Madras High Court
Commissioner Of Income Tax vs The Acit Made In I.T.A.No.856/Mds/06 on 18 August, 2008
Author: K.Raviraja Pandian
Bench: K.Raviraja Pandian
IN THE HIGH COURT OF JUDICATURE AT MADRAS Dated : 18.08.2008 Coram : THE HONOURABLE MR.JUSTICE K.RAVIRAJA PANDIAN and THE HONOURABLE MR.JUSTICE P.P.S.JANARTHANA RAJA Tax Case (Appeal) No.1192 of 2008 Commissioner of Income Tax Chennai Appellant v. M/s Nexus Computer Pvt Ltd., New No.131, LDG Road, Thomas Nagar, Saidapet, Chennai. Respondent Tax Case Appeal filed under section 260A of the Income Tax Act, 1961 against the order of the Income Tax Appellate Tribunal, Madras 'B' Bench, Chennai, dated 28.04.2006 passed in ITA No.719/Mds/2004. For appellant : Mr.J.Narayanaswamy JUDGMENT
(Judgment of the Court was delivered by K.RAVIRAJA PANDIAN, J.) The revenue on appeal against the order of the Tribunal dated 28.04.2006 made in ITA No.719/Mds/2004. The relevant assessment year is 2000-2001.
2. The assessee company is engaged in the business of manufacture and trading in computer system. For the assessment year 2000-01, the company filed its return of income under section 143(1). The assessing officer disallowed the payment of provident fund and ESI contribution as the payments were made belatedly in terms of Section 43B. Aggrieved by the order of the Assessing Officer, the assessee filed an appeal before the Commissioner of Income Tax (Appeals), who partly allowed the appeal by directing the Assessing Officer to restrict the disallowance to Rs.37,692/- on the ground that they were paid within the grace period allowed under the statute. Aggrieved by that portion of the order of the Commissioner of Income Tax (Appeal), which went against the assessee, the assessee filed further appeal before the Income Tax Appellate Tribunal. The Tribunal, following the decision of the Special Bench rendered in the case of M/s Kwality Milk Foods Ltd., vs. The ACIT made in I.T.A.No.856/Mds/06, dated 16.03.2006, wherein, it was held thus:
"34. We have considered the entire conspectus of the case. As per the prescription of Section 43B oft he Act, deduction for statutory payments pertaining to labour, taxes,etc., are to be allowed as deductions, if they are actually paid during the financial year. However, to mitigate the unintended hardship it is stipulated in the proviso that taxes are deemed to have been paid during the financial year even if they are paid by the due date of filing of return. In the case of statutory payment relating to labour, it was sine qua non to make the payment any time before the last date for payment of labour related liability. It was represented before the government that the delayed payment of statutory liability related to labour should be accorded the same treatment as delayed payment of taxes etc. The deduction if denied in a year could not be claimed in subsequent year. On account of various reasons like postal delay, strikes or long holidays, the payment of employer's contributions to the respective authorities at times delayed even though the payment tendered before the due date. Having regard to this unintended hardship by the Finance Act, 2003 in the first proviso to Sec.43B the words, brackets and letters referred to clause (c) or clause (d) or clause (e) or clause (f) have been omitted and second proviso, was also omitted. Legislature removed the differentiation between employee welfare payments and others. Uniform criteria was prescribed for the allowability of the claim. The amendment was made to eliminate unintended consequences that caused undue hardship to the tax payers. Therefore, amendment in proviso to Sec.43B by Finance Act, 2003 was curative in nature. Accordingly, it should be applied retrospectively."
The Tribunal having noted that in the instant case the exact dates of payment of provident fund and ESI contribution specified in Section 43B(b) of the Act are not available, set aside the order of the Commissioner of Income-tax (Appeals) and remitted the case back to the assessing officer with a direction to find out the exact date of payments and allowed the assessee's claim. Aggrieved by the said order of the Tribunal, the revenue filed this appeal by formulating the following questions of law:-
"1. Whether in the facts and circumstances of the case, the Tribunal was right in holding that the omission of the 2nd proviso to Sec.43B is deemed to have retrospective effect?
2. Whether on the facts and circumstances of the case, deduction of payments to provident fund made belatedly beyond the time and grace period under that statute be allowed u/s 43B?".
3. The learned counsel appearing for the revenue submitted that the above two questions of law has been considered by the Division Bench of this Court and decided in favour of the revenue in the case of Commissioner of Income Tax vs. Synergy Financial Exchange Ltd., reported in 288 ITR 366 by holding that every statute is prima facie prospective unless it is expressly or by necessary implication made to have retrospective operation. A statute or a section in it is not to be construed so as to have larger retrospective operation than its language renders necessary. The Division Bench also held that the second proviso to Section 43B of the Income Tax Act, 1961, as it stood prior to its omission by the Finance Act, 2003, with effect from 1st April 2004 imposed a condition that no deduction shall, in respect of any sum referred to in clause (b) of the section 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. With the omission of the proviso the assessee is entitled to the deduction of payment made towards provident fund, etc., when such payment is actually made by the assessee on or before the due date applicable for filing the return, irrespective of whether such payment is made on or before the due date by which the assessee is required to credit the contribution to the employee's account in the relevant fund under the relevant Act. It is not permissible in law to take a liberal view or lenient approach to give retrospective effect to the deletion of the second proviso to Section 43B of the Act so as to apply it to earlier assessment years, particularly when there is no indication in the Finance Act, 2003, from the language used and from the object indicated that the Legislature intended expressly or by implication that the second proviso to Section 43B was deleted to cure an acknowledged evil for the benefit of the community as a whole or to remove any such hardship, or any express provision in the statute that such deletion of the second proviso to section 43B of the Act would have any retrospective effect. On that basis the Division Bench held that any payment made subsequent to the due date or the extended date would not entitle to the exemption under Section 43B of the Act.
4. The very same provision has been considered by the Gauhati High Court in the case of Commissioner of Income Tax vs. George Williamson (Assam) Ltd., reported in 284 ITR 619. In that case it was contended that the question raised in the appeal is covered by the decision of the Gauhati High Court in the case of CIT Vs. Assam Tribune (2002) 253 ITR 93, wherein it was held that the contributions towards provident fund, etc., paid before the filing of the return by the assessee are entitled for the deduction. That decision in the case of CIT Vs. Assam Tribune (2002) 253 ITR 93 was rendered by that Court based on the earlier decision of that Court in the case of CIT Vs. Bharat Bamboo and Timber Suppliers (1996) 219 ITR 212 and the Gauhati High Court has also taken note of the contrary decision of the Kerala High Court in the case of CIT vs. South India Corportion Ltd., (2000) 242 ITR 114. After considering the same, the Gauhati High Court held that the contribution made towards PF., etc., after the close of the accounting period, but before the due date for filing return of income for the assessment year 1992-93 are entitled for deduction under Section 43B(b) of the Income Tax Act, 1961.
5. This Judgment of George Willamson reported in 284 ITR 618 was taken on appeal by the Revenue by way of SLP to the Supreme Court. The Supreme Court in the case of Commissioner of Income Tax vs. Vinay Cement Ltd., reported in (2007) 213 CTR 268, while affirming the case of George Willamson reported in 284 ITR 618 has held as follows:-
"Delay condoned.
2. In the present case, we are concerned with the law as it stood prior to the amendment of S.43B. In the circumstances the assessee was entitled to claim the benefit in S.43B for that period particularly in view of the fact that he has contributed to provident fund before filing of the return.
The Special Leave Petition is dismissed."
6. Thus, the Apex Court affirmed the view taken in the case of George Willamson reported in 284 ITR 618, which is contrary to the view taken by the Division Bench of this Court in the case of CIT VS. SYNERGY FINANCIAL EXCHANGE LIMITED, (2007) 288 ITR 366. What is the effect of the said order of the Supreme Court, which is rendered by dismissing the S.L.P. by a speaking order is well said by the Judgment of the Apex Court in the case of Kunhayammed and Others vs. State of Kerala and another reported in 119 STC 505 at page 526 in paragraph 40. The proposition has been summed up by the Supreme Court in paragraph 43. The 5th proposition of law reads as follows:-
"If the order refusing leave to appeal is a speaking order, ie., gives reasons for refusing the grant of leave, then the order has two implications. Firstly, the statement of law contained in the order is a declaration of law by the Supreme Court within the meaning of Article 141 of the Constitution. Secondly, other than the declaration of law, whatever is stated in the order are the findings recorded by the Supreme Court which would bind the parties thereto and also the Court, Tribunal or authority in any proceedings subsequent thereto by way of judicial discipline, the Supreme Court being the Apex Court of the country, But, this does not amount to saying that the order of the Court, Tribunal or authority below has stood merged in the order of the Supreme Court rejecting special leave petition or that the order of the Supreme Court is the only order binding as res judicata in subsequent proceedings between the parties."
7. Admittedly the decision reported in 213 CTR 268, which has been extracted above, is a speaking order passed by the Supreme Court by giving reasons for rejecting the SLP. The reasoning given in the dismissal of the SLP in the decision reported in 213 CTR 268 would bind this Court, as law declared by the Apex Court under Article 141 of the Constitution.
8. Admittedly in this case, the contribution has been paid prior to the filing of the return. The Supreme Court decision reported in 213 CTR 268 squarely covers the issue and the assessee is entitled to the benefit under Section 43(B) of the Income Tax Act. Hence, the appeal under consideration has to be dismissed and the same is dismissed. No costs.
rg To
1. The Income Tax Appellate Tribunal, Chennai 'B' Bench, Chennai