IN HIGH COURT OF JUDICATURE AT BOMBAY ORDINARY ORIGINAL CIVIL JURISDICTION INCOME TAX APPEAL NO.662 OF 2015 Pr.Commissioner of Income Tax-3, Mumbai .. Appellant. Vs. M/s. Hind Filter Ltd. .. Respondent. Mr.Suresh Kumar for Appellant. Mr.Atul K. Jasani for Respondent. CORAM : A.S. OKA & A.K. MENON, JJ. DATED : 13TH NOVEMBER, 2017 P.C. 1. By this appeal under Section 260A of Income Tax Act, 1961 appellant Revenue called into question order dated 28th November, 2014 passed by Income Tax Appellate Tribunal ( Tribunal ) whereby appeal of assessee in respect of assessment year 2009-10 came to be allowed and appeals filed by Assessee and Revenue came to be dismissed. 2. assessee's appeal sought to challenge disallowance under Section 14A along with Section 8D(2)(iii) which came to be confirmed by Commissioner of Income Tax (Appeals) [CIT (A)]. Tribunal rejected assessee's contention that by offering disallowance in respect of direct expenditure in relation to investment made for earning of exempt income under Section 14A read with Section 8D(2)(i), then disallowance under Section 8D(2)(iii) cannot be made. assessee has not challenged order of revenue. However, revenue being aggrieved by ::: Uploaded on - 08/12/2017 ::: Downloaded on - 11/12/2017 09:26:36 ::: 2 itxa662.15 dismissal of Revenue's appeal has proposed following three questions as substantial questions of law : (i) Whether, on facts and in circumstances of case, Tribunal was justified in holding that M/s.Dewas Soya Ltd is public limited company as per provision of Section 2(18) of Income Tax Act, 1961 without appreciating fact that assessee is beneficial owner of shares of company holding 38.3% of shares in lending company ? (ii) Whether, on facts and in circumstances of case, Tribunal was justified in deleting addition made under Section 2(22)(e) of Income Tax Act, 1961 by holding that assessee company is public limited company and money was not lent in ordinary course of business in absence of any documentary evidence before assessing officer in this regard ? (iii) Whether, on facts and in circumstances of case Tribunal was justified in deleting addition made on account of employees' contribution to provident fund without appreciating fact that assessee is not entitled to deduction under Section 36(1)(va) in respect of employee's contribution to PF/ESIC if it is paid ::: Uploaded on - 08/12/2017 ::: Downloaded on - 11/12/2017 09:26:36 ::: 3 itxa662.15 after due date as specified in Explanation to Section 36(1)(va) on basis of provision of Section 43B of Income Tax Act, 1961 and as upheld in case of CIT II Vs. Gujarat State Road Transport Corporation (2014) 41 Taxman.com 100 (Gujarat) ? 3. It is assessee's case that it had submitted returns on 19th September, 2009 declaring income of Rs.3,30,27,019/-and subsequently revised return was filed on 10th October, 2009 for Rs.3,30,27,019/- in view of some arithmetical error. return was processed and case of assesee was selected under scrutiny and notices under Sections 142(1) and 143(2) were sent. Assessing Officer then made addition by disallowing Rs.32,17,444/- under Section 14A after reducing suo motu disallowance made by assessee of Rs.6,07,305/- and also observed that assessee has defaulted in payment of Rs.9,770/- towards employee's contribution under Employees State Insurance Scheme (ESIC). Hence, that addition was made by Assessing Officer. It was further observed that assessee had obtained loan from M/s. Dewas Soya Ltd. in which assessee held 38.31% shares. According to Assessing Officer no evidence was submitted showing that lending company was one of which public was substantially interested as contemplated under Act. Assessing Officer also observed that no documentary ::: Uploaded on - 08/12/2017 ::: Downloaded on - 11/12/2017 09:26:36 ::: 4 itxa662.15 evidence was submitted that company has advanced loan to shareholder was substantially involved in business of money lending. Assessing Officer treated sum of Rs.1,00,00,000/- as deemed dividend in hands of assessee. 4. Being aggrieved, assessee filed appeal before CIT (A). CIT (A) then considered appellant's case and observed that Assessing Officer had discussed action for making addition of Rs.1,00,00,000/- by invoking provisions of Section 2(22)(e) of Act. Considering challenge before him CIT (A) observed that amount of Rs.1,00,00,000/- was not taken as loan but was inter-corporate deposit from M/s. Dewas Soya Ltd. which was disclosed in Note No.(3) of Schedule 19 forming part of balance sheet as well as clause (iii)(e) of annexure to Auditor's report. He observed that finding of Assessing Officer was misconceived. CIT (A) found that company has advanced Rs.1,00,00,000/- as inter-corporate deposit to appellant which was public company. He concluded that provisions of Section 2(22)(e) were not applicable and payment was made in ordinary course of business. Thus, addition made by Assessing Officer was deleted. This aspect has been considered in appeal filed by Revenue before Tribunal which concurred in decision of CIT (A) holding that provision of Section 2(22)(e) was not applicable to company since company was public company. Assessing Officer's ::: Uploaded on - 08/12/2017 ::: Downloaded on - 11/12/2017 09:26:36 ::: 5 itxa662.15 observation to effect that assesse has procured funds from M/s.Dewas Soya Ltd in which assessee had 38.31% shares was without basis and therefore, amount of Rs.1,00,00,000/- could not have been treated as deemed dividend under Section 2(22)(e) of Act. Tribunal did not find any infirmity with order of CIT (A) which it found was well reasoned order. Accordingly, provisions of Section 2(22)(e) were not attracted. 5. We find nothing wrong in order passed by Tribunal on this aspect. Even otherwise finding that company was recipient company could not be held to be public limited company on basis that assessee had 38.31% shares cannot be accepted. assessee of limited company was entitled to hold shares of other corporate entities and holding of 38.31% shares of M/s. Dewas Soya Ltd will not by itself constitute reason enough to hold that company is not public limited company or company in which public are not substantially interested in. company M/s. Dewas Soya Ltd. and assessee were apparently part of same group. There is nothing on record to suggest that company was privately held merely because assessee held 38.31% shares. Tribunal as last fact finding Court has clearly opined that company was one in which public was substantially interested. In circumstances question nos.1 and 2 as proposed will not construe substantial questions of law that requires consideration by Court. ::: Uploaded on - 08/12/2017 ::: Downloaded on - 11/12/2017 09:26:36 ::: 6 itxa662.15 6. As far as third question is concerned, on aspect of addition made on account of employees' contribution as provident fund, we find that Tribunal has considered this aspect. Assessing Officer has made disallowance observing that contribution to Employees' Provident Fund was paid by assessee after due date as specified in explanation to section 36(1)(va). CIT (A) deleted disallowance relying upon decision of Supreme Court in case of CIT (A) vs. Alom Extrusions Ltd.1 held that effect of deletion of second proviso to Section 43B of Finance Act, 2003 was addressed and in view of retrospective effect of decision, assessee would be entitled to benefit of company. 7. In present case, Tribunal found that assessee had deposited contribution within grace period and having done so, even assuming applicability of Section 43B, requirement of law is deemed to have been complied. Furthermore, payment having been made within grace period, same was held to have been made within period prescribed by law. On this ground also order of CIT (A) was upheld by Tribunal. order of CIT (A) noted that due date of amount was 21st September, 2008 and actual date of payment was 29th September, 2008. CIT (A) also had found that addition made by Assessing Officer was not justified 1 (2009) 319 ITR 306 (SC) ::: Uploaded on - 08/12/2017 ::: Downloaded on - 11/12/2017 09:26:36 ::: 7 itxa662.15 and same was deleted. only ground on which Assessing Officer sought to make addition was apparently default in payment before due date and amount of Rs.9,770/- was required to be treated as income of assessee in accordance with Section 2(24)(x), however, it was admittedly deposited in ESIC account before expiry of grace period which was not considered by Assessing Officer. 8. This Court in case of Commissioner of Income Tax vs. Hindustan Organics Chemicals Ltd. 2 has observed that second proviso to Section 43B of Act was deleted from 1st April, 2004 and simultaneously first proviso was also amended to bring uniformity in deductions claimed towards tax, as also contribution to employees' provident fund and other welfare funds. second proviso reads as under : Provided further that no deduction shall, in respect of any sum referred to in clause (b), be allowed unless such sum has actually been paid in cash or by issue of cheque or draft or by any other mode on or before due date as defined in Explanation below clause (va) of sub-section (1) of Section 36, and where such payment has been made otherwise than in cash, sum has been realised within fifteen days from due date. 2 (2014) 366 ITR 1 (Bom.) ::: Uploaded on - 08/12/2017 ::: Downloaded on - 11/12/2017 09:26:36 ::: 8 itxa662.15 9. Thus, employers such as Hindustan Organics Chemicals Ltd. (supra) were entitled to deductions only if contributions to any fund for welfare of employees stood credited on or before due date. This once again led to difficulties for assessee. Ministry of Finance, meanwhile, considering various representations inserted amendment in Finance Act, 2003 which came into effect from 1st April, 2004 deleting second proviso to section 43B and further amending first proviso. Provided that nothing contained in this section shall apply in relation to any sum which is actually paid by assessee on or before due date applicable in his case for furnishing return of income under sub-section (1) of Section 139 in respect of previous year in which liability to pay such sum was incurred as aforesaid and evidence of such payment is furnished by assessee along with such return. 10. result of this amendments were to provide benefit to assessee contributing to employee's welfare funds. In yet another decision of this Court in Commissioner of Income Tax vs. Ghatge Patil Transports Ltd.2 to which one us (A.K.Menon,J.) was party it was held that Tribunal's order assailed therein 2 (2014) 368 ITR 749 (Bom.) ::: Uploaded on - 08/12/2017 ::: Downloaded on - 11/12/2017 09:26:37 ::: 9 itxa662.15 was correct inasmuch as Tribunal held that disallowance of employees' contribution made on account of provident fund, employees' State Insurance and pension fund for assessment year 2003-04 on account of delay in payment of employees' contribution was not sustainable. On appeal, tribunal had relied upon judgment of Supreme Court in case of Alom Extrusions Ltd. (supra) and this Court found that benefit of amendment were available with retrospective in nature. 11. In our view decision of Tribunal in upholding order of CIT (A) in case at hand cannot be faulted. assessee was found to have deposited amount within grace period and hence there is no substance in grievance of Revenue. Thus even third question does not require any further consideration. 12. In conclusion, therefore, we are of view that questions proposed could not give rise to substantial question of law. Hence same are not entertained. Consequently appeals are dismissed. No costs. (A.K. MENON, J.) (A.S. OKA, J.) ::: Uploaded on - 08/12/2017 ::: Downloaded on - 11/12/2017 09:26:37 ::: Pr. Commissioner of Income-tax-3, Mumbai v. Hind Filter Ltd