Asst. Commissioner of Income Tax, Circle - 1, Nashik V. Capital Constructions, Nashik

MA 69/PUN/2023

AI Insights

The case revolves around a Miscellaneous Application (MA No. 69/PUN/2023) filed by the Revenue against the Tribunal's earlier decision in ITA No.412/PUN/2021, which allowed a deduction for the Employees' share of EPF and ESI under section 36(1)(va) of the Income Tax Act. The initial Tribunal decision was based on the Himachal Pradesh High Court's judgment in CIT Vs. Nipso Polyfabriks Ltd., which was later overturned by the Supreme Court in Checkmate Services P. Ltd. & Ors. VS. CIT & Ors. The Supreme Court clarified that such deductions are only permissible if the contributions are made within the statutory deadlines, not merely by the due date for filing the tax return under section 139(1). The Revenue sought rectification of the Tribunal's earlier order in light of this new precedent.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 138087 (ITAT-PUNE)
• Duration Of Justice: 4 month(s) 25 day(s)
• Appeal Type: Miscellaneous Application
• Pronouncement Date: 21-08-2023
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2019-2020
• Appeal Filed On: 27-03-2023
• Other Referred Cases: CIT Vs. Nipso Polyfabriks Ltd., Checkmate Services P. Ltd. & Ors. VS. CIT & Ors., CIT Vs. Saurashtra Kutch Stock Exchange Ltd., CIT Vs. Arun Luthra, Kailashnath Malhotra Vs. JCIT
• Laws Referred To: Income Tax Act
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Assessee Lawyers: INCLUDING NIPSO POLYFABRIKS
• Section: 254(2)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE „A‟ BENCHES :: PUNE BEFORE SHRI R.S. SYAL, HON. VICE-PRESIDENT & SHRI PARTHA SARATHI CHAUDHURY, HON. JUDICIAL MEMBER M.A.No. 69/PUN/2023 (Arising out of ITA No.412/PUN/2021) (A.Y. 2019-20) ACIT, Circle-1, Nashik. vs Capital Constructions, 10 Siddhi Park, Sharanpur Road, Nashik-422002. PAN: AACFC 7452 L Applicant Respondent Assessee by : None Revenue by : Shri Ramnath P. Murkunde, DR Date of hearing : 18/08/2023 Date of pronouncement : 22/08/2023 O R D E R Per PARTHA SARATHI CHAUDHURY, JM: This Misc. Application preferred by the Revenue emanates from the order of this Tribunal passed in ITA No.412/PUN/2021 dated 19/09/2022 for A.Y. 2019-20 as per the grounds of MA on record. 2. The facts of the case are that the Assessing Officer (AO) made disallowance of Rs.7,49,261/- in the intimation u/s.143(1) of the Act on the ground that the assessee deposited the Employees‟ share of EPF and ESI etc. belatedly. The Tribunal in its order u/s.254(1) observed that the Employees‟ share was deposited prior to the due date of filing return u/s.139(1) and hence deduction was allowable under section 36(1)(va) of the Act. In reaching this conclusion, the MA No.69/PUN/2023 Capital Constructions 2 Tribunal relied on the judgment of Hon‟ble Himachal Pradesh High Court in CIT Vs. Nipso Polyfabriks Ltd. (2013) 350 ITR 327 (HP). 3. The Revenue has moved the instant Miscellaneous Application urging that the view taken by the Hon‟ble Himachal Pradesh High Court in Nipso Polyfabriks Ltd. has since been overruled by the Hon‟ble Supreme Court in Checkmate Services P. Ltd. & Ors. VS. CIT & Ors. (2022) 448 ITR 518 (SC) holding that the deduction of the Employees‟ share can be allowed u/s.36(1)(va) only if it is deposited before the time limit under the respective statutes and not by the due date u/s.139(1) of the Act. It was, thus, urged by the ld. DR that the order earlier passed by the Tribunal granting the deduction required rectification for disallowing the same. 4. Per contra, the ld. AR submitted that the Miscellaneous Application should not be entertained because the Tribunal took note of the law as prevalent at that point of time when the order was passed. The subsequent judgment in Checkmate Services P. Ltd. (SC) would not render the correct order passed at that time becoming erroneous later on and hence amenable to rectification. 5. We have heard the rival submissions and perused the relevant material on record. There is no dispute on the fact the law prevalent at that time of passing the order u/s.254(1) was in favour of the assessee by virtue of certain judgments, including Nipso polyfabriks MA No.69/PUN/2023 Capital Constructions 3 Ltd., granting deduction u/s.36(1)(va) of the employees‟ share of EPF etc. even if the deposit was made after the due date under respective Acts but before the time limit provided for filing the return u/s.139(1) of the Act. Such favourable view has since been reversed by the Hon‟ble Supreme Court in the case of Checkmate Services P. Ltd.(SC). 6. The moot question is whether the subsequent judgment, which was not available at the time of passing of the order u/s 254(1) of the Act, would provide a foundation for rectification? It is fundamental that the Courts declare law and do not legislate. The declaration of law by the Courts is always retrospective taking effect from the date of insertion of the provision. The Hon‟ble Supreme Court in CIT Vs. Saurashtra Kutch Stock Exchange Ltd. (2008) 305 ITR 227 (SC) has held that any existing order in derogation of a subsequent binding judgment requires rectification. To be more specific, the Hon‟ble Apex Court has held that : `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 some time, the decision rendered later on would have retrospective effect clarifying the legal position which was earlier not correctly understood.‟ Similar view was taken by the Full Bench of the Hon‟ble Punjab & Haryana High Court in CIT Vs. Arun Luthra (2001) 252 ITR 76 (P&H) (FB). In that case also, it was argued on behalf of MA No.69/PUN/2023 Capital Constructions 4 the assessee that a decision rendered by a court subsequent to the passing of the order cannot constitute an error apparent from the record so as to entitle an authority to proceed u/s.154. Rejecting such a contention, the Hon‟ble High Court held that if such a view point is accepted “the result would be that even though the order of the authority is contrary to the law declared by the highest court in the state or the country, still the mistake could not be rectified for the reason that the decision is subsequent to the date of the order”. Almost similar view has been taken in a Third Member decision by the Mumbai Benches of the Tribunal in Kailashnath Malhotra Vs. JCIT (2009) 34 SOT 541 (TM) holding that non-consideration of a judgment of the Hon‟ble Supreme Court or that of the Hon‟ble jurisdictional High Court delivered prior to or even subsequent to the order constitutes a mistake apparent from record. In view of the above discussion, it is observed and held that the subsequent judgment of the Hon‟ble Supreme Court in Checkmate Services P. Ltd. denying the benefit of deduction has rendered the order u/s 254(1) erroneous necessitating its rectification in terms of section 254(2) of the Act. 7. In the result, the Miscellaneous Application is allowed. Order pronounced in open Court on 22 nd August, 2023. Sd/- Sd/- (R.S. SYAL) (PARTHA SARATHI CHAUDHURY) VICE-PRESIDENT JUDICIAL MEMBER Dated : 22 nd August, 2023 MA No.69/PUN/2023 Capital Constructions 5 vr/- Copy to : 1. The Appellant. 2. The Respondent. 3. The Pr. CIT concerned. 5. The DR, ITAT, “A” Bench Pune. 6. Guard File. By Order // TRUE COPY // Senior Private Secretary ITAT, Pune.