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TMI Blog2012 (6) TMI 649X X X X Extracts X X X X X X X X Extracts X X X X ..... shraes - ACIT had failed to prove that there was nexus between the borrowed money and the investment – Held that:- Disallowance made under section 14A, deleted and the ground raised by the assessee is allowed. Employees contribution of PF and employer’s contribution to PF - payments were made before the due date of filing the return – Held that:- payments are not only before the close of accounting financial year but also much before the due date for filing the return of income - in the case of employees’ contribution towards provident fund, the same should be allowed even though it is paid beyond the grace period, if the same is paid before the time allowed for filing the return of income – In favor of assessee. - ITA No.522/Mum./2006 - - - Dated:- 28-4-2011 - SHRI, J. SUDHAKAR REDDY, AND SMT. ASHA VIJAYRAGHAVAN, JJ. Assessee by : Mr. Vijay Mehta Revenue by : Mr. Goli Srinivas Rao O R D E R PER J. SUDHAKAR REDDY, A.M. This appeal filed by the assessee, is directed against the impugned order dated 28th November 2005, passed by the Commissioner (Appeals)-XI, Mumbai, for assessment year 2002-03. 2. Brief facts of the case are that, the assessee is a compa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... terest calculated under section 234B and 234C of the Act. 3. Learned Counsel, Mr. Vijay Mehta, appearing on behalf of the assessee, contends before us that ground no.1, is on the issue of valuation of closing stock. He submitted that the assessee produced news programmes and earlier in the assessment year 2002-03, the assessee was valuing the closing stock of programmes like news, current affairs, etc., @ 2% after the first exploitation. During the year under assessment, the assesse has changed its policy of valuation of news programmes after first exploitation @ nil for the reason that the there is proliferation of news channels and there is no value to the news production after exploitation. Learned Counsel further referred to the policies of Zee Telefilms, Gee News, as well as the policies of NDTV Limited in valuing such programmes and pointed out that the industry in general has been valuing the news programmes after first exploitation @ nil and, hence, the assessee changed its policy to value news programmes after the first exploitation from 2% to nil in the year. In case of TV serials, the previous policy of closing stock valuation was to value the serial @ 10% on first ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is available to the assessee. He also pointed out that in the previous financial year ending 31st March 2001, the assessee has not paid any interest and was having investment of Rs. 5,50,00,000. 5. On ground no.3, the learned Counsel submitted that a look at the date of payment recorded by the Assessing Officer, shows that the employer s contribution to provident fund as well as employees contribution were made in most of the cases within the grace period and in the balance of the cases, prior to the filing of the return of income. 6. On ground no.4, learned Counsel did not wish to press this ground. 7. Insofar as ground no.5 is concerned, the learned Counsel submits that the same is consequential in nature. 8. Learned Departmental Representative, Mr. Goli Srinivas Rao, opposed the contentions of the learned Counsel and submitted that subsequent to the introduction of section 145A, w.e.f. 1st April 1999, the legal position has changed and the decisions relied upon by the learned Counsel are no more applicable. He took this Bench with the language of section 145A, and relied on the same. He also relied on the following case laws:- 1. Ajanta Raj Proteins Ltd. v/s DCIT, (2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , the assessee was valuing the TV serials @ nil. Now valuation is changed and the assessee has come to a conclusion that after the second exploitation, the valuation of the TV serial should be @ 3.33%. We do not find any infirmity in such methodology adopted by the assessee. iii) Now coming to the case laws relied on Snow White Food Products Co. Ltd. (supra), the Hon ble Calcutta High Court held that the assessee has a right to change the method of accounting. The only condition being with the changed method should be consistently followed. IN this case, the issue is not as to whether the assessee has changed its method of accounting. In fact, the assessee is continuing to follow the same recognized method of accounting. What is changed is the value that has to be assigned to a particular product i.e., a news programme or TV serials subsequent to exploitation of the same. iv) In the case of Echke Limited (supra), the Hon ble Gujarat High Court held that merely because the taxable income of the assessee is reduced in a particular year, cannot be said that the change in method of accounting was undertaken with an intention to deliberately reduce the tax burden. The assessee has b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... borrowed funds whatsoever. The assessee has not incurred any interest expenditure in F.Y. 2000-01. Thus, the conclusion of the Assessing Officer that the assessee should have incurred certain interest expenditure on amount borrowed for investing in non-cumulative preference shares of ₹ 5,00,00,000, is factually wrong. The facts clearly show that no borrowed amount has been utilized for making investment in Rs. 5,00,00,000, in noncumulative preference shares and, hence, no disallowance under section 14A, is not called for on these two items.. Thus, the assessee succeeds on this ground x) Coming to the investment in equity shares out of Rs. 45,00,000, ₹ 5,00,000 has been invested in previous year, when the assessee had no borrowed funds. This leaves us with only Rs. 40,00,000 investment in equity shares in Sahara India Life Insurance Co. Ltd., and a further sum of Rs. 6,99,000 in equity shares in Sahara India Commercial Corporation Overseas Ltd., Mauritius. Thus, the total investment made during the year is Rs. 46,99,000. Admittedly, the assessee has non-interest bearing funds of Rs. 90,47,73,000. The presumption would be that Rs. 47,00,000, has been invested from out ..... X X X X Extracts X X X X X X X X Extracts X X X X
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