2018 (12) TMI 456 - AT - Income Tax

Allowable revenue expenditure u/s 37(1) - assessee company paid compensation for vacating the land, within the leased area - Held that - Assessee has incurred an expenditure of ₹ 60 lacs during the previous year relevant to impugned assessment year and a claim u/s 37(1) was made during the course of assessment proceedings. The fact of incurrence of the expenditure and the fact that the said expenditure has been incurred for the purposes of the business has not been disputed. In the return of income, the assessee has claimed depreciation of ₹ 52.98 lacs however, the said depreciation relates to expenditure incurred in earlier years and which has been capitalized as well as expenditure incurred during the year under consideration on which depreciation has been claimed. In the earlier year i.e, AY 2013-14, the whole of the expenditure has been allowed as revenue expenditure and therefore, if we were to approve the approach of the Revenue, it will create an inconsistent position as far as this claim of expenditure is concerned. Once a claim is held to be legally allowed, there is thus no basis to restrict the quantum of such claim once other conditions for claiming such expenditure has been duly satisfied. Therefore, consistent with the position in the earlier year and following the decision of the Coordinate Bench referred supra, the whole of the expenditure of ₹ 60,00,000 incurred during the year is allowed as revenue expenditure u/s 37(1) - Decided in favour of assessee Addition towards contribution to PF and ESI - Held that - The assessee company has deposited employee s contribution to PF and ESI with delay of few days from the due dates, however the same were deposited before the due date of filing of the return of income U/s 139(1) which is evident from the order of the Assessing Officer. It was further submitted that the matter is squarely covered in favour of the assessee by the decisions in case of CIT vs. State Bank of Bikaner & Jaipur 2014 (5) TMI 222 - RAJASTHAN HIGH COURT and JAIPUR VIDYUT VITRAN NIGAM LTD AND RAJASTHAN RAJYA VIDYUT UTPADAN NIGAM LTD 2014 (1) TMI 1085 - RAJASTHAN HIGH COURT - Decided in favour of assessee.

Summary

Issues Involved:
1. Claim under Section 37(1) for ?60,00,000 as revenue expenditure.
2. Deletion of addition of ?13,70,733 towards employee's contribution to PF and ESI.

Detailed Analysis:

1. Claim under Section 37(1) for ?60,00,000 as Revenue Expenditure:
- Facts of the Case: The assessee company engaged in mining, manufacturing, and trading of minerals paid ?60,00,000 as compensation for vacating land within the leased mining area. This amount was initially claimed as depreciation but later sought as revenue expenditure under Section 37(1) during assessment proceedings.
- Assessment Proceedings: The AO disallowed the depreciation claim of ?52,98,858 following the precedent set in the previous year (A.Y. 2013-14).
- CIT(A) Decision: The CIT(A) allowed the claim under Section 37(1) but restricted it to ?52,98,858, citing reliance on previous ITAT decisions in similar cases.
- Assessee's Argument: The assessee argued that the entire ?60,00,000 should be allowed under Section 37(1) and that CIT(A) erred in restricting the claim. They cited the Supreme Court judgments (Jute Corporation of India and National Thermal Power Company Limited) and other legal precedents to support their position.
- ITAT Decision: The ITAT upheld the assessee's claim, allowing the full ?60,00,000 as revenue expenditure under Section 37(1). The tribunal emphasized consistency with the previous year's decision and rejected the restriction imposed by CIT(A). The ITAT found that the expenditure was incurred for business purposes and no capital asset was acquired, aligning with the Supreme Court's principles in Bikaner Gypsum.

2. Deletion of Addition of ?13,70,733 towards Employee's Contribution to PF and ESI:
- Facts of the Case: The assessee deposited employee contributions to PF and ESI amounting to ?13,70,733 with a delay but before the due date of filing the return under Section 139(1).
- CIT(A) Decision: The CIT(A) deleted the addition, relying on the Rajasthan High Court decisions in CIT vs. State Bank of Bikaner & Jaipur and CIT vs. Jaipur Vidyut Vitran Nigam Ltd., which held that contributions made before the due date of filing the return should be allowed.
- Revenue's Argument: The Revenue contested the deletion, arguing that the contributions were deposited beyond the prescribed time limit.
- ITAT Decision: The ITAT confirmed the CIT(A)'s order, citing the Rajasthan High Court's decisions. The tribunal dismissed the Revenue's appeal, upholding that contributions deposited before the due date of filing the return are allowable.

Conclusion:
The ITAT allowed the assessee's appeal for the full claim of ?60,00,000 under Section 37(1) and dismissed the Revenue's appeal regarding the addition of ?13,70,733 towards PF and ESI contributions. The tribunal's decision was consistent with legal precedents and the principles laid out by higher courts.