2023 (7) TMI 1454 - AT - Income Tax

Festival gift and puja expenses allowed as business expenditure with proper documentation under Section 14A

The Assistant Commissioner of Income Tax, Central Circle-1, Raipur (C.G.) Versus M/s. Chhattisgarh Steel & Power Limited.

The Assistant Commissioner of Income Tax, Central Circle-1, Raipur (C.G.) Versus M/s. Chhattisgarh Steel & Power Limited. - TMI Issues Involved:1. Disallowance of festival, gift, and puja expenses.2. Disallowance under Section 14A read with Rule 8D.3. Disallowance under Section 40(a)(ia) for non-deduction of TDS on transmission charges.4. Disallowance of ash handling expenses.5. Disallowance of delayed deposit of employee contributions towards EPF.Detailed Analysis:(A) Disallowance of Rs. 1,36,688/-:The Assessing Officer (AO) disallowed the assessee's claim for deduction of festival, gift, and puja expenses totaling Rs. 1,36,688/-. The CIT(Appeals) upheld the disallowance of puja expenses (Rs. 3,185/-) but vacated the remaining disallowances. The Tribunal found that the expenses were related to the business and were duly reflected in the books of accounts without any specific defect pointed out by the AO. The Tribunal upheld the CIT(Appeals)' decision to vacate the disallowance of festival and gift expenses, finding no infirmity in the decision.(B) Disallowance under Section 14A read with Rule 8D: Rs. 1,08,17,711/-:The AO disallowed interest expenses of Rs. 1,08,17,711/- under Section 14A read with Rule 8D, as the assessee failed to substantiate that investments in exempt dividend income-yielding shares were made from its own funds. The CIT(Appeals) vacated the disallowance on the grounds that the assessee had substantial interest-free funds and had not earned any exempt income during the year. The Tribunal upheld the CIT(Appeals)' decision, noting that the assessee had sufficient interest-free funds and had not earned any exempt income, thus no disallowance was warranted.(C) Disallowance under Section 40(a)(ia) for transmission charges: Rs. 1,18,63,401/-:The AO disallowed transmission charges of Rs. 1,18,63,401/- under Section 40(a)(ia) for non-deduction of TDS. The CIT(Appeals) deleted the disallowance, relying on judicial pronouncements that no TDS was required on transmission charges under Sections 194C, 194-I, or 194J. The Tribunal upheld the CIT(Appeals)' decision, referencing similar judicial precedents and finding no obligation for TDS on transmission charges.(D) Disallowance of ash handling expenses: Rs. 5,17,200/-:The AO disallowed 10% of ash handling expenses (Rs. 5,17,200/-) due to lack of supporting bills. The CIT(Appeals) vacated the disallowance, noting that the expenses were recorded in the books and no specific defects were pointed out. The Tribunal upheld the CIT(Appeals)' decision, finding the disallowance to be presumptive and unsupported by evidence.(E) Disallowance of delayed deposit of employee contributions towards EPF: Rs. 1,48,041/-:The AO disallowed the delayed deposit of employee contributions towards EPF (Rs. 1,48,041/-). The CIT(Appeals) vacated the disallowance, but the Tribunal reversed this decision, referencing the Supreme Court's ruling in Checkmate Services Pvt. Ltd. vs. Commissioner of Income Tax-I, which held that delayed deposits beyond the due dates prescribed under the respective Acts are disallowed as per Section 36(1)(va) read with Section 2(24)(x).Result:- Appeal for A.Y. 2012-13 (ITA No. 91/RPR/2020) dismissed.- Appeal for A.Y. 2013-14 (ITA No. 92/RPR/2020) partly allowed, upholding the disallowance of delayed EPF deposits but dismissing other grounds.