Dy. Commissioner of Income Tax , Circle-16(2), Hyderabad V. Ushodaya Enterprises Private Limited , Hyderabad

ITA 649/Hyd/2019

• Counselvise Citation: [2021] 109 COUNSELVISE.COM (IT) 5199 (ITAT-HYDERABAD)
• Duration Of Justice: 1 year(s) 8 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-01-2021
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: DB-A
• Next Hearing Date: 21-01-2021
• Assessment Year: 2014-2015
• Appeal Filed On: 01-05-2019
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: SUNIL KUMAR PANDEY
• Assessee Lawyers: V SIVA KUMAR
• Keywords: Rectification of order; Earning of tax free income; Rule 8D
• Section: 43B; 14A; 201; 154

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCHES A : HYDERABAD (THROUGH VIRTUAL CONFERENCE) BEFORE S HRI SATBEER SINGH GODARA , JUDICIAL MEMBER AND SHRI LAXMI PRASAD SAHU , ACCOUNTANT MEMBER ITA NO. 649/H/2019 AND C.O. NO. 01/H/2021 ASSESSMENT YEAR: 2014 - 15 DY. COMMISSIONER OF INCOME - TAX, CIRCLE 16(2), HYDERABAD. VS. USHODAYA ENTERPRISES PVT. LTD., HYDERABAD. PAN AAACU 2690P (APPELLANT) (RESPONDENT/ CROSS - OBJECTOR) REVENUE BY: SHRI SUNIL KUMAR PANDEY ASSESSEE BY: SHRI V. SIVA KUMAR DATE OF HEARING: 21/01/2021 DATE OF PRONOUNCEMENT: 29 /01/2021 O R D E R PER BENCH : T H IS IS AN APPEAL FILED BY THE REVENUE DIRECTED AGAINST THE ORDER OF CIT(A) 4 , HYDERABAD, DATED 1 4 / 0 2 / 201 9 RELATING TO AY 20 1 4 - 1 5 ON THE FOLLOWING GROUNDS OF APPEAL: 1. WITHOUT PREJUDICE TO GROUND NO. 1 ABOVE, THE LD. CIT(A) ERRED IN DELETING THE DISALLOWANCE MADE ULS 14A ITA NO. 649 /HYD/1 9 & CO NO. 1/H 20 USHODAYA ENTERPRISES PVT. LTD., HYD. : - 2 - : R.W.RULE 8D WITHOUT TAKING INTO ACCOUNT CBDT CIRCULAR NO.5 OF 2014 WHEREIN IT WAS CLARIFIED THAT THE DISALLOWANCE ULS 14A APPLICABLE EVEN WHEN THE ASSESSEE HAS NOT RECEIVED EXEMPT INCOME DURING THE YEA R. 2. WITHOUT PREJUDICE TO GROUND NO.1 ABOVE, THE LD.CIT(A) ERRED IN DELETING THE DISALLOWANCE MADE ULS 14A WITHOUT CONSIDERING THE DECISION OF THE HON'BLE SUPREME COURT IN THE CASE OF CIT VS WALFORT SHARE & STOCK BROKERS P. LTD. 3. THE LD. CIT(A) ERRE D IN DELETING THE ADDITION MADE ULS 36(1)(VA) RWS 2(24(X) OF THE ACT WITHOUT TAKING INTO CONSIDERATION THE CBDT CIRCULAR NO.22/20 15. 4. ANY OTHER GROUND (S) THAT MAY BE URGED AT THE TIME OF HEARING. THE ASSESSEE ALSO FILED ITS CROSS OBJECTIONS AGAI NST THE VERY SAME ORDER OF CIT(A). 2. IT TRANSPIRES AT THE OUTSET THAT ALTHOUGH THE REVENUE HAS PREFERRED INSTANT MAIN APPEAL ITA NO. 649/HYD/2019 SEEKING TO REVERSE THE CIT(A)S FINDINGS THAT SECTION 14A DISALLOWANCE OF RS. 4,24,93,173/ - IS NOT SUSTAINABLE IN THE ABSENCE OF ANY EXEMPT INCOME DERIVED BY THE ASSESSEE IN THE RELEVANT PREVIO US YEAR, TH IS LOWER APPELLATE ORDER HAS BEEN SUBJECTED TO SECTION 154 RECTIFICATION AT THE CIT(A)S END ON 08/08/2019 RESTRICTING THE FOREGOING DISALLOWANCE TO THE EXTENT OF TAXPAYERS EXEMPT INCOME RS. 19,00,000/ - ITA NO. 649 /HYD/1 9 & CO NO. 1/H 20 USHODAYA ENTERPRISES PVT. LTD., HYD. : - 3 - : ONLY. TH IS ORDER PASSED U/S 154 HAS NOWH ERE BEEN CHALLENGED AT THE REVENUES BEHEST B EFORE THE TRIBUNAL . LEARNED DR ALSO FAILS TO REBUT THE CLINCHING FACT THAT THE LEGAL PROPOSITION IS SETTLED AS OF NOW THAT SECTION 14A RWR 8D DISALLOWANCE DOES NOT EXCEED THE QUANTUM OF EXEMPT INCOME ITSELF AS P ER THE HONBLE DELHI HIGH COURTS DECISION IN JOINT INVESTMENTS PVT. LTD. VS. CIT 372 ITR 694 (DELHI). WE THUS DECLINE R EVENUES PRAYER AT THIS STAGE. THIS REVENUES APPEAL IS ACCORDINGLY DISMISSED IN ABOVE TERMS. 3. WE NOW ADVERT TO ASSESSEES CO NO. 1 /HYD/2021 SEEKING TO DELETE THE REMAINING DISALLOWANCE COMPONENT OF RS. 19,00,000/ - AS WELL. LEARNED AR FAILS TO DISPUTE THAT THE IMPUGNED DISALLOWANCE OF RS. 19,00,000/ - HAS BEEN MADE CIT(A)S RECTIFICATION ORDER (SUPRA) WHICH IS NOWHERE SUBJECT MATTER OF CHALLENGE IN R EVENUES APPEAL. WE THUS DECLINE ASSESSEES CROSS OBJECTION AS NOT MAINTAINABLE. ON THIS COUNT ALONE. D ELAY OF 480 DAYS IN FILING THEREIN IS CONDONED SINCE OWING CIRCUMSTANCES BEYOND ASSESSEES ITA NO. 649 /HYD/1 9 & CO NO. 1/H 20 USHODAYA ENTERPRISES PVT. LTD., HYD. : - 4 - : CONTROL. THE ASSESSEES CO NO. 1/HYD/2021 IS REJECTED THEREFORE. 4 . IN RESPECT OF GROUND NO. 3, THE LD. AR RELIED ON THE ORDER OF CIT(A) AND THE LD. DR RELIED ON THE ORDER OF AO AND SUBMITTED THAT THE EMPLOYEES PF & ESI CONTRIBUTION IS GOVERNED U/S 36(1)(A) RWS 2(24 ) (X) OF THE IT ACT, 1961. THE ACT HAS MADE A CLEAR PROVISI ON IN THIS REGARD, HENCE, SECTION 43B (B) DOES NOT COME INTO PLAY. AFTER HEARING BOTH THE PARTIES AND PERUSING THE MATERIAL ON RECORD AS WELL AS THE ORDERS OF REVENUE AUTHORITIES, WE ARE OF THE VIEW THAT THE DECISION OF THE CIT(A) IN DELETING THE ADDITION M ADE BY THE AO U/S 36(1)(VA) IS NOT PROPER AS THE ASSESSEE HAS NOT COMPLIED WITH THE PROVISIONS OF SECTION 36(1)(VA), DUE TO WHICH THE AO TREATED THE EMPLOYEES CONTRIBUTION TOWARDS PF & ESI AS INCOME U/S 2(24)(X) RWS 36(1)(VA) OF THE ACT. WE FOUND SUBSTANCE IN THE SUBMISSIONS OF LD. DR. IN THE PECULIAR FACTS AND CIRCUMSTANCES OF THE CASE4, THE CASE LAW RELIED ON BY THE CIT(A) ARE NOT APPLICABLE TO THE FACTS OF THE ITA NO. 649 /HYD/1 9 & CO NO. 1/H 20 USHODAYA ENTERPRISES PVT. LTD., HYD. : - 5 - : PRESENT CASE. IN THIS CONNECTION, WE REFER TO SECTION 2(24)(X), 36(1)(VA) AND SECTION 43WHI CH READ AS UNDER: SECTION. 2 (24) (X) PROVIDES THAT AMOUNTS RECEIVED BY AN ASSESSEE FROM EMPLOYEES TOWARDS PF CONTRIBUTIONS ETC SHALL BE INCOME. SECTION. 36 (1) (VA) PROVIDES THAT IF SUCH SUMS ARE CONTRIBUTED TO THE EMPLOYEES ACCOUNT IN THE RELEVANT F UND ON OR BEFORE THE DUE DATE SPECIFIED IN THE PF ETC LEGISLATION, THE ASSESSEE SHALL BE ENTITLED TO A DEDUCTION. 43B. NOTWITHSTANDING ANYTHING CONTAINED IN ANY OTHER PROVISION OF THIS ACT, A DEDUCTION OTHERWISE ALLOWABLE UNDER THIS ACT IN RESPECT OF (A) ANY SUM PAYABLE BY THE ASSESSEE BY WAY OF TAX, DUTY, CESS OR FEE, BY WHATEVER NAME CALLED, UNDER ANY LAW FOR THE TIME BEING IN FORCE, OR (B) ANY SUM PAYABLE BY THE ASSESSEE AS AN EMPL OYER BY WAY OF CONTRIBUTION TO ANY PROVIDENT FUND OR SUPERANNUATION FUND OR GRATUITY FUND OR ANY OTHER FUND FOR THE WELFARE OF EMPLOYEES, OR (C) ANY SUM REFERRED TO IN CLAUSE (II) OF SUB - SECTION (1) OF SECTION 36 , OR (D) ANY SUM PAYABLE BY THE ASSESSEE AS INTEREST ON ANY LOAN OR BORROWING FROM ANY PUBLIC FINANCIAL INSTITUTION OR A STATE FINANCIAL CORPORATION OR A STATE INDUSTRIAL INVESTMENT CORPORATION, IN ACCORDANCE WITH THE TERMS AND CONDITIONS OF THE AGREEMENT GOVERNING SUCH LOAN OR BORROWING, OR (E) ANY SUM PAYABLE BY THE ASSESSEE AS INTEREST ON ANY LOAN OR ADVANCES FROM A SCHEDULED BANK 55 [OR A CO - OPERATIVE BANK OTHER THAN A PRIMARY AGRICULTURAL CREDIT SOCIETY OR A PRIMARY CO - OPERATIVE AGRICULTURAL AND RURAL DEVELOPMENT BANK] IN ACCORDANCE WITH THE TERMS AND CONDITIONS OF THE AGREEMENT GOVERNING SUCH LOAN OR ADVANCES, OR (F) ANY SUM PAYABLE BY THE ASSESSEE AS AN EMPLOYER IN LIEU OF ANY LEAVE AT THE CREDIT OF HIS EMPLOYEE, OR (G) ANY SUM PAYABLE BY THE ASSESSEE TO THE INDIAN RAILWAYS FOR THE USE OF RAILWAY ASSETS, 4 .1 AFTER CAREFUL READING OF THE AFORESAID SECTION, WE ARE OF THE CONSIDERED OPINION THAT THE ISSUE INVOLVED IN THIS CASE IS SQUARELY COVERED UNDER SECTION 36(1)(VA) OF THE ACT. IN THIS CONNECTION, WE ALSO REFER TO THE PRESS NOTE BY PIB ITA NO. 649 /HYD/1 9 & CO NO. 1/H 20 USHODAYA ENTERPRISES PVT. LTD., HYD. : - 6 - : REGARDING EPFOS WITHDR AWS GRACE PERIOD OF 5 DAYS FOR DEPOSITING THE DUES FROM FEBRUARY, 2016, DATED 12 TH JANUARY, 2016, WHICH READS AS UNDER: PRESS INFORMATION BUREAU GOVERNMENT OF INDIA MINISTRY OF LABOUR & EMPLOYMENT 12 - JANUARY - 2016 EPFO'S WITHDRAWS GRACE PERIOD OF 5 DAYS FOR DEPOSITING THE DUES FROM FEBRUARY, 2016 EMPLOYEES PROVIDENT FUND ORGANISATION(EPFO) HAS WITHDRAWN GRACE PERIOD OF 5 DAYS FOR DEPOSITING THE DUES WITH EFFECT FROM FEBRUARY ,2016. EPFO HAS EARLIER ISSUED A CIRCUL AR ON 8TH JANUARY, 2016 TO THIS EFFECT. IN A COMMUNICATION TO EMPLOYERS ,EPFO HAS INFORMED THAT THE DUES FOR THE MONTH OF JAN, 2016 ARE TO BE PAID BY 15TH FEBRUARY 2016. IN VIEW OF AVAILABILITY OF TECHNOLOGICAL TOOLS TO THE EMPLOYERS, THE CONCESSION OF 5 D AYS HAS OUTLIVED ITS BASIC PURPOSE AND UTILITY. ACCORDINGLY, THE CONCESSION OF GRACE PERIOD OF 5 DAYS AVAILABLE TO THE EMPLOYERS FOR DEPOSITING THE CONTRIBUTION AND OTHER DUES HAS BEEN WITHDRAWN. EMPLOYERS ARE REQUIRED TO PAY THE CONTRIBUTIONS AND ADMINI STRATIVE CHARGES WITHIN FIFTEEN DAYS OF CLOSE OF EVERY MONTH AS PER THE PROVISIONS OF EPF & MP ACT 1952 UNDER THREE SCHEMES NAMELY EMPLOYEES' PROVIDENT FUNDS SCHEME (EPFS), 1952, EMPLOYEES' PENSION SCHEME (EPS), 1995 AND EMPLOYEES' DEPOSIT LINKED INSURANCE SCHEME (ED US), 1 976.A GRACE PERIOD OF 5 DAYS WAS ALSO ALLOWED IN ADDITION TO THE STATUTORY PROVISIONS. THIS GRACE PERIOD OF 5 DAYS WAS ALLOWED IN VIEW OF THE PRACTICE OF MANUAL PROCESSING OF CALCULATION OF WAGES AND DUES OF THE EMPLOYEES AT THE END OF E MPLOYERS. THE REMITTANCES OF THE DUES IN THE BANK ALSO REQUIRED ADDITIONAL TIME IN THE MANUAL SETUP. ITA NO. 649 /HYD/1 9 & CO NO. 1/H 20 USHODAYA ENTERPRISES PVT. LTD., HYD. : - 7 - : RECENT TECHNOLOGICAL ADVANCEMENT, HAVE EMPOWERED EMPLOYERS TO COMPUTE THE WAGES AND LIABILITIES THROUGH AID OF COMPUTERS. FACILITY NOW EXISTS TO FILE ELE CTRONIC CHALLAN - CUM - RETURN (ECR) AND REMITTANCE OF DUES THROUGH INTERNET BANKING. THIS HAS SUBSTANTIALLY REDUCED THE PROCESS AND TIME TAKEN IN CALCULATION OF PF DUES AND ITS REMITTANCES IN THE BANK. THE CONCESSION OF 5 DAYS HAS OUTLIVED ITS BASIC PURPOSE AND UTILITY. ACCORDINGLY, THE CONCESSION OF GRACE PERIOD OF 5 DAYS AVAILABLE TO THE EMPLOYERS FOR DEPOSITING THE CONTRIBUTION & OTHER DUES IS WITHDRAWN. THIS SHALL APPLY FROM FEBRUARY, 2016 FOR DEPOSITING CONTRIBUTIONS FOR THE MONTH OF JANUARY, 2016 THA T IS PAYABLE IN THE MONTH OF FEBRUARY, 2016.THE EMPLOYERS WIL L THEREFORE NEED TO DEPOSIT THE REMITTANCES WITHIN 15 DAYS OF CLOSE OF EVERY MONTH FROM FEBRUARY, 2016. THE FIELD OFFICES OF EPFO ARE BEING ASKED TO SENSITIZE LARGE ESTABLISHMENTS THAT EMPLOY M ORE THAN 500 EMPLOYEES, ALL PSUS AND IMPORTANT ESTABLISHMENT IN THIS REGARD, THROUGH LOCAL PRESS RELEASES, EMAILS AND AT APPROPRIATE FORUMS. 4 .2 FROM THE ABOVE PRESS NOTE, IT IS CLEAR THAT EARLIER THERE WAS 5 DAYS GRACE PERIOD FOR REMITTING HAS ALSO BEE N WITHDRAWN WITH EFFECT FROM FEBRUARY, 2016. WE ALSO FOUND FROM THE ORDER OF CIT(A) THAT IN MANY INSTANCES, THE ASSESSEE HAS DEPOSITED AFTER 15 DAYS OF THE FOLLOWING MONTHS. THEREFORE, TO MEET THE ENDS OF JUSTICE, WE REMIT THE ISSUE BACK TO THE FILE OF TH E AO WITH A DIRECTION TO ITA NO. 649 /HYD/1 9 & CO NO. 1/H 20 USHODAYA ENTERPRISES PVT. LTD., HYD. : - 8 - : DECIDE THE SAME AFRESH AS PER THE DECISION OF HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS. BHARAT HOTELS LTD., ITA NO. 271/2005, VIDE ITS ORDER DATED 6 TH SEPTEMBER, 2018 WHEREIN THE HONBLE COURT HAS HELD AS UNDER: 8. HAVING RE GARD TO THE SPECIFIC PROVISIONS OF THE EMPLOYEES PROVIDENT FUNDS ACT AND ESI A CT AS WELL AS THE CONCERNED NOTIFICATIONS WHICH GRANTED A GRACE PERIOD OF 5 DAYS (WHICH APPEARS TO HAVE BEEN LATE WITHDRAWN RECENTLY ON 08.01.2016), WE ARE OF THE OPINION THAT THE ITAT S DECISION IN THIS CASE WAS NOT CORRECT. THE ASSESSEE UNDOUBTEDLY WAS E NTITLED TO CLAIM THE BENEFIT AND PROPERLY TREAT SUCH AMOUNTS AS HAVING BEEN DULY DEPOSITED, WHICH WERE IN FACT DEPOSITED WITHIN THE PERIOD PRESCRIBED (I.E. 15 + 5 DAYS IN THE CASE OF EPF AND 21 DAYS + ANY OTHER GRACE PERIOD IN TERMS OF THE EXTENT NOTIFICAT ION). AS FAR AS THE AMOUNTS CONSTITUTING DEDUCTIONS 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 DIS CUSSION, 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 PROVI SIONS AND NOTIFICATIONS. WE ALSO CLARIFY THAT THE ASSESSEE WOULD BE ENTITLED TO DEDUCTION IN TERMS OF SECTION 36(1)(VA) OF THE ACT. 4 .3 THEREFORE, THE AO IS DIRECTED TO DECIDE THE ISSUE IN LINE WITH THE ABOVE DECISION AFTER GIVING REASONABLE OPPORTUNITY OF HEARING TO THE ASSESSEE IN THE MATTER. THUS, ITA NO. 649 /HYD/1 9 & CO NO. 1/H 20 USHODAYA ENTERPRISES PVT. LTD., HYD. : - 9 - : GROUND NO. 3 RAISED BY THE REVENUE IS TREAT ED AS ALLOWED FOR STATISTICAL PURPOSES. 5 . IN THE RESULT, APPEAL OF THE REVENUE IS PARTLY ALLOWED FOR STATISTICAL PURPOSES AND THE CO FILED BY THE ASSESSEE IS DISMISSED. PRONOUNCED IN THE OPEN COURT ON 29 TH JANUARY, 2021 SD/ - SD/ - ( SATBEER SINGH GODARA ) ( LAXMI PRASAD SAHU) JUDICIAL MEMBER ACCOUNTANT MEMBER HYDE RABAD, DATED : 29 TH JANUARY, 20 2 1 K V C OPY TO : 1 DCIT, CIRCLE 1 6 (2) 2 ND FLOOR, B BLOCK, IT TOWERS, AC GUARDS, MASAB TANK , HYDERABAD. 2 M/S USHODAYA ENTERPRISES PVT. LTD., D.NO. 6 - 3 - 569/3, EENADU COMPLEX, SOMAJIGUDA, HYDERABAD 500 082 3 CIT(A) 4 , HYDERABAD. 4 PR. CIT - 4 , HYDERABAD 5 ITAT, DR, HYDERABAD. 6 GUARD FILE.