Unitac Energy Solutions (India) Pvt. Ltd. Vs ACIT (Kerala High Court)
Kerala High Court held that when employees’ contribution to EPF/ESI not made within due date prescribed for making payments is liable to be disallowed under section 36(1)(va) of the Income Tax Act.
Facts- The appellant is a company engaged in the business of providing infrastructure maintenance of more than 7000 telecom tower sites in the States of Kerala, Karnataka, and Tamil Nadu. During assessment proceedings, AO made two disallowances, namely, (1) U/s. 40(a)(ia) of the Act, and (2) U/s. 36(1)(va).
The disallowance u/s. 40(a)(ia) was essentially on the ground that the assessee, who was obliged to deduct tax at source u/s. 194C of the IT Act on payments made to the contractor, did not do so, and hence the disallowance u/s. 40(a)(ia) in relation to the amounts paid to such contractors would operate.
Conclusion- In the absence of such a finding by the assessing authority, his finding that the payments were made only to agents had to be seen as wholly without any basis, and against the documents made available before him. To that extent, we find that the First Appellate Authority, who had perused the declarations and found them to be genuine arrived at a correct decision by deleting the disallwance made by the assessing authority under Section 40(a)(ia).
