2017 (3) TMI 1732 - AT - Income Tax

Addition on account of delayed deposited of Employees contribution in PF - CIT(A) granted relief to assessee by observing that the amount of PF and ESI was deposited before due date as prescribed u/s. 139(1) - Held that - Admittedly the amount of PF and ESI was not deposited within due date as specified under the respective Act. There is no dispute that the amount of PF and ESI were paid within due dates of filing of IT return in the year under consideration. We find that issue is squarely covered in favour of assessee and against the Revenue as contribution were made within due date of filing IT return as observed by Ld. CIT(A) in his order. While doing so we find support and guidance from the decision of Co-ordinate Bench of this Tribunal in the case of ACIT v. M/s Vijay Shree Ltd. 2011 (4) TMI 63 - ITAT KOLKATA for AY 2006-07 wherein it was held that the employees contribution made towards PF before the due date of filing of return is allowable business expenditure. - Decided in favour of assessee. Addition invoking the provision of Rule 8D(2)(iii) r.w.s. u/s 14A - no exempt income earned by assessee - Held that - Admittedly there was no income earned during the year under consideration from the aforesaid investment. It is a settled law that no disallowance shall be warranted under the provision of Sec. 14A r.w. Rule 8D if there is under the year consideration. See CHEMINVEST LIMITED VERSUS COMMISSIONER OF INCOME TAX-VI 2015 (9) TMI 238 - DELHI HIGH COURT - There is no dispute with regard to the fact that the assessee in the year under consideration has not earned any exempted income. - Decided in favour of assessee.

Summary

Issues Involved:
1. Addition made for delayed deposit of Employees' contribution in PF.
2. Addition made under Rule 8D read with section 14A of the IT Act.

Analysis:

Issue 1: Addition for Delayed Deposit of Employees' Contribution in PF:
The Revenue appealed against the CIT(A)'s order deleting the addition made for delayed deposit of Employees' contribution in PF. The AO observed that the assessee failed to deposit the employees' contribution to Provident Fund and Employees' State Insurance within the due date, invoking Sec. 2(24)(x) r.w.s. Sec. 36(1)(v) of the Act. However, the CIT(A) deleted the addition, noting that the contributions were deposited before the due date of filing the income tax return u/s 139(1) of the Act. The ITAT upheld the CIT(A)'s decision, citing precedents and holding that contributions made before the due date of filing the return are allowable business expenditures. The ITAT dismissed the Revenue's appeal, directing the AO to delete the disallowance.

Issue 2: Addition under Rule 8D read with section 14A of the IT Act:
The Revenue challenged the CIT(A)'s deletion of the addition made under Rule 8D(2)(iii) r.w.s. u/s 14A of the Act. The AO made the disallowance even though no income was earned from the investments during the year. The CIT(A) deleted the addition, emphasizing that no disallowance is warranted if there is no exempt income earned. The ITAT supported this decision by referring to relevant case laws and held that disallowance under Sec. 14A r.w. Rule 8D is not applicable without exempt income. Consequently, the Revenue's appeal was dismissed, and the ITAT partly allowed the assessee's appeal for statistical purposes.

In conclusion, the ITAT upheld the CIT(A)'s decisions in both issues, emphasizing compliance with due dates and the absence of exempt income as key factors in determining the additions. The ITAT dismissed the Revenue's appeals and provided detailed legal reasoning based on precedents and statutory provisions.