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Income Tax Appellate Tribunal, “H” Bench, Mumbai
PER RAVISH SOOD, JM
The present appeal filed by the revenue is directed against the order passed by the CIT(A)-9, Mumbai, dated 27.11.2018, which in turn arises from the assessment order passed by the A.O under Sec. 143(3) of the Income Tax Act, 1961(for short „Act‟), dated 26.08.2016 for A.Y. 2014-15. The revenue has assailed the impugned order on the following effective ground of appeal
before us: “1. On the facts and in the circumstances of the case and in law, the ld. CIT(A) erred in deleting the additions made on account of delayed payments of PF & ESIC.”
2. Briefly stated, the assessee company which is engaged in the business of manufacturing and trading of chemicals had e-filed its return of income for A.Y. 2014-15 on 28.11.2014, declaring its total income at Rs.nil (after showing the current year loss at Rs.140,24,92,234/-). The return of income filed by the assessee was processed as such under DCIT, Circle-4(2)(2) Vs. M/s Hindustan Organic Chemicals Ltd. Sec.143(1) of the Act. Subsequently, the case of the assessee was selected for scrutiny assessment under Sec. 143(2) of the Act.
During the course of the assessment proceedings it was observed by the A.O that the assessee had delayed the deposit of the employees contribution to ESIC and PF amounting to Rs.2,37,46,611/-. Observing, that the assessee who was obligated to deposit the aforesaid amount within the „due date‟, had however failed to do so, the A.O disallowed the same under Sec.36(1)(va) r.w.s. 2(24)(x). On the basis of his aforesaid deliberations the A.O assessed the loss of the assessee company at (-) Rs.1,37,87,45,780/-.
Aggrieved, the assessee assailed the assessment order before the CIT(A). Observing, that the issue was squarely covered by the decision of the Hon‟ble High Court of Bombay in the assesses own case in CIT-4 Vs. Hindustan Organic Chemicals Ltd. (ITA No.399 of 2012, dated 11.07.2014) for A.Y. 2006-07 and the order of the ITAT Mumbai in dated 13.01.2012 for A.Y. 2007-08, the CIT(A) vacated the disallowance of Rs.2,37,46,511/- that was made by the A.O under Sec. 36(1)(va) r.w.s. 2(24)(x) of the Act.
The revenue being aggrieved with the order of the CIT(A) has carried the matter in appeal before us. As observed by us hereinabove, the A.O taking note of the fact that the assessee had delayed the deposit of the employees contribution towards ESIC and PF of Rs.2,37,46,511/-, had disallowed the same as per the „Explanation‟ to Sec. 36(1)(va) r.w. Sec. 2(24)(x) of the Act. Admittedly, though the assessee had delayed the deposit of the aforesaid amounts, however, the same was deposited before the „due date‟ of filing of its return of income for the year under consideration. We are unable to accept the view taken by the A.O, that the provisions of Sec.43B would not be applicable as regards the employees contribution to PF & ESIC, as the same would continue to be governed by Sec. 36(1)(va) r.w.s. 2(24)(x) of the Act. As observed by us hereinabove, the issue is squarely covered by the judgment of the Hon‟ble High Court of Bombay in the assesse‟s own case in CIT-4 Vs. Hindustan Organic Chemicals Ltd.(ITA No. 399 of 2012, dated 11.02.2014) for A.Y. 2006-07. Observing, that as the assessee had deposited the employees contribution of provident fund within the „due date‟ of filing of its return of income, therefore, the same was allowable as a deduction under Sec. 43B of the Act, the Hon‟ble High Court had in its aforesaid order observed as under:
DCIT, Circle-4(2)(2) Vs. M/s Hindustan Organic Chemicals Ltd.
5. We find no merit in the aforestated contention. Section 43B of the Income Tax Act 1961 was inserted in the Act with effect from 1 St April 1984 by which the mercantile system of accounting with regard to tax, duty and contribution to welfare funds stood discontinued and under section 43B of the Act, it became mandatory for the Assessees to account for the aforestated items not on a mercantile basis but on a cash basis. This situation continued between 1st April 1984 and 1st April 1988 when Parliament again amended section 43B and inserted the first proviso thereto vrd 5 1TXA399/12 which inter alia laid down that in the context of any sum payable by the Assessee by way of tax, duty, cess or fee, if paid by the Assessee even after the closing of the accounting year but before the date filing of the return of income, the Assessee would be entitled to the deduction under section 43B on actual payment basis and such deduction would be admissible for that accounting year. This proviso however did not apply to contributions made by the Assessees to the Labour Welfare Funds. In view thereof, by the Finance Act 1988, the second proviso came to be inserted which read as under:-
Provided further that no deduction shall, in respect of any sum referred to in clause (b), be allowed unless such sum has actually been paid during the previous year on or before the due date as defined in the Explanation below clause (va) of sub-section (1) of section 36." Thereafter, the said second proviso was further amended vide Finance Act 1989 with effect from 1st April 1989 which read as under:- "Provided further that no deduction shall, in respect of any sum referred to in clause (b), be allowed unless such sum has actually been paid in cash or by issue of a cheque or draft or by any other mode on or before the due date as defined in the Explanation below clause (vu) of sub- section (1) of section 36, and where such payment has been made otherwise than in cash, the sum has been realised within fifteen days from the due date."
On a plain reading of the above provisos, it became ex-facie clear that the Assessees - employers were entitled to deductions only if the contributions to any fund for the welfare of the employees stood credited on or before the due date given in the relevant Act.
However, the second proviso once again created further difficulties for the Assessees - employers. Therefore, Industry once again made representations to the Ministry of Finance who, after taking cognizance of the difficulties, inserted an amendment vide Finance Act, 2003 which came into force with effect from 1st April 2004. In other words, with effect from 1st April 2004, two changes were made in section 43B viz. deletion of the second proviso to section 43B and further amendment in the first proviso which reads as under:- "Provided that nothing contained in this section shall apply in relation to any sum which is actually paid by the assessee on or before the due date applicable in his case for furnishing the return of income under sub- section (1) of section 139 in respect of the previous year in which the liability to pay such sum was incurred as aforesaid and the evidence of such payment is furnished by the assessee along with such return." Therefore, the amendments introduced by the Finance Act, 2003 put on par the benefit of deductions of tax, duty, cess and fee on the one hand with contributions to various Employee's Welfare Funds on the other.
The section referred to above viz. section 43B and the amendments thereto came up for consideration before the Hon'ble Supreme Court in the case of Commissioner of Income Tax v/s Alom Extrusions Ltd., reported in (2009) 319 ITR 306 (SC) when the Supreme Court inter alia held that