RAY ENGINEERING LTD.,MUMBAI vs. DCIT-15(3)(1), MUMBAI

This appeal by the assessee is directed against the order of the CIT(A)- 24, Mumbai dated 25.01.2016 for A.Y. 2012-13.

01. On the facts and circumstances of the case and in law the Commissioner of Income tax (Appeals 24 erred in confirming the disallowance made by the Assessing Officer with regard to contribution of Employees Provident Fund of Rs.28,70,807/- paid before the due date of filing the income tax return.

02. The Commissioner of Income Tax (Appeals) 24 failed to appreciate that the issue was covered in favour of the Appellant by the jurisdictional High Court in the case of CIT v. Hindustan Organic Chemicals Ltd. ITXA 399/12 dated 27-06- 2014, but instead relied on the decision in the case of CIT v. Gujarat State Road Transport Corporation 366 ITR 170 (Guj.)

03. The Appellant craves leave to add amend or delete any of the grounds of appeal.” 3.2 All these grounds (supra) pertain to the single issue of challenging the order of the learned CIT(A) in upholding the disallowance of `28,70,807/- made by the Assessing Officer (AO) on account of delayed payment of contribution to EPF in accordance with provisions of section 2(24)(x) r.w.s. 36(1) of the Act relying on the judgement of the Hon'ble Gujarat High Court in the case of CIT vs. Gujarat State Road Transport Corporation (366 ITR 170) (Guj). It is submitted that the said amount of EPF were paid by the assessee before the due date of filing of the return of income for A.Y. 2012013. According to the learned A.R. of the assessee this issue in question, i.e. payment of contribution to Employees Provident Fund (EPF) is covered in favour of the assessee by the decision of the Hon'ble Bombay High Court in the case of CIT vs. Hindustan Organic Chemicals Ltd. (2014) 366 ITR 1) (Bom). 3.3 Per contra, the learned D.R. for Revenue placed strong reliance on the decision of the learned CIT(A) on this issue. 3.4.1 We have heard the rival contentions and carefully considered the material on record, including the judicial pronouncements cited and M/s. Ray Engineering Ltd. placed reliance upon. It is not disputed that the fact situation is that though the contribution of EPF was not paid within the period specified under the PF Act; the same has been paid before the due date of filing of the return of income in the case on hand for A.Y. 2012-13. In this factual matrix, we are of the view that this issue is squarely covered by the decision of the jurisdictional High Court in the case of CIT vs. Hindustan Organics Chemicals Ltd. (2014) (366 ITR 1) (Bom). In its judgement their Lordships, while dismissing Revenue’s appeal on this issue, held that the deduction claimed on this count by the assessee could not have been disallowed. The second proviso to section 43B of the Act was deleted w.e.f. 01.04.2004 and simultaneously the first proviso was also amended bringing about uniformity in deduction claimed towards tax, duty, cess and fee on the one hand and contribution to EPF, superannuation fund and other welfare funds on the other. In coming to this finding the Hon'ble Bombay High Court applied the decision of the Hon'ble Apex Court in the case of CIT vs. Alom Extrusions Ltd. (2009) 319 ITR 306 (SC). 3.4.2 On similar facts as in the case on hand, we find that this issue of the assessee’s claim for deduction of contribution to EPF under section 43B of the Act is squarely covered by the decision of the Hon'ble Bombay High Court in the case of CIT vs. Hindustan Organics Chemicals Ltd. (supra) wherein at paras 5 to 9 of its order, while dismissing Revenue’s appeal, has held as under: - “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 1st 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 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 of 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 M/s. Ray Engineering Ltd. 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 (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.”