EAGLE TRANS SHIPPING & LOGISTICS (INDIA) PVT. LTD.,,NEW DELHI vs. ACIT, NEW DELHI

Private Ltd. (hereinafter referred to as the ‘assessee’) by filing the present appeal sought to set aside the impugned order dated 16.11.2016 passed by the Commissioner of Income - tax (Appeals)-3, New Delhi qua the assessment year 2013-14 on the grounds inter alia that :-

Briefly stated the facts necessary for adjudication of the issue at hand are : Assessee is into the business of Freight Forwarder (shipping) which buys freight space in the shape of container of ships from shipping lines and sells the same to the Indian importer and exporter. During the assessment proceedings, Assessing Officer (AO) noticed that from Annexure 2 to Annexure 6 of the Form 3CD filed by the assessee that payment of Rs.4,29,110/- towards employees contribution to PF & ESI was deposited after due date prescribed in the Income-tax Act, 1961 (for short ‘the Act’). Declining the contentions raised by the assessee, AO proceeded to make addition of Rs.4,29,110/- u/s 2(24)(x) read with section 36(1)(v) of the Act.

Assessee carried the matter by way of an appeal before the ld. CIT (A) who has confirmed the addition by partly allowing the appeal. Feeling aggrieved, the assessee has come up before the Tribunal by way of filing the present appeal.

We have heard the ld. Authorized Representatives of the parties to the appeal, gone through the documents relied upon and orders passed by the revenue authorities below in the light of the facts and circumstances of the case.

Undisputedly, assessee has made payment towards employees contribution of PF& ESI after due date prescribed in the Act which is tabulated for ready perusal as under :-

Ld. AR for the assessee challenging the impugned order contended that since the assessee company has made the payment of employees contribution on account of PF & ESI before the date of filing the return by the assessee, the same is within due date for the purpose of section 36(1)(va) of the Act read with section 2(24)(x) and also relied upon the decision of Hon’ble Delhi High Court in case of Pr. CIT-7 vs. Planman HR Pvt. Ltd. – 2017 (9) TMI 1688 – Delhi High Court and the decision rendered by Hon’ble Supreme Court in CIT vs. M/s. Alom Extrusions Ltd. – (2009) 319 ITR 306 (SC).

However, on the other hand, in order to repel the arguments addressed by the ld. AR for the assessee, ld. DR for the Revenue relied upon the decision rendered by Hon’ble High Court of Gujarat in case of CIT-II vs. Gujarat State Road Transport Corporation in Tax Appeal No.637 of 2013 & ors. order dated 26.12.2013 and contended that the appeal is liable to be dismissed.

Decision of the Hon’ble Supreme Court relied upon by the assessee cited as CIT vs. Alom Extrusions Ltd. (supra) is not applicable to the facts and circumstances of the case because Hon’ble Supreme Court has decided the issue in Alom Extrusions Ltd. case qua employers contribution as per section 43B(b) of the Act and not qua employees contribution u/s 36(1)(va) of the Act.

Hon’ble jurisdictional High Court in case of CIT vs. Bharat Hotels Ltd. (2019) 410 ITR 417 (Delhi) (supra) decided the identical issue qua delayed deposit of employees contribution on account of PF & ESI against the assessee by holding that assessee would be entitled to deduction in terms of section 36(1)(va) of the Act to the extent if the employees contribution on account of PF & ESI is deposited on or before the due date, and the employees contribution on account of PF & ESI deposited beyond the stipulated period would not make the assessee company entitled to claim deduction from its return. For ready perusal, operative part of the judgment of CIT vs. Bharat Hotels Ltd. (supra) is extracted as under :-

Having regard to the specific provisions of the Employees' Provident Funds Act and ESI Act as well as the concerned notifications which granted a grace period of 5 days (which appears to have been late withdrawn recently on 08.01.2016), we are of the opinion that the ITAT's decision in this case was not correct. The assessee undoubtedly was entitled to claim the benefit and properly treat such amounts as having been duly deposited, which were in fact deposited within the period prescribed (i.e. 15 + 5 days in the case of EPF and 21 days + any other grace, period in terms of the extent notification). As far as the amounts constituting deductions from employees' salaries towards their contributions, which were made beyond such stipulated period, obviously the assessee was not entitled to claim the deduction from its returns.

In view of this discussion, the Revenue's appeal is partly allowed. The AO is directed to examine the contributions made with reference to the dates when they were actually made and grant relief to such of them which qualified for such relief in terms of the prevailing provisions and notifications. We also clarify that the assessee would be entitled to deduction in terms of Section 36(1)(va) of the Act.”

In view of what has been discussed above and following the decision rendered by the Hon’ble jurisdictional High Court in case of CIT vs. Bharat Hotels Ltd. (supra), we are of the considered view that the assessee company is not entitled for deduction of Rs.4,29,110/- u/s 36(1)(va) of the Act claimed on account of depositing the employees contribution towards ESI & PF as per provisions contained u/s 2(24)(x) read with section 36(1)(va) after due date which is evident from table extracted in preceding para no.5. So, the case laws relied upon by the ld. AR for the assessee is not applicable to the facts and circumstances of the case. Consequently, finding no illegality or perversity in the impugned order passed by the ld. CIT (A), appeal filed by the assessee is hereby dismissed. Order pronounced in open court on this 25th day of July, 2019.