2018 (6) TMI 1857 - AT - Income Tax

Revenue loses appeal on depreciation advance disallowance and late PF/ESI contributions under Section 139(1)

ITAT Jaipur dismissed revenue's appeal on two grounds. First, regarding disallowance of advance received against depreciation deferred, the tribunal ... Disallowance on account of advance received against depreciation deferred - CIT(A) deleted addition - HELD THAT:- Given that there are no changes in the facts and circumstances of the case, we do not see any infirmity in the order of ld. CIT (A) who has followed the decision of National Hydro Electric Power Corporation Ltd. [2010 (1) TMI 281 - SUPREME COURT] as well as NHPC Ltd. [2014 (12) TMI 214 - ITAT DELHI] and the fact that the same is covered by our own decision referred supra to hold that the CIT (A) was correct in holding that advance against depreciation cannot be added under the computation of the normal income. Decided against revenue. Depositing the employees’ contribution to PF & ESI beyond the prescribed time limit - CIT(A) deleted addition - CIT(A) justification that employee’s contribution to PF & ESI are governed by the provisions of Section 43B and not by section 36(1)(va) r.w.s 2(24)(x) - HELD THAT:- CIT (A) has returned a finding that contribution to PF and ESI has been paid before the due date of filing of return of income under section 139(1) of the Act. The said findings remain uncontroverted before us. Following the decisions of Jaipur Vidyut Vitran Nigam ltd [2014 (1) TMI 1085 - RAJASTHAN HIGH COURT] and Udaipur Dugdh Utpadak Sahakari Sangh Ltd [2014 (8) TMI 677 - RAJASTHAN HIGH COURT] he has allowed the claim of the assessee. No infirmity in the order of the ld. CIT (A) has directed the deletion of disallowance so made by the AO. Decided against revenue. Issues Involved:1. Deletion of disallowance on account of advance received against depreciation deferred.2. Deletion of disallowance for depositing the employees' contribution to PF & ESI beyond the prescribed time limit.3. Applicability of Section 43B versus Section 36(1)(va) r.w.s 2(24)(x) concerning employees' contributions to PF & ESI.Issue-wise Detailed Analysis:1. Deletion of Disallowance on Account of Advance Received Against Depreciation Deferred:The Revenue challenged the action of the CIT(A) in deleting the disallowance related to advance received against depreciation deferred. The case was argued to be covered by the precedent set in the assessee's own case for the assessment year 2008-09, where the facts and circumstances were identical. The Tribunal referred to the Hon'ble Supreme Court's decision in NHPC Vs. CIT, which clarified that Advance Against Depreciation (AAD) is not a reserve but 'income received in advance' and a 'timing difference.' The Supreme Court held that AAD is not carried through the profit and loss account and is not an appropriation of profits, thus not applicable under clause (b) of Explanation 1 to Section 115JB. The Tribunal found no infirmity in the CIT(A)'s order, which followed this Supreme Court ruling, and dismissed the Revenue's appeal on this ground.2. Deletion of Disallowance for Depositing Employees' Contribution to PF & ESI Beyond Prescribed Time Limit:The Revenue contested the deletion of disallowance for late deposit of employees' contributions to PF and ESI. The CIT(A) found that the contributions were paid before the due date for filing the income return under Section 139(1). The Tribunal noted that this finding was uncontroverted and upheld the CIT(A)'s decision, which relied on the Hon'ble Rajasthan High Court's rulings in Jaipur Vidyut Vitran Nigam Ltd and Udaipur Dugdh Utpadak Sahakari Sangh Ltd. The Tribunal did not find any error in the CIT(A)'s order and dismissed the Revenue's appeal on this issue.3. Applicability of Section 43B Versus Section 36(1)(va) r.w.s 2(24)(x) Concerning Employees' Contributions to PF & ESI:The Revenue questioned whether the CIT(A) was justified in holding that employees' contributions to PF and ESI are governed by Section 43B rather than Section 36(1)(va) read with Section 2(24)(x) of the Income Tax Act, 1961. The CIT(A) concluded that since the contributions were paid before the due date of filing the return, they should be allowed under Section 43B. The Tribunal agreed with the CIT(A)'s interpretation, consistent with the Rajasthan High Court's decisions, and dismissed the Revenue's appeal on this ground.Conclusion:Both appeals filed by the Revenue were dismissed, with the Tribunal upholding the CIT(A)'s decisions on all grounds. The Tribunal's judgment was pronounced in open court on 01/06/2018.