2013 (10) TMI 1546 - AT - Income Tax

Tribunal upholds CIT(A)'s decisions, allows deductions for PF/ESI, deletes additions, and dismisses Revenue's appeal

The Tribunal dismissed the Revenue's appeal and upheld the CIT(A)'s decisions on all contested issues, including allowing a deduction for Employee's ... - Issues Involved:1. Deduction towards Employee's Contribution of PF/ESI.2. Deletion of addition u/s.2(22)(e) on account of received loan/advance.3. Deletion of addition u/s.2(22)(e) on account of accumulated profits.4. Disallowance u/s.14A r.w.r.8D.5. Interest disallowance.Summary:Issue 1: Deduction towards Employee's Contribution of PF/ESIThe Revenue challenged the CIT(A)'s decision allowing a deduction of Rs. 5,16,132/- for Employee's Contribution of PF/ESI deposited after the due date. The Tribunal upheld the CIT(A)'s decision, referencing various judicial pronouncements favoring the assessee, including decisions from the ITAT Ahmedabad and the Hon'ble Gujarat High Court.Issue 2: Deletion of addition u/s.2(22)(e) on account of received loan/advanceThe Revenue contested the deletion of Rs. 26 lacs added u/s.2(22)(e) for loans/advances received. The Tribunal upheld the CIT(A)'s decision, noting that the assessee was not a registered shareholder in the lender company, thus the provisions of section 2(22)(e) were not applicable. The decision was supported by the Special Bench of ITAT Mumbai in ACIT vs. Bhaumik Colour Pvt.Ltd.Issue 3: Deletion of addition u/s.2(22)(e) on account of accumulated profitsThe Revenue disputed the deletion of Rs. 12,21,393/- added u/s.2(22)(e) due to accumulated profits. The Tribunal upheld the CIT(A)'s finding that there were no accumulated profits in the lender company, thus no amount could be considered u/s.2(22)(e). The CIT(A)'s decision was not countered by any contrary material from the Revenue.Issue 4: Disallowance u/s.14A r.w.r.8DThe assessee's cross-objection challenged the disallowance of Rs. 12,33,628/- u/s.14A r.w.r.8D. The Tribunal found that the assessee did not earn any exempt income during the year, referencing the Hon'ble Punjab & Haryana High Court's decision in CIT vs. Winsome Textile Industries Ltd., which held that section 14A could not apply if no exempt income was claimed. The Tribunal directed the AO to delete the addition.Issue 5: Interest disallowanceThe assessee contested the CIT(A)'s direction to the AO to work out interest disallowable from the total addition of Rs. 3,94,950/-. The Tribunal found that the assessee had sufficient interest-free funds and referenced the ITAT Ahmedabad's decision in Torrent Financiers, which held that if interest-free funds exceed non-business advances, no interest disallowance is warranted. The Tribunal directed the AO to delete the addition.Conclusion:The Tribunal dismissed the Revenue's appeal and allowed the assessee's cross-objection, upholding the CIT(A)'s decisions on all contested issues.