DCIT, CHENNAI V. India Piston Ltd., CHENNAI

ITA 3346/CHNY/2016

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 4624 (ITAT-CHENNAI)
• Duration Of Justice: 4 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-05-2017
• Appeal Filed By: Department
• Bench Allotted: A
• Assessment Year: 2012-2013
• Appeal Filed On: 14-12-2016
• Court: TRIBUNAL
• Department Lawyers: ANJENEYALU
• Keywords: Depreciation; Additional depreciation; Earning of tax free income; Question of law
• Section: 43B; 14A; 147; 148

Judgement Text

, , IN THE INCOME - TAX APPELLATE TRIBUNAL A BENCH, CHENNAI , . , BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER & SHRI DUVVURU RL REDDY, JUDICIAL MEMBER ./ I T.A. NO. 334 6 /MDS/201 6 / ASSESSMENT YEAR :20 1 2 - 1 3 THE DEPUTY COMMISSIONER OF INCOME TAX, CORPORATE CIRCLE 2 ( 2 ) , ROOM NO. 512, 5 TH FLOOR, WANAPARTHY BLOCK, 121, M.G. ROAD, CHENNAI 600 034. VS. M/S. INDIA PI STON LTD., HUZUR GARDENS, SEMBIAM, CHENNAI 600 011. [PAN: AA A C I1439E ] ( / APPELLANT ) ( / RESPONDENT ) / APPELLANT BY : SHRI ANJENEYALU, CIT / RESPONDENT BY : SHRI VIKRAM VIJAYARAGHAVAN, AD VOCATE / DATE OF HEARING : 16 . 0 2 .201 7 / DATE OF P RONOUNCEMENT : 09 . 0 5 .201 7 / O R D E R PER DUVVURU RL REDDY , JUDICIAL MEMBER : THIS APPEAL FILED BY THE REVENUE IS DIRECTED AGAINST THE ORDER OF THE LD. COMMI SSIONER OF INCOME TAX (APPEALS) 6 , C HENNAI DATED 2 9 . 0 9 .201 6 RELEVANT TO THE ASSESSMENT YEAR 20 1 2 - 1 3 . 2. THE FIRST GROUND RAISED IN THE APPEAL OF THE REVENUE IS WITH REGARD TO DELETION OF ADDITION OF .39,45,868/ - MADE UNDER SECTION 32(1)(IIA) OF THE ACT ON ACCOUNT OF DEPRECIATION CLAIMED BY THE ASSESSEE. IN THE ASSESSMENT ORDER, THE ASSESSING OFFICER HAS NOTICED THAT THE CLAIM OF THE ASSESSEE I.T.A. NO . 3346 /M/ 16 2 RELATES TO ASSETS ACQUIRED IN THE PRECEDING ASSESSMENT YEAR, WHEREIN THE ASSETS WERE USED FOR LESS THAN 180 DAYS AND ONLY 10% OF DEPRECIATION WAS CLAIMED IN EARLIER YEAR. THUS, IN THE PRESENT ASSESSMENT YEAR, THE ASSESSEE HAS CLAIMED THE RESIDUAL 10% OF THE ADDITIONAL DEPRECIATION. THE ASSESSING OFFICER HAS HELD THAT THE ASSESSEE CANNOT CLAIM THE BALANCE 10% OF DEPRE CIATION IN THE SUBSEQUENT YEAR AS PER PROVISIONS OF SECTION 32(1)(IIA) OF THE ACT BY FOLLOWING VARIOUS DECISION OF THE TRIBUNAL. 3 . ON APPEAL, BY FOLLOWING THE DECISION IN THE CASE OF CIT V. RITTAL INDIA PVT. LTD. 380 ITR 423, THE LD. CIT(A) DIRECTED THE ASSESSING OFFICER TO ALLOW THE ADDITIONAL DEPRECIATION AS CLAIMED BY THE ASSESSEE. 4. ON BEING AGGRIEVED, THE REVENUE I S IN APPEAL BEFORE THE TRIBUNAL. T HE LD. DR HAS STRONGLY RELIED ON THE DECISION IN THE CASE OF M.M. FORGINGS LTD. V. ADDL. CIT 349 IT R 673 (MAD)] AND SUBMITTED THAT THE HON BLE JURISDICTIONAL HIGH COURT HAS CONSIDERED THE VERY SAME ISSUED OF ADDITIONAL DEPRECIATION AND ALSO INTERPRETED SECTION 32(1) AND 32(1)(IIA) AND HELD THAT IF THE ASSESSEE HAS USED THE NEW PLANT AND MACHINERY BELOW 180 DAYS, IT IS ONLY ELIGIBLE FOR 50% OF THE ADDITIONAL DEPRECIATION AS PROVIDED IN THE STATUTE AND STRONGLY SUPPORTED THE ASSESSMENT ORDER . 5. ON THE OTHER HAND, THE LD. COUNSEL FOR THE ASSESSEE HAS SUBMITTED THAT THE ADDITIONAL DEPRECIATION AS PROVIDED BY THE LEGISLATURE, IS A BENEFICIAL I.T.A. NO . 3346 /M/ 16 3 PROVISION AND IF THE ASSESSEE IS NOT IN A POSITION TO UTILIZE IN THE YEAR IN WHICH THE MACHINERIES WERE PURCHASED AND INSTALLED, THE REMAINING BALANCE CAN BE ALLOWED IN SUBSEQUENT YEAR AND STRONGLY RELIED ON THE DECISIO N IN THE CASE OF CIT V. RITTAL INDIA PVT. LTD. (SUPRA). 6 . WE HAVE HEARD BOTH SIDES, PERUSED THE MATERIALS ON RECORD AND GONE THROUGH THE ORDERS OF AUTHORITIES BELOW. THE ISSUE INVOLVED IN THE APPEAL OF THE ASSESSEE IS WHEN THE ASSESSEE HAS USED NEW PLAN T AND MACHINERY LESS THAN 180 DAYS, WHETHER THE ASSESSEE IS ELIGIBLE FOR REMAINING BALANCE OF 50% OF ADDITIONAL DEPRECIATION IN SUBSEQUENT YEAR BY CARRY FORWARDING THE CLAIM. IN THIS CASE, THE ASSESSEE HAS SUBMITTED THAT ONLY 10% OF DEPRECIATION WAS CLAIME D IN THE YEAR OF INSTALLATION SINCE THE ASSETS WERE USED FOR LESS THAN 180 DAYS ONLY. THEREFORE, THE BALANCE 10% OF DEPRECIATION HAS BEEN CLAIMED IN THE SUBSEQUENT YEAR RELEVANT TO THE ASSESSMENT YEAR UNDER CONSIDERATION. THE CLAIM OF THE ASSESSEE WAS DENI ED BY THE ASSESSING OFFICER ON THE GROUND THAT THE STATUTE DOES NOT PROVIDE CARRY FORWARD THE ADDITIONAL DEPRECIATION UNDER SECTION 32(1)(IIA) OF THE ACT AND THE SAME WAS CONFIRMED BY THE CIT(A). 7. I N THE CASE OF M.M. FORGINGS LTD. V. ADDL. CIT 349 ITR 673 (MAD)] , THE HON BLE JURISDICTIONAL HIGH COURT HAS CONSIDERED THE ISSUE OF ADDITIONAL DEPRECIATION AND ALSO INTERPRETED SECTION 32(1) AND 32(1)(IIA) AND HELD THAT IF THE ASSESSEE HAS USED THE NEW PLANT AND MACHINERY BELOW 180 DAYS, IT IS I.T.A. NO . 3346 /M/ 16 4 ONLY ELIGIBLE FOR 50% OF THE ADDITIONAL DEPRECIATION AS PROVIDED IN THE STATUTE BY OBSERVING AS UNDER: 3. T HE ASSESSING AUTHORITY BY APPLYING THE SECOND PROVISO TO SECTION 32(1) OF THE ACT, RESTRICTED THE ALLOWABILITY OF THE DEPRECIATION TO 50 PER CENT OF THE AMOUNT PERMISSIBLE UNDER SECTION 32(1)(IIA)OF THE ACT. ACCORDING TO THE APPELLANT, WHEN IT SATISFIED ALL THE CONDITIONS STIPULATED UNDER THE PROVISOS TO SECTION 32(1)(IIA) OF THE ACT, THE ASSESSING AUTHORITY OUGHT NOT TO HAVE RESTRICTED THE DEPRECIATION PERMISSIB LE UNDER THE SAID SECTION BY RESORTING TO THE SECOND PROVISO TO SECTION 32(1) OF THE ACT. THE LEARNED COUNSEL HOWEVER FAIRLY POINTED OUT BEFORE US THAT IN THE SECOND PROVISO TO SECTION 32(1) OF THE ACT, THAT VERY CLAUSE (IIA) ITSELF WAS INSERTED BY FINANCE ACT, 2002 WITH EFFECT FROM 01.04. 2003. THEREFORE, IT WAS IMPERATIVE THAT ON AND AFTER 01.04.2003, THE CLAIM OF THE ASSESSEE MADE UNDER SECTION 32(1)(IIA) OF THE ACT, HAD TO BE NECESSARILY ASSESSED BY APPLYING THE SECOND PROVISO TO SECTION 32(1) OF THE AC T. THEREFORE, WHEN THERE WAS STATUTORY STIPULATION PROVIDING FOR RESTRICTION TO 50 PER CENT OF THE AMOUNT ALLOWABLE UNDER SECTION 32(1)(IIA) OF THE ACT, NO FAULT CAN BE FOUND WITH THE CONCLUSION OF THE ASSESSING AUTHORITY AS WELL AS THAT OF THE APPELLATE A UTHORITY AND THE TRIBUNAL IN HAVING AFFIRMED THE ACTION OF THE ASSESSING AUTHORITY. WE, THEREFORE, DO NOT FIND ANY SCOPE TO ENTERTAIN THE SAID QUESTION OF LAW. 8 . FROM THE ABOVE DECISION OF THE HON BLE JURISDICTIONAL HIGH COURT, IT IS CLEAR THAT WHEN T HE NEW ASSET ACQUIRED AND PUT IT IN USE FOR LESS THAN 180 DAYS, AS PER THE PROVISIONS OF SECTION 32(1)(IIA) OF THE ACT, THE ASSESSEE CANNOT CLAIM 100% ADDITIONAL DEPRECIATION AND THEREFORE, RESTRICTED 50% OF THE ELIGIBLE ADDITIONAL DEPRECIATION TO THE ASSE SSEE. THIS CASE LAW RELIED ON BY THE LD. DR HAS NO APPLICATION TO THE FACTS OF THE PRESENT CASE. IF THE NEW ASSET ACQUIRED AND INSTALLED AND PUT IT IN USE FOR MORE THAN 180 DAYS, THE ASSESSEE IS ELIGIBLE TO CLAIM 20% OF ADDITIONAL DEPRECIATION. IN THE PRES ENT CASE, THE NEW ASSET ACQUIRED, INSTALLED AND PUT IT IN USE FOR LESS THAN 180 I.T.A. NO . 3346 /M/ 16 5 DAYS, THE ASSESSEE HAS CLAIMED ONLY 1 0% OF THE ELIGIBLE ADDITIONAL DEPRECIATION IN THE RELEVANT ASSESSMENT YEAR, WHICH WAS ALLOWED. SINCE THE ASSESSEE WAS ELIGIBLE TO CLAIM 20% ADDITIONAL DEPRECIATION ON NEW ASSET ACQUIRED, THE BALANCE 10% OF ADDITIONAL DEPRECIATION WAS CLAIMED IN THE NEXT YEAR RELEVANT TO THE ASSESSMENT YEAR UNDER CONSIDERATION. I N SIMILAR FACTS AND CIRCUMSTANCES, IN THE CASE OF CIT V. RITTAL INDIA PRIVATE LIMI TED (SUPRA), T HE HON BLE KARNATAKA HIGH COURT HAS OBSERVED AND HELD AS UNDER: 7. CLAUSE (IIA) OF SECTION 32(1) OF THE ACT, AS IT NOW STANDS, WAS SUBSTITUTED BY THE FINANCE ACT, 2005, APPLICABLE WITH EFFECT FROM 0L.04.2006. PRIOR TO THAT, A PROVISO TO THE SAID CLAUSE WAS THERE, WHICH PROVIDED FOR THE BENEFIT TO BE GIVEN ONLY TO A NEW INDUSTRIAL UNDERTAKING, OR ONLY WHERE A NEW INDUSTRIAL UNDERTAKING BEGINS TO MANUFACTURE OR PRODUCE DURING ANY YEAR PREVIOUS TO THE RELEVANT ASSESSMENT YEAR. 8. THE AFORESAI D TWO CONDITIONS, I.E., THE UNDERTAKING ACQUIRING NEW PLANT AND MACHINERY SHOULD BE A NEW INDUSTRIAL UNDERTAKING, OF THAT IT SHOULD BE CLAIMED IN ONE YEAR, HAVE BEEN DONE AWAY BY SUBSTITUTING CLAUSE (IIA) WITH EFFECT FROM 01.0.2006. THE GRANT OF ADDITIONAL DEPRECIATION, UNDER THE AFORESAID PROVISION, IS FOR THE BENEFIT OF THE ASSESSEE AND WITH THE PURPOSE OF ENCOURAGING INDUSTRIALIZATION, BY EITHER SETTING UP A NEW INDUSTRIAL UNIT OR BY EXPANDING THE EXISTING UNIT BY PURCHASE OF NEW PLANT AND MACHINERY, AND PUTTING IT TO USE FOR THE PURPOSE OF BUSINESS. THE PROVISO TO CLAUSE [II] OF THE SAID SECTION MAKES IT CLEAR THAT ONLY 50% OF THE 20% WOULD BE ALLOWABLE, IF THE NEW PLANT AND MACHINERY SO ACQUIRED IS PUT TO USE FOR LESS THAN 180 DAYS IN A FINANCIAL YEAR. HOWEVER, IT NOWHERE RESTRICTS THAT THE BALANCE 10% WOULD NOT BE ALLOWED TO BE CLAIMED BY THE ASSESSEE IN THE NEXT ASSESSMENT YEAR. 9. THE LANGUAGE USED IN CLAUSE (IIA) OF THE SAID SECTION CLEARLY PROVIDES THAT 'A FURTHER SUM EQUAL TO 20% OF THE ACTUAL CO ST OF SUCH MACHINERY OR PLANT SHALL BE ALLOWED AS DEDUCTION UNDER CLAUSE (II)'. THE WORD 'SHALL' USED IN THE SAID CLAUSE IS VERY SIGNIFICANT. THE BENEFIT WHICH IS TO BE GRANTED IS 20% ADDITIONAL DEPRECIATION. BY VIRTUE OF THE PROVISO REFERRED TO ABOVE, ONL Y 10% CAN. BE CLAIMED IN I.T.A. NO . 3346 /M/ 16 6 ONE YEAR, IF PLANT AND MACHINERY IS PUT TO USE FOR LESS THAN 180 DAYS SAID FINANCIAL YEAR. VERY PURPOSE OF INSERTION OF CLAUSE (IIA) WOULD BE DEFEATED BECAUSE IT PROVIDES FOR 20% DEDUCTION WHICH SHALL BE ALLOWED. 10. HAS BEEN CONSISTENTLY HELD BY THIS COURT, AS WELL AS THE APEX COURT, THAT BENEFICIAL LEGISLATION, AS IN THE PRESENT CASE, SHOULD BE GIVEN LIBERAL INTERPRETATION SO AS TO BENEFIT THE ASSESSEE. IN THIS CASE, THE INTENTION OF THE LEGISLATION IS ABSOLUTELY CLEAR, THAT THE ASSESSEE SHALL BE ALLOWED CERTAIN ADDITIONAL BENEFIT, WHICH WAS RESTRICTED BY THE PROVISO TO ONLY HALF OF THE SAME BEING GRANTED IN ONE ASSESSMENT YEAR, IF CERTAIN CONDITION WAS NOT FULFILLED. BUT, THAT, IN OUR CONSIDERED VIEW, WOULD NOT RESTRAIN THE ASSESSEE FROM CLAIMING THE BALANCE OF THE BENEFIT IN THE SUBSEQUENT ASSESSMENT YEAR. THE TRIBUNAL, IN OUR VIEW, HAS RIGHTLY HELD, THAT ADDITIONAL DEPRECIATION ALLOWED UNDER SECTION 32(1)(IIA) OF THE ACT IS A ONETIME BENEFIT TO ENCOURAGE INDUSTRIALIZATION, AND PROVISIONS RELATED TO IT HAVE TO BE CONSTRUED REASONABLY, LIBERALLY AND PURPOSIVELY, TO MAKE THE PROVISION MEANINGFUL WHILE GRANTING ADDITIONAL ALLOWANCE. WE ARE IN FULL AGREEMENT WITH SUCH OBSERVATIONS MADE BY THE TRIBUNAL. 9. IN VIEW OF THE ABOVE JUDGEMENT OF HON BLE KARNATAKA HIGH COURT, WE ARE OF THE CONSIDERED OPINION THAT THE LD. CIT(A) HAS RIGHTLY FOLLOWED THE ABOVE JUDGEMENT AND DIRECTED THE ASSESSING OFFICER TO ALLOW ADDITIONAL DEPRECIATION. THUS, WE FIND NO INFIRMITY IN THE ORDER PASSED BY THE LD. CIT(A) ON THIS ISSUE AND THE GROUND RAISED BY THE REVENUE IS DISMISSED. 10. THE NEXT GROUND RAISED IN THE APPEAL OF THE REVENUE IS THAT THE LD. CIT(A) HAS ERRED IN DELETING THE ADDITION MADE IN RESPECT OF EMPLOYEES CONTRIBUTION TOWARDS PF/ESI OF . 1,84,154 / - . THE DISALLOWANCE WAS MADE ON THE GROUND THAT THE SAID CONTRIBUTIONS HAVE BEEN PAID BELATEDLY AND THEREFORE, NO DEDUCTION UNDER SECTION 36(1)(VA) OF THE ACT CAN BE CLAIMED BY THE ASSESSEE . I.T.A. NO . 3346 /M/ 16 7 11 . ON APPEAL, THE LD. CIT(A) ALLOWED THE GROUND RAI SED BY THE ASSESSEE BY FOLLOWING THE DECISION OF THE HON BLE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT V. INDUSTRIAL SECURITY & INTELLIGENCE INDIA PVT. LTD. IN TCA NOS. 585 AND 586 OF 2015 DATED 24.07.2015. 1 2 . ON BEING AGGRIEVED, THE REVENUE IS IN AP PEAL BEFORE TRIBUNAL AND THE LD. DR DUTIFULLY SUPPORTED THE ORDER PASSED BY THE ASSESSING OFFICER. 13. WE HAVE HEARD BOTH SIDES, PERUSED THE MATERIALS AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF AUTHORITIES BELOW. IN THE ASSESSMENT ORDER, THE ASS ESSING OFFICER HAS DEEMED AN AMOUNT OF .1,84,154/ - , BEING BELATED REMITTANCE OF THE EMPLOYEE S CONTRIBUTION TO PF AND ESI AS THE INCOME OF THE ASSESSEE IN VIEW OF THE PROVISIONS OF SECTION 2(24)(X) OF THE ACT READ WITH SECTION 36(1)(VA) OF THE ACT. BEFORE THE AUTHORITIES BELOW, THE ASSESSEE HAS SUBMITTED THAT SINCE THE ENTIRE AMOUNT HAS BEEN REMITTED BEFORE THE DUE DATE FOR FILING OF RETURN OF INCOME UNDER SECTION 139(1) OF THE ACT, THE EMPLOYEE S CONTRIBUTION TO PF SHOULD BE TREATED AS PART WITH EMPLOYER S CONTRIBUTION AND SINCE IT WAS REMITTED BEFORE THE DUE DATE OF FILING OF RETURN OF INCOME, IT SHOULD BE ALLOWED AS DEDUCTION UNDER SECTION 43B OF THE ACT. BEFORE US, THE LD. DR HAS SUBMITTED THAT THE PROVISIONS OF SECTION 43B OF THE ACT WILL BE APPLICABLE ONLY IN RESPECT EMPLOYER S CONTRIBUTION TO THE FUNDS FOR THE WELFARE OF EMPLOYEES AND NOT IN RESPECT OF THE EMPLOYER S CONTRIBUTION TO THE FUNDS. PER CONTRA, THE LD. COUNSEL FOR THE ASSESSEE HAS SUBMITTED THAT I.T.A. NO . 3346 /M/ 16 8 THE ISSUE IS COVERED IN FAVOUR OF THE ASSESSE E BY THE HON BLE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT V. M/S. INDUSTRIAL SECURITY & INTELLIGENCE INDIA PVT. LTD. (SUPRA) . WE HAVE PERUSED THE ABOVE DECISION, WHEREIN, THE HON BLE HIGH COURT HAS OBSERVED AND HELD AS UNDER: 2. THE BRIEF FACTS OF TH E CASE ARE AS FOLLOWS: THE RESPONDENT/ASSESSEE FILED ITS RETURN OF INCOME FOR THE ASSESSMENT YEARS IN QUESTION. THE SAID RETURNS WERE PROCESSED AND WERE NOT SELECTED FOR SCRUTINY. SUBSEQUENTLY, THE ASSESSING OFFICER NOTICED THAT THERE WAS ESCAPEMENT OF INCOME AND HENCE REOPENED THE ASSESSMENTS UNDER SECTION 147 OF THE INCOME TAX ACT BY ISSUING NOTICE UNDER SECTION 148 OF THE INCOME TAX ACT. WHILE COMPLETING THE RE - ASSESSMENT, THE ASSESSING OFFICER DISALLOWED THE EXPENSES CLAIMED BY WAY OF EMPLOYEE'S CONTRIBUTION TO PF AND ESI HOLDING THAT THE ASSESSEE HAD NOT PAID THE EMPLOYEE'S CONTRIBUTION OF PF AND ESI WITHIN THE DUE DATES SPECIFIED UNDER THE RE SPECTIVE ACT. AGGRIEVED BY THE SAID ORDER OF ASSESSMENT, THE ASSESSEE PREFERRED APPEALS BEFORE THE COMMISSIONER OF INCOME TAX (APPEALS) CHALLENGING THE REOPENING AS WELL AS THE DISALLOWANCE. THE COMMISSIONER OF INCOME TAX (APPEALS) SUSTAINED THE ORDER OF THE ASSESSMENT, THEREBY DISMISSED THE APPEALS. AGGRIEVED BY THE SAME, THE ASSESSEE PREFERRED FURTHER APPEALS BEFORE THE TRIBUNAL. THE TRIBUNAL RELIED UPON THE DECISION OF THE SUPREME COURT IN THE CASE OF CIT V. ALOM EXTRUSIONS LTD . REPORTED IN 319 ITR 306, DECISION OF THE DELHI HIGH COURT IN THE CASE OF CIT V. AMIL LTD . REPORTED IN 321 ITR 508 AND THAT OF THE CO - ORDINATE BENCH OF THE TRIBUNAL IN THE CASE OF M/S.VENKATESWARA ELECTRICAL INDUSTRIES P. LTD. V. DCIT IN ITA NOS.1344, 1345 AND 1636/MDS/2014 DATED 28.8.2014 HELD AS FOLLOWS: 5. HEARD BOTH SIDES. PERUSED ORDERS OF LOWER AUTHORITIES AND THE DECISIONS RELIED ON BEFORE US. IT IS NOT IN DI SPUTE THAT ALL THESE PAYMENTS OF PROVIDENT FUND RS.16,20,571/ - AND ESI RS.17,51,490/ - WERE MADE BEYOND THE GRACE PERIOD/DUE DATE ALLOWED UNDER PROVIDENT FUND & ESI ACTS BUT BEFORE DUE DATE FOR FILING OF INCOME - TAX RETURN. THIS ISSUE HAS BEEN DECIDED IN FA VOUR OF THE ASSESSEE BY VARIOUS HIGH COURTS FOLLOWING THE DECISION OF THE HON'BLE SUPREME COURT IN THE CASE OF CIT VS. ALOM EXTRUSIONS LTD. (319 ITR 306), WHEREIN THE HON'BLE SUPREME COURT HELD THAT OMISSION OF SECOND PROVISO TO SECTION 43B AND AMENDMENT OF FIRST PROVISO BY FINANCE ACT , 2003 ARE CURATIVE IN NATURE AND ARE EFFECTIVE RETROSPECTIVELY AND THUS WITH EFFECT FROM 1.4.1988 I.E. THE DATE OF INSE RTION OF FIRST PROVISO. THE CO - ORDINATE BENCH OF THIS TRIBUNAL CONSIDERING A SIMILAR ISSUE IN THE CASE OF M/S.VENKATESWARA ELECTRICAL INDUSTRIES P. LTD. VS. DCIT (SUPRA) FOLLOWING THE DECISION OF HON'BLE DELHI HIGH COURT IN THE CASE OF CIT I.T.A. NO . 3346 /M/ 16 9 VS. AMIL LTD. ( 321 ITR 508) HELD THAT EVEN THE EMPLOYEES CONTRIBUTION TO PROVIDENT FUND IS TO BE ALLOWED AS DEDUCTION IF IT IS PAID WITHIN DUE DATE FOR FILING OF RETURN. WHILE HOLDING SO, THE TRIBUNAL OBSERVED AS UNDER: - 6. WE HAVE HEARD THE SUBMISSIONS MADE BY THE REPRESENTATIVES OF BOTH THE SIDES AND HAVE PERUSED THE ORDERS OF THE AUTHORITIES BELOW, AS WELL AS THE JUDGMENTS/DECISIONS RELIED ON BY THE LD. COUNSEL FOR THE ASSESSEE. IT IS AN UN - DISPUTED FACT THAT THERE HAS BEEN DELAY IN REMITTANCE OF EMPLOYEES CONTRI BUTION OF ESI AND PROVIDENT FUND IN BOTH THE AYS I.E., 2008 - 09 & 2009 - 10. IT IS EQUALLY UN - DISPUTED THAT THE ASSESSEE HAS DEPOSITED THE AMOUNT TOWARDS EMPLOYEES CONTRIBUTION OF ESI AND PROVIDENT FUND BEFORE THE DUE DATE OF FILING OF RETURN. THE HON'BLE D ELHI HIGH COURT IN THE CASE OF CIT VS. AMIL LTD., REPORTED AS 321 ITR 508 HAS HELD THAT IF THE ASSESSEE HAD DEPOSITED EMPLOYEES CONTRIBUTION TOWARDS PROVIDENT FUND AND ESI AFTER DUE DATE AS PRESCRIBED UNDER THE RELEVANT ACT BUT BEFORE THE DUE DATE OF FILIN G OF RETURN UNDER THE INCOME TAX ACT , NO DISALLOWANCE COULD BE MADE IN VIEW OF THE PROVISIONS OF SECTION 43B AS AMENDED BY THE FINANCE ACT , 2003. THE DECISION OF THE HON'BLE DELHI HIGH COURT HAS BEEN FOLLOWED BY THE CO - ORDINATE BENCH OF THE TRIBUNAL IN THE CASE OF JCIT VS. M/S. S.M.APPARELS (P) LTD. (SUPRA). THE TRIBUNAL HAS BEEN CONSISTENTLY FOLLOW ING THE VIEW TAKEN BY THE HON'BLE DELHI HIGH COURT. ACCORDINGLY, WE HOLD THAT THE ASSESSEE IS ENTITLED TO CLAIM EXPENDITURE ON EMPLOYEE'S CONTRIBUTION TOWARDS ESI AND PROVIDENT FUND FOR BOTH THE AYS. ACCORDINGLY, BOTH THE APPEALS OF THE ASSESSEE ARE ALLO WED. 6. RESPECTFULLY FOLLOWING THE ABOVE, DECISION, WE DIRECT THE ASSESSING OFFICER TO DELETE DISALLOWANCES MADE UNDER SECTION 43B OF THE ACT FOR BOTH THESE ASSESSMENT YEARS. THE GROUNDS OF APPEAL RA ISED BY THE ASSESSEE ARE ALLOWED.' 3. AGGRIEVED BY THE SAID ORDER OF THE TRIBUNAL, THE REVENUE IS BEFORE THIS COURT. 4. HEARD LEARNED STANDING COUNSEL APPEARING FOR THE REVENUE AND PERUSED THE MATERIALS PLACED BEFORE THIS COURT. 5. WE FIND THAT THE TRIBUNAL HAS RIGHTLY RELIED ON THE DECISION OF THE SUPREME COURT IN THE CASE OF CIT V. ALOM EXTRUSIONS LTD . REPORTED IN 319 ITR 306, WHEREBY, THE SUPREME COURT HELD THAT OMISSION OF SECOND PROVISO TO SECTION 43B AND AMENDMENT TO FIRST PROVISO BY FINANCE ACT , 2003 ARE I.T.A. NO . 3346 /M/ 16 10 CURATIVE IN NATURE AND ARE EFFECTIVE RETROSPECTIVELY, I.E., WITH EFFECT FROM 1.4.1 988 I.E., THE DATE OF INSERTION OF FIRST PROVISO. THE DELHI HIGH COURT IN THE CASE OF CIT V. AMIL LTD . REPORTED IN 321 ITR 508 HELD THAT IF THE ASSESSEE HAD DEPOSITED EMPLOYEE'S CONTRIBUTION TOWARDS PROVIDENT FUND AND ESI AFTER DUE DATE AS PRESCRIBED UNDER THE RELEVANT ACT, BUT BEFORE THE DUE DATE OF FILING OF RETURN UNDER THE INCOME TAX ACT , NO DISALLOWANCE COULD BE MADE IN VIEW OF THE PROVISIONS O F SECTION 43B AS AMENDED BY FINANCE ACT , 2003. 6. IN THE PRESENT CASE, THE ASSESSEE HAD REMITTED THE EMPLOYEES CONTRIBUTION BEYOND THE DUE DATE FO R PAYMENT, BUT WITHIN THE DUE DATE FOR FILING THE RETURN OF INCOME. HENCE, FOLLOWING THE ABOVE - SAID DECISIONS, WE FIND NO REASON TO DIFFER WITH THE FINDINGS OF THE TRIBUNAL. ACCORDINGLY, WE FIND NO QUESTION OF LAW MUCH LESS ANY SUBSTANTIAL QUESTION OF LA W ARISES FOR CONSIDERATION IN THESE APPEALS. ACCORDINGLY, BOTH THE TAX CASE (APPEALS) STAND DISMISSED. NO COSTS. CONSEQUENTLY, M.P.NO.1 OF 2015 IS ALSO DISMISSED. 14 . RESPECTFULLY FOLLOWING THE ABOVE DECISION OF THE HON BLE HIGH COURT, WE FIND NO REA SON TO INTERFERE WITH THE ORDER PASSED BY THE LD. CIT(A) ON THIS ISSUE AND ACCORDINGLY, THE GROUND RAISED BY THE REVENUE IS DISMISSED. 15 . THE LAST GROUND RAISED IN THE APPEAL OF THE REVENUE IS THAT THE LD. CIT(A) HAS ERRED IN DELETING THE DISALLOWANCE MADE UNDER SECTION 14A R.W. RULE 8D. IN THE ASSESSMENT ORDER, THE ASSESSING OFFICER DISALLOWED A SUM OF . 1,16,48,077/ - / - UNDER SECTION 14A R.W. RULE 8D BEING THE EXPENDITURE INCURRED RELATABLE TO THE INCOME EARNED BY THE ASSESSEE. 16. ON APPEAL, AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE AND BY FOLLOWING THE DECISION OF THE TRIBUNAL IN THE CASE OF EIH ASSOCIATED HOTELS LIMITED V. CIT 2013 - TIOL - 796 - ITAT - MAD, THE LD. CIT(A) PARTLY ALLOWED. 17. THE REVENUE IS IN APPEAL BEFORE THE TRIBUNAL AND THE LD. DR HAS SUBMITTED THE DECISION OF THE TRIBUNAL IN THE CASE OF EIH ASSOCIATED HOTELS I.T.A. NO . 3346 /M/ 16 11 LIMITED V. CIT (SUPRA) HAS NOT BEEN ACCEPTED BY THE DEPARTMENT AND FURTHER APPEAL IS PENDING BEFORE THE HON BLE HIGH COURT AND PLEADED THAT THE ORDER OF THE LD. CIT(A) S HOULD BE REVERSED. ON THE OTHER HAND, THE LD. COUNSEL FOR THE ASSESSEE HAS STRONGLY SUPPORTED THE ORDER PASSED BY THE LD. CIT(A). 17. WE HAVE CONSIDERED RIVAL SUBMISSIONS AND PERUSED THE MATERIALS AVAILABLE ON RECORD. DURING THE YEAR UNDER CONSIDERATION, THE ASSESSEE HAS EARNED DIVIDEND INCOME OF .2,61,45,738/ - [ AS APPEARED IN APPELLATE ORDER] FROM MUTUAL FUNDS AND DOMESTIC COMPANIES AND CLAIMED THE ENTIRE INCOME AS EXEMPT UNDER SECTION 10(33) AND 10(34) OF THE ACT. IN THE ASSESSMENT ORDER, THE ASSESSING OFFICER HAS INVOKED THE PROVISIONS OF RULE 8D AND DETERMINED THE EXPENDITURE INCURRED RELATABLE TO THE EXEMPT INCOME EARNED BY THE ASSESSEE. BEFORE THE LD. CIT(A), IT WAS THE SUBMISSION OF THE ASSESSEE THAT NO AMOUNT OF BORROWED CAPITAL HAS BEEN UTILIZED FOR MAKING INVESTMENTS CAPABLE OF EARNING EX EMPT INCOME AND RELIED ON THE DECISION IN THE CASE OF CIT V. HDFC BANK LIMITED 89 CCH 185 (MUM) AND IN THE CASE OF CIT V. HOTEL SAVERA 239 ITR 795 (MAD) AND PLEADED THAT THERE CAN BE NO DISALLOWANCE UNDER RULE 8D(2)(II) OF THE IT RULES. WITH REGARD TO DISA LLOWANCE UNDER RULE 8D(2)(III), IT WAS THE SUBMISSION OF THE ASSESSEE THAT INVESTMENTS IN SUBSIDIARY COMPANIES IS P U RELY FOR FURTHERANCE OF STRATEGIC BUSINESS INTERESTS AND SHOULD NOT BE TAKEN INTO CONSIDERATION WHILE COMPUTING THE DISALLOWANCE UNDER SECTI ON 14A R.W. RULE 8D AND RELIED ON I.T.A. NO . 3346 /M/ 16 12 THE DECISION IN THE CASE OF EIH ASSOCI A TED HOTELS LIMITED V. CIT (SUPRA). IT WAS ALSO ARGUED THAT DISALLOWANCE UNDER RULE 8D(2)(III) SHOULD N O T BE MADE ON THE T OTAL INVESTMENTS REFLECTED IN BALANCE SHEET BUT ONLY ON THE IN VESTMENTS THAT HAVE GIVEN RISE TO THE EXEMPT INCOME DURING THE YEAR UNDER CONSIDERATION. RELIANCE IN THIS REGARD HAS BEEN PLACED IN THE CASE OF ACIT V . COMPUTER AGE MANAGEMENT SERVICES (P) LIMITED IN ITA NO.1236 & 1 240/ M DS/2014 D ATED 28.11.2 0 1 4. AFTER CONS IDERING THE SUBMISSIONS OF THE ASSESSEE, THE LD. CIT(A) HAS OBSERVED AS UNDER: 7.3 THE MATTER IS CONSIDERED. ON VERIFICATION OF THE FINANCIAL DETAILS OF THE APPELLANT COMPANY, I FIND THAT THE OPENING BALANCE OF INVESTMENTS AS ON THE FIRST DAY OF THE AY W AS .22,64,32,540/ - WHEREAS THE CLOSING BALANCE OF LAST DAY OF THE AY WAS .27,12,41,432/ - . THERE HAS BEEN A FRESH INVESTMENTS OF .13,36,75,352/ - DURING THE YEAR. IT IS FURTHER NOTICED THAT THE APPELLANT'S NET CASH FROM OPERATING ACTIVITIES DURING THE YEAR STOOD AT .20,87,42,475/ - BESIDES A GENERAL RESERVE OF .47,45,903/ - . THE APPELLANT COMPANY HAS ALSO SUBMITTED DETAILS OF LOAN SANCTIONED LETTERS FROM VARIOUS BANKS. IT IS SEEN THERE FROM THAT THE LOANS HAVE BEEN SANCTIONED FOR SPECIFIC BUSINESS PURPOSES AND THE TOTAL INTEREST ON LONG TERM BORROWINGS IS AT .357.42 LAKHS. THE TOTAL TERM LOANS TAKEN FROM BANK AMOUNTED TO .30,24,44,747/ - . IT HA BEEN WELL SETTLED THAT WHERE ASSESSEE S CAPITAL, PROFIT. RESERVE SURPLUS CURRENT AND DEPOSITS WERE HIGHER THAN THE INVESTMENTS SECURITIES CAPABLE OF EARNING EXEMPT INCOME, IT HAS TO BE PRESUMED THAT INVESTMENTS MADE BY THE ASSESSEE IS FROM OWN FUNDS AVAILABLE NOT OUT OF THE INTEREST BEARING BORROWED FUNDS. A REVIEW OF THE FINANCIAL FIGURES OF THE APPELLANT AS ABOVE CL EARLY INDICATES THIS TO BE THE CASE. AS AGAINST FRESH INVESTMENTS MADE OF RS.13.36 CRORES, THE APPELLANT HAS NET OPERATING REVENUE OF RS.20.87 CRORES DURING THE YEAR, AND A FURTHER SUM OF RS. 68.47 CRORES IN THE GENERAL RESERVE. HENCE THE DISALLOWANCE MADE BY THE AO UNDER RULE 8D(2)(II) OF THE INCOME - TAX RULES ON ACCOUNT OF ATTRIBUTION OF INTEREST STANDS DELETED. WITH REGARD TO DISALLOWANCE UNDER SECTION 8D(2)(III) OF THE INCOME - TAX RULES IS CONCERNED MY DIRECTIONS TO THE ASSESSING OFFICER IS TO FOLLOW THE DECISION OF ID. CHENNAI TRIBUNAL IN THE CASE OF EIH ASSOCIATED HOTELS LIMITED (SUPRA) AND EXCLUDE INVESTMENTS MADE IN THE SISTER AND GROUP COMPANIES FROM THE PURVIEW OF DISALLOWANCE UNDER SECTION 14A OF THE ACT. THE LD. CHENNAI TRIBUNAL IN THIS CASE HAS HELD THAT SUCH INVESTMENTS ARE NOT MADE FOR THE PURPOSE OF EARNING DIVIDEND INCOME, BUT FOR STRATEGIC BUSINESS PURPOSES. I.T.A. NO . 3346 /M/ 16 13 THE AO IS FURTHER DIRECTED, IN VIEW OF THE DECISION OF LD. CHENNAI TRIBUNAL IN THE CASE OF M/S. COMPUTER AGE MANAGEMENT SERVICES (P) LIMITED (SUPRA) TO RECOMPUTE DISALLOWANCE UNDER SECTION RULE 8D(2)(III) BY TAKING ONLY THE INVESTMENTS WHICH HAVE GIVEN RISE TO THE INCOME DURING THE YEAR WHICH DOES NOT FORM THE PART OF TOTAL INCOME. SUBJECT TO THE ABOVE DIRECTIONS, APPELLAN T S CLAIM OF SECTION 14A DISALLOWANCE IS PARTLY ALLOWED. FROM THE APPELLATE ORDER , ON VERIFICATION OF THE FINANCIAL DETAILS, THE LD. CIT(A) HAS OBSERVED THAT THE LOANS HAVE BEEN SANCTIONED FOR SPECIFIC BUSINESS PURPOSES AND THE TOTAL TERM LOANS TAKEN FRO M THE BANK WAS AMOUNTED TO .30,24,44,747/ - , WHEREAS, THE TOTAL INTEREST ON LONG TERM BORROWINGS IS AT .357.42 LAKHS . HE HAS FURTHER NOTICED THAT THE CAPITAL, PROFIT, RESERVE SURPLUS, CURRENT AND DEPOSITS WERE HIGHER THAN THE INVESTMENTS ON SECURITIES CAPABLE OF EARNING EXEMPT INCO ME AND PRESUMED THAT INVESTMENTS MADE BY THE ASSESSEE IS FROM OWN FUNDS AVAILABLE AND NOT OUT OF THE INTEREST BEARING BORROWED FUNDS. NO DETAILS WITH REGARD TO THE STATEMENT OF ACCOUNT, BALANCE SHEET, ETC. WERE AVAILABLE ON RECORD FOR PERUSAL. HOWEVER, THE LD. CIT(A) HAS STATED THAT AGAINST FRESH INVESTMENTS OF .13.36 CRORES, THE ASSESSEE HAS NET OPERATING REVENUE OF .20.87 CRORES DURING THE YEAR AND FURTHER SUM OF .68.47 CRORES IN THE GENERAL RESERVE. WHEN THE ASSESSEE GOT ITS OWN SUFFICIENT FUNDS FOR INVESTMENT, THE ASSESSING OFFICER CANNOT APPLY RULE 8D(2)( II) AND MAKE THE DISALLOWANCE. THUS, WE ARE OF THE OPINION THAT THE LD. CIT(A) HAS RIGHTLY DELETED THE DISALLOWANCE ON ACCOUNT OF ATTRIBUTION OF INTEREST. BOTH THE CASE LAW OF THE TRIBUNAL RELIED ON BY THE LD. CIT(A) WERE NOT ACCEPTED BY THE DEPARTMENT I.T.A. NO . 3346 /M/ 16 14 AN D FURTHER APPEALS ARE PENDING BEFORE THE HIGH COURT CANNOT BE A GROUND TO TAKE DIFFERENT VIEW UNTIL AND UNLESS, THE DECISION OF THE TRIBUNAL IS REVERSED OR MODIFIED BY HIGHER FORUM. THUS, WE FIND NO INFIRMITY IN THE ORDER PASSED BY THE LD. CIT(A) AND THUS, THE GROUND RAISED BY THE REVENUE IS DISMISSED. 18 . IN THE RESULT, THE APPEAL FILED BY THE REVENUE IS DISMISSED. ORDER PRONOUNCED ON THE 09 TH MAY , 201 7 AT CHENNAI. SD/ - SD/ - (CHANDRA POOJARI) ACCOUNTANT MEMBER ( DUV VURU RL REDDY ) JUDICIAL MEMBER CHENNAI, DATED, THE 09 . 0 5 .201 7 VM/ - / COPY TO: 1. / APPELLANT , 2. / RESPONDENT , 3. ( ) / CIT(A) , 4. / CIT , 5. / DR & 6. / GF.