2018 (12) TMI 117 - AT - Income Tax

TDS u/s.194H - incentives paid to the employees - TDS liability - Held that - CIT(A) gave a categorical finding that the incentives paid to the employees are not subjected to TDS u/s.194H and there is no question of change of nomenclature and the incentives given to the employees by the assessee are found to be correct, hence the same is allowed. It is brought to our notice the detailed statement on incentive distribution among its employees. The total payment including salaries are below the threshold limits. CIT(A) has called for remand report from AO and AO has not disputed the actual expenditure but expressed his views that the assessee has changed the nomenclature of the expenses to incentives. CIT(A) has allowed the assessee s appeal. Therefore, we do not find any infirmity in the order of CIT(A) and hence, upholding the same, we dismiss the grounds raised by the revenue on this issue. Disallowance towards ESIC and PF contributions - AO observed that since the assessee failed to substantiate its claim before him, made disallowance u/s 36(v)(a) for non payment of ESIC and PF before the due date - Held that - It is a settled position of law that though the assessee paid the contributions towards ESIC and PF beyond the due date, but, before filing of the return of income, no disallowance can be made in this regard. The Hon ble Delhi High Court in CIT VS. Aimil Ltd. & Ors. 2009 (12) TMI 38 - DELHI HIGH COURT has held that if the employees share of contribution is paid before the due date of filing the return u/s 139(1) of the Income-tax Act, 1961 then no disallowance can be made. Accordingly, we uphold the order of CIT(A) on this count and dismiss the grounds raised by the revenue. - decided against revenue.

Summary

Issues:
1. Disallowance of expenses under section 194H of the Income Tax Act.
2. Disallowance of expenditure towards interest on TDS.
3. Disallowance under section 36(1)(v)(a) for delay in remittance of PF amount.

Analysis:
1. The appeal by the Revenue challenged the CIT(A)'s order for the assessment year 2009-10. The CIT-1, Hyderabad set aside the assessment order due to the failure of the Assessing Officer (AO) to examine specific issues. The AO later determined the total income at a different amount, making disallowances related to incentives, commission, ESIC, and PF contributions.
2. The Revenue contended that the disallowance of expenses under section 194H was unjustified due to non-compliance with TDS provisions and lack of proof of expenditure genuineness. The CIT(A) deleted this disallowance after the assessee clarified that the payments were sales incentives to employees, not commission subject to TDS under section 194H.
3. Regarding the disallowance for delay in remittance of PF amount, the AO disallowed the expenditure, but the CIT(A) reversed this decision based on timely payment before the income tax return filing date. Citing legal precedent, the Tribunal upheld the CIT(A)'s decision, emphasizing that no disallowance can be made if the employees' share of contribution is paid before the due date of filing the return.

In conclusion, the Tribunal dismissed the Revenue's appeal, upholding the CIT(A)'s decisions on the disallowances related to expenses under section 194H and the delay in remittance of PF amount. The judgment highlighted the importance of timely payments in determining the allowability of deductions under the Income Tax Act.