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Income Tax Appellate Tribunal, “B”, BENCH KOLKATA
Before: SHRI S. S. GODARA, JM &DR. A.L.SAINI, AM
Appellant by : ShriS. Dasgupta, Addl. CIT, Sr. DR Respondent by :ShriB. K. Poddar, FCA सुनवाईक�तार�ख/ Date of Hearing : 08/05/2018 घोषणाक�तार�ख/Date of Pronouncement : 31/07/2018 आदेश / O R D E R Per Dr. A. L. Saini: By way of this appeal, the Revenue has challenged the correctness of the order dated 04.08.2016, passed by the ld. Commissioner of Income Tax (Appeals)-17, Kolkata in the matter of assessment u/s 143(3) of the Income Tax Act, 1961 ( ‘the Act’) for the Assessment Year 2011-12.
The grievances raised by the Revenueare as follows:
“1. Whether on the facts and in the circumstances of the case and in law, the Ld.CIT(A) has erred in allowing deduction in respect of employees' contribution to PF and ESI without considering the provisions stipulated in Sec.36(1)(va).
2. Whether on the facts and in the circumstances of the case and in law, the Ld.CIT(A) has erred in allowing puja expenses and temple expenses since such expenses are non- business expenditure and the assessee could not establish the nexus between the necessity of such expenditure and the business carried on by the assessee company.
3. Whether on the facts and in the circumstances of the case and in law, the Ld.CIT(A) has erred in deleting the addition made under Nursery expenses of Rs.70,34,922/- without appreciating the fact that Nursery expenses have always been held as capital in nature andas per law, as the said expenditure utilized for developing nursery and providing plants andshade trees for the tea garden.
M/s. Gillanders Arbuthnot & Co. Ltd. Assessment Year: 2011-12 4. Whether on the facts and in the circumstances of the case and in law, the Ld.CIT(A) haserred in allowing gift expense since such expenses are non-business expenditure and theassessee could not establish the nexus between the necessity of such expenditure and thebusiness carried on by the assessee company during the scrutiny proceedings.
That the appellant craves for leave to add, delete, amend or modify any ground before or atthe time of appellate proceedings.”
The first ground raised by the Revenue relates to deduction in respect of employees’ contribution of PF and ESI without considering the provisions stipulated in section 36(1)(va) of the Act.
When this appeal was called out for hearing, learned counsel for the assessee invited our attention to the order dated 01.03.2018, passed by the Division Bench of this Tribunal in assessee’s own casein for the Assessment Year 2010-11 whereby the addition on account of employees’ contribution of PF and ESI is squarely covered by the judgment of the Hon’bleDivision Bench.
5.Learned Departmental Representative did not have much to say but he nevertheless relied upon the orders of the authorities below.
We see no reasons to take any other view of the matter than the view so taken by the Division Bench of this Tribunal in assessee’s own case vide order dated 01.03.2018. In this order, the Tribunal has inter alia observed as follows:
“6. None appeared on behalf of the assessee. At the time of hearing it was brought to our notice that the Hon'ble Calcutta High Court has also taken the view that employees' contribution to PF paid on or before the due date of filing the return of income u/s 139(1) of the Act should be allowed as deduction. In this regard the decision of the Hon'ble Calcutta High Court in the case of M/s. Akzo Nobel India Ltd. Vs CIT in ITA 110 of 2011 order dated 14.06.2016 and in the case of CIT vs Vijayshree Ltd., of the Hon'ble Calcutta High Court in GA No.2607 of 2011 order dated 06.09.2011 was filed before us. In the order in the case of Vijayshree Ltd., (supra), the Hon'ble Calcutta High Court held as follows : "The only issue involved in this appeal is as to whether the deletion of the addition by the Assessing Officer on account of Employees'Contribution to ESI and PF by invoking the provision of Section 36(1)(va) read with Section 2(24)(x) of the Act was correct or not. It appears that the Tribunal below, in View of the decision of the Page | 2 M/s. Gillanders Arbuthnot & Co. Ltd. Assessment Year: 2011-12 Supreme Court in the case of Commissioner of Income Tax vs. Alom Extrusion Ltd., reported in 2009 Vol.390 ITR 306, held that the deletion was justified. Being dissatisfied, the Revenue has come up with the present appeal. After hearing Mr. Sinha, learned advocate, appearing on behalf of the appellant and after going through the decision of the Supreme Court in the case of Commissioner of Income Tax vs. Alom Extrusion Ltd., we find that the Supreme Court in the aforesaid case has held that the amendment to the second proviso to the Sec. 43(B) of the Income Tax Act, as introduced by Finance Act, 2003, was curative in nature and is required to be applied retrospectively with effect from 1st April, 1988. Such being the position, the deletion of the amount paid by the Employees' Contribution beyond due date was deductible by invoking the aforesaid amended provisions of Section 43(B) of the Act. We, therefore, find that no substantial question of law is involved in this appeal and consequently, we dismiss this appeal."
In view of the aforesaid decision of the Hon'ble Calcutta High Court, we do not find any merits in the ground raised
by the revenue and accordingly the same is dismissed. Ground No.1 raised by the revenue is dismissed.”
7. We note that as the issue is squarely covered in favour of the assessee by the decision of the Coordinate Bench of Kolkata ITAT in assessee’s own case (supra) and there is no change in facts and law and the Revenue is unable to produce any material to controvert the aforesaid findings and ld. CIT(A) has allowed the appeal of the assessee. We find no reason to interfere in the order of the ld. CIT(A) and the same is hereby upheld. Therefore, Ground No.1 raised by the Revenue is dismissed.
Ground No.2 raised by the Revenue relates to puja expenses and temple expenses.
At the outset, the ld. counsel for the assessee submitted before us that this ground of appeal raised by the Revenue is squarely covered by the judgment of the Hon’ble ITAT, Kolkata in the assessee’s own case in for Assessment Year 2010-11, wherein it was held as follows:
“9. The assessee besides growing and manufacturing of tea was also engaged in the business of real estate and trading . The AO disallowed a sum of Rs.35,040/- which was puja expenses incurred in the trading division of the assessee. The AO also disallowed a sum of Rs.2,48,179/- which was a payment to temple. These expenses were incurred in the ,textile division of the assessee. In the Micco division of the puja expenses Rs.2,84,312/- was disallowed. In the Cotton Mill division puja expenses of Rs.26,166/- was disallowed. Page | 3 M/s. Gillanders Arbuthnot & Co. Ltd. Assessment Year: 2011-12 10. On appeal by the assessee the CIT(A) deleted the addition of puja expenses of Rs..2,84,312/- in the micco division, Rs.26,166/- in the cotton mill division and Rs.35,040/- in the trading division. The AO had made the disallowance on the ground that these expenses have no nexus with the business of the assesee. The CIT(A) however followed the decision rendered in assessee's own case for A.Y.2007-08 in order dated 19.12.2013 wherein it was held that such expenses are incurred to keep harmony among the assessee's employees and therefore have to be considered as business expenses.
11. Aggrieved by the order of (CIT(A) the revenue has raised ground no.2 before the Tribunal.
12. We are of the view that there is no merit in ground no.2 raised by the revenue in view of the decision of the tribunal rendered in assessee's own case for A.Y.2007- 08 referred to by the CIT(A) in his order. Ground No.2 raised by the revenue is accordingly dismissed.”
We note that as the issue is squarely covered in favour of the assessee by the decision of the Coordinate Bench of Kolkata ITAT in assessee’s own case (supra) and there is no change in facts and law and the Revenue is unable to produce any material to controvert the aforesaid findings and ld. CIT(A) has allowed the appeal of the assessee. We find no reason to interfere in the order of the ld. CIT(A) and the same is hereby upheld. Therefore, Ground No.2 raised by the Revenue is dismissed.
Ground No.3 raised by the Revenue relates to nursery expenses of Rs.70,34,922/-.
At the outset, the ld. counsel for the assessee submitted before us that this ground of appeal raised by the Revenue is squarely covered by the judgment of the Hon’ble ITAT, Kolkata in the assessee’s own case in for Assessment Year 2010-11 wherein it was held as follows:
“20. The AO disallowed the claim of the assessee for deduction of a sum of Rs..67,12,313/- incurred by the assessee under the head 'nursery expenses'. According to the AO the expenditure in question was incurred to develop the nursery which is mainly intended to be used for a long term purpose to provide plants and shady trees for tea gardens. The AO therefore concluded that the expenditure was capital expenditure.
On appeal by the assessee the CIT(A) found that on identical issue the tribunal in assessee's own case in A.Y.2009-10 deleted similar addition made by the AO observing as follows :- Page | 4
M/s. Gillanders Arbuthnot & Co. Ltd. Assessment Year: 2011-12 " The issue is covered by the Hon'ble ITAT Kolkata Bench 'A' in dated 29.02.2016 wherein it has been held as under: "We find that the assessee has incurred expenditure for re-plantation in the existing area and plants grown in the nursery were used for replacement of dead plants within the plantation area. This fact has not been denied by revenue before CIT (A) or before us now. The AO also noted that this is re- plantation in the existing area and replacement of dead plants but by going through the volume of expenditure he made disallowance and Hon 'ble Jurisdictional High Court in the case of Tasati Tea Ltd. (supra) has considered the issue and allowed the claim of replacement of plants in existing area against dead plants by observing as under: "But however we are not inclined to interfere with the order allowing the expenditure of Rs. 468615/- as a revenue expenditure, though on different ground, in as much as if the plants are raised and maintained in a nursery for being utilized for the purpose of replantation without any expansion of the plantation area or replantation in an abandoned area, then it cannot be said to be a capital expenditure. Capital expenditure involves an investment increasing the capital for higher profit. The expansion means extension of plantation to an additional area. An area already abandoned, if replanted would be an expansion of the area under cultivation for the previous year concerned. The maintenance of an area already under cultivation cannot be treated to be an expansion of the plantation not can it be treated to be an investment or expansion adding to the capital already invested. On the other hand, it would be maintenance of the plantation itself and, therefore, is revenue expenditure.” Respectfully following the tribunal decision the AO is directed to delete the addition of Rs. 67,12,313/- added on account of Capital expenditure. This ground of appeal of the assessee is hereby allowed for statistical purposes."
13. We note that as the issue is squarely covered in favour of the assessee by the decision of the Coordinate Bench of Kolkata ITAT in assessee’s own case (supra) and there is no change in facts and law and the Revenue is unable to produce any material to controvert the aforesaid findings and ld. CIT(A) has allowed the appeal of the assessee. We find no reason to interfere in the order of the ld. CIT(A) and the same is hereby upheld. Therefore, Ground No.3 raised by the Revenue is dismissed.
14. Ground No.4 raised by the Revenue relates to gift expenses incurred by the assessee.
During the course of hearing, the ld. Counsel for the assessee has submitted that Assessing Officer treated gift expenses of Rs.6,75,309/- of Micco Division of the company as non-business expenditure and disallowed the same. The ld. Counsel for the assessee has submitted Page | 5
M/s. Gillanders Arbuthnot & Co. Ltd. Assessment Year: 2011-12 before us that above Gift Expenses are incurred in the normal course of business with regards to the Micco Division as it is a construction division and has different sites, in all those sitessome expenses are made for the purpose of Diwali gift, gift to employees and other gift expenses are only for the purposeof normal business expenditure.The ld. Counsel for the assessee submitted that all the gift expenses were incurred for the ultimate purpose of the business only and it should be treated asnormal business expenditure.
On the other hand, the ld. DR for the Revenue has primarily reiterated the stand taken by the Assessing Officer which we have already noted in our earlier para and is not being repeated for the sake of brevity.
We have heard both the parties and perused the materials available on record, we note that gift expenses were incurred by the assessee is for the purpose of his business, as these gift expenses are incurred in the normal course of doing business. Therefore, such expenses are allowable u/s 37(1) of the Act. We note that some expenses/gifts were made to the employees on the occasion of diwali to keep the employee happy and productive and, therefore, these expenses are for the purpose of business and allowable u/s 37(1) of the Act. However, we note that the disallowance of Rs.6,75,309/- on account of diwali expenses made by the Assessing Officer because some vouchers were found not verifiable. Therefore, on this issue we rely on the Coordinate Bench of Mumbai, ITAT in the case of Urmila & Co. Ltd. [2012] 20 taxmann.com 324(Mum.) wherein it was held as follows:
“29. We have heard the learned authorized representative as well as the learned Departmental representative. It is undisputed fact that the assessee did not produce the complete vouchers in supports of its claim. Moreover, the majority of payments were made in cash. Therefore, the assessee has failed to substantiate its claim that the expenditure has been wholly and exclusively incurred for business purposes. Hence, we are of the view that the 50 per cent,disallowance made by the Assessing Officer and confirmed by the Commissioner of Income-tax (Appeals) is just and proper keeping in view of the facts and circumstances of the case. Therefore, we were not inclined to interfere in the order of the learned Commissioner of Income-tax (Appeals)”. Page | 6
M/s. Gillanders Arbuthnot & Co. Ltd. Assessment Year: 2011-12 Since, the assessee has not produced entire vouchers of gift expenses during the assessment proceedings, therefore relying on the judgment of the Coordinate bench (supra), the disallowance made by AO is restricted to 50%. Therefore, we confirm the action of the ld. CIT(A) to restrict the gift expenses at the rate of 50% of expenses incurred by the assessee. That being so, we decline to interfere in the order passed by the ld. CIT(A), his order on this issue is hereby upheld and ground raised by the Revenue is dismissed.
In the result, the appeal filed by the Revenue is dismissed.
Order is pronounced in the open court on 31.07.2018.