DCIT, CHENNAI vs. SRINIVASA FASHIONS LTD., CHENNAI

आदेश/ O R D E R

PER S. JAYARAMAN, ACCOUNTANT MEMBER:

The assessee’s appeals are against the orders of the CIT (A) -15,

Chennai in ITA No 269 / CIT(A)-15/13-14 against the original assessment

made for ay 2008-09 on 30.12.2010 , in ITA No 77/ CIT(A)-15/14-15 against

the re-assessment made for ay 2008-09 on 30.3.2014 , respectively, dt

15.02.2016, in ITA Nos 356, 445&78 / CIT(A)-15/13-14 against the

assessments made for ays 2009-10, 2010-11& 2011-12 , respectively , on

28.11.2011 , 30.3.2013 & 11.01.2016. The Revenue filed appeals for ays

2009-10 & 2011-12 in ITA No. 1297/2016 & 1130/2016 against the CIT(A)

orders mentioned, supra. The assessee also filed CO 85/2016 and 84/2016

for ays 2009-10 & 2011-12 against the CIT(A) orders mentioned above.

1966/Chny/2016, the appeal for ay 2010-11 in ITA No. 1967/Chny/2016, the

appeal for ay 2011-12 in ITA No. 1968/Chny/2016, each of them are filed

belatedly by 30 days and the Revenue’s appeal for ay 2011-12 in ITA No.

1130/Chny/2016 is filed belatedly by 12 days. Both the assessee and the

Revenue filed condonation petitions. We heard the AR and the DR. We find

that there was sufficient cause for not filing these appeals/Cross Objections

:-3-: I.T.A. N0s. 1130, 1297, 1965, 1966, 1967 & 1968/Mds/2016 & 2096/Mds/2017 & CO. Nos. 84 & 85/Mds/2016

before the stipulated time. Therefore, we condone the delay and admit these

appeals/CO.

M/s. Srinivasa Fashions Pvt. Ltd, the assessee , an export garment 3.

manufacturing company is in Special economic Zone (SEZ) and is eligible for

tax exemption u/s 10A. It took over all the assets and liabilities of M/s Srinivas

Exports International, a partnership firm and a garment manufacturing unit in

a domestic tariff area (DTA) , as on 01.03.2008. Thus, as on the year end ie

as on 31.3.2008 , the assesse had two units viz SEZ unit & DTA unit. The A O

found that the expenditure incurred in DTA unit for one month was high as

compared to the expenditure incurred in the SEZ for 12 months. The AO has

linked the installed and actual capacity of machinery in SEZ unit and DTA unit

and found that the production in DTA unit depends on the work orders

received from the SEZ and hence the production in the DTA unit has been

transferred to the SEZ unit, which sold and claimed the deduction in SEZ unit.

Since the sales are made to related parties , invoking the provisions of section

10AA(9) , the AO took 25% of sales of SEZ unit as that of DTA unit and

recalculated eligible profit to be allowed in SEZ unit at Rs. 20,37,21,093/-,

after determining the total turnover in DTA unit at Rs.1,61,50,501/- and thus

completed the assessment u/s 143(3). Later on , the AO has reopened the

above assessment u/s 148 , on the ground that the unabsorbed depreciation

of Rs.97,53,913/- claimed by the erstwhile firm M/s Srinivasa Exports

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International has been wrongly been allowed when the assessee did not claim

depreciation on the assets transferred from M/s Srinivasa Exports

International but claimed as unabsorbed depreciation . However as per

proviso to sec.32(1)(ii), the depreciation between the predecessor and

successor failing under the section 47(xiii) (taken over of business of the firm

by company) has to be apportioned for the number of days for which the

assets were used by them. Since the assessee company took over the firm

only from 01.03.2008 onwards, it can set off depreciation only to the extent of

Rs.31/366 x 97,53,913 i.e. Rs.8,26,151/- only as against Rs.97,53,913/-

allowed. Further u/s 78(2), there is no provision to set off the losses of the

firm against the income of the company taking over it and the assessment of

the firm up to 29.02.2008 has to be separately made as the case of

dissolution . After giving opportunity to the assessee and after considering its

submissions, the AO held that since the assessee company took over the firm

only from 01.03.2008 onwards, it can set off depreciation only to the extent of

Rs.31/366 x 97,53,913 i.e. Rs.8,26,151/- only as against Rs.97,53,913/-

allowed in the original assessment and hence added Rs. 89,27,762/-.

the CIT(A) dismissed the appeal against the original assessment holding that

the processing charges by DTA unit are not at market price. However, on the

addition of Rs.89,27,762/- made in the reassessment , being unabsorbed

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depreciation of the predecessor firm, the CIT (A) accepted the appellant’s

submission and held that provision of section 78(2) are not applicable but

provision of section 72A(6) r.w.s 47(xii) is applicable and directed the AO to

allow claim of set off of unabsorbed depreciation after verification of

conditions as laid down in section 47(xii) from the relevant records. Thus, the

CIT(A) allowed the assessee’s grounds of appeal .

assessment order as well as against the reassessment order , the assessee

filed appeals in ITA nos. 1966 & 1965/ CHNY/ 2016, respectively, with

following grounds of appeal :

“2. For that the Commissioner of Income Tax (Appeals) failed to appreciate that the order of the Assessing Officer is without jurisdiction. 3. For that the Commissioner of Income Tax (Appeals) failed to appreciate that the Assessing Officer erred in invoking the provisions of section 10AA(9). 4. For that the Commissioner of Income Tax (Appeals) failed to appreciate that the DTA (Domestic Tariff Area) of the appellant merely carried out the job contract for the eligible unit u/s.10AA of the appellant. 5. For that the Commissioner of Income Tax (Appeals) failed to appreciate that the Assessing Officer erred in concluding that the transactions between the DTA unit and eligible unit u/s.10AA were not at market rate. 6. For that the Commissioner of Income Tax (Appeals) erred in upholding the action of the Assessing Officer in adopting 25% of sales of the eligible u/s.10AA as the sales of the DTA unit and consequently recalculating the profits of both the units and the allowable deduction u/s.10AA. 7. For that without prejudice to the above, the Commissioner of Income Tax (Appeals) ought to have appreciated the fact that after setting off of the available losses the total income of appellant was NIL.

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The grounds on the reassessment are :

at market price, is common from ays 2008-09 to 2010-11 and hence, it would

be dealt appropriately, infra. With regard to the addition of Rs. 89,27,762/-,

unabsorbed depreciation of the predecessor firm, the CIT(A) dealt as under:

“5.2.1 I have considered the findings given by the AO and submissions made by the AR of the appellant. The AO has reopened the assessment u/s 148 on the ground that unabsorbed depreciation of Rs.97,53,913/- as claimed by M/s Srinivasa Exports International which It took over on 01.03.2008 has wrongly been allowed. The AO has stated that the unabsorbed depreciation of Rs.97,53,913/- as claimed by the firm was allowed. However as per proviso to sec.32(1)(ii), the depreciation between the predecessor and successor failing under the section 47(xlii) (taken over of business of the firm by company) has to be apportioned for the number of days for which the assets were used by them. Since the assessee company took over the firm only from 01.03.2008

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onwards, It can set off depreciation only to the extent of Rs.31/366 x 97,53,913 i.e. Rs.8,26,151/- only as against Rs.97,53,913/- allowed. Further u/s 78(2), there Is no provision to set off the losses of the firm against the income of the company taking over it. The appellant has submitted that provision of section 72A(6) are applicable and not section 78(2) as the firm no longer exists and has been taken over by the appellant company. The contention of the appellant is acceptable since provision of section 78(2) are not applicable but provision of section 72A(6) r.w.s 47(xii) is applicable. The AO is directed to allow claim of set off of unabsorbed depreciation after verification of conditions as laid down in section 47(xii) from the relevant records. These grounds of appeal are allowed for statistical purpose.”

The AR submitted that the order of the CIT(A) is not clear as to whether the

unabsorbed depreciation should be set off fully or for 31 days. Per contra, the

DR supported the order of the CIT(A).

CIT(A) for proper adjudication and also for passing a speaking order. Hence,

the corresponding grounds of the asseesee in ITA Nos. 1965 of 2016 is

treated as allowed for statistical purposes.

ITA Nos. 1297 of 2016 , 2096 of 2016 & CO 85 of 2016 of ay 2009-10 :

loss claimed in the DTA unit whereas profit is shown in the SEZ unit especially

when the entire processing income for the DTA unit is from the services

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rendered to SEZ unit. The AO observed that the DTA pays jobwork charges to

outsiders at a higher rate. However, it charges at lesser rate to the SEZ unit

(as admitted by the AR of the appellant during assessment proceedings), thus

incurring huge losses. By this mechanism of under invoicing at a lower rate,

the DTA unit is incurring huge losses whereas in the case of the SEZ unit to

which deduction u/s 10AA are available, huge profit are being shown. The

assessee was asked to give documentary evidence as proof in respect of the

services rendered and to prove that services rendered by the DTA unit to the

SEZ unit are at market rate. The AR admitted during the assessment

proceedings that though the workers are employed throughout the year by

the DTA, its cost is not charged to the SEZ unit. The AO observed that profit

in the SEZ unit is shown at Rs. 69,088,163/-, whereas loss shown in the DTA

unit at Rs. 4,68,22,748/-. Combined profit of two units is Rs.2,22,65,415/-

itself proves that the assessee's contention is wrong. The AO observed that

consequently in DTA unit, whose income is chargeable to income tax but it

does not have any deduction/exemption benefit u/s 10AA , consequently

huge artificial losses are created by deliberately keeping the processing

charges charged to the SEZ unit at a very low price, extraordinarily lesser

than the operating costs and processing charges incurred by the DTA unit,

thereby creating huge losses to be set off against 'income from other sources'

as well as ensuring that huge losses are carried forward to be set off against

any further income of DTA in the subsequent AYs. This modus operandi is

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followed by the assessee because the income from the DTA unit is taxable.

Since the assessee could not give the comparable market price with regard to

the services rendered by DTA to SEZ unit, the provisions of section 10AA(9)

are clearly applicable . Therefore, the AO reworked the income of DTA unit

and the SEZ units as per provisions of section 10AA(9), as if the processing

charges/job work charges charged by the DTA unit are charged so that there

is no loss to the DTA unit. The job work charges raised by the DTA unit on the

SEZ unit are taken at as if the processing charges are charged at cost of

expenditure incurred by the DTA unit and there could be no loss incurred

bythe DTA unit. The A O computed the income from the SEZ unit at

Rs.1,90,08,126/- and from the DTA unit at Rs.32,05,499/-. Further, while

computing the income, the A O set off the unabsorbed depreciation against

income of the SEZ unit before allowing deduction u/s 10AA.

assessee has failed to give comparable market price with regard to the

services rendered by the DTA to the SEZ unit, the CIT (A) upheld the action

of AO . With regard to set off the unabsorbed depreciation against income of

the SEZunit before allowing deduction u/s 10AA, following the decision of

the Hon'ble ITAT Mumbai in the case of London Infotech P. Ltd. vs. DIT in

ITA No.6582/Mum/2012 dated 01.01.2014 which relied on the decision in

the Scientific Atlanta India Technology (P) Ltd. vs. ACIT(2010) 38 SOT

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252(Chennai)(SB) directed the AO not to set off unabsorbed depreciation

against total income while computing deduction u/s 10AA and thus partly

allowed the assessee’s appeal. Aggrieved against the order of the CIT(A),

the Revenue filed an appeal in ITA No 1297 of 2016 and the assesse filed the

cross appeal in ITA No. 2096 of 2017 and CO85 of 2016. The Revenue’s

grounds of appeal are as under :

“ 2. The Ld CIT(A) directed the AO not to set off unabsorbed depreciation against total income while computing deduction u/s. 10AA. 2.1 The ld CIT(A) failed to appreciate even though the profit of the eligible undertaking has to be first computed. Then depreciation is to be treated as current year depreciation and is to be set off against the business income of the eligible unit it before allowing deduction u/s. 10AA. 2.2 The Ld CIT(A) failed to appreciate even though the carry forward losses of earlier assessment years have to set off against total income of relevant assessment year and it is out of balance income only that deduction under section 10B can be granted. 2.3 The Ld CIT(A) failed to appreciate even though the unabsorbed depreciation of SEZ unit is adjusted against the profit of eligible unit (SEZ Unit) before allowing deduction u/s. 10AA. Hence, the unabsorbed depreciation of Rs. 1,03,02,299/- is set off against income from business and profession arrived at Rs. 1,90,08,126/- 2.4 The Ld CIT(A) failed to appreciate, even though the similar issue decided is in favour of Revenue in CIT vs Yokogawa India Ltd 17 Taxmann.com (KTK). The same is being entrusted before the Apex Court. 3. For these and other grounds that may be adduced at the time of hearing. It is prayed that the order of the Learned CIT(A) may be set aside and that of the Assessing Officer restored. ”

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CO.NO: 85/2016 of ay 2009-10: The grounds of Cross Objection are extracted as under: 1. For that the order of the Commissioner of Income Tax (Appeals) is contrary to the law, facts and circumstances of the case to the extent prejudicial to the interest of the assessee and is opposed to the principles of equity, natural justice and fair play. 2. For that the Commissioner of Income Tax (Appeals) failed to appreciate that the Assessing Officer erred in invoking the provisions of section 10AA(9). 3. For that the Commissioner of Income Tax (Appeals) failed to appreciate that the DTA (Domestic Tariff Area) of the respondent merely carried out the job contract for the eligible unit u/s.10AA of the respondent. 4. For that the Commissioner of Income Tax (Appeals) erred in concluding that the transactions between the DTA unit and eligible unit u/s. 10AA were not at market rate. 5. For that the Commissioner of Income Tax (Appeals) consequently erred in upholding the action of the Assessing Officer in treating Rs.5,00,80,038/- as the additional processing charges of the eligible unit. ”

at market price, huge artificial loss is claimed in the DTA unit while profit is

shown in the SEZ unit etc., is common from ays 2008-09 to 2010-11 and

hence, it would be dealt appropriately, infra.

ays 2006-07 & 2007-08. The assessee also had brought forward depreciation

loss in the SEZ unit for ays 2006-07 & 2007-08. While making the

computation, the AO arrived the SEZ unit income after allowing the current

depreciation, from which he allowed the unabsorbed depreciation of ays

:-12-: I.T.A. N0s. 1130, 1297, 1965, 1966, 1967 & 1968/Mds/2016 & 2096/Mds/2017 & CO. Nos. 84 & 85/Mds/2016

2006-07 & 2007-08 and then arrived the income from the SEZ unit. To which

he added the income from the DTA unit and arrived the total income at Rs.

1,19,11,331/-. From which, the AO allowed the SEZ units brought forward

business loss of ay 2006-07 & 2007-08 to the extent of Rs. 1,19,11,331/- and

then allowed to carry forward the balance business loss of SEZ unit related to

ay 2007-08 at Rs. 94,78,204/-. The CIT(A) directed the AO not to set off

unabsorbed depreciation against total income while computing the deduction

u/s. 10AA. Aggrieved, the Revenue is on appeal.

2008-09 & 2009-10. We find from the assessment order of assessment year

2008-09, that the AO has allowed eligible profit to be allowed in the SEZ unit

at Rs. 20,37,27,093/- and send a Nill demand notice to the assessee.

However, in the assessment order of the assessment year 2009-10, the AO

set off the SEZ units, brought forward depreciation and business losses of

assessment years 2006-07 & 2007-08. It is known as to how the so called

brought forward SEZ units business & depreciation losses of ays 2006-07 &

2007-08 in assessment year 2008-09. Since, the relevant facts are not clear

from the orders, this issue is remitted back to the AO for a fresh examination

and determination in accordance with law. Before deciding this issue the AO

shall afford adequate opportunity to the assessee. The Revenue’s appeal is

treated as allowed for statistical purposes.

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Since, the assessee has not pressed this appeal, it is dismissed.

ITA No 1967 of 2016 for ay 2010-11 :

give the comparable market price with regard to the services rendered by the

DTA to the SEZ unit, the AO reworked the income of the DTA unit and the

SEZ unit , as was done in ay 2009-10. Further, the AO has disallowed

depreciation on land of Rs.64,926/-, depreciation on preoperative expenses

Rs.1,05,166/- and disallowed Rs 15,890/- u/s 14 A . Aggrieved , the assesse

filed appeal before the CIT(A) . The CIT(A) dismissed the appeal . The

assessee filed an appeal in ITA No 1967 of 2016 with following prayers :

“(a) Direct the Assessing Officer to delete the disallowance of depreciation of Rs.64,926/- on leasehold land. (b) Direct the Assessing Officer to delete the disallowance of amortization of preoperative expenses amounting to RS.1,05,166/- (c) Direct the Assessing Officer to delete the disallowance of Rs.15,890/- made u/s.14A r.w.r. 8D. (d) Direct the Assessing Officer to allow the entire claim of the appellant u/s.10AA. (e) Pass such other order as this Hon'ble Tribunal may deem fit.”

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manufacturing company is in Special economic Zone (SEZ) and is eligible for

tax exemption u/s 10A. It took over all the assets and liabilities of M/s Srinivas

Exports International, a partnership firm and a garment manufacturing unit in

a domestic tariff area (DTA) , as on 01.03.2008. Thus, as on the year end ie

as on 31.3.2008 , the assesse had two units viz SEZ unit & DTA unit. The A O

found that the expenditure incurred in DTA unit for one month was high as

compared to the expenditure incurred in the SEZ for 12 months. The A O has

linked the installed and actual capacity of machinery in SEZ unit and DTA unit

and found that the production in DTA unit depends on the work orders

received from the SEZ and hence the production in the DTA unit has been

transferred to the SEZ unit, which sold and claimed the deduction in SEZ

unit. Since the sales are made to related parties , invoking the provisions of

section 10AA(9) , the AO took 25% of sales of SEZ unit as that of DTA unit

and recalculated eligible profit to be allowed in SEZ unit at Rs. 20,37,21,093/-,

after determining the total turnover in DTA unit at Rs. 1,61,50,501/- and thus

completed the assessment u/s 143(3). In the assessment made for ay 2009-

10, the AO found that there is a loss claimed in the DTA unit whereas profit is

shown in the SEZ unit especially when the entire processing income for the

DTA unit is from the services rendered to SEZ unit. The A O observed that

the DTA pays jobwork charges to outsiders at a higher rate. However, it

charges at lesser rate to the SEZ unit (as admitted by the AR of the appellant

:-15-: I.T.A. N0s. 1130, 1297, 1965, 1966, 1967 & 1968/Mds/2016 & 2096/Mds/2017 & CO. Nos. 84 & 85/Mds/2016

during assessment proceedings), thus incurring huge losses. By this

mechanism of under invoicing at a lower rate, the DTA unit is incurring huge

losses whereas in the case of the SEZ unit to which deduction u/s 10AA are

available, huge profit are being shown. The assessee was asked to give

documentary evidence as proof in respect of the services rendered and to

prove that services rendered by the DTA unit to the SEZ unit are at market

rate. The AR admitted during the assessment proceedings that though the

workers are employed throughout the year by the DTA, its cost is not charged

to the SEZ unit. The AO observed that profit in the SEZ unit is shown at Rs.

69,088,163/-, whereas loss shown in the DTA unit at Rs. 4,68,22,748/-.

Combined profit of two units is Rs. 2,22,65,415/- itself proves that the

assessee's contention is wrong. The AO observed that consequently in DTA

unit, whose income is chargeable to income tax but it does not have any

deduction/exemption benefit u/s 10AA , consequently huge artificial losses

are created by deliberately keeping the processing charges charged to the

SEZ unit at a very low price, extraordinarily lesser than the operating costs

and processing charges incurred by the DTA unit, thereby creating huge

losses to be set off against 'income from other sources' as well as ensuring

that huge losses are carried forward to be set off against any further income

of DTA in the subsequent AYs. This modus operandi is followed by the

assessee because the income from the DTA unit is taxable. Since the assessee

could not give the comparable market price with regard to the services

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rendered by DTA to SEZ unit, the provisions of section 10AA(9) are clearly

applicable . Therefore, the AO reworked the income of DTA unit and the SEZ

units as per provisions of section 10AA(9), as if the processing charges/job

work charges charged by the DTA unit are charged so that there is no loss to

the DTA unit. The job work charges raised by the DTA unit on the SEZ unit

are taken at as if the processing charges are charged at cost of expenditure

incurred by the DTA unit and there could be no loss incurred by the DTA

unit. The A O computed the income from the SEZ unit at Rs.1,90,08,126/- and

from the DTA unit at Rs.32,05,499/-. Similarly, he re-worked the income of

the DTA unit and the SEZ unit for the ay 2010-11 also. On appeal against this

issue, the CIT(A) upheld such re-working made by the AO in all these ays.

made different workings in each of the ays. The Ld. CIT(A) has not

appreciated such differences and simply confirmed the position taken by the

AO. Per contra, the DR supported the orders of the lower authorities. Since

the AO has observed that the DTA unit, whose income is chargeable to

income tax but it does not have any deduction/exemption benefit u/s 10AA ,

consequently huge artificial losses are created by deliberately keeping the

processing charges charged to the SEZ unit at a very low price, extraordinarily

lesser than the operating costs and processing charges incurred by the DTA

:-17-: I.T.A. N0s. 1130, 1297, 1965, 1966, 1967 & 1968/Mds/2016 & 2096/Mds/2017 & CO. Nos. 84 & 85/Mds/2016

unit, thereby creating huge losses to be set off against 'income from other

sources' as well as ensuring that huge losses are carried forward to be set off

against any further income of DTA in the subsequent AYs etc, the onus is on

the assessee to lay all material in support of its contentions . It would be open

to the A O to take into consideration various factors which would go to show

whether the amount was paid as required under section10AA (9) . If after

taking the relevant factors into consideration, the AO comes to the conclusion

that the payment does not correspond to the market value of such goods or

services as on the date of transfer, it would be open to him to determine the

market value of such goods or services as on the date for the purpose of

deduction under this section. On the facts and circumstances , we deem it fit

to set aside the orders of the CIT (A) on this issue for ays 2008-09 to 2010-11

and remit this issue to the AO for re-examination. The AO after giving

adequate opportunity to the assessee decide this issue in accordance with

law. The assessee’s appeals, Cos on this issue for ays 2008-09 to 2010-11

are treated as allowed for statistical purposes.

ITA 1130-2016, ITA No 1968 of 2016 & CO 84/2016 for ay 2011-12:

Rs.68,14,858/- u/s 36(1)(va) on the basis that employees contribution to ESI

and PF were made beyond the due date prescribed in the relevant Acts.

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Aggrieved , the assesse filed appeal before the CIT(A) . The CIT(A) relying

on the decision of the Hon'ble ITAT, Mumbai in the case of ITA vs. LKP

Securities Ltd vide ITA No. 638/Mum/2012 and ITA No.1093/Mum/2012 dated

17.05.2013 directed the AO to allow the deduction u/s 36(1) (va) where any

payment is made within the grace period and thus partly allowed the appeal.

Aggrieved, the Revenue filed the appeal in ITA No 1130 of 2016 and the

assessee filed the cross appeal in ITA No 1968 of 2016 . The assessee filed a

CO 84/CHNY/2016. The Revenue’s grounds of appeal are as under :

“1. The order of the LdCIT(A) is contrary to law and facts of the case. 2. The LdCIT(A) direct the AO to allow deduction u/s 36(1)(va) for Rs. 69,83,315/- Where any payment is made within the grace period. 2.1 The Ld CIT(A) failed to appreciate, eventhough the AO in assessment order mentioned as per Annexure to Form 3CD that the assessee company had not paid the employee's contribution to ESI within the due dates as per the relevant Acts. 2.2 The LdCIT(A) failed to appreciate, eventhough the AO relied upon in Honourable ITAT Kolkatta in the case of DClTVs Bengal Chemicals & Pharmaceuticals Ltd (2011) 10 taxmann .com 26 (Kol) has categorically held that employee's contribution to PF etc. received by the employer is income in his hands as per sec 2(24)(x) and deductible only if paid within the due date as per the respective act as specified in sec 36(1)(va). 2.3 The Ld CIT(A) failed to appreciate, eventhough the provisions of sec 43B which is applicable in respect of employer's contribution is quite different than the provisions of sec 36(1)(va) which is applicable in respect of employee's contribution. 2.4 The LdCIT(A) failed to appreciate, even though the AO relied upon in Rajasthan High Court in the case of CIT Vs Udaipur Distillery Co . The Honourable High Court held that “in order to avail benefits of deduction in respect of contributions to provident fund, superannuation fund and gratuity

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fund or any other funds for welfare of employees, sums are not only required to be actually paid before end of the previous year but are required to be paid within time stipulated under relevant statute or notification etc., and if payments have not been made within stipulated time, deduction cannot be claimed at any time thereafter." 3. For these and other grounds that may be adduced at the time of hearing. It is prayed that the order of the Learned CIT (A) may be set aside and that of the Assessing Officer restored.

company has complied with the conditions of payment of PF/ESI under the

respective statues but there was a delay in payments and assessee is liable

for payment of interest also. But under the provisions of Income Tax Act the

assessee company has deposited employees contribution of ESI and EPF

before time limit specified u/s.139(1) of the Act and covered by the provisions

of Sec. 43B of the Act. We found similar issue was considered by the

Jurisdictional High Court in the case of CIT vs. M/s. Industrial Security &

Intelligence India Pvt. Ltd TCA No. 585 & 586/2015 and has held as under:-

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We respectfully follow the jurisdictional High Court decision and direct the AO

to delete the addition and accordingly dismiss the grounds of the Revenue

and allow the assessee’s cross appeal.

lease agreement with M/S Mahindra Industrial Park of Rs.64,00,000/- which is

non refundable and lease premiums is amortized at 1% over the period of

lease. The AO has disallowed depreciation on land of Rs.64,926/-. Further it

submitted that it claimed pre-operative expenses of Rs.1,05,166/- . The AO

in the assessment order held that the Income Tax Act allows only preliminary

expenses to be amortized u/s 35D and disallowed the depreciation claim on

pre-operative expenses claimed at 15% at Rs 1,05,166/- is disallowed. The

assessee submitted that it has been claimed as per Audit Report and pleaded

that the AO without re-examination has disallowed them.

the disallowance made u/s. 14A r.w.r. 8D, the corresponding ground is

dismissed. We deem it fit to set aside the above issues to the AO for a fresh

examination. The AO after giving adequate opportunity to the assessee

:-21-: I.T.A. N0s. 1130, 1297, 1965, 1966, 1967 & 1968/Mds/2016 & 2096/Mds/2017 & CO. Nos. 84 & 85/Mds/2016

decide them, a fresh, in accordance with law. The assessee’s CO is treated

as partly allowed for statistical purposes.

treated as allowed for statistical purposes & ITA No. 2096/2017 is dismissed

and the Revenue appeals in ITA Nos. 1297/2016 is treated as allowed for

statistical purposes & 1130/2016 is dismissed. The assessee’s cross appeal in

ITA No. 1968/2016 is allowed and the CO Nos. 84 & 85/2016 are treated as

allowed for statistical purposes.

Order pronounced on Thursday, the 30th day of November, 2017 at Chennai.

Sd/- Sd/- (एन एन एन.आर एन आर आर.एस आर एस एस . . . .गणेशन एस गणेशन गणेशन) गणेशन (एसजयरामन एसजयरामन एसजयरामन) एसजयरामन (N.R.S. GANESAN) (S. JAYARAMAN) �याियकसद�य �याियकसद�य/Judicial Member �याियकसद�य �याियकसद�य लेखासद�य लेखासद�य/Accountant Member लेखासद�य लेखासद�य

चे�ई/Chennai, �दनांक/Dated: 30th November, 2017 JPV आदेशक��ितिलिपअ�ेिषत/Copy to: 1. अपीलाथ�/Appellant 2. ��यथ�/Respondent 3. आयकरआयु� ) अपील(/CIT(A) 4. आयकरआयु�/CIT 5. िवभागीय�ितिनिध/DR 6. गाड#फाईल/GF