India Insure Risk Management and Insurance Broking Services private Limited , Secunderabad V. Dy. Commissioner of Income Tax , Circle-2(1), Hyderabad

ITA 1725/Hyd/2018

• Counselvise Citation: [2019] 117 COUNSELVISE.COM (IT) 8272 (ITAT-HYDERABAD)
• Duration Of Justice: 7 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-04-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB-A
• Next Hearing Date: 14-02-2019
• Assessment Year: 2015-2016
• Appeal Filed On: 20-08-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: NILANJAN DEY
• Section: 43B; 143(3); 201; 43; 20

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH A ', HYDERABAD BEFORE S MT. P. MADHAVI DEVI , JUDICIAL MEMBER AND SHRI S. RIFAUR RAHMAN , ACCOUNTANT MEMBER ITA NO. 1725 / HYD/201 8 ASSESSMENT YEAR: 20 1 5 - 16 INDIA INSURE RISK MANAGEMENT AND INSURANCE BROKING SERVICES PVT. LTD., SECUNDERABAD. PAN AABCB 7031 Q VS. DY. COMMISSIONER OF INCOME - TAX, CIRCLE 2(1), HYDERABAD. APPELLANT RESPONDENT REVENUE BY: S HRI A.V. RAGHURAM ASSESSEE BY: SHRI NILANJAN DEY DATE OF HEARING: 14 / 0 2 / 201 9 DATE OF PRONOUNCEMENT: 12 / 0 4 /201 9 O R D E R PER S. RIFAUR RAHMAN , AM: T H IS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF CIT(A) 6 , HYDERABAD, DATED, 1 8 / 07 /201 8 FOR AY 20 1 5 - 16 . 2. BRIEF FACTS OF THE CASE ARE, THE ASSESSEE , A PRIVATE LIMITED COMPANY, ENGAGED IN THE BUSINESS OF PROVIDING INSURANCE BROKERS AND CONSULTANCY SERVICES IN INSURANCE, FILED ITS RETURN OF INCOME FOR THE A.Y. 2015 - 16 ON 28/09/2015 DECLARING A TOTAL INCOME OF RS. 2,67,52,770/ - . THE AO COMPLETED THE ASSESSMENT U/S 143(3) O F THE ACT, VIDE ORDER DATED 31/03/2017 DETERMINING THE TOTAL INCOME OF RS. 2,70,93,400/ - BY MAKING AN ADDITION OF RS. 2,38,433/ - ON ACCOUNT OF TREATING THE BELATED PAYMENT OF EMPLOYEES I.T.A. NO. 1725 /HYD/1 8 M/S INDIA INSURE RISK MANAGEMENT AND INSURANCE BROKING SERVICES PVT. LTD., 2 CONTRIBUTION TO PF AND ESI ACCOUNTS AS INCOME OF THE ASSESSEE U/S 36(1 )(VA) RWS 2(24(X) OF THE ACT. 3. WHEN THE ASSESSEE PREFERRED AN APPEAL BEFORE THE CIT(A), THE CIT(A) AFTER ANALYSING THE ISSUE WITH VARIOUS CASE LAWS, CONFIRMED THE ADDITION MADE BY THE AO. 4. AGGRIEVED BY THE ORDER OF CIT(A) THE ASSESSEE IS IN APPEAL B EFORE US CONTENDING THAT THE CIT(A) ERRED IN CONFIRMING THE DISALLOWANCE MADE BY THE AO TOWARDS EPF AND ESI. 5. CONSIDERED THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. WE NOTICE THAT ASSESSEE HAS NOT REMITTED CONTRIBUTION OF EMPLOYEES TO PROV IDENT FUND OF RS. 2,30,406/ - AND RS. 8,027/ - TOWARDS ESI WITHIN DUE DATE AS PRESCRIBED U/S 36(1)(VA) OF THE ACT. BY VIRTUE OF SECTION 2(24)(X), THE SUM RECEIVED FROM EMPLOYEES AS CONTRIBUTION TO ANY PROVIDENT FUND OR SUPERANNUATION FUND OR ESI OR ANY OTHER FUND FOR THE WELFARE OF THE EMPLOYEES, ARE INCOME OF THE ASSESSEE FOR THE AY OF COLLECTION. IF THE ASSESSEE FAILED TO CREDIT IN THE EMPLOYEES ACCOUNT ON OR BEFORE DUE DATE. THE DUE DATE AS PER THE RELEVANT FUND IS APPLICABLE. IN THE GIVEN CASE, THE ASSESS EE HAS PAID AFTER THE DUE DATE OF THE RELEVANT FUND. THEREFORE, AO BY APPLYING THE PROVISIONS OF SECTION 36(1)(VA) R.W.S. 2(24)(X) OF THE ACT, DISALLOWED THE EMPLOYEES CONTRIBUTION AS NOT PAID WITHIN THE DUE DATE OF RELEVANT FUNDS. 5.1 AS PER THE PROVISI ONS OF SECTION 36(1)(VA) RWS 2(24)(X) OF THE ACT, ANY SUM RECEIVED BY THE EMPLOYER FROM I T S EMPLOYEES AS A CONTRIBUTION TO A PROVIDENT FUND OR SUPERANNUATION FUND OR A FUND SET UP UNDER ESI ACT, 1948, OR ANY OTHER FUND FOR THEIR WELFARE, IS DEEMED U/S 2(24 )(X) TO BE INCOME OF THE EMPLOYER I.T.A. NO. 1725 /HYD/1 8 M/S INDIA INSURE RISK MANAGEMENT AND INSURANCE BROKING SERVICES PVT. LTD., 3 AND IT IS ALLOWABLE TO HIM AS A DEDUCTION U/S 36(1)(VA) ONLY IF T HE Y CREDITS IT TO THE EMPLOYEES ACCOUNT IN THE RELEVANT FUND ON OR BEFORE DUE DATE IN THE RELEVANT FUND AS PER THE ACT OR NOTIFICATION GOVERNING THE RELEVANT FUND. THE RIGHT TO DEDUCTION WOULD BE LOST EVEN IF THE SUM IS CREDITED AFTER DUE DATE U/S 36(1)(VA) OF THE ACT. 5.2 HOWEVER, WHATEVER FUND COLLECTED BY THE EMPLOYER FROM ITS EMPLOYEES IS ALSO THE DUES PAYABLE TO THE RESPECTIVE WELFARE FUNDS SET UP FOR TH E WELFARE OF THE EMPLOYEES. AS SOON AS IT IS COLLECTED, IT IS AN OBLIGATION ON THE EMPLOYER TO REMIT THE RESPECTIVE FUND. WHEN IT IS PAID WITHIN THE DUE DATE OF THE RESPECTIVE FUND, IT IS ALLOWED AS DEDUCTION U/S 36(1) ( VA) AND BEYOND DUE DATE, IT IS CREDIT ED IN THE LIABILITY SIDE AND IT IS A LIABILITY ON THE PART OF THE EMPLOYER. WHEN IT MAKES ACTUAL PAYMENT, THE PROVISION OF SECTION 43B COMES INTO PLAY. ON MAKING ACTUAL PAYMENT, THE PROVISION OF SECTION 43B GIVES OVERRIDING RIGHT TO THE EMPLOYER TO CLAIM A S DEDUCTION U/S 43B AS THE PROVISION OF SECTION 43B STARTS WITH NON - OBSTANTE CLAUSE AND A DEDUCTION OTHERWISE ALLOWABLE UNDER THIS ACT, BY MAKING ACTUAL PAYMENT BEFORE FILING OF RETURN, SHALL BE ALLOWED. 5.3 IN OUR CONSIDERED VIEW, WHEN EMPLOYER DOES NOT MAKE PAYMENT WITHIN THE DUE DATE OF SUCH FUND, THE PROVISIONS OF SECTION 2(24)(X) OF THE ACT IS INVOKED, IT IS TREATED AS INCOME OF THE EMPLOYER AND WHEN IT MAKES ACTUAL PAYMENT, THE PROVISIONS OF SECTION 43B IS ATTRACTED AS THE OUTSTANDING LIABILITIES OF THE FUND SET UP FOR THE WELFARE OF THE EMPLOYEES. THE SUM PAYABLE MENTIONED IN THE SECTION 43B(B) INDICATES THE TOTAL SUM OUTSTANDING IN THE BOOKS OF THE EMPLOYER, WHICH INCLUDES BOTH THE EMPLOYER S AND EMPLOYEE S CONTRIBUTION . THEREFORE, WHEN IT MAKES PAYMENT, AS PER THE PROVISI ONS OF SECTION 43B, IT IS ALLOWABLE DEDUCTION AS BUSINESS I.T.A. NO. 1725 /HYD/1 8 M/S INDIA INSURE RISK MANAGEMENT AND INSURANCE BROKING SERVICES PVT. LTD., 4 EXPENDITURE. WE FURTHER REL Y ON THE FOLLOWING CASE LAW FOR COMING TO THE ABOVE CONCLUSION : A) SAGUN FOUNDRY (P) LTD. VS. CIT [2017] 78 TAXMANN.COM 47 (ALL.) B) CIT VS. ALOM EXTRUSIONS LTD. 319 ITR 306 (SC) C) CIT VS. MARK AUTO INDUSTRIES LTD., 358 ITR 43 IN VIEW OF THE ABOVE OBSERVATIONS, THE GROUNDS RAISED BY THE ASSESSEE ARE ALLOWED. 6. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED. PRONOUNCED IN THE OPEN COURT ON 12 TH APRIL , 201 9. SD/ - ( P. MADHAVI DEVI ) JUDICIAL MEMBER SD/ - ( S. RIFAUR RAHMAN ) ACCOUNTANT MEMBER HYDERABAD, DATED 12 TH APRIL , 201 9. KV COPY FORWARDED TO: 1. M/S INDIA INSURE RISK MANAGEMENT AND INSURANCE BROKING SERVICES PVT. LTD., C/O S/SHRI K. VASANTKUMAR, AV RAGHURAM, P. VINOD & M. NEELIMA DEVI, ADVOCATES, 610 BABUKHAN ESTATE, BASHEERBAGH, HYDERABAD 500 001. 2 . DCIT, CIRCLE 2(1), SIGNATURE TOWERS, K ONDAPUR, HYDERABA D. 3 . CIT (A) - 6 , HYDERABAD 4. PR. CIT 2 , HYDERABAD 5. THE DR, ITAT, HYDERABAD 6. GUARD FILE