2021 (11) TMI 220 - AT - Income Tax

Delay in deposit of employees contribution to PF and ESI u/s 36(1)(va) read with Section 2(24)(x) - assessee contributing/depositing the same before the due date of filing of return of income u/s 139(1) - CIT-A allowed deduction - HELD THAT - As relying on M/S. VIJAY SHREE LIMITED 2011 (9) TMI 30 - CALCUTTA HIGH COURT and HARENDRA NATH BISWAS VERSUS DCIT, CIRCLE-29 KOLKATA 2021 (7) TMI 942 - ITAT KOLKATA CIT(A) has rightly allowed the deduction in respect of employee's contribution to PF ESI which had been admittedly remitted on or before the due date for filing the return of income u/s. 139(1) of the Act. We therefore do not find any infirmity in the order of the Ld. CIT(A) and, we confirm the same and dismiss this ground of appeal of revenue. Disallowance of discount brokerage debited to the Profit Loss Account - HELD THAT - As decided in 2018 (11) TMI 1877 - ITAT KOLKATA adopt judicial consistency in this facts and circumstances to affirm the CIT(A)'s findings under challenge deleting discount and brokerage disallowance -Decided against revenue. Disallowance u/s 14A r.w.r. 8D - HELD THAT - As decided in own case 2018 (5) TMI 420 - ITAT KOLKATA we remand this issue to the file of A.O. with the direction to consider only the investment which yielded dividend income to the assessee for computing the disallowance under section 14A of the Act read with Rule 8D(2)(ii) of the Rules. Transfer pricing adjustment made by the TPO to the claim of deduction u/s 80-IA - arm s length price of power transferred by the three CPPs at Vasavdatta, Karnataka to the cement unit - HELD THAT - Even if the Ld. CIT, DR s contention is accepted at its face value and the eligible unit is taken as the tested party , we still find that there was reliable internal CUP data available to benchmark the transfer price of power supplied by the CPPs to the cement unit. If the rates at which the CPPs sold power to IEX, GEPL (₹ 6.24/unit) is taken as the benchmark ALP rate, even then the transfer price of power adopted by the assessee (₹ 5.96 - ₹ 6.23/unit) was comparable and accordingly no adjustment was permissible in this regard. We find that, on same set of facts and circumstances, the Revenue had categorically accepted this manner of application of internal CUP Method in respect of power supplied by the CPPs at Karnataka in the immediately preceding AY 2013-14 and accordingly no transfer pricing adjustment was made in relation thereto. When enquired in this regard, the Ld. CIT, DR fairly agreed with the Ld. CIT(A) s above findings qua the CPPs at Vasavdatta, Karnataka. For the reasons as aforesaid, we do not find any infirmity in the order of the Ld. CIT(A) deleting the transfer pricing adjustment of ₹ 40,03,60,133/- made by the TPO to the transfer value of power supplied by the CPPs at Vasavdatta, Karnataka to the noneligible cement unit. CPP at Hooghly, West Bengal - As from the data provided by the assessee, it is noted that both the CPP and SEB have supplied power in all the months of the year and therefore there are no timing differences as well. In the circumstances, we find merit in the findings of the Ld. CIT(A) that the transaction involving purchase of power by the non-eligible unit from the SEB, fulfilled the internal CUP parameters and thus the landed cost paid by the rayon unit to the SEB represented internal comparable arm s length rate. CIT(A) had indeed taken into account the amendment made by the Legislature to Explanation to Section 80-IA(8) by the Finance Act, 2012 introducing the transfer pricing regulations, and had held that the open market value as determined by this Tribunal in the earlier years in relation to the power transferred by the CPPs to the non-eligible units was in adherence to the arm s length principle enunciated in Section 92C Referring to the decisions of this Tribunal in assessee s own case for earlier years, we uphold the order of the Ld. CIT(A) deleting the transfer pricing adjustment made in relation to the transfer price of power supplied by the CPP at Hooghly, West Bengal to the rayon unit.

Summary

Issues Involved:
1. Delayed deposit of employees' contribution to PF and ESI.
2. Disallowance of discount and brokerage debited to the Profit & Loss Account.
3. Disallowance under Section 14A of the Income Tax Act.
4. Transfer pricing adjustments related to the claim of deduction under Section 80-IA.

Detailed Analysis:

1. Delayed Deposit of Employees' Contribution to PF and ESI:
The Revenue challenged the deletion of an addition of ?67,16,882/- made by the AO due to delayed deposit of employees' contribution to PF and ESI. The Tribunal noted that although there was a delay, the sums were deposited before the due date of filing the return under Section 139(1). The Tribunal referenced the consistent view of the Hon'ble Calcutta High Court, which allows such deductions if deposits are made before the return filing deadline. Citing cases like M/s. Akzo Nobel India Ltd. Vs. CIT and CIT Vs. Vijayshree Ltd., the Tribunal upheld the CIT(A)'s decision to allow the deduction.

2. Disallowance of Discount and Brokerage:
The Revenue contested the deletion of a disallowance amounting to ?3,13,86,883/- related to discounts and brokerage. The Tribunal noted that the assessee provided both upfront/trade discounts and conditional/post-sales discounts, which were debited separately in the Profit & Loss Account. The AO's disallowance was based on the assumption that no further discounts could be given post-sales. However, the Tribunal referenced its own decision in the assessee's case for AY 2008-09, which upheld the treatment of such discounts. The Tribunal found no new material facts to warrant a change and upheld the CIT(A)'s deletion of the disallowance.

3. Disallowance under Section 14A:
For AY 2014-15, the assessee's appeal contested the disallowance under Section 14A read with Rule 8D(2)(iii). The AO had computed a higher disallowance than the assessee's self-assessed amount. The CIT(A) directed the AO to re-compute the disallowance considering only those investments that yielded dividend income. The Tribunal upheld this approach, referencing its own decision in the assessee's case for AY 2008-09 and 2009-10, which supported considering only dividend-bearing investments for such disallowances.

4. Transfer Pricing Adjustments Related to Section 80-IA:
The Revenue appealed against the CIT(A)'s deletion of transfer pricing adjustments made by the TPO to the claim of deduction under Section 80-IA. The TPO had re-computed the transfer price of power supplied by the assessee's captive power plants (CPPs) to non-eligible units using external CUP data. The CIT(A), however, upheld the assessee's method of using the average landed cost of power procured from State Electricity Boards (SEBs) as the benchmark. The Tribunal agreed with the CIT(A), noting that reliable internal CUP data was available, and the rates used by the assessee were comparable to the rates at which power was sold to unrelated parties. The Tribunal referenced similar decisions in the assessee's case for earlier years and other relevant cases, concluding that the assessee's benchmarking analysis was justified.

Conclusion:
The Tribunal dismissed the Revenue's appeals for AYs 2012-13, 2014-15, and 2015-16, and upheld the CIT(A)'s decisions on all contested issues. The assessee's appeal for AY 2014-15 was also dismissed, while the appeal for AY 2015-16 was allowed for statistical purposes, directing the AO to re-compute the disallowance under Section 14A.