Tirubala International Pvt. Ltd., Kanpur V. DY. Commissioner of Income Tax, Kanpur

ITA 726/LKW/2016

• Counselvise Citation: [2018] 121 COUNSELVISE.COM (IT) 6596 (ITAT-LUCKNOW)
• Duration Of Justice: 1 year(s) 5 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-05-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2013-2014
• Appeal Filed On: 13-12-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Business expenditure
• Section: 43B; 143(3); 14A; 28; 2; 139

Judgement Text

I.T.A. NO.726/LKW/2016 ASSESSMENT YEAR:2013-14 1 IN THE INCOME TAX APPELLATE TRIBUNAL LUCKNOW BENCH A, LUCKNOW BEFORE SHRI T. S. KAPOOR, ACCOUNTANT MEMBER AND SHRI PARTHA SARATHI CHAUDHURY, JUDICIAL MEMBER ITA NO.726/LKW/2016 ASSESSMENT YEAR:2013-14 M/S TIRUBALA INTERNATIONAL PVT. LTD., C-7, PANKI INDUSTRIAL AREA, KANPUR. PAN:AAECT 2086 J VS. DY.C.I.T., RANGE-VI, KANPUR. (APPELLANT) (RESPONDENT) O R D E R PER T. S. KAPOOR, A.M. THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST TH E ORDER OF LEARNED CIT(A) DATED 03/10/2016. 2. THE ONLY GROUND OF APPEAL TAKEN BY THE ASSESSEE IS THE ACTION OF LEARNED CIT(A) BY WHICH HE HAS CONFIRMED THE ADDITI ON OF RS.2,73,172/- WHICH THE ASSESSING OFFICER HAD MADE ON ACCOUNT OF PAYMENT OF EMPLOYEES CONTRIBUTION TO PROVIDENT FUND BEYOND THE DUE DATE STIPULATED UNDER THAT ACT. 3. AT THE OUTSET, LEARNED A. R. SUBMITTED THAT THIS IS AN UNDISPUTED FACT THAT THE EMPLOYEES CONTRIBUTION TO PROVIDENT FUND WAS DEPOSITED IN CERTAIN MONTH BEYOND THE DUE DATE OF PAYMENT HOWEVER, THE P AYMENT WAS DEPOSITED IN THE FINANCIAL YEAR ITSELF AND BEFORE T HE FILING OF RETURN OF INCOME APPELLANT BY SHRI VIKAS GARG, FCA RESPONDENT BY S HRI R. K. VISHWAKARMA, D. R. DATE OF HEARING 16/05/2018 DATE OF PRONOUNCEMENT 17 / 05 /201 8 I.T.A. NO.726/LKW/2016 ASSESSMENT YEAR:2013-14 2 U/S 139(1) OF THE ACT AND IN THIS RESPECT OUR ATTEN TION WAS INVITED TO LEARNED CIT(A) ORDER PAGE 3 WHERE HE HAS NARRATED VARIOUS P AYMENTS MADE DURING THE YEAR ALONG WITH ACTUAL DATE OF PAYMENT AND DUE DATE OF PAYMENT. LEARNED A. R. STATED THAT HON'BLE ALLAHABAD HIGH CO URT IN THE CASE OF SAGUN FOUNDRY (P.) LTD. VS. CIT [2017] 78 TAXMANN.COM 47 (ALLD) HAS HELD THAT IF THE ASSESSEE DEPOSITED CONTRIBUTION OF EMPLOYER AND EMPLOYEE TOWARDS PROVIDENT FUND BEYOND DUE DATE PRESCRIBED UNDER REL EVANT ACT BUT BEFORE DUE DATE OF FILING OF RETURN OF INCOME U/S 139(1), THE ASSESSEE WAS ENTITLED TO DEDUCTION U/S 43B AND 36(1)(VIA) OF THE ACT. 4. LEARNED D. R., ON THE OTHER HAND, HEAVILY RELIED ON THE ORDERS OF THE AUTHORITIES BELOW. 5. WE HAVE HEARD THE RIVAL PARTIES AND HAVE GONE THROUGH THE MATERIAL PLACED ON RECORD. WE FIND THAT THE ASSESSEE IS A PRIVATE LIMITED COMPANY AND IS ENGAGED IN THE BUSINESS OF MANUFACTURING AND EXPORT OF LEATHER AND LEATHER FOOTWEAR. DURING ASSESSMENT PROCEEDINGS TH E ASSESSING OFFICER, FROM THE PERUSAL OF THE TAX AUDIT REPORT, OBSERVED THAT THE ASSESSEE HAD DEPOSITED AN AMOUNT OF RS.2,73,172/- TOWARDS EMPLOY EES CONTRIBUTION TOWARDS PROVIDENT FUND WHICH WERE DEPOSITED AFTER D UE DATE AND THEREFORE, THE ASSESSING OFFICER DISALLOWED THE EXPENDITURE U/ S 36(1)(VA) OF THE ACT. LEARNED CIT(A) ALSO UPHELD THE ADDITION. WE FIND T HAT LEARNED CIT(A), IN HIS ORDER, HAS RECORDED MONTHWISE EMPLOYEES CONTRIBUTIO N ALONG WITH ACTUAL DATE OF PAYMENT AND DUE DATE OF PAYMENT THE DELAY IN DEPOSIT OCCURRED IN THE MONTH OF MAY 2012 AND OCTOBER 2012 AND IN REST OF THE MONTHS THE PAYMENT WAS MADE BEFORE THE DUE DATE OF PAYMENT. H OWEVER, THIS IS ALSO A FACT THAT THE ASSESSEE HAD DEPOSITED THE UNPAID AMO UNTS OF MAYN2012 AND OCTOBER 2012 BEFORE THE DUE DATE OF FILING OF RETUR N OF INCOME. THE HON'BLE ALLAHABAD HIGH COURT RELYING ON THE JUDGMENT OF HON 'BLE SUPREME COURT IN I.T.A. NO.726/LKW/2016 ASSESSMENT YEAR:2013-14 3 THE CASE OF CIT VS. ALOM EXTRUSIONS LTD. [2009] 319 ITR 306 (SC) HAS HELD THAT IF THE PAYMENT OF PROVIDENT FUND IS MADE BEFOR E DUE DATE OF FILING OF THE RETURN, THE ASSESSEE WAS ENTITLED TO DEDUCTION. THE OPERATIVE PART OF THE JUDGMENT AS CONTAINED FROM PARA 17 ONWARDS IS R EPRODUCED BELOW: 17. WE FIND THAT WITH RESPECT TO EMPLOYEES CONTRIB UTION TO PROVIDENT FUND, AS TO WHETHER DISALLOWABLE OR NOT W ITH REFERENCE TO SECTION 36(1)(VA) READ WITH SECTION 43 B, A SIMILAR QUESTION CAME UP FOR CONSIDERATION BEFORE GUJARAT H IGH COURT IN CIT\. GUJARAT STATE ROAD TRANSPORT CORPN. [20141 36 6 ITR 170/223 TAXMAN 398/41 TAXMANN.COM 100. THEREIN ASSESSEE COLLECTED RS.51,06,02,712/- FROM ITS EMPLOYEES TOWA RDS PROVIDENT FUND CONTRIBUTION BUT DEPOSITED RS.21,16, 61,582/- WITH PROVIDENT FUND TRUST. THUS THERE WAS A SHORT F ALL OF RS. 24,89,41,130/-. THIS AMOUNT OF SHORT FALL WAS TREAT ED BY ASSESSING OFFICER AS INCOME OF ASSESSEE VIDE SECTIO N 2(24)(X) READ WITH SECTION 36(1)(VA) OF ACT 1961. ASSESSING OFFICER ALSO ADDED RS. 1,93,55,580/- BEING THE AMOUNT OF SHORT F ALL TOWARDS EMPLOYERS CONTRIBUTORY PROVIDENT FUND AND DISALLOWE D THE SAME UNDER SECTION 43B OF ACT 1961. HE ALSO DISALLOWED T HE SAID AMOUNT OF RS. 1,93,55,580/- FROM EXPENSES CLAIMED B Y ASSESSEE FOR THE A.Y. IN QUESTION I.E. 2005-06 AS P ER PROVISIONS UNDER SECTION 43B. DISSATISFIED WITH ASSESSMENT ORD ER, ASSESSEE PREFERRED APPEAL BEFORE CIT(A) WHO VIDE OR DER DATED 25.06.2009 PARTLY ALLOWED THE SAME AND DELETED DISA LLOWANCE OF RS. 24,89,41,130/- (SHORT FALL IN EMPLOYEES CONTRIB UTION TO PROVIDENT FUND) AND RS. 1,93,55,580/- (SHORT FALL I N EMPLOYERS CONTRIBUTION TO PROVIDENT FUND) OBSERVING THAT EMPL OYEES CONTRIBUTION7EMPLOVERS CONTRIBUTION WAS DEPOSITED B EFORE FILING RETURN UNDER SECTION 139(1) OF ACT 1961 FOR THE REL EVANT PERIOD. REVENUE, IN ITS TURN, PREFERRED APPEAL BEFO RE TRIBUNAL. RELYING ON JUDGMENT IN ALOM EXTRUSIONS LTD. (SUPRA) , TRIBUNAL DISMISSED APPEAL AND CONFIRMED ORDER PASSED BY CIT( A). THAT IS HOW MATTER CAME BEFORE HIGH COURT IN APPEAL. COURT CONSIDERED FOLLOWING QUESTION, POSED IN PARA 7.01, READS AS UN DER: 'SHORT QUESTION WHICH IS POSED FOR CONSIDERATION OF THIS COURT IS WITH RESPECT TO THE DISALLOWANCE OF THE AM OUNT BEING THE EMPLOYEES' CONTRIBUTION TO THE PF ACCOUNT /ESI CONTRIBUTION WHICH ADMITTEDLY WHICH THE CONCERNED ASSESSEE DID NOT DEPOSIT WITH THE PF DEPARTMENT7ESI I.T.A. NO.726/LKW/2016 ASSESSMENT YEAR:2013-14 4 DEPARTMENT WITHIN DUE DATE UNDER THE PF ACT AND7OR THE ESI ACT.' 18. GUJRAT HIGH COURT REFERRED TO SECTION 2(24)(X) AND FOUND THAT ANY SUM RECEIVED BY ASSESSEE (EMPLOYER) FROM H IS EMPLOYEES AS CONTRIBUTIONS TO ANY PROVIDENT FUND OR SUPERANNUATION FUND OR ANY FUND SET UP UNDER ACT, 1 948, OR ANY OTHER FUND FOR WELFARE OF SUCH EMPLOYEES, CONSTITUT E INCOME. HOWEVER, SECTION 36 OF ACT 1961 PROVIDES FOR DEDUCT ION IN COMPUTING INCOME REFERRED TO IN SECTION 28. THE REL EVANT PROVISION OF SECTION 36 APPLICABLE TO THE CASE BEFO RE GUJARAT HIGH COURT WAS SECTION 36(1)(VA) WITH WHICH WE ARE ALSO CONCERNED. IT ENTITLES AN ASSESSEE FOR DEDUCTION IN COMPUTING INCOME REFERRED TO IN SECTION 28 WITH RESPECT TO AN Y SUM RECEIVED BY ASSESSEE (EMPLOYER) FROM HIS EMPLOYEE T O WHICH SECTION 2(24)(X) APPLY, IF SUCH SUM IS CREDITED BY ASSESSEE TO EMPLOYEES ACCOUNTS IN THE RELEVANT FUND BEFORE DUE DATE I.E. DATE PRESCRIBED IN THE RELEVANT STATUTE APPLICABLE TO THE CONCERNED FUND. COURT ALSO NOTICED THAT SECTION 43B IS IN RESPECT TO CERTAIN DEDUCTIONS AND APPLIES ONLY ON A CTUAL PAYMENT. IT HELD THAT AMENDMENT WAS MADE BY DELETIO N OF SECOND PROVISO OF SECTION 43B ONLY, BUT NO CORRESPO NDING AMENDMENT WAS MADE UNDER SECTION 36(L)(VA). IT SAID : 'IT IS REQUIRED TO BE NOTED THAT AS SUCH THERE IS N O AMENDMENT IN SECTION 36(1)(VA) AND EVEN THE EXPLANATION TO SECTION 36(1)(VA) IS NOT DELETED AND IS STILL ON THE STATUTE AND IS REQUIRED TO BE COMPLIED WITH. MERELY BECAUSE WITH RESPECT TO THE EMPLOYER'S CONTRIBUTION THE SECOND PROVISO TO SECTION 43B WHIC H PROVIDED THAT EVEN WITH RESPECT TO THE EMPLOYER'S CONTRIBUTION (SECTION 43B(6), THE ASSESSEE WAS REQU IRED TO CREDIT THE AMOUNT IN THE RELEVANT FUND UNDER THE PF ACT OR ANY OTHER FUND FOR THE WELFARE OF THE EMPLOY EES ON OR BEFORE THE DUE DATE UNDER THE RELEVANT ACT, IS D ELETED, IT CANNOT BE SAID THAT SECTION 36(1)(VA) HAS BEEN D ELETED AND /OR AMENDED.' 19. THAT IS HOW GUJRAT HIGH COURT HELD THAT SECTION 43B WOULD NOT BE ATTRACTED IN A CASE WHERE DISPUTE RELATES TO EMPLOYEES CONTRIBUTION ONLY. SECTION 43B WOULD BE CONFINED ON LY TO EMPLOYERS CONTRIBUTION. IT FURTHER SAID: I.T.A. NO.726/LKW/2016 ASSESSMENT YEAR:2013-14 5 'THEREFORE, WITH RESPECT TO THE EMPLOYEES CONTRIBUT ION RECEIVED BY THE ASSESSEE IF THE ASSESSEE HAS NOT CR EDITED THE SAID SUM TO THE EMPLOYEES' ACCOUNT IN THE RELEV ANT FUND OR FUNDS ON OR BEFORE THE DUE DATE MENTIONED I N THE EXPLANATION TO SECTION 36(L)(VA), THE ASSESSEE SHAL L NOT BE ENTITLED TO DEDUCTIONS OF SUCH AMOUNT IN COMPUTI NG THE INCOME REFERRED TO IN SECTION 28 OF THE ACT.' 20. GUJRAT HIGH COURT DISTINGUISHED JUDGMENT OF ALOM EXTRUSIONS LTD (SUPRA) ON THE GROUND THAT THEREIN A CTUAL DISPUTE RELATES TO EMPLOYERS' CONTRIBUTION AND WHETHER AMEN DMENT IN SECTION 43B BY FINANCE ACT, 2003 WOULD OPERATE RETR OSPECTIVE OR NOT, SUPREME COURT HAD NO OCCASION TO CONSIDER D EDUCTION WITH REFERENCE TO SECTION 36(1 )(VA). FOR THE SAME REASON GUJRAT HIGH COURT DISSENTED WITH THE JUDGMENTS OF R AJASTHAN HIGH COURT IN CIT VS. UDAIPUR DUGDH UTPADAK SAHAKAR I SANGH LTD [20141 366 ITR 163/12013] 217 TAXMAN 64 (MAG.V3 5 TAXMANN.COM 616, PUNJAB & HARYANA HIGH COURT IN CIT\. HERNIA EMBROIDERY MILLS (P.) LTD [20141 366 ITR 167/[20131217 TAXMAN 207/37 TAXMANN.COM 160, HIMACHAL PRADESH HIGH COURT IN CIT V. NIPSO PLOYFABRIKS LTD. [2013] 350 ITR 327/213 TAXMAN 376/30 TAXMANN.COM 90 AND KARNATAKA HIGH COURT IN CIT V. SABRI ENTERPRISES [2008] 298 I TR 141. 21. KARNATAKA HIGH COURT HAD AN OCCASION TO CONSID ER, WHETHER IT SHOULD DISSENT WITH THE VIEW TAKEN IN TH E EARLIER JUDGMENTS AND FOLLOW THE VIEW TAKEN BY GUJRAT HIGH COURT IN GUJARAT STATE ROAD TRANSPORT CORPN. (SUPRA) AND THI S OCCASION CAME IN ESSAE TERAOKA (P.) LTD. V. DY. CIT 120141 3 66 ITR 408/222 TAXMAN 170/43 TAXMANN.COM 33. DISPUTE RELATES TO A.Y. 2008-09. ASSESSEE FILED RETURN ON 26.09.2008. RETURN WAS PROCESSED UNDER SECTION 143(1) AND THEREAFTER ON SC RUTINY, NOTICE UNDER SECTION 143(2) WAS ISSUED. ASSESSING O FFICER COMPLETED ASSESSMENT BY ORDER DATED 24.12.2010 UNDE R SECTION 143(3) DISALLOWING RS. 12,51,737/- UNDER SE CTION 36(L)(VA) AND ALSO DISALLOWING RS. 1,04,621/- UNDER SECTION 14A READ WITH RULE 8D. IN APPEAL, CIT (A) REVERSED FIND INGS OF ASSESSING OFFICER BUT ON APPEAL PREFERRED BY REVENU E, TRIBUNAL RESTORED ASSESSING OFFICER'S ORDER AND THAT IS HOW MATTER CAME TO KARNATAKA HIGH COURT. THE QUESTION UP FOR CONSID ERATION WAS, 'WHETHER TRIBUNAL WAS JUSTIFIED IN AFFIRMING F INDING OF ASSESSING OFFICER AND DENYING ASSESSEE'S CLAIM OF D EDUCTION OF EMPLOYEES CONTRIBUTION TO PF/ESI ALLEGING THAT THE PAYMENT I.T.A. NO.726/LKW/2016 ASSESSMENT YEAR:2013-14 6 WAS NOT MADE BY APPELLANT IN ACCORDANCE WITH THE PR OVISIONS OF SECTION 36(L)(VA) OF ACT 1961.' THE ASSESSEE'S COUN SEL RELIED ON EARLIER JUDGMENT OF KARNATAKA HIGH COURT IN CITV. S PECTRUM CONSULTANTS (P.) LTD. F2014] 49 TAXMANN.COM 297/227 TAXMAN 164 (MAG.) WHILE COUNSEL FOR REVENUE ATTEMPTED TO PURSUE TO TAKE A DIFFERENT VIEW FOLLOWING DECISION OF GUJRAT HIGH COURT. THE DIVISION BENCH JUDGMENT DELIVERED BY HON'BLE DI LIP B. BHOSALE, (AS HIS LORDSHIP THEN WAS) HELD, IF THE CO NTRIBUTION OF EMPLOYEES FUND IS DEPOSITED WITHIN DUE DATE THE ASS ESSEE IS STRAIGHTAWAY ENTITLED FOR DEDUCTION UNDER SECTION 3 6(L)(VA). HOWEVER SECTION 43B PROVIDES FOR CERTAIN DEDUCTIONS ALLOWABLE ONLY ON ACTUAL PAYMENT. IT GIVES AN EXTENSION TO TH E EMPLOYER TO MAKE PAYMENT OF CONTRIBUTION TO PROVIDENT FUND O R ANY OTHER FUND, TILL DUE DATE APPLICABLE FOR FURNISHING OF RE TURN UNDER SECTION 139(1) OF ACT 1961, IN RESPECT OF PREVIOUS YEAR IN WHICH LIABILITY TO PAY SUCH SUM WAS INCURRED, AND EVIDENC E OF SUCH PAYMENT IS FURNISHED BY ASSESSEE ALONG WITH SUCH RE TURN. COURT THEN SAID: 'IN SHORT, THIS PROVISION STATES, NOTWITHSTANDING A NYTHING CONTAINED 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 W AY OF CONTRIBUTION TO ANY FUND SUCH AS PROVIDENT FUND SHALL BE ALLOWED IF IT IS PAID ON OR BEFORE THE DUE DATE AS CONTEMPLATED UNDER SECTION 139(1) OF THE INCOME-TAX ACT. THIS PROVISION HAS NOTHING TO DO WITH THE CONSEQUENCES, PROVIDED FOR UNDER THE PF ACT/PF SCHEME/ESI ACT, FOR NOT DEPOSITING THE 'CONTRIBUTIO N' ON OR BEFORE THE DUE DATES THEREIN.' (EMPHASIS ADDED) 22. IT ALSO SAID THAT THE WORD 'CONTRIBUTION' USED IN CLAUSE (6) OF SECTION 43B OF ACT 1961 MEANS THE CONTRIBUTION O F EMPLOYER AND EMPLOYEE, BOTH, AND THAT BEING SO, IF CONTRIBUT ION IS DEPOSITED ON OR BEFORE DUE DATE FOR FURNISHING RETU RN OF INCOME UNDER SUB-SECTION (1) OF SECTION 139 OF ACT 1961, E MPLOYER IS ENTITLED FOR DEDUCTION. 23. THOUGH IN A SHORT JUDGMENT, BUT PUNJAB & HARYAN A HIGH COURT IN HERNIA EMBROIDERY MILLS (P.) LTD. (SUPRA) NOT ONLY FOLLOWED ALOM EXTRUSIONS LTD. (SUPRA) BUT ALSO ITS OWN EARLIER JUDGMENT IN CIT V. RAI AGRO INDUSTRIES LTD. [2011] 334 ITR 122/[2012] 20 TAXMANN.COM 194/207 TAXMAN 10 (MAG.), TO I.T.A. NO.726/LKW/2016 ASSESSMENT YEAR:2013-14 7 HOLD THAT SECTION 43B SHALL APPLY TO BOTH 'CONTRIBU TIONS' I.E. EMPLOYERS' AND EMPLOYEES'. 24. KERALA HIGH COURT IN RECENT JUDGMENT IN CITV. M ERCHEM LTD. [2015] 378 ITR 443/235 TAXMAN 291/61 TAXMANN.COM 11 9, HAS FOLLOWED THE DECISION OF GUJARAT HIGH COURT IN GUJARAT STATE ROAD TRANSPORT CORPORATION (SUPRA) AND DISSENTED WI TH THE OTHERWISE JUDGMENTS OF RAJASTHAN HIGH COURT IN C/RV . STATE BANK OFBIKANER AND JAIPUR [2014] 363 ITR 70/43 TAXM ANN.COM 411/225 TAXMAN 6 (MAG.) KARNATAKA HIGH COURT IN SPECTRUM CONSULTANTS INDIA (P.) LTD. (SUPRA) AND BOMBAY HIGH COURT IN CITV. GHATGE PATIL TRANSPORTS LTD. [2014] 368 ITR 7 49/[2015] 228 TAXMAN 340/53 TAXMANN.COM 141. 25. BEFORE FOLLOWING A PARTICULAR VIEW WHEN THERE I S DIVERGENCE IN VIEWS OF DIFFERENT HIGH COURTS, WE FIND IT APPRO PRIATE TO EXAMINE SUPREME COURT JUDGMENT IN ALOM EXTRUSIONS L TD. (SUPRA) TO FIND OUT WHETHER IT CAN BE CONFINED ONLY IN RESPECT TO EMPLOYERS' CONTRIBUTION OR IS APPLICABLE TO BOTH 'C ONTRIBUTIONS', WHETHER BY EMPLOYER OR EMPLOYEE. 26. THE QUESTION, WHETHER BENEFIT UNDER SECTION 43B , AS A RESULT OF AMENDMENT OF FINANCE ACT, 2003, IS RETROS PECTIVE OR NOT, CAME TO BE CONSIDERED IN ALOM EXTRUSIONS LTD ( SUPRA). COURT CONSIDERED THE INTENT, PURPOSE AND OBJECT IN THE HISTORICAL BACK DROP OF INSERTION OF SECTION 43B AND ITS PROGR ESS BY WAY OF VARIOUS AMENDMENTS. REFERRING SECTION 2(24)(X) IT S AID, INCOME IS DEFINED UNDER SECTION 2(24) WHICH INCLUDES PROFI TS AND GAINS. FURTHER IN CLAUSE (X) OF SECTION 2(24) ANY SUM RECE IVED BY ASSESSEE FROM EMPLOYEES AS 'CONTRIBUTIONS' TO ANY P ROVIDENT FUND/SUPERANNUATION FUND OR ANY FUND SET UP UNDER A CT 1948, OR ANY OTHER FUND FOR WELFARE OF SUCH EMPLOYEES CON STITUTE 'INCOME'. THIS IS THE REASON WHY EVERY ASSESSEE/EMP LOYER WAS ENTITLED TO DEDUCTION EVEN PRIOR TO APRIL, 1, 1984, KEEPING BOOKS ON MERCANTILE SYSTEM OF ACCOUNTING, AS A BUSINESS E XPENDITURE, BY MAKING PROVISION IN HIS BOOKS OF ACCOUNT IN THAT REGARD. ASSESSEE WAS CAPABLE OF KEEPING MONEY WITH HIM AND JUST BY MENTIONING IN ACCOUNTS, WAS ABLE TO CLAIM DEDUCTION AS BUSINESS EXPENSES. SECTION 43B WAS INSERTED TO CHEC K THIS PRACTICE AND IT RESULTED IN DISCONTINUING MERCANTIL E SYSTEM OF ACCOUNTING WITH REGARD TO TAX, CONTRIBUTIONS ETC. W ITH INDUCTION OF SECTION 43B AN ASSESSEE COULD CLAIM DEDUCTION ON ACTUAL PAYMENT BASIS. BY FINANCE ACT, 1988 PARLIAMENT INSE RTED FIRST I.T.A. NO.726/LKW/2016 ASSESSMENT YEAR:2013-14 8 PROVISO W.E.F. 01.04.1988 WHICH INTER ALIA PROVIDES THAT ANY SUM PAYABLE BY ASSESSEE BY WAY OF TAX, DUTY, CESS O R FEE, IF PAYMENT IS MADE AFTER CLOSING OF ACCOUNTING YEAR BU T BEFORE DATE OF FILING OF RETURN UNDER SECTION 139(1), ASSE SSEE WOULD BE ENTITLED TO DEDUCTION ON ACTUAL PAYMENT BASIS. T HIS PROVISO DID NOT INCLUDE WITHIN ITS AMBIT, CONTRIBUTIONS UND ER LABOUR WELFARE STATUTES. BY FINANCE ACT, 1988, SECOND PROV ISO THUS SECOND PROVISO WAS FURTHER AMENDED BY FINANCE ACT, 1989 W.E.F. 01.04.1989. 27. COURT HELD THAT ASSESSEE/EMPLOYER THUS WOULD BE ENTITLED TO DEDUCTION ONLY IF CONTRIBUTION STANDS CREDITED O N OR BEFORE DUE DATE GIVEN IN THE ACT 1952 OR ACT 1948. SECOND PROVISO CREATED DIFFICULTIES, INASMUCH AS UNDER ACT, 1981, DUE DATE WAS AFTER THE DATE OF FILING OF RETURNS AND THUS INDUST RIES MADE REPRESENTATIONS TO THE MINISTRY OF FINANCE. COURT, LOOKING TO THE HISTORY OF AMENDMENTS HELD, IT IS EVIDENT THAT SECT ION 43B, WHEN ENACTED IN 1984, COMMENCES WITH A NON OBSTANTE CLAUSE. THE UNDERLYING OBJECT BEING TO DISALLOW DEDUCTIONS CLAIMED MERELY BY MAKING A BOOK ENTRY BASED ON THE MERCANTI LE SYSTEM OF ACCOUNTING. AT THE SAME TIME, SECTION 43B MADE I T MANDATORY FOR THE DEPARTMENT TO GRANT DEDUCTION IN COMPUTING INCOME UNDER SECTION 28 IN THE YEAR IN WHICH TAX, D UTY, CESS ETC. IS ACTUALLY PAID. PARLIAMENT TOOK COGNIZANCE O F THE FACT THAT ACCOUNTING YEAR OF A COMPANY DID NOT ALWAYS TALLY W ITH THE DUE DATES UNDER PROVIDENT FUND ACT, MUNICIPAL CORPORATI ON ACT (OCTROI) AND OTHER TAX LAWS. THEREFORE, BY WAY OF F IRST PROVISO, AN INCENTIVE/RELAXATION WAS SOUGHT TO BE GIVEN IN R ESPECT OF TAX, DUTY, CESS OR FEE BY EXPLICITLY STATING THAT IF SUC H TAX DUTY CESS OR FEE IS PAID BEFORE THE DATE OF FILING OF THE RET URN UNDER ACT 1961, ASSESSEE WOULD THAN BE ENTITLED TO DEDUCTION. THIS RELAXATION/INCENTIVE WAS RESTRICTED ONLY TO TAX, DU TY, CESS AND FEE. IT DID NOT APPLY TO CONTRIBUTIONS TO LABOUR WE LFARE FUNDS. THE REASON APPEARS TO BE THAT THE EMPLOYER SHOULD N OT SIT ON THE COLLECTED CONTRIBUTIONS AND DEPRIVE WORKMEN OF THE RIGHTFUL BENEFITS UNDER SOCIAL WELFARE LEGISLATIONS BY DELAY ING PAYMENT OF CONTRIBUTIONS TO THE WELFARE FUNDS. BUT WHEN IMP LEMENTATION PROBLEMS WERE POINTED OUT FOR DIFFERENT DUE DATES, UNIFORMITY WAS BROUGHT ABOUT IN FIRST PROVISO BY FINANCE ACT, 2003. HENCE, AMENDMENT MADE BY FINANCE ACT 2003 IN SECTION 43B I S RETROSPECTIVE, BEING CURATIVE IN NATURE AND APPLY F ROM 01.04.1988. IN THE RESULT WHEN CONTRIBUTION HAD BEE N PAID, PRIOR TO FILING OF RETURN UNDER SECTION 139(1), I.T.A. NO.726/LKW/2016 ASSESSMENT YEAR:2013-14 9 ASSESSEE/EMPLOYER WOULD BE ENTITLED FOR DEDUCTION A ND SINCE DELETION OF SECOND PROVISO AND AMENDMENT OF FIRST P ROVISO IS CURATIVE AND APPLY RETROSPECTIVELY W.E.F. 01.04.198 8. 28. FROM THE AFORESAID JUDGMENT, WE FIND THAT IRRES PECTIVE OF THE FACT THAT DEDUCTION IN RESPECT OF SUM PAYABLE B Y EMPLOYER CONTRIBUTION WAS INVOLVED, BUT COURT DID NOT RESTRI CT OBSERVATIONS, FINDINGS AND DECLARATION OF LAW TO-TH AT CONTEXT BUT LOOKING TO THE OBJECTIVE AND PURPOSE OF INSERTION O F SECTION 43B APPLIED IT TO BOTH THE CONTRIBUTIONS. IT ALSO OBSER VED CLEARLY THAT SECTION 43B IS WITH A NON-OBSTANTE CLAUSE AND THERE FORE OVER RIDE EVEN IF, ANYTHING OTHERWISE IS CONTAINED IN SE CTION 36 OR ANY PROVISION OF ACT 1961. 29. THEREFORE, WE ARE CLEARLY OF THE VIEW THAT LAW LAID DOWN BY HIGH COURTS OF KARNATAKA, RAJASTHAN, PUNJAB & HARYA NA, DELHI, BOMBAY AND HIMACHAL PRADESH HAVE RIGHTLY APPLIED SE CTION 43B IN RESPECT TO BOTH CONTRIBUTIONS I.E. EMPLOYER AND EMPLOYEE. OTHERWISE VIEW TAKEN BY GUJRAT HIGH COURT AND FOLLO WED BY KERALA HIGH COURT, WITH GREAT RESPECT, WE FIND EXPE DIENT TO DISSENT THEREWITH. 30. IN VIEW OF ABOVE ALL THE QUESTIONS FORMULATED ABOVE ARE ANSWERED AGAINST REVENUE AND IN FAVOUR OF ASSESSEE. 5.1 THEREFORE, RESPECTFULLY FOLLOWING THE ABOVE JUD ICIAL PRECEDENT, WE ALLOW THE APPEAL FILED BY THE ASSESSEE. 6. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALL OWED. (ORDER PRONOUNCED IN THE OPEN COURT ON 17/05 /2018) SD/. SD/. (PARTHA SARATHI CHAUDHURY) ( T. S. KAPOOR ) JUDICIAL MEMBER A CCOUNTANT MEMBER DATED:17/05/2018 *SINGH COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT. 3. CONCERNED CIT 4. THE CIT(A) 5. D.R., I.T.A.T., LUCKNOW