THE ACIT, CIRCLE-2,, JAMNAGAR vs. M/S HIRAVATI MARINE PRODUCTS (P) LTD.,, PORBANDAR

The revenue has raised following substantive grounds of appeal:- “1. The ld. CIT(A) has erred in law and in facts in deleting the addition of Rs. 22,800/- being the disallowance for payments made in cash u/s.40A(3) of the Act.

The ld. CIT(A) has erred in law and in facts in deleting the addition of Rs..4,42,334/- being the disallowance for non-deduction of TDS u/s.40(a)(ia) of the Act.

The ld. CIT(A) has erred in law and in facts in deleting the addition of I Rs. 10, 21,060 /- being the disallowance on account of rate difference.

The ld. CIT(A) has erred in law and in facts in deleting the addition of Rs. 29,478/- being the disallowance on account of payment to provident fund u/s. 43B(e) of the Act.

The Id. CIT(A) has erred in law and in facts in deleting the addition of Rs.26,39,676/- being the disallowance on account of various expenses.

The ld. CIT(A) in law and in facts in deleting the addition of Rs. 4,42,200 /- being the disallowance on account of non-deduction of TDS U/s.40(a)(ia) of the Act.

The ld. CIT(A) erred in law and in facts in deleting the addition of Rs. 18, 95, 600/- being the disallowance on account of non deduction of TDS on export commission u/s.40(a)(ia) of the Act.”

The fact in brief is that return of income declaring loss of Rs. 9,37,33,047/- was filed on 31st August, 2005. The return of income was processed u/s. 143(1)(a) of the act on 24th Feb, 2016. Subsequently, a notice u/s. 148 of the act was issued on 13th March, 2009. The assessment u/s. 143(3) of the act was made on 30th December, 2009. The assessing officer has made various disallowances as under:- (i) Addition of Rs. 1,70,66,716/- u/s. 40(a)(ia) of the act (ii) Addition of Rs. 22,558/- on account of payment made in cash (iii) Addition of Rs. 4,42,334/- u/s. 40(a)(ia) of the act (iv) Addition of Rs. 6,96,774/- on account of disallowance of rate difference. (v) Addition of Rs. 3,24,286/- on account of disallowance of rate difference (vi) Addition of Rs. 8,51,217/- on account of disallowance u/s. 38B(e) (vii) Addition of Rs. 29,478/- u/s. 43B of the act (viii) Addition of Rs. 26,39,676/- on account of disallowance of expenses (ix) Addition of Rs. 4,42,200/- on account of disallowance u/s. 40(a)(ia) (x) Addition of Rs. 18,95,600/- u/s. 40(a)(ia)

Against the aforesaid disallowances made by the assessing officer, the assessee has preferred the appeal before the ld. CIT(A). The ld. CIT(A) has partly allowed the appeal of the assessee. Further, fact of the case are I.T.A No. 945/Rjt/2010 A.Y. 2005-06 Page No 3 ACIT vs. M/s. Hiravati Marine Products (P) Ltd.

During the course of assessment u/s. 147 of the act, the assessing officer has made disallowance of Rs. 28,558/- being 1/5 of the amount of Rs. 114,000/- made in cash for expenditure of labour charges and advances paid to staff as salary. The ld. CIT(A) has deleted the addition.

We have heard the rival contentions on this issue. In this regard, we have noticed that ld. CIT(A) has deleted the aforesaid addition on the basis that assessee has made payment to staff member as advance which was not called as expenditure. Further, the disallowance of labour charges is applicable only in case where the payment is exceeded Rs. 20,000/- to per person. In view of above facts, we consider that ld. CIT(A) has rightly deleted the aforesaid addition. Therefore, we do not find any merit in this ground of appeal and the same is dismissed.

The assessing officer has made aforesaid addition on account of non- deduction of tax at source u/s. 40(a)(ia) of the act. The ld. CIT(A) has partly allowed the appeal of the assessee by deleting the amount of Rs. 1,89,400/- and sustaining balance disallowance of Rs. 2,52,934/-

We have heard rival contentions on this issue. We consider that the ld. CIT(A) has partly allowed the appeal of the assessee considering the fact

During the course of assessment proceedings, the assessing officer has made disallowance of Rs. 6,96,774/- and Rs. 3,24,286/- being rate difference credit given to group company of the assessee M/s. Amar Polifils Pvt. Ltd. by treating the same as accommodation entry. The ld. CIT(A) has allowed the appeal of the assessee by deleting the disallowance of Rs. 3,24,286/- made on account of rate difference.

On this issue after hearing both parties and perusal of the material on record, it is noticed that assessee has purchased fish from its group concern M/s Amar Polfils Pvt. Ltd. and the payment received was also shown as of income of the group concern. The rate of difference is allowed as per the business policy to the other concerns including its associate concern.

During the course of assessment, the assessing officer has made disallowance of Rs. 26,39,676/- being 10% of travelling transportation, telephone, mobile, entertainment expense, miscellaneous expenses, carriage outward and repair and maintenance excesses. The assessing officer has disallowed these expenses on the ground that these expenses were not fully supported with bills and vouchers therefore for want of proper verification the assessing officer has made the disallowance. The ld. CIT(A) has deleted the aforesaid additions.

We have heard rival contentions on this issue. We consider that during the course of assessment proceedings, the assessing officer has noticed that the aforesaid expenses were not fully supported with the proper bills and vouchers therefore for want of proper verification, the assessing officer has disallowed 10% of the aforesaid expenses. The ld. CIT(A) has deleted the aforesaid addition without disproving the fact reported by the assessing officer that the aforesaid expenses were difficult to be verified for want of proper bills and vouchers. Therefore, we consider that it will be appropriate to disallow the 5% of aforesaid expenses. Accordingly, an amount of Rs. 13,19,838/- is disallowed for want of proper bill and vouchers in support of the claim of aforesaid expenses. Accordingly, this ground of appeal of the revenue is partly allowed.

During the course of assessment, the assessing officer disallowed the transportation expenses to the amount of Rs. 4,42,200/- for non-deduction of I.T.A No. 945/Rjt/2010 A.Y. 2005-06 Page No 6 ACIT vs. M/s. Hiravati Marine Products (P) Ltd.

During the course of assessment, the assessing officer has made disallowance of Rs. 18,95,600/- as export commission on the ground that assessee has not deducted tax on the aforesaid payment. The ld. CIT(A) has deleted the aforesaid addition on the ground that in the case of the assessee provision of section 172 was applicable therefore assessee was not required to deduct tax u/s. 194C of the act.

We have heard rival contentions on this issue. On perusal of the material on record, it is observed that the aforesaid payment was made to the non-resident ship owner or from agent and such payment are dealt with by section172 of the act. The assessee has also referred Circular No. 723 dated 19th Sep, 1995 wherein it is stated that where payment are made to shipping agent of non-residents ship owners or charters for carriage on process etc. shipped at a port in India provision of seciton172 shall apply and those of section 194C and 195 will not apply. We have noticed that ld. CIT(A) in his finding has considered aforesaid Circular No. 723 dated 19th Sep, 1995. I.T.A No. 945/Rjt/2010 A.Y. 2005-06 Page No 7 ACIT vs. M/s. Hiravati Marine Products (P) Ltd.

During the course of assessment proceedings, the assessing officer has made disallowance of Rs. 29,478/- in respect of amount of Employees Contribution and ESIC for not depositing the same to the Govt. Account on or before the due date prescribed in the specified act. The ld. CIT(A) has deleted the addition.

We have heard the rival contentions on this issue. We find that ld. CIT(A) is not justified in deleting this addition in view of the decision of Hon’ble Gujarat High Court in the case of Gujarat State Road Transport Corporation wherein it is held that in case the employees contribution towards PF and ESIC are not deposited on or before the due date prescribed in the specified act, the deduction of the same is not available to the assesse. Therefore, we are not inclined with the decision of ld. CIT(A) and appeal of the revenue on this issue is allowed.

In the result the appeal of the revenue is partly allowed. Order pronounced in the open court on 23-07-2019 (MAHAVIR PRASAD) (AMARJIT SINGH) JUDICIAL MEMBER ACCOUNTANT MEMBER Ahmedabad : Dated 23/07/2019