2017 (9) TMI 1094 - AT - Income Tax

Eligible business expenditure under section 37(1) - contribution made by the assessee to SPARSH Trust - Held that - contribution made by assessee to this trust is an expenditure incurred wholly and exclusively for the purpose of business which is allowable u/s 37(1). Disallowance for depositing the employee s contribution to PF and ESI beyond the prescribed limit provided in the respective Acts - Held that - Admittedly, contribution to PF & ESI has been paid by the appellant, in all instances, before the due date of filing the return of income u/s 139(1). This fact is therefore, not in dispute. In view of the judgments of the Rajasthan High Court in the case Jaipur Vidhyut Nigam Ltd.(2014 (1) TMI 1085 - RAJASTHAN HIGH COURT) the claim of the appellant is allowable. - Decided against revenue

Summary

Issues:
1. Allowability of contribution made to 'Sparsh Trust' under section 37(1).
2. Allowability of employee's contribution to PF & ESI beyond prescribed time limit.
3. Applicability of section 43B to employee's contribution to PF & ESI.

Analysis:

Issue 1:
The appeal by the revenue challenged the deletion of an addition made by the AO in disallowing the contribution to 'Sparsh Trust.' The Tribunal noted that the contribution was directly linked to the business purpose of procuring better quality milk. The Trust incurred expenses for the health and well-being of milk-producing animals, benefiting the assessee's business. Previous tribunal orders supported the allowability of such contributions as business expenditure under section 37(1). The Tribunal upheld the deletion of the addition, stating that the contribution was an eligible business expenditure.

Issue 2 & 3:
The AO disallowed the employee's contribution to PF & ESI for being deposited beyond the prescribed time limit. However, the CIT(A) allowed the claim, citing precedents and confirming that the contributions were made before the due date of filing the return of income under section 139(1). The Tribunal found no fault in the CIT(A)'s order and confirmed the deletion of the disallowance. The judgments of the Rajasthan High Court and other case laws supported the allowability of the claim. Therefore, the grounds raised by the revenue regarding the employee's contributions were dismissed.

In conclusion, the Tribunal dismissed the revenue's appeal, upholding the allowability of the contribution to 'Sparsh Trust' as a business expenditure under section 37(1) and confirming the employee's contributions to PF & ESI made before the due date. The judgments cited in support of these decisions provided a strong legal basis for the Tribunal's rulings.