2023 (8) TMI 213 - AT - Income Tax

Appellate Tribunal Overturns CIT(A) Order on Section 43B Expenses

MDC Pharmaceuticals Ltd., Versus The ACIT, CPC, Bangalore.

The Appellate Tribunal allowed the appeal, setting aside the order of the CIT(A) that disallowed certain expenditures claimed by the assessee under ... Disallowance u/s 36(1)(va) - employees contribution to PF and ESI and TDS deposited beyond the due dates - Intimation passed u/s 143(1) - As during the pendency of the appellate proceedings, the CPC Bangalore passed u/s 154 has deleted the addition so made by the CPC - HELD THAT:- There is no further grievance and cause of action which is left with the assessee to agitate before the ld CIT(A) and the appeal before the ld CIT(A) therefore becomes infructuous and there is thus no basis left for the confirmation of addition by the ld. CIT(A) NFAC. In any case, the assessee has also brought out the factual inaccuracy which has crept in the order of ld. CIT(A), NFAC wherein the statutory dues have been held to be relatable to the employee’s share of contribution whereas the disallowances which have been made by the CPC vide intimation u/s 143(1) pertains to the statutory dues pertaining to the employer’s share of contribution towards ESI & PF and TDS payable which is covered under the provisions of section 43B and therefore, CIT(A) NFAC has wrongly invoked the provisions of section 36(1)(va) while confirming the same - order so passed by the ld CIT(A) is therefore set-aside. Decided in favour of assessee. Issues:The issues involved in this case are related to the assessment year 2020-21 and pertain to the disallowance by CPC under section 36(1)(va) of the Income Tax Act, 1961 for employees' contribution to PF and ESI, as well as TDS deposited beyond the due dates. The appeal was filed against the order of the CIT(A)/NFAC, Delhi.Grounds of Appeal:1. The appellant contended that the CIT(A) erred in passing the order without giving a reasonable opportunity to be heard.2. The appellant argued that the CIT(A) misstated the facts by considering the disallowance as pertaining to employee contributions, while it actually pertained to employer contributions to ESI, EPF, and TDS payable.3. The appellant claimed that the CIT(A) failed to appreciate that the amounts in question pertained to employer contributions covered under section 43B of the Income Tax Act, 1961.4. The appellant asserted that the assessment was framed hastily without affording a reasonable opportunity to be heard.The Appellate Tribunal noted a delay in filing the appeal, which was condoned after considering the reasons provided in an affidavit by the Director of the assessee company.During the hearing, it was highlighted that the assessee had claimed certain expenditures under section 43B of the Act, which were duly deposited before the due date of filing the return of income. However, CPC disallowed these expenditures, leading to an appeal before the CIT(A).The CIT(A) dismissed the appeal, considering the statutory dues as employee contributions, contrary to the appellant's claim that they were employer contributions to PF, ESI, and TDS payable covered under section 43B of the Act.The appellant had also filed a rectification application before CPC Bangalore, resulting in the deletion of the disallowance made during the processing of the return of income. Therefore, the confirmation of the disallowance by the CIT(A) was deemed unjustified.After hearing both parties, the Tribunal found that the appeal was valid, especially considering the rectification made by CPC Bangalore. The Tribunal set aside the order of the CIT(A) and allowed the appeal of the assessee.The appeal was allowed, and the order was pronounced in the Open Court on 21st April 2023.