2019 (11) TMI 645 - AT - Income Tax

Employee s Contribution payments towards ESIC before due date specified under section 36(1)(va) - HELD THAT - Hon ble Jurisdictional High Court in the case of CIT-vs-Gujarat State Road Transport Corporation 2014 (1) TMI 502 - GUJARAT HIGH COURT wherein it has been held that the assessee shall not be entitled to deduction of payments of Employee s Contribution to ESIC account if it is paid to the concerned account after the due date as specified u/s 36(1)(va), though he deposits the same before the due date prescribed u/s 43B i.e., prior to filing of return u/s 139(1) of the Act which according to us is just and proper, without any infirmity. Hence, we find no merit in this ground of appeal preferred by the assessee. The same is thus, dismissed. Disallowance of expenditure which was incurred for the purpose of distributing gifts, providing hospitality to the doctors and/or medical practitioners - HELD THAT - Assessee duly admitted the disallowance of ₹ 5 lacs made by the AO on an ad-hoc basis during the assessment proceedings. The AO made the addition by observing that the assessee failed to furnish the details of the actual recipient of these gift articles. The assessee has also incurred traveling expenses which were claimed by the assessee for the traveling of the medical representatives. But the assessee failed to file the requisite documents evidencing that there was no benefit extended to the doctors /medical practitioners out of such traveling expenses. Therefore the addition was made by the AO on an ad-hoc basis. In this regard, we also note that the assessee has also not produced any evidence before us to prove that the doctors were not the actual recipient of these gift articles. Thus in the absence of necessary documentary evidence the AO had no alternative except to make the disallowance on an ad-hoc basis. Thus we are inclined not to disturb the finding of the lower authorities. Accordingly, we dismiss the ground of appeal of the assessee.

Summary

Issues Involved:
1. Addition of Employee's Contribution payments towards ESIC.
2. Disallowance of expenditure for distributing gifts and hospitality to doctors/medical practitioners.

Analysis:

Issue 1: Addition of Employee's Contribution payments towards ESIC
The appeal challenged the addition of ?3,79,404 to the total income of the assessee for not making Employee's Contribution payments towards ESIC before the specified due date under section 36(1)(va) of the Income Tax Act. The Tribunal upheld the addition citing a judgment by the Jurisdictional High Court, which stated that such payments should be made before the due date specified under section 36(1)(va). The Tribunal found no merit in the appeal and dismissed it.

Issue 2: Disallowance of Expenditure for Distributing Gifts and Hospitality
The second ground of appeal related to the disallowance of expenditure amounting to ?19,45,443 incurred for distributing gifts and providing hospitality to doctors/medical practitioners. The Tribunal noted that a significant portion of the expenditure was on items like laptops, mobile phones, watches, etc., categorized as gifts for doctors. The disallowance was also based on the lodging, boarding, and traveling expenses of doctors, invoking section 37 of the IT Act and relevant circulars. The Tribunal referred to a previous case where a similar disallowance was upheld. The Tribunal found that the gifts and benefits to doctors were prohibited under the law and circulars, leading to the disallowance. The assessee failed to provide sufficient evidence that the gifts were not given to doctors, resulting in the confirmation of the disallowance. The Tribunal dismissed the appeal based on the findings and upheld the disallowance made by the authorities.

In conclusion, the Tribunal upheld the addition of Employee's Contribution payments towards ESIC and the disallowance of expenditure for distributing gifts and hospitality to doctors/medical practitioners based on legal provisions and lack of evidence provided by the assessee. The appeal was dismissed, and the Tribunal's decision was in line with previous judgments and relevant circulars.