TaxTMI 
TaxTMI 
TaxTMI 
2023 (6) TMI 1431
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....,229/- and Rs. 1,23,57,656/- on account of disallowance u/s 36(1)(va) of the Act being delayed deposit of PF/ESI. 4. Aggrieved by the order of AO, assessee carried the matter before CIT(A) who vide order dated 31.08.2020 in Appeal No.10599/19-20 granted partial relief to the assessee. Aggrieved by the order of CIT(A), assessee is now in appeal and has raised the following grounds of appeal: "1. That on the law, facts and in the circumstances of the case, the Ld. CIT(A) has erred in upholding the action of Ld. AO, CPC, Bangalore, who had made adjustment of Rs. 1,23,57,656/- u/s 36(i)(va) of Income Tax Act 1961 to the returned income of the assessee, on account of non-deposit of EPF and ESI within the prescribed period in law, though the same was paid before the due date of filing of return of income. 2. That on the law, facts and in the circumstances of the case, the Ld CIT(A) has erred in upholding the action of Ld. AO, CPC, Bangalore, who had made addition of Rs. 3,43,817/- on account of club expenses u/s 37 of Income-tax Act. The said business expense of revenue nature was incurred by the company on account of subscription/fees paid to Clubs and is an allowable expenditure ....
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....ing the decision of Pune Bench of Tribunal. 8. We have heard the rival submissions and perused the material available on record. The issue in the present ground is with respect to the disallowance of delayed deposit of employee's contribution of PF & ESI in the intimation passed u/s 143(1) of the Act. We find that Hon'ble Supreme Court in the case of Checkmate Services Pvt. Ltd. (supra) has held that the contribution by the employees to the relevant funds is the employer's income u/s 2(24)(x) of the Act and the deduction for the same can be allowed only if such amount is deposited in the employee's account in the relevant fund before the date stipulated under the respective Acts. Thus the deduction u/s 36(1)(va) of the Act can be allowed only if the employees' share in the relevant funds is deposited by the employer before the due date stipulated in respective Acts. We find that identical issue of disallowance of delayed deposit of PF/ESI dues in the intimation issued u/s 143(1) of the Act arose before the Pune Bench of Tribunal in the case of Cemetile Industries vs. ITO in ITA No.693/PUN/2022 and others. The Co-ordinate Bench of Tribunal vide order dated 23.11.2022 has observed a....
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.... is sine qua non for claiming the deduction. Au Contraire, if the contribution of the employees to the relevant funds is not deposited by the employer before the due date under the respective etc., then the deduction u/s. 36(1)(va) is lost notwithstanding the fact that the share of the employees had already crystallized as income of the employer u/s. 2(24)(x) of the Act. 5. Adverting to the facts of the case, it is seen that the assessee claimed the deduction for the employees' share for depositing the same in the relevant funds beyond the due date as given in Explanation 1 to section 36(1)(va) on the strength of section 43B. The latter section opens with a non-obstante clause and provides that a deduction otherwise allowable in respect of: '(b) any sum payable by the assessee as an employer by way of contribution to any provident fund or superannuation fund or gratuity fund or any other fund for the welfare of employees' shall be allowed only in that previous year in which such sum is actually paid. The first proviso to section 43B states that: 'nothing contained in this section shall apply in relation to any sum which is actually paid by the assessee on or before the due date ....
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....effect and application ab initio, being, the date of insertion of the provision, unless a judgment is categorically made prospectively applicable. The ld. AR candidly admitted that this judgment will equally apply to the disallowance u/s. 36(1)(va) anent to all earlier years as well for the assessments completed u/s. 143(3) of the Act. He, however, accentuated the fact that the instant batch of appeals involves the disallowance made u/s. 143(1) of the Act. It was argued that no prima facie adjustment can be made in the Intimation issued u/s 143(1) of the Act unless a case is covered within the specific four corners of the provision. It was stressed that the action of the AO in making the extant disallowance does not fall in any of the clauses of section 143(1). 7. We fully agree with the proposition bolstered by the ld. AR that adjustment to the total income or loss can be made only in the terms indicated specifically u/s. 143(1) of the Act. Now, we proceed to examine if the case falls under any of the clauses. The rival parties are consensus ad idem that the case can be considered as falling either under clause (ii) or (iv) of section 143(1). For ready reference, we are extract....
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.... to be furnished, but such report has not been furnished along with the return. Clause (iii) contemplates a situation in which deduction exceeds specified statutory limit. For example, section 24(a) provides for a standard deduction for a sum equal to 30% of the annual value, but the assessee has claimed deduction at 40%. These situations warrant an adjustment. It is obvious that none of the three clauses of Explanation (a), defining an incorrect claim apparent from any information in the return, gets magnetized to the facts of the present case. 10. Now we turn to clause (iv) of section 143(1)(a) which provides for 'disallowance of expenditure or increase in income indicated in the audit report but not taken into account in computing the total income in the return'. The words "or increase in income" in the above provision were inserted by the Finance Act, 2021 w.e.f. 01-04-2021. As such, this part of the provision cannot be considered for application during the years under consideration, which are anterior to the amendment. We are left with ascertaining if the disallowance made u/s 36(1)(va) in the Intimation under section 143(1)(a) can be construed as a 'disallowance of expendi....
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....dit report clearly indicated that there was a delay in the deposit of the employees' share in the relevant funds, which was in contravention of the prescription of u/s. 36(1)(va), the assessee chose not to offer the disallowance in computing the total income in the return, which rightly called for the disallowance in terms of section 143(1)(a) of the Act. 11. The ld. AR vehemently argued that it was a case of "increase in income" which has been enshrined in clause (iv) of section 143(1)(a) w.e.f. 01-04-2021 and hence cannot be take note of for the year under consideration. In our considered opinion, the contention is ill-founded. We have noted above that clause (iv) of section 143(1)(a) talks of two different limbs, namely, 'disallowance of expenditure' and 'increase in income' by means of indication in the audit report. Both the limbs are independent of each other. The indication in the audit report for 'Increase of income' should be qua some item of income and not increase of income because of the 'disallowance of expenditure'. Every disallowance of expenditure leads to increase of income. If the contention of the ld. AR is taken to a logical conclusion, then the second expres....
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....ross salary is of Rs. 100, out of which a sum of Rs. 10 has been deducted as contribution to relevant fund, then the debit of Rs. 100 in the Profit and loss account means deduction has been claimed for Rs. 10 as well. Ex consequenti, if deduction of Rs. 10 is not allowed u/s 36(1)(va) for late deposit of the amount before the due date under the respective Act, it would mean that the claim of Rs. 10 included in Rs. 100 is not allowed deduction. 13. The ld. AR referred to section 5 of the Payment of Wages Act, 1936, to contend that deduction made from an employee's salary for the month of October should suffer disallowance only if it is not paid by 15th December. This argument was premised on the language of section 5, which says that the wages of every person employed upon or in any railway, factory or industrial or other establishment upon or in which less than one thousand persons are employed, shall be paid before expiry of the seventh day, after the last day of the wage-period in respect of which the wages are payable. It was contended that salary for the month of October, 2022 will be paid before the 7th of November, which will result into income of the employer only at the ....
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....No.523/PUN/2022 and ITA No.702/PUN/2022 are allowed for statistical purposes and all other appeals are dismissed." 9. Before us, Learned AR has not pointed to any contrary binding decision on the issue nor has placed on record any material to demonstrate that the order of Pune Bench of Tribunal in the case of Cemetile Industries (supra) has been set aside, stayed or overruled by higher judicial forum. Further on identical issue, speaking through one of us i.e. Accountant Member the Co-ordinate Bench of Tribunal of ITAT, Delhi Bench in the case of ACIT vs. Teradata India Pvt. Ltd. (ITA No.1431/Del/2022 order dated 29.03.2023) following the decision of Pune ITAT cited hereinabove and Hon'ble Apex Court has decided the issue against the assessee. In such a situation, we following the reasoning given by the ITAT of Pune Benches and for similar reasons find no reason to interfere with the order of CIT(A) and thus the grounds of assessee are dismissed. 10. Ground No.2 is with respect to the addition of Rs. 3,43,817/- on account of club expenses u/s 37 of the Act. 11. Before us, Learned AR submitted that in the tax audit report, the tax auditor had reported a sum of Rs. 3,43,817/- as ....