2020 (2) TMI 977 - AT - Income Tax

Addition u/s 14A read with rule 8D(2)(iii) on account of administrative expenses - HELD THAT - As decided in own case 2019 (7) TMI 1567 - ITAT AHMEDABAD CIT(A) after taking note of the various facts as reproduced above came to the conclusion for non applicability of Rule 8D(2)(ii). No substantive fallacy has been pointed out on behalf of the Revenue in the action of the CIT(A) except placing reliance upon the order of the AO. We find that the action of the CIT(A) is in tune with law and judicial precedents. Without repeating the contents of the CIT(A), we endorse the same. - No merit in the plea of the Revenue for applicability of Rule 8D(2)(iii) where the specification of the nature of the expenditure is available and such expenditure can be reasonably identified toward revenue from taxable operations and revenue from income which is exempt. Assessee is entitled for the deduction of employee benefit expenses to the tune of 2/3rd such expenses. Accordingly the assessee gets relief in part. Hence the ground of appeal of the assessee is allowed in part. MAT Computation u/s 115JB - HELD THAT - The claim of the assessee that no adjustment i s called for while computing book profit is violative of Explanation 1(f) referred to Section 115JB of the Act and thus cannot entertained. No blanket exemption can re ad in the special bench decision in Vireet s case 2017 (6) TMI 1124 - ITAT DELHI in this regard. Disallowance of late payment of employee s contribution to PF and ESI - HELD THAT - As decided in GUJARAT STATE ROAD TRANSPORT CORPORATION 2014 (1) TMI 502 - GUJARAT HIGH COURT tribunal has erred in deleting respective disallowances being employees' contribution to PF Account / ESI Account made by the AO as, as such, such sums were not credited by the respective assessee to the employees' accounts in the relevant fund or funds (in the present case Provident Fund and/or ESI Fund on or before the due date as per the explanation to section 36(1)(va) of the Act i.e. date by which the concerned assessee was required as an employer to credit employees' contribution to the employees' account in the Provident Fund under the Provident Fund Act and/or in the ESI Fund under the ESI Act. - Decided against assessee.

Summary

Issues:
1. Disallowance under section 14A read with Rule 8D
2. Disallowance of late payment of employees' contribution to PF and ESI
3. Addition while computing book profit under section 115JB of the IT Act

Issue 1 - Disallowance under section 14A read with Rule 8D:
The appellant contested the disallowance of ?67,86,490 out of the total disallowance made by the Assessing Officer under section 14A read with Rule 8D. The AO found that the assessee earned dividend income claimed as exempt under section 10(34) but did not disallow corresponding expenses. The CIT (A) reduced the disallowance to ?67,86,490, considering only expenses related to the dividend income. The ITAT referred to a previous year's decision where relief was granted on similar grounds. The ITAT allowed relief to the assessee in part, following the precedent.

Issue 2 - Disallowance of late payment of employees' contribution to PF and ESI:
The assessee's appeal against the disallowance of ?80,870 for late payment of employees' contribution to PF and ESI was dismissed. The AR acknowledged that the issue was unfavorable based on a High Court ruling. The ITAT upheld the decision of the authorities, citing the relevant legal provisions and the High Court judgment.

Issue 3 - Addition while computing book profit under section 115JB of the IT Act:
Regarding the addition of ?67,86,490 while computing income under section 115JB, the ITAT partially allowed relief to the assessee based on a previous decision in the assessee's favor. The ITAT noted similarities with a previous case and granted relief accordingly.

In conclusion, the ITAT allowed the appeal in part, providing relief to the assessee on the issues of disallowance under section 14A read with Rule 8D and addition while computing book profit under section 115JB. However, the disallowance of late payment of employees' contribution to PF and ESI was upheld.