Synergies Castings Ltd. V. Asst. C. I. T., Circle 3(1) Hyderabad

ITTA/129/2024

AI Insights

The case involves Synergies Castings Ltd., the appellant, who contested the disallowance of deductions for delayed contributions to PF and ESI for the assessment year 2019-2020. Initially, the Centralized Processing Center disallowed the deductions, which was upheld by the Commissioner of Income Tax (Appeals) and subsequently by the Income Tax Appellate Tribunal. The Tribunal's decision was based on the Supreme Court's precedent that such contributions must be made within statutory deadlines to qualify for deductions. The High Court dismissed the appeal, agreeing with the Tribunal's application of the law.

• Counselvise Citation: [2024] 140 COUNSELVISE.COM (IT) 688426 (HC-TELANGANA)
• Appeal Type: Others
• Pronouncement Date: 16-12-2024
• Assessment Year: misc
• Other Referred Cases: Checkmate Services (P) Ltd. v. CIT, Syeda Rahimunnisa vs. Malan Bi by LRs, Principal Commissioner of Income Tax Bangalore vs. Softbrands India Private Limited
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Revenue
• Court: HIGH COURT
• Assessee Lawyers: K V S RAM
• Keywords: Assessment year 2019-2020; Deduction Disallowance; Delayed Payment; Employees' State Insurance; Income Tax; Provident fund
• Section: 143(1); 43B; 260A; 143(1)(a); 36(1)(va)

Judgement Text

"I [ 34r81 IN THE HIGH COURT FOR THE STATE OF TELANGANA AT HYDERABAD MONDAY,THE SIXTEENTH DAY OF DECEMBER TWO THOUSAND AND TWENTY FOUR PRESENT THE HONOURABLE THE CHIEF JUSTICE ALOK ARADHE AND THE HONOURABLE SRI JUSTICE J. SREENIVAS RAO INCOME TAX TRIBUNAL APPEAL NO: 129 OF 2024 Appeal filed under Section 2604 of the lncome Tax Act, 1961 against the Order dated 13.03.2024 passed in ITA No. 94lHydl2o24 for the Assessment year 2019-20 on the file of the lncome Tax Appellate Tribunal, Hyderabad 'A' Bench, Hyderabad preferred against the Order dated 18.12.2023 passed in PAN No. AA|CS7410H on the file of the Commissioner of income Tax, Appeal AddI/JCIT (A) - '1, Bengaluru preferred against the Order dated 18.05.2020 passed in PAN No. AA|CS7410H on the file of the Centralized Processing Center, lncome Tax Department, Bengaluru. Between: Synergies Castings Ltd. Hyderabad, Flat No.4A, D.No.6-3355/10/A, Sampathji Apartments, Sadat Manjil, Ameerpet, Hyderabad ...Appellant AND Asst. C. l. T., Circle 3(1) Hyderabad ACIT, Circle 3('l) Signature Towers, Opp. Botanical Gardens, Serilingampally (M), Ranga Reddy District, Hyderabad - 500084 Counsel for the Appellant ...Respondent Mr. K.V.S. Vishnu Ram, representing M/S. Harsheet Reddy Law Firm Counsel for the Respondent : None appeared The Court delivered the following: JUDGMENT EH B T EH B F STI E K E AND I S E RA I T N 9 UDGME prr tbe Hon'b/e tbe Cbief Jutie Alok Aradhe) Mr. I('V.S.Vishnu Ram, learned counsel aPpears for M/s. Harsheet Reddy Law Firm, learned counsel for the appellant 2. Heard on the question of admission. 3' This appeal under Secrion 260A of the Incorne Tax Act, 1961 (for short the Act) has been fi_led againsr order dated 13.03.2024, passed by the Income Tax Appellate T'ribunal, Hyderabad .A, Bench, Hyderabad (for short .the Tribunal). 4. The subject mamer of the appeal perrains ro the asses sment y ear 201 9 _2020. 5. Facts giving rise to fiIing of this appeal in a nutshell are that the appellant (hereinafter referred to as .the assessee,) filed I I I l refruns of income for rhe assessmenr year 2019_2020 on 22.11.2019. In the rerurns, the assessee disclosed dre income as NIL after claiming set off and brought forward the Ioss of Rs.16,60,59,649/_. Notice under Sectio n 143(1)(a) of the Act was issued to the assessee proposing to disallow the deduction of a sum of Rs.1,g5,76,4g2/_ rowards delayed payrnent of employees contribution to provident trund (pF) and Employees, Srare Insurance (ESI). In response, the assessee filed a reply wherein it was stated that delay in depositing amounts withrn the due dares prescribed under the respective Acts is due to reasons beyond the control. ft was further pointed out that the amount due was pard before the date of filing of tlle return of income and therefore, requested for deduction of the said expenditure. 6. An intimation under Secuon 143(1) of the Act was issued to the assessee on 1g.05.2020 by which a sum of Rs.1,85,76,482/- was disallowed on accouot of assessee,s -t, . .).. 3 contribution under the ESI and pF and the total incorne of the assessee was determined at Rs.1,g5,76,4g2/_ and the tax pavable on this income was computed at Rs.55,72,944/_. The credit of TDS of Rs.72,87,370f _ was allowed and the refund was determined at Rs.11,6 1,797 /_. 7. Being aggrieved, the assessee filed an appeal before the Commissioner of Income Tax (Appeals) (hereinafter referred to as 'CIT(A)). The CIT(A), by order dated 18.12.2023, drsmissed the :lppeal. The assessee thereupon approached the Tdbunal. The Tribunal, by the rmpugned order dared 13.03.2024, inter alia held that the issue involvecl in the appeal is covered by a decision of the Supreme Court in Checkrnate Services (p) Ltd. v. CIT1 and held that since rhe assessee had not remitted the employees, conffibution to pF and ESI withir the statutory dates, the amount cannot be claimed as a deduction. It was further held that, admittedly, the assessee had not deposited the employees, pF and ESi L 1zozz1 ua rrR s18 (sc) ', ., 1: :r', i 4 within the statutory dates but has deposited the same beyond the statutory dates. Accordingly, the Tnbunal dismissed the appeal preferred by the assessee. Hence, dris appeal 8. Learned counsel fot the assessee submitted that the issue involved in the appeat has not attained finality and is debatable' Thetefore, the appeal should be admitted. 9. We have considered the submission made by learned counsel for the assessee and have perused the recotd. 10. The Supreme Court, in Checkmate Services (P) Ltd' (supra), nparagaph52,has held as under: 'qMhen Padiament introduced Section 438 ol the Income Tax Act, 1961, what was on the Statute Book, was only employer's contribution (Section 34(1)(tg). At that point in time, there u/as no question of employee's contribution being considered as part of the employet's earning' On the application of the original principles of law, it could have been treated only as receipts not amounting to income' When Parliament introduced the amendments in 1988-89, inserting Secrion 3 6() (va)-and simultaneously in serting thc 5 second proviso o[ Sect_ion 43B, its .intention was nor to treat the desperate nature of the amounts, smilady. As discusscd prcvious ., rhe memorandum introducing the Finance Bill clearly srar:cd that the provisions _ especially second ltroviso to Secrion 43Il - was introduced to ensure timely payments were mad,: bv the employer to the concerned fund (Eptr, ESI, err.) and avoid the mischief of employcrs retaining amounts [or long periods. That parliament intcn(led to retain thc separate character of these two amounts, is cvident 6om the use of differenr language. Sect_ion 2r!.a)@) too, deen'rs amount received from the employees (whether the amoun r is received from the employee or by rvay of dcducuon :1u thorized by the stature) as income _ it is the character o[ the amount that is important, i.e., not rn.comc carncd. '['hus, amounts retained by the employet frorn out oF the employce's income by way of deduction etc. wete trcated as r ocome in the hands of the employer. The signif,rcance of this provision is t_lrar on the one ha,d, it brought inro rhe fold of ..income,, amounts that were receipts or cleductions from employees, income, at the time, paymeflt within the prescribed rime _ by way of contribution of rhc empl.vees' share to their credit with the rerevant [und is to be treared as deducrion (Section 36O(va). The other impotant feature is that this distinction between the employers' conrribution (Section 36(1)(rv)) and emplovees, 6 contribution required to be deposited by the employer (Section 36O(va) was maintained - and conrinues to be maintained. On the other hand, Section 43B covers all deductions that are permissible as expenditures, or out- goings forming part of the assessees' liabiliry. These include liabilities such as tax liabiliry, cess duties etc., or inreresr l-iability having regard to the terms o[ the conrract. Thus, timely payment of these alone entide an assessee to thc benefit of deducrion from the total income. The essential obiective of Section 43B is to ensure that if asscssees are following the mercantile method of account-ing, nevertheless, the deduction of such liabilities, based only on book entries, would not be given. To pass muster, actual payments were a necessary pre-condition for allowing the expenditure.\" 11. The relevant portion of Para 54 is extracted below for the fadtry of reference: \"In tl're opinion of this Court, the reasoning in the impugned iudgment that the non-obstante clause would not in any maflner dilute or override the employer's obligarion to deposit the amounts 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 correcr and jusrihed.\" 7 12. Thus, from a perusal of the aforesaid relevant extracts of the decision of the Supreme Court in Checkmate Services (P) Ltd. (supra), it is evident that the assessee has to make payment of tl.re contribution to PF and ESI before the statutory datt:s in order to claim the amount as dt:duction. Admittedl,v, thc assessee has not paid the aforesaid amount on or before the statutory dates. The findings of fact has been recorded by the assessing officer, CIT($ as well as by the Tribunal. The aforesard finding of fact cannot, by any stretch of imagrnation,, be said to be perverse. 13. It is not the case of the assessee that the aforesaid finding of fact is pen.erse. It is well setded in law that this (lourt, in exercise of powers under Secdon 2604 of the Act, cannot interfere with the finding of fact until and unless the same is demonsuated to be perverse. (see Syeda Rahimunnisa vs. 8 Malan Bi by LRs2 and Principal Comrnissioner of Income TaxrBangalore vs. Softbrands India Private Lirnited3). 14. In view of the preceding analysis, no substantial question of law arises for consideration in fiis appeal. The same fails and is, hereby, dismrssed. No costs. As a sequel, miscellaneous petitions, pending if any, stand closed. sdr- K. sRl JOINT IVASA RAO N GIS R ,,TRUE COPY\" SECTION OFFICER To, ir:[:ffi,qff f,*i.t\"ffi#lri#f#*.lthilt\"r\"f; ft I 1 2. J 4 5 Yv Njb/gh Two CD CoPies 'z (2016) 10 scc a15 3 (2018) 406 rrR 513 HIGH COURT DATED:16 t1Z|ZO24 JUDGMENT lTTA.No.l29 ot 2024 DISMISSING THE ITTA WITHOUT COSTS .. .-.: -. .._:lt:.- ,.'', t rx OEJATzffi i )i 7. t) ?I --4 ,o ;. ^ =::- * 'rcttf-o =t^c4 q- qtt -q5 "