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Income Tax Appellate Tribunal, MUMBAI BENCH “E”, MUMBAI
आदेश ORDER �ी अिमत शु�ला,�या.स :- PER AMIT SHUKLA, J. M.: The aforesaid appeal has been filed by the department against impugned order dated 30th October- 2012, passed by Commissioner of Income-tax (Appeals) CIT(A)-9, Mumbai, for the quantum of assessment passed under section 143(3) for the assessment year 2008-09. In the grounds of appeal
, the department has raised following grounds of appeal:
1. Whether, on the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in deleting additions of Rs.20,78,279/- made by Assessing Officer by way of disallowance u/s 2(24)(x) r.w.s. 36(1)(va) of the I.T. Act for delayed payment of employees contribution towards Provident Fund and ESIC, without appreciating the fact that in the instant case, most of 2 �ी राज �ावे�स अँड टूरस �ल�मटेड Shree Raj Travels and Tours Ltd ITA 251/M/2013 payments were made beyond the grace period allowed under the respective Act?”
2. Whether, on the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in relying upon the decision of Hon’ble Delhi High Court in the case of CIT vs AIML Ltd. (2010) 321 ITR 308 (SC) and CIT vs Vinay Cements 213 CTR 268 (SC), which pertain to disallowances made u/s 43(b) for delayed payment of employers contribution towards Provident Fund and ESIC, whereas in the instant case, the mater pertains to disallowance made u/s 2(24)(x) r.w.s. 36(1)(vi) of the I.T. Act, which is squarely covered by the decision of Special Bench of Kolkatta ITAT in the case of JCIT vs. ITC Ltd. [112 ITD 57]”.
Brief facts are that, the assessee company is engaged in the business of tours and travels. The Ld. AO from the perusal of the Tax audit report noted that, the assessee has failed to deposit the Employees contribution towards PF and ESIC within the stipulated due date and also within the grace period allowed. In response to the show cause notice, the assessee submitted that all the contribution were deposited before the due date of filing of return. The details of such deposits as incorporated by the AO at page 2 and 3 are reproduced herein below: “Employees Contribution of Provident Fund (Head Office, Pune, Delhi & Indore) S. Month Employees Due Date Date of deposit No. Share into Govt. A/Circle 1 April, 07 1,82,853 15.05.2007 20.06.2007 1,94,636 15.08.2007 2 July, 07 27.10.2007 1,92,912 15.09.2007 3 August, 07 03.04.2008 4 Sept., 07 1,89,649 15.10.2007 03.04.2008 2,14,665 15.11.2007 03.04.2008 5 Oct., 07 2,02,554 15.12.2007 03.04.2008 6 Nov., 07 2,00,470 15.01.2008 03.04.2008 7 Dec., 07 1,95,628 15.02.2008 8 Jan., 08 05.04.2008 9 Feb., 08 1,93,637 15.03.2008 03.04.2008 1,95,690 15.04.2008 10 Mar., 08 22.04.2008 Total 19,62,695 3 �ी राज �ावे�स अँड टूरस �ल�मटेड Shree Raj Travels and Tours Ltd ITA 251/M/2013 “Employees Contribution of E.S.I.C. (Head Office, Pune, Delhi & Indore) S. Month Employees Due Date Date of deposit No. Share into Govt. A/Circle 1 April, 07 10,712 15.05.2007 20.06.2007 2 May, 07 11,665 15.06.2007 23.08.2007 3 June, 07 8,199 15.07.2007 24.08.2007 11,012 15.08.2007 4 July, 07 19.10.2007 5 August, 07 10,512 15.09.2007 12.11.2007 10,512 15.10.2007 08.01.2008 6 Sept., 07 10,034 15.11.2007 07.01.2008 7 Oct., 07 8,518 15.12.2007 07.01.2008 8 Nov., 07 8,498 15.01.2008 05.02.2008 9 Dec., 07 10 Jan., 08 8,680 15.02.2008 05.04.2008 8,670 15.03.2008 11 Feb., 08 05.04.2008 8,573 15.04.2008 12 Mar., 08 22.04.2008 1,15,584
The Ld. AO rejected the assessee’s contention and held that since these payments were made beyond the stipulated dates, therefore, they are deemed income of the assessee under section 2(24)(x) r.w.s. 36(1)(va).
The Ld. CIT(A) has deleted the said addition after observing and holding as under:- “The disallowance of Rs.20,78,279/- under section 2(24)(va) r.w.s. 36(1)(va) of the Act made by the LAO on account of delayed payment to Employees Contribution to Employer’s Provident Fund by the employer is not maintainable in the light of various Tribunal as well as High Court decisions cited in the preceding paras. Hon’ble Delhi High Court in the case of CIT vs. AIMIL Limited [2010] 321 ITR 508 (Del) and Hon’ble Supreme Court in the case of CIT vs. Alom Extrusion Limited 319 ITR 306(SC) and CIT vs Vinay Cements 213 CTR 268 (SC) have held that such disallowances are not maintainable. Under the circumstances, ground of appeal no.2 is allowed”.
4 �ी राज �ावे�स अँड टूरस �ल�मटेड Shree Raj Travels and Tours Ltd ITA 251/M/2013 4. Despite service of notice, none appeared on behalf of the assessee, therefore, we are proceeding to decide the appeal on merits and after hearing the Ld. DR.
After considering the relevant finding given in the impugned order, we find that it is an undisputed fact that the delayed payments on account of employees contribution to EPF & ESIC has been made much within the due date of filing of return of income. We find that now this issue stands covered in favour of the assessee by the decision of Hon’ble jurisdictional High Court in the case of CIT vs Ghatge Patil Transports Ltd., reported in [2014] 368 ITR 749 wherein the Hon’ble High Court on the issue of payment of employees contribution towards EPF and ESIC has held that, the payment has been made before the due date of furnishing of return of income then same should be allowed under section 43B. In the case before the Hon’ble Court was exactly same question of law which has been answered in favour of the assessee. For the sake of ready reference substantial question of law as been admitted by the Hon’ble High Court reads as under:
“(1) Whether the decision of the ITAT ignoring the provisions of section 2(24)(x) r/w 36(1)(va) as per which employee’s contribution to ESI, PF and Pension fund is deductible only if payment is made before the due date as prescribed in the respective Act, Rule, Order or Notification governing such funds is erroneous and contrary to provisions of Income Tax Act, 1961 ? (2) Whether on the facts and circumstances of the case and in law, the Tribunal was right in ignoring the clear distinction between employee’s contribution to ESI, PF and pension fund and employer’s contribution and the fact that the decision of the Hon’ble Supreme Court in the case of Alom Extrusions Ltd 319 ITR 306 is applicable only to employer’s contribution ?
5 �ी राज �ावे�स अँड टूरस �ल�मटेड Shree Raj Travels and Tours Ltd ITA 251/M/2013 (3) Whether on the facts and circumstances of the case and in law, the Tribunal was right in holding that payment of employees contribution to PF/ESI/pension fund is subject to provisions of section 43B of the Act ?
(4) Whether the ITAT failed to appreciate the fact that the amendment to section 43B is applicable only to employer’s contribution and not to employees contribution and hence, whether second proviso to section 43B omitted w.e.f. 01.04.04 is retrospective or not, is not germane to issue of employee’s contribution”.
The Hon’ble High Court answered the said questions in the following manner: “7. The question arising, therefore, is (a) whether the Tribunal was right in ignoring the distinction between the employees contribution and employer's contribution and whether the decision of the Hon'ble Supreme Court in the case of Commissioner of Income Tax V/s. Alom Extrusions Ltd. reported in [2009] 319 ITR 306 would apply only in the cases of employee's contribution and (b) whether the Tribunal was right in holding that payment of employees contribution is subject to the provisions of section 43B of the I.T. Act entailing that amendment to section 43B would lead to the inclusion of the employers' contribution as well.
Mr. Gupta submitted that the Tribunal erred in deletion of addition of amount to the extent of Rs.32,03,947/- and that the impugned order dated 29th July, 2011 is liable to be quashed. Mr. Gupta relied upon the judgment of Punjab & Haryana in Commissioner of Income-Tax V/s. Lakhani Rubber Works reported in [2010] 326 ITR 415 (P & H) and submitted that question Nos.1 & 2 in that case had already been decided against the revenue in view of the decision of Alom Extrusions Ltd. (supra). It is for this reason that he did not press for an answer to question No.1 in these Appeals.
Mr. Naniwadekar, learned counsel appearing on behalf of the assessee on the other hand relied upon the decision of the Supreme Court upon the decision of Alom Extrusions (supra) and pointed out that the scheme of the Income Tax Act, 1961 as it existed prior to April 1, 1984 and thereafter.
6 �ी राज �ावे�स अँड टूरस �ल�मटेड Shree Raj Travels and Tours Ltd ITA 251/M/2013 10. He submitted that Section 43B 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 the accounting year of a company did not always tally with the due dates under certain statutes and, therefore, by way of the 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, the assessee would be entitled to deduction. It did not apply to contributions to labour welfare funds.
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 made applicable with effect from April 1, 2004 and the assessee would argue that it curative in nature, clarificatory and, therefore, applied retrospectively from 1st 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 1, 2004 and who pays the contributor after April 1, 2004, would get the benefit of deduction under section 43B of the I.T. 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 legislation5 by delaying payment of contributions to the welfare funds.
Mr. Naniwadekar also relied upon the judgment dated 11th 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.:- "(A) Whether on the facts and in the circumstances of the case, the Tribunal, in law, wa5 right in allowing the claim of the Assessee on account of delayed payments of P.F. employees' contribution amounting to Rs.1,82,77,138/- by relying on the decision of the Hon'ble Supreme Court in the case of CIT Vs/. Alom Extrusions Ltd. (319 ITR 306) ? (B) Whether on the facts and in the circumstances of the case, the Tribunal in law, was right in deleting the disallowance of Rs.10,00,300/- on bond 7 �ी राज �ावे�स अँड टूरस �ल�मटेड Shree Raj Travels and Tours Ltd ITA 251/M/2013 registration charges and allowing the claim of the assessee u/s. 37(1) of the I.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 1st April, 1984 and 1st April, 1988. It is also 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 sub- section (1) a 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 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.'' 14. 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 8 �ी राज �ावे�स अँड टूरस �ल�मटेड Shree Raj Travels and Tours Ltd ITA 251/M/2013 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 Finance Act, 2003 put on par the benefit of deductions of tax, duty, cess and fee on the one hand with contribution to various Employee’s Welfare Funds 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 the Tribunal. We are of the view that the decision of the Supreme Court in Alom Extrusions Ltd. applied to employees’ contribution as well as employers’ contribution. Question No. 2, 3 & 4 are accordingly answered in favour of the assessee and against the revenue”. Thus, respectfully following the ratio of the Hon’ble jurisdictional High Court, we also hold that if such payments have been made before the due date of filing of return of income, then same have to be allowed under section 43B. Accordingly, we decide this issue in favour of the assessee and the ground raised by the revenue are dismissed.
In the result, appeal of the revenue stands dismissed. Order pronounced in the open court on 13th April, 2016.