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TMI Blog2024 (5) TMI 148X X X X Extracts X X X X X X X X Extracts X X X X ..... 2023 (1) TMI 1124 - ITAT KOLKATA] interest on late deposit of TDS is not an allowable expenditure and this ground of appeal is dismissed. - Shri Sanjay Garg, Judicial Member And Shri Rakesh Mishra, Accountant Member For the Appellant : Shri Soumitra Choudhury, Advocate Shri Pronabesh Sarkar, Advocate For the Respondent : Shri B. K. Singh, JCIT, Sr. DR ORDER PER RAKESH MISHRA, ACCOUNTANT MEMBER: Both these appeals filed by the assessee are against the separate orders of the Ld. Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (NFAC) (hereinafter referred to as the Ld. CIT(A) vide separate orders dated 25.07.2023 which are against the assessment orders by the DCIT Circle-11(1), Kolkata u/s. 143(3) of the Income Tax Act, 1961 (hereinafter referred to as the Act ) dated 16.12.2019 for AY 2017-18 and by the Assessing Officer, National e-Assessment Centre, Delhi dated u/s. 143(3) read with sections 143(3A) 143(3B) of the Act dated 29.03.2021 for AY 2018-19. Since the grounds of appeal are common and the facts are identical, we dispose of both these appeal by this consolidated order for the sake of brevity and convenience. 2. The grounds of appeal raised by the ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ocessed u/s. 143(1) of the I.T. Act is infructuous and no valid, and no leg to stand the disallowance, as such his finding is completely arbitrary, unjustified and illegal. 3. For that on the facts of the case, the Ld. C.I.T.(A) was wrong in confirming the disallowance towards employees contribution towards P.F. amounting to Rs. 52,00,111/- which is completely arbitrary, unjustified and illegal. 4. For that on the facts of the case, the Ld. C.I.T.(A) was wrong in not considering the facts that the payment was made towards contribution of P.F. of Rs. 52,00,111/- before filing of the return u/s. 139(1) of the I.T. Act on 19.09.2018 allowable u/s. 36(1)(va)/43B covered by various Court's judgements, as such his finding is completely arbitrary, unjustified and illegal. 5. For that the amendment brought in by Finance Act, 2021 on this issue has been held to be prospective in nature in the case of Shri Harendra Nath Biswas (supra), therefore, Bench reiterate the same view that the amendment/explanation brought in by Finance Act, 2021 with effect from 01.04.2021 on this issue is prospective; and taking note that the relevant assessment year i.e. 2015-16 the ibid explanation brought in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ecord. Ground nos. 2, 3 and 4 relate to the addition made by the AO in respect of employees contribution towards PF amounting to Rs. 92,12,637/-. The Ld. CIT(A) has discussed the issue elaborately and after considering the legal provisions in details has rejected the claim of the assessee. During the course of hearing of the appeal before the Ld. CIT(A), the assessee relied on the case of CIT Vs. M/s. Vijay Shree Ltd. in ITAT No. 245 of 2011. The assessee has also relied upon the following decisions in the course of the appeal before us: i. CIT v Noble Hewitt (I) (P) Ltd. 305 ITR 324 (Del) ii. Checkmate Services (P) Ltd. V CIT-I 448 ITR 518 (SC) iii. Parv Buildcon v DCIT Raipur ITA No. 357/RPR/2023 We have gone through the decisions relied upon in both the appeals. However, the same are of no assistance to the assessee. This issue is no longer res integra and the issue has been decided by the Hon ble Supreme Court in the case of Checkmate Services Pvt. Ltd. Vs. CIT (2022) 143 taxmann.com 178 (SC) dated 12.10.2022 wherein it has been held that deduction u/s 36(1)(va) in respect of delayed deposit of amount collected towards employees contribution to PF cannot be claimed when deposit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... suring that they are paid within the due date specified in the particular law. They have to be deposited in terms of such welfare enactments. It is upon deposit, in terms of those enactments and on or before the due dates mandated by such concerned law, that the amount which is otherwise retained, and deemed an income, is treated as a deduction. Thus, it is an essential condition for the deduction that such amounts are deposited on or before the due date. If such interpretation were to be adopted, the non-obstante clause under Section 43B or anything contained in that provision would not absolve the assessee from its liability to deposit the employee's contribution on or before the due date as a condition for deduction. Respectfully relying on the aforesaid decision, we dismiss the grounds of appeal raised by the assessee in this respect. 5. Ground no. 5 relates to disallowance of interest paid on TDS u/s. 201(1A) of the Act amounting to Rs. 1,80,495/-. The Ld. CIT(A) relying on the decision of Hon ble Calcutta High Court in the case of Martin Harris Private Limited Vs. CIT and also the judgment of Hon ble Madras High Court in the case of CIT Vs. Chennai Properties Investment L ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... viable on the income of the payee, along with interest, becomes a charge upon the property of such person responsible/deductor. Further, as per the provisions of section 4 of the Income-tax Act, the deduction of tax at source is one of the modes of recovery of charge of income tax. Thus statute has casted a duty upon the payer to deduct tax on behalf of Government of India on the payment made to a payee on which such tax is liable to be deducted as per the provisions of the Act and further such deductor is required to deposit the said tax with the Central Government, failing to do so declares such a person as a defaulter of tax as if of his own tax liability by way of the deeming fiction of section 201 of the Act. Therefore, under the circumstances, no such defense is available to the person responsible/deductor it to say that it was the liability of the other person. Even though, as per the relevant provisions, if the payee takes into account the said receipts for the purpose of computation of income and pays tax thereupon and files return of income, then such person responsible/deductor is absolved of the liability of payment of tax which he was liable to deduct and deposit but h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Act. If an amount does not qualify as a deductible expenditure under the provisions of sections 30 to 37 of the Act, then, even though, the same has not been specifically excluded u/s 40 or to be more specifically 40(ii) of the Act, even then non-exclusion does not put it into the category of allowable expenditure. 19. At this stage, reliance can be placed on the recent decision of the coordinate Delhi bench of the Tribunal in the case of Universal Energies Ltd. v. DCIT [IT Appeal No. 2761 (Delhi) of 2018, dated 26-7-2022], wherein the Tribunal has made following observations in this respect: 7. Interest as defined in section 2(28A) of the Act means interest payable in any manner in respect of any moneys borrowed or debt incurred (including a deposit, claim or other similar right or obligation) and includes any service fee or other charge in respect of the moneys borrowed or debt incurred or in respect of any credit facility which has not been utilized. Hence, section 36(1)(iii) of the Act allows a deduction for interest paid on capital borrowed while computing the business income of the taxpayer. It provides deduction of the interest paid in respect of capital borrowed for th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s and other marketable securities of a like nature, Government securities and rights or interests in securities. Section 3(1) provided for the appointment by the Central Government of a Custodian. By reason of section 3, the Custodian was empowered, on being satisfied on information received that any person had been involved in any offence relating to transactions in securities after 1st April, 1991, and before 6th June, 1992 (the stated dates), to notify the name of such person in the Official Gazette. On and from the date of such notification, by reason of section 3(3), property, movable and immovable, belonging to the person notified stood attached and, by reason of section 3(4), could be dealt with by the Custodian in such manner as the Special Court directed. Any person aggrieved by notification under section 3(2) or section 4(1) was entitled to file a petition of objection before the Special Court. By reason of section 11(1), the Special Court could make such order as it deemed fit directing the Custodian in the matter of disposal of property under attachment. Section 11(2) set out the order in which the liabilities of the persons notified had to be discharged. Such liabiliti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 38, wherein, the Hon'ble Supreme Court has held that the Income-tax Act is a complete code with respect to assessment and reassessment of incometax. 21. At this stage, it is pertinent to mention here, that it is not all type of taxes that are not allowable as deduction under the Income-tax Act, but the question before us is of the allowability of interest on delayed payment income tax itself. Certain taxes such as sales tax, excise or custom duty etc. which go on to increase the purchase cost of the goods or raw material etc. are allowed as deduction under the Income-tax Act for arriving at the profits earned. Therefore, an interest paid on delayed payment of sales tax etc. being adding to the cost/purchase price or decreasing the profit margin on sales may be taken into account for computation of profit or to say computation of taxable income, but that concession is not available in respect of interest on Income-tax. Hence, any case laws dealing with the levy of indirect taxes and interest thereupon are not applicable for the purpose of interpretation of the relevant provisions of the Income-tax Act. 22. The Hon'ble Madras High Court in the case of Chennai Properties and I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... character of business expenditure. The court held that an assessee could not possibly claim that it was borrowing from the State, the amounts payable by it as income-tax, and utilising the same as capital in its business, to contend that the interest paid for the period of delay in payment of tax amounted to a business expenditure. 23. The Jurisdictional Calcutta High Court in the case of Martin Harris (P.) Ltd. v. CIT [1994] 73 Taxman 555 observed in the case of default by the employer in deposit of tax deducted at the salary of the employee has held that the amount of tax deducted and not paid plus the amount of interest leviable under section 201(1A) was not a part of the salary of the employees which was withheld. It was tax on salary of the employees which was deducted but not paid. Therefore what has been deducted is tax and it does not retain the character of salary although such deduction has been made from the salary. The Hon'ble Calcutta High Court, therefore, held that the character and quality of interest payable for non-compliance with the provisions of the Act would be the same, whether it is levied for non-submission of return in time or non-payment of tax within ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Once, the deductee pays the due taxes, the deductor is absolved from the said tax liability but not of the interest liability on the delayed payment. Allowing of such interest payment on delayed deposit of TDS as deduction would defeat the very purpose of the TDS provisions ensuring the deduction of taxes from the income of the recipient and the payment/deposit thereof with the Central Govt. within the due time. 25. In view of the above discussion, we hold that the interest payment on delayed deposit of Income-tax, whether TDS or otherwise, is not an allowable expenditure. Hence, in view of the elaborate discussion made in the case decided by the coordinate Bench of the Tribunal (supra), interest on late deposit of TDS is not an allowable expenditure and this ground of appeal is dismissed. 9. Ground nos. 1 and 6 are general in nature and require no adjudication, hence dismissed. 10. The appeal of the assessee for the AY 2017-18 is hereby dismissed. 11. Now we take up the appeal filed vide ITA No. 1009/Kol/2023 for AY 2018-19. 12. Ground Nos. 1 and 7 are general in nature do not require any adjudication. 13. Ground no. 2 relates to processing of an intimation u/s. 143(1) on 13.11.2 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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