RASNA PRIVATE LIMITED,AHMEDABAD vs. THE ACIT, CIRCLE-3(1)(1), AHMEDABAD

Aggrieved against the additions, the assessee filed appeal before the Addl. CIT(A) who has confirmed the addition made by the AO, thereby dismissed the assessee’s appeal.

Aggrieved against the same, the assessee is in appeal before us raising following grounds:

He has erred in law and on facts in not considering the Decision of Hon'ble ITAT with regard to disallowance u/s. 14A in the case of assessee itself.

He has erred in law and on facts in not appreciating that no proper satisfaction has been recorded by the A.O. for not accepting the disallowance made by the appellant in as much as that the nature of exempt income does not require incurring of expenditure.

On the facts of the assessee no such disallowance u/s. 14A of Rs.33,81,941 ought to have been made.

The upholding of disallowance of Rs. 16,90,052 u/s. 36(1) (va) of the Act on account of delayed payment of employees contribution to PF/ESI is submitted to be erroneous read with the decisions of Tribunal in ITA No. 252/MUM/2023 Bench "E

The CIT(A) has erred in law and on facts in holding the appeal as dismissed in as much as that disallowance of depreciation of Rs. 2,04,268 as per Para-5.1 has been allowed resulting appeal of the assessee having been allowed partly.

Appellant craves leave to add, to alter and or modify any ground of appeal.”

We have heard rival submissions and perused the materials available on record.

Regarding Ground Nos. 1 to 4 namely disallowance u/s.14A of the Act. The brief facts of the case are that during the year the assessee company earned dividend of Rs.23,32,859/- (on shares of Rs.12,12,290/- and on Mutual Funds Rs.11,20,569/-) and interest on tax from Bonds of Rs.3,12,12,046/-. The assesee’s investment in various taxable and tax free bonds and securities amounting to Rs.14179.26 Lakhs as on the year ended on 31.03.2017. The investment in the previous year were Rs.13441.62/- Lakhs. The AO made disallowance of 1% on annual average investment in tax free bonds of Rs.40,36,890/= and after suo-moto disallowance made the assessee of Rs.6,81,036/= demanded balance amount of Rs,33,81,941 as disallowance u/s.14A read with Rule 8D.

1. We have heard the rival submissions and perused the material on record. It is observed that the assessee has already made a disallowance of Rs.6,81,036/= while computing the income. Further,

2. Further the co-ordinate Bench of this Tribunal in assessee’s own case for the Asst. year 2016-17 in ITA No.671/Ahd/2024 vide its decision dated 08-11-2024 held as under:-

Having said so, we find that in Asst.Year 2010-11, the ITAT held that considering the nature of investment made by the assessee in bonds and securities, the disallowance made on administrative expenses by invoking Rule 8D was not proper. The disallowance made in the said year on the said account amounted to Rs.20,57,946/-, being 0.5% of the average investment computed as per Rule 8D of the Rules. Accordingly, the ITAT restricted the disallowance of administrative expenses to the extent of Rs.7 lakhs. In the subsequent years, the ITAT followed the decision in the case of the assessee for Asst.Year 2010-11, and accordingly restricted the disallowance of administrative expenses on a proportionate basis, noting the quantum of disallowance computed as per the Rule 8D as under:

In the result, the appeal of the assessee is partly allowed in above terms.”

3. Considering the binding precedent in the assessee’s own case and the fact that the assessee has already disallowed Rs.6,81,036, we direct to disallow Rs.13 lakhs under section 14A rwr 8D after taking into account of the suo-motto disallowance made by the assessee. In the result the Ground Nos. 1 to 4 raised by the assessee are partly allowed.

Regarding Ground No. 5, namely, late payment of PF & ESI contribution. Though, the assessee failed to make the payment within the due date as per the PF & ESI Act, however, paid the employees’ contributions well before filing the return of income. Therefore, no disallowance to be made u/s.36(1)(va) of the Act.

1. We have considered the rival submissions. The issue regarding allowability of employees’ contribution to PF/ESI deposited after the due date prescribed under the respective Acts is now settled by the I.T.A No. 926/Ahd/2025 - A.Y. 2017-18 Hon’ble Supreme Court in the case of Checkmate Services Pvt. Ltd. vs CIT (448 ITR 518) wherein it has been held that employees’ contribution deposited beyond the due date under the respective Act is not allowable as deduction, even if paid before filing the return of income. Since in the present case the assessee has admittedly deposited the employees’ contribution beyond the due date prescribed under the respective Acts, the disallowance made by the Assessing Officer is in accordance with law. Accordingly, Ground No. 5 raised by the assessee is dismissed.

Ground No.6, the findings of Ld CIT[A] there is typo mistake. The same is rectified and the disallowance of depreciation of Rs.2,04,268/ is allowed.

In the result, the appeal filed by the assessee is partly allowed.

Revenue 3. Concerned CIT 4. CIT (A) 5. DR, ITAT, Ahmedabad 6. Guard file. By order/आदेश से,