TMI Blog2010 (3) TMI 1250X X X X Extracts X X X X X X X X Extracts X X X X ..... e addition made of ₹ 11,23,686/-on account of disallowance of interest expenses. 4. The Ld. Commissioner of Income tax (A) - XI, Ahmedabad has erred in law and on facts in deleting the addition made of ₹ 2,21,082/- on account of disallowance of travelling expenses. 5. The Ld. Commissioner of Income tax (A) - XI, Ahmedabad has erred in law and on facts in deleting the addition made of ₹ 10,32,342/-on account of disallowance of deduction of PF and ESI collected from the employees paid after due dates. 6. The Ld. Commissioner of Income tax (A) - XI, Ahmedabad has erred in law and on facts in allowing deduction of payment of PF and ESI made after due date by not accepting the decision of the Hon'ble Madras High Court in the case of CJT Vs Mdras Radiators and Pressings Limited 183 CTR 322 (Mad.) (2003). 7. On the facts and in the circumstances of the case, the Ld. Commissioner of Income tax (A) -XI, Ahmedabad ought to have upheld the order of the Assessing Officer. 8. It is therefore prayed that the order of the Ld. Commissioner of Income tax (A) - XI} Ahmedabad may be set aside and that of the Assessing Officer be restored. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... proceedings, It is submitted by the A. R. of the appellant that Mr.Hitesh Patel was looking after the appellant's group concern M/s. Rampion Eyetech Pvt. Ltd., wherein also due to same reasons there was a delay in filing the appeal. It is seen that the said appeal was decided by me on 22-12-2006, wherein on identical grounds the delay was condoned and the appeal was admitted. Therefore, the appeal in question is also admitted accordingly. 3. During the course of appeal proceedings, objecting to the A.O's action, the A. R. has filed written submissions wherein he has raised several grounds of appeal and claimed relief. The same are discussed in the succeeding paragraphs. 3. The ground No. 1 to 3 of appeal are directed against the invocation of the provisions of section 144 and not granting proper opportunity. This grounds of appeal are general in nature and does not call for any specific comments. 4. The fourth ground of appeal is directed against the addition of ₹ 4,48,03,196/- under section 68 of the I. T. Act, 1961. According to the assessing officer, the appellant has failed to substantiate its claim with regard to unsecured loans. Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not be given during the course of assessment proceedings. May we further mention that the assessment for A. Y. 2002-03 was also a scrutiny assessment, wherein no such addition u/s.68 has been made in respect of these loans, (copy of the assessment order for A. Y. 200203 passed u/s. 143(3) and also u/s. 143(3) r. w. s. 147 are attached herewith for your ready reference (page Nos. 85 to 87 88 to 89). 4.1.2. In view of the facts and circumstances of the case and also relying upon the above decision, it is submitted by the A. R. of the appellant that the action of the assessing officer is not justified and pleaded to delete the addition made by her under section 68 of the Act, 4.2. The submissions of the A. R. of the appellant have been perused. The details produced before me by the A. R., as well as decisions relied upon by him and the observations of the assessing officer in the assessment order have also been examined. 4.2.1. On carefully perusal of the facts and circumstances of the case, I find that the entire addition made by the A.O. on account of unexplained cash credits is not received by the appellant during the year under considerati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... borrowed funds. She further observes in the assessment order that in the earlier year 2002-03, similar issue was raised and-an interest of ₹ 16.789/- was added by disallowing interest u/s. 36(1)(iii). The Ld. AO has disallowed this amount on the ground that the appellant has failed to prove nexus of interest free advances with interest free funds and therefore, an amount equal to 15% as interest on a sum of ₹ 74,91,240/- which comes to ₹ 11,23,686/- has been disallowed. Your appellant submits that these advances were originally given in A.Y. 1997-98 for business purpose, since the subsidiary was working as distributors for the appellant (Page 86 being assessment order for A. Y, 2002-03). Since the said advance was for the business purpose no disallowance u/s. 36(i)(iii) be made following the latest Supreme Court's decision in case of S. A. Builders vs. CIT 288 ITR 1. 5.2.1. Therefore, in the light of above, it is argued that the advances given is only to the subsidiary company of the appellant which can be very well said for business purpose, hence, no presumptive interest can be disallowed. 5.2.2. After going through t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ons in support of the expenses claimed particularly with regard to foreign travel and also not proved that the said expenses were meant for business purpose only. 6.2.2. During the course of appeal proceedings, copy of invoices from travel agency and other details have been furnished. However, these documents themselves do not speak about the purpose of the visits and also cannot be ascertained that the entire expenditure claimed has been spent for business purpose exclusively. 6.2.3. Further, as it is seen from the nature of appellant's business, there could be a possibility of having foreign travel for business purpose and thereby some expenses related to said foreign travel. However, in view of no elaborative explanation to pin point that the entire expenditure is for a business purpose, I am inclined to retain 50% of the disallowance made by the A. O. Accordingly, out of addition of ₹ 2.21.082/-, only ₹ 1,10,541 is given as relied and the balance addition is confirmed. Therefore this ground of appeal is partly allowed. 7. The seventh ground in this appeal is directed against the disallowance of ₹ 10,41,768/- on accou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ot examine the legislative history of various amendments made in S.43B from time to time, more particularly it did not examine the impact of omission of the words during the previous year used in second proviso until its omission w.e.f. 1st April, 1989. 22. The Hon'ble Gujarat High Court in the case of Lakhanpal National Ltd..(supra) has clearly held that in view of specific language of section, deduction of the amount as mentioned in els. (a) and (b) of s. 43B shall be allowed in the previous year in which the same is paid. There is no scope for any doubt that such sum can be allowed by way of deduction while computing the income in the previous year in which such sum is actually paid by the assessee. Such a clear meaning of s. 43B is selfevident from a plain reading of the provisions contained in s. 43B. Sec. 43B opens with a non obstinate clause which means that s. 43B will have overriding effect over the other provisions contained in I.T. Act. It clearly lays down that, deduction in respect of any tax or duty or in respect of any sum payable by the assessee as an employer by way of contribution to any PF etc. shall be allowed only in computing the income that p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... literal interpretation made by the Hon'ble Delhi High Court in the case of Sanghi Motors vs. Union of India (1991) 91 CTR (Del) 15 : (1991) 187 ITR 703 (Del). The Hon'ble Supreme Court has approved the judgement of the Hon'ble Gujarat High Court in the case of CIT vs. Chandulal Venichand (supra) and also the judgement of the Hon'ble Calcutta High Court in the case of CIT vs. Jagannath Steel Corpn. (supra). The Hon'ble Supreme Court has clearly observed that the proviso to s. 43B was remedial in nature, designed to eliminate unintended consequences which may cause undue hardship to the assessee. The Hon'ble apex Court following its earlier decision in the case of Goodyear India Ltd. vs. State of Haryana (1991) 188 ITR 402 (SC) held that rule of reasonable construction must be applied while construing a statute. Literal construction should be avoided if it defeats the manifest object and purpose of the Act. They also referred to their judgement in the case of R. B. Jodha Mal Kuthiala vs. CIT (1971) 82 ITR 570 (SC) while applying rule of reasonable interpretation in relation to first proviso to s. 43B. It was observed that a proviso which is inserted to remedy ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of having been allowed sufficient opportunity for doing the same. The Learned Assessing Officer framed the assessment by making the following disallowances and additions. 1. Addition under section 68 of the Act on account of unsecured loan ₹ 4,48,03,196/-. 2. Disallowance of interest expenditure in relation to interest free loans advanced by the assessee ₹ 11,23,686/-. 3. Disallowance of Foreign travel expenses of ₹ 2,21,082/-. 4. Disallowance of PF and ESI expenditure not paid within due date ₹ 10,41,768/-. 4. We have heard the rival submissions and perused the orders of the lower authorities and the materials available on record. We find that the assessment came to be made by the Learned Assessing Officer under section 144 of the Act as in spite of sufficient opportunities allowed to the assessee, the assessee did not file the details and evidences required by the Learned Assessing Officer for making the assessment. Therefore, the Learned Assessing Officer made the assessment making the additions stated above. 5. On appeal before the Learned Commissioner of Income Tax(Appeals), the assessee filed ..... X X X X Extracts X X X X X X X X Extracts X X X X
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