MEHTA CAD CAM SYATEMS PVT LTD.,AHMEDABAD vs. ACIT, CIRCLE-2(1)(2),, AHMEDABAD

आदेश / O R D E R

PER WASEEM AHMED, ACCOUNTANT MEMBER: The captioned appeal has been filed at the instance of the Assessee against the order of the Commissioner of Income Tax(Appeals)-6, Ahmedabad [CIT(A) in short] vide appeal no.CIT(A)-6/349/16/17 dated 08.12.2017 arising in the matter of assessment order passed under s.143(3) of the Income Tax Act, 1961 (hereinafter referred to as "the Act") dated 29.02.2016 relevant to Assessment Year (AY) 2013-14.

ITA No.418/Ahd/2018 Mehta CAD CAM System Pvt. Ltd. Vs. ACIT Asst.Year – 2013-14 - 2 - 2. The grounds of appeal raised by the assessee are as under:- “1. The learned CIT(A) has erred both in law and on the facts of the case in confirming the action of the AO of disallowing employee's contribution towards PF and ESIC amounting to Rs.33,60,148/- u/s 36(1)(va) r.w.s.2(24)(x) of the Act. 2. Both the lower authorities have passed the orders without properly appreciating the facts and they further erred in grossly ignoring various submissions, explanations and information submitted by the appellant from time to time which ought to have been considered before passing the impugned order. This action of the lower authorities is in clear breach of law and Principles of Natural Justice and therefore deserves to be quashed. 3. The learned CIT(A) has erred in law and on facts of the case in confirming action of the Id. AO in levying interest u/s.234A/B/C of the Act. The appellant craves leave to add, amend, alter, edit, delete, modify or change all or any of the grounds of appeal at the time of or before the hearing of the appeal.” 3. The solitary issue raised by the assessee in this appeal is that ld.CIT(A) erred in confirming the order of AO by sustaining the disallowance of Rs.33,60,148/- u/s 36(1)(va) r.w.s. 2(24)(x) of the Act.

ITA No.418/Ahd/2018 Mehta CAD CAM System Pvt. Ltd. Vs. ACIT Asst.Year – 2013-14 - 3 - CIT vs. GSRTC reported in 41 taxmann.com 100 and added to the total income of the assessee.

Being aggrieved by order of Ld. CIT(A) assessee is in the second appeal before us. The ld. AR before us conceded the fact that the issue is covered against the assessee by the Hon’ble Gujarat High Court in the case of CIT vs. GSTRC reported in 41 taxmann.com 100. However, the ld. AR before us further submitted that the due date for the depositing the amount of employees contribution towards PF/ESI is to be seen from the relevant month, in which salary was paid to the employees and not from the month in which salary became due. The ld. AR in support of his claim relied on the order of this jurisdictional Tribunal in the case of Suzlon Energy Ltd. vs. DCIT reported in 764 & 765/Ahd/2018 vide order dated 27.06.2018, wherein it was held as under: “We may, however, add that a co-ordinate bench of this Tribunal, in the case of Rajjratna Metal Industries Ltd Vs. ACIT (ITA No.940/Ahd/2015; order dated 22.09.2017), has observed as follows:- "3. Assessee's latter substantive ground challenges correctness of both the lower authorities' action disallowing/adding a sum of Rs.3,85,810/- u/s. 36(1)(va) r.w.s. 2(24) of the Act on account late payment of employees' contribution to PF & ESI in question. There is no dispute that hon'ble jurisdictional high court's decision in CIT vs. Gujarat State Road Transport Corporation (2014) 366 ITR 170 (Guj) upholds such a disallowance in principle. The assessee's case however is that relevant due date has to be seen not from the

ITA No.418/Ahd/2018 Mehta CAD CAM System Pvt. Ltd. Vs. ACIT Asst.Year – 2013-14 - 4 - relevant month of salary but the one pertaining to its payment. He then files a computation chart indicating it to have paid above employees' PF/ESI contributions on 22.05.2009 and 28.05.2009 as against the due dates thereof following on 20.06.2009. The Revenue fails to dispute this factual position. We therefore quote this tribunal's co-ordinate bench decision in Kanoi paper & Industries Ltd. vs. ACIT 75 TTJ 448 that the relevant date in such case is that of month of the actual payment of wages/salaries. We therefore rely on the above co-ordinate bench decision and direct the Assessing Officer to delete the impugned disallowance as well.” 4. In effect thus while any delayed deposit of PF/ESI is to be disallowed, in terms of Hon'ble Gujarat High Court's judgment in the case of Gujarat State Road Transport Corporation (supra), the question as to whether there is a delay or not may be decided by the Assessing Officer in the light of above observations by the coordinate bench. The assessee will get relief, if found admissible, on that basis. 5. In the result, appeals of the assessee are allowed for statistical purposes. Pronounced in the open court today on the 27th June, 2018.”

In view of the above, the AR for the assessee before us submitted that the matter could be restored back to the file of AO for fresh adjudication in terms of the above.

On the other hand, the ld. DR submitted that the jurisdictional ITAT in the case of Suzlon Energy Ltd. (supra) has relied on the order of Hon’ble ITAT, Kolkata Benches in the case of Kanoi Paper & Industries Ltd. vs. ACIT reported in 75 TTJ 448, wherein, the issue was decided about employees provident fund. As such, there was no issue about the payment of employee’s contribution towards ESI. Therefore, the disallowance of the contribution towards ESI should be seen from the month in which it became due. Therefore, the claim of the assessee in the

ITA No.418/Ahd/2018 Mehta CAD CAM System Pvt. Ltd. Vs. ACIT Asst.Year – 2013-14 - 5 - case of delay in the payment of employee’s contribution towards ESI, cannot be decided/ allowed by the date of payment.

The ld DR further submitted that the payment of Wages Act, 1936 requires that the payment should be made before the expiry of the 7th day after the last day of the wage period, where the salary is less than thousand rupees and in other cases, it should be the 10th day. The payment of Wages Act requires that the payment should be made within the period as specified. Thus, if the assessee can claim a deduction of the employee’s contribution towards PF/ESI on the payment basis, then there is a possibility that the assessee will delay in the payment of wages to the workers. Thus, if the deduction for contribution towards PF / ESI is allowed to the assessee on the basis of date of payment for contribution towards PF / ESI, then the purpose of Wage Act, 1936 will be defeated.

The ld. AR in his rejoinder submitted that no reference should be made to the payment of wages Act while deciding the issue under the Income Tax Act.

ITA No.418/Ahd/2018 Mehta CAD CAM System Pvt. Ltd. Vs. ACIT Asst.Year – 2013-14 - 6 - challenged the proposition laid down by the Hon’ble Gujarat High Court in the case of CIT Vs. GSRTC (Supra), wherein it was held as under: “In view of the above and for the reasons stated above, and considering section 36(1)(va) of the Income Tax Act, 1961 read with sub-clause (x) of clause 24 of section 2, it is held that with respect to the sum received by the assessee from any of his employees to which provisions of sub- clause (x) of clause (24) of section (2) applies, the assessee shall be entitled to deduction in computing the income referred to in section 28 with respect to such sum credited by the assessee to the employees' account in the relevant fund or funds on or before the "due date" mentioned in explanation to section 36(1)(va). Consequently, it is held that the learned tribunal has erred in deleting respective disallowances being employees' contribution to PF Account / ESI Account made by the AO as, as such, such sums were not credited by the respective assessee to the employees' accounts in the relevant fund or funds (in the present case Provident Fund and/or ESI Fund on or before the due date as per the explanation to section 36(1)(va) of the Act i.e. date by which the concerned assessee was required as an employer to credit employees' contribution to the employees' account in the Provident Fund under the Provident Fund Act and/or in the ESI Fund under the ESI Act.”

However, the ld. AR before us has submitted that the due date for depositing the employee’s contribution towards PF/ESI should be seen from the date of the payment and not from the due date. In this regard, we note that the Jurisdictional Tribunal in the identical facts and circumstance in the case of Suzlon Energy Ltd.(supra) has restored this issue to the file of the AO for fresh adjudication. Therefore, respectfully following the same we are inclined to restore the issue on hand to the file of AO for fresh adjudication and in accordance to the provision of law as well as after considering the order of this Tribunal in the case of Suzlon Energy Ltd. (Supra). Thus, the ground of appeal of the assessee is allowed for statistical purpose.

ITA No.418/Ahd/2018 Mehta CAD CAM System Pvt. Ltd. Vs. ACIT Asst.Year – 2013-14 - 7 -

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