2018 (9) TMI 1801 - AT - Income Tax

Addition on account of rent payment to M/s Tag Enterprises in absence of Rent agreement - Held that - CIT (A) has relied on the case of M/s Murjani Retails Pvt. Ltd. a group company of the assessee in which the CIT (A) has decided the identical issue in favour of the assessee. The assessee has explained during the appellate proceedings that the premises Metro Dome 4th Floor Metro Theatre M.G. Road Mumbai was shared by the group company aforesaid and the rent and amenities were also equally shared. The coordinate Bench has allowed the identical deduction in the case of the group company M/s Murjani Retails Pvt. Ltd.. Since the coordinate Bench has decided the identical issue in favour of the assessee and since the order of the Ld. CIT (A) is in accordance with the findings of the coordinate Bench we do not find any reason to interfere with the findings of the Ld.CIT (A) Addition on account of unpaid VAT and Service tax liability - whether assessee should have credited these amounts to the P&L account and should have claimed deduction u/s 43B? - Held that - The findings of the Ld. CIT (A) are based on the evidence on record. Since the assessee has not debited the profit and loss account the assessee has not claimed the same as expenditure. Therefore the said amount cannot be added back u/s 43B of the Act. Hence we do not find any legal or factual infirmity in the findings of the Ld. CIT (A) to interfere with. Hence we uphold the findings of the Ld. CIT (A) and dismiss this ground of appeal of the revenue. Disallowance under the provisions of section 36(1)(va) read with section 2(24)(x) - payment of Employees contribution to the Provident Funds beyond the prescribed date under the PF Act - Held that - We notice that the AO has admitted in its report that the assessee had paid the amount of contribution in question before the due date of filing of return. Since the findings of the Ld. CIT (A) are based on the evidence on record and the report submitted by the AO we do not find any infirmity in the said findings to interfere with the same. We accordingly uphold the findings of the Ld. CIT (A) and dismiss this ground of appeal of the revenue.

Summary

Issues Involved:

1. Deletion of addition on account of rent payment to M/s Tag Enterprises in absence of Rent agreement.
2. Deletion of addition on account of unpaid VAT and Service tax liability.
3. Deletion of disallowance on account of employees' contribution to PF and ESIC beyond the due date.

Detailed Analysis:

1. Deletion of Addition on Account of Rent Payment to M/s Tag Enterprises:

The revenue challenged the deletion of an addition of ?1,24,60,604/- made by the AO on account of rent paid to M/s Tag Enterprises, arguing that there was no rent agreement between the assessee and M/s Tag Enterprises. The assessee contended that the office space was shared with group affiliates as per clause 14 of the agreement, which permitted assignment of rights to specific affiliates, including the assessee. The CIT (A) found that the office space was used for business purposes and the rent was paid after due deduction of tax at source under section 194I. The CIT (A) relied on a similar case of M/s Murjani Retail P. Ltd., where the same issue was decided in favor of the assessee. The ITAT upheld the CIT (A)'s findings, noting that the AO did not dispute the business use of the office space or the payment of rent. The ITAT dismissed the revenue's appeal, affirming the CIT (A)'s decision.

2. Deletion of Addition on Account of Unpaid VAT and Service Tax Liability:

The revenue contested the deletion of an addition of ?53,67,633/- on account of unpaid VAT and service tax liability, arguing that these amounts should have been credited to the P&L account and claimed as deductions under Section 43B. The assessee argued that since these amounts were not debited to the P&L account, they were not claimed as expenditure and hence could not be added back under Section 43B. The CIT (A) obtained a remand report which confirmed that the liabilities were not passed through the P&L account. The CIT (A) concluded that what was not claimed as an expense could not be added back to the income. The ITAT upheld the CIT (A)'s findings, agreeing that the amounts not debited to the P&L account could not be added back under Section 43B, and dismissed the revenue's appeal.

3. Deletion of Disallowance on Account of Employees' Contribution to PF and ESIC:

The revenue challenged the deletion of a disallowance of ?1,48,296/- under Section 36(1)(va) read with Section 2(24)(x) on account of employees' contribution to PF and ESIC paid beyond the prescribed due date under the PF Act. The assessee argued that the contributions were paid before the due date for filing the return of income under Section 43B. The CIT (A) relied on a remand report from the AO, which confirmed that the contributions were paid before the due date for filing the return. The ITAT upheld the CIT (A)'s findings, noting that the AO's report confirmed the timely payment of contributions, and dismissed the revenue's appeal.

Similar Case Analysis:

In the case of M/s M.K. Retail Pvt. Ltd., the issues and arguments were identical to those in the case of M/s M.C. Retail Pvt. Ltd. The CIT (A) had similarly deleted the additions made by the AO, and the revenue's appeal raised the same grounds. The ITAT, consistent with its findings in the case of M/s M.C. Retail Pvt. Ltd., upheld the CIT (A)'s decision and dismissed the revenue's appeal.

Conclusion:

In both cases, the ITAT dismissed the revenue's appeals, upholding the CIT (A)'s decisions to delete the additions on account of rent payment, unpaid VAT and service tax liability, and employees' contribution to PF and ESIC. The ITAT's decisions were based on the evidence on record and the findings of the CIT (A), which were found to be legally and factually sound.