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Income Tax Appellate Tribunal, “A” BENCH: KOLKATA
Before: Shri Mahavir Singh, JM & Shri Waseem Ahmed, AM]
IN THE INCOME TAX APPELLATE TRIBUNAL “A” BENCH: KOLKATA [Before Shri Mahavir Singh, JM & Shri Waseem Ahmed, AM]
I.T.A No.744/Kol/2012 Assessment Year: 2008-09 Joint Commissioner of Income-tax(OSD), Vs. M/s. Gillander Arbithnot & Co. Ltd. Circle-4, Kolkata. (PAN: AAACG9832F) (Appellant) (Respondent)
Date of hearing: 26.10.2015 Date of pronouncement: 30.10.2015
For the Appellant: N o n e For the Respondent: Shri S. M. Surana, Advocate & Shri Sunil Surana, ACA
ORDER Per Shri Mahavir Singh, JM: This appeal by revenue is arising out of order of CIT(A)-IV, Kolkata in Appeal No.145/CIT(A)-VI/10-11 dated 28.12.2011. Assessment was framed by DCIT, Circle-4, Kolkata u/s. 143(3) of the Income-tax Act, 1961 (hereinafter referred to as “the Act”) for Assessment Year 2008-09 vide his order dated 24.12.2010. 2. At the outset, it is noticed that this appeal by revenue is delayed by 24 days and revenue has filed condonation petition supported by affidavit stating the reasons. The Ld. Counsel for the assessee fairly conceded that in view of the reasons given in condonation petition delay can be condoned. In view of concession given by Ld. Counsel for the assessee, we condone the delay and admit the appeal for hearing. 3. It is also noticed that the revenue has moved adjourned petition in almost 19 cases out of the listed case of 23. This en block adjournment is not possible and hence, the possible case, we have taken up for hearing and decided the issue by rejecting the adjournment petition. In this case also, we have rejected the adjournment petition and heard the appeal. 4. The first issue in this appeal of revenue is as regards to the order of CIT(A) allowing deduction in respect of PF & ESI payments without considering the provisions stipulated in section 36(1)(va) of the Act. For this, revenue has raised following ground no.1:
2 ITA No.744/K/2012 M/s. Gillander Arbithnot & Co. Ltd. AY 2008-09 “1. That on the facts and circumstances of the case, Ld. CIT(A) erred in law in directing the AO to allow deduction in respect of Pf and ESI without considering the provisions stipulated in Sec.36(1)(va).”
We have heard Ld. Counsel for the assessee and gone through facts and circumstances of the case. Briefly stated facts are that the assessee claimed deduction of PF and ESI payments amounting to Rs.7,77,244/- being employees’ contribution u/s 43B of the Act but the AO disallowed by noting that these payments are not made within the due dates as mentioned in the respective Acts. Before CIT(A) assessee has given dates of payment and due date and CIT(A) noted that the employees’ contribution to PF & ESI were deposited within one or two days of the due date falling under the respective Acts. The CIT(A) noted that these payments are within the due date of filing of return of income u/s. 139(1) of the Act by the assessee. Accordingly, he allowed the claim of assessee. Aggrieved, revenue is in second appeal before Tribunal.
We find that the PF & ESI payments by the assessee are within the due date of filing of return of income by the assessee u/s. 139(1) of the Act and once these payments are within the due date, the issue is covered by the judgment of jurisdictional High Court in the case of CIT Vs. M/s. Vijay Shree Limited vide ITAT No. 245 of 2011 in GA No.2607 of 2011 dated 7th September, 2011, wherein it has been held as under: “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.” Once the issue is decided by Hon’ble jurisdictional High Court in the case of Vijay Shree Ltd. Supra, where in it is held that the PF & ESI are paid on or before the due date of filing of return u/s. 139(1) of the Act, deduction in respect to the amount on which PF &ESI is so paid, is allowable. In the present case the assessee has paid the PF deducted on account of employees’ contribution before due date of filing of return u/s. 139(1) of the Act, hence, we dismiss this ground of appeal of revenue.
3 ITA No.744/K/2012 M/s. Gillander Arbithnot & Co. Ltd. AY 2008-09
The second issue in this appeal of revenue is against the order of CIT(A) in allowing puja expenses and temple expenses as business expenses. For this, revenue has raised following ground no.2: “2. That on the facts and circumstances of the case, Ld. CIT(A) erred in law in directing the AO to allow puja expense for Rs.2,90,237/- and temple expense for Rs.2,74,535/- since such expenses are non-business expenditure and the assessee company could not establish the nexus between the necessity of such expenditure and the purpose of the business carried on by the assessee company.”
We have heard Ld. Counsel for the assessee and gone through facts and circumstances of the case. Briefly stated facts are that the AO disallowed puja expenses and temple expenses for the reason that these are not for a legitimate requirement of the business. The CIT(A) allowed the claim of the assessee. Aggrieved, revenue came in second appeal before Tribunal.
At the outset, Ld. Counsel for the assessee relied on the decision of Coordinate Bench of this Tribunal in assessee’s own case in ITA No. 589/K/2012 for AY 2007-08 dated 19.12.2013, wherein Tribunal has allowed as under: “Aggrieved, now Revenue came in appeal before us. We find that the puja expense incurred on occasion of Diwali and Mahurat are customary expenses and going by the turnover of the assessee-company and the nature of the business of the assessee, we feel that these are incurred for the harmony of the assessee-company’s employees and these are for the purpose of business. Similar are the reasons for incurring temple expense. Hence, we confirm the order of CIT(A) and this issue of Revenue’s appeal is dismissed.”
As the issue is covered in assessee’s own case, we confirm the order of CIT(A). Accordingly, this issue of revenue’s appeal is dismissed.
The third issue in this appeal of revenue is against the order of CIT(A) in deleting the addition made on account of cess on green leaf. For this, revenue has raised following ground no. 3: “3. That on the facts and circumstances of the case, ld. CIT(A) erred in law in deleting the addition of Rs.59,06,928/- on account of cess on green leaf without considering the fact that expenses on account of cess on green leaf is related to 100% agricultural operation and SLP is pending before the Hon’ble Supreme court against the decision of Calcutta High Court in the case of AFT Industries ltd. Vs. CIT (270 ITR 167) in the light of which ld. CIT(A) decided the issue in favour of the assessee.
4 ITA No.744/K/2012 M/s. Gillander Arbithnot & Co. Ltd. AY 2008-09 11. At the outset, Ld. Counsel for the assessee relied on the decision of Coordinate Bench of this Tribunal in assessee’s own case in ITA No. 589/K/2012 for AY 2007-08 dated 19.12.2013, wherein Tribunal has allowed as under:
“We find that this issue is covered by the decision of Hon’ble jurisdictional High Court in the case of AFT Industries Ltd. V. CIT 270 ITR 167 (Cal), wherein it has been decided by Hon’ble jurisdictional High Court that cess on green leaf is a normal business expenditure and once the Hon’ble jurisdictional High Court decides the issue in favour of assessee, same is covered. Hence, the order of CIT(A) is confirmed on this issue. This issue of Revenue’s appeal is dismissed.
As the issue is covered in assessee’s own case, we confirm the order of CIT(A). Accordingly, this issue of revenue’s appeal is dismissed.
The fourth issue in this appeal of revenue is against the order of CIT(A) deleting the disallowance made by AO on account of non-deduction of TDS on expenses of commission payment u/s. 195(1) of the Act thereby invoking the provisions of section 40(a)(ia) of the Act. For this, revenue has raised following ground no. 4:
“4. That on the facts and circumstances of the case, Ld. CIT(A) erred in law in deleting the addition of Rs.11,35,554/- on account of non deduction of TDS u/s. 40(a)(ia) in view of the judgment given by the Supreme Court in the case of M/s. Transmission Corporation of India reported in 239 ITR 587.”
At the outset, Ld. Counsel for the assessee relied on the decision of Coordinate Bench of this Tribunal in assessee’s own case in ITA No. 589/K/2012 for AY 2007-08 dated 19.12.2013, wherein Tribunal has allowed as under: “7. We have heard rival contentions and gone through facts and circumstances of the case. We find that Assessing Officer treated the commission paid to foreign agent as non allowable expenses as assessee failed to deduct TDS and he disallowed the commission to the extent of Rs.11,35,554/-. Aggrieved, assessee preferred appeal before CIT(A), who allowed the claim of assessee by observing vide para-7.1 of his order as under:- “7.1 It is seen that AO made this disallowance on the basis of Supreme Court decision in case of M/s. Transmission Corporation of India reported in 239 ITR 587 wherein it was held that only way to escape liability is to get no deduction certificate or lower rate deduction certificate from AO. Appellant on the other hand has submitted that this issue was further clarified by Hon’ble Supreme Court in case of GE India Technology Centre P Ltd. Vs. CIT in 44 DTR Supreme Court 201,in which Supreme Court has clarified that obligation to deduct tax at source arises u/s.194 only when there is any sum chargeable under the Act. and CBDT circular has also clarified, that TDS provision will not applied in case where such income is not taxable in India. In this case, as the income does not arise in India and the commission is paid to those foreign agents, who have no permanent
5 ITA No.744/K/2012 M/s. Gillander Arbithnot & Co. Ltd. AY 2008-09 establishment or business place in India and services are also rendered outside India. It is very clear that no tax is deductible in case where the non-resident agents operate outside the country and no part of his income arises in India. In view of the circular No. 23 and 786, the company was under no obligation to deduct tax and as provision u/s. 40(a)(ia) does not apply, the disallowance made by AO is directed to be deleted.” We find that assessee's claim was that the commission paid to foreign agents, who are not having permanent establishment business place in India and they are providing services outside India and even the payment is directly made outside India in foreign exchange. According to assessee, assessee's income does not accrue or arise in India and once income does not accrue or arise in India, the assessee is not liable to deduct TDS on foreign payments. According to him, this issue is covered by the decision of Hon’ble Supreme Court in the case of GE India Technology Centre P. Ltd. v. CIT 44 DTR 201 (SC). As the issue is covered in favour of assessee by the decision of Hon’ble Supreme Court, we have no reason to interfere in the order of CIT(A) and we confirm the same. This issue of revenue’s appeal is also dismissed.
As the issue is covered in assessee’s own case, we confirm the order of CIT(A). Accordingly, this issue of revenue’s appeal is dismissed.
The fifth issue in this appeal of revenue is against the order of CIT(A) in directing the AO to allow deduction of wealth tax while computing book profit u/s. 115JB of the Act. For this, revenue has raised following ground no.5:
“5. That on the facts and circumstances of the case, Ld. CIT(A) erred in law in allowing the deduction of Wealth Tax while computing profit u/s. 115JB without considering the fact that as per Explanation-1, Wealth Tax cannot be deducted to ascertain book profit u/s. 115JB.”
We have heard Ld. Counsel for the assessee and gone through facts and circumstances of the case. Briefly stated facts are that the AO while computing book profit u/s. 115JB of the Act adjusting the book profit by the amount of provision made for Wealth Tax Act Rs.1.20 lac. Aggrieved, assessee preferred appeal before CIT(A), who relying on the decision of Coordinate Bench of ITAT in the case of Usha Martin Industries Ltd. Vs. CIT (2003) 81 TTJ 158 (Cal) and allowed the claim of assessee. We find no infirmity in the order of CIT(A) as he allowed the claim of assessee by relying on the decision of ITAT in the case of Usha Martin Industries Ltd., supra. This ground of appeal of revenue is dismissed.
The sixth issue in this appeal of revenue is against the order of CIT(A) in deleting the disallowance of bad debt. For this, revenue has raised following ground no.6:
6 ITA No.744/K/2012 M/s. Gillander Arbithnot & Co. Ltd. AY 2008-09 “6. That on the facts and circumstances of the case, Ld. CIT(A) erred in law in deleting the disallowance of bad debt without deliberating upon the provisions of section 36(2).”
We have heard Ld. Counsel for the assessee and gone through facts and circumstances of the case. Briefly stated facts are that the assessee company granted loan to one Kanoi Plantation Pvt. Ltd. amounting to Rs.45,00,000/- in the normal course of business i.e. money lending. The assessee also charged interest on this loan at Rs.59,558/- and credited the same. The assessee tried to recover the loan along with interest but Kanoi Plantation Pvt. Ltd. became sick and chances of recovery from the same company became nil. Under these circumstances, the Board of Directors in their meeting on 29.06.2007 passed a resolution to write off the above amount in the P&L Account of the assessee company for the year ended 31.03.2008. Accordingly, assessee claimed the same as bad debt. But the AO disallowed the claim of bad debt. Aggrieved, assessee preferred appeal before CIT(A), who allowed the claim of assessee by following the decision of Hon’ble Supreme Court in the case of TRF Ltd. Vs. CIT 323 ITR 397 (SC) and also of Hon’ble Calcutta High Court in assessee’s own case reported in (1982) 138 ITR 763 (Cal) by observing as under:
“9.1. Company is a renowned old company having multifarious business activities such as owing tea gardens, Textile Business, Construction activities and it is also engaged in trading activities. In addition to above, the appellant has also income from House Property investment and financing activities. A composite profit & loss account and balance sheet is drawn taking into consideration overall receipt and expenditure from such composite business. There was unitary of control and same management handling the whole affairs. There are being common Directors and common fund, both control of business and flow of funds are from common account. Hence, it transpires that lending of money is also part of business of the company. And as per memorandum of association and capital utilization company has advanced money to earn interest and the same is reflected as income of the company. And, therefore, advance made to M/s. Kanoi Plantation Pvt. Ltd. is in the normal course of business. The case laws relied upon by the appellant including that of Supreme Court and Calcutta High Court also support even alternate view taken by appellant that expenditure incurred for advancing money to subsidiary company is allowable as bad debt and even as business loss. The claim of appellant is therefore allowable as bad debt and even as business loss. The claim of appellant is therefore allowable in view of pronouncement of jurisdictional High court and Apex court. Even now, it is very clear from the Apex Court decision in case of TRF Ltd. Vs. CIT 323 ITR 398 (SC) that after 1st April, 1989, it is not necessary for the assessee to establish that the debt, in fact, has become irrecoverable. It is enough if the bad debt is written off as irrecoverable in the accounts of the assessee”. Respectfully following the ratio laid down by Hon’ble Calcutta High Court and Apex Court, the claim of appellant for bad debt of the amount advanced to M/s. Kanoi Plantation Pvt. Ltd. is directed to be allowed.”
As the issue is covered in favour of assessee by the decision of Hon’ble Supreme court
7 ITA No.744/K/2012 M/s. Gillander Arbithnot & Co. Ltd. AY 2008-09 in the case of TRF Ltd., Supra, we find no infirmity in the order of CIT(A) and the same is hereby confirmed. Accordingly, this issue of revenue’s appeal is dismissed.
The seventh issue in this appeal of revenue is against the order of CIT(A) in directing the AO to delete the Nursery Expenses without appreciating the fact that nursery expenses has always been held as capital in nature. For this, revenue has raised following ground no. 7:
“7. That on the facts and circumstances of the case, Ld. CIT(a) erred in law in directing the AO to delete the Nursery Expenses of Rs.59,06,924/- without appreciating the fact that nursery expenses were always been held as capital in nature and as per law, nursery expenses and replanting of bushes are not the same.”
We have heard Ld. Counsel for the assessee and gone through facts and circumstances of the case. Briefly stated facts are that the AO during the course of assessment proceedings disallowed nursery expenses amounting to Rs.58,93,332/- by attributing the same to be of enduring nature for long term plantation of tea gardens for growing good quality of tea. Aggrieved, assessee preferred appeal before CIT(A), who relying on the jurisdictional High Court decision in the case of CIT Vs. Tasati Tea Ltd. (2003) 262 ITR 388(Cal) deleted the disallowance of expenses by observing as under:
“10.2. I have considered the facts narrated by appellant and also decision relied upon of the Hon’ble jurisdictional High Court. The expenditure claimed by appellant is incurred for the purpose of re-plantation in the existing area and plants grown in the nursery were used for replacement of useless or dead plants within the plantation area. As the re-plantation is an essential part of the growing and manufacturing tea, and nothing contrary to the fact is brought on record by the AO, the expenditure claimed by appellant is to be allowed as revenue expenditure. As per facts available, the area under cultivation also remains the same, and therefore, the claim of expenditure is allowable as revenue expenditure. The addition made, therefore, by AO is directed to be deleted and claim of appellant is allowed.”
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. Hon’ble Calcutta 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
8 ITA No.744/K/2012 M/s. Gillander Arbithnot & Co. Ltd. AY 2008-09 against dead plants by observing as under:
“But, however, we are not inclined to interfere with the order allowing the expenditure of Rs.4,68,615/- as a revenue expenditure, though on different grounds, inasmuch as if the plants are raised and maintained in a nursery for being utilized for the purpose of re-plantation without any expansion of the plantation area or re- plantation 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 nor can it be treated to be an investment or expansion adding to the capital already invested. On the other hand, it would be a maintenance of the plantation itself and, therefore, is a revenue expenditure.”
In view of the above facts and circumstances and following the case law of Hon’ble Jurisdictional High Court in the case of Tasati Tea Ltd., supra, we uphold the order of CIT(A) and this issue of revenue’s appeal is dismissed.
The eighth issue in this appeal of revenue is against the order of CIT(A) in directing the AO to allow the donation subject to verification of certificates. For this, revenue has raised following ground no. 8:
“8. That on the facts and circumstances of the case, Ld. CIT(A) erred in law in directing the AO to allow the donation subject to verification of certificates produced without appreciating the fact that exemption for donation has already been allowed as per law.”
We have heard Ld. Counsel for the assessee and gone through facts and circumstances of the case. We find that the CIT(A) has directed the AO to verify the certificates of donation and hence, revenue cannot be aggrieved on this count. Accordingly, we confirm the order of CIT(A) and this issue of revenue’s appeal is dismissed.
The ninth issue in this appeal of revenue is against the order of CIT(A) in directing the AO to allow TDS and Advance Tax as per assessee’s claim without giving cognizance to the CBDT instruction. For this, revenue has raised following ground no. 9:
“9. That on the facts and circumstances of the case, Ld. CIT(A) erred in law in directing the AO to allow TDS and Advance Tax as per assessee’s claim without giving cognizance to the CBDT’s instruction of allowing TDS and Advance Tax only as per the
9 ITA No.744/K/2012 M/s. Gillander Arbithnot & Co. Ltd. AY 2008-09 credits available in 26AS format.” 24. We have heard Ld. Counsel for the assessee and gone through facts and circumstances of the case. We find that the CIT(A) has directed the AO to verify the TDS and advance tax challans, and accordingly allowed the claim of the assessee, and hence, revenue cannot be aggrieved on this count. Accordingly, we confirm the order of CIT(A) and this issue of revenue’s appeal is dismissed.
In the result, the appeal of revenue is dismissed.
Order is pronounced in the open court on 30.10.2015 Sd/- Sd/- (Waseem Ahmed) (Mahavir Singh) Accountant Member Judicial Member
Dated : 30th October, 2015 Jd. Sr. P.S Copy of the order forwarded to: APPELLANT – JCIT (OSD), Circle-4, Kolkata. 1. Respondent - M/s. Gillander Arbithnot & Co. Ltd., C-4, Gillander House, 2 N. S. Road, Kol-700 001. The CIT(A), Kolkata 3. 4. CIT Kolkata 5. DR, Kolkata Benches, Kolkata /True Copy, By order,
Asstt. Registrar.