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TMI Blog2019 (7) TMI 360X X X X Extracts X X X X X X X X Extracts X X X X ..... - for Employees' State Insurance Corporation (ESIC) and Rs. 11,81,255 for Employees Provident Fund (EPF) u/s 37(1) of the Income tax Act, 1961, voluntarily paid on behalf of the sub-contractors employing labourers at the appellants project site. While arriving at the conclusion learned CIT(A)-1, Pune ought to have appreciated that, in absence of such voluntary compliances under respective ESIC and PF act, ultimate cascading liability is on the Appellant. 2. Alternate and without prejudice to the Ground no 1 above, learned CIT(A)-1, erred in law and on facts in not appreciating that the said expenses is incurred on account of commercial expediency and hence should be allowed u/s 37 of ITA 1961. 3. The learned CIT(A)-1, Pune erred in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... siness expenditure and was incurred on account of commercial expediency and hence allowable under the provisions of section 37 of the Act. The ld. AR in support of his contentions placed reliance on the decision of Pune Bench of Tribunal in the case of Ratilal Bhagwandas Construction Co. (P.) Ltd. Vs. Income Tax Officer reported as 82 taxmann.com 292. 3.1 In respect of ground No. 3 of the appeal, the ld. AR submitted that the assessee has assailed disallowance u/s. 14A r.w. Rule 8D(iii) Rs. 3,90,531/- sustained by the First Appellate Authority. The ld. AR submitted that the Assessing Officer had made disallowance of Rs. 13,22,343/- u/s. 14A r.w. Rule 8D. In First Appellate proceedings the Commissioner of Income Tax (Appeals) granted partia ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lal Bhagwandas Construction Co. (P.) Ltd. Vs. Income Tax Officer (supra). In the said case under somewhat similar circumstances payments were made under Employees Provident Fund Act, 1952 in respect of sub-contract labourers. The Co-ordinate Bench after examining the facts of the case and provisions of Employees Provident Fund Act, 1952 allowed assessee's claim therein by observing as under : "10. The perusal of the aforesaid sections of the Employees Provident Fund & Miscellaneous Provisions Act 1952 and Employees Provident Fund Scheme 1952 together with the clauses of the agreement that the Assessee had entered into with his clients shows that Assessee is responsible for the deduction of provident fund dues of the employees including th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... previous year; and finally, expenditure should not 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Department. The payments were wholly and exclusively for the purpose of business of assessee. Thus, in view of the facts of the case and the decision of Co-ordinate Bench, we are of considered view that the assessee's claim of such payments u/s. 37(1) of the Act deserves to be allowed. We accept assessee's alternate contention raised in ground No. 2 of the appeal. Accordingly, ground No. 1 of the appeal is dismissed and the ground No. 2 of the appeal is allowed. 7. In ground No. 3 of the appeal, the assessee has assailed disallowance of expenditure u/s. 14A r.w. Rule 8D(iii) amounting to Rs. 3,90,531/-. A perusal of impugned order shows that the Assessing Officer had made disallowance of Rs. 13,22,343/- u/s. 14A r.w. Rule 8D(ii) and (iii ..... X X X X Extracts X X X X X X X X Extracts X X X X
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