SYAMA PRASAD MOOKERJEE PORT TRUST,KOLKATA vs. PCIT-5, KOLKATA

The captioned appeals filed by the assessee pertaining to the Assessment Years (in short “AY”) 2015-16 & 2016-17 are directed against separate orders u/s 263 of the Income Tax Act, 1961 (in short the “Act”) of ld. Pr. Commissioner of Income-tax-5, Kolkata [in short ld. “PCIT”].

The assessee is in appeal before this Tribunal raising the following grounds: i) Assessment Year 2015-16:

Ld. Counsel for the assessee submitted that as far as AY 2015-16 is concerned, ld. AO has conducted detailed enquiry for each and every issue raised in the notice u/s 142(1) of the Act and complete details have been filed by the assessee. As regards the alleged disallowances referred in the show cause notice u/s 263 of the Act relating to delay in deposit of employees’ contribution to PF & ESI, it is stated that the said amount has been deposited before due date of filing the return of income and this fact has been duly incorporated in the impugned order and it is judicially settled by various decisions of this Tribunal that if the assessee deposits the employees’ contribution to PF & ESI before the due date of filing .: 169 & 170/Kol/2021 Assessment Years: 2015-16 & 2016-17 Syma Prasad Mookerjee Port Trust. return of income u/s 139(1) of the Act, the same is allowable for the year under consideration. Similarly, for contribution to officers’ wives’ association, these expenses have been consistently claimed by the assessee and have been allowed in the past also. He has also submitted that for FY 2012-13 to 2014-15 this Tribunal has allowed such contribution of officers’ club as business expenditure and contribution to officers’ wives’ association as donation eligible for deduction u/s 80G of the Act.

As regards the issues in show cause notice for AY 2016-17 are concerned, ld. Counsel for the assessee submitted that ld. PCIT is alleging that the assessee has received interest on refund u/s 244A of the Act. However, no such refund has been received by the assessee till date and if considered, then necessary directions may be given to verify the correctness of the finding given by the ld. PCIT.

Per contra, ld. D/R vehemently argued supporting the order of ld. PCIT for AY 2015-16 & 2016-17.

We have heard rival contentions and perused the records placed before us.

The assessee has challenged the revisionary proceedings carried out by the ld. PCIT u/s 263 of the Act for AY 2015-16 & 2016-17 and is also challenged the finding that the order of ld. AO is erroneous and prejudicial to the interests of the Revenue.

Before we advert to the facts and law involved in this issue before us, let us revisit the law governing the issue before us. The .: 169 & 170/Kol/2021 Assessment Years: 2015-16 & 2016-17 Syma Prasad Mookerjee Port Trust. assessee has challenged in the first place, the very usurpation of jurisdiction by ld. PCIT to invoke his revisional powers enjoyed u/s 263 of the Act. Therefore, first we have to see whether the requisite jurisdiction necessary to assume revisional jurisdiction is existing in this case before the PCIT rightfully exercises his revisional power. For that, we have to examine as to whether in the first place the order of the Assessing Officer found fault by the Principal CIT is erroneous as well as prejudicial to the interest of the Revenue. For that, let us take the guidance of judicial precedence laid down by the Hon'ble Apex Court in Malabar Industries Ltd. vs. CIT [2000] 243 ITR 83(SC) wherein their Lordship have held that twin conditions need to be satisfied before exercising revisional jurisdiction u/s 263 of the Act by the ld. PCIT. The twin conditions are that the order of the ld. AO must be erroneous insofar as prejudicial to the interests of the Revenue. In the following circumstances, the order of the ld. AO can be held to be erroneous order, that is (i) if the ld. AO’s order was passed on incorrect assumption of fact; or (ii) incorrect application of law; or (iii) Ld. AO’s order is in violation of the principle of natural justice; or (iv) if the order is passed by the ld. AO without application of mind; (v) if the AO has not investigated the issue before him; [because AO has to discharge dual role of an investigator as well as that of an adjudicator] then in aforesaid any event the order passed by the ld. AO can be termed as erroneous order. Coming next to the second limb, which is required to be examined as to whether the actions of the ld. AO can be termed as prejudicial to the interests of Revenue. When this aspect is examined, one has to understand .: 169 & 170/Kol/2021 Assessment Years: 2015-16 & 2016-17 Syma Prasad Mookerjee Port Trust. what is prejudicial to the interests of the Revenue. The Hon’ble Supreme Court in the case of Malabar Industries (supra) held that this phrase i.e. “prejudicial to the interests of the revenue” has to be read in conjunction with an erroneous order passed by the ld. AO. Their Lordship held that it has to be remembered that every loss of revenue as a consequence of an order of ld. AO cannot be treated as prejudicial to the interests of the Revenue. When the ld. AO adopted one of the courses permissible in law and it has resulted in loss to the revenue, or where two views are possible and the ld. AO has taken one view with which the ld. PCIT does not agree, it cannot be treated as an erroneous order prejudicial to the interests of the Revenue “unless the view taken by the ld. AO is unsustainable in law”.

Now, examining the facts of the case for AY 2015-16 in light of above discussion on the legality of the provision of Section 263 of the Act, we find that in the show cause notice reference has been made for two issues namely delay in deposit of employees’ contribution to PF & ESI and contribution to officers’ club and officers’ wives’ association being not examined by the ld. AO in the assessment proceedings carried out u/s 143(3) of the Act.

We find that as far as the issue of delay in deposit of employees’ contribution to PF & ESI is concerned the facts remain uncontroverted and as stated by the ld. Counsel for the assessee at Bar that the alleged sum has been deposited before the due date of filing the return of income u/s 139(1) of the Act and in view of the ratio laid down by this Tribunal in the case of Lumino Industries Ltd. vs. ACIT, Circle-5(1), Kolkata in I.T.A. Page 9 of 15 .: 169 & 170/Kol/2021 Assessment Years: 2015-16 & 2016-17 Syma Prasad Mookerjee Port Trust. No.365/Kol/2021 for AY 2015-16 order dated 17.11.2021 no disallowance is called for. The relevant portions of this decision read as under: “17. Have heard both the parties. We note that the Finance Bill, 2021 has brought in an amendment which disallows the employees’ contribution made in PF and ESI if not made within the due date as prescribed by the respective statutes (PF and ESI Act). So after the amendment has been inserted according to Shri Miraj D Shah takes effect from 1st April, 2021 i.e. AY 2021-22 and subsequent assessment year and if the remittance of PF/ESI Employees’ Contribution is not made within the time prescribed by the PF/ESI Act then the remittance cannot be allowed as a deduction which is prospective in operation. Whereas according to Ld. CIT(A), the amendment brought in is clarificatory in nature so, retrospective in operation. So we have to adjudicate this issue whether the amendment brought in by Finance Act, 2021 is prospective or retrospective in operation. We note that before this amendment has been inserted by Finance Bill, 2021, the Hon’ble Jurisdictional Calcutta High Court in the case of Shri Vijayshree Ltd. Ltd.(supra), M/s Philips Carbon Black Ltd.(supra), M/s Coal India Ltd.(supra), M/s Akzo Nobel India Ltd. (supra) has held that the payment of employees’ contribution if made by an assessee before the due date of filing of return of income u/s 139(1) of the Act, is allowable as a deduction. We note that by Finance Act, 2021, the provision of Section 36(1)(va) as well as Section 43B has been amended to this extend by inserting the Explanation 2 whereby it is clarified that the provision of Section 43B shall not apply and shall be deemed never to have been applied for the purpose of determining the due date under this clause. For ready reference, we reproduce the Explanation-2 to Section 36(1)(va) as under: “Section 36(1)(va) Explanation-2 - For the removal of doubts, it is hereby clarified that the provisions of Section 43B shall not apply and shall be deemed never to have been applied for the purpose of determining the ‘due date* under this clause.”

We find that this amendment has been brought in the Act to provide certainty about the applicability of Section 43B in respect of belated payment of employees’ contribution. In order to test whether the amendment brought in later is retrospective or not one has to apply the test as laid by the Hon’ble Supreme Court in the case of M/s Snowtex Investment Ltd. (supra) wherein the Hon’ble Supreme court took note of the law laid down on this issue by the Constitution Bench in M/s Vatika Township Ltd. and held that the intent of the .: 169 & 170/Kol/2021 Assessment Years: 2015-16 & 2016-17 Syma Prasad Mookerjee Port Trust. Parliament/legislature need to be looked into for ascertaining whether the amendment should be retrospective or not. In Vatika Township Ltd. (supra) the Hon’ble Supreme Court held that the notes on clauses appended to the Finance Bill will throw light as to the legislative intent; because it has to be borne in mind that Parliament/legislature is aware of three concepts before an amendment is brought in, which can be discerned from reading of the “Notes on Clauses” to the Bill which are (i) prospective amendment with effect from a fixed date; (ii) retrospective amendment with effect from a fixed anterior date; and (iii) clarificatory amendments which are retrospective in nature. So when we adjudicate whether the view of Ld CIT(A) that the explanation 2 brought in by Finance Act, 2021 is retrospective, let us look at the “Notes on Clauses and the relevant clauses 8 & 9 of the Finance Bill, 2021 (supra) pertaining to the issue in hand which in clear and unambiguous terms spells out the intention of Parliament that the amendment shall take effect from 1st April, 2021 and therefore will accordingly apply to Assessment Year 2021-22 and subsequent years. So since the legislative intent is clear, the amendment brought in by Finance Act, 2021 on this issue as discussed is prospective and Ld. CIT(A) erred in holding otherwise. So till AY 2021-22, the Jurisdictional High Court’s view in favor of assessee will hold good and is binding on us. As discussed the decision of the Hon’ble Delhi High Court in Bharat Hotels Ltd. (supra) which was in favor of revenue has not considered the decision of the Co-ordinate Division Bench decision in M/s Aimil Ltd. (supra) which is in favour of assessee. So we note that later decision of the Delhi/Hyderabad Tribunal have followed the decision favouring assessee in the light of the Hon’ble Supreme Court decision in M/s Vegetable Products (supra). In the light of the aforesaid decision and relying on the ratio of the Hon’ble Supreme Court in the case of Vatika Township Pvt. Ltd. (supra) and M/s Snowtex Investment Ltd. (supra) and also taking note of the binding decision of the Hon’ble Jurisdictional Calcutta High Court on this issue before us in Shri Vijayshree Ltd. Ltd.(supra), M/s Philips Carbon Black Ltd.(supra), M/s Coal India Ltd.(supra), M/s Akzo Nobel India Ltd. (supra), we set aside the impugned order of Ld CIT(A) and direct the AO to allow the claim of deduction in respect of employees contribution shares towards ESI, PF, by the assessee before the due date of filing of return u/s 139(1) of the Act. Therefore the appeal of assessee succeeds and so, it is allowed in favor of assessee.”

Since the case of the assessee pertains to AY 2015-16 and the amendment brought in by Finance Act is prospective in nature effective from 01.04.2022, no disallowance is called for and therefore, we find no reason for setting aside this issue to the ld.

As regards the second issue for AY 2015-16 relating to contribution to officers’ club and officers’ wives’ association at Rs. 27,93,751/-, we find that similar disallowances were made by the then AOs for AY 2014-15 and the issue travelled up to this Tribunal vide order dated 21.02.20220 in and this Tribunal on observing that the assessee Port Trust has been contributing such contribution for the welfare of the employees for last four decades and has been consistently allowed by the ld. AO in the earlier assessment years and therefore, based on the principle of consistency and placing reliance on the judgment of the Hon’ble Allahabad High Court in the case of Commissioner of Income-tax vs Radhaswami Satsang (No. 2) reported in [1993] 201 ITR 493 (Allahabad) the claim of the assessee was allowed. Since this issue stands already settled and is decided in favour of the assessee, we find no reason restoring this issue to the file of the ld. AO as the order of the ld. AO cannot be treated as erroneous and prejudicial to the interests of the Revenue on this issue. Thus, the finding of the ld. PCIT is reversed. We, therefore, quash the impugned revisionary proceedings u/s 263 of the Act and restore the assessment order dated 29.12.2017 framed u/s 143(3) of the Act.

In the result, the appeal of the assessee for AY 2015-16 is allowed.

Now we take up for AY 2016-17. The only issue raised by ld. PCIT is that ld. AO has not examined the fact that the assessee Trust has received the refund of interest at Rs. 10,08,41,680/- u/s 244A of the Act which has not been offered to tax by the assessee in the return of income. Before us ld. Counsel for the assessee has stated that though the refund of interest of Rs. 10,08,41,680/- has been generated but the assessee has not received any such refund u/s 244A of the Act till date. Once such interest refund is received, the assessee agrees to offer it to tax. Even on perusal of the submissions made by the assessee before ld. PCIT, we find that certain refunds were received during the year for AY 2009-10 & AY 2010-11 which included interest of Rs. 1.28 Cr and 0.19 Cr which the assessee has already offered to tax in AY 2017-18 as the intimation was received on a later date. As far as the issue of the interest refund amounting to Rs. 10,08,41,680/- u/s 244A of the Act claimed by the ld. PCIT to have been given to the assessee during the year, the details of the said amount is as follows: Assessment Refund Interest Payment Sr.No. Year Amount Amount Date 1 2010 13740150 12503047 11-Apr-15 2 2009 50870250 51347106 11-Apr-15 19-Aug- 3 2010 269373240 36991527 15 Total 10,08,41,680

The above information was obtained by the Revenue Audit party from ITS data. Ld. PCIT has observed that the above said interest amount should have been offered to income by the I.T.A. Nos.: 169 & 170/Kol/2021 Assessment Years: 2015-16 & 2016-17 Syma Prasad Mookerjee Port Trust. assessee and since the ld. AO has not examined this aspect, the same deserves to be restored to ld. AO as the order of the ld. AO is erroneous and prejudicial to the interests of the Revenue. However, on the other hand, a claim of the assessee through the ld. Counsel for the assessee before us is that no such amount has been received by the assessee Trust till date. Copies of bank statement were filed before the ld. PCIT and claimed that no such amount has been received. Ld. PCIT has not made any effort to examine the aforesaid claim made by the assessee that no such refund has been received in its bank account by conducting necessary enquiry but still since the ITS data is providing some details showing that the assessee has been paid Rs. 10,08,41,680/- as interest u/s 244A of the Act during the FY 2015-16 (AY 2016-17), the matter needs to be examined in detail. We, therefore, confirm the action taken by the ld. PCIT invoking the provision u/s 263 of the Act directing the ld. AO for setting aside the assessment order passed u/s 143(3) of the Act dated 28.09.2018 only to the extent of verifying that whether the assessee has received any such refund of interest u/s 244A of the Act at Rs. 10,08,41,680/- in its bank accounts. We therefore, under the given facts and circumstances of the case and since ld. PCIT has specifically pointed out the ITS data about the interest refund u/s 244A of the Act given to the assessee during FY 2015-16, uphold the order of the ld. PCIT u/s 263 of the Act. Thus, appeal of the assessee for AY 2016-17 is dismissed. .: 169 & 170/Kol/2021 Assessment Years: 2015-16 & 2016-17 Syma Prasad Mookerjee Port Trust.

In the result, the assessee’s appeal for AY 2015-16 is allowed and for AY 2016-17 is dismissed. Kolkata, the 6th June, 2022. Sd/- Sd/- [Rajpal Yadav] [Manish Borad] Vice President Accountant Member Dated: 06.06.2022 Bidhan (P.S.) Copy of the order forwarded to: