Case Law Details
Cognizant Technology Solutions India Pvt. Ltd. Vs ACIT (ITAT Chennai)
In a significant judgment, the Income Tax Appellate Tribunal (ITAT) Chennai ruled in the case of Cognizant Technology Solutions India Pvt Ltd Vs ACIT that late payment of Employee’s Provident Fund (EPF) and Employee’s State Insurance (ESI) contributions could not be claimed alternatively under Section 37(1) of the Income Tax Act. The Tribunal stated that the provisions of Section 37(1) were residuary and that any expenditure that fell within the ambit of sections 30 to 36 could not be claimed alternatively under this provision.
The primary concern in this case was the disallowance made by the Assessing Officer (AO) under sections 36(v)(a) and 2(24)(x) for late payment of EPF and ESI contributions, amounting to Rs.79.47 Lacs. The ITAT Chennai, while adjudicating on this matter, took note of a previous Supreme Court ruling in Checkmate Services P. Ltd. Vs CIT, which had decided on a similar issue.
Cognizant’s counsel referenced a previous decision by the Cuttack Bench of the Tribunal in ACIT vs. Sunila Sahu, where the matter had been restored to the lower authorities to examine the claim alternatively under section 37(1). However, the Tribunal rejected this argument, maintaining that the disallowance was covered specifically under Section 36(1)(va) and could not be claimed alternatively under the residuary Section 37(1).
FULL TEXT OF THE ORDER OF ITAT CHENNAI
1. The sole grievance of the assessee, in the captioned appeal, is disallowance made by Ld. AO u/s 36(v)(a) r.w.s. 2(24)(x) for late payment of EPF and ESI contributions aggregating to Rs.79.47 Lacs. The default has been tabulated by Ld. AO in opening para of the assessment order dated 27.11.2018 passed u/s 143(3) r.w.s. 263 of the Act. The fact that there is default in payment under respective acts, remain undisputed before us. The Ld. CIT(A) has confirmed the disallowance by relying upon the recent decision of Hon’ble Supreme Court in bunch of appeals titled as Checkmate Services P. Ltd. Vs CIT (Civil Appeal No.2833 of 2016 dated 12.10.2022). Aggrieved, the assessee is in further appeal before us. The position that the aforesaid issue stood decided against the assessee by aforesaid decision is also undisputed.
2. The Ld. AR has referred to the decision of Cuttack Bench of Tribunal in ACIT vs. Sunila Sahu (MA No.23/CTK/2022 dated 13-01-2023) wherein the matter has been restored back to the file of lower authorities to examine the claim alternatively u/s 37(1). The Ld. AR has urged for similar directions which we are not inclined to accept since the disallowance is covered under specific Sec.36(1)(va) and therefore, the deduction could not be claimed alternatively under residuary Section 37(1). In our considered opinion, the provisions of Section 37(1) are residuary provisions. Any expenditure which falls within the ambit of Sec.30 to 36 and if it is found not to be fulfilling the conditions laid under those provisions, the same could not be claimed alternatively u/s 37(1). For the same reasons, the reliance of Ld. AR on the decision of Hon’ble High Court of Kerala in CIT vs. High Land Produce Co. Ltd. (102 ITR 803) as well as the decision of Hon’ble High Court of Gujarat in Khimji Visram & Sons (Gujarat) Pvt. Ltd. vs. CIT (79 Taxman 112) render no assistance to the case of the assessee considering the cited decision of Hon’ble Apex Court.
3. In the result, the appeal stands dismissed.
Order pronounced on 30th May, 2023.
