2017 (6) TMI 1356 - AT - Income Tax

Delayed employee s contribution to Provident Fund - HELD THAT - Section 43B of the Act will not override the provisions of Section 36(1)(va) of the Act with respect to employee s contribution to provident fund. As pertinent to mention that though employee s employer s contribution to P.F are remitted by the employer, they are separate and distinct for which independent provisions have been cast under the Act. Employee s contribution to P.F., is nothing but appropriation of a portion of the salary which is legitimately due to the employee and remitted by the employer in the Government treasury on behalf of the employee in accordance with the provisions of the relevant P.F., Act. Hence it is crystal clear from Section 36(1)(va) of the Act that with respect to remittance of employee s contribution to recognized Provident Fund, deduction will be allowable to the assessee only if the same is remitted within the due date mentioned in the relevant P.F. Act and with respect to employer s contribution to recognized Provident Fund, Section 43B of the Act makes it clear that deduction will be allowable if the remittance is made with in the due date of filing the return of income. For the above stated reasons we do not find any infirmity in the order of the Ld. Revenue Authorities. Accordingly, we confirm the Order of the Revenue Authorities on this issue. Belated remittance of Employees contribution towards ESI - HELD THAT - Since with respect to employee s contribution to ESI, provisions of Section 36(1)(va) of the Act apply by virtue of Section 2(24)(x) of the Act, the decision with respect to employee s contribution towards PF supra will hold good. Accordingly, this issue is also held against the assessee. Professional consultancy charges paid without deducting TDS - HELD THAT - We remit back the matter to the file of the Ld.AO to decide the issue in the light of the decision of ANSAL LAND MARK TOWNSHIP (P) LTD. 2015 (9) TMI 79 - DELHI HIGH COURT after duly verifying the return of income filed by M/s. Manohar Chowdhry Associates and M/s. SAP BPO Services Pvt. Ltd which shall be produced by the assessee before the Revenue Authorities with all requisite particulars. This issue is accordingly disposed off. Deduction u/s.10B of the Act with respect to interest income - HELD THAT - We merit in the submission of the assessee because the interest income will neither form part of export turnover nor total turnover as it has to be taxed under the head Income from other sources . Therefore the ratio laid down in the case Pentasoft Technologies Ltd. 2010 (7) TMI 75 - MADRAS HIGH COURT will apply in the case of the assessee - We hereby direct the Ld.AO to delete the interest income from the export turnover and total turnover if the same is so included in the export turnover /or total turnover, while computing deduction u/s.10B.

Summary

Issues Involved:
1. Belated remittance of employee’s contribution towards Provident Fund.
2. Belated remittance of employee’s contribution towards ESI.
3. Professional consultancy charges paid without deducting TDS.
4. Exclusion of gain on foreign exchange fluctuations from export turnover while computing deduction U/s.10B.
5. Disallowance of excess claim of depreciation.

Detailed Analysis:

1. Belated Remittance of Employee’s Contribution towards Provident Fund:
The Ld.AO disallowed ?2,69,590/- under Section 36(1)(va) of the Act for the late remittance of employee’s contribution to the Provident Fund. The Ld.CIT(A) upheld this disallowance, emphasizing that the due date for such remittance is as per the relevant PF Act, not the due date for filing the return of income. The Tribunal confirmed that Section 36(1)(va) pertains specifically to employee’s contributions and must be remitted within the stipulated period under the PF Act. Section 43B, which allows deductions for employer’s contributions if paid before the return filing date, does not apply to employee’s contributions.

2. Belated Remittance of Employee’s Contribution towards ESI:
The Tribunal held that the provisions of Section 36(1)(va) also apply to employee’s contributions towards ESI by virtue of Section 2(24)(x) of the Act. Consequently, the disallowance for late remittance of ?32,654/- towards ESI was upheld, consistent with the decision on the Provident Fund issue.

3. Professional Consultancy Charges Paid without Deducting TDS:
The Ld.AO disallowed ?1,21,648/- and ?1,57,404/- paid to M/s. Manohar Chowdhry & Associates and M/s. SAP BPO Services Pvt. Ltd., respectively, under Section 40(a)(ia) for short deduction of TDS. The Ld.CIT(A) upheld this disallowance, referencing the jurisdictional ITAT decision in Frontier Offshore Exploration (India) Ltd., which held that Section 40(a)(ia) applies to short deductions as well. The Tribunal remitted the matter back to the Ld.AO to verify if the recipients had included the amounts in their income and paid tax accordingly, as per the amended provisions of Section 40(a)(ia) and the Delhi High Court decision in CIT vs. Ansal Landmark Township Pvt. Ltd.

4. Exclusion of Gain on Foreign Exchange Fluctuations from Export Turnover while Computing Deduction U/s.10B:
The Ld.AO excluded foreign exchange gain from export turnover for computing deduction U/s.10B, treating it as a treasury income. The Ld.CIT(A) allowed the assessee’s plea based on the jurisdictional High Court decision in CIT v. Pentasoft Technologies Ltd., which held that foreign exchange gains related to export activities should be included in the export turnover. The Tribunal directed the Ld.AO to exclude the interest income from both export turnover and total turnover, in line with this precedent.

5. Disallowance of Excess Claim of Depreciation:
The ground regarding the disallowance of excess depreciation amounting to ?13,45,141/- was not pressed by the assessee and was dismissed.

Conclusion:
The appeal was partly allowed for statistical purposes. The Tribunal upheld the disallowances related to the belated remittance of employee’s contributions towards Provident Fund and ESI. It remitted the issue of professional consultancy charges back to the Ld.AO for verification. The Tribunal directed the exclusion of interest income from both export turnover and total turnover while computing deduction U/s.10B. The excess depreciation claim issue was dismissed as not pressed.