ACIT, New Delhi V. M/s. VRV Foods Ltd., Noida

ITA 4456/DEL/2016

• Counselvise Citation: [2019] 112 COUNSELVISE.COM (IT) 0797 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 3 month(s) 30 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-12-2019
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: G
• Assessment Year: 2011-2012
• Appeal Filed On: 17-08-2016
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: S S RANA
• Keywords: Unexplained cash credit; Opportunity of being heard; Principle of natural justice; Earning of tax free income; Additional evidence; Non-deduction of tax; TDS; Rule 8D; Set aside
• Section: 14A; 115JB; 40(a)(ia); 133(6); 13

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH G : NEW DELHI) BEFORE SHRI R.K. PANDA, ACCOUNTANT MEMBER AND SHRI KULDIP SINGH, JUDICIAL MEMBER ITA NO.6639/DEL./2014 (ASSESSMENT YEAR : 2010-11) ITA NO.4121/DEL./2016 (ASSESSMENT YEAR : 2011-12) M/S. VRV FOODS LTD., VS. DCIT, CIRCLE 17 (1), F 32/3, FIRST FLOOR, NEW DELHI. OKHLA INDUSTRIAL AREA PHASE II, NEW DELHI 110 020. (PAN : AAACV0448E) ITA NO.4456/DEL./2016 (ASSESSMENT YEAR : 2011-12) DCIT, CIRCLE 17 (1), VS. M/S. VRV FOODS LTD., NEW DELHI. F 32/3, FIRST FLOOR, OKHLA INDUSTRIAL AREA PHASE II, NEW DELHI 110 020. (PAN : AAACV0448E) (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI MUKESH AGGARWAL, FCA REVENUE BY : SHRI S.S. RANA, CIT DR DATE OF HEARING : 05.12.2019 DATE OF ORDER : 16.12.2019 O R D E R PER KULDIP SINGH, JUDICIAL MEMBER : SINCE COMMON QUESTIONS OF FACTS AND LAW HAVE BEEN R AISED IN ALL THE AFORESAID APPEALS FOR ASSESSMENT YEARS 2 010-11 AND ITA NO.6639/DEL./2014 ITA NO.4121/DEL./2016 ITA NO.4456/DEL./2016 2 2011-12 (CROSS APPEALS), THE SAME ARE BEING DISPOSE D OFF BY WAY OF COMPOSITE ORDER TO AVOID REPETITION OF DISCUSSION. 2. APPELLANT, M/S. VRV FOODS LIMITED (HEREINAFTER R EFERRED TO AS THE ASSESSEE) BY FILING THE PRESENT APPEALS SO UGHT TO SET ASIDE THE IMPUGNED ORDERS DATED 15.10.2014 & 30.05.2016 P ASSED BY COMMISSIONER OF INCOME-TAX (APPEALS) 19, NEW DELH I & COMMISSIONER OF INCOME-TAX (APPEALS) 9, NEW DELHI QUA THE ASSESSMENT YEARS 2010-11 & 2011-12 ON THE GROUNDS I NTER ALIA THAT:- AY 2010-11 . 1. THE LOWER AUTHORITIES HAVE ERRED AND WERE NOT JU STIFIED IN PASSING THE IMPUGNED RESPECTIVE ORDERS IN HASTE AND ARBITRARILY, IN TOTAL DISREGARD TO THE PRINCIPLES O F NATURAL JUSTICE ON THE GROUND THAT THE EVIDENCES/ DOCUMENT/ DETAILS FURNISHED DURING THE COURSE OF ASSESSMENT WERE PLAINLY BRUSHE D ASIDE WITHOUT ANY COGENT REASON OR CONFRONTING THE APPELL ANT WITH THE NATURE OF DISCREPANCY IF THOSE WERE FOUND TO BE NOT TENABLE/ ACCEPTABLE: 2. ON THAT FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, LOWER AUTHORITIES HAVE ERRED AND WERE NOT JUSTIFIED IN MAKING AN ADDITION OF RS 65,7311- U/S 14A OF THE INCOME TAX A CT READ WITH RULE 80 AS AGAINST THE EXEMPT INCOME OF RS 8,000/- IN A MECHANICAL MANNER AND ON HYPOTHETICAL BASIS, WHEN T HE RULE SHOULD HAVE BEEN APPLIED ONLY IN RESPECT OF THOSE I NVESTMENTS ON WHICH EXEMPT INCOME WAS EARNED. 3. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND I N LAW, LOWER AUTHORITIES HAVE ERRED AND WERE NOT JUSTIFIED IN MAKING AN AGGREGATE ADDITION OF RS.189,55.126/- ON ACCOUNT OF VARIATIONS IN THE CONFIRMATIONS FROM CREDITORS WITHOUT CONFRONTIN G THE APPELLANT ABOUT THE DISCREPANCIES NOTICED AND IN TO TAL DISREGARD TO THE DOCUMENTS AND EXPLANATIONS SUBMITTED ON RECO RD. 4. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND I N LAW, LOWER AUTHORITIES HAVE ERRED AND WERE NOT JUSTIFIED IN MAKING A DISALLOWANCE OF RS.7,85,160/- U/S 36(1)(III) OF TH E INCOME TAX ITA NO.6639/DEL./2014 ITA NO.4121/DEL./2016 ITA NO.4456/DEL./2016 3 ACT, WITHOUT BRINGING ABOUT THE CASE OF ANY DIVERSI ON OF INTEREST BEARING FUNDS IN TOTAL DISREGARD TO THE FACT THAT N O NEW INVESTMENT WAS MADE DURING THE YEAR. 5. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND I N LAW, LOWER AUTHORITIES HAVE ERRED AND WERE NOT JUSTIFIED IN COMPUTING THE TAX DEMAND OF RS.445,550/- BY WAY OF WRONGLY CO MPUTING THE TAX LIABILITY AS WELL AS NOT ALLOWING THE COMPLETE TAX CREDIT OF ALL TCS/TDS, WHICH, ON THE CONTRARY, WERE CONSIDERED FO R THE PURPOSE OF COMPUTING TAXABLE INCOME U/S 143 (3), IN SPITE OF HAVING COMPLETE PARTICULARS AND EVIDENCES ON RECORD . AY 2011-12 1. THE LOWER AUTHORITIES HAVE ERRED AND WERE NOT J USTIFIED IN PASSING THE IMPUGNED RESPECTIVE ORDERS IN HASTE AND ARBITRARILY, IN TOTAL DISREGARD TO THE PRINCIPLES O F NATURAL JUSTICE ON THE GROUND THAT THE EVIDENCES/ DOCUMENT/ DETAILS FURNISHED DURING THE COURSE OF ASSESSMENT WERE PLAINLY BRUSHE D ASIDE WITHOUT ANY COGENT REASON OR CONFRONTING THE APPELL ANT WITH THE NATURE OF DISCREPANCY IF THOSE WERE FOUND TO BE NOT TENABLE/ ACCEPTABLE. 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, LOWER AUTHORITIES HAVE ERRED AND WERE NOT JUSTIFIED IN MAKING AN AGGREGATE ADDITION OF RS.35,10,494/- ON ACCOUNT OF NON- CONFIRMATIONS FROM CREDITORS WITHOUT CONFRONTING TH E APPELLANT ABOUT THE DISCREPANCIES NOTICED AND IN TOTAL DISREG ARD TO THE DOCUMENTS AND EXPLANATIONS SUBMITTED ON RECORD OR W ITHOUT BRINGING ANY COGENT MATERIAL ON RECORD AS TO CESSAT ION OF TRADING LIABILITY. 3. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND I N LAW, LOWER AUTHORITIES HAVE ERRED AND WERE NOT JUSTIFIED IN MAKING AN AGGREGATE ADDITION OF RS.15,19,688/- (OUT OF RS 35, 10,494/-) ON ACCOUNT OF NON-CONFIRMATIONS FROM CREDITORS, WHICH HAS RESULTED IN DOUBLE TAXATION DUE TO SIMILAR ADDITION IN PRECE DING YEARS. 4. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND I N LAW, LOWER AUTHORITIES HAVE ERRED AND WERE NOT JUSTIFIED IN MAKING A DISALLOWANCE OF RS.7,85,160/- U/S 36(1)(III) OF THE INCOME TAX ACT, WITHOUT BRINGING ABOUT THE CASE OF ANY DIVERSI ON OF INTEREST BEARING FUNDS IN TOTAL DISREGARD TO THE FACT THAT N O NEW INVESTMENT WAS MADE DURING THE YEAR. 3. APPELLANT, DCIT, CIRCLE 17 (1), NEW DELHI (HEREI NAFTER REFERRED TO AS THE REVENUE) BY FILING THE PRESENT APPEAL SOUGHT TO ITA NO.6639/DEL./2014 ITA NO.4121/DEL./2016 ITA NO.4456/DEL./2016 4 SET ASIDE THE IMPUGNED ORDER DATED 30.05.2016 PASSE D BY COMMISSIONER OF INCOME-TAX (APPEALS)9, NEW DELHI Q UA THE ASSESSMENT YEAR 2011-12 ON THE GROUNDS INTER ALIA T HAT:- 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LD.CIT(A) HAS ERRED IN DELETING THE ADDITI ON OF RS.66,578/- ON ACCOUNT OF DISALLOWANCE U/S 14A R.W. R. 8D(III). 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LD.CIT(A) ERRED IN DELETING THE ADDITION O F RS.98,688/- U/S 36(1)(VA) ON ACCOUNT OF DELAY IN EMPLOYEE'S CON TRIBUTION TO PF. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LD.CIT(A) HAS ERRED IN DELETING THE ADDITI ON OF RS.1,96,79,942/- U/S 40(A)(IA) ON DISALLOWANCE FOR NON-DEDUCTION OF TAX ON COMMISSION EXPENSES.' BRIEF FACTS OF ITA NO.6639/DEL/2014 (ASSESSMENT YEAR 2010-11 ASSESSEES APPEAL) 4. ASSESSEE COMPANY IS INTO THE BUSINESS OF MANUFAC TURING, MARKETING OF I.M.F.L. COUNTRY LIQUOR AND MARKETING OF VANASPATI/EDIBLE OIL. ASSESSING OFFICER (AO) BY IN VOKING THE PROVISIONS CONTAINED UNDER SECTION 14A OF THE INCOM E-TAX ACT, 1961 (FOR SHORT THE ACT) READ WITH RULE 8D OF TH E INCOME-TAX RULES, 1962 (FOR SHORT THE RULES) MADE ADDITION O F RS.65,731/- ON THE GROUND THAT TO EARN THE DIVIDEND INCOME, ASSESS EE HAS NOT MADE SUO MOTU DISALLOWANCE AND IN THE PREVIOUS YEAR, ASS ESSEE COMPANY ITSELF MADE A DISALLOWANCE OF RS.64,329/- U/S 14A O F THE ACT. 5. AO FURTHER MADE ADDITION OF RS.1,89,55,126/- ON ACCOUNT OF UNEXPLAINED CREDITS BY THE ASSESSEE ON THE GROUND T HAT GENUINENESS ITA NO.6639/DEL./2014 ITA NO.4121/DEL./2016 ITA NO.4456/DEL./2016 5 OF THE TRANSACTION HAS NOT BEEN PROVED AND BALANCE HAS NOT BEEN RECONCILED. AO FURTHER MADE ADDITION OF RS.7,85,16 0/- BY CALCULATING THE INTEREST ON THE AMOUNT OF RS.65.43 LAKHS @ 12% ON THE GROUND THAT ASSESSEE COMPANY UTILIZED ITS FUNDS FOR THE PURPOSE OF GIVING INTEREST FREE LOAN OF RS.65.43 LAKHS. AO COMPUTED THE TAX DEMAND OF RS.4,45,550/- AND THEREBY ASSESSED TH E BOOK PROFIT OF RS.50,37,345/- U/S 115JB OF THE ACT. BRIEF FACTS OF ITA NO.4121/DEL/2016 (ASSESSMENT YEAR 2011-12 ASSESSEES APPEAL) 6. AO MADE ADDITION OF RS.35,10,494/- AS UNEXPLAINE D CREDIT ON THE GROUND THAT THE ASSESSEE HAS FAILED TO RECON CILE THE BALANCE AND ON THE GROUND THAT THE NOTICES ISSUED U/S 133 ( 6) EITHER RETURNED BACK OR NOT COMPLIED WITH AND BALANCES ARE YET TO B E RECONCILED. AO FURTHER MADE AGGREGATE ADDITION OF RS.15,19,688/ - OUT OF AN AMOUNT OF RS.35,10,494/- ON ACCOUNT OF NON-CONFIRMA TIONS FROM THE CREDITORS. AO FURTHER MADE ADDITION OF RS.7,85 ,160/- ON ACCOUNT OF DISALLOWANCE MADE U/S 36(1)(III) OF THE ACT ON ACCOUNT OF DIVERSION OF INTEREST BEARING FUNDS. BRIEF FACTS OF ITA NO.4456/DEL/2016 (ASSESSMENT YEAR 2011-12 REVENUES APPEAL) 7. AO MADE ADDITION OF RS.98,688/- ON ACCOUNT OF NO N-DEPOSIT OF EMPLOYEES SHARE OF PROVIDENT FUND ON OR BEFORE THE DUE DATE U/S 36(1)(VA) OF THE ACT. AO FURTHER MADE ADDITION OF ITA NO.6639/DEL./2014 ITA NO.4121/DEL./2016 ITA NO.4456/DEL./2016 6 RS.1,96,79,942/- BY WAY OF DISALLOWANCE CLAIMED BY THE ASSESSEE ON ACCOUNT OF REBATE OR DISCOUNTS AND TREATED THE S AME AS COMMISSION BEING IN THE NATURE OF INCENTIVES GIVEN ON THE BASIS OF SALE PERFORMANCE AND DISALLOWED FOR NON-DEDUCTION O F TDS ON THE SAME. 8. ASSESSEE CARRIED THE MATTER BY WAY OF APPEALS BE FORE THE LD. CIT (A) WHO HAS CONFIRMED THE ADDITIONS IN AY 2010- 11 BY DISMISSING THE APPEAL AND IN AY 2011-12, THE LD. CI T (A) DELETED THE ADDITION OF RS.66,578/-, RS.98,688/- & RS.1,96, 79942/- MADE BY THE AO U/S 14A R/W RULE 8D, U/S 36(1)(VA) AND U/ S 40(A)(IA) RESPECTIVELY BY PARTLY ALLOWING THE APPEAL. FEELING AGGRIEVED, THE ASSESSEE HAS COME UP BEFORE THE TRIBUNAL BY WAY OF FILING THE PRESENT APPEAL IN AY 2010-11 AND IN AY 2011-12, BOT H THE ASSESSEE AS WELL AS REVENUE HAVE COME UP BEFORE THE TRIBUNAL BY WAY OF FILING THE CROSS APPEALS. 9. 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. GROUND NO.1 OF ASSESSEES APPEAL FOR AYS 2010-11 & 2011-12 ITA NO.6639/DEL./2014 ITA NO.4121/DEL./2016 ITA NO.4456/DEL./2016 7 10. GROUND NO.1 OF ASSESSEES APPEAL FOR AYS 2010-1 1 & 2011- 12 IS GENERAL IN NATURE, HENCE NEEDS NO ADJUDICATIO N. GROUND NO.2 OF ASSESSEES APPEAL FOR AY 2010-11 GROUND NO.1 OF REVENUES APPEAL FOR AY 2011-12 11. THE ADDITION MADE BY THE AO BY INVOKING THE PRO VISIONS CONTAINED U/S 14A OF THE ACT R/W RULE 8D TO THE TUN E OF RS.65,731/- & RS.66,578/- FOR AYS 2010-11 & 2011-12 RESPECTIVELY HAS BEEN CONFIRMED BY THE LD. CIT(A). IT IS UNDISPUTED FACT THAT DURING THE YEAR UNDER ASSESSME NT, ASSESSEE COMPANY HAS RECEIVED DIVIDEND INCOME OF RS.8,000/- ON ITS OLD INVESTMENT OF RS.12,400/- IN AY 2010-11 IN PUNJAB & NATIONAL BANK. ASSESSEE HAS COME UP WITH CATEGORIC CASE THA T IT HAS NOT INCURRED ANY DIRECT EXPENSES TO EARN THE EXEMPT INC OME OF RS.8,000/-. AO, WITHOUT RECORDING HIS DISSATISFACT ION THAT WORKING GIVEN BY THE ASSESSEE COMPANY IS NOT CORRECT, MECHA NICALLY INVOKED THE PROVISIONS OF SECTION 14A READ WITH RUL E 8D WHICH IS NOT PERMISSIBLE UNDER LAW. 12. EVEN OTHERWISE BY NOW, IT IS SETTLED PRINCIPLE OF LAW THAT DISALLOWANCE CANNOT BE MORE THAN THE EXEMPT INCOME EARNED DURING THE YEAR UNDER ASSESSMENT AS HAS BEEN HELD B Y HONBLE DELHI HIGH COURT IN CASE OF JOINT INVESTMENTS PVT. LTD. VS. CIT ITA NO.6639/DEL./2014 ITA NO.4121/DEL./2016 ITA NO.4456/DEL./2016 8 (2015) 372 ITR 694 (DEL.) . SO, WE ARE OF THE CONSIDERED VIEW THAT AO/CIT(A) HAVE ERRED IN MAKING DISALLOWANCE OF RS.6 5,731/- FOR AY 2010-11 U/S 14A AS AGAINST THE EXEMPT INCOME OF RS.8,000/- MECHANICALLY, SO THE DISALLOWANCE IS ORDERED TO BE RESTRICTED TO RS.8,000/- EQUIVALENT TO THE EXEMPT INCOME EARNED B Y THE ASSESSEE COMPANY. GROUND NO.2 OF ASSESSEES APPEAL FOR AY 2 010-11 IS PARTLY ALLOWED IN FAVOUR OF THE ASSESSEE. 13. LD. CIT (A) DELETED THE ADDITION OF RS.66,578/- MADE BY THE AO ON ACCOUNT OF DISALLOWANCE MADE U/S 14A R/W RULE 8D(III) WHICH HAS BEEN CHALLENGED BY THE REVENUE. PERUSAL OF THE IMPUGNED ORDER PASSED BY THE LD. CIT (A) IN PARA 3 GOES TO PROVE THAT DURING THE YEAR UNDER ASSESSMENT, THE ASSESSEE COMPANY RECEIVED AN AMOUNT OF RS.8,800/- AS DIVIDEND INCOME . LD. CIT (A) DELETED THE ADDITION ON THE GROUND THAT ASSESSEE HA S NEVER CLAIMED DIVIDEND INCOME IN THE COMPUTATION OF INCOME BY RET URNING FOLLOWING FINDINGS :- 3.1 IN THIS CASE THE APPELLANT HAS SUBMITTED THAT IT HAS NOT CLAIMED THE DIVIDEND INCOME / IN THE COMPUTATION OF INCOME. THE APPELLANT HAS RELIED THE DECISION OF CIT VS. CORRTE CH ENERGY (P.) LTD. (2014) 45 TAXMAN.CORN 116 (GUJARAT) THAT THE A SSESSEE DID NOT MAKE ANY CLAIM FOR EXEMPTION IN SUCH A SITUATIO N UNDER SECTION 14A COULD HAVE NO APPLICATION THE APPELLANT HAS ALSO RELIED THE DECISION OF CIT VS SHIVAM MOTORS JUDGEME NT DATED 05.05.2014 OF HON'BLE ALLAHABAD HIGH COURT WHERE IT WAS HELD THAT 'IN THE ABSENCE OF ANY INTEREST FREE INCOME, T HERE CANNOT BE ANY DISALLOWANCE AS NO CORRESPONDING EXPENDITURES W ERE INCURRED TO EARN A PARTICULAR TAX FREE INCOME.' IN THE ABOVE CIRCUMSTANCES AND IN VIEW OF THE ABOVE DECISIONS TH AT ASSESSEE ITA NO.6639/DEL./2014 ITA NO.4121/DEL./2016 ITA NO.4456/DEL./2016 9 HAS NOT CLAIMED EXEMPT INCOME. SO, NO DISALLOWANCE CAN BE MADE. THEREFORE, THE ADDITION MADE BY THE AO IS HER EBY DELETED. 14. WE ARE OF THE CONSIDERED VIEW THAT THOUGH THE A SSESSEE HAS EARNED DIVIDEND INCOME OF RS.8,800/- AS AGAINST DIS ALLOWANCE OF RS.66,578/- MADE BY THE AO BUT HAS NOT CLAIMED THE SAME AS DIVIDEND INCOME IN THE COMPUTATION OF INCOME, IN TH ESE CIRCUMSTANCES, NO DISALLOWANCE CAN BE MADE U/S 14A READ WITH RULE 8D. SO, WE FIND NO ILLEGALITY OR PERVERSITY I N THE FINDINGS RETURNED BY THE LD. CIT (A). GROUND NO.1 OF REVENU ES APPEAL FOR AY 2011-12 IS DETERMINED AGAINST THE REVENUE. GROUND NO.3 OF ASSESSEES APPEAL FOR AY 2010-11 GROUND NO.2 & 3 OF ASSESSEES APPEAL FOR AY 2011-12 15. BARE PERUSAL OF THE ASSESSMENT ORDERS PASSED BY THE AO MAKING ADDITION OF RS.1,89,55,126/- & RS.35,10,494/ - IN AYS 2010-11 & 2011-12 RESPECTIVELY GO TO PROVE THAT THE ADDITION HAS BEEN MADE BY THE AO MERELY ON THE GROUND THAT INFOR MATION CALLED FOR U/S 133 (6) OF THE ACT FROM VARIOUS PARTIES TO CONFIRM THE BALANCE OUTSTANDING AS ON YEAR END WITH ASSESSEE AN D THE AO HAS FOUND DISCREPANCIES ON THE REPLY BY THE PARTIES AND IN SOME OF THE CASES, REPLIES WERE NOT GIVEN BY THE PARTIES TO THE AO, AN ADDITION HAS BEEN MADE. ASSESSEE FILED REPLY EXPLAINING THE DISCREPANCIES ITA NO.6639/DEL./2014 ITA NO.4121/DEL./2016 ITA NO.4456/DEL./2016 10 POINTED OUT BY THE AO VIDE REPLY DATED 10.03.2014 B UT THE SAME HAS BEEN REJECTED BY WRITING ONE SENTENCE THAT THE SAME WAS DULY CONSIDERED BUT NOT FOUND ACCEPTABLE. WE ARE OF THE CONSIDERED VIEW THAT WHEN THE ASSESSEE HAS DULY FILED PAN, ITR TO ESTABLISH GENUINENESS OF THE TRANSACTION, THE ADDITION CANNOT BE MADE MERELY ON THE BASIS OF FACT THAT INFORMATION U/S 133 96) H AS NOT BEEN FILED BY SOME OF THE CREDITORS. 16. IT IS PROVED THAT THE AO AS WELL AS LD. CIT (A) PROCEEDED TO MAKE/CONFIRM THE ADDITION WITHOUT CONSIDERING THE R EPLY OF THE ASSESSEE AND WITHOUT PROCURING THE PRESENCE OF SUCH SUNDRY CREDITORS TO WHOM THE NOTICES U/S 133(6) WERE ISSUE D BY USING COERCIVE METHOD. IN AY 2011-12, AO AS WELL AS LD. CIT (A) HAVE MADE/CONFIRMED THE ADDITION OF RS.15,19,688/- OUT O F AMOUNT OF RS.35,10,494/- CHALLENGED VIDE GROUND NO.3 ON ACCOU NT OF NON- CONFIRMATION FROM CREDITORS WHICH HAD RESULTED INTO DOUBLE TAXATION AS THE SIMILAR ADDITION WAS MADE IN THE PR ECEDING YEARS. 17. IN AY 2010-11, AO HAS ALSO RECORDED STRANGE OBS ERVATION THAT, THE ASSESSEE WAS TO PROVIDE INFORMATION CALLED FOR ALONG WITH PROOF OF IDENTITY ON THE ASSESSEES LETTER-HEA D WITH COP OF PAN AND ITR TO ESTABLISH THE GENUINENESS OF THE TRANSAC TION. WE ARE CONSTRAINED TO RECORD THAT INFORMATION CALLED FOR N EED NOT BE FURNISHED ON THE LETTER-HEAD WHEN IT IS OTHERWISE S UPPORTED WITH ITA NO.6639/DEL./2014 ITA NO.4121/DEL./2016 ITA NO.4456/DEL./2016 11 REQUISITE DOCUMENTS. ALL THESE FACTS SHOW THAT THE ADDITION HAS BEEN MADE MERELY ON THE BASIS OF CONJECTURES AND SU RMISE AND THE ISSUE IS REQUIRED TO BE REMITTED BACK TO THE AO TO DECIDED AFRESH AFTER PROVIDING OPPORTUNITY OF BEING HEARD TO THE A SSESSEE, SO AS TO RECONCILE THE DISCREPANCIES ARISEN OUT OF THE REPLY OF VARIOUS PARTIES GIVEN IN RESPONSE TO NOTICE U/S 133 (6). SO, GROUN D NO. 3 OF ASSESSEES APPEAL FOR AY 2010-11 & GROUNDS NO.2 & 3 OF ASSESSEES APPEAL FOR AY 2011-12 ARE DETERMINED IN FAVOUR OF THE ASSESSEE COMPANY FOR STATISTICAL PURPOSES. GROUND NO.4 OF ASSESSEES APPEAL FOR AYS 2010-11 & 2011-12 18. AO NOTICED THAT THE ASSESSEE COMPANY HAS ADVANC ED INTEREST FREE LOAN TO M/S. GLOBAL INDUSTRIES & SERVICES LTD. TO THE TUNE OF RS.65.43 LAKHS WHICH THE ASSESSEE HAS CLAIMED TO BE A BUSINESS ADVANCE. AO MADE ADDITION OF RS.7,85,160/- EACH IN AYS 2010-11 & 2011-12 BY WAY OF DISALLOWANCE U/S 36 (1)(III) OF THE ACT ON THE GROUND THAT THE ASSESSEE HAS NOT BROUGHT ON RECORD ANY EVIDENCE TO PROVE THAT INTEREST FREE LOANS GIVEN TO M/S. GLOBAL INDUSTRIES & SERVICES LTD. WAS FOR BUSINESS PURPOSES AND THEREBY CHARGED AVERAGE RATE @ 12%. 19. LD. AR FOR THE ASSESSEE CHALLENGING THE IMPUGNE D DISALLOWANCE CONTENDED INTER ALIA THAT THE SAID LOA N HAS BEEN GIVEN ITA NO.6639/DEL./2014 ITA NO.4121/DEL./2016 ITA NO.4456/DEL./2016 12 OUT OF OWN INTEREST FREE LOAN FROM THE ASSESSEE COM PANY; THAT ASSESSMENT IN THE EARLIER YEARS WERE COMPLETED U/S 143 (3) OF THE ACT BUT NO SUCH DISALLOWANCE HAS BEEN MADE; FROM TH E ORDER PASSED BY THE AO AS WELL AS LD. CIT (A) IT HAS COME ON RECORD THAT AO AS WELL AS LD. CIT (A) HAVE NOT ADDRESSED THE CO NTENTIONS RAISED BY THE ASSESSEE THAT THE LOAN HAS BEEN ADVAN CED OUT OF ITS OWN INTEREST FREE FUNDS AND THE SAME WERE GIVEN FOR BUSINESS EXPEDIENCY. 20. NO DOUBT, HONBLE DELHI HIGH COURT IN CASE OF PUNJAB STAINLESS STEEL INDUSTRIES VS. CIT-VII (2010) 324 I TR 396 (DELHI) RELIED UPON BY THE LD. DR FOR THE REVENUE HELD THAT WHEN ADVANCES HAVE BEEN MADE OUT OF BORROWED FUNDS AND NOT OUT OF CREDIT BALANCE AVAILABLE WITH ASSESSEE COMPANY, INTEREST H AS TO BE DISALLOWED. 21. HOWEVER, IN THE INSTANT CASE, WHEN THE ASSESSEE HAS COME UP WITH SPECIFIC DEFENCE THAT THE ADVANCE HAS BEEN MAD E OUT OF INTEREST FREE FUNDS AND THE SAME HAS BEEN MADE FOR BUSINESS EXPEDIENCY, THE APPLICABILITY OF THE JUDGMENT RELIE D UPON BY THE LD. DR FOR THE REVENUE IS TO BE SEEN AFTER MARSHALLING OF THE FACTS PLEADED BY THE ASSESSEE ONLY. 22. SO, IN THE GIVEN CIRCUMSTANCES, THESE ISSUES AR E REQUIRED TO BE DECIDED BY PASSING A SPEAKING ORDER. ACCORDINGL Y, THIS ISSUE IS ITA NO.6639/DEL./2014 ITA NO.4121/DEL./2016 ITA NO.4456/DEL./2016 13 REMITTED BACK TO THE AO TO DECIDE AFRESH AFTER PROV IDING OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. GROUND NO.4 OF ASSESSEES APPEAL FOR AYS 2010-11 & 2011-12 ARE DET ERMINED IN FAVOUR OF THE ASSESSEE FOR STATISTICAL PURPOSES. GROUND NO.5 OF ASSESSEES APPEAL FOR AY 2010-11 23. LD. AR FOR THE ASSESSEE CONTENDED THAT THE LOWE R REVENUE AUTHORITIES HAVE WRONGLY COMPUTED TAX DEMAND OF RS. 4,45,550/- BY NOT ALLOWING THE COMPLETE TAX CREDIT OF TCS AND TDS. WE ARE OF THE CONSIDERED VIEW THAT THIS ISSUE HAS BEEN ARI SEN OUT OF SOME CLERICAL ERROR ON THE PART OF THE AO WHO HAS NOT TA KEN INTO CONSIDERATION TCS AND TDS CREDIT FOR COMPUTING THE TAX LIABILITY. SO, WE DIRECT THE AO TO VERIFY THE TCS AND TDS CRED ITS CLAIMED BY THE ASSESSEE AND COMPUTED THE TAX LIABILITY ACCO RDINGLY, HENCE GROUND NO.5 OF ASSESSEES APPEAL FOR AY 2010-11 IS DETERMINED IN FAVOUR OF THE ASSESSEE FOR STATISTICAL PURPOSES. GROUND NO.2 OF REVENUES APPEAL FOR AY 2011-12 24. LD. CIT (A) DELETED THE ADDITION OF RS.98,688/- MADE BY THE AO U/S 36(1)(VA) ON ACCOUNT OF DELAY IN FILING THE EMPLOYEES CONTRIBUTION TO PROVIDENT FUND ON THE GROUND THAT T HE ASSESSEE HAS MADE PAYMENT BEFORE FILING OF THE RETURN OF INCOME. ITA NO.6639/DEL./2014 ITA NO.4121/DEL./2016 ITA NO.4456/DEL./2016 14 25. HOWEVER, BY NOW, IT IS SETTLED PRINCIPLE OF LAW THAT AS PER PROVISIONS CONTAINED U/S 36(1)(VA) EXPLANATION, ASS ESSEE WOULD BE ENTITLED FOR DEDUCTION QUA THE SUM RECEIVED FROM AN Y OF HIS EMPLOYEE TO WHICH PROVISIONS UNDER SUB-SECTION (X) OF CLAUSE 24 OF SECTION 2 IS APPLICABLE ONLY IF SUCH SUM IS CREDITE D IN THE EMPLOYEES ACCOUNT IN THE RELEVANT FUNDS OR FUNDS ON OR BEFORE THE DUE DATE. DUE DATE IS DEFINED IN THE EXPLANATION A S THE DATE BY WHICH THE ASSESSEE IS REQUIRED BY AN EMPLOYER TO CR EDIT EMPLOYEES CONTRIBUTION TO THE EMPLOYEES ACCOUNT IN THE RELEVA NT FUND UNDER ANY ACT OR RULE OR ORDER OR NOTIFICATION THEREUNDER . IDENTICAL ISSUE HAS BEEN DECIDED BY THE COORDINATE BENCH OF THE TRI BUNAL IN CASE CITED AS EAGLE TRANS SHIPPING & LOGISTICS (INDIA)(P.) LTD. V S. ACIT (2019) 178 ITD 849 AGAINST THE ASSESSEE BY RETURNING FOLLOWING FINDINGS :- 9. WHEN WE EXAMINE THE ISSUE IN CONTROVERSY IN THE LIGHT OF THE PROVISIONS CONTAINED U/S 36(1)(VA) OF THE ACT, IT IS APPARENTLY CLEAR THAT THE ASSESSEE WOULD BE ENTITLED FOR DEDUC TIONS QUA THE SUM RECEIVED FROM ANY OFFICE EMPLOYEE TO WHICH PROV ISIONS UNDER SUB-SECTION (X) OF CLAUSE (24) OF SECTION 2 IS APPL IED ONLY, IF SUCH SUM IS CREDITED BY THE ASSESSEE TO THE EMPLOYEES AC COUNT IN THE RELEVANT FUND OR FUNDS ON OR BEFORE THE DUE DATE. DUE DATE IS FURTHER DEFINED IN THE EXPLANATION, WHICH MEANS, TH E DATE BY WHICH THE ASSESSEE IS REQUIRED AS AN EMPLOYER TO CR EDIT EMPLOYEES CONTRIBUTION TO THE EMPLOYEES ACCOUNT IN THE RELEVA NT FUND UNDER ANY ACT OR RULE OR ORDER OR NOTIFICATION ISSUED THE REUNDER OR ANY STANDING ORDER OR AWARD OR SERVICE OR OTHERWISE. M EANING THEREBY, IN CASE, EMPLOYER FAILS TO DEPOSIT THE ENT IRE AMOUNT TOWARDS EMPLOYEES CONTRIBUTION ON ACCOUNT OF PF & E SI WITH CONCERNED DEPARTMENT ON OR BEFORE THE DUE DATE UNDE R PF & ESI, THE ASSESSEE SHALL NOT BE ENTITLED FOR DEDUCTI ON TO THAT EXTENT. ITA NO.6639/DEL./2014 ITA NO.4121/DEL./2016 ITA NO.4456/DEL./2016 15 10. DECISION OF THE HONBLE SUPREME COURT RELIED UP ON BY THE ASSESSEE CITED AS CIT VS. ALOM EXTRUSIONS LTD. (SUPRA) IS NOT APPLICABLE TO THE FACTS AND CIRCUMSTANCES OF THE CA SE BECAUSE HONBLE SUPREME COURT HAS DECIDED THE ISSUE IN ALOM EXTRUSIONS LTD. CASE QUA EMPLOYERS CONTRIBUTION AS PER SECTION 43B(B) OF THE ACT AND NOT QUA EMPLOYEES CONTRIBUTIO N U/S 36(1)(VA) OF THE ACT. 11. HONBLE JURISDICTIONAL HIGH COURT IN CASE OF CI T VS. BHARAT HOTELS LTD. (2019) 410 ITR 417 (DELHI) (SUPR A) DECIDED THE IDENTICAL ISSUE QUA DELAYED DEPOSIT OF EMPLOYEE S CONTRIBUTION ON ACCOUNT OF PF & ESI AGAINST THE ASSESSEE BY HOLD ING THAT ASSESSEE WOULD BE ENTITLED TO DEDUCTION IN TERMS OF SECTION 36(1)(VA) OF THE ACT TO THE EXTENT IF THE EMPLOYEE S CONTRIBUTION ON ACCOUNT OF PF & ESI IS DEPOSITED ON OR BEFORE TH E DUE DATE, AND THE EMPLOYEES CONTRIBUTION ON ACCOUNT OF PF & E SI DEPOSITED BEYOND THE STIPULATED PERIOD WOULD NOT MA KE THE ASSESSEE COMPANY ENTITLED TO CLAIM DEDUCTION FROM I TS RETURN. FOR READY PERUSAL, OPERATIVE PART OF THE JUDGMENT O F CIT VS. BHARAT HOTELS LTD. (SUPRA) IS EXTRACTED AS UNDER :- 7. THE ISSUE HERE CONCERNS THE INTERPLAY OF SECTIO N 2(24)(X) OF THE ACT READ WITH SECTION 36(1)( VA) OF THE ACT ALONGSIDE PROVISIONS OF THE EMPLOYEES' PROVIDENT FU NDS AND MISCELLANEOUS PROVISIONS ACT, 1952 (ESPECIALLY REGULATION 38 OF THE EMPLOYEES' PROVIDENT FUNDS SCHEME, 1952) AND THE PROVISIONS OF THE EMPLOYEES' STATE INSURANCE ACT, 1948. THE AO HAD BROUGHT TO TAX AMOU NTS WHICH WERE DEDUCTED BY THE EMPLOYER/ASSESSEE FROM T HE SALARIES AND WAGES PAYABLE TO ITS EMPLOYEES, AS PAR T OF THEIR CONTRIBUTIONS. IT IS NOT IN DISPUTE THAT THE EMPLOYER'S RIGHT TO CLAIM DEDUCTIONS UNDER THE MAIN PART OF SE CTION 43-B OF THE ACT IS NOT AN ISSUE. THE QUESTION THE A O HAD TO THEN DECIDE WAS WHETHER THE AMOUNTS DEDUCTED FRO M THE SALARIES OF THE EMPLOYEES WHICH HAD TO BE DEPOS ITED WITHIN THE STIPULATED TIME (IN TERMS OF NOTIFICATION/CIRCULAR DATED 19.03.1964 WHICH WAS MO DIFIED ON 24.10.1973), AS FAR AS THE EPF CONTRIBUTION WENT AND THE PERIOD OF THREE WEEKS AS FAR AS THE ESI CONTRIB UTIONS WENT. THE AO MADE A TABULAR ANALYSIS WITH RESPECT T O THE CONTRIBUTIONS DEDUCTED AND ACTUALLY DEPOSITED. THE CUMULATIVE EFFECT OF NOTIFICATIONS UNDER THE EMPLOY EES' PROVIDENT FUNDS ACT, 1952 AND THE EMPLOYEES STATE INSURANCE ACT, 1948 WAS THAT IN RESPECT OF THE EPF SCHEME CONTRIBUTIONS THE DEDUCTIONS WERE TO BE DEPO SITED WITHIN 15 DAYS OF THE SUCCEEDING WAGE PERIOD WITH A GRACE PERIOD OF 5 DAYS; FOR ESI CONTRIBUTIONS THE DEPOSIT WITH THE CONCERNED STATUTORY AUTHORITY HAD TO BE MADE WI THIN THREE WEEKS OF THE SUCCEEDING WAGE MONTH/PERIOD. TH E ITA NO.6639/DEL./2014 ITA NO.4121/DEL./2016 ITA NO.4456/DEL./2016 16 CIT IN THIS CASE CONFIRMED THE ADDITIONS - MADE BY THE AO BASED ON THE ENTIRE AMOUNTS THAT WERE DISALLOWED. T HE ITAT HOWEVER GRANTED COMPLETE RELIEF. 8. HAVING REGARD TO THE SPECIFIC PROVISIONS OF THE EMPLOYEES' PROVIDENT FUNDS ACT AND ESI ACT AS WELL AS THE CONCERNED NOTIFICATIONS WHICH GRANTED A GRACE P ERIOD OF 5 DAYS (WHICH APPEARS TO HAVE BEEN LATE WITHDRAW N RECENTLY ON 08.01.2016), WE ARE OF THE OPINION THAT THE ITAT'S DECISION IN THIS CASE WAS NOT CORRECT. THE A SSESSEE UNDOUBTEDLY WAS ENTITLED TO CLAIM THE BENEFIT AND P ROPERLY TREAT SUCH AMOUNTS AS HAVING BEEN DULY DEPOSITED, W HICH WERE IN FACT DEPOSITED WITHIN THE PERIOD PRESCRIBED (I.E. 15 + 5 DAYS IN THE CASE OF EPF AND 21 DAYS + ANY OTHER GRACE, PERIOD IN TERMS OF THE EXTENT NOTIFICATION). AS FAR AS THE AMOUNTS CONSTITUTING DEDUCTIONS FROM EMPLOYE ES' SALARIES TOWARDS THEIR CONTRIBUTIONS, WHICH WERE MA DE BEYOND SUCH STIPULATED PERIOD, OBVIOUSLY THE ASSESS EE WAS NOT ENTITLED TO CLAIM THE DEDUCTION FROM ITS RETURN S. 9. IN VIEW OF THIS DISCUSSION, THE REVENUE'S APPEAL IS PARTLY ALLOWED. THE AO IS DIRECTED TO EXAMINE THE CONTRIBUTIONS MADE WITH REFERENCE TO THE DATES WHEN THEY WERE ACTUALLY MADE AND GRANT RELIEF TO SUCH OF THEM WHICH QUALIFIED FOR SUCH RELIEF IN TERMS OF THE PRE VAILING PROVISIONS AND NOTIFICATIONS. WE ALSO CLARIFY THAT THE ASSESSEE WOULD BE ENTITLED TO DEDUCTION IN TERMS OF SECTION 36(1)(VA) OF THE ACT. 12. IN VIEW OF WHAT HAS BEEN DISCUSSED ABOVE AND FO LLOWING THE DECISION RENDERED BY THE HONBLE JURISDICTIONAL HIGH COURT IN CASE OF CIT VS. BHARAT HOTELS LTD. (SUPRA), WE A RE OF THE CONSIDERED VIEW THAT THE ASSESSEE COMPANY IS NOT EN TITLED FOR DEDUCTION OF RS.4,29,110/- U/S 36(1)(VA) OF THE ACT CLAIMED ON ACCOUNT OF DEPOSITING THE EMPLOYEES CONTRIBUTION TO WARDS ESI & PF AS PER PROVISIONS CONTAINED U/S 2(24)(X) READ WI TH SECTION 36(1)(VA) AFTER DUE DATE WHICH IS EVIDENT FROM TABL E EXTRACTED IN PRECEDING PARA NO.5. SO, THE CASE LAWS RELIED UPON BY THE LD. AR FOR THE ASSESSEE IS NOT APPLICABLE TO THE FACTS AND CIRCUMSTANCES OF THE CASE. CONSEQUENTLY, FINDING NO ILLEGALITY O R PERVERSITY IN THE IMPUGNED ORDER PASSED BY THE LD. CIT (A), APPEA L FILED BY THE ASSESSEE IS HEREBY DISMISSED. 26. SO, FOLLOWING THE DECISION RENDERED BY THE COOR DINATE BENCH OF THE TRIBUNAL, WE ARE OF THE CONSIDERED VIEW THAT THE LD. CIT (A) HAS ERRED IN DELETING THE ADDITION OF RS.98,688/- M ADE BY THE AO. ITA NO.6639/DEL./2014 ITA NO.4121/DEL./2016 ITA NO.4456/DEL./2016 17 SO, THE FINDINGS RETURNED BY THE LD. CIT (A) ARE HE REBY SET ASIDE AND ORDER PASSED BY THE AO ON THIS ISSUE IS HEREBY RESTORED. CONSEQUENTLY, GROUND NO.2 IS DECIDED IN FAVOUR OF T HE REVENUE. GROUND NO.3 OF REVENUES APPEAL FOR AY 2011-12 27. LD. CIT (A) DELETED THE ADDITION OF RS.1,96,79, 942/- MADE U/S 40(A)(IA) OF THE ACT ON ACCOUNT OF DISALLOWANCE FOR NON- DEDUCTION OF TAX ON COMMISSION EXPENSES WHICH HAS B EEN CHALLENGED BY THE REVENUE. 28. AO NOTICED THE FACT THAT THE ASSESSEE COMPANY H AS DEDUCTED A SUM OF RS.1,16,12,646/- ON ACCOUNT OF REBATE AND DISCOUNT FROM SALES AND THE ASSESSEE HAS FURTHER CLAIMED EXPENDIT URE UNDER THE HEAD REBATE & DISCOUNT OF RS.80,67,296/- IN P&L A CCOUNT AND HAS NOTICED THE DETAILS OF REBATE AND DISCOUNT AMOU NTING TO RS.1,42,74,307/-. AO PROCEEDED TO CONCLUDE THAT TH E ASSESSEE HAS ALLOWED INCENTIVE @ 10% ON SALES TO VARIOUS PARTIES WHICH AMOUNTED TO COMMISSION WITHIN THE MEANING OF EXPLAN ATION OF SECTION 194H OF THE ACT AND THEREBY DISALLOWED THE SAME U/S 194H OF THE ACT. 29. HOWEVER, LD. CIT (A) AFTER THRASHING THE FACTS AND AFTER ENTERTAINING ADDITIONAL EVIDENCE FILED BY THE ASSES SEE QUA WHICH REMAND REPORT WAS CALLED REACHED THE CONCLUSION THA T THE ASSESSEE ITA NO.6639/DEL./2014 ITA NO.4121/DEL./2016 ITA NO.4456/DEL./2016 18 COMPANY HAS GIVEN REBATE AND DISCOUNT ON SALES WHIC H CANNOT BE TREATED AS COMMISSION. WHEN IT IS UNDISPUTED CASE OF THE ASSESSEE COMPANY THAT THE PAYMENT HAS BEEN DIRECTLY GIVEN TO THE VENDEE AND NOT THROUGH ANY COMMISSION AGENT, IT CANNOT BE TREATED AS COMMISSION. DURING THE PRECEDING YEARS, SUCH PAYME NT HAS BEEN TREATED AS REBATE AND DISCOUNT AND NOT COMMISSION A ND THE AO HAS NOT BEEN ABLE TO DISTINGUISH THE FACTS OF THE INSTA NT CASE WITH THAT OF THE PRECEDING YEARS. 30. SO, IN THE GIVEN CIRCUMSTANCES, WE ARE OF THE C ONSIDERED VIEW THAT WHEN IT IS REBATE AND DISCOUNT AND NOT CO MMISSION, NO TDS IS REQUIRED TO BE DEDUCTED. CONSEQUENTLY, WE A RE OF THE CONSIDERED VIEW THAT CIT (A) HAS RIGHTLY DELETED TH E ADDITION, HENCE GROUND NO.3 IS DETERMINED AGAINST THE REVENUE . 31. RESULTANTLY, THE APPEAL FILED BY THE ASSESSEE F OR AY 2010-11 IS PARTLY ALLOWED FOR STATISTICAL PURPOSES, THE APP EAL FILED BY THE ASSESSEE FOR AY 2011-12 IS ALLOWED FOR STATISTICAL PURPOSES AND THE APPEAL FILED BY THE REVENUE FOR AY 2011-12 IS PARTL Y ALLOWED. ORDER PRONOUNCED IN OPEN COURT ON THIS 16 TH DAY OF DECEMBER, 2019. SD/- SD/- (R.K. PANDA) (KULDIP SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED THE 16 TH DAY OF DECEMBER , 2019 TS ITA NO.6639/DEL./2014 ITA NO.4121/DEL./2016 ITA NO.4456/DEL./2016 19 COPY FORWARDED TO: 1.APPELLANT 2.RESPONDENT 3.CIT 4.CIT(A)-19, NEW DELHI. 5.CIT(ITAT), NEW DELHI. AR, ITAT NEW DELHI.