Adani Wilmar Limited, Ahmedabad V. The AO CPC, Banglore

ITA 302/AHD/2021

AI Insights

The case involves Adani Wilmar Ltd. appealing against the order of the Commissioner of Income Tax (Appeals), which upheld adjustments made under section 143(1) of the Income Tax Act, 1961, for alleged delays in depositing employees' contributions to welfare funds. The Tribunal found that the contributions primarily related to the National Pension Scheme (NPS) and not to Provident Fund (PF) or Employees' State Insurance (ESI), and thus the disallowance under section 36(1)(va) for NPS contributions was not applicable as there is no prescribed due date for such deposits. The Tribunal directed the CIT(A) to reconsider the issue in light of these facts. However, the disallowance related to PF contributions was upheld based on established legal precedents.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 133614 (ITAT-AHMEDABAD)
• Duration Of Justice: 1 year(s) 5 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-04-2023
• Appeal Filed By: Assessee
• Order Result: PartlyAllowed
• Bench Allotted: D
• Next Hearing Date: 17-01-2023
• Assessment Year: 2019-2020
• Appeal Filed On: 15-11-2021
• Other Referred Cases: Checkmate Services P. Ltd. Vs. CIT, CIT vs. Checkmate Services P. Ltd., Southern Industrial Corpn. Ltd. vs. Dy. CIT, Kvaverner John Brown Engg. (India) (P.) Ltd. vs. Asstt. CIT, Tamilnadu Magnesite Ltd. vs. Dy. CIT, S.V. Engineering Constructions India (P.) Ltd. vs. Dy. CIT, SVS Guarding Services (P.) Ltd. vs. ITO, 360 Realtors LLP vs. ADIT
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: BIREN SHAH
• Keywords: Deemed to accrue or arise in india
• Section: 43B; 115JB; 143(1); 22

Judgement Text

आयकर अपीलीय अिधकरण आयकर अपीलीय अिधकरणआयकर अपीलीय अिधकरण आयकर अपीलीय अिधकरण, अहमदाबाद 瀈यायपीठ अहमदाबाद 瀈यायपीठअहमदाबाद 瀈यायपीठ अहमदाबाद 瀈यायपीठ ‘D’ अहमदाबाद। अहमदाबाद।अहमदाबाद। अहमदाबाद। IN THE INCOME TAX APPELLATE TRIBUNAL “D” BENCH, AHMEDABAD BEFORE SMT.ANNAPURNA GUPTA, ACCOUNTANT MEMBER AND SHRI SIDDHARTHA NAUTIYAL, JUDICIAL MEMBER ITA No.302/Ahd/2021 Assessment Year : 2019-20 Adani Wilmar Ltd. 3 rd , Nr. Navrangpura Railway Crossing, Navrangpura Fortune House Ahmedabad. PAN : AABCA 8056 G Vs. AO-CPC Bangalore. (Applicant) (Responent) Assessee by : Shri Biren Shah, AR Revenue by : Shri Atul Pandey, Sr.DR स ु नवाई क तार ख/D a t e o f H e a r i n g : 1 8 / 0 1 / 2 0 2 3 घोषणा क तार ख /D a t e o f P r o n o u n c e m e n t : 1 7 / 0 4 / 2 0 2 3 आदेश/O R D E R PER ANNAPURNA GUPTA, ACCOUNTANT MEMBER Present appeal has been filed by the assessee against order passed by the ld.Commissioner of Income Tax (Appeals), National Faceless Appeal Centre[hereinafter referred to as “Ld.CIT(A)/NFAC”]dated 23.9.2021passed under section 250(6) of the Income Tax Act, 1961 [hereinafter referred to as "the Act" for short]for the Asst.Year 2019-20. 2. The effective grounds raised are as under: 1. In law and on the facts and in the circumstances of the Appellant's case, the Ld. CIT(A) has erred in making disallowance of Rs. 22,95,789/- on account of payment of employees contribution to National Pension Scheme when entire payment is made before due date of filing return of Income. ITA No.302/Ahd/2021 2 2. In law and on the facts and in the circumstances of the Appellant's case, the Ld. CIT(A) has erred in treating employees contribution to National Pension Scheme as Employees contribution to Provident Fund and ESIC. The Ld. CIT(A) ought to have appreciated that no due date of payment is prescribed for payment of such employees contribution to NPS. 3. In law and on the facts and in the circumstances of the Appellant's case, the Ld. CIT(A) has erred in not following decisions of CIT(A) rendered in other group cases and relied upon by appellant in appellate proceedings. 4. In law and on the facts and in the circumstances of the Appellant's case, the Ld. CIT(A) has grossly erred in making disallowance of Rs.53.221/- under section 36(1 )(va) of the Act, when no such disallowance is tenable while processing return of income under section 143(1) of the Act. The Ld. CIT(A) may be directed to delete such adjustment. 5. In law and on the facts and in the circumstances of the Appellant's case, the Ld. CIT(A) ought to have appreciated that amendment brought by Finance Act, 2021, relating to provisions of Section 43B r.w.s. 36(1)(va) is prospective in nature as mentioned in Memorandum issued by CBDT explaining the provisions in the Finance Bill 2021, hence it cannot be applied in year under consideration. 3. At the outset itself, the ld.counsel for the assessee stated that solitary grievance of the assessee related to the addition made to the income of the assessee on account of alleged delay in depositing of employees contribution to the relevant welfare fund as per the provisions of section 36(1)(v)(a) of the Act amounting in all to Rs.23,49,019/-. 4. The ld.counsel for the assessee contended that the issue emanates from the adjustment made inthis regard to the intimation made to the assessee under section 143(1) of the Act. He contended that before theld.CIT(A) it was pointed out that employees’ contribution so added related to their contribution to National Pension Scheme (NPS) to the extent of Rs.22,95,789/- and the balance of Rs.53,221/- related to the employees contribution to Provident Fund. It was contended that to the amount with respect to the employees’ contribution to NPS, the provisions of section ITA No.302/Ahd/2021 3 36(1)(va) of the Act was not applicable since there is no due date prescribed for depositing the employees contribution to the NPS scheme. It was pointed out that NPS was a voluntary contribution scheme and there is no statutory requirement for collection ofany amount from the employees to be deposited to the relevant fund account; that despite having stated so, the ld.CIT(A) ignored all the factual contentions made by the assessee, and upheld the adjustment made under section 143(1) of the Act, treating the employees’ contribution as that towards ESI & PF though the assessee had demonstrated to him that the same related to NPS scheme and not to the ESI & PF funds. He drew our attention to the submissions made in this regard before the ld.CIT(A), copy of which was placed at PB 22 to 38. Our attention was drawn to the submission in this regard at para 1-2.5 as under. Brief Facts of the case: The Appellant Company has e-filed its Return of Income on 27.11.2019 declaring total income of Rs. 3,63,77,46,800/- under normal provisions of the Act and Rs. 5,85,33,28,463/- under book profit under section 115JB of the Act. The acknowledgement and computation of income is enclosed herewith as Page No.1-7 of the Paper book. Thereafter, the Appellant was in receipt of communication from Central Processing Centre (CPC) vide Communication Reference No. CPC/1920/G22/1972608335 for adjustment under section 143(1)(a) of the Act on 10.01.2020. In response to the said communication, the Appellant Company has filed online response wherein it has disagreed with adjustment proposed by the Ld. Assessing Officer-CPC and following response was filed: ITA No.302/Ahd/2021 4 ITA No.302/Ahd/2021 5 ITA No.302/Ahd/2021 6 ITA No.302/Ahd/2021 7 ITA No.302/Ahd/2021 8 5. The ld.counsel for the assessee also challenged the adjustment made on account of late deposit of employees’ contribution to PF amounting toRs.53,221/- relying on the submissions made before the ld.CIT(A) at para-3 of his submissions as under: ITA No.302/Ahd/2021 9 ITA No.302/Ahd/2021 10 ITA No.302/Ahd/2021 11 ITA No.302/Ahd/2021 12 ITA No.302/Ahd/2021 13 ITA No.302/Ahd/2021 14 ITA No.302/Ahd/2021 15 6. The ld.DR, however, supported order of the ld.CIT(A). 7. We have heard both the parties. We have also gone through orders of the authority below. We have noted, as per the facts of the case before us, that an adjustment of Rs.23,49,019/- had been made to the income of the assessee in the intimation made under section 143(1) of the Act on account of delayed deposits of employees’ contribution to PF & ESI fund as per the provision of section 36(1)(va) of the Act. This fact isbrought out by the description of the adjustment made to the income of the assessee in the intimation itself, which is reproduced in the submissions made by the assessee to the ld.CIT(A) also, as reproduced above. There is no dispute with regard to this fact that the adjustment was made in the intimation under section 143(1) of the Act on account of late deposits of employees’ contribution of PF& ESI under section 36(1)(va) of the Act. We have also noted from the copy of the submissions filedby the assessee before the ld.CIT(A) that it was pointed out to him that the employees’ contribution so disallowed, did not relate to ESI and PF fund, but were their contributionsto National Pension Scheme i.e. NPS. The assessee had also brought to the notice of the ld.CIT(A) that there was no due date prescribed under the NPS for the deposits of employees contribution, and it was totally voluntary contribution to the scheme and therefore there could not be any case of delayed deposit of employees contribution to the said scheme so as to attract disallowance u/s 36(1)(va0 of the ITA No.302/Ahd/2021 16 Act. The assessee had also pointed out that all the contribution of the employees to the NPS had been made within the due date of filing of the return which fact was evident in the report of the tax auditor in his tax audit report also. Despite the assessee having so pointed out that the entire employees contribution of Rs.22,95,789/- out of total addition of Rs.23,49,019/- was made and related to the NPS and the balance amount to the PF & ESI funds,theld.CIT(A) went on to uphold the adjustment treating the same as contribution of employees’ to ESI and PF fund. His findingsinthis regard that the contributions related to ESI and PF are at para-7 of the order as under: “7. I have considered the facts of the case and submission filed by appellant. During the appellate proceedings, I have gone through the contentions of he appellant and material available on record. It is noted that the appellant has mainly contested the ground on the plea that the relevant contribution of ESI and PF has been made after the due date of deposit as prescribed under the relevant provisions but before the due date of filing of return of income.” And thereafter, we have noted, he goes on to discuss the provision of law with regard to disallowance under section36(1)(va) of the employees’ contribution to ESI and PF deposited late. 8. From the above, it is clear that theld.CIT(A) has totally mis- appreciated the facts of the case while rendering his judgment on the issue. He has totally ignored the contentions of the assessee that the employees’ contribution primarily related to the NPS scheme and not ESI/PF. We have noted from the submission made by the assessee before the ld.CIT(A), he had clearly pointed out from the tax audit report that all employees contribution towards ESI/PF had been reflected in the tax audit report as having been deposited by the assessee before the due date prescribed under the relevant Act ITA No.302/Ahd/2021 17 and it was only with respect to “other welfare fund” that contributions were shown to be deposited during the year. The assessee had clarified that this “other welfare fund” was relating to NPS. 9. Since the ld.CIT(A) has clearly mis-appreciated the facts of the case, therefore, the issue of disallowance u/s 36(1)(va) of the Act to the extent of Rs.22,95,789/- is restored back to the ld.CIT(A) to be considered afresh in the light of the facts as pointed out by the ld.counsel for the assessee. He is also directed to go through the NPS scheme whether it qualifies for being covered under section 36(1)(va) of the Act, and thereafter decide the issue afresh in accordance with law. 10. As for the issue of adjustment on account of employees’ contribution to PF of Rs.53,221/-, we see no reason to interfere in the order of the ld.CIT(A) in upholding the adjustment made in this regard under section 143(1) of the Act. The proposition that delay in employees’ contribution to ESI & PF will attract the provisions of section 36(1)(va) of the Act warranting addition to the income of the assessee to the extent of amount so delayed to be deposited, has been settled by the Hon’ble Apex Court in the case of Checkmate Services P.Ltd. Vs. CIT, 143 taxmann.com 178 (SC) dated 12.10.2022 . The decision of Hon’ble Apex Court interprets the law as it always was. There is no doubt that such delayed payments of employees contribution to ESI /PF would attract adjustment even in intimations made u/s 143(1) of the Act. The issue is settled and cannot be said to be debatable for deriving any benefit on account of the same. This issue has been adequately dealt by the ITAT, Chennai Bench in a group of case in ITA Nos.789/Chny/2022 and others dated 4.11.2022 at para 7-14 of its order as under: ITA No.302/Ahd/2021 18 “7. We find that the provisions of section 2(24) enumerate different components of income. The Income as defined therein includes any sum received by the assessee from his employees as contributions to any provident fund or superannuation fund or any fund set up under the visions of the Employees' State Insurance Act, 1948 (34 of 1948), or any other fund for the welfare of such employees. It is thus clear that as soon as the Employer receives any contribution from its employees towards provident fund or ESI by way of deduction or otherwise, then the same is treated as income of the assessee. If the assessee deposit the same as per the mandate of Sec. 36(1)(va), the deduction of the same is allowed to the assessee otherwise the right to claim the deduction is lost forever. In other words, the contribution is first treated as deemed income of the assessee and thereafter, the deduction of the same is allowed to the assessee if the conditions of Sec.36(1)(va) are met. The CPC, as is evident, has denied this deduction to the assessee since the assessee did not fulfil the mandate of Sec.36(1)(va). It could also be seen that this is not an increase in income but disallowance of expenditure, the adjustment of which is covered u/s 143(1)(a)(iv) which provide that the disallowance of expenditure indicated in the audit report but not taken into account in computing the total income in the return could be made while processing the return of income. The amendment made w.e.f. 01.04.2021 by insertion of words 'increase in income' would have no impact on such disallowance since it is only a disallowance of expenditure and the revenue is very well entitled to make such an adjustment u/s 143(1)(a)(iv). 9. Another argument is that the debatable issues could not be subject matter of adjustment u/s 143(1). However, so far as the revenue is concerned, this issue is not debatable for the revenue. The revenue has always maintained a position that the claim is allowable to assessee only when the contribution is deposited as per the mandate of Sec.36(1)(va) otherwise not. Therefore, it is incorrect to say that the issue is debatable one. The Hon'ble Supreme Court has upheld the stand of the revenue. 10. The Hon'ble High Court of Madras in Southern Industrial Corpn. Ltd. (supra) held that when a statutory provision is interpreted by the Apex Court in a manner different from the interpretation made in the earlier decisions by a smaller Bench, the order which does not conform to the law laid down by the larger Bench in the later decision which decision would constitute the law of the land and is to be regarded as the law as it always was, unless declared by the court itself to be prospective in operation, would clearly suffer from a mistake which would be apparent from the record. Therefore, in the present case, the law laid down by Hon'ble court is to be regarded as law of land and it was to be presumed that the law was always like that. 11. The case law of Hon'ble Supreme Court in Kvaverner John Brown Engg. (India) (P.) Ltd. v. Asstt. CIT [2008] 170 Taxman 304/305 ITR 103, as referred on behalf of assessee, deal with deduction u/s 80-O for which two interpretations were possible viz. the deduction could be computed at gross value or the same could be computed on net value. The same is not the case here. The action of revenue is in accordance with the law laid down by Hon'ble Supreme Court in the cited decision. In fact, Hon'ble High Court of Madras in Tamilnadu Magnesite Ltd. v. Dy. CIT [2008] 303 ITR 71 held that ITA No.302/Ahd/2021 19 where the amount was inadmissible in view of Sec.43B which overrides section 36(1) of the Act, the revenue was well within its power to make a prima facie adjustment in the computation of taxable total income while processing return of income under section 143(1)(a) of the Act. The aforesaid decision supports our view. 12. The decision of Hon'ble High Court of Bombay in Bajaj Auto Finance Ltd. v. CIT [2018] 93 taxmann.com 63 as referred before us deals with case of debatable issue and hence distinguishable. The case law of Chandigarh Tribunal in Lanjani Co-operative Agri Service Society Ltd. v. Dy. CIT [IT Appeal No. 332 (Chd.) of 2021, dated 29-8-2022] relates with adjustment u/s 143(1)(a)(v) which is not the case here. The case law of Visakhapatnam Tribunal in S.V. Engineering Constructions India (P.) Ltd. v. Dy. CIT [IT Appeal No. 130 (Viz) of 2021, dated 23-9-2021] relies on another decision of Tribunal in CIT v. Andhra Trade Development Corpn. Ltd. [IT Appeal No. 434 (Viz) of 2019, dated 5-5-2021] which deal with set-off of losses. In this decision, the bench also dealt with the merits of the case by following earlier view which has now been reversed by Hon'ble Supreme Court. The decision of Delhi Tribunal in SVS Guarding Services (P.) Ltd. v. ITO [IT Appeal No. 231 (Delhi) of 2022, dated 24-5-2022] held that the issue whether the amendment made by Finance Act, 2021 was retrospective or prospective was debatable and controversial and consequently, the adjustment was beyond the scope of sec.143(1). Further the bench did not specifically examine the applicability of clauses (ii) and (iv) of sec.143(1)(a) in that decision. The subsequent decision of the bench in 360 Realtors LLP v. ADIT [IT Appeal No. 303 (Delhi) of 2022, dated 26-9-2022] is substantially on same lines. All these case laws have been rendered before the recent decision of Hon'ble Supreme Court which has settled the law since its inception. Therefore, all these case laws do not render any assistance to the case of the assessee. 13. In the above background, the captioned appeals are disposed-off as under: - (i) ITA No. 789/Chny/2022 The CPC processed the return of income and issued an intimation u/s 143(1) on 21-1-2021. The CPC denied deduction of Rs. 28.45 Lacs for late payment of PF/ESI as indicated in the Tax Audit Report under the head 'disallowance of expenditure indicated in the audit report but not taken into account in computing the total income in the return-143(1)(a)(iv). The Ld.CIT(A) confirmed the same on the ground that CPC was empowered to make such an adjustment as Auditor had indicated the default in the Tax Audit Report. But the assessee claimed it in the return of income against the Audit Report. The Ld. CIT(A) relied on the clarificatory amendment made by Finance Act, 2021 and confirmed the additions. Aggrieved, the assessee is in further appeal before us. (ii) ITA No. 813/Chny/2022 The CPC processed the return of income and made similar disallowance of Rs. 2.88 Lacs in an intimation issued u/s 143(1) on 24-12-2021. The Ld. CIT(A) confirmed the same against which the assessee is in further appeal before us. (iii) ITA No. 788/Chny/2022 ITA No.302/Ahd/2021 20 The CPC processed the return of income and made similar disallowance of Rs. 21.40 Lacs in an intimation issued u/s 143(1) on 5-5-2020. The adjustment was made under the head 'disallowance of expenditure indicated in the audit report but not taken into account in computing the total income in the return- 143(1)(a)(iv). The Ld.CIT(A) confirmed the same against which the assessee is in further appeal before us. (iv) ITA No. 756/Chny/2022 The CPC processed the return of income and made similar disallowance of Rs. 31.48 Lacs in an intimation issued u/s 143(1) on 19-1-2019. The adjustment was made under the head 'disallowance of expenditure indicated in the audit report but not taken into account in computing the total income in the return-143(1)(a)(iv). The Ld.CIT(A) confirmed the same against which the assessee is in further appeal before us. 14. Respectfully following the recent decision of Hon'ble Supreme Court in bunch of appeals titled as Checkmate Services (P.) Ltd. (supra) and considering our findings and adjudication in preceding paragraphs, the impugned disallowances stand confirmed. All the appeals stand dismissed.” 11. In view of the above, the issue is squarely covered by the aforesaid decision of the ITAT, Chennai Bench following which, we uphold order of the ld.CIT(A) regarding adjustment made to the income of the assessee in the intimation under section 143(1) of the Act relating to the employees’ contribution to PF amounting to Rs.53,221/-. 12. In the result, appeal of the assessee is partly allowed for statistical purposes. Order pronounced in the Court on 17 th April, 2023 at Ahmedabad. Sd/- Sd/- (SIDDHARTHA NAUTIYAL) JUDICIAL MEMBER (ANNAPURNA GUPTA) ACCOUNTANT MEMBER Ahmedabad,dated 17/04/2023 vk*