2022 (7) TMI 1217 - AT - Income Tax

Tribunal Upholds Business Income Deductions, Overturns Disallowance, Aligns with Precedents

JT CIT (OSD) 11 (2) (2), Mumbai Versus State Street Syntel Services Pvt. Ltd.

The Tribunal upheld deductions under section 10 AA for interest income, considered as business income related to software exports. Disallowance of ... Deduction u/s 10 AA - interest income earned from SEZ Unit - HELD THAT:- We find that in the present case the assessee is a company, which is eligible for deduction u/s 10 AA of the income tax act. It also received certain interest income on which the deduction was claimed u/s 10 AA - This issue is already decided by the coordinate bench in assessee’s own case for earlier years, the learned and CIT- A followed the same and allowed the claim of the assessee. In view of this we do not find any infirmity in the order of the CIT – A in holding that assessee is eligible for deduction u/s 10 AA of the income tax act so far as the interest income is concerned. Accordingly, ground number 1 – 4 of the appeal is dismissed. Late payment of the employee’s contribution to fund - HELD THAT:- It is undisputed that both the above contribution has been deposited before the due date of filing of the return of income. CIT – A deleted the disallowance following decision of the honourable jurisdictional High Court in case of CIT versus Ghatge patil transport private limited [2014 (10) TMI 402 - BOMBAY HIGH COURT] and CIT versus Hindustan organic chemicals Ltd [2014 (7) TMI 477 - BOMBAY HIGH COURT] As the learned CIT – A has deleted the disallowance following the decision of the honourable jurisdictional High Court and no contrary decision is pointed out by the learned departmental representative, we do not find any infirmity in the order of the CIT – A in deleting the above disallowance . Accordingly, ground numbers 5 – 6 of the appeal are dismissed. Issues involved:1. Allowability of deduction under section 10 AA of the Income Tax Act on interest income.2. Treatment of interest income as income from other sources instead of business income.3. Disallowance of employee's contribution to the Employees State Insurance Scheme.4. Applicability of CBDT circular on late payment of employees' contribution.5. Justification of deleting the addition based on the decision of the jurisdictional High Court.6. Distinction between provisions related to employers' and employees' contributions.Analysis:Issue 1:The appeal questioned the Tribunal's decision on allowing deduction under section 10 AA without considering the source of interest income from the industrial undertaking. The Tribunal upheld the deduction based on the precedent set by a coordinate bench in the assessee's earlier cases, concluding that the interest income was eligible for deduction under section 10 AA.Issue 2:The Tribunal addressed the concern of the assessing officer regarding the treatment of interest income as income from other sources rather than business income. It was established that the interest income was directly linked to the business and development of software exports, making it eligible for inclusion in the computation of profits for deduction under sections 10 A and 10 AA.Issue 3:Regarding the disallowance of employee's contribution to the Employees State Insurance Scheme, the assessing officer found a delay in the deposit of contributions and deemed them disallowable. However, the CIT - A overturned this decision based on timely deposits before the due date of filing the income tax return, citing relevant High Court decisions.Issue 4:The Tribunal examined the applicability of the CBDT circular on late payment of employees' contribution, emphasizing the distinction between employers' and employees' contributions. The decision to delete the addition was supported by the jurisdictional High Court's rulings, leading to the dismissal of the appeal by the assessing officer.Issue 5:The Tribunal justified the deletion of the addition based on the decisions of the High Court and the absence of contradictory rulings presented by the departmental representative. The deletion of the disallowance was deemed appropriate, resulting in the dismissal of the assessing officer's appeal.Issue 6:A distinction was drawn between the provisions related to employers' and employees' contributions, highlighting the different treatment under Section 43B and Section 36(1)(va) respectively. The Tribunal's decision aligned with the precedent set in relevant cases, leading to the dismissal of the assessing officer's appeal.In conclusion, the Tribunal upheld the deductions under section 10 AA, justified the treatment of interest income as business income, and supported the deletion of the disallowance based on timely deposits of employee contributions, in line with relevant legal precedents and decisions of the jurisdictional High Court.