Income Tax Appellate Tribunal - Chandigarh
Nahar Industrial Enterprises Ltd, ... vs Assessee on 30 May, 2012
IN THE INCOME TAX APPELLATE TRIBUNAL
CHANDIGARH BENCH 'B', CHANDIGARH
BEFORE Ms. SUSHMA CHOWLA, JUDICIAL MEMBER
AND SHRI MEHAR SINGH, ACCOUNTANT MEMBER
ITA No. 692/Chd/2011
Assessment Year : 2007-08
D.C.I.T. Circle VII V. Nahar Industrial Enterprises
Ludhiana Ltd., Focal Point
Ludhiana
AACCN 3563 A
Cross-objections No. 59/Chd/2011
Arising out of ITA No. 692/Chd/2011
Assessment Year : 2007-08
Nahar Industrial Enterprises V. D.C.I.T. Circle VII
Ltd., Focal Point Ludhiana
Ludhiana
(Appellant) (Respondent)
Department by : Smt. Jaishree Sharma
Respondent by : Shri Navdeep Sharma
Date of hearing : 30.05.2012
Date of Pronouncement : 31.05 .2012
O R D E R
PER SUSHMA CHOWLA, J.M,
The appeal filed by the revenue is against the order of the Commissioner of Income Tax (Appeals)-II, Ludhiana dated 6.4.2011 r e l a t i n g t o a s s e s s m e n t ye a r 2 0 0 7 - 0 8 . T h e a s s e s s e e h a s f i l e d c r o s s - objections against the appeal filed by the Revenue.
2. Appeal filed by the Revenue and the cross-objections filed by the assessee were heard together and are being disposed off by this consolidated order for the sake of convenience.
3. The Revenue has raised the following grounds of appeal:
"1 On the facts and circumstances of the case, the ld. CIT(A)-II, Ludhiana has erred in law in allowing relief of Rs. 20,733/- on account of PF & ESI though deposited beyond due date of respective act but before filing the Income Tax return.2
2. On the facts and circumstances of the case, the ld. CIT(A)-II, Ludhiana has erred in deleting the addition of Rs. 76,101/- on account of article distributed among business associates on various occasions for want of detail of persons to whom the gifts were distributed.
3. On the facts and circumstances of the case, the ld. CIT(A)-II, Ludhiana has erred in deleting the addition of Rs. 16,129/- on account of Club expenses of the directors and employees of the company.
4. On the facts and circumstances of the case, the ld. CIT(A)-II, Ludhiana has erred in deleting the addition made by the Assessing Officer on account of disallowance of expenses pertaining to earning of dividend income as per provisions of section 14A read with rule 8D.
5. That the order of ld. CIT(A), Ludhiana be set aside and that of the Assessing Officer be restored."
4. The issue in ground No. 1 raised by the revenue is against the order of the CIT(A) in allowing relief of Rs. 20,733/- on account of PF & ESI.
5. The brief facts relating to the issue are that the assessee had n o t d e p o s i t e d e m p l o ye e s s h a r e o f P F a n d E S I w i t h i n t h e s t i p u l a t e d period prescribed under the respective statute, but had deposited the same before due date of filing the return of income. The Assessing Officer had made an addition of Rs. 20,733/- on this account. The CIT(A) has allowed the claim of the assessee.
6. Smt. J aishree Sharma appeared for the Revenue and Shri Navdeep Sharma appeared for the assessee and put forwarded their contentions.
7. We have heard the rival contentions and perused the record. The issue raised vide ground No. 1 of Revenue's appeal is covered b y t h e r a t i o l a i d d o w n b y H o n ' b l e P u n j a b & H a r ya n a H i g h C o u r t i n CIT V. Nuchem Lt d. ITA No. 323/2009 - date of decision 2.2.2010. I n l i n e w i t h t h e r a t i o l a i d d o w n b y t h e H o n ' b l e P u n j a b & H a r ya n a High Court in CIT V. Nuchem Ltd (supra), we hold that the assessee 3 is entitled to claim of deduction of PF and ESI in respect of e m p l o ye e s c o n t r i b u t i o n p a i d b e f o r e d u e d a t e o f f i l i n g t h e r e t u r n o f income, though not paid within the stipulated period prescribed under the respective statute. Upholding the order of ld. CIT(A), we dismiss ground No. 1 of Revenue's appeal.
8. Ground Nos. 2 and 3 raised by the Revenue are against the deletion of addition of Rs. 76,101/- under the head "Diwali expenses and Rs. 16,191/- on account of Club expenses. The ld. AR for the a s s e s s e e h a s f u r n i s h e d t a b u l a t e d ye a r w i s e d e t a i l s o f t h e e x p e n s e s incurred under the respective heads of expenditure and claimed that s i m i l a r e x p e n s e s w e r e b e i n g i n c u r r e d f r o m ye a r t o y e a r a n d w a s allowed in the hands of the assessee b y the CIT(A), against which Revenue has not filed any second appeal before the Tribunal. It is also pointed out by the ld. AR for the assessee that the Tribunal in ITA No. 111/Chd/2007 in assessee's own case relating to Assessment Year 2003-04 vide order dated 6th August, 2007 has allowed similar expenses incurred on Diwali. The Tribunal in ITA No. 284/Chd/2006 in assessee's own case relating to Assessment Year 2001-02 vide order dated 14.2.2007 had allowed the claim of the Club expenses. The ld. DR for the revenue for the revenue placed reliance on the order of the CIT(A).
9. On the perusal of the record, we find that the assessee had claimed similar expenditure of distributing the articles amongst its business associates on Diwali. The expenditure of Rs. 76,101 was disallowed by the Assessing Officer for want of detail to whom the said gifts were distributed.
10. The CIT(A) had allowed the claim of the assessee in view of t h e s i m i l a r c l a i m b e i n g a l l o w e d i n t h e e a r l i e r ye a r s . 4
11. We find that the assessee is incurring similar expenses from year to year which has been allowed in the hands of the assessee by the CIT(A). The Tribunal in ITA No. 111/Chd/2007 (supra) had also upheld the order of the CIT(A) in deleting the aforesaid disallowance made out of Diwali expenses. In AYs 2004-05 to 2006-07 though similar deletion was made b y the CIT(A), the Revenue has not filed an y second appeal against the order of CIT(A) before the Tribunal. The expenses incurred by the assessee by way of distribution pf gift articles on the occasion of Diwali are in the nature of business expenses and the same is to be allowed in e n t i r e t y. Similarly the club expenses incurred by the assessee for t h e f a c i l i t i e s a v a i l e d b y t h e e m p l o ye e s o f t h e a s s e s s e e - c o m p a n y a r e allowable as business expenditure and allowable as deduction. Upholding the order of CIT(A) we dismiss the ground Nos. 2 and 3 raised by the Revenue.
12. Ground No. 4 raised by the Revenue is in relation to application of provisions of section 14A r.w Rule 8D of I.T. Rules. The assessee vide its cross-objections No. 1 has also raised the issue against the addition of Rs. 1.00 lakh u/s 14A of I.T. Act.
13. Brief facts relating to the issue are that the Assessing Officer in view of the tax free income earned by the assessee through dividend received on its investment was of the view that the provisions of section 14A r.w. Rule 8D of I.T. Rules were applicable and consequently disallowance of Rs. 13.49 lakhs was made by the Assessing Officer.
14. The CIT(A) relied upon the ratio laid down b y the Hon'ble B o m b a y H i g h C o u r t i n G o d r e j & B o yc e M a n u f a c t u r i n g C o . L t d . reported in 234 CTR 1 held that the provisions of rule 8D were 5 applicable only w.e.f. 2008-09. However, the CIT(A) disallowed Rs. 1.00 lakh out of administrative expenses to earn dividend income of Rs. 95,36,681/-. The Revenue is in appeal against the relief allowed by the CIT(A) and the assessee has filed cross- objections No. 1 against the addition of Rs. 1.00 lakh u/s 14A of the Act.
15. On perusal of the record, we find that disallowance made by t h e A s s e s s i n g O f f i c e r w a s b y a p p l yi n g t h e p r o v i s i o n s o f r u l e 8 D o f I.T. Rules in order to compute the expenditure relatable to earning o f e x e m p t i n c o m e . T h e a s s e s s e e d u r i n g t h e ye a r u n d e r c o n s i d e r a t i o n had earned dividend income of Rs. 95,30,681/- which was claimed as exempt. T h e H o n ' b l e B o m b a y H i g h C o u r t i n G o d r e j & B o yc e Manufacturing Co. Ltd (supra) has categoricall y held that the provisions of rule 8D are applicable w.e.f. Assessment Year 2008-
09. The captioned Assessment Year in appeal before us is Assessment Year 2007-08 and consequently the provisions of rule 8D are not applicable. We are in agreement with the order of the CIT(A) in this regard. We uphold the order of CIT(A) in disallowing the expenditure of Rs. 1.00 lakh out of administrative expenses being relatable to earning of dividend income. Thus the ground No. 4 raised by the Revenue and Ground No. 1 raised in the cross-objections by the assessee, are dismissed.
16. Ground No. 2 of the cross-objections is against the disallowance of Rs. 1.20 lakhs incurred on account of purchase of tickets of Cricket Match. The plea of the assessee is that the said tickets were purchased for its dealers/business associates. The ld. AR for the assessee during the course of hearing was asked to furnish the list of dealers/business associates to whom the said tickets were given. The assessee failed to furnish any such detail. 6 We are in agreement with the orders of authorities below that the aforesaid expenses are personal in nature and consequently the said addition of Rs. 1.20 lakhs is upheld. Ground No. 2 raised by the assessee in cross-objections is thus, dismissed.
17. In the result, appeal of the Revenue and the Cross-objections of the assessee are dismissed.
O r d e r P r o n o u n c e d i n t h e O p e n C o u r t o n t h i s d a y 3 1 s t o f M a y, 2012.
Sd/- Sd/-
(MEHAR SINGH) (SUSHMA CHOWLA)
ACCOUNTANT MEMBER JUDICIAL MEMBER
Dated : 31st May, 2012
SURESH
Copy to: The Appellant/The Respondent/The CIT/The CIT(A)/The DR 7