Income Tax Appellate Tribunal - Mumbai
Umed Textiles Mills P. Ltd., Mumbai vs Department Of Income Tax on 31 January, 2006
IN THE INCOME TAX APPELLATE TRIBUNAL
"E" Bench, Mumbai
Before Shri R.S. Padvekar, Judicial Member
and Shri B. Ramakotaiah, Accountant Member
ITA No.2737/Mum/2006
(Assessment Year: 2000-01)
ACIT 4(3) M/s. Umed Textiles Mills P. Ltd.
Room No. 649, 6th Floor Vs. 72, 3rd Floor, Champa Galli
Aayakar Bhavan, M.K. Road Kalbadevi Road
Mumbai 400020 Mumbai 400002
PAN - AAACU 7381 L
Appellant Respondent
Appellant by: Shri D. Songate
Respondent by: Shri Vipul B. Joshi/
Shri Sameer G. Dalal
ORDER
Per B. Ramakotaiah, A.M.
This appeal by the Revenue is against the order of the CIT(A) XIV, Mumbai dated 31.01.2006.
2. Revenue has raised the following grounds: -
"(i) On the facts and in the circumstances of the case and in law, the CIT(A) erred in allowing the depreciation on Combi Pack Boiler of Rs.13,76,420/- as it was brought on the record by the Assessing Officer that the boiler was not commissioned during the accounting year and hence depreciation on the same was not allowable.
(ii) On the facts and in the circumstances of the case and in law, the CIT(A) erred in deleting the disallowance made by the Assessing Officer of the claim for excise duty payment of Rs.1,01,33,220/-
as it is clearly mentioned in the Tax Audit Report that "Sales does not include excise duty".
(iii) On the facts and in the circumstances of the case and in law, the CIT(A) erred in deleting the disallowance u/s 36(1)(iv) of Rs.2,02,303/- being delayed payment of PF contribution as the payment was not made by the due date or even within the grace period as allowed by the provident Fund Act."
2 ITA No.2737/Mum/2006M/s. Umed Textiles Mills P. Ltd.
3. We have heard the learned D.R. and the learned counsel. Paper book by the assessee containing pages 1 to 90 are on record.
4. Regarding ground No. 1 the assessee claimed depreciation on Combi Pack Boiler of `13,76,420/- at 50% rate as it was stated to have been commissioned on 07.03.2000 for which prior approval has been obtained from the Factories & Boilers Inspection Department of Rajasthan Government. The A.O. was of the view that the boiler was not commissioned on 07.03.2000 but was installed on 22.04.2000 on the basis of the final certificate issued by the Boiler Inspection Department dated 22.04.2000. He was of the opinion that the boiler was found to have been installed and commissioned after 31.03.2000 and so depreciation was not allowable. Before the CIT(A) it was submitted that the boiler was purchased on 30.11.1999 and various installation works were done and was commissioned on 07.03.2000. The Factories & Boiler Inspection Department has inspected the boiler and issued a provisional certificate dated 21.02.2000 (paper book page No. 51) and supplier company, M/s. Thermax Ltd. has issued a Commissioning Protocol, which clearly states that the date of commission was 07.03.2000. The CIT(A), after examining the facts, has held that the boiler was commissioned on 07.03.2000 and accordingly directed the A.O. to allow the depreciation.
5. We have examined the provisional certificate of the Inspector of Boilers and the final certificate of the same authority issued on 22.04.2000. We are unable to understand on what basis the A.O. has come to the conclusion that the boiler was not installed or commissioned on 07.03.2000. Even the final certificate dated 22.04.2000 states that the boiler was hydraulically tested on 14.02.2000 and a provisional certificate was issued earlier. This is the certificate given by the Inspector of Boilers dated 22.04.2000: -
"I further certify that the main steam pipe was tested hydraulically to a pressure of feed line 21kg/cm2, Steam line 15.8 kg./cm2 lbs. per square inch last on 14.2.2000"3 ITA No.2737/Mum/2006
M/s. Umed Textiles Mills P. Ltd.
The above certificate clearly indicates that the boiler was hydraulically tested on 14.02.200 and this indicates that the boiler was ready for commencement before it was tested and after testing a provisional certificate dated 21.02.2000 was issued for a period of six months to use 'the Horizontal Smoketube with Water Wall Furnace Boiler' made by M/s. Thermax Limited, Pune. In view of the overwhelming evidence that the boiler was commissioned much before 31.03.2000 there is no need for the A.O. to disallow depreciation simply because the final certificate was dated 22.04.2000. In view of the above the ground raised by the Revenue is rejected.
6. Ground No. 2 pertains to disallowance of excise duty to the extent of `1,01,33,220/- on the basis of Audit objection that the notes to the account and audit report indicates that 'sales does not include excise duty' whereas the P & L Account shows that excise duty has been debited. The A.O. did not accept assessee's explanation that there is no collection of excise duty from the customers as excise duty was borne by the company on the basis of the installed capacity as per Hot Air Stenter Independent Textile Processor annual Capacity Determination Rules 1988 and there is no separate collection of excise duty but there was payment of excise duty. It was submitted that there was no wrong claim and requested the A.O. to allow the claim. The A.O., without assigning any reason, simply stated in para 6 that the explanation was not acceptable and an amount of `1,01,33,220/- was added to the total income of the assessee by disallowing the same. Before the CIT(A) the assessee submitted that excise duty was borne by the assessee company as per the said rules and the sales are inclusive of excise duty and filed the sales details to explain that eventhough the rate of excise duty was stated in the sale bills issued to the customers for VAT purposes the assessee was billing on the gross amount and assessee's bills were furnished in evidence alongwith account copies of excise duty account. It is also explained that the change in excise duty methodology was adopted from 16.12.1998 consequent to the change in the excise duty rules and the 4 ITA No.2737/Mum/2006 M/s. Umed Textiles Mills P. Ltd.
auditors has stated inadvertently that sales does not include excise duty whereas sale price was inclusive of excise duty, which was not separately charged. It was also further submitted that there was no outstanding amount to excise duty as on 31.03.2000 as under the new scheme duty was not payable on clearance of goods from the factory but instead the duty was payable based on the capacity of production determined as per notified rules therefore, irrespective of clearance from factory, duty was payable on the capacity of the stenter installed in the factory. On the basis of the statements and evidences on record the CIT(A) opined that the A.O. failed to appreciate the changes made in the method of charging excise duty from ad- valorum to duty on annual capacity of the hot air stenters installed. He deleted the addition so made. Revenue is aggrieved.
7. We have heard the submissions and perused the evidences on record. Consequent to the change in rules in levy of excise duty from ad-valorum to annual capacity installed the assessee was not separately charging excise duty in the sale bills but indicating the excise duty as basis excise duty at 4.8% and additional excise duty at 8% on bills (the gross bill amount was same as that of indicated before the excise duty was worked out). This indicates that excise duty was not separately charged when the goods were sold/cleared from the factory but was being paid on the basis of the installed capacity. Not only that the assessee also availed rebate on the exports and the rebate was paid by cheques issued by the Excise Department in the year 1999-2000 relevant for the assessment year. Assessee was entitled for a rebate of `46,52,476/-, which was shown as credit in the Schedule of other income. These indicate that the assessee was claiming excise duty as and when it has paid on the installed capacity and was claiming rebate on exports as entitled and offering the same as income in the Schedules. In view of this, the Revenue's contention that the sales does not include excise duty on the basis of the mistake in tax audit report cannot be accepted. The facts speak otherwise and assessee has correctly accounted for the excise duty payment and the rebate allowed in its P & L 5 ITA No.2737/Mum/2006 M/s. Umed Textiles Mills P. Ltd.
Account. Therefore, the Assessing Officer's action in simply not accepting assessee's explanation and making the addition without even a whisper about the reasoning for disallowance cannot be upheld. Order of the CIT(A) is upheld. Revenue's ground is rejected.
8. Ground No. 3 pertains to disallowance of PF contribution of `2,02,303/-. Assessee submitted that the amount was paid mostly on due dates but sometimes small delay of 3-4 days in certain months which was allowable by virtue of the decision of the ITAT in the case of Fluid Air (India) Limited vs. DCIT 63 ITD 182 (Bom). The CIT(A) allowed the claim. Accordingly Revenue is aggrieved.
9. We have considered the issue. First of all there are no details of the amounts paid beyond the due date from the order of the assessment. As seen from the schedule filed in this regard in the paper book page 45, the total of the amount paid with delay ranging 3 days to 9 days comes to only `1,71,758/- as against `2,02,303/- disallowed by the A.O. We are unable to reconcile from where the amount was taken by the A.O. Out of this amount, `55,036/- was paid within 3 days, that is within the grace period. With reference to balance of `1,16,695/- it is noticed that the amounts were paid by cheques and these were cleared later and so these also to be considered that the amounts were paid within due date/grace period. Accordingly the CIT(A)'s order in allowing the same is upheld both on facts and on law. Not only that, the ITAT in the case of M/s. Pranavaditya Spinning Mills Ltd. vs. ACIT in ITA No. 6855/Mum/2008 for A.Y. 2002-03 vide order dated 22.03.2010 has held that contribution of employees paid before due date for filing return of income is also allowable as deduction, following series of orders in this regard. The findings of the ITAT in para 4 are as under:-
"4. The learned counsel for the assessee relied on several orders of the Mumbai Benches of the Tribunal in support of his contention that the employees' contribution should be allowed under section 43B if it is deposited within the due date for filing the return of the assessment year in question. In the case of Simplex Engineering & Foundry Works P. ltd. vs. JCIT, in ITA No. 5760/Mum/2006 dated 29th November 1007 6 ITA No.2737/Mum/2006 M/s. Umed Textiles Mills P. Ltd.
(assessment year 2003-04) and connected appeals, it has been opined by the Tribunal in para 16 that since the contribution of the employees' is withheld by the employer by deducting the same from the wages and salaries, the dues of the employees' merged with the funds of the employer and the employees' contribution thus becomes similar to the employer's own contribution. It has been observed that the nature of the source of both employer's as well as employees' contribution is the same, namely, the funds of the employer. In this view of the matter it has been held that the contribution of the employees' paid within the due date of filing the return of income is allowable under section 43B. This order of the Tribunal has not been referred to in the subsequent order of the Tribunal dated 28th January 2010 in the case of the same assessee, namely, Simplex Engineering & Foundry Works, for the assessment year 2004-05 in ITA No. 378/Mum/2009 and without reference to the earlier order, the disallowance of the employees' contribution was upheld by the Tribunal. In another order passed on 28th January 2010 in ITA No. 6847/Mum/2008 (assessment year 2005-06) in the case of Pik Pen Private Limited vs. ITO, the Tribunal was dealing with the employees' contribution to Provident Fund and ESIC, which was paid even beyond the grace period. The Assessing Officer had disallowed the payment under section 26(1)(va), holding that the contribution was not covered by section 43B. The Tribunal was of the opinion that the case was covered by the judgement of the Supreme Court in the case of CIT vs. Alom Extrusions ltd. (2009) 319 ITR 306 (SC) and accordingly held that the contribution of the employees', if paid before the due date for filing the return of income was contemplated by the proviso to section 43B, is to be allowed as a deduction. In the case of Radhakrishna Foodland Pvt. ltd. vs. ACIT, in ITA No. 4211/Mum/2006 (assessment year 2003-04), the Tribunal by order dated 11th February 2008 held, following the view taken by the Supreme Court in the case of CIT vs. Vinay Cement Ltd. (2007) 213 CTR 268 (SC), that employees' contribution paid before the due date of filing the return of income is allowable as a deduction. There is thus a series of orders of the Mumbai Benches of the Tribunal on the issue and respectfully following them we delete the disallowance of 14,02,512/-, out of which Rs.5,62,450/- was paid after the due date but before the grace period and Rs.8,40,062/- was paid after the grace period but before the due date for filing the return of income. The first ground is accordingly allowed."
10. In view of the above, since most of the amounts are paid within the grace period and even the small delay in paying some of the amounts due to cheque clearance relates back to the date of issue, we are of the opinion that the assessee is entitled for deduction of the amount on the basis of the payment within the grace period. Even otherwise if it were to be considered that few payments are made beyond the grace period, since these are paid 7 ITA No.2737/Mum/2006 M/s. Umed Textiles Mills P. Ltd.
within the due date for filing the return of income, the same will also be eligible for deduction. In view of this, the ground of Revenue is rejected.
11. In the result, appeal of the Revenue is dismissed.
Order pronounced in the open court on 31st August 2010.
Sd/- Sd/-
(R.S. Padvekar) (B. Ramakotaiah)
Judicial Member Accountant Member
Mumbai, Dated: 31st August 2010
Copy to:
1. The Appellant
2. The Respondent
3. The CIT(A) - XIV, Mumbai
4. The CIT- IV, Mumbai City
5. The DR, "E" Bench, ITAT, Mumbai
By Order
//True Copy//
Assistant Registrar
ITAT, Mumbai Benches, Mumbai
n.p.