Leyan Global Private Limited, Kanpur V. Deputy Commissioner of Income Tax-VI, Kanpur

ITA 768/LKW/2017

• Counselvise Citation: [2018] 119 COUNSELVISE.COM (IT) 0873 (ITAT-LUCKNOW)
• Duration Of Justice: 11 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-11-2018
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2013-2014
• Appeal Filed On: 08-12-2017
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: P K KAPOOR C A SHRI C K SINGH
• Keywords: Business expenditure; Earning of tax free income; Question of law
• Section: 43B; 143(3); 14A; 6; 28; 139

Judgement Text

I.T.A. NO.768/LKW/2017 ASSESSMENT YEAR:2013-14 1 IN THE INCOME TAX APPELLATE TRIBUNAL LUCKNOW BENCH A, LUCKNOW BEFORE SHRI A. D. JAIN, VICE PRESIDENT AND SHRI T. S. KAPOOR, ACCOUNTANT MEMBER ITA NO.768/LKW/2017 ASSESSMENT YEAR:2013-14 M/S LEAYAN GLOBAL PVT. LTD., PLOT NO. 119, 120, 121 BLOCK P &T KALPI ROAD, KANPUR. PAN:AABCL 8692 B VS. DY.C.I.T.-II, 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)-II, KANPUR DATED 19/09/2017 PERTAINING TO AS SESSMENT YEAR 2013-14. IN THIS APPEAL THE ASSESSEE HAS TAKEN SIX GROUNDS H OWEVER, THE CRUX OF THE GROUNDS OF APPEAL IS THE ACTION OF LEARNED CIT(A) B Y WHICH HE HAS SUSTAINED ADDITION WHICH THE ASSESSING OFFICER HAD MADE ON AC COUNT OF DISALLOWANCE U/S 14A OF THE ACT AND U/S 36(1)(VA) OF THE ACT FO R DELAY IN DEPOSIT OF EMPLOYEES CONTRIBUTION TO PF /ESIC. 2. AT THE OUTSET, LEARNED A. R. STATED THAT GROUND NO. 1 TO 4 RELATE TO DISALLOWANCE U/S 14A OF THE ACT WHEREAS GROUND NO. 5 RELATES TO DISALLOWANCE ON ACCOUNT OF DELAY IN DEPOSIT OF EMPL OYEES CONTRIBUTION TO PF/ESIC. AS REGARDS THE FIRST ISSUE, LEARNED A. R. SUBMITTED THAT ASSESSEE APPELLANT BY SHRI P. K. KAPOOR, C. A. RESPONDENT BY SHRI C. K. SINGH, D.R. DATE OF HEARING 31/10/2018 DATE OF PRONOUNCEMENT 16 / 11 /201 8 I.T.A. NO.768/LKW/2017 ASSESSMENT YEAR:2013-14 2 SUO MOTU HAD MADE A DISALLOWANCE U/S 14A WHICH THE ASSESSING OFFICER HAD ENHANCED BY APPLYING THE PROVISIONS OF SECTION 8D O F THE ACT. IN THIS RESPECT LEARNED A. R. SUBMITTED THAT THERE WAS NO E XEMPT INCOME TO THE ASSESSEE AND IN THIS RESPECT OUR ATTENTION WAS INVI TED TO COMPUTATION OF INCOME PLACED AT PAGE 2 OF THE PAPER BOOK WHERE NO EXEMPT INCOME WAS MENTIONED. OUR ATTENTION WAS ALSO INVITED TO AUDIT ED FINANCIAL STATEMENT AVAILABLE AT PAGES 5 TO 32 OF THE PAPER BOOK AND OU R SPECIFIC ATTENTION WAS INVITED TO PAGE 23 OF THE PAPER BOOK WHERE THE BREA K-UP OF TOTAL REVENUE ALONG WITH OTHER INCOME WAS PLACED AND IN THE BREAK -UP THERE WAS NO MENTION OF ANY EXEMPT INCOME. THEREFORE, IT WAS AR GUED THAT IN THE ABSENCE OF EXEMPT INCOME, NO DISALLOWANCE U/S 14A W OULD HAVE BEEN CALLED FOR. RELIANCE IN THIS RESPECT WAS PLACED ON A DECI SION OF HON'BLE DELHI HIGH COURT IN THE CASE OF CHEMINVEST LTD. VS. CIT [2015] 61 TAXMANN.COM 118 (DELHI). FURTHER RELIANCE WAS PLACED ON AN ORDER O F HON'BLE ALLAHABAD HIGH COURT IN THE CASE OF CIT VS. SHIVAM MOTORS (P.) LTD . [2015] 55 TAXMANN.COM 262 (ALLD). WITHOUT PREJUDICE LEARNED A. R. SUBMIT TED THAT NO SATISFACTION WAS RECORDED BY THE ASSESSING OFFICER WHILE MAKING DISALLOWANCE U/S 14A OF THE ACT AND HE SIMPLY RELIED ON THE PROVISIONS OF R ULE 8D. LEARNED A. R. SUBMITTED THAT THIS ACTION OF THE ASSESSING OFFICER , WITHOUT FIRST RECORDING SATISFACTION, IS ALSO CONTRARY TO THE JUDGMENT OF H ON'BLE SUPREME COURT IN THE CASE OF MAXOPP INVESTMENT LTD. VS. CIT [1018] 3 01 CTR 489 (SC) WHERE THE HON'BLE COURT HAS HELD THAT BEFORE WORKING OUT THE DISALLOWANCE U/S 14A, THE ASSESSING OFFICER HAS TO MAKE SATISFACTION REGARDING HIS DISSATISFACTION REGARDING DISALLOWANCE MADE BY THE ASSESSEE. FURTHER RELIANCE IN THIS RESPECT WAS PLACED ON THE JUDGMENT OF HON'BLE ALLAHABAD HIGH COURT IN THE CASE OF CIT VS. U.P. ELECTRONICS CORPORATION LIMITED [2017] 397 ITR 113 (ALL). RELIANCE WAS ALSO PLACED ON AN ORDER OF LUCKNOW BENCH OF THE TRIBUNAL IN THE CASE OF JUHI ALLOYS LTD. VS. DCIT IN I.T.A. NO.410 & 411/LKW/2016. I.T.A. NO.768/LKW/2017 ASSESSMENT YEAR:2013-14 3 2.1 AS REGARDS THE OTHER DISALLOWANCE FOR DELAY IN DEPOSIT OF EMPLOYEES CONTRIBUTION, LEARNED A. R. SUBMITTED THAT BEFORE T HE DUE DATE OF FILING OF INCOME TAX RETURN, THE EMPLOYEES CONTRIBUTION TO PF AND ESIC WERE DULY DEPOSITED AND THEREFORE, THE DISALLOWANCE WAS NOT W ARRANTED AS HELD BY HON'BLE ALLAHABAD HIGH COURT IN THE CASE OF SAGUN F OUNDRY PRIVATE LIMITED VS. CIT IN INCOME TAX APPEAL NO. 87 OF 2006. 3. LEARNED D. R., ON THE OTHER HAND, SUPPORTED THE ORDERS OF THE AUTHORITIES BELOW. 4. WE HAVE HEARD THE RIVAL PARTIES AND HAVE GONE T HROUGH THE MATERIAL PLACED ON RECORD. WE FIND THAT THE ASSESSEE, WHIL E FILING THE INCOME TAX RETURN, MADE A DISALLOWANCE OF RS.5,74,985/- U/S 1 4A WHICH THE ASSESSING OFFICER ENHANCED BY RS.1,65,368/- AS PER THE PROVIS IONS OF RULE 8D OF THE ACT. BEFORE LEARNED CIT(A) THE ASSESSEE FILED APPE AL AGAINST THE ENHANCED AMOUNT OF DISALLOWANCE WHEREAS BEFORE US THE ASSESS EE AGITATED THE WHOLE DISALLOWANCE INCLUDING THAT MADE BY THE ASSESSEE IT SELF. LEARNED A. R. ARGUED THAT SINCE THERE WAS NO EXEMPT INCOME EARNED BY THE ASSESSEE, THEREFORE, THE DISALLOWANCE WAS NOT WARRANTED AT AL L. WE ALSO NOTED THAT THIS CONTENTION OF THE ASSESSEE IS CORRECT AS THE H ON'BLE DELHI HIGH COURT IN THE CASE OF CHEMINVEST LTD. VS. CIT [2015] 61 TAXMA NN.COM 118 (DELHI) AND HON'BLE ALLAHABAD HIGH COURT IN THE CASE OF CIT VS. SHIVAM MOTORS (P.) LTD. HAS MADE SIMILAR FINDINGS AND HAS HELD THAT IN THE ABSENCE OF TAX FREE INCOME EARNED BY THE ASSESSEE, DISALLOWANCE U/S 14A CANNOT BE MADE. FOR THE SAKE OF COMPLETENESS, THE FINDINGS OF HON'BLE A LLAHABAD HIGH COURT IN THE CASE OF SHIVAM MOTORS ARE REPRODUCED BELOW: 10. AS REGARDS THE SECOND QUESTION, S. 14A OF THE ACT PROVIDES THAT FOR THE PURPOSES OF COMPUTING THE TOT AL INCOME UNDER THE CHAPTER, NO DEDUCTION SHALL BE ALLOWED IN RESPECT OF I.T.A. NO.768/LKW/2017 ASSESSMENT YEAR:2013-14 4 EXPENDITURE INCURRED BY THE ASSESSEE IN RELATION TO INCOME WHICH DOES NOT FORM PART OF THE TOTAL INCOME UNDER THE ACT. HENCE, WHAT S. 14A PROVIDES IS THAT IF THERE IS ANY INCOME WHICH DOES NOT FORM PART OF THE INCOME UNDER THE ACT, THE EXPENDITURE WHICH IS INCURRED FOR EARNING THE INCOM E IS NOT AN ALLOWABLE DEDUCTION. FOR THE YEAR IN QUESTION, THE FINDING OF FACT IS THAT THE ASSESSEE HAD NOT EARNED ANY TAX-FREE' I NCOME. HENCE, IN THE ABSENCE OF ANY TAX-FREE INCOME, THE CORRESPONDING EXPENDITURE COULD NOT BE WORKED OUT F OR DISALLOWANCE. THE VIEW OF THE CIT(A), WHICH HAS BEE N AFFIRMED BY THE TRIBUNAL, HENCE DOES NOT GIVE RISE TO ANY SU BSTANTIAL QUESTION OF LAW. HENCE, THE DELETION, OF THE DISALL OWANCE OF RS.2,03,752/- MADE BY THE AO WAS IN ORDER. IN THE PRESENT CASE WE HAVE ALREADY NOTED FROM THE AUDITED FINANCIAL STATEMENTS OF THE ASSESSEE THAT THERE WAS NO EXEMPT INCOME THEREFORE, FOLLOWING THE JUDICIAL PRECEDENT IN THE CASE OF SHI VAM MOTORS DECIDED BY HON'BLE ALLAHABAD HIGH COURT, NO DISALLOWANCE WAS R EQUIRED TO BE MADE U/S 14A OF THE ACT. THEREFORE, GROUND NO. 1 TO 4 ARE A LLOWED. 4.1 AS REGARDS THE ISSUE OF DISALLOWANCE FOR LATE D EPOSIT OF EMPLOYEES CONTRIBUTION TO PF /ESIC, WE FIND THAT BEFORE THE D UE DATE OF FILING OF INCOME TAX RETURN, THE ASSESSEE HAD DULY DEPOSITED THE DUE S AND HON'BLE ALLAHABAD HIGH COURT IN THE CASE OF SAGUN FOUNDRY PRIVATE LIM ITED VS. CIT [2017] 145 DTR 265 (ALL) HAS HELD THAT WHERE SUCH DEPOSITS ARE MADE BEFORE THE DUE DATE OF FILING OF INCOME TAX RETURN, NO DISALLOWANC E U/S 36(1)(VA) ARE REQUIRED TO BE MADE. IN THIS RESPECT, WE REPRODUCE THE FINDING OF HON'BLE COURT FROM PARA 17 ONWARDS WHERE AFTER ANALYSIS OF VARIOUS JUDGMENTS OF VARIOUS HIGH COURT, THE HON'BLE COURT HAS DECIDED T HE ISSUE IN FAVOUR OF THE ASSESSEE BY HOLDING AS UNDER: 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 43B, A SIMILAR QUESTION CAME UP FOR CONSIDERATION BEFORE GUJRAT HIGH COURT IN COMMISSIONER OF INCOMETAX VS GUJRAT STATE ROAD TRANSPORT CORPORATI ON, I.T.A. NO.768/LKW/2017 ASSESSMENT YEAR:2013-14 5 (2014) 366 ITR 170 . THEREIN ASSESSEE COLLECTED RS. 51,06,02,712/- FROM ITS EMPLOYEES TOWARDS PROVIDENT FUND CONTRIBUTION BUT DEPOSITED RS. 21,16,61,582/- WITH PROVIDENT FUND TRUST. THUS THERE WAS A SHORT FALL OF RS. 24,89,41 ,130/-. THIS AMOUNT OF SHORT FALL WAS TREATED BY ASSESSING OFFICER AS I NCOME OF ASSESSEE VIDE SECTION 2(24)(X) READ WITH SECTION 36(1)(VA) O F ACT 1961. ASSESSING OFFICER ALSO ADDED RS. 1,93,55,580/- BEIN G THE AMOUNT OF SHORT FALL TOWARDS EMPLOYERS CONTRIBUTORY PROVIDENT FUND AND DISALLOWED THE SAME UNDER SECTION 43B OF ACT 1961. HE ALSO DISALLOWED THE SAID AMOUNT OF RS. 1,93,55,580/- FRO M EXPENSES CLAIMED BY ASSESSEE FOR THE A.Y. IN QUESTION I.E. 2 005-06 AS PER PROVISIONS UNDER SECTION 43B. DISSATISFIED WITH A SSESSMENT ORDER, ASSESSEE PREFERRED APPEAL BEFORE CIT(A) WHO VIDE OR DER DATED 25.06.2009 PARTLY ALLOWED THE SAME AND DELETED DISALLOWANCE OF RS. 24,89,41,130/- (SHORT FALL IN EMPLOYEES CONTRI BUTION TO PROVIDENT FUND) AND RS. 1,93,55,580/- (SHORT FALL IN EMPLOYER S CONTRIBUTION TO PROVIDENT FUND) OBSERVING THAT EMPLOYEES CONTRIBU TION/EMPLOYERS CONTRIBUTION WAS DEPOSITED BEFORE FILING RETURN UND ER SECTION 139(1) OF ACT 1961 FOR THE RELEVANT PERIOD. REVENUE, I N ITS TURN, PREFERRED APPEAL BEFORE TRIBUNAL. RELYING ON JUDGMENT IN COMMISSIONER OF INCOMETAX VS 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 CONS IDERED FOLLOWING QUESTION, POSED IN PARA 7.01, READS AS UNDER:- 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 DEPARTMENT/ESI DEPARTMENT WITHIN DUE DATE UNDER THE PF ACT AND/OR 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 SUPERANNU ATION FUND OR ANY FUND SET UP UNDER ACT, 1948, OR ANY OTHER FUND FOR WELFARE OF SUCH EMPLOYEES, CONSTITUTE INCOME. HOWEVER, SECTION 36 O F ACT 1961 PROVIDES FOR DEDUCTION IN COMPUTING INCOME REFERRED TO IN SECTION 28. THE RELEVANT PROVISION OF SECTION 36 APPLICABLE TO THE CASE BEFORE GUJRAT 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 ANY SUM R ECEIVED BY ASSESSEE (EMPLOYER) FROM HIS EMPLOYEE TO WHICH SECT ION 2(24)(X) APPLY, IF SUCH SUM IS CREDITED BY ASSESSEE TO EMPLO YEES ACCOUNTS IN THE RELEVANT FUND BEFORE DUE DATE I.E. DATE PRESCRI BED IN THE RELEVANT STATUTE APPLICABLE TO THE CONCERNED FUND. COURT ALS O NOTICED THAT I.T.A. NO.768/LKW/2017 ASSESSMENT YEAR:2013-14 6 SECTION 43B IS IN RESPECT TO CERTAIN DEDUCTIONS AND APPLIES ONLY ON ACTUAL PAYMENT. IT HELD THAT AMENDMENT WAS MADE BY D ELETION OF SECOND PROVISO OF SECTION 43B ONLY, BUT NO CORRESP ONDING AMENDMENT WAS MADE UNDER SECTION 36(1)(VA). IT SAID: IT IS REQUIRED TO BE NOTED THAT AS SUCH THERE IS NO AMENDMENT IN SECTION 36(1)(VA) AND EVEN THE EXPLANA TION TO SECTION 36(1) (VA) IS NOT DELETED AND IS STILL O N THE STATUTE AND IS REQUIRED TO BE COMPLIED WITH. MERELY BECAUSE WITH RESPECT TO THE EMPLOYERS CONTRIBUTION THE SEC OND PROVISO TO SECTION 43B WHICH PROVIDED THAT EVEN WITH RESPECT TO THE EMPLOYERS CONTRIBUTION (SECTION 43B (B)), THE ASSESSEE WAS REQUIRED TO CREDIT THE AMOUNT IN T HE RELEVANT FUND UNDER THE PF ACT OR ANY OTHER FUND FO R THE WELFARE OF THE EMPLOYEES ON OR BEFORE THE DUE DATE UNDER THE RELEVANT ACT, IS DELETED, IT CANNOT BE SAID THA T SECTION 36(1)(VA) HAS BEEN DELETED 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: 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(1)(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 COMMISSIONER OF INCOMETAX VS ALOM EXTRUSIONS LTD. (SUPRA) ON THE GROUND THAT THEREIN ACTUAL DISPUTE RELATES TO EMPL OYERS CONTRIBUTION AND WHETHER AMENDMENT IN SECTION 43B BY FINANCE ACT , 2003 WOULD OPERATE RETROSPECTIVE OR NOT, SUPREME COURT HAD NO OCCASION TO CONSIDER DEDUCTION WITH REFERENCE TO SECTION 36(1) (VA). FOR THE SAME REASON GUJRAT HIGH COURT DISSENTED WITH THE JU DGMENTS OF RAJASTHAN HIGH COURT IN COMMISSIONER OF INCOMETAX VS UDAIPUR DUGDH UTPADAK SAHAKARI SANGH LTD., (2014) 3 66 ITR 163, PUNJAB & HARYANA HIGH COURT IN COMMISSIONER OF INCOMETAX VS HEMLA EMBROIDERY MILLS P. LTD., (2014 ) 366 ITR 167, HIMACHAL PRADESH HIGH COURT IN COMMISSIONER OF INCOMETAX VS NIPSO PLOYFABRIKS LTD., (2013) 350 IT R 327 AND KARNATAKA HIGH COURT IN COMMISSIONER OF INCOMETAX VS SABRI ENTERPRISES, (2008) 298 ITR 141 . I.T.A. NO.768/LKW/2017 ASSESSMENT YEAR:2013-14 7 21. KARNATAKA HIGH COURT HAD AN OCCASION TO CONSIDE R, WHETHER IT SHOULD DISSENT WITH THE VIEW TAKEN IN THE EARLIE R JUDGMENTS AND FOLLOW THE VIEW TAKEN BY GUJRAT HIGH COURT IN COMMISSIONER OF INCOMETAX VS GUJRAT STATE ROAD TRANSPORT CORPORATI ON (SUPRA) AND THIS OCCASION CAME IN ESSAE TERAOKA P. LTD. VS DEPUTY COMMISSIONER OF INCOMETAX, (2014) 366 ITR 408 . DISPUTE RELATES TO A.Y. 2008-09. ASSESSEE FILED RET URN ON 26.09.2008. RETURN WAS PROCESSED UNDER SECTION 143( 1) AND THEREAFTER ON SCRUTINY, NOTICE UNDER SECTION 143(2 ) WAS ISSUED. ASSESSING OFFICER COMPLETED ASSESSMENT BY ORDER DAT ED 24.12.2010 UNDER SECTION 143(3) DISALLOWING RS. 12,51,737/- UN DER SECTION 36(1)(VA) AND ALSO DISALLOWING RS. 1,04,621/- UNDER SECTION 14A READ WITH RULE 8D. IN APPEAL, CIT (A) REVERSED FINDINGS O F ASSESSING OFFICER BUT ON APPEAL PREFERRED BY REVENUE, TRIBUNA L RESTORED ASSESSING OFFICERS ORDER AND THAT IS HOW MATTER CAME TO KARNATAKA HIGH COURT. THE QUESTION UP FOR CONSIDERATION WAS, WHETHER TRIBUNAL WAS JUSTIFIED IN AFFIRMING FINDING OF A SSESSING OFFICER AND DENYING ASSESSEES CLAIM OF DEDUCTION OF EMPLOYEE S CONTRIBUTION TO PF/ESI ALLEGING THAT THE PAYMENT WAS NOT MADE BY APP ELLANT IN ACCORDANCE WITH THE PROVISIONS OF SECTION 36(1)(V A) OF ACT 1961. THE ASSESSEES COUNSEL RELIED ON EARLIER JUDGMENT O F KARNATAKA HIGH COURT IN COMMISSIONER OF INCOMETAX VS SPECTRUM CONSULTANTS P. LTD., (2014) 2 ITROL 622 WHILE COUNSEL FOR REVENUE ATTEMPTED TO PURSUE TO TAKE A DIFFERENT V IEW FOLLOWING DECISION OF GUJRAT HIGH COURT. THE DIVISION BENCH JUDGMENT DELIVERED BY HONBLE DILIP B. BHOSALE, (AS HIS LORD SHIP THEN WAS) HELD, IF THE CONTRIBUTION OF EMPLOYEES FUND IS DEPOSITED WITHIN DUE DATE THE ASSESSEE IS STRAIGHTAWAY ENTITLED FOR DEDUCTION UNDER SECTION 36(1)(VA). HOWEVER SECTION 43B PROVIDES FOR CERTAI N DEDUCTIONS ALLOWABLE ONLY ON ACTUAL PAYMENT. IT GIVES AN EXTENS ION TO THE EMPLOYER TO MAKE PAYMENT OF CONTRIBUTION TO PROVIDE NT FUND OR ANY OTHER FUND, TILL DUE DATE APPLICABLE FOR FURNISHING OF RETURN 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 RETURN. CO URT THEN SAID: IN SHORT, THIS PROVISION STATES, NOTWITHSTANDING ANYTHING CONTAINED IN ANY OTHER PROVISION CONTAINED IN THIS ACT , A DEDUCTION OTHERWISE ALLOWABLE IN THIS ACT IN RESPECT OF ANY SUM PAYABLE BY THE ASSES SEE AS AN EMPLOYER BY WAY 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 TH E 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 CONTRIBUTION ON OR BEFORE THE DUE DATES THEREIN. I.T.A. NO.768/LKW/2017 ASSESSMENT YEAR:2013-14 8 22. IT ALSO SAID THAT THE WORD CONTRIBUTION USED I N CLAUSE (B) OF SECTION 43B OF ACT 1961 MEANS THE CONTRIBUTION OF E MPLOYER AND EMPLOYEE, BOTH, AND THAT BEING SO, IF CONTRIBUTION IS DEPOSITED ON OR BEFORE DUE DATE FOR FURNISHING RETURN OF INCOME UND ER SUB-SECTION (1) OF SECTION 139 OF ACT 1961, EMPLOYER IS ENTITLE D FOR DEDUCTION. 23. THOUGH IN A SHORT JUDGMENT, BUT PUNJAB & HARYAN A HIGH COURT IN COMMISSIONER OF INCOMETAX VS HEMLA EMBROIDERY MILLS (P.) LTD., (SUPRA) NOT ONLY FOLLOWED COMMISSIONER OF INCOMETAX VS ALOM EXTRUSIONS LTD. (SUPRA) BUT ALSO ITS OWN EARLIER JUDGMENT IN COMMISSIONER OF INCOMETAX VS RAI AGRO INDUSTRIES LTD., (2011) 334 ITR 122 , TO HOLD THAT SECTION 43B SHALL APPLY TO BOTH 'CONTRIBUTIONS' I.E. EMPLOYERS' AND EMPLOYEES'. 24. KERALA HIGH COURT IN RECENT JUDGMENT IN COMMISSIONER OF INCOMETAX VS MERCHEM LTD., (2015) 378 ITR 443 , HAS FOLLOWED THE DECISION OF GUJRAT HIGH COURT IN COMMISSIONER OF INCOMETAX VS GUJRAT STATE ROAD TRANSPORT CORPORA TION (SUPRA) AND DISSENTED WITH THE OTHERWISE JUDGMENTS OF RAJAS THAN HIGH COURT IN COMMISSIONER OF INCOMETAX VS STATE BANK OF BIKANER AND JAIPUR, (2014) 363 ITR 70 , KARNATAKA HIGH COURT IN COMMISSIONER OF INCOMETAX VS SPECTRUM CONSULTANTS INDIA P. LTD. (SUPRA) AND BOMBAY HIGH COURT IN COMMISSIONER OF INCOMETAX VS GHATGE PATIL TRANSPORTS LTD., (2 014) 368 ITR 749 . 25. BEFORE FOLLOWING A PARTICULAR VIEW WHEN THERE I S DIVERGENCE IN VIEWS OF DIFFERENT HIGH COURTS, WE FIND IT APPROPRI ATE TO EXAMINE SUPREME COURT JUDGMENT IN COMMISSIONER OF INCOMETAX VS ALOM EXTRUSIONS LTD. (SUPRA) TO FIND OUT WHETHER IT CAN BE CONFINED ONLY IN RESPECT TO EMPLOYERS' CONTRIBUTIO N OR IS APPLICABLE TO BOTH 'CONTRIBUTIONS', WHETHER BY EMPLOYER OR EMPLOY EE. 26. THE QUESTION, WHETHER BENEFIT UNDER SECTION 43B , AS A RESULT OF AMENDMENT OF FINANCE ACT, 2003, IS RETROSPECTIVE OR NOT, CAME TO BE CONSIDERED IN COMMISSIONER OF INCOMETAX VS ALOM EXTRUSIONS LTD. (SUPRA) . COURT CONSIDERED THE INTENT, PURPOSE AND OBJECT IN THE HISTORICAL BACK DROP OF INSERTION OF SECTION 43B AND ITS PROGRESS BY WAY OF VARIOUS AMENDMENTS. REFERRING S ECTION 2(24)(X) IT SAID, INCOME IS DEFINED UNDER SECTION 2(24) WHI CH INCLUDES PROFITS AND GAINS. FURTHER IN CLAUSE (X) OF SECTION 2(24) A NY SUM RECEIVED 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 CONSTITUTE 'INCOME'. THIS IS THE REASON WHY EVERY ASSESSEE/EMPLOYER WAS ENTITLED TO DEDUCTION EVEN PRIOR TO APRIL, 1, 1984, KEEPING BOOKS ON MERC ANTILE SYSTEM OF ACCOUNTING, AS A BUSINESS EXPENDITURE, BY MAKING PR OVISION IN HIS I.T.A. NO.768/LKW/2017 ASSESSMENT YEAR:2013-14 9 BOOKS OF ACCOUNT IN THAT REGARD. ASSESSEE WAS CAPAB LE OF KEEPING MONEY WITH HIM AND JUST BY MENTIONING IN ACCOUNTS, WAS ABLE TO CLAIM DEDUCTION AS BUSINESS EXPENSES. SECTION 43B W AS INSERTED TO CHECK THIS PRACTICE AND IT RESULTED IN DISCONTINUIN G MERCANTILE SYSTEM OF ACCOUNTING WITH REGARD TO TAX, CONTRIBUTIONS ETC . WITH INDUCTION OF SECTION 43B AN ASSESSEE COULD CLAIM DEDUCTION ON AC TUAL PAYMENT BASIS. BY FINANCE ACT, 1988 PARLIAMENT INSERTED FIR ST PROVISO W.E.F. 01.04.1988 WHICH INTER ALIA PROVIDES THAT ANY SUM P AYABLE BY ASSESSEE BY WAY OF TAX, DUTY, CESS OR FEE, IF PAYME NT IS MADE AFTER CLOSING OF ACCOUNTING YEAR BUT BEFORE DATE OF FILIN G OF RETURN UNDER SECTION 139(1), ASSESSEE WOULD BE ENTITLED TO DEDUC TION ON ACTUAL PAYMENT BASIS. THIS PROVISO DID NOT INCLUDE WITHIN ITS AMBIT, CONTRIBUTIONS UNDER LABOUR WELFARE STATUTES. BY FIN ANCE ACT, 1988, SECOND PROVISO THUS SECOND PROVISO WAS FURTHER AMEN DED 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 ON O R 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 INDUSTRIES MADE REPRESENTATIONS TO THE MINISTRY OF FINANCE. COURT, LOOKING TO THE HIST ORY OF AMENDMENTS HELD, IT IS EVIDENT THAT SECTION 43B, WHEN ENACTED IN 1984, COMMENCES WITH A NON OBSTANTE CLAUSE. THE UNDERLYIN G OBJECT BEING TO DISALLOW DEDUCTIONS CLAIMED MERELY BY MAKING A B OOK ENTRY BASED ON THE MERCANTILE SYSTEM OF ACCOUNTING. AT THE SAM E TIME, SECTION 43B MADE IT MANDATORY FOR THE DEPARTMENT TO GRANT D EDUCTION IN COMPUTING INCOME UNDER SECTION 28 IN THE YEAR IN WH ICH TAX, DUTY, CESS ETC. IS ACTUALLY PAID. PARLIAMENT TOOK COGNIZA NCE OF THE FACT THAT ACCOUNTING YEAR OF A COMPANY DID NOT ALWAYS TALLY W ITH THE DUE DATES UNDER PROVIDENT FUND ACT, MUNICIPAL CORPORATION ACT (OCTROI) AND OTHER TAX LAWS. THEREFORE, BY WAY OF FIRST PROVISO, AN INCENTIVE/RELAXATION WAS SOUGHT TO BE GIVEN IN RESP ECT OF TAX, DUTY, CESS OR FEE BY EXPLICITLY STATING THAT IF SUCH TAX DUTY CESS OR FEE IS PAID BEFORE THE DATE OF FILING OF THE RETURN 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 WELFARE FU NDS. THE REASON APPEARS TO BE THAT THE EMPLOYER SHOULD NOT SIT ON T HE COLLECTED CONTRIBUTIONS AND DEPRIVE WORKMEN OF THE RIGHTFUL BENEFITS UNDER SOCIAL WELFARE LEGISLATIONS BY DELAYING PAYMENT OF CONTRIBUTIONS TO THE WELFARE FUNDS. BUT WHEN IMPLEMENTATION PROBLEMS WE RE POINTED OUT FOR DIFFERENT DUE DATES, UNIFORMITY WAS BROUGHT ABO UT IN FIRST PROVISO BY FINANCE ACT, 2003. HENCE, AMENDMENT MADE BY FINA NCE ACT 2003 IN SECTION 43B IS RETROSPECTIVE, BEING CURATIVE IN NATURE AND APPLY FROM 01.04.1988. IN THE RESULT WHEN CONTRIBUTION HAD BEEN PAID, PRIOR TO FILING OF RETURN UNDER SECTION 139(1), ASS ESSEE/EMPLOYER I.T.A. NO.768/LKW/2017 ASSESSMENT YEAR:2013-14 10 WOULD BE ENTITLED FOR DEDUCTION AND SINCE DELETION OF SECOND PROVISO AND AMENDMENT OF FIRST PROVISO IS CURATIVE AND APPL Y RETROSPECTIVELY W.E.F. 01.04.1988. 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 THAT CONTEXT BUT LOOKING TO THE OBJECTIVE AND PURPOSE OF INSERTION OF SECTION 43B A PPLIED IT TO BOTH THE CONTRIBUTIONS. IT ALSO OBSERVED CLEARLY THAT SEC TION 43B IS WITH A NON-OBSTANTE CLAUSE AND THEREFORE OVER RIDE EVEN IF , ANYTHING OTHERWISE IS CONTAINED IN SECTION 36 OR ANY PROVISI ON 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 EMP LOYEE. OTHERWISE VIEW TAKEN BY GUJRAT HIGH COURT AND FOLLOWED BY KER ALA HIGH COURT, WITH GREAT RESPECT, WE FIND EXPEDIENT TO DISSENT TH EREWITH. 30. IN VIEW OF ABOVE ALL THE QUESTIONS FORMULATED AB OVE ARE ANSWERED AGAINST REVENUE AND IN FAVOUR OF ASSESSEE. IN VIEW OF THE ABOVE JUDICIAL PRECEDENTS, GROUND NO . 5 OF THE APPEAL IS ALLOWED. 4.2 IN THE RESULT, THE APPEAL OF THE ASSESSEE STAND S ALLOWED. (ORDER PRONOUNCED IN THE OPEN COURT ON 16/11/2018) SD/. SD/. ( A. D. JAIN ) ( T. S. KAPOOR ) VICE PRESIDENT ACCOUNTANT MEMBER DATED:16/11/2018 *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 ASSISTANT REGISTRAR