TMI Blog2015 (7) TMI 84X X X X Extracts X X X X X X X X Extracts X X X X ..... h Court in the case of CIT vs. Bhogilal Ramjibhai Atara (2014 (2) TMI 794 - GUJARAT HIGH COURT). Before us, Revenue has not brought any material on record to controvert the findings of ld. CIT(A) nor has brought any contrary binding decision in its support. In view of the aforesaid facts, we find no reason to interfere with the order of ld. CIT(A) - - Decided against revenue. Addition on account of welfare expenses - CIT(A) deleted the addition - Held that:- CIT(A), following the order in Assessee’s own case for A.Y. 2000-01 has deleted the addition by a cryptic order. Before us none of the parties have placed the order of ld. CIT(A) for A.Y. 2000-01 that was relied by ld. CIT(A) while deleting the addition nor could throw light as to whether the order of ld. CIT(A) for A.Y. 2000-01 has attained finality. In view of the aforesaid facts, we restore the issue back to the file of ld. CIT(A). In case the order of ld. CIT(A) for A.Y. 2000-01 that was relied by ld. CIT(A) for deciding the present ground has been accepted by Revenue and attained finality, then no interference to the order of ld. CIT(A) for the year under consideration is called for. In case the order of ld.CIT(A) for A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... GEB - Held that:- CIT(A) while upholding the disallowance made by A.O has noted that the deposit with GEB cannot be compared with deposit under OYT scheme which is under different terms and conditions. We find that ld. CIT(A) has not pointed out as to how the scheme of deposit with GEB is different from OYT scheme which was relied upon by Assessee. In such circumstance, we are of the view that the issue needs to be re-examined in the light of the submissions made by ld. A.R, the case law relied upon by ld. A.R. and on the basis of facts and circumstances of the case. Ld. CIT(A) shall give a categorical finding with respect to the nature of expense. The Assessee is also directed to co-operate by furnishing all the required details called for by ld. CIT(A). - Decided in favour of Assessee for statistical purposes. Additions of the payments made towards Credit Cards expenses incurred by the Director - Held that:- The expenses incurred by the Directors of the Company through Credit Cards were considered to be personal in nature by the A.O. On the other hand, it is Assessee’s submission that the expenses have been incurred on behalf of the Company and no personal element is involved. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nue, are against the order of CIT(A)-IV, Baroda dated 17.03.2010 for A.Ys. 2005-06 to 2007-08. 2. Before us, at the outset both the parties submitted that though the appeals relate to 3 different assessment years but most of the grounds are identical except for the assessment years and amounts and the submissions are also common for all those grounds in the appeals and therefore all the appeals can be heard together. We therefore proceed to dispose of all the appeals together for the sake of convenience and thus proceed with the facts in A.Y. 2005-06. 3. The relevant facts as culled out from the material on record are as under. 4. Assessee is a company stated to be engaged in the business of manufacturing of engineering goods. Assessee filed its return of income for A.Y. 2005-06 on 29.10.2005 declaring total loss of ₹ 1,25,95,376/-. The case was selected for scrutiny and thereafter the assessment was framed under section 143(3) vide order dated 30.04.2007 and the total income, before adjustment of carry forward unabsorbed business loss, was determined at ₹ 2,93,00,155/-. Aggrieved by the order of A.O., Assessee carried the matter before ld. CIT(A) who vide orde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rst proceed with the appeal of Revenue in ITA No. 1921/Ahd/2010 1st ground and its sub grounds are with respect to deletion of addition on account of Employees Contribution Fund and ESIC. 5. During the course of assessment proceedings, A.O noticed that the employees contribution to provident fund and ESIC was not paid by the Assessee though it had become payable on the various due dates. He accordingly disallowed the employees contribution of provident fund of staff of ₹ 45,78,683/-, contribution of Provident Fund of ₹ 59,25,030/- and ESIC contribution of ₹ 10,29,515/-. Aggrieved by the order of A.O., Assessee carried the matter before ld. CIT(A) who granted partial relief to the Assessee by holding as under:- 2.2. I have considered the matter. Appellant's contention is that the amounts in question did not come within the purview of provisions of section 36(l)(va) r.w.s. 2(24)(x) due to salary being paid late. As discussed in Order dated 2.3.2009 by the ITAT, Ahmedabad Bench in ITA No.2609/Ahd/2008 for A.Y.2004-05 in the case of Gujarat Containers Ltd., para 30 of Employees' Provident Fund Scheme imposes obligation on the employer to remit both the s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s held has under:- any sum with respect to the employees contribution as mentioned in s. 36(l)(va), assessee shall be entitled to the deduction of such sum towards the employees contribution if the same is deposited in the accounts of the concerned employees and in the concerned fund such as Provident Fund, ESI Contribution fund, etc provided the said sum is credited by the assessee to the employees accounts in the relevant fund or funds on or before the due date under the Provident fund Act, ESI Act, Rule, Order or Notification issued thereunder or under any Standing Order, Award, Contract or Service or otherwise. .. 9. In view of the submission of ld. A.R. and D.R. and in view of the fact that the contribution of provident fund and ESIC not being paid before the due dates and in the absence of any contrary binding decision and respectfully following the decision of Hon ble Gujarat High Court in the case of CIT vs. Gujarat State Road Transport Corporation (supra) we set aside the order of ld. CIT(A) on this issue and uphold the decision of A.O. Thus this ground of Revenue is allowed. Ground no. 2 is with respect to deletion of addition in respect of long outstanding d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on record. We find that ld. CIT(A) while deleting the addition has noted that the amounts outstanding in the Assessee s Balance Sheet were considered as liability by the Assessee and in the absence of any material suggesting that the Assessee had no intention of honoring the debts, no profit could be said to accrue. We further find that the issue in the present case is also covered in Assessee s favour by the decision of Hon ble Gujarat High Court in the case of CIT vs. Bhogilal Ramjibhai Atara (supra). Before us, Revenue has not brought any material on record to controvert the findings of ld. CIT(A) nor has brought any contrary binding decision in its support. In view of the aforesaid facts, we find no reason to interfere with the order of ld. CIT(A) and thus this ground of Revenue is dismissed. Ground no. 3 is with respect to deleting the addition on account of welfare expenses. 14. On perusing the details of welfare expenses, A.O noticed that the expenses debited to welfare expenses included expenses in respect of grocery, pulses and other requirement to run the canteen. He also noticed that the canteen facility provided to the employees of the Assessee could have been us ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gardening, guesthouse, hotel expenses for guest, aggregating to the ₹ 19,81,644/-. A.O was of the view that the expenses in the entirety cannot be considered to have been incurred wholly and exclusively for the purpose of business. He accordingly considered 10% of such expenses amounting to ₹ 1,98,164/- being for non business and accordingly disallowed the same. Aggrieved by the order of A.O., Assessee carried the matter before ld. CIT(A) who deleted the addition by holding as under:- 9.2. I have considered the matter. Following the decision of CIT(A)-I, Baroda for A.Y. 2000-01, where by following appellate orders for earlier years and by noting that adhoc addition in the absence of adverse report by the auditor cannot be sustained, disallowance of ₹ 1,98,164/- is cancelled. 19. Aggrieved by the aforesaid order of ld. CIT(A), Revenue is now in appeal before us. 20. Before us, ld. D.R. supported the order of A.O. On the other hand ld. A.R. reiterated the submissions made before A.O and ld. CIT(A) and further placed reliance on the decision of Hon ble Gujarat High Court in the case of CIT vs. Torrent Pharmaceuticals Ltd. (2013) 263 CTR 683 (Guj). He thus su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rs as being agitation period had elapsed in view of the decision in the case of CIT vs Chaudhary Cotton Ginning Pressing Factory, 2005, 271 ITR 17 (PH). 3. On the facts and in the circumstances of the case and in law, the Id.CIT(Appeals) erred in deleting the addition made on account of disallowance out of welfare expenses of ₹ 4,66,650/- as the assessee has failed to establish that the entire expense was incurred for business purpose. 4. On the facts and in the circumstances of the case and in law, the Id.CIT(Appeals) erred in deleting the addition of ₹ 1,73,531/- made u/s.37(l) of the Act on account of disallowance out of misc. expense claimed to have incurred for maintenance of garden and guest house as the assessee has failed to establish that the entire expense was incurred for business purpose. 24. Before us, at the outset both the parties submitted that the facts and circumstances of the case in all the grounds raised in the present appeal are identical to the grounds raised by Revenue in its appeal A.Y. 05-06 except for the amounts and the submissions made by them while arguing the appeal for A.Y. 05-06 would be applicable to the present grounds. In v ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts and circumstances of the case for the ground no. 1 to 4 raised in the present appeal are identical to the grounds raised by Revenue in A.Y. 05-06 except for the amounts and the submissions made by them, while arguing the appeal of Revenue for A.Y. 05-06 would be applicable to the present grounds. In view of the aforesaid submissions and for the reasons stated hereinabove while deciding the appeal for A.Y. 2005-2006 in ITA No. 1921/AHD/2010 (supra) and for similar reasons decide the grounds no. 1 to 4 of Revenue in the present appeal. Ground no. 5 is with respect to deletion of disallowance of bad debts. 28. During the course of assessment proceedings, A.O noticed that Assessee has claimed bad debts of ₹ 49,85,000/- (the list of which is reproduced by A.O at page 4 of the assessment order). A.O was of the view that Assessee has not substantiated its claim of the efforts made for the recovery of bad debts nor has furnished any documentary evidence to testing the claim of bad debts. He accordingly denied the claim of bad debts Aggrieved by the order of A.O., Assessee carried the matter before ld. CIT(A) who deleted the addition by holding as under:- 6.2. Assessing Of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eals)-IV has erred in confirming the revenue expenditure of ₹ 2,85,747/- on repairs to building as capital. On the fact and circumstances of the case the Learned Commissioner of Income Tax (Appeals)-IV ought to have deleted the addition. 3. The Learned Commissioner of Income Tax (Appeals)-IV has erred in disallowing upgradation charges paid to Gujarat Electricity Board amounting to ₹ 1,85,508/- as capital. On the fact and circumstances of the case and in law the Learned Commissioner of Income Tax (Appeals)-IV ought to have allowed the payment as revenue. 4. The Learned Commissioner of Income Tax (Appeals)-IV has erred in confirming partly the payment made by the company towards Credit Card expenses incurred by the director for and on behalf of the company. On the fact and circumstances of the case and in law the Learned Commissioner of Income Tax (Appeals)-IV ought to have allowed the entire expenses. 5. The Learned Commissioner of Income Tax (Appeals)-lV has erred in confirming the addition of ₹ 2,02,97,974/- being interest payment made by the appellant to the bank. On the fact and circumstances of the case and in law the Learned Commissioner of Income T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The ld. D.R. on the other hand supported the order of A.O and ld.CIT(A). 38. We have heard the rival submissions and perused the material on record. We find that ld. CIT(A) while upholding the addition has by a very cryptic order upheld the order of A.O. We further find that there is no finding of ld. CIT(A) with respect to the nature of expenses incurred by the Assessee. In such circumstances, we are of the view that the issue needs to be reconsidered and therefore we remit the issue back to the file of ld. CIT(A) to decide the issue afresh after giving a clear finding on the expenses. Needless to state that ld. CIT(A) shall grant reasonable opportunity of hearing to both the parties. In the result, this ground of Assessee is allowed for statistical purposes. 3rd ground is with respect to deletion of charges paid to GEB. 39. A.O noticed that Assessee has paid one time charges to GEB for augmentation of the capacity utility for supply of power. He was of the view that the incurring of expenditure culminated in additional benefit and advantage of enduring nature. He therefore considered the expenditure to be of capital in nature and accordingly disallowed the amount of S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssee company. The submissions of the Assessee that Shri R.N. Amin had incurred expenditure towards the purchase of books and other useful items for use by the Assessee and the expenses were therefore reimbursed by the Assessee was not found acceptable to the A.O. With respect to the expense incurred by Smt. Tejal Amin, A.O noted that no details of expenses incurred by the Assessee were furnished. He therefore considered the expenses of ₹ 1,48,584/- incurred by Shri R.N. Amin and ₹ 1,12,438/- incurred by Smt. Tejal Amin, aggregating to ₹ 2,61,022/- to be for the non business purpose and accordingly disallowed the same. Aggrieved by the order of A.O., Assessee carried the matter before ld. CIT(A) who upheld the order of A.O by holding as under:- 7.2. I have considered the matter. The details of expenses in the case of Smt. Tejal Amin filed by the appellant show that the expenses were in respect of purely personal items. Such expenses are clearly disallowable in the case of appellant company. In case of Shri Rahul Amin, considering the nature of expenses, part of the expenses are accepted to be for the business and out of disallowance of ₹ 1,48,584/-, 50% di ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the financial year and also remained unpaid till the due date of furnishing of return of income. A.O thereafter on detailed analysis of the various accounts ( at page 13 to 20 of the assessment order) was of the view that as per the provisions of Section 43B(e), the interest liability to the extent unpaid cannot be allowed as deduction. He accordingly worked out the amount of disallowance at ₹ 2,02,97,974/- and added to the income. Aggrieved by the order of A.O., Assessee carried the matter before ld. CIT(A) who upheld the order of A.O by holding as under:- 10.2. I have carefully considered facts of the case and appellant's submissions. Appellant's contention is that the Assessing Officer has disallowed the interest u/s.43B(e) primarily due to availing of debt restructuring scheme / CDR package by the appellant and by wrongly interpreting CBDT's Circular No.7 of 2006. The Assessing Officer separately analyzed appellant's various loan accounts on which interest was paid, i.e. cash credit account, working capital term loan account, term loan account for other purposes and FITL, In respect of all the accounts, Assessing Officer gave credit for interest servic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... debited to appellant's loan accounts cannot mean that the interest was paid by the appellant. The fact that interest remained outstanding in appellant's loan accounts on the last date of financial year establishes that it was not paid. Appellant has also relied upon letters dated 9.3.2007 and 1.9.2009 by Central Bank of India, Baroda. In these letters, the bank has only certified the amount of interst charged to appellant's accounts, which was taken as income in bank books. As discussed above, this cannot mean that interest was paid by the appellant. Disallowance of ₹ 2,02,97,974/-under section 43B(e) is confirmed 48. Aggrieved by the aforesaid order of ld. CIT(A), Assessee is now in appeal before us. 49. Before us, ld. A.R. reiterated the submissions made before A.O and ld. CIT(A) and further placed reliance on the decision of Karnataka High Court in the case of Vinir Engineering Pvt. Ltd. vs. DCIT reported in 313 ITR 154. He therefore submitted that the disallowance made by the A.O be deleted. The ld. D.R. on the other hand supported the order of A.O and ld.CIT(A). 50. We have heard the rival submissions and perused the material on record. The issue in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n clause (e) which has been converted into a loan or advance shall not be deemed to have been actually paid. In the present case, it is an undisputed fact that a portion of interest has been converted into loan pursuant to the CDR package approved by the Bankers of the Assessee. Considering the express provision of the Act read along with Explanation 3D and in view of the aforesaid facts, we are of the view that the A.O was right in disallowing the claim of Assessee. Before us, ld. A.R. has also relied on the decision of Karnataka High Court in the case of Vinir Engineering Pvt. Ltd. (supra) We are of the view that the ratio of the aforesaid decision would not be applicable to the facts of the present case more so when in that case, the interest was payable to a Finance Corporation and not to a Scheduled Bank and the issue of disallowance was also not with respect to Section 43B(e) of the Act. Thus considering the provisions of the Act in the light of Explanation 3D which has been inserted with retrospective effect from 01.04.1997, and in the absence of any contrary binding decision in support of the Assessee, We find no reason to interfere with the order of ld. CIT(A) Thus this gr ..... X X X X Extracts X X X X X X X X Extracts X X X X
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