2019 (7) TMI 1681 - AT - Income Tax

Contribution to Pension Fund Trust - HELD THAT - As decided in own case 2014 (8) TMI 1199 - ITAT CHENNAI bare reading of section 36(1)(iv) makes is amply clear that the sum should be contributed by the employer towards a recognized provident fund or approved superannuation funds subject to such limits as may be prescribed for recognizing provident fund or approving the superannuation fund. The section does not lay down any specific condition that the fund should be approved by the jurisdictional Commissioner or Chief Commissioner only. In the present case, the assessee is contributing in the Pension Fund Scheme jointly floated by twelve State Transport Corporations operating in different districts of the state of Tamil Nadu. All the State Transport Corporations are signatories to the Trust Deed for setting up of joint State Transport Employees Pension Fund Scheme. It is not in dispute that the said fund has been recognized by the CIT-VII, Chennai. Once the assessee is contributing towards recognized fund, the assessee is entitled to get the benefit for the contributions made to the said fund. Allowing the damages for remittance to Pension Fund Trust - HELD THAT - As decided in own case 2018 (11) TMI 1798 - ITAT CHENNAI issue is decided in favour of the assessee and against the Revenue. Disallowance of Chairman s Office Expenses - HELD THAT - As submitted by ld. D.R that during the course of Appellate proceedings, the assessee has submitted their evidences before the ld.CIT(A) and the ld.CIT(A) has decided the matter without calling for the remand Report from the ld.Assessing Officer. The ld.AR has not denied the said factual position. We accordingly set aside the matter to the file of ld.CIT(A) to seek the Remand Report from the ld.Assessing Officer and decide the matter afresh as per law. This Ground relating to the expenses incurred for Chairman s Office Expenses is allowed for statistical purposes. Disallowance u/s.14A read with Rule 8D - HELD THAT - By no stretch of imagination can Section 14A or Rule 8D be interpreted so as to mean that the entire tax exempt income is to be disallowed. The window for disallowance is indicated in Section 14A, and is only to the extent of disallowing expenditure incurred by the assessee in relation to the tax exempt income . This proportion or portion of the tax exempt income surely cannot swallow the entire amount as has happened in this case. See JOINT INVESTMENTS PVT LTD VERSUS COMMISSIONER OF INCOME TAX 2015 (3) TMI 155 - DELHI HIGH COURT .

Summary

Issues Involved:
- Appeal against orders of CIT(A) for assessment years 2008-09 & 2012-13.
- Challenge to the action of allowing contributions to Pension Fund Trust.
- Challenge to the action of allowing damages for remittance to Pension Fund Trust.
- Challenge to the action of allowing claim towards Chairman's Office Expenses.
- Challenge to the restriction of disallowance under section 14A.

Analysis:

Issue 1: Contributions to Pension Fund Trust
The Revenue challenged the action of the CIT(A) in allowing the contribution to Pension Fund Trust. The Appellate Tribunal referred to a previous decision and held that since the assessee was contributing to a recognized fund, the contributions were allowable. Citing relevant sections and case law, the Tribunal decided in favor of the assessee, dismissing the Revenue's grounds.

Issue 2: Damages for Remittance to Pension Fund Trust
The Revenue contested the allowance of damages for remittance to the Pension Fund Trust. The Tribunal referred to a previous decision where the nature of the payment was considered compensatory and not penal. Following the same reasoning, the Tribunal dismissed the Revenue's grounds, upholding the decision of the CIT(A) to allow the damages.

Issue 3: Chairman's Office Expenses
The Revenue challenged the allowance of the claim towards Chairman's Office Expenses. The CIT(A) had allowed the expenses after considering the necessity and official nature of the expenditure. However, the Tribunal noted that the matter was decided without the Assessing Officer's remand report. Therefore, the Tribunal set aside the decision and directed a fresh consideration based on the law.

Issue 4: Disallowance under Section 14A
The Revenue disputed the restriction of disallowance under section 14A to the extent of exempt income. The Tribunal referred to relevant case law and confirmed the CIT(A)'s decision to restrict the disallowance to the amount of exempt income. Following the decision of the Delhi High Court, the Tribunal dismissed the Revenue's grounds.

In conclusion, the Tribunal partly allowed the appeal in one case for statistical purposes and dismissed the appeal in the other case. The judgments were pronounced on 05/07/2019 at Chennai, with detailed analysis provided for each issue raised in the appeals.