TaxTMI 
TaxTMI 
2020 (10) TMI 23
X X X X Extracts X X X X
X X X X Extracts X X X X
....,533 u/s 40A(3) of the Act in view of the fact that, the said expenditure had been incurred for purchase of vegetables and chicken, which are covered under the Income Tax Rules 6DD(e) as exception to the section 40A(3) of the Act. Therefore the additions of Rs. 16,09,533 is illegal and liable to be deleted. 4. That, the Ld. Authorities below erred in facts in circumstances in making adhoc disallowance of Rs. 3,67,309, at the rate of 10% of the expenditure incurred under the head "Gardening Expenses & Cultural Expenses". Therefore the additions of Rs. 3,67,309 is illegal and liable to be deleted. 5. That, the Ld. Authorities below are not correct in disallowing the employees contribution to EPF amounting to Rs. 17,46,576 u/s 36(l)(va) of the Act in view of the fact that the same had been deposited before the due date of filing of return of income and therefore the same is liable to be deleted. 6. For these among other grounds if any to be argued at the time of hearing. 2. Brief facts of the case are that the assessee is a society registered under the Societies Registration Act, 1860 on 01.07.2008. The assessee filed his return of income on 30.09.2011 declaring loss of Rs. 9,39....
X X X X Extracts X X X X
X X X X Extracts X X X X
....show cause notice was issued to the assessee and in response to which the assessee submitted his written reply which reads as under :- "in para no.4 of the questionnaire issued, your honour has raised the issued regarding disallowance of expenses u/s.40A(3) of the Act. For this query it is submitted that, the assessee has made the advance cash payments to its employees for the purchase of vegetables and chickens and the employees of the assessee used to purchase the vegetable and chicken from the market. So the advance cash payment to employees for purchase is not coming under the purview of the provisions of section 40A(3) read with Rule 6DD of the Income Tax Rules. Further in some cases the assessee directly made the payments for purchase of vegetables, fruits & chickens etc from some vendors who belongs to unorganized sectors and they don't accept the cheques. As per the rule 6DD(e)(i) & rule 6DD(e)(ii) of the IT Rules payments made for purchase of agricultural and animal husbandry products are not to be disallowed u/s.40A(3) of the Act in view of the fact that the vegetables, fruits are coming under the agricultural products and chickens are coming under the animal husban....
X X X X Extracts X X X X
X X X X Extracts X X X X
....nefit of the beneficial provision which was not in the legislature but subsequently it has been amended in the interest of the assessee. Therefore, he is eligible for prior to registration u/s.12A of the Act. He also submitted that on the date of amendment the case of the assessee was pending before the CIT(A) and, therefore, the assessment order has been merged with the CIT(A). Accordingly, ld. AR submitted that the pending before the CIT(A) must be treated as assessment is pending. In support of his arguments, he relied on the following case laws, which are placed in the paper book :- i) Shyam Mandir Committee Vs. ACIT, (2016) 49 ITR (Trib) 0462; ii) SNDP Yogam Vs. ADIT(Exemption) (2016) 161 ITD 001(Cochin) 7. Further, in respect of depreciation, ld. AR submitted that the assessee has rightly claimed the same and in respect of disallowance u/s.40A(3) of the Act, he reiterated the submission made before the CIT(A) and submitted that there was no any violation of provisions of Income Tax Act while making payment to the vegetable vendors and for purchase for agricultural and animal husbandry products towards the meals provided to the students, as the society is running a reside....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e that in respect of ground No.1 regarding disallowance of capital expenditure of Rs. 7,94,06,622/-, we observe that the registration certificate granted by the Society Registering Authority from which it is clear that the society has got registered on 01.07.2008 and applied registration in Form No.10A u/s.12A(a) of the Act on 19.07.2011. The CIT after considering the application of the assessee granted registration on 14.09.2011 stating therein that it will effective from 01.04.2011. We have to decide the case for the assessment year 2011-2012, which is not covered under the effective date of registration granted u/s.12AA of the Income Tax Act. We also noted that the assessee has claimed benefit of Section 11 of the Act for the investment in fixed assets to the tune of Rs. 7,94,06,622/-. We noted from the arguments of the ld. AR that the assessee himself got the benefit for the previous years also is not correct because on the date of registration there was no any assessment pending. For more clarification, we would like to reproduce the details of the movement of case of assessee as under :- 1. Financial Year 2010-2011 2. Assessment Year 2011-2012 3. Return of Income filed....
X X X X Extracts X X X X
X X X X Extracts X X X X
....1st day of June, 2007;] [(aa) the person in receipt of the income has made an application for registration of the trust or institution on or after the 1st day of June, 2007 in the prescribed form and manner to the [Principal Commissioner or] Commissioner and such trust or institution is registered under section 12AA;] [(ab) the person in receipt of the income has made an application for registration of the trust or institution, in a case where a trust or an institution has been granted registration under section 12AA or has obtained registration at any time under section 12A [as it stood before its amendment by the Finance (No. 2) Act, 1996 (33 of 1996)], and, subsequently, it has adopted or undertaken modifications of the objects which do not conform to the conditions of registration, in the prescribed form and manner, within a period of thirty days from the date of said adoption or modification, to the Principal Commissioner or Commissioner and such trust or institution is registered under section 12AA;] (b) where the total income of the trust or institution as computed under this Act without giving effect to [the provisions of section 11 and section 12 exceeds the maximum ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....t appeal was filed before the CIT(A) on 24.03.2014, therefore, the same is to be treated as the assessment is pending with the CIT(A), cannot be accepted. In the above proviso to section 12A of the Act, there is specific sentence has been used by the legislature that Assessment are pending before the Income Tax Officer, therefore, we should confine as per the above quoted proviso/sections. Therefore, as per our above findings recorded, we do not find any much weightage on the argument of the assessee that the appeal pending before the CIT(A) is to be treated as assessment is pending before the Assessing Officer. In this regard, for more clarification, we would like to reproduce the Section 2(7A) of the Act, wherein the Assessing Officer has been defined as under :- "(7A) " Assessing Officer" means the Assistant Commissioner [or Deputy Commissioner] [or Assistant Director] [or Deputy Director] or the Income- tax Officer who is vested with the relevant jurisdiction by virtue of directions or orders issued under sub- section (1) or sub- section (2) of section 120 or any other provision of this Act, and the [Additional Commissioner or] [Additional Director or] [Joint Commissioner or ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....nt. In the instant case, the registration u/s.12A of the Act has already been granted on 14.09.2011 when there was neither any appeal nor any assessment was pending either before the first appellate authority or before the AO. Therefore, there were no any assessments pending before the revenue authorities. In view of this, considering to the facts and circumstances of the case, we are of the opinion that the case law relied on by the ld. AR of the assessee is not applicable in the present case in hand. At the time of hearing, a specific query was raised by the Bench to the parties as to whether any assessment or any appeal was pending before granting registration for any assessment year. In response to the same, ld. DR stated at bar that no assessment nor any appeal was pending before the authorities below, to which ld. AR could not controvert the same. 11. In the impugned case, the registration was not granted on 14.09.2011 w.e.f.01.04.2011. Therefore, without registration u/s.12AA of the Income Tax Act in the hands of the assessee the benefit of Section 11 of the Act cannot be given. The case law relied on by the ld.DR in the case of U.P.Forest Corporation [2017] 165 TAXMAN 533 ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....in hostel are not be disallowed u/s.40A(3) of the Act. Accordingly, we direct the AO to delete the addition made u/s.40A(3) of the Act. Thus, ground No.3 of the appeal of the assessee is allowed. 14. In respect of ground No.4, the AO has made adhoc disallowance of Rs. 3,67,309/- at the rate of 10% of the expenses. The assessee could not controvert the findings recorded by the authorities below in respect of addition made by the AO and confirmed by the CIT(A). The assessee has submitted statement of gardening & cultural expenses for the financial year 2010-2011, copies of which are placed in the paper book from pages 81 to 84. However, the expenses have not been clarified that on what basis/object the expenditure have been incurred, neither any narration has been quoted for the said expenses. In view of this, we also uphold the action of lower authorities on this issue. Thus, ground No.4 is dismissed. 15. In respect of ground No.5, with regard to late payment of provident fund amounting to Rs. 17,46,576/- u/s.36(1)(va) of the Act, 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....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... vs. CIT - [2018] 96 taxmann.com 13 (Ker.) (ii) CIT vs. Gujarat State Road Transport Corporation - [2014] 41 taxmann.com 100 (Guj.) 7. Considering the majority view rendered by Hon'ble High Courts on the issue of late deposit of employee's contribution, the decision favourable to the assessee should be followed as per the ratio laid down by Hon'ble Supreme Court in the case of CIT vs. Vegetables Product Ltd., 88 ITR 192 (SC). 8. It may be noted that in the case of PCIT vs. Rajasthan State Beverages Corporation Ltd. reported in 84 Taxman .com. 185, the Supreme Court has dismissed the SLP filed by the Revenue against the judgment of the Hon'ble Rajasthan High Court in Pr. CIT vs Rajasthan State Beverages Corporation Ltd., reported in [2017] 84 taxmann.com 173(Raj.), wherein, where it was held as under :- "Section 43B, read with section 36(1)(va), of the Income-tax Act, 1961 - Business disallowance - Certain deductions to be allowed only on actual payment (PF and ESI contribution) - High Court by impugned order held that amount claimed on payment of PF and ESI having been deposited on or before due date of filing of returns, same could not be disallowed under section 43B o....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ees' Provident Funds Act and ESI Act as well as the concerned notifications which granted a grace period of 5 days (which appears to have been late withdrawn recently on 08.01.2016), we are of the opinion that the ITAT‟s decision in this case was not correct. The assessee undoubtedly was entitled to claim the benefit and properly treat such amounts as having been duly deposited, which were in fact deposited within the period prescribed (i.e. 15 + 5 days in the case of EPF and 21 days + any other grace period in terms of the extent notification). As far as the amounts constituting deductions from employees‟ salaries towards their contributions, which were made beyond such stipulated period, obviously the assessee was not entitled to claim the deduction from its returns. 9. In view of this discussion, the Revenue's appeal is partly allowed. The AO is directed to examine the contributions made with reference to the dates when they were actually made and grant relief to such of them which qualified for such relief in terms of the prevailing provisions and notifications. We also clarify that the assessee would be entitled to deduction in terms of Section 36(1)(va) of the A....