M/S RAJASTHAN STATE BEVERAGES, Jaipur V. ACIT, Jaipur

ITA 540/JPR/2011

• Counselvise Citation: 54023114 RSA 2011
• Duration Of Justice: 4 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-10-2011
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 14-10-2011
• Assessment Year: 2007-2008
• Appeal Filed On: 01-06-2011
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: SUBHASH CHANDRA
• Assessee Lawyers: ANURAG KALAWATIA
• Keywords: Business expenditure; Competent authority
• Section: 43B; 37

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES, B JAIPUR (BEFORE SHRI R.K.GUPTA AND SHRI N.L. KALRA) ITA NO.540/JP/2010 ASSESSMENT YEAR : 2007-2008 M/S. RAJASTHAN STATE BEVERAGES VS. ASSTT. COMMIS SIONER CORPORATION LIMITED, JAIPUR. OF INCOME-TAX, CI RCLE 6, JAIPUR. (APPELLANT) (RESPONDENT) ITA NO.545/JP/2011 ASSESSMENT YEAR: 2007-2008 THE DY.C.I.T., CIRCLE-6, VS. M/S. RAJASTHAN STA TE JAIPUR. BEVERAGES CORP. LTD., JAIPUR. (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI ANURAG KALAWATIA DEPARTMENT BY: SHRI SUBHASH CHANDRA DATE OF HEARING: 14.10.2011 DATE OF PRONOUNCEMENT: ORDER PER SHRI N.L. KALRA, A.M. THE ASSESSEE AS WELL AS THE REVENUE HAS FILED APPE AL AGAINST ORDER OF LD. CIT (A)- II, JAIPUR DATED 22.03.2011. FIRST WE WILL TAKE UP APPEAL OF THE ASSESSEE. 2 2. THE ONLY GRIEVANCE OF THE ASSESSEE IS THAT LD. C IT (A) HAS ERRED IN CONFIRMING THE ADDITION OF RS.7,70,806/- ON ACCOUNT OF DEMURRAGE C HARGES THOUGH SUCH AMOUNT WAS NOT CREDITED IN PROFIT AND LOSS ACCOUNT. 3. THE FACTS IN BRIEF ARE AS UNDER: THE GOODS SUPPLIED BY THE MANUFACTURERS AGAINST THE ORDER FOR SUPPLIES ARE HELD AT THE DEPOTS OF THE RSBCL. MANUFACTURER/S UPPLIERS UNDERTAKE THE RESPONSIBILITY FOR CREATING DEMAND OF THE GOODS SUPPLIED TO THE CORPORATION. PAYMENT FOR THE STOCK SUPPLIED IS MADE AT PREVAILING RATES, AFTER SALE OF SUCH SUPPLIES. THE RSBCL HAS A POLICY OF LEVYING DEMURRAGE CHARGE ON SLOW MOVING STOCKS WHICH IS MORE THAN 60 DAYS AND 120 DAYS RESPECTIVELY FOR BEER & IMFL @ RS.2/- PER CASE PER DAY. DURING THE YEAR, THE ASSESSEE COMPANY HAS SOLD UNAPPROVED BRANDS FOR RS.19,81,205/- WHICH WAS CONTRARY TO LIQUOR SUPPLY POLICY 2007. ON ACCOUNT OF SALE OF UNAPPROVED BRANDS, DEMURRAGE CHARGES OF RS.7,70,806 /- WERE NOT CREDITED TO THE PROFIT & LOSS ACCOUNT, THEREBY THE PROFITS OF THE COMPANY WERE UNDERSTATED BY RS.7,70,806/- CONSEQUENTLY, THE AO ADDED THE SAID SUM OF RS.7,70,806/- TO THE TOTAL INCOME OF THE ASS ESSEE. AS PER THE TERMS & CONDITIONS OF LIQUOR SUPPLY POLICY OF 2006-07, TH E MANUFACTURER/SUPPLIER PLACES AN OFFER TO SUPPLY LIQ UOR BASED ON THE DEMAND PREVAILING IN THE RESPECTIVE LOCATIONS. THER EFORE, AN ORDER FOR SUPPLY (OFS) IS ISSUED TO THE MANUFACTURER/SUPPLIER . GOODS SUPPLIED AGAINST OFS ARE STACKED IN THE DEPOTS OF THE CORPOR ATION WHICH IS INSURED BY RSBCL. MANUFACTURER/SUPPLIERS UNDERTAKE THE RESP ONSIBILITY FOR CREATING DEMAND FOR THE GOODS SUPPLIED TO THE CORPO RATION. PAYMENT FOR THE STOCK SUPPLIED IS MADE AT PREVAILING RATES, AFT ER SALE OF SUCH SUPPLIES. STOCKS REMAINED UNSOLD AFTER A SPECIFIED PERIOD IN THE DEPOT OF THE CORPORATION ARE SUBJECT TO LEVY OF DEMURRAGE CHARGE WHICH IS DEBITED/RECOVERED FROM THE MANUFACTURERS FROM TIME TO TIME. THE CORPORATION HAD CHARGED RS.35,27,602/- TOWARDS DEMU RRAGE FROM THE SUPPLIERS FOR THE DEFAULT FOR NON-MOVING STOCK WHIC H HAS BEEN SHOWN IN THE PROFIT & LOSS ACCOUNT FOR THE PERIOD ENDING ON 31.3.2007. THE SALE OF UNAPPROVED BRANDS REFERS TO THE SALE OF BRANDS CARR IED OVER FROM F.Y.05- 06, FOR WHICH THE RATE WAS NOT OFFERED BY THE CONCE RNED SUPPLIER, RATHER THE RATE WAS DECIDED BY CORPORATION, AT ITS OWN & T HE STOCK IF SOLD WAS SHOWN AGAINST THIS CATEGORY. THE CORPORATION CONSID ERING THE SLOW MOVING NATURE OF THESE BRANDS AND RESPECTIVE MANUFACTURERS /SUPPLIERS ARE NO LONGER ASSOCIATED AND REGISTERED THEIR BRANDS TO TH E CORPORATION EXEMPTED THE DEMURRAGE CHARGES OF RS.7,70,806/- AND THEREFOR E IT WAS NOT CREDITED TO THE PROFIT & LOSS ACCOUNT AS STATED IN ANNEXURE- 1 TO THE ANNUAL REPORT PAGE 32 AT SR. NO.(F) AND THE SAME IS REPRODUCED HE REIN BELOW FOR THE SAKE OF READY REFERENCE:- 3 REFER NOTE NO.08 IN NOTES ON ACCOUNTS, DURING THE YEAR COMPANY HAS SOLD UNAPPROVED BRANDS FOR RS.19,81,205/- WHICH IS CONTRARY TO LSP 2007. DEMURRAGE CHARGES OF RS.7,70,806/- ARE NOT CREDITED TO PROFIT & LOSS ACCOUNT ON SALE OF UNAPPROVED BRANDS. THUS THE PROFIT ARE UNDERSTATED BY RS.7,70,806/- AND CONSEQUENTLY LOANS AND ADVANCES ARE UNDERSTATED BY RS.5,00,080/- AND CURRENT LIABILITIES ARE OVERSTATED BY RS.2,70,726/- DEMURRAGE CHARGE, IF ANY, UP TO 31.3.06 ON THESE BRANDS WERE RECOVERED. CONSIDERING SLOW MOVING NATURE OF THESE BRANDS AND RESPECTIVE MANUFACTURERS ARE NO LONGER ASSOCIATED AND REGISTERED THEIR BRANDS TO CORPORATION, LEAVES NO OPTION TO CORPORATION, BUT TO EXEMPT THE DEMURRAGE CHARGES, IF ANY. 4. THE LD. CIT (A) HAS CONFIRMED THE ADDITION AFTER OBSERVING AS UNDER: I HAVE DULY CONSIDERED THE SUBMISSIONS OF THE APPEL LANT. IT IS NOT REPUDIATED THAT THE APPELLANT HAS CHARGED THE DEMUR RAGE CHARGES OF RS.7,70,806/-. THE APPELLANT HAS CLAIMED THAT SALE OF UNAPPROVED BRANDS WAS CARRIED OVER FROM FY 05-06, HOWEVER IF THE SALE HAD TAKEN PLACE THEN THERE WAS NO CASE OF CHARGING DEMURRAGE CHARGES SIN CE IT IS CHARGED FOR NON MOVING STOCK. HENCE THIS CONTENTION OF THE APPE LLANT SUFFERS FROM FALLACY. THERE IS NO CASE THAT STOCK OF UNAPPROVED BRANDS WAS CARRIED OVER FROM FY 05-06 SINCE ALL THE UNSOLD STOCK OF MANUFAC TURERS/SUPPLIERS HAS TO BE RETURNED AT THE END OF THE YEAR. THE APPELLANT H AS NOT LED ANY EVIDENCE THAT WHO WERE THE ALLEGED MANUFACTURERS/SUPPLIERS A GAINST WHOM DEMURRAGE CHARGES OF RS.7,70,806/- WERE LEVIED AND HOW THEY WERE NO LONGER ASSOCIATED WITH THE APPELLANT. THE APPELLANT BEING A STATE GOVT. UNDERTAKING WOULD HAVE MADE ALL EFFORTS FOR RECOVER Y. THE APPELLANT HAS ALSO FAILED TO SUBSTANTIATE ITS CLAIM THAT CHARGING OF DEMURRAGES CHARGES WAS A UNILATERAL ACT AND AT RATES NOT OFFERED BY TH E MANUFACTURERS/SUPPLIERS. THERE IS NO OSTENSIBLE REA SON AS TO WHY DEMURRAGE CHARGES WERE LEVIED BY THE APPELLANT AT I TS OWN RATES AND WHY NO RECOVERY COULD BE MADE. SINCE THE DEMURRAGE CHAR GES HAD BEEN LEVIED, THE AUDITORS THOUGHT IT PRUDENT TO COMMENT THAT IT WAS NOT CREDITED TO THE PROFIT & LOSS ACCOUNT AND THEREFORE PROFITS OF THE APPELLANT WERE UNDERSTATED TO THAT EXTENT. THE INCOME TAX ACT IS N OT CONCERNED WHETHER SALE OF UNAPPROVED BRANDS WAS IN CONTRAVENTION OF L IQUOR SUPPLY POLICY OF 2006-07 OR NOT. THE FACT THAT SALE OF RS.19,81,205/ - FOR UNAPPROVED BRANDS WAS MADE, IS NOT DISPUTED THEREFORE THE APPE LLANT HAD RIGHTLY LEVIED DEMURRAGE CHARGES FOR SLOW MOVING STOCK AND IT CONSTITUTED INCOME IN THE HANDS OF APPELLANT. ACCORDINGLY THE ARGUMENT S OF THE APPELLANT ARE REJECTED AND ADDITION OF RS.7,70,806/- MADE BY THE AO IS CONFIRMED. 5. BEFORE US THE LD. A/R HAS FILED THE SUBMISSIONS AS UNDER: 4 AS PER THE TERMS & CONDITIONS OF LIQUOR SOURCING PO LICY OF 2006-07, THE MANUFACTURER/SUPPLIER PLACES AN OFFER TO SUPPLY LIQ UOR BASED ON THE DEMAND PREVAILING IN THE RESPECTIVE LOCATIONS. THER EAFTER, AN ORDER FOR SUPPLY (OFS) IS ISSUED TO THE MANUFACTURER/SUPPLIER . GOODS SUPPLIED AGAINST OFS ARE STACKED IN THE DEPOTS OF THE CORPOR ATION WHICH IS INSURED BY RSBCL. MANUFACTURER/SUPPLIERS UNDERTAKE THE RESP ONSIBILITY FOR CREATING DEMAND FOR THE GOODS SUPPLIED TO THE CORPO RATION. PAYMENT FOR THE STOCK SUPPLIED IS MADE AT PREVAILING RATES, AFT ER SALE OF SUCH SUPPLIES. STOCKS REMAINED UNSOLD AFTER A SPECIFIED PERIOD IN THE DEPOT OF THE CORPORATION ARE SUBJECT TO LEVY OF DEMURRAGE CHARGE WHICH IS DEBITED/RECOVERED FROM THE MANUFACTURERS FROM TIME TO TIME. THE CORPORATION HAD CHARGED RS.3,52,76,02 TOWARDS D EMURRAGE FROM THE SUPPLIERS FOR THE DEFAULT FOR NON-MOVING STOCK WHIC H HAS SHOWN IN THE PROFIT & LOSS ACCOUNT FOR THE PERIOD ENDING ON 31.3 .2007. THE SALE OF UNAPPROVED BRANDS REFERS TO THE SALE OF BRANDS CARRIED OVER FROM F.Y. 05-06, OF WHICH THE RATE WAS NOT OFFERED BY THE CONCERNED SUPPLIER, RATHER THE RATE WAS DECIDED BY CORPORATIO N, AT ITS OWN & THE STOCK SOLD IS SHOWN AGAINST THIS CATEGORY. THE CORPORATION CONSIDERING THE SLOW MOVING NATURE OF THESE BRANDS AND ALSO THAT THE RESPECTIVE MANUFACTURERS/SUPPLIERS OF SUCH OLD STOCK WERE NO LONGER ASSOCIATED AND REGISTERED THEIR BRANDS WITH THE CORPORATION EXEMPTED THE DEMURRAGE CHARGES OF RS.7,70,806/- AND THEREFORE NOT CREDITED THE SAME TO THE PROFIT & LOSS ACCOUNT AS S TATED IN ANNEXURE-2 AT POINT NO.(F) TO THE ANNUAL REPORT AT PAGE NO.35 AND THE SAME IS REPRODUCED HEREIN BELOW FOR THE SAKE OF READY REFER ENCE:- (F) REFER NOTE NO.08 IN NOTES ON ACCOUNTS DURING HE YEAR COMPANY HAS SOLD UNAPPROVED BRANDS FOR RS.19,81,205/- WHICH IS CONTRARY TO LSP 2007. DEMURRAGE CHARGES OF RS.7,70,806/- NOT CREDITED TO PROFIT & LOSS ACCOUNT ON SALE OF UNAPPROVED BRAND. THUS THE PROFIT ARE UNDERSTATED BY RS.7,70,806.00 AND CONSEQUENTLY LOANS AND ADVANCES ARE UNDERSTATED BY RS.5,00,080/- AND CURRENT LIABILITIES ARE OVERSTATED BY RS.2,70,726.00 DEMURRAGE CHARGE, IF ANY, UPTO 31.3.2006 ON THESE BRANDS WERE RECOVERED. CONSIDERING SLOW MOVING NATURE OF THESE BRANDS AND RESPECTIVE MANUFACTURERS ARE NO LONGER ASSOCIATED AND REGISTERED THEIR BRANDS TO CORPORATION, LEAVES NO OPTION TO CORPORATION, BUT TO EXEMPT THE DEMURRAGE CHARGES, IF ANY. 5 6. ON THE OTHER HAND THE LD. D/R SUPPORTED THE ORDE R OF AUTHORITIES BELOW: 7. WE HAVE HEARD BOTH THE PARTIES. THE ASSESSEE IS FOLLOWING THE MERCANTILE SYSTEM OF ACCOUNTING. IN THIS SYSTEM, ONE HAS TO ASCERTAIN AS TO WHETHER ANY ITEM OF PROFIT OR EXPENDITURE HAS ACCRUED OR NOT. AN ENTRY IN THE BOO KS OF ACCOUNT IS NOT CONCLUSIVE TO DECIDE THE ISSUE. SUTLEJ COTTON MILLS LTD. V CIT 116 ITR 1 (S.C.) CIT V SHOORGI VALLABHDASS ARCL CO. 46 ITR 144 (S.C .) CIT V INDIA DISCOUNT CO. LTD. 75 ITR 191 (S.C.) TUTICORIN ALKALI AND CHEMICALS AND FERTILISERS LTD . V CIT 227 ITR 172 (S.C.) 8. HENCE THE CONTENTION OF THE LD. A/R IS NOT ACCEP TABLE THAT AMOUNT CAN NOT BE ADDED AS THE AMOUNT IS NOT CREDITED IN PROFIT AND L OSS ACCOUNT. IF A RECEIPT HAS ACCRUED BUT NOT SHOWN IN THE BOOKS THEN IT DOES NOT MEAN TH AT SUCH ACCRUAL OF MONEY IS NOT TO BE CONSIDERED FOR INCOME. WHEN A PERSON GETS A RIGHT T O CLAIM DEBT FROM OTHERS THEN SUCH DEBT STAND ACCRUED. IN THE CASE OF NAPTHA JHAKRI JO INT VENTURE V ACIT 5 ITR (TRIB) 75 (MUMBAI) , IT WAS HELD THAT REFUND OF TERMINAL EXCI SE DUTY ACCRUES WHEN APPLICATION FOR REFUND IS FILED. THE LUCKNOW BENCH IN THE CASE OF M .B. COLD STORAGE (P) LTD. V ITO 140 TTJ 344 HAS AN OCCASION TO CONSIDER THE CASE OF A C OLD STORAGE WHERE RECEIPTS WERE RECOGNIZED WHEN GOODS WERE LIFTED. IN THE MERCANTIL E SYSTEM OF ACCOUNTING, THE RECEIPTS FOR THE LAST QUARTER WERE HELD AS ACCRUED SUBJECT T O EXCLUSION OF RECEIPTS OF LAST QUARTER OF LAST YEAR. 6 9. THE EXPLANATION OF THE ASSESSEE WAS THAT SUCH DE MURRAGE CHARGE WAS EXEMPTED. EXEMPTION IS AVAILABLE WHICH IS OTHERWISE INCLUDIBL E. NO RESOLUTION OF BOARD OF DIRECTORS FILED. AS PER POLICY, DEMURRAGE CHARGE WAS RECEIVAB LE. IF AFTER ACCRUAL THE INCOME IS WAIVED THEN SUCH WAIVER IS TO BE EXAMINED AS TO WHE THER THE SAME SATISFIES THE REQUIREMENT OF SECTION 37. IF THE AMOUNT RECEIVABLE FROM THE PARTIES IS NOT RECEIVED OR IS WRITT OFF IN THE BOOKS THEN THE SAME CAN BE CLAIMED AS BAD DEBT U/S 36 (1)(VII). 10. THE AUDITOR HAS POINTED OUT THAT DUE TO NOT MAK ING SUCH ENTRY OF DEMURRAGE CHARGES IN PROFIT AND LOSS ACCOUNT, THEN LOANS AND ADVANCES ARE UNDERSTATED BY RS.5,00,080/- AND LIABILITY OVERSTATED BY RS.2,70,7 26/-. IT MEANS THAT ASSESSEE HAS TO PAY RS.2,70,726/- TO THOSE PARTIES FROM WHOM DEMURRAGE WAS TO CHARGED. HENCE TO THIS EXTENT, THE ASSESSEE CAN RECOVER THROUGH JOURNEL EN TRY WITHOUT WRITING OFF DEBT UNLESS DEMURRAGE IS WAIVED BY BOARD OF DIRECTORS AND ALLOW ED BY REVENUE U/S 37 OF THE I.T. ACT. 11. CONSIDERING THE ABOVE FACTUAL POSITION. WE HOLD THAT LD. CIT (A) WAS JUSTIFIED IN CONFIRMING THE ADDITION OF RS.7,70,606/-. 12. NOW WE WILL TAKE UP THE APPEAL OF THE REVENUE T HE FIRST GRIEVANCE OF THE REVENUE IS THAT LD. CIT (A) HAS ERRED IN DELETING THE ADDITION OF RS.15 CRORES MADE BY THE A.O. BY DISALLOWING THE PAYMENT OF PRIVILEGE FEE WITHOUT AP PRECIATING THE FACT THAT SAID EXPENDITURE IS OF CAPITAL NATURE. 7 13. THE LD. CIT (A) HAS FOLLOWED THE ORDER OF HIS P REDECESSOR AND SUCH DECISION HAS BEEN CONFIRMED BY THE TRIBUNAL VIDE ITS ORDER NO.90 1/JP/2009 DATED 20.08.2010. THE LD. CIT (A) HAS REPRODUCED THE OBSERVATIONS OF THE TRIB UNAL AS UNDER: WE HAVE ALREADY DECIDED THE APPEAL IN THE CASE OF R AJASTHAN STATE GANGANAGAR SUGAR MILLS LTD. AND HAVE HELD THAT THE PRIVILEGE FEE PAID BY ASSESSEE IS ALLOWABLE AS BUSINESS EXPENDITURE. THE FEE WAS PAID FOR GRANTING RIGHT TO MANUFACTURE AND VEND THE LIQUOR W HICH IS EXCLUSIVELY DOMAIN OF THE STATE. DETERMINATION OF PRIVILEGE FEE AT ANY REASONABLE AMOUNT WAS WITHIN THE JURISDICTION OF STATE AUTHORI TIES I.E. EXCISE DEPARTMENT AND LEVY FEE CANNOT BE TERMED AS APPLICA TION OF INCOME OR DIVIDEND. THIS IS PURELY A BUSINESS EXPENDITURE AND HAS TO BE ALLOWED IN VIEW OF PROVISION OF SECTION 37 (1) OF THE ACT. THE AO HAS MADE AN OBJECTION THAT PRIVILEGE FEE WAS NOT PAID AGAINST A NY AGREEMENT ENTERED BETWEEN ASSESSEE COMPANY AND THE GOVERNMENT OF RAJA STHAN. IT IS NOT NECESSARY THAT ANY FEE IS TO BE PAID UNDER ANY MOU. THE ASSESSEE COMPANY IN WHICH THE MAIN STAKE HOLDERS ARE GOVERNM ENT OF RAJASTHAN, WAS ALLOWED TO MANUFACTURE AND VEND LIQUOR AFTER FI XING THE PRIVILEGE FEE WHICH WAS AGREED BY THE ASSESSEE AND WAS PAID ACCOR DINGLY. FIRSTLY, IT WAS LEVIED ON AN EXCESS AMOUNT, THEREAFTER ON REPRE SENTATION OF ASSESSEE COMPANY IT WAS REDUCED TO RS.12.50 CRORES AND THE S AME WAS PAID BY THE ASSESSEE TO START ITS BUSINESS ACTIVITY. IT IS FURT HER SEEN THAT THE PRIVILEGE FEE WAS COMPULSORY TO START THE BUSINESS ACTIVITY. IN OUR CONSIDERED VIEW, THE LEVY OF PRIVILEGE FEE IS LIKE LICENSE FEE TO ST ART THE BUSINESS, OTHERWISE THE ASSESSEE COULD NOT HAVE STARTED THE MANUFACTURI NG AND VEND THE LIQUOR. THE ASSESEE HAS EARNED A HUGE PROFIT EVEN AFTER PAY ING THIS PRIVILEGE FEE AS THE RETURN FILED BY THE ASSESSEE WAS OF RS.4.98 CRORES OR SO. THE DEPARTMENT HAS RAISED AN OBJECTION THAT THE EXC ISE COMMISSIONER IS ALSO THE DIRECTOR OF THE ASSESSEE COMPANY, THEREFOR E, THIS IS A WELL PLANNED ACTIVITY AND HAS TO BE TREATED AS APPLICATION OF MO NEY. IN OUR CONSIDERED VIEW, THIS OBJECTION OF THE DEPARTMENT IS ALSO NOT TENABLE FOR THE SIMPLE REASON THAT ANY AUTHORITY UNDER ANY ACT CAN BE DEPU TED AS A DIRECTOR OR IN ANY OTHER CAPACITY BY THE GOVERNMENT TO LOOK AFT ER THE BUSINESS ACTIVITY. THE FEE IS NOT LEVIED BY THE EXCISE COMMI SSIONER BUT IS LEVIED ON BEHALF OF THE EXCISE DEPARTMENT. EXCISE DEPARTMENT IS NOT A SHAREHOLDER IN THE ASSESSEE COMPANY Y AS THE SHAREHOLDER IS THE RAJASTHAN GOVERNMENT. THEREFORE, THIS OBJECTION OF THE DEPART MENT ALSO DOES NOT HOLD GOOD. THE LD. D/R HAS ALSO STATED THAT FEE PAI D BY ASSESSEE IS IN CONTRAVENTION OF SECTION 29 OF EXCISE ACT IS NOT TH E ISSUE HERE. THE ISSUE IS WHETHER THE FEE PAID IS FOR THE PURPOSE OF BUSINESS OR NOT. IF IT IS IN CONTERAVENTION OF PROVISIONS OF EXCISE ACT, THE EXC ISE AUTHORITY WILL TAKE 8 APPROPRIATE ACTION, BUT IF THE SAME IS PAID FOR BUS INESS PURPOSE, THEN THE PAYMENT CANNOT BE HELD AS IN GENUINE OR HELD AS NOT ALLOWABLE IN VIEW OF PROVISIONS OF SECTION 37 (1) OF THE ACT. IT IS FURT HER SEEN THAT EVEN THERE IS NO CONTRAVENTION IN PAYING THE PRIVILEGE FEE AS THE FEE IS PAID UNDER SECTION 24 OF THE EXCISE AND THE PROVISIONS OF SECT ION 28, 29 ARE NOT APPLICABLE AS THEY ARE ON SEPARATE ASPECT. WE HAVE GONE THROUGH THE OTHER CASE LAWS, RELIED UPON BY LD. A/R AND FOUND THAT TH EY ALSO SUPPORT THE CASE OF THE ASSESSEE. IN VIEW OF THE ABOVE FACTS AND CIR CUMSTANCES, WE HOLD THAT PRIVILEGE FEE PAID BY ASSESSEE IS ALLOWABLE AS BUSI NESS EXPENDITURE. ACCORDINGLY WE DIRECT THE AO TO ALLOW THE DEDUCTION TO THE ASSESSEE. SINCE THE FACTS ARE IDENTICAL, THEREFORE, FOLLOWING THE P RECEDENT, WE CONFIRM THE ORDER OF LD. CIT (A) HERE IN THE PRESENT CASE ALSO. 14. THE LD. CIT (A) AFTER CONSIDERING THE ABOVE OBS ERVATION DELETED THE ADDITION AFTER OBSERVING AS UNDER: IN THE PRESENT CASE, THE APPELLANT COMPANY WAS GRAN TED EXCLUSIVE PRIVILEGE FOR WHOLESALE TRADE OF INDIAN MADE FOREIG N LIQUOR & BEER IN THE STATE OF RAJASTHAN FOR THE FINANCIAL YEAR 2006-07 U NDER THE PROVISIONS OF THE RAJASTHAN EXCISE ACT, 1950 BY COMPETENT AUTHORI TY UNDER THE SAID ACT. IN EXERCISE OF ITS POWERS UNDER SECTION 30 AND 42 ( C) OF THE RAJASTHAN EXCISE ACT 1950, THE COMPETENT AUTHORITY UNDER THE SAID ACT HAS LEVIED A PRIVILEGE FEES OF RS.15 CRORES FOR FY 2006-07 VIDE ITS ORDER NO.F.4(5)FD/EX/2005 DATED 28.3.2007 UPON THE APPELL ANT COMPANY IN LIEU OF GRANTING THE SAID PRIVILEGE. IN VIEW OF THESE FA CTS AND FOLLOWING THE ORDER OF HONBLE TRIBUNAL, JAIPUR FOR AY 2006-07, I DIRECT THE AO TO DELETE THE ADDITION OF RS.15 CRORES. THIS GROUND OF APPEAL IS ALLOWED. 15. AFTER HEARING BOTH THE PARTIES, WE FEEL THAT IS SUE BEFORE US STANDS COVERED BY THE ORDER OF TRIBUNAL IN THE CASE OF THE ASSESSEE FOR E ARLIER YEARS AND HENCE WE DECLINE TO INTERFERE IN THE FINDING OF LD. CIT (A). 16. THE SECOND GRIEVANCE OF THE REVENUE IS THAT LD. CIT (A) HAS ERRED IN: DELETING ADDITION OF RS.7,61,177/- MADE ON ACCOUNT OF DEPOSITING THE PF/ESI PAYMENT BEYOND THE PRESCRIBED TIME DESPITE T HE FACT THAT AS PER SECTION 36(1)(VA) EMPLOYEES CONTRIBUTION SHOULD HAV E BEEN DEPOSITED IN 9 TIME AS PRESCRIBED IN THE RELEVANT LAW. SECTION 43B PERMITS DELAYED PAYMENT IF PAID BEFORE FILING OF ROI AS PER SECTION 139(1) IN CASE OF EMPLOYERS CONTRIBUTION NOT IN THE CASE OF EMPLOYEE S CONTRIBUTION. 17. THIS ISSUE ALSO STANDS DECIDED BY TRIBUNAL AGAI NST THE REVENUE IN THE CASE OF SOME BLOCK PINTS (P) LTD. IN ITA NO.1173/JP/2010. VIDE O RDER DATED 28.04.2011 FOR THE ASSESSMENT YEAR 07-08. IT WILL BE USEFUL TO REPRODU CE PARA 5.2 FROM THE ABOVE DECISION. 5.2 THIS ISSUE HAS BEEN DECIDED AGAINST THE REVENU E BY THE TRIBUNAL IN THE CASE OF M/S. SWASTIK METAL CASTING VS. ACIT (IT A NO.964/JP/2010) VIDE ORDER DATED 20.04.2011. IT WILL BE USEFUL TO R EPRODUCE PARA 3.2 AND 3.3 OF THE ABOVE REFERRED ORDER. 3.2 THE LD. CIT (A) HELD THAT THE EMPLOYEES CONTRI BUTION TO PF AND ESI IS NOT TO BE ALLOWED AS THE SAME HAS NOT BEEN PAID WITHIN THE STIPULATED TIME AS PROVIDED IN RESPECTIVE ACT OF PF AND ESI. T HE LD. CIT(A) CONFIRMED THE ACTION OF THE A.O. 3.3 WE HAVE HEARD BOTH THE PARTIES. HONBLE APEX CO URT IN THE CASE OF CIT VS ALOM EXTRUSIONS LTD., 319 ITR 306 HAS HELD T HAT THE PROVISO INTRODUCED BY THE FINANCE ACT, 2003 IS CURATIVE IN NATURE AND IS RETROSPECTIVE. HOWEVER, WE ARE CONCERNED WITH THE A SSESSMENT YEAR 2007- 08. THE HONBLE APEX COURT HAS REFERRED TO THE EXPL ANATION GIVEN IN SECTION 36(1)(V)(A) OF THE ACT. THE ISSUE OF EMPLOY EES CONTRIBUTION COVERED U/S 43B HAS BEEN CONSIDERED BY THE HONBLE KARNATAKA HIGH COURT IN THE CASE OF CIT VS SABRI ENTERPRISES, 298 ITR 141. THE HONBLE APEX COURT HAS UPHELD THE DECISION OF HONBLE KARNA TAKA HIGH COURT IN THE CASE OF CIT VS SABRI ENTERPRISES (SUPRA) WHILE DECIDING THE APPEAL IN THE CASE OF CIT VS ALOM EXTRUSIONS LTD. (SUPRA). TH E HONBLE APEX COURT HAS DISMISSED THE SLP IN THE CASE OF CIT VS VINAY C EMENT 313 ITR 1 (ST.). WHILE DISMISSING THE SLP, THE HONBLE APEX COURT HA S REFERRED TO DECISION OF HONBLE GAUHATI HIGH COURT IN THE CASE OF CIT VS GEORGE WILLIAMSON (ASSAM) LTD., 284 ITR 619. IN THE CASE B EFORE HONBLE GAUHATI HIGH COURT, THE ISSUE WAS IN RESPECT OF CON TRIBUTION OF PF AND ESI RELATING TO EMPLOYEES SHARES. IT IS NOTICED FRO M THE AUDIT REPORT THAT ALL THE PAYMENT HAVE BEEN PAID BEFORE THE DUE DATE OF FILING OF RETURN AND THEREFORE, THE LD. CIT(A) WAS NOT JUSTIFIED IN NOT DELETING THE SUM OF RS.1,50,294/-. THE SAME IS DELETED. THUS THE LD. CIT(A) HAS RIGHTLY DELETED THE DISALLO WANCE MADE BY THE A.O. 10 MOREOVER, THE HONBLE DELHI HIGH COURT IN THE CASE CIT VS. AIMIL LTD. 321 ITR 508 HAS HELD THAT NO DISALLOWANCE CAN BE MA DE IN RESPECT OF EMPLOYERS P.F. CONTRIBUTION AND EMPLOYEES P.F. CONT RIBUTION IN CASE SUCH CONTRIBUTIONS ARE PAID BEFORE DUE DATE OF FILI NG. IT IS NOT IN DISPUTE BEFORE US THAT THE CONTRIBUTIONS HAVE NOT BEEN PAID BEFORE DUE DATE OF FILING OF THE RETURN. WE THEREFORE, HOLD THAT THE L D. CIT(A) WAS JUSTIFIED IN DELETING THE EMPLOYERS P.F. CONTRIBUTION AND EMPLOY EES P.F. CONTRIBUTION. 18. HENCE THE LD. CIT (A) WAS JUSTIFIED IN DELETING ADDITION OF RS.7,61,177/-. IN THE RESULT APPEALS OF THE ASSESSEE AS WELL AS O F REVENUE ARE DISMISSED. THE ORDER IS PRONOUNCED IN OPEN COURT ON 21.10.201 1 SD/- SD/- (R.K.GUPTA) (N.L.KALRA) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 21.10.2011 *S.KUMAR* COPY FORWARDED TO:- 1. M/S. RAJASTHAN STATE BEVERAGES CORPORATION LTD., JAIPUR. 2. THE ASSISTANT COMMISSIONER OF INCOME TAX CIRCLE- 6, JAIPUR. 3. THE CIT 4. THE CIT(A), 5. THE D/R, ITAT, JAIPUR 6. THE GUARD FILE IN ITA NO.540/JP/2011&545/JP/2011 BY ORDER A.R., I.T.A.T., JAIPUR