PATEL INTEGRATED LOGISTICS LTD, MUMBAI V. ADDL CIT 9(2), MUMBAI

ITA 428/MUM/2010

• Counselvise Citation: 42819914 RSA 2010
• Duration Of Justice: 1 year(s) 3 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-04-2011
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: C
• Next Hearing Date: 11-04-2011
• Assessment Year: 2006-2007
• Appeal Filed On: 18-01-2010
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: O P SHARMA
• Assessee Lawyers: Y P TRIVEDI
• Keywords: Rule 8D; Set aside
• Section: 43B; 14A

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH, MUMBAI BEFORE SHRI R.S.PADVEKAR (JM) AND SHRI RAJENDRA SI NGH(AM) ITA NO.428/M/2010 ASSESSMENT YEAR 2006-07 M/S. PATEL INTEGRATED LOGISTICS LTD. THE ADDL.CIT 9(2), AAYAKAR BHAVAN NATASHA, 52 HILL ROAD, M.K.MARG, MUMBAI 400 020. BANDRA (W), MUMBAI-400 050. PAN : AAACP6445K APPELLANT RESPONDENT ASSESSEE BY : SHRI Y.P.TRIVEDI & MS USH A DALAL REVENUE BY : SHRI O.P. SHARMA O R D E R PER RAJENDRA SINGH (AM) THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST TH E ORDER DATED 26.11.2009 OF CIT(A) FOR THE ASSESSMENT YEAR 2006-0 7. THE ASSESSEE IN THIS APPEAL HAS RAISED DISPUTES ON FOUR DIFFERENT GROUND S. 2. THE FIRST DISPUTE IS REGARDING ADDITION MADE OF RS.17,70,500/- ON ACCOUNT OF DISALLOWANCE OF EXPENDITURE UNDER SECTIO N 14A OF THE INCOME-TAX ACT. THE AO NOTED THAT THE ASSESSEE HAD RECEIVED DI VIDEND INCOME OF RS.4,76,356/- WHICH HAD BEEN CLAIMED AS EXEMPT UNDE R SECTION 10(34). HE THEREFORE DISALLOWED THE EXPENSES RELATABLE TO THE DIVIDEND INCOME WHICH WAS CALCULATED BY HIM UNDER THE PROVISIONS OF RULE 8D A T RS.17,70,500/- SINCE THE ASSESSEE HAD ALREADY DISALLOWED A SUM OF RS.93,987/ - ON THIS ACCOUNT, THE AO 2 MADE ADDITION OF RS.16,76,513/-. (17,70,500 -93987) . IN APPEAL CIT(A) OBSERVED THAT THE AO HAD MADE DISALLOWANCE BOTH IN RESPECT OF INTEREST AND OTHER EXPENSES FOLLOWING RULE 8D WHICH WAS JUSTIFIE D. THE ASSESSEE HOWEVER CLAIMED THAT IT HAD PAID INTEREST OF RS.39,70,465/ - ON BANK LOANS TAKEN FOR PURCHASES OF TRUCKS AND VEHICLES AND BILL DISCOUNTI NG CHARGES OF RS.60,76,971/- PAID TO BANK OF BAHRAIN FOR DISCOUNTING THE LC OF J ET AIRWAYS LTD WHICH DID NOT QUALIFY FOR DEDUCTION. CIT(A) THEREFORE DIRECTED TH E AO TO EXAMINE THE SAID ASPECT AND IN CASE IT WAS FOUND TO BE TRUE THE DISA LLOWANCE OF INTEREST TO THAT EXTENT COULD NOT BE MADE. AGGRIEVED BY THE SAID DEC ISION OF CIT(A), THE ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL. 2.1 WE HAVE HEARD BOTH THE PARTIES, PERUSED THE REC ORDS AND CONSIDERED THE MATTER CAREFULLY. THE DISPUTE IS REGARDING DISALLOW ANCE OF INTEREST AND OTHER EXPENSES IN RELATION TO THE DIVIDEND INCOME WHICH W AS EXEMPT FROM TAX. THE AUTHORITIES BELOW HAVE COMPUTED THE DISALLOWANCE AS PER 8D. HOWEVER HONBLE HIGH COURT OF MUMBAI IN CASE OF GODREJ & BOYCE MANU FACTURING CO. (328 ITR 81) HAVE HELD THAT RULE 8D WOULD APPLY ONLY FROM AS SESSMENT YEAR 2008-09 AND THAT FOR THE PRIOR YEARS, DISALLOWANCE OF EXPEN SES BOTH DIRECT AND INDIRECT HAS TO BE MADE ON REASONABLE BASIS AFTER ALLOWING O PPORTUNITY OF HEARING TO THE ASSESSEE. THE SAID JUDGMENT WAS NOT AVAILABLE AT TH E TIME OF PASSING THE ORDER BY THE AUTHORITIES BELOW. WE THEREFORE SET ASIDE TH E ORDER OF THE CIT(A) ON THIS POINT AND RESTORE THE ISSUE TO THE FILE OF AO FOR P ASSING A FRESH ORDER AFTER NECESSARY EXAMINATION IN THE LIGHT OF JUDGMENT OF H ONBLE HIGH COURT OF MUMBAI (SUPRA) AND AFTER ALLOWING OPPORTUNITY OF HE ARING TO THE ASSESSEE. 3. THE SECOND DISPUTE IS REGARDING DISALLOWANCE OF RS.6 LACS MADE BY THE AO OUT OF EXPENSES AGGREGATING TO RS.9,83,47,361/- CLAIMED AS SUNDRY AIRPORT 3 EXPENSES, MISCELLANEOUS OPERATING EXPENSES, REPAIRS AND MAINTENANCE EXPENSES AND SUNDRY EXPENSES. THE AO VERIFIED THE B ILLS AND VOUCHERS RELATING TO THE ABOVE EXPENSES AND FOUND THAT SOME OF THE EX PENSES WERE NOT SUPPORTED BY PROPER VOUCHERS OR WERE SUPPORTED BY O NLY SELF MADE VOUCHERS AND NO THIRD PARTY CONFIRMATIONS HAVE BEEN FILED. H E THEREFORE DISALLOWED A SUM OF RS.2 LACS OUT OF MISCELLANEOUS OPERATING EXPENSE S OF RS.3,25,33,983/-; RS.2 LAC OUT OF REPAIRS AND MAINTENANCE EXPENSES OF RS.2 ,98,04,676/- AND RS.1 LAC OUT OF SUNDRY EXPENSES OF RS.2,31,42,883/-. IN APPE AL ASSESSEE SUBMITTED THAT THE AO HAD NOT POINTED OUT ANY SPECIFIC ITEMS OF EX PENSES WHICH HE COULD CONSIDER HAVING NOT SPENT FOR THE PURPOSE OF BUSINE SS AND IN THE ABSENCE OF ANY PRECISE FINDING, HE WAS NOT EMPOWERED TO MAKE A DHOC DISALLOWANCE. CIT(A) HOWEVER OBSERVED THAT THE ASSESSEE PRODUCED NO MATERIAL BEFORE HIM TO COUNTER THE FINDING OF AO THAT SOME OF THE EXPENSES WERE NOT SUPPORTED BY BILLS OR WERE SUPPORTED BY ONLY SELF MADE VOUCHERS. THE ESTIMATED DISALLOWANCE WAS THEREFORE JUSTIFIED. CIT(A) ALSO OBSERVED THAT THE ASSESSEE HAD NOT RAISED ANY OBJECTION IN RELATION TO THE QUANTUM OF DISALLO WANCE. HE THEREFORE CONFIRMED THE DISALLOWANCE MADE BY THE AO AGGRIEVED BY WHICH THE ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL. 3.1 WE HAVE HEARD BOTH THE PARTIES IN THE MATTER. T HE LEARNED AR FOR THE ASSESSEE REITERATED THE SUBMISSIONS MADE BEFORE AUT HORITIES BELOW WHEREAS THE LEARNED DR PLACED RELIANCE ON THE ORDER OF CIT(A). THE DISPUTE IS REGARDING ESTIMATED DISALLOWANCE OUT OF VARIOUS EXPENSES MENT IONED EARLIER ON THE GROUND THAT THE EXPENSES WERE NOT FULLY SUPPORTED B Y BILLS AND VOUCHERS OR SOME OF THE EXPENSES WERE SUPPORTED ONLY BY SELF MA DE VOUCHERS. THESE FINDINGS OF THE AO WERE NOT CONTRAVERTED EITHER BEF ORE CIT(A) BY PRODUCING NECESSARY EVIDENCE OR BEFORE US. THEREFORE IN THE A BSENCE OF PROPER BILLS AND 4 VOUCHERS ESTIMATED DISALLOWANCE IS JUSTIFIED. AO HA S MADE DISALLOWANCE OF ONLY RS.6 LACS OUT OF TOTAL EXPENSES OF RS.9.83 CRORES W HICH COMES TO LESS THAN 1%. THE ASSESSEE HAD NOT DISPUTED THE QUANTUM OF DISALL OWANCE BEFORE CIT(A). IN OUR VIEW ON THE FACTS OF THE CASE THE ESTIMATED DIS ALLOWANCE IS REASONABLE AND THE ORDER OF CIT(A) IS ACCORDINGLY UPHELD. 4. THE THIRD DISPUTE IS REGARDING DISALLOWANCE OF R S.8,76,728/- MADE BY THE AO UNDER SECTION 43B(F) TOWARDS THE PROVISIONS FOR LEAVE ENCASHMENT. AO OBSERVED THAT SUCH EXPENSES COULD BE ALLOWED ONLY O N PAYMENT BASIS UNDER SECTION 43B(F). SINCE THE ASSESSEE HAD NOT MADE THE PAYMENT, THE AO DISALLOWED THE CLAIM. IN APPEAL THE ASSESSEE SUBMIT TED THAT PROVISIONS OF SECTION 43B(F) HAD BEEN STRUCK DOWN BY HONBLE KOLK ATA HIGH COURT IN CASE OF EXCIDE INDUSTRIES LTD. VS UNION OF INDIA (292 ITR 4 70) AND THEREFORE NO DISALLOWANCE COULD BE MADE. CIT(A) HOWEVER OBSERVED THAT THE JUDGMENT OF HONBLE HIGH COURT OF KOLKATA HAD BEEN STAYED BY TH E HONBLE SUPREME COURT IN APPEAL FILED BY THE REVENUE. THE PROVISIONS WER E THEREFORE IN FORCE AND THE DISALLOWANCE HAD TO BE MADE. ACCORDINGLY CIT(A) CON FIRMED THE DISALLOWANCE AGGRIEVED BY WHICH THE ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL. 4.1 WE HAVE HEARD BOTH THE PARTIES. THE LEARNED AR FOR THE ASSESSEE REITERATED THE SUBMISSIONS MADE BEFORE LOWER AUTHOR ITIES WHEREAS THE LEARNED DR PLACED RELIANCE ON THE ORDER OF CIT(A). WE HAVE CONSIDERED THE MATTER CAREFULLY. THE ADDITION HAS BEEN MADE ON ACCOUNT OF DISALLOWANCE OF CLAIMS OF LEAVE ENCASHMENT ETC. WHICH UNDER THE PROVISIONS OF SECTION 43B(F) CAN BE ALLOWED ONLY ON PAYMENT BASIS. THOUGH THE HONBLE H IGH COURT OF KOLKATA IN CASE OF EXCIDE INDUSTRIES LTD. VS UNION OF INDIA (S UPRA) HAD STRUCK DOWN THE PROVISIONS OF SECTION 43B(F) BUT THE SAID JUDGMENT HAS BEEN STAYED BY THE APEX 5 COURT AS POINTED OUT BY CIT(A). THE LEARNED AR HAS NOT PLACED BEFORE US ANY MATERIAL TO SHOW THAT THE PROVISIONS OF SECTION 43B (F) HAVE BEEN FINALLY STRUCK DOWN AS ULTRA VIRUS. WE THEREFORE SEE NO INFIRMITY IN THE ORDER OF CIT(A) IN CONFIRMING THE DISALLOWANCE AND THE SAME IS THEREFO RE UPHELD. 5. THE FOURTH DISPUTE IS REGARDING DISALLOWANCE OF RS.30,142/- UNDER SECTION 43B OF THE INCOME-TAX ACT BEING THE AMOUNT PAID ON ACCOUNT OF PF & ESIC IN RESPECT OF EMPLOYEES CONTRIBUTION. THE AO NOTED THAT THE ASSESSEE HAD MADE THE PAYMENT IN RESPECT OF EMPLOYEES CONTRIBUT ION TO ESIC AMOUNTING TO RS.35,408/- AFTER THE DUE DATE. HE THEREFORE DISALL OWED THE CLAIM. IN APPEAL CIT(A) NOTED THAT PART OF THE PAYMENT HAD BEEN MADE WITHIN THE GRACE PERIOD ALLOWED UNDER THE RELEVANT STATUTE. HE THEREFORE AL LOWED THE PAYMENTS WHICH WERE MADE WITHIN THE GRACE PERIOD AND RESTRICTED TH E DISALLOWANCE ONLY TO THE TUNE OF RS.30,142/-. AGGRIEVED BY THE SAID DECISIO N THE ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL. 5.1 BEFORE US THE LEARNED AR FOR THE ASSESSEE SUBM ITTED THAT EMPLOYEES CONTRIBUTION TO ESIC HAD BEEN DEPOSITED BEFORE THE DUE DATE OF FILING THE RETURN OF INCOME AND THEREFORE THE SAME HAS TO BE ALLOWED IN VIEW OF THE AMENDED PROVISIONS. RELIANCE WAS PLACED ON THE JUDGMENT OF HONBLE SUPREME COURT IN CASE OF ALOM EXTRUSIONS LTD. (319 ITR 306). THE LEA RNED DR PLACED RELIANCE ON THE ORDER OF CIT(A). 6 5.2 WE HAVE PERUSED THE RECORDS AND CONSIDERED THE MATTER CAREFULLY. THE DISPUTE IS REGARDING ALLOWABILITY OF DEDUCTION ON A CCOUNT OF EMPLOYEES CONTRIBUTION TO ESIC. THE HONBLE SUPREME COURT IN CASE OF ALOM EXTRUSIONS LTD. (SUPRA) HAVE HELD THAT CONTRIBUTIONS TO PF/ESI C HAVE TO BE ALLOWED AS DEDUCTION IN CASE OF THEY ARE PAID BEFORE THE DUE D ATE OF FILING THE RETURN OF INCOME. THE VARIOUS MUMBAI BENCHES OF TRIBUNAL FOLL OWING THE SAID JUDGMENT HAVE BEEN TAKEN A VIEW THAT EMPLOYEES CONTRIBUTION TO PF/ESIC IF MADE BEFORE THE DUE DATE OF FILING THE RETURN OF INCOME HAS TO BE ALLOWED AS DEDUCTION. IN THIS CASE THERE IS NO DISPUTE THAT THE PAYMENTS HAD BEEN MADE BEFORE THE DUE DATE OF FILING THE RETURN OF INCOME. WE THEREFORE S ET ASIDE THE ORDER OF CIT(A) AND ALLOWED THE CLAIM OF THE ASSESSEE. 6 IN THE RESULT APPEAL OF THE ASSESSEE IS ALLOWED P ARTLY. 7. ORDER WAS PRONOUNCED IN THE OPEN COURT 27 .04.20 11. SD/- SD/- ( R.S. PADVEKAR ) (RAJEND RA SINGH) JUDICIAL MEMBER ACCOUNTANT MEMBER DATE : 27.04.2011 AT :MUMBAI COPY TO : 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A), MUMBAI CONCERNED 4. THE CIT, MUMBAI CITY CONCERNED 5. THE DR C BENCH, ITAT, MUMBAI // TRUE COPY// BY ORDER ASSISTANT REGISTRAR ITAT, MUMBAI BENCHES, MUMBAI ALK