GENPACT INDIA PRIVATE LIMITED,NEW DELHI V. ACIT OSD RANGE 10, NEW DELHI

ITA 2043/DEL/2024

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The case involves Genpact India Pvt. Ltd, which appealed against the orders of the Commissioner of Income Tax (Appeals) and the Assessing Officer regarding disallowances and additions made in the assessment years 2019-20 and 2022-23. The primary issues revolved around the disallowance of employee contributions to the Labour Welfare Fund and the Employee State Insurance Corporation, as well as the treatment of gratuity payments under the Income-tax Act. The Tribunal found that the contributions and payments were made within the prescribed deadlines and were thus eligible for deductions. The Tribunal's decision was influenced by the proper application of sections 36(1)(va) and 43B of the Act, and the recognition of payments made under the respective labor laws and tax audit reports.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 303100 (ITAT-DELHI)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-04-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2019-2020
• Other Referred Cases: Checkmate Services in Civil Appeal No. 2833 of 2016
• Laws Referred To: Income-tax Act, 1961, Haryana Labour Welfare Board Act
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SURENDER PAL
• Assessee Lawyers: SACHIT JOLLY
• Keywords: Additional evidence; TDS; FORM 26AS
• Section: 143(1); 139(1); 234B; 43B; 115JB

Judgement Text

"Page | 1 INCOME TAX APPELLATE TRIBUNAL DELHI BENCH “B”: NEW DELHI BEFORE SHRI M. BALAGANESH, ACCOUNTANT MEMBER AND MS MADHUMITA ROY, JUDICIAL MEMBER ITA Nos. 2043 & 1874/Del/2024 (Assessment Years: 2019-20 & 2022-23) Genpact India Pvt. Ltd, 12A, Ground Floor, Prakash Deep Building7, Tolstoy Marg, Baroda House, S. O. Baroda House, New Delhi Vs. ACIT (OSD), Range-10, New Delhi (Appellant) (Respondent) PAN: AABCE4461B Assessee by : Shri Sachit Jolly, Adv Ms. Rashi Khanna, Adv Revenue by: Shri Surender Pal, CIT DR Date of Hearing 18/02/2025 Date of pronouncement 23/04/2025 O R D E R PER M. BALAGANESH, A. M.: 1. These appeals in ITA Nos. 2043 & 1874/Del/2024 for AYs 2019-20 & 2022-23, arise out of the order of the Commissioner of Income Tax (Appeals)-, Aurangabad [hereinafter referred to as ‘ld. CIT(A)’, in short] dated 30.03.2024 for AY 2019-20 and 22.02.2024 for AY 2022-23 against the order of assessment passed u/s 143(1) of the Income-tax Act, 1961 (hereinafter referred to as ‘the Act’) dated 17.09.2020 for AY 2019-20 and 13.04.2023 by the Assessing Officer, CPC, Bengaluru for AY 2022-23 (hereinafter referred to as ‘ld. AO’). Both the appeals were heard together and hence, they are disposed off by this common order for the sake of convenience. ITA Nos. 2043 & 1874/Del/2024 Genpact India Pvt. Ltd Page | 2 ITA No. 2043/Del/2024- AY 2019-20 2. The Ground No. 1 raised by the assessee is general in nature and does not require any specific adjudication. 3. Ground No. 2 raised by the assessee is challenging the confirmation of disallowance of labour expenses made u/s 36(1)(va) of the Act in the sum of Rs. 3,66,830/- on account of employee’s contribution to the Labour Welfare Fund. 4. We have heard the rival submissions and perused the material available on record. The assessee is engaged in the business of providing of host of Business Processing Outsourcing (BPO) services, including finance and accounting, collections, insurance, customer fulfillment, data modeling and analytics support, managed IT services, software solutions and e- learning. The assessee had filed its return of income and which was later revised on 30.03.2020 declaring net income of Rs. 862,08,58,410/- under the normal provisions of the Act and book profit of Rs. 520,01,23,566/- u/s 115JB of the Act. The assessee during the year under consideration received sum towards employees’ contribution to Labour Welfare Fund amounting to Rs. 15,16,090/-. The same were duly remitted to the account of the Govt within the due date specified under the respective labour law and duly disclosed in the tax audit report of the assessee. In respect of the amount collected by the assessee in the sum of Rs. 1,21,250/-, Rs. 1,22,330/- and Rs. 1,23,250/- totaling to Rs. 3,66,830/-, the due date of payment was 31.01.2020 as per the section 9 of the Haryana Labour Welfare Board Act, including the grace period of 1 month. The assessee in the statement of facts filed before the ld CIT(A) had also stated that due date was further extended to 30.06.2020 by the Welfare Commissioner, Haryana Labour Welfare Board vide letter dated 02.06.2020. The assessee had duly remitted ITA Nos. 2043 & 1874/Del/2024 Genpact India Pvt. Ltd Page | 3 the Labour Welfare Fund dues within the due date prescribed thereon. However, the said due dates were beyond the due date of filing of income tax return u/s 139(1) of the Act. Hence, the ld CPC, Bengaluru while processing the return had erroneously construed this employees’ contribution to have not been remitted within the due date prescribed under the respective Labour Act and made addition u/s 36(1)(va) of the Act in the sum of Rs. 3,66,830/- which was also confirmed by the assessee ld CIT(A). We find that in view of section 9 of Haryana Labour Welfare Board Act, the labour welfare fund dues of Rs 3,66,830/- in the instant case had been duly remitted within the respective dates prescribed under the Labour Laws. Hence, the decision of Hon'ble Supreme Court in the case of Checkmate Services in Civil Appeal No. 2833 of 2016 dated 12.10.2022. relied by the NFAC is not applicable to the facts of the instant case. Hence, we direct the ld AO to delete the addition in the sum of Rs. 3,66,830/- u/s 36(1)(va) of the Act. Accordingly, Ground No. 2 raised by the assessee is allowed. 5. Ground No. 3 raised by the assessee is challenging the confirmation of addition of Rs. 29,20,974/- disallowing the Employee State Insurance Corporation fund u/s 43B of the Act by making double addition. 6. We have heard the rival submission and perused the material available on record. We find that the assessee had made suo moto disallowance of Rs. 29,20,974/- being the employees’ contribution to ESI in the return of income which is evident from the tax audit report enclosed at page 19 of the paper vide Sl. No. 7 thereon. This fact was ignored by the ld ld CPC while processing the return and addition of Rs. 29,20,974/- was made by the ld CPC. The assessee had brought this point to the knowledge of the ld CIT(A)/ NFAC. In the written submission which is enclosed in page 78 of the Paper Book which is to be read along with page 117 of the Paper Book containing the ITR, vide Sl. No. 7(1) wherein, a sum of Rs. ITA Nos. 2043 & 1874/Del/2024 Genpact India Pvt. Ltd Page | 4 20,35,36,103/- was reflected in the ITR. The assessee submitted that sum of Rs. 20,35,36,103/- was suo moto disallowed by it in the return of income itself which included employees’ contribution to ESI of Rs. 29,20,974/-. This fact was ignored by the ld NFAC thereby resulting in double addition. We are convinced with this fact that there was indeed double addition. Hence, we direct the ld AO to delete the addition of Rs. 29,20,974/- towards employees’ contribution to ESI. Accordingly, ground No. 3 raised by the assessee is allowed. 7. Ground No. 4 raised by the assessee is challenging the confirmation of action of the ld AO in making an upward adjustment of Rs. 18,85,57,096/- on account of inconsistency between amount reported in the tax audit report and the deduction claimed in the income tax return towards gratuity component and other comprehensive income. 8. We have heard the rival submissions and perused the material available on record. The Company has prepared its books of accounts for the year under consideration as per the requirements of IND-AS. According to IND-AS, the gratuity payable amount has to be recognized as an expense in profit and loss account, however, any actuarial gain/loss arising on account of re- measurement of said gratuity expenses on the basis of actuarial valuation has to be recognized as OCI component. During the financial year 2018-19, the assessee incurred an expense of Rs. 73,09,94,025 towards gratuity which was duly reported by the assessee under Clause 26(b), Enclosure X of Tax Audit Report in signed Form 3CD along with the date of its payment. Out of aforesaid Rs. 73,09,94,025, payment of Rs. 54,24,36,929 made by the assessee was debited to/routed through the statement of profit and loss for computing 'profit before tax'. And the balance payment made by the assessee of Rs. 18,85,57,096 was reported and routed through OCI and adjusted with 'Profit after tax' to ITA Nos. 2043 & 1874/Del/2024 Genpact India Pvt. Ltd Page | 5 compute 'Total comprehensive income for the year' in the statement of profit and loss account of the assessee for the year ended 31.03.2019. It is pertinent to note that all the adjustments under the Act for the purpose of computing the profit under the head 'Profits and gains from Business' are made to the 'Profit before tax' as reported in the books of the assessee. Since payment of Rs. 54,24,36,929 out of the total payment of Rs. 73,09,94,025 towards gratuity payments was already debited in the profit and loss statement while arriving at 'Profit before tax', the assessee claimed the balance payment of Rs. 18,85,57,096, as allowable deduction, routed through OCI, in accordance with the provisions of the section 43B of the Act. The same has also been put on record by the assessee vide its response filed on July 7, 2020 (under S. No. 2 - Incorrect Claim u/s 143(1)(a)(ii)) on the e-filing portal of the income-tax department, against the notice dated June 9, 2020 issued under section 143(1)(a) of the Act. Accordingly, the disallowance considered by the CPC in the intimation order issued, of the aforesaid OCI component of gratuity expense, amounting to Rs. 18,85,57,096, is an expenditure which the assessee has rightly claimed as deduction under section 43B of the Act and therefore, the said adjustment made by the CPC ought to be deleted. 9. In support of this, the ld AR drew our attention to page 232 of the Paper Book containing ITR and Form 3CD under the head gratuity u/s 43B of the Act, wherein in reply to Question No. 26(i)(B)(a) a sum of Rs. 73,09,94,025/- was sought to be claimed as deduction on account of gratuity paid u/s 43B of the Act. The ld AR also drew our attention to the Tax Audit Report containing the dates of payment made on account of gratuity in page 19 of the Paper Book clearly proving that the entire sum of Rs. 73,09,94,025/- on account of gratuity was fully paid before due date of fling of income tax return u/s 139(1) of the Act. ITA Nos. 2043 & 1874/Del/2024 Genpact India Pvt. Ltd Page | 6 10. In view of the aforesaid narration of facts and explanation given and in view of the fact that the entire gratuity amount was duly paid by the assessee within the due date prescribed u/s 139(1) of the Act, there is no scope for making any brought forward adjustment of Rs. 18,85,57,096/- on account of gratuity as there is no mismatch or inconsistency between the amount returned in the Tax Audit Report and deduction claimed in the income tax return. The entire addition has been made by the lower authorities without understanding the requirement of IND-AS which has been duly explained by the assessee before the lower authorities. Further, the ld AR also submitted that in AY 2017-18, the ld CIT(A) granted relief on this issue and revenue did not challenge the same before the Tribunal which goes to prove that the revenue had accepted the same in AY 2017-18. The copy of the said CIT(A) order dated 12.07.2023 for AY 2017-18 is enclosed in page 340 of the Paper Book. The relevant observation of the ld CIT(A) in para 4.5 of his order where these issues were deleted by the ld CIT(A) is enclosed in pages 356 to 357 of the Paper Book for AY 2017-18. It is pertinent to note that the ld CIT(A) while addressing this issue for the year under consideration had erroneously looked at clause 26(i)(A)(a) in Form 3CD instead of clause 26(i)(B)(a) which had lead the ld NFAC to arrive at the conclusion. Accordingly, ground No. 4 raised by the assessee is allowed. 11. Ground No. 5 raised by the assessee in challenging the chargeability of interest u/s 234C of the Act. The law is very well settled that the interest u/s 234C of the Act could be charged only on the returned income and not on the assessed income. We order accordingly. 12. The assessee has filed an application under Rule 29 of the Income Tax Appellate Tribunal Rules on 14.02.2025. In our considered opinion, there is no requirement or need to look into this additional evidences and hence, the same are not even admitted. ITA Nos. 2043 & 1874/Del/2024 Genpact India Pvt. Ltd Page | 7 13. In the result, the appeal of the assessee is allowed for AY 2019-20. ITA 1874/Del/2024-AY 2022-23 –Assessee’s appeal 14. Ground No. 1 is general in nature and does not require any specific adjudication. 15. Ground Nos. 2 and 3 raised by the assessee are exactly identical to the ground No. 4 raised in AY 2019-20 supra and hence, the decision rendered thereon in AY 2019-20 shall apply mutatis mutandis for Ground Nos. 2 and 3 for AY 2022-23 in view of the identical facts except with variance in figures. 16. Ground No. 4 raised by the assessee is only seeking credit of advance of Rs. 1.50 crores relating to Endeavour Software Technology Pvt Ltd and Axis Risk Consulting Pvt Ltd which got merged with the assessee with an appointed date of 01.04.2021. 17. We have heard the rival submissions and perused the materials available on record. Amalgamating entities paid an advance tax of Rs. 1.50 crores. Later the two amalgamating entities got amalgamated with the assessee. The appointed date is 01.04.2021. The fact of advance tax payment made by the amalgamating entity in the sum of Rs. 1.35 crores and Rs. 0.15 crores are reflected in Form 26AS in pages 118 and 123 of the Paper Book. Since the entire transactions of the amalgamating entities are reflected in the hands of the assessee, credit for advance tax paid by the amalgamating entity should be given to the assessee. We direct the ld AO accordingly and allow Ground No. 4 raised by the assessee. 18. Ground No. 5 raised by the assessee seeking TDS credit for the very same reason as in ground No. 4. We direct the ld AO to grant TDS credit of ITA Nos. 2043 & 1874/Del/2024 Genpact India Pvt. Ltd Page | 8 amalgamating entities to the assessee. Accordingly, Ground No. 5 raised by the assessee is allowed. 19. Ground No. 6 raised by the assessee is challenging the levy of interest u/s 234B of the Act is consequential in nature. With regard to chargeability of interest u/s 234C of the Act, the law is well settled that the interest u/s 234C of the Act is to be charged only on the returned income and not on the assessed income. 20. The assessee has filed an application under Rule 29 of the Income Tax Appellate Tribunal Rules on 14.02.2025. In our considered opinion, there is no requirement or need to look into this additional evidence and hence, the same are not even admitted. 21. In the result, the both the appeals of the assessee are allowed. Order pronounced in the open court on 23/04/2025. -Sd/- -Sd/- (MADHUMITA ROY) (M. BALAGANESH) JUDICIAL MEMBER ACCOUNTANT MEMBER Dated: 23/04/2025 A K Keot Copy forwarded to 1. Applicant 2. Respondent 3. CIT 4. CIT (A) 5. DR:ITAT ASSISTANT REGISTRAR ITAT, New Delhi "