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Income Tax Appellate Tribunal, ‘D’ BENCH: CHENNAI
Before: SHRI V. DURGA RAO, HON’BLE & SHRI G. MANJUNATHA, HON’BLE
आदेश / O R D E R PER G. MANJUNATHA, ACCOUNTANT MEMBER: This appeal filed by the Revenue is directed against the order of the Commissioner of Income Tax (Appeals)-6, Chennai, dated 28.01.2019 and pertains to assessment year 2013-14.
The Revenue has raised the following grounds of appeal:
1.The Order of the learned Commissioner of Income Tax (Appeals) is contrary to the Law and facts of the case. 2.1 The CIT(A) erred in directing the TPO to consider the same facts as in the case of the assessee for the AY 2012-13 when the issue contested by the assessee was different in the AY 2013-14.
2.2 The CIT(A) has incorrectly stated as against the facts on record that the issue of idle capacity adjustment has been examined by the ITAT during the AY 2012-13 in the assessee's own case while the same was not adjudicated upon by the Hon'ble ITAT during the said AY.
2.3 The CIT(A) has exceeded his jurisdiction by setting aside the case to the TPO since the power of the CIT(A) to set aside the case wiped off by the Finance Act 2001 w.e.f. 01.06.2001.
2.4 The CIT(A) failed to take cognizance of the fact that the assessee has not furnished details of capacity installed for the assessee and the comparables in order to prove that only the assessee was having idle capacity. Details of installed capacity - sine qua non for granting of adjustment by Hanil Tubes.
3.1 The CIT(A) erred in deleting the addition made on account of employees' contribution on ESI & PF when the same were not paid by the assessee within the due date of relevant Acts.
3.2 The CIT(A) ought to have appreciated that the employee's contribution of ESI & PF are governed by the section 36(1) (va) of the Act and not under section 43B of the Act.
3.3 The recent Board's Circular No. 22/2015, dt.17.12.2015 has accepted the decision of the Supreme Court in the case of Alom Extrusions only in respect of disallowance u/s 43B of the Act and has stated that this Circular does not apply to the claim of deduction relating to employee's contribution to welfare funds which are governed by section 36(1) (va) of the Act. 3.4The decision of Hon'ble High Court of Madras in the case of M/s.Unifac Management Services (India) Pvt Ltd [409 ITR 225], on similar issue, is in favour of revenue.
4 For these and other grounds that may be adduced at the time of hearing, it is prayed that the Order of the learned Commissioner of Income Tax (Appeals) be set aside and that of the Assessing Officer be restored.
The brief facts of the case are that the assessee is engaged in the business of manufacturing of suspension control arm, tools and related components and providing other related services for the automotive services, filed its return of income for the assessment year 2013-14 on 30.11.2013 declaring ‘Nil’ total income and said return has been subsequently revised, claiming total loss of Rs.3,19,94,891/-. The case has been taken up for scrutiny and during the course of assessment proceedings, a reference was made to the Transfer Pricing Officer (in short “TPO") for determining Arm’s Length Price (in short “ALP") of international transactions of the assessee with its Associated Enterprises (in short “AE").
The TPO vide his order dated 24.10.2016 has suggested an upward adjustment of Rs.3,22,04,592/-. In pursuant to directions of the TPO, the AO has passed final assessment order and made upward adjustment of Rs.3,22,04,592/- as proposed by the TPO in respect of international transactions of the assessee of its AE. The AO had also made disallowance of Employee’s Contribution to PF & ESI u/s.36(1)(va) r.w.s.2(24)(x) of the Act, for belated remittances of employee’s contribution to PF & ESI. The assessee carried the matter in appeal before the Ld.CIT(A). Before the Ld.CIT(A), the assessee submitted that the Tribunal has restored the transfer pricing issue to the file of the AO for the AY 2012-13 to re-consider the issue of idle capacity adjustment and the AO in the consequential proceedings, has allowed idle capacity adjustment and re-computed upward adjustment towards international transactions of the assessee. The Ld.CIT(A) after considering the relevant submissions of the assessee and also taken note of findings of the Tribunal for the AY 2012-13, has directed the TPO to consider the findings of the Tribunal, given for the AY 2012-13 and make suitable adjustments in respect of idle capacity adjustment while suggesting transfer pricing adjustment in respect of international transactions. As regards disallowance of delayed payment of employee’s contribution to PF & ESI, the Ld.CIT(A) by following certain judicial precedents, including the decision of the Hon’ble Supreme Court in the case of CIT v. Alom Extrusions Ltd., reported in [2009] 319 ITR 306 (SC), deleted the additions made by the AO. Aggrieved by the order of the Ld.CIT(A), the Revenue is in appeal before us.
The Ld.AR for the assessee, at the time of hearing, submitted that the appeal filed by the Revenue becomes infructuous, because, the TPO in pursuant to the directions of the Ld.CIT(A), has examined the claim of the assessee for idle capacity adjustment and after considering the relevant facts, has allowed relief to the assessee. Therefore, the appeal filed by the Revenue may be dismissed as infructuous.
The Ld.DR, on the other hand, submitted that the Ld.CIT(A) has followed the decision of the ITAT for the AY 2012-13 and has allowed relief to the assessee without giving any reasons, as to how, the assessee is entitled for idle capacity adjustment while computing operating margin.
Therefore, he submitted that if at all, the claim of the assessee is correct that the TPO had already granted relief to the assessee, then the matter requires fresh examination from the side of the Ld.CIT(A) and thus, the appeal may be set aside to the file of the Ld.CIT(A) to decide the issue in accordance with law.
We have heard both the parties, perused the materials available on record and gone through orders of the authorities below. The Ld.AR for the assessee made a statement at bar that the appeal filed by the Revenue becomes infructuous, because the ground on which appeal filed by the assessee had already been considered by the TPO while giving effect to the directions of the ITAT for the AY 2012-13 and further, in line with the earlier findings, the TPO had allowed relief for the AY 2013-14. Therefore, on the issue of idle capacity adjustment, the assessee has got relief and thus, the appeal filed by the Revenue challenging the findings of the Ld.CIT(A) becomes infructuous and the same may be dismissed. We find that the Ld.CIT(A) has directed the AO/TPO to re-consider the claim of the assessee and determine the ALP of international transactions of the assessee in accordance with the directions given by the ITAT in AY 2012-13 while deciding the issue for the impugned assessment year. Although, the counsel for the assessee claims that the assessee has got relief from the TPO on the issue of idle capacity adjustment, because, the Revenue has filed the appeal against the findings of the Ld.CIT(A), we are of the considered view that the issue needs to be re-examined by the Ld.CIT(A) in light of order passed by the TPO for the AY 2013-14 on the issue of idle capacity adjustment. Hence, we set aside the issue to the file of the Ld.CIT(A) and direct the Ld.CIT(A) to re-examine the claim in light of claim of the assessee.
As regards disallowance of delayed payment of PF & ESI u/s.36(1)(va) r.w.s.2(24)(x) of the Act, we find that the issue is now settled by various courts, including the decision of the Hon’ble Supreme Court in the case of Alom Extrusions Ltd. (supra), wherein, it has already been held that belated payment of PF & ESI contributions after the due date specified under respective Act, but before the due date of filing of return u/s.139(1) of the Act, is allowable deduction. Since, the Ld.CIT(A) has deleted the additions made by the AO towards disallowance of belated payments of employees’ contribution to PF & ESI by following the decision of the Hon’ble Supreme Court in the case of Alom Extrusions Ltd. (supra), we are of the considered view that there is no error in the reasons given by the Ld.CIT(A) to delete the addition. Hence, we are inclined to uphold the findings of the Ld.CIT(A) and reject the ground taken by the Revenue.
In the result, the appeal filed by the Revenue is partly allowed for statistical purposes.
Order pronounced on the 18th day of March, 2022, in Chennai.