Addition for interest U/s. 244A cannot be made in absence of intimation regarding grant of interest

Denis Chem Lab Ltd. Vs ACIT (ITAT Ahmedabad)

With regard to confirming the addition for a sum of Rs.46,960/- being interest u/s.244A on Income Tax Refund for Y.2009-10 is concerned. AO during the course of assessment proceeding on verification of the details generated through Income Tax Department noticed that appellant received Rs.46,960/- on 01/03/20 12 as interest u/s.244A of the Act on refund. AO contended that interest received u/s.244A of the act is taxable under the head “income from other sources”. In this case, though the refund of Rs.46,960/- was shown in the record of Income Tax Department and during the course of assessment proceeding assessee has submitted Affidavit of Managing Director of the Company stating that the company is not aware about the details of the interest in the absence of any working thereof or statement thereof issued by the Department. The said refund was less and there were adjustment relating to earlier year for which the assessee had separately written to the Department.

In our opinion, assessee has received the said information from the Assessing Officer during the course of assessment proceedings which took place during financial year 2014-15. The said amount of interest has therefore been provided in the Financial Year 2015-16, which is also subject to certain rectification on factual grounds as the amount of set off of different years is not correct. They have made separate entry in general voucher dated 01/04/2015 mentioning “Being the jv pass for interest received form Income Tax Dep. for the A.Y. 2009-10. Interest income booked in F.Y. 2015-16”.

In our considered opinion, in such circumstances no addition can be made. In the result, this ground of appeal is in favour of the assessee.

FULL TEXT OF THE ITAT JUDGMENT

This is an appeal by the assessee against the order of the Learned Commissioner of Income Tax (Appeals) – Gandhinagar, Ahmedabad, vide Appeal No.CIT(A)/GNR/363/2014-15 dtd. 21/07/2015 for Assessment Year (A.Y.) 2012-13, on the following Grounds:

1. The Order passed by CIT(Appeals) is bad in law and on facts and hence, it is submitted that the same be cancelled and be suitably modified.

2. (a) The learned Commissioner of Income Tax (Appeals)- Gandhinagar, has erred in law and on facts in confirming the action of the AO in making addition for a sum of Rs.46,960/- being interest u/s.244A on Income Tax Refund for A.V. 2009-10.

(b) The learned Commissioner of Income Tax(Appeals)- Gandhinagar grossly erred in law and on facts of the case in confirming the impugned addition in utter disregard to the fact that as per the return of income filed for A.V.2009-10, though the appellant has claimed Income Tax Refund, as on the date of filing the return of income for A.V.2012-13, the appellant company has not been served with any intimation u/s.143(1) or any other communication regarding the grant of interest u/s.244A of the I.T. Act for A.V.2009-10 and the refund in question had been directly credited by the department to the bank account and therefore the appellant company has no knowledge as to the element of interest u/s.244A in the amount of refund credited to the bank account.

(c) The learned Commissioner of Income Tax (Appeals)- Gandhinagar grossly erred in law and on facts of the case in confirming the impugned addition in utter disregard to the fact that the appellant assessee was not provided with copy of the intimation u/s.143(1) or the break-up of the refund credited to its bank account for A.V.2009-10 and that in spite of the request made to the Assessing Officer as well as the Income Tax Authority at Central Processing Unit at Bangalore, no break-up of the Income Tax Refund and amount of interest thereon was furnished to the assessee by the department.

(d) The learned Commissioner of Income Tax (Appeals)- Gandhinagar grossly erred in law and on facts of the case in confirming the impugned addition in utter disregard to the fact that as on the date of filing the return of income for the year under appeal, the Form 26AS did not indicate the element of interest granted on the Income Tax Refund for A. Y. 2009-10.

It is therefore prayed that the impugned addition may please be deleted.

3. (a) The learned Commissioner of Income Tax (Appeals)- Gandhinagar grossly erred in law and on facts of the case in confirming the action of the AO in making disallowance/addition for a sum of Rs.14,56,844/- on account of alleged late payment of employees’ contributions of provident fund and ESIC (Rs.13,76,928/- Provident Fund + Rs.79,916/- ESIC) by invoking Section 36(1)(va) of the I.T. Act in utter disregard to the fact that Employees’ contribution to Provident Fund and ESIC had been paid before the due date for the filing of the return of income u/s.139(1) and therefore the entire amount is eligible for deduction u/s.43B of the I.T. Act.

(b) The learned Commissioner of Income Tax (Appeals)- Gandhinagar grossly erred in law and on facts of the case in confirming the impugned addition in utter disregard to the ratio of the following judgments of the Supreme Court, High Courts and ITAT which were specifically brought his attention:

a) CIT vs. Vinay Cement Company Limited (SC)213CTR 268

b) CIT vs. Alom Extrusions Ltd. (2009) 319 ITR 306 (SC)

c) CIT vs. Lakhani Rubber Works 326 ITR 415 (P&H) (2010)

d) Precision Products ACIT (ITA No.4/A hd/201 1)(Ahd)(2012)

e) Sai Consulting Engineers (P) Limited. V. DCIT Circle 8, ITA No. 2262/A hd/2007

f) Sabari Enterprises 298 ITR 141 (Kar)

g) George Williamson 284 ITR 619 (Gau)

h) Sunil Goel v. ACIT 118 TTJ (Del) 415

i) CIT v. P.M. Electronics Limited. 15 DTR 258 (Delhi High Court)

j) CIT v. AIMIL Limited & Ors. (2010) 35 DTR (Del) 68 (Delhi High Court) 

k) CIT v. ANZ Information Technology 318 ITR 123 (Karnataka)

I) Additional CIT v. Vestas RRB India Limited (2005) 93 TTJ (Del) 144

m) CIT v. Kichha Sugar Company Ltd. (2013) 356 ITR 351 (Uttarakhand-HC)

n) CIT v. Nipso Polyfabriks Ltd. (2013) 350 ITR 327 (HP)

o) CIT v. Udaipur Dugdh Utpadak Sahakari Sangh Ltd. (2013) 53 (I) ITCL 433 (Raj-HC).

p) Commissioner of Income-Tax, Faridabad Vs. Hemla Embroidery Mills (P) Ltd., [2013] 37 com160 (Punjab & Haryana).

q) Spectrum Consultants (India) Pvt. Ltd. vs. CIT (Karnataka High Court)

r) Hindustan Organic Limited vs. CIT (Bombay High Court)

s) Essae Teraoka Private Limited (2014) 266 CTR (Kar) 246

It is therefore prayed that the impugned addition may please be deleted.

4. The appellant craves leave to add and or alter any ground at the time of hearing of appeal.

2. The brief facts of the case are that in this case, the appellant is a limited company incorporated under the Companies Act, 1956 and is engaged in the business of manufacturing of bulk drugs and pharmaceutical products and job work of I.V. Fluids. For the assessment year under consideration, the assessee company had filed its return of income on 29/09/2012 declaring total income of Rs. 1,38,04,010/-. The assessee’s case was selected for scrutiny and the learned Assessing Officer issued notice u/s. 143(2). In response to the notice issued, the appellant caused appearance before the Assessing Officer from time to time and furnished all the details and information. Thereafter, the assessing officer finalized, the assessment for the year under consideration determining total income at Rs.1,59,07,810/-. In the assessment order, the AO has made following additions/disallowances:

Thereafter, the appellant filed first statutory appeal before the ld.CIT(A)- Gandhinagar, wherein he had confirmed the additions made by the AO on account of interest u/s.244A of Rs.46,960/- and disallowance made u/s.36(l)(va) of Rs. 14,56,844/-. The CIT(A) has deleted the disallowance made by the AO out of sales commission of Rs.6,00,000/-.

3. We have gone through the relevant record and impugned order. So far as Ground No.1 and 4 are general and does not require any adjudication.

4. So far as Ground No.2 with regard to confirming the addition for a sum of Rs.46,960/- being interest u/s.244A on Income Tax Refund for Y.2009-10 is concerned. AO during the course of assessment proceeding on verification of the details generated through Income Tax Department noticed that appellant received Rs.46,960/- on 01/03/20 12 as interest u/s.244A of the Act on refund. AO contended that interest received u/s.244A of the act is taxable under the head “income from other sources”. In this case, though the refund of Rs.46,960/- was shown in the record of Income Tax Department and during the course of assessment proceeding assessee has submitted Affidavit of Managing Director of the Company stating that the company is not aware about the details of the interest in the absence of any working thereof or statement thereof issued by the Department. The said refund was less and there were adjustment relating to earlier year for which the assessee had separately written to the Department.

In our opinion, assessee has received the said information from the Assessing Officer during the course of assessment proceedings which took place during financial year 2014-15. The said amount of interest has therefore been provided in the Financial Year 2015-16, which is also subject to certain rectification on factual grounds as the amount of set off of different years is not correct. They have made separate entry in general voucher dated 01/04/2015 mentioning “Being the jv pass for interest received form Income Tax Dep. for the A.Y. 2009-10. Interest income booked in F.Y. 2015-16”.

In our considered opinion, in such circumstances no addition can be made. In the result, this ground of appeal is in favour of the assessee.

5. So far as Ground No.3 is concerned being late payment of employees’ contributions of provident fund and ESIC by invoking Section 36(1)(va) of the I.T. Act. On verification of P&L account noticed that assessee had debited Rs.19,71,067/- towards contribution to Provident Fund and other funds. However, from the details of PF contribution annexed to Audit Report, ld. AO noticed that appellant had deposited amounts of Rs.13,76,928/- and Rs.79,916/- towards PF and ESIC late. He added Rs. 14,56,844/- invoking provisions of Section 36(1)(v)(a) of the Act. We have considered the facts and circumstance and gone through the impugned order. In our opinion Jurisdictional High Court is very much clear on this point in the case of CIT vs. Gujarat State Road Transport Corporation, relevant Para of the same is reproduced here as under:

“Section 43B, read with section 36(1)(va) of the Income-tax Act, 1961 – Business disallowance – Certain deductions to be allowed on actual payment (Employee contribution) – Whether where an employer has not credited sum received by it as employees’ contribution to employees’ account in relevant fund on or before due date as prescribed in Explanation to section 36(1)(va), assesses shall not be entitled to deduction of such amount though he deposits same before due date prescribed under section 43B i.e., prior to filing of return under section 139(1) – Held, yes – Assessee State transport corporation collected a sum being provident fund contribution from its employees – However, it had deposited lesser sum in provident fund account – Assessing Officer disallowed same under section 43B – However, Commissioner (Appeals) deleted disallowance on ground that employee, contribution was deposited before filing return – Whether since assesses had no deposited said contribution in respective fund account on date as prescribed in Explanation to section 36(1)(va), disallowance made by Assessing Officer was just and proper – Held, yes [para 8] [In favour of revenue]”

6. In view of the above judgment, we confirm the impugned order and dismiss this ground of appeal.

7. In the result, appeal filed by the assessee is partly allowed.

This Order pronounced in Open Court on 21/12/2017