ITO 3(1)(2), MUMBAI V. BANGALORE SHIRT CO.P.LTD, MUMBAI

ITA 788/MUM/2015

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 8333 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-02-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2011-2012
• Appeal Filed On: 05-02-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: SUMAN KUMAR
• Keywords: Depreciation
• Section: 43B; 143(3)

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, MUMBAI BEFORE SHRI MAHAVIR SINGH , JM AND SHRI RAJESH KUMAR, AM , , ITA NO. 498 / MUM/ 20 1 5 ( / ASSESSMENT YEAR: 2011 - 12 ) M/S BANGALORE SHIR T CO.PVT LTD,115, CAMA INDUSTRIAL ESTAE, SUN MILL COMPOUND, LOWER PAREL (W), MUMBAI - 400013 / VS. INCOME - TAX OFFICER - 3(1)(2), 6 TH FLOOR, AAYAKAR BHAVAN, M K MARG, MUMBAI - 400020 ( / APPELLANT) ( / RESPONDENT ) ITA NO. 788 / MUM/ 2015 ( / ASSESSMENT YEAR: 20 1 1 - 12 ) INCOME - TAX OFFICER - 3(1)(2), 6 TH FLOOR, AAYAKAR BHAVAN, M K MARG, MUMBAI - 400020 / VS. M/S BANGALORE SHIRT CO.PVT LTD, MUMBAI - 400013 ./ PAN : AA A C B2193G ( / APPELLANT) : ( / RESPONDENT ) / ASSESSEE BY : NONE /RESPONDENT BY : SHRI SUMAN KUMAR / DATE OF HEARING : 2.2.2017 / DATE OF PRONO UNCEMENT : 27. 2.2017 / O R D E R PER RAJESH KUMAR, A. M: THESE CROSS APPEALS ARE DIRECTED AGAINST THE ORDER DATED 14.1 1 .2014 PASSED BY THE LD. CIT(A) - 5 , MUMBAI. THESE APPEALS, FOR THE SAKE OF 2 ITA NO. 498/MUM/2015 ITA NO.788/MUM/2015 CONVENIENCE, ARE CLUBBED TOGETHER, HEARD TOGETHER A ND ARE BEING DISPOSED OF IN THIS CONSOLIDATED ORDER. 2. AT THE OUTSET, WE WOULD LIKE TO MENTION THAT NEITHER THE ASSESSEE NOR ANY AUTHORIZED REPRESENTATIVE APPEARED AT THE TIME OF HEARING OF THE APPEAL. THEREFORE, WE PROCEED TO DECIDE THE APPEAL EX - PARTE IN ABSENCE OF THE ASSESSEE AFTER HEARING LD.DR ON THE BASIS OF MATERIAL AVAILABLE BEFORE US. ITA NO. 498 /MUM/2015 3 . THE ISSUE RAISED BY THE ASSESSEE IN VARIOUS GROUNDS OF APPEAL IS AGAINST THE CONFIRMATION OF DISALLOWANCE OF DEPRECIATION OF RS.14,22, 372/ - INTEREST PAID ON BORROWED FUNDS OF RS.8,14,400/ - AND RUNNING EXPENSES OF RS.5569/ - OF THE CAR ON THE GROUND THAT CAR WAS REGISTERED IN THE NAME OF ONE OF THE MAJOR SHAREHOLDERS OF THE COMPANY. 4 . BRIEF FACTS IN BRIEF ARE THAT DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE AO OBSERVED THAT A BMW MOTOR CAR FOR THE YEAR UNDER CONSIDERATION WAS PURCHASED IN THE NAME OF MRS.MRIDULADEVI N AGARWAL AFTER TAKING LOAN AND WAS ACCOUNTED FOR IN THE BOOKS OF ACCOUNT S OF THE COMPANY ACC O RDIN G LY. I NTEREST ON LOAN BORROWED RS. 8,14,400/ - AND DEPRECIATION ON BMW CAR OF RS.14,22,372/ - W ERE CLAIMED AS EXPENSES BESIDES CA R RUNNING EXPENSES OF RS.5569/ - . ACCORDING TO THE AO THE CAR WAS NEITHER PURCHASED IN THE NAME OF THE DIRECTOR N OR MANAGING DIRECTOR OF THE COMPANY AND THEREFORE, THE EXPENSES CLAIMED BY WAY DEPRECIATION , INTEREST AND RUNNING 3 ITA NO. 498/MUM/2015 ITA NO.788/MUM/2015 AND MAINTENANCE WERE NOT ADMISSIBLE UNDER THE PROVISIONS OF INCOME TAX ACT, 1961 . A S A RESULT DISALLOWED AND ADDED THE SAME TO THE TOTAL INCOME OF THE ASSESSEE BY F RAMING THE ASSESSMENT UNDER SECTION 143(3) OF THE ACT VIDE ASSESSMENT ORDER DATED 31.1.2014 ASSESSING THE TOTAL INCOME AT RS.64,96,070/ - . AGGRIEVED BY THE ORDER OF THE AO, THE ASSESSEE PREFERRED AN APPEAL BEFORE THE LD.CIT(A), WHO AFTER CONSIDERING THE CONTENTIONS RAISED BY THE LD.AR DURING THE COURSE OF APPELLATE PROCEEDINGS, DISMISSED THE APPEAL OF THE ASSESSEE ON THIS ISSUE. FURTHER AGGRIEVED BY THE ORDER OF FAA, THE ASSESSEE IS IN APPEAL BEFORE THIS TRIBUNAL. 5. HEARD THE LD.DR AND PERUSED THE MATE RIAL AVAILABLE BEFORE US INCLUDING THE IMPUGNED ORDER. WE FIND THAT THE A CAR PURCHASED IN THE NAME OF MRS.MRIDULADEVI N AGARWAL, WHO IS A MAJOR SHAREHOLDER OF THE COMPANY AND THE LOAN WAS ALSO SANCTIONED IN THE NAME OF SHAREHOLDER MRS.MRIDULADEVI N AG ARWAL. THE LD.CIT(A) HAS RECORDED A FINDING OF FACT S THAT IT WAS NOT PROVED BY THE ASSESSEE BY WAY OF PRODUCTION OF ANY LOGBOOK OR OTHER EVIDENCE TO SHOW THAT THE CAR WAS USED FOR THE BUSINESS PURPOSE. THERE IS NOTHING BEFORE US TO REVERSE THE FINDING S OF THE LD.CIT(A) AND WE ARE , THEREFORE , INCLINED TO CONFIRM THE ACTION OF THE LD.CIT(A) ON THIS ISSUE. ACCORDINGLY, THE APPEAL OF THE ASSESSEE ON THIS ISSUE STANDS DISMISSED. 4 ITA NO. 498/MUM/2015 ITA NO.788/MUM/2015 ITA NO.788/MUM/2015 6 . THE ISSUE RAISED IN THE GROUNDS OF APPEAL NO. 1 IS AGAINST THE DELETION OF ADDITION ON THE DELAYED PAYMENT OF EMPLOYEES CONTRIBUTION TO PROVIDENT FUNDS AND ESIC AFTER THE DUE DATE IN TERMS OF EXPLANATION TO SECTION 36(1)(VA) OF THE INCOME TAX ACT, 1961 AND THE ISSUE S RAISED IN GROUND NO . 2 ARE THA T EMPLOYEES CONTRIBUTION TO PF AND ESIC WAS NOT ALLOWABLE UNDER THE PROVISIONS OF SECTION 43B OF THE ACT. 7 . THE AO DURING THE COURSE OF ASSESSMENT PROCEEDINGS OBSERVED THAT THE EMPLOYEES CONTRIBUTION TOWARDS PF AND ESIC WAS PAID AFTER DUE DATE IN VIOLA TION OF PROVISIONS OF SECTION 36(1)(VA) OF THE ACT AND THEREFORE PROVISIONS OF SECTION 43B C OULD NOT BE RESORTED TO CLAIM THE BENEFIT OF DEDUCTION QUA THESE EXPENSES WHEN THE DEDUCTION WAS NOT ALLOWABLE UNDER THE RELEVANT PROVISIONS OF ACT I.E 36(V)(VA) OF THE ACT . 8 . DURING THE APPELLATE PROCEEDINGS, THE FAA ALLOWED THE APPEAL OF THE ASSESSEE ON THIS ISSUE BY OBSERVING AND HOLDING AS UNDER : 4. 2 GROUND NO(2): THROUGH THIS GROUND, THE ASSESSEE HAS CHALLENGED THE DISALLOWANCE OF CLAIM OF DEDUCTION BE ING EMPLOYEE'S CONTRIBUTION TO THE PF & ESIC AMOUNTING TO RS . 3454199/ - [ 24,34,146 / - + 1 0,20 ,053/ - ]. THE AO DISALLOWED THE CLAI M IN VIEW OF THE PROVISIONS OF S. 36 (1) (VA) AS THOSE AMOUNTS WERE NOT CREDITED TO THE RELEVANT FUND WITHIN THE DUE DATE OF PAYMEN TS PRESCRIBED IN THOSE ACTS. AS PER THE PROVISIONS OF IT ACT, THE EMPLOYEE'S CONTRIBUTION TO THE PF / ESIC IS TREATED AS INCOME OF THE ASSESSEE '(EMPLOYER) UNDER SECTION Z(Z4)(X) AND THE DEDUCTION THEREOF IS ALLOWABLE UNDER SECTION 36(1 )(VA) PROVIDED THE AM OUNT IS CREDITED IN THE RELEVANT FUND WITHIN THE DUE DATE AS PRESCRIBED IN PF / ESIC ACTS. UNDER THOSE ACTS, THE DUE DATE FOR PAYMENT, AS REGARDS TO 5 ITA NO. 498/MUM/2015 ITA NO.788/MUM/2015 THE CONTRIBUTION RECEIVED DURING A MONTH, IS ON THE 15TH DAY OF THE SUCCEEDING MONTH. FURTHER A GRACE PERIO D OF 7 DAYS IS ALSO AVAILABLE. THAT WAY IF THE AMOUNT WAS NOT CREDITED TO THE RELEVANT FUND BY 22 ND OF THE NEX T MONTH, THEN DEDUCTION UNDER SECTION 36(1 )(VA) WOULD NOT BE AVAILABLE TO THE ASSESSEE. THE AO HAS BEEN OF THE VIEW THAT SECTION 43B IS NOT - APPL ICABLE AS REGARD TO THE EMPLOYEE'S CONTRIBUTION; AND THE RELEVANT PROVISION IS SEC 36(1 )(VA). IT IS NOTED THAT THE PROVISION OF SECTION 43B IS RATHER APPLICABLE ONTO EMPLOYER' S CONTRIBUTION AND THE DEDUCTION THEREON WOULD BE AVAILABLE IF PAYMENT WAS MADE BEFORE THE DUE DATE OF FILING RETURN. ACCORDINGLY, THE AO HAS DISALLOWED THE CLAIM OF DEDUCTION AND ADDED THAT AMOUNT TO THE ASSESSEES TOTAL INCOME. 4.2.1 DURING THE APPELLATE PROCEEDINGS, IT WAS STATED THAT THE VARIOUS TRIBUNAL AND HIGH COURTS' HA VE TREATED THE EMPLOYEE'S CONTRIBUTION AND EMPLOYERS CONTRIBUTION AT PAR AND 'HAD HELD THAT THE DEDUCTION AS REGARDS TO EMPLOYEE'S CONTRIBUTION TOO WOULD BE ALLOWABLE IF PAYMENT WAS MADE BEFORE THE DUE DATE OF FILING OF RETURN (AS PROVIDED IN 'SECTION 43B FOR EMPLOYER'S CONTRIBUTION]. IN THE CONTEXT THE ASSESSEE HAS ALSO RELIED ONTO A RECENT DECISION OF THE HON'BLE MUMBAI HIGH COURT IN THE CASE OF HINDUSTAN ORGANICS CHEMICALS LTD 366 I TR 001 (BOM). RESPECTFULLY FOLLOWING THE DECISION OF JURISDICTION AL HIGH COURT, THE ADDITION MADE BY THE AO IN THIS REGARD IS DELETED . THE AO IS DIRECTED TO ALLOW THE CLAIM OF DEDUCTION OF RS.34,54,199/ - 9 . HEARD THE LD.DR AND PERUSED THE MATERIAL PLACED BEFORE US. WE FIND THAT THE ORDER PASSED BY THE LD.CIT(A) W AS CORRECT BASED ON THE CORRECT APPRECIATION OF FACTS AND LAW ON TH IS POINT BY FOLLOWING THE DECISION OF THE JURISDICTIONAL HIGH COURT IN THE CASE OF HINDUSTAN ORGANICS CHEMICALS LTD (SUPRA). AFTER PERUSING THE RECORD, WE ARE IN AGREEMENT WITH THE VIE W TAKEN BY THE LD.CIT(A) ON THIS ISSUE AND ALSO THERE IS NOTHING ON RECORD TO PROVE THE CONTRARY WHICH WARRANT US TO TAKE A DIFFERENT VIEW . ACCORDINGLY WE ARE INCLINED TO DISMISS THE APPEAL OF THE REVENUE ON THIS GROUND. 6 ITA NO. 498/MUM/2015 ITA NO.788/MUM/2015 10. IN THE RESULT , ASSESSEES APP EAL AS WELL AS THE APPEAL FILED BY THE REVENUE STANDS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 27TH FEB, 2017. S D SD ( /MAHAVIR SINGH ) ( / RAJESH KUMAR) / J UDICIAL MEMBE R / A CCOUNTANT MEMBER MUMBAI ; DATED : 27 . 2 .2017 SRL,SR.PS / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / T HE RESPONDENT 3. ( ) / THE CIT(A) 4. / CIT CONCERNED 5. , , / DR, ITAT, MUMBAI 6. / GUARD F ILE / BY ORDER, T RUE COPY / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI