2013 (4) TMI 8 - AT - Income Tax

Allowability of ESIC & PF - Addition as professional fees - Held that - Insofar as the Income-tax Act is concerned, the assessee can get the benefit if the actual payment is made before the return is filed, as per the principle laid down in Vinay Cement (2007 (3) TMI 346 - Supreme Court of India) where the deletion of the second Proviso to s. 43B was held applicable to earlier years as well. As the deletion of the 2nd Proviso is retrospective, the case has to be governed by the first Proviso. Dharmendra Sharma (2007 (11) TMI 39 - HIGH COURT , DELHI) & P.M. Electronics (2008 (11) TMI 3 - DELHI HIGH COURT)followed. - If the employees contribution is Not deposited by the due date prescribed and is deposited late, the employer not only pays interest on delayed payment but can incur penalties also. - deduction claimed by the Assessee has to be allowed. - Decided in favor of assessee. Regarding Professional Fees - AO added the sum observing that the assessee failed to reconcile the bills and books of account. - The assessee s stand was that in the receipts it had reflected a sum of Rs.40,200/- as receipt from TCM Property Consultancy Pvt. Ltd. - This sum was arrived at by the assessee by deducting Rs. 5594/- as service tax received from Rs. 45794/- receivable from the aforesaid party. - Held that - matter remanded back for reconsideration.

Summary

Issues:
1. Disallowance of delayed payments made for ESIC & PF, out of employees contribution.
2. Addition of professional fees not reflected in the receipts shown by the assessee.

Issue 1: Disallowance of Delayed Payments for ESIC & PF:
The appellant, a company engaged in manpower consultancy, appealed against the disallowance of Rs.6,58,824 as delayed payments made for ESIC & PF out of employees' contribution for the assessment year 2007-08. The AO observed that the appellant made contributions beyond due dates for both PF and ESIC. The CIT(A) disallowed the deduction, stating that employees' contribution must be made on or before the due date. The appellant relied on the decision of the Hon'ble Karnataka High Court in CIT vs. M.N. Chari. The Tribunal referred to the judgment in CIT vs. AIMIL Limited by the Hon'ble Delhi High Court, emphasizing that deductions are allowable if payments are made before the return filing date. Citing relevant sections and case laws, the Tribunal held that the deduction claimed by the appellant should be allowed. Ground No.1 was accordingly allowed.

Issue 2: Addition of Professional Fees:
The appellant contested the addition of Rs.45,794 as professional fees not reflected in the receipts shown by the assessee. The AO added the amount despite the appellant's explanation that no such payment was received from Trammell Crow Megharaj Property Consultant Pvt. Ltd. The CIT(A) upheld the AO's decision, stating that the appellant failed to provide evidence to reconcile the figures. However, the Tribunal found that the issue should be remanded to the AO for fresh consideration. The appellant argued that the amount reflected in the receipts was from TCM Property Consultancy Pvt. Ltd., which included the disputed sum. The Tribunal noted that the connection between Trammell Crow Megharaj Property Consultant Pvt. Ltd. and TCM Property Consultancy Pvt. Ltd. was not properly understood by the lower authorities. Therefore, the issue was remanded to the AO for reevaluation, providing the appellant with an opportunity to explain and reconcile the receipt. The appeal was partly allowed.

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