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TMI Blog2019 (4) TMI 1847X X X X Extracts X X X X X X X X Extracts X X X X ..... rdingly, the ground No. 5 raised by the assessee is allowed. Disallowance of interest on proportionate basis u/s.36(1)(iii) - interest free advances given to the subsidiary and sister concerns of the assessee - HELD THAT:- In view of the fact that assessee has got sufficient own funds, we direct the ld. AO not to make any disallowance of interest and accordingly, the disallowance made by the ld. AO is deleted. Accordingly, ground No.6 raised by the assessee is allowed. Disallowance of employee s contribution of provident fund - paid beyond the due dates prescribed under the PF Act but were paid before the due date of filing the return of income u/s.139(1) - distinction between the employees contribution and employer's contribution - HELD THAT:- The amendment provided by Finance Act, 2003 put on par the benefit of deductions of tax, duty, cess and fee on the one hand with contributions to various Employees' Welfare Funds on the other. All this came up for consideration before the Hon'ble Supreme Court in the case of Alom Extrusions Ltd. [ 2009 (11) TMI 27 - SUPREME COURT] . The Tribunal in the case at hand relied upon the said judgment. There is no reason to f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 8377; 2,56,66,941/- and claimed the same as exempt u/s.10(34) of the Act. The assessee made suomoto disallowance of ₹ 24,42,759/- u/s.14A of the Act in the return of income both under normal provisions of the Act as well as computing the book profits u/s.115JB of the Act. The details of the suo moto disallowance made by the assessee are as under:- Sr. No. Particulars Amount (Rs.) 1. D-MAT expenses 1,28,488/- 2. Salary paid to one employee i.e., incharge of these investment activities 15,42,847/- 3. Other overheads being 50% of salary 7,71,424 Total 24,42,759/- 3.2. The ld. AO observed that the disallowance made by the assessee is not in accordance with the computation mechanism provided in Rule 8D of the rules and accordingly proceeded to invoke Rule 8D(2) thereon and made disallowance of ₹ 10,88,24,112/- in all the three limbs of Rule 8D while computing book p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ebited to profit and loss account by the assessee and the disallowance u/s.14A for the purpose of 115JB should be made based on actual amounts debited to the profit and loss account. In this scenario, assessee s disallowance should be accepted. Since the assessee has voluntarily disallowed this sum of ₹ 24,42,759/- u/s.14A while computing book profits u/s.115JB of the Act, no further disallowance need to be made thereafter. Accordingly, the ground No. 5 raised by the assessee is allowed. 4. The ground No.6 raised by the assessee is with regard to the action of the ld. DRP in confirming the disallowance of interest of ₹ 8,37,01,584/- on proportionate basis u/s.36(1)(iii) of the Act in respect of interest free advances given to the subsidiary and sister concerns of the assessee. 4.1. The brief facts of this issue are that the ld. AO observed that on perusal of the balance sheet, the assessee had shown huge amounts under the head loans and advances given by the assessee. The perusal of the balance sheet reveal that assessee had taken huge secured and unsecured loans and interest has been paid thereon. The interest free advances given by the assessee to subsidiaries a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ribunal rendered in the case of group concern of assessee Alok Infrastructure Ltd., vs. ACIT in ITA Nos. 818 and 1651/Mum/2012 for A.Y.2008-09 dated 29/07/2016 wherein the facts and the decision rendered thereon are reproduced hereunder:- 9. In so far as cross appeal of the Revenue is concerned, the solitary issue relates to action of the CIT(A) in deleting an addition of ₹ 53,07,260/-, which was made by the Assessing Officer by invoking the provisions of section 36(1)(iii) of the Act. 9.1 In this context, relevant facts are that the Assessing Officer noticed that assessee company had incurred interest expenditure of ₹ 1,66,32,240/- on borrowings of ₹ 43.00 crores raised from L T Infrastructure Finance Company Ltd. The Assessing Officer also noted that during the year under consideration assessee had made investments of ₹ 135.00 crores in shares, which was claimed to have been made out of own non-interest bearing funds. The Assessing Officer has noted in the assessment order that on being asked to furnish any nexus between the funds utilized and investments, the assessee failed to do so. The Assessing Officer further noticed that after raising of borr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he order of the Assessing Officer in support of the case of the Revenue, without controverting any of the factual matrix brought out by the CIT(A). Notably, the CIT(A) in para 3.9 of his order has referred to the fund flow statement furnished by the assessee whereby, assessee had owned interest free funds of ₹ 193.70 crores and investment in subsidiary was ₹ 135.00 crores. On this basis, the CIT(A) has concluded that assessee had sufficient own funds and , therefore, following the judgment of Hon'ble Bombay High Court in the case Reliance Utilities And Power Limited(supra), it can be presumed that no borrowed funds were used to make such investments. As per Hon'ble Bombay High Court, the principle is that, if there are funds available both interest free and interest bearing, then a presumption can be drawn that investments are made out of interest free funds, so long as such interest free funds are sufficient to meet the investments. In our considered opinion, having regard to the fact position brought out by the CIT(A), the proposition laid down by the Hon'ble Bombay High Court in the case of Reliance Utilities And Power Limited(supra) is fully attracted in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was on account of delay in payment of the employees contribution was not sustainable. 7. The question arising, therefore, is (a) whether the Tribunal was right in ignoring the distinction between the employees contribution and employer's contribution and whether the decision of the Hon'ble Supreme Court in the case of Commissioner of Income Tax V/s.Alom Extrusions Ltd. reported in [2009] 319 ITR 306 would apply only in the cases of employee's contribution and (b) whether the itxa1002-12+1 Tribunal was right in holding that payment of employees contribution is subject to the provisions of section 43B of the I.T. Act entailing that amendment to section 43B would lead to the inclusion of the employers' contribution as well. 8. Mr. Gupta submitted that the Tribunal erred in deletion of addition of amount to the extent of ₹ 32,03,947/- and that the impugned order dated 29th July, 2011 is liable to be quashed. Mr.Gupta relied upon the judgment of Punjab Haryana in Commissioner of Income-Tax V/s. Lakhani Rubber Works reported in [2010] 326 ITR 415 (P H) and submitted that question Nos.1 2 in that case had already been decided against the revenue in view ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lations by delaying payment of contributions to the welfare funds. 12. Mr.Naniwadekar also relied upon the judgment dated 11 th July, 2014 in Income Tax Appeal No.399 of 2012 passed by this Court, to which one of us (S.C.Dharmadhikari,J.) was a party where following two issues of law were raised.:- (A) Whether on the facts and in the circumstances of the case, the Tribunal, in law, was right in allowing the claim of the Assessee on account of delayed payments of P.F. of employees' contribution amounting to ₹ 1,82,77,138/- by relying on the decision of the Hon'ble Supreme Court in the case of CIT Vs/. Alom Extrusions Ltd. (319 ITR 306) ? (B) Whether on the facts and in the circumstances of the case, the Tribunal in law, was right in deleting the disallowance of ₹ 10,00,300/- on bond registration charges and allowing the claim of the assessee u/s. 37(1) of the I.T. Act, 1961 ? 13. In that judgment, this Court held that no substantial questions of law would arise since section 43B is inserted in the I.T. Act with effect from 1st April, 1984 by which the mercantile system of accounting with regard to tax, duty and contribution to welfare funds stood dis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ided by Finance Act, 2003 put on par the benefit of deductions of tax, duty, cess and fee on the one hand with contributions to various Employees' Welfare Fundsitxa1002-12+1 on the other. All this came up for consideration before the Hon'ble Supreme Court in the case of Alom Extrusions Ltd. (supra). The Tribunal in the case at hand relied upon the said judgment. There is no reason to fault the order passed by the Tribunal. We are of the view that the decision of the Supreme Court in Alom Extrusions Ltd. applies to employees' contribution as well as employers' contribution. Question Nos.2, 3 4 are accordingly answered in favour of the assessee and against the revenue. 16. The facts in Income Tax Appeal No.1034 of 2012 are similar, except for the change in the assessment year and the questions arise out of the common order of the Tribunal dated 29th July, 2011 and accordingly the question Nos.2, 3 4 are answered in favour of the assessee and against the revenue. We hold that both employees' and employer's contributions are covered under the amendment to Section 43B of I.T. Act and the Alom Extrusions judgment. Hence the Tribunal was right in holding tha ..... X X X X Extracts X X X X X X X X Extracts X X X X
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