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ACIT, Cir-6, Ahmedabad Versus Frontline Corporation Ltd.

2016 (5) TMI 1173 - ITAT AHMEDABAD

Disallowance of deduction u/s 36(1)(va) for employees contribution beyond due date of payment - Held that:- The assessee credited the amount of employees contribution in the books and delayed in depositing the same with PF/ESI department within the statutory time limit. Ld. Assessing Officer further observed that assessee was required to deposit PF on a monthly basis but in respect of PF deducted at ₹ 59,784/- the same was deposited after the due date of payment and claimed the same to be .....

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ns by the coordinate bench in assessee’s own case it has been repeatedly held that no disallowance is called for on account of proportionate disallowance of interest for application of borrowed funds to interest free loans and advances and therefore, for the year under appeal also we do not find any reason to interfere with the order of ld. CIT(A) in deleting the disallowance - Decided against revenue

Addition on account shortage of automobile parts - Held that:- From going through t .....

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tems sold. We are of the considered view that ld. Assessing Officer has made an estimated addition without corroborating the facts with the books of accounts and not pointing out any mistake in the quantitative purchase and sale nor any defect has been pointed out in the manufacturing activities carried on by the assessee and not appreciating the fact that while conducting business of items which are huge in numbers, a minor shortage on account of pilferage, handling, wear and tear etc. cannot b .....

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IT(A) at ₹ 13,82,433/- is upheld. - Decided against revenue - ITA No. 2326/Ahd/2011 - Dated:- 6-5-2016 - Shri Rajpal Yadav, JM And Shri Manish Borad, AM For the Appellant : Shri James Kurien, Sr. DR For the Respondent : Shri P. F. Jain, AR ORDER Per Manish Borad, Accountant Member Revenue is in appeal against the order of CIT(A)-VIII, Ahmedabad dated 4.7.2011. Assessment u/s 143(3) of the I.T. Act, 1961 (in short the Act) for Asst. Year 2008-09 was framed on 30th December, 2010 by DCIT, Ci .....

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ith questionnaire was issued on 19.5.2010 and 13.08.2010. Case was discussed and assessment was completed at ₹ 91,78,364/- after making addition of ₹ 59,92,020/-. 3. Appeal before ld. CIT(A) brought part relief to the assessee and aggrieved, Revenue is now in appeal before the Tribunal. 4. Ground No.1 is as under :- 1. The Ld.CIT(A) has erred in law and on facts in deleting the disallowance of deduction u/s 36(l)(va) of ₹ 59,784/- without appreciating fact that employee's c .....

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gh the judgment in the case of CIT vs. GSRTC (supra) relied on by the ld. DR. This ground raised by the Revenue is against the action of ld. CIT(A) in deleting the disallowance of deduction u/s 36(1)(va) of the Act of ₹ 59,784/- for employees contribution. From going through the records we observe that the assessee credited the amount of employees contribution in the books and delayed in depositing the same with PF/ESI department within the statutory time limit. Ld. Assessing Officer furth .....

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g section 36(1 )(va) of the Income Tax Act, 1961 read with sub-clause (x) of clause 24 of section 2, it is held that with respect to the sum received by the assessee from any of his employees to which provisions of sub-clause (x) of clause (24) of section (2) applies, the assessee shall be entitled to deduction in computing the income referred to in section 28 with respect to such sum credited by the assessee to the employees' account in the relevant fund or funds on or before the "due .....

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. date by which the concerned assessee was required as an employer to credit employees' contribution to the employees' account in the Provident Fund under the Provident Fund Act and/or in the ESI Fund under the ESI Act. Consequently, all these appeals are allowed and the impugned judgement and orders passed by the tribunal in deleting the disallowances made by the AO are hereby quashed and set aside and the disallowances of the respective sums with respect to the Provident Fund / ESI Fun .....

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no.2 reads as under :- 2. The Ld.CIT(A) has erred in law and on facts in deleting the disallowance of proportionate interest of ₹ 2,42,500/- 10. During the course of assessment proceedings, ld. Assessing Officer observed that there stood loan and advances to WGF Finances Services Ltd. and India Telecom Ltd. totaling to ₹ 24,25,000/- and there was an interest expenditure debited to profit and loss account at ₹ 3,79,20,116/-. Ld. Assessing Officer was of the view that on one han .....

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003-04. 12. Aggrieved, Revenue is now in appeal before the Tribunal. 13. The fact was not controverted by the Revenue that this issue is squarely covered by the decision of co-ordinate bench in the case of assessee in ITA No. 2226/Ahd/2007 & ITA No.2527/Ahd/2007 for Asst. Year 2003-04. 14. We have heard the rival contentions and perused the material on record. Revenue has raised the ground against the action of ld. CIT(A) for deleting the interest proportionate basis at ₹ 24,25,000/-. .....

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of times and it has been held that no disallowance was sustainable on account of interest expenditure and in deciding so co-ordinate bench has held as under :- 10. Issue No.3: The revenue on ground No.2 challenged the order of the learned CIT(A) in deleting the disallowance of ₹ 6,70,494/-. The AO found that capital advance of ₹ 49,57,000/- was outstanding as advance to various parties on which no interest was charged. It ITA No.2226 and 2527/Ahd/2007 M/s. Frontline Corporation Ltd. .....

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preceding assessment year noted that in fact the outstanding balance has come down from ₹ 79,28,000/- to ₹ 49,57,000/-. He, therefore agreed with the order of his predecessor that no disallowance could be made. The advances were also not found for non-business purpose. The addition was accordingly deleted. The learned Counsel for the assessee at the outset submitted that the Tribunal dismissed the departmental appeal on the similar issue vide order dated 12-03-2010 in Para 27 to 30. .....

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05 for Asst. Year 2001-02 and ITA No.4329/Ahd/2007 for Asst. Year 2004-05, wherein there were advances to India Telecom Ltd. at ₹ 1,0,00,000/- and to WGF Financial Services at ₹ 14,75,000/- respectively as on 31.3.2004 and co-ordinate bench dismissed the ground raised by the Revenue by observing as under :- 27. Next ground no. 2 in the appeal of the Revenue relates to disallowance of ₹ 1,78,682/- on account of interest on capital advances. During the course of assessment procee .....

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ding, the assessee was not eligible for deduction of interest on borrowed funds utilized for aforesaid advances. The ITA No.1091/Ahd/2005& ITA No.4329,3451&4258/Ahd/2007 13 AO further noticed that the assessee paid interest of ₹ 1,73,89,717/- on the loans of ₹ 24,83,35,637/- as on 31.3.2004. Accordingly, the AO disallowed proportionate interest of ₹ 1,78,682/- ,relying ,inter alia, on the decision in the case of PRMS Ramnathan Chettiar Vs. CIT,72 ITR 534(Mad.) and MSP R .....

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ell. In fact the outstanding balance has come down from ₹ 49.57 lacs to ₹ 25.52 lacs. Following the orders of CIT(A)-VIII for the earlier years, I hold that the disallowance u/s 36(1)(iii) is not sustainable in the absence of finding to the contrary. The advances were also not for nonbusiness purpose. In that view of the matter the addition is directed to be deleted. 29. The Revenue is now in appeal before us against the aforesaid findings of the ld. CIT(A). The ld. DR supported the .....

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aid orders relied upon by the ld. CIT(A) have been reversed in further appeal. Even otherwise, the ld. CIT(A) found that advances were not for non-business purposes. In this connection, Hon ble Apex Court in SA Builders 288 ITR 1 (SC), ITA No.1091/Ahd/2005& ITA No.4329,3451&4258/Ahd/2007 14 have held that the expenditure may not have been incurred under any legal obligation, but yet it is allowable as a business expenditure if it was incurred on grounds of commercial expediency. In the l .....

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e bench in assessee s own case it has been repeatedly held that no disallowance is called for on account of proportionate disallowance of interest for application of borrowed funds to interest free loans and advances and therefore, for the year under appeal also we do not find any reason to interfere with the order of ld. CIT(A) and accordingly dismiss this ground of Revenue. 17. Ground no.3 of Revenue s appeal reads as under :- 3. The Ld.CIT(A) has erred in law and on facts in deleting the addi .....

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ng average price value of ₹ 184570/- to the shortage of goods and added the same to the income of the assessee. 19. On appeal before ld. CIT(A), the said addition was deleted. 20. Revenue is now in appeal before the Tribunal. 21. Ld. DR supported the order of Assessing Officer. 22. On the other hand, ld. AR submitted that shortage of 1111 no. of items of automobile parts was just 0.13% of total sales of 825262 nos. And this being a normal shortage in the course of running of regular busine .....

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rve that short was duly shown in the quantitative details forming part of tax audit report showing therein a shortage of 1111 number of parts. We however, observe that complete quantitative details have been maintained and no defect has been pointed out by ld. Assessing Officer during the course of assessment proceedings. We further observe that total number of 825262 nos. of components were sold during the year and in percentage terms the shortage is just 0.13% of the total items sold. We are o .....

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ore, ld. CIT(A) has rightly deleted the addition and no interference is called for in the order of ld. CIT(A) relating to this ground. This ground of Revenue is dismissed. 24. Ground no.4 of the appeal reads as under :- 4. The Ld.CIT(A) has erred in law and on facts in deleting the disallowance of diesel expenses and trip and bhatta expenses of ₹ 27,64,867 out of ₹ 41,47,300/-. 25. Ld. Assessing Officer while comparing the diesel expenses and trip bhatta expenses to the total revenue .....

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icer, before ld. CIT(A), who gave part relief to the assessee by observing as under :- 7.4 I have carefully considered the entire facts on record regarding this issue. Before me, the Ld. AR contended that all the details were submitted during assessment proceedings vide their letter dated 03.11.2010 & 15.12.2010, before the DCIT and the accounts were audited by internal as well as statutory auditors and authenticated and the disallowance was ad hoc and arbitrary. The same arguments were put .....

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o of expense to income. Thus, according to appellant overall there is growth in the profit and therefore no artificial or estimated disallowance can be confirmed. 7.5 I have perused the relevant portion of the assessment order and also considered the written explanations of the appellant. The AO after considering the increase in fuel cost and mixed nature of accounts disallowed 10% of total expenses claimed on trip and bhatta charges and diesel expenses thereby making total addition of ₹ 4 .....

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the issue. The disallowance effected by the AO was at 10% of total claim, which is on the higher side. The current year operational results being on lower side vis-a-vis low ratio of such expenses to income during the year under consideration, also the claim of the appellant that freight rates, most of which are on rate contract basis cannot be increased instantly commensurate with diesel expenses, cannot be ignored fully. It was also observed that on the similar facts in the judgement of IT AT .....

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ance made of ₹ 41.47.300/- and that a relief of ₹ 27,64,8677- being 2/3rd of the disallowance be granted to the appellant, , 27. Aggrieved, Revenue is in appeal before the Tribunal. 28. Ld. DR supported the order of Assessing Officer whereas ld. AR relied on the order of ld. CIT(A) and further submitted that same issue was adjudicated by the co-ordinate bench in assessee s own case in ITA No.1091/Ahd/2005 for Asst. Year 2001-02, ITA No.4329/Ahd/2007 for Asst. Year 2004-05 & in IT .....

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ral view that most of the expenses are booked on the basis of self-generated evidences. 29. We further observe that such disallowance of diesel expenses and bhatta expenses had been made in the past also and the issue had travelled upto the Tribunal. We find that while dealing with this issue co-ordinate bench in ITA No.4329 and 4258/Ahd/2007 for Asst. Year 2004-05 has held as under :- "22. We have heard both the parties and gone through the facts of the case. As already mentioned, the onus .....

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ct that input cost has gone up due to rise in diesel prices and other inflation cost, observed that current year operational results are found to be different from the preceding year. Taking into considering the fact that most of the freight rates were on rate contract basis which could not be increased commensurate with diesel expenses, the Id. CIT (A) restricted the disallowance to the l/3rd of the total disallowance of ₹ 56.52 lacs. Though the Id. AR relied upon a decision in the case o .....

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are different from the facts obtaining in the preceding years as noted by the Id CIT (A), we are not inclined to interfere. Thus, ground No.l in the appeal of the assessee & ground No.l in the appeal of the revenue are dismissed." 30. We further observe that co-ordinate bench in ITA No.1091/Ahd/2005 for Asst. Year 2001-02 dealt with the same issue, wherein it has been held as under :- 6. We have duly considered the rival submissions, perused the relevant materials on record and also the .....

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highlighted by the learned CIT (A). Thus, in our considered view, the CIT (A) was very fair in coming to a conclusion to estimate the GP on job work of the assessee at 36% and, thereby, slashing the addition of ₹ 6,94 lakhs to ₹ 3.55 lakhs. However, the Revenue has not brought any credible evidence or working to upset the reasoning of the CIT (A). In view of the matter, we tend to agree with the CIT (A) on this issue. In essence, no interference of this Bench warranted on the issue. .....

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dings recorded by the Hon'ble earlier Bench are extracted, chronologically, as under: (ii) Interest on capital advances: "30. We have heasrd both the parties and gone through the facts of the case. Undisputedly, the Ld. CIT (A) relied upon orders of his predecessor for the earlier years. Revenue have not placed before us any material that the said orders relied upon by the Id. CIT (A) have been reversed in further appeal. Even otherwise, the Id. CIT (A) found that advances were not for .....

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were for business purposes, we do not find any merit in the ground raised by the Revenue..........." (iii) Restricting the disallowance out of trip bhatta and diesei expenses: "22. We have heard both the parties and gone through the facts of the case. As already mentioned, the onus squarely rested upon the assessee to satisfy the revenue authorities in respect of the purpose for which the expenditure concerned was incurred. In the instant case, the assessee did not produce log book / t .....

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