TMI Blog2022 (3) TMI 1536X X X X Extracts X X X X X X X X Extracts X X X X ..... 1) - The year under consideration is also before the effective date (01.04.2021, AY 2021-22 onwards) of the amended provision by Finance Bill 2021. Accordingly, disallowance could not be made in respect of PF/ESI paid within the due date of filing return of income. Appeal of the assessee is allowed to this extent. Disallowance of Capital Expenditure - HELD THAT:- As assessee has failed to provide required information regarding construction of the temporary hutments, however, if it is proved that such structures were constructed on temporary basis and were used for the purpose of business of the assessee, a deduction of expenditure will be allowable, if the same is revenue in nature or depreciation would be allowed if the same is capital in nature. 100% disallowance without disputing the actual incurrence of the expenditure which is used for the purpose of the business of the assessee is unwarranted and bad in law. Therefore, this Ground of appeal is directed to restore back to files of AO to reassess the same. - ITA No. 358/CTK/2017 - - - Dated:- 30-3-2022 - Shri Chandra Mohan Garg, JM And Shri Arun Khodpia, AM For the Assessee : None. For the Revenue : Shri Mano ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stomary. Hence the addition is liable to be quashed. 5. Learned Assessing officer has added an amount of Rs.21,64,220/- paid as interest on late deposit of TDS without considering the ground reality of the facts. The assessee has saved working capital which has more interest than the above. Hence the addition is liable to be quashed. 6. That the Appellant craves the leave of the Hon'ble Bench to add, alter, amend, modify, substitute, delete and/or rescind all or any of the grounds of appeal, submit written submissions, paper book and such other facts and figures before or at the time of final hearing of the case, if necessity so arises. 5. This case was fixed for hearing several times before starting from 01.08.2018, initially, at few occasions adjournment was sought by the AR of the assessee, subsequently, the case was fixed for hearing on several dates but neither any one was appeared nor adjournment was sought on behalf of the assessee. Therefore, the bench proceeded to dispose of the case based on pleadings of the Ld CITDR and on the basis submission in form a paper book as well as the material facts available on record. 6. Ground 1 - At the outset, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... factory 2.2.1 After insertion of the above proviso, from AY 2013-14, the assessee cannot take shelter under the decisions in the case of Lovely Exports and Stellar Investment Ltd.(supra), and has to furnish an explanation from the company from whom share application money is received about the nature and source of the credit entered in its name. Moreover, the AO has to be satisfied about the explanation furnished in respect of the nature and source of the credit. In the case of the assessee, no such explanation has been furnished by M/s. Mahabali Enclave (P) Ltd. The AO has pointed out that there was no cash balance in the bank account of M/s. Mahabali Enclave (P) Ltd. and substantial cash deposits were made just to enable issue of cheque in favour of the assessee-company. On the facts of the case M/s. Mahabali Enclave (P) Ltd. clearly appears to be a penny-stock company not having genuine creditworthiness. This company has been used as a conduit to channelize the undisclosed income of the assessee-company through the medium of share application money. In this view of the matter, the addition of Rs.1,30,60,000/- u/s.68 is confirmed. 6.2 In contradiction to the opinion of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Investor Company is not doubtful. Regarding genuineness or credit worthiness of the investor company, no material evidences were fetched by the AO. Ld CIT(A) in para 2.2.1 of its order has mentioned on the basis of observations of AO that The AO has pointed out that there was no cash balance in the bank account of M/s Mahabali Enclave (P) Ltd and substantial cash deposit were made just to enable issue of cheque in favour of the assessee company , however, on perusal of the bank statement submitted at page number 12-13 of the paper book of the assessee, it is evident that all the deposits in the said account of M/s Mahabali Enclave (P) Ltd are through bank transfers and no cash was deposited during the entire period under assessment. It shows that AO has not scrutinized the matter appropriately and CIT(A) has made a incorrect opinion based on facts presented by the AO. 6.5 From the above discussion, we found that the findings of the revenue authorities are not justified and are irrational, they have deliberated the matter without due application of mind, identity of the investor had duly disclosed by the assessee and identified by the AO, all the transactions were through prope ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 12,21,359 2 15/07/2012 17/09/2012 12,73,811 3 15/08/2012 13/12/2012 12,03,709 4 15/09/2012 30/09/2013 12,30,904 5 15/10/2012 30/09/2013 11,34,696 6 15/11/2012 23/09/2013 13,62,799 7 15/12/2012 23/09/2013 12,10,295 8 15/01/2013 23/09/2013 11,56,620 9 15/02/2013 23/09/2013 10,00,118 10 15/03/2013 23/09/2013 9,06,116 11 15/04/2013 30/09/2013 9.75,852 TOTAL ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to employee's contribution governed by section 36(1)(va) - Held, yes [Para 19] [In favour of revenue] ii) CIT Vs. Gujarat State Road Transport Corporation [2014] 41 taxmann.com 100 (Gujarat): Section 43B, read with section 36(1)(va) of the Income-tax Act, 1961 - Business disallowance - Certain deductions to be allowed on actual payment (Employees contribution) - Whether where an employer has not credited sum received by it as employees' contribution to employees' account in relevant fund on or before due date as prescribed in Explanation to section 36(1)(va), assessee shall not be entitled to deduction of such amount though he deposits same before due date prescribed under section 43B i.e., prior to filing of return under section 139(1) - Held, yes - Assessee State transport corporation collected a sum being provident fund contribution from its employees - However, it had deposited lesser sum in provident fund account - Assessing Officer disallowed same under section 43B - However, Commissioner (Appeals) deleted disallowance on ground that employees contribution was deposited before filing return - Whether since assessee had not deposited said contribution ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... phraseology used persuade us to think that Sec.43B can be applied to the contribution payable by the assessee as an employer, which reads thus: x x x x x x x For the removal of doubts, it is hereby declared that where a deduction in respect of any sum referred to in clause (a) or clause (b) of this section is allowed in computing the income referred to in section 28 of the previous year (being a previous year relevant to the assessment year commencing on the 1st day of April, 1983 or any earlier assessment year) in which the liability to pay such sum was incurred by the assessee, the assessee shall not be entitled to any deduction under this section in respect of such sum in computing the income of the previous year in which the sum is actually paid by him. Therefore, according to us, since the Respondent has admittedly not paid the deduction so made within the due date as provided under Sec.36(1)(va), the Respondent was not entitled to get deduction of the amounts deducted thereunder for and on behalf of the employees. 20. In view of the reliance placed by various High Courts in 'Alom Extrusions' (supra), to arrive at a conclusion that the assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he first proviso, quoted above. By the Finance Act, 2003, the amendment made in the first proviso equated in terms of the benefit of deduction of tax, duty, cess and fee on the one hand with contributions to employees; provident fund, superannuation fund and other welfare funds on the other. However, the Finance Act, 2003, bringing about this uniformity came into force w.e.f. 1st April, 2004. x x x x x x x x x x x x x x x x 22. Therefore, on a reading of the afore-extracted portion of the judgment, it is clear that the Apex Court had considered only the question relating to the effect of the amendment so made and found that amendment was curative in nature and therefore that it operated retrospectively from 1st April, 1988. 23. Thereafter, in paragraph 15 of the judgment, it was held that the amendments were brought about under the Finance Act, 1983 for the purpose of ensuring that the relaxation/incentive was restricted only to tax, duty, cess and fee under Sec.43B in order to ensure that it did not apply to contributions to labour welfare funds. Further, it was held that the reason appears to be that the employers should not sit on the collected contribut ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... en in the year of account in which they pay the contributions to the welfare funds, whereas a defaulter, who fails to pay the contribution to the welfare fund right up to 1st April, 2004, and who pays the contribution after 1st April, 2004, would get the benefit of deduction under Sec.43B of the Act. According to us, it is thus clear that the decision rendered by the Apex Court in 'Alom Extrusions' (supra) did not consider the question involved in this case. 25. So also, in paragraph 16 of the judgment supra, the Apex Court had quoted with approval the judgment in 'Commissioner of Income Tax v. J.H. Gotla' [(1985) 156 ITR 323 (SC)], which read thus: We should find out the intention from the language used by the legislature and if strict literal construction leads to an absurd result, i.e. a result not intended to be subserved by the object of the legislation found in the manner indicated before, then if another construction is possible apart from strict literal construction, then that construction should be preferred to the strict literal construction. Though equity and taxation are often strangers, attempts should be made that these do not remain ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch reads as follows: It is also a settled proposition of law that Courts should not place reliance on decisions without discussing as to how the factual situation fits in with the fact situation of the decision on which reliance is placed. There is always peril in treating the words of a speech or judgment as though they are words in a legislative enactment, and it is to be remembered that judicial utterances are made in the setting of the facts of a particular case, said Lord Morris in 'Harrington v. British Railways Board'. Circumstantial flexibility, one additional or different fact may make a world of difference between conclusions in two cases. 28. We are also conscious of the fact that if the intention of a particular provision of a statute can be gathered from the language used by the legislation, then we are bound to abide by the language used therein in order to ascertain the intention. We are also of the opinion that there was a clear logic behind Sec.36(1)(va) and Explanation thereto since the Legislature intended that the amount received towards contribution of the employee was money belonging to the employee and the assessee was not entitled to ut ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... further obliged to pay the same within fifteen days of the close of every month pay i.e. such contribution and administrative charges. The reference to fifteen days of the close of the month must be in relation to month during which the payment of wages is to be made and corresponding liability to deduct employee's contribution to the fund arises. This Court held that the expression within fifteen days of the close of every month therefore, must be interpreted as having reference to the close of the month, for which, the wages are required to be paid with corresponding duty to deduct employee's contribution and to deposit the same in the fund. 8 In such circumstances referred to above, the finding recorded by the Tribunal that if such wages are paid for the following month, the liability to deposit the employee's contribution to the fund gets differed by another month is not the correct statement of law. 9 In view of the aforesaid, this appeal succeeds and is hereby allowed. The impugned order passed by the Tribunal is hereby quashed and set aside. v) CIT Vs. Bharat Hotels Ltd., (2019) 410 ITR 0417 (Delhi), wherein the Hon ble High Court in paras 7, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ons from employees‟ salaries towards their contributions, which were made beyond such stipulated period, obviously the assessee was not entitled to claim the deduction from its returns. 9. In view of this discussion, the Revenue s appeal is partly allowed. The AO is directed to examine the contributions made with reference to the dates when they were actually made and grant relief to such of them which qualified for such relief in terms of the prevailing provisions and notifications. We also clarify that the assessee would be entitled to deduction in terms of Section 36(1)(va) of the Act. vi) Vedvan Consultants Pvt. Ltd., ITA No.1312/Del/2020, order dated 26.08.2021, wherein the Tribunal has held as under :- 8. Section 43B specifies the list of deductions that are admissible under the Act only upon their actual payment. Employer 's contribution is covered in clause (b) of section 43B. According to it, if any sum towards employer's contribution to any provident fund or superannuation fund or gratuity fund or any other fund for the welfare of the employees is actually paid by the assessee on or before the due date for furnishing the return of the inco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt was explained by the Memorandum to the Finance Bill, 2021 as below: There is a distinction between employer contribution and employee's contribution towards welfare fund. It may be noted that employee's contribution towards welfare funds is a mechanism to ensure the compliance by the employer s of the labour welfare laws. Hence, it needs to be stressed that the employer's contribution towards welfare funds such as ESI and PF needs to be clearly distinguished from the employee's contribution towards welfare funds. Employee's contribution is employee own money and the employer deposits this contribution on behalf of the employee in fiduciary capacity . By late deposit of employee contribution, the employers get un justly enriched by keeping the money be longing to the employees . Clause (va) of sub-section (1) of Section 36 of the Act was in ser ted to the Act vide Finance Act 1987 as a measures of penalizing employer s who mis-utilize employee' s contributions. 14. From the above, it can be said that the law is now made clear that employees' contribution to specified fund will not be allowed as deduction if there is delay in deposits as per ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... deduction otherwise allowable under this Act in respect of- (b) any sum payable by the assessee as an employer by way of contribution to any provident fund or superannuation fund or gratuity fund or any other fund for the welfare of employees, shall be allowed (irrespective of the previous year in which the liability to pay such sum was incurred by the assessee according to the method of accounting regularly employed by him) only in computing the income referred to in section 28 of that previous year in which such sum is actually paid by him: [Provided that nothing contained in this section shall apply in relation to any sum which is actually paid by the assessee on or before the due date applicable in his case for furnishing the return of income under sub-section (1) of section 139 in respect of the previous year in which the liability to pay such sum was incurred as aforesaid and the evidence of such payment is furnished by the assessee along with such return. Explanation 5.-For the removal of doubts, it is hereby clarified that the provisions of this section shall not apply and shall be deemed never to have been applied to a sum received by the assessee fr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on 43B of the Act covers only employer s contribution and does not cover employee contribution, some courts have applied the provision of section 43B on employee contribution as well. There is a distinction between employer contribution and employee s contribution towards welfare fund. It may be noted that employee s contribution towards welfare funds is a mechanism to ensure the compliance by the employers of the labour welfare laws. Hence, it needs to be stressed that the employer s contribution towards welfare funds such as ESI and PF needs to be clearly distinguished from the employee s contribution towards welfare funds. Employee s contribution is employee own money and the employer deposits this contribution on behalf of the employee in fiduciary capacity. By late deposit of employee contribution, the employers get unjustly enriched by keeping the money belonging to the employees. Clause (va) of sub-section (1) of Section 36 of the Act was inserted to the Act vide Finance Act 1987 as a measures of penalizing employers who mis-utilize employee s contributions. Accordingly, in order to provide certainty, it is proposed to (i) amend clause (va) of sub-section (1) o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (1) of the Act, is hereby directed to be deleted. Decided in favour of assessee. ii) Stirred Creative Advertising Pvt. Ltd. Vs DCIT (ITAT Bangalore), Appeal Number : ITA No. 594 595/Bang/2021, Date of Judgement/Order : 12/12/2021 HELD THAT:- We find no merit in the argument of the ld.DR since the explanation as provided in Finance Act 2021 prescribes that the amendment in both sec.36(va) as well as 43B by inserting corresponding explanation that although impugned PF comes in the form of provision and the same is applicable from 1/4/2021 onwards only. In the present case we are concerned with the asst. year 2017-18 and the amended provision could not be applied retrospectively as it is only applicable w.e.f 1/4/2021. Being so no disallowance could be made by the AO in respect of PF/ESI paid within the due date of filing return of income. Though, it was beyond the date mentioned in the respective Act. This view of ours is supported by various judgment relied on by the ld.AR. Accordingly the appeal of the assessee is allowed. iii) Adyar Ananda Bhavan Sweets India P Ltd Vs ACIT (ITAT Chennai), Appeal Number : ITA [2015 5/23 402 403/CHNY/2021, Date of Judgeme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e company is eligible for deduction made by the AO by invoking provisions of Section 36(1)(va) read with 2(24) (x) and 43B of the Act. The AO is, therefore, directed to delete the addition. Decided in favour of assessee. v) Star Facilities Management Limited VS ITO (ITAT Delhi), Appeal Number : ITA No. 1755/Del/2020, Date of Judgement/Order : 01/11/2021 HELD THAT:- Admittedly, the assessee, in the instant case, has deposited the employees‟ contribution to PF and ESI after the relevant date prescribed under the PF and ESI Act, but, before the due date of filing the return of income. In the case of PCIT vs. Pro Interactive Service (India) Pvt. Ltd. [2018 DELHI HIGH COURT] has held that the legislative intent was/is to ensure that the amount paid is allowed as an expenditure only when payment is actually made. The Hon ble High Court has further held that legislative intent and objective is not to treat belated payment of Employee s Provident Fund (EPD) and Employee s State Insurance Scheme (ESI) as deemed income of the employer under the Act. Tribunal in the case of CIT v. Dee Development Engineers Ltd. [2021 ITAT DELHI] has decided the issue in favour of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 36(1)(va) as under: Section 36(1)(va) Explanation-2 For the removal of doubts, it is hereby clarified that the provisions of Section 43B shall not apply and shall be deemed never to have been applied for the purpose of determining the due date‟ under this clause‟ 18. We find that this amendment has been brought in the Act to provide certainty about the applicability of Section 43B in respect of belated payment of employees‟ contribution. In order to test whether the amendment brought in later is retrospective or not one has to apply the test as laid by the Hon ble Supreme Court in the case of M/s Snowtex Investment Ltd. (supra) wherein the Hon ble Supreme court took note of the law laid down on this issue by the Constitution Bench in M/s Vatika Township Ltd. and held that the intent of the Parliament/legislature need to be looked into for ascertaining whether the amendment should be retrospective or not. In Vatika Township Ltd. (supra) the Hon ble Supreme Court held that the notes on clauses appended to the Finance Bill will throw light as to the legislative intent; because it has to be borne in mind that Parliament/legislature is aware of three c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under:- i) Mavinahalli Shivananjappa Vijay Kumar Vs. DCIT, ITA Nos.596 597/Bang/2021, order dated 13/12/2021; ii) Shri Prakash Pai Kochikar Vs. ADIT, ITA No.479/Bang/2021, order dated 09/12/2021; iii) Eskay heat Transfers Pvt. Ltd. Vs. ADIT, ITA No.534/Bang/2021, order dated 07/12/2021; iv) Anand Sweets and Savouries Vs. DCIT, ITA No.530/Bang/2021, order dated 06/12/2021; v) Transzone Logistics (India) Pvt. Ltd. Vs. DCIT, ITA No.1740/Del/2020, order dated 29/10/2021; vi) Jai Enterprises Vs. DCIT, ITA No.248/JP/2021, order dated 25/11/2021; vii) Nayrathan Jewellers Pvt. Ltd. Vs. ADIT, ITA No.470/Bang/2021, order dated 23/11/2021; viii) Abhimanyu Sharma Vs. ITO, ITA No.175/JP/2021, order dated 23/11/2021; ix) Nikhil Mohine Vs. DCIT, ITA No.37 38/Jab/2021, order dated 18/11/2021; x) DCIT Vs. Kesoram Industries Ltd., ITA No.1777/Kol/2019, order dated 28/10/2021; xi) Suba Singh Vs. ITO, ITA No.85/ASR/2021, order dated 10/11/2021; xii) Citi Centre Developers Vs. CPC, ITA No.126/Chd/2021, order dated 28/11/2021; xiii) Pee Tee Turners Vs. ADCPC, ITA No.105/JP/2021, order dated 28/11/2021; xiv) Amandeep Singh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aw in taxation, the one favourable to the assessee has to be preferred. 7.14 In Sun Export Corporation, Bombay vs Collector of Customs (1997) 6 SCC 564 it was observed that even assuming that there are two views possible, it is well settled that one favourable to the assessee in matters of taxation has to be preferred. . 7.14 In CIT vs. Gwalior Rayon Silk Mfg. Co. Ltd. (1992) 196 ITR 149 (SC) it has held that provisions for deduction, exemption and relief should be interpreted liberally, reasonably and in favour of the assessee. 7.15 In CIT vs. Vegetable Products Ltd., 88 ITR 192 (SC): if two reasonable constructions of a taxing provisions are possible, that construction which favours the assessee must be adopted . 7.16 The Hon ble Supreme Court in the case of CIT Vs. Vatika Township Private Limited, (2014) 367 ITR 466 (SC) has held that the intention of the legislature regarding amendment in the Finance Act, was to make it prospective in nature, which cannot be treated as declaratory/statutory or curative in nature. The relevant observations of the Hon ble Apex Court in this regard in para 38 are as under :- 38. When we examine the insertion of proviso in Sectio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion with 30 days notice. In the case of Shalivahana Constructions Ltd vs. DCIT Circle 3(1), (2007) 12 SOT 406(Hyd.).This was an appeal of assessee against revision order passed by CIT who disallowed the depreciation allowance allowed by the A.O. on temporary erections. The ITAT was held that, It was no where mentioned that a temporary erection should not be made of cement or brick. Therefore the commissioner was wrong in talking the view that the order passed by the assessing officer suffered from an error and it was prejudicial to the interests of revenue. Hydrabad Bench 'B' of the tribunal in case of Jt. CIT vs. Lanco Industries Ltd. (IT Appeal No.487 (Hyd.) of 2000 order dated 31.01.2005) it was clearly held that for temporary structures depreciation is allowable at 100%. The assessee has shown the above in the fixed asset schedule under the head temporary shed and claims 100% depreciation on the same being eligible for the same. The assessing officer has added this on the ground that capital expenditure debited to profit and loss account. But the real fact is that it is a asset eligible for 100% depreciation which is shown properly in the Asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee could not adduce any evidence to show that the expenditure was laid out solely for the purpose of its business. Of course, donation, as the nomenclature suggests, is gratuitous payment normally not having any business expediency. However, for smooth running of business, sometimes, the assessee has to pay subscription to the local puja committee etc. Unless the donation is given, the local people may be impediments in the way of business progress. In this view of the matter, I am of the opinion that 50% of the donation expenses may be considered to have been spent on account of business expediency and, therefore, allowable. With this view, I delete disallowance to the extent of Rs.3,6,506/- and confirm the balance. 9.1 Ld DR has relied on orders of the revenue authorities. 9.2 The assessee in its paper book page 10 has submitted that the Assessing officer has disallowed a sum of Rs.6,13,011/debited to Profit and loss account under the head donation expenses on the ground that the assessee could not adduce any reason that the above expenditure has been laid out solely for the purpose of business of the assessee Company. The amount is paid to different local puja ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 0 ITR 733 Held that We do not see any reason why any distinction can be made between such interest and interest paid under the Income Tax Act, 1961. Both payments do not have any nexus with the business of the assessee. They are statutory liabilities in respect of the obligations of the assessee which arise under the Income Tax Act and the Voluntary Disclosure of Income and Wealth Act, 1976 after the income of the assessee is determined and/or declared under the said Acts. They cannot be deducted before the determination of such income. 10.1 Contrary to the contention of revenue, the assessee submitted on page 11 of its paper book that the assessing officer has added a sum of Rs.21,64,220/- as interest on late deposit of TDS. The assesse had used the funds in the day-to-day business instead of taking financial loan from bank as the rate of interest is high at bank. Hence the assessee prays before you to consider the same as business expenses and allow deduction. The assessee has also placed the same argument before the CIT appeals; however, he had not appreciated the claim of assessee and has just added all the additions of AO without considering the assessee s view at ..... 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