NARMADA CATERERS V. INCOME TAX OFFICER WARD-4

TAXAP/1125/2007

AI Insights

The case involves Narmada Caterers, the appellant, who contested the order of the Income Tax Appellate Tribunal, which had sustained the disallowance of certain contributions to Provident Fund and ESI under Section 43B of the Income Tax Act, 1961. The primary legal questions pertained to whether the Tribunal erred in confirming the Assessing Officer's treatment of these contributions as income and the disallowance under Section 43B despite the payments being made before the due date of the tax return. The High Court referenced previous decisions to resolve these issues, partly in favor of the appellant.

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 765772 (HC-GUJARAT)
• Appeal Type: Others
• Pronouncement Date: 22-12-2014
• Assessment Year: misc
• Other Referred Cases: Commissioner of Income-tax vs. Gujarat State Road Transport Corporation, Commissioner of Income Tax vs. JMC Projects (India) Ltd
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Partly Allowed
• Court: HIGH COURT
• Department Lawyers: K M PARIKH
• Assessee Lawyers: R K PATEL
• Keywords: Disallowance; Employee's Contribution; Employer's contribution; ESI; Income Tax; Provident fund
• Section: 139(1); 43B; 36(1)(va); 2(24)(x)

Judgement Text

"O/TAXAP/1125/2007 JUDGMENT IN THE HIGH COURT OF GUJARAT AT AHMEDABAD TAX APPEAL NO. 1125 of 2007 FOR APPROVAL AND SIGNATURE: HONOURABLE MR.JUSTICE KS JHAVERI and HONOURABLE MR.JUSTICE K.J.THAKER =========================================================== 1 Whether Reporters of Local Papers may be allowed to see the judgment ? 2 To be referred to the Reporter or not ? 3 Whether their Lordships wish to see the fair copy of the judgment ? 4 Whether this case involves a substantial question of law as to the interpretation of the Constitution of India, 1950 or any order made thereunder ? 5 Whether it is to be circulated to the civil judge ? ================================================================ NARMADA CATERERS....Appellant(s) Versus INCOME TAX OFFICER WARD-4....Opponent(s) ================================================================ Appearance: MR RK PATEL, ADVOCATE for the Appellant(s) No. 1 MR KM PARIKH, ADVOCATE for the Opponent(s) No. 1 ================================================================ CORAM: HONOURABLE MR.JUSTICE KS JHAVERI and HONOURABLE MR.JUSTICE K.J.THAKER Date : 22/12/2014 Page 1 of 6 O/TAXAP/1125/2007 JUDGMENT ORAL JUDGMENT (PER : HONOURABLE MR.JUSTICE KS JHAVERI) 1. Being aggrieved and dissatisfied with the impugned order passed by the Income Tax Appellate Tribunal, Ahmedabad Bench ‘C’ (hereinafter referred to as ITAT) dated 19.01.2007 in ITA No. 2302/Ahd/2006 for the Assessment Year 2003-04, the assessee has preferred the present Tax Appeal. 2. This appeal was admitted on 26.08.2008 for consideration of the following substantial question of law: 1. Whether on the facts and in law the Tribunal has erred in confirming the action of the Assessing Officer in treating the amount of Rs. 4,74,092/- being employees’ contribution to Provident Fund as income of the appellant under section 2(24)(x) read with Section 36(1)(va) of the Income Tax Act, 1961 when the appellant has already deposited the same before the due date of furnishing return of income under Section 139(1) of the Act? 2. Whether on the facts and in law the Tribunal has erred in confirming the disallowance under Section 43B of the Act 1961 of Rs. 5,37,660/- being employer’s contribution to Provident Fund and Rs. 13,619/- being amount of ESI paid before the due date of furnishing return of income under Section 139(1) of the Act? 2.1 The assessee Company is engaged in the business of running industrial canteen. The Assessing Officer on the basis of tax audit report under section 44AB of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) came to the conclusion that the appellant had not deposited employer’s contribution of Rs. 5,37,660/- and employee’s contribution amounting to Rs. 4,74,092/- toward PF before Page 2 of 6 O/TAXAP/1125/2007 JUDGMENT due date of payment and therefore disallowed the said amounts under section 43B of the Act. On appeal before the CIT(A), the CIT(A) partly allowed the appeal and deleted the addition made towards delayed payments of employer’s contribution, employee’s contribution to PF and contribution to ESI. 2.2 Being aggrieved by the order of the first appellate authority, the revenue preferred appeal before the Tribunal and the Tribunal vide impugned order allowed the appeal and reversed the order passed by CIT(A) thereby sustaining disallowance under section 43B of the Act. Being aggrieved by the said order, the present appeal is filed. 3. Question no. (1) raised for consideration in the present Tax Appeal is now not res integra in view of the decision of this Court in the case of Commissioner of Income-tax vs. Gujarat State Road Transport Corporation reported in [2014] 41 taxmann.com 100. This Court in the aforesaid decision has held that as assessee had not deposited employer’s/employee’s contribution in respective fund account on date as prescribed in Explanation to section 36(1) (va), the disallowance made by Assessing Officer was just and proper. 3.1 Similarly, question no. (2) raised in this appeal is also squarely governed by the decision of this Court in the case of Commissioner of Income Tax vs. JMC Projects (India) Ltd, wherein this Court vide judgement and order dated 16.06.2011 rendered in Tax Appeal No. 451 of 2007 has held as under: Page 3 of 6 O/TAXAP/1125/2007 JUDGMENT “(5) The Supreme Court in the case of Commissioner of Income Tax Vs. Alom Extrusions Ltd. (supra) has observed that the omission of the second proviso to section 43B of the Income-tax Act, 1961, by the Finance Act, 2003, operated, retrospectively, with effect from April 1, 1988 and not prospectively from April 1, 2004. Earlier under the second proviso to section 43B as amended by the Finance Act, 1989, assessees were entitled to deduction only if the contribution stood credited on or before the due date given in the Provident Funds Act. This created further difficulties and on a representation made to the Finance Ministry one more amendment was made by the Finance Act, 2003. Though this amendment was made applicable with effect from April 1, 2004, the amendment was curative in nature and applied retrospectively with effect from April 1, 1988. When a proviso in a section is inserted to remedy unintended consequences and to make the section workable, the proviso which supplies an obvious omission therein is required to be read retrospectively in operation, particularly to give effect to the section as a whole. It was further held that if strict construction leads to a result not intended to be subserved by the object of the legislation, and if another construction is possible apart from the literal construction, then that construction should be preferred. (6) The aforesaid decision of the Supreme Court would be squarely applicable to the facts of the case. In the circumstances, following the aforesaid decision, the question is answered accordingly, that is, in favour of the assessee and against the revenue. The Appellate Tribunal is right in law and on facts in deleting the disallowance made under section 43B of Rs.51,05,963/- being late payment of the employer's contribution to provident fund. The appeal is, accordingly, dismissed with no order as to costs.” 4. Having heard learned advocates for the revenue and the Page 4 of 6 O/TAXAP/1125/2007 JUDGMENT assessee and the questions posed for consideration before us reproduced hereinabove and considering the decisions cited which squarely govern the questions raised in the present appeal, question no. (1) which is raised in the present appeal is required to be answered in favour of the revenue. Similarly, question no. (2) is required to be answered in favour of the assessee. There is no serious dispute between the learned advocates for the parties about the applicability of the aforesaid decisions on the facts and circumstances of the case. We are not giving further elaborate reasons for the same as this Court in similar cases has answered the very same question in favour of assessee/revenue. 5. In view of the above, the question no. (1) raised in the present appeal is answered in the negative i.e. in favour of the revenue and against assessee and question no. (2) is answered in the affirmative i.e. favour of the assessee and against the revenue. We, therefore, hold that the Tribunal is right in law and on facts in confirming the action of the Assessing Officer in treating the amount of Rs. 4,74,092/- being employees’ contribution to Provident Fund as income of the appellant under section 2(24)(x) read with Section 36(1) (va) of the Income Tax Act, 1961 when the appellant has already deposited the same before the due date of furnishing return of income under Section 139(1) of the Act. However, the Tribunal is not justified in law as well as on facts in confirming the disallowance under Section 43B of the Act 1961 of Rs. 5,37,660/- being employer’s contribution to Provident Fund and Rs. 13,619/- being amount of ESI paid before the due date of furnishing return of income under Section 139(1) of the Act. Consequently, the impugned order Page 5 of 6 O/TAXAP/1125/2007 JUDGMENT passed by the Tribunal is modified. Present Tax Appeal is partly allowed. (K.S.JHAVERI, J.) (K.J.THAKER, J) divya Page 6 of 6 "