Income Tax Appellate Tribunal - Ahmedabad
Oswal Industries Limited,, Ahmedabad vs The Acit, Mehsana Circle,, Mehsana on 7 March, 2018
IN THE INCOME TAX APPELLATE TRIBUNAL
AHMEDABAD "C" BENCH
Before: Shri Rajpal Yadav, Judicial Member
And Shri Amarjit Singh, Accountant Member
ITA No. 2843/Ahd/2015
Assessment Year 2012-13
Oswal Industries Ltd., The ACIT,
Village: Bileshwarpura Mehsana Circle,
Chhatral, Tal: Kalol, Dist. Vs Mehsana-384315
Gandhi nagar (Respondent)
PAN: AAACO03443L
(Appellant)
Revenue by: Shri Prasoon Kabra, Sr. D.R.
Assessee by: Shri P.D. Shah, A.R.
Date of heari ng : 23-01-2018
Date of pronouncement : 07-03-2018
आदेश /ORDER
PER : AMARJIT SINGH, ACCOUNTANT MEMBER:-
This assessee's appeal for A.Y. 2012-13, arises from order of the CIT(A), Gandhinagar, Ahmedabad dated 28-08-2015, in proceedings under section 143(3) of the Income Tax Act, 1961; in short "the Act".
2. The assessee has raised following grounds of appeal:-
"1. That the learned CIT(A) has erred in law and facts by confirming the addition u/s. 36(1)(va) r.w. sub clause (x) of clause 24 of section 2 of the Income Tax Act related to Late payment of Provident Fund Contribution of Rs 2,81,895/- made by the learned AO and therefore the learned AO should be directed to delete the addition of Rs. 2,81,895/-.I.T.A No. 2843/Ahd/2015 A.Y. 2012-13 Page No 2
Oswal Industries Ltd. vs. ACIT
2. That the learned CIT(A) has erred in law and facts by confirming the disallowance of Travelling Expenses of Rs.2,44,625/- made by the learned AO and therefore the learned AO should be directed to delete the disallowance of Rs. 2,44, 625/-."
The brief facts of the case are discussed under the grounds of appeal as follows:-
Addition u/s. 36(1)(va) r.w. sub clause (x) of clause 24 of section 2 of the Income Tax Act
3. The assessee has filed return of income on 30th September, 2012 declaring income of Rs.5,79,64,490/-. Subsequently, the case was selected under scrutiny by issuing of notice u/s. 143(2) of the act on 17th August, 2013. On scrutiny the assessing officer noticed that assessee has debited Rs. 18,38,515/- towards contribution to provident fund. On verification of the details as per audit report in form no. 3CD, the assessing officer noticed that assessee had deposited the amount pertaining to employee's contribution to PF after the due dates prescribed in the PF Act as under:-
Sr. No. Amount (Rs.) Due date Date of payment
1. 96,893/- 15/05/2011 17/05/2011
2. 73,387/- 15/06/2011 16/06/2011
3. 93,363/- 15/07/2011 18/07/2011
4. 97,078/- 15/08/2011 23/08/2011
5. 98,446/- 15/09/2011 16/09/2011
6. 96.360/- 15/10/2011 17/10/2011
7. 93,727/- 15/11/2011 21/11/2011
8. 1, 18,257/- 15/12/2011 19/12/2011
9 92,980/- 15/01/2012 20/01/2012
I.T.A No. 2843/Ahd/2015 A.Y. 2012-13 Page No 3
Oswal Industries Ltd. vs. ACIT
10 91,090/- 15/04/2012 01/05/2012
Total 9,51,581/-
Consequently after following the decision of hon'ble Gujarat High Court in the case of Gujarat State Road Transport the assessing officer has disallowed the amount of Rs. 9,51,581/- according to the provision of section 36(1)(va) r.w sub-clause (x) of clause 24 of section 2 of IT act, 1961 for failing to deposit within the stipulated dates .
4. Aggrieved assessee filed appeal before the ld. CIT(A). The ld. CIT(A) has partly allowed the appeal of the assessee by observing as under:-
"5.3 I have considered the facts of the case, assessment order, submission made by the appellant and the, case laws relied upon.
AO has made the impugned disallowance of Rs.9,51,581/- relying on the decision of Gujarat State Road Transport Corpn., reported at 223 Taxman 398 wherein the Hon'ble Gujarat High Court had held that Employees' PF/ES1 contribution is not covered under s.436 and is only allowable as a deduction u/s 36(l)(va) if paid by the due date prescribed therein. AO has contended that the contribution towards PF payable by the employees shall be paid before the stipulated dates as per PF Rules and disallowed Rs. 9,51,581/-.
On the other hand has contended that no disallowance is warranted in the case of the appellant on account of payment of Employees' PF as all the payments were made before the due date including grace period of payment allowed under the PF Act of 5 days. Appellant further contended that as per Section 38 of the EPF Scheme, 1952, the payment is required to be made within 15 days from the close of the month and each welfare fund scheme provides a grace period for delayed payments. With regard to the Gujarat High Court decision in the case of Guj'arat State Road Transport Corpn (Supra) relied upon by the AO it is contended that it is not relevant in the case of the appellant as appellant had deposited the Employees' PF contribution within the grace period whereas in the case relied upon by the AO the contribution is made to the government account beyond the grace period allowed.
In the entirety of the facts of the circumstances of the case, it is seen that in the case of the appellant, payments in respect of employees' contribution have been made on or before the due date as per the relevant Act within the grace period. In the case of Indo Swiss Anti Shock Ltd, Hon'ble Ahmedabad Tribunal has held that payment of employees' contribution within the grace period is allowable and has been treated as paid on or before the due date as per explanation to section 36(l)(va) of Act. Similarly, the in the case of Sony India (P) Otd reported at 315 ITR 150, Hon'ble Delhi Tribunal relying on the decision taken by the Hon'ble Madras High Court in the case of Ganapathy Mills Co.
I.T.A No. 2843/Ahd/2015 A.Y. 2012-13 Page No 4Oswal Industries Ltd. vs. ACIT Ltd (2000) 243 ITR 879, had deleted the addition made by the AO holding that the \due date' for payment of PF contribution as defined in Explanation to section 36(l)(va) gets extended by the grace period of 5 days allowed under the relevant statute. From the discussion made above, it is clear that for the purpose of computing the due date u/s 36(l)(va), the grace period of 5 days is to be added to the due date. In the case of the appellant, the employees' contribution had been deposited to the government account within the grace period allowed as per the relevant PF Act and therefore, the contention of the appellant is allowable. Following the judicial pronouncements as above, the disallowance and addition made by the AO on account of Employees' PF paid within the grace period is allowable. However, from the submission made by the appellant, all the payments are not made within the grace period allowed. An amount of Rs.2,81,895/- is paid into the government beyond the grace period allowed by the PF Act. Therefore, this amount will not be allowed to the appellant and addition to this extent is confirmed and the balance addition of Rs.6,69,686/- (Rs.9,51,895/- less Rs.2,81,895/-) is directed to be deleted. Relevant ground of appeal is allowed in part."
5. During the course of appellate proceedings before us, the learned counsel has contended that relevant due date has to be seen not from the relevant month of salary but from the month in which the payment was made. Therefore, he has filed the relevant detail and computation as under:-
Month Employees' Actual Due date Due date Actual
contribution date of of of date of
payment payment payment payment
of salary Of PF as as per Act
per
assessing
officer
March,2012 91,090 10.04.2012 15.04.2012 20.05.2012 01.05.2012
July,2011 97,078 10.08.2011 15.08.2011 20.09.2011 23.08.2011
October,2011 93,727 10.11.2011 15.11.2011 20.12.2011 21.11.2011
Total 2,81,895
The ld. authorized representative has also placed reliance on the decision of Co-ordinate Bench of ITAT in the case of Rajjratna Metal Industries Ltd.
I.T.A No. 2843/Ahd/2015 A.Y. 2012-13 Page No 5Oswal Industries Ltd. vs. ACIT vs. Addl. CIT in ITA no. 940/Ahd/2015 dated 22-09-2017. The ld. DR supported the order of CIT(A).
6. We have heard both the parties and perused the material on record carefully. We have noticed that the identical issue has been decided by the above referred decision of Co-ordinate Bench of the ITAT, Ahmedabad in which it was held that the relevant date in such case is the date of month of actual payment of wages and salaries. Following the decision of the Co- ordinate Bench, we allow the appeal of the assessee. Therefore, the appeal of the assessee on this issue is allowed.
Disallowance of Travelling Expenses of Rs.2,44,625/-
7. During the course of assessment proceedings, the assessing officer noticed that assessee has debited travelling expenses incurred for foreign visit to the amount of Rs. 9,78,500/-. The assessee failed to substantiate its claim of foreign expenses with relevant material consequently the assessing officer has disallowed 25% of these expenses amounting to Rs. 2,44,625/-.
8. Aggrieved assessee filed appeal before the ld. CIT(A). The ld. CIT(A) has sustained the addition by observing as under:-
"8.3 I have considered the facts of the case, assessment order, submission made by the appellant and the case laws relied upon.
AO has made the disallowance as the appellant furnished a very general reply during the assessment proceedings. AO has contended that unless motive or purpose of foreign visit is solely for promoting the business is not proved, the expenditure claimed will not qualify for deduction. AO has further contended that for allowintg a claim within the ambit of sec. 37(1), the following condition are to be satisfied cumulatively,
(a) The expenditure should not be of the nature described in sec. 30 to
36.
(b) The expenditure should not be in the nature of capital expenditure.
(c) The expenditure should not be in the nature of personal expenditure.
(d) The expenditure should be laid out or expended wholly and exclusively for the purposes of business.I.T.A No. 2843/Ahd/2015 A.Y. 2012-13 Page No 6
Oswal Industries Ltd. vs. ACIT Appellant before the AO had only copy of account and invoice of imported goods and no further details of documentary proofs of the persons who visited exhibition etc was made available. In absence of such details, AO contended that element of personal visit cannot be ruled out. In such facts an amount equal to 25% of the expenses claimed by the appellant of Rs.2,44,625/- out of Travelling expenses is disallowed.
On the other hand, appellant has contended that the expenditure is incurred for the purpose of its business tour to foreign countries for the purpose of procurement of raw materials and to attend the exhibition and therefore, no part of expenditure can be disallowed on the ground of personal expenses on estimate basis. In support of this contention, appellant has submitted details of the expenses, copy of accounts and .invoice of imported goods and urged to delete the addition made.
In the entirety of facts of the case, it is seen that AO has contended that personal foreign visit cannot be ruled out in absence of documentary proof of the persons who visited exhibition etc. It is the contention of the appellant that expenditure is incurred for the purpose of procurement of raw materials and to attend the exhibition and therefore, no part of expenditure can be disallowed on the ground of personal expenses on estimate basis and furnished details of the expenses, copy of accounts and invoice of imported goods. Appellant has not been able to submit the details of the persons who undertook foreign tour and also could not prove with evidences that the tour was undertaken wholly and exclusively for the purpose of business. Though appelant furnished a copy of import bill but appellant has not been able to prove how the business of the appellant was benefitted by the foreign visit. Appellant though stated that expenditure was incurred for visit of exhibition, no details whatsoever of the place of exhibition, invitation letter, date of exhibition could be furnished. In absence of documentary evidences, the claim of the appellant of travelling expenses cannot be allowed. The action of the AO in disallowing Rs.2,44,625/- being 25% of the total expenses claimed is held justified and is hereby confirmed. The relevant ground of appeal is rejected."
9. During the course of appellate proceedings before us, ld. counsel has contended that assessee has not undertaken foreign visit for personal purposes. Therefore, the decision of the ld. CIT(A) of treating the expenses incurred for the company as a personal expenses is not correct. On the other hand, ld. departmental representative supported the order of CIT(A).
10. We have heard both the sides and perused the material on record carefully. We have noticed that in respect of foreign travelling expenses the I.T.A No. 2843/Ahd/2015 A.Y. 2012-13 Page No 7 Oswal Industries Ltd. vs. ACIT assessee has submitted a copy of account and invoices of imported goods etc. The assessing officer has disallowed 25% of the aforesaid expenses on estimated basis as the assessee failed to substantiate the same with any specific evidences of persons visiting foreign country. The Ld. CIT(A) has stated that the assessee has furnished only copy of account and invoice of imported goods and not furnished further details of documentary proofs of the persons who visited exhibition etc . We observe that the assessee has failed to furnish the relevant details of the persons who undertook foreign tour and also could not prove with evidences that the tour was undertaken wholly and exclusively for the purpose of business before the assessing officer and Ld. CIT(A) Even at the third stage during the course of appellate proceedings before us the assessee has also failed to demonstrate with basic relevant material that the tour was undertaken for business purposes. Under such circumstances we do not find any reason to interfere in the decision of the Ld. CIT(A). Accordingly, the appeal of the assessee on this issue is dismissed.
11. In the result, the appeal of the assessee is partly allowed.
Order pronounced in the open court on 07-03-2018
Sd/- Sd/-
(RAJPAL YADAV) (AMARJIT SINGH)
JUDICIAL MEMBER ACCOUNTANT MEMBER
Ahmedabad : Dated 07/03/2018
आदेश क त ल प अ े षत / Copy of Order Forwarded to:-
1. Assessee
2. Revenue
3. Concerned CIT
4. CIT (A)
5. DR, ITAT, Ahmedabad
6. Guard file.
By order/आदेश से,
उप/सहायक पंजीकार
आयकर अपील य अ धकरण,
अहमदाबाद