AI Drafter 
TaxTMI 
TaxTMI 
2022 (11) TMI 1568
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....income and the tax liability, has been grossly unjustified, erroneous and unsustainable and necessary direction be given to the Ld. AO (CPC) to give appropriate relief in accordance with law. 2. That on the facts and in the circumstances of the case, the Ld. CIT(A) was not justified and grossly erred in confirming the addition of Rs. 10,38,973/- made by the Ld. AO(CPC) on account of payment made for employee's contribution to Provident Fund and ESI, despite that fact that it has been paid after the due date as prescribed in the respective PF and ESI Acts but on or before the filing of its original return of Income of the A.Y.2018-19. 3. That on the facts and in the circumstances of the case the Ld. AO(CPC) has wrongly enhanced interest u/s 234C of the Act by Rs. 16,539 as same has to be calculated on returned income instead of assessed income. At the outset, the Ld. A/R for the assessee requested for permission to raise following additional Grounds which were raised in Form 36 bearing No. 4 to 9 as under: - 4. On the facts and circumstances of the case, the appellant wishes to lodge claim for deduction of Education Cess on income tax and dividend....
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....T(A) has erred in holding that by virtue of insertion of explanation 5 to section 5 to section 43B, the provisions of this section shall not apply and shall be deemed never to have been applied to a sum received by the assessee from any of his employees to which the provisions of sub clause (x) of clause (24) of section 2 applied. The said finding is illegal and unjustified. 3 That the Ld. CIT(A) has erred in confirming the disallowance of Rs. 1,77,450/- u/s 36(1)(va) of the Act in respect of employees contributions towards ESI/PF which was deposited before the due date of filing return u/s 139(1) ignoring the decisions of the jurisdictional high court and appellant tribunal. The disallowance confirmed is illegal, unjustified and excessive. Further, following additional ground has also been filed on 04-082022 1. That On the facts and circumstances of the case, the appellant wishes to lodge claim of Export Incentives availed in the form of MEIS of Rs. 2,50,31,247/-as capital receipt in computing tax liability under the normal provision of the Act. 3. As regards to the admissibility of additional ground, the Ld. AR vide his argument has submitted that ad....
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....ITAT only and also admitted by Hon'ble Tribunal. 3.2 We have heard the rival contentions and perused the material available on record. While dealing with the case of NTPC, the Hon'ble Apex Court enunciated that it would not be proper if the Tribunal is confined only to issues arising out of the appeal before the Commissioner of Income-tax (Appeals) and it amounts to taking too narrow a view of the powers of the Appellate Tribunal. Undoubtedly, the Tribunal will have the discretion to allow or not allow a new ground to be raised. But where the Tribunal is only required to consider a question of law arising from the facts which are on record in the assessment proceedings, we fail to see why such a question should not be allowed to be raised when it is necessary to consider that question in order to correctly assess the tax liability of an assessee. Thus, we find that the Courts have always upheld the powers of the Tribunal or rather directed the Tribunals to assess the correct tax liability of the assessee. In case the assessee has wrongly or owing to lack of knowledge pays tax on an item of amount which is not taxable in accordance with the provisions of the Income Tax Act, the a....
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....in the case of DCIT vs. Crescent EPC Projects and Technical Services Limited [ITA No. 399 / Del / 2019 at Page no. 66 to 71 of the PB. It was accordingly submitted that the adjustment so made and confirmed by the ld. CIT(A) NFAC may be directed to be deleted. 6. Per contra, the ld. DR submitted that as per details furnished in the tax audit report, the payment of employee's contribution of PF/ESI amounting to Rs. 10,38,973/- was not made within the prescribed due date U/s 36(1) (va) of the Act and since these amounts were not disallowed in the return of income filed by the assessee, the variance between the tax audit report and ITR has been duly flagged by the CPC in the computerized processing and disallowance U/s 143(1)(a)(iv) on the basis of fact furnished by the assessee was made which clearly fails within ambit of prima facie adjustment to be carried out U/s 143(1)(a)(iv) of the Act. Further, reliance was placed on the amendment brought in by the Finance Act, 2021 wherein the explanation to Section 36(1) (va) has been introduced. It was submitted from the said amendment, that the law is and has always very clear i.e. employee's contribution to specified fund will not be all....
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....ch have been collected by the assessee from its employees have thus been deposited well before the due date of filing of return of income u/s 139(1) of the Act. The issue is no more res integra in light of series of decisions rendered by the Hon'ble Rajasthan High Court starting from CIT vs. State Bank of Bikaner & Jaipur (supra) and subsequent decisions. 17. In this regard, we may refer to the initial decision of Hon'ble Rajasthan High Court in case of CIT vs. State Bank of Bikaner & Jaipur wherein the Hon'ble High Court after extensively examining the matter and considering the various decisions of the Hon'ble Supreme Court and various other High Courts has decided the matter in favour of the assessee. In the said decision, the Hon'ble High Court was pleased to held as under: "20. On perusal of Sec. 36(1)(va) and Sec. 43(B)(b) and analyzing the judgments rendered, in our view as well, it is clear that the legislature brought in the statute Section 43(B)(b) to curb the activities of such tax payers who did not discharge their statutory liability of payment of dues, as aforesaid; and rightly so as on the one hand claim was being made under Section 36 for allowing ....
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.... of interest and other consequences and to get benefit under the Income Tax Act, an assessee ought to have actually deposited the entire amount as also to adduce evidence regarding such deposit on or before the return of income under sub-section (1) of Section 139 of the IT Act. 23. Thus, we are of the view that where the PF and/or EPF, CPF, GPF etc., if paid after the due date under respective Act but before filing of the return of income under Section 139(1), cannot be disallowed under Section 43B or under Section 36(1) (va) of the IT Act." 18. The said decision has subsequently been followed in CIT vs. Jaipur Vidyut Vitran Nigam Ltd. 363 ITR 307, CIT vs. Udaipur Dugdh Utpadak Sahakari Sangh Ltd. 366 ITR 163, CIT vs Rajasthan State Beverages Corporation Limited (supra) and PCIT vs Rajasthan Renewable Energy Corporation Ltd. In all these decisions, it has been consistently held that where the PF and ESI dues are paid after the due date under the respective statues but before filing of the return of income under section 139(1), the same cannot be disallowed under section 43B read with section 36(1) (va) of the Act. 19. We further note that though the ld. ....
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....es 25; Commissioner of Income Tax v. Pamwi Tissues Ltd. 26; Commissioner of Income-Tax, Udaipur v. Udaipur Dugdh Utpadak Sahakari Sandh Ltd. 27 and Nipso Polyfabriks (supra) would reveal that in all these cases, the High Courts principally relied upon omission of second proviso to Section 43B (b). No doubt, many of these decisions also dealt with Section 36(va) with its explanation. However, the primary consideration in all the judgments, cited by the assessee, was that they adopted the approach indicated in the ruling in Alom Extrusions. As noticed previously, Alom Extrutions did not consider the fact of the introduction of Section 2(24)(x) or in fact the other provisions of the Act. 52. When Parliament introduced Section 43B, what was on the statute book, was only employer's contribution (Section 34(1)(iv)). At that point in time, there was no question of employee's contribution being considered as part of the employer's earning. On the application of the original principles of law it could have been treated only as receipts not amounting to income. When Parliament introduced the amendments in 1988-89, inserting Section 36(1)(va) and simultaneously inserting the second p....
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....ctive of Section 43B is to ensure that if assessees are following the mercantile method of accounting, nevertheless, the deduction of such liabilities, based only on book entries, would not be given. To pass muster, actual payments were a necessary pre-condition for allowing the expenditure. 53. 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 www.taxmann.com 33 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 liability is to be paid out of its income whereas the second is deemed an income, by definition, since it is the deduction from the employees' income and held in trust by the employer. This marked distinction....
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.... to the explanation to section 36(1) (va) and section 43B by the Finance Act, 2021 and has also referred to the rationale of the amendment as explained by the Memorandum in the Finance Bill, 2021. We find that there are express wordings in the said memorandum which says "these amendments will take effect from 1^st April, 2021 and will accordingly apply to assessment year 2021-22 and subsequent assessment years". In the instant case, the impugned assessment year is assessment year 2018-19 and therefore, the said amended provisions may not be applied in the instant case. 7.3 However, The Hon'ble Apex Court in the case of "Checkmate Services P Ltd vs. Commissioner of Income Tax - 1", (Supra) deliberated on the issue and clarified that the non-obstante clause in section 43B would not in any manner dilute or override the employer's obligation under section 36(1)(va) to deposit the amounts retained by it or deducted by it from the employee's income, unless the condition that it is deposited on or before the due date, is correct and justified. The non-obstante clause has to be understood in the context of the entire provision of Section 43B which is to ensure timely payment bef....
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....as been wrongly enhanced by Rs. 16,539/- in the order passed by the Assessing officer. Since, the assessed income has been determined at a figure which is more than the returned income, therefore interest under section 234C of the I.T. Act has to be computed on the basis of returned income. Also, as per Explanation to section 234C (1) of the I.T. Act, "tax due on returned income" means the tax chargeable on the total income declared in the return of income furnished by the assessee for the relevant assessment year. As per the provisions of the Act, the assessee is liable to interest under section 234C of the I.T. Act for deferment of advance tax on the returned income. In light of the aforesaid discussions, and as per the provisions of section 234C, the law is clear regarding the chargeability of interest under section 234C of the I.T. Act in a case where the assessment is completed at a figure more than the returned income, therefore, this ground of appeal of the assessee is allowed. Additional Ground No. 1 -Claim of Education Cess as an allowable expenditure 9. During the course of hearing, the ld. AR submitted that the assessee company has debited to its profit and loss ac....
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....A 11. A gain, during the course of hearing, the ld. AR submitted that the assessee had net increase of 2 employees from the end of F.Y.2016-17 to F.Y. 2017-18. Therefore, the Assessee Company was eligible for claiming deduction u/s 80JJAA of the Act in A.Y. 2018-19 and lodged the said claim by way of additional ground. Accordingly, the assessee was eligible to claim the deduction of Rs. 55,798/- i.e. (30% of Rs. 1,85,994/) on employees who joined in FY 2017-18 and who have worked for more than 240 days and having average salary below Rs. 25,000 per month as per the provisions of section 80JJAA of the Act which provides that A person who is having income from business and is liable for tax audit under section 44AB of the Act and is providing employment to new additional employees can claim deduction u/s 80JJAA of the Act of an amount equal to 30 per cent of additional employee cost incurred in the course of such business in the previous year, for 3 assessment years including the assessment year relevant to the previous year in which such employment is provided. However, no claim was made in the return of income. In support of the claim, reliance was also placed on the....
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....utive summary at page no. 3 to 4 of the Executive summary. The assessee also submitted copy of Form 10DA certifying the claim at page no. 84 to 86 of the PB. 13. Thus, it is evident from the facts on record that the assessee was eligible to claim the deduction u/s 80JJAA of the Act, amounting to Rs. 14,93,105/-. The said amount pertained to deduction in respect of additional wages paid in financial years F.Y.2016-17 and F.Y. 2017-18. Before us, the ld. AR contended that the decision taken in the case of International Tractors Limited vs. DCIT (435 ITR 85) by Hon'ble Delhi high court is applicable in the assessee company case. The view taken in the International Tractors Limited vs. DCIT is as follows: "6.7.2 Regarding the claim under section 80JJAA, the appellant filed before me, a copy of the audit report in prescribed form no. 1ODA, which was duly certified by Chartered Accountant. According to the same, the appellant had employed new regular workmen numbering 543 over and above the existing employees numbering 1262. The additional wages paid to the regular workmen by the appellant amounted to Rs. 3,54,57,213/-. The appellant had claimed 30% of the same in the cur....
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....fect. For this proposition, we draw support from the judgment of the Hon'ble Supreme Court in the case of Allied Motors Pvt. Ltd Vs. CIT 224 ITR 677 [SC]. The relevant finding of the Hon'ble Supreme Court reads as under: "In the case of Goodyear India Ltd. v. State of Haryana and Anr. (188 ITR 402) this court said that the rule of reasonable construction must be applied while construing a statute. Literal construction should be avoided if it defeats the manifest object and purpose of the Act. Therefore, in the well-known words of Judge learned Hand, one cannot make a fortress out of the dictionary; and should remember that statutes have some purpose and object to accomplish whose sympathetic and imaginative discovery is the surest guide to their meaning. In the case of R.B. Jodha Mal Kuthiala v. Commissioner of Income-tax, Punjab, Jammu & Kashmir and Himachal Pradesh (82 ITR 570), this Court said that one should apply the rule of reasonable interpretation. A proviso which is inserted to remedy unintended consequences and to made the provision workable, a proviso which supplies an obvious omission in the section and is required to be read into the section t....
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.... operation particularly to give effect to section as a whole. 101. Same view was followed by the Hon'ble Supreme Court in the case of CIT Vs. Kolkata Export Company 404 ITR 654. 102. Respectfully following the ratio laid down by the Hon'ble Supreme Court [supra] we direct the Assessing Officer to allow claim of deduction u/s 80JJAA of the Act as claimed by the assessee. 15. In view of the aforesaid discussions and in the entirety of facts and circumstances of the case and following the consistent decisions taken by the various judiciaries, the assessee is eligible to claim of deduction u/s 80JJAA of the Act. Accordingly, we direct the Assessing Officer to allow claim of deduction u/s 80JJAA of the Act as claimed by the assessee as per the Form 10DA. Additional Ground No. 6 - Claim of deduction u/s 80-IA on power generation in the form of Steam and heat 16. During the course of hearing, the ld. AR submitted that the Assessee company has 4 units of Thermal Fluid Heater which generate Power in the form of heat and one unit of Boiler which generate power in the form of Steam. The undertaking generating power in the form of Heat Energy & Steam and is a....
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....dent Chartered Engineer in respect of generation of power and steam is attached at page no. 184 to 188 of PB which were duly issued after proper verification of records by the Chartered engineer. 19. It was also submitted that the word power is not defined under the Act. Taking the reference of Hon'ble Apex Court in the case of Tanfac Industries (Supra), Mumbai Tribunal in the case of DCIT- vs.- Saf Yeast Company Private Ltd. (ITA No. 1634-1637/Mum/2015, Date of order 24-11-2017) at page no. 219 to 251 of PB has held that the term 'Power' has not been defined to mean electrical power to the exclusion of other forms of power and the term has to be understood in its natural meaning. ITAT further stated that legislature has clearly provided benefit of deduction u/s 80-IA of the Act for generation of any form of power generated by an undertaking. ITAT finally held that boilers being a separate undertaking, the assessee has generated steam power from various sources is entitled for deduction u/s 80-IA of the Act. The same view has been upheld by Hon'ble Tribunal in DCW Ltd. -vs.- Addl. CIT (2010) 42 DTR 369 (Mum) and CIT - vs.- Jay Chemicals [ITA No. 2693/Ahd/2014 dtd. 26-03-2019....
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....mers and to compute the deduction after taking into consideration of total number of power generated into KWH/steam as per the Technical Certificate issued by the Chartered Engineer and compute the deduction accordingly. For the purpose of computation of deduction on Steam, the assessee has taken 50% of landed cost which is supported by Delhi ITAT in the case of Shahi Export and found correct. Therefore, additional Ground is allowed for statistical purposes. Incentive received under Merchandise Export from India Scheme (MEIS) 21. During the course of hearing, the ld. AR has taken yet another additional ground and submitted that the assessee company had received export incentives in form of the Merchandise Exports from India Scheme (MEIS) amounting to Rs. 2,89,31,297/-. Copy of ledger account is submitted at Page No. 268 to 273. The assessee has paid taxes on the same in filing return of income. However, by way of additional ground, the same was claimed as Capital receipt not chargeable to tax. Further, the Ld. AR submitted that the export incentives as per the Foreign Trade Policy in the form of MEIS are incentives granted in form of Reward only. The MEIS was launched as a pa....
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....normal provisions of the Act. However, the appellant in the original return of income has offered the said reward as taxable and before us, the same has been treated as capital receipt. In support, the Ld. AR further placed reliance on the decision of Hon'ble Jammu & Kashmir High Court in the case of 'Shree Balaji Alloys vs. CIT', [333 ITR 335] wherein it was held that Excise duty refund, Interest subsidy and Insurance subsidy received with the object of creating avenues for perpetual employment, to eradicate the social problem of unemployment in the state by accelerated industrial development is capital receipt. Further, SLP filed against the aforesaid order of Shree Balaji Alloys vs. CIT has been dismissed by Hon'ble Apex court. Reliance was also placed on the decision of Hon'ble jurisdictional HC in the case of PCIT vs. M/s Nitin Spinners Limited (116 taxmann.com 26) at page no. 279 to 282 of PB. 24. The underlying facts in this issue are that appellant had received export incentives in form of the Merchandise Exports from India Scheme (MEIS) amounting to Rs. 2,89,31,297/- and claiming it as capital receipt treating the same as reward. This is not an assistance in any for....
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.... Therefore, no disallowance is sustainable as the assessee has not incurred any expenditure to earn the said exempt income. The AR also relied on the decision of the Apex court in the case of South Indian Bank Ltd. -vs.- CIT [2021] 130 taxmann.com 178 (SC)/ [2021] 283 Taxman 178 (SC) at APB, Pg. no. 301 to 309. Further, reliance was also placed on the jurisdictional ITAT in the case of ACIT vs. A U Financiers (India) P Ltd. [102 taxmann.com 290 (Jaipur)] wherein Hon'ble Tribunal has held that where assessee-company had sufficient interest free funds to meet its investments yielding exempt dividend income, disallowance made under section 14A read with rule 8D was unjustified at Page no. 310 to 321 of the PB. 28. In case of ACIT vs. A U Financiers (India) P Ltd. Hon'ble jurisdictional Tribunal has held as under: 27. We have heard the rival contentions and purused the material available on record. Undisputedly, in the earlier years, the matter has been decided in favour of the assessee company and thus, what has to be seen is the fresh investments which have been made during the year. On perusal of financial statements, we find that the fresh investments have been made in ....