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Income Tax Appellate Tribunal, MUMBAI BENCH “H”, MUMBAI
Before: Shri G Manjunatha & Shri Ravish Sood
O R D E R Per G Manjunatha, AM : This appeal filed by the revenue is directed against the order of the CIT(A)-20, Mumbai dated 16-02-2018 and it pertains to AY 2014-15. The revenue has raised the following grounds of appeal:-
"Whether on the facts and in the circumstances of the case and in law, the Ld. CIT(A) was justified in deleting the addition made by the A.O. considering the income received by the assessee from his employees amounting to Rs. 48,01,342/- as per section 2(24)(x) r.w.s 36(i)(va) of the I T Act, 1961 which was not deposited by the 2 ITA 3123/Mum/2018 assessee in due time by considering the same to be a allowable deduction under section 43 B. "
The brief facts of the case are that the assessee company is engaged in the business of manufacturing PVC pipes, agri-fittings, gamela, suction hose pipes & fittings, flush tank and toilet seat cover, molded furniture, etc. filed its return of income for AY 2014-15 on 30-09-2014 declaring total income at Rs.1,44,22,116. The case was selected for scrutiny and the assessment has been completed u/s 143(3) of the I.T. Act, 1961 on 23-12-2016 determining the total income at Rs.1,92,23,460 interalia making addition towards disallowance of employees contribution to provident fund u/s 36(1)(va) r.w.s. 2(24)(x) of the I.T. Act, 1961 for delayed payment of provident fund contribution to respective fund within the due date prescribed under the provident fund and miscellaneous Act.
Aggrieved by the assessment order, assessee preferred appeal before the CIT(A). Before the CIT(A), the assessee submitted that although there is a delay in remittance of employees contribution to provident fund to the respective fund within the due date prescribed under the respective Act, but such contribution has been paid on or before due date of furnishing return of income u/s 139(1) of the I.T. Act, 1961 and hence, in view of the decision of Hon’ble Supreme Court in the case of CIT vs Alom Extrusions Ltd (2009) 319 ITR 306 (SC), no disallowance could be made. The assessee had also relied upon
3 ITA 3123/Mum/2018 the decision of Hon’ble Bombay High Court in the case of CIT vs Ghatgepatil Transport Ltd 368 ITR 749 (Bom). The Ld.CIT(A), after considering relevant submissions of the assessee and also by relying upon the decision of Hon’ble Supreme Court in the case of CIT vs Alom Extrusions Ltd (supra) and the decision of Hon’ble Bombay High Court in the case of CIT vs Hindustan Organics Ltd 366 ITR 1 (Bom) deleted addition made by the AO towards disallowance of employees’contribution to provident fund for delayed payment of such fund within the due date prescribed under the provisions of the employees provident fund & miscellaneous Act. The relevant findings of the Ld.CIT(A) are as under:-
The submissions filed by the Ld. Counsel are carefully considered. The Assessing Officer has made the disallowance stating that the Employees contribution to Provident Fund is not covered u/s. 43B but is covered u/s. 2(24)(x) r.w.s, 36(1)(va). The jurisdictional High Court in the cases of CIT vs Hindustan Organics & Chemical Ltd. 366 ITR 1 (Bom) and in the case of CIT vs. Ghatge Patil Transport Ltd. 368 ITR 749 (Bom) held that both the employee's and employer's contribution are covered under amendment to section 43B and the judgement of Supreme court in the case of CIT vs. Alom Extrusion Ltd. (2009) 319 ITR 306 (SC). The Hon'ble Bombay High Court in the case of Hindustan Organics & Chemical Ltd. (supra) held as under :
6. On a plain reading of the above provisos, it became ex-fade 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 ht April 2004, two changes were made in section 43B viz. deletion of the second proviso to section -f3B and further amendment in ih\> 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 4 ITA 3123/Mum/2018 the previous year in which the liability to pay such sum was incurred as aforesaid and the e vidence of such payment isjurnished 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 the amendments to the said section brought about by the Finance Act, 2003 with effect from 1st April 2004 were retrospective in nature and would vrd 7 ITXA399/12 operate from 1st April 1988. The ITAT, relying upon the aforesaid judgment of the Supreme Court, has dismissed the Revenue's Appeal and confirmed the order passed by the CIT (Appeals). In this view of the matter and in view of the fact that the Supreme Court has expressly held that the amendments to section 43B that were brought about by the Finance Act, 2003 are retrospective in nature, we find that the /TAT was fully justified in deleting the addition of Rs.1,82, 77J38/- on account of delayed payment of Provident Fund of employees' contribution. We therefore find that no substantial question of law arises on this count as sought to be contended by Mr Malhotra on behalf of the Revenue.
Even otherwise, we fail to understand how this deduction could have been disallowed to the Assessee. Admittedly, the Assessment Year in question is 2006-07. The second proviso to section 43Bquoted above was deleted with effect from 1st April 2004 and simultaneously the first proviso was also amended bringing about a uniformity in deductions claimed towards tax, duty, cess and fee on the one hand and contribution to the employees' provident fund, superannuation fund and other welfare funds on the other. These deductions being claimed in the return of income filed for the Assessment Year 2006-07, the amendments to Section 43B which came into force with effect from 1st April 2004 would have clearly applied to the Assessee's case. In this view of the matter also, we find that the ITAT wasvrd 8 ITXA399/12 fully justified in deleting the addition of Rs. 1,82,77,138/- on account of delayed payment of provident fund of employees' contribution. " Similarly, the jurisdictional High Court in the case of Ghatge Patil Transports (Supra) held as under: "11. The second proviso resulted in implementation problems and which led to deletion of the second proviso in the Finance Act, 2003 and bringing about uniformity in the first proviso by equating tax, duty, cess and fee with contributions to welfare funds like employees' provident fund, superannuation. Fund and other welfare funds. The first proviso by Finance Act, 2003 was made applicable with effect from April I, 2004 and the assessee would argue that it was curative in nature, clarificatory and, therefore, applied retrospectively from / st April, 1988. The department argued that it was clarifactory and, therefore, applied prospectively. The Supreme Court held that Finance Act. 2003 would be applicable retrospectively and defaulter who fails to pay the contribution to the welfare fund right upto April I, 2004 and who pays itxa 1002-12+1 the contribution after April I, 2004, would get the benefit of deduction under section 43Bofthe IT. Act. It is held that the Finance Act, 2003 to the extent indicated above would be curative in nature and hence is retrospective. The reason being to be that the employers should not sit on the collected contributions and deprive the workmen of the rightful benefits under social welfare legislations by delaying payment of contributions to the welfare funds.
Mr.Naniwadekar also relied upon the judgment dated II th July, 2014 in Income Tax Appeal No.399 of 2012 passed by this Court, to which one of us (S.C.Dharmadhikari,J.) was a party where following two issues of law were raised.:-
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(A) Whether on the facts and in the circumstances of the cose, the Tribunal, in law, was right in allowing the claim of the Assessee on account of delayed payments of P.P. of employees' contribution amounting to Rs.1,82,77,138/- by relying on the decision of the Hon'ble Supreme Court in the cose ofCIT Vs/. Atom Extrusions Ltd. (319 ITR 306) ? (B) Whether on the facts and in the circumstances of the cose, the Tribunal in law, was right in deleting the disallowance of Rs.10,00,300/- on bond registration charges and allowing the claim of the assessee u/s. 37(1) of the t.T. Act, 1961 ? 13, In that judgment, this Court held that no substantial questions of law would arise since section 43B is inserted in the I. T. Act with effect from 1st April, 1984 by which the mercantile system of accounting with regard to tax, duty and contribution to welfare funds stood discontinued. Under section 43B of the I. T. Act, it became mandatory for the assessee to account for such payment including to welfare funds not on mercantile basis but on cash basis. The judgment further mentions that this situation continued between 1 st April, 1984 and 1st April, 1988. It is a/so noticed that section 43B was again amended and the first proviso thereto has been added which was restricted to tax, duty, cess or fee excluding labour welfare. In view thereof, the second proviso as follows came to be inserted:-
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 subsection (1) of section 36." The second proviso was further amended with effect from 1st April, 1989 to 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 itxalOQ2-12+l Explanation below clause (va) 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."
From a reading of above, it is clear that the employer- assessee would be entitled to deduction only if the contribution to the employee's welfare fund stood credited on or before the due date and not otherwise. It transpires that Industry once again made representations to the Ministry of Finance to remove this anomaly. The result was that an amendment was inserted which came into force with effect from 1st April, 2004 and two changes were made in section 43B firstly by deleting the second proviso 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."
In this manner, the amendment provided by Finajice Act, 2003 put on par the benefit of deductions of tax, duty, cess and fee on the one hand with contributions to various Employees' Welfare Fundsitxa 1002-l2+l on the other. All this came up for consideration before the Hon'ble Supreme Court in the case of Alom Extrusions Ltd. (supra). The Tribunal in the case at hand relied upon the said judgment. There is no reason to fault the order passed by I he Tribunal We are of the view that the decision of the Supreme Court in Alom Extrusions Ltd applies to employees' contribution as well as emplovers' contribution. Question Nos.2, 3 & 4 are accordingly answered in favour of the assessee and against the revenue. " 7.4. In view of the above binding judgements of the jurisdictional High court and that of the Supreme Court, the disallowance of Rs. 48,01,342A made by the Assessing Officer cannot be sustained as it is an admitted fact that the amount has been paid before the due date for filing the return of income. These grounds of appeal are allowed.”
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The Ld.DR submitted that the Ld.CIT(A) was erred in deleting the addition made by the AO towards employees contribution to PF for delayed remittance of such fund to the respective fund as per the provisions of section 2(24)(x) r.w.s. 36(1)(va) of the Act without appreciating the fact that if employees’ contribution is not remitted on or before the due date prescribed under respective Act, then the same constitute income within the meaning of section 2(24)(x) r.w.s. 36(1)(va) of the I.T. Act, 1961. Consequently, the same cannot be allowed as deduction u/s 43B of the Act.
The Ld.AR for the assessee submitted that this issue is squarely covered in favour of the assessee by the decision of Hon’ble Bombay High Court in the case of CIT vs Ghatgepatil Transport Ltd (supra) where the High Court, by following the decision of Hon’ble Supreme Court in the case of CIT vs Alom Extrusions Ltd (supra) held that section 43B is applicable to both, employees and employer’s contribution and if such contribution is remitted on or before due date of filing return of income u/s 139(1), then the same is allowable u/s 43B of the I.T. Act, 1961.
6. We have heard both the parties, perused the material available on record and gone through the order of authorities below. There is no dispute with regard to the fact that the assessee has remitted employees’ contribution to PF beyond the due date prescribed under the provisions of Employees
7 ITA 3123/Mum/2018 Provident Fund & Miscellaneous Act, but such payment has been remitted on or before due date of filing return of income u/s 139(1) of the I.T. Act, 1961.
The Ld.CIT(A), after considering the fact that the payments have been made before filing return of income u/s 139(1) by following the decision of Hon’ble Supreme Court in the case of CIT vs Alom Extrusions Ltd (supra) and also the decision of Hon’ble Bombay High Court in the case of CIT vs Ghatgepatil Transport Ltd (supra) and held that if employees contribution to PF is remitted on or before due date of filing return of income u/s 139(1), then such payment needs to be considered on par with employer’s contribution to PF; consequently, section 43B is applicable and hence, any payment is made on or before due date of filing return of income, then the same is allowable u/s 43B of the Act. Facts remain unchanged. The revenue fails to bring on record any contrary decision to controvert the findings of fact recorded by the Ld.CIT(A) in the light of decision of Hon’ble Bombay High Court in the case of CIT vs Ghatgepatil Transport Ltd (supra). Therefore, we are inclined to uphold the findings of Ld.CIT(A) and dismiss appeal filed by the revenue.
In the result, appeal filed by the revenue is dismissed.
8 ITA 3123/Mum/2018
Order pronounced in the open court on 26-06-2019.