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Income Tax Appellate Tribunal, DELHI BENCH: ‘Friday/B’ NEW DELHI
Before: SHRI PRASHANT MAHARISHI & SHRI K.NARASIMHA CHARY
Aggrieved by the order dated 14/11/2014 in appeal No. 43/10-11, passed by the learned Commissioner of Income Tax (Appeals)-V, New Delhi (“Ld. CIT(A)”) for assessment year 2005-06, Ester Industries Ltd., (“the assessee”), preferred this appeal.
Brief facts of the case are that the assessee is a company engaged in the business of manufacturing and selling of Polyester chips, polyester films and engineering plastics. For the assessment year 2005-06, they have filed their return of income on 30.10.2005 showing nil income after adjusting the brought forward losses to the tune of Rs.17,61,29,318/-. Assessment u/s. 143(3) of the Income-tax Act (for short “the Act”) was complete at Rs. Nil, but making certain disallowances of Rs.16,50,000/- towards investments in mutual funds, Rs.3,70,696/- towards club fees besides disallowing Rs.1,16,64,344/- denying the carry forward short-term capital loss and the learned Assessing Officer reached the total income at Rs.18,30,23,363/- under the normal provisions of the Act. The learned Assessing Officer further added a sum of Rs.18,18,000/- towards provision for doubtful debts and advances and Rs.4,82,73,000/- towards provision for deferred tax to the book profits u/s. 115JB of the Act and thereby concluded the taxable income u/s. 115JB at Rs.1,14,78,773/-.
When the assessee preferred appeal, ld. CIT(A) granted part relief to the assessee in respect of certain additions, but confirmed the denial of carry forward short term capital loss of Rs.1,16,64,344/-, Rs.16,50,000/- on account of unexplained investments, Rs.3,70,396/- on account of club expenses, Rs.18,18,000/- addition to the book profit for MAT by disallowing the provision for bad and doubtful debts and advances and Rs.4,82,73,000/- in respect of provision for deferred tax. The assessee, therefore, preferred this appeal, challenging these two additions.
In so far as the denial of carry forwarding of short-term capital loss of Rs.1,16,64,344/- is concerned, the assessee’s case is that the assessee was never heard on this aspect and was never asked to produce any material in support of their claim. Even the impugned order on this aspect reads that the assessee so complained before the ld. CIT(A). It is the submission on behalf of the assessee before us that given an opportunity, the assessee would cooperate with the learned Assessing Officer for verification of the claim of the assessee in respect of carry forward short term capital loss. In these circumstances, we are of the considered opinion that the assessee is entitled to an opportunity to submit the material, if any, for verification of the entitlement to carry forward short term capital loss and therefore, we set aside the impugned finding of the ld. CIT(A) and remand the matter to the file of Learned Assessing Officer for verification of the claim of the assessee to carry forward short term capital loss by giving an opportunity to the assessee. Ground No. 1 of the assessee is, therefore, allowed for statistical purposes.
In so far as the second ground of appeal in respect of addition of Rs.16.5 lacs towards unexplained investment is concerned, the assessee has been contending before the authorities below that two items of investment in Reliance Mutual Fund to the tune of Rs.8.00 lacs on 02.04.2004 and Rs. 8.5 lacs on 25.08.2004 was wrongly shown in the AIR received by the department and it can be an inadvertent mistake by the person providing information in AIR. The assessee also filed the confirmation dated 15.06.2008 from Reliance Mutual Fund to say that the assessee has not made any investment of Rs.8.00 lacs on 02.04.2004 and Rs.8.5 lacs on 25.08.2004. This establishes that some mistake had crept in while providing information in AIR by the person and the confirmation issued by Reliance Mutual Fund confirms the same. Since, there is no investment to the tune of Rs.8.00 lacs and 8.5 lacs on 02.04.2004 and 25.08.2004, no addition could be made concerning the same. We, therefore, allow ground No. 2 of the assessee and direct the deletion of this addition.
6. Ground No. 3 relates to the disallowance of Rs.3,70,696/- towards club expenses, which the assessee claims to have incurred legitimately and therefore, eligible as revenue deduction. CIT(A) observed that such a disallowance was made by learned Assessing Officer for the reason that Tax Auditors of the assessee company pointed out these expenses to be personal in nature. Assessee is a company and there cannot be any personal expense, and in view of the decision in the case of CIT vs. United Glass Manufacturing Company Limited, 28 Taxman 429 (SC), the club expenses of a company are allowable as revenue deduction. We, therefore, while respectfully following the decision of Hon’ble Supreme Court, allow the expenses and direct the Learned Assessing Officer to delete these expenses.
7. Ground No. 4 & 5 relate to the addition of Rs.18,18,000/- by disallowing the provision for bad and doubtful debt and advances and Rs.4,82,73,000/- in respect of provision for deferred tax by adding it to the book profit u/s. 115JB for MAT. Ld. CIT(A) confirmed this addition by referring to the retrospective amendment to Section 115JB w.e.f. 01.04.2001 by way of Finance Act, 2008. Though the assessee placed reliance on certain decisions like AppolloTyres Ltd. Vs. CIT (2002) 255 ITR 273(SC) and decision of Hon’ble Delhi High court in CIT vs. HCL Comnet Systems & Services Ltd. (2008) 305 ITR 409 etc., in view of retrospective amendment to section 115JB, we cannot find fault with the findings of the ld. CIT(A) in confirming these additions. We, therefore, decline to interfere with the same and confirm these additions.
In the result, the appeal of the assessee is allowed in part but for statistical purposes. Order pronounced in the open court on 21/10/2020