2015 (7) TMI 861 - AT - Income Tax

Disallowance u/s 43B - late payments of employees contribution to the PF fund - Held that - The issue in dispute is squarely covered against the assessee by the decision of Gujarat Road Transport Corporation reported in 2014 (1) TMI 502 - GUJARAT HIGH COURT wherein held that employees contribution if not paid within the due date provided in the PF and ESI Act then, deduction will not be admissible to the assessee. The view of the ld. Commissioner of Income Tax (Appeals) is in line with the hon ble High Court s decisions therefore, we do not find any merit in this ground of appeal.- Decided against assessee. Disallowance u/s 40(a)(ia) - amount of expenses on which Tax Deducted at Source (TDS) was not deposited into the Government account within due date - AO submitted that the disallowance be confirmed and it be excluded from the exemption of section 10B - Held that - It is not in dispute that the disallowance is in respect of appellant s unit eligible for deduction under section 10 B. Since by disallowing expenses on account of non-deduction of TDS or not depositing TDS to government account in time, assessing officer only increased business profit. Such increased business profit is eligible for deduction under section 10 B, appellant is eligible for deduction under section 10 B for addition of expenses disallowed under section 40(a) (ia) of IT Act. Accordingly the disallowance of expense on account of default under TDs provisions will not affect appellant s taxable income. In view of this, the applicability of TDS provisions and disallowance under section 40 (a) (ia) is not discussed here. Once the expenses which are to be disallowed with the aid of section 40(a)(ia) then it will enhance the taxable income of the assesse which will fall in the eligible profit for exemption u/s. 10B.- Decided against assessee. Disallowance of donation given to flood victim collected from the employees salaries - CIT(A) deleted the addition - Held that - A specific deduction was made from the salary and after collecting that amount it was given as a donation. The assessee has not claimed any deduction as such from its business profit, the amount collected from the employees salaries does not involve element of income in the hands of assessee because the assessee has only acted as a facilitator between the amounts collected vis- -vis remitted to the flood victims. Therefore, ld. Commissioner of Income Tax (Appeals) has rightly deleted the disallowance..- Decided against assessee.

Summary

Issues:
1. Condonation of delay in filing appeal by the assessee.
2. Disallowance of employee's contribution to provident funds and ESI.
3. Disallowance of expenses under section 40(a)(ia) related to TDS and non-deduction of tax.

Issue 1: Condonation of Delay
The Appellate Tribunal, ITAT Ahmedabad, addressed the delay in filing the appeal by the assessee, which was found to be time-barred by 42 days. The Tribunal considered the application for condonation of delay, noting that both the assessee and revenue were in cross-appeal against the Commissioner of Income Tax (Appeals) order. The Tribunal decided to condone the delay and proceed with deciding both appeals on merit.

Issue 2: Disallowance of Employee's Contribution
The assessee, a company engaged in back office operations and software development, had its employee's provident fund and ESI contributions disallowed by the Assessing Officer. The disallowance was based on non-timely deposit of these contributions, leading to the deemed inclusion of these amounts as income of the assessee. The Tribunal upheld the decision based on a previous judgment by the Gujarat High Court, stating that if contributions are not paid within the due date, the deduction will not be admissible to the assessee.

Issue 3: Disallowance of Expenses under Section 40(a)(ia)
The revenue appealed against the deletion of disallowances under section 40(a)(ia) related to TDS and non-deduction of tax on certain expenses. The Assessing Officer disallowed these expenses, but the Commissioner of Income Tax (Appeals) observed that adding these expenses back would not affect the assessee's taxable income significantly due to the nature of the deductions under section 10B. The Tribunal agreed with the Commissioner's findings, stating that disallowing these expenses would enhance the taxable income, making them eligible for deduction under section 10B.

In conclusion, the Tribunal dismissed both appeals, upholding the decisions on the condonation of delay, disallowance of employee's contribution, and disallowance of expenses related to TDS and non-deduction of tax. The judgment was pronounced on 19th June 2015 by the ITAT Ahmedabad.