West Cost Pharmaceuticals Works Ltd, Ahmedabad V. DCIT, Circle-4(1)(2), Ahmedabad

ITA 1178/AHD/2018

• Counselvise Citation: [2021] 109 COUNSELVISE.COM (IT) 1768 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 9 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-02-2021
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Assessment Year: 2013-2014
• Appeal Filed On: 08-05-2018
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: S S SHUKLA
• Assessee Lawyers: BIREN SHAH
• Keywords: Set aside
• Section: 143(3); 13; 22; 28; 10

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL , SMC BENCH, AHMEDABAD (CONDUCTED THROUGH VIRTUAL COURT AT AHMEDABAD) BEFORE SHRI WASEEM AHMED , ACCOUNTANT MEMBER AND MS MADHUMITA ROY , JUDICIAL MEMBER ./ ITA NO. 1178 /AHD/2018 / ASSTT. YEAR: 2013 - 2014 WEST COST PHARMACEUTICALS WORKS LTD. , 312, MELODY ESTATE , NR. GOTA RAILWAY CROSSING, GOTA , AHMEDABAD . PAN : AAACW7013Q VS. D.C.I.T. CIRCLE - 4(1)(2) AHMEDABAD. (APPLICANT) ( RESPON D ENT ) ASSESSEE BY : SHRI BIREN SHAH , A.R REVENUE BY : SHRI S.S. SHUKLA, SR .D. R / DATE OF HEARING : 18 / 01 / 2021 / DATE OF PRONOUNCEMENT: 22 / 02 /2021 / O R D E R PER WASEEM AHMED, ACCOUNTANT MEMBER: THE CAPTIONED APPEAL HAS BEEN FILED AT THE INSTANCE OF THE ASSESSEE A GAINST THE ORDER OF THE LEARNED COMM ISSIONER OF INCOME TAX (APPEALS) - 8, AHMEDABAD , DATED 20/02 /2018 ARISING IN THE MATTER OF ASSESSM ENT ORDER PASSED UNDER S. 143(3) OF THE INCOME TAX ACT, 1961 ( HERE - IN - AFTER REFERRED TO AS 'THE ACT') RELEVANT TO THE ASSESSMENT YEAR 2013 - 20 14 . ITA NO.1178 /AHD/2018 ASSTT. YEAR 2013 - 14 2 2. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL: 1. ON FACTS AND CIRCUMSTANCES OF THE CASE OF THE APPELLANT, THE LEARNED CIT(A) HAS ERRED IN CONFIRMING THE DISALLOWANCE OF PF AND ESIC OF RS.4,04,659/ - HAS ERRED IN CONFIRMING THE DISALLOWANCE OF PF AND ESIC OF RS.4,04,659/ - WITHOUT APPRECIATING THE FACT THAT THE APPELLAN T HAS PAID SUCH AMOUNT BEFORE DUE DATE OF FILING RETURN. 1.1 ON FACTS AND CIRCUMSTANCES OF THE CASE OF THE APPELLANT, THE LD. ASSESSING OFFICER AND CIT(A) OUGHT TO HAVE COMPUTED DUE DATE OF PF AND ESIC FROM THE END OF MONTH IN WHICH ACTUAL PAYMENT OF SALARY MONTH IS MADE AS AGAINST THE DATE OF MONTH OF WHICH SALARY PERTAINS AND ACCORDINGLY THE APPELLANT HAS PAID THE AMOUNT OF PF AND ESIC WITHIN THE DUE DATE OF FUND AND HENCE THE DISALLOWANCE OF RS.4,04,659/ - IS NOT JUSTIFIED. 2. ON FACTS AND CIRCUMSTANCES OF THE CASE OF THE APPELLANT, THE LEARNED CIT(A) HAS ERRED IN CONFIRMING THE DISALLOWANCE OF PRIOR PERIOD EXPENSES OF RS.2,61,857/ - WHEN THE SAME IS NOT CALLED FOR. 2.1 ON FACTS AND CIRCUMSTANCES OF THE CASE OF THE APPELLANT, TH E LEARNED CIT(A) HAS ERRED IN UPHOLDING THE DISALLOWANCE WITHOUT APPRECIATING THE FACT THAT THE TAX RATES FOR BOTH THE ASSESSMENT YEARS WERE SAME AND THUS THERE IS NO LOSS TO THE REVENUE AND ISSUE IS SQUARELY COVERED IN FAVOUR OF APPELLANT IN THE DECISION OF HON BLE GUJARAT HIGH COURT IN CASE OF ADANI ENTERPRISES LTD TAX APPEAL NO 566 OF DATED 20/07/2016. 2.2 ON FACTS AND CIRCUMSTANCES OF THE CASE OF THE APPELLANT, THE LEARNED CIT(A) OUGHT TO HAVE HELD THAT ONLY NET PRIOR PERIOD EXPENSES OF RS.1,94,545/ - ARE TO BE DISALLOWED AS AGAINST GROSS PRIOR PERIOD EXPENSE OF RS.2,61,857/ - 2.3 ON FACTS AND CIRCUMSTANCES OF THE CASE OF THE APPELLANT, EVEN IF SUCH EXPENSE IS NOT ALLOWED IN THE YEAR UNDER CONSIDERATION, IT MAY BE DIRECTED TO ALLOW IN THE YEAR TO WHICH IT PERTAINS I.E A.Y. 2012 - 13. 3. THE APPELLANT CRAVES LEAVE TO ADD, ALTER, AMEND AND/OR WITHDRAW ANY GROUND OR GROUNDS OF APPEAL EITHER BEFORE OR DURING THE COURSE OF HEARING OF THE APPEAL. 3 . THE FIRST ISSUE RAISED BY THE ASSESSEE IN GROUND NO. 1 IS TH AT THE ''LD.CIT (A)'' ERRED IN CONFIRMING THE DISALLOWANCE MADE BY THE AO FOR RS. 4,04,659/ - ON ACCOUNT OF DELAY IN PAYMENT OF EMPLOYEES PROVIDENT FUND/ESIC. 4 . THE FACTS IN BRIEF ARE THAT THE ASSESSEE IN THE PRESENT CASE IS A LIMITED COMPANY AND ENGAGED IN THE MANUFACTURING BUSINESS OF PHARMACEUTICAL PRODUCTS. THE AO DURING THE ASSESSMENT PROCEEDINGS FOUND THAT THERE WAS A DELAY IN MAKING PAYMENT OF EMPLOYEES PROVIDE NT FUND/ESIC AS SP ECIFIED UNDER THE RELEVANT ACT. A CCORDINGLY THE AO DISALLOWED THE SAME UNDER SECTION 2(24)(X) R.W.S 36(1)(VA) OF THE ACT AND ADDED THE SUM OF RS. 4,04,659/ - TO THE TOTAL INCOME OF THE ASSESSEE. ITA NO.1178 /AHD/2018 ASSTT. YEAR 2013 - 14 3 5 . AGGRIEVED ASSESSEE PREFERRED AN APPEAL B EFORE THE ''LD.CIT (A)'' WHO CONFIRMED THE ORDER OF THE AO. 6 . BEING AGGRIEVED BY THE ORDER OF THE ''LD. CIT (A)'' THE ASSESSEE IS IN APPEAL BEFORE US. 7 . THE LD. A R BEFORE US AGREED TO THE FACT THAT THE ISSUE OF DELAY IN THE PAYMENT OF E PF/ESIC IS COVERED AGAIN S T THE ASSESSEE BY THE ORDER OF THE HON BLE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS GSRT C REPORTED IN 366 ITR 170. HOWEVER, THE LD.A.R BEFORE US FURTHER CONTENTED THAT THE JUDGMENT OF THE HON BLE GUJARA T HIGH COURT IN THE CASE OF GSR T C (S UPRA) HAS BEEN CHALLENGED BEFORE HON BLE APEX COURT WHICH IS PENDING FOR ADJUDICATION. ACCORDINGLY, IT WAS THE SUBMISSION OF THE LD. AR THAT THE MATTER CAN BE DECIDED AGAIN S T THE ASSESSEE BUT SUBJECT TO THE DIRECTION THAT IN CASE HON BLE APEX COURT DEC IDES THE ISSUE IN FAVOUR OF THE ASSESSEE THEN THE ISSUE ON HAND SHOULD BE REVIEWED BY THE AO FOR FURTHER ADJUDICATION IN THE LIGHT OF THE JUDGMENT OF HON BLE S UPREME COURT. 7 .1 THE LD. A R IN SUPPORT OF HIS CONTENTION RELIED UPON THE ORDER OF THE CO - ORDINATE BENCH IN THE CASE OF M/S ABEER TEXTILE PVT. LTD. VS. DCIT BEARING ITA NO . 1585/AHD /2018 PRONOUNCED ON 30/11/2018 . 8 . ON THE OTHER HAND LD. DR VEHEMENTLY SUPPORTED THE ORDER OF THE AUTHO RITIES BELOW. 9 . WE HAVE HEARD THE RIVAL CONTENTIONS OF BOTH THE PARTIES AND PERUSED THE MATERIALS AVAILABLE ON RECORD. ADMITTEDLY, THE ISSUE HAS BEEN DECIDED BY THE HON BLE GUJARAT HIGH COURT IN THE CASE OF GSRTC (SUPRA) AGAINST THE ASSESSEE. THE RELEVAN T EXTRACT OF THE JUDGMENT READS AS UNDER: ITA NO.1178 /AHD/2018 ASSTT. YEAR 2013 - 14 4 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 EMPL OYEES' 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. 9. 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 ASIDE AND THE DISALLOWANCES OF THE RESPECTIV E 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. 9 . 1 REGARDING THE CONTENTION OF THE LD. AR THA T THE MATTER SHOULD BE SET - ASIDE TO THE FILE OF THE AO WITH THE DIRECTION TO RES TORE THE ISSUE IF THE HON BLE SUPREME C OURT DECIDES THE DI SPUTE IN FAVOUR OF THE ASSESSEE. IN T HIS REGARD WE NOTE THAT IN THE PRESENT TIME THE JUDGMENT OF THE HON BLE GUJARAT HIGH COURT IS AGAINST THE ASSE SSEE WHICH SHALL PREVAIL. A CCORDINGLY WE ARE NOT INCLINED TO ENTERTAIN THE ALTERNATIVE CONT ENTION OF THE LD . AR FOR THE ASSESSEE. T HEREFORE , WE DISMISS THE SAME. 10 . THE SECOND ISSUE RAISED BY THE ASSE SSEE IS THAT THE ''LD.CIT (A)'' ERRED IN CONFIRMING THE DISALLOWANCE MADE BY THE AO FOR RS. 2,61,857/ - ON ACCOUNT OF PRIOR PERIOD EXPENSES. 11 . THE AO DURING THE ASSESSMENT PROCEEDINGS FOUND THAT THE ASSESSEE IS MAINTAINING IT S BOOKS OF ACCOUNTS ON MERCAN TILE SYSTEM OF ACCOUNTING. ACCORDINGLY, THE AO WAS OF THE VIEW THAT THE PRIOR PERIOD EXPENSES AMOUNTING TO RS. 2,61,857/ - ITA NO.1178 /AHD/2018 ASSTT. YEAR 2013 - 14 5 CANNOT BE ALLOWED AS DEDUCTION . H ENCE THE AO DISALLOWED THE SAME AND ADDED BACK TO THE TOTAL INCOME OF THE ASSESSEE. 12 . AGGRIEVED A SSESSEE PREFERRED AN APPEAL TO THE ''LD. CIT (A)'' WHO CONFIRMED THE ORDER OF THE AO. 13 . BEING AGGRIEVED BY THE ORDER OF THE ''LD. CIT (A)'' THE ASSESSEE IN APPEAL BEFORE US. 14 . THE LD. AR BEFORE US SUBMITTED THAT THERE WAS A PRIOR PERIOD INCOME OF RS. 67,372/ - WHICH WAS OFFERED TO TAX AND THE SAME WAS ACCEPTED BY THE R EVENUE . A CCORDINGLY THE LD. AR CONTENDED THAT THE PRIOR PERIOD EXPENSES SHOULD BE REDUCED BY THE AMOUNT OF PRIOR PERIOD INCOME. 15 . ON THE OTHER HAND THE LD. DR VEHEMENTLY SUPPORTED THE ORDER OF THE AUTHORITIES BELOW. 16 . WE HAVE HEARD THE RIVAL CONTENTIONS OF BOTH THE PARTIES AND PERUSED THE MATERIALS AVAILABLE ON RECORD. THE LIMITED ISSUE ARISING BEFORE US FOR THE ADJUDICATION WHETHER THE AMOUNT OF PRIOR PER IOD EXPENSES CLAIM ED BY THE ASSESSEE SHOULD BE REDUCED BY THE AMOUNT OF PRIOR PERIOD INCOME. IN THIS REGARD WE NOTE THAT THE HON BLE HIGH COURT OF GUJARAT IN THE CASE OF PCIT VS DISHMAN PHARMACEUTICALS & CHEMICALS LTD. REPORTED IN 112 TAXMANN.COM 91 HAS DI RECTED TO REDUCE THE PRIOR PERIOD EXPENSES WITH THE PRIOR PERIOD INCOME IRRESPECTIVE OF THE FACT THERE WAS ANY NEXUS EITHER DIRECT OR INDIRECTLY BETWEEN SUCH PRIOR PERIOD INCOME AND EXPENSES . THE RELEVANT EXTRACT OF THE JUDGMENT IS REPRODUCED AS UNDER: 24 . THUS, IN VIEW OF THE AFORESAID DISCUSSION, WE ARE OF THE VIEW THAT THE ITAT COMMITTED NO ERROR IN HOLDING THAT ONCE THE PRIOR PERIOD INCOME IS HELD TO BE TAXABLE, THE PRIOR PERIOD EXPENDITURE ALSO SHOULD BE ALLOWED TO BE SET OFF AND THE ASSESSEE IS NOT O BLIGED IN LAW TO INDICATE ANY DIRECT OR INDIRECT NEXUS BETWEEN THE PRIOR PERIOD INCOME AND PRIOR PERIOD EXPENDITURE. ITA NO.1178 /AHD/2018 ASSTT. YEAR 2013 - 14 6 16 .1 IN VIEW OF THE ABOVE, WE DIRECT THE AO TO RESTRICT THE DISALLOWANCE OF PRIOR PERIOD EXPENSES AFTER REDUCING THE PRIOR PERIOD INCOME AS DISCUSSED ABOVE . H ENCE THE GROUND OF APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. 17 . IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED. O RDER PRONOUNCED IN THE COURT ON 22 /02 / 2021 AT AHMEDABAD. SD/ - SD/ - (MADHUMITA ROY ) (WASEEM AHMED) JUDICIAL MEMBER ACCOUNTANT MEMBER (TRUE COPY) A HMEDABAD; DATED 22 / 02 /2021 M ANISH