ACIT, UDAIPUR V. M/s. The Lake Palace Hotels & Motels Pvt. Ltd., UDAIPUR

ITA 394/JODH/2014

• Counselvise Citation: 39423314 RSA 2014
• Duration Of Justice: 3 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 01-10-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 22-09-2014
• Assessment Year: 2010-2011
• Appeal Filed On: 30-06-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: JAI SINGH
• Assessee Lawyers: CHANDRA RAM
• Keywords: Capital asset; Depreciation; Additional evidence; Revenue expenditure; Capital expenditure
• Section: 43B; 143(3); 37(1)

Judgement Text

IN THE INCOME TAX APPELALTE TRIBUNAL : JODHPUR BENCH : JODHPUR BEFORE SHRI HARI OM MARATHA, JUDICIAL MEMBER AND SHRI N.K. SAINI, ACCOUNTANT MEMBER. ITA NO. 394 /JODH/2014 (A.Y. 20 1 0 - 11 ) ACIT, CIRCLE - 1, UDAIPUR. VS. THE LAKE PALACE HOTEL & MOTELS PVT. LTD., CITY PALACE, UDAIPUR. (APPELLANT) PAN NO. AAACT 7433 M (RESPONDENT) ASSESSEE BY : SHRI CHANDRA RAM . DEPARTMENT BY : SHRI JAI SINGH - D.R. DATE OF HEARING : 22 / 0 9 /201 4 . DATE OF PRONOUNCEMENT : 01 / 1 0/201 4 . O R D E R PER N.K. SAINI, A.M TH IS IS AN APPEAL BY THE D EPARTMENT AGAINST THE ORDER DATED 30 /0 4 /201 4 OF L D . CIT(A), UDAIPUR . THE FOLLOWING GROUNDS HAVE BEEN RAISED IN THIS APPEAL: ON THE F ACTS AND IN THE PRESENT CIRCUMS TA N CES OF THE CASE, THE LD. CIT(A) HAS ERRED IN: - 1. DELETING THE DISALLOWANCE OF INTEREST OF RS. 4,83,53,100/ - MADE U/S. 36(1)(III) OUT OF INTEREST FREE ADVANCES DESPITE THE FACT THAT INTEREST 2 FREE ADVANCES HAVE BEEN GIVEN FOR NON - BUSINESS PURPOSE FROM BORROWED FUNDS AND ON OTHER HAND ASSESSEE INCURRED HEAVY INTEREST EXPENDITURE ON BORROWED FUNDS. 2. DELETING THE DISALLOWANCE OF EXPENDITURE OF RS. 19,99,768/ - OUT OF RS. 29,19,321/ - CLAIMED AS REVENUE EXPENDITURE U/S. 37(1) IN RESPECT OF BUILDING & ELECTRICAL REPAIRS. 3. DELETING THE DISALLOWANC E OF EXPENDITURE OF RS. 1,56,19,005/ - MADE U/S. 40(A)(IA) ON ACCOUNT OF NON DEDUCTION OF TAX AT SOURCE. 4. DELETING THE ADDITION OF EMPLOYEES CONTRIBUTION OF PF & ESI PAYMENTS OF RS. 16,59,728/ - WITHOUT APPRECIATING THE FACT THAT THE ASSESSEE HAS FAILED T O DEPOSIT SAID AMOUNT WITHIN PRESCRIBED TIME LIMIT. THAT THE APPELLANT CRAVES TO ADD, AMEND, ALTER, DELETE OR MODIFY ANY OR ALL THE ABOVE GROUNDS OF APPEAL BEFORE OR AT THE TIME OF HEARING. 2 VIDE GROUND NO. 1 , THE GRIEVANCE OF THE DEPARTMENT RELATES TO THE DELETION OF DISALLOWANCE OF INTEREST A MOUNTING TO RS. 4,83,53,100/ - MADE BY THE ASSESSING OFFICER U/S. 36(1)(III) OF THE I.T. ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT IN SHORT). 3. FACTS RELATING TO THIS ISSUE, IN BRIEF, ARE THAT THE ASSESSING OFFICER DURING THE COURSE OF ASSESSMENT PROCEEDINGS NOTICED THAT THE ASSESSEE HAD DEBITED INTEREST PAYMENTS OF RS. 9,67,51,363/ - IN THE P & L ACCOUNT AND HAD SHOWN HUGE ADVANCES TO ITS SISTER C ONCERNS. THE ASSESSING OFFICER WAS OF THE VIEW TH A T THE ASSESSEE WAS NOT ENTITLED FOR THE CLAIM OF INTEREST TO THE EXTENT OF RS. 4,83,53,100/ - OUT OF ITS INTEREST CLAIM OF RS. 9,67,51,363/ - AS IT HAD ADVANCE AMOUNTS WITHOUT INTEREST TO ITS SISTER CONCERNS . 3 4. BEING AGGRIEVED, THE ASSESSEE CARRIED THE MATTER TO THE LD. CIT(A) , WHO DELETED THE DISALLOWANCE BY FOLLOWING THE DECISION OF THE ITAT, JODHPUR BENCH IN ASSESSEES OWN CASE VIDE ORDER DATED 10/05/2013 IN I.T.A.NO. 394/JU/2012 FOR THE PRECEDING A.Y. 2009 - 10. NOW THE DEPARTMENT IS IN APPEAL. 5. LEARNED D.R. ALTHOUGH SUPPORTED THE ORDER OF THE ASSESSING OFFICER, BUT COULD NOT CONTROVERT THE FINDING GIV E N BY THE LD. CIT(A) THAT THIS ISSUE IS COVERED BY THE EARLIER ORDER DATED 10/05/2013 OF THE ITAT . 6 . IN HIS RIVAL SUBMISSIONS, LEARNED COUNSEL FOR THE ASSESSEE STRONGLY SUPPORTED THE ORDER OF THE LD. CIT(A) . 7 . WE HAVE CONSIDERED THE SUBMISSIONS OF BOTH THE PARTIES AND CAREFULLY GONE THROUGH THE MATERIAL AVAILABLE ON RECORD. IN THE PRESENT CASE, IT IS AN ADMITTED FACT THAT THE ITAT VIDE ORDER DATED 10/05/2013 IN I.T.A.NO. 394/JU/2012 FOR THE A.Y. 2009 - 10 HAS DELETED THE SIMILAR ADDITIONS BY OBSERVING IN PARA NOS. 5 TO 7 WHICH READ AS UNDER: - 5. AFTER CONSIDERING SAME AND SIM ILAR AND RIVAL SUBMISSIONS OF THE PARTIES IN THE LIGHT OF THE EVIDENCE AVAILABLE ON RECORD, WE ARE ALSO OF THE OPINION AS HAS BEEN TAKEN BY LD. CIT(A). IN FACT, IN THE GIVEN CASE, INTEREST FREE ADVANCES HAVE BEEN GIVEN TO FURTHER AND ENHANCE ASSESSEES BUS INESS INTEREST AND FOR THE BUSINESS PURPOSE. BEFORE US ALSO THE MODUS OF OPERATION 4 AMONGST THE CONCERNS OF GROUP WAS EXPLAINED AND WE ARE IN AGREEMENT WITH LD. CIT(A) THAT THESE ADVANCES PERTAIN TO EXPENSES INCURRED ON RECIPROCAL BASIS. IT IS AN UNDISPUTED FACT THAT HRH, ARE ASSESSEES SISTER CONCERNS. THE ASSESSEE IS IN THE HOTEL BUSINESS AND ITS SISTER CONCERNS ARE ALSO IN THE HOTEL BUSINESS, AND THEY OPERATE FROM THE CITIES OF UDAIPUR, JAISALMER AND BIKANER. IT WAS FOUND THAT THESE CONCERNS INCUR EXPENSE S TO MEET TO REQUIREMENTS OF THEIR GUESTS (CUSTOMER) THROUGH THEIR UNITS, AND BILLS ARE RAISED BY WAY OF DEBIT NOTES TO THE CONCERNED ENTITY TO WHICH THE CUSTOMERS / GUEST BELONGED TO. THIS PRACTICE HELPS THE SISTER CONCERNS IN GETTING REGULAR GUESTS AS BO OKING IS DONE OF TOURIST GROUPS WHO VISIT DIFFERENT PLACES. EACH CONCERN ACCOMMODATES EACH OTHERS GUEST. THE MISCELLANEOUS EXPENSES LIKE THE PETROL, DIESEL, ELECTRICITY, PRINTING WORK, TELEPHONE, INTEREST, ETC. ARE RECOVERED THROUGH DEBIT NOTES FROM THE CONCERNS FOR WHOM THESE EXPENSES ARE RELATED TO. IN THE SIMILAR PATTER, THE EXPENSES ARE INCURRED ON MUTUAL BENEFIT BASIS TO ENHANCE EACH OTHERS BUSINESS INTERESTS. THAT IS WHY NEITHER THE SISTER CONCERNS CHARGE INTEREST FROM THE ASSESSEE, NOR THE ASSESSE E CHARGES INTEREST FROM THEM. IT WAS FOUND THAT NO PART OF SUCH EXPENSES ARE INCURRED OTHER THAN ON BUSINESS CONSIDERATIONS. WE HAVE ALSO CONFIRMED THAT SIMILAR EXPENSES WERE MADE IN THE EARLIER YEAR AND THE SAME HAS BEEN ALLOWED IN THE ASSESSMENT MADE FOR A.Y. IN 2006 - 07 U/S 143(3) OF THE ACT. DURING THE YEAR THE NET OUTSTANDING AMOUNT HAS REDUCED AND THIS FACT IS PROVED BY THE ABOVE, UNDISPUTED, CHART. THE DECISIONS ON WHICH AO HAS PLACED RELIANCE WERE RENDERED ON DISTINGUISHABLE FACTS. THEREFORE, THIS IN TEREST HAS TO BE ALLOWED EVEN U/S 36(1)(III) OF THE ACT. SO LONG AS THE INTEREST FREE ADVANCES SUBSERVE THE BUSINESS INTEREST OF AN ASSESSEE, THE INTEREST, PART CANNOT BE DISALLOWED WITH REFERENCE TO INTEREST PAID, ON PROPORTIONATE BASIS. THE DEPARTMENT HA S NOT RAISED ANY ISSUE REGARDING ADMISSION OF AN ADDITIONAL EVIDENCE IN VIOLATION OF RULE 46A OF THE I.T. RULES. THE FACTS AND FIGURES TAKEN BY LD. CIT(A) ARE FROM THE BALANCE SHEET, ETC WHICH WERE ALSO AVAILABLE BEFORE AO. 6. REGARDING, DECISIONS ON WHICH AO HAS RELIED, WE HAVE ALREADY OBSERVED THAT THESE DECISIONS, IN FACT, SUPPORT THE CASE OF THE ASSESSEE - COMPANY. (I) MADHAV PRASAD JATIA VS CIT REPORTED IN (1979) 118 ITR 200 (SC) IN THAT CASE BORROWALS WERE MADE FOR GIVING DONA TIONS TO A COLLEGE TO COMMEMORATE THE MEMORY OF ASSESSEES 5 DECEASED HUSBAND. THIS IS PURELY AND APPARENT BY A PERSONAL EXPENDITURE AND DEDUCTION OF INTEREST US/ 36(1)(III) CANNOT BE ALLOWED. THEREFORE, THIS DECISION IS NOT APPLICABLE TO THE FACTS OF THE GI VEN CASE. (II) S.A. BUILDERS LTD. VS CIT (2007) 288 ITR 1 (SC) IN THAT CASE THE HOLDING COMPANY (THE ASSESSEE) DEBITED INTEREST IN THE SUBSIDIARY COMPANY AND ADVANCED BORROWED MONEY TO ITS SUBSIDIARIES WHICH WAS USED BY THE SUBSIDIARIES FOR THEIR OWN BUSINESS PURPOSES. APPARENTLY, THIS EXPENDITURE CANNOT BE TAKEN AS INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF ASSESSEES BUSINESS. BUT IN THE GIVEN CASE THE ASSESSEE - COMPANY HAS INCURRED EXPENSES AS ADVANCE TO ITS SUBSIDIARIES FOR BUSINESS PURPOSE AND NOT O THERWISE. RATHER THE ASSESSEE AND ITS SUBSIDIARIES HAVE INCURRED MUTUAL EXPENSES FOR MUTUAL BUSINESS BENEFITS AND NO PERSONAL ELEMENT IS INVOLVED THEREIN. THIS DECISION ALSO SUPPORTS THE CASE OF THE ASSESSEE. (III) K. SOMASUNDARAM & BROTHERS VS CIT 238 I TR 939 (MAD) IN THAT CASE OUT OF INTEREST PAID ON BORROWING TO THE EXTENT OF INTEREST FREE LOAN GIVEN TO THE RELATIVES OF THE PARTNERS WAS DISALLOWED U/S 36(1)(III), BUT THE FACTS OF THIS CASE ARE ENTIRE DIFFERENT. (III) IN ABHISHEK INDUSTRIES CASE (2006) 156 TAXMAN 257 (P&H) IN THAT CASE INTEREST FREE ADVANCES WERE GIVEN TO SISTER CONCERN WITHOUT ANY BUSINESS PURPOSE. AGAIN, THE RATIO OF THIS DECISION CANNOT APPLY THE CASE IN HAND. 7. ACCORDINGLY, WE CONFIRM, THE IMPUGNED DELETION AND DISMISS GROUND NO. (1) A ND 1.1 OF REVENUES APPEAL. 8 . SINCE THE FACTS FOR THE YEAR UNDER CONSIDERATION ARE SIMILAR TO THE FAC TS OF THE AFORESAID REFERRED TO CASE, SO RESPECTFULLY FOLLOWING THE EARLIER ORDER DATED 10/05/2013 OF THIS BENCH OF THE TRIBUNAL IN ASSESSEES OWN CASE FOR THE A.Y. 2009 - 10 IN I.T.A.NO. 394/JU/2012 , WE DO NOT SEE ANY MERIT IN THIS GROUND OF THE DEPARTMENTAL APPEAL . 6 9 . THE NEXT ISSUE VIDE GROUND NO. 2 RELATES TO THE DELETION OF DISALLOWANCE OF EXPENDITUR E AMOUNTING TO RS. 19,99,768/ - OUT OF RS. 29,19,321/ - . 10 . FACTS RELATING TO THIS ISSUE, IN BRIEF, ARE THAT THE ASSESSEE CLAIMED EXPENDITURE OF RS. 1,75,74,540/ - ON ACCOUNT OF REPAIRS & MAINTENANCE. THE ASSESSING OFFICER CONSIDERED A SUM OF RS. 29,19,321/ - AS CAPITAL EXPENDITURE OUT OF THE SAID EXPENDITURE AND MADE THE DISALLOWANCE . 11 . BEING AGGRIEVED, THE ASSESSEE CARRIED THE MATTER TO THE LD. CIT(A) , WHO DELETED THE DISALLOWANCE TO THE EXTENT OF RS. 19,99,768/ - BY OBSERVING AT PAGE NOS. 13 TO 15 OF THE IMPUGNED ORDER WHICH READ AS UNDER: - I HAVE CONSIDERED THE SUBMISSIONS OF THE APPELLANT AS WELL AS THE FINDINGS OF THE LD. AO. IT IS NOTICED THAT THE LD. CIT(A), UDAIPUR VIDE HIS ORDER DATED 22.08.2012 IN APPEAL NO. 427/IT/UDR/2011 - 12 HAS FOUND THAT SOME OF THESE EXPENSES ARE REVENUE AND SOME OF THEM TO BE CAPITAL IN NATURE AND HAD PARTLY ALLOWED THE ABOVE GROUND OF APPEAL WITH THE FOLLOWING FINDING : - I HAVE CONSIDERED THE SUBMISSIONS OF THE APPELLANT AS WELL AS THE ASSESSMENT ORDER. THE ISSUES ARE DECIDED HERE UNDER: (A) PUMP EXPENDITURE RS. 95,212 THE APPELLANT HAS EXPLAINED THAT A SEWERAGE PLANT HAS BEEN INSTALLED IN THE EARLIER YEARS HAVING WRITTEN DOWN VALUE OF RS.52.92 LAKHS AT THE END OF YEAR. THE OLD SEWERAGE PLANT HAD BECOME OBSOLETE AND WAS OUT OF DATE 7 AND THEREFORE WAS NOT FUNCTIONIN G TO THE REQUIRED CAPACITY. THE NEW SUBMERSIBLE PUMP WITH GRINDER WAS INSTALLED IN THE SEWERAGE PLANT SO AS TO OBTAIN FULL FUNCTIONING OF THE SEWERAGE PLANT WHICH WAS ESSENTIAL TO MAINTAIN THE BUSINESS OF THE ASSESSEE. FROM THE ABOVE, IT IS APPARENT THAT T HE ASSESSEE REPLACED THE SUBMERSIBLE PUMP WITH GRINDER IN PLACE OF OBSOLETE OLD PUMPING SYSTEM WHICH HAS INCREASED THE EFFICIENCY OF THE SEWERAGE PLANT. SO, THIS EQUIPMENT IS PART OF SEWERAGE PLANT AND NOT ANY NEW CAPITAL ASSET IN ITSELF. THE EXPENSES WERE INCURRED FOR SEWERAGE PLANT TO INCREASE THE EFFICIENCY OF BUSINESS OF THE APPELLANT. ACCORDINGLY IT IS TREATED AS REVENUE EXPENDITURE. (B) AS REGARDING EXPENDITURE OF RS.2,69,729/ - ON ACCOUNT OF CONSTRUCTION RCC ETC. WORK, THE ASSESSEE HAD STATED THAT TH E ABOVE EXPENSES WERE INCURRED TO SHIFTING THE EXISTING WATER TANK UNDERGROUND WHICH WAS LYING ON THE SURFACE. IN THE ABOVE PROCESS, VARIOUS TRENCH PIPELINE, MANHOLE AND CONSTRUCTION WAS ALSO CARRIED. THERE WAS NO NEW WATER TANK INSTALLED BUT IT IS ONLY A SHIFTING OF EXISTING WATER TANK WHICH DOES NOT CREATE A NEW ASSETS IN THE CASE OF THE ASSESSEE. IT IS APPARENT THAT WATER TANK LYING ON SURFACE WAS SHIFTED UNDERGROUND FOR CREATING ADDITIONAL SPACE FOR INCREASED EFFICIENCY AND NO NEW ASSET WAS CREATED. ACCORDINGLY, THE ABOVE EXPENSES ARE TREATED AS REVENUE EXPENDITURE. ( C) AS REGARDING THE EXPENDITURE OF RS.42,455 ON ACCOUNT OF PAINTING WORK AT BADI PAL TOILETS AND RS.787980 BADI PAL STAFF QUARTERS, IT IS SEEN THAT THE A.O. HAS LISTED THE VARIOUS WORK C ARRIED OUT AT BADI PAL TOILETS AND STAFF QUARTERS AND HELD THAT NEW CONSTRUCTION HAS BEEN DONE. THE WORK CARRIED OUT IS THAT EARTHWORK IN EXCAVATION, CEMENT CONCRETE, CENTERING AND SHUTTERING, RCC CONCRETE STONE MASONRY WORK, RCC FOR PLINTH BEAM, BEAM LINT ED, BRICK MASONRY WORK, RCC REINFORCEMENT STEEL, FIXING TILES , SUPPLYING & FISHING DOORS, WINDOWS, OTHER FRAMES, RIGID PVC PIPE INCLUDING JOINTING THE PIPE, GL PIPE, UNION VALVE, FIXING OF WC URINALS, FIXING OF MARBLE MOLDING ETC. FIXING OF MARBLE SLABS F OR WASH BASIN, POP FALSE CEILING, BRASS HARDWARE. FROM ABOVE, IT IS APPARENT THAT NO NEW TOILETS OR NO NEW STAFF QUARTERS HAS BEEN CONSTRUCTED. IN FACT, ALREADY EXISTING STRUCTURES HAVE BEEN REPAIRED. 8 NOTHING HAS BEEN POINTED OUT TO SHOW THAT ADDITIONAL NE W ROOMS OR NEW TOILETS HAS BEEN CONSTRUCTED BY THE ASSESSEE AND IT IS APPARENT THAT ONLY REPAIR OF OLD STRUCTURES HAS BEEN DONE TO CARRY OUT THE BUSINESS OF THE ASSESSEE EFFICIENTLY AND ACCORDINGLY, THE ABOVE EXPENDITURE ARE HELD TO BE AS REVENUE EXPENDITU RE. (D) AS REGARDS THE EXPENDITURE OF RS.19,10,137 FOR DG FOUNDATION, CABLE TRANCHES ETC. THE A.O. HAS MENTIONED THAT IN THE ASSESSMENT ORDER THAT THE ABOVE EXPENDITURES WERE INCURRED FOR THE CONSTRUCTION OF DG FOUNDATION, CABLE TRENCHES AND ROOM, 33 KV PANEL ROOM AND OTHER RELATED EXPENSES. FROM THIS, IT IS APPARENT THAT NEW CONSTRUCTION FOR THE INSTALLATION OF DG SET ALONGWITH TWO ROOMS HAS BEEN CARRIED OUT. MOREOVER, THE ASSESSEE ITSELF HAS CAPITALIZED EXPENDITURE INCURRED ON THE ELECTRICAL INSTALLATION REL ATED TO CABLE SUPPLIES TO THE EXTENT OF RS.49,11,904 WHICH IS ALSO RELATED TO ABOVE ASSET. CONSIDERING THE NATURE OF EXPENSES , IT IS HELD THAT THESE EXPENSES ARE CAPITAL IN NATURE. ACCORDINGLY, THE ADDITION MADE BY THE A.O. IS UPHELD. (E) AS REGARDING THE CO NFERENCE SET UP AMOUNTING TO RS.45,985 AND SPEAKERS OF RS.73,800 PAID TO MEGA SOUND, IT IS SEEN THAT THE ASSESSEE HAS PURCHASED THE ABOVE NEW EQUIPMENT FOR ITS BUSINESS AND NO SUCH CONFERENCE SET UP WITH SPEAKERS WAS SHOWN TO HAVE BEEN EXISTING EARLIER. SO, IT APPARENT NEW ASSETS AND THE ABOVE EXPENDITURE AT ARE TREATED AS CAPITAL IN NATURE AND ADDITION MADE ON THIS ACCOUNT IS CONFIRMED. (F) AS REGARDING THE EXPENDITURE ON PUMP S OF RS. 41,560, RS.65,800 AND RS.81.434, THESE PUMPS WERE INSTALLED FOR REPLACING THE OLD PUMPS FOR ENSURING PROPER WATER SUPPLY SYSTEM WHICH IS ESSENTIAL IN THE HOTEL BUSINESS. SIMILARLY, TELEPHONE MOTHER BOARD OF EPBX WAS REPLACED FOR EFFICIENT FUNCTIONING OF THE EXCHANGE. IN VIEW OF THE NATURE OF EXPENSES INCURRED, THEY ARE TREATED A S REVENUE EXPENDITURE. II) DURING APPEAL, IT WAS CLAIMED BY THE APPELLANT THAT IF THE ADDITION IS SUSTAINED AS CAPITAL EXPENSES, DEPRECIATION ON THE RELEVANT ASSET MAY BE ALLOWED AS PER LAW. THE CONTENTION IS ACCEPTABLE AND THE A.O. IS DIRECTED TO ALLOW T HE DEPRECIATION ON CAPITAL EXPENSES AS PER ELIGIBLE RATES. 9 THIS GROUND OF APPEAL IS PARTLY ALLOWED. FURTHER, THE HONBLE JURISDICTIONAL ITAT , JODHPUR VIDE THEIR ORDER DATED 10.05.2013 IN ITA NO.394/JODH/2012 FOR AY 2009 - 10 HAS CONFIRMED THE ABOVE FINDIN GS OF THE LD. CIT(A) AND DISMISSED THE APPEAL OF THE REVENUE ON THIS GROUND. I HAVE CONSIDERED THE SUBMISSIONS OF THE APPELLANT AS WELL AS THE FINDINGS OF THE LD. AO. IT IS NOTICED THAT THE EXPENSES ON THE FOLLOWING ITEMS ARE OF CAPITAL NATURE : - (I) FOLDING HUT FOR BOOKING OFFICE AT BADI PAL RAMESHWAR GHAT - RS. 2,55,710/ - . (II) EXHAUST SYSTEM FOR 2DG SET 1250KVA ( JOB CHARGES, EXHAUST PIPE, EXHAUST PIPE SUPPORT STRUCTURE ) - RS. 6,63,843/ - . THUS, THE ABOVE EXPENSES ARE TREATED AS CAPITAL IN NATURE AND ACCORDINGLY ADDITION OF RS. 9,19,553/ - IS CONFIRMED. DURING THE APPEAL PROCEEDINGS, IT WAS CLAIMED BY THE APPELLANT THAT IF THE ADDITION IS SUSTAINED AS CAPITAL EXPENSES, DEPRECIATION ON THE RELEVANT ASSET MAY BE ALLOWED AS PER LAW. T HE CONTENTION IS ACCEPTABLE AND THE A.O. IS DIRECTED TO ALLOW THE DEPRECIATION ON ABOVE MENTIONED CAPITAL ASSETS AS PER ELIGIBLE RATES. FURTHER, THE BALANCE ADDITION OF RS. 19,99,768/ - ( 29,19,321 - 9,19,553 ) TREATING THEM AS CAPITAL EXPENDITURE OUT OF R EPAIRS TO BUILDINGS AND REPAIRS TO ELECTRICAL ARE DELETED AS THE ASSESSEE COMPANY HAS NOT CREATED ANY NEW ASSET AND AS SUCH THE EXPENSES ARE ALLOWABL E AS REVENUE EXPENDITURE. HENCE , T HIS GROUND IS PARTLY ALLOWED. NOW THE DEPARTMENT IS IN APPEAL. 12. LEARNED D.R. STRONGLY SUPPORTED THE ORDER OF THE ASSESSING OFFICER AND FURTHER SUBMITTED THAT THOSE EXPENSES WHICH WERE CAPITAL IN NATURE WERE DISALLOWED BY THE ASSESSING OFFICER BECAUSE THE ASSESSEE CLAIMED THE SAME AS REVENUE EXPENDITURE. THEREFORE, THE LD. CIT(A) WAS NOT 10 JUSTIFIED IN DIRECTING THE ASSESSING OFFICER TO TREAT THE EXPENSES AMOUNTING TO RS. 19,99,768/ - AS REVENUE IN NATURE. 13 IN HIS RIVAL SUBMISSIONS, LEARNED COUNSEL FOR THE ASSESSEE REITERATED THE SUBMISSIONS MADE BEFORE THE LD. CIT(A) AND FURTHER SUBMITTED THAT THE LD. CIT(A) WHILE PASSING THE IMPUGNED ORDER HAD FOLLOWED THE ORDER DATED 10/05/2013 OF THE ITAT IN I.T.A.NO. 394/JU/2012 FOR THE A.Y. 2009 - 10, THEREFORE, THERE IS NO MERIT IN THIS GROUND OF THE DEPARTMENTAL APPEAL. 14 WE HAVE CONSIDERED THE SUBMISSIONS OF BOTH THE PARTIES AND CAREFULLY GONE THROUGH THE MATERIAL AVAILABLE ON RECORD. IN THE INSTANT CASE, IT IS AN ADMITTED FACT THAT THE LD. CIT(A) DELETED THE DISALLOWANCE MADE BY THE ASSESSING OFFICER BY FOLLOWING THE OR DER OF HIS PREDECESSOR , WHICH HAS BEEN AFFIRMED BY THE ITAT VIDE ORDER DATED 10/05/2013 IN I . T.A.NO. 394/JU/2012 FOR THE A.Y. 2009 - 10 AND NOTHING IS BROUGHT ON RECORD THAT THE SAID ORDER DATED 10/05/2013 HAS BEEN REVERSED BY THE HON'BLE HIGH COURT OR HON'BLE SUPREME COURT. THEREFORE, WE DO NOT SEE ANY VALID GROUND TO INTERFERE WITH THE FIN D INGS OF THE LD. CIT(A) ON THIS ISSUE BECAUSE ONLY THOSE ITEMS WHICH WERE HAVING ENDURING EFFECT AND CREATED NEW ASSETS WERE DIRECTED TO BE CONSIDERED AS CAPITAL IN NATURE. 11 15 THE NEXT ISSUE VIDE GROUND NO. 3 RELATES TO THE DELETION OF DISALLOWANCE OF EXPENDITURE OF RS. 1,56,19,005/ - MADE BY THE ASSESSING OFFICER U/S. 40(A)(IA) OF THE ACT. 16 FACTS RELATING TO THIS ISSUE, IN BRIEF, ARE THAT THE ASSESSING OFFICER DURING THE COURSE OF ASSESSMENT PROCEEDINGS NOTICED THAT THE ASSESSEE HAD MADE PAYMENTS UNDER DIFFERENT HEADS AMOUNTING TO RS. 1,56,19,005/ - TO THE SPECIFIED PERSONS FOR WHICH NO TAX WAS DEDUCTED AT SOUR CE. HE , ACCORDINGLY, DISALLOWED THE SAID EXPENSES IN VIEW OF THE PROVISIONS OF SECTION 40(A)(IA) OF THE ACT . THE ASSESSING OFFICER DISCUSSED THE ISSUE IN PARA 6.1 TO 6.9 O F THE ASSESSMENT ORDER DATED 12/03/2013 , FOR THE COST OF REPE T IT ION, THE SAME IS NOT REPRODUCED HEREIN. 17 BEING AGGRIEVED, THE ASSESSEE CARRIED THE MATTER TO THE LD. CIT(A) AND SUBMITTED AS UNDER: - THE NEXT GROUND OF APPEAL IS AGAINST DISALLOWANCE OF EXPENDITURE OF RS.1,56,19,005/ - DUE TO NON - DEDUCTION OF TDS U/S 40 (A) (IA). OUR POINT - WISE REPLY IS AS UNDER: I) WITH REGARDS TO PAYMENTS MADE TO HISTORIC RESORT HOTELS PVT. LTD AND THE LAKE SHORE PALACE HOTELS PVT. LTD.(PERSONS SPECIFIED U/S. 40A(2)(B)) AND DISALLOWANCE DUE TO NON - DEDUCTION OF TDS U/S 40 (A) (IA) WE RESPECTFULLY SUBMIT THAT ON PERUSAL OF THE CURRENT A/C OF HISTORIC RESORT HOTELS PVT. LTD. IN THE BOOKS OF THE APPELLANT COMPANY, YOU R HONOUR MAY PLEASE OBSERVE THAT THERE IS A DR. BALANCE OF RS. 22,07,18,079/ - AS ON 31/03/2010. 12 WE FURTHER SUBMIT THAT HISTORIC RESORT HOTELS PVT. LTD. IS CONDUCTING COMMON SALES AND MARKETING ACTIVITIES FOR ALL THE GROUP HOTELS INCLUDING HOTEL UNIT OF THE APPELLANT COMPANY. HISTORIC RESORT HOTELS PVT. LTD. WAS INCURRING THE COMMON EXPENDITURE LIKE SALARIES AND WAGES, OFFICE RENT, ADVERTISEMENT & PUBLICITY, TELEPHONE EXP, TRAVELLING ETC. AND PAYING THE VARIOUS SERVICE PROVIDERS AFTER DEDUCTING TDS AS PER AP PLICABLE PROVISIONS OF THE INCOME TAX ACT 1961 AT FIRST STAGE. HISTORIC RESORT HOTELS PVT. LTD. HAS ISSUED DEBIT NOTES TO APPELLANT COMPANY AND ITS HOTEL UNITS FOR RECOVERY OF THEIR SHARE IN THE ABOVE COMMON EXPENSES WITHOUT ANY MARKUP( AT COST). COPY OF M EMORAND U M OF ARRANGEMENT IN THIS REGARDS IS ENCLOSED HEREWITH WHILE REPAYING THE COMMON SHARED EXPENSES BY THE APPELLANT COMPANY TO HRH THE PROVISIONS OF TDS ARE NOT ATTRACTED. (II) WITH REGARDS TO DISALLOWANCE U/S 40(A)(IA) FOR PAYMENT TO THE LAKE SHORE PALAC E HOTEL PRIVATE LIMITED, WE RESPECTFULLY SUBMIT THAT SHIVNIWAS PALACE, A UNIT OF THE LAKE SHORE PALACE HOTEL PVT. LTD. IS OPERATING COMMON BAKERY FOR ALL THE GROUP HOTELS. IT IS THEREFORE SUPPLYING THE BAKERY/FOOD ITEMS FOR STAFF AS WELL AS GUESTS OF FATEH PRAKASH PALACE, FATEH BAGH, AODHI & JAGMANDIR (UNITS OF THE APPELLANT) AND ISSUING DEBIT NOTES TO THE HOTEL UNITS OF APPELLANT COMPANY AGAINST RECOVERY OF FOOD COST AND WE WOULD LIKE TO MENTION THAT THE FOOD COST IS DISTRIBUTED WITHOUT ANY MARKUP (AT COST ). MOREOVER SHIVNIWAS PALACE HAS BEEN INCURRING ALL THE EXPENDITURE AFTER DEDUCTING TDS , WHEREVER APPLICABLE AS PER PROVISIONS OF THE INCOME TAX ACT 1961, AT THE FIRST STAGE WHILE MAKING PAYMENTS TO ITS SERVICE PROVIDERS. AS TDS PROVISIONS ARE NOT APPLICABLE TO THE APPELLANT COMPANY, THEREFORE APPLICATION OF THE PROVISION OF SECTION 40A(IA) DOES NOT ARISE. 18 THE LEARNED CIT(A), AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE, DELETED THE ADDITION BY OBSERVING AS UNDER: - I HAVE CONSIDERED THE SUBMISSIONS OF THE APPELLANT AS WELL AS THE FINDINGS OF THE LD. AO. IT IS NOTICED THAT THE LD. CIT(A), UDAIPUR VIDE HIS ORDER DATED 22.08.2012 IN A. NO. 427/IT/UDR/2011 - 12 HAS ALLOWED THE ABOVE GROUND OF APPEAL WITH THE FOLLOWING FINDING : - 13 I HAVE CONSIDER ED THE SUBMISSIONS OF THE APPELLANT AS WELL AS THE ASSESSMENT ORDER. IT HAS BEEN EXPLAINED THAT HISTORIC RE SORT HOTELS PVT. LTD. (IN SHORT HRH PVT. LTD.) IS MAINLY CARRYING OUT SALES AND MARKETING ACTIV I T I ES FOR ALL GROUP HOTELS INCLUDING THE APPELLANT. IT IS ALSO MAKING SALARY AND WAGE PAYMENTS AND OTHER EXPENSES FOR VARIOUS EMPLOYEES OF ITS UNITS AS WELL AS OF THE UNITS OF THE ASSESSEE. WHILE MAKING ABOVE PAYMENT, THE HRH PVT. LTD. HAS DEDUCTED TDS WHEREVER APPLICABLE, LATER ON, BY WAY OF DEBIT NOTE, THE EXPENDITURE INCURRED BY HRH PVT. LTD. ON ACCOUNT OF VARIOUS GROUP COMPANIES ARE ASCERTAINED AND DEBIT NOTE IS RAISED TO THE CONCERNED COMPANY. BASED ON THIS DEBIT NOTE, PAYMENT IS REIMBURSED BY THE ASSESSEE TO HRH PVT. LTD. EITHER BY WAY OF ADJUSTMENT OF A DVANCES OR BY WAY OF PAYMENT. SO, APPELLANT HAS ALREADY REIMBURSED THE EXPENSES INCURRED BY HRH PVT. LTD. ON THE BASIS OF DEBIT NOTE. AS REGARDING PAYMENTS MADE TO LAKE SHORE PALACE HOTEL PVT. LTD., THIS IS ON ACCOUNT OF MEALS PROVIDED TO THE EMPLOYEES OF THE ASSESSEE BY THE LAKE SHORE PALACE HOTELS PVT. LTD. IN THE EXECUTIVE DINING ROOM. THERE IS NO PROFIT INVOLVED IN THE SAME AND IT IS FOR SAKE OF CONVENIENCE AND REQUIREMENT OF BUSINESS. THE ASSESSEE HAS REIMBURSED THE EXPENSES INCURRED BY THE LAKE SHORE PALACE HOTELS PVT. LTD. FOR THE FOOD PROVIDED TO THE EMPLOYEES OF THE ASSESSEE. THE EXPENDITURE FOR MEALS HAS BEEN INCURRED BY LAKE SHORE PALACE HOTELS PVT. LTD. AND THEY RAI S ED DEBIT NOTE ON THE ASSESSEE WHICH IS SETTLED BY WAY OF BOOK ENTRIES. THE LSPH P VT. LTD. HAS DEDUCTED TDS AS PER THE RELEVANT PROVISIONS FROM THE PAYMENTS MADE TO THE SERVICE PROVIDERS. MOREOVER, IT MAY BE MENTIONED THAT IN NONE OF THESE CASE, NO AMOUNT REMAIN PAYABLE BY THE APPELLANT TO THE ABOVE TWO CONCERNS AS ON 31.03.2009 AND THE REFORE PROVISIONS OF SECTION 40 ( A ) (I A) ARE APPLICABLE ONLY FOR THE AMOUNT REMAINED PAYABLE AT THE END OF THE YEAR AS HELD BY THE HONOURABLE ITAT VISAKHAPATNAM SPECIAL BENCH IN THE CASE OF MERILYN SHIPPING & TRANSPORTS VS. ADDL. CIT (2012)70 DTR (VISAKHA SB ) (TRIB) 81 AS UNDER: - 'PROVISIONS OF S.4 0 (A ) (IA) ARE APPLICABLE ONLY TO THE AMOUNT OF EXPENDITURE WHICH IS PAYABLE AS ON 31 ST MARCH OF EVERY YEAR AND IT CANNOT BE INVOKED TO DISALLOW THE EXPENDITURE WHICH HAD BEEN ACTUALLY PAID DURING THE PREVIOUS YEAR WITHOUT DEDUCTION ON TDS. 14 FROM ABOVE, IT IS APPARENT THAT TDS HAS BEEN DEDUCTED BY THE ACTUAL PAYER OF THE EXPENSES I. E. M/S LAKE SHORE PALACE HOTEL PVT. LTD. AND HISTORIC RESORT HOTELS PVT. LTD. AS PER PROVISIONS OF THE ACT. AND DEBIT NOTE HAS BEEN RAISED IN THE CASE OF THE ASSESSEE WHICH HAS BEEN SQUARED UP BY DEBIT ENTRY. MOREOVER, ABOVE AMOUNTS ARE NOT REMAINED PAYABLE AT TH E END OF THE YEAR. IN VIEW OF ABOVE FACTS, ADDITION MADE UNDER SECTION 40(A)(IA) IS NOT SUSTAINABLE IN THE EYES OF LAW AND THE SAME IS DELETED. THIS GROUND OF APPEAL IS ALLOWED. FURTHER, THE HONBLE JURISDICTIONAL ITAT , JODHPUR VIDE THEIR ORDER DATED 10 .05.2013 IN ITA NO.394/JODH/2012 FOR AY 2009 - 10 HAS CONFIRMED THE ABOVE FINDINGS OF THE LD. CIT(A) AND DISMISSED THE APPEAL OF THE REVENUE ON THIS GROUND. . KEEPING INTO CONSIDERATION THE VARIOUS CASE LAWS OF THE HIGHER APPELLATE AUTHORITIES AND THE HONBL E COURTS I HAVE NO REASON TO DEVIATE FROM THE ABOVE MENTIONED DECISIONS. ACCORDINGLY, THE ADDITION/ DISALLOWANCE OF RS.1,56,19,005/ - ON ACCOUNT OF NON - DEDUCTION OF TDS U/S 40(A)(IA) OF THE ACT IS DELETED. HENCE, THIS GROUND IS ALLOWED. NOW THE DEPARTMENT IS IN APPEAL. 19 LEARNED D.R. REITERATED THE OBSERVATIONS MADE BY THE ASSESSING OFFICER IN THE ASSESSMENT ORDER DATED 12/03/2013 AND STRONG L Y SUPPORTED THE SAID ASSESSMENT ORDER. 20 IN HIS RIVALS SUBMISSIONS, LEARNED COUNSEL FOR THE ASSESSEE REITERATED THE SUBMISSIONS MADE BEFORE THE AUTHORITIES BELOW AND FURTHER SUBMITTED THAT THIS ISSUE HAS NOW BEEN SETTLED BY THE HON'BLE SUPREME COURT BY DISMISSING THE SLP FILED AGAINST THE ORDER OF THE HON'BLE ALLAHABAD HIG H COURT IN THE CASE OF CIT VS. VECTOR SHIPPING SERVICES (P) LTD. WHEREIN THE VIEW TAKEN BY THE ITAT VISHAKHAPATNAM SPECIAL BENCH IN THE CASE OF 15 MERILYN SHIPPING & TRANSPORTS VS. ACIT REPORTED IN 136 ITD 23 HAS BEEN AFFIRMED. 21 AFTER CONSIDERING THE SUBMISSIONS OF BOTH THE PARTIES AND THE MATERIAL ON RECORD, IT IS NOTICED THAT THE LD. CIT(A) DECIDED THIS ISSUE ON THE BASIS OF THE VIEW TAKEN BY THE SPECIAL BENCH IN THE CASE OF MERILYN SHIPPING & TRANSPORT VS. ACIT (SUPRA), THE SAID VIEW HAS BEEN AFFIRMED BY THE HON'BLE ALLAHABAD HIGH COURT IN THE CASE OF CIT VS. VECTOR SHIPPING SERVICES (P) LTD. VIDE JUDGMENT DATED 09/07/2013 IN I.T.A.NO. 122/JODH/13. AGAINST THE SAID JUDGMENT, SLP FILED BY THE REVENUE DEPARTMENT HAS BEEN DISMI SSED BY THE HON'BLE SUPREME COURT IN C.C.NO. 8068/14 VIDE ORDER DATED 02/07/2014. WE, THEREFORE, DO NOT SEE ANY MERIT IN THIS GROUND OF THE DEPARTMENTAL APPEAL. 2 2 V IDE GROUND NO. 4, THE GRIEVANCE OF THE DEPARTMENT RELATES TO THE DELETION OF ADDITION MADE BY THE ASSESSING OFFICER ON ACCOUNT OF NON - DEPOSIT OF PF & ESI PAYMENTS AMOUNTING TO RS. 16,59,728/ - WITHIN THE PRESCRIBED TIME LIMIT. 23 FACTS RELATING TO THIS ISSUE, IN BRIEF, ARE THAT THE ASSESSING OFFICER DISALLOWED THE IMPUGNED AMOUNT SINCE THE AMOUNT WAS PAID AFTER DUE 16 DATE AND ACCORDINGLY CONSIDERED THE SAME AS INCOME OF THE ASSESSEE U/S. 2(24)(10) OF THE ACT. 2 4 BEING AGGRIEVED, THE ASSESSEE CARRIED THE MATTER TO THE LD. CIT(A) , WHO DELETED THE ADDITION BY OBSERVING AS UNDER: - I HAVE CONSIDERED THE SUBMISSIONS OF THE APPELLANT AS WELL AS THE FINDINGS OF THE LD. AO. IT IS NOTICED THAT THE LD. CIT(A), UDAIPUR VIDE HIS ORDER DATED 05.07.2010 IN A. NO. 371/IT/UDR/2007 - 08 HAS ALLOWED THE ABOVE GROUND OF APPEAL WITH THE FOLLOWING FINDING : - I HAVE CONSIDERED THE SUBMISSIONS OF THE LEARNED A/R. VIS - A - VIS THE RELEVANT PROVISIONS OF THE ACT. IN MY VIEW, AFTER THE AMENDMENT IN THE PROVISIONS OF SECTION 43B OF THE ACT, THE PAYMENTS MADE BEFORE THE DUE DATE OF FILING THE RETURN IS AN ALLOWABLE EXP ENDITURE IRRESPECTIVE OF THE FACT WHETHER IT IS EMPLOYEES CONTRIBUTION OR EMPLOYERS CONTRIBUTION. THEREFORE, THE DISALLOWANCE MADE BY THE A.O. AMOUNTING TO RS. 1,19,014 STANDS DELETED. KEEPING INTO CONSIDERATION THE VARIOUS CASE LAWS OF THE HIGHER APPELLA TE AUTHORITIES AND THE HONBLE COURTS I HAVE NO REASON TO DEVIATE FROM THE ABOVE MENTIONED DECISIONS. ACCORDINGLY, THE ADDITION/ DISALLOWANCE OF RS 16,59,728/ - CONSIDERING THE SAME AS INCOME U/S 2(24) (10) OF THE ACT IS DELETED AS THE PAYMENTS MADE BEFORE THE DUE DATE OF FILING THE RETURN ARE AN ALLOWABLE EXPENDITURE. HENCE, THIS GROUND IS ALLOWED. NOW THE DEPARTMENT IS IN APPEAL. 25 LEARNED D.R. SUPPORTED THE ORDER OF THE ASSESSING OFFICER AND FURTHER SUBMITTED THAT SINCE THE AMOUNT ON ACCOUNT OF EMPLOYEES CONTRIBUTION TOWARDS PF & ESI WAS NOT DEPOSITED BY THE ASSESSEE WITHIN 17 THE DUE DATE, SO IT WAS RIGHTLY DISALLOWED BY THE ASSESSING OFFICER AND THE LD. CIT(A) WAS NOT JUSTIFIED IN DELETING THE SAID DISALLOWANCE. 2 6 IN HIS RIVAL SUBM ISSIONS , LEARNED COUNSEL FOR THE ASSESSEE STRONGLY SUPPORTED THE ORDER OF THE LD. CIT(A) AND FURTHER SUBMITTED THAT THE SIMILAR DISALLOWANCE HAS ALREADY BEEN DELETED BY THE ITAT IN ASSESSEES OWN CASE FOR THE A.Y. 2009 - 10 IN I.T.A.NO. 394/JU/2012 VIDE ORDER DATED 10/03/2013 . 27 WE HAVE CONSIDERED THE SUBMISSIONS OF BOTH THE PARTIES AND CAREFULLY GONE THROUGH THE MATERIAL AVAILABLE ON RECORD. I N THE PRESENT CASE, IT IS AN ADMITTED FACT THAT THE ASSESSEE ALTHOUGH MADE THE PAYMENTS OF THE PROVIDENT FUND AND ESI FUND, BUT THE SAID PAYMENTS WERE BEYOND THE PRESCRIBED DUE DATE PROVIDED IN THE EXPLANATION TO SECTION 36(1)(VA) OF THE ACT. HOWEVER, THE PAY M ENT WAS MADE BEFORE F ILING THE RETURN OF INCOME U/S. 139(1) OF THE ACT . 2 8 . ON A SIMILAR ISSUE, THE HON'BLE KARNATAKA HIGH COURT IN THE CASE OF CIT AND ANOTHER VS. M.N. CHARI (2009) 310 ITR 445 HAS HELD AS UNDER: - THAT THE CONTRIBUTIONS MADE BY THE ASSESSEE WERE ALLOWABLE DEDUCTIONS EVEN THOUGH THEY WERE MADE BEYOND THE STIPULAT ED PERIOD UNDER SECTION 18 36(1)(VA) OF THE INCOME - TAX ACT, 1961, READ WITH SECTION 2(24)(X) AND SECTION 43B AS THE AMOUNTS WERE PAID BY THE ASSESSEE ON OR BEFORE THE DUE DATE FOR FURNISHING THE RETURN UNDER SECTION 139(1) OF THE ACT. 29 . NOW, THIS ISSUE HAS BEEN SETTLED BY THE HON'BLE SUPREME COURT IN THE CASE OF CIT VS. ALOM EXTRUSIONS LTD. (2009) 319 ITR 306 , WHEREIN THEIR LORDSHIP AT PAGES 315 & 316 HAVE HELD AS UNDER: - LASTLY, WE MAY POINT OUT THE HARDSHIP AND THE INVIDIOUS DISCRIMINATION WHICH WOULD BE CAUSED TO THE ASSESSEE(S) IF THE CONTENTION OF THE DEPARTMENT IS TO BE ACCEPTED THAT THE FINANCE ACT, 2003, TO THE ABOVE EXTENT, OPERATED PROSPECTIVELY. TAKE AN EXAMPLE - IN THE PRESENT CASE, THE RESPONDENTS HAVE DEPOSITED THE CONTRIBUTIONS WITH THE R.P.F.C. AFTER MARCH, 31 (END OF THE ACCOUNTING YEAR) BUT BEFORE FILING OF THE RETURNS UNDER THE INCOME - TAX ACT AND THE DATE OF PAYMENT FALLS AFTER THE DUE DATE UNDER THE EMPLOYEES PROVIDENT FUND ACT, THEY WILL BE DENIED DEDUCTION F OR ALL TIMES. IN VIEW OF THE SECOND PROVISO, WHICH STOOD ON THE STATUTE BOOK AT THE RELEVANT TIME, EACH OF SUCH ASSESSEE(S) WOULD NOT BE ENTITLED TO DEDUCTION UNDER SECTION 43B OF THE ACT FOR ALL TIMES. THEY WOULD LOSE THE BENEFIT OF DEDUCTION EVEN IN THE YEAR OF ACCOUNT IN WHICH THEY PAY THE CONTRIBUTIONS TO THE WELFARE FUNDS, WHEREAS A DEFAULTER, WHO FAILS TO PAY THE CONTRIBUTION TO THE WELFARE FUND RIGHT UP TO APRIL, 2004, AND WHO PAYS THE CONTRIBUTION AFTER APRIL 1, 2004, WOULD GET THE BENEFIT OF DEDUC TION UNDER SECTION 43B OF THE ACT. IN OUR VIEW, THEREFORE, THE FINANCE ACT, 2003, TO THE EXTENT INDICATED ABOVE, SHOULD BE READ AS RETROSPECTIVE. IT WOULD, THEREFORE, OPERATE FROM APRIL 1, 1988, WHEN THE FIRST PROVISO WAS INTRODUCED. IT IS TRUE THAT PAR LIAMENT HAS EXPLICITLY STATED THAT THE FINANCE ACT, 2003, WILL OPERATE WITH EFFECT FROM APRIL 1, 2004. HOWEVER, THE MATTER BEFORE US INVOLVES THE PRINCIPLE OF CONSTRUCTION TO BE PLACED ON THE PROVISIONS OF THE FINANCE ACT, 2003. 30 . SO BY KEEPING IN VIE W THE RATIO LAID DOWN IN THE AFORESAID REFERRED TO JUDGMENTS , WE DO NOT SEE ANY MERIT IN THIS GROUND OF THE DEPARTMENTAL APPEAL. 19 31 IN THE RESULT, APPEAL OF THE DEPARTMENT IS DISMISSED. ( ORDER PRONOUNCED IN THE COURT ON 01 ST OCTOBER , 201 4) . S D/ - SD/ - ( HARI OM MARATHA ) (N.K.SAINI) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 01 ST OCTOBER , 201 4 . VR/ - COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE LD. CIT 4. THE CIT(A) 5. THE D.R SR. PRIVATE SECRETARY , ITAT, JODHPUR .