2020 (4) TMI 859 - HC - Income Tax

Contribution to National H.V..D.C. Project - Deduction u/s 37(1) - Allowable revenue expenditure - HELD THAT - There was material before the AO to adjudge the admissibility of the said deduction in favour of the assessee particularly when the said step taken by the assessee was in accordance with Section 24 of the Electricity (Supply) Act, 1948 which was applicable to assessee. Section 24 of the said Act enabled the Electricity Board to subscribe to associations constituted for the purpose conducive to development of electricity and promotion of common interest of persons engaged in generation, distribution and supply of electricity. The provision was also considered by the AO but without dealing with the same, he held the said subscription to be of capital nature and/or by way of donation - expenses/grant-in-aid was in conformity with Section 24 of the Electricity Act, as stated above which required the assessee to subscribe to the associations constituted for the purpose conducive to development of electricity. Thus expenditure in question was to be allowed u/s 37(1) as the same was incurred in ordinary course of the business of the assessee and as a part of obligation to its consumers to develop electricity - contribution was made as per the order of the Government of India and it was wholly, necessarily and exclusively for the purpose of business. It was not a voluntary contribution/donation but was given on specific directions of the Government of India. In this view of the matter, we do not find any error in the finding recorded by the learned Tribunal in this regard. Addition of Provident Fund which was not paid on due date under section 36(1)(va) - HELD THAT - Assessee had got exemption from depositing the money with the Provident Fund Commissioner and instead, was allowed to deposit the same with the P.F. Trust and as per Regulation 11 of the PF Regulations which are applicable to the respondent, there is no specific date for deposit of the provident fund by the Board. In M.P.E.B. s case 2015 (7) TMI 1350 - ITAT JABALPUR which has been relied upon by learned counsel for the assessee, similar question raised by the Revenue was answered against them on the basis of order dated 30.12.2010 passed by the Assessing Officer accepting the same principle in respect of assessment year 2003-2004. Thus, there is nothing to take any different view in the present case. In view of the foregoing reasons in addition to the findings recorded by the learned Tribunal coupled with the view taken by the Division Bench of this Court in M.P.E.B. s case 2015 (7) TMI 1350 - ITAT JABALPUR , we do not find any case is made out in favour of the Revenue.

Summary

Issues:
1. Deduction of contribution to National H.V.D.C. Project under section 37(1) of the Income Tax Act.
2. Deletion of addition of Provident Fund not paid on due date under section 36(1)(va).

Issue 1: Deduction of contribution to National H.V.D.C. Project under section 37(1) of the Income Tax Act:

The Revenue filed an appeal against the order passed by the Income Tax Appellate Tribunal regarding the deduction of ?1.50 Crores on account of contribution to the National HVDC Project for the assessment year 1994-95. The Revenue argued that the contribution was capital in nature and not related to the day-to-day business operations, thus not falling under Section 37(1) of the Act. However, the Tribunal upheld the deduction, stating that the contribution was made to an organization approved by the Government of India and was necessary for the business. The Court agreed with the Tribunal, emphasizing that the expenditure was incurred in the ordinary course of business and as an obligation to develop electricity, as per Section 24 of the Electricity Act. The Court found no error in allowing the deduction, as it was not a voluntary donation but a specific direction from the Government of India.

Issue 2: Deletion of addition of Provident Fund not paid on due date under section 36(1)(va):

The Revenue also challenged the deletion of the addition of ?24,25,05,585/- of Provident Fund which was not paid on the due date under Section 36(1)(va) of the Act. The Revenue argued that since the assessee did not deposit the amount with the P.F. Trust within the due date, the deduction was not admissible. However, the Court noted that the assessee had an arrangement to deposit the money with the P.F. Trust as per their own Provident Fund rules and regulations, where payments were made regularly on an ad hoc basis. Referring to Regulation 11 of the PF Regulations, the Court found that there was no specific date for deposit mentioned. Relying on previous judgments and the Division Bench's decision, the Court dismissed the Revenue's appeal, stating that there was no illegality or perversity in the impugned order, and no case was made out in favor of the Revenue.

In conclusion, the High Court upheld the deductions allowed by the Tribunal for both the contribution to the National HVDC Project and the Provident Fund, dismissing the Revenue's appeal and affirming the impugned order.