2015 (10) TMI 2178 - AT - Income Tax

Addition towards employees' contribution to Provident Fund (E.P.F.) - amount remitted beyond the due date prescribed under the P.F. Act but before the due date of filing the return of income under sect ion 139(1) - CIT(A) deleted the addition - Held that - This issue is directly covered in favour of the assessee by the decision of the Apex Court in Vinay Cement Limited reported in (2007 (3) TMI 346 - Supreme Court of India ), wherein it has been held that statutory item like EPF is paid before the due date of filing the return of income be allowed irrespective of the fact where the contribution related to the employee and employer . From the verification of the dates as stated in the assessment order, it is observed that the assessee had duly remitted the entire EPF dues before the due date of filing the return of income - Decided in favour of assessee. Disallowance of the Foreign Exchange loss - Held that - It is seen from the ECB loan agreement, that the loan was utilized for general corporate purposes and not for acquisition of any fixed assets. Hence, we hold that the borrowings were utilized on Revenue Account and the provisions of section 43A of the Act were not applicable at all in the facts of the case. Based on this, it could logically be concluded that any exchange fluctuation arising out of the restatement of the said loan at the end of the year, be it gain or loss, would also fall on revenue account and hence, automatically comes under the ambit of taxation if it is a gain and allowable as an expenditure if it is a loss. This issue is squarely covered by the decision of the Hon'ble Supreme Court in the case of CIT vs.- Woodward Governor India P. Ltd. reported in (2009 (4) TMI 4 - SUPREME COURT) to hold that the sum being the exchange loss would be allowed as deduction under section 37(1) - Decided in favour of assessee. Miscellaneous receipts - income arose from tea business - business income or income from other sources - Held that - Items A to F Sale of gunny bag/drums,Bazaar Rent,Road Roller Hire Charges,Land Acquisition by ONGC,Land Acquisition by Montu Nag and Hire charges of Machinery to Apeejay Tea Ltd. were only arising out of business income and accordingly to be treated as income from business. As regards Items G to J, Post Office Rent, Car Insurance Claim, Miscellaneous Receipt and Hire Charges of vehicle for election duty they are to be treated as income from other sources. We direct the Assessing Officer to re-compute accordingly. - Decided partly in favour of assessee.

Summary

Issues Involved:
1. Condonation of delay in filing the appeal.
2. Deletion of addition towards employees' contribution to Provident Fund (EPF).
3. Disallowance of Foreign Exchange loss.
4. Classification of miscellaneous receipts as business income or income from other sources.

Detailed Analysis:

1. Condonation of Delay in Filing the Appeal:
The appeal was delayed by 66 days. The appellant's representative, Shri Manish Tiwari, filed an affidavit explaining the delay, citing procedural matters and the time taken to gather necessary documents. The tribunal accepted the reasons as genuine and condoned the delay, admitting the appeal.

2. Deletion of Addition Towards Employees' Contribution to Provident Fund (EPF):
The first issue was whether the CIT(A) correctly deleted the addition of Rs. 69,706 towards employees' contribution to EPF, which was remitted beyond the due date under the PF Act but before the due date of filing the income tax return under section 139(1) of the Act. The Assessing Officer disallowed this under section 36(1)(va) read with section 2(24)(x) of the Act. The tribunal, referencing the Supreme Court decision in Vinay Cement Limited (313 ITR 1), held that as the EPF was paid before the due date of filing the return, it should be allowed. Thus, the appeal on this ground was allowed.

3. Disallowance of Foreign Exchange Loss:
The second issue was the disallowance of a foreign exchange loss of Rs. 11,00,000. The assessee had borrowed External Commercial Borrowings (ECB) in USD for general business purposes, leading to a notional exchange loss due to restatement at year-end. The Assessing Officer disallowed this, invoking section 43A, which was amended to allow such losses only on payment basis. However, the tribunal noted that section 43A was not applicable as the loan was for revenue purposes and not for acquiring assets. Citing the Supreme Court ruling in Woodward Governor India P. Ltd. (312 ITR 254), the tribunal held that the exchange loss on revenue account is allowable under section 37(1). Thus, the appeal on this ground was allowed.

4. Classification of Miscellaneous Receipts:
The third issue was whether miscellaneous receipts totaling Rs. 4,64,057 should be classified as business income or income from other sources. The CIT(A) had treated these as business income, while the Assessing Officer classified them as income from other sources. The tribunal reviewed the nature of the receipts and concluded that items A to F (e.g., sale of gunny bags, bazaar rent, road roller hire charges) were business income, while items G to J (e.g., post office rent, car insurance claim) were income from other sources. The tribunal directed the Assessing Officer to re-compute accordingly, thus partly allowing the appeal on this ground.

Conclusion:
The appeal was partly allowed, with the tribunal condoning the delay, allowing the claims regarding EPF contributions and foreign exchange loss, and partially reclassifying the miscellaneous receipts. The order was pronounced in the court on 29.9.2015.