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Income Tax Appellate Tribunal, : ‘D’ BENCH, KOLKATA
Before: Shri P.M. Jagtap & Shri S.S.Viswanethra Ravi
This appeal by the Revenue is against the order dt. 04-09- 2015 of the CIT-A, 4, Kolkata for the A.Y 2012-13 in allowing the relief to the assessee on the issue of depreciation/PF contribution.
It is noticed that neither the assessee nor any one appeared for the assessee nor any application filed seeking adjournment. Therefore, we proceed to hear the ld.DR for the appellant and dispose of the appeal on merits and by perusing the material available on record.
Ground no.1 is relating to allowance of depreciation @ 30% on written down value of motor cars.
As per Form 3CD, the AO found that the assessee claimed depreciation @ 30% on Written down value of motor car used for commercial purposes. The assessee was asked why such depreciation will not be restricted to 15% on WDV. Before the AO the assessee submitted that motor buses, motor lorries and motor taxies are used in a business running on hire and the assessee is entitled to avail 2 M/s. S & IB Services Pvt. Ltd such depreciation @ 30% vide sub-clause (ii) to the clause (3) under Schedule III, Part A of New Appendix, which came into effect from A.Y 2006-07 w.r.t Rule 5 of the IT Rules, 1962. The AO has not accepted such submission of assessee and disallowed @ 15 i.e. at Rs.18,22,744/- and added the same to the total income of the assessee.
Before the CIT-A the ld.AR of the assessee has relied on following case laws in support of the contention:- In the case of Magma Fincorp Ltd Vs. ACIT Reported in (2010) 128 TTJ 715(Kol) of ITAT Kolkta.
In the case of CIT Vs. Brinks Arya (I) P.Ltd In of ITAT Mumbai
In the case of Union of India & Ors. Vs. Kamlakshi Finance Corporation Reported in AIR 1992 SC 711 (SC) running , which was used
The CIT-A after considering the above case laws and submissions of assessee directed the AO to apply the depreciation @ 30% as claimed by the assessee and to delete the addition made in this regard. Relevant portion of the CIT-A order on this issue is reproduced herein below:- “5.2 I have considered the contention of the AR of the appellant in the matter in the backdrop of the assessment order I have also considered the judicial precedence in this regard. I find that the decision of the Hon'ble Mumbai Tribunal in case of CIT vs. M/s. Brinks Arya India Pvt. Ltd. [I. T.A. No. 8455/Mum/2010] wherein the Tribunal has held that if the assessee is engaged in the business of transportation of cash,valuables belonging to the third parties. for which it uses motor lorries customized as Armoured/Security vans and further that these Armoured/Security vans are customized motor lorries which are used in the business of running them on hire for transportation of valuables, thus depreciation thereon is allowable at higher rate to be applicable in the appellant's case as well. The judgment of the Apex Court in the case of Union of India and Others vs. Kamlakshi Finance Corporation reported in AIR 1992 SC 711 as referred to by the AR has also been considered. I find the findings of the AO on this point in his order to be not in consonance with the decision of the Hon'ble Mumbai Tribunal in case of CIT v M/s. Brinks Arya India Pvt. Ltd. [I.T.A. No. 8455/Mum/2010 supra. Therefore, going by the judicial precedence. I do not find any avenue to sustain the action of the AO in charging 15% as depreciation on the vehicles used for the purpose as discussed in the foregoing as against the claim @ 30% by the appellant. In view of this the AO is directed to apply the rate of 30% on account of depreciation on the vehicles as discussed in the foregoing. The addition made on this count is deleted. This ground is therefore allowed.”
Before us the ld. DR relied on the order of the AO in adopting the rate of deprecation @ 15% on WDV of motor cars. He also submits that the CIT-A has erred in allowing the same @ 30% instead of 15% as applied by the AO. 3 M/s. S & IB Services Pvt. Ltd
Heard the ld. DR and perused the record. We find that the case law relied on by the assessee in the case of Magma Fincorp Ltd of Kolkata Tribunal reported in (2010) 128 TTJ 715 (Kol), which in turn relied on a decision of Hon’ble Jurisdictional High Court of Calcutta in the case of Agarwal Finance, which held that if the motor cars are used by the assessee in the business of running them on hire, the claim of higher rate of depreciation is maintainable. We find that the assessee is engaged in the business of transportation of cash and valuables belonging to the third parties, for which it uses motor lorries customized as armoured vehicles. The security vans are customized, used for transportation of cash and valuables on hire and, therefore, we find the ratio of the decision of Calcutta High Court in the case of Agarwal Finance is applicable and the depreciation is allowable at higher rate. The CIT-A was justified in directing the AO and in allowing @ 30 depreciation as claimed by the assessee. We find no infirmity in the impugned order of the CIT-A and it is justified. Thus, ground no. 1 raised by the revenue is dismissed.
The next effective issue is to be decided as to whether the CIT- A is justified in deleting the impugned addition of Rs.86,28,073/- made u/s. 2(24) r.w.s 36(1)(va) of the Act towards employees’ contribution to PF in the facts and circumstances of the case.
The AO found that the assessee company received the sum of Rs.86,28,073/- from its employees towards Employees ‘Contribution to Provident Fund, which was deposited by the assessee after the due date of payment claimed the same as allowable expenditure by relying on its own order decided by ITAT Kolkata, wherein it has been held that PF/ESI are allowed, when the same was deposited before furnishing of return of income. But, the AO was of the view that since 4 M/s. S & IB Services Pvt. Ltd the assessee had failed to deposit the same within the due dates specified u/s. 2(24) r.w.s 36(1)(va) of the Act and by relying on the decision of Hon’ble Gujarat High Court in the cast of CIT-II Vs. Gujarat State Road Transport (GSRTC) added the same to the total income of the assessee.
Aggrieved by such order of the AO, the assessee preferred an appeal before the CIT-A. Before him the assessee has relied on various case laws in support of its claim.
The CIT-A after considering the submission and the case laws as relied on by the assessee directed the AO to delete the impugned addition. The CIT-A in his order has also held that amounts on account of Employees’ Contribution to Provident Fund were deposited well before the date of filing of return of income u/s. 139(1) of the Act and directed to be deleted on this issue.
Before us the ld. DR relied on the order of the AO in making the impugned addition on this issue. He also relied on the judgment of Hon’ble Gujarat High Court in the case of CIT Vs. GSRTC and prayed to allow the appeal of revenue.
Heard the ld. DR and perused the record. We find that the issue in hand is squarely covered by the decisions of the Hon’ble Supreme Court and High Court of Calcutta High Court in the cases of Vinay Cement Ltd, Alom Extrusions Ltd reported in (2009) 313 ITR (St.1)(SC), in (2009) 319 ITR 306(SC) respectively and Vijay Shree Ltd. We find that the impugned amount towards employees’ contribution to Provident Fund were deposited well before the due date of filing of return. We find that the Hon’ble High Court of Calcutta in the case of Vijay Shree Ltd supra has upheld the finding of the Tribunal basing on same identical facts on the ratio of decision as laid down by the Hon’ble Supreme Court in the case of Alom 5 M/s. S & IB Services Pvt. Ltd Extrusion Ltd reported in 309 ITR 306(SC), wherein the Hon’ble Supreme Court had an occasion to determine the effect of deletion of 2nd proviso and effect of amendment to 1st proviso to Section 43B by Finance Act 2003 from 01-04-2004 or retrospectively i.e from 01-04- 1988.
The Hon’ble Supreme Court found that the amendment to 1st proviso to Section 43B extended the benefit of deduction of tax to contributions to Employee’s Provident Fund, superannuation fund and other welfare funds on par with duty, cess and fee and, whereby, the Hon’ble Supreme Court held that bringing the uniformity to the contributions of Employee’s Provident Fund, superannuation fund and other welfare funds on par with duty, cess and fee came into force with effect from 01-04-2004 by Finance Act, 2003, was curative in nature and should be read as retrospective and shall operate from 01-04-1988 when the 1st proviso was actually inserted. The relevant portion of which is reproduced herein below:
9. We find no merit in these civil appeals filed by the Department for the following reasons: firstly, as stated above, Section 43-B [main section], which stood inserted by Finance Act, 1983, with effect from 1st April, 1984, expressly commences with a non- obstante clause, the underlying object being to disallow deductions claimed merely by making a Book entry based on Mercantile System of Accounting. At the same time, Section 43-B [main section] made it mandatory for the Department to grant deduction in computing the income under Section 28 in the year in which tax, duty, cess, etc., is actually paid. However, Parliament took cognizance of the fact that accounting year of a company did not always tally with the due dates under the Provident Fund Act, Municipal Corporation Act [octroi] and other Tax laws. Therefore, by way of first proviso, an incentive/relaxation was sought to be given in respect of tax, duty, cess or fee by explicitly stating that if such tax, duty, cess or fee is paid before the date of filing of the Return under the Income Tax Act [due date], the assessee(s) then would be entitled to deduction. However, this relaxation/incentive was restricted only to tax, duty, cess and fee. It did not apply to contributions to labour welfare funds. The reason appears to be that the employer(s) 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. However, as stated above, the second proviso resulted in implementation problems, which have been mentioned hereinabove, and which resulted in the enactment of Finance Act, 2003, deleting the second proviso and bringing about uniformity in the first proviso by equating tax, duty, cess and fee with contributions to welfare funds. Once this uniformity is brought about in the first proviso, then, in our view, the Finance Act, 2003, which is made applicable by the Parliament only with effect from 1st April, 2004, would become curative in nature, hence, it would apply retrospectively with effect from 1st April, 1988. Secondly, it may be noted that, in the case of Allied Motors (P) Limited vs. Commissioner of Income Tax, reported in [1997] 224 I.T.R.677, the Scheme of Section 43-B of the Act came to be examined. In that case, the question which arose for determination was, whether sales tax collected by the assessee and paid after the end of the relevant previous year but within the time allowed under the relevant Sales Tax law should be disallowed under Section 43-B of the Act while computing the business income of the previous year? That was a case which related to Assessment Year 1984-1985. The relevant accounting period ended on June 30, 1983. The Income Tax Officer disallowed the deduction claimed by the assessee which was on account of sales tax collected by the assessee for the last quarter of the relevant accounting year. The 6 M/s. S & IB Services Pvt. Ltd
deduction was disallowed under Section 43-B which, as stated above, was inserted with effect from 1st April, 1984. It is also relevant to note that the first proviso which came into force with effect from 1st April, 1988 was not on the statute book when the assessments were made in the case of Allied Motors (P) Limited (supra). However, the assessee contended that even though the first proviso came to be inserted with effect from 1st April, 1988, it was entitled to the benefit of that proviso because it operated retrospectively from 1st April, 1984, when Section 43-B stood inserted. This is how the question of retrospectivity arose in Allied Motors (P) Limited (supra). This Court, in Allied Motors (P) Limited (supra) held that when a proviso is inserted to remedy unintended consequences and to make the section workable, a proviso which supplies an obvious omission in the section and which proviso is required to be read into the section to give the section a reasonable interpretation, it could be read retrospective in operation, particularly to give effect to the section as a whole. Accordingly, this Court, in Allied Motors (P) Limited (supra), held that the first proviso was curative in nature, hence, retrospective in operation with effect from 1st April, 1988. It is important to note once again that, by Finance Act, 2003, not only the second proviso is deleted but even the first proviso is sought to be amended by bringing about an uniformity in tax, duty, cess and fee on the one hand vis-a-vis contributions to welfare funds of employee(s) on the other. This is one more reason why we hold that the Finance Act, 2003, is retrospective in operation. Moreover, the judgement in Allied Motors (P) Limited (supra) is delivered by a Bench of three learned Judges, which is binding on us. Accordingly, we hold that Finance Act, 2003, will operate retrospectively with effect from 1st April, 1988 [when the first proviso stood inserted]. Lastly, we may point out the hardship and the invidious discrimination which would be caused to the assessee(s) if the contention of the Department is to be accepted that Finance Act, 2003, to the above extent, operated prospectively. Take an example - in the present case, the respondents have deposited the contributions with the R.P.F.C. after 31st March [end of accounting year] but before filing of the Returns under the Income Tax Act and the date of payment falls after the due date under the Employees' Provident Fund Act, they will be denied deduction for all times. In view of the second proviso, which stood on the statute book at the relevant time, each of such assessee(s) would not be entitled to deduction under Section 43-B of the Act for all times. They would lose the benefit of deduction even in the year of account in which they pay the contributions to the welfare funds, whereas a defaulter, who fails to pay the contribution to the welfare fund right upto 1st April, 2004, and who pays the contribution after 1st April, 2004, would get the benefit of deduction under Section 43-B of the Act. In our view, therefore, Finance Act, 2003, to the extent indicated above, should be read as retrospective. It would, therefore, operate from 1st April, 1988, when the first proviso was introduced. It is true that the Parliament has explicitly stated that Finance Act, 2003, will operate with effect from 1st April, 2004. However, the matter before us involves the principle of construction to be placed on the provisions of Finance Act, 2003.
Applying the principle as laid down by the Hon’ble Supreme Court in the aforementioned case as followed by the Hon’ble High Court of Calcutta to the present case, We may usefully read the 1st proviso as amended by Finance Act 2003 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."
A plain reading of the aforementioned proviso explains that the deduction is available that if the employer deposits the contributions collected from its employees to any fund created for the welfare of the employees beyond due date of payment in terms of the amendment to 1st proviso to Section 43B of the Act and within the due date of filing return of income. 7 M/s. S & IB Services Pvt. Ltd
In the present case, the CIT-A found satisfied with the submissions of the assessee that the impugned amounts were paid before filing return of income. Therefore, respectfully following the decision of the Hon’ble High Court of Calcutta in the case of Vijay Shree Ltd supra, we hold that the Assessee is entitled to claim deduction as per 1st proviso to Section 43B of the Act and the order of the CIT-A is justified and needs no interference. Therefore, the employees’ contribution to PF can be paid before the due date of filing of return of income. We find no infirmity in the impugned order of the CIT-A and it was justified. Thus, the ground raised by the revenue in this regard is dismissed.
In the result, the appeal filed by the revenue is dismissed. Order pronounced in the open court on 06-12-2017