TMI Blog2018 (9) TMI 223X X X X Extracts X X X X X X X X Extracts X X X X ..... contention of the assessee. In this case, these shares, securities etc. on which dividend income was earned, were purchased compulsorily by the assessee in obedience to the direction of the Reserve Bank of India and were different from those which are bought and sold for the purpose of profit making. These assets of the assessee could not be considered as its trading assets. None the less investment in shares, securities etc. was so much an integrate part of the business of the assessee, that the business expenditure could not be segregated into parts representing expenses for earning dividend and other expenses. If for convenience and speedy disposal of cases one per cent of the expenses is deducted as attributable to earning exempted income it cannot be said that it is a bad practice. At times, even damages are computed on the basis of approximation and accepted by the Court. The calculation of the exact expenses incurred for earning dividend may not be theoretically possible. Therefore, computation on the basis of one per cent of the total business expenditure is reasonable in our view. This point fails. Provident fund contribution by assessee beyond the due date but b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tricting the depreciation only with regard to capital expenditure for any structure by way of addition and/or alteration ? ii) Whether on the facts and in the circumstances of the case the Tribunal erred in affirming the disallowance of ₹ 1,31,002/- being the liabilities for business expenditure on the ground that they relate to earlier previous year, even when the assessee undeniably received the relevant bills during the next previous year relevant to instant assessment year? iii) Whether the Tribunal should have held that the Reserve Bank of India s regulatory Directions requiring investment of the assessee s surplus fund in securities, stocks, specified bonds etc. as the 2 precondition for the licence to carry on the business as a Residuary Non-banking Financial Company rule out the part disallowance of business expenditure by ad hoc estimate at ₹ 8,86,266/- under Section 14A of the I.T. Act deeming it as incurred in relation to earning exempt dividend income and further that the Proviso to that section precludes such disallowance of expenditure? iv)Whether the Tribunal should have held that the assessee s plea for a direction for alternative relie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... view. The issue involves more questions of fact and principles of accounting than law. We do not find that any substantial question of law has been raised by the assessee. With regard to question (iii), from time to time, the Reserve Bank of India made directions upon the assessee compelling them to invest a specified amount in security, stocks, specified bonds etc. This was one of the conditions for continuance of their licence to carry on the business as a residuary non-banking financial company. The income tax department made an estimate of ₹ 8,86,266 as business expenditure to earn exempt dividend income under Section 14A of the Income Tax Act, 1961 and disallowed it. The question was whether Section 14A and the proviso thereto precluded this disallowance. The above sum of ten per cent of the business expenditure, which the assessing officer attributed to earning exempt income, was a thumb rule. This was reduced to one per cent by the Commissioner of Income Tax (Appeals). The decision of the Commissioner of Income Tax (Appeals) was affirmed by the tribunal. Mr. Chatterjee, learned Senior Advocate for the assessee contended that his client was a non-residuary non- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sidered as its trading assets. But none the less investment in shares, securities etc. was so much an integrate part of the business of the assessee, that the business expenditure could not be segregated into parts representing expenses for earning dividend and other expenses. We are also of the opinion that if for convenience and speedy disposal of cases one per cent of the expenses is deducted as attributable to earning exempted income it cannot be said that it is a bad practice. At times, even damages are computed on the basis of approximation and accepted by the Court. The calculation of the exact expenses incurred for earning dividend may not be theoretically possible. Therefore, computation on the basis of one per cent of the total business expenditure is reasonable in our view. This point also fails. This Section 260A appeal is accordingly disposed of. ( 2) ITA No.601 of 2004 On 23rd December, 2010 this appeal was admitted by the same division bench of our Court to be heard on the following substantial questions of law which related to the assessment year 1999-2000 of the assessee. ( 1)Whether the Tribunal erred in declining to allow the depre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the one raised in ITA 600 of 2004. In that appeal this issue was not raised. This was for the reason that the appellant got the relief it wanted. In the notes of argument submitted by the appellant in this matter they have said that their argument in this appeal is similar to the one in ITA 600 of 2004. So we take it that this ground is not pressed in this appeal also. The fourth ground is most interesting. Section 43B of the said Act lays down that notwithstanding anything contained elsewhere in the Act, any deduction allowable by the Income Tax Act, 1961 as contribution to any provident fund or to an employees welfare fund shall be allowed in the previous year in which the sum is actually paid. This provision is to be read with 36 (1) (va) which says that the assessee would be entitled to deduction in respect of any sum received by the assessee from his employees on account of, inter alia, provident fund, if such sum is credited by the assessee to the employees account in the relevant fund on or before the due date. Two provisos to Section 43B were added by the Finance Act, 1987 with effect from 1st April, 1988. The second proviso was amended with effect from 1st April, 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... if deposited in the relevant fund before the due date. Under Section 43B any sum payable by the assessee as an employer by way of his contribution to any provident fund can be claimed as a deduction in the previous year in which the sum was actually paid by him by the first proviso. Time to make such payment is extended by the first proviso till the filing of the return of income tax under Section 139(1) of the said Act in respect of the previous year in which the liability to pay such sum was incurred. Hence, by using the expression liability incurred the legislature permitted the assessee to deposit the money with the return for the year in which the liability was incurred irrespective of the fact whether payment was made or not in that previous year. In Commissioner of Income Tax Vs. Alom Extrusions Ltd. reported in (2009) 185 Taxman 416 (SC) and Commissioner of Income-Tax, Circle I, Kolkata Vs. Vijay Shree Ltd. reported in (2014) 43 Taxman.com 396 (Calcutta), the Court has allowed the deduction on provident fund contribution made beyond the due date for its deposit but made before the due date for filing the assessee s return for the previous year when the liability wa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1. Whether the Tribunal erred in affirming the disallowance on ad hoc estimate @ 1% of the dividend income, out of the assessee s overall expenditure, under Section 14A and failed to appreciate that Section 14A in relation to dividend income is not relevant, where the investment in securities is not for earning dividend but for the purpose of carrying on the business in compliance with the directions and regulatory control of the Reserve Bank of India over the business of the assessee as a Residuary Non-Banking Financing Company? 2. Whether on the facts and in the circumstances of the case the Tribunal failed to appreciate that the assessee s alternative claim for deferred liability of ₹ 195.68 crore for excess collection of processing charges relatable to the instant year s account out of the total liability of ₹ 613.20 crore, which the Tribunal had allowed in the Assessment Year 1996-1997, is reasonable in view of the said Order of the Tribunal for Assessment Year 1996-1997 being in contest by the Department under Section 260A of the Act. The second question was not pressed by learned Counsel for the appellant for the same reasons it was not urged i ..... X X X X Extracts X X X X X X X X Extracts X X X X
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