ACIT CIR 4(2), MUMBAI V. HINDUSTAN ORGANIC CHEMICALS LTD, MUMBAI

ITA 3683/MUM/2010

• Counselvise Citation: 368319914 RSA 2010
• Duration Of Justice: 1 year(s) 3 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-08-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: H
• Next Hearing Date: 11-08-2011
• Assessment Year: 2006-2007
• Appeal Filed On: 07-05-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: C G K NAIR
• Keywords: Revenue expenditure; Capital expenditure
• Section: 43B

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL H BENCH: MUMBAI BEFORE SHRI P.M. JAGTAP, ACCOUNTANT MEMBER AND SHRI R.S. PADVEKAR, JUDICIAL MEMBER ITA NO.3683/MUM/2010 (ASSESSMENT YEAR: 2006-07) ACIT CIR 4(2), ROOM NO.642, 6 TH FLOOR, AAYAKAR BHAVAN, M.K. ROAD, MUMBAI -400 020 ....... APPELLANT VS HINDUSTAN ORGANIC CHEMICALS LTD., 2 ND FLOOR, HARCHANDRAI HOUSE, 81, MAHARSHI KARVE ROAD, NEW MARINE LINES, MUMBAI -400 002 ..... RESPONDENT PAN: AAACH 2663 P APPELLANT BY: SHRI C.G.K. NAIR RESPONDENT BY: SHRI K. GOPAL DATE OF HEARING: 11.08.2011 DATE OF PRONOUNCEMENT: 26.08.2011 O R D E R PER R.S. PADVEKAR, JM: IN THIS APPEAL THE REVENUE HAS CHALLENGED THE IMPUG NED ORDER OF THE LD. CIT (A)-8, MUMBAI DATED 17.02.2010 FOR THE A.Y. 2006-07. GROUND NO.1 READS AS UNDER:- 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LD. CIT (A) ERRED IN DELETING THE ADDITION OF RS 1,82,77,138 ON ACCOUNT OF DELAYED PAYMENT OF PF OF EMPLOYEES CONTRIBUTION. 2. WE HAVE HEARD THE PARTIES. WE FIND THAT THE ASS ESSEE HAS MADE PAYMENT BEYOND DUE DATE AS PROVIDED UNDER THE EMPLO YEES PROVIDENT ITA 3683/MUM/2010 HINDUSTAN ORGANIC CHEMICALS LTD. 2 FUNDS ACT BUT THE PAYMENTS ARE MADE BEFORE FILING OF RETURN OF INCOME. WE FURTHER FIND THAT THE ASSESSEE HAS PAID THE PF D UES IN SOME MONTHS WITHIN THE GRACE PERIOD ALLOWED. NOW, THIS ISSUE STANDS COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION O F THE HONBLE SUPREME COURT IN THE CASE OF CIT VS. ALOUM EXTRUSIO N LTD. 319 ITR 306. THE SAID DECISION HAS BEEN FOLLOWED BY THE IT AT C BENCH MUMBAI IN THE CASE OF M/S. PINKPEN P. LTD. VS. CIT IN ITA NO.6847/MUM/2008 DATED 28.8.2010. THE OPERATIVE PA RT OF THE TRIBUNALS ORDER ON THIS ISSUE IS AS UNDER:- 10. THE NEXT ISSUE IS DISALLOWANCE OF EMPLOYEES CON TRIBUTION TO PF AND ESIC OF RS. 43,721/-. THE SHORT CONTROVE RSY BEFORE US IS IN RESPECT OF THE PAYMENT OF THE EMPLOYEES CONTR IBUTION TO P.F./E.S.I.C BEYOND THE GRACE PERIOD WHICH WAS RELA TING TO THE MONTH OF FEBRUARY. THE LD. COUNSEL RELIED ON THE D ECISION OF THE HONBLE SUPREME COURT IN THE CASE OF CIT V/S. ALOM EXTRUSION LTD., 319 ITR 306. THE A.O. MADE THE DISALLOWANCE U/S. 36(1)(VA) AS HE WAS OF THE OPINION THAT THE EMPLOYE ES CONTRIBUTION TO PF/ESIC EVEN IF MADE BEFORE FILING OF THE RETURN OF INCOME IS NOT COVERED U/S. 43B OF THE I.T. ACT. IN THE CASE OF ALOM EXTRUSION LTD.(SUPRA), THE ISSUE BEFORE THEIR LORDS HIP WAS WHETHER THE OMISSION OF SECOND PROVISO TO SECTION 43B OF THE I.T. ACT 1961 BY THE FINANCE ACT 2003 OPERATED W.E.F. 1 .2.2004 OR WHETHER IT OPERATED RETROSPECTIVELY W.E.F. 1.4.1988 . IN THE SAID CASE ALSO, THE ISSUE WAS CONCERNING THE CONTRIBUTIO N PAYABLE BY THE EMPLOYER TO THE P.F/SUPERANNUATION FUND OR ANY OTHER FUND OF WELFARE OF THE EMPLOYEES. IN OUR OPINION, NOW TH E ISSUE STANDS COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION O F HONBLE SUPREME COURT IN THE CASE OF ALOM EXTRUSION LTD. (S UPRA). WE, THEREFORE, ALLOW THE GROUND TAKEN BY THE ASSESSEE A ND DELETE THE ADDITION. ITA 3683/MUM/2010 HINDUSTAN ORGANIC CHEMICALS LTD. 3 3. WE, THEREFORE, FIND NO REASON TO INTERFERE WITH THE FINDINGS OF THE LD. CIT (A) ON THIS ISSUE AND WE ACCORDINGLY ALLOW GROUND NO.1. 4. GROUND NO.2 READS AS UNDER:- 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LD. CIT (A) ERRED IN GIVING RELIEF OF RS 4 LACS ON ACCOUNT OF STAFF WELFARE EXPENDITURE WITHOUT APPRECIATING THE FACT THAT THE AUDITOR HAD HIMSELF REPORTED THAT THESE EXPENDITURE WAS NOT COVERED U/S.40A(9). 5. IN THE TAX AUDIT REPORT THE AUDITORS HAVE OBSERV ED THAT THE FOLLOWING PAYMENTS ARE NOT ALLOWED AS PER SEC. 40A( 9) OF THE ACT:- I) OFFICERS CLUB RS 2,00,000/- II) STAFF CLUB RS 2,00,000/- ---------------------- RS 4,00,000/- ============= 6. THE ASSESSEE EXPLAINED TO THE A.O. THAT THE SAID EXPENDITURE HAS BEEN INCURRED FOR THE CELEBRATION OF SPORTS AND CULTURAL ACTIVITIES ON THE OCCASION ON THE INDEPENDENCE DAY AND SEVERAL OTHER OCCASIONS. THE A.O. DID NOT ACCEPT THE EXPLANATION OF THE ASSE SSEE AND DISALLOWED THE ENTIRE CLAIM OF RS 4 LAKH U/S.40A(9) OF THE ACT . THE ASSESSEE CARRIED THE SAID ISSUE BEFORE THE LD. CIT (A) WHO F OLLOWING THE ORDER FOR THE A.Y. 2004-05 ALLOWED THE CLAIM OF THE ASSESSEE. THE LD. CIT DR FAIRLY CONCEDED THAT THIS ISSUE STANDS COVERED IN F AVOUR OF THE ASSESSEE IN ASSESSEES OWN CASE FOR THE A.Y. 2004-0 5. WE, THEREFORE, FIND NO REASON TO INTERFERE WITH THE ORDER OF THE L D. CIT (A) AND ACCORDINGLY SAME IS CONFIRMED. 7. GROUND NO.3 READS AS UNDER:- ITA 3683/MUM/2010 HINDUSTAN ORGANIC CHEMICALS LTD. 4 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LD. CIT (A) ERRED IN DELETING THE DISALLOWANCE OF RS 10,00,300 OF BOND ISSUE EXPENSES WITHOUT APPRECIATING THE FACT THAT IT HAD BEEN ESTA BLISHED DURING THE ASSESSMENT PROCEEDINGS THAT ITS BENEFITS WERE ACCRUING OVER A PERIOD OF YEARS. 8. WE HAVE HEARD THE PARTIES. THE ASSESSEE IS A PU BLIC SECTOR UNDERTAKING AND ENGAGED IN THE MANUFACTURING AND TR ADING OF CHEMICALS. IT WAS NOTICED BY THE A.O. THAT THE ASS ESSEE HAS PAID ` 10,00,300/- TOWARDS BOND REGISTRATION CHARGES. THE A.O. WAS OF THE OPINION THAT IT IS A CAPITAL EXPENDITURE AND HE, TH EREFORE, MADE THE DISALLOWANCE OF THE ENTIRE AMOUNT. THE ASSESSEE C ARRIED THE ISSUE BEFORE THE LD. CIT (A) WHO HAS DELETED THE ADDITION . THE LD. CIT (A) FOLLOWING THE ORDERS IN ASSESSEES OWN CASE FOR THE A.Y. 1998-99, 2000-01, 2002-03 AND 2003-04 ALLOWED THE CLAIM OF T HE ASSESSEE. NOW, THE REVENUE HAS RAISED GRIEVANCE AGAINST SAID DELETION. 9. WE HAVE HEARD THE PARTIES. WE FIND THAT THIS IS SUE HAS ALREADY BEEN DECIDED IN FAVOUR OF THE ASSESSEE IN THE PRECE DING YEARS. WE FURTHER FIND THAT THE ASSESSEE HAS EXECUTED THE BON DS IN FAVOUR OF THE BANK AS A GUARANTEE AGAINST THE BORROWINGS. THE A. O. TREATED THE SAID EXPENDITURE AND MADE THE DISALLOWANCE. 10. WE FIND THAT THE GOVERNMENT OF INDIA AGREED TO PROVIDE GUARANTEE ON THE BORROWINGS MADE BY THE ASSESSEE CO MPANY TO THE EXTENT OF ` 100 CRORE AND ON THE SAID GUARANTEE BOND AND THE A SSESSEE WAS REQUIRED TO PAY THE STAMP DUTY. IN OUR OPINION , THE SAID EXPENDITURE IS A REVENUE EXPENDITURE AND HENCE ALLO WABLE U/S.37(I). ACCORDINGLY, ORDER OF THE LD. CIT (A) IS CONFIRMED AND GROUND NO.3 IS DISMISSED. 11. IN THE RESULT, REVENUES APPEAL IS DISMISSED. ITA 3683/MUM/2010 HINDUSTAN ORGANIC CHEMICALS LTD. 5 ORDER PRONOUNCED IN THE OPEN COURT ON THIS DAY OF 26TH AUGUST 2011. SD/- SD/- ( P.M. JAGTAP ) ACCOUNTANT MEMBER ( R.S. PADVEKAR ) JUDICIAL MEMBER MUMBAI, DATE: 26TH AUGUST 2011 COPY TO:- 1) THE APPELLANT. 2) THE RESPONDENT. 3) THE CIT (A)8, MUMBAI. 4) THE CIT-4, MUMBAI. 5) THE D.R. H BENCH, MUMBAI. BY ORDER / / TRUE COPY / / ASSTT. REGISTRAR I.T.A.T., MUMBAI *CHAVAN ITA 3683/MUM/2010 HINDUSTAN ORGANIC CHEMICALS LTD. 6 SR.N. EPISODE OF AN ORDER DATE INITIALS CONCERNED 1 DRAFT DICTATED ON 11.08.2011 SR.PS 2 DRAFT PLACED BEFORE AUTHOR 15.08.2011 SR.PS 3 DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER JM/AM 4 DRAFT DISCUSSED/APPROVED BY SECOND MEMBER JM/AM 5 APPROVED DRAFT COMES TO THE SR.PS/PS SR.PS/PS 6 KEPT FOR PRONOUNCEMENT ON SR.PS/PS 7 FILE SENT TO THE BENCH CLERK SR.PS/PS 8 DATE ON WHICH FILE GOES TO THE HEAD CLERK 9 DATE OF DISPATCH OF ORDER