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2013 (12) TMI 1559 - AT - Income TaxDelay in deposit of Employees contributions of Provident Fund - Held that - EPF was paid before the due date of filing the return. Thus we direct the A.O. to allow the payment of EPF contributions since the same has been paid before the due date of filing the return. Claim of deduction u/s 80IB - Held that - As the assessee has supplied DG sets to the customers which includes installation testing and commissioning which is intricate and inseparable part of manufacturing activity and therefore any surplus arising therefrom shall be termed as derived from an industrial undertaking and eligible for deduction u/s 80IB of the Act Accordingly the order of the Ld. CIT(A) is reversed and the AO is directed to allow deduction u/s 80IB Violation of provisions of section 40A(3) - Held that - There is no dispute to the fact that the rent has been paid in cash in violation of provisions of section 40A(3) and the Ld. CIT(A) has rightly confirmed the action of the AO in disallowing the same. It is also fact that the disallowance of sum claimed enhances the income of the assessee and the income so enhanced is available u/s 80IB of the Act. Therefore in the facts and circumstances of the case the ld. CIT(A) is not justified in not allowing deduction u/s 80IB of the Act.
Issues involved:
1. Disallowance of employees' Provident Fund contributions. 2. Disallowance of profits attributable to installation and testing charges of DG sets under section 80IB(4). 3. Disallowance of cash payment of rent to the Landlord. 4. Charging/withdrawing penalty interests under sections 234B & 234A of the Income-tax Act, 1961. Issue 1: Disallowance of employees' Provident Fund contributions: The assessee's appeal challenged the disallowance of Rs. 44,626 made by the Assessing Officer (AO) for delayed deposit of employees' Provident Fund contributions. The AO added this amount to the income of the assessee for violating section 36(1)(va) of the Act. The ITAT, Amritsar Bench's decision in a similar case supported the assessee's claim that if EPF is paid before the due date of filing the return, no addition should be made. Relying on this precedent, the ITAT directed the AO to delete the addition, allowing the assessee's appeal. Issue 2: Disallowance of profits attributable to installation and testing charges of DG sets under section 80IB(4): The AO disallowed Rs. 13,74,074 of profits related to installation and testing charges of DG sets, stating it was not derived from an industrial undertaking. The assessee argued that installation is an integral part of the sale transaction and should be eligible for deduction under section 80IB. The ITAT agreed, considering installation, testing, and commissioning as part of the manufacturing activity. Consequently, the ITAT reversed the CIT(A)'s decision and directed the AO to allow the deduction under section 80IB. Issue 3: Disallowance of cash payment of rent to the Landlord: The AO disallowed a cash payment of Rs. 35,000 in violation of section 40A(3) of the Act, adding it to the assessee's income. The CIT(A) upheld this decision, but the assessee argued that despite the contravention, the disallowance enhances income and should still be eligible for deduction under section 80IB. The ITAT agreed with the assessee, directing the AO to allow the deduction under section 80IB in light of the income enhancement. Issue 4: Charging/withdrawing penalty interests under sections 234B & 234A: The appeal also raised concerns about the charging/withdrawing of penalty interests under sections 234B & 234A of the Income-tax Act, 1961. The ITAT deemed these interests as consequential and mandatory, without further elaboration. Ultimately, the ITAT allowed the appeal filed by the assessee in ITA No.331(Asr)/2013. This judgment by the Appellate Tribunal ITAT Amritsar addressed various issues, including the disallowance of EPF contributions, profits from installation charges, rent payment disallowance, and penalty interests. The ITAT ruled in favor of the assessee on the EPF contributions and profits from installation charges, allowing deductions under section 80IB. It also directed the AO to permit the deduction despite the disallowance of rent payment under section 40A(3). The ITAT considered penalty interests under sections 234B & 234A as mandatory. Ultimately, the ITAT allowed the appeal filed by the assessee.
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