2021 (4) TMI 393 - AT - Income Tax

Revenue's Appeal Dismissed by ITAT: Assessee Prevails on Various Grounds

DCIT Circle-7 (1), New Delhi Versus Dee Development Engineers Ltd.

DCIT Circle-7 (1), New Delhi Versus Dee Development Engineers Ltd. - TMI Issues:1. Late deposit of ESIC & PF2. Sales promotion & festival expenses3. Expenditure on Corporate Social Responsibility4. Disallowance u/s 14A of the Income Tax Act5. Allowability of provisions of carbon creditsLate deposit of ESIC & PF:The Revenue challenged the deletion of the addition made by the Assessing Officer on account of late deposit of ESIC & PF. The CIT(A) relied on legal precedents and held that the amount deposited by the assessee after the due dates but before filing the Income Tax Return qualifies for deduction. The Hon'ble Delhi High Court's decisions in favor of the assessee were considered, leading to the dismissal of this ground in favor of the assessee.Sales promotion & festival expenses:The Revenue contended that the sales promotion and Diwali expenses were personal in nature and not related to business. However, the CIT(A) provided a detailed finding supporting the business nature of these expenses. The lack of justification by the Assessing Officer led to the dismissal of this ground in favor of the assessee.Expenditure on Corporate Social Responsibility:The Revenue challenged the addition made on account of expenditure incurred on Corporate Social Responsibility. The assessee argued that the expenditure was incidental to the business and should be allowed as a deduction under Section 37 of the Act. Legal precedents and the absence of exempt income during the year supported the assessee's position, resulting in the dismissal of this ground in favor of the assessee.Disallowance u/s 14A of the Income Tax Act:As the assessee did not earn any exempt income during the year, the disallowance under Section 14A was not permissible. The decisions in relevant cases were cited to support this argument, leading to the dismissal of this ground in favor of the assessee.Allowability of provisions of carbon credits:The provision of carbon credits was inadvertently included in the taxable income of the assessee, though it was not taxable under the Act. No sale of carbon credits occurred during the year, and the provision was written off in subsequent years. The CIT(A) accepted the evidence provided by the assessee, including certification reports, and observed that no taxable event had occurred. The dismissal of this ground in favor of the assessee was based on these findings.In conclusion, the appeal of the Revenue was dismissed by the Appellate Tribunal ITAT DELHI, with detailed analysis and legal reasoning provided for each issue raised by the Revenue against the order passed by the CIT(A) for Assessment Year 2011-12.