THE COMMISSIONER OF INCOME TAX-V vs. P M ELECTRONICS LTD

ITA 475/2007

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* HIGH COURT OF DELHI : NEW DELHI +

ITA No. 475/2007 %

Judgment reserved on: 23.09.2008

Judgment delivered on:03.11.2008 THE COMMISSIONER OF INCOME TAX-V ..... APPELLANT Through : Ms Rashmi Chopra, Advocate

versus P M ELECTRONICS LTD

..... Respondent Through : Mr Prakash Kumar, Advocate

CORAM :

HON’BLE MR JUSTICE BADAR DURREZ AHMED HON’BLE MR JUSTICE RAJIV SHAKDHER

Yes 2. To be referred to Reporters or not ?

Yes 3. Whether the judgment should be reported in the Digest ?

Yes RAJIV SHAKDHER, J.

ITA 475/2007

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Provident Fund Act and the Rules made thereunder before the due date for furnishing the return of income under sub-Section 1 of Section 139. 2. The Revenue being aggrieved by the impugned judgment on account of the fact that the Tribunal, based on its own decision in the case of ACIT v. M/s Vistas RRB (India) Ltd: (2005)92 ITD 1 Delhi, has taken the view that the amendment brought about in Section 43B by virtue of Finance Act, 2003 was curative in nature and hence applicable retrospectively. In other words, the Tribunal held that the assessee would be eligible for deduction in respect of such payments made before the due date of filing of return. The Revenue has contested this position before us. Towards this end, the Revenue has proposed the following questions of law which according to them are substantial questions of law:- “(a) Whether amounts paid on account of PF/ESI after „due date‟ are allowable in view of Section 43B, read with Section 36(1)(va) of the Act? (b) Whether the deletion of the 2nd Proviso to Section 43 by way of amendment by the Finance Act 2003 is retrospective in nature?” 3. In order to adjudicate upon the present appeal, the following facts require to be noted:- 4. On 27.11.98 the assessee had filed a return of income declaring a loss of Rs 8,92,888/-. On 11.5.99 the return was processed under Section 143(1)(A) of the Act. The case of the assessee was selected for scrutiny. Accordingly, a 2008:DHC:2959-DB

ITA 475/2007

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notice dated 27.9.99 under Section 143(2) of the Act was issued to the assessee. In response to the notice and on examination of the details submitted by the assessee with respect to provident fund payments made both on account of employer‟s and employees‟ share revealed that payments in the sum of Rs 17,94,042/- were late as per the provisions of Section 36(1)(5A) read with Section 2(24)(x) and Section 43B. Consequently, the Assessing Officer disallowed the deduction and added a sum of Rs 17,94,042/- towards EPF contribution. 5. Being aggrieved, the assessee filed an appeal before the Commissioner of Income Tax (Appeals) [hereinafter referred to in short as the „CIT(A)‟]. The CIT(A) after considering the matter while accepting the view of the Assessing Officer on the interpretation of the relevant provisions of the Act on facts directed the deletion of an addition of Rs 4,83,251 being payments made towards provident fund in respect of December, 1997, January, 1998 and February, 1998 on the ground that they were within the time prescribed under the relevant provisions of the Act. As a result, the CIT(A) confirmed the addition to the income of the assessee only a sum of Rs 13,10,791/- as against Rs 17,94,042/- added by the Assessing Officer. 6. The assessee being aggrieved preferred an appeal to the Tribunal. The Tribunal, as indicated hereinabove, allowed the appeal of the assessee. 2008:DHC:2959-DB

ITA 475/2007

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ITA 475/2007

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that the amendments had been made to the provisions of Section 43B of the Act by virtue of Finance Act, 2003 w.e.f 1.4.2004 it agreed with the submission of the learned counsel for the assessee that by virtue of the omission of the second proviso and the omission of Clauses (a), (c), (d), (e) and (f) without any saving clause would mean that the provisions were never in existence. For this purpose, in the said case the assessee had placed reliance on the judgment of a Constitution Bench of the Supreme Court in the case of Kolhapur Canesugar Works Ltd v. Union of India: (2000) 2 SCC 536 and Rayala Corporation P. Ltd v. Director of Enforcement (1969) 2 SCC 412 and General Finance Co. v. Asst. CIT: (2002) 257 ITR 338 (SC). The said submissions found favour with the Division Bench of the Guahati High Court and relying on earlier decisions of its own Court in CIT v. Assam Tribune: (2002) 253 ITR 93 and CIT v. Bharat Bamboo and Tiber Suppliers: (1996) 219 ITR 212 the Division Bench dismissed the appeal of the Revenue. It transpires that the aforesaid matter was taken up in appeal alongwith other matters including Vinay Cement (supra). The order in Vinay Cement (supra) was passed by the Supreme Court on 7.3.2007 wherein it observed as follows:- “Delay condoned. In the present case we are concerned with the law as it stood prior to the amendment of Section 43-B. In the circumstances, the assessee was entitled to claim the benefit in Section 43-B for that period particularly in view of the fact that he has contributed to provident fund before filing of the return. Special Leave Petition is dismissed.” 2008:DHC:2959-DB

ITA 475/2007

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(A) No. 1192/2008 discussed the impact of both the dismissal of the special leave petition in the case of George Williamson (Assam) Ltd (supra) and Vinay Cement (supra) as well as a contrary view of the Division Bench of its own Court in Synergy Financial Exchange (supra). The Division Bench of the Madras High Court has explained the effect of the dismissal of a special leave petition by a speaking order by relying upon the judgment of the Supreme Court in the case of Kunhayammed and Others v. State of Kerala and another: 119 STC 505 at page 526 in Paragraph 40 and noted the following observations:- 2008:DHC:2959-DB

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“It the order refusing leave to appeal is a speaking order, ie., gives reasons for refusing the grant of leave, then the order has two implications. Firstly, the statement of law contained in the order is a declaration of law by the Supreme Court within the meaning of Article 141 of the Constitution. Secondly, other than the declaration of law, whatever is stated in the order are the findings recorded by the Supreme Court which would bind the parties thereto and also the Court, Tribunal or authority in any proceedings subsequent thereto by way of judicial discipline, the Supreme Court being the Apex Court of the country, But, this does not amount to saying that the order of the Court, Tribunal or authority below has stood merged in the order of the Supreme Court rejecting special leave petition or that the order of the Supreme Court is the only order binding as res judicata in subsequent proceedings between the parties.”

ITA 475/2007

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RAJIV SHAKDHER, J

BADAR DURREZ AHMED, J November 03, 2008 mb

2008:DHC:2959-DB