2022 (10) TMI 160 - AT - Income Tax

Revenue appeal dismissed; disallowances under Income Tax Act upheld for AY 2016-17. Exempt income absence & PF Act cited.

The Tribunal dismissed the Revenue's appeal, upholding the decisions of the Ld. CIT(A) regarding disallowances under section 14A and section 2(24)(x) read ... Disallowance u/s 14A r.w. 8D - HELD THAT:- As assessee has not earned any exempt income which is not rebutted by the Revenue placing any cogent material on records. Assessee brought to our notice that the decision of the Co-ordinate Bench of the Tribunal rendered in the case of ACIT vs M/s. Hindustan EPC Company Ltd. [2022 (8) TMI 904 - ITAT DELHI] wherein decided issue in favour of assessee as held that the aforesaid Explanation cannot be presumed to be retrospective in operation. As a corollary, the law prevailing prior to the insertion of Explanation would continue to apply and shall not be guided by the Explanation being prospective. Late payment of employee’s contribution as per the Provident Fund Act - HELD THAT:- We find that the Revenue has not brought any contrary material to rebut the finding of Ld.CIT(A). Since the issue is otherwise decided in favour of the assessee by the judgement of Hon’ble Delhi High Court in the case of PCIT vs Pro Interactive Service (India) Pvt.Ltd. [2018 (9) TMI 2009 - DELHI HIGH COURT] held that legislative intent was/is to ensure that the amount paid is allowed as an expenditure only when payment is actually made. We do not think that the legislative intent and objective is to treat belated payment of Employee’s Provident Fund (EPD) and Employee’s State Insurance Scheme (ESI) as deemed income of the employer under section 2(23)(x) - Appeal of the Revenue is dismissed. Issues:1. Disallowance under section 14A of the Income Tax Act.2. Disallowance under section 2(24)(x) read with section 36(1)(va) of the Act.Issue 1: Disallowance under section 14A of the Income Tax Act:The appeal was filed by the Revenue against the order of the Ld. CIT(A) for the assessment year 2016-17, challenging the deletion of an addition of Rs. 7,69,68,431 on account of disallowance under section 14A. The Revenue contended that the disallowance should be computed by applying Rule 8D if the assessing officer is not satisfied with the amount disallowed under section 14A. However, the Ld. CIT(A) deleted the addition as the appellant did not earn any exempt income during the relevant year. The Tribunal, after considering the arguments, upheld the decision of the Ld. CIT(A) citing judicial precedents, including the decision of the Hon'ble Delhi High Court in a similar case. The Tribunal affirmed the finding of the Ld. CIT(A) and dismissed Ground No.1 raised by the Revenue.Issue 2: Disallowance under section 2(24)(x) read with section 36(1)(va) of the Act:The second issue pertained to the deletion of an addition of Rs. 19,19,163 on account of late payment of employee's contribution as per the Provident Fund Act. The Ld. CIT(A) had allowed the appeal in part, deleting this addition. The Revenue challenged this decision, but the Tribunal noted that no contrary material was presented to rebut the finding of the Ld. CIT(A). The issue was found to be covered in favor of the assessee by the judgment of the Hon'ble Delhi High Court and a Co-ordinate Bench of the Tribunal. Citing these binding precedents, the Tribunal affirmed the decision of the Ld. CIT(A) and dismissed Ground No.2 raised by the Revenue.In conclusion, the appeal of the Revenue was dismissed by the Tribunal, upholding the decisions of the Ld. CIT(A) regarding the disallowances under section 14A and section 2(24)(x) read with section 36(1)(va) of the Income Tax Act for the assessment year 2016-17.