2023 (1) TMI 470 - AT - Income Tax

Disallowing employees contribution towards ESIC - HELD THAT - The non-obstante clause has to be understood in the context of the entire provision of Section 43B which is to ensure timely payment before the returns are filed of certain liabilities which are to be borne by the assessee in the form of tax interest payment and other statutory liability. In the case of these liabilities what constitutes the due date is defined by the statute. Nevertheless the assessees are given some leeway in that as long as deposits are made beyond the due date but before the date of filing the return the deduction is allowed. However cannot apply in the case of amounts which are held in trust as it is in the case of employees contributions-which are deducted from their income. They are not part of the assessee employer s income nor are they heads of deduction per se in the form of statutory pay out. They are others income monies only deemed to be income with the object of ensuring that they are paid within the due date specified in the particular law. They have to be deposited in terms of such welfare enactments. As 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 34 interpretation were to be adopted the non-obstante clause u/s 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 following in the case of CHECKMATE SERVICES P. LTD 2022 (10) TMI 617 - SUPREME COURT we dismiss ground raised by the assessee. Deduction u/s 80IA(4) - deduction claimed by assessee on account of income earned from the Gabheni Unit Surat - HELD THAT - We note that as per the amended provision of Explanation to Section 80IA deduction u/s 80IA(4) shall not be allowable to an assessee engaged in the business of developing or operating and maintaining or developing operating and maintaining any infrastructure facility the nature of a work contract awarded by any person including the Central or State Government and executed by the undertaking or enterprise referred to Section (1) of Section 80IA. The assessee is executing only a works contract therefore not eligible for deduction under section 80IA of the Act. Moreover the assessee has not entered into an agreement with the Central Government or a State Government for developing maintaining and operating a new infrastructure facility. The legal precedents which we have cited in case of Ghabine Unit are applicable in this unit also therefore we confirm the findings of Assessing Officer and allow the appeal of the Revenue. Deduction u/s 80IA(4) which includes income derived from the Palsana Unit - HELD THAT - We note that assessee has entered into works contract hence not eligible for deduction u/s 80IA(4) - Besides the assessee has not followed the due procedure for establishing Palsana unit. The letter received by assessee from GPCB for its authorization is not a valid document to claim deduction under section 80IA(4) - Assessee has not entered into an agreement with the Central Government or a State Government or a local authority for developing maintaining and operating a new infrastructure facility. As per the amended provision of Explanation to Section 80IA inserted by the Finance Act (No.2) 2009 with retrospective effect from 01.04.2000 the deduction under section 80IB(4) claimed by the assessee from the profits and gains of Palsana Unit of the assessee company is not allowable. One of the rules of interpretation of a tax statute is that if a deduction or exemption is available on compliance with certain conditions the conditions are to be strictly complied with. The legal precedents cited by us in case of Ghabini Unit are squarely applicable to this unit also. Hence we confirm the findings of the assessing officer and allow the appeal of the Revenue.

Issues Involved:

1. Disallowance of top liner expenses.
2. Validity of reassessment under section 147.
3. Disallowance of deduction under section 80IA(4).
4. Disallowance of various expenses (Top Liner, Post Monitoring, and Land Utilization).
5. Adjustments to book profit under section 115JB.
6. Disallowance of employees' contribution towards ESIC.
7. Levy of interest under sections 234B and 234C.
8. Initiation of penalty under section 271(1)(c).
9. Issues not pressed by the assessee.

Detailed Analysis:

1. Disallowance of Top Liner Expenses:

The assessee's appeal regarding the disallowance of Rs. 8,033 for top liner expenses was dismissed as not pressed.

2. Validity of Reassessment under Section 147:

The reassessment was challenged on the grounds that the relevant material was disclosed in the original return and that the reassessment was based on a mere change of opinion. The Tribunal upheld the reassessment, citing that the Assessing Officer had valid reasons based on fresh information. The Tribunal referenced the Supreme Court's decision in Phul Chand Bajrang Lal, which allows reassessment based on new, specific, and reliable information.

3. Disallowance of Deduction under Section 80IA(4):

The Tribunal dealt with multiple units under this issue:
- Alang Unit: The deduction was disallowed as the assessee was engaged in a works contract, which is not eligible under section 80IA(4) as per the amended provision effective from 01.04.2000.
- VMC, SMC, and NMC Units: Similar disallowances were made for these units on the same grounds as the Alang Unit.
- Gabheni Unit: The deduction was disallowed because the assessee did not have a proper agreement with the government for developing, operating, and maintaining the infrastructure facility. The Tribunal noted that the MOU provided was a subsidy disbursal agreement, not a development agreement.
- Co-Processing and Palsana Units: The deductions were disallowed as the units were engaged in works contracts and lacked proper agreements with the government.

4. Disallowance of Various Expenses:

The Tribunal upheld the disallowance of top liner expenses, post monitoring expenses, and land utilization charges. It was noted that these expenses were either not actually incurred during the year or were in the nature of provisions for future expenses, which are not allowable.

5. Adjustments to Book Profit under Section 115JB:

The Tribunal directed the Assessing Officer to make adjustments to the book profit strictly as per the provisions of section 115JB.

6. Disallowance of Employees' Contribution towards ESIC:

The Tribunal dismissed the assessee's appeal, citing the Supreme Court's decision in Checkmate Services P. Ltd., which mandates that employees' contributions must be deposited on or before the due date to be eligible for deduction.

7. Levy of Interest under Sections 234B and 234C:

The Tribunal directed the Assessing Officer to compute interest in accordance with the provisions of sections 234B and 234C.

8. Initiation of Penalty under Section 271(1)(c):

The Tribunal dismissed the ground as premature, noting that the assessee did not file or argue the appeal under section 271(1)(c) before the Bench.

9. Issues Not Pressed by the Assessee:

Certain grounds of appeal were dismissed as not pressed by the assessee during the hearing.

Conclusion:

The Tribunal dismissed/partly allowed the appeals filed by the assessee for statistical purposes and allowed the appeals filed by the Revenue. The Tribunal emphasized strict compliance with the provisions of the Income Tax Act and upheld the disallowances where the conditions for deductions were not met.

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