2008 (1) TMI 425 - AT - Income Tax

Summary

Issues Involved:
1. Transfer of Biccavolu unit.
2. Write-off of advance.
3. Disallowance of Rs. 27,021.
4. Reimbursement of medical expenses.
5. Disallowance of PF contributions.
6. Disallowance of employees' and employer's contributions to PF, ESI, etc.
7. Imposition of interest u/s 234D.
8. Disallowance of Rs. 1,37,03,258 by Revenue.

Summary:

1. Transfer of Biccavolu Unit:
The assessee contended that the transfer of the Biccavolu unit had not been completed during the relevant assessment year due to a stay order by the Calcutta High Court. The CIT(A) upheld the AO's decision that the transfer had taken place based on the High Court's order and physical possession given to the workers' union. The Tribunal found that the sale was finalized in the assessment year 2006-07 and directed the AO to exclude the value of the land of Biccavolu unit from the sale consideration while reducing the value of the block of assets.

2. Write-off of Advance:
The assessee claimed a write-off of Rs. 1,50,000 given as an advance in the course of business. The AO disallowed the claim, and the CIT(A) upheld this decision due to lack of evidence. The Tribunal agreed with the CIT(A) that the assessee failed to prove the conditions of s. 36(2), thus sustaining the disallowance.

3. Disallowance of Rs. 27,021:
The AO disallowed Rs. 27,021 related to sales-tax differential due to non-submission of declaration forms, as the liability was incurred in a prior year. The Tribunal held that the liability arose when the declaration was not submitted, allowing the deduction in the year under consideration.

4. Reimbursement of Medical Expenses:
The assessee did not press this ground during the hearing, and it was dismissed as not pressed.

5. Disallowance of PF Contributions:
The AO disallowed Rs. 3,45,055 for contributions to an unrecognized PF. The Tribunal, following the Gujarat High Court's decision, allowed the expenditure u/s 37 as bona fide business expenditure, reversing the CIT(A)'s order.

6. Disallowance of Employees' and Employer's Contributions to PF, ESI, etc.:
The Tribunal referred to the Special Bench decision in Jt. CIT vs. ITC Ltd., which distinguished between employer's and employees' contributions. The matter was remanded to the AO for verification of actual payment dates and recalculation of disallowance u/s 43B/36(1)(va).

7. Imposition of Interest u/s 234D:
The Tribunal held that s. 234D, inserted by the Finance Act, 2003, w.e.f. 1st June, 2003, could not be applied to the assessment year 2002-03. The AO was directed to delete the interest charged u/s 234D.

8. Disallowance of Rs. 1,37,03,258 by Revenue:
The AO disallowed Rs. 1,37,03,258 presuming it was for penalty, not tax. The CIT(A) deleted the addition, noting the AO's lack of evidence. The Tribunal upheld the CIT(A)'s decision, confirming the deduction u/s 43B based on actual payments made.

Conclusion:
The assessee's appeal was partly allowed, and the Revenue's appeal was dismissed.