M/S. Axis Motors Private Limited, Kanpur V. Deputy Commissioner of Income Tax-6, Kanpur

ITA 289/LKW/2019

• Counselvise Citation: [2019] 116 COUNSELVISE.COM (IT) 6714 (ITAT-LUCKNOW)
• Duration Of Justice: 2 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-07-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2014-2015
• Appeal Filed On: 13-05-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Business expenditure; Rule 8D
• Section: 271(1)(c); 43B; 143(3); 14A; 6; 28; 139

Judgement Text

I.T.A. NO.289/LKW/2019 ASSESSMENT YEAR:2014-15 1 IN THE INCOME TAX APPELLATE TRIBUNAL LUCKNOW BENCH SMC, LUCKNOW BEFORE SHRI T. S. KAPOOR, ACCOUNTANT MEMBER I.T.A. NO.289/LKW/2019 ASSESSMENT YEAR:2014-15 M/S AXIS MOTORS PVT. LTD., 127W-1, 68-69, SAKET NAGAR, KANPUR. PAN:AAHCA 0208 J VS. DY.C.I.T.-6, KANPUR. (APPELLANT) (RESPONDENT) O R D E R THIS APPEAL HAS BEEN FILED BY THE ASSESSEE AGAINST THE ORDER OF LEARNED CIT(A)-II, KANPUR DATED 07/03/2019 PERTAINI NG TO ASSESSMENT YEAR 2014-15. 2. THE ASSESSEE HAS TAKEN VARIOUS GROUNDS OF APPEAL HOWEVER, THE CRUX OF GROUNDS OF APPEAL IS THE ACTION OF LEARNED CIT(A ) BY WHICH HE HAS CONFIRMED A PENALTY AMOUNTING TO RS.25,600/- WHICH THE ASSESSING OFFICER HAD IMPOSED U/S 271(1)(C) OF THE ACT. 3. LEARNED A. R., EXPLAINING THE FACTS OF THE CASE, SUBMITTED THAT ASSESSING OFFICER, DURING THE ASSESSMENT PROCEEDING S, HAD OBSERVED THAT THE ASSESSEE HAD DEPOSITED CERTAIN EMPLOYEES CONTRI BUTION TO PF AND ESI BEYOND THE PRESCRIBED PERIOD AS PROVIDED IN THE REL EVANT ACT AND THEREFORE, HE DISALLOWED THE SAME. IT WAS SUBMITTED THAT THE ASSESSEE DID NOT FILE APPEAL AGAINST THE ORDER OF THE ASSESSING OFFICER A S THE AMOUNT WAS VERY APPELLANT BY SHRI P. K. KAPOOR, C. A. RESPONDENT BY S MT. ALKA SINGH, D.R. DATE OF HEARING 29/07/2019 DATE OF PRONOUNCEMENT 31/07/2019 I.T.A. NO.289/LKW/2019 ASSESSMENT YEAR:2014-15 2 SMALL. HE FURTHER SUBMITTED THAT NON FILING OF THE APPEAL AGAINST THE ASSESSMENT ORDER DOES NOT MEAN THAT ASSESSEE WAS LI ABLE FOR PENALTY U/S 271(1)(C) OF THE ACT AS THE ISSUE WAS ENTIRELY COVE RED IN FAVOUR OF THE ASSESSEE AS THE ASSESSEE HAD DEPOSITED THE AMOUNT B EFORE FILING OF RETURN OF INCOME AND THEREFORE, AS PER THE JUDGMENT OF HON 'BLE ALLAHABAD HIGH COURT IN THE CASE OF SAGUN FOUNDRY (P.) LTD. VS. CI T IN IT APPEAL NO. 87 OF 2006, THE ADDITION WAS NOT WARRANTED AND THEREFORE, THE PENALTY WAS ALSO NOT WARRANTED. REGARDING THE DATE OF DEPOSIT OF PF AND ESI, LEARNED A. R. TOOK US TO THE ANNEXURE FORMING PART OF AUDIT REPOR T U/S 44AB OF THE ACT AND OUR SPECIFIC ATTENTION WAS INVITED TO PAGE NO. 1 WH ERE THE CHARTS SHOWING THE DUE DATE OF DEPOSIT AND ACTUAL DATE OF DEPOSITS WAS PLACED. IN VIEW OF THE ABOVE, IT WAS PRAYED THAT THE PENALTY SHOULD BE DELETED. 4. LEARNED D. R., ON THE OTHER HAND, SUPPORTED THE ORDER OF THE AUTHORITIES BELOW. 5. I HAVE HEARD THE RIVAL PARTIES AND HAVE GONE THR OUGH THE MATERIAL PLACED ON RECORD. I FIND THAT IT IS AN UNDISPUTED F ACT THAT PENALTY WAS IMPOSED FOR DELAY IN MAKING PAYMENT OF EPF AND ESI. IT IS ALSO AN UNDISPUTED FACT THAT SUCH DEPOSITS WERE MADE BEFORE THE DUE DATE OF FILING OF INCOME TAX RETURNS, AS IS APPARENT FROM PAGE 1 O F THE PAPER BOOK WHERE THE LAST DATE OF MAKING PAYMENT IS 17/04/2014 WHERE AS THE DUE DATE FOR FILING THE INCOME TAX RETURN WAS 31/10/2014. HON'B LE ALLAHABAD HIGH COURT IN THE CASE OF SAGUN FOUNDRY (P.) LTD. VS. CIT IN I T APPEAL NO. 87 OF 2006, VIDE JUDGMENT DATED 21/12/2016, HAS HELD THAT IF TH E ASSESSEE DEPOSITS THE ESI AND EPF BEFORE THE DUE DATE OF FILING OF RETURN OF INCOME, THE DISALLOWANCE U/S 36(1)(VA) CANNOT BE MADE. THE OPER ATIVE PART OF THE JUDGMENT OF HON'BLE ALLAHABAD HIGH COURT, AS CONTAI NED FROM PARA 17 TO 30, ARE REPRODUCED BELOW: I.T.A. NO.289/LKW/2019 ASSESSMENT YEAR:2014-15 3 17. WE FIND THAT WITH RESPECT TO EMPLOYEES CONTRIB UTION TO PROVIDENT FUND, AS TO WHETHER DISALLOWABLE OR NOT W ITH REFERENCE TO SECTION 36(1)(VA) READ WITH SECTION 43B, A SIMILAR QUESTION CAME UP FOR CONSIDERATION BEFORE GUJRAT HIGH COURT IN COMMISSIONER OF INCOMETAX VS GUJRAT STATE ROAD TRANSPORT CORPORATI ON, (2014) 366 ITR 170 . THEREIN ASSESSEE COLLECTED RS. 51,06,02,712/- FROM ITS EMPLOYEES TOWARDS PROVIDENT FUND CONTRIBUTION BUT DEPOSITED RS. 21,16,61,582/- WITH PROVIDENT FUND TRUST. THUS THERE WAS A SHORT FALL OF RS. 24,89,41 ,130/-. THIS AMOUNT OF SHORT FALL WAS TREATED BY ASSESSING OFFICER AS I NCOME OF ASSESSEE VIDE SECTION 2(24)(X) READ WITH SECTION 36(1)(VA) O F ACT 1961. ASSESSING OFFICER ALSO ADDED RS. 1,93,55,580/- BEIN G THE AMOUNT OF SHORT FALL TOWARDS EMPLOYERS CONTRIBUTORY PROVIDENT FUND AND DISALLOWED THE SAME UNDER SECTION 43B OF ACT 1961. HE ALSO DISALLOWED THE SAID AMOUNT OF RS. 1,93,55,580/- FRO M EXPENSES CLAIMED BY ASSESSEE FOR THE A.Y. IN QUESTION I.E. 2 005-06 AS PER PROVISIONS UNDER SECTION 43B. DISSATISFIED WITH A SSESSMENT ORDER, ASSESSEE PREFERRED APPEAL BEFORE CIT(A) WHO VIDE OR DER DATED 25.06.2009 PARTLY ALLOWED THE SAME AND DELETED DISALLOWANCE OF RS. 24,89,41,130/- (SHORT FALL IN EMPLOYEES CONTRI BUTION TO PROVIDENT FUND) AND RS. 1,93,55,580/- (SHORT FALL IN EMPLOYER S CONTRIBUTION TO PROVIDENT FUND) OBSERVING THAT EMPLOYEES CONTRIBU TION/EMPLOYERS CONTRIBUTION WAS DEPOSITED BEFORE FILING RETURN UND ER SECTION 139(1) OF ACT 1961 FOR THE RELEVANT PERIOD. REVENUE, I N ITS TURN, PREFERRED APPEAL BEFORE TRIBUNAL. RELYING ON JUDGMENT IN COMMISSIONER OF INCOMETAX VS ALOM EXTRUSIONS LTD. (SUPRA) , TRIBUNAL DISMISSED APPEAL AND CONFIRMED ORDER PASSED BY CIT( A). THAT IS HOW MATTER CAME BEFORE HIGH COURT IN APPEAL. COURT CONS IDERED FOLLOWING QUESTION, POSED IN PARA 7.01, READS AS UNDER:- S H O R T Q U ES TI O N W HI C H I S PO S ED FO R C O N S I D ER ATI O N O F THI S C O U R T I S W ITH R ESPEC T TO TH E D I S ALLO W AN C E O F TH E AM O U NT BEI N G TH E EMPLO YEES C O N TR I BU T I O N TO TH E PF AC C O U N T/ E S I C O N TR I BU TI O N W HI C H A D M I TTED LY W HI C H TH E C O N C ER N ED AS S ES S EE D I D N O T DEPO S I T W ITH TH E PF D EPAR TMEN T / E S I D EPAR T MEN T W ITHI N D U E D AT E U N D ER TH E PF A C T AN D / O R TH E E S I A C T. 18. GUJRAT HIGH COURT REFERRED TO SECTION 2(24)(X) AND FOUND THAT ANY SUM RECEIVED BY ASSESSEE (EMPLOYER) FROM H IS EMPLOYEES AS CONTRIBUTIONS TO ANY PROVIDENT FUND OR SUPERANNU ATION FUND OR ANY FUND SET UP UNDER ACT, 1948, OR ANY OTHER FUND FOR WELFARE OF SUCH EMPLOYEES, CONSTITUTE INCOME. HOWEVER, SECTION 36 O F ACT 1961 PROVIDES FOR DEDUCTION IN COMPUTING INCOME REFERRED TO IN SECTION 28. THE RELEVANT PROVISION OF SECTION 36 APPLICABLE TO THE CASE BEFORE GUJRAT HIGH COURT WAS SECTION 36(1)(VA) WITH WHICH WE ARE ALSO CONCERNED. IT ENTITLES AN ASSESSEE FOR DEDUCTION IN COMPUTING INCOME I.T.A. NO.289/LKW/2019 ASSESSMENT YEAR:2014-15 4 REFERRED TO IN SECTION 28 WITH RESPECT TO ANY SUM R ECEIVED BY ASSESSEE (EMPLOYER) FROM HIS EMPLOYEE TO WHICH SECT ION 2(24)(X) APPLY, IF SUCH SUM IS CREDITED BY ASSESSEE TO EMPLO YEES ACCOUNTS IN THE RELEVANT FUND BEFORE DUE DATE I.E. DATE PRESCRI BED IN THE RELEVANT STATUTE APPLICABLE TO THE CONCERNED FUND. COURT ALS O NOTICED THAT SECTION 43B IS IN RESPECT TO CERTAIN DEDUCTIONS AND APPLIES ONLY ON ACTUAL PAYMENT. IT HELD THAT AMENDMENT WAS MADE BY D ELETION OF SECOND PROVISO OF SECTION 43B ONLY, BUT NO CORRESP ONDING AMENDMENT WAS MADE UNDER SECTION 36(1)(VA). IT SAID: I T I S R EQ UI R ED TO BE N OTED TH AT AS S U C H TH ER E I S N O AM EN D MEN T I N S EC TI O N 3 6 ( 1 )( V A ) AN D EV EN TH E E X PLAN ATI O N TO S EC T I O N 3 6 ( 1 ) ( V A ) I S N O T D ELETE D AN D I S S T ILL O N TH E S TATU TE AN D I S R EQ UI R ED TO BE C OMPL I ED W ITH . M ER ELY BEC AU S E W ITH R ESPEC T TO TH E EMPLO YER S C O N TR I BU TI O N TH E S E C O N D P R O V I S O TO S EC T I O N 4 3 B W HI C H PR O V I DED TH AT EV EN W ITH R ESPEC T TO TH E EMPLO YER S C O N TR I BU T I O N ( S EC T I O N 4 3 B ( B) ) , TH E A SS ES S EE W AS R EQ UI R ED TO CR ED I T TH E AM O U NT I N TH E R ELEV AN T FU N D U N D ER TH E PF A C T O R AN Y O TH ER FU N D FO R TH E W ELFAR E O F TH E E MPLO YEES O N O R BEFO R E TH E D U E D ATE U N D ER TH E R ELEV AN T A C T, I S D ELETED , I T C AN N O T B E S AI D TH AT S EC T I O N 3 6 ( 1 )( V A ) H AS BE EN D ELETED AN D / O R AM EN DED . 19. THAT IS HOW GUJRAT HIGH COURT HELD THAT SECTION 43B WOULD NOT BE ATTRACTED IN A CASE WHERE DISPUTE RELATES TO EMPLOYEES CONTRIBUTION ONLY. SECTION 43B WOULD BE CONFINED ON LY TO EMPLOYERS CONTRIBUTION. IT FURTHER SAID: THEREFORE, WITH RESPECT TO THE EMPLOYEES CONTRIBUT ION RECEIVED BY TH E AS S ES S EE I F TH E AS S E SS EE H AS N O T CR ED I TED TH E S A I D S U M TO TH E EMPLO YEES AC C O U NT I N TH E R ELEV AN T FU N D O R FU N D S O N O R BEFO R E TH E D U E D ATE MEN TI O N ED I N TH E E X PLAN ATI O N TO S E C TI O N 3 6 ( 1 )( V A ), TH E AS S ES S EE S H ALL N O T BE E N TI TLED TO DED U C TI O N S O F S U C H AM O U NT I N C OMPU TI N G TH E I N C OM E R EFE RR ED TO I N S EC TI O N 2 8 O F TH E A C T. 20. GUJRAT HIGH COURT DISTINGUISHED JUDGMENT OF COMMISSIONER OF INCOMETAX VS ALOM EXTRUSIONS LTD. (SUPRA) ON THE GROUND THAT THEREIN ACTUAL DISPUTE RELATES TO EMPL OYERS CONTRIBUTION AND WHETHER AMENDMENT IN SECTION 43B BY FINANCE ACT , 2003 WOULD OPERATE RETROSPECTIVE OR NOT, SUPREME COURT HAD NO OCCASION TO CONSIDER DEDUCTION WITH REFERENCE TO SECTION 36(1) (VA). FOR THE SAME REASON GUJRAT HIGH COURT DISSENTED WITH THE JU DGMENTS OF RAJASTHAN HIGH COURT IN COMMISSIONER OF INCOMETAX VS UDAIPUR DUGDH UTPADAK SAHAKARI SANGH LTD., (2014) 3 66 ITR 163, PUNJAB & HARYANA HIGH COURT IN COMMISSIONER OF INCOMETAX VS HEMLA EMBROIDERY MILLS P. LTD., (2014 ) 366 ITR 167, HIMACHAL PRADESH HIGH COURT IN COMMISSIONER OF I.T.A. NO.289/LKW/2019 ASSESSMENT YEAR:2014-15 5 INCOMETAX VS NIPSO PLOYFABRIKS LTD., (2013) 350 IT R 327 AND KARNATAKA HIGH COURT IN COMMISSIONER OF INCOMETAX VS SABRI ENTERPRISES, (2008) 298 ITR 141 . 2.1 KARNATAKA HIGH COURT HAD AN OCCASION TO CONSIDE R, WHETHER IT SHOULD DISSENT WITH THE VIEW TAKEN IN THE EARLIE R JUDGMENTS AND FOLLOW THE VIEW TAKEN BY GUJRAT HIGH COURT IN COMMISSIONER OF INCOMETAX VS GUJRAT STATE ROAD TRANSPORT CORPORATI ON (SUPRA) AND THIS OCCASION CAME IN ESSAE TERAOKA P. LTD. VS DEPUTY COMMISSIONER OF INCOMETAX, (2014) 366 ITR 408 . DISPUTE RELATES TO A.Y. 2008-09. ASSESSEE FILED RET URN ON 26.09.2008. RETURN WAS PROCESSED UNDER SECTION 143( 1) AND THEREAFTER ON SCRUTINY, NOTICE UNDER SECTION 143(2 ) WAS ISSUED. ASSESSING OFFICER COMPLETED ASSESSMENT BY ORDER DAT ED 24.12.2010 UNDER SECTION 143(3) DISALLOWING RS. 12,51,737/- UN DER SECTION 36(1)(VA) AND ALSO DISALLOWING RS. 1,04,621/- UNDER SECTION 14A READ WITH RULE 8D. IN APPEAL, CIT (A) REVERSED FINDINGS O F ASSESSING OFFICER BUT ON APPEAL PREFERRED BY REVENUE, TRIBUNA L RESTORED ASSESSING OFFICERS ORDER AND THAT IS HOW MATTER CAME TO KARNATAKA HIGH COURT. THE QUESTION UP FOR CONSIDERATION WAS, WHETHER TRIBUNAL WAS JUSTIFIED IN AFFIRMING FINDING OF A SSESSING OFFICER AND DENYING ASSESSEES CLAIM OF DEDUCTION OF EMPLOYEE S CONTRIBUTION TO PF/ESI ALLEGING THAT THE PAYMENT WAS NOT MADE BY APP ELLANT IN ACCORDANCE WITH THE PROVISIONS OF SECTION 36(1)(V A) OF ACT 1961. THE ASSESSEES COUNSEL RELIED ON EARLIER JUDGMENT O F KARNATAKA HIGH COURT IN COMMISSIONER OF INCOMETAX VS SPECTRUM CONSULTANTS P. LTD., (2014) 2 ITROL 622 WHILE COUNSEL FOR REVENUE ATTEMPTED TO PURSUE TO TAKE A DIFFERENT V IEW FOLLOWING DECISION OF GUJRAT HIGH COURT. THE DIVISION BENCH JUDGMENT DELIVERED BY HONBLE DILIP B. BHOSALE, (AS HIS LORD SHIP THEN WAS) HELD, IF THE CONTRIBUTION OF EMPLOYEES FUND IS DEPOSITED WITHIN DUE DATE THE ASSESSEE IS STRAIGHTAWAY ENTITLED FOR DEDUCTION UNDER SECTION 36(1)(VA). HOWEVER SECTION 43B PROVIDES FOR CERTAI N DEDUCTIONS ALLOWABLE ONLY ON ACTUAL PAYMENT. IT GIVES AN EXTENS ION TO THE EMPLOYER TO MAKE PAYMENT OF CONTRIBUTION TO PROVIDE NT FUND OR ANY OTHER FUND, TILL DUE DATE APPLICABLE FOR FURNISHING OF RETURN UNDER SECTION 139(1) OF ACT 1961, IN RESPECT OF PREVIOUS YEAR IN WHICH LIABILITY TO PAY SUCH SUM WAS INCURRED, AND EVIDENC E OF SUCH PAYMENT IS FURNISHED BY ASSESSEE ALONG WITH SUCH RETURN. CO URT THEN SAID: I N S H O R T, TH I S P ROVI S I ON S TA T E S , NOTW I TH S TA ND I NG A NY TH I NG C ONTA I NE D I N A NY OTH E R P ROVI S I ON C ONTA I NE D I N TH I S A C T , A DED U C T I O N O TH ER W I S E ALLO W ABLE I N THI S A C T I N R ESPEC T O F AN Y S U M PAYABL E BY TH E AS S ES S EE AS AN EMPLO YE R BY W AY O F C O N TR I B UTI O N TO AN Y FU N D S U C H AS P R O V I D EN T FU N D S H ALL BE ALLO W ED I F I T I S PAI D O N O R BEFO R E TH E D U E D ATE AS C O N TEM PLATE D U N DE R S EC TI O N 1 3 9 ( 1 ) O F TH E I N C OM E- T AX A C T. T H I S P ROVI S I ON I.T.A. NO.289/LKW/2019 ASSESSMENT YEAR:2014-15 6 H A S NOTH I NG TO DO W I TH TH E C ONS E Q UE NC E S , PR O V I DED FO R U N DE R TH E PF A C T/ PF S C H EM E/ E S I A C T, FO R N O T DEPO S I T I N G TH E C O N TR I BU TI O N O N O R BEFO R E TH E D U E D ATES TH ER EI N . 22. IT ALSO SAID THAT THE WORD CONTRIBUTION USED I N CLAUSE (B) OF SECTION 43B OF ACT 1961 MEANS THE CONTRIBUTION OF E MPLOYER AND EMPLOYEE, BOTH, AND THAT BEING SO, IF CONTRIBUTION IS DEPOSITED ON OR BEFORE DUE DATE FOR FURNISHING RETURN OF INCOME UND ER SUB-SECTION (1) OF SECTION 139 OF ACT 1961, EMPLOYER IS ENTITLE D FOR DEDUCTION. 23. THOUGH IN A SHORT JUDGMENT, BUT PUNJAB & HARYANA HI GH COURT IN COMMISSIONER OF INCOMETAX VS HEMLA EMBROIDERY MILLS (P.) LTD., (SUPRA) NOT ONLY FOLLOWED COMMISSIONER OF INCOMETAX VS ALOM EXTRUSIONS LTD. (SUPRA) BUT ALSO ITS OWN EARLIER JUDGMENT IN COMMISSIONER OF INCOMETAX VS RAI AGRO INDUSTRIES LTD., (2011) 334 ITR 122 , TO HOLD THAT SECTION 43B SHALL APPLY TO BOTH 'CONTRIBUTIONS' I.E. EMPLOYERS' AND EMPLOYEES'. 24. KERALA HIGH COURT IN RECENT JUDGMENT IN COMMISSIONER OF INCOMETAX VS MERCHEM LTD., (2015) 378 ITR 443 , HAS FOLLOWED THE DECISION OF GUJRAT HIGH COURT IN COMMISSIONER OF INCOMETAX VS GUJRAT STATE ROAD TRANSPORT CORPORA TION (SUPRA) AND DISSENTED WITH THE OTHERWISE JUDGMENTS OF RAJAS THAN HIGH COURT IN COMMISSIONER OF INCOMETAX VS STATE BANK OF BIKANER AND JAIPUR, (2014) 363 ITR 70 , KARNATAKA HIGH COURT IN COMMISSIONER OF INCOMETAX VS SPECTRUM CONSULTANTS INDIA P. LTD. (SUPRA) AND BOMBAY HIGH COURT IN COMMISSIONER OF INCOMETAX VS GHATGE PATIL TRANSPORTS LTD., (2 014) 368 ITR 749 . 25. BEFORE FOLLOWING A PARTICULAR VIEW WHEN THERE I S DIVERGENCE IN VIEWS OF DIFFERENT HIGH COURTS, WE FIND IT APPROPRI ATE TO EXAMINE SUPREME COURT JUDGMENT IN COMMISSIONER OF INCOMETAX VS ALOM EXTRUSIONS LTD. (SUPRA) TO FIND OUT WHETHER IT CAN BE CONFINED ONLY IN RESPECT TO EMPLOYERS' CONTRIBUTIO N OR IS APPLICABLE TO BOTH 'CONTRIBUTIONS', WHETHER BY EMPLOYER OR EMPLOY EE. 26. THE QUESTION, WHETHER BENEFIT UNDER SECTION 43B , AS A RESULT OF AMENDMENT OF FINANCE ACT, 2003, IS RETROSPECTIVE OR NOT, CAME TO BE CONSIDERED IN COMMISSIONER OF INCOMETAX VS ALOM EXTRUSIONS LTD. (SUPRA) . COURT CONSIDERED THE INTENT, PURPOSE AND OBJECT IN THE HISTORICAL BACK DROP OF INSERTION OF SECTION 43B AND ITS PROGRESS BY WAY OF VARIOUS AMENDMENTS. REFERRING S ECTION 2(24)(X) IT SAID, INCOME IS DEFINED UNDER SECTION 2(24) WHI CH INCLUDES PROFITS AND GAINS. FURTHER IN CLAUSE (X) OF SECTION 2(24) A NY SUM RECEIVED BY ASSESSEE FROM EMPLOYEES AS 'CONTRIBUTIONS' TO ANY P ROVIDENT FUND/SUPERANNUATION FUND OR ANY FUND SET UP UNDER A CT 1948, OR ANY I.T.A. NO.289/LKW/2019 ASSESSMENT YEAR:2014-15 7 OTHER FUND FOR WELFARE OF SUCH EMPLOYEES CONSTITUTE INCOME'. THIS IS THE REASON WHY EVERY ASSESSEE/EMPLOYER WAS ENTITLED TO DEDUCTION EVEN PRIOR TO APRIL, 1, 1984, KEEPING BOOKS ON MERC ANTILE SYSTEM OF ACCOUNTING, AS A BUSINESS EXPENDITURE, BY MAKING PR OVISION IN HIS BOOKS OF ACCOUNT IN THAT REGARD. ASSESSEE WAS CAPAB LE OF KEEPING MONEY WITH HIM AND JUST BY MENTIONING IN ACCOUNTS, WAS ABLE TO CLAIM DEDUCTION AS BUSINESS EXPENSES. SECTION 43B W AS INSERTED TO CHECK THIS PRACTICE AND IT RESULTED IN DISCONTINUIN G MERCANTILE SYSTEM OF ACCOUNTING WITH REGARD TO TAX, CONTRIBUTIONS ETC . WITH INDUCTION OF SECTION 43B AN ASSESSEE COULD CLAIM DEDUCTION ON AC TUAL PAYMENT BASIS. BY FINANCE ACT, 1988 PARLIAMENT INSERTED FIR ST PROVISO W.E.F. 01.04.1988 WHICH INTER ALIA PROVIDES THAT ANY SUM P AYABLE BY ASSESSEE BY WAY OF TAX, DUTY, CESS OR FEE, IF PAYME NT IS MADE AFTER CLOSING OF ACCOUNTING YEAR BUT BEFORE DATE OF FILIN G OF RETURN UNDER SECTION 139(1), ASSESSEE WOULD BE ENTITLED TO DEDUC TION ON ACTUAL PAYMENT BASIS. THIS PROVISO DID NOT INCLUDE WITHIN ITS AMBIT, CONTRIBUTIONS UNDER LABOUR WELFARE STATUTES. BY FIN ANCE ACT, 1988, SECOND PROVISO THUS SECOND PROVISO WAS FURTHER AMEN DED BY FINANCE ACT, 1989 W.E.F. 01.04.1989. 27. COURT HELD THAT ASSESSEE/EMPLOYER THUS WOULD BE ENTITLED TO DEDUCTION ONLY IF CONTRIBUTION STANDS CREDITED ON O R BEFORE DUE DATE GIVEN IN THE ACT 1952 OR ACT 1948. SECOND PROVISO CREATED DIFFICULTIES, INASMUCH AS UNDER ACT, 1981, DUE DATE WAS AFTER THE DATE OF FILING OF RETURNS AND THUS INDUSTRIES MADE REPRESENTATIONS TO THE MINISTRY OF FINANCE. COURT, LOOKING TO THE HIST ORY OF AMENDMENTS HELD, IT IS EVIDENT THAT SECTION 43B, WHEN ENACTED IN 1984, COMMENCES WITH A NON OBSTANTE CLAUSE. THE UNDERLYIN G OBJECT BEING TO DISALLOW DEDUCTIONS CLAIMED MERELY BY MAKING A B OOK ENTRY BASED ON THE MERCANTILE SYSTEM OF ACCOUNTING. AT THE SAM E TIME, SECTION 43B MADE IT MANDATORY FOR THE DEPARTMENT TO GRANT D EDUCTION IN COMPUTING INCOME UNDER SECTION 28 IN THE YEAR IN WH ICH TAX, DUTY, CESS ETC. IS ACTUALLY PAID. PARLIAMENT TOOK COGNIZA NCE OF THE FACT THAT ACCOUNTING YEAR OF A COMPANY DID NOT ALWAYS TALLY W ITH THE DUE DATES UNDER PROVIDENT FUND ACT, MUNICIPAL CORPORATION ACT (OCTROI) AND OTHER TAX LAWS. THEREFORE, BY WAY OF FIRST PROVISO, AN INCENTIVE/RELAXATION WAS SOUGHT TO BE GIVEN IN RESP ECT OF TAX, DUTY, CESS OR FEE BY EXPLICITLY STATING THAT IF SUCH TAX DUTY CESS OR FEE IS PAID BEFORE THE DATE OF FILING OF THE RETURN UNDER ACT 1961, ASSESSEE WOULD THAN BE ENTITLED TO DEDUCTION. THIS RELAXATION/INCENTIVE WAS RESTRICTED ONLY TO TAX, DU TY, CESS AND FEE. IT DID NOT APPLY TO CONTRIBUTIONS TO LABOUR WELFARE FU NDS. THE REASON APPEARS TO BE THAT THE EMPLOYER SHOULD NOT SIT ON T HE COLLECTED CONTRIBUTIONS AND DEPRIVE WORKMEN OF THE RIGHTFUL BENEFITS UNDER SOCIAL WELFARE LEGISLATIONS BY DELAYING PAYMENT OF CONTRIBUTIONS TO THE WELFARE FUNDS. BUT WHEN IMPLEMENTATION PROBLEMS WE RE POINTED OUT FOR DIFFERENT DUE DATES, UNIFORMITY WAS BROUGHT ABO UT IN FIRST PROVISO I.T.A. NO.289/LKW/2019 ASSESSMENT YEAR:2014-15 8 BY FINANCE ACT, 2003. HENCE, AMENDMENT MADE BY FINA NCE ACT 2003 IN SECTION 43B IS RETROSPECTIVE, BEING CURATIVE IN NATURE AND APPLY FROM 01.04.1988. IN THE RESULT WHEN CONTRIBUTION HAD BEEN PAID, PRIOR TO FILING OF RETURN UNDER SECTION 139(1), ASS ESSEE/EMPLOYER WOULD BE ENTITLED FOR DEDUCTION AND SINCE DELETION OF SECOND PROVISO AND AMENDMENT OF FIRST PROVISO IS CURATIVE AND APPL Y RETROSPECTIVELY W.E.F. 01.04.1988. 28. FROM THE AFORESAID JUDGMENT, WE FIND THAT IRRES PECTIVE OF THE FACT THAT DEDUCTION IN RESPECT OF SUM PAYABLE B Y EMPLOYER CONTRIBUTION WAS INVOLVED, BUT COURT DID NOT RESTRI CT OBSERVATIONS, FINDINGS AND DECLARATION OF LAW TO THAT CONTEXT BUT LOOKING TO THE OBJECTIVE AND PURPOSE OF INSERTION OF SECTION 43B A PPLIED IT TO BOTH THE CONTRIBUTIONS. IT ALSO OBSERVED CLEARLY THAT SEC TION 43B IS WITH A NON-OBSTANTE CLAUSE AND THEREFORE OVER RIDE EVEN IF , ANYTHING OTHERWISE IS CONTAINED IN SECTION 36 OR ANY PROVISI ON OF ACT 1961. 29. THEREFORE, WE ARE CLEARLY OF THE VIEW THAT LAW LAID DOWN BY HIGH COURTS OF KARNATAKA, RAJASTHAN, PUNJAB & HARYA NA, DELHI, BOMBAY AND HIMACHAL PRADESH HAVE RIGHTLY APPLIED SE CTION 43B IN RESPECT TO BOTH CONTRIBUTIONS I.E. EMPLOYER AND EMP LOYEE. OTHERWISE VIEW TAKEN BY GUJRAT HIGH COURT AND FOLLOWED BY KER ALA HIGH COURT, WITH GREAT RESPECT, WE FIND EXPEDIENT TO DISSENT TH EREWITH. 30. IN VIEW OF ABOVE ALL THE QUESTIONS FORMULATED AB OVE ARE ANSWERED AGAINST REVENUE AND IN FAVOUR OF ASSESSEE. 5.1 IN VIEW OF THE ABOVE FACTS AND JUDICIAL PRECEDE NTS, I HOLD THAT PENALTY SUSTAINED BY LEARNED CIT(A) IS NOT JUSTIFIED AS THE ADDITION ITSELF WAS NOT JUSTIFIED. 6. IN THE RESULT, THE APPEAL OF THE ASSESSEE STANDS ALLOWED. (ORDER PRONOUNCED IN THE OPEN COURT ON 31/07 /2019) SD/. ( T. S. KAPOOR ) ACCOUNTANT MEMBER DATED:31/07/2019 *SINGH COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT. 3. CONCERNED CIT 4. THE CIT(A) 5. D.R., I.T.A.T., LUCKNOW