2019 (5) TMI 1441 - AT - Income Tax

Tribunal decision on expense disallowance, EPF & ESI contributions, and tax benefits disallowance

Assistant Commissioner of Income Tax, Jhandewalan Extn, New Delhi Versus Sheela Foam Pvt. Ltd.

The Tribunal upheld the assessee's position on the disallowance of expenses under section 14A due to the absence of exempt income. However, it ruled in ... Disallowance u/s.14A r.w.r. 8D - HELD THAT:- We find that the assessee has not earned any exempt income during the year under consideration. Thus this grievance of the assessee has to be allowed following the judgment of the Special Bench of the Tribunal in the case of Cheminvest Ltd. Vs. CIT 2009 (8) TMI 126 - ITAT DELHI-B] which has been affirmed by the Hon’ble High Court of Delhi [2015 (9) TMI 238 - DELHI HIGH COURT] - Decided against revenue Disallowance of EPF & ESI-contribution - belated deposits after the grace period - HELD THAT:- Though the coordinate bench [2018 (5) TMI 1882 - ITAT DELHI] has decided this issue in favour of the assessee but now with the decision of Hon’ble High Court Delhi in the case of Bharat Hotels Limited [2018 (9) TMI 798 - DELHI HIGH COURT] the same has to be decided against the assessee and in favour of the revenue since the Hon’ble High Court has held that employees contribution provident fund and ESI contribution has to be deposited within the grace period and since in the present case the deposit have been made after the grace period the same cannot be allowed. - Decided in favour of revenue Claim of deduction u/s.10 A and 80 IB - HELD THAT:- As decided in assessee's own case it cannot be said that the eligible units had borrowed funds from the Head Office - the debtors of the eligible units were realized by the Head Office and accordingly, necessary entries were passed through Head Office account. Considering the factual matrix exhibited in the statement of account, it can be stated that the eligible units have not borne any financial charges and therefore, no allocation of financial charges is to be made between these eligible units. Thus not necessary to remit the matter to the Assessing Officer for verification once again. - Decided against revenue Issues:- Disallowance of expenses under section 14A- Disallowance of EPF & ESI contributions- Disallowance under section 10A and section 80IBAnalysis:1. Disallowance of expenses under section 14A:The Tribunal considered the grounds raised by the revenue regarding the disallowance of expenses under section 14A. The counsel for the assessee pointed out that similar issues had been decided in favor of the assessee in previous years. The Tribunal referred to a previous order and upheld the decision in favor of the assessee, citing that no exempt income was earned during the relevant year. As no distinguishing fact was presented, the Tribunal dismissed the ground raised by the revenue.2. Disallowance of EPF & ESI contributions:The Tribunal analyzed the disallowance of EPF & ESI contributions made by the Assessing Officer. While the coordinate bench had previously decided this issue in favor of the assessee, a recent decision by the Hon'ble High Court of Delhi necessitated a different outcome. The High Court held that contributions must be deposited within the grace period, and since the deposits in this case were made after the grace period, the disallowance was upheld. Consequently, the Tribunal allowed the ground raised by the revenue on this issue.3. Disallowance under section 10A and section 80IB:The Tribunal addressed the claims for deduction under section 10A and section 80IB of the Income Tax Act. Referring to a previous decision by the coordinate bench, the Tribunal examined the relevant documentary evidence and financial statements. It was observed that the eligible units did not borrow funds from the Head Office and did not bear any financial charges. The Tribunal dismissed the grounds raised by the revenue, stating that the CIT(A) had adequately considered the underlying facts. The Tribunal declined to remit the matter to the Assessing Officer for further verification, ultimately partly allowing the appeals filed by the revenue.In conclusion, the Tribunal's judgment addressed multiple issues related to disallowances and deductions under the Income Tax Act, providing detailed analysis and referring to previous decisions and legal principles to arrive at its conclusions.