2019 (8) TMI 1412 - AT - Income Tax

ITAT Hyderabad: Appellant's Appeal Partly Allowed on Various Tax Additions for A.Y. 2012-13

The ITAT Hyderabad partly allowed the appellant's appeal, overturning various additions made by the CIT (A) under sections 43B, 36(1)(va), 40(a)(ia), and ... Addition of service tax payable u/s 43B - not debited to the P&L A/c - HELD THAT:- We find that u/s 43B, certain deductions are allowable on actual payment. By not debiting the service tax to the P&L A/c, the assessee has not claimed it as an expenditure. Therefore, the disallowance of the same u/s 43B of the Act would not arise. In the case before us, the AO is not disallowing the expenditure, but is bringing it to tax, which is not the purpose of the section.Therefore, the addition made u/s 43B is deleted. Disallowance of interest payment u/s 40(a)(ia) - an assessee in default” u/s 201(1) - second proviso to section 40(a)(ia) - HELD THAT:- As w.e.f. 1.4.2013, 2nd proviso has been appended to section 40(a)(ia) according to which where an assessee is not deemed to be an assessee in default under the 1st proviso to sub-section 1 of section 201, it shall be deemed that the assessee has deducted and paid tax on such sum on the date of furnishing of such income by the recipient in the said proviso. It is the case of the assessee that the recipient has offered the income to tax in his hands and therefore, the proviso to section 201(1) applies and the assessee cannot be deemed to be an assessee in default. Admittedly, the assessee has not been treated as an assessee in default u/s 201(1) and the proviso to section 201(1) has been held to be retrospectively applicable. Therefore disallowance u/s 40(a)(ia) cannot be made subject to verification that the recipient has offered the income to tax in its hands. Thus, the ground is allowed for statistical purposes. Addition u/s 14A r.w.Rule 8D - HELD THAT:- This issue is covered in favour of the assessee by the decision of the various Courts particularly the Hon'ble Delhi High Court in the case of Cheminvest Limited vs Commissioner Of Income Tax-Vi [2015 (9) TMI 238 - DELHI HIGH COURT] and also the decisions of the Coordinate Benches of this Tribunal to which I am also a signatory. Respectfully following the same, I delete the disallowance made u/s 14A of the Act. Payment of ESI and PF on account of disallowance u/s 36(1)(va) i.e. employees contribution - HELD THAT:- Assessee has made the payment before filing of the return of income and as held the disallowance u/s 36(1)(va) is deleted. Issues involved:1. Dismissal of appeal by CIT (A) on various grounds2. Addition of Service Tax under section 43B3. Disallowance of ESI and PF under section 36(1)(va)4. Disallowance of interest payments under section 40(a)(ia)5. Addition of interest under section 14ADismissal of appeal by CIT (A) on various grounds:The appellant appealed against the CIT (A)'s order for the A.Y. 2012-13, citing errors in both facts and law. The grounds of appeal included issues of discrepancy in disallowance amounts, lack of reasonable opportunity for the appellant to be heard, failure to appreciate case facts and legal positions, and dismissal without considering written submissions. The appellant contested multiple additions made by the CIT (A) without proper appreciation of evidence and details provided.Addition of Service Tax under section 43B:The CIT (A) dismissed the appeal on the issue of adding a specific amount towards service tax disallowance under section 43B. The appellant argued that since the service tax was not debited to the P&L account but mentioned in the balance sheet, it should not be disallowed under section 43B. The ITAT Hyderabad agreed with the appellant, stating that if an expenditure is not claimed, it cannot be disallowed under section 43B, leading to the deletion of the addition.Disallowance of ESI and PF under section 36(1)(va):The CIT (A) dismissed the appeal regarding disallowance of employees' contribution towards ESI and PF, despite being paid before the due date for filing the return of income. The appellant contended that such contributions are deductible under section 43B if paid before the due date, citing relevant court decisions. The ITAT Hyderabad concurred with the appellant, deleting the disallowance under section 36(1)(va).Disallowance of interest payments under section 40(a)(ia):The CIT (A) dismissed the appeal on the addition of interest payments under section 40(a)(ia). The appellant argued that since the recipients had declared the interest payments as income and the appellant was not treated as an assessee in default, section 40(a)(ia) should not apply. The ITAT Hyderabad, considering the retrospective application of the relevant proviso, ruled in favor of the appellant, allowing the ground for statistical purposes.Addition of interest under section 14A:The CIT (A) dismissed the appeal on the addition of interest under section 14A. The appellant contended that no exempt income was earned during the relevant A.Y, thus disallowance under section 14A was unwarranted. The ITAT Hyderabad, following judicial precedents and relevant court decisions, deleted the disallowance made under section 14A.In conclusion, the ITAT Hyderabad partly allowed the appellant's appeal, overturning various additions made by the CIT (A) based on detailed legal analysis and consideration of the facts presented during the proceedings.