2022 (12) TMI 446 - AT - Income Tax

Disallowance u/s. 14A - earning of exempt income - HELD THAT - Uncontroverted facts at the end of both the parties are that during both the years assessee has not earned any exempt income. Respectfully following the settled judicial precedents as consistently held in the case of Cheminvest Ltd. 2015 (9) TMI 238 - DELHI HIGH COURT , Reliance Chemotex Industries Ltd. 2022 (2) TMI 1309 - CALCUTTA HIGH COURT and recent judgment Era Infrastructure India Ltd. 2022 (7) TMI 1093 - DELHI HIGH COURT hold that in case there no exempt income is earned during the year, provisions of section 14A of the Act cannot be invoked and, therefore, the disallowance made u/s. 14A of the Act are deleted - Decided in favour of assessee. Disallowance of additional depreciation claimed u/s. 32 - assets purchased and put to use for a period less than 180 days in the preceding previous year - HELD THAT - We find that similar issue came up for adjudication before this Tribunal in the case of National Engineering Industrial Ltd. 2021 (12) TMI 1130 - ITAT KOLKATA and the issue was decided in favour of the assessee - Thus we allow the remaining 50% claim of additional depreciation at Rs.57,84,200/- made by the assessee. Thus, finding of the Ld. CIT(A) is reversed. Ground No. 4 raised by the assessee is allowed. Disallowance of employees contribution towards PF ESI - HELD THAT - We find that recently in Chekmate Services Pvt. Ltd. 2022 (10) TMI 617 - SUPREME COURT has settled the issue holding that if the employees contribution towards PF ESI is not deposited by the employer before the due date as prescribed under the relevant Act governing PF ESI then strict compliance has to be made with regard to sec. 36(1)(va) of the Act read with section 2(24) of the Act and such sum shall be treated as income of the employer and Hon ble Court further held that for such employees contribution provision of section 43B of the Act cannot be applied. Since in the instant case the alleged sum has been deposited after the due date prescribed under the PF Act, we fail to find any merit in the ground raised by the assessee and confirm the finding of Ld. CIT(A) disallowing the sum - Ground raised by the assessee is dismissed. Claim of deduction u/s. 80JJAA - AO only allowed the claim for 30% of the additional wages paid during the year but did not allow the claim of eligible deduction for previous assessment years - HELD THAT - We fail to find any merit in the said findings of the Ld. AO because he has partly accepted the claim of deduction but the deduction which has been claimed for AY 2011-12 and 2012-13 and stands allowed by the revenue in the past and the assessee was eligible for such deduction for subsequent two assessment years as per the provisions section 80JJAA - In case the AO has denied the total deduction u/s. 80JJAA of the Act for incorrect report furnished by the assessee then situation may have been different but in the instant case on the basis of the said report part of the claim has been allowed and part of the claim has been denied which in our considered opinion was not correct on the part of lower authorities. We are of the considered view that for such minor technical defect, which in real sense is not defect since the said audit report has given more clarity to the year wise deduction claimed u/s. 80JJAA of the Act since it constitutes the figure of 30% of additional wages for current year and if eligible than for preceding two years also. Thus, we hold that assessee is eligible for deduction u/s. 80JJAA - Decided in favour of assessee.

Issues Involved:
1. Condonation of delay in filing appeals.
2. Disallowance under Section 14A of the Income-tax Act.
3. Disallowance of additional depreciation under Section 32.
4. Disallowance of employees' contribution towards PF and ESI.
5. Deduction under Section 80JJAA.
6. Ex parte order by CIT(A).

Issue-wise Detailed Analysis:

1. Condonation of Delay in Filing Appeals:
The appeals were time-barred by 1146 and 699 days, primarily due to COVID-19 restrictions. The Tribunal referenced the Hon'ble Supreme Court's judgment in Miscellaneous Application No. 21 of 2022, which excluded the limitation period from 15.03.2020 to 28.02.2022 for filing appeals. Consequently, the delay was condoned, and the appeals were admitted for adjudication.

2. Disallowance under Section 14A:
The Tribunal noted that the assessee had not earned any exempt income during the years under consideration. Citing judicial precedents, including Hon'ble Delhi High Court in Cheminvest Ltd. Vs. ITO and Hon'ble Calcutta High Court in Reliance Chemotex Industries Ltd., the Tribunal held that provisions of Section 14A cannot be invoked if no exempt income is earned. Therefore, the disallowances of Rs. 1,89,447/- and Rs. 68,280/- for AYs 2013-14 and 2014-15 were deleted, reversing the CIT(A)'s findings.

3. Disallowance of Additional Depreciation under Section 32:
For AY 2014-15, the assessee claimed balance 50% of additional depreciation on assets used for less than 180 days in the preceding year. The Tribunal referred to the decision in National Engineering Industrial Ltd., which allowed such claims, viewing the amendment to Section 32(1) as curative. Consequently, the Tribunal allowed the claim of Rs. 57,84,206/-, reversing the CIT(A)'s decision.

4. Disallowance of Employees' Contribution towards PF and ESI:
The Tribunal upheld the disallowance of Rs. 9,26,938/- for employees' contributions deposited after the due date prescribed under the relevant Act, referencing the Hon'ble Supreme Court's judgment in Chekmate Services Pvt. Ltd. Vs. CIT. The Court held that strict compliance with Section 36(1)(va) is required, and Section 43B cannot be applied to employees' contributions. Thus, the Tribunal confirmed the CIT(A)'s findings.

5. Deduction under Section 80JJAA:
The assessee's claim for deduction under Section 80JJAA was partly allowed by the AO but denied for previous years due to technical reasons in the Chartered Accountant's report. The Tribunal found no merit in the AO's partial acceptance of the claim, emphasizing that deductions for previous years were already allowed by the revenue. The Tribunal held that minor technical defects should not disallow legitimate claims and allowed the deductions of Rs. 1,19,33,440/- and Rs. 2,02,53,323/- for AYs 2013-14 and 2014-15, respectively, reversing the CIT(A)'s findings.

6. Ex parte Order by CIT(A):
The assessee contended that the CIT(A) erred in framing an ex parte order. The Tribunal did not specifically address this issue separately in the detailed analysis, implying that the primary focus was on the substantive grounds of appeal.

Conclusion:
The appeals were partly allowed, with significant relief granted on disallowances under Sections 14A and 80JJAA, and additional depreciation under Section 32, while upholding the disallowance of employees' contributions towards PF and ESI. The Tribunal's order was pronounced in open court.

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