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Income Tax Appellate Tribunal, ‘C’ BENCH, BENGALURU
O R D E R
Per PAVAN KUMAR GADALE, JM :
The revenue has filed the appeal against the order of the CIT(A)-5, Bengaluru, in dated 29/12/2017 for the assessment year 2014-15.
The revenue raised the following grounds of appeal: 1. “Whether on the facts and circumstances of the cases and in law, CIT (A) was right in holding that since no exempt income has been received by the assessee during the year no disallowance/addition can be made U/s 14A rw Rule 8D of I.T. Rule, 1962?
2. Whether on the facts and circumstances of the cases and in law, CIT (A) was right in deleting the disallowance/addition made on account delayed payment of employees contribution to Provident Funds and ESI beyond due dates prescribed under PF Act and ESI Act respectively?
Page 2 of 6 3. The Appellant craves leave to alter, amend or delete the above grounds of appeal or add any other grounds of appeal on or before the hearing of the appeal.”
3. Briefly, facts of the case are that the assessee is engaged in manufacturing and trading of garments and apparels and e- filed the Return of income for the assessment year 2014-15 with total income of Rs.2,82,23,130/-. The case was selected for scrutiny under CAAA and notices u/s 143(2) and 142(1) of the Income-tax Act,1961 ['the Act' for short] was served. In compliance, learned AR of the assessee appeared from to time and furnished the relevant details, particulars and furnished clarifications. The Assessing Officer (AO) on perusal of financial statements found that the assessee has made investments in equity shares. Hence, applying the provisions of section 14A of the Act read with rule 8D(2)(iii) made addition of Rs.2,81,160/- . The AO observed that the assessee has remitted employees contribution of provident fund and ESI after the due date under respective Acts. Therefore, the AO relying on the provisions of section 36(1)(va) and circular and sec.43B made PF disallowance of Rs.54,90,041/- and Rs.4,51,412/- of ESI and with other additions and passed the order u/s 143(3) dated 02/12/2016.
Aggrieved by the assessment order, the assessee filed an appeal with the CIT(A). In the appellate proceedings, learned AR reiterated the submissions made before AO on the disputed issues. With respect to disallowance u/s 14A read with rule 8D(2)(iii), the CIT(A) relied on the judicial decision of Special Bench of Tribunal in the case of Cheminvest Ltd. vs. ITO (121 ITD 318)(Del)(SB) and High Court decisions came to conclusion that since there is no exempt income, no disallowance u/s 14A shall be made in the year under consideration and allowed the ground of appeal of the assessee.
Page 3 of 6 5. In respect of disallowance of employees contribution to PF of Rs.54,90,041/- and Rs.4,51,412/- of ESI aggregating to Rs.59,41,453/-, CIT(A) dealt on the provisions of section 36(1) and section 2(24)(x) of the Act and relied on the decision of the Hon’ble Supreme Court in the case of CIT vs Alom Extrusions (319 ITR 306)(SC) and also the jurisdictional High Court decision in the case of Spectrum Consultants India Pvt. Ltd. vs. CIT (215 Taxman 597) directed the AO to delete the additions and allowed the appeal.
Aggrieved by the CIT(A) order, the revenue has filed the appeal before the Tribunal on these two disputed issues. The learned DR submitted that the CIT(A) erred in deleting disallowance u/s 14A of the Act irrespective of the fact that they are mandatory requirements and the CIT(A) also erred in deleting disallowance of deposit of employees contribution to provident fund and ESI beyond the due dates prescribed under the respective statutes as per provisions of law and the decisions relied by the CIT(A), are distinguishable. Contra, the learned AR supported the order of the CIT(A) with paper book and judicial decisions.
We heard rival submissions and perused the material on record. On the first disputed issue of disallowance u/s 14A read with rule 8D(2)(iii), the learned DR’s contention that the CIT(A) has erred in deleting addition irrespective of the fact that the circular mandates that the disallowance has to be made even if there is no exempt income. The learned AR submitted that the assessee has not received any dividend income and referred to Annual Report and schedule 23 at page 22 of the paper book and also copy of computation of taxable income where there is no income received by the assessee from exempted assets and supported his argument with the decision of the Hon’ble
Page 4 of 6 Supreme Court in the case of Maxopp Investment Ltd. vs. CIT (402 ITR 640)(SC) and also the Special Bench decision in the case of Cheminvest Ltd. (supra).
We find that the argument of learned AR are supported by facts and judicial decisions. Whereas the learned DR could not controvert the findings of the CIT(A) or brought any cogent evidence or new facts in the course of hearing. Therefore, we are of the substantive opinion that the CIT(A), having dealt with the provisions and the judicial decisions, took a reasoned view and therefore, we are not inclined to interfere with the order of the CIT(A) on this ground and uphold the same and dismiss the ground of appeal of the revenue.
On the second ground of appeal viz., the CIT(A) erred in deleting addition made in respect of employees contribution to PF and ESI after due date. The learned DR submitted that the AO was correct in making disallowance whereas the CIT(A) overlooked the facts and provisions and granted relief.
Contra, learned AR submitted that employees contribution to PF and ESI was deposited within due date allowed u/s 139(1) of the Act which is not disputed by the revenue and also supported his arguments with following judicial decisions: i. CIT vs. Spectrum Consultants India (P) Ltd. (49 taxmann.com 29 ii. CIT vs. Alom Extrusions Ltd. (185 Taxman 416)(SC) iii. CIT vs. Sabari Enterprises (298 ITR 141)(Kar) iv. BPL Ltd. vs. ACIT (ITA No.1055/Bang/2017 dt.3/11/2017) v. M/s.UB Infrastructure Projects Ltd. vs. Deputy Commissioner of Income-tax (ITA No.2098/Bang/2016 dt.22/12/2017)
Page 5 of 6 We find the decision of the jurisdiction High Court In the case of Sabari Enterprises (supra) is applicable to this case and which reads as under: “Section 36(1)(va) of the Income-tax Act, 1961 - Employee’s contributions - Contributions made by assessee to PF and ESI are allowable deductions even though made beyond stipulated period as contemplated under mandatory provisions of section 36(1)(va), read with section 2(24)(x), provided such contributions are paid by assessee on or before due date for furnishing return of income as per section 139(1) In view of the statutory provisions of section 2(24)( x), section 36(1)(va ) and section 43B(b), contributions made by the assessee to PF and ESI are allowable deductions even though made beyond stipulated period as contemplated under the mandatory provisions of section 36(1)(va), read with section 2(24)( x), provided such contributions are paid by the assessee on or before the due date for furnishing the return of income as per section 139(1).” Whereas, the learned DR only supported the order of the AO but could not controvert the observations and findings of the CIT(A) with any evidence. We are of the substantive opinion that the CIT(A), having considered the provisions and judicial decisions and the facts of the assessee’s case, has passed the order directing the AO to delete the addition. Accordingly, we are not inclined to interfere with the action of CIT(A) and dismiss the ground of appeal of the revenue.
In the result, the revenue’s appeal is dismissed Pronounced in the open court on 15th February, 2019.