N.R. WIRES PRIVATE LIMITED, BHILAI V. DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE 1(1), BHILAI

ITA 67/RPR/2019

• Counselvise Citation: [2022] 106 COUNSELVISE.COM (IT) 3195 (ITAT-RAIPUR)
• Duration Of Justice: 3 year(s) 3 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-07-2022
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Assessment Year: 2013-2014
• Appeal Filed On: 07-04-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: SWEETY AGRAWAL
• Keywords: Depreciation
• Section: 43B; 139; 143(3); 37(1); 143(2); 139(1)

Judgement Text

आयकर अपीलȣय अͬधकरण Ûयायपीठ रायप ु र मɅ। IN THE INCOME TAX APPELLATE TRIBUNAL, RAIPUR BENCH, RAIPUR BEFORE SHRI RAVISH SOOD, JUDICIAL MEMBER AND SHRI RATHOD KAMLESH JAYANTBHAI, ACCOUNTANT MEMBER आयकर अपील सं. / ITA No. 67/RPR/2019 Ǔनधा[रण वष[ / Assessment Year : 2013-14 N R. Wires Private Limited 20, Light Industrial Area, Bhilai (C.G.) PAN : AAACN7560R .......अपीलाथȸ / Appellant बनाम / V/s. The Deputy Commissioner of Income Tax-1(1) Bhilai (C.G.) ......Ĥ×यथȸ / Respondent Assessee by : Ms. Sweety Agrawal, AR Revenue by : Shri G.N Singh, DR स ु नवाई कȧ तारȣख / Date of Hearing : 08.06.2022 घोषणा कȧ तारȣख / Date of Pronouncement : 26.07.2022 2 N R. Wires Private Limited Vs. DCIT-1(1) ITA No. 67/RPR/2019 आदेश / ORDER PER RAVISH SOOD, JM: The present appeal filed by the assessee is directed against the order passed by the CIT (Appeals)-II, Raipur dated 10.01.2019, which in turn arises from the order passed by the A.O under Sec. 143(3) of the Income Tax Act, 1961 (for short ‘the Act’) dated 31.12.2015 for assessment year 2013-14. Before us the assessee has assailed the impugned order on the following grounds of appeal: “1. For that the order passed by the learned Commissioner of Income Tax (Appeals)-II, Raipur is bad in law as well as on facts. 2. The Ld. CIT(A) erred in confirming the disallowance of Rs.49,188/- towards delay deposit of PF and ESIC. 3. The Ld. CIT(A) erred in confirming the disallowance of Rs.1,00,000/- out of vehicle running and maintenance expenses. 4. The Ld. CIT(A) erred in confirming the disallowance of Rs.1,99,066/- out of depreciation claimed on vehicles. 5. The Ld. CIT(A) erred in confirming the disallowance of Rs. 60.140/- out of telephone and mobile expenses. 6. For that the appellant craves leave to add, alter or amend any ground/s of appeal on or before hearing of the case.” 2. Succinctly stated, the assessee company which is engaged in the business of manufacturing and trading of M.S Wire, 3 N R. Wires Private Limited Vs. DCIT-1(1) ITA No. 67/RPR/2019 binding wire & barbed wire had e-filed its return of income for the assessment year 2013-14 on 30.09.2013, declaring a loss of Rs. (-) 48,56,194/-. Subsequently, the case of the assessee was selected for scrutiny assessment u/s. 143(2) of the Act. 3. Assessment was, thereafter, framed by the A.O vide his order passed u/s. 143(3) dated 31.12.2015 determining the loss of the assessee company at Rs. (-) 43,75,300/- after, inter alia, making the following disallowances: 4. Aggrieved, the assessee carried the matter in appeal before the CIT(Appeals) but without any success in so far the aforesaid disallowances were concerned. Sl. No. Particulars Amount 1. Disallowance of delay deposit of PF & ESIC u/s.2(24)(x) r.w.s. 36(1)(va) of the Act Rs.49,188/- 2. Disallowance out of vehicle running & maintenance expenses Rs.1,00,000/- 3. Disallowance out of assessee’s claim for depreciation on vehicles Rs.1,99,066/- 4. Disallowance out of telephone & mobile expenses Rs.60,140/- 4 N R. Wires Private Limited Vs. DCIT-1(1) ITA No. 67/RPR/2019 5. The assessee being aggrieved with the order of the CIT(Appeals) has carried the matter in appeal before us. 6. We have heard the Ld. Authorized Representatives of both the parties, perused the orders of the lower authorities and the material available on record, as well as considered the judicial pronouncements that have been pressed into service by the ld. AR to drive home his contentions. 7. Observing that the assessee had delayed the deposit of the employees share of contribution towards PF & ESI the A.O triggered the provisions of Section 2(24)(x) r.w.s. 36(1)(va) of the Act and disallowed an amount of Rs.49,188/-. As is discernible from the orders of the lower authorities, the assessee had though deposited the employee’s share of contributions towards EPF & ESI beyond the stipulated time period contemplated in the respective Employees Welfare Acts, but had deposited the same prior to the “due date” of filing of its return of income u/s.139(1) of the Act. 5 N R. Wires Private Limited Vs. DCIT-1(1) ITA No. 67/RPR/2019 8. Issue in hand i.e allowability of the assessee’s claim for deduction of the employees share of contribution towards PF/ESIC that is deposited beyond the time period stipulated under the respective Employee Welfare Acts, but before the “due date” prescribed for filing of its return of income u/s 139(1) of the Act is covered in favour of the assessee by the judgment of Hon’ble High Court of Bombay in the case of CIT v. Ghatge Patil Transports Ltd. (2014) 368 ITR 749 (Bom). In its aforesaid order the Hon’ble High Court had held as under: "11. The second proviso resulted in implementation problems and which led to deletion of the second proviso in the Finance Act, 2003 and bringing about uniformity in the first proviso by equating tax, duty, cess and fee with contributions to welfare funds like employees' provident fund, superannuation. Fund and other welfare funds. The first proviso by Finance Act, 2003 was made applicable with effect from April 1, 2004 and the assessee would argue that it was curative in nature, clarificatory and, therefore, applied retrospectively from 1st April, 1988. The department argued that it was clarificatory and, therefore, applied prospectively. The Supreme Court held that Finance Act, 2003 would be applicable retrospectively and defaulter who fails to pay the contribution to the welfare fund right upto April 1, 2004 and who pays the contribution after April 1, 2004, would get the benefit of deduction under section 43B of the I.T. Act. It is held that the Finance Act, 2003 to the extent indicated above would be curative in nature and hence is retrospective. The reason being to be that the employers should not sit on the collected contributions and deprive the workmen of the rightful benefits under social welfare legislations by delaying payment of contributions to the welfare funds. 12. Mr.Naniwadekar also relied upon the judgment dated 11th July, 2014 in Income Tax Appeal No.399 of 2012 passed by this Court, to which one of us (S.C.Dharmadhikari,J.) was a party where following two issues of law were raised.:-- 6 N R. Wires Private Limited Vs. DCIT-1(1) ITA No. 67/RPR/2019 "(A) Whether on the facts and in the circumstances of the case, the Tribunal, in law, was right in allowing the claim of the Assessee on account of delayed payments of P.F. of employees' contribution amounting to Rs.1,82,77,138/- by relying on the decision of the Hon'ble Supreme Court in the case of CIT v. Alom Extrusions Ltd. [2009] 319 ITR 306? (B) Whether on the facts and in the circumstances of the case, the Tribunal in law, was right in deleting the disallowance of Rs.10,00,300/- on bond registration charges and allowing the claim of the assessee u/s. 37(1) of the I.T. Act, 1961 ?" 13. In that judgment, this Court held that no substantial questions of law would arise since section 43B is inserted in the I.T. Act with effect from 1st April, 1984 by which the mercantile system of accounting with regard to tax, duty and contribution to welfare funds d. Under section 43B of the I.T. Act, it became mandatory for the assessee to accosted discontinued for such payment including to welfare funds not on mercantile basis but on cash basis. The judgment further mentions that this situation continued between 1st April, 1984 and 1st April, 1988. It is also noticed that section 43B was again amended and the first I.T.A. No.214 & 215/Mum/2018 proviso thereto has been added which was restricted to tax, duty, cess or fee excluding labour welfare. In view thereof, the second proviso as follows came to be inserted:- "Provided further that no deduction shall, in respect of any sum referred to in clause (b), be allowed unless such sum has actually been paid during the previous year on or before the due date as defined in the Explanation below clause (va) of sub- section (1) of section 36." The second proviso was further amended with effect from 1st April, 1989 to read as under:-- "Provided further that no deduction shall, in respect of any sum referred to in clause (b), be allowed unless such sum has actually been paid in cash or by issue of a cheque or draft or by any other mode on or before the due date as defined in the Explanation below clause (va) of sub-section (1) of section 36, and where such payment has been made otherwise than in cash, the sum has been realised within fifteen days from the due date." 14. From a reading of above, it is clear that the employer-assessee would be entitled to deduction only if the contribution to the employee's welfare fund stood credited on or before the due date and not otherwise. It transpires that Industry once again made representations to the Ministry of Finance to remove this anomaly. The result was that an amendment was inserted which came into force with effect from 1st April, 2004 and two changes were made 7 N R. Wires Private Limited Vs. DCIT-1(1) ITA No. 67/RPR/2019 in section 43B firstly by deleting the second proviso and further amendment in the first proviso which reads as under:-- "Provided that nothing contained in this section shall apply in relation to any sum which is actually paid by the assessee on or before the due date applicable in his case for furnishing the return of income under sub-section (1) of section 139 in respect of the previous year in which the liability to pay such sum was incurred as aforesaid and the evidence of such payment is furnished by the assessee along with such return." 15. In this manner, the amendment provided by Finance Act, 2003 put on par the benefit of deductions of tax, duty, cess and fee on the one hand with contributions to various Employees' Welfare Funds on the other. All this came up for consideration before the Hon'ble Supreme Court in the case of Alom Extrusions Ltd. (supra). The Tribunal in the case at hand relied upon the said judgment. There is no reason to fault the order passed by the Tribunal. We are of the view that the decision of the Supreme Court in Alom Extrusions Ltd. (supra) applies to employees' contribution as well as employers' contribution. Question Nos.2, 3 & 4 are accordingly answered in favour of the assessee and against the revenue." (emphasis supplied by us) On the basis of its aforesaid observations the Hon’ble High Court of Bombay had held, that where an assessee had delayed the deposit of the employees share of contribution towards PF/ESIC i.e beyond the time period contemplated in the respective employees welfare acts, but had deposited the same before the “due date” for filing of its return of income as contemplated in Sec. 139(1) of the Act, then, the same shall be allowed as a deduction. The Hon’ble Bombay High Court while concluding as hereinabove had drawn support from the judgment of the Hon’ble Supreme Court in the case of CIT vs. Alom Extrusions 8 N R. Wires Private Limited Vs. DCIT-1(1) ITA No. 67/RPR/2019 Limited (2009) 185 Taxman 416(SC). We, thus, respectfully following the above settled position of law vacate the disallowance of Rs.49,188/- made by the AO qua delayed deposit of PF and ESI. Thus, the Ground of appeal No.2 raised by the assessee is allowed in terms of our aforesaid observations. 9. Adverting to the disallowance out of vehicle running and maintenance expenses of Rs.1,00,000/- (out of Rs. 3,76,439/-), we find that the same is backed by the conviction of the AO that occasional usage of the cars for non-business purposes cannot be ruled out. As regards the observation of the A.O that the personal element qua the usage of the vehicles cannot be ruled out, we are unable to persuade ourselves to subscribe to the same. As the assessee before us is a company, i.e, a distinct assessable entity as per the definition of “person” contemplated in Sec. 2(31) of the Act, therefore, being an inanimate person there cannot be anything personal about such entity. Our aforesaid view is fortified by the judgment of the Hon’ble High Court of Gujarat in the case of Sayaji Iron And Engg. Co. Vs. CIT 9 N R. Wires Private Limited Vs. DCIT-1(1) ITA No. 67/RPR/2019 (2002) 253 ITR 749 (Guj). We, thus, in terms of our aforesaid observations vacate the disallowance of Rs.1,00,000/- made by the A.O out of vehicle running and maintenance expenses. Thus, the Ground of appeal No.3 raised by the assessee is allowed in terms of our aforesaid observations. 10. Adverting to the disallowance of the assessee’s claim for depreciation on vehicles amounting to Rs.1,99,066/-, we find that the genesis of the same lies in the conviction of the A.O that the occasional use of cars for non-business purpose could not be ruled out. As we have vacated the disallowance of vehicle running and maintenance expenses for the reason stated hereinabove, therefore, on the said count no part of the disallowance of the assessee’s claim for depreciation on vehicle expenses can be sustained and has to meet the same fate. Thus, the Ground of appeal No.4 raised by the assessee is allowed in terms of our aforesaid observations. 11. Adverting to the disallowance out of the assessee’s claim for deduction of telephone and mobile expenses of Rs.60.140/- (out 10 N R. Wires Private Limited Vs. DCIT-1(1) ITA No. 67/RPR/2019 of Rs.300709/-), the same had been made by the A.O for the reason that the occasional use of the telephones by the Directors for non-business purpose could not be ruled out. Based on the reasons given by us while vacating the disallowance of the assessee’s claim for deduction of vehicle running and maintenance expenses, we are herein unable to sustain the aforesaid disallowance of telephone and mobile expenses of Rs.60,140/- so made by the AO and vacate the same. Thus, the Ground of appeal No.5 raised by the assessee is allowed in terms of our aforesaid observations. 12. The Grounds of appeal No.(s) 1 & 6 being general in nature are dismissed as not pressed. 13. In the result, appeal of the assessee is allowed in terms of our aforesaid observations. Order pronounced under rule 34(4) of the Appellate Tribunal Rules, 1963, by placing the details on the notice board. Sd/- Sd/- RATHOD KAMLESH JAYANTBHAI RAVISH SOOD (ACCOUNTANT MEMBER) (JUDICIAL MEMBER) रायप ु र/ RAIPUR ; Ǒदनांक / Dated : 26 th pJuly, 2022 SB 11 N R. Wires Private Limited Vs. DCIT-1(1) ITA No. 67/RPR/2019 आदेश कȧ ĤǓतͧलͪप अĒेͪषत / Copy of the Order forwarded to : 1. अपीलाथȸ / The Appellant. 2. Ĥ×यथȸ / The Respondent. 3. The CIT(Appeals)-II, Raipur (C.G) 4. The Pr. CIT-II, Raipur (C.G) 5. ͪवभागीय ĤǓतǓनͬध, आयकर अपीलȣय अͬधकरण,रायप ु र बɅच, रायप ु र / DR, ITAT, Raipur Bench, Raipur. 6. गाड[ फ़ाइल / Guard File. आदेशान ु सार / BY ORDER, // True Copy // Ǔनजी सͬचव / Private Secretary आयकर अपीलȣय अͬधकरण, रायप ु र / ITAT, Raipur. 12 N R. Wires Private Limited Vs. DCIT-1(1) ITA No. 67/RPR/2019 Date 1 Draft dictated on 08.06.2022 Sr.PS/PS 2 Draft placed before author 21.06.2022 Sr.PS/PS 3 Draft proposed and placed before the second Member JM/AM 4 Draft discussed/approved by second Member AM/JM 5 Approved draft comes to the Sr. PS/PS Sr.PS/PS 6 Kept for pronouncement on Sr.PS/PS 7 Date of uploading of order Sr.PS/PS 8 File sent to Bench Clerk Sr.PS/PS 9 Date on which the file goes to the Head Clerk 10 Date on which file goes to the A.R 11 Date of dispatch of order