TMI Blog2014 (1) TMI 502X X X X Extracts X X X X X X X X Extracts X X X X ..... tion 36 is deleted, which is with respect to employees' contribution - Decision in Alom Extrusions Ltd. (2009 (11) TMI 27 - SUPREME COURT ), distinguished - additions confirmed - Decided in favour of Revenue. - Tax Appeal Nos. 1711 & 2577 of 2009, 925, 949, 965, 1655, 2365, 2378 & 2644 of 2010 & 814 of 2011 AND 637 of 2013 - - - Dated:- 26-12-2013 - M.R. SHAH AND R.P.DHOLARIA, JJ. For the Appellant : Manish R. Bhatt, Mrs. Mauna M. Bhatt, K.M. Parikh, Ms. Paurami B. Sheth and Sudhir M. Mehta. For the Respondent : Deepak Shah and Manish J. Shah. JUDGEMNT:- PER : M.R. Shah As common question of facts and law arise in this group of appeals, they are disposed of by this common judgement. 2. Common substantial question of law which arises in this group of appeals is with respect to deletion of disallowance of employees' contribution to PF Account as well as ESI contribution despite provisions of section 36(1)(va) of the Income Tax Act, 1961. (hereinafter referred to as "the IT Act" for short). 3. For the sake of convenience facts of Tax Appeal No.637 of 2013 are narrated which in nutshell are as under : 3.1 That the respondent - assessee is a Corporation run ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ead with section 36(1) (va) of the IT Act while passing final assessment order. 3.4 The Assessing Officer also added amount of Rs.1,93,55,580/- being the amount of shortfall towards the employers' contributory provident fund and therefore disallowed the same under section 43B of the IT Act and disallowed the said amount of Rs.1,93,55,580/- from the expenses claimed by the assessee Corporation for the year under consideration, as per the provisions contained in section 43B of the IT Act. 3.5 Thereafter, being aggrieved by and dissatisfied with the Assessment Order passed by the Assessing Officer in making addition of Rs. Rs.24,89,41,130/- by invoking provisions of section 2(24)(x) read with section 36(1) (va) of the IT Act being shortfall in employees' contribution to the provident fund and in making total disallowance of Rs.1,93,55,580/- being shortfall in employers' contribution to the provident fund, the assessee preferred an appeal before the CIT(A) and the learned CIT(A) by order dtd. 25/6/2009 partly allowed the said appeal and directed to delete disallowance of Rs.24,89,41,130/- (shortfall in employees' contribution to PF Account) and Rs.1,93,55,580/- (shortfall in employ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g on behalf of the revenue has vehemently submitted that the learned tribunal has materially erred in relying upon the decision of the Hon'ble Supreme Court in the case of Commissioner of Income-Tax v. Alom Extrusions Ltd., reported in [2009] 319 ITR 306 SC. It is submitted that as such before the Hon'ble Supreme Court in the case of Alom Extrusions (supra) the issue involved was with respect to employer's contribution to PF Account whereas in the present cases, the issue involved is with respect to employees' contribution to PF Account. It is submitted that as such under the Income Tax Act provisions with respect to employees' contribution to PF Account and employers' contribution to PF Account are different. It is submitted that as such with respect to employers contribution, section 43B of the IT Act would be applicable. However, with respect to employees' contribution, section 36(1) (va) of the IT Act would be applicable. It is submitted that both the provisions i.e. section 43B and section 36(1) (va) of the IT Act are different and distinct and will operate in different situation and with respect to different contributions and therefore, the provision applicable with respect t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s' contribution is deposited by the assessee / employer on or before the due date of filing of the return under section 139 of the IT Act shall be entitled to deduction in the relevant year, shall not be applicable with respect to employees' contribution. It is submitted that, therefore, when the assessee has not deposited the employees' contribution in the PF Account before the due date provided under the PF Act and/or ESI Act, the assessee shall not be entitled to deduction under section 36 of the IT Act in the relevant assessment order though the assessee might have deposited employees contribution on or before the due date of filing of the return under section 139 of the IT Act. It is submitted that, therefore, both, the learned CIT(A) as well as the learned tribunal have materially erred in deleting disallowance of shortfall in employees' contribution, by holding that as the assessee had deposited the shortfall on or before the due date of filing of the return under section 139 of the IT Act, the assessee shall be entitled to the deduction under section 36(1)(va) of the Act. By making above submissions, it is requested by Mr.Manish Bhatt, learned counsel appearing on behalf ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sited / made before filing of the return, assessee shall be entitled to deduction under section 36(1) (va) in the same year. It is submitted by the learned counsel appearing on behalf of the assessee that in all the aforesaid decisions it is held by various High Courts that the deletion with effect from April 1, 2004 by the Finance Act, 2003 of the second proviso to section 43B of the Income Tax Act, which stipulated that contributions to the provident fund and Employees State Insurance fund should be made within the time mentioned in section 36(1)(va), that is the time allowed under the Employees' Provident Fund and Miscellaneous Provisions Act, 1952, as well as the Employees' State Insurance Act, 1948, is treated as retrospective in nature. It is further held that if the provident fund and ESI contribution is made before due date of filing of the return under section 139 of the I.T. Act, there shall not be disallowance in view of provisions of section 43B as amended by Finance Act, 2003. It is submitted that in all these cases, admittedly provident fund / ESI funds have been deposited by the respective assessee on or before the due date of filing of the return and therefore, they ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... consideration of this Court is with respect to the disallowance of the amount being employees' contribution to PF Account / ESI Contribution which admittedly which the concerned assessee did not deposit with the PF Department / DSI Department within due date under the PF Act and/or ESI Act. 7.2 To answer the above controversy, the relevant provisions of Income Tax Act, 1961 are required to be referred to. 7.3 "Income" has been defined under section 2(24) of the Act. Under section 2(24)(x), any sum received by the assessee from his employees as contributions to any provident fund or superannuation fund or any fund set up under the Employees' State Insurance Act, 1948, or any other fund for welfare of such employees, constitute income. Section 2(24)(x) reads as under :- "Section 2(24)(x) :- Any sum received by the assessee from his employees as contributions to any provident fund or superannuation fund or any fund set up under the Employees' State Insurance Act, 1948, or any other fund for welfare of such employees." 7.4 Section 36 of the Act provides for deduction in computing the income referred to in section 28. The relevant provisions applicable to the present ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t of the previous year in which the liability to pay such sum was incurred as aforesaid and the evidence of such payment is furnished by th assessee along with such return: Provided further that no deduction shall, in respect of any sum referred to in clause (b), be allowed unless such sum has actually been paid in cash or by issue of a cheque or draft or by any other mode on or before the due date as defined in the Explanation below clause (va) of sub-section (1) of section 36, and where such payment has been made otherwise than in cash, the sum has been realised within fifteen days from the due date." By the Finance Act, 2003, Second Proviso to section 43B of the Act came to be deleted and even the first proviso to section 43B of the Act came to be amended. The first proviso to section 43B of the Act, after its amendment by the Finance Act, 2003 reads as under :- "Provided that nothing contained in this section apply in relation to any sum which is actually paid by the assessee on or before the due date applicable in his case for furnishing the return of income under sub-section (1) of section 139 in respect of the previous year in which the liability to pay such ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h such return. It also further provided that no deduction shall, in respect of any sum referred to in clause (B) i.e. with respect to the employer's contribution, be allowed unless such sum is actually been paid in cash or by issue of cheque or draft or by any other mode on or before the due date as defined in explanation below clause (va) of sub-section (1) of section 36 and where such sum has been made otherwise that in cash, the sum has been realised within 15 days from the due date. By the Finance Act 2003, Second Proviso of section 43B of the Act has been deleted and First Proviso to section 43B has also been amended which is reproduced hereinabove. Therefore, with respect to employer's contribution as mentioned in clause (b) of section 43(B), if any sum towards employer's contribution to any provident fund or superannuation fund or gratuity fund or any other fund for the welfare of the employees is actually paid by the assessee on or before the due date applicable in his case for furnishing the return of the income under sub-section (1) of section 139, assessee would be entitled to deduction under section 43B on actual payment and such deduction would be admissible for the ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g the condition as mentioned under section 36(1) (va), the assessee shall be entitled to deduction with respect to such employees' contribution. Section 2(24)(x) refers to any sum received by the assessee from his employees as contribution and does not refer to employer's contribution. Under the circumstances and so long as and with respect to any sum received by the assessee from any of his employees to which provisions of sub-clause (x) of sub-section 24 of section 2 applies, assessee shall not be entitled to deduction of such sum in computing the income referred to in section 28 unless and until such sum is credited by the assessee to the employees' account in the relevant fund or funds on or before the due date as mentioned in explanation to section 36(1)(va). Therefore, with respect to the employees contribution received by the assessee if the assessee has not credited the said sum to the employees' account in the relevant fund or funds on or before the due date mentioned in explanation to section 36(1) (va), the assessee shall not be entitled to deductions of such amount in computing the income referred to in section 28 of the Act. 7.7 Now so far as the reliance placed upon ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lass Industries Ltd. (supra) is concerned, on facts and considering the provisions of section section 36(1)(va) of the Act as is stands, the said decision would not be applicable to the facts of the case on hand and the controversy in question. 7.9 Now, so far as the reliance placed upon the decision of the Karnataka High Court in the case of Sabari Enterprises (supra) is concerned, on facts and controversy raised in the present appeals, the said decision would not be any assistance to the assessee. In the case before the Karnataka High Court, the dispute was with respect to the employer's contribution and the controversy was whether the amendment to section 43B of the Act would be retrospective in nature or not. In the aforesaid case before the Karnataka High court, there was no dispute with respect to employees' contribution as is there in the present case. 7.10 Similarly, the decision of the Bombay High Court in the case of Pamwi Tissues Ltd. (supra) also would not be applicable to the facts of the case on hand. In the case before the Hon'ble Bombay High Court, the dispute was whether deletion of Second Proviso to section 43B would be applicable retrospectively or not and in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ces, we are not in agreement with the view expressed by the Himachal Pradesh High Court; Karnataka High Court; Rajasthan High Court and Punjab and Haryana High Court in the cases refereed to hereinabove. 7.12 Now, so far as the reliance placed upon the decision of the Hon'ble Supreme Court in the case of Sarabhai Sons Ltd. (supra), by the learned counsel appearing on behalf of the assessee and his submission that if two views are possible and different High Courts have taken a particular view, this Court may not take a different view, is concerned, we are of the opinion that in the present case, and as discussed hereinabove, only one view is possible as canvassed on behalf of the revenue and as observed by under section hereinabove and we are not in agreement with the view taken by the Himachal Pradesh High Court; Karnataka High Court; Rajasthan High Court and Punjab and Haryana High Court in the cases refereed to hereinabove, and therefore, the submission made on behalf of the assessee to follow the decisions of the different High Courts refereed to hereinabove and/or not to take a contrary view cannot be accepted. 8. In view of the above and for the reasons stated above, and ..... X X X X Extracts X X X X X X X X Extracts X X X X
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