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TMI Blog2017 (6) TMI 783X X X X Extracts X X X X X X X X Extracts X X X X ..... , the disallowance of employees contribution of Provident Fund (as made by AO) & that of employers contribution of Provident Fund (as enhanced by CIT (A)] was uncalled for and therefore set aside. Thus the grounds of Assessee are allowed. X X X X Extracts X X X X X X X X Extracts X X X X ..... Local Conveyance Rs.10,79,139/- e. Office Expenses ₹ 6,50,437/- Rs.22,65,621/- 6.1] The learned CIT (A) failed to appreciate that all the expenses were incurred by the assessee for the business purpose and were duly supported by proper bills / vouchers and hence, the adhoc disallowance made in respect of the said expenses was not justified on facts of the case. 7] The appellant craves leave to add, alter amend or delete any of the above grounds of appeal." 3. Before us at the outset, the Ld AR submitted that ground no 7 is general and requires no adjudication and he did not wish to press ground no 6. He further submitted that as far as other grounds are concerned, though the assessee has raised various grounds but all the grounds are interconnected and the sole controversy which requires adjudication is with respect to disallowance of provident contribution. In view of the aforesaid submission of Ld AR Ground no.7 requires no adjudication and ground no.6 is dismissed as not pressed. 4. During the course of assessment proceedings and on perusing the "office and administration expenses" account, Assessing Officer noticed that assessee had debited ₹ 20,78,557 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... his liability. The argument of the appellant is difficult to be accepted as nothing prevented the appellant to debit the account of sub-contractors on account of such payments in case these sub-contractors were not having PF registration members. I also find that observation of the Assessing Officer is quite correct regarding non contractual nature of such payment as it was basically duty of the subcontractors to collect the same from respective employees and make the payment either directly or through the appellant but never the less the same cannot be claimed expenditure of the appellant company. 8. The appellant's reliance on the decision of Hon'ble Bombay High Court's order in the case of CIT Vs. Sales Magnesite Pvt. Ltd. 214 ITR 1, for allowability of the same on the grounds of commercial expediency is also misplaced as the appellant has not been able to prove that the payment was made out of commercial expediency. Therefore, I do not find any merit in the submissions of the appellant and disallowance of ₹ 9,73,953/- being employees contribution of contractors is upheld. 9. During the course of appellate proceedings, it was noticed that while the Assessing Office ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or carrying on its business. He pointed to the sample agreement entered into by the assessee with one of the clients (Kansai Nerolac Paints Ltd) which is placed at page 12-22 of the paper book. In support of his stand that it is the Assessee as the principal employer who is liable to make the payment of contribution of provident fund, he pointed to the section 30 of the Employees Provident Funds Scheme, 1952 and section 8A of the Employers Provident Fund (Miscellaneous) Provision Act, 1952. He further submitted that the expenditure was incurred during the course of business out of commercial expediency and therefore even on that ground it was allowable. He therefore submitted that the entire expenditure (including the enhancement made by Ld.CIT(A) needs to be set aside and the expenditure be allowed. The Ld DR on the other hand vehemently supported the order of AO and CIT(A). 7. We have heard the rival submissions and perused the material on record. The issue in the present case is with reference to disallowance of provident fund contribution made on behalf of the sub contractors and that which was claimed as expenditure. It is an undisputed fact that Assessee is engaged in constr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f any payable to such employee. (3) Notwithstanding any contract to the contrary, no contractor shall be entitled to deduct the employer's contribution or the charges referred to in sub-section 1 from the basic wages, dearness allowance, and retaining allowance if any payable to an employee employed by or through him or otherwise to recover such contribution or charges from such employee. Explanation. - In this section, the expressions 'dearness allowance' and 'retaining allowance' shall have the same meanings as in section 6." 9. Section 30 under chapter-V of the Employees Provident Funds Scheme 1952, reads under: "30. Payment of contributions: (1) The employer shall, in the first instance, pay both the contribution payable by himself (in this Scheme referred to as the employer's contribution) and also, on behalf of the member employed by him directly or by or through a contractor, the contribution payable by such member (in this Scheme referred to as the member's contribution). (2) In respect of employees employed by or through a contractor, the contractor shall recover the contribution payable by such employee (in this Scheme referred to as the member's contribution) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... have been incurred for the purpose which is an offence or which is prohibited by law (Explanation to Section 37 (1 )). 12. Section 37(1) does not curtail or prevent an assessee from incurring an expenditure which he feels and wants to incur for the purpose of business. Expenditure incurred may be direct or may even indirectly benefit the business in form of increased turnover, better profit, growth etc. Various courts have held that when as long as the expenditure incurred is "wholly and exclusively" for the purpose of business, the Assessing Officer cannot by applying of his own mind, disallow whole or a part of the expenditure. The Assessing Officer cannot question the reasonableness by putting himself in the arm-chair of the businessman and assume status or character of the assessee and that it is for the assessee to decide whether the expenses should be incurred in the course of his business or profession or not. Courts have also held that if the expenditure is incurred for the purposes of the business, incidental benefit to some other person would not take the expenditure outside the scope of Section 37(1) of the Act. Further, it is settled law that the commercial e ..... X X X X Extracts X X X X X X X X Extracts X X X X
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