DCIT, CIR-I, KOLKATA, Kolkata V. M/s Reliance Jute Mills International Ltd., Kolkata

ITA 897/KOL/2014

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 9142 (ITAT-KOLKATA)
• Duration Of Justice: 2 year(s) 10 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-03-2017
• Appeal Filed By: Department
• Bench Allotted: A
• Next Hearing Date: 07-03-2017
• Assessment Year: 2008-2009
• Appeal Filed On: 08-05-2014
• Court: TRIBUNAL
• Assessee Lawyers: S M SURANA LD
• Section: 43B

Judgement Text

1 ITA NO.897/KOL/2014 IN THE INCOME TAX APPELLATE TRIBUNAL,ABENCH, KOLKATA BEFORE: SHRI M.BALAGANESH, ACCOUNTANT MEMBER AND SHRI S.S.VISWANETHRA RAVI, JUDICIAL MEMBER ITA NO. 897/KOL/2014 A.Y 2008-09 DEPUTY COMMISSIONER OF VS. M/S. RELIANCE JUTE MILLS INCOME TAX, CIR-1, INTERN ATIONAL LTD KOLKATA PAN: AABCR 4761R (APPELLANT) (RESPONDENT) APPEARANCES BY : SHRI SALLONG YADEN, ADDL. CIT FOR THE REVENUE SHRI S.M SURANA, ADVOCATE, LD.AR FOR THE ASSESSEE DATE OF HEARING : 07-03-2017 DATE OF PRONOUNCEMENT : 17-03-2017 O R D E R SHRI S.S. VISWANETHRA RAVI, JM :- THIS APPEAL BY THE REVENUE IS AGAINST THE ORDER DT: 30-01- 2014 PASSED BY THE COMMISSIONER OF INCOME TAX (APPE ALS),I KOLKATA FOR THE ASSESSMENT YEAR 2008-09. 2. IN THIS APPEAL, THE APPELLANT REVENUE HAS RAISED THE FOLLOWING EFFECTIVE GROUNDS OF APPEAL:- 1. THAT, ON THE FACTS AND CIRCUMSTANCES OF THE CASE , THE LD. CIT(A) IS NOT JUSTIFIED IN DELETING THE DISALLOWANCE OF GR ATUITY LIABILITY OF RS.2,54,03,464/- WITHOUT CONSIDERING THE FACT THAT THE ASSESSEE WAS FOLLOWING MERCANTILE SYSTEM OF ACCOUNTING AND THAT THERE WAS NO ACCRUAL OF SUCH LIABILITY DURING THE YEAR UNDER CON SIDERATION. 2. THAT, ON THE FACTS AND CIRCUMSTANCES OF THE CAS E, THE LD. CIT(A) IS NOT JUSTIFIED IN DELETING THE DISALLOWANCE OF EM PLOYEES CONTRIBUTION TO THE LABOUR WELFARE BOARD AND PF OF RS.15,951/- AND 32,62,654/- RESPECTIVELY, WITHOUT CONSIDERING THE FACT THAT PRO VISIONS OF SECTION 43B OF THE I.T ACT, 1961 IS NOT RELATED TO THE EMPL OYEES CONTRIBUTION TO PF. THE HONBLE ITAT A BENCH, MUMBAI HAS DECID ED THIS ISSUE IN FAVOUR OF THE DEPARTMENT IN THE CASE OF M/S. LKP SE CURITIES LTD. 2 ITA NO.897/KOL/2014 3. GROUND NO.1 IS RELATING TO DELETION OF ADDITION/ DISALLOWANCE OF RS.2,54,03,464/- TOWARDS GRATUITY LIABILITY. 4. BRIEF FACTS OF THE ISSUE ARE THAT DURING THE AS SESSMENT PROCEEDINGS THE AO ON PERUSAL OF THE COMPUTATION SH EET FILED BEFORE HIM FOUND THAT THE ASSESSEE CLAIMED DEDUCTIO N OF GRATUITY LIABILITY OF RS.2,54,03,464/- IN RESPECT O F RETIRED EMPLOYEES NOT DEBITED TO THE PROFIT & LOSS ACCOUNT. IN EXPLANATION, THE ASSESSEE SUBMITTED THAT BY FOLLOW ING THE ORDER DATED 21-09-2007 IN ITA NO. 1832/KOL/2007 FOR THE A.Y 2004-05 [ ASSESSEES OWN CASE], THE ASSESSEE MADE P ROVISION IN THAT RESPECT. HOWEVER, THE AO DISALLOWED THE SAID A MOUNT OF RS.2,54,03,464/- AS PER PROVISIONS OF SECTION 36(1) (IV), 43B & 40A(7) OF THE ACT AND ADDED THE SAME TO THE TOTAL I NCOME OF ASSESSEE. 5. THE CIT-A BY FOLLOWING THE EARLIER ORDER DATED 2 1-09-2007 OF THE TRIBUNAL SUPRA, WHEREIN IT HAS BEEN HELD BY THE ITAT THAT THIS ACCRUED GRATUITY LIABILITY WAS NOT DISALLOWABL E U/S. 36(1)(V), 43B AND 40A(7)(A) OR RULE 103 AND 104 OF THE IT RULES AND AS SUCH THE ADDITION MADE BY THE AO WAS DELETED BY THE CIT-A. 6. THE LD. AR SUBMITS THAT THE ISSUE IS COVERED BY THE ORDER OF CO-ORDINATE BENCH OF KOLKATA IN ASSESSEES OWN C ASE AND REFERRED TO PARA-8 AND PLACED RELIANCE ON THE SAME. THE LD.DR HAS RELIED ON THE ORDER OF THE AO. 3 ITA NO.897/KOL/2014 7. HEARD RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. WE FIND THAT THE ISSUE IS COVERED BY ORDER OF THIS TRIBUNAL IN ASSESSEES OWN CASE FOR A.Y 2004-05 AND RELEVANT PORTION IS REPRODUCED HEREIN BELOW:- 8. THIS LEAVES US TO DECIDE ON THE REASONS ENUMERA TED BY THE LD. CIT(A) CONFIRMING THE ADDITION ON THE BASIS OF RELI ANCE ON SECTION 36(I)(V), 40A(7)(A), 43B(B) OF THE I.T ACT 1961 AND RULE 103 AND 104 OF THE I.T RULES. THE LD. CIT(A) HAS NOT ACCEPTED THE CONTENTI ON OF THE ASSESSEE AND HAS DISTINGUISHED THE JUDGEMENT OF THE HONBLE SUPR EME COURT IN THE CASE OF KEDARNATH JUTE ON THE GROUND THAT AFTER INTRODUC TION OF SECTION 43B THE JUDGEMENT IN KEDARNATHS WAS NOT RELEVANT. BUT IT A PPEARS TO US THAT THE LD. CIT(A) HAS ERRED IN RELYING ON 36(1)(V), SECTIO N 40A(7) AND SECTION 43B(B) OR RULE 103 AND 104 OF THE INCOME TAX ACT 19 61. FOR CONVENIENCE SECTION 36(1)(V), SECTION 40A(7)(A), SECTION 43B(B) AND RULE 103 AND 104 ARE REPRODUCED HEREUNDER HERE UNDER:- 36(I)(V) - ANY SUM PAID BY THE ASSESSEE AS AN EMPL OYER BY WAY OF CONTRIBUTION TOWARDS AN APPROVED GRATUITY FU ND CREATED BY HIM FOR THE EXCLUSIVE BENEFIT OF HIS EMPLOYEES UNDER AN IRR EVOCABLE TRUST. 40A(7) (A) - SUBJECT TO THE PROVISIONS OF CLAUSE (B ), NO DEDUCTION SHALL BE ALLOWED IN RESPECT OF ANY PROVISION (WHETHER CALLED AS SUCH OR BY ANY OTHER-NAME) MADE BY THE ASSESSEE FOR THE PAYMENT OF GRATUITY TO HIS EMPLOYEES ON THEIR RETIREMENT OR ON TERMINATION OF THEIR EMPLOYMENT FOR ANY REASON. 43B(B) -ANY SUM PAYABLE BY THE ASSESSEE AS AN EMPLO YER BY WAY OF 'CONTRIBUTION TO ANY PROVIDENT FUND OR SUPERANNUATI ON FUND OR GRATUITY FUND OR ANY OTHER FUND FOR THE WELFARE OF THE EMPLOYEES, RULE 103 - ORDINARY ANNUAL CONTRIBUTION: THE ORDINA RY ANNUAL CONTRIBUTION BY THE EMPLOYER TO A FUND SHALL BE MADE ON A REASON ABLE BASIS .... THAT SUCH CONTRIBUTION SHALL NOT EXCEED ..... RULE 104 - INITIAL CONTRIBUTION: THE AMOUNT TO BE A LLOWED AS A DEDUCTION AS INITIAL CONTRIBUTION SERVICE WITH THE EMPLOYER. ON READING OF 36(1)(V) IT IS CLEAR THAT THE SAID SE CTION DEALS WITH THE PAYMENT BY WAY OF CONTRIBUTION TOWARDS ON APPRO VED GRATUITY FUND ONLY. THE SECTION NOWHERE SPEAKS OF THE ACTUAL LIAB ILITY INCURRED DURING THE YEAR ON ACCOUNT OF RETIREMENT OF THE EMPLOYEES DURI NG THE YEAR ITSELF. SECTION 40A(7)(A) SPEAKS THAT ANY OF PROVISIONS MAD E FOR THE PAYMENT OF THE GRATUITY TO THE EMPLOYEES ON THE RET IREMENT SHALL NOT BE LIABLE WHICH MEANS THAT THE PROVISION MADE FOR PRER ETIREMENT OF THE EMPLOYEES IN FUTURE SHALL NOT BE LIABLE AND THE SAM E ALSO THEREFORE DO NOT DEBAR THE ALLOWABILITY OF ACCRUED LIABILITY FOR THE EMPLOYEES WHO ACTUALLY RETIRED DURING THE YEAR. IN FACT SUCH LIABILITY ACC RUED DURING THE YEAR IS TAKEN CARE OF IN SECTION 40A(7)(B) AND THE OPERATIO N OF SECTION 40A(7)(A) IS SUBJECT TO SECTION 40A(7)(B) WHICH IS AS UNDER:- (B) NOTHING IN CLAUSE (A) SHALL APPLY IN RELATION T O ANY PROVISION MADE BY THE ASSESSEE FOR THE PURPOSE OF PAYMENT OF A SUM BY WAY OF ANY CONTRIBUTION TOWARDS AN APPROVED GRATUITY FUND, OR FOR THE PURPOSE OF PAYMENT OF ANY GRATUITY, THAT HAS BECOME PAYABLE DU RING THE PREVIOUS YEAR. 9.1 IT IS CLEAR FROM THE ABOVE PROVISIONS CONTAINED IN SECTION 40A(7)(B) THAT PROVISION MADE BY THE ASSESSEE FOR THE PURPOSE OF PAYMENT OF ANY GRATUITY, THAT HAS BECOME PAYABLE DURING THE YEAR I S ALLOWABLE WHICH MEANS THAT THE LIABILITY WHICH HAS ACTUALLY ACCRUED DURIN G THE YEAR IS ALLOWABLE. IN FACT THE CBDT HAS ALSO CLARIFIED THE INTRODUCTION OF SECTION 40A(7) THAT THE PROVISION MADE FOR PAYMENT OF GRATUITY THAT HAS BEC OME PAYABLE DURING PREVIOUS YEAR IS ALLOWABLE. THEREFORE THE LIABILITY ACCRUED ON ACCOUNT OF THE GRATUITY WHICH BECAME PAYABLE DURING THE YEAR ON AC COUNT OF THE EMPLOYEES WHO RETIRED DURING THE YEAR ITSELF IS ALL OWABLE. 9.2 SIMILARLY SECTION 43B ALSO SPEAKS OF THE CONTRI BUTION OF ANY GRATUITY OR OTHER FUND AND NOT TO THE LIABILITY ACCRUED AS A BOVE. 4 ITA NO.897/KOL/2014 9.3 SIMILARLY RULE 103 AND 104 ALSO SPEAKS OF THE C ONTRIBUTION OR INITIAL CONTRIBUTION TO ANY GRATUITY FUND AND NOT FOR THE A CTUAL LIABILITY ACCRUED DURING THE YEAR. 9.4 IN VIEW OF THE ABOVE DISCUSSIONS IT IS CLEAR TH AT ON THE FACTS OF THIS CASE THE PRINCIPLES LAID DOWN IN KEDARNATH AND OTHE R JUDGEMENTS MENTIONED ABOVE ARE FULLY APPLICABLE AND THE ASSESSEE IS ENTI TLED TO THE DEDUCTION OF THE ACCRUED LIABILITY AS CLAIMED BY IT IN THE COMPU TATION OF THE INCOME. IN VIEW OF ABOVE, WE UPHOLD THE ORDER OF THE CIT-A ON THIS ISSUE. HENCE, THIS GROUND OF REVENUES APPEAL IS DI SMISSED. 8. GROUND NO. 2 IS RELATING TO DELETION OF DISALLOW ANCE TOWARDS EMPLOYEES CONTRIBUTION TO THE LABOUR WELFA RE BOARD AND PF OF RS.15,951/- AND RS.32,62,654/- RESPECTIVE LY. 9. ON PERUSAL THE TAX AUDIT REPORT U/S. 44AB OF THE ACT AS FILED BY THE ASSESSEE BEFORE THE AO, DURING THE ASS ESSMENT PROCEEDINGS HE FOUND THAT THE ASSESSEE HAS NOT DEPO SITED THE EMPLOYEES CONTRIBUTION TOWARDS LABOUR WELFARE BOARD OF RS.15,951/- AND PROVIDENT FUND OF RS.32,62,654/- AS PER P.F ACT WITHIN DUE DATE. THUS, THE AO DISALLOWED THE AM OUNT OF RS.15,951/- AND RS.32,62,654/- AS PER PROVISIONS OF SECTION 36(1)(VA) R.W.S 2(24)(X) OF THE ACT AND ADDED THE S AME TO THE TOTAL INCOME OF ASSESSEE. 10. THE CIT-A DELETED THE IMPUGNED ADDITION BY RELY ING ON THE DECISION OF THE HONBLE CALCUTTA HIGH COURT IN THE CASE OF CIT VS. VIJAYSHREE LTD REPORTED IN . RELEVANT PORTION O F THE CIT-A ORDER IS REPRODUCED HEREIN BELOW :- 6.1 IN APPEAL IT HAS BEEN SUBMITTED THAT WITH RESPE CT TO THE DISALLOWANCE OF EMPLOYEES CONTRIBUTION TOWARDS LAB OUR WELFARE BOARD A SUM OF RS.15,894/- WAS PAID ON 24-1-2008 WHICH WA S WELL BEFORE THE DUE DATE. FURTHER THAT THE PAYMENT FOR EMPLOYEES C ONTRIBUTION TO PROVIDENT FUND AND THERE HAD ONLY BE A DELAY OF 2 D AYS FOR PAYMENT OF RS.81,691/- AND 1 DAY FOR PAYMENT OF RS.3L,80,963/- . IT WAS FURTHER SUBMITTED THAT - 'A) DISALLOWANCE OF EMPLOYEES CONTRIBUTION TO LABOU R WELFARE BOARD. 5 ITA NO.897/KOL/2014 OUT OF THIS AMOUNT OF RS.15951/- (57/- + 15894/-), A SUM OF RS.15894/- WAS MADE BY THE COMPANY BY CHEQUE NO. 73 2238 DATED 16.01.2008 DULY ACKNOWLEDGED BY LABOUR WELFARE BOAR D ON 24.01.08 WHICH IS IN TIME AS DUE DATE OF SUCH IS ONE MONTH F ROM THE DATE OF DEDUCTION. B) DISALLOWANCE OF RS.3264654/- (RS.81691/- + RS.31 80963/-) ON ACCOUNT OF EMPLOYEES CONTRIBUTION TO PROVIDENT FUND . BOTH THE PAYMENTS OF RS.81691/- & RS.3180963/- HAS BEEN DEPOSITED BY THE ASSESSEE VIDE CHEQUE NO. 472994 & 472967 ON 13.10.2007 & 15.10.2007 WHICH WERE DEPOSITED IN THEIR BANK ACCOU NT PUNJAB NATIONAL BANK ON 17.10.2007 & 16.10.2007 RESPECTIVELY I.E. T HERE HAS BEEN A DELAY OF 2 DAYS FOR RS.81691/- & 1 DAY FOR RS.31809 63/-. YOUR KIND ATTENTION IS DRAWN TO MADRAS HIGH COURT'S DECISION OF SHRI GANAPATHY MILLS CASE IN 247 ITR 879 & ANOTHER DECIS ION OF THE SAME COURT IN THE CASE CIT -VS- SOLEM CO-OP. SPINNING MI LLS LTD. 258 ITR 360 WHERE IT HAS BEEN HELD DEDUCTION IN THE YEAR OF PAYMENT CANNOT BE DENIED AS LONG AS THE SAME IS MADE WITHIN THE GRACE PERIOD ALLOWED UNDER THE RESPECTIVE STATUTE. SECTION 38 OF EPF SCH EME 1952 REQUIRES THE PAYMENT TO BE MADE WITHIN 15 DAYS OF THE MONTH & VARIOUS CIRCULAR ISSUED BY CPFC & IN PARTICULARS DATED 04.03.1964 & 24.10.1973 PROVIDE FOR GRACE PERIOD WHICH IS 5 DAYS. MOREOVER, AFTER DELETION OF WORDS DURING THE PREVIO US YEAR ON OR BEFORE THE DUE DATE BY FINANCE ACT, 2003, ALL PAYMENTS MAD E DURING THE YEAR SHOULD BE ALLOWED AS DEDUCTION. IT HAS THEREFORE BEEN CLAIMED THAT THESE EXPENSES W ERE ALLOWABLE AND THE A.O AS NOT JUSTIFIED IN DISALLOWING THE SAME. 6.2 THE SUBMISSIONS OF THE APPELLANT AND THE EVIDEN CES SUBMITTED IN SUPPORT OF THE SAME HAVE BEEN CONSIDERED. IN VIE W OF THE SAME, IT IS SEEN THAT THE PAYMENT TO THE LABOUR WELFARE BOARD H AD BEEN MADE IN TIME OF THE DUE DATE OF PAYMENT. FURTHER WITH RESPE CT TO THE EMPLOYEES CONTRIBUTION TO PROVIDENT FUND, IN VIEW OF THE DECISIONS IN THE CASE OF CIT VS- VIJAYSHREE LTD OF THE CALCUTTA HIGH COURT IN ITA NO. 245 OF 2011 DATED 6-9-2011, THE PAYMENT TOWARDS EMPLOYEES CONTRIBUTION TO PROVIDENT FUND IS ALLOWABLE EVEN IF THE SAME HAS BEEN DEPOSITED AFTER THE DUE DATE BUT BEFORE THE DATE OF FILING OF RETURN. THEREFORE, THE CLAIM OF THE APPELLANT IS ALLOWABLE AND THE DISALLOWANCE MADE BY THE AO IS DELETED. 11. LD. AR SUBMITS THAT THOUGH PAYMENTS WERE NOT MA DE IN DUE DATE, BUT PAID WITHIN GRACE PERIOD AND PLACED R ELIANCE ON DECISION OF HONBLE HIGH COURT OF MADRAS. 12. HEARD RIVAL SUBMISSIONS AND PERUSED THE MATERIA L AVAILABLE ON RECORD. WE FIND SUPPORT FROM THE DECISION OF HON BLE HIGH COURT OF MADRAS IN THE CASE OF GANAPATHY MILLS REPO RTED IN 247 ITR 879, WHEREIN IT HELD THAT THE DEDUCTION CAN BE ALLOWED IF THE PAYMENTS ARE MADE WITHIN THE GRACE PERIOD. THUS THE FACTS OF THE ISSUE ON HAND ARE CLEARLY APPLICABLE TO THE RATIO LAID DOWN BY THE HONBLE HIGH COURT OF MADRAS SUPRA. TH US, WE FIND 6 ITA NO.897/KOL/2014 NO INFIRMITY IN THE ORDER OF CIT-A AND ACCORDINGLY IT IS JUSTIFIED. HENCE, THIS GROUND OF REVENUE IS DISMISSED. 13. IN THE RESULT, THE APPEAL OF THE REVENUE IS DIS MISSED. ORDER PRONOUNCED IN OPEN COURT ON 17/03/2 017 SD/- SD/- M.BALAGANESH S.S. VISWANETHRA RAVI ACCOUNTANT MEMBER JUDICIAL MEMBER DATED 17 - 03-2017 *PP/SPS: COPY OF THE ORDER FORWARDED TO: 1 . THE APPELLANT/REVENUE: THE DEPUTY COMMISSIONER OF INCOME TAX, CIR-1, 5 TH FLOOR, ROOM NO.15, P-7 CHOWRINGHEE SQUARE KOLKATA-69. 2 THE RESPONDENT/ASSESSEE: M/S. RELIANCE JUTE MILLS INTERNATIONAL LTD SOUTH BLOCK, 4 TH FLOOR, IDEAL PLAZA 11/1 SARAT BOSE ROAD, KOLKATA-20. 3 4. THE CIT(A) THE CIT 5 . DR, KOLKATA BENCH 6 . GUARD FILE . BY ORDER, ASSTT. REGISTRAR 7 ITA NO.897/KOL/2014