TMI Blog2023 (3) TMI 1190X X X X Extracts X X X X X X X X Extracts X X X X ..... THAT:- AO has made adhoc disallowance on percentage basis out of the claim of small amount on account of travel expenses. It is not a case of huge travelling and conveyance expenses, wherein, the AO may suspect element of personal expenses. In view of this, we do not find any justification on the part of the Assessing Officer in making the impugned disallowance and the same is ordered to be deleted. Ground No.4 is allowed. Disallowance u/s 14A r.w.r. 8D - assessee has submitted that no exempt income was earned by the assessee during the assessment year under consideration and there is no expenses were made by the assessee in making the investment in question - HELD THAT:- As decided in various cases like Cheminvest Ltd. [ 2015 (9) TMI 238 - DELHI HIGH COURT ], Shivam Motors (P.) Ltd. [ 2014 (5) TMI 592 - ALLAHABAD HIGH COURT ] the assessee has not derived any tax exempt income from investments, then no disallowance is attracted u/s 14A - A/R, has relied upon the recent decision of Era Infrastructure (India) Ltd. [ 2022 (7) TMI 1093 - DELHI HIGH COURT ] wherein, it has been held that the aforesaid explanation inserted to Section 14A of the Act is applicable prospectively. We a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessee in this appeal has taken the following grounds of appeal: 1. That the order passed by the Ld. CIT (Appeals)-17, Kolkata u/s 250 confirming the additions and disallowances made by learned assessing officer is wrong in the law and facts of the case. 2. That the Ld. CIT (Appeals) - 17, Kolkata erred in law as well as on facts of the case by confirming the disallowance of Employee's Contribution for ESI and PF Expenses amounting to Rs. 1,07,733/- and addition of the same to the total income of the appellant. 3. That the Ld. CIT (Appeals) - 17, Kolkata erred in law as well as on facts of the case by confirming the disallowance of puja expenses of Rs. 1,48,252/- and addition of the same to the total income of the appellant. 4. That the Ld. CIT(Appeals)- 17, Kolkata erred in law as well as on facts of the case by confirming the disallowance of 10 percent of travelling conveyance expenses amounting Rs.64,210/- based on estimate and thereby making addition to the total income of the appellant. 5. That the Ld. CIT(Appeals)- 17, Kolkata erred in law as well as on facts of the case by confirming the disallowance u/s 14A r/w rule 3D of the I. T. Act, 1961 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ceipts that belonged to the assessee, but were held by it, as trustees, as it were, Section 36(1)(va) was inserted specifically to ensure that if these receipts were deposited in the EPF/ESI accounts of the employees concerned, they could be treated as deductions. Section 36(1)(va) was hedged with the condition that the amounts/receipts had to be deposited by the employer, with the EPF/ESI, on or before the due date. The last expression due date was dealt with in the explanation as the date by which such amounts had to be credited by the employer, in the concerned enactments such as EPF/ESI Acts. Importantly, such a condition (i.e., depositing the amount on or before the due date) has not been enacted in relation to the employer's contribution (i.e., Section 36(1)(iv)). The significance of this is that Parliament treated contributions under Section 36(1)(va) from those under Section 36(1)(iv). The latter (hereinafter, employers' contribution ) is described as sum paid by the assessee as an employer by way of contribution towards a recognized provident fund . However, the phraseology of Section 36(1)(va) differs from Section 36(1)(iv). It enacts that any sum rec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s introduced to ensure timely payments were made by the employer to the concerned fund (EPF, ESI, etc.) and avoid the mischief of employers retaining amounts for long periods. That Parliament intended to retain the separate character of these two amounts, is evident from the use of different language. Section 2(24)(x) too, deems amount received from the employees (whether the amount is received from the employee or by way of deduction authorized by the statute) as income - it is the character of the amount that is important, i.e., not income earned. Thus, amounts retained by the employer from out of the employee's income by way of deduction etc. were treated as income in the hands of the employer. The significance of this provision is that on the one hand it brought into the fold of income amounts that were receipts or deductions from employees income; at the time, payment within the prescribed time by way of contribution of the employees' share to their credit with the relevant fund is to be treated as deduction (Section 36(1)(va)). The other important feature is that this distinction between the employers' contribution (Section 36(1)(iv)) and employees' contri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r 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. That, 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. 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 u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... -9-2014 CIT v. Shivam Motors (P.) Ltd. [2015] 230 Taxman 63 CIT vs. Ashika Global Securities Ltd. (G.A. No. 2122 of 2014) dt. 11/06/2018 In these case laws, Hon ble High Courts have been unanimous to hold that where the assessee has not derived any tax exempt income from investments, then no disallowance is attracted u/s 14A of the Act. 7.2 The ld. D/R, however, has relied upon the newly inserted explanations to Section 14A of the Act, which is extracted for the sake of ready reference:- 14A. [(1)] [Notwithstanding anything to the contrary contained in this Act, for the purposes of] computing the total income under this Chapter, no deduction shall be allowed in respect of expenditure incurred by the assessee in relation to income which does not form part of the total income under this Act.] ************************ *********************** [Explanation. For the removal of doubts, it is hereby clarified that notwithstanding anything to the contrary contained in this Act, the provisions of this section shall apply and shall be deemed to have always applied in a case where the income, not forming part of the total income under this Act, has no ..... X X X X Extracts X X X X X X X X Extracts X X X X
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