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2013 (5) TMI 582 - AT - Income TaxAddition of delayed payment of PF on account of employees contribution - CIT(A) deleted the addition - Held that - Assessee has made payment on or before the due date of filing of return u/s. 139(1) thus this issue is squarely covered by the decision of Vijay Shree Limited 2011 (9) TMI 30 - CALCUTTA HIGH COURT wherein the deletion of the amount paid by the Employees contribution beyond due date was deductible by invoking the aforesaid amended provisions of Section 43(B) as introduced by Finance Act, 2003. In favour of assessee. Disallowance u/s 14A r.w.r. 8D - Held that - The expenditure incurred in relation to the income which does not form part of total income has to be disallowed. However, it should be proximate relationship between the expenditure and the income, which does not form part of total income. Once such proximity relationships exist, the disallowance is to be effected. In case the assessee had claimed that no expenditure has been incurred for earning the exempt income, it was for the assessing officer to determine as to whether the assessee had incurred any expenditure in relation to income which did not form part of total income and if so to quantify the extent of disallowance. Thus, in order to disallow the expenditure under section 14A, there must be a live nexus between the expenditure incurred and the income not forming part of total income. No notional expenditure can be apportioned for the purpose of earning exempt income unless there is an actual expenditure in relation to earning the income not forming part of total income. Thus no disallowance under section 14A is called for when the assessee has not incurred and claimed any expenditure for earning the exempt income. AO has not examined the accounts of the assessee and there is no satisfaction recorded by the AO about the correctness of the claim of the assessee and without the same he invoked Rule 8D of the Rules. From the facts of the present case it is noticed that the AO has not considered the claim of the assessee and straight away embarked upon computing disallowance under Rule 8D of the Rules on presuming the average value of investment at % of the total value. Thus respectfully following the decision in the case of J. K. Investors (Bombay) Ltd. 2013 (5) TMI 580 - ITAT MUMBAI ground of appeal of revenue is dismissed.
Issues Involved:
1. Deletion of addition of delayed payment of PF u/s. 43B of the Act. 2. Deletion of addition made by AO by invoking the provisions of section 14A read with Rule 8D(2)(iii) of the I. T. Rules, 1962. Issue-wise Detailed Analysis: 1. Deletion of Addition of Delayed Payment of PF u/s. 43B of the Act: The first issue concerns the deletion of the addition of Rs.1,92,913/- by the CIT(A) on account of delayed payment of employees' contribution to the Provident Fund (PF) under section 43B of the Income-tax Act, 1961. The revenue argued that the CIT(A) erred in law by holding that the amount deposited beyond the due date was deductible by invoking the amended provision of section 43B. The revenue contended that the deduction was not allowable as per Explanation to section 36(1)(va) of the Act. During the assessment proceedings, the Assessing Officer (AO) disallowed the payment of Rs.1,92,913/- made beyond the specified limit under the PF Act. However, the CIT(A) deleted the addition by relying on the decision of the Hon'ble Calcutta High Court in the case of CIT Vs. M/s. Vijay Shree Limited. The Tribunal noted that the payment was made on or before the due date of filing the return under section 139(1) of the Act. The Hon'ble Calcutta High Court had held that the amendment to the second proviso to section 43(B) was curative in nature and applied retrospectively from April 1, 1988. Consequently, the deletion of the amount paid beyond the due date was deductible under the amended provisions of section 43(B). Respectfully following the jurisdictional High Court's decision, the Tribunal upheld the CIT(A)'s order and dismissed the revenue's ground of appeal. 2. Deletion of Addition Made by AO by Invoking Provisions of Section 14A Read with Rule 8D(2)(iii) of the I. T. Rules, 1962: The second issue pertains to the deletion of the addition made by the AO by invoking the provisions of section 14A read with Rule 8D(2)(iii) of the I. T. Rules, 1962. The revenue argued that the CIT(A) erred in law by deleting the disallowance made under section 14A without appreciating that the AO had conducted the necessary examination and groundwork. During the assessment proceedings, the AO noticed that the assessee had earned dividend income of Rs.1,65,924/-, which was claimed as exempt under section 10(34) of the Act. The AO required the assessee to furnish details of expenditure incurred for earning this dividend income. The assessee stated that no expenditure was incurred as no new investment was made during the year, and no interest was paid on investments. The AO, not convinced with the reply, made a disallowance by applying Rule 8D, resulting in a total disallowance of Rs.53,64,636/-. The CIT(A), after considering the submissions, deleted the disallowance. The Tribunal noted that the AO did not bring any evidence to prove that any expenditure was incurred towards earning the dividend income. The assessee clarified that it had sufficient own funds to cover the investments and no loans were taken for making these investments. The Tribunal referred to various judicial precedents, including the Mumbai Tribunal's decision in the case of J. K. Investors (Bombay) Ltd. Vs. ACIT, which emphasized that the AO must record dissatisfaction with the correctness of the assessee's claim before invoking Rule 8D. The Tribunal observed that the AO had not examined the accounts of the assessee or recorded any dissatisfaction with the claim. Consequently, the Tribunal upheld the CIT(A)'s order and dismissed the revenue's ground of appeal. Conclusion: In conclusion, the Tribunal dismissed the revenue's appeal on both issues. The deletion of the addition of delayed payment of PF was upheld based on the jurisdictional High Court's decision, and the deletion of the disallowance under section 14A read with Rule 8D was upheld due to the AO's failure to record dissatisfaction with the assessee's claim.
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