Unicorn Industries Limited, Hyderabad, Hyderabad V. ITO, Ward-17(1), Hyderabad, Hyderabad

ITA 447/HYD/2017

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 2329 (ITAT-HYDERABAD)
• Duration Of Justice: 4 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-07-2017
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2013-2014
• Appeal Filed On: 08-03-2017
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Assessee Lawyers: A V RAGHURAM
• Section: 43B; 139

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH A, HYDERABAD BEFORE SHRI D. MANMOHAN, VICE PRESIDENT AND SHRI S. RIFAUR RAHMAN, ACCOUNTANT MEMBER ITA NO. 447/HYD/2017 ASSESSMENT YEAR: 2013-14 M/S UNICORN INDUSTRIES LTD., HYDERABAD. PAN AAACU3501B VS. INCOME-TAX OFFICER, WARD 17(1), HYDERABAD. (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI A.V. RAGHURAM REVENUE BY : SHRI PRABHAT KUMAR GUPTA DATE OF HEARING : 13-07-2017 DATE OF PRONOUNCEMENT : 28-07-2017 O R D E R PER S. RIFAUR RAHMAN, A.M.: THIS IS AN APPEAL OF THE ASSESSEE DIRECTED AGAINST THE ORDER OF THE LEARNED COMMISSIONER OF INCOME-TAX (A) 5, HYD ERABAD, DATED 30/01/2017 FOR AY 2013-14. 2. THE AO HAS DISALLOWED THE EMPLOYEES CONTRIBUTIO NS OF PF AMOUNTING TO RS. 3,82,155/- BY INVOKING PROVISIONS OF SECTION 36(1)(VA) ON THE GROUND THAT THE SAME WAS PAID BY T HE ASSESSEE BEYOND THE DUE DATE AFTER AVAILING GRACE PERIOD, RE JECTING THE SUBMISSIONS OF THE ASSESSEE THAT THE PAYMENTS WERE MADE BEYOND DUE DATE BUT PAID BEFORE FILING OF RETURN OF INCOME U/S 139(1) AND HENCE, THE SAME IS ALLOWABLE AS DEDUCTION U/S 43 OF THE ACT. 3. AGGRIEVED BY THE ORDER OF THE AO, THE ASSESSEE P REFERRED AN APPEAL BEFORE THE CIT(A) AND CONTENDED BEFORE THE CIT(A) THAT 2 ITA NO. 447/H/17 M/S UNICORN INDUSTRIES LTD. THOUGH THE EMPLOYEE CONTRIBUTIONS OF PF WERE NOT PA ID WITHIN THE PERMISSIBLE TIME UNDER THE RESPECTIVE ACT BUT WAS P AID BEFORE THE DUE DATE OF FILING OF RETURN. HE RELIED ON VARIOUS JUDI CIAL PRONOUNCEMENTS INCLUDING THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF CIT VS. ALOM EXTRUSIONS LTD., [2009] 319 ITR 306 (SC). 4. THE CIT(A) AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE AND FOLLOWING THE DECISION OF THE HONBLE GUJARAT H IGH COURT IN THE CASE OF CIT VS. GUJARAT STATE ROAD TRANSPORT CORPOR ATION [2014] 57 (I) ITCL 72 (GUJ-HC) CONFIRMED THE ADDITION MADE BY THE AO. 5. AGGRIEVED BY THE ORDER OF THE CIT(A), THE ASSESS EE IS IN APPEAL BEFORE US RAISING THE FOLLOWING GROUNDS OF APPEAL: 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E, THE ORDER OF THE LD. COMMISSIONER OF INCOME TAX (APPEAL S)-5, HYDERABAD, DISMISSING THE APPEAL FILED BY THE APPEL LANT IS ERRONEOUS, ILLEGAL AND UNSUSTAINABLE IN LAW. 2. THE COMMISSIONER OF INCOME TAX (APPEALS) ERRED I N SUSTAINING THE ADDITION OF RS.3,82,155 MADE BY THE ASSESSING OFFICER AS PER THE PROVISIONS OF SECTION 36(1)(VA) OF THE INCOME TAX ACT, 1961. THE FINDINGS OF THE LD. COMMISSIONER (APPEALS) ON THE ISSUE ARE LEGALLY INCORRECT AND UNSUSTAINABL E. 3. THE COMMISSIONER OF INCOME TAX (APPEALS) FAILED TO APPRECIATE VARIOUS JUDGEMENTS OF HIGH COURTS WHICH ARE IN FAVOUR OF APPELLANT, INCLUDING THE ORDER OF THE JUR ISDICTIONAL TRIBUNAL. FOR THESE AND OTHER GROUNDS THAT MAY BE URGED AT TH E TIME OF HEARING, IT IS PRAYED THAT THE HON'BLE TRIBUNAL MAY BE PLEASED TO ALLOW THE APPEAL. 6. CONSIDERED THE RIVAL SUBMISSIONS AND PERUSED THE ORDERS OF REVENUE AUTHORITIES AS WELL AS MATERIAL ON RECORD. THE AO HAS DISALLOWED THE EMPLOYEES CONTRIBUTIONS OF PF AMOUNT ING TO RS. 3,82,155/- BY INVOKING PROVISIONS OF SECTION 36(1)( VA) ON THE GROUND THAT THE SAME WAS PAID BY THE ASSESSEE BEYOND THE D UE DATE AFTER 3 ITA NO. 447/H/17 M/S UNICORN INDUSTRIES LTD. AVAILING GRACE PERIOD. THE CONTENTION OF THE ASSESS EE IS THAT THE PAYMENTS WERE MADE BEYOND DUE DATE BUT PAID BEFORE FILING OF RETURN OF INCOME U/S 139(1) AND HENCE, THE SAME IS ALLOWAB LE AS DEDUCTION U/S 43 OF THE ACT. WE HAVE CAREFULLY GONE THROUGH T HE SECTION 36(1)(VA) WITH SECTION 2(24)(X) AND ALSO GONE THROU GH DECISION OF THE HONBLE HIGH COURT OF ALLAHABAD IN THE CASE OF SAGU N FOUNDRY (P) LTD. VS. CIT, [2017] 78 TAXMANN.COM 47 (ALL.) WHERE IN THE HONBLE COURT HAS OBSERVED AS UNDER: SECTION 36(1)(VA) PERMITS DEDUCTIONS IN RESPECT TO RELEVANT FUND OF EMPLOYEES. SECTION 43B PERMITS DEDUCTIONS OTHERWISE ALLOWABLE UNDER THE INCOME- TAX ACT IN CASE ANY SUM PAYABLE BY THE ASSESSEE IS PAID ACTUALLY BEFORE THE DATE OF FILING OF RETURN UNDER SECTION 139 AND CARVES OUT AN EXCEPTION IN THIS REGARD. EXPLANATION TO SECTION 36(1)(VA) PROVIDES THAT DED UCTION SHALL BE ALLOWED IN RESPECT TO THE SUM PAID BY THE ASSESSEE TO EMPLOYEE'S ACCOUNT, IN THE RELEVANT FUND, ON OR BEFORE DUE DATE, I.E., SUCH DATE BY WHICH ASSESSEE IS REQUIRED TO CREDIT EMPLOYEE'S CONTRIBUT ION IN THE RELEVANT FUND, UNDER ANY ACT, RULE, ORDER OR NOTIFICATION ISSUED T HEREIN. IN THE INSTANT CASE, DUE DATE, THEREFORE, SHALL BE THE DATE MENTIO NED IN THE 1952 ACT OR 1948 ACT OR RULES FRAMED THEREUNDER, ETC. BY WHICH CONTRIBUTIONS WERE TO BE MADE. ADMITTEDLY AS PER DUE DATE UNDER THE RELEV ANT ACTS, CONTRIBUTIONS WERE NOT PAID BY THE ASSESSEE. SECTIO N 36(1)(VA) TALKS OF ONLY EMPLOYEE'S CONTRIBUTION AND ALLOW DEDUCTION IN RESPECT THERETO IN COMPUTING 'INCOME' UNDER SECTION 28. SO FAR AS SECTION 43B IS CONCERNED, IT WAS INSERTE D WITH EFFECT FROM 1-4- 1984 TO ALLOW DEDUCTIONS PROVIDED PAYMENTS ARE ACTU ALLY MADE BEFORE FILING OF RETURN AS PER DUE DATE UNDER SECTION 139( 1). 'INCOME' DEFINED UNDER SECTION 2(24) INCLUDES 'PROFITS AND GAINS'. U NDER SECTION 2(24)(X), ANY SUM RECEIVED BY ASSESSEE FROM HIS EMPLOYEES AS CONTRIBUTION TO ANY PROVIDENT FUND/SUPERANNUATION FUND OR ANY FUND SET UP UNDER EMPLOYEES STATE INSURANCE ACT, 1948, OR ANY OTHER FUND FOR WE LFARE OF SUCH EMPLOYEES, CONSTITUTE 'INCOME'. IN RESPECT TO SUCH CONTRIBUTIONS DEDUCTION WAS ALLOWED UNDER SECTION 36(1)(VA) WHEN CONTRIBUTI ONS RECEIVED BY EMPLOYER IS DEPOSITED WITHIN TIME PRESCRIBED, UNDER RELEVANT LABOUR WELFARE STATUTE. PRIOR TO 1-4-1984, EVERY ASSESSEE WAS ENTITLED TO DEDUCTION ON MERCANTILE SYSTEM OF ACCOUNTING AS A B USINESS EXPENDITURE BY MAKING PROVISION IN HIS BOOKS OF ACCOUNT IN THAT REGARD AND THIS SITUATION CONTINUED UPTO 1-4-1984. AN ASSESSEE, IF MAINTAINING BOOKS ON 4 ITA NO. 447/H/17 M/S UNICORN INDUSTRIES LTD. ACCRUAL SYSTEM OF ACCOUNTING, EVEN AFTER COLLECTING CONTRIBUTION FROM HIS EMPLOYEE, AND EVEN WITHOUT REMITTING THE AMOUNT TO REGIONAL PROVIDENT FUND COMMISSIONER, HE WOULD HAVE CLAIMED DEDUCTION AS 'BUSINESS EXPENSE' BY MERELY MAKING A PROVISION TO THAT EFFEC T IN HIS BOOKS OF ACCOUNT. A SIMILAR DISCREPANCY WAS NOTICED IN THE C ONTEXT OF SALES TAX WHERE ASSESSEE COLLECTED THE SAME AND OTHER INDIREC T TAXES FROM HIS RESPECTIVE CUSTOMERS AND CLAIMED DEDUCTION ONLY BY MAKING PROVISIONS IN HIS BOOKS WITHOUT ACTUALLY REMITTING THE AMOUNT TO EXCHEQUER. TO CURB THIS PRACTICE, SECTION 43B WAS INSERTED WITH EFFECT FROM 1-4-1984, WHEREBY MERCANTILE SYSTEM OF ACCOUNTING WITH REGARD TO TAX, DUTY AND CONTRIBUTIONS TO WELFARE FUNDS STOOD DISCONTINUED. NOW IT BECAME NECESSARY FOR THE ASSESSEE TO ACCOUNT FOR THE AFORE STATED ITEMS, NOT ONMERCANTILE BASIS, BUT ON CASH BASIS. WITH EFFECT FROM 1-4-1988 SECTION 43B WAS AGAIN AMENDED AND A PROVISO WAS INSERTED. I T PROVIDED, INTER ALIA, IN THE CONTEXT OF ANY SUM PAYABLE BY THE ASSE SSEE BY WAY OF TAX, DUTY, CESS OR FEE, IF SUCH AN ASSESSEE PAYS SUCH TAX, DUT Y, CESS OR FEE EVEN AFTER CLOSING OF ACCOUNTING YEAR BUT BEFORE DATE OF FILIN G OF RETURN UNDER SECTION 139(1), ASSESSEE WOULD BE ENTITLED TO DEDUCTION UND ER SECTION 43B ON ACTUAL PAYMENT BASIS AND SUCH DEDUCTION WOULD BE AD MISSIBLE FOR THE ACCOUNTING YEAR. THIS PROVISO, HOWEVER, WAS NOT MAD E APPLICABLE TO CONTRIBUTIONS MADE BY THE ASSESSEE TO LABOUR WELFAR E FUNDS. BY FINANCE ACT, 1988, WITH EFFECT FROM 1-4-1988, SECOND PROVIS O CAME TO BE INSERTED. SECOND PROVISO WAS FURTHER AMENDED BY FINANCE ACT, 1989 WITH EFFECT FROM 1-4-1989. FROM THE ABOVE PROVISIONS, NOW ASSESSEE BECOMES EN TITLED TO DEDUCTION ONLY IF CONTRIBUTION STAND CREDITED ON OR BEFORE DU E DATE, GIVEN IN LABOUR WELFARE STATUTES. HOWEVER, SECOND PROVISO AGAIN CRE ATED CERTAIN DIFFICULTIES. IN MANY OF THE COMPANIES, FINANCIAL Y EAR ENDED ON 31ST MARCH DID NOT COINCIDE WITH ACCOUNTING PERIOD OF LABOUR W ELFARE STATUTES. IN MANY CASES, TIME TO MAKE CONTRIBUTION OF FUNDS ENDE D AFTER DUE DATE OF FILING OF RETURNS. ON THE REPRESENTATION OF INDUSTR IES, AGAIN PARLIAMENT, VIDE FINANCE ACT, 2003, WITH EFFECT FROM 1-4-2004, MADE AMENDMENT BY DELETING SECOND PROVISO AND AMENDING FIRST PROVISO. THE SUPREME COURT IN THE CASE OF ALOM EXTRUSIONS L TD. (SUPRA) CONSIDERED THE INTENT, PURPOSE AND OBJECT IN THE HI STORICAL BACK DROP OF INSERTION OF SECTION 43B AND ITS PROGRESS BY WAY OF VARIOUS AMENDMENTS AND HELD THAT WHEN THE CONTRIBUTION HAD BEEN PAID B Y THE ASSESSEE TOWARDS PROVIDENT FUND, ETC. PRIOR TO FILING OF RET URN UNDER SECTION 139(1), THE ASSESSEE WOULD BE ENTITLED FOR DEDUCTION UNDER SECTION 43B. [PARA 27] FROM THE AFORESAID JUDGMENT OF THE SUPREME COURT, THE BENCH FINDS THAT IRRESPECTIVE OF THE FACT THAT DEDUCTION IN RESPECT OF SUM PAYABLE BY 5 ITA NO. 447/H/17 M/S UNICORN INDUSTRIES LTD. EMPLOYER'S CONTRIBUTION WAS INVOLVED, BUT THE COURT DID NOT RESTRICT OBSERVATIONS, FINDINGS AND DECLARATION OF LAW TO TH AT CONTEXT BUT LOOKING TO THE OBJECTIVE AND PURPOSE OF INSERTION OF SECTIO N 43B APPLIED IT TO BOTH THE CONTRIBUTIONS, WHETHER BY EMPLOYER OR EMPLOYEE. IT ALSO OBSERVED CLEARLY THAT SECTION 43B IS WITH A NON OBSTANTE CLA USE AND, THEREFORE, OVER RIDE EVEN IF, ANYTHING OTHERWISE IS CONTAINED IN SE CTION 36 OR ANY PROVISION OF THE INCOME-TAX ACT. IN VIEW OF THE AFORESAID, THE ASSESSEE WAS ENTITLE D TO DEDUCTIONS UNDER SECTIONS 43B AND 36(1)(VA). 6.1 MOREOVER, THE COORDINATE BENCH OF ITAT HYDERABA D IN THE CASE OF ITO VS. M/S GOOD HEALTH TPA SERVICES LTD., IN IT A NO. 1706/HYD/2016 VIDE ORDER DATED 15/03/2017, ON WHICH RELIANCE PLACED BY THE ASSESSEE, HELD THAT THE DEDUCTION IS AVAILAB LE TOWARDS EMPLOYEES SHARE OF CONTRIBUTION TO EPF AND ESI REMI TTED ON OR BEFORE THE DUE DATE OF FILING OF RETURN U/S 139(1) OF THE ACT, FOLLOWING THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF A LOM EXTRUSIONS LTD. (SUPRA). 6.2 IN VIEW OF THE ABOVE DISCUSSION, WE HOLD THAT N O DISALLOWANCE CAN BE MADE TOWARDS PF/ESI CONTRIBUTIONS MADE BY TH E ASSESSEE WITHIN THE FY OR BEFORE FILING OF THE RETURN. IN TH E GIVEN CASE, ASSESSEE HAS PAID THE EMPLOYEES CONTRIBUTION TO PF BEFORE FILING OF THE RETURN OF INCOME AND HENCE, THE ASSESSEE IS AL LOWED TO CLAIM THE ABOVE PAYMENT AS DEDUCTION IN THE SAME FY. THEREFOR E, THE AO IS DIRECTED TO DELETE THE ADDITION MADE. 8. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISSE D. PRONOUNCED IN THE OPEN COURT ON 28 TH JULY, 2017. SD/- SD/- (D. MANMOHAN) (S. RIFAUR RAHMAN ) VICE PRESIDENT A CCOUNTANT MEMBER 6 ITA NO. 447/H/17 M/S UNICORN INDUSTRIES LTD. HYDERABAD, DATED: 28 TH JULY, 2017. KV COPY TO:- 1) UNICORN INDUSTRIES LTD., C/O S/SHRI K. VASANTKUM AR, AV RAGHURAM, P. VINOD & M NEELIMA DEVI, ADVOCATES, 610 BABUK HAN ESTATE, BASHEERBAGH, HYDERABAD 1. 2) ITO, WARD 17(1), HYDERABAD, SIGNATURE TOWERS, OPP. BOTANICAL GARDENS, KONDAPUR, HYDERABAD 500 084. HYDERABAD 500 034. 3) CIT(A) - 5, HYDERABAD 4) PR. CIT - 5, HYDERABAD 5) THE DEPARTMENTAL REPRESENTATIVE, I.T.A.T., HYDE RABAD. 6) GUARD FILE