DCIT, CHENNAI V. Prumatech Services (P) Ltd., CHENNAI

ITA 894/CHNY/2016

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 8752 (ITAT-CHENNAI)
• Duration Of Justice: 4 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-08-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2012-2013
• Appeal Filed On: 07-04-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SAHADEVAN
• Keywords: Opportunity of being heard
• Section: 43B; 143(3); 115JB

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL , B B ENCH, CHENNAI . . . , . , & BEFORE SHRI N.R.S.GANESAN, JUDICIAL MEMBER AND SHRI A.MOHAN ALANKAMONY, ACCOUNTANT MEMBER ./ I.T.A.NO.894/MDS/2016 ( / ASSESSMENT YEAR: 2012-13) THE DEPUTY COMMISSIONER OF INCOME TAX, CORPORATE CIRCLE-5(2), CHENNAI - 34. VS M/S. PRUMATECH SERVICES P.LTD., 18, LADY MADHAVAN ROAD, MAHALINGAPURAM, CHENNAI - 600 034. PAN:AAACP6482A ( /APPELLANT) ( /RESPONDENT) / APPELLANT BY : MR. SAHADEVAN, JCIT /RESPONDENT BY : MR. Y.SRIDHAR, C.A. /DATE OF HEARING : 9 TH JUNE, 2016 /DATE OF PRONOUNCEMENT : 11 TH AUGUST, 2016 / O R D E R PER A. MOHAN ALANKAMONY, AM: THIS APPEAL IS FILED BY THE REVENUE AGGRIEVED BY THE ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX (AP PEALS)- 3, CHENNAI DATED 27.01.2016 IN ITA NO.116/CIT(3) -A/2014- 15 PASSED UNDER SECTION 143(3) R.W.S 250(6) OF THE ACT. 2. THE REVENUE HAS RAISED SEVERAL GROUNDS IN ITS AP PEALS, HOWEVER, THE CRUX OF THE ISSUE IS AS FOLLOWS:- THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) HAS ERRED BY HOLDING THAT THE ASSESSEE WILL BE ENTITLED FOR DEDUCTION OF RS. 31,71,243/- TOWARDS PAYMENT MADE FOR EMPLOYEES CONTRIBUTION TO PROVIDENT FUND AND 2 ITA NO.894/MDS/2016 RS.67,261/- TOWARDS PAYMENT MADE FOR EMPLOYEES CONTRIBUTION TO ESI AGGREGATING TO RS.32,40,504/-, SINCE THE SAME WAS PAID BEFORE THE DUE DATE OF FILING OF THE RETURN. 3. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE I S A COMPANY ENGAGED IN THE BUSINESS OF ENGINEERING AND TECHNICAL CONSULTANTS/ CONTRACTORS FILED ITS RETU RN OF INCOME ON 29.09.2012 ADMITTING INCOME OF RS.2,21,77,280/- AND BOOK PROFIT OF RS.2,44,00,257/- UNDER SECTION 115JB OF THE ACT. SUBSEQUENTLY, THE CASE WAS TAKEN UP FOR SCRU TINY AND THE ASSESSMENT WAS MADE UNDER SECTION 143(3)OF THE ACT ON 12.01.2015 WHEREIN THE LEARNED ASSESSING OFFICER MA DE ADDITION TOWARDS NON-REMITTANCE OF EMPLOYEES CONTR IBUTION TO PF & ESI FUND AGGREGATING TO RS 32,40,504/- WITHIN THE DUE DATE UNDER THE RELEVANT ACT. 4. ON APPEAL, THE LEARNED COMMISSIONER OF INCOM E TAX (APPEALS) RELYING ON THE VARIOUS DECISIONS OF THE H IGHER JUDICIARY ALLOWED THE APPEAL OF THE ASSESSEE BY HOL DING THAT THE ASSESSEE HAD MADE THE AFORESAID PAYMENTS WITH IN THE DUE DATE OF FILING OF THE RETURN OF INCOME UNDER TH E ACT AND 3 ITA NO.894/MDS/2016 THEREFORE ENTITLED TO CLAIM THE DEDUCTION UNDER THE PROVISIONS OF THE ACT. THE RELEVANT PORTION OF THE ORDER OF TH E LEARNED COMMISSIONER OF INCOME TAX (APPEALS) IS REPRODUCED HEREIN BELOW FOR REFERENCE:- I HAVE CONSIDERED SUBMISSIONS OF THE APPELLANT, FI NDINGS GIVEN BY THE AO AND MATERIAL ON RECORD. IN APPELLAN T'S CASE, THE EMPLOYEE CONTRIBUTION FOR PF AND ESI OF RS. 1,16,25,146 AND RS. 3,31,454 RESPECTIVELY HAVE BEEN CLAIMED U/S. 36(1 )(VA) FOR THE PREVIOUS YEAR RELEV ANT YEAR 2012-13. HOWEVER, AO HAD NOTICED, DURING THE COURSE OF SCRUTINY PROCEEDINGS, THAT AN AMOUNT OF RS. 31,73,2 43 TOWARDS EMPLOYEES CONTRIBUTION TO PF AND AN AMOUNT OF RS. 67,261 TOWARDS EMPLOYEES CONTRIBUTION WERE NOT MADE WITHIN THE DUE DATE MENTIONED AS PER SECTION 36(1 ) (VA) .. SINCE, THE SAID PAYMENTS WERE NOT MADE WITHIN THE D UE DATE AS PER THE PF ACT AND ESI ACT, THEREFORE, AO H AD DISALLOWED THE SAME AFTER GIVING AN OPPORTUNITY OF BEING HEARD. AO HAD ALSO RELIED CERTAIN JUDGMENTS IN THE ASSESSMENT ORDER, WHICH ARE SELF-EXPLANATORY. BEFOR E ME, AR OF THE APPELLANT HAS ARGUED THAT THE AMOUNTS UND ER APPEAL HAVE BEEN PAID ON OR BEFORE DUE DATE OF FILI NG THE INCOME TAX RETURN. THEREFORE, PAYMENTS MADE, IN THE OPINION OF THE AR OF THE APPELLANT SHOULD BE ALLOWE D U/S. 438 AND ADDUCED HON'BLE SUPREME COURT JUDGMENT IN T HE CASE OF CIT VS. ALOM EXTRUSIONS LTD. 319 ITR 306 AN D OTHER HON'BLE HIGH COURTS SUCH AS CIT (UDAIPUR) VS. UDAIP UR DUGDH UTPADAK SAHAKARI SANGH LTD. 366 ITR 163 (RAJASTHAN), CIT, (FARIDABAD) VS. HEMLA EMBROIDERY MILLS P. LTD. 366 ITR 167, SPECTRUM CONSULTANTS INDIA P.L TD. VS. CIT(BANGALORE) 266 CTR 94 KAR. BEFORE PROCEEDING TO DISCUSS THE CASE LAWS RELIED BY THE AR OF THE APPEL LANT, IT IS OBSERVED THAT AO HAD ALSO RELIED UPON CERTAIN JUDGM ENTS IN THE ASSESSMENT ORDER. HE HAD RELIED UPON DECISION O F HON'BLE GUJRAT HIGH COURT IN THE CASE OF CIT VS. GU JRAT STATE ROAD TRANSPORT CORPORATION 41 TAXMANN 100 (GU J.) AND HON'BLE MADRAS HIGH COURT DECISION IN THE CASE OF CIT VS. MADRAS RADIATORS AND PRESSINGS LTD. 129 TAXMANN 709. IN THIS REGARD, IT IS NOTED THAT THESE TWO DECISION S WERE RENDERED BY THE RESPECTIVE HIGH COURTS PRIOR TO THE DECISION OF HON'BLE SUPREME COURT IN THE CASE OF CIT VS. ALO M EXTRUSIONS LTD. 319 ITR 306. IT IS ALSO NOTICED THA T WITH THE DECISION OF APEX COURT ON THE ISSUE ON HAND IS FOUN D TO 4 ITA NO.894/MDS/2016 HAVE SETTLED. IT IS APPROPRIATE TO REPRODUCE RELEVA NT PARAS OF JUDGMENTS RELIED BY THE AR OF THE APPELLANT. THE HON'BLE SUPREME COURT IN THE CASE OF CIT VS. AL OM EXTRUSIONS LTD. 319 ITR 306 HELD AS UNDER:- .......... .. SECTION 43B (MAIN SECTION), WHICH STOOD INSERTED BY THE FINANCE ACT, 1983, WITH EFFECT FROM APRIL 1, 1984, EXPRESSLY COMMENCES WITH A NON OBSTANTE CLAUSE, THE UNDERLYING OBJECT BEING TO DISALLOW DEDUCTIONS CLAIMED MERELY BY MAKING A BOOK ENTRY BASED ON THE MERCANTILE SYSTEM OF ACCOUNTING. AT THE SAME TIME, SECTION 43B (MAIN SECTION' MADE) MADE IT MANDATORY FOR THE DEPARTMENT TO GRANT DEDUCTION IN COMPUTING THE INCOME U/S.28 IN THE YEAR IN WHICH TA X, DUTY, CESS, ETC., IS ACTUALLY PAID. HOWEVER, PARLIAMENT T OOK COGNIZANCE OF THE FACT THAT THE ACCOUNTING YEAR OF A COMPANY DID NOT ALWAYS TALLY WITH THE DUE DATES UND ER THE PF ACT, MUNICIPAL; CORPORATION ACT(OCTROI) AND OTHE R TAX LAWS. THEREFORE, BY WAY OF THE FIRST PROVISO, . AN INCENTIVE LRELAXATION WAS SOUGHT TO BE GIVEN IN RESPECT OF TA X, 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 THE IT ACT(DUE DATE), THE ASSESSE(S) THEN WOULD BE ENTITLED TO DEDUCTION. HOWEVER THIS RELAXATION/INCE NTIVE WAS RESTRICTED ONLY TO TAX, DUTY, CESS AND FEE. IT DID NOT APPLY TO CONTRIBUTION TO LABOUR WELFARE FUNDS. THE REASON AP PEARS TO BE THAT THE EMPLOYERS(S) SHOULD NOT SIT ON THE COLL ECTED CONTRIBUTIONS AND DEPRIVE THE WORKMEN OF THE RIGHTF UL BENEFITS UNDER SOCIAL WELFARE LEGISLATIONS BY DELAY ING PAYMENT OF CONTRIBUTIONS TO THE WELFARE FUNDS. HOWE VER, AS STATED ABOVE, THE SECOND PROVISO RESULTED IN IMPLEM ENTATION PROBLEMS, WHICH HAVE BEEN MENTIONED HEREINABOVE, AN D WHICH RESULTED IN THE ENACTMENT OF THE FINANCE ACT, 2003, DELETING THE SECOND PROVISO END BRINING ABOUT UNIFO RMITY IN THE FIRST PROVISO BY EQUATING TAX, DUTY, CESS AND F EE WITH CONTRIBUTIONS TO WELFARE FUNDS.' FURTHER HON'BLE KARNATKA HIGH COURT IN THE CASE OF SPECTRUM CONSULTANTS INDIA P.LTD. VS. CIT(BANGALORE) 266 CTR 94 KAR HAS HELD AS UNDER: 'IT IS NO DOUBT TRUE THAT IN ALOM EXTRUSIONS CASE, THE QUESTION THAT FELL FOR CONSIDERATION BY THE APEX CO URT WAS, WHETHER THE OMISSION (DELETION) OF THE SECOND PROVISO TO SEC. 43B OF THE ACT BY FINANCE ACT 2003 OPERATED W.E.F 1/4/2004 OR' RETROSPECTIVELY W.E.F 1/4/1988 ? IN ORDER TO ANSWER THE SAID QUESTION, THE APEX COURT FELT THE NEED TO UNDERSTAND THE SCHEME OF THE ACT AS IT EXISTED PRIOR TO 1/4/1984 5 ITA NO.894/MDS/2016 AND AS IT STOOD AFTER 1/4/1984 AND ACCORDINGLY EXAMINED THE DEFINITION OF THE TERM INCOME UNDER SE C. 2 (24)(X), THE MERCANTILE SYSTEM OF ACCOUNTING WITH REGARD TO TAX, DUTY AND CONTRIBUTION TO WELFARE FUN DS, WHICH WAS DISCONTINUED U/S. 43B LEADING TO THE INTRODUCTION OF THE FIRST PROVISO W.E.F 1/4/1988 AND THE INSERTION OF THE SECOND PROVISO VIDE FINANCE AC T 1988, MAKING REFERENCE TO THE TERM 'DUE DATE' IN TH E EXPLANATION TO SEC 36(1)(VA) OF THE ACT, AS WELL AS THE AMENDED SECOND PROVISO BY FINANCE ACT 1989, W.E.F 14/2004, TWO CHANGES WERE MADE, NAMELY DELETION OF SECOND PROVISO AND FURTHER AMENDMENT T O THE FIRST PROVISO, EQUATED IN TERMS OF THE BENEFIT OF DEDUCTION OF TAX, DUTY, CESS AND FEE ON THE ONE HAN D WITH CONTRIBUTIONS TO THE EMPLOYEES PROVIDENT FUND, SUPERANNUATION FUND AND OTHER WELFARE FUNDS ON THE OTHER. IT IS FURTHER OBSERVED THAT I ORDER TO BRING ABOUT UNIFORMITY IN ALLOWING DEDUCTIONS TO CONTRIBUTIONS TO WELFARE FUNDS, THE AMENDMENT WAS NECESSITATED, WHILE THE REASON NOT TO EXTEND SUCH DEDUCTION APPEARED TO BE THAT THE EMPLOYER SHOULD NOT SIT ON THE COLLECTED CONTRIBUTIONS AND DEPRIVE THE WORKMAN OF THE RIGHTFUL BENEFITS UNDER THE SOCIAL WELFARE LEGISLATION BY DELAYING PAYMENT, OF CONTRIBUTION. REGARD BEING HAD TO THE WORDS 'DUE DATE' AS INTERPR ETED IN SABARI ENTERPRISES CASE (SUPRA), AND AFFIRMED BY THE APEX COURT IN ALOM EXTRUSIONS LTD. CASE (SUPRA), THERE CAN BE NO MORE DOUBT THAT THE A. 0 AS WELL AS THE REVISION AUTHORITY FELL IN ERROR IN DISALLOWING THE DEDUCTION OF RS. 22,91,7911-. BEING THE EMPLOYEES ' CONTRIBUTION REMITTED BY THE PETITIONER-EMPLOYER-ASSESSEE BOTH U NDER THE ESI AND EPF ACT, PARTLY BEFORE 31/3/2006 IN THE FINANCI AL YEAR CONCERNED AND THE BALANCE BEFORE THE FILING OF THE RETURNS ULS. 139(1) OF THE ACT, AS EXTENDED UP TO 30/11/2006. IN THE CIRCUMSTANCES, THE QUESTION IS ANSWERED IN T HE NEGATIVE AND AGAINST THE REVENUE'. HON'BLE RAJASTHAN HIGH COURT AND HON'BLE PUNJAB & HARYANA COURT HAVE ALSO EXPRESSED SIMILARLY IN THE ABOVE CITED RESPECTIVE DECISIONS. ON PERUSAL OF ABOVE CIT ED DECISIONS OF RESPECTIVE COURTS I AM INCLINED TO AGR EE WITH THE ARGUMENTS OF AR OF THE APPELLANT. KEEPING IN VIEW O F SETTLED POSITION OF LAW HELD BY HON'BLE APEX COURT, AO IS D IRECTED TO DELETE THE ADDITION AMOUNT OF RS, 32.40,504. ALL TH E GROUNDS TAKEN BY THE APPELLANT ON THIS ISSUE ARE ALLOWED. 6 ITA NO.894/MDS/2016 5. AFTER HEARING BOTH SIDES, WE DO NOT FIND IT NECESSARY TO INTERFERE WITH THE ORDER OF THE LD.CIT(A) BECAUSE H E HAS HELD THE ISSUE IN FAVOUR OF THE ASSESSEE ONLY BY FOLLOWI NG THE DECISIONS OF HONBLE RAJASTHAN HIGH COURT AND HONB LE PUNJAB & HARYANA HIGH COURT, WHICH SQUARELY COVERS THE ISSUE IN FAVOUR OF THE ASSESSEE. THEREFORE, WE HERE BY CONFIRM THE ORDER OF THE LEARNED COMMISSIONER OF IN COME TAX (APPEALS) ON THIS ISSUE. 6. IN THE RESULT, THE APPEAL OF THE REVENUE IS D ISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON THE 11 TH AUGUST, 2016 SD/- SD/- ( . . . ) ( . ) (N.R.S.GANESAN) ( A.M OHAN ALANKAMONY ) # % / JUDICIAL MEMBER % / ACCOUNTANT MEMBER # /CHENNAI, ( /DATED 11 TH AUGUST, 2016 SOMU *+ ,+ /COPY TO: 1. APPELLANT 2. RESPONDENT 3. - () /CIT(A) 4. - /CIT 5. + 1 /DR 6. /GF .