Tribunal rules for assessee on ESI & PF delay, dismisses appeal on late TDS interest.

The Tribunal ruled in favor of the assessee regarding the addition under section 2(24)(x) and section 36(1)(va) for delay in ESI and PF payments, citing precedents. However, the appeal was dismissed concerning the disallowance of interest on late TDS payment under section 37(1), with the Tribunal upholding the disallowance based on legal violations. The order was issued on 08/01/2020.

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Issues:
1. Addition under section 2(24)(x) read with section 36(1)(va) for delay in ESI and PF payment.
2. Disallowance of interest on late TDS payment under section 37(1).

Issue 1 - ESI and PF Payment Delay:
The appeal challenged the addition of Rs. 3,15,533 under section 2(24)(x) and section 36(1)(va) due to delay in ESI and PF employee contributions. The Tribunal referred to the decision of the Rajasthan High Court in CIT vs. JVVNL and others, directing deletion of the addition since the contributions were deposited before filing the income tax return. Consequently, the Tribunal ruled in favor of the assessee on this issue.

Issue 2 - Disallowance of Interest on Late TDS Payment:
The appeal contested the disallowance of Rs. 34,644 as interest on late TDS deposit under section 37(1). The CIT(A) upheld the disallowance, stating that TDS non-deposit is a violation of law, making the interest penal and not deductible. The assessee relied on the Karnataka High Court decision in CIT vs. Oriental Insurance Company Ltd., arguing that interest under section 201(1)(A) is not penal. However, the Tribunal differentiated the case, emphasizing the deductibility of interest on late TDS deposit. Referring to previous judgments, including Ferro Alloys Corporation Ltd vs. CIT and CIT vs. Chennai Properties & Investment Ltd., the Tribunal concluded that interest under section 201(1A) is not allowable as a business deduction. Consequently, the Tribunal dismissed the appeal on this issue, upholding the disallowance of interest on late TDS payment.

In conclusion, the Tribunal partially allowed the appeal concerning the ESI and PF payment delay issue but dismissed the appeal regarding the disallowance of interest on late TDS payment. The order was pronounced on 08/01/2020.

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