M/s. TOPIAM PROPERTIES P. LTD., MUMBAI V. ITO Wd. - 8(3)- 3, MUMBAI

ITA 4109/MUM/2008

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 7440 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 9 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-03-2010
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: J
• Next Hearing Date: 09-03-2010
• Assessment Year: 2005-2006
• Appeal Filed On: 09-06-2008
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: N K BHALODIA
• Assessee Lawyers: REEPAL TRALSHAWALA
• Keywords: Commercial expediency; Set aside
• Section: 43B

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH J MUMBAI BEFORE SHRI PRAMOD KUMAR, AM & SMT. P.MADHAVI DEVI, JM I.T.A.NO.4109/MUM/2008 - A.Y 2005-06 M/S TOPIAM PROPERTIES P.LTD., C/O. AHUJA CONSTRUCTION, RAJPIPLA, GR.FLOOR, OPP. STANDARD CHARTERED BANK, LINKING ROAD, SANTACRUZ [W] MUMBAI PAN NO.AAACT 3722 B VS. INCOME TAX OFFICER, WARD 8(3)-3, MUMBAI (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI REEPAL TRALSHAWALA. REVENUE BY : SHRI N.K.BHALODIA. O R D E R PER P.MADHAVI DEVI, JM: THIS APPEAL OF THE ASSESSEE IS DIRECTED AGAINST CI T(A)S ORDER DATED 26/03/2008. 2. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL- A) DISALLOWANCE OF PF 2,66,980/- 1. THE LEARNED CIT[A] ERRED IN CONFIRMING DISALLOWANCE IN RESPECT OF EMPLOYEES AND EMPLOYERS CONTRIBUTION TOW ARDS P.F. BY APPLYING THE PROVISIONS OF SECTION43B OF TH E ACT, WITHOUT APPRECIATING THE FACT THAT PART OF THE PAYM ENTS WERE MADE WITHIN THE FINANCIAL YEAR AND BALANCE PAYMENTS WITHIN THE DUE DATE OF FILING THE RETURN OF INCOME AND HEN CE, THE DISALLOWANCE MADE U/S.43B OF THE ACT IS UNJUSTIFIE D AND MAY BE DELETED. 2. THE LEARNED CIT[A] FAILED TO APPRECIATE THAT THE AMENDMENT BROUGHT OUT IN SECTION 43B BY OMITTING THE SECOND P ROVISO TO SECTION 43B(1) WAS RETROSPECTIVE IN NATURE AND HENC E, THE PAYMENTS MADE BEFORE THE DUE DATE OF FILING THE RET URN OF INCOME TOWARDS THE P.F. CONTRIBUTIONS WAS ALLOWABLE DEDUCTION AND HENCE, THE DISALLOWANCE MADE U/S.43B IS UNJUST IFIED AND MAY BE DELETED. 2 B) DISALLOWANCE OUT OF INTEREST RS.18,34,717 /- 3. THE LEARNED CIT[A] ERRED IN CONFIRMING DISALLOWANCE OF RS.18,34,717/- OUT OF INTEREST EXPENSES OF RS.68,62 ,758/- WITHOUT APPRECIATING THE FACT THAT THE BORROWED FUN DS WERE UTILIZED FOR THE PURPOSE OF BUSINESS OF THE APPELLA NT AND THAT THE ENTIRE FLOW OF FUNDS FOR UTILIZATION OF BORROWE D FUNDS WERE FURNISHED AND HENCE, THE DISALLOWANCE OF PROPORTIO NATE INTEREST AMOUNTING TO RS.18,34,717/- I S UNJUSTIFIED AND MAY BE DELETED. 4. THE LEARNED CIT[A] FAILED TO APPRECIATE THAT THERE WAS NO INTEREST FREE ADVANCES GIVEN OUT OF THE LOANS BORRO WED AND THAT THE RELIANCE PLACED ON EARLIER YEAR ORDER FOR A.Y 2003-04 WAS WITHOUT ANY JUSTIFICATION AND HENCE, THE PROPOR TIONATE DISALLOWANCE OF RS.18,34,717/- OUT OF INTEREST IS JUSTIFIED AND THE SAME MAY BE THEREFORE BE DELETED. 5. WITHOUT PREJUDICE TO THE ABOVE, THE LEARNED CIT[A] FAILED TO APPRECIATE THAT THE DISALLOWANCE OF INTEREST WAS M ADE BY AO ON ESTIMATED BASIS OUT OF INTEREST EXPENSES AMOUNTI NG TO RS.18,34,717/- IS UNJUSTIFIED AND LIABLE TO BE DELE TED. 3. AS REGARDS GROUND NO. A, AT THE TIME OF HEARING BOTH THE PARTIES AGREED THAT THIS ISSUE IS COVERED BY THE DE CISION OF THE APEX COURT IN THE CASE OF CIT VS. ALOM EXERCUSION LTD. R EPORTED IN 319 ITR 306. IT IS ALSO NOTICED THAT THE HON'BLE DELHI HIGH COURT IN THE CASE OF CIT VS. AIMIL LTD., REPORTED IN 2010 TIOL-125-S.C-D EL-IT HAS ALSO HELD THAT THE TRIBUNAL WAS CORRECT IN DELETING THE ADDIT ION MADE BY THE AO ON THE GROUND THAT THE ASSESSEE HAD DEPOSITED EMPLO YERS AS WELL AS EMPLOYEES CONTRIBUTIONS TOWARDS PF/ESI AFTER THE DU E DATE AS PRESCRIBED UNDER THE RELEVANT ACT/RULES BUT BEFORE THE DATE OF FILING THE RETURN. RESPECTFULLY FOLLOWING THE SAME, THIS G ROUND OF APPEAL OF THE ASSESSEE IS ALLOWED. 4. AS REGARDS GROUND (B), BRIEF FACTS ARE THAT DURI NG THE ASSESSMENT PROCEEDINGS, AO OBSERVED THAT THE ASSESS EE HAS INCURRED 3 FINANCIAL EXPENSES OF RS.69.56 LAKHS DURING THE YEA R, OUT OF WHICH RS.68,62,758/- WAS TOWARDS INTEREST ON TERM LOAN AN D OTHER LOANS FROM BANKS. AO FURTHER OBSERVED THAT ASSESSEE HAS ALSO M ADE INTEREST FREE LOANS AND ADVANCES TO SISTER OR ASSOCIATE CONCERNS/ FIRMS, DIRECTORS OR CLOSE RELATIVES. THEREFORE, HE CAME TO THE CONCLUSI ON THAT THE ASSESSEE HAS DIVERTED ITS INTEREST BEARING FUNDS FOR MAKING THE INTEREST FREE ADVANCES. HE, ACCORDINGLY, DISALLOWED THE PROPORTIO NATE INTEREST BY FOLLOWING THE ORDER OF HIS PREDECESSOR IN THE ASSES SEES OWN CASE FOR A.Y 2003-04. 5. AGGRIEVED, ASSESSEE FILED AN APPEAL BEFORE THE C IT[A] WHO CONFIRMED THE ORDER OF THE AO BY FOLLOWING THE ORDE R OF HIS PREDECESSOR FOR A.Y 2003-04. AGGRIEVED, ASSESSEE IS IN APPEAL BEFORE US. 6. AT THE TIME OF HEARING, THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ISSUE OF DISALLOWANCE OF INTERES T IN THE ASSESSEES OWN CASE FOR THE A.Y 2003-04 HAD COME UP BEFORE E BENCH OF THE TRIBUNAL IN I.T.A.NO.1087/M/07 AND THE TRIBUNAL HAS SET ASIDE THE MATTER TO THE FILE OF THE AO WITH A DIRECTION TO VE RIFY THE RELEVANT FACTS AND DECIDE THE ISSUE KEEPING IN MIND GUIDELINES LAI D DOWN BY THE TRIBUNAL IN THE CASE OF H.P.SHAH & CO. IN I.T.A.NO. 3694/M/06 DATED 15-1-09 AND ALSO CONSIDERING THE ALTERNATE CONTENTI ON OF THE ASSESSEE REGARDING COMMERCIAL EXPEDIENCY. 7. HAVING HEARD BOTH THE PARTIES, WE FIND THAT BOT H THE AO AS WELL AS THE CIT[A] HAVE RELIED UPON THE ASSESSMENT ORDE R AND THE 4 APPELLATE ORDER IN THE ASSESSEES OWN CASE FOR THE A.Y 2003-04 AND, THEREFORE, RESPECTFULLY FOLLOWING THE DECISION OF T HE CO-ORDINATE BENCH FOR A.Y 2003-04, THIS ISSUE IS ALSO SET ASIDE TO TH E FILE OF THE AO WITH SIMILAR DIRECTIONS. NEEDLESS TO MENTION THAT THE AS SESSEE SHALL BE GIVEN A FAIR OPPORTUNITY OF HEARING. THIS GROUND IS ALLOW ED FOR STATISTICAL PURPOSE. 8. IN THE RESULT, ASSESSEES APPEAL IS ALLOWED. ORDER PRONOUNCED ON THIS 17TH DAY OF MARCH, 2010. SD/- SD/- (PRAMOD KUMAR) (P.MADHAVI DEVI) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI:17 TH MARCH, 2010. P/-*