THE DCIT RG 8(3), MUMBAI V. M/S. TOPS SECURITY LTD, MUMBAI

ITA 5393/MUM/2008

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 1404 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 10 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-06-2010
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: E
• Next Hearing Date: 20-10-2009
• Assessment Year: 2005-2006
• Appeal Filed On: 27-08-2008
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: HEMANT J LAL
• Assessee Lawyers: CHETAN KARIA
• Keywords: Depreciation; Opportunity of being heard; Additional evidence; Revenue expenditure; Capital expenditure; Set aside
• Section: 43B; 208; 68

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES E, MUMBAI BEFORE SHRI R.S.SYAL, AM AND SHRI V.DURGA RAO, JM ITA NO.5186/MUM/2008 : ASST.YEAR 2005-2006 M/S.TOP SECURITY LIMITED 5, SUJATA BUILDING, JUHU TARA ROAD JUHU, MUMBAI 400 049. PA NO.AAACT0160F. VS. THE ADDL.COMMISSIONER OF INCOME-TAX RANGE 8(3) MUMBAI. (APPELLANT) (RESPONDENT) ITA NO.5393/MUM/2008 : ASST.YEAR 2005-2006 THE ADDL.COMMISSIONER OF INCOME-TAX RANGE 8(3) MUMBAI. VS. M/S.TOP SECURITY LIMITED 5, SUJATA BUILDING, JUHU TARA ROAD JUHU, MUMBAI 400 049. (APPELLANT) (RESPONDENT) REVENUE BY : SHRI HEMANT J.LAL ASSESSEE BY : SHRI CHETAN KARIA O R D E R PER R.S.SYAL, AM : THESE TWO CROSS APPEALS ONE BY THE ASSESSEE AND THE OTHER BY THE REVENUE - ARISE OUT OF THE ORDER PASSED BY THE COMMISSIONER OF INCOME-TAX (APPEALS) ON 9.6.2008 IN RELATION TO THE ASSESSMENT YEAR 2005-20 06. 2. FIRST GROUND OF THE ASSESSEES APPEAL IS AGAINST THE CONFIRMATION OF DISALLOWANCE OF RS.8,88,686 OUT OF TRAVELLING EXPEN SES. AT THE VERY OUTSET THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE LEARNED CIT(A), FOLLOWING HIS ORDER FOR ASSESSMENT YEAR 2003-2004 ON SIMILAR ISSU E SUSTAINED THE DISALLOWANCE. WHILE REFERRING TO THE COPY OF THE ORDER DATED 20.1 1.2009 PASSED BY THE TRIBUNAL IN ASSESSMENT YEAR 2003-2004 IN ITA NO.4964/MUM/200 7, THE LEARNED A.R. SUBMITTED THAT THE TRIBUNAL WAS PLEASED TO DECIDE T HIS ISSUE AGAINST THE ASSESSEE. IT IS COMMON SUBMISSION THAT THE FACTS AND CIRCUMSTANC ES OF THE INSTANT GROUND ARE SIMILAR TO THOSE ALREADY DECIDED IN ASSESSMENT YEAR 2003-2004. RESPECTFULLY FOLLOWING THE PRECEDENT, WE DISMISS THIS GROUND OF APPEAL. ITA NOS.5186 & 5393/MUM/2008 M/S.TOP SECURITY LIMITED. 2 3. GROUND NO.2 IS AGAINST THE CONFIRMATION OF DISAL LOWANCE OF 10% OUT OF OTHER TRAVELLING EXPENSES. THE ASSESSING OFFICER MADE DIS ALLOWANCE OF 10% OF OTHER TRAVELLING EXPENSES AMOUNTING TO RS.6,40,850 ON THE GROUND THAT THE EXPENSES WERE NOT VERIFIABLE. NO RELIEF WAS ALLOWED IN THE FIRST APPEAL. 4. HAVING HEARD THE RIVAL SUBMISSIONS AND PERUSED T HE RELEVANT MATERIAL ON RECORD, IT IS NOTICED THAT THE POSITION AS PREVAIL ING BEFORE THE AUTHORITIES BELOW QUA THE NON-VERIFIABILITY OF EXPENSES REMAINS THE SAME. IN SUCH A SITUATION WE HAVE NO OPTION BUT TO UPHOLD THE IMPUGNED ORDER ON THIS ISS UE. THIS GROUND IS NOT ALLOWED. 5. GROUND NO.3 IS AGAINST THE CONFIRMATION OF DISAL LOWANCE AMOUNTING TO RS.24,08,760 OUT OF INTEREST PAID. HERE ALSO THE LE ARNED A.R. FAIRLY CONCEDED THAT THE AUTHORITIES BELOW HAVE FOLLOWED THEIR RESPECTIV E ACTIONS IN ASSESSMENT YEAR 2003-2004 FOR MAKING AND CONFIRMING THE DISALLOWANC E AND THE TRIBUNAL HAS DISMISSED THIS GROUND IN ITS ORDER PASSED FOR ASSES SMENT YEAR 2003-2004 AS REFERRED TO ABOVE. RESPECTFULLY FOLLOWING THE PRECEDENT, WE UPHOLD THE IMPUGNED ORDER ON THIS ISSUE. THIS GROUND IS NOT ACCEPTED. 6. GROUND NO.4 IS AGAINST THE CONFIRMATION OF DISAL LOWANCE OF EXPENSES OF RS.2,23,67,630 BY TREATING THEM AS CAPITAL IN NATUR E. BRIEFLY STATED THE FACTS OF THIS GROUND ARE THAT THE ASSESSEE, IN THE CURRENT YEAR, LAUNCHED A NEW LINE OF BUSINESS UNDER THE NAME AND STYLE OF TOPSLINE PROVIDING EMER GENCY RESPONSE SERVICES (ERS) I.E. AMBULANCE FACILITIES FITTED WITH MEDICAL EQUIPMENT IN CASE OF EMERGENCIES LIKE ACCIDENT ETC. THESE SERVICES WERE LAUNCHED ON 11.09.2004. SEPARATE ACCOUNTS WERE MAINTAINED IN RESPECT OF THE SE SERVICES AND SALES WERE DECLARED AT RS.85.11 LAKHS AND NET LOSS OF RS.584.9 3 LAKHS WAS SHOWN. THE A.O. OBSERVED THAT A LARGE AMOUNT WAS SPENT ON THE ADVER TISEMENT OF THIS NEW LINE OF BUSINESS. HE HELD THAT THE PRE-OPERATIVE EXPENSES O F SUCH NEW PROJECT COULD NOT BE ITA NOS.5186 & 5393/MUM/2008 M/S.TOP SECURITY LIMITED. 3 ALLOWED AS DEDUCTION. FOR THIS PROPOSITION HE RELIE D ON THE JUDGEMENT OF THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF TRADE WINGS LTD. VS. CIT [(1990) 185 ITR 267 (BOM.)]. HE ALSO CONSIDERED THE JUDGEMENTS OF THE HONBLE CA LCUTTA HIGH COURT IN THE CASE OF INDIAN OXYGEN LTD. VS. CIT [(1987) 164 ITR 466 (CAL .)] AND ASHOKE MARKETING LTD. VS. CIT [(1994) 208 ITR 941 ( CAL.)] FOR THE SAME PROPOSITION. IN THE LIGHT OF THESE JUDGEMENTS THE ASSESSING OFFICER NOTICED THAT THE ASSESSEE HAD COMMENCED A NEW LINE OF BUSINESS AND H ENCE THE EXPENSES INCURRED IN RELATION TO SUCH NEW LINE OF BUSINESS ON OR BEFORE THE COMMENCEMENT OF COMMERCIAL OPERATIONS I.E. 11.09.2004, COULD NOT B E ALLOWED. SUCH AMOUNT WAS DETERMINED AT RS.1,45,63,372. IT WAS FURTHER NOTICE D THAT THE ASSESSEE INCURRED ADVERTISEMENT EXPENSES IN TOTAL IN RESPECT OF ERS B USINESS OUT OF WHICH AN AMOUNT OF RS.1.10 CRORE WAS INCURRED PRIOR TO THE COMMENCE MENT OF BUSINESS, WHICH WAS DULY INCLUDED BY HIM IN THE DISALLOWANCE MADE AT RS .1.45 CRORES. ON THE PERUSAL OF DETAILS OF THE REMAINING ADVERTISEMENT EXPENSES HE NOTICED THAT SOME OF THE ENTRIES RELATED TO EXPENDITURE INCURRED BEFORE THE DATE OF COMMENCEMENT BUT THE BILLS FOR WHICH WERE RAISED AFTER THAT. HE, THEREFO RE, CAME TO HOLD THAT 50% OF THE BALANCE EXPENSES OF RS.1,56,16,516 WERE ALSO TO BE TREATED CAPITAL IN NATURE. RESULTANTLY DISALLOWANCE WAS MADE FOR RS.2,23,67,63 0 (RS.1,45,63,372 + 78,08,258). THE LEARNED CIT(A) UPHELD THE ASSESSMEN T ORDER ON THE ISSUE THAT THE COMMENCEMENT OF ERS WAS A NEW AND DISTINCT LINE OF BUSINESS, INDEPENDENT OF EARLIER BUSINESS OF PROVIDING SECURITY TO THE CUSTO MERS. HE ALSO TOOK INTO CONSIDERATION THE JUDGEMENT OF THE HONBLE GUJARAT HIGH COURT IN THE CASE OF GUJARAT MINERAL DEVELOPMENT CORPORATION LTD. VS. CI T [(1983) 143 ITR 822 (GUJ.)] WHICH HAS LAID DOWN CERTAIN TESTS TO ASCERTAIN WHE THER THE EXPENDITURE IS IN CAPITAL OR REVENUE IN NATURE. COMING TO THE QUAN TUM OF THE ADDITION, THE LEARNED CIT(A) NOTED THAT THE EXPENDITURE OF RS.1.45 CRORE WAS PRE-OPERATIVE EXPENDITURE AND WAS RIGHTLY DISALLOWED BY THE AO. HOWEVER THE REMAINING DISALLOWANCE OF RS.78.08 LAKHS MADE BY THE AO AT 50% OF REMAINING E XPENDITURE ON ESTIMATE BASIS ITA NOS.5186 & 5393/MUM/2008 M/S.TOP SECURITY LIMITED. 4 WAS HELD TO BE NOT SUSTAINABLE. BOTH THE SIDES ARE IN APPEAL AGAINST THEIR RESPECTIVE STANDS. 7. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE RELEVANT MATERIAL ON RECORD. THERE IS NO DISPUTE ON FACT THAT IF THERE I S EXPANSION OF SOME LINE OF BUSINESS THEN THE EXPENDITURE OTHERWISE IN THE NATU RE OF REVENUE, PRIOR TO THE SETTING UP OF SUCH BUSINESS, CANNOT BE CAPITALIZED . IF HOWEVER A DIFFERENT LINE OF BUSINESS IS SET UP, THEN SUCH EXPENDITURE CANNOT BE TREATED AS REVENUE BUT HAS TO BE CAPITALIZED WITH THE FIXED ASSETS AND DEPRECIATION IS TO BE ALLOWED. FROM THE FACTS NARRATED ABOVE IT IS SEEN THAT THE ASSESSEE WAS ENG AGED IN THE BUSINESS OF DETECTIVE AND SECURITY SERVICES. IN THE YEAR UNDER CONSIDERAT ION A NEW LINE OF BUSINESS WAS SET UP FOR PROVIDING EMERGENCY SERVICES I.E. AMBULANCE FACILITIES EQUIPPED WITH MEDICAL EQUIPMENTS IN CASE OF EMERGENCY LIKE ACCIDE NT ETC. OBVIOUSLY THE BUSINESS OF DETECTIVE AND SECURITY SERVICES IS QUITE DISTINC T FROM THAT OF PROVIDING AMBULANCE FACILITIES. BY NO STANDARD THE NEW BUSINESS I.E. ER S CAN BE CONSIDERED AS EXTENSION OF THE EARLIER BUSINESS. THUS PRE-OPERATIVE EXPENSE S OF SUCH BUSINESS CANNOT BE ALLOWED AS REVENUE EXPENDITURE. THE LEARNED A.R. HA S HEAVILY RELIED ON THE JUDGEMENT OF THE DELHI HIGH COURT IN THE CASE OF CIT VS. MODI INDUSTRIES LTD. (NO.3) [(1993) 200 ITR 341(DEL.)] . WE FIND THAT THERE IS NO RESEMBLANCE OF THE FACTS OF THAT CASE WITH THOSE UNDER CONSIDERATION. IN THAT CASE THE ASSESSEE WAS ENGAGED IN MANUFACTURING OF SUGAR, VANASPATI ETC. L ATER ON A NEW STEEL UNIT WAS SET UP. WHEN THE QUESTION OF DISALLOWANCE OF EXPENSES I N RELATION TO THE NEW UNIT CAME UP BEFORE THE HONBLE HIGH COURT, IT WAS OBSERVED THAT THE ASSESSEE WHO WAS ALREADY IN THE MANUFACTURING BUSINESS STARTED MANUF ACTURING OF A NEW COMMODITY AND IN A LARGER SENSE THE BUSINESS OF THE ASSESSEE REMAINED THE SAME, VIZ., THE BUSINESS OF MANUFACTURE. IT CAN BE EASILY NOTICED THAT THE FACTS OF THAT CASE ARE NOT MATCHING INASMUCH AS THE HITHERTO BUSINESS OF DETEC TIVE AND SECURITY SERVICES CARRIED ON BY THE ASSESSEE WAS SEPARATE AND DISTINC T FROM THE NEW BUSINESS OF ITA NOS.5186 & 5393/MUM/2008 M/S.TOP SECURITY LIMITED. 5 PROVIDING EMERGENCY FACILITIES STARTED IN THIS YEAR . WE FIND THAT THE ISSUE RAISED HEREIN HAS ALREADY BEEN DECIDED BY THE HONBLE JUR ISDICTIONAL HIGH COURT IN TRADE WINGS LTD. (SUPRA) . IN THAT CASE THE ASSESSEES EXISTING BUSINESS WAS THAT OF TRAVELLING AGENCY. IT INCURRED EXPENDITURE IN EXPLO RING THE FEASIBILITY OF SETTING UP OF A HOTEL. THE TRIBUNAL CONFIRMED THE DISALLOWANCE OF EXPENDITURE INCURRED IN CONNECTION WITH THE FEASIBILITY OF THE BUSINESS VEN TURE. UPHOLDING THE VIEW TAKEN BY THE TRIBUNAL, THE HONBLE BOMBAY HIGH COURT HELD THAT : WE ARE IN AGREEMENT THAT THE TRAVEL AGENCY BUSINESS DOES NOT INCLUDE HO TELIERING. RESULTANTLY THE QUESTION WAS DECIDED IN FAVOUR OF THE REVENUE. THE OTHER JUDGEMENTS RELIED ON BY THE ASSESSING OFFICER, AS NOTED ABOVE, ALSO SUPPORT THIS VIEW. WE, THEREFORE, HOLD IN PRINCIPLE, THAT THE NEW BUSINESS STARTED BY THE ASSESSEE IN PROVIDING EMERGENCY RESPONSE SERVICES IS A NEW BUSINESS AND CANNOT BE C ONSIDERED AS EXTENSION OF THE EXISTING BUSINESS AND AS SUCH THE PRE-OPERATIVE EXP ENSES OF SUCH BUSINESS CANNOT BE ALLOWED AS DEDUCTION. OUR VIEW IS FORTIFIED BY THE RECENT JUDGEMENT OF THE HONBLE SUPREME COURT IN CIT VS. MCDOWELL (NO.2) [(2009) 314 ITR 174 (SC)] IN WHICH IT HAS BEEN HELD THAT DEPRECIATION ON MACHINERY USED F OR FAST FOOD BUSINESS WHICH WAS CLOSED, IS NOT ALLOWABLE AGAINST INCOME OF LIQUOR U NIT. 8. NOW COMING TO THE QUANTUM OF DISALLOWANCE, THE LEARNED A.R. CONTENDED THAT WITHOUT PREJUDICE TO HIS ABOVE ARGUMENTS EVEN IF ANY DISALLOWANCE WAS TO BE SUSTAINED, THEN THAT SHOULD BE RESTRICTED ONLY UPTO THE DATE OF SETTING UP OF THE BUSINESS AND AS SUCH THE EXPENSES INCURRED AFTER SU CH SETTING UP OF THE NEW LINE OF BUSINESS BE ALLOWED. WE NOTE THAT THE HONBLE DELHI HIGH COURT IN CIT VS. L.G.ELECTRONIC INDIA LTD. HAS HELD THE EXPENDITURE INCURRED BY THE ASSESSEE AFTER SETTING UP OF THE BUSINESS WAS ALLOWABLE EVEN THOUG H THE BUSINESS HAD NOT COMMENCED. IT WAS HELD THAT THE DATE OF SETTING UP OF THE BUSINESS AND THE DATE OF ITS COMMENCEMENT ARE TWO SEPARATE DATES AND HENCE T HE EXPENDITURE INCURRED AFTER THE SETTING UP OF THE BUSINESS, WHICH IS OTHERWISE OF THE REVENUE NATURE, CANNOT BE ITA NOS.5186 & 5393/MUM/2008 M/S.TOP SECURITY LIMITED. 6 CAPITALIZED. THE SAME VIEW HAS BEEN TAKEN BY THE HO NBLE GUJARAT HIGH COURT IN CIT VS. WESTERN INDIA SEAFOOD (P.) LTD. [(1993) 199 ITR 777 (GUJ.)] . IN THIS CASE IT WAS HELD THAT THE BUSINESS COULD BE DEEMED TO HAVE BEEN SET UP WHEN A GODOWN WAS ACQUIRED WHERE PROCESSING COULD BE DONE AND ALL THE REVENUE EXPENDITURE INCURRED THEREAFTER WERE DEDUCTIBLE U/S.37 THOUGH T HE ACTUAL COMMENCEMENT TOOK PLACE LATER ON. FROM THE ABOVE JUDGEMENTS IT IS CLE AR THAT ANY EXPENDITURE INCURRED BY THE ASSESSEE PRIOR TO THE SETTING UP OF THE BUSI NESS IS TO BE CAPITALIZED AND THE EXPENDITURE, WHICH IS OTHERWISE OF THE REVENUE NAT URE, BUT SPENT AFTER THE SETTING UP OF THE BUSINESS, WHETHER BEFORE OR AFTER THE CO MMENCEMENT OF THE BUSINESS, HAS TO BE ALLOWED AS DEDUCTION. SECTION 3 PROVIDES THAT IN THE CASE OF BUSINESS OR PROFESSION NEWLY SET UP, OR SOURCE OF INCOME NEWLY COMING INTO EXISTENCE, IN THE SAID FINANCIAL YEAR, THE PREVIOUS YEAR SHALL BE THE PERIOD BEGINNING WITH THE DATE OF SETTING UP OF THE BUSINESS OR PROFESSION OR, AS THE CASE MAY BE, THE DATE ON WHICH THE SOURCE OF INCOME NEWLY COMES INTO EXISTENCE AND ENDING WITH THE SAID FINANCIAL YEAR. THE HONBLE DELHI HIGH COURT IN CIT VS. HUGHES ESCORTS COMMUNICATIONS LTD. [(2009) 311 ITR 253 (DEL.)] HAS HELD THAT WHERE THE BUSINESS WAS SET UP ON THE DATE ON WHICH THE ASSESSEE, INCORPORATED FOR CARRYI NG ON BUSINESS OF THE SETTING UP OF SATELLITE COMMUNICATION SYSTEM, PLACED THE ORDER FOR PURCHASE OF VSAT EQUIPMENT. EXPENDITURE INCURRED AFTER THE DATE OF S ETTING UP WAS HELD TO BE DEDUCTIBLE AS REVENUE EXPENDITURE. THE LEARNED COUN SEL FOR THE ASSESSEE CONTENDED THAT THE FIRST AMBULANCE WAS PURCHASED BY THE ASSES SEE ABOUT THREE FOUR MONTHS PRIOR TO 11.09.2004, BEING THE DATE OF COMMERCIAL C OMMENCEMENT OF OPERATIONS, AND HENCE SUCH EARLIER DATE BE CONSIDERED AS THE DA TE OF SETTING UP OF THE BUSINESS. WE ARE IN AGREEMENT WITH THE ABOVE PROPOSITION OF LAW THAT ONLY THE EXPENDITURE INCURRED UP TO THE DATE OF SETTING UP OF THE BUSINE SS IS TO BE CAPITALIZED AND THE BUSINESS IS SET UP ON THE DOING OF THE ACTIVITY, I .E., PURCHASE OF THE FIRST AMBULANCE IN THE INSTANT CASE. SINCE THE NECESSARY DETAILS A ND FACTS ON THIS ISSUE ARE NOT AVAILABLE BEFORE US, IN OUR CONSIDERED OPINION, IT WILL BE JUST AND FAIR IF WE SET ASIDE ITA NOS.5186 & 5393/MUM/2008 M/S.TOP SECURITY LIMITED. 7 THE IMPUGNED ORDER ON THIS ISSUE AND REMIT THE MATT ER TO THE FILE OF ASSESSING OFFICER FOR WORKING OUT THE QUANTUM OF CAPITAL EXPE NDITURE UP TO THE DATE OF THE FIRST PURCHASE OF VEHICLE USED FOR ERS BUSINESS. TH E REMAINING AMOUNT HAS TO BE ALLOWED AS DEDUCTION, IF IT IS OTHERWISE OF REVENU E NATURE. FURTHER THE EXPENDITURE INCURRED UP TO THE DATE OF PURCHASE OF FIRST VEHICL E WHETHER, PAID BEFORE OR AFTER THAT DATE HAS TO BE INCLUDED IN THE PRE-OPERATIVE E XPENSES. THE AMOUNT SO WORKED OUT WILL BE CHARACTERIZED AS CAPITAL EXPENDITURE, O N WHICH DEPRECIATION IS TO BE GRANTED. ON THIS ASPECT, OUR VIEW IS SUPPORTED BY THE JUDGEMENT OF THE MADRAS HIGH COURT IN CIT VS. LUCAS TVS LTD. [(1977) 110 ITR 346 (MAD.)] . THIS DISPOSES OF GROUND NO.4 OF THE ASSESSEES APPEAL AND GROUND NO.3 OF THE REVENUES APPEAL. 9. GROUND NO.5 IS AGAINST THE DISALLOWANCE OF BONUS MADE BY THE ASSESSING OFFICER U/S.43B OF THE ACT. THE ASSESSING OFFICER M ADE ADDITION OF RS.2,83,40,504 ON THE GROUND THAT NO DETAILS IN AUDIT REPORT ABOUT THESE PAYMENTS WERE AVAILABLE. THE LEARNED CIT(A) UPHELD THE DISALLOWANCE. THE LEA RNED A.R. HAS BROUGHT TO OUR NOTICE THAT THE ASSESSEE MOVED APPLICATION U/S.154 OF THE ACT AGAINST SUCH DISALLOWANCE, WHICH HAS SINCE BEEN ALLOWED BY THE A.O. AS THE NECESSARY RELIEF HAS BEEN GRANTED BY THE A.O. IN THE RECTIFICATION PROCEEDINGS, THIS GROUND HAS, THEREFORE, BECOME INFRUCTUOUS. 10. GROUND NO.6 IS AGAINST DISALLOWANCE OUT OF PROV IDENT FUND PAYMENT AMOUNTING TO RS.95,14,841 WHICH WAS REDUCED IN THE FIRST APPEAL BY THE LEARNED CIT(A) TO RS.38,95,085. THE ASSESSEE HAS RAISED AN ADDITIONAL GROUND OF APPEAL ABOUT THE DISALLOWANCE OF EMPLOYEES CONTRIBUTION T O THE EPF AMOUNTING TO RS.69,52,801. GROUND NO.2 OF THE REVENUES APPEAL IS AGAINST THE CONFIRMATION OF DISALLOWANCE OUT OF EMPLOYEES CONTRIBUTION TO PROV IDENT FUND ON ACCOUNT OF LATE PAYMENT AMOUNTING TO RS 47,38,203. GROUND NO.4 IS A GAINST RESTRICTING THE ITA NOS.5186 & 5393/MUM/2008 M/S.TOP SECURITY LIMITED. 8 DISALLOWANCE ON ACCOUNT OF EPF AND ESI AT RS.38,95, 085 AND RS.5,88,650 RESPECTIVELY. 11. WE HAVE HEARD BOTH SIDES ON THIS ISSUE AND PERU SED THE RELEVANT MATERIAL ON RECORD. THE LEGAL POSITION WHICH NOW STANDS IS THA T NO DISALLOWANCE CAN BE MADE U/S.43B IN RESPECT OF EMPLOYERS OR EMPLOYEES SHAR E TO EPF/ESI ETC. IF SUCH AMOUNT IS PAID ON OR BEFORE THE DUE DATE OF FILING THE RETURN OF INCOME U/S.139(1) OF THE ACT. IF HOWEVER ANY AMOUNT IS DEPOSITED BEYOND SUCH DUE DATE, THEN THE DISALLOWANCE IS SUSTAINABLE. OUR VIEW IS SUPPORTED BY THE JUDGEMENT OF THE HONBLE SUPREME COURT IN THE CASE OF CIT VS. ALOM EXTRUSIONS LTD. [(2009) 319 ITR 306 (SC)] , CIT VS. VINAY CEMENT LTD. [(2007) 213 CTR (SC) 268] AND THE RECENT JUDGEMENT OF THE HONBLE DELHI HIGH COURT IN THE CA SE OF CIT VS. AIMIL LTD. [(2010) 321 ITR 508 (DEL.)] . THE JUDGEMENT OF THE HONBLE DELHI HIGH COURT IN AIMIL LTD. (SUPRA) HAS BEEN SUBSEQUENTLY FOLLOWED BY VARIOUS BENCHES OF THE MUMBAI TRIBUNAL. COPIES OF CERTAIN ORDERS, FOLLOWI NG SUCH JUDGEMENT, HAVE BEEN PLACED ON RECORD BY THE LD. AR. SINCE IT IS A COMM ON SUBMISSION BY BOTH THE SIDES THAT CERTAIN DETAILS ABOUT THE DATES OF PAYMENT WER E FILED BEFORE THE LEARNED CIT(A) FOR THE FIRST TIME, WHO ACTED ON THE SAME IN VIOLAT ION OF RULE 46A, WE, THEREFORE, SET ASIDE THE IMPUGNED ORDER ON THIS SCORE AND REMIT TH E MATTER TO THE FILE OF A.O. FOR COMPUTING THE DISALLOWANCE U/S.43B AFRESH IN ACCORD ANCE WITH THE PRINCIPLE STATED HEREINABOVE ABOUT THE CONTRIBUTION BY EMPLOYER AND EMPLOYEE TO EPF AND ESI ETC. NEEDLESS TO SAY THE ASSESSEE WILL BE ALLOWED A REAS ONABLE OPPORTUNITY OF BEING HEARD. THESE GROUNDS ARE DISPOSED OFF ACCORDINGLY. 12. GROUND NO.1 OF THE REVENUES APPEAL IS AGAINST THE DELETION OF DISALLOWANCE OUT OF SERVICE TAX. BRIEFLY STATED THE FACTS OF THI S GROUND ARE THAT THE ASSESSEE HAD SHOWN SERVICE TAX PAYABLE IN ITS BALANCE SHEET TO T HE TUNE OF RS.4,96,15,044. ON ITA NOS.5186 & 5393/MUM/2008 M/S.TOP SECURITY LIMITED. 9 BEING SHOW CAUSED AS TO WHY THE UNPAID AMOUNT SHOUL D NOT BE DISALLOWED U/S.43B, THE ASSESSEE FURNISHED REPLY WHICH HAS BEEN REPRODU CED ON PAGES 6 AND 7 OF THE ASSESSMENT ORDER CLAIMING THAT THE AMOUNT SHOULD NO T BE DISALLOWED AS IT WAS NOT PAYABLE IN THE PREVIOUS YEAR. NOT CONVINCED, THE AS SESSING OFFICER HELD THAT A SUM OF RS.3,94,04,341 WAS NOT DEDUCTIBLE AS IT WAS NOT PAID BY THE ASSESSEE. IN THE FIRST APPEAL THE ASSESSEE FURNISHED THE DETAIL OF RS.4,96 ,15,044 AS UNDER:- SERVICE TAX PAID AFTER MARCH 1,51,82 ,537 SERVICE TAX AGAINST DEBTORS 31.3.2005 2,74,26,695 SERVICE TAX NOT PAID 74,04,435 -------------- 5,00,13,667 AMOUNT PAID PENDING ADJUSTMENT 3,95,623 -------------- 4,96,15,044 ========= 13. THE LEARNED CIT(A) NOTED THAT THE PROVISIONS OF SECTION 43B PROVIDE FOR DISALLOWANCE IN RESPECT OF ANY SUM PAYABLE BY THE ASSESSEE, WHICH IS NOT PAID. HE CONSIDERED THE PROVISIONS OF SECTION 68 OF SERVI CE TAX ACT ALONG WITH RULE 6 AS PER WHICH THE SERVICE TAX IS REQUIRED TO BE PAID TO THE CENTRAL GOVERNMENT BY THE 5 TH OF THE MONTH IMMEDIATELY FOLLOWING THE CALENDAR MO NTH IN WHICH THE PAYMENT IS RECEIVED. HE, THEREFORE, HELD THAT THE LIABILITY TO PAY SHALL ARISE ONLY WHEN THE AMOUNT IS ACTUALLY COLLECTED BY THE ASSESSEE. IF TH E AMOUNT AFTER COLLECTION IS NOT PAID WITHIN THE PRESCRIBED PERIOD, ONLY THEN SECTIO N 43B, PROVIDING FOR DISALLOWANCE, SHALL APPLY. HE NOTED THAT A SUM OF RS.74,04,435 WAS NOT PAID EVEN THOUGH IT WAS COLLECTED BY THE ASSESSEE DURING THE YEAR. TO THIS EXTENT THE DISALLOWANCE WAS UPHELD. HOWEVER, THE REMAINING AMO UNT OF RS.3,19,99,906 WAS HELD TO BE WRONGLY ADDED. THE REVENUE IS IN APPEAL AGAINST THE DELETION OF ADDITION ITA NOS.5186 & 5393/MUM/2008 M/S.TOP SECURITY LIMITED. 10 OF RS.3,19,99,906, WHEREAS THE ASSESSEE IS SATISFIE D WITH THE ADDITION SUSTAINED ON THIS COUNT BECAUSE OF THE RECEIPT AND NON-PAYMENT O F SERVICE TAX IN THE YEAR. 14. AFTER CONSIDERING THE RIVAL SUBMISSIONS AND PER USING THE RELEVANT MATERIAL ON RECORD IT IS SEEN THAT A SUM OF RS.2,74,26,695 REPR ESENTS THE AMOUNT WHICH WAS DEBITED TO THE PROFIT AND LOSS ACCOUNT BUT NOT PAID TO THE GOVERNMENT AS IT WAS NOT COLLECTED. THE REMAINING AMOUNT OF RS.45 LAKHS AND ODD REPRESENTS THE AMOUNT WHICH WAS COLLECTED BY THE ASSESSEE AND IN TURN PAI D TO THE GOVERNMENT IN THIS YEAR. THE CONTENTION OF THE LEARNED DEPARTMENTAL R EPRESENTATIVE THAT THE SAID SUM OF RS.3.19 CRORE WHICH WAS CLAIMED AS DEDUCTION SHO ULD BE DISALLOWED U/S.43B AS IT WAS NOT PAID TO THE GOVERNMENT, DOES NOT MERIT ACCEPTANCE IN VIEW OF A DIRECT ORDER OF THE TRIBUNAL PASSED BY THE CHENNAI BENCH IN ACIT VS. REAL IMAGE MEDIA TECHNOLOGIES (P.) LTD. [(2008) 114 ITD 573 (CHENNAI )] . IN THIS CASE IT HAS BEEN HELD THAT SERVICE TAX THOUGH BILLED BUT NOT RECEIVE D NOT HAVING BEEN CREDITED TO THE CENTRAL GOVERNMENT BY VIRTUE OF FINANCE ACT, 1994 R EAD WITH RULE 6 OF SERVICE TAX RULES, 1994, CAN NOT BE DISALLOWED U/S.43B. NO CONTRARY JUDGEMENT HAS BEEN BROUGHT TO OUR NOTICE BY THE LEARNED DEPARTMENTAL R EPRESENTATIVE. RESPECTFULLY FOLLOWING THE PRECEDENT, WE UPHOLD THE VIEW TAKEN BY THE LEARNED CIT(A) ON THIS ISSUE. THIS GROUND IS NOT ALLOWED. 15. LAST GROUND OF THE REVENUES APPEAL IS AGAINST THE DELETION OF DISALLOWANCE OF UNPAID INTEREST TO CORPORATION BANK. THE ASSESSI NG OFFICER MADE ADDITION OF RS.26,46,916 ON THIS ACCOUNT FOR THE REASON THAT TH E NECESSARY DETAILS WERE NOT FURNISHED. THE LEARNED CIT(A), ON THE PERUSAL OF TH E DETAILS FILED BEFORE HIM FOR THE FIRST TIME, DELETED THE ADDITION. THE LEARNED A.R. HAS FAIRLY CONCEDED THAT THE ADDITIONAL EVIDENCE PLACED BEFORE THE LEARNED CIT(A ) WAS NOT REMITTED TO THE A.O. FOR COMMENTS AND OBSERVATION. UNDER SUCH CIRCUMSTA NCES WE ARE OF THE CONSIDERED OPINION THAT IT WILL BE JUST AND FAIR IF THE IMPUGN ED ORDER ON THIS ISSUE IS SET ASIDE ITA NOS.5186 & 5393/MUM/2008 M/S.TOP SECURITY LIMITED. 11 AND THE MATTER IS RESTORED TO THE FILE OF A.O. WE O RDER ACCORDINGLY AND DIRECT HIM TO DECIDE THIS ISSUE AFRESH AS PER LAW AFTER ALLOWING A REASONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. 16. IN THE RESULT, BOTH THE APPEALS ARE PARTLY ALLO WED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED ON THIS 30 TH DAY OF JUNE, 2010. SD/- SD/- (V.DURGA RAO) (R.S.SYAL) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI : 30 TH JUNE, 2010 . DEVDAS* COPY TO : 1. THE APPELLANT. 2. THE RESPONDENTS. 3. THE CIT CONCERNED 4. THE CIT(A)-XXIX, MUMBAI. 5. THE DR/ITAT, MUMBAI. 6. GUARD FILE. TRUE COPY. BY ORDER ASSISTANT REGISTRAR, ITAT, MUMBAI. ITA NOS.5186 & 5393/MUM/2008 M/S.TOP SECURITY LIMITED. 12 DATE INITIAL 1. DRAFT DICTATED ON 2 4 .06.2010 SR.PS 2. DRAFT PLACED BEFORE AUTHOR 2 5 .06.2010 SR.PS 3. DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER JM/AM 4. DRAFT DISCUSSED/APPROVED BY SECOND MEMBER. JM/AM 5. APPROVED DRAFT COMES TO THE SR.PS/PS SR.PS/PS 6. KEPT FOR PRONOUNCEMENT ON SR.PS 7. FILE SENT TO THE BENCH CLERK SR.PS 8. DATE ON WHICH FILE GOES TO THE HEAD CLERK. 9. DATE OF DISPATCH OF ORDER. *