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Income Tax Appellate Tribunal, “B” BENCH: KOLKATA
Before: Shri Rajesh Kumar & Shri Sonjoy Sarma]
IN THE INCOME TAX APPELLATE TRIBUNAL “B” BENCH: KOLKATA [Before Shri Rajesh Kumar, Accountant Member & Shri Sonjoy Sarma, Judicial Member] I.T.A. No. 102/Kol/2022 Assessment Year : 2014-15 Dalmia Laminators Ltd. Vs. DCIT, Circle-7(1), Kolkata (PAN: AABCD 1748 C) Appellant Respondent Date of Hearing 31.08.2022 Date of Pronouncement 14.09.2022 For the Appellant Shri N.S. Saini, AR For the Respondent Smt. Ranu Biswas, ACIT, DR
ORDER Per Shri Sonjoy Sarma, JM: This appeal is preferred by the assessee against the order passed by National Faceless Appeal Centre [hereinafter referred to as ‘CIT’] dated 26.11.2021 passed u/s 250 of the Income-tax Act, 1961. The assessee has taken the following grounds of appeal:
“i. On the facts & circumstances of the case and law, impugned assessment order so passed by the NFAC is bad in law, illegal and having been passed in violation of the principle of natural justice as well as against the set procedure in law. ii. On the facts & in the circumstances of the case as well as in law the NFAC had grossly erred in confirming the order of the AO in making the addition of Rs.4,18,965/- u/s 36(1)(va) read with section 2(24)(x) under the head employee’s contribution to PF & ESI deposited with the concerned authorities within the due date prescribed for filing of return u/s 139(1) by not following the judgment of the Hon’ble Jurisdictional Calcutta High Court in the case of CIT vs Vijayshree Ltd. reported in 43 taxmann.com 396 and CIT-2, Kolkata vs Coal India Ltd. in ITA 12 of 2015 order dated 12th August, 2015 as well as the decision of the Kolkata Bench of the Tribunal in the case of Harendra Nath Biswas vs DCIT, Kolkata in ITA No. 186/Kol/2021 dated 16.07.2021 for AY 2019-20. iii. On the facts and in the circumstances of the case as well as in law the NFAC erred in not deleting the addition made u/s 14A without recording mandatory satisfaction u/s 14(2) that the disallowance made by the assessee is not correct.
2 ITA No. 102/Kol/2022 AY: 2014-15 Dalmia Laminators Ltd. iv. On the facts and in the circumstances of the case the NFAC erred in directing the AO to restrict the disallowance to the extent of expenses incurred to earn exempt income as against the judgment of Hon’ble Calcutta High Court in case of REI Agro Ltd. that disallowance u/s 14A was required to be limited to the investments which yielded exempt income. v. Without prejudice to Ground No. 3 and 4, on the facts and in the circumstances of the case, the NFAC erred in not restricting the disallowance u/s 14A to the extent of exempt income of Rs. 3,906/-. vi. On the facts and in the circumstances of the case, the NFAC erred in confirming the order of the AO making addition for disallowance u/s 14A of the Act in computing the book profit u/s 115JB of the Act.” 2. It is pertinent to mention here that from the note of registry, it has come to our notice that there is a delay of 28 days in filing the instant appeal. However, the assessee explained the reasons for such delay and considering the same, we condone the delay as prayed by the appellant.
At the time of hearing, the ld. AR appeared and submitted that the core issue in this appeal is disallowance of sum of Rs. 4,18,965/- being contribution of employees’ share towards ESI and PF set up for the welfare of the employee u/s 36(1)(va) read with section 2(24)(x) of the Income Tax Act, 1961 which were paid within the due dates of filing of return u/s 139 of the Income Tax Act, 1961.
While going through the material available on record it is found that there was a delay in depositing employee’s as well as employer’s contribution to the Employee’s Provident Fund/ESI fund. However, the amount was deposited before the due date of the filing of the return under the respective Acts. The instant this issue is squarely covered by the decision of the Hon’ble Jurisdictional Calcutta High Court in the case of CIT, Kolkata vs. M/s Vijay Shree Limited 43 taxman.com 396(Cal) which has been further followed by the Coordinate Calcutta Bench of this Tribunal in the case of Harendra Nath Biswas vs. DCIT in ITA No.186/Kol/2021 by the order dated
3 ITA No. 102/Kol/2022 AY: 2014-15 Dalmia Laminators Ltd. 16.07.2021. The ld. DR fairly submitted there is no contrary to the case law cited above.
We find that the issue is covered in favour of the assessee as the assessment year involved is AY 2014-15 and the Explanation-5 inserted by Finance Act, 2021 to section 43B w.e.f. 01.04.2021 is not applicable to the assessment year under consideration. The relevant portion of the Co-ordinate Bench decision of the Tribunal in the case of Harendra Nath Biswas vs. DCIT (supra) for the sake of reference is reproduced as under: “ 2. The sole grounds of appeal raised by the assessee is against the Ld. CIT(A) in confirming the action of AO who disallowed/added back a sum of Rs. 1,10,62,263/- on account of delayed deposit of employees contribution to PF and ESI u/s 36(1)(va) read with Section 2(24)(x) of the Income Tax Act, 1961 ( hereinafter referred to as the Act) despite the assessee contributing/depositing the same before the due date of filing of return of income u/s 139(1) of the Act. 3. Brief facts of the case is that the CPC while processing the return disallowed/added Rs. 1,10,62,263/- on the ground that employees contribution to employees provident fund (EPF) and ESI fund has been deposited beyond the due date applicable under the provision of ESI Act, 1948 and EPF Act by invoking the provision of Section 36(1)(va) of the Act. Aggrieved by this disallowance, the assessee filed the appeal before the national Faceless Appeal Centre (NFAC), Delhi where the Ld. CIT(A) has taken note of the assessee’s submission that no disallowance was warranted in respect of delayed deposit of employees contribution to EPF /ESI fund since the assessee has deposited the employees contribution in respect of both these Acts (EPF & ESI Act) before filing the return of income and relied on the various judicial decision including that of the jurisdictional Hon’ble High Court of Calcutta in the case of CIT vs. Vijayshree Ltd. in [2014] 43 taxman.com 396(Cal). However the Ld. CIT(A) did not accept the contentions of the assessee in this regard and by relying on the Explanation-5 below section 43B which was brought in by Finance Act, 2021 to deny the claim of assessee. Therefore, the assessee is before us by preferring this appeal. 4. We have heard both the parties and perused the record. First of all we do not countenance this action of the Ld. CIT(A) for the simple reason that the Explanation 5 was inserted by the Finance Act, 2021, with effect from 01.04.2021 and relevant assessment year before us is AY 2019-20. Therefore the law laid down by the Jurisdictional Hon’ble High Court will apply and since this Explanation-5 has not been made retrospectively. So we are inclined to follow the same and we reproduce the order of Hon’ble Calcutta High Court in the case of Vijayshree Ltd. supra wherein the Hon’ble Calcutta High Court has taken note of the Hon’ble Supreme Court decision in CIT vs. Alom Extrusion Ltd. reported in
4 ITA No. 102/Kol/2022 AY: 2014-15 Dalmia Laminators Ltd. 390 ITR 306. The Hon’ble Calcutta High Court’s decision in Vijayshree Ltd. supra is reproduced as under: “This appeal is at the instance of the Revenue and is directed against an order dated 28th April, 2011 passed by the Income Tax Appellate Tribunal, “A” Bench, Kolkata in ITA No. 1091/Kol/2010 relating to assessment year 2006-07 by which the Tribunal dismissed the appeal preferred by the Revenue against the order of CIT(A). The only issue involved in this appeal is as to whether the deletion of the addition by the AO on account of Employees ‘Contribution to ESI and PF by invoking the provision of Section 36(1)(va) read with Section 2(24)(x) of the Act was correct or not. It appears that the Tribunal below, in view of the decision of the Supreme Court in the case of Commissioner of Income Tax vs. Alom Extrusion Ltd., reported in 2009 Vol.390 ITR 306, held that the deletion was justified. Being dissatisfied, the Revenue has come up with the present appeal. After hearing Mr. Sinha, learned advocate, appearing on behalf of the appellant and after going through the decision of the Supreme Court in the case of Commissioner of Income Tax vs. Alom Extrusion Ltd., we find that the Supreme Court in the aforesaid case has held that the amendment to the second proviso to the Sec 43(B) of the Income Tax Act, as introduced by Finance Act, 2003, was curative in nature and is required to be applied retrospectively with effect from 1st April, 1988. Such being the position, the deletion of the amount paid by the Employees’ Contribution beyond due date was deductible by invoking the aforesaid amended provisions of Section 43(B) of the Act. We, therefore, find that no substantial question of law is involved in this appeal and consequently, we dismiss this appeal. Urgent xerox certified copy of this order, if applied for, be supplied to the parties subject to compliance with all requisite formalities.” In the light of the aforesaid discussion we do not accept the Ld. CIT(A)’s stand denying the claim of assessee since assessee delayed the employees contribution of EPF & ESI fund and as per the binding decision of the Hon’ble High Court in Vijayshree Ltd. (supra) u/s 36(1)(va) of the Act since assessee had deposited the employees contribution before filing of Return of Income. Therefore, the assessee succeeds and we allow the appeal of the assessee.” 6. In view of the above proposition of law and the issue no. 2 being squarely covered in favour of the assessee, and accordingly allowed.
5 ITA No. 102/Kol/2022 AY: 2014-15 Dalmia Laminators Ltd. 7. The issue raised in ground no. 3 to 4 is against the order of ld. CIT(A) not deleting the additions of Rs. 2,09,163/- whereas the issue raised in ground no. 5 is without prejudice to ground no. 3 to 4 in which the assessee has prayed to restrict the disallowance to Rs. 3,906/- which the exempt income.
We have heard the rival contention and perused the material on records the undisputed facts are that the assessee has earned Rs. 3,906/- as exempt income. This is settled legal position that disallowance cannot exceed the exempt income. Accordingly we set aside the order of ld. CIT(A) on this issue and direct the AO to restrict the disallowance to Rs. 3,906/-. Consequently, ground no. 5 is allowed. In view of our decision in ground no. 3 to 4 are not being adjudicated.
The issue raised in ground no. 6 is against the order of ld. CIT(A) confirming the addition of amount of disallowance u/s 14A to book profit u/s 115JB.
After hearing the rival contention and perusing the applicable provisions of law with the ratio laid down by various judicial forums, we set aside the order of ld. CIT(A) and direct the AO not to make any addition to book profit qua the disallowance u/s 14A. The ground no. 6 is allowed.
The appeal of the assessee is hereby allowed and the impugned addition made by the lower authorities is ordered to be deleted.
In the result, the appeal of the assessee stands allowed. Order is pronounced in the open court on 14th September, 2022
Sd/- Sd/- (Rajesh Kumar) (Sonjoy Sarma) Accountant Member Judicial Member Dated: 14th September, 2022 Biswajit, Sr. PS
6 ITA No. 102/Kol/2022 AY: 2014-15 Dalmia Laminators Ltd.
Copy of the order forwarded to: 1. Appellant- Dalmia Laminators Ltd., 130 Cotton Street, Burra Bazar, Kolkata – 700 007. 2. Respondent – DCIT, Circle-7(1), Kolkata.
Ld. CIT, Kolkata 4. Ld. CIT(A)- Kolkata. 5. DR, Kolkata.