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Income Tax Appellate Tribunal, DELHI BENCHES “B” : DELHI
Before: SHRI BHAVNESH SAINI & SHRI B.R.R. KUMAR
This appeal by Revenue has been directed against the Order of the Ld. CIT(A)-29, New Delhi, Dated 25.10.2016, for the A.Y. 2013-2014, on the following grounds :
1. That on the facts and in the circumstances of the case, the Ld. CIT(A) has erred in law and on facts in 2 ITA.No.238/Del./2017 M/s. Digicall Teleservices P. Ltd., New Delhi. deleting the disallowance of employee’s contribution to the provident fund (PF) of Rs.1,43,17,261/- and the employee’s contribution to the ESI of Rs.68,20,240/- in view of the provisions of section 36(1)(va) rws 2(24)(x) of the I.T. Act, 1961 without appreciating the fact that the assessee has made [payments of these amounts to the respective funds after the due dates as specified by rules of relevant funds.
2. That on the facts and in the circumstances of the case, the Ld. CIT (A) had erred in law and on facts in deleting the above said disallowances without appreciating the findings of the Kerala High Court in the case of Commissioner of Income Tax, Cochin v. Mercham Ltd., [2015] 61 taxmann.com 119 (Kerala) where the Hon’ble high Court has held that the section 36(1)(va) and section 43B(b) operate in different fields i.e. the former takes care of employee’s contribution and the latter of employer’s contribution and so far as the employee’s 3 ITA.No.238/Del./2017 M/s. Digicall Teleservices P. Ltd., New Delhi. contribution received is concerned, it should have been paid on or before the due date prescribed under the relevant statutes as per section 36(l)(va) to be eligible for deduction.
3. That on the facts and in the circumstances of the case, the Ld. CIT (A) erred in law and on facts in deleting the above said disallowances without appreciating that if the intention of a particular provision statute can be gathered from language used by the legislation, then one is bound to abide by the language used therein in order to ascertain the intention. There was a clear logic behind section 36(1 )(va) and explanation thereof since the legislature intended that the amount received towards contribution of the employee was money belonging to the employee and the assessee was not entitled to utilize the said fund and enrich himself.”
2. Briefly the facts of the case are that during the assessment proceedings, it is noticed from the return of income that the assessee has not discharged its liabilities as 4 ITA.No.238/Del./2017 M/s. Digicall Teleservices P. Ltd., New Delhi. specified in section 2(24)(x) of the Act regarding payment of provident fund and ESI contribution within the specified dates. It is noticed that there is delay in deposit of provident fund in almost all the months during the year. The due date of payment in the case of contribution to provident fund is 20th of each succeeding month which includes grace period of five days as per CBFC's Circular No. E-128(1)60-11 I dated 19.03.1964 as modified by circular number E-11/128 (14-13 amendment)/73 dated 24.10.1973 which allows 05 days grace period to the employers for payment of PF contribution, administrative charges and DLI charges. The employees’ contribution to the provident fund and ES1C is an allowable deduction under section 36(1)(va) of the Act only if the payment is made on or before the due date prescribed in the statute. As per the circular referred to above, the amount has to be deposited in fund by 20lh of the succeeding month, but, the assessee has failed to deposit the provident fund within the stipulated period in most of the cases. The A.O. has noted all the details in the assessment order and came to the finding that the amount
5 ITA.No.238/Del./2017 M/s. Digicall Teleservices P. Ltd., New Delhi. claimed by the assessee is not allowable as deduction under section 36(1)(va) of the Act. The A.O, accordingly, made addition of Rs.1,43,17,269/-. The A.O. further noted that as per details furnished there is a delay in deposit of employees contribution to ESIC, details of the same are noted in the assessment order that all the payments are belated as against the Rules. The A.O. noted that the due date for depositing employees contribution towards ESIC is 16th of succeeding month. Even if grace period of 05 days is given, the same is to be deposited by 21st of succeeding month, which the assessee has failed to comply in most of the cases as reproduced in the assessment order. The A.O, accordingly, disallowed Rs.68,20,240/- under section 2(24)(x) read with section 36(1)(va) of the I.T. Act, 1961. The addition was accordingly made. The Ld. CIT(A) deleted both the additions because of following his appellate order for preceding A.Ys. 2002-2003 to 2005-2006 and 2007-2008 and 2008-2009.
We have heard the Ld. D.R. who has submitted that the issue is covered in favour of the Revenue by 6 ITA.No.238/Del./2017 M/s. Digicall Teleservices P. Ltd., New Delhi. Judgment of Hon’ble Delhi High Court in the case of CIT, Delhi vs., M/s. Bharat Hotels Ltd., 410 ITR 417 (Del.) in which in paras 8 and 9 the Hon’ble Delhi High Court has held 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 ITATs 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 7 ITA.No.238/Del./2017 M/s. Digicall Teleservices P. Ltd., New Delhi. deduction from its returns.
In view of this discussion, the Revenues 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.”
However, none appeared on behalf of the assessee, despite notifying the date of hearing through registered post.
Considering the facts of the case in the light of decisions of Hon’ble Delhi High Court in the case of CIT, Delhi vs., M/s. Bharat Hotels Ltd., (supra), we set aside the Order of the Ld. CIT(A) and restore the matter in issue to the file of Ld. CIT(A) with a direction to re-decide the issue in the light of decisions of Hon’ble Delhi High Court in the case of CIT, Delhi vs., M/s. Bharat Hotels Ltd., (supra). The Ld. CIT(A) need not to follow his order for preceding assessment
8 ITA.No.238/Del./2017 M/s. Digicall Teleservices P. Ltd., New Delhi. years in the case of the assessee because of the above decision. The Ld. CIT(A) shall give reasonable, sufficient opportunity of being heard to the assessee as well as A.O.
In the result, appeal of the Department allowed for statistical purposes.
Order pronounced in the open Court.