2025 (5) TMI 824

X X   X X   Extracts   X X   X X

Full Text of the Document

X X   X X   Extracts   X X   X X

....ployees' contribution in EPF and ECGI under section 36(1)(va) r.w.s.2(24)(x) and 43B of the Act. (iii) Disallowance of interest of Rs. 50,50,442/- on Government loans/ advances (iv) Disallowance of shortage/shrinkage of stock of petroleum products sold from petrol pumps run by the assessee across Kumaon region of Uttarakhand (v) Unutilized fund of Rs. 82,40,612/- received from the Government since 2006 (vi) Disallowance of interest Rs. 65,56,936/- on earmarked fund (vii) Taxability of contract receipt of Rs. 1,38,08,610 /- on accrual basis (viii) Disallowance of interest under section 14A. ITA No. 1200/Del/2018 3.1 Vide 5 grounds; the Revenue has raised following issues (i) Disallowance of employees' contribution in ECGI under section 36(1)(va) r.w.s.2(24)(x) of the Act. (ii) Disallowance of interest of Rs. 50,50,442/- on Government loans/ advances (iii) Disallowance of interest of Rs. 65,56,936/- on earmarke d fund (iv) Disallowance of interest under section 14A. (v) Taxability of contract receipt of Rs. 8,19,2 65/- on accrual basis 4. The facts of the case giving rise to th....

X X   X X   Extracts   X X   X X

Full Text of the Document

X X   X X   Extracts   X X   X X

....e to Revenue by the AO was strongly objected to. In case, the loss had to be assessed as per the ITR then the additions/disallowance were required to be made based on the tentative Profit & Loss accounts annexed with ITRs. Otherwise, the auditor report should be taken as a whole for computing income. Pick and choose should not be done. The Ld. Sr. DR did not able to answer the query raised by the Ld. Counsel. The reliance placed by the Ld. Sr. DR on the decision of the Hon'ble Supreme Court in the case of Goetz India Ltd. is of no help as the same is held distinguishable on the facts. We find merit in the argument of the Ld. Counsel on the simple reasoning that the Revenue has to believe the audit report in toto or not as the pick and choose cannot go together. We do not find any infirmity in the finding of the Ld. CIT(A). We therefore, decline to interfere with the finding of the Ld. CIT(A). Thus, the ground raised by the Revenue fails. 7. The second issue is in respect of the disallowance made on account of delay in payments of Employee Contributions to PF and ECGI. There is delay in payment of Employees' Contributions to provident fund trust and group insurance aggregating to....

X X   X X   Extracts   X X   X X

Full Text of the Document

X X   X X   Extracts   X X   X X

....n the record to demonstrate that either the nature of the said interest-bearing loan has been changed by the lender; UP Government or the appellant assessee is not required to pay any interest on the said loan. It was not brought on the record by the Revenue (AO/CIT(A)/Sr. DR) that either the UP Government has waived the interest on the said loan or the UP Government has converted the said loan into non-interest-bearing loan/grant-in-aid, etc. Here, we not find any material on the record which supports the AO's stand on the disallowance of interest of Rs. 1,12,80,692/- in both years particularly when the AO, without questioning the accounting method of the appellant assessee followed over the years, has acted against the principle of consistency. 8. In view of the above, we are of the considered view that the Ld. CIT(A) is not justified in sustaining the disallowance of Rs. 1,12,80,692/- in both years. We therefore, set aside the impugned order and delete the disallowance of interest of Rs. 1,12,80,692/- made in both years. 8.1 We are of the considered view that this issue is squarely covered by our decision in the assessee's own case in the ITA No. 61 & 57/DDN/2023. We....

X X   X X   Extracts   X X   X X

Full Text of the Document

X X   X X   Extracts   X X   X X

....venue fails accordingly. 11. The next issue is in respect of accrued interest of Rs. 65,56,936/-. The assessee has received certain specific fund/advances from the Government. Since such fund/advances, if not spent for the specified purpose, is kept, in the form of the FDRs, under the head "Earmarked Fund" in the books of accounts of the assessee. The assessee has accounted for the accrued interest of Rs. 65,56,936/- in its books of accounts, but the same has not been Offred as income in the Profit & Loss accounts. In response the show-cause notice of the AO, the assessee has submitted that the accrued interest of Rs. 65,56,936/- is credited in the "Earmarked Fund" and has been shown as liability on the advice of the C & AG. Further, it has been contended that the assessee has not any authority to use the accrued interest of Rs. 65,56,936/-; hence, the same has been shown as liability by increasing the corresponding sum in the "Earmarked Fund". The Ld. Sr. DR, placing emphasis on the comments of the auditor, vehemently argued the case supporting the AO. We find the merit in the arguments of the Ld. Sr. DR. The C & AG noting will not affect the taxability of any income under the ....

X X   X X   Extracts   X X   X X

Full Text of the Document

X X   X X   Extracts   X X   X X

....ng of the Ld. CIT(A). Thus, this ground raised by the Revenue fails accordingly. 14. In nutshell, the appeal of the Revenue is partly allowed as above. ITA No. 1200/Del/2018, A.Y. 2013-14 15. The first issue is in respect of the disallowance of Rs. 9,77,145/- (employee's contribution to Group Insurance). The AO had taxed the disallowance made on account of delay in payments of Employee Contributions to PF and ECGI. The CIT(A) deleted both disallowances. But the Revenue has not challenged both disallowances. It has challenged the disallowance of Rs. 9,77,145/- (employee's contribution to Group Insurance), which has been taxed in accordance with the provisions of Section 2(24)(x) r.w.s. 36(1)(va) and 43B of the Act. This issue has been decided above in para 7 of this order in the favour of Revenue. Following the same reasoning as above in para 7 of this order, we direct the AO to verify the disallowance of Rs. 9,77,145/- again in view of the finding of the Hon'ble Supreme Court in the case of Checkmate Services P. Ltd. (supra) and make the disallowance accordingly. The Revenue succeeds as above in this ground. 16. The next issue is in respect of the disallowance of intere....