AI Drafter 
TaxTMI 
TaxTMI 
2020 (6) TMI 241
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....ase. During the course of hearing before the Assessing officer, Identity cards (I. Card) of employees were produced. The unsecured loan accepted from employees is very nominal and that is treated as a security money kept with the employer and paid back when they left the service. (2) Confirming the addition of Rs. 87,83,626/- on account of leave Encashment is bad in law. Actually this is the amount paid to employees in lieu of leave i.e. payment made for working on weekly off days and paid holidays. This is a wrong head being reflected in the Profit & Loss Accounts as leave encashment instead of salary in lieu of leave. (3) The order of the Learned Commissioner CIT Appeal-2, Bhubaneswar confirming the addition of Gratuity amounting to Rs. 6,77,823/- made by the assessing officer in computing the business income of the appellant is contrary to law and facts of the case. (4) Confirming the addition of disallowance of Employees contribution to Provident Fund amounting to Rs. 18,29,501/- is bad in law and hence is liable to the deleted. Actually, the amount has been deposited to the P.F authorities during the year, but beyond statutory due date. (5) ....
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.... date i.e. 20th of the every month. The similar case has been heard in this CUTTACK BENCH of ITAT(ITA No. 131/CTK/2018) in favour of the Assessee M/S Industrial Security & Allied Services Pvt. Ltd. in which Brig. Narayan Nayak is one of the Director. Copy of Assessment Order is enclosed herewith vide Annexure-2. So the addition of Rs. 18,29,501/- may be deleted. 3. Regarding non deduction of TDS from Audit fees and Legal fees of Rs. 1,70,500/- Clause-9, Page-10 of the Assessment Order, 30% of the expenditure may be disallowed as decided in CUTTACK BENCH of ITAT recently in case of M/S Sri Nilmadhab Builders Pvt. Ltd. VS. ITO, WARD-1(3), Bhubaneswar, ITA No- 296/CTK/2018. The above additional grounds may please be considered for passing the order. 4. Brief facts of the case are that the assessee filed return of income on 12.11.2012 declaring at total income of Rs. 38,99,378/-. The case was selected for scrutiny and statutory notices were issued to the assessee. In response to the notice, the assessee filed details of accounts and bills and vouchers maintained along with audit report u/s.44AB of the Act. After examining the materials/documents produced by the ass....
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....erefore, he drew inference that the some provisions are still unpaid till the date of filing of the return of income as per Section 139(1) of the Act i.e. on 30.09.2012. He, therefore, concluded that it is not allowable as per Section 43B(f) of the Act and show cause notice was issued to the assessee and accordingly the AO added the total expenditure claimed by the assessee to his total income. 6. Further on scrutiny of accounts, the AO noted that the assessee has debited Rs. 6,77,823/- towards amount of gratuity to employees in the profit and loss account and balance sheet and it was shown as payable in the liability side of the balance sheet. The actual details of the payments of gratuity were not produced by the assessee. The AO noticed that if the same was not paid to the approved fund as mentioned in Section 40A(7) of the Act, therefore, the show cause notice was issued to the assessee for furnishing explanation as to why the claimed expenditure is not in accordance with the provisions of Act and, therefore, is not to be disallowed. Therefore, the AO added to the total income to the assessee to the tune of Rs. 6,77,823/-. 7. Further, on scrutiny of accounts the AO notice....
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....illages, they collect all the money on account of their dues from the organisation at a time. In respect of gratuity amounting to Rs. 6,77,823/- actually it is not gratuity and it is a nature of compensation paid to employees after leaving to the institution for some period and there is no complaint against the employees and these employees worked for goodwill of the assessee company, therefore, they are paid a lumpsum amount as a gratuity but due to mistake of the accountant the wrong nomenclature has been given in the books of accounts which has subsequently been paid to the employees. Further in respect of employees contribution to provident fund and ESI contribution, the assessee submitted that it was paid before filing of the return of income, therefore, it should be allowed as per Section 43B of the Act. In support of his contentions, ld. AR relied on the decision of the coordinate bench of the Tribunal in the case of Industrial Security and Allied Services Pvt. Ltd. in ITA No.131/CTK/2018, order dated 31.07.2018, wherein the assessee is director of the company. 13. Further in respect of non-compliance of the TDS, ld. AR submitted that these payments were genuine payments ....
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....orm No.36 as well as the additional ground filed by the assessee subsequently. After hearing both the sides and perusing the entire material available on record, with regard to ground No.1, we find that the AO observed that there is an outstanding credit balance of Rs. 10,02,312/- in his balance sheet. The ld.AR of the assessee submitted that it was security deposits and it has been taken from the employees which is below Rs. 2000/-. We observe from the details of the amount that all the amounts are below Rs. 20,000/- which are very low and it has been received from 61 employees out of which 40 employees' identity cards were produced before the AO. The AO did not issue any notice either u/s.131 or u/s.133(6) of the Act to any of the employees. If the AO had any doubt regarding their identity, creditworthiness and genuineness of the transactions, he could have at least issued any notice either u/s.131 or u/s.133(6) of the Act to any of the employees but merely stating that the assessee could not produce the identity card of the 21 employees and they had no PAN and not filing their income tax returns, cannot be accepted. It was submitted by the ld. AR of the assessee that the unsecur....
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....yees. 17. With regard to disallowance of employees' contribution to provident fund as raised by the assessee in ground No.4&5, we find that the ld. DR before us relied on the decision of Hon'ble Delhi High Court in the case of Bharat Hotel Ltd. (supra) and submitted that this issue should be restored to AO for verification. After hearing both the sides, perusing the entire materials available on record and the orders of authorities below, we noticed that the assessee has not deposited the employees contribution within the due date as specified in that particular Act. We found substance in the submissions of the ld. DR that Section 36(1)(va) of the Act deals with the deduction in respect of the sum received by the assessee from any of his employees to which the provisions of sub-section 2(24)(x) of the Act applies, provided such sum is credited by the assessee to the employee's account in relevant fund on or before the due date. The 'due date' is defined under the Explanation to section 36(1)(va) of the Act by stating that the due date referred under the relevant Act and certainly not the due date for filing the return. We also found that this very similar issue has also been dec....
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.... to decide the same as per the case laws quoted by both the sides. Thus, the ground of appeal of the assessee is allowed for statistical purposes. 18. With regard to addition made on account of ESI contribution as raised in ground No.6, we find that this ground is similar to the ground decided by us in ground No.5 above, wherein we have restored the issue to the AO for verification relying on the decision of coordinate bench of the Tribunal in the case of Milind Gupta (supra). Therefore, following the same reasoning as stated in ground No.5, we also restore this issue of addition made on account of ESI contribution to the file of AO for verification. This ground of appeal of the assessee is allowed for statistical purposes. 19. With regard to violation of deduction of TDS raised in ground No.7 by the assessee, we find that the coordinate bench of the Tribunal in the case of Nilamadhab Builders Pvt. Ltd. in ITA No.296/CTK/2018, order dated 26.11.2019 has restricted the disallowance to 30% on account of non-compliance of the TDS, wherein the Tribunal has observed as under :- "7. After considering the rival submissions of both the parties and carefully perusing the enti....
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....inserted in the Act to be a curative one having retrospective effect. We therefore, direct the Assessing Officer to restrict the impugned disallowance to the extent of 30% only. Necessary computation to follow. This first substantive ground is taken as partly accepted in foregoing terms." Similarly, the Kolkata Bench of the Tribunal in the case of Dipak Parui (supra), wherein it has been held that the amendment w.e.f. 01.04.2015 to be retrospective effect being curative nature and observed as under:- "5. Latter issue before us is that of correctness of section 40 (a)(ia) disallowance of Rs. 1.79,800/- out of assessee's total claim of Rs.,3,05,364/-. His only argument before us is that section 40(a)(ia) as amended by Finance Act 2014 w.e.f. 01.04.2015 prescribing such disallowance to be restricted to 30% only than the entire amount of Rs. 1,79,800/-; applies with retrospective effect. Learned Departmental Representative vehemently opposes this legal plea. He pleads that the said proviso does not carry any retrospective effect. We find no force in Revenue's instant arguments as a coordinate bench of this tribunal in Shri Rajendra Yadav in ITA No.895/JP/2012 ....
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....dment is to ensure tax compliance. The fact that the intention of the legislature was not to punish the assessee is further reflected from a bare reading of the provisions of section 40(a)(ia). It only results in shifting of the year in which the expenditure can be claimed as deduction. In a case where the tax deducted at source was duly deposited with the Government within the prescribed time, the said amount can be claimed as a deduction from the income in the previous year in which the TDS was deducted. However, when the amount deducted in the form of TDS was deposited with the Government after the expiry of period allowed for such deposit then the deductions can be claimed for such deposited TDS amount only in the previous year in which such payment was made to the government. [Para 16]" 9. On careful perusal of the amendment brought to the Section 40(a)(ia) of the Act by the Finance Act, 2014 w.e.f. 01.04.2015, it is clear that the intent of legislature to reduce the hardship, it is proposed that in case of non-deduction or non-payment of TDS on payments made to residents as specified in section 40(a)(ia) of the Act, the disallowance shall be restricted to 30....
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....hedpur Motor Accessories Stores v. Union of India [1991] 189 ITR 70/ 54 Taxman 521. It has held the amendment inserting first proviso to be retrospective. The special leave petition from this decision of the Patna High Court was dismissed. The view of the Delhi High Court, therefore, that the first proviso to section 43B will be available only prospectively does not appear to be correct. As observed by G.P. Singh in his Principles of Statutory Interpretation, Fourth edn., page 291, "It is well-settled that if a statute is curative or merely declaratory of the previous law retrospective operation is generally intended". In fact the amendment would not serve its object in such a situation unless it is construed as retrospective. The view, therefore, taken by the Delhi High Court cannot be sustained. 10. Respectfully following the above decisions of the Tribunal as well as Hon'ble Supreme Court, we direct the AO to restrict the 100% disallowance confirmed by the CIT(A) to the extent of 30% only taking into account the actual claim of the assessee in its profit and loss account. We order accordingly. Thus, the sole ground of appeal of the assessee is partly allowed. ....
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....f the assessee in ITA No.230/CTK/2019. 26. Now, a procedural issue comes before us that though the hearing of the present appeals were concluded on 25.02.2020, however, this order is being pronounced much after the expiry of 90 days from the date of conclusion of hearing. We find that Rule 34(5) of the Income tax Appellate Tribunal Rules, 1962, which envisages the procedure for pronouncement orders, provides as follows: 34(5) The pronouncement may be in any of the following manners: - (a) The Bench may pronounce the order immediately upon the conclusion of hearing. (b) in case where the order is not pronounced immediately on the conclusion of the hearing, the Bench shall give a date of pronouncement. (c) In a case where no date of pronouncement is given by the Bench, every endeavour shall be made by the Bench to pronounce the order within 60 days from the date on which the hearing of the case was concluded but, where it is not practicable so to do on the ground of exceptional and extraordinary circumstances of the case, the Bench shall fix a future day for pronouncement of the order, and such date shall not ordinarily be a day beyond a further....
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....count of strict enforcement of health advisories with a view of checking spread of Covid 19. The epidemic situation in Mumbai being grave, there was not much of a relaxation in subsequent lockdowns also. In any case, there was unprecedented disruption of judicial wok all over the country. As a matter of fact, it has been such an unprecedented situation, causing disruption in the functioning of judicial machinery, that Hon'ble Supreme Court of India, in an unprecedented order in the history of India and vide order dated 6.5.2020 read with order dated 23.3.2020, extended the limitation to exclude not only this lockdown period but also a few more days prior to, and after, the lockdown by observing that "In case the limitation has expired after 15.03.2020 then the period from 15.03.2020 till the date on which the lockdown is lifted in the jurisdictional area where the dispute lies or where the cause of action arises shall be extended for a period of 15 days after the lifting of lockdown". Hon'ble Bombay High Court, in an order dated 15th April 2020, has, besides extending the validity of all interim orders, has also observed that, "It is also clarified that while calculating time for d....