THE COMMISSIONER OF INCOME TAX,COCHIN vs. M/S APOLLO TYRES LTD,KOCHI

Facts

The Revenue has challenged an order of the Income Tax Appellate Tribunal (Tribunal) for the assessment year 1999-2000. The assessee, Apollo Tyres Ltd., had filed its return, and the Assessing Officer (AO) made certain additions. The Commissioner of Income Tax (Appeals) granted some relief, but the assessee appealed further to the Tribunal. The Tribunal accepted the assessee's version and granted relief, leading to the present appeal by the Revenue. The dispute involves the deletion of disallowance of expenditure relating to prior years on non-convertible debentures, disallowance for delayed payment of employee and employer's contribution to PF and ESIC, and allowance of deduction under Section 80IA.

Held

The High Court held that the Tribunal was not right in deleting the disallowance of Rs. 1,07,99,770/- relating to the premium on redemption of debentures. The Court found that the Supreme Court's decision in Madras Industrial Investment Corporation v. CIT (225 ITR 802) mandates that such premium, while revenue expenditure, must be spread over the period of the debentures. The Tribunal's allowance of the entire claim was therefore incorrect. Regarding the delayed payment of PF/ESIC contributions, the Court held that the law laid down by the Supreme Court in CIT v. Alom Extrusions Ltd. granting deduction for Provident Fund contribution applies only to the employer's contribution, not the employee's contribution. Relying on its own decision in CIT v. Merchem Ltd. (2015) 378 ITR 443, the Court held that employee's contribution amounting to Rs. 51,668/- must be disallowed. For the 80IA deduction, the Tribunal had ordered a remand, and the AO's subsequent decision was against the assessee, which attained finality. The Court found no substantial question of law on this issue. The appeal was allowed to the extent of disallowing the employee's contribution to PF/ESIC.

Key Issues

The Tribunal had to decide the following substantial questions of law: 1. Whether the Tribunal was correct in deleting the disallowance of Rs. 1,07,99,770/- made towards expenditure relating to prior years concerning the issue and redemption premium of non-convertible debentures, and whether the allowance at 1/8th of the expenses for the assessment year 1999-2000 was appropriate, contrary to the Tribunal's allowance of the entire claim. 2. Whether the Tribunal was correct in deleting the disallowance made under Section 36(1)(va) for delayed payment of employees' and employer's contribution to PF and ESIC, considering the import of the word "due date". 3. Whether the Tribunal was correct in allowing 80IA deduction from gross total income. Assessee's arguments: - Regarding debenture premium, the assessee argued there was a vital distinction between the Supreme Court's case (Madras Industrial Investment Corporation) and the present facts, as the former dealt with discount on debentures. - Regarding PF/ESIC contributions, the assessee contended that since payments were made before the filing of the return, they were allowable expenditure, relying on CIT v. Sabari Enterprises. - Regarding 80IA deduction, the assessee's position was accepted by the Tribunal via remand. Revenue's arguments: - Regarding debenture premium, the Revenue argued that the Supreme Court's decision in Madras Industrial Investment Corporation v. CIT (225 ITR 802) was wrongly applied and interpreted by the Tribunal, and the expenditure should be spread over the entire period of debentures. - Regarding PF/ESIC contributions, the Revenue contended that the Tribunal's decision was not in conformity with the law declared by the Supreme Court in CIT v. Alom Extrusions Ltd., and that the scope of that judgment was clarified by this Court in CIT v. Merchem Ltd., which held that employee's contribution cannot be claimed if not paid by the due date. - Regarding 80IA deduction, the Revenue's stand was reiterated after remand, and it was answered against the assessee.