DCIT, CIRCLE-4(2), MUMBAI vs. M/S HINDUSTAN ORGANIC CHEMICALS LTD, MUMBAI

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

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:

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