TMI Blog2004 (9) TMI 563X X X X Extracts X X X X X X X X Extracts X X X X ..... y are disposed of together. 3. Facts of the case briefly, are that the assessee company is a Public Limited Company incorporated on 14-12-1962. It is engaged in the business of manufacturing and trading of Borosilicate Glass, a glass with low expansion capacity. The manufacturing units are at Marol-Maroshi Road, Mumbai and the other at MM Nagar, Chennai, Tamil Nadu. The assessee company had taken plant and machinery on lease from M/s. Sundaram Finance Ltd. (SFL), M/s. Tata Finance Ltd. (TFL) M/s. IDBI. This plant and machinery was sub-leased to its subsidiary company M/s. Gujarat Borosil Ltd. (GBL) vide agreement and arrangement in the assessment year 1994-95. The Assessing Officer noticed that the assessee paid lease rent of Rs. 2,56,47,446 for assessment year 1998-99 and Rs. 2,19,34,664 for assessment year 1999-2000, whereas it received only Rs. 97,00,000 in both the assessment years from its subsidiary company as lease rent. The assessee was asked to explain as to why the company has charged only Rs. 97,00,000 in each assessment year from the subsidiary company as the lease rent on the same plant and machinery which was taken on lease at a lease rent of Rs. 2,56,47,446 f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... % of total GBL share. Therefore, it is in our interest to revive GBL in such a way that future losses/liabilities may be reduced and GBL starts making profits. After consideration of all above facts and circumstances as well as our discussions with various Financial Institutions, it was decided to workout the payment of lease rent and recovery of lease rent from GBL. The working for the same was made in such a way that there should not be any loss to us which can be seen from the enclosed comparative statement of Lease Rent Paid and received from 1993-94 onwards. Your goodself will kindly appreciate that the total lease rent payable over 7 years period is Rs. 1299.72 lacs while the total recovery is to be made over a period of 14 years is Rs. 1367.50 lacs. Thus, over all there will be more recovery of Rs. 67.78 lacs and there is no loss on account of lease rent paid by our company." In another letter dated 8-12-2000, the assessee submitted that the total recovery to be made over the period of 15 years was Rs. 1367.50 lacs and furnished the following comparative statement of lease rent paid and recovered from assessment year 1994-95 onwards: Accounting ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the assessee company, these were two different entities. The difference in lease rent paid by the assessee company and received from the subsidiary company in some years are as under: A.Y. Amount paid as Lease Rent (Rs.) Amount received (Rs.) Difference (Rs.) 1994-95 34,38,347 95,000 24,88,347 1995-96 2,43,71,915 97,00,000 1,46,71,915 1996-97 2,58,03,258 97,00,000 1,61,03,258 1997-98 2,58,03,258 97,00,000 1,61,03,258 1998-99 2,56,47,446 97,00,000 1,59,47,446 1999-00 2,19,34,664 97,00,000 1,22,34,664 The figures of income/loss reflected by the assessee as well as by GBL is as under: Borosil Glass Works Ltd. (Returned Income as per normal provisions of computation) Gujarat Borosil Ltd. (Loss as per books) (Rs. in lakhs) A.Y. Income Returned of the year Difference in lease rent Total income Loss as per books Difference in lease rent Total ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nalyzing section 37(1) and the meaning of the words "wholly" and "exclusively" with reference to the motive, objective and purpose of the expenditure in context of the assessee company concluded that the expenditure on lease rent was not incurred wholly and exclusively for the purpose of the business of the company because the assessee company is in the manufacture of glass with low expansion capacity borosilicate glass, whereas GBL is engaged in the manufacture of glass sheets. Both the products are different. Therefore, the plant and machinery shown to have been taken on lease were not required for the purpose of the assessee s business but for the subsidiary company. Thus, the expenditure incurred was not wholly and exclusively for the business of the assessee company. The assessee had incurred these expenses on behalf and for the business of the subsidiary company, therefore, these expenses which were laid out and expended wholly and exclusively for the business of the subsidiary company cannot be allowed under section 37(1). It was further pointed out by the Assessing Officer that the period of lease with Sundaram Finance, Tata Finance and IDBI was only for five years whereas, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the holding company. The Assessing Officer therefore, held that the expenditure incurred cannot be allowed under section 37 of the Income-tax Act. The Assessing Officer keeping in view the facts and legal position, held that the assessee is not entitled for deduction of lease rent paid for the business of the subsidiary company. However, as the assessee has credited the net amount of Rs. 97,00,000 as rent received from the subsidiary company in each assessment year; therefore, the net disallowance of Rs. 1,59,47,446 for assessment year 1998-99 and Rs. 1,22,34,664 for assessment year 1999-2000 is added to the taxable income of the assessee company. 6. The assessee company also paid interest to the financial institutions amounting to Rs. 3,97,379 for assessment year 1998-99 and Rs. 56,867 for assessment year 1999-2000 by way of interest on late payment of lease rent. The Assessing Officer was of the view that the lease rent expenditure was not incurred wholly and exclusively for conducting the business of the assessee company, therefore, interest paid on late payment of lease rent is also held as not incurred wholly and exclusively for the purpose of the business of assessee com ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... term loan was also obtained from various financial institutions. Promoters also brought interest free unsecured loans to the extent of Rs. 230 lakhs to meet a part of the cost overrun. On the basis of the note prepared by the financial institutions they conveyed to GBL that only after fulfilling and making necessary contribution by the promoters, the cost overrun would be financed by them. Though production had started in August, 1994, as highly sophisticated modern plant was used the teething troubles and fine tuning continued for another one and half years before the production stabilized. It was pointed out that owing to abolition of the industrial licensing system, another large float glass plant of 29 MSM capacity also came into production in December, 1995. Consequently, owing to the price war and consequent losses the company became sick and came under the purview of BIFR. Though the project when conceived was sound and economically viable, due to various unforeseen adverse circumstances, such as, the country facing unprecedented foreign exchange crisis in 1991-92, foreign exchange loan sanctioned by the IDBI was cancelled by them on the ground of foreign exchange shortages ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ircumstances in which this transaction was entered into were that the investment made by the assessee in its subsidiary company was floundering on account of multiple factors including unforeseen competitions, delays, uncertain political situation etc. The assessee had given counter guarantees to financial institutions which were in force in respect of the investments made in the subsidiary company. The lease transactions were made having regard to the requirements of the financial institutions. The main reason given by the Assessing Officer is that there is loss in the transaction inasmuch as the lease rent received was larger than that paid. It is submitted that the transaction entailed the revenue generation for a period of fifteen years and outlay of seven years. The total revenue generated on account of the transaction was Rs. 13,67,50,000 and the total outgoing was Rs. 12,84,16,868. Therefore in the first instant, it is a factual error to say that there was a loss on the transaction. The learned counsel further contended that undoubtedly, in the year under consideration the lease rent paid is in excess of the lease rent received but there is no law that requires an assessee t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... learned Assessing Officer has failed to appreciate the distinction between "wholly" and "exclusively" and "necessarily". This distinction has been explained by the Hon ble Supreme Court in the case of Sassoon J. David Co. (P.) Ltd. v. CIT [1979] 118 ITR 261 . The learned counsel read out the relevant provision to emphasize the argument. It is pointed out that before the Hon ble Supreme Court similar arguments were raised and the Hon ble Supreme Court laid down the following principle at page 273 in the following terms : "In order to claim deduction under section 10(2)( xv ) of the Act, an assessee has to show that the expenditure in question, ( i ) was not an allowance of the nature described in any of the clauses ( i ) to ( xiv ) of section 10(2), ( ii ) was not in the nature of the capital expenditure or personal expenses of the assessee, and ( iii ) had been laid out or expended wholly and exclusively for the purposes of his business, profession or vocation. Even assuming that the motive behind the payment of retrenchment compensation was that the terms of the agreement of the sale of shares should be satisfied, as long as the amount had been laid out or expended whol ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the total lease rent paid. In other words, it is not the case of the Assessing Officer that the agreements for lease entered into with Tata Finance, Sundaram Finance IDBI are sham or bogus or non-existent or fanciful. Therefore, in effect, what the Assessing Officer has done is that he has held that the expenditure incurred for obtaining the lease is reasonable to the extent of Rs. 97,00,000 and any amount paid in excess of Rs. 97,00,000 is unreasonable, unnecessary and therefore subject to disallowance. It is submitted that it is not within the power or province of the Assessing Officer to determine what lease rent is reasonable to be paid, that is the matter for the assessee to choose to pay. In this connection, reliance was placed on the decision of Hon ble Supreme Court in the case of CIT v. Walchand Co. (P.) Ltd. [1967] 65 ITR 381. It is further brought to our notice that same observations were reiterated by the Hon ble Supreme Court in the case of J.K. Woollen Manufacturers v. CIT [1969] 72 ITR 612 . These observations are modified only to the extent that if the payments were made to related parties they must also pass the test of being not greater than the mar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... machinery or immovable asset. Therefore, the lease rent income would fall under the head "Income from other sources". The learned Departmental Representative tried to distinguish the case laws cited by the learned counsel for the assessee and pointed out relevant paragraphs from the decisions. 10. We have considered the rival submissions and have gone through the material available on record. The Assessing Officer disallowed the differ- ence between the gross lease rent paid by the assessee and the amount of Rs. 97,00,000 received from the subsidiary company in each assessment years on various grounds. Firstly, the lease rent expenses were not incurred on the ground of commercial expediency but to claim inflated expenses with a motive to evade taxes. So far as this ground is concerned, the circumstances in which these transactions were entered into have been enumerated above in the arguments of the learned counsel for the assessee. However, at the cost of repetition we would like to mention here that investments made by the assessee in the subsidiary company were floundering on account of multiple factors including unforeseen competitions, delays, uncertain political situation ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on, as on the date of such agreement for transfer, determined by adopting such rate of interest as may be prescribed in this behalf....". Therefore, the concept of the net present value as a concept is not unknown to the Legislature in the context of Income-tax Act. It is because the basic underlying basis on which the Income-tax Act is based is that accounts are prepared on a historical basis, that is, sums were entered as received or accrued or expended or paid out at absolute values and not hypothetical ones. The concept of net present value must be looked at to determine whether the transaction was at all profitable or not is unsustainable because of the legal proposition laid down in several cases. For instance in the case of Calcutta Co. Ltd. s ( supra ) the Hon ble Supreme Court had to consider a case where the appellant had bought land and sold them as plots for building purposes alongwith an undertaking to develop them by laying out roads, providing a drainage system, installing lights etc. These undertakings and developments were to be carried out within six months but time was not of essence to the contract. In the relevant accounting year the appellant received in cas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that benefit is to accrue immediately or after a lapse of time and whether directly or indirectly is immaterial. At page 787, the following principals culled out by a Division Bench of this High Court from the earlier reported cases were reproduced, with which we respectfully agree: (1) One has not got to take an abstract or academic view of what was proper expenditure laid out or expended wholly and exclusively for the purposes of one s business but one has got to take into consideration question of commercial expediency and the principles of ordinary commercial trading and the main consideration that has got to weigh with the court is whether the expenditure was a part of the process of profit making. (2) The test for the purpose of deciding whether a particular amount can be allowed as deductible allowance under section 12(2) of the Act is whether the transaction is properly entered into as a part of the assessee s legitimate commercial undertakings in order indirectly to facilitate the carrying on of its business. If the transaction had been entered into on the ground of commercial expediency in order even indirectly to facilitate the carrying on of the business of the asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er to claim deduction under section 10(2)( xv ) of the Act, an assessee has to show that the expenditure in question, ( i ) was not an allowance of the nature described in any or the clauses ( i ) to ( xiv ) of section 10(2), ( ii ) was not in nature of the capital expenditure or personal expenses of the assessee, and ( iii ) had been laid out or expended wholly and exclusively for the purposes of his business, profession or vocation. Even assuming that the motive behind the payment of retrenchment compensation was that the terms of the agreement of the sale of shares should be satisfied, as long as the amount had been laid out or expended wholly and exclusively for the purpose of the business of the assessee "there appears to be no good reason for denying the benefit of section 10(2)( xv ) of the Act to the company if there is no other impediment to do so." Applying these principles the Supreme Court thereafter went into the question on facts and concluded as under: "The next contention urged on behalf of the department was that since the Davids and Tatas were indirectly benefited by the retrenchment of the services of the employees of the company and payment of compensation ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the following principle: "even assuming that the motive behind the payment of retrenchment compensation was that the terms of the agreement of the sale of shares should be satisfied, as long as the amount had been laid out or expended wholly or exclusively for the purpose of business of the assessee, there appears to be no good reason for denying the benefit of section 10(2)( xv ) of the Act to the company if there is no other impediment to do so." 13. Further, the Assessing Officer while disallowing the above expenditure made reference to the decision of Jurisdictional High Court in the case of Phaltan Sugar Works Ltd. ( supra ). However, a perusal of that judgment indicates that the assessee did not charge any interest to the said subsidiary company on the amount of loan in question. Thus, the crux of the matter was that in Phaltan Sugar Works Ltd. s case ( supra ) there was payment of interest but no corresponding interest was received and, therefore, the interest was disallowed. However, in the present case there is payment of lease rent alongwith corresponding receipt of lease rent and the total of the lease rent paid is far lower than the total of the lease rent re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e matter for the assessee to choose to pay. In case of Walchand Co. (P.) Ltd. ( supra ) Hon ble Supreme Court has laid down the following principles: "In applying the test of commercial expediency for determining whether an expenditure was wholly and exclusively laid out for the purpose of the business, reasonableness of the expenditure has to be adjusted from the point of view of the businessman and not of the revenue. It is open to the Tribunal to come to a conclusion either that the alleged payment is not real or that it is not incurred by the assessee in the character of a trader or that it is not laid out wholly and exclusively for the purpose of the business of the assessee and to disallow it. But it is not the function of the Tribunal to determine the remuneration, which in their view should be paid to an employee of the assessee." Similar observations were reiterated by the Hon ble Supreme Court in the case of J.K. Woollen Manufacturers (supra) . Therefore, the learned counsel rightly contended that the Assessing Officer could not disallow the claim of the assessee on this ground. 15. The learned Departmental Representative raised the issue relating to the pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... resentative further referred to the period of sub-lease granted to the subsidiary company. We would like to mention here that this was a commercial transaction and what the parties settle between themselves is not subject to scrutiny, for this may be one of the circumstances but not a solitary ground to reject the claim of the assessee. The learned Departmental Representative has also raised alternative plea that it was not the business of the assessee to take on lease and then sub-lease. Even if for the sake of argument if one were to accept this contention then income would fall under the head "Income from other sources" and in such a case the lease rent received would be taxable under section 56 and lease rent paid would be deductible under section 57 of the Act. Taking into consideration the totality of facts and circumstances, evidence placed on record and the case laws referred to, we are of the opinion that the revenue authorities have wrongly disallowed the claim of the assessee. Thus, ground Nos. 1 and 2 are decided in favour of the assessee for both the years. 17. Ground Nos. 3 and 4 for assessment year 1999-2000 reads as under : "3. On the facts and in the circumst ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... year 1986-87 and subsequent years. However, later on, when the said bill was enacted into law, the provision was made applicable form April 1, 1999, i.e., assessment year 1999-2000. This appeal was concerned with the assessment year 1989-90. In this circumstances, the provisions of section 145A could not be taken into consideration. The Hon ble Bombay High Court has held that section 145A is applicable only from April 1, 1999 for the purpose of valuation of stock. In view of these provisions the CIT(A) has held that unutilized Modvat is to be included in the closing stock and, therefore, confirmed the addition made by the Assessing Officer. The learned CIT(A) analyzed the position with regard to the observation of Hon ble Bombay High Court in the case of Indo Nippon Chemical Co. Ltd. (supra) viz-a-viz the provision of section 145A in paragraphs 10, 10.1 and 10.2 of the impugned order. He also referred to the decision of Hon ble Supreme Court in the cases of CGT v. N.S. Getti Chettiar [1971] 82 ITR 599 ; CED v. Alladi Kuppuswamy [1977] 108 ITR 439; R.C. Mitter Sons v. CIT [1959] 36 ITR 194 ; and CIT v. Ajax Products Ltd. [1965] 55 ITR 741 . In view of the ab ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Further, its working capital cycle was elongated with the increase in its debtor and inventory levels leading to liquidity constraints. Considering the above and the increased turnover levels over the next two years, the requirement of funds for the 24 month period ending March 31, 2000, is estimated at Rs. 485 million. The Company has approached ICICI for Rupee Term Loan of Rs. 120 million to meet a part of its long-term requirement of funds." As per the terms and conditions of the agreement of loan, which was taken for running the business of the company for meeting the long-term working capital, the financial institutions charged front-end-fees @ 1.05% of the said loan amounting to Rs. 16,73,000. The case of the assessee is that the expenditure is like the processing fees, which is a part of the cost for obtaining loan for long-term requirement of working capital where no capital assets had been acquired. The Assessing Officer was of the view that the front-end-fees paid to ICICI was not allowable as the loan was obtained from the financial institution for long-term requirements. He relied on the decision of the Authority of Advance Ruling in the case of XYZ/ABC, Equity Fun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ot concern itself as to whether front-end-fees were capital in nature or revenue in nature and, therefore, the observation made by the Assessing Officer is fully misplaced. Further the learned counsel invited our attention to the decision of Hon ble Bombay High Court in the case of CIT v. Tata Chemicals Ltd. [2002] 256 ITR 395 ; Gujarat High Court decision in the case of Dy. CIT v. Core Healthcare Ltd. [2001] 251 ITR 61 wherein it has been held that expenditure incurred for obtaining a loan is revenue expenditure. 23. On the other hand, the learned Departmental Representative relied on the decision of Hon ble Bombay High Court in the case of S.F. Engineer v. CIT [1965] 57 ITR 455 , wherein it has been observed that the expenditure incurred for obtain loan would be regarded as capital in nature. To this stand, the learned counsel contended that the decision cited by the learned Departmental Representative although correct in its conclusion, was wrong in its reasoning and it has been expressly disapproved by the Hon ble Supreme Court in the case of India Cements Ltd. ( supra ). 24. We have considered the rival submissions and have gone through the material avail ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as revenue expenditure or capital expenditure." Thus, from the above observation it is clear that the Hon ble Supreme Court did not agree with the principle that the nature of expenditure would depend upon the nature and purpose of loan. Secondly, we would like to refer to the observation of the Hon ble Supreme Court in the case of India Cements Ltd. ( supra ): "To summarize this part of the case, we are of the opinion that: ( a ) the loan obtained is not an asset or advantage of an enduring nature; ( b ) that the expenditure was made for securing the use of money for a certain period; and ( c ) that it is irrelevant to consider the object with which the loan was obtained. Consequently, in the circumstances of the case, the expenditure was revenue expenditure within section 10(2)( xv )." So far as the reliance on the decision of Advance Ruling Authority is concerned the question for consideration in the case is set out in question No. 11 which reads as under: "11. Whether, on the facts and circumstances of the case, "front-end-fees" (hereinafter referred to as "deterrence fees") received on a discretionary basis by the applicant from port folio companies, not being sp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t on fuel consumption. Therefore, the assessee company entered into agreement with Mahanagar Gas Ltd. (MGL) for supply of natural gas. MGL agreed to supply the gas provided the assessee bore the cost of laying the requisite pipeline from MGL s supply plant i.e., Sakinaka to Marol Plant which is their standard practice. The original estimated cost of the gas pipeline was Rs. 23,31,000 which finally came to Rs. 26,81,000. It was a pre-condition that after the Commissioning of the supply of gas, the ownership and maintenance of the pipeline will belong to MGL. Thus, it was a pre-requisite condition that if the company wanted to obtain Natural Gas to save substantial fuel cost, it is necessary to pay the cost of laying the entire gas pipeline, the ownership of which would go to MGL. The case of the assessee is that the expenses were necessary to save substantial fuel cost which can be reflected from the Profit Loss Account and Balance Sheet of the year under consideration and subsequent years. Substantial amounts were saved after the usage of gas as fuel. In this connection, reliance was placed by the assessee on the decision of Hon ble Supreme Court in the case of Gotan Lime Synd ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l Corporation was to exempt the assessee from paying municipal taxes for 15 years. The Assessing Officer held that the expenditure incurred on constructing the pipeline was capital expenditure because it would obtain an advantage of enduring nature namely it would not have to pay municipal taxes for a period of 15 years. The Hon ble Supreme Court emphasized that "If these liabilities had to be paid, the payments would have been on revenue account and hence the advantage secured was in the field of revenue and not capital". The pipelines, which might have been regarded as capital asset and which came into existence as a result of the expenditure incurred did not belong to the assessee-company but to the Municipality. In view of the principle laid down by the Hon ble Supreme Court, the Calcutta High Court in the case of CIT v. Birla Jute Mfg. Co. Ltd. [1990] 182 ITR 497 held that electricity lines laid down at the cost of the assessee but owned by the Electricity Board was allowable as revenue expenditure. Reliance was also placed on the decision of Hon ble Bombay High Court in the case of CIT v. Chowgule Chemicals (P.) Ltd. [1995] 216 ITR 234 , CIT v. Excel Industries Lt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... furnaces be allowed to the assessee. 31. The facts of the case, briefly, stated before the Assessing Officer is as under : "Certain experiments had been conducted on furnace No. 2 at Marol to determine the technical parameter for production of the medium expansion which the company proposes to produce in future. The experiments, which started in January, 1999 ended in February, 1999 when the furnace was shut down, entailed the running of the furnace for an additional period of one month. Expenses relating to such experiment amounting to Rs. 57.31 lacs has been treated as deferred revenue expenditure, since the benefits of the same are of enduring nature. Rs. 1.91 lacs has been amortized in the current year and the total amount of Rs. 57.31 lacs has been shown as deduction in computing Taxable Income. The Company is manufacturing hard Borosilicate glass having 33 10 C expansion. Company wanted to produce natural gas - i.e., softer glass. Though the furnace was scheduled to shut down, it was run while the experiments were conducted. During the period of experiment, the expenses incurred on the existing furnace i.e., electricity, natural gas, salary etc. - i.e., all ex ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Electricity 6,47,472 Natural Gas 1,08,057 Oxygen 3,47,110 L.D. Oil 2,92,027 Furnace Oil 11,04,071 H.S.D. 3,724 Raw Materials 7,30,926 Local Stores 16,243 Imp. Stores 1,23,972 Dept. Supply 8,155 Dept. Expenses 1,782 Moulds 2,04,000 35,87,440 Less Cullets 2,24,310 33,63,130 Salaries Wages 17,03,717 50,66,847 50,66,847 0JOU0287 31-3-1999 Int. on Rs. 400 lacs loan of IDBI transfer from Int. Exp A/c. 4035 @ 18.33% p.a. for Feb. March 99 (59 days) Rs. 11,84,500 38% transfer of New Project 4,50,000 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3-2002 would indicate that the expenditure in question is a revenue expenditure. Mere fact that the expenditure which was otherwise revenue expenditure has been treated as deferred revenue expenditure in the books of the company cannot for that reason alone be disallowed in computing total income. He further placed reliance on the decision of Hon ble Supreme Court in the case of State Bank of India v. CIT [1986] 157 ITR 67 and Hon ble Bombay High Court decision in the case of CIT v. Mogul Line Ltd. [1962] 46 ITR 590 . On the other hand, the learned Departmental Representative relied on the orders of the authorities below. 33. We have considered the rival submissions and have perused the material placed on record. A perusal of the expenses indicates that the expenditure in question was incurred on salary, electricity, natural gas etc. The mere fact that the expenditure which was otherwise revenue expenditure has been treated as deferred revenue expenditure in the books of the company cannot for that reason alone be disallowed in computing total income. In this connection, we would like to mention the observation of Hon ble Supreme Court in the case of State Bank of Indi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1,16,374 under section 43B of the Act. During the course of assessment proceedings from the details of employees and employer s contributions towards PF filed by the assessee, the Assessing Officer noticed that the following contributions were not paid on or before the due dates : Month Employees Contribution Employer s Contribution Due date of payment Date of payment Total Feb 99 48,958 48,958 15-3-1999 27-3-1999 97,916 March 99 51,901 51,901 15-4-1999 27-4-1999 103,802 Total 100,859 100,859 201,718 Late payment of Employer s contribution to ESIC : Month Amount Due Date Date of payment Not mentioned 14,686 Not mentioned 13-11-1998 Not mentioned 879 Not mentioned Not mentioned Total 15,515 He further mentioned that the assessee had not given any details as the month to which these payments related, their due dates and date of payment etc. The Assessing Of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... been cited by the Assessing Officer. As per this decision, the payments for Provident Fund are to be made within due dates prescribed in the Provident Fund Act after considering the five days grace period. Further the decision of ITAT, Mumbai Bench D , Mumbai given in ITA No. 2371/B/94 for assessment year 1990-91 in the case of DC Special Range 5, Bombay v. M/s. Navin Bharat Industries Ltd., Bombay on 5-3-2002 is relied. In this decision, the Hon. ITAT has referred to various ITAT s decisions given on this issue. Such decisions are as under : ( i )CPEC Ltd. (ITA No. 2150/Mum./97 of ITAT, Mumbai Bench C dated 17-8-2000 ( ii ) DCIT v. Udaipur Distillery 74 TTJ 193 ( iii )Madras Radiators and Pressings Ltd. 59 ITD 515 (Mad.) ( iv )Fluid Air India - 63 ITD 182 (Mum.) These decisions have been held as not applicable so far as provisions of section 43B of the Act are concerned. Instead of Hon. ITAT has followed the following decisions of various High Courts. (1) CIT v. Synpol Products Pvt. Ltd., 217 ITR 154 (Guj.) (2) CIT v. South India Corporation Ltd. 242 ITR 114 (Ker.) (3) CIT v. Shree Kamakhya Tea Co. Pvt. Ltd., 199 ITR 714 (Cal.) In these decis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt has rightly been disallowed by the Assessing Officer. Therefore, this ground of appeal is dismissed and the action of the Assessing Officer is confirmed." Aggrieved, the assessee is in appeal before the Tribunal. 37. During the course hearing before us the learned counsel for the assessee admitted that the late payment of employers contribution for which no date of payment has been mentioned at para 14.2 of the assessment order amounting to Rs. 15,515 cannot be allowed. However, the other payments for which the due date and date of payments have been mentioned is allowable as per the various decisions of the Tribunal and the decision of the Hon ble Supreme Court in the case of Allied Motors (P.) Ltd. v. CIT [1997] 224 ITR 677 . The learned Departmental Representative relied on the orders of the authorities below. 38. We have considered the rival submissions and have gone through the material placed on record. As admitted by the learned counsel, the amount of Rs. 15,515 representing the delayed payment of employers contribution cannot be allowed. As regards the amount of Rs. 1,00,859 we find that the Mumbai Bench of the Tribunal in the case of Fluid Air (India) (P. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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