2018 (6) TMI 538 - AT - Income Tax

Tribunal upholds CIT decisions, allows deductions for State Renewal Fund & more. Precedents key.

The Tribunal dismissed the revenue's appeal, affirming the CIT (Appeals) decisions on all grounds. Contributions to the State Renewal Fund, Energy ... Contribution of State Renewal Fund - Allowable expenses u/s 37(1) - Held that:- CIT (Appeals) has allowed the claim of the assessee by following the earlier orders for the assessment years 2011-12 and 2012-13 [2017 (8) TMI 1382 - ITAT JAIPUR] as held State Renewal Fund was set up to provide safety to the employees working under the state owned entities in case of restructuring/wind-up/closure of the undertaking Disallowance of employees’ contribution to PF and ESI - delayed payment - Held that:- This issue is now covered by the decision of CIT vs. State bank of Bikaner & Jaipur [2014 (5) TMI 222 - RAJASTHAN HIGH COURT] as well as the decision in case of CIT Jaipur Vidyut Vitran Nigam Ltd. [2014 (1) TMI 1085 - RAJASTHAN HIGH COURT] as held where Contribution were paid by the assessee before filing of the return and proof of payment was submitted before the Assessing Officer, the amounts were deductible as deduction - Decided in favour of assessee. Contribution of Energy Conservation Fund - Held that:- Identical issue has been considered by this Tribunal in assessee’s own case for the assessment year 2008-09 [2017 (8) TMI 1382 - ITAT JAIPUR] wherein disallowance on account of contribution to energy conservation fund made by the Assessing Officer is directed to be deleted as held contribution to the fund set up for products which was also the business of the assessee has direct nexus to the advancement of the assessee business - Decided in favour of assessee Addition on account of Publicity and Advertisement expenses - Held that:- As decided in assessee's own case one of the business objects of the assessee company is to promote and facilitate energy conservation and popularize the usage of renewable energy sources & encourage companies to set up renewable energy plants. As part of its activities, the assessee company has incurred the publicity and advertisement expenditure during the year. CIT(A) has given a findings on perusal of ledger account that these expenditure largely related to payment to advertising agencies and printing and publishing agencies. The said finding of the ld CIT(A) remain uncontroverted before us. - Decided in favour of assessee Issues Involved:1. Deletion of addition made by disallowing contribution to State Renewal Fund.2. Deletion of addition made for depositing the employees’ contribution to PF & ESI beyond the prescribed time limit.3. Applicability of provisions of Section 43B versus Section 36(1)(va) r.w.s. 2(24)(x) of the Income Tax Act, 1961 for employees’ contribution to PF & ESI.4. Deletion of addition made by disallowing contribution to Energy Conservation Fund.5. Deletion of addition made on account of Publicity and Advertisement expenses.Detailed Analysis:1. Deletion of Addition Made by Disallowing Contribution to State Renewal Fund:The assessee company debited Rs. 20,00,000/- as a contribution to the State Renewal Fund in the Profit & Loss account. The AO disallowed this amount, stating it is not covered under Section 37(1) of the IT Act. The CIT (Appeals) allowed the claim, following earlier orders for assessment years 2011-12 and 2012-13. The Tribunal noted that this issue was previously decided in favor of the assessee in its own case and by the Hon’ble Rajasthan High Court in the case of CIT vs. Rajasthan State Seed Corporation Ltd. The Tribunal affirmed that the contribution made to the State Renewal Fund is solely for the welfare and benefit of employees and is allowable under Section 37(1).2. Deletion of Addition Made for Depositing the Employees’ Contribution to PF & ESI Beyond the Prescribed Time Limit:The AO disallowed the employees' contribution to PF & ESI deposited beyond the prescribed time limit. The CIT (Appeals) deleted the disallowance, and the Tribunal upheld this decision, noting that the issue is covered by the decisions of the Hon’ble Jurisdictional High Court in cases like CIT vs. State Bank of Bikaner & Jaipur and CIT vs. Jaipur Vidyut Vitran Nigam Ltd. The Tribunal confirmed that contributions made before the due date of filing the return of income are allowable deductions.3. Applicability of Provisions of Section 43B versus Section 36(1)(va) r.w.s. 2(24)(x) of the Income Tax Act, 1961 for Employees’ Contribution to PF & ESI:The Tribunal reiterated that the issue is covered by the binding precedents of the Hon’ble Jurisdictional High Court, which have consistently held that employees' contributions to PF & ESI paid before the due date of filing the return of income are governed by Section 43B and are allowable deductions.4. Deletion of Addition Made by Disallowing Contribution to Energy Conservation Fund:The AO disallowed Rs. 2,00,00,000/- contributed to the Energy Conservation Fund, stating it was not wholly and exclusively for the assessee's business. The CIT (Appeals) deleted this disallowance, relying on the Tribunal's decision in the assessee’s own case for previous years. The Tribunal affirmed that the contribution to the Rajasthan State Energy Conservation Fund, constituted under Section 16 of the Energy Conservation Act, 2001, is for the purpose of business and is allowable as a deduction.5. Deletion of Addition Made on Account of Publicity and Advertisement Expenses:The AO disallowed Rs. 3,25,71,656/- on account of Publicity and Advertisement expenses, considering them as new business development expenses. The CIT (Appeals) deleted this disallowance, noting that the expenses were related to the assessee's business activities of promoting energy conservation and renewable energy sources. The Tribunal upheld this decision, confirming that the expenses were incurred wholly and exclusively for business purposes and are allowable under Section 37(1).Conclusion:The Tribunal dismissed the revenue's appeal, affirming the CIT (Appeals) decisions on all grounds, based on binding precedents and consistent findings in the assessee's own cases for previous years. The contributions to the State Renewal Fund, Energy Conservation Fund, and expenses on Publicity and Advertisement were held to be allowable deductions, and the employees' contributions to PF & ESI paid before the due date of filing the return were also deemed allowable.