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Income Tax Appellate Tribunal, JAIPUR BENCHES “B”, JAIPUR
Before: SHRI SANDEEP GOSAIN, JM & SHRI VIKRAM SINGH YADAV, AM vk;dj vihy la-@ITA No. 1287/JP/2019
ORDER PER: SANDEEP GOSAIN, J.M. The present appeal has been filed by the Revenue against the order of the ld. CIT(A)-2, Jaipur dated 03/09/2019 for the A.Y. 2016-17, wherein the Revenue has raised following grounds of appeal: “1. Whether on the facts and circumstances of the case and in law, the ld. CIT(A) is justified in deleting the disallowance of Rs. 6,88,83,063/- made for depositing the employees’ contribution to PF & ESI beyond the prescribed time limited provided in the respective Acts.
2. Whether in the facts and circumstances of the case and in law the ld. CIT(A) is justified in holding that the employees’ contribution to PF and ESI are governed by the provisions of Section 43B and not by section 36(1)(va) r.w.s. 2(24)(x) of the Income Tax Act, 1961.”
2 ITA 1287/JP/2019_ DCIT Vs JVVNL 2. The hearing of the appeal was concluded through video conference in view of the prevailing situation of Covid-19 Pandemic.
In this appeal, the Revenue is basically aggrieved by the order of the ld. CIT(A) in deleting disallowance made for depositing the employees’ contribution to PF and ESI beyond the prescribed time limit. The facts of the case in brief are that the assessee is a State Government undertaking and engaged in distribution and sale of electricity. The assessee filed its return of income for the under consideration on 31/03/2017 declaring total loss of Rs.43,29,74,69,046/-. The case was selected for scrutiny and notice U/s 143(2) of the Income Tax Act, 1961 (in short, the Act) was issued on 26/09/2017. After hearing the assessee, the A.O. completed assessment U/s 143(3) of the Act on 05/10/2018 and made addition on account amounts deposited in respect of employees’ contribution towards ESI/PF.
The ld. CIT(A) has relied on the order of the A.O. and at the outset, the ld. AR appearing on behalf of the assessee has reiterated the same arguments as were raised before the ld. CIT(A) and relied upon the order of the ld. CIT(A).
We have considered the rival contentions and perused the material available on record. We have also perused the orders of the authorities below carefully. From perusal of the record, we found that the ld. CIT(A)
3 ITA 1287/JP/2019_ DCIT Vs JVVNL has deleted the disallowances by following the decision of Coordinate Bench of the Jaipur ITAT in the case of M/s K.S. Automobiles Pvt. Ltd. in and 1185/JP/2018 order dated 08/03/2019. The ld. CIT(A) has dealt with the issue in para 2.3 of her impugned order as under:
“2.3 I have perused the facts of the case, the assessment order and the submissions of the appellant. The Ld. Authorized Representative argued that assessee deposited PF CPF and GPF contribution after the due date but before due date of filing of return of income. I find that in a recent case of M/s K.S. Automobiles Pvt. Ltd., Jaipur for Assessment Years 2013-14 and 2014-15 in ITAT Nos. 1184/JP/2018 & 1185/JP/2018 dated 08.03.2019 the Hon'ble ITAT, Jaipur has decided as follows:-
2. The solitary common issue raised in these appeals is regarding disallowance of employees construction to PF and ESI within the due date of filing of return of income but after the due date of payment as per respective Acts PF & ESI 3. We have heard the Id. AR as well as Id. DR and considered the relevant material on record. At the outset, we note that this issue is covered in favour of the assessee by the various decisions of the Hon'ble jurisdictional High Court including the decision in case of CIT vs. State Bank of Bikaner & Jaipur 99 DTR 131 as well as decision in case of CIT vs. Jaipur Vidyut Vitran Nigam Ltd. 363 ITR 307 and in case of CIT vs. Udaipur Dugdh Utpadak Sahakari Sangh Ltd. 366 ITR 163. We further note that the Id. CIT(A) though has not disputed the various decisions of Hon'ble High Court however, disallowance made by the AO are sustained as he misunderstood the decision of Hon'ble Jurisdictional High Court in case of PCIT vs. M/s Rajasthan Renewable Energy Corporation Limited in DB & 12/2018 dated 13.03.2018. In the case of PCIT vs. M/s Rajasthan Renewable Energy Corporation Limited (supra) the Hon'ble High Court has considered this issue in para 4 to 6 as under:-
4. So far as question No, 1 is concerned, the same is now covered by the decisions of this Court in Principal Commissioner of Income- 4 ITA 1287/JP/2019_ DCIT Vs JVVNL Tax V/s Rajasthan state seed Corporation Ltd. [2016] 386ITR 267 (Raj) wherein it has been held as under:-"In so far as the expenditure incurred on State Renewal Fund is concerned, the said expenditure also goes to show that the renewal fund was set up by the State Government and was created with the object of providing a safety net for the workers likely to be effected by restricting in the State Public Enterprise and that a finding of fact has been recorded that the contribution made to the State Renewal fund is solely for the purposes of the welfare and benefit of the employees. In our view, it is for the assessee to decide whether any expenditure should be incurred in the course of business and expenditure of this nature being for business expediency is certainly allowable deduction under section 37(1) of the Act. In our view any normal expenditure for the welfare and benefit of the employees is allowable expenditure under section 37(1), the Tribunal has come to a finding of fact that it was a legal obligation of the respondent- assessee towards contribution of the said amount to the State Renewal Fund and there being a legal obligation as well in our view the Tribunal has come to a correct conclusion." In view of the above, question No. 1 is answered in favour of the assessee and against the department.
6. With regard to issue No. 2 and 3 the controversy is pending before the Supreme Court in C.I. T, Jaipur Vs/ Ms State Bank of Bikaner and Jaipur in SLP© No. 16249/2014, therefore, subject to decision of SLP, for the present, these issues are decided on in favour of the department and against the assessee. It will be open for the department to recover the amount if the decision is in their favour." Thus, it is clear that the Hon'ble jurisdictional High Court has followed the earlier decisions in case of PCIT vs. Rajasthan State Seed Corporation Limited 386 ITR 267 as well as decision in case of CIT vs. State Bank of Bikaner & Jaipur (supra). All these decisions which were allowed by the Hon'ble jurisdictional High Court are in favour of the assessee however, in the conclusion in para 6 there is a typographical mistake wherein it is stated "these issues decided in favour of the Department and against the assessee". The whole decision of the Hon'ble High Court has to be considered in the contest of the decision followed and the subsequent line which says "it will be opened for the Department to recover the amount" if the decision in their favour which means that in case of further appeal before Hon'ble Supreme Court if decision is delivered in favour of the 5 ITA 1287/JP/2019_ DCIT Vs JVVNL department it can recover the amount. Therefore, even the decision which relied upon the Id. CIT(A) the same is in favour of the assessee though due to typographical mistake it was misunderstood by the Id. CIT(A) as in favour of the Revenue. Accordingly, in view of a series of decisions of the Hon'ble jurisdictional High Court in favour of the assessee and further Hon'ble Supreme Court in case of PCIT vs. Rajasthan State Beverages Corporation Ltd. 250 taxmann 16 has dismissed the SLP filed by the Department this issue is decided in favour of the assessee and against the Revenue. Hence, disallowances/additions made by the AO on account of employees contribution to PF & ESI are deleted." In view of the same, the disallowance on this account made by the Assessing Officer is deleted. This ground of appeal is allowed.”
From perusal of the record, we draw strength from the decision of the Coordinate Bench of this ITAT in assessee’s own case for the A.Y. 2007-08 in dated 05/08/2020 wherein the Coordinate Bench has observed as under:
“2.4 We have considered the rival contentions and carefully gone through the orders of the authorities below and found from record that the AO made an addition of Rs. 19,73,42,499/- on account of delay in deposit of employee's contribution towards CPF/GPF/ESI u/s 36(1)(va). In this regard, the AO noted that there was delay in depositing of employee's contribution to CPF (Rs. 42986497/-), GPF (Rs. 15425088/-) & ESI (Rs.102913). On being asked vide show cause notice, the assessee has submitted that the principles and provisions of section 36(1)(va) and Section 43B of the Act are based on harmonious interpretation and similarity of objectives and consequent to omission of second proviso to section 43B and insertion of the new proviso regarding allowance of any sum 6 ITA 1287/JP/2019_ DCIT Vs JVVNL paid by him as an employer subject to payment before the due date of furnishing of the return should apply to section 36(1)(va) simultaneously. The reply of the assessee was not found acceptable by the AO. The AO was of the opinion that as per the provisions of section 2(24)(x) of the Act the same is an income of the assessee and can be allowed as deduction only, if such contributions was actually paid on or before due date mentioned in the relevant Act or Rules. In this case, the assessee made the above payments amounting to Rs. 19,73,42,499/- after the prescribed due date. Hence, it forms the taxable income of the assessee as per section 2(24)(x) or the Act and deduction of this amount is not allowable u/s 36(1)(va) of the Act. Accordingly, the AO disallowed Rs. 19,73,42,499/- and added the same to the total income of the assessee.
2.5 We found that the issue under consideration is squarely covered by the decision of ITAT, Jaipur Bench in assessee’s own case for the A.Y. 2006-07.
2.6 We also found that the decision of ITAT Jaipur Bench in assessee’s own case has been upheld by the Jurisdictional High Court vide order dated 07-08-2019 in Appeal No. 284/2018. The precise observation of the Hon’ble High Court is as under:-
‘’Learned Counsel for the parties are at idom that the questions that are proposed in these appeals pertain to contribution towards Provident Fund and ESI and the said issues shave already been decided against the Revenue by this Court vide Judgement dated 06- 01-2014 passed in Commissioner of Income Tax Vs. M/s. State Bank of Bikaner and Jaipur (2014) 363 ITR 70 (Raj). However, the Revenue has preferred SLP (C ) No. 016249/2014 against the aforesaid judgement before the Supreme Court. Learned Counsel submit that although this Court has answered the question with respect to interpretation to Section 43-B of the Income Tax Act against the Revenue but correctness of that judgement is to be 7 ITA 1287/JP/2019_ DCIT Vs JVVNL tested by the Supreme Court in the aforesaid pending SLP. Therefore, these appeals may be disposed of making them subject to that final judgement of the Supreme Court on the aforesaid question in pending SLP. In view of above, all the aforesaid appeals are disposed of accordingly.” 2.7 Respectfully following the order of the Coordinate Bench, Jaipur in assessee’s own case which has been confirmed by the Hon’ble High Court (supra), we do not find any reason to interfere in the order of the ld. CIT(A).”
In view of the above facts and circumstances and by respectfully following the order of the Coordinate Bench, Jaipur in assessee’s own case for the A.Y. 2007-08, we do not find any reason to interfere in the order of the ld. CIT(A) qua this issue. Hence, we uphold the same.
In the result, this appeal of the Revenue is dismissed.
Order pronounced in the open court on 18th January, 2021.
Sd/- Sd/- ¼foØe flag ;kno½ ¼lanhi x®lkÃa½ (VIKRAM SINGH YADAV) (SANDEEP GOSAIN) ys[kk lnL;@Accountant Member U;kf;d lnL;@Judicial Member Tk;iqj@Jaipur fnukad@Dated:- 18/01/2021 *Ranjan आदेश की प्रतिलिपि अग्रेf’ात@ब्वचल वf जीम वतकमत वितूंतकमक जवरू vihykFkhZ@The Appellant- The D.C.I.T., Circle-6, Jaipur. 1. izR;FkhZ@ The Respondent- M/s Jaipur Vidyut Vitaran Nigam Limited, 2. Jaipur. vk;dj vk;qDr@ CIT 3.