2020 (12) TMI 1143 - AT - Income Tax

Disallowance of prior period expenses - HELD THAT - It is clear from the Assessment Order that this issue has not been properly examined. Therefore, we deem it fit to remit this issue to the AO for a fresh examination. The assessee shall lay relevant evidence/material in support of its contention and comply with the requirements of the AO in accordance with law. The AO on due examination and after affording due opportunity to the assessee, shall decide the issue on merits Disallowance of employee's contribution to the PF - assessee paid belatedly u/s. 36(1)(va) but before the due date of filing the return of income - HELD THAT - We allow the claim of the assessee for deduction towards employees contribution to PF which was deposited late beyond due date as prescribed under relevant statute governing PF, but the same stood deposited to the credit of employees with relevant fund before the due date for filing of return of income as prescribed u/s. 139(1).

Summary

Issues:
- Disallowance of prior period expenses
- Disallowance of employee's contribution to EPF

Analysis:

Disallowance of Prior Period Expenses:
The assessee, a public sector undertaking, claimed prior period expenses and employee's contribution to PF, which were paid belatedly u/s. 36(1)(va) but before the due date of filing the return for AY 2013-14. The AO disallowed them, leading to an appeal before the CIT(A) and subsequently to the ITAT Chennai. The Tribunal found that the AO had not properly examined the issue of disallowance of prior period expenses. Therefore, it remitted the issue back to the AO for a fresh examination. The assessee was directed to provide relevant evidence and comply with the AO's requirements. This decision was based on the lack of proper examination by the AO, ensuring a fair opportunity for the assessee to present its case.

Disallowance of Employee's Contribution to EPF:
Regarding the disallowance of employee's contribution to EPF, the Tribunal considered various High Court decisions and legal provisions, including Sections 36(1)(va), 43B(b), and judgments of the Apex Court and High Courts. The Tribunal referred to the decision in DCIT v. Repco Home Finance (P) Ltd. and highlighted the interpretation of relevant provisions by the Hon'ble Supreme Court. The Tribunal emphasized the power of Constitutional Courts to read down provisions to avoid absurd results. It noted that most Constitutional Courts, including the Jurisdictional High Court, allowed deductions for belated employee contributions if deposited before the due date for filing the return of income. Relying on precedent and legal principles, the Tribunal allowed the claim for deduction of employee's contribution to PF, which was deposited late but before the due date for filing the return. The decision was based on a strict and literal interpretation of relevant provisions and judicial precedent, ensuring consistency and fairness in tax treatment.

Conclusion:
The ITAT Chennai partially allowed the appeal filed by the assessee, remitting the issue of prior period expenses back to the AO for fresh examination and allowing the claim for deduction of belated employee contributions to EPF based on legal interpretations and precedent. The detailed analysis and application of legal principles ensured a fair and reasoned decision in line with established jurisprudence.