M/S. WORKS STATION SYSTEMS (P) LTD.,BHOPAL vs. ACIT (CENTRAL) GWALIOR, STATION BHOPAL, BHOPAL

आदेश / O R D E R

“1. That on the facts and in the circumstances of the case, the decision is contrary to law materially incurred and unsustainable in law, hence the same may kindly be quashed. 2. That on the facts and in the circumstances of the case 1

ITANo.933/2019 Work Station Systems P. Ltd. and in law, the Ld. CIT(A) erred and was not justified in disallowing interest on Entry Tax amounting to Rs.2220/- u/s 37(1) of the Income Tax Act 1961 and therefore, the same be allowed and addition made be deleted.

4. That on the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred and was not justified in disallowing charges for delay in supply amounting to Rs.50256/- u/s 37(1) of the Income Tax Act,1961 and therefore the same be allowed and addition made be deleted.

5. That the appellant craves leave to add, amend, alter substitute, modify or withdraw any of the above ground(s) at the time of hearing of the appeal.”

The case of the assessee was centralized and a consolidated assessment order u/s 153A r.w.s. 143(3) of the Act for A.Ys. 2011-12 to 2017-18 was passed vide order dated 28.12.2018, thereby for the assessment year under appeal an addition of Rs.52,873/- was made by the ITANo.933/2019 Work Station Systems P. Ltd.

Assessing Officer on account of interest on TDS, interest on entry Tax and payment of penalty on delay in supply of printing material.

3. Aggrieved against this the assessee preferred an appeal before Ld. CIT(A), who also sustained the addition.

2. That during the course of Assessment the Ld Assessing officer vide order made ad hoc disallowance u/s 37 (1) of the Act on expenditure claimed on account of Interest on delayed payment of entry tax of Rs 2,220 and secondly on account of Charges on delayed supply of books to M.P. Text Book Corporation Ltd of Rs 50,256/-. That being aggrieved by the order of Ld AO assessee filed Appeal before the Ld CIT(A)

ITANo.933/2019 Work Station Systems P. Ltd. wherein Ld CIT (A) without considering the submission of Assessee uphold the disallowance u/s 37 of the Act.

4. As submitted in the present case of Ld subordinate authorities has made disallowance u/s 37 of the Act :-

Nature of disallowance Amount Interest on delayed 2,220 payment of entry tax Charges on delayed supply 50,256 of books to M.P. Text Book Corporation Ltd

5.1 It is submitted that in view of the judgment of Hon’ble Supreme Court in the case of Laxmi Sugar Mills Co Ltd Vs. CIT reported in 123 ITR 429 (SC), this is a deductible expenditure u/s. 37(1) of the Act. the Hon’ble Supreme Court has held as under : 5.2 In our opinion, the interest paid under s. 3(3) of the Cess Act cannot be described as a penalty paid for an infringement of the law. As that is the only ground on which the revenue resist the claim of the assessee to a deduction of the interest under s. 10(2)(xv) of the Indian I.T. Act, 1922, the assessee is entitled to succeed. There is no dispute that the payment of interest represents expenditure laid out wholly or exclusively for the purpose of the business. There is also no dispute that it is in the nature of revenue expenditure.

5.3 Reliance s also placed in case of M/s Naaraayani Sons Pvt. Limited, in vide order dated 21.08.2018 the Hon’ble Tribunal held that interest expense on late deposit of VAT, service tax, TDS etc are allowable

ITANo.933/2019 Work Station Systems P. Ltd. expenditure under section 37(1) of the Act. the observation are as under : In view of the above judgement, there remains no doubt that the interest expense on the delayed payment of service tax is allowable deduction. The above principles can be applied to the interest expenses levied on account of delayed payment of TDS as it relates to the expenses claimed by the assessee which are subject to the TDS provisions. The ass essee claims the specified expenses of certain amount in its profit & loss account and thereafter the assessee from the payment to the party deducts certain percentage as specified under the Act as TDS and pays to the Government Exchequer. The amount of TDS represents the amount of income tax of the party on whose behalf the payment was deducted & paid to the Government Exchequer. Thus the TDS amount does not represent the tax of the assessee but it is the tax of the party which has been paid by the ass essee. Thus any delay in the payment of TDS by the assessee cannot be linked to the income tax of the assessee and consequently the principles laid down by the Hon’ble Apex Court in the case of Bharat Commerce Industries Ltd. Vs. C1T (1998) reported in 230 1TR 733 cannot be applied to the case on hand.

Thus, in our considered view, the principle laid down by the Hon’ble Supreme Court in the case of Bharat Commerce Industries Ltd. (supra) is not applicable in the instant facts of the case. Thus, we hold that the Assessing Officer in the instant case has wrongly applied the principle laid down by the Hon ‘ble Supreme Court in the case of Bharat Commerce Industries Ltd. (supra). We also find that the Hon’ble Supreme Court in the case of Lachmandas Mathura (Supra) has allowed the deduction on account of interest on late deposit of sales tax u/s 37(1) of the Act. In view of the above, we conclude that the interest expenses claimed by the assessee on account of delayed deposit of service tax as well as TDS liability are allowable expenses u/s 37(1) of the Act. In this view of the matter, we find no reason to interfere in the order of Ld. C1 T(A)

ITANo.933/2019 Work Station Systems P. Ltd. and we uphold the same. Hence, this ground of Revenue is dismissed. ” Respectfully following the aforesaid decision, we confirm the order of Ld. CIT(A) and dismiss the ground no. 5 of revenue’s appeal for AY 2012-13 and thus the appeal of Revenue for AY 2012-13 also stands dismissed.”

5.4 In light of above it is submitted that the Ld lower authorities was not at all justified in making disallowance of Interest on delayed payment of entry tax as it is a settled law that payment of interest represents expenditure laid out wholly or exclusively for the purpose of the business.

6.1 It is also submitted that the charges paid for delayed supply of books to M.P. Text Book Corporation Ltd. In the profit & loss account the assessee has claimed deduction of Rs. 50,256 for the charges for delay supply of text books. This amount was paid as per the tender agreement Clause Nos. 29 & 33. The ledger account is also shows on different dates the debits were made. The copy of the payment released bills of M.P. Text Book Corporation clearly shows that deductions made from the supply bills of the assessee. This payment is on account of contractual obligation of the assessee for supply of books as per the tender terms and conditions. The payment is not in the nature of penalty. It is also not paid for any infraction of law. The deductions of Rs. 50,256 made from the supply of bills are fully deductible u/s 37(1) of the Act. Reliance is placed on Chaudhary Hammer Works Ltd., Vs. Department of Income Tax ITA No: 4332/Del/2011 ITAT Delhi.