2022 (3) TMI 1549 - HC - Income Tax

Delayed deposit of employees contribution towards PF/ESI - Addition u/s 36(1)(va) r.w.s. 2(24)(x) - HELD THAT - We find the tax liability in so far as the disallowance of payment of Provident Fund and ESI is far below the threshold limit in both the assessment years which would prevent the appellant/Department from pursuing this appeal. However, taking note of the fact that similar substantial question of law has already been admitted in other cases, we leave this question of law open to be decided in an appropriate case. Disallowance u/s 14A r.w.r. 8D - HELD THAT - As Identical issue arose in the assessee s own case for the assessment year 2008-09 2013 (9) TMI 156 - ITAT KOLKATA which was decided in favour of the assessee by the CIT(A) and confirmed by the tribunal and HC - thus applying the decision of this Court, the said issue was decided against the revenue and in favour of the assessee, we find no ground to take a different view in the matter.

Summary

Issues:
1. Disallowance of employees' contribution towards PF/ESI under Section 36(1)(va) read with Section 2(24)(x) of the Income Tax Act, 1961.
2. Disallowance under Section 14A of the Income Tax Act, 1961 read with Rule 8D of the Income Tax Rules, 1962.

Analysis:

Issue 1: Disallowance of employees' contribution towards PF/ESI
The appeal filed by the revenue under Section 260A of the Income Tax Act, 1961 challenges the order of the Income Tax Appellate Tribunal regarding the addition made by the Assessing Officer under Section 36(1)(va) read with Section 2(24)(x) of the Act. The primary contention raised by the revenue is whether the Tribunal erred in law by deleting the said addition without considering CBDT's Circular No.22 of 2015. The High Court noted that similar issues have been admitted in other cases, but due to the low tax liability in this specific instance, the appeal was dismissed. The Court decided to leave this question of law open for consideration in a more suitable case.

Issue 2: Disallowance under Section 14A of the Income Tax Act
The second substantial question of law pertains to the disallowance under Section 14A of the Act read with Rule 8D of the Income Tax Rules, 1962. The Tribunal's order, which was affirmed by the Commissioner of Income Tax (Appeals) and the Tribunal itself in a previous case, was upheld by the High Court. Referring to a previous judgment, the Court rejected the appeal on this issue, as it had already been decided in favor of the assessee in earlier assessment years. Consequently, the Court dismissed the appeal filed by the revenue, answering substantial question of law no.2 against the revenue and leaving substantial question of law no.1 open for future consideration.

In conclusion, the High Court dismissed the revenue's appeal concerning the disallowances related to employees' contribution towards PF/ESI and under Section 14A of the Income Tax Act, 1961. The Court cited previous decisions and low tax effect as reasons for its rulings, leaving one issue open for potential reconsideration in the future.