ACIT CIRCLE 1, SALEM vs. M/S TAMILNADU STATE TRANSPORT CORPORATION (SLEM) LTD, SALEM

आदेश /O R D E R

PER VIKRAM SINGH YADAV, ACCOUNTANT MEMBER: These two appeals filed by the Revenue are against the respective orders of CIT(A), Salem, for assessment years 2008-09 & 2012-13.

2.2 In this regard, ld.AR submitted that the matter has been decided by the Co-ordinate Bench of this Tribunal in assessee’s own case for assessment year 2009-10 in dated 22.08.2014 wherein the relevant finding is contained at paras 6 & 7 of the order of Tribunal which is reproduced as under:-

“”6. We have heard the submissions made by the representatives of both the sides and have perused the orders of the authorities below. We have also examined the decisions on which the respective sides have placed reliance and the documents placed on record by the ld.Counsel for the assessee in the form of Paper Book. The first issue raised in appeal is with regard to contributions made by the assessee towards Pension Fund Trust. The assessee has contributed a sum of `15.60 Crores (approximately) towards Tamil Nadu State Transport 8 Corporation Employees Pension Fund Trust, Chennai. The CIT is of the opinion that since the Trust is not approved by the jurisdictional Commissioner or Chief Commissioner, the contributions made by the assessee are not towards approved pension fund. A bare reading of section 36(1)(iv) makes is amply clear that the sum should be contributed by the employer towards a recognized provident fund or approved superannuation funds subject to such limits as may be prescribed for recognizing provident fund or approving the superannuation fund. The section does not lay down any specific condition that the fund should be approved by the jurisdictional Commissioner or Chief Commissioner only.

In the present case, the assessee is contributing in the Pension Fund Scheme jointly floated by twelve State Transport Corporations operating in different districts of the state of Tamil Nadu. All the State Transport Corporations are signatories to the Trust Deed for setting up of joint State Transport Employees Pension Fund Scheme. It is not in dispute that the said fund has been recognized by the CIT-VII, Chennai. Once the assessee is contributing towards recognized fund, the assessee is entitled to get the benefit for the contributions made to the said fund.

4.1 At the outset, ld.AR submitted that the matted has been decided by the Co-ordinate Bench of this Tribunal in assessee’s own case for assessment year 2003-04 in dated 27.11.2018 wherein the relevant portions are contained at paras 6 & 7 of the order of Tribunal which is reproduced as under:-

“6. Per contra, the Ld. AR submitted a copy of “order giving effect to CIT(A) order” passed by the ACIT, Circle -1, Salem for assessment year 2011-12 dated 15.11.2017, wherein, the AO held as under: “3. Accordingly, the case was posted for hearing and the assessee was asked cc furnish necessary documents and evidences in support of their claim. In response, the assessee appeared and represented that the damages paid for remittance to Pension fund trust is nothing but interest @ 9.5% on the delayed pay pent monthly contribution and the payments were compensatory in nature and not a penalty In support, the assessee company had furnished Government’s order, details of interest paid and detailed explanation in this regard. Considering the reply furnished, the assessee’s claim of damages for remittance if Pension fund trust for Rs 2,35,91,384/ is allowed.” furnishing a copy of interest rate declared by Pension Fund accumulation since 1952 to 2014, the AR submitted that since the AO has already decided the nature of this payment ie., the damages paid by it in assessment year 2011-12, is compensatory in nature, this appeal may be allowed.

7. We heard the rival submissions and find merit in the submissions made by the ld. AR, supra, and hence, do not find any merit in the submission of the Revenue. The appeal grounds of the Revenue are dismissed.”

“5. Disallowance of Chairman’s Office Expenses

The Assessing Officer found that assessee company has booked an expenditure of Rs.7,81,274/- under the head on account “Chairman’s Office Expenses’’. In response to specific query on the nature of this expenditure and the commercial expediency with reference to the business operation of the company, the Appellant failed substantiate the necessity of the expenditure to qualify for the deduction u/s.37 of the I.T.Act,1961. Hence, the Assessing Officer disallowed this expenditure claimed of Rs.7,81,274/- to the income of Appellant. Before me, the Appellant submitted that the Secretary to the Transport Department is the Chairman to all the State Transport Corporation in Tamil Nadu and the office is functioning at the Secretariat, Chennai with a separate Chairman’s office comprising of five officers on deputation from various transport corporations. The function of this office is to co=ordinate the details required by the Government and other Govt. departments then and there. Since this is an exclusive nodal and administrative office for all the transport corporations the administrative expenses are shared equally by all the State Transport Corporations, which is being accounted in ou books of accounts as “Chairman’s Cell Expenses’’. It was neither personal expenses nor capital expenditure enduring benefit to the company. The Appellant produced the break-up of expenses incurred in the Chairman cell, proof for the payment and other relevant particulars in support of its claim. I have perused the submissions of the Appellant and satisfied that the above expenses were incurred for the official purposes and it is allowable. Hence, I allow this ground of appeal of the assessee.

“6.1 It was submitted by ld. D.R that during the course of Appellate proceedings, the assessee has submitted their evidences before the ld.CIT(A) and the ld.CIT(A) has decided the matter without calling for the remand Report from the ld.Assessing Officer. The ld.AR has not denied the said factual position. We accordingly set aside the matter to the file of ld.CIT(A) to seek the Remand Report from the ld.Assessing Officer and decide the matter afresh as per law. This Ground relating to the expenses incurred for Chairman’s Office Expenses is allowed for statistical purposes.

6.2 In the appeal of Revenue in is partly allowed for statistical purposes.

7. Next we take the Revenue’s appeal in .

“10. In view of the above, respectfully following the decision of the Hon’ble Madras High Court, cited(supra), and the disallowance u/s.14A should be restricted to the amount of exempt income. On perusal of the assessment order I find that the Appellant has stated that sum of Rs.6,63,236/- had been sanctioned during the year as dividend @ 2.43% of the above investment. Therefore, the disallowance may be restricted to Rs.6,63,236/-. However, if an higher amount is claimed as exempt income in the return of income, the amount may be revised upwards accordingly. Hence, the grounds of appeals are partly allowed.”

’9. In the present case, the AO has not firstly disclosed why the appellant/assessee’s claim for attributing Rs.2,97,440/- as a disallowance under Section 14A had to be rejected. Taikisha says that the jurisdiction to proceed further and determine amounts is derived after examination of the accounts and rejection if any of the assessee’s claim or explanation. The second aspect is there appears to have been no scrutiny of the accounts by the AO - an aspect which is completely unnoticed by the CIT (A) and the ITAT. The third, and in the opinion of this court, important anomaly which we cannot be unmindful is that whereas the entire tax exempt income is Rs.8,90,000/-, the disallowance ultimately directed works out to nearly 110% of that sum, i.e., Rs.52,56,197/-. By no stretch of imagination can Section 14A or Rule 8D be interpreted so as to mean that the entire tax exempt income is to be disallowed. The window for disallowance is indicated in Section 14A, and is only to the extent of disallowing expenditure “incurred by the assessee in relation to the tax exempt income”. This proportion or portion of the tax exempt income surely cannot swallow the entire amount as has happened in this case’’.