2018 (4) TMI 1789 - AT - Income Tax

Delay in deposit of employee s contribution to Provident Fund and ESI u/s 2(24)(x) r.w.s. 36(1)(va) - HELD THAT - The aforesaid issue is squarely covered against the assessee by Hon ble jurisdictional High Court s judgment in the case of CIT vs. Gujarat State Road Transport Corporation 2014 (1) TMI 502 - GUJARAT HIGH COURT wherein it is categorically held that in the case of delayed deposit of employees contribution to PF the same will not be deductable in computing income under section 28 of the Act. The law so laid down by the Hon ble jurisdictional High Court is binding on us. The mere fact that an appeal against the said decision is pending before the Hon ble Supreme Court does not dilute binding nature of this judicial precedent.- Decided against assessee Addition towards Prior Period Expenditure - HELD THAT - Issue decided in favour of assessee as relying on Adani Enterprises Ltd 2016 (7) TMI 1250 - GUJARAT HIGH COURT assessee being a company was charged uniformly for all years and would therefore have no revenue implication of whether the expenditure was recognised in this assessment year or earlier year. The second ground was that in any case the Revenue had recognised the prior period income. If that be so according to the Tribunal it would be unfair not to recognise the expenditure also of the prior period.

Summary

Issues:
1. Addition on account of delay in deposit of employee's contribution to Provident Fund and ESI.
2. Addition pertaining to prior period expenses.

Analysis:

Issue 1: Addition on account of delay in deposit of employee's contribution to Provident Fund and ESI:
The appellant challenged the addition made by the Assessing Officer for delay in depositing employee's contributions to Provident Fund and ESI. The CIT(A) confirmed the addition, citing the Gujarat State Road Transport Corporation case, which held that delayed deposits are not deductible under section 28 of the Income-tax Act. The appellant's argument regarding the pending appeal before the Supreme Court was dismissed, emphasizing that a non-speaking order of dismissal does not constitute binding precedent. The Tribunal upheld the CIT(A)'s decision based on the binding nature of the Gujarat High Court judgment.

Issue 2: Addition pertaining to prior period expenses:
The appellant contested the addition of ?2,18,090 for prior period expenses made by the Assessing Officer. The CIT(A) upheld the addition, but the appellant argued that the amount was minor compared to the total expenditure and should not be disallowed. Additionally, the appellant highlighted that TDS related to the security expenses considered as prior period expenses was paid in the relevant assessment year. The Tribunal referred to the Pri. CIT vs. Adani Enterprises Ltd case where the Gujarat High Court ruled in favor of the assessee regarding prior period expenditure. Following this precedent, the Tribunal deleted the addition made by the Assessing Officer for prior period expenses.

In conclusion, the appeal was partly allowed, with the Tribunal dismissing the addition related to delay in depositing employee contributions and deleting the addition for prior period expenses based on the precedents set by the Gujarat High Court.