2022 (9) TMI 825 - AT - Income Tax

Excess Contribution to Provident Fund, Superannuation Fund or Gratuity Fund - allowability of contribution with reference to section 36(1)(va) and 43B read with section 2(24)(x) - HELD THAT - As gone through the order of AO, misconceived order of Ld. CIT (A) and submissions of assessee. We have gone through the Paper Book filed by the assessee dated 14.06.2022. To decide the matter, we need to take cognizance of Part-XII, Recognized Provident Funds, Part-XIII, Approved Superannuation Funds and Part-XIV Gratuity Funds. Rule-75 deals with limit for contribution in Recognized Provident Funds, Rule-87 deals with Ordinary Annual Contributions to Approved Superannuation Funds and Rule-103 deals with Ordinary Annual Contributions to Gratuity Funds. Part-XII, Part-XIII and Part-XIV of the I.T. Rules, 1962 deals with social security contributions made by employer for the benefit of its employees. Each part deals with different type of social security payments and have their own maximum limits prescribed for contribution by employer. Part-XII dealing with Employer Contribution to Provident Fund does not have any limit. Limit of 27% as prescribed in Rule 87 is applicable only in case of contribution to Superannuation Fund (minus contributions made to Provident Fund). We found force in the contentions of the assessee and considering the legal position enumerated above, we are of the view that contributions of the assessee to the Provident Fund may be even exceeding 27% is allowable. Ground No.1 2 of the assessee are allowed. Scope of maximum limit provided under Rule 87 - Heading of the rule 87, Ordinary annual contributions as per Part-XIII, Approved Superannuation Funds - HELD THAT - The limit prescribed in Rule 87, having reference of the word Provident Fund is just for sake of fulfilment of conditions laid down with reference to maximum limit of contribution to be made under Superannuation Fund. It s nothing to do with Rule 75 applicable to contributions to be made under Provident Fund. The ordinary annual contribution by the employer to a fund shall be made on a reasonable basis as may be approved by the Chief Commissioner or Commissioner having regard to the length of service of each employee concerned so, however, that such contribution shall not exceed 81/3 per cent of the salary of each employee during each year. Credit of TDS - HELD THAT - We considered the view of the ITAT in the case of Kirtida Rameshchandra Chandarana in 2022 (8) TMI 679 - ITAT MUMBAI . In the result, Ground No.3 of the assessee is allowed subject to submission of certified documents mentioned above.

Summary

Issues Involved:
1. Disallowance of employer's contribution to provident fund, ESIC, etc.
2. Disallowance under section 43B without providing an opportunity to the appellant.
3. Short credit for TDS.
4. Allowance of interest as per Sec. 244A of the Act.

Detailed Analysis:

1. Disallowance of Employer's Contribution to Provident Fund, ESIC, etc.:
The primary issue revolves around the disallowance of Rs. 16,77,419/- claimed by the assessee as an employer's contribution to the provident fund, ESIC, etc. The Assessing Officer (AO) disallowed this amount, stating it exceeded the limits prescribed under section 36(1)(iv) of the Income Tax Act, 1961, read with Rule 87 of the Income Tax Rules, 1962. The assessee argued that the contribution was within permissible limits. The ITAT examined the provisions of Part-XII, Part-XIII, and Part-XIV of the I.T. Rules, 1962, which deal with different types of social security contributions by employers and found that the limit of 27% prescribed in Rule 87 pertains only to contributions to the Superannuation Fund and not to the Provident Fund. Consequently, the ITAT concluded that contributions to the Provident Fund exceeding 27% are allowable, thereby allowing Ground No.1 and Ground No.2 of the assessee's appeal.

2. Disallowance under Section 43B Without Providing an Opportunity to the Appellant:
The assessee contended that the CIT(A) confirmed the disallowance under section 43B without giving an opportunity to explain that no disallowance could be made under this section. The ITAT noted that the CIT(A) had erroneously referenced section 36(1)(va) and section 43B read with section 2(24)(x) of the Act, ignoring the actual issue and submissions. The ITAT emphasized that the CIT(A) failed to consider the correct legal provisions and submissions, thus allowing the assessee's grounds related to this issue.

3. Short Credit for TDS:
The assessee claimed that the CIT(A) erred in not directing the AO to allow short credit for TDS amounting to Rs. 39,477/-. The ITAT directed the AO to allow the short credit of TDS after verifying the certified copies of Form 26AS and Form-16A submitted by the assessee. This direction aligns with the ITAT's view in a similar case, thus allowing Ground No.3 of the assessee's appeal.

4. Allowance of Interest as per Sec. 244A of the Act:
The assessee argued that the CIT(A) failed to direct the AO to allow interest as per Sec. 244A of the Act. The ITAT noted that this issue is consequential in nature and directed the AO to calculate the interest under section 244A, considering the findings of the appeal. Consequently, Ground No.4 was allowed.

Conclusion:
The ITAT allowed the appeal filed by the assessee, addressing each ground comprehensively and providing directions to the AO for necessary actions, including the allowance of employer's contributions to the provident fund, rectification of TDS credits, and calculation of interest as per Sec. 244A. The judgment emphasized the importance of adhering to the correct legal provisions and considering the submissions made by the assessee.