TaxTMI 
TaxTMI 
2018 (8) TMI 1128
X X X X Extracts X X X X
X X X X Extracts X X X X
....in India. The appellant filed its return of income for the Assessment Year 2010- 11 on 27.9.2010 declaring total income of Rs. 1, 79, 84, 160/-. The case was selected for scrutiny by issuing notice u/s 143(2) of the Act and the assessment u/s 143(3) of the Act was completed on 26.03.2013 on total income of Rs. 2, 62, 08, 880/- after making various additions totalling Rs. 82, 24, 720/-. 3. Aggrieved with the additions the assessee filed an appeal before the appellate authority and partly succeeded. Now the revenue is in appeal before the Tribunal raising following grounds of appeal. "On the facts and in the circumstances of the case, the Commissioner of Income Tax (Appeal)-I has erred in: 1. Deleting the disallowance of Rs. 35, 477/- made by the u/s 2(24)(x) of the Act on account delayed payment of employee contribution to PF. 2. Deleting the disallowance of Rs. 7, 66, 563/- made by the AO on interest expenses on account of diversion of borrowed funds for non-business consideration. 3. Deleting the disallowance of commission payment to the extent of Rs. 59, 85, 000/- made by the AO out of total claim of Rs. 70, 50, 000/-. Ground No.1 4. G....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... that employees' contribution to PF collected by an employer also comes within the ambit of Section 438 of the Act whereas some of the High Courts have held that employees' contributions, if not paid before the due date as specified in Explanation below section 36(1)(va) of the Act, cannot be allowed as deduction and the same is to be treated as income u/s 2(24 )(x) of the I.T.ACL In the following cases, it has been held that if the employees' contribution to PF is deposited before the due date offiling of return of income u/s 139(1) of the Act. the same would be allowable deduction: - (i) CIT Vs. Nippo Poly Fabric Ltd - 350 ITR 327 (HP) (ii) CIT Vs. Kicha Sugar Co. Ltd - 356 ITR 351 (Uttarkhand) (iii) CIT Vs. Spectrum Consultants' India Pvt Ltd - 266 CTR (Karn) 241 (iv) CIT Vs. Hcmla Embroidery Mills Pvt Ltd - 265 CTR (P &II) 57 (v) CIT Vs. Udaipur DugdhUtpadakSahkariSangh Ltd - 265 CTR (Raj) 59 (vi) CIT Vs. State Bank of Bikaner &Jaipur - 363 ITR 70 (Raj) (vii) EssaeTeraokaPvt Ltd Vs. DCIT - 266 CTR 246 (Kar) (viii) CIT Vs. AIMIL Ltd - 32] IT 508 ((Del) However, in the case of Assam T....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ch no interest has been charged. The Assessee has explained that the amount under consideration was advance for business purpose only but his explanation did not find favor from the Ld. Assessing Officer. In the first appeal the Ld. Commissioner of Income Tax Appeals has given elaborate findings on the subject running from Page number 7-13 of this order. It is reiterated that the funds were advanced for business purpose only. Therefore, Hon'ble' Supreme Court decision on S.A. Builders (288 ITR 1 Supreme Court) squarely applies in the instant case as the advances are for business exigency. Even otherwise also, the Balance Sheet of the Assessee may kindly be persued. It clearly reveals that the Assessee has sufficient interest free funds in the form of capital reserve. Therefore, unless direct nexus between interest bearing loans being given interest free; there is no scope of any disallowance. Reference is further invited to Hon'ble Supreme Court decision in case of Munjal Singh Corporation reported in 298 ITR 298 in which Hon'ble Apex Court has held that in view of sufficient interest free funds no disallowance could be made for advances given to sister concerns. ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ant, it is noticed that UBI Term Loan was an old account and the said term loan was obtained for the purchase of airport handling equipment's in earlier years. Therefore, there was no diversion of those fund, during the year under consideration. Similarly, in the case of loan from Chola Mandalam DBF Finance, it is noticed that it was taken in earlier years for the purchase of Tata 207 vehicle, which was used for transportation of aviation fuel. Hence, there was no question of diversion of this loan also. The third bank loan is a cash credit account, which was a working capital loan amounting to Rs. 23, 96, 4 27 I-as on 3 1.03.20 I O. Therefore. the interest paid on UBI Term Loan and on the loan taken from Chola Mandalam DBI' Finance cannot be disallowed on the ground that the interest bearing funds were diverted [or nonbusiness purposes because the appellant had actually used these funds in earlier years for the purchase of airport handling equipments and purchase of Tata 207 vehicle for the purpose of business. Now, the only issue remaining is regarding interest of Rs. 2, 99, 590/- paid on Cash Credit Account, which was a working capital loan. All the business receipts of the ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....und No.2. Ground No.3 21. Ground No.3 relating to disallowance of commission payment to the extent of Rs. 59, 85, 000/- made by the Ld.A.O out of total claim of Rs. 70, 50, 000/- deleted by CIT(A). 22. The Ld. Departmental Representative supported the orders of Ld. Assessing Officer. 23. Per contra The Ld.Counsel for the assessee submitted that Learned Assessing Officer has disallowed as Rs. 59, 85, 000/-- this much from Rs. 70, 50, 000/- this much changed as the sole ground for this disallowance that Assessing Officer's opinion the expenditure was not reasonable. Obviously the action of the Learned Assessing Officer is based on misconstrued operation of statue. The phraseology of section 37 provides for allowability of an expenditure on the condition i) The expenditure should not be in the nature described in section 30-36. ii) It should not be in the nature of capital expenditure. iii) It should not be personal expense of assessee. iv) It should laid out or expended. v) It should be wholly and exclusively for the purpose of business. 24. From the above description it may kindly be appreciated that all the above condi....
X X X X Extracts X X X X
X X X X Extracts X X X X
...., the total income was shown at Rs. 78, 15, 000/-.Hence Captain Hanif had paid lax on the commission income of Rs. 70, 00, 000/- received by him. It may also be pertinent to note that rate of tax paid by Captain Hanif was also almost same to tax rate payable by the appellant company. Further, the fact that the appellant had paid commission of Rs. 70, 00, 000/- for the purpose of his business was not in dispute. The genuineness of the expenditure was proved by the appellant. The ld. A.O. had also not disputed the allowability of expenditure u/s 37(1) of the Act, as he had himself allowed the commission to the extent of Rs. 10, 60, 000/- treating the same as reasonable for the services rendered by Captain Hanif It may not be out of place to mention here that the appellant had furnished working of commission, which was arrived at as per the agreement entered with Captain Hanif The relevant portion of the said agreement regarding payment of commission are as under:- i. Commission Rs. 15, 000/- per hour will only be paid for those Helicopter Aircraft that are booked through Capt. A.N. Hanif sources and will be based on per hour basis against total minimum guaranteed flying hour....
X X X X Extracts X X X X
X X X X Extracts X X X X
....tifiable claim to put itself in the armchair of the businessman or in the position of the board of directors and assume the role to decide how much is reasonable expenditure having regard to the circumstances of the case. No businessman can be compelled to maximize its profit. Therefore, the A.O. was not justified in disallowing the part of commission paid to Captain Hanif on the ground that the commission paid was excessive and unreasonable. Similarly, in regard to the commission paid of Rs. 50, 000/- to M/s Travel India Tourism Pvt. Ltd., Bhopal, the A.O. had restricted the allowance of commission to Rs. 5, 000/- as against the payment of Rs. 50, 000I- made by the appellant treating the same as unreasonable and excessive. Once there is no dispute regarding the allowability of expenditure u/s 37(1) of the Act, the A.O. cannot disallow a portion of the expenditure treating the same as excessive and unreasonable putting himself in the position of the businessman or the board of directors. Thus, the disallowance to the extent of Rs. 45, 000/- also cannot be sustained. Therefore, considering the facts and circumstances of the case and legal position on the issue as well as judicial de....