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2018 (8) TMI 1184 - AT - Income TaxAddition of ESI Contribution and PF Contribution 36(1)(va) r.w.s 43B - failure to deposit before due date - Held that - we are inclined to restore the issue on hand to the file of AO for fresh adjudication and in accordance to the provision of law as well as after considering the order of this Tribunal in the case of Suzlon Energy Ltd. (2018 (8) TMI 447 - ITAT AHMEDABAD). Depreciation - personal use of the vehicles - Held that - the assessee has been given depreciation on the vehicle in the earlier years but the AO made no disallowance for the same. Therefore in our view the principle of consistency needs to be made. - following the decision in the case o Sayaji Iron & Engg. Co. 2001 (7) TMI 70 - GUJARAT HIGH COURT decided in favor of assessee.
Issues Involved:
1. Disallowance of ESI and PF contributions under section 36(1)(va) of the Income Tax Act. 2. Disallowance of vehicle depreciation on grounds of personal use. Issue-wise Detailed Analysis: 1. Disallowance of ESI and PF Contributions: The first issue concerns the disallowance of ?3,04,007 under section 36(1)(va) read with section 2(24)(x) of the Income Tax Act. The assessee, a private limited company engaged in the manufacturing and trading of pharmaceutical products, failed to deposit the employee’s contribution to PF/ESI within the due date specified under the relevant Act. The Assessing Officer (AO) disallowed the contributions based on the judgment of the Hon’ble Gujarat High Court in the case of CIT vs. GSRTC, which upheld such disallowances. The Commissioner of Income Tax (Appeals) [CIT(A)] confirmed the AO’s decision. The assessee’s representative conceded that the issue is covered against the assessee by the Gujarat High Court judgment but argued that the due date for depositing the contributions should be considered from the month of salary payment, not when the salary became due. The representative cited the jurisdictional Tribunal's order in Suzlon Energy Ltd. vs. DCIT, which supports this view. The Tribunal noted that while delayed deposits should be disallowed, the question of delay should be decided based on the actual payment date of wages/salaries. The Departmental Representative (DR) argued that the disallowance for ESI contributions should be based on the month they became due, citing the Payment of Wages Act, 1936. However, the Tribunal decided to restore the issue to the AO for fresh adjudication, considering the Tribunal's earlier order in Suzlon Energy Ltd. Thus, the ground of appeal was allowed for statistical purposes. 2. Disallowance of Vehicle Depreciation: The second issue pertains to the disallowance of ?1,16,570 on account of vehicle depreciation, claimed by the assessee. The AO disallowed 10% of the total depreciation claimed, citing the absence of details regarding the usage of the vehicles, suggesting personal use. The CIT(A) upheld this disallowance, noting the assessee's failure to provide usage details. The assessee argued that no disallowance was made in previous years for personal use of vehicles and cited the Gujarat High Court's judgment in Sayaji Iron & Engg. Co. vs. CIT, which held that a corporate entity cannot have personal use of vehicles. The Tribunal agreed, noting the principle of consistency and the absence of disallowance in earlier years. The Tribunal reversed the orders of the lower authorities, allowing the ground of appeal. Conclusion: The Tribunal restored the issue of ESI and PF contributions to the AO for fresh adjudication, allowing the appeal for statistical purposes. It reversed the disallowance of vehicle depreciation, allowing the appeal on this ground. The appeal was partly allowed for statistical purposes.
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