2015 (6) TMI 802 - AT - Income Tax

Disallowance of deduction claimed U/s 80IC - CIT(A) allowed part claim - Held that - CIT(A) had given detailed findings in his order dated 06/07/2012 and verified the XIII schedule items and held that PVC Pipe do not fall in excise classification 39.09 to 39.15 of Schedule-XIII of Act or under Schedule 14. Further, the auditor had corrected the audit report in column No. 26(A) in form No. 10CCB. Further the ld DR has not controverted the finding given by the ld CIT(A). Therefore, we uphold the order of the ld CIT(A) on this ground. - Decided against revenue. Trading addition - CIT(A) allowed part claim - Held that - The assessee has shown G.P. rate during the year under consideration @ 27.36% as against 29.95% in immediate preceding year on gross turnover of ₹ 4,62,90,109/- during the year under consideration and ₹ 4,14,49,005/- in immediate preceding year. The assessee s item produced is under excisable items where excise audit has been done by it. The assessee has produced all the sale/purchase vouchers. There was a difference in account of some of the parties, which has been reconciled by the assessee before the ld CIT(A) and also explained the cash payment U/s 40A(3) of the Act. During the year, the assessee s sale also has gone up compared to preceding year and there is a marginal decline in the G.P. rate. The ld DR had not controverted the finding given by the ld CIT(A). Therefore, we uphold the order of the ld CIT(A). Accordingly, this ground of revenue is dismissed. - Decided against revenue. Addition U/s 2(24)(x) r.w.s. 36(1)(va) - ESI & PF payments were not made in time as per audit report.CIT(A) deleted addition - Held that - The ld CIT(A) has considered the various case laws on this issue including the SLP of Hon ble Apex Court in the case of Vinay Cement Ltd. (2007 (3) TMI 346 - Supreme Court of India) and rejected the appeal after observing that the assessee had paid these payments U/s 43B of the Act on or before due date of return, therefore, SLP was rejected after considering the Hon ble Delhi High Court decision in the case of said assessee. Therefore, we do not find any reason to intervene in the order of the ld CIT(A). - Decided against revenue.

Summary

Issues Involved:
1. Restriction of addition on account of disallowance of deduction claimed U/s 80IC.
2. Restriction of trading addition made by the Assessing Officer.
3. Deletion of addition made U/s 2(24)(x) r.w.s. 36(1)(va) of the Act.

Detailed Analysis:

Issue 1: Restriction of Addition on Account of Disallowance of Deduction Claimed U/s 80IC
The Assessing Officer (AO) disallowed the deduction of Rs. 37,70,488 claimed under Section 80IC by the assessee, who was engaged in manufacturing PVC pipes, arguing that PVC pipes were covered under Schedule XIII, thus ineligible for the deduction. The AO also rejected a corrigendum issued by the auditor correcting an error in Form No. 10CCB. The CIT(A) found that PVC pipes fell under excise classification 39.17, not 39.09 to 39.15, and thus were not excluded by Schedule XIII. The CIT(A) accepted the auditor's corrigendum and allowed the deduction, except for Rs. 17,779 related to interest income, which was not derived from the business. The Tribunal upheld the CIT(A)'s order, confirming that PVC pipes did not fall under the restricted classifications and the correction by the auditor was valid.

Issue 2: Restriction of Trading Addition Made by the Assessing Officer
The AO observed a decline in the gross profit (GP) rate from 29.95% to 27.36% and made a trading addition of Rs. 11,95,508 by estimating a higher GP rate. The CIT(A) upheld the rejection of books under Section 145(3) due to discrepancies but found the AO's GP rate application excessive. Considering the average GP rate over three years, the CIT(A) adjusted the addition to Rs. 77,690. The Tribunal agreed with the CIT(A), noting the marginal decline in GP rate and reconciliation of discrepancies, thus confirming the adjusted addition.

Issue 3: Deletion of Addition Made U/s 2(24)(x) r.w.s. 36(1)(va) of the Act
The AO added Rs. 49,945 for late payment of ESI and PF contributions, arguing they were not made within the due dates specified by respective Acts. The CIT(A) allowed the deduction, referencing judicial precedents that contributions paid before the due date of filing the income tax return are allowable under Section 43B. The Tribunal upheld the CIT(A)'s decision, citing the Supreme Court's dismissal of a related SLP and confirming the payments were made before the return filing due date.

Conclusion:
The Tribunal dismissed the revenue's appeal, affirming the CIT(A)'s decisions on all issues, thereby providing relief to the assessee on the grounds of Section 80IC deduction eligibility, reasonable GP rate adjustment, and allowable ESI and PF contributions.