Employees Contribution to PF- Section 36(1)(va) will prevail over section 43B

ORDER

1. This Special Bench has been constituted under Section 255(3) of the Income Tax Act, 1961 by the Hon’ble President, I.T.A.T. in the case of M/s. I.T.C. Ltd. vide I.T.A. No. 1541 (Cal)/2000 for assessment year 1997-98 to consider the following questions:

(1) That on the facts and in the circumstances of the case, the Hon’ble CIT(A) has erred in deleting addition of Rs. 38,64,1091-debited to year’s revenue account as value of stores written off by holding that it is for the A.O. to prove that consumable stores had either not been used or individually costed less than Rs. 5,0001-ignoring, in the process, the findings in assessment that claim could not be established on record.

(2) That, on the facts and in the circumstances of the case, the Hon’ble CIT(A) has erred in deleting addition of Rs. 5,00,000/- on account of building, furniture, fixture & fittings thereby contravening enunciation by the jurisdictional High Court to the defect that prohibition against guest house expenses stipulated in Section 37(4) is absolute.

(3) That, on the facts and in the circumstances of the case, the Hon’ble CIT(A) has erred in deleting addition of traveling expenses disregarding the specific finding that assessee could no discharge the statutory onus of providing that the entire amount debited as expenses represented revenue expenditure laid out wholly and exclusively for purposes of business.

(4) That, on the facts and in the circumstances of the case, the Hon’ble CIT(A) has erred in deleting addition of Rs. 67,59,104/-without requiring the expenses to controvert the finding that the amount represented outgoings in the form of entertainment expenses.

(5) That, on the facts and in the circumstances of the case, the Hon’ble CIT(A) has erred in deleting the addition of Rs. 1,45,48,331/- under the sub-head of payments to clubs disregarding the finding that no part of the expenditure could be shown to have any direct and intelligible nexus with business of the company as such.

(6) That on the facts and in the circumstances of the case, the Hon’ble CIT(A) has erred in deleting addition of Rs. 13,30,000/-claimed as advertisement expenses when clearly the expenditure in question did not qualify to be treated as admissible revenue expenses of the company’s business.

(7) That, on the facts and in the circumstances of the case, the Hon’ble CIT(A) has erred in deleting addition of ‘Repairs’ when the order of assessment showed that material evidence to establish the claim had been omitted to be made available for A.O.’s scrutiny.

(8) That, on the facts and in the circumstances of the case, the CIT(A) has erred in deleting addition of Rs. 1,77,05,366/- basing his analysis on method of accounting thereby ignoring the fact that the provision represented purely contingent expenditure.

 (9) That on the facts and in the circumstances of the case, the CIT(A) has erred in deleting addition of Rs. 55,00,000/- by ascertaining capital or revenue nature of the expenses solely with reference to composition of the amount rather than the purpose each component of the expenditure was expected to serve.

(10) That the ld. CIT(A) erred in law and on facts in summarily deleting addition Under Section 43B read with Section 36(1)(Va) without appreciating that the statutory disallowance is essentially to be based on facts and that unlike the governmental liabilities of other nature covered by Section 43B, option to claim deduction in the year of payment is not available under the law in regard to contribution to employees’ provident & pension funds.

(11) That, on the facts and in the circumstances of the case, the Hon’ble CIT(A) has erred in deleting the addition disallowances of Rs. 2.5 crores under the head other staff welfare business by holding that the although the assessee could not furnish details of such expenses before the assessing officer in course of assessment in deleting addition of Rs. 30,00,000/- on account of expenditure on fuel soft coke for staff and mill workers by holding the same as in nature of employees welfare expenses incurred on the basis of an agreement with workers in gross disregard to Rule 46A of the Income Tax Rules, 1962 as the assessee did not disclose the fact of the agreement with workers in course of assessment procedure & in deleting addition of Rs. 4,00,000/- on account of school fees scholarship and educational tour expenses by holding that the expenditure were incidental to assessee’s business.

(12) That the ld. CIT(A) erred in law and on facts in deleting addition of miscellaneous expenses ignoring the trite law that a decision in regard to a different year can not be taken as an authority on facts.

(13) That on the facts and in the circumstances of the case, the CIT(A) has erred in deleting addition by holding that the onus of proof is, not on the assessee, but on the A.O.

(14) That on the facts and in the circumstances of the case, the CIT(A) has erred in deleting addition applicable without appreciating that arm’s length principle had been clearly shown to have been violated.

(15) Ld. CIT(A) erred in law and on facts in directing adoption of total turnover net of excise duty for purposes of computation of admissible amount of deduction Under Section 80HHC which directly contradicts the law.

(16) That, on the facts and in the circumstances of the case, the Hon’ble CIT(A) has erred in directing the A.O. top allow deduction Under Section 80HHC of the Income Tax Act, 1961 as per computation made by the assessee’s auditor without pointing out any defect in the computation made by assessing officer.

2. At the outset, the ld. Departmental Representative for the Revenue submitted that most of the additions in this case have been deleted by the ld. CIT(A) following the decision of ITAT for the assessment year 1994-95. He stated that the facts of 1994-95 are not identical to the facts of issues raised by the Revenue in this case. In 1994-95, the Hon’ble ITAT while upholding the order of ld. CIT(A) has basically observed that the Special Auditor 142(2A) was appointed by the Revenue and such Special Auditor in his audit report has not commented anything adverse, which could support the observation of A.O. while making the additions in case of assessment year 1994-95. Ld. D.R. submitted that since no special audit was got done by the Revenue for the year under consideration, the decision of ITAT for assessment year 1994-95 could not be relied for supporting the order of ld. CIT(A) for the year under consideration. He stated that the ld. CIT(A) should have adjudicated the matters on merit and should not have followed simply the order of ITAT for assessment year 1994-95.

3 The ld. Departmental Representative for the Revenue arguing the first ground raised by the Revenue, has submitted that the A.O. has dealt with the above ground at page no.35 of his order, wherein he has given a specific reason for disallowing the above claim. It has been contended by the ld. D.R. that the assessee in this case could not submit any evidence and documents asked for by the A.O. It has been pointed out by the ld. D.R. that though the A.O. has asked for details and evidences as per direction of this Tribunal while setting aside the matter to the file of assessee, and in its reply the assessee has relied upon the documents and evidences filed before the ld. CIT(A). Ld. D.R. pleaded that the assessee has not discharged its burden to prove the genuineness of the claim made by it. It has been submitted by the ld. D.R. that though the assessee has debited the entire value of such obsolete consumable stores, at the same time no re-sale value of such obsolete goods or stores has been shown by the assessee, which is highly surprising. She has submitted that even this Tribunal while adjudicating the Ground No. 17 in case of 1994-95 had held that there should be some re-sale value of such items declared by the assessee. It has been submitted by the ld. D.R. that the ld. CIT(A) while deleting the addition made by the A.O., has only followed the decision of this Tribunal for the assessment year 1994-95, wherein Tribunal upheld the order of ld. CIT(A) on the ground that no adverse comment was passed by the special auditor. Ld. D.R. contended that in these circumstances the order of this Tribunal for assessment year 1994-95 should not be simply followed for deciding the grounds raised by revenue in this vear.

4. The ld. D.R. has thereafter drawn the attention of this Bench on the details in respect of items of consumable stores which were written off by the asscsscc and has submitted that from the perusal of such details available at annexure-3 to Enclosure B of the paper book No. D, it is evident that such written off obsolete consumable stores includes 1246 metric ton of coal, which is highly improbable of becoming obsolete. It has, therefore, been contended by the ld. D.R. that since the assessee has not cooperated with the A.O. in providing details and evidences in support of the claim made, the A.O. has no option but to make disallowance, which has been deleted by the ld. CIT(A) in a casual manner without disposing the same on merit and, therefore, such order of ld. CIT(A) is liable to be reversed.

5. In his rival submission, the ld. Senior Counsel Shri R.N. Bajoria appearing for and on behalf of the assessee has assailed the above submission of the ld. D.R. and has first pointed out that this Tribunal while restoring the matter back to the file of A.O. has basically done so to give an opportunity to the A.O. to examine the evidence and documents filed by the assessee before the ld. CIT(A). However, the A.O. after such setting aside has asked for voluminous documents, which is not possible humanly. Shri Bajoria in support of his above contention has drawn the attention of this Special Bench on the letter of A.O,. which is available at page No. 204 of the paper book, wherein the A.O. asked for the details in support of such obsolete consumer stores written off. It has been submitted by Shri Bajoria that the direction of this Tribunal should have been followed by the A.O. in a constructive manner as the restoration of issues were made by this Tribunal for the verification of evidence and documents filed by the assessee before the ld. CIT(A) and it was not made with an intention to provide an opportunity to the A.O. to make fresh assessment in regard to such claim of the assessee. It has been submitted by Shri Bajoria that the assessee-company is having a turnover of more than 6,000 crores and writing off 38,00,000/- of consumer stores, which has become obsolete, is general phenomena in the line of the business of the assessee. Shri Bajoria has also pointed out that so far as the obsolesce of coal is concerned such coal was wet having no value and even otherwise whenever such obsolete items were sold through auction, the assessee used to show the same under the head ‘miscellaneous income’.

6. Shri Bajoria has thereafter submitted that the facts of the present case are exactly similar to the facts of assessment year 1994-95 as the nature of business of assessee remains same and, therefore, the ld. CIT(A) has rightly followed the decision of this Tribunal in the assessment year 1994-95 and such order of ld. CIT(A) is liable to be upheld. The ld. D.R. in his rejoinder has once again reiterated that the A.O. is well competent to ask for the details from the assessee in respect of claim made by it and the assessee was duty bound to prove the genuineness of the claim made by it and since the assessee adopted the method of non-cooperation by not filing the details called for, the action of A.O. was well within the ambit of law.

7. We have carefully considered the arguments of both the sides and perused the material placed before us. The assessee has written off the consumable stores amounting to Rs. 38 lacs, the details of which furnished before the A.O. and kept at Annexure-3 of Enclosure B of the paper book No. II of the assessee are as under: