Pandhe Constructions Pvt. Ltd.,, Solapur v. Assistant Commissioner of Income-tax,,

ITA 1593/PUN/2014 | 2004-2005
Pronouncement Date: 07-10-2016 | Result: Partly Allowed

Appeal Details

RSA Number 159324514 RSA 2014
Assessee PAN AAACP9228Q
Bench Pune
Appeal Number ITA 1593/PUN/2014
Duration Of Justice 2 year(s) 1 month(s) 19 day(s)
Appellant Pandhe Constructions Pvt. Ltd.,, Solapur
Respondent Assistant Commissioner of Income-tax,,
Appeal Type Income Tax Appeal
Pronouncement Date 07-10-2016
Appeal Filed By Assessee
Order Result Partly Allowed
Bench Allotted A
Tribunal Order Date 07-10-2016
Assessment Year 2004-2005
Appeal Filed On 18-08-2014
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH A PUNE . . ' # BEFORE SHRI R.K. PANDA AM AND SHRI VIKAS AWASTHY JM . / ITA NOS.1592 TO 1594/PN/2014 '% % / ASSESSMENT YEARS : 2003-04 04-05 & 06-07 PANDHE CONSTRUCTIONS PVT. LTD. 157 RAILWAY LINES SUSHILA APARTMENT SOLAPUR 431 001 PAN :AAACP9228Q . / APPELLANT V/S ACIT CIRCLE - 1 SOLAPUR . /RESPONDENT . / ITA NOS.1949 TO 1951/PN/2014 '% % / ASSESSMENT YEARS : 2007-08 08-09 & 09-10 PANDHE CONSTRUCTIONS PVT. LTD. 157 RAILWAY LINES SUSHILA APARTMENT SOLAPUR 431 001 PAN :AAACP9228Q . / APPELLANT V/S ACIT CIRCLE - 1 SOLAPUR . /RESPONDENT / APPELLANT BY : SHRI VIPIN GUJRATHI / RESPONDENT BY : SHRI SUHAS S.KULKARNI / ORDER PER R.K.PANDA AM : ITA NOS. 1592 TO 1594/PN/2014 FILED BY THE ASSESSEE ARE DIRECTED AGAINST THE SEPARATE ORDERS DATED 12-06-2014 OF THE CIT(A)- III PUNE RELATING TO ASSESSMENT YEARS 2003-04 2004-05 AND 2006- 07 RESPECTIVELY. ITA NOS. 1949 TO 1951/PN/2014 FILED BY THE ASSESSEE ARE DIRECTED AGAINST THE SEPARATE ORDERS DAT ED 14-07-2014 / DATE OF HEARING :03.10.2016 / DATE OF PRONOUNCEMENT:07.10.2016 2 ITA NOS.1592 TO 1594 & 1949 TO 1951/PN/2014 OF THE CIT(A)-III PUNE RELATING TO ASSESSMENT YEARS 200 7-08 2008-09 & 2009-10 RESPECTIVELY. FOR THE SAKE OF CONVENIENCE ALL THESE APPEALS WERE HEARD TOGETHER AND ARE BEING DISPOSED OF B Y THIS COMMON ORDER : ITA NO.1592/PN/2014 (A.Y. 2003-04) : 2. IN GROUND OF APPEAL NO.1 THE ASSESSEE HAS CHALLENGED THE ORDER OF THE CIT(A) IN CONFIRMING THE DISALLOWANCE OF INTEREST OF RS.10 40 369/- MADE BY THE AO. 3. FACTS OF THE CASE IN BRIEF ARE THAT THE ASSESSEE IS A COMPANY ENGAGED IN THE BUSINESS OF BUILDER AND DEVELOPER. IT FILED ITS RETURN OF INCOME ON 29-11-2003 DECLARING TOTAL INCOME OF RS.6 55 250 /-. DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE AO OBS ERVED FROM THE BALANCE SHEET AND PROFIT AND LOSS ACCOUNT THAT THE ASSESSEE COMPANY HAS RAISED SECURED LOANS OF RS.7.54 CRORES AND U NSECURED LOANS OF RS.0.45 CRORES AND HAS DEBITED AN AMOUNT OF RS.71 47 656/- AS INTEREST PAID TO BANKS AND DIFFERENT PARTIES. AT THE S AME TIME THE ASSESSEE COMPANY HAS ADVANCED AN AMOUNT OF RS.3.5 CROR ES TO DIFFERENT PERSONS INCLUDING M/S. A.V. PANDHE SISTER CONCERN O F THE ASSESSEE AND RELATIVES OF THE DIRECTORS COVERED U/S.40A(2 )(B) WITHOUT ANY INTEREST. HE THEREFORE ASKED THE ASSESSEE TO EXP LAIN AS TO WHY PROPORTIONATE INTEREST SHOULD NOT BE DISALLOWED AS PER TH E PROVISIONS OF SECTION 36(1)(III) OF THE I.T. ACT. IT WAS EXPLAINED BY THE A SSESSEE THAT OUT OF THE TOTAL ADVANCE MADE AN AMOUNT OF RS.43 41 040/- IS IN THE NATURE OF TRADE ADVANCE. SO FAR AS THE AMOUNT OF RS.2 40 53 697/- APPEARING AS ADVANCE DUE FORM M/S. A.V. PANDHE SISTER CONCERN OF THE ASSESSEE IS CONCERNED IT W AS SUBMITTED THAT THE SAID ACCOUNT WAS IN CREDIT DURING THE MAJOR PA RT OF THE YEAR 3 ITA NOS.1592 TO 1594 & 1949 TO 1951/PN/2014 AND THE ASSESSEE HAD CREDITED INTEREST OF RS.2 10 594/- O N SUCH CREDIT BALANCE AFTER DEDUCTING TDS OF RS.22 112/-. THE DET AILS OF OTHER ADVANCES ON WHICH NO INTEREST WAS CHARGED WAS S TATED TO BE AS UNDER : NAME OF THE PERSON AMOUNT OF ADVANCE AWANTI SOCIETY B 2 79 868 AWANTI SOCIETY C 6 00 000 PANDHE A.V. HUF 17 635 SON - ANKUR EXPORTS PVT. LTD. 17 20 000 M/S. A.V. PANDE (SHIV STONE) 11 18 034 R.A. PANDHE 23 47 762 TOTAL 60 83 299 4. IT WAS ARGUED THAT THE FIRST SET OF ADVANCE AGGREGA TED TO RS.43 14 040/- WAS IN THE NATURE OF TRADE ADVANCES AND T HE SAME WOULD BE SETTLED IN THE REGULAR COURSE OF THE BUSINESS O F THE COMPANY. AS REGARDS THE OTHER ADVANCES AMOUNTING TO RS.60 83 299/- IS CONCERNED IT WAS SUBMITTED THAT THESE W ERE GIVEN OUT OF OWN FREE FUNDS AVAILABLE WITH THE ASSESSEE OF RS.508.9 7 LAKHS AS ON 31-03-2003. IT WAS ACCORDINGLY ARGUED THAT NO B ORROWED FUNDS WERE DIVERTED FOR MAKING INTEREST FREE ADVANCES AND THE SAME WERE UTILIZED FOR THE PURPOSES FOR WHICH IT WAS BORROWED AND TH E INTEREST FREE ADVANCES WERE OUT OF OWN FUNDS. IT WAS ACCORDINGLY ARGUED THAT THERE IS NO JUSTIFICATION IN MAKING ANY DISALLOWANCE OF INTERES T U/S.36(1)(III). 5. HOWEVER THE AO WAS NOT SATISFIED WITH THE EXPLANATION GIVEN BY THE ASSESSEE. AS REGARDS THE CLAIM OF TRADE ADVANC ES AMOUNTING TO RS.43.14 LAKHS IS CONCERNED THE AO NOTED THAT THE DE TAILS FURNISHED BY THE ASSESSEE WERE CRYPTIC AND DID NOT ELABO RATE ON THE NATURE OF THE ADVANCES AND WERE ALSO NOT SUPPORTED BY ANY 4 ITA NOS.1592 TO 1594 & 1949 TO 1951/PN/2014 EVIDENCES. AS PER THE AO THE ASSESSEE FAILED TO PROVE T HAT SUCH ADVANCES WERE MADE OUT OF COMMERCIAL EXPEDIENCY. SIMILARLY IT WAS NOTED BY THE AO THAT OUT OF THE OTHER ADVANCES GIVEN AT LEAST A SUM OF RS.69.35 LAKHS WERE ADVANCED TO THE VARIOUS PERSONS W ITHOUT CHARGING ANY INTEREST AND AT LEAST PART OF THE BORROWED FUNDS WERE UTILIZED FOR MAKING THE INTEREST FREE ADVANCES. 6. THE AO ALSO FOUND THAT SECURED LOANS BY THE ASSESSEE HAD GONE UP TO RS.7.54 CRORES IN THE YEAR AS AGAINST RS.3.99 CRORE S IN THE PRECEDING YEAR. SIMILARLY ADVANCES WERE ALSO FOUND TO HA VE GONE UPTO RS.3.25 CRORES IN THE YEAR FROM RS.11 LAKHS IN THE PR ECEDING YEAR. HE NOTED THAT THE LOAN OF RS.2 CRORES MADE IN OD ACCOUNT 79 HAD BEEN UTILIZED FOR PURPOSES OF MAKING NON-BUSINESS ADV ANCES. HIGHLIGHTING THAT THE ASSESSEE HAD BEEN CHARGED INTEREST @15% ON ADVANCES MADE TO ITS SISTER CONCERN M/S. A.V. PANDHE THE AO HELD THAT THERE WAS NO JUSTIFICATION FOR THE ASSESSEE IN NOT C HARGING INTEREST ON OTHER ADVANCES GIVEN ESPECIALLY WHEN IT WAS PAYING HUGE INTEREST ON BORROWINGS MADE. THE INTEREST CHARGEABLE O N SUCH INTEREST FREE ADVANCES GIVEN @15% WAS QUANTIFIED BY THE A O AT RS.10 40 369/- AND THE SAME WAS ADDED TO THE INCOME OF T HE ASSESSEE. 7. BEFORE CIT(A) IT WAS SUBMITTED THAT THE VARIOUS BORRO WINGS MADE BY THE ASSESSEE FROM BANKS WERE DEPLOYED IN THE B USINESS OF THE ASSESSEE AND NO PART OF IT WAS DIVERTED TO MAKE IN TEREST FREE ADVANCES AND THAT MAJOR PORTION OF THE ADVANCES IN QUE STION WERE MADE IN THE EARLIER YEARS. THE ASSESSEE FILED ELABORATE WR ITTEN SUBMISSION DETAILING THE MANNER IN WHICH BORROWINGS WERE MA DE AND THE POSITION OF ADVANCES GIVEN THE DETAILS OF WHICH ARE AS UNDER : 5 ITA NOS.1592 TO 1594 & 1949 TO 1951/PN/2014 NAME OF THE BANK TYPE OF FACILITY/ ACCOUNT NO. BALANCE AT THE BEGINNING OF THE YEAR BALANCE AT THE END OF THE YEAR KAVITA URBAN COOP. BANK OD 3 18 85 790 6 31 862 MANORAMA URBAN COOP. BANK HYP 71 1 80 84 898 3 07 89 653 MANORAMA URBAN COOP. BANK OD 71 -- 95 15 375 MANORAMA URBAN COOP. BANK OD 79 -- 2 00 00 050 SAHASTRARJUN NAGARI SAHARI PATSANSTHA TERM LOAN 64 22 090 22 16 425 YASHWANT KAMGAR SAHAKARI BANK LTD. HYP 166 49 99 442 49 08 403 8. AS REGARDS THE LOAN FROM KAVITA URBAN COOP. OD 3 ACC OUNT AND SAHASTRARJUN NAGARI SAHAKARI PATSANSTHA LTD. ARE CONCERNED IT WAS SUBMITTED THAT THERE WAS REPAYMENT OF RS.12 53 928/- AND RS.42 05 665/- RESPECTIVELY. HYPOTHECATION LIMIT OF RS.50 LAKH S FROM YASHWANT KANGAR SAHAKRI BANK LTD. CONTINUED TO BE AVAILED FROM THE LAST YEAR. THUS IT WAS EXPLAINED THAT THERE WERE NO FRES H BORROWINGS IN THESE LOAN ACCOUNTS. LOAN FROM MANORAMA URBAN COOP. BANK OD 79 OF RS.200 LAKHS WAS OBTAINED ON 31-03-2003 I.E. AT THE E ND OF THE YEAR ONLY AND PROCEEDS OF THE LOAN WERE CREDITED IN MAN ORAMA URBAN COOP. BANK LTD. HYPOTHECATION ACCOUNT 71. SIMILARLY LOAN OF RS.90 LAKHS IN MANORAMA URBAN COOP. BANK OD ACCOUNT 71 WAS OBTAINED IN NOVEMBER 2002 AND PROCEEDS WERE DEPOSITED IN MANORAMA URBAN COOP. BANK HYPOTHECATION 71 ACCOUNT O NLY. THE LIMIT IN MANORAMA URBAN BOOP. BANK HYP ACCOUNT 71 WAS INC REASED FROM RS.200 LAKHS TO RS.300 LAKHS DURING THE YEAR UND ER REVIEW. IT WAS THUS EXPLAINED THAT THE FRESH LOANS OBTAINED DURING T HE YEAR UNDER REVIEW WERE USED FOR THE BUSINESS PURPOSES OF THE ASSESSEE AND THERE WAS NO DIVERSION OF FUNDS FROM THESE BORROWINGS. 6 ITA NOS.1592 TO 1594 & 1949 TO 1951/PN/2014 9. THE ASSESSEE SUBMITTED THAT THE EXTRACTS OF LEDGER ACCOUNT OF THESE LOAN ACCOUNTS AND COPIES OF THE STATEMENT OF ACCO UNTS FROM BANKS WERE PRODUCED BEFORE THE AO DURING THE COURSE OF ASSESSMENT PROCEEDINGS ALONG WITH ALL OTHER BOOKS OF ACCOUNT. THE TR ANSACTIONS APPEARING IN THESE LOAN ACCOUNTS REFLECT THAT THE LOANS WERE UTILIZED FOR THE BUSINESS PURPOSES OF THE ASSESSEE. THUS THE AS SESSEE HAD DISCHARGED ITS DUTY TO PROVE THAT THE LOANS AVAILED WERE UTILIZED FOR THE PURPOSE OF BUSINESS PURPOSES AND COMPLIED WITH THE DECISION IN THE CASE REPORTED IN 61 ITR 480 (MADRAS). THE CONTENTIO N OF THE AO THAT ASSESSEE COMPANY FAILED TO PROVE THAT THE LOANS WE RE UTILIZED FOR BUSINESS PURPOSES IS NOT FACTUALLY CORRECT AND IS NOT JU STIFIED. THEREFORE THERE IS NO JUSTIFICATION FOR DISALLOWANCE OF INTER EST MADE BY ADDL.CIT. SINCE THE ASSESSEE COMPANY HAS COMPLIED WITH THE PROVISIONS CLAUSE (III) OF SECTION 36(1) OF THE I.T. ACT THEREFO RE THERE IS NO JUSTIFICATION FOR DISALLOWANCE OF INTEREST OF RS.10 40 369/-. 10. THE ASSESSEE FURNISHED DETAILS OF ADVANCES MADE BY THE COMPANY ON WHICH PROPORTIONATE INTEREST HAS BEEN DISALLOW ED BY THE AO WHICH ARE AS UNDER : NAME OF THE PERSON TO WHOM ADVANCES WERE GIVEN BALANCE AT THE START OF THE YEAR 01-04-2002 AMOUNT ADVANCED DURING THE YEAR AMOUNT RECOVERED/ADJUSTED DURING THE YEAR BALANCE AS AT THE END OF THE YEAR 31-03-2003 KARAMPURI DATTATRAYA 8 50 000 0 0 8 50 000 M KUMAR & ASSOCIATES PVT. LTD. 0 5 00 000 0 5 00 000 SHAH FISHERY 4 00 000 0 0 4 00 000 SON - ANKUR EXPORTS PVT. LTD. 17 35 000 10 000 25 000 17 20 000 M/S. A.V. PANDHE SHIV STONE CRUSHER 4 75 688 7 59 772 1 17 426 11 18 034 PANDHE R.A. 22 81 500 2 33 062 1 66 800 23 47 762 TOTAL 57 42 188 15 02 834 3 09 226 69 35 796 11. IT WAS ARGUED THAT MAJOR PORTION OF THE ADVANCE OF RS.57 42 188/- IS MADE IN THE EARLIER YEARS. DURING THE YEA R UNDER REVIEW ONLY RS.15 02 834/- ARE PAID AND RS.3 09 226/- ARE 7 ITA NOS.1592 TO 1594 & 1949 TO 1951/PN/2014 RECOVERED. THE BALANCE OUTSTANDING AT THE END OF THE Y EAR IS ONLY RS.69 35 796/-. IT WAS STATED THAT THE LOANS AVAILED FROM THE BANKS STATED ABOVE SHOW THAT THESE WERE AVAILED FROM THE BA NK IN THE EARLIER PERIOD AND WERE CONTINUED TO BE AVAILED DURING THE YEAR UNDER CONSIDERATION. INTEREST ON THESE LOANS WERE ALLOWED IN TH E EARLIER YEARS AND THERE WAS NO DISALLOWANCE OF INTEREST IN ANY OF THE EARLIER YEARS. THIS CLEARLY PROVES THAT THERE IS NO NEXUS BETW EEN FUNDS BORROWED ON INTEREST AND ADVANCES MADE BY THE ASSESSEE. RELY ING ON VARIOUS DECISIONS IT WAS SUBMITTED THAT THERE IS NO JUSTIFIC ATION FOR ANY DISALLOWANCE OF INTEREST. 12. SO FAR AS THE AMOUNT OF RS.2.40 CRORES ADVANCED TO M /S. A.V. PANDHE SISTER CONCERN IS CONCERNED IT WAS ARGUED THAT THE BALANCE IN THIS ACCOUNT WAS ALMOST CREDITED DURING THE YEAR AND DAY TO DAY WORKING OF INTEREST @15% PER ANNUM RESULTED INTO INTEREST PAYABLE TO THEM AT RS.2 10 594/- WHICH IS ACCEPTED BY THE AO AND TH ERE IS NO DISALLOWANCE ON THIS ACCOUNT. SO FAR AS THE ADVANCES GIVE N TO 6 PARTIES ON ACCOUNT OF WHICH INTEREST IS SOUGHT TO BE DISA LLOWED IS CONCERNED THE ASSESSEE GAVE THE FOLLOWING DETAILS : SR. NO. NAME OF THE PERSON TO WHOM ADVANCES WERE GIVEN BALANCE AS AT THE END OF THE YEAR 31-03-2003 PURPOSE FOR WHICH ADVANCES WERE GIVEN 1 KARAMPURI DATTATRAYA 850000 PURCHASE OF PROPERTY THE DEAL BEING NOT MATERIALISED 2 M KUMAR & ASSOCIATES PVT. LTD. 5 00 000 AGAINST PROJECT FEES 3 SHAH FISHERY 4 00 000 FEES FOR THE PROJECT 4 M/S. A.V. PANDHE SHIV STONE CRUSHER 11 18 034 ADVANCE FOR STONE METAL DURING THE YEAR MATERIAL PURCHASED RS.21 57 244 IN SEPARATE PURCHASE ACCOUNT 5 SON - ANKUR EXPORTS PVT. LTD. 17 20 000 ADVANCES FROM LAST YEAR 6 PANDHE R.A. 23 47 762 ADVANCES FROM LAST YEAR TOTAL 69 35 796 8 ITA NOS.1592 TO 1594 & 1949 TO 1951/PN/2014 13. IT WAS ARGUED THAT OUT OF THE ABOVE 6 PARTIES PART Y NOS. 1 TO 3 ARE NOT FALLING WITHIN THE DEFINITION OF SPECIFIED PERSONS AND AR E TOTAL OUTSIDERS. FURTHER THE ADVANCES RELATED TO PARTY NOS. 1 TO 4 WERE STRICTLY FOR THE PURPOSES OF BUSINESS. THE TOTAL OF THE A MOUNT IS RS.28 68 034/- AND DISALLOWANCE OF INTEREST ON THESE ADVANC ES IS NOT AT ALL JUSTIFIED. IT WAS ARGUED THAT SINCE THE OWN FUNDS O F THE COMPANY ARE MUCH IN EXCESS OF AMOUNTS ADVANCED THEREFO RE THERE IS NO JUSTIFICATION FOR ANY DISALLOWANCE. 14. HOWEVER THE CIT(A) WAS ALSO NOT SATISFIED WITH THE EXPLA NATION GIVEN BY THE ASSESSEE. HE OBSERVED THAT OUT OF THE INT EREST FREE ADVANCES GIVEN OF RS.69 35 LAKHS THE MAJOR ADVANCE OF RS.23 47 762/- WAS GIVEN TO SMT. R.A. PANDHE WIFE OF SHRI ANIL PANDHE DIRECTOR OF THE ASSESSEE COMPANY. THOUGH THE ASSESSEE ARGUED THAT THE IMPUGNED ADVANCE WAS GIVEN DURING THE REGULAR COURSE OF BUSINESS IT REMAINS TO BE A MERE ASSERTION AS NO DOCUMENTARY EVIDENCES WERE FURNISHED EITHER DURING THE A SSESSMENT PROCEEDINGS OR IN THE PRESENT PROCEEDINGS TO BACK SUCH A CLAIM. IT IS ALSO NOT CLEAR WHAT WERE THE CIRCUMSTANCES WHICH JUSTIFIED PARTING OF WITH A HUGE AMOUNT IN FAVOUR OF THE WIFE OF THE DIRECTOR OF THE COMPANY NOR WHAT WAS THE BUSINESS INTEREST SERVED BY THE ASSESSEE IN GIVING SUCH A LOAN ON WHICH NO INTEREST IS CHARGED. 15. AS REGARDS THE OTHER ADVANCES ARE CONCERNED THE LD.CIT(A) NOTED THAT THE CLAIM THAT SUCH ADVANCES WERE GIVEN TO WARDS ON ACCOUNT PAYMENTS TO M/S SON-ANKUR EXPORTS PVT. LTD. A MOUNTING TO RS. 17 20 000/- AND M/S. A.V. PANDHE (SHIV STONE) IS NOT BACKED BY ANY STATEMENT AS TO WHY SUBSTANTIAL SUMS OF MONEY WERE ADVANCED TO SISTER CONCERNS AND WHAT WAS THE BU SINESS 9 ITA NOS.1592 TO 1594 & 1949 TO 1951/PN/2014 PURPOSE. SIMILARLY THE CLAIM THAT ADVANCES WERE MADE TOWA RDS PURCHASE OF LAND REMAINS UNSUBSTANTIATED IN THE ABSENCE OF THE RELEVANT DETAILS SUCH AS COPY OF AGREEMENTS IF ANY DETAILS OF LAND ETC. IN SUCH CIRCUMSTANCES THE CLAIM THAT THE ADVANCES IN QUESTION WERE GIVEN OUT OF COMMERCIAL EXPEDIENCY LACKS SUB STANCE. FURTHER IT HAS ALREADY BEEN ESTABLISHED BY THE AO THAT MANY OF THE LOANS AND BORROWINGS FROM THE BANK HAS BEEN UTILIZED IN THE EARLIER YEARS FOR MAKING NON-BUSINESS ADVANCES. ON THE O THER HAND IT IS SEEN THAT THE ASSESSEE HAS MADE SUBSTANTIAL BORROWINGS FROM ITS SISTER CONCERN M/S. A.V. PANDHE ON WHICH IT HAS BE EN PAYING INTEREST AT 15%. NOTHING HAS BEEN BROUGHT ON RE CORD TO ESTABLISH THAT THERE WAS NO NEXUS BETWEEN THE ADVANC ES MADE AND THE BORROWINGS MADE. HAD THE MONEY BEEN NOT ADVANCED TO SISTER CONCERNS IT WOULD HAVE BEEN AVAILABLE TO THE ASSESSEE FOR ITS BUSINESS PURPOSES AND TO THAT EXTENT IT MAY NOT HAVE BEEN NECESSARY FOR THE ASSESSEE TO BORROW FUNDS FROM BANKS /FINANCIAL INSTITUTIONS THEREBY REDUCING THE ASSESSEES OUTGO ON A CCOUNT INTEREST LIABILITY ON THE BORROWINGS MADE. ON THE FACE OF TH E FAILUR E OF THE ASSESSEE IN EST A BLISHING ANY BUSINESS EXPEDIENCY IN ADVANCING THE AMOUNTS IN QUESTION ON WHICH NO INTEREST W AS CHARGED THE CORRESPONDING INTEREST EXPENDITURE CLAIMED O N BORROWINGS TO SUCH EXTENT CANNOT BE ALLOWED AS DEDUCT ION IN VIEW OF THE PROVISIONS OF SECTION 36(1)(III) OF THE I.T . ACT. RELYING ON VARIOUS DECISIONS HE HELD THAT THERE WAS NO APPARENT CO MMERCIAL EXPEDIENCY IN MAKING THE INTEREST FREE ADVANCES TO WIFE O F THE DIRECTOR AS WELL AS TO THE OTHER PARTIES. 10 ITA NOS.1592 TO 1594 & 1949 TO 1951/PN/2014 16. SO FAR AS THE DECISION OF HONBLE BOMBAY HIGH COURT IN THE CASE OF RELIANCE UTILITIES AND POWER LTD. REPORTED IN 313 ITR 340 IS CONCERNED HE OBSERVED THAT THE HONBLE BOMBAY HIGH CO URT DID NOT ADMIT OR ADJUDICATE THE ISSUE RELATING TO COMMERCIAL EXPED IENCY RAISED BEFORE IT BY THE REVENUE SINCE THE COUNSEL FOR THE REVENUE DID NOT PRESS THIS ISSUE AT THE TIME OF HEARING. REJECTING TH E VARIOUS EXPLANATIONS GIVEN BY THE ASSESSEE AND DISTINGUISHING THE VARIOUS DECISIONS RELIED BEFORE HIM THE LD.CIT(A) UPHELD THE DISALLOWANC E OF RS.10 40 369/- MADE BY THE AO. 17. AGGRIEVED WITH SUCH ORDER OF THE CIT(A) THE ASSESSEE IS IN APPEAL BEFORE US. 18. THE LD. COUNSEL FOR THE ASSESSEE FILED THE FOLLOWING CHART TO SHOW THAT NON-INTEREST BEARING/SURPLUS FUNDS ARE AVAILABLE FOR GIVING INTEREST FREE ADVANCES TO SISTER CONCERNS AND DIFFERENT PARTIES : STATEMENT SHOWING NON INTEREST BEARING FUNDS AVAILABLE & INTEREST FREE ADVANCES & SURPLUS FUNDS SR PARTICULARS AY 02-03 AY 03-04 AY 04-05 AY 05-06 AY 06-07 AY 07-08 AY 08-09 AY 09-10 A SHAREHOLDERS FUND PAID UP SHARE CAPITAL 20000 450000 450000 5000000 5000000 5000000 5000000 5000000 SHARE APPLICATION MONEY 1710000 1280000 1280000 0 0 0 0 0 GENERAL RESERVE 45000 45000 45000 45000 45000 45000 45000 45000 PROFIT AND LOSS A/C 1434669 15044924 33744663 61076555 83349267 103621863 138990378 171987122 SUB-TOTAL A 3209669 16819924 35519663 66121555 88394267 108666863 144035378 177032122 B NON INTEREST BEARING ADVANCES RECEIVED FROM DEPOSIT FROM DIRECTORS 5260669 4444793 3544793 3544793 0 0 0 0 SUB-TOTAL B 5260669 4444793 3544793 3544793 0 0 0 0 C TOTAL NON INTEREST BEARING FUNDS A + B 8470338 21264717 39064456 69666348 88394267 108666863 144035378 177032122 D LESS NON INTEREST BEARING ADVANCES GIVEN TO A) TRADE ADVANCES 2486670 4314040 7346562 0 2450000 2450000 0 0 B) NON TRADE ADVANCES 2614870 6083301 7978215 0 8218222 7247578 0 0 SUB-TOTAL D 5101540 10397341 15324777 0 10668222 9697578 0 0 E SURPLUS OF NON INTEREST BEARING FUNDS (C-D) 3368798 10867376 23739679 69666348 77726045 98969285 144035378 177032122 11 ITA NOS.1592 TO 1594 & 1949 TO 1951/PN/2014 19. REFERRING TO THE ABOVE CHART HE SUBMITTED THAT SUFFICIE NT INTEREST FREE FUNDS ARE AVAILABLE TO GIVE INTEREST FREE ADVA NCES. REFERRING TO THE DECISION OF THE HONBLE BOMBAY HIGH COURT IN THE CASE OF RELIANCE UTILITIES AND POWER LTD. REPORTED IN 313 IT R 340 AND THE DECISION OF THE PUNE BENCH OF THE TRIBUNAL IN THE CASE OF A.V. PANDHE VS. ACIT VIDE ITA NO.937/PN/2014 AND BUNCH OF OT HER APPEALS ORDER DATED 15-04-2016 HE SUBMITTED THAT UNDE R IDENTICAL FACTS AND CIRCUMSTANCES THE TRIBUNAL HAS DELETED THE DIS ALLOWANCE OF INTEREST. HE SUBMITTED THAT THE TRIBUNAL VIDE ITA NO.936/ PN/2014 ORDER DATED 28-10-2015 IN THE CASE OF A.V. PANDHE VS. AC IT HAS ALSO DELETED SUCH DISALLOWANCE OF INTERESTS U/S.36(1)(III). HE ACCORDIN GLY SUBMITTED THAT THIS BEING A COVERED MATTER THE GROUND RAISED BY THE ASSESSEE SHOULD BE ALLOWED. 20. THE LD. DEPARTMENTAL REPRESENTATIVE ON THE OTHER HAND HEAV ILY RELIED ON THE ORDER OF THE CIT(A). HE SUBMITTED THAT THE LD.CIT(A) WHILE ADJUDICATING THE ISSUE HAS GIVEN VALID REASONS FOR CON FIRMING THE DISALLOWANCE OF INTEREST MADE BY THE AO. THE ASSESS EE COULD NOT JUSTIFY THE COMMERCIAL EXPEDIENCY OF GIVING SUCH INTEREST FR EE LOANS OUT OF INTEREST BEARING FUNDS. HE ALSO RELIED ON THE DECIS ION OF THE PUNE BENCH OF THE TRIBUNAL IN THE CASE OF M/S. NIMBKAR SEE DS PVT. LTD. VS. DCIT VIDE ITA NO.1458/PN/2011 ORDER DATED 29-1 1-2013 AND SUBMITTED THAT THE TRIBUNAL AT PARA 10.3 OF THE ORDE R HAS GIVEN CERTAIN OBSERVATIONS WHICH IS RELEVANT FOR ADJUDICATING THIS CASE. 21. REFERRING TO PARA 10.3 OF THE ABOVE ORDER CITED (SUPRA ) THE LD. DEPARTMENTAL REPRESENTATIVE SUBMITTED THAT THE TRIBUNAL IN THE SAID DECISION HAS NOT ACCEPTED THE ARGUMENT OF THE ASSESSEE THAT IT HAS SUFFICIENT INTEREST FREE FUNDS AND THEREFORE IN VIEW OF THE DECISION OF 12 ITA NOS.1592 TO 1594 & 1949 TO 1951/PN/2014 THE HONBLE BOMBAY HIGH COURT IN THE CASE OF RELIANCE UTILIT IES AND POWER LTD. (SUPRA) NO DISALLOWANCE SHOULD BE MADE. IT WAS O BSERVED THAT THE ASSESSEE HAS NOT PROVED THE NATURE OF COMME RCIAL EXPEDIENCY AS TO HOW THE MONEY HAS BEEN UTILIZED BY THE SAID COMPANY. IT WAS ACCORDINGLY HELD IN THE AFOREMENTIONED D ECISION THAT THE DECISION RELIED ON BY THE LD. COUNSEL FOR THE ASS ESSEE IS DISTINGUISHABLE AND NOT APPLICABLE TO THE FACTS OF THE PRESE NT CASE. HE ACCORDINGLY SUBMITTED THAT THE ORDER OF THE CIT(A) BE UPHELD. 22. WE HAVE CONSIDERED THE RIVAL ARGUMENTS MADE BY BOTH THE SIDES PERUSED THE ORDERS OF THE AO AND CIT(A) AND THE P APER BOOK FILED ON BEHALF OF THE ASSESSEE. WE HAVE ALSO CONSIDERED TH E VARIOUS DECISIONS CITED BEFORE US. WE FIND THE AO DISALLOWED AN AMO UNT OF RS.10 40 369/- U/S.36(1)(III) ON THE GROUND THAT THE ASSESSEE HAS GIVEN INTEREST FREE LOANS TO SISTER CONCERNS AND RELATED PARTIES OUT OF INTEREST BEARING FUNDS AND THE ASSESSEE COULD NOT JUSTIF Y FOR NOT CHARGING ANY INTEREST ON THE ADVANCES GIVEN. WE FIND THE LD.CIT(A) UPHELD THE ACTION OF THE AO ON THE GROUND THAT THE ASS ESSEE COULD NOT EXPLAIN THE COMMERCIAL EXPEDIENCY OF GIVING SUCH INTERES T FREE ADVANCES OUT OF INTEREST BEARING FUNDS. 23. SO FAR AS RELIANCE ON THE DECISION OF HONBLE BOMBAY H IGH COURT IN THE CASE OF RELIANCE UTILITIES AND POWER LTD. REPOR TED IN 313 ITR 340 IS CONCERNED THE LD.CIT(A) OBSERVED THAT THE HO NBLE BOMBAY HIGH COURT DID NOT ADJUDICATE THE ISSUE RELATING T O COMMERCIAL EXPEDIENCY AS THE REVENUE DID NOT PRESS THIS ISSUE AT THE TIME OF HEARING. IT IS THE SUBMISSION OF THE LD. COUNSEL FOR THE ASSESSEE THAT IT HAD SUFFICIENT INTEREST FREE ADVANCES AVA ILABLE WITH IT FOR MAKING INTEREST FREE ADVANCES. FURTHER IN THE CASE OF THE SISTER 13 ITA NOS.1592 TO 1594 & 1949 TO 1951/PN/2014 CONCERN OF THE ASSESSEE THE TRIBUNAL HAS ALREADY DELETE D SUCH DISALLOWANCE OF INTEREST. THEREFORE NO DISALLOWANCE IS CALLED FOR. 24. WE FIND MERIT IN THE ABOVE ARGUMENT OF THE LD. COUNSEL FOR THE ASSESSEE. FROM THE CHART FILED BY THE ASSESSEE WHICH HA S ALREADY BEEN REPRODUCED IN THE PRECEDING PARAGRAPHS WE FIND THE ASSESSEE HAD SUFFICIENT INTEREST FREE FUNDS AVAILABLE WITH IT AT THE BEG INNING OF THE YEAR. APART FROM THIS THE ASSESSEE HAS ALSO EARNE D SUFFICIENT PROFIT DURING THE YEAR. WE FIND IN THE CASE OF A.V. PANDHE V IDE ITA NO.937/PN/2014 ORDER DATED 15-04-2016 IDENTICAL ISSUE H AD COME UP WHEREIN THE AO MADE DISALLOWANCE OF RS.18 91 108/- BEING INTEREST ATTRIBUTABLE TO INTEREST FREE ADVANCES GIVEN TO SISTER CONCERNS. THE CIT(A) CONFIRMED THE ADDITION. ON FURTHER AP PEAL BY THE ASSESSEE THE TRIBUNAL DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE BY OBSERVING AS UNDER : 8. GROUND NO.4 CONCERNS THE DISALLOWANCE OF INTEREST OF RS.18 91 108/- BEING INTEREST ATTRIBUTABLE TO ADVANCE GIVEN TO SISTER CONCERNS. 8.1 SHRI VIPIN GUJARATHI LD. AUTHORIZED REPRESENTAT IVE FOR THE ASSESSEE SUBMITTED THAT THE ASSESSEE HAS INTEREST FREE FUNDS IN THE FORM OF CAPITAL CONTRIBUTION OF PARTNERS AND INTEREST FRE E LOANS OF RS.307.72 LACS AT ITS DISPOSAL AS AGAINST INTEREST FREE ADVANCES GI VEN RS.128.55 LACS WHICH INCLUDES ADVANCES TO M/S SON ANKUR EXPORTS PVT. L TD. RS.111.91 LACS AND OTHER ADVANCES RS.16.64 LACS. HE ADVERTED OUR ATTENTION TO A TABULAR STATEMENT SHOWING INTEREST FREE FUNDS AVAILABLE AT THE DISPOSAL OF THE ASSESSEE AND INTEREST FREE ADVANCES MADE AS APPEARING ON PAGE 1 OF THE PAPER BOOK CONCERNING ALL THE YEARS IN APPEAL. THE CONSOLIDATED TABULAR STATEMENT IS REPRODUCED HEREUNDER :- ----- ... _. -- _ - ----- .. _ ..... _ -- - - _ .. _ - -- .. . YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED 31.03.2001 31.03.2002 31.03.2003 31 03.2004 31.03.2 005 31.03.2006 31.03.2007 31.03.2008 31.03.2009 A PARTNER'S CAPITAL 22990718 30514262 35931013 44569250 39762364 38790244 43080055 125730198 266870793 B NON INTEREST BEARING ADVANCES RECEIVED FROM PANDHE CONSTRUCTION PVT LTD 3689779 0 0 0 0 0 0 0 0 PANDHE RA 79425 79425 0 0 0 0 0 0 0 PANDHE A V INDIVIDUAL 0 0 0 0 5880938 0 0 0 0 DEPOSIT FROM TENANT 178875 178875 178875 178875 178875 178875 178875 178875 262875 INTEREST FREE UNSECURED LOANS 0 0 0 0 0 0 0 0 0 SUB-TOTAL B 3948079 258300 178875 178875 6059813 178875 178875 178875 262875 14 ITA NOS.1592 TO 1594 & 1949 TO 1951/PN/2014 C TOTAL NON INTEREST BEARING FUNDS A+ B 26938797 30772562 36109888 44748125 45822177 38969119 43258930 125909073 267133668 D LESS NON INTEREST BEARING ADVANCES GIVEN TO SON-ANKUR EXPORTS PVT LTD 10152244 11191500 14373680 15010664 15605372 9910155 1620155 1620155 1620155 PANDHE A V HUF 1611584 1664223 1685443 5071393 71529 24141 120214 612442 749258 PANDHE A V INDIVIDUAL 0 0 0 0 0 1944436 5854851 0 0 PANDHE RA 605538 0 0 0 0 0 0 0 0 OTHER ADVANCES 2706376 2706376 2319244 2319244 2319244 2264244 SUB-TOTAL D 12369366 12855723 16059123 22788433 18383277 14197976 9914464 4551841 4633657 E SURPLUS OF NON INTEREST BEARING FUNDS (C-D 14569431 17916839 20050765 21959692 27438900 24771143 33344466 121357232 262500011 8.2 THE LD. AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE SU BMITTED THAT IN VIEW OF THE FACT THAT THE ASSESSEE POSSESSED SUFFIC IENT INTEREST FREE FUNDS OF ITS OWN COMPRISING OF PARTNERS CAPITAL AND O THER FUNDS PRESUMPTION STANDS ESTABLISHED IN FAVOUR OF THE ASSESSEE TH AT INTEREST FREE ADVANCES TO SISTER CONCERNS WERE MADE BY THE ASSESSEE OUT OF INTEREST FREE FUNDS AVAILABLE WITH IT. THEREFORE NO PART OF INTEREST OF BORROWINGS CAN BE DISALLOWED ON THE BASIS THAT INTERE ST FREE ADVANCES WERE GIVEN OUT OF INTEREST BEARING FUNDS. 8.3 WE FIND ON FACTS THAT THE ISSUE IS SQUARELY COVERED BY THE DECISION OF THE HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. RELIANCE UTILITIES & POWER LTD. (2009) 313 ITR 340 (BOM). WE ALSO FIN D THAT THE PUNE BENCH OF THE TRIBUNAL IN ASSESSEES OWN CASE IN ITA NO.93 6/PN/2014 RELATING TO ASSESSMENT YEAR 2001-02 ORDER DATED 28.10. 2015 HAD AN OCCASION TO DEAL WITH IDENTICAL ISSUE AND HAS DECIDED T HE ISSUE IN FAVOUR OF THE ASSESSEE. FOLLOWING THE SAME WE FIND MERIT IN T HE CLAIM OF THE ASSESSEE. 8.4 IN THE RESULT GROUND NO.4 IS OF THE ASSESSEES APPEAL IS ALLOWED. 25. SINCE IN THE INSTANT CASE ALSO ADMITTEDLY THE ASSESSE E HAS SUFFICIENT OWN FUNDS AND FREE RESERVES A FACT BROUGHT BEFOR E THE AO AND THE CIT(A) AND NOT CONTROVERTED BY EITHER OF THEM T HEREFORE RESPECTFULLY FOLLOWING THE DECISION OF THE TRIBUNAL IN THE SIST ER CONCERN WE HOLD THAT NO DISALLOWANCE U/S.36(1)(III) IS CALLED FOR UNDER THE FACTS AND CIRCUMSTANCES OF THE CASE. WE ACCO RDINGLY SET ASIDE THE ORDER OF THE CIT(A) AND ALLOW THE GROUND RAISED BY THE ASSESSEE ON THIS ISSUE. 26. IDENTICAL GROUNDS HAVE BEEN TAKEN BY THE ASSESSEE FOR A.YRS. 2004-05 2006-07 AND 2007-08 THE DETAILS OF DISALLOWANCES MADE ARE GIVEN BELOW : 15 ITA NOS.1592 TO 1594 & 1949 TO 1951/PN/2014 ITA NO. ASST. YEAR DISALLOWANCE ITA NO.1593/PN/2 014 2004 - 05 21 45 469/ - ITA NO.1594/PN/2014 2006 - 07 16 00 233/ - ITA NO.1949/ON/2014 2007 - 08 14 60 902/ - 27. FOLLOWING OUR REASONINGS GIVEN ABOVE THE GROUNDS RAISE D BY THE ASSESSEE ON THIS ISSUE FOR THE ABOVE ASSESSMENT YE ARS ARE ALSO ALLOWED. 28. IN GROUND OF APPEAL NO.2 THE ASSESSEE HAS CHALLENGED THE ORDER OF THE CIT(A) IN CONFIRMING THE DISALLOWANCE OF RS.15 86 0 00/- OUT OF DISALLOWANCE OF RS.31 72 304/- MADE BY THE AO OUT OF MANPWOER/LABOUR CHARGES. 29. FACTS OF THE CASE IN BRIEF ARE THAT THE AO ON SCRUT INY OF THE TRADING ACCOUNT SUBMITTED BY THE ASSESSEE NOTED THAT THE ASSESSEE HAD CLAIMED EXPENDITURE OF RS.3 17 23 043/- ON ACCOUNT OF W AGES. FURTHER THE ASSESSEE HAS ALSO CLAIMED AN AMOUNT OF RS.4 89 22 470/- FOR MATERIAL PURCHASES. THUS THE AMOUNT OF WAGES WORKS OUT TO 65% OF THE MATERIAL CONSUMED WHICH ACCORDING TO THE AO IS ON THE HIGHER SIDE. HE THEREFORE ASKED THE ASSESSEE TO JUSTIFY THE MANPOWER EXPENSES INCURRED BY IT. 30. THE ASSESSEE SUBMITTED THAT DUE TO DIFFERENT TYPES O F BULK QUANTITY THE WORK IS DONE SPEEDILY AT LOWER COST OF LA BOUR AT BIDI GHARKUL WHEREAS ON OTHER SITES THE SPEED OF COMPLETION C HANGES FOR EACH JOB. DUE TO RESEARCH AND DEVELOPMENT THE COST O F LABOUR HAS BEEN REDUCED SUBSTANTIALLY. FURTHER THE COST OF MATERIA L AND THE SAND IS REDUCED AS THE ASSESSEE IS HAVING ITS OWN QUARR Y AND CRUSHER AND IT HAS ALSO OBTAINED THE AUCTION OF SAND AT RIVER WITH ONLY TRANSPORTATION COST. HOWEVER FROM THE BILLS AND VO UCHERS 16 ITA NOS.1592 TO 1594 & 1949 TO 1951/PN/2014 MUSTER REGISTERS ETC MAINTAINED FOR THE PURPOSE OF LABOUR PAYMENT THE AO NOTED THAT THERE ARE NUMBER OF DEFICIENCIES I.E. NAM E OF SITE NATURE OF WORK PERIOD OF WORK WHEN WORK IS DONE ACTUAL MEASUREMENT OF WORK ETC. THESE VITAL POINTS ARE MISSING. FURTHER THE SIGNATURES OF DIFFERENT PERSONS IN THE MUSTER HAVE BE EN MADE BY SAME PERSON ONLY. THE REGISTERS AS WELL AS VOUCHERS D O NOT GIVE THE FULL AND CORRECT PICTURE OF THE WAGES. THE AO FURTHER HELD THAT THE ASSESSEE MIGHT HAVE MADE UNACCOUNTED PURCHASES TO ES CAPE SOME OTHER LIABILITY LIKE SALES TAX. CONSIDERING ALL THESE ASPECTS A ND THE EXPLANATION SUBMITTED BY THE ASSESSEE THE AO HELD THAT THE EXPENDITURE CLAIMED BY THE ASSESSEE IS NOT COMMENSURATE WITH THE MATERIAL CONSUMED. HE THEREFORE DISALLOWED 10% OF THE LABOUR CHARGES OF SUCH EXPENSES AND THEREBY MADE DISALLOWANCE OF RS.31 72 304/-. 31. BEFORE CIT(A) THE ASSESSEE GAVE BREAK UP OF MANPOWER EXPENSES WHICH IS REPRODUCED BY THE CIT(A) AT PARA 16 O F HIS ORDER. IT WAS SUBMITTED THAT COST OF LABOUR TO THE COST OF MAT ERIAL CANNOT BE STANDARD IN A STATISTICAL METHOD OR PERCENTAGE FOR A PAR TICULAR PERIOD. THE GENERAL NUMBER OF LABOUR INVOLVEMENT MAY BE RANGING WITHIN 25% TO 40% BUT THE SAME CANNOT BE APPLIED TO EAC H AND EVERY CASE. A HARD AND FAST RATIO WILL ALWAYS GIVE AN ABS URD RESULT IF THE FACTS ARE NOT APPRISED PROPERLY. THE TYPE OF CONS TRUCTION IN WHICH THE ASSESSEE COMPANY IS ENGAGED CONSISTS B AND C CLASS BUILDING THAT TOO PROPORTION OF C CLASS BUILDING IS VERY HIGH AS COMPARED TO B CLASS WHERE COSTLY MATERIALS ARE RARELY USED. THEREFORE THE COST OF MATERIAL IS LOW AND COST OF LABOUR AS COMPARED WITH MATERIAL COST IS HIGH. IN VIEW OF THE LARGE SITE FOR CO NSTRUCTING 10 000 DWELLING UNITS THE ASSESSEE HAS MADE ITS OWN ARRAN GEMENT OF 17 ITA NOS.1592 TO 1594 & 1949 TO 1951/PN/2014 TRANSPORT OF MATERIAL AND SAND. THEREFORE THE COST OF T RANSPORTATION IS INCREASED WHEREAS THE COST OF MATERIAL IS REDUCED. IF THE SAND AND STONE IS PURCHASED FROM THE MARKET IT WILL INCLUDE THE COST OF TRANSPORT. IN SUCH CASES THE COST OF METAL AND SAND IS VERY LOW BUT THE COST OF TRANSPORTATION IS VERY HIGH. ASSESSEE COMPA NY HAS PRODUCED ALL THE RECORDS INCLUDING PAYMENT VOUCHERS FOR T HE LABOUR COST. THE LABOUR EXPENSES WERE INCURRED AND PAID BY THE SITE INCHARGE AFTER VERIFYING THE ATTENDANCE THE TYPE AND QU ANTITY OF WORK DONE AND BY APPLYING PREDETERMINED RATES. THE TE CHNICAL PERSONS FURTHER VERIFIED THESE EXPENSES AT THE HEAD OFFICE AND UPON SUCH VERIFICATION AND APPROVAL THE PAYMENTS WERE MADE AN D RECORDED IN THE BOOKS VERIFIED AND APPROVED VOUCHERS DU LY SUPPORT ALL THE EXPENSES. THE TAX AT SOURCE IS DULY DEDUCTED AND PAID WHEREVER APPLICABLE. 32. IT WAS SUBMITTED THAT THE OBSERVATION OF THE AO THA T LABOUR EXPENDITURE CLAIMED BY THE ASSESSEE IS NOT COMMENSURATE WITH COST OF MATERIAL IS WITHOUT APPRISING PROPERLY THE TECHNICAL DETA ILS. IT WAS ACCORDINGLY ARGUED THAT THE DISALLOWANCE OF EXPENDITURE OF RS.31 72 304/- IS UNJUSTIFIED AND ARBITRARY AND SHOULD BE DELETED. 33. BASED ON THE ARGUMENTS ADVANCED BY THE ASSESSEE THE LD.CIT(A) RESTRICTED SUCH DISALLOWANCE TO 50% BY OBSERVING AS UNDER: 3.3 THE SUBMISSIONS OF THE APPELLANT ARE CAREFULLY EX AMINED WITH REFERENCE TO THE FACTS OF THE CASE AND MATERIAL AVAIL ABLE ON RECORD. THE ADDITION HAS BEEN MADE BY THE ASSESSING OFFICER PRIMARI LY ON THE BASIS OF THE OBSERVATION THAT THE MANPOWER EXPENSES CLAIMED BY THE APPELLANT WAS IN GROSS DISPROPORTION TO THE EXPENSES CLAIMED ON MA TERIAL CONSUMED AND THAT MANY OF THE CORRESPONDING VOUCHERS M AINTAINED ARE FOUND TO BE DEFECTIVE. THE JUSTIFICATION BEING GIVEN BY THE APPELLANT FOR THE HIGHER COST OF LABOUR IS THAT DURING THE YEAR IT WAS ENGAGED IN A MEGA 18 ITA NOS.1592 TO 1594 & 1949 TO 1951/PN/2014 HOUSING PROJECT NAMELY BIDI GHARKUL CONSISTING OF AB OUT 10 000 TENEMENTS WHICH WAS MORE OR LESS A LABOUR INTENSIVE PROJ ECT INASMUCH AS MOST OF THE CONSTRUCTION MATERIAL REQUIRED I.E. BRI CKS DOOR & WINDOW FRAMES AND OTHER SIMILAR PARTS WERE BEING MANUFACTURED BY THE APPELLANT ITSELF USING LABOUR. IT IS ALSO BEING CONTEND ED THAT THE BASIC RAW MATERIAL LIKE SAND METAL AND OTHER CONSTRUCTION MATE RIAL COULD BE OBTAINED AT CHEAPER RATES DUE TO CAPTIVE PRODUCTION OR BULK PURCHASE. THE APPELLANT STATED THAT DUE TO THE ABOVE FACTORS THERE WAS HIGHER EXPENDITURE ON LABOUR COMPARED TO MATERIAL COST. 3.3.1 THE ARGUMENT BEING ADVANCED BY THE APPELLANT THROUGH APPEALING IS FAR FROM CONVINCING. THE MAJOR PROJEC T IN RESPECT OF WHICH THE MAJOR PART OF THE EXPENDITURE CLAIMED IS SAID TO BE ATTRIBUTABLE NAMELY BIDI GHARKUL IS HELD TO BE ELIGIBLE FOR DEDU CTION U/S.80IB(10). THE BREAK UP OF THE GROSS PROFIT EARNED BY THE APPELL ANT FROM DIFFERENT PROJECTS ARE STATED TO BE AS UNDER : BIDI GHARKUL PROJECT OTHER SITES OVERALL POSITION 19.82% 12.97% 13.84% THUS IT IS NOT A CASE OF MERE INCREASE IN THE PROPORT ION OF LABOUR EXPENSES OVER MATERIAL COST BUT THE OVERALL PROFIT RAT IO IS ALSO MUCH HIGHER IN THE BIDI GHARKUL PROJECT VIS-A-VIS OTHER P ROJECTS. ADMITTEDLY THE BIDI GHARKUL PROJECT IS A GOVERNMENT SPONSORED PRO JECT AND THE CONSTRUCTION IS SUBJECT TO SEVERAL CRITERIA RULES AND R EGULATIONS. THE SELLING PRICE OF EACH TENEMENT CONSTRUCTED UNDER THE SCHEME IS FIXED AT RS.60 000/- AND BY APPELLANT'S OWN ADMISSION IT IS EXPE CTED TO EARN ONLY A MINIMUM AMOUNT OF PROFIT OUT OF THE PROJECT. HOWE VER AS NOTED ABOVE THE APPELLANT HAS SHOWN A GROSS PROFIT OF 19.82% IN TH E SAID PROJECT WHICH IS SUBSTANTIALLY HIGHER THAN THE PROFIT PERCENT AGE SHOWN FOR OTHER PROJECTS. THOUGH THE APPELLANT HAS GIVEN SCORES OF REA SONS FOR THE RELATIVELY LESS EXPENDITURE INCURRED ON ACCOUNT OF MA TERIAL. FOR THE BIDI GHARKUL PROJECT LIKE USING OF CHEAP MATERIAL MANUF ACTURING OF CEMENT BLOCKS IN ON ITS OWN USE OF SAND FROM CAPTIVE SITES ETC. STILL IT DOES NOT JUSTIFY THE HIGHER PERCENTAGE OF PROFIT SHOWN IN THE BIDI GHARKUL SCHEME GIVEN THE LOW MARGIN DUE TO CONSTRAINTS IN THE SELLING PRICE. FURTHER THERE IS NO LOGIC IN THE ARGUMENT THAT RAW MATERIAL FROM CAPTIVE SOURCES LIKE SAND METAL ETC. WERE BEING USED ONLY FOR BIDI G HARKUL PROJECT AND NOT ANYWHERE ELSE. THERE IS NOTHING ON RECORD TO SUGGE ST THAT ALL SUCH CAPTIVE MATERIAL WERE BEING USED FOR THE ABOVE PARTI CULAR SITES ONLY AND THE SAME WERE NOT BEING USED IN OTHER SITES ALSO. ALL TH ESE FACTORS COUPLED WITH THE FACT THAT THE PROFIT PERCENTAGE IN THE 80IB(10) ELIGIBLE PROJECT CLEARLY INDICATE THAT THERE HAS BEEN AN ATTE MPT TO SHIFT EXPENDITURE IS HOW MUCH QUANTUM OF EXPENDITURE ON LA BOUR MANPOWER COULD BE SAID TO BE LOADED ON TO THE NON-ELIGIBLE PR OJECTS. 3.3.2 THE OTHER REASON CITED BY THE ASSESSING OFFICER F OR MAKING THE DISALLOWANCE IS REGARDING THE EVIDENTIARY VALUE OF TH E DOCUMENT MAINTAINED IN SUPPORT OF THE EXPENDITURE CLAIMED. M OST OF SUCH DOCUMENTARY EVIDENCES ARE SELF MADE VOUCHERS ON WHICH SIGNATURE OF THE RECIPIENTS IS OBTAINED. THE EXPENSES FURNISHED BY THE APPELLANT SHOWS THAT OUT OF THE TOTAL EXPENDITURE CLAIMED OF RS. 3 17 23 043/- MAJOR PORTION AMOUNTING TO RS.2 47 16 716/- HAVE BEE N PAID TO SUB- CONTRACTORS WHICH IS BY AND LARGE NOT DISPUTED BY THE ASSESSING OFFICER. THUS THE FLAWS POINTED OUT BY THE ASSESSING OFFICER CAN BE LOGICALLY ASSUMED TO BE CONFINED TO ONLY A PORTION OF THE EXPEN DITURE MAINLY 19 ITA NOS.1592 TO 1594 & 1949 TO 1951/PN/2014 RELATING TO OTHER NON-ELIGIBLE PROJECTS OF THE APPEL LANT. THEREFORE THE DISALLOWANCE MADE BY THE ASSESSING OFFICER AT 10% OF THE MANPOWER EXPENSES CLAIMED BY THE APPELLANT IS ON HIGHER SIDE AND THE SAME NEEDS TO BE SUITABLY REDUCED. 3 . 3.3 CONSIDERING THE VARIOUS ASPECTS DISCUSSED ABOVE AND HA VING CONSIDERED THE TOTALITY OF THE FACTS AND CIRCUMSTANCE S OF THE CASE I AM OF THE CONSIDERED VIEW THAT IT WOULD BE FAIR AND REASONA BLE IF THE QUANTUM OF DISALLOWANCE MADE BY THE ASSESSING OFFICER IS . RESTRICTED TO 50% OF THE AMOUNT DISALLOWED. ACCORDINGLY THE DISALLOWANCE IS R ESTRICTED TO RS.15 86 000/- AS AGAINST RS.31 72 3034/- MADE BY THE A SSESSING OFFICER. THE APPELLANT GETS A CONSEQUENTIAL RELIEF OF RS.15 86 304/-. 34. AGGRIEVED WITH SUCH ORDER OF THE CIT(A) THE ASSESSEE IS IN APPEAL BEFORE US. 35. THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE DISALLOWANCE HAS BEEN MADE BY THE AO ON THE GROUND THA T THE LABOUR PAYMENTS ARE EXCESSIVE AS COMPARED TO MATERIAL P URCHASED AND THERE ARE DISCREPANCIES IN THE MAINTENANCE OF VOUCHE RS AND REGISTERS. HE SUBMITTED THAT SINCE THE MAJOR PORTION OF RS.2 47 16 716/- IS PAID TO SUB-CONTRACTORS AND THE SAME IS NOT DISPUTED EITHER BY THE AO OR THE CIT(A) THEREFORE DISALLOWA NCE CAN BE MADE ONLY OUT OF THE BALANCE AMOUNT OF RS.70 07 327/-. HE SUBMITTED THAT CONFIRMATION OF DISALLOWANCE OF RS.15 86 304/- AMOUNTS TO 22.46% OF THE BALANCE LABOUR EXPENSES WHICH IS NOT ONLY HIGH BUT EXORBITANT. HE ACCORDINGLY SUBMITTED THAT DISALLO WANCE IF ANY MAY BE RESTRICTED WITH REFERENCE TO RS.70 06 327/- ON LY. HE FURTHER SUBMITTED THAT THE EXPENDITURE INCURRED OUT OF RS.70 06 327/- IS ON 80IB(10) PROJECT. 36. THE LD. DEPARTMENTAL REPRESENTATIVE ON THE OTHER HA ND HEAVILY RELIED ON THE ORDER OF THE CIT(A). 20 ITA NOS.1592 TO 1594 & 1949 TO 1951/PN/2014 37. WE HAVE CONSIDERED THE RIVAL ARGUMENTS MADE BY BOTH THE SIDES PERUSED THE ORDERS OF THE AO AND CIT(A) AND THE P APER BOOK FILED ON BEHALF OF THE ASSESSEE. WE FIND THE AO MADE DISALL OWANCE OF RS.31 72 304/- BEING 10% OF THE TOTAL LABOUR EXPENSES OF RS.3 17 23 043/- ON THE GROUND (A) THAT THE LABOUR EXPENSE S CLAIMED ARE ON HIGHER SIDE AS COMPARED TO MATERIAL CONSUMED. (B) THE MATERIAL CONSUMPTION OF RS.4.89 CRORES AND LABOUR EXPENSE S OF RS.3.17 CRORES FORMS 65% OF MATERIAL CONSUMPTION (C) NUMBER OF DEFICIENCIES IN THE VOUCHERS AS WELL AS REGISTERS AND (D) THE ASSESSEE MIGHT HAVE MADE UNACCOUNTED PURCHASES TO ESCAPE LIABILITY TO SALES TAX. WE FIND THE LD.CIT(A) RESTRICTED SUCH DISALLOWANCE TO 5 0% OF THE DISALLOWANCE MADE BY THE AO. IT IS THE SUBMISSION OF THE LD. COUNSEL FOR THE ASSESSEE THAT SINCE AN AMOUNT OF RS.2 47 1 6 716/- HAS BEEN PAID TO THE SUB-CONTRACTORS OUT OF THE LABOUR EXPENSES OF RS.3 17 23 043/- AND SINCE THE SUB-CONTRACT EXPENSES HAV E NOT BEEN DOUBTED BY THE AO OR THE CIT(A) THEREFORE DISALLOWAN CE ON ADHOC BASIS ON THE WHOLE OF THE LABOUR EXPENSES IS UNCALLE D FOR AND UNJUSTIFIED. 38. WE FIND MERIT IN THE ABOVE SUBMISSION OF THE LD. COUNSEL FOR THE ASSESSEE. SINCE AN AMOUNT OF RS.2 47 16 716/- HAS BEEN PAID TO THE SUB CONTRACTORS A STATEMENT MADE BY THE LD. COUN SEL FOR THE ASSESSEE AT THE BAR AND NOT CONTROVERTED BY THE LD. DEPARTMENTAL REPRESENTATIVE THEREFORE WE FIND MERIT IN THE SUBMISSION OF THE LD. COUNSEL FOR THE ASSESSEE THAT DISALLOWANCE IF ANY CAN BE M ADE OUT OF THE BALANCE OF RS.70 06 327/- WHICH CONTAIN NUMBER OF DEFICIENCIES. SINCE DISALLOWANCE OF RS.15 86 304/- AMOUNTS TO 22.46% OF THE BALANCE LABOUR EXPENSES OF RS.70 07 327/- WHIC H IN OUR OPINION IS ON THE HIGHER SIDE THEREFORE CONSIDERING TH E TOTALITY 21 ITA NOS.1592 TO 1594 & 1949 TO 1951/PN/2014 OF THE FACTS OF THE CASE WE ARE OF THE CONSIDERED OPINIO N THAT DISALLOWANCE OF RS.10 LAKHS ON ADHOC BASIS OUT OF THE BALAN CE AMOUNT OF RS.70 06 327/- WILL MEET THE ENDS OF JUSTICE. WE H OLD AND DIRECT ACCORDINGLY. GROUND OF APPEAL NO.2 BY THE ASS ESSEE IS ACCORDINGLY PARTLY ALLOWED. 39. THE ASSESSEE HAS ALSO RAISED TWO ADDITIONAL GROUNDS FOR A.YRS. 2003-04 AND 2004-05. HOWEVER THE LD. COUNSEL FOR THE A SSESSEE AT THE TIME OF HEARING DID NOT PRESS THESE ADDITIONAL GROUNDS FOR WHICH THE LD. DEPARTMENTAL REPRESENTATIVE HAS NO OBJECTION. A CCORDINGLY THE ADDITIONAL GROUNDS RAISED BY THE ASSESSEE FOR A.YRS.20 03-04 AND 2004-05 ARE DISMISSED AS NOT PRESSED. 40. THE SECOND ISSUE RAISED BY THE ASSESSEE IN ITA NO.1593/PN/2014 FOR A.Y. 2004-05 RELATES TO THE ORDER OF THE CIT(A) IN PARTLY SUSTAINING THE DISALLOWANCE OF LABOUR PAYMENTS. 41. AFTER HEARING BOTH THE SIDES WE FIND THE AO MADE DISALLO WANCE OF RS.8 41 334/- BEING 20% OF LABOUR CHARGES OF RS.42 06 771/- RELATING TO OTHER SITES ON THE GROUND THAT ASSESSEE H AS CLAIMED LABOUR PAYMENT OF RS.220 LAKHS AS AGAINST THE MATERIAL PUR CHASED OF RS.361 LAKHS WHICH COMES TO 61% OF THE MATERIAL CONSUME D. FURTHER THERE IS MASSIVE FALL IN THE GROSS PROFIT RATIO AS C OMPARED TO GROSS PROFIT OF 13.3% FOR A.Y. 2003-04. WE FIND THE LD.CIT(A) N OTED THAT THE LABOUR PAYMENTS OF OTHER SITES ARE RS.76.61 LAKH S AND ACCORDINGLY HE REDUCED THE DISALLOWANCE TO 10% OF LABOUR PAYMENTS OF OTHER SITES. IT IS THE SUBMISSION OF THE LD. COUNSEL FOR THE ASSESSEE THAT LABOUR EXPENSES AMOUNT TO 30 TO 35% OF THE TOTAL COST OF CONSTRUCTION. THE TOTAL COST OF CONSTRUCTION IS RS.13 39 1 LAKHS AGAINST WHICH LABOUR EXPENSES ARE ABOUT RS.220 LAKHS. TH EREFORE 22 ITA NOS.1592 TO 1594 & 1949 TO 1951/PN/2014 THE LABOUR EXPENSES ARE 16% AND NOT 61% AS STATED BY THE AO. FURTHER IT IS ALSO HIS SUBMISSION THAT THE COMPARISON OF LAB OUR PAYMENTS WITH MATERIAL CONSUMPTION IS INCORRECT AND THE DISALLOWANCE OF 20% WAS VERY HIGH. EVEN THOUGH THE LD.CIT (A) HAS RESTRICTED SUCH DISALLOWANCE TO 10% HE SUBMITTED THAT TH E SAME IS ALSO VERY HIGH. 42. IT IS THE SUBMISSION OF THE LD. DEPARTMENTAL REPRESENT ATIVE THAT CIT(A) HAS ALREADY REDUCED THE DISALLOWANCE TO 10% O F THE EXPENSES. THEREFORE NO FURTHER RELIEF IS CALLED FOR. 43. AFTER HEARING BOTH THE SIDES WE FIND THE AO DISALLOWED A N AMOUNT OF RS.8 41 335/- BEING 20% OF THE LABOUR EXPENSES/MANPOWER EXPENSES IN RESPECT OF OTHER SITES. W E FIND THE LD.CIT(A) HAS ALREADY RESTRICTED SUCH DISALLOWANCE TO 10% WHICH UNDER THE FACTS AND CIRCUMSTANCES OF THE CASE IS PROPER AND JUSTIFIED. SINCE THE LD.CIT(A) HAS ALREADY GIVEN SUBSTANTIAL RELIEF TO T HE ASSESSEE ON THIS ISSUE BY SUSTAINING AN AMOUNT OF RS.4 20 677/- ONLY THEREFORE WE FIND NO INFIRMITY IN THE ORDER OF THE CIT(A ). ACCORDINGLY THE SAME IS UPHELD AND THE GROUND RAISED BY THE ASSESSEE ON THIS ISSUE IS DISMISSED. 44. THE THIRD ISSUE BY THE ASSESSEE IN THE GROUNDS OF APPEAL FOR ITA NO.1593/PN/2014 FOR A.Y. 2004-05 RELATES TO THE ORDER OF THE CIT(A) IN CONFIRMING THE ADDITION OF RS.35 992/- MADE ON ACCOUNT OF BELATED PAYMENT OF EMPLOYEES CONTRIBUTION TO PF. 45. FACTS OF THE CASE IN BRIEF ARE THAT THE AO MADE DISALLO WANCE OF RS.50 656/- U/S.36(1)(VA) R.W.S. 2(24)(X) OF THE I.T. ACT BEIN G BELATED PAYMENT OF EMPLOYEES CONTRIBUTION OF PF. BEFORE C IT(A) IT 23 ITA NOS.1592 TO 1594 & 1949 TO 1951/PN/2014 WAS SUBMITTED THAT ASSESSEE WAS UNDER BONAFIDE BELIED TH AT THERE IS NO DELAY. HOWEVER IN THE OPINION OF THE AUDITOR THERE WA S DELAY IN PAYMENTS AND THEREFORE THE AUDITOR REPORTED THE DELAY IN THE AUDIT REPORT U/S.44AB OF THE ACT. RELYING ON VARIOUS DECISIONS IT WAS SUBMITTED THAT CONTRIBUTION TO PF ESI ETC. EVEN IF PAID BE LATEDLY BUT PAID BEFORE DUE DATE OF FILING OF THE RETURN OF INCOME IS ALLO WABLE AS DEDUCTION. IT WAS FURTHER SUBMITTED THAT PROVISIONS OF S ECTION 43B HAVE OVERRIDING EFFECT AND EVEN IF THE DISALLOWANCE U/S.2(24)(X ) R.W.S. 36(1)(VA) IS PRESUMED TO BE CORRECT STILL THE ASSESSEE IS ELIG IBLE FOR DEDUCTION FOR PF PAYMENTS MADE BEFORE THE DUE DATE OF FILING OF RETURN IN TERMS OF PROVISIONS OF SECTION 43B OF THE I.T. ACT. 46. HOWEVER THE CIT(A) WAS NOT FULLY SATISFIED WITH THE ARGU MENTS ADVANCED BY THE ASSESSEE. RELYING ON THE DECISION OF HONBLE GUJARA T HIGH COURT IN THE CASE OF GUJARAT STATE ROAD CORPORATIO N VIDE TAX APPEAL NO.637/2013 AND BUNCH OF OTHER APPEALS ORDER DA TED 26-12-2013 HE HELD THAT BELATED PAYMENT OF EMPLOYEES CO NTRIBUTION TO PF AMOUNTING TO RS.35 992/- IS INCOME OF THE ASSESSEE U/S.2(24)(X) R.W. EXPLANATION TO SECTION 36(1) (VA) OF THE ACT. HE HOWEVER DELETED AN AMOUNT OF RS.14 664/- BEING PORTION O F EMPLOYERS CONTRIBUTION TO PF AND ESI. 47. AGGRIEVED WITH SUCH ORDER OF THE CIT(A) THE ASSESSEE IS IN APPEAL BEFORE US. 48. AFTER HEARING BOTH THE SIDES WE FIND THE ISSUE STANDS DECIDED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF HONBLE BOMBA Y HIGH COURT IN THE CASE OF CIT VS. GHATGE PATIL TRANSPORTS LTD . REPORTED IN 368 ITR 749 WHERE IT HAS BEEN HELD THAT DEDUCTION FOR P AYMENT OF EMPLOYEES CONTRIBUTION CANNOT BE DISALLOWED IN CASE OF C ONTRIBUTION 24 ITA NOS.1592 TO 1594 & 1949 TO 1951/PN/2014 TO EMPLOYEES WELFARE FUNDS STOOD PAID ON OR BEFORE DUE DA TE OF FILING OF RETURN. SINCE ADMITTEDLY IN THE INSTANT CASE THE EMPLO YEES CONTRIBUTION TO PF AND ESI HAVE BEEN DEPOSITED BEFORE T HE DUE DATE OF FILING OF THE RETURN THEREFORE FOLLOWING THE DECISION OF THE H ONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF GHATGE PATIL TRANSP ORTS LTD. (SUPRA) THE ORDER OF THE CIT(A) IS SET ASIDE AND THE GRO UND RAISED BY THE ASSESSEE IS ALLOWED. 49. SO FAR AS THE GROUNDS OF APPEAL NO. 1 & 2 IN ITA NO.1594/PN/2014 FOR A.Y. 2006-07 ARE CONCERNED THE LD. C OUNSEL FOR THE ASSESSEE DID NOT PRESS THE GROUNDS OF APPEAL NO .1 AND 2 FOR WHICH THE LD. DEPARTMENTAL REPRESENTATIVE HAS NO OBJECT ION. ACCORDINGLY THE ABOVE GROUNDS ARE DISMISSED AS NOT PRESSED. 50. SO FAR AS THE GROUNDS OF APPEAL NO.3 IS CONCERNED THE SAME RELATES TO DISALLOWANCE OF INTEREST U/S.36(1)(III) AMOUNTING TO RS.16 00 233/-. THE SAME HAS ALREADY BEEN ADJUDICATED WH ILE DECIDING GROUND OF APPEAL NO. 1 IN ITA NO.1592/PN/2014 AT PARA 20 OF THIS ORDER. FOLLOWING THE SAME REASONING THIS GROUND B Y THE ASSESSEE IS ALLOWED. 51. NOW COMING TO THE GROUNDS OF APPEAL NO. 4 WHICH RELATE S TO DISALLOWANCE OF RS.5 67 768/- OUT OF MANPOWER/LABOUR PAYMENT WE FIND THE AO DISALLOWED AN AMOUNT OF RS.5 68 768/- ON ACCOUN T OF MANPOWER EXPENSES BEING 2% OF THE EXPENSES OF RS.2 84 38 4 11/-. IN APPEAL THE LD.CIT(A) SUSTAINED THE ADDITION MADE BY TH E AO. IT IS THE CASE OF THE LD. COUNSEL FOR THE ASSESSEE THAT NO DIS CREPANCIES HAVE BEEN NOTICED BY THE AO IN THE VOUCHERS OR REGISTE RS MAINTAINED AND THE PAYMENTS TO CONTRACTORS OF RS.2 51 94 130/- ARE FULLY VERIFIABLE. ACCORDING TO HIM IF THERE COULD BE ANY ISSUE THAT IS WITH 25 ITA NOS.1592 TO 1594 & 1949 TO 1951/PN/2014 RESPECT TO DEPARTMENTAL LABOUR OF RS.32 44 281/-. THEREFOR E DISALLOWANCE IS ABOUT 17.33% WHICH IS VERY HIGH. 52. AFTER CONSIDERING THE TOTALITY OF THE FACTS OF THE CASE WE ARE OF THE CONSIDERED OPINION THAT DISALLOWANCE OF RS.5 67 768/- AP PEARS TO BE ON THE HIGHER SIDE. THEREFORE FOLLOWING THE REASONS GI VEN WHILE DECIDING ITA NO.1592/PN/2014 WE ARE OF THE CONSIDERED OP INION THAT DISALLOWANCE OF RS.3 LAKHS ON ESTIMATE WILL MEET THE ENDS OF J USTICE. WE HOLD AND DIRECT ACCORDINGLY. THIS GROUND BY THE ASSE SSEE IS ACCORDINGLY PARTLY ALLOWED. 53. SO FAR AS ITA NO.1949/PN/2014 FOR A.Y. 2007-08 IS CONC ERNED THE FIRST GROUND RELATES TO DISALLOWANCE OF INTEREST OF RS.14 60 902/- WHICH HAS ALREADY BEEN DECIDED ALONG WITH ITA NO.1592/PN/ 2014 FOR A.Y. 2003-04. 54. SO FAR AS THE SECOND GROUND IS CONCERNED THE SAME RELATES TO THE ORDER OF THE CIT(A) IN CONFIRMING THE DISALLOWANCE OF RS.3 80 804/- OUT OF MANPOWER/LABOUR PAYMENTS. 55. AFTER HEARING BOTH THE SIDES WE FIND THE AO MADE DISALLO WANCE OF RS.3 80 808/- BEING 2% OF LABOUR EXPENSES OF RS.1 90 40 42 5/- ON THE GROUND THAT SUCH EXPENSES ARE ON THE HIGHER SIDE WHICH HAS BE EN UPHELD BY THE CIT(A). FOLLOWING OUR REASONS GIVEN IN THE PR ECEDING PARAGRAPHS WE ARE OF THE CONSIDERED OPINION THAT DISALLOWA NCE OF RS.2 LAKHS ON ADHOC BASIS WILL MEET THE ENDS OF JUSTICE. WE HOLD AND DIRECT ACCORDINGLY. THIS GROUND BY THE ASSESSEE IS ACCO RDINGLY PARTLY ALLOWED. 26 ITA NOS.1592 TO 1594 & 1949 TO 1951/PN/2014 56. SO FAR AS GROUNDS OF APPEAL IN ITA NOS. 1950/PN/2014 AND 1951/PN/2014 FOR A.YRS. 2008-09 AND 2009-10 ARE CONCER NED THE LD. COUNSEL FOR THE ASSESSEE DID NOT PRESS THE GROUNDS RAISED BY THE ASSESSEE BECAUSE OF SMALLNESS OF THE AMOUNT FOR WHICH THE LD. DEPARTMENTAL HAS NO OBJECTION. ACCORDINGLY THE GROUNDS RAISED BY THE ASSESSEE FOR THE ABOVE APPEALS ARE DISMISSED AS NOT PRESSED . 57. IN THE RESULT ITA NOS. 1592 TO 1594/PN/2014 AND I TA NO.1949/PN/2014 ARE PARTLY ALLOWED. ITA NO. 1950/PN/201 4 AND ITA NO.1951/PN/2014 ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 07-10-2016. SD/- SD/- (VIKAS AWASTHY) (R.K. PANDA) JUDICIAL MEMBER ACCOUNTANT MEMBER PUNE; ' DATED : 07 TH OCTOBER 2016. ( )'+ / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT 3 . 4. THE CIT(A ) - III PUNE THE CIT-III PUNE 5. $ ''( ( / DR ITAT A PUNE; 5 . + / GUARD FILE. / BY ORDER // $ ' //TRUE COPY // -. ' ( / SR. PRIVATE SECRETARY ( / ITAT PUNE