TaxTMI 
TaxTMI 
2018 (4) TMI 1918
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....#39;Act') on the following grounds: Ground No 1 - Disallowance of ESIC of Rs. 1,48,520/- under section 36(1)(va) r.w.s. 2(24)(x) of the Act 1. On the facts and in the circumstances of the case and in law, the learned CIT(A) has erred in confirming the action of the learned AO of disallowing ESIC by invoking the provision of section 36(1)(va) r.w.s. 2(24)(x) without considering the facts such ESIC does not represent employee's contribution to such fund. 2. On the facts and in the circumstances of the case and in law, the learned CIT(A) has erred in rejecting the contention of the Appellate that such ESIC contribution is the labour expenses for the company since it is contributed by the Appellate without any recovery from labourers and therefore the same is not covered under section 36(1)(va) of the Act. Ground No 2 -Disallowance of Rs. 10,75,906/- Under section 36(1)(iii) towards Capital Work in Progress ("CWIP") 3. Based on the facts and circumstances of the case and in law, the learned CIT(A) has erred in making disallowance of interest of Rs. 10,75,906/- under section 36(1)(iii) of the Act on account of expenditure incurred by the Appellate on CWIP. 4. On the fa....
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....e made by the assessing officer by observing as under:- "3.3. Decision: I have carefully considered the facts of the case, the assessment order and the written submission of the appellant. The AO has made the disallowance on account of late payment of employees contribution to ESI totalling to Rs. 1,48,520/-. The Assessing Officer in the order has mentioned that as per the provisions of clause (va) of sub section (1) of 36 of the Act, the assessee is entitled to deduction in respect of the sum referred to in sub clause (x) of clause (24) of section 2 of the Act if such sum is credited by the assessee to the employees account in the relevant fund on or before the due date of respective Acts. The AO has further relied on the recent judgment of Hon'ble High Court of Gujarat in the case of Gujarat State Road Transport Corporation [2014] 41 Taxmann.com 100 (Gujarat). 3.4. The appellant on the other hand has stated during the course of assessment proceedings as well as at the appellate stage that the contribution related to employees towards employee's contribution to ESIC was deposited in the fund after the due date mentioned in the respective Act. However, the appellant has ....
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....r expenses which were payable to the employees. Therefore it is established from these facts that labour expenses which were to be paid to the labours have been deposited as contribution on the behalf of labours in the ESI. In view of the above facts and the detailed findings of the Ld.CIT(A) it is clear that the provisions of section 2(24) (x) r.w.s. 36(1)(va) are attracted to the case of the assessee. After considering above and the judgment of Hon'ble Gujarat High Court in the case of CIT Vs. GSRTC in Tax Appeal No. 637 of 2013 we are inclined with the decision of Ld.CIT(A). Therefore, grounds of appeal no.1 to 2 of the assessee are dismissed. Disallowance of Rs. 10,75,906/- u/s. 36(1)(iii) 6. During the course of assessment proceedings, the assessing officer has asked the assessee to explain whether any interest was capitalized towards the capital assets acquired out of the borrowed funds during the year up to date of put to use of asset in the business. On scrutiny of the details filed by the assessee, the assessing officer has noticed that during the year under consideration the closing capital work in progress was reported at Rs. 1,79,31,767/- and the assessee has not....
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....such overdraft balance on the immediate date of the payment towards CWIP depicted as under:- Date of CWIP payment Amount paid towards CWIP (Rs.) Overdraft balance in bank account immediately prior to the CWIP payment (Rs.) 26/10/2011 5,91,992/- 1 ,32,23,054/- 22/12/2011 4,50,000/- 30,28,460/- 23/12/2011 27,000/- 1,79,13,226/- 27/12/2011 10,715/- 7,67,680/- 31/12/2011 8,542/- 1,49,60,391/- 02/01/2012 58,736/- 5,62,16,162/- 06/01/2012 27,000/- 2,52,22,648/- 20/01/2012 2,035/- 6,01,46,517/- 03/02/2012 1 ,83,784/- 8,73,74,902/- 04/02/2012 9,317/- 9,13,07,846/- 06/02/2012 2,33,396/- 9,08,84,082/- 10/02/2012 83,651/- 12,60,98,639/- 17/02/2012 1,60,792/- 13,63,32,590/- 18/02/2012 17,301/- 13,34,55,335/- 23/02/2012 1,55,850/- 1 2,58,1 0,950/- 29/02/2012 37,49,723/- 11,25,28,157/- 02/03/2012 20,81, 781/- 11,72,99,713/- 08/03/2012 4,51,398/- 11.24,97,677/- 09/03/2012 1,83,077/- 11,27,04,361/- 13/03/2012 6,07,304/- 9,84,26,960/- 16/03/2012 83,810/- 10,84,36,838/- 23/03/2012 62,062/- 10,55,32,056/- 24/03/2012 94,690/- 9,80,96,908/- 30/03/2012 2,32,147/- 4,09,50,312/- 31/03/2012 3,42,014/- 4,00,82,083/- Total....
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....ring the year under consideration various machines were under installation by the appellant. Out of the aforesaid total cost of Rs. 1,79,31,767/-, the assesee has made the payment of Rs. 99,08,118/-with the balance unpaid at Rs. 80,23,649/-. It has been established from the findings of the Ld. CIT(A) that most of the payment towards CWIP has been made out of the overdraft balance in its cash credit account in Corporation Bank. The assessee has failed to demonstrate that how the payments have been made out of its own funds. The Ld Counsel has furnished a paper book containing the following judicial pronouncements:- 1. Deputy Commissioner of Income Tax Vs Core Health Care Limited (298 ITR 194) (SC) 2. Vardhman Poiytex Limited Vs Commissioner of Income Tax (254CTR102)(SC) 3. Joint Commissioner of Income Tax Vs United Phosphorous Limited (299 ITR 9)(SC) 4. Commissioner of Income Tax Vs Nirma Limited (367 ITR 12)(Gujarat HC) 5. Deputy Commissioner of Income Tax Vs Gujarat Narmada Valley Fertilizers Co. Ltd. (215 taxman 616) 6. Deputy Commissioner of Income Tax Vs Vodafone West Limited (ITA No. 909/Ahd/2014 & 944/Ahd/2014) (Ahmedabad ITAT) 7. Assistant Commissioner of Income Tax V....