ITAT Jaipur’s Composite Ruling on Section 80JJAA, Section 80-IA, MEIS Receipts & Employees’ PF/ESI in Mayur Uniquoters Ltd. Vs CIT

1. Overview of the Decision

In a consolidated order, the ITAT Jaipur adjudicated two connected appeals filed by Mayur Uniquoters Ltd. Vs CIT relating to Assessment Years 2018-19 and 2019-20. The appeals arose from orders of the Commissioner of Income Tax (Appeals) – National Faceless Appeal Centre, New Delhi dated 23.11.2021 and 22.04.2022.

Across both years, the assessee contested:

  • Disallowance of employees’ contribution to PF/ESI made beyond the statutory due dates (Section 36(1)(va)).
  • Levy of interest under Section 234C.
  • Additional legal claims at the ITAT stage regarding:
    • Deductibility of education cess.
    • Deduction under Section 80JJAA.
    • Deduction under Section 80-IA in respect of captive power generation.
    • Treatment of MEIS export incentives as capital receipts (not taxable).
    • Deletion of disallowance under Section 14A.

The Tribunal:

  • Admitted the additional grounds as pure questions of law where the underlying facts were already part of the assessment record.
  • Upheld disallowances of employees’ PF/ESI contributions in line with the Supreme Court’s ruling in Checkmate Services (P.) Ltd. Vs Commissioner of Income Tax-1, Civil Appeal No. 2833 of 2016.
  • Directed correction of interest under Section 234C based on “returned income”.
  • Rejected the education cess deduction due to retrospective amendment by the Finance Act, 2022.
  • Allowed deduction under Section 80JJAA after verifying compliance with statutory conditions, applying the curative amendment retrospectively.
  • Allowed deduction under Section 80-IA on captive power units, subject to verification of the rate and computation.
  • Held that MEIS incentives were capital receipts.
  • Deleted the disallowance under Section 14A relying on the principle that interest-free funds exceeded investments and there were no fresh investments during the year.

For AY 2019-20, the Tribunal followed the same reasoning, mutatis mutandis, on corresponding issues. Both appeals were partly allowed.

2.1 Additional Grounds Raised

For AY 2018-19 (ITA No. 2/JP/2022), the assessee sought to raise additional grounds claiming:

  • Deduction of Education Cess (Rs. 1,38,93,503/-).
  • Deduction under Section 80JJAA (Rs. 14,93,105/-).
  • Deduction under Section 80-IA on captive power generation.
  • Treatment of MEIS incentives (Rs. 2,89,31,297/-) as capital receipt.
  • Allowability of the amount disallowed under Section 14A (Rs. 67,01,184/-) as business expenditure.

For AY 2019-20 (ITA No. 212/JP/2022), an additional ground was raised claiming MEIS incentives of Rs. 2,50,31,247/- as capital receipts.

The assessee relied on:

  • National Thermal Power Co. Ltd. Vs Commissioner of Income Tax [1998] 229 ITR 383 (SC)
  • Jute Corporation of India Ltd. Vs Commissioner of Income Tax

The Supreme Court in National Thermal Power Co. Ltd. Vs CIT held that the Tribunal is competent to entertain new legal grounds that arise from facts already on record, where consideration of such grounds is necessary for computing the correct tax liability.

The Tribunal reiterated:

When facts are already available in the assessment record, and only a legal question is sought to be raised, the ITAT has the jurisdiction and discretion to admit such grounds if they are necessary to correctly determine the assessee’s tax liability.

The Tribunal also drew support from:

  • Crystal Crop Protection Pvt. Ltd. Vs DCIT, ITA No. 1539/Del./2016, where additional grounds concerning excise duty subsidy as capital receipt were entertained for the first time at the ITAT level.

Accordingly, the additional grounds were formally admitted for adjudication.

3. Employees’ Contribution to PF/ESI under Section 36(1)(va)

3.1 Facts – AY 2018-19

  • Return filed on 30.11.2018 declaring income of Rs. 1,36,03,96,750/-.
  • Processed under Section 143(1) by CPC, which made a disallowance of Rs. 10,38,973/- towards employees’ contribution to PF/ESI.
  • The ld. CIT(A) upheld the disallowance, treating the delayed contributions as barred by Section 36(1)(va).

The assessee’s stance:

  • Contributions were deposited after the due dates under the PF/ESI laws but before the due date under Section 139(1).
  • It relied upon:
    • CIT Vs Rajasthan State Beverages Corporation Ltd. [84 taxmann.com 173] (Rajasthan High Court), accompanied by dismissal of Department’s SLP by the Supreme Court.
    • Various ITAT decisions holding that such claims could not be adjusted as a prima facie disallowance under Section 143(1).

3.2 Revenue’s Stand

The Department argued that: