THE ACIT 1(1), Ujjain V. M/S PARAG FANS & COOLING SYSTEMS LTD., Dewas

ITA 562/Ind/2018

• Counselvise Citation: [2021] 109 COUNSELVISE.COM (IT) 5143 (ITAT-INDORE)
• Duration Of Justice: 2 year(s) 8 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-02-2021
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: DB
• Next Hearing Date: 07-01-2021
• Assessment Year: 2014-2015
• Appeal Filed On: 08-06-2018
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: S S DESH
• Keywords: Business income; Depreciation; Bad and doubtful debts; Unabsorbed depreciation; TDS; Set aside
• Section: 143(3); 201; 143(2); 139(1); 43; 40a(ia); 72; 13

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL, INDORE BENCH, INDORE BEFORE HON'BLE KUL BHARAT, JUDICIAL MEMBER AND HON'BLE MANISH BORAD, ACCOUNTANT MEMBER ITA NOS.561 & 562/IND/2018 ASSESSMENT YEARS: 2012-13 & 2014-15 REVENUE BY SHRI HARSHIT BARI, SR.DR APPELLANT BY SHRI S.S. DESHPANDE, CA DATE OF HEARING 0 7 .01.2021 DATE OF PRONOUNCEMENT 09 . 0 2 .202 1 O R D E R PER MANISH BORAD, AM. THE ABOVE CAPTIONED APPEAL FILED AT THE INSTANCE OF REVENUE PERTAINING TO ASSESSMENT YEARS 2012-13 & 2014-15 AR E DIRECTED AGAINST THE ORDER OF COMMISSIONER OF INCOME TAX (AP PEALS) (IN SHORT LD.CIT], UJJAIN EVENLY DATED 21.03.2018, WHICH AR E ARISING OUT OF THE ORDER U/S 143(3) OF THE INCOME TAX ACT 1961(IN SHORT THE ACT) ACIT, CIRCLE-1(1), UJJAIN VS. MS PARAG FANS & COOLING SYSTEM PVT. LTD, PLOT NO.1/2, A.B, 1B/3A, INDUSTRIAL ESTATE NO.1, A.B. ROAD, DEWAS (MP) (REVENUE ) (APPELLANT) PAN NO. AA CCP1895K ITA NOS.561 & 562/IND/2018 PARAG FANS COOLING SYSTEM PVT. LTD 2 DATED 27.03.2015 AND 26.12.2016 FRAMED BY DCIT-1(1) AND ACIT- 1(1), UJJAIN RESPECTIVELY. 2. REVENUE HAS RAISED FOLLOWING GROUNDS OF APPEAL : - ITA NO.561/IND/2018 ASSESSMENT YEAR 2012-13 (I) WHETHER IN THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, LD. CIT(A) WAS JUSTIFIED IN DIRECTING TO ALLOW THE BROUGHT FOR WARD LOSSES AND UNABSORBED DEPRECIATION OF RS. 26,63,698/- AS THE SAME IS NOT CLAIMED IN THE RETURN OF INCOME. (II) WHETHER IN THE FACTS AND IN THE CIRCUMSTANCES OF TH E CASE, LD. CIT(A) WAS JUSTIFIED IN DELETING THE DISALLOWANCE OF RS. 58,24,000/- MADE ON ACCOUNT OF BELATED BAD DEBTS. (III) WHETHER IN THE FACTS AND IN THE CIRCUMSTANCE S OF THE CASE, LD. CIT(A) WAS JUSTIFIED IN DELETING THE DISALLOWANCE OF RS. 1,08,95,467 /- MADE ON ACCOUNT OF COMMISSION EXPENSES. THE APPELLANT RESERVES HIS RIGHT TO ADD, AMEND OR A LTER THE GROUNDS OF APPEAL ON OR BEFORE THE DATE; THE APPEAL IS FINALLY HEARD FOR DISPOSAL. ITA NO.562/IND/2018 ASSESSMENT YEAR 2014-15 (I) WHETHER IN THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, LD. CIT(A) WAS JUSTIFIED IN DIRECTING THE DISALLOWANCE OF RS.1 ,03,81,727/- MADE ON ACCOUNT OF COMMISSION EXPENSES. (II) WHETHER IN THE FACTS AND IN THE CIRCUMSTANCES OF TH E CASE, LD. CIT(A) WAS JUSTIFIED IN DELETING THE DISALLOWANCE OF RS. 4,17,302/- MADE ON ACCOUNT OF ITA NOS.561 & 562/IND/2018 PARAG FANS COOLING SYSTEM PVT. LTD 3 BELATED PAYMENT OF SCIC AND EPF CONTRIBUTION OF EMP LOYEES. (III) WHETHER IN THE FACTS AND IN THE CIRCUMSTANCE S OF THE CASE, LD. CIT(A) WAS JUSTIFIED IN DELETING THE DISALLOWANCE OF RS. 25,95,609/- MADE ON ACCOUNT OF EXPENSES U/S 40(A)(IA). (IV) WHETHER IN THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, LD. CIT(A) WAS JUSTIFIED IN DELETING THE DISALLOWANCE OF RS. 58,24,000/- MADE ON ACCOUNT OF BAD DEBTS. 3. AS THE ISSUES RAISED IN THESE APPEALS PERTAINS T O THE SAME ASSESSEE AND THE ISSUES RAISED ARE MOSTLY COMMON, A LL THESE APPEALS ARE BEING DISPOSED OFF BY THIS COMMON ORDER FOR THE SAKE OF CONVENIENCE AND BREVITY ON THE REQUEST OF BOTH THE PARTIES. 4. THE BRIEF FACTS OF THE CASE AS CULLED OUT FROM T HE RECORDS ARE THAT THE ASSESSEE IS ENGAGED IN MANUFACTURING OF CO OLING FAN PARTS. ASSESSEE FILED ITS RETURN DECLARING INCOME OF RS. N IL FOR ASSESSMENT YEAR 2012-13 & 2014-15 ON 01.10.2012 AND 27.09.2013 RESPECTIVELY. THE CASE WAS SELECTED FOR SCRUTINY A ND NOTICES U/S 143(2) OF THE ACT WAS ISSUED ON 21.08.2013 FOR ASSE SSMENT YEAR 2012-13 AND ON 28.8.2015 FOR ASSESSMENT YEAR 2014-1 5. THE ASSESSMENT FOR ASSESSMENT YEAR 2012-13 WAS COMPLETE D ON 27.03.2015 U/S 143(3) OF THE ACT FOR 2012-13 AT RS. 2,01,47,200/- AFTER ADDING VARIOUS DISALLOWANCES. FOR ASSESSMENT YEAR 2014-15 ITA NOS.561 & 562/IND/2018 PARAG FANS COOLING SYSTEM PVT. LTD 4 THE INCOME WAS ASSESSED U/S 143(3) OF THE ACT ON 26 .12.2016 AT RS.2,67,25,902/- AFTER ADDING VARIOUS DISALLOWANCES . AGGRIEVED ASSESSEE PREFERRED APPEAL BEFORE LD. CIT(A) AND PAR TLY SUCCEEDED. NOW THE REVENUE IS IN APPEAL BEFORE THE TRIBUNAL. 5. AT THE OUTSET LD. DEPARTMENTAL REPRESENTATIVE SU PPORTED THE ORDER OF LD. A.O. 6. PER CONTRA LD. COUNSEL FOR THE ASSESSEE WITH REG ARD TO THE DISALLOWANCE OF COMMISSION EXPENSES DELETED BY LD. CIT(A) SUBMITTED THAT THE ISSUE IS SQUARELY COVERED BY THE DECISION OF THIS TRIBUNAL IN ASSESSEES OWN CASE FOR ASSESSMENT YEAR 2011-12 IN ITA NO.372/IND/2016 DATED 11.08.2017. WITH REGARD TO THE REMAINING ISSUES RELIANCE WAS PLACED ON THE FINDING OF LD. CIT(A). 7. WE HAVE HEARD RIVAL CONTENTIONS AND PERUSED THE RECORDS PLACED BEFORE US. 8. AS REGARDS THE COMMON ISSUE OF DISALLOWANCE OF C OMMISSION EXPENSES AT RS.1,08,95,467/- AND RS.1,03,81,727/- R AISED BY THE REVENUE THROUGH GROUND NO.3 FOR ASSESSMENT YEAR 201 2-13 AND GROUND NO.1 FOR ASSESSMENT YEAR 2014-15, WE FIND TH AT THE GENUINENESS OF CLAIM OF SIMILAR TYPE OF COMMISSION EXPENSES WAS IN ITA NOS.561 & 562/IND/2018 PARAG FANS COOLING SYSTEM PVT. LTD 5 CHALLENGE BEFORE THIS TRIBUNAL IN ASSESSEES OWN CA SE FOR ASSESSMENT YEAR 2011-12 WHEREIN THE TRIBUNAL VIDE I TS ORDER DATED 11.8.2017 IN ITA NO.372/IND/2016 AFTER CONSIDERING THE RELEVANT FACTS WHICH ARE IDENTICAL TO THE FACTS OF THE INSTA NT APPEAL BEFORE US DELETED THE DISALLOWANCE OF COMMISSION HOLDING THEM TO BE WHOLLY AND EXCLUSIVELY FOR BUSINESS PURPOSES OBSERVING AS FOLLOWS:- 7. WE HAVE CONSIDERED THE FACTS AND CIRCUMSTANCES OF T HE CASE AND FIND THAT THE ASSESSEE COMPANY IS DOING MANUFAC TURING OF VARIOUS KINDS OF INDUSTRIAL PRODUCTS SUCH AS FRP AX IAL FLOW FANS, FRP SEAL DISC, FRP FAN STACKS, FRE FILL HANGE RS WHICH ARE BEING USED IN VARIOUS POWER PLANTS, STEEL PLANT , COAL MINES AND OTHER HEAVY INDUSTRIES. THE COMPANY HAS STARTED IN THE YEAR 1991 HOWEVER IT HAS BEEN INCURRING HEAVY LOSS DURIN G THE EARLIER YEARS. IT IS SEEN THAT THE COMPANY ENTERED INTO SAL E AGREEMENT ON FEBRUARY, 9, 2008 WITH M/S B-3 PROJECTS & CONSULTANTS, NAGPUR WITH THE CONDITION THAT IF THE SALES/TURNOVE R OF THE ASSESSEE COMPANY IS ACHIEVED THE MINIMUM TARGET OF 5.50 CRORES, THEN THE SOLE DISTRIBUTOR SHALL BE ELIGIBLE FOR COMMISSION. SINCE, DURING THE ASSESSMENT YEAR UNDER CONSIDERATI ON, SALES HAVE INCREASED TO RS.7.23 CRORES, THEREFORE THE ASS ESSEE COMPANY HAD PAID THE COMMISSION OF RS.64,16,013/- D URING THE YEAR TO M/S B-3 PROJECTS & CONSULTANTS, NAGPUR. IT IS ALSO NOTICED THAT SHRI SANDEEP BARJATYA, DIRECTOR OF THE DISTRIBUTOR COMPANY M/S B-3 PROJECTS & CONSULTANTS, NAGPUR HAS APPOINTED AS DIRECTOR FROM 10.12.2008 OF THE ASSESS EE COMPANY WITH, SHARE HOLDING OF 15%. AFTER APPOINTMENT OF T HE SOLE ITA NOS.561 & 562/IND/2018 PARAG FANS COOLING SYSTEM PVT. LTD 6 DISTRIBUTOR THE SALES OF THE ASSESSEE COMPANY WERE INCREASED FROM 5.11 CRORES TO 7.23 CRORES DURING THE CURRENT YEAR GIVING RISE TO 41% AND IN TERMS OF AMOUNT OF 2.12 CRORES. THIS IS BECAUSE OF THE SERVICES ENTERED BY M/S B-3 PROJECTS & CONSULTANTS, NAGPUR THE TURNOVER OF THE COMPANY RAI SED TO 2.12 CRORES AS COMPARED TO PRECEDING YEAR. THEREFORE, CO MMISSION OF RS.64.16 LAKHS PAID ON TOTAL TURNOVER WHICH COMES T O 8.8% CANNOT BE TREATED AS EXCESSIVE. THE DISALLOWANCE THE PAYMENT OF COMMISSION ON THE GROUND THAT NO SUCH COMMISSION WA S PAID IN EARLIER YEARS, CANNOT BE CONSIDERED AS VALID BASIS, AS WE FIND FROM THE DETAILS SUBMITTED AND AGREEMENT DATED 9.2. 2008 THAT THE SALES TARGET ASSIGNED TO THE DISTRIBUTOR OF RS. 5.5 CRORES WAS NOT ACHIEVED IN EARLIER YEARS IN TERMS OF AGREEMENT , THEREFORE THERE WAS NO PAYMENT OF COMMISSION IN THE EARLIER Y EARS. THE AO HAS OVER LOOKED THIS ASP ECT OF THE AGREEMENT , THEREFORE THE DISALLOWANCE OF COMMISSION MADE BY THE AO IS NOT JUSTIFIED. IT IS ALSO NOT THE CASE OF THE AO THAT THE COMMISSION PAYMENT WAS NOT GENUINE AND THERE WAS DIVERSION OF PROFIT. AS W E FIND FROM THE PAPER BOOK PAGE NO.42 TO 43 WHICH ARE THE COPIE S OF THE PROFIT AND LOSS ACCOUNT AND INCOME TAX COMPUTATION OF INCOME OF M/S 83 PROJECTS AND CONSULTANTS PVT. LTD, ACCORDING TO WHICH THE AGENT COMPANY HAD SHOWN INCOME OF RS. 20,60,850 /-. THEREFORE IT IS CLEAR THAT THE COMMISSION AGENT IS ASSESSED TO TAX AND SHOWN SUCH BUSINESS INCOME, THEREFORE THE I DENTITY OF THE, COMMISSION AGENT IS ALSO PROVED. IN SUCH CIRCU MSTANCES AS STATED ABOVE, THE INCREASE IN TURNOVER OF THE ASSES SEE COMPANY AND THE AGREEMENT WAS EXISTED FROM 2008, WE ARE OF THE CONSIDERED VIEW THAT THE PAYMENT OF COMMISSION ON A CCOUNT OF SALES PROMOTION OF BUSINESS IS ALLOWABLE AS HELD BY THE HON'BLE RAJASTHAN HIGH COURT IN THE CASE OF ITO V/S LAXMI E NGINEERING ITA NOS.561 & 562/IND/2018 PARAG FANS COOLING SYSTEM PVT. LTD 7 INDUSTRIES 298 ITC 203 (RAJ.). THE LD. COUNSEL ALSO PLACED RELIANCE IN THE CASE OF DCIT V/S MICROTEX SEPERATOR S LTD. 293 ITR 451 (KAR.) WHEREIN THE TRIBUNAL FOUND THAT THE SISTER COMPANY WAS THE SOLE DISTRIBUTOR AGENT FOR SEVERAL YEARS AND HAD SOLE SELLING AGENT OF THE ASSESSEE COMPANY PROV IDED FOR PAYMENT OF COMMISSION AT 10% NOT ON THE NET ENTIRE AMOUNT AFTER GIVING DEDUCTIONS. TAKING INTO CONSIDERATION OF THESE ASPECTS OF THE MATTER ALLOWED ENTIRE 10 OF BILL THE APPEAL BEFORE HON'BLE HIGH COURT WHILE DISMISSING THE APPEAL THAT TAKING INTO CONSIDERATION THE LONG STANDING RELATIONSHIP A ND ALSO TAKING INTO CONSIDERATION THE REPUTATION OF THE ASS ESSEE AND THE AGENT ALSO IN CONSIDERATION THERE WAS NO INTENT ION TO EVADE THE TAX RIGHTLY ALLOWED TO TAKEN OF ENTIRE COMMISSION. SEEING TO THE FACTS OF THE PRESENT CASE, WE ARE OF THE VIEW T HAT EVEN THOUGH IT WAS NOT A SISTER CONCERN AT THE. TIME OF ENTERING IN TO THE AGREEMENT, HAS PAID COMMISSION FOR RENDERING SE RVICES WHICH HAS RESULTED IN INCREASE OF TURNOVER BY 2.12 CRORES. SIMILARLY IN THE CASE OF PURE PHARMA PVT. LTD V /S CIT (SUPRA) WHEREIN THE COMMISSION WAS PAID TO GOVERNMENT AND I TS AGENCIES AND ALL THE PAYMENT WERE MADE TO THE VARIO US PARTIES THROUGH CHEQUES / DEMAND DRAFT AND THE EXPENDITURE WAS FOUND INCURRED FOR BUSINESS PURPOSES IT WAS HELD TH AT SUCH EXPENDITURE WERE ALLOWABLE AND CONSEQUENTLY THE ADD ITION WAS DELETED. THUS ON THE FACTS AND CIRCUMSTANCES AN D THE TRIBUNAL PRONOUNCEMENTS AS CITED BY THE ASSESSEE, WE DID NOT FIND ANY JUSTIFICATION FOR DISALLOWANCE OF COMMISSION WHICH WAS WHOLLY AND. EXCLUSIVELY FOR BUSINESS PURPOSES IS ALLOWED AS DEDUCTION OF RS.59,90,620/- TOWARDS COMMISSION PAYM ENT. ACCORDINGLY THE GROUND OF APPEAL IS ALLOWED. ITA NOS.561 & 562/IND/2018 PARAG FANS COOLING SYSTEM PVT. LTD 8 8. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLOWED. 9. THE ABOVE FINDING OF THIS TRIBUNAL IN ASSESSEES OWN CASE FOR ASSESSMENT YEAR 2011-12 IS SQUARELY APPLIC ABLE ON THE ISSUES RAISED BEFORE US IN GROUND NO.3 FOR ASSESSMENT YEAR 2012-13 AND GROUND NO.1 FOR ASSESSMENT YEAR 2014-15 AND LD. DEPARTMENTAL REPRESENTATIVE FAILED TO CONTROVERT THIS FACT BY BR INGING ANY CONTRARY MATERIAL ON RECORD. WE THEREFORE RESPECTF ULLY FOLLOWING THE DECISION OF THIS TRIBUNAL, CONFIRM TH E FINDING OF LD. CIT(A) DELETING COMMISSION DISALLOWANCE AT RS.1,08,95,467/- AND RS. 1,03,81,727/- FOR ASSESSME NT YEARS 2012-13 AND 2014-15 RESPECTIVELY AND ACCORDIN GLY DISMISS GROUND NO.3 FOR ASSESSMENT YEAR 2012-13 AND GROUND NO.1 FOR ASSESSMENT YEAR 2014-15. 10. NOW WE TAKE UP NEXT COMMON ISSUE RAISED BY THE REVENUE IN GROUND NO.2 FOR ASSESSMENT YEAR 2012-13 AND GROUND NO.4 FOR ASSESSMENT YEAR 2014-15 CHALLENGING THE FINDING OF LD. CIT(A) DELETING THE DISALLOWANCE OF BAD DEBT S OF RS.58,24,000/- EACH IN BOTH THE YEARS. ITA NOS.561 & 562/IND/2018 PARAG FANS COOLING SYSTEM PVT. LTD 9 11. FROM PERUSAL OF THE RECORDS AND THE ORDERS OF L OWER AUTHORITIES WE FIND THAT IN THE AUDITED BALANCE SHE ET AS ON 31.3.2012, PARA OF THE NOTES TO ACCOUNTS READS AS F OLLOWS:- OUT OF THE TOTAL LOANS AND ADVANCES OF RS.2,96,06, 398/- APPEARING IN THE BALANCE SHEET AS ON THE LAST DAY OF THE YEA R AMOUNT OF RS.2,33,02,571/- IS CONSIDERED AS IRRECOVERABLE AN D HENCE THE MANAGEMENT HAS DECIDED TO WRITE OFF OF THE SAME IN A PERIOD OF 4 YEARS. ACCORDINGLY RS.58,25,000/- HAS BEEN WRITTEN OFF DU RING THE YEAR 12. WE FURTHER OBSERVE THAT THE ASSESSEE HAS DEBITE D THE ABOVE STATED AMOUNT OF RS.58,25,000/- AS AN EXPENSES UNDE R THE HEAD EXTRA ORDINARY ITEM IN THE NAME OF ACCOUNT WRITTE N OFF. SIMILAR AMOUNT HAS ALSO BEEN CLAIMED DURING THE ASSESSMENT YEAR 2014- 15. 13. DURING THE ASSESSMENT PROCEEDINGS LD. A.O DISAL LOWED THIS CLAIM OBSERVING THAT THE ALLEGED AMOUNT WAS A WRITE OFF OF OUTSTANDING BALANCE OF LOANS AND ADVANCES AND SINCE THE ASSESSEE IS NOT ENGAGED IN THE BUSINESS OF PROVIDING LOANS A ND ADVANCES SUCH CLAIM CANNOT BE ALLOWED AS BAD DEBTS. WHEN TH E MATTER TRAVELLED BEFORE LD. CIT(A), HE DELETED THE DISALLO WANCE FOR BOTH THE YEARS PLACING RELIANCE ON THE JUDGMENT OF HONBLE S UPREME COURT IN ITA NOS.561 & 562/IND/2018 PARAG FANS COOLING SYSTEM PVT. LTD 10 THE CASE OF T.R.F. LTD V. CIT 190 TAXMAN 391(SC) AND WAS OF THE VIEW THAT SINCE THE ASSESSEE HAS WRITTEN OFF THE AM OUNT IN THE BOOKS OF ACCOUNTS SHOULD BE ALLOWED. 14. WE HOWEVER ON PERUSAL OF THE JUDGMENT OF HONBL E SUPREME COURT IN THE CASE OF T.R.F. LTD V. CIT 190 TAXMAN 391(SC)(SUPRA) FIND THAT THE HONBLE COURT HAS ALSO MADE FOLLOWING OBSERVATION:- WHEN BAD DEBTS OCCURS, THE BAD DEBT AMOUNT IS DEB ITED AND THE CUSTOMERS ACCOUNT IS CREDITED. IN THE CASE OF COMPANIES, THE PROVISION IS DEDUCTED FROM SUNDRY DEBTORS 15. IN THE ABOVE OBSERVATION OF THE HONBLE APEX CO URT TWO IMPORTANT WORDS ARE CUSTOMERS AND SUNDRY DEBTORS . THE BAD DEBT WHICH THE ASSESSEE COMPANY WANTS TO CLAIM AS AN EXP ENDITURE NEEDS TO BE REDUCED FROM SUNDRY DEBTORS. AS PER TH E ACCOUNTING PRINCIPLES WHEN AT THE END OF THE FINANCIAL YEAR UN REALISED SALES ARE SHOWN UNDER THE HEAD SUNDRY DEBTORS. IN OTHER WORD S SALES EFFECTED BUT CONSIDERATION NOT RECEIVED UP TO THE E ND OF FINANCIAL YEAR ARE SHOWN AS SUNDRY DEBTORS. FROM GOING THROU GH THE FINDING OF LD. CIT(A) WE FIND THAT NO EFFORTS HAVE BEEN MAD E BY LD. CIT(A) TO EXAMINE THE FACT THAT WHETHER THE ALLEGED AMOUNT CL AIMED TO BE BAD ITA NOS.561 & 562/IND/2018 PARAG FANS COOLING SYSTEM PVT. LTD 11 DEBTS BY THE ASSESSEE ARE IN THE NATURE OF SALES MA DE IN THE PRECEDING YEARS, OR LOANS AND ADVANCES. IF THE A LLEGED AMOUNT ARE PART OF SALES EFFECTED DURING THE YEAR OR IN THE PR ECEDING YEAR AND THEY HAVE BECOME BAD AND DOUBTFUL, SUCH CLAIM MAY B E ALLOWED IF THE ASSESSEE HAS WRITTEN OFF IN ITS BOOKS OF ACCOUN TS CREDITING THE CUSTOMER ACCOUNT BUT IN CASE IT IS A LOANS AND ADVA NCES WHICH HAVE BECOME BAD THEN THE ASSESSEE WILL HAVE TO CLAIM IT UNDER THE HEAD OF BUSINESS LOSS BY SHOWING THAT THE SAME WERE GI VEN IN THE COURSE OF BUSINESS. SINCE LD. CIT(A) HAS NOT EXAMI NED THIS ASPECT WE RESTORE THE ISSUE OF DISALLOWANCE OF BAD DEBT FO R ASSESSMENT YEAR 2012-13 AND 2014-15 RAISED BY THE REVENUE IN G ROUND NO.2 & 4 RESPECTIVELY TO THE FILE OF LD. CIT(A) WHO SHALL CARRY OUT NECESSARY EXERCISE TO EXAMINE THE ASPECT AS TO WHETHER THE AL LEGED DEBTS WERE PART OF THE SALES EFFECTED BY THE ASSESSEE OR WERE REFLECTED IN THE PROFIT & LOSS ACCOUNT OF DURING THE YEAR UNDER APPE AL OR EARLIER YEAR AS LOANS AND ADVANCES AND SHOULD DECIDE ACCO RDINGLY AS PER THE DISCUSSIONS MADE ABOVE. THUS BOTH THESE GROUND S ARE ALLOWED FOR STATISTICAL PURPOSES. 16. NOW WE TAKE UP GROUND NO.1 FOR ASSESSMENT YEAR 2012-13 ITA NOS.561 & 562/IND/2018 PARAG FANS COOLING SYSTEM PVT. LTD 12 THROUGH WHICH THE REVENUE HAS CHALLENGED THE ACTION OF LD. CIT(A) ALLOWING THE CLAIM OF BROUGHT FORWARD LOSSES AND UN ABSORBED DEPRECIATION AT RS.26,63,698/-. 17. BRIEF FACTS RELATING TO THIS ISSUE THAT AS CLAI MED BY THE ASSESSEE BEFORE LD. CIT(A) WITH SOME BROUGHT FORWAR D LOSSES OF UNABSORBED DEPRECIATION WHICH THE ASSESSEE HAS MENT IONED IN THE RETURN OF INCOME AND AFTER CLAIMING THE SAME AGAINS T THE INCOME FOR THE YEAR HAS SHOWN AS NIL INCOME. HOWEVER LD. A.O WHILE COMPUTING THE ASSESSEES INCOME HAS ADOPTED THE INC OME AS PER RETURNED BEFORE SET OFF OF LOSSES. THE SAME WAS CHA LLENGED BY THE ASSESSEE BEFORE LD. CIT(A) WHO ALLOWED THE GROUND O F THE ASSESSEE DIRECTING THE LD. A.O TO GRANT THE BENEFIT OF BROUG HT FORWARD AND UNABSORBED DEPRECIATION AND CARRY FORWARD IF ANY. 18. WE ON PERUSAL OF RECORD FIND THAT COMPUTATION O F INCOME FOR ASSESSMENT YEAR 2012-13 IS NOT PLACED ON RECORD. T HE RETURN OF INCOME OF PRECEDING YEARS FROM WHICH THE BUSINESS L OSSES AND UNABSORBED DEPRECIATION LOSS ARE BEING BROUGHT FORW ARD ARE ALSO NOT PLACED ON RECORD. NO SPECIFIC FINDING IS GIVEN IN THIS REGARD BY LD. A.O. UNDER THESE GIVEN FACTS AND CIRCUMSTANCES OF THE CASE WE ITA NOS.561 & 562/IND/2018 PARAG FANS COOLING SYSTEM PVT. LTD 13 ARE OF THE CONSIDERED VIEW THAT THE ISSUE NEEDS TO BE SET ASIDE TO THE FILE OF LD. A.O FOR AFRESH EXAMINATION. IN CASE THE ASSESSEE HAS LEGALLY AND RIGHTFULLY CLAIMED THE SET OFF OF UNABS ORBED BUSINESS LOSS AND UNABSORBED DEPRECIATION LOSS AND THE RETUR N OF INCOME OF THE YEARS IN WHICH SUCH LOSS WAS SHOWN HAVE BEEN FI LED ON THE DUE DATES U/S 139(1) OF THE ACT THEN THE ASSESSEE DESER VES TO GET THE BENEFIT OF SET OFF. GROUND NO.1 OF THE REVENUE IS THUS ALLOWED FOR STATISTICAL PURPOSES. 19. NOW WE TAKE UP GROUND NO.2 OF REVENUES APPEAL FOR ASSESSMENT YEAR 2014-15 THROUGH WHICH THE REVENUE H AS CHALLENGED THE FINDING OF LD. CIT(A) DELETING THE D ISALLOWANCE OF RS.4,17,302/- MADE ON ACCOUNT OF BELATED PAYMENT OF ESIC AND EPF CONTRIBUTION. 20. WE FIND THAT THERE OCCURRED SOME DELAY ON THE PART OF THE ASSESSEE IN DEPOSITING THE ESIC AND EPF CONTRIBUTIO N OF EMPLOYEES. HOWEVER THIS IS NOT IN DISPUTE THAT THE TOTAL AMOUN T OF EMPLOYEES CONTRIBUTION WAS DEPOSITED IN TREASURY BEFORE THE D UE DATE OF FILING OF RETURN OF INCOME I.E. 30.11.2014. UNDER THESE G IVEN FACTS AND CIRCUMSTANCES LD. CIT(A) DELETED THE DISALLOWANCE O BSERVING AS ITA NOS.561 & 562/IND/2018 PARAG FANS COOLING SYSTEM PVT. LTD 14 FOLLOWS:- GROUND NO.5:- THROUGH THIS GROUND OF APPEAL THE APPELLANT HAS CH ALLENGED THE ADDITION OF RS 4 ,17,302/- ON ACCOUNT OR DISALLOWANCE OF EPF AND ESIC LATE DEPOSIT. THE APPELLANT MADE THE ABOVE PAYMENTS BEFORE FILING OF RETURN OF INCOME. THE ABOVE EXPENDITURE IS ALLOWABL E EXPENDITURE IN VIEW OF HON'BLE ITAT, LNDORE'S DECISION IN THE CASE OF A SST. CIT V . I NDIRA EXPORT PVT LTD. (201 3) 21 ITJ 3 72 (TRIB. - INDORE)- EMPLOYEES CONTRIBUTION TO PROVIDENT FUND- EMPLOYEES CONTRIBUTION TO PROVIDENT FUND EMPLOYEES CONTRIBUTION TO PROVIDENT FUND - DELETION OF SECOND PROVIS O TO SECTION 43B- HELD-IN VIEW OF CIT V ALOM EXTRUSIONS LTD. (2010) 14 ITJ 133 (SC), DELE T ION OF SECOND PROVIS O IS RETROSPECTIVE-THEREFORE, EVEN IF EMPLOYEES CONTRIBUTION IS DEPOSITED BEFORE DUE DATE OF F I LING OF RETURN, SAME IS ALLOWABLE. THEREFORE, THE ADDITION MADE BY THE AO AMOUNTING TO RS.4,17,302 /- IS DELETED . THEREFORE, THE APPEAL ON THIS GROUND IS ALLOWED. 21. LD. DEPARTMENTAL REPRESENTATIVE COULD NOT CONTR OVERT THE FINDING OF LD. CIT(A) BY FILING ANY OTHER JUDGMENT IN ITS FAVOUR. WE THEREFORE FIND NO REASON TO INTERFERE IN THE FINDIN G OF LD. CIT(A) WHICH HAVE BEEN ARRIVED AT AFTER PLACING RELIANCE O N APPLICABLE JUDICIAL PRONOUNCEMENTS. THUS GROUND NO.2 OF REVEN UE FOR ASSESSMENT YEAR 2014-15 IS DISMISSED. ITA NOS.561 & 562/IND/2018 PARAG FANS COOLING SYSTEM PVT. LTD 15 22. NOW WE TAKE UP GROUND NO.3 FOR ASSESSMENT YEAR 2014-15 WHEREIN THE REVENUE HAS CHALLENGED THE FINDING OF L D. CIT(A) DELETING THE DISALLOWANCE OF RS.25,95,609/-MADE BY THE LD. A.O APPLYING PROVISIONS OF SECTION U/S 40A(IA) OF THE A CT. BRIEF FACTS RELATING TO THIS GROUND ARE THAT THE COMPANY HAS SE TTLED LOAN RECEIVED FROM TECHNOLOGY INFORMATION, FORECASTING A ND ASSESSMENT COUNCIL (IN SHORT TIFAC). THE ASSESSEE CLAIMED S AID LOAN BE INTEREST FREE. HOWEVER LD. A.O ON GOING THROUGH TH E MEMORANDUM OF SETTLEMENTS CAME TO THE CONCLUSION THAT THERE WA S AN INBUILT AMOUNT OF INTEREST OF RS.21.12 LAKHS PROPOSED IN TH E AGREEMENT ITSELF AND FURTHER WHILE MAKING SETTLEMENT BEFORE T HE COURT AN AMOUNT OF RS.4,83,609/- WAS ADDED ON ACCOUNT OF INT EREST. SINCE NO TAX WAS DEDUCTED AT SOURCE BY THE ASSESSEE TOTA L AMOUNT OF RS.25,95,609/- IS DISALLOWED U/S 40A(IA) OF THE AC T. THE MATTER WAS TAKEN UP BY THE ASSESSEE BEFORE LD. CIT(A) WHIC H RESULTED IN SUCCESS AGAINST WHICH THE REVENUE IS IN APPEAL BEFO RE THE TRIBUNAL. 23. LD. COUNSEL FOR THE ASSESSEE SUPPORTED THE FIND ING OF LD. CIT(A). ITA NOS.561 & 562/IND/2018 PARAG FANS COOLING SYSTEM PVT. LTD 16 24. AS MENTIONED ABOVE THIS DISALLOWANCE WAS MADE F OR THE ALLEGED NON DEDUCTION OF TAX AT SOURCE ON THE ALLEG ED AMOUNT OF INTEREST OF RS.25,95,609/-. WE FIND THAT LD. CIT(A) DELETED THIS ADDITION OBSERVING AS FOLLOWS:- 1. GROUND NO,6: THROUGH THIS GROUND OF APPEAL THE APPELLANT HAS CH ALLENGED THE ADDITION OF RS.25,95,609/~ ON ACCOUNT OF DISALL OWANCE OF INTEREST PAYMENT WITHOUT TDS. THE AO OBSERVED THAT DURING TH E YEAR, THE COMPANY SETTLED A LOAN RECEIVED FROM TIF AC (TECHNO LOGY INFORMATION, FORECASTING AND ASSESSMENT COUNCIL) ALONG WITH INTE REST OF RS.25,95,609/~. THE AO OBSERVED THAT TIFAC IS A SOC IETY REGISTERED UNDER THE SOCIETIES REGISTRATION ACT OF 1860. THEREFORE, ANY PAYMENT TOWARDS INTEREST IS SUB J ECT TO DEDUCTION OF TAX AT SOURCE UNDER SECTION 194 A OF THE ACT. IN ABSENCE OF THE SAME, THE ENTIRE SUCH EXPEND ITURE IS REQUIRED TO BE DISALLOWED IN TERM S OF PROVISIONS OF SECTION 40A(IA) OF THE IT AC T THEREFORE, HE ADDED A SUM OF RS.25,95,609/~ UNDER THE TOTAL IN COME OF THE APPELLANT . THE COMPANY HAS NOT CLAIMED ANY EXPENDITURE TOWARDS PAYMENT OF INTEREST UNDER ITS PROFIT AND LOSS ACCOUNT TO TIFAC . THE APPELLANT CLAIMED FOLLOWING EXPENDITURE TOWARDS INTEREST UNDER ITS PR OFIT AND LOSS ACCOUNT AS DETAILED UNDER THE FINANCIAL ACCOUNTS: I. BANK COMMISSION AND CHARGES RS.6,09,095 II. FOREIGN BANK CHARGES ON REALIZATION RS. 17,423 III. INTEREST ON CAR LOAN RS.4,19,939 IV. INTEREST ON CC LIMIT RS. 38,37,59 4 V. INTEREST TO NSIC RS.2,16,054 ITA NOS.561 & 562/IND/2018 PARAG FANS COOLING SYSTEM PVT. LTD 17 VI. INTEREST TO OTHERS RS. 8,808 THE COMPANY HAS NOT CLAIMED ANY EXPENDITURE TOWARDS PAYMENT OF INTEREST OF RS.25,95,609/- TO TIFAC. TH E AO HAS MADE THE ADDITION WITHOUT ANY BASIS BECAUSE, THE AP PELLANT HAS NOT DEBITED SUCH AMOUNT. THEREFORE, THE ADDITI ON MADE BY THE AO AMOUNTING TO RS.25,95,609/- IS DELETED. THE REFORE, THE APPEAL ON THIS GROUND IS ALLOWED. 25. AFTER GOING THROUGH THE ABOVE FINDING OF LD. CI T(A) AND AS SUBMITTED BY LD. COUNSEL FOR THE ASSESSEE WE FIND T HAT THE ASSESSEE HAS NOT SHOWN EXPENDITURE OF RS.25,95,609/ - IN ITS PROFIT &LOSS ACCOUNT. SINCE NO SUCH EXPENDITURE HAS BEEN CLAIMED BY THE ASSESSEE AGAINST THE REVENUE FOR THE YEAR AND T HIS FACT REMAINS UNDISPUTED AT THE END OF BOTH THE PARTIES, THEN IN SUCH SITUATION THE DISALLOWANCE MADE U/S 40A(IA) OF THE ACT IS UNC ALLED FOR. WE THUS FIND NO REASON TO INTERFERE IN THE FINDING OF LD. CIT(A) WHO HAS RIGHTLY DELETED THE DISALLOWANCE BASED ON THE FACTS OF THE CASE. WE ACCORDINGLY DISMISS GROUND NO.3 FOR ASSESSMENT YEA R2014-15 RAISED BY THE REVENUE. ITA NOS.561 & 562/IND/2018 PARAG FANS COOLING SYSTEM PVT. LTD 18 26. IN THE RESULT APPEALS OF THE REVENUE IN ITA NOS . 561 & 562/IND/2018 FOR ASSESSMENT YEARS 2012-13 & 2014-15 ARE PARTLY ALLOWED FOR STATISTICAL PURPOSES. THE ORDER PRONOUNCED IN THE OPEN COURT ON 09.02.20 21. SD/- SD/- ( KUL BHARAT) (MANISH BORAD) JUDICIAL MEMBER ACCOUNTANT MEMBER / DATED : 09 FEBRUARY, 2021 /DEV COPY TO: THE APPELLANT/RESPONDENT/CIT CONCERNED/CIT (A) CONCERNED/ DR, ITAT, INDORE/GUARD FILE. BY ORDER, ASSTT.REGISTRAR, I.T.A.T., INDORE