VST MOTOR PVT. LTD.,CHENNAI vs. ITO, CORPORATE WARD - 3 (4),, CHENNAI

The Assessee filed this appeal against the order of the Commissioner of Income Tax (Appeals)-7, Chennai in ITA No.101(T)/C.I.T(A)-7/2016-17, dated 25.06.2019 for the assessment year 2013-14.

The ground No.1 is general in nature and therefore, the assessee is not pressing this ground. The Ld.Counsel further submitted before this Tribunal that the assessee is not pressing the ground No.2. The Ld. Departmental Representative had no objection to dismiss these grounds as not pressed. Accordingly Grounds Nos.1 & 2 are dismissed as not pressed.

Ground Nos.3 to 3.2 raised by the assessee are with regard to claiming of deduction of ₹.7,61,428/- in respect of employees’ contribution to PF and ESI, which were remitted by the assessee beyond the due dates prescribed in the respective Acts, but before the due date of filing of the return.

We have heard the rival submissions and perused the material available on record. We find from the date of remittances made for each of the month as detailed in pages 1& 2 of the assessment order that employees’ contribution towards PF and ESI had been duly remitted by the assessee within the end of the previous year relevant to assessment year 2013-14, though the same were remitted beyond the due dates prescribed under the respective Acts. We find this issue is already decided in favour of the assessee by the Hon’ble Jurisdictional High Court in the case of C.I.T, Chennai Vs. M/s.Industrial Security & Intelligence India Pvt Ltd., in Tax Case (Appeal) Nos.585 and 586 of 2015 & M.P. No.1 of 2015 dated 24.07.2015 wherein it was held that if the empoyees’ contribution towards PF and ESI had been remitted by the assessee before the due date of filing of the return of income, the assessee would be entitled for deduction. Respectfully following the same, the Grounds Nos.3 to 3.2 raised by the assessee are allowed.

Ground Nos. 4 to 4.5 raised by the assessee are with regard to challenging the action of the learned CIT(A) in confirming the disallowance of ₹.9,21,424/- made under Section 40(a)(ia) of the Act in respect of payments made to M/s.Tata Motors Ltd., for a Web enabled software in Siebel in which all marketing related information can be stored and the reports relating to marketing activities can be generated from the system.

We have heard the rival submissions and perused the material available on record. The ld. A.R. vehemently pleaded that this payment does not fall within the ambit of fee for professional or technical services rendered by M/s.Tata Motors Ltd., as there is no human intervention involved in the same. The Ld. A.R. also pleaded that this software is routine software of M/s.Tata Motors Ltd., wherein the assessee was permitted to use the same. In any case, he argued that in the second proviso to Section 40(a)(ia) of the Act read with section 201 of the Act, if the payments made by the assessee had been duly subjected to tax in the hands of the recipient, i.e. M/s.Tata Motors Ltd., then the assessee cannot be invited with the disallowance under Section 40(a)(ia) of the Act. We find this is a statutory benefit provided in the Statute to the assessee and accordingly deem it fit and appropriate, to direct the Ld. A.O to verify the fact as to whether M/s.Tata Motors Ltd., had duly offered the said sum of ₹.9,21,424/- received from the assessee herein as its income and paid taxes due thereon. If it is found to be correct, no disallowance under Section 40(a)(ia) of the Act would come into operation in the hands of the assessee payer. Accordingly, Grounds Nos.4 to 4.5 raised by the assessee are allowed for statistical purposes.

The Grounds Nos.5 to 5.10 raised by the assessee are in respect of challenging the action of the learned CIT(A) in confirming the disallowance made under Section.14A of the Act r.w.Rule 8D(2) of Income Tax Rules, 1962.

We have heard the rival submissions and perused the material available on record. We find that the assessee had received dividend income of ₹.1,82,22,465/- during the year and claimed the same as exempt in the return of income. The assessee had not made any disallowance voluntarily under Section.14A of the Act in the return of income. The Ld. A.O. resorted to invoke the computation mechanism provided in Rule 8D(2) of the Rules and accordingly made disallowance of ₹.4,60,217/- and raised ₹.39,040/- under Second and Third limbs thereon respectively. On appeal, learned CIT(A) confirmed the action of the Assessing Officer.

Before us, the Ld. A.R. placed on record the copy of balance sheet of the assessee company as on 31.03.2013 from where it is evident that assessee is having own funds to the tune of ₹.38.72 crores, whereas the total investments made by the assessee is only ₹.78 lakhs. Hence, it can be safely persumed and concluded that the investments were made only out of own funds of the assessee in the light of ratio laid down by Hon’ble Bombay High Court in the case of C.I.T vs. HDFC Bank Ltd. reported in 366 ITR 505. Respectfully following the same, no disallowance of interest under Second limb to Rule 8D(2) of the Rules could be made in the hands of instant case.

With regard to administrative expenses under the 3rd limb, before Ld. A.R. fairly conceded for the said disallowance. Accordingly, grounds Nos. 5 to 5.10 raised by the assessee are partly allowed.

Ground No.5.11 raised by the assessee is general in nature and does not require any specific adjudication

In the result, the appeal of assessee is partly allowed for statistical purposes.