2005 (10) TMI 424 - AT - Income Tax

Summary

Issues involved:
1. Disallowance of employer's contribution to PF and FPD under section 43B of the Income-tax Act, 1961.
2. Disallowance of employees' contribution under section 36(1)(va).
3. Curtailing the deduction under section 80HHC by reducing service charges and interest received from adjusted business profits.
4. Disallowance of deduction under section 80-I for service charges and interest income.

Issue 1:
The appeal contested the disallowance of the employer's contribution to PF and FPD under section 43B of the Income-tax Act, 1961. The Tribunal found that the administrative charges were not hit by the provisions of section 43B. Following the deletion of the 2nd proviso to section 43B, payments made before the due date for filing the return of income were allowed. The disallowance related to the employer's contribution was directed to be deleted, and Ground Nos. 1 & 2 were allowed accordingly.

Issue 2:
Regarding the employees' contribution, the Tribunal determined that section 43B was not applicable. Payments made beyond the due date prescribed under the relevant Act were not deductible under section 36(1)(va). As the payments in question were made beyond the prescribed time limit, the disallowance concerning the employees' contribution was confirmed.

Issue 3:
The issue involved curtailing the deduction under section 80HHC by reducing service charges and interest received from adjusted business profits. The Assessing Officer curtailed the deduction, stating that income not derived from the business of export did not qualify for deduction under section 80HHC. The CIT(A) upheld this action, excluding 90% of service charges and interest received, as they were not related to export activity. The Tribunal set aside the CIT(A)'s order and remitted the issue back to the Assessing Officer for necessary verification and re-adjudication in line with relevant legal precedents.

Issue 4:
The final issue concerned the disallowance of deduction under section 80-I for service charges and interest income. The Tribunal agreed that service charges and interest income were not derived from industrial undertakings. However, it suggested that only net income from service and interest should be excluded, and directed the Assessing Officer to verify and re-adjudicate the matter accordingly. The order of the CIT(A) was set aside for further examination in light of the provided guidance.

In conclusion, the appeal was partly allowed for statistical purposes, addressing various disallowances and deductions under different sections of the Income-tax Act, 1961.