Income Tax Appellate Tribunal - Hyderabad
Singareni Collieries Co. Ltd. vs Deputy Commissioner Of Income-Tax on 30 November, 1994
Equivalent citations: [1995]53ITD249(HYD)
ORDER
M. Ramakrishna, Judicial Member
1. This appeal is by the assessee aggrieved by the order passed by the CIT (Appeals)-V, Hyderabad, dated 22-3-1994, for the assessment year 1991-92.
2. The assessee is a public limited company with State and Central Governments holding 99.5 per cent of the shares. It carries on coal mining business in Andhra Pradesh. For the assessment year 1991-92, the assessee filed return of income, declaring a loss of Rs. 2,04,57,08,048. While processing the return under Section 143(1)(a), the Assessing Officer by invoking the provisions of Section 43B disallowed Rs. 11,99,76,761 which was the outstanding amount payable to Coal Mines Provident Fund Account towards assessee's contribution and administrative charges and determined the loss of the assessee at Rs. 1,92,57,31,287. Though there was no tax liability, the Assessing Officer charged additional tax of Rs. 1,10,37,862 in terms of Section 143(1A). Intimation under Section 143(1)(a) was issued on 3-11-1992. Thereafter, assessee filed a petition under Section 154 on 28-11-1992, which was allowed in part and the additional tax was revised to Rs. 91,45,303, as against Rs. 1,10,37,862 levied originally and the Assessing Officer also reduced the disallowance under Section 43B to Rs. 9,94,05,471 after considering the payment of Rs. 2,05,71,290 made to CMPF A/c within due date and thus finally determined the net loss at Rs. 1,94,63,02,577.
3. In the appellate proceedings before the CIT (Appeals), it was the contention of the assessee that there was no time limit for remittance of recovery towards provident fund in the Coal Mines Provident/Fund and Bonus Scheme Acts, though under the A.P. Coal Mines Provident Fund Scheme, the remittance was to be made before the end of the month following the month to which the recoveries related. It was also contended that the sum of Rs. 11,90,76,761 has been paid to the same CMPF authorities before the date for the filing of the IT Return and therefore the conditions stipulated in Section 43B were satisfied. It is further contended that in a note in Part IV of the return, the grounds for claiming this expenditure have been mentioned and therefore, the disallowance could not be treated as a prima facie adjustment, attracting the levy of additional tax. It was also pleaded that additional tax was not leviable in cases where loss still existed, even after making prima facie adjustments. The learned CIT (Appeals) did not agree with the submissions of the assessee and therefore, dismissed the appeal of the assessee. Hence, assessee is in further appeal before us.
4. Before us, the learned counsel for the assessee contended that provisions of Section 43B do not permit the disallowance of this payment which is not due. He also submitted that Explanation 2 to Section 43B of the IT Act, 1961 states that any sum payable' for the purpose of Clause (a) means any sum for which assessee incurred liability during the previous year and since the payment of P.F. falls under Clause (b) of Section 43B, the disallowance could not have been made. He also submitted that the Board of Trustees of the Coal Mines Provident Fund resolved that in case of delay in remittance, the defaulter would be charged interest on the principal amount at 2 per cent higher than the rate at which interest is allowed to the members, which amounts to rescheduling the due dates as the due dates got extended sine die and therefore, payment in accordance with the above resolution should be treated as payment within the time. Hence, provisions of Section 43B are not attracted.
5. The learned counsel for the assessee also contended that the addition made under Section 43B is not prima facie addition as held by the CIT (Appeals), as the allowance of the deduction is based on arguable question of law and therefore, the Assessing Officer has to decide the allowance under regular assessment in terms of Section 143(3) and he is barred under law to take a recourse to Section 143(1)(a). It is the contention of the assessee that the power to make an addition in the intimation under Section 143(1)(a) is co-terminus with the power to rectify the mistake under Section 154 of the IT Act, and, therefore, the addition made is illegal. It is further submitted that Section 143(1A) permits the levy of additional tax only in case where the loss returned is reduced or converted into income. Since the addition made in this case only reduces the unabsorbed depreciation and does not affect the loss returned, no levy of additional tax is warranted.
6. The learned counsel for the assessee filed a paper-book containing 97 pages and invited our attention to extract of Circular No. 549 dated 31 -10-1989 on Explanatory Notes on the provisions of Direct Tax Laws (Amendment) Act, 1987, Part II, filed at page 1 of the paper book. He has also relied on the decision of the Hyderabad Bench 'B' of Tribunal in Anam Machinery Fabricators Ltd. v. ITO [1994] 49 ITD 617, a copy of which is filed at pages 3 to 18 of the paper-book. He also relied on the decisions of the Rajasthan High Court in JKS Employees' Welfare Fund v. ITO [1993] 199 ITR 765; of the Supreme Court in CIT v. M. Chandra Sekhar [1985] 151 ITR 433; of the Bombay High Court in Bank of America N.T. and S.A. v. Dy. CIT [1993] 200 ITR 739, of the Bombay High Court in Khatau Junkar Ltd. v. K.S. Pathania [1992] 196 ITR 55 and submitted that the CIT (Appeals) was not justified in confirming the addition made under Section 43B and also confirming the levy of additional tax. The learned counsel for the assessee has also relied upon the Board's Circular No. 689 dated 24-8-1994, wherein the Board clarified the scope of prima facie disallowances under Section 143(1)(a) of the Income-tax Act, 1961.
7. On the other hand, the learned Departmental Representative supported the orders passed by the lower authorities. He contended that as per the Scheme framed under Section 3 of the Coal Mines Provident Fund Act the remittances have to be made before the end of the following month, i.e., before the end of the month following the month to which the remittances relate. An analogous provision is also there under the A.P. Coal Mines Provident Funds Scheme, prescribing that the remittance was to be made before the end of the month following the month to which the remittance relates. He also contends that merely because the Board of Trustees provided for charging interest on the remittances made beyond the specified date, it cannot be said that the due date is extended or that the payments are rescheduled or that the due date is postponed sine die.
8. We have considered the facts of the case and the rival submissions carefully and also perused the decisions relied on by the learned counsel for the assessee. In our considered opinion, the contentions of the learned counsel for the assessee have to be negatived for the following reasons.
9. The relevant provisions of Section 143(1)(a) read as follows :-
143(1)(a) where a return has been made under Section 139 in response to a notice under Sub-section (1) of Section 142-
(i) if any tax or interest is found due on the basis of such return, after adjustment of any tax deducted at source, any advance-tax paid and any amount paid otherwise by way of tax or interest, then, without prejudice to the provisions of Sub-section (2), an intimation shall be sent to the assessee specifying the sum so payable and such intimation shall be deemed to be a notice of demand issued under Section 156 and all the provisions of this Act shall apply accordingly; and
(ii) if any refund is due on the basis of such return, it shall be granted to the assessee :
Provided that in computing the tax or interest payable by or refundable to the assessee, the following adjustments shall be made in the income or loss declared in the return, namely :-
(i) ...
(ii) ...
(iii) any loss carried forward, deduction, allowance or relief claimed in the return, which, on the basis of the information available in such return, accounts or documents, is prima facie inadmissible, shall be disallowed:
[Emphasis supplied] Provided further that where adjustments are made under the first proviso, an intimation shall be sent to the assessee, notwithstanding that no tax or interest is found due from him after making the said adjustments:
Provided also...
The provisions of Section 43B insofar as they are relevant for our purpose read as follows :-
43B. Notwithstanding anything contained in any other provisions of the Act, a deduction otherwise allowable under this Act in respect of-
(a) ...
(b) any sum payable by the assessee as an employer by way of contribution to any provident fund or superannuation fund or gratuity fund or any other fund for the welfare of employees, or
(c) ...
(d) ...
shall be allowed (irrespective of the previous year in which the liability to pay such sum was incurred by the assessee according to the method of accounting regularly employed by him) only in computing the income referred to in Section 28 of that previous year in which such sum is actually paid by him :
Provided that nothing contained in this section shall apply in relation to any sum referred to in Clause (a) or Clause (c) or Clause (d) which is actually paid by the assessee on or before the due date applicable in his case for furnishing 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 as aforesaid and the evidence of such payment is furnished by the assessee along with such return.
Provided further that no deduction shall in respect of any sum referred to in Clause (b), 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 (3) 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.
** ** ** Explanation below Clause (va) of Section 36(1) of the Act defines due date as follows :-
For the purposes of this clause 'due date' means the date by which the assessee is required as an employer to credit an employee's contribution to the employee's account in the relevant fund under any Act, rule, order or notification issued thereunder or under any standing order, award, contract of service or otherwise;
Pages 40 to 61 of the paper-book filed by the assessee contain a zerox copy of Coal Mines Provident Fund and Miscellaneous Provisions Act, 1948. Section 3 of the said Act empowers the Central Government to frame a scheme, by notification in the Official Gazette, to be called the 'Coal Mines Provident Fund Scheme' for the establishment of a Fund for employees and specify the coal mines to which the said Scheme shall apply. In exercise of the powers conferred by Section 3 of the Coal Mines Provident Fund and Miscellaneous Provisions Act, 1948 (XLVI of 1948), the Central Government by the Notification (No. P.F. 15(5)/48) of the Ministry of Labour dated 11-12-1948, framed Coal Mines Provident Fund Scheme. The extent of the application of the said Scheme, as contained in Para 1(ii) thereof reads as follows :-
1. Short title and Application (i)... ii) It shall apply to all coal mines is West Bengal, Bihar, Maharashtra, the Central Provinces and Berar, Nagaland and Orissa including those in partially excluded areas in the Provinces of West Bengal, Bihar, Central Provinces and Berar and Orissa to which the Coal Mines Provident Fund and Miscellaneous Provisions Act, 1948 has been applied under Sub-section (1) of Section 92 of the Government of India Act, 1935.
The erstwhile princely State of Berar is no other than the part of Andhra Pradesh where the assessee, Singareni Collieries Co. Ltd., Kothagudem, is situated. Thus, the above Scheme framed by the Central Government applies to the assessee-company. Sub-para (2) of para 33 of the said Scheme, dealing with the due date for the remittances to be made reads as follows-
33A. Mode of payment of contribution for any period of currency commencing on or after the 1st April 1953 payment in cash.-(1), Every contribution payable under this Scheme during a period of currency commencing at any time on or after the 1st April 1953, shall be paid monthly in respect of each colliery separately on or before the date specified in sub-paragraph (2). The contributions shall be calculated as provided in this scheme for all wage periods ending in a month.
(2) The employer shall pay to the Fund both the employer's contribution as well as the member's contribution together with an amount calculated at the rates mentioned in paragraph 33B of this scheme to defray the cost of administration of the Fund on or before the last day of every month following the month to which the contributions relate.
(3)...
[Emphasis supplied] A perusal of the above provisions of the Coal Mines Provident Fund and Miscellaneous Provisions Act, 1948 and the Coal Mines Provident Fund Scheme, which applies to the assessee-company, make it absolutely clear that there is in fact a last date for remitting the contributions by an employer, viz., on or before the last day of every month following the month to which the contributions relate.
10. A copy of the Income-tax Return filed by the assessee is furnished at pages 79 to 91 of the paper-book. With the said return, assessee filed a note with reference to Part-IV of the return in support of income claimed exempt vide page 8 of the Return. A copy of the said note is furnished at page 91 of the paper-book and it reads as follows :-
The Coal Mines Provident Fund and Bonus Schemes Act, 1948 governs the recoveries towards Coal Mines Provident Fund from the workmen and officials of the Company. This Act did not prescribe time! limitation for the remittance of recovery. The Andhra Pradesh Coal Mines Provident Fund Scheme framed under the abovesaid Act governs the recoveries and remittances. Under the said Act, the remittances are to be made before the end of the month following the month to which the recoveries relate. Further the provisions in terms of the decisions of the Board of Trustees of the Coal Mines Provident Fund are also binding under the Scheme on the Company.
The Board of Trustees at the 99th meeting held on 27-12-1985 (copy of Commissioner's letter enclosed) resolved that in the case of delay in remittande of the Coal Mines Provident Fund recoveries as per the Scheme, the Coal Mines Provident Fund should charge interest on the principal; amount 2 per cent higher than the rate at which interest is allowed to the members. Thus, there is no limitation of the time prescribed for the purpose. Hence, the Company treats the remittance of Provident Fund made as having made in time and so claimed the expenditure towards Company's contribution accordingly and not included the recoveries from the employees as income of the Company for the assessment year 1991-92. Further, all the Coal Mines Provident Fund dues for the financial year 1990-91 relevant to the assessment year 1991-92 are remitted before the submission of the return and evidence is enclosed.
A copy of the letter dated 24-7-1991 from the Coal Mines Provident Fund Commissioner, addressed to the, assessee is filed at pages 92 to 94 of the paper-book. By the said letter, it was brought to the, notice of the assessee that Provident Fund contributions are required to be remitted by last day of the month following the month to which the contributions relate and the assessee-company started defaulting in making payment of Provident Fund Contributions, since June 1990 continuously till that date, i.e., July 1991. The said letter furnished details of defaults committed by the assessee and arrived at the aggregate amounts due from the assessee as follows :-
(i) Principal amount of Provident Fund contributions from October 1990 (part) to June 1991 (except November 1990) Rs. 27,00,00,000.00
(ii) Amount of interest payable on contributions remitted belatedly or not remitted Rs. 1,61,13,761.63
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Total Rs. 28,61,13,761.63
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In our opinion assessee is not right in contending that there is no due date prescribed for remitting the contributions and merely because interest is charged under the resolution of the Board of Trustees of the Fund, it cannot be said that there is no due date at all or it has the effect of postponing the due date sine die or that it amounts to rescheduling the remittances due. On the other hand, the very fact that interest is charged on remittances made belatedly and beyond a particular date indicates that there is a due date by which the remittance of the contributions should be made. The provisions of the CMPF Act and the Scheme framed thereunder are very clear with regard to the date by which remittance must be made in respect of each month's contributions and there is no ambiguity at all that a due date is prescribed for remitting the contributions to provident fund.
11. The case of the assessee in this case is covered by Clause (b) of Section 43B and as such neither the provisions of Clauses (a), (c) or (d), nor the first proviso below Section 43B have any application to the facts on hand. On the other hand, second proviso to Section 43B applies to the cases covered by Clause (b) of Section 43B and as such since the remittance of the provident fund dues in question is the instant case not haying been made before the due date, as defined in the Explanation below Clause (vi) of Sub-section (1) of Section 36, which we have extracted above, disallowance under Section 43B is attracted and as such the claim of the assessee in respect of the remittances in question is patently inadmissible in law.
12. Board's Circular No. 549 dated 31-10-1989, an extract of which is filed at page 1 of the paper book, at para 5.4, lists out the prima facie adjustments which can be made only on the basis of information available in the return or the accompanying accounts or documents and not on the basis of the past records of the assessee. Though the said list does not contain disallowance under Section 43B, as coming under the purview of proviso to Section 143(1)(a), the said para 5.4 concludes stating that 'the above is not an exhaustive but only an illustrative list of prima facie admissibles or inadmissibles for which adjustments can be made to the returned income or lons'. Further, Board's Circular No. 689 dated 24-8-1994, a copy of which is also filed by the assessee from 209 ITR (St.) 75, also clarifies the scope of prima facie disallowance under Section 143(1)(a) of the IT Act, 1961. The said circular lists out the prima facie disallowances that may be made in various types of claims and mentions against item (d), 'Any claim which is patently inadmissible in law'. In our considered opinion, neither Circular No. 549 nor Circular No. 689 issued by the Board, relied by the learned counsel for the assessee can come to the aid of the assessee, because assessee's claim in respect of remittance of provident fund contributions is patently inadmissible in law, as disallowance under Section 43B is attracted in terms of Clause (b) and second proviso thereunder.
13. None of the cases relied on by the learned counsel for the assessee has any application to the facts of the case on hand. In the case of Anam Machinery Fabricatores Ltd. (supra), the ITAT, Hyderabad Bench 'B' in the context of rectificatory order under Section 154 passed by the ITO, held that what the Assessing Officer cannot do by invoking the provisions of Section 143(1)(a) while sending the intimation cannot be available to him at the time of rectification and when he does not have the powers to disallow the loss at the time of intimation under Section 143(1)(a), he cannot get such powers while invoking the provisions of Section 154. Similarly, in the case of J.K.S. Employees Welfare Fund (supra), the Hon'ble Rajasthan High Court held that application of a different rate of tax will not fall under the category of loss carried forward, deduction or allowance, so as to attract the provisions of Section 143(1)(a). It was held that the ITO cannot create a demand under Section 167B, while acting under Section 143(1)(a). The decision of the Supreme Court in the case of M. Chandra Sekhar (supra) was rendered in the context of penalty levied under Section 271(1)(a) and it has no application to the facts of the case on hand. Similarly, the decisions of the Bombay High Court in Bank of America N.T. and N.A.'s case (supra) and in Khatau Junkar Ltd. 196 ITR 55 are not applicable to the instant case. In the case before us, assessee filed along with return, an explanatory note which shows that the amount has to be remitted within one month. The said note and also the provisions of Coal Mines Provident Fund and Miscellaneous Provisions Act and of the Scheme framed thereunder, clearly indicate that there is a due date for the remittance of the provident fund contributions and the remittances not made in accordance with the said provisions and before the said due date are clearly inadmissible in accordance with the provisions of Clause (b) of Section 43B and second proviso thereunder. In this view of the matter, we uphold the prima facie adjustments made under Section 143(1)(a) and rejecting the contentions of the assessee, we uphold the order of the CIT (Appeals) on this aspect.
14. As regards the other contention that the disallowance under Section 43B only goods to reduce the unabsorbed depreciation and no loss is reduced and therefore, no additional tax can be, levied, we find that the CIT (Appeals) has rejected this contention observing as under :
10. The next contention of the appellant that the disallowance under Section 43B only goes to reduce the unabsorbed depreciation and no loss is reduced, although apparently impressive, is not convincing. The 'loss declared in the return' mentioned in Section 143(1A) refers to the net loss which is inclusive of depreciation not fully adjusted against the profit. [Garden Silk Weaving Factory v. CIT 189 ITR 512 (SC)]. The distinction between the unabsorbed loss and unabsorbed depreciation is made for a specific purpose of carrying forward and set off. For filing the return, the net loss, after allowing the depreciation fully or partly as may be, should be declared because of prima facie adjustments would attract additional tax. Thus, this ground fails.
We find that the CIT (Appeals) was perfectly justified in rejecting the said contention. We are unable to subscribe to the view canvassed by the learned counsel for the assessee that additional tax can be levied only where loss returned is converted into income and not where loss returned was only reduced and as such, in the instant case, since the loss was only reduced on account of disallowance under Section 43B, additional tax is not attracted. In view of the retrospective amendment to the provisions of Section 143(1A) made by Finance Act,' 1993 w.e.f. 1-4-1989, even where the loss declared by the assessee is reduced, additional income-tax can be levied. In this view of the matter, we find no justification to interfere with the order of the CIT (Appeals) on this aspect as well.
15. In the result, assessee's appeal is dismissed.