J Ray McDermott Engineering Services Private Limited, CHENNAI V. DCIT Corporate Circle 2(2), CHENNAI

ITA 3239/CHNY/2017

• Counselvise Citation: [2021] 108 COUNSELVISE.COM (IT) 1011 (ITAT-CHENNAI)
• Duration Of Justice: 3 year(s) 6 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-07-2021
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: D
• Assessment Year: 2013-2014
• Appeal Filed On: 29-12-2017
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: G SRINIVASA RAO
• Keywords: Transfer pricing; Opportunity of being heard; Principle of natural justice; International transaction; Wholly owned subsidiary; Revenue expenditure
• Section: 92F; 92A; 13

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL , D B ENCH, CHENNAI , . , & BEFORE SHRI MAHAVIR SINGH, VICE-PRESIDENT AND SHRI G.MANJUNATHA, ACCOUNTANT MEMBER ./ I.T.A.NO.3239/CHNY/2017 ( / ASSESSMENT YEAR: 2013-14) M/S. J RAY MCDERMOTT ENGINEERING SERVICES PVT. LTD. RMZ MILLENIA BUSINESS PARK, 6 TH FLOOR, CAMPUS 3B, NO.143, DR.MGR ROAD, KANDANCHAVADY, CHENNAI-600 096. VS THE DEPUTY COMMISSIONER OF INCOME TAX, CORPORATE CIRCLE-2(2) 512, WANAPARTHY BLOCK, CHENNAI-34. PAN: AABCJ 6787H ( /APPELLANT) ( /RESPONDENT) / APPELLANT BY : MR.ASHIK SHAH,C.A /RESPONDENT BY : MR.G.SRINIVASA RAO, CIT /DATE OF HEARING : 05.07.2021 /DATE OF PRONOUNCEMENT : 07.07.2021 / O R D E R PER G.MANJUNATHA, AM: THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGA INST FINAL ASSESSMENT ORDER PASSED BY THE ASSESSING OFF ICER U/S.143(3) R.W.S. 144C(13) OF THE INCOME TAX ACT, 1961, IN TURN WHICH HAS ARISEN OUT OF THE DIRECTIONS OF DRP-2, B ENGALURU DATED 23.08.2017 AND PERTAINS TO ASSESSMENT YEAR 2 013-14. 2. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL:- 1. THE ASSESSING OFFICER (AO), DISPUTE RESOLUTI ON PANEL (DRP) AND TRANSFER PRICING OFFICER (TPO) HAVE E RRED IN FINALIZING AN ORDER OF ASSESSMENT, WHICH IS AGAINST THE 2 ITA NO.3239/CHNY/2017 PRINCIPLES OF NATURAL JUSTICE, VIOLATIVE OF PROVISI ONS OF THE ACT, DEVOID OF MERITS, WITHOUT APPRECIATING THE FACTS IN VOLVED, WITHOUT APPRECIATING THE DOCUMENTS SUBMITTED IN PRO PER LIGHT, WITHOUT CONDUCTING ADEQUATE INQUIRIES AND AS SUCH I S WITHOUT JURISDICTION. 2. TRANSFER PRICING: 2.1 THE TPO AND DRP ERRED IN REJECTING THE TRANSFER PRICING DOCUMENTATION/ BENCHMARKING CONDUCTED BY THE APPELL ANT WITHOUT PROVIDING ANY COGENT REASONS FOR THE SAME. 2.2 THE DRP, AO AND TPO ERRED IN CONSIDERING ACROPE TAL TECHNOLOGIES LIMITED (ACROPETAL) AS A COMPARABLE COMPANY WHEN THE APPELLANT HAD DEMONSTRATED THAT THE COMPAN Y IS NOT COMPARABLE AND THAT IN THE YEAR UNDER ASSESSMENT, A CROPETAL EARNED EXORBITANT MARGINS. 2.3 THE DRP, AO AND TPO ERRED IN CONSIDERING VAMA INDUSTRIES LIMITED (VAMA) AS A COMPARABLE COMPANY DESPITE DEMONSTRATING THAT VAMA IS FUNCTIONALLY DIFFERENT F ROM THE APPELLANT. 2.4 THE DRP, AO AND TPO ERRED IN DISREGARDING THE U SAGE OF MULTIPLE YEAR DATA FOR COMPARABILITY ANALYSIS. 2.5 THE DRP, AO AND TPO ERRONEOUSLY APPLIED THE EXP ORT TURNOVER FILTER, DESPITE, THE APPELLANT DEMONSTRATI NG VARIOUS PRACTICAL DIFFICULTIES IN APPLYING THE FILTER. THE DRP, AO AND TPO ERRED IN INTRODUCING THE FILTER WITHOUT PROVIDI NG ANY THRESHOLD FOR APPLICATION OF THE SAID FILTER. 2.6 THE DRP AND TPO ERRED IN EXCLUDING COMPARABLE COMPANIES WHICH WERE OTHERWISE COMPARABLE TO THE AP PELLANT BY APPLYING INCORRECT FILTERS. 3 CORPORATE TAX.: 3.1 ON FACTS AND CIRCUMSTANCES OF THE CASE, THE DRP AND AO HAVE ERRED IN DISALLOWING THE CLUB MEMBERSHIP FEE T O THE TUNE OF INR 1,68,540 WITHOUT APPRECIATING THAT THE EXPEN DITURE 3 ITA NO.3239/CHNY/2017 TOWARDS CLUB MEMBERSHIP FEE IS FOR BUSINESS PURPOSE S AND WITHOUT PROVIDING ADEQUATE OPPORTUNITY OF BEING HEA RD. 3.2 ON THE FACTS AND CIRCUMSTANCES OF THE CASE, TH E DRP AND AO HAVE ERRED IN DISALLOWING INTEREST ON DELAYED RE MITTANCE OF STATUTORY DUES WITHOUT APPRECIATING THAT THE SAME I S COMPENSATORY IN NATURE AND WITHOUT PROVIDING ADEQUA TE OPPORTUNITY OF BEING HEARD. 3. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE CO MPANY IS A WHOLLY OWNED SUBSIDIARY OF MCDERMOTT ASIA PACIFIC P TE LTD., SINGAPORE. THE ASSESSEE IS A CAPTIVE SERVICE PROVI DER OF ENGINEERING DESIGN AND RELATED SERVICES TO MCDERMOT T GROUP. THE COMPANY PROVIDES ENGINEERING DESIGN AND RELATE D SERVICES TO J.RAY MCDERMOTT MIDDLE EAST INC.,DUBAI AND IS COMPENSATED ON A COST PLUS BASIS. THE ASSESSEE FIL ED ITS RETURN OF INCOME FOR ASSESSMENT YEAR 2013-14 ON 28. 11.2013 DECLARING TAXABLE INCOME AT RS.11,37,53,110/-. THE ASSESSEE HAS ENTERED INTO VARIOUS INTERNATIONAL TRANSACTIONS WITH ITS AES AND SUCH TRANSACTIONS HAVE BEEN REPORTED IN FORM 3CEB FILED IN ACCORDANCE WITH PROVISIONS OF INDIAN TRANSFER P RICING REGULATIONS CONTAINED IN SECTION 92, 92A TO 92F OF THE INCOME TAX ACT, 1961. THE ASSESSEE HAS AGGREGATED ALL TRA NSACTIONS WITH ITS AES AND SUBSTANTIATED INTERNATIONAL TRANSA CTIONS BY USING TNMM AS MOST APPROPRIATE METHOD. FURTHER, 4 ITA NO.3239/CHNY/2017 INTERNATIONAL TRANSACTIONS IN THE NATURE OF REIMBUR SEMENT OF EXPENSES RECEIVED WERE JUSTIFIED FOR ARMS LENGTH PRICE BY USING CUP METHOD. THE ASSESSEE HAD OPERATING MARGIN AT 18.57% AND SAME WAS COMPARED WITH COMPARABLE COMPA NIES MARGIN AT 12.03%. 4. THE CASE WAS TAKEN UP FOR SCRUTINY AND DURING TH E COURSE OF ASSESSMENT PROCEEDINGS, A REFERENCE WAS MADE T O TPO TO DETERMINE ARMS LENGTH PRICE OF INTERNATIONAL TRANS ACTIONS OF THE ASSESSEE WITH ITS AES. DURING THE COURSE OF TRANSFE R PRICING PROCEEDINGS, THE TPO HAS RE-CHARACTERISED TP STU DY CONDUCTED BY THE ASSESSEE AND HAS EXCLUDED CERTAIN COMPANIES SELECTED BY THE ASSESSEE AND HAS ALSO INCLUDED CERTAIN NEW COMPARABLES AND ARRIVED AT AVERAGE A RITHMETICAL MEAN MARGIN OF 27.98%. THE TPO HAS ALSO RECOMPUTE D MARGIN OF THE ASSESSEE BY INCLUDING FOREX INCOME A S OPERATING INCOME AND COMPUTED MARGIN OF 19.66% AS AGAINST MAR GIN COMPUTED BY THE ASSESSEE AT 18.57%. THUS, THE TPO HAS RECOMPUTED ARMS LENGTH PRICE OF INTERNATIONAL TRAN SACTIONS BY TAKING COMPARABLE MARGIN OF 27.98% AND MADE TP AD DITION OF RS.4,94,25,547/-. 5 ITA NO.3239/CHNY/2017 5. PURSUANT TO TRANSFER PRICING ADJUSTMENT AS SUGGE STED BY TPO, THE ASSESSING OFFICER HAS PASSED DRAFT ASSESS MENT ORDER U/S.143(3) R.W.S 144C(I) OF THE ACT ON 15 TH NOVEMBER, 2016 AND MADE TP ADJUSTMENT OF RS.4,94,25,547/-, AS SUGGEST ED BY THE TPO. THE ASSESSING OFFICER HAD ALSO MADE TWO CORPO RATE TAX ADJUSTMENT OF DISALLOWANCE OF MEMBERSHIP FEES PAI D TO CLUBS FOR EMPLOYEES OF THE ASSESSEE FOR RS.1,68,540/- AN D HAS ALSO MADE DISALLOWANCE OF INTEREST PAID FOR DELAYED REMI TTANCE OF SERVICE TAX FOR RS.1,40,951/-. THE ASSESSEE HAS FI LED OBJECTIONS AGAINST DRAFT ASSESSMENT ORDER PASSED B Y THE ASSESSING OFFICER BEFORE THE DISPUTE RESOLUTION PA NEL-2, BANGALORE AND CHALLENGED RE-CHARACTERIZATION OF TP STUDY AND INCLUSION OF CERTAIN COMPARABLES. THE ASSESSEE HAS ALSO CHALLENGED ADDITIONS MADE BY THE ASSESSING OFFICER TOWARDS DISALLOWANCE OF CLUB MEMBERSHIP FEES AND DISALLOWA NCE OF INTEREST PAID FOR DELAYED REMITTANCE OF STATUTORY PAYMENTS. 6. THE LEARNED DRP VIDE ITS DIRECTIONS DATED 23.0 8.2017 HAS REJECTED OBJECTIONS FILED BY THE ASSESSEE REGA RDING TP ADJUSTMENT IN RESPECT OF INCLUSION OF M/S. ACROPETA L 6 ITA NO.3239/CHNY/2017 TECHNOLOGIES LTD. AS COMPARABLE BY HOLDING THAT MER E ALLEGATIONS OF FRAUD AGAINST COMPANY AND ITS MARG INS ARE NOT SUFFICIENT GROUND TO EXCLUDE THE COMPANY FROM THE L IST OF COMPARABLES WHEN FUNCTIONS PERFORMED BY COMPARABLE S ARE SIMILAR TO FUNCTIONS CARRIED OUT BY THE ASSESSEE. THE DRP HAS ALSO REJECTED THE OBJECTIONS FILED BY THE ASSESSE E TOWARDS CLUB MEMBERSHIP FEES PAID TO MADRAS CLUB ON THE GROUND THAT THE SAME IS IN THE NATURE OF PERSONAL EXPENDITURE AND NOT ALLOWABLE AS DEDUCTION UNDER THE ACT. SIMILARLY, T HE DRP HAS REJECTED OBJECTIONS FILED BY THE ASSESSEE REGARDING DISALLOWANCE OF INTEREST ON DELAYED PAYMENT OF RE MITTANCE OF INCOME TAX AND SERVICE TAX. AGGRIEVED BY THE DRP DIRECTIONS, THE ASSESSEE IS IN APPEAL BEFORE US. 7. THE FIRST ISSUE THAT CAME UP FOR OUR CONSIDERATI ON FROM GROUND NO.2 OF THE ASSESSEE APPEAL IS INCLUSION O F M/S. ACROPETAL TECHNOLOGIES LTD. AS COMPARABLE COMPANY. THE LEARNED AR FOR THE ASSESSEE SUBMITTED THAT M/S. AC ROPETAL TECHNOLOGIES LTD. IS NOT A GOOD COMPARABLE, BECAU SE IT HAS HIGH MARGINS AND ALSO SEBI HAS PASSED AN ORDER ON ALLEGED 7 ITA NO.3239/CHNY/2017 FRAUD COMMITTED BY THE COMPANY AND HENCE, FINANCI ALS OF THE COMPANY WHICH CANNOT BE RELIED UPON. THEREFORE, TH E TPO AS WELL AS DRP WERE ERRED IN INCLUSION OF M/S. ACROP ETAL TECHNOLOGIES LTD. AS GOOD COMPARABLE. THE LEARNED A.R FOR THE ASSESSEE REFERRING TO PAPER BOOKS FILED FOR TH IS PURPOSE SUBMITTED THAT THE ITAT., CHENNAI IN THE CASE OF M/ S. BLOOM ENERGY INDIA PVT.LTD., IN ITA NO.2857/CHNY/2017 DAT ED 20.06.2018 HAS CLEARLY HELD THAT THERE WERE SEVERA L ALLEGATIONS OF WINDOW DRESSING ITS STATEMENT OF ACCOUNTS FOR TH E RELEVANT ASSESSMENT YEAR AND FURTHER, IT HAS ABNORMAL VARIAT IONS IN OPERATING MARGINS, THEREFORE, SAME CANNOT BE CONSID ERED AS GOOD COMPARABLE. THE AR FURTHER REFERRING TO REPOR T OF SEBI SUBMITTED THAT SEBI HAS CONDUCTED A THOROUGH INQUI RY ON THE AFFAIRS OF M/S. ACROPETAL TECHNOLOGIES LTD. AND H ELD THAT THE COMPANY HAS DIVERTED ITS IPO FUNDS TO NON-BUSINE SS PURPOSE AND SAME HAS BEEN TREATED AS FRAUD WITHIN THE MEAN ING OF PFUTP REGULATIONS. THEREFORE, WHEN THE COMPANIES F INANCIALS ARE NOT TO BE CONSIDERED AS GENUINE, THE SAME CANN OT BE CONSIDERED AS GOOD COMPARABLE FOR A COMPANY, WHIC H IS PROVIDING CAPTIVE SERVICE TO ITS AES. 8 ITA NO.3239/CHNY/2017 8. THE LEARNED DR, ON THE OTHER HAND, STRONGLY SUPP ORTING THE ORDER OF TPO AS WELL AS DRP DIRECTIONS, SUBMI TTED THAT MERE ALLEGATIONS OF FRAUD AND HIGH MARGINS IS NO T A GROUND TO EXCLUDE A COMPANY FROM THE LIST OF COMPARABLES, WHE N FAR ANALYSIS OF THE COMPANY ARE SIMILAR TO THE ASSESSEE . 9. WE HAVE HEARD BOTH THE PARTIES, PERUSED MATERIAL S AVAILABLE ON RECORD AND GONE THROUGH ORDERS OF THE AUTHORITIES BELOW. THE TPO HAS INCLUDED M/S. ACROPETAL TECH NOLOGIES LTD. AS COMPARABLE TO DETERMINE OPERATING MARGIN OF THE ASSESSEE COMPANY. THE ASSESSING OFFICER HAS INCLUD ED M/S. ACROPETAL TECHNOLOGIES LTD. AS COMPARABLE BY REJE CTING OBJECTIONS FILED BY THE ASSESSEE ON THE GROUND THAT MERE ALLEGATION OF FRAUD AND HIGH MARGINS IS NOT A RE ASON FOR EXCLUSION OF COMPANY, WHEN FAR ANALYSIS ARE SIMILAR TO FUNCTIONS CARRIED OUT BY THE ASSESSEE. WE HAVE GIV EN OUR THOUGHTFUL CONSIDERATION TO REASONS GIVEN BY THE AS SESSING OFFICER TO INCLUDE M/S. ACROPETAL TECHNOLOGIES LTD . AS COMPARABLE AND ARGUMENTS ADVANCED BY THE LEARNED A.R FOR THE ASSESSEE IN LIGHT OF SEBI REPORT ON ALLEGED I RREGULARITIES IN 9 ITA NO.3239/CHNY/2017 THE FINANCIALS OF THE COMPANY AND FIND THAT SEBI HAS CLEARLY STATED THAT THE COMPANY HAS COMMITTED A FRAUD IN UTILIZATION OF FUNDS RAISED IN IPO AND HAS DIVERTED MAJORITY OF FUNDS TO NON- BUSINESS PURPOSES AND WHICH HAS A SIGNIFICANT EFFE CT ON OPERATING MARGINS. WE FURTHER NOTED THAT CO-ORDINA TE BENCH OF THIS TRIBUNAL IN M/S. BLOOM ENERGY INDIA PVT.LTD ( SUPRA) HAS ALSO CONSIDERED COMPARABILITY OF M/S. ACROPETAL TE CHNOLOGIES LTD. AND AFTER CONSIDERING FINANCIALS HELD THAT F INANCIALS OF M/S. ACROPETAL TECHNOLOGIES LTD. CANNOT BE RELIED UPON FOR THE ASSESSMENT YEAR 2013-14, BECAUSE THERE IS A FINDIN G FROM SEBI REGARDING DIVERSION OF FUNDS TO NON-BUSINESS PURPOSES AND WHICH IS A FRAUD WITHIN THE MEANING OF PFUTP RE GULATIONS. THE TRIBUNAL FURTHER NOTED THAT EVEN IF IT IS CONS IDERED, BUT THE PROFIT OF THE COMPANIES ARE ABNORMALLY HIGH DURING THE RELEVANT ASSESSMENT YEAR AND HENCE, IT CANNOT BE CONSIDERED AS GOOD COMPARABLE TO A COMPANY, WHICH IS PROVIDING CAPTIV E SERVICE TO ITS AES. THE ITAT., CHENNAI IN THE CASE OF M/S.CAME RON MANUFACTURING INDIA PVT.LTD., VIDE ITS ORDER DATED 16.10.2018 HAS ONCE AGAIN REITERATED ITS FINDING AND HELD THAT M/S. ACROPETAL TECHNOLOGIES LTD. IS HAVING ABNORMAL OPE RATING 10 ITA NO.3239/CHNY/2017 MARGIN, WHICH CANNOT BE COMPARED WITH THE MARGIN OF A COMPANY WHICH IS PROVIDING CAPTIVE SERVICE TO ITS A ES. WE FURTHER NOTED THAT SEBI HAS CONDUCTED INQUIRY ABOUT THE ACTIVITIES OF M/S. ACROPETAL TECHNOLOGIES LTD. AND OBSERVED THAT IT HAS DIVERTED ITS IPO PROCEEDS TO VARIOUS G ROUP COMPANIES FOR NON-BUSINESS PURPOSES AND CONCLUDED THAT DIVERSION OF IPO FUNDS IS A FRAUD WITHIN THE MEANIN G OF PFUTP REGULATIONS . THEREFORE, WE ARE OF THE CONSIDERED VIEW THAT A COMPANY WHICH HAS COMMITTED A FRAUD, AS PER FINDING S OF SEBI REGULATIONS CANNOT BE CONSIDERED AS GOOD COMPARABLE FOR A COMPANY, WHICH IS PROVIDING CAPTIVE SERVICE TO ITS AES IN THE AREA OF ENGINEERING DESIGN SERVICE. THEREFORE, CONS IDERING FACTS AND CIRCUMSTANCES OF THE CASE AND ALSO BY FOLLOWING DECISION OF THE CO-ORDINATE BENCH IN THE CASE OF M/S.BLOOM ENG INEERING INDIA LTD.(SUPRA), WE ARE OF THE CONSIDERED VIEW T HAT M/S. ACROPETAL TECHNOLOGIES LTD. IS NOT A GOOD COMPARAB LE AND HENCE, WE DIRECT THE TPO TO EXCLUDE M/S. ACROPETAL TECHNOLOGIES LTD. FROM THE LIST OF COMPARABLES AND RECOMPUTE MARGIN AFTER EXCLUSION OF THE COMPANY. 11 ITA NO.3239/CHNY/2017 10. THE NEXT ISSUE THAT CAME UP FOR OUR CONSIDERATI ON FROM GROUND NO.3 OF THE ASSESSEE APPEAL IS DISALLOWANCE OF EXPENDITURE INCURRED ON MEMBERSHIP FEES PAID TO MA DRAS CLUB. THE ASSESSING OFFICER HAS DISALLOWED MEMBERSHIP FEE S PAID TO MADRAS CLUB ON THE GROUND THAT IT IS IN THE NATURE OF PERSONAL EXPENDITURE CANNOT BE ALLOWED AS DEDUCTION. IT WAS CLAIM OF THE ASSESSEE BEFORE LOWER AUTHORITIES THAT EXPENDIT URE TOWARDS CLUB MEMBERSHIP FEES WAS FOR BUSINESS PURPOSE AND WITHOUT PROVIDING ADEQUATE OPPORTUNITY OF BEING HEARD TO TH E ASSESSEE, THE ASSESSING OFFICER HAS TREATED SAME AS PERSONAL IN NATURE. 11. HAVING HEARD BOTH SIDES AND CONSIDERED MATERIA LS AVAILABLE ON RECORD, WE DO NOT FIND ANY MERIT IN TH E ARGUMENTS OF THE LEARNED AR FOR THE ASSESSEE THAT MEMBERSHIP FEES PAID TO MADRAS CLUB IS HAVING BEARING ON BUSINESS OF THE ASSESSEE. FURTHER, CLUB MEMBERSHIP FEES PAID IS DEFINITELY IN THE NATURE OF PERSONAL EXPENDITURE, UNLESS THE ASSESSEE DEMONSTR ATES WITH EVIDENCE THAT IT HAS BEEN INCURRED FOR THE PURPOSE OF PROMOTING BUSINESS OF THE ASSESSEE. IN THIS CASE, THE ASSESSE E HAS NOT PRODUCED ANY DETAILS TO PROVE THAT CLUB MEMBERSHIP FEES PAID TO MADRAS CLUB IS HAVING BEEN INCURRED FOR THE PURP OSE OF 12 ITA NO.3239/CHNY/2017 PROMOTING BUSINESS OF THE ASSESSEE. THEREFORE, WE A RE OF THE CONSIDERED VIEW THAT THERE IS NO ERROR IN THE FINDI NGS RECORDED BY THE ASSESSING OFFICER TO DISALLOW CLUB MEMBERSH IP FEES PAID TO MADRAS CLUB AND HENCE, WE ARE INCLINED TO UPHOLD THE FINDINGS OF THE DRP AND REJECT THE GROUND TAKEN BY THE ASSESSEE. 12. THE NEXT ISSUE THAT CAME UP FOR OUR CONSIDERATI ON FROM GROUND NO.3.2 OF THE ASSESSEE APPEAL IS DISALLOWA NCE OF INTEREST ON DELAYED STATUTORY PAYMENTS. THE ASSESSE E HAS CLAIMED DEDUCTION TOWARDS INTEREST ON DELAYED / DE FERRED PAYMENT OF INCOME-TAX, DELAYED PAYMENT OF PROVIDENT FUND AND DELAYED PAYMENT OF SERVICE TAX. THE ASSESSING OFFI CER HAS DISALLOWED ALL THREE PAYMENTS ON THE GROUND THAT TH EY ARE NOT ALLOWABLE AS DEDUCTION. IT WAS CLAIM OF THE ASSESSE E THAT INTEREST ON DELAYED / DEFERRED PAYMENT OF INCOME-T AX OF RS.32,107/- HAS BEEN ADDED BACK IN THE STATEMENT OF TOTAL INCOME AND HENCE, SAME CANNOT BE ONCE AGAIN DISALLO WED. AS REGARDS INTEREST ON DELAYED PAYMENT OF PF AND SERVI CE TAX, THE ASSESSEE CLAIMED THAT IT IS IN THE NATURE REVENUE E XPENDITURE AND NEEDS TO BE ALLOWED. 13 ITA NO.3239/CHNY/2017 13. WE HAVE HEARD BOTH THE PARTIES, PERUSED MATERIA LS AVAILABLE ON RECORD AND GONE THROUGH ORDERS OF THE AUTHORITIES BELOW. AS REGARDS INTEREST ON DELAYED PAYMENT OF I NCOME-TAX, THERE IS NO DISPUTE WITH REGARD TO THE FACT THAT TH E LEARNED DRP HAS RECORDED CATEGORICAL FINDING THAT ASSESSEE ITSE LF HAS ADDED BACK SAID INTEREST IN THE STATEMENT OF TOTAL INCOME AND HENCE, SAME CANNOT ONCE AGAIN BE DISALLOWED. IF THE ASSESS EE HAS ALREADY DISALLOWED INTEREST PAID ON DELAYED PAYMENT S OF INCOME TAX, THEN THE ASSESSING OFFICER IS NOT REQUI RED TO DISALLOW ONCE AGAIN SAID PAYMENT, BECAUSE IT AMOUN TS TO DOUBLE DISALLOWANCE. HENCE, WE DIRECT THE ASSESSING OFFICER TO VERIFY CLAIM OF THE ASSESSEE AND TAKE APPROPRIATE D ECISION. 14. AS REGARDS INTEREST ON DELAYED PAYMENT OF PF, W E FIND THAT IT IS A PENAL IN NATURE FOR DELAYED REMITTANCE OF STATUTORY DUES PAYABLE UNDER RESPECTIVE ACTS AND CANNOT BE AL LOWED AS DEDUCTION. THEREFORE, THERE IS NO MERIT IN THE ARGU MENTS OF THE ASSESSEE THAT INTEREST PAID ON DELAYED REMITTANCES OF PROVIDENT FUND IS AN ALLOWABLE DEDUCTION. 14 ITA NO.3239/CHNY/2017 15. INSOFAR AS DELAYED REMITTANCE OF SERVICE-TAX, WE ARE OF THE CONSIDERED VIEW THAT SINCE SERVICE TAX IS AN IN DIRECT EXPENDITURE, WHICH IS ALLOWABLE UNDER THE ACT, ANY INTEREST PAID ON DELAYED REMITTANCES OF SUCH INDIRECT TAXES IS A LSO IN THE NATURE OF REVENUE EXPENDITURE, BECAUSE IT IS COMPE NSATORY IN NATURE. HENCE, WE DIRECT THE ASSESSING OFFICER TO A LLOW DEDUCTION TOWARDS INTEREST ON DELAYED PAYMENT OF S ERVICE TAX AT RS.23,719/-. 16. IN THE RESULT, APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 7 TH JULY, 2021 SD/- SD/- ( ) ( . ) (MAHAVIR SINGH) (G. MANJUNATHA ) / VICE-PRESIDENT % / ACCOUNTANT MEMBER ' /CHENNAI, ( / DATED 7 TH JULY, 2021 DS *+ ,+ /COPY TO: 1. APPELLANT 2. RESPONDENT 3. - () /CIT(A) 4. - /CIT 5. + 1 /DR 6. /GF .