Asst. Commissioner of Income Tax, Circle-1, Nashik V. M/s. Bharat Glass Tubes Ltd., Nashik

ITA 953/PUN/2013

• Counselvise Citation: 95324514 RSA 2013
• Duration Of Justice: 1 year(s) 5 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-10-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2009-2010
• Appeal Filed On: 02-05-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S PRAVEENA
• Keywords: Depreciation; Proportionate interest; Question of law; Notional interest; Commercial expediency; Revised return; Unabsorbed depreciation
• Section: 43B; 139

Judgement Text

INCOME TAX APPELLATE TRIBUNAL PUNE BENCH B, PUNE BEFORE SHRI G.S.PANNU, ACCOUNTANT MEMBER AND SHRI R.S. PADVEKAR, JUDICIAL MEMBER ITA NO. 953/PN/2013 (ASSESSMENT YEAR : 2009-10) ACIT, CIRCLE-1, NASHIK .. APPELLANT VS. M/S. BHARAT GLASS TUBES LTD., F-2, MIDC, MALEGAON, SINNAR, DIST : NASHIK-422113 .. RESPONDENT PAN NO.AABCB5703D ASSESSEE BY : SHRI NIKHIL PATHAK DEPARTMENT BY : SMT. S. PRAVEENA ORDER PER R.S. PADVEKAR, JM : THIS APPEAL IS FILED BY THE REVENUE CHALLENGING THE IMPUGNED ORDER OF THE LD.CIT(A)-I, NASHIK DATED 28-02-2013 F OR THE A.Y. 2009- 10. 2. GROUND NO.1 BY THE REVENUE READS AS UNDER: 1. WHETHER ON THE FACTS AND IN THE CIRCUMSTA NCES OF THE CASE, THE LD.CIT(A)-I, NASHIK WAS JUSTIFIED IN DELETING T HE DISALLOWANCE OF INTEREST OF RS. 36,93,731 ON THE INTEREST FREE LOAN S AND ADVANCES GIVEN TO THE ASSOCIATE CONCERNS. 2.1 THE FACTS WHICH ARE REVEALED FROM THE RECORD AS UNDER. THE ASSESSEE COMPANY IS IN THE MANUFACTURE OF ROLLED FI GURED AND WIRE GLASS ETC. THE ASSESSEE FILED THE RETURN OF INCOME DECLARING TOTAL INCOME IN THE NORMAL PROVISIONS AT NIL AND INCOME C OMPUTED U/S.115JB AT RS.1,52,07,595/-. THE ASSESSEES CASE WAS SELECTED FOR SCRUTINY AND ASSESSMENT HAS BEEN COMPLETED U/S.143( 3) OF THE ACT. AS OBSERVED BY THE ASSESSING OFFICER, DURING THE YE AR UNDER 2 CONSIDERATION, THE ASSESSEE HAS SET UP ONE MORE UNI T AT ANKLESHWAR, GUJARAT. SO FAR AS ISSUE OF DISALLOWANCE OF THE IN TEREST IS CONCERNED, AS NOTED BY THE ASSESSING OFFICER, ASSESSEE HAS ADV ANCED INTEREST FREE LOANS TO ASSOCIATE CONCERNS WHICH ARE RECOVERA BLE IN CASH AND KIND AS ON 31-03-2009, THE DETAILS OF THE SAID LOAN S ARE GIVEN AT PAGE 3 OF THE ASSESSMENT ORDER WHICH ARE AS UNDER : S.NO. NAME OF THE PERSON ADVANCE AMOUNT (RS.) 1 SUMANGAL GLASS INDUSTRIES PVT. LTD., SAMAKHYARI 1,25,92,558/ - 2 HARYANA SHEET GLASS LTD., ANKALESHWAR 2,86,21,059/ - 3 CHANDRA LAXMI SAFETY GLASS 7,66,001/ - 4 SAGAR GLASS ENTERPRISES 49,25,000/ - 5 K.F.G. GLASS INDUSTRIES 50,12,334/ - 6 I.A.G. CO. LTD., 8,62,020/ - 7 PARAMOUNT FARMS P. LTD., 10,45,000/ - TOTAL 5,38,23,972/ - 2.2 THE ASSESSING OFFICER SOUGHT THE EXPLANATION OF THE ASSESSEE AS TO WHY THE PROPORTIONATE INTEREST SHOULD NOT BE DIS ALLOWED. THE ASSESSEE FILED HIS REPLY STATING THAT THE ASSESSEE HAS SUFFICIENT NON- INTEREST BEARING FUNDS IN THE FORM OF SHARE CAPITAL AND RESERVES TO THE EXTENT OF RS.25,75,30,555/- AND HENCE, EVEN IF THE INTEREST FREE ADVANCES TO THE EXTENT OF RS.5,38,23,972/- ARE GIVE N, THE FIRST PRESUMPTION WOULD BE, IT IS OUT OF THE INTEREST FRE E FUNDS OF THE ASSESSEE. 2.3 THE ASSESSEE ALSO FURTHER STATED BEFORE THE ASS ESSING OFFICER THAT SO FAR AS INTEREST BEARING BORROWINGS ARE CONC ERNED, THERE IS DIRECT NEXUS BETWEEN THE LOANS RAISED FROM THE BANK S/FINANCIAL INSTITUTIONS AND THE ASSETS ACQUIRED. THOSE LOANS HAVE BEEN ALLOWED SPECIFICALLY WITH A VIEW TO FINANCE THE ACQUISITION OF THE CONCERNED FIXED ASSETS IN THE YEARS OF RAISING SUCH LOANS. T HE ASSESSEE FURTHER STATED THAT EVEN IF THE INTEREST BEARING INSTITUTIO NAL LOANS ARE RAISED BUT THERE IS NO DIRECT NEXUS WITH THE INTEREST FREE ADVANCES AS THOSE LOANS ARE APPLIED FOR SPECIFIC PURPOSES. THE ASSES SEE RELIED ON THE 3 DECISION OF THE HONBLE JURISDICTIONAL HIGH COURT I N THE CASE OF CIT VS. RELIANCE UTILITIES AND POWER LTD REPORTED IN 313 IT R 340. 3. THE ASSESSING OFFICER WAS NOT IMPRESSED WITH THE EXPLANATION OF THE ASSESSEE. HE APPLYING THE DECISION OF THE HON BLE HIGH COURT OF KERALA VS. CIT V.I. BABY AND COMPANY REPORTED IN 25 4 ITR 248, PROCEEDED TO MAKE THE PROPORTIONATE DISALLOWANCE OF THE INTEREST WHICH WAS WORKED OUT AT RS.36,93,731/-, BY TAKING T HE INTEREST RATE AS 13% U/S.36(1)(III) OF THE I.T. ACT. 3.1 THE OPERATIVE PART OF THE REASONS GIVEN BY THE ASSESSING OFFICER FOR MAKING THE DISALLOWANCE ARE AS UNDER : 4.5 KEEPING IN VIEW THE ABOVE JUDICIAL PRONOUNCEME NT AND THE FACT THAT THE ASSESSEE HAS BEEN ADVANCING LOANS TO ASSOCIATE CONCERNS FOR THEIR PERSONAL BENEFITS CLAI M OF DEDUCTION U/S.36(L)(III) IS NOT JUSTIFIED ON THE BORROWING FR OM THE BANK FOR THE BUSINESS PURPOSES OF THE ASSESSEE. THE CLAIM OF THE ASSESSEE THAT IT HAS OBTAINED LOAN ON WHICH INTERES T HAS BEEN CLAIMED IN THE PROFIT AND LOSS ACCOUNT IS FOR ACQUI RING THE ASSETS AND VEHICLES. IT WAS FURTHER CLAIMED BY THE ASSESSE E THAT IT WAS HAVING SHARE CAPITAL AND RESERVE OF RS.25,75,30,555 /- AND OUT OF SUCH FUNDS IT HAS ADVANCES THESE NON TRADE ADVAN CES TO THE ASSOCIATE CONCERNS. THE ASSESSEE HAS DEBITED INTERE ST ON TERM LOAN IN THE PROFIT AND LOSS ACCOUNT OF RS.2,00,23,2 82/- AND OTHER INTEREST OF RS.13,91,245/- AND INTEREST ON HI RE PURCHASE. AS PER THE CLAIM OF THE ASSESSEE THAT IT WAS HAVING SHARE CAPITAL AND RESERVE AND SURPLUS AS STATED ABOVE. IF THE ASS ESSEE HAS NOT ADVANCED INTEREST FREE LOAN OF RS.5,38,23,972/- THEN, ASSESSEE HAS NOT TO BORROW THE FUNDS AND PAY THE IN TEREST TO THE FINANCIAL INSTITUTION AS DEBITED IN THE PROFIT AND LOSS ACCOUNT. SINCE THE ASSESSEE HAS ADVANCED INTEREST FREE LOAN TO ITS ASSOCIATE CONCERNS OF RS.5,38,23,972/- THEREBY IT H AS PAID INTEREST TO THE FINANCIAL INSTITUTIONS AND THEREBY DEBITED THE INTEREST IN THE PROFIT AND LOSS ACCOUNT AND REDUCED THE INCOME. THUS, IT IS FOUND THAT THERE IS NO COMMERCIAL EXPED IENCY IN ADVANCING THE LOAN OF RS.5,38,23,972/-. THEREFORE, INTEREST ELEMENT ON THE AMOUNT OF RS.5,38,23,972/- HAS TO BE DISALLOWED. 4. THE ASSESSEE CARRIED THE ISSUE BEFORE THE LD.CIT (A) AND LD.CIT(A) DELETED THE ADDITION. THE OPERATIVE PART OF THE FINDINGS AND REASONS OF THE LD.CIT(A) ARE AS UNDER : 4 5.3 I HAVE CAREFULLY CONSIDERED THE FACTS OF THE C AE, THE ASSESSMENT ORDER AND THE SUBMISSIONS OF THE APPELLA NT. THE APPELLANT COMPANY HAS GIVEN INTEREST FREE LOANS TO ITS SISTER CONCERNS VIZ., SUMANGAL GLASS INDUSTRIES PVT. LTD., RS.1,25,92,558/-, SAMAKHYARI, HARYANA SHEET GLASS L TD., ANKALESHWAR-RS.2,86,21,059/-, CHANDRA LAXMI SAFETY GLASS- RS.7,66,001/-, SAGAR GLASS ENTERPRISES-RS.49,25,000 /-, K.F.G. GLASS INDUSTRIES-RS.50,12,334/-, I.A. G. CO. LTD.,- RS.8,62,020/- AND PARAMOUNT FARMS P. LTD. RS.10,45,000/- AGGREGATING TO RS.5,38,23,972/-. THE APPELLANT CO HAS DEMONSTRATED THAT IT HAD IN THE BALANCE SHEET AS ON 31/03/2009 NON-INTEREST BEA RING FUNDS I.E. SHARE CAPITAL AND RESERVES OF RS. 25,75,30,555/- WH ICH WERE SUFFICIENT TO FINANCE THE NON INTEREST BEARING ADVANCE OF RS. 5,38,23,972/- GIVEN TO ITS ASSOCIATE CONCERNS. IT IS AN UNDISPUTE D FACT THAT THE APPELLANT COMPANY BORROWED RS.15 CRORE FOR PURCHASE OF FACTORY LAND AND BUILDING, & PLANT AND MACHINERY AT ANKLESHWAR F ROM COSMOS CO- OPERATIVE BANK, FORT, MUMBAI. THE PAYMENT OF RS.15 CRORE WAS DIRECTLY MADE TO IFCI LTD. NO NEXUS THEREFORE IS ES TABLISHED BETWEEN THE AMOUNT BORROWED AND INTEREST FREE ADVANCES GIVE N TO THESE SISTER CONCERNS. THEREFORE, THERE IS NO JUSTIFICATION TO M AKE ANY DISALLOWANCE OUT OF THE INTEREST. THIS VIEW IS FORT IFIED IN THE CASE OF GANDHI BHANDARI & CO V/S ACIT (2003) 78 TTJ (PUNE) 161 WHEREIN IT IS HELD AS UNDER : 'THIS TRIBUNAL HAS BEEN HOLDING THAT INTEREST DISAL LOWANCE IS TO BE MADE ONLY IF THE AO IS ABLE TO ESTABLISH NEXUS BETW EEN THE FUNDS WITH INTEREST TO THE AMOUNTS ADVANCED FREE OF INTER EST. THIS VIEW ALSO GETS SUPPORT FROM THE JUDGMENT OF THE HON'BLE BOMBA Y HIGH COURT IN CIT VS. BOMBAY SAMACHAR (1969) 74 ITR 723 (BOM.)'. THEREFORE, IT IS HELD THAT THE APPELLANT COMPANY HAD SUFFICIENT F UNDS AVAILABLE IN THE FORM OF SHARE CAPITAL AND RESERVES OTHER THAN T HE BORROWED MONEY FOR ADVANCING A SUM OF RS. 5,38,23,972/-. THU S, IT CANNOT BE SAID THAT THE AMOUNT OF LOAN ADVANCED TO THE SISTER -CONCERNS IS OUT OF THE BORROWED FUND. IN THE CASE OF CIT VS. RELIANCE UTILITIES & POWER L TD. (2009) 313 ITR 340 (BOM.), IT HAS BEEN HELD THAT IF THERE ARE FUND S AVAILABLE, BOTH, INTEREST FREE AND OVER DRAFT AND/OR LOANS TAKEN, TH EN A PRESUMPTION WOULD ARISE THAT INVESTMENTS WOULD BE OUT OF INTERE ST-FREE FUNDS GENERATED OR AVAILABLE WITH COMPANY, PROVIDED SAID FUNDS ARE SUFFICIENT TO MEET INVESTMENTS. THUS AS PER THE PRI NCIPLE OF PRECEDENT, IT IS THE LATEST AUTHORITY AND NEEDS TO BE FOLLOWED . THE ID. A.R. HAS CORRECTLY POINTED OUT THAT THE RATIO OF THE CONTRAR Y JUDGEMENT OF THE HON. KERALA HIGH COURT IN THE CASE OF CIT VS. V.I. BABY & CO. (2002) 254 ITR 248 (KER.) IS NOT APPLICABLE ON THE FACTS O F THE APPELLANT'S CASE. THIS IS BECAUSE OF TWO REASONS. FIRSTLY, THE SAID DECISION PRONOUNCED IN 2001 IS EARLIER AND THE DECISION OF T HE RELIANCE UTILITIES AND POWER LTD. IS PRONOUNCED IN 2009 IS LATER AND S ECONDLY, THE DECISION OF RELIANCE UTILITIES AND POWER LTD. IS BY THE JURISDICTIONAL HIGH COURT, HENCE IT IS BINDING ON THE AO. WHILE DE ALING WITH THE ISSUE THE ID. AO HAS MADE THE FOLLOWING OBSERVATION IN PA RA 4.5 ON PAGE 5 OF THE IMPUGNED ASSESSMENT ORDER:- 'IF THE ASSESSEE HAS NOT ADVANCED INTEREST FREE LOA N OF RS.5,38,23,972/- THEN, ASSESSEE HAS NOT TO BORROW T HE FUNDS AND PAY THE INTEREST TO THE FINANCIAL INSTITUTION AS DEBITE D IN THE PROFIT AND LOSS ACCOUNT. SINCE THE ASSESSEE HAS ADVANCED INTEREST F REE LOAN TO ITS ASSOCIATE CONCERNS OF RS.5,38,23,972/- THEREBY IT H AS PAID INTEREST TO THE FINANCIAL INSTITUTIONS AND THEREBY DEBITED THE INTEREST IN THE PROFIT AND LOSS ACCOUNT AND REDUCED THE INCOME. THUS, IT IS FOUND THAT THERE IS NO COMMERCIAL EXPEDIENCY IN ADVANCING THE LOAN OF RS.5,38,23,972/-'. 5 AS MAY BE SEEN, THE ID. AO HAS PROCEEDED ON THE ASS UMPTION THAT THERE WAS NO NEED FOR THE ASSESSEE TO BORROW F UNDS AND PAY INTEREST THEREON, WHEN IT HAS ADVANCED INTEREST FREE LOANS TO ITS SISTER CONCERNS. IT IS SETTLED POSITION OF L AW THAT IT IS THE ASSESSEE'S DISCRETION TO UTILIZE ITS PROFITS AND RE SERVES. THE ID. AO'S CONTENTION, THEREFORE, IS PRESUMPTUOUS AND NOT TENABLE IN THE EYES OF LAW. WHAT THE AO WAS REQUIRED TO EXAMIN E WAS WHETHER THE FUNDS BORROWED ON WHICH INTEREST WAS PA ID WERE ADVANCED INTEREST FREE TO ITS SISTER CONCERN. THE A SSESSEE HAS DEMONSTRATED BEFORE THE AO AS WELL AS BEFORE ME THA T THE BORROWED FUNDS WERE UTILIZED FOR THE PURCHASE OF AN KLESHWAR UNIT OF HARYANA GLASS SHEETS FOR WHICH PAYMENT OF R S.15 CRORE WAS PAYABLE WHICH WAS PAID BY THE COSMOS BANK LTD. DIRECTLY TO THE IFCI LTD. WITH WHICH THE SAID UNIT WAS MORTG AGED. ON THE SAID BANK LOAN, THE ASSESSEE PAID INTEREST OF RS.2,00,23,282/-. THIS INTEREST IS PURELY FOR THE P URPOSE OF BUSINESS AND, THEREFORE, AN ALLOWABLE EXPENDITURE. THEREFORE, THE ID. AO'S CONTENTION WITH REGARD TO COMMERCIAL E XPEDIENCY IN ADVANCING THE INTEREST FREE LOAN TO ITS SISTER C ONCERN, HAS NO RELEVANCE BECAUSE IT IS SETTLED POSITION OF LAW THA T IF THE INTEREST FREE FUNDS ARE SUFFICIENT TO FUND NON INTE REST BEARING FUNDS, THEN IT IS TO BE ASSUMED THAT NON BUSINESS P URPOSE ADVANCES HAVE BEEN MADE FROM NON INTEREST BEARING F UNDS OF THE ASSESSEE. (EAST INDIA PHARMACEUTICAL WORKS LTD. VS. CIT(SUPRA). AS IS EVIDENT FROM THE FACTS ON RECORD, THE ASSESSEE HAD SUFFICIENT FUNDS OF ITS OWN TO ADVANCE THE IMPUGNED AMOUNTS OF RS.5,38,23,972/-. IN MY CONSIDERED VIEW, SUCH AN OBSERVATION MADE BY THE ID. AO TANTAMOUNT TO PRESUMPTION THAT PER SE T NOTIONAL INTEREST HAS TO BE DISALLOWED ON ALL THE INTEREST FREE ADVAN CES IN ALL CASES. IN VIEW OF THE DECISIONS REFERRED TO ABOVE, THE DISALLOWANCES ON A/C OF INTEREST OF RS.36,93,731/- IS UNJUSTIFIED AND THE SAME IS DIRECTED TO BE DELETED. THIS VIEW I S FORTIFIED BY THE DECISION IN THE CASE OF CIT VS. RADICO KHAITAN 274 ITR 354 (ALL.). THIS GROUND OF APPEAL IS ALLOWED. NOW THE REVENUE IS IN APPEAL BEFORE US. 5. WE HAVE HEARD THE PARTIES AND PERUSED THE RECORD . THE LD. COUNSEL SUPPORTED THE ORDER OF THE LD.CIT(A) AND AL SO PLACED HIS HEAVY RELIANCE ON THE DECISION IN THE CASE OF RELIA NCE UTILITIES AND POWER LTD. (SUPRA). HE FURTHER SUBMITS THAT AS PER THE BALANCE SHEET FILED ON RECORD, THERE IS NO DISPUTE THAT THE ASSES SEE HAS SUFFICIENT INTEREST FREE FUNDS IN THE FORM OF SHARE CAPITAL AN D GENERAL RESERVES WHICH ARE TO THE EXTENT OF RS.25.75 CRORES. HE ARGU ED THAT AT THE MOST, EVEN IF IT IS PRESUMED THAT ASSESSEE HAS GIVE N INTEREST FREE ADVANCES TO NON BUSINESS PURPOSES TO THE EXTENT OF RS.5.38 CRORES 6 WHICH ARE MUCH MORE LESS THAN THE AVAILABLE INTERES T FREE FUNDS WITH THE ASSESSEE. HE SUBMITS THAT THE DECISION OF THE HONBLE HIGH COURT OF KERALA IN THE CASE OF V.I. BABY AND COMPANY (SUP RA) IS NOT APPLICABLE AS THERE IS A DIRECT DECISION OF HONBLE JURISDICTIONAL HIGH COURT. HE ACCORDINGLY PLEADED FOR DISMISSING THE G ROUNDS RAISED BY THE REVENUE. 6. PER CONTRA THE LD. DEPARTMENTAL REPRESENTATIVE P LEADED FOR RESTORING THE ORDER OF THE ASSESSING OFFICER. IN O UR OPINION, THE GROUND TAKEN BY THE REVENUE HAS TO BE DISMISSED. A DMITTEDLY, THE ASSESSEE HAS SUFFICIENT INTEREST FREE FUNDS IN THE FORM OF CAPITAL AND GENERAL RESERVES TO THE EXTENT OF RS.25.75 CRORES A S AGAINST THAT THE ASSESSEE HAS GIVEN THE INTEREST FREE ADVANCES TO TH E EXTENT OF RS.5.38 CRORES. ONE OF THE ARGUMENTS OF THE ASSESS EE IS THAT THERE IS A COMMERCIAL AND BUSINESS EXPEDIENCY BUT EVEN IF IT IS ASSUMED THAT THOSE ADVANCES ARE NOT GIVEN ON COMMERCIAL EXPEDIEN CY BUT AT THE SAME TIME THE LEGAL PRINCIPLES LAID DOWN IN THE CAS E OF RELIANCE UTILITIES AND POWER LTD. (SUPRA) ARE SQUARELY APPLI CABLE TO THE ASSESSEES CASE AS PER THE FACTS ON RECORD. WE, TH EREFORE, UPHOLD THE ORDER OF THE LD.CIT(A) AND DISMISS THE GROUND TAKEN BY THE REVENUE. 7. GROUND NOS.2 AND 3 BY THE REVENUE READ AS UNDER : 2. WHETHER ON THE FACTS AND IN THE CIRCUMSTA NCES OF THE CASE, THE LD.CIT(A)-I, NASHIK WAS JUSTIFIED IN DELETING T HE DISALLOWANCE OF RS. 18,89,569/-, IN SPITE OF THE FACT THAT ASSESSEE HAS NOT MADE THE EMPLOYEES CONTRIBUTION OF PF AND ESIC TO THE GOVT A CCOUNT WITHIN DUE DATE AS PRESCRIBED UNDER THE RELEVANT ACT. 3. WHETHER ON THE FACTS AND IN THE CIRCUMSTAN CES OF THE CASE, THE LD.CIT(A)-I, NASHIK WAS JUSTIFIED IN DELETING THE D ISALLOWANCE OF RS.10,99,305/-, IN SPITE OF THE FACT THAT EMPLOYERS CONTRIBUTION OF PF AND ESIC HAS NOT BEEN PAID TO THE GOVT ACCOUNT WITH IN DUE DATE AS PRESCRIBED UNDER THE RELEVANT ACT. 7 7.1 THE ISSUE IS IN RESPECT OF DISALLOWANCE OF EMPL OYEES CONTRIBUTION OF PF AND ESIC NOT PAID WITHIN DUE DAT E AS STIPULATED IN SECTION 36(I)(VA) OF THE ACT. THE ASSESSING OFFICE R HAS DISCUSSED THIS ISSUE IN PARA NOS. 5, 5.1, 5.2, 5.3 AND 5.4 OF THE ASSESSMENT ORDER. AS OBSERVED BY THE ASSESSING OFFICER, THE EMPLOYEES CONTRIBUTION TOWARDS PF AMOUNTING TO RS.18,89,569/- WAS NOT PAID WITHIN DUE DATE AS STIPULATED IN SECTION 36(I)(VA) OF THE ACT. SAM E WAY, THE ASSESSEE HAS NOT DEPOSITED ESIC WITHIN DUE DATE AS PER P.F. ACT. THE AO HAS GIVEN THE CHART IN THE ASSESSMENT ORDER. ADMITTEDL Y, IN ALL THOSE CASES ALL THE PAYMENTS ARE MADE BEFORE THE DUE DATE OF FILING OF THE RETURN. THE LD.CIT(A) ALLOWED THE CLAIM OF THE ASS ESSEE. NOW THE REVENUE IS IN APPEAL BEFORE US. 8. WE HAVE HEARD THE PARTIES. WE FIND THAT THE ISS UE STANDS SQUARELY COVERED IN FAVOUR OF THE ASSESSEE BY THE D ECISION OF THE HONBLE HIGH COURT OF DELHI IN THE CASE OF CIT VS. AIMIL LTD. 321 ITR 508 AS WELL AS THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF ALOM EXTRUSIONS LTD. (2009) 319 ITR 306. THE AS SESSEE HAS ALSO FILED A COPY OF THE DECISION BY JURISDICTIONAL HIGH COURT IN THE CASE OF CIT-IV, MUMBAI VS. M/S. HINDUSTAN ORGANICC CHEMICAL S LTD. VIDE ITA NO.399/2012 JUDGMENT DATED 11-07-2014. THE OPERATI VE PART OF THE DECISION IN THE CASE OF HINDUSTAN ORGANIC CHEMICALS LTD., (SUPRA) IS AS UNDER : 5. WE FIND NO MERIT IN THE AFORESTATED CONTENTION. SECTION 43B OF THE INCOME TAX ACT 1961 WAS INSERTED IN THE ACT WITH EFFECT FROM 1ST APRIL 1984 BY WHICH THE MERCANTILE SYSTEM OF ACCOUNTING WITH REGARD TO TAX, DUTY AND CONTRIBUTI ON TO WELFARE FUNDS STOOD DISCONTINUED AND UNDER SECTION 43B OF THE ACT, IT BECAME MANDATORY FOR THE ASSESSEES TO ACCOUNT FOR T HE AFORESTATED ITEMS NOT ON A MERCANTILE BASIS BUT ON A CASH BASIS. THIS SITUATION CONTINUED BETWEEN 1ST APRIL 1984 AN D 1ST APRIL 1988 WHEN PARLIAMENT AGAIN AMENDED SECTION 43B AND INSERTED THE FIRST PROVISO THERETO WHICH INTER ALIA LAID DOWN THAT IN THE CONTEXT OF ANY SUM PAYABLE BY THE ASSESSEE B Y WAY OF TAX, DUTY, CESS OR FEE, IF PAID BY THE ASSESSEE EVE N AFTER THE CLOSING OF THE ACCOUNTING YEAR BUT BEFORE THE DATE OF FILING OF 8 THE RETURN OF INCOME, THE ASSESSEE WOULD BE ENTITL ED TO THE DEDUCTION UNDER SECTION 43B ON ACTUAL PAYMENT BASIS AND SUCH DEDUCTION WOULD BE ADMISSIBLE FOR THAT ACCOUNTING YEAR. THIS PROVISO HOWEVER DID NOT APPLY TO CONTRIBUTIONS MADE BY THE ASSESSEES TO THE LABOUR WELFARE FUNDS. IN VIEW THER EOF, BY THE FINANCE ACT 1988, THE SECOND PROVISO CAME TO BE INS ERTED WHICH READ AS UNDER :- PROVIDED FURTHER THAT NO DEDUCTION SHALL, IN RESPE CT OF ANY SUM REFERRED TO IN CLAUSE (B), BE ALLOWED UNLESS SUCH SUM HAS ACTUALLY BEEN PAID DURING THE PREVIOUS YEAR ON OR BEFORE THE DUE DATE AS DEFINED IN THE EXPLANATION BELOW CLAUS E (VA) OF SUB-SECTION (1) OF SECTION 36. THEREAFTER, THE SAID SECOND PROVISO WAS FURTHER AME NDED VIDE FINANCE ACT 1989 WITH EFFECT FROM IST APRIL 1989 WH ICH READ AS UNDER: PROVIDED FURTHER THAT NO DEDUCTION SHALL, IN RESPE CT OF ANY SUM REFERRED TO IN CLAUSE (B), BE ALLOWED UNLESS SUCH S UM HAS ACTUALLY BEEN PAID IN CASH OR BY ISSUE OF A CHEQUE OR DRAFT OR BY ANY OTHER MODE ON OR BEFORE THE DUE DATE AS DEFINED IN THE EXPLANATION BELOW CLAUSE (VA) OF SUB-SECTION (1) OF SECTION 36, AND WHERE SUCH PAYMENT HAS BEEN MADE OTHERWISE THAN IN CASH, THE SUM HAS BEEN REALISED WITHIN FIFTEEN DAYS FROM THE DUE DATE. 6. ON A PLAIN READING OF THE ABOVE PROVISOS, IT BEC AME EX-FACIE CLEAR THAT THE ASSESSEES EMPLOYERS WERE ENTITLED TO DEDUCTIONS ONLY IF THE CONTRIBUTIONS TO ANY FUND F OR THE WELFARE OF THE EMPLOYEES STOOD CREDITED ON OR BEFORE THE D UE DATE GIVEN IN THE RELEVANT ACT. 7. HOWEVER, THE SECOND PROVISO ONCE AGAIN CREATED F URTHER DIFFICULTIES FOR THE ASSESSEES EMPLOYERS. THEREF ORE, INDUSTRY ONCE AGAIN MADE REPRESENTATIONS TO THE MINISTRY OF FINANCE WHO, AFTER TAKING COGNIZANCE OF THE DIFFICULTIES, INSERTED AN AMENDMENT VIDE FINANCE ACT, 2003 WHICH CAME INTO F ORCE WITH EFFECT FROM 1ST APRIL 2004. IN OTHER WORDS, WITH EF FECT FROM 1ST APRIL 2004, TWO CHANGES WERE MADE IN SECTION 43B VI Z. DELETION OF THE SECOND PROVISO TO SECTION 43B AND FURTHER AM ENDMENT IN THE FIRST PROVISO WHICH READS AS UNDER:- PROVIDED THAT NOTHING CONTAINED IN THIS SECTION SH ALL APPLY IN RELATION TO ANY SUM WHICH IS ACTUALLY PAID BY THE A SSESSEE ON OR BEFORE THE DUE DATE APPLICABLE IN HIS CASE FOR FURN ISHING THE RETURN OF INCOME UNDER SUB-SECTION (1) OF SECTION 1 39 IN RESPECT OF THE PREVIOUS YEAR IN WHICH THE LIABILITY TO PAY SUCH SUM WAS INCURRED AS AFORESAID AND THE EVIDENCE OF SUCH PAYM ENT IS FURNISHED BY THE ASSESSEE ALONG WITH SUCH RETURN. THEREFORE, THE AMENDMENTS INTRODUCED BY THE FINANCE ACT, 2003 PUT ON PAR THE BENEFIT OF DEDUCTIONS OF TAX, DUTY, CESS AND FEE ON THE ONE HAND WITH CONTRIBUTIONS TO VARI OUS EMPLOYEES WELFARE FUNDS ON THE OTHER. 8. THE SECTION REFERRED TO ABOVE VIZ. SECTION 43B A ND THE AMENDMENTS THERETO CAME UP FOR CONSIDERATION BEFOR E THE HON'BLE SUPREME COURT IN THE CASE OF COMMISSIONER O F INCOME TAX V/S ALOM EXTRUSIONS LTD., REPORTED IN (2009) 3 19 ITR 306 9 (SC) WHEN THE SUPREME COURT INTER ALIA HELD THAT TH E AMENDMENTS TO THE SAID SECTION BROUGHT ABOUT BY THE FINANCE ACT, 2003 WITH EFFECT FROM 1ST APRIL 2004 WERE RET ROSPECTIVE IN NATURE AND WOULD OPERATE FROM IST APRIL 1988. THE ITAT RELYING UPON THE AFORESAID JUDGMENT OF THE SUPREME COURT, HAS DISMISSED THE REVENUE'S APPEAL AND CONFIRMED THE OR DER PASSED BY THE CIT (APPEALS). IN THIS VIEW OF THE MATTER AN D IN VIEW OF THE FACT THAT THE SUPREME COURT HAS EXPRESSLY HELD THAT THE AMENDMENTS TO SECTION 43B THAT WERE BROUGHT ABOUT B Y THE FINANCE ACT, 2003 ARE RETROSPECTIVE IN NATURE, WE F IND THAT THE ITAT WAS FULLY JUSTIFIED IN DELETING THE ADDITION O F RS.1,82,77,138/- ON ACCOUNT OF DELAYED PAYMENT OF P ROVIDENT FUND OF EMPLOYEES' CONTRIBUTION. WE THEREFORE FIND THAT NO SUBSTANTIAL QUESTION OF LAW ARISES ON THIS COUNT AS SOUGHT TO BE CONTENDED BY MR MALHOTRA ON BEHALF OF THE REVENUE. 9. EVEN OTHERWISE, WE FAIL TO UNDERSTAND HOW THIS D EDUCTION COULD HAVE BEEN DISALLOWED TO THE ASSESSEE. ADMITTE DLY, THE ASSESSMENT YEAR IN QUESTION IS 2006-07. THE SECOND PROVISO TO SECTION 43B QUOTED ABOVE WAS DELETED WITH EFFECT FR OM 1ST APRIL 2004 AND SIMULTANEOUSLY THE FIRST PROVISO WAS ALSO AMENDED BRINGING ABOUT A UNIFORMITY IN DEDUCTIONS CLAIMED T OWARDS TAX, DUTY, CESS AND FEE ON THE ONE HAND AND CONTRIBUTION TO THE EMPLOYEES' PROVIDENT FUND, SUPERANNUATION FUND AND OTHER WELFARE FUNDS ON THE OTHER. THESE DEDUCTIONS BEING CLAIMED IN THE RETURN OF INCOME FILED FOR THE ASSESSMENT YEAR 2006-07, THE AMENDMENTS TO SECTION 43B WHICH CAME INTO FORCE WIT H EFFECT FROM 1ST APRIL 2004 WOULD HAVE CLEARLY APPLIED TO T HE ASSESSEE'S CASE. IN THIS VIEW OF THE MATTER ALSO, WE FIND THAT THE ITAT WAS FULLY JUSTIFIED IN DELETING THE ADDITION OF RS.1,82 ,77,138/- ON ACCOUNT OF DELAYED PAYMENT OF PROVIDENT FUND OF EMP LOYEES' CONTRIBUTION. 8.1 WE THEREFORE FIND NO INFIRMITY IN THE ORDER OF THE LD.CIT(A). ACCORDINGLY, THE GROUND NOS. 2 AND 3 ARE DISMISSED. 9. GROUND NO.4 BY THE REVENUE READS AS UNDER : 4. WHETHER ON THE FACT AND IN THE CIRCUMSTANCES OF THE CASE THE LD CIT(A) WAS JUSTIFIED IN ALLOWING THE EXPENSE S WHICH WERE NEITHER CLAIMED IN THE ORIGINAL RETURN OF INCOME, N OR ANY REVISED RETURN WAS FILED. 9.1 THE ABOVE GROUND TAKEN BY THE REVENUE IS VERY V AGUE AND GENERAL IN NATURE. ON PERUSAL OF THE ORDER OF LD.C IT(A), THE ASSESSEE HAS RAISED THE GROUND THAT NO SPECIFIC ORDER WITH R EGARD TO CARRY FORWARD OF UNABSORBED BROUGHT FORWARD LOSSES AND AL LOWANCES WAS PASSED BY THE ASSESSING OFFICER. THE LD.CIT(A) ACC EPTED THE PLEA OF 10 THE ASSESSEE AND ALLOWED THE CARRY FORWARD UNABSORB ED LOSSES AND ALLOWANCES AS UNDER : A.Y. NATURE OF LOSS/ALLOWANCE AMOUNT 2002-03 LONG TERM CAPITAL LOSS RS.52,87,587/- 2008-09 LONG TERM CAPITAL LOSS RS.42,22,314/- 2008-09 UNABSORBED DEPRECIATION RS.4,63,21,640/- 9.2 IN OUR OPINION, IT IS A LEGAL ISSUE AND THE SAM E HAS BEEN DECIDED BY THE LD.CIT(A) ON THE BASIS OF MATERIAL AVAILABLE ON RECORD AND THERE IS NO MERIT IN THE GROUND NO.4 TAKEN BY THE R EVENUE. ACCORDINGLY, SAME IS DISMISSED. 10. GROUND NOS. 5, 6 AND 7 ARE GENERAL IN NATURE AN D DO NOT REQUIRE ANY ADJUDICATION. ACCORDINGLY, SAME ARE DISMISSED. 11. IN THE RESULT, REVENUES APPEAL IS DISMISSED. PRONOUNCED IN THE OPEN COURT ON 17-10-2014. SD/- SD/- (G.S.PANNU) (R.S. PADV EKAR) ACCOUNTANT MEMBER JUDICIAL MEM BER PUNE DATED: 17 TH OCTOBER, 2014 SATISH COPY OF THE ORDER FORWARDED TO : 1. ASSESSEE 2. DEPARTMENT 3. THE CIT(A)-I, NASHIK 4. CIT-I, NASHIK 5. THE D.R, B PUNE BENCH 6. GUARD FILE BY ORDER // TRUE COPY // ASSISTANT REGISTRAR, ITAT, PUNE BENCHES, PUNE