M/s.Kalyan Silks Trichur (P) Ltd, Trichur V. The JtCIT, Trichur

ITA 461/COCH/2015

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 96765 (ITAT-COCHIN)
• Duration Of Justice: 1 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-10-2015
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 28-10-2015
• Assessment Year: 2008-2009
• Appeal Filed On: 14-09-2015
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: K P GOPAKUMAR
• Assessee Lawyers: K N SREEKUMAR
• Section: 43B; 139

Judgement Text

1 IN THE INCOME TAX APPEL L A TE T R IBUNAL COCHIN BENCH , COCHIN BEFORE S/SH RI B P JAIN , A M & G EORGE GEORGE.K , J M ITA NO S . 461 & 462/COCH/2015 (ASST YEAR S 2008 - 09 & 2009 - 10 ) & STAY PETITION NOS.59 & 60/COCH/2015 M/S KALYAN SILKS TRICHUR (P) LTD CORPORATE OF FICE 4/621/2 KURICHIRA POST THRISSUR 680 006 VS THE JT COMMR OF INCOME TAX RANGE 1, TRICHUR ( APPELLANT) (RESPONDENT) PAN NO. AABCK5929J ASSESSEE BY SHRI K N SREEKUMAR REVENUE BY SHRI K P GOPAKUMAR, SR DR DATE OF HEARING 28 TH OCT 2015 DATE OF PRONOUNCEMENT 29 TH OCT 2015 OR D ER PER GEORGE GEORGE. K. J M: THESE TWO APPEALS, AT THE INSTANCE OF THE ASSESSEE , ARE DIRECTED AGAINST SEPARATE ORDERS OF THE CIT(A) BOTH DATED 30.6.2015. THE RELEVANT ASSESSMENT YEARS ARE 2008 - 09 AND 2009 - 10. 2 SINC E COMMON ISSUE IS INVOLVED IN THESE APPEALS, THEY WERE HEARD TOGETHER AND DISPOSE OFF BY THIS CONSOLIDATED ORDER. 3 THE SOLITARY ISSUE THAT ARISES FOR OUR CONSIDERATION IS WHETHER THE CIT(A) IS JUSTIFIED IN SUSTAINING THE DISALLOWANCE OF DEDUCTION MADE TOWARDS BELATED DEPOSIT OF EMPLOYEES CONTRIBUTION T O PF/ESI. 4 THE BRIEF FACTS THAT ARE NECESSARY FOR THE DISPOSAL OF THIS APPEAL ARE AS FOLLOW: THE ASSESSEE IS A PRIVATE LIMITED COMPANY. IT IS ENGAGED IN THE BUSINESS OF PURCHASE AND SALE OF TEXTILES O N WHOLESALE AND RETAIL BASIS. FOR THE AY 2008 - 09 2 WHILE COMPLETING THE SCRUTINY ASSESSMENT, THE AO TREATED THE BELATED PAYMENT OF EMPLOYEES CONTRIBUTION TO PF & ESI TO THE TUNE OF RS.9,63,879/ - AS INCOME U/S 2(24)(X) R.W.S 36(1)(VA) OF THE ACT AND ADDED BACK THE SAME TO THE RETURNED INCOME. SIMILARLY FOR THE AY 2009 - 10, AN AMOUNT OF RS.1,64,865/ - TOWARDS DELAYED PAYMENT OF EMPLOYEES CONTRIBUTION TO PF/ESI WAS ALSO ADDED BACK TO THE RETURNED INCOME OF THE ASSESSEE. 5 AGGRIEVED BY THE ASSESSMENT ORDER FOR THE AYS 2008 - 09 AND 2009 - 10, THE ASSESSEE PREFERRED APPEAL TO THE FIRST APPELLATE AUTHORITY. THE FIRST APPELLATE AUTHORITY FOLLOW ING THE ORDER OF THE COCHIN BENCH OF THE TRIBUNAL IN THE CASE OF SFO TECHNOLOGIES (P)LTD IN ITA NO.454/COCH/2014 , CONFIR MED THE ADDITION MADE TO THE RETURNED INCOME AND DISMISS THE APPEAL OF THE ASSESSEE. THE RELEVANT FINDINGS OF THE CIT(A) WITH REFERENCE TO AY 2008 - 09 ARE REPRODUCED AS UNDER: 5 . I HAVE CONSIDERED THE FACTS GIVEN IN THE ORDER OF THE JOINT . COMMISSIONER OF INCOME TAX AS WELL AS THE SUBM I SSIONS MADE BY THE AUTHORIZED REPRESENTAT I VE OF THE APPELLANT AND ALSO OTHER FACTS AVAILABLE ON RECORD . 6. THE ASSESSING OFFICER DURING THE ASSESSMENT PROCEEDINGS HAS OBSERVED THAT THERE WERE DELAY ON THE PART OF THE A PPELLANT IN REMITTING THE EMPLOYEES CONTRIBUTION OF PF AND ESI WITHIN THE DUE DATE STIPULATED IN SECTION 36 (1 )(VA) OF THE INCOME TAX ACT AND THEREFORE DISALLOWED THE APPELLANT ' S CLAIM AND ADDED A SUM OF RS . 9 , 63 , 879/ - TO THE TOTAL INCOME . THE APPELLANT HAS ARGUED THAT NO ADDITION WAS TO BE MADE IN RESPECT OF ANY DELAY IN PAYMENT OF EMPLOYEES ' CONTRIBUTION TO PF AND ESI AS THESE PAYMENTS WERE MADE WITHIN THE DUE DATE FOR FILING THE RETURN OF INCOME IN ACCORDANCE WITH THE PROVISIONS OF SECTION 43B OF THE INCO ME TAX ACT . THE APPELLANT HAS ALSO RELIED ON THE FOLLOWING DECISIONS FOR ITS SUPPORT. 1 . COMMISSIONER OF INCOME TAX VS . ANZ INFORMATION TECHNOLOGY (P) LTD. 318 ITR 123(KAR) . 2 . COMMISSIONER OF INCOME TAX VS . SABARI ENTERPRISES 298 ITR 141 (KAR). 7. THE ISSUE S RELATING TO SECTION 36(1 )(VA) HAVE BEEN CONSIDERED AND DISCUSSED IN DETAIL BY THE HON'BLE ITAT COCHIN BENCH IN THE CASE OF SFO TECHNOLOGIES (P) LTD. (ITA NO. 454/COCH/2014) AND DECIDED IN FAVOUR OF THE DEPARTMENT . THE HON ' BLE ITAT HAS HELD THAT: W E A RE INCLINED TO HOLD THAT WHERE ANY SUM RECEIVED BY THE ASSESSEE FROM ANY OF ITS EMPLOYEES AS CONTRIBUTION TO PF AND/OR ESI WAS NOT CREDITED BY THE ASSESSEE TO THE EMPLOYEES' ACCOUNTS IN THE RELEV ANT FUND OR FUNDS ON OR BEFORE THE DUE DATE AS PER EXPLANAT ION TO SECTION 36(1)(VA) OF THE I . T. ACT, THE ASSESSEE SHALL NOT BE ENTITLED TO DEDUCTION THEREOF ' . 8 . IN VIEW OF THE ABOVE AND RELY I NG ON THE DECISION OF THE HON ' BLE IT AT , COCHIN BENCH , IT IS HELD THAT THE APPELLANT IS NOT ENTITLED FOR DEDUCTION AND TH EREFORE , THE ADDITION MADE BY THE ASSESSING OFFICER AMOUNTING TO RS. 9 , 63 , 879/ - IS CONFIRMED . . 3 6 THE ASSESSEE BEING AGGRIEVED IS IN APPEAL BEFORE US RAISING SEVEN GROUNDS. THE LD COUNSEL FOR THE ASSESSEE, FAIRLY SUBMITTED THAT THE ISSUE IN QUESTION IS COVERED AGAINST THE ASSESSEE BY THE RECENT JUDGMENT OF THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS MERCHEM LTD., REPORTED IN (2015) 61 TAXANN.COM 119(KERALA) . THE LD DR PRESENT WAS DULY HEARD. 7 WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL ON RECORD. ADMITTEDLY, IN THIS CASE, THE DISALLOWANCE MADE IS WITH REFERENCE TO THE EMPLOYEES CONTRIBUTION TO PF/ESI. T HE REMITTANCE IS BEYOND THE DUE DATE MENTIONED IN SEC. 36(1)(VA) OF THE ACT. THE HONBLE JURISDICTIONAL HIGH C OURT IN THE CASES OF CIT VS SOUTH INDIA CORPORATION REPORTED IN (2015) 58 TAXMANN.COM 208(KERALA) AND CIT VS MERCHEM LTD ( (2015) 61 TAXANN.COM 119(KERALA) HAS CATEGORICALLY HELD THAT WITH REFERENCE TO EMPLOYEES CONTRIBUTION IN ORDER TO CLAIM IT AS A DED UCTION, THE SAME HAS TO BE REMITTED WITHIN THE DUE DATE SPECIFIED UNDER SECTION 36(1)(VA) OF THE ACT. THE RELEVANT FINDINGS OF THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASES OF SOUTH INDIA CORPORATION LTD.(SUPRA) READ AS UNDER: 4. G O I N G B Y THE M A T E RI A L FINDIN GS OF F AC T S, IT CA NN O T B E DI S PUTED THAT TH E PA Y M E NT S WE R E M A D E B Y TH E AS S E SS EE A F T E R TH E D A T E B Y W HI C H TH E A SSESSEE WAS R E QUIR E D A S T H E E MPL OYE R T O C R E D I T AN E MP L OYE E 'S C O NTR I BUTI O N T O TH E E MPL O Y EES' AC CO UNT IN TH E P ROV I DE NT F UND . T HER EF O R E, I N TE R M S O F T H E EX P L A N A TI O N T O C L A U SE ( VA ) OF SEC TI O N 36 ( I ) O F TH E IN CO M E TAX AC T , S UCH S UM S P A I D A F T E R T H E DU E D A T E C A NN O T B E CL A IME D AS O THER D E DUCTI O N S IN T E RM S OF SEC TI O N 36 O F TH E INC O M E T AX AC T . T HI S I S P O I N TE DL Y SO B E CA U S E IN TERM S OF S EC TI O N 4 3 B O F T H E IN C O ME TAX AC T , DE DUCTI O N S A R E TO BE O NL Y O N AC T U A L P AY M EN T . T H ESE T WO PR OV I S I O N S WE R E C O N S I D E R E D B Y TH E H O N ' BL E A NDHR A PR A D ES H HI G H C O U RT I N HIT EC H ( I NDIA ) ( P . ) LTD . V. U NION OF I NDIA L19 97] 2 2 7 I T R 44 6 / 94 T AX MA N 454 IN W HI CH IT WAS H E LD TH A T A CO MB I NE D R EA DIN G OF C L A U SE (VA ) O R S EC T I O N 36 ( I ) AND S EC TI O N 43B O F TH E I NC O ME T AX AC T M AKE S IT C L EA R TH A T I F TH E A S S E SS EE (E MPL OYE R ) C R EDITED A N Y S UM R ECE I VE D B Y H I M F R O M A N Y O F H I S E M PL OYEES O N O R B E F O R E TH E D U E DA TE, TH A T I S , TH E D A T E B Y W HI C H TH E A SS E S SEE ( E M P L OYER) I S R EQ UIR ED T O CRED IT TH E E M P L OY E E S' C O N T R IBUTI O N T O THE E MPL O Y EE S' A CC O UNT IN TH E R E L EVA NT F UND ( IN C LUDIN G TH E P R O V ID EN T F U ND ) , HE W IL L BE E NTITL E D T O D E DUCT TH E SA ID A M O UNT IN C O MPUT I N G HI S BU S INE SS IN CO M E. BUT , SE CTI O N 43 B C O NTR O L S TH E A LL O W A BILIT Y O F DEDU C TI O N O R P AY MENT S PECIFI E D IN C LAU S ES (A) T O ( D ) TH E R EOF A N D PR O VIDE S C ERT A IN C O NDITION S S UBJECT T O WHICH A L O N E TH E D E DU C TI O N S M A Y BE P E RMI S S IBL E . E NUN C I A TI N G TH E P O I NT . IT W A S HELD THAT DEDUCTION W O ULD B E AVA IL A BL E O NL Y IF TH E R E MITT A NC E T O TH E F UND I S M A D E W I T HIN TH E D U E DA T E FI XE D FOR MAKING SUCH REMITT A N CE INT O THE FUND ; IN TH E C ASE IN H A ND , THE PR OV ID E NT F UND . S O M UC H SO , TH E QUE S TI O N REFERRED IS T O BE ANSWERED IN FAV O UR O F TH E REVENUE. HENCE W E A N SWE R TH E R E F E R E N CE B Y HOLDING THAT ON TH E FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE ASSESSEE IS NOT ENTITLED TO CLAIM DEDUCTION OF THE BELATED PAYMENT TO THE PROVIDENT FUND IN VIEW OF THE PROVISIONS OF THE EXPLANATION TO CLAUSE (VA) OF SECTION 36(1) AND 43B OF THE INCOME TAX ACT, IN THE LI GHT OF THE LAW LAID IN HITECH (INDIA) P LTDS CASE (SUPRA) 4 8 FURTHER, THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF MERCHEM LTD (SUPRA) FOLLOWING THE JUDGMENT OF THE HONBLE GUJARAT HIGH COURT IN THE CASE OF CIT VS GUJARAT STATE ROAD TRANSPORT CORP ORATION REPORTED IN 366 ITR 179(GUJ) HAVE ELABORATELY EXAMINED THE ISSUE AND DECIDED THE MATTER IN FAVOUR OF THE REVENUE. THE RELEVANT FINDINGS OF THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF MERCHEM LTD (SUPRA) READ AS UNDER: 18. ON A READIN G O F SEC . 36 ( I )(VA), W H A T WE F IND I S THAT A N Y S UM R E CEIVED BY TH E ASSESSEE F R O M HI S E M PL OY EE S T O W HICH TH E PR O VI S I O N S OF S UB - C L A U SE (X ) O F C L A U S E ( 2 4) OF SEC.2 APPLY WAS CRED I TED BY TH E A SS E SSE E T O TH E EMPL O YEES ' ACC O UNT IN THE REL E VANT FUND O R F UND S O N O R B E F O RE TH E DU E DAT E PR E S C RIB ED UND E R EXPLANATION I TO SEC . 36( I )(V A), I S ENTITLED T O DEDUCTI O N . ACC O RDIN G T O U S, IT THU S M EA N S TH AT S E C .36( I )(V A ) TAK ES CARE O F CO NTRIBUTI O N RE CE I V ED O N A CCO UNT O F TH E E MPL OYEES A ND C R EDI T E D BY THE ASS E SSE E T O TH E EMPL O Y EE S' AC C O UNT IN THE REL EVA NT F UND O R FUND S O N OR BE F O R E TH E DU E D A T E AS P R OVIDE D UNDER THE RELEVANT S TATUTE AL O NE WILL BE ENTITLED T O GET DEDU C TI O N . IN THI S CO NT EX T , TH E D EF INI T I O N OF INCOME CONTAINED UNDER SEC . 2(24) (X) IS RELEVANT , WHICH READ THU S: ' AN Y SUM RECEIVED B Y THE ASSESSEE FROM HIS EMPLOYEES AS C O NTRIBUTION S T O A N Y PR OV IDENT FUND ON S UPERANNUATI O N FUND OR AN Y FUND SET UP UNDER THE PRO V ISI O N S O F THE E MPL OYEES' S T A T E IN S UR A NC E ACT , 1948 (34 OF 1948) , O R A N Y OTHER FUND F O R TH E WELFARE OF S UCH EM PL OY EE S.' 19. THEREFORE, INCOME OF THE ASSESSEE INCLUDED ANY SUM RECEIVED BY THE ASSESSEE FROM HIS EMPLOYEE AS CO NTRIBUTI O N T O AN Y PROVIDENT FUND O R S UPERANNUATI O N FUND O R FUND S SE T UP UND E R TH E P R OV I S I O N S OF TH E E MPL OY EE S' STATE IN S URANCE A C T , 1948 ( 34 O F 1 9 48 ) O R AN Y O THER F UND FO R TH E WE L FA R E O F S UCH E MPLO Y EE S. A CC O RDIN G T O U S, O N A RE A DIN G OF S E C .3 6 ( 1 )(VA) A L O N G W ITH SCC.2(24)(X), IT I S CA T EGO RI C A N D CLEAR THAT THE CONTRIBUTION RECEIVED B Y THE A SS E S SEE FR O M THE EMPL OY EE AL O NE W AS TREATED AS INC O M E FOR THE PURPO S E OF SE C.3 6 ( I ) ( V A) OF TH E A C T A ND TH E R E F O R E W E A R E O F TH E CONSIDERED OPINION T H A T THE A SS E SS EE WAS E NTITLED T O GE T DEDU C TI O N FO R TH E S UM R ECEIVE D B Y TH E ASSESSEE F R O M HI S E MPL OYEES TOWARDS CO NTRIBUT IO N T O TH E FUND O R F UND S SO M E NTI O N ED O N L Y IF TH E SA ID A M O UN T WAS CREDI T ED BY T HE ASS E SSE E ON O R B E F O RE TH E DUE D A T E T O THE EMPL OYEES A C CO UNT I N TH E REL EV ANT FUND A S PR OV I DE D UN DE R EXPLA N A TI O N 1 TO S EC . 36( I )(VA) OF THE ACT . ACCORDING T O US, S O FAR A S SEC . 43B (B) IS CONCERNED, IT TAKE S C A R E O F O NL Y THE CO NTRIBUTION PAYABLE BY THE EMPLOYER / ASSESSEE TO THE RESPECTIVE FUND . TH E REF O RE , IN THAT C IR C UM S T A N CES S E C. 36 ( 1) ( V A) AND SEC . 43B ( B ) O PER A TE IN DIFFERENT FIELD S I.E . THE F O RMER TAK ES CA R E OF E MPL OYEE'S CO NTRIBUTI O N AND THE LATTER EMPL OY ER 'S C O NT RIBUTI O N. TH E A S SE SSEE WAS E NTITL E D T O GE T T H E BEN EFI T OF DEDUCTION UNDER SEC . 43B ( B ) AS PR O VIDED UNDER THE PR O VIS O THERET O O NL Y W ITH R EGA RD T O THE P O RTI O N OF TH E A M O UNT PAID BY THE EMPLO Y ER T O THE CONTRIBUTORY FUND . SUCH AN UND E R S T A NDING OF SE C . 43 B I S FURT HER EX EMPLIFIED B Y THE PHRASEOLO GY U S ED IN THE PR O VIS O, WHICH READS THU S: 5 ' PR OV ID E D THAT N O THIN G C O NT A IN E D IN THI S SE C TI O N S H A LL A PPL Y IN R E L A TI O N T O A N Y SU M W H IC H IS A CTUALL Y PAID B Y THE ASS E SSEE O N O R B E F O R E THE DUE D A TE A PPLIC A BL E I N HI S CASE F O R F URNI S HI NG TH E RETURN O F IN CO ME UND E R S UB - SE CTI O N (I ) OF S EC T I O N 1 39 IN R ES P E CT O F TH E PR EV I O U S YEAR IN W HI C H THE LI A BILIT Y T O P AY S U C H S UM WAS IN C URR E D AS A F O R ESA ID A ND TH E EV I DE N CE OF S U CH P AYMEN T I S FURNI S H ED BY TH E ASSESSEE A L O N G W ITH S U C H R E TURN .' F URTH E R , IN EX PLAN A TI O N I T O S EC . 43 B A L SO TH E PHRA SEO L OGY U S ED P E R S U A D E U S T O TH INK TH A T SEC. - 43B CAN BE A PPLI E D T O THE C O NTRIBUTI O N PA Y ABL E B Y TH E A S S E SS EE A S A N EMPL OY ER, WHICH R E AD S THU S: FOR THE REM O VAL OF DOUBT S, IT I S HEREB Y DECLARED TH A T W H E RE A D E DUCTI O N I N R ES P EC T OF A N Y SUM REFERRED TO IN C L AUSE (A) OR CLAUSE (B) OF THIS SECTION IS ALLOWED IN C O MPUTING TH E INC O M E REFERR E D TO IN SECTION 28 O F THE PRE V I O US Y EAR ( BEING A PREVIOUS Y EAR REL E VANT T O TH E A SSESS MENT YE A) CO MMENCING O N THE IST D A Y O F APRIL , 1 9 8 3 O R A N Y EA RLIER ASSESS MENT Y E A R ) IN W HI C H T H E LI A BILIT Y TO PAY SUCH SUM W A S INCURR ED B Y T HE ASSESS EE, TH E ASSESS EE S HALL N O T B E E NTITL ED T O ANY DE DU C TI ON UNDER THIS SECTION IN RESPECT OF S UCH S UM IN C O MPUTIN G TH E INCOM E O F TH E PR EV I O U S YEA R IN W HICH THE SUM IS ACTUALLY PAID B Y HIM . ' T H E R E F O RE , A C CO RDIN G T O U S, S INC E THE R ES P O ND E NT H AS A DMITT E DL Y N O T P A ID TH E D ED U C T IO N SO MA D E W ITHI N THE DUE D A TE A S PR O VIDED UND E R SE C.3 6( I )(VA), TH E R ES P O ND E NT WAS N O T E NTITL ED T O GE T D ED U C TI O N O R TH E AM O UNT S DEDUCTED THER E UN D ER FO R A ND O N BEH A L F OF TH E E MPL OY E ES . 20. IN V I EW O F TH E R E LI A N C E PL ACE D B Y V AR IO U S HI G H CO UR TS IN 'ALOM EXTRUSIONS' (SUPRA ), TO ARRIVE A T A CO N C LU S I O N TH A T TH E ASSESS EE S TH E R E IN WER E L IA BL E T O P AY B O TH THE EMPL OYEES AS WE L L AS E MPL OYE R ' S CO NTRIBUTI O N O N O R BEF O RE FILIN G O F RETURN UND E R SEC. 1 39( I ) O NL Y, WE TH O U G HT T H A T IF 'AL OM EX TRU S I O N S' (S UPRA) I S DISCUS S ED IN DETAIL ; TH E QUE S TION R A I SE D IN THI S CASE CA N B E M ADE C L EA R . IN PA R AG RAPH 3 O F THE SA ID JUD G M E NT , THE QUE S TI O N C O N S ID E RED WAS FOR MUL A T E D AS FO LL OWS: 1 '3 . A S H O RT QU ES T IO N W H IC H AR I SES FO R DETERM IN AT I O N I N TH I S B A T C H OF CIVI L APPEAL S I S WHE TH ER O M ISSION (DELETI O N ) OF T HE S ECOND PROVI SO T O S EC T ION 43B O F T HE I NC O ME - TAX ACT . 1961 BY T H E FI N ANCE AC T 2003 O P ERATED WITH EFFECT FROM 1 S T APRI L . 2004 O R WHET H ER IT O PER A TED RE TR OSPEC T IVELY W ITH E F FEC T FRO M 1S T A PR I I . 1988 ? '. 21 . T H E R EFO R E, T H E QU ES TI O N TH A T WAS CO N S ID ERED I N ALOM EX T RUSIONS' CASE' WAS WHET H ER O M ISSIO N OF SECO ND PR OV IS O T O SE C . 43B O F TH E IN CO ME TAX AC T B Y T H E F IN A N CE AC T , 2003 O P ERA T ED WITH EFFECT FROM 1S T APRIL , 2004 OR R E TR OS PECTIV E L Y WITH EFFE C T F R O M 1 S T A PRIL , 1 9 88. T H E R EFO R E, TH E QU E S T IO N R A I SED IN THI S APPEAL HA S NOTHIN G TO DO WITH THE QUESTI O N CO N S IDER E D IN TH E S AID D EC I S I O N . IT I S T RU E TH AT SEC . 2 (2 4 , (X) AS W ELL AS SEC . 36 ( I ) ( VA ) WERE DI S CUSS E D IN P ARAG RAPH S 10 A ND II OF TH E S AID J UD G M EN T . B U T I T WAS FOR TH E SO L E PURP OS E OF UNDER S T A NDIN G THE SC H E M E OF THE I NC OME TAX A C T , 1 96 1 AS I T EXISTED PR IO R T O 1 ST A PRIL , 1 984 A ND AS IT S T OO D A FT E R I S T APRIL , 1 9 8 4. AFTE R DI SC U SS IN G TH E AFO R ESA ID PR OV I S I O N S AN D SEC . 43 B THE A P EX CO URT H E LD IN P A R AG R A PH 14 OF T HE J UD G M E N T AS FOL L OWS : ' 1 4. ON RE ADIN G T H E A B OVE PR OVIS I O N S , I T BECO M ES CLEA R T H AT THE ASSESSEE( S ) - EMPLO YER ) WOU LD BE E NTITL E D TO D E DU CT I O N O NL Y IF TH E C O NTRIBU TIO N STA ND S CRE DIT E D O N OR BEFORE T H E D U E DATE GIVE N IN THE PR OV ID E NT FUND AC T . H OWEVE R , TH E SECO N D PR OV I SO O N CE AGA IN C R EA T ED FURTH ER DI FF I C UL TIES. IN MANY O F TH E C O MPANI ES, FINANCI A L YEA R E NDED O N 3 1 S T M A R C H , W HI C H D I D NO T COI N C ID E W ITH TH E ACCO UNTING PERI O D O R R .P.F.C. FO R EXA MPL E, I N M ANY CA S E TH E T IM E T O M AKE CO NT RI B U TI ON T O R . P .F . C ENDED AF T E R DU E D A T E OF F ILIN G OR RE TU RNS. T H ER E F O RE, TH E I ND U S T R Y ONCE AGAIN MA D E REPRE S EN T A T ION T O TH E M INI S TR Y O F F IN ANCE A ND TA KIN G COG N IZA N CE OF TH IS D I FF I C UL TY, TH E PAR L IAM E NT IN S ERTED O N E MORE A M E NDM E NT VI D E F IN A N CE AC T 2003 , W H ICH, AS S T A T E D A B OVE, CAME I N T O F O RCE W.E.F . I S T APRIL 2004. IN O TH E R WO RD S, A FT E R I S T A PR I L , 2004 , TWO C H A N GES WE R E MADE, NA M E L Y, DELETION O F THE SECOND PR OVISO A ND F URTH E R A M E N DM E NT I N THE F I RST PR OV I SO , Q U O T E D A B OVE. B Y T H E FINA N CE ACT 2003, T H E A M E ND ME NT M A D E IN TH E F IR ST PR OV I SO EQU A T E D IN T E RM S OF TH E B E N EFI T OF DE DU CTIO N OF TAX, DUTY, CESS A ND FEE O N TH E O N E H A ND W ITH CO NTRIBUTI O N S TO E MPL OYEES ; PR OV ID E N T F UN D , S U PERA N N U AT ION F UN D O N E O TH E R WE LF A RE F UNDS ON THE O THE R . H O W EVER , TH E FIN A N CE AC T , 2 0 03, B RIN GI N G A B O UT T HIS UN I F ORMITY CA M E INT O F O RCE W. E .F. I S T APRIL , 2 004 . 22. THEREFO R E , O N A READI N G OF T H E AFORE - EXTRACTED PO RT ION OF T H E JUDGMEN T , IT I S C L E AR T HA T THE APEX COURT HAD CONSIDE R ED ONLY THE QUE S TI O N RELA T IN G TO T HE EFF E CT OF THE AMENDMENT SO MADE A ND FOUND THAT A M ENDME NT WAS CURATIVE IN NAT U RE AND T HEREFORE THAT I T OPE R ATED R E TR OSPEC T IVELY FR O M 1 S T A PRIL . 1988 . 23. T H E R EAF T ER, IN PA R AG R A PH 1 5 O F TH E J UD G M ENT, IT WAS H E LD TH A T T H E 2 A M ENDME NT S WERE B R OUG HT ABOUT U ND ER TH E FI N A N CE AC T , 198 3 FO R TH E PURP OSE OF E N S URIN G TH A T TH E RE L AXA T IO N / IN CE N T I VE WAS REST RI C T ED O NL Y T O T AX, DUT Y, CESS A ND F EE UND E R SEC . 4 3 B IN O RD E R T O E N S UR E TH A T IT DID N O T A PPL Y T O CO N T RIBUT IO N S T O LA B O UR WE L FA R E F UND S. F URTH ER , IT WAS HE LD TH A T T H E REA S O N AP P EA R S T O BE T HA T THE EMP L OY ER S S H O ULD N O T SIT : O N THE CO LL EC T E D CO N T RI B UTI O N S A N D DEPRIVE THE WORK M EN O F TH E RIGH T FU L BEN E F IT S UNDER S O CIAL WE L FARE LEGIS L A TI O N S B Y D E L AY IN G PA Y M E N T OF CO NTR I BU TIONS TO TH E WE L FA R E FU N DS. IT WAS A L S O HE L D T HAT CONSEQUENT TO THE IMP LE MENT A T IO N PR O BLEM S OF TH E SECO ND P ROV I SO T O SEC . 4 3 B R ES UL TE D I N E N AC TM E N T OF FINA N CE ACT 2003 , DEL E TIN G TH E SECO ND PR OV I SO A ND B R IN G IN G A B OUT U NI FO RMIT Y I N TH E F IR S T P R OV I SO BY EQ U A TIN G TAX D UT Y, C E SS AND FEE W ITH C O NTRIBUTI O N S TO WE L FA R E F UND S AND TH E R EFO RE T H E F IN A N CE AC T , 2003 W HI CH WA S M A D E APPLIC A BLE B Y TH E PARLI A M E NT O NL Y WIT H EFFEC T FR O M I S T A PRIL , 2004 WO UL D B ECOME C U RA TI VE IN N A TURE A ND HENCE IT WO ULD APPL Y R E TR OS P EC TI VE L Y F R O M A PRIL , 1 988. 24. S O A L SO , THE LE A RN E D C O UN SE L FO R TH E A SSESSEE CO NT E NT E D TH A T S IN CE SEC . 43 B CO MM E N C E S ' WI TH A NON O B S T A NT E C L A U S E , EX PL A NATI O N I T O SEC.36( I )(VA) WAS EXC LUD E D . BUT I N ALOM EX T RUS I ONS ' CASE ' (S U PRA) THE AP EX COU RT H A D H E LD TH A T TH E UND E RL Y I NG OBJEC T OF TH E N O N - O B S T A NT E C L AUSE W AS T O D I S A LL O W DED U CT I O N S C L AI M E D M E R E L Y BY M AKI N G T HE BO O K ENTRY U NDER MERCANTI L E SYS TEM O F ACC O U NTING TH E R E FORE , THE CONTENTI O N OF THE LEARNED COUNSEL FOR THE A S SESSEE THAT SINCE SEC . 4 3 B C O MMENC ES W ITH , N O N - OBSTANTE CLAUSE , SEC . 36( I ) (VA) STOOD EXCLUDED, CANN O T BE SUSTAINED . A C C O RDIN G T O U S , THE F INDIN G OF THE APEX COURT TOWARDS THE LATTER PART OF PARAGRAPH 15 MAKE S THE I NTENTI O N A ND PURP OSE B E HIND TH E A M E NDMENT BR O UGHT ABOUT T O SEC . 43B CLEAR AN D IT READ S THU S: ACC O RDIN G L Y, W E ' H O LD TH A T F IN A NCE ACT , 2003 W I L L O P E R A T E R E TR OS P E CTI VE L Y W.E.F . IS T A PRIL 19 88 (WHEN THE FIRST PR O VI SO S T OO D IN S ERTED ). L AS TL Y, WE MA Y P O INT O UT THE H A RD S H IP A N D TH E IN V IDI O U S DI S CRIMINATION WHICH W O ULD BE CAUSED T O TH E ASS E SSEE ( S) IF THE C ONTENTI O N OF ' T H E D EPA RTM E NT I S TO BE ACCEPTED THAT FINANCE ACT, 2003, TO THE ABO VE EXT E NT, O PERATED PR O SP E CTI VE L Y. TAKE A N EX AMPL E - IN THE PRESENT CASE , THE RE S PONDENTS HAVE DEP OS ITED THE CONTRIBUTI O NS WITH TH E R . P . F .C AFTER 3 1 ST M ARCH (END OF ACCOUNTING Y EAR) BUT BEFORE FILING O F THE RETURN S UNDER THE I T ACT A ND THE DATE OF PAYMENT FALLS AFTER THE DUE DATE UNDER THE EMPLOYEES' PROVIDENT FUND ACT , THEY WILL BE DENIED DEDUCTION FOR ALL TIMES . IN VIEW OF THE SECOND PROVISO , WHICH STOO D ON TH E S TATUT E B O OK AT THE RELEVANT TIME , EACH OF SUCH ASSESSEE(S) WOULD NOT BE ENTITLED TO DEDUCTION UNDER S E C . 43B O F THE ACT F O R ALL TIMES . THE Y WOULD LOSE THE BENEFIT OF D E DUCTION EVEN IN THE Y E A R O F ACC O UNT IN WHICH THE Y PA Y THE C O NTRIBUTI O N S T O THE WELF A RE FUND S, W HEREA S A D EFA ULT E R W H O FA IL S T O PA Y THE C O NTRIBUTION TO THE 3 WELF A R E F UND RIGHT UP T O IST APRIL , 2 004 A ND W H O P AYS TH E CO NTRI B UTI O N A LTER IST APRIL , 2004 , WOULD G ET THE B E NEFIT O F DEDUCTI O N UNDER S E C . 4 3 B O F TH E AC T . ' AC C O RD I N G T O U S, IT I S THU S CLE A R THAT TH E D EC I S I O N R E ND E RED B Y TH E A P EX C O URT IN ALOM EX TRUSI O NS ' (SU PR A ) D I D N O T C O N S ID E R TH E QUE S TI O N I N VO L VE D IN T HI S CASE. 25 . S O A L SO. I N P A R AG R A PH 16 OF TH E JU D G M E NT S U PRA, TH E A P EX CO U RT H AD Q UOTED WITH APPROVAL THE J UD G M E NT I N C O M MI S SI O N ER OF I NCO M E TAXV. V J H GOTLA L ( 1 985) 1 56 1 T R 323 (SC) W HI CH READ TH US: ' WE S H O ULD FIND O UT TH E INTENTI O N FR O M THE L A N G U AGE U SE D B Y TH E L EG I S L A TUR E A N D I F S TRICT LITER AL C O N S TRUCTI O N LEAD S T O AN AB S URD R ES ULT , I . E . A RE S ULT N O T INTEND E D T O BE S UBSE R VED B Y TH E OB J EC T OF THE L E GI S LATI O N F O UND IN THE M A NNER INDICATED BEF O RE , THEN IF AN O THER C O N S TRU C TI O N I S POSS IBLE A P PEA R FROM STRICT LITERAL C O NSTRUCTI O N , THEN THAT C O N S TRUCTION S H O ULD B E PREFERR E D T O TH E S TRI C T LI TE R AL C ONSTRUCTI O N. TH O U G H E QUIT Y AND TA XATI O N A R E O FT E N S TRAN GE R S, A TTEMPT S S H O ULD B E MA D E THAT TH ES E DO N O T REMAIN ALWAYS S O AND IF A CONSTRUCTION RESULT S IN EQUIT Y RATHER TH A N IN INJU S TIC E, THEN S UCH CONSTRUCTI O N SHOULD BE PREFERRED TO THE LITERAL CONSTRUCTION . ' 26. THEREFORE , IN OUR VIEW , WHEN SE C . 43B A S IT S T OO D PRIOR T O THE AM E NDM E NT A ND S E C .3 6(1)(VA)) EX PL A NATI O N I THERET O R L W S E C .2( 24 ) (X ) ARE C O N S IDER E D T OG ETHER , IT I S CLEAR TH A T TH EY O P E R A TE IN DIFF E R E N T F IE LD S. S O F A R AS THE E MPL OYEE'S CO NTRIBUTI O N R ECEIVE D I S CO N CE RN E D, IT S H O ULD H AVE BEE N PAI D ON OR B EFO R E TH E DU E D A T E PR ESC RI BE D U ND E R TH E R E L EVA NT S T A TUT ES. T H E N AGA IN T H E L EARNED CO U N S E L CO NT EN D ED TH A T O N A R EA DIN G OF SEC . 4 3 B (B), A N Y S UM ' P AYA BL E BY TH E ASSESSEE AS AN EMPLOYE R ' BY WAY CO NTRIBUTI ON T O A N Y P ROV ID E NT F UND M EA NT P AY M E NT O F BO TH E MPL OYEES CO NTRIBUTI O N A N D E MPL OYE R 'S CO NTR I BUTI O N B Y THE E MPL OYE R A ND TH E R EFO RE TH E ASSESSEE WAS E NTITL ED T O P AY B O TH CO NTR IBUT I ONS T OGE T HER ON O R B EFO R E THE F I LIN G OF TH E R E TURN UNDER S EC. 1 39( I ) OF THE AC T . WE ARE UN AB L E T O ACCE PT TH E SAID CON T EN TI O N A D VA NC E D BY TH E L EA RN E D COU N SE L . I F SUCH A CON T E NT IO N IS ACCEP T ED , T HA T WO UL D MAKE SEC .36(1) (VA) AND TH E EX PL A N A TI O N THERE T O O TI OSE . ACCO RD I N G T O U S, T H E R E WAS NO INDICA T ION IN SEC.43B AS IT ' STOO D PRI O R T O THE AM E NDM E NT A ND TH E REAFT E R A L SO T O D EFAC E S E C.36( I )(VA) A ND THE EX PL A N A TI O N TH ERE TO F R O M THE INC O ME TA X ACT . T HU S, IT MEAN S TH A T B O TH PR OV I S I O N S AR E O PER A TI VE A ND TH E CO NTRIBUTI O N S H AVE T O BE PAID IN ACCORDANCE W ITH THE M A NDATE C O NT A INED UND E R SE C.3 6 (1)(VA) AND EX PL A N A TI O N TH E RET O A ND UNDER SE C . 43B, RESPECTIVEL Y. 4 27. S O FAR A S THE DECI S I O N S CIT E D B Y TH E LEARN E D CO UN S EL F O R TH E ASSESSEE R E F ER R E D T O IN PA R AG R A PH 1 5 OF THI S JUDGMENT WERE C O NC E RN E D , IT I S TRUE THAT IN TH E SA ID J UD G M E NT S, TH E HI G H CO URT S WE R E CO N S I DE RIN G TH E QUESTION O F REMIT TANCE O F TH E CO NTRIBUTI O N S R E CEIV E D F R O M THE E MPL OY E E AS W ELL AS TH E E MPL OYE R A N D H E LD THAT THE CONTRIBUTIONS R E CEIVED FROM THE EMPL O YEE WERE AL S O LIABLE T O B E P A ID T O TH E RE S P E CTIV E S TATUT O R Y AUTHORITIE S UNDER THE PF AND ESI A C T O N O R B E F O RE TH E FILIN G O F RETURN UND E R SEC. 1 39( I ) W AS ALO NE S UFFICI E NT T O BE E LI G IBLE F O R DEDUCTION . F O R TH E RE ASO N S S TATED, WE A RE UN A BL E T O S U BSC RIB E T O TH E VIE W S EXPRE S SED B Y THE HI G H CO URT S I N TH E D E CI S I O N S C IT E D S U PRA B Y TH E L EA R NED CO UN SE L FO R TH E AS S E S SEE . THAT APART, WE A RE REMINDED OR THE JUDGMENT OR THE HON'BLE APEX COURT IN P AD M A S UN DARA RAO AND OTHERS V . STATE OF T.N . AND OTHERS [(2002) 3 SCC 533] PARAGRAPH 9 WHICH R E AD S AS F O LL OWS: 'IT IS ALSO A SETTLED PROPOSITION OF LAW THAT COURTS SHOULD NOT PLACE RELIANCE O N D E C I S I O NS WITH O UT DISCUSSING AS TO HOW THE FACTUAL SITUATI O N FITS IN WITH THE FACT SITUATI O N O F THE D E CI S I O N O N WHI C H RELIANCE I S PLACED . THERE I S ALWA Y S PERIL IN TRE A TIN G THE W O RD S O F A S P EE CH O R J UD G M E NT A S TH O U G H THEY ARE WORD S IN A LEGI S LATIVE ENACTMENT A ND IT I S T O B E R E M E MB E R E D TH A T JUDI C I A L UTT E R A N CES A R E MADE IN THE SE TTING O F TH E F A CT S O F A P A RTI C UL A R C A SE SA ID L OR D M O RRI S IN ' H ARR IN G T ON V . BRITI S H RAILW AYS B O ARD '. CIRCUM S TANTIAL FLEXIB I LIT Y, O NE ADDITI O N A L O R D IF F E R E NT FACT M AY M AKE A WO RLD O F DIFFE REN C E BET WE EN CONCLU S I O N S IN TWO C A S E S. ' 28. WE ARE ALSO CONSCIOUS OF THE FACT THAT IF THE INTENTION OF A PARTICULAR PROVISIONS OF STATUTE CAN BE GATHERED FROM THE LANGUAGE USED B Y THE LEGI S L A TION , THEN WE AR E B O UND T O A BIDE B Y TH E L A N G U AG E U SE D THEREI N IN ORDER TO ASCERTAIN THE INTENTION. WE ARE ALSO O F THE O PINI O N TH A T THERE W AS A CLEAR L OG IC BEHIND SEC.36( I )(VA) AND EXPLANATION THERETO SINCE THE LEGISLATURE INTENDED THAT THE AM O UNT RECEIVED TOWARDS CONTRIBUTION OF THE EMPLOYEE WAS MONEY BELONGING T O THE EMPLOYEE AND THE ASSE SSEE WA S NOT ENTITLED TO UTILIZE THE SAID FUND AND ENRICH HIMSELF . SO ALSO , B O TH THE PROVISIONS S UPRA W ILL C O - E X I S T HARM O NIOUSL Y WITH O UT DISTURBING EACH O THER. THEREF O RE , THE DI S TINCTI O N DR AW N T O CR E DIT TH E A M O UNT OF THE EMPL OY E R AND TH E EMPLO Y EE WA S WITH A C L EA R O BJ E CTI V E AN D THER E I S N O ILL EGA L ITY OR O TH E R L EGA L INFIRMIT Y IN C LA S SIF Y IN G THE C O NTRIBUTI O N S O F E MPL OY EE S A ND EMPL OYE R IN TH E M A TT E R O F C R E DITIN G TH E S AM E T O THE APPROPRIATE STATUT O R Y AUTH O RITIES . 29. IN THAT VIEW O F THE M A TTER , WE AR E OF THE CO N S ID E RED O PINI O N THAT TH E V I EW TAK E N B Y TH E TRIBUN A L WHICH AFFIRMED THE D E CISI O N O F THE I S T APP E LL A TE AUTH O RIT Y TH A T THE RE S P O ND E NT WAS E NTITL E D T O G ET DEDUCTION O F ' THE CO NTRIBUTI O N S 5 R ECE I VE D FR O M TH E E MPL OY EE S IF PAID O N O R B E F O R E TH E F ILIN G OF TH E RETURN UNDER SEC . 1 39 (I) WA S N O T C O RRECT . WE A R E IN C LIN E D T O AG R E E W ITH TH E JUD G M EN T O R TH E GUJ A R A T HIGH CO URT IN 'G UJ AR AT S TAT E R OAD T RA N S P O RT CO RP O RA/I O N 'S CASE (S U P R A). WE ARE A L SO OF TH E O PINI O N TH A T TH E JUDGM E NT S O F THE O TH E R H IGH C OURT S R E F E RRED T O B Y THE LEARNED CO UN SE L F O R TH E R ES P O NDENT D O N O T L AY DOWN THE LAW CORRECTL Y. 30. LEARN E D COUN S EL F O R THE RE S P O ND E NT HA S A L SO C O NTEND E D THAT W H E N T WO V I EWS ARE P OS S I B L E. O N E I N FAV O UR O F THE A SSESS EE S H A LL BE A DOPTED A ND O UR A TTENTI O N WAS DR AW N T O TH E DEC I S I O N S IN ' C OMMI SS IONER OF IN CO ME - TAX V . PODAR C EM E NT PVT . LTD. A ND OTH E R S ' [ ( 1997 ) 2 2 6 I T R 62 5] , 'M ONI S H MAH E SHW A RI V. A SS T . C OMMIS S ION E R OF INCOM E TAX AND ANOTH E R ' [(2007 ) 289 ITR 341 (SC)] A ND IND O R E CO NSTRU C TION P . LTD. V. CO MMI S SIONER OF INCOME - TA X ' [(2007) 289 ITR 341] A ND CA NV ASS ED F O R THE SA ID PR O P O SITI O N . BUT SINCE WE ARE OF THE C LEAR OPINI O N THAT THE A SS E SS EE WA S ENTITL E D T O G ET THE DEDUCT IO N O F THE AM O UNTS A S PR O VID E D UNDER S EC . 36 ( I ) ( V A ) O NL Y IF TH E A M O UNT S SO R ECE I VE D F R O M TH E EMPL OY EE WAS PAID W ITHIN TH E DU E D A T E AS PR OV ID E D UND E R TH E R ELEVA NT S T A TUT E. WE DO N O T THINK T H A T T H I S I S A C ASE T O W HI C H S UCH A PRIN C IPL E I S A PPLI CA BL E . 31 . THE RE FO R E , TH E QU ES TI O N S OF L AW R AIS ED B Y TH E R EV ENU E I S A N SW E RE D A FFIRMATI VE L Y IN FAVO UR O F ' TH E R EVE NU E. IN TH E F AC T S AND CIR C UM S T A N C E S O F TH E C A S E , W E SE T AS ID E TH E OR D E R O F ' TH E TRIBUN AL IN ITA NO.8/2014 D A TED 09. 05 . 2014 SO F A R AS THE QU ES TI O N S RAI SE D HEREIN A R E C O NC ER NED AND R ES T O R E TH E O RD E R OF TH E ASS E SS IN G OFFICER . ACC O RDINGL Y , THE APP E AL I S ALL O W E D . 9 IN VIEW OF THE ABOVE JUDGMENT OF THE HONBLE JURISDICTIONAL HIGH COURT CITED SUPRA, WE HOLD THAT CIT(A) IS JUSTIFIED IN CONFIRMING THE ASSESSMENT ORDERS. 10 IN THE RESULT, THE APPEALS FILED BY THE ASSESSEE ARE DISMISSED. 6 STAY PETITION NOS. 59 & 60/COCH/2015 11 SINCE WE HAVE DISMISSED THE APPEALS FILED BY THE ASSESSEE; THEREFORE, THE STAY PETITIONS FILED BY THE ASSESSEE ARE BECOME INFRUCTUOUS AND THE SAME ARE ALSO DISMISSED, AS INFRUCTUOUS. 12 IN THE RESULT, THE APPEALS AS WEL L AS THE STAY PETITIONS FILED BY THE ASSESSEE ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 29 TH , DAY OF OCT 2015 . SD/ - SD/ - ( B P JAIN ) ( GEORGE GEO RGE K ) ACCOUNTANT MEMBER JUDICIAL MEMBER COCHIN: DATED 29 TH , OCT 2015 RAJ* 7 COPY TO: 1 . APPELLANT 2 . RESPONDENT 3 . CIT(A) 4 . CIT , 5 . DR 6 . GUARD FILE BY ORDER ASSISTANT REGISTRAR ITAT, COCHIN