Income Tax Appellate Tribunal - Indore
M.P. State Cooperative Oil Seed Growers ... vs Department Of Income Tax on 31 December, 2012
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IN THE INCOME TAX APPELLATE TRIBUNAL
INDORE BENCH, INDORE
Before Shri Joginder Singh, Judicial Member
And
Shri R.C. Sharma, Accountant Member
ITA No.145/Ind/2013
A.Y.2004-05
ACIT 1(2), Bhopal :: Appellant
Vs
M.P. State Cooperative
Oil Seed Growers Federation Ltd.
Bhopal
PAN - AAAAM2180M :: Respondent
Appellant by Smt. Mridula
Bajpai
Respondent by Shri R.N. Gupta
Date of hearing 25.6.2013
Date of 26.7.2013
pronouncement
O R D E R
PER SHRI R.C. SHARMA, AM
This is an appeal filed by the revenue against the order of the CIT(A) dated 31st December, 2012 for the A.Y. 2004-05 in the matter of order passed u/s 154 of the Act.
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2. Rival contentions have been heard and record perused. The facts, in brief, are that the assessee is a cooperative society. In respect of return filed on 28.10.2004 declaring deficit of Rs.17,17,20,050/- from purchase of oil seeds and sale of oil produce was assessed u/s 143(3) vide order dated 8.12.2006 at Rs. (-) 16,96,240/-. Later on, perusal of assessment record of the assessee, the AO found that as per computation of income, the assessee had claimed deduction u/s 43B towards the provident fund to the extent of Rs. 1,38,00,000/- out of total payment of Rs. 1,44,82,972/-. The total P.F. payment of Rs. 1,44,82,972/- includes both employees & employer's contribution. As per provision of section 43B r.w.s. 36(1)((iv) & 36(1)(v), if the employees contribution is not made within due date, the deduction cannot be allowed, however, employer's contribution can be made on or before the due date of submission of return. In this case, the employee's contribution of Rs.72,41,486/- (being 50%) of total P.F. 3 contribution of Rs.1,44,82,972/-) was made after the due date and therefore was not allowable. This is a mistake apparent from record. Further, it is seen that there was provision of Rs. 25,69,34,325/- for interest to bank and financial institution out of which Rs. 4,60,80,325/- was added back to the business income as per computation sheet but remaining amount ofRs. 21,08,54,000/- was neither added back into income nor any proof of payment was filed. Therefore, provision of Rs.21,08,54,000/- was not allowable as per provision of section 43B of the IT Act, 1961. This was held by the AO as a mistake apparent from record.
3. After considering the explanation of the assessee, the AO held that with effect from 1.4.2004 interest on any loan has been brought under the ambit of section 43B(e). Total unpaid provisional interest of Rs. 21,08,54,000/- is not allowable and hereby added back to the total income of the assessee. Accordingly, by 4 passing order u/s 154 on 31.3.2011 income of the assessee was revised as under :-
Total income as per order Passed u/s 143(3) dt.8.12.2006 Rs. (-) 16,96,96,240/-
Add:- (i) As discussed in para 3 Rs. 72,41,486/-
(ii) As discussed in para 4 Rs. 21,08,54,000/-
Total income Rs. 4,83,99,246/-
4. By the impugned order, the CIT(A) deleted the addition after having the following observations :-
"12. I have carefully gone through the written submissions of the appellant and also the order u/s 154. There is no dispute as regards disallowance of Rs.
14,60,58,000/- as the same was admitted by the appellant itself during the course of assessment proceedings. As regards disallowance of interest payable to M.P. State Co-op. Bank Maryadit and Mandi 5 Board, it is imperative to extract hereunder the provisions of section 43B :
"SECTION 43B - CERTAIN DEDUCTIONS TO BE ONLY ON ACTUAL PAYMENT This section reads as under :-
Certain deductions to be only on actual payment - Notwithstanding anything contained in any other provision of this Act, a deduction otherwise allowable under this Act in respect of -
(a) Any sum payable by the assessee by way of tax, duty, cess or fee, by whatever name called, under any law for the time being in force, or
(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) any sum referred to in clause (ii) of sub-section (1) of section 36, or
(d) any sum payable by the assessee as interest on any loan or borrowing from any public financial institution or a state financial corporation or a state industrial investment corporation in accordance with the terms and conditions of the agreement governing such loan or borrowing, or
(e) any sum payable by the assessee as interest on any loan or advances from a scheduled bank in accordance with the terms and conditions of the agreement governing such loan or advances, or 6
(f) any sum payable by the assessee as an employer in lieu of any leave at the credit of his employee, 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 sum is actually paid by him.
Provided that nothing contained in this section shall apply in relation to any sum 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.
Explanation 1 : For the removal of doubts, it is hereby declared that where a deduction in respect of any sum referred to in clause (a) or clause (b) of this section is allowed in computing the income referred to in section 28 of the previous year (being a previous year relevant to the assessment year commencing on the Ist day of April, 1983 or any earlier assessment year) in which the liability to pay such sum was incurred by the assessee, the assessee shall not be entitled to any deduction under this section in respect of such sum in computing the income of the previous year in which the sum is actually paid by him.
Explanation 2 : For the purposes of clause (a) as in force at all material times, "any sum payable"
means a sum for which the assessee incurred liability in the previous year even though such sum might not have been payable within that year under the relevant law.7
Explanation 3 : For the removal of doubts, it is hereby declared that where a deduction in respect of any sum referred to in clause (c) or clause (d) of this section is allowed in computing the income referred to in section 28 of the previous year (being a previous year relevant to the assessment year commencing on the Ist day of April, 1988, or any earlier assessment year) in which the liability to pay such sum was incurred by the assessee, the assessee shall not be entitled to any deduction under this section in respect of such sum in computing the income of the previous year in which the sum is actually paid by him.
Explanation 3A : For the removal of doubts, it is hereby declared that where a deduction in respect of any sum referred to in clause (e) of this section is allowed in computing the income referred to in section 28 of the previous year (being a previous year relevant to the assessment year commencing on the Ist day of April, 1996, or any earlier assessment year) in which the liability to pay such sum was incurred by the assessee, the assessee shall not be entitled to any deduction under this section in respect of such sum in computing the income of the previous year in which the sum is actually paid by him.
Explanation 3B : For the removal of doubts, it is hereby declared that where a deduction in respect of any sum referred to in clause (f) of this section is allowed in computing the income, referred to in section 28 of the previous eyar (being a previous year relevant to the assessment year commencing on the Ist day of April, 2001, or any earlier assessment year) in which the liability to pay such sum was incurred by the assessee, the assessee shall not be entitled to any deduction under this section in respect of such sum in computing the income of the previous year in which the sum is actually paid by him.8
Explanation 3C : For the removal of doubts, it is hereby declared that a deduction of any sum, being interest payable under clause (d) of this section, shall be allowed if such interest has been actually paid and any interest referred to in that clause which has been converted into a loan or borrowing shall not be deemed to have been actually paid.
Explanation 3D : For the removal of doubts, it is hereby declared that a deduction of any sum, being interest payable under clause (e) of this section, shall be allowed if such interest has been actually paid and any interest referred to in that clause which has been converted into a loan or advance shall not be deemed to have been actually paid.
Explanation 4 : For the purposes of this section :
(a) "public financial institution" shall have the meaning assigned to it in section 4A of the Companies Act, 1956 (1 of 1956) (aa) "Scheduled bank" shall have the meaning assigned to it in the Explanation to clause (iii) of sub-section (5) of section 11
(b) "State financial corporation" means a financial corporation established under section 3 or section 3A or an institution notified under section 46 of the state Financial Corporation Act, 1951 (63 of 1951)
(c) "State industrial investment corporation" means a Government company within the meaning of section 617 of the Companies Act, 1956 (1 of 1956) engaged in the business of providing long term finance for industrial projects and "eligible for deduction under clause (viii) of sub-section (1) of section 36"
13. From the perusal of order u/s 154, it is seen that the AO has failed to prove that 9 M.P. State Co-op. Bank Maryadit or Mandi Board falls in any of the clauses of Explanation 4 to section 43B. Thus, the disallowance of interest u/s 43B cannot be sustained. Accordingly, the disallowance of interest is deleted."
5. Against the above order of the CIT(A), the Revenue is in further appeal before the Tribunal. As per our considered view, M.P. State Cooperative Bank falls under Explanation 4 to section 43B, therefore, provisions with regard to section 43B are applicable to the interest payable to it. Thus, the CIT(A) was not justified in holding that the provisions of section 43B are not applicable to the interest payable to it. Interest payable to consortium bank amounting to Rs. 14,60,58,000/- also falls within the purview of section 43B, accordingly, the AO was justified in adding the same in its order passed u/s 154 of the Act. The interest payable on soft loan to M.P. State Cooperative Bank Maryadit, Bhopal, amounting to Rs. 3,93,80,000/- is also covered by 10 section 43B, therefore, not to be allowed if there is no actual payment of interest.
6. However,Mandi Board is covered by Explanation 4 to section 43B of the Act. Accordingly, Mandi Board is neither a public financial institution, nor scheduled bank nor State Financial Corporation nor State Industrial Investment Corporation, therefore, interest payable to Mandi Board cannot be disallowed by invoking the provisions of section 43B of the Act.
7. The CIT(A) has allowed the assessee's claim for deduction of employees' contribution by observing as under :-
"7. I have carefully gone through the written submissions of the appellant and also the order u/s 154. I find that the caseof the appellant is squarely covered by the decision of various courts relied upon by the appellant and the issue of allowability of deduction on account of employees contribution to PF and ESIC (deposited after the due date of relevant statute) has been upheld. I find that the Hon'ble High Court of Delhi in CIT vs. 11 Aimil Ltd. (2010) 321 ITR 508 (Del) held as under :-
"As soon as employees' contribution towards PF or ESI is received by the assessee by way of deduction or otherwise from the salary/wages of the employees, it will be treated as "income" at the hands of the assessee. It clearly follows therefrom that if the assessee does not deposit this contribution with PF/ESI authorities, it will be taxed as income at the hands of the assessee. However, on making deposit with the concerned authorities, the assessee becomes entitled to deduction under the provisionhs of s. 36(1)(va). Sec. 43B(b) however stipulates that such deduction would be permissible only on actual payment. This is the scheme of the Act for making an assessee entitled to get deduction from income insofar as employees' contyribution is concerned. Deletion of the second proviso has been treated as retrospective in nature and would not apply at all. The case is to be governed with the application of the first proviso. If the employees' contribution is not deposited by the due date prescribed under the relevant Acts and is deposited late, the employer not only pays interest on delayed payment but can incur penalties also for which specific provisions are made in the Provident Fund as well as the ESI Act. Therefore, the Acts permit the employer to make the deposit with some delays, subject to the aforesaid consequences. Insofar as the IT Act is concerned, the assessee can get the benefit if 12 the actual payment is made before the return is filed - CIT vs. Vinay Cement Ltd.(2007) 213 CTR 268, CIT vs. Dharmendra Sharma (2007) 213 CTR(Del) 609 : (2008) 297 ITR 320 (Del) and CIT vs. P.M. Electronics Ltd. (2008) 220 CTR (Del) 635 : (2008) 15 DTR (Del) 258 followed.
(Paras 11 & 15 to 17)"
8. It is not the case of the AO that the appellant had not made the payment of employees contribution before the due date of filing return of income u/s 139(1), hence the disallowance made by the AO cannot be sustained. Therefore, the disallowance is deleted."
We are in agreement with the order of the CIT(A) to the effect that employees' contribution, if paid, before the last date of filing of the return, the same is to be allowed. However, there is no positive finding by the CIT(A) to the effect that such contribution was actually paid before the last date of filing the return. Accordingly, we direct the AO to verify the actual date of payment of employees' contribution and allow the same.
In view of the above, we reverse the order of the CIT(A) with respect to interest of Rs.14,60,58,000/-, 13 Rs. 3,93,80,000/- payable to consortium bank and M.P. State Cooperative Bank, respectively. We direct accordingly.
In the result, the appeal of the revenue is allowed in part.
Order pronounced in open Court on 16.7.2013 Sd/- sd/-
(JOGINDER SINGH) (R.C. SHARMA) JUDICIAL MEMBER ACCOUNTANT MEMBER Dated - 16.7.2013
Copy to : Appellant/Respondent/CIT/CIT(A)/DR Dn/-