MDC Pharmaceuticals Limited, Chandigarh V. ITO, Ward 2(1), Chandigarh

ITA 659/CHANDI/2022

AI Insights

MDC Pharmaceuticals Ltd. appealed against the order of the CIT(A) NFAC, Delhi, which had upheld the disallowance of certain expenditures claimed under section 43B of the Income Tax Act, 1961. The expenditures in question were the employer's contributions to EPF and ESI, and TDS payable, which the assessee claimed were deposited before the due date of filing the income tax return for AY 2020-21. The CIT(A) had misinterpreted these as employee contributions, leading to their disallowance under section 36(1)(va). The Tribunal found that the CIT(A)'s interpretation was incorrect and that the expenditures were covered under section 43B, leading to the setting aside of the CIT(A)'s order.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 127503 (ITAT-CHANDIGARH)
• Duration Of Justice: 6 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-04-2023
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 18-04-2023
• Assessment Year: 2020-2021
• Appeal Filed On: 16-10-2022
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: RAHUL KHURANA
• Keywords: Opportunity of being heard; TDS
• Section: 154; 43B; 143(1); 250

Judgement Text

आयकर अपील य अ धकरण,च डीगढ़ यायपीठ , च डीगढ़ IN THE INCOME TAX APPELLATE TRIBUNAL, CHANDIGARH BENCH ‘B’ CHANDIGARH BEFORE: SHRI A.D.JAIN, VICE PRESIDENT AND SHRI VIKRAM SINGH YADAV, ACCOUNTANT MEMBER आयकर अपील सं./ ITA No. 659/CHD/2022 नधा रण वष / Assessment Year : 2020-21 MDC Pharmaceuticals Ltd., Plot No. 213, Industrial Area, Phase-I, Chandigarh. बनाम VS The ACIT, CPC, Bangalore. थायी लेखा सं./PAN /TAN No: AACCM4527B अपीलाथ /Appellant यथ /Respondent नधा रती क ओर से/Assessee by : Shri Rahul Khurana, CA राज व क ओर से/ Revenue by : Smt. Tarundeep Kaur, Sr.DR तार"ख/Date of Hearing : 19.04.2023 उदघोषणा क तार"ख/Date of Pronouncement : 21.04.2023 आदेश/ORDER PER VIKRAM SINGH YADAV,A.M. This is an appeal filed by the asse ssee against the order of the CI T(A)/NFAC, Delhi dated 10.09.2022 pertaining to assessment year 2020-21 wherein the assessee has taken the following grounds of appeal: 1. That on the facts, circumstances and legal position of the case, the Worthy CIT(A)in Appeal No. ITBA/NFAC/S/250/2022-23/1044573892(1) dated 10.08.2022 has erred in passing the order without giving the assessee reasonable and proper opportunity of being heard. 2. That on the facts and circumstances of the case, the worthy CIT(A] has erred in holding that the issue in appeal pertains to disallowance by CPC under section 36(l)(va) of the Income Tax Act, 1961 for employees contribution to PF and ESI and TDS deposited beyond the due dates in the respective Acts, wherein as, the appellant in his grounds of appeal filed in Form 35 and written submissions filed thereafter in response to notice issued under section 250 of the Income Tax Act, ITA 659/CHD/2022 A.Y.2020-21 Page 2 of 5 1961 has very clearly stated that amount of disallowance pertained to ESI Employer Contribution, EPF Employer Contribution and TDS Payable which have been duly deposited by the appellant before the due date of filing of Income Tax Return for the AY 2020-21. The worthy CIT(A) misstated the entire facts by considering the same as ESI and EPF Employee Contribution and upheld the order of Ld. AO by wrongly interpreting the facts of the case which is totally unjustified/ unwarranted and without application of mind. The worthy CIT(A) misstated the facts and wrongly dismissed the appeal of the appellant which was highly unjustified and deserves to be deleted. 3. That on facts and circumstances of the case, the worthy CIT(A) was not justified in confirming the order of the Ld. AO, whereby he failed to appreciate the facts that the said amounts in actual pertained to the employer contribution to EPF and ESI covered under the provisions of section 43B of the Income Tax Act, 1961 and also that the same have also been reported in the Tax Auditor Report filed for the said year under the clause 26(i)(B)(a) i.e. " Paid on or before the due date for furnishing the return of income of the previous year under section 139(1)". The worthy CIT(A) further also erred in not considering the order passed by the Ld. AO, CPC dated 17.06.2022 wherein they have suo-moto under section 154 of the Income Tax Act, 1961 rectified its erstwhile order passed under section 143(1) and deleted the inadvertent demand raised against the assessee for which the appeal has originally preferred by the appellant. 4. That on facts and circumstances of the case, the impugned assessment deserves to be quashed having been framed in haste and without affording reasonable opportunity of being heard.” 2. At the outset, it is noted that there is a delay in filing the present appeal by the assessee by 8 days. During the course of hearing, the ld. AR taken us through the affidavit filed by the Director of the assessee company and after taking into account the contents of the affidavit so filed, we believe that there was a reasonable cause for delay in filing the present appeal. Hence, the delay is hereby condoned and the appeal of the assessee company is hereby admitted for adjudication on merits. 3. During the course of hearing, the ld. AR submitted that the assessee filed its return of income on 14.10.2020 wherein it has claimed an amount of Rs.14,95,805/- u/s 43B of the Act as his ITA 659/CHD/2022 A.Y.2020-21 Page 3 of 5 expenditure pertaining to statutory dues i.e. ESI Employer share of Contribution, EPF Employer share of contribution and TDS payable which were duly deposited by the assessee on or before the due date of filing of the return of income. However, CPC, Bangalore while processing return of income has disallowed the said expenditure and intimation in this regard was issued u/s 143(1) dated 06.08.2021. 4. Against the said intimation, the assessee moved an appeal before the ld. CIT(A) and the ld. CIT(A) NFAC, Delhi vide the impugned order dated 10.08.2022 has dismissed the appeal of the assessee holding that the statutory dues re lates to the employee’s share of contribution which are disallowable u/s 36(1)(va) read with Section 2(24)(x) of the Act. 5. It was submitted that the ld. CI T(A), NFAC has wrongly considered the statutory dues as relating to the employee’s share of contribution whereas the fact of the matter is that the same relates to e mployer’s share of contribution towards PF and ESI and TDS payable which are clearly covered u/s 43B of the Act and the provisions of Section 36(1)(va) of the Act have no role or relevance in respect of said claim so made by the assessee. 6. It was further submitted that the assessee had also moved a rectification application u/s 154 before the CPC Bangalore and vide its order dated 17.06.2022 passed u/s 154 of the Act, the ITA 659/CHD/2022 A.Y.2020-21 Page 4 of 5 CPC Bangalore has since rectified the intimation u/s 143(1) of the Act wherein the disallowance so made while processing the return of income has since been deleted. It was, accordingly, submitted that where the demand pursuant to the intimation has already been deleted by the CPC, Bangalore pursuant to the order u/s 154 of the Act, the disallowance so confirmed by the ld. CI T(A) deserve to be deleted. 7. Per contra, the ld. DR has relied on the order of the ld. CI T(A) NFAC, Delhi. 8. We have heard the rival contentions and perused the material available on record. Given the fact that the assessee had moved an appeal against the intimation passed u/s 143(1) dated 06.08.2021 before the ld. CI T(A) and simultaneously, also moved an application u/s 154 before the CPC, Bangalore and during the pendency of the appellate proceedings, the CPC Bangalore vide its order dated 17.06.2022 passed u/s 154 has deleted the addition so made by the CPC, there is no further grievance and cause of action which is left with the assessee to agitate before the ld CIT(A) and the appeal before the ld CI T(A) therefore becomes infructuous and there is thus no basis left for the confirmation of addition by the ld. CI T(A) NFAC. In any case, the assessee has also brought out the factual inaccuracy which has crept in the order of ld. CI T(A), NFAC wherein the statutory ITA 659/CHD/2022 A.Y.2020-21 Page 5 of 5 dues have been held to be relatable to the employee’s share of contribution whereas the disallowances which have been made by the CPC vide intimation u/s 143(1) dated 06.08.2021 pertains to the statutory dues pertaining to the employer’s share of contribution towards ESI & PF and TDS payable which is covered under the provisions of section 43B and therefore, the ld CI T(A) NFAC has wrongly invoked the provisions of section 36(1)(va) while confirming the same. In the entirety of facts and circumstances of the case, the order so passed by the ld CI T(A) is therefore set-aside. 9. In view of the above, the appeal of the assessee is allowed. Order pronounced in the Open Court on 21 s t April,2023. Sd/- Sd/- (A.D.JAIN ) (VIKRAM SINGH YADAV) VICE PRESIDENT ACCOUNTANTMEMBER “Poonam” आदेश क琉 灹ितिलिप अ灡ेिषत/ Copy of the order forwarded to : 1. अपीलाथ牸/ The Appellant 2. 灹瀄यथ牸/ The Respondent 3. आयकर आयु猴/ CIT 4. िवभागीय 灹ितिनिध, आयकर अपीलीय आिधकरण, च瀃डीगढ़/ DR, ITAT, CHANDIGARH 5. गाड榁 फाईल/ Guard File आदेशानुसार/ By order, सहायक पंजीकार/ Assistant Registrar