2023 (1) TMI 963 - AT - Income Tax

Assessment u/s 153A - Disallowance on account of provisions made against loss of stock due to damage/obsolete conditions - HELD THAT - We find that Ld. CIT(A) while deciding the issue has noted that Ld. CIT(A) for the same assessment year in assessee s own case had deleted the addition in the order framed u/s. 153C r.w.s. 153A of the Act. We further find that on identical facts the coordinate bench of the Tribunal while deciding the issue for A.Y. 2003-04 2021 (10) TMI 696 - ITAT DELHI had held that the obsolete inventories were written off by reducing the carrying cost of inventory and the claim was therefore allowed to the assessee. Late deposit of PF contribution - disallowance made u/s. 43B on account of delayed contribution of PF/ESI dues - HELD THAT - It is an undisputed fact that the PF/ESIC dues which were disallowed by A.O. were not deposited by the assessee before the due date prescribed under the respective statute. We find that Hon ble Apex Court in the case of Checkmate Services (P.) Ltd. 2022 (10) TMI 617 - SUPREME COURT has held that employees contribution is money held by the assessee employer in trust and is its income unless paid into the fund by due date . It has further held that the due date is the date prescribed by the enactment governing the fund in question and it is deductible only if it is deposited in respective fund by that date. In the present case since it is undisputed fact that the amount of contribution of PF/ESI has not been deposited before the due date prescribed under the relevant Acts, therefore following the decision of Hon ble Apex Court in the case of Checkmate Services (P.) Ltd. 2022 (10) TMI 617 - SUPREME COURT the same is not allowable. We accordingly, uphold the action of A.O. in disallowing the same. Thus the ground of the Revenue is allowed.

Summary

Issues:
1. Disallowance of Rs. 411.02 Lakhs made by AO on account of provisions against loss of stock due to damage/obsolete conditions.
2. Disallowance of Rs. 1,69,90,870/- made by the AO u/s 43B of the IT Act for late deposit of PF contribution.

Analysis:

Issue 1: Disallowance of Rs. 411.02 Lakhs on Stock Loss
- The assessee claimed a loss of Rs. 11,32,12,000 on obsolete/damaged stock during assessment proceedings.
- The AO disallowed the claim, stating that the closing stock should be valued at cost price or realizable value, and the assessee had not discarded the items from stock.
- The Ld. CIT(A) allowed the claim, noting that in a previous case for the same assessment year, the claim was allowed by his predecessor under a different section.
- The Tribunal had previously allowed similar claims for the assessee for other assessment years.
- The Revenue failed to show any fallacy in the Ld. CIT(A)'s findings or distinguish the current case from previous decisions.
- The Tribunal upheld the Ld. CIT(A)'s decision, dismissing the Revenue's appeal.

Issue 2: Disallowance of Rs. 1,69,90,870/- for Late PF Contribution
- The AO disallowed Rs. 1,69,90,870/- for late deposit of PF dues, as the payments were made after the due dates.
- The Ld. CIT(A) allowed the claim, stating that since all dues were paid before the due date of filing the return, they were allowable.
- The Revenue cited a Supreme Court decision that late PF/ESI contributions are not allowable.
- The Tribunal upheld the AO's disallowance, following the Supreme Court's ruling that contributions must be deposited by the due date to be deductible.
- Consequently, the Tribunal allowed the Revenue's appeal partially on this ground.

In conclusion, the Tribunal partially allowed the Revenue's appeal concerning the disallowance of Rs. 1,69,90,870/- for late PF contributions but upheld the Ld. CIT(A)'s decision regarding the disallowance of Rs. 411.02 Lakhs on stock loss. The judgment provided detailed analysis and comparisons with previous cases to support the decisions made.