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Facts
The assessee company, engaged in the business of drugs and pharmaceuticals, filed its return of income for AY 2017-18. The AO made several additions, including disallowances for delayed deposit of employee contributions to PF & ESI, disallowances under Section 40(a)(ia), and disallowances for non-deduction of TDS. The CIT(A) upheld most of these additions.
Held
The Tribunal upheld the CIT(A)'s decision regarding the disallowance of employee's contribution to PF & ESI due to delayed deposit, relying on Supreme Court judgments. However, for other grounds concerning disallowances of remuneration paid to directors and disallowances under Sections 194J and 194C, the Tribunal restored the matter to the AO for fresh adjudication as new documents were produced by the assessee.
Key Issues
Whether disallowance of employee's contribution to PF & ESI deposited beyond the due date is justified. Whether remuneration paid to directors, which was returned as salary income by directors, is eligible for deduction.
Sections Cited
36(1)(va), 2(24)(x), 40(a)(ia), 194J, 194C
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Income Tax Appellate Tribunal, “B” BENCH: KOLKATA
Before: Shri Rajesh Kumar&Shri Pradip Kumar Choubey]
ORDER / आदेश Per Pradip Kumar Choubey, JM: This is the appeal preferred by the assessee against order of Commissioner of Income Tax (Appeal)-NFAC, Delhi (hereinafter referred to as the Ld. CIT(A)] dated 22.09.2023 for AY 2017-18.
Brief facts of the case of the assessee is that the assessee being a company engaged in the business of drugs and pharmaceuticals filed return of income for AY Assessment Year: 2017-18 GSA Surgical & Medicines Pvt. Ltd. 2017-18 declaring total income of Rs. 1,42,00,000/-. The case was selected for scrutiny, notices were issued and after going over the facts of the case as well as hearing the assessee’s representative the AO has added an amount of Rs. 2,68,887/- which was disallowed u/s 36(1)(va) read with Section 2(24)(x) as it was deposited beyond the due date. The AO has further added Rs. 2,54,37,984/- as it was disallowed in terms of Section 40(a)(ia) of the Act. The AO has further added Rs. 12,22,349/- which was disallowed on account of non-deduction of tax and further added Rs. 18,07,384/- as the assessee failed to make TDS on the expenses amounting to Rs. 60,24,614/- and computed total income at Rs. 4,29,36,604/-.
3. Aggrieved by the said order the assessee preferred an appeal before the Ld. CIT(A) wherein the Ld. CIT(A) has upheld the addition of Rs. 2,68,887/- on account of employee’s contribution towards PF & ESI, do not interfere with the order of AO with regard to the disallowance made by the AO of Rs. 2,54,37,984/- and further upheld the disallowance of Rs. 18,07,384/- but so far the disallowance of claim of Rs. 12,33,341/- was concerned, the AO has been directed to verify whether the deduction has been made and paid on several dates as submitted by the assessee.
Being aggrieved and dissatisfied the present appeal has been preferred by the assessee on the following grounds: i) That on the facts and in the circumstances of the case, the Ld. CIT(A) erred in confirming the disallowance of provident fund Contribution of Rs. 2,68,887/- for payment of which , there was a purported delay. ii) That the Ld. CIT(A) erred in confirming the disallowance of Rs. 2,54,37,984/- made by the Assessing Officer out of Commissioner paid by the appellant to its Directors. iii) That on the facts and in the circumstances of the case, the Ld. CIT(A) erred in confirming the disallowance of Rs. 18,07,383/- made by the Assessing Officer form the Appellant’s purported default u/s 194J and 194C of the Act.
The Ld. Counsel of the assessee in course of argument has submitted that the contribution towards Provident Fund and ESI are paid by the employer before the due date of furnishing the income tax return, the same will be allowable as deduction in computing Business income of the appellant. So for other grounds are concerned his Assessment Year: 2017-18 GSA Surgical & Medicines Pvt. Ltd. submission is that the Ld. CIT(A) has erred in confirming the disallowance of Rs. 2,54,37,984/- ignoring the fact that the assessee has paid remuneration to its director Shri Swapan Das, Mrs. Sudipa Das and Mrs. Maya Das calculated by way of commission on its sale. It is nothing less but Salary or remuneration paid by the assessee to its director who have rendered full time service. The Ld. Counsel further submitted that the name of the directors appearing in the Articles of Association are the first directors of the company. He has further been submitted that the recipient directors returned the same as there income under the head salary. He has filed a petition regarding the death of one of the director Maya das with death certificate of Maya Das. Ld. Counsel filed documents in a paper book by giving certificate that the same have not been filed with the authorities below.
Contrary to that the Ld. D.R supports the impugned order.
Upon hearing the submission of the counsel of the respective parties, we have perused the record and order it appears to us that the AO has assessed the total income at Rs. 4,29,36,604/-as there was an addition of Rs. 2,68,887/- received from the employees towards contribution PF & ESI, deposited the same beyond the due date. The first grounds of appeal are against the addition of Rs. 2,68,887/-. The Ld. A.R submitted before us that the judgment of Hon’ble Supreme Court in Checkmate Services Pvt. Ltd. Vs. CIT (2022) 143 taxmann.com 178 (SC) dated 12.10.2022 is not applicable as the contribution are paid by the employer before the due date of furnishing the income tax return so the same will be allowable as deduction on the computing the business income of the assessee. We have gone through the order of Ld. CIT(A) and find that the Ld. CIT(A) in dismissing the appeal of the assessee on this ground has discussed the judgment passed by the Hon’ble Supreme Court in the case of Checkmate Services Pvt. Ltd. (supra). It is not in dispute that the assessee has deposited a sum of Rs. 2,68,886/- received from the employee’s contribution towards PF & ESI beyond the due date. A.O. has given a chart of payment of contribution and their due date, which is as follows:
Assessment Year: 2017-18 GSA Surgical & Medicines Pvt. Ltd. Sl Nature of Sum received Due date of Actual Actual date of No. fund from payment amount payment to the employees (In paid (In concerned rs.) Rs.) authorities
Provident 114021/- 15.07.2016 114021/- 16.07.2016 Fund
2. Provident 118536/- 15.10.2016 118536/- 27.10.2016 Fund
ESI 36330/- 21.10.2016 36330/- 26.10.2016
Total: Rs. 2,68,887/-
Going over the order and judgment passed by the Apex court, we are not inclined to interfere in the order passed by the Ld. CIT(A) on this issue. The order passed by the A.O. confirmed by the CIT(A) on this issue is hereby upheld.
So far, the next grounds are concerned, we find that the Ld. A.R has filed following paper before us: i) Copy of audited balance sheet and profit and loss account for the AY 2017-18 ii) Extracts of the Articles of Association (Page 5 Remuneration to the Directors). iii)Tax Audit Report for the AY 2017-18 iv)Computation of income for the AY 2017-18 of Mr. Swapan Das, Director v)Computation of income for the AY 2017-18 of Mrs. Sudipa Das, Director vi) Provident fund Scheme (Clause 30) vii) 26AS for the AY 2017-18 of the Appellant Assessment Year: 2017-18 GSA Surgical & Medicines Pvt. Ltd.
The submission of the A.R. is that in the present case is that assessee paid remuneration to its directors and the recipient Directors returned the same as their income under head salary. He filed computation of income of two Directors. His submission is that one of the Director Mya Das has died.
8. Keeping in view the admitted fact that the paper which has been filed by the Ld. A.R before us had not been filed before the lower authorities, we are in this view to restore the appeal of the assessee before the Ld. A.O to pass a fresh order after going over the paper filed by the assessee. Accordingly, the record of the assessee is hereby restored to the file of the A.O.for fresh adjudication on the issue of ground no. 2 and 3 made in the appeal. The order passed by the A.O. confirmed by the CIT(A) on the issue of confirming the disallowance of Rs 2,54,37,984 and confirming the disallowances of Rs 18,07,384 are hereby set aside.
In the result, the appeal filed by the assessee is partly allowed for statistical purposes.
Order is pronounced in the open court on 25th February, 2025
Sd/- Sd/- (Rajesh Kumar/राजेश कुमार) (Pradip Kumar Choubey /�द�प कुमार चौबे) Accountant Member/लेखा सद�य Judicial Member/�या�यक सद�य Dated: 25th February, 2025 SM, Sr. PS Copy of the order forwarded to: 1. Appellant- GSA Surgical & Medicines Pvt. Ltd., 55, Canning Street, West Bengal-700001 2. Respondent – ACIT, Circle-6(2), Kolkata 3. Ld. CIT(A)-NFAC, Delhi 4. Ld. Pr. CIT- , Kolkata 5. DR, Kolkata Benches, Kolkata (sent through e-mail)