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01-03-2019, JRG Securities, Section 35D(2)(c)(iv), 35D, Tribunal Cochin

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2 months 1 week ago #8745 by amit
Section - 35D(2)(c)(iv), 35D, 139(5), 43B, 37, 350
Order Date - 01-03-2019
Favouring - Revenue Partly allowed for statistical purposes
Court - Tribunal Cochin
Appellant - ITO
Respondent - JRG Securities Ltd.
Citation - 319Taxpundit185
Appeal No. - I.T.A. No.356/Coch/2017
Asstt. Year - 2008-09



These appeals filed by the assessee as well as by the Revenue are directed against the order of the CIT(A)-1, Kochi and pertain to the assessment year 2008- 09. The assessee has also filed Cross Objection in C.O. No.03/Coch/2018 against Revenue’s appeal in ITA No. 356/Coch/2017 for the assessment year 2008-09. ITA No. 356/Coch/2017 : Revenue’s appeal : AY 2008-09

2. The first ground, Ground No. 2 raised by the revenue is with regard to deletion of addition of Rs.6,74,707/- made u/s. 36(1)(va) r.w.s. 2(24)(x) in respect of employees’ contribution to PF/ESI.

3. After hearing both the parties, we find that this issue is squarely covered against the assessee by the judgment of Jurisdictional High Court in the case of CIT vs. Merchem Ltd. (378 ITR 443) wherein it was held that due date in the respective ESI/PF Act is the date to be considered for allowing deduction u/s. 36(1)(va).

3.1 In view of the above judgment of the Jurisdictional High Court, we are inclined to reverse the order of the CIT(A) and restore that of the Assessing Officer. Hence, employees’ contribution to PF/ESI after due date under the relevant PF/ESI Act is not eligible for deduction u/s. 36(1)(va) of the Act r.w.s 2(24)(x) of the Act. This ground of appeal of the Revenue is allowed.

4. The next ground, Ground No. 3 raised by the Revenue is with regard to allowance of purported non-IPO expenses to the tune of Rs.1,17,77,496/- in AY 2008-09. The CIT(A) erred in allowing the aforesaid expenditure u/s. 37(1) in AY 2008-09 which was incurred in earlier F.Y. 2006-07 and liability discharged in that year itself..

4.1 The facts of the case are that the assessee had incurred an amount of Rs.1,47,85,680/- in relation to the IPO undertaken by the assessee during the F.Y. 2006-07. The Company had claimed a deduction of one fifth of the total expenditure incurred being an amount of Rs.29,57,136/- (1/5th of Rs.1,47,85,680/-). The detailed split of Rs 1,47,85,680/- is as follows:

The Assessing Officer, while computing the taxable income, had disallowed an amount of Rs.29,57,136/- being the amount of expenditure incurred towards the
public issue of shares which primarily relates to advertisement expenses, postage and courier, printing and stationery, travelling expenses etc. The Assessing Officer had disallowed the said amount on the content on that the expenditure was capital in nature and was incurred in earlier assessment year and was considered as deferred/prior period capital expenditure.

4.2 On appeal, the CIT(A) deleted the disallowance made of Rs.23,55,449 (out of the total disallowance made by the Assessing Officer of Rs.29,57,136) and confirmed the balance disallowance of Rs.6,01,636/-. The CIT(A) held that the expenses incurred towards advertising, travelling, postage etc. were purely in the revenue field and operational in nature and intended for the furtherance of the assessee’s business. It was held that expenses would have been incurred irrespective of whether the IPO had taken place or not.

4.3 Against this, the Revenue is in appeal before us.

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