Income Tax Appellate Tribunal - Cochin
Eastern Clay & Ceramics Ltd. vs Assistant Commissioner Of Income Tax on 17 August, 1999
Equivalent citations: (2001)69TTJ(COCH)422
ORDER
M. M. Cherian, A.M. This is an appeal by the assessee, M/s. Eastern Clay & Ceramics Ltd., Feroke against the order passed by the Commissioner (Appeals), Calicut, in the income-tax assessment for the assessment year 1992-93. The only ground raised by the assessee in this appeal is that the Commissioner (Appeals) erred in confirming the disallowance of a total sum of Rs. 1,46,702 claimed as a deduction as payment towards provident fund and employees state insurance.
2. The assessee is a private company engaged in the manufacture of tiles and ridges. In computing the income for the assessment year 1992-93 the assessee claimed deduction for the sum of Rs. 1,46,702 as payment towards provident fund and employees state insurance. The claim for deduction on payment basis for the current year was disallowed by the assessing officer on the view that it was not a liability relating to this year. In the first appeal, the Commissioner (Appeals), held that the assessee ought to have made the payment before the due date and so the same could not be allowed for the assessment year 1992-93. Aggrieved with the order of the Commissioner (Appeals), the assessee has filed this appeal before the Tribunal.
3. On behalf of the assessee, Shri C.B.M. Warrier, chartered accountant, submitted before us that the revenue authorities were not justified in disallowing the claim for deduction of the amount paid towards provident fund and employees state insurance on the view that the liability did not relate to the year under consideration. Shri Warrier stated that though the assessee had claimed deduction for the liability for the assessment year 1991-92, the same was not allowed for the reason that the liability was outstanding as on the last day of the accounting year and that the payment had not been made before the due date. But then, the assessee subsequently made the payment during the accounting year 1991-92 and on the basis of actual payment deduction was claimed for the assessment year 1992-93. The learned representative of the assessee contended that the readlines of section 43B provides that certain deductions were to be allowed only on actual payment. Drawing our attention to section 43B, Shri Warrier pointed out that deduction would be allowed irrespective of the previous year in which the liability to pay the amount was incurred by the assessee according to the method of accounting regularly employed by him, in computing the income of that previous year in which the same was actually paid. It was his contention that after making the disallowance for the assessment year 1991-92 there was no justification for again denying the deduction for the subsequent year when the assessee had actually made the payment. Arguing on the above lines, the learned representative urged us to reverse the order of the Commissioner (Appeals) and to allow the assessee's claim for deduction of the amount.
4. The Departmental Representative, Smt. T. Prasannakumari, on the other hand, supported the order of the Commissioner (Appeals) and submitted that when the liability related to the assessment year 1991-92, the assessee ought to have claimed deduction for that assessment year and having not complied with the provisions of section 43B, the assessee could not claim for the subsequent year that deduction should be allowed on payment basis. The learned Departmental Representative contended that in a case where the accounts were maintained on mercantile basis, the liability could be allowed only for the year in which it became due and not for a subsequent year, irrespective of actual payment.
5. It is not disputed that the assessee's claim for deduction of the contribution to provident fund and employees state insurance for the assessment year 1991-92 had been disallowed under section 43B on the ground that the liability had not been discharged during the previous year. Shri Warrier filed before us a statement showing the dates on which the payments had been made. We notice that the entire sum of Rs. 1,46,702 had been remitted by the assessee during the previous year ending on 31-3-1992. The assessee's claim is for deduction of the amount for the assessment year 1992-93 on actual payment basis. In the case of Hunsur Plywood Works Ltd, v. Dy. CIT (1995) 54 ITD 394 (Bang-Trib), the Bangalore Bench of the Tribunal has held that deduction was allowable on the basis of actual payment, irrespective of the year to which the liability related. In the case of M/s. Jairam & Sons in ITA No 53/Coch/1995, dated 9-8-1998, this Tribunal held that the claim for deduction of the contribution towards provident fund should be considered under section 43B(b) de hors the second proviso. The Tribunal further held that the due date as defined in the Explanation applied only to the employees' contribution to be credited to the employees account and so it would not be correct to say that the employer's contribution should also be made before the same due date. The Tribunal in that case held that the assessee was entitled to deduct the contribution to the provident fund in the year of actual payment. Following the decision stated above, we hold that the assessee was entitled to deduct the contribution to the provident fund and the employees state insurance in the year of actual payment. We accordingly reverse the order of the Commissioner (Appeals).
6. In the result, this appeal by the assessee is allowed.