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Ocean Agro (India) Ltd. v/s The Deputy Commissioner of Income


Company & Directors' Information:- K. N. C. AGRO LIMITED [Active] CIN = U01500WB2005PLC102657

Company & Directors' Information:- OCEAN AGRO (INDIA) LTD [Active] CIN = L15174GJ1990PLC013922

Company & Directors' Information:- F AND K AGRO PRIVATE LIMITED [Active] CIN = U01111PN1980PTC014563

Company & Directors' Information:- R T AGRO PRIVATE LIMITED [Active] CIN = U15400MH1988PTC122934

Company & Directors' Information:- N M AGRO PRIVATE LIMITED [Active] CIN = U15209DL2000PTC103461

Company & Directors' Information:- K F AGRO PRIVATE LIMITED [Active] CIN = U01132PB1998PTC021937

Company & Directors' Information:- T K M AGRO LIMITED [Active] CIN = U01119TZ2000PLC009159

Company & Directors' Information:- M S AGRO PRIVATE LIMITED [Active] CIN = U01403WB2011PTC163653

Company & Directors' Information:- S K K AGRO PRIVATE LIMITED [Active] CIN = U01110DL2007PTC163157

Company & Directors' Information:- P N AGRO PVT LTD [Active] CIN = U01401WB1992PTC056261

Company & Directors' Information:- B R V AGRO PRIVATE LIMITED [Strike Off] CIN = U15139UP2007PTC034299

Company & Directors' Information:- A A AND A AGRO LIMITED [Converted to LLP] CIN = U01111DL1986PLC025101

Company & Directors' Information:- B. P AGRO INDIA PRIVATE LIMITED [Active] CIN = U15132DL2019PTC357421

Company & Directors' Information:- M Y AGRO PRIVATE LIMITED [Active] CIN = U51221DL2011PTC215043

Company & Directors' Information:- H R D AGRO PRIVATE LIMITED [Active] CIN = U15490PB2006PTC030412

Company & Directors' Information:- C F L AGRO PRIVATE LIMITED [Strike Off] CIN = U01409KA2001PTC028797

Company & Directors' Information:- L K AGRO PRIVATE LIMITED [Active] CIN = U15140MH1998PTC115185

Company & Directors' Information:- H D AGRO PRIVATE LIMITED [Strike Off] CIN = U01111MH1996PTC097451

Company & Directors' Information:- P C L AGRO PRIVATE LIMITED [Active] CIN = U74899DL1992PTC049537

Company & Directors' Information:- THE INDIA COMPANY PRIVATE LIMITED [Active] CIN = U74999TN1919PTC000911

Company & Directors' Information:- A S AGRO PRIVATE LIMITED [Active] CIN = U74899DL1989PTC040467

Company & Directors' Information:- S N N AGRO PRIVATE LIMITED [Active] CIN = U01114JH2016PTC008919

Company & Directors' Information:- R R S AGRO PRIVATE LIMITED [Strike Off] CIN = U15139DL2010PTC209756

Company & Directors' Information:- AGRO PRIVATE LIMITED [Strike Off] CIN = U51101KA1962PTC001475

Company & Directors' Information:- D. J. AGRO PRIVATE LIMITED [Strike Off] CIN = U01112DL1994PTC057414

Company & Directors' Information:- G A AGRO PRIVATE LIMITED [Active] CIN = U01229KL2002PTC015736

Company & Directors' Information:- M K B AGRO PRIVATE LIMITED [Active] CIN = U01100MH1996PTC101802

Company & Directors' Information:- T D K AGRO PRIVATE LIMITED [Active] CIN = U29190BR1991PTC004486

Company & Directors' Information:- S G AGRO PRIVATE LIMITED [Active] CIN = U01122KA1995PTC017091

Company & Directors' Information:- AGRO INDIA PRIVATE LIMITED [Active] CIN = U01407AR2013PTC008381

Company & Directors' Information:- U & V AGRO PRIVATE LIMITED [Active] CIN = U01403TZ2015PTC021823

Company & Directors' Information:- B A B AGRO LTD [Strike Off] CIN = U24231MH1993PLC073114

Company & Directors' Information:- B A B AGRO LTD [Active] CIN = U24233WB1987PLC043179

Company & Directors' Information:- B C M AGRO PRIVATE LIMITED [Active] CIN = U01119WB1999PTC090308

Company & Directors' Information:- K. K. AGRO PVT. LTD. [Strike Off] CIN = U51420WB1987PTC042090

Company & Directors' Information:- H & W AGRO PRIVATE LIMITED [Strike Off] CIN = U01400MH2012PTC238144

Company & Directors' Information:- K D AGRO PRIVATE LIMITED [Converted to LLP] CIN = U15312DL2005PTC131996

Company & Directors' Information:- H R AGRO PRIVATE LIMITED [Active] CIN = U01119PB1995PTC016403

Company & Directors' Information:- C K N AGRO PRIVATE LIMITED [Active] CIN = U01300KL2020PTC064742

Company & Directors' Information:- A Q AGRO PVT LTD [Under Process of Striking Off] CIN = U51209WB2006PTC109930

Company & Directors' Information:- S E AGRO PRIVATE LIMITED [Active] CIN = U52500AP2016PTC103446

Company & Directors' Information:- S U B AGRO PRIVATE LIMITED [Active] CIN = U24129PN2000PTC015404

Company & Directors' Information:- INDIA CORPORATION PRIVATE LIMITED [Active] CIN = U65990MH1941PTC003461

Company & Directors' Information:- A S G AGRO LIMITED [Strike Off] CIN = U01119HR2004PLC035459

Company & Directors' Information:- T & T AGRO PRIVATE LIMITED [Active] CIN = U01132WB1999PTC090368

Company & Directors' Information:- C L AGRO PRIVATE LIMITED [Strike Off] CIN = U74120UP2012PTC051898

Company & Directors' Information:- P M S AGRO PVT LTD [Strike Off] CIN = U29211PB1994PTC014448

Company & Directors' Information:- B R K AGRO PRIVATE LTD [Strike Off] CIN = U29211PB1994PTC014302

Company & Directors' Information:- R E I AGRO LTD. [Active] CIN = U01111WB1994PLC065082

Company & Directors' Information:- P & S AGRO INDIA LIMITED [Strike Off] CIN = U01403MH2011PLC214782

Company & Directors' Information:- D N D AGRO (INDIA) LIMITED [Active] CIN = U01403PN2011PLC139235

Company & Directors' Information:- L C A AGRO PRIVATE LIMITED [Strike Off] CIN = U01112UP2005PTC029657

Company & Directors' Information:- V M G AGRO INDIA LIMITED [Active] CIN = U01100MP2011PLC026434

Company & Directors' Information:- G D AGRO PRIVATE LIMITED [Strike Off] CIN = U24122UP1993PTC015164

Company & Directors' Information:- P B AGRO PRIVATE LIMITED [Amalgamated] CIN = U26960MH1990PTC057137

Company & Directors' Information:- R A P AGRO INDIA PVT LTD [Strike Off] CIN = U14200WB2006PTC107514

Company & Directors' Information:- G T AGRO INDIA PRIVATE LIMITED [Strike Off] CIN = U74899DL2005PTC142577

Company & Directors' Information:- F AND K AGRO PVT LTD [Strike Off] CIN = U29248PN1980PTC022759

Company & Directors' Information:- E M AGRO (INDIA) PRIVATE LIMITED [Strike Off] CIN = U02001UP1997PTC022261

Company & Directors' Information:- J S AGRO PRIVATE LIMITED [Strike Off] CIN = U01300PB1993PTC013943

Company & Directors' Information:- A N AGRO PRIVATE LIMITED [Strike Off] CIN = U01119DL1996PTC081855

Company & Directors' Information:- V R L AGRO PRIVATE LIMITED [Strike Off] CIN = U85110KA1999PTC024717

Company & Directors' Information:- P. S. R. AGRO PRIVATE LIMITED [Active] CIN = U24248UP1974PTC004017

Company & Directors' Information:- O N AGRO PRIVATE LIMITED [Active] CIN = U74899DL1988PTC031986

Company & Directors' Information:- K R S AGRO PRIVATE LIMITED [Strike Off] CIN = U01400PN2011PTC141711

Company & Directors' Information:- J K AGRO PRIVATE LIMITED [Strike Off] CIN = U74900PY2011PTC002548

Company & Directors' Information:- W B S AGRO PRIVATE LIMITED [Active] CIN = U01122PB2003PTC025879

Company & Directors' Information:- G T M AGRO PRIVATE LIMITED [Strike Off] CIN = U01100MH2005PTC150816

Company & Directors' Information:- Y K AGRO PRIVATE LIMITED [Converted to LLP and Dissolved] CIN = U74999DL2013PTC250398

Company & Directors' Information:- N P M AGRO PRIVATE LIMITED [Strike Off] CIN = U15494DL2011PTC214942

Company & Directors' Information:- B L B AGRO PRIVATE LIMITED [Strike Off] CIN = U51200DL2012PTC244511

Company & Directors' Information:- D A AGRO PRIVATE LIMITED [Active] CIN = U74900DL2015PTC288168

Company & Directors' Information:- D. B. AGRO PRIVATE LIMITED [Active] CIN = U01100MP2010PTC025035

    ITA No. 3365/Ahd of 2016

    Decided On, 13 August 2018

    At, Income Tax Appellate Tribunal Ahmedabad

    By, THE HONOURABLE MR. RAJPAL YADAV
    By, JUDICIAL MEMBER & THE HONOURABLE MR. WASEEM AHMED
    By, ACCOUNTANT MEMBER

    For the Appellant: Ira Kapoor, P.M. Mehta, ARs. For the Respondent: Mudit Nagpal, Sr.DR.



Judgment Text

Rajpal Yadav, Judicial Member:

1. Assessee is in appeal before the Tribunal against order of the ld.CIT(A)-9, Ahmedabad dated 17.10.2016 passed for the assessment year 2013-14.

2. Though the assessee has raised five grounds of appeal, it has pressed only ground no.2 and 3 for adjudication. Ground no.2 is regarding disallowance of deduction under section 36(1)(va) of the Act towards Provident Fund and Employees State Insurance, while ground no.2 is against upholding of disallowance of Rs.26,000/- paid towards legal expenses.

3. Brief facts of the case are that the assessee has filed its return of income on 30.9.2013 declaring total income at Rs.57,96,180/-. The case of the assessee was selected for scrutiny assessment and notice under section 143(2) was issued and served upon the assessee. During the assessment proceedings, it was noticed by the AO that an amount of Rs.5,01,183- received by the assessee from its employees towards employees' contribution to PF and ESIC has not been deposited by the assessee on or before the due date. The details amounts of contribution by the employees, due date and date of payment have been mentioned by the AO in the assessment order at page no.10. AO proposed to disallow the same, and for that a show cause notice was issued to the assessee to explain the reason for late payment of PF and ESCI collected from the employees. Assessee submitted a reply dated 7.1.2016, but such reply of the assessee did not find favour from the AO. The AO accordingly disallowed the same and added to the income of the assessee. Dissatisfied with the order of the AO, the assessee went in appeal before the ld.First Appellate Authority. The ld.CIT(A) considering submissions and details furnished by the assessee restricted the disallowance to Rs.4,10,932/-.

4. Before us, the ld.counsel for the assessee reiterated submissions as were made before the Revenue authorities, while ld.DR relied upon the orders of Revenue authorities.

5. We have considered submissions of both the sides and gone through the record carefully. The claim of the assessee is that since PF contributions have been made within the due date of filing of return, the same would be allowable as deduction under section 43B of the Act. We find that amount in dispute relates to "employees' contribution" and not "employer's contribution". Section 43B relates to sum payable by the assessee as an employer by way of contribution to any provident fund etc., whereas section 36(1)(va) relates to any sum received by the assessee from any his employees to be credited to the employee's account in the relevant fund or before the due date provided in relevant Act. Therefore, these two sections are distinct and independent to each other and apply in different situations. The claim of the assessee falls within the ambit of section 36(1)(va) and the "due date" defined in the Explanation attached to this section for depositing the sum deducted from the salary of the employees with the relevant fund is the date provided relevant Act and not the due date as provided in section 139(1) of the Income Tax Act. Revenue authorities have considered this position of law and disallowed the deduction. Further, in number of similar cases, Tribunal has consistently dismissed such claim of the assessee by following the judgment of Hon'ble jurisdictional High Court in the case of CIT Vs. GSRTC, 265 CTR 64 (Guj) wherein it has held that where assessee did not deposit employees' contribution to employees' account in relevant fund before due date prescribed in Explanation to section 36(1)(va), no deduction would be admissible even though he deposits same before due date under section 43B. This being the position, as interpreted by the Hon'ble jurisdictional High Court, we are not inclined to interfere in the order of the Revenue authorities on this issue, which is upheld, and this ground of assessee is dismissed.

6. Coming to the next issue of the assessee regarding disallowance of alleged legal expenses of rs.26,000/-, brief facts are that during the assessment proceedings the AO noticed that the assessee debited a sum of Rs.26,000/-, which according to the AO was in the nature of penalty for an offence. AO by issuing a show cause notice proposed disallowance of the same, and accordingly sought for explanation from the assessee. Assessee submitted that the payment in question was towards compounding fees levied by the Legal Metrology department, Nagpur, which was compensatory in nature and not penal as alleged by the AO. It was submitted that expenditure cannot be allowed under Explanation to section 37 only when it was incurred for an offence or the acts prohibited by the law. The payment of compounding fees, which was neither an offence nor prohibited by the law, cannot be disallowed. The AO did not accept this submission of the assessee and held that since legal expenses claimed by the assessee has an element of breach of law, therefore, the same was penalty and not allowable under section 37. Aggrieved assessee went in appeal before the ld.First Appellate who also concurred with the finding of the AO and confirmed addition. Assessee is now before the Tribunal.

7. Before us also the assessee reiterated submissions as were made before the Revenue authorities below. She further contended that in the claim of the assessee there is no element of penalty. It was an expenditure motivated by commercial purpose and would be eligible for deduction under section 37(1) of the Act. She also placed on record copy of letter of Inspector of Legal Metrology Deptt. Nagpur dated 11.7.2012 requesting to make payment of compounding fees. The ld.DR, on the other hand, supported the orders of the Revenue authorities.

8. We have considered rival submissions and gone through the record carefully. A short issue before us is, whether compounding fees expended by the assessee is compensatory in nature, and allowable expenditure under section 37(1) or not. We find that Explanation 1 appended to section 37(1) of the Income Tax Act prohibits allowance of any expenditure, if it was incurred for illegal activities or towards infringement of law. The ld.Revenue authorities construed the payment made by the assessee to Inspector of Legal metrology Department as incurred towards violation of law which is penal in nature. On the other hand, the stand of the assessee is that it is a compensatory in nature and not penal nature and accordingly the same should not be disallowed. On due consideration of the facts and circumstances, we find that the impugned expenditure incurred by the assessee is more in the nature of compensatory and necessitated by commercial expediency. In the normal incidences of business, certain damages are to be paid by an assessee and the expenses so incurred is an allowable deduction in the ordinary course of the business. The letter of Inspector of Legal Metrology, Nagpur dated 11.7.2012 states that the assessee to make payment of Rs.20,000/- to avoid any future litigation. The assessee has settled the issue by paying the sum as compensation/damages for the interest of its b

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usiness, which according to us, cannot be treated as incurred for infraction of any law and therefore to be disallowed. We are not convinced with the action of the AO in disallowing the impugned claim of the assessee, as there is no finding recorded by the Revenue authorities below to demonstrate that expenses incurred by the assessee is a penal in nature and assessee has committed any contravention of law. Revenue authorities simply treated the expenses as inadmissible without examination of any facts. In the absence of the same, we are not inclined to uphold orders of both the authorities below on this issue, which is accordingly deleted and the ground of appeal of the assessee on this issue is allowed. 9. In the result, the appeal of the assessee is partly allowed.
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