2021 (1) TMI 673 - AT - Income Tax

Delay in the deposit of employees contribution towards PF and ESIC - employees contribution is required to be deposited within the due date prescribed u/s. 36(1)(va) - HELD THAT - The issue is covered against the assessee by the Hon'ble Gujarat High Court in the case of CIT vs. GSTRC 2014 (1) TMI 502 - GUJARAT HIGH COURT - Decided in favour of revenue. Addition on account of the amount written off for non-recovery of security deposits - assessee during the year has written of security deposit made with the landlord - HELD THAT - Issue decided in favour of assessee as relying on ow case 2020 (3) TMI 620 - ITAT AHMEDABAD . Addition u/s 40(a)(ia) - non-deduction of TDS with respect to the expenses claimed on provisional basis - Addition u/s. 40(a)(ia) on account of disallowance of commission expenses - HELD THAT - Cumulative effect of the provisions of section 194C/194H/194J/200/203 of the Act is that after the deduction TDS from the sum/income payable to a person, the same has to be paid to the government exchequer and a certificate has to be issued to the concerned person who is recipient of such sum/income payable by the assessee. But the same is not possible where the recipient of such sum/income payable by the assessee is not identifiable. In other words, the assessee cannot comply the provisions of chapter XVII of the Act with respect to the expenses claimed on provisional basis in a situation where the recipients/parties/payees are not identifiable. In the case on hand, there was no allegation from the revenue that recipients/parties/payees are identifiable. Thus we can safely conclude that recipients/parties/payees are not identifiable in the present case in the given facts and circumstances and accordingly the assessee cannot be treated as assessee is default on account of non-deduction of TDS under the provisions of section 40(a)(ia) - Decided in favour of assessee. Depreciation on data processing equipment - HELD THAT - As relying on assessee's own case we are of the view that the assessee is entitled for depreciation on data processing equipments at the rate of 60%.

Summary

Issues Involved:
1. Validity of the assessment order.
2. Addition relating to employees' contribution to PF and ESIC.
3. Disallowance of loss due to non-recoverable security deposits.
4. Disallowance under section 40(a)(ia) for non-deduction of TDS on provisions for expenses.
5. Initiation of penalty proceedings under section 271(1)(c).
6. Depreciation rate applicable to data processing equipment.

Issue-wise Detailed Analysis:

1. Validity of the assessment order:
The appellant's ground challenging the validity of the assessment order was treated as general in nature and dismissed by the CIT(A). The appellant did not press this ground during the hearing, leading to its dismissal.

2. Addition relating to employees' contribution to PF and ESIC:
The CIT(A) upheld the addition of ?27,84,027/- for delayed deposit of employees' PF and ESIC contributions under section 36(1)(va). The assessee conceded that this issue was covered against them by the Gujarat High Court's decision in CIT vs. GSTRC. Consequently, the ground of appeal was dismissed.

3. Disallowance of loss due to non-recoverable security deposits:
The CIT(A) confirmed the addition of ?4,55,074/- for non-recovery of security deposits, as the assessee failed to prove that the amount was offered to tax in earlier years, a requirement under section 36(1)(vii) read with section 36(2). However, the Tribunal found that the loss incurred in the course of business is eligible for deduction under section 37 or section 28, and directed the AO to allow the claim, reversing the CIT(A)'s order.

4. Disallowance under section 40(a)(ia) for non-deduction of TDS on provisions for expenses:
The CIT(A) upheld the disallowance of ?3,04,82,419/- for non-deduction of TDS on provisional expenses. The Tribunal, however, noted that the assessee could not comply with TDS provisions as the payees were not identifiable at the time of making the provisions. Citing judicial precedents, the Tribunal concluded that the assessee cannot be treated as in default for non-deduction of TDS in such circumstances and allowed the appeal.

5. Initiation of penalty proceedings under section 271(1)(c):
The CIT(A) dismissed the ground challenging the initiation of penalty proceedings under section 271(1)(c), stating that an appeal does not lie against mere initiation of penalty proceedings. This ground was deemed premature and dismissed.

6. Depreciation rate applicable to data processing equipment:
The CIT(A) deleted the addition of ?2,64,46,952/- made by the AO, treating data processing equipment as eligible for 60% depreciation instead of 15%. The Tribunal upheld this decision, noting that the items in the block were computers and related devices, following its own decision in the assessee's case for the previous year.

Conclusion:
The Tribunal's consolidated order resulted in partly allowing the assessee's appeals and dismissing the Revenue's appeal. The decisions were based on judicial precedents and the specific facts of the case, ensuring compliance with relevant provisions of the Income Tax Act.