THE ASSISTANT COMMISSIONER OF INCOME TAX, CORC;E 14(1)(1) , MUMBAI V. SIMPLE LOGIC IT PRIVATE LTD, MUMBAI

MA 427/MUM/2022

AI Insights

The case involves the Income Tax Department (revenue) seeking a recall of the Tribunal's order which had favored Simple Logic IT Pvt. Ltd. by deleting an addition made by the Assessing Officer regarding the delayed deposit of employees' contributions to PF/ESI. The Tribunal's initial decision was based on precedents that were later contradicted by a Supreme Court ruling in Checkmate Services Pvt Ltd v. CIT, which clarified that deductions for delayed deposits of employees' contributions are not allowable under Section 36(1)(va) of the Income Tax Act. The revenue argued that the Tribunal's decision was a mistake apparent from the record in light of the Supreme Court's interpretation.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 123702 (ITAT-MUMBAI)
• Duration Of Justice: 2 month(s) 23 day(s)
• Appeal Type: Miscellaneous Application
• Pronouncement Date: 14-03-2023
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: H
• Next Hearing Date: 23-02-2023
• Assessment Year: 2019-2020
• Appeal Filed On: 21-12-2022
• Other Referred Cases: Checkmate Services Pvt Ltd and CIT [2022] 143 taxmann.com 178 (SC), DCIT Vs. M/s. Maharashtra Tourism Development Corporation Ltd.
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Keywords: Period of limitation; Time period of passing order
• Section: 2; 43B; 143(1); 254(2)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH “H”, MUMBAI BEFORE SHRI AMIT SHUKLA, HON'BLE JUDICIAL MEMBER AND SHRI S. RIFAUR RAHMAN, HON'BLE ACCOUNTANT MEMBER MA.No. 427/MUM/2022 [ARISING OUT OF ITA NO. 1831/MUM/2021 (A.Y: 2019-20)] ACIT – 14(1)(2) Room No. 455, Aayakar Bhavan M.K. Road, Mumbai - 400020 v. Simple Logic IT Pvt. Ltd., 10, Arihant, Ghatkopar Mumbai - 400077 PAN: AANCS3390M (Appellant) (Respondent) Assessee Represented by : None Department Represented by : Shri H.M. Bhatt Date of Hearing : 24.02.2023 Date of Pronouncement : 15.03.2023 O R D E R PER S. RIFAUR RAHMAN (AM) 1. Through this Miscellaneous Application revenue is seeking for recall of the order passed by the Tribunal in ITA.No. 1831/Mum/2021 dated 21.04.2022 for the A.Y.2019-20. We observe from the record that the order was pronounced on 21.04.2022. However, we noticed that the order was dispatched to the parties only on 13.06.2022. As per our 2 MA.No. 427/MUM/2022 Simple Logic IT Pvt. Ltd., view the provision of section 254(2) & (3) of the Act has to be read together. Therefore, the Miscellaneous Application filed by the revenue is within the limitation period. 2. In the Miscellaneous Application, Revenue submitted as under: - “In this case, the assessee had filed appeal before the Hon'ble ITAT, vide ITA No. 1831/Mum/2021, against the order of the Ld. CIT (A) dated 18.08.2021. The appeal of the assessee was against the decision of the Ld. CIT (A) of upholding the disallowance of Rs.16,26,520/- made by the Assessing Officer, CPC u/s. 36(1)(va) of the Act, while processing return of income for A.Y. 2019-20 u/s. 143(1) of the Income Tax Act, 1961. The said disallowance was made by the Assessing Officer, CPC, on account of payment made by the assessee towards employee's contribution to ESIC and EPF after the due date as provided in the relevant Acts. 2. The "H" Bench of the Hon'ble ITAT has decided the appeal in favour of the assessee. While deciding the issue of disallowance u/s. 36(1)(va) on merit, the Hon'ble ITAT has held that the issue has now been well settled. The facts of the present case are quite similar to the facts of the case titled as M/s. Maharashtra Tourism Development Corporation Ltd. therefore, relying upon the said decision, the Hon'ble ITAT has allowed the claim of the assessee. Accordingly, all the issues are decided in favour of the assessee against the revenue. Therefore, the Hon'ble ITAT decided this issue in favour of the assessee by deleting the addition made by the Assessing Officer, CPC. The relevant part of the order of the Hon'ble ITAT (i.e Para 4 & 5) is reproduced as under for ready reference:- “........4. All the issues are in connection with the disallowance of the claim of the deposit of PF and ESIC. At the very outset, the Ld. Representative of the assessee has argued that the issue is duly covered with the decision of the Hon'ble ITAT in ITA. Nos. 6425/M/2017 for the A.Y.2011-12, 6426/M/2017 for the A.Y.2012-13 & 1140/M/2017 for the A.Y.2014-15 dated 27.07.2021 titled as DCIT Vs. M/s. Maharashtra Tourism Development Corporation Ltd., therefore, the claim of the assessee is liable to be allowed. However, on the other hand, the Ld. Representative of the Department has strongly relied upon the order passed by 3 MA.No. 427/MUM/2022 Simple Logic IT Pvt. Ltd., the National Faceless Appeal Centre in question The copy of order of ITA. Nos. 6425/M/2017 for the A.Y.2011-12, 6426/M/2017 for the A.Y.2012-13 & 1140/M/2017 for the A.Y.2014 15 dated 27.07.2021 titled as DCIT VS. M/s. Maharashtra Tourism Development Corporation Ltd. is on the file in which the relevant issue has been adjudicated by Hon'ble ITAT 5. In view of the above mentioned decision, the issue has now been well settled. The facts of the present case are quite similar to the facts of the case titled as M/s. Maharashtra Tourism Development Corporation Ltd (supra), therefore, relying upon the said decision, we allowed the claim of the assessee. Accordingly, all the issues are decided in favour of the assessee against the revenue..... 3. In the case of Checkmate Services Pvt Ltd and CIT (2022] 143 taxmann.com 178 (SC), similar issue has been dealt with by the Hon'ble Supreme Court. The issue before the Hon'ble Supreme Court was with respect to the interpretation of Section 36(1)(va) and Section 43B and to decide the question "whether deposits of employee's contribution towards EPF and ESI after the expiry of the due date under the relevant Acts eligible for deduction?". 3.1 The Hon'ble Supreme Court, vide its order dated 12.10.2022, has pronounced that the Parliament treated contribution u/s 36(1)(va) differently from those u/s 36(1)(vi). The latter is described as "sum paid by the assessee as an employer by way of contribution towards a recognized provident fund". Whereas the section 36(1)(vi) enact that "any sum received by the assessee from any of his employees to which the provisions of Section 2(24)(x) apply if such sum is credited by the assessee to the employee's account in the relevant fund of fund on or before the due date." Thus, the Parliament while introducing Section 36(1)(va) along with Section 2(24)(x) was aware of the distinction between the two types of contribution 3.2 The Hon'ble Supreme Court further held that the essential character of an employee's contribution (ie it is part of employee's income, held in trust by the employer) is underlined by the condition that is has to be deposited on or before the due date. Amounts retained by the employer from out of the employee's income by way of deduction etc. were treated as income in the hands of the employer. It is upon deposit (on or before the due dates mandated in the relevant Act) that the employee's contribution which is otherwise retained, and deemed an income, is treated as deduction. Thus, it is essential condition for deduction 4 MA.No. 427/MUM/2022 Simple Logic IT Pvt. Ltd., that such amounts are deposited on or before the due date prescribed in the relevant Acts. 3.3 The Hon'ble Supreme Court has further held that since there is a marked distinction between the nature and character of the two amounts, the same has to be borne while interpreting the obligation of every assessee u/s 43B. Accordingly, the benefit of Section 43B cannot be made available for employee's contribution deposited before the filing of the Income-tax Return. The relevant part of the ruling of the Hon'ble Supreme Court is under:- "..........53. The distinction between an employer's contribution which is its primary liability under law-in terms of Section 36(1)(iv), and its liability to deposit amounts received by it or deducted by it (Section 36(1)(va) is, thus crucial. The former forms part of the employers' income, and the later retains its character as an income (albeit deemed), by virtue of Section 2(24)(x)-unless the conditions spelt by Explanation to Section 36(1)(va) are satisfied i.e, depositing such amount received or deducted from the employee on or before the due date. In other words, there is a marked distinction between the nature and character of the two amounts the employer's liability is to be paid out of its income whereas the second is deemed an income, by definition, since it is the deduction from the employees' income and held in trust by the employer. This marked distinction has to be borne while interpreting the obligation of every assessee under Section 43B. 54. In the opinion of this Court, the reasoning in the impugned judgment that the non-obstante clause would not in any manner dilute or override the employer's obligation to deposit the amount retained by it or deducted by it from the employee's income, unless the condition that it is deposited on or before the due date, is correct and justified. The non- obstante clause has to be understood in the context of the entire provisions of Section 43B which is to ensure timely payment before the return are filed, of certain liabilities which are to be borne by the assessee in the form of tax, interest payment and other statutory liability. In this case of these liabilities, what constitutes the due date is defined by the statute. Nevertheless, the assessees are given some leeway in that as long as deposits are made beyond the due date, but before the date of filing the return, the deduction is allowed. That, however, cannot apply in the case of amounts which are held in trust, as it is in the case of employees' contribution - which are deducted from their income. They are not part of the assessee employer's 5 MA.No. 427/MUM/2022 Simple Logic IT Pvt. Ltd., income, nor are they heads of deduction per se in the form of statutory pay out They are others' income, monies, only deemed to be income, with the object of ensuring that they are paid within the due dates specified in the particular law. They have to be deposited in terms of such welfare enactments. It is upon deposit, in terms of those enactments and on or before the due dates mandated by such concerned law, that the amount which is otherwise retained, and deemed an income, is treated as deduction. Thus, it is essential condition for the deduction that such amounts are deposited on or before the due date. If such interpretation were to be adopted, the non-obstante clause under Section 43B or anything contained in that provision would not absolve the assessee from its liability to deposit the employee's contribution on or before the due date as a condition for deduction.. 4. Further, with due respect to Hon'ble ITAT it is stated that the issue is no more litigable and Explanation 2 to section 36(1)(va) specifically states that for the purpose of section 36(1)(va), the provisions of section 43B shall not apply and shall be deemed never to have been applied for the purpose of determining the due date under this clause. It is stated before Your Honour that, the amendment is retrospective in nature as the words used in the Explanation specifically makes it clear. Once the law itself is clear and adjustment is made under section 143(1) as per the law applicable, the adjustment clearly falls under section 143(1)(a)(ii) of the Act which mandates that, 'an incorrect claim if such incorrect claim is apparent from any information in the return'. Assessee's case being claim u/s. 36(1)(va) even if contribution made after due date, the adjustment made of addition of same u/s. 143(1) is appropriate and same be please not deleted. The maxim of applicability of judgments of Constitutional Courts on issue and hence the adjustments not possible u/s 143(1)(a) is applicable only when the issue is litigable, which is not the fact of the case. 5. In view of the above facts, it is prayed that the order dated 24.05.2022 of the "F" bench of the Hon'ble ITAT may be reconsidered and the matter may decided in the light of the ruling of the Hon'ble Supreme Court pronounced in the case of Checkmate Services Pvt Ltd and CIT [2022] 143 taxmann.com 178 (SC) and under light of provisions of section 143(1)(a)(ii) r.w.s Explanation 2 to section 36(1)(va) of the Act 6. The Hon'ble ITAT is therefore, requested to admit Miscellaneous Application in the instant case and also condone the delay in filing of the same.” 6 MA.No. 427/MUM/2022 Simple Logic IT Pvt. Ltd., 3. In spite of issue of notice none appeared on behalf of the assessee nor any adjournment was sought. Therefore, we proceed to dispose of this Miscellaneous Application with the assistance of Ld.DR. 4. At the time of hearing, Ld. DR submitted that in this appeal, the Tribunal has deleted the addition made by the Assessing Officer on account of delayed deposit of employees’ contribution to PF/Employees’ State Insurance (ESI). He further submitted that in view of the decision of the Hon’ble Supreme Court in the case of Checkmate Services Pvt Ltd v. CIT dated 12.10.2022, no deduction is allowable for delayed deposit of employees’ contribution to PF/ESI u/s. 36(1)(va) of the Act. Since the Hon’ble Supreme Court has interpreted the provisions which were in existence from the date, the same have been introduced by the Parliament and, therefore, allowing the said deduction for late deposit of PF/ESI is a mistake apparent from record in view of the decision of the Hon’ble Supreme Court in the case of Checkmate Services Pvt Ltd v. CIT (supra). Accordingly, he submitted that order of the Tribunal need to be recalled. 5. Considered the submissions of the Ld.DR and material placed on record. In view of the decision of the Hon’ble Supreme Court in the 7 MA.No. 427/MUM/2022 Simple Logic IT Pvt. Ltd., case of Checkmate Services Pvt Ltd v. CIT(supra), the finding of the Tribunal amounts to mistake apparent from record and, therefore, the order of the Tribunal on this appeal is recalled. Accordingly, we direct the registry to fix the appeal for hearing in due course and inform the parties accordingly. 6. In the result, Miscellaneous Application filed by the revenue is allowed. Order pronounced in the open court on 15 th March, 2023. Sd/- Sd/- (AMIT SHUKLA) (S. RIFAUR RAHMAN) JUDICIAL MEMBER ACCOUNTANT MEMBER Mumbai / Dated 15/03/2023 Giridhar, Sr.PS Copy of the Order forwarded to: 1. The Appellant 2. The Respondent. 3. The CIT(A), Mumbai. 4. CIT 5. DR, ITAT, Mumbai 6. Guard file. //True Copy// BY ORDER (Asstt. Registrar) ITAT, Mum