DCIT 14(1)(1), MUMBAI V. HARMAN FINOCHEM LTD, MUMBAI

MA 331/MUM/2023

AI Insights

The case revolves around the recall of a Tribunal order that had initially allowed the appeal of M/s. Harman Finochem Ltd., concerning the disallowance of a deduction for employees' contribution to Provident Fund (P.F.) under section 36(1)(va) of the Income Tax Act, 1961. The Tribunal's earlier decision was based on a precedent that was later overturned by the Supreme Court in Checkmate Services Pvt. Ltd. v/s CIT, which held that such payments made after the due date prescribed under the relevant statute are not deductible. The Revenue filed a Miscellaneous Application seeking recall of the Tribunal's order based on this new Supreme Court decision. The Tribunal, acknowledging the retrospective effect of the Supreme Court's decision, recalled its earlier order and disallowed the deduction.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 299515 (ITAT-MUMBAI)
• Duration Of Justice: 3 month(s) 5 day(s)
• Appeal Type: Miscellaneous Application
• Pronouncement Date: 30-07-2023
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: H
• Next Hearing Date: 20-07-2023
• Assessment Year: 2018-2019
• Appeal Filed On: 24-04-2023
• Other Referred Cases: Kalpesh Synthetics Pvt. Ltd. v/s DCIT, Checkmate Services Pvt. Ltd. v/s CIT, ACIT v/s Saurashtra Kutch Stock Exchange, Lakshmi Sugar Mills Co. Ltd. v/s CIT
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Keywords: Set aside
• Section: 254(2); 22

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL “H” BENCH, MUMBAI BEFORE SHRI B.R. BASKARAN, ACCOUNTANT MEMBER, AND SHRI SANDEEP SINGH KARHAIL, JUDICIAL MEMBER M.A. no.331/Mum./2023 (Arising out of ITA no.2273/Mum./2021) (Assessment Year : 2018–19) Dy. Commissioner of Income Tax Central Circle–14(1)(1), Mumbai ................ Applicant (Original Respondent) v/s M/s. Harman Finochem Ltd. 107–A, Vinaya Bhavya, 159–A CST Road, Kalina, Santacruz Mumbai 400 098 PAN – AABCH3223J ................Respondent (Original Appellant) ITA no.2273/Mum./2021 (Assessment Year : 2018–19) M/s. Harman Finochem Ltd. 107–A, Vinaya Bhavya, 159–A CST Road, Kalina, Santacruz Mumbai 400 098 PAN – AABCH3223J ................ Appellant v/s Dy. Commissioner of Income Tax Central Circle–14(1)(1), Mumbai ................ Respondent Assessee by : Shri Fenil Bhatt Revenue by : Shri Suresh Gaikwad Date of Hearing – 21/07/2023 Date of Order – 31/07/2023 O R D E R PER SANDEEP SINGH KARHAIL, J.M. The present Miscellaneous Application (“M.A.”) has been filed by the Revenue seeking recall of the order dated 15/07/2022, passed under section M/s. Harman Finochem Ltd. M.A. no.331/Mum./2023 ITA no.2273/Mum./2021 Page | 2 254(1) of the Income Tax Act, 1961 (“the Act”) by the Co–ordinate Bench of the Tribunal in assessee’s appeal being ITA no.2273/Mum./2021, for the assessment year 2018–19. 2. During the hearing, the learned D.R. submitted that the Co–ordinate Bench of the Tribunal allowed the appeal filed by the assessee following its earlier decision rendered in Kalpesh Synthetics Pvt. Ltd. v/s DCIT, in ITA no. 1785/Mum./2021, order dated 27/04/2022. The learned D.R. further submitted that the Hon'ble Supreme Court in Checkmate Services Pvt. Ltd. v/s CIT, [2022] 448 ITR 518 (SC) upheld the disallowance made under section 36(1)(va) of the Act due to delayed payment towards employee’s contribution to Provident Fund (P.F) / Employees State Insurance Corporation (E.S.I.C.). Therefore, it was submitted that in light of the aforesaid decision of the Hon'ble Supreme Court, the order passed by the Tribunal may be recalled under section 254(2) of the Act for a fresh hearing on the merits of the case. 3. On the contrary, the learned Authorised Representative for the assessee (“learned A.R.”) vehemently opposed the prayer for recalling the order. 4. We have considered the submissions, and decisions relied on by both sides and perused the material available on record. We find that the issue on merit before the Co–ordinate Bench of the Tribunal in assessee’s appeal was regarding the disallowance on account of alleged delay in payment of P.F. under section 36(1)(va) r/w section 2(24) of the Act. While deciding the aforesaid issue, the Co–ordinate Bench of the Tribunal following its earlier decision rendered in Kalpesh Synthetics Pvt. Ltd. (supra) allowed the appeal M/s. Harman Finochem Ltd. M.A. no.331/Mum./2023 ITA no.2273/Mum./2021 Page | 3 filed by the assessee. Subsequently, the Hon'ble Supreme Court in Checkmate Services Pvt. Ltd. (supra) held that payment towards employee’s contribution to P.F. / E.S.I.C. after the due date prescribed under the relevant statute is not allowable as a deduction under section 36(1)(va) of the Act. On the basis of this decision rendered by the Hon'ble Supreme Court, the Revenue has preferred the present M.A. under section 254(2) of the Act. 5. We find that the Hon'ble Supreme Court in ACIT v/s Saurashtra Kutch Stock Exchange, [2008] 305 ITR 227 (SC) held that non–consideration of the decision of the Hon'ble Jurisdictional High Court or the Hon'ble Supreme Court can be said to be a “mistake apparent from record” which can be rectified under section 254(2) of the Act. We further find that the Hon'ble Supreme Court in Saurashtra Kutch Stock Exchange (supra) also held that the judicial decision acts retrospectively and it is not the function of the Court to pronounce a “new rule”, but to maintain and expound the “old one”. Thus, it was held that the Judges do not make a law, they only discover or find the correct law. The relevant findings of the Hon'ble Supreme Court, in this regard, are as under:– “42. In our judgment, it is also well-settled that a judicial decision acts retrospectively. According to Blackstonian theory, it is not the function of the Court to pronounce a 'new rule' but to maintain and expound the 'old one'. In other words, Judges do not make law, they only discover or find the correct law. The law has always been the same. If a subsequent decision alters the earlier one, it (the later decision) does not make new law. It only discovers the correct principle of law which has to be applied retrospectively. To put it differently, even where an earlier decision of the Court operated for quite sometime, the decision rendered later on would have retrospective effect clarifying the legal position which was earlier not correctly understood. 43. Salmond in his well-known work states: “. . . (T)he theory of case law is that a judge does not make law; he merely declares it, and the overruling of a previous decision is a declaration that the supposed rule never was law. Hence any intermediate transactions made on M/s. Harman Finochem Ltd. M.A. no.331/Mum./2023 ITA no.2273/Mum./2021 Page | 4 the strength of the supposed rule are governed by the law established in the overruling decision. The overruling is retrospective, except as regards matters that are res judicataor accounts that have been settled in the meantime." [Emphasis supplied] 44. It is no doubt true that after a historic decision in Golak Nath v. State of Punjab AIR 1967 SC 1643, this Court has accepted the doctrine of 'prospective overruling'. It is based on the philosophy: "The past cannot always be erased by a new judicial declaration”. It may, however, be stated that this is an exception to the general rule of the doctrine of precedent.” 6. The facts before the Hon’ble Supreme Court in Saurashtra Kutch Stock Exchange (supra) were that the decision of the Hon'ble Jurisdictional High Court was available, however, the attention of the Tribunal was not invited to the said decision at the time of the disposal of the appeal. Thus, in these circumstances, the aforesaid findings were rendered by the Hon'ble Supreme Court and the decision of the Tribunal under section 254(2) of the Act, in recalling its earlier order, was affirmed. 7. The issue now arises whether even a subsequent decision of the Hon'ble Supreme Court, which is binding as per Article 141 of the Constitution of India, can be a basis for rectifying the order under section 254(2) of the Act. We are of the considered opinion that in view of the aforesaid findings of the Hon’ble Supreme Court in Saurashtra Kutch Stock Exchange (supra), as noted in para 42-44 of the judgment, the answer to this issue is affirmative. We are of the view that the issue under consideration before the Hon’ble Supreme Court in Saurashtra Kutch Stock Exchange (supra) is similar to the present M.A., therefore, we are of the considered opinion that the said decision squarely covers the present case. We further find that the Hon’ble Delhi High Court in Lakshmi Sugar Mills Co. Ltd. v/s CIT, [2012] 22 taxmann.com 300 (Del.) held that where the Larger Bench of the Hon'ble Supreme Court overrules its earlier M/s. Harman Finochem Ltd. M.A. no.331/Mum./2023 ITA no.2273/Mum./2021 Page | 5 decision on which the Tribunal relied on, the said decision of the Tribunal can be rectified under section 254(2) of the Act since the decision of the Hon'ble Supreme Court operates retrospectively. 8. Therefore, respectfully following the aforesaid judicial pronouncements, we find merit in the present M.A. filed by the Revenue seeking recall of the Tribunal’s order on the basis of the subsequent decision of the Hon'ble Supreme Court in Checkmate Services Pvt. Ltd. (supra). Accordingly, the order dated 15/07/2022, passed by the Co–ordinate Bench of the Tribunal in assessee’s appeal for the assessment year 2018–19 is hereby recalled. ITA no.2273/Mum./2021 Assessee’s Appeal – A.Y. 2018–19 9. With the consent of the parties, the corresponding appeal being ITA no.2273/Mum./2021, was taken up for hearing. On merits, the learned AR submitted that employees’ contribution of Rs. 8,71,893 towards P.F., pertaining to the month of May 2017, was paid by the assessee within the due date. It was further submitted that due to the non-working of the website, the Employees’ Provident Fund Organisation, India, extended the last date for remittance for the due month of May 2017 payable by 15/06/2017, by one day, i.e. 16/06/2017, and accordingly, the assessee made the payment on 16/06/2017. In order to substantiate its claim, we find that the assessee has placed on record the screenshot from the official website of Employees’ Provident Fund Organisation, India, wherein it was informed that the last date for remittance for the month of May 2017 is extended by one date, i.e. extended up to 16/06/2017. From the challan, we find that the aforesaid sum M/s. Harman Finochem Ltd. M.A. no.331/Mum./2023 ITA no.2273/Mum./2021 Page | 6 of Rs. 8,71,893 towards employees’ share of contribution to P.F. was paid by the assessee on 16/06/2017. From the copy of the audit report, we find that this payment of Rs. 8,71,893, towards P.F. is mentioned to be paid on 16/06/2017. From the perusal of orders passed by the lower authorities, we find that only this solitary payment of employees’ contribution to P.F., inter- alia, was disallowed since the same was paid after the due date. However, on the basis of the documents placed on record, we find that the concerned authority under the relevant statute itself had extended the last date by one day, and on the said date, i.e. on 16/06/2017, the assessee made the payment of employees’ share of contribution to PF. We find that similar submissions, by placing reliance on the aforesaid documents, made before the learned CIT(A) were not at all considered vide impugned order. 10. We find that the Hon'ble Supreme Court in Checkmate Services Pvt. Ltd. (supra) held that the payment towards employees’ contribution to P.F. and E.S.I.C., after the due date prescribed under the relevant statute is not allowable as a deduction under section 36(1)(va) of the Act. Since, in the present case, the payment towards employees’ contribution to P.F. is made by the assessee within the extended time granted by the authority under the relevant statute, therefore the same is allowable as a deduction under section 36(1)(va) of the Act. Accordingly, the addition of Rs. 8,71,893 upheld by the learned CIT(A) is deleted and to this extent, the impugned order is set aside. As a result, grounds raised by the assessee are allowed. M/s. Harman Finochem Ltd. M.A. no.331/Mum./2023 ITA no.2273/Mum./2021 Page | 7 11. In the result, Miscellaneous Application filed by the Revenue and the appeal by the assessee are allowed. Order pronounced in the open Court on 31/07/2023 Sd/- B.R. BASKARAN ACCOUNTANT MEMBER Sd/- SANDEEP SINGH KARHAIL JUDICIAL MEMBER MUMBAI, DATED: Copy of the order forwarded to: (1) The Assessee; (2) The Revenue; (3) The PCIT / CIT (Judicial); (4) The DR, ITAT, Mumbai; and (5) Guard file. True Copy By Order Pradeep J. Chowdhury Sr. Private Secretary Assistant Registrar ITAT, Mumbai