PR COMMISSIONER OF INCOME TAX vs. RAJASTHAN RAJYA VIDYUT UTPADAN NIGAM LTD

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ITA/330/2018HC RajasthanRJHC02107242201826 September 2024Bench: AVNEESH JHINGAN,ASHUTOSH KUMAR3 pages
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What did the High Court hold?

The High Court decided the substantial questions of law based on its prior decision in D.B. Income Tax Appeal No. 329/2018. For the first substantial question of law, concerning whether employee's contribution to Provident Fund and ESI is governed by Section 43B or Section 36(1)(va) read with Section 2(24)(x) of the Income Tax Act, 1961, the Court held in favour of the appellant-Department. This implies that the Court found the provisions of Section 36(1)(va) to be applicable, and the deduction for late deposits would not be allowed. For the second substantial question of law, as reformulated, concerning the deletion of disallowance of Rs. 85,42,00,000/- on account of advance against depreciation, the Court held against the appellant-Department. This means the ITAT's deletion of the disallowance was upheld. The appeal was disposed of accordingly.

What were the facts?

The assessee, Rajasthan Rajya Vidyut Utpadan Nigam Ltd., is engaged in electricity distribution. For Assessment Year 2007-08, the assessment was finalized under Section 143(3). Two issues arose: (1) deductibility of employee's PF/ESI contributions deposited beyond the statutory due dates, and (2) the effect of late TDS deposit on expenditure deductibility. The Commissioner (Appeals) ruled in favour of the assessee. The Tribunal's order, which dismissed the Revenue's appeal, is under challenge. The High Court admitted the appeal on two substantial questions of law. However, due to overlapping issues with a previous appeal (D.B. Income Tax Appeal No. 329/2018), the second question was reformulated. The parties agreed to take up the matter for hearing immediately after admission.

What were the issues?

The Tribunal had to decide two main questions of law: 1. Whether the ITAT's view that employee's contribution to Provident Fund and ESI is governed by Section 43B of the Income Tax Act, 1961, and not by Section 36(1)(va) read with Section 2(24)(x) of the Act, is legally sustainable, considering the Supreme Court's decision in Checkmate Services P Ltd. vs. Commissioner of Income Tax-I. 2. Whether the ITAT was justified in deleting the disallowance of Rs. 85,42,00,000/- made on account of advance against depreciation, without appreciating that it was an internal arrangement not affecting the nature of receipts as revenue. Assessee's contentions: Not recorded for the first issue. For the second issue, the assessee argued that the advance against depreciation was an internal arrangement and did not alter the revenue nature of receipts. Revenue's contentions: For the first issue, the Revenue relied on the Supreme Court's decision in Checkmate Services P Ltd. For the second issue, the Revenue contended that the ITAT erred in deleting the disallowance as the advance against depreciation was an internal arrangement and did not affect the revenue nature of receipts.

Which sections of the Income-tax Act were involved?

Section 260A,Section 143(3),Section 43B,Section 36(1)(va),Section 2(24)(x)

AI-generated summary — verify with the full judgment below

[2024:RJ-JP:41041-DB] HIGH COURT OF JUDICATURE FOR RAJASTHAN BENCH AT JAIPUR D.B. Income Tax Appeal No. 330/2018 Principal Commissioner of Income Tax Jaipur -II, Jaipur ----Appellant Versus Rajasthan Rajya Vidyut Utpadan Nigam Ltd, Vidyut Bhawan, Janpath, Jaipur ----Respondent For Appellant : Mr. Anuroop Singhi with Mr. Aditya Khandelwal For Respondent : Mr. Prakul Khurana with Mr. Rajat Sharma HON'BLE MR. JUSTICE AVNEESH JHINGAN HON'BLE MR. JUSTICE ASHUTOSH KUMAR Order 26/09/2024 AVNEESH JHINGAN, J:- 1. This appeal is filed under Section 260A of the Income Tax Act, 1961 (for short ‘the Act’) against the order dated 01.06.2018 passed by the Income Tax Appellate Tribunal, Jaipur Bench, Jaipur (for short ‘the Tribunal’). 2. The brief facts are that the respondent-company is engaged in distribution of electricity. The return for assessment year 2007- 08 was filed and the assessment was finalized under Section 143(3) of the Act. The two issues arose in the assessment proceedings. Firstly, can deduction be allowed if employees’ share of provident fund is deposited beyond the date stipulated in the Employees’ Provident Funds and Miscellaneous Provisions Act, 1952 (for short ‘EPF Act’) and Employees’ State Insurance Act,

[2024:RJ-JP:41041-DB] (2 of 3) [ITA-330/2018] 1948 (for short ‘ESI Act’). Secondly, the effect of late deposit of TDS on claiming deduction of the expenditure. 3. The appeal filed by the respondent was accepted by the Commissioner of Income Tax (Appeal) and the appeal filed by the appellant was dismissed by the Tribunal, hence this appeal. 4. The appeal was admitted on 19.05.2023 formulating following two substantial questions of law:- “(1) Whether the view taken by the ITAT that employees’ contribution to Provident Fund and ESI is governed by the provisions of Section 43B of the Income Tax Act, 1961 and not by Section 36(1)(va) read with Section 2(24)(x) of the Income Tax Act, 1961 is sustainable in law in view of the decision of the Hon’ble Supreme Court in the case of Checkmate Services P Ltd Vs. Commissioner of Income Tax-I (Civil Appeal No.2833 of 2016 decided on 12.10.2022)? (2) Whether in the facts and circumstances of the case, the ITAT was justified in law in deleting addition of Rs.854200000/- made for depositing the

employees’

contribution

to Provident Fund beyond the prescribed time limit provided in the respective Acts?” 5. Heard learned counsel for the parties. 6. Learned counsel for the parties are at ad idem that due to number of pending appeals against the respondent having overlapping questions the substantial question No.2 was wrongly formulated. 7. In view of the above, the substantial question No.2 is reformulated:- “whether in the facts and circumstances of the case the ITAT

[2024:RJ-JP:41041-DB] (3 of 3) [ITA-330/2018] was justified in law in deleting disallowance of Rs.85,42,00,000/- made on account of advance against the depreciation deferred without appreciating that same is head created as an internal arrangement and does not effect the nature of receipts as revenue received?” 8. The appeal is admitted on substantial question No.1 formulated earlier and the substantial question No.2 as reformulated today. 9. With the consent of learned counsel for both the parties, after admission, the matter is taken up for hearing today itself as the substantial questions involved have already been decided by this Court in D.B. Income Tax Appeal No. 329/2018 titled as “Principal Commissioner of Income Tax Jaipur-II, Jaipur Vs. Rajasthan Rajya Vidyut Utpadan Nigam Ltd., Vidyut Bhawan Janpath Marg Jaipur”. 10. For the reasons mentioned in the order dated 26.09.2024 passed by this Court in D.B. Income Tax Appeal No. 329/2018, the substantial question No.1 is decided in favour of the appellant-Department and the substantial question No.2 against the appellant-Department. 11. In view of the above, the appeal is accordingly disposed of. (ASHUTOSH KUMAR),J (AVNEESH JHINGAN),J AARZOO ARORA /Riya/139 S. Whether Reportable: Yes

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