M/S. DEEPAK INDUSTRIES LTD.,KOLKATA vs. DCIT, CIRCLE - 6(1), KOLKATA, KOLKATA
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Income Tax Appellate Tribunal, KOLKATA BENCH ‘C’, KOLKATA
Before: Shri Rajesh Kumar & Shri Sonjoy Sarma]
IN THE INCOME TAX APPELLATE TRIBUNAL KOLKATA BENCH ‘C’, KOLKATA [Before Shri Rajesh Kumar, Accountant Member & Shri Sonjoy Sarma, Judicial Member] I.T.A. Nos. 466 & 467/Kol/2022 Assessment Year : 2018-19 & 2019-20 M/s. Deepak Industries Ltd. vs DCIT, Circle-6(1), Kolkata PAN: AAACD 8676 J Appellant Respondent Date of Hearing 03.11.2023 Date of Pronouncement 10.01.2024 For the Assessee Mr. Siddharth Jhajharia, FCA For the Revenue Mr. B.K. Singh, JCIT, Sr. DR
ORDER Per Sonjoy Sarma, JM: The captioned appeals are filed by the assessee directed against two separate orders dated 04.08.2022 and 03.08.2022 by ld. CIT(A), NFAC relating to A.Y. 2018-19 & 2019-20 respectively. Since the issues involved in both the appeals are common and identical to each other. Therefore, all the appeals were heard together and are being disposed of by this common order. The assessee has raised the following grounds of appeal for A.Y. 2018-19: “1. For that in view of the facts and in the circumstances, the Ld. CIT(A) was wholly unjustified in confirming the disallowance / addition of Rs. 21,29,570/- on account of delayed payment of Employees' Contribution towards PF/ESI, though the same has been deposited in the Govt. Account much before the prescribed due date w/s 139(1) and in view of the facts and in the circumstances it may be held accordingly.
Without prejudice to Ground No. 1 above, the impugned addition and the affirmation of such addition in order u/s 143(1) by Ld. CIT(A) was in violation of judgment of Jurisdictional Tribunal and in view of the facts and in the circumstances it may be held accordingly.
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Without prejudice to Grounds No. 1 & 2 above, the adjustment so made by the AO in respect of such sum of Rs. 21,29,570/- is not covered within the scope of sec. 143(1) and the Ld.CIT(A) was wholly unjustified in dismissing such grounds of appellant and in view of the facts and in the circumstances such order of Ld. CIT(A) as well as order u/s 143(1) may be quashed / cancelled accordingly.
Without prejudice to Grounds No. 1, 2 & 3 above, the amendment to Sec.36(1)(va) read with sec. 2(24)(x) in respect of Employees' Contribution to PF/ESI is not retrospective and not applicable prior to A.Y 202 1-22 and it may be held accordingly.
Without prejudice to validity of adjustments so made in order w/s 143(1), the AO failed to grant depreciation on cost of assets granted under sec. 43(1) read with sec. 43A vide ITA Nos. 263-264/K/ 2020 [C.0. 425/K/21] [A.Ys 2014-15 & 2015-16] and AO may kindly be 'directed to allow such depreciation accordingly.
For that in view of the facts and in the circumstances, the Ld. CIT(A) was wholly unjustified in holding charging of interest u/s 234C as consequential since such interest is chargeable on returned income only and in view of the facts and in the circumstances it may be held accordingly.
For that your petitioner craves the right to put additional grounds and/or to alter/ amend/modify the present grounds at the time of hearing.” The assessee has raised following grounds of appeal for A.Y. 2019-20: “1. For that in view of the facts and in the circumstances, the Ld. CIT(A) was wholly unjustified in confirming the disallowance / addition of Rs. 7,57,291/- on account of delayed payment of Employees' Contribution towards PF/ESI, though the same has been deposited in the Govt. Account much before the prescribed due date u/s 139(1) and in view of the facts and in the circumstances it nay be held accordingly.
Without prejudice to Ground No. I above, the impugned addition and the affirmation of such addition in order w/s 143(1) by Ld. CIT(A) was in
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violation of judgment of Jurisdictional Tribunal and in view of the facts and in the circumstances it may be held accordingly.
Without prejudice to Grounds No. 1 & 2 above, the adjustment so made by the AO in respect of such sum of Rs. 7,57,291/- is not covered within the scope of sec.143(1) and the Ld.CIT(A) was wholly unjustified in dismissing such grounds of appellant and in view of the facts and in the circumstances such order of Ld. CIT(A) as well as order u/s 143(1) may be quashed /cancelled accordingly.
Without prejudice to Grounds No. 1, 2 & 3 above, the amendment to Sec.36(1)(va) read with sec. 2(24)(x) in respect of Employees' Contribution to PF/ESI is not retrospective and not applicable prior to A.Y 2021-22 and it may be held accordingly.
Without prejudice to validity of adjustments so made in order u/s 143(1), the AO failed to grant depreciation on cost of assets granted under sec. 43(1) read with sec. 43A vide ITA Nos. 263-264/K/ 2020 [C.0. 425/K/21] [A.Ys 2014-15 & 2015-16] and AO may kindly be directed to allow such depreciation accordingly.
For that in view of the facts and in the circumstances, the Ld. CIT(A) was wholly unjustified in holding charging of interest u/s 234C as consequential since such interest is chargeable on returned income only and in view of the facts and in the circumstances it may be held accordingly.
For that your petitioner craves the right to put additional grounds and/or to alter/ amend/modify the present grounds at the time of hearing.”
First we take up ITA No. 466/Kol/2022 for A.Y. 2018-19. Brief facts of the case are that assessee is a company and filed its return of income declaring an income of Rs. 54,20,47,250/- and book profit of Rs. 50,26,02,831/- u/s 115JB of the I.T. Act, 1961. Subsequent to it intimation u/s 143(1) of the Act was issued to
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the assessee by assessing the income at Rs. 54,41,76,816/- by making an addition of Rs. 21,29,570/- added to the income of assessee u/s 36 of the Act and due to the same reduced the refund as claimed by assessee from Rs. 43,90,290/- to Rs. 36,25,442/- by the AO. The ld. AO after assessed the income of assessee at Rs. 54,41,76,816/- necessary tax was computed at Rs. 15,93,37,508/- by collecting interest u/s 234C of the Act at Rs. 20,43,522/-.
Aggrieved by the above order assessee went into appeal before the ld. CIT(A) where the ld. CIT(A) has confirmed the addition of Rs. 21,29,570/- on account of delayed payment of employees contribution towards PF & ESI, though the same has been deposited by the assessee in the Govt. account much before the prescribed due date as made u/s 139(1) of the Act and similarly on another issue of charging interest u/s 234C at an assessed income. However, according to assessee, the view taken by the ld. CIT(A) charging of interest on assessed income which is contrary to the provisions of law.
Aggrieved by the above order, assessee is in appeal before the Tribunal raising various grounds of appeal. However, going through the grounds, we find that ground no. 1 to 4 as read by assessee in relation with confirming the disallowance of addition made of Rs. 21,29,570/- on account of delayed payment of employees contribution towards PF & ESI which was not deposited by the assessee as prescribed under the law. The issue
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relating to above grounds are taken by the assessee have come to rest by the recent verdict of the Hon’ble Supreme Court in Chekmate 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 collected towards employees’ contribution to PF cannot be claimed when deposited within the due date of filing of return even when read with Section 43B of the Income-tax Act,1961.”
By following the decision of Hon’ble Supreme Court, the issue no. 1 to 4 are goes against the assessee. Accordingly, grounds taken by the assessee are dismissed.
The other issue no. 5 is in relation to adjustment made by AO in the order u/s 143(1) of the Act where the AO failed to grant depreciation on cost of assets granted u/s 143(1) r.w.s. 43A of the Act. In this regard, the ld. AR stated before the bench that the issue is covered in favour of the assessee vide ITA No. 263- 264/Kol/2020 for A.Y. 2014-15 and 2015-16 respectively where the Tribunal by allowing the issue in favour of the assessee by dismissing the appeal of the revenue in following manner: “13. Facts in brief are that the assessee had made some additions to fixed asset in the latter half of F.Y. 2012-13 and consequently the assets were put to use for less than 180 days. Accordingly, the assessee claimed depreciation @ 10% being 50% of normal rate of depreciation. During the year, the assessee claimed 10% additional depreciation on the ground that the assessee had claimed only 50% depreciation in FY 2012- 13 in terms of proviso to Section 32(1) of the Act. The assessee referred to the Finance Act, 2015 inserting to proviso to Section 32(1)(iia) effective
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w.e.f 01.04.2016 providing that where assets has been put to use for the purpose of business for a period less than 180 days in the previous year, the deduction shall be allowed in respect of depreciation @ 50% of normal depreciation as prescribed under clause (iia) and the deduction in the remaining 50% of the amount calculated at the normal rate as prescribed under clause (iia) shall be allowed under sub-section (1) in the succeeding year. The AO disallowed the deduction on the ground that the Finance Act, 2015 has made this provisions w.e.f. 01.04.2016 and consequently the assessee is not entitled to claim the deduction for AY 2014-15 of Rs. 60,66,115/-.
In the appellate proceedings the Ld. CIT(A) allowed the appeal by referring to the provision of Section 32(1) of the Act and also to the Finance Act, 2015 inserting proviso to Section 32(1)( iia). The Ld. CIT(A) also referred to the decision of Coordinate bench in the case of M/s Birla Corporation Ltd. vs. DCIT reported in [2015] 55 taxmann.com 33 (Kolkata-Trib) while allowing the appeal of the assessee wherein the similar issue has been decided in favour of the assessee.
After hearing the rival parties and perusing the material on record, we note that 4the additional depreciation has been denied by the AO on the ground that there was no provision in the Statute granting additional depreciation to the assessee which has not been allowed in the preceding assessment year in which the conditions were made on the ground that the provision of Section 32(1)(iia) of the Act provides that the assessee is entitled to claim depreciation @ 50% of the of the normal rates as prescribed under clause (iia) and the said benefit has been specially granted w.e.f. 1.4.2016 by Finance Act,2015 from AY 2016-17 . We note that the issue has been decided by the coordinate bench in M/s Birla corporation Ltd. vs. DCIT (supra) by holding that assessee is entitled to remaining 50% of the depreciation in the subsequent year where the said depreciation could not be claimed in preceding assessment year because of the reason that the asset was put to use for less than 180 days in terms of provision of Section 32(1)(ii) of the Act. The operative part of the case M/s Birla corporation Ltd. vs. DCIT is extracted below: “We have heard rival submissions and gone through facts and circumstances of the case. The facts are admitted and there is no dispute on the facts. Only issue for adjudication is whether the assessee is entitled for the balance 50% additional depreciation in view of sec.
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32(1)(iia) of the Act in the next assessment year for remaining unutilized additional depreciation. We have gone through the relevant provisions of second proviso to section 32(1)(ii) and 32(1)(iia) of the Act. In the present case before us, the assessee has purchased and installed new plant and machinery for its manufacturing unit and put to use for a period of less than i.e. 180 days, during the FY 2005-06 relevant to AY 2006-07 and claimed 50% additional depreciation u/s. 32(1)(iia) of the Act in view of the second proviso to section 32(1)(ii) of the Act. Further, the balance 50% of additional depreciation on such plant and machinery has been claimed by the assessee company during the year under consideration i.e. the FY 2006-07 relevant to this assessment year 2007-08. A bare reading of clause (iia) of section 32(1) of the Act w.e.f. the AY 2006-07, provides for allowance of additional depreciation equal to 20% of actual cost of new plant and machinery acquired and installed after March, 31st 2005 by an assessee engaged in the business of manufacture or production of any article or thing. Such additional depreciation is to be allowed as deduction u/s. 32(1)(iia) of the Act but second proviso to section 32(1)(ii) restricts the allowance of depreciation at 50%, if the plant and machinery is acquired during the previous year is put to use for a period of less than 180 days in that previous year. The second proviso specifically makes a reference to an asset referred to in clause (iia) of the said section 32(1) of the Act. And it is because of the second proviso assessee claimed only 50% additional depreciation for AY 2006-07 and accordingly, claimed the balance amount of additional depreciation in the immediately subsequent year i.e. the year under consideration AY 2007-08. We are in full agreement with the argument of Shri J. P. Khaitan, Senior Advocate that a bare reading of section 32(1)(iia) clearly shows that the assessee is eligible for additional depreciation in case the new machinery and plant was acquired and installed after 31-03-2005. There is no restrictive condition in the clause for the eligibility of the assessee to claim additional depreciation. When the assessee is eligible for depreciation @ 20%, in the absence of any specific provision, the AO cannot cut down the scope of deduction by referring to second proviso to section 32(1)(ii) of the Act. He also pointed out that even if there is any contradiction between sections 32(1)(iia) and second proviso to section 32(1)(ii), it has to be reconciled so as to give harmonious effect to the legislative intent. The benefits conferred on the assessee by way of incentive provision cannot be taken away by adopting an implied meaning to second proviso to section 32(1)(ii) of the Act. Since the second proviso to section 32(1)(ii) does not expressly prohibit the allowance of the balance 50%
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depreciation in the subsequent year, second proviso to section 32(1)(ii) shall not be interpreted to mean that it impliedly restrict the additional depreciation to be allowed in the subsequent assessment year. We are of the view that the assessee now is entitled for 50% additional depreciation, because in the year in which the machinery was first put to use the assessee claimed only 50% of additional depreciation for the reason that the same was put to use for less than 180 days, in this assessment year for the balance of depreciation.”
Similar ratio was laid down in the case of Cosmo Fins Ltd.- 139 ITD 683 (Del) and DCIT vs. National Engg. Industries Ltd.-193 ITD 420 (kol). Since the issue before us is same as decided by the co-ordinate benches (supra), we therefore respectfully following the decisions of respective benches dismiss the ground no. 5 raised by the revenue by confirming the order of Ld. CIT(A) on this issue.
Since the issue before us is similar to the above case decided by the Kolkata bench in assessee’s own case. We, therefore, respectfully following the ratio of the same remand back the issue to the file of AO to re-examine the issue by allowing the claim of assessee in respect of additional depreciation as claimed in its return of income by following the decision rendered by this Tribunal.
The issue no. 6 of the appeal is in relation with charging of interest u/s 234C of the Act on assessed income in place of return income filed by the assessee while passing the impugned order by ld. CIT(A) against the assessee. On this context, the ld. AR stated that interest u/s 234C of the Act is applicable only on the returned income filed by the assessee. However, the ld. CIT(A) while passing the order holding that charging of interest u/s 234C of the Act on the assessed income which is contrary to the
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law. In order to substantiate his claim the ld. AR brought to our notice to the provisions of section 234C of the Act which is read as under: “Interest for deferment of advance tax 234C (1) Where in any financial year,— (a) the company which is liable to pay advance tax under section 208 has failed to pay such tax or— (i) the advance tax paid by the company on its current income on or before the 15th day of June is less than fifteen per cent of the tax due on the returned income or the amount of such advance tax paid on or before the 15th day of September is less than forty-five per cent of the tax due on the returned income or the amount of such advance tax paid on or before the 15th day of December is less than seventy-five per cent of the tax due on the returned income, then, the company shall97 be liable to pay simple interest at the rate of [one] per cent per month for a period of three months on the amount of the shortfall from fifteen per cent or forty- five per cent or seventy-five per cent, as the case may be, of the tax due on the returned income; (ii) the advance tax paid by the company on its current income on or before the 15th day of March is less than the tax due on the returned income, then, the company shall be liable to pay simple interest at the rate of [one] per cent on the amount of the shortfall from the tax due on the returned income: Provided that if the advance tax paid by the company on its current income on or before the 15th day of June or the 15th day of September, is not less than twelve per cent or, as the case may be, thirty-six per cent of the tax due on the returned income, then, it shall not be liable to pay any interest on the amount of the shortfall on those dates; (b) the assessee, other than a company, who is liable to pay advance tax under section 208 has failed to pay such tax or,— (i) the advance tax paid by the assessee on his current income on or before the 15th day of September is less than thirty per cent of the tax due on the returned income or the amount of such advance tax paid on or before the 15th day of December is less than sixty per cent of the tax due on the returned income, then, the assessee shall be liable to pay simple interest at the rate of [one] per cent per month for a period of three months on the amount of the shortfall from thirty per cent or, as the case may be, sixty per cent of the tax due on the returned income;
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(ii) the advance tax paid by the assessee on his current income on or before the 15th day of March is less than the tax due on the returned income, then, the assessee shall be liable to pay simple interest at the rate of [one] per cent on the amount of the shortfall from the tax due on the returned income:] [Provided that nothing contained in this sub-section shall apply to any shortfall in the payment of the tax due on the returned income where such shortfall is on account of under-estimate or failure to estimate— (a) the amount of capital gains; or (b) income of the nature referred to in sub-clause (ix) of clause (24) of section 2, and the assessee has paid the whole of the amount of tax payable in respect of income referred to in clause (a) or clause (b), as the case may be, had such income been a part of the total income, as part of the [remaining installments of advance tax which are due or where no such instalments are due], by the 31st day of March of the financial year:] [Provided further that nothing contained in this sub-section shall apply to any shortfall in the payment of the tax due on the returned income where such shortfall is on account of increase in the rate of surcharge under section 2 of the Finance Act, 2000 (10 of 2000), as amended by the Taxation Laws (Amendment) Act, 2000 (1 of 2001), and the assessee has paid the amount of shortfall, on or before the 15th day of March, 2001 in respect of the instalment of advance tax due on the 15th day of June, 2000, the 15th day of September, 2000 and the 15th day of December, 2000:] [Provided also that nothing contained in this sub-section shall apply to any shortfall in the payment of the tax due on the returned income where such shortfall is on account of increase in the rate of surcharge under section 2 of the Finance Act, 2000 (10 of 2000) as amended by the Taxation Laws (Amendment) Act, 2001 (4 of 2001) and the assessee has paid the amount of shortfall on or before the 15th day of March, 2001 in respect of the instalment of advance tax due on the 15th day of June, 2000, the 15th day of September, 2000 and 15th day of December, 2000.] [Explanation.—In this section, "tax due on the returned income" means the tax chargeable on the total income declared in the return of income furnished by the assessee for the assessment year commencing on the 1st day of April immediately following the financial year in which the advance tax is paid or payable, as reduced by the amount of,—
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(i) any tax deductible or collectible at source in accordance with the provisions of Chapter XVII on any income which is subject to such deduction or collection and which is taken into account in computing such total income; (ii) any relief of tax allowed under section 90 on account of tax paid in a country outside India; (iii) any relief of tax allowed under section 90A on account of tax paid in a specified territory outside India referred to in that section; (iv) any deduction, from the Indian income-tax payable, allowed under section 91, on account of tax paid in a country outside India; and (v) any tax credit allowed to be set off in accordance with the provisions of section 115JAA [or section 115JD ]. (2) The provisions of this section shall apply in respect of assessments for the assessment year commencing on the 1st day of April, 1989 and subsequent assessment years.]]”
From the perusal of above provisions of law as cited by the ld. AR of the assessee it is clear that interest u/s 234C of the Act has to be collected on returned income. As per explanation to section 234C(1) of the Act “tax due on returned income” means the tax chargeable on the total income declared in the returned income furnished by assessee only relevant assessment year. From the above, it is clear that interest chargeable to the assessee u/s 234C of the Act on the returned income in place of assessed income as viewed by the ld. CIT(A) in his order. Accordingly the ground is allowed in favour of the assessee with the direction to AO to calculate the interest u/s 234C of the Act on the returned income as made by the assessee.
Ground no. 7 is general in nature need not required to be adjudicated.
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Since the issue in ITA No. 467/Kol/2022 similar to one as decided by us in ITA No. 466/Kol/2022, therefore, our finding in ITA No. 466/Kol/2022 would mutatis and mutandis apply to this appeal as well.
In the result, both the appeals of the assessee are partly allowed.
Order pronounced in the open court on10.01.2024 Sd/- Sd/-
(Rajesh Kumar) (Sonjoy Sarma) Accountant Member Judicial Member Dated:10.01.2024 Biswajit, Sr. PS Copy of the order forwarded to: 1. Appellant – M/s. Deepak Industries Ltd., C/o. M/s. Salarpuria Jajodia & Co., 7, C.R. Avenue, 3rd Floor, Kolkata-700072. 2. Respondent – DCIT, Circle-6(1), Kolkata. 3. Ld. CIT 4. Ld. CIT(A) 5. Ld. DR
