MILIND GUPTA,BHUBANESWAR vs. ITO, WARD-5(2), BHUBANESWAR

IN THE INCOME TAX APPELLATE TRIBUNAL, CUTTACK BENCH, CUTTACK

BEFORE SHRI CHANDRA MOHAN GARG, JUDICIAL MEMBER AND LAXMI PRASAD SAHU, ACCOUNTANT MEMBER

ITA Nos.382 & 383/CTK/2017 Assessment Years : 2031-14 & 2014-15

Milind Gupta,N-2/160, IRC Vs. ITO, Ward 5(2), Bhubaneswar Village, Nayapalli, Bhubaneswar. PAN/GIR No.AAUPG 8639 F (Appellant) .. ( Respondent)

Assessee by : Shri Jagabandhu Sahu/Goutam Sahu, AR Revenue by : Shri Subhendu Dutta, DR

Date of Hearing : 08/08/ 2019 Date of Pronouncement : 27/09/ 2019

O R D E R Per C.M.Garg,JM These are appeals filed by the assessee against the separate orders

both dated 29.6.2017 of the CIT(A)-2, Bhubaneswar for the assessment

years 2013-14 & 2014-15, respectively.

confirmation of disallowance u/s.2(24)(x) r.w.s 36(1)(va) of the Act in

respect of late payment of employee’s contribution to PF of Rs.44,097/-.

inter alia, did not allow deduction for employees’ contribution towards PF of

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Rs.44,097/- which was deposited beyond the period prescribed in the

relevant statute but before the due date of filing the return u/s.139(1). The

learned CIT(A) upheld the assessment order on this point.

material on record of the Tribunal. we find that the assessee has deposited

the EPF amount of Rs.44,097/- before due date of filing of the return

u/s.139(1) of the Act. The addition was made on the ground that the

employees’ contribution to PF was not deposited within the time prescribed

under the P.F.Act. Ld D.R. relied on the Circular No.22/2015 dated

17.12.2015.

clarifying that the issue is well settled in so far as employer’s contribution if

deposited on or before the due date of filing of return of income, is

allowable. However, the CBDT was categorical in stating that the settled

position does not apply to deduction relating to employee’s contribution

governed by section 36(1)(va). We find that the following decisions of the

various High Courts are in favour of the assessee allowing deduction of

employee’s contribution paid beyond due date:

(i) CIT vs. Hindustan Organic Chemicals Ltd. (2014) 366 ITR 1 (Bom) (ii) CIT vs. Ghatge Patil Transport Limited – 368 ITR 749 (Bom.)

(iii) CIT vs. Aimil Ltd. – 321 ITR 508 (Del.)

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(iv) Spectrum Consultants India (P) Ltd vs CIT – 215 Taxman 597 (Kar.) (v) CIT vs. Raj Agro Industries Ltd. – 334 ITR 122 (P&H) o

(vi) CIT vs. Kichha Sugar Co. Ltd. – 356 ITR 351 (Uttarakhand) o

(vii) CIT vs. Udaipur Dugdh Utpadak Sahakari Sangh Ltd. – 366 ITR 163 (Raj.)

section 36(1) (va) in favour of the revenue and denied deduction :

(i) Popular Vehicles & Services Pvt Ltd vs. CIT – [2018] 96 taxmann.com 13 (Ker.) (ii) CIT vs. Gujarat State Road Transport Corporation - [2014] 41 taxmann.com 100 (Guj.)

the issue of late deposit of employee’s contribution, the decision favourable

to the assessee should be followed as per the ratio laid down by Hon’ble

Supreme Court in the case of CIT vs. Vegetables Product Ltd., 88 ITR 192

(SC).

Beverages Corporation Ltd. reported in 84 Taxman .com. 185, the Supreme

Court has dismissed the SLP filed by the Revenue against the judgment of

the Hon'ble Rajasthan High Court in Pr. CIT vs Rajasthan State Beverages

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Corporation Ltd., reported in [2017] 84 taxmann.com 173(Raj.), wherein,

where it was held as under :-

“ Section 43B, read with section 36(1)(va), of the Income-tax Act, 1961 – Business disallowance – Certain deductions to be allowed only on actual payment (PF and ESI contribution) – High Court by impugned order held that amount claimed on payment of PF and ESI having been deposited on or before due date of filing of returns, same could not be disallowed under section 43B or under section 36(1)(va) – Whether SLP against said impugned order was to be dismissed – Held, yes [Para 2] [In favour of assessee]” 9. In the instant case, it is not in dispute that the contribution to EPF

was deposited by the assessee before due date of filing the return of

income u/s.139(1) of the Act. Although the CBDT Circular No.22/2015 dated

17.12.2015 provides that the deduction relating to employee’s contribution

to welfare fund are governed by section 36(1)(va) of the Act as relied by

the ld D.R. In the case of CIT vs. Bharat Hotels Ltd., (2019) 103

Taxmann.com 295 (Del), the Hon’ble Delhi High Court held thus:

“ 7. The issue here concerns the interplay of Section 2(24)(x) of the Act read with Section 36(1)(va) of the Act alongside provisions of the Employees‟ Provident Funds and Miscellaneous Provisions Act, 1952 (especially Regulation 38 of the Employees‟ Provident Funds Scheme, 1952) and the provisions of the Employees‟ State Insurance Act, 1948. The AO had brought to tax amounts which were deducted by the employer/assessee from the salaries and wages payable to its employees, as part of their contributions. It is not in dispute that the employer‟s right to claim deductions under the main part of Section 43-B of the Act is not an issue. The question the AO had to then decide was whether the amounts deducted from the salaries of the employees which had to be deposited within the stipulated time (in terms of notification/circular dated 19.03.1964 which was modified on 24.10.1973), as far as the EPF contribution went and the period of three weeks as far as the ESI contributions went. The AO made a tabular analysis with respect to the contributions deducted and

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actually deposited. The cumulative effect of notifications under the Employees‟ Provident Funds Act, 1952 and the Employees State Insurance Act, 1948 was that in respect of the EPF Scheme contributions the deductions were to be deposited within 15 days of the succeeding wage period with a grace period of 5 days; for ESI contributions the deposit with the concerned statutory authority had to be made within three weeks of the succeeding wage month/period. The CIT in this case confirmed the additions - made by the AO based on the entire amounts that were disallowed. The ITAT however granted complete relief.

judgment (supra), the issue is restored to the file of the Assessing Officer to

examine the contributions made with reference to the dates when they

were actually made and grant relief to such of claim which qualified for such

relief in terms of prevailing provisions of the Act. We clearly obverse that

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the assessee would be entitled to deductions in terms of section 36(1)(va)

of the Act. Accordingly, this ground is allowed for statistical purposes.

appeal for the assessment year 2013-14 relates to sustenance of addition

to the extent of 10% by the CIT(A) in respect of repairs and maintenance,

travelling, conveyance and demonstration charges and carriage inward

expenses.

case placed on the Tribunal. We find that the Assessing Officer made

disallowance of the total expenses on account of repair & Maintenance @

30% and with regard to travelling, conveyance and demonstration charges

and carriage inward @ 20%, inter alia, observing that payments have been

made in cash on day to day basis, which was reduced to 10% by the CIT(A)

in respect of the above claim of the assessee on the ground that the rate of

disallowance is excessive. The main reason of disallowance by the

authorities below that no third party bills are available and all the vouchers

are self made. Before us also, ld A.R. could not furnish any external

vouchers in support of the claim. On bare perusal of the assessment order,

it was clearly discernible that the payments were made by other parties on

behalf of the assessee and only credit notes are issued and, therefore, the

genuineness of the expenses could not be verified and most of the vouchers

are self made. However, the Assessing Officer has not pointed out any

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specific defects in the bills and vouchers. However, the CIT(A) after taking

into consideration all these aspects and also considering that the

disallowance is excessive, reduced to 10% of the total expenses claimed by

the assessee. Therefore, the order of the CIT(A) in restricting the

disallowance to 10% is fair and reasonable and need not be interfered with.

Hence, this ground for both the assessment years is dismissed.

the assessment year 2014-15 relates to confirmation of addition of

Rs.13,05,649/- and Rs.14,39,430/- for the assessment years 2013-14 &

2014-15, respectively.

account, the assessee has debited a sum of Rs. 26,11,299/- for A.Y. 2013-

14 and Rs.28,78,861/- for A.Y. 2014-15 under the head 'Electricity charges'.

The Assessing Officer required the assessee to furnish the evidence in

support of payment of the electricity dues and to furnish the copy of ledger

account. The A.R. of the assessee filed photocopies of two electricity bills

only evidencing payment of Rs. 7,09,211/- and Rs. 7,34,001/- on

31.03.2013 and 30.04.2013 respectively for the assessment year 2013-14.

But no other bills as well as details including the copy of ledger account in

respect of the above expenses could be filed by the A.R. On going through

the copies of the electricity bills, it is found that the bill was raised by the

Central Electricity Supply of Orissa Ltd in favour of one M/s. Protection

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Manufacturing Pvt Ltd. The A.R. was asked to explain the reasons as to why

the payment was made by the assessee and debited to the P&L account as

revenue expenditure when the bill was raised in the name of some other

party. It was explained by the A.R. that the assessee had taken on rent the

factory premises of M/s Protection Manufacturing Pvt Ltd to run its

manufacturing activities in the said factory premises. The A/R was asked to

furnish a copy of agreement showing that the assessee had taken on lease

of the premises to run its business activity. However, the A.R. could not

furnish any evidence in this regard. The Assessing Officer found that M/s

Protection Manufacturing Pvt Ltd is a company where the assessee is a

Director. There was no agreement between the assessee and the company

to show that the assessee will utilize the factory premises of -the company

for business purposes. From the books of account of the assessee, it is also

seen that there was no payment of rent to the above company in respect of

leasing out of the premises. There was also no evidence on record that the

assessee had incurred such huge expenses in respect of consumption of

electricity during the Asst. Year 2013-14 and 2014-15. The assessee had

not furnished the copy of the manufacturing account to show that the

assessee had utilized so much of power supply to run the machineries for

the purpose of manufacturing. Further, at column 28(b) of the audit report

in form no.3CD, the auditor has certified that there was no manufacturing

activity by the assessee and hence, there was no mention about the

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purchase and consumption of raw materials, yield of finished products,

closing stock finished products etc.

P&L account without showing any manufacturing account from which it can

be reasonably inferred that the assssee had incurred such huge expenses

on account of consumption of electricity for manufacturing process. Further,

in the audited accounts, the assessee has shown gross sales on account of

moulded furniture to the tune of Rs. 17,40,870/-, sale of Air Coolers to the

tune of Rs. 37,04.700/- and sale of chair products to the tune of

Rs.20,316/- totaling to Rs.54,65,886/- for the assessment year 2013-14.

gross sales on account of moulded furniture to the tune of Rs. 20,32,700/-,

sale of Air Coolers to the tune of Rs. 27,90,500/- and sale of chair products

to the tune of Rs. 20,849/-, totaling to Rs.48,46,049/- .

products in its books of account, therefore, he presumed that if the gross

sales of these sales are taken into account as manufacturing activity , then

the ratio of consumption of electricity to manufacture these products

including the gross profit will be more than 50% of the gross sales. There

are other expenses involved in the manufacturing activity such as labour

charges, consumption of raw materials, water charges, etc, and, therefore,

he observed that the huge expenses on account of consumption of

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electricity in respect of manufacturing activity is baseless and unreasonable

and, accordingly disallowed 50% of the expenditure incurred on account of

electricity not being utilized for the purpose of manufacturing activity.

Hence, the assessee is in appeal before the Tribunal.

materials placed on the record of the Tribunal. The contention of ld A.R. of

the assessee is that the estimation made by the AO is not justified and the

presumption of the ld CIT(A) that the electricity expenses is excessive is

without any material on record. He also submitted that the plant &

machinery used by the assessee for its manufacturing activities are second

hand and old and, therefore, the consumption of lot of electricity has not

been considered in its right prospective. Whereas, ld D.R. supported the

orders of lower authorities.

assessee and Protection Manufacturing Private Limited for sharing the

electricity. During the assessment years under consideration, the auditor of

the assessee has certified that there is no manufacturing activity

undertaken by the assessee, however, the claim of electricity expenses

seems to be excessive. Although the claim of the assessee that the same is

business expenditure and fully verifiable duly supported by documents but

neither before the authorities below nor before us, could furnish any

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positive material on record to substantiate the claim. In view of above, we

find no infirmity in the orders of lower authorities to interfere. Hence, this

ground of appeal is dismissed.

allowed for statistical purposes and appeal for the assessment year 2014-15

is dismissed.

Order pronounced on 27 /09/2019.

Sd/- sd/- (Laxmi Prasad Sahu) (Chandra Mohan Garg) ACCOUNTANT MEMBER JUDICIAL MEMBER

Cuttack; Dated 27 /09/209 B.K.Parida, SPS Copy of the Order forwarded to : 1. The Appellant : Milind Gupta,N-2/160, IRC Village, Nayapalli, Bhubaneswar

By order

Sr.Pvt.secretary ITAT, Cuttack

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