2018 (3) TMI 307 - AT - Income Tax

Deduction in respect of employee s contribution to PF and ESI - contribution deposited beyond the due date prescribed under the relevant law governing contribution to provident fund - Held that - The amendment to the second proviso to the Sec. 43(B) as introduced by Finance Act, 2003, was curative in nat2607 of 2011 ure and is required to be applied retrospectively with effect from 1st April, 1988. Such being the position, the deletion of the amount paid by the Employees Contribution beyond due date was deductible by invoking the aforesaid amended provisions of Section 43(B) of the Act. See Vijayshree Ltd 2011 (9) TMI 30 - CALCUTTA HIGH COURT - Decided against revenue Allowing puja expenses and temple expenses - allowable business expenses - Held that - As decided in assessee s own case for A.Y.2007-08 2013 (12) TMI 1573 - ITAT KOLKATA wherein it was held that such expenses are incurred to keep harmony among the assessee s employees and therefore have to be considered as business expenses.- Decided in favour of assessee TDS u/s 194H - non deduction of tds on commission paid by the assessee to persons who are not residents in India and who rendered services outside India - Held that - As decided in Circular No.786, dated 07.02.2000 If commission does not accrue or arise in India, the same is not taxable. in India. Non-resident agent operates outside the country, no part of his income arises in India, and since the payment is usually remitted directly abroad, it cannot be held to have been received by or on behalf of the agent in India. Such payments were therefore, held to be not taxable in India - Decided in favour of assessee Addition made under Nursery expenses - nature of expenditure - revenue or capital - Held that - We are of the view that in the light of the admitted factual position that expenses were incurred on plants and for replantation without any expansion of plantation area or replantation in an abandoned area, the expenditure in question cannot be regarded as a capital expenditure. - Decided in favour of assessee

Summary

Issues Involved:
1. Deduction of employee's contribution to PF and ESI under Sec. 36(1)(va).
2. Allowance of puja and temple expenses as business expenditure.
3. Disallowance of commission paid to non-residents under Sec. 40(a)(ia) for non-deduction of tax at source.
4. Classification of nursery expenses as capital or revenue expenditure.

Issue-Wise Detailed Analysis:

1. Deduction of Employee's Contribution to PF and ESI:
The Revenue challenged the CIT(A)'s decision to allow the deduction of employee's contribution to PF and ESI, arguing it was contrary to Sec. 36(1)(va). The AO had added ?7,00,683/- to the assessee's income because the contribution was deposited beyond the due date. The CIT(A) allowed the deduction, stating contributions made before the return filing due date should be allowed. The Tribunal referenced the Calcutta High Court's decisions in M/s. Akzo Nobel India Ltd. and CIT vs Vijayshree Ltd., which supported the CIT(A)'s view. The Tribunal found no merit in the Revenue's appeal and dismissed it.

2. Allowance of Puja and Temple Expenses:
The Revenue contested the CIT(A)'s decision to allow puja and temple expenses as business expenditures. The AO had disallowed these expenses, totaling ?3,93,697/-, arguing they lacked a business nexus. The CIT(A) allowed the expenses, referencing a prior decision in the assessee's own case for A.Y. 2007-08, which held such expenses maintain employee harmony and are thus business-related. The Tribunal upheld the CIT(A)'s decision, dismissing the Revenue's appeal.

3. Disallowance of Commission Paid to Non-Residents:
The AO disallowed ?11,50,740/- paid as commission to non-residents, citing non-deduction of tax at source under Sec. 40(a)(ia). The CIT(A) deleted the disallowance, noting the commission was for services rendered outside India by agents without permanent establishments in India, thus not taxable in India. The Tribunal upheld the CIT(A)'s decision, referencing its own prior ruling and CBDT Circular No. 786, which clarified non-resident agents' commissions for services rendered outside India are not taxable in India. The Tribunal found no merit in the Revenue's appeal and dismissed it.

4. Classification of Nursery Expenses:
The AO classified ?67,12,313/- spent on nursery expenses as capital expenditure, arguing it was for long-term use in tea gardens. The CIT(A) disagreed, citing a Tribunal decision in the assessee's favor for A.Y. 2009-10, which treated similar expenses as revenue expenditure because they were for replantation without expanding the plantation area. The Tribunal upheld the CIT(A)'s decision, finding the expenses were for maintaining existing plantations, not capital investment. The Tribunal dismissed the Revenue's appeal.

Conclusion:
The Tribunal dismissed the Revenue's appeal on all grounds, upholding the CIT(A)'s decisions regarding the deduction of PF and ESI contributions, allowance of puja and temple expenses, disallowance of commission paid to non-residents, and classification of nursery expenses as revenue expenditure.