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Before: Shri Duvvuru RL Reddy & Shri G. Manjunatha
O R D E R
PER DUVVURU RL REDDY, JUDICIAL MEMBER:
This appeal filed by the Revenue is directed against the order of the ld. Commissioner of Income Tax (Appeals)-3, Chennai dated 29.12.2017 relevant to the assessment year 2013-14. The effective ground raised by the Revenue is that the ld. CIT(A) has erred in deleting the addition made towards non-payment of employees contribution of EPF and ESI to the tune of ₹.61.71 lakhs, which was disallowed under section 36(1)(va) of the Income Tax Act, 1961 [“Act” in short].
Brief facts of the case are that the assessee has filed its return of income for the assessment year 2013-14 on 30.11.2013 admitting total income of ₹. NIL after computing a current year loss of ₹.63,76,34,493/-. The case was selected for scrutiny. After considering the details furnished against statutory notices, the Assessing Officer completed the assessment under section 143(3) of the Act by disallowing the belated remittance of employees’ contribution of EPF and ESI to the tune of ₹.61,71,822/- under section 36(1)(va) of the Act. On appeal, the ld. CIT(A) allowed the claim of the assessee by following various decisions including the decision of the Hon’ble Jurisdictional High Court in the case of CIT v. Industrial Security & Intelligence India Pvt. Ltd. in TCA Nos. 585 and 586 of 2015 dated 24.07.2015.
Aggrieved, the Revenue is in appeal before Tribunal. By relying on the grounds of appeal, the ld. DR has argued that unlike the employers contribution, the employees part of contribution to EPF and ESI are not allowable under section 43B of the Act since the said contributions are not paid within the due dates as specified in the respective Acts, and such unpaid employees contributions are liable for disallowance under section 36(1)(va) r.w. section 2(24)(x) of the Act. On the other hand, the ld. Counsel for the assessee has submitted that the issue involved in this appeal is squarely covered in favour of the assessee by the decision of the Hon’ble Jurisdictional High Court and various other decisions of the Tribunal.
We have heard both the sides, perused the materials available on record and gone through the orders of authorities below. Against the disallowance of ₹.61,71,822/- under section 43B of the Act towards delayed remittance of Provident Fund contribution, the Assessing Officer found that the assessee had remitted belatedly beyond the due dates under the relevant statutes and therefore, the same was disallowed and brought to tax. Before the ld. CIT(A), the assessee has submitted that since the entire amounts have been remitted before the due date of filing of return of income under section 139(1) of the Act, the same should be allowed as deduction under section 43B of the Act. By following the decision of the Hon’ble Madras High Court in the case of CIT v. Industrial Security & Intelligence India Pvt. Ltd. (supra) and various other decisions, the ld. CIT(A) directed the Assessing Officer to delete the addition made on account of delayed payment of EPF and ESI. We have perused the decision in the case of CIT v. Industrial Security & Intelligence India Pvt. Ltd. (supra), wherein, the Hon’ble Jurisdictional High Court has observed and held as under: “2. The brief facts of the case are as follows: The respondent/assessee filed its return of income for the assessment years in question. The said returns were processed and were not selected for scrutiny. Subsequently, the Assessing Officer noticed that there was escapement of income and hence reopened the assessments under Section 147 of the Income Tax Act by issuing notice under Section 148 of the Income Tax Act. While completing the re-assessment, the Assessing Officer disallowed the expenses claimed by way of Employee's contribution to PF and ESI holding that the assessee had not paid the employee's contribution of PF and ESI within the due dates specified under the respective Act. Aggrieved by the said order of assessment, the assessee preferred appeals before the Commissioner of Income Tax (Appeals) challenging the reopening as well as the disallowance. The Commissioner of Income Tax (Appeals) sustained the order of the assessment, thereby dismissed the appeals. Aggrieved by the same, the assessee preferred further appeals before the Tribunal. The Tribunal relied upon the decision of the Supreme Court in the case of CIT V. Alom Extrusions Ltd. reported in 319 ITR 306, decision of the Delhi High Court in the case of CIT V. Aimil Ltd. reported in 321 ITR 508 and that of the Co-ordinate Bench of the Tribunal in the case of M/s. Venkateswara Electrical Industries P. Ltd. V. DCIT in 1345 and 1636/Mds/ 2014 dated 28.8.2014 held as follows: “5. Heard both sides. Perused orders of lower authorities and the decisions relied on before us. It is not in dispute that all these payments of provident fund Rs.16,20,571/- and ESI Rs.17,51,490/- were made beyond the grace period/due date allowed under Provident Fund & ESI Acts but before due date for filing of income-tax return. This issue has been decided in favour of the assessee by various High Courts following the decision of the Hon'ble Supreme Court in the case of CIT Vs. Alom Extrusions Ltd. (319 ITR 306), wherein the Hon'ble Supreme Court held that omission of second proviso to section 43B and amendment of first proviso by Finance Act, 2003 are curative in nature and are effective retrospectively and thus with effect from 1.4.1988 i.e. the date of insertion of first proviso. The co- ordinate Bench of this Tribunal considering a similar issue in the case of M/s.Venkateswara Electrical Industries P. Ltd. Vs. DCIT (supra) following the decision of Hon'ble Delhi High Court in the case of CIT Vs. Aimil Ltd. (321 ITR 508) held that even the employees contribution to provident fund is to be allowed as deduction if it is paid within due date for filing of return. While holding so, the Tribunal observed as under:- “6. We have heard the submissions made by the representatives of both the sides and have perused the orders of the authorities below, as well as the judgments/decisions relied on by the ld. Counsel for the assessee. It is an un- disputed fact that there has been delay in remittance of employees contribution of ESI and Provident Fund in both the AYs i.e., 2008-09 & 2009-10. It is equally un-disputed that the assessee has deposited the amount towards employees contribution of ESI and Provident Fund before the due date of filing of return. The Hon'ble Delhi High Court in the case of Cit Vs. Aimil Ltd., reported as 321 ITR 508 has held that if the assessee had deposited employees contribution towards Provident Fund and ESI after due date as prescribed under the relevant Act but before the due date of filing of return under the Income Tax Act, no disallowance could be made in view of the provisions of section 43B as amended by the Finance Act, 2003. The decision of the Hon'ble Delhi High Court has been followed by the co-ordinate bench of the Tribunal in the case of JCIT Vs. M/s. S.M. Apparels (P) Ltd. (supra). The Tribunal has been consistently following the view taken by the Hon'ble Delhi High Court. Accordingly, we hold that the assessee is entitled to claim expenditure on employee's contribution towards ESI and Provident Fund for both the AYs. Accordingly, both the appeals of the assessee are allowed.”
Respectfully following the above, decision, we direct the Assessing Officer to delete disallowances made under section 43B of the Act for both these assessment years. The grounds of appeal
raised by the assessee are allowed."
3. Aggrieved by the said order of the Tribunal, the Revenue is before this Court.
4. Heard learned Standing Counsel appearing for the Revenue and perused the materials placed before this Court.
5. We find that the Tribunal has rightly relied on the decision of the Supreme Court in the case of CIT V. Alom Extrusions Ltd. reported in 319 ITR 306, whereby, the Supreme Court held that omission of second proviso to Section 43B and amendment to first proviso by Finance Act, 2003 are curative in nature and are effective retrospectively, i.e., with effect from 1.4.1988 i.e., the date of insertion of first proviso. The Delhi High Court in the case of CIT V. Aimil Ltd. reported in 321 ITR 508 held that if the assessee had deposited employee's contribution towards Provident Fund and ESI after due date as prescribed under the relevant Act, but before the due date of filing of return under the Income Tax Act, no disallowance could be made in view of the provisions of Section 43B as amended by Finance Act, 2003.
6. In the present case, the assessee had remitted the employees contribution beyond the due date for payment, but within the due date for filing the return of income. Hence, following the above-said decisions, we find no reason to differ with the findings of the Tribunal. Accordingly, we find no question of law much less any substantial question of law arises for consideration in these appeals. Accordingly, both the Tax Case (Appeals) stand dismissed. No costs. Consequently, M.P.No.1 of 2015 is also dismissed.” 4.1 The ld. DR could not controvert the above findings of the Hon’ble Jurisdictional High Court. Moreover, in this case, on perusal of the details of break-up of the PF/ESI contribution remitted on the actual dates as given in the assessment order, we find that the assessee has remitted the belated remittance of the employee’s contribution to PF and ESI much before the filing of the return of income under section 139(1) of the Act on 30.11.2013 for the assessment year 2013-14. In view of the above facts and respectfully following the above decision of the Hon’ble Jurisdictional High Court, we find no infirmity in the order passed by the ld. CIT(A) on this issue and accordingly, the ground raised by the Revenue stands dismissed.
In the result, the appeal filed by the Revenue is dismissed. Order pronounced on the 11th February, 2021 at Chennai.