Nuzivedu Swati Coastal Consortium, Hyd, Hyderabad V. ITO, Ward-8(3), Hyd, Hyderabad

ITA 620/HYD/2015

• Counselvise Citation: 62022514 RSA 2015
• Duration Of Justice: 3 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-08-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 18-08-2015
• Assessment Year: 2010-2011
• Appeal Filed On: 12-05-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: T VENKAT REDDY
• Assessee Lawyers: V RAGHAVENDRA RAO
• Section: 43B; 6; 263; 139

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCHES A : HYDERABAD BEFORE SMT. P. MADHAVI DEVI, JUDICIAL MEMBER AND SHRI B. RAMAKOTAIAH, ACCOUNTANT MEMBER ITA.NO.620/HYD/2015 ASSESSMENT YEAR 2010-2011 M/S. NUZIVEDU SWATI COASTAL CONSORTIUM, HYDERABAD 500 073. PAN AAAAN3839R VS. THE INCOME TAX OFFICER, WARD 8(3), HYDERABAD. (APPELLANT) (RESPONDENT) FOR ASSESSEE : MR. V. RAGHAVENDRA RAO FOR REVENUE : MR. T. VENKAT REDDY DATE OF HEARING : 18.08.2015 DATE OF PRONOUNCEMENT : 26 . 08.2015 ORDER PER SMT. P. MADHAVI DEVI, J.M. THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER PASSED BY THE PRINCIPAL CIT-II, HYDERABAD DATED 3003.2015 PASSED UNDER SECTION 263 OF THE INCOME TAX ACT, 1961 FOR THE A.Y. 2010-2011. TH E ASSESSEE HAS RAISED THE FOLLOWING GROUNDS : 1. THE ORDER DATED 30.03.2015 PASSED UNDER SECTION 263 OF INCOME TAX ACT, 1961 BY THE LEARNED PR. COMMISSIONER OF INCOME TAX -II, HYDERABAD IS AGAINST LAW AND FACTS OF THE CASE. 2. THE LEARNED PR. COMMISSIONER OF INCOME TAX-II OUGHT NOT TO HAVE EXERCISED THE JURISDICTION U/S. 263 OF THE LT. ACT, 1961, INASMUCH AS, THE ORDER 2 ITA.NO.620/HYD/2015 M/S. NUZIVEDU SWATI COASTAL CONSORTIUM, HYDERABAD. SOUGHT TO BE REVISED IS NEITHER PREJUDICIAL TO THE INTEREST OF REVENUE NOR ERRONEOUS. 3. THE LEARNED PR. COMMISSIONER OF INCOME TAX-II OUGHT TO HAVE APPRECIATED THAT THERE IS CONFLICT OF JUDICIAL OPINION ON THE ISSUE WHICH WAS THE SUBJECT-MATTER OF REVISION US. 263 OF LT. ACT, 1961 AND, THEREFORE, OUGHT NOT TO HAVE EXERCISED THE JURISDICTION U/S. 263 OF I. T. ACT, 1961. 4. THE LEARNED PR. COMMISSIONER OF INCOME TAX-II OUGHT TO HAVE APPRECIATED THAT EVEN THE EMPLOYEES' CONTRIBUTION STANDS ON PAR WITH THE EMPLOYEES' CONTRIBUTION; HENCE SUCH AMOUNTS PAID BEFORE THE DUE DATE FOR FILING THE RETURN OF INCOME ARE ALLOWABLE AS DEDUCTION. 5. FOR THESE OR ANY OTHER GROUNDS THAT MAY BE URGED AT THE TIME OF HEARING OF THE APPEAL. 2. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE, AN ASSOCIATION OF PERSONS (AOP), FILED ITS RETURN OF INCOME FOR THE A.Y. 2010-2011 DECLARING NIL INCOME ON 15.10.2010. THE CASE WAS SELECTED FOR SCR UTINY. THE A.O. COMPLETED THE ASSESSMENT UNDER SECTION 143 (3) BY DISALLOWING THE CLAIM OF SET-OFF OF BROUGHT FORW ARD LOSSES AND COMPUTED THE TAXABLE INCOME AT RS.2,91,79,390. 3. BY VIRTUE OF THE POWERS VESTED IN HIM UNDER SECTION 263 OF THE I.T. ACT, 1961, THE PR. CIT-II, HYDERABAD ISSUED NOTICE UNDER SECTION 263 TO REVISE THE ASSES SMENT ORDER PASSED BY THE A.O., BY STATING THAT IT IS ERR ONEOUS AND PREJUDICIAL TO THE INTERESTS OF THE REVENUE IN SO FAR AS ALLOWING OF DEDUCTION OF EMPLOYEES CONTRIBUTION TO P.F. EVEN THOUGH IT WAS REMITTED TO THE GOVERNMENT ACCOU NT 3 ITA.NO.620/HYD/2015 M/S. NUZIVEDU SWATI COASTAL CONSORTIUM, HYDERABAD. AFTER THE DUE DATES. IN RESPONSE TO THE SHOW CAUSE NOTICE, THE ASSESSEES AUTHORISED REPRESENTATIVE MR. DIWAKARATLURI, C.A. ATTENDED AND FILED WRITTEN SUBMISSIONS. AFTER CONSIDERING THE SUBMISSIONS OF T HE ASSESSEE, THE PR. CIT-II HAS PASSED THE ORDER AND D IRECTED THE A.O. TO RE-COMPUTE THE INCOME AFTER DISALLOWING THE DEDUCTION OF EMPLOYEES CONTRIBUTION TOWARDS P.F. AGGRIEVED BY THE ORDER OF THE PR. CIT-II, THE ASSES SEE IS IN APPEAL BEFORE US. 4. THE AUTHORISED REPRESENTATIVE OF THE ASSESSEE SUBMITS THAT THE EMPLOYEES P.F. CONTRIBUTIONS ARE P AID WITHIN THE DUE DATE OF FURNISHING OF RETURN UNDER S ECTION 139(1) OF THE I.T. ACT AND HENCE ALLOWABLE AS DEDUC TION UNDER SECTION 43B. HE, FURTHER ARGUED THAT ITS CASE IS SQUARELY COVERED BY THE TWO JUDGMENTS OF HONBLE KARNATAKA HIGH COURT IN THE CASE OF ESSAETERAOKA P . LTD. VS. CIT REPORTED IN 366 ITR 408 (KAR) AND CIT VS. S ABARI ENTERPRISES REPORTED IN 298 ITR 141 (KAR). HE ALSO RELIED ON THE COORDINATE BENCH DECISION IN THE CASE OF IME RYS CERAMICS (INDIA) P. LTD., ITA.NO.43/HYD/2010 AND ACCORDINGLY REQUESTED TO QUASH THE ORDER OF PR. CIT -II. 5. THE LEARNED D.R., ON THE OTHER HAND, STR ONGLY RELIED UPON THE ORDER OF PR. CIT-II AND REQUESTED T O UPHOLD THE PR. CIT-II ORDER. 6. WE HAVE HEARD THE RIVAL CONTENTIONS AND ALSO PERUSED THE MATERIALS ON RECORD. THE PR. CIT-II EXE RCISED HIS POWER VESTED WITH HIM UNDER SECTION 263 AND REV ISED 4 ITA.NO.620/HYD/2015 M/S. NUZIVEDU SWATI COASTAL CONSORTIUM, HYDERABAD. THE ASSESSMENT ORDER BY FORMING AN OPINION THAT THE ORDER IS ERRONEOUS AS WELL AS PREJUDICIAL TO THE IN TERESTS OF THE REVENUE IN SO FAR AS ALLOWING OF DEDUCTION OF T HE EMPLOYEES CONTRIBUTION TO P.F., AS THESE PAYMENTS W ERE NOT MADE WITHIN THE DUE DATE SPECIFIED UNDER THE P. F. ACT. THE PR. CIT-II WAS OF THE VIEW THAT AS PER SECTION 36(1)(VA), THE DEDUCTION IS TO BE ALLOWED ONLY, WHEN THE PAYME NTS ARE MADE WITHIN THE DUE DATE UNDER THE RESPECTIVE A CTS. THE PR. CIT-II DISTINGUISHED THE PROVISIONS OF SECT ION 36(1)(VA) AND THE PROVISIONS OF SECTION 43B. ACCORD ING TO HIM, EMPLOYEES CONTRIBUTIONS ARE COVERED UNDER SECT ION 36(1)(VA) AND EMPLOYERS CONTRIBUTIONS ARE COVERED UNDER SECTION 43B OF THE I.T. ACT, 1961. THEREFORE, THE P R. CIT-II WAS OF THE VIEW THAT IF EMPLOYEES CONTRIBUTIONS ARE NOT DEPOSITED WITHIN THE DUE DATE AS SPECIFIED UNDER TH E P.F. ACT, IT IS NOT ALLOWABLE AS BUSINESS DEDUCTION UNDE R SECTION 36(1)(VA). WE DO NOT AGREE WITH THIS OPINIO N OF THE PR. CIT-II, FOR THE REASON THAT THERE IS NO DIFFERE NCE BETWEEN EMPLOYEES AND EMPLOYERS CONTRIBUTIONS UNDER THE P.F. ACT. SECTION 6 OF PF ACT PROVIDES FOR CONT RIBUTIONS AND THE MANNER IN WHICH THE CONTRIBUTIONS SHALL BE MADE. PARAGRAPH 30 OF THE PF SCHEME PROVIDES FOR PAYMENT OF CONTRIBUTIONS. AS PER THE SCHEME, THE EMPLOYER AT T HE FIRST INSTANCE SHALL MAKE THE TOTAL CONTRIBUTION INCLUDIN G EMPLOYEES SHARE HIMSELF. PARAGRAPH 32 PROVIDES FOR RECOVERY OF MEMBERS SHARE OF CONTRIBUTION AND AS PE R THE SCHEME THE EMPLOYER CAN RECOVER IT FROM THE WAGES P AID TO THE EMPLOYEES. THEREFORE, AS PER THE P.F. ACT AN D SCHEME OF CONTRIBUTIONS, IT MEANS AND INCLUDE BOTH 5 ITA.NO.620/HYD/2015 M/S. NUZIVEDU SWATI COASTAL CONSORTIUM, HYDERABAD. EMPLOYEES AND EMPLOYERS SHARE. SECTION 2(C) OF THE P.F. ACT DEFINES THE CONTRIBUTION TO MEAN A CONTRIBUTION PAYABLE IN RESPECT OF A MEMBER UNDER THE SCHEME OR THE CONTRIBUTION PAYABLE IN RESPECT OF AN EMPLOYEE TO W HOM THE INSURANCE SCHEME APPLIES. THERE IS A PRESCRIBED MODE OF PAYMENT OF CONTRIBUTIONS UNDER THE P.F. ACT. UND ER THE SAID ACT, THE EMPLOYER SHALL CONTRIBUTE BOTH EMPL OYEES AND EMPLOYERS SHARE ALONG WITH ADMINISTRATIVE CHARG ES BEFORE THE DUE DATE SPECIFIED UNDER THE ACT. THE A CT PRESCRIBES ONLY ONE DUE DATE FOR DEPOSITING THE CONTRIBUTION I.E., 15 TH OF SUBSEQUENT MONTH WITH THE GRACE PERIOD OF 5 DAYS, WHICH INDICATES THAT THERE IS NO DIFFERENCE BETWEEN EMPLOYEE AND EMPLOYER CONTRIBUTI ON. IF THE LEGISLATURE INTENDS TO DIFFERENTIATE EMPLOYEES AND EMPLOYERS CONTRIBUTION, THEN THERE WOULD HAVE BEEN TWO DUE DATES LIKE IN THE CASE OF INCOME TAX ACT. THERE FORE, FROM THE ABOVE, IT IS CLEAR THAT THE PF ACT DOES NO T DIFFERENTIATE BETWEEN EMPLOYEES AND EMPLOYERS CONTRIBUTION AND CONTRIBUTION MEANS BOTH EMPLOYEES AND EMPLOYERS CONTRIBUTION UNDER THE SCHEME. 7. SECTION 43B OF THE I.T. ACT PROVIDES FOR CERTAIN DEDUCTIONS TO BE ALLOWED ONLY ON ACTUAL PAYMENT BAS IS. SUB CLAUSE (B) OF SECTION 43B COVERS ANY SUM PAYABL E BY THE ASSESSEE AS AN EMPLOYER BY WAY OF CONTRIBUTION TO ANY P.F. OR SUPERANNUATION FUND OR GRATUITY FUND OR ANY OTHER FUND FOR THE WELFARE OF THE EMPLOYEES. THE PROVISO TO THE SECTION PROVIDES THAT ANY SUM PAID BY THE ASSESSEE ON OR BEFORE THE DUE DATE OF FURNISHING THE RETURN OF INC OME 6 ITA.NO.620/HYD/2015 M/S. NUZIVEDU SWATI COASTAL CONSORTIUM, HYDERABAD. UNDER SECTION 139(1), THEN NO DISALLOWANCE CAN BE M ADE UNDER SECTION 43B. ON CAREFUL CONSIDERATION OF SECT ION 43B, IT IS CLEAR THAT AN EXTENSION IS GRANTED TO TH E ASSESSEE TO MAKE THE PAYMENT OF P.F. CONTRIBUTIONS OR ANY OTHER FUND TILL THE DUE DATE OF FURNISHING OF T HE RETURN UNDER SECTION 139(1). THEREFORE, IN OUR OPINION, TH ERE IS NO DIFFERENCE BETWEEN EMPLOYEES AND EMPLOYER CONTRIBUTION TO P.F., AND IF SUCH CONTRIBUTION IS M ADE ON OR BEFORE THE DUE DATE OF FURNISHING THE RETURN OF INCOME UNDER SECTION 139(1), THEN DEDUCTION IS TO BE ALLOW ED UNDER SECTION 43B OF THE I.T. ACT. THESE PROPOSITIO NS WERE UPHELD BY VARIOUS HIGH COURTS AND IN ONE SUCH CASE, THE HONBLE KARNATAKA HIGH COURT IN THE CASE OF ESSAETERAOKA P. LTD. VS. CIT 366 ITR 408 (KAR) HAS HELD AS UNDER : 15. FROM BARE PERUSAL OF THIS PROVISION, IT IS DE AR THAT UNDER THE PROVISION, FOR IT ACT, AN EXTENSION IS GIVEN TO THE EMPLOYER TO MAKE PAYMENT OF CONTRIBUTION TO PROVIDENT FUND OR ANY OTHER FUND TI LL THE 'DUE DATE' APPLICABLE FOR FURNISHING THE RETURN OF INCOME UNDER SUB- SECTION(1) OF SECTION 139 OF THE IT ACT IN RESPECT OF THE PREVIOUS YEAR IN WHICH THE LIABILITY TO PAY SUCH SUM WAS INCURRED AND THE EVIDENCE OF SUCH PAYMENT IS FURNISHED BY THE ASSESSEE ALONG WITH SUCH RETURN. IN SHORT, THIS PROVISION STATES, NOTWITHSTANDING ANYTHING CONTAINE D IN ANY OTHER PROVISION CONTAINED IN THIS ACT, A DEDUCTION OTHERWISE ALLOWABLE IN THIS ACT IN RESPEC T OF ANY SUM PAYABLE BY THE ASSESSEE AS AN EMPLOYER BY WAY OF CONTRIBUTION TO ANY FUND SUCH AS PROVIDENT FUND SHALL BE ALLOWED IF IT IS PAID ON OR BEFORE TH E DUE DATE AS CONTEMPLATED UNDER SECTION 139(1) OF THE IT ACT. THIS PROVISION HAS NOTHING TO DO WITH THE CONSEQUENCES, PROVIDED FOR UNDER THE PF ACT/PF 7 ITA.NO.620/HYD/2015 M/S. NUZIVEDU SWATI COASTAL CONSORTIUM, HYDERABAD. SCHEME/ESI ACT, FOR NOT DEPOSITING THE 'CONTRIBUTIO N' ON OR BEFORE THE DUE DATES THEREIN. 16. IN THE PRESENT CASE, ADMITTEDLY, THOUGH THE EMPLOYER DID NOT DEPOSIT THE CONTRIBUTION, WITHIN T HE STIPULATED TIME, AS CONTEMPLATED BY PARAGRAPH-30 OF THE PF SCHEME OR BEFORE THE DUE DATE UNDER THE PROVISIONS OF THE PF SCHEME/ACT, HE DEPOSITED THE CONTRIBUTION TO THE PF/ESI FUND BEFORE THE DUE DATE CONTEMPLATED UNDER SECTION 139(1) OF THE ACT. 17. SECTION 6 OF THE PF ACT PROVIDES FOR CONTRIBUTIONS AND MATTERS WHICH MAY BE PROVIDED FOR IN SCHEMES. PARAGRAPH-29 OF THE PF SCHEME STATES WHAT IS 'CONTRIBUTION'. THE EXPRESSION 'CONTRIBUTIO N' IS ALSO DEFINED UNDER THE PF ACT BY SECTION 2(C) OF THE PF ACT, WHICH MEANS A CONTRIBUTION PAYABLE IN RESPECT OF A MEMBER UNDER THE SCHEME OR THE CONTRIBUTION PAYABLE IN RESPECT OF AN EMPLOYEE TO WHOM THE INSURANCE SCHEME APPLIES. IF THIS DEFINITI ON IS READ WITH SUB-PARA(1) OF PARAGRAPH-29 IN CHAPTER - V OF THE PF SCHEME, IT WOULD MEAN THAT THE CONTRIBUTIONS PAYABLE BY THE EMPLOYER UNDER THE SCHEME SHALL BE AT A PARTICULAR RATE AND THE CONTRIBUTION PAYABLE BY THE ASSESSEE SHALL BE EQUAL TO THE CONTRIBUTION PAYABLE BY THE EMPLOYER. 18. PARAGRAPH-30 OF THE PF SCHEME PROVIDES FOR PAYMENT OF CONTRIBUTIONS. SUB-PARA(1) OF PARAGRAPH- 30 STATES THAT THE EMPLOYER SHALL, : =N THE FIRST INSTANCE, PAY BOTH THE CONTRIBUTION PAYABLE BY HIMSELF (IN THIS SCHEME REFERRED TO AS THE EMPLOYER 'S CONTRIBUTION) AND ALSO, ON BEHALF OF THE MEMBER EMPLOYED BY HIM DIRECTLY OR BY OR THROUGH A CONTRACTOR, THE CONTRIBUTION PAYABLE BY SUCH MEMBER (IN THIS SCHEME REFERRED TO AS THE MEMBER'S CONTRIBUTION). 19. FROM BARE PERUSAL OF SUB-PARA(1) OF PARAGRAPH- 30, IT IS CLEAR THAT THE WORD 'CONTRIBUTION' IS USE D NOT ONLY TO MEAN CONTRIBUTION OF THE EMPLOYER BUT ALSO CONTRIBUTION TO BE MADE ON BEHALF OF THE MEMBER EMPLOYED BY THE EMPLOYER DIRECTLY. 8 ITA.NO.620/HYD/2015 M/S. NUZIVEDU SWATI COASTAL CONSORTIUM, HYDERABAD. 20. PARAGRAPH-38 OF THE PF SCHEME PROVIDES FOR MODE OF PAYMENT OF CONTRIBUTIONS. AS PROVIDED IN SU B- PARA(1), THE EMPLOYER SHALL, BEFORE PAYING THE MEMBER, HIS WAGES, DEDUCT HIS CONTRIBUTION FROM HIS WAGES AND DEPOSIT THE SAME TOGETHER WITH HIS OWN CONTRIBUTION AND OTHER CHARGES AS STIPULATED THEREI N WITH THE PROVIDENT FUND OR THE FUND UNDER THE ESI A CT WITHIN FIFTEEN DAYS OF THE CLOSURE OF EVERY MONTH P AY. IT IS CLEAR THAT THE WORD 'CONTRIBUTION' USED IN CLAUSE(B) OF SECTION 43-B OF THE IT ACT MEANS THE CONTRIBUTION OF THE EMPLOYER AND THE EMPLOYEE. THAT BEING SO, IF THE CONTRIBUTION IS MADE ON OR BEFORE THE DUE DATE FOR FURNISHING THE RETURN OF INCOME UNDER SUB-SECTION(1) OF SECTION 139 OF THE IT ACT IS MADE , THE EMPLOYER IS ENTITLED FOR DEDUCTION. 8. A SIMILAR ISSUE HAD COME UP FOR CONS IDERATION BEFORE THE COORDINATE BENCH OF THIS TRIBUNAL IN THE CASE OF IMERYS CERAMICS (INDIA) P. LTD., ITA.NO.43/HYD/2 010 WHEREIN THE COORDINATE BENCH HAS DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE. 9. IN THE PRESENT CASE ON HAND, THE CONTRIBUTIONS ARE NOT DEPOSITED AS PRESCRIBED UNDER THE P.F. ACT., BUT THE PAYMENTS ARE MADE BEFORE THE DUE DATE OF FURNISHING THE RETURN UNDER SECTION 139(1) AS RE QUIRED BY LAW UNDER SECTION 43B. THEREFORE, WE ARE OF THE OPINION THAT THE CASE ON HAND IS SQUARELY COVERED BY THE DE CISION OF HONBLE KARNATAKA HIGH COURT IN THE CASE OF ESSA E TERAOKA P. LTD. VS. CIT (SUPRA) AND ALSO THE COORDI NATE BENCH DECISION IN THE CASE OF IMERYS CERAMICS (INDI A) P. LTD., (SUPRA). RESPECTFULLY FOLLOWING THE ABOVE DEC ISIONS, WE ARE OF THE OPINION THAT THE ASSESSMENT ORDER IS NOT ERRONEOUS AND PREJUDICIAL TO THE INTERESTS OF THE R EVENUE 9 ITA.NO.620/HYD/2015 M/S. NUZIVEDU SWATI COASTAL CONSORTIUM, HYDERABAD. IN SO FAR AS ALLOWING OF DEDUCTION OF EMPLOYEES CONTRIBUTION TO P.F. IS CONCERNED. ACCORDINGLY, WE SET ASIDE THE ORDER PASSED BY THE PR. CIT-II UNDER SECT ION 263 AND RESTORE THAT OF THE ASSESSING OFFICER. 10. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOW ED. ORDER PRONOUNCED IN THE OPEN COURT ON 26.08.2015. SD/- SD/- (B. RAMAKOTAIAH) (SMT. P. MADHAVI DEVI) ACOUNTANT MEMBER JUDICIALMEMBER HYDERABAD, DATED 26 TH AUGUST, 2015 VBP/- COPY TO : 1. M/S. NUZIVEDU SWATI COASTAL CONSORTIUM, HYDERABAD. C/O. I.R. RAO & COMPANY, C.AS., H.NO.8-3-222/29, C- 69, MADHURANAGAR, HYDERABAD 38. 2. THE INCOME TAX OFFICER, WARD - 8(3), I.T. TOWERS, MASAB TANK, HYDERABAD. 3. PR. CIT - I I , HYDERABAD. 4 . J CIT , RANGE - 8, HYDERABAD. 5 . D.R. ITAT A BENCH, HYDERABAD. 6 . 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