TMI Blog2018 (1) TMI 597X X X X Extracts X X X X X X X X Extracts X X X X ..... ibution to PF paid on or before the due date of filing the return of income u/s 139(1) of the Act should be allowed as deduction. SEE CIT vs Vijayshree Ltd. [2011 (9) TMI 30 - CALCUTTA HIGH COURT] Additions u/s 14A - Held that:- In the light of the uncontroverted factual details with regard to availability of own funds the disallowance of interest expenses in terms of Rule 8D(2)(ii) of the Rules was rightly deleted by CIT(A). As far as disallowance under Rule 8D(2)(iii) of the Rules is concerned, the CIT(A) has followed the decision of the Tribunal in the case of REI Agro Ltd. (2013 (9) TMI 156 - ITAT KOLKATA) and has directed the AO to exclude the investments which did not yield tax free income, while working out the average value of investment. We find no grounds to interfere with the order of CIT(A). - ITA No. 1652/Kol/2016 - - - Dated:- 10-1-2018 - Hon ble Shri N.V.Vasudevan, JM And Shri Waseem Ahmed, AM For the Appellant : Shri Arindam Bhattacharjee, Addl. CIT For the Respondent: Shri Subash Agarwal, Advocate ORDER PER N. V. VASUDEVAN, JM This is an appeal by the Revenue against the order dated 23.05.2016 of C.I.T- (A)-20, Kolkata relating to A.Y.2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessee submitted that the goods are loaded for despatch to customers through Railway Wagons. When the Assessee loads the goods for despatch through Railway Wagons actual measurement of weight cannot be done due to absence of Weighing Bridge at the originating station. The loading nevertheless is done on some estimate basis which often varies from the railway measurement when it actually goes to the Weighing Bridge. In case it is found that the goods were loaded in excess than the permissible load, it cannot be unloaded. The Railways however recover punitive charges for such overloading as additional freight which is only compensatory in nature. The Assessee reiterated that overloading charges were not in the nature of punishment for violation or infraction of law but by way of compensation for permitting to overload the goods beyond the permissible limit; moreover, there is no provision for criminal action or prosecution or confiscation of goods for overloading. It was argued that in fact overloading was very common which was permitted by the railways on additional freight termed as punitive charges. 5. The Assessee also submitted that overloading of wagons was not a deliberate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nts and cannot be disallowed under Explanation to section 37(1) of the Act. 1. M/s Taurian Iron Steel Co vs ACIT, ITA No. 847 1613/M/2010 2. Western Coalfields Ltd vs DCIT, ITA Nos. 289 290/Nag/2006 261/Nag/2008 3. Agarwal Roadlines (P) Ltd vs DCIT, ITA No. 668/Ahd/2009 4. DCIT vs Bharat C Gandhi, ITA No. 4270/Mum/2009 9. The CIT(A) found that on an identical issue he had in one of assessee s group of cases for A.Y.2008-09 in an order dated 11.12.2014 taken a view that the punitive charges for overloading were actually in the nature of additional freight for transporting goods beyond the permissible carrying capacity which cannot be categorised as an expenditure incurred for any purpose which is an office or infringement of law. Following the aforesaid decision the CIT(A) took the view that payment in question was compensatory in nature and not penal and therefore the provision to Explanation to Section 37(1) of the Act will not be applicable. In the decision relied upon by CIT(A) there is also a discussion about the notification issued by the railway ministry of overloading charges and also the decision of the Hon ble Supreme Court in the case of Pra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... elivery system by providing a civil alterative to criminal prosecution of minor crimes. His submission was that the punitive damages in the present case are to be regarded as penalty for infringement of law falling within the ambit of Explanation to section 37(1) of the Act. The ld. DR also placed reliance to the decision of the Hon ble Karnataka High Court in the case of CIT vs Mamta Enterprises 266 ITR 356 (Ka. In the aforesaid case, compounding charges paid for unauthorised construction was claimed as deduction while computing income from business. The Hon ble Karnataka High Court held that the compounding fee was paid for the purpose of compounding a criminal offence and was therefore hit by the provision of Explanation to section 37(1) of the Act. Reference was also made to the decision of the Hon ble Supreme Court in the case of Haji Aziz Abdul Brothers vs CIT 41 ITR 350 (SC) . In the aforesaid case fine paid to customs authorities for release of confiscated goods imported contrary to law was held to be not allowable as deduction u/s 37(1) of the Act. 13. The ld. Counsel for the assessee placed reliance on the decision of the ITAT, Kolkata Bench in the case of DCIT vs M/ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntire weight loading beyond the permissible carrying capacity would be '2 times the freight rates applicable to that commodity in case of Situation A' and 3 times the freight rates applicable to the highest class in case of Situation B'. Thus, it is obvious from the notification of Ministry of Railways dated 23.12.2005 that the railway authorities do allow overloading of its rake and it charges 2 or 3 times the freight rate applicable to that commodity as punitive charges'. Though the words used in the notification are 'punitive charges', the charges levied by the Indian Railways for carrying the goods in its rake .are permitted by Railway authorities itself and the punitive charges are computed as 2 times or 3 times of the freight rates. The punitive charges levied by Railways, in accordance with the notification of Ministry of Railways dated 23.12.2005, for carrying goods in its rakes are not 'for any purpose which is an offense or which is prohibited by law'. As a matter of fact, the Indian Railways itself permits carrying weight load beyond the permissible carrying capacity subject to payment of higher rate of freight by 2 times or 3 times. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under the relevant law governing the provident fund, will not be allowed as deduction. It is the plea of the assessee that the employees contribution to PF ESI had been paid by the assessee on or before the due date of filing the return of income for the relevant assessment year u/s 139(1) of the Act and therefore deduction claimed should be allowed as provided under the proviso to section 43B of the Act. The said plea of the assessee was rejected by the AO for the reason that the proviso to section 43B of the Act cannot be read into the provision of section 36(1)(va) of the Act. 19. On appeal by the assessee, the CIT(A) directed the AO to allow the claim of the assessee for deduction and in doing so, the CIT(A) followed the decision of the Hon ble Delhi High Court in the case of CIT vs AIMIL Ltd. Ors. 229 CTR 418 (Del) wherein it was held that employees contribution to PF should be allowed as deduction which is paid on or before the due date of filing the return of income u/s 139 of the Act. Aggrieved by the order of CIT(A) the revenue has raised ground no.2 before the Tribunal. 20. At the time of hearing it was brought to our notice that the Hon ble Calcutta High Cour ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... far as ground no.3 raised by the revenue is concerned the facts are that the assesee earned tax free dividend income. The AO invoking the provision of section 14A of the Act r.w. Rule 8D of the I.T.Rules, 1962 (Rules) disallowed the expense of ₹ 3,52,568/- computed in the following manner :- As such ₹ 3,52,568/- was added back to the total income of the assessee. 24. Before CIT(A) the assessee pointed out that the investments as appearing in the balance sheet as on 31.03.2013 was a sum of ₹ 4 corres and that since A.Y.2009- 10 there was no new investments. The assessee pointed out that the position of own funds are as follows :- 31.03.2013 31.03.2012 Share Capital 24,57,54,000.00 24,57,54,000.00 Reserve Surplus 18,83,19,63,076.53 14,65,67,95,185.00 It was argued that as far as disallowance of interest under Rule 8D(2)(ii) is concerned no disallowance on account of interest expenditure is warranted as the assessee was having huge own funds in the form of s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dend income while working out the average value of investments. The following were the relevant observations of the CIT(A) : I have perused the impugned order and also considered the submissions of the assessee and relevant judicial decisions. It was argued before me that the investments were made by the assessee out of its own fund and that the borrowed fund was utilized for the purposes of the business. I find from the balance sheet for the relevant year that the assessee had share capital of ₹ 245754000/- as on 31-03-2013. In this factual background, I find merit in the argument that the investments were made by the own fund of the assessee and therefore no disallowance out of interest expenditure was justified. The contention of the assessee is also supported by the decision of the jurisdictional High Court in the case of Britannia Industries Ltd 280 ITR 525 (Cal). In view of the above, the addition of ₹ 152568/ -made under rule 8D(2)(ii) is deleted. The assessee has contended before me that all investments have not yielded dividend income during the year and therefore no disallowance could lawfully be made under rule 8D(2)(iii) for all investments in view of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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