SIDDHI VINAYAK KNOTS & PRINTS PRIVATE LIMITED,SURAT vs. PR. CIT-2, SURAT, SURAT

आदेश / O R D E R PER DR. A. L. SAINI, AM: By way of this appeal, the assessee appellant has called into question correctness of impugned order passed by the Learned Principal Commissioner of Income Tax under section 263 of the Income tax Act, 1961, in the matter of assessment under section 143(3) of the Act for the assessment year 2017-18, on the following grounds: “1. On the facts and in circumstances of the case as well as law on the subject, the learned Pr. CIT has erred in passing the order u/s 263, although the assessment order passed u/s 143(3) of the I.T. Act, 1961 was neither erroneous nor prejudicial to the interest of the revenue. 2. On the facts and in circumstances of the case as well as law on the subject, the learned Pr. CIT has erred in holding that the PF & ESI amounting (Rs.93,12,103 + 32,84,720) on account of employee contribution is disallowable under Explanation of sec 36(1)(va) r.w.s 2(24)(x). 3. It is therefore prayed that above order passed by Pr. CIT u/s. 263 may please be quashed or modified as your honours deem it proper. 4. Appellant craves leave to add, alter or delete any ground(s) either before or in the course of hearing of the appeal.”

ITA 58/SRT/2022/AY.2017-18 Siddhi Vinayak Knots & Prints Pvt. Ltd. 2. Succinct facts are that assessee before us is a private limited company and filed its return of income for Assessment Year 2017-18 on 30.10.2017, declaring total income of Rs.23,24,18,780/-. Subsequently, scrutiny assessment was completed under section 143(3) of the Income-tax Act, 1961 (here in after referred to as 'the Act') on 15.11.2019 by the Assessing Officer (here in after 'the AO') accepting the returned income.

ITA 58/SRT/2022/AY.2017-18 Siddhi Vinayak Knots & Prints Pvt. Ltd. 36(1)(va) read with section 2(24)(x) of the Act. Therefore assessment order dated 15.11.2019 for Asst. Year 2017-18, was held as erroneous and prejudicial to the interest of revenue in the light of the Hon'ble Gujarat High Court's decision in the case of Commissioner of Income Tax-II Vs. Gujarat State Road Transport Corporation, tax appeal no.637 of 2013. Therefore, the assessment order passed by the Assessing Officer is not in accordance with the decision of the Jurisdictional Gujarat High Court in the case of Commissioner of Income- tax-II Vs. Gujarat State Road Transport Corporation (supra) which is prejudicial to the revenue. Accordingly such assessment order passed by the Assessing Officer is erroneous in so far as it is prejudicial to the interest of the revenue, therefore ld PCIT set aside assessment order with direction to the Assessing Officer to pass a fresh assessment order in accordance with the law. 6. Aggrieved by the order of Ld. PCIT, the assessee is in appeal before us.

ITA 58/SRT/2022/AY.2017-18 Siddhi Vinayak Knots & Prints Pvt. Ltd. 4. At the outset it is submitted that in the notices issued by the PCIT, it was stated that assessing officer didn’t consider the issue of disallowance of deduction on account of employee’s PF and ESIC at the time of assessment. However, in the revision order passed u/s. 263, he mentioned that although assessing officer considered the alleged issue but he didn’t follow the decision of jurisdiction High Court in case of CIT vs. Gujarat State Road Transport Corporation – [2014] 14 taxmann.com 100 (Guj. HC) in preference to decision of Rajasthan High Court in case of PCIT vs. Rajasthan State Beverages Corporation (supra). He also held that the decision of Supreme Court in case of this Rajasthan High Court summarily rejected the SLP filed by the department. 5. From the perusal of the order of the Supreme Court in case of Rajasthan State Beverages Corporation cited supra, it is clear that the issue was considered by the Supreme Court as it was clearly stated in the order that the supreme court didn’t find any merit in the petition. So it is clear that it is not the case of mere dismissal of SLP but dismissal of SLP after finding no merits in the petition. 6. It is true that the Gujarat High Court and Kerala High Court took the decision in the favour of the revenue on this issue but it is also true that the Supreme court in case of CIT vs. Alom Extrusions Ltd. [2009] 31 ITR 306 (SC) took the decision in the favour of the assessee when the order was passed by the assessing officer and even by PCIT. Further, as stated above decision of the Supreme Court in case of Rajasthan State Beverages Corporation cited supra was considered at the time of assessment. 7. After passing the order u/s. 263, the supreme court in the case of Checkmate Services (P.) Ltd. vs. CIT - [2022] 143 taxmann.com 178 (SC) rendered the judgment in favour of the revenue. However, in the judgment also it was observed at para no. 44 that “There is no doubt that in Alom Extrusions, this court did consider the impact of deletion of second proviso to Section 43B, which mandated that unless the amount of employers' contribution was deposited with the authorities, the deduction otherwise permissible in law, would not be available. This court was of the opinion that the omission was curative, and that as long as the employer deposited the dues, before filing the return of income tax, the deduction was available.” In para 45 of this judgment it was mentioned that supreme court didn’t consider section 2(24)(x) and 36(1)(va) in the case of CIT vs. Alom Extrusions Ltd cited supra. Further, at para no. 54 it was held as under: “In the opinion of this Court, the reasoning in the impugned judgment that the non- obstante clause would not in any manner dilute or override the employer's obligation to deposit the amounts retained by it or deducted by it from the employee's income, unless the condition that it is deposited on or before the due date, is correct and justified. The non-obstante clause has to be understood in the context of the entire provision of Section 43B which is to ensure timely payment before the returns are filed, of certain liabilities which are to be borne by the assessee in the form of tax, interest payment and other statutory liability. In the case of these liabilities, what constitutes the due date is defined by the statute. Nevertheless, the assessees are given some leeway in that as long as deposits are made beyond the due date, but before the date of filing the return, the deduction is allowed. That, however, cannot apply in the case of amounts which are held in trust, as it is in the case of employees' contributions- which are deducted from their income. They are not part of the assessee employer's income, nor are they heads of deduction per se in the form of statutory pay out. They are others' income, monies, Page | 4

ITA 58/SRT/2022/AY.2017-18 Siddhi Vinayak Knots & Prints Pvt. Ltd. only deemed to be income, with the object of ensuring that they are paid within the due date specified in the particular law. They have to be deposited in terms of such welfare enactments. It is upon deposit, in terms of those enactments and on or before the due dates mandated by such concerned law, that the amount which is otherwise retained, and deemed an income, is treated as a deduction. Thus, it is an essential condition for the deduction that such amounts are deposited on or before the due date. If such interpretation were to be adopted, the non-obstante clause under section 43B or anything contained in that provision would not absolve the assessee from its liability to deposit the employee's contribution on or before the due date as a condition for deduction.” 8. From the reading of the para no. 44, 45 & 54, it is clear that even in terms of the subsequent decision of supreme court in case of Checkmate Services (P.) Ltd. vs. CIT cited supra, it can be seen that two views are possible particularly when assessing officer has considered the decision of supreme court in case of PCIT vs. Rajasthan State Beverages Corporation Ltd cited supra. 9. In this case the clause (a) & (b) of Explanation 2 to section 263 is not applicable as assessment order was passed after making inquiries or verification which should have been made and relief was allowed after inquiry of the same. The clause (d) of Explanation 2 to section 263 cannot be applied as assessing officer has taken the view on the basis of the judgment of the supreme court in case of Rajasthan State Beverages Corporation Ltd. cited supra and Alom Extrusions Ltd cited supra. 10. As per the clause (b) of Explanation 1 to section 263 “"record" shall include and shall be deemed always to have included all records relating to any proceeding under this Act available at the time of examination by the Principal 93[Chief Commissioner or Chief Commissioner or Principal] Commissioner or Commissioner;”. Accordingly, the supreme court’s judgment in case of Checkmate Services (P.) Ltd. vs. CIT cited supra doesn’t form part of the record as this judgment was not available at the time of passing of order by PCIT. 11. For the purpose of revision u/s. 263, the twin conditions viz. the assessment order should be erroneous and the assessment order should be prejudicial to the interest of revenue should be satisfied cumulatively. It has been held by the Honourable Gujarat High Court in case of CIT vs. Nirma Chemicals Works. Pvt. Ltd. [309 ITR 0067] (Guj HC) that the twin conditions have to be fulfilled by the commissioner before the commissioner exercise jurisdiction u/s. 263. However, none of these conditions are satisfied in this case. 12. The Hon’ble Supreme Court in the case of CIT Vs Max India Ltd. - 295 ITR 0282 (SC) relying upon its earlier decision in the case of Malabar Industrial Co. Ltd. - 243 ITR 0083 (SC) held as under: “The phrase “prejudicial to the interests of the Revenue” in section 263 of the Income-tax Act, 1961, has to be read in conjunction with the expression “erroneous” order passed by the Assessing Officer. Every loss of revenue as a consequence of an order of the Assessing Officer cannot be treated as prejudicial to the interests of the Revenue. For example, when the Assessing Officer adopts one of two courses permissible in law and it has resulted in loss of revenue, or where two views are possible and the Assessing Officer has taken one view with which the Commissioner does not agree, it cannot be treated as an erroneous order

ITA 58/SRT/2022/AY.2017-18 Siddhi Vinayak Knots & Prints Pvt. Ltd. prejudicial to the Revenue, unless the view taken by the Assessing Officer is unsustainable in law”. 13. Similarly, Hon’ble Gujarat High Court in the case of CIT Vs R. K. Construction Co. 313 ITR 65 held as under: “As far as law is concerned, the Assessing Officer has taken a particular view on the basis of evidence produced before him. On the basis of the said material and materials which were collected by the CIT in revisional proceedings, the Commissioner has taken a different view. However, in the revisional proceedings under section 263, it is not open for the Commissioner to take such a different view in view of the decisions of the Hon'ble Supreme Court in the case of Malabar Industrial Co. Ltd. There is nothing on record to suggest that the view taken by the Assessing Officer is unsustainable at law. This Court has also taken the same view in case of Arvind Jewellers whereby the order passed by the Commissioner under section 263 of the Act was quashed and set aside.” 14. In the case of CIT v. Arvind Jewellers [2003] 259 ITR 502(Guj), it was observed that the finding of fact given by the Tribunal was that the assessee had produced relevant material and offered explanations in pursuance of the notices issued under section 142(1) as well as section 143(2) of the Act and after considering the material and explanations, the Income-tax Officer had come to a definite conclusion. Since the material was there on record and the said material was considered by the Income-tax Officer and a particular view was taken, the mere fact that a different view can be taken should not be the basis for an action under section 263. The Hon’ble jurisdictional High Court, therefore, took the view that the order of revision was not justified. In the words of the Hon’ble High Court it was held as under: “Coming to the facts of the present case, it is the finding of fact given by the Tribunal that the assessee has produced relevant material and offered explanations in pursuance of the notices issued under section 142(1) as well as section 143(2) of the Act and after considering the materials and explanation, the Income-tax Officer has come to a definite conclusion. The Commissioner of Income-tax did not agree with the conclusion reached by the Income-tax Officer. Section 263 of the Act does not empower him to take action on these facts to arrive at the conclusion that the order passed by the Income-tax Officer is erroneous and prejudicial to the interests of the Revenue. Since the material was there on record and the said material was considered by the Income-tax Officer and a particular view was taken, the mere fact that a different view can be taken, should not be the basis for an action under section 263 of the Act and it cannot be held to be justified.” 15. Though there is a fine though subtle distinction between “lack of inquiry” and “inadequate inquiry,” it is only in cases of “lack of inquiry” that the CIT can exercise his revisional jurisdiction. As held in CIT vs. Gabriel India Ltd. [203 ITR 108(Bom)], the CIT cannot initiate proceedings with a view to start fishing and roving enquiries in matters or orders which are already concluded. 16. In the case of CIT v/s. G.M. Mittal Stainless Steel (P.) Ltd. [2003] 263 ITR 255 (SC), it was held that the order u/s. 263 is not valid as when PCIT passed the order, the decision of jurisdictional High Court in the favour of the assessee was available which was turned down by the Supreme Court subsequently. In the case of the assessee, the decisions of the Supreme Court were available in assessee’s favour on

ITA 58/SRT/2022/AY.2017-18 Siddhi Vinayak Knots & Prints Pvt. Ltd. the basis of which assessing officer passed the assessment order. The decision of the Supreme Court in the case of Checkmate Services (P.) Ltd. cited supra was not available at the time of revision order and therefore the ratio of the judgment of Supreme Court in case of G.M. Mittal Stainless Steel (P.) Ltd. cited supra is applicable. The decision of the Supreme Court in the case of Alom Extrusions Ltd. cited supra was dissented recently by the Supreme Court in the case of Checkmate Services (P.) Ltd. on the new line of reasoning. It is noteworthy to reproduce the decision of Supreme Court in case of G.M. Mittal Stainless Steel (P.) Ltd. cited supra at para 5 of the judgment: “Given the fact that the decision of the jurisdictional High Court was operative at the material time, the Assessing Officer could not be said to have erred in law. The fact that the instant Court had subsequently reversed the decision of the High Court would not justify the action of the Commissioner in treating the Assessing Officer's decision as erroneous. The power of the Commissioner under section 263 must be exercised on the basis of the material that was available to him when he exercised the power. At that time, there was no dispute that the issue whether the power subsidy should be treated as capital receipt had been concluded against the revenue. The satisfaction of the Commissioner, therefore, was based on no material, either legal or factual, which would have given him the jurisdiction to take action under section 263.” 17. In view of the above submission, your honours are requested to quash the revision order passed u/s. 263 of the Act.” 8. On the other hand, Ld. CIT(DR) for the Revenue relied on the judgment of Hon'ble Supreme Court in the case of Checkmate Services Pvt. Ltd., in Civil Appeal No. 2833 of 2016, dated 12.10.2022 and stated that now position is clear and the judgment of the law of land, has been declared by the Hon`ble Supreme Court, on the issue of employee contribution to PF and ESIC. Moreover, Assessing Officer has not followed the judgment of Jurisdictional High Court of Gujarat, in the case of CIT vs. Gujarat State Road Transport Corporation (in short ‘GSRTC’), in Tax Appeal No. 376 of 2013 / (2014) 41 taxmann.com 100 (Guj.), dated 26.12.2013, therefore order passed by the assessing officer is erroneous. At the time of passing the order by the Assessing Officer, the judgment of the Hon`ble High Court in the case of GSRTC (supra) was effective and the Assessing Officer was supposed to follow the judgment of jurisdictional High Court of Gujarat, therefore assessment order passed by the Assessing Officer is erroneous as well as prejudicial to the interest of Revenue. Hence, order passed by the Ld. PCIT should be upheld.

ITA 58/SRT/2022/AY.2017-18 Siddhi Vinayak Knots & Prints Pvt. Ltd. 9. We have heard both the parties and carefully gone through the submission put forth on behalf of the assessee along with the documents furnished and the case laws relied upon, and perused the fact of the case including the findings of the ld. PCIT and other materials brought on record. We note that at the time of framing the assessment order passed by the Assessing Officer under section 143(3) of the Act, dated 15.11.2019, the order of the Hon`ble High Court of Gujarat in the case of GSRTC (supra) in Tax Appeal No.376 of 2013, dated 26.12.2013 was effective, therefore we note that Assessing Officer has not followed the judgment of jurisdictional High Court on the issue under consideration. On the issue of employees` contribution to PF and ESIC the judgment delivered by the jurisdictional High Court of Gujarat, in the case of GSRTC (supra) was against the assessee, and the assessing officer failed to apply the judgment of Jurisdictional High Court, therefore order passed by the Assessing Officer is not sustainable in the eye of law.

ITA 58/SRT/2022/AY.2017-18 Siddhi Vinayak Knots & Prints Pvt. Ltd. apply with respect to certain deductions which are otherwise allowed in respect of loss, expenditure or trading liability etc. If we consider this scheme, Sections 40- 43B, are concerned with and enact different conditions, that the tax adjudicator has to enforce, and the assessee has to comply with, to secure a valid deduction. 32. The scheme of the provisions relating to deductions, such as Sections 32- 37, on the other hand, deal primarily with business, commercial or professional expenditure, under various heads (including depreciation). Each of these deductions, has its contours, depending upon the expressions used, and the conditions that are to be met. It is therefore necessary to bear in mind that specific enumeration of deductions, dependent upon fulfillment of particular conditions, would qualify as allowable deductions: failure by the assessee to comply with those conditions, would render the claim vulnerable to rejection. In this scheme the deduction made by employers to approved provident fund schemes, is the subject matter of Section 36 (iv). It is noteworthy, that this provision was part of the original IT Act; it has largely remained unaltered. On the other hand, Section 36(1)(va) was specifically inserted by the Finance Act, 1987, w.e.f. 01-04-1988. Through the same amendment, by Section 3(b), Section 2(24) – which defines various kinds of “income” – inserted clause (x). This is a significant amendment, 19 because Parliament intended that amounts not earned by the assessee, but received by it, - whether in the form of deductions, or otherwise, as receipts, were to be treated as income. The inclusion of a class of receipt, i.e., amounts received (or deducted from the employees) were to be part of the employer/assessee’s income. Since these amounts were not receipts that belonged to the assessee, but were held by it, as trustees, as it were, Section 36(1)(va) was inserted specifically to ensure that if these receipts were deposited in the EPF/ESI accounts of the employees concerned, they could be treated as deductions. Section 36(1)(va) was hedged with the condition that the amounts/receipts had to be deposited by the employer, with the EPF/ESI, on or before the due date. The last expression “due date” was dealt with in the explanation as the date by which such amounts had to be credited by the employer, in the concerned enactments such as EPF/ESI Acts. Importantly, such a condition (i.e., depositing the amount on or before the due date) has not been enacted in relation to the employer’s contribution (i.e., Section 36(1)(iv)). 33. The significance of this is that Parliament treated contributions under Section 36(1)(va) differently from those under Section 36(1)(iv). The latter (hereinafter, “employers’ contribution”) is described as “sum paid by the assessee as an employer by way of contribution towards a recognized provident fund”. However, the phraseology of Section 36(1)(va) differs from Section 36(1)(iv). It enacts that “any sum received by the assessee from any of his employees to which the provisions of sub-clause (x) of clause (24) of section 2 apply, if such sum is credited by the assessee to the employee's account in the relevant fund or funds on or before the due date.” The essential character of an employees’ contribution, i.e., that it is part of the employees’ income, held in trust by the employer is underlined by the condition that it has to be deposited on or before the due date. 34. It is therefore, manifest that the definition of contribution in Section 2 (c) is used in entirely different senses, in the relevant deduction clauses. The 20 differentiation is also evident from the fact that each of these contributions is separately dealt with in different clauses of Section 36 (1). All these establish that Parliament, while introducing Section 36(1)(va) along with Section 2(24)(x), was aware of the distinction between the two types of contributions. There was a statutory classification, under the IT Act, between the two.

ITA 58/SRT/2022/AY.2017-18 Siddhi Vinayak Knots & Prints Pvt. Ltd. 35. It is instructive in this context to note that the Finance Act, 1987, introduced to Section 2(24), the definition clause (x), with effect from 1 April 1988; it also brought in Section 36(1)(va). The memorandum explaining these provisions, in the Finance Bill, 1987, presented to the Parliament, is extracted below: “Measures of penalising employers mis-utilising contributions to the provident fund or any funds set up under the provisions of the Employees State Insurance Act, 1948, or any other fund for the welfare of employees – 12.1. The existing provisions provide for a deduction in respect of any payment by way of contribution to the provident fund or a superannuation fund or any other fund for welfare of employees in the year in which the liabilities are actually discharged (Section 43B). The effect of the amendment brought about by the Finance act, is that no deduction will be allowed in the assessment of the employer, unless such contribution is paid into the fund on or before the due date. “Due date” means the date by which an employer is required to credit the contribution to the employees account in the relevant fund or under the relevant provisions of any law or term of the contract of service or otherwise. (Explanation to Section 36 (1) of the Finance Act) 12.2. In addition, contribution of the employees to the various funds which are deducted by the employer from the salaries and wages of the employees will be taxed as income within brackets insertion of new [clause (x) in clause (24) of Section 2] of the employer, if such contribution is not credited by the employer in the account of the employee in the relevant fund by the due date. Where such income is not chargeable to tax under the head “profits and gains of business or profession” it will be assessed under the head “income from other sources.” 36. Significantly, the same Finance Act, 1987 also introduced provisos to Section 43B, through amendment (clause 10 of the Finance Bill). The 21 memorandum explaining the Bill, pertinently states, in relation to second proviso to Section 43B that: “…The second proviso seeks to provide that no deduction shall be allowed in regard to the sum referred to in clause (b) unless such sum has actually been paid during the previous year on or before the due date. The due date for the purposes of this proviso shall be the due date as under Explanation to clause (va) of sub-section (1) of Section 36.” 37. It is evident that the intent of the lawmakers was clear that sums referred to in clause (b) of Section 43B, i.e., “sum payable as an employer, by way of contribution” refers to the contribution by the employer. The reference to “due date” in the second proviso to Section 43B was to have the same meaning as provided in the explanation to Section 36(1)(va). Parliament therefore, through this amendment, sought to provide for identity in treatment of the two kinds of payments: those made as contributions, by the employers, and those amounts credited by the employers, into the provident fund account of employees, received from the latter, as their contribution. Both these contributions had to necessarily be made on or before the due date. 38. This court had occasion to consider the object of introducing Section 43B, in Allied Motors. The court held, after setting out extracts of the Budget speech of the Finance Minister, for 1983-84, that: "Section 43B was, therefore, clearly aimed at curbing the activities of those tax-payers, who did not discharge their statutory Page | 10

ITA 58/SRT/2022/AY.2017-18 Siddhi Vinayak Knots & Prints Pvt. Ltd. liability of payment of excise duty, employer’s contribution to provident fund, etc., for long periods of time but claimed deductions in that regard from their income on the ground that the liability to pay these amounts had been incurred by them in the relevant previous year. It was to stop this mischief that Section 43B was inserted.” 39. Original Section 43B(b) enabled the assessee/employer to claim deduction towards contribution as an employer, “by way of contribution to any provident fund”. The second proviso was substituted by Finance Act, 1989 with effect from 01.04.1989 and 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 22 paid in cash or to 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 same has been realised within 15 days from the due date." 40. The position in law remained unchanged for 14 years. The Central Government then constituted the Kelkar Committee, to suggest tax reforms. The report suggested amendments inter alia, to Section 43B. The relevant extract of the report is as follows: "In terms of the provisions of section 43B of the Income-tax Act, deduction for statutory payments relating to labour, taxes and State and public financial institutions are allowed as deductions, if they are paid during the financial year. However, under the provisions payment of taxes and interest to State and public financial institution are deemed to have been paid during the financial year even if they are paid by the due date of filing of return. Further if the liability is discharged in the subsequent year after the due date of filing of return, the payment is allowed as a deduction in the subsequent year. In the case of statutory payment relating to labour, the deduction for the payment is disallowed if such payment is made any time after the last date of payment of the about related liability. Trade and industry across the country represented that the delayed payment of statutory liability related to labour should be accorded the same treatment as delayed payment of taxes and interest, i.e. they should be allowed in the year of account. Since the objective of the provision is to ensure that a tax- payer does not avail of any statutory liability without actually making a payment for the same, we are of the view that these objectives would be served if the deduction for the statutory liability relating to labour are allowed in the year of payment. The complete disallowance of such payments is too harsh a punishment for delayed payments. Therefore, we recommend that the deduction for delayed payment of statutory liability relating to labour should be allowed in the year of payment like delayed taxes and interest." Based on the report, the Union introduced amendments to the IT Act, including an amendment to Section 43B; the memorandum explaining the provisions in the Finance Bill, 2003 in the matter of Section 43B. inter alia, reads thus: "The Bill also proposes to provide that in case of deduction of payments made by the assessee as an employer by way of contribution to any provident fund or superannuation fund or any other fund for the welfare of the employees shall be allowed in computing the income of the year in which such sum is actually paid. In case the same is paid before the 23 due Page | 11

ITA 58/SRT/2022/AY.2017-18 Siddhi Vinayak Knots & Prints Pvt. Ltd. date of filing the return of income for the previous year, the allowance will be made in the year in which the liability was incurred. These amendments will take effect from 1st April, 2004 and will accordingly apply in relation to the assessment year 2004-05 and subsequent years.” 41. The Notes on Clauses inter alia, reads as follows: "It is also proposed to amend the first proviso to the said section so as to omit the references of clause (a), clause (c), clause (d), clause (e) and clause (f) which is consequential in nature. It is also proposed to omit the second proviso to the said section. These amendments will take effect from 1st April, 2004 and will, accordingly, apply in relation to the assessment year 2004-2005 and subsequent years." 42. The rationale for introduction of Section 43B was explained by this court in M.M. Aqua Technologies Ltd. vs. Commissioner of Income Tax, Delhi: 16 “19. The object of Section 43B, as originally enacted, is to allow certain deductions only on actual payment. This is made clear by the nonobstante Clause contained in the beginning of the provision, coupled with the deduction being allowed irrespective of the previous years in which the liability to pay such sum was incurred by the Assessee according to the method of accounting regularly employed by it. In short, a mercantile system of accounting cannot be looked at when a deduction is claimed under this Section, making it clear that incurring of liability cannot allow for a deduction, but only "actual payment", as contrasted with incurring of a liability, can allow for a deduction.” 43. This condition, i.e., of payment of actual amount on or before the due date to enable deduction, continued for 14 years. By the amendment of 2003, the second proviso was deleted. This court interpreted the law, in the light of these developments, in Alom Extrusions. The court considered the effect of omission of the second proviso, and observed as follows: “10. “Income” has been defined under Section 2(24) of the Act to include profits and gains. Under Section 2(24)(x), any sum received by the assessee from his employees as contributions to any provident fund/superannuation fund or any fund set up under the Employees’ State Insurance Act, 1948, or any other fund for the welfare of such employees constituted income. This is the reason why every assessee(s) 16 M.M. Aqua Technologies Ltd. vs. Commissioner of Income Tax, Delhi, 2021 SCC On Line SC 575. 24 [employer(s)] was entitled to deduction even prior to 1-4-1984, on mercantile system of accounting as a business expenditure by making provision in his books of accounts in that regard. In other words, if an assessee(s) [employer(s)] is maintaining his books on accrual system of accounting, even after collecting the contribution from his employee(s) and even without remitting the amount to the Regional Provident Fund Commissioner (RPFC), the assessee(s) would be entitled to deduction as business expense by merely making a provision to that effect in his books of accounts. The same situation arose prior to 1-4-1984, in the context of assessees collecting sales tax and other indirect taxes from their respective customers and claiming deduction only by making provision in their books without actually remitting the amount to the exchequer. To curb this practice, Section 43-B was inserted with effect from 1-4-1984, by which the mercantile system of accounting with regard to tax, duty and contribution to welfare funds stood discontinued and, under Section 43-B, it became mandatory for the assessee(s) to account for the aforestated items not on Page | 12

ITA 58/SRT/2022/AY.2017-18 Siddhi Vinayak Knots & Prints Pvt. Ltd. mercantile basis but on cash basis. This situation continued between 1-4- 1984 and 1-4-1988, when Parliament amended Section 43-B and inserted the first proviso to Section 43-B. 11. By this first proviso, it was, inter alia, laid down, in the context of any sum payable by the assessee(s) by way of tax, duty, cess or fee, that if an assessee(s) pays such tax, duty, cess or fee even after the closing of the accounting year but before the date of filing of the return of income under Section 139(1) of the Act, the assessee(s) would be entitled to deduction under Section 43-B on actual payment basis and such deduction would be admissible for the accounting year. This proviso, however, did not apply to the contribution made by the assessee(s) to the labour welfare funds. To this effect, the first proviso stood introduced with effect from 1-4-1988. *** 15. By the Finance Act, 2003, the amendment made in the first proviso equated in terms of the benefit of deduction of tax, duty, cess and fee on the one hand with contributions to the Employees' Provident Fund, superannuation fund and other welfare funds on the other. However, the Finance Act, 2003, bringing about this uniformity came into force with effect from 1-4-2004. Therefore, the argument of the assessee(s) is that the Finance Act, 2003, was curative in nature, it was not amendatory and, therefore, it applied retrospectively from 1-4-1988, whereas the argument of the Department was that the Finance Act, 2003, was amendatory and it applied prospectively, particularly when Parliament had expressly made the Finance Act, 2003 applicable only with effect from 1-4-2004. *** 18. However, as stated above, the second proviso resulted in implementation problems, which have been mentioned hereinabove, and which resulted in the enactment of the Finance Act, 2003, deleting 25 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 Parliament only with effect from 1-4-2004, would become curative in nature, hence, it would apply retrospectively with effect from 1-4-1988. 19. Secondly, it may be noted that, in Allied Motors (P) Ltd. v. CIT [(1997) 3 SCC 472 : (1997) 224 ITR 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 30-6-1983. 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 deduction was disallowed under Section 43-B which, as stated above, was inserted with effect from 1-4-1984 *** 22. It is important to note once again that, by the Finance Act, 2003, not only is the second proviso deleted but even the first proviso is sought to be amended by bringing about a uniformity in tax, duty, cess and fee on the one hand vis-à-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 judgment in Allied Motors (P) Page | 13

ITA 58/SRT/2022/AY.2017-18 Siddhi Vinayak Knots & Prints Pvt. Ltd. Ltd. [(1997) 3 SCC 472 : (1997) 224 ITR 677] was delivered by a Bench of three learned Judges, which is binding on us. Accordingly, we hold that the Finance Act, 2003 will operate retrospectively with effect from 1-4-1988 (when the first proviso stood inserted). 23. 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 the Finance Act, 2003, to the above extent, operated prospectively. Take an example, in the present case, the respondents have deposited the contributions with RPFC 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 up to 1-4-2004, and who pays 26 the contribution after 1-4-2004, would get the benefit of deduction under Section 43-B of the Act.” 44. There is no doubt that in Alom Extrusions, this court did consider the impact of deletion of second proviso to Section 43B, which mandated that unless the amount of employers’ contribution was deposited with the authorities, the deduction otherwise permissible in law, would not be available. This court was of the opinion that the omission was curative, and that as long as the employer deposited the dues, before filing the return of income tax, the deduction was available. 45. A reading of the judgment in Alom Extrusions, would reveal that this court, did not consider Sections 2(24)(x) and 36(1)(va). Furthermore, the separate provisions in Section 36(1) for employers’ contribution and employees’ contribution, too went unnoticed. The court observed inter alia, that: “15. …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, 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 43B 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, Page | 14

ITA 58/SRT/2022/AY.2017-18 Siddhi Vinayak Knots & Prints Pvt. Ltd. would get the benefit of deduction under Section 43B of the Act. In our view, therefore, Finance 27 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”. 46. A discussion on the Principles of interpretation of tax statutes is warranted. In Ajmera Housing Corporation & Ors. vs. Commissioner of Income17 this court held as follows: “27. It is trite law that a taxing statute is to be construed strictly. In a taxing Act one has to look merely at what is said in the relevant provision. There is no presumption as to a tax. Nothing is to be read in, nothing is to be implied. There is no room for any intendment. There is no equity about a tax. (See: Cape Brandy Syndicate v. Inland Revenue Commissioners (1921) 1 KB 64 and Federation of A.P. Chambers of Commerce and Industry and Ors. v. State of A.P. and Ors.(2000) 6 SCC 5 50. In interpreting a taxing statute, the Court must look squarely at the words of the statute and interpret them. Considerations of hardship, injustice and equity are entirely out of place in interpreting a taxing statute. (Also see: Commissioner of Sales Tax, Uttar Pradesh v. The Modi Sugar Mills Ltd. 1961 (2) SCR 189.)” 47. Likewise, this court underlined the rule, regarding interpretation of taxing statutes, in Commissioner of Income Tax-III v Calcutta Knitwears, Ludhiana. 18 Recently, in Union of India & Ors. vs. Exide Industries Limited & Ors, 19 this court examined, and repelled a challenge to the constitutionality of Section 43B, especially the provision requiring actual payment, in respect of leave encashment benefit of employees. The court observations in this regard are relevant: “20. Section 43B, however, is enacted to provide for deductions to be availed by the Assessee in lieu of liabilities accruing in previous year without making actual payment to discharge the same. It is not a provision to place any embargo upon the autonomy of the Assessee in adopting a particular method of accounting, nor deprives the Assessee of any lawful deduction. Instead, it merely operates as an additional condition for the availment of deduction qua the specified head. 17 Ajmera Housing Corporation & Ors. vs. Commissioner of Income, 2010 (8) SCC 739. 18 Commissioner of Income Tax-III v Calcutta Knitwears, Ludhiana 2014 (6) SCC 444. 19 Union of India & Ors. vs. Exide Industries Limited & Ors., 2020 (5) SCC 274. 28 21. Section 43B bears heading "certain deductions to be only on actual payment". It opens with a non-obstante clause. As per settled principles of interpretation, a non obstante Clause assumes an overriding character against any other provision of general application. It declares that within the sphere allotted to it by the Parliament, it shall not be controlled or overridden by any other provision unless specifically provided for. Out of the allowable deductions, the legislature consciously earmarked certain deductions from time to time and included them in the ambit of Section 43B so as to subject such deductions to conditionality of actual payment. Such conditionality may have the inevitable effect of being different from the theme of mercantile system of accounting on accrual of liability basis qua the specific head of deduction covered therein and not to other heads. But that is a matter for the legislature and its wisdom in doing so.

ITA 58/SRT/2022/AY.2017-18 Siddhi Vinayak Knots & Prints Pvt. Ltd. 22. The existence of Section 43B traces back to 1983 when the legislature conceptualised the idea of such a provision in the 1961 Act. Initially, the provision included deductions in respect of sum payable by Assessee by way of tax or duty or any sum payable by the employer by way of contribution to any provident fund or superannuation fund. It is noteworthy that the legislature explained the inclusion of these deductions by citing certain practices of evasion of statutory liabilities and other liabilities for the welfare of employees...” *** 23. With the passage of time, the legislature inserted more deductions to Section 43B including cess, bonus or commission payable by employer, interest on loans payable to financial institutions, scheduled banks etc., payment in lieu of leave encashment by the employer and repayment of dues to the railways. Thus understood, there is no oneness or uniformity in the nature of deductions included in Section 43B. It holds no merit to urge that this Section only provides for deductions concerning statutory liabilities. Section 43B is a mix bag and new and dissimilar entries have been inserted therein from time to time to cater to different fiscal scenarios, which are best determined by the government of the day. It is not unusual or abnormal for the legislature to create a new liability, exempt an existing liability, create a deduction or subject an existing deduction to override regulations or conditions. 24. The leave encashment scheme envisages the payment of a certain amount to the employees in lieu of their unused paid leaves in a year. The nature of this payment is beneficial and pro-employee. However, it is not in the form of a bounty and forms a part of the conditions of service of the employee. An employer seeking deduction from tax liability in advance, in the name of discharging the liability of leave encashment, without actually extending such payment to the employee as and when the time for payment arises may lead to abhorrent consequences. When time for such payment arises upon retirement (or otherwise) of the employee, an employer may simply refuse to pay. Consequently, the innocent employee will be entangled in litigation in the evening of his/her life for claiming a hard- earned right without any fault on his part. Concomitantly, it would entail in double benefit to the employer - advance deduction from tax liability without any burden of 29 actual payment and refusal to pay as and when occasion arises. It is this mischief Clause (f) seeks to subjugate.” 48. One of the rules of interpretation of a tax statute is that if a deduction or exemption is available on compliance with certain conditions, the conditions are to be strictly complied with. 20 This rule is in line with the general principle that taxing statutes are to be construed strictly, and that there is no room for equitable considerations. 49. That deductions are to be granted only when the conditions which govern them are strictly complied with. This has been laid down in State of Jharkhand v Ambay Cements 21 as follows: “23…. In our view, the provisions of exemption clause should be strictly construed and if the condition under which the exemption was granted stood changed on account of any subsequent event the exemption would not operate.

ITA 58/SRT/2022/AY.2017-18 Siddhi Vinayak Knots & Prints Pvt. Ltd. 24. In our view, an exception or an exempting provision in a taxing statute should be construed strictly and it is not open to the court to ignore the conditions prescribed in the industrial policy and the exemption notifications. 25. In our view, the failure to comply with the requirements renders the writ petition filed by the respondent liable to be dismissed. While mandatory rule must be strictly observed, substantial compliance might suffice in the case of a directory rule. 26. Whenever the statute prescribes that a particular act is to be done in a particular manner and also lays down that failure to comply with the said requirement leads to severe consequences, such requirement would be mandatory. It is the cardinal rule of interpretation that where a statute provides that a particular thing should be done, it should be done in the manner prescribed and not in any other way. It is also settled rule of interpretation that where a statute is penal in character, it must be strictly construed and followed. Since the requirement, in the instant case, of obtaining prior permission is mandatory, therefore, non-compliance with the same must result in cancelling the concession made in favour of the grantee, the respondent herein.” 20 See for e.g., Eagle Flask Industries Ltd. v. Commissioner of Central Excise, 2004 Supp (4) SCR 35. 21 State of Jharkhand v Ambay Cements, (2005) 1 SCC 368. 30 This was also reaffirmed in a number of judgments, such as Commissioner of Income Tax v. Ace Multi Axes Systems Ltd.22 50. The Constitution Bench, in Commissioner. of Customs v. Dilip Kumar & Co. 23 endorsed as following: “24. In construing penal statutes and taxation statutes, the Court has to apply strict rule of interpretation. The penal statute which tends to deprive a person of right to life and liberty has to be given strict interpretation or else many innocents might become victims of discretionary decision- making. Insofar as taxation statutes are concerned, Article 265 of the Constitution [ “265. Taxes not to be imposed save by authority of law.—No tax shall be levied or collected except by authority of law.”] prohibits the State from extracting tax from the citizens without authority of law. It is axiomatic that taxation statute has to be interpreted strictly because the State cannot at their whims and fancies burden the citizens without authority of law. In other words, when the competent legislature mandates taxing certain persons/certain objects in certain circumstances, it cannot be expanded/interpreted to include those, which were not intended by the legislature. *** 34. The passages extracted above, were quoted with approval by this Court in at least two decisions being CIT v. Kasturi & Sons Ltd. [CIT v. Kasturi & Sons Ltd., (1999) 3 SCC 346] and State of W.B. v. Kesoram Industries Ltd. [State of W.B. v. Kesoram Industries Ltd., (2004) 10 SCC 201] (hereinafter referred to as “Kesoram Industries case [State of W.B. v. Kesoram Industries Ltd., (2004) 10 SCC 201]”, for brevity). In the later decision, a Bench of five Judges, after citing the above passage from Justice G.P. Singh's treatise, summed up the following principles applicable to the interpretation of a taxing statute: ‘(i) In interpreting a taxing statute, equitable considerations are entirely out of place. A taxing statute cannot Page | 17

ITA 58/SRT/2022/AY.2017-18 Siddhi Vinayak Knots & Prints Pvt. Ltd. be interpreted on any presumption or assumption. A taxing statute has to be interpreted in the light of what is clearly expressed; it cannot imply anything which is not expressed; it cannot import provisions in the statute so as to supply any deficiency; (ii) Before taxing any person, it must be shown that he falls within the ambit of the charging section by clear words used in the section; and (iii) If the words are ambiguous and open to two interpretations, the benefit of interpretation is given to the subject and there is nothing 22 Commissioner of Income Tax v. Ace Multi Axes Systems Ltd., 2018 (2) SCC 158 23 Commissioner. of Customs v. Dilip Kumar & Co, 2018 (9) SCC 1. 31 unjust in a taxpayer escaping if the letter of the law fails to catch him on account of the legislature's failure to express itself clearly.’” 51. The analysis of the various judgments cited on behalf of the assessee i.e., Commissioner of Income-Tax v. Aimil Ltd. 24; Commissioner of Income-Tax and another v. Sabari Enterprises25; Commissioner of Income Tax v. Pamwi Tissues Ltd. 26; Commissioner of Income-Tax, Udaipur v. Udaipur Dugdh Utpadak Sahakari Sandh Ltd. 27 and Nipso Polyfabriks (supra) would reveal that in all these cases, the High Courts principally relied upon omission of second proviso to Section 43B (b). No doubt, many of these decisions also dealt with Section 36(va) with its explanation. However, the primary consideration in all the judgments, cited by the assessee, was that they adopted the approach indicated in the ruling in Alom Extrusions. As noticed previously, Alom Extrutions did not consider the fact of the introduction of Section 2(24)(x) or in fact the other provisions of the Act. 52. When Parliament introduced Section 43B, what was on the statute book, was only employer’s contribution (Section 34(1)(iv)). At that point in time, there was no question of employee’s contribution being considered as part of the employer’s earning. On the application of the original principles of law it could have been treated only as receipts not amounting to income. When Parliament introduced the amendments in 1988-89, inserting Section 36(1)(va) and simultaneously inserting the second proviso of Section 43B, its intention was not to treat the disparate nature of the amounts, similarly. As discussed previously, the memorandum introducing the Finance Bill clearly stated that the provisions – especially second proviso to Section 43B - was introduced to ensure timely payments were made by the employer to the concerned fund (EPF, ESI, etc.) and avoid the mischief of employers retaining amounts for long periods. That 24 Commissioner of Income- Tax Vs. Aimil Ltd., [2010] 321 ITR 508 (Delhi High Court). 25 Commissioner of Income-Tax and another Vs. Sabari Enterprises, [2008] 298 ITR 141 (Karnataka High Court). 26 Commissioner of Income Tax Vs. Pamwi Tissues Ltd., [2009] 313 ITR 137 (Bombay High Court). 27 Commissioner of Income-Tax, Udaipur v. Udaipur Dugdh Utpadak Sahakari Sandh Ltd., [2013] 35 taxmann.com 616 (Rajasthan High Court). 32 Parliament intended to retain the separate character of these two amounts, is evident from the use of different language. Section 2(24)(x) too, deems amount received from the employees (whether the amount is received from the employee or by way of deduction authorized by the statute) as income - it is the character of the amount that is important, i.e., not income earned. Thus, amounts retained by the employer from out of the employee’s income by way of deduction etc. were treated as income in the hands of the employer. The significance of this provision is that on the one hand it brought into the fold of “income” amounts that were receipts or deductions from employees income; at the time, payment within the prescribed time – by way of contribution of the employees’ share to their credit with the relevant fund isto be treated as deduction (Section 36(1)(va)). The other important feature is that this distinction between the Page | 18

ITA 58/SRT/2022/AY.2017-18 Siddhi Vinayak Knots & Prints Pvt. Ltd. employers’ contribution (Section 36(1)(iv)) and employees’ contribution required to be deposited by the employer (Section 36(1)(va)) was maintained - and continues to be maintained. On the other hand, Section 43B covers all deductions that are permissible as expenditures, or out-goings forming part of the assessees’ liability. These include liabilities such as tax liability, cess duties etc. or interest liability having regard to the terms of the contract. Thus, timely payment of these alone entitle an assessee to the benefit of deduction from the total income. The essential objective of Section 43B is to ensure that if assessees are following the mercantile method of accounting, nevertheless, the deduction of such liabilities, based only on book entries, would not be given. To pass muster, actual payments were a necessary pre-condition for allowing the expenditure. 53. The distinction between an employer’s contribution which is its primary liability under law – in terms of Section 36(1)(iv), and its liability to deposit amounts received by it or deducted by it (Section 36(1)(va)) is, thus crucial. The former forms part of the employers’ income, and the later retains its character as an income (albeit deemed), by virtue of Section 2(24)(x) - unless the conditions spelt by Explanation to Section 36(1)(va) are satisfied i.e., depositing such 33 amount received or deducted from the employee on or before the due date. In other words, there is a marked distinction between the nature and character of the two amounts – the employer’s liability is to be paid out of its income whereas the second is deemed an income, by definition, since it is the deduction from the employees’ income and held in trust by the employer. This marked distinction has to be borne while interpreting the obligation of every assessee under Section 43B. 54. In the opinion of this Court, the reasoning in the impugned judgment that the non-obstante clause would not in any manner dilute or override the employer’s obligation to deposit the amounts retained by it or deducted by it from the employee’s income, unless the condition that it is deposited on or before the due date, is correct and justified. The non-obstante clause has to be understood in the context of the entire provision of Section 43B which is to ensure timely payment before the returns are filed, of certain liabilities which are to be borne by the assessee in the form of tax, interest payment and other statutory liability. In the case of these liabilities, what constitutes the due date is defined by the statute. Nevertheless, the assessees are given some leeway in that as long as deposits are made beyond the due date, but before the date of filing the return, the deduction is allowed. That, however, cannot apply in the case of amounts which are held in trust, as it is in the case of employees’ contributions- which are deducted from their income. They are not part of the assessee employer’s income, nor are they heads of deduction per se in the form of statutory pay out. They are others’ income, monies, only deemed to be income, with the object of ensuring that they are paid within the due date specified in the particular law. They have to be deposited in terms of such welfare enactments. It is upon deposit, in terms of those enactments and on or before the due dates mandated by such concerned law, that the amount which is otherwise retained, and deemed an income, is treated as a deduction. Thus, it is an essential condition for the deduction that such amounts are deposited on or before the due date. If such 34 interpretation were to be adopted, the non-obstante clause under Section 43B or anything contained in that provision would not absolve the assessee from its liability to deposit the employee’s contribution on or before the due date as a condition for deduction. 55. In the light of the above reasoning, this court is of the opinion that there is no infirmity in the approach of the impugned judgment. The decisions of the other High Courts, holding to the contrary, do not lay down the correct law. For these Page | 19

ITA 58/SRT/2022/AY.2017-18 Siddhi Vinayak Knots & Prints Pvt. Ltd. reasons, this court does not find any reason to interfere with the impugned judgment. The appeals are accordingly dismissed.”

Order pronounced on 19/12/2022 by placing the result on the Notice Board.

Sd/- Sd/- (PAWAN SINGH) (Dr. A.L. SAINI) JUDICIAL MEMBER ACCOUNTANT MEMBER lwjr /Surat �दनांक/ Date: 19/12/2022 SAMANTA Copy of the Order forwarded to 1. The Assessee 2. The Respondent 3. The CIT(A) 4. CIT 5. DR/AR, ITAT, Surat 6. Guard File By Order // TRUE COPY // Assistant Registrar/Sr. PS/PS ITAT, Surat