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TMI Blog2018 (7) TMI 1544X X X X Extracts X X X X X X X X Extracts X X X X ..... tallized as at the year-end in-as-much as the relevant employee/s had superannuated during the relevant year/s. The assessee’s case, even as confirmed by the ld. AR during hearing, continues to be the same, so that its claim remains wholly unsubstantiated before us as well. Accordingly, we have no hesitation in upholding the impugned disallowance. Needless to add, the assessee shall be entitled to deduction in its respect u/s. 37(1), of course subject to the satisfaction of the AO with regard to the genuineness of the assessee’s claim, in the year of payment/s Disallowance of prior period expenses made - Held that:- The assessee admittedly following mercantile method of accounting, with each year being an independent unit of assessment, we find no reason not to uphold the impugned disallowance, even as fairly conceded to by the ld. AR during hearing. So, however, we consider it as incumbent upon us to state that while finalizing the assessment for AY 2009-10, prior period expenditure to the extent the same relate to AY 2007-08, subject to his examination and verification, be allowed by the AO. The onus to furnish the relevant details, as well as press any claim/s in its respect, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . represented provisions in respect of bills payable, salary payable, etc., leaving a balance of ₹ 4.05 lacs, which was accordingly confirmed as unexplained credit. Very clearly, the assessee has no explanation for this sum, which represents neither an opening balance nor a provision was during the year. The confirmation of the addition to this extent is accordingly confirmed. Addition in respect of interest on FDRs - Held that:- The assessee is maintaining its accounts, disclosing business income, on mercantile basis. Section 145 obliges an assessee to maintain books either on cash or mercantile basis, so that hybrid system of accounting is impermissible w.e.f. AY 1997-98. The assessee has, we are sorry to state, at no stage, i.e., during the audit u/s. 142(2A); the assessment proceedings; the remand proceedings – the ld. CIT(A) calling for a remand report on quite a few issues, as well as in the appellate proceedings, made any effort to call for the relevant details, i.e., the interest accrued on its different FDRs as outstanding as at the relevant/s year-end. The Revenue is under the circumstances constrained to make an estimate of the interest accrued, and which is in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fy, would be different where the excess service tax stands collected, and credited to the income account, in which case there is admittedly no question of payment thereof, so that the same stands rightly accounted as income. The burden to prove its claim/s, it may be clarified, would be on the assessee, and which it may do at the time of the AO giving appeal effect to this order, for which he shall allow the assessee a reasonable opportunity. Disallowance u/s. 40(a)(ia) on the short deduction of tax at source - Held that:- there has been a short deduction of tax at source, i.e., at the rate of 3%, no disallowance u/s. 40(a)(ia) is called for in-as- much as the tax deducted at source is on the entire sum of ₹ 1000. At the same time, the same cannot be allowed to be used as a bogey, so that an actual non- deduction, i.e., in the absence of any confusion, is sought to be impressed with the character of a short deduction, as where there has been no deduction (on ₹ 400, going by our example). The orders by the authorities are silent on this aspect. What, for example is the nature of the confusion, i.e., the different sections under which the tax was actually deducted, an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ation of section 40A(3) of the Act. The facts in brief that the assessee was observed to have incurred an expenditure in the sum of ₹ 1,79,61,814/- in cash in apparent contravention of section 40A(3) of the Act. The assessee s claim of the places where the payments in cash were made, which were predominantly as salary to its employees (Rs.160.19 lacs), were not serviced by banks, so that its case would fall within the one of the excepting clauses of rule 6DD (of the Income Tax Rules, 1962) providing for the prescribed circumstances excluding application of the non obstante clause of 40A(3), was rejected on the basis of the rebuttal by the AO, with several branches of different banks, viz. J K Bank, State Bank of India and other Nationalized Banks, existing at the places mentioned by the assessee. The ld. CIT(A) would upon this, i.e., after issuing a finding that the assessee s contention with regard to the non-servicing of the relevant places by bank facilities to be factually incorrect and, in fact, misleading, hold as under: The appellant during the course of appellate proceedings made a submission wherein the appellant has accepted that there was technical default in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... [2008] 116 ITD 1 (Kol)(SB) relied on a number of decisions by the Hon ble High Courts across the country to hold that only where the assessee s case falls under any one of the specified circumstances enumerated u/r. 6DD, would the saving from the rigor of the provision hold; there being no ambiguity in the express language thereof. No decision by the jurisdictional High Court has been brought to our notice. Under the circumstances, we only consider it proper that the matter is restored back to the file of the ld. CIT(A) for a decision on merits in accordance with law after allowing the assessee a reasonable opportunity of being heard. This also decides Ground 3 of the Revenue s appeal for AY 2007-08. Coming to Gd. 1 of the assessee s appeal for AY 2009-10, the disallowance stands upheld by the ld. CIT(A), again, on the aspect of serviceability of the banks at the places where the expenditure stands paid. The said finding remains unrebutted. As, however, we have remitted the matter back to the file of the ld. CIT(A) for AY 2007-08, it is only considered proper that, like-wise, it be done for this year so as to ensure consistency of decision at his end; the facts being largely the sa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ource (TDS) had been deposited by the due date of filing of the return of income u/s. 139(1). The Revenue contests the same (vide Gd. 1 of its appeals) on the ground that the proviso to s. 40(a)(ia), introducing the leverage so as to exclude from the ambit of the statutory disallowance there-under where the payment has been made by the due date of filing the return u/s. 139(1), stands inserted by Finance Act, 2010 w.e.f. AY 2010-11, so that the said amendment, invoked by the ld. CIT(A) without specifically referring thereto, would not obtain for the relevant years. 6. We have heard the parties, and perused the material on record. The ld. CIT(A) has confirmed the disallowance u/s. 40(a)(ia) to the extent there has been non-deduction of tax at source, i.e., after confirming the figures from the AO through the remand proceedings. The assessee before us contests the said confirmation on the ground that the assessee does not stand to gain/benefit from the non-deduction of tax at source in any manner in-as-much as the relevant expenditure, i.e., against which there has been non-deduction of tax at source, stands already incurred in the course of and for the purposes of its business ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to AY 2008-09 and AY 2010- 11 respectively, all that is required, for the purpose, is to see if the assessee had made any claim qua the said sum for these years, i.e., with reference to its disallowance for the relevant years. We decide accordingly. 7. Ground 5 for AY 2007-08 is in respect of confirmation of an addition for ₹ 21,750 credited to the suspense account, so that the same was inferred by the AO as an unexplained liability and, accordingly, added as income. The same stood confirmed on the same basis. No improvement in its case stands effected before us, with the ld. AR in fact conceding to the impugned addition. We accordingly confirm the same. The subject matter of the assessee s Gd. 6 for AY 2009-10 being the same, the same stands also confirmed at the impugned amount of ₹ 27,100. We may though add that the latter sum of ₹ 27,100 should not include in whole or in part, the former sum of ₹ 21,750, else, to that extent, it would be a case of a double addition. We say so as it could well be that the excess credit as on 31.03.2007 continues to obtain (to whatever extent) as on 31.03.2009 as well, in which case it would amount to a double add ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... est accrued for the relevant years on the basis of the average amount outstanding (on the basis of the monthly balance) for the two years under reference. Information u/s. 133(6) was sought from the bank with regard to the interest rates obtaining during the relevant period, and which informed the same to be at 4.5% p.a., (for deposits with maturity from 15 days to 45 days) and at 9.5% p.a., (with maturity period ranging from 46 days to 1 year). He, accordingly, applied an average rate of 8% per annum and computed the interest accrued on FDRs/CDRs accordingly. The same stood confirmed in appeal, with the assessee making no improvement in its case in the appellant proceedings. 10. We have heard the parties, and perused the material on record. The assessee is maintaining its accounts, disclosing business income, on mercantile basis. Section 145 obliges an assessee to maintain books either on cash or mercantile basis, so that hybrid system of accounting is impermissible w.e.f. AY 1997-98. The assessee has, we are sorry to state, at no stage, i.e., during the audit u/s. 142(2A); the assessment proceedings; the remand proceedings the ld. CIT(A) calling for a remand report on qui ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e). The same being not produced, he worked out the depreciation as per the relevant provision at ₹ 82,325 and, accordingly, made a disallowance for 83,825 (Rs.82325+1500). The same stood confirmed in appeal in the absence of any improvement in its case by the assessee. The position continues to be the same before us. Accordingly, we have no hesitation in confirming the same. We decide accordingly. 12. The eight ground of appeal for AY 2009-10 is in respect of disallowance of claim for service-tax at ₹ 3,25,000. On the basis of the details of service tax collected by the assessee s different units from piece workers, and that remitted to the account of the Central Government, it was found that there was an excess collection by ₹ 3.25 lacs. This was also confirmed on the basis of the assessee s liability to service tax, for which though no systematic record was found to be maintained by it. The same was accordingly disallowed and, further, confirmed in appeal in the absence of the assessee furnishing any evidence of payment thereof, so that section 43B would operate to bar the allowance of the unremitted amount (sec.43B). Again, there is no improvement in the ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the disallowance u/s. 40(a)(ia) on the short deduction of tax at source. The basis of the Revenue s disallowance is that there has been no deduction of tax at source to that extent. The assessee s case, and which found favour with the ld. CIT(A), is that it is a case of short deduction, i.e., with reference to the entire amount liable for deduction of tax at source, arising on account of a bona fide confusion with regard to the rate of deduction, so that the same could not be construed as non-deduction on the balance amount. We may clarify the dichotomy by way of an example. The assessee deducts tax on a sum of ₹ 1000 (say) at 3% (say). The correct rate for TDS is, however, 5% (say). While the Revenue states that there has been no deduction on ₹ 40; the tax deducted (Rs.30) being relatable to the principal sum of ₹ 600, the assessee states that it has deducted tax on ₹ 1000 at the rate of 3% (Rs.30). The matter in our view is factual. If the assessee can show that there has been a short deduction of tax at source, i.e., at the rate of 3%, no disallowance u/s. 40(a)(ia) is called for in-as- much as the tax deducted at source is on the entire sum of ₹ 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion is deemed as his income u/s. 2(24)(x)) is regulated by section 36(1)(va), providing for its deduction subject to payment within the time prescribed under the relevant Act, or rules framed thereunder. And that the same has no interface with section 43B, which concerns the employer s contribution to the provident or other employee welfare funds (i.e., as an employer, in addition to the employee s contracted remuneration). The other High Courts, viz. Delhi, Uttarakhand, Bombay, Punjab Haryana Rajasthan, have expressed a contrary view, holding that section 43B which allows deduction in respect of the sums specified therein subject to their payment by the due date of filing the return of income u/s. 139(1), would regulate deduction of the employees contribution, i.e., besides the employers contribution, as well. There is nothing in the language of the relevant provision, i.e., s. 43B, to indicate that the section is applicable to the employee s contribution as well, deduction in respect of which is, as afore-stated, governed by s. 36(1)(va) r/w s. 2(24)(x). Further, even assuming for the sake of argument, that sec. 43B is applicable to the employee s contribution, deductio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Accordingly, deduction shall be subject to the payment of the impugned sum by the due date of filing of the return u/s. 139(1), which the AO shall verify. We decide accordingly. 18. The fourth and last ground of the Revenue s appeal for AY 2009-10 is in respect of the relief allowed qua the disallowance of depreciation on fixed assets. The assessee failing to produce the bills/vouchers in respect of addition to the fixed assets during the year, the AO worked out the depreciation thereon as per the applicable rates and period, at ₹ 25,97,261. The assessee having made a claim for depreciation at ₹ 120.17 lacs, he effected a disallowance for the balance ₹ 94.20 lacs. In appeal, it was clarified by the assessee that the AO s working fails to take into account the depreciation on the opening value of the different block of assets. The same was worked at ₹ 87.96 lacs, so that the ld. CIT(A) allowed relief to the assessee to that extent. We find no infirmity in the impugned order nor was any pointed out to us during hearing. We accordingly confirm the said deletion. We decide accordingly. 19. In the result, the assessee s appeals are partly allowed, and the R ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the order of Ld. CIT(A) in the case of the appellant itself for the A.Y.2011-12, deleted the said addition. Even we realized that jurisdictional High Court in the case of M/s R.M. Exports vs. CIT, Jalandhar in ITA No.115 of 2009 order dated 06.08.2013 held that: 8. In the present case, the assessee had deposited the amounts under ESI and EPF contributions prior to the filing of the return under Section 139(1) of the Act. Section 43B of the Act was interpreted by this Court vide judgment delivered on 5.9.2006 in Avery Cycle Industries (P) Ltd s case (supra) and on 7.3.2007 delivered by the Hon ble Supreme Court in Vinay Cement Ltd s case (supra). The said decisions were prior in point of time to the decisions of the Tribunal on 5.11.2007 and 23.11.2007. Once that was so, applying the enunciation of law as laid down by the Hon ble Supreme Court in Saurashtra Kutch Singh Gurbachan 2013.09.11 15:34 I attest to the accuracy and integrity of this document High Court Chandigarh Stock Exchange Ltd s case (supra), the Tribunal was in error in declining to rectify the mistake which was apparent on the face of the record. In the said case decided by the Hon ble Punjab Haryana Hi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Fund as the same had been deposited prior to the filing of the return under Section 139 (1) of the Act. 6. In view of the above, the substantial questions of law are answered against the revenue and in favour of the assessee. Consequently, the appeals are dismissed. Even ITAT Bench at Delhi in the case of ACIT vs. M/s Vipul Facility Management Pvt. Ltd. in ITA No.1020/Del/2012 relevant to the Asst.Year:2008-09 vide order dated 06.09.2012, while dealing with the same and identical issue hold that the employees contribution towards PF paid by the assessee before due date on filing of return u/s 139(1) of the Act for the Asst. Year under consideration is admissible for deduction. In view of the decisions of the jurisdictional High Court as well as Co-ordinate Bench of ITAT at Delhi, we do not have any hesitation to upheld the deletion of addition qua contribution of employee's provident fund (PF) on account of employee's contribution towards provident funds as well as under ESI Act. Respectfully following the dictum in its true spirit, of Apex Court judgment held in Commissioner of Income Tax vs. Alom Extrusions Ltd. [2009] 319 ITR 306 (SC) and mandate of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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