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Employees Provident Fund Organization Versus DCIT (TDS) , New Delhi, ACIT, Circle 51 (1) , Delhi

2016 (8) TMI 697 - ITAT DELHI

TDS liability on payments made out of accumulated balances in the EPF a/c - AO estimated that 50% of the withdrawals were made before rendering five years of continuous service and, therefore, in view of Rule 8(1) the said withdrawals were liable to TDS in terms of Rule 10 of Part A of Fourth Schedule to the Income-tax Act - assessee contended withdrawals from EPF a/c under the Employees Provident Fund and Miscellaneous Provisions Act, 1952 are covered u/s 10(11) of the Income-tax Act and not un .....

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The submission of ld. counsel primarily revolves around a case of casus omisus but the court cannot fill the gap and read ‘1961’ instead of ‘1922’ in the Employees Provident Fund and Miscellaneous Provisions Act, 1952, particularly when the said provision is not under consideration before us. Be that as it may, Tribunal is not empowered with such powers. Therefore, we hold that the provisions of section 10(11) are not applicable to the present proceedings but Schedule IV to the Income-tax Act is .....

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, 1952 only specifies the circumstances in which the accumulation in the funds are payable to a member but that does not impinge upon the deduction of tax as per Rule 10 of Part A of Schedule IV to Income Tax Act. Rule 69 of the Employees Provident Fund scheme nowhere prohibits deduction of TDS from the accumulated balances to the members of the scheme. Therefore, there is no repugnancy between Rule 69 of EPF Scheme and Rules 8,9 and 10 of part A of Schedule IV. - Considering the argument re .....

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in this plea of ld. counsel because as per Rule 10 of the Part A of Schedule IV, deduction is required to be made from the amount payable under Rule 9 as per provisions of Chapter XVII B by treating accumulated balance being income chargeable under the head “salary”. Whenever assessee fails to furnish the necessary information as required by deductor then the TDS is to be made at the maximum marginal rate and that is how the AO had made the TDS at maximum marginal rate. Therefore, it cannot be .....

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wals as being of employees who had rendered less than five years of continuous service thereby coming within the ambit of Rule 9 & 10 of Part A of Schedule IV of the Income-tax Act. We, therefore, set aside the order of ld. CIT(A) and restore the matter to the file of AO with a direction that assessee will furnish the required details before the AO in respect of withdrawals made by employees within 5 years of rendering continuous service with his employer. The AO will also take into consideratio .....

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ss than ₹ 30,000/-. The short deduction is to be computed @ 10% in all the cases where the PAN number is furnished by assessee in respect of the employees from whose income tax was to be deducted. - Decided in favour of assessee for statistical purposes. - ITA Nos. 4214/Del/2015, 4215/Del/2015, 4216/Del/2015, ITA Nos. 2415/Del/2015, 2416/Del/2015, 2417/Del/2015, ITA Nos. 2655/Del/2015, 2656/Del/2015, 2657/Del/2015, 2658/Del/2015, ITA No. 481/Del/2015 - Dated:- 3-8-2016 - Shri S. V. Mehrotr .....

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tion, the main issue is of TDS being not made in respect of settlement or withdrawals of accumulated balances by the Principal Officer, Employees Provident Fund Organization. 3. For the sake of brevity, we are referring to the facts as obtaining in ITA no. 4216/Del/2015 in the case of Principal Officer, Employees Provident Fund Organization, A-2C, Sector-24, Noida. 4. Brief facts, as obtaining from the order passed u/s 201(1)/201(1A), passed by the DCIT, TDS, Noida dated 31.3.2014 are that: 4.1. .....

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mp; 9 of Part A of the ivTH Schedule to the Income Tax Act. 4.2. After referring to rules 8,9 & 10 of Part A of Schedule IV, the AO pointed out that the trustees of a recognized provident fund (hereinafter referred to as RPF ), or any person authorized by the regulation of the fund to make payment of accumulated balances due to employees, should have, in cases where sub-rule(1) of Rule 8 applied at the time of accumulated balances due to an employee was paid, should have deducted therefrom t .....

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he following format: S. No. Name of the employer Name of the employee Contribution of employer Contribution employee Interest on the contribution of employer Interest on the contribution of employee. 4.3. The AO has reproduced the information furnished by assessee at pages 3 & 4 of his order. The AO treated the assessee in default, inter alia, observing as under: 8. The fourth schedule of Income Tax, 1961 applies on Employees Provident Fund Act, 1952, as rule I of part A of fourth schedule o .....

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by it in this behalf in the Official Gazette] is exempt from income Tax under the provisions of section 10 Sub section 11 of the Income Tax, 1961 under the category of exempted incomes. In the instant case, the assessee is in default of not abiding by the duty as laid down u/s 206 of the Income Tax Act as the withdrawal under the Employee's Provident Fund 1952 are not covered under provisions of section 10 sub section 11 of 1. T Act. and are covered under fourth schedule of I.T Act, 1961. Th .....

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2,25,049 48,22,34,851 2011-12 2012-13 20,87,17,439 6,60,62,332 27,47,79,771 2012-13 2013-14 7,81,35,967 1,56,36,475 9,37,72,442 4.5. Before ld. CIT(A) the assessee raised following contentions: (1) The assessee was not provided adequate opportunity and the order passed by DCIT was in gross violation of principles of natural justice. (2) On correct interpretation of Section 2(38) it is clear that every statutorily recognized provided fund is recognized provided fund, but every recognized provided .....

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s [or from any other provident fund set up by the Central Government and notified by it in this behalf in the official Gazette]. It was submitted that the EPF Act, 1952 was notified by the Central Government by Official Gazette Notification no. S.R.O. 1509 dated 2.9.1952, New Delhi and hence the same was within the purview of application of I.T. Act. (4) The payment given under the statutory Provident Fund (hereinafter referred as Employee s Provident Fund Act, 1952), was not liable to tax deduc .....

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was pointed out that as per the provisions of the EPF Act and the scheme framed there under, the assessee was mandatorily required to repay the accumulated balance to the respective eligible members in full without any diversion of the deduction what-so-ever. (7) The methodology of calculation of tax sought to be applied to the EPFO, necessitates the existence of an employee/employer relationship. Employer is in possession of complete details of income of the employee for deduction of the income .....

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essee on contribution made by employees and covered establishment was not taxable as per the provisions of the Income-tax Act, 1961. Further, there was no provision for deduction of tax in the schemes framed under the EPF act, 1952. The assessee had not deducted tax at any point of time right from the enactment of the statute. (b) The assessee s objections filed before AO were not disposed of. 4.7. Ld. CIT(A) after considewring the assessee s detailed submissions recorded following findings: (i) .....

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ot tenable. He pointed out that the statutory provident funds are those which are set up under the provisions of the Provident Fund Act, 1925 and the fund is maintained by the government and Semi- government organization, local authorities, Railway, Universities and recognized educational institutions. Therefore, the assessee EPFO is not a statutory provident fund as the same had not been set up under the provisions of the Provident Fund Act, 1925. Further, he pointed out that there is no disput .....

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1952 is statutory fund. He further submitted that the present Employees Provident Fund, 1952 is a fund established by the Central Government and also notified by it in the official gazette relying on section of EP & MP Act, 1952 and, therefore, Employees Provident Fund Act, 1952 is a notified fund within the terms of the provisions of section 10(11) of the Income-tax Act, 1962. He, therefore, submitted that any payment received under the Scheme of EPF Act, 1952 is covered u/s 10(11) of the .....

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t at the time of enactment of Employees Provident Fund Act, 1952, Income-tax Act, 1961 was not in force. Therefore, the applicability of section 2(38) of the Income-tax Act, 1961 was not available. He, therefore, submitted that the intention of the Parliament can be very well inferred from section 9 of EPF & MP Act, 1952 which mandated for overriding effect of EPF & MP Act, 1952 over Income-tax Act, 1922 in case of repugnancy. He submitted that inadvertently amendment in section 9 of Emp .....

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t, 1961, which was not in force when Employees Provident Fund Act, 1952 was enacted. He submitted that after enactment of Income-tax Act, 1961, section 10(11) applied even upon Employees Provident Fund Act, 1952, because provisions of section 10(11) specifically mentioned the Provident Fund Act, 1925 or any other provident fund, notified by the Central Government. He submitted that since the Employees Provident Fund Act, 1952 is a fund, which was set up by the Central Government in 1952, therefo .....

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ct, 1961, resultantly no separate notification was warranted. He, therefore, submitted that Employees Provident Fund Act, 1952 is a statutory provident fund within the provisions of section 10(11) of the Income-tax Act. He further submitted that no where u/s 10(11) it is mentioned that the notification is to be issued by the Central Government after the enactment of Income-tax act, 1961. Ld. counsel submitted that in any view of the matter interpretation beneficial to the assessee is to prevail. .....

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ally been inserted w.e.f. 1.6.2015 for the purpose of TDS on the withdrawal under Employees Provident Fund Act, 1952. Therefore, intention of the Parliament is very clear that section 192A is specifically inserted parallel to section 10(11) to the effect of only Employees Provident Fund Act, 1952. 5.4. Ld. counsel further pointed out that in any view of the matter the AO was not justified solely relying on the figures submitted by assessee without examining the applicability of Rule 8 on Part A .....

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as impossible to implement Rule 9 of Part A of IVth Schedule, therefore, AO worked out short deduction of tax @ 33% whereas u/s 192A, now it has been clarified that the TDS has to be made @ 10%. 5.7. In the alternative ld. counsel submitted that the matter may be restored back to the file of AO to apply the provisions of Rule 8 of Part A of IVth schedule, wherever the withdrawal has been made before 5 years of rendering of continuous service. He further submitted that if the payees had paid the .....

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ees Provident Fund Act, 1952. 6.1. Ld. CIT(DR) submitted that there is no provision under the scheme of GPF or PPF, which is under 1925 Act, for premature withdrawal. Therefore, any payment from GPF or PPF is exempt from applicability of Income-tax as per provisions of section 10(11). However, premature withdrawals are allowed from recognized provident fund. Certain categories of such withdrawals, from recognized provident funds, are exempt by virtue of provisions of section 10(12) but certain p .....

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at source as if the same was income chargeable under the head salary . He, therefore, submitted that it is not correct to say that no mechanism has been prescribed under Part A of Fourth schedule for deduction of TDS. 6.4. Ld. CIT(DR) further submitted that as far as the introduction of section 192A w.e.f. 1.6.2015 is concerned, in the explanatory note to the Finance Act, 2015, the following heading is there Simplification of tax deduction at source mechanism for Employees Provident Fund Scheme .....

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e tax was deducted @ 33%. As regards the assessee s plea that calculation of liability was based on maximum marginal rate, ld. CIT(DR) submitted that AO provided sufficient opportunity to the assessee to provide the details. However, the assessee did not avail those opportunities. As regards the assessee s claim that since deductees are likely to have paid their taxes, therefore, liability cannot be enforced on the deductor in view of Judgment in the case of Hindustan Coca Cola Vs. CIT. Ld. DR s .....

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shes a certificate from CA in form 26A to the effect of fulfillment of preceding three conditions. 6.7. As regards the assessee s plea that it was impossible for them to comply with the provisions, ld. CIT(DR) submitted that law contemplates that whenever there is doubt, the deductor can deduct tax at maximum marginal rate and issue TDS certificate. The deductee has option to get a certificate from the AO to the effect of deducting TDS at lower rate or claiming the return by filing return of inc .....

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ade before rendering five years of continuous service and, therefore, in view of Rule 8(1) the said withdrawals were liable to TDS in terms of Rule 10 of Part A of Fourth Schedule to the Income-tax Act. The main contention of Shri Pankaj Garg Advocate is that withdrawals from EPF a/c under the Employees Provident Fund and Miscellaneous Provisions Act, 1952 are covered u/s 10(11) of the Income-tax Act and not under the Fourth Schedule to the Income-tax Act. In order to properly appreciate this su .....

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ncludes a provident fund established under a scheme framed under the Employees' Provident Funds Act, 1952 (19 of 1952) 10(11) any payment from a provident fund to which the Provident Funds Act, 1925 (19 of 1925), applies [ or from any other provident fund set up by the Central Government and notified"? by it in this behalf in the Official Gazette ]; (12) the accumulated balance due and becoming payable to an employee participating in a recognised provident fund, to the extent provided i .....

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hed) which is repugnant to any of the provisions of that Chapter or of the rules made thereunder.] 7.3. Entry 69 of the Employees Provident Funds Scheme, 1952, reads as under: [69. Circumstances in which accumulations in the Fund are payable to a, member.-(l) A member may withdraw the full amount standing to his credit in the Fund- (a) on retirement from serv,ice after attaining the age of 55 years: [Provided that a member, who has not attained the age of 55 years at the time of termination of h .....

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India for permanent settlement abroad [or for taking employment abroad]; [(d) on termination of service in the case of mass or individual retrenchment: [(dd) on termination of service under a voluntary scheme of retirement framed by the employer and the employees under a mutual agreement specifying, inter alia, that notwithstanding the provisions contained in sub-clause (a) of clause (00) of section 2 of the Industrial Disputes Act, 1947, excluding voluntary retirement from the scope of definiti .....

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ed by the employer to other factory or establishment, not covered under the Act; (ii) where a member is transferred from a covered factory or other establishment to another factory or other establishment not covered under the Act, but is under the same employer; and (iii) where a member is discharged and is given retrenchment compensation under the Industrial Disputes Act, 1947 (14 of 1947);] [(lA) For the purpose of clause (b) of sub-paragraph (1)- (i) where an establishment has been closed, th .....

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e is registered under that Scheme, shall be produced: Provided that where by mutual agreement of employers and employees, a Medical Board exists for any establishment or a group of establishments, certificate issued by such Medical Board may also be accepted for the purpose of this paragraph: Provided further that it shall be open to the Regional Commissioner to demand from the member a fresh certificate from a Civil Surgeon or any doctor acting on his behalf where the original certificate produ .....

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ering from tuberculosis or leprosy 3[ or cancer ,even if contracted after leaving the service of an establishment on grounds of illness but before payment has been authorised, shall be deemed to have been permanently and totally incapacitated for work.] [(2) In cases other than those specified in sub-paragraph (I), the Central Board, or where so authorised by the Central Board, the Commissioner or where so authorised by the Commissioner, any officer subordinate to him, may permit a member to wit .....

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tablishment for the purpose of getting married.] (5) Any member who withdraws the amount due to him under sub- paragraph (2) shall, on obtaining re- employment in a 4[factory or other establishment] to which the scheme applies, be required to qualify or again for the membership of the Fund and on qualifying for membership shall be treated as a fresh member thereof. 7.4. A bare perusal of section 2(38) clearly shows that recognized provident fund includes a provident fund established under a sche .....

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the assessee cannot detain us for long to deliberate on the same. It is well settled law that the courts are not supposed to legislate the law and fill the gaps in the legislation. The entire endeavor of ld. counsel for the assessee is that the Provident Fund Act, 1925 should be equated with the Employees Provident Fund and Miscellaneous Provisions Act, 1952 and, accordingly, the withdrawals from the accumulated balances should be covered u/s 10(11). We are unable to accept this contention beca .....

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elhi dated 14.1.1961, The Government of India (Allocation of Business), Rules, wherein distribution of subjects among the department is given As per Rule 3 given in second Schedule, Central Board of Direct Taxes was under Department of Revenue, whereas the notification under Employees Provident Fund and Miscellaneous Provisions Act, 1952 was passed by Labour Ministry. He, therefore, submitted that this cannot be considered as a notification issued under the Income Tax Act. We find considerable f .....

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in the Act which is not there. Be that as it may, when Fourth Schedule has been incorporated in the Income-tax Act, 1961, dealing with cases of recognized provident fund, the Tribunal cannot go beyond that. The submission of ld. counsel primarily revolves around a case of casus omisus but the court cannot fill the gap and read 1961 instead of 1922 in the Employees Provident Fund and Miscellaneous Provisions Act, 1952, particularly when the said provision is not under consideration before us. Be .....

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han Rule 8 of Part A of Fourth Schedule of the Income Tax Act and in no way repugnant to Rule 8,9 and 10 of Part A of Schedule IV. Rule 69 of the Employees Provident Fund and Miscellaneous Provisions Act, 1952 only specifies the circumstances in which the accumulation in the funds are payable to a member but that does not impinge upon the deduction of tax as per Rule 10 of Part A of Schedule IV to Income Tax Act. Rule 69 of the Employees Provident Fund scheme nowhere prohibits deduction of TDS f .....

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only with specifically recognized provident funds which are private in nature and for Employees Provident Fund Scheme 1952, the provisions for the first time have been made in section 192A. We do not find much substance in this plea of ld. counsel because as per Rule 10 of the Part A of Schedule IV, deduction is required to be made from the amount payable under Rule 9 as per provisions of Chapter XVII B by treating accumulated balance being income chargeable under the head salary . Whenever asse .....

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