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Income Tax Appellate Tribunal, BANGALORE BENCH C, BANGALORE
Before: SHRI VIJAY PAL RAO
PER S. JAYARAMAN, ACCOUNTANT MEMBER :
This is an appeal filed by the Revenue against the order of the CIT (A), Bengaluru-2, Bengaluru, dt.09.07.2015, for A. Y. 2012-13.
The assessee, a private limited company, engaged in rendering facility management services. While doing the assessment, the AO noted that though it had made deductions from the salary payments of its employees towards contributions to PF and ESI aggregating to Rs.4,28,54,679/-, it had remitted the same to the government account ITA.1266/Bang/2015 Page - 2 beyond the dates prescribed by the respective laws and therefore, he disallowed the deduction claimed u/s 43B (b) on the ground that the retention of the amounts with it beyond the dates due for their remittance to the government account constituted its income for the respective assessment years in terms of section 2(24)(x) read with section 36(1)(va) as it is independent of section 43B. In doing so, the AO rejected the assessee's contention that irrespective of whether the belated remittance of PF /ESI contributions included the contributions made by the employees of the assessee, the deduction claimed was allowable if the deductions had been remitted to the government account within the time allowed for filing the return of income u/s 139(1) of the Act. Thus, according to the AO, only the delay in remitting the contributions of the employer to the government account within the time prescribed for filing the return u/s 139(1) was allowable and not the contributions made by the employees withheld by the employer until the date due for filing the return of income u/s 139(1) . Accordingly, he disallowed Rs.4,28,54,679/- representing the amount consisting of the contribution of both the employer and the employees, which had been belatedly remitted to the government account. Aggrieved, the assessee filed an appeal before the CIT (A), Bengaluru-2. The CIT (A), inter alia, relying the Jurisdictional High Court decision in the case of M/s. Essae Teraoka P. Ltd v. DCIT (ITA No.480/2012), reported in [2014] 43 Taxmann.Com 33 (Kar) held that the disallowance is unwarranted.
Aggrieved, the Revenue filed this appeal mainly with following ground :
ITA.1266/Bang/2015 Page - 3
“The CIT (A) has erred in relying on the jurisdictional High Court in the case of M/s. Essae Teraka P. Ltd v. DCIT (ITA No.480/2012), by holding that the disallowance made by the AO is unwarranted and by deleting the disallowance of Rs.1,45,12,672/- *(subsequently the CIT (A) corrected it at Rs. Rs.4,28,54,679/- by her order in dt 24.9.2015) made by the AO since the same case has also not reached its final state.” *supplied by us
The relevant portion of the Jurisdictional High Court’s decision in the case of M/s. Essae Teraoka P. Ltd v. DCIT, re po rte d in [ 2014] 266 C TR 0246 is e xtrac ted as u n de r:
From bare perusal of sub-para (1) of paragraph- 30, it is clear that the word contribution is used not only to mean contribution of the employer but also contribution to be made on behalf of the member employed by the employer directly.
Paragraph-38 of the PF Scheme provides for Mode of payment of contributions. As provided in sub-para(1), the employer shall, before paying the member, his wages, deduct his contribution from his wages and deposit the same together with his own contribution and other charges as stipulated therein with the provident fund or the fund under the ESI Act within fifteen days of the closure of every month pay. It is clear that the word contribution' used in Clause (b) of Section 43-B of the IT Act means the contribution of the employer and the employee. That being so, if the contribution is made on or before the due date for furnishing the return of income under sub-section(1) of Section 139 of the IT Act is made, the employer is entitled for deduction. 21. The submission of Mr. Aravind, learned counsel for the revenue that if the employer fails to deduct the ITA.1266/Bang/2015 Page - 4
employees' contribution on or before the due date, contemplated under the provisions of the PF Act and the PF Scheme, that would have to be treated as income within the meaning of Section 2(24)(x) of the IT Act and in which case, the assessee is liable to pay tax on the said amount treating that as his income, deserves to be rejected.”
From the above, it is clear that the order of the CIT (A) deserve no interference as the Jurisdictional High Court’s above decision is in operation.
In the result, the Revenue’s appeal is dismissed.
Order pronounced in the open court on 21st April, 2017.