V.V.R. Engineering Works, Visakhapatnam V. The Income Tax Officer, Ward-2(1), Visakhaptnam

ITA 139/VIZ/2021

• Counselvise Citation: [2022] 105 COUNSELVISE.COM (IT) 9156 (ITAT-VISAKHAPATNAM)
• Duration Of Justice: 5 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-02-2022
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Assessment Year: 2019-2020
• Appeal Filed On: 02-09-2021
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Section: 43B; 143(1); 139(1)

Judgement Text

आयकर अपीलीय अधिकरण, धिशाखापटणम पीठ, धिशाखापटणम IN THE INCOME TAX APPELLATE TRIBUNAL, VISAKHAPATNAM BENCH, VISAKHAPATNAM (through web-based video conferencing platform) श्री द ु व्वूरु आर एल रेड्डी, न्याधयक सदस्य एिं श्री एस बालाकृ ष्णन, लेखा सदस्य के समक्ष BEFORE SHRI DUVVURU RL REDDY, HON’BLE JUDICIAL MEMBER & SHRI S BALAKRISHNAN, HON’BLE ACCOUNTANT MEMBER आयकर अपील सं./I.T.A.No. 138 & 139/Viz/2021 (निर्धारण वर्ा/Assessment Year : 2018-19 & 2019-20) M/s V.V.R. Engineering Works D.No.36-53-4/1, NH-5 Road Reddy Kancharapalem Visakhapatnam [PAN : AABFV9797L] Vs. Income Tax Officer Ward-2(1), Range-2 [Erstwhile Income Tax Officer, Ward-4(1)] Visakhapatnam (अपीलार्थी/ Appellant) (प्रत्यर्थी/ Respondent) अपीलधथी की ओर से/ Appellant by : Shri I.Kama Sastry, AR प्रत्यधथी की ओर से / Respondent by : Shri SPG Mudaliar, DR सुिवधई की तधरीख / Date of Hearing : 01.02.2022 घोर्णध की तधरीख/Date of Pronouncement : 09.02.2022 आदेश /O R D E R Per Shri Duvvuru RL Reddy, Judicial Member : These appeals are filed by the assessee against the orders of the Commissioner of Income Tax (Appeals) [CIT(A)], National Faceless Appeal Centre (NFAC) dated 17.08.2021 for the Assessment Year (A.Y.) 2018-19 and 2019-20. Since the facts are identical, these appeals are clubbed, heard 2 ITA No. 138 & 139/Viz/2021 V.V.R.Engineering Works, Visakhapatnam together and a common order is being passed for the sake of convenience as under. The facts are extracted from I.T.A. No.138/Viz/2021. 2. The only grievance of the assessee in both the appeals is that the Ld.CIT(A) confirmed the disallowance of Employees Contribution to Provident Fund and Employees State Insurance, on the ground that the assessee made the payments belatedly as per the respective Acts. Brief facts of the case are that the assessee is a firm engaged in the business of contract works and maintenance of Industrial Plant. The assessee filed its return of income for the A.Y.2018-19, declaring total income of Rs.1,05,91,350/- and revised return was filed on 02.02.2019, declaring total income of Rs.1,05,91,350/-. The CPC sent a communication on 29.01.2019 proposing the adjustment u/s 143(1)(a) of Rs.8,82,761 (Rs.8,12,461 towards PF and Rs.70,300 towards ESI) being the payments made after the due date under respective Acts. Subsequently, the assessee filed rectification petition on 11.10.2019 with a request not to make any addition towards late payment of PF and ESI. The CPC passed an order on 21.11.2019 denying the request made by the assessee. 3. On being aggrieved, the assessee preferred an appeal before the Ld.CIT(A). After considering the grounds raised by the assessee, the Ld.CIT(A) confirmed the disallowance made by the Assessing Officer(AO). 3 ITA No. 138 & 139/Viz/2021 V.V.R.Engineering Works, Visakhapatnam 4. On being aggrieved, the assessee preferred an appeal before us and raised the following grounds : 1. The Ld.Commissioner of Income Tax (A), NFAC has failed to appreciate the provisions of the Act, while uphold the order of the Assessing Officer, CPC, which is contrary tot eh facts of the case and bad in law. 2. The Ld.Commissioner of Income Tax(A), NFAC has failed to appreciate the law in confirming the addition of Rs.8,82,761/- towards Employees share of ESI and PF paid before filing the return of income u/s 139(1) of the Act. 3. The Ld.Commissioner of Income Tax(A), NFAC has failed to appreciate that the Orders of the Jurisdictional ITAT, Visakhapatnam are binding on him, as the appellant jurisdictional Assessing Officer at Visakhapatnam. 4. The Ld.Commissioner of Income Tax, NFAC, Delhi failed to apply the prospective amendment by way of explanation to Sec.36(1)(v) of the I.T.Act, 1961 with effect from 01.04.2021 brought into the statue book. 5. The Ld.Commissioner of Income Tax (A), NFAC has failed to appreciate that adjustment made in the intimation u/s 143(1) towards payment of employees share of ESI and PF of Rs.8,82,761 is contrary to the facts of the case and bad in law since the issue is debatable. 6. The Appellant pleads for permission to add, modify, delete any of the above, at the time of hearing or before. 5. The only grievance of the assessee is that the lower authorities made disallowance of Rs.8,82,761/- on account of late deposit of ESI and EPF contribution from the employees. The Ld.Counsel for the assessee has submitted that the assessee made the payment before filing of the due date of filing of return of income u/s 139(1) of the Income Tax Act, 1961 (in short ‘Act’) and also relied on the decision of Hon’ble Karnataka High Court in the case of Essae Teraoka (P) Ltd. Vs. DCIT, reported in 366 ITR 408, 4 ITA No. 138 & 139/Viz/2021 V.V.R.Engineering Works, Visakhapatnam wherein, it was held that if the payments were made before filing of the due date of filing of return of income u/s 139(1), the assessee is entitled to claim the deduction. Therefore, submitted that the ground raised by the assessee is to be allowed. 6. On the other hand, the DR submitted that the lower authorities have rightly disallowed the payments made belatedly as per the respective Acts. He further submitted that the Employees Contribution to PF is allowed as deduction, if the same is deposited on or before the due date specified under the provisions of Provident Fund Act. He further submitted that since the assessee has not deposited the contribution to respective fund account on the date as prescribed in Explanation to section 36(1)(va) of the Act, the disallowance made by the AO was just, proper and reasonable, therefore, submitted that the Ld.CIT(A) rightly confirmed the disallowance made by the AO, hence the addition is to be sustained. The Ld.DR relied on the decision of Hon’ble Kerala High Court in the case of CIT Vs. Merchem Ltd. reported in (2015) 378 ITR 443 and Hon’ble Gujarat High Court in the case of CIT Vs. Gujarat State Road Transport Corporation (366 ITR 170) [2014] (Gujarat) reported in (2014) 366 ITR 170 41 taxmann.com 100. 5 ITA No. 138 & 139/Viz/2021 V.V.R.Engineering Works, Visakhapatnam 7. We have heard both the parties and perused the records and after considering the facts and circumstance of the case, it is undisputed fact that the payments were made beyond due date of specified time mentioned in the Provident Fund Act. It is also admitted fact that the payments were made by the assessee before filing of the due date of filing the return of income. On this aspect, the coordinate Bench of ITAT, Visakhapatnam on similar set of facts decided the issue in favour of the assessee, relying on the decision of Hon’ble Karnataka High Court in the case of Essae Teraoka (P) Ltd. Vs. DCIT (supra), wherein, the Hon’ble Karnataka High Court viewed as follows : “8. The Hon’ble Karnataka High Court, in the case of Essae Teraoka (P) Ltd. Vs. DCIT 366 ITR 408 took the view that the word contribution occurring in section 43B of the Act would include employees’ contribution to PF in the light of the definition of the word contribution as per the provisions of section 2(c) of the PF Act. As per the said section, contribution would mean both employer’s contribution and employees’ contribution. Accordingly, it was held that the provisions of section 43B of the Act allowing deduction for payment made before the due date of filing of Income Tax return cannot be ignored. Similarly, the ITAT, Hyderabad Tribunal in the case of Tetra Soft (India) Pvt. Ltd. Vs. ACIT (2015) 40 ITR (Trib) 470 held that when assessee remitted employees’ contribution to PF within due date of filing return of income u/s 139(1) of the Act, amount of employees’ contribution to PF cannot be disallowed. Similar view was upheld by the Chennai bench of the ITAT, in the case of ACIT Vs. Farida Shoes Pvt. Ltd. (2016) 46 CCH 29. The coordinate bench held that if assessee had not deposited employees’ contribution towards provident fund up to the due date as prescribed under relevant statute, but before due date of filing of return no disallowance could be made in view of the provisions of section 43B of the Act. In the case of CIT Vs. Udaipur Dugdh Utpadak Sahakari Sangh Ltd. 35 Taxman 616, the Hon’ble High Court of Rajasthan, after referring to the apex court decision in the case of CIT Vs. Alom Extrusions Ltd. 319 ITR 306 & CIT Vs. Vinay Cement Ltd. held that the deductions should be allowed for the payment of employees’ contribution made before the due date of filing of return. Similarly, in the case of CIT Vs. State Bank of Bikaner, the Hon’ble 6 ITA No. 138 & 139/Viz/2021 V.V.R.Engineering Works, Visakhapatnam Rajasthan High Court held that contribution paid after the due date under the respective Act, but before filing the return of income u/s 139(1) of the Act cannot be disallowed u/s 43B of the Act and or u/s 36(1)(va) of the Act. “ Coordinate Bench of ITAT, Visakhapatnam considered the decision of Hon’ble Kerala High Court, Hon’ble High Court of Gujarat (supra) and also considered the decision of Hon’ble Supreme Court in the case of CIT Vs. M/s Vegetables Products Ltd. reported in 88 ITR 192, wherein it was held that if two reasonable constructions of a taxing provision are possible that construction which favours the assessee must be adopted. After considering all these decisions, the coordinate Bench of this Tribunal has allowed the appeal of the assessee in the case of Focus Trans Tech Shipping Private Ltd., Vs DCIT, Visakhapatnam in I.T.A. No.132/Viz/2021 dated 23.09.2021. Therefore, respectfully following the view taken by the Tribunal on similar set of facts, we hold that the orders passed by the AO as well as the Ld.CIT(A) are erroneous. Hence, the disallowance on account of late deposit of employees contribution to PF / ESI is hereby deleted and thus this ground is allowed. 8. In the result, appeals of the assessee are allowed. 7 ITA No. 138 & 139/Viz/2021 V.V.R.Engineering Works, Visakhapatnam Order pronounced in the open court on 9 th February, 2022. Sd/- Sd/- (एस बालाकृ ष्णन) (द ु व्वूरु आर.एल रेड्डी) (S.BALAKRISHNAN) (DUVVURU RL REDDY) लेखा सदस्य/ACCOUNTANT MEMBER न्याधयक सदस्य/ JUDICIAL MEMBER Dated : 09.02.2022 L.Rama, SPS आदेश की प्रतितिति अग्रेतषि/Copy of the order forwarded to:- 1. तिर्धाररिी/ The Assessee – M/s V.V.R. Engineering Works, D.No.36-53- 4/1, NH-5 Road, Reddy Kancharapalem, Visakhapatnam 2. रधजस्व/The Revenue – Income Tax Officer, Ward-2(1), Range-2, [Erstwhile Income Tax Officer, Ward-4(1)], Visakhapatnam 3. आयकर आयुक्त (अपील)/ CIT(A), National Faceless Appeal Centre (NFAC), Delhi 4. प्रर्धि आयकर आयुक्त / Pr.CIT 4. तवभधगीय प्रतितितर्, आयकर अिीिीय अतर्करण, तवशधखधिटणम/DR, ITAT, Visakhapatnam 5.गधर्ाफ़धईि / Guard file आदेशधिुसधर / BY ORDER // True Copy // Sr. Private Secretary ITAT, Visakhapatnam