U AND T TRACTOR SPARES PRIVATE LIMITED,JODHPUR vs. ACIT/DCIT, CIRCLE-1, JODHPUR

IN THE INCOME TAX APPELLATE TRIBUNAL, JODHPUR BENCH, JODHPUR BEFORE: SHRI SANDEEP GOSAIN, JM & SHRI VIKRAM SINGH YADAV, AM ITA. No. 05/JODH/2021 Assessment Year: 2019-20 Mohangarh Engineers and Construction Vs. The DCIT, Company, CPC, 181A, Ajit Colony, Bangalore, Jodhpur PAN/GIR No.: AANFM 4741 R Appellant Respondent ITA. No. 28 & 29/JODH/2021 Assessment Years: 2018-19 & 2019-20 Pali Urban Cooperative Bank Ltd. Vs. The ADIT, CPC, SA-4, Pali Urban Bank Head Office, Bangalore, Gurlal Marg Mandia Road, Pali. PAN/GIR No.: AAFAP 2727 F Appellant Respondent ITA. No. 43/JODH/2021 Assessment Year: 2018-19 U and T Tractor Spares Private Limited Vs. The ACIT, CPC, F-538, Export Promotion Industrial Park Bangalore, Boranada, Jodhpur. PAN/GIR No.: AABCU 1170 B Appellant Respondent

Date of Pronouncement: 12/08/2021 Assessee: Shri Raksha Birla (C.A.) & Shri Mohit Soni (C.A.) Shri Rajendra Jain (Adv.) Revenue: Miss Kajal Singh (JCIT) vkns'k@ ORDER

ITA No. 05, 28, 29 & 43/JODH/2021 2 Mohangarh Engineers and Construction Co. & Others vs. CPC

PER: VIKRAM SINGH YADAV, A.M. These are four appeals filed by the assessees against the respective orders of ld. CIT(A), Delhi (NFAC) dated 05.03.2021 & 08.05.2021 for the assessment years 2018-19 & 2019-20.

“1. That on the facts and in the circumstances of the case, the ld. CIT(A) grossly erred in upholding the validity of order passed by the Ld. CPC U/s 143(1) of the Act. 2. That on the facts and in the circumstances of the case, the ld. CIT(A) grossly erred in sustaining the addition of Rs. 438,530/- in respect of employees contribution to ESI & PF. 3. That on the facts and in the circumstances of the case, the ld. CIT(A) grossly erred in disregarding the decision of jurisdictional High Court which is binding upon him. 4. That on the facts and in the circumstances of the case, the ld. CIT(A) ought to have deleted the addition in the light of law decided by the jurisdictional High Court and on similar issue decision passed in the assessee’s own case for A.Y. 2018-19.

ITA No. 05, 28, 29 & 43/JODH/2021 3 Mohangarh Engineers and Construction Co. & Others vs. CPC 5. That on the facts and in the circumstances of the case, the ld. CIT(A) grossly erred in not following the principle of natural justice.”

ITA No. 05, 28, 29 & 43/JODH/2021 4 Mohangarh Engineers and Construction Co. & Others vs. CPC u/s 143(1) should have allowed the deduction as claimed by the assessee. The Hon'ble Jurisdictional High Court and other Hon'ble High Courts in various cases has held that the payment made on or before due date of filing of return of income, no disallowances can be made. In support, reliance was placed on the following decisions:-  CIT vs. State Bank of Bikaner and Jaipur (2014) 363 ITR 70  CIT vs. Jaipur Vidyut vitran Nigam Ltd (2014) 363 ITR 307  CIT vs. Udaipur Dugdh Utpadak Sahakari Sangh Ltd (2014) 366 ITR 163

ITA No. 05, 28, 29 & 43/JODH/2021 5 Mohangarh Engineers and Construction Co. & Others vs. CPC 9. It was submitted that the ld. CIT (A) has however sustained the disallowance made by the CPC while processing the return relying on the decisions of Hon’ble Delhi, Kerala and Madras High Courts and ignoring the binding decisions of the Hon’ble Rajasthan High Court referred supra. 10. It was submitted that recently, a similar matter came before the Agra Bench of the Tribunal in the case of Mahadev Cold Storage v/s AO, Aligarh (ITA No. 41 & 42/Agr/2021 dated 14.06.2021) wherein also the issue was exactly similar that the AO while processing the return made disallowance of contribution received from employees which was deposited lately than prescribed dates in respective statute but deposited prior to the scheduled date of filing return u/s 139(1). The matter was carried in appeal before the ld. CIT (A) who in faceless proceedings sustained the action of the AO relying on the judgment of the Hon’ble Gujarat High Court in the case of State Road Transport Corporation - 366 ITR 170 and ignoring the decision of the jurisdictional High Court of Allahabad rendered in the case of Sagan Foundry P Ltd. v/s CIT (145 DTR 265). The Agra Bench decided this issue in favour of the assessee holding that “NFAC is bound by the binding decision of the jurisdictional Allahabad High Court, as the assessing officer is situated within the territorial and subjective jurisdiction of High Court. Hence, we allow the appeal of the assessee by respectfully following the decision of jurisdictional High Court in the matter of Sagun Foundry P Ltd. v/s CIT (2017) (78 Taxmann 47)." 11. It was accordingly submitted that in the instant case, the ld. CIT (A) was bound to follow the binding decisions of the Hon’ble Rajasthan

ITA No. 05, 28, 29 & 43/JODH/2021 6 Mohangarh Engineers and Construction Co. & Others vs. CPC High Court and the order so passed by the ld CIT(A) may thus be set-aside and appeal of the assessee be allowed. 12. Per contra, the ld. DR, Kajal Singh submitted that there has been a delay in deposit of employees contribution towards PF and ESI by the assessee and as the same has not been deposited within the stipulated time frame as prescribed by the relevant statue, the same has been rightly disallowed in terms of section 36(1)(va) while processing the return of income u/s 143(1) and has been rightly confirmed by the ld CIT(A) following the decisions of the Hon’ble Delhi High Court in case of CIT vs Bharat Hotels Ltd, Hon’ble Gujarat High Court in case of PCIT vs Suzlon Energy Ltd 115 Taxmann.com 340, Hon’ble Kerala High Court in case of CIT vs Merchem Ltd 61 Taxmann.com119 and Hon’ble Madras High Court in case of Unifac Management Services (India) Pvt Ltd vs CIT 409 ITR 225. The ld DR has thus relied on the findings of the lower authorities. 13. We have heard the rival contentions and perused the material available on record. On perusal of the details submitted by the assessee as part of its return of income, it is noted that the assessee has deposited the employees’s contribution towards ESI and PF well before the due date of filing of return of income u/s 139(1) and the last of such deposits were made on 16.04.2019 whereas due date of filing the return for the impugned assessment year 2019-20 was 31.10.2019 and the return of income was also filed on the said date. Admittedly and undisputedly, the employees’s contribution to ESI and PF which have been collected by the assessee from its employees have thus been

ITA No. 05, 28, 29 & 43/JODH/2021 7 Mohangarh Engineers and Construction Co. & Others vs. CPC deposited well before the due date of filing of return of income u/s 139(1) of the Act. 14. The issue is no more res integra in light of series of decisions rendered by the Hon’ble Rajasthan High Court starting from CIT vs. State Bank of Bikaner & Jaipur (supra) and subsequent decisions. 15. In this regard, we may refer to the initial decision of Hon’ble Rajasthan High Court in case of CIT vs. State Bank of Bikaner & Jaipur wherein the Hon’ble High Court after extensively examining the matter and considering the various decisions of the Hon’ble Supreme Court and various other High Courts has decided the matter in favour of the assessee. In the said decision, the Hon’ble High Court was pleased to held as under: “20. On perusal of Sec.36(1)(va) and Sec.43(B)(b) and analyzing the judgments rendered, in our view as well, it is clear that the legislature brought in the statute Section 43(B)(b) to curb the activities of such tax payers who did not discharge their statutory liability of payment of dues, as aforesaid; and rightly so as on the one hand claim was being made under Section 36 for allowing the deduction of GPF, CPF, ESI etc. as per the system followed by the assessees in claiming the deduction i.e. accrual basis and the same was being allowed, as the liability did exist but the said amount though claimed as a deduction was not being deposited even after lapse of several years. Therefore, to put a check on the said claims/deductions having been made, the said provision was brought in to curb the said activities and which was approved

ITA No. 05, 28, 29 & 43/JODH/2021 8 Mohangarh Engineers and Construction Co. & Others vs. CPC by the Hon'ble Apex Court in the case of Allied Motors (P) Ltd. (supra). 21. A conjoint reading of the proviso to Section 43-B which was inserted by the Finance Act, 1987 made effective from 01/04/1988, the words numbered as clause (a), (c), (d), (e) and (f), are omitted from the above proviso and, further more second proviso was removed by Finance Act, 2003 therefore, the deduction towards the employer's contribution, if paid, prior to due date of filing of return can be claimed by the assessee. In our view, the explanation appended to Section 36(1)(va) of the Act further envisage that the amount actually paid by the assessee on or before the due date admissible at the time of submitting return of the income under Section 139 of the Act in respect of the previous year can be claimed by the assessee for deduction out of their gross total income. It is also clear that Sec.43B starts with a notwithstanding clause & would thus override Sec.36(1) (va) and if read in isolation Sec. 43B would become obsolete. Accordingly, contention of counsel for the revenue is not tenable for the reason aforesaid that deductions out of the gross income for payment of tax at the time of submission of return under Section 139 is permissible only if the statutory liability of payment of PF or other contribution referred to in Clause (b) are paid within the due date under the respective enactments by the assessees and not under the due date of filing of return. 22. We have already observed that till this provision was brought in as the due amounts on one pretext or the other were not being

ITA No. 05, 28, 29 & 43/JODH/2021 9 Mohangarh Engineers and Construction Co. & Others vs. CPC deposited by the assessees though substantial benefits had been obtained by them in the shape of the amount having been claimed as a deduction but the said amounts were not deposited. It is pertinent to note that the respective Act such as PF etc. also provides that the amounts can be paid later on subject to payment of interest and other consequences and to get benefit under the Income Tax Act, an assessee ought to have actually deposited the entire amount as also to adduce evidence regarding such deposit on or before the return of income under sub-section (1) of Section 139 of the IT Act. 23. Thus, we are of the view that where the PF and/or EPF, CPF, GPF etc., if paid after the due date under respective Act but before filing of the return of income under Section 139(1), cannot be disallowed under Section 43B or under Section 36(1)(va) of the IT Act.” 16. The said decision has subsequently been followed in CIT vs. Jaipur Vidyut Vitran Nigam Ltd. (supra), CIT vs. Udaipur Dugdh Utpadak Sahakari Sangh Ltd. (supra), and CIT vs Rajasthan State Beverages Corportation Limited (supra). In all these decisions, it has been consistently held that where the PF and ESI dues are paid after the due date under the respective statues but before filing of the return of income under section 139(1), the same cannot be disallowed under section 43B read with section 36(1)(va) of the Act.

ITA No. 05, 28, 29 & 43/JODH/2021 10 Mohangarh Engineers and Construction Co. & Others vs. CPC 17. We further note that though the ld. CIT(A) has not disputed the various decisions of Hon’ble Rajasthan High Court but has decided to follow the decisions rendered by the Hon’ble Delhi, Madras, Gujarat and Kerala High Courts. Given the divergent views taken by the various High Courts and in the instant case, the fact that the jurisdiction over the Assessing officer lies with the Hon’ble Rajasthan High Court, in our considered view, the ld CIT(A) ought to have considered and followed the decision of the jurisdictional Rajasthan High Court, as evident from series of decisions referred supra, as the same is binding on all the appellate authorities as well as the Assessing officer under its jurisdiction in the State of Rajasthan. 18. In light of aforesaid discussion and in the entirety of facts and circumstances of the case, the addition by way of adjustment while processing the return of income u/s 143(1) amounting to Rs 4,38,530/- so made by the CPC towards the delayed deposit of the employees’s contribution towards ESI and PF though paid well before the due date of filing of return of income u/s 139(1) of the Act is hereby directed to be deleted as the same cannot be disallowed under section 43B read with section 36(1)(va) of the Act in view of the binding decisions of the Hon’ble Rajasthan High Court. 19. In the result, the appeal of the assessee is allowed. ITA No. 28 & 29/JODH/2021

ITA No. 05, 28, 29 & 43/JODH/2021 11 Mohangarh Engineers and Construction Co. & Others vs. CPC 20. Heard ld AR, Raksha Birla, who appeared on behalf of the assessee and ld. DR, Kajal Singh who appeared on behalf of the Department. 21. Both the parties submitted that the facts and circumstances of the case in both these appeals are exactly identical to facts and circumstances of the case in ITA No. 05/JODH/2021 and therefore, contentions as advanced by the respective parties in ITA No. 05/JODH/2021 may be considered.

ITA No. 05, 28, 29 & 43/JODH/2021 12 Mohangarh Engineers and Construction Co. & Others vs. CPC circumstances of the case in ITA No. 05/JODH/2021 except that in this case, the appeal has been filed in respect of rectification order issued u/s 154 by the CPC rather than intimation u/s 143(1) of the Act and therefore, contentions as advanced by the respective parties in ITA No. 05/JODH/2021 may be considered.

Order pronounced in the open Court on 12/08/2021.

Sd/- Sd/- (Sandeep Gosain) (Vikram Singh Yadav) Judicial Member Accountant Member

Jodhpur Dated:- 12/08/2021. *Santosh Copy of the order forwarded to:

ITA No. 05, 28, 29 & 43/JODH/2021 13 Mohangarh Engineers and Construction Co. & Others vs. CPC 1. A. The Appellant- Mohangarh Engineers and Construction Company, Jodhpur. B. Pali Urban Cooperative Bank Ltd., Pali. C. U and T Tractor Spares Private Limited, Jodhpur. 2. The Respondent- DCIT, CPC, Bengalore. ADIT, CPC, Bengalore. ACIT, CPC, bengalore. 3. CIT CIT(A) 4. DR, ITAT, Jodhpur. 5. 6. Guard File { ITA No. 05, 28, 29 & 43/Jodh/2021} By order, Asst. Registrar