Income Tax Appellate Tribunal - Ahmedabad
Astral Polytechnik Ltd.,, Ahmedabad vs The Dy. Commissioner Of Income Tax, ... on 6 May, 2019
IN THE INCOME TAX APPELLATE TRIBUNAL
"D" BENCH, AHMEDABAD
BEFORE SHRI WASEEM AHMED, ACCOUNTANT MEMBER &
Ms. MADHUMITA ROY, JUDICIAL MEMBER
I.T.A. No.2235/Ahd/2016
(Assessment Year : 2013-14)
DCIT, Vs. Astral Polytechnik Ltd.,
Circle - 1(1)(1), 207/1, Astral House,
Ahmedabad. B/h Rajpath Club
S. G. Highway,
Ahmedabad - 380 059.
And
CO No. 160/Ahd/2016
(in ITA No.2235/Ahd/2016)
(Assessment Year : 2013-14)
Astral Polytechnik Ltd., Vs. DCIT,
207/1, Astral House, Circle - 1(1)(1),
B/h Rajpath Club, Ahmedabad.
S. G. Highway,
Ahmedabad - 380 059.
[PAN No. AABCA 2951 N]
(Appellant) .. (Respondent)
Appellant by : Shri Vinod Tanwani, Sr. D.R.
Respondent by : Ms. Ira Kapoor, A.R.
Date of Hearing 08.02.2019
Date of Pronouncement 06.05.2019
ORDER
PER Ms. MADHUMITA ROY - JM:
The instant appeal filed by the revenue and cross objection filed by the assessee are directed against the order dated 29.06.2016 passed by the ITA No.2235/Ahd/2016 & CO No.160/Ahd/2016 Astral Polytechnik Pvt. Ltd.
Asst.Year -2013-14 -2- Commissioner of Income Tax (Appeals)-1, Ahmedabad under section 143(3) of the Income Tax Act, 1961 (in short 'the Act') arising out of the order dated 15.03.2016 passed by the Deputy Commissioner of Income Tax, Circle -
1(1)(1), Ahmedabad for the Assessment Year 2013-14 with the following grounds:
i. "That the Ld CIT(A) erred in law and on facts in deleting the addition of Rs.5,22,55,026/- made on account of disallowance of deduction u/s 80IC of the Act.
ii. That the Ld CIT(A) erred in law and on facts in deleting the addition of Rs.1,15,41,900/- made on account of rejecting the accounting policy for allocation of interest expenses.
iii. That the Ld CIT(A) erred in law and on facts in deleting the addition of Rs.3,64,326/- made on account of disallowance u/s 14A r.w. Rule 8D of the Act."
2. Ground No.1: The revenue has challenged the order passed by the Learned CIT(A) in deleting the addition of Rs.5,22,55,026/- made on account of disallowance of deduction u/s 80IC of the Act.
3. The assessee-company engaged in the business of manufacturing and trading of PVC / CPVC pipes and fittings, filed its original return of income on 29.11.2013 declaring total income at Rs.58,33,35,860/-, which was processed u/s 143 of the Act. Subsequently, under scrutiny notice u/s 143(2) dated 04.09.2014 followed by a further notice u/s 143(2) r.w.s. 129 due to change of incumbent along with questionnaire dated 30.06.2015 was served upon the assessee. Upon perusal of the computation of income during the course of assessment proceeding, it was found that the assessee claimed a sum of Rs.17,88,05,425/- as deduction u/s 80IC of the Act for its unit at Baddi, Himachal Pradesh (8th Year), being 30% of the profit of the unit. The turnover of the assessee unit in terms of the P&L account was shown at Rs.1,40,45,66,296/- for that particular unit. The total turnover of the company ITA No.2235/Ahd/2016 & CO No.160/Ahd/2016 Astral Polytechnik Pvt. Ltd.
Asst.Year -2013-14 -3- was at Rs.82,108.79 lacs. The profit claimed by the assessee for Baddi unit and Ahmedabad unit worked out as under:
Ahmedabad Baddi Assessee
Company-
whole
Turnover 6806312704 1404566296 8210879000
Book Profit 197052750 582093250 779146000
%age of profits to 2.89 41.44 9.49
turnover (PBT)
Claim u/s 80IC 178805425 178805425
The Learned AO found that the assessee has shown abnormally high profits for the Baddi Unit @ 41.44% of the total turnover as compared to Ahmedabad unit which is engaged in the manufacture of similar line of products. A show-cause dated 26.02.2016 was issued upon the assessee directing to address as to why the claim u/s 80IC of the Act should not be restricted to the profits derived from manufacturing activities undertaken in Baddi Unit in the same manner as was done in A.Y. 2007-08, 2008-09, 2009- 10, 2010-11, 2011-12 & 2012-13. Ultimately, the explanation rendered by the assessee was not found tenable by the Learned AO and he thus disallowed Rs. 5,22,55,026/- in the manner as follows:
"2.5 The contention of the assessee has been considered and not found to be tenable as the Assessing Officer has rightly taken gross profit as the base for working out the profits attributable to brand value and marketing network and the profits so attributable to the brand value and marketing network have been rightly reduced from the deduction claimed by the assessee-company u/s. 80IC of the Act as deduction cannot be allowed on profits not derived from manufacturing activities as per the provisions of section 80IC of the Act. Thus, the contention of the assessee is fallacious and untenable. In view of the above, it is held that 5% of the profits are derived from the brand value and further, 35% profits have been derived from marketing activities.
No. Narration Amount
1 Sales of the Baddi Unit 1,40,45,66,296
ITA No.2235/Ahd/2016 & CO No.160/Ahd/2016
Astral Polytechnik Pvt. Ltd.
Asst.Year -2013-14
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2 Increase in stock of finished goods 2,29,10,381
3 Total Turnover row (1+2) 1,42,74,76,677
4 Gross Profit 71,35,31,011
Gross Profit in % 49.99%
5 Percentage Profits Attributable to Tax benefits 19.48%
available at Baddi ( as per the Discussion) %
6 Percentage Profits Shown by the unit excluding the 30.51%
Tax Benefits
7 Percentage Profits derived from Brand value 85 12.20%
Marketing ((35+5)40% of 6)
8 Profit derived from Brand value & Marketing at 17,41,83,422
Baddi Unit = row (3*7)
Disallowance profit derived from Brand value & 5,22,55,026
Marketing at Baddi Unit = row 30% * (3*7)
Allocation of interest expenses 0
Total disallowance 5,22,55,026
Accordingly, the disallowance of Rs.5,22,55,026/- is made u/s 80IC of the Act."
In appeal, the Learned CIT(A) relying upon the order passed by the Hon'ble ITAT in assessee's own case for A.Y. 2007-08 deleted such disallowance. Hence, the instant appeal filed by the revenue before us.
4. At the time of hearing of the instant appeal, the Learned Advocate appearing for the assessee submitted before us that the order passed by the Learned ITAT in revenue's appeal for A.Y. 2007-08 in upholding the order passed by the Learned CIT(A) by deleting disallowance was challenged before the Jurisdictional High Court by the department which in turn was dismissed by its order dated 17.07.2017 in Tax Appeal No.481 of 2017 affirming the order passed by the Co-ordinate Bench in favour of the assessee. Further that, ITA No.2235/Ahd/2016 & CO No.160/Ahd/2016 Astral Polytechnik Pvt. Ltd.
Asst.Year -2013-14 -5- the Co-ordinate Bench of this Tribunal relying upon the said order passed by the Hon'ble Tribunal dismissed the appeal preferred by the revenue on the similar ground for A.Y. 2008-09 which was ultimately upheld by the Hon'ble Jurisdictional High Court. However, Learned DR failed to controvert the contention made by the Learned AR.
5. Heard the respective parties, perused the relevant materials available on record. We have taken into consideration of the order passed by the Learned CIT(A). The relevant portion thereof is as follows:
"5. Before us, ld.Sr.DR supported the order of the AO. On the other hand, ld.AR(s) reiterated the submissions made before the AO and ld.CIT(A). He submitted that the books of account of Baddi Unit are audited and no defect has been pointed out by the Auditors and therefore no adjustments to the profits of Baddi Unit could have been undertaken by AO. He further submitted that the claim of deduction u/s.80IC of the Act for the impugned year was second year of claim and that the assessee had also claimed deduction u/s.80IC of the Act in AY 2006-07 and the claim of assessee was allowed in the assessment order framed u/s.143(3) of the Act. He also placed on record the copy of the said order. He further submitted that the claim of deduction in AY 2006-07 has not been disturbed by Revenue either by reopening the assessment u/s.147/148 of the Act or by invoking revisionary powers u/s. 263 of the Act, meaning thereby that claim of the deduction u/s.80IC of the Act as made by the assessee has been found to be in order. He further submitted that since there are no change in the facts of the case between AY 2006- 07 and the year under consideration, the claim of assessee needs to be accepted in toto. He thus, supported the order of the ld.CIT(A).
6. We have heard the rival submissions, perused the material available on record and gone through the orders of the authorities below. The issue in the present case is with respect to denying the claim of deduction u/s.80IC of the Act. We find that ld.CIT(A) while deciding the issue in favour of assessee has given a finding that there was no marketing division and, therefore, there was no transfer of goods from eligible to non-eligible undertaking and in the absence of marketing division being a separate undertaking, no profit could be attributed to the marketing activity. With respect to brand value, the ld.CIT(A) has given finding that the same is owned by the foreign collaborator and there cannot be any profit attributable to brand. He has further given a finding that AO had quantified the gross profit attributable to ITA No.2235/Ahd/2016 & CO No.160/Ahd/2016 Astral Polytechnik Pvt. Ltd.
Asst.Year -2013-14 -6- marketing and brand value and disallowance and that since deduction u/s.80IC is claimed in respect of net profit and, therefore, disallowing gross profit attributable to marketing and brand value is not correct and that further, since the marketing expenses debited to the Profit & Loss Account are more than gross profit computed by the AO, that there cannot be any disallowance of deduction u/s.80IC of the Act. Before us, Revenue has not placed any material to controvert the findings of ld.CIT(A). We further find that the assessee had claimed deduction u/s.80IC in AY 2006-07 also and the claim has been allowed in the assessment framed u/s.143(3) of the Act, and that no reopening of assessment u/s.147/148 or u/s.263 has been initiated for withdrawing the claim meaning thereby that the claim of assessee has been accepted by Revenue and has attained finality. In view of the aforesaid reasons, we find no reason to interfere with the order of the ld.CIT(A) and thus ground raised by the Revenue is dismissed. As a result, Revenue's appeal for AY 2007-08 is dismissed.
7. Now, we take up Revenue's appeal in ITA No.559/Ahd/2012 for AY 2008-
09. 7.1. Before us, since both the parties have admitted that the facts in the case of Assessment Year 2008-09 (in Revenue's appeal) are identical to the fact of AY 2007-08, we therefore for the reasons given hereinabove while disposing of Revenue's appeal in ITA No.3216/Ahd/2011 for AY 2007-08 and for similar reasons, dismiss the ground of Revenue for Assessment Year 2008-09 also."
We have also carefully considered the judgment passed by the Hon'ble Jurisdictional High Court on the appeal preferred by the revenue challenging the order passed by the Learned Tribunal in assessee's case for A.Y. 2007-08 and 2008-09 while dismissing the tax appeal preferred by the revenue. The Hon'ble High Court observed as follows:
"1. Revenue is in appeal against the judgement of the Income Tax Appellate Tribunal raising following question for our consideration:
"Whether the Appellate Tribunal was right in law and facts in deleting the addition in respect of deduction u/s. 80IC of Rs.4,04,59,475/- for A.Y. 2007-08 and Rs. 6,87,73,362/- for A.Y. 2008-09 made by the Assessing Officer ? "
2. The issue pertains to the assessee's claim of deduction under section 80IC of the Act to its unit situated at Baddi, Himachal Pradesh, which ITA No.2235/Ahd/2016 & CO No.160/Ahd/2016 Astral Polytechnik Pvt. Ltd.
Asst.Year -2013-14 -7- unit was eligible for such deduction. The Revenue, however, have dispute about the entire claim being granted on the ground that the profit expenditure relatable to the marketing division and the brand value owned by foreign collaboration should have been disallowed. The CIT (Appeals) as well as the Tribunal both came to a concurrent conclusion that there was no separate marketing division and therefore, there was no transfer of goods from eligible to non-eligible undertaking. Thus, in absence of any separate marketing division, there could not be separation of profit and expenditure. It was also found that the brand was owned by the foreign collaboration and there cannot be any profit attributable to such brand.
3. More importantly, the Tribunal noted that in the preceding assessment year 2006-07, the assessee had set up such a claim. The Assessing Officer had framed scrutiny assessment during which no disallowance was made. No attempt was made on part of the Revenue either to take such order in revision nor process of reopening of exemption was resorted to.
4. In such circumstances, we see no reason to interfere. No question of law arises. Tax appeal is dismissed."
Respectfully relying upon the same, we find no infirmity in the order impugned passed by the first appellate authority so far as to warrant interference. The question is accordingly answered in the affirmative, i.e. in favour of the assessee and against the revenue. Consequently, the appeals failed and accordingly dismissed.
6. Ground No.2: Revenue has challenged the order passed by the Learned CIT(A) in deleting the addition of Rs.1,15,41,900/- made on account of rejecting the accounting policy for allocation of interest expenses.
7. The assessee has debited interest expenses of Rs.590.17 lacs. It was further seen from the profit and loss account of non-taxable unit of Baddi Unit (Non Taxable Unit) that the assessee has not debited interest expenses. It has ITA No.2235/Ahd/2016 & CO No.160/Ahd/2016 Astral Polytechnik Pvt. Ltd.
Asst.Year -2013-14 -8- only claimed in respect of Ahmedabad Unit. According to the Learned AO, it is nothing but a diversion of income by way of wrong allocation of interest expenses between the assessee's manufacturing unit at Baddi, which is exempted u/s 80IC of the Act and another unit at Ahmedabad being non- exempted unit. It was further observed by the Learned AO that the raw materials are mainly imported from US and are sent to both the units as per the requirement of the units. The assessee is a public limited company which has shown huge profit at Himachal Pradesh unit as against the profit of Gujarat Unit. A show-cause was issued on 26.02.2016 to explain as to why the interest expenses should not be proportionality allocated between both the units to show the true and correct allocation of expenses between two units. However, the contention made by the assessee in reply was not found acceptable. The Learned AO ultimately treated Rs.3,84,73,000/- being the interest expenses as profit of Baddi Unit and disallowed 30% of it u/s 80IC of the Act to the tune of Rs.1,15,41,900/-. In appeal, the Learned CIT(A) relying upon the order passed by his predecessor for A.Y. 2012-13 decided the issue in favour of the assessee by deleting addition made by the Learned AO. Hence, the instant appeal before us.
8. At the time of hearing of the instant appeal, the Learned Advocate appearing for the assessee submitted before us that the issue was already decided in favour of the assessee by the Hon'ble Co-ordinate Bench in revenue's appeal. In that view of the matter, the appeal is liable to be dismissed. However, Learned DR failed to controvert the contention made by the Learned AR.
ITA No.2235/Ahd/2016 & CO No.160/Ahd/2016Astral Polytechnik Pvt. Ltd.
Asst.Year -2013-14 -9-
9. Heard the respective parties, perused the relevant materials available on record. We find that while passing the order in deleting the disallowance made by the Learned AO observed as follows:
"5.3 I have carefully considered the Assessment Order and the submission filed by the Appellant. Further, ongoing through the assessment records, I find that similar issue had come up for adjudication in the case of Appellant in Assessment Year 2012-13 and undersigned has decided the issue in favour of the appellant. The relevant portion of the Appellate Order for the A. Y. 2012-13 reads as under:
"5.3 Identical Issue came up for consideration in the preceding A. Y. 2008-09 in the appellant's own case. Vide my order of even date in Appeal No. CIT(A)-VI/DC. Cir. 1/239/11-12, it was held as under:
"4.4 The contentions of the Id. A.R. are tenable. The allocation of interest expenditure between the H.P. Unit and Gujarat Unit was being done consistently on daily product basis. In the immediately preceding year, interest expenditure of Rs. 22.83 lakhs was allocated to the H.P. Unit. In the year under consideration since no borrowed funds were utilized by the H.P. Unit, interest expenditure was not allocated to it. The contention that the H.P. Unit was generating enough profits/cash surplus and was in a position to advance surplus money to the head of ice (instead of utilizing the funds borrowed by the head office) was not controverted by the A.O. As regards the foreign exchange gain/loss, in the reasons recorded for re-opening, this issue was figuring therein. However, in the year under consideration, A.O. did not allocate the foreign exchange gain to H.P. Unit, whereas in the subsequent A.Y. 2009-10 the foreign exchange loss was allocated between the two units. In the preceding A. Y. 2007-08 the interest expenditure allocated by the appellant to the H.P. Unit of Rs. 22.83 lakhs was not disturbed by the A.O. Thus, the AO's approach in allocating interest expenditure and foreign exchange gain/loss between the two units has been inconsistent. It is varying merely on the basis of the assessability of higher or lower income. Taking into account the totality of the facts, I do not find any reason to disturb the allocation as being done by the appellant consistently over the years. I am the view that impugned disallowance is not sustainable. It is deleted. Accordingly, Ground No. 3,4& 5 are allowed. Ground No. 6 is an alternate claim and has become ITA No.2235/Ahd/2016 & CO No.160/Ahd/2016 Astral Polytechnik Pvt. Ltd.
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infructuous in view of my finding above. Accordingly, it dismissed."
In the preceding A.Y. 2008-09, A.O. allocated interest expenditure between the two units but did not allocate the foreign exchange gain between the two units.
Whereas in the year under consideration he has allocated interest expenditures and the foreign exchange losses between the two units. As seen from the chart furnished by the appellant (reproduced at page-40 of this order), the foreign exchange loss was Rs. 31.24 lakhs in A.Y. 2006-07, foreign exchange gain was Rs. 87.09 lakhs in A. Y. 2007-08, foreign exchange gain was Rs. 115.63 lakhs for A.Y. 2008- 09, foreign exchange loss was Rs. 733.67 lakhs in A.Y. 2009-10, foreign exchange gain was Rs. 300.54 lakhs in A.Y. 2010-11 and foreign exchange gain was Rs. 24.47 lakhs in A.Y. 2011-12. Irrespective the foreign exchange gain or loss, appellant has been allocating the entire gain or loss only to the Gujarat Unit, which is not eligible for deduction u/s. 80IC.
All other facts remaining the same in the year under consideration, following my order for A.Y. 2008-09,1 am of the view that the allocation of interest expenditure and foreign exchange loss was not warranted. Accordingly, impugned disallowance is deleted. These grounds of appeal are allowed."
Facts remaining the same in the year under consideration, following the above mentioned order, impugned addition is deleted. This ground of appeal is allowed."
In view of the above discussion, as facts of year under consideration are identical to facts of earlier Assessment Years, following the order of my predecessor CIT(Appeals), disallowance of Rs.96,81,300/- made by Assessing Officer is deleted. These grounds of appeal are allowed."
5.4 As the facts of the case in the present appeal for the A. Y. 2013-14 are identical to those for A.Y. 2012-13, following the decision referred supra, the impugned addition made by the Assessing Officer for Rs. 1,15,41,9007- being interest expenses allocated to Appellant's eligible unit in Bade// is deleted. This ground of appeal is allowed."
ITA No.2235/Ahd/2016 & CO No.160/Ahd/2016Astral Polytechnik Pvt. Ltd.
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We find no infirmity in the order passed by the Learned CIT(A) since the same view has consistently been followed by the Learned CIT(A) which was upheld by the Learned ITAT. In that view of the matter, we find revenue's appeal to be devoid on merit and hence dismissed.
10. Ground No.3: This ground relates to deletion of addition of Rs.3,64,326/- made on account of disallowance u/s 14A r.w.r. 8D of the Act. (Out of total disallowance of Rs.3,64,326/-, Rs.2,68,476/- pertains to interest disallowance and Rs.95,850/- pertains to administrative disallowance.)
11. The appellant-company invested in the Unquoted Equity Shares of Astral Technologies Ltd. Kenya and the same is taxable. It has also invested in Mutual Funds out of his own interest free funds to earn short term benefit for such investment and not utilized borrowed capital amount as the case made out by the assessee before the authorities below. It was further contended by the assessee that it has not earned any exempt income, which is evident from the return of income for the year under consideration. Since no exempt income has been earned during the year under consideration and the provision of Section 14A does not apply. Reliance was also placed on the judgment passed by the Apex Court in the case of CIT-vs-Chettinad Logistics (P) Ltd. [2018] 95 taxmann.com 250 (SC). So far as the allocation made by the Learned AO that no administrative expenses has been disallowed in respect of management of investment in mutual funds, it was submitted that the investment in mutual fund has been made on own interest free funds. Neither any new investment has been made during the year under consideration in Unquoted Equity Shares of his subsidiary companies namely Astral Biochem Pvt. Ltd. and Advance Adhesives Ltd. However, without considering the contention and/or ITA No.2235/Ahd/2016 & CO No.160/Ahd/2016 Astral Polytechnik Pvt. Ltd.
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explanation rendered by the appellant company, the Learned AO applied the section 14A r.w.r. 8D(2)(ii) of the Act and disallowed Rs.3,64,326/-. The Learned CIT(A), in appeal deleted such addition made by the Learned AO. Hence the instant appeal before us.
12. At the time of hearing of the instant appeal, the Learned Counsel appearing for the assessee submitted before us that since assessee has not earned any exempt income for investment made by it which is also apparent from the audited account relying upon the judgment passed by the Hon'ble Jurisdictional High Court in the case of CIT-vs-Corrtech Energy Pvt. Ltd. reported in 223 taxman 130, the Learned CIT(A) rightly deleted the addition made by the Learned AO. On the contrary, the Learned DR relied upon the order passed by the Assessing Officer.
13. Heard the respective parties, perused the relevant materials available on record. It appears that the assessee has really not earned any exempt income which is evident from records available before us. The assessee has not claimed any exemption. It is a fact that no deduction shall be allowed in respect of expenditure incurred by the assessee in relation to income which does not form part of the total income under the Act. In that view of the matter following the ratio laid down by the Hon'ble Jurisdictional High Court in the case of Corrtech Energy Ltd. (supra), the Learned CIT(A) while deleting addition observed as follows:
"6.3 I have carefully considered the Assessment Order and the submission filed by the Appellant. I observe that during the year under consideration, Appellant has not earned any exempt income from investments made by it which is apparent from Audited Annual accounts as well as computation of total income as submitted before Assessing Officer as well as in Appellate Proceedings. The Hon'ble Gujarat High Court in the case of CIT V/s Corrtech Energy Pvt. Limited 223 Taxman 130 on identical issue of ITA No.2235/Ahd/2016 & CO No.160/Ahd/2016 Astral Polytechnik Pvt. Ltd.
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disallowance under Section 14A when no dividend income is earned by Assessee has held as under:
"4. Counsel for the Revenue submitted that the Assessing Officer as well as CIT(Appeals) had applied formula of rule 8D of the Income Tax Rules, since this case arose after the assessment year 2009-2010. Since in the present case, we are concerned with the assessment year 2009-2010, such formula was correctly applied by the Revenue. We however, notice that sub-section(l) of section 14A provides that for the purpose of computing total income under chapter IV of the Act, no deduction shall be allowed in respect of expenditure incurred by the assesses in relation to income which does not form part of the total income under the Act. In the present case, the tribunal has recorded the finding of fact that the assessee did not make any claim for exemption of any income from payment of tax. It was on this basis that the tribunal held that disallowance under section 14A of the Act could not be made. In the process tribunal relied on the decision of Division Bench of Punjab and Haryana High Court in case of CIT v Winsome Textile Industries Ltd. [2009] 319 ITR 204 in which also the Court had observed as under:
"7. We do not find any merit in this submission. The judgement of this court in Abhishek Industries Ltd (2006) 286 ITR 1 was on the issue of allowability of interest paid on loans given to sister concerns, without interest. It was held that deduction for interest was permissible when loan was taken for business purpose and not for diverting the same to sister concern without having nexus with the business. The observations made therein have to be read in that context. In the present case, admittedly the assessee did not make any claim for exemption. In such a situation section 14A could have no application."
5. We do not find any question of law arising, Tax Appeal is therefore dismissed."
It is observed that case of Appellant is squarely covered by decision of Hon'ble Gujarat High Court referred supra hence relying upon said decision, disallowance under Section 14A made by Assessing Officer for Rs.3,64,326/- is deleted. This ground of appeal is allowed."
Having regard to the ratio laid down by the Jurisdictional High Court in the case of Corrtech Energy Ltd., we find no infirmity in the order passed by ITA No.2235/Ahd/2016 & CO No.160/Ahd/2016 Astral Polytechnik Pvt. Ltd.
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the Learned CIT(A) so far as to warrant interference. The question is accordingly answered in the affirmative, i.e. in favour of the assessee and against the revenue. Consequently, the appeal fails and is accordingly dismissed.
Cross Objection No.160/Ahd/2016 :
14. The Cross Objection has been filed by the assessee against the confirmation of disallowance of employees contribution to PF and ESI for Rs.57,850/- made by the Assessing Officer on the premise that said amount though has been paid by the assessee before the due date of filing of return but not within the due date prescribed in the concerned Act.
15. It appears from the record that the employees contribution amounting to Rs.57,097/- and Rs.752/- to PF and ESI respectively not paid within due dates prescribed in PF Act and therefore the same is not allowable for deduction u/s 36(1)(va) of the Act. The issue has already been settled by the Hon'ble High Court in the case of CIT-vs-Gujarat State Road Transport Corporation holding that the employees contribution to PF and ESI is not covered by Section 43B and is only allowable as a deduction u/s 36(1)(va) if paid by the "due date"
prescribed therein. Hence, relying upon the ratio laid down by the said judgment the Learned AO disallowed the amount of Rs.57,849/- of which Rs.57,097/- was the employees contribution towards PF and Rs.752/- towards ESI and ultimately the same was added to the total income of the assessee.
16. The Learned CIT(A) following the judgment passed by the Hon'ble Jurisdictional High Court while confirming the addition made by the Learned AO observed as follows:ITA No.2235/Ahd/2016 & CO No.160/Ahd/2016
Astral Polytechnik Pvt. Ltd.
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"7.2 During the course of appellate hearing, Appellant has not filed any written submission but argued that as above contribution is paid before due date of filing of Return of Income, no disallowance should be made. 7.3 I have carefully considered the Assessment Order and arguments made by appellant. The Assessing Officer has observed that appellant has failed to deposit employees contribution to Provident Fund and ESIC before due date prescribed under relevant provisions of the said Acts hence he relied upon provisions of section 36(1)(va) r.w.s 2(24) (x) and decision of Hon'ble Gujarat High court in the case of State Road Transport Corporation and made disallowance of Rs 57849/-. On the other hand, appellant has argued that as employees' contribution to Provident Fund and ESIC are made before due date of filing of return of income disallowance cannot be made.
7.4 On careful consideration of observation of Assessing Officer and contention of appellant, I observe that entire issue is covered against appellant by decision of Hon'ble Gujarat High court in case of State Road Transport Corporation (366 ITR 170) wherein it is held as under :
"Section 43B, read with section 36(1)(va) of the Income-tax Act, 1961
-Business disallowance - Certain deductions to be allowed on actual payment (Employees contribution) - Whether where an employer has not credited sum received by it as employees' contribution to employees' account in relevant fund on or before due date as prescribed in Explanation to section 36(1 )(va), assesses shall not be entitled to deduction of such amount though he deposits same before due date prescribed under section 43B i.e., prior to filing of return under section 139(1) - Held, yes - Assessee State transport corporation collected a sum being provident fund contribution from its employees - However, it had deposited lesser sum in provident fund account - Assessing Officer disallowed same under section 43B - However, Commissioner (Appeals) deleted disallowance on ground that employees contribution was deposited before filing return - Whether since assessee had not deposited said contribution in respective fund account on date as prescribed in Explanation to section 36(1 )(va), disallowance made by Assessing Officer was just and proper - Held, yes [Para 8] [In favour of revenue] 7.5. Considering the above decision of Hon'ble Jurisdictional High court in the case of State Road Transport Corporation (366 ITR 170) addition made by Assessing Officer is upheld. This Ground of Appeal is dismissed."
Taking into consideration the ratio laid down by the Jurisdictional High Court in the case Gujarat State Road Transport Corporation (supra), we find no ITA No.2235/Ahd/2016 & CO No.160/Ahd/2016 Astral Polytechnik Pvt. Ltd.
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justification to interfere with the order passed by the Learned CIT(A). Hence, the same is hereby upheld. In the result, assessee's CO is dismissed.
17. In the combined result, revenue's appeal and assessee's CO both are dismissed.
This Order pronounced in Open Court on 06/05/2019
Sd/- Sd/-
( WASEEM AHMED ) ( Ms. MADHUMITA ROY )
ACCOUNTANT MEMBER JUDICIAL MEMBER
Ahmedabad; Dated 06/05/2019
Priti Yadav, Sr.PS
आदे श क त ल प अ े षत/Copy of the Order forwarded to :
1. अपीलाथ / The Appellant
2. यथ / The Respondent.
3. संबं धत आयकर आयु त / Concerned CIT
4. आयकर आयु त(अपील) / The CIT(A)-1, Ahmedabad.
5. वभागीय त न ध, आयकर अपील!य अ धकरण, अहमदाबाद / DR, ITAT, Ahmedabad
6. गाड' फाईल / Guard file.
आदे शानुसार/ BY ORDER, स या पत त //True Copy// उप/सहायक पंजीकार (Dy./Asstt.Registrar) आयकर अपील य अ धकरण, अहमदाबाद / ITAT, Ahmedabad
1. Date of dictation 01/05/2019 (Dictation Pages 12)
2. Date on which the typed draft is placed before the Dictating Member ...06/05/2019
3. Other Member.....................
4. Date on which the approved draft comes to the Sr.P.S./P.S ...06.05.2019
5. Date on which the fair order is placed before the Dictating Member for pronouncement......
6. Date on which the fair order comes back to the Sr.P.S./P.S.......
7. Date on which the file goes to the Bench Clerk.....................
8. Date on which the file goes to the Head Clerk..........................................
9. The date on which the file goes to the Assistant Registrar for signature on the order..........................