POPULAR FREIGHT EXPRESS PRIVATE LIMITED,KOCHI V. DCIT, CORPORATE CIR 2(1), KOCHI

ITA 416/COCH/2025

AI Insights

The case involves Popular Freight Express Pvt. Ltd., which appealed against the order of the CIT(A) confirming the disallowances made by the Assessing Officer (AO) during the assessment year 2013-14. The AO had disallowed employees' contributions towards PF & ESI that were remitted beyond the due dates and had also disallowed interest expenses amounting to Rs. 11,91,555, alleging that interest-bearing funds were diverted to directors as interest-free loans. The CIT(A) upheld these disallowances, leading to the appeal before the Tribunal. The Tribunal dismissed the challenge regarding the PF & ESI contributions based on a Supreme Court ruling but allowed the appeal concerning the disallowance of interest, citing insufficient evidence of non-business use of the funds.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 713015 (ITAT-COCHIN)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-07-2025
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Assessment Year: 2013-2014
• Other Referred Cases: Checkmate Services P. Ltd. v. CIT [2022] 448 ITR 518 (SC)
• Laws Referred To: Income Tax Act
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: LEENA LAL
• Assessee Lawyers: THOMAS JOSEPH; WAY
• Section: 143(3)

Judgement Text

"IN THE INCOME TAX APPELLATE TRIBUNAL COCHIN BENCH BEFORE SHRI INTURI RAMA RAO, AM ITA No. 416/Coch/2025 Assessment Year: 2013-14 Popular Freight Express Pvt. Ltd. .......... Appellant Plot No.111, Judges Avenue Road, Kaloor, Kochi [PAN: AAFCP 1918 A] vs. ITO, Corporate Ward-2(3) .......... Respondent Ernakulam Appellant by: Shri Thomas Joseph, CA Respondent by: Smt. Leena Lal, Sr.DR Date of Hearing: 13.06.2025 Date of Pronouncement: 31.07.2025 O R D E R This appeal filed by the assessee is directed against the order of the ADDL/JCIT (A)-1 Visakhapatnam [CIT(A)] dated 31.03.2025 for Assessment Year (AY) 2013-14. 2. Brief facts of the case are that the assessee is a company engaged in the business of clearing & forwarding of Air Cargo as a sub-agent for commission. The return of income for the A.Y. 2013- 14 was filed on 01/10/2013 disclosing income of Rs. 16,61,880/-. Printed from counselvise.com 2 ITA No. 416/Coch/2025 Popular Freight Express Pvt. Ltd. Against the said return of income, the assessment was completed by the AO vide order dated 25/02/2016 passed u/s. 143(3) of the Act at a total income of Rs. 29,55,773/-. While doing so, the AO made disallowance of Rs. 92,338/- being amount of employees’ contribution towards PF & ESI remitted beyond the due date specified in the respective Act. The AO also made addition of Rs. 11,91,555/- by holding that the interest bearing funds were diverted to the Directors by way of extending the interest free loans. Accordingly, disallowed the interest expenses of Rs. 11,91,555/-. 3. Being aggrieved, an appeal was filed before the CIT(A), who vide the impugned order confirmed the disallowance of employees’ contribution towards PF & ESI and also confirmed the disallowance of interest on account of diversion of funds to Directors. 4. Being aggrieved, the assessee is in appeal before the Tribunal in the present appeal. 5. Ground Nos. 1 & 9 are general in nature. The assessee by way of ground No.2 challenges the disallowance of belated payment of employees’ contribution towards PF & ESI. The issue is now settled against the assessee by the judgment of the Hon'ble Supreme Court in the case of Checkmate Services P. Ltd. v. CIT [2022] 448 ITR 518 (SC) wherein it has been held that the deduction of the employees’ share can be allowed u/sec.36(1)(va) only if it is Printed from counselvise.com 3 ITA No. 416/Coch/2025 Popular Freight Express Pvt. Ltd. deposited before the time limit under the respective statutes and not before the due date u/sec. 139(1) of the Act. 6. Respectfully following the decision of Hon'ble Supreme Court in the above referred to case, I dismiss this ground of appeal raised by the assessee. 7. Ground Nos.3 to 8 challenges the disallowance of interest by holding that interest bearing funds were diverted to the Directors in the form of interest free bearing advances. 8. It is contended that the amounts were advanced to the Directors for the purpose of repayment of principal amount of loan and interest to the third parties. Therefore, the question of disallowance of interest does not arise. 9. On the other hand, ld. Sr. DR supported the orders of the lower authorities and submitted that the order passed by the Ld. CIT(A) is a reasoned one, requires no interference. 10. I have heard rival submissions and perused the material on record. 11. The issue in the present ground of appeal relates to disallowance of interest by holding that interest bearing funds were diverted for non-business purpose in the form of interest free bearing advances to the Directors. On mere perusal of the Printed from counselvise.com 4 ITA No. 416/Coch/2025 Popular Freight Express Pvt. Ltd. assessment order, it appears that the AO merely swayed by the fact that money were advanced to the Directors, but no material was brought on record by the AO to demonstrate that these were made to the Directors for non-business purpose. There can be for many reasons as to why money was paid to the Directors to meet the expenses on behalf of the company. It is a question of fact which has to be demonstrated by leading necessary evidence on record. The contention of the assessee that, the money were paid to the Directors to repay the loans borrowed on behalf of the company, cannot be ruled out. Therefore, in absence of any evidence to show that money were advanced to the Directors for non-business purpose. Thus, these grounds of appeal raised by the assessee are allowed. 12. In the result, the appeal filed by the assessee is partly allowed Order pronounced in the open court on 31st July, 2025. Sd/- (INTURI RAMA RAO) ACCOUNTANT MEMBER Cochin, Dated: 31st July, 2025 vr/- Printed from counselvise.com 5 ITA No. 416/Coch/2025 Popular Freight Express Pvt. Ltd. Copy to: 1. The Appellant 2. The Respondent 3. The Pr. CIT concerned 4. The Sr. DR, ITAT, Cochin 5. Guard File By Order Assistant Registrar ITAT, Cochin Printed from counselvise.com "