TMI Blog2009 (5) TMI 123X X X X Extracts X X X X X X X X Extracts X X X X ..... appeal filed by the assessee for the assessment year 2003-04 in I.T.A. No. 331/Coch/2008. The first ground raised by the assessee is that the Commissioner of Income-tax (Appeals) has erred in confirming the disallowance of interest amounting to Rs. 18,88,690 treating it as expenditure incurred in relation to exempted income under section 14A of the income-tax Act, 1961. The learned chartered accountant appearing for the assessee has produced a copy of the order passed by the Income-tax Appellate Tribunal, Cochin Bench, in the case of Asst. CIT v. Veega Holidays Parks (P) Ltd. in I.T.A. No. 281/Coch/2008, wherein the Tribunal has held that the disallowance under section 14A was not justified, under similar circumstances. We consid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... also not available before the Tribunal while passing the said order in the case of Veega Holidays Parks (P.) Ltd. Therefore, the decision relied on by the learned chartered accountant is clearly distinguishable. As far as the present case is concerned, the judgment of the Special Bench is available before us and we are bound to follow the same. Therefore, we remit the issue back to the Assessing Officer with a direction to reconsider the issue of section 14A in the light of the rules framed. If the Assessing Officer comes to a finding that the assessee has incurred direct or indirect expenditure in earning exempted income, the assessing authority shall proceed to make appropriate disallowance as prescribed by the Rules. The assessee shal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fact whether the contributions related to the employer or employee. Regarding the amendment brought in respect of employer's contribution, the Supreme Court has held that the amendment was retrospective as held in Allied Motors P. Ltd. v. CIT [1997] 224 ITR 677. In the said decision, the Supreme Court has held that the amendment is retrospective and in the later decision of the Supreme Court in the case of CIT v. Vinay Cement Ltd. [2009] 313 ITR (St.) 1 it has held that the payments should be allowed as a deduction if they were made before the due date of filing of the return. In view of the above decisions, the decision of the jurisdictional High Court in the case of CIT v. South India Corporation Ltd. [2000] 242 ITR 114 (Ker) stands disap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... paramount. In the case of employees' contribution if payments are not made within the time allowed so as to get the benefit of section 43B, then the provisions of sections 36(1)(va)/2(24)(x) will apply and the consequence will follow. Where the payment is found to be deductible under section 43B, no further consequence follows. Therefore, the contention of the Revenue that this issue has to be considered independent of section 43B is not acceptable. Therefore, we accept the contention of the assessee and direct the Assessing Officer to give deduction for the amount of Rs. 16,20,040 while computing the taxable income of the assessee. The assessee is partly successful in its appeal for the assessment year 2003-04. As far as the appeal file ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t invested any amount out of the borrowings. The contention of the Revenue is that the Commissioner of Income-tax (Appeals) has not verified the facts of the case. Having heard rival submissions, we remit this issue back to the Assessing Officer in the light of our discussions made in the context of the cross appeals filed by the assessee. It does not mean that we are reversing the finding of the Commissioner of Income-tax (Appeals) and holding that the assessee has diverted borrowed funds in earning income from coffee. This question is left open. The Assessing Officer has to re-examine the issue after giving an effective opportunity to the assessee. The Revenue is partly successful in its appeals. In result, the appeals filed by ..... X X X X Extracts X X X X X X X X Extracts X X X X
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