Income Tax Officer, Ward-1, Bellary V. Koppal District PRHW Co-op Society, Koppal

ITA 1059/BANG/2022

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The case involves the Income Tax Department (Revenue) appealing against the order of the CIT(A), which had directed the deletion of disallowances made on account of non-payment of employees' contributions to ESI and PF within the statutory due dates but before the due date for filing the return of income. The assessee, a worker co-operative society, argued that it acted merely as a conduit for these contributions, which were collected on behalf of various government entities that actually employed the workers. The Tribunal found that the unique nature of the relationship between the assessee and its members, and the role of government entities as actual employers, required further factual examination.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 124615 (ITAT-BANGALORE)
• Duration Of Justice: 1 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 01-01-2023
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 21-12-2022
• Assessment Year: 2019-2020
• Appeal Filed On: 16-11-2022
• Other Referred Cases: Cheminvest Ltd. Vs. CIT 378 ITR 3
• Laws Referred To: Income Tax Act
• Result in Favour of: Matter Remanded
• Court: TRIBUNAL
• Department Lawyers: NISHA PADMA
• Assessee Lawyers: VEERANNA M MURGOD
• Section: 143(1)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL “A” BENCH :BANGALORE BEFORE SHRI N. V. VASUDEVAN, VICE PRESIDENT AND MS. PADMAVATHY S, ACCOUNTANT MEMBER ITA No.1059/Bang/2022 Assessment Year : 2019-20 ITO, Ward – 1, Bellary. Vs. M/s. Koppal District PRHW Co-op Society, Kuvempu Nagar, Huvinal Road, Koppal – 583 231. PAN : AACAK 0025 E APPELLANTRESPONDENT Assessee by :Shri.Veeranna M Murgod,CA Revenue by:Smt. Nisha Padma, Addl. CIT Date of hearing:22.12.2022 Date of Pronouncement:02.01.2023 O R D E R Per Padmavathy S, Accountant Member This appeal is filed by the Revenue against the order of CIT(A), National Faceless Appeal Centre (NFAC), dated 20.09.2022, for Assessment Year 2019-20. 2. The only issue contended by the grounds raised by the assessee is with regard to disallowance of contribution made towards employees’ contribution and the ESI and PF that has not been paid with due dates specified under the relevant statute but before the due date for filing the return of income. ITA No.1059/Bang/2022 Page 2 of 4 3. Brief facts of the case Assessee had filed the return of income for Assessment Year 2019-20 on 24.07.2019 declaring total income of Rs.16,08,167/-. The return was processed by CPC and intimation under section 143(1) was issued on 28.05.2020 assessing the total income of the assessee at Rs.2,90,42,611/- by making an addition of Rs.2,74,34,444/- towards PF and ESI contributions by employer and employees by invoking the provisions of section 36(1)(va) of the Act. On further appeal, the CIT(A) directed the AO to delete the disallowance after verifying whether these payments have been made before due date of filing the return of income based on various decisions of jurisdictional High Court. Aggrieved by the order of the CIT(A) the revenue is in appeal before the Tribunal. 4. The ld DR submitted that the issue of taxability of employees contribution towards ESI and PF that is not paid within the due date as specified in the relevant statutes has been settled by the Hon’ble Supreme Court in the case of Cheminvest Ltd. Vs. CIT 378 ITR 3 and therefore prayed for setting aside the order of the CIT(A) 5. The learned AR on the other hand raised contentions with regard to the applicability of provisions of section 36(1)(va) to the assessee which is a worker co-operative society registered under Karnataka Co- operative Societies Act, 1959, and is engaged in the activity of providing manpower supply to various government hostels and other government entities. The learned AR in this regard submitted that the contributions towards ESI and PF collected by the assessee are on ITA No.1059/Bang/2022 Page 3 of 4 behalf of these entities and the assessee is not the employee of the persons from whom these collections are made. The learned AR further submitted that the Members of the society being workers will be outsourced by the order of District Collector, Koppal and Chief Executive Officer, Zilla Panchayat, Koppal or any other competent authority. The amount of wages to be paid to such outsourced staff will be decided by the competent authority and the assessee will be having no control of the salary or the statutory remittances and will remit the payments only when received from competent authorities. It is therefore submitted by the learned AR that there is no employer employee relationship established in the case of the assessee and the persons who make the contributions and therefore the provisions of section 36(1)(va) of the Act is not applicable. 6. We heard the rival submissions and perused the material on record. We notice that the contention with regard to unique nature of relationship between the assessee and its Members who make the PF and ESI contributions is raised for the first time before the Tribunal. Learned AR admitted that this contention is not raised before the lower authorities. The nature of relationship is a critical fact that needs to be examined factually and the contention that the statutory remittances are made by the assessee on behalf of the government entities who is actual the employer also needs examination. We therefore remit this issue back to the AO for verification of the relationship between the assessee, the Members and the government entities who employ the members. The AO is directed to keep in mind the ratio laid down by ITA No.1059/Bang/2022 Page 4 of 4 the Hon’ble Supreme Court in the case of Cheminvest Ltd (supra) while examining the facts of the case and decide accordingly. 7. In the result, appeal is allowed for statistical purposes. Pronounced in the open court on the date mentioned on the caption page. Sd/- (N. V. VASUDEVAN) Sd/- (PADMAVATHY S) Vice PresidentAccountant Member Bangalore, Dated: 02.01.2023. /NS/* Copy to: 1.Appellants2.Respondent 3.CIT4.CIT(A) 5.DR 6.Guard file By order Assistant Registrar, ITAT, Bangalore.