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TMI Blog2016 (5) TMI 700X X X X Extracts X X X X X X X X Extracts X X X X ..... e interest free own funds are deployed for making the investments which yield tax free income and then accordingly the disallowance be worked out . The AO shall also keep in view the presumption as laid down by Hon’ble Bombay High Court in the case of HDFC Bank Limited (2014 (8) TMI 119 - BOMBAY HIGH COURT ) and also other case laws relied upon by the assessee company while de-novo determination of the issue. Needless to say that the AO shall grant proper and adequate opportunity of hearing to the assessee company in accordance with law in compliance with principles of natural justice. We order accordingly. Delayed payments in respect of Employees’ Contribution towards PF and ESIC - Held that:- We have observed that the assessee company has made payments towards Employee’s PF contribution beyond the time stipulated i.e. due date under the relevant PF Act but however the assessee company has made the afore-stated payments of PF before the due date of filing of return of income u/s 139(1) of the Act. We have observed that this issue is squarely covered by the decision of Hon’ble Bombay High Court in Ghatge Patil Transport Ltd [2014 (10) TMI 402 - BOMBAY HIGH COURT] and also Hon’b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rovident Fund amounting to ₹ 86,358 in view of the fact that the said amount has been paid to provident Fund Authority in time. 3. The brief facts of the case are that the assessee is a company and is engaged in the business of Stevedoring. 4. During the course of the assessment proceedings u/s 143(3) read with Section 143(2) of the Income Tax Act,1961(Hereinafter called the Act ) the learned Assessing Officer(hereinafter called the AO ) observed that the disallowance of assessee s claim of interest expenses was made by the AO in the assessment order passed for the assessment year 2005-06 on account of the reasons that the assessee company has not charged the interest on the loans and advances given to various parties and the AO observed that for the current year also the facts are similar whereby the assessee company has not charged interest on loans and advances given to various parties. The AO issued show cause notice dated 19.12.2008 u/s. 142(1) of the Act to the assessee company whereby the assessee company was asked to show cause as under:- It is seen that you have taken secured and unsecured loans of ₹ 20,10,28,597/- whereas you have paid interest ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rewal Associates Pvt. Ltd. 9,20,739 23 J.N. Patnaik 31,279 24 Mr. Abhaykumar Panda 3,67,938 25 National Enterprises 1,46,289 26 EDB Co. 2,00,000 27 Continental Warehousing Corpn. 7,58,930 28 Pact Solution Pvt. Ltd. 5,00,000 29 Unitech Automobiles Pvt. Ltd. 4,800 Therefore, you are herby asked to show cause as to why the interest expenses claimed by you be not disallowed u/s. 36(1)(iii) of the Act because interest bearing funds have been diverted by you for non business purpose. The assessee company submitted that the assessee company has given the interest free advances to parties for business purposes which are in the nature of trading advances given to parties on account of commercial expediency. The assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... whereas the assessee company merely claimed that they are trade advances given for business purposes but the assessee company failed to prove that the advances are for the business purposes. Hence, the disallowance of interest of ₹ 8,39,411/- made by the AO was confirmed by the CIT(A) vide orders dated 09-01-2013. 6. Aggrieved by the orders dated 09-01-2013 passed by the CIT(A) , the assessee company filed an appeal before the Tribunal. The assessee company contended that the money has been advanced for the business purposes being trade advances and the assessee company submitted that in the preceding assessment years 2004-05 and 2005-06, the assessee company had advanced to 16 parties which was accepted by the Tribunal in ITA No. 69/Mum/2008 70/Mum/2008 vide orders dated 13-11-2009 as trade advances for business purposes and the additions made by the AO by way of disallowance of interest was deleted by Tribunal . The assessee company produced before us the copies of the assessment order, CIT(A) Order and ITAT Orders for the assessment year 2005-06, which are placed in file. The assessee company submitted that during the course of assessment year 2006-07, in all advances ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to 16 parties which has been held by the Tribunal to be advanced for business purposes in ITA No.69/Mum/2008 and ITA No. 70/Mum/2008 vide orders dated 13-11-2009. In our considered view, interest of justice will be best served if the matter is restored to the file of the AO for de-novo determination of the issue with directions to the assessee company to bring on record the cogent material / evidences before the AO to substantiate its claim and contentions that the amounts have been advanced for the purpose of business for commercial expediency. The AO will also take into account the decision of the Tribunal for the assessment year 2004- 05 and 2005-06 in ITA No. 69 70/Mum/2008 vide orders dated 13-11-2009 whereby the advances to 16 parties were held to be trading advances for business purposes and disallowance of the interest was, therefore, deleted and also case laws relied upon by the assessee company. Needless to say that the AO will grant proper and adequate opportunity of hearing to the assessee company as per law in compliance with principles of natural justice. We order accordingly. 8. During the course of assessment proceedings u/s 143(3) read with Section 143(2) of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Income Tax Rules 1962 was made vide assessment order dated 24.12.2008 passed by the AO u/s 143(3) of the Act.. 9. Aggrieved by the assessment orders dated 24.12.2008 passed by the AO u/s 143(3) of the Act, the assessee company filed the first appeal with the CIT(A) and submitted as under:- The amount of interest amounting to ₹ 11,82,953/- .The Assessing Officer disallowed interest amounting to ₹ 11,82,953/- by applying the provisions of Rule Rule 8D. He relied on the decision of Hon ble Apex Court in the case of Garden Silk Weaving Factory v/s. CIT 189 ITR 517. However, that case is in no way applicable to our case. The Assessing Officer had asked the Appellant to show cause as to why disallowance should not be made u/s 14A of the Income Tax Act and Rule 8D. The company had vide its Authorized Representative letter dated 23.12.2008 submitted that no expenditure had been incurred on Long Term Capital Gains and Dividend Incomes. Reliance was also placed upon the decision of Vijaylaxmi Sugar Mills Ltd. v/s. CIT (1991) 191 ITR 641 (SC) where it was held that there was no evidence to show that the expenses sought to be disallowed were to facilitated the earning of di ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... T(A). 11. We have considered the rival contentions and perused the material on record .We have observed that Hon ble Bombay High Court in the case of Godrej Boyce Mfg. Co. Ltd. (Supra) has held that Rule 8D of Income Tax Rules, 1962 is applicable only from the assessment year 2008-09 , while the relevant assessment year under appeal is 2006-07. Section u/s 14A of the Act is applicable for the relevant assessment year and the disallowance has to be made in respect of the income which does not from part of the total income . The assessee company has mixed pool of funds which are deployed for earning the taxable income and tax free income and it is for the assessee company to show with the cogent material/evidences that interest free funds are deployed in making investments which yield tax free income . In our considered view , the interest of justice will be best served if the matter is restored to the file of the AO for de-novo determination of the issue with the directions to the assessee company to produce on record cogent material/evidences to substantiate its claim that the interest free own funds are deployed for making the investments which yield tax free income and then ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y filed the first appeal before the CIT(A) and the CIT(A) confirmed the addition of ₹ 86,358/- as the assessee company has not filed any submission in this regard , vide orders dated 09-01-2013. 14. Aggrieved by the orders of the CIT(A) dated 09-01-2013, the assessee company is in appeal before the Tribunal, the assessee company submitted that the assessee company has made the payment of Employee Contribution to PF before the due date of filing of return of income u/s. 139(1) of the Act and as per Sec. 43B of the Act, if the payments are made before the due date of filing the return of income u/s. 139(1) the assessee company is entitled for the deduction of said amount u/s 36(1)(va) of the Act read with Section 43B of the Act. The assessee company relied upon the decision of Hon ble Bombay High Court in CIT v. Ghatge Patil Transports Ltd. (2015) 53 taxman.com 141 (Bom). The Ld DR relied upon the order of the authorities below. We have considered the rival contentions and perused the material on record. We have observed that the assessee company has made payments towards Employee s PF contribution amounting to ₹ 86,358/- beyond the time stipulated i.e. due date und ..... 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