2020 (10) TMI 1322 - AT - Income Tax

Disallowance of interest paid - excess payment of interest to a related party - CIT(A) held that the excess interest was just 1 % per annum and well within tolerable limits and deleted the additions - HELD THAT - We do not find any infirmity in this finding of the ld. CIT(A). In the result, we dismiss Ground No. 1 of the revenue . Addition made on account of delay in deposit of employees contribution to PF ESI u/s 36 (1)(va) r.w.s. 2(24)(x) - CIT-A deleted the addition - HELD THAT - CIT(A) applied the judgment of the Hon ble Jurisdictional High Court in the case of CIT vs. M/s. Vijay Shree Ltd. 2011 (9) TMI 30 - CALCUTTA HIGH COURT and CIT vs. REI Agro Limited 2013 (12) TMI 1517 - CALCUTTA HIGH COURT and allowed the claim of the assessee. We find no infirmity in this finding. Hence, we dismiss this ground of the revenue. Sales tax incentive received by the assessee from the Govt. of West Bengal as being capital receipt and hence no taxable - CIT(A) held that the sales tax incentive received from the Government of West Bengal is capital in nature - HELD THAT - We find that the Kolkata C Bench of the ITAT, in the case of ACIT, CC-3(2) vs. Shantinath Detergents Pvt. Ltd. 2020 (3) TMI 964 - ITAT KOLKATA in the case of a group concern of the assessee and has considered an identical facts and adjudicated the same in favour of the assessee. On a query from the Bench, the ld. D/R, could not demonstrate that the scheme under which the Sales Tax incentive was given to the assessee was different from the scheme under which sales tax incentive was given to Shantinath Detergents Pvt. Ltd. On facts, he could not distinguish this case from that of the case of Shantinath Detergents Pvt. Ltd. Hence, we find no infirmity in the order of the ld. CIT(A). We uphold the same by applying the proposition of law laid down by the ITAT, in the case of Detergents Pvt. Ltd. (supra). Hence Ground Nos. 3, 4 5 raised by the revenue are dismissed.

Summary

Issues:
1. Disallowance of interest paid to a related party.
2. Deletion of disallowance for delay in depositing employees' contributions to PF & ESI.
3. Taxability of sales tax incentive received from the Government of West Bengal.

Analysis:
1. The first issue pertains to the disallowance of interest paid to a related party. The Assessing Officer disallowed an amount on the grounds of excess payment of interest. However, the ld. CIT(A) held that the excess interest was minimal and within acceptable limits, leading to the deletion of the disallowance. The ITAT found no fault in this decision and dismissed Ground No. 1 raised by the revenue.

2. The second issue concerns the deletion of disallowance due to a delay in depositing employees' contributions to PF & ESI. The ld. CIT(A) allowed the claim based on judgments of the Hon'ble Jurisdictional High Court, supporting the assessee's position. The ITAT concurred with this finding and dismissed Ground No. 2 raised by the revenue.

3. The final issue revolves around the taxability of a sales tax incentive received from the Government of West Bengal. The ld. CIT(A) treated this incentive as a capital receipt, making it non-taxable. The ITAT noted that the assessee raised this claim for the first time before the ld. CIT(A) and cited relevant Supreme Court decisions to support their position. Referring to a similar case involving a group concern of the assessee, the ITAT upheld the ld. CIT(A)'s decision, dismissing Ground Nos. 3, 4, and 5 raised by the revenue.

In conclusion, the ITAT upheld the decisions of the ld. CIT(A) on all issues, leading to the dismissal of the revenue's appeal. The judgment was delivered on October 22, 2020, in Kolkata.