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Income Tax Appellate Tribunal, “B” BENCH, MUMBAI
O R D E R PER RAJESH KUMAR, A. M: These cross appeals are directed against the order dated 14.11.2014 passed by the ld. CIT(A)-5, Mumbai. These appeals, for the sake of in this consolidated order.
At the outset, we would like to mention that neither the assessee nor any authorized representative appeared at the time of hearing of the appeal. Therefore, we proceed to decide the appeal ex-parte in absence of the assessee after hearing ld.DR on the basis of material available before us.
The issue raised by the assessee in various grounds of appeal
is against the confirmation of disallowance of depreciation of Rs.14,22,372/- interest paid on borrowed funds of Rs.8,14,400/- and running expenses of Rs.5569/- of the car on the ground that car was registered in the name of one of the major shareholders of the company.
4. Brief facts in brief are that during the course of assessment proceedings, the AO observed that a BMW Motor car for the year under consideration was purchased in the name of Mrs.Mriduladevi N Agarwal after taking loan and was accounted for in the books of accounts of the company accordingly. Interest on loan borrowed Rs. 8,14,400/- and depreciation on BMW car of Rs.14,22,372/- were claimed as expenses besides car running expenses of Rs.5569/-. According to the AO the car was neither purchased in the name of the Director nor managing director of the Company and therefore, the expenses claimed by way depreciation, interest and running Act, 1961 . As a result disallowed and added the same to the total income of the assessee by framing the assessment under section 143(3) of the Act vide assessment order dated 31.1.2014 assessing the total income at Rs.64,96,070/-. Aggrieved by the order of the AO, the assessee preferred an appeal before the ld.CIT(A), who after considering the contentions raised by the ld.AR during the course of appellate proceedings, dismissed the appeal of the assessee on this issue. Further aggrieved by the order of FAA, the assessee is in appeal before this Tribunal.
5. Heard the ld.DR and perused the material available before us including the impugned order. We find that the a car purchased in the name of Mrs.Mriduladevi N Agarwal, who is a major shareholder of the company and the loan was also sanctioned in the name of shareholder Mrs.Mriduladevi N Agarwal. The ld.CIT(A) has recorded a finding of facts that it was not proved by the assessee by way of production of any logbook or other evidence to show that the car was used for the business purpose. There is nothing before us to reverse the findings of the ld.CIT(A) and we are ,therefore, inclined to confirm the action of the ld.CIT(A) on this issue. Accordingly, the appeal of the assessee on this issue stands dismissed.
6. The issue raised in the grounds of appeal No.1 is against the deletion of addition on the delayed payment of Employees contribution to provident funds and ESIC after the due date in terms of Explanation to section 36(1)(va) of the Income Tax Act, 1961 and the issues raised in ground No. 2 are that employees contribution to PF and ESIC was not allowable under the provisions of section 43B of the Act.
7. The AO during the course of assessment proceedings observed that the employees contribution towards PF and ESIC was paid after due date in violation of provisions of section 36(1)(va) of the Act and therefore provisions of section 43B could not be resorted to claim the benefit of deduction qua these expenses when the deduction was not allowable under the relevant provisions of Act i.e 36(v)(va) of the Act.
8. During the appellate proceedings, the FAA allowed the appeal of the assessee on this issue by observing and holding as under : “4.2 Ground No(2): Through this ground, the assessee has challenged the disallowance of claim of deduction being employee's contribution to the PF & ESIC amounting to Rs.3454199/-[ 24,34,146/-+ 10,20,053/-]. The AO disallowed the claim in view of the provisions of s. 36 (1) (va) as those amounts were not credited to the relevant fund within the due date of payments prescribed in those acts. As per the provisions of IT Act, the employee's contribution to the PF/ESIC is treated as Income of the assessee '(employer) under section Z(Z4)(x) and the deduction thereof is allowable under section 36(1 )(va) provided the amount is credited in the relevant fund within the due date as prescribed in PF / ESIC acts. Under those acts, the due date for payment, as regards to succeeding month. Further a grace period of 7 days is also available. That way if the amount was not credited to the relevant fund by 22nd of the next month, then deduction under section 36(1 )(va) would not be available to the assessee. The AO has been of the view that section 43B is not- applicable as regard to the employee's contribution; and the relevant provision is sec 36(1 )(va). It is noted that the provision of section 43B is rather applicable onto employer's contribution and the deduction thereon would be available if payment was made before the due date of filing return. Accordingly, the AO has disallowed the claim of deduction and added that amount to the assessee’s total income. 4.2.1 During the appellate proceedings, it was stated that the various Tribunal and High Courts' have treated the employee's contribution and employer’s contribution at par and 'had held that the deduction as regards to employee's contribution too would be allowable if payment was made before the due date of filing of return (as provided In 'section 43B for employer's contribution]. In the context the assessee has also relied onto a recent decision of the Hon'ble Mumbai High Court in the case of Hindustan Organics Chemicals Ltd 366 ITR 001 (Bom). Respectfully following the decision of jurisdictional High Court, the addition made by the AO in this regard is deleted . The AO is directed to allow the claim of deduction of Rs.34,54,199/-“