Amico Pesticides Ltd. v. ACIT 10(1), Mumbai
[Citation -2016-LL-1005-128]

Citation 2016-LL-1005-128
Appellant Name Amico Pesticides Ltd.
Respondent Name ACIT 10(1), Mumbai
Court ITAT-Mumbai
Relevant Act Income-tax
Date of Order 05/10/2016
Assessment Year 2007-08
Judgment View Judgment
Keyword Tags contribution to provident fund • ad hoc disallowance
Bot Summary: a. The Ld CIT erred in not following the Supreme Court judgment and disallowed ESIC contribution and the PF contribution deducted by the assessee company from its employees and deposited with the concerned authorities before due date of filing of return of income. b. The Ld CIT however failed to appreciate that the employees contribution to the business of the assessee and hence, the same ought to have been allowed in full. Referring to the first issue, relating to the disallowance of Rs.13,69,834/-, Ld Counsel for the assessee narrated the facts that the assessee consistently claiming the payment Freight and Forwarding Charges and no disallowance was made in the earlier assessment years. During the proceedings before the first appellate authority, after considering the submissions of the assessee, CIT confirmed the disallowance as per the discussion given in para 4.3 of his order. Again aggrieved with the said decision of the CIT, assessee is in further appeal before the Tribunal. During the proceedings before the Tribunal, bringing our attention to the said para 4.3 of the CIT s order, Ld Counsel for the assessee submitted that the CIT rejected the arguments of the assessee that the books of accounts and the transactions of these payments were added as per the provisions of the Act. We allow the arguments of the assessee and the relevant grounds are allowed in favour of the assessee.


IN INCOME TAX APPELLATE TRIBUNAL BENCH, MUMBAI BEFORE SHRI D. KARUNAKARA RAO, ACCOUNTANT MEMBER AND SHRI SAKTIJIT DEY, JUDICIAL MEMBER I.T.A. No.9211/M/2010 (Assessment Year: 2007-2008) Amico Pesticides Ltd., ACIT 10(1), th Akhand Jyoti, 8 Road, Mumbai. Vs. Santacruz (E), Mumbai 400 056. PAN : AACA3365K (Appellant) ( Respondent) Appellant by : Shri Vipul Joshi Respondent by : Shri A. Ramachandran, DR Date of Hearing : 29.08.2016 Date of Pronouncement : 05 .10.2016 O R D E R PER D. KARUNAKARA RAO, AM: This appeal filed by assessee on 31.12.2010 is against order of CIT (A)-21, Mumbai dated 16.9.2010 for assessment year 2007-08. In this appeal, assessee raised following grounds which read as under:- 1. Ld CIT (A) erred in disallowing Rs. 13,69,834/- being 15% of Freight and Forwarding Charges of Rs. 91,32,227/- on ad-hoc basis. 2. Disallowance of employees contribution to Provident Fund and Employees State Insurance Scheme of Rs. 1,56,315/- deposited with concerned authorities before due date of filing of return of income. a. Ld CIT (A) erred in not following Supreme Court judgment and disallowed ESIC contribution and PF contribution deducted by assessee company from its employees and deposited with concerned authorities before due date of filing of return of income. b. Ld CIT (A) however failed to appreciate that employees contribution to business of assessee and hence, same ought to have been allowed in full. 2. In above grounds, assessee is aggrieved against confirming of addition of Rs. 13,69,834/- being 15% of Freight and Forwarding Charges on ad- hoc basis. Further, assessee also aggrieved against disallowance of employees contribution to Provident Fund (PF) and Employees State Insurance Scheme (ESIC). 2 3. Referring to first issue, relating to disallowance of Rs.13,69,834/-, Ld Counsel for assessee narrated facts that assessee consistently claiming payment Freight and Forwarding Charges and no disallowance was made in earlier assessment years. In AY under consideration, out of total claim of Rs. 91.32 lakhs, on clumsy grounds, Assessing Officer disallowed 15% of same on ad-hoc basis. It is reasoning of AO that said payment constitutes payment on higher side. Books of accounts of assessee were not rejected and provisions of section 145(3) of Act are not invoked. No show cause notice was given by AO before such disallowance is made (para 4.2 of CIT (A) s order is relevant in this regard). Matter travelled to first appellate authority. 4. During proceedings before first appellate authority, after considering submissions of assessee, CIT (A) confirmed disallowance as per discussion given in para 4.3 of his order. Again aggrieved with said decision of CIT (A), assessee is in further appeal before Tribunal. 5. During proceedings before Tribunal, bringing our attention to said para 4.3 of CIT (A) s order, Ld Counsel for assessee submitted that CIT (A) rejected arguments of assessee that books of accounts and transactions of these payments were added as per provisions of Act. Confirming of said disallowance on ad-hoc basis is unsupported by any incriminating material against assessee. 6. After hearing both parties, we find, decision given by CIT (A) in para 4.3 of his order is fair and reasonable. There is no dispute on fact that this is case of ad-hoc disallowance. No assessment should be made based on ad- hocism, moreso, when accounts are audited by statutory auditors and books of accounts are complete and accurate. AO has not found any mistake whatsoever in books of accounts on this issue of Freight and Forwarding Charges. vagaries in sales and turnover is common in any business if said charges have reduced, it will have direct and definite impact on sales. As such, there is no basis for ad-hocism and also for adopting fixed percentage of 15% in this case. This kind of payments is not new to this business. Assessee is 3 consistently incurring such expenditure over years. Assessing Officer was also regularly accepting claim of assessee in other assessments in this case of assessee. Therefore, we allow arguments of assessee and relevant grounds are allowed in favour of assessee. Accordingly, Ground no.1 is allowed. 7. Regarding Ground no.2, relating to payment of PF and ESIC, it is undisputed fact that payments are made before due date for filing return of income. Considering settled position on issue in view of judgment of Hon ble Bombay High Court in case of CIT vs. Hindustan Organics Chemicals Ltd [2014] 366 ITR 1 (Bom.), which is relevant for proposition that by virtue of deletion of proviso of section 43B of Act, payments made up to due date for filing of return of income are outside disallowance u/s 43B of Act. Considering same, we direct AO to allow claim of assessee following said ratio laid down in judgment of Hon ble jurisdictional High Court. Accordingly, Ground no.2 raised by assessee is allowed. 8. In result, appeal of assessee is allowed. Order pronounced in open court on 05th October, 2016. Sd/- Sd/- (SAKTIJIT DEY) (D. KARUNAKARA RAO) JUDICIAL MEMBER ACCOUNTANT MEMBER Mumbai; 05.10.2016 . . OKK , Sr. PS Copy of Order forwarded to : 1. Appellant 2. Respondent. 3. CIT(A)- 4. CIT 5. DR, ITAT, Mumbai 6. Guard file. 4 //True Copy// BY ORDER, (Dy./Asstt. Registrar) ITAT, Mumbai Amico Pesticides Ltd. v. ACIT 10(1), Mumbai
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