PR COMMISSIONER OF INCOME TAX JAIPUR-II vs. M/S RAJASTHAN RENEWABLE ENERGY COR LTD

HIGH COURT OF JUDICATURE FOR RAJASTHAN BENCH AT JAIPUR D.B. Income Tax Appeal No. 10/2018 Pr. Commissioner Of Income Tax, Jaipur-Ii, Jaipur. ----Appellant Versus M/s. Rajasthan Renewable Energy Corp. Ltd., E-166, Akshay Urja Bhawan, Yudhister Marg, C-Scheme, Jaipur ----Respondent Connected With D.B. Income Tax Appeal No. 11/2018 Pr. Commissioner Of Income Tax, Jaipur-Ii, Jaipur ----Appellant Versus M/s. Rajasthan Renewable Energy Corp. Ltd., E-166, Akshay Urja Bhawan, Yudhister Marg, C-Scheme, Jaipur ----Respondent D.B. Income Tax Appeal No. 12/2018 Pr. Commissioner Of Income Tax, Jaipur-Ii, Jaipur. ----Appellant Versus M/s. Rajasthan Renewable Energy Corp. Ltd., E-166, Akshay Urja Bhawan, Yudhister Marg, C-Scheme, Jaipur ----Respondent For Appellant(s) : Mr. K. D. Mathur & Mr. Prateek Kedawat on behalf of Mr. R. B. Mathur For Respondent(s) : HON'BLE MR. JUSTICE K.S.JHAVERI HON'BLE MR. JUSTICE VIJAY KUMAR VYAS Judgment 13/03/2018

(2 of 4) [ITA-10/2018] 1. In these appeals since identical questions of law and facts are involved, they are decided by this common judgment. 2. By way of these appeals, the appellant has challenged the judgment and order of the Tribunal whereby the Tribunal has disposed of the appeal of the assessee by issuing certain directions. 3. This court while admitting the appeals framed the following question of law:- 1. In D.B. Income Tax Appeal No. 10/ 2018 “I Whether in the facts and circumstances of the case and in law the ITAT was justified in deleting the addition of Rs. 20,00,000/- made on account of contribution made to State Renewal Fund ignoring the fact that contribution towards fund is not connected with the business but is diversion of Income and not allowable u/s. 37(1) of the IT Act?” II Whether in the facts and circumstances of the case and in law the ITAT was justified in deleting the addition of Rs. 126059/- made for depositing the employees’ contribution to PF & ESI beyond the prescribed time limit provided in the respective Acts. III Whether in the facts and circumstances of the case and in law the ITAT was justified in holding that employees’ contribution to PF and ESI governed by the provision of Section 43 B and not by Section 36(1)(va) r.w.s. 2(24)(x) of the IT Act. IV. Whether on the facts and in the circumstances of the case and in law the ITAT is justified in upholding the deletion of disallowance of contribution to Energy Conservation Fund of Rs. 10000000/- as made by Assessing Officer ignoring the fact that contribution towards fund is diversion of income and not allowable u/s. 37(1) of the Income Tax Act. 2.In D.B. Income Tax Appeal No. 11/ 2018

(3 of 4) [ITA-10/2018] “I Whether in the facts and circumstances of the case and in law the ITAT was justified in deleting the addition of Rs. 80,00,000/- made on account of contribution made to State Renewal Fund despite the fact that it was application of income and not expenditure incurred for business expediency?” II Whether in the facts and circumstances of the case and in law the ITAT was justified in deleting the addition of Rs. 395066/- made for depositing the employees’ contribution to PF & ESI beyond the prescribed time limit provided in the respective Acts. III Whether in the facts and circumstances of the case and in law the ITAT was justified in holding that employees’ contribution to PF and ESI governed by the provision of Section 43 B and not by Section 36(1)(va) r.w.s. 2(24)(x) of the IT Act.?” 3. In D.B. Income Tax Appeal No. 12/ 2018 “I Whether in the facts and circumstances of the case and in law the ITAT was justified in deleting the addition of Rs. 20,00,000/- made on account of contribution made to State Renewal Fund ignoring the fact that contribution towards fund is not connected with the business but it is diversion of Income and not allowable u/s. 37(1) of the IT Act ?” II Whether in the facts and circumstances of the case and in law the ITAT was justified in deleting the addition of Rs. 124442/- made for depositing the employees’ contribution to PF & ESI beyond the prescribed time limit provided in the respective Acts. III Whether in the facts and circumstances of the case and in law the ITAT was justified in holding that employees’ contribution to PF and ESI governed by the provision of Section 43 B and not by Section 36(1)(va) r.w.s. 2(24)(x) of the IT Act?” 4. So far as question No.1 is concerned, the same is now covered by the decision 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:- “Insofar as the expenditure incurred on State Renewal Fund is concerned, 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

(4 of 4) [ITA-10/2018] 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 employees is allowable expenditure 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. 5. In view of 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(c) 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. 7. With regard to Issue No.4 in D. B. Income Tax Appeal No. 10/2018, in view of the observations made by CIT(A), which has not been challenged before the Tribunal, that question will not arise and the same is answered against the department. 8. In view of the above, the appeals stand disposed of. (VIJAY KUMAR VYAS),J (K.S.JHAVERI),J B.M.G/Gourav/4-6