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Income Tax Appellate Tribunal, HYDERABAD BENCHES “A”: HYDERABAD
Before: SHRI SATBEER SINGH GODARA & SHRI LAXMI PRASAD SAHU
IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCHES “A”: HYDERABAD (THROUGH VIRTUAL CONFERENCE) BEFORE SHRI SATBEER SINGH GODARA, JUDICIAL MEMBER AND SHRI LAXMI PRASAD SAHU, ACCOUNTANT MEMBER
ITA No. 1879/H/2018 Assessment Year: 2014-15 TMI E2E Academy Pvt. Vs. Income-tax Officer, Ltd., Hyderabad. Ward – 2(4), Hyderabad. PAN – AADCT 7103 K (Appellant) (Respondent) Assessee by: Shri J. Maruthi Raghuram Revenue by: Smt. N. Swapna Date of hearing: 09/09/2021 Date of pronouncement: 04/10/2021 O R D E R PER L.P. SAHU, A.M.: This appeal filed by the assessee is directed against CIT(A) – 2, Hyderabad’s order dated 28/06/2018 for AY 2014-15 involving proceedings u/s 143(3) of the Income Tax Act, 1961 ; in short “the Act”, as stated in grounds of appeal.
Briefly the facts of the case are that the assessee company, in the business of training and placement for fresh graduates, filed its return of income for the AY 2014-
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15 on 26/09/2014 declaring loss of Rs. 2,36,39,812/-. Subsequently, the case was selected for scrutiny and accordingly, statutory notices were issued to the assessee, against which the ld. AR of the assessee filed the required information.
2.1 The AO passed the order u/s 143(3) of the Act determining the loss at Rs. 2,26,45,731/- as against the loss returned by the assessee at Rs. 2,26,45,731/- by making the following additions: 1. Belated PF & ESI & PT - Rs. 4,88,216/- 2. Disallowance u/s 43B - Rs. 70,350/- 3. Interest on TDS - Rs. 3,89,675/- 4. Interest u/s 244A - Rs. 45,839/- 3. When the assessee preferred an appeal before the CIT(A), the CIT(A) partly allowed the appeal of the assessee.
Aggrieved by the order of CIT(A), the assessee is in appeal before the ITAT.
As regards ground No. 2 relating to disallowance of Rs. 70,350/- towards professional tax payments, the AO observed that in form 3CD the assessee had shown payment of professional tax of Rs. 1,30,050/- and on verification, it was noticed that out of Rs. 1,35,050/- an amount of Rs. 64,700/- was paid before the due date prescribed under the
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said Act. He, therefore, disallowed the difference amount of Rs. 70,350/-.
5.1 On appeal, the CIT(A), confirmed the disallowance made by the AO.
Before us, the ld. AR of the assessee invited our attention to page No. 62 of paper book wherein the table showing the number of days delay payment of professional tax is mentioned, which is as under: Sl.No. Month PT due date Actual date Amount Delay for of payment as per in days payments challan 1 May’13 10-06-2013 14-06-013 12,100 4 2 Jun’13 10-07-2013 16-07-2013 12,900 6 3 Jul’13 10-08-2013 29-08-2013 12,750 19 4 Sep’13 10-10-2013 16-10-2013 12,400 6 5 Oct’13 10-11-2013 13-11-2-13 10,400 3 6 Jan’14 10-02-2014 11-02-2014 9,800 1 Total 70,350 Total PT amount paid after due date under PT Act 70,350
The ld. DR on the other hand relied on the orders of revenue authorities.
We have considered the rival submissions and perused the material on record as well as gone through the orders of revenue authorities. In this connection, we refer to the CBDT issued Circular, which is as under: “355. Professional tax - Whether deductible as revenue expenditure
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It has been represented to the Board that the professional tax is not being allowed as a revenue expenditure under section 37(1), as its deduction is not covered by the specific provisions of section 40(0 )(ii). Section 40(a)(ii) authorizes disallowance of any sum paid on account of any rate or tax levied on the profits or gains of any business or profession or assessed at a proportion of, or otherwise on the basis of, any such profits and gains. The professional tax levied by local authorities cannot normally be considered to fall within section 40(0)( ii). In order to fall in this category, it would be necessary that the rate of tax is levied on the profits or gains of the business, profession or vocation and it should be assessed at a proportion or otherwise, on the basis of such profits or gains. In other words, what the section essentially seeks to convey is to prohibit the deduction of taxes on income. Profession taxes are levied under entry 60 of List II of the Constitution of India which speaks of taxes on professions, rates, callings and employments. Article 276 of the Constitution makes it clear that such taxes shall not be invalid on the ground that they relate to a tax on income, though the quantum of tax might to some extent depend upon the amount of income earned. Strictly speaking, a professional tax is leviable whether or not any profits or gains accrue or arise in a particular year. The payment of such tax is a necessary condition for the carrying on of business within the area of a local authority. It would, accordingly, appear that the professional tax paid by a person carrying on 0 business or trade can be allowed to him as a deduction under section 37(1). (Circular: No. 16 [F No.9 38 69-IT(A-JI)}. dated 18-9- 1969.)”
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8.1 The authorities below have not doubted the payments of professional tax of Rs. 70,350/-, but, the same was not allowed on the ground that the same was paid after due dates. The assessee has paid it before the filing of return of income. The issue in dispute is squarely covered by the decision of the Hon’ble Gauhati High Court in the case of Commissioner Of Income-Tax vs Associated Flour Mills P. Ltd. (1996) 221 ITR 123 Gauhati. The following question was referred by the Tribunal at the instance of the Revenue under Section 256(1) of the Income-tax Act, 1961 :
“1) Whether, on the facts and in the circumstances of the case and in view of insertion of Explanation 2 to Section 43B by the Finance Act, 1989, with retrospective effect from April 1, 1984, the Tribunal was justified in law in directing that the outstanding liability of sales tax, professional tax and municipal tax be allowed if paid by the statutory dates for payment fixed by the respective State law or if paid prior to filing of return as per Section 139(1) of the Income-tax Act ?" 6.1 The Hon’ble Court, answered to the above question as under: “We have heard Dr. A.K. Saraf, counsel appearing on behalf of the assessee, and Mr. G.K. Joshi, senior standing counsel for the Department. Counsel for the parties submit that the question is covered by the decision rendered on January 10, 1996, by this court in CIT v. Bharat Bamboo and Timber Suppliers [1996] 219 ITR 212. Following the said decision, we answer the question in the affirmative, i.e., in favour of the assessee and against the Revenue.” 6.2 Respectfully following the above decision, we delete the disallowance of Rs. 70,350/- made by the AO on this count and accordingly, grounds raised on this issue are allowed.
As regards ground No. 3 relating to disallowance of Rs. 3,89,675/- towards interest on TDS, the AO observed
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that it was seen from the Note 22 for in part of P&L Account, the assessee under the head finance cost claimed an amount of Rs. 3,98,355/- towards interest on statutory payments which includes interest on TDS of Rs. 3,89,675/-. He, therefore, concluded that as the interest on TDS is not allowable expenditure, the same was added back to the total income of the assessee.
7.1 On appeal, the CIT(A) upheld the disallowance by holding that though the AR of the assessee had filed written submissions, but, has not raised any grounds of appeal on this issue.
The ld. AR of the assessee submitted that the interest on TDS is to be allowed as expense u/s 37 of the Act and accordingly, requested to be allowed the same.
The ld. DR relied on the orders of the lower authorities and relied on the following two decisions: 1. M/s Govindam Clearing Agencies Pvt. Ltd. Vs. DCIT, ITA No. 70/JP/2019, order dated 01/09/2020 (ITAT, Jaipur Bench “B”) 2. DNV GL AS (formerly known as DET Norske Veritas AS) Vs. ADIT (International Taxation – 1(2), Mumbai, ITA No. 4687/Mum/2016, order dated 31/05/2017 (ITAT, Mumbai Bench “B”).
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We have considered the rival submissions and perused the material on record. As the assessee has not raised any ground before the CIT(A), the CIT(A) upheld the action of AO. Therefore, we remit the issue to the file of the CIT(A) with a direction to decide the issue in accordance with law after providing reasonable opportunity to the assessee. The assessee is directed to substantiate its claim before the CIT(A) with documentary evidence. Thus, this ground is also allowed for statistical purposes.
In the result, appeal of the assessee is partly allowed for statistical purposes, in above terms. Pronounced in the open court on 4th October, 2021.
Sd/- Sd/- (S.S. GODARA) (L. P. SAHU) JUDICIAL MEMBER ACCOUNTANT MEMBER Hyderabad, Dated: 4th October, 2021. kv Copy to : 1 M/s TMI E2E Academy Pvt. Ltd., 1-8- 303/48/12, Career Center, Prenderghast Road, Secunderabad – 500 003. 2 ITO, Ward - 2(4), Hyderabad. 3 CIT(A) – 2, Hyderabad. Pr. CIT - 2, Hyderabad. 4 ITAT, DR, Hyderabad. 5 6 Guard File.