DECO MICA LIMITED vs. DEPUTY COMMISSIONER OF INCOME TAX

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TAXAP/1187/2018HC GujaratGJHC24052548201801 October 2018Author: HONOURABLE MR. JUSTICE AKIL KURESHI,HONOURABLE MR. JUSTICE B.N. KARIA3 pages
AI SummaryRemanded

What did the High Court hold?

The High Court acknowledged that the issue was squarely covered by its own prior judgment in CIT vs. Gujarat State Road Transport Corporation Limited. However, considering that an SLP was pending before the Supreme Court and the disputed amount was small, the Court opted for an arrangement to allow the assessee to benefit from a potential Supreme Court reversal without immediate further appeal. The Court dismissed the appeal at that stage but provided that if the Supreme Court reverses the judgment in CIT vs. GSRTC, the assessee would be permitted to revive the appeal by filing an application within three months from the date of the Supreme Court's judgment. The operative direction is to dismiss the appeal with a liberty to revive.

What were the facts?

The assessee, Deco Mica Limited, is challenging an order of the Income Tax Appellate Tribunal (Tribunal) dated March 22, 2018, for Assessment Year 2013-14. The dispute concerns the deductibility of Rs. 8,13,235, representing the employees' contribution towards Provident Fund and ESI. The assessee had deposited these contributions but missed the statutory deadline. Consequently, the Revenue disallowed the deduction. The Tribunal dismissed the assessee's ground of appeal, relying on the Gujarat High Court's judgment in CIT vs. Gujarat State Road Transport Corporation Limited (366 ITR 170). The assessee acknowledged that the issue was covered by the Gujarat High Court's decision but noted that a Special Leave Petition (SLP) was pending before the Supreme Court. Given the small amount in dispute and the cost of further litigation, the assessee sought to benefit from a potential Supreme Court reversal of the High Court's ruling.

What were the issues?

1. Whether the disallowance of employees' contribution towards Provident Fund and ESI, deposited after the statutory deadline, is justified, turning on the interpretation of relevant provisions of the Income Tax Act, 1961 concerning deductibility of such payments. Assessee's contention: The assessee argued that while the issue was covered by the Gujarat High Court's judgment in CIT v. GSRTC, an SLP was pending before the Supreme Court. The assessee highlighted the small disputed amount and the prohibitive cost of pursuing the matter to the Supreme Court. The assessee requested that the benefit of a potential Supreme Court judgment reversing the High Court's decision be made available. Revenue's contention: The judgment records no specific contention from the Revenue regarding the arguments presented by the assessee. However, the Revenue's initial disallowance and the Tribunal's reliance on the Gujarat High Court's judgment imply a stance that the deduction is not permissible under the prevailing law.

Which sections of the Income-tax Act were involved?

Section 43B

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Income Tax Appellate Tribunal, Ahmedabad

not permit deduction of such sum from the income of the assessee. Such disallowance thereupon became the subject matter of appeal before the Tribunal. The Tribunal dismissed the ground, relying upon the judgment of this Court in the case of Commissioner of Income-tax vs. Gujarat State Road Transport Corporation Limited, reported in 366 ITR 170 [Gujarat].

Counsel for the appellant did not dispute that the issue on hands is squarely covered by this Court in the case of CIT v. GSRTC [Supra]. He, however, submitted that the appeal is pending against the judgment of the High Court before the Supreme Court and SLP has been granted. The amount involved is not very large and it would be extremely expensive for the assessee to carry this in appeal before the Supreme Court. He, therefore, suggested that the benefit of this judgment of the Supreme Court may be made available to the assessee; as and when rendered and in case, the judgment of the High Court is reversed.

Two clear ways are possible to enable the appellant- assessee to get benefit of the judgment of the Supreme Court, in case the High Court judgment is reversed. One is to dismiss this C/TAXAP/1187/2018 ORDER appeal and allow the assessee to approach the Supreme Court; like some other assesses would have. The other way is to make some arrangement under which without filing the appeal, the assessee would also be able to claim the benefit of the judgment. Looking to the smallness of the disputed amount, we adopt the latter option by providing as under : This appeal at this stage is dismissed. However, if the Supreme Court reverses the judgment in the case of CIT vs. GSRTC [Supra], it would be open for the appellant to revive this appeal by filing an application for such purpose within three months from the date of the judgment.

Appeal stands disposed of accordingly. [Akil Kureshi, J.] [B.N Karia, J.] Prakash

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