Income Tax Appellate Tribunal - Hyderabad
Ito, Ward-2(4), Hyderabad, Hyderabad vs Toshali Cements Private Limited, ... on 16 June, 2017
IN THE INCOME TAX APPELLATE TRIBUNAL
HYDERABAD BENCHES "B" (SMC), HYDERABAD
BEFORE SHRI B. RAMAKOTAIAH, ACCOUNTANT MEMBER
I.T.A. No. 293/HYD/2017
Assessment Year: 2012-13
Income Tax Officer, M/s. Toshali Cements Pvt. Ltd.,
Ward-2(4), Vs HYDERABAD
HYDERABAD [PAN: AABCT8989K]
(Appellant) (Respondent)
For Revenue : Shri L. Ramji Rao, DR
For Assessee : NONE
Date of Hearing : 14-06-2017
Date of Pronouncement : 16-06-2017
ORDER
This is an appeal by Revenue against the order of the Commissioner of Income Tax (Appeals)-2, Hyderabad, dated 28-12-2016 on the issue whether the CIT(A) is correct in law holding that the payment of employee's contribution towards EPF and ESI by the employer-assessee, which is not in consonance with the Explanation to Section 36(1)(va) of the Income Tax Act [Act], is entitled for deduction u/s. 43B of the Act?
2. The only issue which is contended is with reference to allowance of an amount of Rs. 1,29,986/- disallowed by the Assessing Officer (AO) and treated as income u/s. 2(24)(x) of the Act as assessee has remitted the employee's contribution belatedly after the due date. The Ld.CIT(A) following the Co-ordinate Bench decision in the case of Nuzivedu Swati Costal Consortium [62 :- 2 -: I.T.A. No. 293/Hyd/2017 M/s. Toshali Cements Pvt. Ltd., taxman 258] has allowed the deduction. Revenue is aggrieved and raised the ground accordingly.
3. Ld.DR placed on record the letter of the AO to submit that though the mandatory limit prescribed by the CBDT to prefer second appeal is below the appeal filing limit, appeal has been filed on the basis of Circular No. 25 of 2015 under 8(b). It was submitted that the Board Circular No. 22 of 2015 is not applicable to the claim of deduction of payment of employee's share of EPF and ESI which is governed by Section 36(1)(va) and not Section 43B. Considering the explanation given by the AO, the appeal is admitted.
4. Assessee was not represented by anybody, even though the case was posted on 06-06-2017 and 13-06-2017. The case was adjourned to next day so as to enable the DR to explain the issue involved. The case was heard on 14-06-2017 ex-parte assessee.
5. It was the contention of DR that as per the provisions of Section 36(1)(va) of the Act, the belated payment of employee's contribution would be an income u/s. 2(24)(x). Therefore, the provisions of Section 43B are not applicable. He relied on the decision of the Hon'ble Gujarat High Court in the case of Gujarat State Road Transport Corporation. He also further relied on the Co-ordinate Bench decisions in the case of ITO Vs. LKP Securities Ltd., in ITA No. 638/Mum/2012 dt. 17-05-2013 and the decision in the case of DCIT Vs. M/s. Bengal Chemicals & Pharmaceuticals Ltd., in ITA No. 1680/Kol/2010 dt. 07-01-2011 in support of the contention that the amount cannot be allowed u/s. 43B.
:- 3 -: I.T.A. No. 293/Hyd/2017 M/s. Toshali Cements Pvt. Ltd.,
6. I have considered the contentions of Ld.DR and perused the facts on record. Even though assessee has paid the employee's contribution within the month, but after the due date including the grace period, AO has allowed the amounts pertaining to employer's contribution u/s. 43B, but treated the amount as income u/s. 2(24)(x). Ld.CIT(A) following the decision of the Co-ordinate Bench in the case of Nuzivedu Swati Costal Consortium [62 taxman 258] given in the context of Section 263, allowed the assessee's appeal on the issue.
7. The law on the issue is that the employee's contribution which is not paid within the due dates including the grace period is to be treated as income. The employer's contribution which is matching with the employee's contribution is however, governed by the provisions of Section 43B and is allowable, if it is paid within the due date of filing the return, consequent to the amendment to provisions of Section 43B. Thus, these two amounts stand on a different footing. However, there is conflict in the judicial pronouncements on the subject.
8. The Hon'ble Karnataka High Court in the case of CIT Vs. Sabari Enterprises [298 ITR 141] (KAR) and in the case of Spectrum Consultants India (P.) Ltd., Vs. CIT [34 taxmann.com 20] (Karnataka) has allowed the deduction on employee's contribution also, remitted after due dates prescribed under the said statutes, but before due date for filing return of income u/s. 139(4). Similar view was held in the following cases:
:- 4 -: I.T.A. No. 293/Hyd/2017 M/s. Toshali Cements Pvt. Ltd., i. CIT Vs. Kichha Sugar Company Ltd (ITA No. 50 of 2009) (Uttarakhand HC);
ii. CIT Vs. Aimil Ltd., [321 ITR 508] (Del); iii. CIT Vs. Nipso Polyfabricks Ltd., [350 ITR 327] (HP); iv. CIT Vs. Udaipur Dugdh Utpadak Sahakari Sandh Ltd [taxmann.com 616] (Raj);
v. CIT Vs. Hemla Embroidery Mills (P) Ltd., [37 taxmann.com 160 (P&H);
8.1. However, the Hon'ble Kerala High Court in the case of CIT Vs. Merchem Ltd., [378 ITR 443], took a different view and held as under:
"Held: Section 36(1)(va) and section 43B operate in different field i.e., section 36(1)(va) provides deduction in respect of employees contribution to PF and ESI, whereas section 43B provides deduction in respect of employers contribution. There was no indication in section 43B as it stood prior to the amendment and thereafter also to deface section 36(1)(va) and the Explanation thereto from the Income Tax Act. Assessee was entitled to get the deduction of the amounts as provided under section 36(1)(va) only if the amounts so received from the employees was paid within the due date as provided under the relevant statute. Since remittance of employees contribution to PF and ESI had been delayed beyond the due date prescribed under the respective Acts, therefore, assessee was not entitled to deduction under section 36(1)(va)".
8.2. There is no jurisdictional High Court judgment so far on this issue. In view of the conflicting judgments, I am of the view that the judgment which is in favour of assessee should be followed, as a judicial principle. Moreover, majority of the High Courts have held the issue in favour of assessee. Consequently, I am of the opinion that there is no need to modify the order of the CIT(A), allowing the deduction which was paid within the due date for filing the return u/s. 139(1) (in fact even paid during the year of :- 5 -: I.T.A. No. 293/Hyd/2017 M/s. Toshali Cements Pvt. Ltd., account itself but after the due date). There is no merit in Revenue's contentions. Ground is therefore, dismissed.
9. In the result, appeal of Revenue is dismissed.
Order pronounced in the open court on 16th June, 2017 Sd/-
(B. RAMAKOTAIAH) ACCOUNTANT MEMBER Hyderabad, Dated 16th June, 2017 TNMM Copy to :
1.The Income Tax Officer, Ward-2(4), Hyderabad.
2. M/s. Toshali Cements Pvt. Ltd., 'Rajaprasadam', Beside Jain Heritage School, 6th Floor, South Wing, Hyderabad.
3. Commissioner of Income Tax(Appeals)-2, Hyderabad.
4. The Pr. Commissioner of Income Tax-2, Hyderabad.
5. D.R. ITAT, Hyderabad.
6. Guard File.