Appeal Details
Counselvise Citation
[2018] 112 COUNSELVISE.COM (IT) 6005 (ITAT-MUMBAI)
Assessee PAN
Bench
Appeal Number
Duration Of Justice
2 year(s) 1 month(s) 19 day(s)
Appellant
Respondent
Appeal Type
Income Tax Appeal
Pronouncement Date
31-12-2018
Appeal Filed By
Department
Order Result
Dismissed
Bench Allotted
F
Assessment Year
2011-2012
Appeal Filed On
11-11-2016
Judgement Text
IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH F MUMBAI BEFORE SHRI SAKTIJIT DEY (JUDICIAL MEMBER) AND SHRI N.K. PRADHAN (ACCOUNTANT MEMBER) ITA NO. 6664/MUM/2016 ASSESSMENT YEAR: 2011 - 12 DY. CIT - 9(3)(1), MUMBAI, 215, 2 ND FLOOR, AAYAKARBHAVAN, MUMBAI - 400020. VS. M/S FEDEX EXPRESS TRANSPORTATION AND SUPPLY CHAIN SERVICES INDIA PVT. LTD. (FETSCS) (M/S FEDEX EXPRESS SERVICES INDIA PVT. LTD.) MERGED WITH FETSCS WITH EFFECT FROM OCTOBER 1, 2013 BOOMERANG, UNIT NO. 801, WING - A, 8 TH FLOOR, CHANDIVALI FARM ROAD, ANDHERI (E), MUMBAI - 400072. PAN NO. AABCF6516A APPELLANT RESPONDENT ITA NO. 6750/MUM/2016 ASSESSMENT YEAR: 2011 - 12 M/S FEDEX EXPRESS TRANSPORTATION AND SUPPLY CHAIN SERVICES INDIA PVT. LTD. (FETSCS) (M/S FEDEX EXPRESS SERVICES INDIA PVT. LTD.) MERGED WITH FETSCS WITH EFFECT FROM OCTOBER 1, 2013 BOOMERANG, UNIT NO. 801, WING - A, 8 TH FLOOR, CHANDIVALI FARM ROAD, ANDHERI (E), MUMBAI - 400072. VS. DY. CIT - 9(3)(1), MUMBAI, 215, 2 N D FLOOR, AAYAKARBHAVAN, MUMBAI - 400020. PAN NO. PAN NO. AABCF6516A APPELLANT RESPONDENT M/S FEDEX EXPRESS ITA NOS 6664 & 6750/MUM/2016 2 REVENUE BY : MR. RAJIV GUBGOTRA, DR ASSESSEE BY : MR. ALIA SG E R RAMPUR A WALA , AR DATE OF HEARING : 06/12 /2018 DATE OF PRONOUNCEMENT: 31/12/2 018 ORDER PER N.K. PRADHAN, A.M. THE CAPTIONED CROSS APPEALS - ONE BY THE REVENUE AND ONE BY THE ASSESSEE ARE DIRECTED AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) - 16, MUMBAI [IN SHORT CIT(A)] AND ARISE OUT OF THE ASSESSMENT COMPLETED U/S 143(3) R.W.S. 92CA(4) OF THE I NCOME TAX ACT 1961 (THE ACT). AS COMMON ISSUES ARE INVOLVED, WE ARE PROCEEDING TO DISPOSE THEM OFF BY THIS CONSOLIDATED ORDER FOR THE SAKE OF CONVENIENCE. ITA NO. 6664/MUM/2016 ASSESSMENT YEAR: 2011 - 12 2. THE 1 ST GROUND OF APPEAL WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD CIT(A) ERRED IN ALLOWING THE EXPENDITURE INCUSED IN PAYMENT OF THE EMPLOYEES CONTRIBUTION TO PROVIDENT FUND & ESIC IGNORING THE FACT THAT THE SAME WAS PAID BEYOND THE DUE DATES SPECIFIED IN THE INCOME - TAX ACT 1961. 3. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER (AO) NOTICED THAT EMPLOYEES CONTRIBUTION TOWARDS PF & ESIC AMOUNTING TO RS.58,09,222/ - HAVE BEEN PAID BY THE ASSESSEE - COMPANY AFTER THE DUE DATE INCLUDING THE GRACE PERI OD ALLOWABLE. AS THE ASSESSEE HAS NOT MADE A DISALLOWANCE OF THE SAID PAYMENT IN ITS RETURN OF INCOME, M/S FEDEX EXPRESS ITA NOS 6664 & 6750/MUM/2016 3 THE AO DISALLOWED RS.58,09,222/ - U/S 36(1)(VA) R.W.S. 2(24)(X) OF THE ACT. 4. WE FIND THAT THE HONBLE DELHI HIGH COURT IN CIT V. AIMIL LTD. (2010) 35 D TR 68 (DEL) HAS HELD THAT IF THE EMPLOYEES CONTRIBUTION IS NOT DEPOSITED BY THE DUE DATE PRESCRIBED UNDER THE RELEVANT ACTS AND IS DEPOSITED LATE, THE EMPLOYER NOT ONLY PAYS INTEREST ON DELAYED PAYMENT BUT CAN INCUR PENALTIES ALSO, FOR WHICH SPECIFIC PRO VISIONS ARE MADE IN THE PROVIDENT FUND ACT AS WELL AS THE ESI ACT. THEREFORE, THE ACTS PERMIT THE EMPLOYER TO MAKE THE DEPOSIT WITH SOME DELAYS, SUBJECT TO BE AFORESAID CONSEQUENCES. IN SO FAR AS THE IT ACT IS CONCERNED, THE ASSESSEE CAN GET THE BENEFIT IF THE ACTUAL PAYMENT IS MADE BEFORE THE RETURN IS FILED. SUM DEDUCTED, BY EMPLOYER AS EMPLOYEES CONTRIBUTION TO PF & ESI SHALL BE ELIGIBLE AS DEDUCTION EVEN IF THE PAYMENT IS DEPOSITED AFTER DUE DATE MENTIONED UNDER RELEVANT ACTS BUT BEFORE THE DUE DATE OF FILING THE RETURN. SIMILAR VIEW HAS BEEN TAKEN IN THE CASE OF CIT V. GHATGE PATIL TRANSPORTS LTD . (2014) 368 ITR 749 (BOM), CIT V. NIPSO POLLY FABRICS LTD . (2013) 350 ITR 327 (HP ), CIT V. HEMLA EMBROIDERY MILLS (P.) LTD . (2014) 366 ITR 167 (P&H). FAC TS BEING IDENTICAL, WE FOLLOW THE RATIO LAID DOWN IN THE ABOVE DECISIONS AND UPHOLD THE ORDER OF THE LD. CIT(A). 5. THE 2 ND GROUND OF APPEAL WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) ERRED IN ALLOWING DEPRECIATION ON COMPUTER SOFTWARE OF M/S FEDEX EXPRESS ITA NOS 6664 & 6750/MUM/2016 4 RS.44,17,743/ - IGNORING SHE FACTS THAT NO TDS WAS DEDUCTED AND THEREFORE THE ASSESSEE HAD FAILED TO COMPLY WITH THE PROVISION OF SECTION 40(A)(IA) OF THE I T. ACT. THE 3 RD GROUND OF APPEAL W HETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN TAW, THE LD. CIT(A) ERRED IN HOLDING THAT THE PROVISION OF SECTION 40(A)(IA) OF THE I.T. ACT CANNOT BE APPLIED FOR REJECTING THE CLAIM OF ASSESSEE U/S 32 OF THE ACT, IGNORING THE DECISION OF THE HON'BLE ITAT - E BENCH, MUMBAI IN THE CASE OF SPACO CARBURETTORS (I) LTD. WHEREIN IT HAS BEEN HELD BY THE HON'BLE ITAT THAT EVEN IF AN EXPENDITURE OR DISALLOWANCE COMES WITHIN TH E PURVIEW OF ALL THE SECTION FROM 30 TO 38 AS WELL AS SECTION 40, THE PROVISIONS OF SECTION 40 SHALL PREVAIL . 6. WHILE MAKING A DISALLOWANCE OF RS.44,17,743/ - , THE AO FOLLOWED THE ORDER OF HIS PREDECESSOR FOR THE AYS 2008 - 09, 2009 - 10 AND 2010 - 11. THE ASSESSEE HAD SUBMITTED VIDE LETTER DATED 24.02.2015 BEFORE THE AO THAT PROVISIONS OF SECTION 40(A)(I) OF THE ACT WOULD NOT APPLY TO THE DEPRECIATION ALLOWANCE OF RS.44,17,743/ - CLAIMED BY THE ASSESSEE IN THE IMPUGNED ASSESSMENT YEAR. HOWEVER, THE AO WAS NOT CONVINCED TO THE ABOVE EXPLANATION AND MADE A DISALLOWANCE OF DEPRECIATION ALLOWANCE OF THE ABOVE SUM OF RS.44,17,74 3/ - . THE AO FURTHER HELD THAT SINCE FEDEX EXPRESS TRANSPORTATION & SUPPLY CHAIN SERVICES (INDIA) PVT. LTD. (FETSCS) HAS MADE THE PAYMENT FOR THE APPLICABLE TDS, ON THE AMOUNT PAID FOR COMPUTER SOFTWARE, THE DEPRECIATION CLAIMED OF RS.44,17,743/ - MADE IN THE AY 2011 - 12 WOULD BE ALLOWED AS A DEDUCTION TO FETSCS IN THE YEAR OF PAYMENT OF TDS I.E. AY 2013 - 14. M/S FEDEX EXPRESS ITA NOS 6664 & 6750/MUM/2016 5 7. IN APPEAL, THE LD. CIT(A) FOLLOWED THE ORDER OF THE TRIBUNAL IN THE CASE OF SKOL BREWERIES LTD. V. ACIT (ITA NO. 6175/2011) (MUMBAI - TRIB) AND EPICENT ER TECHNOLOGIES PVT. LTD. V. ACIT (ITA NO. 8335/MUM/2004) (MUMBAI - TRIB) AND DELETED THE DISALLOWANCE OF RS.44,17,743/ - MADE BY THE AO. 8. BEFORE US, THE LD. DR RELIES ON THE ORDER OF THE AO WHEREAS THE LD. COUNSEL OF THE ASSESSEE RELIES ON THE ORDER OF TH E TRIBUNAL IN ASSESSEES OWN CASE FOR THE AY 2008 - 09 (ITA NO. 7409/MUM/2012) AND AY 2009 - 10 (ITA NO. 3088/MUM/2014) AND THUS SUPPORTS THE ORDER PASSED BY THE LD. CIT(A). 9. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE RELEVANT MATERIALS ON RECORD. WE FIND THE SIMILAR ISSUE AROSE BEFORE THE ITAT F BENCH MUMBAI IN ASSESSEES OWN CASE REFERRED ABOVE. THE TRIBUNAL VIDE ORDER DATED 01.06.2018 HELD : 11. WE HAVE HEARD BOTH THE COUNSEL AND PERUSED THE RECORDS. THE LEARNED COUNSEL OF THE ASSESSEE SUBMIT TED THAT PROVISIONS OF SECTION 40(A)(IA) ARE NOT AT ALL ATTRACTED IN THIS CASE, AS THE SAID AMOUNT HAS NOT BEEN CLAIMED AS REVENUE EXPENDITURE. HENCE, HE SUBMITTED THAT THERE IS NO QUESTION OF DISALLOWING DEPRECATION CLAIMED ON THE CAPITAL ITEM SO ACQUIRED . FOR THIS PROPOSITION, HE PLACED RELIANCE UPON FOLLOWING CASE LAWS: SR. NO. DECISIONS CITATION 1. CIT VS. MARK AUTO INDUSTRIES LTD. [358ITR43(P&HHQ] 2. SAB MILLER INDIA LTD. VS. ACIT [155 1TD 1093 (MUMBAI TRIB.)] M/S FEDEX EXPRESS ITA NOS 6664 & 6750/MUM/2016 6 3. SONIC BIOCHEM EXTRACTIONS (P.) LTD. VS. ITO [23 1TR(T) 447 (MUMBAI TRIB.)] 4. SKOL BREWERIES LTD. VS. ACIT [28 ITR (T) 465 (MUMBAI TRIB.)] 5. KAWASAKI MICROELECTRONICS INC. VS. DDIT(IT) [60 TAXMANN.COM 259(BANG. TRIB.)] 6. JAGUAR ENTERPRISES VS. DCIT [33 ITR(T) 483 (DELHI TRIB.)] 12. UPON CAREFUL CONSIDERATION, WE FIND THAT IN THE ABOVE CASE LAWS IT HAS DULY BEEN HELD THAT WHEN THE PAYMENT IS IN THE REALM OF CAPITAL EXPENDITURE AND EXPENDITURE IS NOT CLAIMED AS REVENUE EXPENDITURE, THE PROVISIONS OF SECTION 4O(A)(IA) ARE NOT APPLIC ABLE. IN THIS REGARD, WE MAY GAINFULLY REFER TO THE DECISION OF HONBLE PUNJAB AND HARYANA HIGH COURT IN THE CASE OF CIT VS. MARK AUTO INDUSTRIES LTD. (SUPRA). IN THIS CASE THE QUESTION CONSIDERED BY THE HONOURABLE HIGH COURT WAS AS UNDER: (II) WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE LD. ITAT IS RIGHT IN LAW IN UPHOLDING THE ORDER OF LD. CIT(A), THAT THE PROVISION OF SECTION 40(A)(I) OF INCOME TAX ACT, 1961 ARE NOT APPLICABLE TO PAYMENTS OF TECHNICAL KNOW - HOW, SIMPLY BECAUSE ONLY PART OF I T IS WRITTEN OFF BY THE ASSESSEE, EACH YEAR BY WAY OF DEPRECIATION U /S 32 OF INCOME TAX ACT, 1961? 13. THE HONBLE HIGH COURT ANSWERED THE ABOVE QUESTION AS UNDER: 6. LEARNED COUNSEL FOR THE REVENUE WAS UNABLE TO SUBSTANTIATE THAT IN THE ABSENCE OF ANY RE QUIREMENT OF LAW FOR MAKING DEDUCTION OF TAX OUT OF THE EXPENDITURE ON TECHNICAL KNOW - HOW WHICH WAS CAPITALIZED AND NO AMOUNT WAS CLAIMED AS REVENUE EXPENDITURE, THE DEDUCTION COULD BE DISALLOWED UNDER SECTION 40(A)(I) OF THE ACT. ACCORDINGLY, NO INFIRMITY COULD BE FOUND IN THE ORDER PASSED BY THE TRIBUNAL WHICH M/S FEDEX EXPRESS ITA NOS 6664 & 6750/MUM/2016 7 MAY WARRANT INTERFERENCE BY THIS COURT. THUS, BOTH THE QUESTIONS ARE ANSWERED AGAINST THE REVENUE AND IN FAVOUR OF THE ASSESSEE. 14. SIMILAR PROPOSITION WAS ALSO HELD BY THE RESPECTIVE DECISIONS OF TRIBUNAL AS ABOVE. FOLLOWING THE ABOVE SAID PRECEDENTS, WE ARE OF THE CONSIDERED OPINION THAT ADVERSE INFERENCE DRAWN FOR LACK OF DEDUCTION OF TDS IN THIS CASE IS NOT SUSTAINABLE, INASMUCH AS THE PAYMENT WAS MADE IN RESPECT OF CAPITAL EXPENDITURE. HENCE, FOLLOWING THE ABOVE SAID PRECEDENTS, WE HOLD THAT ASSESSEES CLAIM FOR DEPRECATION WAS JUSTIFIED. 9.1 FACTS BEING IDENTICAL, WE FOLLOW THE ABOVE ORDER OF THE CO - ORDINATE BENCH AND UPHOLD THE ORDER OF THE LD. CIT(A). 10. IN THE RESULT, THE APPEAL FILED BY THE REVENUE IS DISMISSED. ITA NO. 6750/MUM/2016 ASSESSMENT YEAR: 2011 - 12 11. THE GROUND OF APPEAL FILED BY THE ASSESSEE READS AS UNDER: ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE AO ERRED IN APPLYING THE PROVISIONS OF SECTION 43B OF THE ACT TO THE IMPUGNED PROVISION FOR LEAVE ENCASHMENT. IT IS PRAYED THAT THE DISALLOWANCE OF PROVISION FOR LEAVE ENCASHMENT OF RS.24,9 4,757/ - UNDER SECTION 43B OF THE ACT BE DELETED. 12. WE FIND THAT THE SAME ISSUE AROSE BEFORE THE ITAT F BENCH IN ASSESSEES OWN CASE REFERRED ABOVE AND THE TRIBUNAL VIDE ORDER DATED 01.01.2018 HELD AT PARA 6 AS UNDER : 6. WE HAVE HEARD BOTH THE COUNSEL AND PERUSED THE RECORDS. WE FIND THAT THIS ISSUE IS COVERED AGAINST THE ASSESSEE BY SEVERAL CASE LAWS INCLUDING THAT IN THE ASSESSEES GROUP CASE IN ITA NO. 1475/MUM/2012 IN THE CASE OF M/S FEDEX EXPRESS ITA NOS 6664 & 6750/MUM/2016 8 FEDERAL EXPRESS (INDIA) LTD. VS. ACIT VIDE ORDER DATED 20.03.2013. IN THIS CASE, THE TRIBUNAL HAS HELD AS UNDER: 4. WE HAVE PERUSED THE RECORDS AND CONSIDERED MATTER CAREFULLY. THE DISPUTE RAISED IS REGARDING ALLOWABILITY OF DEDUCTION ON ACCOUNT OF LEAVE ENCASHMENT ON THE BASIS OF PROVISIONS MADE IN THE ACCOUNTS. THE AO, D ISALLOWED THE CLAIM ON THE GROUND THAT LEAVE ENCASHMENT HAS TO BE ALLOWED ON PAYMENT BASIS U/S 43 B (F). THE ASSESSEE HAS ARGUED THAT HONBLE HIGH COURT OF KOLKATA IN CASE OF EXIDE INDUSTRIES (SUPRA) HAVE STRUCK DOWN THE PROVISIONS OF SECTION 43 B (F) AND THEREFORE, THE SAID PROVISIONS IS NOT APPLICABLE AND CLAIM HAS TO BE ALLOWED. HOWEVER, WE NOTE THAT THE JUDGMENT OF HONBLE HIGH COURT HAD BEEN CHALLENGED BY THE REVENUE BEFORE THE SUPREME COURT WHICH HAD STAYED THE OPERATION OF JUDGMENT AND HAS HELD THAT DURING THE PENDENCY OF THE APPEAL, THE ASSESSEE HAS TO PAY TAX AS IF SECTION 43B(F) WAS ON STATUTE BOOK. THEREFORE, CLAIM OF THE ASSESSEE COULD NOT BE ALLOWED ON THE BASIS OF JUDGMENT OF KOLKATA HIGH COURT IN CASE OF EXIDE INDUSTRIES LTD. (SUPRA). IN VIEW OF THE JUDGMENT THE SUPREME COURT (SUPRA) THE PROVISIONS OF SECTION 43B(F) HAVE TO BE TAKEN AS PART OF THE STATUTE WHILE CONSIDERING THE CLAIM OF DEDUCTION ON ACCOUNT OF LEAVE ENCASHMENT. WE THEREFORE SEE NO INFIRMITY IN THE ORDER OF CIT(A) CONFIRMING THE DISALLOWANCE MADE BY AO AND THE SAME IS THEREFORE, UPHELD. 7. RESPECTFULLY FOLLOWING THE PRECEDENT AS ABOVE, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE ASSESSING OFFICER. ACCORDINGLY, WE UPHOLD THE SAME. 12.1 FACTS BEING IDENTICAL, WE FOLLOW THE ABO VE ORDER OF THE CO - ORDINATE BENCH AND UPHOLD THE ORDER OF THE LD. CIT(A) ON THE ABOVE GROUND OF APPEAL. M/S FEDEX EXPRESS ITA NOS 6664 & 6750/MUM/2016 9 13. TO SUM UP, THE APPEALS FILED BY THE REVENUE AS WELL AS THE ASSESSEE ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT 31/12/2018. SD/ - SD/ - ( SAKTIJIT DEY ) (N.K. PRADHAN) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI ; DATED: 31/12/2018 RAHUL SHARMA, SR. P.S. COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT. 3. THE CIT(A) - 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE . BY ORDER, //TRUE COPY// (SR. PRIVATE SECRETARY) ITAT, MUMBAI
