Appeal details
Counselvise Citation
[2018] 118 COUNSELVISE.COM (IT) 8629 (ITAT-CHENNAI)
Assessee PAN
Bench
Appeal Number
Duration Of Justice
9 month(s) 22 day(s)
Appellant
Respondent
Appeal Type
Income Tax Appeal
Pronouncement Date
13-12-2018
Appeal Filed By
Department
Order Result
Allowed
Bench Allotted
D
Assessment Year
2013-2014
Appeal Filed On
21-02-2018
Judgement Text
, , IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, CHENNAI , , % BEFORE SHRI GEORGE MATHAN, JUDICIAL MEMBER AND SHRI S. JAYARAMAN, ACCOUNTANT MEMBER /. I.T.A. NOS. 650 & 651/CHNY/2018 / ASSESSMENT YEARS : 2013-14 & 2014-15 DEPUTY COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE 1(1), CHENNAI . VS. M/S. ORCHID PHARMA LTD., (FORMERLY KNOWN AS M/S. ORCHID CHEMICALS & PHARMACEUTICALS LTD.,) 313, ORCHID TOWERS, VALLUVAR KOTTAM HIGH ROAD, NUNGAMBAKKAM, CHENNAI 600 034. [PAN: AAACO 0402B] ( / APPELLANT) ( &'( /RESPONDENT ) REVENUE BY : SHRI. M. SRINIVASA RAO, CIT ASSESSEE BY : NONE / /DATE OF HEARING : 13.12.2018 / /DATE OF PRONOUNCEMENT : 13.12.2018 / O R D E R PER S. JAYARAMAN, ACCOUNTANT MEMBER : THE REVENUE FILED THESE APPEALS AGAINST THE ORDERS OF THE COMMISSIONER OF INCOME TAX (APPEALS)-3, CHENNAI IN ITA NOS. 36 & 235/16-17/A-3 DATED 31.11.2017 FOR ASSESSMENT YEAR 2013-14 & 2014- 15, RESPECTIVELY. :-2-: ITA NOS. 650 & 651/CHNY/2018 2. M/S. ORCHID PHARMA LTD., THE ASSESSEE, IS A MANU FACTURER OF DRUGS AND FERTILIZER PRODUCTS. WHILE MAKING THE AS SESSMENT FOR ASSESSMENT YEAR 2013-14, THE ASSESSING OFFICER NOTI CED, INTER ALIA, THAT THE ASSESSEE HAS NOT PAID EMPLOYEES CONTRIBUTION TO PF & ESI WITHIN THE DUE DATES AS SPECIFIED IN THE RELEVANT ACTS, AL THOUGH, THE ASSESSEE HAS REMITTED THEM BEFORE THE DUE DATE FOR FILING TH E RETURN UNDER THE INCOME TAX ACT. FURTHER, IN THE ASSESSMENT MADE FO R ASSESSMENT YEAR 2014-15, THE AO MADE DISALLOWANCE U/S. 14A R.W.R. 8 D. AGGRIEVED AGAINST THOSE ORDERS, THE ASSESSEE FILED APPEALS BE FORE THE CIT(A). ON THE ISSUE OF DISALLOWANCE MADE U/S. 36(1)(VA), THE CIT(A) ALLOWED THE ASSESSEES APPEAL RELYING ON THE FOLLOWING DECISION S I. DELHI HIGH COURT IN AIMIL LTD (2010) (321 ITR 50 8) (DELHI) II. RAJASTHAN HIGH COURT IN STATE BANK OF BIKANER A ND JAIPUR (2014) (265 CTR 471) (RAJASTHAN) III. UTTARAKAND HIGH COURT IN KICHHA SUGAR CO. LTD (2013) (356 ITR 327) IV. HIMACHAL PRADESH HIGH COURT IN NIPSO POLYFABRIK S LTD (2013) (350 ITR 327) V. BOMBAY HIGH COURT IN GHATGE PATIL TRANSPORTS (20 14) (368 ITR 749) (BOMBAY) WITH REGARD TO THE DISALLOWANCE MADE U/S. 14A, RELY ING ON THIS TRIBUNAL DECISION IN THE CASE OF ACIT VS M. BASKARAN ITA NO. 1717/MDS/2013 FOR ASSESSMENT YEAR 2009-10, THE CIT(A) DELETED THE ADDITION. AGGRIEVED, THE REVENUE FILED THESE APPEALS. :-3-: ITA NOS. 650 & 651/CHNY/2018 3. THE REVENUE FILED BOTH THE APPEALS WITH A DELAY OF ONE DAY. WE HAVE CONSIDERED THE REVENUES AFFIDAVIT, HEARD THE PARTIES AND CONDONE THE DELAY. 4. THE REVENUES GROUNDS IN RESPECT OF THE ISSUE U/ S. 36(1)(VA) R.W.S. 2(24)(X) ARE AS UNDER: 1. THE ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) IS ERRONEOUS ON FACTS OF THE CASE AND IN LAW. 2. THE ID. CIT(A) ERRED IN DELETING THE DISALLOWANC E OF RS. 17, 12,37,289/- MADE U/S 36(1)(VA) OF THE INCOME TAX AC T, 1961, BY THE ASSESSING OFFICER (AO) TOWARDS BELATED PAYMENT OF EMPLOYEERS CONTRIBUTION TO PROVIDENT FUND(PF) OF RS15,79,41,12 5/- AND EMPLOYEE STATE INSURANCE (ESI) OF RS. 1,32,96,164/- IN THE ASSESSMENT ORDER PASSED U/S 143(3) OF THE IT ACT, 1 961, FOR AY 2013-14 IN THE ASSESSEES CASE, 2.1 THE LD.CIT(A) IS NOT JUSTIFIED IN DELETING THE DISALLOWANCE MADE U/S 36(1)(VA) RELYING ON DECISIONS OF VARIOUS HONB LE HIGH COURTS, WHICH HELD THAT ALL CONTRIBUTIONS TO ESI/PF MADE WI THIN THE DUE DATE U/S 139(1) OF THE IT ACT IS DEDUCTIBLE U/S 438(B) O F THE IT ACT, WHEN THE DEDUCTION ON ACCOUNT OF REMITTANCE OF EMPLOYEE S CONTRIBUTION TO WELFARE FUNDS IS GOVERNED BY SECTION 36(1)(VA) R .W.S 2(24)(X) OF THE IT ACT, WHEREIN IT IS CATEGORICALLY STATED THAT THE EMPLOYEES CONTRIBUTION SHOULD BE PAID INTO THEIR ACCOUNT WITH IN THE DUE DATE ALLOWED IN THE RESPECTIVE ACTS VIZ,, ESI ACT AND PF ACT. 2.2 THE LD.CIT(A) OUGHT TO HAVE APPRECIATED THAT TH E OPENING WORDS OF SECTION 438 OF THE IT ACT MAKE IT CLEAR THAT THE PROVISIONS OF THE SAID SECTION WOULD APPLY ONLY WHEN A DEDUCTION IS O THERWISE ALLOWABLE UNDER THE INCOME TAX ACT AND THUS THE PRO VISIONS OF SECTION 438 OF THE IT ACT CANNOT BE PRESSED INTO SE RVICE TO ALLOW A DEDUCTION WHICH IS OTHERWISE NOT ALLOWABLE UNDER TH E INCOME TAX ACT INCLUDING SECTION 36(1)(VA) THEREOF. :-4-: ITA NOS. 650 & 651/CHNY/2018 2.3 THE LD.CIT(A) OUGHT TO HAVE APPRECIATED THAT PR OVISIONS OF SEC.43B(B) OF THE IT ACT DEAL WITH ALLOWABILITY OF EMPLOYERS CONTRIBUTION TO PROVIDENT FUND OR ANY OTHER FUNDS F OR THE WELFARE OF EMPLOYEES, WHEREAS THE EMPLOYEES CONTRIBUTION TO T HE SAID FUNDS IS NOT AN EXPENDITURE INCURRED BY THE ASSESSEE BUT AN AMOUNT COLLECTED BY THE ASSESSEE, AS AN EMPLOYER, FROM THE EMPLOYEESS SALARY TO BE CREDITED TO THE EMPLOYEESS ACCOUNT IN THE RELEVANT FUNDS AND AS SUCH, THE EMPLOYEES CONTRIBUTION TO P F/ESI FUNDS, PARTAKES THE CHARACTER OF INCOME OF THE ASSESSEE EM PLOYER AS PER THE PROVISIONS OF SECTION 2(24FLX) OF THE IT ACT, 1 961. 2.4 THE LD.CIT(A) OUGHT TO HAVE APPRECIATED THAT TH E EMPLOYEES CONTRIBUTION TO PF/ESI FUNDS, DEEMED AS INCOME OF T HE ASSESSEE EMPLOYER U/S 2(24)(X) OF THE IT ACT, BECOMES ELIGIB LE FOR DEDUCTION U/S 36(1)(VA) OF THE IT ACT, ONLY WHEN IT IS DEPOSI TED WITHIN THE DATE BY WHICH THE ASSESSEE AS AN EMPLOYER, IS REQUI RED TO CREDIT THE RESPECTIVE EMPLOYEESS ACCOUNT IN THE RELEVANT FUND S UNDER THE PF ACT AND ESI ACT, INDEPENDENT OF AND DE HORS SECTION 438 OF THE IT ACT. 2.5 THE LD.CIT(A) OUGHT TO HAVE APPRECIATED THAT IN THE PRESENT CASE, THE EMPLOYEES CONTRIBUTION OF RS.15,79,41,12 5/- TOWARDS PROVIDENT FUND (PF) AND RS.1,32,96,164/- TOWARDS EM PLOYEE STATE INSURANCE (ESI) WERE NOT CREDITED BY THE ASSESSEE, AS AN EMPLOYER, TO THE RESPECTIVE EMPLOYEES ACCOUNT IN THE RELEVAN T FUNDS ON OR BEFORE THE DUE DATE UNDER THE PF ACT AND ESI ACT AS REQUIRED IN THE EXPLANATION TO SECTION 36(1)(VA) OF THE IT ACT, AS IS EVIDENCED FROM THE FORM 3CD FILED ALONG WITH THE RETURN OF INCOME FURNISHED BY THE ASSESSEE FOR THE A.Y 20 13-14. 2.6 THE LD.CIT(A) OUGHT TO HAVE APPRECIATED THE CLA RIFICATION GIVEN BY THE CENTRAL BOARD OF DIRECT TAXES VIDE CIRCULAR NO. 22 OF 2015 DATED 17, 12.2015, WHEREIN IT WAS CLARIFIED THAT TH E DEDUCTIONS RELATING TO EMPLOYEESS CONTRIBUTION TO WELFARE FU NDS ARE GOVERNED BY SECTION 36(L)(VA) OF THE IT ACT. 2.7 THE ICLCIT(A) OUGHT TO HAVE TAKEN COGNIZANCE TO THE DECISION OF THE HONBLE GUJARAT HIGH COURT IN THE CASE OF CI T VS MIS GUJARAT STATE ROAD TRANSPORT CORPORATION LTD4366 IT!? 170), DECISION OF :-5-: ITA NOS. 650 & 651/CHNY/2018 HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF CI T VS MIS MADRAS RADIATORS PRESSING LTD. (264 IT!? 620), THE DECISIO N OF HONBLE KERALA HIGH COURT IN THE CASE OF CIT, COCHIN VS M/S MERCHAM LTD. REPORTED IN (2015) 378 IT!? 443 AND THE DECISIONS O F THE HONBLE ITAT, MUMBAI IN THE CASE OF MIS LKP SECURITIES LTD [ITA 638/MUM/2012 DATED 17.05.2013 WHEREIN IT WAS HELD T HAT THE EMPLOYEESS CONTRIBUTION SHOULD BE PAID WITHIN THE DUE DATE AS PROVIDED IN THE RELATED STATUTES TO BE ALLOWED AS D EDUCTION U/S 36(1)(VA) OF THE IT ACT. 2.8 THE LD.CIT(A) OUGHT TO HAVE APPRECIATED THAT TH E DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF MIS RAJASTHAN STATE BEVERAGES CORPORATION LTD.12017} 84 TAXMANN.COM 185 IS ONLY A DISMISSAL IN-LIMINE, WITHOUT DISCUSSION ON MERITS O F THE CASE, OF THE SLAP FILED BY THE REVENUE AGAINST THE ORDER OF THE HONBLE RAJASTHAN HIGH COURT AND AS SUCH CANNOT BE TAKEN AS LAW SETTL ING THE ISSUE. 2.9 HAVING REGARD TO THE SUBMISSIONS IN THE FOREGOI NG GROUNDS, THE LD.CIT(A) OUGHT TO HAVE APPRECIATED THAT THE DECISI ONS RELIED ON BY HIM TO ALLOW RELIEF TO THE ASSESSEE ARE DISTINGUISH ABLE TO THE FACTS OF THE PRESENT CASE AND AS SUCH, OUGHT TO HAVE UPHELD THE ACTION OF THE AO IN DENYING DEDUCTION OF BELATED REMITTANCE O F EMPLOYEES CONTRIBUTION TO ES! & PF FUNDS AND DEEMING THE SAME AS INCOME OF THE ASSESSEE AS PROVIDED IN SECTION 2(24)(C) R.W.S. 36(LJ(VA} OF THQ IT ACT IN THE ASSESSMENT ORDER PASSED U/S 143(3) OF THE IT ACT, 1961, FOR AY 2013-14 IN THE ASSESSEES CASE. 3. FOR THESE GROUNDS AND ANY OTHER GROUND INCLUDING AMENDMENT OF GROUNDS THAT MAY BE RAISED DURING THE COURSE OF THE APPEAL PROCEEDINGS, THE ORDER OF LEARNED CIT(APPEALS) MAY BE SET ASIDE AND THAT OF THE ASSESSING OFFICER BE RESTORED. THE LD. DR VERY ELABORATELY ARGUED ON THE LINES OF THE GROUNDS OF THE APPEAL. NONE WAS PRESENT FOR THE ASSESSEE. :-6-: ITA NOS. 650 & 651/CHNY/2018 5. WE HEARD THE LD. DR AND GONE THROUGH THE RELEVAN T MATERIAL. THE FACT REMAINS THAT THE ASSESSEE HAS PAID THE EMP LOYEES CONTRIBUTION TO PF & ESI WITHIN THE DUE DATE PERMIT TED UNDER INCOME TAX ACT BEFORE FILING THE RETURN, ALTHOUGH, IT HAS NOT PAID THEM WITHIN THE DUE DATES PERMITTED UNDER THE RESPECTIVE ACT. IN THIS REGARD, THE JURISDICTIONAL HIGH COURT DECISION IN THE CASE OF C IT VS INDUSTRIAL SECURITY & INTELLIGENCE PVT LTD., IN TCA NO 585 & 5 86 OF 2015 DATED 24.07.2015 IS EXTRACTED AS UNDER: 5. WE FIND THAT THE TRIBUNAL HAS RIGHTLY RELIED ON THE DECISION OF THE SUPREME COURT IN THE CASE OF CIT VS ALUM EXTRUSIONS L TD. REPORTED IN 319 HR 306, WHEREBY, THE SUPREME COURT HELD THAT OMI SSION OF SECOND PROVISO TO SECTION 43B AND AMENDMENT TO FIRST PROVIS O BY FINANCE ACT, 2003 ARE CURATIVE IN NATURE AND ARE EFFECTIVE RETROSP ECTIVELY I.E WITH EFFECT FROM 1.4. 1 988 I.E. THE DATE OF INSERT FORT OF FIRST PROVISO. THE DELHI HIGH COURT IN THE CASE OF CIT V AMIL LTD. REP ORTED IN 321 ITR 508 HELD THAT IF THE ASSESSEE HAD DEPOSITED EMPLOYEES CONTRIBUTION TOWARDS PROVIDENT FUND AND ESI AFTER DUE DATES AS PRESCRIBE D UNDER THE RELEVANT ACT, BUT BEFORE THE DUE DATE OF FILING OF RETURN UND ER THE INCOME TAX ACT, NO DISALLOWANCE COULD BE MADE IN VIEW OF THE P ROVISIONS OF SECTION 43.B AS AMENDED BY FINANCE ACT, 2003. 6. IN THE PRESENT CASE, THE ASSESSEE HAD REMITTED T HE EMPLOYEES CONTRIBUTION BEYOND THE DUE DATE FOR PAYMENT, BUT W ITHIN THE DUE DATE FOR FILING THE RETURN OF INCOME. HENCE, FOLLOWING THE ABOVE SAID DECISION, WE FIND NO REASON, TO DIFFER WITH THE FINDINGS OF THE T RIBUNAL. ACCORDINGLY, WE FIND NO QUESTION OF LAW MUCH LESS ANY SUBSTANTIAL QUESTION OF LAW ARISES FOR CONSIDERATION IN THESE APP EALS. ACCORDINGLY, BOTH THE TAX CASE (APPEALS) STAND DISMISSED. NO COS TS. CONSEQUENTLY, M.P.NO.1 OF2015 IS ALSO DISMISSED. :-7-: ITA NOS. 650 & 651/CHNY/2018 ACCORDINGLY, WE DO NOT FIND ANY REASON TO INTERFERE WITH THE ORDER OF THE CIT(A). THE REVENUES APPEAL FOR ASSESSMENT YE AR 2013-14 IS DISMISSED. 6. WITH REGARD TO THE DISALLOWANCE MADE U/S. 14A, F OR ASSESSMENT YEAR 2014-15, THE REVENUES GROUNDS OF APPEAL ARE EXTRACTED AS UNDER: 1. THE ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) IS ERRONEOUS ON FACTS OF THE CASE AND IN LAW. 2. THE LD. CIT(A) ERRED IN DELETING THE DISALLOWANC E OF RS. 11,92,11,436/- MADE BY THE ASSESSING OFFICER (AO) U /S 14A OF THE INCOME TAX ACT, 1961, READ WITH RULE 8D OF THE INCO ME TAX RULES, 1962, IN THE ASSESSMENT ORDER FOR AY 2014-15 PASSED U/S 143(3) OF THE ITACT,1961,IN THE ASSESSEES CASE. 2.1 THE LD.CIT(A) HAVING DELETED THE DISALLOWANCE U /S 14A OF THE IT ACT ON THE GROUND THAT THE ASSESSEE HAS NOT EARNED /RECEIVED ANY DIVIDEND INCOME NOR CLAIMED THE SAME P THE RETURN O F INCOME, OUGHT TO HAVE APPRECIATED THE CBDT CIRCULAR NO.5/20 14 DATED 11/02/2014 STATING THAT RULE 8D R.W.S 14A OF THE IT ACT PROVIDES FOR DISALLOWANCE OF THE EXPENDITURE, EVEN WHERE THE TAX PAYER, IN A PARTICULAR YEAR, HAS NOT EARNED ANY EXEMPT INCOME. 2.2 THE LD. CIT(A) OUGHT TO HAVE APPRECIATED THAT I N THE PRESENT CASE, THE ASSESSEE HAS DECLARED DIVIDEND INCOME OF RS.1,09,943/- AND THAT HAVING ACCEPTED THE APPLICABILITY OF SEC. 14A OF THE IT ACT, THE ASSESSEE HAS DISALLOWED ON ITS OWN AND ADDED RS .95,079/- TO THE TOTAL INCOME IN THIS REGARD, IN THE COMPUTATION OF TOTAL INCOME FILED ALONG WITH THE RETURN OF INCOME FURNISHED FOR A.Y 2014-15. 2.3 THE LD. CIT(A) OUGHT TO HAVE APPRECIATED THAT I N THE PRESENT CASE, THE AO HAS RECORDED HIS SATISFACTION IN THE A SSESSMENT ORDER, AS REQUIRED IN SECTION 14A (2) OF THE IT ACT AND TH AT ALTER DISCUSSING THE SAID PROVISIONS, THE AO WENT ON TO MAKE DISALLO WANCE U/S 14A OF THE IT ACT AS PER RULE 8D OF THE IT RULES, 1962. :-8-: ITA NOS. 650 & 651/CHNY/2018 2.4 HAVING RELIED ON THE DECISION OF THE HONBLE IT AT, CHENNAI IN THE CASE OF ACIT VS M. BHASKARAN IN ITA NO.1717/MDS /2013 DATED 31.07.2014 TO DELETE THE DISALLOWANCE MADE U/S 14A OF THE IT ACT IN THE ASSESSEES CASE, THE LD. CIT(A) OUGHT TO HAVE A PPRECIATED THAT THE SAID DECISION WAS NOT CONTESTED BY THE REVENUE ONLY BECAUSE THE TAX EFFECT INVOLVED WAS BELOW THE MONETARY LIMI TS PRESCRIBED BY CBDT. 2.5 THE LD. CIT(A) OUGHT TO HAVE APPRECIATED THAT T HE AO HAS RIGHTLY COMPUTED THE DISALLOWANCE U/S 14A OF THE IT ACT AS PROVIDED IN RULE 8D OF THE IT RULE 1962, AND AS SUCH OUGHT T O HAVE CONFIRMED THE DISALLOWANCE MADE BY THE AO IN THE AS SESSMENT FOR 2014-15 IN THE CASE OF THE ASSESSEE. 3. FOR THESE GROUNDS AND ANY OTHER GROUND INCLUDING AMENDMENT OF GROUNDS THAT MAY BE RAISED DURING THE COURSE OF THE APPEAL PROCEEDINGS, THE ORDER OF LEARNED CIT (APPEALS) MAY BE SET ASIDE AND THAT OF THE ASSESSING OFFICER BE RESTORED. THE LD. DR ARGUED ON THE LINES OF THE GROUNDS OF TH E APPEAL. NONE WAS PRESENT FOR THE ASSESSEE. 7. WE HEARD THE LD. DR AND GONE THROUGH THE RELEVAN T MATERIAL. IN THE ASSESSMENT ORDER, THE AO HAS NOT SPECIFIED A S TO WHETHER THE ASSESSEE HAS EARNED ANY EXEMPT INCOME OR NOT. HE H AS ALSO NOT MENTIONED WHETHER THE ASSESSEE HAS MADE ANY DISALLO WANCE ON ITS OWN TOWARDS EARNING OF EXEMPT INCOME. HOWEVER, THE REVENUE HAS TAKEN GROUND NO 2.2 WHICH IS EXTRACTED AS UNDER: 2.2 THE LD. CIT(A) OUGHT TO HAVE APPRECIATED THAT I N THE PRESENT CASE, THE ASSESSEE HAS DECLARED DIVIDEND INCOME OF RS.1,09,943/- AND THAT HAVING ACCEPTED THE APPLICABILITY OF SEC. 14A OF THE IT ACT, THE ASSESSEE HAS DISALLOWED ON ITS OWN AND ADDED RS .95,079/- TO :-9-: ITA NOS. 650 & 651/CHNY/2018 THE TOTAL INCOME IN THIS REGARD, IN THE COMPUTATION OF TOTAL INCOME FILED ALONG WITH THE RETURN OF INCOME FURNISHED FOR A.Y 2014-15. IN VIEW OF THAT, SINCE THE FACTS AND CIRCUMSTANCES ASSOCIATED WITH THE ISSUE IS NOT ON RECORD, THIS ISSUE IS REMITTED BACK TO THE AO FOR A FRESH EXAMINATION. THE ASSESSING OFFICER SHALL DECIDE TH E ISSUE AFTER AFFORDING ADEQUATE OPPORTUNITY TO THE ASSESSEE, IN ACCORDANCE WITH LAW. 8. IN THE RESULT, THE REVENUES APPEAL IN ITA NO. 6 50/CHNY/2018 FOR ASSESSMENT YEAR 2013-14 IS DISMISSED AND ITS AP PEAL IN ITA NO. 651/CHNY/2018 FOR ASSESSMENT YEAR 2014-15 IS TREAT ED AS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 13 TH DECEMBER, 2018 AT CHENNAI. SD/- ( ) (GEORGE MATHAN) ! /JUDICIAL MEMBER SD/- ( ) (S. JAYARAMAN) ! /ACCOUNTANT MEMBER /CHENNAI, 4 /DATED: 13 TH DECEMBER, 2018 JPV /&6787 /COPY TO: 1. (/ APPELLANT 2. &'( /RESPONDENT 3. : ) (/CIT(A) 4. : /CIT 5. 7& /DR 6. /GF
Mehul