RAY ENGINEERING LTD., MUMBAI V. DCIT-15(3)(1), MUMBAI

ITA 2638/MUM/2016

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 8395 (ITAT-MUMBAI)
• Duration Of Justice: 10 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 01-03-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Assessment Year: 2012-2013
• Appeal Filed On: 11-04-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ARJU GARODIA
• Assessee Lawyers: ASHOK J PATIL
• Keywords: Question of law
• Section: 43B; 143(3); 139

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL 'C' BENCH, MUMBAI BEFORE SHRI JASON P. BOAZ, ACCOUNTANT MEMBER AND SHRI RAM LAL NEGI, JUDICIAL MEMBER ITA NO. 2638/MUM/2016 (ASSESSMENT YEAR: 2012-13) M/S. RAY ENGINEERING LTD. VS. DY. C.I.T. 15(3)(1) PLOT NO. 2, RAY COMPOUND POST IIT MARKET, POWAI MUMBAI 400076 ROOM NO. 451, 4 TH FLOOR AAYAKAR BHAVAN, M.K. ROAD MUMBAI 400020 PAN AADCR3859C APPELLANT RESPONDENT APPELLANT BY: SHRI ASHOK J. PATIL RESPONDENT BY: MS. ARJU GARODIA DATE OF HEARING: 08.02.2017 DATE OF PRONOUNCEMENT: 01.03.2017 O R D E R PER JASON P. BOAZ, A.M. THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF THE CIT(A)- 24, MUMBAI DATED 25.01.2016 FOR A.Y. 2012-13. 2. THE FACTS OF THE CASE, BRIEFLY STATED, ARE AS UNDER : - 2.1 THE ASSESSEE, A COMPANY ENGAGED IN CONSTRUCTION WORK, FILED ITS RETURN OF INCOME FOR A.Y. 2012-13 ON 22.09.2012 DE CLARING TOTAL INCOME OF ` 15,80,66,050/-. THE RETURN WAS PROCESSED UNDER SECT ION 143(1) OF THE INCOME TAX ACT, 1961 (IN SHORT 'THE ACT') AND THE C ASE WAS SUBSEQUENTLY TAKEN UP FOR SCRUTINY. THE ASSESSMENT WAS COMPLETED UNDER SECTION 143(3) OF THE ACT VIDE ORDER DATED 31.01.2015 WHEREIN THE ASSESSEES INCOME UNDER NORMAL PROVISIONS WAS DETERMINED AT ` 16,34,64,440/- IN VIEW OF THE FOLLOWING DISALLOWANCES: - (I) UNDER SECTION 2(24)(X) R.W.S 36(1)(VA) ON ACCOU NT ` 28,70,807/- OF DELAYED PAYMENTS OF EPF (II) INTEREST ON DELAYED PAYMENT OF TDS ` 71,043/- (III) DISALLOWANCE UNDER SECTION 43B ` 39,16,035/- ITA NO. 2638/MUM/2016 M/S. RAY ENGINEERING LTD. 2 2.2 AGGRIEVED BY THE ORDER OF ASSESSMENT FOR A.Y. 2 012-13 DATED 31.01.2015, THE ASSESSEE PREFERRED AN APPEAL BEFORE THE CIT(A)-24, MUMBAI, WHICH WAS DISMISSED VIDE THE IMPUGNED ORDER DATED 25.01.2016. 3.1 AGGRIEVED BY THE ORDER OF THE CIT(A)-24, MUMBAI DATED 25.01.2016 THE ASSESSEE HAS PREFERRED THIS APPEAL RAISING THE FOLL OWING GROUNDS: - 01. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THE COMMISSIONER OF INCOME TAX (APPEALS 24 ERRED IN CON FIRMING THE DISALLOWANCE MADE BY THE ASSESSING OFFICER WITH REGARD TO CONTRIBUTION OF EMPLOYEES PROVIDENT FUND OF RS.28,7 0,807/- PAID BEFORE THE DUE DATE OF FILING THE INCOME TAX R ETURN. 02. THE COMMISSIONER OF INCOME TAX (APPEALS) 24 FAI LED TO APPRECIATE THAT THE ISSUE WAS COVERED IN FAVOUR OF THE APPELLANT BY THE JURISDICTIONAL HIGH COURT IN THE C ASE OF CIT V. HINDUSTAN ORGANIC CHEMICALS LTD. ITXA 399/12 DATED 27-06- 2014, BUT INSTEAD RELIED ON THE DECISION IN THE CAS E OF CIT V. GUJARAT STATE ROAD TRANSPORT CORPORATION 366 ITR 17 0 (GUJ.) 03. THE APPELLANT CRAVES LEAVE TO ADD AMEND OR DELE TE ANY OF THE GROUNDS OF APPEAL. 3.2 ALL THESE GROUNDS (SUPRA) PERTAIN TO THE SINGLE ISSUE OF CHALLENGING THE ORDER OF THE LEARNED CIT(A) IN UPHOLDING THE DISALL OWANCE OF ` 28,70,807/- MADE BY THE ASSESSING OFFICER (AO) ON ACCOUNT OF DE LAYED PAYMENT OF CONTRIBUTION TO EPF IN ACCORDANCE WITH PROVISIONS O F SECTION 2(24)(X) R.W.S. 36(1) OF THE ACT RELYING ON THE JUDGEMENT OF THE HO N'BLE GUJARAT HIGH COURT IN THE CASE OF CIT VS. GUJARAT STATE ROAD TRANSPORT CORPORATION (366 ITR 170) (GUJ). IT IS SUBMITTED THAT THE SAID AMOUNT OF EPF WERE PAID BY THE ASSESSEE BEFORE THE DUE DATE OF FILING OF THE RETUR N OF INCOME FOR A.Y. 2012013. ACCORDING TO THE LEARNED A.R. OF THE ASSES SEE THIS ISSUE IN QUESTION, I.E. PAYMENT OF CONTRIBUTION TO EMPLOYEES PROVIDENT FUND (EPF) IS COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISIO N OF THE HON'BLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. HINDUSTAN ORGANIC CHEMICALS LTD. (2014) 366 ITR 1) (BOM). 3.3 PER CONTRA, THE LEARNED D.R. FOR REVENUE PLACED STRONG RELIANCE ON THE DECISION OF THE LEARNED CIT(A) ON THIS ISSUE. 3.4.1 WE HAVE HEARD THE RIVAL CONTENTIONS AND CAREF ULLY CONSIDERED THE MATERIAL ON RECORD, INCLUDING THE JUDICIAL PRONOUNC EMENTS CITED AND ITA NO. 2638/MUM/2016 M/S. RAY ENGINEERING LTD. 3 PLACED RELIANCE UPON. IT IS NOT DISPUTED THAT THE F ACT SITUATION IS THAT THOUGH THE CONTRIBUTION OF EPF WAS NOT PAID WITHIN THE PERIOD SPECIFIED UNDER THE PF ACT; THE SAME HAS BEEN PAID BEFORE THE DUE DATE OF FILING OF THE RETURN OF INCOME IN THE CASE ON HAND FOR A.Y. 2 012-13. IN THIS FACTUAL MATRIX, WE ARE OF THE VIEW THAT THIS ISSUE IS SQUAR ELY COVERED BY THE DECISION OF THE JURISDICTIONAL HIGH COURT IN THE CA SE OF CIT VS. HINDUSTAN ORGANICS CHEMICALS LTD. (2014) (366 ITR 1) (BOM). I N ITS JUDGEMENT THEIR LORDSHIPS, WHILE DISMISSING REVENUES APPEAL ON THI S ISSUE, HELD THAT THE DEDUCTION CLAIMED ON THIS COUNT BY THE ASSESSEE COU LD NOT HAVE BEEN DISALLOWED. THE SECOND PROVISO TO SECTION 43B OF TH E ACT WAS DELETED W.E.F. 01.04.2004 AND SIMULTANEOUSLY THE FIRST PROVISO WAS ALSO AMENDED BRINGING ABOUT UNIFORMITY IN DEDUCTION CLAIMED TOWA RDS TAX, DUTY, CESS AND FEE ON THE ONE HAND AND CONTRIBUTION TO EPF, SU PERANNUATION FUND AND OTHER WELFARE FUNDS ON THE OTHER. IN COMING TO THIS FINDING THE HON'BLE BOMBAY HIGH COURT APPLIED THE DECISION OF THE HON'B LE APEX COURT IN THE CASE OF CIT VS. ALOM EXTRUSIONS LTD. (2009) 319 ITR 306 (SC). 3.4.2 ON SIMILAR FACTS AS IN THE CASE ON HAND, WE F IND THAT THIS ISSUE OF THE ASSESSEES CLAIM FOR DEDUCTION OF CONTRIBUTION TO E PF UNDER SECTION 43B OF THE ACT IS SQUARELY COVERED BY THE DECISION OF THE HON'BLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. HINDUSTAN ORGANICS CHE MICALS LTD. (SUPRA) WHEREIN AT PARAS 5 TO 9 OF ITS ORDER, WHILE DISMISS ING REVENUES APPEAL, HAS HELD AS UNDER: - 5. WE FIND NO MERIT IN THE AFORESTATED CONTENTION. SECTION 43B OF THE INCOME TAX ACT 1961 WAS INSERTED IN THE ACT WITH EF FECT FROM 1ST APRIL 1984 BY WHICH THE MERCANTILE SYSTEM OF ACCOUNTING W ITH REGARD TO TAX, DUTY AND CONTRIBUTION TO WELFARE FUNDS STOOD D ISCONTINUED AND UNDER SECTION 43B OF THE ACT, IT BECAME MANDATORY F OR THE ASSESSEES TO ACCOUNT FOR THE AFORESTATED ITEMS NOT ON A MERCA NTILE BASIS BUT ON A CASH BASIS. THIS SITUATION CONTINUED BETWEEN 1ST AP RIL 1984 AND 1ST APRIL 1988 WHEN PARLIAMENT AGAIN AMENDED SECTION 43 B AND INSERTED THE FIRST PROVISO THERETO WHICH INTER ALIA LAID DOW N THAT IN THE CONTEXT OF ANY SUM PAYABLE BY THE ASSESSEE BY WAY OF TAX, D UTY, CESS OR FEE, IF PAID BY THE ASSESSEE EVEN AFTER THE CLOSING OF T HE ACCOUNTING YEAR BUT BEFORE THE DATE OF FILING OF THE RETURN OF INCO ME, THE ASSESSEE WOULD BE ENTITLED TO THE DEDUCTION UNDER SECTION 43 B ON ACTUAL PAYMENT BASIS AND SUCH DEDUCTION WOULD BE ADMISSIBL E FOR THAT ACCOUNTING YEAR. THIS PROVISO HOWEVER DID NOT APPLY TO CONTRIBUTIONS ITA NO. 2638/MUM/2016 M/S. RAY ENGINEERING LTD. 4 MADE BY THE ASSESSEES TO THE LABOUR WELFARE FUNDS. IN VIEW THEREOF, BY THE FINANCE ACT 1988, THE SECOND PROVISO CAME TO BE INSERTED WHICH READ AS UNDER :- PROVIDED FURTHER THAT NO DEDUCTION SHALL, IN RESPE CT OF ANY SUM REFERRED TO IN CLAUSE (B), BE ALLOWED UNLESS SUCH S UM HAS ACTUALLY BEEN PAID DURING THE PREVIOUS YEAR ON OR B EFORE THE DUE DATE AS DEFINED IN THE EXPLANATION BELOW CLAUSE (VA ) OF SUB- SECTION (1) OF SECTION 36. THEREAFTER, THE SAID SECOND PROVISO WAS FURTHER AME NDED VIDE FINANCE ACT 1989 WITH EFFECT FROM 1ST APRIL 1989 WH ICH READ AS UNDER:- PROVIDED FURTHER THAT NO DEDUCTION SHALL, IN RESPE CT OF ANY SUM REFERRED TO IN CLAUSE (B), BE ALLOWED UNLESS SUCH SUM HAS ACTUALLY BEEN PAID IN CASH OR BY ISSUE OF A CHEQUE OR DRAFT OR BY ANY OTHER MODE ON OR BEFORE THE DUE DATE AS DEFINED IN THE EXPLANATION BELOW CLAUSE (VA) OF SUB - SECTION (1) OF SECTION 36, AND WHERE SUCH PAYMENT HAS BEEN MADE OTHERWISE THAN IN CASH, THE SUM HAS BEEN REALISED WITHIN FIFTEEN DAYS FROM THE DUE DATE. 6. ON A PLAIN READING OF THE ABOVE PROVISOS, IT BEC AME EX-FACIE CLEAR THAT THE ASSESSEES EMPLOYERS WERE ENTITLED TO DED UCTIONS ONLY IF THE CONTRIBUTIONS TO ANY FUND FOR THE WELFARE OF THE EM PLOYEES STOOD CREDITED ON OR BEFORE THE DUE DATE GIVEN IN THE REL EVANT ACT. 7. HOWEVER, THE SECOND PROVISO ONCE AGAIN CREATED F URTHER DIFFICULTIES FOR THE ASSESSEES EMPLOYERS. THEREFORE, INDUSTRY ONCE AGAIN MADE REPRESENTATIONS TO THE MINISTRY OF FINANCE WHO, AFT ER TAKING COGNIZANCE OF THE DIFFICULTIES, INSERTED AN AMENDME NT VIDE FINANCE ACT, 2003 WHICH CAME INTO FORCE WITH EFFECT FROM 1S T APRIL 2004. IN OTHER WORDS, WITH EFFECT FROM 1ST APRIL 2004, TWO C HANGES WERE MADE IN SECTION 43B VIZ. DELETION OF THE SECOND PROVISO TO SECTION 43B AND FURTHER AMENDMENT IN THE FIRST PROVISO WHICH READS AS UNDER:- PROVIDED THAT NOTHING CONTAINED IN THIS SECTION SH ALL 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 139 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. THEREFORE, THE AMENDMENTS INTRODUCED BY THE FINANCE ACT, 2003 PUT ON PAR THE BENEFIT OF DEDUCTIONS OF TAX, DUTY, CESS AND FEE ON THE ONE HAND WITH CONTRIBUTIONS TO VARIOUS EMPLOYEES WELFA RE FUNDS ON THE OTHER. 8. THE SECTION REFERRED TO ABOVE VIZ. SECTION 43B A ND THE AMENDMENTS THERETO CAME UP FOR CONSIDERATION BEFORE THE HON'BL E SUPREME COURT IN THE CASE OF COMMISSIONER OF INCOME TAX V/S ALOM EXTRUSIONS LTD., REPORTED IN (2009) 319 ITR 306 (SC) WHEN THE SUPREME COURT INTER ALIA HELD THAT THE AMENDMENTS TO THE SA ID SECTION BROUGHT ABOUT BY THE FINANCE ACT, 2003 WITH EFFECT FROM 1ST APRIL 2004 WERE ITA NO. 2638/MUM/2016 M/S. RAY ENGINEERING LTD. 5 RETROSPECTIVE IN NATURE AND WOULD OPERATE FROM 1ST APRIL 1988. THE ITAT, RELYING UPON THE AFORESAID JUDGMENT OF THE SU PREME COURT, HAS DISMISSED THE REVENUE'S APPEAL AND CONFIRMED THE OR DER PASSED BY THE CIT (APPEALS). IN THIS VIEW OF THE MATTER AND I N VIEW OF THE FACT THAT THE SUPREME COURT HAS EXPRESSLY HELD THAT THE AMENDMENTS TO SECTION 43B THAT WERE BROUGHT ABOUT BY THE FINANCE ACT, 2003 ARE RETROSPECTIVE IN NATURE, WE FIND THAT THE ITAT WAS FULLY JUSTIFIED IN DELETING THE ADDITION OF RS.1,82,77,138/- ON ACCOUN T OF DELAYED PAYMENT OF PROVIDENT FUND OF EMPLOYEES' CONTRIBUTIO N. WE THEREFORE FIND THAT NO SUBSTANTIAL QUESTION OF LAW ARISES ON THIS COUNT AS SOUGHT TO BE CONTENDED BY MR MALHOTRA ON BEHALF OF THE REV ENUE. 9. EVEN OTHERWISE, WE FAIL TO UNDERSTAND HOW THIS D EDUCTION COULD HAVE BEEN DISALLOWED TO THE ASSESSEE. ADMITTEDLY, T HE ASSESSMENT YEAR IN QUESTION IS 2006-07. THE SECOND PROVISO TO SECTION 43B QUOTED ABOVE WAS DELETED WITH EFFECT FROM 1ST APRIL 2004 A ND SIMULTANEOUSLY THE FIRST PROVISO WAS ALSO AMENDED B RINGING ABOUT A UNIFORMITY IN DEDUCTIONS CLAIMED TOWARDS TAX, DUTY, CESS AND FEE ON THE ONE HAND AND CONTRIBUTION TO THE EMPLOYEES' PRO VIDENT FUND, SUPERANNUATION FUND AND OTHER WELFARE FUNDS ON THE OTHER. THESE DEDUCTIONS BEING CLAIMED IN THE RETURN OF INCOME FI LED FOR THE ASSESSMENT YEAR 2006-07, THE AMENDMENTS TO SECTION 43B WHICH CAME INTO FORCE WITH EFFECT FROM 1ST APRIL 2004 WOU LD HAVE CLEARLY APPLIED TO THE ASSESSEE'S CASE. IN THIS VIEW OF THE MATTER ALSO, WE FIND THAT THE ITAT WAS FULLY JUSTIFIED IN DELETING THE A DDITION OF RS.1,82,77,138/- ON ACCOUNT OF DELAYED PAYMENT OF P ROVIDENT FUND OF EMPLOYEES' CONTRIBUTION. 3.4.3 RESPECTFULLY FOLLOWING THE DECISION OF THE HO N'BLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. HINDUSTAN ORGANICS CHE MICALS LTD. (2014) (366 ITR 1) (BOM), WE REVERSE THE ORDERS OF THE LEA RNED CIT(A) ON THIS ISSUE AND DIRECT THE AUTHORITIES BELOW TO ALLOW THE ASSES SEES CLAIM FOR DEDUCTION ON ACCOUNT OF CONTRIBUTIONS TO EMPLOYEES PROVIDENT FUND (EPF) AMOUNTING TO ` 28,70,807/- UNDER SECTION 43B OF THE ACT WHICH, ADM ITTEDLY, HAVE BEEN PAID BEFORE THE DUE DATE FOR FILING THE RETURN OF I NCOME FOR A.Y. 2012-13. CONSEQUENTLY, ASSESSEES GROUNDS OF APPEAL 1 TO 3 A RE ALLOWED. 4. IN THE RESULT, THE ASSESSEES APPEAL FOR A.Y. 2012- 13 IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 1 ST MARCH, 2017. SD/ - SD/ - (RAM LAL NEGI) (JASON P. BOAZ) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI, DATED: 1 ST MARCH, 2017 ITA NO. 2638/MUM/2016 M/S. RAY ENGINEERING LTD. 6 COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) -24, MUMBAI 4. THE CIT - 15, MUMBAI 5. THE DR, C BENCH, ITAT, MUMBAI BY ORDER //TRUE COPY// ASSISTANT REGISTRAR ITAT, MUMBAI BENCHES, MUMBAI N.P.