2017 (11) TMI 208 - AT - Income Tax

Addition u/s 2(24)(x) r.w.s. Section 36(1)(va) on account of delayed deposit of employees PF - Held that - The issue is squarely covered in favour of assessee and against the Revenue by the jurisdictional High Court in the case of M/s Vijay Shree Limited (2011 (9) TMI 30 - CALCUTTA HIGH COURT) wherein held deletion of the amount paid by the Employees contribution beyond due date was deductible by invoking the aforesaid amended provisions of Section 43(B) of the Act. As the issue is already covered, hence, we dismissed Revenue s ground of appeal. Addition on account of diversion of interest bearing loan to non-income generating activity - Held that - DR has not brought on record any change in the facts of the present case with that of the earlier year pertaining to AY 2010-11 where the issue was decided in favour of assessee by the Hon ble Tribunal in its own case. Indeed, the own capital of assessee is exceeding the amount of impugned investment. - Decided against revenue Addition u/s 14A r.w.s Rule 8D - Held that - We find that there was no dividend income earned by assessee in the year under consideration. Therefore, the question of making disallowance u/s. 14A of the Act does not arise. Disallowance on account of commission expense - Held that - As the assessee failed to bring any evidence to justifying the payment of commission expense. Therefore we are not inclined to interfere in the order of Ld. CIT(A). We uphold the same. Hence, this ground of assessee s CO is dismissed. Disallowance on account of service charge - Held that - No documentary evidence furnished by assessee to justify the business connection for payment of such expenses.Hence, this ground of assessee s CO is dismissed.

Issues Involved:
1. Deletion of addition for delayed deposit of Employees' PF.
2. Deletion of addition for interest payment on loans used for non-income generating purposes.
3. Deletion of addition under Section 14A read with Rule 8D for disallowance in respect of investments capable of yielding exempt income.
4. Sustaining disallowance of commission expenses.
5. Sustaining disallowance of service charges.

Detailed Analysis:

1. Deletion of Addition for Delayed Deposit of Employees' PF:

The Revenue contended that the CIT(A) erred in deleting the addition of ?35,098/- made under Section 2(24)(x) read with Section 36(1)(va) of the Income Tax Act for the delayed deposit of Employees' PF. The Assessing Officer (AO) had disallowed this amount as it was not deposited within the due date specified under the Provident Fund Act. However, the CIT(A) deleted the addition, citing the judgment of the Hon'ble jurisdictional High Court in the case of CIT v. M/s Vijay Shree Limited, which held that payments made before the due date of income tax return filing are deductible. The Tribunal upheld the CIT(A)'s decision, dismissing the Revenue's appeal on this ground.

2. Deletion of Addition for Interest Payment on Loans Used for Non-Income Generating Purposes:

The AO observed that the assessee had made significant investments in unquoted shares and share application money while having substantial borrowed funds. Consequently, the AO disallowed the interest expense of ?49,30,943/- on the grounds that the borrowed funds were used for non-income generating investments. The CIT(A) deleted the disallowance, referencing a similar decision in the assessee's own case for AY 2010-11 and the judgment of the Hon'ble jurisdictional High Court in CIT v. Britannia Industries Ltd. The Tribunal found no change in facts from the earlier year and upheld the CIT(A)'s order, dismissing the Revenue's appeal.

3. Deletion of Addition Under Section 14A Read with Rule 8D:

The AO made a disallowance of ?1,21,442/- under Section 14A read with Rule 8D, arguing that the assessee had made substantial investments in shares capable of yielding exempt income. The CIT(A) deleted the addition, noting that the assessee did not earn any dividend income in the year under consideration. The Tribunal upheld the CIT(A)'s decision, referencing the Tribunal's earlier order in the assessee's own case, and dismissed the Revenue's appeal on this ground.

4. Sustaining Disallowance of Commission Expenses:

The assessee claimed a brokerage expense of ?2.50 lakh paid to its sister concern, M/s Rex Agro (P) Ltd., but failed to provide documentary evidence to justify the expense. The AO disallowed the expense, and the CIT(A) confirmed the disallowance. The Tribunal upheld the CIT(A)'s order, noting the lack of evidence provided by the assessee, and dismissed the assessee's cross-objection on this ground.

5. Sustaining Disallowance of Service Charges:

The assessee claimed an expense of ?1.50 lakh on account of service charges paid to its sister concern but did not furnish documentary evidence during the assessment proceedings. The AO disallowed the expense, and the CIT(A) confirmed the disallowance. The Tribunal upheld the CIT(A)'s order, citing the absence of evidence to justify the business connection for the payment, and dismissed the assessee's cross-objection on this ground.

Conclusion:

The Tribunal dismissed the Revenue's appeals and upheld the CIT(A)'s orders, providing relief to the assessee on the grounds of delayed deposit of Employees' PF, interest payment on loans, and disallowance under Section 14A. The Tribunal also dismissed the assessee's cross-objections regarding the disallowance of commission expenses and service charges due to a lack of supporting evidence.

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