2020 (6) TMI 466 - AT - Income Tax

Delayed payments in employee s contribution to welfare fund - HELD THAT - This issue is squarely covered by the decision of the Supreme Court in the case of Commissioner of Income Tax vs. Alom Extrusion Ltd. 2009 (11) TMI 27 - SUPREME COURT . Therefore, employee s contribution deposited beyond the due dates specified under the relevant PF laws, but before the due date of filing income-tax return as specified in section 43B of the Act, cannot be treated as the deemed income of the appellant within the meaning of section 36(1)(va) read with section 2(24)(x) of the Act. Therefore, the addition of ₹ 19,85,240/- made by the AO has been rightly deleted by ld CIT(A).That being so, we decline to interfere with the order of Id. C.I T.(A) in deleting the aforesaid addition. His order on this addition is, therefore, upheld and the grounds of appeal of the Revenue are dismissed. Addition u/s 36(2) proviso (i) of the Act, pertaining to bad debts - HELD THAT - We note that the assessee company has debited written off on account of bad debts in its audited Profit Loss account.CIT(A) relied on the judgment of the Apex Court in the case of TRF Ltd vs CIT 2010 (2) TMI 211 - SUPREME COURT wherein as held After 1st April, 1989, it is not necessary for the assessee to establish that the debt, in fact, has become irrecoverable. It is enough if the bad debt is written off as irrecoverable in the accounts of the assessee. Addition u/s 194C(7) read with section 40a(ia) - HELD THAT - Through the submission put forth on behalf of the assessee along with the documents furnished and the case laws relied upon, and perused the fact of the case including the findings of the ld CIT(A) and other materials available on record. We have gone through the order of ld CIT(A) and noted that ld CIT(A) has reached on a logical conclusion, hence we note that there is no infirmity in the order of the ld. CIT(A). That being so, we decline to interfere in the order passed by the ld. CIT(A), his order on this issue, is hereby upheld and the ground no. 3 raised by the revenue is dismissed. Addition which pertains to reimbursement of expenses - HELD THAT - A.O. has treated the reimbursement expenditure as income due to the facts that TDS was deducted. These reimbursements under no stretch of imagination can be considered to be income at the hands of the appellant. The deduction of TDS on expenditure reimbursed would not change the nature of these payments. There are number of judicial decisions which have held the reimbursement of expenditure does not constitute income assessable to tax. Addition being Puja and subscription expenses - HELD THAT - We note that Puja and subscription expenses are incidental to the assessee s business therefore should be allowed We note that there is no infirmity in the order of the ld. CIT(A) . That being so, we decline to interfere in the order passed by the ld. CIT(A), his order on this issue, is hereby upheld and the ground no. 5 raised by the revenue is dismissed. Disallowance u/s 14A read with Rule 8D of the Rules - HELD THAT - Since the assessee does not have any exempt income therefore no disallowance is warranted as held in the case of Chem Investment vs CIT 2015 (9) TMI 238 - DELHI HIGH COURT wherein it was held that if there is no exempt income earned or received by the assessee, no disallowance is warranted u/s 14A read with Rule 8D of the Rules. Since this issue is squarely covered by the Hon ble Delhi High Court in the case of Chem Investment (supra) therefore, we dismiss the ground no. 6 raised by the revenue and upheld the order of ld CIT(A). Appeal of the revenue is dismissed.

Summary

Issues Involved:
1. Addition on account of delayed payments in employee’s contribution to welfare fund.
2. Addition related to bad debts under Section 36(2) proviso (i) of the Income Tax Act.
3. Addition under Section 194C(7) read with Section 40(a)(ia) of the Income Tax Act.
4. Addition pertaining to unexplained income from reimbursement of expenses.
5. Addition of Puja and subscription expenses.
6. Addition on account of disallowance under Section 14A read with Rule 8D of the Income Tax Rules.

Issue-wise Detailed Analysis:

1. Delayed Payments in Employee’s Contribution to Welfare Fund:
The Assessing Officer (AO) added ?19,85,240 to the total income due to delayed payments of employee’s contributions to welfare funds, which were not credited by the due date. The Commissioner of Income Tax (Appeals) [CIT(A)] deleted this addition, citing various case laws including the Supreme Court decision in Commissioner of Income Tax vs. Alom Extrusion Ltd., which held that contributions paid before the due date of filing the income-tax return should be allowed. The Tribunal upheld the CIT(A)'s decision, confirming that the delayed payments made before the due date of filing the return cannot be treated as deemed income under Section 36(1)(va) read with Section 2(24)(x) of the Act.

2. Addition Related to Bad Debts:
The AO disallowed ?12,72,983 as the assessee failed to provide evidence that the debts were taken into account in computing income in any previous year. The CIT(A) deleted the addition, relying on the Supreme Court judgment in TRF Ltd vs CIT, which clarified that post-1st April 1989, it is sufficient if the bad debt is written off as irrecoverable in the accounts of the assessee. The Tribunal upheld the CIT(A)'s decision, noting no infirmity in the order.

3. Addition Under Section 194C(7) Read with Section 40(a)(ia):
The AO disallowed ?6,37,75,651 for non-deduction of TDS on several expenses. The CIT(A) deleted the addition, observing that PAN cards were obtained from the transporters, and the payments did not cross the threshold limit for TDS deduction. The Tribunal upheld the CIT(A)'s decision, referencing the Jurisdictional ITAT’s decision in Rani Ghosh Vs. DCIT, which held that compliance with Section 194C(6) alone suffices for immunity from TDS obligations, even if Section 194C(7) is violated.

4. Unexplained Income from Reimbursement of Expenses:
The AO added ?56,57,052 as unexplained income based on discrepancies between receipts shown in the balance sheet and Form 26AS. The CIT(A) deleted the addition, explaining that the receipts were accounted for in the books as reimbursement of expenses and not income. The Tribunal upheld the CIT(A)'s decision, noting no discrepancy in the books of accounts and that reimbursements cannot be considered as income.

5. Puja and Subscription Expenses:
The AO disallowed ?2,57,213, considering these expenses not incidental to business. The CIT(A) deleted the addition, relying on the Calcutta High Court decision in CIT vs. Bata India Ltd., which recognized such expenses as necessary for maintaining business relations. The Tribunal upheld the CIT(A)'s decision, agreeing that these expenses are incidental to the assessee’s business.

6. Disallowance Under Section 14A Read with Rule 8D:
The AO disallowed ?76,977 under Section 14A read with Rule 8D, despite no exempt income being earned. The CIT(A) deleted the addition, and the Tribunal upheld this decision, referencing the Delhi High Court’s ruling in Chem Investment vs CIT, which held that no disallowance is warranted if there is no exempt income.

Conclusion:
The Tribunal dismissed the revenue’s appeal, upholding the CIT(A)’s decisions on all grounds. The Tribunal confirmed that the additions made by the AO were rightly deleted by the CIT(A) based on prevailing legal precedents and factual correctness.