TaxTMI 
TaxTMI 
2004 (9) TMI 563
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..... Since the two grounds are inter connected, they are disposed of together. 3. Facts of the case briefly, are that the assessee company is a Public Limited Company incorporated on 14-12-1962. It is engaged in the business of manufacturing and trading of Borosilicate Glass, a glass with low expansion capacity. The manufacturing units are at Marol-Maroshi Road, Mumbai and the other at MM Nagar, Chennai, Tamil Nadu. The assessee company had taken plant and machinery on lease from M/s. Sundaram Finance Ltd. (SFL), M/s. Tata Finance Ltd. (TFL) & M/s. IDBI. This plant and machinery was sub-leased to its subsidiary company M/s. Gujarat Borosil Ltd. (GBL) vide agreement and arrangement in the assessment year 1994-95. The Assessing Officer noticed that the assessee paid lease rent of Rs. 2,56,47,446 for assessment year 1998-99 and Rs. 2,19,34,664 for assessment year 1999-2000, whereas it received only Rs. 97,00,000 in both the assessment years from its subsidiary company as lease rent. The assessee was asked to explain as to why the company has charged only Rs. 97,00,000 in each assessment year from the subsidiary company as the lease rent on the same plant and machinery which was taken ....
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.... Rs. 2005.95 lacs which is more than 50% of total GBL share. Therefore, it is in our interest to revive GBL in such a way that future losses/liabilities may be reduced and GBL starts making profits. After consideration of all above facts and circumstances as well as our discussions with various Financial Institutions, it was decided to workout the payment of lease rent and recovery of lease rent from GBL. The working for the same was made in such a way that there should not be any loss to us which can be seen from the enclosed comparative statement of Lease Rent Paid and received from 1993-94 onwards. Your goodself will kindly appreciate that the total lease rent payable over 7 years period is Rs. 1299.72 lacs while the total recovery is to be made over a period of 14 years is Rs. 1367.50 lacs. Thus, over all there will be more recovery of Rs. 67.78 lacs and there is no loss on account of lease rent paid by our company." In another letter dated 8-12-2000, the assessee submitted that the total recovery to be made over the period of 15 years was Rs. 1367.50 lacs and furnished the following comparative statement of lease rent paid and recovered from assessment year 1994-95 onwar....
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.... 95,000 24,88,347 1995-96 2,43,71,915 97,00,000 1,46,71,915 1996-97 2,58,03,258 97,00,000 1,61,03,258 1997-98 2,58,03,258 97,00,000 1,61,03,258 1998-99 2,56,47,446 97,00,000 1,59,47,446 1999-00 2,19,34,664 97,00,000 1,22,34,664 The figures of income/loss reflected by the assessee as well as by GBL is as under: Borosil Glass Works Ltd. (Returned Income as per normal provisions of computation) Gujarat Borosil Ltd. (Loss as per books) (Rs. in lakhs) A.Y. Income Returned of the year Difference in lease rent Total income Loss as per books Difference in lease rent Total 94-95 155.72 24.88 24.88 95-96 56.05 146.72 202.77 (-) 627.77 146.72 (-) 774.49 96-97 38.8 161.03 122.23 (-) 402.22 161.03 (-) 563.23 97-98 (-) 158.33 161.03 2.7 (-) 795.19 161.03 (-) 956.22 98-99 19.05 159.47 178.52 (-) 2120.10 159.47 (-) 2279.57 99-00 4.96 122.34 127.3 (-) 1020.68 122.34 (-) 1143.02 The Assessing Officer pointed out....
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....of the assessee's business but for the subsidiary company. Thus, the expenditure incurred was not wholly and exclusively for the business of the assessee company. The assessee had incurred these expenses on behalf and for the business of the subsidiary company, therefore, these expenses which were laid out and expended wholly and exclusively for the business of the subsidiary company cannot be allowed under section 37(1). It was further pointed out by the Assessing Officer that the period of lease with Sundaram Finance, Tata Finance and IDBI was only for five years whereas, the assessee company had sub-leased the same to the subsidiary company for a period of fourteen years. This shows that the lease agreement with the subsidiary for the extended period of fourteen years is not a normal commercial transaction rather extra commercial transaction for the purpose of claiming higher expenses in the hands of the assessee and thereby to evade tax. He further mentioned that the quantification of benefit (if any) cannot be done in absolute terms but on the basis of the Net Present Value (NPV) of the lease rent paid and lease rent received. As per the NPV method the assessee would end up pa....
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....e of the assessee company. 6. The assessee company also paid interest to the financial institutions amounting to Rs. 3,97,379 for assessment year 1998-99 and Rs. 56,867 for assessment year 1999-2000 by way of interest on late payment of lease rent. The Assessing Officer was of the view that the lease rent expenditure was not incurred wholly and exclusively for conducting the business of the assessee company, therefore, interest paid on late payment of lease rent is also held as not incurred wholly and exclusively for the purpose of the business of assessee company. He therefore, disallowed these amounts also. The CIT(A) having concurred with the Assessing Officer, the assessee is in second appeal before the Tribunal. 7. The learned assessee counsel submitted that the assessee company promoted GBL and the said company was initially incorporated as Gujarat Window Glass Ltd., with the objective to manufacture sheet glass and allied products. Later, its name was changed to Gujarat Borosil Ltd. The project cost was originally estimated at Rs. 4575 lacs in 1989 which was revised to Rs. 6,487 lacs in December, 1991. The finance institutions insisted on a corporate guarantee by the p....
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.... abolition of the industrial licensing system, another large float glass plant of 29 MSM capacity also came into production in December, 1995. Consequently, owing to the price war and consequent losses the company became sick and came under the purview of BIFR. Though the project when conceived was sound and economically viable, due to various unforeseen adverse circumstances, such as, the country facing unprecedented foreign exchange crisis in 1991-92, foreign exchange loan sanctioned by the IDBI was cancelled by them on the ground of foreign exchange shortages and curfew on account of Babri Masjid demolition resulting in delay of equipments to be delivered. These factors resulted in increase in project cost. He further pointed out that if the assessee company did not agree to help GBL the project would have been abandoned as GBL was not in a position to meet such huge liability. Since GBL did not have liquid funds to further invest, it was decided by the assessee to borrow them by way of equipment lease and sub-lease the same to GBL. 8. The Revenue authorities have stated that the lease rent paid was more than what was received by the assessee company. Therefore, the differenc....
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....t paid. It is submitted that the transaction entailed the revenue generation for a period of fifteen years and outlay of seven years. The total revenue generated on account of the transaction was Rs. 13,67,50,000 and the total outgoing was Rs. 12,84,16,868. Therefore in the first instant, it is a factual error to say that there was a loss on the transaction. The learned counsel further contended that undoubtedly, in the year under consideration the lease rent paid is in excess of the lease rent received but there is no law that requires an assessee to enter into a transaction expecting to get profit immediately and instantly. A businessman works in his own prudence. Sometimes the transactions are entered with an eye on a stream of profits and the instant transaction is one of that kind. The observation of the Assessing Officer at para 5.10 that the net present value of the payments would exceed the net present value of the receipts, imports a concept which is alien to Income-tax Act. In the context of deductibility of expenditure it is submitted that NPV has no role to play in the deductibility of expenditure. Wherever, the Income-tax seeks to bring into play the concept of net pre....
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....uestion, (i) was not an allowance of the nature described in any of the clauses (i) to (xiv) of section 10(2), (ii) was not in the nature of the capital expenditure or personal expenses of the assessee, and (iii) had been laid out or expended wholly and exclusively for the purposes of his business, profession or vocation. Even assuming that the motive behind the payment of retrenchment compensation was that the terms of the agreement of the sale of shares should be satisfied, as long as the amount had been laid out or expended wholly and exclusively for the purpose of the business of the assessee, there appears to be no good reason for denying the benefit of section 10(2)(xv) of the Act to the company if there is no other impediment to do so." Applying these principles the Supreme Court concluded at pages 275 and 276 that if the company felt that there was a method which would inure to its benefit, it cannot be said that the payment of compensation was made with an oblique motive and without regard to commercial considerations or expediency. Thus, it was submitted that that it is clear that deductibility of expenditure under section 37(1) must not be examined on the touchstone o....
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....e assessee to choose to pay. In this connection, reliance was placed on the decision of Hon'ble Supreme Court in the case of CIT v. Walchand & Co. (P.) Ltd. [1967] 65 ITR 381. It is further brought to our notice that same observations were reiterated by the Hon'ble Supreme Court in the case of J.K. Woollen Manufacturers v. CIT [1969] 72 ITR 612 . These observations are modified only to the extent that if the payments were made to related parties they must also pass the test of being not greater than the market value for a similar facility or service. It is pointed out that it is no ones case that Tata Finance Ltd., Sundaram Finance Ltd. and IDBI are related parties and therefore, the question of applicability of section 40(A)(2)(b) of the Act does not arise. 9. The learned Departmental Representative basically relied on the opinion given by the Assessing Officer in paragraphs 3.3 to 5.3 of the assessment order and pointed out that the assessee was trying to reduce the tax burden by way of the lease transaction. It is further submitted that the principle of res judicata must apply and as during year there was no surplus between the lease rent received and lease rent paid th....
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....claim inflated expenses with a motive to evade taxes. So far as this ground is concerned, the circumstances in which these transactions were entered into have been enumerated above in the arguments of the learned counsel for the assessee. However, at the cost of repetition we would like to mention here that investments made by the assessee in the subsidiary company were floundering on account of multiple factors including unforeseen competitions, delays, uncertain political situation due to riots in the country after Babri Masjid demolition, foreign exchange crisis etc. There was also increase in the project cost owing to these factors. The assessee had given counter guarantees to financial institutions which were in force in respect of the investments made in the subsidiary company. The Assessing Officer has pointed out that the assessee paid lease rent of Rs. 2,56,47,446 for assessment year 1998-99 and Rs. 2,19,34,664 for assessment year 1999-2000, whereas it received only Rs. 97,00,000 in both the assessment years from its subsidiary company as lease rent without realizing that the transaction entailed a revenue generation for a period of fifteen years and outlay of seven years.....
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....instance in the case of Calcutta Co. Ltd.'s (supra) the Hon'ble Supreme Court had to consider a case where the appellant had bought land and sold them as plots for building purposes alongwith an undertaking to develop them by laying out roads, providing a drainage system, installing lights etc. These undertakings and developments were to be carried out within six months but time was not of essence to the contract. In the relevant accounting year the appellant received in cash only Rs. 29,392 in respect of all the plots of land which were undertaken to be sold at Rs. 43,692. In its return of income the appellant offered to tax the whole price of Rs. 43,692 although it had actually received only Rs. 29,392 and the balance amount of Rs. 14,300 was to be received in the future. Conversely as the assessee has undertaken to develop the plots of land it had provided for expenditure of Rs. 24,809 which again was to be expended in the future. The Assessing Officer disallowed the entire expenditure holding that the expenditure was to be incurred in the future and it had not actually been disbursed. The Supreme Court held that the expenditure was allowable in full and the income was according....
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....rpose of deciding whether a particular amount can be allowed as deductible allowance under section 12(2) of the Act is whether the transaction is properly entered into as a part of the assessee's legitimate commercial undertakings in order indirectly to facilitate the carrying on of its business. If the transaction had been entered into on the ground of commercial expediency in order even indirectly to facilitate the carrying on of the business of the assessee, it would attract the provisions of section 12(2) even though the transaction might have been voluntarily entered into. (3) If the payment was made with an indirect or improper motive for some considerations aliunde the business or out of generosity, then the payment is not liable to be regarded as one covered by the provisions of section 10(2)(xv): that the matter has to be viewed in the light of principles of commercial trading and commercial expediency and what is required is that the expenditure must be germane to the business of the assessee and not something which is de hors the business." Therefore, the concept of net present value cannot be imported in context of the present case. The contention of the Assessing....
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....denying the benefit of section 10(2)(xv) of the Act to the company if there is no other impediment to do so." Applying these principles the Supreme Court thereafter went into the question on facts and concluded as under: "The next contention urged on behalf of the department was that since the Davids and Tatas were indirectly benefited by the retrenchment of the services of the employees of the company and payment of compensation to them and since there was no necessity to retrench the services of all the employees, the expenditure in question could not be treated as an expenditure laid out wholly and exclusively for business purposes of the company. It has to be observed here that expression "wholly and exclusively" used in section 10(2)(xv) of the Act does not mean "necessarily". Ordinarily, it is for the assessee to decide whether any expenditure should be incurred in the course of his or its business. Such expenditure may be incurred voluntarily and without any necessity and if it is incurred for promoting the business and to earn profits, the assessee can claim deduction under section 10(2)(xv) of the Act even though there was no compelling necessity to incur such expend....
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....amount of loan in question. Thus, the crux of the matter was that in Phaltan Sugar Works Ltd.'s case (supra) there was payment of interest but no corresponding interest was received and, therefore, the interest was disallowed. However, in the present case there is payment of lease rent alongwith corresponding receipt of lease rent and the total of the lease rent paid is far lower than the total of the lease rent received over the period of fifteen years. Therefore, the question of applicability of Phaltan Sugar Works Ltd.'s case (supra) to the case of the assessee cannot arise. We find that this decision was referred by Bombay High Court in the case of Rajaram Bandekar (supra) wherein it has been held as under: "The Supreme Court in the case of CIT v. Delhi Safe Deposit Co. Ltd. [1982] 133 ITR 756 has considered when expenditure can be considered as laid out on purely business consideration and wholly for the purpose of assessee's business. The Supreme Court has observed that the true test of an expenditure laid out wholly and exclusively for the purposes of trade or business is that it is incurred by the assessee as incidental to his trade for the purpose of keeping the trade g....
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.... in their view should be paid to an employee of the assessee." Similar observations were reiterated by the Hon'ble Supreme Court in the case of J.K. Woollen Manufacturers (supra). Therefore, the learned counsel rightly contended that the Assessing Officer could not disallow the claim of the assessee on this ground. 15. The learned Departmental Representative raised the issue relating to the principle of res judicata and referred to the decision in the case of M.M. Ipoh (supra) wherein it has been observed as under: "The doctrine of res judicata does not apply so as to make a decision on a question of fact or law in a proceeding for assessment in one year binding in another year. The assessment and the facts found are conclusive only in the year of assessment; the findings on questions of fact may be good and cogent evidence in subsequent years, when the same question falls to be determined in another year, but they are not binding and conclusive." The learned Departmental Representative contended that the principle of res adjudicata has no role to play in the present context, because the question before us is when a businessman enters into a transaction which may give h....
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.... of facts and circumstances, evidence placed on record and the case laws referred to, we are of the opinion that the revenue authorities have wrongly disallowed the claim of the assessee. Thus, ground Nos. 1 and 2 are decided in favour of the assessee for both the years. 17. Ground Nos. 3 and 4 for assessment year 1999-2000 reads as under : "3. On the facts and in the circumstances of the case and in law, the learned Assessing Officer erred in making addition of Rs. 16,07,922 on account of Modvat Credit to the closing stock and the learned CIT(A) erred in confirming the above addition. The appellant prays that the addition of Rs. 16,07,922 may please be deleted." 4. Without prejudice to Ground No. 3 above, alternatively, it is prayed that the Modvat Credit on the beginning of the previous may please be added to the opening stock on the similar basis of adding Modvat Credit to the closing stock. The appellant prays that a suitable direction to add the Modvat Credit to Opening Stock may please be given in case Ground No. 3 is not allowed." The assessee-company has been regularly following the system of valuation of closing stock net of Modvat and the same was accepted by ....
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....sion of section 145A in paragraphs 10, 10.1 and 10.2 of the impugned order. He also referred to the decision of Hon'ble Supreme Court in the cases of CGT v. N.S. Getti Chettiar [1971] 82 ITR 599 ; CED v. Alladi Kuppuswamy [1977] 108 ITR 439; R.C. Mitter & Sons v. CIT [1959] 36 ITR 194; and CIT v. Ajax Products Ltd. [1965] 55 ITR 741 . In view of the above decisions the CIT(A) held as under : "In view of the above cited decisions, it is held that these decisions are applicable to interpret the provisions of section 145A and the words used in this section are very precise and unambiguous as they are to be construed in the setting in which they have been used in this section. The interpretation of the provisions of section 145A clearly shows that opening stock is not to be considered for the purpose of adjustments which are only to be made in purchases and sales of goods and inventory. Hence the Assessing Officer has rightly added the unutilized modvat credit in the closing stock as on 31-3-1999. Hence, the Assessing Officer's action is confirmed and this ground of appeal is rejected." Aggrieved, the assessee has raised the above grounds before the Tribunal. 19. During the co....
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....rm requirement of working capital where no capital assets had been acquired. The Assessing Officer was of the view that the front-end-fees paid to ICICI was not allowable as the loan was obtained from the financial institution for long-term requirements. He relied on the decision of the Authority of Advance Ruling in the case of XYZ/ABC, Equity Fund, In re [2001] 250 ITR 194 , which according to him held that front-end-fees are capital in nature. This addition was confirmed by the CIT(A). The CIT(A) distinguished all the case laws relied on by the assessee mentioned at page 30 of the impugned order, and came to the conclusion that the front-end-fees paid to financial institutions for raising a loan is a capital expenditure. He has also indicated that the assessee in the grounds of appeal admitted that the loan was obtained for the expansion of the existing business. Therefore, the expenditure shall be treated as capital in nature. 22. The learned counsel submitted that the front-end-fee is like a processing charge in respect of grant of loan. In this connection, are our attention was invited to page 140 of the paper-book (Appendix I, Special Terms and Conditions). It is submitte....
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.... decision cited by the learned Departmental Representative although correct in its conclusion, was wrong in its reasoning and it has been expressly disapproved by the Hon'ble Supreme Court in the case of India Cements Ltd. (supra). 24. We have considered the rival submissions and have gone through the material available on record. We would like to mention here that the observation of the learned CIT(A) that the loan was obtained for expansion of the existing business has been admitted by the assessee itself in grounds of appeal is "incorrect". He has taken the opening sentence of para 4 at page 12 of 'The statement of facts' as admission of the assessee, whereas this is an averment by ICICI. In order to determine whether the expenditure in the present case is capital or revenue, we would like to mention here the observation of the Hon'ble Supreme Court in the case of India Cements Ltd. ( supra): "In S.F. Engineer v. Commissioner of Income-tax, the Bombay High Court held that the expenditure incurred for raising loan for the carrying on of a business cannot in all cases be regarded as an expenditure of a capital nature. On the facts of the case, they held that as construction ....
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....stion for consideration in the case is set out in question No. 11 which reads as under: "11. Whether, on the facts and circumstances of the case, "front-end-fees" (hereinafter referred to as "deterrence fees") received on a discretionary basis by the applicant from port folio companies, not being specifically covered by any other article of the Treaty, will fall within the purview of article 22 of the Treaty?" The discussion by the AAR is as under: "In question No. 11, the applicant's case is that deterrence fees are charged to deter portfolio companies from shopping around using the information available to them through the investment adviser. If the basic character of such fees is in the nature of compensation for loss of possible investment, the taxability of such fees will fall within the purview of article 22 of the Treaty. Article-22 Other income-1. Subject to the provisions of paragraph (2) of this article, items of income of a resident of a Contracting State, wherever arising, which are not expressly dealt with in the foregoing articles of this Convention, shall be taxable only in that Contracting State." On perusal of the question No. 11 along with Article 2....
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....cted from the Profit & Loss Account and Balance Sheet of the year under consideration and subsequent years. Substantial amounts were saved after the usage of gas as fuel. In this connection, reliance was placed by the assessee on the decision of Hon'ble Supreme Court in the case of Gotan Lime Syndicate v. CIT [1966] 59 ITR 718 to support his claim that the expenditure incurred was revenue in nature. The Assessing Officer after going through the agreement (paragraph 5.1) came to the conclusion that the expenditure was capital in nature. To support this conclusion the Assessing Officer relied on the decision of CIT v. National Machinery Manufacturers Ltd. [1991] 191 ITR 483 (Bom.) and Jaswant Trading Co. v. CIT [1995] 212 ITR 293 (Raj.). The CIT(A) confirmed the addition made by the Assessing Officer on this issue for the reasons given in his order at paragraphs 18 and 19. He has discussed various case laws relied on by the learned counsel, details of which are given at para 13 of the impugned order. The case of the assessee was that the expenses were claimed as revenue expenditure on the ground that the assessee was compelled to pay the amount of Rs. 26,81,000 for getting gas connec....
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....lines laid down at the cost of the assessee but owned by the Electricity Board was allowable as revenue expenditure. Reliance was also placed on the decision of Hon'ble Bombay High Court in the case of CIT v. Chowgule Chemicals (P.) Ltd. [1995] 216 ITR 234 , CIT v. Excel Industries Ltd. [1980] 122 ITR 995 (Bom.), CIT v. Madras Auto Services (P.) Ltd. [1998] 233 ITR 468 (SC) for the proposition that the said principle was approved by the Hon'ble Supreme Court. Thus, it is submitted that the expenditure incurred by the assessee for laying the pipeline for the supply of natural gas from MGL is revenue in nature. 27. On the other hand, the learned Departmental Representative relied on the orders of the authorities below and further placed reliance on the decision of Hon'ble Bombay High Court in the case of National Machinery Manufacturers Ltd. (supra). 28. We have considered the rival submissions and have gone through the material available on record. In the case of National Machinery Manufacturers Ltd. (supra), the principle laid down by the Hon'ble Bombay High Court in Excel Industries Ltd.'s case (supra) has been reiterated. Question No. 1 in that reference was whether a....
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....s - i.e., softer glass. Though the furnace was scheduled to shut down, it was run while the experiments were conducted. During the period of experiment, the expenses incurred on the existing furnace i.e., electricity, natural gas, salary etc. - i.e., all expenses of revenue nature and have been taken under the Head "Deferred Revenue Expenditure - New Projects 1998-99". There was no need of erecting separate factory or separate plant or separate machinery or recruiting additional manpower. The new items were to be manufactured within the same premises, will the same employees, same machinery and same raw material. Therefore, the expenses incurred were for the existing line of business with different items/shape and no assets have been created. Hence, the experimental expenses incurred for the manufacture of new items are completely allowable for deduction in full in computing the income. However, it is only for the accounting purpose, the different heading was given and the expenses were taken under the head Deferred Revenue Expenses. It is submitted that all the expenses incurred under the above 3 heads have been capitalized for book entry purpose, but the same have been clai....
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....rom Int. Exp A/c. 4035 @ 18.33% p.a. for Feb. & March 99 (59 days) Rs. 11,84,500 38% transfer of New Project 4,50,000 57,31,514" It was submitted before the Assessing Officer that the above expenses were incurred during the continuation of business for new product development. It was further submitted that in the assessee's line of business, it was necessary to find out new varieties, new products and new range of items. However, the Assessing Officer was not satisfied with the submissions of the assessee. He held that had the experiments not been carried out electricity, various fuels, raw material, stores and supplies etc. would not have been consumed. Also the man power utilized would have been used for other gainful purposes. He placed reliance on the decisions in the cases of CIT v. Bazpur Co-operative Sugar Factory Ltd. [1983] 142 ITR 1 (All.); Shree Digvijay Woollen Mills Ltd. v. CIT [1993] 204 ITR 398 (Guj.) and Triveni Engg. Works Ltd. v. CIT [1998] 232 ITR 639 (Delhi). Relying on the abovementioned decisions the Assessing Officer held that the expenditure of Rs. 57,31,514 is a capital expenditure an....
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.... income. In this connection, we would like to mention the observation of Hon'ble Supreme Court in the case of State Bank of India (supra) affirming the decision of Hon'ble Bombay High Court in the case of Mogul Line Ltd. ( supra). "The important question to be considered is the true nature of the transaction and whether in fact it had resulted in profit or loss to the assessee. In that context, it is well-settled that the way in which entries are made by the assessee in its books of account is not determinative of the question whether the assessee has earned any profit or suffered any loss. The assessee might, by making entries which were not in conformity with the proper principles of accountancy, have concealed profit or showed loss and the entries made by him could not, therefore, be regarded as conclusive one way or the other. CIT v. Mogul Line Ltd. [1962] 46 ITR 590 (Bom.) was a case where it was held that if a foreign fund of the assessee was allowed to remain unused where it lay, the mere circumstances that there had been fluctuation in the currency resulting in appreciation of the fund in terms of the coin of another country would not result in profit to the owner of ....
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....rther stated that the employees contribution towards PF, FPF and other welfare funds was an income in the hands of the assessee as per provisions of section 2(24)( x). However, if the contribution is credited to the respective funds on or before due date, the same is allowable as deduction under section 36(1)(va). The contribution has been credited to the respective funds beyond the due date therefore, the amount of Rs. 1,00,859 has to be treated as income in the hands of the assessee under section 2(24)( x) and no deduction is allowable under section 36(1)(va). Similarly, in the case of employer's contribution, towards PF and ESIC is otherwise allowable deduction under section 36(1)(iv). But if the contribution is not credited to the respective funds on or before due dates, the same is liable for disallowance under section 43B read with second provision thereunder. Further the Assessing Officer observed that in the present case the assessee had not credited the employer's contribution on or before the due date and therefore, Rs. 1,16,374 (1,00,859 + 15,515) is not allowable under section 43B. 36. The learned CIT(A) observed as under : "29. I have considered the facts and evi....
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....before which the payments are required to be made. If payments are not made within due dates, then such payments are not allowed as deduction. Therefore, in view of this decision of the Jurisdictional ITAT, the disallowance made by the Assessing Officer is confirmed and the decision of the ITAT, 'C' Bench, Ahmedabad as relied upon by the appellant, is not applicable as because the decision of the Jurisdictional ITAT will prevail upon the decision of other Income-tax Appellate Tribunals and also this issue has been decided by various High Courts as mentioned by the Assessing Officer in the assessment order itself and as mentioned by the Hon. ITAT in its decision as stated hereinabove. Therefore, Assessing Officer's action is justified in making this disallowance. The Assessing Officer has rightly treated the employees contribution as income under the provisions of section 2(24)( x) of the Act in view of the fact that they have not been paid in the Provident Fund account as per the due date prescribed under the provisions of Explanation of section 36(1)(va) of the Act. 31. As regards the payment of Rs. 14,686 disallowed being employer's contribution to ESIC, it is held that act....