Adroit Management Consultants Private Limited, Secunderabad V. Income Tax Officer, Ward-1(1), Hyderabad

ITA 1044/Hyd/2017

• Counselvise Citation: [2018] 119 COUNSELVISE.COM (IT) 2986 (ITAT-HYDERABAD)
• Duration Of Justice: 11 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-05-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 10-05-2018
• Assessment Year: 2013-2014
• Appeal Filed On: 20-06-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: K SRINIVAS REDDY
• Keywords: Revision of order; Assessment record
• Section: 43B; 143(3); 142(1); 263; 139

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH B, HYDERABAD BEFORE SMT P. MADHAVI DEVI, JUDICIAL MEMBER AND SHRI S. RIFAUR RAHMAN, ACCOUNTANT MEMBER ITA NO. 1044/HYD/2017 ASSESSMENT YEAR: 2013-14 ADROIT MANAGEMENT CONSULTANTS PVT. LTD., SECUNDERABAD PAN AAHCA2632C VS. INCOME-TAX OFFICER, WARD 1(1), HYDERABAD. (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI A. SRINIVAS REVENUE BY : SHRI K. SRINIVAS REDDY DATE OF HEARING 10/05/2018 DATE OF PRONOUNCEMENT 23/05/2018 O R D E R PER S. RIFAUR RAHMAN, A.M.: THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAI NST THE ORDER DATED 31 ST MAY, 2017 OF CIT 1, HYDERABAD, PASSED U/S 263 OF THE ACT, FOR AY 2013-14. 2. BRIEFLY THE FACTS OF THE CASE ARE, ASSESSEE COMP ANY, ENGAGED IN THE BUSINESS OF MANPOWER SUPPLY SERVICES, E-FILED I TS RETURN OF INCOME ON 30/09/2013 ADMITTING TOTAL INCOME AT RS. 10,78,1 10/-, WHICH WAS PROCESSED U/S 143(1) OF THE INCOME-TAX ACT, 1961 (I N SHORT THE ACT) ON 01/08/2014. SUBSEQUENTLY, THE CASE WAS SELECTED FOR SCRUTINY UNDER CASS AND NOTICES U/S 142(1) AND 143(2) WERE I SSUED. IN RESPONSE TO THE NOTICES, THE ASSESSEE FURNISHED THE INFORMATION AS CALLED FOR. 2 ITA NO. 1044/HYD/17 M/S ADROIT MANAGEMENT CONSULTANTS (P) LTD.. 2.1 ON EXAMINATION OF THE INFORMATION PROVIDED BY T HE ASSESSEE, THE AO NOTICED FROM THE PROFIT AND LOSS ACCOUNT THA T THE ASSESSEE HAD SHOWN GROSS RECEIPTS AT RS. 13,83,97,691/-. HOWEVER AS PER THE 26AS STATEMENT, THE GROSS RECEIPTS WERE RS. 14,55,21,239 /- AND THE DIFFERENCE AMOUNT WAS RS. 71,23,548/-. WHEN QUESTIO NED FOR THE DIFFERENCE AMOUNT, THE AR HAD EXPLAINED THAT AN AMO UNT OF RS. 69,85,664/- PERTAINS TO SERVICE TAX COMPONENTS WHIC H WAS SUPPORTED BY THE SERVICE TAX RETURNS. WITH REGARD TO THE BALA NCE GROSS RECEIPTS OF RS. 1,37,884/-, THE AR COULD NOT SUBMIT ANY EVID ENCE, HENCE, THE DIFFERENCE AMOUNT OF RS. 1,37,884/- WAS ADDED TO TH E TOTAL INCOME OF THE ASSESSEE, WHICH WAS AGREED BY THE AR OF THE ASS ESSEE. 3. ON PERUSAL OF ASSESSMENT RECORD BY EXERCISING TH E POWERS VESTED U/S 263 OF THE ACT, THE PR. CIT FOUND THAT T HE ASSESSEE REMITTED EMPLOYEES CONTRIBUTION TO PF & ESI AGGREG ATING TO RS. 48,59,869/- BELATEDLY. ACCORDING TO THE CIT, THE SA ID AMOUNT WAS NOT ADDED BACK BY THE ASSESSEE IN THE COMPUTATION OF TO TAL INCOME NOR DID THE AO EXAMINE THIS ASPECT OR ADDED BACK THE BE LATED PAYMENTS DURING THE ASSESSMENT PROCEEDINGS. HENCE, HE WAS O F THE VIEW THAT THE ORDER PASSED U/S 143(3) IS PRIMA-FACIE ERRONEOU S AND PREJUDICIAL TO THE INTERESTS OF REVENUE AND A SHOW CAUSE NOTICE DATED 14/03/2017 WAS ISSUED TO THE ASSESSEE TO EXPLAIN AS TO WHY THE ASSESSMENT SO MADE SHOULD NOT BE REVISED BY MAKING DISALLOWANCE U /S 36(1)(VA) OF THE ACT IN RESPECT OF THE ABOVE BELATED PAYMENT. 3.1 IN COMPLIANCE TO THE SHOW CAUSE NOTICE, THE ASS ESSEE VIDE ITS REPLY DATED 18/03/2017, INTER-ALIA, STATED THAT THO UGH THE SAID AMOUNT PAID BELATEDLY BY A FEW DAYS, BUT ALL THE RELEVANT AMOUNTS WERE PAID BEFORE DUE DATE OF FILING OF RETURN OF INCOME U/S 1 39(1) OF THE ACT. ASSESSEE RELIED ON THE DECISION OF THE TRIBUNAL IN THE CASE OF TETRA SOFT (INDIA) PVT. LTD. VS. ACIT [2015] 40 ITR (TRIB ) 470. 3 ITA NO. 1044/HYD/17 M/S ADROIT MANAGEMENT CONSULTANTS (P) LTD.. 3.2 THE PR. CIT AFTER CONSIDERING THE SUBMISSIONS O F THE ASSESSEE, ELABORATELY DISCUSSED THE ISSUE WITH VARIOUS CASE L AW AS WELL AS BOARD CIRCULAR NO. 22/2015, DATED 17/12/2015 AND D IRECTED TO MAKE THE ADDITION OF RS. 33,23,058/- U/S 2(24(X) OF THE ACT OUT OF THE TOTAL BELATED PAYMENTS OF RS. 48,59,869/-, AS HE ALLOWED AN AMOUNT OF RS. 15,36,811/-, THE PAYMENTS OF WHICH WERE PAID WITHIN THE GRACE PERIOD OF FIVE DAYS. 4. AGGRIEVED BY THE ORDER OF CIT, THE ASSESSEE IS I N APPEAL BEFORE US RAISING THE FOLLOWING GROUNDS: 1. THE ORDER OF THE ADMINISTRATIVE COMMISSIONER OF INCOME TAX - 1, HYDERABAD IS CONTRARY TO LAW, FACTS & CIRC UMSTANCES OF THE CASE. 2. THE PRINCIPAL COMMISSIONER OF INCOME TAX - 1, HY DERABAD, OUGHT NOT TO HAVE HELD THAT THE ORDER PASSED U/S.14 3(3) DATED 08/03/2016 IS ERRONEOUS & PREJUDICIAL TO THE INTERE ST OF REVENUE. 3. THE PRINCIPAL COMMISSIONER OF INCOME TAX - I, HY DERABAD OUGHT NOT TO HAVE DIRECTED THE A.O TO BRING TO TAX THE AMOUNT OF RS.33,23,058/- BEING DISALLOWABLE U/S.36(1)(VA) OF THE ACT. 5. CONSIDERED THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. SIMILAR ISSUE ON DISALLOWANCE OF EMPLOYEES CONTRIBUTION TO PF & ESI CAME UP FOR CONSIDERATION BEFORE US IN TH E CASE OF TETRASOFT INDIA PVT. LTD., IN ITA NO. 291/HYD/2017 WHEREIN TH E COORDINATE BENCH HAS HELD AS UNDER: 7. CONSIDERED THE RIVAL SUBMISSIONS AND PERUSED TH E ORDERS OF REVENUE AUTHORITIES AS WELL AS MATERIAL ON RECORD. THE AO HAS INVOKED T HE PROVISIONS OF SECTION 36(1)(VA) TO DISALLOW ESI & PF PAYMENTS. WE HAVE CAREFULLY GONE THROUGH THE SECTION 36(1)(VA) WITH SECTION 2(24)(X) AND ALSO GONE THROUGH DECISION OF THE HONBLE HIGH COURT OF ALLAHABAD IN THE CASE OF SAGUN FOUNDRY (P) LTD. VS. CIT, [201 7] 78 TAXMANN.COM 47 (ALL.) WHEREIN THE HONBLE COURT HAS OBSERVED AS UNDER: SECTION 36(1)(VA) PERMITS DEDUCTIONS IN RESPECT TO RELEVANT FUND OF EMPLOYEES. SECTION 43B PERMITS DEDUCTIONS OTHERWISE ALLOWABLE UNDER THE INCOME-TAX ACT IN CASE ANY SUM PAYABLE BY THE ASSE SSEE IS PAID ACTUALLY BEFORE THE DATE OF FILING OF RETURN UNDER SECTION 139 AND CARVES OUT AN EXCEPTION IN THIS REGARD. 4 ITA NO. 1044/HYD/17 M/S ADROIT MANAGEMENT CONSULTANTS (P) LTD.. EXPLANATION TO SECTION 36(1)(VA) PROVIDES THAT DED UCTION SHALL BE ALLOWED IN RESPECT TO THE SUM PAID BY THE ASSESSEE TO EMPLOYEE'S ACCOUNT, IN THE RELEVANT FUND, ON OR BEFORE DUE DAT E, I.E., SUCH DATE BY WHICH ASSESSEE IS REQUIRED TO CREDIT EMPLOYEE'S CONTRIBUTION IN THE RELEVANT FUND, UNDER ANY ACT, RULE, ORDER OR NO TIFICATION ISSUED THEREIN. IN THE INSTANT CASE, DUE DATE, THEREFORE, SHALL BE THE DATE MENTIONED IN THE 1952 ACT OR 1948 ACT OR RULES FRAM ED THEREUNDER, ETC. BY WHICH CONTRIBUTIONS WERE TO BE MADE. ADMITT EDLY AS PER DUE DATE UNDER THE RELEVANT ACTS, CONTRIBUTIONS WERE NO T PAID BY THE ASSESSEE. SECTION 36(1)(VA) TALKS OF ONLY EMPLOYEE' S CONTRIBUTION AND ALLOW DEDUCTION IN RESPECT THERETO IN COMPUTING 'INCOME' UNDER SECTION 28. SO FAR AS SECTION 43B IS CONCERNED, IT WAS INSERTE D WITH EFFECT FROM 1-4-1984 TO ALLOW DEDUCTIONS PROVIDED PAYMENTS ARE ACTUALLY MADE BEFORE FILING OF RETURN AS PER DUE DATE UNDER SECTION 139(1). 'INCOME' DEFINED UNDER SECTION 2(24) INCLUDES 'PROF ITS AND GAINS'. UNDER SECTION 2(24)(X), ANY SUM RECEIVED BY ASSESSE E FROM HIS EMPLOYEES AS CONTRIBUTION TO ANY PROVIDENT FUND/SUP ERANNUATION FUND OR ANY FUND SET UP UNDER EMPLOYEES STATE INSUR ANCE ACT, 1948, OR ANY OTHER FUND FOR WELFARE OF SUCH EMPLOYE ES, CONSTITUTE 'INCOME'. IN RESPECT TO SUCH CONTRIBUTIONS DEDUCTIO N WAS ALLOWED UNDER SECTION 36(1)(VA) WHEN CONTRIBUTIONS RECEIVED BY EMPLOYER IS DEPOSITED WITHIN TIME PRESCRIBED, UNDER RELEVANT LABOUR WELFARE STATUTE. PRIOR TO 1-4-1984, EVERY ASSESSEE WAS ENTI TLED TO DEDUCTION ON MERCANTILE SYSTEM OF ACCOUNTING AS A BUSINESS EX PENDITURE BY MAKING PROVISION IN HIS BOOKS OF ACCOUNT IN THAT RE GARD AND THIS SITUATION CONTINUED UPTO 1-4-1984. AN ASSESSEE, IF MAINTAINING BOOKS ON ACCRUAL SYSTEM OF ACCOUNTING, EVEN AFTER C OLLECTING CONTRIBUTION FROM HIS EMPLOYEE, AND EVEN WITHOUT RE MITTING THE AMOUNT TO REGIONAL PROVIDENT FUND COMMISSIONER, HE WOULD HAVE CLAIMED DEDUCTION AS 'BUSINESS EXPENSE' BY MERELY M AKING A PROVISION TO THAT EFFECT IN HIS BOOKS OF ACCOUNT. A SIMILAR DISCREPANCY WAS NOTICED IN THE CONTEXT OF SALES TAX WHERE ASSESSEE COLLECTED THE SAME AND OTHER INDIRECT TAXES FROM HI S RESPECTIVE CUSTOMERS AND CLAIMED DEDUCTION ONLY BY MAKING PROV ISIONS IN HIS BOOKS WITHOUT ACTUALLY REMITTING THE AMOUNT TO EXCH EQUER. TO CURB THISPRACTICE, SECTION 43B WAS INSERTED WITH EFFECT FROM 1-4-1984, WHEREBY MERCANTILE SYSTEM OF ACCOUNTING WITH REGARD TO TAX, DUTY AND CONTRIBUTIONS TO WELFARE FUNDS STOOD DISCONTINU ED. NOW IT BECAME NECESSARY FOR THE ASSESSEE TO ACCOUNT FOR T HE AFORESTATED ITEMS, NOT MERCANTILE BASIS, BUT ON CASH BASIS. WIT H EFFECT FROM 1-4- 1988 SECTION 43B WAS AGAIN AMENDED AND A PROVISO WA S INSERTED. IT PROVIDED, INTER ALIA, IN THE CONTEXT OF ANY SUM PAYABLE BY THE ASSESSEE BY WAY OF TAX, DUTY, CESS OR FEE, IF SUCH AN ASSESSEE PAYS SUCH TAX, DUTY, CESS OR FEE EVEN AFTER CLOSING OF A CCOUNTING YEAR BUT 5 ITA NO. 1044/HYD/17 M/S ADROIT MANAGEMENT CONSULTANTS (P) LTD.. BEFORE DATE OF FILING OF RETURN UNDER SECTION 139(1 ), ASSESSEE WOULD BE ENTITLED TO DEDUCTION UNDER SECTION 43B ON ACTUA L PAYMENT BASIS AND SUCH DEDUCTION WOULD BE ADMISSIBLE FOR THE ACCO UNTING YEAR. THIS PROVISO, HOWEVER, WAS NOT MADE APPLICABLE TO C ONTRIBUTIONS MADE BY THE ASSESSEE TO LABOUR WELFARE FUNDS. BY FI NANCE ACT, 1988, WITH EFFECT FROM 1-4-1988, SECOND PROVISO CAM E TO BE INSERTED. SECOND PROVISO WAS FURTHER AMENDED BY FIN ANCE ACT, 1989 WITH EFFECT FROM 1-4-1989. FROM THE ABOVE PROVISIONS, NOW ASSESSEE BECOMES EN TITLED TO DEDUCTION ONLY IF CONTRIBUTION STAND CREDITED ON OR BEFORE DUE DATE, GIVEN IN LABOUR WELFARE STATUTES. HOWEVER, SECOND P ROVISO AGAIN CREATED CERTAIN DIFFICULTIES. IN MANY OF THE COMPAN IES, FINANCIAL YEAR ENDED ON 31ST MARCH DID NOT COINCIDE WITH ACCO UNTING PERIOD OF LABOUR WELFARE STATUTES. IN MANY CASES, TIME TO MAKE CONTRIBUTION OF FUNDS ENDED AFTER DUE DATE OF FILIN G OF RETURNS. ON THE REPRESENTATION OF INDUSTRIES, AGAIN PARLIAMENT, VIDE FINANCE ACT, 2003, WITH EFFECT FROM 1-4-2004, MADE AMENDMEN T BY DELETING SECOND PROVISO AND AMENDING FIRST PROVISO. THE SUPREME COURT IN THE CASE OF ALOM EXTRUSIONS L TD. (SUPRA) CONSIDERED THE INTENT, PURPOSE AND OBJECT IN THE HI STORICAL BACK DROP OF INSERTION OF SECTION 43B AND ITS PROGRESS B Y WAY OF VARIOUS AMENDMENTS AND HELD THAT WHEN THE CONTRIBUTION HAD BEEN PAID BY THE ASSESSEE TOWARDS PROVIDENT FUND, ETC. PRIOR TO FILING OF RETURN UNDER SECTION 139(1), THE ASSESSEE WOULD BE ENTITLE D FOR DEDUCTION UNDER SECTION 43B. [PARA 27] FROM THE AFORESAID JUDGMENT OF THE SUPREME COURT, THE BENCH FINDS THAT IRRESPECTIVE OF THE FACT THAT DEDUCTION IN RESPECT OF SUM PAYABLE BY EMPLOYER'S CONTRIBUTION WAS INVOLVED, BU T THE COURT DID NOT RESTRICT OBSERVATIONS, FINDINGS AND DECLARATION OF LAW TO THAT CONTEXT BUT LOOKING TO THE OBJECTIVE AND PURPOSE OF INSERTION OF SECTION 43B APPLIED IT TO BOTH THE CONTRIBUTIONS, W HETHER BY EMPLOYER OR EMPLOYEE. IT ALSO OBSERVED CLEARLY THAT SECTION 43B IS WITH A NON OBSTANTE CLAUSE AND, THEREFORE, OVER RID E EVEN IF, ANYTHING OTHERWISE IS CONTAINED IN SECTION 36 OR AN Y PROVISION OF THE INCOME-TAX ACT. IN VIEW OF THE AFORESAID, THE ASSESSEE WAS ENTITLE D TO DEDUCTIONS UNDER SECTIONS 43B AND 36(1)(VA). 7.1 AFTER CONSIDERING THE RATIO LAID DOWN BY THE HO NBLE HIGH COURT AS ABOVE IN THE SAID CASE AND RESPECTFULLY FOLLOWING THE SAME, WE H OLD THAT NO DISALLOWANCE CAN BE MADE TOWARDS PF/ESI CONTRIBUTIONS MADE BY THE ASSES SEE WITHIN THE FY OR BEFORE FILING OF THE RETURN. IN THE GIVEN CASE, ASSESSEE HAS PAID SHORTFALL AMOUNT WITHIN THE FY, HENCE, THE ASSESSEE IS ALLOWED TO CLAIM THE ABOVE P AYMENT AS DEDUCTION IN THE SAME FY. THEREFORE, THE AO IS DIRECTED TO DELETE THE ADD ITION MADE. 6 ITA NO. 1044/HYD/17 M/S ADROIT MANAGEMENT CONSULTANTS (P) LTD.. RESPECTFULLY FOLLOWING THE ABOVE DECISION AS WELL A S CONSIDERING THE FACT THAT THE ASSESSEE HAS REMITTED THE EMPLOYEES CONTRIBUTION TO PF & ESI BEFORE THE FILING OF THE RETURN U/S 139(1) OF THE ACT, WE OBSERVE THAT THE AO HAS ALLOWED THE CLAIM OF THE ASSESSEE A ND NOT DISALLOWED THE CONTRIBUTION WHICH IS AS PER THE DECISION OF TH E JURISDICTIONAL ITAT. ACCORDINGLY, WE SET ASIDE THE ORDER OF CIT PASSED U /S 263 OF THE ACT AND RESTORE THE ORDER OF AO. ACCORDINGLY, THE GROUN DS RAISED BY THE ASSESSEE ARE ALLOWED. 6. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED . PRONOUNCED IN THE OPEN COURT ON 23 RD MAY, 2018. SD/- SD/- (P. MADHAVI DEVI) (S. RIFAUR RAHM AN) JUDICIAL MEMBER A CCOUNTANT MEMBER HYDERABAD, DATED: 23 RD MAY, 2018 KV COPY TO:- 1) M/S ADROIT MANAGEMENT CONSULTANTS PVT. LTD., 1-8 -32/44/1, PLOT NO. 45, BAPU BAGH COLONY, PG ROAD, SECUNDE RABAD. 2) PR. CIT 1, IT TOWERS, MASAB TANK, HYDERABAD. 3) ADDL. CIT - 1, HYD. 4) THE DEPARTMENTAL REPRESENTATIVE, I.T.A.T., HYDE RABAD. 5) GUARD FILE