Sri Krishna Engineering & Construction Co, Visakhapatnam V. Deputy Commissioner of Income-tax, Circle-3(1), Visakhapatnam

ITA 155/VIZ/2021

• Counselvise Citation: [2022] 105 COUNSELVISE.COM (IT) 9149 (ITAT-VISAKHAPATNAM)
• Duration Of Justice: 4 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-02-2022
• Appeal Filed By: Assessee
• Order Result: PartlyAllowed
• Bench Allotted: DB
• Assessment Year: 2019-2020
• Appeal Filed On: 15-09-2021
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Section: 43B; 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. 154 & 155/Viz/2021 (निर्धारण वर्ा/Assessment Year : 2018-19 & 2019-20) Sri Krishna Engineering & Construction Co. 9/2, MVP Colony Visakhapatnam [PAN : AAPFS8945P] Vs. Dy.Commissioner of Income Tax Circle-3(1) Visakhapatnam (अपीलार्थी/ Appellant) (प्रत्यर्थी/ Respondent) अपीलधथी की ओर से/ Appellant by : Shri I.Kama Sastry, AR प्रत्यधथी की ओर से / Respondent by : Shri Mudaliar, DR सुिवधई की तधरीख / Date of Hearing : 02.02.2022 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 dated 12.08.2021 for the Assessment Year (A.Y.) 2018-19 and 2019- 20. Since the facts are identical, these appeals are clubbed, heard together 2 ITA No. 154 & 155/Viz/2021 Sri Krishna Engineering & Construction Co, Visakhapatnam and a common order is being passed for the sake of convenience as under and the facts are extracted from I.T.A. No.154/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. The assessee is a transport contractor filed it’s return of income declaring total income of Rs.22,06,350/-. The CPC had sent an intimation disallowing the belated payment of PF and ESI. The assessee disagreed for the disallowance. The CPC has not considered the assessee’s objection and raised a demand by making addition of Rs.51,84,120/- on account of late deposit of ESI and EPF contribution from the employees. 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). 4. On being aggrieved, the assessee preferred an appeal before us and raised the following grounds : 1. In the facts and circumstances of the case and as per law the disallowance of the Employees' Contribution to Provident Fund and Employees State Insurance is not justified. 3 ITA No. 154 & 155/Viz/2021 Sri Krishna Engineering & Construction Co, Visakhapatnam 2. The adjustment to the return made by the CPC, Bengaluru is beyond the scope and jurisdiction of the adjustments as provided in section 143(1)(a)(iv) of the Income-tax Act, 1961 being a debatable issue. 3. Without prejudice to the above ground of appeal, the National Faceless Appeal Centre is not justified in confirming the disallowance, of Rs.51,84,120/- and not following the binding precedent of the jurisdictional Visakhapatnam Bench of the Honourable Tribunal in the case of the very same assessee for the assessment year 2014-15. 4. The National Faceless Appeal Centre is not justified in holding that the amendments made to sections 36(1)(va) and 43B by inserting Explanation 2 and 5 respectively by the Finance Act, 2021 as clarificatory and are therefore applicable retrospectively. 5. The appellant craves leave to add to; alter; modify; delete all or any of the above grounds of appeal. During the course of arguments, the Ld.Counsel for the assessee has not pressed Ground No.2, therefore, it needs no adjudication and hence dismissed as not pressed. 5. The only grievance of the assessee is that the lower authorities made disallowance of Rs.51,84,120/- 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. 154 & 155/Viz/2021 Sri Krishna Engineering & Construction Co, 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. 154 & 155/Viz/2021 Sri Krishna Engineering & Construction Co, 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. 154 & 155/Viz/2021 Sri Krishna Engineering & Construction Co, 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 partly allowed. 7 ITA No. 154 & 155/Viz/2021 Sri Krishna Engineering & Construction Co, 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 Sri Krishna Engineering & Construction Co. 9/2, MVP Colony, Visakhapatnam 2. रधजस्व/The Revenue – Dy.Commissioner of Income Tax, Circle-3(1), Visakhapatnam 3. आयकर आयुक्त (अपील)/ CIT(A), National Faceless Appeal Centre (NFAC), Delhi 4. प्रर्धि आयकर आयुक्त / Pr.CIT 5. तवभधगीय प्रतितितर्, आयकर अिीिीय अतर्करण, तवशधखधिटणम/DR, ITAT, Visakhapatnam 6.गधर्ाफ़धईि / Guard file आदेशधिुसधर / BY ORDER // True Copy // Sr. Private Secretary ITAT, Visakhapatnam 8 ITA No. 154 & 155/Viz/2021 Sri Krishna Engineering & Construction Co, Visakhapatnam