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2021 (4) TMI 997 - AT - Income TaxDelayed payments of employees contribution to PF as u/s.36(1)(va) r.w.s 2(24)(x) or u/s 43B - HELD THAT - Considering the submissions of the parties that the issue raised in present appeal is covered by the decisions of Hon'ble Jurisdictional High Court in CIT Vs GSRTC 2014 (1) TMI 502 - GUJARAT HIGH COURT wherein it was held that sec. 43B of the Act is not applicable for the delayed payments of employees contribution to PF as under section 36(1)(va) r.w.s 2(24)(x) of the Act. In the light of above discussion and facts and circumstances and judicial decision Hon ble High Court we upheld the addition made by the ld.AO, accordingly appeal of the assessee is dismissed. In the result, Ground No.1 of the appeal is dismissed. Interest paid to NBFC Kotak Mahindra Pvt. Ltd - assessee submits that the recipient of the interest has paid tax on the interest, therefore this ground of appeal may be restored to the file of the Assessing Officer (AO) for verification of facts, if the recipient has paid tax on the interest received by them than the AO be directed not to made the addition against the assessee - HELD THAT - Considering the submissions by both the parties and the fact the ld.AR of the assessee submitted that recipient has already paid tax on the interest received, therefore, we restore the issue to the file of the AO to verify the facts if the recipient had paid the tax on the interest paid by the assessee, no disallowance be made against the assessee. Therefore, the A.O. is directed to verify the facts and pass the order afresh in accordance with Law. The assessee is directed to provide all necessary information and documents to the AO, accordingly this ground no.2 is allowed for statistical purpose. Disallowance of interest paid on TDS - assessee submits that the interest paid by the assessee is not a penalty and compensatory in nature and is allowable deduction under section 37 - HELD THAT - Hon ble Apex Court in Prakash Cotton Mills Vs CIT 1993 (4) TMI 3 - SUPREME COURT held that whenever any statutory impost paid by an assessee by way of damages or penalty or interest is claimed as an allowable expenditure under section 37(1), the assessing authority is required to examine the scheme of the provisions of the relevant statute providing for the payment of such impost notwithstanding the nomenclature of the impost as given by the statute, to find whether it is compensatory or penal in nature. The authority has to allow deduction under section 37(1) wherever such examination reveals the concerned impost to be purely compensatory in nature. Considering the fact that the assessee has paid interest of TDS, which is statutory impost, paid by the assessee and is compensatory in nature and thus is allowable deduction. Hence, we direct the AO to allow the interest paid by assessee on TDS. In the result, the ground No. 3 is allowed. Disallowance u/s.14A - assessee submits that during the financial year relevant to the assessment period under consideration, the assessee has not shown any exempt income, therefore there should not be any disallowance under section 14A - HELD THAT - As relying on Cheminvest Ltd. 2009 (8) TMI 126 - ITAT DELHI-B considering the fact the A.O. has not identified any exempt income earned by the assessee during the year, thus the A.O. was not justified in making disallowance under section 14A. Ground No. 4 of the appeal is allowed.
Issues Involved:
1. Addition under Section 36(1)(va) of the Income Tax Act, 1961. 2. Addition under Section 40(a)(ia) of the Income Tax Act, 1961. 3. Disallowance of interest paid on late payment of TDS under Section 37 of the Income Tax Act, 1961. 4. Disallowance under Section 14A of the Income Tax Act, 1961. Issue-wise Detailed Analysis: 1. Addition under Section 36(1)(va): The assessee contested the addition of ?3,11,536/- made by the Assessing Officer (A.O.) under Section 36(1)(va) for delayed payments of employees' contribution to Provident Fund (PF) and Employee State Insurance (ESI). The Tribunal referred to the decision of the Hon'ble Gujarat High Court in the case of Gujarat State Road Transport Corporation, which held that Section 43B is not applicable for delayed payments of employees' contributions as per Section 36(1)(va) read with Section 2(24)(x). Given this precedent, the Tribunal upheld the addition made by the A.O. and dismissed this ground of appeal. 2. Addition under Section 40(a)(ia): The assessee challenged the disallowance of ?90,637/- being interest paid to Kotak Mahindra Pvt. Ltd. under Section 40(a)(ia). The assessee's representative argued that the recipient had already paid tax on the interest, and thus, the matter should be verified by the A.O. The Tribunal agreed with this submission and restored the issue to the A.O. for verification. If the recipient had indeed paid tax on the interest, no disallowance should be made against the assessee. This ground was allowed for statistical purposes. 3. Disallowance of Interest on Late Payment of TDS under Section 37: The assessee argued that the interest paid on late payment of TDS was compensatory and not penal, and thus should be allowed as a deduction under Section 37. The Tribunal referred to the Hon'ble Supreme Court's decision in Prakash Cotton Mills, which mandates examining whether statutory imposts are compensatory or penal. The Tribunal concluded that the interest on TDS was compensatory and directed the A.O. to allow the deduction. This ground was allowed. 4. Disallowance under Section 14A: The assessee contended that no exempt income was earned during the relevant assessment year, and therefore, no disallowance should be made under Section 14A. The Tribunal referred to the Hon'ble Delhi High Court's decision in Cheminvest Ltd. v. CIT, which held that Section 14A does not apply if no exempt income is received or receivable during the relevant year. Since the A.O. had not identified any exempt income earned by the assessee, the Tribunal ruled that the disallowance under Section 14A was unjustified. This ground was allowed. Conclusion: The appeal was partly allowed. Ground No. 1 was dismissed, Ground No. 2 was allowed for statistical purposes, and Grounds No. 3 and 4 were allowed. The order was pronounced on 09-10-2020 as per Rule 34 of the Income Tax (Appellate Tribunal Rules -1963).
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