PF ESI disallowance under section 143(1) intimation cannot be challenged in appeals under section 143(3) with 144C(13)

ITAT Pune dismissed the assessee's challenge to PF and ESI disallowance made under intimation u/s 143(1), ruling that such grievances must be addressed through remedies available against the intimation itself, not in appeals against orders u/s 143(3) r.w.s. 144C(13). Regarding deduction u/s 10AA, the tribunal followed established precedent that inflated business profits from disallowances qualify for deduction, but remitted the matter to AO to verify if the PF/ESI disallowance related to units eligible for s.10AA benefits.

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Issues:
1. Transfer Pricing adjustments
2. Disallowance of deduction for employees' contribution to PF and ESI
3. Disallowance of deduction under section 10AA
4. Computation of excessive assessed income and tax liability
5. Credit of Tax Deducted at Source (TDS) amount
6. Interest levied under sections 234A, 234B, and 234C

Transfer Pricing Adjustments:
The appeal involved challenging the addition on account of Transfer Pricing (TP) adjustments. The appellant contested the adjustments made by the Assessing Officer (AO) and Transfer Pricing Officer (TPO) regarding the provision of Information Technology (IT) services. The appellant argued that the adjustments did not satisfy the arm's length principle under the Income Tax Act, 1961. Various grounds were raised, including disregarding the Arm's Length Price (ALP), rejecting comparability analysis, and errors in computation of margins for selected companies. The Advanced Pricing Agreement entered into by the appellant with the CBDT led to the withdrawal of this ground of appeal.

Disallowance of Deduction for Employees' Contribution to PF and ESI:
The issue involved the disallowance of deduction for employees' contribution to Provident Fund (PF) and Employee State Insurance (ESI) due to belated payment. The disallowance was initially made under section 36(1)(va) and was repeated in the final assessment order. The Tribunal ruled that this issue could not be agitated in the appeal against the final order, as the remedy should have been sought against the initial intimation under section 143(1).

Disallowance of Deduction under Section 10AA:
The challenge was against the direction of the Dispute Resolution Panel (DRP) disallowing the deduction under section 10AA in relation to the disallowance made under section 36(1)(va). The Tribunal referred to legal precedents indicating that inflated business profits due to disallowances could qualify for deduction under section 10AA. However, it was remitted to the Assessing Officer to determine if the disallowance was made in relation to profits eligible for the deduction.

Computation of Excessive Assessed Income and Tax Liability:
The appellant raised concerns regarding the computation of excessive assessed income and consequential tax liability in the final assessment order. However, these grounds were withdrawn and not pressed during the appeal hearing.

Credit of Tax Deducted at Source (TDS) Amount:
The issue involved the AO's decision not to grant complete credit for Tax Deducted at Source (TDS) as claimed by the appellant. The AO restricted the credit amount, leading to a challenge by the appellant. This ground was dismissed as withdrawn during the appeal proceedings.

Interest Levied under Sections 234A, 234B, and 234C:
The appellant contested the levy of interest under sections 234A, 234B, and 234C of the Income Tax Act. The Tribunal noted that interest under section 234A was imposed despite the timely filing of the return. The interest under sections 234B and 234C was considered consequential. These grounds were dismissed, and the appeal was partly allowed based on the issues discussed and the Tribunal's rulings.

Conclusion:
The Tribunal addressed various issues related to Transfer Pricing adjustments, deduction disallowances, interest levies, and computation of income and tax liability. The appeal was partly allowed based on the specific findings and rulings on each issue presented before the Tribunal.

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