TMI Blog2010 (1) TMI 913X X X X Extracts X X X X X X X X Extracts X X X X ..... 073 - SUPREME COURT), as the dates of payment are not on record, and allow payments made before the due date of filing of the return. - ITA No. 3864/Mum/2007, ITA No. 4529/Mum/2007 - - - Dated:- 27-1-2010 - J. Sudhakar Reddy, V.D. Rao, JJ. Chetan Karia for the Appellant N.K. Balodia for the Respondent ORDER J. Sudhakar Reddy: These are cross appeals and are directed against the order of the CIT(Appeals) dated 30-03-2007 for the assessment year 2001-02. 2. Facts in brief: The assessee is in the business of security services and it filed its return of income on 31-10-2001 declaring a total income of Rs.2,75,85,408/-. The AO completed the assessment u/s 143(3) on 19-03-2004, inter alia, making disallowances under various heads including delayed payment of P.F., event expenses and salary and wages etc. He assessed the income at Rs.12,84,42,505/-. Aggrieved, the assessee carried the matter in appeal. The first appellate authority granted part relief. 3. On the issues where the first appellate authority held against the assessee, the assessee filed the appeal and on the issues where the first appellate authority granted relief to the assessee, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iture has been disallowed by the AO. The CIT(Appeals) obtained the remand report and sustained the disallowance of residential telephone expenses. The assessee's case is that residential telephones are also partly used for business, as the Director are full time involved in the business of the assessee. We agree with this statement and restrict the disallowance of residential telephone expenses to 50% of Rs.1,82,054. Thus the assessee gets a part relief. 5.4 The next issue is disallowance of conveyance expenses on the ground that proper vouchers were not produced. The AO as in the case of general expenses, disallowed 50% and the CIT(Appeals) restricted the disallowance to 10%. The learned counsel for the assessee submitted before us that in view of the smallness of this amount, he is not pressing this ground. Hence this ground is dismissed as not pressed. 5.5 Similarly, the learned counsel has not pressed the disallowance on account of staff welfare expenses which is restricted to Rs.1 lakh by the CIT(Appeals) in view of the smallness of the amount. Hence we dismiss this ground as not pressed. 5.6 Similarly, we dismiss the ground against the disallowance of Rs.1,76,995/ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urther submitted that the expenditure in question were incurred in the earlier years also and during this year for the purpose of clarity, sub division of expenditure has been made in different heads. This is a plausible explanation and the amount in question is a small as compared to the total turnover of the assessee. Thus, in view of above discussion, we are of the considered opinion that the addition in question is not warranted. Thus we delete the addition of Rs.5,71953/- as undisclosed income. 7.2 Thus, ground No.4 of the assessee is allowed. 8. In the result, the appeal of the assessee is allowed in part. 9. This brings us to the Revenue's appeal in ITA No.4529/Mum/2007. 10. Ground No.1 is on the issue whether the CIT(Appeals) was right in allowing the employer's and employee's contribution towards PF and ESIC made after the due dates, but within the grace period allowable under the respective Acts. This issue is covered in favour of the assessee and against the Revenue by the decision 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rom TFMS and the amount received by TFMS has been offered to tax in its hands. It was pointed out that only expenses claimed by TFMS from out of this payment of Rs.58,60,000/- was interest and finance charges, insurance charges, registration charges and depreciation. Complete details of Car Nos., name of user and designation of the person using the vehicles were given by the assessee. On these facts, the first appellate authority, in our humble opinion, rightly deleted the addition. We uphold the same and dismiss this ground of the Revenue. 13. The next issue is in ground No.3 which is against the disallowance of 10% of total wages and salary amounting to Rs.3,34,80,156/-. The AO made the disallowance in question on the ground that the claim of the assessee that all the security guards have opened bank accounts and one consolidated cheque for each unit is sent is not fully correct, as there are certain branches where there is no bank account guard-wise. After encashing the consolidated 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 record ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .00 76.51% AO had made the disallowance because on the basis of information furnished during the course of assessment proceedings, it was noticed that there was increase of more than 2% under this head of expenditure. This was apparently because the figures taken were incorrect. As per the correct figures as noted above, the increase is less than 1%. AO had also disputed the appellant's contention that all the payments under this head are made through bank account. It was noted by AO that there are certain units (particularly the new ones) where there are no bank accounts guard-wise and after encashing the consolidated cheques, the amounts are paid to the guards in cash. He has however nor identified any such specific existence. He has also asked the appellant to furnish documentary evidence with reference to PF and ESIC records of new recruitment. The same was not produced before AO because there was no sufficient time available for the same. The matter, therefore, was referred to AO to verify the appellant's claim with 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 f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... c Security and Detective Agencies Pvt. Ltd. wherein 10% disallowance has been upheld under this head by the concerned CIT(A). AO has however not provided further details as to the scale of business done by M/s Dynamic Security and Detective Agencies Pvt. Ltd. as also by all the expenditure under the head wages and salaries is incurred through bank account or in cash. Appellant has argued that the case of M/s Dynamic Security and Detective Agencies Pvt. Ltd. is not comparable because the said company operates in an unorganized sector while the appellant company caters to multinationals and big industrial house where various laws are applicable and required to be followed not only by the agencies concerned but also by the clients. It has also been pointed out that the turnover of M/s Dynamic Security and Detective Services Pvt.Ltd. was Rs.115 lakhs in A.Y. 2001-02 while it is Rs.4,722.92 lakhs in the case of appellant. Therefore, the reference to that case cannot be basis for disallowance in this case particularly when in this case, the expenditure has been incurred through bank accounts and no discrepancy has been noticed after detailed examination. Appellant has also relied upon th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 6, it is held as follows: 16. We are unable to agree with the submissions of the learned CIT-DR on this issue. The undisputed fact is that the assessee has been taken a deposit from the security guards and has been giving uniforms. In the paper book from page No.346 to 363, the assessee has provided photo state copies of uniform issue register. This register is maintained guardwise and batchwise and minute details as to the uniforms given, security deposit taken, refunds given etc. are recorded. There is no gainsaying that refundable security deposit cannot be considered as income of the assessee. We do not see how the expenditure incurred by the assessee towards uniforms can be held as that which is not the expenditure of the assessee just because the assessee taken certain deposits from the security guards. In our considered opinion, the first appellate authority was right in holding that the AO has done a fundamental mistake while analyzing the accounting entries passed by the assessee. The decision of the Hon'ble Supreme Court in the case of Punjab Distilling Industries Ltd. is not applicable to the facts of the case as there were certain deposits in that case, which were n ..... X X X X Extracts X X X X X X X X Extracts X X X X
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