PHARMACIA HEALTH CARE LTD, MUMBAI V. ITO 2(2)(1), MUMBAI

ITA 2585/MUM/2010

• Counselvise Citation: 258519914 RSA 2010
• Duration Of Justice: 1 year(s) 5 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-09-2011
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: C
• Next Hearing Date: 15-09-2011
• Assessment Year: 2002-2003
• Appeal Filed On: 05-04-2010
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: ALEXANDER CHANDY
• Assessee Lawyers: R MURLIDHAR
• Keywords: Business expenditure; Additional evidence; Non compliance; Capital expenditure
• Section: 43B; 80HHC; 12; 28; 139

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH C MUMBAI BEFORE SHRI B.R. MITTAL (JUDICIAL MEMBER) AND SHRI B. RAMAKOTAIAH (ACCOUNTANT MEMBER) ITA NO.2585/MUM/2010 ASSESSMENT YEAR- 2002-03 M/S. PHARMACIA HEALTH CARE LTD., (SINCE MERGED WITH PFIZER LTD) PFIZER CENTRE, PATEL ESTATE, S.V. ROAD, JOGESHWARI (W), MUMBAI- 400 102 PAN-AAACA 5994GT VS. THE ITO 2(2)(1), AAYAKAR BHAVAN, MUMBAI-400 020 (APPELLANT) (RESPONDENT) APPELLANT BY: SHRI R. MURLIDHAR RESPONDENT BY: SHRI ALEXANDER CHANDY DATE OF HEARING : 15.09.2011 DATE OF PRONOUNCEMENT: O R D E R PER B.R. MITTAL, JM : THE ASSESSEE HAS FILED THIS APPEAL FOR ASSESSMENT YEAR 2002-03 AGAINST ORDER OF LD. CIT(A) DT.10.02.2010 DISPUTING CONFIRM ATION OF DISALLOWANCES MADE BY AO. 2. IN GROUND NO. 1 OF THE APPEAL, THE ASSESSEE HAS D ISPUTED CONFIRMATION OF DISALLOWANCE OF RS. 69,93,000/- BEING PRIOR PERI OD EXPENSES. 3. RELEVANT FACTS ARE THAT ASSESSEE DEBITED AN AMOU NT OF RS. 1,40,05,000/- TO PROFIT & LOSS ACCOUNT AS PRIOR YEA R EXPENSES, DETAILS OF ITA NO. 2585/M/2010 2 WHICH ARE GIVEN BY ASSESSING OFFICER AT PAGE 1 OF T HE ASSESSMENT ORDER. IT INCLUDES A SUM OF RS. 69,93,000/- UNDER THE HEAD O THER CHARGES. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, ASSESSEE SUBM ITTED VIDE ITS LETTER DT. 28.2.2005, THE DETAILS OF EXPENSES GIVING INVOICE N OS., DATE OF INVOICES, AMOUNT OF INVOICES, NAME OF THE PARTIES ETC. AND ST ATED THAT THERE WAS DISPUTE REGARDING THE RATES CHARGED FOR VARIOUS ITE MS AND NON DELIVERY OF ITEMS ON TIME. AS A RESULT, THOSE INVOICES WERE NO T PASSED FOR PAYMENT AND SUBSEQUENTLY, WHEN DISPUTE WAS RESOLVED IN THE YEAR ENDED 31.3.2002, PAYMENTS WERE MADE. THEREFORE, THE SAME WERE BOOKE D AS EXPENDITURE IN THE ACCOUNTS FOR THE YEAR ENDED 31.3.2002. HOWEVER , THE AO DID NOT ACCEPT THE SAID CONTENTION OF THE ASSESSEE AND AFTER STATI NG THAT THE ASSESSEE HAD ADOPTED MERCANTILE SYSTEM OF ACCOUNTING , THE EXPEN DITURE MUST BE INCURRED IN THAT PREVIOUS YEAR. THEREFORE, THE EXPENDITURE INCURRED AFTER THE EXPIRY OF THE RELEVANT PREVIOUS YEAR IS NOT ALLOWABLE AS A D EDUCTION. THE AO AFTER PLACING RELIANCE ON THE DECISIONS AS MENTIONED IN P ARA-6 OF THE ASSESSMENT ORDER DISALLOWED THE SAID CLAIM OF THE ASSESSEE ON THE GROUND THAT THOSE EXPENSES ARE RELATING TO PRIOR YEAR EXPENSES. BEIN G AGGRIEVED, ASSESSEE FILED APPEAL BEFORE LD. CIT(A). 4. IT WAS CONTENDED THAT SAID EXPENSES WERE LEGITIMA TE BUSINESS EXPENSES. SINCE DISPUTE HAD BEEN SETTLED IN THE ASS ESSMENT YEAR UNDER CONSIDERATION, THE ASSESSEE WAS ENTITLED TO CLAIM T HE EXPENSES IN THE ASSESSMENT YEAR RELEVANT TO PREVIOUS YEAR. IT WAS A LSO CONTENDED THAT THE AMOUNT OF DISPUTE WAS RS. 69.03 LACS, THE TOTAL NO. OF PARTIES INVOLVED WERE 20. THE PARTIES IN RESPECT OF WHOM BILLS WERE PENDI NG ARE REGULAR PARTIES AND ONCE THE SAME WERE SETTLED AFTER PROPER EXPLANATION IT WAS AGREED TO BE PAID BY THE COMPANY AND WERE DEBITED IN BOOKS OF ACCOUNT S. HOWEVER, LD. CIT(A) DID NOT AGREE WITH THE CONTENTION OF THE ASSESSEE A ND CONFIRMED THE ACTION OF THE AO VIDE PARA-5 OF HIS ORDER WHICH IS AS UNDER: I HAVE CAREFULLY CONSIDERED THE ABOVE FACTS. THE A PPELLANT HAS SUBMITTED A LIST OF PRIOR PERIOD EXPENSES WITH DATE, INVOICE NUMBER AND THE NAMES OF PARTIES. FROM THE DATES OF INVOICES, IT ITA NO. 2585/M/2010 3 WAS FOUND THAT ALL OF THE SAME PERTAIN TO EARLIER Y EARS AND MOSTLY TO THE FY 2000-01. APART FROM SUCH LIST, THE APPELL ANT HAS NOT SUBMITTED ANY OTHER CORROBORATIVE DETAILS TO DEMONS TRATE THE REASON FOR NON PAYMENT OF THE SAME MORE SO WHEN ALL THE INVOICES WERE DULY RAISED ON THE APPELLANT DURING E ARLIER YEAR ITSELF AND THE PAYMENT THEREOF MADE IN THE RELEVANT YEAR WOULD NOT ENTITLED IT TO ANY DEDUCTION. THE APPELLANT HAS FAILED TO BRING ON RECORD ANY MATERIAL FACT TO SHOW THAT ALL SUCH E XPENSES WERE CRYSTALLIZED DURING THE YEAR ITSELF. RELIANCE PLACE D ON VARIOUS CASE LAWS IS MISPLACED AS THE BASICS QUESTION REGAR DING CRYSTALLIZATION OF EXPENSES HAS NOT BEEN ANSWERED B Y THE APPELLANT IN ANY MANNER. AS SUCH, FOLLOWING THE MER CANTILE SYSTEM OF ACCOUNTING, NO DEDUCTION COULD BE ALLOWED TO THE APPELLANT FOR SUCH EXPENSES WHICH PERTAIN TO EARLIE R YEARS. RELIANCE COULD BE PLACED ON IMP POWER LTD. VS. ITO (2007) 9 SOT 156 (MUM) WHERE ALSO SIMILAR EXPENSES WERE NOT RECO RDED IN THE YEAR IN WHICH THEY ACCRUED THOUGH MOST OF THE BILLS SUBMITTED MUCH BEFORE THE DATE OF FILING OF THE RETURN. IT WA S HELD THAT THE ASSESSEE SHOULD HAVE MADE PROVISION IN THE RELEVANT ACCOUNTING YEAR FOR THE EXPENSES BASED UPON THE BILLS AND VOUC HERS RECEIVED SUBSEQUENTLY. IN THE LIGHT OF SUCH DISCUSSION, NO I NTERFERENCE IS CALLED FOR IN THE MATTER AND THE DISALLOWANCE MADE IS UPHELD. HENCE ASSESSEE IS IN FURTHER APPEAL BEFORE THE TRI BUNAL. 5. THE LD. AR REFERRED TO PAGES 10 &11 OF PAPER BOO K WHICH CONTAIN DETAILS OF THE PARTIES TO WHOM THE ASSESSEE HAS MAD E PAYMENTS UNDER CONSIDERATION. LD. AR BY REFERRING PARA-4 OF THE NOTIFIED ACCOUNTING STANDARDS SUBMITTED THAT THE ACCOUNTING POLICIES, A DOPTED BY THE ASSESSEE SHOULD BE SUCH AS TO REPRESENT TRUE AND FAIR VIEW O F THE STATE OF AFFAIRS OF THE BUSINESS OF THE ASSESSEE IN THE FINANCIAL STATEMENT S PREPARED AND SUBMITTED THAT UNDER PARA-7 OF THE SAID ACCOUNTING STANDARDS IF THE PRIOR PERIOD ITEMS ARE SEPARATELY DISCLOSED IN THE PROFIT AND LOSS ACC OUNT IN THE PREVIOUS YEAR TOGETHER WITH THEIR NATURE AND AMOUNT IN A MANNER S O THAT THEIR IMPACT ON PROFIT OR LOSS IN THE PREVIOUS YEAR CAN BE PERCEIV ED AND THE SAME ARE TO BE ALLOWED. 6. THE LD. AR REFERRED TO PAGE-29 OF THE PAPER BOOK WHICH IS A COPY OF PROFIT & LOSS ACCOUNT AS ON 31.3.2002 AND SUBMITTE D THAT AGAINST THE SALES OF RS. 89.58 CRORES, THE PRIOR PERIOD EXPENSES DEBI TED IS ONLY RS. 69.93 LACS ITA NO. 2585/M/2010 4 WHICH IS ONLY 0.8% OF TOTAL SALES. HE SUBMITTED T HAT ITAT MUMBAI BENCH IN ITA NO. 4691/MUM/2005 IN THE CASE OF JOHN FOWLER (I NDIA) PVT. LTD VS ITO VIDE ITS ORDER DT. 8.12.2010 BY FOLLOWING THE DECIS ION OF ITAT DELHI BENCH IN THE CASE OF ESCORTS LTD. VS INSPECTING ASSTT. COMMI SSIONER (2004) 89 TTJ 221 (DEL) HELD THAT WHERE THE TURNOVER OF THE ASSESSEE IS SUBSTANTIAL, SOME BONA FIDE ADJUSTMENTS IN THE BOOKS OF ACCOUNTS WHERE THE ACCOUNTS FOR THE RELEVANT YEAR MAY HAVE BEEN CLOSED OR THE ASSESSEES AVENUES WITH CLAIMING THESE DEDUCTIONS IN THE RELEVANT YEAR HAVE BEEN EXHAUSTED , THE ASSESSEE WOULD BE ENTITLED TO CLAIM SUCH DEDUCTIONS IN THE SUBSEQUENT YEAR AND ACCORDINGLY, THE TRIBUNAL ALLOWED THE CLAIM OF THE ASSESSEE RELATING TO EXPENSES OF PRIOR PERIOD. HE SUBMITTED THAT THE CLAIM OF THE ASSESSE E TO BE ALLOWED AS THESE EXPENSES HAVE BEEN INCURRED IN THE EARLIER YEAR FOR ITS BUSINESS PURPOSES. 7. ON THE OTHER HAND THE LD. DEPARTMENTAL REPRESENT ATIVE RELIED ON THE ORDER OF THE AUTHORITIES BELOW AND SUBMITTED THAT A SSESSEE IS FOLLOWING MERCANTILE SYSTEM OF ACCOUNTING. THEREFORE PRIOR PE RIOD EXPENSES CANNOT BE ALLOWED IN THE ASSESSMENT YEAR UNDER CONSIDERATION. 8. WE HAVE CAREFULLY CONSIDERED THE ORDERS OF THE A UTHORITIES BELOW AND SUBMISSIONS OF THE LD. REPRESENTATIVES OF BOTH PAR TIES AND CASES CITED BY LD. AR (SUPRA). ON PERUSAL OF DETAILS OF EXPENSES, CLA IMED BY THE ASSESSEE, PLACED AT PAGES 10 & 11 OF THE PAPER BOOK, WE OBSER VE THAT THE ASSESSEE HAS GIVEN THE DATE OF INVOICES AS WELL AS PARTIES NAME. WE OBSERVE THAT THE CONTENTION OF THE ASSESSEE IS THAT THERE WAS DISPUT E BETWEEN THE PARTIES AND THEREFORE THE PAYMENTS WERE NOT MADE IN THE RELEVAN T ASSESSMENT YEARS IN WHICH INVOICES WERE RAISED. THE LD. AR SUBMITTED T HAT THE DISPUTE WAS SETTLED UNDER ASSESSMENT YEAR UNDER CONSIDERATION A ND THEREAFTER ASSESSEE DECIDED TO MAKE PAYMENTS TO THE CONCERNED PARTIES A S AGREED UPON. WE ARE OF THE CONSIDERED VIEW THAT WHEN THERE IS A DISPUTE IN RESPECT OF LIABILITIES TO BE DISCHARGED BY AN ASSESSEE, THE SAID LIABILITY IS CRYSTALLIZED ONLY WHEN SAME IS SETTLED BETWEEN THE PARTIES. THE HONBLE BOMBAY HIGH COURT HAS HELD IN THE CASE OF CIT VS PHALTON SUGAR WORKS LTD. 162 ITR 622 (BOM) THAT LIABILITY ITA NO. 2585/M/2010 5 ARISING OUT OF CONTRACTUAL OBLIGATION, IF IT IS DIS PUTED, THEN ASSESSEE IS ENTITLED TO CLAIM DEDUCTION IN THAT YEAR, IN THE ASSESSMENT YEAR RELEVANT TO THE PREVIOUS YEAR IN WHICH THE DISPUTE IS FINALLY SETTL ED. SINCE THE DEPARTMENT HAS NOT DISPUTED THE ABOVE FACTS AND HAS ALSO NOT BROUG HT ANY MATERIAL ON RECORD THAT THE SAID LIABILITY HAS NOT ARISING IN THE REG ULAR COURSE OF THE BUSINESS OF THE ASSESSEE. WE ARE OF THE CONSIDERED VIEW THAT T HE ABOVE CASE OF THE HONBLE JURISDICTIONAL HIGH COURT IS SQUARELY APPLI CABLE TO THE FACTS OF THE ASSESSEE. THEREFORE ASSESSEE IS ENTITLED TO CLAIM D EDUCTION OF THE SAID AMOUNT OF RS. 69,93,000/- IN THE ASSESSMENT YEAR UN DER CONSIDERATION. MOREOVER CASE OF THE ASSESSEE HEREIN IS ALSO COVERE D IN ITS FAVOUR BY THE DECISION OF THE CO ORDINATE BENCH IN THE CASE OF J OHN FOWLER (INDIA) PVT. LTD VS ITO (SUPRA) WHICH HAS BEEN DECIDED BY FOLLOWING THE DECISION OF THE ITAT DELHI BENCH IN THE CASE OF ESCORTS LTD. (SUPRA). I N VIEW OF ABOVE, WE ALLOW GROUND NO. 1 OF THE APPEAL BY DELETING THE DISALLOW ANCE OF RS. 69,93,000/-. HENCE GROUND NO. 1 OF THE APPEAL IS ALLOWED. 9. IN GROUND NO. 2 OF THE APPEAL, THE ASSESSEE HAS D ISPUTED THE CONFIRMATION OF DISALLOWANCE OF RS. 76,15,000/- BEI NG COMPENSATION PAID TO MANAGING DIRECTOR ON HIS RESIGNATION. 10. THE RELEVANT FACTS ARE THAT THE ASSESSEE DEBIT ED A SUM OF RS. 76,15,000/- UNDER THE HEAD EXCEPTIONAL ITEM ON AC COUNT OF PAYMENT MADE TO ITS MANAGING DIRECTOR AS COMPENSATION. IN CLAUSE -7 OF B NOTES TO ACCOUNTS, IT IS STATED THAT THE MANAGING DIRECTOR R ESIGNED ON 8.11.2001 AND THE ASSESSEE COMPANY PAID AN AMOUNT OF RS. 76,15,00 0/- FOR THE UNEXPIRED PERIOD OF THE CONTRACT AS COMPENSATION FOR LOSS OF OFFICE. THE AO HAS STATED THAT DURING THE COURSE OF ASSESSMENT PROCEEDINGS, T HE AUTHORISED REPRESENTATIVE OF THE ASSESSEE HAD NEITHER DIVULGED THE REASON FOR RESIGNATION NOR SUBMITTED COPY OF CONTRACT AGREEMEN T TO SEE AS TO WHETHER AGREEMENT CONTAINS ANY CLAUSE TO MAKE ANY PAYMENT F OR UNEXPIRED PERIOD OF CONTRACT, IN THE CASE OF RESIGNATION, AS COMPENSATI ON FOR LOSS OF OFFICE. THE AO FURTHER STATED THAT THE SAID PAYMENT TO MANAGING DIRECTOR FOR LOSS OF ITA NO. 2585/M/2010 6 OFFICE IS ONE-TIME PAYMENT AND EXPENDITURE INCURRED , ONCE FOR ALL, IS CAPITAL EXPENDITURE. THE AO ALSO RELIED ON THE FOLLOWING DE CISIONS: 1) VALLAMBROVA RUBBER CO. LTD. VS FARMER (1910) 5 TC 5 29 ITR 536 2) CIT VS WESTERN INDIA STATE MOTORS (1993) 203 ITR 363 , 365 (RAJ) 3) INDIAN COPPER CORPN. LTD. VS CIT (1960) 38 ITR 544(P AT.) HENCE THE AO MADE THE ADDITION OF THE SAID AMOUNT T O THE TOTAL INCOME OF THE ASSESSEE COMPANY. BEING AGGRIEVED, A SSESSEE FILED APPEAL BEFORE THE FIRST APPELLATE AUTHORITY. 11. THE ASSESSEE FILED WRITTEN SUBMISSIONS BEFORE L D. CIT(A) WHICH IS STATED BY LD. CIT(A) IN PARA 8 AND 8.1 OF THE IMPUG NED ORDER WHICH READ AS UNDER: IN THE WRITTEN SUBMISSION MADE, IT IS STATED THAT THE CONTRACT WITH MR. TAPAN RAY WAS VALID UP TO 31.12.2 002. HE AGREED TO RESIGN INSTEAD OF COMPANY TERMINATING HIS SERVICES PROVIDED HE WOULD BE PAID ADEQUATE COMPENSATION FOR RESIGNING FROM THE SERVICES WITH IMMEDIATE EFFECT. ACCORDINGL Y, AS AGREED UPON BY THE MANAGEMENT AND MR. TAPAN RAY, HE WAS PA ID A COMPENSATION OF RS.76.15 LACS FOR RESIGNING FROM TH E SERVICES OF THE COMPANY EARLY. FURTHER, COMPANY HAS TAKEN AN OP INION FROM M/S. CRAWFORD BAILEY, A RENOWNED SOLICITORS AND ALS O APPROVAL FROM CENTRAL GOVERNMENT FOR THE EXCESS COMPENSATION PAID TO THE MANAGING DIRECTOR. THE COMPENSATION IS WAS RATIFIED BY THE SHARE HOLDERS IN THE ANNUAL GENERAL MEETING. THUS COMPENS ATION PAID TO MANAGING DIRECTOR FOR EARLY TERMINATION OF SERVI CES WAS IN TERMS OF SECTION 318 OF THE COMPANIES ACT, 1956 AND IS AN ALLOWABLE EXPENSE. IT IS RELEVANT TO MENTION THAT I T HAS BEEN HELD IN VARIOUS HIGH COURT DECISION THAT COMPENSATION PA ID FOR PREMATURE TERMINATION OF SERVICES IS AN ALLOWABLE E XPENSE U/S.37(1) OF THE ACT. LIFE INSURANCE CORPORATION OF INDIA V/S. CIT 119 ITR 900 (MUMBAI HIGH COURT) AND CIT V/S. TURNER MORISSION & CO. PVT. LTD. 68 ITR 147 (CALCUTTA). IT MAY BE STATED HERE THAT IN THE COURSE OF APPEAL PROCEEDINGS, A LETTER DATED 02.11.2009 WAS FILED IN WHICH IT WAS STATED THAT DURING THE COURSE OF THE ASSESSMENT PRO CEEDINGS BEFORE THE ASSESSING OFFICER, THE APPELLANT COULD N OT FURNISH THE NECESSARY DETAILS IN VIEW OF THE FACT THAT THERE WA S AN OPERATIONAL MERGER OF TWO COMPANIES AND MAJORITY OF THE ITA NO. 2585/M/2010 7 EMPLOYEES EITHER RESIGNED FROM THE SERVICES OF THE COMPANY OR TOOK VRS. THE APPELLANT WAS MAINTAINING ITS ACCOUNT S ON BPCS SYSTEM WHEREAS ACCOUNTS OF PFIZZER LTD. WERE BEING MAINTAINED IN SUN SYSTEM. ONE MR. MUKESH SHAH WAS ATTENDING TO TH E TAXATION MATERS OF THE COMPANY, HOWEVER, IT WAS NOT POSSIBLE FOR HIM TO SUBMIT ALL THE DETAILS / ACCOUNTS IMMEDIATELY AT TH E TIME OF HEARING. THE APPELLANT COULD COMPILE THE DETAILS ON LY AFTER CONSULTATION WITH EX-EMPLOYEES OF THE COMPANY. IT I S STATED THAT AT THAT TIME IT WAS BEYOND APPELLANTS CONTROL TO C OMPILE THE DETAILS AND SUBMIT THE SAME TO THE ASSESSING OFFICE R. REQUEST WAS MADE IN TERMS OF RULE 46 A FOR ENTERTAINING ADD ITIONAL EVIDENCES. THE SAME WERE CONFRONTED TO THE AO WHO O BJECTED TO SUCH ADDITIONAL EVIDENCE BY STATING THAT AS EVIDENT FROM THE CONTENTS OF THE ASSESSMENT ORDER, THE AO HAD SPECIF ICALLY REQUIRED ALL RELEVANT DETAILS IN SUPPORT OF THE DED UCTION CLAIMED. THE REASONS STATED FOR NON FURNISHING OF THEM IS NO T WORTHY OF CONSIDERATION AT THIS STAGE AS THERE WAS NO COMPELL ING REASONS FOR NON FURNISHING OF THEM AT THE TIME OF ASSESSMEN T PROCEEDINGS. IN THE COUNTER COMMENTS MADE, THE APPELLANT HAS REI TERATED THE SAME REASONS AS STATED ABOVE. 12. THE LD. CIT(A) AFTER CONSIDERING SUBMISSIONS OF THE ASSESSEE HAS CONFIRMED THE ORDER OF THE AO VIDE PARA-9 & 9.1 OF THE IMPUGNED ORDER WHICH IS AS UNDER: I HAVE CAREFULLY CONSIDERED THE ABOVE FACTS. IT IS NOTED THAT THE AO HAD SPECIFICALLY ASKED THE APPELLANT TO FURN ISH COPY OF CONTRACT AGREEMENT, REASONS FOR RETIREMENT ETC. HOW EVER, THE APPELLANT DID NOT RESPOND TO SUCH QUERRY. IT IS NOT UNDERSTANDABLE AS TO WHAT PREVENTED IT FROM STATING THE REASONS FO R RESIGNATION OR FROM FILING COPY OF AGREEMENT, THE REASONS FOR NON COMPLIANCE ARE STATED TO BE MIGRATION OF STAFF CONCERNED, MAINTENA NCE OF THE ACCOUNTS ON BPCS SYSTEM WHEREAS ACCOUNTS OF PFIZER LTD. WERE BEING MAINTAINED IN SUN SYSTEM. SUCH REASONS CANNOT BE CONSIDERED SATISFACTORY ENOUGH FOR NON COMPLIANCE. ACCORDINGLY, IT IS HELD THAT THE APPELLANT WAS NOT PREVENTED FRO M SUFFICIENT CAUSE IN NOT FURNISHING THE DETAILS WHICH ARE BEING FURNISHED AS ADDITIONAL EVIDENCE. THE REQUEST FOR ENTERTAINING T HEM U/R 46 A IS THEREFORE, REJECTED. EVEN DURING THE APPEAL, THE APPELLANT HAS MERELY SUBMITTED COPIES OF MINUTES OF BOARD MEETING AND TH E OPINION OF A SOLICITOR. BUT THE BASIC DETAILS SUCH AS REASONS FOR RETIREMENT, TERMS OF AGREEMENT, METHOD OF ARRIVING AT THE SAID AMOUNT ETC. WERE NOT ELABORATED IN ANY MANNER. THE DEDUCTION HA S BEEN CLAIMED U/S.37(1) AND ONUS IN THE MATTER IS PRIMARI LY ON THE ITA NO. 2585/M/2010 8 APPELLANT WHICH IT HAS FAILED TO DISCHARGE. ACCORDI NGLY, CONCLUSION DRAWN BY THE AO IS UPHELD. HENCE ASSESSEE IS IN FURTHER APPEAL BEFORE THE TRI BUNAL. 13. DURING THE COURSE OF HEARING, THE LD. AR SUBMI TTED THAT ASSESSEE COULD NOT FURNISH THE DETAILS OF CONTRACT ENTERED I NTO WITH THE MANAGING DIRECTOR AS THERE WERE CHANGE IN MANAGEMENT AND ALL THE RELEVANT PAPERS WERE NOT AVAILABLE. HE SUBMITTED THAT THE COMPENSA TION AMOUNT WAS PAID TO THE EX-MANAGING DIRECTOR ON ACCOUNT OF RESIGNING FR OM THE SERVICES OF THE ASSESSEE COMPANY ON ACCOUNT OF CHANGE IN MANAGEMENT . HE SUBMITTED THAT THE COMPENSATION PAID BY THE ASSESSEE WAS ALSO RECT IFIED BY THE SHAREHOLDERS IN THE ANNUAL GENERAL MEETING AS WELL. HE SUBMITTE D THAT THE AO MADE DISALLOWANCE OF THE CLAIM OF THE ASSESSEE MERELY BE CAUSE THE ASSESSEE COULD NOT FILE COPY OF CONTRACT ENTERED INTO WITH THE RET IRED MANAGING DIRECTOR. HE SUBMITTED THAT WHEN THE ASSESSEE WANTED TO FURNISH THE DETAILS BEFORE LD. CIT(A), LD. CIT(A) DID NOT CONSIDER THOSE DETAILS O N THE GROUND THAT THEY WERE ADDITIONAL DOCUMENTS AND THE ASSESSEE WAS NOT PREVENTED FOR ANY SUFFICIENT REASON TO PRODUCE THE SAME BEFORE THE AO . THE LD. AR REFERRED TO LETTER DT. 27.6.2011 WHICH CONTAINS COPY OF LETTER DT. 2.11.2009, LETTER DT. 4.2.2007 WHICH ADDRESSED TO LD. CIT(A) AND SUBMITTE D THAT ASSESSEE WANTED TO FURNISH THE SAID LETTERS AND ALSO COPY OF RESOLU TION EXPLAINING THE REASONS FOR PAYMENT OF COMPENSATION TO ITS EX-MANAGING DIRE CTOR SHRI TAPAN RAY. THE LD. CIT(A) HAD NOT ACCEPTED THE SAME STATING T HESE ARE ADDITIONAL EVIDENCES. . THE LD. AR RELYING ON THE DECISION O F HONBLE APEX COURT IN THE CASE OF SESSOON J. DAVID & CO. PVT. LTD., VS CIT (1 979) 10 CTR 383 SUBMITTED THAT THE RETRENCHMENT WAS HELD TO BE BUSINESS EXPEN DITURE AS THE SAME WAS STATED TO BE INCURRED BY THE ASSESSEE WHOLLY AND EX CLUSIVELY FOR ITS BUSINESS PURPOSE. HE SUBMITTED THAT THE ABOVE DISALLOWANCE BE DELETED BY CONSIDERING SAID ADDITIONAL DOCUMENTS WHICH THE ASS ESSEE WANTED TO PRODUCE BEFORE LD. CIT(A). ITA NO. 2585/M/2010 9 14. HOWEVER, THE LD. DEPARTMENTAL REPRESENTATIVE RE LIED ON THE ORDERS OF AUTHORITIES BELOW. HE SUBMITTED THAT ASSESSEE WAS ASKED TO PRODUCE COPY OF CONTRACT ENTERED INTO WITH ITS FORMER MANAGING DIRE CTOR BUT ASSESSEE FAILED TO PRODUCE THE SAME. HE SUBMITTED THAT ASSESSEE COULD PRODUCE COPY OF AGREEMENT TO CONSIDER AS TO WHETHER THE SAID COMPEN SATION WAS PAID BY THE ASSESSEE TO ITS FORMER MANAGING DIRECTOR IN ACCORDA NCE WITH CONTRACT ENTERED INTO. HE SUBMITTED THAT NO DETAILS WERE FURNISHED BY THE ASSESSEE BEFORE THE AO AND HENCE DISALLOWANCE MADE IS JUSTIFIED. 15. WE HAVE CAREFULLY CONSIDERED THE SUBMISSIONS OF THE LD. REPRESENTATIVES OF THE PARTIES AND ORDERS OF THE AU THORITIES BELOW. WE OBSERVE THAT THE AO HAS MADE DISALLOWANCE OF PAYME NT MADE BY THE ASSESSEE TO ITS MANAGING DIRECTOR OF RS. 76,15,000/ - AS ASSESSEE FAILED TO PRODUCE COPY OF CONTRACT ENTERED INTO AT THE TIME O F ASSESSMENT PROCEEDINGS. WE OBSERVE THAT ASSESSEE WANTED TO FILE CERTAIN ADD ITIONAL DOCUMENTS BEFORE LD. CIT(A) TO JUSTIFY PAYMENT MADE BY IT TO ITS FOR MER MANAGING DIRECTOR AS COMPENSATION BUT LD. CIT(A) REFUSED TO ENTERTAIN TH E SAID ADDITIONAL DOCUMENTS ON THE GROUND THAT THE ASSESSEE COULD NOT GIVE SATISFACTORY REASON FOR NON COMPLIANCE OF FURNISHING THOSE DETAILS BEFO RE THE AO. MOREOVER, THE LD. CIT(A) HAS ALSO STATED THAT ASSESSEE COULD NOT GIVEN THE DETAILS OF THE METHOD OF ARRIVING AT THE SAID AMOUNT OF COMPENSATI ON PAID BY IT TO ITS FORMER MANAGING DIRECTOR MR. TAPAN RAY. WE OBSERVE THAT T HE SAID DISALLOWANCE HAS BEEN CONFIRMED BY LD. CIT(A) ON THE GROUND THAT THE ASSESSEE COULD NOT FURNISH DETAILS BEFORE THE AUTHORITIES BELOW. CONS IDERING THE ABOVE FACTS AND IN THE INTEREST OF JUSTICE, WE CONSIDER IT PRUDENT TO RESTORE THIS ISSUE TO THE FILE OF THE AO FOR HIS FRESH CONSIDERATION WITH A DIRECT ION THAT THE ASSESSEE WILL FURNISH REQUISITE DETAILS BEFORE THE AO TO JUSTIFY THE AMOUNT PAID TO ITS FORMER MANAGING DIRECTOR AS COMPENSATION ON ACCOUNT OF TER MINATION OF THE CONTRACT WITH HIM. THE AO WILL CONSIDER THOSE DETAILS AND DE CIDE THE SAME IN ACCORDANCE WITH LAW AFTER GIVING DUE OPPORTUNITY OF HEARING TO THE ASSESSEE. WE MAY STATE THAT IF THE ASSESSEE FAILS TO FURNISH THE DETAILS BEFORE THE AO AS MAY BE REQUIRED BY HIM AND/OR DO NOT CO-OPERATE WIT H HIM, THE AO WILL ITA NO. 2585/M/2010 10 DECIDE THE ISSUE IN ACCORDANCE WITH LAW, ON THE BAS IS OF MATERIAL AVAILABLE BEFORE HIM. HENCE GROUND NO. 2 OF THE APPEAL IS ALL OWED FOR STATISTICAL PURPOSES. 16. THE GROUND NO. 3 OF THE APPEAL IS AS UNDER: THE CIT(A) ERRED IN CONFIRMING THE DISALLOWANCE O F DEDUCTION U/S. 80HHC 3.1 THE APPELLANTS SUBMIT THAT, SINCE PROFIT DECLAR ED BY THE ASSESSEE HAS INCREASED CONSEQUENT TO DISALLOWANCES MADE IN THE ASSESSMENT ORDER, DEDUCTION U/S. 80HHC SHOULD CONSEQUENTLY BE RECOMPUTED/ALLOWED ON THE BASIS OF PROFIT AS ASSESSEE 17. AT THE TIME OF HEARING, IT WAS SUBMITTED BY LD. AR THAT IT IS CONNECTED WITH GROUNDS NO. 1 & 2 OF THE APPEAL. HE SUBMITTED THAT BOTH THE GROUNDS I.E. GROUNDS NO. 1 & 2 IF ARE ALLOWED IN FAVOUR OF THE ASSESSEE, GROUND NO. 3 WILL BECOME INFRUCTUOUS. 18. SINCE WE HAVE DECIDED GROUND NO. 1 OF THE APPEA L IN FAVOUR OF THE ASSESSEE AND GROUND NO. 2 HAS BEEN RESTORED TO THE AO FOR HIS FRESH ADJUDICATION, WE DIRECT THE AO THAT IF GROUND NO. 2 IS DECIDED IN FAVOUR OF THE ASSESSEE, THE DEDUCTION ALLOWED U/S. 80HHC OF THE A CT WILL NOT HAVE ANY IMPACT. HOWEVER, IF GROUND NO. 2 IS DECIDED AGAINS T THE ASSESSEE, WE DIRECT THE AO THAT HE WILL RECOMPUTE THE DEDUCTION ALLOWAB LE TO THE ASSESSEE U/S. 80HHC OF THE ACT BY CONSIDERING SAID ADDITION. HE NCE GROUND NO. 3 OF THE APPEAL IS ALLOWED FOR STATISTICAL PURPOSES AS INDIC ATED ABOVE. 19. IN GROUND NO. 4 OF THE APPEAL, THE ASSESSEE HAS DISPUTED THE ORDER OF LD. CIT(A) IN CONFIRMING THE DISALLOWANCE OF DELAYE D PAYMENTS OF CONTRIBUTION TO PROVIDENT FUND, ESIC AND DLIF UNDER SECTIONS 43B/ 36(1)(VA) OF THE ACT. ITA NO. 2585/M/2010 11 20. THE AO HAS STATED THAT ASSESSEE DID NOT DEPOSIT EMPLOYEES CONTRIBUTION TO PROVIDENT FUND OF RS. 47,563/-, ESIC OF RS. 5,764/- WITHIN DUE DATE AND ACCORDINGLY DISALLOWED THE SAME AS PER SEC TION 36(1)(VA) OF THE ACT. THE AO FURTHER DISALLOWED A SUM OF RS. 1,490/- AS E MPLOYEES CONTRIBUTION TO DLIF AS THE SAME WAS PAID BEYOND DUE DATE ON THE GRO UND THAT IT IS A WELFARE FUND OF EMPLOYEES. BEING AGGRIEVED, ASSESS EE FILED APPEAL BEFORE THE FIRST APPELLATE AUTHORITY. 21. THE LD. CIT(A) VIDE HIS IMPUGNED ORDER HAS CONF IRMED THE ACTION OF THE AO AND PLACED RELIANCE ON THE DECISION OF KERAL A HIGH COURT IN THE CASE OF CIT VS SOUTH INDIA CORPORATION LTD. (2000) 108 TAXMA N 322. HENCE ASSESSEE IS IN FURTHER APPEAL BEFORE THE TRIBUNAL. 22. DURING THE COURSE OF HEARING, LD. AR REFERRED T O PAGE 25 AND 26 OF THE PAPER BOOK WHICH CONTAIN DETAILS OF PROVIDENT FUND PAYMENTS, DLIF CONTRIBUTION AND DETAILS OF ESIC. THE LD. AR CONCE DED THAT PAYMENT FOR THE MONTH OF FEBRUARY 2002 OF THE EMPLOYEES CONTRIBUTI ON TO PF AND ESIC COULD NOT BE PAID WITHIN DUE DATE. HOWEVER HE SUBMITTED THAT SAID PAYMENT WERE MADE BEFORE DUE DATE OF FILING THE RETURN. HE FURT HER SUBMITTED THAT LD. CIT(A) HAS CONFIRMED EMPLOYEES CONTRIBUTION AND A DDED TO THE INCOME OF THE ASSESSEE IN VIEW OF SEC. 36(1)(VA) READ WITH SE C. 2(24)(X) OF I.T. ACT. THE LD. AR SUBMITTED THAT SIMILAR ISSUE HAS BEEN CO NSIDERED BY MUMBAI BENCH IN ITA NO. 6847/MUM/2008 BY ITS ORDER DT. 28. 1.2010 IN THE CASE OF PIK PEN PVT. LTD. VS ITO AND THE TRIBUNAL BY FOLLOWING THE DECISION OF HONBLE APEX COURT IN THE CASE OF CIT VS ALOM EXTRUSION LTD . 319 ITR 306 HAS DELETED THE SAID DISALLOWANCE ON THE GROUND THAT AS PER SEC OND PROVISO TO SEC. 43B OF THE I.T. ACT IF THE PAYMENTS ARE MADE BEFORE DUE DAT E OF FILING OF RETURN, THE DEDUCTION IS TO BE ALLOWED. HE FURTHER SUBMITTED T HAT CONTRIBUTION TOWARDS DLIF IS THE EMPLOYEES WELFARE FUND CREATED BY THE A SSESSEE AND THE SAME SHOULD ALSO BE ALLOWED AS DEDUCTION AS THE PAYMENT WAS MADE BEFORE THE DUE DATE OF FILING OF RETURN. ON THE OTHER HAND, T HE LD. DEPARTMENTAL REPRESENTATIVE RELIED ON THE ORDER OF LD. CIT(A). HE SUBMITTED THAT PROVISO ITA NO. 2585/M/2010 12 TO SEC. 43B OF THE I.T. ACT IS NOT APPLICABLE IN RES PECT OF EMPLOYEES CONTRIBUTION TO PROVIDENT FUND/ ESIC. 23. WE HAVE CAREFULLY CONSIDERED THE SUBMISSIONS OF THE LD. REPRESENTATIVES OF THE PARTIES AND ORDERS OF THE AU THORITIES BELOW. WE HAVE ALSO GONE THROUGH THE ORDER OF THE CO ORDINATE BENC H DT. 28.1.2010 AND THE CASES CITED IN THE SAID ORDER OF ITAT. 24. IN RESPECT OF PAYMENT TO DLIF, EMPLOYEES WELFARE FUND, IT WAS POINTED OUT AT THE TIME OF HEARING THAT IT WAS A CONTRACTUA L FUND CREATED BY THE ASSESSEE AS AN EMPLOYEES WELFARE FUND AND THE CONT RIBUTION IS MADE TO IT. IT WAS POINTED OUT THAT IT IS NOT A STATUTORY FUND. I N VIEW OF ABOVE SUBMISSION AND IN THE ABSENCE OF ANY CONTRARY FACTS BROUGHT ON RECORD BY LD. DR, WE HOLD THAT THE PROVISIONS OF SEC. 36(1)(VA) OF THE I .T. ACT WILL NOT BE APPLICABLE TO THE CONTRIBUTION TO THE EMPLOYEES WELFARE FUND AND THEREFORE EVEN IF THE DEPOSIT IS MADE BY THE ASSESSEE TO THE ABOVE EMPLOY EES WELFARE FUND BEYOND THE DATE AS MAY BE MENTIONED IN THE SCHEME, THE SAM E CANNOT BE DISALLOWED. HENCE, WE DELETE THE ADDITION OF RS. 1,490/-. 25. HOWEVER, IN RESPECT OF EMPLOYEES CONTRIBUTION TO PROVIDENT FUND AND ESIC OF RS. 47,563/- AND RS. 5,764/- RESPECTIVELY, W E FIND SUBSTANCE IN THE SUBMISSION OF LD. DR. A SIMILAR ISSUE HAS BEEN CON SIDERED BY ITAT KOLKATTA BENCH IN ITA NO. 1255/KOL./2010 VIDE ORDER DT. 19.1 1.2010 IN WHICH ONE OF US IS A PARTY (JM) WHEREIN THE DECISION OF THE HONBLE APEX COURT IN THE CASE OF ALOM EXTRUSION (SUPRA) AS WELL AS OTHER DECISIONS O F THE HONBLE HIGH COURTS SPECIAL BENCH DECISION OF ITAT KOLKATTA HAVE BEEN C ONSIDERED AND HELD THAT IF THE CONTRIBUTION TO EMPLOYEES PROVIDENT FUND/ OR E SIC ARE MADE BEYOND THE DUE DATE, THE SAME COULD NOT BE ALLOWED UNDER THE P ROVISO OF SEC. 43B OF THE I.T. ACT AS IT DOES NOT APPLY TO EMPLOYEES CONTRIBU TION. THE RELEVANT PARTS OF THE ABOVE ORDER ARE AS UNDER: '5. DURING THE COURSE OF HEARING, THE LEARNED D.R. SUBMITTED THAT SECTION 36(1)(VA) READ WITH SECTION 2(24)(X) OF THE ACT PROVIDES THAT DUE DATE OF PAYMENT OF EMPLOY EES' CONTRIBUTION TO PROVIDENT FUND AND IF IT IS NOT PAI D WITHIN DUE ITA NO. 2585/M/2010 13 DATE, THE SAME CANNOT BE ALLOWED AS DEDUCTION IF IT IS PAID BELATEDLY. LEARNED D.R. SUBMITTED THAT SPECIAL BENC H, ITAT IN THE CASE OF ITC LTD. (SUPRA) HAS HELD THAT THE PROV ISIONS OF SECTION 43B OF THE ACT WILL NOT APPLY IN RESPECT OF PAYMENT OF EMPLOYEES' CONTRIBUTION TO PROVIDENT FUND. LEARNED D.R. FURTHER SUBMITTED THAT THE DECISION OF THE HON'BLE APEX COU RT IN THE CASE OF VINAY CEMENT LTD. ( SUPRA) DEALS WITH THE P ROVISIONS OF SECTION 43B OF THE ACT AND IN RESPECT OF EMPLOYEES' CONTRIBUTION TO PROVIDENT FUND, THE PROVISIONS OF SECTION 43B DO ES NOT APPLY. HE FURTHER SUBMITTED THAT THE DECISION OF THE HON'B LE DELHI HIGH COURT IN THE CASE OF AIMIL LTD. ( SUPRA) HAS ALSO BEE N DECIDED BY FOLLOWING THE DECISION OF VINAY CEMENT LTD. (SUP RA). HE FURTHER SUBMITTED THAT THE ONLY ISSUE DECIDED ON TH OSE APPEALS WERE WHETHER AMOUNT PAID ON ACCOUNT OF PF AFTER DUE DATE ARE ALLOWABLE IN VIEW OF SECTION 43B READ WITH SECTION 36(1)(VA) OF THE ACT. HE FURTHER SUBMITTED THAT IT IS NOWHERE DE CIDED AS TO WHETHER BELATED PAYMENT OF EMPLOYEES' CONTRIBUTION TO PROVIDENT FUND PAID IS ALLOWABLE IF IT IS PAID AFTE R DUE DATE BUT BEFORE DUE DATE OF FILING OF RETURN. 6. ON THE OTHER HAND, LEARNED A.R. SUPPORTED THE OR DER OF THE LEARNED CIT(A) AND ALSO PLACED RELIANCE ON THE AFORESAID DECISIONS AS RELIED BEFORE THE LEARNED CIT(A). BESI DES ABOVE, THE LEARNED A.R. ALSO REFERRED THE DECISION OF THE HON'BLE DELHI HIGH COURT IN THE CASE OF CIT V. P.M. ELECTRONICS L TD. AIT 2008 - 397 - HC. 7. WE HAVE HEARD THE LEARNED REPRESENTATIVES OF THE PARTIES AND HAVE CONSIDERED THE ORDERS OF THE AUTHO RITIES BELOW. WE HAVE ALSO CONSIDERED THE CASES CITED BY THE LEAR NED REPRESENTATIVES OF THE PARTIES IN SUPPORT OF THEIR SUBMISSIONS. WE OBSERVE THAT THERE IS NO DISPUTE TO THE FACT THA T ASSESSEE HAD PAID EMPLOYEES' CONTRIBUTION TO PROVIDENT FUND AFTER THE DUE DATE. WE OBSERVE THAT THE ABOVE ISSUE AS TO WHETHER THE EMPLOYEES' CONTRIBUTION TO PROVIDENT FUND IS ALSO S UBJECT TO THE PROVISIONS OF SECTION 43B OF THE ACT OR NOT. IN THIS RESPECT WE CONSIDER IT NECESSARY TO STATE THE RELEVANT PROVISI ONS OF SECTION 36(1)(VA ) AND RELEVANT CLAUSES OF SECTION 43B OF T HE ACT WHICH ARE AS UNDER : 36. (1) THE DEDUCTIONS PROVIDED FOR IN THE FOLLOWIN G CLAUSES SHALL BE ALLOWED IN RESPECT OF THE MATTERS DEALT WITH THEREIN, IN COMPUTING THE INCOME REFERRED TO IN SEC TION 28 (I)** ** ** (IA)** ** ** ITA NO. 2585/M/2010 14 (IB)** ** ** (IIA )** ** ** ( III )** ** ** ( IIIA )** ** ** (VA) ANY SUM RECEIVED BY THE ASSESSEE FROM ANY OF H IS EMPLOYEES TO WHICH THE PROVISIONS OF SUB-CLAUSE (X) OF CLAUSE (24) OF SECTION 2 APPLY, IF SUCH SUM IS CREDITED BY THE ASSESSEE TO THE EMPLOYEE'S ACCOUNT IN THE RELEVANT FUND OR F UNDS ON OR BEFORE THE DUE DATE. EXPLANATION.FOR THE PURPOSES OF THIS CLAUSE, 'DUE DATE' MEANS THE DATE BY WHICH THE ASSESSEE IS REQUIRED AS AN EMPLOYER TO CREDIT AN EMPLOYEE'S CONTRIBUTION TO TH E EMPLOYEE'S ACCOUNT IN THE RELEVANT FUND UNDER ANY ACT, RULE, O RDER OR NOTIFICATION ISSUED THERE UNDER OR UNDER ANY STANDI NG ORDER, AWARD, CONTRACT OF SERVICE OR OTHERWISE. 43B. NOTWITHSTANDING ANYTHING CONTAINED IN ANY OTHE R PROVISION OF THIS ACT, A DEDUCTION OTHERWISE ALLOWABLE UNDER THI S ACT IN RESPECT OF )** ** ** (B)ANY SUM PAYABLE BY THE ASSESSEE AS AN EMPLOYER B Y WAY OF CONTRIBUTION TO ANY PROVIDENT FUND OR SUPERANNUATIO N FUND OR GRATUITY FUND OR ANY OTHER FUND FOR THE WELFARE OF EMPLOYEES, OR )** ** ** )** ** ** )** ** ** )** ** ** SHALL BE ALLOWED (IRRESPECTIVE OF THE PREVIOUS YEAR IN WHICH THE LIABILITY TO PAY SUCH SUM WAS INCURRED BY THE ASSES SEE ACCORDING TO THE METHOD OF ACCOUNTING REGULARLY EMPLOYED BY H IM) ONLY IN COMPUTING THE INCOME REFERRED TO IN SECTION 28 OF T HAT PREVIOUS YEAR IN WHICH SUCH SUM IS ACTUALLY PAID BY HIM : PROVIDED THAT NOTHING CONTAINED IN THIS SECTION SHALL APPLY IN RELATION TO ANY SUM WHICH IS ACTUALLY PAID BY THE A SSESSEE ON OR BEFORE THE DUE DATE APPLICABLE IN HIS CASE FOR FURN ISHING THE RETURN OF INCOME UNDER SUB-SECTION (1) OF SECTION 1 39 IN RESPECT OF THE PREVIOUS YEAR IN WHICH THE LIABILITY TO PAY SUCH SUM WAS INCURRED AS AFORESAID AND THE EVIDENCE OF SUCH PAYM ENT IS FURNISHED BY THE ASSESSEE ALONG WITH SUCH RETURN.' ITA NO. 2585/M/2010 15 8. FROM THE ABOVE IT EMERGES THAT THE TERM 'DUE DAT E' AS APPEARING IN SECTION 36(1)(VA) READ WITH EXPLANATIO N SPECIFIES THE DUE DATE AS THE DATE BY WHICH THE ASSESSEE IS REQUI RED AS AN EMPLOYER TO CREDIT AN EMPLOYEE'S CONTRIBUTION UNDER THE EMPLOYEES A/C TO THE RELEVANT FUND. AS REGARDS THE TERM 'DUE DATE' AS APPEARING IN SECTION 36(1)(VA ), THE EXPLANATION TO SECTION 36(1)(VA) SPECIFIES THE 'DUE DATE' AS THE 'DATE BY WHICH THE ASSESSEE IS REQUIRED AS AN EMPLOYER TO CREDIT AN EM PLOYEE'S CONTRIBUTION TO THE EMPLOYEE'S ACCOUNT IN THE RELEV ANT FUND UNDER ANY ACT, RULE, ORDER OR NOTIFICATION ISSUED THEREUN DER OR UNDER ANY STANDING ORDER, AWARD, CONTRACT OF SERVICE OR OTHER WISE.' THE TERM 'DUE DATE' AS SPECIFIED IN THE EXPLANATION TO SECTI ON 36(1)(VA) DOES NOT REFER TO THE DUE DATE FIXED FOR FILING THE RETU RN OF INCOME UNDER SECTION 139(1). HENCE THE 'DUE DATE' AS FIXED FOR F ILING THE RETURN OF INCOME UNDER SECTION 139(1) CANNOT BE READ INTO THE EXPLANATION TO SECTION 36(1)(VA). THE 'DUE DATE' FOR CREDITING ANY SUM RECEIVED BY THE ASSESSEE FROM HIS EMPLOYEES AS CONTRIBUTIONS TO WARDS ANY PROVIDENT FUND OR SUPERANNUATION FUND OR ANY FUND F OR THE WELFARE OF THE EMPLOYEES BY THE EMPLOYER-ASSESSEE TO THE EM PLOYEE'S ACCOUNT IN THE RELEVANT FUND OR FUNDS MUST BE THE O NE SPECIFIED IN THE EXPLANATION TO SECTION 36(1)(VA) AND NOT THE 'D UE DATE' FOR FILING THE RETURN OF INCOME UNDER SECTION 139(1). IN THE CASE BEFORE US THERE IS NO DISPUTE THAT THE ASSESSEE COMPANY HA S NEITHER CREDITED THE IMPUGNED CONTRIBUTION RECEIVED BY IT F ROM ITS EMPLOYEES TO THE EMPLOYEES' ACCOUNT IN THE RELEVANT FUND NOR IT HAS DONE SO ON OR BEFORE THE DUE DATE SPECIFIED IN THE EXPLANATION TO SECTION 36(1)(VA) AND HENCE WE ARE OF THE CONSIDERE D VIEW THAT THE CLAIM OF THE ASSESSEE FOR DEDUCTION CANNOT SUCCEED. FURTHER SECTION 43B, WE ARE OF THE CONSIDERED VIEW, DOES NOT APPLY IN RESPECT OF THE EMPLOYEES CONTRIBUTION FOR THE FOLLOWING REASON S : (I)SECTION 43B OPENS WITH A NON OBSTANTE CLAUSE WHI CH MEANS THAT IT CONTROLS THE OPERATION OF OTHER PROVISIONS OF TH E INCOME-TAX ACT IN THAT SECTION 43B WILL HAVE OVERRIDING EFFECT NOTWITHSTANDING OTHER PROVISIONS UNDER WHICH A DEDU CTION MAY OTHERWISE BE ALLOWABLE. (II)THE OPENING WORDS OF SECTION 43B MAKE IT CLEAR THAT THE SAID SECTION WOULD HAVE OVERRIDING EFFECT AND APPLY ONLY WHEN A DEDUCTION IS OTHERWISE ALLOWABLE UNDER THE INCOME-TA X ACT. IN OTHER WORDS, THE VERY APPLICABILITY OF THE NON OBST ANTE CLAUSE WOULD COME INTO PLAY ONLY WHEN A DEDUCTION IS OTHER WISE ALLOWABLE UNDER THE INCOME-TAX ACT. THUS SECTION 43 B CANNOT BE PRESSED INTO SERVICE TO ALLOW A DEDUCTION WHICH IS OTHERWISE NOT ALLOWABLE UNDER THE INCOME-TAX ACT INCLUDING SE CTION 36(1)(VA) THEREOF. IN ORDER TO AVAIL THE BENEFIT OF SECTION 43B UPON ACTUAL PAYMENT, THE ASSESSEE MUST SHOW THAT TH E ITA NO. 2585/M/2010 16 DEDUCTION CLAIMED BY IT UNDER SECTION 43B IS OTHERW ISE ALLOWABLE UNDER THE PROVISIONS OF THE INCOME-TAX ACT INCLUDING SECTION 36(1)(VA) THEREOF. (III)SECTION 43B BARS DEDUCTION, WHICH IS OTHERWISE ALLOWABLE UNDER THE INCOME-TAX ACT, OF ANY SUM REFERRED TO IN CLAUSE S (A) TO (F) UNLESS IT IS ACTUALLY PAID. THUS THE FACTUM OF ACTU AL PAYMENT OF ANY SUM REFERRED TO IN CLAUSES (A) TO (F) IS RELEVA NT ONLY WHEN THE DEDUCTION IS OTHERWISE ALLOWABLE UNDER THE INCO ME-TAX ACT. THERE ARE SEVERAL PROVISIONS IN THE INCOME-TAX ACT, WHICH SET OUT THE CONDITIONS FOR THE ALLOWABILITY OF DEDUCTIO NS OF THOSE VERY SUMS WHICH ARE REFERRED TO IN SECTION 43B. THO SE PROVISIONS WOULD BE RENDERED OTIOSE IF A VIEW WAS T O BE TAKEN THAT DEDUCTIONS OF THE AFORESAID SUMS WOULD BE ALLO WED AS AND WHEN THEY ARE ACTUALLY PAID IRRESPECTIVE OF THE FAC T THAT THEY ARE NOT OTHERWISE ALLOWABLE UNDER THE INCOME-TAX ACT. T HE PLAIN AND UNAMBIGUOUS LANGUAGE USED IN SECTION 43B MAKES IT ABSOLUTELY CLEAR THAT THE ALLOWABILITY OF DEDUCTION OF ANY SUM REFERRED TO IN CLAUSES (A) TO (F ) UPON ACTUAL PAYM ENT IS RESTRICTED TO THOSE DEDUCTIONS ONLY, WHICH ARE OTHE RWISE ALLOWABLE UNDER THE INCOME-TAX ACT. THUS THE FACTUM OF ACTUAL PAYMENT BY ITSELF IS NOT SUFFICIENT TO SUCCESSFULLY CLAIM A DEDUCTION UNDER SECTION 43B, WHICH IS OTHERWISE NOT ALLOWABLE UNDER THE INCOME-TAX ACT. IN OTHER WORDS, ALL THOSE DEDUCTIONS, WHICH ARE OTHERWISE NOT ALLOWABLE UNDER THE INCOME-T AX ACT, CANNOT BE ALLOWED EVEN ON ACTUAL PAYMENT UNDER SECT ION 43B. (IV)THE PROVISO TO SECTION 43B CARVES OUT AN EXCEPT ION AND ALLOWS DEDUCTION IN RESPECT OF ANY SUM REFERRED TO IN CLAU SES (A) TO (F) WHICH IS ACTUALLY PAID BY THE ASSESSEE ON OR BEFORE THE DUE DATE FOR FURNISHING THE RETURN OF INCOME UNDER SECTION 1 39(1) IN RESPECT OF THE PREVIOUS YEAR IN WHICH THE LIABILITY TO PAY SUCH SUM WAS INCURRED. HOWEVER, THE PROVISO APPLIES ONLY TO THOSE MATTERS WHICH ARE SPECIFICALLY REFERRED TO IN SECTI ON 43B TO WHICH IT HAS BEEN ADDED. PROVISO TO SECTION 43B CAN NOT THEREFORE BE MADE APPLICABLE TO THOSE DEDUCTIONS WH ICH ARE OTHERWISE NOT ALLOWABLE UNDER THE INCOME-TAX ACT. 9. FROM THE ABOVE WE ARE OF THE VIEW THAT A CLAIM/D EDUCTION WHICH IS OTHERWISE NOT ALLOWABLE UNDER SECTION 36(1 )(VA) OR FOR THAT MATTER ANY OTHER PROVISION OF THE INCOME-TAX ACT CAN NEITHER BE CONSIDERED NOR IS ALLOWED UNDER SECTION 43B. THE OP ENING WORDS OF SECTION 43B, NAMELY 'NOTWITHSTANDING ANYTHING CONTA INED IN ANY OTHER PROVISION OF THIS ACT A DEDUCTION OTHERWISE A LLOWABLE UNDER THIS ACT. ..... MAKE IT AMPLY CLEAR THAT SECTION 43 B COMES INTO PLAY ONLY WHEN DEDUCTION IS OTHERWISE ALLOWABLE UNDER TH E INCOME-TAX ACT. THE PURPOSE OF SECTION 43B IS (I) TO BAR THE D EDUCTION OF THE SUMS REFERRED TO THEREIN UNLESS THEY ARE ACTUALLY P AID AND (II) NOT TO ALLOW DEDUCTION WHICH IS OTHERWISE NOT ALLOWABLE UN DER THE INCOME- ITA NO. 2585/M/2010 17 TAX ACT. THEREFORE, SECTION 43B CANNOT BE PRESSED I NTO SERVICE IN A CASE LIKE THE ONE BEFORE US WHERE DEDUCTION IS NOT OTHERWISE ALLOWABLE UNDER SECTION 36(1)(VA). MOREOVER, SECTIO N 43B IS A GENERAL PROVISION WHICH MERELY BARS DEDUCTION OF SP ECIFIED SUMS UNLESS THEY ARE ACTUALLY PAID AND WHEREAS PROVISION S OF SECTION 36(1)(VA) SPECIFICALLY DEAL WITH DEDUCTION IN RESPE CT OF PAYMENT OF EMPLOYEES CONTRIBUTION TO THE PROVIDENT FUND. THERE FORE, THE PROVISIONS OF SECTION 36(1)(VA), BEING SPECIAL PROV ISIONS ENACTED TO DEAL WITH SPECIFIC MATTER WOULD, IN OUR VIEW, PREVA IL OVER THE GENERAL PROVISIONS OF SECTION 43B ON THE PRINCIPLE THAT A GENERAL CLAUSE DOES NOT EXPLAIN TO THOSE THINGS THAT HAVE B EEN PREVIOUSLY PROVIDED FOR SPECIFICALLY. 10. WE HAVE GONE THROUGH THE DECISIONS (CITED SUPRA ) IN WHICH IT IS HELD THAT EMPLOYEES' CONTRIBUTION TO PR OVIDENT FUND WOULD BE ELIGIBLE FOR DEDUCTION IF IT IS PAID BEFOR E DUE DATE PRESCRIBED UNDER SECTION 139(1) FOR FILING THE RETU RN OF INCOME. HOWEVER, WE DO NOT FIND ANY SUCH OBSERVATION IN THE SAID CASES (CITED SUPRA) THAT DEDUCTION UNDER SECTION 43B WOUL D HAVE TO BE ALLOWED EVEN IF THE DEDUCTIONS IN RESPECT OF WHICH PAYMENTS HAVE BEEN MADE IN TERMS OF SECTION 43B ARE OTHERWISE NOT ALLOWABLE UNDER THE INCOME-TAX ACT. IN FACT IT HAS NOT EVEN THE QUESTION RAISED IN THOSE DECISIONS AS TO WHETHER DEDUCTION W HICH IS NOT OTHERWISE ALLOWABLE UNDER THE INCOME-TAX ACT, COULD AT ALL BE ALLOWED ON PAYMENT BASIS UNDER SECTION 43B. IT IS WE LL-SETTLED PRINCIPLE THAT A JUDGMENT MUST BE READ AS A WHOLE A ND THE OBSERVATIONS IN THE JUDGMENT HAVE TO BE CONSTRUED I N THE LIGHT OF THE QUESTION RAISED BEFORE THE COURT. IT IS THE JUD ICIAL PRINCIPLE FOUND UPON READING THE JUDGMENT AS A WHOLE IN THE L IGHT OF THE QUESTION RAISED BEFORE THE COURT WHICH FORMS PRECED ENT AND NOT PARTICULAR WORDS OR PHRASES. 11. IN VIEW OF THE ABOVE WE HOLD THAT THE ASSESSEE I S NOT ENTITLED TO DEDUCTION UNDER SECTION 36(1)(VA) OF TH E EMPLOYEES' CONTRIBUTION TO PROVIDENT FUND WHICH WAS PAID AFTER THE DUE DATE AS SPECIFIED IN EXPLANATION TO SECTION 36(1)(VA) OF TH E ACT AS SECTION 43B CANNOT BE PRESSED INTO SERVICE BECAUSE SECTION 43B COMES INTO PLAY ONLY WHEN A DEDUCTION IS OTHERWISE ALLOWABLE U NDER THE INCOME-TAX ACT. HENCE, WE CONFIRM THE ACTION OF THE ASSESSING OFFICER BY REVERSING ORDER OF THE LEARNED CIT(A) AN D ACCORDINGLY ALLOW GROUND NO. 1 TAKEN BY THE DEPARTMENT.' 26. THE ABOVE ORDER OF ITAT KOLKATA BENCH HAS BEEN FOLLOWED BY ITAT KOLKATA BENCH IN THE CASE OF BENGAL CHEMICALS & PHA RMACEUTICALS LTD. IN ITA NO. 1680/KOL/2010 ORDER DT. 7.1.2011 REPORTED IN (2 011) 11 TAXMAN 328(KOL) ITA NO. 2585/M/2010 18 AND REVENUES APPEAL WAS ALLOWED BY REVERSING THE O RDER OF LD. CIT(A) TO HOLD THAT EMPLOYEES CONTRIBUTION TO PROVIDENT FUND AND ESIC COULD NOT BE ALLOWED U/S. 43B BY TAKING IT TO BE EMPLOYERS CONTR IBUTION. 27. IN VIEW OF THE ABOVE, DECISIONS OF SPECIAL BENCH ITAT KOLKATA (SUPRA) AND CO-ORDINATE BENCHES ITAT KOLKATA (SUPRA) AND FO R THE REASONS STATED THEREIN ABOVE, WE HOLD THAT LD. CIT(A) HAS RIGHTLY CONFIRMED THE SUM OF RS. 47,563/- TOWARDS EMPLOYEES PROVIDENT FUND CONTRIBU TION AND RS. 5,764/- TOWARDS ESIC CONTRIBUTION AS THE SAME WAS NOT PAID W ITHIN DUE DATE AS SPECIFIED IN EXPLANATION TO SEC. 36(1)(VA) OF THE I .T. ACT. 28. HENCE GROUND NO. 4 OF THE APPEAL TAKEN BY THE A SSESSEE IS ALLOWED IN PART. 29. IN THE RESULT, APPEAL FILED BY THE ASSESSEE IS A LLOWED IN PART. ORDER PRONOUNCED ON THIS 28 TH DAY OF SEPTEMBER, 2011 SD/- SD/- ( B. RAMAKOTAIAH) (B.R. MITTAL ) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, DATED 28 TH SEPTEMBER, 2011 RJ COPY TO : 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT-CONCERNED 4. THE CIT(A)-CONCERNED 5. THE DR C BENCH TRUE COPY BY ORDER ASSTT. REGISTRAR, I.T.A.T, MUMBAI ITA NO. 2585/M/2010 19 DATE INITIALS 1. DRAFT DICTATED ON: 18.9.2011 SR. PS/PS 2. DRAFT PLACED BEFORE AUTHOR: 20.09.2011 SR. PS/PS 3. DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER: JM/AM 4. DRAFT DISCUSSED/APPROVED BY SECOND MEMBER: JM/AM 5. APPROVED DRAFT COMES TO THE SR. PS/PS: SR. PS/PS 6. ORDER PRONOUNCED ON: SR. PS/PS 7. FILE SENT TO THE BENCH CLERK: 8. DATE ON WHICH FILE GOES TO THE HEAD CLERK: SR. PS/PS 9. DATE ON WHICH FILE GOES TO AR 10. DATE OF DISPATCH OF ORDER: