Glaze Paints Ltd. , Alwar vs Department Of Income Tax

Jh vkj-ih-rksykuh] U;kf;d lnL; ,oa Jh Vh-vkj-ehuk] ys[kk lnL; ds le{k BEFORE: SHRI R.P. TOLANI, JM & SHRI T.R. MEENA, AM

vk;dj vihy la-@ITA No. 786/JP/2012 fu/kZkj.k o"kZ@Assessment Year : 2009-10

Assistant Commissioner of cuke M/s Glaze Paints Limited, G- Income Tax, Vs. 1260, Phase-I, Industrial Area, Circle-2, Alwar. Bhiwadi.

LFkk;h ys[kk la-@thvkbZvkj la-@PAN/GIR No.: AABCG 7849 K vihykFkhZ@Appellant izR;FkhZ@Respondent

jktLo dh vksj ls@ Revenue by : Mrs. Neena Jeph (JCIT) fu/kZkfjrh dh vksj ls@ Assessee by : Shri P.C. Parwal (CA)

lquokbZ dh rkjh[k@ Date of Hearing : 21/04/2015 ?kks"k.kk dh rkjh[k@ Date of Pronouncement : 19/06/2015

vkns'k@ ORDER

PER: T.R. MEENA, A.M.

This is an appeal filed by the revenue against the order dated

06/07/2012 passed by the learned CIT (A), Alwar for A.Y. 2009-10. The

effective grounds of appeal are as under:-

"1. That the Ld. Commissioner of Income Tax (A) has erred in law as well as on the facts and 2 ITA 786/JP/2012_ ACIT Vs. Glaze Paints Ltd.

circumstances of the case in restricting the addition of Rs. 37,70,488/- to Rs. 17,779/- which was made on account of disallowance of deduction claimed U/s 80IC of the Act.

2. That the Ld. Commissioner of Income Tax (A) has erred in law as well as on the facts and circumstances of the case in restricting the trading addition of Rs. 11,95,508/- to Rs. 77,690/- made by the A.O.

3. That the Ld. Commissioner of Income Tax (A) has erred in law as well as on the facts and circumstances of the case in deleting the addition of Rs. 49,945/- made by the A.O. U/s 2(24)(x) r.w.s. 36(1)(va) of the Act."

2. The ld Assessing Officer observed that the assessee is engaged in

the business of manufacturing and trading of paints, primer and allied

products and manufacturing of PVC pipes. The assessee filed return at

Rs. 30,33,498/- after claiming deduction U/s 80IC of the Income Tax

Act, 1961 (hereinafter referred as the Act) at Rs. 37,70,488/- on

16/12/2009. The assessee had declared the profit U/s 115JB at Rs.

54,15,485/-. The assessee had declared income from business and

profession at Rs. 68,03,986/- bearing claiming deduction U/s 80IC of

the Act of Rs. 37,70,488/-. The case was scrutinized U/s 143(3) of the

Act. The manufacturing activity was carried out by the assessee in its

wholly owned unit M/s Hariganga Polymers situated at E-87, B.H.E.L., 3 ITA 786/JP/2012_ ACIT Vs. Glaze Paints Ltd.

Industrial Area, Bahdrabad, Haridwar (Uttaranchal). The ld Assessing

Officer observed that this unit became fully owned unit of M/s Glaze

Paint Limited w.e.f. 06/09/2007 after dissolution of partnership w.e.f.

close of the business hours of 05/09/2007. It is claimed that previously

the assessee company was partner in M/s Hariganga Polymers with

50% share. During the course of assessment proceedings, the assessee

was required to furnish Form No. 10CCB and a copy of audit report in

Form No. 3CD in respect of M/s Hariganga Polymers alongwith copy of

bills of plant and machinery purchased. The ld Assessing Officer

analysed Section 80IC from page 2 to 5 of assessment order. It is held

that M/s Hariganga Polymer is engaged in manufacturing of PVC Pipe,

which is an article or thing specified in Thirteenth Schedule as

mentioned min the provisions of Section 80IC(2)(a). In the Thirteenth

Schedule in Part-B at S.No. 20 plastics and articles thereof are

mentioned and manufacturing of PVC Pipes is thus covered in plastics

and articles thereof. Similarly in Part-C of the Fourteenth Schedule,

manufacturing of PVC Pipes is not covered in audit report in form No.

10CCB dated 04/09/2009, the Auditor had certified that the undertaking

or enterprise has been formed by the splitting up or the reconstruction

of a business already in existence and in Point No. 26(b), the auditor 4 ITA 786/JP/2012_ ACIT Vs. Glaze Paints Ltd.

has further certified/qualified that the circumstances and the period

specified in Section 33B is not applicable. Further perusal of the Form

No. 10CCB and audited P&L account of M/s Hariganga Polymers reveals

that deduction U/s 80IC has been claimed on other income of Rs.

17,779/- on account of interest on FDRs and bank interest which is not

qualified for deduction U/s 80IC of the Act. The Assessing Officer gave

show cause notice on this issue to the assessee. The ld counsel for the

assessee filed a corrigendum dated 22/1/2011 from V. Maskara &

Associates, Chartered Accountants, 110 Ashoka Place, Exhibition Road,

Patna whereby the auditor mentioned that reply of 26(a) of From No.

10CCB should be read as "NO" in place of "YES". The auditor has

further mentioned that the error is inadvertent, unintentional and

human and is deeply regretted. After lapse of over two years, the ld

Assessing Officer further held that there is no rule in the Income Tax

law that such audit report can be rectified under the Income Tax Law.

It is further observed that neither the manufacturing of PVC pipe is

covered U/s 80IC(2)(a) and U/s 80IC(2)(b) nor the corrigendum passed

by the auditor is acceptable in the eyes of law. The ld AR for the

assessee submitted that as per Section 80IC(2) clause specified that

any unit which is engaged in manufacturing in things or article, not 5 ITA 786/JP/2012_ ACIT Vs. Glaze Paints Ltd.

being any articles or things specified in Thirteenth Schedule, deduction

will be allowed. In Thirteenth Schedule point number 20 of part B

mentioned the plastics and articles and thereof with their excise

classification from 39.09 to 39.15. As per excise tariff there is no any

name mentioned of PVC (Poly Vinyl Chloride) Pipe. But this item is

mentioned under tariff item 39.17, which is not restricted through

Schedule Thirteenth. As per sub clause (II) of clause (a) of sub-section

(2) of Section 80I(C) if the items manufactured is not covered under

Schedule Thirteenth and unit established in industrial area or industrial

growth centre of specified states, then the benefits of section 80I(C)

will be available to the assessee." The ld Assessing Officer after

considering the assessee's reply found that this classification is made

for excise purposes in Section 80IC, there is a clear mention that

deduction of unit allowed in respect of the articles or things, which are

mentioned in Schedule-13 and in this Schedule PVC is mentioned at

serial No. 20. He was certain that no deduction U/s 80IC would be

allowable on plastic and article. Accordingly, he disallowed 80IC

deduction at Rs. 37,70,488/-.

6 ITA 786/JP/2012_ ACIT Vs. Glaze Paints Ltd.

3. Being aggrieved by the order of the Assessing Officer, the

assessee carried the matter before the learned CIT(A), who had allowed

the appeal partly by observing as under:-

"I have considered the assessment order as well as submission of the AR. The ld. A.O. has disallowed the claim of deduction U/s 80IC on two grounds:

(i) PVC Pipe is an article or thing specified in the 13th schedule part B serial No. 20 and therefore deduction is not admissible.

(ii) The auditor has initially mentioned 'yes' against serial No. 26(a) of form No. 10CCB and has passed a corrigendum after two years stating that reply of 26(a) of form No. 10CCB should be read as 'No' in place of 'yes' and the same was not acceptable as there is not provision of passing a corrigendum in form No. 10CCB.

Section 80IC provides a deduction from profits and gains derived by an undertaking or an enterprise from any business referred to in sub-section 2 and sub-section 2 provides that this section applies to any undertaking or enterprise,-

(a) which has begun or begins to manufacture or produce any article or thing, not being any article or thing specified in the 13th schedule..........

(b) which has begun or begins to manufacture or produce any article or thing, not being any article or thing specified in the 14th schedule............

7 ITA 786/JP/2012_ ACIT Vs. Glaze Paints Ltd.

The appellant has its enterprise/undertaking, manufacturing PVC pipes set up at block No. E-87, Industrial Area, Bahadrabad District Haridwar in the State of Uttaranchal. Therefore, part B of schedule 13th is applicable in this case. Item 20 of this schedule reads as under:

S.No. Activity or article or thing Excise classification 20 Plastics and articles thereof 39.09 to 39.15 From above it is apparent that section 80IC(2)(a) excludes enterprise/undertaking which are engaged in manufacturing of plastics and articles thereof as mentioned in the excise classification 39.09 to 39.15. It does not exclude enterprise/undertaking which are engaged in manufacturing any item of plastics and articles thereof as inferred by the ld.

A.O.. If it were so, there was no need to mention the excise classification in schedule XIII.

I find that the items mentioned against various excise classification from 39.09 to 39.15 and 39.17 are as under:

Excise Classification Description of goods. 39.09 Amino-resins etc. 39.10 Silicones in primary forms 39.11 Petroleum resins etc. 39.12 Cellulose and its chemical derivatives etc. 39.13 Natural polymers and modified natural Polymers

8 ITA 786/JP/2012_ ACIT Vs. Glaze Paints Ltd.

39.14 Ion-exchangers based on polymers of heading No. 39.01 to 39.13, in primary forms 39.15 Waste, parings and scrap of plastics 39.17 Tubes, pipes and hoses and fittings There for (for example joints, elbows, Flanges, of plastics.

I find that the appellant is assessed to central excise and as per return filed before the excise authorities, the description of goods is PVC pipes and the excise tariff item is 39.17 (39.17- 2310) which is not excluded in schedule XIII. Further, the appellant is not producing any article or thing excluded under schedule XIV Part C (applicable for the State of Uttaranchal). In view of the above discussion, I am of the considered opinion that appellant is manufacturing PVC pipes which do not fall in excise classification 39.09 to 39.15 of schedule XIII of the IT Act or under schedule XIV. Therefore, it is eligible for exemption u/s 80IC(2) of the Act., Further, I am inclined to agree with the submission of the AR that there was a printing error in serial No. 26(a) of the report in form 10CCB and the auditor has already clarified by issuing a corrigendum. It is not the case that the A.O. has given a finding of fact, after examining the matter, that the undertaking ort enterprise has been formed by the splitting up or the reconstruction of a business already in existence. The appellant has also submitted that in A.Y. 08-09 the auditor had reported as 'no' against para 26A of form No. 10CCB.

9 ITA 786/JP/2012_ ACIT Vs. Glaze Paints Ltd.

In view of above facts and circumstances it is held that the appellant is eligible for deduction U/s 80IC of the Act. However, the appellant should have excluded the other income of Rs. 17,779/- on account of interest on FDRs and bank interest while claiming the deduction u/s 80IC of the Act. I find that the claim of deduction on this amount of Rs. 17,779/- is not correct as this income is not derived from the business referred to section 80IC(2). Therefore, the disallowance of Rs. 37,70,488/- made by the ld A.O. is restricted to Rs. 17,779/- and the appellant gets a relief of Rs. 37,52,709/-. This ground is partly allowed."

4. Now the revenue is in appeal before us. The learned D.R.

vehemently supported the order of the Assessing Officer also argued

that these items are covered in Schedule XIII, therefore, deduction U/s

80IC is not allowable.

5. At the outset, the learned A.R. for the assessee has relied upon

the order of the ld CIT(A) and drawn our attention on Schedule-XIII

from serial NO. 39.09 to 39.15 wherein it is clear that PVC pipe is not

covered by this schedule. Further there was a mistake in the audit

report in the column No. 26(a), which has been rectified by the

concerned auditor. Therefore, deduction U/s 80IC is allowable.

10 ITA 786/JP/2012_ ACIT Vs. Glaze Paints Ltd.

6. We have heard the rival contentions of both the parties and

perused the material available on record. The ld CIT(A) had given

detailed findings in his order dated 06/07/2012 and verified the XIII

schedule items and held that PVC Pipe do not fall in excise classification

39.09 to 39.15 of Schedule-XIII of Act or under Schedule 14. Further,

the auditor had corrected the audit report in column No. 26(A) in form

No. 10CCB. Further the ld DR has not controverted the finding given by

the ld CIT(A). Therefore, we uphold the order of the ld CIT(A) on this

ground.

7. The second ground of appeal is against restricting the trading

addition of Rs. 11,95,508/- to Rs. 77,690/-. The ld Assessing Officer

observed that during the year under consideration, the company has

declared gross profit of Rs. 1,26,68,380/- on total turnover/gross

receipts of Rs. 4,62,90,109/- giving a G.P. rate of 27.36% as against

last year's gross profit of Rs. 1,24,16,204/- on turnover of Rs.

4,14,49,005/- giving a GP rate of 29.95%. There was decline in G.P.

rate. This gross profit also include interest income and other income.

The assessee had declared net profit of Rs. 54,76,717/-. The Assessing

Officer gave reasonable opportunity of being heard on decline of G.P..

11 ITA 786/JP/2012_ ACIT Vs. Glaze Paints Ltd.

It was submitted by the assessee that there was increase in the price of

the raw materials, packing material and fuel. The goods manufactured

by the assessee is excisable unit and all the purchases and sales are

subject to excise. The Excise department also audits their books of

account on regular basis. The assessee also submitted the copies of

return filed before the Excise Department and argued that Excise

Department had carried out their audit with reference to stocks and had

not observed anything adverse. The Excise Department is much

particular with the quantity as it affects the ultimate excise. The Excise

authority has accepted the declared result. The ld Assessing Officer

verified the creditors with reference to copy of account received from

the creditors particularly in case of M/s S.B. Shah & Co. (P) Ltd. The ld

Assessing Officer found difference of Rs. 34,790/- in the account. This

difference was explained by the assessee that the creditors had issued

credit note of Rs. 34,790/- but same has not been accounted for.

Similar difference was found in the case of M/s J.M. chemical Co. at Rs.

34,912/-. The ld Assessing Officer observed that the assessee company

claimed to have purchased raw material of Rs. 13,864/- through invoice

No. 248 dated 20/06/2008 but M/s J.M. chemical Co. had declared

such sale to the assessee company thereby the assessee had debited 12 ITA 786/JP/2012_ ACIT Vs. Glaze Paints Ltd.

bogus purchase and raw material. Similarly, M/s J.M. chemical Co.

claimed to have received payment of Rs. 46,505/- on 31/3/2009

through Standard Chartered Bank from the assessee company but the

assessee had not accounted for the same. The assessee could not

reconcile the differences with evidence. M/s Hariganga Polymers had

made cash payment of Rs. 44,607/- on 4/7/2008 for quality certification

expenses in violation of provisions of Section 40A(3). The assessee had

not submitted any evidence regarding increase in price of raw material,

packaging material and fuel. The ld Assessing Officer rejected the book

result and applied Section 145(3) of the Act and estimated the

assessee's G.P. at Rs. 1,38,63,888/- as against the declared gross profit

of Rs. 1,26,68,380/- by applying last year G.P. rate @ 29.95% to the

declared total turnover and consequently a trading addition of Rs.

11,95,508/- was made to the total income of the assessee but no

separate addition U/s 40A(3) of the Act was made at Rs. 44,607/-.

8. Being aggrieved by the order of the Assessing Officer, the

assessee carried the matter before the ld CIT(A), who had confirmed

the addition partly by observing as under:-

13 ITA 786/JP/2012_ ACIT Vs. Glaze Paints Ltd.

"5.3 I have considered the assessment order as well as submissions made by the ld AR, I find that the ld A.O. has rejected the books of accounts u/s 145(3) and has made a trading addition of Rs. 11,95,508/- by estimating the gross profit at Rs. 138,63,888/- by applying the G.P. rate of 29.95% of A.Y. 2008-09 to the declared total turnover, on the following grounds:

(i) There is decline in a GP rate from 29.95% in A.Y. 08-09 to 27.36% in A.Y. 09-10 and the assessee has failed to substantiate the claim with documentary evidences in the form of bills/vouchers for year under consideration and last year in respect of claimed increase in cost of raw material, packing material and fuel.

(ii) The assessee company has made cash payment of Rs.

44,607/- on 04/07/2008 for quality certification expenses in violation of provisions of Section 40A(3).

(iii) The assessee company has debited bogus purchases of raw material amounting to Rs. 13,864/- from M/s J.M. Chemicals Company and could not reconcile the differences in the balances of creditors i.e. S.B. Shah & Co. Pvt. Ltd., J.M. Chemical Co.

Rejection of books of accounts:

It has been submitted that the assessee has been maintaining the books of accounts, stock register, R.G. 14 ITA 786/JP/2012_ ACIT Vs. Glaze Paints Ltd.

register as per guidelines prescribed under the Act and it cannot be said that correct income cannot be worked out on the basis of the same. The ld. A.O. has observed in the assessment order that in support of the claim, during the assessment proceedings, AR of the assessee has produced sale/purchase bills of raw material and finished goods alongwith RG Register and stock register for verification. However, the ld A.O. has not been able to point out to any specific mistake or deficiency in the books of accounts which would result in satisfaction that the books of accounts are incorrect or incomplete.

It has been submitted by the AR that in the case of Singhal Dal Mills Vs. ITO (1994) 123 Taxman 15 (Del.-Trib) it was held that unless the Assessing Officer report a finding that the method of accounting adopted by the assessee is such that it would not enable the A.O. to deduce the taxable income or the books of accounts are not correct and complete, the A.O. is not empowered to reject the book results.

Decline in GP Rate: Regarding the lower rate of G.P. it has been stated that"

(i) During the year the sales has increased by more than 11.68% and in the competitive market it could be achieved by reducing the G.P. margin.

15 ITA 786/JP/2012_ ACIT Vs. Glaze Paints Ltd.

(ii) There is increase in manufacturing expense as proportion of sales from 2.04% in A.Y. 08-09 to 2.43% in A.Y. 09-10.

(iii) During the A.Y. 2009-10 the traded goods was purchased and sold for Rs. 411992/- on which the G.P. rate was only 1.13%.

(iv) The ld A.O. has compared the G.P. of A.Y. 09-10 with A.Y. 08-09 but has ignored the GP rate of A.Y. 06-07 which was 25.43%. The average GP rate for the three years work out to 27.60%. The GP rate at 27.43% for A.Y. 09-10 is only marginally lower than the average GP rate of 27.60%.

(v) Every year is a separate year and cannot be compared with the preceding year results.

Difference in the account of creditors

The AR has submitted that the difference in the account of creditors as per the books of the assessee and as per the books of the creditor is a matter of reconciliation of account and it cannot be said to be defect in the books of accounts. Regarding the difference of Rs. 34790/- in respect of account with M/s S.B. Shah Co Pvt. Ltd. it has been submitted that the said concern had issued a credit note on 27/03/2009 which was received at a later date and the assessee has passed the entry of Rs. 34790/- on 01/04/09.

16 ITA 786/JP/2012_ ACIT Vs. Glaze Paints Ltd.

Regarding the bogus purchase of Rs. 13864/- in the name of M/s J.M. Chemical it has been stated that the purchase is supported by invoice and is verifiable from the copy of purchase and invoice dated `18/06/2008, G.R. dated 18/06/2008 of the goods carrier etc. Regarding the payment of Rs. 46,205/- to M/s J.M. Chemicals, not entered in the books of the assessee it has been submitted that said payment has been made on the presentation of cheque in the bank 17/04/09 and is verifiable from the bank statement of the appellant. Regarding the difference of Rs. 34,912/- with respect to the accounts of M/s J.M. Chemicals Co., it has been stated that this difference is only a matter of reconciliation. The difference of Rs. 34912/- stands reconciled in the books of the appellant by debit entry of Rs. 46505/- on 17/04/2009, on account of payment of the said amount on clearing of cheque by the HDFC bank and a credit entry of Rs. 11600/- made on 01/04/2010 by way of adjustment account.

Cash payment of Rs. 44,607/-

Regarding the cash payment of Rs. 44607/- on 04/07/2008 it has been submitted that the appellant had purchased a demand draft of Rs. 44607/- in favour of M/s Bureau of Indian Stadard, Ghaziabad payable at Delhi by paying cash vide No. 270496/- and this cannot be a ground for invoking the provisions of Section 145(3). A copy of confirmation 17 ITA 786/JP/2012_ ACIT Vs. Glaze Paints Ltd.

from the Vijaya Bank dated 16/01/2012 has been submitted with the reply.

Findings

The two instances of the difference in the account of creditors as per the books of the assessee and as per the books of the creditor is only a matter of reconciliation of account and it cannot be said to be a defect in the books of accounts. Similarly, the instance of cash payment of Rs. 44607/- on 04/07/2008 is actually for purchase of a demand draft of Rs. 44607/- in favour of M/s Bureau of Indian Standard, Ghaziabad and this cannot be a ground for rejecting the books of accounts.

As regard the lower rate of GP, I find that the GP rate is reflected at 27.43% as per the audit report. Further, the auditor has commented against column 28(b) of the report that the quantitative details of principal items of raw materials, finished products and by-products are not available. I find that the appellant is engaged in manufacturing of paints, primer and allied products in one unit and manufacturing of PVC pipes in another unit besides minor trading during the year.

Considering the fall in rate of GP shown by the appellant which is not fully explained and the comments of the auditor that the quantitative details of principal items of 18 ITA 786/JP/2012_ ACIT Vs. Glaze Paints Ltd.

raw materials, finished products and by-products are not available, I am of the considered opinion that the rejection of books of accounts and the application of provision of Section 145(3) should be upheld. However, I find that the application of profit rate at 29.95% by the ld A.O. is on the higher side as in A.Y. 2007-08, the G.P. rate was only 25.43% as against 29.95% in A.Y. 2008-09 and 27.43% in A.Y. 2009-10. I am inclined to hold that the application of G.P. rate at 27.60%(average GP rate for three assessment years) would be reasonable. Applying the rate of 27.60% to the total turnover of 462,90,109/- will give gross profits of Rs. 12776070/- and this will result in an addition of Rs. 77,690/-. Accordingly, the addition under this head is upheld at Rs. 77,690/- and the appellant will get relief of Rs. 11,17,818/-. This ground is partly allowed."

9. Now the Revenue is in appeal before us. The ld DR vehemently

supported the order of the Assessing Officer and argued that the ld

CIT(A) has accepted more or less assessee's G.P. rate by considering

the past history of the case. The assessee had taken different argument

before the ld CIT(A), which has not been taken before the Assessing

Officer. Therefore, order of the Assessing Officer may be confirmed.

19 ITA 786/JP/2012_ ACIT Vs. Glaze Paints Ltd.

10. At the outset, the ld AR of the assessee reiterated the arguments

made before the ld CIT(A) and argued that the ld CIT(A) has

considered all the aspects and has given reasoned order. Therefore,

same may be confirmed.

11. We have heard the rival contentions of both the parties and

perused the material available on the record. The assessee has shown

G.P. rate during the year under consideration @ 27.36% as against

29.95% in immediate preceding year on gross turnover of Rs.

4,62,90,109/- during the year under consideration and Rs.

4,14,49,005/- in immediate preceding year. The assessee's item

produced is under excisable items where excise audit has been done by

it. The assessee has produced all the sale/purchase vouchers. There

was a difference in account of some of the parties, which has been

reconciled by the assessee before the ld CIT(A) and also explained the

cash payment U/s 40A(3) of the Act. During the year, the assessee's

sale also has gone up compared to preceding year and there is a

marginal decline in the G.P. rate. The ld DR had not controverted the

finding given by the ld CIT(A). Therefore, we uphold the order of the ld

CIT(A). Accordingly, this ground of revenue is dismissed.

20 ITA 786/JP/2012_ ACIT Vs. Glaze Paints Ltd.

12. Ground No. 3 of the revenue's appeal is against deleting the

addition of Rs. 49,945/-. The ld Assessing Officer observed that ESI &

PF payments were not made in time as per audit report. The ld

Assessing Officer gave reasonable opportunity of being heard on this

issue and argued that these payments were deposited before due date

of furnishing of return of income. The assessee relied upon various case

laws on this issue but the Assessing Officer had not found the

assessee's reply convincing and held that due date of deposit in ESI &

EPF is governed by ESI & PF Acts which talk of 21st of next month for

ESI and 20th of next month for EPF including relaxation of five days

grace period u/s 14B of the Provident Fund Act provided the payment is

made by cheque. Thus, he made addition of Rs. 49,945/-.

13. Being aggrieved by the order of the Assessing Officer, the

assessee carried the matter before the ld CIT(A), who had allowed the

appeal by observing as under:-

"8.3 I have considered the assessment order as well as submission of the Ar. I find that the courts have taken a divergent view on this matter. In the case relied upon by the appellant the question of law before the Hon'ble High Court of Delhi was: "whether the ITAT was correct in law in 21 ITA 786/JP/2012_ ACIT Vs. Glaze Paints Ltd.

deleting the addition relating to the employees' contribution towards provident fund and ESI made by the A.O. u/s 36(1)(va) of the IT Act, 1961"? The Hon'ble Court has dismissed the appeal of the revenue in view of the order of the Apex Court in the case of Vinay Cement Ltd. reported at (2007) 213 CTR 268; (2009) 313 ITR (St.) 1 wherein the Apex Court while dismissing the SLP of the revenue, observed as follows:-

"Delay condoned. In the present case we are concerned with the law as it stood prior to the amendment of section 43B. In the circumstances, the assessee was entitled to claim the benefit in section 43B for that period particularly in view of the fact that he has contributed to provident fund before filing of the return. Special leave petition is dismissed". In this order the Hon'ble High Court of Delhi has also relied on the judgment of the Madras High Court in Nexus Computer Pvt. Ltd. (2009) 313 ITR 144 and another decision of the division bench of Delhi High Court reported as CIT Vs. Dharmendra Sharma (2008) 297 ITR 320 whereas it has disagreed with the decision of the Hon'ble Bombay High Court in CIT Vs. Pamwi Tissues Ltd. (2009) 313 ITR 137.

After considering the submissions of the AR and decisions on this issue, I am inclined to hold that the emp8loyees' contribution towards provident fund and ESI, even if paid 22 ITA 786/JP/2012_ ACIT Vs. Glaze Paints Ltd.

beyond the due dates of the relevant Act, would be allowable as deduction if the same is paid before the filing of income tax return the disallowance of Rs. 49945/- is deleted. This ground is allowed."

14. Now the revenue is in appeal before us. The ld DR has

vehemently supported the order of the Assessing Officer and argued

that the assessee not paid both the within grace period 5 days as per

respective Act, therefore same may be confirmed.

15. At the outset, the ld AR of the assessee has drawn our attention

on the decision of Hon'ble Rajasthan High Court in the case of Jaipur

Vidyut Vitran Nigam Ltd. wherein the Hon'ble Court has held that if

payment of ESI and PF has been made before due date of filing of

return, is allowable U/s 43B of the Act. Therefore, he prayed to confirm

the order of the ld CIT(A).

16. We have heard the rival contentions of both the parties and

perused the material available on the record. The ld CIT(A) has

considered the various case laws on this issue including the SLP of

Hon'ble Apex Court in the case of Vinay Cement Ltd. (supra) and

rejected the appeal after observing that the assessee had paid these 23 ITA 786/JP/2012_ ACIT Vs. Glaze Paints Ltd.

payments U/s 43B of the Act on or before due date of return, therefore,

SLP was rejected after considering the Hon'ble Delhi High Court decision

in the case of said assessee. Therefore, we do not find any reason to

intervene in the order of the ld CIT(A). Accordingly, this ground of

revenue is dismissed.

17. In the result, the revenue's appeal is dismissed.

Order pronounced in the open court on 19/06/2015.

Sd/- Sd/- ¼vkj-ih-rksykuh½ ¼Vh-vkj-ehuk½ (R.P.Tolani) (T.R. Meena) U;kf;d lnL;@Judicial Member ys[kk lnL;@Accountant Member

Tk;iqj@Jaipur

fnukad@Dated:- 19th June, 2015 *Ranjan

vkns'k dh izfrfyfi vxzsf'kr@Copy of the order forwarded to:

1. vihykFkhZ@The Appellant- The ACIT, Circle-2, Alwar.

2. izR;FkhZ@ The Respondent- M/s Glaze Paints Limited, Bhiwadi.

3. vk;dj vk;qDr@ CIT

4. vk;dj vk;qDr¼vihy½@The CIT(A)

5. foHkkxh; izfrfuf/k] vk;dj vihyh; vf/kdj.k] t;iqj@DR, ITAT, Jaipur

6. xkMZ QkbZy@ Guard File (ITA No. 786/JP/2012) vkns'kkuqlkj@ By order,

lgk;d iathdkj@Asst. Registrar