2015 (1) TMI 1241 - AT - Income Tax

Tribunal partially allows Revenue's appeal, remits Rs. 24,18,295 addition for reassessment. Decision on 09-01-2015.

The Tribunal partly allowed the Revenue's appeal, restoring the disallowance of Rs. 9,20,422 made by the Assessing Officer. The issue of the addition of ... Disallowance of the amount being employees’ contribution to PF Account / ESI Contribution - Held that:- Where any sum received by the assessee from any of its employees as contribution to PF and/or ESI was not credited by the assessee to employees’ accounts in the relevant fund or funds on or before the due date as per Explanation to sec. 36(1)(va) of the I.T. Act, the assessee shall not be entitled to deduction thereof. Accordingly, the order of the CIT(A) is reversed on this issue and that of the Assessing officer is restored. - Decided against assessee. Addition u/s. 2(22)(e) - CIT(A) deleted the addition - Held that:- We find that during the first appellate proceedings, the CIT(A) got admitted the ledger account statements and thereafter, he came to the conclusion that the said amount received were credited on the last date of the financial year and represented salary payments made on behalf of the company on account of commercial expediency. These ledger statements were not filed before the Assessing officer and the CIT(A) has also not called for remand report from the Assessing officer. In our opinion, it is proper to remit the issue to the file of the Assessing officer for fresh consideration in the light of the material produced before the CIT(A) on this issue as this was not placed before the Assessing officer for his comments. - Decided in favour of revenue for statistical purposes. Issues Involved:1. Deletion of disallowance of Rs. 9,20,422/- made by the Assessing Officer.2. Deletion of addition of Rs. 24,18,295/- made under section 2(22)(e) of the Income Tax Act.Issue-wise Detailed Analysis:1. Deletion of Disallowance of Rs. 9,20,422/-:The first issue pertains to the deletion of a disallowance amounting to Rs. 9,20,422/- by the Assessing Officer. The disallowance was made based on the observation in Form No. 3CD that the payments towards employees' contribution to PF/ESI were made after the due date specified by the relevant Act. According to the Assessing Officer, as per Explanation to section 36(1)(va), the 'due date' is the date specified by the relevant Act, and any payment made after this date is not an admissible deduction.On appeal, the CIT(A) relied on the judgments of the Supreme Court in the cases of CIT vs. Vinay Cements Ltd. and CIT vs. Alom Extrusions Ltd., and the Delhi High Court in CIT vs. AIMIL Ltd. These judgments held that if the employer's and employees' contributions towards PF and ESI are deposited after the due date prescribed under the relevant rules but before the due date for filing the return under the Income Tax Act, no disallowance could be made in view of the provisions of section 43B as amended by the Finance Act, 2003.However, the Tribunal referred to the Gujarat High Court's decision in CIT vs. Gujarat State Road Transport Corporation, which held that there is no amendment in section 36(1)(va) and the explanation to section 36(1)(va) is still in force. Thus, any sum received by the assessee from his employees as contributions to PF/ESI must be credited to the employees' accounts in the relevant fund on or before the due date as per the explanation to section 36(1)(va). Failure to do so would result in the disallowance of such amounts in computing the income referred to in section 28.Consequently, the Tribunal reversed the CIT(A)'s order on this issue and restored the disallowance made by the Assessing Officer.2. Deletion of Addition of Rs. 24,18,295/- under Section 2(22)(e):The second issue involves the deletion of an addition of Rs. 24,18,295/- made under section 2(22)(e) of the Income Tax Act. The Assessing Officer observed that the assessee had purchased majority shares in some group companies and received payments from these companies by way of loans, which were deemed dividends under section 2(22)(e). The details of such receipts were:- Crysind Electronics Pvt. Ltd.: Rs. 7,73,295/-- Sun Generic Cable Pvt. Ltd.: Rs. 4,91,907/-- Swift Liank Pvt. Ltd.: Rs. 11,53,093/-The CIT(A) observed that these amounts represented salary payments on behalf of the company and were in the nature of normal business expenses, thus not qualifying as deemed dividends. Therefore, the CIT(A) deleted the addition.The Tribunal noted that the CIT(A) admitted the ledger account statements during the appellate proceedings and concluded that the amounts received were credited on the last date of the financial year as salary payments made on behalf of the company. However, these ledger statements were not filed before the Assessing Officer, nor did the CIT(A) call for a remand report from the Assessing Officer.The Tribunal found it appropriate to remit the issue back to the Assessing Officer for fresh consideration in light of the material produced before the CIT(A) that was not placed before the Assessing Officer. Accordingly, this issue was remitted back to the Assessing Officer for fresh consideration.Conclusion:In conclusion, the appeal filed by the Revenue was partly allowed for statistical purposes. The Tribunal restored the disallowance of Rs. 9,20,422/- made by the Assessing Officer and remitted the issue regarding the addition of Rs. 24,18,295/- under section 2(22)(e) back to the Assessing Officer for fresh consideration. The judgment was pronounced in the open court on 09-01-2015.