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Income Tax Appellate Tribunal, ‘’SMC’’ BENCH, AHMEDABAD
Before: SHRI PRAMOD KUMAR
आयकर अपील�य अ�धकरण, अहमदाबाद �यायपीठ IN THE INCOME TAX APPELLATE TRIBUNAL, ‘’SMC’’ BENCH, AHMEDABAD BEFORE SHRI PRAMOD KUMAR, VICE PRESIDENT AND Ms MADHUMITA ROY, JUDICIAL MEMBER अपील सं./ITA No.2719/Ahd/2016 &�नधा�रण वष�/Asstt. Year:2013-2014
Parth Parenternal Pvt. Ltd., Income Tax Officer, I, GIDC Estate, Ward-4, Vs. Mehsana Highway Road, Kalol, Dist. Gandhinagar PAN: AABCP1588L
(Applicant) (Responent) Assessee by : Shri A.C. Shah, A.R : Revenue by Shri Shiv Sewak, Sr. D.R सुनवाई क� तार�ख/Date of Hearing : 02/01/2019 घोषणा क� तार�ख /Date of Pronouncement: 29/03/2019 आदेश/O R D E R PER Ms MADHUMITA ROY, JUDICIAL MEMBER:
The instant appeal has been preferred by the assessee against the order dated 19.06.2016 passed by the Learned Commissioner of Income Tax(Appeals) Gandhinagar, Ahmedabad arising out of order dated 28.03.2016 passed by the ITO, Ward-4, Mehsana under section 143(3) of the Income Tax Act, 1961( in short the “ the Act’’) for the Assessment Year 2013-14.
The assessee has raised following grounds of appeals:
ITA No.2719/Ahd/2016 A.Y.2013-2014 2 1. The learned CIT(A) has erred in confirming addition of ESI Contribution Rs. 1,31,417 and PF Contribution of Rs. 5,68,299 amounting in allto Rs. 6,99,716 under Section 36(l)(va) read with Section 2(24)(x) on the ground that it is not paid within due date in as much as it is paid before the end of the financial year and therefore it is allowable as deduction. 2. The learned CIT(A) has erred in confirming addition of Rs. 1,09,292 under Section 14A read with Rule 8D in as much as the investment is made out of interest free funds and that no expenditure is incurred for earning the exempt income.
The assessee has filed its return of income through electronic media on 08.10.2013 declaring total income at Rs.85,577/-. Upon the scrutiny notice u/s.143(2) of the Act followed by a further notice u/s.129 of the Act dated 20.04.2015 was served due to the change of incumbent.
The first ground relates to addition on account of late payment of ESIC and PF contribution.
4.1 During the course of assessment proceeding it appears from the documents submitted by the assessee that the payment regarding ESIC and PF contribution received from the employees was not made to the Government account within the due date. The details whereof is evident at page 3 of the Assessment Order before us. It is relevant to mention that as per the provision of section 36(1)(va) r.w.s 2(24)(x)of the I.T Act, 1961 the assessee was required to deposit such PF and ESIC contribution on or before 15 to 21st of the following month respectively. Since the assessee did not deposit the amount of 13,14,717/- and 5,68,299/- on account of ESIC and PF contribution respectively within the stipulated period mentioned in the concerned Act such benefit has been disallowed u/s.36(1)(5) r.ws 2(24)(x) of the Income tax Act. In appeal the same was confirmed by the Ld.CIT(A).
ITA No.2719/Ahd/2016 A.Y.2013-2014 3
At the time of hearing of instant appeal the Ld.Advocate appearing for the assessee submitted before us that since the assessee paid the said amount to the Government account within a month or two therefore the assessee has discharged his liabilities and entitled to his claim.
The Ld.DR relied upon the judgment passed by the Jurisdictional High Court in the matter of Ms Checkmate Facility and Electronic Solutions Pvt. Ltd. Vs D.C.I.T wherein it was held that after taking the employee’s contribution towards the fund the same has to be deposited to the Government account within the date mentioned in concerned Act. Since the deposit of the employee’s contribution to the fund gets deferred by another month the assessee, is not entitled to deduction.
We have heard the learned Advocate appearing for the parities, we have also perused the relevant materials available on record. We have carefully considered the judgment passed by the Jurisdictional High Court in the matter of Checkmate Facility and Electronic Solution Pvt. Ltd. as relied upon by the Ld.DR, the relevant portion whereof is as follows:
“…4. In terms of section 36(1)(va) of the Act, any sum received by the assessee from any of his employees to which the provisions of section 2(24)(x) applies, would be deducted as long as such sum is credited by the assessee to the employee's account in the relevant funds on or before due date. Explanation to the said sub-section provides that for the purpose of the said clause, “due date” means a date by which the assessee is required as an employer to credit an employee's contribution to the account in which relevant fund under any Act, rule, order or notification issued thereunder or under any standing order, award, contract of service or otherwise. section 38 of the Employees Provident Funds and Miscellaneous Provisions Act, 1952, becomes relevant. Sub-section (1)thereof reads as under:
ITA No.2719/Ahd/2016 A.Y.2013-2014 4 “(1) The employer shall, before paying the member his wages in respect of any period or part of period for which contributions are payable, deduct the employee's contribution from his wages which together with his own contribution as well as an administrative charge of such percentage [of the pay (basic wages, dearness allowance, retaining allowance, if any, and cash value of food concessions admissible thereon) for the time being payable to the employees other than an excluded employee, as the Central Government may fix. He shall within fifteen days of the close of every month pay the same to the fund “electronic through internet banking of the State Bank of India or any other Nationalized Bank authorized for collection” on account of contributions and administrative charge]: “Provided that the Central Provident Fund Commissioner may for reasons to be recorded in writing, allow any employer or class of employer to deposit the contributions by any other mode other than internet banking”. 5. This provision thus requires an employer before paying the employee his wages to deduct the employee's contribution along with the employer's own contribution as fixed by the Government. It is further required that he shall within fifteen days of the close of every month pay the same to the fund such contribution and administrative charges. In terms of this provision thus, after deducting the employee's contribution towards the funds, the same has to be deposited with the Government within fifteen days of the close of every month. Reference to fifteen days of the close of the month must be in relation to the month during which the payment of wages is to be made and corresponding liability to deduct employee's contribution to the fund arises. The expression “within fifteen days of the close of every month” therefore must be interpreted as having reference to the close of the month, for which, the wages are required to be paid with corresponding duty to deduct employee's contribution and to deposit the same in the fund. 6. Learned counsel for the appellant is therefore not correct in contending that if such wages are paid in the following month, the liability to deposit the employee's contribution to the fund gets differed by another month. 7. Tax Appeal is therefore dismissed…’’
7.1 Respectfully following the judgment, we are of the considered view that there is no infirmity in the order passed by the authorities below in making the
ITA No.2719/Ahd/2016 A.Y.2013-2014 5 addition of Rs.6,99,716/- in total on account of delay in depositing the ESIC and PF contribution with the concerned authorities. Hence the ground of appeal preferred by the assessee is dismissed.
The second ground of appeal relates to confirming the addition of Rs.1,09,292 u/s 14A r.w. Rule 8D as made by the Ld.AO.
Upon verification of the balance sheet it was found that the assessee has made investment in shares. The profit and loss accounts further shows earning of dividend income of Rs.10,660/- by the assessee during the year under consideration. The Ld.AO applied the formula provided u/s. Rule 8D while working out disallowance u/s.14A of the Act and ultimately disallowed Rs.1,09,292/-
We have heard the learned counsel appearing for the parties and perused the relevant materials available on record. We find that there is no interest income earned by the assessee. In this particular case though the dividend income earned by the assessee is of Rs.10,600/- the disallowance was made to the tune of Rs.1,09,292/- which was confirmed in appeal. This is a settled principle of law that when there is no exempt income available with the assessee disallowance u/s.14A r.w Rule 8D cannot be higher than the dividend income earned by the assessee while laying down the ratio the Jurisdictional High Court in the matter of Corretech Energy Pvt; Ltd., 372 ITR 97 (Guj.) further held that if there is no tax free income in the hands of the assessee, then no disallowance under section 14A r.w. rule 8D of Income Tax Rules ought to be made.
ITA No.2719/Ahd/2016 A.Y.2013-2014 6 11. In view of the above, we restrict the disallowance to the dividend amount of Rs.10,600/-. Thus the assessee appeal is partly allowed.
Order pronounced in the Court on 29/03/2019 at Ahmedabad.
-Sd- -Sd- (PRAMOD KUMAR) (Ms MADHUMITA ROY) VICE PRESIDENT JUDICIAL MEMBER (True Copy) Ahmedabad; Dated 29/03/2019 Manish आदेश क� ��त�ल�प अ�े�षत/Copy of the Order forwarded to : 1. अपीलाथ� / The Appellant 2. ��यथ� / The Respondent. 3. संबं�धत आयकर आयु�त / Concerned CIT 4. आयकर आयु�त(अपील) / The CIT(A) 5. �वभागीय ��त�न�ध, आयकर अपील�य अ�धकरण / DR, ITAT, 6. गाड� फाईल / Guard file. आदेशानुसार/ BY ORDER, उप/सहायक पंजीकार (Dy./Asstt.Registrar) आयकर अपील�य अ�धकरण, अहमदाबाद / ITAT, Ahmedabad