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2017 (1) TMI 677 - RAJASTHAN HIGH COURT

2017 (1) TMI 677 - RAJASTHAN HIGH COURT - TMI - Applicability of the provisions of Section 43B (b) - whether the provisions of Section 43B as it stands after deletion second proviso thereto by Finance Act, 2003, permitting certain deductions on actual payment, can be applied for allowing the deductions in respect of the employee’s contribution towards the relevant fund or funds received by the assessee not credited to the employee’s account on or before the due date as contemplated under explana .....

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‘sum payable by the assessee as an employer by way of contribution’ to any provident fund, superannuation fund or gratuity fund or any other fund for the welfare of the employees. As discussed hereinabove, under the relevant statutes, both the employer’s contribution and employee’s contribution is required to be paid by the employer before the due date and therefore, the expression ‘sum payable by the assessee as an employer by way of contribution’ as used in Section 43B (b) cannot be given rest .....

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tually 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 in respect 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 the assessee alongwith such return. - The contention sought to be raised by the Revenue that the question with regard to entitlement of the assessee for deduction in respect of the employee’s cont .....

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Appellant : Mr.N.M.Ranka, Senior Advocate with Mr.N.K.Jain For the Respondent : Mr.K.K.Bissa JUDGMENT Per Hon ble Mr. Sangeet Lodha, J. 1. These two appeals arising out of the order dated 19.12.07 passed by the Income Tax Appellate Tribunal ( ITAT ), Jodhpur Bench, Jodhpur in Income Tax Appeal No.131/JDPR/2005 and 159/JDPR/2007 for the Assessment Year 2001-02 and 2002-03 respectively, involving common question of facts and law, were heard together and are being disposed of by this common order. .....

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ribution to the employee s account in the relevant fund under the relevant statute, however, the amount was actually paid by the assessee before the due date applicable in its case for furnishing the return of income under sub-section (1) of Section 139 of the Income Tax Act, 1961 ( for short the Act ) in respect of the previous year in which the liability to pay such sum was incurred and the evidence of such payment was furnished alongwith the return. 3. The Assessing Officer vide assessment or .....

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Act, the total disallowance was reduced to ₹ 6,35,092/-. 4. Aggrieved by the assessment order, the assessee preferred an appeal before Commissioner of Income Tax (Appeals) [CIT(A)], Udaipur. The CIT(A) dismissed the appeal vide order dated 4.1.05. 5. Aggrieved by the order passed by the CIT (A), the assessee preferred second appeal before the ITAT. After due consideration, the ITAT allowed the appeal vide order dated 23.6.06, holding that the amendment in proviso to Section 43B of the Act .....

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come Tax Madras-II vs. Madras Radiators and Pressing Limited, (2003) 183 CTR 322. Relying upon the said decisions, the ITAT recalled the order dated 23.6.06 and restored the appeal to its original number. 6. After re-hearing, vide order dated 19.12.07, the ITAT sustained disallowance in respect of employee s contribution but allowed the deduction towards employer s contribution observing that assessee was entitled to claim benefit under Section 43B of the Act, keeping in view the fact that it ha .....

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r allied laws, which is covered by Section 2 (24) (x), can also be said to fall within the expression mentioned in Section 43B(b) as sum payable by the assessee as an employer . 9. Learned counsel Mr.N.M.Ranka, Senior Advocate appearing on behalf of the appellants contended that in view of amendment made in Section 43B, vide Finance Act, 2003, by which the second proviso to Section 43B stands deleted, the deduction has to be allowed even in respect of employee s contribution, notwithstanding the .....

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n of this court in these appeals out of the order impugned passed by the ITAT is no more res integra. In support of the contention, learned counsel also relied upon the decisions of the Hon ble Supreme Court in the matter of CIT vs. Alom Extrusions Ltd. (2009) 319 ITR 306 (SC) and CIT vs. Vinay Cement Ltd., (2009) 313 ITR-St.1 and the decisions of Karnataka High Court in CIT vs. Sabari Enterprises , (2008) 298 ITR 141, Gauhati High Court in CIT vs. George Williamson (Assam) Ltd. , (2006) 284 ITR .....

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ee s contribution before the due date for filing the return under Section 139 of the Act, the deduction has wrongly been disallowed by the ITAT. In support of the contention, learned counsel has relied upon a decision of the Karnataka High Court in the matter of Essae Teraoka P. Ltd. vs. D.C.I.T. , (2014) 366 ITR 408. 10. On the other hand, the counsel appearing for the Revenue submitted that as per provisions of Section 2(24)(x) of the Act, any sum received by the assessee from his employees as .....

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t fund or funds on or before the due date i.e. date by which assessee is required as an employer to credit the employee s contribution to the employee s account in the relevant fund under the relevant statute. Learned counsel submitted that Section 36 (1) (va) and Section 43B (b) operate in different fields and therefore, the contention sought to be raised that the expression contribution used in provisions of Section 43B (b) refers to employer s contribution and employee s contribution both is .....

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lying upon the decision of Kerala High Court in the matter of Commissioner of Income Tax, Cochin vs. Merchem Ltd. , (2015) 378 ITR 443, learned counsel submitted that if the contention raised on behalf of the assessee is accepted it will render the explanation attached to Section 36 (1) (va) redundant. Learned counsel submitted that both the provisions operating in different fields have to be given effect to and therefore, the assessee having failed to deposit the employee s contribution towards .....

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ter deletion of second proviso has been specifically dealt with by the various High Courts and therefore, the contention of the Revenue that the question arising in the present appeals is not dealt with by various High Courts specifically is absolutely devoid of any merit. Learned counsel reiterated that a bare perusal of the decision of this court in State Bank of Bikaner & Jaipur s case (supra) reveals that the question of law arising in the instant appeals already stand decided after due .....

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r superannuation fund or any fund set up under the provisions of ESI Act or any other fund for welfare of such employee shall stand included within the income of the assessee by virtue of provisions of Section 2(24)(x) of the Act. However, while computing income chargeable to income tax under the head Profit and Gains of Business and Profession in terms of Section 28 of the Act, any sum received by the assessee as aforesaid which is treated to be his income under Section 2 (24)(x) of the Act sha .....

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essee shall not be entitled for deduction under Section 36(1) (va) of the Act in computing the income referred to under Section 28 of the Act, in respect of the sum received as employee s contribution if he has not credited the said sum to the employee s account in the relevant fund or funds on or before the due date mentioned in explanation to Section 36 (1) (va) of the Act. 14. But then, the question which arises for consideration in these appeals is whether the provisions of Section 43B as it .....

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hing the return of income under sub-section (1) of Section 139 in respect of the previous year in which the liability to pay such sum was incurred and the evidence of such payment is furnished by the assessee alongwith such return. 15. It is to be noticed that Section 43B, a non obstante clause, shall be operative irrespective of other provisions of the Act in respect of the deductions specified, which are otherwise allowable under the Act. As per clause (b) of Section 43B read with proviso to S .....

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nce of such payment is furnished by the assessee alongwith such return. 16. In the instant cases, it is not disputed that the assessee has deposited the employee s contribution and employer s contribution both in respect of the liability incurred in the previous year but the contention of the Revenue is that the employee s contribution to the relevant funds is not covered by clause (b) of Section 43B and therefore, the ITAT has erred in allowing the deduction in respect thereof invoking the prov .....

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ly or through a contractor. Of course, the contribution payable by the employee paid by the employer or a contractor is recoverable by means of deductions from the wages of the employee and not otherwise. But in any case, the payment of employee s contribution by the employer on or before the due date as specified under the relevant statute is not dependent upon the actual deduction from the employee s wages, by the employer or the contractor who in its turn is required to pay the amount deducte .....

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ution and employee s contribution. The principal employer is entitled to recover from employee the employee s contribution by deduction from his wages and in case of an employee employed through an immediate employer, as per provisions of Section 41 of the ESI Act, the principal employer is entitled to recover the amount of employer s contribution as well as employee s contribution from the immediate employer either, by deduction from any amount payable or as debt payable by the immediate employ .....

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of Section 43B of the Act, it is pertinent to note that the clause (b) thereof refers to sum payable by the assessee as an employer by way of contribution to any provident fund, superannuation fund or gratuity fund or any other fund for the welfare of the employees. As discussed hereinabove, under the relevant statutes, both the employer s contribution and employee s contribution is required to be paid by the employer before the due date and therefore, the expression sum payable by the assessee .....

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e both the employer s contribution and the employee s contribution, if the same 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 in respect 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 the assessee alongwith such return. 19. Having gone through the decisions cited at the bar, we are of the opinion t .....

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dealt with. 20. In State Bank of Bikaner & Jaipur s case (supra), while specifically dealing with the question with regard to the entitlement of the assessee for deduction in respect of the employee s contribution to PF fund paid beyond the due date as mentioned in explanation to Section 36(1)(va) of the Act, a Bench of this court relying upon the decisions of Supreme Court in Alom Extrusions Ltd. s case (supra) and Vinay Cement s case (supra), categorically held that contributions to provi .....

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d as contemplated under mandatory provisions of Section 36 (1)(va) read with Section 2(24) (x) and Section 43B of the Act, held that the provisions of Section 43B (b) clearly provides that notwithstanding anything contained in the other provisions of the Act including Section 36(1) clause (va) of the Act, even prior to insertion of that clause the assessee is entitled to get statutory benefit of deduction. The court observed that the explanation to clause (va) of Section 36(1) of the Act further .....

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rospectively i.e. with effect from 1.4.88. 23. In Desh Rakshak Aushdhalaya Ltd s case (supra), the Uttrakhand High Court while dealing with the question regarding the entitlement of the assessee for deduction of the amount deposited in relation to employee s contribution towards provident fund with delay, upheld the order of the ITAT deleting the addition made in this regard by the AO, relying upon the decision of the Hon ble Supreme Court in the matter of Allied Motors Private Limited vs. CIT ( .....

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the same makes it amply clear that the due date as mentioned in Section 36(1)(va), is the due date as mentioned in Section 43B(b) i.e. payment of contributions made to the provident fund authority any time before filing of the return for the year in which the liability to pay accrued alongwith evidence to establish payment thereof. 25. In Nexus Computers Pvt. Ltd. s case (supra), the Madras High Court while relying upon the decision of Hon ble Supreme Court in rejecting SLP by a speaking order .....

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t can incur penalties also for which specific provisions are made under the Provident Fund Act as well as ESI Act. The court held that in so far as Income Tax Act, 1961 is concerned, the assessee can get benefit of deduction if the actual payment is made before filing the return as per the principle laid down by the Supreme Court in Vinay Cement s case (supra). 27. In Essae Teraoka Pvt. Ltd. s case (supra), the Karnataka High Court held that contribution used in clause (b) of Section 43B of the .....

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d: 26. Therefore, in our view, when Sec.43B as it stood prior to the amendment and Sec.36(1)(va) Explanation 1 thereto r/w Sec.2(24)(x) are considered together, it is clear that they operate in different fields. So far as the employee s contribution received is concerned, it should have been paid on or before the due date prescribed under the relevant statutes. Then again the learned counsel contended that on a reading of Sec.43B(b), any sum payable by the assessee as an employer by way of contr .....

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ood prior to the amendment and thereafter also to deface Sec.36(1)(va) and the Explanation thereto from the Income Tax Act. Thus, it means that both provisions are operative and the contributions have to be paid in accordance with the mandate contained under Sec.36(1) (va) and Explanation thereto and under Sec.43B, respectively. 29. In George Williamson (Assam) Ltd. s case (supra), while considering the question of law raised regarding interpretation of clause (b) of Section 43B of the Act, read .....

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