2022 (5) TMI 1149 - AT - Income Tax

Disallowance made qua PF ESI in respect employee s contribution u/s. 36(1)(va) r.w.s. 2(24)(x) - Payment before the due date of filing of return u/s 139(1) - scope of amendment - HELD THAT - As relying on case of Lumino Industries Ltd. 2021 (11) TMI 926 - ITAT KOLKATA we are inclined to allow the appeal of the assessee and direct the A.O. to delete the addition and hold that the Amendment brought in Finance Act 2021 w.e.f. 01.04.2021 by inserting an Explanation to section 36(1)(va) and section 43B of the Act is prospective in nature and would apply from AY 2021-22 onwards.Consequently ground no. 2 to 4 are allowed. Difference between books of account and form 26AS - HELD THAT - We observe that the assessee s total turnover during the year was Rs. 39,43,47,812/-. The assessee is engaged in the business of manufacturing and dealing in material handling equipments, electric starters and spares, service etc. We observe from the reconciliation statement filed before us that the amount of difference as added by the AO is very negligible. Keeping in view the total turnover of the assessee and the fact that the assessee has duly explained as to how the discrepancy has occurred between books of account and form 26AS, we are fully convinced with the reply of the assessee on this issue and find that the addition needs to be deleted. Accordingly we set aside the order of Ld. CIT(A) on this issue and direct the AO to delete the disallowance. Addition as interest on TDS - disallowance by the AO on the ground that the same is not allowable u/s 37 of the Act as the interest on Govt. liability is not permissible and preliminary in nature - HELD THAT - We find that the interest on delayed payments of TDS is an expense which is incurred wholly and exclusively for the purpose of business as the interest has been paid on delayed payment of TDS which was the liability of the assessee. Accordingly we set aside the order of the Ld. CIT(A) on this issue and direct the AO to delete the disallowance. Liability of business loss and unabsorbed depreciation claimed in the computation by the assessee - HELD THAT - We find that the assessee has same brought forward business loss and unabsorbed depreciation which the assessee is entitled to claim set off in terms of provision of section 74 of the Act. However, we are of the considered view that the issue is factual and needs to be examined at the level of AO. Accordingly we restore the issue to the file of the AO with the direction to verify the same and allow in terms of provision of section 74 of the Act. This ground is allowed for statistical purposes.

Summary

Issues:
1. Disallowance of PF & ESI contribution
2. Set aside issue of additional income for verification
3. Disallowance of interest on TDS
4. Business loss and unabsorbed depreciation

Disallowance of PF & ESI contribution:
The appeal concerns the disallowance of PF & ESI contribution by the Ld. CIT(A) in the amount of Rs. 51,73,980. The assessee argued that the remittances were made before filing the return of income u/s 139(1) of the Act, thus no disallowance was warranted. The Ld. AR contended that the Finance Act 2021 amendment is prospective, not retrospective, citing the decision in Lumino Industries Ltd. vs. ACIT. The Tribunal held that the amendment is prospective, effective from AY 2021-22 onwards. Relying on judicial precedents and legislative intent, the Tribunal allowed the appeal, directing the AO to allow the deduction for employees' contribution shares towards ESI, PF before the due date of filing the return u/s 139(1) of the Act.

Set aside issue of additional income for verification:
The Ld. CIT(A) set aside the issue of additional income of Rs. 89,269 to the AO for verification. The Tribunal found the difference negligible compared to the total turnover of the assessee. Considering the explanation provided by the assessee for the discrepancy between books of account and Form 26AS, the Tribunal directed the AO to delete the addition.

Disallowance of interest on TDS:
The issue pertains to the disallowance of Rs. 12,420 as interest on TDS by the Ld. CIT(A). The AO disallowed it on the grounds of not being allowable u/s 37 of the Act. The Tribunal held that interest on delayed TDS payments is a business expense incurred wholly and exclusively for business purposes. Consequently, the Tribunal directed the AO to delete the disallowance.

Business loss and unabsorbed depreciation:
The Ld. CIT(A) did not decide on the issue of business loss and unabsorbed depreciation claimed by the assessee. The Tribunal noted that the assessee is entitled to claim set off under section 74 of the Act. However, considering it a factual issue, the Tribunal restored the matter to the AO for examination and allowed the ground for statistical purposes.

In conclusion, the Tribunal allowed the appeal of the assessee for statistical purposes, addressing each issue comprehensively and providing detailed reasoning for its decisions.