ASHOK KUMAR vs. INCOME TAX OFFICER, WARD-I,REWARI

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ITA/362/2007HC Punjab & HaryanaPHHC01073059200708 December 2010Author: MR. JUSTICE AJAY KUMAR MITTAL,MR. JUSTICE ADARSH KUMAR GOEL3 pages
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What did the High Court hold?

The High Court held that both substantial questions of law were to be answered in favour of the assessee and against the revenue. The Court noted that the learned counsel for both parties were ad-idem on this point. This implies that the Court accepted the assessee's contention that the omission of the second proviso to Section 43B by the Finance Act, 2003, was retrospective. Consequently, the ITAT's order setting aside the CIT(A)'s deletion of additions was considered unjustified. The operative direction was to allow the appeal, meaning the disallowances made by the AO were to be deleted, and the order of the CIT(A) was to be upheld. No issue was expressly left undecided.

What were the facts?

The assessee, Ashok Kumar, a labour contractor, filed his return for assessment year 2003-04. He debited Rs.11,66,287/- for Provident Fund and Rs.4,63,635/- for ESI payments in his Profit and Loss Account. The Assessing Officer (AO) disallowed Rs.2,67,217/- and Rs.3,85,694/-, citing Sections 36(1)(va) and the second proviso to Section 43B of the Income Tax Act, 1961. The CIT(A) deleted these disallowances, relying on the omission of the second proviso to Section 43B by the Finance Act, 2003. The Revenue appealed to the ITAT, which set aside the CIT(A)'s order and restored the AO's disallowance. The assessee then filed this appeal before the High Court.

What were the issues?

The substantial questions of law before the High Court were: 1. Whether the omission of the second proviso to Section 43B of the Income Tax Act, 1961, by the Finance Act, 2003, is declaratory and clarificatory, thus retrospective from the date of substitution by the Finance Act, 1989? 2. Whether, on the facts and circumstances, the ITAT was justified in setting aside the CIT(A)'s order, which had deleted the entire addition made by the AO? Assessee's contentions: The assessee argued that the omission of the second proviso to Section 43B by the Finance Act, 2003, was retrospective and therefore the disallowances made by the AO were incorrect. The assessee relied on the pronouncements of the Supreme Court in CIT v. M/s Alom Extrusions Limited and this Court in CIT v. M/s Rai Agro Industries Ltd. Revenue's contentions: The judgment records that the learned counsel for the parties were ad-idem that the questions of law were to be answered in favour of the assessee and against the revenue, implying no specific arguments were advanced by the revenue against the assessee's position.

Which sections of the Income-tax Act were involved?

Section 43B,Section 36(1)(va)

AI-generated summary — verify with the full judgment below

-1- IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH Date of Decision: 8.12.2010 Ashok Kumar ....Appellant. Versus The Income Tax Officer ...Respondent. CORAM:- HON'BLE MR. JUSTICE ADARSH KUMAR GOEL. HON'BLE MR. JUSTICE AJAY KUMAR MITTAL. PRESENT: Mr. Sandeep Goyal, Advocate for the appellant. Ms. Urvashi Dhugga, Advocate for the respondent. AJAY KUMAR MITTAL, J.

1.

The appeal was admitted by this Court on December 3, 2007 for determination of the following substantial questions of law:- “(i) Whether the omission of second proviso to Section 43B of the Income Tax Act, 1961 by Finance Act, 2003 is declaratory and clarificatory and, therefore, retrospective in operation from the date it was substituted by the Finance Act, 1989? (ii) Whether on the facts and circumstances of the case, the learned ITAT is justified to set aside the order of CIT(A), deleting the entire addition made by the A.O.?”

-2-

2.

The facts necessary for adjudication as pleaded in the present appeal are that the assessee is a labour contractor and is engaged in the profession of supply of labour to various companies. He filed his return for the assessment year 2003-04 declaring an income of Rs.3,38,550/-. He had debited in his Profit and Loss Account an amount of Rs.11,66,287/- on account of Provident Fund and Rs.4,63,635/- on account of ESI paid. The Assessing Officer vide order dated 30.1.2006 disallowed the claim of Rs.2,67,217/- and Rs.3,85,694/- on the ground that these payments were not deductible in view of the provisions of Section 36(1)(va) and second proviso to Section 43B of the Income Tax Act, 1961. On appeal by the assessee before the Commissioner of Income Tax (Appeals) [in short “the CIT (A)”], the CIT (A) vide order dated 30.3.2006 deleted the disallowances relying upon the amendment to Section 43B by the Finance Act, 2003, under which the second proviso was omitted. Against the order of the CIT(A), the department went in appeal before the Income Tax Appellate Tribunal, Delhi Bench “B”, New Delhi, who vide order dated 23.3.2007 set aside the order of the CIT(A) and restored that of the Assessing Officer. Hence, the present appeal by the assessee.

3.

We have heard learned counsel for the parties.

4.

Learned counsel for the parties are ad-idem that in view of the pronouncement of the Hon'ble Supreme Court in Commissioner of Income Tax v. M/s Alom Extrusions Limited, 319 ITR 306 (SC) and of this Court in Income Tax Appeal No. 663 of 2005 (The Commissioner of Income Tax, Patiala v. M/s Rai Agro Industries Ltd. Sangrur), decided on 30.11.2010, the substantial questions of law -3- are to be answered in favour of the assessee and against the revenue. Ordered accordingly.

5.

The appeal stands allowed. (AJAY KUMAR MITTAL) JUDGE December 8, 2010 (ADARSH KUMAR GOEL) gbs JUDGE

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