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2018 (7) TMI 1844 - AT - Income Tax


Issues involved:
- Challenge against additions u/s 41(1) on account of outstanding amounts treated as bogus liability and ceased to exist.
- Disallowance of employees' contribution towards ESI and PF.
- Disallowance of interest on late payment of TDS u/s 201 and ESI.

Additions u/s 41(1):
The assessee challenged the additions u/s 41(1) related to outstanding amounts treated as bogus liability and ceased to exist. The AR argued that the liabilities being bogus did not fall under the purview of section 41(1), citing a Co-ordinate Bench decision. The Co-ordinate Bench clarified that only trading liabilities that ceased to exist would fall under section 41(1). The AR contended that if a liability is bogus, there is no question of cessation. The Ld. CIT(A) had added outstanding amounts under section 41(1) due to lack of confirmations and ITRs from creditors. However, the Co-ordinate Bench's decision in the assessee's own case for AY 2012-13 was followed, leading to the deletion of additions made by the AO u/s 41(1.

Disallowance of ESI and PF Contributions:
The assessee contested the disallowance of contributions towards ESI and PF due to a delay in deposit. The AR argued that all contributions were paid before the due date except for one, which was paid shortly after. Citing previous relief granted by the ld. CIT(A) and relevant court decisions, the AR asserted that the disallowance should be deleted. Following the decision of the Hon'ble Rajasthan High Court, the disallowance made by the AO was deleted.

Disallowance of Interest on Late Payments:
The assessee challenged the disallowance of interest on late payments of TDS u/s 201 and ESI. The AR contended that these interest payments were compensatory and allowable u/s 37(1) of the Act. The Hon'ble Karnataka High Court's decision supported the allowance of interest on late ESI payments. However, the interest on late TDS payments was disallowed based on decisions by the Hon'ble Bombay High Court and Madras High Court. The interest on late TDS payments was deemed not deductible, as it was related to failure to deduct or remit tax. Consequently, the interest on late ESI payment was allowed, but interest on late TDS payment was rightly disallowed. The appeal was partly allowed based on these grounds.

This detailed analysis of the legal judgment covers the issues raised by the assessee and the decisions made by the tribunal concerning additions under section 41(1), disallowance of ESI and PF contributions, and disallowance of interest on late payments.

 

 

 

 

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