SHYAM CENTURY FERROUS LIMITED,LUMSHNONG V. ACIT, CIRCLE- SHILLONG, SHILLONG

ITA 44/GTY/2024

AI Insights

The case involves Shyam Century Ferrous Ltd., which appealed against the order of the Commissioner of Income-Tax (Appeals) concerning the Assessment Year 2021-22. The primary issues included the non-exclusion of a profit on the sale of investments from business income, disallowances related to delayed deposits of employees' contributions to provident funds, and non-allowance of deductions for bonus, leave encashment, and gratuity payments not made in the preceding year. The Tribunal examined the applicability of various sections of the Income Tax Act, 1961, and relevant judicial precedents, particularly focusing on the impact of the COVID-19 pandemic on compliance with statutory deadlines.

• Counselvise Citation: [2024] 140 COUNSELVISE.COM (IT) 34635 (ITAT-GUWAHATI)
• Duration Of Justice: 7 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-10-2024
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: DB
• Next Hearing Date: 28-08-2024
• Assessment Year: 2021-2022
• Appeal Filed On: 07-03-2024
• Other Referred Cases: Checkmate Services Pvt. Ltd. vs. Commissioner of Income Tax-I
• Laws Referred To: Income-Tax Act, 1961
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: SOUMENDU SEKHAR DAS
• Assessee Lawyers: AKKAL DEDHWEWALA; WAY OF LONG TERM CAPITAL
• Keywords: Set aside; Business income; Revised return; Capital Gains
• Section: 250; 143(1); 43B

Judgement Text

"Page 1 of 6 INCOME TAX APPELLATE TRIBUNAL, GAUHATI BENCH, GUWAHATI BEFORE DR. MANISH BORAD, HON’BLE ACCOUNTANT MEMBER AND SHRI MANOMOHAN DAS, HON’BLE JUDICIAL MEMBER ITA No. 44 / GTY / 2024 Asstt.Year: 2021-22 Shyam Century Ferrous Ltd. Lumshnong, Khaliehriat East-Jayantia Hills PIN- 793210 (Meghalaya) PAN : AAPCS6873B Vs. ACIT, Circle-Shillong, Shillong (Appellant) (Respondent) Assessee By: Shri Akkal Dedhwewala, FCA Department By: Shri Soumendu Sekhar Das, DR Date of Hearing: 28.08.2024 Date of Pronouncement: 25.10.2024 ORDER PER MANOMOHAN DAS, JM This appeal by the assessee is directed against the order of the learned Commissioner of Income-Tax (Appeals), dated 11.01.2024 (hereinafter referred to as the (‘CIT-(A)) passed under section 250 of the Income-Tax Act, 1961 (hereinafter the ‘Act’) and pertains to the Assessment Year [AY] 2021-22. The grounds of the assessee are as under: ( i) For that on the facts and circumstances of the case, the ld. CIT (A) erred in rejecting the assessee’s claim for exclusion of capital gains of RS. 6,38,81,925/- credited in P&L A/c while computing “Business Income’ in Schedule-BP of the ITR, in spite of the fact that the impugned sum of RS. 6,38,81,925/- was already considered by the assessee by way of Long Term Capital Gains in Schedule CG. For that and circumstances of the case, the Ld. CIT(A)’s action of rejecting the claim of exclusion of the profit on sale of investment of Rs. 6,38,81,925/- from computation ITA No. 44 / GTY / 2024 Shyam Century Ferrous Ltd. vs. ACIT, Circle- Shillong AY: 2021-22 Page 2 of 6 of income, when the appellant had already offered the same by way of capital gains in the return of income, amounted to taxation of the same sum twice and thus the JAO / CPC be directed to delete / exclude the aforesaid sum while assessing the business income for the relevant year.. (ii) For that on the facts and circumstances of the case and in law, the lower authorities erred in disallowing sum to the extent of Rs. 84,963/- u/s 36(1)(va) of the Act alleging delayed deposit of the employees’ contribution to provident fund, without appreciating the fact the date for the month of April 2020 under the EPF Act had been extended in view of the COVID pandemic and that the impugned payment was made within the extended time limits. (iii) For that on the facts and circumstances of the case and in law, the lower authorities failed to appreciate that the appellant had already disallowed the delayed payment of employees’ contribution to the extent of Rs. 92,953/- u/s 36(1)(va) of the Act in the return of income and in that view of the matter the impugned disallowance resulted in addition of the same twice and thus be directed to be deleted. iv) For that on the facts and circumstances of the case, the CIT(A), NFAC grossly erred in confirming the CPC’s action of not allowing the deduction of Rs. 6,91,928/- u/s 43B in relation to bonus [Rs. 16,455/-], leave encashment [Rs. 90,867/-] and gratuity [Rs. 5,84,606/-] which was disallowed due to non-payment in the preceding year and accordingly claimed as deduction on actual payment in the relevant year. 2. The brief facts of the case are that, the assessee is a public limited company incorporated under the Companies Act, 1956 but not a Government company. It is engaged in manufacturing of ferro-alloys and power generation. The assessee’s unit is located at Byrnihat, Meghalaya. The assessee filed its return of income on 14th February, 2022 reporting a total income of Rs. 1,68,20,990/- under the Income Tax Act, 1961 on which the total tax liability of the assessee is Rs. 43,78,669/-. An intimation order u/s 143(1) was sent to the assessee on 11 November, 2022 making disallowance in the return of income on account of disallowance of Bonus, Provident Fund, leave encashment and gratuity u/s 43B of the Act etc by the CPC. Finally, the CPC computed demand payable of INR 3,34,150/-. ITA No. 44 / GTY / 2024 Shyam Century Ferrous Ltd. vs. ACIT, Circle- Shillong AY: 2021-22 Page 3 of 6 3. Being aggrieved, the assessee filed 1st appeal before the ld. CIT(A). The ld. CIT(A) vide order dated 11.01.2024 dismissed the appeal of the assessee. 4. Aggrieved, the assessee filed the present appeal before the Tribunal. 5. Heard the representatives of both the parties and perused the material on record. 6. The first issue of the assessee is against the non-exclusion of profit on sale of Investment amounting to Rs. 6,38,81,925/ from the computation of income. Assessee claimed that, a profit of Rs. 6,38,81,925/- from the sale of investments was disclosed at S. No. 14(vii) of Schedule – ‘Part A – P&L Ind AS’ in its return of income which was filed on 14.02.2022 for the relevant year. The assessee also claimes that, the said profit on sale of investment was duly considered by the assessee at the time of reporting of the corresponding details at Sl. No. 9 of sub- head B- ‘Long Term Capital gain’ of Schedule ‘Capital Gains’ of the income tax return. However, the assessee erroneously omitted to exclude/reduce that profit of Rs. 6,38,81,925/- by way of deduction. The assessee further claims that it was a mistake apparent from record and the same should be rectified and thereafter, re-compute the tax payable / refundable by the CPC. The ld. CIT(A) rejected the claims of the assessee. The ld. CIT(A) observed that – “the CPC has not made any adjustments and has accepted the ITR as was filed. If the appellant has made a mistake it has to be corrected by filing a revised return or under section 264. This is not an error apparent on record to be rectified u/s 154 or to be considered in appeal. The CPC has not made any addition and the grievance is not against the 143(1) order or against the CPC. The ground 2 raised are not valid and are dismissed”. 7. We observe that, the ld. CIT(A) did not deny the claim of the assessee. The ld. CIT(A) also did not deny that the assessee has not excluded / reduced the profited amount of Rs. 6,38,81,925/- by way of deduction. The ld. CIT(A) has held that, the assessee can file a revised return if he has made a mistake. In our opinion, the ld. CIT(A) has correctly made his observation. It is not the case of the ITA No. 44 / GTY / 2024 Shyam Century Ferrous Ltd. vs. ACIT, Circle- Shillong AY: 2021-22 Page 4 of 6 assessee that, he has filed revised return and the same is rejected by the Revenue. Why not the assessee filed revised return so as to correct his mistake? Therefore, this issue we hold against the assessee. However, we direct the ld. CPC AO / CIT(A) to consider the revised return if files by the assessee on the issue. 8. Disallowance of Rs. 1,77,916/- u/s 36(1)(va) of the Act: On this addition, the claim of the asseessee is that it had deposited Rs. 84,963/-, the employees’ contribution of PF within the extended date for the month of April 2020 in view of the Covid Pandemic and therefore, this amount of Rs. 84,963/- has to be treated as was paid on/ within the due date. The assessee had deposited that amount on 19th May 2020 due to prevailing covid pandemic. The assessee, in this context, relies on the notification which was issued by the PF authority and claims for deletion of disallowance of Rs. 84,963/-. We observe that, the ld. CIT(A) has rejected the claim of the assessee by relying of the decision of the Hon’ble Apex Court in the case of Checkmate Services Pvt. Ltd. –vs- Commissioner of Income Tax-I. The ld. CIT(A) observed that the Hon’ble Apex Court in its recent judgment in the case of Checkmate Services Pvt. Ltd. Vs. Commissioner of Income Tax-I, had held that the delayed deposit of the amount of employees share of contribution towards labour welfare funds by the assessee- employer was not to be allowed as a deduction under section 2(24)(x) r.w.s. 36(1)(va) of the Act. It is observed by the Hon’ble Apex Court that as the assessee is not absolved from its obligation to deposit the employees share of contributions on or before the “due dtae” as contemplated in the respective Labour Welfare Acts, as a pre-condition for claiming the same as a deduction under section 2(24)(x) r.w.s. 36(1)(va) of the Act, therefore, it would not be saved by the non-obstante clause of Section 43B of the Act. The judgment of the Apex Court in Checkmate Services Pvt. Ltd. Vs. Commissioner of Income Tax-I has overruled the earlier decisions and the issue has reached a finality. Ground 3 in the appeal is against the Addition / disallowance of Rs. 1,77,916/- u/s 36(1)(va) read with section 2(24)(x) of the Income Tax Act and this issue s squarely covered by the Apex Court decision in Checkmate Services Pvt. Ltd. Vs. Commissioner of Income Tax-I and the decision is against the appellant. ITA No. 44 / GTY / 2024 Shyam Century Ferrous Ltd. vs. ACIT, Circle- Shillong AY: 2021-22 Page 5 of 6 9. We observe that, the assessee claimed that due to Covid pandemic the aforesaid deposit could not be made on or before the due date as per the concerned Act. But the payment was made within the extended date. We observe that, the Employees, Provident Fund Organization vide Circular No. C-I / Misc./ 2020-21 / Vol.I./1112 dated 15.05.2020 was granted relief to establishments and factories covered under EPF and MP Act, 1952 from levy of penal damages for delay in deposit of dues during Lockdown to prevent Covid-19. The contents of this circular inter alia says that the delay in deposit of contributions during the period of lockdown announced in terms of the Disasters Management Act, 2005 cannot be attributed to any culpable state of mind of the employer and will not, therefore, attract the provisions of section 14B of the EPF Act. In view of this circular issued by the EPF Organisation, it is our considered opinion that the employees’ contribution of Rs. 84, 963/- ought to be treated as paid on the due date by the assessee as there was countrywide lockdown during the relevant period. Therefore, we delete the addition of Rs. 84,963/- from the total income of the assessee. Accordingly, we decide this issue of addition of Rs. 84,963/- in favour of the assessee. 10. Regarding the payment of employees contribution of Rs. 92,953/-, the assessee claimed that it had already disallowed as delayed payment of employees’ contribution in the return of income and therefore, disallowance resulted the addition of the same amount twice and should be deleted. We observe that. The ld. CIT(A) upheld the addition of this amount of employees’ contribution of PF by relying of the decision of the Hon’ble Apex Court in the case of Checkmate case including the amount of Rs. 84,963/- total of Rs. 1,77,916/-. But the claims of the assessee is that they themselves had disallowed Rs. 92,953/- in their return of income. As the assessee claimed that, it had already disallowed employees’ contribution of Rs. 92,953/-, we direct the ld. CIT(A) to reconsider his decision and we set aside the addition of Rs. 92,953/- till the reconsideration of the issue by the ld. CIT(A). Thus, we decide this issue of addition of Rs. 92,953/- in favor of the assessee for the statistical purposes only. ITA No. 44 / GTY / 2024 Shyam Century Ferrous Ltd. vs. ACIT, Circle- Shillong AY: 2021-22 Page 6 of 6 11. Page 50 of the PB indicates that, the Bonus, Gratuity and Leave encashment were paid in the previous year. The previous year in this case is 2020-21 as the relevant AY is 2021-22. Therefore, the deductions on account of the aforesaid payment have to be allowed in the AY 2021-22. Hence, we direct the Revenue to allow the deductions relating to the payment made by the assessee as bonus, leave encashment and gratuity. Thus, we decide this issue in favor of the assessee. 12. In the result, the appeal of the assessee is partly allowed. 13. Order pronounced in the open court on this 25th day of October, 2024. (Dr. Manish Borad) (Manomohan Das) Accountant Member Judicial Member Dated: 25 / 10 /2024. Copy forwarded to: 1. Shyam Century Ferrous Ltd., Lumshnong, Khaliehriat, East-Jayantia Hills PIN- 793210 (Meghalaya) 2. The ACIT, Circle, Shillong 3. Pr.CIT 4. CIT(A) 5. DR, ITAT, GAUHATI 6. Guard File. By Order Assistant Registrar ITAT/Guwahati/Kolkata "