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Income Tax Appellate Tribunal, “C” BENCH, KOLKATA
Before: SHRI RAJPAL YADAV, HON’BLE & DR. MANISH BORAD, HON’BLE
O R D E R
PER DR. MANISH BORAD, ACCOUNTANT MEMBER:
The instant appeal is directed at the instance of the assessee against the order of the learned Commissioner of Income Tax (Appeals), Kolkata - 27, [hereinafter the “ld. CIT(A)”] dt. 16/12/2023, passed u/s 250 of the Income Tax Act, 1961 (“the Act”) for the Assessment Year 2018-19.
The first issue raised is against the disallowance u/s 36(1)(va) r.w.s. 2(24)(x) of the Act at Rs.2,41,350/-. Since there is a delay in the payment of delayed deposit of employees’ contribution to PF & ESI. We find that this issue is no more res integra in view of the judgment of the Hon’ble Supreme Court in Checkmate Services Pvt. Ltd. Vs. CIT (2022) 143 taxmann.com 178 (SC) dated 12.10.2022 wherein it has been held that “deduction u/s 36(1)(va) in respect of delayed deposit of amount Assessment Year: 2018-19 Ganpati Industrial Private Limited 2 collected towards employees’ contribution to PF/ESI cannot be claimed even though deposited within the due date of filing of return of income read with Section 43B of the Income-tax Act, 1961”. Under these circumstances, the amount is liable to be added as income in the hands of the assessee. The disallowance of Rs.2,41,350/- is hereby confirmed and the Ground No. 6 raised by the assessee is dismissed.
The next issue for our consideration is against the disallowance u/s 14A of the Act at Rs.28,45,042/-. Facts in brief relating to this issue are that the assessee is a private limited company and derives income from business and profession and income from capital gain. Declared income of Rs. 53,81,20,480/- in the e-return filed on 04/10/2018 during the course of assessment proceedings, carried out after serving notice u/s 143(2) and 142(1) of the Act. The ld. Assessing Officer noticed that the annual average monthly investment fetching/could fetch exempt income is Rs. 28,45,042/-. The ld. Assessing Officer observing that the assessee has not offered any suo moto disallowance applied Rule 8D(2) and calculated the disallowance at Rs.28,45,042/- by applying the rate of 1% on Rs.28.45 Crores. In the appellate proceedings before the ld. CIT(A), assessee failed to succeed.
Now, the assessee is now in appeal before this Tribunal.
The ld. Counsel for the assessee referred to the paper book, more particularly page 62 and stated that the average monthly investment which have given rise to the exempt income, should only be considered for computing the disallowance u/s 14A of the Act. Referring to page 62 of the paper book, he submitted that the ld. Assessing Officer has taken those investments also which have not given rise to any exempt Assessment Year: 2018-19 Ganpati Industrial Private Limited 3 income. He thus prayed that the investments which have not yielded any exempt income should be excluded for calculating the disallowance. He also stated that the Hon’ble Delhi High Court in the case of PCIT Vs. Era Infrastructure (India) Ltd. (ITA 204/2022) judgment dt. 20/07/2022 has held that the disallowance u/s 14A of the Act should not exceed the exempt income earned by the assessee during the year. Further reliance was placed on the decision of the Hon’ble Apex Court in the case of PCIT vs Oil Industry Development Board (2019) 262 Taxmann 102 (SC) wherein the Hon’ble Apex Court dismissed the revenues appeal referring to the decision of Cheminvest Limited vs. Commissioner of Income Tax-VI, (2015) 378 ITR 33, wherein it has been ruled that in absence of any exempt income, disallowance u/s 14A fo the Act is not permissible. Referring to these judgments, he submitted that, since the disallowance u/s 14A of the Act is co-related to exempt income, similar analogy should be applied for selecting the investment which have given rise to the exempt income. Reference was also made to the judgment of the Hon’ble Jurisdictional High Court in the case of CIT v. REI Agro Ltd. (ITAT 161 of2013) Calcutta High Court decision dated 23/12/2013. On the other hand, the ld. D/R vehemently argued supporting the orders of the authorities below.
We have heard rival contentions and perused the material placed before us. We note that the ld. Assessing Officer has computed the disallowance @1% of the annual average of the monthly instalment made by the assessee in the following equities/funds:-