The Malappuram District Cooperative Bank Limited, Malappuram V. ITO, Circle-1, Tirur, Tirur

ITA 577/COCH/2022

AI Insights

The case involves The Malappuram District Co-operative Bank Limited, which appealed against the order of the Commissioner of Income Tax (Appeals) that confirmed the addition of Rs. 59,24,494 to its income for the assessment year 2018-19. This addition was due to the bank's failure to credit the employees' provident fund contributions by the due date, as mandated by Section 36(1)(va) of the Income Tax Act. The bank argued that the delay was caused by technical issues with the PF payment system, which were beyond its control. However, both the CIT(A) and the Tribunal dismissed these arguments, citing the Supreme Court's ruling that the provisions of Section 36(1)(va) and Section 43B(b) have different parameters for due dates and that the employee's contributions must be paid within the prescribed due dates to qualify for deductions.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 129448 (ITAT-COCHIN)
• Duration Of Justice: 10 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-03-2023
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2018-2019
• Appeal Filed On: 08-05-2022
• Other Referred Cases: CHECKMATE SERVICES PVT LTD VS CIT-1
• Laws Referred To: Income Tax Act
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Assessee Lawyers: HAMEED HUSSAIN
• Section: 43B; 143(1); 139(1)

Judgement Text

ITA No.577/Coch/2022 The Malappuram District Co-operative Bank Limited, Malappuram IN THE INCOME TAX APPELLATE TRIBUNAL BENCH: COCHIN BEFORE SMT. BEENA PILLAI, JUDICIAL MEMBER AND SMT. PADMAVATHY S., ACCOUNTANT MEMBER ITA No.577/Coch/2022 Assessment Year: 2018-19 The Malappuram District Co- operative Bank Limited Head Office The Malappuram District Cooperative Bank Malappuram Uphill Malappuram Kerala 676 505 PAN NO : AAAAT3207B Vs. Deputy Commissioner of Income-tax CPC Bangalore APPELLANT RESPONDENT Appellant by : Shri Hameed Hussain, A.R. Respondent by : Smt. J.M. Jamuna Devi, Sr. D.R. Date of Hearing : 11.01.2023 Date of Pronouncement : 30.03.2023 O R D E R PER BEENA PILLAI, JUDICIAL MEMBER: The present appeal is filed by the assessee against order passed by NFAC Delhi dated 9.11.2021 for assessment year 2018-19 on following grounds of appeal:- 1. “The order of the Commissioner of Income Tax (Appeals) is opposed to law and the facts and circumstances of the case. 2. The Commissioner of Income Tax (Appeals) has grossly erred both in law and on facts in adding the PF contribution amounting to Rs. 59,24,494/- by virtue 36(1)(va) of.the Income Tax Act. This will be covered ITA No.577/Coch/2022 The Malappuram District Co-operative Bank Limited, Malappuram Page 2 of 6 under the provisions of section 43B of the Income Tax Act. 3. The Commissioner of Income Tax (Appeals) has failed to appreciate the fact that, Section 43B is a non-obstante clause and would have overriding effect and application over the other provisions. Section 30 of EPF&MP Act is also pointed out to argue that whether it be the contribution of the employer or the employee, it is the liability of the employer and, hence, the employer's and employee's contribution cannot be treated differently insofar as the deductions permissible under Section 36 (1) (va) 4. The Commissioner of Income Tax (Appeals) has ignored the basic fact that penalty proceedings are separate and independent proceedings, thus, reliance placed by learned assessing officer solely on the order of assessment is wholly misconceived and misplaced in law and as such, the penalty order is liable to be quashed as such 5. The Commissioner of Income Tax (Appeals) has failed to appreciate the fact that, part of the disallowance was due to an error in typing the date in audit report. 6. The assessee were regular in paying various contribution to the funds such as ESI and PF. But during the financial year 2017-18, the PF payments were made mandatory by way of electronic payments system. But due to the technical issues on the website of PF, the payments gateway was not properly working at that, time. Hence in some months, the assessee couldn't make the payments on time. This was not any lapse from part of the assessee warranting to the addition by invoicing the provisions of section 36(1)(va) and section 2(24(x). 7. This issue was raised in prominent newspapers at that time. The said newspaper cuttings have been attached herewith for your kind perusal and records. 8. The proposed disallowance U/s. 36(1)(va) is not applicable in this case. Because it was not a intentional action from the assessee side, but it was purely the technical issues of the PF website.” ITA No.577/Coch/2022 The Malappuram District Co-operative Bank Limited, Malappuram Page 3 of 6 3.51 2. Brief facts of the case are as under: The assessee is a co-operative Society. For the assessment year 2018-19 under the appeal, the assessee furnished the return on 16/09/2018 declaring total income of Rs. 65,41,49,100/-. The Central processing center (CPC) did not accept the total income of Rs.65,41,49,100/- declared by the assessee and enhanced to Rs. 66,00,73,590/- reasoning that, "Any sum received from the employees as contribution to any provident fund or superannuation fund or any fund set up under ESI Act or any other fund for the welfare of employees to the extend not credited to the employees account on or before the due date (36(1)(va)) of the Income- tax Act,1961 ['the Act' for short]. 2.1 Accordingly the total income was enhanced with an amount of Rs. 59,24,494/-. The assessee objected to the proposal for said addition, but CPC did not accept the response and intimation U/s. 143(1) of the Act was issued on 02/10/2019. Aggrieved by the intimation u/s 143(1) of the Act, the assessee filed appeal before Ld.CIT(A). 3. The Ld.CIT(A) while considering the issue dismissed by observing as under: “From combined reading of the above two amended provisions, it is clear that provisions of section 43B are no longer applicable and deemed to be never to have been applicable in respect of deduction allowed u/s. 36(1)(va) of the Act, this means that any contribution ITA No.577/Coch/2022 The Malappuram District Co-operative Bank Limited, Malappuram Page 4 of 6 made towards PF/ESI which is made beyond the "due date" as provided in the respective statute is to be disallowed irrespective of the fact that such sum was paid before the due date of filing of return of income. As the fact of delayed payments is clearly established in the case of the present appellant, therefore, the disallowance made by the CPC u/s. 143(1) of the Act is justified. Accordingly, the addition made at Rs. 59,24,494/- is confirmed. The ground Nos 2 and 3 raised by the appellant regarding this issue are dismissed.” We have heard the rival submissions and perused the materials available on record. We note that, on this issue, it is not disputed that as per the decision of the Hon’ble Supreme Court rendered in the case of CHECKMATE SERVICES PVT LTD VS CIT-1 in CIVIL APPEAL 2833/2016 vide its judgment dated 12 October 2022 decided the issue on allowability/treatment of ‘delayed’ Employee PF Contribution payment in hands of assessee under provisions of Income Tax Act and held that Section 36(1)(va) and Section 43B(b) operate on totally different equilibriums and have different parameters for due dates, i.e., employee's contribution is linked to payment before the due dates specified in the respective Acts and employer's contribution is linked to the payment before the prescribed due date for filing of return u/s. 139(1) of Income Tax Act, 1961.The result of any failure to pay within the prescribed dates also leads to different results. In the case of employee's contribution, any failure to pay within the prescribed due date under the respective PF Act or Scheme will result in negating employer's claim for deduction permanently forever u/s.36(1)(va). ITA No.577/Coch/2022 The Malappuram District Co-operative Bank Limited, Malappuram Page 5 of 6 On the other hand, delay in payment of employer's contribution is visited with deferment of deduction on payment basis u/s.43B and is therefore not lost totally. Therefore as per the above decision, the disallowance made by the Revenue authorities, were fully justified. 3.1 Article 141 of the Constitution of India provides that the law declared by Supreme Court shall be binding on all courts within the territory of India. The law laid down by Supreme Court operates retrospectively and is deemed to the law as it has always been unless, the Supreme Court, says that its ruling will only operate prospectively. 3.2. In the light of the law as explained above, in view of the decision of the Hon’ble Supreme Court in the case of Checkmate Services Pvt.Ltd. (supra) the grounds raised by the assessee stands dismissed. In the result, the appeal filed by the assessee stands dismissed. Order pronounced in the open court on 30 th March, 2023 Sd/- (Padmavathy S.) Accountant Member Sd/- (Beena Pillai) Judicial Member Bangalore, Dated 30 th March, 2023. VG/SPS ITA No.577/Coch/2022 The Malappuram District Co-operative Bank Limited, Malappuram Page 6 of 6 Copy to: 1. The Applicant 2. The Respondent 3. The CIT 4. The CIT(Judicial) 5. The DR, ITAT, Bangalore. 6. Guard file By order Asst. Registrar, ITAT, Bangalore.