TAMIL NADU CEMENTS CORPORATION LIMITED,CHENNAI vs. ITO CORPORATE WARD 3(1), CHENNAI

आदेश / O R D E R PER SHRI S. JAYARAMAN, ACCOUNTANT MEMBER:

The Ld.CIT(A) dismissed the appeal. Aggrieved against the order of the Ld.CIT(A), the assessee filed this appeal with the following grounds of appeal:

1.1 The CIT(A) erred in upholding the disallowance of prior period expenses of Rs.17,06,000/-. 1.2 The CIT(A) erred in upholding that the failure on the part of the Appellant to book its expenses in the given time cannot be condoned and ought to have seen that the amounts have in essence crystallized only during the year. 1.3 The CIT(A) erred in holding that the amounts are only rectification and revision entries and went wrong in not appreciating the fact that it is only the net of the prior period income and prior period expenses. 2.1 The CIT(A) erred in upholding the disallowance of Rs.21,85,824/- viz. payment made by the Appellant as Employees Contribution to EPF. 2.2 The CIT(A) ought to have considered the various decisions of the Jurisdictional Tribunal and High Court which says that the due date as mentioned in Section 36(1)(va) includes the date of filing the Return; in the instant case the amounts being paid before the filing of the Return ought to have been allowed in full. 2.3 The CIT(A) erred in relying on the order of the Jurisdictional High Court in the case of Unifac Management Services India Pvt. Ltd. Vs. DCIT (409 ITR 225) and failed to see that the same is contrary to the judgment of the Hon’ble Division Bench. Any other ground that may be raised at the time of hearing. 3.

Therefore, we deem it fit to remit this issue to the AO for a fresh examination. The assessee shall lay relevant evidence/material in support of its contention and comply with the requirements of the AO in accordance with law. The AO on due examination and after affording due opportunity to the assessee, shall decide the issue on merits. On the issue of disallowance of employee’s contribution to the PF, which the assessee paid belatedly u/s.36(1)(va) but before the due date of filing the return of income, as argued by the Ld.DR on this issue, some of the High Court decisions are in favour of the Revenue while some other High Court decisions are in favour of the assessee. This issue was elaborately considered by this Tribunal in the case of DCIT v. Repco Home Finance (P)

Ltd., in dated 17.06.2020 reported in [2020] 117 Taxmann.com 233 (Chennai – Trib.), wherein, this Tribunal after examining the provisions of Sections 2(24)(x), 36(1)(va), 43B(b) and the decisions of the Hon’ble Apex Court in the cases of Alom Extrusions Ltd., reported in 319 ITR 306 (SC), Vinay Cement Ltd. 213 CTR 2108 (SC), the Delhi High Court decision in the case of Amil Ltd., reported in 321 ITR 508, the Madras High Court decisions in the case of CIT v. M/s.Industrial Security & Intelligence India Pvt. Ltd., and also the Hon’ble single judge decision in the case of Unifac Management Services India Pvt. Ltd. v. DCIT in WP No.5264 of 2020, WMP No.6461 of 2018 vide order dated 23.10.2018 reported in (2018) 409 ITR 225 (Mad), etc., this Tribunal held as under:

“……10.3.11 Thus, keeping in view strict and literal interpretation of provisions of Section 36(1)(va) of the 1961 Act read with Explanation 1 and Section 2(24)(x) of the 1961 Act , the assessee will not be entitled for deduction as the employee contribution towards PF received by assessee was deposited late beyond the time stipulated under the relevant statute governing PF. But, it is equally true that the Constitutional Courts viz. Hon’be High Courts and Hon’ble Supreme Court in India have powers to read down the provisions of the 1961 Act to make it workable and to avoid absurdity. On perusal of the decision of Hon’ble Supreme Court in the case of Alom Extrusion(supra) , it is observed that Hon’ble Supreme Court has elaborately discussed provisions of Section 36(1)(va) ,2(24)(x) and amendments made by Finance Act, 2003 to Section 43B of the 1961 Act, which amendments to Section 43B of the 1961 Act were held to be retrospective in nature. The Hon’ble Supreme Court also referred in its decision in Alom Extrusion (supra) to its earlier decision in CIT v. J.H. Gotla [1985] 156 ITR 323(SC) , para 10 that intention of the legislature is to be found out from the language used and if strict literal construction leads to an absurd result i.e. result not intended to be subserved by the object of the legislation found in the manner indicated before, then if another construction is possible apart from strict literal construction, then that construction should be preferred to the strict literal construction. Though equity and taxation are often strangers, attempts should be made that these do not remain always so and if a construction results in equity rather than in injustice, then such construction should be preferred to the literal construction. The Hon’ble Delhi High Court and Hon’ble Bombay High Court after considering, analyzing and interpreting the decision in the case of Alom Extrusion (supra) has held that it will apply both to employers and employee contribution and if the same is deposited before the due date of filing of return of income u/s 139(1) of the 1961 Act, the deduction shall be allowed , even if the same is deposited beyond the time stipulated as due date as prescribed under the provisions of Statute governing PF/ESI Act. Thus, the applicable provision as is contained in Section 36(1)(va) is read down by most of the Constitutional Courts including our Jurisdictional High Court (barring Hon’ble Gujarat High Court and Hon’ble Kerala High Court) to make it workable as otherwise the tax-payer will lose the deduction for ever if the employee contribution is not deposited within due date as prescribed under relevant statute , although the said contribution stood deposited by employer belatedly before the due date for filing of return of income u/s 139(1) of the 1961 Act and the amount will stood brought to tax as income keeping in view provisions of Section 2(24)(x) of the 1961 Act so far employee share of contribution towards PF ,ESI and other employees welfare funds is concerned. No doubt it is well cherished objective that there should not be an unjust enrichment of the employer of the amount which it collects from its employees towards employees share of PF , ESI and other employees welfare funds and in the ideal situation , the said amounts ought to have been deposited by employer which it collected from its employees, to the credit of employee with relevant funds within time stipulated as due date by respective statute governing PF/ESI etc. but at the same time if the employer does not deposit the contribution towards PF/ESI etc within due date as prescribed under relevant statute governing PF/ESI etc, the employers are visited with Interest for delayed deposit of PF/ESI as well Penalties for late deposit beyond the time stipulated under the relevant statute governing PF/ESI and other employees welfare funds. Reference is drawn to Section 7Q and 14 of the Employees’ Provident Funds and Miscellaneous Provisions Act, 1952 . Similarly, Hon’ble Madras High Court in the case of Industrial Security and Intelligence India Private Limited (supra) after considering and interpreting the decision of Hon’ble Supreme Court in the case of Alom Extrusion (supra) and Hon’ble Delhi High Court in the case of Aimil Limited(supra) held that deduction is to be allowed for belated payment of employee contribution to PF/ESI which is deposited beyond the due date stipulated under the relevant statutes governing PF/ESI , but the same stood deposited before the due date for filing of return of income as is prescribed u/s 139(1) of the 1961 Act. We at tribunal being inferior judicial body to Hon’ble Madras High Court , are bound by decision of Hon’ble jurisdictional

High Court in the case of Industrial Security(supra) as a cardinal principles of judicial discipline and to instill certainty among tax-payers, thus, Respectfully following the decision of Hon’ble Madras High Court in the case of Industrial Security and Intelligence(supra) , we allow the claim of the assessee for deduction of Rs. 6,31,788/- towards employees contribution to PF which was deposited late beyond due date as prescribed under relevant statute governing PF , but the same stood deposited to the credit of employees with relevant fund before the due date for filing of return of income as prescribed u/s 139(1) of the 1961 Act. The Revenue fails on this issue for the reasons cited above. We order accordingly”.

Order pronounced on the 03rd day of December, 2020, in Chennai.