TMI Blog2019 (7) TMI 1909X X X X Extracts X X X X X X X X Extracts X X X X ..... ur dated 07/03/2019 pertaining to assessment year 2014-15. 2. The assessee has taken various grounds of appeal however, the crux of grounds of appeal is the action of learned CIT(A) by which he has confirmed a penalty amounting to ₹ 25,600/- which the Assessing Officer had imposed u/s 271(1)(c) of the Act. 3. Learned A. R., explaining the facts of the case, submitted that Assessing Officer, during the assessment proceedings, had observed that the assessee had deposited certain employees contribution to PF and ESI beyond the prescribed period as provided in the relevant act and therefore, he disallowed the same. It was submitted that the assessee did not file appeal against the order of the Assessing Officer as the amount was very small. He further submitted that non filing of the appeal against the assessment order does not mean that assessee was liable for penalty u/s 271(1)(c) of the Act as the issue was entirely covered in favour of the assessee as the assessee had deposited the amount before filing of return of income and therefore, as per the judgment of Hon'ble Allahabad High Court in the case of Sagun Foundry (P.) Ltd. vs. CIT in IT Appeal No. 87 of 200 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... see for the A.Y. in question i.e. 2005-06 as per provisions under Section 43B. Dissatisfied with assessment order, Assessee preferred appeal before CIT(A) who vide order dated 25.06.2009 partly allowed the same and deleted disallowance of ₹ 24,89,41,130/- (short fall in employees contribution to provident fund) and ₹ 1,93,55,580/- (short fall in employers contribution to provident fund) observing that employees contribution/employers contribution was deposited before filing Return under Section 139(1) of Act 1961 for the relevant period. Revenue, in its turn, preferred appeal before Tribunal. Relying on judgment in Commissioner of Income Tax Vs Alom Extrusions Ltd. (supra), Tribunal dismissed appeal and confirmed order passed by CIT(A). That is how matter came before High Court in appeal. Court considered following question, posed in para 7.01, reads as under:- Short question which is posed for consideration of this court is with respect to the disallowance of the amount being the employees' contribution to the PF account/ESI contribution which admittedly which the concerned assessee did not deposit with the PF Department7ESI Department within due date under t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... led to deductions of such amount in computing the income referred to in Section 28 of the Act. 20. Gujrat High Court distinguished judgment of Commissioner of Income Tax Vs Alom Extrusions Ltd. (supra) on the ground that therein actual dispute relates to employers contribution and whether amendment in Section 43B by Finance Act, 2003 would operate retrospective or not, Supreme Court had no occasion to consider deduction with reference to Section 36(1)(va). For the same reason Gujrat High Court dissented with the judgments of Rajasthan High Court in Commissioner of Income Tax Vs Udaipur Dugdh Utpadak Sahakari Sangh Ltd., (2014) 366 ITR 163, Punjab Haryana High Court in Commissioner of Income Tax Vs Hemla Embroidery Mills P. Ltd., (2014) 366 ITR 167, Himachal Pradesh High Court in Commissioner of Income Tax Vs Nipso Ployfabriks Ltd., (2013) 350 ITR 327 and Karnataka High Court in Commissioner of Income Tax Vs Sabri Enterprises, (2008) 298 ITR 141. 2.1 Karnataka High Court had an occasion to consider, whether it should dissent with the view taken in the earlier judgments and follow the view taken by Gujrat High Court in Commissioner of Income Tax Vs Gujrat State Road Tra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s provision has nothing to do with the consequences, provided for under the PF Act/PF Scheme/ESI Act, for not depositing the contribution on or before the due dates therein. (Emphasis added) 22. It also said that the word contribution used in clause (b) of Section 43B of Act 1961 means the contribution of employer and employee, both, and that being so, if contribution is deposited on or before due date for furnishing Return of income under sub-section (1) of Section 139 of Act 1961, employer is entitled for deduction. 23. Though in a short judgment, but Punjab Haryana High Court in Commissioner of Income Tax Vs Hemla Embroidery Mills (P.) Ltd., (supra) not only followed Commissioner of Income Tax Vs Alom Extrusions Ltd. (supra) but also its own earlier judgment in Commissioner of Income Tax Vs Rai Agro Industries Ltd., (2011) 334 ITR 122, to hold that Section 43B shall apply to both 'contributions' i.e. employers' and employees'. 24. Kerala High Court in recent judgment in Commissioner of Income Tax Vs Merchem Ltd., (2015) 378 ITR 443, has followed the decision of Gujrat High Court in Commissioner of Income Tax Vs Gujrat State Road Transport C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... would be entitled to deduction on actual payment basis. This proviso did not include within its ambit, contributions under labour welfare statutes. By Finance Act, 1988, Second Proviso thus Second proviso was further amended by Finance Act, 1989 w.e.f. 01.04.1989. 27. Court held that Assessee/employer thus would be entitled to deduction only if contribution stands credited on or before due date given in the Act 1952 or Act 1948. Second proviso created difficulties, inasmuch as under Act, 1981, due date was after the date of filing of returns and thus industries made representations to the Ministry of Finance. Court, looking to the history of amendments held, it is evident that Section 43B, when enacted in 1984, commences with a non obstante clause. The underlying object being to disallow deductions claimed merely by making a book entry based on the mercantile system of accounting. At the same time, Section 43B made it mandatory for the Department to grant deduction in computing income under Section 28 in the year in which tax, duty, cess etc. is actually paid. Parliament took cognizance of the fact that accounting year of a company did not always tally with the due dates unde ..... X X X X Extracts X X X X X X X X Extracts X X X X
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