VILAS TRANSPORT CO. P. LTD, MUMBAI v. ITO WD 7(3)(1), MUMBAI

ITA 413/MUM/2009 | 2005-2006
Pronouncement Date: 14-09-2011 | Result: Partly Allowed

Appeal Details

RSA Number 41319914 RSA 2009
Assessee PAN AABCV2362A
Bench Mumbai
Appeal Number ITA 413/MUM/2009
Duration Of Justice 2 year(s) 7 month(s) 26 day(s)
Appellant VILAS TRANSPORT CO. P. LTD, MUMBAI
Respondent ITO WD 7(3)(1), MUMBAI
Appeal Type Income Tax Appeal
Pronouncement Date 14-09-2011
Appeal Filed By Assessee
Order Result Partly Allowed
Bench Allotted F
Tribunal Order Date 14-09-2011
Date Of Final Hearing 05-09-2011
Next Hearing Date 05-09-2011
Assessment Year 2005-2006
Appeal Filed On 19-01-2009
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH F MUMBAI BEFORE SHRI J. SUDHAKAR REDDY A.M. AND SHRI V. DUR GA RAO J.M. ITA NO. 413/MUM/2009 ASSESSMENT YEAR : 2005-06 VILAS TRANSPORT CO. P. LTD. APPELLANT 10 IMPERIAL CHAMBERS WILSON ROAD BALLARD ESTATE MUMBAI 400 038. (PAN AABCV2362A) VS. DY. COMMISSIONER OF INCOME-TAX RESPON DENT CENTRAL CIRCLE 18 & 19 AAYAKAR BHAVAN M.K. ROAD MUMBAI 400 020. APPELLANT BY : MR. DILIP LAKHANI RESPONDENT BY : MR. PARTHASARTHI NAIK DATE OF HEARING : 05/09/2011 DATE OF PRONOUNCEMENT : ORDER PER V. DURGA RAO J.M.: THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGA INST THE ORDER OF CIT(A)-VIII MUMBAI PASSED ON 10/10/2008 FOR TH E ASSESSMENT YEAR 2005-06. 2. GROUND NO. 1 IS DIRECTED AGAINST THE ACTION OF T HE CIT(A) IN DISALLOWING INTEREST OF RS. 60 000/-. 3. THE AO NOTED THAT THE ASSESSEE RAISED UNSECURED LOANS AMOUNTING RS. 20 00 000/-. ON BEING ASKED TO EXPLAI N BY THE AO THE SAME WERE TAKEN FOR THE PAYMENT OF THE OUTSTANDING PROVIDENT FUND. THE AO WAS OF THE VIEW THAT THE INTEREST EXPENDITUR E INCURRED ON SUCH LOANS FOR THE DEFAULT IN THE PAYMENT OF THE PROVIDE NT FUNDS THE SAME ITA NO. 413/MUM/2009 VILAS TRANSPORT CO. P. LTD.. 2 IS NOT ALLOWABLE. THEREFORE THE AO DISALLOWED THE INTEREST EXPENDITURE. ON APPEAL THE CIT(A) CONFIRMED THE AC TION OF THE AO. 4. BEFORE US THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE INTEREST EXPENDITURE SHOULD BE ALLOWED AS THE B ORROWINGS WERE TAKEN FOR THE PURPOSE OF BUSINESS. ON THE OTHER HAN D THE LEARNED DR RELIED UPON THE ORDERS OF THE AUTHORITIES BELOW. 5. WE HAVE HEARD BOTH THE PARTIES PERUSED THE MATE RIAL ON RECORD AND GONE THROUGH THE ORDERS OF THE AUTHORITIES BELO W. AS THE CIT(A) HELD THAT THE ASSESSEE IS NOT SUPPOSED TO MAKE USE OF THE EMPLOYEES CONTRIBUTION FOR SOME OTHER PURPOSE AND THEN TAKEN FROM OTHER PARTIES AND INCUR HEAVY INTEREST EXPENDITURE ON SUC H LOANS FOR PAYMENT TO THE GOVERNMENT PF DUES ETC. HOWEVER WE ARE OF THE VIEW THAT THE UNSECURED LOANS WERE USED BY THE ASSESSEE FOR THE PURPOSE OF BUSINESS PURPOSE ONLY. THE AO HAS NOT DENIED THAT THE ASSESSEE HAS UTILIZED THE BORROWED FUNDS FOR OTHER THAN BUSINESS PURPOSE. ACCORDINGLY WE SET ASIDE THE ORDER OF CIT(A) AND D ELETE THE DISALLOWANCE OF RS. 60 000/- MADE BY THE AO ON ACCO UNT OF INTEREST EXPENDITURE ON BORROWED FUNDS AND THE GROUND RAISED BY THE ASSESSEE IS ALLOWED. 6. GROUND NO. 2 REGARDING ADDITION OF RS. 1 11 23 8 05/- MADE U/S 40(A)(AI) GROUND N. 3 REGARDING INITIATION OF PENA LTY PROCEEDINGS U/S 271D AND GROUND NO. 4 PERTAINING TO DISALLOWANCE O F RS. 14 39 590/- BEING PAYMENT OF GRATUITY HAVE NOT BEE N PRESSED BY THE LEARNED COUNSEL FOR THE ASSESSEE AT THE TIME OF HEA RING THEREFORE THE SAME ARE DISMISSED AS NOT PRESSED. 7. GROUND NO. 5 IS PERTAINING TO DISALLOWANCE OF RS . 34 30 478/- ON ACCOUNT OF CONTRIBUTION OF EMPLOYEES PROVIDENT F UND. ITA NO. 413/MUM/2009 VILAS TRANSPORT CO. P. LTD.. 3 8. SINCE THE ASSESSEE HAD NOT PAID THE EMPLOYEES CO NTRIBUTION OF EPF AMOUNTING TO RS. 34 30 478/- WITHIN THE DUE DAT E THE AO DISALLOWED THE SAME U/S 36(1)(VA) R.W.S 2(24)(X) OF THE ACT. BEFORE THE CIT(A) ON APPEAL EXPLAINED THAT THE PAYMENT HAD B EEN MADE TO THE GOVERNMENT ACCOUNT BEFORE THE DUE DATE OF FILING OF RETURN AND THEREFORE THERE SHOULD NOT BE ANY DISALLOWANCE. THE CIT(A) CONFIRMED THE ACTION OF THE AO OBSERVING THAT EVEN EMPLOYEES CONTRIBUTION PAID BY THE DUE DATE OF FILING OF RETURN THE SAME CANNO T BE ALLOWED AS A DEDUCTION U/S 43B BECAUSE SUCH CONTRIBUTIONS ARE NO T OF THE EMPLOYER BUT OF THE EMPLOYEES ONLY. AGGRIEVED THE ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL. 9. BEFORE US THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ISSUE IS COVERED BY THE DECISION OF THE ITAT M UMBAI BENCHES MUMBAI IN THE CASE OF PIK PEN PVT. LTD. V. ITO IN I TA NO. 6847/MUM/08 VIDE ORDER DATED 28/01/10. A COPY OF TH E SAID ORDER FILED BY THE ASSESSEE IS ON RECORD. 10. ON THE OTHER HAND THE LEARNED DR SUBMITTED THA T EMPLOYEES CONTRIBUTION OF PF HAS TO BE REMITTED WITHIN THE DU E DATE AND IF THE ASSESSEE FAILED TO DO SO THE DEDUCTION OF THE SAME CANNOT BE ALLOWED. 11. WE HAVE HEARD BOTH THE PARTIES PERUSED THE REC ORD AND GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. THE HO NBLE SUPREME COURT IN THE CASE OF CIT VS. ALOM EXTRUSIONS LTD. ( 2009) 319 ITR 306 CONSIDERED THE APPLICABILITY OF SECTION 36(1)(VA) R EAD WITH SECTION 2(24)(X) AS WELL AS 43B OF THE ACT AND IT HAS BEEN HELD THAT THE AMENDMENT WAS CURATIVE IN NATURE AND APPLICABLE RET ROSPECTIVELY WITH EFFECT FROM APRIL 1 1988. 12. IN CIT VS. AIMIL LTD. (2010) 321 ITR 508 (D EL) THEIR LORDSHIPS WHILE OBSERVING THAT THE ASSESSEE HAS DEPOSITED EMP LOYERS CONTRIBUTION AS WELL AS EMPLOYEES CONTRIBUTION TOW ARDS PF AND ESIC ITA NO. 413/MUM/2009 VILAS TRANSPORT CO. P. LTD.. 4 AFTER THE DUE DATE AS PRESCRIBED UNDER THE RELEVAN T ACT/RULE BUT BEFORE THE DUE DATE FOR FILING THE RETURN UNDER THE INCOME TAX ACT HAVE HELD THAT NO DISALLOWANCE COULD BE MADE IN VIE W OF THE PROVISIONS OF SECTION 43B AS AMENDED BY THE FINANCE ACT 2003. 13. THE CO-ORDINATE BENCH OF ITAT IN THE CASE OF PI K PEN PVT. LTD. (SUPRA) FOLLOWING THE JUDGMENT OF THE HONBLE SUPRE ME COURT IN THE CASE OF ALOM EXTRUSION LTD. (SUPRA) DELETED THE DIS ALLOWANCE ON THIS COUNT. RESPECTFULLY FOLLOWING THE ABOVE DECISIONS WE FIND THAT THERE IS NO DISPUTE THAT THE ASSESSEE HAS MADE THE PAYMENT O F EMPLOYEES CONTRIBUTION TO PROVIDENT FUND BEFORE THE DUE DATE OF FILING OF THE RETURN THEREFORE WE ARE OF THE VIEW THAT NO SUCH DISALLOWANCE IS CALLED FOR AND ACCORDINGLY THE DISALLOWANCE OF RS. 34 30 478/- MADE BY THE ASSESSING OFFICER AND SUSTAINED BY THE LEARN ED CIT(A) IS DELETED. THIS GROUND TAKEN BY THE ASSESSEE IS ALLO WED. 14. IN THE RESULT APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. PRONOUNCED IN THE OPEN COURT ON THIS 14 TH DAY OF SEPTEMBER 2011. SD/- SD/- (J. SUDHAKAR REDDY) (V. DURGA RAO) ACCOUNTANT MEMBER JUDI CIAL MEMBER MUMBAI DATED: 14 TH SEPTEMBER 2011 KV ITA NO. 413/MUM/2009 VILAS TRANSPORT CO. P. LTD.. 5 COPY TO:- 1) THE APPELLANT. 2) THE RESPONDENT. 3) THE CIT (A) CONCERNED. 4) THE CIT CONCERNED. 5) THE DEPARTMENTAL REPRESENTATIVE F BENCH I.T .A.T. MUMBAI. BY ORDER //TRUE COPY// ASST. REGISTRAR I.T.A.T. MUMBAI. S.NO. DESCRIPTION DATE INTLS 1. DRAFT DICTATED ON 06/09/11 SR.P.S./P.S 2. DRAFT PLACED BEFORE AUTHOR 07/09/11 SR.P.S/PS 3 DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER JM/AM 4 DRAFT DISCUSSED/APPROVED BY SECOND MEMBER JM/AM 5 APPROVED DRAFT COMES TO THE SR.P.S./PS SR.P.S./P.S 6. KEPT FOR PRONOUNCEMENT ON SR. P.S./P.S. 7. FILE SENT TO THE BENCH CLERK SR.P.S./P.S 8 DATE ON WHICH FILE GOES TO THE HEAD CLERK 9 DATE OF DISPATCH OF ORDER