DCIT, New Delhi V. M/s Page Point Service (India) Pvt. Ltd., New Delhi

ITA 3987/DEL/2013

• Counselvise Citation: [2017] 130 COUNSELVISE.COM (IT) 6508 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 8 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-03-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: F
• Next Hearing Date: 06-03-2017
• Assessment Year: 2005-2006
• Appeal Filed On: 26-06-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: PRAMITA TRIPATHI
• Assessee Lawyers: SUDEEP VIJAYAN
• Keywords: Search and seizure; Earning of tax free income; Proportionate interest; Question of law
• Section: 143(3); 142(1); 133A; 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH F : NEW DELHI) BEFORE SHRI KULDIP SINGH, JUDICIAL MEMBER AND SHRI ANADEE NATH MISSHRA, ACCOUNTANT MEMBER ITA NO.3985/DEL./2013 (ASSESSMENT YEAR : 2003-04) ITA NO.3987/DEL./2013 (ASSESSMENT YEAR : 2005-06) DCIT, CENTRAL CIRCLE 1, VS. M/S. PAGE POINT SERVICE (INDIA) PVT.LTD., NEW DELHI. 1501, 15 TH FLOOR, HEMKUNTH TOWER, 89, NEHRU PLACE, NEW DELHI. (PAN : AABCP9794Q) (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI SUDEEP VIJAYAN, ADVOCATE REVENUE BY : SMT. PRAMITA TRIPATHI, CIT DR DATE OF HEARING : 06.03.2017 DATE OF ORDER : 09.03.2017 O R D E R PER BENCH : SINCE COMMON QUESTIONS OF FACTS AND LAW HAVE BEEN R AISED IN BOTH THE AFORESAID APPEALS, THE SAME ARE BEING D ISPOSED OFF BY WAY OF CONSOLIDATED ORDER TO AVOID REPETITION OF DI SCUSSION. 2. THE APPELLANT, DEPUTY COMMISSIONER OF INCOME-TAX , CENTRAL CIRCLE 1, NEW DELHI (HEREINAFTER REFERRED T O AS THE REVENUE) BY FILING THE AFORESAID APPEALS SOUGHT TO SET ASIDE THE ITA NOS.3985 & 3987/DEL./2013 2 ORDER DATED 08.04.2013 PASSED BY THE COMMISSIONER O F INCOME-TAX (APPEALS)-III, NEW DELHI QUA THE ASSESSMENT YEARS 2 003-04 & 2005-06 ON THE GROUNDS INTER ALIA THAT :- ASSESSMENT YEAR 2003-04 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE, THE CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS.37,53,212/- MADE BY THE ASSESSING OFFICER ON ACCOUNT OF LATE DEPOSIT OF EMPLOYEE'S CONTRIBUTION TOWARDS PROVIDENT FUND IN VIEW OF THE PROVISIONS OF SECTION 2(24)(X) READ WITH SECTION 36(1)( VA) OF THE INCOME TAX ACT, 1961. 2. ON THE FACTS AND IN THE CIRCUMSTANCE OF THE CASE . THE CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS.1,81,159/- MADE BY THE ASSESSING OFFICER ON ACCOUNT OF LATE DEPOSIT OF EMPLOYEE'S CONTRIBUTION TOWARDS ESI IN VIEW OF THE PROVISIONS OF SECTION 2(24)(X) READ WITH SECTION 36(1)(VA) OF THE INCOME TAX ACT. 1961. 3. ON THE FACTS AND IN THE CIRCUMSTANCE OF THE CASE , THE CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS.2,36,825/- MADE BY THE ASSESSING OFFICER ON ACCOUNT OF EXPENDITURE IN LIEU OF EXEMPT INCOME AS PER PROVISIONS OF SECTION 14A, OF INCOME TAX ACT, 1961 R.W. RULE 80 OF THE INCOME TAX RULES, 1962. 4. THE ORDER OF THE CIT(A) IS ERRONEOUS AND IS NOT TENABLE ON FACTS AND IN LAW. ASSESSMENT YEAR 2005-06 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E, THE CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS.23,52,291/- MADE BY THE ASSESSING OFFICER ON ACCOUNT OF LATE DEPOSIT OF EMPLOYEE'S CONTRIBUTION TOWARDS PROVIDENT FUND IN VIEW OF THE PROVISIONS ITA NOS.3985 & 3987/DEL./2013 3 OF SECTION 2(24)(X) READ WITH SECTION 36(1)( VA) OF THE INCOME TAX ACT, 1961. 2. ON THE FACTS AND IN THE CIRCUMSTANCE OF THE CASE . THE CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS.6,13,143/- MADE BY THE ASSESSING OFFICER ON ACCOUNT OF LATE DEPOSIT OF EMPLOYEE'S CONTRIBUTION TOWARDS ESI IN VIEW OF THE PROVISIONS OF SECTION 2(24)(X) READ WITH SECTION 36(1)(VA) OF THE INCOME TAX ACT. 1961. 3. ON THE FACTS AND IN THE CIRCUMSTANCE OF THE CASE , THE CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS.2,36,825/- MADE BY THE ASSESSING OFFICER ON ACCOUNT OF EXPENDITURE IN LIEU OF EXEMPT INCOME AS PER PROVISIONS OF SECTION 14A, OF INCOME TAX ACT, 1961 R.W. RULE 80 OF THE INCOME TAX RULES, 1962. 4. THE ORDER OF THE CIT(A) IS ERRONEOUS AND IS NOT TENABLE ON FACTS AND IN LAW. 3. BRIEFLY STATED THE FACTS NECESSARY FOR ADJUDICAT ION OF THE CONTROVERSY AT HAND PERTAINING TO BOTH THE APPEALS ARE : THE ASSESSMENT FOR AYS 2003-04 AND 2005-06 OF THE ASSES SEE WAS COMPLETED U/S 143(3) AT THE LOSS OF RS.3,51,02,917/ - AND RS.11,56,925/- RESPECTIVELY. SUBSEQUENTLY, ON THE BASIS OF SEARCH AND SEIZURE OPERATION CONDUCTED ON THE HFCL GROUP O F CASES ON 10.05.2007 AND AT THE TIME OF CARRYING OUT THE SURV EY U/S 133A AT THE BUSINESS PREMISES OF ASSESSEE COMPANY, CERTAIN DOCUMENTS WERE FOUND AND SEIZED AND CONSEQUENTLY PROCEEDINGS U/S 153C WERE INITIATED. IN RESPONSE TO THE NOTICES U/S 14 3(2) AND 142(1) OF THE ACT, ASSESSEE FURNISHED VARIOUS DETAILS. ITA NOS.3985 & 3987/DEL./2013 4 4. AO NOTICED DURING ASSESSMENT PROCEEDINGS THAT TH E ASSESSEE HAS NOT DISCHARGED ITS LIABILITY SPECIFIED U/S 2(24 )(10) OF THE ACT REGARDING PAYMENT OF PROVIDENT FUND AND EMPLOYEES S TATE INSURANCE (ESI) WITHIN SPECIFIED DATE AND THERE IS A DELAY IN THE PAYMENT OF CONTRIBUTION TOWARDS PF FOR MANY MONTHS. SINCE THE ASSESSEE FAILED TO DEPOSIT THE PF WITHIN A STIPULAT ED PERIOD, THE AMOUNT OF RS.37,53,212/- FOR AY 2003-04 AND RS.23, 52,291/- FOR AY 2005-06 IS TREATED AS INCOME OF THE ASSESSEE AND AS SUCH, WAS NOT ALLOWED DEDUCTION U/S 36(1)(V)(A) AND THEREBY M ADE ADDITION THEREOF TO THE INCOME OF THE ASSESSEE. 5. AO ALSO NOTICED THAT DELAY IN PAYMENT OF ESIC AN D TREATED THE SAME AS INCOME OF THE ASSESSEE TO THE TUNE OF R S.1,81,159/- FOR AY 2003-04 AND RS.6,13,143/- FOR AY 2005-06 U/S 36( 1)(V)(A) OF THE ACT AND MADE ADDITION THEREOF. 6. AO ALSO NOTICED THAT THE ASSESSEE PURCHASED OPTI ONALLY FULLY CONVERTIBLE DEBENTURES OF RS.100 EACH OF MS. MICROW AVE COMMUNICATIONS LTD. FOR A SUM OF RS.4,73,65,000/- D URING AY 2003-04 AND RS.4,73,65,000/- FOR AY 2005-06 AND THE ASSESSEE WAS CALLED UPON TO EXPLAIN AS TO WHY THE PROPORTION ATE INTEREST EARNED WAS NOT ALLOWED U/S 14A OF THE ACT. FINDING THE EXPLANATION MADE BY THE ASSESSEE NOT TENABLE, AO BY INVOKING THE PROVISIONS CONTAINED UNDER RULE 8D OF THE INCOME-TA X RULES, 1962 ITA NOS.3985 & 3987/DEL./2013 5 (FOR SHORT THE RULES) MADE AN ADDITION OF RS.2,36 ,825/- FOR AY 2003-04 AND RS.2,36,825/- FOR AY 2005-06 AND THEREB Y ASSESSED THE LOSS AT RS.3,09,31,721/- AND RS.20,45,334/- FOR AY 2003-04 AND 2005-06 RESPECTIVELY. 7. ASSESSEE CARRIED THE MATTER BEFORE THE LD. CIT ( A) WHO HAS ALLOWED THE APPEALS. FEELING AGGRIEVED, THE ASSESS EE HAS COME UP BEFORE THE TRIBUNAL BY WAY OF FILING THE PRESENT AP PEALS. 8. WE HAVE HEARD THE LD. AUTHORIZED REPRESENTATIVES OF THE PARTIES TO THE APPEAL, GONE THROUGH THE DOCUMENTS R ELIED UPON AND ORDERS PASSED BY THE REVENUE AUTHORITIES BELOW IN T HE LIGHT OF THE FACTS AND CIRCUMSTANCES OF THE CASE. GROUNDS NO.1 & 2 9. UNDISPUTEDLY, THE ASSESSEE HAS NOT DEPOSITED EMP LOYEES CONTRIBUTION TOWARDS PROVIDENT FUND TO THE TUNE OF RS.37,53,212/- AND ESI TO THE TUNE OF RS.1,81,159/- FOR FY 2002-03 AND RS.23,52,291/- AND RS.6,13,143/- FOR FY 2004-05 ON DUE DATE OF DEPOSIT BUT DEPOSITED THE SAME BEFORE DUE DATE OF F ILING OF THE RETURN OF INCOME U/S 139(1) OF THE ACT. 10. IN THE BACKDROP OF THE AFORESAID UNDISPUTED FAC TS AND ORDERS PASSED BY THE LOWER AUTHORITIES, THE FIRST QUESTION ARISES FOR DETERMINATION IN BOTH THE APPEALS IS :- ITA NOS.3985 & 3987/DEL./2013 6 AS TO WHETHER NON-DEPOSIT OF EMPLOYEES CONTRIBUTIO N TOWARDS PROVIDENT FUND AND ESI ON DUE DATE OF DEPOS IT AS PROVIDED UNDER THE LAW BUT DEPOSITED BEFORE FILI NG THE RETURN IS ALLOWABLE EXPENDITURE? 11. ISSUE IN CONTROVERSY HAS ALREADY BEEN SET AT RE ST BY THE HONBLE JURISDICTIONAL HIGH COURT IN CASES CITED AS CIT VS. AIMIL LIMITED 321 ITR 508 (DEL.) AND CIT VS. PAMWI TISSUES LTD. 313 ITR 137 (BOM.) BY DECIDING IN FAVOUR OF THE ASSESSEE. THE RATIO OF THE JUDGMENT IN CASE OF CIT VS. AIMIL (SUPRA) IS REPRODUCED AS UNDER :- CASE NOTE : DIRECT TAXATION - DEDUCTION - CONTRIBUTION TO ESI - PRESENT APPEAL HAS BEEN FILED AGAINST ORDER WHEREBY REVENUE'S APPEAL AGAINST ORDE R DISALLOWANCE MADE BY AO WAS HELD INVALID WAS REJECT ED - WHETHER TRIBUNAL WAS CORRECT IN LAW IN DELETING ADDITION RELATING TO EMPLOYEES CONTRIBUTION TOWARDS PROVIDENT FUND AND ESI MADE BY ASSESSING OFFICER UNDER SECTION 36(1)(VA) OF ACT? - HELD, PERUSAL OF ORDER OF TRIBUNAL WOULD SHOW THAT IT HAS RELIED UPON JUDGMENT OF SUPREME COURT IN CASE OF CIT V. VINAY CEMENT LTD., TO SUPPORT ITS DECISION TO EFFECT THAT IF EMPLOYERS' AS WELL AS EMPLOYEE'S CONTRIBUTION TOWAR DS PROVIDENT FUND AND ESI IS PAID BEFORE DUE DATE OF F ILING OF RETURN, NO DISALLOWANCE CAN BE MADE BY AO - APPLYING RATIO OF DECISION OF SUPREME COURT IN CIT VS. VINAY CEMENT LTD.; DISMISSED APPEALS OF REVENUE - N O SUBSTANTIAL QUESTION OF LAW ARISES FOR OUR CONSIDER ATION IN THE PRESENT APPEAL - APPEAL IS, THUS, DISMISSED - THUS, ANSWER QUESTION IN FAVOUR OF ASSESSEE AND AGAINST REVENUE - AS A CONSEQUENCE, APPEALS FILED BY ASSESS EES STAND ALLOWED AND THOSE FILED BY REVENUE ARE DISMISSED. ITA NOS.3985 & 3987/DEL./2013 7 12. FOLLOWING THE DECISION RENDERED BY HONBLE JURI SDICTIONAL HIGH COURT IN CASE CITED AS CIT VS. AIMIL (SUPRA), WE FIND NO ILLEGALITY OR PERVERSITY IN THE FINDINGS RETURNED B Y LD. CIT (A) IN DELETING THE ADDITION ON ACCOUNT OF LATE DEPOSIT OF EMPLOYEES CONTRIBUTION TOWARDS PF AND ESI BUT BEFORE DUE DATE OF FILING THE RETURN. SO, GROUNDS NO.1 & 2 ARE DETERMINED AGAINS T THE REVENUE. GROUNDS NO.3 & 4 13. AO BY INVOKING THE PROVISIONS CONTAINED UNDER R ULE 8D OF THE RULES DISALLOWED THE PROPORTIONATE INTEREST U/S 14A (2) OF THE ACT ON THE PURCHASE OF OPTIONALLY FULLY CONVERTIBLE DEBENTURES OF RS.100 EACH OF M/S. MICROWAVE COMMUNICATIONS LTD. F OR RS.4,73,56,000/- FOR AY 2003-04 AND RS.4,73,56,000 /- FOR AY 2005-06. BUT THE LD. CIT (A) DELETED THE DISALLOWA NCE MADE BY THE AO U/S 14A(2) OF THE ACT. 14. LD. AR FOR THE ASSESSEE CONTENDED THAT SINCE TH E ASSESSEE HAS NOT INCURRED ANY EXPENDITURE TO EARN THE EXEMPT INC OME, THE INTEREST ON DEBENTURES IS FULLY TAXABLE UNDER THE A CT AND AS SUCH PROVISIONS CONTAINED U/S 14A (2) OF THE ACT ARE NOT APPLICABLE QUA INVESTMENT MADE IN THE OPTIONALLY FULLY CONVERTIBLE DEBENTURES. THE CONTENTION MADE BY THE LD. AR IS TENABLE FOR TH E REASON THAT WHEN INTEREST RECEIVABLE ON DEBENTURES DOES NOT FAL L IN THE CATEGORY OF EXEMPT INCOME, NO ADDITION ON ACCOUNT OF DISALLO WANCE OF ITA NOS.3985 & 3987/DEL./2013 8 INTEREST AS CLAIMED U/S 36(1)(III) OF THE ACT CAN B E MADE. SO, AGAIN, WE FIND NO ILLEGALITY OR PERVERSITY IN DELETING THE ADDITION MADE BY THE AO ON ACCOUNT OF DISALLOWANCE OF INTEREST CLAIM ED U/S 36(1)(III) OF THE ACT BY THE CIT (A). SO, GROUNDS NO.3 & 4 ARE DETERMINED AGAINST THE REVENUE. 15. IN VIEW OF WHAT HAS BEEN DISCUSSED ABOVE, BOTH THE APPEALS FILED BY THE REVENUE ARE HEREBY DISMISSED. ORDER PRONOUNCED IN OPEN COURT ON THIS 9 TH DAY OF MARCH, 2017. SD/- SD/- (ANADEE NATH MISSHRA) (KULDIP SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED THE 9 TH DAY OF MARCH, 2017 TS COPY FORWARDED TO: 1.APPELLANT 2.RESPONDENT 3.CIT 4.CIT (A)-III, NEW DELHI. 5.CIT(ITAT), NEW DELHI. AR, ITAT NEW DELHI.