2017 (9) TMI 1711 - AT - Income Tax

Addition u/s.14A r.w. Rule 8D - Held that - Both the lower authorities are of the opinion that the assessee s investment involved at least this much expenditure in earning its exempt dividend income. The case file however indicates that the assessee has not derived any such exempt income in the impugned assessment year. We therefore quote hon ble jurisdictional high court s decision in CIT vs. Corrtech Energy P. Ltd 2014 (3) TMI 856 - GUJARAT HIGH COURT holding that Section 14A read with computation provision enshrined in Rule 8D does not apply in absence of any exempt income in relevant previous year. We therefore quote the above judicial precedent to delete the impugned disallowance Addition u/s. 36(1)(va) r.w.s. 2(24) on account late payment of employees contribution to PF & ESI in question - Held that - There is no dispute that hon ble jurisdictional high court s decision in CIT vs. Gujarat State Road Transport Corporation 2014 (1) TMI 502 - GUJARAT HIGH COURT upholds such a disallowance in principle. The assessee s case however is that relevant due date has to be seen not from the relevant month of salary but the one pertaining to its payment. He then files a computation chart indicating it to have paid above employees PF/ESI contributions on 22.05.2009 and 28.05.2009 as against the due dates thereof following on 20.06.2009. The Revenue fails to dispute this factual position. We therefore quote this tribunal s co-ordinate bench decision in Kanoi paper & Industries Ltd. vs. ACIT 2001 (5) TMI 139 - ITAT CALCUTTA-E that the relevant date in such case is that of month of the actual payment of wages/salaries. We therefore rely on the above co-ordinate bench decision and direct the Assessing Officer to delete the impugned disallowance as well. - Assessee appeal allowed

Summary

Issues:
1. Disallowance under Section 14A r.w. Rule 8D of the Income Tax Rules.
2. Disallowance under Section 36(1)(va) r.w.s. 2(24) of the Act on account of late payment of employees' contribution to PF & ESI.

Issue 1: Disallowance under Section 14A r.w. Rule 8D of the Income Tax Rules:
The appeal pertains to the assessment year 2010-11, challenging the disallowance of a sum under Section 14A r.w. Rule 8D. The lower authorities disallowed/added a specific amount, citing the investment's expenditure in earning exempt dividend income. However, as per the case file, no exempt income was derived in the relevant assessment year. Citing the decision in CIT vs. Corrtech Energy P. Ltd, it was established that Section 14A along with Rule 8D does not apply in the absence of exempt income. Therefore, the impugned disallowance was deleted based on this judicial precedent.

Issue 2: Disallowance under Section 36(1)(va) r.w.s. 2(24) of the Act on account of late payment of employees' contribution to PF & ESI:
The second substantive ground challenges the correctness of disallowance under Section 36(1)(va) r.w.s. 2(24) concerning late payment of employees' PF & ESI contributions. Referring to the decision in CIT vs. Gujarat State Road Transport Corporation, it was acknowledged that such disallowance is upheld in principle. However, the assessee argued that the relevant due date should be determined based on the actual payment date rather than the month of salary. Evidence was presented showing that the contributions were paid before the due dates. Relying on the decision in Kanoi Paper & Industries Ltd. vs. ACIT, it was established that the relevant date is that of the actual payment. Consequently, the Assessing Officer was directed to delete the disallowance related to late payment of employees' contributions.

In conclusion, the appellate tribunal allowed the assessee's appeal, overturning the disallowances made under Section 14A and Section 36(1)(va) of the Income Tax Act for the respective issues discussed. The judgment was pronounced on September 22, 2017, in favor of the assessee.