PR COMMISSIONER OF INCOME TAX JAIPUR-II V. MS RAJ STATE GANGANAGAR SUGAR MILLS LTD

ITA/81/2018

AI Insights

The case involves two connected appeals by the Principal Commissioner of Income Tax, Jaipur-2 against M/s Rajasthan State Ganganagar Sugar Mills Ltd., concerning several disallowances made by the Assessing Officer which were later overturned by the Tribunal. The main issues revolved around the disallowance of export pass fees, contributions to the State Renewal Fund, and delays in depositing employees' contributions to PF & ESI. The High Court of Rajasthan dismissed the appeals, referencing previous judgments and the principle that employee contributions to PF & ESI are governed by Section 43B of the Income Tax Act, not by Section 36(1)(va) r.w.s. 2(24)(x). The court also noted that some issues were pending before the Supreme Court, which could potentially influence the final decision on those matters.

• Counselvise Citation: [2018] 140 COUNSELVISE.COM (IT) 698137 (HC-RAJASTHAN)
• Appeal Type: Others
• Pronouncement Date: 17-04-2018
• Assessment Year: misc
• Other Referred Cases: Principal Commissioner of Income Tax vs. M/s Rajasthan State Ganganagar Sugar Mills Ltd. (DBITA No. 13/2017), Principal Commissioner of Income Tax, Jaipur-2 Vs. M/s. Rajasthan State Ganganagar Sugar Mills Ltd., Principal Commissioner of Income Tax vs. Rajasthan State Seed Corporation Ltd. (DBITA No. 4/2016), Commissioner of Income Tax Vs. M/s. Rajasthan State Ganganagar Sugar Mills Ltd.
• Laws Referred To: Income Tax Act
• Result in Favour of: Others
• Court: HIGH COURT
• Assessee Lawyers: K D MATHUR
• Keywords: Employee's Contribution to PF & ESI; Export Pass Fee; Income tax appeal; Section 43B; State Renewal Fund; Section 36(1)(va) r.w.s. 2(24)(x)
• Section: 43B; 36(1)(va); 2(24)(x)

Judgement Text

"HIGH COURT OF JUDICATURE FOR RAJASTHAN BENCH AT JAIPUR D.B. Income Tax Appeal No. 81/2018 Principal Commissioner Of Income Tax, Jaipur-2, Jaipur ----Appellant Versus M/s Rajasthan State Ganganagar Sugar Mills Ltd., 4Th Floor Nehru Sahakar Bhawan Jaipur Pan -Aaacr8906R ----Respondent Connected With D.B. Income Tax Appeal No. 82/2018 Principal Commissioner Of Income Tax, Jaipur-2, Jaipur Raj ----Appellant Versus M/s Rajasthan State Ganganagar Sugar Mills Ltd., 4Th Floor Nehru Sahakar Bhawan Jaipur Pan -Aaacr8906R ----Respondent For Appellant(s) : Mr. K.D. Mathur for Mr. R.B. Mathur For Respondent(s) : HON'BLE MR. JUSTICE K.S.JHAVERI HON'BLE MR. JUSTICE INDERJEET SINGH Judgment 17/04/2018 In both appeals common questions of law and facts are involved, hence, they are decided by this common judgment. By way of both the appeals, the appellant has challenged the judgment and order of the Tribunal whereby the Tribunal has dismissed the appeal of the department confirming the order of CIT(A). Counsel for the appellant has framed following questions of law:- (2 of 6) [ITA-81/2018] In DBITA No. 81/2018 i) Whether on the facts and in law the ITAT was justified in deleting the disallowance of export pass fee of Rs. 9925000/- made by the Assessing Officer without appreciating the fact that liability to make such payment is not finalized. ii) Whether in the facts and circumstances of the case, the Tribunal was justified in deleting the addition of Rs. 730000/- made by the Assessing Officer on account of contribution of State Renewal Fund. iii) Whether in the facts and circumstances of the case, the Tribunal was justified in upholding the deleting of addition of Rs. 1360303/- made for depositing the employee’s contribution to PF & ESI beyond the prescribed time limit provided in the respective Act. iv) Whether in the facts and circumstances of the case, the Tribunal was justified in holding that employee’s contribution to PF & ESI are governed by the provision of Section 43B and not by section 36(1)(va) r.w.s. 2 (24)(x) of the Income Tax Act.” In DBITA No. 82/2018 i) Whether on the facts and in law the ITAT was justified in deleting the disallowance of export pass fee of Rs. 19587500/- made by the Assessing Officer without appreciating the fact that liability to make such payment is not finalized. ii) Whether in the facts and circumstances of the case, the Tribunal was justified in deleting the addition of Rs. 730000/- made by Assessing Officer on account of contribution of State Renewal Fund. iii) Whether in the facts and circumstances of the case, the Tribunal was justified in upholding the deleting of addition of Rs. 3871238/- made for depositing the employee’s contribution to PF & ESI beyond the prescribed time limit provided in the respective Act. iv) Whether in the facts and circumstances of the case, the Tribunal was justified in holding that employee’s contribution to PF & ESI are governed by the provision of Section 43B and not by section 36(1)(va) r.w.s. 2 (24)(x) of the Income Tax Act.” (3 of 6) [ITA-81/2018] However, in our considered opinion, the issue no. 1 is covered by the decision of this Court in case of Principal Commissioner of Income Tax vs. M/s Rajasthan State Ganganagar Sugar Mills Ltd. (DBITA No. 13/2017) decided on 17th January, 2017 wherein it has been held as under:- “3. The Tribunal in paragraph 6 observed as under:- “6. We have heard the rival contentions of both the parties and perused the material available on the record and also gone through the record. It has not disputed in view of the judgment of Hon’ble Jurisdictional High Court in the case of JVVNL 265 CTR 62(Raj) and also in the case of CIT Vs SBBJ (2014) 33 DTR 131 (Raj) has allowed the contribution towards PF and ESI in the similar facts and circumstances of the case. By respectfully following the Hon’ble Jurisdictional High Court decision, we dismiss the revenue’s appeal on this ground and held that the order passed by the ld CIT(A) in allowing the contribution towards PF and ESI was in accordance with law.” 4. The counsel for the appellant contended that the Tribunal has committed serious error. However, the issue is now covered by the decision of this Court in Principal Commissioner of Income Tax, Jaipur-2 Vs. M/s. Rajasthan State Ganganagar Sugar Mills Ltd., decided on 9.11.2016 wherein it has been held as under:- “In Income Tax Appeal No.172/2016 the Tribunal has specifically confirmed the order only in view of the fact that the CIT (Appeals) has followed the decision of the Tribunal. In all appeals we are not reproducing the questions of law but in Income Tax Appeal No.128/2015 we are producing the questions of law as under : i) Whether in the facts and circumstances of the case, the Tribunal was justified in deleting the additions of Rs.73,20,000/- made by the Assessing Officer holding that the Excise Duty cannot be part of valuation of finished stock u/s. 145A and can only levied on the removal of goods from the premises. ii) Whether on the facts and in law the ITAT was justified in deleting the addition of Rs.97,15,000/- holding that the Export pass fee was allowable expenditure deposit of the fact that it was contingent liability. iii) Whether in the facts and circumstances of the case, the Tribunal was justified in law in deleting the addition of Rs.6,86,900/- made by the Assessing Officer on account of accrued interest earned on accrued interest earned on decreed disputed compensation. (4 of 6) [ITA-81/2018] iv) Whether in the facts and circumstances of the case, the Tribunal was justified in deleting the addition of one crore made by the Assessing Officer by way of disallowing privilege fees paid by the assessee to Excise Commissioner Govt. Rajasthan despite the fact that it was application of income. v) Whether in the facts and circumstances of the case, the Tribunal has erred in deleting addition of Rs.6,463/- made under Section 36(1)(va) r.w.s. 2(24) (x) of the IT Act for depositing the employee's contribution to PF & ESI beyond the prescribed time limit provided in the respective Acts. vi) Whether in the facts and circumstances of the case, the Tribunal has erred in holding that employee's contribution to PF & ESI are governed by the provision of section 43B and not by section 36(1)(va) r.w.s. 2(24) (X) of the IT Act. However, in view of decision of this Court in DB Income Tax Appeal No.99/2009, titled as Commissioner of Income Tax Vs. M/s. Rajasthan State Ganganagar Sugar Mills Ltd., decided on 26.05.2016, the issues are completely covered by the said decision of this Court. Therefore, substantial questions of law are required to be answered in favour of the assessee and against the Department.” The question no. 2 is squarely covered by the decision of this Court in case of Principal Commissioner of Income Tax vs. Rajasthan State Seed Corporation Ltd. (DBITA No. 4/2016) decided on 29th April, 2016 wherein it has been held as under:- “6. Insofar as the prior period expenses is concerned a finding of fact has been recorded by the Appellate Authorities that approval for payment of the said expenditure was given during the year under appeal therefore the liability crystallized during the year and similar method was being regularly followed by the assessee consistently and when there is a finding recorded by the Appellate Authorities that the expenditure crystallized during the year, was written in the books this year and on year to year basis was claimed in the same manner and fashion was rightly claimed and allowed during the year, is a finding of fact. 7. Insofar as disallowance of claim of Rs. 19282605/- is concerned, admittedly, the assessee- respondent has claimed to have applied for according approval of Group Gratuity Scheme to the concerned Commissioner on 31st March, 1981. Once the assessee files an application for approval of the scheme, it was for the Commissioner to have taken recourse of disposing of the said application either to (5 of 6) [ITA-81/2018] approve or to reject the same. The same having not been done for the last more than almost 25 years, the assessee could not have been blamed for the same. There is no denial by the AO that application for approval has not been filed by the assessee on 31.3.1981. Even the Assessing Officer admits that the application for approval was submitted on 31st March, 1981 and both the Appellate Authorities have come to a definite finding of fact that once an application has been moved for approval and having not been rejected then the claim could not have been disallowed or the claim could not have been rejected merely because the Commissioner did not accord approval of the same. The assessee cannot be made to suffer for inaction of the revenue, admittedly the respondent-assessee is a Government of Rajasthan Undertaking or even otherwise the Commissioner ought not have slept over the application for approval for more than 25 years. The Appellate Authorities are well justified in coming to the said conclusion. Needless to mention that a finding has been given by the Tribunal that the amounts are being disallowed by the learned AO from year to year at least from the assessment year 1996-97 i.e. almost 20 years but is being allowed regularly in appeal therefore, for this reason also we reject the claim of the revenue. The Assessing Officer ought not have made a repeated addition merely for this purpose and a litigation of this nature ought not to have come before this court as appeals all throughout is being allowed year after year. On the one hand the revenue does not decide the application for approval and the amount is being disallowed by the Assessing Officer from year to year which is not at all justified. The Revenue is well advised not to make repetitive additions/disallowance for this purpose and expose its weakness before the Courts as on the one hand application for according approval has not been granted and for inaction of Commissioner amounts are disallowed and to incur wasteful public money either way as at least the respondent has also to incur public money to defend its case being a Government of Rajasthan Undertaking in filing repetitive appeals though succeeding year after year. Merely because the tax effect is more than what is prescribed in the Circulars be it old or the latest being in December 2015 is no ground to file such appeals, we though were inclined to levy cost on the Revenue but stop ourselves in doing the same to make it clear to the Revenue to be more careful in future that such kind of litigation deserves to be avoided as the Courts are choked with such frivolous litigation and is not able to concentrate on other important issues. (6 of 6) [ITA-81/2018] 8. Insofar as the expenditure incurred on State Renewal Fund is concerned, said expenditure also goes to show that the renewal fund was set up by the State Government and was created with the object of providing a safety net for the workers likely to be effected by restricting in the State Public Enterprise and that a finding of fact has been recorded that the contribution made to the State Renewal fund is solely for the purposes of the welfare and benefit of the employees. In our view, it is for the assessee to decide whether any expenditure should be incurred in the course of business and expenditure of this nature being for business expediency is certainly allowable deduction under Section 37(1) of the Act. In our view any normal expenditure for the welfare and benefit of employees is allowable expenditure under Section 37(1), the Tribunal has come to a finding of fact that it was a legal obligation of the respondent-assessee towards contribution of the said amount to the State Renewal Fund and there being a legal obligation as well in our view the Tribunal has come to a correct conclusion. 9. Taking into consideration the facts and circumstances on all the 3 questions raised, in our view the deletion of disallowance is based on material evidence on record and is a finding of fact, no question of law much less substantial question of law can be said to emerge. We find no perversity or illegality in the order impugned so as to call for interference of this Court. Accordingly the appeal being devoid of merits, is hereby dismissed.” With regard to issue no. 3 and 4, the controversy is pending before Supreme Court in CIT Jaipur vs. M/s State Bank of Bikaner & Jaipur SLP (C) No. 016249/2014, therefore, these issues are answered subject to decision by the Supreme Court. In view of the above, no substantial question of law arises. The appeals stand dismissed. (INDERJEET SINGH),J (K.S.JHAVERI),J A.Sharma/2-3 "