2016 (5) TMI 1559 - AT - Income Tax

Tribunal upholds CIT (A) decisions favoring assessee on deductions for expenses and contributions.

The Tribunal upheld the CIT (A)'s decisions in favor of the assessee, allowing deductions for prior period expenses, contributions to the rehabilitation ... Disallowance of prior period expense - AO considering that these expenses related to prior period and the same are not deductible expenditure while computing the profits of the business of current year - CIT (A), who allowed the claim of the assessee - HELD THAT:- We find that the issue of prior period expenses has earlier decided by the ld. CIT (A) in assessee’s own case for the A.Ys. 2007-08 to A.Y. 2009-10 [2015 (7) TMI 1386 - ITAT JAIPUR] whereby the disallowance was deleted by the ld. CIT(A) and no appeal against the same was preferred by the revenue. Considering that the issue involved in the years under consideration is same and also in view of the judicial precedents, we find no infirmity in the order of ld. CIT (A) and the same is confirmed. The ground of the revenue for all the three assessment years is dismissed. Allowable business expenses - Addition of contribution made by the assessee to rehabilitation fund by not treating the same as business related expenditure - assessee has made contribution towards rehabilitation fund to milk unions - CIT (A) allowed the appeal of the assessee by directing the AO to delete the disallowance - HELD THAT:- We find that for the years under consideration, RCDF Rehabilitation and Development Fund was created as a separate trust on 26.03.2008 and was duly registered under section 12AA w.e.f. 02.05.2008 and the actual contribution made to the fund is directly connected with the business of the assessee which has resulted into benefit. Similar contribution made in A.Y. 2012-13 has been allowed by the AO. Recently, the coordinate Bench of the Tribunal in the case of Jaipur Zila Dugdh Utpadak Sahakari Sangh Ltd [2015 (7) TMI 1386 - ITAT JAIPUR] has remanded the matter to the departmental authorities to decide the matter afresh -we find no infirmity in the order of ld. CIT (A), the same is confirmed. The ground of the revenue for both the years is dismissed. Addition made for depositing the employee’s contribution to PF and ESI beyond the prescribed time limit - whether employee’s contribution to PF and ESI are governed by provisions of sec. 43B and not by sec. 36(1)(va) read with section 2(24)(x) of the IT Act? - HELD THAT:- There is no dispute as to the fact that assessee has deposited the PF before filing of the return. The various High Courts including the Rajasthan High Court has held that if the employees contribution to PF is deposited before the due date of filing of the return, the same is allowable. See CIT vs. State Bank of Bikaner & Jaipur [2014 (5) TMI 222 - RAJASTHAN HIGH COURT] , Jaipur Vidyut Vitran Nigam Ltd. [2014 (1) TMI 1085 - RAJASTHAN HIGH COURT] and Udaipur Dugdh Utpadak Sahakari Sangh [2014 (8) TMI 677 - RAJASTHAN HIGH COURT] - Decided in favour of assessee. Issues Involved:1. Deletion of addition made by the AO on account of disallowance of prior period expenses.2. Deletion of addition made by the AO being contribution made by the assessee to the rehabilitation fund.3. Deletion of addition made for depositing the employee’s contribution to PF and ESI beyond the prescribed time limit.Detailed Analysis:1. Deletion of Addition Made by the AO on Account of Disallowance of Prior Period Expenses:The AO disallowed prior period expenses claimed by the assessee, stating that they were not deductible in the current year as per the mercantile system of accounting. The assessee argued that these expenses were crystallized during the year and supported by documents and approvals. The CIT (A) allowed the claim, noting that the assessee's accounting system was consistent and the genuineness of the expenses was not doubted. The Tribunal upheld the CIT (A)'s decision, citing judicial precedents and the absence of Revenue's appeal in previous similar cases.2. Deletion of Addition Made by the AO Being Contribution Made by the Assessee to the Rehabilitation Fund:The AO disallowed contributions to the rehabilitation fund, considering them as non-business-related expenses. The assessee explained that the fund was for financial assistance to member cooperative societies, ensuring an uninterrupted milk supply, and was registered under section 12AA. The CIT (A) allowed the deduction, stating that the expenses were incurred wholly and exclusively for business purposes, citing the Rajasthan High Court's decision in CIT vs. Rajasthan Spinning & Weaving Mills Ltd. The Tribunal confirmed the CIT (A)'s order, noting the fund's registration and the direct business connection of the contributions.3. Deletion of Addition Made for Depositing the Employee’s Contribution to PF and ESI Beyond the Prescribed Time Limit:The AO disallowed the deduction for late deposits of employee contributions to PF and ESI, despite payments being made before the due date of filing the return. The CIT (A) allowed the claim, referencing judgments from the Rajasthan High Court, which held that such contributions are allowable if deposited before the return filing due date. The Tribunal upheld the CIT (A)'s decision, agreeing with the legal precedent that contributions made before the return filing due date are permissible deductions.Conclusion:The Tribunal dismissed the Revenue's appeals on all grounds, confirming the CIT (A)'s orders and allowing the deductions claimed by the assessee for prior period expenses, contributions to the rehabilitation fund, and late deposits of employee contributions to PF and ESI. The judgments were based on consistent accounting practices, the direct business connection of the expenses, and adherence to legal precedents.