Appeal details
Assessee PAN
Bench
Appeal Number
Appellant
Respondent
Appeal Type
Income Tax Appeal
Pronouncement Date
14-03-2025
Appeal Filed By
Assessee
Order Result
Partly Allowed
Bench Allotted
C
Assessment Year
2022-2023
Judgement Text
" आयकर अपीलȣय अͬधकरण,‘सी’ Ûयायपीठ, चेÛनई \nIN THE INCOME TAX APPELLATE TRIBUNAL ‘C’ BENCH, CHENNAI \nĮी जॉज[ जॉज[ क\nे, उपाÚय¢ एवं Įी जगदȣश, लेखा सदèय क\nे सम¢ \nBEFORE SHRI GEORGE GEORGE K, VICE PRESIDENT AND \nSHRI JAGADISH, ACCOUNTANT MEMBER \n \nआयकर अपील सं./ITA No.: 3303/CHNY/2024 \nिनधाᭅरण वषᭅ/Assessment Year: 2022-23 \n \nSPB Projects and Consultancy \nLtd. \nESVIN House, 13, Rajiv Gandhi \nSalai, (OMR) Perungudi, \nChennai-600 096. \nPAN: AAACS-4921-K \n \n \nVs. \nIncome Tax Officer, \nCorporate Ward -6(1) \nChennai. \n(अपीलाथᱮ/Appellant) \n \n \n \n(ᮧ᭜यथᱮ/Respondent) \n \nअपीलाथᱮ कᳱ ओर से/Appellant by \n: Shri N.R.Suresh, F.C.A. \nᮧ᭜यथᱮ कᳱ ओर से/Respondent by \n : Ms. Anitha, Addl.CIT \n \nसुनवाई कᳱ तारीख/Date of Hearing : 12.03.2025 \nघोषणा कᳱ तारीख/Date of Pronouncement : 14.03.2025 \n \nआदेश /O R D E R \n \nPER GEORGE GEORGE K, VICE PRESIDENT: \n \n \nThis appeal at the instance of the assessee is directed against \norder of Addl/JCIT (Appeals)-1, Guwahati dated 25.10.2024 \npassed under section 250 of the Income Tax Act, 1961 (hereinafter \nthe ‘Act’). \n2. \nThe grounds raised by the assessee read as follows:- \n1. Whether the Learned Commissioner of Income Tax (Appeals) \nis right in confirming the addition of PF contribution of \nRs.1,39,050/- based on the typographical error in the Tax Audit \nReport filed; while in fact the details of actual payment has been \nbrought to the notice of Central Processing Centre (CPC) \n\n \n- 2 - \nITA No.3303/CHNY/2024 \n \nmentioning the challan CR No. and date, which is within the due \ndate applicable under Section 43B the Income Tax Act, 1961?. \n \n2. Whether the Learned Commissioner of Income Tax (Appeals) \nis right in confirming the addition made by CPC in respect of \ninterest of Rs. 10,437/- paid under Section 201 (1A), which is \nnot a penalty to be disallowed following the decision of the \nHon'ble Supreme Court in the case of MALWA VANASPATI & \nCHEMICAL CO. LTD. in CIT 225 ITR 383 (SC)? \n \n3. Brief facts of the case are as follows:- \nThe assessee is a public limited company. It is engaged in the \nbusiness of project engineering and consultancy services. For the \nassessment year 2022-23 return of income was filed on 02.11.2022 \ndeclaring Nil income and claimed refund of Rs,1,02,28,850/-. The \nassessee company received a communication from CPC proposing \nto make following adjustments u/s.143(1) of the Act: \ni) Provident Fund Rs.1,39,050/- being employees contribution \nreported in tax audit of belated payment ; \nii) Interest of Rs.10,434/- on delayed payment of TDS whether it is \nallowable deduction u/s.37(1) of the Act. \nAgainst the proposed adjustment, assessee filed its reply on \n21.12.2022. However, CPC issued intimation u/s.143(1) of the Act \non 29.07.2023 making the aforesaid adjustments. \n4. \nAggrieved by the intimation issued by CPC, assessee \npreferred appeal before First Appellate Authority. The CIT(A) \n\n \n- 3 - \nITA No.3303/CHNY/2024 \n \nconfirmed additions/adjustments made in the intimation issued \nu/s.143(1) of the Act. \n5. \nAggrieved assessee has filed present appeal before the \nTribunal. The assessee has filed a paper book comprising of 114 \npages enclosing therein original audit report, revised audit report, \nbalance sheet, profit & loss account, payment details of employees \nprovident fund, intimation issued u/s.143(1) etc. The learned AR \nsubmitted that employees contribution to provident fund for April \nmonth of 2021 was paid within due date prescribed under \nProvident Fund Act, hence, entitled to deduction u/s.36(1)(va) of \nthe Act as per the judgement of the Hon’ble Apex Court in the case \nof Checkmate Services Pvt. Ltd. vs. CIT reported in (2022) 448 ITR \n518 (SC) dated 12.10.2022. The learned AR has placed on record \npayment challans to the provident fund account from pages 90 to \n96 of the paper book. The learned AR submitted that adjustment \nwas made u/s.143(1) of the Act only for the reason audit report \nby inadvertent mistake had shown the payment date as \n08.05.2022 instead of actual date of payment i.e. 08.05.2021. As \nregards the issue whether interest paid u/s.201(1A) of the Act is \nan allowable deduction u/s.37 of the Act, learned AR relied on \nKolkata Bench order of the Tribunal in the case of DCIT \n\n \n- 4 - \nITA No.3303/CHNY/2024 \n \nVs.M/s.Narayani Ispate Private Limited in ITA No.2127/Kol/2014 \ndated 30.08.2017 and Delhi Bench order of the Tribunal in the \ncase of Delhi Cargo Service Center, New Delhi Vs. ACIT in ITA \nNo.9833/Del/2019 dated 24.03.2023. \n6. \nThe ld.DR supported the order of CIT(A). \n7. \nWe have heard rival submissions and perused the material on \nrecord. Two issues are raised in this appeal namely – i) \ndisallowance of employees contribution to provident fund \namounting to Rs.1,39,050/- & ii) Interest paid amounting to \nRs.10,434/- u/s.201(1A), whether it is to be allowed as deduction \nor not. We shall adjudicate the above issues as under: \nEmployees Contribution disallowed u/s.36(1)(va) of the \nAct:- \n \n8. \nThe employees contribution to provident fund amounting to \nRs.1,39,050/- was disallowed in the intimation issued u/s.143(1) \nof the Act for the reason that same has been paid beyond due \ndate prescribed under Provident Fund Act. The due date for \npayment of employees contribution of Provident Fund Act is on or \nbefore 20.05.2021. The adjustment has been made u/s.143(1) of \nthe Act, since tax audit report has shown payment on 08.05.2022. \nThe learned AR had submitted that actual date of payment is on \n08.05.2021. The assessee has placed on record (refer pages 90 to \n\n \n- 5 - \nITA No.3303/CHNY/2024 \n \n96 of paper book) regarding details of payments made in the EPF \naccount for the month of April, 2021. On perusal of the same, it \nis seen that amounts have been paid on 08.05.2021 for wages \npaid in the month of April, 2021. This aspect needs verification by \nthe AO. Therefore, the matter is restored to the files of AO. The \nAO is directed to examine whether the wages paid for the month \nof April, 2021, the employees contribution for same has been \npaid into the Provident Fund account within the due date \nprescribed under P.F Act. If it is found by the AO that amount \nhas been paid within due date prescribed under respective PF & \nESI Act, the same shall be allowed as deduction u/s.36(1)(va) of \nthe Act. It is ordered accordingly. \nInterest u/s.201(1A) of the Act:- \n9. \nThe CIT(A) has confirmed adjustment made u/s.143(1) of \nthe Act by observing as under:- \n“4.2.1 The contention of appellant has been gone through. The \nreferred decision of the apex court has been gone through. On \nperusal of the same, it is noticed that the Apex Court has \ndealt with following issue: \n \n\"Whether on the facts and in the circumstances of the case, the \npenalty levied under sections 8(2) and 17(3) of the Madhya \nPradesh General Sales Tax Act paid by the assessee is allowable \nexpenditure in the computation of total income?\" \n \n4.2.2 It is pertinent to mention here that the impugned \ndisallowance has been made in respect of delay payment of \nTDS and not in respect of penalty of Sales Tax. Therefore, the \ncase law relied upon by the appellant is not squarely applicable \n\n \n- 6 - \nITA No.3303/CHNY/2024 \n \nto the instant case and hence no cognizance of the same is \ntaken. Moreover, the tax paid is not any expenditure in relation \nto the business and therefore it is not allowable. As the \nprinciple amount is not allowable, no question arises in respect \nof interest on the same. Therefore, the action of addition on the \ninstant issue is found correct and hence the addition of Rs. \n10,437/- is confirmed”. \n \n10. The issue of interest paid u/s.201(1A) of Act, whether it is an \nallowable deduction is covered against the assessee by the \njudgement of Hon’ble Jurisdictional High Court in the case of CIT \nVs. Chennai Properties & Investment Limited reported in (1999) \n239 ITR 435 (Mad) dated 20.04.1998. The Hon’ble High Court had \nheld that “when assessee failed to deduct tax at source and remit \nthe same to State and assessee having paid interest u/s.201(1A) \nof the Act for delayed period, it cannot be claimed as business \ndeduction”. It was further held by the Hon’ble Court that “interest \npaid takes colour from the nature of principal amount required to \nbe paid, but not paid in time and this principal amount being \nincome-tax, interest is in the nature of direct tax and cannot be \nregarded as compensatory payment and allowed as business \nexpenditure”. The relevant finding of the Hon’ble Court reads as \nunder:- \n“15. The counsel for the assessee in support of his submission \nthat \nthe \ninterest \npaid \nby \nthe \nassessee \nwas \nmerely \ncompensatory in character besides relying on the case of \nMahalakshmi Sugar Mills Co. (supra) also relied on the decisions \nof the Apex Court in the cases of Prakash Cotton Mills (P.) Ltd. \n\n \n- 7 - \nITA No.3303/CHNY/2024 \n \nv. CIT[1993] 201 ITR 684/67 Taxman 546; Malwa Vanaspati & \nChemical Co. v. CII[1997] 225 ITR 383 and CIT v. Ahmedabad \nCotton Mfg. Co. Ltd. v. CIT[1994] 205 ITR 163. In all those \ncases, the Court was concerned with an indirect tax payable by \nthe assessee in the course of its business and admissible as \nbusiness expenditure. Further, liability for interest which had \nbeen incurred by the assessee therein was regarded as \ncompensatory in nature and allowable as business expenditure. \n \n16. The ratio of those cases is not applicable here. Income-tax \nis not allowable as business expenditure. The amount deducted \nas tax is not an item of expenditure. The amount not deducted \nand remitted has the character of tax and has to be remitted to \nthe State and cannot be utilised by the assessee for its own \nbusiness. The Supreme Court in the case of Bharat Commerce & \nIndustries Ltd. (supra) rejected the argument advanced by the \nassessee that. retention of money payable to the State as tax \nor income-tax would augment the capital of the assessee and \nthe expenditure incurred, namely, interest paid for the period of \nsuch retention, would assume the character of business \nexpenditure. The Court held that an assessee could not possibly \nclaim that it was borrowing from the State the amounts payable \nby it as income-tax and utilising the same as capitalization in its \nbusiness, to contend that the interest paid for the period of \ndelay in payment of tax amounted to a business expenditure.” \n \n11. The above judgement of the Hon’ble Jurisdictional High Court \nin the case of CIT Vs. Chennai Properties & Investment Limited \n(supra) was followed by the Bengaluru Bench of the Tribunal in \nthe case of M/s.Velankani Information Systems Limited Vs DCIT \nreported in (2018) 173 ITD 19. \n \n12. In light of aforesaid reasoning and relying on judicial \npronouncements cited supra, we reject the second ground raised \nby the assessee. \n\n \n- 8 - \nITA No.3303/CHNY/2024 \n \n \n 13. In the result, appeal filed by the assessee is partly allowed for \nstatistical purposes. \nOrder pronounced in the open court on 14th March, 2025. \n \n \n \n \nSd/- \nSd/- \n(जगदȣश) \n(JAGADISH) \nलेखा सदèय/ACCOUNTANT MEMBER \n(जॉज[ जॉज[ क\nे) \n(GEORGE GEORGE K) \nउपाÚय¢ /VICE PRESIDENT \n \nचेÛनई/Chennai, \nǑदनांक/Date:14. 03.2025 \nDS \nआदेश कȧ ĤǓतͧलͪप अĒेͪषत/Copy to: \n \n1. अपीलाथȸ/Appellant \n \n \n2. Ĥ×यथȸ/Respondent \n3. आयकर आयुÈत /CIT, Madurai \n4. ͪवभागीय ĤǓतǓनͬध/DR \n \n5. गाड[ फाईल/GF. \n \n"
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