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Facts
The assessee, N.K. Proteins Pvt. Ltd., filed its income tax return for Assessment Year 2020-21. During the assessment under Section 143(3), additions/disallowances were made for Section 14A (normal and MAT computation), donation, and late payment of PF/ESIC. The CIT(A) confirmed these additions, leading to the present appeal before the ITAT.
Held
The Tribunal restricted the disallowance under Section 14A (normal assessment) to the actual exempt income of Rs. 2,542/-, thereby allowing this ground. The ground concerning donation disallowance was dismissed as not pressed by the assessee. The appeal against disallowance for late payment of PF/ESIC was dismissed, upholding the CIT(A)'s decision, following the Supreme Court's judgment in *Checkmate Services Pvt Ltd*. The ground relating to Section 115JB disallowance for Section 14A was not adjudicated, being rendered infructuous.
Key Issues
1. Whether the disallowance under Section 14A could exceed the exempt income actually earned by the assessee for Assessment Year 2020-21. 2. Whether the disallowance for late payment of employees' contribution to PF and ESIC is justified in light of the Supreme Court's decision in *Checkmate Services Pvt Ltd*. 3. The applicability of Section 14A disallowance for book profit computation under Section 115JB and the retrospective/prospective nature of Finance Act, 2022 amendments.
Sections Cited
250, 139, 143(3), 14A, 8D, 115JB, 43B, 36(1)(va)
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, “B” BENCH, AHMEDABAD
Before: DR. B.R.R. KUMAR, VICE-SHRI T.R. SENTHIL KUMAR
PER DR. B.R.R. KUMAR, VICE-PRESIDENT :
This appeal has been filed by the assessee against the order of the Ld. Commissioner of Income-tax (Appeals)-11, Ahmedabad (hereinafter referred to as "CIT(A)" for short) dated 10.08.2022, passed u/s 250 of the Income-tax Act, 1961, (hereinafter referred to as "the Act" for short) for the Assessment Year (AY) 2020-21.
The assessee has raised following grounds of appeal:-
1. In law, facts and circumstances of the Appellant's case, the learned CIT(Appeals) has erred by not appreciating the fact of the case and hence, the order passed is void and bad in law.
2. In law, facts and circumstances of the Appellant's case, the learned CIT(Appeals) has erred by confirming an addition of Rs. 9,57,533/- u/s 14A r.w.r. 8D of the Act considering amendment made by Finance Act, 2022 retrospective in nature when amendment is prospective. The CIT(A) ought to have appreciated that the Appellant has earned nominal exempt income of Rs. 2,542/- which is already disallowed in return of income filed.
3. In law, facts and circumstances of the Appellant's case, the learned CIT(Appeals) has erred by confirming a disallowance of Donation made amounting to Rs. 1,01,68,057/-.
4. In law, facts and circumstances of the Appellant's case, the learned CIT(Appeals) has erred by confirming a disallowance of late payment of PF and ESIC Contribution amounting to Rs. 44,99,785/-.
4.1 In law, facts and circumstances of the Appellant's case, the learned CIT(Appeals) has ought to have appreciated that cheque towards employees contribution of Rs. 22,54,073 was tendered before due date provided in Act but only realization of such cheque is belated.
In law, facts and circumstances of the Appellant's case, the learned CIT(Appeals) has erred by confirming an addition of Rs. 9,57,533/- u/s 14A r.w.r. 8D of the Act under the book profit calculated as per the provisions of section 115JB of the Act considering amendment made by Finance Act, 2022 retrospective in nature when amendment is prospective. The CIT(A) ought to have appreciated that the Appellant has earned nominal exempt income of Rs. 2,542/- which is already disallowed in return of income filed.”
The brief facts relating to this case are that the assessee is a Company incorporated under Companies Act, 2013 and it had filed its return of income u/s 139 of the Act for the year under consideration on 12.02.2021 declaring total income under normal provisions of the Act at Rs. 32,86,67,060/- and book profit u/s 115JB of the Act as NIL. Subsequently, the case was selected for scrutiny and an assessment order has been passed u/s 143(3) of the Act on 30.03.2022 wherein following additions / disallowances have been made:-
(i) Disallowance u/s 14A r.w.r 8D - Rs. 9,57,533/- (ii) Disallowance of Donation - Rs.1,01,68,057/- (iii) Late payment of PF and ESIC - Rs. 44,99,785/- Late payment of PF and ESIC - Rs. 22,54,073/- (iv) Disallowance u/s 14A r.w. 8D - Rs. 9,57,533/- as per clause (f) to Expl. 1 to Section 115JB
On appeal before the First Appellate Authority, the Ld. CIT(A) confirmed all the aforesaid additions/disallowances made by the Assessing Officer. Aggrieved by the order of the Ld. CIT(A) confirming the additions/disallowances, the assessee has filed the present appeal.
Disallowance u/s 14A:
The assessee has earned exempt income of Rs.2,542/- only as dividend from domestic company. Since the assessment year involved is 2020-21, the disallowance cannot exceed the exempt income earned. Hence the disallowance is restricted to Rs.2,542/-. Appeal of the assessee on this ground is allowed.
Donation amount of Rs.1,01,68,057/- 6. Not pressed, hence dismissed. Appeal of the assessee on this ground is dismissed.
PF and ESIC Contribution amounting to Rs. 44,99,785/- & Rs.22,54,070/-
In view of the judgment of Hon’ble Apex Court in the case of Checkmate Services Pvt Ltd. Vs CIT, in C.A. No. 2830/2016, dated 13.10.2022, wherein it was observed that the essential character of an employees’ contribution, i.e., that it is part of the employees’ income, held in trust by the employer is underlined by the condition that it has to be deposited on or before the due date. The Hon’ble Court pointed out to the finer distinction between Section 43B and the non-obstante clause in that section by observing that the said clause could not be applied to the deemed income u/s 36(1)(va) which was basically a money held in trust.
7.1 This judgement thus sets at rest, the entire issue. Hence, respectfully following the judgment of Hon’ble Apex Court in the case of Checkmate Services Pvt Ltd (supra), the appeal of the assessee on this ground is hereby dismissed.
Computation u/s 115JB - Disallowance u/s 14A :
In view of the deletion of disallowance u/s 14A made by the Assessing Officer, this ground need not be adjudicated being infructuous.
In the result, the appeal of the assessee is partly allowed.
The order is pronounced in the open Court on 06.05.2025