DRS Dilip Roadlines Private Limited, Secunderabad V. Income Tax Officer, Ward-17(2), Hyderabad

ITA 2278/Hyd/2017

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 6566 (ITAT-HYDERABAD)
• Duration Of Justice: 6 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-07-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2014-2015
• Appeal Filed On: 29-12-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: B SURESH BABU
• Assessee Lawyers: M V ANIL KUMAR
• Section: 43B; 143(3); 2; 139

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH A, HYDERABAD BEFORE SMT. P. MADHAVI DEVI, JUDICIAL MEMBER AND SHRI S. RIFAUR RAHMAN, ACCOUNTANT MEMBER ITA NO. 2278/HYD/2017 ASSESSMENT YEAR: 2014-15 DRS DILIP ROADLINES PVT. LTD., HYDERABAD. PAN AADCD 1865 C VS. INCOME-TAX OFFICER, WARD 17(2), HYDERABAD. (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI M.V. ANIL KUMAR REVENUE BY : SHRI B. SURESH BABU DATE OF HEARING : 04-07-2018 DATE OF PRONOUNCEMENT : 13-07-2018 O R D E R PER S. RIFAUR RAHMAN, A.M.: THIS IS AN APPEAL OF THE ASSESSEE DIRECTED AGAINST THE ORDER OF THE LEARNED COMMISSIONER OF INCOME-TAX (A) 2, HYD ERABAD, DATED 16/10/2017 FOR AY 2014-15. 2. THE FACTS IN BRIEF ARE THAT ASSESSEE, A CORPORA TE ENTITY, ENGAGED IN THE BUSINESS OF LOGISTICS, FILED ITS RET URN OF INCOME FOR THE AY 2014-15 ON 26/11/2014 ADMITTING LOSS OF RS. 43,4 8,880/-. THE CASE WAS SELECTED FOR SCRUTINY UNDER CASS AND ACCOR DINGLY, STATUTORY NOTICES WERE ISSUED AND SERVED ON THE ASSESSEE. IN RESPONSE TO THE SAID NOTICES, THE ASSESSEE FURNISHED INFORMATION. A FTER EXAMINING THE RECORDS, THE AO COMPLETED THE ASSESSMENT U/S 143(3) OF THE ACT, DETERMINING THE INCOME OF THE ASSESSEE AT RS. 1,02, 23, 520/- BY MAKING THE FOLLOWING DISALLOWANCES: 1. DISALLOWANCE OF RS. 8,32,933/- U/S 36(1)(III) 2 ITA NO. 2278/H/17 DRS DILIP ROADLINES PVT. LTD., HYD. 2. DISALLOWANCE OF RS. 1,13,17,767/- ON ACCOUNT OF CASH PAYMENTS. 3. DISALLOWANCE OF RS. 24,21,698/- U/S 43B ON ACCOU NT OF EMPLOYEES CONTRIBUTION TO PF & ESI. 3. WHEN THE ASSESSEE PREFERRED AN APPEAL BEFORE THE CIT(A) AGAINST THE DISALLOWANCE U/S 36(1)(III) AND DISALL OWANCE U/S 43B. THE CIT(A) DELETED THE DISALLOWANCE U/S 36(1)(III) AND CONFIRMED THE DISALLOWANCE U/S 43B. 4. AGGRIEVED BY THE ORDER OF CIT(A), THE ASSESSEE I S IN APPEAL BEFORE US RAISING THE FOLLOWING GROUNDS OF APPEAL: 1. THE CITCA) ERRED IN LAW AND FACTS OF THE CASE IN CONFIRMING ADDITION OF RS. 24,21,698/- (EMPLOYEE CONTRIBUTION TO PF RS. 19,15,964/- AND ESI RS.5,05,734.1-) IGNORING THE FA CT THAT THE SAME HAVE BEEN PAID WITHIN THE FINANCIAL YEAR OR BE FORE THE DUE DATE OF FILING OF THE RETURN OF INCOME, YOUR APPELL ANT SUBMITS THAT THE ADDITION MAY BE DELETED. 2. YOUR APPELLANT SUBMITS THAT THE CIT(A) HAS NOT D ISCUSSED THE RATIO OF THE DECISION IN ALOM EXTRUSIONS LTD 319 IT R 306(SC) REGARDING THE APPLICABILITY OF AMENDMENT TO SECTION 43B TO THAT OF SECTION 36(1)(VA), THEREFORE THE DISALLOWANCE MA Y BE DELETED. 3. YOUR APPELLANT SUBMITS THE CIT(A) AS WELL AS ASS ESSING OFFICER OUGHT TO HAVE APPRECIATED THE FACT THAT BY VIRTUE OF THIS SECTION 36(1) (VA) RWS 2(24)(X) WOULD BECOME INCOME FOR THAT YEAR AND BY VIRTUE OF SECTION 37, THE SAME SHOULD B E ALLOWED AS DEDUCTION IN THE YEAR OF PAYMENT BEING INCURRED IN THE COURSE OF BUSINESS AND FOR THE-PURPOSE OF BUSINESS. FOR THESE AND SUCH OTHER GROUNDS THAT MAY BE URGED AT THE TIME OF HEARING YOUR APPELLANT PRAYS THAT THE ADDITION M AY BE DELETED. 5. CONSIDERED THE RIVAL SUBMISSIONS AND PERUSED THE ORDERS OF REVENUE AUTHORITIES AS WELL AS MATERIAL ON RECORD. THE AO HAS DISALLOWED THE EMPLOYEES CONTRIBUTIONS OF PF ESI AM OUNTING TO RS. 24,21,698/- BY INVOKING PROVISIONS OF SECTION 36(1) (VA) ON THE GROUND THAT THE SAME WAS PAID BY THE ASSESSEE BEYOND THE D UE DATE AFTER AVAILING GRACE PERIOD. THE CONTENTION OF THE ASSESS EE IS THAT THE 3 ITA NO. 2278/H/17 DRS DILIP ROADLINES PVT. LTD., HYD. PAYMENTS WERE MADE BEYOND DUE DATE BUT PAID BEFORE FILING OF RETURN OF INCOME U/S 139(1) AND HENCE, THE SAME IS ALLOWAB LE AS DEDUCTION U/S 43 OF THE ACT. THE HONBLE HIGH COURT OF ALLAHA BAD IN THE CASE OF SAGUN FOUNDRY (P) LTD. VS. CIT, [2017] 78 TAXMANN.C OM 47 (ALL.) HAS OBSERVED AS UNDER: SECTION 36(1)(VA) PERMITS DEDUCTIONS IN RESPECT TO RELEVANT FUND OF EMPLOYEES. SECTION 43B PERMITS DEDUCTIONS OTHERWISE ALLOWABLE UNDER THE INCOME- TAX ACT IN CASE ANY SUM PAYABLE BY THE ASSESSEE IS PAID ACTUALLY BEFORE THE DATE OF FILING OF RETURN UNDER SECTION 139 AND CARVES OUT AN EXCEPTION IN THIS REGARD. EXPLANATION TO SECTION 36(1)(VA) PROVIDES THAT DED UCTION SHALL BE ALLOWED IN RESPECT TO THE SUM PAID BY THE ASSESSEE TO EMPLOYEE'S ACCOUNT, IN THE RELEVANT FUND, ON OR BEFORE DUE DATE, I.E., SUCH DATE BY WHICH ASSESSEE IS REQUIRED TO CREDIT EMPLOYEE'S CONTRIBUT ION IN THE RELEVANT FUND, UNDER ANY ACT, RULE, ORDER OR NOTIFICATION ISSUED T HEREIN. IN THE INSTANT CASE, DUE DATE, THEREFORE, SHALL BE THE DATE MENTIO NED IN THE 1952 ACT OR 1948 ACT OR RULES FRAMED THEREUNDER, ETC. BY WHICH CONTRIBUTIONS WERE TO BE MADE. ADMITTEDLY AS PER DUE DATE UNDER THE RELEV ANT ACTS, CONTRIBUTIONS WERE NOT PAID BY THE ASSESSEE. SECTIO N 36(1)(VA) TALKS OF ONLY EMPLOYEE'S CONTRIBUTION AND ALLOW DEDUCTION IN RESPECT THERETO IN COMPUTING 'INCOME' UNDER SECTION 28. SO FAR AS SECTION 43B IS CONCERNED, IT WAS INSERTE D WITH EFFECT FROM 1-4- 1984 TO ALLOW DEDUCTIONS PROVIDED PAYMENTS ARE ACTU ALLY MADE BEFORE FILING OF RETURN AS PER DUE DATE UNDER SECTION 139( 1). 'INCOME' DEFINED UNDER SECTION 2(24) INCLUDES 'PROFITS AND GAINS'. U NDER SECTION 2(24)(X), ANY SUM RECEIVED BY ASSESSEE FROM HIS EMPLOYEES AS CONTRIBUTION TO ANY PROVIDENT FUND/SUPERANNUATION FUND OR ANY FUND SET UP UNDER EMPLOYEES STATE INSURANCE ACT, 1948, OR ANY OTHER FUND FOR WE LFARE OF SUCH EMPLOYEES, CONSTITUTE 'INCOME'. IN RESPECT TO SUCH CONTRIBUTIONS DEDUCTION WAS ALLOWED UNDER SECTION 36(1)(VA) WHEN CONTRIBUTI ONS RECEIVED BY EMPLOYER IS DEPOSITED WITHIN TIME PRESCRIBED, UNDER RELEVANT LABOUR WELFARE STATUTE. PRIOR TO 1-4-1984, EVERY ASSESSEE WAS ENTITLED TO DEDUCTION ON MERCANTILE SYSTEM OF ACCOUNTING AS A B USINESS EXPENDITURE BY MAKING PROVISION IN HIS BOOKS OF ACCOUNT IN THAT REGARD AND THIS SITUATION CONTINUED UPTO 1-4-1984. AN ASSESSEE, IF MAINTAINING BOOKS ON ACCRUAL SYSTEM OF ACCOUNTING, EVEN AFTER COLLECTING CONTRIBUTION FROM HIS EMPLOYEE, AND EVEN WITHOUT REMITTING THE AMOUNT TO REGIONAL PROVIDENT FUND COMMISSIONER, HE WOULD HAVE CLAIMED DEDUCTION AS 'BUSINESS EXPENSE' BY MERELY MAKING A PROVISION TO THAT EFFEC T IN HIS BOOKS OF 4 ITA NO. 2278/H/17 DRS DILIP ROADLINES PVT. LTD., HYD. ACCOUNT. A SIMILAR DISCREPANCY WAS NOTICED IN THE C ONTEXT OF SALES TAX WHERE ASSESSEE COLLECTED THE SAME AND OTHER INDIREC T TAXES FROM HIS RESPECTIVE CUSTOMERS AND CLAIMED DEDUCTION ONLY BY MAKING PROVISIONS IN HIS BOOKS WITHOUT ACTUALLY REMITTING THE AMOUNT TO EXCHEQUER. TO CURB THIS PRACTICE, SECTION 43B WAS INSERTED WITH EFFECT FROM 1-4-1984, WHEREBY MERCANTILE SYSTEM OF ACCOUNTING WITH REGARD TO TAX, DUTY AND CONTRIBUTIONS TO WELFARE FUNDS STOOD DISCONTINUED. NOW IT BECAME NECESSARY FOR THE ASSESSEE TO ACCOUNT FOR THE AFORE STATED ITEMS, NOT ON MERCANTILE BASIS, BUT ON CASH BASIS. WITH EFFECT FR OM 1-4-1988 SECTION 43B WAS AGAIN AMENDED AND A PROVISO WAS INSERTED. IT PR OVIDED, INTER ALIA, IN THE CONTEXT OF ANY SUM PAYABLE BY THE ASSESSEE BY W AY OF TAX, DUTY, CESS OR FEE, IF SUCH AN ASSESSEE PAYS SUCH TAX, DUTY, CESS OR FEE EVEN AFTER CLOSING OF ACCOUNTING YEAR BUT BEFORE DATE OF FILING OF RET URN UNDER SECTION 139(1), ASSESSEE WOULD BE ENTITLED TO DEDUCTION UNDER SECTI ON 43B ON ACTUAL PAYMENT BASIS AND SUCH DEDUCTION WOULD BE ADMISSIBL E FOR THE ACCOUNTING YEAR. THIS PROVISO, HOWEVER, WAS NOT MADE APPLICABL E TO CONTRIBUTIONS MADE BY THE ASSESSEE TO LABOUR WELFARE FUNDS. BY FI NANCE ACT, 1988, WITH EFFECT FROM 1-4-1988, SECOND PROVISO CAME TO BE INS ERTED. SECOND PROVISO WAS FURTHER AMENDED BY FINANCE ACT, 1989 WITH EFFEC T FROM 1-4-1989. FROM THE ABOVE PROVISIONS, NOW ASSESSEE BECOMES EN TITLED TO DEDUCTION ONLY IF CONTRIBUTION STAND CREDITED ON OR BEFORE DU E DATE, GIVEN IN LABOUR WELFARE STATUTES. HOWEVER, SECOND PROVISO AGAIN CRE ATED CERTAIN DIFFICULTIES. IN MANY OF THE COMPANIES, FINANCIAL Y EAR ENDED ON 31ST MARCH DID NOT COINCIDE WITH ACCOUNTING PERIOD OF LABOUR W ELFARE STATUTES. IN MANY CASES, TIME TO MAKE CONTRIBUTION OF FUNDS ENDE D AFTER DUE DATE OF FILING OF RETURNS. ON THE REPRESENTATION OF INDUSTR IES, AGAIN PARLIAMENT, VIDE FINANCE ACT, 2003, WITH EFFECT FROM 1-4-2004, MADE AMENDMENT BY DELETING SECOND PROVISO AND AMENDING FIRST PROVISO. THE SUPREME COURT IN THE CASE OF ALOM EXTRUSIONS L TD. (SUPRA) CONSIDERED THE INTENT, PURPOSE AND OBJECT IN THE HI STORICAL BACK DROP OF INSERTION OF SECTION 43B AND ITS PROGRESS BY WAY OF VARIOUS AMENDMENTS AND HELD THAT WHEN THE CONTRIBUTION HAD BEEN PAID B Y THE ASSESSEE TOWARDS PROVIDENT FUND, ETC. PRIOR TO FILING OF RET URN UNDER SECTION 139(1), THE ASSESSEE WOULD BE ENTITLED FOR DEDUCTION UNDER SECTION 43B. [PARA 27] FROM THE AFORESAID JUDGMENT OF THE SUPREME COURT, THE BENCH FINDS THAT IRRESPECTIVE OF THE FACT THAT DEDUCTION IN RESPECT OF SUM PAYABLE BY EMPLOYER'S CONTRIBUTION WAS INVOLVED, BUT THE COURT DID NOT RESTRICT OBSERVATIONS, FINDINGS AND DECLARATION OF LAW TO TH AT CONTEXT BUT LOOKING TO THE OBJECTIVE AND PURPOSE OF INSERTION OF SECTIO N 43B APPLIED IT TO BOTH THE CONTRIBUTIONS, WHETHER BY EMPLOYER OR EMPLOYEE. IT ALSO OBSERVED CLEARLY THAT SECTION 43B IS WITH A NON OBSTANTE CLA USE AND, THEREFORE, OVER 5 ITA NO. 2278/H/17 DRS DILIP ROADLINES PVT. LTD., HYD. RIDE EVEN IF, ANYTHING OTHERWISE IS CONTAINED IN SE CTION 36 OR ANY PROVISION OF THE INCOME-TAX ACT. IN VIEW OF THE AFORESAID, THE ASSESSEE WAS ENTITLE D TO DEDUCTIONS UNDER SECTIONS 43B AND 36(1)(VA). 7.1 IN VIEW OF THE ABOVE DISCUSSION, WE HOLD THAT N O DISALLOWANCE CAN BE MADE TOWARDS PF/ESI CONTRIBUTIONS MADE BY TH E ASSESSEE WITHIN THE FY OR BEFORE FILING OF THE RETURN. IN TH E GIVEN CASE, ASSESSEE HAS PAID THE EMPLOYEES CONTRIBUTION TO PF & ESI BEFORE FILING OF THE RETURN OF INCOME AND HENCE, THE ASSE SSEE IS ALLOWED TO CLAIM THE ABOVE PAYMENTS AS DEDUCTION IN THE SAME F Y. THEREFORE, THE AO IS DIRECTED TO DELETE THE ADDITION MADE. 8. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED PRONOUNCED IN THE OPEN COURT ON 13 TH JULY, 2018. SD/- SD/- (P. MADHAVI DEVI) (S. RIFAUR RAHMAN) JUDICIAL MEMBER A CCOUNTANT MEMBER HYDERABAD, DATED: 13 TH JULY, 2018 KV COPY TO:- 1) DRS DILIP ROADLINES PVT. LTD., C/O C/O. M. ANAND AM & CO., CAS, 7A, SURYA TOWERS, SD ROAD, SCUNDERABAD 500 003 . 2) ITO, WARD 17(2), HYDERABAD 3) CIT(A) - 5, HYDERABAD 4) PR. CIT - 5, HYDERABAD 5) THE DEPARTMENTAL REPRESENTATIVE, I.T.A.T., HYDE RABAD. 6) GUARD FILE