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Income Tax Appellate Tribunal, JAIPUR BENCHES, JAIPUR
Before: SHRI VIJAY PAL RAO, JM & SHRI BHAGCHAND, AM vk;dj vihy la-@ITA No. 816/JP/2017
PER SHRI VIJAY PAL RAO, J.M. This appeal by the revenue is directed against the order dated 23.08.2017 of ld. CIT (A)-2, Jaipur for the Assessment Year 2014-15. The revenue has raised the following grounds of appeal :- i) Whether on the facts and in the circumstances of the case and in law, the CIT (Appeals) was justified in deleting the addition of Rs. 20,00,000/- made by disallowing contribution to State Renewal Fund. ii) Whether on the facts and in the circumstances of the case and in law, the CIT (Appeals) was justified in deleting the addition of Rs. 4,25,,000/- made for depositing the employees’ contribution to PF & ESI beyond the prescribed time limit provided in the respective Acts.
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iii) Whether on the facts and in the circumstances of the case and in law, the CIT (Appeals) was justified in holding that the employees’ contribution to PF & ESI are governed by the provisions of Section 43B and not by section 36(1)(va) r.w.s. 2(24)(x) of the Income Tax Act, 1961.
iv) Whether on the facts and in the circumstances of the case and in law, the CIT (Appeals) was justified in deleting the addition of Rs. 2,00,00,000/- made by the AO by disallowing contribution of Energy Conservation Fund.
v) The appellant craves its rights to add, amend or alter any of the grounds on or before the hearing.
Ground No. 1 is regarding the addition made by the AO on account of
contribution of State Renewal Fund was deleted by the ld. CIT (A).
We have heard ld. D/R as well as the ld. A/R and considered the relevant
material on record. The assessee company has debited a sum of Rs. 20,00,000/- as
contribution to State Renewal Fund in the Profit & Loss account. The AO disallowed
the said amount on the ground that it is not covered under the provisions of section
37(1) of the IT Act. On appeal, the ld. CIT (Appeals) has allowed the claim of
the assessee by following the earlier orders for the assessment years 2011-12 and
2012-13. At the outset, we note that this Tribunal in assessee’s own case for the
assessment year 2011-12 vide order dated 18.08.2017 in ITA No. 202/JP/2015 has
considered and decided this issue in para 3 to 6 as under :-
“3. In ground no. 1, the Revenue has challenged the deleting of addition of Rs. 20 lacs towards contribution to the State Renewal Fund. The ld. AR submitted that this issue is covered in favour of the assessee by the decision of ITAT, Jaipur Bench in case of Rajasthan State Seed Corporation Ltd. Vs. ACIT in ITA No. 233/JP/2009 order
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dated 25.05.2009 for A.Y. 2009-10 which has been affirmed by the Hon’ble Rajasthan High Court in the case of CIT vs Rajasthan State Seed Corporation Ltd reported in 386 ITR 267.
The relevant finding of the ld CIT(A) where he has followed the decision of the Coordinate Bench in case of Rajasthan State Seed Corporation Ltd is reproduced as under:
“2.3.1 I have perused the facts of the case, the assessment order and the submission of the appellant. The facts of this issue are similar to the facts in the case of M/s Rajasthan State Seeds Corporation Ltd. in A.Y. 2006-07. In this case, the ITAT, Jaipur (in ITA No. 233/JP/2009) has decided the matter in favour of the assessee by holding as under-
“As per memorandum of State Renewal Fund set up by the State Government, it is created with the object of providing a safety net for the workers likely to be affected by restructuring in the State public Enterprises. We are thus of the view that contribution made to the said fund is solely for the purpose of the welfare and benefit of the employees. The Rajasthan high Court in case of CIT V. Rajasthan Spinning and Weaving Mills Limited 274 ITR 465 has observed that it is for the assessee to decide whether any expenditure should be incurred in course of business. The expenditure can be incurred voluntarily and without necessity. Any contribution made by the assessee to a public welfare fund which is connected or related with his business is an allowable deduction u/s 37. Again the court in the case of CIT V. Shri Rajasthan Syntex Limited 221 CTR 410 (Raj.) held that where assessee gave contribution to the employee’s welfare fund, the same is allowable as business expenditure. The case relied by AO of CIT V. Jodhpur Co- operative Marketing Society 275 ITR 372 (Raj.) is distinguishable as in this case the amount was set apart for the shareholders of the society whereas in the present case amount was provided for the benefit of the employees. In view of this the contribution made to State Renewal Fund is allowable u/s 37(1).”
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In D.B Appeal No. 4/2006 dated 29.04.2016, the Hon’ble Rajasthan High Court in case of Principal CIT vs Rajasthan State Seed Corporation Ltd has held as under:
“9. Insofar as the expenditure incurred on State Renewal fund is concerned, said expenditure also goes to show that the renewal fund was set up by the State Government and was created with the object of providing a safety net for the workers likely to be effected by restricting in the State Public Enterprise and that a finding of fact has been recorded that the contribution made to the state renewal fund is solely for the purposes of the welfare and benefit of the employees. In our view, it is for the assessee to decide whether any expenditure should be incurred in the course of business and expenditure of this nature being for business expediency is certainly allowable deduction under section 37(1) of the Act. In our view, any normal expenditure for the welfare and benefit of employees is allowable expenditure under section 37(1), the Tribunal has come to a finding of fact that it was a legal obligation of the respondent assessee towards contribution of the said amount to the state renewal fund and there being a legal obligation as well in our view the Tribunal has come to a correct conclusion.”
In the present case, it is noted that the State Renewal Fund was set up to provide safety to the employees working under the state owned entities in case of restructuring/wind-up/closure of the undertaking. Based on the study done by the State Government, the assessee has provided an amount of Rs 20 lacs for the purposes of welfare and benefit of the employees. The facts of the case are thus pari-materia to the facts of the case before the Hon’ble Rajasthan High Court in case of Rajasthan Seed Corporation Ltd and respectfully following the same, we affirm the order of the ld CIT(A) who has rightly deleted the disallowance made by the AO towards contribution to State Renewal Fund. In the result, the ground no. 1 of the revenue’s appeal is dismissed. “
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Thus this issue is covered by the decision of the Tribunal in assessee’s own case.
Therefore, following the earlier order of the Tribunal, we do not find any error or
illegality in the order of ld. CIT (A) qua this issue.
Ground Nos. 2 & 3 are regarding disallowance made by the AO in respect of
employees’ contribution to PF and ESI was deleted by the ld. CIT (A).
We have heard rival submissions and considered relevant material on record.
We note that this issue is now covered by the decision of the Hon’ble Jurisdictional
High Court in the case of CIT vs. State Bank of Bikaner & Jaipur, 99 DTR 131 (Raj.)
as well as decision in the case of CIT vs. Jaipur Vidyut Vitran Nigam Ltd. 363 ITR
307 (Raj.) and further in the case of CIT vs. Udaipur Dugdh Utpadak Sahakari Sangh
Ltd. 366 ITR 163 (Raj.). This Tribunal in assessee’s own case for the assessment
year 2011-12 vide order dated 18.8.2017 has decided this issue in para 7 to 9 as
under :-
“7. In ground no. 2 of the Revenue’s appeal, the Revenue has challenged the deletion of addition of Rs. 1,24,442/- made on account of late deposition of EPF after due date of the PF Act. In this regard, ld. AR submitted that in view of the following judicial pronouncements on allowability of deduction of employee’s contribution to PF and other funds after the due dates in respective statute but before the due date of filing of return of income, CIT(A) has rightly deleted the addition and thus the ground of the department be dismissed:
-CIT Vs. State Bank of Bikaner & Jaipur (2014) 363 ITR 70 (Raj) -CIT Vs. Jaipur Vidyut Vitran Nigam Ltd. (2014) 363 ITR 307 (Raj)
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-CIT Vs. Udaipur Dugdh Utpadak Sahakari Sangh Ltd. (2014) 366 ITR 163 (Raj)
The relevant finding of the ld CIT(A) is reproduced as under:-
“3.3 I have perused the facts of the case, the assessment order and the submissions of the appellant. Admittedly, contribution to PF has been paid by the appellant, in all instances, before the due date of filing the return of income u/s 139(1). This fact is therefore, not in dispute. In view of the judgments of the Rajasthan High Court in the case Jaipur Vidhyut Vithran Nigam Ltd, 265 CTR 62 (Raj.), CIT Vs. State Bank of Bikaner & Jaipur (2014) 99 DTR 131 (Raj.), and other case laws on this issue, the claim of the appellant is allowable. Accordingly, this disallowance made by the Assessing officer, is directed to be deleted. This ground is allowed.” 9. In the present case, admittedly, employees’s contribution to PF amounting to Rs 124,442 for the month of August 2010 has been paid by the appellant on 21.09.2010 within the same financial year 2010-11. The issue is no more res integra in light of various judicial pronouncements of the Hon’ble Rajasthan High Court referred supra. We accordingly affirm the order of the ld CIT(A) who has rightly deleted the disallowance made by the AO towards employees contribution to PF. In the result, the ground no. 2 of the revenue’s appeal is dismissed.”
Therefore, when this issue is already covered by the binding precedents of Hon’ble
Jurisdictional High Court as well as the decision of this Tribunal in assessee’s own
case, then we do not find any error or illegality in the order of ld. CIT (A) qua this
issue.
Ground No. 4 is regarding disallowance made by the AO on account of
contribution of Energy Conservation Fund was deleted by the ld. CIT (A).
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We have heard ld. D/R as well as the ld. A/R and considered the relevant
material on record. At the outset, we note that an identical issue has been
considered by this Tribunal in assessee’s own case for the assessment year 2008-09
as well as for the assessment year 2012-13 vide order dated 18.8.2017 in ITA No.
88/JP/2016 in para 91 to 94 as under :-
“91. In respect of ground No. 7, the Revenue has challenged the action of ld CIT(A) in deleting disallowance of contribution to energy conservation fund of Rs. 1 crore. Brief facts of the case are that the assessee contributed Rs.1 crore to State Energy Conservation Fund to be spent on conservation of energy as and when required. The AO held that the contribution so made is not wholly & exclusively for assessee business of generating renewable energy. He therefore, disallowed the same. On appeal, the Ld. CIT(A) by relying on the decision of Coordinate Bench in assessee’s own case in ITA No.983/JP/13 for AY 2008-09 deleted the disallowance.
The ld AR submitted that the issue is covered by the decision of Hon’ble ITAT in assessee’s own case for AY 2008-09. It was further submitted that the contribution is made to Rajasthan State Energy Conservation Fund constituted as per section 16 of the Energy Conservation Act, 2001. The object of the fund is mentioned at Pg 11- 12 of the CIT(A) order. The assessee is incorporated with the object of promoting the non conventional and renewable energy sources and therefore the contribution so made is wholly & exclusively for the purpose of business. Otherwise also, any contribution made to a statutory fund is allowable as deduction as held by Supreme Court in case of CIT Vs. New Horizon Sugar Mills Pvt. Ltd.269 ITR 397 where it was held that amount set apart towards molasses storage reserve fund is to be excluded from assessee’s total income on the principle of
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diversion of income by overriding title. In view of above, CIT(A) has rightly deleted the disallowance and thus the ground of the department be dismissed.
The relevant finding of the ld. CIT(A) are reproduced as under:- “ 5.3 I have perused the facts of the case, the assessment order and the submissions of the appellant. The fact of this issue is similar to the fact in assessee’s own case for the assessment year 2008-09, appeal No. ITA No. 983/JP/2013. This issue has been decided in favour of the assessee as follow:-
“This amount was paid towards energy conversation contribution fund, which is statutory liability as per provisions of Energy Conservation Act, 2001. The case law relied by the assessee of the judgment of the Hon’ble jurisdictional High Court in the case of CIT Vs. Raj Shipping and Weaving Mills Ltd. (supra) is squarely applicable in the case of the assessee wherein it has been held that contribution to the fund set up for products which was also the business of the assessee has direct nexus to the advancement of the assessee business.”
Following the above judgment, the disallowance on account of contribution to energy conservation fund of Rs. 1,00,00,000/- made by the Assessing Officer is directed to be deleted. This ground is allowed.”
Undisputedly, there is no change in the facts and circumstances of the case or any authority which has been brought to our notice subsequent to the decision of the Coordinate Bench in assessee’s own case in AY 2008-09. Respectfully following the decision of the Coordinate Bench referred supra, we affirm the findings of the ld CIT(A) and the ground taken by the Revenue is dismissed.”
Following the earlier order of this Tribunal in assessee’s own case, we do not find
any error or illegality in the order of ld. CIT (A) qua this issue.
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Ground No. 5 is regarding the addition made by the AO on account of
Publicity and Advertisement expenses was deleted by the ld. CIT (A).
We have heard the ld. D/R as well as the ld. A/R and considered the relevant
material on record. We note that this Tribunal in assessee’s own case for the
assessment year 2012-13 vide order dated 18.8.2017 has considered and decided
this issue in para 100 to 103 as under :-
“100. In respect of ground no. 9, the Revenue has challenged the action of ld CIT(A) in deleting disallowance of publicity and advertisement expenses of Rs. 3,25,71,656/- on account of topographic survey, recruitments, technical investigation, printing of energy policy, inviting tenders, etc. The AO observed that these expenditures are in the nature of development/exploration of new business and disallowed the same. The Ld. CIT(A) after considering the nature of the expenditure which largely related to payment to advertisement, printing & publishing agencies allowed the expenditure incurred by the assessee. 101. During the course of hearing, the ld AR submitted that the object of the assessee is to promote and facilitate energy conservation measures. For this purpose it carries out mass communication in public awareness programs by publication of Akshay Urja Sandesh on quarterly basis, distributing brochures, leaflets & hand bills and advertising through TV, radio, cable network, cinema slides, display boards, hoardings, etc. As a result, assessee received a sum of Rs.16.77 crores as registration fees from various entrepreneurs for setting renewable energy plants. Only an amount of Rs.3.50 lacs is incurred for topographic survey which is also a part of its business activity. Hence, the expenditure incurred by the assessee on advertisement is wholly & exclusively for the purpose of business and
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the same is allowable u/s 37(1). In view of above, ld CIT(A) has rightly deleted the disallowance and thus the ground of the department be dismissed 102. The relevant finding of the ld. CIT(A) are reproduced as under:- “7.3 I have perused the facts of the case, the assessment order and the submissions of the appellant. The Assessing Officer has made the disallowance under this head as he found that the expenditure had been incurred for topographic survey, recruits members, technical investigations, printing of energy policy and inviting tenders etc. and was of the opinion that this seemed in the nature of new business development and exploration of business opportunity. Further, it was also felt that this expenditure had increased exceptionally during the year almost 4 times.
In the present proceedings, the AR in his written submissions has stated that the assessee company being the State Nodal Agency of the Ministry of new & renewable energy department, Govt. of India, is required to popularize the usage of Renewable Energy Source & policy deployment too.
Further, in the F.Y. 2010-11, the State Government of Rajasthan, Issued “Rajasthan Solar Energy Policy, 2011 Vide Notification No. F.20(6) Energy/2010 dated 19.04.2011 for the promotion the solar energy in Rajasthan, Prior to enactment to this policy, the promotion of solar energy was being done under the policy for promoting generation of electricity through Non- Conventional Energy Sources, 2004.
The company was also appointed as Nodal Agency for Single Window Clearance of project of Solar Power project set up in the state of Rajasthan, as per Rajasthan Solar Energy policy, 2011 as notified and issued by the Government of Rajasthan Energy Department vide dated 19.04.2011.
The ledger account of the expenditure has been filed and perused. Largely, the expenditure is related to payment to advertising agencies and printing and publishing agencies. A
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small amount of 3.50 lakhs approx. is fixed for topographic survey Geo technical investigation which has been explained by AR as in pursuance of the promulgation of the new policy.
In view of the above the disallowance made by the Assessing Officer is deleted.”
We have heard the rival contentions and purused the material available on record. One of the business objects of the assessee company is to promote and facilitate energy conservation and popularize the usage of renewable energy sources & encourage companies to set up renewable energy plants. As part of its activities, the assessee company has incurred the publicity and advertisement expenditure during the year. The ld CIT(A) has given a findings on perusal of ledger account that these expenditure largely related to payment to advertising agencies and printing and publishing agencies. The said finding of the ld CIT(A) remain uncontroverted before us. In the result, we confirm the order of the ld CIT(A) and ground of appeal taken by the Revenue is dismissed.”
Accordingly in view of the decision of this Tribunal in the assessee’s own case, we do
not find any error or illegality in the order of the ld. CIT (A) qua this issue.
In the result, appeal of the revenue is dismissed.
Order pronounced in the open court on 19/03/2018. Sd/- Sd/- ¼ HkkxpUn½ ¼ fot; iky jkWo ½ (BHAGCHAND) ( VIJAY PAL RAO ) ys[kk lnL;@Accountant Member U;kf;d lnL;@Judicial Member Tk;iqj@Jaipur fnukad@Dated:- 19/03/2018. das/
12 ITA No. 816/JP/2017 Rajasthan Renewal Energy Corpn. Ltd., Jaipur.
आदेश की प्रतिलिपि अग्रेf’ात@ब्वचल वf जीम वतकमत वितूंतकमक जवरू
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सहायक पंजीकार@Aेेज. त्महपेजतंत