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Income Tax Appellate Tribunal, KOLKATA BENCH “B” KOLKATA
Before: Shri N.V. Vasudevan & Shri Waseem Ahmed
आदेश /O R D E R
PER Waseem Ahmed, Accountant Member:-
This appeal by the Revenue is arising out of order of Commissioner of Income Tax (Appeals)-XVI, Kolkata in appeal No.347/CIT(A)-XVI/08-09 dated 25.01.2012. Assessment was framed by DCIT, Circle-7(2) Kolkata u/s 143(3) of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) vide his order dated 31.01.2001 for assessment year 1998-99.
ITA No.1122/Kol/2012 A.Y. 1998-99 CIT Cir-4, Kol. M/s Derby Tea & Inds. Pvt. Ltd. Page 2 Shri D.S. Damle, Ld. Authorized Representative appearing on behalf of assessee and Shri Pinkai Mukherjee, Ld. Departmental Representative appearing on behalf of Revenue.
2 At the outset, it is observed that there is a delay of 44 days in filing the appeal before this Tribunal. In this regard, application has been filed by the Revenue seeking condonation of the said delay as mentioned in the Application. 3. Let us to deal with limitation issue primarily before going to the merits of that case as the contours of the area of discretion of the Courts in the matter of condonation of delays in filing appeals are set out in a number of Apex Court and specially in the case titled as Collector Land Acquisition, ... vs....... Mst. Katiji & Ors (1987 AIR 1353, 1987 SCR (2) 387) analyzed the situation while dealing with the delay on behalf of the Government and observed as enumerated below: "When substantial justice and technical considerations are pitted against each other, cause of substantial justice deserves to be preferred for the other side cannot claim to have vested right in injustice being done because of a non deliberate delay."
"It must be grasped that judiciary is respected not on account of its power to legalise injustice on technical grounds but because it is capable of removing injustice and is expected to do so."
Considering the judgement (Supra) we feel that in litigations to which Government is a party there is yet another aspect which, perhaps, cannot be ignored, if appeals brought by Government are lost for such defaults, no person is individually affected but what, in the ultimate analysis, suffers is public interest. The decisions of Government are collective and institutional decisions and do not share the characteristics of decisions of private individuals.
ITA No.1122/Kol/2012 A.Y. 1998-99 CIT Cir-4, Kol. M/s Derby Tea & Inds. Pvt. Ltd. Page 3 4. In the instant case as the Government is Appellant has submitted that before finalization of appeal , the case has to cross many channel and even there was non-communication qua filing of SLP in Supreme Court of India is related matter of ISG Traders Ltd. –vs.- CIT , Hence on the aforesaid analyzation while following a justice-oriented approach from this perspective, we feel that there is sufficient cause for condoning the delay in the institution of the appeal, hence we are inclined to condone the delay in preferring the instant Appeal . Now let us proceed with the case on merits. First issue 5. First issue raised by Revenue is that Ld. CIT(A) has erred in deleting the addition made by Assessing Officer for Rs.35,57,392/- in case of Nagrijuli Tea Estates and Rs. 5,38,548/- in the case of Tongani Tea Estates on account of late deposit of PF which is reproduced as under:- “That on the facts and circumstances of the case, Ld. CIT(A) erred in law in directing the A.O to delete the addition of ₹ 35,57,392/- in the case of Nagrijuli Tea Estates and ₹5,38,548/- in the case of Tongani Tea Estates without appreciating the fact that Section 36(1)(va) deals with contribution to P.F that deductions u/s43B is allowed only in that previous year in which the sum is actually paid within date.”
Briefly stated facts are that assessee is a limited company and is engaged in the business of growing and manufacturing of tea leaf in India. The assessee has two estates where the tea leaf are manufactured namely – Nagrijuli Tea Estate and Tongani Tea Estate. During the year the AO has disallowed the PF contribution on account of delay payment for an amount of Rs. 4095940.00 only by virtue of sections 43B read with section 36(1)(iv), and section 2(24)(x) read with section 36(1)(va) of the Act.
Aggrieved assessee preferred an appeal before CIT(A) who deleted the addition made by the AO by applying the decision of Apex court in the case of CIT Vs. Alom Extrusions Ltd. 313 ITR 306 (SC) where it was held that amendment to section 43B of the Income tax Act was carried out by the finance Act 2003 is retrospective in operation. In his said decision the Ld.
ITA No.1122/Kol/2012 A.Y. 1998-99 CIT Cir-4, Kol. M/s Derby Tea & Inds. Pvt. Ltd. Page 4 CIT(A) after considering the provisions of sections 2(24)(x) and 36(1)(va) of the Act held in para 3.2 of his order, which is reproduced below:- “3.2 I have carefully considered the submissions of appellant. The issue of allowability of contributions to Provident Fund is no longer res integra. The Hon'ble Supreme Court in the case of CIT vs. Alom Extrusions Ltd. (313 ITR 306) held the amendment to section 43B of the Income Tax Act carried out by the Finance Act 2003 is retrospective in operation. In the said decision the Hon'ble Supreme Court after considering provisions of sections 2 (24)(x) and 36(1)(va) of the IT Act held that Provident Fund contributions paid by an Employer prior to the “due date” of filing of the return is allowable deduction. In the present case the appellant in compliance to the manner prescribed on the relevant P.F Scheme paid Employer and Employee’s contributions to Provident Fund on or before the due date for filing of the tax return for the AY 98- 99. In the light of the decision of the Supreme Court and the fact that the assessee discharged its liability to pay P.F contributions with due date u/s. 139(1). I hold that the appellant is entitled to the relief of Rs.31,09,164/-. The AO is accordingly directed to allow the deduction for Rs.31,09,164/-. Ground Nos. 1 & 2 are allowed.”
Aggrieved revenue is in appeal before us.
We have heard rival parties and perused the materials available on record. Before us Ld. AR has filed paper book which is running from pages 1 to 39. From the aforesaid discussion we find that the deduction for the PF/EPF was disallowed by the AO on account of late deposit as specified under the respective Act. The same disallowance was deleted by the Ld. CIT(A) relying in the decision of Hon’ble Apex Court in the case of Alom Extrusions Ltd.(supra). In view above we allow the claim of the assessee and uphold the order of the CIT(A) deleting the disallowance made on account of delayed payment of PF contribution. This issue of Revenue’s appeal is dismissed. Second issue 8. Second issue is regarding the action of the Ld. CIT(A) in directing the AO to delete interest of ₹ 83,83,743 as unexplained expenditure though according to the Revenue assessee failed to furnish the details and addresses of unsecured creditors.
ITA No.1122/Kol/2012 A.Y. 1998-99 CIT Cir-4, Kol. M/s Derby Tea & Inds. Pvt. Ltd. Page 5 9. During the year, assessee-company has debited interest paid to various parties for an amount of ₹1,85,62,489/-. In this regard, AO called upon the assessee to furnish the details of unsecured loan to whom interest was paid. The assessee produced a chart showing the amount of interest paid and provided for an amount of ₹1,01,78,746/-. The AO found that there was a difference of ₹83,83,743/- between amount of interest claimed as deduction in the profit and loss a/c and details of interest submitted by the assessee during the assessment proceedings. On question by AO to the assessee about the difference of interest as stated above, the assessee could not file any details. Therefore, the AO added the sum to the total income of assessee.
Aggrieved, assessee preferred appeal before Ld. CIT(A). Before the Ld. AR of assessee demonstrated that the interest was claimed for an amount of ₹1,85,62,489/- in the relevant previous year and produced audited account and details of loan and working of interest thereon. The Ld. CIT(A) considering the details submitted by the assessee has deleted the addition made by AO.
Aggrieved, Revenue is in appeal before us.
Before us Ld. AR drew our attention to pages No. 10 to 12, wherein the details of the loan parties and working of interest was provided. Further, Ld. AR submitted the duly audited balance-sheet, wherein the interest paid to the loan parties for an amount of ₹1,85,62,489/- was duly shown which is placed at page 28 of the paper book. We find that AO has disallowed the interest amount of ₹83,83,743/- on the misunderstanding of the facts given by assessee. In the books of accounts of the assessee there were admittedly interest expenses of Rs. 1,85,62,489.00. The chart filed by the Assessee before the AO showed only the unpaid interest of Rs. 1,01,78,746.00 as on 31.3.1998. Thus there was no discrepancy whatsoever as presumed by the AO. Accordingly we are inclined not to interfere in the order of CIT(A), therefore the ground of appeal of Revenue is dismissed.
ITA No.1122/Kol/2012 A.Y. 1998-99 CIT Cir-4, Kol. M/s Derby Tea & Inds. Pvt. Ltd. Page 6 Third issue 13. The third issue raised by Revenue in this appeal is that Ld. CIT(A) has erred in deleting the addition of ₹24,00,316/- out of interest payment to UCO bank though the assessee debited the same in A.Ys 1993-94 & 1994-95.
The facts in brief are that the assessee claimed a sum of ₹ 2,63,45,169/- as interest paid to UCO Bank. This interest was shown as prior year’s adjustment in the books of account of assessee. This interest was explained by the assessee as one time settlement (OTS for short) of dues of the bank for an amount of ₹ 5,72,68,000/-. The breakup of the loan and the interest is as under :- i) Opening balance as on 1.4.97 Rs.3,54,22,906/- Less: Paid by installment of Rs.15 Rs. 45,00,00/- lakhs from April to June Rs.3,09,22,906/- Less: Settled by bank Rs.5,72,68,000/- Rs.2,63,45,094/- Add: Pay order charges Rs. 75/- Rs.2,63,45,169/-
There was a dispute between assessee and the Bank and therefore the assessee did not pay any interest to Bank for the last five years. This interest was not claimed as expense in its books of account. In the settlement with the Bank, the interest was charged for a sum of ₹ 2,63,45,169/-. Since it was not claimed in its books of account in earlier years and this liability got ascertained in the relevant AY only, the entire amount of interest has been claimed as interest expense in this year only. However, the AO found from the previous AYs record that assessee-company has debited a sum of ₹6,68,422/- and Rs. 1731894.00 as interest payment to UCO bank in the AY 1993-94 and 1994-95 respectively which is included in the total interest debited in profit and loss account in the relevant A.Y 1998-99. Accordingly, the A.O disallowed the interest for an amount of ₹24,00,316/- (Rs.6,68,422/- + 17,31,894/).
ITA No.1122/Kol/2012 A.Y. 1998-99 CIT Cir-4, Kol. M/s Derby Tea & Inds. Pvt. Ltd. Page 7 Aggrieved assessee preferred an appeal to CIT(A). Before the Ld. CIT(A) assessee submitted that for AY 1993-94 there was a settlement of another loan with UCO Bank at Guwahati branch, wherein the amount of interest was finalized for an amount of ₹6,68,422/-. There is no nexus between loan amount of settlement of earlier years where interest for an amount of ₹6,68,422/- and that interest was debited in the relevant assessment in which loan was settled. The CIT(A) found the claim of the assessee to be true and deleted the addition made by the AO.
As regards the interest of ₹17,31,894/- pertaining to AY 1994-95. Ld. CIT(A) has deleted the addition by observing that dispute arose with UCO bank for which said UCO bank had taken legal action for recovery of outstanding loan amount and interest. Since the matter was pending before court of law the assessee has not charged this amount of interest in its profit and loss account. During the FY 1997-98 a settlement was arrived with UCO bank under OTS scheme under which a lump sum amount of ₹5,72,68,000/- was paid by assessee. Accordingly, Ld. CIT(A) deleted the addition made by AO.
Aggrieved by the relief allowed by CIT(A) the Revenue is in appeal before us.
As regards the claim of interest for an amount of Rs.2,63,45,169/-paid to UCO bank as a result of OTS, the Ld AR demonstrated that assessee- company did not charge any interest in the last five years and produced ledger account of UCO bank in the books of account of assessee for the AYs 1993- 94 to 1997-98 which are placed at pages 14 to 17 of assessee’s paper book. It was submitted by the Ld AR that loan interest has been debited in its books of account and the liability for interest has been ascertained during the relevant previous year and same has been claimed in the relevant assessment year also. We find from the observation of AO that interest was debited in earlier years for the same loan for AY 1993-94 for a sum of ₹6,68,422/-. In this connection, it was found that interest was debited by assessee on account of
ITA No.1122/Kol/2012 A.Y. 1998-99 CIT Cir-4, Kol. M/s Derby Tea & Inds. Pvt. Ltd. Page 8 some other loan of UCO bank only and this account was maintained by assessee at Guwahati branch of UCO bank and same amount was also settled by assessee with UCO bank. However, as regards interest charged by assessee of ₹17,31,894/- on account of AY 1994-95, AO observed that it has been debited in the books of account of assessee and therefore disallowed. However, Ld. AR has submitted before us that this interest has been reversed in the books of account of that relevant year and in support of its claim a ledger copy of UCO bank in the books of account of assessee is submitted which is placed at page 14 of assessee’s paper book, where said interest charged by assessee has been reversed in its books of account in the assessment year 1994-95 only. So it can be inferred that this amount has never been charged in the profit and loss account in its books. From the aforesaid discussion, we find that assessee has not claimed double deduction of interest paid in earlier year and interest paid in relevant year. On this basis, we are inclined not to interfere in the order of Ld. CIT(A) and this ground of Revenue’s appeal is dismissed.
Fourth issue 15. The issue raised by Revenue in this appeal is that Ld. CIT(A) has erred in deleting the addition of ₹2,36,515/- made by AO on account of profit earned from sale of assets. During the year assessee has sold six assets on which assessee-company has earned profit of ₹2,36,515/- and same profit was credited in its books of account. However, in the computation of income of assessee, same amount was deducted from taxable profit of assessee’s business. So, the AO opined that assessee has not paid tax on this amount of profit and not offered the same to tax and added it to assessee’s income.
Aggrieved, assessee preferred appeal before Ld. CIT(A). Before CIT(A) the assessee submitted that as per the accounting standard, the amount of profit arising of sale of asset is to be credited in the profit and loss account of assessee for the purpose of determining total income or loss of the assessee
ITA No.1122/Kol/2012 A.Y. 1998-99 CIT Cir-4, Kol. M/s Derby Tea & Inds. Pvt. Ltd. Page 9 under the companies Act. However for the purpose of income tax such profit or loss arising from the sale of fixed assets should be added with loss as per account or deducted from composite income in case of profit and effect of sale value needs to be given to the relevant block of assets. The assessee has correctly deduced the written down value as per the provisions of income tax Act as specified under section 32 of the Act r.w.s 43(6) of the Act. Therefore, Ld. CIT(A) deleted the addition made by AO by observing that profit of sale of asset was not chargeable as income.
Aggrieved, Revenue is in appeal before us.
Before us Ld. DR supported the order of AO whereas Ld. AR supported the order of Ld. CIT(A). Ld. AR submitted that as per the accounting method, a company is to declare the profit arising on account of sale-purchase of its assets by crediting the profit and loss account. The AO added the profit arising from the sale of fixed assets treating it as normal business profit. However, while determining the profit chargeable the tax under Income Tax Act, the provision of Sec. 32 has to be complied with and accordingly the Ld. CIT(A) deleted the addition made by the AO. From the aforesaid submissions made by Ld. AR and examination of the case, the assessee has given the correct effect of profit arising from sale-purchase of its fixed assets in books of account and adjusting the written down value of its relevant block as per the income tax Act. We find no infirmity in the order of Ld. CIT(A) and we uphold the order of Ld. CIT(A) and this ground of Revenue’s appeal is dismissed. Fifth issue:- 18. This ground of Revenue’s appeal is that Ld. CIT(A) has erred in deleting the addition made by AO for a sum of ₹2.40 lakh on account of hire charges. In this case, the AO has disallowed the hire charges expenses claimed by assessee in the relevant year on the ground that no supporting evidence was produced by assessee in assessment proceedings. Therefore, the AO added the same to assessee’s income.
ITA No.1122/Kol/2012 A.Y. 1998-99 CIT Cir-4, Kol. M/s Derby Tea & Inds. Pvt. Ltd. Page 10 19. Aggrieved, assessee preferred appeal before Ld. CIT(A) who has deleted the same by observing that similar expenses were allowed as deduction in earlier years and the relevant documents in support of assessee’s claim were produced for verification. Therefore the Ld. CIT(A) has deleted the same
Aggrieved, now Revenue is in appeal before us.
We have heard rival parties and perused the materials available on record and it is observed from the assessment order that disallowance was made for non-production of details of the parties to whom the payment was made. The Ld. AR drew our attention on page 18 of the paper book, wherein the party, Aparna Sales Pvt. Ltd. has confirmed the expenses of ₹2.40 lakh. Since the sufficient details have been furnished by assessee and accordingly Ld. CIT(A) deleted the addition made by AO. So we uphold the order of Ld. CIT(A). This ground of Revenue’s appeal is dismissed. Sixth issue: 22. This ground of Revenue’s appeal is regarding the Ld. CIT(A)’s action in deleting the addition of Rs.2 lacs being the cultivation expenses incurred which addition was made by the AO for want of supporting evidence.
The AO observed during the course of assessment proceedings that the cultivation expenses have increased substantially in comparison to the last year. Last year expenses are Rs. 39,77,730/- and the year under consideration the cultivation expenses were Rs. 56,66,235/-. On question by the AO about the increase of the expenses, the assessee submitted that the increase in expenses are attributable mainly due to (1) spraying medicines, chemicals on tea bushes to avoid infection and pests, (2) skiffing operations were carried out on the tea bushes, (3) irrigation expenses for maintaining the growth of the tea bushes. However the assessee failed to produce the
ITA No.1122/Kol/2012 A.Y. 1998-99 CIT Cir-4, Kol. M/s Derby Tea & Inds. Pvt. Ltd. Page 11 necessary vouchers, bills for verification. Therefore the AO has disallowed an amount of Rs. 2 lacs on ad hoc basis.
Aggrieved assessee preferred an appeal to CIT(A) who deleted the addition of Rs. 2 lacs on the ground that the assessee books were audited under the companies Act and income tax Act and there was no adverse remark from the auditor on the subject. Besides, the AO did not point out any specific instance where cultivation expenses were not supported by any evidence. Therefore the Ld. CIT(A) has deleted the addition made by the AO. Now, aggrieved revenue is in appeal before us.
We have heard rival parties and perused the materials available on record. The AO has just disallowed the expenses of Rs. 2 lacs on estimated basis which is not justifiable as per the law. The AO failed to provide the specific reason for the disallowance. Therefore we are inclined not to interfere in the order of Ld. CIT(A). So this ground of Revenue appeal is dismissed. Last issue: 24. This ground of Revenue’s appeal is that Ld. CIT(A) has erred in treating the interest income of Rs.21,575/- as business income though the AO treated the same as income from other source and applied Rule-8 of IT Rules, 1962.
During the year, assessee has earned interest of Rs.21,575/- from SMIFS capital markets Ltd. The AO treated the same as income from other source in the hands of assessee. The income was claimed by assessee as income from the manufacture of tea and claimed that Rule-8 of the Income Tax Rules 1962 ought to be applied on the said income. The AO rejected the claim of the assessee. Accordingly the AO did not set off this income of Rs. 21,575.00 against unabsorbed depreciation brought forward from earlier years. 26. Aggrieved, assessee filed appeal before Ld. CIT(A) who treated the interest income as income from the manufacture of tea by observing the
ITA No.1122/Kol/2012 A.Y. 1998-99 CIT Cir-4, Kol. M/s Derby Tea & Inds. Pvt. Ltd. Page 12 judgment of Hon'ble jurisdictional High Court in the case of Eveready Industries (India) Ltd. v. CIT 323 ITR 312 (Cal), wherein Hon'ble jurisdictional has held that interest income of an assessee engaged in the business of growing and manufacture of tea is to be assessed as business income subject to Rule 8 of the IT Rule. Accordingly, Ld. CIT(A) has held that interest income is from the business of manufacture of tea in India and set off was allowed.
Aggrieved by this order of Ld. CIT(A) now, Revenue is in appeal before us.
Before us Ld. AR has submitted that the interest income was shown under the head “business income” and drew our attention in the above cited case law of Eveready Industries (India) Ltd. (supra) and prayed that income should be treated as “income from business” only. On the other hand, Ld. DR relied on the order of AO.
We have heard rival parties and perused the materials available on record and examined the facts of the case. Since this issue has already been covered by the judgment of Hon'ble jurisdictional High Court in the case of Eveready Industries (India) Ltd. (supra) in favour of assessee and treating the interest income as “business income” and the same is binding on us. Therefore, we uphold the order of Ld. CIT(A) and this ground of Revenue’s appeal is dismissed.
In the result, appeal filed by Revenue is dismissed. Order pronounced in the open court 24/11/2015
Sd/- Sd/- (N.V.Vasudevan) (Waseem Ahmed) (Judicial Member) (Accountant Member) Kolkata,
*Dkp �दनांकः- 24/11/2015 कोलकाता ।
ITA No.1122/Kol/2012 A.Y. 1998-99 CIT Cir-4, Kol. M/s Derby Tea & Inds. Pvt. Ltd. Page 13
आदेश क� ��त�ल�प अ�े�षत / Copy of Order Forwarded to:- 1. अपीलाथ� / Appellant-DCIT, Circle-4, Kolkata, P-7, Chowringhee Square, Kol-69 2. ��यथ� / Respondent-Derby Tea & Inds. Pvt. Ltd., (renamed as Tongani Tea Co. Ltd.) 15B, Hemanta Basu Sarani, Octavious Centre, Kol-01 3. संबं�धत आयकर आयु�त / Concerned CIT Kolkata 4. आयकर आयु�त- अपील / CIT (A) Kolkata 5. �वभागीय ��त�न�ध, आयकर अपील�य अ�धकरण, कोलकाता / DR, ITAT, Kolkata 6. गाड� फाइल / Guard file. By order/आदेश से, /True Copy/ उप/सहायक पंजीकार आयकर अपील�य अ�धकरण, कोलकाता ।