2019 (1) TMI 539 - AT - Income Tax

Disallowance u/s 36(1)(va) - late payment of employee s contribution to provident fund account - application for rectification under section 254(2) - Held that - As consistency view in favour of the Revenue on the issue of claim of deduction under section 36(1)(va) of the Act, whereby the assessee has missed deadline for deposit of employees contribution in the relevant fund before the due date of filing of the return by following in the case of Gujarat State Road Transport Corporation Ltd. Vs. CIT (supra). As pointed out by the assessee, recently, Hon ble jurisdictional High Court in the case of Salasar Laminates Ltd. Vs. Deputy Commissioner of Income Tax in Tax Appeal No.1186 of 2018 order dated 1.10.2018 has held that since appeal against the judgment of High Court in the case of Gujarat State Road Transport Corporation Ltd. (supra) is pending, and SLP has been granted, liberty was given to assessee to file an application for revival of appeal, in case Hon ble Supreme Court reverse the decision of the High Court on the issue. Addition while computing book profit u/s 115JB - similar addition was made u/s 14A while computing normal income of the assessee-company - Held that - Special Bench answered this question in favour of the assessee and held that computation for the purpose of clause (f) of Explanation 1 to Section 115JB(2) is to be made without resorting to the computation as contemplated under section 14A r.w. rule 8D. Respectfully we allow this ground of appeal and direct the AO not to make adjustments in book profit for the purpose of MAT liability on the basis of calculations made with Rule 8D of the Income Tax Rules. - Appeal of the assessee is partly allowed.

Summary

Issues:
1. Disallowance under section 36(1)(va) of the Act for late payment of employee's contribution to provident fund account.
2. Addition made under section 115JB of the Act while computing book profit due to disallowance under section 14A of the Act.

Issue 1: Disallowance under section 36(1)(va) of the Act:
The appellant contested the disallowance of ?61,728 under section 36(1)(va) by the ld.CIT(A) for late payment of employee's provident fund contribution. The appellant referred to the judgment of Hon'ble Gujarat High Court in a similar case and highlighted the possibility of the decision being overturned by the Hon'ble Supreme Court. The ITAT, Ahmedabad Bench had consistently ruled in favor of the Revenue on this issue based on the Gujarat State Road Transport Corporation Ltd. case. However, the appellant cited a recent judgment in the Salasar Laminates Ltd. case where liberty was granted to the assessee pending the outcome of the Supreme Court decision. The Tribunal noted that if the High Court's decision is reversed by the Supreme Court, the Tribunal's order would be flawed. The Tribunal rejected the appeal, stating that the appellant could seek rectification under section 254(2) if needed after the Supreme Court's decision.

Issue 2: Addition under section 115JB of the Act:
The appellant challenged the addition of ?9,34,945 made by the AO under section 115JB for computing book profit, which was based on a disallowance under section 14A. The AO's action was upheld by the ld.CIT(A) but restricted to ?9,34,945. The appellant relied on the Special Bench decision in the ACIT Vs. Vireet Investments case, arguing that no adjustment could be made in book profit under section 115JB due to disallowances under section 14A. The Tribunal referred to the Special Bench's question on whether expenses for earning exempt income under section 14A should impact book profit under section 115JB. Following the Special Bench's decision, the Tribunal allowed the appeal, directing the AO not to adjust book profit for MAT liability based on Rule 8D calculations.

In conclusion, the Tribunal partly allowed the appellant's appeal, emphasizing the importance of awaiting the Supreme Court's decision for potential rectification and adhering to the Special Bench's decision on adjustments in book profit under section 115JB.