Parth Parenteral Pvt. Ltd., Gandhinagar V. The Income Tax Officer, Ward-4, Mehsana

ITA 2719/AHD/2016

• Counselvise Citation: [2019] 117 COUNSELVISE.COM (IT) 9932 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 5 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-03-2019
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Assessment Year: 2013-2014
• Appeal Filed On: 20-10-2016
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: SHIV SEWAK
• Assessee Lawyers: A C SHAH
• Keywords: Earning of tax free income; Rule 8D
• Section: 143(3); 14A; 15

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL, SMC BENCH, AHMEDABAD BEFORE SHRI PRAMOD KUMAR, VICE PRESIDENT AND MS MADHUMITA ROY, JUDICIAL MEMBER ./ ITA NO. 2719 /AHD/2016 & / ASSTT. YEAR: 2013 - 201 4 PARTH PARENTERNAL PVT. LTD., I, GIDC ESTATE, HIGHWAY ROAD , KALOL, DIST. GANDHINAGAR PA N: AABCP1588L VS . INCOME TAX OFFICER, WARD - 4 , MEHSANA (APPLICANT) (RESPONENT) ASSESSEE BY : SHRI A.C. SHAH , A.R REVENUE BY : SHRI SHIV SEWAK , SR. D . R / DATE OF HEARING : 02 / 01 / 201 9 / DATE OF PRONOUNCEMENT: 29 / 03 /201 9 / O R D E R PER MS MADHUMITA ROY, JUDICIAL MEMBER : THE INSTANT APPEAL HAS BEEN PREFERRED BY THE ASSESSEE AGAINST THE ORDER DATED 19.06.2016 PASSED BY THE LEARNED COMMI SSIONER OF INCOME TAX( APPEALS) GANDHINAGAR, AHMEDABAD ARISING OUT O F ORDER DATED 28.03.2016 PASSED B Y THE ITO, WARD - 4, MEHSANA UNDER SECTION 143(3) OF THE INCOME TAX ACT, 1961 ( IN SHORT THE THE ACT ) FOR THE ASSESSMENT YEAR 2013 - 14 . 2. THE ASSESSEE HAS RAISED FOLLOWING GROUNDS OF APPEALS: ITA NO. 2719 /AHD/2016 A.Y. 2013 - 2014 2 1. THE LEARNED CIT(A) HAS ERRED IN CONFIRMING ADDITION OF ESI CONTRIBUTION RS. 1,31,417 AND PF CONTRIBUTION OF RS. 5,68,299 AMOUNTING IN ALLTO RS. 6,99,716 UNDER SECTION 36(L)(VA) READ WITH SECTION 2(24)(X) ON THE GROUND THAT IT IS NOT PAID WITHIN DUE DATE I N AS MUCH AS IT IS PAID BEFORE THE END OF THE FINANCIAL YEAR AND THEREFORE IT IS ALLOWABLE AS DEDUCTION. 2. THE LEARNED CIT(A) HAS ERRED IN CONFIRMING ADDITION OF RS. 1,09,292 UNDER SECTION 14A READ WITH RULE 8D IN AS MUCH AS THE INVESTMENT IS MADE OUT O F INTEREST FREE FUNDS AND THAT NO EXPENDITURE IS INCURRED FOR EARNING THE EXEMPT INCOME. 3. THE ASSESSEE HAS FILED ITS RETURN OF INCOME THROUGH ELECTRONIC MEDIA ON 08.10.2013 DECLARING TOTAL INCOME AT RS.85,577/ - . U PON THE SCRUTINY NOTICE U/S.143(2) OF THE ACT FOLL OWED BY A FURTHER NOTICE U/S.129 OF THE ACT DATED 20.04.2015 WAS SERVED DUE TO THE CHANGE OF INCUMBENT. 4. THE FIRST GROUND RELATES TO ADDITION ON ACCOUNT OF LATE PAYMENT OF ESIC AND PF CONTRIBUTION. 4.1 DURING THE COURSE OF ASSESSMENT PROCE EDING IT APPEARS FROM THE DOCUMENT S SUBMITTED BY THE ASSESSEE THAT THE PAYMENT REGARDING ESIC AND PF CONTRIBUTION RECEIVED FROM THE EMPLOYEES WAS NOT MADE TO THE GOVERNMENT ACCOU NT WITHIN THE DUE DATE. THE DETAILS WHEREOF IS EVIDENT AT PAGE 3 OF THE ASSES SMENT ORDER BEFORE US. IT IS RELEVANT TO MENTION THAT AS PER THE PROVISION OF SECTION 36(1)(VA) R.W.S 2(24)(X)OF THE I.T ACT, 1961 THE ASSESSEE WAS REQUIRED TO DEPOSIT SUCH PF AND ESIC CONTRIBUTION ON OR BEFORE 15 TO 21 ST OF THE FOLLOWING MONTH RESPECTIVE LY . S INCE THE ASSESSEE DID NOT DEPOSIT THE AMOUNT OF 13 , 14 , 717/ - AND 5 , 68 , 299 / - ON ACCOUNT OF ESIC AND PF CONTRIBUTION RESPECTIVELY WITHIN THE STIPULATED PERIOD MENTIONED IN THE CONCERNED ACT SUCH BENEFIT HAS BEEN DISALLOWED U/S.36(1)(5) R.WS 2(24)(X) OF THE INCOME TAX ACT. IN APPEAL THE SAME WAS CONFIRMED BY THE LD.CIT(A). ITA NO. 2719 /AHD/2016 A.Y. 2013 - 2014 3 5. AT THE TIME OF HEARING OF INSTANT APPEAL THE LD.ADVOCATE APPEARING FOR THE ASSESSEE SUBMITTED BEFORE US THAT SINCE THE ASSESSEE P AID THE SAID AMOUNT TO THE GOVERNMENT ACCOUNT WIT HIN A MONTH OR TWO THEREFORE THE ASSESSEE HAS DISCHARGED HIS LIABILITIES AND ENTITLED TO HIS CLAIM. 6. THE LD.DR RELIED UPON THE JUDGMENT PASSED BY THE JURISDICTIONAL HIGH COURT IN THE MATTER OF MS CHECKMA TE FACILITY AND ELECTRONIC SOLUTIONS PVT. LTD. VS D.C.I.T WHEREIN IT WAS HELD THAT AFTER TAKING THE EMPLOYEE S CONTRIBUTION TOWARDS THE FUND THE SAME HAS TO BE DEPOSITED TO THE GOVERNMENT ACCOUNT WITHIN THE DATE MENTIONED IN CONCERNED ACT . SINCE THE DEP OSIT OF THE EMPLOYEE S CONTRIBUTION TO THE FUND GET S DEFERRED BY ANOTHE R MONTH THE ASSESSEE, IS NOT ENTITLED TO DEDUCTION. 7. WE HAVE HEARD THE LEARNED ADVOCATE APPEARING FOR THE PARITIES, WE HAVE ALSO PERUSED THE RELEVANT MATERIAL S AVAILABLE ON RECORD. WE HAVE CAREFULLY CONSIDERED THE JUDGMENT PASSED BY THE JURISDICTIONAL HIGH COURT IN THE MATTER OF CHECKMATE FACILITY AND ELECTRONIC SOLUTION PVT. LTD. AS RELIED UPON BY THE LD.DR, THE RELEVANT PORTION WHEREOF IS AS FOLLOWS: 4. I N TERMS OF SECTION 36(1)(VA) OF THE ACT, ANY SUM RECEIVED BY THE ASSESSEE FROM ANY OF HIS EMPLOYEES TO WHICH THE PROVISIONS OF SECTION 2(24)(X) APPLIES, WOULD BE DEDUCTED AS LONG AS SUCH SUM IS CREDITED BY THE ASSESSEE TO THE EMPLOYEE'S ACCOUNT IN THE RELE VANT FUNDS ON OR BEFORE DUE DATE. EXPLANATION TO THE SAID SUB - SECTION PROVIDES THAT FOR THE PURPOSE OF THE SAID CLAUSE, DUE DATE MEANS A DATE BY WHICH THE ASSESSEE IS REQUIRED AS AN EMPLOYER TO CREDIT AN EMPLOYEE'S CONTRIBUTION TO THE ACCOUNT IN WHICH RE LEVANT FUND UNDER ANY ACT, RULE, ORDER OR NOTIFICATION ISSUED THEREUNDER OR UNDER ANY STANDING ORDER, AWARD, CONTRACT OF SERVICE OR OTHERWISE. SECTION 38 OF THE EMPLOYEES PROVIDENT FUNDS AND MISCELLANEOUS PROVISIONS ACT, 1952, BECOMES RELEVANT. SUB - SECTION (1) THEREOF READS AS UNDER: ITA NO. 2719 /AHD/2016 A.Y. 2013 - 2014 4 (1) THE EMPLOYER SHALL, BEFORE PAYING THE MEMBER HIS WAGES IN RESPECT OF ANY PERIOD OR PART OF PERIOD FOR WHICH CONTRIBUTIONS ARE PAYABLE, DEDUCT THE EMPLOYEE'S CONTRIBUTION FROM HIS WAGES WHICH TOGETHER WITH HIS OWN CONTRIBUTI ON AS WELL AS AN ADMINISTRATIVE CHARGE OF SUCH PERCENTAGE [OF THE PAY (BASIC WAGES, DEARNESS ALLOWANCE, RETAINING ALLOWANCE, IF ANY, AND CASH VALUE OF FOOD CONCESSIONS ADMISSIBLE THEREON) FOR THE TIME BEING PAYABLE TO THE EMPLOYEES OTHER THAN AN EXCLUDED E MPLOYEE, AS THE CENTRAL GOVERNMENT MAY FIX. HE SHALL WITHIN FIFTEEN DAYS OF THE CLOSE OF EVERY MONTH PAY THE SAME TO THE FUND ELECTRONIC THROUGH INTERNET BANKING OF THE STATE BANK OF INDIA OR ANY OTHER NATIONALIZED BANK AUTHORIZED FOR COLLECTION ON ACCOU NT OF CONTRIBUTIONS AND ADMINISTRATIVE CHARGE]: PROVIDED THAT THE CENTRAL PROVIDENT FUND COMMISSIONER MAY FOR REASONS TO BE RECORDED IN WRITING, ALLOW ANY EMPLOYER OR CLASS OF EMPLOYER TO DEPOSIT THE CONTRIBUTIONS BY ANY OTHER MODE OTHER THAN INTERNET BAN KING . 5. THIS PROVISION THUS REQUIRES AN EMPLOYER BEFORE PAYING THE EMPLOYEE HIS WAGES TO DEDUCT THE EMPLOYEE'S CONTRIBUTION ALONG WITH THE EMPLOYER'S OWN CONTRIBUTION AS FIXED BY THE GOVERNMENT. IT IS FURTHER REQUIRED THAT HE SHALL WITHIN FIFTEEN DAYS OF THE CLOSE OF EVERY MONTH PAY THE SAME TO THE FUND SUCH CONTRIBUTION AND ADMINISTRATIVE CHARGES. IN TERMS OF THIS PROVISION THUS, AFTER DEDUCTING THE EMPLOYEE'S CONTRIBUTION TOWARDS THE FUNDS, THE SAME HAS TO BE DEPOSITED WITH THE GOVERNMENT WITHIN FIFTEEN DAYS OF THE CLOSE OF EVERY MONTH. REFERENCE TO FIFTEEN DAYS OF THE CLOSE OF THE MONTH MUST BE IN RELATION TO THE MONTH DURING WHICH THE PAYMENT OF WAGES IS TO BE MADE AND CORRESPONDING LIABILITY TO DEDUCT EMPLOYEE'S CONTRIBUTION TO THE FUND ARISES. THE EX PRESSION 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 TH E SAME IN THE FUND. 6. LEARNED COUNSEL FOR THE APPELLANT IS THEREFORE NOT CORRECT IN CONTENDING THAT IF SUCH WAGES ARE PAID IN THE FOLLOWING MONTH, THE LIABILITY TO DEPOSIT THE EMPLOYEE'S CONTRIBUTION TO THE FUND GETS DIFFERED BY ANOTHER MONTH. 7. TAX APPE AL IS THEREFORE DISMISSED 7.1 RESPECTFULLY FOLLOWING THE JUDGMENT, WE ARE OF THE CONSIDERED VIEW THAT THERE IS NO INFIRMITY IN THE ORDER PASSED BY THE AUTHORITIES BELOW IN MAKING THE ITA NO. 2719 /AHD/2016 A.Y. 2013 - 2014 5 ADDITION OF RS.6,99,716/ - IN TOTAL ON ACCOUNT OF DELAY IN DEPOSITING THE ESIC AND PF CONTRIBUTION WITH THE CONCERN ED AUTHORITIES. HENCE THE GROUND OF APPEAL PREFERRED BY THE ASSESSEE IS DISMISSED. 8. THE SECOND GROUND OF APPEAL RELATES TO CONFIRMING THE A DDITION OF RS.1,09,292 U/S 14A R.W. RULE 8D AS MADE BY THE LD.AO. 9. UPON VERIFICATION OF THE BALANCE SHEET IT WAS FOUND THAT THE ASSESSEE HAS MADE INVESTMENT IN SHARES. THE PROFIT AND LOSS ACCOUNTS FURTHER SHOWS EARNING OF DIVIDEND INCOME OF RS.10 , 660 / - BY THE ASSESSEE DURING THE YEAR UNDER CONSIDERATION. THE LD.AO APPLIED THE FORMULA PROVIDED U/S. RULE 8D WHILE WORKING OUT DISALLOWANCE U/S.14A OF THE ACT AND ULTIMATELY DISALLOWED RS.1,09,292/ - 10. WE HAVE HEARD THE LEARNED COUNSEL APPEARING FOR THE PA RTIES AND PERUSED THE RELEVANT MATERIALS AVAILABLE ON RECORD. WE FIND THAT THERE IS NO INTEREST INCOME EARNED BY THE ASSESSEE. IN THIS PARTICULAR CASE THOUGH THE DIVIDEND INCOME EARNED BY THE ASSESSEE IS OF RS.10,600/ - THE DISALLOWANCE WAS MADE TO THE TUNE OF RS.1,09,292/ - WHICH WAS CONFIRMED IN APPEAL . THIS IS A SETTLED PRINCIPLE OF LAW THAT WHEN THERE IS NO EXEMPT INCOME AVAILABLE WITH THE ASSESSEE DISALLOWANCE U/S.14A R.W RULE 8D CANNOT BE HIGHER THAN THE DIVIDEND INCOME EARNED BY THE ASSESSEE WHILE LAY ING DOWN T HE RATIO THE JURISDICTIONAL HIGH COURT IN THE MATTER OF CORRETECH ENERGY PVT; LTD., 372 ITR 97 (GUJ.) FURTHER HELD THAT IF THERE IS NO TAX FREE INCOME IN THE HANDS OF THE ASSESSEE, THEN NO DISALLOWANCE UNDER SECTION 14A R.W. RULE 8D OF INCOME TA X RULES OUGHT TO BE MADE. ITA NO. 2719 /AHD/2016 A.Y. 2013 - 2014 6 11. IN VIEW OF THE ABOVE, W E RESTRICT THE DISALLOWANCE TO THE DIVIDEND AMOUNT OF RS.10 , 600/ - . THUS THE ASSESSEE APPEAL IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE COURT ON 29 /03 /2019 AT AHMEDABAD. - SD - - SD - ( PRAMOD KUMAR ) VICE PRESIDENT ( MS MADHUMITA ROY ) JUDICIAL MEMBER (TRUE COPY) AHMEDABAD; DATED 29 / 03 /201 9 MANISH / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. / CONCERNED CIT 4. ( ) / THE CIT(A) 5. , / DR, ITAT, 6. / GUARD FILE . / BY ORDER, / ( DY./ASSTT.REGISTRAR) , / ITAT, AHMEDABAD