2018 (12) TMI 1872 - AT - Income Tax

Addition towards contribution to the State Renewal Fund - HELD THAT - As relying on own case 2017 (8) TMI 1382 - ITAT JAIPUR State Renewal Fund was set up to provide safety to the employees working under the state owned entities in case of restructuring/wind-up/closure of the undertaking. Based on the study done by the State Government the assessee has provided an amount of Rs. 20 lacs for the purposes of welfare and benefit of the employees. As following case of Principal CIT vs Rajasthan State Seed Corporation Ltd 2016 (9) TMI 59 - RAJASTHAN HIGH COURT we affirm the order of the CIT(A) who has rightly deleted the disallowance made by the AO towards contribution to State Renewal Fund. Disallowance for depositing the employees contribution to PF ESI beyond the prescribed time limit provided in respective Act - Whether the employees contribution to PF ESI are governed by the provisions of section 43B and not by section 36(1)(va) r.w.s. 2(24)(x) of the IT Act.? - HELD THAT - Admittedly the employees s contribution to PF has been paid before the due date of filing of return of income u/s 139(1) of the Act. The issue is no more res integra in light of various judicial pronouncements of M/S. STATE BANK OF BIKANER JAIPUR AND JAIPUR VIDYUT VITARAN NIGAM LTD. 2014 (5) TMI 222 - RAJASTHAN HIGH COURT M/S. UDAIPUR DUGDH UTPADAK SAHAKARI SANGH LIMITED UDAIPUR 2014 (8) TMI 677 - RAJASTHAN HIGH COURT and JAIPUR VIDYUT VITRAN NIGAM LTD AND RAJASTHAN RAJYA VIDYUT UTPADAN NIGAM LTD 2014 (1) TMI 1085 - RAJASTHAN HIGH COURT - We accordingly affirm the order of the ld CIT(A) who has rightly deleted the disallowance made by the AO towards employees contribution to PF. Disallowance of energy conservation fund - expenses was not incurred wholly and exclusively for the business purchases and it is only application of income - HELD THAT - As relying on own case 2017 (8) TMI 1382 - ITAT JAIPUR the disallowance on account of contribution to energy conservation fund made by the Assessing Officer is directed to be deleted. This ground is allowed. Addition of contribution to Rajasthan Bhawan - HELD THAT - Assessee got the rebate of 75% as well as the right to use the accommodation by its officers/employees visiting Mumbai. Accordingly in view of the fact that the assessee has received the benefit in the shape of accommodation against the said expenditure for construction of Rajasthan house we hold that the claim of the assessee is an allowable expenditure u/s 37(1) of the Act and the AO is directed to allow the same. In view of the same ground no. 1 of assessee s appeal is allowed. Disallowance of 50% of the expenses incurred on publicity and advertisement - Addition on the ground that in lot of entries details of expenditure are not appearing in the ledger account without providing opportunity to furnish such detail ignoring the explanation given about the nature of the expenditure incurred which is wholly and exclusively for the purpose of business - HELD THAT - The matter is remanded to the file of the AO to examine the details of expenditure incurred under the head publicity and advertisement after providing reasonable opportunity to the assessee. In the result the ground is allowed for statistical purposes. Disallowance of the prior period expenditure on the ground that it could not be ascertained whether the expenses crystallized in the previous year or not - HELD THAT - The incurrence of expenditure for the purposes of business is not been disputed by the Revenue. Further the ld AR has explained that the expenditure has been booked after seeking the approval from the competent authority during the year and the same is consistent with the accounting practice of booking the expenses in earlier years. We accordingly donot see any basis for disallowance of the expenditure so claimed by the assessee. In view of the same the AO is directed to allow the same and the ground no. 3 of assessee s appeal is allowed. Disallowing the claim of deduction u/s 80IA - Excluding the indirect income but at the same time not excluding the indirect expenses - HELD THAT - Firstly it is not under dispute that revenues in form of sales of services FDR interest income and other income are not eligible for deduction u/s 80(IA) and hence the said action of the AO is hereby confirmed. The second issue relates to allocation of indirect expenses incurred at the Head office in form of employees and administrative/establishment expenses. The ld AR has contended that the assessee has worked out the allocation of indirect expenses as per the directions of the Coordinate Bench in AY 2011-12 and as per its working the indirect expenses allocable to the eligible undertakings amounts to Rs. 18, 49, 771. Further taking the same into account as per the revised working it is eligible for deduction u/s 80IA at Rs. 8, 56, 70, 349 as against original claim of Rs. 12, 21, 63, 337. The matter is accordingly set-aside to the file of the AO to examine and verify the said revised working so furnished by the assessee available at assessee s paperbook pages 7-8 after providing reasonable opportunity to the assessee and where the same is found to be in compliance with the directions of the Coordinate Bench referred supra allow the same to the assessee. In the result the ground of appeal is allowed for statistical purposes.

Summary

Issues Involved:
1. Disallowance of contribution to the State Renewal Fund.
2. Disallowance for delayed deposit of employees' contribution to PF & ESI.
3. Applicability of section 43B vs. section 36(1)(va) r.w.s. 2(24)(x) for employees' contribution to PF & ESI.
4. Disallowance of contribution to the Energy Conservation Fund.
5. Disallowance of contribution to Rajasthan Bhawan.
6. Disallowance of 50% of expenses on Publicity and Advertisement.
7. Disallowance of prior period expenditure.
8. Disallowance of deduction under section 80IA.

Detailed Analysis:

1. Disallowance of Contribution to the State Renewal Fund:
The Revenue challenged the deletion of the disallowance of Rs. 20,00,000 towards the State Renewal Fund. The Tribunal referred to its own decision in the assessee’s case for AY 2011-12 and the Rajasthan High Court's decision in Principal CIT vs. Rajasthan State Seed Corporation Ltd., which allowed such contributions as business expenditure under section 37(1). The Tribunal affirmed the CIT(A)'s order, dismissing the Revenue's ground.

2. Disallowance for Delayed Deposit of Employees' Contribution to PF & ESI:
The Revenue contested the deletion of the disallowance of Rs. 8,60,731 for late deposit of employees' contributions to PF & ESI. The Tribunal noted that the contributions were paid before the due date for filing the return under section 139(1). Citing various High Court decisions, it affirmed the CIT(A)'s order, dismissing the Revenue's ground.

3. Applicability of Section 43B vs. Section 36(1)(va) r.w.s. 2(24)(x):
The Tribunal addressed whether employees' contributions to PF & ESI are governed by section 43B or section 36(1)(va) r.w.s. 2(24)(x). It upheld the CIT(A)’s view that section 43B applies, dismissing the Revenue's ground.

4. Disallowance of Contribution to the Energy Conservation Fund:
The Revenue disputed the deletion of Rs. 1,00,00,000 towards the Energy Conservation Fund. The Tribunal referred to its decisions in the assessee’s own case for AY 2008-09 and AY 2012-13, where such contributions were allowed as business expenditure. It affirmed the CIT(A)'s order, dismissing the Revenue's ground.

5. Disallowance of Contribution to Rajasthan Bhawan:
The assessee challenged the CIT(A)'s direction to the AO to re-examine the disallowance of Rs. 1 crore for Rajasthan Bhawan. The Tribunal noted that the Government of Rajasthan provided a 75% rebate on room tariffs for contributors. Following its decision in RIICO Ltd. for AY 2012-13, it allowed the expenditure under section 37(1), directing the AO to allow the claim.

6. Disallowance of 50% of Expenses on Publicity and Advertisement:
The assessee contested the disallowance of 50% of Rs. 57,98,634 on publicity and advertisement. The Tribunal remanded the matter to the AO to verify the details of the expenditure after providing the assessee an opportunity to furnish the necessary details, allowing the ground for statistical purposes.

7. Disallowance of Prior Period Expenditure:
The assessee challenged the disallowance of Rs. 2,33,005 out of Rs. 3,71,601 as prior period expenditure. The Tribunal noted that the expenditure was booked after approval from the competent authority and allowed the claim, directing the AO to allow the same.

8. Disallowance of Deduction under Section 80IA:
The assessee disputed the reduction of its deduction claim under section 80IA by Rs. 10,63,92,647. The Tribunal referred to its decision for AY 2011-12, directing the AO to verify the revised working submitted by the assessee, which allocated indirect expenses proportionately. It set aside the matter to the AO for verification, allowing the ground for statistical purposes.

Conclusion:
The Tribunal dismissed the Revenue's appeal and partly allowed the assessee's appeal for statistical purposes, directing further verification by the AO on certain issues.