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2013 (11) TMI 359
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....alties levied to the assessee were by National Stock Exchange (NSE) for various procedural defaults, viz., trading beyond exposure limit, late submission of margin certificates, delay in making delivery of shares, etc. There was as such no infraction of law, as to attract the Explanation to section 37, but only of the procedural guidelines and regulations by NSE, which cannot be equated with statutory rules or law. NSE is not a statutory body as SEBI. Rather, even in the context of the penalties levied in relation to SEBI regulations, the same cannot be treated as penalty so as to suffer disallowance u/s.37. 3. We have heard the parties, and perused the material on record. Any infraction of law cannot be considered as an incident of business and, accordingly, even apart from Explanation to section 37(1), would not merit allowance there-under. This is trite law, as clarified by the apex court as far back as in the case of Haji Aziz and Abdul Shakoor Bros. vs. CIT [1961] 41 ITR 350 (SC), and which law has been reiterated by it time and again, again, even prior to the insertion of Explanation to section 37(1) by Finance (No.2) Act, 1998 w.r.e.f. 01.04.1962. So, however, in the inst....
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....uch, the amendments to the said section would have no bearing on the deductibility of the sums covered by section 36(1)(va) of the Act. To the same effect, in fact, is the decision by the Hon'ble Jurisdictional High Court in the case of CIT vs. Pamwi Tissues Ltd. [2008] 215 CTR 150 (Bom.), with the hon'ble court clarifying that the dismissal of the Special Leave Petition (SPL) in the case of CIT v. Vinay Cement Ltd. [2007] 213 CTR (SC) 268 (SC) cannot be said to be a law decided, so that the same would not have any bearing on its said decision. As such, accordingly, the employee's contribution to EPF/ESIC, if not paid by the due date, was not allowable. 5.2 The ld. AR, on the other hand, would place reliance on the decision in the case of AIMIL Ltd.(supra), stating that the hon'ble court, after considering the decisions by the apex court in the case of Vinay Cement Ltd. (supra), has clarified that the amendment to section 43B by Finance Act, 2003 (w.e.f. 01.04.2004) would apply to the employer's as well as the employee's contribution to the various welfare funds. It has been clearly held that the decision by the hon'ble jurisdictional High Court in the case of Pamwi Tissues Ltd.....
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....um payable by the assessee by way of tax, duty, cess or fee, by whatever name called, under any law for the time being in force, or] (b) any sum payable by the assessee as an employer by way of contribution to any provident fund or superannuation fund or gratuity fund or any other fund for the welfare of employees, or (c) ............................... (d) ............................... (e) ............................... (f) ............................... shall be allowed (irrespective of the previous year in which the liability to pay such sum was incurred by the assessee according to the method of accounting regularly employed by him) only in computing the income referred to in section 28 of that previous year in which such sum is actually paid by him : Provided that nothing contained in this section shall apply in relation to any sum referred to in clause (a) or clause (c) or clause (d) or clause (e) or clause (f) which is actually paid by the assessee on or before the due date applicable in his case for furnishing the return of income under sub-section (1) of sect....
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.... employee's remuneration, as the employee's contribution to the said fund/s. He is further obliged to make a matching contribution, and pay the entire sum to the credit of the employee's account with the relevant fund by the due date under the relevant Act. Both the contributions are to be paid simultaneously, vide separate challans though, the due date for which is the same. The employer's contribution is deductible u/s. 37(1) of the Act, being only a part of the employee cost or of his employment. The employee's contribution, on the other hand, is to be deducted from the salary/wages due to the employee, i.e., for which the assessee is contractually obliged as an employer, so that no separate expenditure stands incurred in its respect and, consequently, there is no question of the same being claimed or allowed as an expense. So however, section 2(24) of the Act, the provision which defines 'income' under the Act, i.e., inclusively, vide sub-clause (x) thereof, deems the sum so retained by the employer toward the employee's contribution (for onward payment) as the employer's income; the said section reading as under: "Definitions. 2. In this Act, un....
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.... credit in its respect thereof to the employee's account, is the same, section 43B(b), in deviation of the norm of the actual payment during the relevant year, or modified/amended norm of payment by the due date of filing of the return of income for the relevant year, provides for the same basis for deduction thereof under the Act., i.e., the payment by the due date. This, thus, also explains the rationale in providing for a separate payment prescription for sums specified u/s. 43B(b), i.e., as against the uniform prescription for those falling under the other clauses of section 43B. Continuing further, as afore-noted, section 43B provides for an additional qualification of payment (by the date specified there-under), failing which the deduction would stand to be allowed only in the year of actual payment. That is, it subjects the deduction to the additional condition of payment. The sum under reference, however, must be otherwise allowable, i.e., under a particular provision, i.e., but for the factum of payment, the additional condition provided by the section. Now when section 36(1)(va) itself provides for the condition of actual payment, section 43B would even otherwise be re....
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....bt not governed by section 43B. 6.4 The decisions by the apex court in the case of Vinay Cement Ltd. (supra) and Alom Extrusions Ltd. (supra) are admittedly with reference to section 43B and, further, qua the scope of the amendments thereto. The deductibility of the employee's contribution is not regulated by section 43B. Further, even if so considered, the said section would not come into play as the sum under reference has first to be 'otherwise allowable', satisfying the test of the relevant provision under which it is deductible, before the deduction could be subject to the additional rigor of section 43B. It is, therefore, difficult to see as to how these decisions would have any bearing on the issue of the deductibility of the employee's contribution to the employee welfare funds, which is governed solely by section 2(24)(x) r.w.s. 36(1)(va) and, as such, independent of and de hors section 43B of the Act. Consequently, the amendment/s to this section would be of no consequence. This aspect stands also explained by the jurisdictional high court in the case of Pamwi Tissues Ltd. (supra) as well. The same, we are conscious, stands reversed by the apex court vide its decision ....
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....t to be applied to the sums covered u/s. 36(1)(va). The tribunal in the case of Bengal Chemicals & Pharmaceuticals Ltd. (supra), as well as per its earlier decision in ITA No. 1255/Kol./2010, has also considered the decision by the apex court in the case of Alom Extrusions Ltd. (supra), finding it as not germane to the specific issue under reference, i.e., the deductibility of the employee's contribution, being not covered by sec. 43B(b) of the Act. Coming, next, to the decision in the case of CIT v. AIMIL Ltd. (supra). We have gone through the said decision, which stands again considered by the tribunal in the case of Bengal Chemicals & Pharmaceuticals Ltd. (supra). No doubt, the said decision covers payment of employee's contribution to EPF and ESI funds. However, as a perusal of the decision would show, the entire deliberation therein, as well as the subject matter of the decision, is qua s. 43B, including the amendments thereto. In fact, the hon'ble court moved on the premise that the employee's contribution is subject to clause (b) of s. 43B and, accordingly, the interpretation of the section, as well as the nature of the amendments thereto, engaged its mind. Specific refer....
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....edefine or extend the due date, which stands clearly defined, and is constant/fixed. We have given our careful consideration to the matter. In our view, the payment/s made within the grace period as allowed by virtue of any circular, order, etc. would be eligible for deduction u/s. 36(1)(va). The language of the provision accords primacy to not only the relevant Act, but also to any circular, order, notification, etc. issued thereunder. Two, a 'due date', for all practical purposes, as also by definition, is the date by which the relevant action (payment in the instant case) could be performed so as to be considered as eligible, and without inviting any penal consequences. As such, the benefit of the 'grace period' could not be disallowed, and which would rather bring the two enactments in harmony. In so deciding, we also derive support from the decision by the hon'ble jurisdictional high court in the case of Godaveri (Mannar) Sahakari Sakhar Kharkhana Ltd. (supra) inasmuch as the hon'ble court has clearly held in favor of allowing the benefit of the grace period afore-said. The AO is accordingly directed to allow deduction u/s. 36(1)(va) where any payment is made within the grace ....
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....rvices liable for tax deduction at source u/s.194J and, consequently, in case of nondeduction, qualify for disallowance u/s.40(a)(ia) of the Act. The allowance in its respect would fall due on the payment of the tax deductible. Aggrieved, the assessee is in appeal. 10. The ld. AR during hearing placed on record copy of the decision by the hon'ble jurisdictional high court in the case of ITO vs. Angel Capital & Debit Market Ltd. (in ITA No.475 of 2011 dated 28.07.2011). The hon'ble court has clarified that the said charges being paid by the assessee-brokers to the stock exchange were merely reimbursement of charges paid/payable by the Stock Exchange to the Department of Telecommunication (DOT). The same had no element of income and, consequently, the question of deduction of tax on such payment did not arise. The ld. DR could not rebut these averments by the ld. AR. 11. We have heard the parties, and perused the material on record. The decision by the hon'ble high court is squarely on the point. The hon'ble high court observes that the tribunal returning a finding as to the relevant charges being only a reimbursement of the relevant expenses, there is no case for deduction of ....
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....s, which underlies the rule of appropriation of expenditure on the basis of the proportionate financing of all assets, which defines the rationale of rule 8D, would prevail. The Revenue has relied in substantiating its case on the decisions in the case of Dhapa & Sons vs. CIT [2011] 54 DTR 345 (Cal.) and CIT vs. Smt. Leena Ramachandran [2010] 45 DTR 372 (Ker.), besides by the Special Bench of the tribunal in the case of Daga Capital Management [2008] 26 SOT 603 (Mum), since upheld by the Hon'ble Jurisdictional High Court in the case of Godrej & Boyce Mfg. Co. Ltd. v. Dy. CIT [2010] 328 ITR 81 (Bom.). We, therefore, find no infirmity in the impugned orders and, accordingly, confirm the impugned disallowance. 13. The fourth and the fifth grounds of the assessee's appeal are in respect of non allowance of the set off in respect of: a) brought forward long term capital loss (from A.Y. 2003-04) on sale of quoted equity shares (non STT) at Rs.41,36,974/- (Gr. 4) and; b) long term capital loss on sale of quoted equity shares (STT) for the current year at Rs.36,69,436/- (Gr. 5); against long term capital gain on sale of unquoted equity shares (non STT)....