2018 (5) TMI 2163 - AT - Income Tax

TDS credit deducted in respect of interest on FDR - AO disallowed claim as no such income has been shown by the assessee - CIT(A) deleted the addition - HELD THAT - CIT(A) has allowed the claim of the assessee by following decisions of Coordinate Benches of this Tribunal in assessee s own case for the assessment years 2009-10 to 2012-13 2017 (5) TMI 1817 - ITAT JAIPUR There is no denial of the fact that the interest income on which the TDS in question was deducted by the bank was in respect of the funds received by the assessee from HUDCO in the fiduciary capacity on behalf of the State Government for disbursement. The fact in the year under consideration are same as it was for the earlier assessment year followed by the ld. CIT(A). Accordingly no error or illegality in the impugned order of the ld. CIT(A) qua this issue. PF and ESI deposits beyond the prescribed time limit - HELD THAT - Admittedly contribution to PF ESI has been paid by the appellant in all instances before the due date of filing the return of income u/s 139(1). This fact is therefore not in dispute. Thus as relying on State Bank of Bikaner Jaipur 2014 (5) TMI 222 - RAJASTHAN HIGH COURT as well as in case of Jaipur Vidyut Vitran Nigam Ltd. 2014 (1) TMI 1085 - RAJASTHAN HIGH COURT Assessee entitled to deduction in respect of contribution to ESI and PF as the same has been deposited prior to the filing of return of income u/s 139(1). Revenue appeal is dismissed.

Summary

Issues Involved:
1. Disallowance of TDS credit deducted in respect of interest on FDR.
2. Disallowance of employees' contribution to PF and ESI beyond the prescribed time limit.
3. Applicability of Section 43B vs. Section 36(1)(va) r.w.s. 2(24)(x) of the Income Tax Act, 1961.

Detailed Analysis:

1. Disallowance of TDS Credit Deducted in Respect of Interest on FDR:
The Revenue challenged the CIT(A)'s decision to allow TDS credit of Rs. 14,16,550/- deducted by the bank on interest on FDRs. The AO disallowed the TDS credit on the grounds that the corresponding interest income was not included in the assessee's total income. The assessee argued that the interest on FDRs was not chargeable to tax, and thus, TDS credit should not be denied. The CIT(A) allowed the claim, referencing previous ITAT decisions in the assessee's favor for earlier assessment years (2009-10 to 2012-13). The ITAT upheld the CIT(A)'s decision, noting that the interest income was received in a fiduciary capacity on behalf of the State Government, which is not a taxable entity. Therefore, the TDS should be refunded to the assessee, acting as the nodal agency, with the undertaking to return the amount to the State.

2. Disallowance of Employees' Contribution to PF and ESI Beyond the Prescribed Time Limit:
The AO disallowed Rs. 2,52,907/- for late deposits of employees' contributions to PF and ESI. The CIT(A) allowed the claim, observing that the contributions were paid before the due date of filing the return of income under Section 139(1). The CIT(A) relied on several judgments, including CIT vs. Vinay Cements, CIT vs. State Bank of Bikaner & Jaipur, and Alom Extrusions, which held that contributions paid before the return filing due date should not be disallowed. The ITAT affirmed the CIT(A)'s decision, citing binding precedents from the jurisdictional High Court and the Supreme Court.

3. Applicability of Section 43B vs. Section 36(1)(va) r.w.s. 2(24)(x) of the Income Tax Act, 1961:
The AO argued that employees' contributions to PF and ESI should be governed by Section 36(1)(va) r.w.s. 2(24)(x), which mandates disallowance if contributions are not paid within the prescribed time. The CIT(A) and ITAT disagreed, holding that Section 43B, which allows deductions if payments are made before the return filing due date, should apply. The ITAT cited the jurisdictional High Court's rulings in CIT vs. State Bank of Bikaner & Jaipur and CIT vs. Jaipur Vidyut Vitran Nigam Ltd., which supported the CIT(A)'s interpretation.

Conclusion:
The ITAT dismissed the Revenue's appeal, upholding the CIT(A)'s order on all grounds. The TDS credit was allowed as the interest income was not taxable, and the employees' contributions to PF and ESI were considered deductible if paid before the return filing due date, in line with Section 43B and relevant judicial precedents. The order was pronounced in the open court on 30/05/2018.