The Hindustan Times Ltd, New Delhi v. ACIT, New Delhi

ITA 613/DEL/2009 | 2002-2003
Pronouncement Date: 12-03-2010 | Result: Allowed

Appeal Details

RSA Number 61320114 RSA 2009
Assessee PAN AAACT4962F
Bench Delhi
Appeal Number ITA 613/DEL/2009
Duration Of Justice 1 year(s) 23 day(s)
Appellant The Hindustan Times Ltd, New Delhi
Respondent ACIT, New Delhi
Appeal Type Income Tax Appeal
Pronouncement Date 12-03-2010
Appeal Filed By Assessee
Order Result Allowed
Bench Allotted C
Tribunal Order Date 12-03-2010
Date Of Final Hearing 02-03-2010
Next Hearing Date 02-03-2010
Assessment Year 2002-2003
Appeal Filed On 19-02-2009
Judgment Text
ITA NO. 613/DEL/2009 A.Y. 2002-03 1 IN THE INCOMETAX APPELATE TRIBUNAL DELHI BENCH C: NEW DELHI BEFORE SHRI RAJPAL YADAV JUDICIAL MEMBER & SHRI SHAMIM YAHYA ACCOUNTANT MEMBER ITA NO. 613/DEL/2009 A.Y. : 2002-03 THE HINDUSTAN TIMES LIMITED VS. DCIT CIRCLE 16(1) 18-20 HT HOUSE KASTURBA CR BLDG. NEW DELHI GANDHI MARG NEW DELHI 110 001 [PAN : AAACT 4962 F] (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI RUPESH JAIN & MS. SHIKHA AR DEPARTMENT BY : SHRI D.N. KAR CIT(DR) O R D E R PER SHAMIM YAHYA : AM THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST T HE ORDER OF THE LD. CIT(A) DATED 1.1.2009 PERTAINING TO ASSESSM ENT YEAR 2002-03. 2. THE FIRST GROUND READS AS UNDER:- A) THAT ON THE FACTS CIRCUMSTANCES AND LEGAL POSI TION OF THE CASE THE LEARNED CIT(A) HAS ERRED IN CONFIRMING THE ACTION OF ASSESSING OFFICER IN DISALLOWING THE EXPE NSES OF RS. 1 32 31 892/- INCURRED IN CONNECTION WITH EXTE NSION OF EXISTING BUSINESS AT GREATER NOIDA BY TREATING T HE SAME AS CAPITAL EXPENDITURE. ITA NO. 613/DEL/2009 A.Y. 2002-03 2 B) THAT ON THE FACTS CIRCUMSTANCES AND LEGAL POSIT ION OF THE CASE THE LEARNED CIT(A) HAS ERRED IN NOT APPRECIATI NG THE FACT THAT EXPENSE OF RS. 132 31 892/- (INCLUDING IN TEREST EXPENSE OF RS. 122 92 275/-) INCURRED IN CONNECTION WITH EXTENSION OF BUSINESS WERE ALLOWABLE REVENUE EXPENDITURE UNDER SECTION 37(1)/36(1)(III) OF THE INCOME TAX ACT 1961. 2.1 DURING THE COURSE OF ASSESSMENT THE AO MADE TH E FOLLOWING ADDITION BY OBSERVING AS UNDER:- CAPITAL EXPENDITURE DEBITED TO PROFIT AND LOSS ACC OUNT A SUM OF RS. 1 32 31 892/- REPRESENTS EXPENSES INCU RRED ON G.NOIDA PROJECT DURING DETERMENT PERIOD. AS PER D ETAILS FILED IT IS SEEN THAT EXPENSES ARE ON ACCOUNT OF INTEREST ON LOANS TAKEN AND FOR OTHER EXPENSES LIKE SECURITY BHOMI PUJAN ELECTRICITY ETC. THESE EXPENSES ARE CLEARLY CAPITAL IN NATURE AND HAD THE PROJECT NOT BEEN DEFERRED THE ASSESSEE WOU LD HAVE CAPITALIZED THE SAME. HENCE THEY ARE BEING DISALL OWED. 2.2 UPON ASSESSES APPEAL LD. CIT(A) NOTED THE SUBM ISSION OF THE ASSESSEE. LD. CIT FURTHER OBSERVED THAT THE ASSES SEE HAS UNDERTAKEN CONSTRUCTION OF NEW PRINTING UNIT AT GRE ATER NOIDA IN 2000 WITH THE FUNDS BORROWED FROM CENTRAL BANK OF I NDIA. THE EXPENDITURE INCURRED UPTO 12.12.2001 WAS CAPITALIZE D. LD. CIT(A) FURTHER OBSERVED THE DETAILS AS UNDER:- THE DETAILS OF EXPENDITURE ARE AS UNDER:- PARTICULARS AMOUNT RS. LAND 64 162 599 BUILDING (PORTA CABIN) 550 093 ITA NO. 613/DEL/2009 A.Y. 2002-03 3 BUILDING UNDER CONSTRUCTION 19 232 793 PRE OPERATIVE INTEREST CAPITALIZED 2000 2 898 6 02 PRE OPERATIVE INTEREST CAPITALIZED 2001 19 398 3 38 PRE OPERATIVE OTHER EXPENSES 19 221 095 PRE PAID LEASE RENT 955 512 ADVANCE GIVEN TO : MAN - ROLLAND 262 497 143 OTHERS 4 517 000 TOTAL INVESTMENT MADE: 393 433 120 DATE OF DEFERMENT OF PROJECT 12/DEC/01 THE LAND WAS ALLOTTED ON 24.10.2001 AT GREATER NO IDA AS SEEN FROM THE DETAILS FURNISHED. LAND ACCOUNT WAS DEBITED RS. 6 41 62 599/- AS ON 31.3.2002. THE ASSESSEE INCURRED RS. 1 32 31 892/- (MAINLY IN TEREST EXPENDITURE OF RS. 1 22 92 275/-) AFTER 12.12.2001 WHICH WAS CLAIMED AS REVENUE EXPENDITURE ON THE GROUND THAT T HE PROJECT WAS DEFERRED AND THE AR FURTHER CONTENDED THE TREATMEN T IS IN ACCORDANCE WITH AS16. I HAVE GONE THROUGH THE S UBMISSIONS OF THE AR AND AS16. THE AR HAS NOT EXPLAINED AS TO H OW AS16 IS APPLICABLE TO THE FACTS OF THE CASE. THE REASONS FOR DEFERMENT OF THE PROJECT WERE ALSO NOT GIVEN. THE OTHER CONTEN TION OF THE AR IS THAT SINCE THE EXPENDITURE INCURRED IN THE EXISTING LINE OF THE ITA NO. 613/DEL/2009 A.Y. 2002-03 4 BUSINESS THE EXPENDITURE IS TO BE ALLOWED. THE ASS ESSEE ITSELF CAPITALIZED THE EXPENDITURE INCURRED SINCE STARTING OF THE NEW PROJECT IN 2000. THE ASSET MAINLY BUILDING WAS NOT PUT TO USE AS ADMITTED. NO CONVINCING EXPLANATION WAS OFFERED FOR ITS CLAIM. HENCE THE ACTION OF THE AO IS UPHELD. GROUND NO. 3 IS DISMISSED. 2.3 AGAINST THIS ORDER THE ASSESSEE IS IN APPEAL BE FORE US. 2.4 WE HAVE HEARD BOTH THE COUNSEL AND PERUSED THE RECORDS. LD. COUNSEL OF THE ASSESSEE SUBMITTED THAT THE PROJECT IN NOIDA WAS ACTUALLY MEANT FOR EXPANSION OF THE ASSESSEES BUS INESS. ASSESSEE WAS INTENDING TO ESTABLISH A PRINTING UNIT OVER THE RE IN CONNECTION OF WHICH THE LAND WAS ACQUIRED AND BUILDING THEREON HAD BEEN CONSTRUCTED AND ADVANCE WAS ALSO GIVEN FOR THE MACH INERY PURCHASE. HENCE HE CLAIMED THAT IT WAS AN EXPANS ION IN THE SAME LINE OF BUSINESS AND HENCE HE CONTENDED THAT INTERE ST ON BORROWED FUND FOR EXPANSION OF THE EXISTING BUSINESS QUALIFI ES FOR DEDUCTION AS REVENUE EXPENDITURE. LD. COUNSEL OF THE ASSESS EE IN THIS REGARD PLACED RELIANCE UPON THE FOLLOWING CASE LAWS:- - 60 ITR 52 INDIA CEMENT LTD. VS. CIT - 220 ITR 185 VEECUMSEES VS. CIT - 221 CTR 226 CIT VS. MONNET INDUSTRIES LTD. - 200 ITR 345- CIT VS. MODI INDUSTRIES LD. COUNSEL OF THE ASSESSEE FURTHER CLAIMED THAT A MOUNT OF INTEREST IS ALLOWABLE AS PER THE MANDATE OF SECTIO N 36(1)(III) OF THE IT ACT. HE FURTHER SUBMITTED THE PROVISO IN SECTIO N 36(1)(III) WAS INTRODUCED BY THE FINANCE ACT 2003 WITH EFFECT FRO M 1.4.2004. HE ITA NO. 613/DEL/2009 A.Y. 2002-03 5 CLAIMED IT IS A SETTLED LAW THAT THE SAID PROVISO IS PROSPECTIVE IN NATURE AND IS NOT APPLICABLE TO THE ASSESSEES CASE AS THE ASSESSMENT ORDER INVOLVED HERE IS 2002-03. 2.5 LD. DR SUBMITTED THAT IT CANNOT BE SAID THAT TH E ASSESSEE WAS ENGAGED IN THE EXPANSION OF THE SAME BUSINESS. HE CLAIMED THAT IT WAS A NEW LINE OF BUSINESS. HE FURTHER CLAIMED THA T THERE WAS ALSO NO INFORMATION AS TO WHETHER THE PROJECT WHICH HAS BEEN DEFERRED WAS EVER ACTIVATED OR NOT. LD. DR FURTHER REFERRED TO THE TAX AUDIT REPORT WHEREIN IN PARA 17 AGAINST AMOUNT DEBITED TO THE PROFIT AND LOSS ACCOUNT BEING EXPENDITURE IN CAPITAL NATURE FO LLOWING IS ALSO INCLUDED. RS. 13231892/- BEING EXPENSES INCURRED O N NOIDA PROJECT DURING DEFERMENT PERIOD. IT IS FURTHER MENTIONED HEREIN THAT AUDITORS HAVE ACCEPTED THE ACCOUNTING PRINCIPL ES AND JUDICIAL PRONOUNCEMENTS IN CONFIRMING THIS OPINION. LD. DR F URTHER REFERRED TO 315 ITR 114 WHEREIN THE HONBLE APEX COURT HAS O BSERVED THAT ACCOUNTING TREATMENT GIVEN BY THE ASSESSEE IS ALSO INDICATIVE OF THE REAL NATURE OF THE TRANSACTIONS. 2.6 IN REBUTTAL LD. COUNSEL OF THE ASSESSEE CONTEND ED THAT THERE ARE CATENA OF CASE LAWS THAT ACCOUNTING TREATMENT G IVEN BY THE ASSESSEE IS NOT DETERMINATIVE OF THE ACTUAL NATURE OF THE TRANSACTION. HE FURTHER SUBMITTED THAT AS PER AS-1 6 OF THE INSTITUTE OF CHARTERED ACCOUNTANTS OF INDIA VIDE PARA 17 IT IS MENTIONED THAT THE CAPITALIZATION OF BORROWING COST SHOULD BE SUSP ENDED DURING EXTENDED PERIOD IN WHICH ACTIVE DEVELOPMENT IS INTE RRUPTED. HENCE LD. COUNSEL CLAIMED THAT UNDER SUCH CIRCUMSTANCES CLEARLY AS PER ITA NO. 613/DEL/2009 A.Y. 2002-03 6 THE MANDATE OF AS-16 SUCH BORROWING COST SHOULD BE CHARGED TO REVENUE. 2.7 WE HAVE CAREFULLY CONSIDERED THE SUBMISSIONS. AS PER THE FACTS OF THE CASE THE ASSESSEE IS ENGAGED IN NEWSPA PER PRINTING AND PUBLICATION BUSINESS. IT IS AN OWNER OF PRINTING PRESS AT KASTURBA GANDHI MARG NEW DELHI. IT HAS ENGAGED INTO ACQUISI TION OF LAND AND CONSTRUCTION OF BUILDING AT NOIDA TO EXPAND ITS BUSINESS. AO OR THE LD. CIT(A) HAS NOT REFERRED TO THE NATURE EX PANSION OF THE BUSINESS. ASSESSEE HAS OBTAINED LOAN FOR THIS PROJ ECT AND HAD CAPITALIZED THE BORROWING COST IN THE PREVIOUS YEAR WHICH WAS RS.2898602/- AND THE CURRENT YEAR RS. 19398338/- UP TO 12.12.2001. THE ASSESSEE HAD INCURRED RS. 1323 1892/- MAINLY INTEREST EXPENDITURE OF RS. 12292275/- AFTER 12.12. 2001WHCIH WAS CLAIMED AS REVENUE EXPENDITURE ON THE GROUND THAT I T WAS IN ACCORDANCE WITH THE AS-16 OF THE INSTITUTE OF CHART ERED ACCOUNTANTS OF INDIA. IT IS FURTHER CLAIMED THAT SECTION 36(1)(III) MANDATES THAT AMOUNT OF INTEREST PAID IN RESPECT OF CAPITAL BORROWED FOR THE PURPOSE OF BUSINESS AS ALLOWABLE R EVENUE EXPENDITURE. THE PROVISO HOWEVER INSERTED ON 1.4 .2004 MANDATES THAT INTEREST PAID IN RESPECT OF CAPITAL BORROWED FOR ACQUISITION OF ITA NO. 613/DEL/2009 A.Y. 2002-03 7 AN ASSET FOR EXTENSION OF EXISTING BUSINESS SHOULD NOT BE ALLOWED AS DEDUCTION FOR A PERIOD UPTO THE DATE ON WHICH T HE ASSET WAS FIRST PUT TO USE. NOW IT IS A SETTLED THAT THIS PROVIS O IS NOT RETROSPECTIVE IN NATURE. AS-16 AS RELIED BY THE ASSESSEE MANDAT ES VIDE PARA 6 AS UNDER:- 6. BORROWING COSTS THAT ARE DIRECTLY ATTRIBUTABLE TO THE ACQUISITION CONSTRUCTION OR PRODUCTION OF A QUALIF YING ASSET SHOULD BE CAPITALIZED AS PART OF THE COST OF THAT ASSET. THE AMOUNT OF BORROWING COSTS ELIGIBLE FOR CAPITALIZATION SHOULD BE DETERMINED IN ACCORDANCE W ITH THIS STANDARD. OTHER BORROWING COSTS SHOULD BE RECOGNIZED AS AN EXPENSE IN THE PERIOD IN WHICH THE Y ARE INCURRED. 2.8 PARA 17 AND 18 OF THE AS-16 MANDATE AS UNDER:- SUSPENSION OF CAPITALIZATION 17. CAPITALIZATION OF BORROWING COSTS SHOULD BE SU SPENDED DURING PERIODS IN WHICH ACTIVE DEVELOPMENT IS INTERRUPTED. 18. BORROWING COSTS MAY BE INCURRED DURING AN EXTEN DED PERIOD IN WHICH THE ACTIVITIES NECESSARY TO PREPAR E AN ASSET FOR ITS INTENDED USE OR SALE OR INTERRUPTED. SUCH COSTS ARE COSTS OF HOLDING PARTIALLY COMPLETED ASSE TS AND DO NOT QUALIFY FOR CAPITALIZATION. HOWEVER CAPIT ALIZATION OF BORROWING COSTS IS NOT NORMALLY SUSPENDED DURIN G A PERIOD WHEN SUBSTANTIAL TECHNICAL AND ADMINISTRATIV E WORK IS BEING CARRIED OUT. CAPITALIZATION OF BORRO WING COSTS IS ALSO NOT SUSPENDED WHEN A TEMPORARY DELAY IS A NECESSARY PART OF THE PROCESS OF GETTING AN ASSET FOR ITS INTENDED USE OR SALE. FOR EXAMPLE CAPITALIZATION CONTINUES DURING THE EXTENDED PERIOD NEEDED FOR ITA NO. 613/DEL/2009 A.Y. 2002-03 8 INVENTORIES TO MATURE OR THE EXTENDED PERIOD DURIN G WHICH HIGH WATER LEVELS DELAY CONSTRUCTION OF A BRI DGE IF SUCH HIGH WATER LEVELS ARE COMMON DURING THE CONSTRUCTION PERIOD IN THE GEOGRAPHIC REGION INVOLV ED. 2.9 NOW THE ASSESSEES CLAIM IS THAT AFTER 12.12.20 01 THE ASSESSEE HAS SUSPENDED THE WORK ON THE NEW PROJECT AND AS IT IS MANDATE OF AS-6 DURING THE PERIOD IN WHICH THE PROJECT IS SUS PENDED THE BORROWING COST SHOULD NOT BE CAPITALIZED. HENCE TH E INFERENCE IS THAT IT SHOULD BE RECOGNIZED AS AN EXPENSE IN THE PERIOD THEY ARE INCURRED. NOW TO CONSIDER AS TO WHETHER AS-16 IS AP PLICABLE OR NOT IT IS RELEVANT TO FIND OUT AS TO WHETHER THE PRESEN T CASE FALLS UNDER THE SUSPENSION OF CAPITALIZATION. IT HAS BEEN SUBM ITTED THAT BEFORE US THAT THIS PROJECT WAS NOT REVIVED BY THE ASSESS EE AND THE SAME WAS ULTIMATELY SOLD TO HT MEDIA LTD. IN JULY 2003. HOWEVER LD. COUNSEL OF THE ASSESSEE CLAIMED THAT THE PROJECT WA S REVIVED BY THE PURCHASING COMPANY. NOW WE DEAL WITH THE CASE LAW S SUBMITTED BY THE LD.C OUSNEL OF THE ASSESSEE: - 60 ITR 52 (SC) INDIA CEMENT LTD. VS. CIT. THE ISSUE WAS ALLOWABILITY OF RS. 84633/- INCURRED ON STAMPS REGISTRATION FEE LEGAL FEE ETC. IN OBTAINING THE L OAN. IN THIS CASE IT WAS HELD THAT :- A) LOAN OBTAINED WAS NOT AN ASSET OR ADVANCE OF AN ENDURING NATURE (B) EXPENDITURE WAS MADE FOR EXECUTING THE USE OF MONEY FOR THE CERTAIN PERIOD AND (C) IT WAS IRRELEVANT TO CONSIDER THE OBJECT WITH W HICH THE LOAN WAS OBTAINED. CONSEQUENTLY IN THE CIRCUMSTANCES OF THE CASE THE EXPENDITURE WAS REVEN UE EXPENDITURE WITHIN SECTION 10(2)(XV). ITA NO. 613/DEL/2009 A.Y. 2002-03 9 - 220 ITR 185 IN THE CASE OF VEECUMSEES VS. CIT. HONBLE APEX COURT HAS HELD THAT THE TRIBUNAL HAS GIVEN A FINDING THAT BUSINESS CARRIED ON BY THE ASSESSEE AS JEWELLER AND BUSINESS OF RUNNING CINEMA THEATRE WAS COMPOSITE INTEREST ON SUCH LOAN HAD TO BE TREATED AS DEDUCTION UNDER SECTION 36(1)(III) EVEN AFTER THE B USINESS OF RUNNING OF THEATRE HAD BEEN CLOSED. - 200 ITR 345 CIT VS. MODI INDUSTRIES. THE HONB LE HIGH COURT HELD THAT WHEN TRIBUNAL HAD HELD THAT THE MANAGEMENT OF NEW BUSINESS AND EARLIER BUSINESS WAS SAME AND THERE WAS UNITY OF CONTROL OF COMMON FUND THE TRIBUNAL WAS JUSTIFIED IN HOLDING THAT BUSINESS OF MANUFACTURE OF MS SPECIAL ALLOY WIRES AND BILLETS W AS EXPANSION OF BUSINESS AND NOT A NEW BUSINESS AND AS SUCH THE EXPENDITURE INCURRED BY ASSESSEE FOR RAISI NG LOANS BY ISSUE OF DEBENTURES WAS ALLOWABLE AS DEDUC TION. - 221 CTR 226 CIT VS. MONNET INDUSTRIES LTD. IN THIS CASE THE HONBLE DELHI HIGH COURT HELD THAT THE TRI BUNAL HAS FOUND THAT THERE WAS A COMMON BOARD OF DIRECTO RS CONTROLLING BOTH PLANTS. THAT FUNDS FOR TWO PLANTS WERE COMMON AND HENCE THERE WAS INTERMINGLING AND INTERLACING OF FUNDS AND THAT EVEN THOUGH TWO DIVIS IONS WERE GEOGRAPHICALLY LOCATED AT DIFFERENT SITES MAR KETING OF THE FINAL PRODUCTS WAS CARRIED OUT UNDER THE SUPERVISION AND CONTROL OF THE SAME SET OF EXECUTIV ES. THE TRIBUNAL WAS JUSTIFIED IN HOLDING THAT SUGAR PLAN W AS MERE EXTENSION OF EXISTING BUSINESS OF FERRO ALLOYS PLANT AND THEREFORE INTEREST PAID ON FUNDS BORROWED FOR T HE PURPOSE OF SETTING UP OF SUGAR PLAN WAS ALLOWABLE U NDER SECTION 36(1)(III). 2.10 NOW ON THE ANALYSIS OF THE ABOVE CASE LAWS S HOW THAT IF IT IS EXPANSION OF THE SAME LINE OF BUSINESS THE E XPENSE INCURRED ON OBTAINING THE BORROWED FUNDS SHOULD BE ALLOWED A S REVENUE EXPENDITURE. WE FIND THAT IN THE PRESENT CASE THER E WAS NO FINDING ITA NO. 613/DEL/2009 A.Y. 2002-03 10 REGARDING THE NATURE OF THE PROJECT BEING UNDERTAK EN AT NOIDA. ADMITTEDLY THE DETAIL SHOWS ONLY EXPENDITURE ON AC QUISITION OF LAND AND BUILDING CONSTRUCTION. IN SUCH CIRCUMSTANCES IT IS NOT POSSIBLE ON OUR PART TO GIVE A FINDING REGARDING TH E NATURE OF THE SAID PROJECT WHETHER THE SAME WAS A NEW BUSINESS A LTOGETHER OR THE EXPANSION OF THE EXISTING PROJECT. MOREOVER THI S LINE OF ARGUMENT WAS NEVER MADE BY THE ASSESSEE BEFORE THE LOWER AUT HORITIES. ASSESSEE HAD ITSELF CAPITALIZED THE BORROWING CO ST IN THE PRECEDING AS WELL AS CURRENT YEAR AND ONLY AFTER 12.12.2001 W HEN THE PROJECT WAS DEFERRED/SUSPENDED THAT THE ASSESSEE HAS CLAIM ED THE BORROWING COST TO BE ALLOWABLE AS REVENUE EXPENSES AS PER THE AS- 16 OF THE INSTITUTE OF CHARTERED ACCOUNTANTS OF I NDIA. THE RELIANCE UPON A.S. 16 BY THE ASSESSE IS ON THE PREMISE THAT THE CASE COMES UNDER SUSPENSION OF CAPITALIZATION. THIS ASPECT A LSO NEEDS EXAMINATION OF FACTS. THESE FACTS HAVE NOT BEEN E XAMINED BY THE AUTHORITIES BELOW. THE RELEVANT MATERIAL IS ALSO N OT ON RECORD BEFORE US. IT IS PARADOXICAL THAT THIS NEW CLAIM OF THE AS SESSEE THAT THE ENTIRE EXPENDITURE OF INTEREST COST SHOULD BE ALLO WED AS IT IS EXPANSION OF THE NEW LINE OF BUSINESS IS NOT FULLY IN CONSONANCE TO THE AS-16 WHICH MANDATES CAPITALIZATION OF BORROWI NG COST TILL THE ASSET IS PUT TO USE. IN FACT ASSESSEE HAD CAPITALIZ ED THESE EXPENDITURES UPTO THE DATE OF DEFERRAL OF THE PROJ ECT IN THE PRESENT AS WELL AS IN THE PRECEDING ASSESSMENT YEAR. HEN CE IN OUR CONSIDERED OPINION IT WOULD BE APPROPRIATE IF T HE PRESENT ISSUE REGARDING FINDING OUT AS TO WHETHER THE NOIDA PROJE CT WAS A NEW PROJECT OR THE EXPANSION OF THE EXISTING BUSINESS IS REMITTED TO THE ITA NO. 613/DEL/2009 A.Y. 2002-03 11 FILES OF THE AO TO GIVE A FINDING THEREON AFTER GI VING THE ASSESSEE ADEQUATE OPPORTUNITY OF BEING HEARD. ACCORDINGLY THE ISSUE STANDS REMITTED TO THE FILES OF AO TO CONSIDER THE CASE I N ACCORDANCE WITH THE DIRECTIONS AS ABOVE AND IN ACCORDANCE WITH LAW . 3. THE NEXT GROUND READS AS UNDER:- THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE I NTEREST EXPENDITURE AMOUNTING TO RS. 1 93 98 338/- INCURR ED DURING THE RELEVANT PREVIOUS YEAR AND RELATING TO EXTENSIO N OF EXISTING BUSINESS AT GREATER NOIDA TILL THE DATE OF ITS DEF ERMENT CAPITALIZED IN THE BOOKS MUST ALSO BE ALLOWED AS DEDUCTION UNDER SECTION 36(1)(III) OF THE ACT. 3.1 THIS ISSUE WAS NEITHER BEFORE THE AO NOR RAIS ED BEFORE THE LD. CIT(A). HOWEVER LD. COUNSEL OF THE ASSESSEE CON TENDED THAT IT IS AN IMPORTANT LEGAL ISSUE AND HENCE ASSESSEE IS ENTI TLED TO RAISE THIS ISSUE BEFORE THE TRIBUNAL. 3.2 LD. DR ON THE OTHER HAND VEHEMENTLY OPPOSED TH IS SUBMISSION. 3.3 WE HAVE CAREFULLY CONSIDERED THE SUBMISSIONS AN D PERUSED THE RECORDS. IN OUR CONSIDERED OPINION THE ISSUE RAISED BY THE ASSESSEE MERITS ADJUDICATION. FOR THIS PROPOSITION WE DRAW SUPPORT FROM THE HONBLE APEX COURT IN THE CASE OF GOETZ (INDIA) LTD . VS. CIT 284 ITR 323 WHEREIN THE HONBLE APEX COURT HAD CLARIFIED T HAT THE DECISION REFERRED IN THAT CASE SHALL NOT RESTRICT THE POWER S OF THE TRIBUNAL TO ADMIT AND ADJUDICATE THE CLAIM OF THE ASSESSEE. IN OUR CONSIDERED ITA NO. 613/DEL/2009 A.Y. 2002-03 12 OPINION THE CLAIM OF THE ASSESSEE WAS GENUINE. AR TICLE 265 OF THE CONSTITUTION OF INDIA STATES THAT NO TAX CAN BE CO LLECTED EXCEPT BY AUTHORITY OF LAW. CBDT CIRCULAR NO. 114 XL-35 OF 1955 DATED 11.4.1955 STATES THAT OFFICER OF THE DEPARTMENT MUS T NOT TAKE ADVANTAGE OF THE IGNORANCE OF AN ASSESSEE AS TO HIS RIGHTS. HONBLE APEX COURT IN THE CASE OF CIT VS. MR. P. FIRM IN 5 6 ITR 67 WHEREIN THE BENCH COMPRISED THREE OF THEIR LORDSHIPS HAD EX POUNDED THAT IF A PARTICULAR INCOME IS NOT TAXABLE UNDER IT ACT IT CANNOT BE TAXED ON THE BASIS OF ESTOPPEL OF ANY OTHER EQUITABLE D OCTRINE. IF A PARTICULAR INCOME IS NOT EXIGIBLE TO TAX AO HAS NO POWER TO IMPOSE TAX ON THE SAID INCOME. IN THE BACKGROUND OF THE AFORESAID DISCUSSION WE FIND THAT ASSESSEES CLAIM IN THIS REGARD IS JUSTIFIED. HENCE IN OUR CONSIDERED OPINION THERE IS NO INFIRMI TY IN ADMITTING A GENUINE CLAIM OF THE ASSESSEE. 3.5 IN THE LIGHT OF THE ABOVE WE PERMIT THE ASSESS EE TO RAISE THIS GROUND BEFORE US. WE FIND THAT ADJUDICATION OF T HIS ISSUE IS INTER- LINKED WITH THE ADJUDICATION OF THE ISSUE RAISED IN GROUND NO. 1 AND ACCORDINGLY SINCE WE HAVE ALREADY REMITTED THE GRO UND NO. 1 THIS ISSUE STANDS REMITTED TO THE FILES OF THE AO. 4. THE NEXT ISSUE RAISED READS AS UNDER:- THAT ON THE FACTS CIRCUMSTANCES AND LEGAL POSITIO N OF THE CASE THE LD. CIT(A) HAS ERRED IN CONFIRMING THE ADD ITION OF RS. 12 65 976/- AND RS. 7203/- BEING EMPLOYEES CONT RIBUTION TO PF AND ESI WHICH HAVE BEEN DEPOSITED BEFORE THE DUE DATE OF FILING THE RETURN. ITA NO. 613/DEL/2009 A.Y. 2002-03 13 4.1 ON THIS ISSUE THE AO DISALLOWED THE EMPLOYEES CONTRIBUTIONS TO PF AND ESI AS THERE WAS LATE PAYMENT BEYOND THE DUE DATE SPECIFIED IN THE RESPECTIVE ACTS. 4.2 UPON ASSESSEES APPEAL LD. CIT(A) UPHELD THE A OS ACTION RELYING UPON TRIBUNALS DECISIONS FOR THE PROPOSITI ON THAT PAYMENTS MADE BEYOND DUE DATE INCLUDING GRACE PERIOD ARE NO T ALLOWABLE IN RESPECT OF THE EMPLOYEES CONTRIBUTIONS. 4.3 BEFORE US THE LD. COUNSEL OF THE ASSESSEE SUBM ITTED THAT THE ISSUE NOW STANDS COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF CIT VS . VINAY CEMENT LTD. 213 CTR 268. LD. COUNSEL FURTHER PRODUCED BEF ORE US A COPY OF THE ORDER OF THE JURISDICTIONAL HIGH COURT IN ITA N O. 1063/2008 & OTHERS WHEREIN VIDE ORDER DATED 23.12.2009 THE HO NBLE HIGH COURT FOLLOWING THE HONBLE APEX COURT DECISION IN THE CASE OF VINAY CEMENT LTD. CITED ABOVE HAS DECIDED THE ISSUE IN F AVOUR OF THE ASSESSEE. PARAGRAPH NO. 17 OF THE SAID ORDER READ S AS UNDER:- 17. WE MAY ONLY ADD THAT IF THE EMPLOYEES CONTRIB UTION IS NOT DEPOSITED BY THE DUE DATE PRESCRIBED UNDER THE RELE VANT ACTS AND IS DEPOSITED LATE THE EMPLOYER NOT ONLY PAYS INTEREST ON DELAYED PAYMENT BUT CAN INCUR PENALTIES ALSO FOR W HICH SPECIFIC PROVISIONS ARE MADE IN THE PROVIDENT FUND ACT AS WE LL AS THE ESI ACT. THEREFORE THE ACT PERMITS THE EMPLOYER T O MAKE THE DEPOSIT WITH SOME DELAYS SUBJECT TO THE AFORESAID CONSEQUENCES. INSOFAR AS THE INCOME TAX ACT IS CONC ERNED THE ASSESSEE CAN GET THE BENEFIT IF THE ACTUAL PAYMENT IS MADE BEFORE THE RETURN IS FILED AS PER THE PRINCIPLE LA ID DOWN BY THE SUPRME COURT IN VINAY CEMENT (SUPRA). ITA NO. 613/DEL/2009 A.Y. 2002-03 14 4.4 IN THE BACKGROUND OF THE AFORESAID PRECEDENT I T IS CLEAR THAT THE PAYMENTS MADE BY THE ASSESSEE BEFORE FILING THE DUE DATE IS ALLOWABLE. ACCORDINGLY WE SET ASIDE THE ORDERS OF THE AUTHORITIES BELOW AND DECIDE THE ISSUE IN FAVOUR OF THE ASSESSE E. 5. IN THE RESULT THE APPEAL FILED BY THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 12/03/2010. SD/- SD/- [RAJPAL YADAV] [SHAMIM YAHYA] JUDICIAL MEMBER ACCOUNTANT MEMBER DATE: 12/03/ 2010 SRB COPY FORWARDED TO: - 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT (A) 5. DR ITAT TRUE COPY BY ORDER DEPUTY REGISTRAR ITAT DELHI BENCHES