Tax Tribunal Adjusts Disallowances: Deletes Interest, Recalculates Rule 8D(2)(iii), Upholds PF/ESI Delays, Partly Allows Appeals.

The Tribunal ruled on various tax disallowances and additions. It deleted the interest disallowance under Rule 8D(2)(ii) due to sufficient interest-free funds and recalculated disallowances under Rule 8D(2)(iii) for specific assessment years. Additions for deemed dividends were deleted as the assessee was not a shareholder. Disallowances for delayed PF/ESI deposits were upheld, while interest on delayed TDS was disallowed, but allowed for service tax. Appeals for AY 2013-14 and 2014-15 were partly allowed, and those for AY 2016-17 and 2017-18 were partly allowed for statistical purposes.

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Issues Involved:
1. Disallowance under Section 14A read with Rule 8D.
2. Addition towards deemed dividend under Section 2(22)(e).
3. Disallowance for delayed deposit of employees' contribution to PF/ESI under Section 2(24)(x) read with Section 36(1)(va).
4. Disallowance of interest on delayed deposit of TDS and service tax.

Summary:

1. Disallowance under Section 14A read with Rule 8D:
The Tribunal addressed the disallowance under Section 14A of the Income-tax Act, 1961, made under Rule 8D(2)(ii) and 8D(2)(iii) of the Income Tax Rules, 1962. The Tribunal found that the assessee had sufficient interest-free funds for making investments in equity shares, citing the judgment of the Bombay High Court in CIT vs. Reliance Utilities & Power Ltd. Thus, the interest disallowance under Rule 8D(2)(ii) was deleted. For the disallowance under Rule 8D(2)(iii), the Tribunal confirmed the amounts for AY 2013-14 and 2017-18 and recalculated the disallowances for AY 2014-15 and 2016-17 based on correct average investment values.

2. Addition towards deemed dividend under Section 2(22)(e):
The Tribunal examined whether the addition for deemed dividend under Section 2(22)(e) was justified. It was noted that the assessee company was not a shareholder of the lending company, Apeejay Tea Ltd., and vice versa. The Tribunal relied on the Special Bench decision in ACIT vs. Bhaumik Colour Pvt. Ltd., which held that deemed dividend can only be assessed in the hands of the shareholder of the lender company. The Tribunal also noted that the transaction was part of regular business with interest paid on the loan. Consequently, the additions for deemed dividend for AY 2013-14, 2014-15, 2016-17, and 2017-18 were deleted.

3. Disallowance for delayed deposit of employees' contribution to PF/ESI under Section 2(24)(x) read with Section 36(1)(va):
The Tribunal upheld the disallowance for delayed deposit of employees' contribution to PF/ESI, referencing the Supreme Court judgment in Checkmate Services Pvt. Ltd. Vs. CIT, which held that such deductions cannot be claimed even if deposited within the due date for filing the return of income. The disallowances for AY 2014-15 and 2016-17 were confirmed.

4. Disallowance of interest on delayed deposit of TDS and service tax:
The Tribunal confirmed the disallowance of interest on delayed deposit of TDS, following the decision in M/s Premier Irrigation Adritec (P) Ltd. vs. ACIT. However, it allowed the interest on delayed payment of service tax, citing the Supreme Court decision in Lachmandas Mathuradas v. Commissioner of Income-tax. The Tribunal directed the Assessing Officer to bifurcate the disallowed amounts accordingly for AY 2016-17 and 2017-18.

Conclusion:
The appeals for AY 2013-14 and 2014-15 were partly allowed, and the appeals for AY 2016-17 and 2017-18 were partly allowed for statistical purposes.

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