TMI Blog2018 (8) TMI 1128X X X X Extracts X X X X X X X X Extracts X X X X ..... bearing founds have been diverted to interest free advances. Further, from perusal of the list of alleged loans and advances, we find that they have been given in connection to the business of the assessee and are for the business exigencies which do not call for any addition for disallowance of interest expenditure. - No additions - Decided against the revenue. Payment of commission - unreasonable expenses - genuineness - Held that:- payment of commission paid to Capt. Hanif has been paid under written agreement, alleged commission has been offered to tax by Capt. Hanif who is assessed to tax @30%, tax has been duly deducted at source, payment of commission has been made through account payee cheque and the purpose of making the payment is also well established from the agreement as well as the nature of payment which is for procuring the helicopter on hire by a political party. - Claim of expenses cannot be denied - Decided against the revenue. - ITA No.795/Ind/2014 - - - Dated:- 31-7-2018 - SHRI KUL BHARAT, JUDICIAL MEMBER AND SHRI MANISH BORAD, ACCOUNTANT MEMBER For The Revenue : ShriK.G. Goyal, Sr. DR For The Respondent : ShriC.P.RawkaCA ORDER ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ibility on Provident Fund contribution based on plethora of judgment. The ld. CIT(A) has referred to more than 10 case laws in which it has been held that disallowance under section 36(15A) cannot be made if the amount has been deposited before the due date of filing of return. Specific reference has been made to Gujarat High Court decision, Commissioner of Income Tax vs Gujarat State Road Transport Corporation, 366 ITR 170. It may kindly be appreciated that the above case law is nearly the latest on the subject matter. Therefore, all the previous decisions found on this subject stand duly considered by the honorable High Court. In view of the above, the disallowance has been rightly deleted by the Ld. Commissioner of Income Tax Appeals. 7. We have heard rival contentions and perused the records placed before us. The revenue is aggrieved with deletion of disallowance of ₹ 35, 477/-deleted by Ld.CIT(A) on account of delayed payment of employees contribution to Provident Fund. 8. We observe that the Ld.CIT(A) has deleted the disallowance observing as follows; I have carefully considered the submission of the appellant and facts of the case on perusal of the details ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... However, it may be mentioned that the Hon'ble Karnataka High Court in a recentdecision in the case of EssaeTeraoka (P) Ltd. Vs. DCIT (2014) 366 ITR -408 (Kar) (246) did not agree with the view of Hon'ble Gujarat High Court in the case of CIT vs. Gujarat State Road Transport Corporation (supra) and held that even though the employer did not deposit the employees' contribution to PF and ESI within the stipulated time as contemplated in the respective Acts, but if deposited before the due date contemplated u/s 139(1) of the Act, the same is allowable deduction. Thus, it is clear that there is difference of opinion on this issue between different High Courts, though majority of the High Courts have decided the issue in support of the claim of the appellant. Now, it has been held by various Courts that if two view are possible the view which is favourable to the assessee must be accepted. In this regard, reference can be made to the decision of Hon'ble Supreme Court in the case of CIT Vs. Vegetable Products Ltd. (1977) 881TR 192 (SC). Therefore, considering the facts of the case and accepting the favourable view to the appellant, the disallowance of ₹ 35, 477/- m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be available for diversion to other parties. Similarly cash credit limit is sanctioned by a financial institution in consideration of stock and trade departments maintained by the assessee. In this account all the incoming by way of sales are deposited and whenever needed to effect, purchase the consideration is paid there from obviously no funds could be utilized for diversion to third parties from this account as well. 14. Honorable jurisdictional High Court in the case of Commissioner of Income Tax V/s Alok Paper Industries[138 ITR 0729]. The findings of the honorable court as per para 3 of the order are appended below for:- Business expenditure-Interest on borrowed capital-ITO disallowed proportionate interest on the borrowed capital to the extent of debit balance of one partner on which no interest was charged-Tribunal deleted disallowance-Tribunal justified-Though the interest that had been paid to the partners had already been added back to the total income-Hence, the disallowance was not valid 15. In view of the foregoing para's Learned Commissioner of Income Tax Appeals has righty deleted the disallowance. 16. We have heard rival contentions and peru ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d by the appellant during assessment proceedingsthat all advances were related to business purposes. Thus, the A.O. had also not established any nexus that interest bearing funds were diverted for non-business purposes. Therefore, considering the totality of facts and circumstances as well as the decisions relied upon by the appellant, I am of the view that the AO was not justified in disallowing the interest of ₹ 7, 66, 563/- claimed by the appellant. Therefore the disallowance of ₹ 7, 66, 563/- of interest is deleted . 18. From the perusal of the finding of the Ld.CIT(A) as well as in the light of decisions relied by the Ld. Counsel of the assessee and examining the facts in the instant case, we find that the assessee has taken loans by way of cash credit limit from bank, term loan from bank and other loans from Chola Mandalam DBF Finance and these loans have been taken for the specific business purposes. Nowhere during the course of assessment proceedings as well as proceedings before the first appellate authority and before us the revenue has been able to bring any evidence on records to prove that the interest bearing founds have been diverted to interest free ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e further appreciated that no enduring benefits have generated or approved to the assessee from above expenditure. It is further submitted that expenditure does not fall within the category of personal expenditure in any manner. The commission has been paid wholly and exclusively for the business purpose as explained and clarified by the assessee as well as the recipient of the commission. 25. In view of the above order of the Learned Commissioner of Income Tax appeal may be sustained. 26. We have heard rival contentions and perused the records placed before us. The revenue s is appeal regarding deduction of addition of ₹ 59, 85, 000/- by Ld.CIT(A) made by Ld.A.O on account of disallowance of commission payment to the extent of ₹ 59, 85, 000/- out of total claim of ₹ 70, 50, 000/-. 27. We observe that the Ld.CIT(A) deleted the disallowance observing as follows; 6.4 I have carefully considered the submission of the appellant and facts of the case. I have also perused the relevant assessment records of the appellant for A. Y. 2010-11. The appellant had claimed to have paid ₹ 70, 00, 000/- as commission to Captain Hanif Proprietor of M/s Gurez S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... paid by OSS Aviation to the Operator. From the assessment order, it is noticed that the appellant had furnished working of commission paid to Captain Hanif as under: - S.No. Remarks/Helicopter Registration Basis of Commission (Hours Run) Rate (Per Hour) Total Commission 1 VT ERR(Cheetah 135:00 15, 000 20, 25, 000 2 VT-SPN(Bell 407) 120:00 15, 000 18, 00, 000 Total 38, 25, 000 S.No. Remarks/Helicopter Registration Basis of Commission (Hours Run) Rate (Per Hour) Total Commission 1 VT-ERR 86:00 12, 000 10, 32, 000 2 VT-WEX 78:00 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e u/s 37(1) of the Act, the A.O. cannot disallow a portion of the expenditure treating the same as excessive and unreasonable putting himself in the position of the businessman or the board of directors. Thus, the disallowance to the extent of ₹ 45, 000/- also cannot be sustained. Therefore, considering the facts and circumstances of the case and legal position on the issue as well as judicial decisions referred to by the appellant in its submission, I am of the opinion that the disallowance of ₹ 59, 85, 000/- out of commission paid was not lawful and not justified. Hence, the disallowance of commission to the extent of ₹ 59, 85, 000/- is deleted. 28. From the perusal of detailed findings of Ld.CIT(A) there cannot be any dispute to the fact that payment of commission paid to Capt. Hanif has been paid under written agreement, alleged commission has been offered to tax by Capt. Hanif who is assessed to tax @30%, tax has been duly deducted at source, payment of commission has been made through account payee cheque and the purpose of making the payment is also well established from the agreement as well as the nature of payment which is for procuring the helicopt ..... X X X X Extracts X X X X X X X X Extracts X X X X
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