Income Tax Appellate Tribunal - Jaipur
Agribiotech Industries Limited ... vs Income Tax Officer Ward-4(2), Jaipur, ... on 13 January, 2020
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IN THE INCOME TAX APPELLATE TRIBUNAL,
JAIPUR BENCH 'B', JAIPUR
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Before : Shri Vijay Pal Rao, JM & Shri Vikram Singh Yadav, AM
vk;dj vihy la-@ITA No. 264/JP/2019
fu/kZkj.k o"kZ@Assessment Year : 2010-11
M/s. Agribiotech Industries Ltd. cuke The ITO
SP-825, VKIA Vs. Ward- 4(2)
Jaipur Jaipur
LFkk;h ys[kk la-@thvkbZvkj la-@ PAN/GIR No.: AAFCA 1695 R
vihykFkhZ@Appellant izR;FkhZ@Respondent
fu/kZkfjrh dh vksj ls@ Assessee by : Shri Himanshu Goyal, CA
jktLo dh vksj ls@ Revenue by : Shri K.C. Gupta, JCIT-DR
lquokbZ dh rkjh[k@ Date of Hearing : 08/01/2020
?kks"k.kk dh rkjh[k@ Date of Pronouncement : 13 /01/2020
vkns'k@ ORDER
PER VIJAY PAL RAO, JM
This appeal by the assessee is directed against the order dated 24-01-2018 of ld. CIT(A)-2, Jaipur for the Assessment Year 2010-11.
The assessee has raised the following grounds.
''1. On the facts and circumstances of the case, the order passed by the ld. CIT(A) is bad both in the eyes of law and on facts.
2. The ld. CIT(A) has erred both in law and facts of the case in partly sustaining the assessment u/s 143(3) of 2 ITA No.264/JP/2019 M/s. Agribiotech Industries Ltd. vs ITO, Ward-4(2), Jaipur the I.T. Act. The same is illegal, against the provisions contained in the I.T. Act deserves to be quashed and the disallowance made deserves to be deleted.
3. The ld. CIT(A) has erred both in law and facts of the case in confirming the disallowance of a sum of Rs. 1,13,481/- for non-deduction of TDS on interest paid to financial institutions. The disallowances so made are illegal, against the provisions contained in the I.T. Act and deserves to be deleted.
4. The ld. CIT(A) has erred both in law and facts of the case in confirming the disallowance of sum of Rs. 2,88,190/- out of employees Contribution to PF deposited after due date under the PF Act but before filing of ITR for the year under consideration. The disallowances so made are illegal, against the provisions contained in the I.T. Act and deserves to be deleted.
5. (i) The ld. CIT(A) has erred both in law and facts of the case in confirming the partial disallowance of sum of Rs. 3,00,000/- out of total lump sum disallowance made by AO of Rs. 6,00,000/- against the following total expenses:-.
General & Misc. Expenses - Rs. 17,34,360/-
Motor Vehicle Running Maintenance charges- Rs. 13,86,562/- Telephone expenses - Rs. 2,66,838/-
Travelling expenses - Rs. 36,08,986/-
Business expenses - Rs.5,42,006/- and Depreciation - Rs. 11,42,042/-
Treating the component of personal and non-business use.
(ii) The disallowance so made are in arbitrary manner and without appreciating the fact that there cannot be a personal expense in the case of company.'' 3 ITA No.264/JP/2019 M/s. Agribiotech Industries Ltd. vs ITO, Ward-4(2), Jaipur 2.1 The Ground Nos. 1 and 2 of the assessee are general in nature and the assessee has not pressed these grounds as no argument was advanced on behalf of the assessee. Accordingly, the Ground No. 1 and 2 of the assessee are dismissed being not pressed.
3.1 The Ground No. 3 of the assessee is regarding disallowance u/s 40(a)(ia) in respect of interest paid to NBFC without deduction of TDS.
3.2 The AO has disallowed a sum of Rs. 1,13,481/- on account of interest paid to NBFC for non-deduction of TDS. The assessee challenged the action of the AO before the ld. CIT(A). However, the assessee could not succeed as the ld. CIT(A) has observed that though the payment was made to NBFC but the assessee has not furnished the Certificate in Form No. 26A to show that NBFC has declared this amount in its income.
3.3 Before us, the ld.AR of the assessee submitted that the interest of Rs. 1,13,481/- was paid to M/s. Kotak Mahindra Pvt. Ltd. which is a listed NBFC. Since the said company is a regular income tax assessee, therefore, the interest paid by the assessee is part of its income offered to tax in view of second proviso to Section 40(a)(ia) of the Act and no disallowance is called for. The ld.AR of the assessee further contended that the intention of the legislature is that tax must be paid on the income and if the party to whom the payment has been made, has included the 4 ITA No.264/JP/2019 M/s. Agribiotech Industries Ltd. vs ITO, Ward-4(2), Jaipur amounts in its income then the assessee who fails to deduct TDS will not be considered as assessee in default. In the case of the assessee, the payment was made to NBFC and it cannot be presumed that it would not have filed its return of income or would not have paid its tax. In support of his contentions, the ld.AR of the assessee relied on the decision of this Tribunal in the case of ACCME (Urvashi Pumps) Engg. (P) Ltd. vs JCIT (OSD), 90 Taxmann.com 189 (Jaipur Trib).
3.4 On the other hand, the ld. DR has submitted that though the payment was made to NBFC but the assessee has not filed the certificate in Form No. 26A to show that the recipient has declared this amount in its income and paid the tax. Therefore, non-compliance of furnishing of Certificate by the assessee made it illegible to take the benefit of Second Proviso to Section 40(a)(ia) of the Act. The ld. DR relied on the orders of the lower authorities.
3.5 We have heard the rival submissions and considered the relevant materials available on record. At the outset we note that the facts regarding the payment of interest to NBFC without deduction of TDS are not in dispute. The ld. CIT(A) has considered this issue in para 2.3. and 2.3.1 as under:-
5 ITA No.264/JP/2019M/s. Agribiotech Industries Ltd. vs ITO, Ward-4(2), Jaipur ''2.3 I have perused the facts of the case, the assessment order and the submissions of the appellant. It is seen that the Assessing Officer made disallowance of interest of Rs. 1,13,481/- on account of non-deduction of TDS by applying provisions of Section 40a(ia) of the I.T. Act, 1961.Ld. Authorised Representative argued that interest has been paid to M/s. Kotak Mahindra Pvt. Ltd which is a listed NBFC. It cannot be assumed that this company has not disclosed the interest income. Provisions of Section 40a(ia) have been amended with retrospective effect according to Authorised Representative..
2.3.1 Overall facts indicate that there is no dispute on the fact that tax was not deducted at source on payment of interest. The appellant has also not filed certificate in Form No. 26A that NBFC has declared this amount in their income. Therefore, I find that the disallowance was correctly made by the Assessing Officer. Hence, the same is confirmed. This ground of appeal is dismissed.
Thus the ld. CIT(A) has confirmed the disallowance made by the AO on the ground that the assessee has not filed the Certificate in Form No. 26A to show that NBFC has considered this interest payment as part of its income and paid the tax. Once the payment is made to the well-known registered NBFC then generally it is expected that NBFC has considered the interest receipt as part of its income and paid the tax. In order to verify this fact, the assessee is required to file the Certificate in Form No 26A. In the case in hand, though the assessee explained all the facts but due to non-filing of certificate in Form No. 26A, the disallowance is 6 ITA No.264/JP/2019 M/s. Agribiotech Industries Ltd. vs ITO, Ward-4(2), Jaipur sustained by the ld. CIT(A). This Tribunal in the case of ACCMe (Urvashi Pumps) Engg. Pvt. Ltd.vs . CIT (OSD), (supra) has considered the identical issue in para 7 as under:
''7. We have considered the rival submissions as well as relevant material on record. The assessee contended before the ld. CIT(A) that the interest paid to 3 NBFCs namely Reliance Capital Limited, Barclays Bank and Cholamandalam DBC Finance Limited was included in the return of income filed by these Non Banking Financial Companies therefore, in view of the second proviso to section 40(a)(ia) of the Act no disallowance is called for in respect of this amount on which the recipient have paid the taxes. The assessee urged that the second proviso to section 40(a)(ia) is remedial in nature and therefore, the said amendment will have retrospective effect. We find that Hon'ble Delhi High Court in case of Naresh Kumar (supra) while dealing with an identical issue has held in paras 15 to 29 as under:--
"15. Question whether the amendment is retrospective or prospective is vexed and rigid rule can be applied universally. Various rules of interpretation have developed in order to determine whether or not, an amendment is retrospective or prospective. Fiscal statutes imposing liabilities are governed by normal presumption that they are not retrospective. The cardinal rule is that the law to be applied, is that which is in force on the first day of the assessment year, unless otherwise mandated expressly or provided by necessary implication. The aforesaid dictum is based upon the principle that a new provision creating a liability or an obligation, affecting or taking away vested rights or attaching new disability is presumed to be prospective. However, it is accepted that Legislatures have plenary power to make retrospective amendments, subject to Constitutional restrictions.
16. Based upon the aforesaid broad dictum, Judges and jurists have drawn distinction between procedural and substantive provisions. Substantive provisions deal with rights and the same are fundamental, while procedural law is concerned with the legal process involving actions and remedies. Amendments to substantive law are treated as prospective, while amendments to procedural law are treated as retrospective. This distinction itself is not free from difficulties as right to appeal has been held to be a substantive law, but law of limitation is regarded as procedural. There is an interplay and interconnect between what can be regarded as substantive and procedural law [see CITv. Shrawan Kumar Swarup & Sons [1998] 232 ITR 123(All.)].
17. There are decisions, which hold that process of litigation or enforcement of law is procedural. Similarly, machinery provision for collection of tax, rather than tax itself is procedural. Read in this context, it can be strongly argued that 7 ITA No.264/JP/2019 M/s. Agribiotech Industries Ltd. vs ITO, Ward-4(2), Jaipur Section 40(a)(ia) at least to the extent of the amendment is procedural as by enacting Section 40(a)(ia) the Legislature did not want to impose a new tax but wanted to ensure collection of TDS and the amendments made streamline and remedy the anomalies noticed in the said procedure by allowing deduction in the year when the expenditure is incurred provided TDS is paid before the due date for filing of the return. Remedial statutes are normally not retrospective, on the ground that they may affect vested rights. But these statutes are construed liberally when justified and rule against retrospectivity may be applied with less resistance [See Bharat Singh v. Management of New Delhi Tuberculosis Centre [1986] 2 SCC 614 and Workmen Firestone Tyre & Rubber Co. of India (P.) Ltd. v. Management AIR 1973 SC 1227.
18. It is interesting to note that earlier English decisions have held that an enactment fixing a penalty or maximum penalty for offence is merely procedural for the purpose of determining retrospectivity [See DPP v. Lamb [1941] 2 KB 89) and R v. Oliver [1944] 29 Cr. App. 137. This view, however, has been criticized in Reherd Athlumney, In re [1898] 2 QB 547 on the ground that higher or greater punishment impairs existing rights or obligation;-- "No rule of construction is more firmly established than this; that a retrospective operation is not to be given to a statute so as to impair an existing right or obligation, otherwise than as regards matters of procedure, unless that effect cannot be avoided without doing violence to the language of the enactment. If the enactment is expressed in language which is fairly capable of either interpretation, it ought to be construed as prospective only."
19. The word "fairly" used in the aforesaid quotation is important and relevant, but for application of another rule of interpretation. G.P. Singh in "Principles of Statutory Interpretation", 13th Edition, 2012 at page 538 under the sub- heading "Recent statements of the rule against Retrospectivity" has greatly emphasized the principle of fairness and observed that classification of statute either substantive or procedural does not necessarily determine whether the enactment or amendment has retrospective operation, e.g., law of limitation is procedural but its application to past cause of action may result of reviving or extinguishing a right, and such operation cannot be said to be procedural. Similarly, when requisites of an action under the new statute, draws from a time incident to its passing, rule against retrospectivity may not be applicable.
20. In the said text, reference has been made to formulation by Dixon, C.J. in Maxwell v. Murphy [1957] 96 CLR 261 holding:--
"The general rule of the common law is that a statute changing the law ought not, unless the intention appears with reasonable certainty, to be understood as applying to facts or events that have already occurred in such a way as to confer or impose or otherwise affect the rights or liabilities which the law had defined be reference to the past events. But given the rights and liabilities fixed by reference to the past facts, matters or events, the law appointing or 8 ITA No.264/JP/2019 M/s. Agribiotech Industries Ltd. vs ITO, Ward-4(2), Jaipur regulating the manner in which they are to be enforced or their enjoyment is to be secured by judicial remedy is not within the application of such a presumption".
21. Identically, in Secretary of State for Social Security v. Tunnicliffe [1991] 2 All ER 712 (CA), Staughton, L.J. has expressed the said principle in the following words:--
"The true principle is that Parliament is presumed not to have intended to alter the law applicable to past events and transactions in a manner which is unfair to those concerned in them unless a contrary intention appears. It is not simply a question of classifying an enactment as retrospective or not retrospective. Rather it may well be a matter of degree- the greater the unfairness, the more it is to be expected that Parliament will make it clear if that is intended".
22. House of Lords in L' office Cherifien des Phosphates v. Yamashita Shinnihon Steamship Co. Ltd. [1994] 1 All ER 20 has said the question of fairness has to be answered by taking into account various factors, viz., value of the rights which the statute affects; extent to which that value is diminished or extinguished by the suggested retrospective effect of the statute; unfairness of adversely affecting the rights; clarity of the language used by Parliament and the circumstances in which the legislation was created. These factors have to be weighed together to provide an answer whether the consequences of reading the statute with suggested degree of retrospectivity is unfair; that the words used by the Parliament could not have been intended to mean what they might appear to say. This principle was applied while interpreting a new provision in Arbitration Act in this case observing that the delay attributable to the claimant in pursuing a claim before enactment of the new provision, could be taken into consideration for dismissal.
23. Principle of "fairness" has not left us untouched and was applied by the Supreme Court in Vijay v. State of Maharashtra [2006] 6 SCC 289 in the following words:--
"...The negotiation is not a rigid rule and varies with the intention and purport of the legislation, but to apply it in such a case is a doctrine of fairness. When a new law is enacted for the benefit of the community as a whole, even in absence of a provision the statute may be held to be retrospective in nature."
24. In Allied Motors (P.) Ltd. v. CIT [1997] (224) ITR 677/91 Taxman 205 (SC) it was held that the new proviso to Section 43B should be given retrospective effect from the inception on the ground that the proviso was added to remedy unintended consequences and supply an obvious omission. The proviso ensured reasonable interpretation and retrospective effect would serve the object behind the enactment.
25. In State through C.B.I Delhi v. Gian Singh AIR 1999 SC 3450 extreme penalty of death was diluted to alternative option of imprisonment for life 9 ITA No.264/JP/2019 M/s. Agribiotech Industries Ltd. vs ITO, Ward-4(2), Jaipur recording that the legislative benevolence could be extended to an accused, who awaits judicial verdicts against his sentence. Earlier in Rattan Lal v. State of Punjab AIR 1965 SC 444 reference was made to Section 6 of the Probation of Offenders Act, 1958 and it was observed that if the Act was not given retrospective operation, it would lead to anomalies and thus could not be the intention of the Legislature.
26. Principle of matching which is disturbed by Section 40(a)(ia) of the Act, may not materially be of consequence to the Revenue when the tax rates are stable and uniform or in cases of big assessees having substantial turnover and equally huge expenses as they have necessary cushion to absorb the effect. However, marginal and medium taxpayers, who work at low G.P. rate and when expenditure which becomes subject-matter of an order under Section 40(a)(ia) is substantial, can suffer severe adverse consequences as is apparent from the case of Naresh Kumar. Transferring or shifting expenses to a subsequent year, in such cases, will not wipe off the adverse effect and the financial stress. Nevertheless the Section 40(a)(ia) has to be given full play keeping in mind the object and purpose behind the section. At the same time, the provision can be and should be interpreted liberally and equitable so that an assessee should not suffer unintended and deleterious consequences beyond what the object and purpose of the provision mandates. Case of Naresh Kumar is not one of rare cases, but one of several cases as we find that Section 40(a)(ia) is invoked in large number of cases.
27. One important consideration in construing a machinery section is that it must be so construed so as to effectuate the liability imposed by the charging section and to make the machinery workable.
However, when the machinery section results in unintended or harsh consequences which were not intended, the remedial or correction action taken is not to be disregarded but given due regard.
28. It is, in this context, that we had in Rajinder Kumar's case (supra) observed as under:
'22. Now, we refer to the amendments which have been made by the Finance Act, 2010 and the effect thereof. We have already quoted the decision of the Calcutta High Court in Virgin Creations (supra). The said decision refers to the earlier decision of the Supreme Court in the case of Allied Motors (P.) Ltd(supra) and Commissioner of Income Tax v. Alom Extrusions Ltd, [2009] 319 ITR 306 (SC). In the case of Allied Motors (P.) Ltd. (supra), the Supreme Court was examining the first proviso to Section 43B and whether it was retrospective. Section 43B was inserted in the Act with effect from 1st April 1984 for curbing claims of taxpayers who did not discharge or pay statutory liabilities but claimed deductions on the ground that the statutory liability had accrued. Section 43B states that the statutory liability would be allowed as a deduction or as an expense in the year in which the payment was made and 10 ITA No.264/JP/2019 M/s. Agribiotech Industries Ltd. vs ITO, Ward-4(2), Jaipur would not be allowed, even in cases of mercantile system of accountancy, in the year of accrual. It was noticed that in some cases hardship would be caused to assessees, who paid the statutory dues within the prescribed period though the payments so made would not fall within the relevant previous year.
Accordingly, a proviso was added by Finance Act, 1987 applicable with effect from 1st April, 1988. The proviso stipulated that when statutory dues covered by Section 43B were paid on or before the due date for furnishing of the return under Section 139(1), the deduction/expense, equal to the amount paid would be allowed. The Supreme Court noticed the purpose behind the proviso and the remedial nature of the insertion made. Of course, the Supreme Court also referred to Explanation 2 which was inserted by Finance Act, 1989 which was made retrospective and was to take effect from 1st April, 1984. Highlighting the object behind Section 43B, it was observed that the proviso makes the provision workable, gives it a reasonable interpretation. It was elucidated:
"12. In the case of Goodyear India Ltd. v. State of Haryana this Court said that the rule of reasonable construction must be applied while construing a statute. Literal construction should be avoided if it defeats the manifest object and purpose of the Act.
13. Therefore, in the well-known words of Judge Learned Hand, one cannot make a fortress out of the dictionary; and should remember that statutes have some purpose and object to accomplish whose sympathetic and imaginative discovery is the surest guide to their meaning. In the case of R.B. Judha Mal Kuthiala v. CIT, this Court said that one should apply the rule of reasonable interpretation. A proviso which is inserted to remedy unintended consequences and to make the provision workable, a proviso which supplies an obvious omission in the section and is required to be read into the section to give the section a reasonable interpretation, requires to be treated as retrospective in operation so that a reasonable interpretation can be given to the section as a whole.
14. This view has been accepted by a number of High Courts. In the case of CIT v. Chandulal Venichand, the Gujarat High Court has held that the first proviso to Section 43-B is retrospective and sales tax for the last quarter paid before the filing of the return for the assessment year is deductible. This decision deals with Assessment Year 1985-85. The Calcutta High Court in the case of CIT v. Sri Jagannath Steel Corpn. has taken a similar view holding that the statutory liability for sales tax actually discharged after the expiry of the accounting year in compliance with the relevant statute is entitled to deduction under Section 43-B. The High Court has held the amendment to be clarificatory and, therefore, retrospective. The Gujarat High court in the above case held the amendment to be curative and explanatory and hence retrospective. The Patna High court has also held the amendment inserting the first proviso to be explanatory in the case of Jamshedpur Motor Accessories Stores v. Union of India. The special leave petition from this decision of the 11 ITA No.264/JP/2019 M/s. Agribiotech Industries Ltd. vs ITO, Ward-4(2), Jaipur Patna High Court was dismissed. The view of the Delhi High Court, therefore, that the first proviso to Section 43-B will be available only prospectively does not appear to be correct. As observed by G.P. Singh in his Principles of Statutory Interpretation, 4th Edn. At p. 291: "It is well-settled that if a statute is curative or merely declaratory of the previous law retrospective operation is generally intended." In fact the amendment would not serve its object in such a situation unless it is construed as retrospective. The view, therefore, taken by the Delhi High Court cannot be sustained."
23. Section 43B deals with statutory dues and stipulates that the year in which the payment is made the same would be allowed as a deduction even if the assessee is following the mercantile system of accountancy. The proviso, however, stipulates that deduction would be allowed where the statutory dues covered by Section 43B stand paid on or before the due date of filing of return of income. Section 40(a)(ia) is applicable to cases where an assessee is required to deduct tax at source and fails to deduct or does not make payment of the TDS before the due date, in such cases, notwithstanding Sections 30 to 38 of the Act, deduction is to be allowed as an expenditure in the year of payment unless a case is covered under the exceptions carved out. The amended proviso as inserted by Finance Act, 2010 states where an assessee has made payment of the TDS on or before the due date of filing of the return under Section 139(1), the sum shall be allowed as an expense in computing the income of the previous year. The two provisions are akin and the provisos to Sections 40(a)(ia) and 43B are to the same effect and for the same purpose.
24. In Podar Cement (P.) Ltd. (supra), the Supreme Court considered whether term "owner" would include unregistered owners who had paid sale consideration and were covered by Section 53A of the Transfer of Property Act. The contention of the assessees was that the amendments made to the definition of term "owner" by Finance Bill, 1987 should be given retrospective effect. It was held that the amendments were retrospective in nature as they rationalise and clear the existing ambiguities and doubts. Reference was made to Crawford: "Statutory Construction" and "the principle of Declaratory Statutes", Francis Bennion: "Statutory Interpretation", Justice G.P. Singh's "Principles of Statutory Interpretation", it was observed that sometimes amendments are made to supply an obvious omission or to clear up doubts as to the meaning of the previous provision. The issue was accordingly decided holding that in such cases the amendments were retrospective though it was noticed that as per Transfer of Property Act, Registration Act, etc. a legal owner must have a registered document.
25. In view of the aforesaid discussion in paras 18,19 and 20, it is apparent that the respondent assessee did not violate the unamended section 40(a)(ia) of the act. We have noted the ambiguity and referred their contention of Revenue and rejected the interpretation placed by them. The amended provisions are clear and free from any ambiguity and doubt. They will help curtail litigation. The 12 ITA No.264/JP/2019 M/s. Agribiotech Industries Ltd. vs ITO, Ward-4(2), Jaipur amended provision clearly support view taken in paragraphs 17 - 20 that the expression "said due date" used in clause A of proviso to unamended section refers to time specified in Section 139(1) of the Act. The amended section 40(a)(ia) expands and further liberalises the statute when it stipulates that deductions made in the first eleven months of the previous year but paid before the due date of filing of the return, will constitute sufficient compliance.'
29. In view of the aforesaid discussion, we do not find any merit in the present appeals filed by the Revenue and they are dismissed." We further note that the Coordinate Bench of this Tribunal in case of Rajesh Yadav in ITA No. 895/JP/2012 vide order dated 29.01.2016 has held as under:-
"6.1. Recently in the matter of P.M.S. Diesels 2015 ] 59 taxmann.com 100 (Punjab & Haryana), Hon'ble Punjab & Haryana High Court had elaborately discussed the judgment passed by the Hon'ble Calcutta High Court and Hon'ble Gujarat High Court, Hon'ble Allahabad High Court and other judgments as available and thereafter has come to the conclusion that the provisions of section 40(a)(ia) are mandatory in nature and non compliance/non deduction of tax attracts disallowance of the entire amount. Having said so, we will be failing in our duty if we do not discuss the amendment brought in by the Finance (No. 2) Act 2014 with effect from 1.4.2015 by virtue of which proviso to section 40(a)(ia) has been inserted, which provides that if any such sum taxed has been deducted in any subsequent year or has been deducted during the previous year but paid after the due date specified in sub-section (1) of section 139, such sum shall be allowed as a deduction in computing the income of previous year, and further, section 40(a)(ia) has been substituted wherein the 30% of any sum payable to a resident has been substituted. In the present case, the authorities below has added the entire sum of Rs. 7,51,322/- by disallowing the whole of the amount. Though the substitution in section 40 has been made effective with effective from 1.4.2015, in our view the benefit of the amendment should be given to the assessee either by directing the AO to confirm from the contractors, namely, M/s. Garvit Stonex, M/s. Chanda Marbles and M/s. Nidhi Granites as to whether the said parties have deposited the tax or not and further or restrict the addition to 30% of Rs. 11 ITA No. 895/JP/2012 A.Y 2007-08. Shri Rajendra Yadav vs. ITO Ajmer. 7,51,322/-. In our view, it will be tied of justice if the disallowance is only restricted to 30% of Rs. 7,51,322/-. Accordingly, the appeal of the assessee is partly allowed in the above said manner."
Further this Tribunal has taken a similar view on this issue by following the above decisions and therefore even if there is divergent view taken by the Hon'ble Kerala High Court the view taken in favour of the assessee by this Tribunal by following the various decisions are to be followed to maintain the rule of consistency. Accordingly, We are of the view the second proviso to 13 ITA No.264/JP/2019 M/s. Agribiotech Industries Ltd. vs ITO, Ward-4(2), Jaipur section 40(a)(ia) of the Act would be effective retrospective as it was undisputedly inserted to removable the hardship faced by the assesses. Hence, we set aside this issue to the record of the Assessing Officer for limited purpose to verify the fact that the interest income received by these NBFCs have been included in the return of income and offered to tax and then decide this issue in light of above observation.'' Accordingly, the matter is set aside to the record of the AO for limited purpose to verify the fact that interest payment received by NBFC has been included in the return of income and offered to tax. The AO is directed to verify this fact from the assessment record of NBFC. The assessee is also directed to furnish relevant details regarding PAN etc. of NBFC. After verification of this fact, the AO has to decide this issue as per law. Thus the Ground No. 3 of the assessee is allowed for Statistical purposes.
4.1 The Ground No. 4 of the assessee is regarding disallowance of employees to PF & ESI.
4.2 We have heard the rival submissions and considered the relevant materials available on record. The AO disallowed the PF contribution of Rs. 2,88,190/- on account of late payment. However, the said payment was made by the assessee before due date of filing of return of income u/s 139(1) of the Act. The ld. CIT(A) accepted the fact of payment of employees contribution to PF within the due date of filing of return of 14 ITA No.264/JP/2019 M/s. Agribiotech Industries Ltd. vs ITO, Ward-4(2), Jaipur income. However, the same was confirmed due to the decision of Hon'ble Jurisdictional High Court in the case of M/s. Rajasthan Renewable Energy Corporation Ltd., Jaipur wherein on account of typographical mistake it was considered as in favour of Revenue. At the outset, we note that this issue has been considered by this Tribunal in series of decisions and held that the same is covered by various decisions of Hon'ble Jurisdictional High Court. In the case of Zuberi Engineering Co. vs DCIT, Circle - 2, Jaipur [2019] 103 taxmann.co, 196 (Jaipur Trib), this Tribunal has considered and decided this issue in para 18 as under:-
''18. We have heard the ld AR of the assessee as well as the ld. CIT-DR and considered the relevant material on record. This issue is covered by the decision of the Hon'ble Jurisdictional High Court in the case of CIT v. Jaipur Vidyut Vitran Nigam Ltd. [2014] 49 taxmann.com 540/[2015] 228 Taxman 214 (Mag.)/[2014] 363 ITR 307 (Raj) as under:
"6. We have considered the arguments advanced by the learned counsel for the Revenue and have also gone through the impugned orders. In our view no substantial question of law arises out of the orders of the Tribunal as it is an admitted fact that the entire amount was deposited by the respondent-assessee at least on or before the due date of filing of the returns under s. 139 of the IT Act and being a concurrent finding of fact by the respective authorities and in the light of the judgments rendered by this Court in the case of CIT v. State Bank of Bikaner & Jaipur/ Jaipur Vidyut Vitran Nigam Ltd. [2014] 363 ITR 70/43 taxmann.com 411 of even date wherein it has been held that if the amount has been deposited on or before the due date of filing the return under s. 139 and admittedly it was deposited on or before the due date then the amount cannot be disallowed under s. 43B of the IT Act or under s. 36(1)(va) of the Act. In fact in the above matters one of the parties is same as in the present appeals, therefore, the issue is no more res Integra in the light of judgments of this Court referred to supra and, in our view, no substantial question of law arises out of the impugned orders of the Tribunal, which may require attention of this Court."15 ITA No.264/JP/2019
M/s. Agribiotech Industries Ltd. vs ITO, Ward-4(2), Jaipur Similarly in the case of CIT v. State Banking Bikaner & Jaipur [2014] 43 taxmann.com 411/225 Taxman 6(Mag.)/363 ITR 70 (Raj), the Hon'ble Jurisdictional High Court has held as under:
"21. A conjoint reading of the proviso to Section 43-B which was inserted by the Finance Act, 1987 made effective from 01/04/1988, the words numbered as clause (a), (c), (d), (e) and (f), are omitted from the above proviso and, furthermore second proviso was removed by Finance Act, 2003 therefore, the deduction towards the employer's contribution, if paid, prior to due date of filing of return can be claimed by the assessee. In our view, the explanation appended to Section 36(1)(va) of the Act further envisage that the amount actually paid by the assessee on or before the due date admissible at the time of submitting return of the income under Section 139 of the Act in respect of the previous year can be claimed by the assessee for deduction out of their gross total income. It is also clear that Sec.43B starts with a notwithstanding clause & would thus override Sec.36(1) (va) and if read in isolation Sec. 43B would become obsolete. Accordingly, contention of counsel for the revenue is not tenable for the reason aforesaid that deductions out of the gross income for payment of tax at the time of submission of return under Section 139 is permissible only if the statutory liability of payment of PF or other contribution referred to in Clause (b) are paid within the due date under the respective enactments by the assessees and not under the due date of filing of return.
22. We have already observed that till this provision was brought in as the due amounts on one pretext or the other were not being deposited by the assessees though substantial benefits had been obtained by them in the shape of the amount having been claimed as a deduction but the said amounts were not deposited. It is pertinent to note that the respective Act such as PF etc. also provides that the amounts can be paid later on subject to payment of interest and other consequences and to get benefit under the Income Tax Act, an assessee ought to have actually deposited the entire amount as also to adduce evidence regarding such deposit on or before the return of income under sub-section (1) of Section 139 of the IT Act.
23. Thus, we are of the view that where the PF and/or EPF, CPF, GPF etc., if paid after the due date under respective Act but before filing of the return of income under Section 139(1), cannot be disallowed under Section 43B or under Section 36(1)(va) of the IT Act."
Accordingly in view of the binding precedent of the Hon'ble Jurisdictional High Court, the disallowance made by the Assessing Officer and confirmed by the ld. CIT(A) is deleted.'' 16 ITA No.264/JP/2019 M/s. Agribiotech Industries Ltd. vs ITO, Ward-4(2), Jaipur We further note that the decision as relied upon by the ld. CIT(A) is also in favour of the assessee as Hon'ble High Court has relied on earlier decision in the case of CIT vs SBBJ (supra) which is undisputedly in favour of the assessee. However, only in the concluding part, it appears to be a mistake to say that the issue is decided in favour of Revenue.
Therefore, without considering the overall findings and observations of the Hon'ble High Court, the ld. CIT(A) has given much emphasis on the last sentence which appears to be a typographical mistake. Accordingly, the addition made by the AO is deleted. Thus the Ground No. 4 of the assessee is allowed.
5.1 The Ground No. 5 of the assessee's is regarding adhhoc disallowances.
5.2 The AO made disallowances on account of various expenses being General & Misc. Expenses, Motor Vehicle Running Maintenance charges, Telephone Expenses, Travelling Expenses, Business Promotion Expenses and Depreciation on vehicle. The assessee challenged the action before the AO and consequently the disallowances was restricted to Rs.
3.00 lacs by the ld. CIT(A).
5.3 Before us, the ld.AR of the assessee submitted that the AO has merely stated that element of personal nature cannot be denied in the 17 ITA No.264/JP/2019 M/s. Agribiotech Industries Ltd. vs ITO, Ward-4(2), Jaipur above stated expenses and accordingly, the AO made the adhoc disallowance of Rs. 6.00 lacs. The ld.AR of the assessee further submitted that in the case of a company the disallowance cannot be made on the ground of personal element regarding various expenses including the motor vehicles, telephones etc. The ld.AR of the further contended that keeping in view the turnover of the assessee at Rs. 91,29,70,523/-, the expenditure claimed by the assessee is reasonable, proper and is not excessive. Even the AO has also not given the findings that the assessee has inflated the expenses. The ld. CIT(A) has though restricted the disallowance to the extent of Rs. 3.00 lacs yet it is again made on adhoc basis. In support of his contentions, the ld.AR of the assessee relied on the decision of ITAT Jaipur Bench in the case of Arpit Marbles (P) Ltd vs ACIT, 78 taxmann.com 52.
5.4 On the other hand, the ld. DR has submitted that the AO has clearly pointed out various defects and deficiencies in maintaining the records by the assessee in respect of vehicle running maintenance charges as well as telephone charges. Since the assessee has not supported the claim of expenses by verifiable documentary evidences, therefore, the AO has made very reasonable disallowances of Rs. 6.00 lacs out of total claim of about Rs. 50 lacs. The ld. CIT(A) has restricted the addition to Rs. 3.00 18 ITA No.264/JP/2019 M/s. Agribiotech Industries Ltd. vs ITO, Ward-4(2), Jaipur lacs which is now very small in comparison to the total claim of the assessee. The ld. DR relied on the orders of lower authorities.
5.5 We have heard the rival submissions as well as considered the relevant materials available on record. The AO has made adhoc disallowance of Rs. 6.00 lacs as per para 5 as under:-
''5. During the course of assessment proceeding, on scrutiny of final accounts, it is noticed that assessee has debited Rs. 17,34,360/- against General & Misc.
Expenses, Rs. 13,86,562/-, against Motor Vehicle Running & Maintenance Charges, Rs. 2,66,838/- against Telephone Expenses, Rs. 36,08,986/- against Travelling Expenses, Rs. 5,42,006/- against Business Promotion Expenses and Rs. 11,42,042/- against depreciation on Vehicles. During the course of examination of books of accounts and vouchers, it is noticed that neither the log book has been maintained in respect of use of vehicle nor any call register has been maintained in respect of telephone calls. The assessee has stated that all the above stated expenses have been incurred wholly and exclusively for the business of the assessee. Personal use of the car and other vehicles facility cannot be denied and ruled out by the assessee. To cover up the component of personal and non-personal use, a lumpsum disallowance of Rs. 6,00,000/- is made out of all the above stated expenses sand added back to the total income.'' It is clear that the AO has made adhoc disallowance on the ground that neither the log book has been maintained by the assessee in respect of use of vehicles nor any call register has been maintained in respect of telephone calls. The AO finally concluded that to cover up the 19 ITA No.264/JP/2019 M/s. Agribiotech Industries Ltd. vs ITO, Ward-4(2), Jaipur components of personal and non-business use, a lumpsum disallowance of Rs. 6.00 lacs is made. The sole reason of disallowance is personal element and usage of car and telephones whereas AO has given details of so many other expenses which included business promotion expenses also wherein there cannot be any element of personal usage. The ld. CIT(A) while passing the impugned order restricted the disallowance to Rs. 3.00 lacs which is also on adhoc basis. Therefore, we find that such an adhoc disallowance on the ground of element of personal use in the case of the company is not permitted and justified. This Tribunal in the case of Arpit Marbles (P) Ltd. vs ACIT (supra) has considered this issue in para 2.2 as under:-
''2.2 We have heard the rival contentions and pursued the material on record. The AO has disallowed 10% of telephone, vehicle repair &maintenance and depreciation on car holding that these facilities are such that they can be used for other than business purposes. Further, 10% of staff welfare and travelling expenses have been disallowed holding that the expenses are not fully verifiable. In our view, these disallowances cannot be sustained in eye of law on ground of adhoc nature and secondly, the concept of personal use is alien to a corporate entity. In a corporate structure, the facilities are provided to employees as per terms of his/her employment and such facilities suffer the necessary perquisite taxation in hands of the employees. There is nothing on record which proves that the facilities have been used for personal purposes and secondly, they have escaped the perquisite taxation. Regarding disallowance of bonus, no basis has been given by AO to disallow the same. Hence, these disallowances are hereby deleted. Hence, these grounds are allowed.'' 20 ITA No.264/JP/2019 M/s. Agribiotech Industries Ltd. vs ITO, Ward-4(2), Jaipur Accordingly, in view of the above facts and circumstances of the case as well as the decision of this Tribunal in the case of Arpit Marbles vs ACIT (supra), the adhoc disallowance sustained by the ld. CIT(A) is deleted.
Thus Ground No. 5 of the assessee is allowed.
6.0 In the result, the appeal of the assessee is partly allowed for Statistical purposes .
Order pronounced in the open court on 13 /01/2020.
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(Vikram Singh Yadav) (Vijay Pal Rao)
ys[kk lnL;@ Accountant Member U;kf;d lnL;@Judicial Member
Tk;iqj@Jaipur
fnukad@Dated:- 13 /01/ 2020
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vkns'k dh izfrfyfi vxzfs 'kr@Copy of the order forwarded to:
1. vihykFkhZ@The Appellant- M/s. Agribiotech Industries Ltd., Jaipur
2. izR;FkhZ@ The Respondent- The ITO, Ward- 4(2), Jaipur
3. vk;dj vk;qDr¼vihy ) @ CIT(A),
4. vk;dj vk;qDr@ CIT,
5. foHkkxh; izfrfuf/k] vk;dj vihyh; vf/kdj.k] t;iqj@DR, ITAT, Jaipur
6. xkMZ QkbZy@ Guard File (ITA No.264/JP/2019) vkns'kkuqlkj@ By order, lgk;d iathdkj@ Assistant. Registrar