M/S. UNIQUE MERCANTILE INDIA PVT.LTD.,AHMEDABAD vs. DCIT, CIRCLE-4(1)(2), AHMEDABAD

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ITA 1733/AHD/2017Status: DisposedITAT Ahmedabad10 January 2019AY 2012-135 pages
AI SummaryPartly Allowed

What did the Tribunal hold?

The Tribunal rejected the ground related to the disallowance of employee's PF contribution, citing the consistent view of the ITAT and the jurisdictional High Court. However, it allowed the ground concerning the addition to book profit under section 115JB, following a Special Bench decision that disallowances under section 14A cannot be added for MAT computation.

What were the facts?

The assessee appealed against the CIT(A)'s order confirming disallowance of employee's PF contribution due to late payment and addition to book profit under section 115JB on account of section 14A disallowance. The assessee's counsel acknowledged the Gujarat High Court's stance but highlighted pending Supreme Court appeals on the PF issue.

What were the issues?

Whether disallowance of employee's PF contribution due to late deposit is permissible, and whether disallowances made under Section 14A can be added while computing book profit under Section 115JB.

Which sections of the Income-tax Act were involved?

Section 36(1)(va),Section 115JB,Section 14A

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Income Tax Appellate Tribunal, AHMEDABAD – BENCH ‘D’

Before: SHRI RAJPAL YADAV & SHRI WASEEM AHMED

For Appellant: Shri Biren Shah, AR
For Respondent: Shri Ranjan Kumar Singh
Hearing: 07/01/2019Pronounced: 10/01/2019

आयकर अपील�य अ�धकरण, अहमदाबाद �यायपीठ - अहमदाबाद । IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD – BENCH ‘D’

BEFORE SHRI RAJPAL YADAV, JUDICIAL MEMBER AND SHRI WASEEM AHMED, ACCOUNTANT MEMBER आयकर अपील सं./ ITA No.1733/Ahd/2017 �नधा�रण वष�/Assessment Year: 2012-13 Unique Mercantile India P.Ltd. DCIT, Cir.4(1)(2) F/7, Vishal Complex Vs Ahmedabad. Nr. Dinesh Hall, Ashram Road Ahmedabad 380 013. PAN : AAACU 1981 B अपीलाथ�/ (Appellant) �� यथ�/ (Respondent) Assessee by : Shri Biren Shah, AR Revenue by : Shri Ranjan Kumar Singh, Sr.DR

सुनवाई क� तार�ख/Date of Hearing : 07/01/2019 घोषणा क� तार�ख /Date of Pronouncement : 10/01/2019

O R D E R PER RAJPAL YADAV, JUDICIAL MEMBER : Assessee is in appeal before the Tribunal against order of the ld.CIT(A)-8, Ahmedabad dated 2.6.2017 passed for the assessment year 2012-13.

2.

In the first ground of appeal, the assessee has pleaded that ld.CIT(A) has erred in confirming disallowance of Rs.61,728 which was disallowed by the AO with aid of section 36(1)(va) of the Act on account of late payment of employee’s contribution to provident fund account.

3.

The ld.counsel for the assessee at the very outset submitted that though the issue deserves to be decided against the assessee, because

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Hon’ble Gujarat High Court in the case of Gujarat State Road Transport Corpn Ltd. Vs. CIT, 366 ITR 170 has held that if employees’ contribution is not deposited within the time limit provided in PF and ESI Act, then deduction would be disallowed to the assessee. However, he contended that recently Hon’ble Gujarat High Court has observed that judgment of Hon’ble Gujarat High Court in the case of Gujarat State Road Transport Corpn. Ltd. (supra) and other cases have been challenged before the Hon’ble Supreme Court. There are two possibilities, one is that, the assessee should approach the Hon’ble Supreme Court against the confirmation of disallowance at the end of the Hon’ble Court, and other way is to make some arrangement under which without filing appeal, the assessee would also be able to claim benefit of judgment. Looking to this smallness of the dispute of the amount, Hon’ble High Court has adopted other option i.e. to give liberty to the assessee to file application to revive the appeal within three months after the decision of Hon’ble Supreme Court. On the strength of this judgment, the ld.counsel for the assessee contended that benefit, if any, from this judgment may be made available to the assessee, as and when the Hon’ble Supreme Court renders judgment on this issue. On the other hand, the ld.DR supported the order of the ld.CIT(A) and reiterated for confirmation of order of the ld.CIT(A) in line with judgment of Hon’ble Gujarat High Court in the case of Gujarat State Road Transport (supra).

4.

We have heard both the parties and gone through the record. We find that ITAT, Ahmedabad Bench had taken consistency view in favour of the Revenue on the issue of claim of deduction under section 36(1)(va) of the Act, whereby the assessee has missed deadline for

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deposit of employees’ contribution in the relevant fund before the due date of filing of the return by following judgment of Hon’ble jurisdictional High Court in the case of Gujarat State Road Transport Corporation Ltd. Vs. CIT (supra). However, as pointed out by the ld.counsel for the assessee, recently, Hon’ble jurisdictional High Court in the case of Salasar Laminates Ltd. Vs. Deputy Commissioner of Income Tax in Tax Appeal No.1186 of 2018 order dated 1.10.2018 has held that since appeal against the judgment of High Court in the case of Gujarat State Road Transport Corporation Ltd. (supra) is pending, and SLP has been granted, liberty was given to assessee to file an application for revival of appeal, in case Hon’ble Supreme Court reverse the decision of the High Court on the issue.

5.

It is pertinent to observe that if judgment of Hon’ble High Court in the case of Gujarat State Road Transport Corporation Ltd. (supra) is being reversed by the Hon’ble Supreme Court, then the Tribunal order will be construed as suffering from apparent error, because foundation of the order would be extinguished. The assessee will always at liberty to file application for rectification under section 254(2) of the Income Tax Act. By giving a blanket time limit, till the decision of Hon’ble Supreme Court, we would be enhancing power of the Tribunal for rectification of its order under section 254(2). Even if we set aside the issue to the file of AO, then he has to pass assessment order within three months giving effect to the Tribunal’s direction. Again we do not have power to enhance statutory time limit. In case order of Hon’ble High Court is being reversed, the assessee will always have liberty to file misc. application, but such remedy could be exercised only within the time

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limit available under the Act. With the above observation, we do not find any merit in this ground of appeal. It is rejected.

6.

In the second ground of appeal, the grievance of the assessee is that the ld.CIT(A) has erred in confirming addition of Rs.9,34,945/- made by the AO while computing book profit under section 115JB of the Act on the ground that similar addition was made under section 14A of the Act while computing normal income of the assessee-company.

7.

We have heard rival contentions and gone through the record. As the facts emerge, the ld.AO while calculating book profit under section 115JB has taken into consideration disallowance of Rs.11,03,014/- made with the aid of section 14A of the Act read with Rule 8D of the Income Tax Rules. This action of the AO was confirmed by the ld.CIT(A) but restricted to Rs.9,34,945/-. The ld.counsel for the assessee submitted that in view of Special Bench decision in the case of ACIT Vs. Vireet Investments P.Ltd., 165 ITD 27 (Del)(BS) no increase or decrease can be effected in the book profit calculated under section 115JB on account of certain disallowance made under section 14A.

8.

Considering the above facts, we are of the view that Special Bench of the ITAT in the case of Vireet Investment P.Ltd. (supra) has formulated following question for adjudication on this issue: “Whether the expenditure incurred to earn exempt income computed u/s.14A could not be added while computing book profit u/s.115JB of the Act.”

9.

Special Bench answered this question in favour of the assessee and held that computation for the purpose of clause (f) of Explanation 1 to Section 115JB(2) is to be made without resorting to the computation as

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contemplated under section 14A r.w. rule 8D. Respectfully following the above decision of the Special Bench, we allow this ground of appeal and direct the AO not to make adjustments in book profit for the purpose of MAT liability on the basis of calculations made with Rule 8D of the Income Tax Rules.

10.

In the result, appeal of the assessee is partly allowed. Pronounced in the Open Court on 10th January, 2019.

Sd/- Sd/- (WASEEM AHMED) (RAJPAL YADAV) ACCOUNTANT MEMBER JUDICIAL MEMBER

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