2010 (12) TMI 382 - HC - Income Tax

Addition - Late payment of employees contribution to PF - Interest free loans u/s 36(1)(iii) - The issue raised is settled by the Apex Court s judgment in Commissioner of Income Tax v. Alom Extrusions Ltd. 2009 -TMI - 35073 - SUPREME COURT decided gainst the revenue and in favour of the assessee.

Summary

Issues:
1. Interpretation of grace period under the Employee's Provident Fund Scheme, 1952 and its alignment with the Income Tax Act, 1961.
2. Disallowance of interest-free advances to sister concerns and the requirement of proving commercial expediency.

Analysis:

Issue 1:
The High Court addressed the first issue concerning the grace period for making payments under the Employee's Provident Fund Scheme, 1952 in alignment with the Income Tax Act, 1961. The revenue contended that the Income Tax Act does not mention a grace period for payments in relevant funds, emphasizing the due date for payments. However, the Hon'ble ITAT's decision was based on the actual date of payment falling within the grace period permissible under the EPF Scheme. The Court referred to relevant precedents and held that the issue was settled by the Apex Court's judgment in Commissioner of Income Tax v. Alom Extrusions Ltd. The substantial question of law regarding the grace period was answered in favor of the assessee, leading to the dismissal of the appeals.

Issue 2:
The second issue revolved around the disallowance of Rs.5,36,120/- on account of interest-free advances given to sister concerns. The revenue challenged the order of the Ld. CIT(A) in deleting this disallowance, arguing that the assessee failed to prove the 'commercial expediency' behind providing interest-free loans and the specific funds utilized for such advances. The Hon'ble ITAT's decision was criticized for lacking specific details and passing a general order. However, the Court cited a previous judgment in favor of the assessee, emphasizing the need for commercial expediency to be proven. Ultimately, the substantial question of law on this issue was also decided in favor of the assessee, resulting in the dismissal of the appeals.

In conclusion, the High Court's judgment resolved the issues raised by the revenue, aligning the interpretation of legal provisions with established precedents. The decision highlighted the importance of proving commercial expediency and adherence to relevant laws and schemes in financial transactions, ultimately leading to the dismissal of the appeals.