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TMI Blog2018 (9) TMI 798X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Income Tax Act, 1961? (2) Whether the payment of provident fund and employees state insurance dues deposited by the Assessee within the grace period would qualify for deduction under Section 43B of the Income Tax Act, 1961? (3) Whether the Income Tax Appellate Tribunal was correct in law in deleting the disallowance of Rs. 74,01,771/- on the ground that it was a revenue expenditure?" Question No.1 2. The facts here are that the Assessing Officer (hereafter 'AO') brought to tax a total amount of Rs. 1.2 crores for the relevant Assessment Year (A.Y.) 2000-01 holding that these denoted amounts as deemed dividend under Section 2(22)(e) of the Income Tax Act, 1961 (hereafter 'the Act'). The AO rejected the assessee's contention that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n terms of Section 45-1A of the Reserve Bank of India Act, 1934. It was urged that since in this case the business of money lending constituted less than 50% and was in any case did not constitute the pre-dominant business of the lending companies, the amounts received, could not be excluded by virtue of proviso (ii) to Section 2(22)(e) of the Act. 4. The assessee in this case - as the record reveals, sought exclusion from the treatment of the income as deemed dividend under Section 2(22)(e) of the Act stating that the loan received was from two companies (M/s Deeksha Holdings Pvt. Ltd. and M/s Jyotsana Holdings Pvt. Ltd.), which were concededly NBFC. The record would show that these two companies were also engaged in other activities, som ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Various factors and circumstances would be required to be looked into while considering whether a part of the business of a company is its substantial business. Sometimes a portion which contributes a substantial part of the turnover, though it contributes a relatively small portion of the profit, would be a substantial part of the business. Similarly, a portion which relatively a small as compared to the total turnover, but generates a large, say more than 50 per cent, of the total profit of the company would also be a substantial part of its business. Percentage of turnover in relation to the whole as also the percentage of the profit in relation to the whole and sometimes even percentage of a manpower used for a particular part of busi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The question the AO had to then decide was whether the amounts deducted from the salaries of the employees which had to be deposited within the stipulated time (in terms of notification/circular dated 19.03.1964 which was modified on 24.10.1973), as far as the EPF contribution went and the period of three weeks as far as the ESI contributions went. The AO made a tabular analysis with respect to the contributions deducted and actually deposited. The cumulative effect of notifications under the Employees' Provident Funds Act, 1952 and the Employees State Insurance Act, 1948 was that in respect of the EPF Scheme contributions the deductions were to be deposited within 15 days of the succeeding wage period with a grace period of 5 days; for ESI ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... terms of Section 36(1)(va) of the Act. Question No.3 10. On this issue we notice that three amounts were sought to be disallowed by the AO. The first item pertains to expenditure incurred by the assessee for the construction of a hotel in Sri Nagar. In appeal the CIT noticed that the assessee had conceded to a ratio of 75%:25%, as constituting the capital and Revenue streams and confirmed such treatment. The Revenue appealed against this decision to the ITAT which dismissed it, by a separate order of 02.06.2006. That order was the subject matter of an appeal (by the Revenue) being Commissioner of Income Tax vs. Bharat Hotels Limited, ITA 62 of 2007. In the judgment of 31.07.2015 the ITAT's decision was upheld. As a consequence, the quest ..... X X X X Extracts X X X X X X X X Extracts X X X X
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