SAI SERVICE AGENCY(B0MBAY) P LTD,PUNE vs. DEPUTY COMMISSIONER OF INCOME-TAX, CIRCLE -8, PUNE

This assessee’s appeal for Assessment Year 2010-11 is directed against the Commissioner of Income Tax(Appeals), Pune- 8’s order dated 05.08.2019 passed in case no.PN/CIT(A)-8/DCITC Cir-1(2)/202/18-19/188, in proceedings u/s.143(3) r.w.s. 147 of the Income Tax Act, 1961 [in short “the Act”].

The assessee’s first and foremost substantive ground challenges both the lower authorities action disallowing its employees PF and ESIC payments of Rs.228952/- on the ground that the same had been paid after the “due date” prescribed in the A.Y. 2017-18 Sai Service Agency(Bombay) Pvt. Ltd., (A) corresponding statute(s) but before the “due date” of filing return under section 139(1) of the Act. The same is found to be no more res-integra in view of several judgments allowing deduction under section 36(1)(va) of employees’ share of contribution deposited after due date under the respective Acts but before the date prescribed under section 139 of the Act. Hon’ble Himachal Pradesh high court in CIT vs. Nipso Polyfabriks Ltd. (2013) 350 ITR 327 (HP) has held that there exists no difference between employees or employer’s contribution and both are to be allowed as deduction if deposited before the due date of filing Return of Income.

Hon’ble Jurisdictional High Court in the case of CIT Vs. Ghatge Patil Transports Ltd, IT APPEAL No’s.1002 & 1034 of 2012 vide order dated 14/10/2014 also decided the instant issue in assessee’s favour as under : “ In this manner, the amendment provided by Finance Act, 2003 put on par the benefit of deductions of tax, duty, cess and fee on the one hand with contributions to various Employees' Welfare Funds on the other. All this came up for consideration before the Hon'ble Supreme Court in the case of Alom Extrusions Ltd. (supra). The Tribunal in the case at hand relied upon the said judgment. There is no reason to fault the order passed by the Tribunal. We are of the view that the decision of the Supreme Court in Alom Extrusions Ltd. (supra) applies to employees' contribution as well as employers' contribution. Question Nos.2, 3 & 4 are accordingly answered in favour of the assessee and against the revenue.”

At this juncture, it is relevant to mention that the Finance Act, 2021 has inserted Explanation 2 below section 36(1)(va) providing that the provisions of section 43B shall not apply for the purpose of A.Y. 2017-18 Sai Service Agency(Bombay) Pvt. Ltd., (A) determining the due date under this clause w.e.f. 01.04.2021. The effect of this amendment is that if the amount of employees’ contribution towards EPF, ESI, etc is delayed by an employer beyond the due date under the respective Acts, the disallowance will be called for notwithstanding the fact that it was deposited before the due date under section 139 of the Act. The Memorandum explaining the provisions of the Finance Bill, 2021, provides that this amendment will take effect from 1st April, 2021 and will, accordingly apply in relation to Assessment Year 2021-2022 and subsequent assessment years. Since the assessment year under consideration is 2018-19, which is anterior to the amendment carried out with effect from Assessment Year 2021-22, we hold that the foregoing proposition of law applies to the facts and circumstances of the instant case thereby not warranting any disallowance since the amount in question was admittedly deposited before “due date” under section 139(1) of the Act.

Respectfully following the decisions of the Hon’ble High Court(supra) mentioned above, it is held that the payment of employee’s contribution beyond the due date mentioned in the relevant statute but before the due date of filling the return of income u/s 139(1) is allowable expenditure and therefore, the addition is directed to be deleted.

Ms.Khare does not press for the assessee’s second substantive ground challenging section 14A r.w.rule 8D disallowance of Rs.51,356/- keeping in mind smallness thereof. Rejected accordingly.

Next comes section 80G disallowance of Rs.11 lakhs made in both the lower proceedings for want of the assessee’s revised return filed before the Assessing Officer. The Revenue quotes section 80A(5) read with section 80C of the Act as well as hon’ble apex court landmark decision in Goedtz India Ltd. [2006] 284 ITR 323 (SC) that both the lower authorities have rightly disallowed the impugned claim.

We find no merit in the Revenue’s instant technical arguments since the foregoing twin provisions i.e. section 80A(5) read with section 80AC apply only in case of deduction claimed under section 10A, 10AA, 10B or 10BA and the heading “C” to Chapter-VI of the Act in former and under similar provisions in latter instance; respectively not specifically covering section 80G in issue. Hon’ble apex court’s foregoing decision also makes it clear in para 4 thereof that appellate authorities’ jurisdiction to entertain such a new claim even in absence a revised return has nowhere been impinged upon in any manner whatsoever. Faced with this situation, we restore the A.Y. 2017-18 Sai Service Agency(Bombay) Pvt. Ltd., (A) assessee’s section 80G deduction herein back to the Assessing Officer for his appropriate adjudication within three effective opportunities of hearing. Ordered accordingly.

Learned counsel does not press assessee’s fourth substantive ground seeking education-cess deduction of Rs.2,94,404/-. Rejected accordingly.

This assessee’s appeal is partly allowed in above terms.