TaxTMI 
TaxTMI 
2010 (1) TMI 913
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.... appellate authority granted relief to the assessee, the Revenue is in appeal. 4. We first take up the assessee's appeal. The first ground relates to disallowance of employees and employer ESI and contribution to provident fund beyond the grace period allowed under the respective statute. The assessee's case is that the second proviso to section 43B is omitted by the Finance Act, 2003 and that it is retrospective in nature. 4.1 After hearing the rival contentions, we find that the Hon'ble Supreme Court in the case of CIT vs. Alom Extrusions Ltd. 319 ITR 306 held that the amendment to proviso to section 43B as per Finance Act, 2003 is retrospective in nature. But in this case the disallowance has been made in respect of employees contribution also. The employees contribution towards P.F. and ESIC are treated as income u/s 2(24) of the Act and thereafter are allowable as a deduction u/s 36(1)(va) of the Act. There is no amendment in section 36(1)(va). As this expenditure is specifically governed by section 36(1)(va), the claim cannot be allowed u/s 37. Section 43B comes into play, if the expense is otherwise allowable under the Act. As the employees contribution i....
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....iss this ground as not pressed. 5.6 Similarly, we dismiss the ground against the disallowance of Rs.1,76,995/- out of labour welfare expenses as not pressed in view of the smallness of the amount. 5.7 Similarly, disallowances on travelling expenses and tiffin allowances are also dismissed. 5.8 In the result, ground No.2 of the assessee's appeal is allowed in part. 6. Ground No.3 is against the disallowance of Rs.2,45,682/- being payment of PF and ESIC, which was disallowed in the previous year by invoking section 43B and which have been paid during the current year. 6.1 After considering the facts, the payment of provident fund during the year, which was disallowed u/s 43B in the earlier year, would entitle the assessee for a deduction. As only employer's contribution is disallowed by applying section 43B, the same should be allowed on payment basis. 6.2 In the result, ground No.3 of the assessee is allowed in part. 7. Ground No.4 is regarding addition on account of undisclosed income of Rs.5,71,953/-. The AO added this amount as undisclosed income on the ground that the assessee had not correlated certain expenditure with....
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....on of Hon'ble Madras High Court in the case of Salem Cooperative Spinning Mill Mill Ltd. 284 ITR 621 (Mad.) which has been followed by the jurisdictional High court in Income Tax Appeal No.1155 of 2007 order dated 9-10-2007. Respectfully following the same, this ground of the Revenue is dismissed. 11. Ground No.2 is against the deletion of disallowance Rs.50 lakhs made by the AO out of Car and Jeep hire charges. The AO made the disallowance on the ground that there is substantial increase in the expenditure claimed from Rs.28 lakhs to Rs.90 lakhs and the assessee is also not in a position to substantiate as to how many vehicles were used by it and for which branch and as to why there is a steep increase in expenditure. The first appellate authority allowed the claim of the assessee by observing that the assessee had furnished all the evidences and details before the AO and no defects have been found. The first appellate authority further observed that though no log book was maintained, vehicles are required for business. He also observed that the AO has not brought on record evidence to show that the expenses are bogus and are not actually incurred. On the comments of the....
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....d cheques, the amounts were paid to the guards in cash. The AO held that the assessee was not able to furnish documentary evidence for increase in salary and wages in the form of PF and ESIC records of new recruits and reconciliation of the same. The first appellate authority observed that the AO verified the Mumbai offices, ratio of expenses in remand proceedings and this had shown no discrepancy. He further observed that the AO considered absolute increase and not percentage increase in expenditure. He observed that the ratio of salaries and wages to turnover over a period of three years is consistent and the comparison of wages by bifurcation as done by the AO is totally wrong. The CIT(Appeals) called for the remand report and the AO submitted two separate reports one dated 4-2-2005 and the other dated 25-9-2005. 14. On hearing both the parties, we find that the CIT(Appeals) at pages 19, 20 and 21 last para, held as follows: "I have considered the facts of the case, report of AO and submissions made by AR/appellant. Before coming to the merit of the issue, it has to be pointed out that there has been some mistake in assessment order regarding the quantificati....
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....th all the evidences available. In the remand report, AO has stated that there is increase of approximately 50% under this head from last year. The AO further pointed out that wages of the personnel employed by the appellant could be divided into two categories,. One category was wages controlled by the Labour Board and other was wages not controlled by the Labour Board He further noted that wages - income ratio in respect of wages controlled by the Labour Board is approximately 70% whereas for those not controlled by the Labour Board it is 81%. AO also referred to the case of M/s Dynamic Security and Detectives Agencies Pvt. Ltd. where disallowance of 10% under this head has been upheld by learned CIT(A)-VIII, Mumbai. AO, in his remand report dated 25.09.2006, has fairly admitted that verification of this expenditure on test check basis in respect of Mumbai Branch II showed no discrepancy. Mumbai-II is the second largest branch of the appellant. He has also stated that expenses claimed by appellant on account of salary and wages for the Mumbai Branch II were found to be correct. In its rejoinder, appellant has stated that actual increase under this head for last year is less than ....
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....case, the expenditure has been incurred through bank accounts and no discrepancy has been noticed after detailed examination. Appellant has also relied upon the past history of the case as also the subsequent acceptance by the department that expenditure to that extent, it is claimed under this head have been found proper by the department. Regarding AO's observation that percentage of wage-income ratio for those controlled by Labour Board is 70% and those not controlled by Labour Board is 81%. Appellant has disputed this fact also and has furnished a chart. It has been stated that this chart was furnished to AO also. According to appellant, AO has bifurcated the reasons in Mumbai and others. This is incorrect because Maharashtra Security Guard Board Act is applicable to whole of Maharashtra while rest of the country is covered by Minimum Wages Act by law which varies from state to state. Therefore, clubbing of other regions of Maharashtra with rest of the country is not correct. According to appellant, the regions controlled by Labour Board i.e. the whole of Maharashtra, the wages-income ratio is 75.24% while in respect of other than Maharashtra, it is 79.31%. The difference betwe....