9911796707
|
Home
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2022 (10) TMI 388 - AT - Income TaxAdditions in relation to belated remittance to PF and ESI - Delayed payments made but prior to the due date of filing of the return of income u/s 139(1) - HELD THAT - On identical facts, the Bangalore Bench of the Tribunal in the case of M/s. Shakuntala Agarbathi Company 2021 (10) TMI 1196 - ITAT BANGALORE by following the dictum laid down by the Hon ble jurisdictional High Court in the case of Essae Teraoka Pvt. Ltd 2014 (3) TMI 386 - KARNATAKA HIGH COURT had held that the assessee would be entitled to deduction of employees contribution to PF and ESI provided that the payments were made prior to the due date of filing of the return of income u/s 139(1). Therefore, the amended provisions of section 43B as well as 36(1)(va) of the I.T.Act are not applicable for the assessment year under consideration. By following the binding decision of the Hon ble jurisdictional High Court in the case of Essae Teraoka Pvt. Ltd Vs. DCIT (supra), the employees contribution paid by the assessee before the due date of filing of return of income u/s 139(1) of the I.T.Act is an allowable deduction. Accordingly, we decide this issue in favour of the assessee and the disallowance made by the Assessing Officer is deleted. Disallowance u/s 40(a)(ia) - assessee has not deducted tax at source on some payments made by it - assessee submitted before the CIT(A) that income has already been offered to tax by the payee and certificate has been collected by the assessee in this regard - HELD THAT - It is clear that when the payee has paid the taxes, the benefit of proviso to section 201 of the I.T.Act is extended even for claiming deduction of expenses wherein the assessee had failed to deduct tax at source. The assessee in the instant case had provided certificates to the effect (Form 26A) that the amount paid to the payee have been offered to tax. CIT(A) has rejected the claim of the assessee, since it had not complied with Rule 31ACB of the I.T.Rules, 1962. The compliance of Rule is directory and same can be done at later point of time. Therefore, in the interest of justice and equity, we are of the view the matter needs to be examined by the A.O. de hors the observations of the CIT(A). If the assessee can prove that the payee has included the receipt from the assessee as part of his income and filed return disclosing the same, then the benefit of proviso to section 201 of the I.T.Act will be extended to also section 40(a)(ia) of the I.T.Act. For the above said purpose, the issue is restored to the files of the A.O. The assessee shall cooperate with the A.O. and shall furnish the necessary details proving its case.
Issues Involved:
1. Additions in relation to belated remittance to PF and ESI of Rs.56,74,806. 2. Additions in relation to section 40(a)(ia) of the I.T. Act, amounting to Rs.3,48,000. Detailed Analysis: Additions in relation to belated remittance to PF and ESI of Rs.56,74,806: The assessee filed a return of income for the assessment year 2019-2020, declaring a total income of Rs.12,53,83,360. The Assessing Officer, through intimation u/s 143(1) of the I.T. Act, determined the total income at Rs.13,14,06,170, disallowing Rs.56,74,806 for late remittance of employees' contribution to PF and ESI. The assessee appealed to the CIT(A), arguing that the contributions were paid before the due date of filing the return under section 139(1) of the Act, thus qualifying for deduction under section 43B. The CIT(A) differentiated between employer's and employees' contributions, allowing deductions only for the former if paid before the due date. The CIT(A) also cited the Supreme Court's judgment in CIT Vs. Gold Coin Health Food Pvt. Ltd., asserting that amendments to sections 36(1)(va) and 43B by the Finance Act, 2021, are retrospective. The assessee then appealed to the Tribunal, relying on the ITAT's decision in M/s. Shakuntala Agarbathi Company Vs. DCIT, which followed the Karnataka High Court's ruling in Essae Teraoka Pvt. Ltd Vs. DCIT. The Tribunal, referencing the Essae Teraoka case, held that employees' contributions to PF and ESI are deductible if paid before the due date of filing the return under section 139(1). The Tribunal also ruled that the 2021 amendments to sections 36(1)(va) and 43B are not retrospective, citing several Tribunal orders and the Supreme Court's decision in M.M. Aqua Technologies Limited v. CIT. The Tribunal concluded that the amendments to sections 36(1)(va) and 43B apply prospectively from the assessment year 2021-2022. Therefore, for the assessment year 2019-2020, the assessee is entitled to deductions for employees' contributions paid before the due date of filing the return. The Tribunal directed the A.O. to grant the deduction accordingly. Disallowance u/s 40(a)(ia) amounting to Rs.3,48,000: For the assessment year 2019-2020, the A.O. disallowed Rs.3,48,000 under section 40(a)(ia) because the assessee did not deduct tax at source on certain payments. The assessee argued before the CIT(A) that the payee had included the income in their return and provided a certificate to this effect. However, the CIT(A) rejected this argument, noting non-compliance with Rule 31ACB of the I.T. Rules, 1962. The Tribunal noted that if the payee has paid the taxes, the assessee cannot be treated as an "assessee in default" under section 201, as per the Supreme Court's ruling in Hindustan Coca Cola Beverages Pvt. Ltd. v. CIT. The proviso to section 40(a)(ia) extends this principle, allowing deductions if the payee has included the income in their return. The Tribunal found that the compliance with Rule 31ACB is directory and can be fulfilled later. The Tribunal remanded the issue to the A.O., directing them to verify if the payee included the income in their return. The assessee is to provide necessary details to prove this. The Tribunal ordered the A.O. to extend the benefit of section 201's proviso to section 40(a)(ia) if the assessee's claim is substantiated. Conclusion: The appeal was partly allowed. The Tribunal directed the A.O. to grant deductions for employees' contributions to PF and ESI paid before the due date of filing the return and to verify the payee's tax compliance for the disallowed amount under section 40(a)(ia).
|
