2019 (6) TMI 1259 - AT - Income Tax

Delayed payment of employee Contribution of PF and ESI - expenditure was suo-moto disallowed by the assessee while filing the return of income but pleaded for the allowance of the same during assessment proceedings - HELD THAT - Keeping in view the fact that assessee s correct income was to be computed and keeping in view the decision of Jute Corporation of India Ltd. V/s CIT 1990 (9) TMI 6 - SUPREME COURT , we admit the assessee s claim and restore the issue back to the file of Ld. AO to examine the same. The Ld. AO is directed to allow the same after verifying that the aforesaid contributions / payments were deposited before due date of filing of return of income and secondly, the deduction of the same was not claimed by the assessee in any other Assessment Year. The assessee is directed to substantiate the same. This ground stands allowed for statistical purposes. Interest income assessment - correct head of income - Business income or Income from Other Sources - HELD THAT - Interest component include interest on income tax refund for ₹ 155.77 Lacs, which is, undoubtedly, assessable as income from other sources. - the decision of lower authority, to that extent, stand confirmed. The balance interest component as stated to be earned by the assessee from Bank deposits except for assessee s submissions, the aforesaid facts are not forthcoming. AR has submitted that the fixed deposits were kept to facilitate issuance of bank guarantees and to meet certain business obligations. These facts require examination verification by AO. Therefore, we deem it fit to restore the matter back to the file of Ld.AO for re-adjudication in the light of these submissions. The assessee is directed to substantiate the same and demonstrate the business nexus of these deposits and justify assessability of the same as business income. The ground stands partly allowed for statistical purposes. Disallowance on account of foreign exchange fluctuation loss - HELD THAT - We direct AO to ascertain that the facts in this AY are pari-materia the same as in earlier years. AO is directed to examine the fact that the aforesaid liabilities have crystalized during impugned AY as per the terms of the settlement and these liabilities has fully been discharged by the assessee by making actual payment. Further, similar treatment has been given by the assessee to resultant gain, if any, arising out of these transactions in subsequent years. Both these grounds stand allowed for statistical purposes. Adjustment of foreign exchange losses from Book Profits u/s 115JB - HELD THAT - The said matter also stands restored back to the file of Ld. AO. The same may be re-adjudicated in terms of the stand taken against ground nos. 1 2.

Summary

Issues Involved:
1. Employee contribution to PF and ESIC deduction
2. Treatment of interest income as Business Income
3. Disallowance of foreign exchange fluctuation loss
4. Adjustment of foreign exchange losses from Book Profits

Employee contribution to PF and ESIC deduction:
The appellant contested the disallowance of deductions for Employee Contribution to PF and ESIC in the Assessment Year 2013-14. The appellant claimed that the contributions were delayed but paid before the due date of filing the Income Tax Return. The lower authorities rejected the claim based on previous court decisions. However, the Tribunal admitted the claim, directing the Assessing Officer to verify the payments' timing and the absence of previous claims in other assessment years. The issue was allowed for statistical purposes.

Treatment of interest income as Business Income:
The appellant disputed the assessment of interest income as Income from Other Sources instead of Business Income. The interest comprised of bank deposits and income tax refund interest. The appellant argued that the deposits were for business purposes, but the lower authorities disagreed. The Tribunal confirmed the treatment of income tax refund interest as income from other sources but directed the Assessing Officer to re-examine the business nexus of bank deposit interest. The issue was partly allowed for statistical purposes.

Disallowance of foreign exchange fluctuation loss:
The revenue appealed the deletion of disallowance of foreign exchange fluctuation loss. The Assessing Officer disallowed the claimed loss as a contingent liability, which the lower appellate authority reversed. The Tribunal directed the Assessing Officer to verify if the liabilities crystallized during the year and were discharged by the assessee. The issue was allowed for statistical purposes.

Adjustment of foreign exchange losses from Book Profits:
The revenue contested the deletion of adjustment of foreign exchange losses from Book Profits under section 115JB. The Tribunal directed the Assessing Officer to re-examine the liabilities' crystallization and discharge during the year. If found allowable, no adjustment would be warranted under section 115JB. The issue was allowed for statistical purposes.

In conclusion, the revenue's appeal was allowed for statistical purposes, while the appellant's appeal was partly allowed for statistical purposes. The Tribunal provided detailed analysis and directions for each issue raised, ensuring a fair and thorough examination of the legal aspects involved in the judgment.