TMI Blog2017 (12) TMI 1471X X X X Extracts X X X X X X X X Extracts X X X X ..... amounts towards ESIC and PF before due date of filing return of income. - Decided in favour of assessee. Disallowance of donations made for celebration of Ambedkar Jayanti, Construction of dome to Darshak Tarun Mandal and for distribution of school accessories - allowable business expenses - Held that:- In assessment year immediately proceeding the assessment year under appeal, the assessee had made donations to various such organizations. The Coordinate Bench of the Tribunal held that such donations are allowable expenditure under section 37(1) of the Act. - Decided in favour of assessee Disallowance u/s.43B on account of leave encashment - Held that:- The nature of disallowance in the assessment year under appeal is similar to the one adjudicated by Tribunal in assessee’s own case in immediately preceding assessment year. In line with the earlier order of Co-ordinate Bench in assessee’s own case for assessment year 2008-09, we direct the Assessing Officer to allow the claim of assessee to the extent of permissible under the provisions of section 43B(f) of the Act. Disallowance of various payments covered u/s.43B - Held that:- A perusal of impugned order shows that ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... S=sufficeincy of own funds - Held that:- A perusal of the balance sheet and break up of the interest free funds/own funds available with the assessee show that the assessee is having interest free funds to the tune of ₹ 665.35 Crores. The extent of loans advanced to sister concerns and other associate concerns is not emanating from the orders of the authorities below. The ld. AR of the assessee has also not furnished the amount advanced as loan to sister concerns/ associate concerns. Thus, we are of considered view that this issue needs a re-visit to the file of Assessing Officer. The Assessing Officer shall examine the extent of loans under question vis-a-vis availability of interest free own funds of the assessee - Decided in favour of assessee for statistical purpose. Disallowance on account of non-collection of share premium from employees under ESOP scheme - Held that:- This issue is identical to the one adjudicated by the Co-ordinate Bench in assessment year 2008-09 as held that issue of allowability of ESOP expenses on the date of exercising of option by the assessee was held to be an ascertained liability and not contingent liability by the Special Bench of Bangal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... otal income at ₹ 55,99,17,110/-. Aggrieved by the assessment order dated 30.12.2011, the assessee filed appeal before Commissioner of Income Tax (Appeals). The First Appellate Authority after considering facts of the case and submissions of assessee partly allowed the appeal of assessee. Against the findings of Commissioner of Income Tax (Appeals) now, both, assessee and Revenue are in appeal before Tribunal. 3. The assessee in appeal has assailed the findings of Commissioner of Income Tax (Appeals) by raising following grounds: 1. The Ld. Commissioner of Income Tax (Appeals) has erred in law and in facts in not appreciating that the disallowance made by the Assessing Officer u/s. 14A of the Act was incorrect and unjustified. 2. The Ld. Commissioner of Income Tax (Appeals) has erred in law and in facts in confirming the disallowance of ₹ 6,44,363/- on account of late payment of ESIC and PF. 3. The Ld. Commissioner of Income Tax (Appeals) has erred in law and in facts in confirming the disallowance on account of donation of ₹ 26,21,746/-. 4. The Ld. Commissioner of Income Tax (Appeals) has erred in law and in facts in confirming the disall ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... premium from employees under EJOP scheme, claimed under the head Employee Compensation Expenses ignoring the ratios of ITAT s decision in Ranbaxy Laboratories Ltd. Vs. Addl. CIT and VIP Industries Vs. DCIT ( ITA No. 7242/Mum/2008) 6. On the facts and in the circumstances of the case, the Ld. CIT(A) erred in deleting the addition of ₹ 17,10,000/- on account of rental income ignoring the fact that rent of only ₹ 23,08,695/- was offered to tax under the head income from house property whereas deduction claimed under this head in the computation was of ₹ 40,19,298/- 7. On the facts and in the circumstances of the case, the Ld. CIT(A) erred in deleting of ₹ 17,10,600/- on account of rental income, which was in fact the excess deduction claimed under this head. 8. On the facts and in the circumstances of the case, the Ld. CIT(A) erred in deleting the addition of ₹ 3,30,243/- by holding that the assessee, being a member of AOP M/s. Phoenix Venture, received share of profit as well as professional fees, but capitalized portion of these receipts and debited the balance to P L A/c of the AOP, without bringing definite amounts of these figures ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s made by representatives of rival sides. It is an undisputed fact that the assessee has earned tax free income on the investments made. The contention of the assessee is that assessee has made strategic investment. It is also contention of the assessee that own funds of the assessee are sufficient to cover strategic investments, therefore, no disallowance u/s.14A is required to be made. We find that disallowance u/s.14A r.w.Rule 8D was made in immediately preceding assessment year i.e. 2008-09. The Tribunal deleted the disallowance made under Rule 8D(2)(ii) by placing reliance on the decision of Hon ble Bombay High Court in the case of HDFC Bank Ltd. Vs. DCIT (supra). The Tribunal held that own interest free funds of the assessee are much more than the total investment made. Therefore, no disallowance under Rule 8D(2)(ii) was required to be made. In the assessment year under appeal, a perusal of Balance Sheet of the assessee at page No. 8 of the paper book and the summarized statement of own funds of assessee at page No. 58 reveal that total interest free funds including Share Capital and Reserves and funds in the form of Current Liabilities available with the assessee are to t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the ld. AR placed reliance on the following decisions : i) CIT Vs. Ghatge Patil Transports Ltd. reported as 368 ITR 749 (Bom.) ii) CIT Vs. Vinay Cement Ltd. reported as 213 CTR 268 (SC) iii) ACIT Vs. Pradeep Bakru Patil, ITA No. 11272/PN/2012 dated 27.09.2013 iv) DCIT Vs. Gopinath Engineering Co. Pvt. Ltd., ITA No. 8624/M/2011 dated 13.07.2016. 9. The ld. DR submitted that assessee has not made contribution towards ESIC PF within the statutory time prescribed under respective Acts; therefore, Authorities below have rightly disallowed the same. 10. Both sides heard. A perusal of the impugned order shows that disallowance of ₹ 6,44,363/- has been made on account of delayed payment on ESIC and PF. The contention of assessee is that amount has been deposited before due date of filing return of income. The Hon ble Jurisdictional High Court in the case of CIT Vs. Ghatge Patil Transports Ltd. (supra.) has held that where contributions to ESIC and PF are made before due date of filing return of income, the assessee is eligible to claim benefit of the same. It has not been disputed by Revenue that the assessee has deposited the amounts towards ESIC and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hysically challenged. The assessee has also purchased Force Traveler Ambulance for ₹ 7,43,265/- which has been donated to Vikas Mandal by the assessee. The necessary documents in this regard are placed on record. The assessee has also contributed ₹ 11,54,837/- to upgrade Science Lab of St. Felix High School, Pune. The necessary bills are placed in the Paper Book along with quotations received. Further amounts have been given to the said school. The assessee has also enclosed certified donation receipts, wherein the recipient is duly registered under section 80G of the Act for which, 80G receipts are enclosed. In view of the facts and circumstances and evidences available, the assessee is carrying out the activities of upliftment of public at large and by way of making contributions for upgradation of Science lab or providing ambulance to organizations or contributing to the society by purchasing paintings, etc., then such activities of assessee are to create and establish image of assessee company in the eyes of public. The business carried on by the assessee is relatable to public at large, where the tenements built by the assessee were to be picked up by the public. H ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt in terms of section 43B(f) of the Act. We find that in assessment year 2008-09, the Coordinate Bench of the Tribunal has dealt with this issue in appeal by the assessee. The Tribunal partly allowed this ground of appeal of assessee by observing as under : 21. The assessee before us has raised the limited plea on without prejudice basis that the claim to the extent of payment of leave encashment in terms of section 43B(f) of the Act be allowed. We find merit in the said plea of assessee and direct the Assessing Officer to verify the claim of assessee and allow the deduction to the extent of leave encashment actually paid during the year under section 43B of the Act. There is no merit in the alternate plea raised by the assessee that the provisions of section 43B(f) of the Act were struck down by the Hon ble High Court of Calcutta in Exide Industries Ltd. Anr. Vs. Union of India Ors. (2007) 292 ITR 470 (Cal), wherein the Hon'ble Supreme Court in SLP (Civil No.2289/2008) vide order dated 08.05.2009 had stayed the operation of said judgment. Accordingly, the ground of appeal No.3 raised by the assessee is partly allowed. The nature of disallowance in the assessmen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vshahi Mitra Mandal, Shankar Mitra Mandal, cancer awareness etc. aggregating to ₹ 3,85,410/-. The Assessing Officer partly accepted gifts made by assessee and made addition of ₹ 1,50,000/- on the ground that expenditure incurred is not connected with the business of assessee. The Commissioner of Income Tax (Appeals) upheld the findings of Assessing Officer. The ld. AR pointed that the Co-ordinate Bench of Tribunal in assessee s own case in assessment year 2008-09 has allowed such gifts and contribution made by assessee on various occasions and festivals. 21. The ld. DR vehemently supporting the findings of Commissioner of income Tax (Appeals) submitted that donations made by assessee to the tune of ₹ 3,85,410/- to various organization are not connected with business of assessee. Hence, the same are not allowable under provision of section 37 of the Act. However, Authorities below have partly accepted such contribution and donation made by assessee, less than 50% of such contribution have been disallowed. The Assessing Officer and Commissioner of Income Tax (Appeals) are very reasonable in allowing substantial relief to the assessee. 22. We have heard the sub ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... roved sales and provision created for unapproved sales at page No. 87 and 88 of the paper book. The ld. AR also referred to Clause-27 of AS-7. The ld. AR contented that the provision is created on last day of earlier year and is reversed on first day of subsequent year. This method of accounting is consistently followed by assessee over the years. The assessee had created similar provision in assessment years 2007-08 to 2011-12. The Assessing Officer made no disallowance in the said assessment year except assessment year under appeal. The ld. AR further asserted that as the provision is created in current year and is reversed in subsequent year the entire exercise is revenue neutral. The ld. AR submitted that no disallowance is required to be made in the facts of the case. To support his contentions, the ld. AR placed reliance on the decision of the Hon ble Supreme Court of India in the case of CIT Vs. Excel Industries reported as 358 ITR 295 to contend that no addition shall be made merely due to change in the year of taxability, if the same is revenue neutral. 24. On the other hand, ld. DR vehemently supported the findings of Commissioner of Income Tax (Appeals) in confirming ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1/- u/s. 36(1) (iii) of the Act. The ld. AR for the assessee submitted that the Assessing Officer made disallowance u/s.36(1)(iii) of the Act on the ground that assessee has paid interest on borrowed funds at the rate of 14% whereas, the assessee has advanced funds at an average interest rate of 7% to various entities. The Assessing Officer made addition of the difference in interest rate i.e. 7% on the funds advanced. The ld. AR contented that assessee has given loan to group concerns and other parties in the same line of business. Thus, advances are in the normal course of business and hence, the same are allowable as business expenditure. The ld. AR further submitted that the assessee has sufficient own funds to take care of advances made by assessee. In support of his submission, the ld. AR placed reliance on the following decisions : i) CIT Vs. Reliance Utilities and Power Ltd. reported as 313 ITR 340 ( Bom.) ii) S.A. Builders Ltd. Vs. CIT reported as 288 ITR 1 (SC) iii) CIT Vs. Gujarat Reclaim and Rubber Products Ltd. reported as 383 ITR 236 (Bom.) The ld. AR also furnished a chart giving details of advances/loans, interest disallowed by Assessing Officer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Assessing Officer. The Assessing Officer shall examine the extent of loans under question vis-a-vis availability of interest free own funds of the assessee. The Assessing Officer after examining the availability of own funds of the assessee and in light of our above observations shall re-examine the issue, in accordance with principles of natural justice and law. Accordingly, ground No. 8 raised in the appeal by assessee is allowed for statistical purpose. 29. In the result, appeal of the assessee is partly allowed in the aforesaid terms. ITA No. 2137/PUN/2013 ( By Revenue) 30. Now we proceed to decide the appeal of the Revenue. Grounds No. 1 and 2 raised in appeal by Revenue relate to disallowance u/s. 14A made by Assessing Officer by invoking the provision of Rule 8D of the Act. The disallowance has been made under Rule 8D 2(ii) and 8D 2(iii) of the Act. In first appeal, the Commissioner of Income Tax (Appeals) deleted the disallowance computed under Rule 8D 2(ii) and also granted part relief to the assessee while computing disallowance under Rule 8D 2(iii) of the Act. The Revenue is seeking restoration of entire disallowance made by Assessing Officer. In the app ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of three years. During the year under consideration, the assessee claimed expenditure of ₹ 41,58,745/-. The issue of allowability of ESOP expenses on the date of exercising of option by the assessee was held to be an ascertained liability and not contingent liability by the Special Bench of Bangalore Tribunal in Biocon Ltd. Vs. DCIT (supra). The Special Bench held the said discount on ESOP was to be allowed as deduction under section 37(1) of the Act, during the years of vesting on the basis of percentage of vesting during such period, subject to upward or downward adjustment at the time of exercise of option. The Pune Bench of Tribunal further in Sandvik Asia Pvt. Ltd. Vs. ACIT (supra) had also allowed the claim of assessee vide para 6 in turn, relying on the Special Bench decision in Biocon Ltd. Vs. DCIT (supra). Following the same parity of reasoning, we allow the claim of expenditure on account of exercise of ESOP option in the hands of assessee to the extent of 1/3rd as claimed by the assessee at ₹ 41,58,745/-. The ground of appeal No.4 raised by the assessee is thus, allowed. The grounds of appeal raised by the assessee are thus, partly allowed. Undisputedly ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s income and credited to P L account of the assessee. 37. On the other hand, the ld. DR prayed for reversing the findings of Commissioner of Income Tax (Appeals) and restoring the addition made by Assessing Officer. 38. Both sides heard. We find that the Commissioner of Income Tax (Appeals) has deleted the addition by observing as under : 14.3 I have carefully considered the impugned assessment order and the submission of the appellant. I find the above contention of the appellant is acceptable. The income of AOP for A.Y.2009-10 was computed by the concerned AO u/s. 143(3). The appellant being one of the members of the AOP M/s. Phoenix Ventures, had received the share of profit as well as professional fees. Portion of the receipts were capitalized and added to the cost of the asset and the balance was debited to the P L account by M/s. Phoenix Ventures, whereas the appellant has credited the entire amount in the P L account and this is the reason for the difference which was not appreciated by the AO. In view of this, the AO is directed to delete the addition made. This ground of appeal is allowed. The ld. DR for Revenue has not been able to controvert the fi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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