M/S K.S. CARS PVT. LTD.,JAIPUR vs. INCOME TAX OFFICER, WARD-2-2, JAIPUR

आयकर अपीलीय अधिकरण] जयपुर न्यायपीठ] जयपुर IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHE ‘A’ JAIPUR Jh fot; iky jko] U;kf;d lnL; ,oa Jh foØe flag ;kno] ys[kk lnL; ds le{k BEFORE: SHRI VIJAY PAL RAO, JM & SHRI VIKRAM SINGH YADAV, AM vk;dj vihy la-@ITA No. 1182 & 1183/JP/2018 fu/kZkj.k o"kZ@Assessment Year :2013-14 & 2014-15 cuke M/s K.S.Cars Pvt. Ltd., ITO, Vs. National Motors Building, Ward-2(2), M.I. Road, Jaipur Jaipur LFkk;h ys[kk la-@thvkbZvkj la-@PAN/GIR No.: AAACK7953K vihykFkhZ@Appellant izR;FkhZ@Respondent fu/kZkfjrh dh vksj ls@ Assessee by : Shri P. C. Parwal (CA) jktLo dh vksj ls@ Revenue by : Shri A. K. Mahala (JCIT) lquokbZ dh rkjh[k@ Date of Hearing : 05/03/2019 mn?kks"k.kk dh rkjh[k@Date of Pronouncement: 18/03/2019 vkns'k@ ORDER PER: VIKRAM SINGH YADAV, A.M.

These are two appeals filed by the assessee against the order of ld. CIT(A)-1, Jaipur dated 06.08.2018 for AY 2013-14 & 2014-15 wherein the assessee has taken the following grounds of appeal:- for AY 2013-14 “The ld. CIT(A) has erred on facts and in law in confirming the disallowance of employees contribution of PF of Rs. 2,57,722/- and ESI of Rs. 1,08,361/- by invoking provisions of section 2(24)(x) r.w.s 36(1)(va).” for AY 2014-15 “The ld. CIT(A) has erred on facts and in law in confirming the disallowance of employees contribution of PF of Rs. 9,52,468/- and ESI of Rs. 94,463/- by invoking provisions of section 2(24)(x) r.w.s 36(1)(va).” & 1183/JP/2018 M/s K.S.Cars Private Limited. Jaipur Vs. ITO, Ward-2(2), Jaipur

2. Briefly stated, the facts of case are that during the course of assessment proceedings, the AO observed that employees contribution towards PF of Rs.2,57,722/- and ESI of Rs.1,08,361/- for AY 2013-14 and PF of Rs.9,52,468/- and ESI of Rs.94,463/- for AY 2014-15 have been deposited beyond the stipulated time as allowed u/s 36(1) r.w.s. 2(24)(x). The assessee relied on various case laws where it has been held that where the employees contribution to PF/ESI is deposited before due date of filing of return, the same cannot be disallowed u/s 36(1)(va). The AO, however, did not find the contention of the assessee acceptable by stating that a distinction is required to be made between "employer's contribution" and "employees contribution" which are deductible under separate provisions of Section 43B and 36(1)(va) respectively. He further stated that the Hon'ble Rajasthan High Court while dismissing the Departmental appeal in case of CIT vs. State Bank of Bikaner & Jaipur (2014) 99 DTR 131 has not correctly appreciated that the provisions of Section 43B are not relevant in respect of "employee's contribution" to PF and the same has been contested before the Hon'ble Supreme Court through SLP. After placing reliance on the decision of Hon'ble Gujarat High Court in case of CIT vs. Gujarat State Road Transport Corporation and the contested decision of the Hon'ble Rajasthan High Court, he held that the late payment of employees' contribution towards PF and ESI is not allowable expenditure and accordingly, he made disallowance of the same.

3. On appeal, the ld. CIT(A) placed reliance on the decision of the Hon'ble Rajasthan High Court in case of PCIT vs. M/s Rajasthan Renewable Energy Corporation Limited (DB 11 & 12/2018 in order dated 13.03.2018) where it was held that:

with regards to issue nos. 2 & 3, the controversy is pending before the Supreme Court in CIT vs. State Bank of Bikaner & Jaipur in SLP(c) No. 2 & 1183/JP/2018 M/s K.S.Cars Private Limited. Jaipur Vs. ITO, Ward-2(2), Jaipur 16249/2014, therefore, subject to the decision of SLP, for the present, these issues are decided in the favour of the department and against the assesse. It will be open for the department to recover the amount if the decision is in their favour . Relying on the said decision, the ld CIT(A) confirmed the disallowance made by the AO. Against the said findings, the assessee is now in appeal before us.

ITA No. 1182 & 1183/JP/2018 M/s K.S.Cars Private Limited. Jaipur Vs. ITO, Ward-2(2), Jaipur 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 ld. 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- Tax V/s Rajasthan state seed Corporation Ltd. [2016] 386 ITR 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 5 & 1183/JP/2018 M/s K.S.Cars Private Limited. Jaipur Vs. ITO, Ward-2(2), Jaipur 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 context 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 department it can recover the amount. Therefore, even the decision which is relied upon the ld. CIT(A) the same is in favour of the assessee though due to typographical mistake it was misunderstood by the 6 & 1183/JP/2018 M/s K.S.Cars Private Limited. Jaipur Vs. ITO, Ward-2(2), Jaipur ld. 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 the result, appeals of the assessee are allowed.

Pronounced in the Open Court on 18/03/2019.