2020 (9) TMI 620 - AT - Income Tax

Tax tribunal decision: delay condoned, interest disallowance deleted, PF payment disallowed. COVID-19 lockdown not counted.

The tribunal partially allowed the assessee's appeal by condoning the delay in filing, deleting the disallowance of interest under Section 36(1)(iii), and ... Condonation of delay - Notification being No. 11/2016 (F. No. 149/150/2015-TPL dated 01.03.2016 and CBDT Circular No. 20/2016 dated 26.05.2016 which has claimed to be not followed by the assessee - HELD THAT:- As observed that the issuing of Circular of CBDT for extending the date of filing the appeal implicit constraint and elucidate the hiccup in uploading the prescribed appeal in the system electronically. In that particular case though the appeal was filed earlier the same could not be uploaded electronically due to ignorance of technical knowledge. Since there is a bona fide reasonable cause for not filing the appeal electronically by the assessee, in turn the Co-ordinate Bench has not appreciated the dismissal of appeal made by the Ld. CIT(A). Having regard to the identical fact, in the instant case, we find no reason but to appreciate the difficulty faced by the assessee in preferring such appeal electronically within the prescribed time period and dismissal of the appeal by the Ld. CIT(A) in not considering the same is grossly irregular and arbitrary. Hence, the order of dismissal of the appeal on the ground of limitation by the Ld. CIT(A) as impugned before us is hereby quashed. Disallowance of interest u/s 36(1)(iii) - AO has disallowed the proportionate interest expenses assuming the interest bearing fund used for making interest free advances in other ways - HELD THAT:- We find no reason to disallow such interest under Section 36(1)(iii) of the Act. Thus, the addition is hereby deleted. Non-adjudication of relating disallowance of delayed payment of employees’ contribution to Provident Fund u/s 36(1)(va) - HELD THAT:- Admittedly the assessee has made delayed payment in Provident Fund account after the expiry of due date provided under the concern Provident Fund Act. Such expenses, therefore, is not allowable in view of the ratio laid down in the case of CIT vs. Gujarat State Road Transport Corporation [2014 (1) TMI 502 - GUJARAT HIGH COURT]which, according to us was rightly taken into consideration while rejecting the case of the assessee by the Revenue. Hence, we find this ground of appeal has no legs to stand and thus dismissed. Issues Involved:1. Delay in filing the appeal.2. Disallowance of interest under Section 36(1)(iii).3. Disallowance of delayed payment of Employee’s Contribution to Provident Fund under Section 36(1)(va).Issue-wise Detailed Analysis:1. Delay in Filing the Appeal:The assessee's appeal faced a delay of approximately 50 days. The delay was attributed to the late receipt of the appellate order by the authorized representative, which delayed the preparation and filing of the appeal. The tribunal found the explanation genuine and condoned the delay, noting no intentional lapse on the part of the assessee.2. Disallowance of Interest under Section 36(1)(iii):The main issue was the disallowance of interest amounting to Rs. 23,36,125/- under Section 36(1)(iii). The assessee argued that the disallowance was unjustified as the interest-bearing funds were not used for making interest-free advances. The assessee had sufficient own interest-free funds, which were used for business purposes. The tribunal referred to a previous judgment in the assessee's favor for the assessment year 2012-13, where it was established that the assessee had sufficient surplus funds. The tribunal noted that the assessee’s own funds were utilized for advances, and the revenue could not question the reasonableness of the expenditure once the nexus between the expenditure and the business purpose was established. The tribunal found no reason to deviate from the earlier judgment and deleted the disallowance of Rs. 23,36,125/-.3. Disallowance of Delayed Payment of Employee’s Contribution to Provident Fund under Section 36(1)(va):The assessee admitted to a delayed payment of Rs. 3,650/- towards the Employee’s Contribution to Provident Fund. The tribunal upheld the disallowance, citing the Gujarat High Court's judgment in the case of CIT vs. Gujarat State Road Transport Corporation, which mandates that such expenses are not allowable if paid after the due date under the Provident Fund Act.Additional Observations:The tribunal also addressed the procedural issue of pronouncing the order beyond the 90-day period due to the COVID-19 pandemic. It referred to the Supreme Court and Bombay High Court's directives extending the limitation period due to the lockdown. The tribunal excluded the lockdown period from the computation of the 90-day limit, thus pronouncing the order within the permissible time frame.Conclusion:The tribunal allowed the assessee's appeal partly by condoning the delay in filing, deleting the disallowance of interest under Section 36(1)(iii), and upholding the disallowance of the delayed Provident Fund payment under Section 36(1)(va). The procedural delay in pronouncing the order was justified due to the exceptional circumstances of the COVID-19 pandemic.