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Income Tax Appellate Tribunal, PUNE BENCHES “B” :: PUNE
Before: SHRI S.S.GODARA & DR. DIPAK P. RIPOTE
ORDER PER DR. DIPAK P. RIPOTE, AM: These two appeals filed by assessee are against the separate orders of Commissioner of Income-tax (Appeals) in the National Faceless Appeal Centre, Delhi passed u/s.250 of the Income-tax Act, 1961 (hereinafter referred to as ‘The Act’) on 04.09.2023 & 18.09.2023 respectively for Assessment Years 2017-18, & 2018-19. Since some grounds of appeal are common in all these appeals, we proceed to dispose of these appeals by this consolidated order for the sake of convenience. We are discussing A.Y.2017-18 hereonwards. & 1075/PUN/2023 Sai Service Private Limited for A.Y.2017-18 & 2018-19
The Grounds of appeal
raised by the assessee for A.Y. 2017-18 are as under : “1. Grounds of appeal are without prejudice to one another.
2. The Commissioner of Income Tax (Appeals) erred in confirming disallowance of Rs.1,79,33,187/- made by the AO, ignoring the fact that, there were insignificant delays due to technical glitches in remitting Employees’ contribution to PF, ESIC & the entire contributions were either paid during the year or before the time allowed u/s.139(1) of filing the income tax return. The disallowance be quashed and income be reduced accordingly.
3. The Commissioner of Income Tax (Appeals) erred in confirming the additional disallowance of Rs.48,55,402/- made by the learned AO u/s.14A by invoking Rule 8D of the I.T. Rules ignoring the justification of working of disallowance made by the Appellant which was given during the course of proceedings. The excess disallowance of Rs.48,55,402/- confirmed by the Commissioner of Income Tax (Appeals) be deleted. The disallowance be quashed and income be reduced accordingly.
4. The Commissioner of Income Tax (Appeals) erred in not taking favourable cognizance of appellant’s submission in connection with claim of deduction u/s.80G of Rs.1,50,00,000/- which was made during the course of assessment. The Commissioner of Income Tax (Appeals) has perfunctorily confirmed disallowance stating that necessary document was not submitted. Claim of the Appellant made u/s.80G be allowed and income be reduced accordingly.” Brief facts of the case :
3. Assessee is a company which filed the return of income u/s.139(1) of the Act on 30.10.2017 declaring total income at Rs.95,20,63,100/-. For A.Y. 2017-18 return was processed u/s.143(1) of the Act. Thereafter, the assessee revised the return declaring total Sai Service Private Limited for A.Y.2017-18 & 2018-19 income at Rs.95,30,32,210/-. The Department selected the case for scrutiny under CASS. In response to notice u/s.142(1), the assessee company uploaded the details as called for on ITBA portal. During the assessment proceedings, on perusing the Tax Audit report, it was noticed by the Assessing Officer (AO) that assessee remitted the Employee’s Contribution of Rs.1,79,33,187/- to PF/ESIC beyond the due date prescribed under the respective statutes. The AO, vide para no.3.5 of his order, disallowed the said amount treating the same as ‘income from other sources’ u/s.36(1)(va) r.w.s.2(24)(x) of the Act.
4. The Assessing Officer(AO) also noticed that assessee company had received dividend of Rs.2,86,27,085/- from subsidiary company and dividend from mutual funds on investment of Rs.123.78 crore and thus claimed exemption u/s.10 of the Act. In response to notice u/s.142(1) assessee furnished details of opening and closing balance of investments for year under consideration. Eventually, the AO made disallowance u/s.14A read with rule 8D at 1% of Annual Average of the monthly averages of the value of investment earning exempt income.
5. Aggrieved by the said disallowances, assessee filed an appeal before the ld.CIT(A). As regards the disallowance made Sai Service Private Limited for A.Y.2017-18 & 2018-19 u/s.36(1)(va), the ld.CIT(A) dismissed the assessee’s contention by relying on the judgment of Hon’ble Apex Court in the case of Checkmate Services (P). Ltd. Vs. CIT (2022) 143 taxmann.com 178 (SC).
5.1 Regarding the disallowance u/s.14A, the ld. CIT(A) also upheld the disallowance made by the AO u/s.14A read with Rule 8D of the Act amounting to Rs.48,55,402/-.
5.2 As regards the claim u/s.80G of the Act, the ld.CIT(A) held that the assessee did not claim such deduction either in original return or revised return within the prescribed time limit. Assessee did not upload any documents to substantiate its claim, thus eventually dismissed this claim as well.
Aggrieved by the action of the ld. CIT(A) in dismissing the appeal, the assessee filed the extant appeal before the Tribunal.
Findings and Analysis: 7. We have heard both the parties and perused the records. Ground No.2 : 8. The Ground No.2 raised by the appellant Assessee is regarding disallowance of Rs.1,79,33,187/-. The assessee has deposited the Sai Service Private Limited for A.Y.2017-18 & 2018-19 amount of Rs.1,79,33,187/- which was Employee’s Contribution towards ESIC and PF beyond the due dates mentioned in the respective statutes. The Ld.AR pleaded that the payments which were due on 15/07/2016 and 15/03/2017 could not be made in time due to technical issues of the servers. The Ld.AR filed copy of Screen Shot. On perusal of the Screen Shot of State Bank of India filed by the Ld.Authorised Representative(ld.AR) for the assessee, it is observed that the screen shot just have following sentence : “EPFO Payment will be allowed between 8 am to 8 pm.”
This sentence does not show any technical problem. Hence, we do not find any merit in the said contention of the Ld.AR. The Ld.CIT(A) has confirmed the disallowance following Hon’ble Supreme Court’s decision in the case of Checkmate Services (P) Ltd Vs. CIT [2022] 448 ITR 518 (SC)[12-10-2022]. Hence, we agree with the Ld.CIT(A).
9.1 However, it has been pleaded by Ld.AR that the Employee’s Provident Fund Organisation vide its letter No.WSU/ 9(1)2013/Settlement of claims/26308 dated 12.01.2017 had extended the due date for deposit of Employee’s Contribution for the month of December 2016 to 20/01/2017. The Ld.AR also pleaded that the Sai Service Private Limited for A.Y.2017-18 & 2018-19 Assessee has paid the contribution of Rs.44,19,568/- for the month of December on 20/01/2017. In these fact and circumstances of the case we direct the AO to verify the contention of the Assessee regarding Rs.44,19,568/-, and decide the allowability of Rs.44,19,568/- based on the impugned letter of the Employee’s Provident Fund Organisation. The AO shall provide opportunity to the assessee.
9.2 The remaining disallowance of Rs.1,35,13,619/- (1,79,33,187 (-) 44,19,568/-) is confirmed as discussed above.
9.3. Accordingly, the Ground No.2 is partly allowed.
Ground No.3: 10. It is regarding disallowance u/s.14A read with Rule 8D. During the year the Assessee had received Dividend of Rs.2,86,27,085/-. The Assessee claimed the said income as exempt u/s.10 of the Act. In the computation of Income the assessee had suo-moto disallowed Rs.5,00,000/- under Section 14A towards Office and Admin expenses, which was claimed to be calculated on the basis of time spent by the officials who were involved in the Investment Activities.
The AO was not satisfied with the disallowance made by the Assessee. The AO noted that the Total Investment was Sai Service Private Limited for A.Y.2017-18 & 2018-19 Rs.102,05,82,096/-. The AO also noted that the monthly closing balance of Investments earning exempt income were not same for any two consecutive months meaning there by that the Assessee was either redeeming or investing every month. Thus, the investment activity was a continuous activity. The AO has recorded proper satisfaction in the order in para 4.4. The Ld.CIT(A) has also noted that the Assessee has made ad-hoc disallowance of Rs.5,00,000/- .
In this case it is a fact that the Assessee has earned exempt income of Rs.2,86,27,085/-. Assessee in its submission has accepted that certain officials of the assessee were involved in the management of the Investment. The closing Balance of the Investment was Rs.102,05,82,096/-. The AO has noted that there were continuous fluctuations in the monthly closing balances of the investments. Thus, the Assessee was actively managing the huge investments. Obviously, the Assessee had incurred expenditure for the same. The AO has calculated 1% of Annual Average of Monthly average of investment on which exempt income was earned. Therefore, we agree with the disallowance of Rs.48,55,402/-made u/s.14A read with rule 8D. Therefore, the disallowance is upheld.
12.1 Accordingly, the Ground No.3 is dismissed. Sai Service Private Limited for A.Y.2017-18 & 2018-19 Ground No.4 : 13. The assessee had claimed deduction of Rs.1,50,00,000/- u/s.80G during the assessment proceedings. The Assessee in the written statement claimed that the Assessee had filed copy of the receipt for 80G deduction before the AO during the Assessment proceedings. The AO rejected the claim of the assessee as Assessee had not raised the said claim in the return of income. The Ld.CIT(A) has upheld the rejection made by the AO on the ground that the Assessee failed to file documentary evidence for 80G. Before us the Ld.AR relied on the order of ITAT Pune in the case of Sai Services Agency (Bombay) Pvt Ltd ITA 490/PUN/2021 dated 30/08/2022 ,to which Hon’ble JM is signatory. In Sai Services Agency (Bombay) Pvt. Ltd., it has been held that the Section 80A(5) and Section 80AC does not apply to deductions u/s 80G of the Act and hence the Assessee can claim the deduction u/s 80G even if not claimed in the return of income. Therefore, respectfully following the order in the case of Sai Services Agency (Bombay) Pvt. Ltd., ITA 490/PUN/2021, we direct the AO to verify the claim of the Assessee for deduction u/s.80G of the Act. The Assessee will file all relevant documents before the AO. The AO shall provide opportunity to the assessee. Sai Service Private Limited for A.Y.2017-18 & 2018-19 13.1 Accordingly, the Ground No.4 is allowed for statistical purpose.
Ground No.1 is general in nature and does not need any adjudications as we have decided the specific grounds raised by the assessee. Accordingly, it is dismissed.
14.1 In the result, appeal of the assessee is partly allowed. ; For A.Y.2018-19 : 15. The grounds of appeal for A.Y.2018-19 are as under : “The Appellant being aggrieved by the Order and decision of the Commissioner of Income Tax (Appeals), National Faceless Appeal Centre, Delhi, vide order dated 18/09/2023 bearing DIN & Order No. ITBA/NFAC/S/250/2023-24/1056188013(1) is filing this appeal on the following Grounds of Appeal.
1. Grounds of Appeal are without prejudice to each other.
2. The Commissioner of Income Tax (Appeals) erred in confirming the additional disallowance of Rs.32,41,198/- made by the learned AO u/s 14A by invoking Rule 8Dn of the I.T.Rules despite the fact that, justification of working of disallowance made by the Appellant was given. The excess disallowance of Rs.32,41,198/- confirmed by the Commissioner of Income Tax (Appeals) be deleted. Addition made to the income be deleted and Appellant’s contention be accepted.
3. The Commissioner of Income Tax (Appeals) erred in not taking favourable cognizance of appellant’s submission in connection with claim of deduction u/s 80G of Rs.1,00,00,000/- made during the course of assessment. The Commissioner of Income Tax (Appeals) has perfunctorily confirmed disallowance stating that necessary document was not submitted. Sai Service Private Limited for A.Y.2017-18 & 2018-19 Claim of the Appellant made u/s 80G during the course of assessment be allowed.
4. The appellant craves leave to add, amend, alter, delete or substitute all or any of the above grounds of appeal.
5. Such order and such other orders be passed as deem fit and proper.”
16. The Ground No.2 is regarding disallowance under section 14A of the Act. Assessee had received a dividend of Rs.2,20,97,710/-. Assessee claimed the said amount exempt under section 10 of the Act. Assessee had voluntarily disallowed Rs.8,34,424/- under section 14A of the Act. The Assessing Officer(AO) invoked the disallowance under section 14A read with Rule 8D(2)(ii) at 1% of the Average Investments made during the Financial Year. The AO has recorded proper satisfaction before invoking Rule 8D. We have discussed the issue in Appeal No.1074/PUN/2023 at length. Since the facts of this appeal are identical to the facts in Ground No.2 is dismissed.
17. The Ground No.3 is regarding assessee’s claim of deduction under section 80G of Rs.1 crore. Admittedly, assessee had not claimed the said deduction in the Return of Income, but assessee claimed the deduction under section 80G during the assessment proceedings by filing a letter. Assessee also claimed that the assessee Sai Service Private Limited for A.Y.2017-18 & 2018-19 had filed the copy of the receipt issued by Shikshan Prasarak Mandali which is duly registered under section 80G of the Act. Since the facts of this appeal are identical to the facts in Ground No.3 is allowed for statistical purpose.
18. The Ground No.1, 4 and 5 are general in nature, hence no adjudication is required. Accordingly, the Ground No.1, 4 and 5 are dismissed.
In the result, appeal of the assessee is partly allowed.