ACIT, Central Circle - VII, Kolkata, Kolkata V. M/s. Vijay Shree Ltd., Howrah

ITA 1091/KOL/2010

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 48094 (ITAT-KOLKATA)
• Duration Of Justice: 11 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-04-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 28-04-2011
• Assessment Year: 2006-2007
• Appeal Filed On: 28-05-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: A K PRAMANIK
• Assessee Lawyers: N O N E
• Keywords: Question of law
• Section: 43B; 143(3); 139

Judgement Text

, A , IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH: KOL KATA () , , , !' ) [BEFORE HONBLE SRI MAHAVIR SINGH, JM & HONBLE SHR I AKBER BASHA, AM] # # # # / I.T.A NO. 1091/KOL/2010 $% &' $% &' $% &' $% &'/ // / ASSESSMENT YEAR: 2006-07 ASSISTANT COMMISSIONER OF INCOME-TAX VS. M/S. VIJAY SHREE LTD. CIRCLE-VII, KOLKATA. (PAN-AAACV 9833 B) ()* /APPELLANT ) (+,)*/ RESPONDENT ) FOR THE APPELLANT: SHRI A. K. PRAMANIK FOR THE RESPONDENT: N O N E ! / ORDER PER SHRI MAHAVIR SINGH/ : THIS APPEAL BY REVENUE IS ARISING OUT OF THE ORDER OF CIT(A), CENTRAL-1, KOLKATA IN APPEAL NO. 427/CC-VII/CIT(A), C-1/08-09 DATED 10.0 3.2010. THE ASSESSMENT WAS FRAMED BY DCIT, CC-VII, KOLKATA, U/S. 143(3) OF THE INCOME TA X ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT) FOR ASSESSMENT YEAR 2006-07 VIDE HIS ORD ER DATED 31.12.2008. 2. THE ONLY ISSUE IN THIS APPEAL OF THE REVENUE IS AGAINST THE ORDER OF CIT(A) DELETING THE ADDITION MADE BY THE AO ON ACCOUNT OF EMPLOYEES CO NTRIBUTION TO ESI & PF BY INVOKING THE PROVISIONS OF SECTION 36(1)(VA) R.W.S. 2(24)(X) OF THE ACT. FOR THIS REVENUE HAS RAISED THE FOLLOWING TWO GROUNDS: 1. THE LD. CIT(A) HAS ERRED IN DELETING THE ADDITI ON MADE U/S. 36(1)(VA) READ WITH SEC. 2(24)(X) OF THE I. T. ACT, 1961 ON ACCOUNT OF THE E MPLOYEES CONTRIBUTION TO ESI AMOUNTING TO RS.14,62,739/- AND EMPLOYEES CONTRIBU TION TO P.F. AMOUNTING TO RS.59,25,188/- DUE TO NON-DEPOSIT OF THE CONTRIBUTI ONS WITHIN THE DUE DATE TO THE APPROPRIATE AUTHORITY. 2. THE LD. CIT(A) HAS ERRED IN DELETING THE ADDITIO NS BY WRONGLY INVOKING THE PROVISIONS OF SECTION 43B SINCE THE EMPLOYEES CONTRIBUTION IS NOT ALLOWED UNDER SECTION 43B ON PAYMENT BASIS BUT UNDER SECTION 36(1)(VA) READ WITH SECTION 2(24)(X) AND SECTION 43B IS ATTRACTED IN CASE OF EMPLOYER CONTRIBUTION ONLY. 3. THE BRIEF FACTS ARE THAT THE AO DISALLOWED THE E SI & PF PAYMENTS BY OBSERVING AS UNDER: ON GOING THROUGH THE ANNEXURE D-1 AND D-11 OF THE TAR IT WAS FOUND THAT THE EMPLOYEES CONTRIBUTION TOWARDS P.F. AND ESI WERE NO T DEPOSITED WITHIN THE DUE DATE TO THE APPROPRIATE AUTHORITY. THE ASSESSEE SUBMITTED THAT AS THERE WAS SUSPENSION OF WORK THEY COULD NOT PAID THE SAME. IN VIEW OF PROVISION S OF SECTION 36(1)(VA) READ WITH 2 ITA 1091/K/201 0 VIJAY SHREE LTD. A.Y.06-07 SECTION 2(24)(X) OF THE I. T. ACT, 1961., THE EMPLO YEES CONTRIBUTION TO PF RS.59,25,188/- AND THAT TO ESI OF RS.14,62,739/- ARE ADDED BACK TO THE TOTAL INCOME OF THE ASSESSEE. AGGRIEVED, ASSESSEE PREFERRED APPEAL BEFORE CIT(A) AND CIT(A) DELETED THE ADDITION BY CONSIDERING THE DECISION OF HONBLE KARNATAKA HIGH COURT IN THE CASE OF CIT VS. SABARI ENTERPRISES (2008) 298 ITR 141 (KARN.) AND OF HONB LE APEX COURT IN THE CASE OF CIT VS. ALOM EXTRUSIONS LTD. (2009) 319 ITR 306 (SC). AGGR IEVED, NOW REVENUE IS IN APPEAL BEFORE US. 4. BEFORE US, LD. SR. DR ARGUED THAT THE COORDINATE BENCH IN THE CASE OF DCIT VS. M/S. ASHIKA STOCK BROKING LTD., ITA NO.1255/K/2010, A.Y. 2007-08 DATED 19.11.2010 HAS CONSIDERED THE ISSUE OF EMPLOYEES CONTRIBUTION TOW ARDS ESI & PF AND HELD THE SAME IN FAVOUR OF THE REVENUE. HE ARGUED THAT THIS COORDIN ATE BENCH DECISION SHOULD BE FOLLOWED. 5. WE HAVE HEARD LD. SR. DR AND GONE THROUGH FACTS AND CIRCUMSTANCES OF THE CASE. WE FIND FROM THE ORDER OF CIT(A) THAT PF AND ESI PAYME NTS ON ACCOUNT OF EMPLOYEES CONTRIBUTION WERE PAID WITHIN THE DUE DATES OF FILI NG OF RETURN OF RELEVANT ASSESSMENT YEAR AND FURTHER EVEN THE PAYMENTS MADE WITHIN THE GRACE PER IOD PROVIDED UNDER RESPECTIVE ACTS I.E. THE EMPLOYEE'S PROVIDENT FUND ACT' & 'THE EMPLOYEES STATE INSURANCE ACT '. WE FIND THAT THE ISSUE IS SQUARELY COVERED IN FAVOUR OF THE ASSE SSEE, AS THE PAYMENTS OF THESE CONTRIBUTION ARE MADE WITHIN THE DUE DATE OF FILLING OF RETURN O F INCOME AS NOTED BY CIT(A) IN HIS APPELLATE ORDER, BY THE DECISION OF HONBLE DELHI HIGH COURT IN THE CASE OF CIT V. P.M. ELECTRONICS LTD. (2008) 220 CTR 635 (DEL), WHEREIN THE ISSUE HAS BEE N DISCUSSED IN PARA-4 AS UNDER:- 4. ON 27 TH NOV., 1998 THE ASSESSEE HAD FILED A RETURN OF INCO ME DECLARING A LOSS OF RS.8,92,888. ON 11 TH MAY, 1999 THE RETURN WAS PROCESSED UNDER S. 143(1) (A) OF THE ACT. THE CASE OF THE ASSESSEE WAS SELECTED FOR SCRUTINY. ACC ORDINGLY, A NOTICE DT. 27 TH SEPT., 1999 UNDER S. 143(2) OF THE ACT WAS ISSUED TO THE ASSESSEE. IN RESPONSE TO THE NOTICE AND ON EXAMINATION OF THE DETAILS SUBMITTED BY THE ASSESSEE WITH RESPECT TO PROVIDENT FUND PAYMENTS MADE BOTH ON ACCOUNT OF EMPLOYERS AND EMPLOYEES SHARE REVEALED THAT PAYMENTS IN THE SUM OF RS.17,94,042 WERE LATE AS PER THE PROVISIONS OF S. 36(1)(VA) R.W S. 2(24)(X) AND S. 43B. CONSEQUENTLY, THE AO DISALLOWED THE DEDUCTION AND A DDED A SUM OF RS.17,94,042 TOWARDS EPF CONTRIBUTION. AND SUBSEQUENTLY DECIDE THIS ISSUE IN PARA-10 TO 14 OF HON'BLE DELHI HIGH COURT, WHICH READ AS UNDER:- 10. IN VIEW OF THE ABOVE, IT IS QUITE EVIDENT THAT THE SPECIAL LEAVE PETITION WAS DISMISSED BY A SPEAKING ORDER AND WHILE DOING SO THE SUPREME COURT HAD NOTICED THE FACT THAT THE MATTER IN APPEAL BEFORE IT PERTAINS TO A PERIOD PRIOR TO THE AMENDMENT BROUGHT ABOUT IN S. 43B OF THE ACT. THE AFORESAID POSITION AS REGARDS THE STATE OF THE LAW FOR A PERIOD PRIOR TO THE AMENDMENT TO S. 43B HAS BEEN NOTICED BY A DIVISION BENCH OF T HIS COURT IN DHARMENDRA SHARMA (SUPRA). APPLYING THE RATIO OF THE DECISION OF THE SUPREME C OURT IN VINAY CEMENT (SUPRA) A DIVISION BENCH OF THIS COURT DISMISSED THE APPEALS OF THE RE VENUE. IN THE PASSING WE MAY ALSO NOTE THAT A DIVISION BENCH OF THE MADRAS HIGH COURT IN THE CA SE OF CIT VS. NEXUS COMPUTER (P) LTD. BY 3 ITA 1091/K/201 0 VIJAY SHREE LTD. A.Y.06-07 A JUDGMENT DT. 19 TH AUG., 2008, PASSED IN TAX CASE (APPEAL) NO.1192/20 08 [REPORTED AT (2008) 219 CTR (MAD.) 54 ED.] DISCUSSED THE IMPACT OF BO TH THE DISMISSAL OF THE SPECIAL LEAVE PETITION IN THE CASE OF GEORGE WILLIAMSON (ASSAM) LTD. (SUPRA) AND VINAY CEMENT (SUPRA) AS WELL AS A CONTRARY VIEW OF THE DIVISION BENCH OF IT S OWN COURT IN SYNERGY FINANCIAL EXCHANGE (SUPRA). THE DIVISION BENCH OF THE MADRAS HIGH COU RT HAS EXPLAINED THE EFFECT OF THE DISMISSAL OF A SPECIAL LEAVE PETITION BY A SPEAKING ORDER BY RELYING UPON THE JUDGMENT OF THE SUPREME COURT IN THE CASE OF KUNHAYAMMED & ORS.VS. STATE OF KERALA & ANR. (2000) 162 CTR (SC) 97: 119 STC 505 AT P. 526 IN PARA 40 AND N OTED THE FOLLOWING OBSERVATIONS : IF THE ORDER REFUSING LEAVE TO APPEAL IS A SPEAKIN G ORDER, I.E., GIVES REASONS FOR REFUSING THE GRANT OF LEAVE, THEN THE ORDER HAS TWO IMPLICATIONS. FIRSTLY, THE STATEMENT OF LAW CONTAINED IN THE ORDER IS A DECLARATION OF L AW BY THE SUPREME COURT WITHIN THE MEANING OF ART. 141 OF THE CONSTITUTION. SECONDLY, OTHER THAN THE DECLARATION OF LAW, WHATEVER IS STATED IN THE ORDER ARE THE FINDINGS RE CORDED BY THE SUPREME COURT WHICH WOULD BIND THE PARTIES THERETO AND ALSO THE COURT. TRIBUNAL OR AUTHORITY IN ANY PROCEEDINGS SUBSEQUENT THERETO BY WAY OF JUDICIAL D ISCIPLINE, THE SUPREME COURT BEING THE APEX COURT OF THE COUNTRY. BUT, THIS DOES NOT A MOUNT TO SAYING THAT THE ORDER OF THE COURT. TRIBUNAL OR AUTHORITY BELOW HAS STOOD MERGED IN THE ORDER OF THE SUPREME COURT REJECTING SPECIAL LEAVE PETITION OR THAT THE ORDER OF THE SUPREME COURT IS THE ONLY ORDER BINDING AS RES JUDICATA IN SUBSEQUENT PR OCEEDINGS BETWEEN THE PARTIES. 11. UPON NOTING THE OBSERVATIONS OF THE SUPREME COU RT IN KUNHAYAMMED & ORS. (SUPRA) THE DIVISION BENCH OF THE MADRAS HIGH COURT IN THE CASE OF NEXUS COMPUTER (P) LTD. (SUPRA) CAME TO THE CONCLUSION THAT THE VIEW TAKEN BY THE S UPREME COURT IN VINAY CEMENT (SUPRA) WOULD BIND THE HIGH COURT AS IT WAS LAW DECLARED BY THE SUPREME COURT UNDER ART. 141 OF THE CONSTITUTION. 12. WE ARE IN RESPECTFUL AGREEMENT WITH THE REASONI NG OF THE MADRAS HIGH COURT IN NEXUS COMPUTER (P) LTD. (SUPRA). JUDICIAL DISCIPLINE REQUIRES US TO FOLLOW THE VIEW OF THE SUPREME COURT IN VINAY CEMENT (SUPRA) AS ALSO THE VIEW OF THE DIVISION BENCH OF THIS COURT IN DHARMENDRA SHARMA (SUPRA). 13. IN THESE CIRCUMSTANCES, WE RESPECTFULLY DISAGRE E WITH THE APPROACH ADOPTED BY A DIVISION BENCH OF THE BOMBAY HIGH COURT IN PAMWI TISSUES LTD. (SUPRA). 14. IN THESE CIRCUMSTANCES INDICATED ABOVE, WE ARE OF THE OPINION THAT NO SUBSTANTIAL QUESTION OF LAW ARISES FOR OUR CONSIDERATION IN THE PRESENT APPEAL. THE APPEAL IS, THUS, DISMISSED. 6. WE FIND THAT THE HON'BLE DELHI HIGH COURT IN THE CASE OF P.M. ELECTRONICS LTD. (SUPRA) HAS DECIDED THIS ISSUE OF PAYMENT OF EMPLOYEES CONT RIBUTION TOWARDS PROVIDENT FUND AFTER CONSIDERING THE DECISION OF HON'BLE APEX COURT IN T HE CASE OF VINAY CEMENT (SUPRA) AND ALSO DISTINGUISHED THE CASE LAW OF HONBLE BOMBAY HIGH C OURT IN PAMWI TISSUES LTD. (SUPRA) . WE FURTHER FIND THAT EVEN HONBLE KARNATAKA HIGH COURT IN THE CASE OF SABARI ENTERPRISES (SUPRA) HAS CONSIDERED THIS SPECIFIC ISSUE OF EMPLOYEES CO NTRIBUTION FALLING UNDER 36(1)(VA) R.W.S. 2(24)(X) OF THE ACT AND ALLOWED THE CLAIM OF THE AS SESSEE BY HOLDING AS UNDER: THIS CLAUSE IS INSERTED BY THE FINANCE ACT WITH EF FECT FROM APRIL 1, 1988. THE EXPLANATION TO THIS CLAUSE IS READ VERY CAREFULLY. DUE DATE HAS BEEN EXPLAINED STATING THAT : MEANS THE DATE BY WHICH THE ASSESSEE IS REQU IRED AS AN EMPLOYER TO CREDIT CONTRIBUTION TO THE EMPLOYEES ACCOUNT IN THE RELE VANT FUND UNDER ANY ACT, RULE OR ORDER OR NOTIFICATION ISSUED THEREUNDER OR UNDER ANY STAN DING ORDER, AWARD, CONTRACT OF SERVICE OR OTHERWISE. PRIOR TO THE ABOVE CLAUSE WA S INSERTED TO SECTION 36 GIVING STATUTORY DEDUCTIONS OF PAYMENT OF TAX UNDER THE P ROVISIONS OF THE ACT, SECTION 43B(B) 4 ITA 1091/K/201 0 VIJAY SHREE LTD. A.Y.06-07 WAS INSERTED BY THE FINANCE ACT, 1983, WHICH CAME I NTO FORCE WITH EFFECT FROM APRIL 1, 1984. THEREFORE, AGAIN THE PROVISION OF SECTION 43B (B) CLEARLY PROVIDES THAT NOTWITHSTANDING ANYTHING CONTAINED IN THE OTHER PRO VISIONS OF THE ACT INCLUDING SECTION 36(1) CLAUSE (VA) OF THE ACT, EVEN PRIOR TO THE IN SERTION OF THAT CLAUSE THE ASSESSEE IS ENTITLED TO GET STATUTORY BENEFIT OF DEDUCTION OF PAYMENT OF TAX FROM THE REVENUE. IF THAT PROVISION IS READ ALONG WITH THE FIRST PROVISO OF T HE SAID SECTION WHICH WAS INSERTED BY THE FINANCE ACT, 1987, WHICH CAME INTO EFFECT FROM APRIL 1, 1988, THE LETTERS NUMBERED AS CLAUSE (A), OR CLAUSE (C) OR CLAUSE (D) OR CLAUS E (E) OR CLAUSE (F) ARE OMITTED FROM THE ABOVE PROVISO AND THEREFORE DEDUCTION TOWARDS THE E MPLOYEES CONTRIBUTION PAID CAN BE CLAIMED BY THE ASSESSEE. THE EXPLANATION TO CLAUSE (VA) OF SECTION 36(1) OF THE INCOME- TAX ACT FURTHER MAKES IT VERY CLEAR THAT THE AMOUNT ACTUALLY PAID BY THE ASSESSEE ON OR BEFORE THE DUE DATE APPLICABLE IN THIS CASE AT THE TIME OF SUBMITTING RETURNS OF INCOME UNDER SECTION 139 OF THE ACT TO THE REVENUE IN RESP ECT OF THE PREVIOUS YEAR CAN BE CLAIMED BY THE ASSESSEES FOR DEDUCTION OUT OF THEIR GROSS INCOME. THE ABOVE SAID STATUTORY PROVISIONS OF THE INCOME-TAX ACT ABUNDAN TLY MAKES IT CLEAR THAT, THE CONTENTION URGED ON BEHALF OF THE REVENUE THAT DED UCTION FROM OUT OF GROSS INCOME FOR PAYMENT OF TAX AT THE TIME OF SUBMISSION OF RETURN S UNDER SECTION 139 IS PERMISSIBLE ONLY IF THE STATUTORY LIABILITY OF PAYMENT OF PROVI DENT FUND OR OTHER CONTRIBUTION FUNDS REFERRED TO IN CLAUSE (B) ARE PAID WITHIN THE DUE D ATE UNDER THE RESPECTIVE STATUTORY ENACTMENTS BY THE ASSESSEES AS CONTENDED BY LEARNED COUNSEL FOR THE REVENUE IS NOT TENABLE IN LAW AND THEREFORE THE SAME CANNOT BE AC CEPTED BY US. LEARNED COUNSEL SRI PARTHASARATHY AND DR. KRISHNA A PPEARING FOR THE RESPONDENTS, ALSO DREW OUR ATTENTION TO THE DELETION OF THE SECO ND PROVISO TO SECTION 43B OF THE INCOME-TAX ACT BY THE FINANCE ACT, 2003, WHICH PROV ISION HAS COME INTO FORCE, WITH EFFECT FROM APRIL 1, 2004. THE RELIANCE PLACED UPO N THE DECISION OF THE APEX COURT IN ALLIED MOTORS P. LTD. V. CIT [1997] 224 ITR 677 A ND ALSO ON THE DECISION IN GENERAL FINANCE CO. V. CIT (ASST.) [2002] 257 ITR 338 ( SC) IN RESPECT OF APPLICABILITY OF SECTION 43B(B) AND ALSO OMISSION OF CLAUSE (A) OR (C) OR (D) OR (E) OR (F) REFERRED TO ABOVE OCCURRED IN THE FIRST PROVISO TO SECTION 43B , SUPPORTS THE CASE OF THE ASSESSEES AND ALSO RELEVANT PARAGRAPHS EXTRACTED FROM ALLIED MOTORS CASE [1997] 224 ITR 677 A ND PARAGRAPH 59 REFERRED TO SUPRA IN THIS JUDGMENT FROM THE FINANCE BILL WITH ALL FOURS SUPPORTS THE CASE OF THE ASSESSEE/ RESPONDENT S. THEREFORE, WE HAVE TO ANSWER THE SUBSTANTIAL QUESTION OF LAW NO. 1 FRAMED BY THIS C OURT IN THESE APPEALS AT THE INSTANCE OF THE REVENUE AGAINST THEM, VIZ., IN THE NEGATIVE. A CCORDINGLY, WE ANSWER THE SUBSTANTIAL QUESTION NO. 1 FRAMED IN THESE APPEALS IN THE NEGAT IVE. EVEN THE HONBLE SUPREME COURT IN THE CASE OF ALOM EXTRUSIONS LTD. (SUPRA) HAS CLEARLY DISCUSSED THE PROVISIONS OF SECTION 36(1)(VA) AND HELD AS UNDER: 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 DEDUC TION EVEN IN THE YEAR OF ACCOUNT IN WHICH THEY PAY THE CONTRIBUTIONS TO THE WELFARE FUN DS, WHEREAS A DEFAULTER, WHO FAILS TO PAY THE CONTRIBUTION TO THE WELFARE FUND RIGHT UP T O APRIL 1, 2004, AND WHO PAYS THE CONTRIBUTION AFTER APRIL 1, 2004, WOULD GET THE BEN EFIT OF DEDUCTION UNDER SECTION 43B OF THE ACT. IN OUR VIEW, THEREFORE, THE FINANCE ACT , 2003, TO THE EXTENT INDICATED ABOVE, SHOULD BE READ AS RETROSPECTIVE. IT WOULD, THEREFOR E, OPERATE FROM APRIL 1, 1988, WHEN THE FIRST PROVISO WAS INTRODUCED. IT IS TRUE THAT PARLIAMENT HAS EXPLICITLY STATED THAT THE FINANCE ACT, 2003, WILL OPERATE WITH EFFECT FROM APRIL 1, 2004. HOWEVER, THE MATTER BEFORE US INVOLVES THE PRINCIPLE OF CONSTRUCTION TO BE PLACED ON THE PROVISIONS OF THE FINANCE ACT, 2003. 7. IN VIEW OF THE ABOVE DECISIONS OF HONBLE APEX C OURT IN THE CASE OF ALOM EXTRUSIONS LTD. (SUPRA), VINAY CEMENT (SUPRA) AND THE DECISIONS OF HONBLE DELHI HIGH COU RT AND 5 ITA 1091/K/201 0 VIJAY SHREE LTD. A.Y.06-07 KARNATAKA HIGH COURT, WE ALLOW THE CLAIM OF THE ASS ESSEE AND UPHOLD THE ORDER OF CIT(A) DELETING THE DISALLOWANCE MADE ON ACCOUNT OF PAYMEN T MADE FOR EMPLOYEES CONTRIBUTION TO ESI AND PF. THIS ISSUE OF THE REVENUES APPEAL IS DISMISSED. 8. IN THE RESULT, THE REVENUE APPEAL IS DISMISSED. 9. ORDER IS PRONOUNCED IN THE OPEN COURT. SD/- SD/- , !' , (AKBER BASHA) (MAHAVIR SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER ( -' -' -' -') )) ) DATED 28 TH APRIL, 2011 ./ $01 2 JD.(SR.P.S.) ! 3 +4 5!4&6- COPY OF THE ORDER FORWARDED TO: 1 . )* / APPELLANT ACIT, CENTRAL CIRCLE-VII, KOLKATA 2 +,)* / RESPONDENT M/S. VIJAY SHREE LTD., 17 & 48, R.N. R.C. GHAT ROAD, HOWRAH-2. 3 . $ ( )/ THE CIT(A), KOLKATA 4. 5. $ / CIT KOLKATA 4<= +$ / DR, KOLKATA BENCHES, KOLKATA ,4 +/ TRUE COPY, ! $>/ BY ORDER, 1 /ASSTT. REGISTRAR .