2023 (5) TMI 1049 - AT - Income Tax

Late deposit of employees share towards Provident Fund contribution after the due date - whether income has to be computed pursuant to Rule 8(1) of the Income Tax Rules, 1962 needs to be computed from the business of tea growing and manufacturing equal to 40% of total income determined - HELD THAT - As perused the Rule 8(1) of the Income Tax Rules, 1962, which deals with the manner of computing the income from cultivation and manufacturing of tea. Sub-Rule (1) provides that where the income derived from the sale of tea grown and manufactured by the seller in India shall be computed as if it were income derived from business, and forty per cent of such income shall be deemed to be income liable to tax . Having considered the above Rule, we find merit in the contention of the assessee that the income of the assessee should be computed first after making the disallowance and whatever is the resultant income only 40% of that income has to be treated as taxable income in terms of Rule 8(1) of the Income Tax Rules, 1962. Since the issue requires no examination and verification of records, we are, therefore, restoring the issue to the file of ld. Assessing Officer to examine the same to compute the income in terms of our observations as stated above by following the Rule 8(1) of the Income Tax Rules. Assessing Officer is directed to compute the income after making disallowance in respect of EPF late deposit by the assessee and then re-compute the taxable income by applying Rule 8(1) of the Income Tax Rules, 1962. Appeal of the assessee is allowed for statistical purposes.

Summary

Issues:
The appeal before ITAT KOLKATA against the order of Commissioner of Income Tax(Appeals) for A.Y. 2019-20.

Issue 1: Additional Ground of Appeal
The assessee filed an additional ground of appeal regarding the disallowance of Rs.2,51,10,171/- on account of late deposit of employees' share towards Provident Fund contribution.

- The assessee contended that income needs to be computed pursuant to Rule 8(1) of the Income Tax Rules, 1962, and only 40% of the total income determined should be taxed.
- The facts revealed that the Assessing Officer disallowed the sum on account of late payment of employees' contribution to Provident Fund, deposited beyond the due date as per the relevant Act.
- The CIT(Appeals) upheld the disallowance, stating that the contribution should be deposited within the time stipulated under the Act, not under section 139(1) of the Income Tax Act.
- The assessee challenged this decision before the Tribunal, citing a recent Supreme Court judgment against them.
- The Tribunal admitted the additional ground, following precedents, and directed the Assessing Officer to compute the income after the disallowance and tax only 40% of the resultant income as per Rule 8(1) of the Income Tax Rules, 1962.

Conclusion:
The ITAT KOLKATA allowed the appeal for statistical purposes, directing the Assessing Officer to compute the income after the disallowance of EPF late deposit and apply Rule 8(1) of the Income Tax Rules, 1962 for determining taxable income.