DHRUVI PHARMA PVT LTD vs. JOINT COMMISSIONER OF INCOME TAX (OSD)

TAXAP/962/2018HC GujaratGJHC24037688201814 August 2018Author: HONOURABLE MR. JUSTICE AKIL KURESHI,HONOURABLE MR. JUSTICE B.N. KARIA3 pages
AI SummaryRemanded

What were the facts?

The assessee, Dhruvi Pharma Pvt Ltd, is in appeal against the order of the Income Tax Appellate Tribunal (ITAT) for the assessment year 2011-12. The dispute concerns the disallowance of Rs. 28,00,579/-, representing the employees' contribution to Provident Fund (PF) and Employees' State Insurance Corporation (ESIC). The assessee had deposited these amounts with the government authorities before the due date of filing the return, but after the statutory due dates for such deposits. The ITAT had rejected the assessee's contention that the expenditure should not be disallowed under Section 36(1) of the Income Tax Act, 1961, relying on a Gujarat High Court judgment.

What did the High Court hold?

The High Court held that the issue is squarely covered by its own previous judgment in CIT vs. Gujarat State Road Transport Corporation. In that judgment, the Court had concluded that for the sum received by the assessee from employees, deduction under Section 28 is permissible only if such sum is credited to the employees' account in the relevant fund on or before the 'due date' mentioned in the explanation to Section 36(1)(va). Consequently, the Tribunal had erred in deleting the disallowances made by the Assessing Officer, as the sums were not credited to the employees' accounts in the Provident Fund or ESI Fund on or before the due date as per the Act. The High Court restored the disallowances made by the AO and answered the question in favour of the revenue. The Court granted a certificate of fitness for appeal to the Supreme Court, acknowledging that other High Courts have taken a contrary view and the appeal against the Gujarat High Court's judgment was admitted by the Supreme Court.

What were the issues?

1. Whether, in the facts and circumstances of the case, the Income Tax Appellate Tribunal was right in law in not allowing deduction for payment of employees' contribution of PF and ESIC for Rs. 22,69,539/- and Rs. 5,31,040/- totalling to Rs. 28,00,579/- deposited with the Government Authority on or before the due date of filing of return for the relevant AY 2011-12? Assessee's Contention: The assessee argued that since the employees' contribution to PF and ESIC was deposited before the due date of filing the return, the expenditure should not be disallowed under Section 36(1) of the Income Tax Act, 1961. Revenue's Contention: The revenue contended, and the Tribunal held, that the deduction is not allowable because the deposits were not made on or before the specific 'due date' as defined for the purpose of Section 36(1)(va) read with Section 2(24)(x) of the Act. The Tribunal relied on the Gujarat High Court's decision in CIT vs. Gujarat State Road Transport Corporation.

Which sections of the Income-tax Act were involved?

Section 36(1),Section 36(1)(va),Section 2(24)(x),Section 28

AI-generated summary — verify with the full judgment below

Cause title — parties, addresses and appearances
C/TAXAP/962/2018 ORDER IN THE HIGH COURT OF GUJARAT AT AHMEDABAD R/TAX APPEAL NO. 962 of 2018 ========================================================== DHRUVI PHARMA PVT LTD Versus JOINT COMMISSIONER OF INCOME TAX (OSD) ========================================================== Appearance: MR B S SOPARKAR(6851) for the PETITIONER(s) No. 1 for the RESPONDENT(s) No. 1 ========================================================== CORAM: HONOURABLE MR.JUSTICE AKIL KURESHI and HONOURABLE MR.JUSTICE B.N. KARIA Date : 14/08/2018

ORAL ORDER (PER : HONOURABLE MR.JUSTICE AKIL KURESHI)

1.

The assessee is in appeal against the judgement of the Income Tax Appellate Tribunal dated 07.02.2018 suggesting following questions for our consideration: “Whether in the facts and circumstances of the case, the Income Tax Appellate Tribunal was right in law in not allowing deduction for payment of employees' contribution of P.F. And ESIC for Rs. 22,69,539/- and Rs. 5,31,040/- totalling to Rs. 28,00,579/- deposited with the Government Authority on or before due date of filing of return for the relevan

The order continues below.

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