TaxTMI 
TaxTMI 
2024 (5) TMI 148
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....nd the facts are identical, we dispose of both these appeal by this consolidated order for the sake of brevity and convenience. 2. The grounds of appeal raised by the assessee for the AY 2017-18 are reproduced as under: "1. For that on the facts of the case, the order passed by the Ld. C.I.T.(A) on 25.07.2023 is completely arbitrary, unjustified and illegal. 2. For that on the facts of the case, the Ld. C.I.T.(A) was wrong in confirming the disallowance towards employees contribution towards P.F. amounting to Rs. 92,12,637/- which is completely arbitrary, unjustified and illegal. 3. For that on the facts of the case, the Ld. C.I.T.(A) was wrong in not considering the facts that the payment was made towards contribution of P.F. of Rs. 92,12,637/- before filing of the return u/s. 139(1) of the LT. Act on 17.08.2017 allowable u/s 36(1)(va)/43B covered by various Court's judgements, as such his finding is completely arbitrary, unjustified and illegal. 4. For that the amendment brought in by Finance Act, 2021 on this issue has been held to be prospective in nature in the case of Shri Harendra Nath Biswas (supra), therefore, Bench reiterate me s....
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.... Nath Biswas (supra), therefore, Bench reiterate the same view that the amendment/explanation brought in by Finance Act, 2021 with effect from 01.04.2021 on this issue is prospective; and taking note that the relevant assessment year i.e. 2015-16 the ibid explanation brought in by Finance Act, 2021, cannot be used/applied to unsettle the settled position of law passed by the Hon'ble jurisdictional High Court in the case of Vijayshree Ltd. (supra), since there is no retrospective legislative over-ruling. Therefore, the finding of the Ld. CIT(A) is completely arbitrary, unjustified and illegal. 6. For that on the facts of the case, the Ld. C.I.T.(A) was wrong in confirming the disallowance of interest paid on TDS u/s. 201(1A) amounting to Rs. 2,25,037/- which is completely arbitrary, unjustified and illegal. 7. For that the appellant reserves the right to adduce any further ground or grounds, if necessary, at or before the hearing of the appeal." 3. First, we take up ITA No. 1008/Kol/2023 for AY 2017-18. Brief facts are that the return of income was E-filed on 17.08.2017 by the assessee company declaring Loss (-)(Rs. 5,95,95,589.00). The return was processed ....
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....egra and the issue has been decided by the Hon'ble Supreme Court in the case of Checkmate Services Pvt. Ltd. Vs. CIT (2022) 143 taxmann.com 178 (SC) dated 12.10.2022 wherein it has been held that "deduction u/s 36(1)(va) in respect of delayed deposit of amount collected towards employees' contribution to PF cannot be claimed when deposited within the due date of filing of return even when read with Section 43B of the Income-tax Act,1961." Relevant extract of the said judgment is reproduced as under: "The distinction between an employer's contribution which is its primary liability under law - in terms of Section 36(1)(iv), and its liability to deposit amounts received by it or deducted by it (Section 36(1)(va)) is, thus crucial. The former forms part of the employers' income, and the later retains its character as an income (albeit deemed), by virtue of Section 2(24)(x) - unless the conditions spelt by Explanation to Section 36(1)(va) are satisfied i.e., depositing such amount received or deducted from the employee on or before the due date. In other words, there is a marked distinction between the nature and character of the two amounts - the employer's liabil....
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....sessee in this respect. 5. Ground no. 5 relates to disallowance of interest paid on TDS u/s. 201(1A) of the Act amounting to Rs. 1,80,495/-. The Ld. CIT(A) relying on the decision of Hon'ble Calcutta High Court in the case of Martin & Harris Private Limited Vs. CIT and also the judgment of Hon'ble Madras High Court in the case of CIT Vs. Chennai Properties & Investment Ltd. (1991) 239 ITR 435 (Madras) has dismissed these grounds of appeal of the assessee. 6. At the time of the hearing before us, the Ld. Counsel for the assessee reiterated the submissions as made before the lower authorities that the assessee had paid interest u/s 201(1A) of the Act amounting to Rs. 1,90,495/- for delayed payment of TDS before filing ofthe income tax return. It was urged that the said payment is not in the nature of penalty but it is the amount of interest which is not penal in nature, therefore, it should be allowed u/s. 37(1) of the Act and for this, he placed reliance on the judgment of CIT Vs. Noble and Hewitt (I) Pvt. ltd. reported in 305 ITR 324 (Delhi). 7. On the other hand, the Ld. CIT, DR heavily relied on the order of lower authorities and prayed before the bench to confirm the ac....
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....e is available to the person responsible/deductor it to say that it was the liability of the other person. Even though, as per the relevant provisions, if the payee takes into account the said receipts for the purpose of computation of income and pays tax thereupon and files return of income, then such person responsible/deductor is absolved of the liability of payment of tax which he was liable to deduct and deposit but he is not absolved from the payment of interest for the period of default from the date from which such tax was liable to be deducted and the date on such tax was actually paid by the deductee/payee. This liability has been statutorily fastened upon such deductor/payer and it cannot be said to be a business expenditure of the payer. Further, the carrying on or continuation of business by such deductor/payer is not dependent upon the payment of tax as nonpayment of tax does not bar a person from continuation of his business nor the discontinuation of business absolves such a person from payment of tax liability. Such tax liability of the deductor, though, may arise in the course of business but nonetheless, this is not the expenditure for the purpose of bus....
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....ncurred (including a deposit, claim or other similar right or obligation) and includes any service fee or other charge in respect of the moneys borrowed or debt incurred or in respect of any credit facility which has not been utilized. Hence, section 36(1)(iii) of the Act allows a deduction for interest paid on capital borrowed while computing the business income of the taxpayer. It provides deduction of the interest paid in respect of capital borrowed for the purpose of the business or profession. 8. In the case of K.M.S.Lakshmanier and Sons v. CIT 1953 AIR 145: 1953 SCR 1057 (SC) it was held that the expression "borrowed money" means real borrowing or real lending. It must be construed in its natural and ordinary meaning and implies a real borrowing and real lending. It requires the existence of a borrower and a lender and accordingly there must be a real borrowing. 9. Unlike section 2(28A), clause (iii) of section 36(1) does not use the term 'debt incurred'. Hence, section 2(28A) defines 'interest' in a wider sense whereas section 36(1)(iii) has used it in a restrictive manner. Therefore, it may be concluded that there must be a loan on which in....
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....ould be dealt with by the Custodian in such manner as the Special Court directed. Any person aggrieved by notification under section 3(2) or section 4(1) was entitled to file a petition of objection before the Special Court. By reason of section 11(1), the Special Court could make such order as it deemed fit directing the Custodian in the matter of disposal of property under attachment. Section 11(2) set out the order in which the liabilities of the persons notified had to be discharged. Such liabilities include all revenues, taxes, cesses and rates due from the persons notified by the custodian. The relevant section 11 of the "Special Court (Trial of Offences relating to Transactions in Securities) Act, 1992" is reproduced as under: 11. Discharge of liabilities. (1) Notwithstanding anything contained in the Code and any other law for the time being in force, the Special Court may make such order as it may deem fit directing the Custodian for the disposal of the property under attachment. (2) The following liabilities shall be paid or discharged in full, as far as may be, in the order as under:-- (a) all revenues, taxes, cesses and rates due from....
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....profits earned. Therefore, an interest paid on delayed payment of sales tax etc. being adding to the cost/purchase price or decreasing the profit margin on sales may be taken into account for computation of profit or to say computation of taxable income, but that concession is not available in respect of interest on Income-tax. Hence, any case laws dealing with the levy of indirect taxes and interest thereupon are not applicable for the purpose of interpretation of the relevant provisions of the Income-tax Act. 22. The Hon'ble Madras High Court in the case of "Chennai Properties and Investment Ltd." (supra) has held that the interest paid for the period of delay takes colour from the nature of the principal amount required to be paid but not paid within time. That the amount required to be deducted was the amount payable as income-tax. The Hon'ble High Court, therefore, held that the interest paid under section 201(1A) of the Act, therefore, would not assume the character of business expenditure and cannot be regarded as a compensatory payment as contended by learned counsel for the assessee. The Hon'ble Madras High Court further held that the fact tha....
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....ld that the amount of tax deducted and not paid plus the amount of interest leviable under section 201(1A) was not a part of the salary of the employees which was withheld. It was tax on salary of the employees which was deducted but not paid. Therefore what has been deducted is tax and it does not retain the character of salary although such deduction has been made from the salary. The Hon'ble Calcutta High Court, therefore, held that the character and quality of interest payable for non-compliance with the provisions of the Act would be the same, whether it is levied for non-submission of return in time or non-payment of tax within the prescribed time or for any other reason and that it cannot be allowed as deduction in computing total income as essentially interest in such a case for non-compliance with the provisions of the Act is inextricably connected with the amount of income-tax. The Hon'ble High Court categorically held that where income-tax itself is not a deductible amount, be it compensation or be it penalty, payable in addition to the tax cannot be allowed as a deduction in computing total income. The relevant part of the order of the Hon'ble Calcutta High ....