DHRUVI PHARMA PVT LTD V. JOINT COMMISSIONER OF INCOME TAX (OSD)

TAXAP/962/2018

AI Insights

The case involves Dhruvi Pharma Pvt Ltd, the appellant, contesting the decision of the Income Tax Appellate Tribunal which disallowed deductions for late deposits of employees' contributions to Provident Fund and ESIC for the assessment year 2011-12. The contributions were made before the due date of filing the return, but were not credited to the employees' accounts in the respective funds by the due date as required under section 36(1)(va) of the Income Tax Act, 1961. The Tribunal's decision was based on the precedent from CIT vs. Gujarat State Road Transport Corporation, which held that such contributions must be credited by the due date to qualify for deductions. The appellant sought a certificate for appeal to the Supreme Court, arguing that other High Courts have taken a contrary view and the Supreme Court has admitted an appeal against the Gujarat High Court's decision.

• Counselvise Citation: [2018] 140 COUNSELVISE.COM (IT) 752738 (HC-GUJARAT)
• Appeal Type: Others
• Pronouncement Date: 14-08-2018
• Assessment Year: misc
• Other Referred Cases: CIT vs. Gujarat State Road Transport Corporation
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Revenue
• Court: HIGH COURT
• Assessee Lawyers: B S SOPARKAR
• Keywords: Deduction; Employees Contribution; ESIC; Income Tax; Provident fund; Special leave
• Section: 36(1)(va); 36(1)

Judgement Text

"C/TAXAP/962/2018 ORDER IN THE HIGH COURT OF GUJARAT AT AHMEDABAD R/TAX APPEAL NO. 962 of 2018 ========================================================== DHRUVI PHARMA PVT LTD Versus JOINT COMMISSIONER OF INCOME TAX (OSD) ========================================================== Appearance: MR B S SOPARKAR(6851) for the PETITIONER(s) No. 1 for the RESPONDENT(s) No. 1 ========================================================== CORAM: HONOURABLE MR.JUSTICE AKIL KURESHI and HONOURABLE MR.JUSTICE B.N. KARIA Date : 14/08/2018 ORAL ORDER (PER : HONOURABLE MR.JUSTICE AKIL KURESHI) 1. The assessee is in appeal against the judgement of the Income Tax Appellate Tribunal dated 07.02.2018 suggesting following questions for our consideration: “Whether in the facts and circumstances of the case, the Income Tax Appellate Tribunal was right in law in not allowing deduction for payment of employees' contribution of P.F. And ESIC for Rs. 22,69,539/- and Rs. 5,31,040/- totalling to Rs. 28,00,579/- deposited with the Government Authority on or before due date of filing of return for the relevant A.Y. 2011-12.?” 2. The issue pertains to assessment year 2011-12. The assessee was late in depositing employees' contribution in the Provident Fund account and was also late in depositing contribution in Employees State Insurance Corporation ['ESIC' for short]. Page 1 of 3 C/TAXAP/962/2018 ORDER However, such amounts were deposited before the appropriate authorities before the due date of filing of the return. Under such circumstances, the assessee argued that expenditure cannot be disallowed under section 36(1) of the Income Tax Act, 1961. The Tribunal, by the impugned judgement, rejected such contention and dismissed the appeal following the judgement of Division Bench of this Court in case of CIT vs. Gujarat State Road Transport Corporation reported in 366 ITR 170. In such judgement, this very issue came up for consideration. The Court concluded as under: “8. In view of the above and for the reasons stated above, and considering section 36(1)(va) of the Income Tax Act, 1961 read with sub-clause (x) of clause 24 of section 2, it is held that with respect to the sum received by the assessee from any of his employees to which provisions of sub-clause (x) of clause (24) of section (2) applies, the assessee shall be entitled to deduction in computing the income referred to in section 28 with respect to such sum credited by the assessee to the employees’ account in the relevant fund or funds on or before the “due date” mentioned in explanation to section 36(1)(va). Consequently, it is held that the learned tribunal has erred in deleting respective disallowances being employees’ contribution to PF Account / ESI Account made by the AO as, as such, such sums were not credited by the respective assessee to the employees’ accounts in the relevant fund or funds (in the present case Provident Fund and/or ESI Fund on or before the due date as per the explanation to section 36(1) (va) of the Act i.e. date by which the concerned assessee was required as an employer to credit employees’ contribution to the employees’ account in the Provident Fund under the Provident Fund Act and/or in the ESI Fund under the ESI Act. Consequently, all these appeals are allowed and the impugned judgement and orders passed by the tribunal in deleting the disallowances made by the AO are hereby quashed and set Page 2 of 3 C/TAXAP/962/2018 ORDER aside and the disallowances of the respective sums with respect to the Provident Fund / ESI Fund made by the AO is hereby restored. The questions raised in present appeal are answered in favour of the revenue. With this, all these appeals are allowed.” 3. This issue is thus squarely covered by the judgement of this Court in case of CIT vs. Gujarat State Road Transport Corporation (supra). Learned counsel for the appellant also did not dispute this position. He however contended that other High Courts have taken a contrary view and the appeal filed against the judgemnet in case of CIT vs. Gujarat State Road Transport Corporation (supra) is admitted by the Supreme Court after granting special leave. He therefore requested that certificate of fitness, for appeal to the Supreme Court on the ground that it involves a substantial question of law of general importance, may be granted. 4. In view of facts noted above, such certificate is granted. Tax Appeal is disposed of. (AKIL KURESHI, J) (B.N. KARIA, J) JYOTI V. JANI Page 3 of 3 "