M/S RMP BEARING LTD. THRU. RAJENDRA C. MAKWANA V. DY. COMMISSIONER OF INCOME TAX, CIRCLE 3(1)(2)

TAXAP/392/2019

AI Insights

The case involves M/S RMP Bearing Ltd., the appellant, who appealed against the order of the Income Tax Appellate Tribunal, which had disallowed their claim for deductions amounting to Rs.41,60,052 for the assessment year 2013-14. The primary issue was whether the Tribunal was correct in law in not allowing the claim when the appellant had failed to deposit the deducted employees' contributions towards provident fund and ESI within the statutory due dates. The High Court referenced a similar case, M/s Checkmate Facility And Electronic Solutions Pvt. Ltd., and the decision of the Gujarat State Road Transport Corporation, which supported the disallowance of such claims when contributions are not deposited within the due dates.

• Counselvise Citation: [2019] 140 COUNSELVISE.COM (IT) 750640 (HC-GUJARAT)
• Appeal Type: Others
• Pronouncement Date: 06-08-2019
• Assessment Year: misc
• Other Referred Cases: M/s Checkmate Facility And Electronic Solutions Pvt. Ltd. Vs. Deputy Commissioner of Income Tax Circle 1, Commissioner of Income Tax v. Gujarat State Road Transport Corporation, Commissioner of Income Tax Vs. Urmin Products Pvt. Limited
• Laws Referred To: Income Tax Act, 1961, Employees Provident Funds and Miscellaneous Provisions Act, 1952
• Result in Favour of: Revenue
• Court: HIGH COURT
• Assessee Lawyers: AMAN SHAH
• Keywords: Disallowance; ESI; Income Tax; Late deposit; Provident fund; Tax appeal
• Section: 143(3); 260A; 36(1)(va); 38

Judgement Text

"C/TAXAP/392/2019 ORDER IN THE HIGH COURT OF GUJARAT AT AHMEDABAD R/TAX APPEAL NO. 392 of 2019 ========================================================== M/S RMP BEARING LTD. THRU. RAJENDRA C. MAKWANA Versus DY. COMMISSIONER OF INCOME TAX, CIRCLE 3(1)(2) ========================================================== Appearance: MR. AMAN K SHAH(9992) for the Appellant(s) No. 1 for the Opponent(s) No. 1 ========================================================== CORAM: HONOURABLE MR.JUSTICE J.B.PARDIWALA and HONOURABLE MR.JUSTICE A.C. RAO Date : 06/08/2019 ORAL ORDER (PER : HONOURABLE MR.JUSTICE J.B.PARDIWALA) 1. This tax appeal under Section 260A of the Income Tax Act, 1961 [for short 'the Act, 1961'] is at the instance of the assessee and is directed against the order passed by the Income Tax Appellate Tribunal, Ahmedabad 'D' Bench, Ahmedabad in the ITA No.3401/Ahd/2016, dated 30/11/2018 for the A.Y 2013­14. 2. The assessee has proposed the following substantial question of law for the consideration of this Court:­ (i) Whether on the facts and in circumstances of the case as well as on law the Tribunal was right in law in not allowing the claim of the appellant amounting to Rs.41,60,052/­? 3. The issue raised as aforesaid is squarely covered by a decision of this Court in the case of M/s Checkmate Facility And Electronic Page 1 of 5 C/TAXAP/392/2019 ORDER Solutions Pvt. Ltd. Vs. Deputy Commissioner of Income Tax Circle 1 in the Tax Appeal No.1256 of 2018 decided on 15/10/2018. “2. The issue arises in following background. The assessee is a private limited company. For the assessment year 2013­14, the assessee had filed the return of income declaring total income of Rs.65,65,980/. The return was taken in scrutiny by the Assessing Officer. In the order of assessment passed by him under section 143(3) of the Income Tax Act, 1961 ('the Act' for short) a disallowance of employees' contributions towards provident fund and ESI amounting to Rs.1,16,87,091/­ was made. This was on account of the fact that the assessee though had deducted such contributions, failed to deposit the same with the statutory authorities within the due date. The Assessing Officer referred to all such deductions and late depositing the contributions in the order of assessment. All these deposits would indicate that the assessee had made the deposits late beyond 20th of Month following the month for which such deduction was being made. The date of 20th of each month was chosen by the Assessing Officer was made considering the normal period of 15 days for making deposit and a further grace period of five days specified under the statute. Since the assessee was delayed in making the deposits even beyond such extended period, he applied the disallowance in terms of section 36(1)(va) of the Act. 3. Learned counsel for the appellant would not dispute that the issue of disallowance of late deposited employees' contributions of PF and ESIC stands covered by the Division Bench judgment of this Court in case of Commissioner of Income Tax v. Gujarat State Road Transport Corporation reported in [2014] 366 ITR 170 (Guj). He however raised a slightly different contention which did not arise for consideration before this Court in case of Gujarat State Road Transport Corporation (supra). He submitted that in terms of section 38 of the Employees Provident Funds and Miscellaneous Provisions Act, 1952, reference to the time limit for depositing the contributions within 15 days of close of the month must be to the month in which the salary payment is made. For example, therefore if the salary payment for the month of June is made on 5th July, the employer would have time upto 15th of August for depositing the employee's contribution of provident fund. Looking from this angle, there was no delay or default on the part of the present assessee. 4. In terms of section 36(1)(va) of the Act, any sum received by the assessee from any of his employees to which the provisions of section 2(24)(x) applies, would be deducted as long as such sum is credited by the assessee to the employee's account in the relevant funds on or Page 2 of 5 C/TAXAP/392/2019 ORDER before due date. Explanation to the said subsection provides that for the purpose of the said clause, “due date” means a date by which the assessee is required as an employer to credit an employee's contribution to the account in which relevant fund under any Act, rule, order or notification issued thereunder or under any standing order, award, contract of service or otherwise. Section 38 of the Employees Provident Funds and Miscellaneous Provisions Act, 1952, becomes relevant. Subsection (1) thereof reads as under: “(1) The employer shall, before paying the member his wages in respect of any period or part of period for which contributions are payable, deduct the employee's contribution from his wages which together with his own contribution as well as an administrative charge of such percentage [of the pay (basic wages, dearness allowance, retaining allowance, if any, and cash value of food concessions admissible thereon) for the time being payable to the employees other than an excluded employee, as the Central Government may fix. He shall within fifteen days of the close of every month pay the same to the fund “electronic through internet banking of the State Bank of India or any other Nationalized Bank authorized for collection” on account of contributions and administrative charge]: “Provided that the Central Provident Fund Commissioner may for reasons to be recorded in writing, allow any employer or class of employer to deposit the contributions by any other mode other than internet banking”. 5. This provision thus requires an employer before paying the employee his wages to deduct the employee's contribution along with the employer's own contribution as fixed by the Government. It is further required that he shall within fifteen days of the close of every month pay the same to the fund such contribution and administrative charges. In terms of this provision thus, after deducting the employee's contribution towards the funds, the same has to be deposited with the Government within fifteen days of the close of every month. Reference to fifteen days of the close of the month must be in relation to the month during which the payment of wages is to be made and corresponding liability to deduct employee's contribution to the fund arises. The expression “within fifteen days of the close of every month” therefore must be interpreted as having reference to the close of the month, for which, the wages are required to be paid with corresponding duty to deduct employee's contribution and to deposit the same in the fund. 6. Learned counsel for the appellant is therefore not correct in contending that if such wages are paid in the following month, the Page 3 of 5 C/TAXAP/392/2019 ORDER liability to deposit the employee's contribution to the fund gets differed by another month.” 4. Mr. Shah, the learned counsel appearing for the appellant – assessee pointed out that this Court in the case of M/s Checkmate Facility And Electronic Solutions Pvt. Ltd. (supra) placed reliance on the decision of this Court in the case of Commissioner of Income Tax Vs. Gujarat State Road Transport Corporation reported in [2014] 366 ITR 170 (Guj). According to Mr. Shah, in the case of Gujarat Road Transport Corporation (supra) there is no reference to the earlier decision of this Court taking a contrary view in the case of Commissioner of Income Tax­ IV Vs. Urmin Products Pvt. Limited; Tax Appeal No.714 of 2010; decided on 18/07/2011. In such circumstances, according to Mr. Shah, the two decisions of this Court (1) Gujarat State Road Transport Corporation (supra); And (2) M/s Checkmate Facility And Electronic Solutions Pvt. Ltd. (supra) could be termed as per­incuriam, we do not find any merit in such contention. 5. In the case of Urmin Products Pvt. Limited (supra), this Court observed in Paragraphs­5 and 6 are as under:­ 5. With regard to the second question of disallowance of Rs.78,790/­ made under Section 36(1)(va) of the Act, this essentially relates to Employees Contribution Fund. This was disallowed by the Assessing Officer on the ground that the company made delayed payment and as under Section 36(1)(va) the Employee's Contribution received by the employer is formed to be employer's income. The same is deductible only when contribution is credited by the employer to the relevant fund on or before the new date. 6. The CIT (A) did not agree with this view of the Assessing Officer and the Tribunal relying on decision of the Delhi High Court in the case of CIT Vs. P M Electronics Ltd., (2009) 177 Taxman 1 (Del.) concurred with the findings of the CIT (A). There is a long discussion on the said aspect where reliance is also placed on the judgment of the Apex Court and various other High Courts. Without further burdening this order with these judgments and its detailed discussion, suffice to Page 4 of 5 C/TAXAP/392/2019 ORDER hold that the Tribunal followed the decision of the Delhi High Court for dismissing appeal on this ground. This Court does not find any error in the approach of Tribunal warranting any interference at the hands of this Court. Resultantly, appellant fails to satisfy this Court on both these issues and no question of law arises for consideration of this Court. The Tax Appeal is dismissed. 6. It is apparent on plain reading of the two paragraphs referred to above that as such this Court has not observed anything except saying that if the tribunal relied on the Delhi High Court decision, then it did not commit any error. As such no law could be said to have been laid down by this Court in Urmin Products Pvt. Limited. 7. In view of the aforesaid, this appeal fails and is hereby dismissed. (J. B. PARDIWALA, J) (A. C. RAO, J) aruna Page 5 of 5 "