TMI Blog2017 (6) TMI 783X X X X Extracts X X X X X X X X Extracts X X X X ..... oyers contribution of Provident Fund (as enhanced by CIT (A)] was uncalled for and therefore set aside. Thus the grounds of Assessee are allowed. - ITA No.1698/PUN/2014 - - - Dated:- 31-5-2017 - MS.SUSHMA CHOWLA, JM AND SHRI ANIL CHATURVEDI AM For The Appellant : Shri Nikhil Pathak For The Respondent : Shri Shivanand Kalakeri ORDER PER ANIL CHATURVEDI, AM : The appeal of the assessee is emanating out of the order CIT (A)-V, Pune dated 24/07/2014 for the AY 2009-10. 2. The facts as culled out from the material on record are as under: 2.1. Assessee is a company stated to be engaged in the business of industrial construction. Assessee filed its return of income for AY 2009- 10 on 2.10.2009 declaring Total Income of ₹ 4,82,49,120/- The case was selected for scrutiny and thereafter assessment was framed u/s 143(3) on 26.12.2011 and the total income was determined at ₹ 4,92,12,630. Aggrieved by the order of AO, Assessee carried the matter before Ld CIT(A), who vide order dtd 24.7.2014 (in appeal Nos PN/CIT(A)-V/ITO(OSD) ud/677/11-12) granted partial relief to the assessee. Aggrieved by the order of Ld CIT(A), Assessee is now in appeal befor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Labour Conveyance and Transport ₹ 25,600/- c. Weighment Charges ₹ 15,230/- d. Local Conveyance Rs.10,79,139/- e. Office Expenses ₹ 6,50,437/- Rs.22,65,621/- 6.1] The learned CIT (A) failed to appreciate that all the expenses were incurred by the assessee for the business purpose and were duly supported by proper bills / vouchers and hence, the adhoc disallowance made in respect of the said expenses was not justified on facts of the case. 7] The appellant craves leave to add, alter amend or delete any of the above grounds of appeal. 3. Before us at the outset, the Ld AR submitted that ground no 7 is general and requires no adjudication and he did not wish to press ground no 6. He further submitted that as far as other grounds are concerned, though the assessee has raised various grounds but all the grounds are interconnected and the sole controversy which requires adjudication ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 7. I have carefully considered the facts of the case as well as of the appellant. The main contention of the appellant is that as per terms of agreement the appellant was responsible for provident fund payments in respect of work done for the respective companies and since sub contractors were not having PF registration the onus fell upon the appellant to discharge this liability. The argument of the appellant is difficult to be accepted as nothing prevented the appellant to debit the account of sub-contractors on account of such payments in case these sub-contractors were not having PF registration members. I also find that observation of the Assessing Officer is quite correct regarding non contractual nature of such payment as it was basically duty of the subcontractors to collect the same from respective employees and make the payment either directly or through the appellant but never the less the same cannot be claimed expenditure of the appellant company. 8. The appellant s reliance on the decision of Hon'ble Bombay High Court s order in the case of CIT Vs. Sales Magnesite Pvt. Ltd. 214 ITR 1, for allowability of the same on the grounds of commercial expediency ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ct of the labours employed by the Assessee and by sub contractors. He further submitted that many of the subcontractors were not registered under the PF Act and that it was not possible for the assessee to ensure that the sub contractors would deposit the PF. He therefore submitted that to fulfill the obligation cast upon it, Assessee had undertaken the obligation which was an extra cost for carrying on its business. He pointed to the sample agreement entered into by the assessee with one of the clients (Kansai Nerolac Paints Ltd) which is placed at page 12-22 of the paper book. In support of his stand that it is the Assessee as the principal employer who is liable to make the payment of contribution of provident fund, he pointed to the section 30 of the Employees Provident Funds Scheme, 1952 and section 8A of the Employers Provident Fund (Miscellaneous) Provision Act, 1952. He further submitted that the expenditure was incurred during the course of business out of commercial expediency and therefore even on that ground it was allowable. He therefore submitted that the entire expenditure (including the enhancement made by Ld.CIT(A) needs to be set aside and the expenditure be allow ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r, either by deduction from any amount payable to the contractor under any contract or as a debt payable by the contractor. (2) A contractor from whom the amounts mentioned in sub-section 1 may be recovered in respect of any employee employed by or through him, may recover from such employee the employee s contribution under any Scheme by deduction from the basic wages, dearness allowance and retaining allowance if any payable to such employee. (3) Notwithstanding any contract to the contrary, no contractor shall be entitled to deduct the employer s contribution or the charges referred to in sub-section 1 from the basic wages, dearness allowance, and retaining allowance if any payable to an employee employed by or through him or otherwise to recover such contribution or charges from such employee. Explanation. In this section, the expressions dearness allowance and retaining allowance shall have the same meanings as in section 6. 9. Section 30 under chapter-V of the Employees Provident Funds Scheme 1952, reads under: 30. Payment of contributions: (1) The employer shall, in the first instance, pay both the contribution payable by himself (in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... must be revenue expenditure and not in the nature of capital expenditure; second, it must be laid out or expended wholly and exclusively for the purpose of the business or profession carried on by the assessee; third, it must not be of the nature described in Sections 30 to 36; fourth, expenditure should not be personal expenditure of the assessee; fifth, expenditure should have been incurred in the previous year; and finally, expenditure should not have been incurred for the purpose which is an offence or which is prohibited by law (Explanation to Section 37 (1 )). 12. Section 37(1) does not curtail or prevent an assessee from incurring an expenditure which he feels and wants to incur for the purpose of business. Expenditure incurred may be direct or may even indirectly benefit the business in form of increased turnover, better profit, growth etc. Various courts have held that when as long as the expenditure incurred is wholly and exclusively for the purpose of business, the Assessing Officer cannot by applying of his own mind, disallow whole or a part of the expenditure. The Assessing Officer cannot question the reasonableness by putting himself in the arm-chair of the busin ..... X X X X Extracts X X X X X X X X Extracts X X X X
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