COMMISSIONER OF INCOME TAX, BANGALORE Vs. KURLON LTD.

JUDGEMENT

(1.) THIS appeal was admitted to consider the following substantial questions of law: - (1) Whether the Tribunal was correct in holding that belated payment of employees contribution to ESI and EPF is an allowable deduction in the light of the provisions of Section 43B of the Act, by ignoring the mandatory requirement of Explanation to clause (va) of sub -section (1) of Section 36 read with Employees State Insurance Act and Employees Provident Fund Act and the provisions of Section 2(24)(x) of the Act? (2) Whether the Tribunal was correct in holding that for the purpose of computation of deduction under section 80HHC of the Act the excise duty and sales tax component should be included in the total turnover? (3) Whether the Appellate Authorities were correct in holding that the interest received by the assessee on the overdue bills is eligible for deduction under Section 80 -IA of the Act when the same was not earned from the business carried on by the assessee?In so far as the first substantial question of law is concerned, it is squarely covered by the judgment of the Apex Court in the case of Commissioner of Income Tax Kolkata -III Vs. Alom Extrusions Limited, (2009) 319 ITR 306 SC where it has been held that if the employers contribute the ESI and EPF even when made after the due date under the aforesaid Acts but before filing of the return, section 43B is attracted and the said contribution is liable to be deducted as expenditure. In that view of the matter, the first substantial question of law is answered in favour of the assessee and against the revenue.

(2.) IN so far as the second substantial question of law is concerned. It is also covered by a judgment of that Apex Court in the case of Commissioner of Income Tax, Coimbatore Vs. Lakshmi Machine Works, AIR 2007 SC 2385 where it has been held that excise duty and sales tax are indirect taxes and do not involve any turnover and therefore they cannot form part of the turnover as such taxes have to be excluded from the total turnover under Section 80HHC. Therefore, the said question is held in favour of the assessee and against the revenue. In so far as the third substantial question of law is concerned, the learned counsel for the revenue relies on the judgment of the Apex Court in the case of Liberty India Vs. Commissioner of Income Tax, (2009) 317 ITR 218 SC and contends that the interest received by the assessee on the overdue bills is ineligible for deduction under Section 80 -IA of the Act as the same was earned from the business carried on by the assessee. The aforesaid judgment does not lay down any law to this effect and in fact the said judgment has no application. Section 80 -IA provides for deduction of the income earned from the business carried on by the assessee as it is a new industrial undertaking and the said income is earned within the prescribed period. Any interest payable on over -due payment is also an income earned from the business. The assessee has not received the amount on the due date and there is a delay in payment of the said amount. Under the agreement interest is payable and the said interest is paid by way of compensation and therefore on the date he receives the payment with interest, the entire amount would be the income earned from the business. As such he is entitled to deduction under Section 80 -IA. In that view of the matter, the said substantial question of law is also answered in favour of the assessee and against the revenue. Accordingly, all the substantial questions are answered. No merit Dismissed.