1 ITA No. 4959/Del/2016

IN THE INCOME TAX APPELLATE TRIBUNAL
DELHI BENCH: ‘B’ NEW DELHI

BEFORE SHRI R. K. PANDA, ACCOUNTANT MEMBER
AND

MS SUCHITRA KAMBLE, JUDICIAL MEMBER

ITA No. 4959/DEL/2016 ( A.Y 2011-12)
(THROUGH VIDEO CONFERENCING)

DCIT Vs Dee Development Engineers
Circle-7(1), Room No. 403, Ltd. 1255,
C. R. Building, I. P. Estate Sector-14,
New Delhi Faridabad
(APPELLANT) PAN: AACCD0207H
(RESPONDENT)

Appellant by Sh. Jagdish Singh, Sr. DR
Respondent by Sh. Ved Jain, Adv

Date of Hearing 09.02.2021

Date of Pronouncement 08.04.2021

ORDER

PER SUCHITRA KAMBLE, JM
This appeal is filed by the Revenue against the order dated 10/06/2016

passed by CIT(A)- 3, New Delhi for Assessment Year 2011-12.

2. The grounds of appeal are as under:-

1. "Ld. CIT(A) erred in law and on facts of the facts of the case in deleting the
addition of Rs. 34,30,151/- made by AO on account of late deposit of ESIC &
PF. "
2. "Ld. CIT(A) erred in law and on facts of the facts of the case in deleting the
addition of Rs. 11,75,214/- made by AO on account of sales promotion &
festival expenses."
3. "Ld. CIT(A) erred in law and on facts of the facts of the case in deleting the
addition of Rs. 87,82,889/- made by AO on account of expenditure incurred
on Corporate Social Responsibility."
4. "Ld. CIT(A) erred in law and on facts of the facts of the case in deleting the
2 ITA No. 4959/Del/2016

addition of Rs. 16,83,921/- made by AO u/s 14A of the Income Tax Act, 1961
read with rule 8D of the Income Tax Rules 1962."
5. "Ld. CIT(A) erred in law and on facts of the facts of the case in admitting
additional ground regarding allowability of provisions of carbon credits."
6. "Ld. CIT(A) erred in law and on facts of the facts of the case in allowing
the appellant relief of Rs. 2,68,40,816/- on account of provisions of carbon
credits"

3. The assessee company is engaged in the business of manufacturing and
fabrication of piping system and pipe fitting, generation of power through BIO
Mass Technology. The assessee company filed return of income declaring a
loss of Rs. 6,66,42,802/- and book profit declared at Rs. 3,82,77,391/- on
24.09.2011. The Company revised its return of income on 25.02.2013. The
case was selected for scrutiny and notices u/s 143(2) and 142(1) were issued.
The assessee through Authorized Representative filed the details and appeared
from time to time during the assessment proceedings. The Assessing Officer
made various disallowances and additions and assessed the total loss at Rs.
5,14,26,560/-.

4. Being aggrieved by the assessment order, the assessee filed before the
CIT(A). The CIT(A) partly allowed the appeal of the assessee.

5. As regards to Ground No. 1 relating to addition of Rs. 34,30,151/- made
by the Assessing Officer on account of late deposit of ESIC & PF, the Ld. DR
submitted that the CIT(A) erred in deleting the said addition without giving
proper findings further, the Ld. DR relied upon the order of the Assessing
Officer. As regards to Ground No. 2 relating to addition of Rs. 11,75,214/-
made by the Assessing Officer on account of sales promotion & festival
expenses, the Ld. DR relied upon the Assessment Order. As regards to Ground
No. 3 relating to addition of Rs. 87,82,889/- made by the Assessing Officer on
account of expenditure incurred on Corporate Social Responsibility, the Ld. DR
submitted that the Assessing Officer has given a detailed reasoning as to why
3 ITA No. 4959/Del/2016

the said expenditure cannot be allowed to the assessee. As regards to Ground
No. 4 relating to addition of Rs. 16,83,921/- made by the Assessing Officer u/s
14A of the Income Tax Act, 1961 read with Rule 8D of the Income Tax Rules,
1962, the Ld. DR submitted that the Assessing Officer has rightly made the
said disallowance. As regards Ground No. 5 and 6, the Ld. DR submitted that
the CIT(A) erred in admitting the additional ground regarding the allowability of
provisions of carbon credits. The Ld. DR further submitted that allowing the
relief of Rs. 2,68,40,816 on account of provisions of carbon credits is
untenable. The Ld. DR relied upon the Assessment Order.

6. The Ld. AR relied upon the assessment order and the order of the CIT(A).
The Ld . AR submitted that the assessee company is engaged in the business of
manufacturing of fabrication of Pipe System and Pipe Fitting, Generation of
power through Bio-Mass Technology. As regards Ground No. 1 of the
Revenue’s appeal, the Ld. AR submitted that the assessee company has
collected amount towards employees contribution towards ESI & PF and
deposited to the Government on various dates as per challans issued.
Undisputedly, the assessee has not disputed the fact that the employees
contribution towards Provident Fund and ESI was filed after due date but
before filing of the Income Tax Return. It is settled principle of law that
amount deposited by the assessee on account of contribution towards PF & ESI
would qualify for deduction even though paid after the due dates prescribed
under the Provident Fund and ESI Act but before filing of the Income Tax
Return. The Ld AR relied upon the decision of CIT Vs. Vinay Cement Ltd.
(2009) 313 ITR (ST.) 1 (SC). The Ld. AR also relied upon the decision of the
Hon’ble Delhi High Court in case of CIT Vs. AIMIL Ltd. (2010) 321 ITR 508 and
the decision of the Hon’ble Delhi High Court in case of Pr. CIT vs. Pro
Interactive Service (India) Pvt. Ltd. ITA No. 983/2018 pronounced on
10.09.2018. As regards Ground No. 2 of the Revenue’s appeal, the Ld. AR
submitted that during the present Assessment Year, the assessee claimed
expenses under the head Sales Promotion at Rs.20,20,436/- and Diwali
4 ITA No. 4959/Del/2016

expenses at Rs.8,76,320/-. The Ld. AR submitted that the Assessing Officer
disallowed these expenses these are personal in nature. The Ld. AR submitted
that the assessee is maintaining regular books of accounts and the same are
being audited. Complete details of expenses were produced before the
Assessing Officer. The Assessing Officer has not at all pointed out that
expenditure was incurred for personal purpose. The Ld. AR relied upon the
Delhi High Court decision in case of DCIT Vs. Haryana Oxygen Ltd. (1999) 76
ITD (Del) 32 and Friends Clearing Agency Pvt. Ltd. Vs. CIT(2011) 332 ITR 269
(Del). The Ld. AR also relied upon the decision of the Delhi High Court in case
of CIT Vs. Monto Motors Ltd. And ITA No. 978/2011 dated 12/12/2011 and
CIT Vs. Jubilant Food Works Pvt. Ltd. , ITA No. 310/2014 dated 1/8/2014. As
regards Ground No. 3 of the Revenue’s appeal, the Ld. AR submitted that the
expenditure of Rs. 87,82,889/- was incurred for community development and
Corporate Social Responsibility (CSR). On specific query raised by the
Assessing Officer, the assessee submitted a note on CSR expenditure that it
has incurred scholarship of Rs. 3,62,236/- on account of scholarship and
tuition fees for girl child of junior employees since Financial Year 2009-10 and
provided scholarship to 48 girl child in Financial Year 2011-12. The Ld. AR
further submitted that the amendment in Section 37(1) of the Act w.e.f.
1/4/2015 which was accompanied by the statutory requirement with regard to
discharging the corporate social responsibility is disabling provision which puts
an additional tax burden on the assessee in the sense that the expenses that
the assessee is required to incur under statutory obligation in the course of his
business are not allowed deduction in the computation of income w.e.f.
1/4/2015. CSR expenses incurred voluntarily as assumption of responsibility
is not affected by amendment in Section 37(1) of the Act. Thus, the Ld. AR
submitted that the expenditure incurred is incidental instant to the assessee’s
business and ought to be allowed as deduction u/s 37 of the Act. As regards
Ground No. 4, the Ld. AR submitted that during the year under construction
the assessee company has not earned any exempt income. The Ld AR relied
upon the decision in case of Cheminvest Ltd. Vs. CIT (2015) 378 ITR 33
5 ITA No. 4959/Del/2016

wherein it is held that in absence of any exempt income, disallowance u/s 14A
was not permissible. As regards Ground No. 5 & 6 relating to additional
ground before CIT(A) in respect of Carbon Credit amounting to Rs.
2,68,40,816/- being wrongly recorded as income, the Ld. AR submitted that
the assessee could not get the credit certified from the concerned authority
during the assessment proceedings and accordingly the management created a
provisions of Rs. 2,68,40,816/- at the year-end which increased the net profit
and closing stock by the said amount. Certification report dated 31/12/2012
and calculation of carbon credits and provisions were placed before the CIT(A)
and CIT (A) after taking into considerations all the aspect has rightly deleted
this addition. In-fact, the Assessing Officer, in his remand report observed that
no taxable amount has been taken place and provisions has been written off in
subsequent years i.e. Assessment Year 2012-13. The Ld. AR further relied
upon the decision as follows:-

1. Pr. CIT Vs. Dodson Lindblom Hydro Power Pvt. ITA No. 1820 of 2016 dated
27.02.2019 Bombay High Court.
2. CIT Vs. Shree Cement Ltd. D. B. ITA No. 85/2014 dated 22.08.2017
Rajasthan High Court
3. Principal CIT Vs. Kalpataru Power Transmission Ltd. Tax Apepal No.
141/2017 dated 2.3.2017 (Gujrat High Court)
4. Pr. CIT Vs. L. H. Sugar Factory Pvt. Ltd. [2017] 392 ITR 568 dated
1/08/2016 Allahabad High Court
5. IT Vs. Subhash Kabini Power Corporation Ltd. [2016] 385 ITR 592 dated
29.03.2016 Karnataka High Court.

7. We have heard both the parties and perused all the relevant material
available on record. As regards Ground No. 1, the assessee company has not
deposited the employees’ contribution within the due date which is prescribed
under the said statute i.e. Provident Fund and ESIC. This issue is dealt by the
Hon’ble Delhi High Court in case of CIT vs. M/s Bharat Hotels Ltd. 410 ITR
6 ITA No. 4959/Del/2016

417 wherein the issue is decided in favour of the Revenue, without considering
the decision of the Hon’ble Delhi High Court in case of CIT vs. AIMIL Ltd.
(2010) 321 ITR 508 (Del.). But the Ld. AR relied upon the decision of the
Hon’ble Delhi High Court in case of Pr. CIT vs. Pro Interactive Service (India)
Pvt. Ltd. ITA No. 983/2018 pronounced on 10.09.2018 wherein the Hon’ble
High Court decided the issue in favour of the assessee relying upon the
judgment of AIMIL Ltd. (supra). The Hon’ble Delhi High Court held that the
legislative intent was/is to ensure that the amount paid is allowed as
expenditure only when payment is actually made. We do not think that the
legislative intent and objective is to treat belated payment of Employee’s
Provident Fund (EPD) and Employee’s State Insurance Scheme (ESI) as deemed
income of the employer under Section 2(24)(x) of the Act. It is settled law that
when two judgments are available giving different views then the judgment
which is in favour of the assessee shall apply as held in case of Vegetable
Products Ltd. 82 ITR 192 by the Hon’ble Supreme Court. Hence, in light of the
latest decision in case of Pro Interactive Service (India) Pvt. Ltd., the issue is
covered in favour of the assessee. Hence, Ground No. 1 is dismissed.

8. As regards Ground No. 2, the Assessing Officer did not justify the
reasoning that the sales promotion expenses and Diwali Expenses were
expenses related to the personal in nature and not that of business expenses.
The assessee has given details as to how these expenses are related to the
business expenses. The CIT(A) has given a detailed finding to that effect.
There is no need to interfere with the findings of the CIT(A). Hence, Ground
No. 2 is dismissed.

9. As regards Ground No. 3, in case of National Seeds Corporation Ltd. Vs.
Additional CIT (ITA No. 6794/Del/2014) dated 4/4/2018 ITAT Delhi, it has
been categorically held that the Explanation (2) of Section 37(1) was inserted
w.e.f. 1st April 2015 and cannot be construed as to assessee’s disadvantage in
7 ITA No. 4959/Del/2016

respect of the period prior to this amendment and thus, supports the case of
the assessee. Hence, Ground No. 3 is dismissed.

10. As regards Ground No. 4, it is clear finding in assessment order as well
as by the CIT(A) that there is no exempt income earned by the assessee during
the year. Hence, the decision of the Hon’ble Delhi High Court in case of
Cheminvest Ltd. (Supra) will be applicable. Hence, Ground No. 4 is dismissed.

11. As regards Ground No. 5 & 6 relating to provision for carbon credits, it is
pertinent to note that the assessee admitted that the provision of carbon
credits was inadvertently included in the taxable income of the assessee,
though the same is not taxable under the Act. Besides this no sale of carbon
credits took place during the year under consideration. The Assessee submitted
the basis for creation of said provision by submitting the calculation of
provision, basis for the same and a certification report and these documents
were verified by the Assessing Officer. In remand report dated 11.09.2015, the
Assessing Officer observed that the provision of carbon credits of Rs.
2,68,40,816/- has been written off in the subsequent year i.e. A.Y. 2012-13
which was disallowed by the Assessing Officer in the assessment order for the
said year. The Assessing Officer has also further observed that no taxable event
has occurred or accrued to the assessee in the year under consideration. The
assessee has also given a proper reasoning as to why the evidences were not
before the Assessing Officer at the time of assessment proceedings. The CIT(A)
has rightly accepted those evidences and has taken cognizance of the remand
report filed by the Assessing Officer wherein it is observed that no taxable
amount has incurred in the present Assessment Year and provisions has been
written off in subsequent years. Therefore, there is no need to interfere with
the finding of the CIT(A). Hence, Ground No. 5 & 6 are dismissed.
8 ITA No. 4959/Del/2016

12. In result, the appeal of the Revenue is dismissed.

Order pronounced in the Open Court on this 08th Day of April, 2021.

Sd/- Sd/-

(R. K. PANDA) (SUCHITRA KAMBLE)
ACCOUNTANT MEMBER JUDICIAL MEMBER

Dated: 08/04/2021
R. Naheed

Copy forwarded to:

1. Appellant
2. Respondent
3. CIT
4. CIT(Appeals)
5. DR: ITAT

ASSISTANT REGISTRAR
ITAT NEW DELHI