The DCIT, Circle-4, Ahmedabad V. M/s. Hari Orgochem Pvt.Ltd., Ahmedabad

ITA 45/AHD/2011

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 73006 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 1 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-02-2014
• Appeal Filed By: Department
• Bench Allotted: B
• Next Hearing Date: 11-02-2014
• Assessment Year: 2007-2008
• Appeal Filed On: 06-01-2011
• Court: TRIBUNAL
• Department Lawyers: P L KUREEL
• Assessee Lawyers: VIJAY RANJAN
• Keywords: Earning of tax free income
• Section: 43B; 14A; 28

Judgement Text

, , , , IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, AHMEDABAD . .. . . .. . , , , , ! ! ! ! ' '' '. .. . . . . . #' #' #' #', , , , $ % $ % $ % $ % BEFORE SHRI D. K. TYAGI, JUDICIAL MEMBER AND SHRI N.S. SAINI, ACCOUNTANT MEMBER ! ! ! !./ ././ ./ ITA NO. 45/AHD/2011 ' ' (' ' ' (' ' ' (' ' ' (' / // / ASSESSMENT YEAR 2007-08 DCIT, CIRCLE-4, AHMEDABAD. VS HARI ORGOCHEM (P) LTD. 1, AVADH APARTMENT, NR. PARIMAL RAILWAY CROSSING, PALDI, AHMEDBAD. PAN: AAACH7088L )*/ APPELLANT +)* / RESPONDENT REVENUE BY : SH. P.L. KUREEL, SR. D.R. ASSESSEE(S) BY : SH. VIJAY RANJAN, AR ,' - . /$/ // / DATE OF HEARING : 11/02/2014 01( . /$ / DATE OF PRONOUNCEMENT : 21/02/2014 2 2 2 2/ // / O R D E R PER SHRI N.S. SAINI, ACCOUNTANT MEMBER: THIS IS AN APPEAL FILED BY THE REVENUE AGAINST THE ORDER OF CIT(A)-VIII, AHMEDABAD DATED 22.10.2010. 2. GROUND NO. 1 OF THE APPEAL IS DIRECTED AGAINST T HE ORDER OF LD. CIT(A) DELETING DISALLOWANCE OF INTEREST OF RS 57,125/- MA DE BY THE ASSESSING OFFICER U/S 14A READ WITH RULE 8D OF THE I.T. RULES AND RESTRIC TING THE DISALLOWANCE OF ADMINISTRATIVE EXPENSES TO 2% OF THE DIVIDEND INCOM E EARNED BY THE ASSESSEE AS AGAINST RS 5,85,658/- DISALLOWED BY THE ASSESSING O FFICER U/S 14A READ WITH RULE 8D OF THE I.T. RULES. ITA NO.45/AHD/2011 HARI ORGOCHEM (P) LTD. VS. DCIT, CIRCLE-4, AHD. FOR A.Y. 2007-08 - 2 - 3. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E COMPANY EARNED DIVIDEND INCOME OF RS 73,84,488/- FROM MUTUAL FUNDS AND SHAR ES. THE ASSESSING OFFICER OBSERVED THAT IT WAS NOT POSSIBLE THAT NO AMOUNT OF ADMINISTRATIVE AND MANAGERIAL MACHINERY WAS USED TO HANDLE TAX FREE INVESTMENT. THERE ARE SOME HANDLING AND PROCESSING CHARGES REGARDING MANAGEMENT OF INVESTME NT PORTFOLIO. HE ALSO OBSERVED THAT ONCE THE FUNDS WERE PUT IN THE BUSINE SS, THEY GOT INTERMINGLED AND IT WAS NOT POSSIBLE TO KEEP THE FUNDS SEGREGATED FOR E ACH AND EVERY PURPOSE. HE ALSO NOTED THAT NO DOUBT THE ASSESSEE IS HAVING SUFFICIE NT FUNDS FROM INTERNAL ACCRUALS AND ACCUMULATED PROFITS BUT IT WAS NOT ESTABLISHED THAT ONLY SUCH FUNDS AND NO OTHER FUNDS HAVE BEEN USED FOR DERIVING TAX FREE IN VESTMENT INCOME. HE ALSO OBSERVED THAT THE ASSESSEE CANNOT NOT PRODUCE DAY-T O-DAY MOVEMENT OF FUNDS SO THAT SEGREGATION OF NATURE OF SPENDING CAN BE ASCER TAINED WITH A DEGREE OF CERTAINTY. HE OBSERVED THAT IT HARDLY MAKES ANY DI FFERENCE WHETHER INVESTMENTS ARE MADE DURING THE CURRENT YEAR OR EARLIER YEARS. THE IMPORTANT ISSUE IS THAT ASSESSABLE FUNDS ARE LOCKED IN TAX FREE INVESTMENTS . IN LIGHT OF ABOVE, IT IS CONCLUDED THAT THE ASSESSEE IS NOT RIGHT IN HOLDING THAT THERE WAS NO EXPENDITURE ATTRIBUTABLE TO EARNING OF TAX FREE INCOME OR A MEA GRE DISALLOWANCE OF RS 1,00,000/- BE MADE U/S 14A. HE, THEREFORE, BY INVO KING PROVISIONS OF SECTION 14A ALONGWITH RULE 8D, MADE DISALLOWANCE OF INTEREST EX PENDITURE OF RS 1,37,027/- AND ADMINISTRATIVE EXPENDITURE OF RS 5,85,697/- AND THE REBY A TOTAL DISALLOWANCE OF RS 6,42,822/-. 4. ON APPEAL, THE LD. CIT(A) DELETED THE DISALLOWAN CE BY OBSERVING AS UNDER: I HAVE CONSIDERED THE ASSESSMENT ORDER, FINDING OF A.O AND THE SUBMISSION OF THE APPELLANT. THE APPELLANT HAS EARNED DIVIDEND INCOME OF RS 73,84,448 AND ASSESSING OFFICER BY APPLYING PROVISIONS OF RULE 8D R.W.S 14A HAS MADE DISALLOWANCE OF ADMINISTRATIVE AND INTEREST EXPENSE S WHEREAS APPELLANT HAS SUBMITTED THAT NO SUCH PRESUMPTIVE DISALLOWANCE IS CALLED FOR MORE PARTICULARLY WHEN RULE 8D CANNOT BE APPLIED IN PRESENT CASE. THE CLAIM OF APPELLANT IS SUPPORTED BY DECISION OF BOMBAY HIGH COURT IN CASE OF GODREJ & BOYCE V/S DCIT ITA NO.45/AHD/2011 HARI ORGOCHEM (P) LTD. VS. DCIT, CIRCLE-4, AHD. FOR A.Y. 2007-08 - 3 - INCOME TAX APPEAL NO.626 OF 2010 AND FINDING OF THE HON'BLE COURT IS AS UNDER: ...67. EVEN IN THE ABSENCE OF SUB SECTIONS (2) AND (3) OF SECTION 14A AND OF RULE 8D, THE ASSESSING OFFICER WAS NOT PRECLUDED FROM MA KING APPORTIONMENT. SUCH AN APPORTIONMENT WOULD HAVE TO BE MADE IN ORDER TO GIV E EFFECT TO THE SUBSTANTIVE PROVISIONS OF SUB SECTION (1) OF SECTION 14A WHICH PROVIDE THAT NO DEDUCTION WOULD BE ALLOWED IN RESPECT OF EXPENDITURE INCURRED IN RELATION TO INCOME WHICH DOES NOT FORM PART OF THE TOTAL INCOME UNDER THE AC T. CONSEQUENTLY, DEHORS THE PROVISIONS OF SECTIONS (2) AND (3) OF SECTION 14A A ND RULE 8D, THE ASSESSING OFFICER WAS ENTITLED TO DETERMINE BY THE APPLICATIO N OF A REASONABLE METHOD WHAT QUANTUM OF THE EXPENDITURE INCURRED BY THE ASSESSEE WOULD HAVE TO BE DISALLOWED ON THE GROUND THAT IT WAS INCURRED IN RELATION TO T HE EARNING OF INCOME WHICH DOES NOT FORM PART OF THE TOTAL INCOME UNDER THE ACT. UN DOUBTEDLY IN DETERMINING WHAT WOULD CONSTITUTE A REASONABLE METHOD FOR EFFECTING THE DISALLOWANCE, THE ASSESSING OFFICER WOULD HAVE TO GIVE DUE REGARD TO ALL THE FACTS AND CIRCUMSTANCES OF THE CASE. THE CHANGE WHICH IS BROU GHT ABOUT BY THE INSERTION OF SUB SECTIONS (2) AND (3) INTO SECTION 14A BY THE FI NANCE ACT OF 2006 WITH EFFECT FROM 1 APRIL 2007 IS THAT IN A SITUATION WHERE THE ASSESSING OFFICER IS NOT SATISFIED WITH THE CORRECTNESS OF THE CLAIM OF THE ASSESSEE I N REGARD TO THE EXPENDITURE INCURRED BY IT IN RELATION TO THE NON-TAXABLE INCOM E, THE ASSESSING OFFICER WOULD HAVE TO FOLLOW THE METHOD WHICH IS PRESCRIBED BY TH E RULES. THE RULES WERE NOTIFIED TO COME INTO FORCE ON 24 MARCH 2008. IT IS A TRITE PRINCIPLE OF LAW THAT THE LAW WHICH WOULD APPLY TO AN ASSESSMENT YEAR IS THE LAW PREVAILING ON THE FIRST DAY OF APRIL. CONSEQUENTLY, RULE 8D WHICH HAS BEEN NOTIFIED ON 24 MARCH 2008 WOULD APPLY WITH EFFECT FROM ASSESSMENT YEAR 2008-0 9. THE RULE CONSEQUENTLY CANNOT HAVE APPLICATION IN RESPECT OF ASSESSMENT YE AR 2002-03 WHICH IS THE YEAR UNDER CONSIDERATION IN THIS CASE... CONSIDERING THE DECISION OF HON'BLE BOMBAY HIGH COU RT, RULE 8D R.W.S 14A CANNOT BE APPLIED IN RESPECT OF A.Y. 2007-2008. HOW EVER, THE HON'BLE BOMBAY HIGH COURT HAS HELD THAT EVEN FOR EARLIER YEAR, DIS ALLOWANCE U/S 14A(1) WILL BE MADE BY APPLYING REASONABLE BASIS CONSIDERING ALL T HE FACT AND CIRCUMSTANCES. IN SUCH A SCENARIO, AS SIMILAR DISALLOWANCE IN APPELLA NT'S CASE, WAS MADE IN A.Y. 2005-2006, WHEREIN HON'BLE ITAT REFERRED SUPRA HAS CONSIDERED THE FACTS AND HELD THAT AS APPELLANT HAS SUFFICIENT INTEREST FREE FUNDS, DISALLOWANCE OF INTEREST IS NOT JUSTIFIED AND ADMINISTRATIVE EXPENSES SHOULD BE RESTRICTED @ 2% OF TAX FREE DIVIDEND INCOME. CONSIDERING THE DECISION OF HON'BL E ITAT IN APPELLANT'S OWN CASE FOR PRECEDING ASSESSMENT YEAR, DISALLOWANCE OF INTEREST EXPENDITURE FOR RS 57,125 IS DELETED AND ASSESSING OFFICER IS DIRECTED TO RESTRICT DISALLOWANCE OF ADMINISTRATIVE EXPENSES U/S 14A @ 2% OF DIVIDEND IN COME. THE RELATED GROUNDS OF APPEAL ARE PARTLY ALLOWED. 5. THE LD. DR SUPPORTED THE ORDER OF THE ASSESSING OFFICER WHEREAS THE LD. AR SUPPORTED THE ORDER OF THE LD. CIT(A). ITA NO.45/AHD/2011 HARI ORGOCHEM (P) LTD. VS. DCIT, CIRCLE-4, AHD. FOR A.Y. 2007-08 - 4 - 6. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE ORDERS OF LOWER AUTHORITIES AND MATERIAL AVAILABLE ON RECORD. IN T HE INSTANT CASE, THE ASSESSING OFFICER MADE DISALLOWANCE OF RS 6,42,822/- BY INVO KING PROVISIONS OF SECTION 14A AS BEING RELATABLE TO EXEMPT DIVIDEND INCOME. 7. ON APPEAL, THE LD. CIT(A) OBSERVING THAT THE FAC TS ARE IDENTICAL TO THE FACTS OF THE ASSESSMENT YEAR 2005-06, BY FOLLOWING THE OR DER OF THE TRIBUNAL PASSED IN THE CASE OF THE ASSESSEE ITSELF IN ASSESSMENT YEAR 2005-06 HAS RESTRICTED THE DISALLOWANCE U/S 14A TO 2% OF THE DIVIDEND INCOME A ND DELETED THE BALANCE AMOUNT OF DISALLOWANCE. 8. THE LD. DR COULD NOT POINT OUT ANY SPECIFIC DEFE CT IN THE ORDER OF THE LD. CIT(A) WHICH WAS PASSED BY FOLLOWING THE ORDER OF T HIS TRIBUNAL IN THE CASE OF ASSESSEE ITSELF PASSED IN THE IMMEDIATELY PRECEDING YEAR. IN ABSENCE THEREOF, WE DO NOT FIND ANY GOOD REASON TO INTERFERE WITH ORDER OF THE LD. CIT(A). THEREFORE, THIS GROUND OF APPEAL OF THE REVENUE IS DISMISSED. 9. GROUND NO. 2 OF THE APPEAL IS DIRECTED AGAINST T HE ORDER OF LD. CIT(A) DELETING THE DISALLOWANCE OF RS 12,00,000/- BEING 50% OF PAYMENT MADE TO RELATED PARTY NAMELY DHARNIDHAR CHEMICALS PRIVATE LIMITED T OWARDS FEES AND LEGAL CHARGES. 10. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE ORDERS OF LOWER AUTHORITIES AND MATERIAL AVAILABLE ON RECORD. IN T HE INSTANT CASE, THE ASSESSEE CLAIMED EXPENDITURE OF RS 24,00,000/- ON ACCOUNT OF THE FEES AND LEGAL EXPENSES BEING PAYMENT MADE TO DHARNIDHAR CHEMICALS PRIVATE LIMITED WHICH WAS A SISTER CONCERN AND HAD INCURRED LOSS DURING THE RELEVANT Y EAR. THE ASSESSING OFFICER ON ITA NO.45/AHD/2011 HARI ORGOCHEM (P) LTD. VS. DCIT, CIRCLE-4, AHD. FOR A.Y. 2007-08 - 5 - ASSESSMENT ALLOWED RS 12,00,000/- AND DISALLOWED TH E BALANCE AMOUNT OF RS 12,00,000/- AS BEING EXCESSIVE. 11. ON APPEAL, THE LD. CIT(A) DELETED THE DISALLOWA NCE OF RS 12,00,000/- BY OBSERVING AS UNDER: 5.3 I HAVE CONSIDERED THE ASSESSMENT ORDER, FINDIN G OF A.O. AND THE SUBMISSION OF THE APPELLANT. THE ASSESSING OFFICER HAS DISALLOWED 50 % OF FEES & LEGAL EXPENSES PAID BY APPELLANT TO DCPL MAINLY ON THE GROUND THAT PAYMENT IS TO RELATED CONCERN AND SAID RELATED COMPANY IS INCURRING LOSS HENCE PAYMENT MAD E BY APPELLANT IS EXCESSIVE. THE APPELLANT BOTH AT THE TIME OF ASSESSMENT PROCEEDING S AND APPELLANT PROCEEDINGS SUBMITTED MOU / ENTERED BETWEEN BOTH THE PARTIES AND SUBMITTED THAT AS PRODUCTION OF CURRENT ASSESSMENT YEAR HAS BEEN INCREASED AS WELL AS IT REQUIRED MORE PERSON FOR LEGAL & SECRETARIAL WORK , SOME OF THE EMPLOYEES REFERRED HEREIN ABOVE HAVE WORKED FOR APPELLANT COMPANY FOR WHICH IT HAS MADE PAYMENT OF RS 2 LACS PER MONTH. IN THE PRESENT CASE, ASSESSING OFFICER HAS NEVER DENIED THAT APPEL LANT HAS NOT USED THE SERVICES OF EMPLOYEES AND CONSIDERING IT, AO HAS ALLOWED 50% OF PAYMENT MADE BY APPELLANT. EVEN DCPL IS MAKING PAYMENT OF ROUND ABOUT RS 1.75 LACS TO 1.80 LACS TO PERSONS USED BY APPELLANT FOR DCPL HAS CHARGED RS 2 LACS PER MONTH WHICH CANNOT BE TERMED AS EXCESSIVE MORE PARTICULARLY WHEN AO HAS NOT DISPUTE D THE WORK CARRIED OUT BY SUCH PERSONS. CONSIDERING THIS, THE DISALLOWANCE MADE BY ASSESSING OFFICER ON PRESUMPTION IS NOT JUSTIFIED AND IT IS DELETED AND RELATED GROUND OF APPEAL IS ALLOWED. 12. THE LD. DR OBJECTED AGAINST THE ABOVE DELETION BY LD. CIT(A) AND SUPPORTED THE ORDER OF THE ASSESSING OFFICER. THE LD. DR CONTENDED THAT THE SISTER CONCERN WAS INCURRING LOSS AND THEREFORE, THE ASSES SEE PAID EXCESS AMOUNT TO DIVERT ITS TAXABLE INCOME. 13. WE FIND THAT NO SPECIFIC MISTAKE IN THE FINDING S OF THE LD. CIT(A) COULD BE POINTED OUT BY THE LD. DR. WE FIND THAT THE GENUIN ENESS OF THE PAYMENT IS NOT IN DISPUTE. THE ASSESSING OFFICER AFTER OBSERVING ABO UT THE LOSS INCURRED BY THE ASSESSEE COMPANY HAS BROUGHT NO MATERIAL ON RECORD AFTER MAKING INVESTIGATION TO SHOW THAT THE ASSESSEE HAS NOT RECEIVED THE SERVICE S FOR WHICH PAYMENTS WERE MADE BY THE ASSESSEE. RATHER, ON THE OTHER HAND, T HE ALLOWANCE OF DEDUCTION AT THE RATE OF 50% SHOWS THAT THE ASSESSING OFFICER ALSO A GREED THAT SERVICES OF THE STAFF ITA NO.45/AHD/2011 HARI ORGOCHEM (P) LTD. VS. DCIT, CIRCLE-4, AHD. FOR A.Y. 2007-08 - 6 - OF THE PAYEE COMPANY WERE UTILIZED BY THE ASSESSEE COMPANY FOR ITS BUSINESS PURPOSE. NO MATERIAL WAS BROUGHT ON RECORD TO SHOW THAT THE CONSIDERATION FOR SERVICES RECEIVED BY THE ASSESSEE WAS SO EXCESSIVE AS TO WARRANT ANY DISALLOWANCE OUT OF THE SAME. IT IS ALSO OBSERVED THAT THE AMOU NT OF CONSIDERATION PAID WAS AS PER MEMORANDUM OF UNDERSTANDING ENTERED INTO BY THE ASSESSEE WITH THE PAYEE COMPANY. IN VIEW OF THE ABOVE FACTS AND CIRCUMSTAN CES, WE DO NOT FIND ANY GOOD REASON TO INTERFERE WITH THE ORDER OF THE LD. CIT(A ), HENCE THIS GROUND OF APPEAL OF THE REVENUE IS DISMISSED. 14. GROUND NO. 3 OF THE APPEAL IS DIRECTED AGAINST THE ORDER OF THE LD. CIT(A) DELETING DISALLOWANCE OF RS 1,50,848/- MADE BY THE ASSESSING OFFICER U/S 36(1)(VA) READ WITH SECTION 2(24)(X) OF THE ACT BEI NG THE EMPLOYEES CONTRIBUTION TO PROVIDENT FUND NOT DEPOSITED WITHIN THE STIPULAT ED TIME UNDER THE RELEVANT ACT. 15. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESS ING OFFICER OBSERVED THAT AS PER PROVISIONS OF SECTION 36(1)(VA) OF THE ACT, BELATED CONTRIBUTION OF PROVIDENT FUND CANNOT BE ALLOWED AS DEDUCTION, AND CONSIDERING THE SAME HE DISALLOWED FOLLOWING EMPLOYEES CONTRIBUTION TO PROVIDENT FUND: SR. NO. PARTICULARS AMOUNT (RS) DUE DATE GIVEN IN RESPECTIVE HEAD DUE DATE GIVEN IN SECTION 139(1) DATE OF PAYMENT 1 PROVIDENT FUND 84,068 20.03.2007 31.10.2007 24.03 .2007 2 PROVIDENT FUND 66,780 20.11.2006 31.10.2007 22.11 .2006 TOTAL 1,50,848 16. BEFORE LD. CIT(A), THE ASSESSEE RELIED UPON FOL LOWING DECISIONS: (A) DECISION OF KARNATAKA HIGH COURT IN CASE OF CIT VS. SABARI ENTERPRISE 298 ITR 141 WHEREIN HIGH COURT HAS HELD AS UNDER: HELD ACCORDINGLY, DISMISSING THE APPEALS, THE CONT RIBUTIONS MADE BY THE APPELLANT TO PROVIDENT FUND AND THE EMPLOYEES STATE INSURANCE WERE ALLOWABLE ITA NO.45/AHD/2011 HARI ORGOCHEM (P) LTD. VS. DCIT, CIRCLE-4, AHD. FOR A.Y. 2007-08 - 7 - DEDUCTIONS EVEN THOUGH THEY WERE MADE BEYOND THE ST IPULATED PERIOD AS CONTEMPLATED UNDER THE MANDATORY PROVISIONS OF SECT ION 36(1)(VA) READ WITH SECTION 2(24)(X) AND SECTION 43B AS THE AMOUNTS WER E PAID BY THE APPELLANT ON OR BEFORE THE DUE DATE FOR FURNISHING THE RETURN UNDER SECTION 139(1). THE AMENDMENT TO SECTION 4B, INSERTED BY THE FINANC E ACT, 2003, WITH EFFECT FROM APRIL 01, 2004 SHOULD BE READ RETROSPECTIVELY AND SHOULD BE UNDERSTOOD AS IF SECTION 43 WOULD NOT BE APPLICABLE TO THE APPELLANT .' (B) DECISION OF CIT V/S P. M. ELECTRONICS LTD. 133 ITR 161 WHEREIN DELHI HIGH COURT HAS HELD AS UNDER: SECTION 43B, READ WITH SECTION 36(1)(VA), OF THE I NCOME-TAX ACT, 1961 -BUSINESS DISALLOWANCE - CERTAIN DEDUCTIONS TO BE ALLOWED ONL Y ON ACTUAL PAYMENT - ASSESSMENT YEAR 1998-99 - WHETHER DELETION OF SECON D PROVISO TO SECTION 43B BY WAY OF AMENDMENT BY FINANCE ACT, 2003 IS RETROSPECT IVE IN NATURE - HELD, YES - WHETHER AMOUNTS PAID BY EMPLOYER TOWARDS PROVIDENT FUND CONTRIBUTIONS AFTER DUE DATE PRESCRIBED UNDER EMPLOYEES' PROVIDENT FUND ACT BUT BEFORE DUE DATE FOR FURNISHING OF RETURN OF INCOME ARE ALLOWABLE IN VIE W OF SECTION 43B, READ WITH SECTION 36(1)(VA) - HELD, YES' (C) DECISION OF AHMEDABAD ITAT IN CASE OF DYNAMIC I NDUSTRIES LIMITED (A.Y. 2001-2002), IN ITA NO 1545/AHD/2005 DATED 23/01/200 9 .....AFTER CAREFUL CONSIDERATION OF THE RIVAL SUBM ISSIONS, FACTS AND CIRCUMSTANCES OF THE CASE AND THE VARIOUS DECISIONS REFERRED TO B Y THE ASSESSEE IN ITS WRITTEN SUBMISSIONS, WE ARE OF THE OPINION THAT THOUGH THER E ARE CONTRARY DECISION OF VARIOUS HIGH COURTS, BUT IN VIEW OF THE PROPOSITION OF LAW THAT IN CASE OF CONTRARY DECISION, A DECISION FAVOURABLE TO THE ASSESSEE SHO ULD BE APPLIED, WE, RESPECTFULLY FOLLOWING THE PROPOSITION OF LAW, APPLY THE RATIO L AID DOWN BY THE HON'BLE HIGH COURT OF MADRAS IN THE CASE OF CIT VS. MADURAI DIST RICT CO-OP. SPINNING MILLS LTD. [2003] (131 TAXMAN 513) [MAD.] AND OF HON'BLE HIGH COURT OF KARNATAKA IN THE CASE OF CIT VS. SABARI ENTERPRISE (298 ITR 141) [KAR.], ARE OF THE OPINION THAT EMPLOYEES' CONTRIBUTION ALSO, IF PAID BEFORE THE DU E DATE FOR FURNISHING THE RETURN OF INCOME IS ELIGIBLE FOR DEDUCTION U/S 43-B OF THE ACT..'. (D) DECISION OF AHMEDABAD ITAT IN CASE OF GUJARAT C ONTAINERS LIMITED (A.Y. 2004- 05), IN ITA NO 2609/AHD/2008 DATED 03/03/2009. ... .IN VIEW OF THE FOREGOING AND ESPECIALLY WHEN IT HAS NOT BEEN DISPUTED BY THE REVENUE BEFORE US THAT THE AFORESAID CONTRIBUTIONS TOWARDS PF & ESI HAVE BEEN PAID BEFORE THE DUE DATE OF FILING OF RETURN U/S 13 9(1) OF THE ACT, IN THE LIGHT OF VIEW TAKEN BY THE HON'BLE DELHI HIGH COURT IN THE C ASE OF CIT VS. P.M. ELECTRONICS, 220 CTR (DEL.) 635 AND THE DECISION OF HON'BLE APEX COURT IN THE CASE OF VINAY CEMENT LTD. (SUPRA), WE HAVE NO HESIT ATION IN HOLDING THAT THE EMPLOYEES' CONTRIBUTION TOWARDS PF, HAVING BEEN MAD E BY THE ASSESSEE WITHIN THE DUE DATE OF FILING OF THE RETURN FOR THE YEAR UNDER CONSIDERATION. THERE IS NO GROUND FOR DISALLOWING THE SAME. THUS, GROUND NO. 2 RAISED IN THE APPEAL IS ALLOWED.' ITA NO.45/AHD/2011 HARI ORGOCHEM (P) LTD. VS. DCIT, CIRCLE-4, AHD. FOR A.Y. 2007-08 - 8 - 17. LD. CIT(A) AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE DELETED THE DISALLOWANCE BY OBSERVING THAT THE AHMEDABAD BENCH OF THE TRIBUNAL IN THE CASE OF DYNAMIC INDUSTRIES LIMITED (SUPRA) AND GUJARAT C ONTAINERS LIMITED (SUPRA) IN SIMILAR CIRCUMSTANCES HAS DECIDED THE ISSUE IN FAVO UR OF THE ASSESSEE. 18. THE LD. DR FILED BEFORE US COPY OF THE ORDER OF HONBLE GUJARAT HIGH COURT IN THE CASE OF CIT VS. GUJARAT STATE ROAD TRANSPORT CORPORATION (2014) 41 TAXMANN.COM 100 (GUJ.) AND SUBMITTED THAT THE HONB LE HIGH COURT HAS HELD THAT WITH RESPECT TO THE SUM RECEIVED BY THE ASSESSEE F IRM FROM ANY OF HIS EMPLOYEES TO WHICH PROVISIONS OF SUB-CLAUSE (X) OF CLAUSE (24) O F SECTION (2) APPLIES, THE ASSESSEE SHALL BE ENTITLED TO DEDUCTION IN COMPUTIN G THE INCOME REFERRED TO IN SECTION 28 WITH RESPECT TO SUCH SUM CREDITED BY THE ASSESSEE TO THE EMPLOYEES ACCOUNT IN THE RELEVANT FUND OR FUNDS ON OR BEFORE THE DUE DATE MENTIONED IN EXPLANATION TO SECTION 36(1)(VA). 19. THE LD. AR OF THE ASSESSEE VERY FAIRLY CONCEDED THAT THE ISSUE WAS COVERED IN FAVOUR OF THE REVENUE BY THE ABOVE CITED DECISIO N OF THE HONBLE GUJARAT HIGH COURT. THEREFORE, WE SET ASIDE THE ORDER OF THE LD. CIT(A) AND RESTORE BACK THE ORDER OF THE ASSESSING OFFICER. THUS, THIS GROUND OF APPEAL OF THE REVENUE IS ALLOWED. 20. IN THE RESULT, THE APPEAL OF THE REVENUE IS PAR TLY ALLOWED. ORDER PRONOUNCED IN THE COURT ON FRIDAY, THE 21 ST OF FEBRUARY, 2014 AT AHMEDABAD. SD/- SD/- (D. K. TYAGI) JUDICIAL MEMBER ( N.S. SAINI) ACCOUNTANT MEMBER AHMEDABAD; DATED 21/02/2014 GHANSHYAM MAURYA GHANSHYAM MAURYA GHANSHYAM MAURYA GHANSHYAM MAURYA, SR. P , SR. P , SR. P , SR. P. .. .S SS S. .. .