DCIT 1(1), MUMBAI V. HARDCASTLE & WAUD MFG CO. LTD, MUMBAI

ITA 4817/MUM/2010

• Counselvise Citation: [2011] 119 COUNSELVISE.COM (IT) 7281 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 1 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-08-2011
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: H
• Assessment Year: 2006-2007
• Appeal Filed On: 10-06-2010
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Keywords: Bad and doubtful debts
• Section: 43B; 14A; 115JB; 12; 10

Judgement Text

1 ITA NO. 4817/MUM/2010 (ASST YEAR 2006-07) & CROSS OBJECTION NO. 70/MUM/2011 IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI H BENCH MUMBAI BENCHES, MUMBAI BEFORE SHRI P M JAGTAP, AM & SHRI VIJAY PAL RAO, JM ITA NO. 4817/MUM/2010 (ASST YEAR 2006-07) & CROSS OBJECTION NO. 70/MUM/2011 THE DY COMMR OF INCOME TAX 1(1), MMBAI VS M/S HARDCASTLE & WAUD MFG CO LTD GATE NO. 10, 1 ST FLOOR BRABOURNE STADIUM 87 VEER NARIMAN ROAD MUMBAI 400 020 (APPELLANT/RESPONDENT ) (RESPONDENT/CROSS OBJECTOR ) PAN NO. AAACH0398F ASSESSEE BY SHRI SUNIL HIRAWAT REVENUE BY SHRI GOLI SRINIWAS RAO DT OF HEARING 21.7.2011 DT OF PRONOUNCEMENT 5 TH AUG 2011 ORDER PER VIJAY PAL RAO, JM THIS APPEAL BY THE REVENUE AND THE CROSS OBJECTION BY THE ASSESSEE ARE DIRECTED AGAINST THE ORDER DATED 19.1.2010 FOR THE ASSESSMENT YEAR 2006-07. ITA NO. 4817/MUM/2010 ( BY THE REVENUE) 2 THE REVENUE HAS RAISED THE FOLLOWING GROUNDS IN I TS APPEAL: I) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD CIT(A) ERRED IN DIRECTING TO DELETE THE ADDITION OF R.. 30, 85,955/- BEING PROVISION FOR DOUBTFUL DEBTS/ADVANCES WHILE COMPUTING INCOME U/S 115JB. II THE LD CIT(A) HAS FURTHER OVERLOOKED THE PROVISIONS OF EXPLANATION 1(I) TO SEC. 115JB INTRODUCED BY FINANCE (NO.2) ACT, 2009 WITH EF FECT FROM 1.4.2001. 2 ITA NO. 4817/MUM/2010 (ASST YEAR 2006-07) & CROSS OBJECTION NO. 70/MUM/2011 3 WE HAVE HEARD THE LD DR AS WELL AS THE LD AR OF T HE ASSESSEE AND CONSIDERED THE RELEVANT MATERIAL ON RECORD. THE ISSUE RAISED BY THE REVENUE IS NOW SETTLED AGAINST THE ASSESSEE IN VIEW OF THE AMENDMENT IN SECTION 115JB OF THE I T ACT VIDE FINANCE ACT (NO.2) 2009 WHEREBY CLAUSE (I) OF EXPLA NATION 1 HAS BEEN SUBSTITUTED W.E.F 1.4.2001. ACCORDINGLY, BY VIRTUE OF THE AMEN DMENT IN SEC. 115JB, WE DECIDE THE ISSUE IN FAVOUR OF THE REVENUE AND AGAINST THE ASSESSEE. THE ORDER OF THE CIT(A), QUA, THIS ISSUE IS SET ASIDE AND THE ORDER OF THE A SSESSING OFFICER IS RESTORED. CROSS OBJECTION NO. 70/MUM/2011( BY THE ASSESSEE) 4 THE ASSESSEE HAS RAISED THE FOLLOWING GROUND IN T HIS CROSS OBJECTION: I) ON FACTS AND IN LAW, THE LD CIT(A) ERRED IN CONFI RMING THE DISALLOWANCE OF RS. 10,53,334/- U/S 14A OF THE I T ACT. UNDER THE FACTS AND CIRCUMSTANCES OF THE MATER, HE OUGHT NOT TO HAVE CONFIRMED THE SAID DISAL LOWANCE WHILE COMPUTING INCOME UNDER NORMAL PROVISIONS OF THE I T AC T, 1961. 2 ON FACTS AND IN LAW, THE LD CIT(A) ERRED IN CONFIRM ING THE DISALLOWANCE OF RS. 37,146/- BEING ALLEGED DELAYED PAYMENT TOWARDS EMPL OYEES CONTRIBUTION TO PF (RS.36,458/-) AND ESIC (RS. 688/-). UNDER THE FAC TS AND CIRCUMSTANCES OF THE MATTER, HE OUGHT NOT TO HAVE CONFIRMED THE SAID DISA LLOWANCE. 3. ON FACTS AND IN LAW, THE LD CIT(A) ERRED IN CONFI RMING THE DISALLOWANCE OF RS. 10,53,334/- BY INVOKING THE PROVISIONS OF SEC.1 4A FOR COMPUTING BOOKS PROFIT U/S 115JB. UNDER THE FACTS AND CIRCUMSTANCES O F THE MATER, HE OUGHT NOT TO HAVE CONFIRMED THE SAID ADDITION. 5 GROUND NO.1 IS REGARDING DISALLOWANCE U/S 14A. 5.1 WE HAVE HEARD THE LD AR OF THE ASSESSEE AND THE LD DR AND CONSIDERED THE RELEVANT MATERIAL ON RECORD. AT THE OUTSET, WE FI ND THAT IN VIEW OF THE DECISION OF THE JURISDICTIONAL HIGH COURT IN THE CASE OF GODREJ & BOYCE MFG P LTD VS ACIT REPORTED IN 328 ITR 81, RULE 8D IS NOT APPLICABLE F OR THE ASSESSMENT YEAR UNDER CONSIDERATION AND THEREFORE, WE SET ASIDE THE ISSUE TO THE FILE OF THE ASSESSING OFFICER 3 ITA NO. 4817/MUM/2010 (ASST YEAR 2006-07) & CROSS OBJECTION NO. 70/MUM/2011 FOR FRESH ADJUDICATION IN LIGHT OF THE DECISION OF THE JURISDICTIONAL HIGH COURT IN THE CASE OF GODREJ & BOYCE MFG LD (SUPRA). 6 GROUND NO.2 IS REGARDING EMPLOYEES CONTRIBUTION TO PF & ESIC. 6.1 WE HAVE HEARD THE LD AR OF THE ASSESSEE AS WEL L AS THE LD DR AND CONSIDERED THE RELEVANT MATERIAL ON RECORD. THE ASSESSING OF FICER DISALLOWED THE PAYMENT OF RS. 5,63,990/- BEING DELAYED PAYMENTS TOWARDS EMPLO YEES CONTRIBUTION TO PF AND RS. 1,86,117/- TOWARDS EMPLOYEES CONTRIBUTION TO ESIC. SINCE THE PAYMENTS WERE MADE BEYOND THE DUE DATE, THE ASSESSING OFFICER DIS ALLOWED THE SAME. ON APPEAL, THE ASSESSEE BROUGHT OUT THE FACTS THAT MOST OF THE PAYMENTS WERE MADE WITHIN THE DUE DATE BECAUSE THE DUE DATE WAS EITHER SUNDAY OR HOLIDAY; THEREFORE, PAYMENTS WERE MADE ON THE NEXT WORKING DAY. AFTER CONSIDERIN G THESE FACTS, THE CIT(A ALLOWED THE CLAIM OF THE ASSESSEE TO THE EXTENT OF RS. 5,26,844/- AND SUSTAINED THE DISALLOWANCE TO THE EXTENT OF RS. 37,146/-. 6.2 THE PROVISIONS OF SEC. 43B INTER-ALIA APPLICABL E ONLY WHEN A SUM PAYABLE BY THE ASSESSEE AS AN EMPLOYER BY WAY OF CONTRIBUTION TO PF OR SUPERANNUATION FUND OR GRATUITY FUND OR ANY OTHER FUND FOR THE WELFARE OF EMPLOYEES ACTUALLY PAID BY THE ASSESSEE ON OR BEFORE THE DUE DATE APPLICABLE IN HI S CASE FOR FURNISHING THE RETURN OF INCOME UNDER SEC 139(1) OF THE ACT. THE SUM RECEIV ED BY THE ASSESSEE FROM EMPLOYEES TO CREDIT THE EMPLOYEES CONTRIBUTION TO THE RELEVANT FUNDS, THE PROVISIONS OF SEC. 36(1)(VA) AS WELL AS SEC. 2(24) (X) ARE APPLICABLE. 6.3 SECTION 36(1)(VA) READS AS UNDER: ANY SUM RECEIVED BY THE ASSESSEE FROM ANY OF HIS E MPLOYEES TO WHICH THE PROVISIONS OF SUB CLAUSE (X) OF CLAUSE (24) OF SEC. 2 APPLY, IF SUCH SUM S 4 ITA NO. 4817/MUM/2010 (ASST YEAR 2006-07) & CROSS OBJECTION NO. 70/MUM/2011 CREDITED BY THE ASSESSEE TO THE EMPLOYEES ACCOUNT I N THE RELEVANT FUND OR FUNDS ON OR BEFORE THE DUE DATE. EXPLANATION FOR THE PURPOSES OF THIS CLAUSE, DUE D ATE MEANS THE DATE BY WHICH THE ASSESSEE IS REQUIRED AS AN EMPLOYER TO CREDI T AN EMPLOYEES CONTRIBUTION TO THE EMPLOYEES ACCOUNT IN THE RELEVA NT FUND UNDER ANY ACT, RULE, ORDER OR NOTIFICATION ISSUED THERE UNDER OR UNDER ANY STANDING ORDER, AWARD, CONTACT OF SERVICE OR OTHERWISE. THEREFORE, IF THE SAID AMOUNT RECEIVED BY THE ASSES SEE FROM HIS EMPLOYER TOWARDS THEIR CONTRIBUTION IN THE RELEVANT FUNDS HAS NOT BE EN PAID ON OR BEFORE THE DUE DATE AS PRESCRIBED UNDER THE RELEVANT ACTS, UNDER WHICH THE EMPLOYEES ACCOUNT IN THE FUND HAS TO BE CREDITED, THEN THE CLAIM OF SUCH SU M IS NOT ALLOWABLE. THUS, AS PER PROVISIONS OF SEC. 2(24(X), THE SAID AMOUNT IS TREA TED AS INCOME OF THE ASSESSEE AND THE SAME IS ALLOWABLE AS DEDUCTION U/S 36(1)(VA), I F IT IS CREDITED TO EMPLOYEES ACCOUNT IN THE RELEVANT FUNDS ON OR BEFORE THE D UE DATE AS PRESCRIBED UNDER THE RELEVANT ACT. THEREFORE, WE DO NOT FIND ANY ERROR OR ILLEGALITY IN THE ORDER OF THE CIT(A), QUA, THIS ISSUE AND THE SAME IS UPHELD. 7 THE NEXT ISSUE REGARDING ADDITION MADE ON ACCOUNT OF PROVISIONS OF SEC. 14A FOR COMPUTING BOOK PROFIT. 8 WE HAVE HEARD THE LD AR OF THE ASSESSEE AND THE L D DR AND CONSIDERED THE RELEVANT MATERIAL ON RECORD. THE CIT(A) HAS ADJU DICATED THIS ISSUE IN PARA 10.3 OF HIS ORDER AS UNDER: 10.3 I HAVE PERUSED THE ASSESSMENT ORDER AS WELL AS THE APPELLANT SUBMISSION. HAVING CONSIDERED THE BOTH, I AM OF THE CONSIDERED VIEW THAT THE ASSESSING OFFICER HAS CORRECTLY MADE THE ADJUSTMENT U/S 115JB OF THE I T ACT. FOR MAKING THIS PROPOSITION I INTEND TO TAKE RELEVAN T PORTION OF SEC. 115JB(1) PROVISO TO EXPLANATION (1) SUB CLAUSE (F) WHICH IS AS UNDER: 5 ITA NO. 4817/MUM/2010 (ASST YEAR 2006-07) & CROSS OBJECTION NO. 70/MUM/2011 (F) THE AMOUNT OR AMOUNTS OF EXPENDITURE RELATABLE TO ANY INCOME TO WHICH (SECTION 10 (OTHER THAN THE PROVISIONS CONTAINED IN C LAUSE (38) THEREOF ) OR SCTION11 OR SECTION 12 APPLY; OR) WHEN THIS ADJUSTMENT IS MADE BY THE LOWER AUTHORITI ES AS PER PROVISIONS OF SEC 115JB THEN WE DO NOT SEE ANY REASON TO INTERFERE WITH THE ORDER OF THE CIT(A), QUA THIS ISSUE, AND THE SAME IS UPHELD. 9 IN THE RESULT, THE APPEAL FILED BY THE REVENUE IS ALLOWED WHEREAS THE CROSS OBJECTION FILED BY THE ASSESSEE IS PARTLY ALLOWED FOR STATISTICAL PURPOSE. ORDER PRONOUNCED ON THE 5 TH DAY OF AUG 2011. SD/- SD /- ( P M JAGTAP ) ACCOUNTANT MEMBER ( VIJAY PAL RAO ) JUDICIAL MEMBER PLACE: MUMBAI : DATED: 5 TH AUG 2011 RAJ* COPY FORWARDED TO: 1 APPELLANT 2 RESPONDENT 3 CIT 4 CIT(A) 5 DR /TRUE COPY/ BY ORDER DY /AR, ITAT, MUMBAI