I.T.O Wd - 8(3),kolkata, Kolkata V. M/s Polar Pharma (India)Ltd., Kolkata

ITA 2380/KOL/2013

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 4706 (ITAT-KOLKATA)
• Duration Of Justice: 2 year(s) 8 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 01-06-2016
• Appeal Filed By: Department
• Bench Allotted: A
• Assessment Year: 2005-2006
• Appeal Filed On: 17-09-2013
• Court: TRIBUNAL
• Department Lawyers: S S ALAM
• Assessee Lawyers: MANISH TIWARI
• Keywords: Revenue expenditure
• Section: 43B; 143(3); 37(1); 154

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH : KOLKATA [BEFORE HONBLE SRI N.V.VASUDEVAN, JM & SHRI M.BA LAGANESH, AM] I.T.A NO.2380/KOL/201 3 ASSESSMENT YEAR : 2005-0 6 I.T.O., WARD-8(3) -VS.- M/S. POLAR PHARM A (INDIA) LTD. KOLKATA KOLKATA [PAN : AABCP5071A] (APPELLANT) (RESPONDENT) FOR THE APPELLANT : S.S.ALAM, JCIT, SR.DR FOR THE RESPONDENT : SHRI MANISH TIWARI, FCA DATE OF HEARING : 19.05.2016. DATE OF PRONOUNCEMENT : 01.06.2016. ORDER PER N.V.VASUDEVAN, JM THIS IS AN APPEAL BY THE REVENUE AGAINST THE ORDER DATED 22.07.2013 OF CIT(A)- CENTRAL-II, KOLKATA, RELATING TO AY 2005-06. 2. GROUNDS OF APPEAL RAISED BY THE REVENUE READ AS FOLLOWS :- '1. THAT, ON THE FACTS AND IN CIRCUMSTANCES OF THE CASE AND IN LAW, THE CIT(APPEALS) ERRED IN HOLDING THAT THE ORDER PASSED BY THE ASSESSING O FFICER U/S 154 OF THE INCOME TAX ACT, 196/ IS BEYOND JURISDICTION AND BAD IN LAW. ' 2. THAT, ON THE FACTS AND CIRCUMSTANCES OF THE CA SE, AND IN LAW, THE LD.CIT(A) HAS ERRED IN ALLOWING RELIEF TO THE ASSESSEE COMPANY BY DISPO SING THE CASE ON TECHNICAL GROUNDS WITHOUT GOING INTO THE MERITS OF THE CASE. ' 3. THAT THE APPELLANT CRAVES LEAVE TO SUBMIT AD DITIONAL GROUNDS OF APPEAL, IF ANY, AT OR BEFORE THE TIME OF HEARING AND/OR ALTER, MODIFY, RE FRAME ANY GROUNDS OF APPEAL AT OR BEFORE THE TIME OF HEARING.' 3. THE ASSESSEE IS A COMPANY. IT IS ENGAGED IN THE BUSINESS OF TRADING IN RUBBER, PROPHYLACTICS. THE ASSESEE FILED RETURN OF INCOME F OR A.Y.2005-06 DECLARING THE TOTAL LOSS OF RS.1,12,03,082/-. THE AO COMPLETED THE ASS ESSMENT U/S 143(3) OF THE INCOME TAX ACT, 1962 (ACT) VIDE ORDER DATED 31.12.2007 ACC EPTING THE LOSS RETURNED BY THE SSESSEE. 4. SUBSEQUENTLY THE AO ISSUED A SHOW CAUSE NOTICE U/S 154 OF THE ACT DATED 27.07.2011 PROPOSING TO RECTIFY CERTAIN APPARENT ER RORS IN THE ORDER DATED 31.12.2007. 2 ITA NO.2380/KOL/2013 M/S. POLAR PHARMA (INDIA)LTD. A.YR.2005-06 2 ACCORDING TO THE AO WHILE COMPLETING THE ASSESSMENT THERE WAS AN ITEM OF PRIOR PERIOD LOSS OF RS.7,86,242/- WHICH WAS CLAIMED AS DEDUCTIO N WHILE COMPUTING THE INCOME AS REVENUE EXPENDITURE INCIDENTAL TO THE BUSINESS AND THEREFORE THE SAME HAD TO BE DISALLOWED WHILE COMPUTING THE INCOME OF THE ASSESS EE. SIMILARLY THE AO ALSO WAS OF THE VIEW THAT A SUM OF RS.21,68,000/- WHICH WAS EMP LOYEES CONTRIBUTION TO PF AND ESI HAD BEEN PAID BEYOND THE DUE DATE OF PAYMENT IN ACCORDANCE WITH LAW GOVERNING PAYMENT OF PF AND ESI AND THEREFORE IT OUGHT TO HAV E BE DISALLOWED AND DEDUCTION OF THE SAID SUM WHILE COMPUTING THE TOTAL INCOME OUGHT NOT TO HAVE BEEN ALLOWED IN VIEW OF THE PROVISION OF SECTION 36(1)(VA) OF THE ACT. SEC.36(1)(VA) OF THE ACT PROVIDES THAT ANY SUM RECEIVED BY AN ASSESSEE FROM ANY OF HIS EMP LOYEES TO WHICH THE PROVISIONS OF SUB-CLAUSE(X) OF CLAUSE (24) OF SEC.2 OF THE ACT AP PLY, IF SUCH SUM IS CREDITED BY THE ASSESSEE TO THE EMPLOYEES ACCOUNT IN THE RELEVANT FUND OR FUNDS ON OR BEFORE THE DUE DATE. DUE DATE MEANS THE DATE BY WHICH THE ASSESS EE IS REQUIRED AS AN EMPLOYER TO CREDIT AN EMPLOYEES CONTRIBUTION TO THE EMPLOYEES ACCOUNT IN THE RELEVANT FUND UNDER ANY ACT, RULE, ORDER OR NOTIFICATION ISSUED THEREUN DER OR UNDER ANY STANDING ORDER, AWARD, CONTRACT OF SERVICE OR OTHERWISE. 4. THE ASSESSEE IN REPLY TO THE SHOW CAUSE NOT ICE, FIRSTLY SUBMITTED THAT THE MISTAKES SOUGHT TO BE RECTIFIED BY THE AO CANNOT BE CONSTRUE D AS A MISTAKE APPARENT FROM THE RECORD AND THEREFORE JURISDICTION U/S 154 OF THE AC T CANNOT BE INVOKED. IT WAS SUBMITTED THAT A MISTAKE APPARENT FROM RECORD MUST BE OBVIOUS AND PATENT MISTAKE AND NOT SOMETHING WHICH CAN BE ESTABLISHED BY A LONG DRAWN PROCESS OF REASONING. A DECISION ON A DEBATABLE POINT OF LAW IS NOT A MISTAKE APPARENT FR OM RECOVERY. IT WAS SUBMITTED THAT POINTS WHICH ARE NOT EXAMINED ON FACTS OR IN LAW, CANNOT B E DEALT WITH AS A MISTAKE APPARENT FROM RECORD. AS HELD IN CIT - VS - HERO CYCLES (P) LTD. 228 ITR 463. SECONDLY THE ASSESSEE POINTED OUT THAT THE FOLLOWING FACTS WITH REGARD TO THE PRIOR PERIOD ADJUSTMENT AND EMPLOYEES CONTRIBUTION TO PF : 1. PRIOR PERIOD ADJUSTMENT - THE AGGREGATE AMOUNT OF RS. 7,86,242/ - INCLUDES MAJOR ITEMS VIZ BONUS PAYMENT OF RS. 3,96,200/- AND LEAVE ENCASHMENT OF RS. 2,23,850/-. THE COMPANY PROVIDED BONUS IN THE F.Y. 2003-04 @ 8.33%. HOWEVER, SUCH BONUS WAS ACTUALLY PAID IN SEPTEMBER / OCTOBER 2004 @ 13%. AC CORDINGLY, UNDER ACCOUNTING 3 ITA NO.2380/KOL/2013 M/S. POLAR PHARMA (INDIA)LTD. A.YR.2005-06 3 PRINCIPLE THE PAYMENT WAS BOOKED AS PRIOR PERIOD IT EM IN ASSESSMENT YEAR 2005-06. MOREOVER, BONUS IS ALLOWABLE ON PAYMENT BASIS ACCOR DING TO THE PROVISIONS SECTION 43B(C). 2. AS REGARDS LEAVE ENCASHMENT IT WAS STATED THAT THE SYSTEM OF ACCOUNTING FOLLOWED AT NOIDA FACTORY TO DISBURSE ON RETIREMENT OF EMPLOYEE WAS CHANGED TO ALIGN WITH THE SYSTEM FOLLOWED AT HEAD OFFICE. THIS RESULTED IN MA KING ADJUSTMENT OF RS. 2,23,850/ - AS PRIOR PERIOD ADJUSTMENT. THE ASSESSEE POINTED OUT THAT ADJUSTMENT FOR PRIOR PERIOD ITEMS IS COMMON WHERE SYSTEM OF ACCOUNTING FOLLOWED IS MERCANTILE. THE ALLOWABIL ITY OF PRIOR PERIOD EXPENSES WAS CLARIFIED BY ITAT IN THE CASE OF DY CIT - VS - INDA G RUBBER LTD. 280 ITR (AT) 194 (DEL). 3. EMPLOYEE' CONTRIBUTION TO PF /ESI - IT IS EVIDEN T FROM ANNEXURE-ILL OF FORM NO. 3CD THAT THOUGH EMPLOYEE'S CONTRIBUTION TO PF/ESI WAS N OT PAID WITHIN THE DUE DATE THE SAME WAS PAID WITHIN THE DUE DATE OF FILING OF RETURN U / S 139. IT IS SUBMITTED THAT THE DISPUTE REGARDING DISALLOWABILITY U / S 36(1)(VA) READ WITH SECTION 43B OF THE ACT HAS SINCE BEEN SET AT REST BY VARIOUS IT ATS, HIGH COURTS AS WELL AS SUPREME COURT. IT HAS BEEN HELD THAT WHERE THE ASSESSEE HAS FAILED TO MAKE PAYMENT OF EM PLOYEE'S CONTRIBUTION TO PF /ESI WITHIN DUE DATE AS PROVIDED IN SEC.36(1)(VA) OF THE ACT BUT HAS MADE THE SAID PAYMENT BEFORE DUE DATE OF FILING OF RETURN U / S 139, NO D ISALLOWANCE OF SUCH PAYMENT CAN BE MADE U / S 43B. 5. THE AO HOWEVER PASSED AN ORDER U/S 154 OF THE ACT DATED 19.08.2011 WITHOUT DEALING WITH THE STAND TAKEN IN THE REPLY TO THE SH OW CAUSE NOTICE U/S 154 OF THE ACT REFERRED TO ABOVE AND MERELY HOLDING THAT THE ASSES SEE FAILED TO PLACE ON RECORD OR TO SHOW EVIDENCES ON THE BASIS OF WHICH PRIOR PERIOD L OSS COULD BE CONSIDERED AS ALLOWABLE U/S 37(1) OF THE ACT. THE AO ALSO HELD THAT EMPLOYE ES CONTRIBUTION WAS DIFFERENT FROM EMPLOYERS CONTRIBUTION WHICH COVERED U/S 43B OF THE ACT AND THEREFORE PAYMENT OF EMPLOYEES CONTRIBUTION WITHIN THE DUE DATE OF FILIN G OF THE RETURN U/S 36(1)(VA) OF THE ACT CANNOT BE THE BASIS TO ALLOW BELATED PAYMENT OF CONTRIBUTION OF PF AND ESI. ACCORDINGLY THE TOTAL LOSS DETERMINED IN THE ORDER U/S 143(3) OF THE ACT WAS REDUCED BY A SUM OF RS.29,54,842/-. 6. ON APPEAL BY THE ASSESSEE THE CIT(A) HELD THAT T HE ISSUES SOUGHT TO BE RECTIFIED IN THE PROCEEDINGS U/S 154 OF THE ACT WERE DEBATABL E ISSUES ON WHICH TWO VIEWS ARE POSSIBLE AND THEREFORE IT CANNOT BE SAID THAT THERE WERE MISTAKES APPARENT ON THE FACE OF 4 ITA NO.2380/KOL/2013 M/S. POLAR PHARMA (INDIA)LTD. A.YR.2005-06 4 THE RECORD WHICH CAN BE RECTIFIED IN THE PROCEEDING S U/S 154 OF THE ACT. ACCORDINGLY ORDER U/S 154 OF THE ACT WAS CANCELLED BY CIT(A). 7. AGGRIEVED BY THE ORDER OF CIT(A) THE REVENUE HAS PREFERRED THE PRESENT APPEAL BEFORE THE TRIBUNAL. 8. WE HAVE HEARD THE SUBMISSIONS OF THE LD. DR, WHO REITERATED THE STAND OF THE AO AS CONTAINED IN THE ORDER OF ASSESSMENT. THE LD. CO UNSEL FOR THE ASSESSEE FILED BEFORE US A COPY OF THE REPLY GIVEN BY THE ASSESSEE TO THE SH OW CAUSE NOTICE AND HIGHLIGHTED THE FACT THAT THIS OBJECTION WAS NOT CONSIDERED BY AO I N THE ORDER U/S 154 OF THE ACT. HE PLACED RELIANCE ON THE ORDER OF CIT(A). 9. WE HAVE GIVEN A VERY CAREFUL CONSIDERATION T O THE RIVAL SUBMISSIONS. THE QUESTION AS TO WHETHER THE PRIOR PERIOD LOSS WHICH WAS CLAIM ED AND ALLOWED AS DEDUCTION IN THE ASSESSMENT PROCEEDINGS U/S 143(3) OF THE ACT, COUL D BE ALLOWED OR NOT IN THE PRESENT ASSESSMENT YEAR ON PAYMENT BASIS CANNOT BE EXAMINED IN THE PROCEEDINGS U/S 154 OF THE ACT. IN ANY EVENT THE CLAIM OF THE ASSESSEE THAT TH ERE WAS ACTUAL PAYMENT OF THE AFORESAID SUM DURING THE PREVIOUS YEAR AND THE LOSS IN QUESTION IS ALLOWABLE AS DEDUCTION U/S 43B(C ) OF THE ACT WAS NOT CONSIDERED BY THE AO IN THE ORDER U/S 154 OF THE ACT. IN ANY EVENT THIS IS A DEBATABLE ISSUE AND THEREFORE PROCEEDINGS U/S 154 OF THE ACT CANNOT BE APPROPRIATE. AS FAR AS THE EMPLOYEES CONTRIBUTION TO PF AND ESI IS CONCERNED THE QUESTION IS AS TO WHETHER ANALOGY OF SECTION 43B OF THE ACT IS APPLICABLE TO THE EMPLOYERS CONTRIBUTION CAN BE EXTENDED TO E MPLOYEES CONTRIBUTION U/S 36(1)(VA) OF THE ACT IS A DEBATABLE ISSUE. A SERIES OF CASE L AWS ON THIS ISSUE WOULD ALSO SHOW THAT THIS ISSUE IS HIGHLY A DEBATABLE ONE AND OUTSIDE TH E PURVIEW OF THE PROCEEDINGS U/S 154 OF THE ACT. IN CIT VS. AIMIL LIMITED, THE HONBLE DELHI HIGH COURT IN ITA NO. 1063 OF 2006 ITA NO.755 OF 2008 ITA NO. 204 OF 2009 ITA NO. 1214/2008 WITH ITA NO. 1246/2008 ITA NO. 50/2009 ITA NO. 78/2 009 JUDGMENT DATED DECEMBER 23, 2009 HAD TO DEAL WITH A CASE OF DISALL OWANCE U/S.36(1)(VA) OF THE ACT. THE HONBLE COURT HELD THAT IF THE EMPLOY EES CONTRIBUTION IS NOT DEPOSITED BY THE DUE DATE PRESCRIBED UNDER THE RELE VANT ACTS AND IS DEPOSITED 5 ITA NO.2380/KOL/2013 M/S. POLAR PHARMA (INDIA)LTD. A.YR.2005-06 5 LATE, THE EMPLOYER NOT ONLY PAYS INTEREST ON DELAYE D PAYMENT BUT CAN INCUR PENALTIES ALSO, FOR WHICH SPECIFIC PROVISIONS ARE M ADE IN THE PROVIDENT FUND ACT AS WELL AS THE ESI ACT. THEREFORE, THE ACT PERM ITS THE EMPLOYER TO MAKE THE DEPOSIT WITH SOME DELAYS, SUBJECT TO THE AFORES AID CONSEQUENCES. INSOFAR AS THE INCOME-TAX ACT IS CONCERNED, THE ASSESSEE CA N GET THE BENEFIT IF THE ACTUAL PAYMENT IS MADE BEFORE THE RETURN IS FILED. CONTRARY VIEW HAS BEEN EXPRESSED BY SOME OF HONBLE HIGH COURT ON THIS ISS UE AND THERE IS NO DECISION OF THE JURISDICTIONAL HIGH COURT ON THIS I SSUE. IN SUCH CIRCUMSTANCES, THE ISSUE HAD TO BE REGARDED AS HIGH LY DEBATABLE. WE THEREFORE CONCUR WITH THE VIEW OF CIT(A) AND FIND NO GROUND T O INTERFERE WITH THE ORDER OF CIT(A). CONSEQUENTLY THE APPEAL OF THE REVENUE IS D ISMISSED. 10. IN THE RESULT THE APPEAL OF THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE COURT ON 01.06.2016. SD/- SD/- [M.BALAGANESH] [ N.V.VASUDEVAN ] ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 01.06.2016. [RG PS] COPY OF THE ORDER FORWARDED TO: 1.M/S. POLAR PHARMA (INDIA)LTD., 113, PARK STREET, KOLAKTA0-700016. 2. ITO, WARD-8(3), KOLKATA. 3. CIT(A)-CENTRAL-II, KOLKATA 4. CIT-II, K OLKATA. 5. CIT(DR), KOLKATA BENCHES, KOLKATA. TRUE COPY BY ORDER ASSTT.REGISTRAR, ITAT, KOLKATA BENCHES 6 ITA NO.2380/KOL/2013 M/S. POLAR PHARMA (INDIA)LTD. A.YR.2005-06 6