2001-VIL-166-ITAT-

Equivalent Citation: TTJ 073, 727,

Income Tax Appellate Tribunal MADRAS

Date: 13.11.2001

DEPUTY COMMISSIONER OF INCOME-TAX.

Vs

ASHER TEXTILES LTD.

BENCH

Member(s)  : A. KALYANASUNDHARAM., I. S. VERMA.

JUDGMENT

I.S. VERMA, J.M.:

In this appeal the Revenue has objected to the order of the CIT(A) dt. 30th June, 1993, by way of following grounds:

"1. The learned CIT(A) erred in deleting the addition made under s. 43B on the ground that the amount has been paid on 18th April, 1990. As per the Calcutta High Court decision in CIT vs. Edcons (India) (P) Ltd. (1992) 198 ITR 86 (Cal) the provident fund contribution has to be paid within 15 days from the last date of the month. Hence addition made under s. 42B is in order.

2. The learned CIT(A) erred in directing to reduce the excess depreciation added back amounting to Rs. 31,69,163 for the purpose of s. 115J. As per the provisions of Companies Act, the depreciation has to be worked out only on the pro rata basis. If this is done, depreciation will be less by Rs. 31,69,163.

3. The learned CIT(A) erred in directing to exclude excise duty and sales-tax from the turnover for the purpose of s. 80HHC. These clearly form part of the turnover as per the Supreme Court's decision in CIT vs. T. Naggi Reddy (1993) 115 CTR (SC) 418 : (1993) 202 ITR 253 (SC).

We have heard the learned Departmental Representative as well as the counsel appearing for the respondent-assessee.

2. So far as Ground No. 1 is concerned, the learned Departmental Representative has supported the order of the AO by relying on the decision of the Hon'ble Calcutta High Court in the case of CIT vs. Edcons (India) (P) Ltd., wherein the Hon'ble High Court, while considering the allowability of contribution to provident fund, had observed that the provident fund contribution has to be paid within 15 days from the last day of the month, and, therefore, the assessee could not, by not making the payment and showing it as a liability, get the benefit of deduction in case of the provident fund. The Hon'ble High Court further held that the principles governing the cases of sales-tax dues will apply to the case of provident fund contribution in respect of the last month of the accounting year and not for any other month.

The counsel for the assessee, however, in addition to supporting the order of the CIT(A), submitted that in view of the decision of the Tribunal, Bangalore Bench in the case of Hansur Plywood Works Ltd. vs. Dy. CIT (1996) 54 TTJ (Bang) 260 : (1995) 54 ITD 394 (Bang), the contribution towards provident fund, E.P.F., E.S.I., if paid within the grace period allowed under the relevant Act, have to be considered as having paid within the prescribed period allowed under the relevant Act, and, therefore, the CIT(A) was justified in deleting the disallowance. Coming to the disallowance of P.F. administrative charges, the counsel submitted that the provisions of s. 43B speaks of contribution to the provident fund and not P.F. administrative charges and, therefore, the assessee's claim was not disallowable under the provisions of s. 43B of the Act, as has been held in the aforesaid decision of the Tribunal.

3. After careful consideration of the facts and circumstances of the case, rival submissions and the decisions relied upon by the parties, we are of the opinion that the decision relied upon by the learned Departmental Representative, instead of supporting the Revenue's case, supports the assessee's case because, the contribution towards P.F., etc. in respect of last month of the accounting year could be paid by the 15th of the next month and at the same time the Tribunal Bangalore Bench in the case of Hansur Plywood Works Ltd. having held that the contributions made within the grace period are deemed to have been paid within the period allowed under the relevant Act, we do not see any reason to interfere with the order of the CIT(A). Similarly, we do not see any reason to interfere with the order of the CIT(A) on the point of deletion of addition having made by disallowing provident fund administrative charges. Revenue's this ground fails.

4. In ground No. 2 the Revenue has objected to the order of the CIT(A) whereby he had directed the AO to reduce the excess depreciation of Rs. 31,69,163 added by the AO while computing book profit for the purpose of s. 115J of the IT Act, 1961.

5. The learned Departmental Representative, after relying on the decision of the Hon'ble Madhya Pradesh High Court in the case of CIT vs. Vandana Rolling Mills Ltd. (1998) 146 CTR (MP) 726 : (1998)234 ITR 693 (MP), submitted that the assessee had no power to tringle with the profit arrived at by drawing the P&L a/c in accordance with Parts II and in of Sch. VI of the Companies Act, and therefore, the CIT(A) was not justified in allowing the assessee's claim of higher depreciation. The counsel for the assessee agreeing in principle that the profit arrived at by drawing the P&L a/c in terms of Parts II and III of Sch. VI to the Companies Act, has to be considered for the purpose of s. 115J of the Act, but disputed the claim of the AO with regard to his so-called observation that depreciation is to be allowed on pro rate basis on the plea that s. 115J does not speak of such pro rata basis.

6. After careful consideration of the rival submissions, facts and circumstances of the case and the decision in the case of Vandana Rolling Mills ltd., we are in agreement with the submissions of the learned Departmental

Representative that it is the profit arrived at by drawing P&L a/c in terms of Parts II and III of Sch. VI to the Companies Act, which has to be considered for the purpose of s. 115J, but at the same time we find from the order of the CIT(A) as well as of the AO that none of the authorities have given a specific finding as to whether the assessee had drawn P&L a/c in terms of Parts II and III of Sch. VI to the Companies Act or not. Under these circumstances, we, in the interest of justice, are of the opinion that the issue may be remanded back to the file of the AO with the direction that the book profit for the purpose of s. 115J may be considered on the basis of P&L a/c drawn as provided under sub-s. (1A) of s. 115J. Consequently we restore this issue back to the file of the AO for fresh decision in accordance with law, after allowing the assessee a proper opportunity of being heard.

7. The third issue raised by the Revenue in this appeal relates to the exclusion of excise duty and sales-tax from the total turnover for the purpose of s. 80HHC.

8. The learned Departmental Representative, after relying on the decision of the Hon'ble Supreme Court in the case of CIT vs. T. Naggi Reddy wherein the Hon'ble apex Court has held that in the case of an assessee who maintains his accounts on mercantile system, sales-tax collected but not paid to the sales-tax department pending adjudication of dispute over his liability to pay sales-tax, is a revenue receipt of the year in which it is collected, submitted that since the assessee was maintaining its books of account on mercantile system, the sales-tax as well as excise duty had to be part of its turnover for the purpose of s. 80HHC of the IT Act, 1961 and, therefore, pleaded that the order of the CIT(A) on this point may be reversed.

The counsel for the assessee, however, after relying on the decision of the Hon'ble Bombay High Court in the case of CIT vs. Sundarshan Chemicals Industries Ltd. (2000) 163 CTR (Bom) 596 : (2000) 245 ITR 769 (Bom), submitted that the excise duty and sales-tax having no element of profit in them cannot be taken as part of total turnover for the purpose of s. 80HHC, and, therefore, supported the order of the CIT(A).

9. After careful consideration of the facts and circumstances of the case, rival submissions and the decisions relied upon by the parties, we are of the opinion that the decision of the Hon'ble Supreme Court relied upon by the learned Departmental Representative is distinguishable on facts and the issue raised by the Revenue is covered in favour of the assessee and against the Revenue by the decision of Hon'ble Bombay High Court in the case of Sudarshan Chemicals Industries Ltd. In view of these facts, we do not find any infirmity in the order of the CIT(A) on this point.

10. In the result, the Revenue's appeal is partly allowed for statistical purposes.

 

DISCLAIMER: Though all efforts have been made to reproduce the order accurately and correctly however the access, usage and circulation is subject to the condition that VATinfoline Multimedia is not responsible/liable for any loss or damage caused to anyone due to any mistake/error/omissions.