2025 (8) TMI 682 - AT - Income Tax

Payment of Labour Welfare Fund within grace period under Punjab Labour Welfare Act is timely; addition under Section 36(1)(va) deleted

The ITAT Delhi held that the assessee's payment of the Labour Welfare Fund contribution on 30.01.2021, within the grace period allowed under the Punjab ... Addition u/s 36(1)(va) - employees contribution of the Labour Welfare Fund belatedly - it is the case of the assessee that the same was deposited within the statutory timeline provided under the respective Act. - HELD THAT:- As the amount in question paid by the assessee on 30.01.2021 i.e. within the grace period provided by the Punjab Labour Welfare Act, 1965 the addition is found to be not sustainable in the eyes of law under Section 36(1)(va) of the Act and thus, the same is hereby deleted. 1. ISSUES PRESENTED and CONSIDERED Whether the final assessment order passed by the Assessing Officer (AO) and Dispute Resolution Panel (DRP) is erroneous, based on surmises and conjectures, and against principles of natural justice. Whether the AO acted without jurisdiction in issuing the draft assessment order under Section 144C(1) read with Section 144B of the Income Tax Act, 1961, given that such power lies solely with the National Faceless Assessment Centre (NFAC). Whether the AO erred in assessing total income higher than declared by the assessee and raising demand accordingly. Whether the AO erred in considering the total income computed by the Centralized Processing Centre (CPC), including items not warranting disallowance or addition. Whether the AO erred in disallowing Rs. 9,15,16,231 under Section 43B of the Act in respect of bonus payment/reversal. Whether the AO erred in making an addition of Rs. 94,400 under Section 36(1)(va) of the Act for employee contribution to Labour Welfare Fund, despite payment being made within statutory timelines. Whether the AO erred in levying interest under Sections 234A, 234B, and 234C of the Act. 2. ISSUE-WISE DETAILED ANALYSIS Issue: Jurisdiction of the AO under Section 144C(1) read with Section 144B of the Act - Legal Framework: Section 144B of the Income Tax Act provides for faceless assessment, conferring jurisdiction to the National Faceless Assessment Centre (NFAC) for issuing draft assessment orders. Section 144C(1) empowers the AO to issue draft orders, subject to the provisions of Section 144B. - Court Reasoning: The assessee contended that the AO acted without jurisdiction, as the power to issue draft assessment orders lies exclusively with the NFAC. However, this ground was not pressed during the appeal and was accordingly dismissed as not pressed. - Conclusion: No interference was made on this ground as it was not pressed by the assessee. Issue: Disallowance under Section 43B of the Act (Bonus Payment/Reversal) - Legal Framework: Section 43B mandates that certain expenses, including bonus payments, are allowable only if actually paid before the due date of filing the return. - Court Reasoning: The assessee filed an application for rectification which was allowed by the DCIT, granting relief on this issue. Consequently, the ground became infructuous. - Conclusion: The disallowance under Section 43B was set aside following rectification; the ground was dismissed as infructuous. Issue: Addition under Section 36(1)(va) of the Act for Employee Contribution to Labour Welfare Fund - Legal Framework: Section 36(1)(va) disallows deduction for employee contributions to welfare funds if not deposited within the prescribed timelines under respective labour laws. The relevant labour law here is the Punjab Labour Welfare Fund Act, 1965, specifically Section 9A(4), which provides a grace period of 30 days beyond the due date for payment without attracting interest. - Court's Interpretation and Reasoning: The assessee demonstrated payment of the Labour Welfare Fund contribution on 30.01.2021 for the period 01.01.2020 to 31.12.2020, which was within the grace period allowed under the Punjab Labour Welfare Fund Act. Payment details and statutory provisions were examined, confirming compliance with timelines. The Tribunal relied on a coordinate bench decision involving identical facts, which held that payments made within the grace period under respective Labour Welfare Fund Acts do not warrant addition under Section 36(1)(va). The Revenue failed to controvert the assessee's submissions or the precedent relied upon. - Application of Law to Facts: Since the payment was made within the statutory grace period, the addition under Section 36(1)(va) was unwarranted. - Conclusion: The addition of Rs. 94,400 under Section 36(1)(va) was deleted. Issue: Levy of Interest under Sections 234A, 234B, and 234C of the Act - Court Reasoning: The grounds relating to interest levies were raised but not specifically addressed in the order due to their consequential nature or lack of pressing by the appellant. - Conclusion: No separate order was passed on these grounds. Issue: General Grounds Regarding Errors, Surmises, and Consideration of CPC Computation - Court Reasoning: The general grounds challenging the assessment as erroneous, based on surmises, or on consideration of CPC computations including items not warranting disallowance, were noted but no separate orders were passed as they were either general or consequential in nature. - Conclusion: No interference was made on these grounds.