TaxTMI 
TaxTMI 
TaxTMI 
1995 (3) TMI 145
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....upgradation and diversification in collaboration with Tioxide Group Ltd., U.K. The Government also assisted the assessee by intervening and settling the issues with the local people for laying sub-marine pipes for effluent disposal, and for sponsoring of the unit for the manufacture of products utilising the effluents collected from the company. Further, the Government assisted the assessee in settling labour disputes and in maintaining good industrial relations. It is in view of such services that the assessee was asked to pay service charges to the Government at varying rates per tonne of Titanium Dioxide in the past and such payments were not disallowed. However, for the impugned assessment year, the payment was disallowed as in the view of the Assessing Officer the services rendered by the Government are not special services, but are rendered in its capacity as the Government of the State for promotion of industrial development. He further held that the so-called services stated to have been rendered by the Government represented nothing but part of the normal day-to-day functioning and statutory responsibilities of the State Government and such services were rendered for other....
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....ges was made applicable to the assessee-company and that there was no exchange of correspondence between the Government and the assessee before the levy of service charges and that no formal discussion took place in the Board's meeting regarding the Government order and that the assessee has simply started paying service charges on the basis of the Government order. Since the Government is a major shareholder, the assessee is not bound to make the payment on the basis of the order of the Government. The mere fact that the Government had demanded and the assessee had paid service charges, will not clothe it with the nature of an expenditure wholly and exclusively laid out for the purpose of the business. Then he noticed the details of services listed by the Government in its letter No. 17238/H-3/94/ID dated 21-6-1994 and opined that the Government was only discharging its functions as a Government and there was nothing special meant for the assessee or in connection with its activities. The levy was not collected from all public undertakings but only from a few undertakings which were making profits. Thus, he upheld the disallowance. The assessee is in second appeal. 3 . Sri K.R. R....
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....he Dy. Commissioner of Income-tax (Assessment), Special Range, Trivendrum, had addressed a letter dated 22-12-1993 to the Secretary, Industries (H) Department, Government of Kerala, Secretariat, Trivendrum seeking clarifications regarding the levy of service charges on the assessee and KSIPTC. In response to this letter, the Secretary to Government, Industries (H) Department, Trivendrum, has replied by his letter dated 21-6-1994 as follows :--- " From The Secretary to Government To The Deputy Commissioner of Income-tax (Assessment), Special Range, Kowdiar, Thiruvananthapuram. Sir, Sub:- Levy of service charges on Titanium Dioxide - Reg. Ref: ----- (1) G.O. (MS) No. 48/89/ID dated 25-3-1988. (2) G.O. (MS) No. 89/26/89/ID dated 2-2-1989. (3) G.O. (MS) No. 2/90/ID dated 5-1-1990. (4) Govt. letter No. 47291/H3/91/ID dated 7-12-1991. (5) Your letter No. CQ/6472 dated 22-12-1993. I am directed to invite your attention to your letter fifth cited and to inform you as follows: The State Government has been rendering various direct and support service to the Travancore Titanium Products Limited, in matters related to the business of the company. Major policy decisions of the c....
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....sis legal or otherwise) and as other units in the State also derived benefits from such services, it cannot be said that the services were rendered exclusively in the cause of the assessee and thus disallowed the payment. In the process, the authorities have overlooked the facts that in the preceding years they have allowed the payment as business expenditure, though it was in different sums and under different rates per tonne of Titanium Dioxide. The business of the Government is, no doubt, to govern, but in order to govern it has to augment its resources and any Government, if committed to welfare programmes, has to provide infrastructure for industrial growth, good environment and labour welfare. In this process, it has to have resources to fall back upon and for that purpose in view, the Government can make levies in selected areas or from selected persons or generally in order to carry out its policies regarding industrial growth and welfare. Such collections can be by way of tax, duties or fees. Such collections can also be by way of service charges for specific services rendered. While the tax, duties and fees have to have legislative sanction, the levy of service charges or....
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....ourt observed as follows : ". . . But the reasonableness or the necessity of payments .... must be ascertained in the light of what may be regarded as commercially expedient and not on any legalistic considerations. It would not be expected of a businessman to start a litigation in respect of a tax which the Legislature of State was competent to levy on the ground that the method devised for computing the tax liability was ultra vires. The tax was duly assessed and paid and the reasonableness and necessity must be adjudged in the light of the circumstances then prevailing and not in the light of subsequent developments. " What, however, follows from the above discussion is that the fact that an assessee, in the first instance, disputes the validity of a claim or fails to dispute it would not prevent the assessee from claiming the ultimate payment as a proper business expense. Litigiousness cannot be said to be good businessmanship. In the undernoted case [Cannanore Spinning and Weaving Mills Ltd v. CIT [1961] 42 ITR 528 (Ker.)] the board of directors of the assessee-company suspended and remove the managing agent from office. Some shareholders, presented a petition in the High Co....
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....should not come in the way of an expenditure being allowed by way of deduction under section 10(2)(xv) of the Act if it satisfies otherwise the tests laid down by law. CIT v. Chandulal Keshavalal & Co. [1960] 38 ITR 601 (SC) relied on. The three tests laid down by the Supreme Court in Gordon Wood-roffe Leather Mfg. Co. v. CIT [1962] 44 ITR 551, viz. (i) that the payment should have been made as a matter of practice which affected the quantum of salary, (ii) that there was an expectation by the employee of getting a gratuity, and (iii) that the sum of money was expended on the ground of commercial expediency and in order indirectly to facilitate the carrying on of the business of the assessee, have to be read disjunctively. " In view of the clear cut pronouncements of the Apex Court we have no hesitation in setting aside the order of the learned CIT (Appeals) and directing the Assessing Officer to grant deduction of the impugned amount of Rs. 5,75,15,000 from its income for the assessment year under consideration. 7. The next dispute is about the disallowance of Rs. 6,72,429 under section 43B of the Income-tax Act, 1961. According to item No. VI of the notes to the Profit and Los....
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....see is entitled to claim this amount as a deduction in respect of the assessment year 1992-93. The assessee is aggrieved. 8. Having regard to rival submissions, we modify the order of the learned CIT (Appeals). Provident fund contribution consists of two kinds : (i) contribution received from the employee and (ii) contribution to be made by the employer. Contribution received from the employee is treated as income of the employer at the first instance under section 2(24)(x) of the I.T. Act, 1961. A deduction is allowed under section 36(1)(va) of the I.T Act in respect of such contribution, if it is credited by the assessee to the employee's account in the relevant fund on or before the due date prescribed under the rules of the fund. Thus, even under section 36(1)(va), in respect of contribution recovered from the employees on the last working day of the previous year, the assessee would be entitled to get deduction if he credits the amount within 15th of April as permitted by P.F. Rules. There is no condition that employee's contribution of the last month of the previous year should have been in the same previous year. 9. The provisions of section 43B(b) read with the second pro....
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....n such a manner as to put an impossible burden on the subject. Further the rules of provident fund themselves permit payment on or before 15th of the following month. A comparison of the second proviso as it stood before 1-4-1989 and the second proviso as it stood after 1-4-1989 would be revealing : Before 1-4-1989 After 1-4-1989 Provided further that no deduction Provided further that no deduction shall, in respect of any shall, in respect of any sum referred to in clause (b) sum referred to in clause (b), be be allowed unless such sum has allowed unless such sum has actually been paid during the &n....
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....clusion that the payment must be not only within the due date, but also within the previous year. Such a pedantic interpretation is not called for in the scheme of the section as regards employer's contribution to provident fund. For this reason, we delete the disallowance. 10. The last point in the appeal is against the levy of interest under section 234B of the I.T. Act. In this case, the assessee's return was furnished under section 143(1)(a) on 31-12-1991 in which the income returned was accepted. Subsequently, the present assessment was passed under section 143(3) on 11-3-1994. The assessee's contention is that the interest under section 234B must be limited only up to the date of assessment under section 143(1)(a) of the I.T. Act in its case. The learned CIT (Appeals) held that in all cases the returns will be processed under section 143(1) and then only assessments will be taken up for scrutiny and completed under section 143(3) and, therefore, there is nothing wrong in levying interest to the date when the assessment is completed under section 143(1) and also to the date when the regular assessment is completed under section 143(3). 11. We have heard rival submissions. Th....