Dalmia Laminators Ltd. Vs ACIT (ITAT Kolkata)
ITAT Kolkata held that when original return filed was defective and such defect is removed u/s. 139(9) of the Income Tax Act, the return filed u/s. 139(1) becomes a valid return from the date when it was originally filed. Accordingly, set off business income with carry forwarded business loss allowed.
Facts- AO framed the assessment order u/s 143(3) for the A.Y. 2017-18 of the Act. The assessee in its return of income disclosing total income of Rs. Nil and book profit of Rs. 5,54,72,136/-. In the order passed u/s 143(3) of the Act, AO assessed the income of the assessee at Rs. 16,43,788/- after making an additions/disallowances on account of u/s 36(1)(va) r.w.s. 2(24)(x) of Rs. 13,04,162/- and disallowance by way of penalty or fine for violation of any law of Rs. 3,39,626/-.
CIT(A) dismissed the appeal of the assessee by the sustaining the order of ld. AO. Being aggrieved, the present appeal is filed.
Conclusion- Hon’ble Supreme Court in the case of Prakash Cotton Mills Pvt. Ltd. vs CIT (201 ITR 684 (SC) has held that imposed of damages paid by the assessee under the Employees State Insurance Act, 1948 for delayed payment of contribution thereunder is allowable deduction u/s 37(1) of the Act.
Held that the original return of assessee was filed defective and the defect removed u/s 139(9) of the Act. Therefore, the return filed u/s 139(1) becomes a valid return from the date when it was originally filed. We are inclined to allow the ground taken by the assessee and direct the AO to allow set off the business income of Rs. 16,43,788/- with carry forwarded business loss of Rs. 5,61,50,519/- for A.Y. 2015-16 by the assessee. Accordingly, the appeal of the assessee is partly allowed.
FULL TEXT OF THE ORDER OF ITAT KOLKATA
This appeal of the assessee for the assessment year 2017-18 is directed against the order dated 08.12.2021 passed by the ld. Commissioner of Income-tax, Appeals, NFAC, Delhi [hereinafter referred to as ‘the ‘ld. CIT(A)’]. The assessee has raised the following grounds of appeal:
“i. That the order passed u/s 250 of the ld. CIT(Appeals) confirming the additions and disallowances made by learned assessing officer is contrary to the law and facts of the case.
ii. That the ld. CIT(Appeals) erred in law as well as in facts of the case by confirming the addition made by the ld. AO who treated the increase in share capital and premium amounting to Rs. 1,60,00,000/- as undisclosed income u/s 68 of the I.T. Act.
iii. That the appellant craves leave to add/or amend any ground of this appeal.”
2. Brief facts of the case are that the ld. AO framed the assessment order u/s 143(3) vide order dated 14.12.2019 for the A.Y. 2017-18 of the Act. The assessee in its return of income disclosing total income of Rs. Nil and book profit of Rs. 5,54,72,136/-. In the order passed u/s 143(3) of the Act, the ld. AO assessed the income of the assessee at Rs. 16,43,788/- after making an additions/disallowances on account of u/s 36(1)(va) r.w.s. 2(24)(x) of Rs. 13,04,162/- and disallowance by way of penalty or fine for violation of any law of Rs. 3,39,626/-.
3. Aggrieved by the above order, assessee preferred an appeal before the ld. CIT(A) where the appeal of the assessee was dismissed by the sustaining the order of ld. AO.
4. Feeling aggrieved by the above order, assessee is in appeal before the Tribunal raising multiple grounds of appeals. First we take up ground no. 1 which is general in nature need not required to be adjudicated. The 2nd ground of appeal relating to disallowance made u/s 36(1)(va) of the Act in respect of delay in deposit of Employees’ Contribution of Provident Fund and Employees State Insurance (PF & ESI) totaling to Rs.13,04,162/-. The issue relating to ground taken by the assessee have come to rest by the recent verdict of the Hon’ble Supreme Court in Chekmate Services Pvt. Ltd. Vs. CIT (2022) 143 taxmann.com 178 (SC) dated 12.10.2022 wherein it has been held that “deduction u/s 36(1)(va) in respect of delayed deposit of amount collected towards employees’ contribution to PF cannot be claimed when deposited within the due date of filing of return even when read with Section 43B of the Income-tax Act,1961.” Relevant extract of the said judgment is reproduced as under:
“• The deduction made by employers to approved provident fund schemes, is the subject matter of Section 36(1) (iv). It is noteworthy, that this provision was part of the original IT Act; it has largely remained unaltered. On the other hand, Section 36(1)(va) was specifically inserted by the Finance Act, 1987, w.e.f. 01-04-1988. Through the same amendment, by Section 3(b), Section 2(24) – which defines various kinds of “income” – inserted clause (x). This is a significant amendment, because Parliament intended that amounts not earned by the assessee, but received by it, – whether in the form of deductions, or otherwise, as receipts, were to be treated as income. The inclusion of a class of receipt, i.e., amounts received (or deducted from the employees) were to be part of the employer/assessee’s income. Since these amounts were not receipts that belonged to the assessee, but were held by it, as trustees, as it were, Section 36(1)(va) was inserted specifically to ensure that if these receipts were deposited in the EPF/ESI accounts of the employees concerned, they could be treated as deductions. Section 36(1)(va) was hedged with the condition that the amounts/receipts had to be deposited by the employer, with the EPF/ESI, on or before the due date. The last expression “due date” was dealt with in the explanation as the date by which such amounts had to be credited by the employer, in the concerned enactments such as EPF/ESI Acts. Importantly, such a condition (i.e., depositing the amount on or before the due date) has not been enacted in relation to the employer’s contribution (i.e., Section 36(1)(iv)).
