE R SECTION 14A CANNOT STAND. 13.3 IN THE LIGHT OF VIEW TAKEN IN THE AFORESAID DECISIONS, HONBLE JURISDICTIONAL HIGH COURT IN A RECENT DECISION DATED 18.11.2011 IN MAXOPP INVESTMENT LTD. VS. CIT,[2011] 15 TAXMANN.COM 390 (DELHI) HELD AS UNDE R: 40. FROM THE ABOVE DISCUSSION, IT IS CLEAR THAT, IN EF FECT, THE PROVISIONS OF SUB SECTIONS (2) AND (3) OF SECTION 14A WOULD BE WORKAB LE ONLY WITH EFFECT FROM THE DATE OF INTRODUCTION OF RULE 8D. THIS IS SO BECAUSE PRIOR TO THAT DATE, THERE WAS I.T.A. NOS.29&296/DEL./2011 12 NO PRESCRIBED METHOD AND SUB-SECTIONS (2) AND (3) O F SECTION 14A REMAINED UNWORKABLE. HOW IS SECTION 14A TO BE WORKED FOR THE PERIOD PRIO R TO THE INTRODUCTION OF RULE 8D? 41. SUB-SECTION (2) OF SECTION 14A, AS WE HAVE SEEN, S TIPULATES THAT THE ASSESSING OFFICER SHALL DETERMINE THE AMOUNT OF EXP ENDITURE INCURRED IN RELATION TO INCOME WHICH DOES NOT FORM PART OF THE TOTAL INC OME 'IN ACCORDANCE WITH SUCH METHOD AS MAY BE PRESCRIBED'. OF COURSE, THIS DETER MINATION CAN ONLY BE UNDERTAKEN IF THE ASSESSING OFFICER IS NOT SATISFIE D WITH THE CORRECTNESS OF THE CLAIM OF THE ASSESSEE IN RESPECT OF SUCH EXPENDITUR E. THIS PART OF SECTION 14A(2) WHICH EXPLICITLY REQUIRES THE FULFILLMENT OF A COND ITION PRECEDENT IS ALSO IMPLICIT IN SECTION 14A(1) [AS IT NOW STANDS] AS ALSO IN ITS IN ITIAL AVATAR AS SECTION 14A. IT IS ONLY THE PRESCRIPTION WITH REGARD TO THE METHOD OF DETERMINING SUCH EXPENDITURE WHICH IS NEW AND WHICH WILL OPERATE PROSPECTIVELY. IN OTHER WORDS, SECTION 14A, EVEN PRIOR TO THE INTRODUCTION OF SUB-SECTIONS (2) & (3) WOULD REQUIRE THE ASSESSING OFFICER TO FIRST REJECT THE CLAIM OF THE ASSESSEE WITH REGARD TO THE EXTENT OF SUCH EXPENDITURE AND SUCH REJECTION MUST BE FOR DISCLOSED COGENT REASONS. IT IS THEN THAT THE QUESTION OF DETERMINATION OF SUCH EXPENDITURE BY THE ASSESSING OFFICER WOULD ARISE. THE REQUIREMENT OF ADOPTING A SPECIFIC METHOD OF DETERMINING SUCH EXPENDITURE HAS BEEN INTRODUCED BY VIRTUE OF S UB-SECTION (2) OF SECTION 14A. PRIOR TO THAT, THE ASSESSING WAS FREE TO ADOPT ANY REASONABLE AND ACCEPTABLE METHOD. 42. THUS, THE FACT THAT WE HAVE HELD THAT SUB-SECTIONS (2) & (3) OF SECTION 14A AND RULE 8D WOULD OPERATE PROSPECTIVELY (AND, NOT R ETROSPECTIVELY) DOES NOT MEAN THAT THE ASSESSING OFFICER IS NOT TO SATISFY H IMSELF WITH THE CORRECTNESS OF THE CLAIM OF THE ASSESSEE WITH REGARD TO SUCH EXPEN DITURE. IF HE IS SATISFIED THAT THE ASSESSEE HAS CORRECTLY REFLECTED THE AMOUNT OF SUCH EXPENDITURE, HE HAS TO DO NOTHING FURTHER. ON THE OTHER HAND, IF HE IS SAT ISFIED ON AN OBJECTIVE ANALYSIS AND FOR COGENT REASONS THAT THE AMOUNT OF SUCH EXPE NDITURE AS CLAIMED BY THE ASSESSEE IS NOT CORRECT, HE IS REQUIRED TO DETERMIN E THE AMOUNT OF SUCH EXPENDITURE ON THE BASIS OF A REASONABLE AND ACCEPT ABLE METHOD OF APPORTIONMENT. IT WOULD BE APPROPRIATE TO RECALL TH E WORDS OF THE SUPREME COURT IN WALFORT SHARE & STOCK BROKERS (P.) LTD. (SUPRA) TO THE FOLLOWING EFFECT:- 'THE THEORY OF APPORTIONMENT OF EXPENDITURE BETWEEN TAXABLE AND NON- TAXABLE HAS, IN PRINCIPLE, BEEN NOW WIDENED UNDER S ECTION 14 A.' SO, EVEN FOR THE PRE-RULE8D PERIOD, WHENEVER THE IS SUE OF SECTION 14A ARISES BEFORE AN ASSESSING OFFICER, HE HAS, FIRST OF ALL, TO ASCERTAIN THE CORRECTNESS OF THE CLAIM OF THE ASSESSEE IN RESPECT OF THE EXPENDI TURE INCURRED IN RELATION TO INCOME WHICH DOES NOT FORM PART OF THE TOTAL INCOME UNDER THE SAID ACT. EVEN WHERE THE ASSESSEE CLAIMS THAT NO EXPENDITURE HAS B EEN INCURRED IN RELATION TO INCOME WHICH DOES NOT FORM PART OF TOTAL INCOME, TH E ASSESSING OFFICER WILL HAVE TO VERIFY THE CORRECTENESS OF SUCH CLAIM. IN CASE, THE ASSESSING OFFICER IS SATISFIED WITH THE CLAIM OF THE ASSESSEE WITH REGARD TO THE E XPENDITURE OR NO EXPENDITURE, AS THE CASE MAY BE, THE ASSESSING OFFICER IS TO ACC EPT THE CLAIM OF THE ASSESSEE INSOFAR AS THE QUANTUM OF DISALLOWANCE UNDER SECTIO N 14A IS CONCERNED. IN SUCH I.T.A. NOS.29&296/DEL./2011 13 EVENTUALITY, THE ASSESSING OFFICER CANNOT EMBARK UP ON A DETERMINATION OF THE AMOUNT OF EXPENDITURE FOR THE PURPOSES OF SECTION 1 4A(1). IN CASE, THE ASSESSING OFFICER IS NOT, ON THE BASIS OF OBJECTIVE CRITERIA AND AFTER GIVING THE ASSESSEE A REASONABLE OPPORTUNITY, SATISFIED WITH THE CORRECTN ESS OF THE CLAIM OF THE ASSESSEE, HE SHALL HAVE TO REJECT THE CLAIM AND STA TE THE REASONS FOR DOING SO. HAVING DONE SO, THE ASSESSING OFFICER WILL HAVE TO DETERMINE THE AMOUNT OF EXPENDITURE INCURRED IN RELATION TO INCOME WHICH DO ES NOT FORM PART OF THE TOTAL INCOME UNDER THE SAID ACT. HE IS REQUIRED TO DO SO ON THE BASIS OF A REASONABLE AND ACCEPTABLE METHOD OF APPORTIONMENT. 14.. IN VIEW OF THE FOREGOING, ESPECIALLY WHEN THE LD. CIT(A) DID NOT HAVE THE BENEFIT OF AFORESAID DECISION OF THE HONBLE JURISD ICTIONAL HIGH COURT, WE CONSIDER IT FAIR AND APPROPRIATE TO MODIFY THE DIRE CTIONS OF THE LD. CIT(A) AND RESTORE THE MATTER TO THE FILE OF THE AO FOR DECIDING THE ISSUE OF DISALLOWANCE U/S 14A RAISED IN THE GROUN D NO. 4 IN THE APPEAL OF THE REVENUE AND GROUND NOS. 1 & 2 IN THE APPEAL OF THE ASSESSEE, AFRESH IN ACCORDANCE WITH LAW IN THE LIGH T OF AFORESAID JUDICIAL PRONOUNCEMENT OF THE HONBLE JURISDICTIONA L HIGH COURT AFTER ALLOWING SUFFICIENT OPPORTUNITY TO BOTH THE PARTIES , BRINGING OUT CLEARLY AS TO WHETHER OR NOT BORROWED FUNDS HAD IND EED BEEN UTILISED IN INVESTMENT IN SHARES FOR EARNING EXEMPT INCOME. WITH THESE OBSERVATIONS, GROUND NO. 4 IN THE APPEAL OF THE REV ENUE AND GROUND NOS.1 & 2 IN THE APPEAL OF THE ASSESSEE ARE DISPOSE D OF. 15. GROUND NO.5 IN THE APPEAL OF THE REVENUE RELATE S TO DISALLOWANCE ON ACCOUNT OF PROVISION FOR GRATUITY AND LEAVE ENCASHM ENT. WHILE COMPUTING BOOK PROFIT IN TERMS OF PROVISIONS U/S 115JB OF THE ACT, THE AO DISALLOWED AN AMOUNT OF 99,55,837/- TOWARDS PROVISION FOR GRATUITY AND LEAV E ENCASHMENT ON THE BASIS OF HIS FINDINGS IN THE ASSESSMENT ORDER FOR THE AY 20 06-07,HOLDING THAT THE SAID PROVISIONS WERE NOT FOR AN ASCERTAINED LIABILITY, R ELYING, INTER ALIA, ON DECISIONS IN CIT VS. VAIKUNDAM RUBBER CO. LTD.,241 ITR 50(KER.) AND APOLLO TYRES LTD. VS. CIT,255 ITR 273(SC). I.T.A. NOS.29&296/DEL./2011 14 16. ON APPEAL, THE LD. CIT(A) ALLOWED THE CLAIM OF THE ASSESSEE, FOLLOWING HIS OWN DECISION IN THE PRECEDING ASSESSMENT YEAR . 17. THE REVENUE IS NOW IN APPEAL BEFORE US AGAIN ST THE AFORESAID FINDINGS OF THE LD. CIT(A).AT THE OUTSET, BOTH THE PARTIES AGR EED THAT THE ISSUE IS SQUARELY COVERED BY THE DECISION DATED 15 TH SEPTEMBER, 2010 OF THE ITAT IN THE ASSESSEES OWN CASE IN ITA. NOS. 431& 432/DEL./2010 FOR THE AYS 2005-06 AND 2006-07,NOW REPORTED IN 134 TTJ715(DEL.). 18. WE HAVE HEARD BOTH THE PARTIES AND GONE THROUG H THE FACTS OF THE CASE. WE FIND THAT WHILE ADJUDICATING A SIMILAR ISSUE IN THE AYS 2005-06 & 2006-07, THE ITAT IN THEIR DECISION DATED 15 TH SEPTEMBER, 2010 CONCLUDED AS UNDER:- 5. WE HAVE HEARD BOTH THE PARTIES AND GONE T HROUGH THE MATERIAL AVAILABLE ON RECORD. ITAT, DELHI BENCH B IN THE CASE OF DCM LTD. IN I.T.A. NO.1983/D/2009 FOR ASSESSMENT YE AR 2005-06 DATED 17.11.2009 DELETED THE SIMILAR ADDITION. WE ALSO FIND THAT HONBLE DELHI HIGH COURT IN THE CASE OF DCM SHRIRAM CONSOLIDATED LTD. IN I.T.A. NO.947/D/2007 DATED 2 ND APRIL, 2009 FOLLOWING THE DECISION IN THE CASE OF CIT VS. HEWLETT PACKARD P. LTD. (SUPRA); CIT VS. BECHETEL INDIA P. LTD. 2 DTR (DEL.) 145 AND IN THE CASE OF CIT VS. DCM SHRIRAM CONSOLIDATED LTD. IN I.T.A. NO.1249 /2007 DATED 21.11.2008 DISMISSED THE APPEAL FILED BY THE REVENU E. THE SPECIAL LEAVE PETITION FILED BY THE REVENUE IN THE CASE OF DCM SHRIRAM CONSOLIDATED LTD. WAS DISMISSED BY HONBLE SUPREME COURT VIDE ORDER DATED 11.11.2009 IN CC (16973/2009 ). FROM THESE DECISIONS IT IS CLEAR THAT THE PROVISION FOR GRATUITY CANNOT BE ADDED IN CLAUSE (C) OF EXPLANATION (2) TO SECTION 1 15-JB OF THE ACT. SINCE THE ASSESSEE HAD MADE THE PROVISION BASED ON ACTUARIAL METHOD, RESPECTFULLY FOLLOWING THE DECISION OF HON BLE SUPREME COURT REFERRED TO ABOVE, NO ADJUSTMENT CAN BE MADE ON ACCOUNT OF PROVISION FOR GRATUITY AND LEAVER ENCASHMENT FOR CO MPUTATION OF BOOK PROFIT U/S 115JB OF THE ACT. THEREFORE, THIS GROUND OF APPEAL RAISED BY THE REVENUE IN BOTH THE YEARS IS DISMISSE D. 19. IN THE LIGHT OF AFORESAID VIEW TAKEN BY A C O-ORDINATE BENCH IN THE ASSESSEES OWN CASE FOR THE PRECEDING AYS 2005-06 & 2006-07,ESPECIALLY WHEN THE REVENUE HAVE NOT PLACED BEFORE US ANY CONTRARY DECISION NOR ANY OTHER I.T.A. NOS.29&296/DEL./2011 15 MATERIAL SO AS TO ENABLE US TO TAKE A DIFFERENT VIE W IN THE MATTER, WE HAVE NO ALTERNATIVE BUT TO UPHOLD THE FINDINGS OF THE LD. CIT(A).CONSEQUENTLY, GROUND NO.5 IN THE APPEAL OF THE REVENUE IS DISMISSED. 20. GROUND NO.3 IN THE APPEAL OF THE ASSESSEE RE LATES TO INITIATION OF PENALTY PROCEEDINGS U/S 271(1)(C) OF THE ACT. SINCE NO APPE AL IS PROVIDED AGAINST MERE INITIATION OF PENALTY PROCEEDINGS, THEREFORE, THIS GROUND IS DISMISSED.. 21. GROUND NO.1 IN THE APPEAL OF THE REVENUE AND GROUND NO.4 IN THE APPEAL OF THE ASSESSEE, BEING GENERAL IN NATURE NOR ANY SU BMISSIONS HAVING BEEN MADE BEFORE US ON THESE GROUNDS, DO NOT REQUIRE ANY SEPA RATE ADJUDICATION WHILE NO ADDITIONAL GROUND HAVING BEEN RAISED BEFORE US IN T ERM OF RESIDUARY GROUND NO.6 IN THE APPEAL OF THE REVENUE AS ALSO GROUND NO.5 IN THE APPEAL OF THE ASSESSEE, ACCORDINGLY, ALL THESE GROUNDS ARE DISMISSED. 22. NO OTHER PLEA OR ARGUMENTS WAS MADE BEFORE US. 23. IN THE RESULT, BOTH THESE APPEALS ARE PARTLY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN OPEN COURT SD/- SD/- (R.P. TOLANI) (A.N. PA HUJA) JUDICIAL MEMBER ACCOUNTANT MEMBER NS COPY OF THE ORDER FORWARDED TO :- 1. M/S D.C.M. ENGINEERING LTD., 6 TH FLOOR, VIKRANT TOWER, RAJENDRA PLACE,NEW DELHI. 2. A.C.I.T., CIRCLE 10(1), NEW DELHI. 3. CIT (APPEALS)-XVII, NEW DELHI 4. THE CIT CONCERNED. 5. THE DR, ITAT,B BENCH, NEW DELHI 6. GUARD FILE. TRUE COPY BY ORDER, DEPUTY / ASSTT.REGISTRAR ITAT, DELHI