2022 (7) TMI 1513 - AT - Income Tax

Delayed payment of employees contribution towards EPF - deposits made before the due date - HELD THAT - The said issue is covered in favour of assessee by the decision of Nipso Polyfabriks Ltd. 2012 (11) TMI 592 - HIMACHAL PRADESH HIGH COURT as held that there exists no difference between employees or employer s contribution and both are to be allowed as deduction if deposited before the due date. The payment of employee s contribution beyond the due date mentioned in the relevant statute but before the due date of filling the return of income u/s 139(1) is allowable expenditure. Thus, the Ground No.2 of the assessee is allowed. Nature of receipt - Subsidy received from Govt of Maharashtra under Industrial Promotion Scheme (IPS) - AO treated the subsidy for acquiring the fixed assets and accordingly reduced the subsidy amount from addition to block of plant and machinery - HELD THAT - The subsidy shall not be reduced from the actual cost of fixed assets u/s 43(1) for the purpose of calculation of depreciation. Thus, respectfully following the ITAT Pune Bench in Shrinivas Engineering Auto Components Pvt. Ltd. 2022 (4) TMI 1486 - ITAT PUNE the AO is directed to delete the addition of depreciation. Accordingly, Ground No.3 and 4 raised by the assessee are allowed. Addition of Dividend - AR submitted that the assessee has already offered the said dividend for taxation, hence there is double addition - HELD THAT - The assessee shall file the required documents before the AO and AO shall verify the facts. If the assessee has already offered the said amount in the return of income there shall not be any double addition. Accordingly, this issue is set aside to the file of the AO for factual verification. Accordingly, the ground is allowed for statistical purpose.

Summary

Issues Involved:
1. Ex parte order by CIT(A).
2. Addition of Rs.1,93,452/- on account of delayed contribution to PF.
3. Treatment of subsidy received under IP scheme.
4. Classification of subsidy as capital receipt.
5. Addition of Rs.48,000/- on account of dividend received.

Summary:

1. Ex parte order by CIT(A):
The Assessee contended that the CIT(A) erred in passing an ex parte order. Despite several opportunities, no one appeared on behalf of the Assessee, leading the CIT(A) to adjudicate based on available records.

2. Addition of Rs.1,93,452/- on account of delayed contribution to PF:
The AO disallowed Rs.1,93,452/- as it was deposited after the due date under the EPF Act but before the due date u/s 139(1) of the Income Tax Act. The Tribunal, referencing CIT vs. Nipso Polyfabriks Ltd. and CIT Vs. Ghatge Patil Transports Ltd., held that both employees' and employer's contributions are deductible if deposited before the due date of filing the return u/s 139(1). Thus, this ground was allowed in favor of the Assessee.

3. Treatment of subsidy received under IP scheme:
The AO treated the subsidy of Rs.2,72,696/- received under the IP scheme as a reduction from the block of assets, thereby disallowing depreciation. The Tribunal, referencing DCIT Vs. Bhagyalaxami Rolling Mills Pvt. Ltd. and ITO Vs. Shrinivas Engineering Auto Components Pvt. Ltd., held that the subsidy under the Industrial Promotion Scheme (IPS) is a capital receipt and should not be deducted from the actual cost of fixed assets u/s 43(1) for depreciation purposes. Thus, this ground was allowed in favor of the Assessee.

4. Classification of subsidy as capital receipt:
The Tribunal reiterated that the subsidy received under the IPS is a capital receipt, not a revenue receipt, and should not be deducted from the actual cost of fixed assets for depreciation purposes. This was consistent with the findings in the aforementioned cases.

5. Addition of Rs.48,000/- on account of dividend received:
The Assessee claimed that the dividend income of Rs.48,000/- was already offered to tax under "Income From Other Sources." The Tribunal directed the AO to verify the facts and ensure no double addition occurs. This ground was allowed for statistical purposes.

Conclusion:
The appeal of the Assessee was partly allowed, with specific directions to the AO for verification and deletion of certain additions. The Tribunal's decision was pronounced in the open Court on 6th July, 2022.