Vignan Vidyalayas Ltd., Hyd, Hyderabad v. DCIT, Central Circle-2, Hyd, Hyderabad

ITA 1014/HYD/2016 | 2006-2007
Pronouncement Date: 29-11-2017 | Result: Partly Allowed

Appeal Details

RSA Number 101422514 RSA 2016
Assessee PAN ITANO1014A
Bench Hyderabad
Appeal Number ITA 1014/HYD/2016
Duration Of Justice 1 year(s) 4 month(s) 15 day(s)
Appellant Vignan Vidyalayas Ltd., Hyd, Hyderabad
Respondent DCIT, Central Circle-2, Hyd, Hyderabad
Appeal Type Income Tax Appeal
Pronouncement Date 29-11-2017
Appeal Filed By Assessee
Tags No record found
Order Result Partly Allowed
Bench Allotted B
Tribunal Order Date 29-11-2017
Date Of Final Hearing 29-11-2017
Next Hearing Date 29-11-2017
Last Hearing Date 09-05-2017
First Hearing Date 27-11-2017
Assessment Year 2006-2007
Appeal Filed On 14-07-2016
Judgment Text
ITA NO 1014 AND 1015 OF 2016 VIGNAN VIDYALAYAS HYDERABAD PAGE 1 OF 8 IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD B BENCH HYDERABAD BEFORE SMT. P. MADHAVI DEVI JUDICIAL MEMBER AND SHRI S.RIFAUR RAHMAN ACCOUNTANT MEMBER ITA NOS.1014 & 1015/HYD/2016 (ASSESSMENT YEARS: 2006-07 & 2007-08) VIGNAN VIDYALAYAS LTD HYDERABAD PAN: AAACV 8234 A VS DY. COMMISSIONER OF INCOME TAX CENTRAL CIRCLE-2 HYDERABAD (APPELLANT) (RESPONDENT) FOR ASSESSEE : SHRI V. RAGHAVENDRA RAO FOR REVENUE : SMT. N. SWAPNA DR O R D E R PER SMT. P. MADHAVI DEVI J.M. BOTH ARE ASSESSEES APPEALS FOR THE A.Y 2006-07 & 2007-08 RESPECTIVELY AGAINST THE ORDERS OF THE CIT (A)-5 HYDERABAD DATED 30.03.2016. 2. IN THE APPEAL FOR THE A.Y 2006-07 BRIEF FACTS A RE THAT THE ASSESSEE COMPANY FILED ITS RETURN OF INCOME ON 28.11.2016 ADMITTING LOSS OF RS.2 77 861. DURING THE ASSESSMEN T PROCEEDINGS U/S 143(3) OF THE ACT THE AO OBSERVED THAT THE ASS ESSEE HAS INCURRED EXPENDITURE EXCEEDING RS.20 000 IN CASH. T HE ASSESSEE SUBMITTED THAT THERE ARE NO CASH PAYMENTS IN EXCESS OF RS.20 000 AND THE INSTANCES OF 4 OR 5 SUCH PAYMENTS ARE TRANS ACTIONS OF SHOPPING MADE BY THE EMPLOYEES OF THE ASSESSEE COMP ANY AND DATE OF HEARING: 29.11.2017 DATE OF PRONOUNCEMENT: 29 . 1 1 .2017 ITA NO 1014 AND 1015 OF 2016 VIGNAN VIDYALAYAS HYDERABAD PAGE 2 OF 8 THAT SUCH TRANSACTIONS ARE NOT REPETITIVE IN NATURE AND ARE EXEMPT UNDER RULE 6DD ( L ) OF IT RULES. 3. THE AO HOWEVER WAS NOT CONVINCED WITH ASSESSEE S CONTENTIONS AND OBSERVED THAT THE PAYMENTS MADE BY THE ASSESSEE ARE NOT EXEMPT UNDER RULE 6DD(L). THE AO T HEREFORE MADE THE DISALLOWANCE @ 20% OF THE CASH PAYMENTS IN EXCESS OF RS.20 000 U/S 40A(3) OF THE ACT. AGGRIEVED THE ASS ESSEE PREFERRED AN APPEAL BEFORE THE CIT (A) WHO CONFIRMED THE ORDE R OF THE AO AND THE ASSESSEE IS IN SECOND APPEAL BEFORE US. 4. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED T HAT THE AO HAS RELIED UPON THE AMENDED PROVISIONS OF RU LE 6DD(L) AND THEREFORE HAS MISINTERPRETED THE CONTENTION OF THE ASSESSEE. FURTHER HE ALSO POINTED OUT THAT CERTAIN PAYMENTS MADE TO DR. L. RATHAIAH ARE HIS PERSONAL EXPENDITURE WHICH HAVE NE VER BEEN CLAIMED BY THE ASSESSEE. HE DREW OUR ATTENTION TO T HE GROUND OF APPEAL NO.5 RAISED BEFORE THE CIT (A) WHEREIN IT W AS SPECIFICALLY SUBMITTED THAT THE SAME WAS NEVER CLAIMED AS EXPEND ITURE IN THE BOOKS OF ACCOUNT. FURTHER HE DREW OUR ATTENTION TO THE OTHER GROUNDS OF APPEAL RAISED BEFORE THE CIT (A) WHERE THE ASSESSEE HAS BROUGHT OUT AS TO HOW THE SAID PAYMENTS ARE NOT DISALLOWABLE U/S 40A(3) OF THE ACT. HE SUBMITTED THAT THE CIT (A ) HAS NOT CONSIDERED ANY OF THESE GROUNDS AND HAS SUMMARILY R EJECTED THE ASSESSEES OBJECTIONS AND CONFIRMED THE ORDER OF TH E AO. THE LEARNED DR HOWEVER SUPPORTED THE ORDERS OF THE AU THORITIES BELOW. ITA NO 1014 AND 1015 OF 2016 VIGNAN VIDYALAYAS HYDERABAD PAGE 3 OF 8 5. HAVING REGARD TO THE RIVAL CONTENTIONS AND THE M ATERIAL ON RECORD WE FIND THAT THE ASSESSEE HAD RAISED DET AILED GROUNDS OF APPEAL BEFORE THE CIT (A) EXPLAINING THE NATURE OF EACH PAYMENT AND AS HOW IT IS NOT DISALLOWABLE UNDER SECTION 40A (3). WE FIND THAT THE CIT (A) HAS NOT EVEN REFERRED TO ANY OF TH E GROUNDS BUT HAS SUMMARILY CONFIRMED THE ORDER OF THE AO. IT IS THE DUTY OF THE CIT (A) TO CONSIDER AND DISPOSE OF THE SAME IN ACCO RDANCE WITH LAW. WE FIND THAT ASSESSEES CONTENTION NEED FACTUA L VERIFICATION. THEREFORE WE DEEM IT FIT AND PROPER TO REMIT THE I SSUE TO THE FILE OF THE AO FOR EXAMINATION AND VERIFICATION OF THE ASSE SSEES EXPLANATION FOR THE PAYMENTS IN EXCESS OF RS.20 000 AND TO CONSIDER THE SAME IN ACCORDANCE WITH LAW. THUS GRO UND OF APPEAL NO.2 IS TREATED AS ALLOWED FOR STATISTICAL P URPOSES. 6. AS REGARDS GROUND NO.3 BRIEF FACTS ARE THAT THE ASSESSEE HAS ADVANCED INTEREST FREE LOAN TO ONE OF ITS EMPLOYEE WHO IS THE DIRECTOR OF THE ASSESSEE COMPANY. THE AO PROPOSED TO DISALLOW PROPORTIONATE EXPENDITURE ON INTEREST CLAI MED BY THE ASSESSEE. THE ASSESSEE EXPLAINED THAT THE ADVANCES TO MR. T.V.P.C. SASTRY ARE IN THE ROUTINE COURSE OF THE AS SESSEES BUSINESS AND THAT IT WAS ADVANCED TO RETAIN HIS SER VICES. THE AO HELD THAT THE EMPLOYEE IS THE DIRECTOR OF THE ASSES SEE COMPANY AND ENJOYED THE BENEFIT OF THE INTEREST FREE LOAN B Y CONSTRUCTING HIS HOUSE PROPERTY WHILE THE ASSESSEE WAS INCURRIN G INTEREST EXPENDITURE. HE THEREFORE DISALLOWED THE PROPORTIO NATE INTEREST @ 12% ON BORROWED CAPITAL DEBITED TO THE P&L A/C AND ADDED IT TO THE INCOME RETURNED BY THE CIT (A). THE CIT (A) ALS O CONFIRMED THE ADDITION AND THE ASSESSEE IS IN SECOND APPEAL BEFOR E US. ITA NO 1014 AND 1015 OF 2016 VIGNAN VIDYALAYAS HYDERABAD PAGE 4 OF 8 7. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED T HAT THIS PAYMENT TO MR. T.V.P.C. SASTRY IS IN THE NATUR E OF ADVANCE WHICH HAS LATER BEEN RECOVERED FROM HIS SALARY. HE SUBMITTED THAT THE BENEFIT GIVEN TO THE EMPLOYEE CANNOT BE TREATED AS AN INTEREST FREE LOAN AND PROPORTIONATE INTEREST CANNOT BE DISA LLOWED. 8. THE LEARNED DR HOWEVER SUPPORTED THE ORDERS OF THE AUTHORITIES BELOW. 9. THE LEARNED COUNSEL FOR THE ASSESSEES CONTENTIO N THAT THESE ADVANCES WERE FOR THE BENEFIT OF AN EMPLOYEE AND ALSO THAT THESE ADVANCES WERE LATER RECOVERED FROM HIS SALARY NEED VERIFICATION BY THE AO. FURTHER IF THE ASSESSEE B EING A COMPANY HAS GIVEN ANY BENEFIT TO THE EMPLOYEE IT SHOULD HA VE RETURNED IT AS A FRINGE BENEFIT. THE LEARNED COUNSEL FOR THE AS SESSEE HAS NOT BEEN ABLE TO CONFIRM WHETHER THE ASSESSEE HAS FILED THE FRINGE BENEFIT RETURN AND HAS SHOWN THIS PAYMENT TO THE EM PLOYEE AS A FRINGE BENEFIT. THEREFORE WE DEEM IT FIT AND PROPE R TO REMAND THIS ISSUE ALSO TO THE FILE OF THE AO FOR VERIFICATION A S TO WHETHER THE AMOUNTS WERE RECOVERED BY THE ASSESSEE COMPANY FROM THE SALARY OF THE SAID EMPLOYEE AND ALSO WHETHER THE ASSESSEE HAS TREATED IT AS A FRINGE BENEFIT. THE AO SHALL DECIDE THE ISSUE IN ACCORDANCE WITH THE LAW AFTER GIVING THE ASSESSEE A FAIR OPPOR TUNITY OF HEARING. 10. GROUND NO.4 IS AN ALTERNATIVE TO GROUND NO.3 S HOULD BE ALLOWED AS BUSINESS EXPENDITURE U/S 37(I) OF THE ACT. THE ADVANCES WERE ADMITTEDLY WERE GIVEN FOR THE PERSONA L BENEFIT OF ITA NO 1014 AND 1015 OF 2016 VIGNAN VIDYALAYAS HYDERABAD PAGE 5 OF 8 THE EMPLOYEE BUT IT IS THE ASSESSEES CONTENTION TH AT IT WAS IN THE BUSINESS INTEREST OF THE ASSESSEE TO RETAIN THE EMP LOYEE DIRECTOR AND SHOULD BE TREATED AS FOR THE BUSINESS PURPOSE O F THE ASSESSEE. SINCE GROUND OF APPEAL NO.3 IS REMITTED TO THE FILE OF THE AO THIS GROUND IS ALSO REMITTED FOR DE NOVO CONSID ERATION IN ACCORDANCE WITH LAW. 11. GROUND NO.5 IS AGAINST THE REJECTION OF ADDITIO NAL GROUND OF APPEAL RAISED BEFORE THE CIT (A) OBJECTIN G TO THE ADDITION OF RS.4 73 528 MADE ON ACCOUNT OF UNEXPLAINED CASH CREDIT. IN THE STATEMENT OF FACTS BEFORE THE CIT (A) THE ASSE SSEE HAS STATED THAT THE ASSESSEE ITSELF HAD AGREED TO THE ADDITION OF RS.4 73 528 AS IT WAS DUE TO A SOFTWARE PROBLEM AND TAKING THAT THE SAME INTO CONSIDERATION THE CIT (A) HAS REFUSED TO ADMIT THE ADDITIONAL GROUND OF APPEAL. WE FIND THAT THE REASON FOR FILIN G OF THE ADDITIONAL GROUND OF APPEAL AS MENTIONED IN THE ADD ITIONAL GROUND ITSELF IS THAT THERE WERE NO CREDIT ENTRIES IN THE BOOKS OF ACCOUNT AND THE SHORTFALL IN THE CASH BY THE MANAGI NG DIRECTOR OF THE COMPANY WAS MET DAY-TO-DAY BASIS AS HE HAD SUFF ICIENT AND SUBSTANTIAL CASH BALANCE ON ANY DAY OF THE PREVIOUS YEAR. SINCE THE CONTENTION BEFORE THE AO IN ASSESSEES LETTER AND BEFORE THE CIT (A) WHILE RAISING THE ADDITIONAL GROUND OF APPE AL ARE AT VARIANCE WITH EACH OTHER WE DO NOT DEEM IT FIT AND PROPER TO ADMIT THE SAID GROUND AND TO DISPOSE OF THE SAME. T HE REASON GIVEN BY THE ASSESSEE BEFORE THE CIT (A) IS CLEARLY AN AFTERTHOUGHT AND CANNOT BE ENTERTAINED AT THIS STAGE. THUS ASSE SSEES APPEAL FOR THE A.Y 2006-07 IS PARTLY ALLOWED FOR STATISTIC AL PURPOSES. ITA NO 1014 AND 1015 OF 2016 VIGNAN VIDYALAYAS HYDERABAD PAGE 6 OF 8 12. IN THE A.Y 2007-08 THE ASSESSEE IS AGGRIEVED B Y THE DISALLOWANCE OF RS.1 20 719 OUT OF THE INTEREST EXP ENDITURE ON ACCOUNT OF THE ADVANCE GIVEN TO EMPLOYEE-DIRECTOR O F THE COMPANY. FOR THE A.Y 2006-07 WE HAVE REMITTED THIS ISSUE TO THE FILE OF THE AO FOR EXAMINATION AND VERIFICATION OF THE ASSESSEES CLAIM. FOR SIMILAR REASONS THESE GROUNDS OF APPEAL ARE ALSO REMITTED TO THE FILE OF THE AO. 13. GROUND NO.4 IS ALTERNATIVE TO THE ABOVE GROUND FOR ALLOWING EXPENDITURE U/S 37(1) OF THE ACT. FOR THE A.Y 2007-08 WE HAVE SET ASIDE THIS ISSUE ALSO TO THE AO FOR DE NOVO CONSIDERATION. THEREFORE THIS GROUND OF APPEAL IS ALSO SET ASIDE TO THE AO WITH SIMILAR DIRECTION. 14. AS REGARDS GROUNDS 6 & 7 THEY ARE AGAINST THE DENIAL OF DEDUCTION OF RS.1 94 031 BEING THE EMPLOYEES CO NTRIBUTION TO THE PF WHICH WAS PAID BEFORE THE DUE DATE OF FILING OF THE RETURN. THE AO HAS DISALLOWED THE SAME ON THE GROUND THAT I T WAS NOT PAID BEFORE THE DUE/PRESCRIBED DATE UNDER THE RELEV ANT ACT. WE FIND THAT THIS IS NOT A DISALLOWANCE U/S 43B OF THE ACT BUT IT IS A DISALLOWANCE U/S 36(1)(VA) OF THE ACT. THE LEARNED DR RELIED UPON THE DECISIONS OF THE HON'BLE GUJARAT HIGH COURT IN THE CASE OF GUJARAT STATE TRANSPORT CORPORATION AND ALSO THE DE CISION OF THE HON'BLE KERALA HIGH COURT IN THE CASE OF MERCHEM LT D. 15. WE FIND THAT THIS ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE BY VARIOUS DECISIONS OF THIS TRIBUNAL WHER E THE ABOVE TWO DECISIONS HAVE BEEN CONSIDERED. IN VIEW OF THE DECISION OF THIS ITA NO 1014 AND 1015 OF 2016 VIGNAN VIDYALAYAS HYDERABAD PAGE 7 OF 8 TRIBUNAL IN THE CASE OF M/S. NAGARJUNA ENGINEERING CONSTRUCTIONS VS. ACIT IN ITA NO.766/HYD/2017 DATE D 30.11.2017 WHEREIN AT PARA 6 IT HAS BEEN HELD AS U NDER: 6. HAVING REGARD TO THE RIVAL CONTENTIONS AND THE MATERIAL ON RECORD WE FIND THAT AS REGARDS THE ALLOWABILITY OF DEDUCTION U/S 43B OF THE ACT OF EMPLOYERS CONTRIBUTION TO PF AND ESIC THE HON'BLE SUPREME COURT HAS HELD THAT IF IT IS PAID ON OR BEFORE THE DUE DATE OF THE FILING OF THE RETU RN U/S 139(1) OF THE ACT IT IS ALLOWABLE. AS REGARDS THE APPLICABILITY OF SUCH PROVISO TO THE DISALLOWANCE MADE U/S 36(1)(VA) OF THE ACT WE FIND THAT DECISIONS ARE BOTH AGAINST AND IN FAVOUR OF THE ASSESSEE. WE FIND THAT THE COORDINATE BENCH OF THIS TRIBUNAL AT VISAKHAPATNAM IN THE CASE OF DCIT VS. EASTERN POWER DISTRIBUTION COMPANY OF A.P. LTD (CITED SUPRA) HAS CONSIDERED ALL THE ABOVE DECISIONS REFERRED TO BY THE ASSESSEE AS WELL AS THE DR AND HAS HELD THAT THERE IS NO DISTINCTION BETWEEN THE EMPLOYEES AND EMPLOYERS CONTRIBUTION OF PF AND IF THE TOTAL CONTRIBUTION IS DEPOSITED ON OR BEFORE THE DUE DATE OF FURNISHING THE RETURN U/S 139(1) OF THE ACT THEN NO DISALLOWANCE CAN BE MADE OF EMPLOYEES CONTRIBUTION TO PF. RESPECTFULLY FOLLOWING THE DECISION OF THE COORDINATE BENCH ON SIMILAR SET OF FACTS THIS APPEAL OF THE ASSESSEE I S ALLOWED. RESPECTFULLY FOLLOWING THE SAME THIS GROUND IS ALL OWED. 16. IN THE RESULT ASSESSEES APPEAL FOR 2007-08 IS ALSO PARTLY ALLOWED. 17. TO SUM UP BOTH THE APPEALS OF THE ASSESSEE FOR A.Y 2006-07 & 2007-08 ARE PARTLY ALLOWED FOR STATISTICA L PURPOSES. ITA NO 1014 AND 1015 OF 2016 VIGNAN VIDYALAYAS HYDERABAD PAGE 8 OF 8 ORDER PRONOUNCED IN THE OPEN COURT ON 29 TH NOVEMBER 2017. SD/- SD/- (S.RIFAUR RAHMAN) ACCOUNTANT MEMBER (P. MADHAVI DEVI) JUDICIAL MEMBER HYDERABAD DATED 29 TH NOVEMBER 2017. VINODAN/SPS COPY TO: 1 VIGNAN VIDYALAYAS LTD FLAT NO.503 BABUKHAN EST ATE BASHEERBAGH HYDERABAD 500029 2 DCIT/ACIT CIRCLE 17(2) SIGNATURE TOWERS KONDAPUR HYDERABAD 3 CIT (A) - 5 HYDERABAD 4 PR. CIT 5 HYDERABAD 5 THE DR ITAT HYDERABAD 6 GUARD FILE BY ORDER