DY. COMMISSIONER OF INCOME TAX, CIRCLE-1(1), HYDERABAD vs. ANDHRA PRABHA PUBLICATIONS LIMITED, HYDERABAD

Brief facts of the case are that the assessee, engaged in the business of printing and publication of newspapers and magazines, filed its return of income on 30/09/2009 declaring income of Rs. 71,82,352/-. The case was selected for scrutiny and order u/s 143(3) was passed on 31/10/2011 determining the assessed income at Rs. 82,74,231/-. The CIT-1, Hyderabad, powers vested u/s 263, set aside the assessment order vide his order dated 18/03/2014 stating that on verification of the assessment records, it was seen that the AO had failed to examine the following issues and completed the assessment: 1. Relevance of provisions of section 194H of the Act, on the amount of Rs. 1,51,55,998/- debited in the P&L

Aggrieved by the order of CIT(A), the revenue is in appeal before us raising the following grounds of appeal: “(i) The Ld. CIT(Appeals) erred in deleting the addition of Rs 1,38,29,928/- (out of Rs 1,51,55,998/-) made by the Assessing Officer u/s 40(a)(ia) for non compliance with relevant TDS provisions and also on the ground that the genuineness of the expenditure was not proved by the assessee. (ii) The Ld. CIT(A) ought to have considered that the said expenditure was shown as 'sales discount and commission' in the P & L A/c and not claimed as personnel cost in the P & L A/c as well as the return of account filed by the assessee for the year, (iii) The Ld. CIT(A) ought to have upheld the action of the assessing officer as the assessee failed to deduct tax at source on the said sales discount and commission as required u/s 194H and therefore the expenditure is liable for disallowance u/s 40(a)(ia). (iv) The Ld. CIT(A) erred in deleting the addition of Rs 3,02,361/- (out of Rs 6,45,331) made by the assessing

As regards ground Nos. (i) to (iii) relating to disallowance of Rs. 1,51,55,998/- towards incentives and commission paid to employees, during the course of assessment proceedings, the AO issued notices u/s 143(2) and 142(1) calling for information regarding the claim of incentives and commission paid of Rs 1,51,55,998/-. Since, the assessee failed to appear for hearing and submit any information with regard to its claim, the AO held that in the absence of any explanation or documentary proof, the genuineness of the expenditure cannot be verified, and hence, disallowed the above claim of Rs. 1,51,55,998/-.

Before the CIT(A), the assessee submitted that Rs.1,51,55,998/- was paid to various persons is not

Since the evidence submitted before the CIT(A) was not submitted before the AO, the CIT(A) called for a remand report from AO regarding the additional evidences of statement of affidavits in respect of the employees for the FY 2008-09 and statement of incentives paid to employees for the FY 2008-09.

After considering the submissions of the assessee as well as remand report from the AO, the CIT(A) deleted the disallowance of Rs. 1,51,55,998/- made by the AO by observing as under: “6.4 The submissions of the appellant have been carefully considered. The appellant's contention has strength. The appellant submitted affidavits of the employees to substantiate the payments of incentives amounting to Rs.l,38,29,928/-. The appellant submitted details of the incentives paid to the employees which includes name of the employees, designation, address of the employees, sales incentives paid and salaries paid. The submissions given by the appellant are found

Considered the rival submissions and perused the material on record. The CIT(A) gave a categorical finding that the incentives paid to the employees are not subjected to TDS u/s.194H and there is no question of change of nomenclature and the incentives given to the employees by the assessee are found to be correct, hence the same is allowed. It is brought to our notice the detailed statement on incentive distribution among its employees. The total payment including salaries are below the threshold limits. Ld. CIT(A) has called for remand report from AO and AO has not disputed the actual expenditure but expressed his views that the assessee has changed the nomenclature of the expenses to incentives. After considering the relevant papers submitted before him and remand report, ld. CIT(A) has allowed the assessee’s appeal. Therefore, we do not find any infirmity in the order of CIT(A) and hence, upholding the same, we dismiss the grounds raised by the revenue on this issue.

With regard to ground Nos. (iv) to (vii) relating to disallowance towards ESIC and PF contributions, the AO observed that since the assessee failed to substantiate its claim before him, made disallowance u/s 36(v)(a) of Rs. 6,45,331/- for non payment of ESIC and PF before the due date.

Considered the rival submissions and perused the material on record. It is a settled position of law that though the assessee paid the contributions towards ESIC and PF beyond the due date, but, before filing of the return of income, no disallowance can be made in this regard. The Hon’ble Delhi High Court in CIT VS. Aimil Ltd. & Ors. [(2010) 321 ITR 508 (Del)] has held that if the employees’ share of contribution is paid before the due date of filing the return u/s 139(1) of the Income-tax Act, 1961 then no disallowance can be made. Accordingly, we uphold the order of CIT(A) on this count and dismiss the grounds raised by the revenue.

In the result, appeal of the revenue is dismissed. Pronounced in the open court on 29th November, 2018.