DCIT, CHENNAI V. India Land Facilities Management P Ltd. (Formerly Karthiga Facility Management P. Ltd.), CHENNAI

ITA 506/CHNY/2013

• Counselvise Citation: [2013] 120 COUNSELVISE.COM (IT) 2487 (ITAT-CHENNAI)
• Duration Of Justice: 2 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-06-2013
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 20-06-2013
• Assessment Year: 2007-2008
• Appeal Filed On: 25-03-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: T N BETGERI IRS
• Assessee Lawyers: N DEVANATHAN

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH, CHENNAI BEFORE DR. O.K. NARAYANAN, VICE-PRESIDENT AND SHRI VIKAS AWASTHY, JUDICIAL MEMBER I.T.A.NO. 506/MDS/2013 ASSESSMENT YEAR : 2007-08 THE DEPUTY COMMISSIONER OF INCOME-TAX, COMPANY CIRCLE-II(3), CHENNAI 34. VS. M/S. INDIA LAND FACILITIES MANAGEMENT P. LTD., (FORMERLY KARTHIGA FACILITY MANAGEMENT P. LTD.), PLOT NO.14, 3 RD MAIN ROAD, AMBATTUR INDUSTRIAL ESTATE, CHENNAI 600 058. PAN AACCK7255J (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI T.N.BETGERI, IRS, JCI T RESPONDENT BY : SHRI N. DEVANATHAN, ADVOC ATE DATE OF HEARING : 20 TH JUNE, 2013 DATE OF PRONOUNCEMENT : 20 TH JUNE, 2013 O R D E R PER DR. O.K. NARAYANAN, VICE-PRESIDENT THIS APPEAL IS FILED BY THE REVENUE. THE RELEVANT ASSESSMENT YEAR IS 2007-08. THE APPEAL IS DIRECTE D AGAINST THE ORDER OF THE COMMISSIONER OF INCOME- TAX(APPEALS)-I, COIMBATORE DATED 4.1.2013. THE APP EAL ITA 506/13 :- 2 -: ARISES OUT OF THE ASSESSMENT COMPLETED UNDER SEC.14 3(3) OF THE INCOME-TAX ACT, 1961. 2. THE FIRST ISSUE RAISED BY THE REVENUE IN THE PRE SENT APPEAL IS THAT THE COMMISSIONER OF INCOME-TAX(APPEA LS) HAS ERRED IN HOLDING THAT THE EMPLOYEES CONTRIBUTI ON TO PF AND ESI DEPOSITED AFTER THE STATUTORY DUE DATE ACCO RDING TO THE PROVISIONS OF SEC.36(1)(VA) CANNOT BE TREATED A S INCOME ACCORDING TO SEC.2(24)(X) IF THE SAID AMOUNT WAS DE POSITED BEFORE THE DUE DATE FOR FILING THE RETURN OF INCOME . 3. IT IS THE CASE OF THE REVENUE THAT THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF CIT VS. VINAY CEMENT LTD. (2009) [313 ITR(ST.) 1], WAS RENDERED IN CONNE CTION WITH UNPAID EMPLOYERS CONTRIBUTION TO PF AND ESI A ND NOT APPLICABLE TO THE FACTS OF THE PRESENT CASE. 4. WE CONSIDERED THE ISSUE. IN FACT, THE PAYMENTS OF EMPLOYERS CONTRIBUTION AND EMPLOYEES CONTRIBUTION TOWARDS PF & ESI ARE BOTH GOING OUT OF CASH ACCOUNT OF THE ASSESSEE-EMPLOYER. IN THE CASE OF PAYMENTS MADE BY THE EMPLOYEES, THE EMPLOYER IS PAYING SALARY TO THE EM PLOYEES ITA 506/13 :- 3 -: AFTER DEDUCTING THEIR SHARES AND THAT SHARES ARE PA ID BY THE EMPLOYER ALONG WITH ITS OWN SHARE. AS MISUNDERSTOOD, THERE IS NO QUESTION OF EMPLOYER HOLDING BACK THE C ASH GIVEN BY THE EMPLOYEES FOR MAKING ESI & PF PAYMENTS . THE CONTRIBUTION OF EMPLOYEES SHARES TOWARDS ESI & PF ARE MADE THROUGH ACCOUNTING JOURNAL ENTRIES. EFFECTIVELY, THE CASH NECESSARY FOR MAKING EMPLOYERS SHARE AND THE EMPLOYEES SHARES TOWARDS ESI & PF ARE GOING OUT OF THE CASH ACCOUNT OF THE ASSESSEE-EMPLOYER. IT IS IN TH IS CONTEXT THAT WE HAVE TO FOLLOW THE JUDGMENT OF THE HONBLE SUPREME COURT IN THE CASE OF CIT VS. VINAY CEMENT LTD. [313 ITR(ST.)1]. IN THE SAID CASE, THE HONBLE SUPREME C OURT HELD THAT EMPLOYERS CONTRIBUTION, IF PAID BEFORE D UE DATE OF FILING OF RETURN, SHOULD BE ALLOWED AS A DEDUCTION AND PROVISIONS OF SEC.43B WILL NOT APPLY. THE ABOVE R ATIO SHOULD EQUALLY APPLY TO EMPLOYEES CONTRIBUTION, AS WELL FOR THE SIMPLE REASON THAT DE FACTO SPEAKING THE CASH NECESSARY FOR PAYING EMPLOYEES SHARES IS COMING OU T OF THE CASH ACCOUNT OF THE ASSESSEE-EMPLOYER. IN VIEW OF THE ABOVE, THE TRIBUNAL HAS BEEN CONSISTENTLY HOLDING T HAT EMPLOYEES CONTRIBUTION TOWARDS ESI & PF IF PAID BE FORE DUE ITA 506/13 :- 4 -: DATE OF FILING OF RETURN, SHALL BE ALLOWED AS A DED UCTION AND THE PROVISIONS OF SEC.43B WILL NOT APPLY. THEREFOR E, WE FIND THAT THE COMMISSIONER OF INCOME-TAX(APPEALS) IS JUS TIFIED IN HIS DECISION ON THIS POINT. 5. THE SECOND ISSUE RAISED BY THE REVENUE IS THAT T HE COMMISSIONER OF INCOME-TAX(APPEALS) HAS ERRED IN DE LETING THE ADDITION OF ` 41,57,803/- MADE BY THE ASSESSING OFFICER, WHICH WAS CLAIMED BY THE ASSESSEE AS BAD DEBT WRITT EN OFF. THE COMMISSIONER OF INCOME-TAX(APPEALS) EXAMINED TH E ISSUE AND FOUND THAT IN FACT THE CLAIM MADE BY THE ASSESSEE WAS NOT BAD DEBT, BUT ON THE OTHER HAND, BUSINESS L OSS ITSELF. THE LEARNED COUNSEL APPEARING FOR THE ASSE SSEE EXPLAINED THAT THE ASSESSEE CREDITS ITS TURNOVER ON THE BASIS OF BILLS ISSUED TO ITS CUSTOMERS. BUT THE CUSTOMER S DO NOT MAKE THE PAYMENTS AS PER THE BILLS ISSUED BY THE AS SESSEE AND THEY CUT A PORTION OF THE BILL AMOUNT, CITING C OSTS OF DEFICIENCY IN SERVICES. IN VARIOUS SUCH CASES, THE ASSESSEE HAS RECEIVED THE PAYMENTS LESSER THAN THE BILL AMOU NT. THIS CUT MADE BY THE CUSTOMERS AGAINST DEFICIENCY IN SER VICES HAS BEEN WRITTEN OFF BY THE ASSESSEE, AS THE GROSS AMOUNT ITA 506/13 :- 5 -: ALREADY HAD SHOWN AS REVENUE. HE EXPLAINED THAT IN FACT, THE INCOME NEVER REACHED THE ASSESSEE AT ALL AND TECHNICALLY IT WAS ONLY IN THE NATURE OF BUSINESS L OSS AND NOT IN THE NATURE OF BAD DEBT. 6. WE AGREE WITH THE LEARNED COUNSEL. ACTUALLY, THE AMOUNT WRITTEN OFF BY THE ASSESSEE REPRESENTED THE UNREALIZED PORTION OF THE BILL AMOUNT. AS SOON AS THE BILLS ARE ISSUED, THE ASSESSEE CREDITS THE SAME IN ITS RE VENUE ACCOUNT. BUT WHEN THE BILLS ARE SETTLED, THE ASSES SEE RECEIVES SOMETHING LESSER THAN THE GROSS AMOUNT. A S THE GROSS BILL AMOUNT HAS ALREADY BEEN CREDITED AS REVE NUE, THE ASSESSEE HAS NO OTHER WAY, BUT TO SEPARATELY WRITE OFF THE DEFICIENCY IN THE COLLECTION MADE FROM THE CLIENTS. IT IS THEREFORE NOT IN THE NATURE OF BAD DEBT. IT IS ACT UALLY SHORT COLLECTION OF BILLS OR IT IS THE UNREALIZABLE PORTI ON OF THE BILL AMOUNT. THE CUSTOMERS HAVE NOT ACKNOWLEDGED THE DISPUTED AMOUNT AS DEBT AT ALL. THEREFORE, THERE IS NOTHING AS UNREASLIED PORTION OF THE BILLS ISSUED BY THE AS SESSEE. THEREFORE, THIS CANNOT BE DISALLOWED, TREATING IT A S BAD DEBT FOR THE REASON THAT THE DEBT HAS NOT BECOME BAD OR HAS NOT ITA 506/13 :- 6 -: BEEN WRITTEN OFF IN THE BOOKS OF ACCOUNT. WE CONFI RM THE ORDER OF THE COMMISSIONER OF INCOME-TAX(APPEALS) ON THIS POINT. 7. IN RESULT, THIS APPEAL FILED BY THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT AT THE TIME OF HEARING ON THURSDAY, THE 20 TH OF JUNE, 2013 AT CHENNAI. SD/- SD/- (VIKAS AWASTHY) (DR.O.K.NARAY ANAN) JUDICIAL MEMBER VICE-PRESIDENT CHENNAI, DATED THE 20 TH JUNE, 2013 MPO* COPY TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR 6. GF.