RUKMANI INFRA PROJECTS PVT. LTD.,BHUBANESWAR vs. ACIT, CIRCLE-1(2), BHUBANESWAR

Aggrieved by the order of AO, the assessee challenged the additions made by the AO by filing an appeal with the first Appellate Authority i.e CIT(A)-1, Bhubaneswar. In process, the Ld CIT(A) had observed the matter and sum-up the same with a minor relief to the assessee vide his order dated 16.06.2017. 4. Dissatisfied with the decision of Ld CIT(A), the assessee preferred an appeal before the ITAT and has raised the following grounds:

Learned Assessing officer has added an amount of Rs.21,64,220/- paid as interest on late deposit of TDS without considering the ground reality of the facts. The assessee has saved working capital which has more interest than the above.

That the Appellant craves the leave of the Hon'ble Bench to add, alter, amend, modify, substitute, delete and/or rescind all or any of the grounds of appeal, submit written submissions, paper book and such other facts and figures before or at the time of final hearing of the case, if necessity so arises.

This case was fixed for hearing several times before starting from 01.08.2018, initially, at few occasions adjournment was sought by the AR of the assessee, subsequently, the case was fixed for hearing on several dates but neither any one was appeared nor adjournment was sought on behalf of the assessee. Therefore, the bench proceeded to dispose of the case based on pleadings of the Ld CITDR and on the basis submission in form a paper book as well as the material facts available on record.

Ground 1 - At the outset, on this ground relates to disallowance of receipt of Rs.1,30,60,000/- by the assessee company towards share capital by treating the same as Income u/s 68 of the Income Tax Act by Ld AO. Ld DR brought to our attention the relevant paras of order of AO and CIT(A), also furnished before the bench his written submission having details of Mahabali Enclave Private Limited containing a list of 34 companies registered on the same address identical to Mahabali Enclave Private Limited with a contention to prove that the finding of the CIT(A) is correct that “M/s Mahabali Enclave Pvt Ltd is a penny-stock company not having genuine credit worthiness”.

1 On perusal of the order of AO as well as order of CIT(A), wherein after discussing the issue in detail, a common inference drawn by both the revenue authorities, extracted from order of the CIT(A) was as under: -

2 I have considered the facts of the case, the reasons given by the AO to make the addition u/s.68 and the written submission of the assessee. The assessee in its written submission has referred to the decisions in the cases of Lovely Exports (P) Ltd. and Stellar Investment Ltd. of the Hon'ble Apex Court and also certain other decisions of various High Courts which are mainly based on the above decisions of the Hon'ble Apex Court. Relying on these decisions, the assessee pleads that since the identity of the party, i.e. M/s. Mahabali Enclage (P) Ltd. has been established, there is 4 no need to prove its creditworthiness and genuineness of the transaction. It may be mentioned here that by way of an amendment by the Finance Act, 2012, a new proviso, being proviso-1 has been inserted w.e.f. 1.4.2013 (AY 2013-14) to section 68 of the Act providing that in the case of a company not being a company in which the public are substantial interested, if there is a credit consisting of share application money, share capital, share premium or any such amount by whatever name called, any explanation offered by such assessee-company shall be deemed to be not satisfactory, unless the following conditions are satisfied: (a) The person, being a resident in whose name such credit is recorded in the books of such company also offers an explanation about the nature and source of such sum so credited; and (b) Such explanation in the opinion of the Assessing Officer aforesaid has been found to be satisfactory 2.2.1 After insertion of the above proviso, from AY 2013-14, the assessee cannot take shelter under the decisions in the case of Lovely Exports and Stellar Investment Ltd.(supra), and has to furnish an explanation from the company from whom share application money is received about the nature and source of the credit entered in its name. Moreover, the AO has to be satisfied about the explanation furnished in respect of the nature and source of the credit. In the case of the assessee, no such explanation has been furnished by M/s. Mahabali Enclave (P) Ltd. The AO has pointed out that there was no cash balance in the bank account of M/s. Mahabali Enclave (P) Ltd. and substantial cash deposits were made just to enable issue of cheque in favour of the assessee- company. On the facts of the case M/s. Mahabali Enclave (P) Ltd. clearly appears to be a penny-stock company not having genuine creditworthiness. This company has been used as a conduit to channelize the undisclosed income of the assessee-company through the medium of share application money. In this view of the matter, the addition of Rs.1,30,60,000/- u/s.68 is confirmed.

2 In contradiction to the opinion of the authorities below, the assessee in its paper book on this ground has mentioned that the assessee has proved the identity and genuineness of the transaction and fulfilled its onus thereby proved that the additions are bad in law. To prove its contention the assessee has submitted copies of assessment order, pan card, bank statement of the company Mahabali Enclave Pvt Ltd., the investment company to whom the shares were allotted by the assessee

3 In conclusion to submission on this ground the assessee had stated on para 2 of page number 7 of its paper book, as under: Moreover, assessee is not required to provide any material for creditworthiness of the investors and if they are bogus investors or their income is less than the amount invested then the remedy to the AO is to 'open the assessment of the respective investors and cannot add the credit in the as undisclosed income in any circumstances. In the present case also assessee has proved the identity of all the investors by copy of PAN card Xerox, Annual Report, and Bank statement of the party. Therefore, assessee has fulfilled its onus cast upon him to prove the identity of shareholders and genuineness. Therefore, it is prayed your honor to delete the addition made with regard to share application money based on the facts and laid down principles."

4

5 From the above discussion, we found that the findings of the revenue authorities are not justified and are irrational, they have deliberated the matter without due application of mind, identity of the investor had duly disclosed by the assessee and identified by the AO, all the transactions were through proper banking channel, no cash deposit was found as alleged by the AO, assessee has discharged its duty by providing all the relevant material required for the investigation. Therefore, application of section 68 of the income tax act in the instant case is not reasonable and uncalled-for.

6

Ground 2 relates to disallowance of statutory dues of Rs. 1,60,35,365/- which were paid after the due date but before filing of the ITR u/s 139(10 of the Act. This disallowance consists of 3 items: i) Belated remittance of EPF contributions 1,26,76,279/- ii) Unpaid VAT 31,83,370/- iii) Unpaid professional tax 1,75,715/-

1 Item no ii) and iii) were not pressed by the assessee while the same were decided by CIT(A), hence the same disallowances, under the non- prosecution, are treated as accepted by the assessee and hence are decided in favour of the revenue by upholding the order of CIT(A) on this issue.

2 Regarding item i) late payment of EPF contribution for Rs. 1,26,76,279/-, CIT(A) has mentioned in his order that the EPF contribution consists of employee’s contribution of Rs. 59,30,423/- and employer’s contribution of Rs. 67,45,856/-.

3 For employer’s contribution CIT(A) has told that “so far as employer‟s contribution is concerned, there being no evidence to show that the same was paid before the due date of filing of the return, the disallowance u/s 43B is justified.” However, on perusal of the order of AO it is clearly evident from the table of payment (reproduced hereunder for ready reference) of EPF that all such payments are made along with employee’s contribution before the due date for filing of income tax return. Therefore, employer’s contribution of Rs.67,45,856/- admittedly paid before the date of filing of return is allowable u/s 43B of the Income Tax Act.

4 So far as Employee’s Contribution is concerned Ld CITDR has supplied copies of certain case laws, which revenue has relied upon are as under: - [2018] 100 taxmann.com 244 (Madras) : Section 36(1)(va), read with sections 43B and 2(24)(x), of the Income-tax Act, 1961 - Employees contribution (General) - Whether sum received by assessee as an employer from employee is an income at hands of assessee, as per section 2(24)(x) and said sum would be entitled for deduction only when it is paid to concerned authority within due date as per section 36(1)(va) and certainly, sum payable by assessee as an employer by way of his contribution towards beneficial fund cannot be treated as an income at his hand but only as an expenditure allowable for deduction when such payment is made in accordance with section 43B(b) - Held, yes - Whether scope of section 43B and section 36(1)(va) are different and thus, there is no question of reading both provisions together to consider as to whether assessee-employer is entitled to deduction in respect of sum paid (employees contribution to PE, ESI) belatedly and therefore, for considering such question, application of section 36(1)(va), read with section 2(24)(x) alone is proper course and any other interpretation would only defeat object and scope of both provisions, viz., 43B and 36(1)(va) - Held, yes [Paras 18 to 27] [In favour of revenue] Section 43B, read with section 36(1)(va), of the Income-tax Act, 1961 - Business disallowance - Certain deductions to be allowed on actual payment - Employers contribution (General) - Whether though an amendment has been introduced to section 43B, whereby actual date of payment is enough for considering deduction, if such date falls before date for filing return but in absence of any amendment made to section 36(1)(va), both

Therefore, income of the assessee includes any sum received by the assessee from his employee as contribution to any Provident Fund or superannuation fund or funds set up under the provisions of the Employees' State Insurance Act, 1948 (34 of 1948) or any other fund for the welfare of such employees. According to us, on a reading of Sec.36(1)(va) along with Sec.2(24)(x), it is categoric and clear that the contribution received by the assessee from the employee alone was treated as income for the purpose of Sec.36(1)(va) of the Act and therefore we are of the considered opinion that the assessee was entitled to get deduction for the sum received by the assessee from his employees towards contribution to the fund or funds so mentioned only if, the said amount was credited by the assessee on or before the due date to the employees account in the relevant fund as provided under Explanation 1 to Sec.36(1)(va) of the Act. According to us, so far as Sec.43B (b) is concerned, it takes care of only the contribution payable by the employer/assessee to the respective fund. Therefore, in that circumstances, Sec.36(1) (va) and Sec.43B(b) operate in different fields i.e. the former takes care of employee's contribution and the latter employer's contribution. The assessee was entitled to get the benefit of deduction under Sec.43B(b) as 10 provided under the proviso thereto only with regard to the portion of the amount paid by the employer to the contributory fund. Such an understanding of Sec.43B is further exemplified by the phraseology used in the proviso, which reads thus: “Provided that nothing contained in this section shall apply in relation to any sum which is actually paid by the assessee on or before the due date applicable in his case for furnishing the return of income under sub-section (1) of section 139 in respect of the previous year in which the liability to pay such sum was incurred as aforesaid and the evidence of such payment is furnished by the assessee along with such return.” Further, in Explanation 1 to Sec.43B also, the phraseology used persuade us to think that Sec.43B can be applied to the contribution payable by the assessee as an employer, which reads thus: “ x x x x x x x For the removal of doubts, it is hereby declared that where a deduction in respect of any sum referred to in clause (a) or clause (b) of this section is allowed in computing the income referred to in section 28 of the previous year (being a previous year relevant to the assessment year commencing on the 1st day of April, 1983 or any earlier assessment year) in which the liability to pay such sum was incurred by the assessee, the assessee shall not be entitled to any deduction under this section in respect of such sum in computing the income of the previous year in which the sum is actually paid by him.” Therefore, according to us, since the Respondent has admittedly not paid the deduction so made within the due date as provided under Sec.36(1)(va), the Respondent was not entitled to get deduction of the amounts deducted thereunder for and on behalf of the employees.

In view of the reliance placed by various High Courts in 'Alom Extrusions' (supra), to arrive at a conclusion that the assessees therein were liable to pay both the employees as well as employer's contribution on or before filing of return under Sec.139(1) only, we thought that if 'Alom Extrusions' (supra) is discussed in detail, the question raised in this case can be made clear. In paragraph 3 of the said judgment, the question considered was formulated as follows::

Therefore, on a reading of the afore-extracted portion of the judgment, it is clear that the Apex Court had considered only the question relating to the effect of the amendment so made and found that amendment was curative in nature and therefore that it operated retrospectively from 1st April, 1988. 23. Thereafter, in paragraph 15 of the judgment, it was held that the amendments were brought about under the Finance Act, 1983 for the purpose of ensuring that the relaxation/incentive was restricted only to tax, duty, cess and fee under Sec.43B in order to ensure that it did not apply to contributions to labour welfare funds. Further, it was held that the reason appears to be that the employers should not sit on the collected contributions and deprive the workmen of the rightful benefits under social welfare legislations by delaying payment of contributions to the welfare funds. It was also held that consequent to the implementation problems of the second proviso to Sec.43B resulted in enactment of Finance Act, 2003, deleting the second proviso and bringing about uniformity in the first proviso by equating tax, duty, cess and fee with contributions to welfare funds and therefore the Finance Act, 2003 which was made applicable by the Parliament only with effect from 1st April, 2004 would become curative in nature and hence it would apply retrospectively from April, 1988. 24. So also, the learned counsel for the assessee contented that since Sec.43B commences with a non-obstante clause, Explanation 1 to Sec.36(1)(va) was excluded. But in Alom Extrusions' case' (supra), the Apex Court had held that the underlying object of the 12 non-obstante clause was to disallow deductions claimed merely by making the book entry under mercantile system of accounting. Therefore, the contention of the learned counsel for the assessee that since Sec.43B commences with a non-obstante clause, Sec.36(1) (va) stood excluded, cannot be sustained. According to us, the findings of the Apex Court towards the latter part of paragraph 15 makes the intention and purpose behind the amendment brought about to Sec.43B clear and it reads thus:

Therefore, in our view, when Sec.43B as it stood prior to the amendment and Sec.36(1)(va) Explanation 1 thereto r/w Sec.2(24)(x) are considered together, it is clear that they operate in different fields. So far as the employee's contribution received is concerned, it should have been paid on or before the due date prescribed under the relevant statutes. Then again the learned

So far as the decisions cited by the learned counsel for the assessee referred to in paragraph 15 of this judgment were concerned, it is true that in the said judgments, the High Courts were considering the question of remittance of the contributions received from the employee as well as the employer and held that the contributions received from the employee were also liable to be paid to the respective statutory authorities under the PF and ESI Act on or before the filing of return under Sec.139(1) was alone sufficient to be eligible for deduction. For the reasons stated, we are unable to subscribe to the views expressed by the High Courts in the decisions cited supra by the learned counsel for the assessee. That apart, we are reminded of the judgment of the Hon'ble Apex Court in 'Padma Sundara Rao and Others v. State of T.N. and Others' [(2002) 3 SCC 533] paragraph 9 which reads as follows: “It is also a settled proposition of law that Courts should not place reliance on decisions without discussing as to how the factual situation fits in with the fact situation of the decision on which reliance is placed. There is always peril in treating the words of a speech or judgment as though they are words in a legislative enactment, and it is to be remembered that judicial utterances are made in the setting of the facts of a particular case, said Lord Morris in 'Harrington v. British Railways Board'. Circumstantial flexibility, one additional or different fact may make a world of difference between conclusions in two cases.”

We are also conscious of the fact that if the intention of a particular provision of a statute can be gathered from the language used by the legislation, then we are bound to abide by the language used therein in order to ascertain the intention. We are also of the opinion that there was a clear logic behind Sec.36(1)(va) and Explanation thereto since the Legislature intended that the amount received towards contribution of the employee was money belonging to the employee and the assessee was not entitled to utilise the said fund and enrich himself. So also, both the provisions supra will co-exist harmoniously without disturbing each other. Therefore, the distinction drawn to credit the amount of the employer and the employee was with a clear objective and there is no illegality or other legal infirmity in classifying the contributions of employees and employer in the matter of crediting the same to the appropriate statutory authorities.

In that view of the matter, we are of the considered opinion that the view taken by the Tribunal which affirmed the decision of the 1st Appellate Authority that the Respondent was entitled to get deduction of the contributions received from the employees if paid on or before the filing of the return under Sec. 139(1) was not correct. We are inclined to agree with the judgment of the Gujarat High Court in 'Gujarat State Road Transport Corporation's case (supra). We are also of the opinion that the judgments of the other High Courts referred to by the learned counsel for the Respondent do not lay down the law correctly.

Learned counsel for the Respondent has also contended that when two views are possible, one in favour of the assessee shall be adopted and our attention was drawn to the decisions in 'Commissioner of Income-Tax v. Podar Cement Pvt. Ltd. and Others' [(1997) 226 ITR 625], 'Manish Maheshwari v. Asst. Commissioner of Income Tax and Another' [(2007) 289 ITR 341 (SC)] and Indore Construction P. Ltd. v. Commissioner of Income-Tax' [(2007) 289 ITR 341] and canvassed for the said proposition. But since we are of the clear opinion that the assessee was entitled to get the deduction of the amounts as provided under Sec.36(1)(va) only if the amounts so received from the employee was paid within the due date as provided under the relevant statute, we do not think that this is a case to which such a principle is applicable. iv) Pr.CIT Vs. M/s Suzlon Energy Ltd., (2020) 423 ITR 608 (Guj), wherein the Hon’ble High Court has held as under :-

Thus, the dictum as laid in the aforesaid decision is that Section 38 of the Employees Provident Funds and Miscellaneous Provisions Act 1952 makes it obligatory for the employer before paying him his wages to deduct the employee's contribution along with the employer's own contribution as fixed by Government. The employer is further obliged to pay the same within fifteen days of the close of every month pay i.e. such contribution and administrative charges. The reference to fifteen days of the close of the month must be in relation to month during which the payment of wages is to be made and corresponding liability to deduct employee's contribution to the fund arises. This Court held that the expression "within fifteen days of the close of every month" therefore, must be interpreted as having reference to the close of the month, for which, the wages are required to be paid with corresponding duty to deduct employee's contribution and to deposit the same in the fund. 8 In such circumstances referred to above, the finding recorded by the Tribunal that if such wages are paid for the following month, the liability to deposit the employee's contribution to the fund gets differed by another month is not the correct statement of law. 9 In view of the aforesaid, this appeal succeeds and is hereby allowed. The impugned order passed by the Tribunal is hereby quashed and set aside. v) CIT Vs. Bharat Hotels Ltd., (2019) 410 ITR 0417 (Delhi), wherein the Hon’ble High Court in paras 7 , 8 & 9, has held as under:-

The issue here concerns the interplay of Section 2(24)(x) of the Act read with Section 36(1)(va) of the Act alongside provisions of the Employees‟ Provident Funds and Miscellaneous Provisions Act, 1952 (especially Regulation 38 of the Employees‟ Provident Funds Scheme, 1952) and the provisions of the Employees‟ State Insurance Act, 1948. The AO had brought to tax amounts which were deducted by the employer/assessee from the salaries and wages payable to its employees, as part of their contributions. It is not in dispute that the employer‟s right to claim deductions under the main part of Section 43-B of the Act is not an issue. The question the AO had to then decide was whether the amounts deducted from the salaries of the employees which had to be deposited within the stipulated time (in terms of notification/circular dated 19.03.1964 which was modified on 24.10.1973), as far as the EPF contribution went and the period of three weeks as far as the ESI contributions went. The AO made a tabular analysis with respect to the contributions deducted and actually deposited. The cumulative effect of notifications under the Employees‟ Provident Funds Act, 1952 and the Employees State Insurance Act, 1948 was that in respect of the EPF Scheme contributions the deductions were to be deposited within 15 days of the succeeding wage period with a grace period of 5 days; for ESI contributions the deposit with the concerned statutory authority had to be made within three weeks of the succeeding wage month/period. The CIT in this case confirmed the additions - made by the AO based on the entire amounts that were disallowed. The ITAT however granted complete relief.

Having regard to the specific provisions of the Employees‟ Provident Funds Act and ESI Act as well as the concerned notifications which granted a grace period of 5 days (which appears to have been late withdrawn recently on 08.01.2016), we are of the opinion that the ITAT‟s decision in this case was not correct. The assessee undoubtedly was entitled to claim the benefit and properly treat such amounts as having been duly deposited, which were in fact deposited within the period prescribed (i.e. 15 + 5 days in the case of EPF and 21 days + any other grace period in terms of the extent notification). As far as the amounts constituting deductions from employees‟ salaries towards their contributions, which were made beyond such stipulated period, obviously the assessee was not entitled to claim the deduction from its returns.

In view of this discussion, the Revenue‟s appeal is partly allowed. The AO is directed to examine the contributions made with reference to the dates when they were actually made and grant relief to such of them which qualified for such relief in terms of the prevailing provisions and notifications. We also clarify that the assessee would be entitled to deduction in terms of Section 36(1)(va) of the Act. vi) Vedvan Consultants Pvt. Ltd., ITA No.1312/Del/2020, order dated 26.08.2021, wherein the Tribunal has held as under :-

Section 43B specifies the list of deductions that are admissible under the Act only upon their actual payment. Employer 's contribution is covered in clause (b) of section 43B. According to it,

Section 36(1)(va) and section 43B(b) operate in different fields, i.e ., former takes care of employee's contribution and later the employer's contribution. Therefore , an assessee is entitled to get bene fit o f deduction under section 43B as provided under the proviso thereto only with regard to portion of amount paid by the employer to contributory fund. So far as the employee's contribution is concerned, the assessee is entitled to get deduction of amounts as provided under section 36(1)(va) only if amounts so received from the employee is credited in specified account within due date as provided under relevant statute (CIT v. Merchem Ltd. 61 taxmann.com 119).

The section 43B of the Act covers only employer's contribution and does not cover employees' contribution, sometimes they have been applied to the provision of section 43B on employees' contribution as well and allowed the deduction to employer even if the employees' contribution is deposited by the due date of filing Income Tax Return (ITR) as mentioned under section 139(1).

To provide clarity and certainty on non applicability o f section 43B on employees' contribution to specified funds, the Budget 2021 has proposed to amend the provisions of section 36(1)(va) and section 43B as under: (a) amend section 36(1)(va) of the Act by inserting another explanation 2 to the said clause to clarify that the provision of section 43B does not apply and deemed to never have been applied for the purposes of determining the due date under this clause; and (b) amend section 43B of the Act by inserting Explanation 5 to the said section to clarify that the provisions of the said section do not apply and deemed to never have been applied to a sum received by the assessee from any of his employees to which provisions of sub-clause (x) o f clause (24) o f section 2 applies.

The language o f newly proposed explanation 2 to section 36(1)(va) and explanation 5 to section 43B makes it clear that the amendment is retrospective.

The rational of the amendment was explained by the Memorandum to the Finance Bill, 2021 as below: “There is a distinction between employer contribution and employee' s contribution towards welfare fund. It may be noted that employee's contribution towards welfare funds is a mechanism to ensure the compliance by the employer‟s of the labour welfare law s. Hence , it needs to be stressed that the 17 employer' s contribution towards welfare funds such as ESI and PF needs to be clearly distinguished from the employee' s contribution towards welfare funds. Employee' s contribution is employee own money and the employer deposits this contribution on behalf of the employee in fiduciary capacity . By late deposit of employee contribution , the employers get un justly enriched by keeping the money be longing to the employees . Clause (va) of sub-section (1) of Section 36 o f the Act was in ser ted to the A ct vide Finance Act 1987 as a measures of penalizing employer s who mis-utilize employee' s contributions.

From the above, it can be said that the law is now made clear that employees' contribution to specified fund will not be allowed as deduction if there is delay in deposits as per the due dates mentioned in the respective legislation.

5 Based on the above case laws, the ld. DR further submitted on the following points to prove its contention :- a) Amendment in Section 36 & 43B of the Act in the Finance Act, 2021 has no effective date to apply so the same will be effective retrospectively; b) courts decision favouring the assessee are no longer valid/good in terms of new amendment brought in by the legislature in the Finance Act, 2021. This shows intent of the law; and c) Section 43B of the Act applies to employers’ contribution only and not on employees’ contribution. Employees’ contribution shall be governed by Section 36(i)(va) read with Section 2(x)(24) of the Act.

6 Further the ld. DR submitted that a clarificatory amendment was brought in by the Finance Act 2021 by adding explanation 2 in Section 36(1)(va) and explanation 5 to section 43B. The language of these explanations clearly suggest that the amendment is retrospective and intent of legislature was never to apply provisions of section 43B on provisions of Section 36(1 )(va) prospectively. Ld. CIT DR placed vehement reliance on the order of ITAT Delhi Bench. Now section 18 36(1)(va) and section 43B after amendment by Finance Act, 2021 read as under:

17 Keeping in sight of the above discussion, in the present case which is for the asst. year 2013-14, it is an undisputed fact that the Employees contribution for EPF was duly deposited by the Assessee Company before the due date of filing of return u/s 139(1) of The Income Tax Act. The year under consideration is also before the effective date (01.04.2021, AY 2021-22 onwards) of the amended provision by Finance Bill 2021. Accordingly, in view of various judgments in the favour of assessee, disallowance could not be made in respect of PF/ESI paid within the due date of filing return of income. Therefore, it is directed to delete the disallowance made for delayed remittance of employee’s contribution to EPF for Rs. 59,30,423/-, consequently, the appeal of the assessee is allowed to this extent.

18 Thus, ground number 2 of the assessee is partly allowed. Ground 3 – Disallowance of Capital Expenditure for Rs. 40,22,979/-

Submission of the Assessee on this ground vide page 9-10 of the paper book are: Learned Assessing officer has disallowed a sum of Rs.40,22,979/- debited to the profit and loss account being 100% depreciation on temporary sheds constructed for labour hutment at site. This is purely allowable expenses. 100% depreciation of hutments and sheds for labour created at work sites are purely allowable in nature which the learned AO has erred in adding. Assssee's contractees have stringent conditions for labour safety dwelling place etc in the contract requisite itself. In this regard the assessee enclosed herewith the copies of work orders marked as annexure-I, where the contractee company stipulates space for construction of temporary sheds for its workmen."

1 Ld DR on this ground has agitated and drawn our attention to para 6 of the AO’s order and para 4 of the CIT(A)’s order wherein, it is observed by the AO that as per comments in column number 17(a) of the tax Audit report a sum of Rs. 40,22,979/- has been debited to profit & loss account being expenditure of capital nature is not allowable item under section 37 of the Income Tax Act, 1961. 8.2 Ld LCTDR had further augmented by taking us to the order of CIT(A) whereby it has come out that the assessee contends in the course

3 After considering the rival contention, it is clear that the assessee has failed to provide required information regarding construction of the temporary hutments, however, if it is proved that such structures were constructed on temporary basis and were used for the purpose of business of the assessee, a deduction of expenditure will be allowable, if the same is revenue in nature or depreciation would be allowed if the same is capital in nature. 100% disallowance without disputing the actual incurrence of the expenditure which is used for the purpose of the business of the assessee is unwarranted and bad in law. Therefore, this Ground of appeal is directed to restore back to files of AO to reassess the same in light of actual facts and according to the intent of the legislature.

4 Thus, ground No.3 of appeal is allowed for statistical purposes. Ground 4 – Disallowance of Donation of Rs. 6,13,011/-

On this ground finding of CIT(A) is as under:-

Ground No.4 relates to disallowance of Rs.6,13,011/- on account of payment of donation. The AO has disallowed the entire claim on the ground that the assessee could not adduce any evidence to show that the expenditure was laid out solely for the purpose of its business. Of course, donation, as the nomenclature suggests, is 31 gratuitous payment normally not having any business expediency. However, for smooth running of business, sometimes, the assessee has to pay subscription to the local puja committee etc. Unless the donation is given, the local people may be impediments in the way of business progress. In this view of the matter, I am of the opinion that 50% of the donation expenses may be considered to have been spent on account of business expediency and, therefore, allowable. With this view, I delete disallowance to the extent of Rs.3,6,506/- and confirm the balance.

1 Ld DR has relied on orders of the revenue authorities.

2 The assessee in its paper book page 10 has submitted that the Assessing officer has disallowed a sum of Rs.6,13,011/- debited to Profit and loss account under the head donation expenses on the ground that the assessee could not adduce any reason that the above expenditure has been laid out solely for the purpose of business of the assessee Company. The amount is paid to different local puja committees towards subscription for puja. The assessee is a company engaged in execution of different project works at different places all over India where local co- operation is highly necessary for the uninterrupted execution. To get local harmony the above amounts are paid as customary from time to time.

3 After careful perusal of the observation of Ld CIT(A) and submissions of the assessee it is concurred that the expense incurred are necessary and for commercial expediency of the business of the assessee. CIT(A) also approved the contention of assessee by allowing 50% of the expenditure treating the same spent on account of business expediency of the assessee. We, therefore of the view that expenditure on donation was incurred for the purpose of and essential for business of 32 the assessee shall be allowed as deductible expenditure. Accordingly, we decide the issue in favour of assessee. Thus, the ground No.4 is allowed. Ground 5 – Interest on Late Deposit of TDS for Rs. 21,64,220/-

Ld DR, relied on the following case laws with respect to this ground: i) Commissioner Of Income-Tax vs Chennai Properties 239 ITR 435 . Relevant para 13 and 14 of the said order are as under:

Learned counsel for the Revenue also referred to the decisions of the Bombay High Court in the case of Ferro Alloys Corporation Ltd. v. CIT [1992] 196 ITR 406 and the decision of the Calcutta High Court in the case of Martin and Harris Pvt. Ltd. v. CIT [1994] 73 Taxman 555. It was held in those cases that the interest paid under Section 201(1A) of the Act was not deductible as business expenditure under Section 37 of the Act.

As already noticed the payment of interest takes colour from the nature of the levy with reference to which such interest is paid and the tax required to be but not paid in time, which rendered the assessee liable for payment of interest was in the nature of a direct tax and similar to the income-tax payable under the Income-tax Act. The interest paid under Section 201(1A) of the Act, therefore, would not assume the character of business expenditure and cannot be regarded as a compensatory payment as contended by learned counsel for the assessee.

1 Contrary to the contention of revenue, the assessee submitted on page 11 of its paper book that the assessing officer has added a sum of Rs.21,64,220/- as interest on late deposit of TDS. The assesse had used

2 On perusal of the above citations by the Ld CITDR and submissions by the assessee, we are of the opinion that ratio decided by the above judgments squarely applies on this ground of appeal, we do not find any merit in the contention of the assessee and therefore, we upheld the order of CIT(A) and dismiss the ground No.5 of the assessee.

In the result, the appeal of the assessee is partly allowed for statistical purposes. Order pronounced in the open court on 30/03/ 2022. (C.M.GARG) (ARUN KHODPIA) न्यानयक सदस्य / JUDICIAL MEMBER ऱेखा सदस्य / ACCOUNTANT MEMBER कटक Cuttack; ददनाांक Dated 30/03/2022 Prakash Kumar Mishra, Sr.P.S.

ITAT, Cuttack आदेशािुसार/ BY ORDER, गार्ग पाईऱ / Guard file. 6. सत्यापऩत प्रयत //// (